FAF - NYSE

Greetings, and welcome to the First American Financial Corporation first quarter earnings conference call. At this time, presentation. Anyone should require operator assistance during the conference, a copy of today's press release is available on First American's website at www.firstam.com/investor. Please note that the call is being recorded and will be available for replay from the company's investor website and for a short time by dialing 877-660-6853, 201-612-7415. Enter the conference ID 13753085. I will now turn the call over to Craig Barberio, Vice President, Investor Relations, to make an introductory statement.

Good morning, everyone, and welcome to First American's earnings conference call for the first quarter of 2025. Joining us today on the call will be our newly appointed Chief Executive Officer, Mark Seaton, and Matt Wazner, Chief Financial Officer. Some of the statements made today may contain forward-looking statements that do not relate strictly to historical or current facts. These forward-looking statements speak only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these risks and uncertainties, please refer to yesterday's earnings release and the risk factors discussed in our Form 10-K and subsequent SEC filings. Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into the operational efficiency and performance of the company relative to earlier periods and relative to the company's competitors. For more details on these non-GAAP financial measures, including presentation with and reconciliation to the most direct comparable GAAP financials, please refer to yesterday's earnings release available on our website at www.firstam.com. I will now turn the call over to Mark Seaton.

Thank you, Craig. I'll begin by commenting on our recent leadership changes. First, we announced that our prior CEO, Ken DeGiorgio, has been part of the company. Ken was a pillar of strength at First American for over twenty years. Many of us worked with Ken for many years and valued his commitment, intellect, and dedication to First American. We wish him and his family all the best. We also announced that I have replaced Ken as CEO. I've been with the company for eighteen years, serving as our Chief Financial Officer for the last twelve. I believe in our purpose, which is to deliver certainty and trust to power seamless real estate transactions. We have an amazing team and a great collection of businesses led by our core title and escrow business. We also have several adjacent businesses that are synergistic to our core title business, including data and analytics, home warranty, our bank, First American Trust, and ServiceMac, our subservicer. These adjacent businesses each have attractive growth characteristics and margin potential greater than our title business. We have a bright future given our people, unique assets, and our commitment to be the best in the markets we operate in. Next, we announced that Matt Wazner has been appointed our Chief Financial Officer. Matt has been with First American for fifteen years, most recently serving as our treasurer and prior to that, our chief accounting officer. Prior to First American, Matt held roles at JPMorgan Chase and PwC. He's a perfect fit for the role and has proven to be a great leader with sound judgment and strong financial acumen. I look forward to our investor community getting to know more of Matt in days and weeks to come. Finally, we announced that our Chairman of the Board, Dennis Gilmore, will become our Executive Chairman. Dennis was our CEO for twelve years between 2010 and 2022, during which time we generated an eighteen percent annual total shareholder return. I worked very closely with Dennis during that time and look forward to working with him in our new roles. Turning to our business, I believe First American is poised for a good run. As we all know, our core business is Title and Escrow, which is driven by mortgage originations. Residential originations continue to be at trough levels, both in terms of purchase and refinance, but we experienced revenue improvement in both markets this quarter. Real estate goes in cycles, and we're at the very beginning of the next cycle. There's a lot of macro noise with tariffs, the path of rates, inflation, and uncertainty in the general economy. I believe residential originations have hit a bottom, and now we can debate the path and pace of growth. The commercial side of the business, which began declining in the second half of 2022, is seeing meaningful improvement. Commercial volume started picking up in the second half of last year, and the momentum continues into 2025, as our revenue was up twenty-nine percent this quarter. While the macro uncertainty may cause transactions to slow, we have a great pipeline heading into the second quarter. As I mentioned earlier, we're at the very beginning of another growth cycle and are poised to outperform the market given our extraordinary people, deep expertise, unique assets, and commitment to do what we need to do to win. For many years now, our data and analytics business has gained market share while dramatically expanding its title plant, property record database, and document image repositories. As the world becomes increasingly digitized, and the power of artificial intelligence continues to grow exponentially, data is needed to drive automation. Since we have more of that data than anyone, it puts us in a strong position. We are leveraging our bank in new ways to add value to our customers, and it also serves as a countercyclical business that is helping to mitigate the challenging residential origination market that we face. We also have momentum with our technology initiatives. In many ways, we're carrying redundant tech costs since we support both the new modern systems and the legacy tech that our business depends on today. But when this transition is complete, we'll not only reduce costs by eliminating redundant platforms but, more importantly, enhance the productivity of our operations. This will enable us to be the lowest-cost producer of our products and services, all while maintaining the high-touch customer experience our clients expect. Our business will always be a people business, but data and technology become more important every day, and First American is committed to winning with these capabilities. In the short term, our order counts are somewhat of a mixed bag. For the first three weeks in April, our open purchase orders are down four percent. Our refinance orders rose fifty-two percent relative to last year, but it's off a low base, and the market continues to be challenged with mortgage rates hovering between six and a half and seven percent. Commercial orders are up five percent so far this month, in line with the five percent growth we experienced during the first quarter. Finally, I'm pleased to report that we've been named one of the one hundred best companies to work for by Great Places to Work and Fortune magazine for the tenth consecutive year. This is an incredible accomplishment and a testament to our hardworking teams around the world who tirelessly service our customers and make First American a great place to be. Now I would like to turn the call back over to Matt for a more detailed review of our financial results.

Thank you, Mark. This quarter, we generated GAAP earnings of $0.71 per diluted share. Our adjusted earnings, which exclude the impact of net investment losses and purchase-related intangible amortization, was $0.84 per diluted share. Revenue in our title segment was $1.5 billion, up twelve percent compared with the same quarter of 2024. Commercial revenue was $184 million, a twenty-nine percent improvement over last year. Our closed orders were down two percent from the prior year, while our average revenue per order surged thirty-one percent due to broad-based strength across both asset class and transaction size. Purchase revenue was up one percent during the quarter, driven by an eight percent improvement in the average revenue per order, partly offset by a six percent decline in closed orders. Refinance revenue climbed forty percent compared with last year, primarily due to a twenty-eight percent improvement in closed orders. Refinance accounted for just five percent of our direct revenue this quarter and highlights how challenged this market continues to be with mortgage rates hovering between six and a half and seven percent. In the agency business, revenue was $655 million, up sixteen percent from last year. Given the reporting lag in agent revenues of approximately one quarter, these results primarily reflect remittances related to fourth-quarter economic activity. Information and other revenues were $236 million during the quarter, up nine percent compared with last year, primarily due to our Canadian operations seeing higher refinance activity. Investment income was $138 million in the first quarter, up $21 million compared with the same quarter of last year, primarily due to higher interest income from the company's investment portfolio and an increase in average interest-bearing deposit balances, which more than offset the reduction in income related to the Fed cutting rates by a hundred basis points in the second half of 2024. The provision for policy losses and other claims was $33 million in the first quarter, or 3.0% of title premiums and escrow fees, unchanged from the prior year. The first-quarter rate reflects an ultimate loss rate of 3.75% for the current policy year and a net decrease of $8 million in the loss reserve estimate for prior policy years. Pretax margin in the title segment was 7.2% or 7.9% on an adjusted basis. Turning to the home warranty segment, total revenue was $108 million this quarter, up two percent compared with last year. The loss ratio was thirty-seven percent, improving from forty-two percent in the first quarter of 2024, driven primarily by lower claim severity. Pretax margin in the home warranty segment was 22.9% or 23.5% on an adjusted basis. The effective tax rate in the quarter was 22.6%, which is slightly below the company's normalized tax rate of 24%. Our debt-to-capital ratio was 31.2%. Excluding secured financings payable, our debt-to-capital ratio was 23.5%. In the first quarter, we repurchased 448,000 shares for a total of $28 million at an average price of $62.99. So far in April, we repurchased 323,000 shares for $19 million at an average price of $59.95. Now I'd like to turn the call back over to the operator to take your questions.

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. Please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question comes from the line of Terry Ma with Barclays.

Hey, thank you. Good morning. Maybe just start off with commercial, you saw some strong revenue growth in the quarter. It actually came in ahead of your January update. So can you maybe just talk more about what you're seeing in commercial, how the pipeline's shaping up, particularly just given all the macro uncertainty in recent weeks.

Yeah, Terry. Thanks for the question. I'd say we're cautiously optimistic about commercial. This is the third quarter in a row where we've seen some meaningful improvement on a year-over-year basis. And we've got broad-based strength in commercial. We track eleven asset classes in commercial, and nine of them were up year over year. Coast to coast, we've got roughly forty-five commercial offices, and they're all busy with deals these days. We've got strength across asset classes, we've got strength across geography, and one thing we're seeing is that the bid-ask spread between buyers and sellers is narrowing. We've talked about this price discovery here the last couple of quarters, and we're getting to the end of price discovery. Even office, which has been a challenging commercial market for the last couple of years, we had more office mega deals this quarter than any asset class. We are seeing a lot of strength, and we've seen volatility in the macro here these last couple of weeks, but our business hasn't slowed down as of yet. We feel really good about the pipeline heading into the second quarter. We feel like the momentum is going to continue. Based on what we're seeing now, we feel like the year is going to be good, but we'll see how it turns out. Overall, I think we're pleased with how commercial is performing right now.

Got it. That's very helpful color. And then on NII for the quarter, it was just a little bit under your guide. So any puts and takes there? And how should we kind of think about that as we progress through the year? Thank you.

Hi, Terry. This is Matt. I'll take that question. So net interest or interest income or investment income for the quarter, if you're saying it was down a little bit, I assume you're talking about sequentially from Q4 to Q1. That was really impacted by balances in the quarter. Q1, I'll just remind you, is kind of our seasonally low asset investment deposit earning balances, just because of the seasonal flow of business. The other impact was due to our mortgage warehouse funding business. Interest income was down in that business sequentially as well. Year over year, we had pretty good growth. That was driven by the portfolio rebalancing that we completed last year, so increasing interest income for the investment portfolio. Then we had growth in our average balances year over year. When we turn towards the full year, we expect that we're going to have modest improvement over 2024 for the full year 2025. We also expect that Q1 will be the low point for the year, so we expect it to grow from here. Just as a reminder, that's including what we see today in the forward curve of approximately three and a half rate cuts considered in that. I'll also remind you that we expect, for each rate cut, approximately $15 million of annual impact negatively to our investment income.

The next question comes from the line of John Temple with Stephens Inc. Please proceed.

Hey, guys. Good morning. And, Matt, congrats on the new role. Looking forward to working with you. And, Mark, congrats on the move into the CEO seat. That's exciting. Mark, maybe starting with you. I mean, you've been in this business for a while. I'm curious about how you're viewing the path forward, whether you're looking to stick with the strategy in place or if there are areas of the business you're looking to tweak or address or attack.

Yeah. Thanks for the question, John. I think at least in the short term and the medium term, there's not going to be any dramatic immediate changes with our strategy. I mean, I feel really good about the path we're on, and we work on it as a team. Ken and I, the rest of the executive team, we're a team here. We work on it together, and I've fully bought into the strategy that we're on, and not just in the last couple of years, but for the last ten years. I feel really good about the businesses we're in. I feel like the path of the core title business is a good path. It's a good industry to be in. Again, like I said, we're at the first pitch of the first inning here of the next real estate cycle. I think that's a good place to be. I think when you look at our adjacent businesses, we're very optimistic about those too. I think they've got as much as we like the title business, I think some of these adjacent businesses we have have higher growth prospects and have higher margin potential, and I think we've got a right to win in those businesses. So I like where we're playing, and I like how we're going to win in those businesses in terms of having the best people in the industry, and I think we do. We have to win with data and technology. I think with data, we're winning. I think with technology, we're doing an okay job. I think there's a lot of improvement we can make, but we've got a lot of momentum now in technology. I think the last couple of years, we've really built a good foundation, and now we just need to prove it in our results. I think that's going to happen in a couple of years. Strategically, I really like the path that we're on, and we just have to execute. I'm sure there might be some things around the margins that will change over time, but you're not going to wake up and see some press release saying we're getting into some big business that has nothing to do with our core title and escrow business. As a general statement, I like the path, and there might be some changes around the margins, but we're on a good path right now.

Okay. Makes a lot of sense. And then on the success ratio for this year, I know there's always a lot of moving parts, but assuming you're going to get enough growth for that to matter, and then on the investment side, it does seem like you've tapered back a good bit. But as far as what you have earmarked for this year as far as investment activity, taking that into account, would you expect to abide by your typical success ratio this year?

Yeah. We've talked about a sixty percent success ratio, and we were fifty-one in the first quarter, I think. I would say somewhere between fifty to sixty for the full year, and quarters are going to be volatile. But for the full year, I think we abide by that. We are becoming more productive too. We haven't quite filed the queue yet, but our CapEx is down another nineteen percent year over year, so we're continuing to make progress on those fronts. From a success ratio perspective, I think fifty to sixty is reasonable for this year.

Okay. Great. And if I could squeeze in one more, just on the April title order data on purchase, down four, it looks like from a sequential standpoint, that's a pretty decent step down relative to what you usually see from March to April. I know thirty-year rates have been a bit volatile. I think in early, maybe mid-part of April, we hit a 2025 low, and then here of late, it's we're back above the seven percent level. So just curious about if you have this granularity, just the week-to-week phasing, was there a pretty big step down later in the month or just how that looked?

Yeah. We've seen some volatility within the month of April. The first week we were up five percent. Second week, we're down ten. Third week, we're down six. That's purchase, so that includes resale and new home. With new home, there's more volatility in that number. As a general statement, with our purchase orders down four in April, we have seen a big decline in the second week. It's not as bad as the third week, but we have seen that. I would say relative to the beginning of the year, and even relative to the last earnings call we had in February, I think our outlook for the year is more positive now. I think commercial is doing better than we thought. I think the purchase side is less than what we thought. Heading into the year, we thought purchase revenue was going to be up kind of high single digits, and now we're looking at maybe low single digits. But on a net basis, I think we're more optimistic about the business today than we were a couple of months ago.

Yeah. Makes a lot of sense. It's like commercial is certainly got some strength. Appreciate the time, guys.

Thanks a lot, John.

The next question comes from the line of Bose George with KBW. Please proceed.

Yeah. Good morning. And a couple of congratulations to Mark and Matt. Actually, a couple of questions on expenses. Actually, first, on the margin impact from Endpoint and Sequoia, what was that this quarter?

So this quarter, it was a hundred and thirty basis points. Maybe just a couple of things on that, Bose. It hasn't come down in the last couple of quarters. Q1 is our seasonal business, obviously, for earnings. Right? So if earnings are more depressed in the first quarter, that number is going to be higher. We would expect it to narrow over the next couple of quarters. The other thing too is we've really started breaking out the Endpoint and Sequoia earnings separately because we really wanted investors to think about our core business differently. We wanted to separate it out so investors could really monitor how our core business is doing without the drag, let's say, of some of our innovation initiatives. But really for both Endpoint and Sequoia, we're in the early stages of integrating them into our core business right now. I think at some point here, soon, if not today, it's not going to make as much sense to disclose that separately because now we're at the point where we think investors should judge us kind of on a consolidated basis because we need to get the value out of these investments. Even though we still track it today, it's starting to get more integrated into our business, and it's not going to be as meaningful to track, and we think that's fine for investors to judge us with those being included, if that makes sense for us.

Yeah. Okay. Great. Yeah. That definitely makes sense. And then, Mark, just going back to the comment you made right at the beginning just about the cost of the new and legacy systems, is that sort of referring to these investments as well, or could you just elaborate on that and how that plays out?

Yeah. It's primarily related to these investments. We've got these new platforms that are title in the case of Sequoia, whether it's closing and escrow in the case of Endpoint. We've got systems that we've been running on for twenty years that support ninety-nine percent of our orders. Our business runs on these systems. We've been developing these new modern systems on the side, and they're working. We're very pleased with the milestones, and I can go into details on this and hope to at some point, but we're very pleased that this is going to really propel us into the next generation, make us more competitive. We know they work, but they haven't proven they can work at scale. That's what we need to do now. We need to scale our management involved. It's not going to happen in the quarter. We are in the process of doing that. Once we're fully rolled out, we can start dismantling the old systems, and we'll be running on new technology that's going to make us more productive. We're really having these redundant costs here, but over time, we'll get savings from that. I don't think we're going to be spending any more than we are now. As I mentioned before, our CapEx is down nineteen percent, and we're doing a good job of just becoming a lot more efficient with our tech spend. I think we're spending as much as we need to right now. I think our spend will go down, and we'll see productivity improvements gradually over the next couple of years.

Breaking up a little bit there, but thanks very much. I think I got it.

Okay. Thanks.

As a reminder, ladies and gentlemen, press star one on your telephone keypad. Truist Securities. Please proceed.

Yeah. Thank you. Good morning, and congrats, Mark and Matt. What do you think of, if we do go through a recession, how do you see the take? Would you be enthusiastic, so to speak, at least in terms of the impact, potential of lower interest rates, on the housing market? How would commercial react in that? Just a few thoughts on what you might anticipate.

Thanks a lot for the question, Mark. You were kind of breaking up a little bit here on this side. Maybe we have a faulty line here. Let me try to answer your question just about how our business would be impacted by a recession. There's good news and bad news with a recession. As a general statement, a recession isn't good for the purchase market. But again, the purchase market's pretty low. Last year, the industry had as many existing home sales as we did in 1995. The purchase market's like a one out of ten right now. Would it be impacted by a recession? Sure. But it's pretty low right now. With a recession, it depends on what happens with rates, obviously. In most recessions, what happens is rates lower, and we get a refi wave. That typically serves as somewhat of an offset for us. I think a refi business would pop a little bit. On the commercial side, commercial would typically follow purchase. They're not exactly a hundred percent correlated, but if we're in a recession, that would cause some decline or at least softness in the commercial market. I wouldn't say we're hoping for a recession. I don't think that would be a good thing for the economy. It wouldn't be a good thing for First American, but we do have some offsets in that scenario.

Any change in philosophy that you might have around share buybacks? I think the company historically has been fairly deliberate in the buybacks. You've been active here lately, but how do you view buybacks as a use of capital?

We have to think our stock is undervalued, which we do now. We should be buying back our stock every single trading day of the year forever. I think there's windows where it's open, where it's a good thing for our shareholders, and there's times when it's not a good thing for our long-term shareholders. The windows open and close, but I think the window's open because I do think our stock is undervalued. I feel great about the future of the company and the trajectory of our earnings. Because of those reasons, we repurchase shares. That's how we think about it going forward.

Very good. Finally, the bank contribution to earnings and the contribution to or I guess just as a cyclical offset perhaps, could you maybe just expand on any initiatives or what we might expect out of the bank in the next year or two and maybe even throw in if the economy does show some volatility, how might that influence the bank contribution?

The bank is a real strategic asset for us. It makes our escrow operations extremely efficient because title companies work with banks every single day. Since we have a bank and a title company, we can integrate systems. It's easier to operate and open up and close bank accounts with us than any other company out there. There's operational benefits, but a big benefit is financial. Over the last decade or so, we've really tried to maximize the number of deposits that we get internally. Historically, it's been an internal utility where we hold escrow deposits in connection with realty transactions. We push a lot of those to our bank. We push a lot of those to third-party banks. The thing that's exciting about our bank to us is there's a lot of growth potential. Historically, we've really had one big customer, that's First American Title. Every single month, we're signing up new customers. We have what's called an agent banking strategy where we're trying to and having success with banking title agents that are out there, having title agents put their escrow deposits at First American Trust. Every single month, we're signing up new agents and getting more deposits. There are also synergies with ServiceMac, our subservicer, who carries certain types of deposits that we have at our bank. We're opening it up to third parties more, and we're having a lot of success with that. We stumbled early because we needed to invest in new technologies. We need to create a customer service team, but we finally figured out the system, and the flywheel is really going right now with agent banking. We're really excited about the future. As a general statement, the higher the Fed funds rate, and higher rates, it's generally not good for the residential business. As I said before, the residential business is like a one out of ten. But the bank is going to have record earnings this year. We won't have higher earnings than we will in 2025 from the bank. Higher interest rates are a good thing for the bank. Now we get in a lower interest rate environment, obviously, that's going to help our title business, and it's not going to be as good for the bank. We have taken more duration in the bank because we just feel like we want to lock in these good spreads that we have. The bank is a real strategic asset, and we feel like we can grow it over time. It's unique because none of our competitors have one, and it's a good thing to have.

Appreciate that detail. Thank you.

Thanks a lot, Mark.

The next question comes from the line of Mark DeVries with Deutsche Bank. Please proceed.

Yeah. Thanks. Mark, could you give us an update on where you stand with the rollout of Endpoint and Sequoia?

Sure. With Sequoia, we've had a pilot in two markets, in Phoenix and Riverside. When we started the pilot, the goal was to have fifty percent of purchase transactions automated, fifty percent. We've got a clear line of sight into sixty percent. Our hit rates are higher than what we initially thought, and we're going to be able to do it for lower cost than we thought. We've exceeded our base case with respect to Sequoia. The next step with Sequoia is we're in the early stages of rolling it out through the entire state of California. That's in early stages right now. We're coming up right now with the national rollout plan. We don't have it yet, but the team's working on it. For Endpoint, we've made so much progress with the system itself. We are running it live in Seattle. It's working really well. I think it's exceeded our expectations. Now we're in the early stages, and it's going to be a lot harder to roll out the technologies within Endpoint than it is on Sequoia for a lot of different reasons. We're in the early stages of coming up with a national rollout plan to try to figure out how we can get this technology and other technologies that we have in the hands of our escrow officers with the goal of eliminating more of the administrative tasks and giving our escrow officers more time with their customers, more time closing transactions where they can get paid more, and they can just deal with these edge cases where things go wrong in a transaction as opposed to spending so much time on administrative tasks. That's the vision. I would say we're going to have a national rollout plan by the end of the year with Endpoint. We're coming up with it right now to figure out which offices we want to do and what type of people we want to roll it out to, but we're going to have a rollout plan by the end of this year as a goal. We want to have users on it. We want test users in our core business by the end of the year too.

Great. That's helpful. Any updates on what the status is of the proposed rate cut in Texas and some of the efforts to push back on the initial proposal?

It's going to go into effect July first. I know there's a lot of groups fighting it. We're operating under the assumption it's going to happen. We're planning for it. There are things we can do on the margins to mitigate the risk, but we're not going to be able to mitigate the entire blunt of it. One of the things that's helpful for us is we're a big national business with scale. I think it really hurts a lot of the title agents in Texas that don't have the scale where a hundred percent of business comes from Texas. It's a lot worse for the smaller title companies. I don't think it's good for the industry as a whole. We're planning on it happening as of July first.

Okay. Got it. Finally, you made a point a couple of times that the macro uncertainty could cause a slowdown in commercial. Are you just saying that out of either abundance of caution or past experience, or are you actually seeing anything tangible, whether it's in conversations with customers that point to that?

When we look back at the last couple of recessions, we've had the purchase and the commercial market both decline together. There is evidence of that. What I'd say is we haven't seen it yet. We haven't seen it yet. We've seen one deal that I'm aware of in the US that has been postponed. It wasn't really recessionary. I think it was just because of tariff uncertainty. We've seen a couple of international deals postponed, commercial deals. When I say postponed, these are refinance deals that are going to happen eventually. We just thought they were going to close in the first quarter, and now they're pushed off. We haven't seen a decline at all, and we always see strength right now in commercial. But if we see a recession, if we're going to a recession, I have to imagine our commercial business will get softer because that's how it's always been the last few recessions.

Okay. Got it. Thank you.

Thanks, Mark.

The next question comes from the line of Geoffrey Dunn with Dowling and Partners. Please proceed.

Thanks. Good morning.

Good morning, Jeff.

I appreciate your thoughts on the philosophy of buyback, but I was wondering if you could walk us through how you're thinking about the resources for buyback. If the window remains open, can you walk through some math with respect to expected cash flows, opco dividend capacity, common dividend, and debt service obligations? What's the actual pool that could be an opportunity to buy back as we pick it up here?

Hi, Jeff. This is Matt. I'll start on that one. At the end of Q1, when we look at what's the capital that we have available for those types of activities, at the holding company, we had about $100 million of cash. We feel good about that level of cash as kind of what we need. When we turn to Patiko, the way we look at Patiko and measure what we believe is excess capital in Patiko is we try to approximate what we believe we need for rating agencies' requirements and then also to run our business. We think we have about $160 million roughly in excess capital at Patiko as well. Those right there, that's resources that we could use. We're also generating meaningful earnings every month. That's a potential. As you know, we have our corporate revolver with $900 million. If we were to need additional liquidity or capital, we could access our revolver. When we think about dividend capacity, right now, Patiko's dividend capacity is $535 million. There's no regulatory constraints for what we would need to be able to pull out of Patiko if we wanted to access some of that excess capital. When we look at our debt to cap, we're at a comfortable 23.5% right now. It's a little bit over what our target would be through the cycle, which is 20%, but we're very comfortable at 23.5% given where we are in the cycle. Where we would think we want to be is generally not over 25% for a sustained period of time, but for rating agency purposes, as long as we're not over 30% for a sustained period of time, the rating agencies would be fine. Our covenants are at 35%. We do have quite a bit of capacity to access debt if we needed to on our facility. Those are kind of the pool that we think of as capital available.

Great. Thank you. That's helpful.