#236 - Get Your Reinsurance Money Back

Hey guys, just real quick, before we start the podcast, we want to make sure you guys know about the owner's manual. It's the Independent Dealer Podcast, weekly newsletter.

Yeah, Jeff, a lot of fun. It's something you and I came up with weekly. Pithy, less than five minute video talking to you about things you need to be doing as an owner, things you can do to help train your staff. And I think the easiest way to get that, Jeff, is to go to the website. Right? What is the website?

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You are listening to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson.

Hello and welcome to the Independent Dealer Podcast brought to you by Buckeye Dealership Consulting. And Luke, we actually have, we have a Buckeye Dealership Consulting.

With us we've got the mighty leader of Buckeye, Rob Vox. So thank you. Rob, the, the reinsurance guru we should call you. How about that?

I don't know if that's the case, but I'll accept it.

And we also have Michael T. From MCMC in Texas, one of the largest buy here pay heres in the country. Probably one of the older ones too. So thanks for being with us, Michael.

T. You're very welcome. Thanks for having me.

Luke. This means we're going to be talking reinsurance and everyone knows we are big fans.

Everybody should be a big fan.

Everyone should be a big fan. And we're not going to talk about the, you know, the A's, the B's, the nuts and bolts and how to get it started. This is going to be reinsurance, kind of an advanced lesson.

This is like 301 or, or 500 level. What do you think?

Yeah, this is, this is kind of the end game. That's what we wanted to talk about. We all talk about funding our reinsurance companies and how it's such a great idea and move the money, blah blah blah blah. But then, then what? Then what?

And, and that's, you know, actually I've been kind of dealing with that. Our reinsurance company has been open for I think 11 years now. And it's just, you know, if you manage it right, it starts to build pretty big number in there. And Rob, I know you've seen this over the years, even if you're only selling 25, 30 cars a month, if you do it for 11 or 12 years, it's a big number. And so the money's sitting there. Now what do we do is I guess is the title to this one, right?

Yep. Rob. So tell us to set up the conversation. Luke's funded his reinsurance. Michael's funded his reinsurance. They've got four options, right? Once they decide to do something with that money, they've got four options. So explain to us what those four options are. Are. And then we'll have Michael T. Kind of jump in and tell us how he's put those into practical applications in his dealership. So that us dealers can see. Oh yeah, like there's some options here, like there's some ideas, there's some things I could be doing. What are our options with that reinsurance money?

Sure. There's really only four, as you said, there's do nothing.

Okay.

Just leave it in the bank account. Maybe an interest bearing. But we all know what that means in today's world. You know, it's just now creeping up to something. You can invest it traditional investments. The national association of Insurance Commissioners puts out an acceptable list of what you can invest in and what you can't. And then you can borrow the money out. The IRS will is okay with the owners of the reinsurance company borrowing money out of the reinsurance company. Or lastly, you can dividend as you're, as you start having earned proceeds, you can dividend that money out. It's tax, it's done at a tax favorable status as a qualified dividend. And for majority of people, it's anywhere from 15 to 23.8% is what you'll pay. And those are really your four, your four choices.

And so Rob, let's, let's start with number one. Like let's say we leave it in forever. Is that possible? Or do you have to start winding it down at some point? Because I've kind of started hearing something about that.

So if you're not ready any more risk, yes, you do have to wind it down, okay. As it earns out. And if it ever becomes fully earned out and you're not accepting any new risk, it's actually then considered a special investment vehicle. And it's foreign at that. And the tax rates on that are huge. And the US Government does not like Money does not like its citizens having money offshore or in a special investment vehicle that's considered a foreign investment vehicle even though it's kept in America. So yes, you do at some point, if you're done writing risk, have to close it. If you're continuing to write risk, you can have earned reserves on earned reserves. Just sit there.

So let's say, let's say I quit writing risk as in I sold my last car yesterday and I'm not going to write any more VSCs or warranties, but I'm still writing CPI until I collect out all my accounts. Does that allow me to leave it in until the CPI risk is gone or not?

Yes, it allows you to keep that open because then you're still acting as a reinsurance company and it also, you're allowed to keep it open until that last contract turns out okay. So like in the new car business, some of our guys are writing 10 year wraps. If you wrote one 10 year wrap the day before you stop selling, you could earn it out over 10 years.

Is there any purpose in just leaving it there? Is that? Or is that just because I don't know what to do and I'm waiting for tax?

You know what?

Yeah, everyone's situation is different, Jeff. You know, and this is where you get involved with the outside accounting firms. You know, we have three CPAs on staff and I know our other competitors have accountants on staff. And that's where you deal together and talk about the right time to start taking it out, either in dividends or, you know, well, dividends is really the only way to take it out at that point because you're done. But so when is the best time tax wise for you?

Let me ask that of Michael. Michael T. When did you. I mean, you've had it forever, right? I mean, I don't know if you can remember this far back, but at what point did you decide I need.

To put some more color in my hair or something?

Yeah. Or none, just shave it. Was there a trigger where you said, I assume you've exercised one of these three options, borrowing it back, investing it, or taking it as a dividend. At what point did you decide one of these was good for you at your dealership?

So we've probably been doing reinsurance companies and products for 15 or 20 years. We've been through several different administrators, several different dealer product reps before we landed with, with Rob. Not that was probably 10 years ago or more that we landed with Rob 17 years ago. 17 years ago. I've had a few Birthdays, I guess.

Yeah.

So pretty much it, it probably took us about three years to see the money that we wanted to seed into it and to kind of get comfortable with it. And to start it's. No, this is not your question, but this was our question in the beginning. We're kind of toe tippers. We tip our toe into the water and see how is it going to be cold? Is it going to be. So the first, you know, we first started with a little three month warranty. And how is this really going to work? Is this really what the, this product really works the way they say it works? And then you figure out it does work that way. Now how much more product can I put together? How many different ways can I get this open because it's such a valuable tool in our lives? So it took about three years to kind of figure all that out. And once that happened, then we figured out. I particularly take mine out in dividends once a year. I don't dividend out all of it out or even maybe not what's available, just what I want to dividend out. And I typically do that once a year.

And I've got like a Gulf Stream or something or like a 100 foot yacht or whatever you decide to pick.

Up that I'm sure some could afford. 100 foot? Yeah, yeah, probably.

Well, that's, that's interesting that you did it a year. Yeah, and I took a dividend this year because it had been sitting there for a while and you know, I just said, you know, I'm not sure we're going to be in a better tax position than we currently are in this, in this country. I think it probably only goes up from here. So I thought it was a good idea. So that's an interesting concept, Michael, of dividend out once a year. That sounds like a great idea. What, what led you to that?

Just, that's the way I wanted to. I use, I don't use my money to live on. We've changed our philosophy over the. And when we first started, I said, look, I just put, I basically take the minimum salary from the dealership that I can take and I put all the rest that I could afford to put into the, into these tax, favorable reinsurance. And then I would take that money out once a year and I would live on some of it, would invest some of it, things like that. Now I've kind of changed that philosophy. I take a larger salary and I use all this dividend money that I take out for particular investments that I want to Do I typically invest in real estate? I have a brother in law that invests solely in stocks and he uses his for that. So.

Well, that, that's what I did this year, to be honest with the viewers out there is I had an advantage, I had an opportunity to take advantage of a rather large hedge fund. And I said, you know, it's probably a good time to pull some of that money and get in when the, when the market was down this, you know, a couple months ago. And I think that's a great strategy. Real estate. I know. Jeff, you're a big real estate guy.

You put it all in dogecoin, right, Luke?

No, no, no, no dogecoin. But that, I mean, that's great. Dividends are awesome. Rob, now that we're on the talking about investments, you said that you can invest your money straight from it. Yeah. So. Yeah.

So your reinsurance company is allowed to have an investment account, you know, and they're allowed to invest it in the market. And again, the, the National Association's naic, National association of Insurance Commissioners, they put out and it needs to be updated because it talks about blue chip and you know, you can't do arbitrage, but it tells you, hey, listen, you can do A rated stocks, B rated stocks, bonds, that type of stuff. So within your reinsurance company, you can have an investment account with your unearned reserves and your earned reserves because again, remember the irs, what, they like you to do that. Okay, yeah. What, what they don't like is if you just keep it and it does nothing because you pay no taxes, then these companies pay taxes on investment income. So they want to see you investing it. They want to see you using the money reasonably to drive revenue that then drives tax, you know, receipts.

But there's certain, is there certain stocks or certain certain things that the reinsurance company can put it in.

Again, I mean, there, there's a, there's again, it's really broad. You just can't do like arbitrage. You cannot do speculative. We just a minute ago you made a joke about dogecoin. None of that, okay?

They don't allow.

Yeah, you're not gonna be doing that, but you can do, you know, some good asset back business. You can do, you know, again, what I call what they call A rated stocks and B rated and also your bonds, your A and B rated bonds. You just can't do junk bonds. You can't get really risky with it, but you can be very conservative with it.

And that is something that the folks you have on Staff, Rob can advise the dealers on how much they can use and how much they can't use and the risk that that's there. Correct.

Correct. Yeah. You know, traditionally in most everyone, they want you to keep 20%. In fact, this is part of the NIAC guidelines also 20 in cash and cash equivalents, and then 80%, you're, you can go invest. Okay. Now that doesn't take consideration loss ratios or anything. So that's being real. I'm being really general with that. But they do want to see you at least 20 in cash and cash equivalents to cover any losses you might have in a particular month.

Because losses do happen. You know, Rob, that might be something to, to just touch on real quick. I know that might not have been where we're going, but leaving that 20% there, because this, if you're, if you just started your, your reinsurance company, that money's got to build. So how long does it do you see before you can really start taking advantage, you know, of a dealer selling.

20 to 30 cars a month? It depends on the underwriter, the insurance company.

Okay.

There are some insurance companies, no matter how well it performs for the first year, will not allow you to borrow the money out. Just won't. Okay. There are others that have requirements on your trust account that want you to have 110 of your earned to your honor. I mean, there's so it, it runs the gambit we like to see in the first year, keeping it really conservative, trying to keep IT in the 60% range. Borrowing out, we have gone higher depending on the product and depending on the term. And then as we get lost information, our actuaries will do loss curves on our current business and they'll tell us, hey, listen, you can lend out this much. And then so, and we have good relationship with our insurers and they'll take our loss curves, allow us to do the inverse of the loss ratio. So if you're running a 20% loss ratio, you can borrow 80, you run in 29, you can borrow 71. And so, but again, we provide that data to the insurance company and they allow us then to do the documents.

Well, I think that brings us to another one of the top four things you are the four things you can do. And that would be lending the money to yourself or to your, you know, to reinvest in your company or whatever. Can you walk us through how that works, Rob, and the advantages there?

Well, sure. You're, you know, you're borrowing from yourself. I mean, in the buyer payer space we all know these things. Eat, eat cash like cows. I mean they're just, they just graze on it. So you're, if you're, if you put a plan together, you can actually pay off your line or pay down your line to make it more manageable. I have one client who was getting ready to retire, had a 40 million dollar line, wanted to give, get down to 10 because he didn't want to leave the next generation a 40 million dollar line. And we were able to do that with them. You know what you need to do is you need to make the loan dog. You know, there's things that the IRS wants. You know, you need a board, you need minutes approving that loan. You need a loan document. Okay, you need an amortization schedule and it has to be performing again. Go back to what the IRS looks for investment income. Well, what's the best way to get investment income?

A loan.

Steady stream of interest income.

So Michael, why did you guys not implement that kind of a strategy? Why wouldn't you have just borrowed the money back to yourself to buy real estate or other things? Was there a reason you took it as a dividend instead of either investing it inside the insurance vehicle itself or borrowing it to yourself?

I think just to try to keep it as simple as possible. For me, it can get pretty complicated and I have borrowed money from the to use for investments. It gets pretty complicated. I just try to do. To keep it as simple as possible. For me, I pay the taxes, it's a favorable tax rate, and I go make the investment. There's a lot of different ways to do that. I know a lot of what y' all are talking about. I know a lot of dealers that loan the money back to their dealerships. So they're paying themselves the interest. There's just, it's a fantastic tool. It's very flexible. There's tons of things you can do with it. If your dealership can afford the extra cash, that's the main thing, then, then by all means you should be using. These are smart plays and they're all completely above board and legal and there's nothing, I think that the, the term offshore, which people don't use that much anymore, that used to scare people. Oh, I'm going to have money offshore, you know, really, Money's not really offshore ever. So.

Hey Michael, that was, that was interesting talking about why you, why you loan and didn't loan. We've, we've loaned a bunch of our money over, over a time. Loan it back to ourselves to, to get rid of not to never have to have a, to have a line of credit. And I'm sure with the size of your business, it's when you first start putting that money into the reinsurance company, the cash flow bite that it takes. Can you walk through that and how scary that was? Because I remember, I remember doing this thing for two or three years and then start looking at the cash flow and I was, I was like, I'm shutting it down because, because it's eating me out of house and home. And I remember getting on the phone with Dave Keller and I said, Dave, you gotta walk me through why do I keep this thing open. So he did a little, he did a little, you know, song and dance and a spreadsheet and he showed me and I said, oh, I see why I keep it open. So talk about how scary that is. The initial cash flow threat.

Well, so that it is if you have to, your business has to be mature enough to handle it and then you have these expenses. So let's say in the beginning we put a $300 per car, three month warranty on. So we had to be able to afford to put that 300 times 3,000 a year and move that cash away. But we were already really spending most of that money anyway because we were fixing the people's cars. We were just doing that out of good policy. We didn't have any warm and fuzzy to give them. When we started the three month warranty. Hey, the customer got a warm and fuzzy, something breaks down, they're going to come back and fix it. Now instead of taking it out of our right pocket, we're taking it out of our left reinsurance pocket and paying those same fees and you're just moving money around. The difference was we moved it out of where the company was going to take that profit and moved it over to where the reinsurance companies now going to take that profit at a much favorable tax rate. That's really the bottom line.

If you look at that $900,000 a year that you just, you know, demonstrated, you know, most of us are going to pay almost 40% of that. And so it's absolutely, it's a huge cash flow give back once you can recognize that. And that's essentially what Dave Keller was telling me. Rob, I know Michael's probably past the, the three month 3000, but that's where I started. Is that where most dealers start? And how do you see it evolve after that?

You know, most dealers actually start now with cpi.

Okay.

You know, when we go and Talk to dealers. We talk about accounting for the transaction you're already doing. Michael just made mention. Hey, we were paint, we were fixing the cars. I'll tell you what, there's three dealers on this, on this call you if I'm a great, if I'm a good client. You're fixing my car whether it's covered or not. Because you want me to continue to make payments. That is our basic covenant, right? Is it? If it's running, I'm paying. So we go in and talk to people. Let's account for the transaction. Well, the first transaction I can talk about is how many people aren't insured that need to be insured. Oh, 60 of your portfolio, more than likely. And by the way, why? Well, they can't afford it. Well, what if I gave them a. What if we gave them a cheaper option and you could do cpi? So we, we're seeing more people start with CPI than the three month warranty, then gap and then go into a service contract. And that seems to be the normal progression, I guess, accounting for the transaction.

Yeah, I think the last product out, the last product I went to was cps, so. That's funny.

Yeah, the CPI for me is hard to wrap my brain around, but it does make a lot of sense because again, CPI is such an easy sell because that's money that technically would have been going elsewhere to some GEICO or progressive, and instead you're capturing that, that insurance money as a cpi. The warranty thing makes sense because I was already giving a three, three month, 3,000 mile, you know, guarantee on my cars. So it's like, okay, like Mike said, just, just officially account for it. Put that money aside in a reserve instead of self reserving for it.

So there's two big, two big differences here. The warranty money, the dealership is funding, you're funding it out of your cash flow. The CPI money, the customers funding it. It's a customer pool that's taking care of customer accidents and wrecks and fixes. So we're not supplying that money to the CPI customer basis. It's a huge difference.

That's a great point, Michael. I know, I didn't even think about that.

You know, one of the big pushbacks we got when we started doing CPI was oh, I've already maxed my client out. They can't afford to give me that extra $90 a month. I mean, I heard that everywhere and I'm like, you don't understand, they will.

Give it to you.

You didn't max them out. You Know, we kept it at $20 a week and by God, it works.

Hey everybody, real quick. All this great reinsurance talk and talk about big trust accounts and earned premiums and someday we'll get there. But if you do have a couple extra bucks, make sure you're buying your GPSs.

Just as simple as reinsurance helps protect you pastime GPSs help protect their assets, which is you as well. So they kind of go hand in hand. If you, if you really want to protect your business and protect your, your asset, which is your portfolio or if you're not even a buyer pay here store, you're a retailer facility. Protecting your assets is what passtime does and luckily they're the best in the business and you need to go soon.

It makes a huge difference too, Luke. I think sometimes when I'm looking at a customer that might have expired insurance and I'm like, okay, do I go through the hassle of putting force place CPI on them and then this, this, this, if I GPS them and I see that they're somewhere they're not supposed to be or that I don't expect or you know, I can sometimes use that as a decision of whether like, okay, yeah, let's do CPI and let's give them some time or no, we just need to go repo this thing. Thing. I'm not even going to go through the hassle of force placing the insurance. I'm just going to go pick the car up.

It's a great collection tool, Jeff. And I don't know what we do without them.

Yeah.

All right, back to the episode.

It's a great product.

Back to the third, the third or the fourth one? Taking it out as a dividend from my reinsurance company, is that not just a wash? I mean, I, I, I brought the money from my dealership over to my reinsurance company so that I wouldn't have money in there to take as a dividend. If I just take it back out of my reinsurance company as a dividend, aren't I essentially just kind of paying the same on taxes either way?

Depends on what your tax rate for normal ordinary income is. Okay, totally based on that.

Yeah.

Currently in some ways it could be a favorable tax rate and maybe if you're not in that tax bracket, it may be a wash. But there's, there's, you know, there's other things that are, the benefit, the customer feels better when they leave the dealership. Even if it is a wash, the customer, even if you spent all your money, the customers benefit the customers Keep their cars running. These products help keep their cars running. They make payments. And you're making money on that, on that side, on the business side of it, on the traditional original buy here, pay here side of it.

I mean, I think, Rob, correct me if I'm wrong, but currently depending on your tax bracket, but 20% long term capital gains, three and a half percent Obama tax and then your state tax. And Texas is lucky, they don't have state income taxes and Florida's lucky. So Texas is, is very advantageous at, let's say 23 and a half percent. South Carolina, not so much, 31 and a half percent. But still it's cheaper than, you know, 37%. That 37% plus 8%. So 43, 44% that I would be paying. That sound right?

Yeah. And Jeff, what you can also do is you can time it. So one of the biggest things that we're not talking about is the deferral. Okay. So you can time it to where you have a loss and take the dividend and it really is not a taxable event.

Yeah.

You know, in your case, with your concern, what I would do is I would open a second account to where your earned premium under your reinsurance company where your earned premium can sit. You can do whatever you want with it there. You can invest it. You know, I told you NAIC puts rules on honored, it does not put rules on the earned. So you open an investment account by ABC Reinsurance Company, invest it, treat it the way you want to treat it like you would if it was yours. Don't divide it out, you know, loan it to yourself, whatever you want to do, but keep it underneath that company until such time your taxable situation is, hey, I could take some of that out and not have, you know, not that, that big of a tax bill. And that's one of the biggest things these offers, tax deferral.

Borrow some back, buy some real estate, do a cost sag, taking an advanced depreciation, and then take the dividend that same year because you're. Yeah. When you say wait for that year when your income is down or when you have some large loss to offset it, then bring that dividend back in. That makes sense.

Yeah. And some of our people are using their money from their reinsurance companies to get into these opportunity zones. And that opens up a whole new way of not having a taxable event. You know, and we work with the outside CPA firms to help them do that. But we had quite a few dealers open new lots in the opportunity zones. To take advantage of those.

So you're bringing your reinsurance money back in, either borrowing it or dividending it, but you're putting in an opportunity zone that will never pay capital gains. Yeah, that's so smart. So did that works when you're the only owner of the reinsurance company? Right. I mean, I guess I could see Michael T's situation if he has multiple owners like you mentioned, mentioned a family member that might have a different objective. So he says, hey, my objective is to buy real estate. His objective is to buy stocks, and I don't really like those ones. So let's take the dividend. You do what you need to do, I do what I need to do.

Traditionally, we set up two different reinsurance companies. If you have two different people. Okay. Even brothers and brother in laws.

It's our dad, our debt, our dads. Yeah.

Or your dad, you know? Okay. Dad's a really good example. Oh, my different needs. Okay. You know, you might be thinking of private school or a pool in your backyard. And you say, I want to do it and I want to put my kid in private school. I want to put a pool in the backyard. And your dad's sitting there and he's my age or older. He says, hell no, I already got it. I already put you in private school. I'm not taking money out dividend. So you need to agree on it. So what we do is usually when we have two or more members, we allow each one to set up one.

I would recommend.

We've always had separate insurance companies.

I don't want to speak for you, Michael, but yeah, they have all seven.

We've always had separate. And for that reason right there, because we all want to do something different with our money and don't necessarily want to have a partner in there.

How does that work logistically then? If you have two reinsurance companies at your dealership, so one to one, they're just funded left one, right.

Every dollar comes in, 50 cents goes to one, 50 cents goes to the other. I don't.

You guys do it all.

Yeah. You just take it down to a dollar. Okay. You could have six reinsurance companies. I'll split that dollar six ways.

We can speak to ours. We can speak to ours. We have, let's see, we have 1, 2, 3. We have, we have six reinsurance companies.

Wow.

Because I have one and my brother in law has one, and then I've got three set up for my children and he has one set up for his children.

Yeah. So that's, that's Great.

And all that money that cascades just gets split into however we decide to see those. And then Rob's guys take care of that. We say, look, 40 goes here and 40% goes there, and 20, you know, 20 there and 20 there. And that's.

Man, I wish I would have when I set mine up. Rob, I wish I'd talked to you about it, because I tell you what, what can happen, because this happened to me a couple years ago. We were looking at setting up a. An investment account with our money. Because if people don't know, most of these accounts, well, all these accounts are sitting in trust accounts, and these trust accounts pay like 0.2% interest or whatever. I mean, it's. It's nothing. And when this money gets very large sitting there, you need to do something with it because it's time value money. Inflation, which we've just gone through, can really crush that value. And I had three investment companies come in and pitch, me and my dad and our wives. And in the end we did nothing because my dad and my stepmother's, you know, lack of, of investment savvy or lack of risk because they're older in life, too. So I don't necessarily blame them all that much.

Different needs, different wants.

So.

But if I had a separate one, I could have used my money however I felt like it, and I wouldn't even talk to him about it. So anyway, it's a great idea.

And then.

And when we suggest that we walk into it, I mean, you can come up with a million different scenarios that you just described. Okay. And it's just easier to separate them up. They're not that expensive. You know, when we set up more than one, we start doing. We cut prices on them. So to set them up, you know, it's not that expensive.

Makes sense. I mean, imagine. Yeah. From the logistics standpoint, tax returns, all those types of things, you pay a little bit more. But from, from a long term. Let me ask you this, then. What if the dealership has multiple owners, but only one one of them wants the reinsurance company? Have you seen that? Where maybe the dealership has like a father, son or father, brother, operating member.

So it has to be whoever controls. Okay. So you could have four owners and each one 25. If they don't agree, then we don't set up. Because you can't do that because you're taking risk. Right.

I might go out and say, I own a car lot with my, you know, dad, and I'm going to set up a reinsurance company that Mine and my dad's car lot is going to fund my personally owned reinsurance company.

We would want your father to sign off on that if it's 5050, because what. I don't want to walk in. I'm gonna use Michael. Walk in and you meet Mark Jones. Well, if I time it right, during a year, Mark Jones might be. Michael might be gone. You know, I mean, he might be off on vacation. And for a month, I only see Mark Jones and he says, oh, yeah, I own this place. Don't worry. Here, I'll sign up. Well, then all of a sudden, by the time you're done, you're funneling all.

This money to Mark.

He's not even an owner. So when we go in, we try to find it, we find out who the owners are, and then we. They have to decide as a group. And if they want to make sure that Jeff gets all the money, we're good with it, but they're going to tell us it's okay.

Yeah, yeah, that's. That's great.

I did, yeah. It's smart to have your own. I. I do know. I say that because I've talked to a dealer that I think is running something similar to that, and I don't know what company they're running it through, but obviously you got to make sure everyone's signed up and signed off. And so my last question is, is there a dollar amount that you would say, like, if I have earned premiums, should I be putting those somewhere? Like, is it 20 grand? Is it 200 grand? Is it 2 million?

Like, so any earned premium, I would move out of any trust account with an insurer. Okay. I still keep it under the company if you. So for tax reasons, I would keep it under the umbrella of the reinsurance company, but I would move it away from where the insurance company can tag it if your other. If your other products go negative. So one, once it's all under the. In the trust account, the insurance company is allowed to touch it. So like with our clients, some of their money is in trust, some of their money is not trust. We move the earned premium and we will move it monthly. So it's not subject. If, you know, if we all sudden have the Chrysler minivan transmissions again. Okay, we're all set. Everyone went negative. They can't touch your earned premium because you move to somewhere they can't get it. So any earned premium, first off, should be moved. Second, you should invest it minimum somewhere, getting you some interest. Yeah. You know, a lot of these people that Put money. They force you into their. Their bank accounts, their trust accounts. If you look at it, you're getting.01% interest and $1,000 in fees every year. Well, the fees are bigger than what you're making in interest, so it goes negative. You know, you need to manage that. So that does not happen. You know, does. These are great profit centers, okay? And these are outside of your dealership. You still need to manage them. You just can't. You can't just trust. So you need to look and say, okay, I want to move that money. You know, go to your local bank, open up an account under ABC Reinsurance Company. Say, I want you to invest this money. Even that's better than doing nothing.

This is something that everybody should listen to because I made the mistake of having all this earned out money for years and years and years that I should have put to work. I. I can't tell you how far behind we got because we didn't make this money earn. So, Jeff.

And why didn't you, Luke? Is it because you didn't know or because your reinsurance company didn't come to you and say, you need to do something with this?

Number one, I didn't. I didn't know. And then I finally found out, I think in about 2018 or 19. Then of course, Covid hit. So I was kind of stockpiling cash just in case we needed to. But I mean, honestly, it's the lack of education. I did not know. I know now, and I'm hoping everybody out there is listening to this and thinking about it, because it is definitely something, especially with inflation that we've had. Tom, if you just left that money there, you're. I mean, it's worth less than it was, you know, this time last year, especially right now.

Okay, we're seeing a lot of our dealers put their money back into their bank account, but they're getting interest now. I mean, they're getting one. I say the interest, you know, 1 or 2%, because they've got such a good relationship with the bank now. The bank has given them a little more. And again, that's better than the scenario I just told you where you're getting 0.02 and a thousand dollars in fees. You can't. You. You can't. These things will not, you know, they'll still be successful, but they won't be as successful. You need to manage them.

Yeah. And Jeff, I think. I think another. Another reason I did not do that was because I didn't know if we would need the cash, if we. If we started to grow really fast, and I. And I needed that cash back. I was afraid if I took distributions that. And I went to my dad for a capital call. Hey, I just don't want to do it anymore. So I kept enough there just in case we went on a run, you know, And I think that's another reason, because then you can borrow it back out and pay yourself interest. I think that's a reason to keep some of it there.

Okay, Rob, so I do have one more question. If you're running a reinsurance company currently elsewhere, is transitioning to a Buckeye reinsurance company, do you. Do you bring everything over, or do you just wind down the one and start the other one?

You just bring it up, everything's transferable. Yeah.

You swim out to Turks and Caicos, bust in the bank, grab the cash, swim it back.

And.

And it sounded like Michael T. Y' all went through that, right? You went through a transition to. To Rob. I mean, was that a. Was that a difficult situation or was it pretty simple?

Pretty simple. Pretty simple ever now. We didn't. We didn't. I don't remember transferring it. Maybe we did. This have been, obviously, 17 years ago, and we would have been much smaller than two and maybe only had one or two reinsurance companies at that point with a much smaller load. But we probably just ran those down and. And just started with, you know, you can shut one off and start one tomorrow, so they're fairly easy to deal with, very flexible.

But you can.

There's even a change of management letter. That's all you do, fill out, a change of management letter. Because you own these reinsurance companies. That's one thing. You know, you guys have to remember you own them, okay? They're your assets.

So I'm not setting up a whole new reinsurance company. Like, when you say change of management, like I'm literally keeping the same company, the same name, the same everything. It's just a new administrator, a new.

New underwriter, new administrator.

And all my current. All my current policies, the paperwork stays the same. They're still administered. I'm not going to too.

Yeah, so. So they would still be admitted. They still be administered. And that trust account will still stay with that, with. With that company until it earns out. Okay, so. Yes, but it's just. It's just another asset again. It's another asset under the. The veil of the company, under the umbrella of the company. Just you account for it. You know, we've got 10 accountants that work at Buckeye and three of our CPAs. That's all we do all day long, you know, is financials.

Oh, well, there's a lot of information here, Jeff. I think. I think it's probably time to wrap this thing up.

Yes. Thank you. And everyone knows how to get a hold of Buckeye if they need to.

Please.

And nobody knows how to get a hold of Michael T. If they need.

Yeah, don't Call Mark Jones if you have.

Yeah, call Mark Jones. He's got all the answers. He's the guy.

All right. Thanks, guys.

See ya. Thank you.

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