Steven Mendel, CEO & Co-Founder at ManyPets sits down with Brian McLoughlin, Partner & Co-Founder at MTech Capital to discuss the future of pet insurance with insurtech disruption at the helm.
Transcript
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[Music]
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welcome everyone my name is brian
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mclaughlin i’m the co-founder of mtech
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capital and insure tech venture capital
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fund and i have with us today steven
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mendel who is the ceo of bought by many
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welcome stephen brian very nice to meet
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you thanks very much indeed for the
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opportunity to talk about uh what we’re
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up to going to talk about shortly i’m
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not sure that’s going to be yet but i’m
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excited well let’s get started at the
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beginning uh how did you come to focus
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on pet insurance because i have to say
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you were a bit of a pioneer we’re
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talking
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2013-ish when you started the business
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so
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you could give the audience a sense of
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that
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sure very happy to so
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actually the business set up in
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september 2012 so shockingly for me
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nearly eight years ago
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um in fact next week it’s eight years so
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this is really quite staggering um and
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specifically we
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we focus in a whole broad area of niche
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insurance categories
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over
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over 330 different niche areas
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and we were found that we were just
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unable to persuade insurers
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to be able to provide better product
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price and experience today to our
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members in those communities
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and so we looked at the communities and
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and ranked them according to levels of
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engagement
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and all of our pets communities just had
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a much higher level of engagement than
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any other communities so that was our
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answer i i can’t claim to have huge
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rocket science or great insight into
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this we just looked at engagement and
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thought fine we’ll start there that’s
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what we’re going to do we’re going to
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try and reinvent the pet insurance
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marketplace and at the time we were only
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focused on the uk uh things have moved
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on in both dimensions since then not
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just pet and and not just the uk
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but it’s really very clear for us that
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this was just an engagement driven
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decision and nothing further and tell me
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back then and maybe it’s still true
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today
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incumbent insurance carriers did what
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well for you and what did they not do
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well for you and is this just a matter
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of i have a digital experience i want to
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deliver or even did it come down to
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policy language that they were refusing
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to change
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tell us about that
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yeah so i mean these are good questions
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right because basically they wouldn’t
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change very much they would just about
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change price
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most incumbents were very happy to
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negotiate over price with us
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but definitely nothing on product design
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nothing at all on customer experience uh
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you mentioned policy wording i mean this
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you know
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in the insurance basis we all know is
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incredibly antiquated
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and the uk pet market is no different to
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that
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in fact actually when we launched our
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own pet stuff in february 2017 we won a
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plain english award for the our
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documentation which was created at the
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point of sale so each policyholder has
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bespoke policy documentation
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and that policy documents are designed
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to be read by an 11 year old although
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frankly i’m not quite sure any 11 year
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old would actually want to re to read it
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that’s a requirement to get the plain
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english award so we have that
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so tell me
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your series a was done i believe in
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early 2017
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for the entrepreneurs in the audience
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who are more early stage addressing
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those folks because right you’re a
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company that’s now raised over 100
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million dollars but for a bunch of folks
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listening
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what do you think the key
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uh
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milestones were for you to raise that
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series a what had you sorted out
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so
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so
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so i’ll take you back a little bit
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further than that so we had decided by
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the end of 2015 that we wanted to focus
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exclusively in and around the pet space
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and so we had made a small acquisition
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at that point to enable us to have all
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the regulatory licenses in september
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2015.
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and and in the early part of 2016 we had
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already
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signed an agreement with munich re who
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would provide the capacity for us
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which actually led on to the development
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of munich digital partners which many
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insurtechs now use extensively but this
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was before those days
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and so we had in place licenses capacity
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a target market that we had already
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understood well by this point and these
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were really the main contributing
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elements to our series a which which
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closed at the end of 2016 um and enabled
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us to launch in the pet space in
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february 2017. okay well you know let’s
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do this let’s fast forward to today
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uh it was just early this year that you
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raised close to 100 million dollars
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and
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again for our leaders that’s a lot of
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money and so our later stage uh uh
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entrepreneurs who are thinking about
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what the future looks like for them
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how much capital they might need and
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what the milestones need to be maybe you
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can
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tell us a little bit more about revenue
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progression in the last two years you
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know some quick kpis
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what your uh what your cost to acquire a
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customer is and what your lifetime value
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is and what that multiple is and what
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you think entrepreneurs pardon me what
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you think uh investors were looking for
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as sort of a minimum as it relates to
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those kpis right so brian i i will tell
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you off the bat as i as i as clearly you
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know seasoned investor you hit all the
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right points
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and these we knew we had to have some
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really compelling metrics to be able to
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to raise significant money and and as
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you’ll appreciate raising 100 million
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dollars in the middle of covid lockdown
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was not necessarily a walk in the park
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um so i can talk a bit about that
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experience as well if that’s interesting
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but specifically to your point uh we had
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doubled revenue or in our world premium
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income every single year since inception
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and we’ve never missed that target so so
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being able to make that commitment to
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being not just look at what we’ve always
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done but look at our plans and we’re
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going to stick to that so that doubling
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year on year is an important part of the
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process and in fact actually in recent
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times that’s accelerated so so
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so to give you some very real data to
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bring you up to speed uh june of 2020
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over june of 2019 was 195 up so nearly a
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3x multiple
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um so that rate of growth has been
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accelerating so all of this
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really important
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but not as important as that critical
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lifetime value over cost of acquisition
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multiple that you were just alluding to
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this for me is the single most important
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metric that i watch like a hawk
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i can tell you what it is for every
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single channel on a daily basis
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by product type
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and we
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we all the leadership team are bought by
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many pay a lot of attention to it so for
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us
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we have always said we will beat 3.0 uh
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so and that’s a fully loaded uh lifetime
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value of fully loaded cost of
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acquisition so no jiggery pokery in the
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calculations um we we’re very
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transparent about that um we have said
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that to be able to be sure that we will
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beat 3.0 we will target 3.6 so i
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described that as kind of putting a
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fence around the core target so so we’re
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going to make sure we never do less than
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3.6 of course we’ll pass three
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and in fact um i’m delighted to say that
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over the last few months our
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ltv over cac has never been below 4.6
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and when you calculate ltv do you do it
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based on revenue or based on
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contribution to the overhead of your
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business i’m curious oh so so it’s based
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completely on contribution so
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it’s f and fully loaded contribution so
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so we take out all associated costs uh
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in the co the when i’ve looked at other
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calculations of this it’s actually
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normally the cost of acquisition that’s
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most played around with um we take out
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of that
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on servicing the cost of bringing the
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business on the books as well as the
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cost of the marketing team into that so
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it really is genuinely a fully loaded
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cost of acquisition
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what do you attribute
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the relatively clearly low cost of
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customer acquisition and the very high
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growth rate too and if you look at the
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competitive landscape let’s say in the
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uk choose that market
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what are the key differentiators that
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your uh customers reward you with well
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like what what makes that difference
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that allows you to execute like that i
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think only one i think there’s only one
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thing that really matters i mean i can
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give you i can give you 20 minutes worth
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of specific real examples i think we
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recently counted we have 26 points of
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differentiation compared to the best in
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the market
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um but but i don’t think actually that’s
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why people come to us i think people
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come to us because we have a genuinely
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differentiated and outstanding customer
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service
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our net promoter score has never been
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below 70
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and that’s across all customer touch
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points so so that’s not just post sale
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because i’d like to think that everyone
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has a great experience at sale but
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that’s post complaint post renewal post
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complaining and claiming and we put it
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all together in fact i can tell you that
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for for august which is the month that’s
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just finished our post claims net
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promote score was 84.
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um and and that’s i think why people
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keep coming to us so
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driving down cost of acquisition through
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driving up referral rates is a core part
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of our future success and a part of our
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recent past as well all right so as we
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wrap up stephen tell me
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what does the future hold for you having
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just raised 100 million close to 100
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million dollars i assume almost all of
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that will be directed toward customer
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acquisition but you can tell me more
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about that
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and then
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so you’ve been a hot market m a wise and
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so i’m sure you’ve gotten phone calls uh
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from more than one uh investment bank
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for sure and maybe directly from some
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insurance companies maybe you can come
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in i’ve also had a bunch of phone calls
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from wealth managers i think they’re a
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bit deluded i think they got me a bit
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confused about that 100 million dollars
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um clearly clearly maybe not the
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maybe weren’t reading necessarily the
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press release correctly
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um so
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so yes we’ve been uh we’ve had a lot of
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uh approaches about m a um we as i
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alluded to already once we’ve done we
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actually have done a small number of of
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acquisitions in over the last few years
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uh we’re actually looking at another
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small one right now uh but this is not a
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core part of our growth strategy at all
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we’re not to acquire the reason for
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acquisition is about acquiring talent or
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capability not customers um so we will
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be putting very little of that hundred
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million dollars into into acquisition of
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businesses you are right of course
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customer acquisition is critically
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important to us uh and so and
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maintaining this doubling year on year
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is we’ve made that commitment and we
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intend to keep delivering to it
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and and of course there is this new
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business strain on all insurance
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operations so we have that to contend
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with
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but also it’s about expanding overseas
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it’s about expanding our range of of
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capability as i alluded to also earlier
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on the conversation so we don’t intend
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to be just in the uk and and sweden we
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don’t intend to be just providing pest
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insurance and we don’t intend to be just
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thinking about those very small
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fast-growing but specific marketplaces
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and so some of the money is is to be
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used to expand our horizons in a bunch
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of different dimensions
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and does that include coming to the us
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so we’re looking very hard at the u.s
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marketplace the u.s pet insurance
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marketplace uh actually has a a a
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significant number of players very few
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of whom have properly innovated in that
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space uh the marketplace looks different
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to sweden and to into the uk so a lot of
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people confuse that it is a different
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operation the biggest issue in the us is
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just lack of understanding and
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experience and knowledge and even
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exposure to pet insurance
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so in the uk about one-third of pet
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owners buys pet insurance about 30
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percent uh in sweden it’s 60 which is
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where pet insurance as i said was was
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invented uh 10 years ago sweden was at
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the uk levels of penetration so the uk
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is on that trajectory
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staggeringly in the u in the u.s it’s
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just two percent
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so only one in 50 pet owners buys pet
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insurance we’ve spoken to many vets in
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the us to try and understand why this is
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the case and many of them have never
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even heard of pet insurance themselves
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so so there’s a huge education program
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that would need to happen for the us to
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be on that same trajectory but but who
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knows
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no there are there are more than
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well over a dozen competitors i wouldn’t
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be surprised surprised that there are 84
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brands here too as well but your point
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about uh low penetration is still is
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still 100 accurate um
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but the market is growing very quickly
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so it is uh it’s an exciting market for
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the us uh for sure so
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final question for you stephen in terms
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of
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you know there’s some inside baseball in
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terms of
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the way you’re building your business
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many of your competitors in different
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lines have decided that their reinsurers
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their capacity providers do not keep up
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cannot innovate will not take greater
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risk they decide that they want to be a
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full stack
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insurance company and at least in the
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u.s market there are a number of ways
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you can do that you don’t just have to
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raise equity capital
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um there are reciprocal arrangements
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that you can set up and
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choose your state they’re about a half
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dozen that are popular
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how does bought by many think about
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whether
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capacity providers are keeping up
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whether you need to go full stack or
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whether you can be
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as big as you want as an mga
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so as an excellent question brian and
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unsurprisingly a question i get asked
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often um and and so the first thing i
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must tell you is never say never
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um so
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i i think that’s important to say
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critically it’s not on our agenda right
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now our board keeps track keeps track of
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this debate and we often talk about it i
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think we did it last maybe back in march
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i believe is the last time the board
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meeting we talked about it
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but we are blessed with phenomenal
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reinsurance capacity providers who are
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very happy to stand behind us um so i
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mentioned munich re right at the
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beginning we’re about to announce we’re
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another very large global reinsurer
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who’ll be stepping into sitting
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alongside them and maybe two is not
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enough in the in the long run and we’ll
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have a third but i can assure you that
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of the volume of business we’re writing
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right now this does not at all worry any
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of the reinsurers who are out of the
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marketplace
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yeah our loss ratios are at market
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leading levels as in low not high
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and
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and the growth rates make this a very
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attractive proposition for them to put
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capacity to work there’s no shortage of
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capacity as i’m sure you’re aware in the
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insurance industry but there’s a
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shortage of places to put it
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economically attractively to work and
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this looks like one of them for them so
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when we were looking to add another
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reinsurer alongside munich we were
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actually delighted to find that we had a
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significant number of players who were
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really properly interested in it some we
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approached several approached us
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directly
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and so
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again never say never but right now i
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can’t really see why we would go through
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the heartache and hassle to do it when
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we’re in such a strong position
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excellent well stephen thanks for your
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time today really appreciate it
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stephen mendel
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uh walked by many ceo and founder thank
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you
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brian many thanks to you too
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you