Arthur J. Gallagher & Co. (AJG) 2005 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Arthur J. Gallagher & Co. third quarter 2005 earnings conference call. (OPERATOR INSTRUCTIONS).

It is important to note that some of the comments made by Arthur J. Gallagher & Co. today may constitute forward-looking statements within the meaning of securities laws, and are subject to the certain factors and risks described in its filings with the Securities and Exchange Commission, which may cause actual results to differ materially.

It is now my pleasure to hand the floor over to your host, J. Patrick Gallagher, Jr., President and CEO of Arthur J. Gallagher & Co. Sir, the floor is yours.

Good morning everyone, and welcome to our third quarter conference call.

This morning I am joined by Doug Howell, our Chief Financial Officer, John Rosengren, our General Counsel, Dave McGurn, the President of our Specialty Marketing and International Operation, which is our wholesale and reinsurance international business, and Jim Gault the President of our Brokerage Services Division, which is our retail property casualty operation.

As is our custom, I will make some comments.

Then I will turn it over to Doug to hit on some numbers, and we will go pretty quickly to questions and answers.

After that I will have a few brief closing remarks, and that will be the call.

This morning there are four specific areas related specifically to the third quarter that I want to address.

The first is the hurricanes, the second is the regulatory environment, thirdly is our quarterly results, and forth I would like to touch on some operating highlights in the quarter.

Let me start with the hurricanes which hit the Gulf Coast.

It is too early this morning to comment much on Florida.

We're still without power.

Our offices are closed down there.

So I want to touch primarily on Katrina and Rita.

Thankfully in the Gulf Coast all of our people were okay.

We didn't lose anyone there.

We did have some serious house damage.

It is too early to report on Florida.

We still have not heard from everybody.

We're hoping they are all safe.

On October 11 and 12 I visited New Orleans and Baton Rouge.

And anyone who has been there knows that the pictures and television coverage really couldn't do justice to the widespread damage.

The devastation down there is just incredible.

And we know that the recovery efforts are going to take longer than we expected.

Our two offices alone in Baton Rouge and Metairie, which is New Orleans, have received one full year's worth of claims in just one month.

Our other offices around the country, 27 of them, have had retail claims put to them with over 100 of them being more than $1 million each.

The most impressive thing though about my visit was watching the Gallagher culture at work.

Literally all of our offices poured with offers to help.

Our employee involvement was incredible.

We slapped a sign on one truck that said Gallagher Claim Response Team and basically set up a barbecue and our people fed countless numbers of relief workers.

What I am most proud though is our people put our clients first.

In fact, some of our people worked endless hours while their homes, just an hour's drive away, sat with nine feet of water in them.

Our Gallagher employees and the Company, through our matching program, responded with over $500,000 of donations to the American Red Cross.

Our Metairie offices of Gallagher Bassett and our brokerage operation, which essentially is New Orleans, still remain closed.

But our backup systems worked.

We were up and running in Baton Rouge in 24 hours.

There is quite a bit of speculation in the market as to what all these losses will do to the rates.

Clearly the reinsurance market has taken a huge loss from Katrina and Rita, and it is too soon to really tell what the impact of Wilma will be, but we know it is only going to add to the problem.

The reinsurance market simply cannot recoup the losses by raising property prices alone.

So we think that either new capital coming into the market, we see a lot of balance sheet reloading going on, but not too much new company formation activity, or the reinsurers will dictate where rates will go in the future.

With the magnitude of these events, we believe rates will have to rise across the entire industry.

And we also have to remember that the hurricane season is still not over.

Second, I want to touch on regulatory matters.

These matters still continue to impact our people.

On September 30, we mailed 83,000 letters offering $27 million in refunds to our clients.

While the recipients have until the 31st of December to respond, to date we have received 14,000 returns.

In addition, beginning in November we will begin training all 4,700 of our employees in the brokerage segment.

Make no mistake about it, this is no small task.

As of January 1, we will begin operating in a fully transparent manner.

While we do embrace the changes in the world, this is a big change in the way the business is conducted, especially in the middle market.

We have settled with the Illinois Director of Insurance and the Attorney General, which we hope will be viewed as a universal settlement.

However, we continue to cooperate with 22 other state Departments of Insurance, or AGs, and we're dealing with class-action lawsuits.

Number three, let me touch on our third quarter.

In the face of the challenges that I have mentioned we're very pleased with our third quarter results.

The market continued to soften greatly in the third quarter, pre the hurricanes.

New business was strong in the quarter.

Our new hires are selling, and as expected are accretive to pretax but dilutive to margin.

Our merger and acquisition closing activity was a bit slower in the quarter, but our pipeline continues to be strong.

Tight headcount control remains in place.

Nonetheless, we remain committed to our internship in which we had 140 college students who finished the program with us this quarter.

We continue to bring young people into our business, building the team for the future.

Fourth, and finally, let me comment on some operating highlights for the quarter.

Gallagher Bassett, which is our risk management segment, showed accelerated growth in the third quarter.

We had a 7% growth, all of which is organic, and we maintained an 18% margin.

Last quarter I talked a little bit about GB's international operation.

Internationally we had a good quarter and we're expecting good growth going forward.

Interestingly we have also noticed a trend at Gallagher Bassett, a good trend, and that is our existing clients are actually incurring fewer claims, which we believe valuates our value proposition.

Our specially marketing operations wholesale ARMs, both here and in London, had excellent third quarter results.

And assuming there is capacity in the market, we should see tremendous activity in the fourth quarter and into '06 from the property market demands.

Our Gallagher REIT operation, an area of ongoing investment for the Company.

And some real momentum with some very nice orders in the quarter.

We are validating our strategic belief that there is a good opportunity to grow on that business.

Gallagher benefit services, part of our brokerage segment, performed extremely well in the quarter, helped by some great acquisitions that we made in '04 and '05.

And the benefit acquisition pipeline is very, very strong.

In our brokerage services operation, our retail P&C branches hired a number of new people from our competitors, people who simply would not have been available in previous years.

Our prospects for additional quality hires are outstanding.

And in the quarter we did pick up some very nice pieces of business.

So there is a lot of positive things going on, and I thought I would let Doug touch on some of the numbers.

Good morning everyone.

Today I have seven comments.

As a reminder, we have a 19 quarter spread on our website, and we expect to file our 10-Q later today, or first thing tomorrow morning.

First, let me -- my first comment I want to talk about -- let me repeat what I said in our second for conference.

The seasonality historically seen in our brokerage segment will become even more pronounced in 2006 as we stop taking contingent commissions as a retail broker.

To help you understand the impact as you build your 2006 model, our earnings release includes a detailed analysis of retail contingent commission income by quarter for 2004 and thus far in 2005.

Second, some comments related to our cash.

During the quarter we used 26 million to pay dividends, 3 million for capital expenditures, and 3 million in acquisitions and earnouts.

Our stock buybacks during the quarter were diminimus.

Also, please note that we have no debt for general corporate purposes, and we increased our unsecured line of credit to $450 million during the quarter.

Third, as we announced in the second quarter, we made changes to our retirement plan, which if you recall, were under funded by nearly $60 million at the end of '04.

At September 30, 2005 these plans are now nearly fully funded.

We are extremely pleased to have this significant legacy cost behind us.

My fourth comment relates to our procurement and sourcing efforts we have discussed from time to time in these conference calls.

We're still pleased with our results from this exercise, and the rollout will continue through early 2006.

The last significant category we're just now tackling is our branch office leases.

Currently Gallagher has over 250 leased office properties.

And over the next 15 months we expect to rationalize approximately 20 of these locations.

Generally this rationalization exercise will focus on securing ongoing cost savings by reducing location square footage and/or finding alternate lower-cost locations near existing facilities.

But please note, this exercise does not contemplate significant location consolidation.

We expect that the future savings will more than offset any onetime costs associated with doing the rationalization.

Unfortunately, under GAAP accounting any cost or loss on a rationalization project must be recorded when we execute the new lease and move into the new space, but any gains would be deferred and amortized over the future weeks.

By the time we do our year-end conference call, I should be able to dimension the financial impact of this exercise.

My fifth comment relates to our financial services segment and the impact of oil prices on our coal production.

I know many of you are trying to refine your 2006 forecast, so we have given you some guidance in the earnings release.

While the guidance is really more like bookends, please understand that we might ultimately implement a production plan that is a hybrid of those two scenarios.

We'll just have to wait and see where oil prices go over the next three to four months.

Also, like I said before, the oil prices we have given you in the earnings release for our best estimate based on historical oil prices and correlations.

Our estimated prices could be slightly different than the actual phaseout prices that get published by the IRS.

Six, the financial services team remains committed to divesting our noncore investments.

Recently we began marketing our investment in our home office building, and we hope to consummate a deal by the end of 2005, or early in the first quarter of 2006.

We expect the sale will generate cash and remove about 70 million of debt from our balance sheet.

However, any financial statement gains would be deferred and amortized through 2011 under GAAP accounting.

Finally, you need to know that the Gallagher team is diligent in our efforts to build a great brokerage and risk management Company.

We are hard at work at divesting our noncore investments, reducing our investment related debt, and eliminating legacy costs by modernizing our retirement plan.

We are hard at work buying goods and services more effectively.

And we're investing the more production talent, all the while adapting to a changing brokerage landscape.

Those are my comments.

Back to you, Pat.

I think it is time that we go right to questions and answers.

Jason?

(OPERATOR INSTRUCTIONS).

Adam Klauber from Cochran, Caronia.

What is the acquisitions in the first nine months of this year compared to the first nine months of last year?

And could you give us some characterization of the acquisition atmosphere currently compared to when we were sitting at this time last year?

I will let Doug talk about the specific numbers.

He is looking at that now.

But I will talk about the atmosphere.

The controversy in our industry over the last 12 months has clearly brought about a point in the process where there is a lot of discussion among the brokers that are representing, or the consultants that are representing, some of the sellers about how are we going to account for price in contingent income.

And that has led to some -- a slowdown in some of the closings.

As people look at the new way we're going to have to operate in the new world, with much more transparent -- a transparent world.

And what is going to happen with the fact that we are no longer accepting contingents.

Now we have had some success at negotiating with our larger markets an increase in upfront commissions, which will be disclosed to clients, replacing hopefully some of those contingent incomes.

It is too early to really say exactly what kind of percentage replacement we're going to get, or what have you.

But we do have -- five or ten largest markets have agreed to additional upfront commissions.

As we see how that shakes out, we will have a better understanding of how we are going to be able to price the ongoing pretext of the seller.

I would say that what you have is an atmosphere out there is considerably different than let's say 15 months ago.

But having said that, still very interesting.

A lot of interest in our Company.

A lot of -- the pipeline is very strong.

There is not a week that goes by that we don't have someone in here talking to us about whether or not they should join us.

And I think that once the whole market kind of settles out with what is going to happen in terms of transparency and the like, that acquisition activity will pick up.

On some of the numbers, this year we have done eight deals through September 30; last year was 14.

But on a dollar basis last year we did $43 million of annualized revenues is what we acquired in the first nine months.

This year we've done about 27 million.

And in the third quarter '05 we did about 5 million.

So we are -- again, it is 27 million thus far this year compared to 43 million last year in terms of annualized revenues acquired.

Obviously legal expense have been running high all year.

Would you venture a guess that they will begin to decline next year?

Yes, and please, I like your phrase.

I am venturing a guess here.

There is a tremendous of activity, but the class-action suits seem to be folding into basically one major suit, which is the multidistrict litigation, used to be referred to as OptiCare.

There don't seem to be as many new suits arising.

You probably saw that one of the directors and officers suit, the Fenner case, is essentially gone away.

So I'm hopeful.

The other thing is that we are seeing a slowdown in some of the informational requests by some of the 22 other authorities that we're dealing with.

Hopefully, we will be able to make some progress in the quarter and into the year with getting other states, DOIs and AGs to agree that our settlement with Illinois is a universal settlement.

And if those things begin to happen, then I do think we could have better results next year.

Finally on Gallagher Bassett, could you go into some of the dynamics why the claim counts -- why you think the claim counts are slowing down?

Very interesting.

We are really trying to study that more.

I'll probably have more on that as we finish the year.

But literally I think clients are doing an outstanding job of working with us, and their own people and some of the brokerage people on loss control.

Bob Glasspiegel of Langen McAlenney.

You gave us a little bit more fuzz than I was sort of expecting regarding 1 1 (ph) renewals and pricing.

And I guess I could understand with the market in flux you meant to be fuzzy.

But how positive are you about what deltas could be to Gallagher?

And specifically you are rethinking hiring plans to be able to take care of more demand, or are you just sort of going to hunker down with what you've got, and if it is a positive, you will scramble through?

I think we'll we are probably more in the hunker down wait and see mode.

Although if you take a look at what is going on daily in our wholesaling operations and any of our Gulf Coast offices, the market is going to be in disarray here shortly.

In particular, the property market.

We're still going to be cautious.

There are good new hire opportunities.

We're taking them very much one at a time.

Headcount control is the call of the hour.

We've got some very nice new hires made in the quarter and in the year, but we are looking hard at our compensation costs.

As you know, we have rationalized our pension.

We had about $1 million of termination expense in the quarter.

And we're going to go very, very slowly and be cautious, but we are very optimistic.

You said third quarter rates were down.

You didn't give us your normal sort of percentage decline, but what would you think vanilla commercial rates would be doing in 1 1?

What are you telling your clients to prepare for?

That is a very good question.

I would say in the third quarter pre hurricanes we were seeing on the order of the about 10% decline in rates, and that is very much across the board.

We are counseling our production staff to be very much upfront with clients in telling them that we believe that the slide in rates is over, and that this is such a serious amount of dollars lost, and the cash flow is going to be so bad that we expect that at the very least even plain vanilla Midwest stuff should be flat.

Just switching gears.

Your financial service guidance for '06 I thought was very helpful and much appreciated.

If I could push you a little harder, with oil at 62.05 here, what is the sort of over/under that pushes you to A vs.

B?

If it was 65, would you definitely go to scenario B?

Can you give me like a number where if A then definitely go to scenario A, and if B definitely go to scenario B?

This is Doug.

Thanks for the question.

It is a little early for that.

I think that we have to see what is happening with oil trends and what is going on with the winter.

If we get a harsh winter that would influence us.

And so put it this way.

You and I both would love to have this decision made today.

But it is just something I can't -- we can't really make until December, January -- maybe even into February on it.

I would love to give you an answer, but I just don't have one at this point.

Well, if oil is let's say $68, would it be a no-brainer to close it down, or does it have to go higher than that?

Let's talk about that.

What we would do regardless of the situation, if we decided to take any action to not produce, we would actually idle the plant.

And much that means is -- and we put it in mothball status for three or four months and see what happens to oil.

So we could be looking at this on a month-to-month basis all the way through June or July of next year.

There is a scenario that would say that if that -- let's just make up a number and say that $74 a barrel through June, that would say you wouldn't produce at all, because your credits would be gone.

That would be scenario B. But in June if oil would all of a sudden drop to $30 a barrel, and it would bring the average price down for the year.

We might decide to fire the plants back up and produce again, because the average will be down into the phaseout model -- right below the phaseout model.

So it is going to be a month-to-month wait and see next year on where pricing goes.

So you wouldn't take that $18 million charge until we're pretty far through the year then?

No, that is not necessarily the case.

We would have to look at our feeling about the idle decision.

And odds are if we decided to going to idle, we would probably take the charge at that time.

Okay, thank you very much.

Remember, Bob, that is a non-cash charge.

That is a non-cash charge if we take it.

Matthew Roswell of Legg Mason.

I was wondering if we could get some color on the new hires, both in the P&C side as well as Gallagher Bassett?

The Gallagher Bassett new hires -- as the business grows you have to have the people there to handle the claims.

So it is strictly a function of just in time hiring, having the people there the claims are going to ramp up.

When you put an account on, you literally now that of the 4,000 claims how many are going to come in the door and how it is going to ramp up, and you better have the people and the branches that you're going to need to service it.

In terms of that, it is all demand driven.

As it relates to the brokerage side of the house, and I would also comment on our reinsurance operation, these are very opportunistic hires.

There is not a -- we don't a press out there to recruit in, as we did in '01 on the order of 100 people or anything on that.

Opportunistically looking at opportunities with new people that could help build our Company.

I would say that probably from this time last year to today, we probably have on the order of 40 to 45 new hires that was brought into the production ranks of the Company.

And cost to hire and retain for producers -- is that still running a little higher than normal or --?

Cost of recruiting, yes.

The people that we are bring in.

If you think about our business model, here is essentially what we're doing.

The young people we are bring in come from our college internship.

And we really have always for 40 years emphasized building our own team, bringing kids in here.

And we continue to do that.

The people that we hire from competition are always either very successful or very senior people, and they are expensive.

What about to keep your own people, because obviously it seems like everyone is in flux and using this is an opportunity to penetrate up or get the right people.

I'm very proud of our retention.

You think of what we have been through in the last year, and literally there's probably three or four people that you could name that I wish we hadn't lost.

And on a base of 8,200 people that is pretty darn good.

Switching gears a little bit, with the extra claims coming out of the Gulf Coast, does that have a significant impact going forward in terms of your cost?

Meaning are you going to have to put people there to get those claims out the door quickly?

Now let me address that in two points.

The natural question is does the Gulf losses do they really bolster Gallagher Bassett's results?

Any the answer to that is no. 95% of our claims at Gallagher Bassett are not property related.

And we do not chase storm work, so we're not sending people down there to take overflow claims from the Hartford trailers, etc.

So from a GB standpoint, remember their contracts claims management firms, these Gulf Coast costs will not boost their revenue in the quarter.

As it relates to our operations on the brokerage side, no, I don't think we will need to hire new people, but I'm very proud of the hours are people are putting in.

This is a strain.

When you take on a full year's worth of claims in a month, you've got a lot of hands on deck.

Dan Johnson with Citadel Investment.

I've got a couple of them.

First of all on the share account, can you talk a little bit about the increase we have seen over the last couple of quarters?

And can you kind of hazard a guess, excluding share repurchase, where we might be looking for that number to be a year from now?

The answer to that is clearly the treasury method of accounting for stock options has caused the increase in shares, as well as acquisitions where we put shares out when we do an acquisition.

So that is the pure increase in the share account.

With respect to going forward, as you know, we have been warehousing cash for the last -- really for the year -- the last three quarters.

And I would expect us to return to more of a normal share repurchase program sometime in 2006.

Absent share repurchase in terms of -- and I guess it also depends on the acquisition environment for '06 -- but are we seeing sort of due to share grants or shares for earnouts -- is there a sort of a natural sort of 1 to 2% lift to the share account over time?

Yes, that is what it has historically been.

On the financial services, maybe I misunderstood, but could you be in a position next year to shutter capacity, and then restart it later in the year if you so deemed that to be a good idea?

Yes, that is exactly what -- that is what I was trying to explain to Bob when he asked the question.

We could shut down for six months or idle it for six months, and then crank it up in the next six months after that.

The claim count with your clients at Bassett, how should we -- I mean if this isn't an exceedingly short-term trend, if I recall, claim count does tends to drive revenue.

Absolutely.

Claim count does drive revenue.

How should we think about that when we think about a go forward revenue profile for that segment?

Because historically it is obviously been very strong in the mid teens, certainly over the last six or seven quarters minus the last two.

Do we want to rethink that as being normal because that might have been --?

I don't know.

I think for now I would say that it looks like more of a blip than normal.

Typically Gallagher Bassett's claim counts have reflected what is going on in the economy.

And when we have had recessions and people will go from three shifts to two shifts we see a decrease in claims.

We know that our clients' businesses are strong.

We know they are hiring more people.

We know that in many instances they are running full shifts, and yet we're actually seeing a flattening in the number of claims coming our way.

I would say that let's watch it for a quarter, and I will have a better comment probably next quarter.

And then finally on Bassett, even though you're not participating in, as you said, chasing storm claims, certainly other people are.

What is the availability for appropriate claims people as your business grows?

Does this put any challenge on your ability to hire those folks?

We think we offer a very nice differential from our competitors in the marketplace, both insurance companies and TPAs.

We have successfully hired the necessary complement of people for the last 35 years when we need them, because frankly we think we do offer a better place to work.

In Gallagher Bassett the claims work is our product.

In many other places the claims work is a by product.

No, I don't think we going to have a problem hiring people.

Shane Diamant with Stephens.

Pat, I have a question for you on the dividend policy.

If we go through the scenario I guess with the synfuel and say kind of the worst-case scenario, which would probably drag earnings down I guess below $2, would that lead to a change do you think in the dividend policy?

No, absolutely not.

It is remaining the same as it is right now.

Yes, we are committed to our dividend.

And then Doug, one more question actually on the synfuel as well.

If you do choose to shut those assets down, is there any part of that investment that can be recovered as far as like a salvage value that could be sold on the market or anything like that?

The answer to that is yes, but it is a very small amount.

So I don't even factor it in when I really look at the numbers.

To me it is more, can we get oil prices lower and get the things started up again.

That is more of an issue to me.

So to me I wouldn't be trying to salvage those plants until after 2007 anyway.

And then a plant that produces Section 29 credits after 2007 might not have much value in the scrap marketplace.

And then one more question, Doug, on your comment on the seasonality of the contingent.

I think looking out over 2004 at the EPS percentage relative to the total for the year ranged anywhere from 20 to 27%.

Can you put any parameters on how much more variability we can expect in '06?

Are we talking 30, 20 kind of swings, or how do you look at that?

Can you just repeat your question again?

I didn't follow you very well on that.

If you look at the seasonality in 2004, looking at I guess each quarter's EPS relative to the total, like for instance the first quarter EPS is 20% of the total.

Oh, I see what you're saying.

And third quarter we have 28% of the total.

And I think we are seeing maybe the same swings or a little bit bigger right now.

And then I guess you are expecting more in '06.

I guess the question would be, would it be realistic -- and this may be a little drastic -- but do you see a quarter that maybe 15% of earnings for the year?

Is it going to swing that much, or is it more like -- more of an 18 to 30% range?

Here is the answer.

I'm going to answer it a little bit different way.

If you go back and you adjust down -- out 2004 for the contingent commissions that are going away, you will see a similar emergence of seasonality in the future, based on what we know today -- the mix of our book of business today -- in 2006 and 2007.

So the relationship of the first quarter to the second, second to the third, third to the fourth is not going to change dramatically.

But if you're asking me within 2 or 3 points or 4 or 5 points, I can't give you that.

But it is not going to swing like 20 points for instance.

Okay.

That was helpful.

And then one final question for you, Pat.

I think on the last call you commented that you weren't seeing much in the way of movement of large accounts.

Have you seen any changes in that in this quarter, or are the hurricanes kind of causing an environment where the larger accounts stay put with their current brokers?

No, we have actually seen some some account movement in this quarter.

We have had some very positive wins in the quarter.

Do think that is sustainable?

Yes, I think that we are proving ourselves every day in the market.

It is a very competitive market.

It is every day.

We fight it out on the street.

That is what we're really all about.

The whole sales thing is what we do.

And I think that we are getting traction.

We continue to be focused on the upper middle market.

That has always been our home.

And some of the larger connectivity in the last quarter has been very positive.

(OPERATOR INSTRUCTIONS).

Mark Dwelle with Ferris Baker.

There are just two questions that haven't already been covered.

With respect to Gallagher Bassett, the organic growth there -- that is primarily growth of activity with existing accounts, or have you added any kind of significant -- I guess what I call completely new business.

We had a tremendous completely new business year in '04 -- written new business of well over $50 million, which was our greatest year ever.

And new business -- new clients to the mix are very, very important to every year.

And our growth is really a function of -- it is very simple.

It is a function of bringing on new clients that bring new claim activity with them, and is pretty much driven on a per claim basis.

And it is a function of what we renew -- the client base that we renew.

And our client retention at Gallagher Bassett is outstanding.

And it is then a function of whether or not our clients have growth in their operations.

All those add to organic growth.

I guess what I was getting at was just to characterize whether this year's result has been more on the new client side or more on retention or volume increments.

It has almost all been new clients.

A second question is probably more for Doug.

With respect to the decision, whenever it is made, regarding the synthetic fuel operations, would that decision have any implications for amounts accrued related to Headwaters?

We are partners in two of our plants going forward.

So the amount that would -- if we stopped producing on those two plants it would impact Headwaters.

Wouldn't have any implication for the amounts put up at the end of first quarter -- basically the accrual that is already on the books?

No.

So that number is sort of firm no matter what you decide from here forward?

Correct.

There appear to be no further questions at this time.

I turn the floor back over to management for any closing remarks.

Just a quick closing remark.

The quarter that we just finished was certainly an interesting one.

It was filled with some ups and downs, but we really see our opportunities as great.

Our culture is very, very strong.

We're coming through a difficult time in terms of training our people and the like.

And it is impressive to me to see how everybody's hanging together.

Our team is selling.

I mentioned that we had some very nice orders in the quarter.

And that is really what we're all about.

Our merger and acquisition activity, while the closing activity slowed a bit, our pipeline is strong.

There's a lot of interest.

And our new hires are accretive.

We also know that these terrible storm are going to have an impact on the market.

And all in all we're very bullish about our future.

And thank you for joining us this morning.

Thank you for your participation, ladies and gentlemen.

This does conclude today's teleconference.

You may disconnect your lines at this time.

And have a wonderful day.