Everest Group Ltd (EG) 2003 Q1 法說會逐字稿

Good day, everyone, and welcome to the first quarter 2003 earnings real estate call for Everest Reinsurance.

Today's conference is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Mr. James Foster, senior vice president of Investor Relations.

Please go ahead, sir.

Thank you.

Good morning, everyone and thanks for joining us.

With me this morning are Joe Taranto our CEO and Stephen Limauro, our CFO.

Before I turn the call over to Steve for review of the numbers, I'll preface our comments as usual by noting our SEC filings include extensive disclosures with respect to forward-looking statements.

In that regard statements made which are forward looking in nature are subject to various risks.

As you know, actual results could differ materially from current projections or expectations.

Our SEC filings have a full listing of the risks the investigators should consider.

Let me turn the call over to Stephen Limauro.

Thanks, Jim, and good morning.

I'm pleased to report that Everest first quarter results were its best ever.

Market conditions and company fundamentals on balance continued to improve re-enforcing our favorable view of near and intermediate term opportunities.

After tax operating income $104.1m or $2.02 per diluted share exceeded the $100m mark for the first time, up 58#% from the 2002 $66m or $1.35 per share.

Net income, which include realized capital losses, was $94.4m or $1.83 per diluted share, a 55% increase from 2002's $61.1m or $1.24 per diluted share.

Taking full advantage of the most favorable overall market conditions we've seen in many years, we wrote just over $1b of gross premiums, an increase of 68% from first quarter of 2002.

This includes a 73.9% increase in worldwide reinsurance premiums and a 56.2% increase in insurance premiums.

Worldwide net written premiums of $952m and earned premiums of $745m were up 68.5% and 51.6%.

Highlighting gross written premiums for our segments, our U.S. reinsurance operations are up 88%, which is $342m reflecting strong demand in pricing with an increasing emphasis on casualty lines.

U.S. specialty operations were up 13% to $132m, reflecting improving markets for marine, aviation, surety, and slowing growth in our accident and health business.

International reinsurance businesses are up 78% to $169m reflecting strong conditions across virtually all of our markets.

Our Bermuda operation is up to $48m from $4m in 2002 reflecting our continuing roll out of more traditional capabilities in Bermuda.

Our insurance operation is up 56% to $311m, reflecting continued but moderating growth in the worker’s compensation lines and growing diversification in E&S lines and selected brokerage writings.

The quarter was uneventful from a loss perspective resulting in a combined ratio of 93.5% compared to 99.3% in the first quarter of 2002.

The improved combined ratio approximates our underwriting expectations of 2002 and 2003 premiums earned.

Importantly we continue to reserve prudently including an increase for the quarter of $208m in net loss reserves.

Pretax investment income of $93m for the quarter is up 9% from 2002's $86m reflecting strong and improving cash flow from operations we have seen, as well as the impact of the 2002 capital transaction proceeds against the back drop of a lower interest rate environment.

After tax environment $80m up 14%, embedded pretax and after tax yield of the quarter end portfolio are 5.2% and 4.6% respectively compared to 5.3% and 4.6% at December 2002.

The quarter includes after tax realized capital losses of $10m mainly reflecting impairments of bond investments in continually difficult credit market conditions.

After tax unrealized depreciation increased by $26m.

Cash from operations for the quarter was our highest ever at $328m, a 210% increase from $106m recorded for the first quarter of 2002 and a $47m or 17% increase above our previous highest quarter, the fourth quarter of 2002.

Cash and invested assets stand at $7.6b, up $324m or 4.5% from December 2002, mainly reflecting the very strong cash flow from operations.

Total assets at $10.4b for the first time exceeded the $10b marked with $2.1b of these held in investment portfolios of our Bermuda companies.

Our balance sheet remains strong including shareholders equity at $2.489b or $48.90 per outstanding share up $120.7m or $2.36 per share, a 5% increase from $2.369b and $46.55 per share value at December 2002.

Total capital including borrowings is $3.2b.

Analyzed ROE at 19% compared to 14% for 2002.

We made no share repurchases during the quarter choosing to retain capital to support our expanding business opportunities, an emphasis we expect will continue.

The capital transactions we completed in 2002 were very effective in positioning us for 2003.

We are not capital constrained although, important as our ratings were as a competitive advantage, we continue to carefully manage our capital position.

Overall, we had a superb quarter and fundamentals, market conditions, and business opportunities positioning us for a great year in 2003 and still better year in 2004.

Accordingly increasing our guidance for 2003 to an operating earnings range of $7.75 to $8.25 per diluted share and establishing an initial range for 2004 of $9.50 to $10.50 per diluted share.

In each case these estimates exclude the potential impact of unusual loss activity.

Clearly we are pleased with our results.

The opportunities we face and momentum we've established.

Over the past few years, we’ve focused on building expertise, capabilities, infrastructure and financial strength for this type of market.

It’s exciting now to have the opportunity to put these to work.

We will now take questions you may have.

Operator, we're ready for questions.

Thank you.

Today's question and answer session will be conducted electronically.

If you would like to ask a question today, simply press the star key followed by the digit one on your touchtone telephone.

Again, that's star one to ask a question.

Additionally, if you are on a speaker phone or a phone that has a mute function, please make sure to depress or release your mute function in order to allow your signal to reach our equipment.

Again, that's star one to ask your question.

We will take our first question from Mike Lewis with UBS Warburg.

Good morning.

Very, very nice quarter.

Maybe you can give me a little more flavor on the U.S. specialty reinsurance businesses.

I was a little surprised by the lack of growth.

I know you are slowing down your medical stop loss business but doesn't seem like much growth.

Could you go into some of the reasons for the 108 combined, where there is problems and what's being done there?

Sure.

Good morning, Michael and thank you.

That component, the biggest piece, is our medical stop loss business.

As we have indicated, we've had a very good run for the last three or so years and in that end of the business.

At this point we see rates topping out and so we really are just modestly growing that end of the book at this point in time.

Same will probably be true for the next few months and even into next year.

We are very happy with the results but with the market kind of topping out we are holding steady with the client base that we have which we are very pleased with.

The other components in that area are the marine, aviation, and surety book of business.

We are growing somewhat more in those areas.

The reason for the combined ratio being higher in that area is really driven by the surety component where we have continued through this quarter to see some poor results coming in on contracts that were put together in the softer end of the market, 1997 through 2000.

We are seeing the surety marketing starting to change.

We have transformed our book in the last six to nine months.

We’re not only getting some rate increases but basically changed the book where it is more a regional book, less exposed at the major contractors.

So we anticipate that the surety results will improve for us on a going forward basis but this past quarter again they ran a bit high and that's what made that component higher than what we'd like it to be on a combined ratio basis.

Thanks very much.

Just a quick follow up.

Could you go into some details.

Are you telling us with these estimates that you are coming up with now in the first quarter results that all the reserve strengthening you did in the fourth quarter addressed all those specific coverages, asbestos, D&O, other than surety which you continue to have a little bit of problems with, all the other worker's compensation, are you now very comfortable with the way your reserves stand?

We feel good about the reserves, Michael, across all the lines that you mentioned.

We took some lumps as you know in 2001, 2002, probably less than most anybody else did but, yes, we feel did about the reserves at this point in time.

Thanks very much.

Thank you.

We will now hear from Marco Pinzon (ph).

Couple questions.

Number one is just kind of following up on your comments about capital adequacy.

Is this, first of all, is this premium growth rate that you put up in the fourth quarter is it sustainable throughout the rest of the year?

If so is the capital that you have in place right now sufficient to address that?

Sure, Marco.

Let me start that one.

We did a couple of capital transactions in 2002 such that we ended 2002 more strongly than we had entered -- we ended it more strongly than we entered it.

As we look to 2003, we certainly wanted to position ourselves and we think we are very successful in that respect.

Having said that, as we look at the 68% gross written premium growth this quarter, we would not expect that that would continue over the full year.

We're probably thinking more in the range of 40% to 50%.

But that really remains to be seen depending upon the opportunities that arise for us.

In that kind of environment, you know, we start about a very strong capital base.

We will continue to very carefully monitor the opportunities and the writings as well as the discussions we have with our rating agencies and, frankly, the flight to security taking place in the market and coupled with our ratings give us a very significant advantage that we're very pleased with.

We're going to make sure that we sustain that.

So, you know, as we get later on in the year if we need to do something, we will.

We would only raise additional capital if we thought we could put it to immediate good use by just writing good business today.

And in that sense, we don't really look at it like if we did that that it would be dilutive.

Okay.

Thank you.

And then a second question is the catastrophe losses are moving around quite a bit from quarter inform quarter, basically absent this quarter.

They accounted for, I think, two points on the loss ratio in the fourth quarter which was also I guess a relative benign quarter overall for losses in the industry.

How do we better kind of project that number?

Can you give us some insight there?

I think, Marco it is a difficult number to project.

When we build our plans and our estimates, we do presume there is some normalized level of attritional type losses, you know, so we accommodate it that way.

But having said that, you know, it just is quite variable depending upon the event that you experience.

To some extent that's caused us to look at the combined ratio excluding catastrophes as, you know, a good measure, but I would note that we do, you know, as we build estimates and plans assume that there will be, you know, some very modest level of catastrophe attritional losses as we go through time.

It should be a lot smaller number for us than those companies in the sense we have a lot of diversification, big participation in the casualty market and other markets.

When you do kind of try to figure out what an average quarter is, it turns out to be a much smaller number for us than for most.

Clearly, this quarter was quite good in the sense that it's close to zero.

But in two to four points might be in the neighborhood of an average quarter for us.

Having said that, you never get an average quarter.

With Merrill Lynch we will now hear from Jay Cohen.

Question to see if there's any prior year development in the quarter either positive or negative.

Jay, you know, with what we did in surety, we actually saw kind of a rebalancing in other areas that offset a good bit of that.

Similarly with what we did on asbestos we saw a rebalancing that, although we did have some asbestos incurred, you know, on an income statement basis that was offset by some re-characterization of old year liability reserves.

So as a practical matter, while we may have a very modest amount for the quarter, it is not going to be anything appreciable.

We look at the 93.5 we put out there as a pretty good reflection of the run rate given where we are.

That's great.

Second question, if you could, if you look into your near term crystal ball and talk about what you think will be happening from a market condition standpoint, pricing, terms and conditions, really, over the next four to six quarters.

Let me use that question to kind of offer a little bit of color on the marketplace and go through some of the product lines and, again, try to get back to the forecasting that you're asking for.

A year-and-a-half ago when we, basically, experienced September 11, we saw a tremendous change in our marketplace but the change largely was in the areas that were most affected by the losses thrown off by the World Trade Center losses.

So we saw the property market hardened both on the property cat side and the non-cat side.

We saw the aviation market change dramatically as four planes went down in one day.

We saw the worker's compensation's excess market start to spike as losses were thrown off in that area and personal accident area also started to change as many losses were put into that bucket as well.

We also saw the beginning of a new cover for insurers and re-insurers and that is for terrorism.

All of those areas I would say, rates are kind of leveling off at this point a year-and-a-half later.

Some areas may even mildly going down.

But still all of those areas are in very good shape in terms of rate to exposure because of the changes that took place a year to a year-and-a-half ago.

What we've seen more recently is changes in other parts of the market, improvements in, most notably, the casualty arena within the United States and, frankly, where these may have been pushed to a degree by September 11, I think a bigger push has come in the last six months in terms of the recognition of the soft market results and also spikes in claim severity as reported by AIG and others where people are suddenly being faced with awards greater than what they had anticipated, greater than what they had seen in the past.

That has all led to a correction going on in the casualty market.

We see it across the entire casualty market, general liability, auto liability, worker's compensation's in most all states, certainly California, a tremendous change is going on.

We see a lot of changes going on in the D&O market which has had its share of losses and problems and bad results, a lot of changes going on in the medical malpractice market and other forms of errors and omissions.

We see a lot of changes going on in the surety market which also experienced a lot of red ink.

All of those areas, the more dramatic part of those changes is just really started in the last six months, and I believe most of us in the business believe that those changes, positive changes, will continue throughout the remainder of this year and we really should have a pretty good casualty market for 2003 and into 2004.

That's particularly important area for Everest since we have a great deal of expertise, a number of clients in that area.

We've also seen what was mainly changes in the U.S. market a year-and-a-half ago extend to the rest of the world.

So we've seen the UK market improve quite nicely, property and casualty, Latin American market improve, Canadian market improve.

These are all areas where we have been in them for many years.

We have people stationed there, clients that go back many years so we are just in a great position to capitalize on the positive changes taking place in the international market.

We have seen the Bermuda market come alive even more so in the last six months.

Again, some of this was driven by the new capital base that forged itself in Bermuda and just the growing amount of surplus that exists in Bermuda has become in my opinion the number one marketplace within the world for re-insurance.

We are very happy that we opened up our office there.

It's doing quite nicely.

It is a tremendous source of positive growth for us.

We are seeing excellent opportunities coming in from all over the world presented to us in Bermuda.

On top of that, we continue to see the flight to security and people are continually ratcheting up the quality of the reinsurance that they want to purchase with our A-plus best rating and the State’s AA minus positive outlook S&P we just make the short list in all cases.

And the short list is getting very short.

We have seen some major companies recently, certainly on U.S. casualty business, cut the list of accepted re-insurers down to just a handful of accepted re-insurers.

Again, we just about always make that list which we're very, very pleased about.

On the U.S. program insurance side, tremendous opportunities, obviously worker's compensation's California is an area that we are very pleased with.

We continue to get rate increases, we put through rate increases in January, another 15% rate increase in may.

It per cent as if we'll put through more rate increases in July as the rest of the market will.

We are very pleased with what Garamendi is having the State fund do in terms of raising rates, lowering commission and acting responsibly in the marketplace.

That continues to go quite well.

We have no shortage of opportunities in the general liability specialty area, medical malpractice area and some property operations as well.

Many of our competitors have just kind of disappeared.

Certainly all those that were pretty much fronting operations, a model that we never endorsed or agreed with, have very, very much disappeared.

There's a tremendous vacuum in this area and, as I said, there's no shortage of opportunities.

So as you can kind of see getting back to your question, we really do see this market having some legs in the sense that an awful big part of it has really just started to improve in the last six months and that's really in reaction to some of the losses that have been posted in the last six months.

We also see people continuing to ratchet up the security requirements and that's something that just serve us very well.

Many of our competitors are struggling.

We're in a position with the same management team that can underwrite and tackle these opportunities, surplus that can support it, ratings that basically attract it.

In short, business has never been so good and we expect it to stay good for a while.

Kind of long winded answer but I did want to give you an overview of what was happening throughout our book of business.

Thank you.

Well now hear from Susan Spivak with Wachovia Securities.

Jack, you actually covered everything so thank you.

Thank you, Susan.

We will now here from Michael Smith with Bear Stearns.

Good morning, Joe.

Steve, was there any particular transaction in the quarter that caused net losses to decline decline?

I'm not sure -- pardon.

Paid losses.

Mike, there was nothing unusual.

We think this is really just a continuation of the trend we have been seeing.

The second question is on your tax rate; it looks like you're moving a greater portion of your portfolio into tax exempt investments.

How much of that is municipals, and if you are moving funds into Bermuda.

We certainly continue to shift towards “munis” (municipals).

The relative profitability of our US operation is growing more dramatically than in Bermuda.

That's causing our effective tax rate to lift despite the beefing up we are doing of municipal investigating.

As a practical matter some of that will catch up as cash flows under our quota share arrangement from the U.S. to Bermuda.

There's a bit of a lag there in that as the volume comes through the cash lags a bit getting out to Bermuda.

But all in all, we continue to try and maneuver that effective tax rate as low as we can at this point, you know, we're struggling to get it any lower simply because of the profitability build up in the U.S. operations.

Should we expect a tax rate to be about where it is now then?

Absolutely, Mike.

That's our best estimate of, you know, kind of where we are and where we expect to end the year given the expectations we've come up with for the year.

Okay.

Thank you very much.

We will now hear from Dave Sheusi with JP Morgan.

Good morning, everyone.

Just a couple questions here.

I wanted to touch on the top line in try and drill down a little bit on the Bermuda base operations, saw robust growth, get some flavor there and just address any one-time revenues that you guys may have seen in the quarter.

There are no unusual one-time entries for the quarter so I don't have anything for you to extract or add in that sense.

Okay.

Good.

The Bermuda operation is it's really largely traditional business that's been tackled there.

When we first started the Bermuda operation 3ish years ago its initial focus was the non-traditional business, finite business, if you will, but its focus is much more the traditional side as that end of the business is so radically improved.

Most of the business would be property business, some cat, some non-cat, a lot of it written on an individual risk basis by our staff in Bermuda.

Some of it property and casualty business that comes into Bermuda both from the United States and a lot of it from the UK and other parts of the world.

We have a small D&O operation that we've just recently set up and hasn't contributed very much yet but it's all traditional business, as I said, mostly property but some casualty and it's not just U.S. business, it is international business as well.

Bermuda gets a rate flow of business.

Again, there's just so many companies there it's easy to get to see them since they are all within a three or four-block radius and they want to see the companies that have the best ratings and we're in that group and very pleased about it.

There's obviously more companies in Bermuda themselves that are insurance companies that are seeking reinsurance so we are happy to be there positioned so we can do business with them as well.

So it's traditional business coming in from all over the world.

Great.

And then on the expense side, it looked like we would expected your margins on the underwriting expense line to fall but on an absolute basis it looks likes you’re trending down.

Is there something going on there?

I mean, are we seeing more just rate on existing business rather than unique roads on new accounts coming in?

What's going on that piece of it?

I think really what you're saying is just, you know, with the market improvements that are being made it's not just a function of rate.

Some of these improvement are coverage, some of those improvements are just lower commissions that we are paying.

And so at the end of the day it is a fact we are paying less.

You can see we've been able to achieve almost three points less on the commission line year to year.

Again nothing unusual going on.

From Cochran Corona Securities we will now hear from Steven Peterson.

Good morning.

Quick question on the U.S. insurance operation.

You indicated that 93’s a pretty decent run rate for the operation overall.

Can we look at that 95 as being sustainable over the long haul and my second question involves sort of the rapid growth and how you're monitoring that out in California in terms of what you need to do in terms of additional infrastructure and so forth as that book continues to grow for you.

Well, we have had to bring in a number of people and will probably bring in more to just oversee that program because it has gotten to be a big and important.

But as we go through the numbers and we go through them monthly, they continue to track largely the way that we have expected.

We've been out there now for three years so we've been able to get a seasoned book that we feel pretty good about the projections that we are making today.

We feel very, very good about where the book is at given the fact we just had continued rate increases on that book of business.

Yes, we do expect the results for our insurance operations to be quite good on a going forward basis.

As I said, we are only getting more in the way of rate increases and we are only getting more in the way of quality opportunities that are coming to us and they're coming to us in many lines of business.

I noted med-mal we are doing some cherry picking, very pleased about that book of business, some property opportunities, some other specialty general liability opportunities.

Frankly in that end of the world, we have letter competition at this stage of the game.

So we're very pleased about what we can achieve today.

We see continued opportunities so we are optimistic about the combined ratio for that end of the business and the growth possibilities for this year and next.

So you don't anticipate growth to slow down any in the near future?

No.

I mean, we may top out in California comp, even though we continue to get rate increases, we may just kind of not see that grow as fast as other ends of our business.

But with the new opportunities on the insurance side coming in, I do expect to see very good growth within the insurance 2003, probably 2004.

Now, having said that, we are getting great opportunities on the reinsurance side as well and so you can see there especially in the casualty but even in the property and some other lines of business like surety, we have so many opportunities that we are getting growth there as well.

The only area that we're somewhat flat as we mentioned at the beginning was the medical stop loss business.

I do think you’ll continue to see us flat in that one component but all of the other components should grow quite nicely.

Okay.

Terrific.

Thank you.

Our next question comes from Bill Wilt with Morgan Stanley.

Good morning.

You just touched on this but I'll come at it in maybe a slightly different way.

Thinking about the pretty substantial dislocations in the California worker's compensation market and global reinsurance market as you pointed out and thinking about all the rating downgrades that have taken place in that sector over the last year, year-and-a-half, as you look to '03 and '04 and as you derived your estimates, your guidance for those two years, where are you, at the margin, allocating both more capital and thinking about your management time?

I guess I am thinking of contrasting insurance opportunities and specifically California worker's compensation versus more traditional reinsurance opportunities in the liability lines.

Well, you know, we just think that they're a great opportunities in both of those areas and so we really want to tackle the opportunities in both of those areas.

You can see most recently that the reinsurance side certainly the U.S. reinsurance side has grown at a greater pace, the international reinsurance is coming along quite nicely.

That to a degree is because those areas have improved quite dramatically in the last six months, particularly the casualty component which a year or two ago wasn't quite as good as it is today.

But meanwhile some of the changes in California a year or two ago comparing that to what was going on in certainly U.S. casualty reinsurance I would have said that was better.

So, you know, our plan is to go where we think we can make the most profits and we like both of those areas and, you know, we think we spend the right amount of time in terms of prioritizing where we think we spend our time but happy to build those businesses at this point in time.

And we will now move to Matthew Heimermann with Goldman Sachs.

Is there anything going on with the mix of business and how you're writing proportional or access?

Number two, could you give us a feel on the insurance side what the proportion of work comp is to the other E&S business and where you think that might go.

Thirdly, in terms of leverage both on a debt to cap bases as well as underwriting leverage on net written premiums to shareholder's equity what do you think the upper limit is, especially on the debt to Cap side given that you really haven’t changed your debt position significantly?

I'll tackle the first two components and ask Steve to comments on leverage.

With regard to the mix, there is certainly no design at the company to do more excess, if you will, or do more pro rata.

We are happy to do deals if they meet our measurements on either basis.

So I don't believe that you should see any dramatic trend one way or the other.

Again, that's not the plan of the company.

Worker's compensation I believe, roughly speaking, worker's compensation California represents about half of the volume in the insurance operation at this stage and leverage.

Sure.

Matt, as we look at the various leverage measures, debt to cap, operating leverage, written premium to surplus, loss reserves to surplus, as I said earlier, we think we got ourselves positioned at the beginning of the year to be exactly where we want to be.

Our debt to cap leverage is very satisfactorily in the range that the rating agencies look for to be with the rating levels we carry and with the rating level we seek particularly from S&P where Joe noted earlier we are on a positive outlook.

From an operating leverage perspective we have some stresses and strains, principally on the domestic operation that led us at the beginning of the year to increase our quote share to our Bermuda operation to 25% on a whole account basis and that helps us effectively balance, if you will, the capital draw U.S. operations versus offshore operations.

Certainly the growth we are seeing in the U.S. has us constantly looking at the statutory entities in the U.S.

We did beef them up with the proceeds of the trust preferred at the end of the year.

We certainly will continue to monitor that situation but we don't think we've reached, you know, the outer boundaries of the range that we need to be in to make sure that we sustain our ratings.

Thank you.

We will now here from Ira Zuckerman from Nutmeg Securities.

Getting back to the catastrophe exposure and two to four points being normal, what percentage of your book now is catastrophe reinsurance?

Well, you know, that's very hard to say because in terms of pure catastrophe business just on premium basis, you know, maybe 5% to 10% area.

But we do have parts of our book that have a catastrophe exposure, even though it is not just a pure cat cover that has been written.

And that gets a little fuzzier in terms of figuring out what portion is cat on the premium and what portion is not cat.

The other question I have as you mentioned earlier, your commission costs are down.

How much of this is roughly makeshift and how much would represent, basically, reduced commissions?

We generally think that it is pretty much reducing commissions.

I mean, we certainly are watching the mix.

It doesn't look like an appreciable change is taking place so I think what you come down to is just a pressure on commission rates in general as a result of competitive conditions.

Okay.

Thank you very much, gentlemen.

And thank you for our last question today we will hear from Greg Lapen (ph) from City Group.

Good morning.

Good morning, Greg.

Can you discuss the continent.

The European continent?

Yes.

Didn't know which one you meant.

More specifically just kind of in your growth there, mix of property versus casualty, and how you're positioned versus the direct writers.

You had a lot of broker market and it's more transaction on the direct basis and are the primary guys getting stung enough to transfer the risk to a greater degree there?

Let me start with European market in general.

It has thrown off some very poor results for the insurers and re-insurers for many, many years.

We had hoped this past January that the continental European market would improve significantly in response to these poor results.

There was some improvement but we did not see it as significant improvement.

So we were disappointed, if you will, with the changes in the marketplace.

We have an office in Brussels which has been doing business in the market for many, many years but going into this year its premium base was quite small, very, very small in response to what we thought was a lousy marketplace.

We also have a London operation and a lot of the business reinsurance business from the continent does flow over to London and we get to see it in London.

Once again, we weren't doing a lot of continental business in our London office either in response to what we thought was a poor marketplace.

The improvements as I said were disappointing.

We did a little bit more business but not what we'd hoped for and so I think there's more change that's just needed to that end of the business.

I was quite surprised it didn't change as much as I thought it would and it should but perhaps there are just too many players and continental Europe is just too slow to change.

I thought with the floods that took place last year that might trigger some additional changes but, again, a disappointment.

Same is somewhat true for the Asian marketplace.

We have an office in Singapore and that also has a small amount of volume for us at this stage of the game to some degree laying in wait for an improved market just like we are in Brussels.

So that has to change eventually because, again, the results just don't justify what the rates currently are and so we do hope that, you know, later in 2003 or 2004 we do get an improved marketplace and ready to write businesses if that is the case.

At this stage of the game we are not excited with the prospects that currently exist there.

Thank you, it does appear we have no time for any further questions.

I will turn the conference back to you for closing or additional comments.

Okay.

Thank you.

We appreciate you all joining us this morning as usual Steve and I will be available for follow-up calls if you have any technical questions.

Have a good day, everyone.

Thank you everyone.

That does conclude today's conference.

We thank you for participation.

You may now disconnect your line.