Fednat Holding Co (FNHC) 2008 Q3 法說會逐字稿

Good day, and welcome, everyone, to the 21st Century Holding Company Third Quarter Earnings Results Conference Call. As a reminder, this call is being recorded.

Statements in this conference call or in documents incorporated by reference that are not historical fact are forward-looking statements. Forward-looking statements are subject to certain risk and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting, the generality of foregoing words such as may, will, expect, believe, anticipate, intend, could, would, estimate, or continue, or the other negative other variations thereof or comparable terminology are intended to identify forward-looking statements.

The risk and uncertainties include, but are not limited to, the risks and uncertainties described by conference call or from time to time in our filings with the SEC. Furthermore, the unaudited consolidation statements of 21st Century Holding Company for the quarter ended September 30, 2008 have been prepared in accordance with Generally Accepted Accounting Principles for the interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. These financial statements do not include all information and notes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2007.

With us today from the Company is the Chief Executive Officer, Mr. Michael Braun, and the Chief Financial Officer, Mr. Peter Prygelski.

At this time for opening remarks, I would like to turn the call over to Mr. Prygelski. Please go ahead, sir.

Thanks, Operator.

Thanks, everybody, for attending the call. I wanted to start off by just highlighting a couple financial pieces that were in the press release that went out a couple hours ago.

Obviously, for the three months ended September 30, we had a loss of approximately $1.5 million, or $0.19 per share. Excluding the investment loss, we would've earned $0.13 per share.

For the nine months ended September 30, we have a gain of $295,000, or about $0.04 per share. Excluding the investment losses for the year, we'd be showing a gain of $0.87 per share.

Obviously, these numbers are disappointing. We can -- I attribute them to three factors, the first being the extraordinary events affecting the financial markets, which has affected investment performance of all insurance companies to the point that the insurance industry as a whole has been forced to write down investments to the point where the industry's total statutory capital levels has fallen about 4%; the second reason being the increased competition in the state of Florida for the property business; and the third reason is the decline in the general housing market has had some effect on our general liability lines. I think Mike's going to go into why-- or more detail on two and three.

That's all I had to say for now until we get to the questions, but I'm going to turn it over to Mike.

Yes, this is Mike Braun, and I appreciate everyone taking the time to call in today and listen to the results that we haven't discussed.

So the first thing I want to go over is just an update of where we are from the second quarter to the third quarter. We previously had put out that we were looking at doing a Citizens depopulation on single-family homes, which is [HO3s]. We anticipated that could've happened in the fourth quarter. Unfortunately, it looks like it's most likely going to happen in January, which has gotten pushed back a little bit. Do still anticipate that being approved. That's been submitted to the State, and like I say, we are waiting approval on that, and the goal is to have it assume policies in January.

The second thing is when we had spoke about the condo program, and once again, that's a new line that we're rolling out [mat]. Once again, we anticipate that will probably be in the first quarter, as well. There's a lot of variables on that where we're applying for the -- a new line of business -- rates, forms, things like that. So that's a bit more complicated, but that's -- we'd like to see that roll out, as well, in the first quarter.

And the third item is one we spoke of in the past call. With that, we're looking for a fronting for our liability, or Arbison line of business, and that is something that has been submitted with the state and unfortunately has not yet been approved, as well, but do anticipate that shortly.

In terms of the need for that product, that's really for Arbison to go in additional states where we do not have an A.M. Best product out there, so this will enable us to sell a product that serves us well and has done well in Florida but just to diverse it to other geographic areas.

That's the main thing that we're looking at in terms of the biggest products that we have for short-term premium. The long-term premium that we're looking at is we're continuing to look into having more well-rounded products associated with our Arbison, such as automobile-type products, commercial auto, things like that, inland marine. We're also pursuing the homeowners. We're looking at other states as well, and that would be primarily states that are prone to win, to enable us to maximize the premium associated with our reinsurance costs, which is, once again, primarily associated with wins.

So that's kind of an overview of where we're at right now, and now the other thing is auto. Auto has really tapered down quite a bit. We're also looking at -- with the launch of a commercial auto, looking at the possibility of launching our regular auto, firing that back up, as well. That's been something that we have not actively written in a few years, but as those numbers give us a lot more data, we know where we can be more successful with that. We're looking to possibly be launching that here in the next few months.

So those are just opening comments, and we'll be glad to take any questions that you may have. Operator, are you there?

Yes. (OPERATOR INSTRUCTIONS)

Richard West, Dutton Associates.

Question first on the security losses. With your equity portion down so low, 1%, and what we're looking for in a bond market, do you think that's over, and has it almost started a recovery since the end of September?

Richard, this is Pete. Are you talking about have the equities recovered or the bond market or --?

Either and or.

Well, right now, our current distribution, like we'd mentioned in the press release, is -- only 1% of our total investment pool is in equities and 57% in fixed income. I don't know, and I can't predict if we've hit the bottom of the equities market. I know that the make-up of our fixed-income portfolio is safe, a lot of government-backed securities -- Fannie, Freddie, Ginny Mae.

As far as the equity portion -- we mentioned this on the last call -- probably sometime late fourth quarter or early first quarter, we are turning the management of the investment portfolio over to professional money managers. I would imagine within the next six months we'll probably head back towards 10% in equities and 90% in fixed or maybe 7, 8%. I should say 6, 7% in equities; the rest in fixed and cash. So we feel pretty confident about that process, actually.

But to comment on the general conditions of the market, that's a tough one, but I do feel where we are now, we've reduced the likelihood of further write-downs the way our portfolio is structured now being 57% in fixed and 42% in cash. I don't think -- I think we're in a good position there.

Okay, one more. The comment on your homeowners' loss ratio up to 65% of-- I wasn't aware. Was it the recent storms or back to claims that are finally coming due?

Yes, what that is is two things. We did have Fay come through the state of Florida. That was about $0.5 million, and that's 100% net. Also, we had just the natural -- I think we reserved claims pretty high. We've got sufficient IBNR and things like that, and as our premium has contracted, I think that we're seeing a little bit of that, as well.

Our non-cat loss tends to run a lot lower than that, and you'll see year to date it shows a much more reasonable number on that of about 29%, and I think that's a fairly accurate number where-- I should say a lot lower towards the 28 than it would be at the 65. That's kind of an anomaly, I think.

Yes, I mean, Richard, the ratio looks out of whack only because in a given period, your denominator is the written -- written for that quarter divided by the losses for that quarter. With written dropping the way it has, the ratio looks out of whack.

Okay. And then State Farm was quoted in the request for about a 47% increase in premiums, and obviously, they're having problems. What is your intention in the raising of premiums?

In terms of our premium, our last adjustment was May and June of '08, May being new, June being renewal. Where we lowered rates, I think it was 11.4%. I'm anticipating that we'll have our next rate filing next May/June, and that's a tough to call to figure out where we're going to be. And what I mean by that is what's the cost of reinsurance going to do? The private market, as it stands, I would feel is fairly stable; however, when you take away, just as we have been impacted by investments, the big boys, the reinsurers sure have. So if you take away capacity, you're definitely going to have some change there in terms of pricing.

The other wildcard is the Florida hurricane cap on the FHCF. We buy a significant amount of reinsurance from them, and what that is is about 50 -- a little over 50% if you look at the aggregate for the year and about two-thirds for any one storm. And they're having problems, and what I mean by that is is that they've expanded their capacity.

This goes back to HB1A back in -- about two years now, and they've expanded their capacity, and their business plan is basically that they have cash on hand, but they could always bond to get additional monies. The market has frozen up, so that really is a problem. I'm anticipating that the FHCF is going to contract, and to be more specific, there's a second layer on there, and I don't know how technically you all want to hear, but basically, there's a traditional layer, there's TEACO, [TIKL], and [LAC] layers.

Last year, the state, Alex Sink, the CFO of the State, was concerned about that and wanted it contracted by about 3 billion. So I think there's going to be a contraction. That's reinsurance that we buy from the state at a very reasonable price or a low price that we cannot get that same coverage in the market.

So I think that's going to be really one of the turning points for the property market, and what I mean by that is I think we're very well situated to be able to write a lot more-- be able to write more business, profitable business, and that probably is going to put a lot of pressure on some people, some new entrants and some aggressive writers, that have been grabbing market share, where they're willing to take an underwriting loss and/or whatever they may be doing to expand their book.

So I do feel that we're well positioned if that happens. I don't know that that will happen, but we'll adjust our rates one way or the other. Either we'll reaffirm where they are, increase them, or decrease them, but I think that we're well positioned if the FHEF does contract.

Okay, thank you.

Thank you.

(OPERATOR INSTRUCTIONS)

[Richard Carlson], RCS Asset Management

Could you tell us what the pretax investment loss was in? You listed these bond categories. This was in the "other" category?

The pretax investment loss, we had -- this might not come to 100%, but I can go through it. They're not right in front of me, but we had a loss of approximately 500 -- this is a realized loss of $500,000 on Lehman bonds, which were triple-A rated about 10 minutes before they filed bankruptcy.

Sorry.

That's okay. We only had about three [traunches]. We had about $750,000' worth of those bonds. We were able to sell them for $0.29 on the dollar, so we recognized about a $500,000 loss there.

We also had a loss in AIG, which was a FAS 115 write-down. Our carrying cost for AIG was approximately $25. We wrote it down to $3. That was about $650,000, so that's pretty close to $1.1 million of the loss.

We had a small loss on Merrill Lynch, and finally, we have a bond fund in the [Black Rock] family, which we wrote down from an average price of about $17 to $8.30, and that should make up about the $3 million.

Okay, so the 5% you have in corporate, 6% in "other," you feel comfortable with in your bond portfolio?

Yes, yes.

Okay. Could you fill us in a little bit on what the Citizens Property Insurance Corporation initiative is going to do for the Company and how much money is involved in that; in other words, how much capital it's going to take?

Well, what you're looking at with Citizens -- this goes back once again about two years -- we're really -- we were able to be more aggressive in the market, and we've lost market share since then. We've lost it not only to Citizens, but we've also lost it to private small companies. There was a capital buildup program where for every dollar you bring in, they would match you. So there was $250 million, and $250 was matched, and so there's $500 million more, and there's some aggressive ratios you have to maintain.

So people are pressured. They have to write premium. In my opinion, they might have to write premium that they might not otherwise write. So there's two pieces to that. I think that some of those guys are getting their fill, and that may slow down in the future [as] more people continue to come to the market, but I think there's more money than there is talent. It's a tough market to operate in.

Citizens has had a piece of it. Their rates are supposed to be returning back to their insurer of last resort in about 15 months. That was originally January 1 of '09, and then they pushed that back to January 1, '10, where their rates are not going to be, I guess, artificially low at this point.

So those things are hurting us short-term, but I'm not sure if there was another piece of that that you're looking for me to answer.

No, I think that's it. Is your basic business right now, it's in run-off?

No, we're not running off the business, but what we're doing is there's more -- there's some very aggressive writers out there, and they're paying for policies upfront, and they're doing some things. But, also, like I say, Citizens tends to be lower in a lot -- and some territories, they're definitely lower. So we're looking at with this depop that we're referring to -- I'm sorry, Citizens' assumption, where we assume policies from Citizens, we're able to cherry-pick policies from the State. There's about 1.3 million policies there. So we're able to pick them based on primarily win. That's really what we're looking at is the win to load. And then when we take those policies, they're going to be at different rates than what we're currently at, and they're going to be basically Citizens. What we're applying for has not been approved yet, but we're approving for a Citizens rate less 2%.

So the question becomes can we take policies that we'd like at Citizens rate plus 2% on our forms and our underwriting and be profitable at it. So I think the answer is yes. But like I say, they both have contracted significantly. I anticipate in the short term that can give us a nice little bump. And then from there, like I say, I anticipate the market turning a bit, I guess, turning that we can -- that [are voluntary]. We're not running it off or running it down. We are writing voluntary. We're getting new business coming in all the time. But I've got to tell you, I see some of these policies that leave us that they go to other carriers, I don't know how they're writing it. The premiums are pretty low in some circumstances.

Are you only admitted in Florida right now?

There's two different companies. Federated National is only writing property in the state of Florida. We are looking at writing in other states. We have nothing to announce to that effect, but that's something that we are looking at.

And then the sister company of Federated is American Vehicle Insurance Company, which is the [Arbison] program, and that's in, I believe, it's 14 states right now, but it's primarily four states where we get premium from, and that's Florida, Texas, Louisiana, and Georgia. But we're looking to diversify both companies on a go-forward basis.

So you have a reasonably hard book here. It's sort of 10 bucks, and your stock's half of that. Is there any reason you're not buying your own shares back in?

Well, there's a long answer on that that Pete's going to answer, but let me just say you're absolutely right; our book is about $10, and the market's about $5, and I attribute a lot of that to -- it's a tough market right now, and I think that we've got disciplined underwriting. I really do. We're not following the herd. The herd's not always right, and I think that there's plenty of evidence out there. So we feel that we are doing well long-term, that our plan is a good plan in terms of how we're going to grow it and how we're going to protect the book. We've taken some hits, unfortunately, but I think a lot of companies have taken those hits. But Pete's got a better answer for you in terms of stock buyback.

We've kind of bantered this around for quite some time, and obviously, there's three ways we can use our excess cash, right? I mean we could buy back the stock, we could maintain the dividend, or we could use it for M&A purposes. We just feel that the best way to use our excess cash is to maintain the dividend and to utilize it for pursuing growth strategies.

Over the last, I'd say, two quarters, I've received several investor calls suggesting that a buyback would show confidence in the future of the Company; however, if we buy -- buying back the stock in this kind of bear market, you would see probably a short-term increase in the price of stock, and then I believe it would probably, till this market straightens out, fall back to the level we bought it at.

Buying it back is not like we're making an investment ourselves. It becomes only treasury stock, and then the distribution of the assets only go to the shareholders who sell while we're buying, so we just believe a fair way to distribute the income or the excess the Company makes is to give it to -- to pay it out in a dividend, and I think that paying it out in a dividend shows as much or if not more confidence by reaffirming our dividend policy.

So that's just -- I know some people disagree with me and, philosophically, I've had conversations with several investors regarding this, but just our philosophy is that we're going to continue to -- we're going to continue to maintain the dividend. We feel that that benefits all the shareholders, not just the ones selling when we're buying.

As far as the earnings-per-share argument that if we bought some back, we'd have less shares outstanding, that the EPS would float upward, the problem with that is our investors can't spend EPS. The investors can spend the dividend, and that's money in their pocket, whereas EPS is just a number. So that's just our philosophy, and I know a lot of people have different opinions, but--

No, I mean I agree with that in principle. The only thing I would say is that you have to view it, I think, as you're a dispassionate investor; you've stepped aside, and you're looking at your company as an investment, and here you're selling at half of book. Would you, in fact, buy your stock at half of book, and the answer is yes, then you as a corporation could turn around and buy at half of book and get the same return.

No, we wouldn't get the same return, though, because we would be -- I see what you're saying. If I personally bought the stock back, I would be benefiting from any price increase, but as a company, if we buy the stock back, it gets retired as treasury stock, and yes, we would save the $0.72 on the dividend per share we bought back. It's just that, like I said, in this current economy with our excess cash, there's basically two things we're trying to do with it -- reward all our shareholders by maintaining the dividend; secondly, with the -- after paying the dividend, we're looking to repaying some cash, to pursue some growth strategies, maybe some strategic partnerships, and finally, given the economy, it's not a bad thing to have some cash on hand.

No, it's not a bad thing to have cash on hand.

[Inaudible] the insurance company. And, again, that coupled with having no debt, I mean, like I said, there's just -- I know there's some people who will have a difference of opinion, but I mean that's --

I think you've thought about the issues. I mean return on investment, buying your stock back, is 14% just based on not paying the dividend, so you've got that immediate return every year. Plus, if you ever get your earnings back up, then you have that same thing. But buying back below book is going to raise your stated book value.

Yes.

So you've got a lot of issues going on. It's pretty nice to have, in a way, a stock selling below book and you've got a hard book like yours. I mean you could run some simulations and come up with some interesting numbers, I think.

Right.

But I appreciate your comments on the dividend.

Yes, it's not a decision we've come to lightly. Trust me, we've bantered it around for quite some time, and we'll continue to revisit it.

All right. Thank you very much.

Thank you.

[David Mudabasi], Private Investor.

My question goes to anybody, Mr. Braun or the other guy. I forgot his name. I'm calling from Canada [inaudible]. And my question is I was reading the annual report of last year, and it says these two companies are subsidiaries, Federated National and American Vehicle, they were rated by AM Best Company but then it was dropped and rated by Demotech. I was wondering like why that took place, and are you thinking in the near future you're going to go back to AM Best?

Yes, where that came from, we did have an AM Best rating, and when the storms of 2004 came through Florida is when we had conversations with them, and we eventually went through from AM Best.

In our property market in the state of Florida, we do have a Demotech rating, and that's sufficient to sell our product. I think that's sufficient to just sell the product actually in more and more states from a property perspective.

Now, in terms of our Arbison program, as we expand that into other states, we're currently selling, like I said, in 14 states that the AM Best-- I'm sorry, the Demotech, we have been able to sell that product. But we also feel that really if we want to expand it, if we want that to grow, that we do need an AM Best-type, a fronting arrangement. And let me explain what I mean by that is the -- what we'll do is basically is we're in the process of doing is looking to have someone that we're writing on their paper, an AM Best, a paper, and then what we do is we come behind and we'll reinsure it. So we're taking 100% of the risk, and we think that's the best way for us to grow that line. The cost associated with being AM Best, we feel, is really prohibitive at this point, and it's not worth the cost for us; better off, a way of doing it is to have this fronting arrangement, which we're working on.

Okay, thank you.

Thank you.

(OPERATOR INSTRUCTIONS)

[Robert Sterling], National Growth Fund.

Gentlemen, when you do the depopulation with Citizens in January, I think you said, what's that going to do to your top line?

Well, it could have a significant, positive impact, and what I mean by that is depending on the policy count that we take and the amount of premium, basically what we do is we assume the unearned premium from the state, so it could have a material impact.

In the last press release, we said that between the two different lines, it may be as high as $45 million. When you look at what that means dividend by four quarters, I mean that's a significant impact, especially when you look at what we're writing per quarter right now. So the -- that would be in the in-force premium that we're -- the depopping. We would assume the unearned premium and then basically renew it on our own paper.

So if the January depop goes as planned, if we're approved and we do it, it could be, like I say, best-case scenario, really for the residential, our goal is to have this up as high as $30 million and the condo program would come at a later date, not in January. So we could theoretically add as much as $30 million of in-force premium to our book of business, which would have a big impact on our top line.

And that would be in the first quarter?

Yes, but basically, yes, it would be in the first quarter, but then we have to earn it out. So there would have to be -- earned out over how unearned premium is. Just on a basic level, it would be earned out over the life of the policy.

Okay, and the--

Just to add to that, the cash flow into the businesses would be immediate, and that money would start to earn investment income immediately, and there's certain fees we would get from that that we would earn immediately, and then a chunk of the premium, though. The premium is the piece that's going to be earned one-twelfth, basically one-twelfth.

Okay, and you've already identified those policies, and you've put them in for approval with the state?

Yes, we have put in our approval to the state, and it's working its way through. We've had different conversations throughout. We were hopeful that it was going to be in the fourth quarter, but I'm anticipating January. Once again, it's not approved until it's approved, but, yes, have -- we have, we've looked at the policies.

Primarily, like I said earlier, it's based on the win, the load, the reinsurance modeling, and then we're also competing with other companies that may be interested in those policies. The agent can opt out and the insurer can opt out. So you never really know exactly what you're going to get until you get it.

But we've identified policies in the 20,000 range. I'm not saying that's what we're going to get. It may be less than that. So if you look at -- it may be 10,000. It could be -- so if you say 10,000 and the average premium is 1,500, that could be 15 million of premium. So let's say the unearned premium might be half of that, so theoretically, could get 7.5 million immediate cash upfront, and then as these renewals circulate through, we would eventually get that book up to the 15 million where we have cash on hand and continuously earn out the unearned premium on a go-forward basis.

Okay. And the selection process, was it brought to you by managing general agents, or did you run a computer program and say, "These are the ones we want to bid on," or how did that work?

Well, we have our own [MJ], as well. We write this product direct, but we also have a reinsurance intermediary, which is [Benfield], and they know the business very well. There's only a couple of people really that are in it in terms of reinsurance brokers for Florida, and I think Benfield does a great job with their program. It's a DPO, a dynamic portfolio optimization, where we look at different policies and how it mixes in with our current ones. So I know we try to take those that would be beneficial to our reinsurance costs.

Okay. The last conference call that your former chairman was on, he said that you were getting registered in California and that California would eventually be more important than all the other states that you were in. How are you doing in California?

Unfortunately, California has not been strong, and we went in there on a non-admitted basis, and there's some concerns that we wound up -- we learned pretty quick, though, we really did not be -- we are not as aggressive as we could've been in California. I don't anticipate California being a hot growth state, but we do have it out there and -- but it's not what was originally anticipated. I know Ted had mentioned that in the past, but we're not seeing that, that California's going to be as strong as he originally anticipated.

Do any of Ted Lawson's relatives, either blood or in-laws, work for the Company at this point?

Yes. Yes, they do. And I can tell you in terms of the Company, we have about 100 employees, and every employee that does work here contributes to the well being of the Company. We don't employ anyone that's not producing, so I think that be where you might be leading with that question.

Well, I saw on the Yahoo message board it said that you were paying out $1 million in salaries to people that showed up a few hours a month.

Well, I can address that from an expense standpoint. You know, you can't believe everything that you see out there, and I don't know who writes those things, but we -- trust me, we don't have any employees that -- first of all, we don't have any employees that are working five hours a week, and certainly, we're not paying out salaries of $1 million to anybody, so that's just --

If you look on our annual report, you'll see people that are related to Ted and what their salaries are.

Right.

That was put out -- the proxy, that was put out, I believe, in June or July. So that's public information. Everyone we have on board, absolutely, I think someone -- you know, on the message board, you don't know what people are putting out there and why they're putting it out there, but rest assured, absolutely everyone who comes -- is employed by this Company, whether they're related to Ted or not or -- come in and put in a full day for the benefit of our shareholders.

Yes, and if you look at the proxy last year, I mean the two -- Ted and Michelle made up a majority of that salary. They're no longer here, and next year's proxy will reflect that they're not here any longer, so -- but if you do look at the proxy and minus out Ted and Michelle, you'll see it's nowhere $1 million.

Okay. Now, in terms of the mantra that everybody is saying nowadays, including us, by the way, "increasing shareholder value," you're going to continue the dividend, which I think is good. You have the stock repurchase program on hold for now, and that's a decision you've thought about and made, as the gentleman was on the call before talked about. What are you doing exactly in the merger and acquisition area?

Well, there's always opportunities out there, and we don't have anything specific that we can talk about. We're always looking for opportunities that can improve our operations. But there's nothing out there that we can speak of specifically. But once again, when he was talking about the dividend -- I'm sorry the stock buyback, the other caller, it made me think of GE. GE was probably one of the most admired companies not only in our country but the world, and they did a buyback and then subsequently issued shares for $0.50 on the dollar, roughly. So there's a lot to be said for keeping the cash in house, and then like Pete said, we'd like to reward every shareholder, as opposed to those that are just willing to sell to us through a stock buyback. And that dividend going to everybody, we feel very good about that. As we indicated on the last call, we don't see a problem with the dividend. Obviously, that's something that the Board votes on every quarter, but we have -- I have no reason to believe that that will change in the near future, and that's something that's important to us.

Have any other companies approached you about acquiring you?

In terms of M&A, there's always opportunities out there, and we don't have anything specific to talk about on that. But we're -- like I say, we feel that what -- our plan of action is solid, and I think that you've got a lot of people that enter the market, and there's some people perhaps making a quick buck. I think our discipline will show in the long run, and we have a plan with some -- what we think that will generate in terms of premium, in terms of earning, things along those line. We're very comfortable where we are. Unfortunately, a lot of people -- there's a lot of pressure on it now because of where we are in that plan, but I think we're heading in the right direction.

Okay, thank you.

Thank you.

And that does conclude our question-and-answer session. I'd now like to turn the call back over to Mr. Braun for any additional or closing remarks.

I just want to thank everyone once again for being on the call with us. It is -- we obviously have had some challenges here, we think the write-downs are behind us, and I think that that's something that's not only affected our company but most companies not only in the insurance industry but everywhere.

In terms of our business plan, we've discussed that. We're anticipating some growth here in the future. That's on the short term by expanding out into the condo line that we have filed with the state, as well as doing a depopulation of single-family homes from the state and also looking to finalize our arrangement through the state for a [inaudible] arrangement. We think these things are good, in the best interest of our shareholders, and we feel good about that. There is some -- there's pressure in the market right now, and it's impacted us, but once again, we think that our plan is solid.

So thank you very much for taking the time to call in and listen.

And that does conclude today's conference. We do appreciate your participation. You may disconnect at this time.