Donegal Group Inc (DGICA) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2007 Donegal Group earnings conference call. My name is Tanya, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Jeff Miller, Senior Vice President and Chief Financial Officer. Please proceed, sir.

Good morning, and thank you for participating in the Donegal Group earnings release conference call for the first quarter ended March 31st, 2007.

I will begin the conference call by providing financial highlights and a discussion and analysis of the quarterly financial results. I will then turn the call over to Don Nikolaus, President and Chief Executive Officer, for his comments on the quarterly results and his perspective on the business trends we're experiencing.

Certain statements made in our earnings release and in this conference call are forward-looking in nature and involve a number of risks and uncertainties. Please refer to our earnings release for more information about forward-looking statements.

After a record 2006 characterized by mild weather throughout the entire year, our first-quarter 2007 results were significantly impacted by the harsher winter weather conditions experienced by our insurance subsidiaries across our operating regions. I will discuss the increased claim activity in a few minutes, but first I would like to highlight some other key numbers for the quarter.

Our net income for the first quarter of 2007 was $5.5 million, or $0.21 per share on a diluted basis compared to $9.1 million or $0.36 per share on a diluted basis for the first quarter of 2006. Total revenues for the first quarter of 2007 were $83.7 million, an increase of 3% over the total revenues of $81.3 million in the first quarter of 2006.

Net premiums earned for the first quarter increased 2.9% to $76.7 million compared to $74.5 million for the first quarter of 2006. We're encouraged that our net premiums risen increased 4.9% for the first quarter of 2007 compared to the first quarter of 2006, with personal lines writings increasing 5.3% and commercial lines writings increasing 4.3%. We attribute these increases to the continuing success of our automated underwriting and policy issuance systems that we refer to as WritePro and WriteBiz. We continue to roll out enhancements and improvements to these systems to maintain a competitive advantage in providing user-friendly systems to our agents, thereby making it easy for them to do business with our companies.

I would also like to highlight another positive development that will be beneficial to our premium growth throughout 2007, and that is the renewal of our reinsurance program at rates comparable to those we paid for 2006. You may recall in our discussion in last year's first-quarter conference call, wherein we described increases in our 2006 reinsurance renewal rate. As we entered the reinsurance renewal process late last year, we anticipated that we might encounter additional rate increases based upon the experience of other companies that renewed their programs in July. However, our book of business and our historical catastrophe management practices were favorably viewed by the reinsurance market and we were able to renew our program with similar or increased coverage at cost levels very near the 2006 rate levels. We're therefore pleased to report that the slowing effect of the 2006 reinsurance cost increases on our premium growth last year will not recur in 2007.

Our investment income increased to $5.5 million for the first quarter of 2007, an increase of 10.4% over the $5 million recorded for the first quarter of 2006, primarily due to an increase in invested assets and improvements in the short-term interest rate environment throughout the past year. Investment income was negatively impacted by the increased claim payment activity in the first quarter of 2007 as the payments reduced operating cash flows. We continue to shift our investment mix into tax exempt municipal bond holdings during the quarter, which slowed the growth of our pretax investment income but will continue to benefit our net result by lowering our effective tax rate.

Our first-quarter 2007 loss ratio was 66%, substantially higher than the 58.1% we reported for the first quarter of 2006. I'll take a few minutes to provide some details about the increased claim activity in the quarter.

Winter of 2007 was marked by a number of severe weather events. You may recall the national news coverage of the Valentine's Day storm that produced significant snow and ice accumulations over a large part of the Mid-Atlantic and Northeast regions, shutting down interstate highways and creating hazardous travel conditions for an extended period of time. According to the Internet, the National Weather Service has determined that this storm was one of the three largest snowstorms to hit the inland areas of the Northeastern United States since 1940. In addition to this major storm, we experienced harsh conditions from multiple storm systems and frigid temperatures for extended periods of time across our operating regions, combining to produce a substantial increase in claim activity. For example, we received a significant number of property losses from wind damage, including those received from a series of tornadoes in Georgia on March 1st; a higher number than usual property losses from water damage caused by frozen plumbing and from fires in homes and commercial buildings. And those fires may not be directly attributed to a winter storm our experience has shown that we generally see an increase of fires during periods of cold weather.

We also incurred a substantial increase in the number of casualty claims that resulted from automobile accidents on icy roads and slip-and-fall injuries. Due to the nature of the claims and the prolonged period of time over which they were incurred, no accumulation of claims qualified for a catastrophe recovery under our reinsurance program. However, as we analyzed the claim data, we were encouraged to find that the increase in losses incurred was limited to current accident-year claims with our prior accident-year reserve development trends continuing to track similarly to the favorable trends we experienced in the first quarter of 2006 and that continued throughout the year.

Our expense ratio was 32.1% for the first quarter of 2007, slightly higher than the 31.9% reported for the first quarter of 2007, but lower than the 32.7% reported for the full year 2006. As noted in the earnings release, we have added to our expense base over the past year to support our long-term premium growth goals, including additional expenses to support our continuing investment in technology and additional personnel such as actuarial staff as well as sales representatives and production underwriters in areas where we're looking to expand our business. These increased expenses were offset by a reduction in underwriting-based incentive costs due to the less favorable underwriting results.

Our combined ratio was 98.4% for the first quarter of 2007, directly reflecting the increased claims activity, but still representing a solid measure relative to the historical results of the insurance industry in general. Our book value per share increased to $12.93 as of the end of the quarter. And yesterday our Board of Directors approved an increase to our quarterly cash dividend, declaring dividends of $0.09 per share of our Class A common stock and $.0775 per share of our Class B common stock payable May 15th to stockholders of record as of the close of business on May 1st. Compared to the previous quarterly cash dividends, these dividend rates represent a 9.1% and 10.7% increase for Class A and Class B dividends, respectively.

At this point, I will turn the call over to our President, Don Nikolaus, for his comments on the quarterly results. Don?

Thank you, Jeff. Good morning, everyone. Thank you for joining our conference call.

Needless to say, we would certainly have much preferred that we had not been adversely affected by winter weather in our first quarter. It is a reality; it did occur, and it reflects the somewhat cyclical nature of the property and casualty insurance industry.

Confirming the favorable reserve development that Jeff referred to, we were particularly pleased by the fact that the adverse results in the first quarter were current accident year losses. And that in addition, that we had favorable loss development. We felt that that was extremely important because, as we continue to analyze and measure the quality of our book, we're always sensitive about those issues and we found that to be a very positive confirmation of what we believe is the quality of our book of business, and has been.

As I'm sure you have noted, our net premiums written increased for the quarter by 4.9%, which is well above the growth of the industry and does emphasize and reflect the concentration that we have been placing on writing quality, profitable business, and I'll talk about some of those initiatives in a moment.

We were also pleased, as Jeff has announced, that Donegal has continued its process over the years of increasing dividends when the Board of Directors felt that it was appropriate, and we're pleased that we have been able to do that again and to provide additional returns to our shareholders going forward.

Investment income, a certainly double-digit increase at 10.4% in our investment income, and that, coupled with the fact that we continue to invest in tax exempts, which we believe is helpful to us and has been in the past, we believe will be in the future, in containing and reducing our effective tax rate.

I'm pleased to tell you that in the first quarter, we had a very nice increase in the number of new agency appointments. We appointed 57 new agencies in all of the various regions that we do business. If you look back over the prior quarters over the last five to six quarters, I believe that's probably the highest number of new agency appointments, and reflects our recognition that going forward, growth will depend upon growing one policy at a time, but also will depend upon increasing our distribution system, particularly in those regions where we do not have the historic multi-decade history of having a distribution system. So we're certainly pleased by that accomplishment.

Also, in the spring of every year, we're going back over twenty years, we have aggressively put on spring marketing meetings. In this case in this year, we will have done 29 of them by next Thursday going back to January. And we have done those in 12 states, and they would be meetings in which anywhere from 30 to 170 agency people would be present. We have probably had the opportunity to be in front of 2000 to 2500 agents over that period of time, to tell the Donegal story, to provide information on new products, new enhancements to our system, and basically also to be able to meet and greed and put a name with the face and be able to promote the growth of Donegal.

As you know, we've been talking a lot over the past year to year and a half about WritePro. I'm pleased to tell you that the quote activity, and quote activity to us is a very important criteria, because it represents the number of times that an agent is utilizing our system to access a quote of a product. I'm pleased to tell you that in WritePro, that our quote activity in the first quarter was 24% higher than the fourth quarter of 2006; and our WriteBiz quote activity was 35% higher than the fourth quarter of 2006. We believe that there is a direct correlation between the quote activity and the growth in net written premium that we talked about previously.

Based upon this particular quarter not being the historic quality, excellent results that we have had in the past because of weather, I think it would do well for me to refresh everyone's recollection of our continued commitment to a strategy that includes the following -- rate adequacy, a disciplined underwriting approach, a commitment to attain underwriting profitability, always to have claims reserve adequacy, a focus on best-in-class claims service, constant expense management, and a focus on return on equity, and production of shareholder value over time.

At this point I'll turn it back to Jeff, and we'll begin to entertain questions.

Okay, Tanya, if you would open the lines for questions?

(OPERATOR INSTRUCTIONS). Ron Bobman, Capital Returns.

Thanks for taking my questions. Boy, that WritePro and WriteBiz activity sure seems strong; they obviously like it. That's impressive. I sort of had a related question. I wonder if you have any figures for us on retention for each of the major buckets, commercial and personal lines, and rate changes on that retained business?

Our attention numbers have held steady from where we would've been in 2006. On the personal lines side, we're seeing in the low 90s. On the commercial side, that is a little more volatile because you have some large accounts that can move the number quite substantially. And I believe those retention numbers would be a little bit lower than the personal lines, probably in the low 80s.

Needless to say, we're not in an environment where a lot of rate increases are taking place, I don't believe for others and certainly that's what we're seeing. However, what I would point out is that within sort of the underwriting black boxes of WritePro and WriteBiz, we're always analyzing the details and the statistics to fine-tune, where regulatorily permissible, some of the criteria that are in those automation systems. And it can result in improved premium and rate changes on various profiles of quotes. So we continue to have a refinement of that process. That's difficult to quantify in a short period of time as to what rate effects it might have. I can say to you that in the first quarter, that in personal lines, we have not reduced any rate, that the market continues to be competitive. We don't see -- we're not aware that it's intensifying. We don't see that. On the commercial side, it's quite competitive, but we're not seeing that it's any more intense than it would've been in 2006.

Now you may get different input from different companies, but that of course, our opinion would be based upon the markets that we are in, and the lines of business, and the, for instance in the commercial end, the size of commercial account that we might write. So you might get different answers from different companies, depending upon what space they're playing in the commercial end.

I didn't quite understand your point about how the box can translate into a change of rate; I'm sorry, could you give me an example? You lost me a little bit; I'm sorry.

I will be happy to clarify. It would not change rates for existing business. It would only potentially change a premium for a new piece of business as compared to how you may have priced that in the past, depending upon certain underwriting criteria. It does not in any way effect your existing premium that's on the books.

Do you have figures for what the effective rate movement was for each of the two major books of business in the first quarter?

Basically, what I indicated is we have not filed any rate changes that would affect the book of business. I was speaking about new business and how we might approach it from an underwriting standpoint. But I would say to you that in terms of the existing book of business, that there really were not rate increases, either or rate decreases.

In commercial business, can't the amount that an account pays premium-wise change a fair bit without regard to whether the insurance company has actually filed a rate change for that class of business, or what have you?

Well there are such things as IRPM credits, and those are applied based upon determined criteria, whether it be management, whether there's safety programs in place, whether the building, if there is a building involved, has a particular good condition, not so good condition. And clearly, individual risk might -- for instance, a renewal premium might change up or down, depending upon the underwriter's analysis of that particular commercial account. That has always taken place historically. We measure -- probably maybe what you're getting to -- what we do measure is what the pricing of the book of business is relative to what are known as manual rates, meaning what's in the rating manual. And we measure that, and basically, that measurement has remained fairly stable over the last six months, meaning that, yes, there'll be individual accounts that may be priced higher or lower, but the overall pricing of the overall book of business has been fairly consistent over the last three months.

My last question -- thanks for being patient with me. In the prepared remarks, there was a sort of a bucket of storms that didn't qualify under the reinsurance contracts as cat's, but obviously delivered losses nonetheless. Any changes in your cat. programs of late, last couple years, that sort of changed -- whether it be the attachment point or the determination as to whether a particular weather event and the resulting losses would've been covered under the cat. program X number of years ago, but by virtue of changes to your program didn't make the threshold? (multiple speakers)

The answer to that is no. We haven't changed our catastrophe threshold in probably five, seven, eight years. We have tried to maintain it. We have felt that it was appropriate, continue to feel that it's appropriate. So no, we're not operating under a different threshold.

Thanks, and good luck. Hopefully there will be better weather.

David Lewis, SunTrust Robinson Humphrey.

Good morning. Jeff, a couple questions to start with, you; then I will come back. Don, maybe I'll ask you afterwards about M&A activity, whether that's picking up at all, and maybe what's new agency appointments are being attracted to Donegal. But first, Jeff, were there actually redundant reserve releases in prior accident years?

The way we characterize that, David, is generally when we settle open claims, we recognize some redundancies from those reserves. And there were redundancies, very similar to what we would've experienced in 2006 in the first quarter, actually a little more favorable. It's hard to measure prior year accident -- prior accident year reserves in the first quarter, because there's not a lot of time that transpired since the end of the year. But the trends would be telling us that we are continuing to realize redundancies, and so there was a small amount of favorable development in the quarterly results.

One question I guess I have is given the pricing environment on the commercial, and the fact that you're at historically low combined ratios, and frequency has been relatively good over the past couple of years, don't you anticipate that we could see a little bit of a pickup in frequency and severity of claim? And if you're seeing any of those occurring in the first quarter?

Well we did see a small pickup in frequency and severity in certain lines of business. Some of that is masked by all the weather claims.

Can you strip that out in any way, and kind of look at it from there, or is that too difficult?

At this point, we've not been able to strip out the weather-related claims in such lines as private passenger auto, for instance. We don't have the ability to separate a claim from an auto accident that happened from a car that slid off the road on ice versus someone who was answering their cell phone. So actually yesterday we had a meeting to try to refine the way we collect information when a claim is reported to give us that ability going forward. Currently we're not able to do that in the casualty line.

I don't know if you specifically mentioned this, I came on a couple minutes late. But can you quantify more directly exactly what the weather-related or unusual claims were in the quarter? Is it actually 8 percentage points?

Candidly, it was difficult for us. We tried to quantify that, and there's a lot of claims that occurred, such as slip-and-fall injuries or auto accidents and those types of things are not necessarily easy to say it's a weather claim or not. But I would say that the first quarter of 2006 was a more normal; we didn't have a lot of storm activity. So we believe that the increase in the loss ratio was primarily weather-related.

And on the weather, have you seen any material storm-related claims activity in the second quarter?

We had some wind here in our area, and I think it was down in the South as well. But we're not seeing substantial number of claims from that wind.

What he is referring to is that Northeastern storm that just went through about a week ago. Clearly it has produced some claims, but does not appear to be any kind of a major event for us.

Okay. Don, we'll come to you now. Do you want to give us any outlook on the gross premiums for the balance of the year, given what you're seeing with the pickup in WritePro and WriteBiz quote activity?

I don't know that we want to give any guidance in that direction. I can only say to you that we are certainly focused on increasing our growth, but at the same time staying committed to our underwriting integrity. We certainly are pleased with the net written premium results for the first quarter. And I think that we would be somewhat disappointed if we didn't certainly achieve that in the second quarter. But we don't want to make any predictions here.

Do you want to touch base on either the M&A activity or what's attracting some of these agencies to Donegal?

Let's cover the agency appointments. Several things. One, we have certainly, in our business plan, definitely stepped-up our resources and commitment to expanding the distribution system. We have brought on additional marketing sales reps; we have set stronger goals. But also, on the receptivity side, I think that we're being well received in the marketplace. I mentioned earlier about the some 29 meetings that we will completed by next week across 12 states. And when you have those meetings, you can get a sense of your audience and whether they're reacting positively to what you're having to say, and the products, and we have been doing them a long time, so we pretty well know how to analyze them, and we were pleased by the reception that we were getting. And I think that that's based upon the fact that our technology is very good. Our products are comparable to the very largest competitors, where we had been placing a lot of emphasis on service standards and claims standards. And I think on our comparability basis, I think we look good relative to our competition and I think that that's part of the reason why we're getting new appointments.

This 2000 to 2500 agents, what percentage of those don't currently write for Donegal? Any (multiple speakers)?

They would all currently write for Donegal. No one -- I shouldn't say that. There might be in each meeting one or two agencies that are being considered for appointments, but these are agents that represent us.

Okay. M&A side?

M&A side -- we're getting an increased number of calls about various opportunities, and we continue to sift through them. And I would say that based upon the call activity, I think that the environment is improving, but we will continue to be cautious about how we proceed on those opportunities. We did of course announce in December the Sheboygan transaction, which is on the mutual side. But certainly, that same kind of activity, we're out there trying to stir up. So I think we're encouraged.

What's the pricing talk out there, since you're coming off of record industry profitability of '06? Is it reasonable?

Now we're talking about on the acquisition side?

Yes, on the M&A side, yes.

What basically we would be hearing, needless to say, if you're talking about mutual companies, there is no pricing because you can't buy or sell a mutual company. But stock companies, I think that some of the pricing is probably still elevated based upon historic numbers, but I think those are only real start of the conversation. So I believe it's still fairly pricey, but maybe that's a little window dressing. Might be just like the housing market. The listing price is higher than what they expect to get.

I understand. Thanks very much.

Michael Phillips, Stifel Nicolaus.

Good morning, everybody. Could you update us on changes in your average premium size in your commercial book?

I don't know that we readily have that statistic handy. We would be happy to get it to you, but I would say to you that I do not believe that it has materially changed over the last year. If you put it on a graph over the last five years, it has certainly increased, but I don't believe quarter over quarter that there has been any material change. As you probably are aware we write a lot of smaller policies, anywhere from 1,000 to $30,000. And the average policy size might be -- when you put in all those small policies -- might be 3,000, 4,000, $5000 average, somewhere in there. But I would be confident that it hasn't materially changed.

Is your split of commercial versus personal today where you want it to be?

I think we're pleased with where it is, that if either one moved and grew more than the other, provided it was profitable business, I think that we would be okay with it. It's still somewhere around a 60/40 split, 60 personal, 40 commercial. Historically that's been sort of determined by the fact that most of our acquisitions were personal lines based. So if two years from now we ended up being 50/50, we wouldn't be unhappy about that. Or if we stayed in the same percentage, we would be fine. It depends upon what the business opportunities are.

Do you have a timeframe for when you expect to complete that share authorization repurchase?

There's no timeframe. The press release basically said that it would be over time and from time to time, so we have not put any time constraints on it.

Finally, just a last numbers question. Jeff, I don't know if you have this handy or not, reinsurance recoverable on your unpaid losses?

Reinsurance recoverable on unpaid losses. Let me take just a minute here to look at that. It would be -- $91 million, $91.1 million.

Perfect, thank you very much, guys.

[Jonathan Grassy], Piper Jaffray.

Thank you, good morning. You guys said you had 57 agency appointments in the quarter. I think you had targeted 100, maybe 134, possibly a little bit more for 2007. Do you think -- would you say you've raised your target for 2007, maybe around 200 or are you still kind of holding to where you were?

I think we're going to exceed the 130, but one of the goals that we've set was to get the agency appointments as early in the calendar year as possible, so that we could get some of the benefit of the premium in the current year. Because, as I think we all would realize, the appointment of an agency is just the start. You then need to orient them on your product, you need to get them started, and that can take time. So there's been a fair amount of emphasis to get those appointments as early as possible. But based upon the success to date, I would think that we will exceed the 125 or 130, and I would be hopeful that it's above 150.

Okay, thank you. And on the redundancies that you're seeing, can you mention which years and lines of business you're seeing those redundancies?

I can. Let me pull those out here and take a look. I believe it's going to be across various lines, as I looked at it. It would be primarily -- we saw some redundancies in workers' compensation; from homeowners and FMP, those lines of business; as well as commercial auto, those developments; the trends would be looking favorable.

As far as what accident years, it is across -- several accident years. It would be 2006, 2005, and going back before that -- several years before that. There's no year that's jumping off the page as being adverse. So it's a combination of various lines of business and various accident years.

Okay. And real quick, do you have the combined ratio for the personal and commercial lines?

I do. These are on a statutory basis, as we normally would give you, and it's -- for commercial lines it was 85.7%. And for personal lines it was 103.4. So the weather events were primarily personal lines impacts.

Okay, thank you.

Scott [Laurel].

We feel you're an extraordinary, highly competent professional, probably the best we met in the insurance sector. And we feel with the share price being down 15% to 20% in the past six months, and the stock market at an all-time high, now would be a good time to tell the Donegal story.

Well, Scott, I think that what I would say to you is that we are on an ongoing basis telling the Donegal story. As an example, the 29 agency meetings with 2000 people, the 2500 people, those are all potential shareholders; many of our agents are shareholders. The number of people on the telephone here, that they have scheduled over time, they have scheduled us to visit various investment groups, and we're open to do that. And they know that, and we have ongoing discussions about scheduling those kinds of things. We want to be very proactive about telling the story.

Let me be specific. What presentations do you have planned in the next few months to the investment community?

We have a presentation scheduled at the SunTrust [UN] conference, which is in May, and we're also finalizing the details of a trip to the Midwest to meet with various current stockholders and potential institutional stockholders.

In the Midwest, what months?

That would be also in May.

In May? Thank you very much.

Dan [Schlimber], Cochran Caronia Waller.

Quick question just on the numbers, specifically the tax rate, dropped down quite a bit. And I just wanted to maybe if you could clarify, was that purely a result of the tax-free bond? It looked like there was a significant drop versus the prior year, prior quarter. So if it was just on the municipal bonds then that would imply a pretty large transition in the portfolio. Or was there something else going on there? And then where you see that going forward.

Sure, I'll be glad to address that question. The drop in the tax rate would be partially due to increased investment in tax-exempt securities. But because of the somewhat substantial decrease in income before taxes as a result of all the claim activity, the tax-exempt interest income of course would've been a very constant number, and that becomes a much larger component of the income before tax. Therefore, in a period such as the first quarter, when the income before tax other than your tax-exempt interest income falls, your tax rate is going to drop to a much larger extent. Do you follow that?

Yes, yes, that makes sense. Thank you.

So there wasn't a significant increase; it would be a gradual increase in the tax-exempt interest income as we have experienced over the last year to two years.

And so then on a go-forward basis --?

On a going forward basis, we would expect -- assuming a return to the levels of profitability that we had in prior quarters, we would expect to see a 28% tax rate, and in that range.

Thank you.

Ron Bobman, Capital Returns.

I was curious to know, inside the commercial book, which subsegments of the commercial book are your retentions under the greatest pressure?

Because we are account writers, their attentions are fairly consistent because we don't write mono-line workers' comp, as an example. And we generally don't write mono-line commercial auto. So generally, if we lose one account, one policy, we're going to generally lose the other. So I would say the retention percentages are fairly consistent.

Thanks a lot. Would you comment at all where you think the competition is? Is it more focused just on the whole account larger in size, or are there subsegments that are more competitive but maybe just not translating into your retention stats?

Clearly, the larger the account, the more competition and the greater the percentage of premium decreases that competitors are prepared to take. But certainly, we would say that the competition is across all product lines. There will be, depending upon the account, you might have less competition in workers' comp if it's a smaller workers' comp. But if it's larger, even though it's a tougher line, it's going to be competitive in how they price that. Although we're looking to write the account, you can lose an account if someone else is pricing one of the components more competitively. Certainly we would have in the last year have seen that maybe property lines were slightly less competitive because of all of the catastrophe concerns, and -- except if you're in the Midwest, then everybody wants to write property in the Midwest because they want to balance their book of business against their exposures on the Northeast.

But coming back to your core question, I think it's fairly consistent across the lines that we write.

Okay. Thank you very much.

Michael Phillips, Stifel Nicolaus.

One more question on the M&A front, if I could. Some of your prior acquisitions of mutual companies -- and maybe you can comment on how they are different I guess. But it looks like from your initial investments of a mutual company to the time they maybe got rolled up in the public company, could range anywhere from a year to five or six years. I guess what accounts for that? And then secondly, how do you -- I guess what are your thoughts on how you see Sheboygan kind of falling into that range?

Let's start with the historic. If you go back a fair number of years that there was probably a greater time span between the time that we would've infused the surplus note and the point in time where it may have ended up being owned by the public company. The most recent example of that would be Le Mars, and that was really 18 months to two years, as I remember it. Because we felt that that was going to be -- that was going to be the appropriate thing to do from a number of standpoints. They also can vary depending upon whether the entity is distressed and needs cleaned up. If we've got to spend -- if the mutual has to spend a fair amount of time cleaning it up it's going to take longer. If it's cleaner it's going to be a shorter time frame.

As far as Sheboygan, Sheboygan, we're still in the regulatory approval process. And I wouldn't want to conjecture how long that might take, because we're still working out details with the Wisconsin department. But certainly, our view of it is we would like it to be sooner rather than later.

Do you see it as more of the cleaner side or the not so clean side?

Well that company is quite clean. It's a fine, well-managed, excellent small company and does not have underwriting or capital problems.

Okay, perfect. Thank you.

Victor [Kaufman].

I had my question answered and I forgot what to do with the phone. So thank you.

Okay, no problem.

(OPERATOR INSTRUCTIONS). I show no further questions at this time. I would now like to turn the call back over to management for closing remarks.

We certainly appreciate you joining us for the conference call, for all the good questions, and wish you a good day. Thank you very much.

Thank you, everybody.

This concludes the presentation. You may now disconnect, and have a great day.