Fednat Holding Co (FNHC) 2012 Q2 法說會逐字稿

Good afternoon and welcome to 21st Century Holding Company's second-quarter 2012 financial results conference call. My name is Sayid and I will be your operator today.

Please note that today's call is being recorded. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

Statements in this conference call that are not historical fact are forward-looking statements without limiting the generality of the foregoing words such as may, will, expect, believe, anticipate, intend, would, could, estimate, or continue, or the negative or other variations thereof comparable terminology are intended to identify forward-looking statements. The matters discussed on this call that are forward-looking statements are based on current management expectations involving risk and uncertainties that may result in these expectations not being realized.

Actual events, outcomes, and results may differ materially from what is expressed or forecasted in forward-looking statements made on this call due to numerous risks and uncertainties including, but not limited to, the risk and uncertainties described in this conference call, our press release issued today, and other filings made by the Company with the SEC from time to time. Forward-looking statements made during this presentation speak only as of the date of which they are made and 21st Century Holding Company specifically disclaims any obligation to update or revise any forward-looking statements to reflect new information, future events, or circumstances or otherwise.

Now at this time I would like to turn the conference over to Mr. Michael Braun, Chief Executive Officer and President of 21st Century Holding Company. Please go ahead, sir.

Good afternoon and thank you for joining us to discuss 21st Century Holding Company's second-quarter 2012 financial results. I am joined on the call by Pete Prygelski, our Chief Financial Officer.

Our financial results for the quarter can be found in our earnings press release. I will go over some brief highlights from the quarter and then Pete and I will open up the line for questions.

Second-quarter net income improved to $1.4 million, or $0.18 per share, for the second quarter 2012 compared with $1.1 million, or $0.13 per share, for the first quarter 2012 and a net loss of $800,000, or $0.10 per share, in the second quarter of 2011. Net income for the 2012 six-month period improved to $0.31 per share compared with a net loss of $0.35 per share in the same six-month period last year. Book value increased to $7.89 per share at June 30, 2012, compared with $7.61 per share at March 31, 2012, and $7.05 per share at June 30, 2011.

Gross written premiums increased by $5.1 million, or 18.1%, compared with the same three-month period last year. Net premiums earned increased by $3 million, or 26%, compared with the same three-month period last year.

Homeowners policy count has grown from 43,793 at the start of 2012 to 52,908 at June 30, 2012, or 20.8%. Our continued focus on writing sustainable quality business and controlling expenses has led to another profitable quarter. The growth in our policy count, gross written premium, and net earned premiums are notable after tightly controlling our book of business over the prior two years. While we have taken a prudent path towards growth, we feel these decisions have set the course for future success.

With that we are glad to open up the call to your questions.

(Operator Instructions) Casey Alexander, Gilford Securities.

I have a couple questions. One, was there a single event on the net realized loss for the quarter, the investment loss?

Casey, this is Pete Prygelski. What specific number are you looking at?

The $218,000 net realized investment loss for the quarter.

No, there was no single one event. I don't know -- you have been on the call in a while but we have outsourced a lot of the equity. That would be all equities, the $200,000 loss. We have outsourced the management of our equity portfolio to three different equity managers in three different asset classes and that was just normal selling on their part.

Okay, that is fine. Secondly, I'm a little curious about the minus 44% loss ratio in the commercial general liability business. Was there like a clawback of a previous claim that was made, or how did that come about?

I will answer that one too, Casey. Basically what we did in the second quarter is we looked at our total IBNR for all lines. CGL had been performing better than expected.

We've reallocated some of our incurred, but not reported, reserves from CGL over to property. So you could see property went up 5% and CGL, which didn't have much earned premium, went down dramatically because it was almost moving $2 million to $3 million over to property and removing it from CGL. So it is probably more helpful to look at it on the total basis of all lines combined.

But that money wasn't supposed to be a clawback, so you are not seeing that $2 million or $3 million that was taken out of CGL purely reflected in the earnings because it was almost -- we took it from CGL and moved it over to property.

Casey, this is Mike, I will give you some more color on that. In the past years ago we used to sell our general liability through general agents and that has led to in the past higher loss ratios. Bringing that back in house has dramatically lowered loss in LAE on that program and with time you saw the ultimates of that come down.

I would anticipate that you might see in the mid to upper 50%s on an ongoing basis on that program.

Okay, all right. That explains it. Great, thank you.

Thank you.

William Meyers, Miller Asset Management.

Congratulations on the quarter and the continuing good trend. You have a lot of cash at this point and you have been in the black for a few quarters now, so I can't say anything to criticize. But I was hoping you could give me some insight as to -- since we are in the wind season what does happen, what are the scenarios if there is a hurricane that hits Florida just in broad strokes?

Are we looking at possibly losing a quarter's worth of earnings? Are we looking at -- what would be, in the best general terms that you can describe, the immediate and long-term financial results of actually being hit by a hurricane? Hopefully, that won't happen.

Sure. Bill, in that regard, we have got some experience in terms of handling hurricanes. What we have is on our reinsurance program is an $8 million retention. Just real rough math, $8 million after tax let's say it is around $5 million.

The capital in our insurance company is approximately, statutory surplus is approximately $46 million. So taking an event with that full retention would bring us to $41 million. We have ample capacity to continue our book of business at that point.

If there was a second event and we had another $5 million event, after-tax based on the $8 million retention, you could argue that perhaps the surplus is at $36 million. Once again that is more than adequate to support our existing book of business.

In the most recent quarter a storm did come through and it was pretty minor, but you are talking that storm is probably around the $400,000 range. So we have cover up and to approximately $233 million.

In terms of $233 million, all the storms that we have been through over the years and the big ones at -- the one that predates us as a company, we have run those through our models and really none of them pierce $100 million. So here we are with about approximately $233 million of cover and the prior storms all the way back in 2004 and 2005 you will see that we paid out a total of over $350 million of cat claims. So that is why we buy a lot of reinsurance and that is why it is critical that we have good reinsurance partners. So we believe we are prepared for that.

Okay. So let me just repeat that back to you in my terms. So because of the reinsurance, in effect when you are booking profits you have kind of already have -- by paying reinsurance you have paid most of the expense of any possible storms. So the profits that you book in any given quarter are solid and in effect you have really prepaid for any possible storm damage; that is the idea here?

Yes, what we have is we have two different reinsurance programs that we have in place. We have it through the private market and through the state, which is the FHCF. But let's just assume for simple math it is $40 million. So overly simplistic you can say that we are expensing $10 million a quarter, so any loss above our retention really would not hit us providing we have the reinsurance recovery.

Well, that is reassuring. I'm happy to hear that answer and hopefully your good results will continue. Thank you so much.

Thank you.

Doug Ruth, Lenox Financial.

Congratulations on a very good quarter. Could you talk to us about your book of business and why it is better now than it has been in the past?

It is significantly improved over the last two, three, four years. In terms of what we do with the CGL, I spoke on that briefly a few minutes ago. Bringing that underwriting in house has made the book a much better quality book of business.

It is a smaller book than it was five years ago, but our focus is not on top-line gross written, our focus is on the bottom-line net earnings. So that book has improved significantly over the years with good underwriting.

The other book of business, the much larger book of business that we have is Florida property. I would say that our analytics on Florida property is very good and our underwriting is very good and I think our claims handling is very good. So not only have we diversified our business throughout the state, approximately 24% of our business is in the tri-counties, which is in the South Florida area.

The book continues to perform well. We have got very good agents all across the state that continue to give us quality business. I think we have very good programs in place from inspection of properties upon underwriting, the modeling of it. So it is a quality book of business that we think is sustainable in the long run to generate what it needs to do.

That sounds terrific. Can we talk a little bit about what the Company and the Board are thinking about as far as a stock buyback? The stock is still trading at a significant discount to its equity. And then also either a stock buyback or a dividend; working with a lot of retired people who could really use dividends.

And, Doug, that is a great question. We clearly know the desire for a dividend and we know that value.

Part of our hesitation has been when we merged the two carriers about a year, year-and-a-half ago, I think it was January of 2011, one of the things that we agreed to do was not have a dividend until we have had two consecutive quarters of an underwriting profit. Well, here we are four quarters out with an underwriting profit.

So while we are legally allowed in that regard to have that dividend, one of the things is to -- I will be visiting with the OIR over the next few months to have a conversation with them just to see, just to confirm that they are in agreement of where we are at. The Board clearly understands the value of the dividend and I think that having four quarters of not only a profit but an underwriting profit lent to that argument. So I am confident that the Board will review that on a go-forward basis and we want to return value to our shareholders.

That would be very beneficial. Could you talk a little bit more about what is happening with the name change and what the benefits would be for the policyholders and the shareholders?

Yes, we have the proxy out there to all of our shareholders. 21st Century Holding Company is not a name that we really use and I think it is really, I want to say, irrelevant in terms of -- what we do with our policyholders and our agents is we operate under the name Federated National. So I think it only makes sense to change the name from 21st Century Holding Company to Federated National Holding Company, which is much more consistent with our insurance company, Federated National Insurance Company. I think it goes a long way.

So that proxy is out there and people are voting on that, and I encourage people to support that before our September 11 shareholder meeting.

Okay. And my last question is if you could just talk a little bit about what is happening with Citizens.

Sure. Citizens has a new president and he has repeatedly stated that they are looking to downsize it. They are at approximately 1.5 million policies. I think their underwriting has gotten significantly tougher over the last year is what I hear in the marketplace from the agents. So I am confident they don't want to grow and I am as confident that they want to shrink.

I personally believe Citizens should be in the ballpark of maybe 250,000 to 500,000 policies. There is clearly certain risks that are non-insurable for any number of reasons.

So as you see from our policy count, we have grown significantly in the first six months of this year and as we sit here in the first week of August that pace is not slowing down. So I think that the private market there is definitely demand out there.

And, as I have said in the past, it is not difficult to write business in Florida. There is plenty of business to write. The trick is writing it profitably year after year.

We bit the bullet in the last two years, in 2010 and 2011, and did a lot of non-renewals and that really hampered us short term. However, I absolutely believe it was the right thing to do and I think you are going to see the positive effects from that on a go-forward basis.

We are grateful that you are focusing on profitability instead of just pure policy count. Thank you again. It was a beautiful report.

Thank you, Doug.

[David Spear], [Mineral Capital].

You mentioned on the previous question, I believe it was Doug, that you're meeting with the OIR about a dividend. I think you have been profitable now four quarters in a row; do you actually need their permission?

We do not need their permission. When we merged the two companies in January of 2011 we agreed that no dividend would be paid until we had two consecutive quarters of an underwriting profit.

I am the one that is requesting the meeting. I think the merger was a fantastic success and I don't think that anyone would disagree with us, including the OIR, but I think it is prudent to share our plans with the OIR and make sure that they are in agreement. I don't anticipate a problem from that, but I think it is the right thing to do.

Out of curiosity, this dividend, do you plan on eventually going forward being in a situation where, after the hurricane season ends, you are going to send out a special dividend or is this plan a quarterly dividend, something like HCAI puts out? Just wondering what type of plan is anticipated.

Sure. Well, I think the most value that people see is a consistent dividend that they can count on quarter to quarter, and we clearly understand that. I think if we -- there is opportunities where you can form a captive. Basically, a captive you can take additional risk in your retention and that can generate an additional special one-time dividend. And you may see that in the marketplace with some of our competitors.

So it is additional risk that you can take and, if it is storm free, it enables you to do a special dividend. That is something that we may look at in the future, but that is a separate item. I think that there is a lot of value to be said for a consistent dividend on a quarter-to-quarter basis.

Definitely, definitely agree. In terms of the rates, do you see rates increasing from here on as they have in the past couple of years, or do you think they are about to stabilize at this point?

Well, I think that the shock of the mitigation credits and the shock of the rollback of a lot of things that we had to do in years past has mostly passed. We had some significant rate increases of 19% and 20%. I don't believe you are going to see us with -- barring something unusual, I don't think you're going to see us with double-digit increases like that.

Right now we have a rate pending of approximately 9%. I think that is going to be approved; I don't know at what amount. I would say in the 5% to 10% range it may be approved, that is subject to the regulatory approval.

Now how does that compare with the industry? I think that our rates are very competitive. You may see in the news that some of the big national carriers are pushing for some pretty significant rate increases. You're seeing Citizens has just recently put in a rate increase of approximately 8.5%. They are on what is called a glide path and that varies by territory, but no single territory of theirs can go up by more than 10%.

So I think the shock of what happened in the marketplace is over where you saw significant rate increases. We had about a 50% rate increase back in 2006 which led to an overreaction of the expansion of the FHCF and perhaps mitigation credits, so then our rates went down sharply. Then they phased out the FHCF and the challenges of mitigation credits are fully realized and our rates go back up.

That volatility was not helpful to anyone. I think that the volatility is no longer there and that you are going to see much more stable rate structure.

Great, because that is really what my question was gearing towards in terms of the fact are we going to see a normalization in the environment? Because if so I think that is a big catalyst of moving your stock above book value, whereas right now you are trading at a discount to book value and I think it just has entirely to do with just the uncertainty with the industry.

I think right now in the current times there seems to be, from an onlooker standpoint, a lot of certainty in the business. I was just wondering, going forward do you see that as being the case, if this is a normalized environment and a profitable environment right now?

Sure. I am very encouraged where we are at. I think not only is the environment much better than it was back three, four years ago from a political perspective, but also financially.

We have great reinsurers on our program. They are all solid and we buy from FHCF, which is more liquid than they have ever been. I think it is much more standard of a normal environment, but we remain committed and focused on writing profitable business.

I have no problem telling you that we could write a lot more business than we are writing. We reject -- the majority of business that comes in does not get written because of our underwriting process. So, regardless of what the future may hold, we are confident that we need to underwrite soundly policy by policy.

You mentioned Citizens, I believe. We don't see doing [de-pop] with Citizens. The quality of writing business individually one at a time, underwriting that, and visiting the property I think there is a lot to be said for that.

Last one and I'm going to get off, but is there a timetable when we can see an announcement regarding the meeting with OIR or a dividend that we can reasonably expect here?

Well, I don't anticipate putting out a press release after meeting with the OIR. Once again, there is not a problem. This is just a courtesy meeting that I am requesting of the OIR and I would anticipate that that is going to be really -- the hurricane season here we go into September, October, November -- in that ballpark.

But I can assure you that we are well aware of the desire for a dividend. Immediately, if the Board makes a decision, we will get information out to that effect, but don't want to mislead you and tell you that this is going be something that is going to be coming out that is certain. It is not. It is going to be a courtesy meeting that we have with the OIR and then we, as a Board, are going to discuss it. But once that decision is made that we will make that available public immediately.

Okay, great. I appreciate it, thanks. Hope for good news then. Have a good one.

Thank you.

[Samir Khare], Capital Returns Management.

I apologize if you guys covered this. I had some technical difficulties earlier and had to dial-in again. But I was hoping you can go over some of the rate increases you guys have been able to get to date and any pending rate increases or rate changes rather that you have in the pipeline?

Sure. I'm going to be brief on that, Samir, because I did speak a little bit more at length. But, basically, we do have an 8.5%, about 9% rate filing pending with the OIR. I anticipate that that should get approved in the fall here. I can't say for certain, obviously.

But the shock of the big rate increases I think that is something that is behind us, not only for us as a carrier but the industry as well.

Okay. Can you also talk about some of the cost-cutting initiatives that you have in place?

I think that we have a great infrastructure in place that we can very easily grow from and write more business on. I think that Pete and I, the whole management team and the Board, prides ourselves on our operations. I think we do a very good job, a quality job with our underwriting, with everything that we do for our insurers and for our agents; our claims handling.

So I think that really the objective is to maintain, to be diligent on our expenses at all times. But we really see the opportunity we; clearly have that in our culture here where we contain expenses. What we see is a great opportunity for us to grow and just seeing significant increases in our growth, not only in this quarter but year to date.

Right now, as we sit here in the first week of August, that is staying pretty steady so I think that is where you are going to see an upside. As we grow the infrastructure doesn't grow at the same rate. A lot of those fixed expenses are -- the most expensive policies are the first ones we write. Adding additional ones is not really the way we control -- variable expenses are much less costly.

Okay, thank you.

Thank you.

Ron Bobman, Capital Returns.

I had a couple of sort of assorted questions. Commission income, could you remind me, is that like sort of reinsurance brokerage commission income or something else?

No, we have an in-house agency that is very small where we have -- it is called Insure-Link -- where we do write third-party products. Then also we have our MGA where we write third-party products as well, so I believe that is what you are seeing.

Okay, okay. Then I had a question, if I heard Michael correctly in the prepared remarks, I think Debbie was the named storm and you mentioned $400,000. Obviously relatively small, very small.

But if I strip out the $400,000 of losses from that cat, if you call it that, your losses are, I don't know, $6.7 million or so. And I get a loss ratio of still pretty high, like over 45% for an attritional loss ratio. Is there something else that is sort of inflating that loss ratio again when you --?

Let me answer that, Ron. I think if you are comparing us to other Florida property companies you have to know that we have a slightly different mix. So I would say that our property, our homeowners property, I think you're looking at from a gross out -- and let's say gross loss in LAE high 20%s, perhaps a 28%. However, after deducting the reinsurance -- well, let's just say for easy math reinsurance is 50%, so really you could double that up to, let's say, 56%, around those lines.

That is not unusual in the industry. What we have that is different is we have our liability line. Our liability line is not heavy on reinsurance where we are giving up 50% of our premium, so you are seeing that our liability line, let's just say that it is going to run 55% to 60%, that will pull up the average on our (multiple speakers) LAE.

Thanks a lot for the help on the mix. I did not appreciate that.

Also, just on a much smaller scale, we do have automobile as well, private passenger and commercial. And, once again, that is not heavy cat, excess of loss, driven.

So if I look at the quarterly gross written premiums of $33 million what is the approximate split of those three lines -- homeowners, GL, and auto?

In terms of our in-force, homeowners you are talking north of $90 million, GL you are talking about $10 million. We have flood, which is under Allied, that is about $5 million right now. Auto you are looking at about $1 million, ballpark.

Okay, so your mix is slightly different. Then my last question, again, Michael, in answering another question talked about -- can you hear me okay? I think Michael mentioned $40 million of sort of private reinsurance and Florida cat fund reinsurance expense annually, $10 million a quarter.

The second quarter obviously still has the prior year's reinsurance program showing up as the $11.7 million. So has your reinsurance rate gone down, has the program structure changed that much that we're sort of going from a quarterly run rate of $11.7 million to $10 million?

Well, where we are at right now is in terms of the reinsurance it is fairly consistent. And I'm oversimplifying it when I say $40 million equals $10 million a quarter. To be more technical, Pete can go in much more detail on how he cedes off the reinsurance on a quarterly basis, but what we put out in our press release and our 8-K on our reinsurance program is that that comes in at $40.7 million.

So last year, I don't recall with the adjustment, it was pretty consistent with that. But we have other reinsurance as well because we do have reinsurance on our auto program, we do have it on our GL. We have some excess of loss where we cede off premiums for, let's just say, if it is a fire or it is a big liability claim, things like that.

This is Pete. We also -- what you're also seeing in that line is we write flood insurance and the flood insurance is all ceded off and then where we take -- is it a 5% commission on that?

Basically the profit on that is about 5% after we pay -- we have a TPA, which is NFS that handles that. Then also after we pay our retailers there is about $5 million. I think the flood book is around $4.8 million.

So the number you see there is not pure catastrophe reinsurance --

For homeowners, right, right.

-- there is other stuff in the actual number that you are seeing. When Mike threw out the $40 million that was specifically just for cat.

Got you. And is the ceded flood premium showing up, for example, in this second quarter $11.7 million? Is there a flood ceded --?

Yes.

Thanks, guys. Appreciate the help.

Casey Alexander, Gilford Securities.

Sorry, and most of my other questions you already got to, particularly I was going to ask if you were considering participating in any more depopulation events from Citizens.

But my other question is it does seem as though that some rationality has returned to the market after years of an irrational underwriting environment. As you know, when Citizens made it somewhat irrational some of the larger national competitors withdrew for all intents and purposes from the market. Have you seen any inkling of a return from the larger competitors to the market now that it is more rational?

You know, I have not seen anything to that effect and when you see that these big boys were in the news recently as they are trying to get rate. I can't speak for them, but I think that they have opportunities in 50 states and Florida can be a bit problematic from them is what they have said in the past. I have not seen anything saying that they are coming back to this marketplace, but what we are seeing is the majority of this market is by Florida domestics, companies like ourselves.

Right. Okay, great. Thank you.

Thank you.

[Brad Nelson], private investor.

Nice quarter and, more so, congrats on really over the last, whatever, two or three or even maybe a little bit more than that years turning the ship around. And also thanks for having these conference calls in both good and bad times even though you are not exactly a big company, so I appreciate that.

This is -- I apologize for my ignorance on this. The first caller I think was a Gilford analyst and you and him were discussing something regarding CGL and property lines. You don't have to explain that to me; I just want to confirm that whatever happened there was basically a wash effect and had no net effect on any bottom line, virtually no net effect on anything to do with the bottom line with CGL and (multiple speakers).

Brad, this is Pete. Exactly, it had no net effect on earnings because --

Okay, great.

Yes, we just removed it. We reduced (multiple speakers)

Guys, you don't have to explain; I will take more of a look at it but I don't expect you to give me a lesson in everything right now.

Anyway, that is it. So thanks a lot and congrats on the quarter.

Thank you very much.

Lee Matheson, Broadview Capital.

Good quarter. Just a quick question on the unpaid or, sorry, the loss expense in the quarter. How much of it was current period versus prior year development?

I would say that the losses actually paid -- the book that we have shown over the last I think now, Lee, 14, 15 months no development in prior years. Meaning that whatever was paid out was previously (multiple speakers)

Flat, okay.

Right. Previously reserved for, right.

And then the $400,000 of cat loss was in the quarter?

That is a ballpark.

That is a pretty good ballpark, actually.

Again regarding the reinsurance ceding on the homeowners program, just the back of the envelope is sort of $28 million of gross premium written and about $10 million ceded under the reinsurance program which is a much lower ratio than historic. Is that kind of where we should expect it?

I would say that you can anticipate us being in the low, perhaps, to the mid-40%s. There is a lot of variables in that, but it has taken a considerable amount of effort on our part, not only from an underwriting perspective but also with the rate adequacy that has moved through our book over the last two to three years.

It seems like it moves through painfully slow, how we had to earn out the premium, but I think that -- as we sit here today I don't see any volatility in the reinsurance market on a go-forward basis. Things could change, but I think that the Florida market is much more stable and I think the reinsurance market is much more stable.

Okay. So from pure operating standpoint, if we back out the $200,000 of realized losses and the $400,000, or thereabouts, of cat losses, we are talking pretax income almost in the $3 million range for the quarter?

I don't know. You just wiped off $600,000 -- $2 million -- I don't know, it is hard to annualize that. But as far as the cats, they come, they come, but you are always going to have -- with the realized investment gains or losses I mean that is going to fluctuate from quarter to quarter.

We are just trying to pull those out to get a sense of your operating to give you a more recurring number, I guess, so we stripped that out. It is obviously a very strong quarter.

Well, if you strip those out you are at $2 million.

Right, okay. Yes, yes, of net.

Net.

Yes, yes. Yes, $3 million pretax and $2 million of net, so we are really starting to see book value grow and obviously at gross premiums to tangible book of about $2 million you have got the ability to accelerate here so good to see.

In terms of taking OpEx, I think somebody asked previously but is there anything material to come out?

In the quarter there was no material impact on our financials, is that what you're asking?

Yes, just in terms of anything else you guys have to go in terms of pulling OpEx down.

No, I think that you are not seeing anything unusual in the quarter and I think you are seeing us -- our fixed expenses are fixed. As we continue to grow, and you can see we are growing, that those variable expenses are leading to much more profitable business.

Okay. And do guys -- I guess I could wait for the Q, but what was the average homeowners policy premium in the quarter?

You know, it has been relatively flat, which is a bit interesting, but over the last couple years it has been relatively flat at about $1,800. But there is a reason for that. Our average non-tri is $1,400 and our average tri-county is about $2,700.

But the reason why you are seeing that it has remained flat over the last two to three years has been our shift where you have seen perhaps 50% of our book in tri-county, now you are seeing we are at about 24% is tri-county. So it is really just a shift in the book.

Lee, I wanted to add something. As Mike said, and I think we said this two years ago almost when we were getting questions on why we were writing so few policies. We have gone from 43,700 to 52,900 and relatively without adding additional staff.

I mean when I say relatively, we might have added one or two to the headcount, but the factory is built and we can continue writing more policies while maintaining a fairly fixed headcount.

And to get the 24% tri-county on the 52-and-change that you reported we are talking sort of 12,700 tri-county policies, which is actually down 1,000 quarter over quarter. So you are still actively running that book down?

Well, we are not writing much business in tri-county and that is intentionally occurring. Then also we are growing non-tri, so I don't think you are going to see that. We are comfortable where we are at on tri-county.

Okay. Then what did you guys spend in the quarter on policy acquisition costs?

Hold on one second, I will tell you. We spent in the quarter approximately $3 million.

That was the amortization of it or that was the actual cash expense?

The cash I don't have. I can get you that; I don't have (multiple speakers)

You didn't really grow year over year the amortization of acquisition costs, which given the strength in the policy count I would expect you to have obviously greater cash costs in that regard this quarter.

Just a rough number for you, if we wrote $30 million in the quarter -- on our homeowners we are averaging at about 11%, so you could say it is about $3.3 million from a gross actual cash out the door. There is other variables on that though, because it depends on how the insured pays and things like.

Lee, if you want to talk about that off-line I can give you the exact numbers.

Sure. I will circle back with you tomorrow.

Okay.

Okay. Thanks, guys.

Thank you.

(Operator Instructions)

With that we will go ahead and wrap it up. It looks that we handled all the questions. We always enjoy getting the information out there; things are going well for us.

We are always available if any other questions come up. Our contact information is on the press release. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.