辛辛納提金融 (CINF) 2013 Q1 法說會逐字稿

Good morning. My name is Brad and I will be your conference operator today. At this time I would like to welcome everyone to the Q1 2013 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I will now turn the call over to Dennis McDaniel, Investor Relations Officer. You may begin your conference.

Hello. This is Dennis McDaniel from Cincinnati Financial. Thank you for joining us for our first-quarter 2013 earnings conference call. Late yesterday we issued a news release on our results along with our supplemental financial package including our quarter end investment portfolio. To find copies of any of these documents please visit our investor website Cinfin.com/investors. The shortest route to the information is the quarterly results link and the navigation menu on the far left.

On this call you will first hear from Steve Johnston, President and Chief Executive Officer, and then from Chief Financial Officer, Mike Sewell. After their prepared remarks, investors participating on the call may ask questions.

At that time some responses may be made by others in the room with us including Executive Committee Chairman, Jack Schiff Jr.; Chairman of the Board, Ken Stecher; Chief Insurance Officer, J.F. Scherer; Principal Accounting Officer, Eric Mathews; Chief Investment Officer, Marty Hollenbeck; and Chief Claims Officer, Marty Mullen.

Please note that some of the matters to be discussed today are forward-looking. These forward-looking statements involve certain risks and uncertainties. With respect to these risks and uncertainties, we direct your attention to our news release and our various filings with the SEC.

Also a reconciliation of non-GAAP measures was provided with the news release. Statutory accounting data is prepared in accordance with the statutory accounting rules and therefore is not reconciled to GAAP.

So with that I will turn the call over to Steve.

Good morning and thank you for joining us today to hear more about our first-quarter results.

We are very pleased with our strong operating results for the quarter. They continue to reflect the steadily growing benefits of initiatives designed to improve insurance profitability, drive premium growth and create shareholder value over time. The continuing improvements resulted in a 91.2% combined ratio and 15% growth in net written premiums.

Catastrophe losses contributed just 1.2 loss ratio points, down from 11.1 points in the same quarter a year ago. The favorable trend in ex-catastrophe current accident year results continued. The ex-cat current accident year combined ratio for the first quarter was 90.3% reflecting a 9.4 point improvement over the first quarter a year ago, a 6.5 point improvement over the full accident year 2012 and it was 2.9 points better than the second half of 2012.

Loss and loss expense reserves for all prior accident years in aggregate developed favorably during the first quarter of 2013 benefiting the combined ratio by 1.1 points. The comparable number a year ago was 14.5 points.

While that is quite a change in the amount of benefit, we follow a well-defined and consistent process every quarter. With just a few weeks passing since our year-end analysis of accident years 2012 and prior, our estimate for those years in total did not change much resulting in the lower than usual 1.1 point of favorable development in the quarter.

Net reserve development for our personal auto, commercial auto and surety and executive risk lines of business was unfavorable. We will continue to keep a close watch on those lines.

Those same three lines contributed to net unfavorable development on an all lines basis for accident year 2012. Accident years 2011 and 2010 developed favorably as did all older accident years.

The higher reserve estimates in total were primarily for losses incurred but not reported, or IBNR, as the consolidated Property Casualty ratio for prior accident year case reserve development was the same this quarter as the first quarter of 2012.

During the past 12 months, we have observed a turning point in terms of performance by accident year, separate from catastrophe loss trends. Accident year 2012 with a combined ratio before catastrophes of 96.8% started an improving trend that has continued into 2013. When more time has passed and more information is available we can verify any improvement and incorporate that into our future estimates of reserves.

While net favorable development on prior accident years is lower this quarter, we remain confident in the process and confident in the reserve position that continues to be well into the upper half of the actuarial range of estimates.

Turning to premium growth, each of our Property Casualty segments continued to increase at a steady pace, again benefiting from greater pricing precision and higher overall pricing. Renewal price increases remained ahead of expected loss cost trends in each of those segments.

Commercial policies that renewed during the first quarter continued to average price increases in the mid-single-digit range though it moved into the higher end of that range since the fourth quarter. Increases on our smaller Commercial Property policies remained in the low-double-digit range.

Our Excess and Surplus Lines segment experienced higher renewal prices for the 31st consecutive month reaching the low-double-digit range.

Policies in our Personal Lines segment that renewed in the first quarter averaged a price increase in the mid-single-digit range with homeowners policies continuing in the high-single-digit range.

New business written premiums for the first quarter continued to show strong growth for both our Commercial and Personal Lines segments reflecting higher pricing and the cumulative effect of growth initiatives including new agency appointments. Our pricing analytics and modeling tools once again indicated that our new business pricing is adequate providing confidence to compete for good accounts and to avoid the underpriced ones.

For our Commercial Lines segment, policies with annual premiums of $50,000 or higher represented just over half of the $22 million first-quarter increase in new business written premiums.

Given recent quarter growth and larger Commercial policies, we reviewed results by policy size and continued to find no correlation to large losses. We drew a similar conclusion when studying large losses compared to length of time an agency has been appointed to represent us.

We believe the larger accounts we wrote resulted from our efforts to increase loss control services and claims specialization making Cincinnati a more attractive market for agencies' marquee accounts.

Our Life Insurance business continued to grow with first-quarter term life earned premiums rising by 7% as operating profit more than doubled the results for last year's first quarter with a one-time adjustment lower 2012 profit. The first quarter of 2013 also benefited from more favorable reserves for Life Insurance policy benefits.

We continue to emphasize growing premiums only when we believe we can do so profitably and we are encouraged by our progress so far. We also remain well positioned to continue growing earnings, dividends and book value per share, adding value for shareholders over time.

The first quarter produced a satisfactory level of investment income given the headwind caused by low interest rates. Our primary financial performance measure, the value creation ratio, was also excellent and was up compared with the first quarter of 2012.

I'll now turn the call over to our Chief Financial Officer, Mike Sewell, to discuss that further along with other financial terms.

Thank you, Steve, and thanks to all of you for joining us today.

Our first-quarter 2013 value creation ratio was 7.0% including a 5.8% contribution from the change in book value per share plus 1.2% from our dividend to shareholders and was well ahead of last year's first quarter. The dividend payout ratio for the first quarter was below 50% and was 15 percentage points less than the full-year annual average since 2002.

The stock portfolio grew during the first quarter with pretax net unrealized gains up $381 million to $1.4 billion. Its quarter-end fair value represented 29% of invested assets. The bond portfolio's pretax unrealized gains declined $25 million during the quarter. Our Company continues to benefit from its equity investing strategy during periods when investment income is pressured by the low interest rate environment.

Dividend income was up 4% for the quarter despite accelerated dividends received in the fourth quarter of last year that we normally would have received in the first quarter.

Of the 50 companies we held in our core, common stock portfolio at March 31, 2013, 46 have increased their dividend rate in the past 12 months. We also continue to invest new money in that portfolio, helping to offset declining bond portfolio yields.

Yields for our bond portfolio continue to move lower as its first quarter 2013 pretax yield of 4.93% fell 27 basis points from a year ago. That contributed to a 4% first-quarter decline in interest income. Our bond portfolio's effective duration measured 4.2 years at the end of the quarter, unchanged from the end of last year.

Cash flow from operating activities continues to benefit investment income and contributed to $102 million in net purchases of securities during the quarter. Compared to a year ago, first quarter consolidated net operating cash flow was lower mainly due to higher payments for income taxes and profit sharing with agencies.

Careful management of expenses continues to be a priority. Our first-quarter Property Casualty underwriting expense ratio rose 0.6 percentage points primarily due to higher commissions to agents.

Our financial strength and liquidity remained at healthy levels. We had over $1.3 billion in cash and marketable securities at the parent company level, up 14% from the end of last year. Our premiums to surplus ratio remained at 0.9 to 1, a reflection of our capacity to support continued premium growth in our insurance segments in addition to capacity for other capital needs.

I will conclude my prepared comments by summarizing the contributions during the first quarter to book value per share.

Property Casualty underwriting increased book value by $0.31. Life Insurance operations added $0.08. Investment income other than Life Insurance and reduce noninsurance items contributed $0.38. The change in unrealized gains at March 31 for the fixed income portfolio net of realized gains and losses lowered book value per share by $0.09.

The change in unrealized gains at March 31 for the equity portfolio net of realized gains and losses boosted book value by $1.66 and we paid $0.4075 per share in dividends to shareholders. The net effect was a book value increase of $1.93 during the first quarter to $35.41 per share.

With that I will turn the call back over to Steve.

Thanks, Mike. The momentum we are building is encouraging and our progress is being recognized. Forbes recently issued its list of America's most trustworthy companies where we are again the top performing large-cap insurance company.

The year ahead of us still has plenty of challenges. We will continually seek to improve our performance while fulfilling our insurance promises to policyholders and providing outstanding service to agents.

We appreciate this opportunity to respond to your questions and also look forward to meeting in person with many of you throughout the year. As a reminder with Mike and me today are Jack Schiff Jr.; Ken Stecher; J.F. Scherer; Eric Mathews; Marty Mullen; and Marty Hollenbeck.

Brad, we are ready to open up the line for questions.

(Operator Instructions). Vincent DeAugustino, KBW.

Good morning. I would just like to first start with acknowledging what you guys have accomplished just because it has been quite a feat over the last few years.

And then second, I would just like to preempt my questions with saying that on our side we unfortunately tend to overly focus on some of the negatives on these calls and our questions which doesn't really often reflect our optimism. So in that light I just don't want to come across as being too critical.

But I would just like to spend a moment on the reserve development in the quarter specifically the comment in the press release on the IBNR reserves and just from my side when going through these Schedule P this year on some of the lines I thought that I could easily justify the lower carried IBNR reserves on accident year 2012 just understanding that in a lot of these lines workers' comp is a really good example where you have pulled forward the claims reporting and have done an excellent job on managing the loss cost side, all things in my opinion that would allow you to carry a little less IBNR reserves.

So is there anything that has emerged that would maybe change your thinking in terms of some of the progress that you have made and just how that impacts your estimates on the IBNR side?

Good question and we really appreciate and respect your balance, Vincent. There really hasn't been a change. I think that we are very consistent in our process and I might just kind of start at the beginning on these sorts of things and I know you are an expert in this and so I just want to make sure that I cover this fully as I can. And I know I'm not telling you anything you don't already know but just to kind of put a framework around our discussion, we do have a consistent process where our actuaries make an estimate of the ultimate accident years' losses for each line and then these estimates are used to calculate the best estimate of IBNR.

And for this quarter and really for every quarter that I can remember, management then adopts actuarial's best estimate. So when we show a 1.1 point of favorable development during the first quarter overall, that just means that our best estimate of accident years 2012 and prior didn't change much during the quarter. And I think where you are coming from that is different than the first quarter a year ago but I think it is very explainable and it is very much indicative of us as a company that prides itself on maintaining a strong and conservatively stated balance sheet.

We consider a lot of factors when we are setting reserves including that we are growing at a strong pace, that our results have turned as you mentioned and that our accident year loss ratios are improving in a strong fashion.

So when we look at all of this information, we just think it is prudent that the best estimate for accident years 2012 and prior did not change much in the short period of time from when they were reviewed at year end. And to be clear and I think in answer to your question, it doesn't mean that we think reserves weakened any during the quarter. In fact on the contrary, we are confident that reserves remain well into the upper half of the actuarial range.

To buttress that position when we compare the first quarter of 2013 to the first quarter of 2012, the emergence of case incurred for prior accident years was the same. Virtually the entire amount of the change was due to change in IBNR released on prior accident years.

Just to summarize and I think that we maintain a consistent process that was a big difference from the first quarter a year ago to this quarter, but I think it is indicative of us in terms of prudent reserve setting and I think we are reflecting the progress as you mentioned that we are making in a lot of areas in terms of our pricing and our underwriting.

That is really helpful and again from our side, your track record is virtually unparalleled. So really good color.

As far as just because the time of the year that it is and as you guys go through and meet with a lot of agents with the 20 or so sales meetings that you do, I am always curious -- I usually get to go to one or so. But as you go through these, is there anything that you are hearing that is a bit of a surprise or just really any good feedback that you might be getting from agents that you are thinking about implementing?

So this is J.F. I would say nothing surprising coming from agencies. I think we are always anxious to hear about pricing and how agencies feel about the industry overall, the industry in their agency if you will and how comfortable they feel with delivering rate increases. And up until this point we have four more meetings to go of the 19 we have attended, it has been consistent that they are comfortable with the approach we are taking that rates are up, renewal pricing is up, a lot of discussions about particularly in the wind prone areas about the use of higher deductibles, percentage deductibles, wind and hail deductibles is something that we are focusing on a lot. And there's a generally consistent comment from everyone that we are going to be able to implement some of those initiatives.

So I wouldn't say that there has been anything at all surprising this spring relative to the types of things we've talked about on previous calls and what is in general happening in the marketplace.

Okay, perfect. And then one last one if I can sneak it in. Just on audit premiums from an accounting standpoint when you have $1 of audit premium come in, is there a corresponding incurred loss with that or because of the way that you do your reserving, have you already necessarily booked the incurred loss regardless of the audit premiums coming in and so would it end up just falling all to the bottom line as far as audit premium tailwind?

Vincent, this is Mike Sewell. That would basically fall to the bottom line because we have already incurred the losses. So that has been very positive for us over the last so many quarters.

Perfect. Always a pleasure to talk to you guys. Take care.

Thank you, Vincent.

Michael Zaremski, Credit Suisse.

Good morning, gentlemen. First, I was curious, your goal for the expense ratio is 30%. I was curious if that is what the time (inaudible) frame is around that goal? I was curious, is the driver to that 30% largely premium growth leverage?

This is Mike. And part of that is premium growth leverage. You are exactly right as we grow the top line there that will have a natural effect to bring down the expense ratio. We are controlling expenses. One of the -- I'm not going to say problems that we have -- but as we are, have more income, more profitable, a lower combined ratio. The offsetting effect to that is that our profit sharing for the agents tends to go up. And so that works against us.

So the commission side is a very large item and that is really what affected the increase for the current year. We do have a lot of initiatives that are going on that are also helping to reduce our loss and expense ratio. So we are controlling those. We watch them. We have got an expense committee, a headcount committee and we are committed to drive it down to the 30. But it is a good problem to have with the profit sharing to the agents.

Okay. Secondly, clearly a really great combined ratio. On an accident year ex-cat basis, I was curious if there was a non-cat weather benefit versus maybe what you would call quote unquote normal or versus last year 1Q? A number of peers or larger insurers have cited the benefit this quarter so far with your earning season. Thanks.

My, this is Steve and I will take a shot at that one. We don't track that for all lines. I mean we could track it for certain personal lines and so forth. I do think though to your point that it is just kind of natural that when we do have high catastrophe losses what we will have more what you call non-cat weather just because there are losses in the region that may not fall into that particular cat but they are weather losses none the less.

So I would think -- this is more of an opinion than something I can back up with a fact because we don't keep it for all lines -- but I do think that there would be a benefit because we had lower cats that it would naturally follow that there would be less non-cat weather as well.

That makes sense. That is probably a correlation between the cat level and non-cat weather. Okay, thank you.

Thank you, Mike.

Ray Iardella, Macquarie.

Good morning. This is actually Chris Maimone calling for Ray. Thanks for taking the question. Just a couple of quick ones. I was wondering if you could just comment on what you guys have been seeing that has been driving the E&S pricing since we last heard from you guys? Just generally as far as any incremental negatives that might be behind the slowdown in pricing there?

First of all on our renewals for our E&S business, we have had 31 consecutive months now where we have had rate increases and they have actually risen for us. So relative to our book of business, the business that's renewing, we are continuing to get strong pricing increases.

One thing that we are seeing and in particular on larger E&S accounts is that there has been a fair number of standard market carriers that have taken business out of the E&S side for us so it is somewhat of a surprising circumstance.

But I would say in terms of how we size up how things have been going on the E&S side, good progress on renewals. Still some competition relative to some larger accounts being taken out of the E&S market. The model for us continues to work nicely. We are still having good experience working with our agencies in writing more E&S business from them. So we still feel very good about how things are going for us.

Great, okay. Thanks for that. And then just one follow-up. I was wondering if you could just run me through with a little more detail on what was behind the life insurance benefit this quarter?

This is Mike. What we had there is on some of the smaller lines there, we were refining a little bit the reserving process between GAAP and stat reserves and so that was under a $4 million effect on the total net income. So it was a minor item but it was a refinement of our reserves.

Okay, and that is just going to be a one-time sort of refinement or is there sort of future --?

I would put it as a one time. There may be smaller ones in the future but if you were to adjust let's say that refinement out of 2013 and then out of 2012 first quarter and kind of come to maybe what I will call a core adjusted, we would end up actually with about a 24.4% increase in net income when you adjust those out so that might help you out. You would go from call it maybe 7.8 million to 9.7 million for the current quarter. So hopefully that would help you in your analysis.

Great. Okay, thanks very much for your help.

Great question. Thank you.

Scott Heleniak, RBC Capital Markets.

Thanks. I was just wondering if you could talk about the new business growth. You mentioned more than half of the accounts are from -- have more than $50,000 in premium. Was that part of the strategy when you appointed all of the new agents over the past few years, was the intention to get more large account business or is that the way the mix just kind of happened? Did you get more of that from your existing agency base too? Just wondering if you could give more detail on that?

No. I don't think half of our new business is coming from $50,000 premium, half of the increase has come from the larger accounts. But as far as the strategy is concerned, no, we haven't appointed agencies with the idea of writing larger accounts. The strategy continues to be the same. We expect as a company to write by our definitions -- continue to write small to medium-sized accounts. Our definition of medium would be from $10,000 to $150,000 or thereabouts. We write our share of larger accounts and larger for us I would call perhaps in the $50,000 range and higher.

One of the things that we have done, though and Steve referred to in his remarks, was that we have progressed quite a bit in the loss control area. We've also done a much better job in claims specialization. Consequently agencies have greater confidence in us to write these larger accounts.

There is still an awful lot of accounts out in the marketplace right now being shopped. Many carriers continue to describe very publicly that they are going to get substantial rate increases on their renewals. That provokes agencies to shop their accounts to protect themselves.

I think we've done a good job of reinforcing to our agencies that we are a consistent market and that in addition to great claims service and loss control, our pricing is consistent so it hasn't been a specific strategy to increase larger accounts. It has just evolved to that.

Okay, that is helpful. And then could you give a little more detail just on the large claims that you had the ones where they were over 4 million. Are those in the three areas that you talked about where I guess you strengthened reserves in the quarter. Is there anything more to it than that? Was there any other areas besides that or if you can give any detail on that?

I can give it a start and maybe Marty can follow up as well. Do you want to give this (multiple speakers)

You are right the majority of the large claims over $4 million were in those lines mentioned -- surety, executive risk -- played a big piece of that more so in the area of the FI accounts. Some development in those areas but that mainly was the main driver of those $4 million or increased reserves.

Okay.

This is Steve. So I will just tack on that it is consistent with the question as you asked it. We agree.

Okay. And then the only other question I had was just on pricing in April you said was up toward the higher end of the mid-single-digit range. And are you seeing that pretty broadly? In other words, is the price increases that you're seeing in April are they a little bit bigger than you were seeing at the beginning of the quarter?

This is J.F. again. We are seeing some we believe consistent pricing. For example in the commercial fire area, we were in the low end of the double-digit increases on our small to medium-sized accounts in the fourth quarter of last year. It has been sustained this year as well and pretty level net rate changes in Casualty and Auto as well. So we haven't seen a change up or down. It has been very consistent trending a little up.

Okay, thanks.

Ian Gutterman, Adage Capital.

Thanks. I'm going to beat the dead horse too I am afraid. So I guess I may have a couple of specific questions on reserves but I guess if I can ask a big picture one first and I admit I'm grasping at straws here. But just want to make sure there is not a relationship here.

I am taking sort of two unrelated statements and trying to tie them together possibly. One is that you have seen a very good growth from agents appointed since the beginning of 2012 and then you have seen adverse development on 2012. And it makes me wonder is there maybe some kind of tie that maybe the agents that you have added have produced worse business than agents you have added in prior years? To the development (multiple speakers)

This is Steve and I will go ahead and take the first shot at least. The short answer is no and we have studied that. We feel that the production of the new agents is of high quality and in particular of our new business whether it is coming from more recently appointed agents or more mature agents, we feel that the new business premium that we are getting is adequately priced and we are confident in that throughout the various appointment periods.

Okay, great. Then just a couple of the detail ones. I know it is hard to sometimes draw trends because there tends to be a lot of quarter-to-quarter volatility in your lines of business. But for example, I'm looking at Commercial Auto which has been showing average development for a few quarters now and the accident year, the last four quarters prior was averaging low 70s and this quarter you dropped it to 60. So I'm kind of wondering if you are seeing adverse trends there why do we see such an improvement in the accident year?

That is a good question and that is one that we specifically studied so it is very insightful. As we look at what we are getting in price versus what we see in the loss trends, we are seeing a favorable trend there where we feel we are getting rates over and above loss cost trend which I think supports the decreasing trend. I think as we do look back at the prior years we are taking I think a prudent view particularly given the growth -- given just as you point out, that there is a turning point and with consistent improvement in the results I think we are being prudent to not release the IBNR on the prior years consistent with what we are seeing in our accident year picks.

But is that translating -- how is that translating into how you set the pick meaning I guess -- and this is oversimplifying -- but I guess I would have thought if you feel less comfortable with the IBNR from the prior years that maybe you'd put up a little bit of extra IBNR cushion in the current year?

That is a great point and one we debate but I think the overriding factor is what we see in terms of the improvement in terms of the price versus what we are doing in the underwriting, loss control, all of the other elements. We think it justifies the pick that we have for the current accident year.

Got it. (multiple speakers)

And that is the overriding factor there.

Okay. Then just a couple on Personal Lines. I might have missed this. This is going a little fast for me. Did you say specifically on the Personal Auto what drove the adverse? Was that the same trends or was there something changing in severity or loss trends or something?

It is the same overall trend. I do think we had a little bit higher in terms of large losses. I think that -- so severity is something that we are keeping a close eye on there and I do think I made the statement that overall our case incurred emergence in the first quarter was very much equal to first-quarter a year ago. I think Personal Auto might have been one exception there where we did see a bit more emergence this first quarter than we had seen the first quarter of 2012. So we are kind of reflecting that as well.

Then my last one, I promise, on homeowners obviously you're taking a lot of rate there, things are getting better. This is sort of tying back to I think it was Mike's question about non-cat weather. When I am looking at the accident year before cat of a 40, the prior four quarters were between 50 and 80 so I assume a fair chunk of that is the real improvement from the pricing underwriting actions you have taken. But I assume some of it is non-cat as well.

Is there any way to sort of get a sense for maybe just what a normal target is for homeowners? I mean is your goal to be able to have a 40 ex-cat loss ratio or is that really just kind of an outlier number?

I think your question is very intuitive or very spot on in that we have been seeing the improvement in the price. We do think that the losses have been benefited from some of the action that we are taking. We do see we think favorable movement in terms of the non-cat weather and we build 26 points of expected catastrophe losses into our homeowners pricing so we are shooting for pretty low ex-cat loss ratios.

Perfect. That makes sense. Thanks for the time, guys.

(Operator Instructions) Vincent DeAugustino, KBW.

Thanks for taking the follow-ups. I just had two quick ones. We have talked a little bit more about enhanced property inspections lately and I was just curious how the retention for policies going through that process are kind of playing out just because in the aggregate it doesn't really seem to be a drain which would imply that you are getting the rate and being able to push through the terms and conditions as you kind of want on those policies which would be good. Or if you obviously didn't retain them that would also be margin enhancing so just curious of any thoughts on how that is trending?

Vincent, this is J.F. We are not non-renewing a huge percentage of that business. I think and I don't have the exact numbers with me but I think something in the tune of around 6% of the property we have inspected on the homeowners side. We have non-renewed, gotten rid of it in some fashion. An awful lot of what we find are things where we have increased the premium because the policy wasn't rated correctly, it wasn't in the right protection class, there might have been for example in Personal Lines a wood-burning stove for which we have a surcharge, a variety of different ways that premium has been increased which improves the margins.

But even at 6%, I think that is a reassuring amount that we are finding properties that have deteriorated since we first wrote them and we are going to be getting off of them.

Another area of inspections have paid off has been in terms of roof conditions where we discover in some cases dwellings that the roof is much older than we anticipated. We are using an actual cash value endorsement for example in those houses that we would choose to stay on that are in poor condition. So we are really attacking it from a whole variety of directions on the inspection initiatives.

Feeling very good about the return we are getting on them.

Okay, perfect. And then just one last one. The agency appointments were pretty strong at about 50% of your full-year target which is a little bit ahead of the first quarter weighting that we had seen last year. Is it possible that we might see appointments getting closer to maybe 80 than 65?

At this point I don't necessarily think so. One of the things that we feel better about I think a little more encouraged about is that we are coming off a couple of years of pretty strong agency appointments. We've talked to all of our agencies throughout the country about the aspirations we have to grow premiums in their areas. In more cases than perhaps we would have planned for, our current agency force is responding a bit better, the alternative being that we would appoint another agency in their general community and they prefer us not to do that.

So right now I don't believe that we would go much higher than the 65. I think we are getting obviously good new business out of our agency force in general and so I think I would still plan on 65.

Okay. Thanks for all the answers and the time and look forward to talking to you soon.

Thank you, Vincent.

There are no further questions at this time. I turn the call back over to Mr. Johnston.

Thank you very much, Brad, and thanks to all of you for joining us today. We hope to see some of you at our annual shareholders meeting tomorrow at the Cincinnati Art Museum. Others are welcome to listen to our webcast of the meeting available at CinFin.com/investors and we look forward to speaking with you again at our second quarter call. Thank you.

This concludes today's conference call. You may now disconnect.