Argo Group International Holdings Ltd (ARGO) 2008 Q3 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the third quarter 2008 Argo Group International Holdings Limited earnings conference call. My name is Katina and I will be your coordinator for today. At this time all participants are in a listen only mode. We will conduct a question and answer session toward the end of this presentation. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Michael Russell of Investor Relations, please proceed.

Thank you Katina, and good day everyone. Welcome to Argo Group's conference call for the third quarter of 2008. With me today is Mark Watson, President and Chief Executive Officer; and Jay Bullock, Chief Financial Officer. I would also like to introduce Richard Pexton, CEO of Heritage, who will be on the call with us today.

We are pleased to have the opportunity to review the Company's results for the quarter and the first nine months of 2008, as well as provide managements' perspective on the business. No earnings guidance will be provided in this call.

I would like to remind you that this conference call is being recorded, and all participants are in listen only mode. Following managements' opening remarks, the operator will provide instructions on how you may queue in to ask questions.

Let me remind everyone that as a result of this conference call, Argo Group management may make comments that reflect our intentions, beliefs and expectations for the future. Such forward-looking statements are qualified by the inherent risks and uncertainties surrounding future expectations, are generally, and may materially, differ from actual future results involving any one or more of such statements. Argo Group undertakes no obligation to publicly update forward-looking statements as a result of events or developments subsequent to this conference call. For a more detailed discussion of such risks and uncertainties, please see Argo Group's filings with the SEC. With that, I would like to introduce Mark Watson, President and Chief Executive Officer. Mark?

Thank you Mike, and hello everyone. We appreciate that you've taken time to join us today. After my opening remarks, our CFO Jay Bullock will comment on our third quarter financial results, and then we'll open the call for questions.

Given the number of property casualty companies that have reported earnings thus far, it's been well documented how challenging the third quarter proved to be for everyone's financial results. I'm pleased to report, however, that our risk management practices continued to prove effective as they were tested this quarter by two hurricanes and an extraordinary shot to the entire financial sector and international securities markets. For the three and nine months ended September 30, Argo Group generated increased operating income results, despite the impact of hurricanes Gustav and Ike. More importantly, as we entered the fourth quarter, our balance sheet and capital position remain strong.

Yesterday we reported a net loss for the third quarter, but for the year have generated net income of $51 million. Obviously our results have been affected by the financial market turmoil, as well as by the hurricanes. Despite the nature of the challenges we in the industry have faced during 2008, our book value per share on September 30, 2008 was $44.11, a slight increase over the $43.81 book value per share reported a year ago at September 30, 2007.

In the third quarter we reported pre-tax losses of $60 million related to the hurricanes. As we discussed during our second quarter conference call, historically Argo Group's operations had only a moderate property catastrophe exposure. As we continue to diversify our platform, however, we felt comfortable increasing our property exposure. Both the international specialty and reinsurance segments have exposure to property catastrophes, and in fact, two-thirds of our third quarter catastrophe losses were reported by these two segments.

While losses are never easy to report, we go to great lengths to prepare for them, and are pleased they were within our risk tolerances. The strength of our risk management approach was demonstrated in our P&L, as well as by the fact that although we incurred multiple catastrophe events during 2008, both the third quarter and year-to-date operating income exceeded that reported for similar periods in 2007.

As I've shared with you on numerous occasions, we also seek to manage our gross and seeded property exposure such that the types of catastrophes which would cause an expected loss of capital for a year are historically unprecedented. We will continue to monitor our exposures carefully and to purchase reinsurance where appropriate.

Our third quarter results also included a pre-tax realized investment loss of $18.4 million, which included the impact of other than temporary impairments. $3.7 million of that loss related to the sale of fixed maturity obligations issued by Washington Mutual, and $13 million related to the Company's investment in fixed maturity obligations of Lehman Brothers. Jay will discuss our investment portfolio in more detail during his remarks.

Finally, during the third quarter we completed our annual actuarial review of asbestos and environmental loss reserves. This year's review concluded that our run off reserve should be increased by approximately $9 million. Reserve estimates are, by their very nature, based on our judgment of the actuarial best estimates at a point in time. These estimates are refined as historical loss experience develops an additional claims are reported and settled. As a consequence, the estimates may change. We will continue to maintain our conservative reserving philosophy, and to record our actuarial best estimates.

The impact of these three events on our third quarter was a consolidated pre-tax reduction of income of $87.5 million, losses we absorbed without stress on our balance sheet. Our capital remains strong, and we are well positioned to take advantage of the opportunities we believe will develop in the future.

Let me also talk about our US businesses. Our E&S business segment continued to compete with the standard market as well as new entrance into the E&S marketplace. We have not yet seen a significant rush to the exit by the standard market carriers. Because the E&S market responds to a need for unavailable coverages, while a soft market exists and insurance is readily available, the demand for our products is reduced.

Our Commercial Specialty businesses continue to see increased activity by both regional and national admitted carriers. The large accounts in more generic classes of business continue to be under more intense pricing pressures than the smaller niche accounts we service. Single digit rate declines continue to be the norm in our markets, with some minor loosening of terms and conditions.

Let me make a few general market comments; the financial crisis that began in 2007 with the subprime mortgage meltdown has stressed both the financial markets and insurers. When we entered 2008 companies in the property casualty market had ample capital with which to operate and grow. Since that time, insurance industry capital has been eroded by large realized and unrealized losses. One of the largest and most influential insurance companies in the world has suffered as well.

Hurricanes Ike and Gustav further depleted the capital of insurance companies. Hurricane Ike seems likely to result in insured losses that will make it one of the most expensive hurricanes on record for the insurance industry.

And finally, I would say the economy is now slowing with negative GDP growth in the US reported for the third quarter, and a larger decrease being forecast for the fourth. I mention all of this because the combination of these events is having a significant impact on insurance companies. Many insurance companies that had strong balance sheets and were viewed as being over capitalized at the beginning of 2008 are now finding that they have just the right amount of capital. Capital is very difficult to find, and it's more expensive today, but there's a positive side to all of this, which is why I'm mentioning it, and that is when you add up all of these events that have occurred, or are occurring as we speak, we believe these may be the necessary drivers to cause some change in the markets, and we're cautiously optimistic that that will continue for the remainder of this year and through next year. We don't know exactly when things are going to change, but I think that we're on the right track.

In previous calls we spent a lot of time discussing the many steps that we've taken to build our global infrastructure and we continue to do so. However, now we can focus on how it ought to be deployed. There has been much discussion, both on recent earnings calls, and during industry conferences, about the possibility of a market turn, as I just mentioned. And while I'm not prepared to say that it's changed, I think that we're in the right position. One of the things that's been impacting our market has been the impairment to some of the financial services companies, and one of the things that we have started, and recently announced, has been the start or formation of Argo Financial Products, which is a London based underwriter, which will underwrite professional liability coverages through our Heritage subsidiary.

In this time when capital is scarce, and it is difficult to obtain, and costly when found, companies with available capital can put it to good use. I believe that Argo Group is one such company, and we plan to deploy our capital on those lines that will provide us with the greatest returns. We have built an international platform, put together a team of industry leaders, and developed a business model that emphasizes profitable growth and meeting the needs of our customers. I believe we're well positioned to take advantage of the opportunities which are beginning to appear. Now we'll turn the call over to Jay, who will review our financial results, and then open the call to more questions. Jay?

Thanks Mark. Let me add some additional detail to Mark's comments on the quarter. First let me say, given the extraordinary combination of the quarter's adverse capital markets and hurricane activities, our diversification strategy proved to be effective, as the risks we were well managed across all of our business segments, including our most recent additions, International Specialty and Argo Re.

We continued to experience top line growth during the quarter as net written premiums were up 45% over the same period last year. This increase was largely a result of the acquisition of Heritage, and the establishment of Argo Re, along with an increase in the Commercial Specialty segment from the acquisition of Massamont earlier in the year.

During the third quarter we also announced the acquisition of Insight in the US, and as Mark mentioned, launched Argo Financial Products in London. We expect both of these businesses to begin to contributing in the fourth quarter.

Losses for the third quarter were adversely impacted by significant hurricane activity. The $60 million in net losses we reported in the quarter includes all inwards and outwards reinsurance premiums, and in the US business, recovery on our reinsurance programs. Again I'm pleased to say that the results in each of our divisions were within our expectations for such events.

Net reserve development for the quarter was approximately a positive $11 million, and consisted of development from our E&S segment of $12.5 million positive, offset by approximately $2 million in adverse development in our runoff segment. The runoff segment includes the increase to the A&E reserve of $9.1 million, offset by other positive development in this segment of approximately $7 million. Overall we continue to feel our reserve position remains conservative, our reserves are reviewed regularly both internally and by outside independent actuaries.

Now let's turn to the investment portfolio. The capital market turmoil experienced during the third quarter resulted, for Argo, in the recognition of a net pre-tax realized loss of $18.4 million for the quarter. The net realized loss included other than temporary impairment write downs of $20.2 million on investment securities largely related to fixed income securities at Lehman Brothers, and equity security write downs where portfolio declines were deemed other than temporary.

We also sold a small amount of fixed income and equity securities during the quarter, which including our holdings in Washington Mutual bonds. These sales resulted in a small net gain of 1.8, the net effect of the two is the $18.4 million.

At September 30 our investment portfolio was approximately $4 billion and had a pre-tax unrealized gain of $4 million. During the quarter the net unrealized gain on the portfolio decreased by $35.7 million on an after tax basis, exclusive of foreign exchange, or less than 1% of the total portfolio, primarily due to widening credit spreads. The decrease in market value of the portfolio, coupled with the realized investment losses, represents 3.7% of shareholders' equity.

Let me go through the portfolio in a bit more detail. Our fixed income portfolio is well diversified and managed conservatively. US Treasury's, US agencies, agency guaranteed mortgage backed securities, and other government securities represent 32% of the portfolio. These government securities, coupled with our short-term highly liquid investments, represent almost 50% of the entire portfolio.

The next largest component of the portfolio is our investment in municipal securities, which represents 18%, and carry an average rating of AA+ without considering credit enhancements. Our corporate securities make up 15% of the portfolio, and are issues of high quality names. We round out the remaining 9% of the portfolio with various residential and non-residential mortgage backed and asset backed securities. This sector includes $183 million of commercial mortgage backed securities, of which 94% are AAA rated, and the other 6% are AA rated. Exposure in this category is mostly the seasoned deals significantly enhanced by structural subordination and a percentage of loans that are diffuse.

Despite a significant amount of spread volatility in CNBS this year, the sector remains well suited for our portfolio as cash flows are stable and no credit issues in the deals own are anticipated. Our exposure to non-mortgage backed related ABS is less than 3% of the portfolio, and is represented primarily by top tier issuers with underlying prime collateral.

The fixed income portfolio has a duration of three and a half years, with an average credit quality of AA+, and a tax equivalent yield of 4.5% for the third quarter. Our investment in equity securities is approximately 70% of the entire portfolio, and it's generally comprised, primarily, generally of S&P 500 type names. At the end of the third quarter, the unrealized gain on our portfolio was $51.8 million on a pre-tax basis.

We've increased our focus on counter party exposure, given the recent economic environment. The majority of our counter party exposure is in the form of reinsurance recoverables. These recoverables are from highly rated reinsurors and we don't currently see any issues with recoverability. The majority of our receivables are with reinsurance carriers rated A or better by A.M. Best.

At the nine-month balance sheet, the increase in receivables is a function of the consolidation of the third-party capital we manage on the Heritage Syndicate at Lloyds. While accounted for on our balance sheet, these represent the obligations of our third-party capital providers on Syndicate 1200.

Finally, our capital base; Argo Group ended the quarter at $1.8 billion of total capital. Our capital ratios remain strong and we feel we have sufficient capital to meet our business plans for the future.

Katina, that's the end of our prepared remarks and we're ready for questions.

(Operator Instructions).

Your first question comes from the line of David Lewis, representing Raymond James. Please proceed.

Thank you and good morning.

Good morning.

Mark, first for you; given the financial pressures on some of your competitors, can you address the recent changes in quote activity for your businesses? And any potential pricing improvements that you might see as we kind of look at the different segments, maybe focus on London? I think you're in London right now and recently met with Lloyds; you know if you're going to start to potentially see any improvements you think in E&S? Clearly, we might see some stabilization.

And then, also, there's a lot of talk of reinsurance improvements, given the property losses. Any thoughts there?

Yes, well, let me just go around. I'll talk about Bermuda and the US first and then I'll ask Richard Pexton to talk about what's going on here in London.

In the US, first of all, I'll make a general comment. What we're seeing for our Company is that for capacity driven accounts, particularly where some of the larger players that are challenged, accounts receivable are participants that we have accounts that are moving mid-term but, for the most part, we're right now marketing or renewing business for the beginning of January.

And that's where, I think, that we're seeing a fair amount of change as well. So, for the United States, that would mean some change with Argonaut Specialty, which is one of our Excess and Surplus lines' underwriters that writes slightly larger accounts then Colony, our bigger E&S company by premium volume.

And for the smaller accounts, so again, for companies like Colony and many of our commercial specialty lines, we're starting to see a little bit more account activity but not quite as much. There doesn't seem to be too much change, in terms of capacity for the smaller accounts, right now. But we're starting to observe our competitors moving around their underwriting capacity a bit, as are we.

So, going forward, I think we'll first see the larger accounts, where capacity is an issue, move both in the US and in London. For Bermuda, it's the same thing on the reinsurance side, in particular. I think that, while we were at the PCI annual meeting last week, talking with some of the reinsurors for our US program and Argo Re talking with its clients, I think the general notion with capacity being a little bit more constrained this year than last year and given the storms that occurred in the third quarter of 2008 in the United States, that reinsurance pricing is likely to go up.

So, for Bermuda, I think that's a good sign for Argo Re. On the US side, I think that's a good sign, on the primary side, for Argonaut Specialty to begin with. And I'll let Richard talk about the London market.

David, good morning; Richard. I think you're hearing a lot of noise about that there is a [slide] from concentration of risk, be it investment banks and insurance. They factor that's going to lead to a more syndicated approach by risk managers. You'll be aware that the Lloyds market is a syndicated coinsurance market.

That is going to play into our hands well. There isn't a lot of business flow in the market at this moment. We're expecting to get busy within the next few weeks. And yes, I believe prices will go up. The first stage of that has already happened and is happening. Prices are now level. They are no longer being reduced in the market. So, we're seeing flat prices at the moment.

I believe that the year will get better. I don't think this is a big bang situation. I think that, when you see more syndicated risk, prices will go up steadily throughout the year, which is what we're budgeting for now.

That's helpful and Mark, another question for you on the Argo financial products area. You're kind of in a somewhat startup mode there, to participate, I guess, in the professional liability area. Do you think you're positioned well to start capturing some of the movements out of some of the larger players out there?

Well, two parts to that question, or I should say two answers. We've had a professional liability operation for a number of years, in the United States. It was originally part of Colony and we re-branded it earlier this year and now refer to it as Argo Pro. As [respect], the professional liability operation that we just started, that's a London based operation it's more focused; I should say it's focused non-US business. And Richard, you might want to say a couple of words about it.

Yes. This is a very experienced team that we've just acquired. They are basically writing European business; 90% is Europe. There is no US domicile business. They're a market lead.

It's a late startup for 2008 but the demand is definitely there; there's no question. We will significantly over achieve the 2008 premium budget and are looking at, again, at 2009, as the same thing's happening in that market, where big carriers have got big shares. They are being broken up into much smaller shares.

Yes, I think the quote I heard from the team earlier today was that they'd already made their budget for the year in the first week they were here. Now, that was a figurative comment but I think it gives you a little market color.

That's very helpful. I'll re-queue with some additional questions. Thank you.

(Operator Instructions).

The next question comes from the line of Amit Kumar, representing Fox-Pitt Kelton. Please proceed.

Thanks, good morning. I guess, just going back to the discussion on Argo [FP] and inside insurance, it seems the limits are, I guess, $20 million for Argo FP. When you're saying that you've already made the budget, what sort of expectations are we talking about here for 209?

The limit that you refer to was the maximum we can underwrite per client. That's not a premium limit; that's an indemnity limit. The premium limit for 2008 was very modest because it started last week. So, literally, you're looking at about six weeks' premium slide because anything attaching the first of January would affect next year. For 2009 we've got a modest target of premium of, circa, $15 million.

Okay, that's helpful. And I guess, maybe just going back to the discussion on A&E reserves, could you just give us the number? What were the ending reserves as of Q3 in the run-off segment?

Net reserves for A&E at the end of Q3 were approximately $165 million.

And we'll have the exact details published in the 10Q, which I think will be out next week.

Okay and, in terms of the adverse development based on the study, were there any specific trends you had seen? Or was it just more so of truing up?

It was more truing up. The reserves are so small now that, when you're paid, and I said this last year; when your paid patterns change just a little bit, it changes the wealth development factors. Of the $9 million, it was really a $5 million true up. Last year, we were booked; I think management's estimate was $3 million different than Milliman's estimate. So, we decided to move closer to Milliman's estimate this year and there was an additional $1 million of ULAE expense.

So, in terms of pure development this year, it was really about a $5 million true up.

That's helpful. I guess, just moving on and looking at the reinsurance segment, previously you had talked about $100 million new premium number over 2008. And just looking at the run rate, for the nine months, have those expectations changed in any way?

No. I think I meant, sometimes I may say things that are confusing. When I was thinking about that $100 million, I'm thinking about the part that we're writing on our own account. Also keep in mind that we also provide reinsurance cover to a few of our business partners, on a pro rata basis for their programs. That adds another $20 million or so of premium.

So, we may end up a little ahead of plan for the year but I actually think we're right on target for our reinsurance operation.

Okay that's helpful and last question and I promise I'll re-queue. In terms of, I think in your opening remarks, you talked about your capital levels and how it's different from others. And, I guess, that's why you are poised much better, I mean, when you look towards '09. Can you just talk about your premium to equity level? And, you know, what's the target leverage ratio you are thinking of?

Well, that's a number of questions. So, I think that we are in a good capital position and I mean that on an absolute basis and a relative basis. I think the amount of net written premium that we would expect to write next year, relative to capital, is somewhere around one-to-one, which, I think, is a very conservative number.

When I look at leverage, I don't necessarily just look at premium to capital but also we look at loss reserves to capital and assets to capital; firstly, reinsurance recoverables and secondly invested assets to capital. And I think that the leverage that we've got, relative to all of those, is just fine. I also look at financial leverage and, right now, I think we're, Jay's sitting at 28% -- sorry; that may be high, of debt to total capital, which is about where we've been for several years.

So, I think that, if you look at the different places on the balance sheet and the income statement, relative to capital, I think we're in a good spot.

The number's approximately 25%. Remember that the vast majority of that is 30-year trust from junior subordinated debentures [in effect] in the form of trust [reserves].

Correct.

Okay, that's very helpful and congrats on the results.

Thank you.

(Operator Instructions).

Your next question comes as a follow up from the line of David Lewis, representing Raymond James. Please proceed.

Thank you. I think, Mark, in your early comments, you indicated, or Jay's comments, actually, that the Company's got a $1.8 billion capital base. Is that statutory capital?

No, that's the GAAP capital of the Company.

But the statutory capital at September 30, roughly, if you don't have the exact number?

I don't have the exact number.

It's right around that. I think it might be $1.7 billion.

It's probably closer to $1.6 billion; all you have to do is back out the goodwill and you're pretty close to the number.

Okay, so not to put words in your mouth, but Mark, you may have indicated that you hope to write one to one, so that would imply that you could write up to $1.6 billion.

David I was thinking about equity, not total capital.

Okay.

Which is a little less than that.

Okay, yes, it's a little over 1.3. All right.

$1.4 billion.

Okay. Jay, make sure I'm looking at this right, if we take what you reported all in on your combined ratio in the quarter of 106.1%, hurricanes were 8.6 percentage points, and then you had favorable development of 3.3 percentage points. And if we kind of X out hurricanes and the favorable development then your incurred combined ratio was 90.8%, which I think is pretty attractive relative to what we've seen in other periods. Do you kind of look at it the same way, and was there anything particularly favorable in the third quarter that may not be kind of ongoing?

Well I think you have to keep in mind that with the addition of both Argo Re and now Heritage, both operations have cat exposure as a buff. Argo Re is primarily cat exposed; Heritage has a significant amount of cat exposure all through the year. And so we accrue for losses that may occur in every quarter. So think European wind storm at the beginning of the year and the end of the year. Think earthquake, whether it's in the US or Japan throughout the year, and so a part of that change -- or I should say a part of the results of the third quarter are a recognition and some of those events just didn't occur, as well as taking into account those that did.

I'd also add David that while it was a significant quarter for hurricanes and catastrophes; we're going to have catastrophes in the third quarter. So backing out 100% of the catastrophes I think gives you a slightly unrealistic view.

Yes and also attritional property losses were low for the quarter.

Okay, that's helpful. And if we tried to get kind of to a -- well let me back up. If I add back the realized investment losses after tax, it looks to me like your operating earnings per share would have been about $0.18 a share, including the hurricane claims. Does that sound about right? I know the tax rates get a little bit squirrelly here, and that's why I'm just trying to confirm that. But if we just take, I think you indicated you had $14.4 million of after tax losses, and I kind of built from that standpoint.

What did you say David? $0.18?

$0.18 a share.

I think that's a decent ballpark.

So in fact then you had a much better quarter than the mean estimate of a loss of $0.33, which should have been on a similar comparison. Anyway on the review of the A&E business, I think after the third quarter of 2007's review you indicated you were about the middle of the range. Would you say you're still in that middle of the range?

Yes, solidly.

Okay. That's all I had, congratulations on the quarter.

Thank you.

The next question comes from the line of Scott Heleniak representing RBC Capital Markets. Please proceed.

Hi, good morning. The $100 million target you gave for reinsurance premiums this year, any idea what that might look like in '09, if say pricing is up just a little bit? It's obviously starting to firm, but how quickly can you ramp that up in 2009, and any idea what that number might look like?

Boy I wish I had a crystal ball, but yes, I think we're getting a sense for that now Scott. We're marketing for January 1 business today, which we're not that far away. The interest level that we have I think is more than it was a year ago, or this past year, and we've been pleasantly surprised during the course of the year. So there will be two things driving the premium number for 2009. First will be rate, and I think that it is likely that rates will be moving up, for the reasons that I mentioned earlier. I'm not sure how much, we'll know pretty quickly, but I think we'll see rates move up some, and I think we'll see that accelerate during the year. So let's pay attention to January 1 and see what that means for the rest of the year.

And then perhaps the more important driver, for our company anyway, is we have to remember that January 1 for 2008 was not a robust time for us, because we literally launched Argo Re on I think December 23. And so while we did market some business for January 1, we didn't write as much business as we would have liked to had we started marketing in October of 2007. So I think that we will have more business to write January 1 this year, meaning 2009 then 2008, just because we were a little behind in marketing last year. So you add that in with I think demand for our capacity, we've got a great underwriting team led by Andrew Terrier, I think that our ratings are sound and helpful, and some movement in rate in the marketplace, and I think that should put us in a good spot to start next year for Argo Re.

Okay. And then also on reinsurance, you mentioned on previous calls the 15% target, is that still something you look for long-term? I know it's a little bit different mix now that you have Heritage. But are you still comfortable with that target?

Oh absolutely, that was our interest in acquiring Heritage. Over the last five years Heritage has more than exceeded that target return, and while this year may be a challenge for Heritage, given some of the losses, it is, I think, comforting to look back and look at 2004 and 2005 when we had some pretty significant hurricane losses. And you'll see that Heritage will have written, on an accident year basis, a profit in 2005 as well, notwithstanding some pretty big losses from Katrina.

All right. The only other question I have was the one off; you've talked about possibly dividending some capital to the holding company. Have you done that this year, and is there still plans to do that in the next few quarters?

I think right now, given what's going on with the capital markets, a more prudent course of action is hold on to your capital, and use it judiciously.

Fair enough, thanks.

(Operator Instructions). Your final question will come from the line of Amit Kumar, representing Foxx-Pitt Kelton. Please proceed.

Oh, thanks. Just a three quick questions. I know you have an outstanding share buyback program, and I guess based on what I'm hearing today, is it fair to say that one shouldn't expect that to be tapped in the near future?

Well I think that we're always looking at the best use for our capital, but I think right now, given what's going on in the markets, as I've said, that husbanding our capital until the financial markets calm down is probably a prudent course of action.

Got it. And then just, I guess moving on to the Heritage premiums, and I know you've discussed this for quite some time, in terms of the lumpiness. Could you just remind me what sort of premiums, directionally, we should expect for Q4 for Heritage?

Amit just understand, I'll explain to Richard, I think the question you're asking is how does that business come onto the business during the year in terms of --.

Yes, exactly.

Over the course of the year, how we're earning premium?

Not how we're earning it, how it's written. In other words, what timeframe during the year is that business written?

Okay. 2008 we're pretty much written, and you'd expect us to be that for the remaining period, because the business that comes up in November will attach to 2009. We would be writing approximately 70% of our business by the half year, 70% to 75% by the half year is underwritten.

Okay, that's all I had. Thank you so much.

With no further questions in queue, I would now like to turn the call back to Mr. Mark Watson for closing remarks.

Thank you Katina, and thank you everyone for joining our call today. I know that everyone's time is precious given how busy the third quarter has been. I'd like to thank all of our employees for working hard during the third quarter, there's been a lot going on with the market changes that are going on. I think that we are in a very good position to move forward. I'd like to thank everybody for keeping their head down, and we look forward to speaking to you at the end of the fourth quarter and talking about our year end results. Thank you very much.

Ladies and gentlemen thank you for your participation on today's conference. This concludes your presentation, you may now disconnect, good day.