Everest Group Ltd (EG) 2007 Q4 法說會逐字稿

Good day, everyone.

Welcome to the fourth quarter 2007 earnings release call of Everest Reinsurance.

Today's conference is being recorded.

At this time for opening remarks and introductions, I would like to turn the conference over to Ms.

Beth Farrell.

Please go ahead, ma'am.

Thank you.Good morning and welcome to Everest Re's fourth quarter 2007 earnings conference call.

On today's call, Joe Taranto our CEO, will provide opening remarks touching on our business operations and current market conditions.

Next, Craig Eisenacher, our CFO, will review the fourth quarter and year-to-date results.

This will be followed by Jim Foster, Senior Vice-President of Claims, who will discuss in detail the previously-announced asbestos claim review.

Also in attendance for question is Tom Gallagher, our President.

We will open up the call to questions following these prepared comments.

I will preface these comments by noting our SEC filings include extensive disclosures with respect to forward-looking statements.

In that regard I note that statements made during today's call which are forward-looking in nature, such as statement s about projections, estimates, expectations and the like 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 that investors should consider in connection with such statements.

Now let me turn the call over to Joe Taranto.

Thank you, Beth.

Good morning.

We are pleased to report net income of $839 million for 2007.

When you consider the strengthening of our asbestos reserves, that is a great result and highlights the quality of our underlying portfolio.

We are also pleased to have written $4.1 billion of premium, which is a modest increase over 2006.

Considering the challenges posed by the market, we are happy with that achievement as well.

Further, we end the year with our balance sheet extraordinarily strong.

Now on to 2008.

Reporting on the January 1 renewals, first our international reinsurance, which represents about one-third of our worldwide book of business, here we've seen the following.

Underlying insurance rates continuing to decline modestly, perhaps 5%-ish, generally less than the reductions we are seeing on U.S.

business.

Reinsurance terms had very little change.

Cat rates were modestly down in areas with no recent losses, up in areas that had losses, such as Mexico, the UK and Australia.

Our ratings, experienced personnel and quality relationships continue to serve us well, and we get to see and participate in the best business offered in this sector.

In short, I expect another good year, with the quality of the portfolio much the same as 2007.

Next, I'll review our U.S.

property reinsurance portfolio, which represents about one-fourth of our worldwide business.

Roughly 40% of this book, or 10% of our worldwide premium, renewed in January.

Some observations.

First, commercial insurance rates continue to trend down, off 10%-ish.

Risks with a cat element are declining less than risks without a cat exposure.

Second, reinsurance cat rates were down perhaps around 15%.

Note, however, that pure U.S.

excess of loss cat business represents a very small portion of our overall book.

Third, retro cat rates were down about 10%, with the better deals still offering reasonable opportunities for reinsurers.

Fourth, we did see increased competition among reinsurers, including for single-state prorata home owner reinsurance deals.

We saw some examples where major reinsurers aggressively offered improved terms to the client to win the account.

Keep in mind, a substantial amount of business in this category for us is Florida business that renews mid-year.

Accordingly, that business will run at the existing terms through the first six months of the year.

In summary on this sector, although we see some rate decline and Increased competition, our book is quite unique and should remain a quality portfolio into 2008.

Next, I'll comment on the U.S.

casualty reinsurance book, which represents about 15% of our worldwide book.

Here, we continue to see underlying insurance rates going down.

For many classes, rates are significantly off their highs of two and three years ago.

We also continue to see many ceding companies keeping more business net and buying less reinsurance.

Whereas we had witnessed a disciplined reinsurance market up until now, we are starting to see some dumb deals getting done.

This segment of our book decreased in 2007, and we expect it will decrease again in 2008, as we remain disciplined and respond to market conditions.

Next, our insurance operation, which represents about about 20% of our worldwide book.

Most of our business is casualty, but it's a very specialized book and many of our programs are composed of small premium accounts.

This is the end of the market that's seen the least softening.

As we reported last quarter, we recently added three new accounts that will flow into 2008.

I expect us to maintain our diversified, specialized quality insurance book, top line and bottom line, in 2008.

Our specialty book of accident and health surety, marine and aviation completes our worldwide operation.

I expect our marine and surety book to remain steady and profitable in 2008.

We have reduced our aviation writing substantially, as we see market rates as wholly inadequate.

We do not expect significant improvement soon, unless spurred by increased losses.

Our A&H division is likewise down significantly from where it was a few years ago, as we have responded to the weakness in the market, particularly on the medical stop loss business.

We don't expect any major changes in the lA&H landscape in 2008, but our writing should be stable, as we have previously taken the underwriting actions necessary.

When this market does improve, we'll be fully prepared to grow our book.

In summary, we expect to see more competition in 2008.

Our ratings, people and distribution will allow us to continue to participate in the better end of the market.

Our unique portfolio will insulate us somewhat from the market decline.

We will remain disciplined and respond to the market changes appropriately.

Now I'll hand it over to Craig.

Thanks, Joe.

Our after tax net operating income for the quarter was $63 million or $1 per fully diluted share.

In last year's fourth quarter we reported after tax operating income of $201 million or $3.07 per share.

As we pre-announced, we strengthened our asbestos reserves by $325 million on a gross basis.

Net of reinsurance and federal income tax the charge was $235 million, or $3.72 per share.

We also experienced roughly $100 million of favorable development during the quarter on our core reserves.

So our underlying operating results for the quarter were quite strong.

After tax operating income, prior to the asbestos reserve strengthening, was $298 million, which equates to $4.72 per share.

Our net income, which differs from after tax operating income only by $51 million of net after tax realized capital losses, was $12 million, or $0.19 per share.

In last year's fourth quarter, our net income, including realized capital gains and losses, was $206 million, or $3.15 per share.

I would like to comment on the realized loss.

Our realized loss is under the old definition of realized losses, that is gain or loss on sales of securities, plus other than temporary impairments were insignificant.

Our equity portfolio lost approximately $59 million of market value during the quarter, while our bond portfolio appreciated by about $81 million.

However, because our equity portfolio is recorded at fair value, changes in its market value, whether actually realized or not, are recorded as realized gains and losses for the P&L.

Changes in bond values, on the other hand, are recorded net of tax directly to shareholders's equity.

So in reality, changes in the market values of our portfolio holdings netted to a $23 million gain after taxes.

Losses due to sales and/or writedowns were near zero for the quarter.

We don't make the rules, but we are trying to explain to you actually what happened during the quarter.

Moving on to 2007, as a whole, it was clearly, clearly a terrific year.

We reported after tax operating income of $777 million, or $12.21 per share, even after significant strengthening of our asbestos reserves.

It should be noted that we strengthened our asbestos reserves in the second and third quarters as well, so the total strengthening for the year was $388 million.

We'll discuss in detail the asbestos study and charge a little later, but right now I would like to comment on the favorable development we've experienced on our attritional reserves.

We experienced favorable development of about $100 million for the quarter and $189 million for the year as a whole.

By way of comparison, we booked $243 million of favorable development on our attritional reserves in 2006.

Our reinsurance segments, particularly U.S., have seen strong positive development on their reserves, reflective of the favorable market trends in recent years.

This is becoming increasingly evident as these reserves mature.

Except in the strengthening we did in the year for Centrix the insurance segment's reserves are also developing favorably.

We have expanded our quarterly financial supplement, and we now provide you a breakdown of incurred loss components, including prior year development by segment.

So for details, please refer to the supplement which is available on our website.

Our 2007 accident year results were very strong, with a combined ratio of 86 .4%, consistent with the accident year results for 2006.

Our catastrophe losses were light in 2007, at $160 million.

Our expected cat losses based on our portfolio were eight to nine points for the year; so actual losses, which equated to about four lost ratio points, were quite favorable.

Our GAAP equity grew by $577 million to $5.7 billion at year end.

Our book value per share increased to $90.43, or by 15%, from $78.53 at December 31, 2006.

While growing our GAAP book value we returned $363 million to our shareholders, $121 million in dividends and $242 million in share repurchases.

The share repurchases represent 3.9% of beginning outstanding shares, providing incremental growth going forward in our earnings per share and book value.

In addition, we issued $400 million of subordinated debt in the second quarter, at a very attractive 6.6% yield, and used half the proceeds to call in higher coupon trust preferreds.

Net-net we decreased our borrowing costs and we increased our financial flexibility.

Looking at the year as a whole, our gross written premium grew a modest amount, to $4.1 billion.

And for the full year our combined ratio, including the asbestos charge, was 91.6%, compared to 89.7% for 2006 as a whole.

Our operating return on equity was 14.6% for the 12-month period, and our net income return on equity was 15.7%.

S&P removed its negative outlook from our AA minus financial strength rating, A.M.

Best reaffirmed its A-Plus and Moody's reaffirmed its AA3.

So now, all of our ratings contain stable outlooks.

For the fourth quarter our gross written premium was $1.1 billion.

Our U.S.

reinsurance operations reported gross written premium of $240 million, down 31% from the fourth quarter of last year.

We have been talking about the softening casualty market for some time, and we continue to see less casualty business that we believe makes sense to write.

Treaty Property was lower in this year's fourth quarter as well, largely the result of higher seeded reinsurance costs on one large Florida property deal, and the continued run-off of non-renewed accounts.

U.S.

insurance recorded gross written premium of $278 million in the fourth quarter, up by $75 million over the fourth quarter of 2006.

The growth emanates from the Brownstone Program, which we have talked about in prior quarters.

We assumed, through a reinsurance transaction, the December 31 unearned premium on this program, which added $76 million to our gross written premium for the quarter.

Specialty was up 22% for the quarter to $69 million.

Marine and Aviation, and A&H were up for the quarter, in part due to premium on two new quota share programs.

Surety was down, continuing the trends we have been seeing in recent quarters.

International recorded $216 million of gross written premium for the quarter.

That is up by 13.6% over the fourth quarter of 2006.

The largest gain was in our Latin American book, although Asia and Canada each showed gains as well.

Stronger foreign currencies in relation to the U.S.

dollar were a significant growth factor compared to last year's fourth quarter.

Foreign exchange gains represented $9 million, or about 1/3, of the $26 million increase in this segment.

Otherwise, the positive trends for the quarter are mirroring what we've seen all this year, as this segment continues to benefit from economic growth and insurance growth in many international markets.

Our long-term relationships and strong ratings are an advantage in garnering new opportunities and expanding current relationships.

Bermuda, including London, was up 30% to $247 million, with both the Bermuda and London books growing nicely.

Increased premium on several large London contracts, as well as the impact of foreign exchange, added to the growth in this segment.

As well, Bermuda continued to benefit from the addition of one large contract, new for 2007, and growth in its business with existing clients.

The economic fallout from the subprime debacle appears to be far from over.

Clearly it has affected the market values of our stocks and bonds in a general sense, but more directly, we have largely avoided any significant impacts on our insurance and reinsurance results and our invested assets.

From an underwriting standpoint we have posted an additional $13 million in losses during the third and fourth quarters of this year related to subprime exposures, and we have been conservative in setting and holding reserves on our Treaty Casualty book for the 2007 accident year in light of the subprime issue.

Otherwise, we've not seen significant activity.

Doesn't mean we won't, but thus far we've not.

Moving on to investment results.

Net investment income was $174 million for the fourth quarter of 2007, compared to $184 million for the fourth quarter of 2006, and that's down by about 5%.

The largest factor in the decline is income from our limited partnership investments, which was $9 million in this year's fourth quarter, compared to $27 million in last year's fourth quarter.

The annualized return on our limited partnership investments was 7.4% for the quarter.

Clearly the equity markets have not been attractive of late, and we anticipate that first quarter '08 limited partnership results will likely be negatively impacted by the equity market's performance.

For the full year, net investment income was $682 million compared to $629 million for 2006.

That is an increase of 8%.

The growth was in line with our growth in invested assets, which grew by about $1 billion, or 7%, over the 12-month period.

We are a very small investor in subprime-structured paper.

Almost all of what we own is AAA-rated, and to date we have not experienced any significant problems here.

The total December 31, 2007 book value of our securities with underlying subprime credits was $25.9 million, and the related market value was $25.4 million.

During the fourth quarter we reported impairments of $3.4 million; $1.5 million related to subprime, and $1.9 million related to the housing sector.

In addition to the subprime exposures, at December 31, 2007 we held securities backed by Alt-A credits which had a cost of $49.8 million and a related market value of $49.2 million.

The book and market values of our remaining asset-backed securities at December 31, 2007, those would be credit card balances, student loans, auto loans, et cetera, were $269.4 million and $267.4 million respectively.

All of these securities are investment grade.

As far as our mortgage-backed securities, our concern at December 31, 2007, we held agency-issued residential mortgage-backed securities with a book value of $1.03 billion and a market value of $1.02 billion.

We held non-agency mortgage-backed securities with a book value of $611.3 million, and a corresponding market value of $606.1 million.

As well, our investment portfolio includes $3.6 billion of long-term municipal bond securities, of which $2.6 billion are insured by monoline financial guarantors.

Despite the market concerns about these guarantee companies, at December 31, 2007 our insured muni portfolio was in an unrealized gain position overall.

The book value and market value at December 31 of these securities was $2.49 billion, and $2.58 billion respectively.

So all-in, a $90 million unrealized gain.

As of January 25, that is the last Friday, the unrealized gain on our insured munis was $120 million.

At present, insured municipal bonds are trading on their underlying credit quality.

The market is not according any value to the insurance wrap at this point, so future monoline performance would not seem to pose any threat to the insured muni market values going forward.

In the aggregate, we have a very high-quality investment portfolio, and we always have, with 85% or $12.7 billion of the portfolio invested in fixed maturities, short-term investments and cash.

Of the total, 98.3% or $12.5 billion is investment grade.

The embedded yield for the portfolio is 4.7% pre-tax and 3.9% after tax, and it has a duration of 3.9 years.

Rounding out our investment portfolio, at December 31, 2007 we held approximately $1.5 billion of equity securities, which as previously mentioned are carried at fair value.

During the early part of January of this year, we sold $200 million of our holdings.

Nevertheless, we estimate the equity portfolio lost approximately $136 million of market value between year end and last Friday.

The value of our limited partnership investments at December 31, 2007 was $654.4 million, and the yield on these investments for 2007 was 13.5%.

The returns on limited partnership investments fluctuate depending upon the performance of the individual investments made by the partnerships, as well as movements in the equity markets.

As I mentioned, we expect below average returns for the first quarter of 2008.

Cash flow from operations was $236 million for the fourth quarter of 2007, compared to $142 million for the fourth quarter of 2006.

Lower catastrophe loss payments, $86 million this quarter, down from $188 million in the fourth quarter of 2006, explain almost all of the increase.

Lastly, I would like to comment briefly on our asbestos reserve strengthening, and then Jim Foster will comment more fully on the work done and the conclusions drawn.

As we pre-announced and disclosed in our earnings release, we strengthened our gross asbestos reserves by $325 million in the quarter.

That $325 million was split $250 million reinsurance, and $75 million insurance.

After our inuring reinsurance, the pre-tax charge for the quarter was $311 million, and for the year as a whole we incurred $388 million.

An enormous amount of work supports the estimate of our ultimate liabilities.

Our claims department undertook an exhaustive, defendant by defendant analysis, and worked it through all of our reinsurance contracts.

And our actuaries developed nine different methodologies to project our ultimate liabilities.

We developed projections based on internal data and assessments, we extrapolated non-public and publicly available data for our ceding companies, and we benchmarked ourselves against the industry.

To put my summary on it, we did a very thorough job, very competent, and very thoughtful.

We made what we think is a strong provision for our ultimate losses, and we believe our reserve levels are now as strong as any in the industry.

To put it in context, our net asbestos reserves now aggregate to $763 million, the survival ratio on the reinsurance side is 13.6 years and on the direct side 8.2 years, excluding the impact of settlements in place.

For A.M.

Best, the industry aggregate for all insurers and reinsurers was 8.9 years - that's the industry aggregate survival ratio, was 8.9 years as of 12-31-06, and for reinsurers alone it was 9.5 years.

So both relatively and absolutely, we believe we are in a good position at this point.

I think you will be impressed with the extent, quality and thoughtfulness of the work we've done here.

With that, I would like to turn it over to Jim Foster, our Senior Vice-President of Claims, who will provide you with more detailed perspective.

Jim?

Thank you, Craig.

With that introduction I'll get right into the study and provide some color on the study.

In planning the study, we made two fundamental decisions early on.

First, we chose to conduct the study internally, rather than retain an outside consultant.

That approach better utilized the expertise we have in-house, and we believe produced a better product.

Second, we decided the study had to combine the efforts of our claim, actuarial, legal and financial staffs.

In approaching the claim portion of the study, we focused on a number of bellwether policyholders, whose experience was potentially significant in themselves, and which we thought would be indicative of the potential development across the entire book of business.

In choosing policyholders to study ,we focused on companies whose asbestos experience was mature enough that there was information available to study ,and on which we felt we could create a reasonable estimate of their ultimate exposure.

This led us to choose a couple dozen policyholders.

Among those policyholders, Everest's claim experience ranges from having already paid tens of millions of dollars, to having fairly little by way of loss experience.

Having chosen the target policyholders, we then pulled together all the available information and insights concerning those policyholders, including information actually reported by our ceding companies, general market intelligence, information developed in our role as a direct insurer of many of policyholders, and from other sources, including our attorneys, where appropriate.

For each policyholder we constructed an estimate of not only its ultimate liability, but also how that liability would be allocated across the insurance coverage which it purchased.

With those estimates as a starting point, I then turned to my reinsurance claims staff, which is intimately familiar with the business that Everest wrote to our major clients.

The staff took the estimated liability and allocation at the insurance level and analyzed the potential exposure to each reinsurance contract that Everest issued to the major insurers of that policyholder.

That process involved a painstaking review of hundreds of reinsurance contracts by years and layers, on many of which we've never received any claims.

This allowed us to create a preliminary estimate of the potential reinsurance exposure we might face with each of the subject policyholders.

Then, together with our actuaries, I reviewed the preliminary estimate on each policyholder and attempted to factor into the estimate a wide variety of uncertainties and limitations inherent in this kind of study.

For example, based upon the fact unique to each policyholder, our level of confidence in the initial estimates of policyholder liability and insurance allocation might well vary.

In addition, we needed to take account of significant factors, such as the potential application of coverage defenses at either the insurance or reinsurance level, as well as the impact of additional reinsurance which our ceding companies may have purchased and which would work to reduce the exposure to our reinsurance treaties.

This secondary level of analysis not only allowed us to refine our estimate with respect to target policyholders, it helped clarify for us some of the issues relevant to the process by which we extrapolated from the study group the remaining book of business.

We also then had to assign a range of confidence to these estimates.

As you can probably tell from even a thumbnail sketch of the process, this was a very intensive effort.

As we went through the process we became more comfortable with our initial decision to handle the study internally rather than relying on a third party.

There are two main reasons for that comfort.

First, we felt it absolutely critical that the analysis of the reinsurance exposure be handled by people who not only know asbestos liabilities in general, but also know our ceding companies and our book of business.

Only that level of familiarity, which would never be duplicated by an outside consultant, allowed us to consider the many nuances applicable to some of these decisions.

Second, if we'd retained a consultant, that consultant would have most likely relied in part on data which it had from other assignments and/or a proprietary model, and we night not have had access to the data or the inner workings of that kind of model.

By doing this study ourselves, based on the information in our hands and based on our intimate knowledge of our business, I feel that we had a much greater sensitivity not only to the projections being made, but also to the significant and often subtle uncertainties embedded in the projections.

In other words, conducting the study ourselves leaves us with a much better understanding of both the strengths and potential weaknesses in the projections.

Because of the inevitable uncertainties in projecting asbestos liabilities, we believe forcing ourselves to go through this exercise yielded a much better foundation for the judgment as to how to reset our reserves.

Of course the process we went through on the claims side was only one aspect of the study.

We also had our actuarial staff working in parallel with our claim staff.

Although it's well known that asbestos liabilities do not lend themselves to analysis through customary actuarial reserving techniques, our actuaries took a very proactive approach in looking at a wide range of techniques that offered some promise of helping us analyze the potential exposure.

They not only looked at this from the perspective of projecting our exposure based solely on income, they also looked at the projection of our exposures by examining industry positions.

Without going into arcane detail that only an actuary could love, the methods applied to directly estimate our potential exposures, in addition to the work based on the claim study, included a technique using report-year analysis.

In that approach, claims are slotted into the year in which they are first reported, a triangle of those years is developed and then carried forward to reflect future years and create an estimate of potential IBNR.

Although the forward-looking aspect of this technique relies on judgments as to the future number and severity of claims which might be reported, we felt that having gone through the claim portion of the study we were in a better position to make those judgments.

The actuaries also looked at our potential exposure based on assumptions as to varying levels of survival ratios which might be booked.

In addition, using estimates of exposure prepared for Prudential back in the 1990s, we compared our actual paid loss development to the estimated paid development in the earlier studies to project a new ultimate based on our actual experience.

Among the several techniques that were explicitly based on industry-related comparisons, our team went through an exercise to look at the bulk IBNR carried by some of the major national insurance companies, and calculated how that IBNR might flow through to claims that might eventually be reported to Everest.

Our actuaries also looked at a comparison of Everest's claim emergence across the entire industry.

Further, they looked at how Everest's survival ratio might look if it were brought to the same level of accuracy as the entire industry.

With respect to the several techniques that were based on industry data, one important feature that we feel adds a significant element of conservatism to our approach is that we did not assume that the industry is adequately reserved.

As you may know, in its recent report A.M.

Best estimated the industry as a whole to be deficient by $2.8 billion.

In making our estimates relative to the industry position, we ran a number of scenarios, including scenarios assuming that the industry is currently at an adequate level, assuming the $2.8 billion deficiency assumed by A.M.

Best, and assuming a deficiency of $10 billion, or nearly four times that assumed by A.M.

Best.

Although we did not rely exclusively on any of these techniques, in broad terms the reserves that we have booked correspond to an assumption of an industry-wide deficiency of $10 billion.

That reference point gives us a lot of additional comfort that our figures are conservative ones.

Putting all the elements of the study together, we were able to provide Joe, Tom and Craig with a variety of analytical perspectives, driven both by claim-specific and actuarial methodologies.

In light of the uncertainty surrounding asbestos in general, we obviously would not have considered any one of these techniques to be definitive.

That is why we tried to provide as many perspectives as possible.

The fact that the techniques in which we had greater confidence generated IBNR indications that were in the same ballpark as each other gave us greater confidence that this multi-faceted approach provided the best possible basis for making a judgment in an area that admittedly carries uncertainty.

Overall, while of course we'd have preferred that the asbestos environment become more benign rather than less so, we faced those changes proactively.

I'm confident that the creativity and collaboration among the staff generated the best study possible.

While we are not pleased at having to post the reserves, we are very pleased with the analytical work underlying the decision.

All of these comments up until now related to our assumed reinsurance business.

As Craig has indicated, a portion of the charge relates to our direct insurance business in Mt.

McKinley.

Our approach to this question in McKinley necessarily differs from that on the reinsurance business.

McKinley's insurance business at this point is relatively small, with much of the potential exposure concentrated in a small number of accounts.

Each year my staff in McKinley performs a review in which we look at all the policyholders from whom we have received asbestos claims.

While we regularly attempt to obtain information from a policyholder, it can be very difficult and can take an extended period of time to get information.

The purpose of our annual review is to take a fresh look at the information we have been able to gather on a given policyholder and re-evaluate the significance of that information.

Where we have been able to get additional information, either informally or in coverage litigation, that information can also be taken into account.

In addition, the annual review attempts to refine our estimate of potential exposure to expenses, as well as loss payments.

For 2007, the review suggested some incremental exposure on just a couple of policyholders.

That normal development plus some incremental additions with respect to expenses constitute a portion of the charge on McKinley.

Because the McKinley book is fairly small, to a certain extent McKinley's potential exposure is dependent on the most significant individual accounts.

However, some of these accounts present such uncertainties that it is simply not possible to calculate an expected exposure.

Instead, some of the more significant accounts represent situations in which we believe that there is and should be no exposure, but where the circumstances have not yet allowed those issues to be fully litigated.

As a result, a portion of the charge on McKinley is not attributed to any specific case, but reflects a decision that the uncertainties in McKinley suggest the prudence of reserving in a more conservative level.

In sum then, just like other companies we have wrestled with the uncertainties related to asbestos.

In working over the past couple of months to push the envelope in estimating our potential IBNR exposure, we are very pleased with the study we put together and feel comfortable that the provisions we have announced place us in a very strong position, both in the absolute and relative to any benchmarks in the industry.

With those comments, I'll turn it back to Craig.

Thanks, Jim.

Great job.

As you just heard, we have thoroughly examined our exposures and made what we believe is a strong provision for the ultimate liability.

We believe we are strongly reserved, both absolutely and relative to the industry, and relative to our peers.

This should be behind us now, recognizing, of course, that you can never be 100% assured in this area.

In summary, I noted earlier a myriad of accomplishments for 2007.

I do believe 2008 will be a much tougher year for us, both from an underwriting perspective as well as an investment perspective.

Having said that, I really believe we are very well positioned with strong reserves, a conservative investment portfolio, ample capital and financial flexibility, strong financial ratings, well-controlled pricing and underwriting operations, and a well-diversified insurance and reinsurance portfolio.

While we see increasingly competitive conditions pretty much across the board, we expect our 2008 results, absent catastrophes, will be quite good.

With that, I would like to open it up for questions.

(OPERATOR INSTRUCTIONS)

We'll take our first question with Tom Cholnoky with Goldman Sachs.

Good morning.

Jim, I was wondering if you could kind of repeat your presentation there?

No, it was actually very good.

Let me just ask one or two questions, if I can.

On the asbestos, is it fair to assume now, I'm probably asking the obvious but let me ask it anyway, that given what you have done in the fourth quarter, which is obviously a very exhaustive study, that the chances of you having to make any meaningful adjustments to your asbestos reserves over the next couple of years is going to be pretty minimal?

Not to put words in your mouth, but is your level of confidence pretty high that that should be something minimal outside of some extraordinary event?

That's our intent, and hopefully much more than two years.

Okay.

Let me just ask a question then if I can on the subprime, the D&O insurance exposure.

How different is the environment today for you from an underwriting perspective than it was back in the late 1990s, you know with the tech bubble and all the D&O claims that came out there?

Why should we feel comfortable that the very minimal losses that you have thus far are not going to balloon in some fashion?

Have you done anything different today versus what happened back then?

Well you know, Tom, I don't think that we can guarantee you that there won't be more to come out.

But I guess I would start by saying that, you know, the D&O portion of our book is really not that big a portion of our worldwide book.

I'm certain it's less than 5% of our overall premium.

Plus, there was such a stock market bubble, as you point out, at that time, that affected so many stocks, that had them so overvalued, I think to my mind that was going to cause more shakeout than this, which is a very specific item that affects a very specific number of stocks.

Let me ask Tom Gallagher to give you a little bit more color as well.

Also the world has changed since then.

We've changed our underwriting, our clients have changed their underwriting.

We cut out most of the big banks, the big financial institutions, investment banking, so we have limited our down side risk.

We also put out less limits, and exposed what we did write.

Okay.

I guess the last question I have and then I'll get back in if I need to, is just in terms of capital management, Joe, obviously you didn't buy back much stock in the quarter, and you are going to generate, if you meet anywhere close to consensus numbers this year, I mean, somewhere between 900 - let's call it $900 million of income, potentially.

How should we think about that?

Because you're not growing the top line all that much, and what are you going to do with all that cash?

You are right about the fourth quarter.

Although we bought back roughly 4% of the stock during the year, which I think was percentage-wise more than most were buying back in our sector, that is something that we'll likely continue to do into 2008, and we will take a look at that continually, and also the business opportunities.

But as we've done in the past, Tom, that's not something that we're going to give guidance on.

That is something that we continue to want the flexibility each quarter to say - what are the business opportunities?

What do we need to support our ratings?

And make a decision at that particular point in time.

Okay.

Sorry one last question on D&O, just to wrap it up.

Are your limits exposed to D&O lower today than they were back in the late 1990s?

Yes, they are.

Do you want to give us some idea of magnitude?

We'll have to get back to you on that, Tom.

Okay.

I think some of it was just the D&O market, in part, really started going down in 2005, and we started cutting back at that particular point in time, some on the basis of just rate decline.

Okay.

Great.

It is down pretty significantly from a couple of years ago.

Okay.

Great.

Thank you.

Next we will go to Josh Shanker with Citi.

Thank you, good morning.

Good morning.

Looking at the - you guys have been very candid about the rate environment, somewhat more than some others, saying insurance rates down 10%, reinsurance potentially down 15%, but excluding the new program that you are writing, your writings are about flat.

Do you expect this to persist?

Or do you think your exposure - do you think that your actual premiums should drop in the 10, 15% range?

Is there some loss to that for 2008?

Well, you know, it's getting tougher, as you kind of heard in me describing things, and there will be parts of our business that we currently expect will be down.

I guess I would start with our U.S.

casualty business, where underlying insurance rates are off and people are keeping more net, and just the general reinsurance competition's becoming a little bit tougher, so we declined in 2007 over 2006.

I think we were down something like 25% in that portion of our business.

And we see, you know, that shrinking again, by probably again a reasonable percentage in 2008.

Property reinsurance in the U.S., probably down a bit as well.

In part, it's because we had such a stellar year in 2007.

We really grew that book.

Some of that was Florida business, some of that was retro business, some of that was other single-state opportunities.

We had a terrific year, and we expect to do - most of the deals we did in 2007 to renew in 2008, but probably not all.

So that might be off a bit, too.

Our insurance operation, there I think we have some opportunities, so I won't predict any sort of reduction.

International operation continues to go well; I won't predict any thing there.

Same for the specialty book.

When you do put it all together, though, I do think we'll be down in 2008 on a worldwide basis.

If I had to offer you a guess, it would be 5 to 10%.

It remains to be seen.

There is a lot of the year to go, just yet.

Tom, maybe you want to comment on the January renewals as to book that we renewed versus last year?

Yeah, when we look at the January 1 renewals, the overall portfolio, we had about $1.7 billion up for renewal, which is about 55% of our overall portfolio.

When we put the tally together just this week, it looks like we did about 16 -- $1.6 billion in premium, a little higher.

So we are off about 5 or 6% for one month.

The majority of that decrease really came out, as Joe said, on the treaty casualty side.

Property was off slightly in the U.S., our A&H, especially business, were about even.

Internationally, we were up.

But in some places we were slightly down, London being specifically the place where we saw increased retention and a much more competitive environment.

All in all, it is a very good market.

Okay.

Thank you for being so frank.

One other quick question, I think.

Given where the equity markets are right now, given potential opportunities in credit markets, do you see any portfolio management strategy changes in terms of the way that you were investing your float?

No.

The fed has managed to push short rates way down.

So we have been a little more aggressive in trying to put some money to work.

And you know, we are trying to work that portfolio off.

But we are really trying to stay very short in terms of our fixed income investments.

It just seems to us that there is significant interest rate risk in the market.

Either the stimulus package works and interest rates go up, or the stimulus package doesn't work and we have inflation and interest rates go up.

Who knows what the timing of that might be?

But as we put money to work, we are trying to keep it on the short end.

I think I mentioned in my remarks that we pulled a couple hundred million dollars out of the equity markets early in January, and that was again a reaction to the situation where we thought that the downside risks looked unattractive relative to the upside potential.

So we are going to continue to be conservative investors, high-grade, probably shortish maturities until there is more evidence in terms of where this is headed.

Thank you for all the disclosure.

Appreciate it.

Next we will go to Jay Gelb with Lehman Brothers.

Thanks.

Good morning.

Had a couple of numbers questions for you.

First, Craig on the partnership income, is that part of the other income on page 9 of the supplement or is it part of that other income?

It is other investment income.

It goes through the investment income line.

Other income on the P&L is primarily foreign exchange gain and loss.

Right.

So on page 9 of the supplement, where it say "other income" within net investment income, the numbers didn't exactly match up.

I guess maybe there is some other revenue flow coming through there.

Could you give us by quarter the 2007 partnership income, as you track it?

That is it, isn't it?

On page 9.

Okay.

I was looking at December 31, '07 it said $11.7 million.

Yeah, I don't know why that -- is that?

I don't know.

I know the 29 - is there anything else that goes through there?

I guess there is some other minor items but it is almost all limited partnership income.

Okay, so even though you are saying first quarter '08 partnership income is going to be challenged, it was $11 million in the first quarter of '07, so are the comps going to be that difficult versus a year ago in the first quarter?

I think it's hard to say.

That income, we report that between a month and a quarter behind, depending on when the limited partnerships report to us.

And a portion of our portfolio is long-short funds.

More of the portfolio is what we would call infrastructure; it's healthcare, power/energy, et cetera, and then there are some LBO funds as well.

It is more the long-short funds that I think are likely to have poorer results.

I think it's hard to comment on how we would expect it to perform against the first quarter of 2007.

But you know, it's going to be weaker than it's been, I would think.

Okay.

So if you had $70 million or so partnership income in '07, could you venture to guess the direction where that may be?

Beyond the first quarter, no.

I mean I have some insight into the first quarter because a lot of it's going to be based on what happened in the fourth quarter, right?

Because we are a quarter behind.

Beyond that, it's - you know, I really can't.

No, I think when you look at the whole year, we are not suggesting less.

And we are still very happy with a lot of the partnerships that we are in, and many of them are coming up with some very good returns.

So I think Craig was just indicating a couple of them, in light of what's happened in the market in the last couple of months, might have some upsliding for the first quarter.

But overall for the year, no significant implications.

Okay.

That's good.

And then the effective tax rate, what is your sense for 2008, given some of the quarterly gyrations in that number?

I guess I would expect it to be, you know, fairly similar to this year, as a whole.

Maybe a little lower.

Because you know we took the asbestos charge in the fourth quarter, and a lot of that income, that affected the tax rate for the year.

So an operating income, 17 to 18% range?

Probably a reasonable guess.

In that neighborhood.

Yeah, it's a reasonable guess.

Okay.

And then could you explain the uptick in the combined ratio in the Bermuda segment for the quarter, and how that business is going?

Yeah, that would be the result of the asbestos charge.

I don't know if you have the numbers now.

But if you would have the asbestos impact by segment, that would help us maybe get a better baseline on the underlying result.

It's all in direct and it is on the segment page as well, I think.

Yeah, under asbestos.

Oh it's in the supplement?

It is in each of the segments.

Page 6 of 10.

If you look at the segment pages, and they would start on page 5, I believe, maybe page 4.

Page 4 of the supplement.

It starts with total reinsurance and then total insurance, there is an asbestos and environmental line down on the bottom.

Got it.

Thanks very much.

That gives you the breakdown.

The effects on the Bermuda operation, if you look, the difference with and without asbestos, it probably would go from a 94 down to about 82, combined ratios.

For the full year?

Yes.

Okay.

Thank you.

Our next question will come from Susan Spivak with Wachovia.

Good morning.

I was hoping to get more of an outlook on the mid-year renewals, specifically on the property side.

Your comments make it sound like it will be much more challenging this June and July versus a year ago.

So If you could just remind us how much of your business renews then, that would be helpful.

That is my first question.

Then I just wanted to explore whether there was any impact on your business from the Berkshire/Swiss Re transaction?

Were you on any programs that might be taken over?

And finally, Joe, could you give us an update on your outlook for M&A?

Whether some of the use of the $900 million in generated earnings this year could be used toward some new growth opportunities?

Yes, Susan.

On the Swiss Re, I don't know of any impact on us.

With regard to property renewals in mid-year, I mean, I would guess that you know, half of our U.S.

property business - as I said, U.S.

property was 25% of our worldwide book.

So maybe half of that is in the mid-year.

A lot of that is Florida business.

Not all of it, but a lot of it is.

You know, we've established some very, very good positions with some very good clients.

We are the - tend to be the market leader on deals that we have done.

We have tend to have cemented the bond over the last two or three years, as we have really helped these companies through a difficult reinsurance market, particularly in Florida.

So I think we are in a very good position.

But you are right, we are seeing more competition, and in January we saw more competition across-the-board, and we did see it on some single-state prorata deals - not Florida but other states - and we did see a couple of dumb deals there as people were aggressively reaching to get on new business.

So we know we will have to deal with, in all likelihood, more competition.

But I think we are in very good shape.

I'll have to report back to you, in June and July, just exactly what takes place.

On the M&A front, we look, we continue to look.

We are finding, at least on the insurance company side, and even the agency side, things kind of pricey nowadays.

And on the reinsurance side, we have seldom found operations that we thought were complementary.

So we haven't been big, clearly, in the last few years on the M&A side.

But we don't exclude it; we certainly have seen a couple of interesting stories and explored them.

So yes, you always like to have the financial wherewithal to tackle that, if that's something that you want to tackle.

And when we go through the noodling on excess capital and decide, you know, what should we do in terms of buy back versus what should we save for business opportunity, that is certainly one of the areas we have to contemplate.

Joe.

if I could just follow-up again on your comments about some of the competition actually becoming undisciplined.

It's really, you know, one of the first comments we have heard about that moving into the market, and I'm just wondering, is that stemming from more of the larger European players?

Or is it coming from some of the new capital sources who are just struggling to get on program?

You know it ends up being all of the above, Susan.

It should not be anything that is a surprise.

It is something that comes, I think, with a normal market.

You know, I think it was nice to say everyone was being disciplined, but it is almost unrealistic to not expect to see some deals out there that are priced below what you really think is adequate.

You take the U.S.

casualty side, where the pie is shrinking because more people are keeping that, not to mention insurance rates are going down, it stands to reason that what does come to the market might be more fought over.

So yes, I realize a lot of my brethren have kind of said everyone has been disciplined.

I'm just trying to give you, I think, a more realistic view, that not everyone on every deal is perfect, according to us; and I'm sure we are not perfect according to them, sometimes.

But the world that we are entering is a more normal reinsurance market.

Your candor is definitely appreciated.

Thanks, Joe.

You're welcome.

Next we will go to David Small with Bear Stearns.

Just one clarification and then a question.

Just in the insurance piece, could you just explain to us the impact that the Brownstone Program had in Q4?

And then I think in the last quarter call you said you expected that to be $60 million of annualized revenues.

Is that still what you expect it to be, or do you think it is going to be larger now?

Yes, still about $60 million we expect on an annualized basis that will flow into 2008.

Craig will take you through the fourth quarter.

We took on, via a reinsurance transaction, a portfolio transaction, the [under] premium reserve related to the Brownstone Program as of December 31.

So that got booked as $76 million of gross written premium and $76 million of unearned premium reserve.

Also notice in the balance sheet our deferred acquisition cost ratio went up, because there is a higher commission ratio on that, and all of it went into the unearned premium reserve.

Okay.

Great.

That is the primary impact.

Okay.

And that business and that $76 million will earn off, all of that business is not 1-year policies, there are 3-year policies in there as well.

So you can't view the $76 million as all subject to earnings, if you will, or the premium being earned in 2008.

Okay.

Does that --

Actually that's very helpful.

Thank you.

And then in terms of, you know, as you look for growth in the insurance business, we have heard that competition for new MGAs is pretty intense out there, and you guys have historically had tighter underwriting guidelines around new MGA programs than others.

Can you give us some commentary on what the environment is like for that?

Well, the environment MGA business is no different, in general, than the rest of the insurance and reinsurance world; people looking for premium.

If we are different in one respect, we don't focus on getting a lot of the everyday account.

We - as Joe indicated, we try to pick out the specialty business, and it's worked for us.

Over the course of time, we build up the portfolio, whether it be Brownstone's recently, or security guards or forestry and landscaping, very specific programs that have less competition; and once we do get them, we lock them in for a multiple-year contract.

So there isn't a lot of competition on those programs, and if there were, for the whole program, it would take awhile before it could change.

The rates are getting pressured somewhat, but again, as Joe indicated before, not as dramatically as the rest of the marketplace.

New programs are clearly tougher to find, especially those that really meet our standards.

But, as far as what we had going for us in this phase, I really think it is far more than most.

It certainly starts with an A+ Best rating, which is very important.

We carved out a good reputation in the MGA world.

We tend to do deals with our agents where they are exclusive deals, as Tom kind of noted.

Some of the people that we compete with may have multiple agents that are writing the same kind of business, and that doesn't work as well for the agent as the deals that we tend to put together.

And in the last few years, we have just developed a very good backroom that is very helpful to the business and to the agent.

So I think we have some competitive advantages.

But yes, there is no question that, along with everything else, is being more sought after.

Finally, could you give us a Centrix update?

We added $5 million to the Centrix reserve in the quarter, and it was something that we didn't necessarily have to do.

The reserve that we are holding - or I guess what I should say is the bottom end of the range moved up such as the reserve that we are holding was a little below the mid-point, and we topped it up to the mid-point of the range.

The portfolio continues to run off.

We are quite comfortable with where we are, in terms of the reserves.

There is, you know, continuing litigation over - over the program, over the period of years that we were on it, and we'll see how it all turns out.

Can you just maybe also - how much, kind of the detail around how much more there is to run off?

I think there is, well we are holding, I think we are holding at this point about $45 million of reserves.

The portfolio of loans, I think, is down to 60.

It is down to about 60,000, and the aging of the loans, if you will - overall, of course, you know, ages a quarter on average.

So I would guess there's probably 24 months on average to go.

All right.

Thank you.

Uh-huh.

Next we go to Vinay Misquith from Credit Suisse.

Good morning.

There appears to have been a shift on your fixed income securities from AAA and AA to A and BBB.

Was that purely because of ratings downgrade on the securities, or did you actually put more money into the securities?

Not purely because of ratings downgrades.

The biggest item affecting that was Washington Mutual.

We had $23 million, I believe, of bonds that were downgraded to BBB.

$5million of that has since matured or else it matures soon.

Overall, you know, if you look at the quality characteristics of the portfolio relative to the third quarter, it looks like it is down a little bit.

But if you look at it relative to last year, the quality is actually stronger.

Sure.

What new securities did you buy?

Excuse me?

What new securities did you buy with the lower quality?

Do you think the spreads now are sufficient that you want to get more aggressive with your portfolio?

We haven't aggressively gone into BBBs.

We have looked at some hybrids, not in the fixed income securities, but we participated in the Fannie Mae and Freddie Mac preferreds.

So we're going where we see relative value, but we're not investing specifically in BBB securities, so you know, junior securities, if you will, of good issuers, some utilities, but good names overall.

And as I said, short maturities.

Sure.

And on the D&O side, is it just a 2007 year issue because these are claims-made policies, and could you give me a sense of how much IBNR you have on that business?

Well, D&O is done on a claims-made basis, but that's - so there isn't any IBNR.

But you that doesn't mean you won't see more claims reported next year for the industry that will fall into 2008 covers.

I think as I mentioned in my remarks as well that as we look at where we reserved the casualty book this year, we thought we had some room in that.

We opted not to take that down, as a cushion against what might be coming.

All right.

Thank you.

Next we will go to Matthew Heimermann from J.P.

Morgan.

Good morning.

Not much left.

But Jim, with respect to the reserve charge on the reinsurance side, I guess simplistically, when I think about you know what changes over time and why estimates may be high or low, one is kind of the adequacy of the cedants, and two, kind of claims in process, claims that the cedant knows about but there's a reporting lag, and then three, just the actuarial process for estimating.

So with respect to the reinsurance increase there, could you maybe allocate by those three categories that $250 million, If that's possible?

Just to give a sense of how much is attributable to each?

No.

I don't think we could sub divide it like that, Matt.

I think what we can say is that the decision to do the study was stimulated primarily, almost exclusively, by external events that we were seeing in the market, so to speak.

In the sense that, you know, through late 2006 into 2007, we began to see changes in how claims were getting reported to us that suggested a difference in - from what we had seen earlier.

That really suggested to us that we needed to take a new look and a different kind of look.

So, frankly, we don't know exactly why some of our ceding companies were reporting to us differently.

It may be that they were taking some of their bulk IBNR and flowing it through and reporting it to us, and maybe that they were settling cases themselves more readily.

It may be they were simply reporting to us something they had totalled earlier but didn't tell us about earlier.

We don't really know why.

But most of those issues are all, in essence, external stimuli that we were seeing that told us we had to do something.

Fair enough.

Just one clarification on the insurance segment.

Joe, you were talking about flat year-over-year.

That's flat including the assumption of the Brownstone Program in '08?

Because originally I was thinking not hit '08, not offset what otherwise might be some decreases in the rest of your books.

I'm trying to get a sense of it flat including the impact of the assumption in '07, or flat ex that?

Well, you know, that is very hard for me in January to be precise about the whole year.

So you know, flat kind of conveyed to you what our thinking was.

And it did include, at least in my mind, the portfolio into 2007, so us competing with that in 2008.

But, you know, we may be up a bit; we certainly hope to be.

We certainly will look to do that as much of the year left.

We've got some new programs that we are working on.

We have some other ideas that we're working on.

In some ways we have more opportunities on the insurance side, where we are still a small player in the U.S., and much less the worldwide insurance schemes.

Whereas on the reinsurance side we are an established, mature player.

But yes I guess I was generally thinking, you know, we would be able to match 2007, including the portfolio.

Does that help?

Okay.

Appreciate it.

Thank you.

Next we will go to William Wilt from Morgan Stanley.

Thanks.

I'll keep it quick, given the time here.

On the U.S.

insurance, your extra detail in the supplement is great.

The attritional looks like very modest adverse loss development in the prior years, again U.S.

insurance in the calendar year '07.

The question really is the California workers comp reserves, if I'm remembering '02 to '04, were the years of kind of the height of your involvement in the California workers comp environment.

Color commentary on how those reserves have developed as part of U.S.

insurance?

Yeah.

They continue to look very, very good.

We have actually released a little bit over the course of the year.

I can tell you when we reviewed it at December 31, they continue to look strong.

Obviously we have released a good bit over the years, so you can't expect it to continue to be released or we run out of reserves, you know?

Sure.

Do you have a sense for about how much remains at this point?

If I had a sense of that, I would have booked it.

How much is in reserve.

How much as of year end?

If you want to answer it the other -

Oh total reserves?

Off the top of my head, I don't think I do, no.

Don't worry, I'll follow-up.

Okay.

I'll follow-up with you on that.

Next we will go to Mark Serafin from Citadel.

Good morning.

Thanks for taking my question.

Just a numbers question here.

So with the new disclosures, if I add up other underwriting expenses on all the segments I come up to about $47.3 million in the quarter.

Then if I compare that to what you guys reported on the income statement of $38.7 million, I get about an $8.6 million benefit in the quarter.

What was - what was driving that?

When I look back at prior quarters, this number has been averaging at about negative 7.5, and last quarter it was negative 8.4.

So that is about a $17 million year-over-year swing.

I'm not sure I understand the question.

Okay.

Other underwriting expenses in all the segments you provide data on that, right?

Right.

So if I add up that by segment I get $47.3 million in other underwriting expenses.

When I look at what's reported on the income statement, other underwriting expenses is at $38.7 million.

So somewhere there is an $8.6 million benefit in the quarter, other corporate - I'm not sure where that comes from.

If I do this math, going back to 4Q '06, in 4Q '06 that was an $8.5 million expense, and the average has been about $7.5 million expense over the last four quarters.

So the swing is somewhere around $17 million year-over-year.

I'm trying to get a sense of what that was from?

And then what type of tax rate I could apply to that expense or benefit would be helpful as well.

Yeah, you know, off the top of my head, I'm sorry, I can't answer that question for you.

Let me take a look at it and I'll get back to you.

Can I do that?

Sure.

It's corporate expense somewhere but it is a $17 million year-over-year swing, so it is corporate income from somewhere.

Yeah.

That and what type of tax rate would apply would be helpful.

Yeah, let me take that offline and I'll get back to you.

Thank you.

Our final question will be follow-up question from Tom Cholnoky with Goldman Sachs.

Thank you.

I guess I'm the both ends of the sandwich.

[Laughing] But just to get back on the D&O for a second.

Can you give us some idea, Joe - I guess two questions.

One is just in terms of the types of programs that you are attaching on - the primary guys have been also a lot more stringent, in other words are they trying - are they writing just side A coverage or are you also covering side A, B and C?

That's the first question.

And and the second question I guess is so far, and I know we are still early in the reporting season, but everybody seems to deny they have huge exposures to D&O.

If it turns out you are correct and others are correct, who has all this exposure?

Well, you know, I think it's first of all, unclear, just how much D&O exposure there will be, to begin with.

I do believe it's true, at least with regard to the big banks, what you have been hearing from some others, which is if there is a claim, it will be mainly self-insured.

The banks will pay for it themselves, probably because they just bought side A.

Having said that, you know, this exposure goes beyond the big banks.

It goes to insurance companies, it goes to smaller banks, seems to be reaching overseas.

And clearly, some of those companies may have D&O that gets hit that they didn't self-insure.

So that becomes less clear.

And there may be some E&O claims as well, clearly, that get hit.

So we do expect some losses to come to the marketplace.

But I know you have heard from some of the major writers of D&O, and we are really a piker compared to those guys with regard to this issue.

We really had ratcheted down; as I said, it is less than 5% of our worldwide book.

We really have a couple of major accounts for the last couple of years, and so we've had a good dialogue with them, and they are feeling as if it's not a big deal for them, so if that's the case, it won't be a big deal for us.

But have having said all of that Tom, you know the story; nobody can tell you exactly what's going to shake out of this in the next year or two.

So there is an element of let's wait and see.

But at this stage of the game, given what we have put up in specific reserves, what we have in kind of unspecific reserves, you know, we feel like it's going to be fine.

Okay.

I just had to ask the question.

I understand.

All right.

Thank you.

I'll sign off.

We will thank you for joining us on the call.

We realize this is a little bit longer than usual, but it seems to be unusual times with some unusual things to talk about.

But thank you for joining us.

Ladies and gentlemen, that does conclude today's teleconference.

We do appreciate your participation.

Everyone have a great day.