Arthur J. Gallagher & Co. (AJG) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen and welcome to the Arthur J.

Gallagher & Company fourth quarter 2008 earnings conference call.

At this time, all participants have been placed on a listen-only mode.

Your lines will be open for questions following the presentation.

(Operator Instructions).

As a reminder, today's call is being recorded.

If you have any objections, you may disconnect at this time.

Some of the comments made during this conference call, including answers given in response to questions may constitute forward-looking statements within the meaning of the securities laws.

These forward-looking statements are subject to certain risks and uncertainties described in the company's reports filed with the Securities and Exchange Commission.

Actual results may differ materially from those discussed today.

It is now my pleasure to introduce the hosts J.

Patrick Gallagher, Jr., Chairman, President and CEO of Arthur J.

Gallagher & Company.

Thank you, Mr.

Gallagher.

You may begin.

Thank you Diego.

Good morning everyone and thank you very much for being with us this morning.

This morning I'm joined by Doug Howell, our Chief Financial Officer, as well as the heads of our operating divisions.

As I said in my remarks in our press release, we did not escape the negative impact of the rapidly deteriorating economy and continued soft market in the fourth quarter, however, as you saw, there are a lot of moving parts in the quarter.

So I encourage you to use the tables on page three and four as you evaluate our results.

We will answer questions on the table and any other part of the press release when we get to questions and answers.

Although, I think that we are very lucky to be in a business that people need and will continue to buy, we saw some changes in buying behavior in the quarter.

Buyers are buying less coverage and reducing limits.

They are also increasing deductibles and self-insured retentions.

Rates continue to soften and exposure units are down.

Remember all insurance is predicated on sales, payrolls, values and benefits of its full-time equivalent employees.

In my 35 year career, I believe these are the toughest head winds I can ever, ever remember.

Our construction niche has been hit hard by the fall off in construction activity.

Our transportation and our hospitality niches have seen significant slowdowns.

In fact, I think it is fair to say when you look across all of our stated niche markets even the public sector, are feeling the negative effects of the global financial slowdown.

During 2008, we worked hard to proactively address expense saves and head count reductions.

The items we listed on page two of our release are actions we have already taken.

We will see the benefits of these actions in 2009.

Even with these efforts, though, our four fourth quarter was off prior year and below expectations.

In the brokered segment, I have already mentioned the impact of the economy, but also remember that rates are declining.

We started the year with double-digit rate decreases across all lines of coverage in an all geographic locations.

There's been a lot of talk about market hardening which we did see a little bit of in large marine and energy replacements, in particular in London at the end of the year.

But, clearly, though, fourth quarter rates continue to fall.

The CIAB Survey showed a drop of about 7% in the commercial middle market in the fourth quarter.

So '08 was the sixth year our industry has to run up a down escalator to get results.

Underwriting results are beginning to show some mixed results.

Balance sheet asset values are coming down.

So at some point we are going to see some tightening but our middle market property casualty world, there's no evidence of any major change now.

The brokerage business, I think, is going to be unbelievably tough in 2009.

I'm afraid the economy will experience record drops in GDP, which will continue to impact clients severely.

This will result in bankruptcies, layoffs and budgets that just won't be able to pay the same premium dollars.

So we are really battening down the hatches.

Even in tough times though there are some bright spots, and I do want to mention and I do want to mention four of those.

First, in our brokerage segment, our benefits business had an outstanding year.

Accretive acquisitions and organic growth propelled our benefits team to really a record year.

Secondly, in our retail property casualty business, we had a number of our branches that result grew through this tough environment.

There are always people who find a way to get it done and on this call, I want to thank them for their efforts.

They inspire the rest of our team to understand that growth is possible regardless of the environment.

Thirdly, another bright spot in '08 was acquisitions.

We did 37 deals and $165.6 million in revenues purchased.

This is a record result.

Our M&A teams worked tirelessly all year long.

All of our operations, property, casualty, retail, benefits and whole wholesale contributed to those results.

I want to, again, welcome to our new partners and to say thank you to each of you.

I know you had choices and I'm very very proud that you chose to joined Gallagher.

Fourth and finally, in early 2009 we secured the renewal rights to two of Liberty Mutual's Regional Direct sales units and to the Wausau Signature Agency and we are very, very excited about this deal.

In essence, this deal is a series of tuck-in deals.

We will pay based on the business that our new producers write.

So we will only pay for business that is actually billed by us.

This has the potential to be a great deal for Gallagher and for the Liberty Wausau folks joining us.

When ever we have done a successful tuck in acquisition, an acquisition where a team joins one of our existing branches, when it has been successful the return on these deals have usually exceeded any of our stand alone deals.

Probably as important as either of those things is, is the excitement this has brought to our team in the field.

Our branch managers are working hard to recruit these new people into our branches, and continue to report how impressed they are with the talented folks that they are meeting.

In an environment where most of the news is bad, and frankly getting worse, this is a real shot in the arm for our PC team.

We hope to close this transaction in early March and look forward to building a strong middle market relationship with Liberty going forward.

Regarding mergers and acquisitions in 2009, values are coming down in this environment so I believe we will see a natural slowdown in deals in '09.

Frankly, that's okay.

We will integrate the Liberty Wausau teams and we have the 2008 acquisitions to be sure we neatly tuck them into the company.

Let me turn now to the risk management segment.

The soft market and economic downturns hit our risk management segment hard in the quarter as well.

It is just extremely difficult to maintain margin when claim counts are dropping.

We did not give raises in 2008, but the 1.7 one-time bonus payments in lieu of raises impacted the quarter.

Foreign currency was also a big drag on the quarter and the year.

Expense controls are in place, but, for this business to return to our targeted 15% pretax margin we are going to need economic growth and rising claim counts.

Doug, your comments?

Thanks, Pat and good morning, everyone.

Today I have seven comments.

First, a housekeeping comment.

We intend on filing our 10-K later this week, and don't forget to use the quarterly spread on our web site that shows trends and seasonality.

Please don't forget that our first quarter is our smallest of the year.

Second, some comments on the financial services and corporate segment.

When you turn to page eight of the earnings release, there's not much left in the old financial services assets.

As we sit today, I don't expect significant P&L activity from those remaining assets in 2009.

So as you build your models for 2009, just assume this segment will report interest expense on our debt and our line of credit, plus about $1.5 million per quarter of operating cost.

That equates to about $0.06 of loss per quarter after tax.

Third, given the banking sector turmoil during the fourth quarter, we moved nearly all of our cash into fully secured accounts, but we sacrificed return for safety.

In it unsecured accounts, yield are next to nothing today so we could probably earn another 2 or $3 million of EBITDA annually if we wanted to risk the principal.

But in our view the significant risk is not worth the minimal return.

Of course, when stability returns we will look to generate more investment income.

Fourth, our brokerage and risk management segments both have foreign operations.

Overall, because the lions share of our revenues in London are US dollars, a stronger dollar in 2009 would improve our EBITDA earnings.

So if the US dollar stays where it is today, the combined units should generate about $5 million more of EBITDA than it did in 2008.

For my fifth point, you can see in the earnings release that we anticipate saving about 25 to $30 million in 2009, as a result of our cost savings initiatives we put in place in the fourth quarter.

We have been working on some of these for a couple of years and it's nice to be in the harvest phase.

These efforts included reducing our brokerage segment work force by about 400 employees which is a 7% reduction when you exclude acquisitions.

Interestingly, our early metrics indicate that at the same time we were reducing our work force, we have actually improved our customer service quality with the new tools, techniques and technologies that we put in place to support the work force.

On the topic of expense control, we made great strides but we are not done.

As we look at 2009 we have a head count freeze in place, other than production talent.

We know that raises will be sparse.

We know we can use our offshore labor more effectively and we know that we can consolidate more of our back office operations.

These additional efforts won't have big impact in the first half of 2009, but will certainly contribute to further savings in late '09 and into 2010.

Sixth, Pat talked about our strong M&A year, the team did a great job.

Now with the announced Liberty Wausau deal, it's a great way to start 2009.

Certainly on the surface, the Liberty Wausau deal is a bigger deal than we have historically done but when you look at it is really more of a bulk hiring exercise.

This deal is really a collection of two to eight person shops that bring with them a very nice book of business.

Most will tuck into our existing branch footprint or in some cases open up some new territories.

In total, we are hoping to hire about 100 to 120 producers and a like number of support staff.

But this deal is not scheduled to close until March 1st.

So I will give you some more information during our next conference call.

In the meantime, as you build your models, because this is a renewal rights deal, just assume it will about break even in 2009 and that will get you close in your models for now.

Recall also that we have been using more stock to fund our acquisitions.

We see that continuing in 2009.

At the same time, we are tightening terms and conditions as we partner with those rational sellers that understand that in today's world, multiples are falling.

Sellers, if they choose, can hold our stock and reap the benefits when multiples improve.

At this time, we are not anticipates as big an M&A year in 2009 as we had in 2008.

Seventh, from time to time, I get some questions on how to model the additional cash flows that Gallagher gets from the run down of our deferred tax asset.

I have given the short cut answers before, as follows, compute what you think we will pay in taxes then reduce your estimate by about $30 or $40 million for each of the next four to five years.

As a wrap-up comment, for the year, despite a falling economy and a very soft market throughout 2008, Gallagher's Brokerage and Risk Management segments combined to post adjusted EBITDA of $288 million and our combined adjusted EBITDA margin was down less than half a point.

Looking forward to 2009, we are expecting the economy to continue to struggle and insurance rates are likely to flatten at best.

But off studying those head winds, I'm pleased that we have already closed acquisitions that should contribute another $100 million of revenues and we are hitting the ground running with our cost savings initiatives.

But more importantly as I look around the network, the Gallagher team seams to be really turned on, excited about the Liberty Wausau deal and we are aggressively taking actions that are necessary to keep Gallagher vibrant through these tough times.

Okay, Pat, those are my comments, back to you.

Thank you Doug.

Diego, if we could go to questions and answers, now.

Thank you.

(Operator Instructions).

Our first question comes from Keith Walsh with Citi.

Please state your question.

Good morning, everybody.

Couple of questions.

First for Doug.

I'm just a little confused.

I'm looking at $0.12 versus $0.37.

I know there's a lot of one-timers.

What is the core EPS for this quarter, if you can walk us through that.

Thanks.

Good morning, Keith.

I think the way to look at it, in the financial services and corporate segment, again, $0.06 a share of loss per quarter is what we told you at the beginning of year.

The reason why it shows a negative -- I'm working backwards off the press release here.

Working backwards we took it off 5.7, on asset alliance and wrote off some state taxes of $1.9 million.

That's the difference between the $0.06 of interest and operating costs and then the reported $0.11 negative.

Going up to the risk management segment, you can see on page four of press release, if -- if you add back the one-time items, there's about $6.6 million worth of one-time items.

If you tax effect that, you get about $0.04 a share differential.

So the $0.05 plus the $0.04 to $0.05 result of that is about $0.09 to $0.10 there.

On the brokerage segment, you are doing the same exercise.

You get an add back to the earnings there.

About a nickel, again, so your 18 moves to 23.

And the difference between that and probably what you were expecting was 4% negative organic growth and loss investment income.

Those are the big pieces that navigate you back to the -- kind of the core earnings.

So about $0.23 versus the $0.37 if we want to do apples to apples?

If you assume no investment income and assume 4% negative organic growth, that's right.

Okay.

And then just for Pat, two questions.

In the press release, you cite renewal exposure units are down as one of the reasons for the organic being down.

I assume this issue will only accelerate in the first quarter, maybe you could correct me if I'm wrong.

I believe first quarter will probably be a bigger renewal season than fourth quarter.

Then I have a follow-up.

No, first quarter seasonally, Keith, is a smaller quarter than fourth quarter for us.

Okay.

As far as whether or not we will see an acceleration of the impact of the economy, I think your guess is as good as mine.

Okay.

And then just on the head count reductions.

You guys have successfully accomplished that but that was something you announced in 1q '08.

The world has changed dramatically since 1Q '08.

I'm wondering why there has not been a much more aggressive push on the cost reduction side if you saw this coming.

Keith, if you take a look at the head count in our brokerage units.

If you go back to the efforts in 2007.

We reduced the head count in those units by about 9%.

And that's pretty aggressive reduction in head count.

So, you know, we are cutting in every place we can.

We put in basically a hiring freeze.

And as wouldn't surprise you, our attrition dropped in half in 2008.

So we had to be a little bit more aggressive than just using attrition itself.

We targeted 400 heads and that's what we've landed on.

Now, I will share with you there's stress and strain in our field.

Some of those items that you see on page three of the press release are departures that frankly we didn't want those departures to occur.

So, at what point are you cutting muscle and what point are you cutting fat?

We will watch it it as closely as we can and take whatever action we have to do to keep ourselves moving forward.

Thanks a lot.

Our next question comes from Mike Grasher with Piper Jaffray.

Please state your question.

Thank you very much.

Good morning.

Good morning, Mike.

Also I think after the reduced renewal exposure, you spoke about declines and claim frequency, if you could expand on that.

Well, both from economic downturn and, frankly, from, I think, the -- not just the Gallagher Bassett but the industry has seen a decrease in claim activity, primarily in Workers' Compensation and automobile coverages.

We attribute that to a lot of labor in many respects that's moved offshore, but also the fact that I think risk management and safety programs and the like are doing a good job of actually making our customers safer.

So when claim counts reduce and inventories grow, you get a cost squeeze in the claims business.

Primarily Workers Compensation and auto are the two areas.

Correct.

Workers' compensation is about 65% of the activity in our risk management segment.

Okay.

Thanks very much.

Our next question comes from Alison Jacobiwitz with Bank of America, Merrill Leach Please state your question.

Good morning.

I'm wondering if you could -- if there's any trouble spots in your book that you see now?

Anything that you think you might need to divest going forward and he is same time given all the changes do you see any opportunities or any new business areas you might be expanding into?

Well, I think a little of both, Alison.

We have not got any glaring place on our map that screams at me, get out of this.

And a year ago we did.

It was called reinsurance.

And we divested our treaty reinsurance efforts.

Right now, what we have got is, I think, a team of people across all of our segments and all the divisions in the segment that really get it, they are working hard and I think they will be very successful in the long run.

I really don't have any spots out there right now that I'm thinking, boy, we've got to duck out of this.

Now, we do have a branch or two here or there that needs some remedial work and we are on top of that and that doesn't mean that there won't be a divestiture here or there of someone that may have joined us and isn't going to pull their weight.

It's nothing of any major size at all.

As far as opportunities, whenever there's turmoil, we have opportunities.

We had an awful lot of activity in 2008 that did not produce successful -- successful efforts.

When I get down to the individual producers, the guy that's worked, you know, 300, 400, $500,000 in opportunities, and really hasn't written any because the market is soft and the incumbent kept it.

Now with pain in the economy, people are truly willing to listen to us.

I think our niche expertise sets us apart.

We can go into these people and talk about their business, what it is they need to do and where we can help them pair back premium costs.

I think there's new opportunities for new business.

We actually saw an improvement in lost business in the fourth quarter.

I think our guys are doing a good job of holding on to their accounts and at the end of the day, that will make us or break us, 4% negative organic growth is not our style.

I mean, that's -- that's really not a good quarter.

So we're focused on selling a lot of new business.

Great.

Thank you.

Our next question comes from Bill Birdman with MorningStar.

Please state your question.

Hi, good morning.

Good morning, Bill.

Good morning, Pat.

You mentioned the tendency towards self-insurance with the economic slowdown.

Historically, is it your experience that that takes time to come back during a recovery or do people continue to self-insure as a recovery develop?

Or how quick for the appetite for insurance come back during an economic recovery.

It's interesting.

What I said was -- my comments were that the self-insured retentions are increasing.

In a softening market, people moving to self-insurance actually slows down.

It's when the market tightens that people will take -- will move in to self-insurance, take a self-insured retention and reduce their premium costs, but those people who go into the alternative market which isn't so alternative market.

Those people who move into the self-insurance, alternative market tend to stay there whether there's a soft market or not what we are seeing now is that people are just basically looking at their budgets and saying if I had $150,000 retention and I can take that to $250,000 and reduce premiums accordingly, I will take the gamble on the losses, instead of paying out the premium.

All right.

Thank you.

Appreciate it.

Thank you.

(Operator Instructions).

We'll pause for a moment to poll for questions.

Our next question comes from Meyer Shields with Stifel Nicolaus.

Thanks, good morning everyone.

Good morning, Meyer.

Pat, could you contrast -- because we saw a significant dip in employment in the fourth quarter--

Say again, Meyer.

I'm sorry.

I have a terrible headset.

Can you contrast the organic growth rate employee benefits through September with the fourth quarter trend?

What?

The organic growth in employee benefits through the third quarter versus fourth quarter?

Is that the question?

Yes.

I think it's about the same.

We didn't see much difference in the employee benefits space throughout the year.

It had good, strong, organic growth throughout the year, pretty consistent.

And it ranged about 4 to 5%.

Okay.

Thanks.

That's helpful.

With regard to the provision -- I'm not sure what it's termed, but the provision for commission refunds, can you talk a little bit about the expectations that you have for declining payrolls and policy cancellations?

Was there any change in the fourth quarter?

And what are you anticipating for 2009?

First, we maintain a reserve for commission refunds based on -- on subsequent audits that would come up or retro adjustments.

We looked at that reserve.

We adjusted it as we saw the economy at the end of the year.

With the downturn in the economy in the fourth quarter, we don't have a significant series of data -- historical data points but we took our best estimate out right now and I think we are okay.

We haven't had a situation where the economy has fallen off a cliff in one quarter before.

So with that, we will adjust our reserve every quarter if that develops.

I think we are okay right now.

Okay.

Could you quantify the adjustments in the fourth quarter?

I think it was about a $1 million.

Okay.

And one last question, if I can.

Sure.

Do you have a sense, I guess -- the business that the former Liberty Mutual teams in the past, have been for exclusively for Liberty Mutual and it will be up for grabs in the general market place.

Should we anticipate an increase in their revenues because they can charge higher commissions?

It's not going to be a matter of higher commissions, Meyer.

We think in the Liberty world, as a direct writing organization, they just did not have access to being able to round out the whole account.

So in their world, they wrote about two lines of cover for each client they had.

Our average would be closer to four or five.

And so that's where we think that -- we think the opportunity is for them to expand their relationship with clients.

Now, remember, each of those clients, if they have -- if they have two lines, is buying insurance from a broker or agent somewhere else as well.

So you are right.

There's going to be a bit of a battle, but we like our -- we like our odds.

Okay.

That's very helpful.

Thanks so much.

Our next question comes from Dan Farrell with Fox-Pitt Kelton.

Please state your question.

Good morning.

Good morning, Dan.

How are you?

Good.

Good.

I wonder if you could give a little bit more clarity on the economic drag and particularly the decline in unit exposure.

Can you put some numbers around that, how much of a head wind that is.

Are we talking 5%, 7%?

And then also, does this quarter reflect year-end audits and the audits of the unit exposures?

Is there any unusual true up in that?

Should we think about that as a run rate level for you as we head into 2009?

Well, I think when we look at our units, the real question is, how much of our negative organic growth was as a result of units going backwards versus how much was as a result of rate.

I think the second piece of your question is what are we seeing in terms of refunds.

Did I get that right, Dan?

Yes.

Yes.

That's great.

On the refund side, I just answered that.

I think our reserve for that is where it needs to be right now.

But we'll see how it develops.

With respect to how much went backwards, because of rate versus units, I think three-quarters of the decrease was as a result of unit or exposure shrinkage and I think the other quarter is as a result of rates.

Okay.

Great.

Thank you.

Our next question comes from Ken [Ruskin] with [Tammy Jen] Asset Management.

Yes, I wanted to look into the understanding the brokerage segment margins and the adjustments you lay out on the table.

You get to around 350 basis point decrease in EBITDA margins and if organic growth was down around 4%, that sort of implies a full decremental margin or all of those revenues impacted the earnings by an equivalent amount.

I wonder why you wouldn't have seen less of a margin decline with the 4% organic growth decline.

That's a good question.

I think that we are at the point now where when you have unit exposure going backwards and rates going backwards, remember, our teams have to do the same amount of work in order to service that policy, whether it's got a $50,000 SIR or $100,000 or $200,000 SIR.

So the amount of work going into making the placement is basically the same amount of work.

We are getting less premiums and commissions on that policy because the policy premiums are less.

So you are going to see, when you get into a situation where you have negative organic growth of 4%, a big piece of that is going to hit the bottom line.

Granted we don't pay the producer about 20% of that number, so you get a little bit of an offset there, but also contributing to that decline was the lack of investment income.

Again, going back to what I said earlier, we lost about $5 million in the quarter from lesser investment income than we would have had in prior years because of decreasing rates and the fact that we put all of our money in safety rather than yielding accounts.

So you are seeing the gearing there.

When organic goes backwards will hit the bottom line.

It's $0.80 on the dollar and the lost investment income is what makes up the difference.

Okay.

The investment income.

That makes sense sort of.

I guess it's in there for this quarter.

The savings, the $25 to 30 merchandise, can you just help me understand whether that is incremental in '09 or because you have been working on some of this for a while.

It hits in '08 as well?

That number is meant to be incremental in '09.

Okay.

And that shows up -- what kind of run rate?

Does it take a while for that showing up or is it Q1 showing up in a full run rate?

Pretty close to a full run rate in Q1, just slightly skewed, just a little bit.

You figure, you take the average of the two, $28 million, that's $7 million a quarter.

Maybe you will get -- I'm saying this is illustrative.

You get, 8 or more in the fourth quarter, but you can see it's pretty much so a flat the emergence versus a wedge emergence.

Okay.

Great.

Thanks a lot.

Our next question comes from Ken Billingsley with Signal Hill.

Please state your question.

Just one question on your Liberty acquisition.

Are you going to be able to receive contingence on that business for the next two to three years.

We did not the take contingent commissions at this point which is our agreement with the Attorney General in Illinois.

However, the Attorney General's have agreed that we can participate in what are called guaranteed supplemental commissions and we will associate an arrangement such as that with Liberty.

Okay.

So you had to sign on -- I believe -- I thought this was a change where they were -- some of the larger guys were accepting contingent on only acquired businesses for two or three years.

I'm sorry, that's correct, Ken.

We are allowed when we acquire a company to take -- continue to take their contingents for a period of three years.

Okay.

But this is a renewal rights situation.

It's not a going concern acquisition.

And so this will be negotiated as a guaranteed supplemental arrangement.

And the good news about that is a guaranteed supplemental arrangement will go on beyond three years.

Very good.

In the past you had made comments that you were -- when you talked to customers and your client that you really didn't care how you got paid, whether it was, a brokerage or agency basis.

With the way the market is going now, are you seeing a change there?

Are you still able to make that push?

And what are you going to do if rates do actually rise in 2009?

Will that negatively impact you?

Well, I mean, I think those -- those clients who have chosen to pass on a fee, we will not see the typical rise in compensation that goes with commission income in a tightening market.

And that equates to about 25% of our property casualty retail commission, and probably similar amount -- well, it's actually a little higher on the benefits side.

So when rates go up, we will have probably something on the order of 70 to 75% of our book of business that will actually be subject to the increasing rates.

You raise a good point in that we are, in fact, transparent and I think there will be tougher discussions with our clients, especially if this hits while the recession is still strong.

We will just have to see how that goes.

But the push to increase our compensation by asking our clients to make us whole with fees in addition to commissions has slowed dramatically in this economy.

Okay.

Thank you.

Our next question comes from Alison Jacobiwitz with Bank of America, Merrill Lynch Please state your question.

I just figured I would get an updated view on the dividend and how you are thinking about that these days.

Well, as you saw, Alison, just last week we had our board meeting and declared the dividend at the same level for our next payout.

And the January meeting is when we go over our capital plan with the board for the year.

So where we stand today, we see no reason to reduce the dividend.

And, we are slowing the cash use in our acquisitions.

We are being very cautious in our capital planning and we are working very hard on our expenses.

We are in unprecedented times but the board has reviewed where we stand and are comfortable with it.

Thanks.

Thank you.

(Operator Instructions).

Our next question comes from Meyer Shields with Stifel Nicolaus, please state your question.

You talked about how clients are increasing their retentions.

Are you seeing any claim flow in risk management from that trend?

No, because the size of the retention doesn't have much to do with the number of claims.

Okay.

Thanks.

Thank you.

Ladies and gentlemen, there are no further questions at this time.

I will now turn the conference back over to Patrick Gallagher for closing comments.

Just a few quick comments.

Thank you, Diego, thank you everyone for being here.

I said we were disappointed in our results.

We plan at Gallagher for growth every single quarter every year.

However, I don't think anyone on this call would doubt that we are in unprecedented times and these have created an unbelievable head wind.

So in 2009, we are focused on watching our costs and looking for every opportunity to save more.

We will stay very focused on producing new business.

We are a sales and marking company.

We are also going to focus on taking good care of our customers.

If they are feeling pain, we are in business to serve them.

We will continue to add merger and acquisition partners because we think there will be great opportunities there and we offer our new partners great opportunities to grow and prosper.

And it's all of these activities that will get us through this tough time.

Those who come through these times are going to excel in the next upturn and we intend to be one of the stronger players when the opportunity arises.

Thank you for being with us today and we look forward to talking to you after first quarter.

Thank you.

Thank you all for your participation.

Ladies and gentlemen, this concludes today's conference call.

You may disconnect your lines at this time.

Thank you.