CNA Financial Corp (CNA) 2004 Q1 法說會逐字稿

Good day, everyone and welcome to the CNA Financial Corporation's 1st Quarter 2004 Earnings conference call. Just a reminder today's conference is being recorded. For opening remarks and introductions, I would like to turn the conference over to Ms. Dawn Jaffray. Please go ahead, Ma'am.

Thank you, operator and good morning. We'd like to welcome you to CNA's 1st quarter 2004 financial results conference call. My name is Dawn Jaffray. I have the responsibility for Investor Relations. By now, all of you should have received our earnings release and financial supplement. If not, you may access these documents at our website at www.cna.com under the Investor Relations menu.

The earnings release is found under the submenu Investor Communications Financial News and the financial supplement is located under the submenu Investor Communications Financial Reports. And other FCC filings and supplements. Four your reference, this call is being web cast and can be accessed again on our web site after we have concluded. With us this morning is Steve Lilienthal, our CEO, Bob Deutsch, our CFO, Mike Fusco, our Chief Actuary, Jon Kantor, our General Counsel and Jim Lewis, President of P & C Operations. During this call there may be forward-looking statements made and references to non-GAAP financial measures. Please see the section of the earnings release available on our web site, headed Forward-Looking Statement, with regard to both.

The forward-looking statements speak only as of today, April 29, 2004. Further, the company expressly disclaims any obligations to update or revise any forward-looking statements made during this call. There will be time-- time for questions from the investment community following the conclusion of our remarks. Members of the news media may call Charlie Basil at 312-822-2592 and investment analyst questions may be directed to me at 312-822-7757. And with that, I'll turn the call over to Steve.

Thanks, Dawn. And good morning to all of you and thank you for joining us today. The 1st quarter of 2004 was a rather quiet, solid quarter from both an operational and a financial performance standpoint. No surprises- just a clear focus on the continuing improvement of CNA's underlying performance. The net loss of $125 million was associated with the GAAP accounting requirements for the pending sale of our Life business.

This is transactional and accounting related and not reflective of the steadily-improving operational results of our Property and Casualty business. Bob Deutsch and Jim Lewis will talk about this in a minute. As previously disclosed, the Life transaction resulted in a hit on the GAAP side of approximately $400 million after tax but very importantly, a statutory surplus pick up of about $500 million. All in support of our focus on the core Property and Casualty business. This also brings our capital restoration plan to a successful conclusion as committed on schedule. Net operating income, income before realized gains and losses, of $208 million represents a $76 million or 58% improvement over the 1st quarter of 2003 driven largely by the strong performance of the Property and Casualty Operations.

Meanwhile, the unsold portions of the Group business are mostly in run-off as discussed in a prior call. The run-off of CNA Re is also doing quite well and we expect the Life sale to close tomorrow. Overall, CNA continues to execute on the fundamentals of a solid, profitable Property and Casualty underwriting and will tomorrow virtually finish up the disposition of Non-Core, non-strategic assets, complete the capital restoration plan and are well along in a $200 million expense initiative which we began in 2003 and which will earn out over 2004. This is very strong performance by any measure as promised and on time. After my overview, Bob Deutsch will provide a more detailed financial discussion. Bob will be followed by Jim Lewis who will take a closer look at the Property and Casualty Operations then and we'll open it up to your questions. Speaking of the Property and Casualty Operations, under Jim's leadership, it delivered a very solid 1st quarter. Net written premiums were up 6%. We put 8 to 9 points of rate on the books. Retention continued to improve to 77%.

And PC net operating income improved 105% to $189 million. The consolidated combined ratio was 97%, 2nd consecutive quarter under 100 with Standard Lines coming in under 100 combined for the 1st time and Specialty Lines under 90%. This all reflects the solid underwriting and claims practices that we have put in place over the past 2 years. We said that we would sharpen our underwriting and balance our portfolio and we did that. We're now bringing the same discipline and focus to our expense structure and as I mentioned earlier, we are successfully executing a $200 million plus expense initiative begun last year, which was on top of $100 million plus takeout in 2001. Exiting the Re Insurance Life and Group businesses left us with approximately $150 million of stranded overhead. This issue is related to an oversized corporate center.

A certain level of redundancy in our operating platform and a level of inefficiency on our internal processes. We are aggressively attacking these issues and we expect to have more details for you on a later call. Before turning it over to Bob and Jim, I would like to briefly comment on the marketplace. We are watching the rate environment very, very carefully, but we're not discouraged by it. Rate changes are still positive and they still more than cover lost cause. Certain parts of the business such as large Property and Casualty segments as well as the large cap D&O have softened more aggressively than others. Discounting of [indiscernible] and reduced collateral requirements are becoming more common.

Multi-year deals have also begun to reemerge. I have said it before and I say it again, we will not follow the market. We will let underpriced business flow back into the market. CNA will not hesitate to shed business that requires more rate than the market affords. We are committed to underwriting discipline. We will adjust and optimize our portfolio as market conditions evolve rather than attempting to maintain market share. And we will likewise adjust our expense structure as necessary.

When all is said and done, we like our position in the market. We have worked very, very hard to improve our underwriting discipline claims practices and distribution management and we fully intend to use these tools to deliver consistent quality earnings. In summary, we had a nice quarter. Solid operating results from our core Property Casualty business, a more focused company and a lot of good work on the fundamentals. I would like to turn it over to Bob Deutsch but before I do, I do have a couple of comments.

In addition to our normal press release, you've also received a release announcing that Bob will be leaving CNA. Bob and his family have tired of the 4 1/2 year commute from Hartford to Chicago, not to mention the additional travel associated with our business these days. Bob has been and is an incredible Chief Financial Officer. I have truly enjoyed our partnership and it is a pleasure to work with him. He is legendary, as I said in our press release, for his work ethic, for his intelligence, for an intuitive-- an incredible intuitive feel for the business and in particular, the art of the deal.

From a transitional standpoint, we have this well in hand. Bob will continue as CFO and he will assist in our search for his successor, thereby ensuring day to day continuity and a consistency going forward. I certainly wish Bob well. I know the entire company does also. Good luck. Godspeed and now I would appreciate if you get back to work.

Thank you, Steve. Thank you for those kind words. Good morning, everyone. Steve provided you with a good overall discussion of this quarter's major events. I would like to give you a bit more detail on the financial results before turning it over to Jim. Steve described the quarter as rather quiet. But he's being too modest. I believe our financial results this quarter are quite positive and encouraging.

Today, we reported income before realized losses of $208 million or 75 cents per share. Up 58% from 132 million in the 1st quarter of 2003. Property and Casualty net operating income was $189 million up sharply from the $92 million reported in the 1st quarter of 2003. And up nicely from the 151 million reported last quarter. These good results are after incurring $50 million in funds withheld interest expense as shown on page 10 of the financial supplement. $40 million of which was in the P&C operations.

Not only did our P&C operations produce a combined ratio south of 100, coming in at 97%, but Standard Lines also came in just below 100%. You have to go back a long time to see CNA reporting those kinds of results. Page 12 of the supplement shows accident year and calendar year results. You will note that they're basically the same. With the difference being only 0.1 percentage points. As discussed in the financial supplement, we have restated our reporting segments in light of the transactions involving CNA Re, Life and Group.

In order to help you assess the new reporting segments, we have separately prepared a 22-page financial supplement appendix which restates financial information, assuming the 2004 segment changes occurred January 1st, 2002. On the light side, we expect to close our transaction with Swiss Re tomorrow. This quarter, we had good results in Life and Group. Where we reported net operating income of $19 million. Many factors contributed to this including some favorable accounting associated with the life sale and strong limited partnership performance in our S&P 500 products. Last quarter we forecasted that Re Insurance Life and Group would lose $50 million after tax in 2004.

Because of the good 1st quarter, we are revising that estimate and expect these 3 areas to lose $35 million in 2004. Page 10 of the supplement presents the usual pretax components of net investment income. Because of the adoption this quarter of Statement of Position 03-01, we've added a line called Income From Trading Securities. This SOP affects us principally through the presentation format of certain of our separate accounts, although net income is not impacted. As you can imagine, trading income and limited partnership income are quite volatile.

We urge caution in projecting off of the 1st quarter numbers. So, switching to the capital plan, as you know, on December 31st, we closed the sale of the Group business to the Hartford. On February 25th, we sold $346 million of surplus notes to Loews. We expect the life transaction with Swiss Re to close tomorrow, generating additional statutory surplus of just over $500 million. With that sale closing, we will be seeking regulatory approval to repurchase $300 million of the surplus notes. The $1.4 billion capital plan will shortly be complete. With $1 billion 450 million having been raised.

Also on April 20th, the $750 million of preferred stock that was sold to Loews in November converted to 32.3 million shares of common stock. In terms of other corporate activities, on April 20th, we paid off our bank loan of $250 million. Adjusted for this and the expected surplus note retirement, our debt-to-equity and debt-to-capital ratios will be approximately 19% and 16% respectively.

I'm happy to report that our annualized operating return-on-equity this quarter was 9.3% in total. And 8.5% if you back out the Life and Group results. Of course, given the sale of the Life, Group and Re Insurance businesses, along with our capital plan, our stockholder's equity is very large. Nearly $9 billion. Also, the finite interest expense hurts return on equity by roughly 1 1/2 percentage points. We're not satisfied with these returns but we're certainly making progress.

On a personal note, I very much enjoyed my time at CNA. We have accomplished a great deal in the last 4 1/2 years. We lived through some 2 dozen divestitures, ranging from very small ones to large ones such as the Re Insurance Group and Life transactions. We significantly strengthened the balance sheet in all important areas including loss reserves and bad debt allowances. We've gone from a company that never had a financial supplement to one whose earnings transparency and disclosures are cited by many analysts as being among the best. We developed and completed a $1.4 billion capital plan that satisfied the demands of regulators, rating agencies, policyholders and agents and brokers. Under Steve's leadership, the CNA of 2004, bears little resemblance to the one I joined in 1999. It has come through difficult times and is now solely focused on commercial property and casualty insurance.

The last 2 quarters demonstrate CNA's achievements far better than my words can express. I thank Steve, my friends at Loews and many others for having had the opportunity to contribute in some small way to the new CNA. The strategic direction is clear and the foundation is strong. It's all execution from here on out. And with that, I'll turn it over to Jim Lewis.

Thanks, Bob. And good morning, everyone. In the 1st quarter, Property and Casualty Operations continue to improve against our most important metric. Our combined ratio was 97%. 2 points better than the previous quarter. 7 points better than 1st quarter '03. As you heard from Steve, Property and Casualty Operations continues to work the fundamentals.

The improvement in our combined ratio goes back to the drivers we've discussed with you before. Rate, retention, new business and accident year loss ratio. Starting with premium volume, 1st quarter net written premium was 1.8 billion up approximately 6% from the prior year period. Standard Lines was essentially flat. Specialty Lines continue to shine- up 22%. Overall, our premium volume is right in line with the strategy we've discussed with you before. In segments where we can drive rate terms and conditions, we will continue to grow. Where rates are moderated and terms and conditions are weakened, we'll choose profitability over growth every time.

As Steve said, we've already seen a [inaudible] the rate terms and conditions in large property, large casualty and large cap D&O and we're walking away from some of this business. Let's look at rates. Rate achievement averaged 8% to 9% for the 1st quarter. In Standard Lines, rate improvement was 6% to 7%. While Specialty Lines ran at approximately 13%. Early indications on rate are in the same general neighborhood.

Overall, we feel [inaudible] business this rate environment. The rate trend is above loss trend and we continue to find profitable opportunities through controlled discipline underwriting. Turning to retention, we notched up 5 points to 77% across Property and Casualty Operations. Standard Lines retention improved approximately 3 points to 74%. While Specialty Lines moved into the low 80's. These improvements are all on a year-over-year basis. While there's progress that's been gratifying, we expect overall retention to drop back a bit over the course of the year- as a result of our habitational construction defect strategy.

Turning to new business, we wrote approximately 470 million versus 540 million in 1st quarter of '03. The difference is 1 more sign of our discipline underwriting strategy. A year ago, Commercial Line rate increases were in the high 20% range. There was a lot of disruption in the marketplace and abundant opportunities to write good, new business. Today, it is a different marketplace and a different environment for new business. What hasn't changed though is that there are still good opportunities and we're going after them in the same disciplined way as before.

Our focus on cross-sell and this is selling additional products to additional-- existing customers is driving new business with customers we already know and like. Through the end of February, we wrote 55 million in new cross-sale premium. In addition, controls on its adverse selection remains at the heart of our new business strategy. We monitor the differential between new and renewal pricing very carefully by territory and industry class. On the renewal side, we monitor renewal efficiency- the spread between renewed and non-renewed business relative to paid losses and case reserves. We've talked about renewal efficiency before.

Over the past year, the spread between renewed and non-renewed business have consistently told us that our front line underwriters are making the right decision. And are steadily improving the profitability of our book of business. Now let's turn to our loss ratio. Our 1st quarter, net calendar year-loss ratio improved 7 points to 65%. Standard Lines improved 8 points to 66% and Specialty Lines improved 3 points to 63%. Our focus on discipline underwriting is starting to come through in a big way.

Our growth accident year-loss ratios are equally encouraging. Property and Casualty Operations 2004 gross accident year-loss ratios improved approximately 2 points to 63%. Specialty Lines improved approximately 4 points to 62% and Standard Lines improved 2 points to 63%. By the way, these accident year-loss ratios are all evaluated as of the 1st quarter of '04. Turning to our 1st quarter '04 combined ratio, Property and Casualty Operations improved 7 points to 97%. Standard Lines improved 7 points coming in under 100% for the 1st time in my tenure at CNA. Crossing into the 90's is a big deal with us but rest assured, we're not satisfied. As for Specialty Lines, we improved 5 points to just under 90%.

In summary, the 1st quarter represents a good start. Decent rate, improved retention, solid new business and further improvement in our loss ratio. 2004 is all about profitability and rational growth. The challenge now is to keep it going. With that, I'll turn it back to Dawn.

Thanks, Jim. I would like to now open the lines for questions. Operator?

Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, you may do so by pressing the star key followed by the digit 1. We'll proceed in the order that you signal us and take as many questions as time permits. If you're using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. That's star 1 to ask a question.

We'll take our first question from Jay Cohen with Merrill Lynch.

Good morning. I have a couple of questions but before that, I want to wish Bob all of the best of luck. When I first started covering CNA in the mid 90's, I would call up and ask what the combined ratio was for a business and it would take a couple of days to get back to me. So it is pretty dramatic how the changes have occurred. I give a lot of credit to Bob Deutsch.

With that, I was looking back at your 10-K for '03. It looked like the accident year-loss ratio and if I'm wrong, tell me but it looked like it was about 60% for the full year '03 and yet you're booking this year -- while good, at 65%. Why is that? Or am I wrong to begin with?

Jay, 1st, thanks for the kind words. Yeah, the '03 accident year, we are booking at 60-- are you talking net or gross?

I was talking net and that was for the full year.

[inaudible] included or not? --

Yeah, I believe it was. This is from the 10-K. We take out the prior year stuff.

That doesn't sound right because page 12 shows -- page 12 of the supplement showed that it was booked at 68% at the end of '03 and 67% now. Versus 65%. Should we just follow up with you afterwards?

Yeah, I'll double check my numbers.

There must be a reconciliation issue.

Kind of related to that is the combined ratio of the quarter was good, excellent, relative to your past. Anything unusual in there? Is there something you see as kind of a sustainable-- assuming weather is not too crazy and no big losses, is this kind of a good, sustainable level or is there anything unusual that might have helped the number?

I think it was a pretty normal, quiet quarter. There were low catastrophe losses. There were $8 million in catastrophe losses compared to 15 a year ago. That's also shown in the supplement.

But it is still very early to say how the ultimate year will develop. Most cap losses, as you know, occur later on in the summer into September. We're still getting rate increases as Jim pointed out in excess of lost costs. We would like to see the combined ratio come down lower and if, at the end of the year, the property experience continues to be favorable, maybe it develops favorably the way '03 has.

We feel very good, Jay, about those overall results. When you look and see that for the last 3 years, we've pounded 17%, 27%, 19% rate on that book. We're getting 8% to 9% this year. We've finished all of the major re-underwriting of this book of business. we've shifted the book more from high hazards to low-to-moderate hazards. So we're very comfortable right now with where we are.

I'd imagine the expense ratio, too, may drift down as you get those cost savings flowing through.

Right. Jay, this is Steve. Obviously we took 100 million out in '01 as part of the consolidation of the Property Casualty Operations and then we announced last -- we announced then we implemented a $200 million expense take-out that's been going on since last summer and into this year. We will go through -- we have been going through another analysis of our infrastructure, functional necessities. And our internal processes and our operating structure so anyhow, after all is said and done, we feel we have significant opportunities to reduce expenses.

I will echo what Jim says. With respect to rate is continuing to cover lost cost, we're encouraged by the fact that rate has not dropped off precipitously but has dropped off gradually so it's given us a chance to respond to different segments of the market. We expect that our combined ratio will improve going forward because we put into place some very good underwriting practices, our claims initiatives have gone quite well. We've said before that you know, we think we have a very good understanding of the portfolio and that we would optimize it rather than try to grow it recklessly.

And the only areas that we don't see sustainability in terms of ongoing forward is the large Property and Casualty areas where those terms of conditions of rates have dropped off rather precipitously and not in line with the rest of the market. We were somewhat concerned about the large cap DNO market segment and the re-emergence of multi-year deals which we don't think are very prudent at this time.

All in all, I would echo what both Bob and Jim have said. We think this is sustainable. What you're seeing is a natural glide path for this company having gone through a lot of change and a lot of technical initiatives over the last couple of years.

Starting to smell a double-digit ROE in there somewhere.

Well listen, there's certainly huge amount of leverage just on the expense ratio play. Every 1 point in the expense ratio will translate to 15 cents after tax. So, I do think you can see ROE's improve from here. And furthermore, the burden of the finite covers starts coming down. You know it's 200 million this year. We're forecasting that to be 165 million next year and about 135 million after that. In '06. Those are pre-tax numbers.

Jay, just one last point, not to beat it to death but one of the things that I think has been a measure of CNA over the last couple of years is that we have not declared victory early. We have said what we were going to do and how we were going to do it and we did it. Whether that was an underwriting or a claims initiative or whether that was an expense initiative, we did not rationalize why we missed it. We told you when and how we did it and it was always on time.

Thanks, Jay.

Thank you.

As a reminder, that's star 1 to ask a question. We'll now hear from Bob Glasspiegel with Langen McAlenney.

Good morning. Let me echo Jay's positive thoughts toward Bob and your future and I suspect we have not seen the last of you in the insurance world. Let's see. 2 follow-ups to just answers to Jay's question and then I'll move on. Steve, you said you expect underwriting improvements from here. Were you talking for the 97 or were you talking about a sliver of the piece? And Bob, your 190 cost-to-cover was that PC only for '04 or companywide?

Bob, the question -- I wasn't sure exactly what the point was but we're starting at a 97. We're starting with low cash in the 1st quarter. A lot depends on where the market goes. But I think there's room for improvement in that 97. That's what this was all about. We are certainly subject to the vagueries of the marketplace and how fast it moves. And we'll also be subject to how fast we can get the excess expenses out. But we do feel that this is -- that our portfolio is in a very good position. With room for improvement and that there's room for improvement on the 97.

And Bob, the -- those numbers I cited were estimating 205 million in pre-tax interest expense. It was 50 million in the 1st quarter shown on page 10.

That's companywide. Ok. That wasn't just for PC. Gotcha.

And then the 205 goes to 165.

Ok. If I could just follow up with some questions on page 8 of your supplement. Steve, I think you brought the guidance for Life and Group Non-Core from a 50 million loss to a 35 million loss for the year. After a quarter that you just made 19 million. So, if we were thinking the 50 million was spread line through the 4 quarters, you sort of had a 30 million upside surprise this quarter. And you're only bringing it down 15. Are you leaving room for just some adverse surprises? Or is there something --

Bob, a couple of things. One is the 50 million was not ratably over the years. That's 1 point. The 2nd point is it was favorably impacted this quarter by several things included some accounting treatment that we actually-- where we actually thought some of the impairment loss, the 406 million. We thought that might have actually been smaller and some of it would have had to flow through operations. And it turned out it didn't. So, our operations was favorably impacted.

How much was that?

Also very strong LP income. So, it is only 1 quarter so we just want to be cautious about bringing the number down too quickly. Again, we only have 1 quarter behind us.

How much was the Life piece? The sliver?

The favorable news on the Life side was probably 15 million. Again, there are lots of things going on in there. But it was the accounting treatment was favorable to the tune of 15 million.

Ok. Last question, on the Corporate and Other Non-Core broke even this quarter. There are a whole lot of moving parts and interest, you know, adjustments that you've made post the quarter. What should we think of Corporate and Other's ongoing run-rate?

We really have not forecasted that. We wouldn't want to take all of the fun away from you. So, I think the only number we really have projected Bob, is the 35 million after tax for Life Group.

Anything funny in that -- the base run rate of 0, I could do all of the adjustments perspectively but is there anything -- was partnership --

No. If you turn to page 12, you'll see that there certainly was -- not page 12. Page 10. There was some partnership income in the Corporate area. There was $16 million. I leave that to you.

It was 15, 14, 18. It has been running around that the last several quarters.

Right. For the last 4 quarters.That's true. If you go back to early in '02, in '02, it was negative in some cases. 1st quarter of '03, it was only 5. So, you -- it is hard for us to project LP incomes.

The overall partnership -- last question, I said I was before. The overall LP assets at the corporate level are what?

Well, 1.2 billion on the old basis. Bear in mind under the SOP '03--01, we have to take the separate account number and now stick it back into LP income. So it's1.7 including that, but on the old basis it's 1.2.

How is that split between the pieces?

It moved from -- I don't want to get too technical on the accounting here but it moved from a one-line item into a pure consolidation line-by-line and now it is $500 million largely as a result of separate accounts.

I'll follow up later with you. Thank you.

Thank you.

As a reminder that's star 1 to ask a question. We'll now hear from Rob Medway (ph) with Royal Capital.

Hi. Nice quarter. Bob, you will be sorely missed. On your expense ratio, it seems to be- great job on the underwriting but the expense ratio seems to be pretty high compared to most of your competitors. Just curious if you can give us an idea of what -- about your mix of business or your infrastructure is creating that-- that gap and what your goals for expense ratio are potentially going forward.

Yeah, this is Steve. I would -- I would say that our initial goals for an expense ratio would be sub-30, at a minimum. That in some ways, our expense ratios is hung up higher than where we would like it to be in order for us to invest on the underwriting side. We made a lot of changes and we resisted the urge to take out the expenses faster than our underwriting initiatives and claims initiative would have really supported. We felt there was much, much more leverage on the lost cost side trying to manage the portfolio.

We had to import some talent to do that. We had to spend some additional money on technology in order to really make sure we had all of the reporting information that we needed. So, I think what you're seeing here is you know, an initial holding of the line or a little build-up of expense, a shrinking of the portfolio on a real basis because most of it was driven by rate increase, not by organic growth. And you know, we have been taking out expenses by the way. 100 million in '01 and 2, over the course of '03 and '04 is not insignificant. And now aggravated, if you will, by the fact that we've sold off our Re Group and Life operations. So, that kind of exaggerates even further. But you know, on the front end, I would rather make sure I had my portfolio, my loss ratios correct and then deal with the expenses because that is very boxable and very dealable.

And that's what we're about right now. That's why I said I don't want to float a number out there right now. Or give you a soft number. I would rather come back to you in the 2nd or 3rd quarter call with a very hard number and a time line that we would take this out. But we're right there with you on the expense side. We also recognize that a number of our competitors are running lower than we are. I just look at hanging on to a little bit more expense to drop the bottom out of a loss ratio is a really good trade.

Right. And just to follow up, the 100 million -- is the 200 million at this stage done?

No, that will earn out over the course of '04. Most of the issues relating to head count reductions and things like that have been dealt with. We reduced commission on our work comp line in an effort to drive it off. So that's going to earn out over the year. I think that was about 40 million of the entire package. And then some of the other initiatives that we put in place -- we actually started -- this was done last July. We put this in place last July. And the head count was done pretty much '03, early '04. The rest of this will earn out over of the course of the year. The full impact will be this year for sure, and then we'll have another one coming right behind it to deal with the other issues that we've got.

So your answer to the question, your expense ratio different than your competitors is that it shouldn't be. Is that correct?

That's a very fair statement but you know, just to follow up on that, we made an investment in the underwriting claims and systems side to manage this business more effectively and on the actuarial side to manage this business more effectively because we felt that there was huge leverage on the lost cost side borne out on the fact we drop a loss ratio by over- by 25 odd points and I think I would take that trade over a couple of points on an expense ratio any day.

Yeah, I was just looking going forward upside.

Going forward, I've got improvement coming on the loss side. We think based on the fact that we've got embedded rate and an improved portfolio and we've got people here that are very conscious of and willing to deal with the expense issue.

Thank you very much.

Thank you.

There are no further questions at this time. Ms. Jaffray, do you have additional or closing comments?

Ok. Thank you, operator. Once again, I call your attention to our disclosures concerning forward-looking statements in the earnings release and as previously stated at the start of today's call. Please note that a taped replay of today's conference call will be available for one week immediately following this call until May 6th. You can access the replay by dialing 888-203-1112 or 719-457-0820 for international callers. Utilizing pass code 438345. The call will also be archived later in the day for replay on the Investor Relations pages of our web site. We thank you for joining us this morning and appreciate your participation in today's call.