Donegal Group Inc (DGICB) 2009 Q2 法說會逐字稿

Good morning, my name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to the Donegal Group second-quarter 2009 earnings 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 would now like to turn the call over to Mr. Jeff Miller, Chief Financial Officer. Mr. Miller, you may begin the conference.

Thank you. Good morning and welcome to the Donegal Group earnings release conference call for the second quarter ended June 30, 2009. I am Jeff Miller, Chief Financial Officer, and I will begin the conference call by covering financial highlights and providing comments on the quarterly results. Don Nikolaus, President and Chief Executive Officer, will then provide his comments on the quarter and discuss the business trends we are currently experiencing.

Before we get started we want to remind you that 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.

Further information on risk factors that could cause actual results to differ materially from those projected in the forward-looking statements is available in the report on Form 10-K that we submitted to the SEC. You can find a copy of our Form 10-K on the investors portion of our website under the SEC filings link.

Our net income for the second quarter of 2009 was $4.4 million or $0.18 per share of our Class A common stock compared to $6.3 million or $0.25 per share of our Class A common stock for the second quarter of 2008. While we were disappointed that our quarterly results were adversely impacted by an unusually high number of weather-related losses, our second-quarter results represented a significant improvement over those reported for the first quarter of the year.

Our total revenues for the second quarter of 2009 increased 0.9% to $94.8 million with net premiums earned holding constant at $87.5 million. Net premiums written decreased by 1% with personal lines increasing 5.2% and commercial lines decreasing 12.4%. Sheboygan Falls Insurance Company, which we acquired in December of 2008, added $2.3 million to our net premiums written for the quarter.

Our investment income for the quarter was $5.3 million compared to $5.8 million for the second quarter of 2008. The decrease was driven primarily by lower short-term interest rates during the period. We put some short-term funds to work during the quarter but we continue to invest conservatively and maintain a high level of liquidity. The high quality of our portfolio is supported by the fact that there were no other than temporary impairments recognized during either the first or second quarters of 2009.

Our loss ratio for the second quarter was 70.7% compared to 64.5% for the second quarter of 2008. Since the increase in our loss ratio is the primary reason our quarterly results did not reach historical profitability levels, I'll spend a few minutes discussing the claim activity that drove this number higher than expected.

Starting with whether impact, we incurred approximately $8 million in weather-related losses in the second quarter of 2009. From a catastrophe perspective there were two wind and hail events that impacted our Midwest subsidiary and an Easter weekend wind and hail event in Georgia that collectively added up to an impact of $1.6 million after reinsurance.

The remainder of the whether impact related to smaller pockets of storm activity that resulted in a higher than usual number of claims that were spread throughout the quarter and did not aggregate to a level that triggered reinsurance recoveries.

You might remember that we reported an usually large number of fire losses in the first quarter of 2009 and we are pleased to report that the number of fire losses decreased to a level that we would consider normal in the second quarter. We did, however, experience an increase in severity in our workers' compensation line of business with two large claims we noted in our press release contributing to that severity increase.

Also impacting the second-quarter loss ratio was $3.2 million of unfavorable loss reserve developments from prior accident years. We're not overly concerned about this reserve development as it is spread across several lines of business, including several property lines, and falls within an acceptable range relative to our overall reserves.

Our expense ratio was 31% for the second quarter of 2009 compared to 32.8% reported for the second quarter of 2008 with the decrease largely attributable to lower underwriting-based incentive costs due to the higher claim activity in the quarter. We are also benefiting from the expense savings initiative commenced in late 2008 to keep our expenses in line with conservative projections of premium growth.

Our combined ratio for the second quarter of 2009 was 101.8% compared to 97.6% posted in the second quarter of 2008 with the increased loss ratio accounting for the difference between periods.

In summary, while we experienced significant improvement from our first-quarter results, our second-quarter profitability did not measure up to our expectations largely because of weather events and challenging market and economic conditions. Nevertheless, we are pleased to once again report an increase in our book value per share to $14.58 as of June 30, 2009 compared to $14.29 at year end and $14.05 one year ago.

Our pre-FAS 115 book value per share as of June 30, 2009 was $14.30. Last week our Board of Directors declared dividends of $0.1125 per share of our Class A common stock and $0.10 per share of our Class B common stock payable August 17 to stockholders of record as of the close of business on August 3. 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, and good morning, everyone; welcome to our second-quarter earnings call. You've just heard Jeff give an overview with certain specifics as to the quarter. Clearly the second quarter represented a significant improvement over the first quarter of '09, which was a quarter that did not produce at all very satisfactory results. But our second quarter was certainly not as good as the second quarter of 2008.

One of the areas that we have taken a serious look at is what has been the background of increased losses, and Jeff, both in the press release and his review this morning, has highlighted the weather activity. And we certainly don't want to be a company that is overly focusing on weather losses as being the reason why quarterly results are not what they ought to be. However, the reality is that the weather patterns in many of the regions in which we do business have been excessive relative to many prior years.

As an example, for the second quarter on a statutory combined ratio our homeowners' losses were -- combined ratio was 118.2% which is dramatically higher than prior years, and it clearly reflects the weather events, it certainly includes some fire losses. But as Jeff indicated, they are considerably down in the second quarter over the first quarter.

The second line of business with an elevated statutory combined is workers' comp with a 113 combine, which is certainly much higher than we normally would experience. And it primarily was the result of several shock losses, very unusual losses, but they did occur. They would be lines of business and applications that we would rewrite if we were writing them today.

Having said that, our workers' comp losses, meaning the number of claims, over 2008 are down by 18% and as compared to 2007 they're down 26%. However, we also have decreases in premiums writing -- premiums written in workers' comp which would reflect the recessionary environment that we are in. However, we were pleased to see that, although our severity was up in workers' comp, the number of incoming claims is significantly declined.

In other lines of business on the other flip side from the two lines of business where we have experienced a fair amount of severity, our combined ratio on a statutory basis for commercial auto is 88%, on multi-peril it's 85%, other commercial it's 27%, private passenger automobile it's 99.4%, other personal lines it's 76%. So although I read those quickly I'm sure you quickly analyzed that our quarterly results have been primarily impacted by two lines of business and that we do not believe either of those results reflect on the quality of the book of business.

On another item, as we had reported for the fourth quarter of '08 and the first quarter of '09, and we are now reporting for the second quarter of '09, we continue to focus on balance sheet strength. We, as you know, were one of the few companies that did not have a decline in surplus in our various insurance companies at the end of '08. We have not had in any of those quarters a decline in book value. Matter of fact, Jeff indicated what the increase in book value is.

We continue to be focused on expense management. The GAAP expense ratio has declined to 31%. Our investments continue to be in an excellent shape with focus on having only the highest quality of securities in our portfolio. There have been no other than temporary impairments in the second quarter.

From the standpoint of underwriting integrity, even in this environment where writing premiums is more difficult than it is in a non-recessionary environment, we have continued to focus on identifying either geographic areas or product lines or agency books of business that we need to take some type of underwriting action. And we have been as aggressive in doing that in a recessionary environment as we have in a stronger market because we recognize that the quality of the book is most important overall.

From the standpoint of rate filing, in personal lines in 2009 we have made over 15 rate filings based upon an analysis of loss ratio in various personal lines products with a high emphasis on home owners because of the high combined and making sure that we have adequate rates in the various states in which we continue to do business.

Talking about refining of underwriting, we have increased in certain geographic areas reinspections of properties, non-renewals where appropriate in order to make sure that we are dealing with whatever the reality is that may be in the book of business.

We're pleased to tell you that in the second quarter we appointed 45 new agencies, that brings the total for the year 2009 to 89. Everyone is always interested in hearing about competitiveness, personal lines competitiveness, as we reported at the end of the first quarter, is not as intense as it may have been in portions of 2008. As it you heard Jeff talk about, our personal lines grew by 5.2% for the quarter. Commercial lines, however, continues to be quite competitive. We don't see it anymore intense, but we also don't see it going in the other direction.

I am able to tell you that in the end of the second quarter into the beginning of the third quarter we have in personal lines begun to see some improvement in our hit ratios, which would be the ratio between quotes and the writing of new business, meaning the percentage of quotes that turn into new business.

And what that indicates to us is that we have our rate structured correctly and that we are experiencing, on a somewhat relative basis, an improvement in our competitive posture with regard to some other carriers. It's not a dramatic shift in hit ratios but it's always nice to see that they are either remaining steady or trending up slightly, which is what we are reporting.

In terms of our responses to the need to grow and the competitive environment, within the last 60 days we have done an intense analysis of time service standards in both personal and commercial lines. We believe that competitiveness involves more than just price and you have heard that from us previously. And we think that in this environment a company that has just first-class service, first-class timeliness and response has a better opportunity to write the business and to create relationships with agents.

So we have significantly reviewed and basically put in stricter time schedules, which basically would be how fast we have to turn around to give a commercial quote, how quickly we are sending out policies and endorsements and communications, so that we would be perceived among the very best in that area.

We continue and have accelerated the rolling out of enhanced features in products in WritePro and WriteBiz, which are our technology for the distribution of both personal lines and commercial products. We have also enhanced certain personal lines and commercial products to make sure that our products have all of the bells and whistles that the very largest companies might be offering.

And fourthly, we have continued our co-op advertising program as you would all recognize that a medium-sized company cannot have the expense budget of a Geico to go out and spend lots of money in broadcast advertising. We have over the years done some broadcast advertising to basically corporate brand, but we have created a very detailed program in which we are co-branding both our company and the agency at the same time.

And the agency pays for a significant part of that co-op advertising and we pay a portion. And we believe that it is a more targeted form of advertising and it also helps to grow the relationship between the Company and the agent because we also view the agent as one of our customers.

In the area of M&A, I can say to you that we are seeing an increased amount of activity in terms of opportunities to talk to modest-sized companies and also to have visits with them so that we are having increased opportunities for those discussions. We are encouraged by the environment; we think that although there is not an extensive amount of M&A activity going on in the property/casualty insurance business, we believe the environment is conducive to it. Because of the strength of our balance sheet and the experience in doing those transactions we believe that there is an optimistic future for us in that area.

Now although we are in a recessionary environment and there are certainly negatives and not everything is quite the way we would like it, there's an old saying about is the glass half full or is the glass half empty? And we believe that, at least from the Donegal Insurance Group's view of the world, that the glass is half full. We see more positive opportunities in the overall landscape than we see negative issues.

We also are continuing to manage the Company for long-term growth and profitability. We recognize that these are challenging times, but we think that we are doing the things that will provide benefit to the Company on a longer-term basis and not just what's going to do some good for the particular quarter. And we think it's focused on both growth and profitability. At this point I'll turn it back to Jeff and we'll pursue questions.

Thank you. Regina, if you would open the line for questions please.

(Operator Instructions). Joseph DeMarino, Piper Jaffray.

Thank you, good afternoon. Can you provide us an update on your current reinsurance programs you have and where we stand -- if it is an aggregate program, where we stand in terms of losses year to date and how much, I guess, protection we can expect going forward?

Sure, I'll give you a quick summary of our reinsurance program. We have actually several reinsurance programs because some of our subsidiaries are in a different geographical area and have a different risk profile. However, the main reinsurance program is with Donegal Mutual Atlantic States and Southern. And of course Donegal Mutual and Atlantic States share in the pooling arrangement.

So that program we have an excess of loss contract which we have a retention of $750,000. That was increased from 2008 when we had a $600,000 retention. So on a per risk basis, both property and casualty losses, we would have the first $750,000 and then we would cede anything over that $750,000 level.

On a catastrophe event, a property catastrophe event, we have coverage above a $3 million retention; any event that exceeds $3 million would be ceded to outside reinsurers. In addition to that outside reinsurance we have various reinsurance agreements that Donegal Group has with Donegal Mutual that lowers the retention for our subsidiaries in any one event to a lesser number and that number varies by subsidiary, it could be $500,000 or $800,000 or $1 million depending on which subsidiary we're talking about.

We currently do not have any aggregate reinsurance in place, those covers are very costly. And basically in this environment we don't believe that that would be the appropriate route for us to go. Although we have had a level of whether claims in the last several years where that might have benefited us, over the long-term period we don't believe that that would be a benefit.

Thanks. So the second one you mentioned, the cat, that's for one event then? One cat event that's over $3 million would be ceded?

That is correct, for one event. That's to outside reinsurers. So as to Donegal Group, really it's a lower retention for any one event depending on what subsidiary is involved.

And let me add a little background with regard to the $3 million cat retention for external reinsurance programs. That, for the size of our company and the capital structure, is viewed as very conservative, meaning a very low attachment point. We have never wanted to be highly exposed to any significant cat loss.

So that we believe that our catastrophe program is very well structured, very conservatively structured and over the years we had put in place, as Jeff is referring to, the additional reinsurance arrangement between the Mutual company and the public company subsidiaries to basically reduce the attachment point where reinsurance would come into play in the event of a cat.

Thank you. And then on the personal side within homeowners, aside from the rate increases and the reinsurance we just talked about, are you doing anything else to reduce the exposure to some of the storm activity that we've had?

Well, yes. Within what is regulatorily permissible. Just because you have some storm losses you are still governed by the respective requirements of a state. But there are geographic areas that are more prone than others to property losses whether it be hail or tornado. We have taken action in several of those states to better identify where the historic patterns of hail storms and tornadoes have occurred.

We have also put some of those books of business on a shorter reinspection program because one of the things that you always want to be is as current as possible with your book of business as to the condition of the property because, depending upon the condition of a property, it might be more susceptible to damage in the event of a storm.

We have also looked at such things as for new business, looked at whether our credit score minimums are set sufficiently high so that we are making sure that we have the right business on the books and we're comfortable that we are. So that we have taken appropriate action, we continue to take a look at it, and it's never job done, it's always an ongoing process.

All right, thank you. That's very helpful. I'll jump back in the queue.

Michael Phillips, Stifel Nicolaus.

Good morning, everybody. A bit of a follow-up to the last couple questions. Not really withstanding the stuff you've done there that you just talked about in homeowners and the low retention on your ceded reinsurance to external reinsurers, the $3 million limit. Hearing that -- but, Don, I guess commenting on your very first comment that we don't want to be a company that's subject to the nuances of weather. I think the reality is you are.

And even hearing the steps you're taking I think you will be, that's the fact of being a regional company in some of the states you're in. Every other competitor is the same way. So I guess aside the stuff you just talked about, what else can you do to not be a company that is subject to these weather losses that make your quarterly results fluctuate as much as they have?

Well, to clarify what I think I originally said, I believe what I said was that we don't want to be a company that is attempting always to say results are just because of weather. But one of the things that you, in addition to what you can do from an underwriting standpoint, some of the things I mentioned, you can increase the amount of your casualty book of business, which we have been actively doing over the last number of years.

Secondly, as we have been doing, we continue to look at other geographic areas because many times that weather losses can depend upon where you are at a particular point in time in your book of business and where those weather patterns are. If you go back historically, we did not report the kind of weather results that we may have been reporting over the last 18 months. I think we all know that weather patterns change in the sense that you can have a two- or three-year period where there's far more storm activity in the Midwest or tornadoes in the South and then it quiets down for a period of time.

We believe that if you look at our book of business relative to all of the catastrophe events and the weather events that could occur that we have a well structured book of business, it is simply that in the last 18 months there has been an unusual amount of hail and tornado activity and thunderstorm activity. But if you look at it from a cat standpoint having to do with earthquake or having to do with hurricane, we have very conservative property books of business relative to some of the very large catastrophe exposures.

And so, we're not sitting back saying gee, there's something wrong with where we are geographically in property and that we don't believe that this is going to be a long-term challenge. But we're certainly managing around it and we don't know whether weather patterns will be like this for the next five or seven years. And we recognize that we have to, like other companies, deal with it and make sure that we manage around it.

Just to make sure I understand -- one of the things you said was I think we all know that your geographic expansion is something that you're looking pretty hard at and doing a good job at. Did you also say that maybe an increase in spreading out your -- more of a casualty focus is something you're looking at too?

Well, to increase the amount of casualty focus, not some sea change, but to increase the casualty focus and there are states, as an example, where we are looking as in personal lines an example to write more personal lines than we do or write more automobile than we do homeowners. The state of North Carolina would be an example of that. So that we recognize that that is something that is in our interest and we will continue to do that.

Okay, thanks, Don. Last one for me for now. Back to the retention of $750,000 that you have, that's nearly double what you had two years ago I guess. Have you seen -- what have you seen in that extra layer in the past two years from $400,000 to $750,000 and kind of any regrets from almost doubling that and comfort that you have that you're pricing that layer correctly now?

I'd be glad to respond to that, Mike. We have watched that very closely to monitor the additional losses that are coming from that increased exposure. And there are very few losses that have risen to that magnitude so that really the increase that we've seen in our loss ratio over the last two years is very much not related to the increase in that retention.

We do have a few losses, of course, that go through that $750,000 mark. But by and large that decision to increase our retention has been one that has been profitable for us. The premium savings have well offset the increase in losses. So that's something we continue to watch, but it has been a good decision.

And to give a little bit of background to it, in both the years in which we increased it we took a very thorough look at a 10-year history and did a lot of what if's if our retention had been at a higher level over a 10-year period. And that's how we determined that it would -- at least statistically it would be an appropriate change.

Secondly, retention should always be in addition to what you have done historically. It's generally a function of well, what is the size of the company, what is the capital of the company? And we would believe that our retention relative to our capital structure is a modest retention level.

Okay, great. Thank you both very much. I appreciate it.

Matt Rohrmann, KBW.

Good morning. Just you mentioned in your earlier comments the two storm losses in the Midwest. Do you happen to have this states that were specifically hit in each event?

I do. The storms in the Midwest were Iowa and Nebraska. And the weekend Easter event in Georgia, that was primarily in the state of Georgia. So we're talking about Iowa, Nebraska, Oklahoma and Georgia where the majority of those wind and hail events occurred.

We also had quite a few thunderstorms that rolled through the Pennsylvania market place in June, those did not aggregate to a level that would trigger reinsurance recoveries, but there were -- almost every day we had claims that were pouring in from storms that occurred in various areas throughout the state.

Okay, great. And then I know it will be a small number if anything, but were there any shares repurchased in the quarter?

There was a very small number, I think it was 11,000 shares at a cost of 1464.

Great, thank you very much.

Dan Schlemmer, FPK.

A couple more questions on the weather and I hope we're not giving you too much of a barrage all on the weather. But just on what actually happened in the quarter, if I heard it right, I think you said it's $1.6 million that you categorized as cat. Did I hear that part right, total for the quarter, $1.6 million?

Yes, those three events that we talked about.

And all three of them aggregate up to $1.6 million that are cat?

That is correct. And when we say cat, there are events that we are tracking for internal reinsurance purposes.

Actually that goes to my question, what defines a cat. Do you have an internal definition or are you using something external that -- I guess how do you define a cat level?

We define it -- we track the losses, any three day event that exceeds the retention, that's the way the contracts are written which would be customary in the industry. So any 72-hour event that rises to that retention level or above. So those three events we're tracking internally we do not rely on external cat numbers from other organizations, it is an internal analysis.

And then the $6.4 million that you're categorizing as weather related but not cat, I guess what would you classify as a normal quarter, a normal level of losses? Is that within the normal range or is that unusually high by a factor of two or three or I don't know if you can quantify that.

That is a question that varies by quarter because some quarters have different weather characteristics to them. But by and large that is in excess of the average. Our average storm losses would be in the $4 million to $5 million range. So an $8 million weather related loss, that's well above what we would normally experience.

Okay. And then looking at the overall loss ratio on the quarter, it comes in at -- there's enough math here, now I don't see it right in front of me. But if you net at the cats in the development and maybe take off $1.5 million in line with what you were just talking about, that the non-cat weather losses were unusually high. You come in somewhere around a 64, I guess I had 65.2 if you just take out the cat, ex-cat, ex-development. On a quarter where you took adverse development from prior quarters is the 64 or 65 ex-cat ex-development -- what makes you comfortable that that's right given that it's in-line with your '08 full year number?

I'm not sure I fully understanding.

I'm sorry. I guess basically it's taking ex-cat, ex-development loss ratio and it looks like it's in-line with what you've been booking historically that you just took adverse development on. That's really -- and I guess that/s the question is how you feel comfortable that the loss ratio you're booking this quarter is getting you to the right number?

Well, yes, are you asking probably more specifically to the 2009 accident year --

Yes.

-- and the loss (inaudible) that we're using there? Yes, if you pull out the weather impact in this, of course our actuaries will be much better suited to discuss the question, but they are projecting loss ratios that are slightly higher than what we would have in the 2008 period after adjusting some of those periods for weather as well.

So we're normalizing the loss ratios for weather and projecting slight increases in the loss picks exclusive of weather and exclusive of development. So we are comfortable that those picks are conservative, we believe that they are accurate and continue to monitor them by line of business.

Okay. And then a separate question. You talked a little bit about the personal lines competition. And I think you've talked over the last few quarters about some rate changes you've been taking. And then this quarter you mentioned I think for the first time that you're seeing an uptick in your own hit ratios. Is that changing your perspective on forward rate changes, the increase in hit ratios, is that affecting your strategic decisions on rates?

Candidly, I think that it's a positive from the standpoint of being able to take additional rate. If your hit ratios were going down you would be more concerned about what does a rate impact do. But the fact that our hit ratios have trended up. Now they didn't trend up in every state but they trended up in a number of important states. And we would think that's positive, meaning that if we believe we need to take additional rate that we think that it's an environment in which we could do that in an improving hit ratio environment.

Great, thank you.

(Operator Instructions). Joseph DeMarino, Piper Jaffray.

(technical difficulty) in there. What do you think is driving the increase in the hit ratio on personal side? And then, can you just characterize the rate experience on new versus renewal business in personal?

Well, what I think is driving the improvement in hit ratio is that we continue to refine the based upon loss experience. We continue to refine what we call the decision trees in WritePro. There are many, many, many elements that go in to determine how we look at a particular risk. And what we are constantly doing is mining the data to try to find sweet spots where the loss ratios are better than expected and also try to identify those areas where they were worse than expected. And where they are better than expected, if you're able to tweak the decision trees to increase the amount of applications with a certain profile.

And I think that it is partially the result of that because we are constantly having our actuarial people look at a lot of very refined data elements. So I think it's partially that. It also could be that there are some of our carrier competitors that may be in certain jurisdictions, given their own results, have maybe taken more aggressive rate action than we would have taken. But I would certainly want to make it crystal clear that we don't believe that somehow or another we have turned into the low competitor in the block which is far from the case.

Okay, do you have like an average rate you can give me on new business for personal (multiple speakers)?

(multiple speakers) how the loss ratio compares to -- is that what you're saying?

No, no, the premium written, the pricing. What is pricing like on new personal business?

Well, so that you're clear, that if we take a rate change that that also is applicable to a piece of renewal business also. Are you talking about the rate change or are you talking about average premium?

Just what kinds of rates, if any, are you able to get on the new personal lines?

Okay, what kind of rate increases?

Correct.

Okay. It varies. In homeowners, depending upon the jurisdiction it would be anywhere from a 5% to a 9% increase. In automobile it would be lower, it would be somewhere between 3.5% and 7.5%. So we think that that's pretty good. And needless to say, in our business, as you would imagine, you're better off with small bites taken at different times rather than trying to increase it by anything that's too significant because that's when you begin to have customers looking around if you hit them above 9%.

Okay, thanks. And then just one last question. Maybe you already gave it, but do you have the statutory surplus number at the end of the quarter?

Yes, I do. It's $339.4 million.

Okay, great. Thank you.

Michael Phillips, Stifel Nicolaus.

You've talked in the past about your staff reductions to help offset the expense ratio and help out there. Can you remind us what else you might be doing -- maybe not specifically to help out with the expense ratio, but just in general anything you might be doing with field restructuring or claims office restructurings or things like that?

What we have been doing over the last nine months, and to refresh your recollection, we reduced staff by about 50 people back in October and in February/March there were some additional reductions. And basically one of the major things that we are doing is trying to centralize into the home office those functions that can more cost effectively be done here. And as a result it can and is reducing the reliance on people in the field areas. And basically what we centralize are actuarial, investment, accounting functions, some of the overall marketing functions, but not the agency appointment process and the agency development process.

On the claims side and the underwriting side we have tried to be very particular in making sure that we have strong representations in the regions because that's part of the culture of us being a regional company. We've also consolidated a number of information services functions into the home office where maybe several of our subsidiaries were using some of their own technology, that we have moved them onto our systems to eliminate the need of doing that and therefore, whether it be software costs or whether it be people cost.

Okay, thanks. That consolidation on that last piece there, is that all done now?

It is well on its way. We're probably about 75% there. It involves two of our subsidiaries and a part of a third.

Okay, that's all I have. Thank you very much.

There are no further questions at this time. Are there any closing remarks?

I just want to thank everyone for their participation and good questions today. And have a good day.

Yes, thank you, everybody. We appreciate it.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.