Argo Group International Holdings Ltd (ARGO) 2013 Q1 法說會逐字稿

Welcome to the Argo Group 2013 first-quarter earnings call. My name is John and I'll be your operator for today's call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note, this conference is being recorded. I will now turn the call over to Mr. George Luecke, Argo Group Treasurer. Mr. Luecke, you may begin.

Thank you, John. Good day, everyone, welcome to Argo Group's first-quarter 2013 earnings conference call. Joining me today are Mark Watson, Chief Executive Officer, and Jay Bullock, Chief Financial Officer. Before turning the call over to Mark I'd like to remind everyone that Argo Group management may make comments that reflect their intentions, beliefs and expectations for the future. Such forward-looking statements are qualified by the inherent risks and uncertainties surrounding future expectations, 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 more detailed discussion of such risks and uncertainties please see Argo Group's filings with the SEC. With that, it's my pleasure to turn the call over to Mark Watson.

Thank you, George, and good morning, everyone, and welcome to Argo Group's first-quarter earnings conference call. I'll briefly share my thoughts regarding this quarter's highlights, after which Jay Bullock, our Chief Financial Officer, will add some color to the quarter's financial results. We'll look forward to responding to any questions you may have during our question-and-answer session after that.

Overall, we're pleased to begin the year with a strong first quarter relative to last year, having generated $32.7 million, or $1.28 per diluted share of net income, up from $19.6 million, or $0.74 per diluted share in the first quarter of 2012. We ended the quarter with diluted book value per share of $62.67, up 3.2% from $60.75 at the end of 2012. Our results demonstrate the success of the strategies we've employed to grow the top line intelligently, drive more margin through our business and create a diversified platform of product and geography. This quarter we generated underwriting profits in all four of our operating segments and with the prospect of any increase in investment income, modest at best, we'll continue to focus on improvement in our underwriting results first.

We believe that consistency of results and improved return on capital will create long-term value for shareholders. Over the last few months we've added some great executive talent to our team. We were pleased to bring Kevin Rehnberg on board in March as President of our US insurance operations. With more than 25 years experience in specialty lines, Kevin will play an integral role in strengthening and growing the core of our franchise in the US. On the underwriting side, we started up a new inland marine unit within our excess and surplus lines business, reflecting our efforts to recruit best-in-class underwriting talent with the expertise and relationships to access profitable books of business. While adding new talent to the organization is crucial to supporting growth and innovation, I was reminded the other day as I was with the executive management team that the average tenure of our leadership of the organization is growing and now about eight years.

We continued to return capital to shareholders in the quarter at a measured pace. We view share repurchases at a discount to book value as a great investment and we're also paying dividends to our shareholders and think that those are important and recurring capital management tools. In the first quarter, we repurchased $12.3 million, or approximately 326,000 shares, at an average price of $37.71 per share, or 62% of reported book value at year-end 2012. In February, we were also pleased to announce a 25% increase in our cash dividend per share from $0.12 to $0.15. Over the last three years, we've returned over $250 million of capital to our shareholders through share repurchases and dividends. The share repurchases reflect a reduction in outstanding shares of approximately 20% over that period of time.

Turning to the business, in the first quarter we produced consolidated gross written premiums of $488 million, an increase of 11% from the first quarter of last year, and our seventh consecutive quarter of top-line growth. The growth is a function of modest, but steady improvement in pricing, expansion of our existing platforms, and to a lesser extent, new business development. Our excess and surplus line segment and our Brazil -- our business in Brazil were the primary drivers of gross written premium growth this quarter.

With respect to the broader market conditions in which we compete, we continue to experience modest rate improvement, with the magnitude varying by business. In most businesses where rate is needed, we're achieving our rate improvement objectives and in some cases we're exceeding them. So without a catalyst for a dramatic move in rates and given the continued declines in investment yields, I'm hopeful that the industry will maintain its pricing discipline and I'm cautiously optimistic that this general improving market trend will continue. Regardless of the market conditions, we will continue to focus on underwriting profitability and diligently seek out profitable growth opportunities.

As I mentioned, each of our operating segments generated an underwriting profit for this quarter. We benefited from benign catastrophic activity during the quarter, continued modest favorable development from prior years, and most importantly, we continue to see the benefit of past and ongoing repositioning efforts to certain of our core businesses. Our loss and combined ratios improved by four points year over year, reflecting primarily the improved underwriting results. While our expense ratio was higher than is acceptable to us and higher than we expect to see for the balance of the year, it was impacted in the quarter by over 200 basis points as a result of higher expense for equity compensation, a reflection of the greater than 20% increase in our stock price in the quarter, and then to a lesser extent changes in the accrual of deferred acquisition costs.

Towards our objective of improving operational efficiency, we passed some important milestones in the quarter with development and successful launch of the first leg of our new business development platform, or our technology system, and completed the first quarter of fully transitioned work to some of our external business partners. We have a lot of work ahead to complete these efforts but I wanted to take a moment to say thank you to everyone who's been working on these important projects. Frankly, they've been working their tails off for the last couple of years and we still have a long way to go.

Let me briefly comment on each of our operating segments before turning the call over to Jay to discuss more details around our financials. In our Excess and Surplus Lines business, we've been advancing on all fronts. We've been adding to the depth and breadth of our teams, which has enabled us to grow our top line profitably. We've been expanding our product lines and improving on our producer relationships in the process. Accordingly, our gross written premiums grew 19% in the quarter while we achieved overall rate improvement in the single digits. Much of this growth was driven by our property book, reflecting increasing submissions, as well as by our casualty book, which was helped by demand for post Hurricane Sandy repair work. We reported a combined ratio of 95.4% compared to 91.5% in the quarter of 2012, driven in part by modest favorable prior-year developments in this business this year as compared to a year ago.

In Commercial Specialty, we reduced our top line in conjunction with re-underwriting of the portfolio to remove underperforming accounts within Argo Insurance and Trident, which was offset somewhat by growth in our surety business. I think this trend will probably continue for the rest of the year. Accordingly, our gross written premium declined by 1.5%, and net written premium declined by 9%. On a positive note, we've been able to achieve rate increases in excess of 10% at Argo Insurance, and 6% at Trident on retained business. The Commercial Specialty segment overall reported an underwriting profit with a combined ratio of 98.6%, a significant improvement over last-year's first quarter result of 107.4%.

In International Specialty, we achieved a gross written premium increase of 34 -- excused me, 36%, largely due to the build-out of our operations in Brazil. Argo Re, our short tale reinsurance operation, also experienced top line growth despite a competitive property reinsurance market, which saw non-loss affected accounts flat to slightly down upon renewals. Loss affected accounts were up 10% to 30% depending on scale of loss. Conditions are stable to modestly improving in our Excess Casualty and Professional Liability business, as well. One factor that is becoming increasingly apparent is the apparent role of nontraditional capacity within the property cap market. With increased investor demand we've seen very competitive prices in the more remote layers of the reinsurance market and very attractive cap bond issuances. For us, property cat is a small part of our overall business and we will expand or contract depending on pricing and other opportunities to deploy our capital. Through our alternative market capabilities, such as our sidecar Harambee Re, completed early this year, we have the ability to react quickly as the property cat market evolves.

Finally, turning to Syndicate 1200, gross written premium grew 2.4% in the quarter, reflecting the competitive environment, careful risk selection and appropriate pricing. We grew net written premium by 68%, reflecting increased retention as we recalibrate our reinsurance programs. Of particular note, we generated a 93% combined ratio in the segment in the quarter, achieving 10 points of improvement compared to the same quarter last year. Our property and specialty divisions within the Syndicate performed particularly well. Across the various books of business rates were roughly flat with small single-digit increases and decreases among a majority of our lines. Although the Aon Berkshire partnership has received significant press, we do not expect a material impact on our Syndicate business.

As to nonorganic growth, we continue to see a robust pipeline in acquisition opportunities and are particularly focused on adding properly-valued US fee-based businesses to complement the development of our Alteris platform. The challenge we often face is one's view of properly valued. On the investment front we are seeking way to marginally increase our returns without materially impacting our risk profile and we believe we're finding ways to do so. Given our investment leverage, even incremental enhancements to portfolio returns can contribute to ROE. And with that, I'd like to turn the call over to our CFO, Jay Bullock.

Thanks and good morning, everyone. As Mark pointed out, mostly positive news to report and fairly straightforward so I'll keep my remarks brief. As outlined in our press release, we reported net after-tax operating income of $0.78 per diluted share, compared to $0.54 per diluted share in last-year's first quarter, for an increase in operating income per share of over 40%. Gross written premiums grew 10.6% to $438 million in the quarter while net written premiums grew 15.7% to $279 million. The higher increase in net written premium, largely in Syndicate 1200, reflects changes in our Reinsurance program where we have combined certain treaties and in one instance reduced the size of a quota share program.

We generated growth in three of our four operating segments; E&S, International Specialty and Syndicate 1200. In Commercial Specialty we experienced modest declines as we continue to pare underperforming accounts within Argo Insurance and Trident. The overall growth in written premium will be reflected in an increase in net earned premiums in the coming quarters. The combined ratio for the quarter was 99.4%, an improvement of four points from 103.4% last year. This mainly reflected an improvement in the loss ratio to 57% from 61.3% last year. This loss ratio improvement is a result of additional rate, the underwriting changes that we've made across the business, and continued favorable reserve development. That favorable development in the quarter totaled $4.5 million against $3.3 million for the same period a year ago.

By segment, development in E&S in excess and surplus lines was $5.2 million favorable, driven by contract in Allied Medical from 2009 and prior accident years. Development in Syndicate 1200 was $2.2 million favorable, reflecting releases from non-cat property reserves. Development in Commercial Specialty was $1.1 million net adverse, reflecting adverse development in Argo Insurance offset by favorable development from Rockwood. International Specialty recorded just under $1 million of adverse development from a small amount of crop loss development on the 2012 accident year. And finally, in Runoff we recognized $0.9 million of adverse development, largely reflecting commutation activity in that unit.

Catastrophe losses in the quarter were modest at $1.9 million and related to US spring storms compared to $4 million in the same period last year. Prior-year catastrophe losses experienced some modest movement, both up and down, and as a result in total were effectively flat. Other reinsurance-related expenses, which are expenses related to our Loma Re cat bonds, was $5.1 million in the quarter, down from $6.9 million last year, as one of the two covers expired at 12/31/2012. The remaining cover, which protects us against US catastrophe perils, will expire at the end of 2013. We continue to consider structures such as these an important and effective component of our seeded reinsurance program.

Our expense ratio ticked up slightly in the quarter to 42.4% compared to 42.1% a year ago. This quarter's expense ratio, as Mark mentioned, was impacted by $5.5 million of higher non-cash equity-based compensation expenses relative to the prior-year's quarter, due to the increase in our stock price. Adjusting for this, the expense ratio was just over 40%. We expect continued improvement as we gain scale and recognize the benefits from past and ongoing efficiency initiatives.

Turning to investments, the overall size of the investment portfolio, including cash, declined $67 million in the quarter, primarily due to the transfer of assets related to the [whole] account quota share transaction for 2009 and prior years in the Syndicate. We'd note again that any associated income, including the income from the assets held on our balance sheet, goes to the benefit of our counterparty net transaction. The impact of this transaction, combined with continued lower investment yields, resulted in a decline in net investment income in the quarter of $3.5 million versus the same period last year, and $600,000 as compared to the fourth quarter of 2012. The book yield on the portfolio was 3.4% this quarter, down from 3.8% in the first quarter last year.

We recognized pretax gains of $9.5 million, of which $3 million came from our dividend and income producing fund investments, which but for their structure would be contributing to our investment income. Pretax unrealized gains increased $23.5 million in the quarter. Of the total unrealized gain position of $328.5 million, approximately 40% is related to our fixed income portfolio and 60% is related to our equity portfolio. At March 31st our fixed income portfolio had an average rating of AA minus and an effective duration of 3.3 years, unchanged from year end.

Our capital position at March 31st was approximately $1.9 billion, up $33 million from year end. Both our financial and operating leverage remain modest, which provides us the flexibility to respond to market opportunities. Book value per share ended the quarter at $62.67, an increase of 8.2% over the prior 12 months. As Mark mentioned, in the quarter we returned $16 million to shareholders in the form of common dividends and share repurchases and have continued to participate in the market post quarter end through a 10b5 program. As always, we will evaluate our alternatives to deploy our capital based on risk-adjusted return and we continue to buy back our shares as warranted by the availability of competing investments relative to the compelling valuation of our stock. Operator, that concludes our prepared remarks and we're now ready to take questions.

Thank you.

(Operator Instructions)

Our first question comes from Amit Kumar from Macquarie. Please go ahead.

Thanks, and good morning and congrats on the quarter. Just a few questions.

First of all, going back to the discussion on E&S marketplace, you talked about the Aon relationship. Can you also talk about the recent chatter regarding the movement of the team from AIG to Berkshire Hathaway? And how does that change your outlook or your thought process on the marketplace? Thanks.

Amit, it adds one more competitor to a crowded marketplace. Having said that, we all have a different focus or specialty, if you will, within E&S. I have no idea what their business plan is, but I suspect they will focus on larger accounts. If that's the case, then I expect that we'll have little direct impact on our portfolio. It may affect the market pricing as a whole every time new capacity comes into a marketplace, but we'll have to wait and see. There's always someone new coming into the market. I think this one just has more headline.

Okay. Moving on to the discussion on prop cat, you talked about new capital -- and, again, I realize it's a small proportion of your total top line. When you mentioned the sidecar Harambee Re, what are the return objectives and when do you expect to deploy it? And what zones it might focus on?

The exposure that we're putting into Harambee Re is a cross-section of both our property cat reinsurance portfolio, which is both US and international, as well as our US property insurance portfolio. So I guess it'll be a little more weighted towards the US, but there will be some international exposure in there.

You want to talk about return?

Well, Amit, when you say return objectives -- so let's talk about it from two different angles, right? It's the opportunity for us to put a bigger footprint into the market. So we get fee income off of the structure, which augments our primary property programs in E&S and our reinsurance business out of Bermuda -- both of which are some of the higher returning businesses in our portfolio. From the standpoint of the investors, I think that the return profile is similar to what competing investments offer in the market.

In other words, sidecars that are maybe more -- that are directed at higher layers of reinsurance or reinsurance by itself. That tends to be somewhere in the mid to high teens in order to attract capital today.

Got it.

The third question I have is the discussion on capital management -- I know we've spent a lot of time in the past. Based on the stock performance, which has been amazing, does that change your view at all going into the wind season? Or based on the discount evaluation there is still a lot of room for you to keep on buying back your stock?

Yes. Look, the share price has moved up, but so has book value per share. And so we're still trading at a price where we think it's attractive to buy back our stock. It's not quite as attractive as it was a year ago relative to book, but it's still an attractive alternative. I don't think coming into wind season will change our mind about how much stock we do or we don't buy back. With the amount of float that we have outstanding -- excuse me, with the amount of volume that we have right now, the number of shares that we're able to buy back on a normal basis are pretty limited anyway.

Got it. Last question, and I'll re-queue.

You mentioned a commutation on the Run-off side. Can you remind us how much capital is backing in the Run-off entity? And, if possible, expand on this commutation? Thanks.

Right. I don't think we've ever actually said a specific number on it, but we certainly have talked about it. Let me give you some numbers just to put it in context. The total net reserves for the Run-off related to the old Workers' Comp book are around $250 million and the total net reserves related to any legacy exposures, A&E, is less than -- I believe it's less than $60 million today. I know it got below $65 million.

So if you think $300 million or so in reserves, there's probably $100 million to $150 million of capital, depending on your point of view, that would be supporting that Run-off. As it relates to the commutation activity, that's a regular activity for us in that unit. It's all related to the -- not related to the comp exposures and we quarter by quarter are knocking out various contracts, and so I expect that we'll see small movements up and down in that unit.

Okay, I'll stop here. Thanks for all the answers and again, congrats on the quarter.

Thank you.

Our next question comes from Adam Klauber from William Blair. Please go ahead.

Thanks. Again, good quarter. A couple of different questions.

Clearly, real nice improvement in the Commercial Specialty area. Your loss ratio came down materially. How much of that is due to just non-cat-like weather?

A couple of points is due to that, because we did have a couple million dollars more in cat activity last year than a year ago.

You want to add to that?

Yes. There was four versus two. That said, that was a -- for that unit, for that quarter -- for this past quarter, is an expected amount of activity -- pretty close to an expected amount of activity.

The biggest change was that we had less negative prior-year development this year than a year ago.

Okay. So excluding the weather, you're seeing significant improvement in that line of business?

Well, we're getting substantial rate increases in that line of business. We're reducing exposures where it makes sense to. So the combination of those two things -- eliminating the poorest performing accounts, getting rate on the rest of it -- it's just math. Yes, you will see improvement.

Having said that, we still have a fair amount of work to do for the remainder of this year on the two portfolios that we talked about earlier.

Okay. In the Syndicate 1200 -- you may have said this -- but why was the expense ratio down so much?

The actual underlying expenses -- I think what you're going to find is it has to do with the variability in the earned premium, because the actual underlying expenses were pretty much on plan.

Yes, earned premium went from $71 million to $91 million, so --

Okay.

-- it was a function of earned premium finally catching up with the expense load.

Right.

Okay. So again, as earned premium stays higher, expense ratio should be closer to this quarter than it was before, right?

Correct.

Okay. In the E&S segment -- as I've talked to some people in the market, sounds like one of the differences in 2013 versus 2012 is that there's more pressure in the standard market, particularly in the smaller mid-market risks pushing some of them into the E&S than there was before. Does that sound right to you?

I think it just -- for us, I think it varies by line of business. I'm hesitating to answer that because we've seen such an increase in submission activity. I'm not really certain how much of that is because we're doing a better job of asking for business versus business is or is not going from the admitted market to the not-admitted market.

Okay. Okay, that's fair.

And then, finally, on the capital management, just following up. If earnings do continue at a higher level for this year and next year, will the priority continue to be share buyback? And do you consider as you grow earnings, are you growing excess capital at the same time?

Well, the last couple of years we've been paying out most of earnings in the form of either dividends or using the earnings to buy back stock.

Right. So as earnings grow, will you continue to do that, is the question?

So I was just going to come back to an answer that I would give a few years ago, and that is, just how we think about capital. So the first thing is, we think about capital to support the balance sheet. The second use of capital is to support incremental growth in the businesses that we're already in. And then the third use of capital in the Company is to support adjacency growth that's not too far from our core business where we think the execution risk is low.

I would have then said, to the extent that we have opportunities for new business investment, whether it's M&A or not, would be next; followed by shareholder repatriation if we truly had nothing else to do with our capital. But as our share price declined, you'll recall that I flipped that order, and we became much more focused on buying back stock, which is why I mentioned that in my comments earlier this morning -- that over the last three years we've actually bought back $250 million worth of stock.

I think that as -- I don't think it's so much a function of our share price or earnings momentum. I think it's more a function of where do we have investment opportunities going forward. We haven't really seen that many attractive opportunities in the last couple of years, and also you've heard me say and talk about the need for us to make sure that we've got working what we have internally.

So as we start to build growth again and generate excess earnings in the short run, I think we'll still use them to buy back stock, particularly if our stock is trading below book. But we'll also look for additional opportunities prospectively as well. But I think that's consistent with my answer to the question over the last few years as well.

Great, that's helpful. Thank you very much.

Our next question comes from Ken Billingsley from Compass Point. Please go ahead.

Good morning and congratulations on the quarter. I have a couple questions, one of them bigger picture.

This follows up on the question about competition within the E&S market. And I understand that the new players will likely go after some of the large account business; but the assumption is there's still some excess capital in the marketplace in general. What's going to keep the players that are seeing competition on their books from moving down maybe into the smaller account businesses? And how do you compete with them if there's people flowing down into your markets?

Well, the concern that we always have is that we have new entrants into our part of the market, whether it's a de novo start up or an existing business that decides to expand their risk appetite. So there's nothing to stop anyone from doing that. Having said that, as you write smaller account business it becomes more transactionally intensive and you have to invest in that, either in technology or people. And I think that's a slightly different business model, to come after the smaller account business that we focus on.

Okay, and the other question I have is on the investment portfolio. You have a pretty short duration there, at least compared to some of the other competitors out there. You're talking about trying to enhance returns, there. What are you looking to do specifically to generate some higher returns on the portfolio side?

Well, if you look at the evolution of our portfolio over the last few years, we've always been in public equities but we have a higher weighting to public equities today than we did a few years ago. We've taken more -- we don't think much more, but we've taken more credit exposure instead of duration risk. And so I think that we'll continue to look at whether or not we want to increase our weighting to some of the asset classes that we already have exposure to, relative to our fixed income portfolio, or even our public equity portfolio now, because it's run so much in the last year, it has performed very well. And so we're always looking at how we can balance all of our asset classes as well as possible.

I see that your equity investments to at least total shareholders equity is about 35% as at the end of 2012, and last time you were there was going back to somewhere in that 2004-2005 range. How high do you see your exposure? Will you let that go before it might have an impact, whether it's from a rating standpoint or just a capital standpoint for business purposes?

Well, our investment guidelines allow us to go up to 50%, but I think we'll hit the speed limit. I think we will lighten up in the low 40%s. If we hit the low 40%s from asset appreciation, I think we'll begin to lighten up.

And last question is, obviously we're on a great quarter and improving loss ratio's going to help move the ROE numbers. What is it do you see are the key one or two things you need to do to get to that -- I'll call it the magical, at least 10% in this current market -- given the amount of capital that you have? How do you get to that 10% ROE basis?

If you look at the drivers of ROE, they are expense ratio, loss ratio, and investment income. If you look at our loss ratio, I think it's in a pretty good spot, particularly our attritional loss ratio. The challenge for us is expense ratio. We still have plenty of expense initiatives under way internally, but the two things that will drive expense ratio prospectively are the completion of our business delivery platform project that I mentioned earlier, as well as continuing to grow top line as long as we're growing it prudently, because we will grow revenue faster than we will grow expenses.

But there's also a fourth component to economic value creation, and that's the investment portfolio itself and the unrealized gains in the portfolio. If you look at our growth in book value per share over the last 10 years, which has been 10%, it's come, not just from underwriting income or investment income, but from appreciation in the portfolio as well. So I understand that ROE is an important economic driver, but what we're focused on is growing book value per share and have been for a very long time. So ROE is just one component.

Thanks for the answers. Congratulations on the quarter.

Thank you.

(Operator Instructions)

Our next question comes from Amit Kumar from Macquarie. Please go ahead.

Just a few follow-ups to the previous question.

When you talk about book value growth being the primary focus, is it fair to use an 8% book value target for 2013, which would be similar to 2012?

I believe, Amit, what you may be referring to was the target that was established by the Board for the equity compensation program in 2012.

Yes.

I think if you look at ROE across the market, absent changes in the investment portfolio, I think that's a reasonable expectation. Remember, an increase in yields -- the vast majority of our portfolio continues to be fixed income. An increase in underlying yields of 100-basis points would trim that book value per share growth pretty quickly. So I think that, that's a reasonable expectation.

Got it. Two other quick questions.

On the expense initiatives discussion, you talked about the completion of a business delivery platform. All else being equal, if you normalize some of the noise in the expense ratio, what do you think would be the normalized expense ratio run rate once these initiatives are done?

Mid-30%s.

Okay, that's helpful.

Final question on -- I think you mentioned the crop notice. Can you remind us how big is your crop book? And just refresh us as to what the metrics might be surrounding that book? Thanks.

The crop book's very small. It's limited to literally a handful of accounts within Argo Re that are all reinsurance accounts. It's millions of dollars of exposure, not tens of millions.

Got it. And was it reduced compared to 2012 or was it unchanged?

No, we got one additional notice on the 2012 year that -- I mean, had to have something to talk about, right? It was pretty small. We had one additional notice on the 2012 year, so that was --

No, I wasn't asking about the notice, I'm asking about the size of the book. Did it go down for 2013?

No, it's about flat.

It's about the same as it was last year.

Got it, that's what I was looking for. That's all I have. Thanks for the answers.

Thanks, Amit.

Our next question comes from Howard Flinker from Flinker and Company. Please go ahead.

Hello, everybody.

In support of your comment about growing book or intrinsic value, the current focus generally in the investment community -- return on equity is just a fashionable focus. There are other more reliable and useful measures. Just keep doing what you're doing.

Thank you.

Thank you very much.

We have no further questions at this time.

All right, then I'd just like to make a couple of closing comments. I think we kicked off 2013 with a solid first quarter. We still have a lot of work to do, though. Our focus continues to be intelligent growth, improved underwriting margin, and consistent results across all of our business units. We'll continue to invest in our stock and return capital to shareholders, weigh carefully against the risk-adjusted returns of other capital uses. With the investments we've made in our people, systems, and processes, I'm optimistic about the remainder of 2013 and the long-term outlook for Argo Group.

I'd like to thank everyone again for being on the call today and we look forward to reporting our progress at the end of the second quarter. That concludes my remarks.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.