Kestrel Group Ltd (KG) 2009 Q2 法說會逐字稿

Welcome to the Maiden Holdings Limited second quarter 2009 earnings conference call. Just a quick reminder -- today's call is being recorded. Now I'd like to turn this over to our host, Mr. Hilly Gross, Vice President of Investor Relations. Mr. Gross, please go ahead, sir.

Thank you, and good afternoon. Welcome to the second quarter earnings conference call of Maiden Holdings Limited. My name is Hilly Gross. It is my very pleasurable assignment today to introduce to you Art Raschbaum, President and CEO of Maiden Holdings; and John Marshaleck, Chief Financial Officer of Maiden Holdings; and we are delighted to have with us as well today Chairman of the Board of Maiden Holdings, Mr. Barry Zyskind.

However, before I introduce these gentlemen who are with us today, I would by your leave read into the record a mandatory paragraph on forward-looking statements, since this afternoon's conference call will contain forward-looking statements which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the company's current expectations and beliefs concerning future developments and the potential effects on the company. There can be no assurance that actual developments will be those anticipated by the company.

Actual results may differ materially from those projected as a result of significant risks and uncertainties, including nonreceipt of the expected payments; changes in interest rates affecting the performance of financial markets on investment income and fair value of investment; development of claims and the effect on loss reserves; accuracy in projecting loss reserves; the impact of competition and pricing environments; changes in the demands for the company's products; the effect of general economic conditions; adverse state and federal legislation; regulations and regulatory investigations into industry practices; developments relating to existing agreements; heightened competition; changes in pricing environments; and changes in asset valuations. Additional information about these risks and uncertainties as well as others that may cause actual results to differ materially from those projected is contained in item 1A, Risk Factors on the company's annual statement on Form 10-K for the year ending December 31, 2008. The company undertakes no obligation to publicly update any forward-looking statements except as may be required by law.

Having disposed of the legal niceties, it is now my pleasure to introduce President and CEO of Maiden Holdings Limited, Mr. Art Raschbaum.

Thank you. Good afternoon and thank you for joining us. Today we would like to review second quarter 2009 results for Maiden Holdings. I'd like to start out by saying that we continue to make steady progress in implementing our differentiated strategy to become a premier regional and specialty company reinsurer focused on developing a growing portfolio of stable non catastrophe business. Client and prospect acceptance remains high and the Maiden/GMAC RE integration is complete. Highlights from the quarter include very strong growth in shareholders equity, continued improvement in investment earnings, underwriting results at near targeted levels, and revenue and earned premium at expected volumes.

Overall, we are pleased with the second quarter performance, and we remain focused on achieving our target revenue of $1.2 billion, earned premium of $950 million, and an underwriting combined ratio at or below 96%. These are the goals that we laid out earlier in the year. You may remember that last quarter we spoke of the significant level of cash on our balance sheet and our very careful efforts to deploy that cash into high quality investments. Of the roughly $450 million of cash held at the end of the first quarter, we made progress in that effort, with roughly $100 million of the quarter one balance now invested. Overall yield on fixed maturity investments on hand at June 30, 2009 is just under 5%.

We continue to cautiously deploy cash and we anticipate continued strengthening of Maiden run rate earnings and ROE in the coming quarters. While we remain confident that the run rate ROE on the business will achieve a 15% on a run rate basis, in addition to the cautious buildup of run rate investments earnings, our growth in book value of $95.6 million also raises the bar on our target.

That said we are not giving up on the goal. On the other hand we do believe that our cautious and deliberate approach to investing accumulated cash as has rewarded shareholders with continued book value growth. Most significantly, shareholders' equity grew by over $60 million to over $604 million in the quarter. That's an increase of turn 10.5% and reflects the increase in the market value of fixed maturities as well as continued contribution from earnings. The gain essentially we believe reflects the quality of Maiden's carefully developed asset portfolio. Importantly, these gains continue to hold as of today.

From an operating perspective underwriting results for the quarter are slightly above our 96% targeted combined ratio at 96.4%, reflecting the continued impact of the addition of the UBI unearned premium related to the AmTrust business. Now it's important to recognize that when UBI was acquired by AmTrust, Maiden chose to accept the unearned premium reserve related to that business separate and distinct from the business that we reinsure through the AmTrust quota share. That segment is running off at a higher loss ratio than initially expected. Alternatively, we continue to see strong overall performance across the balance of the AmTrust portfolio as well as the acquired GMAC RE portfolio. On a year to date basis, Maiden is achieving its targeted combined ratio of 96% -- actually 95.9% -- benefiting from continuing underwriting discipline.

Maiden is maintaining strong business development momentum with continued growth in active client relationships. Gross written premium for the quarter totaled $238.8 million. That's consistent with our expectation. As we discussed in the last quarter, our revenue written is not recognized on a straight line basis, reflecting seasonality of underwriting deal flow, and also reflecting the booking of reporting basis contracts such as proportional treaties that are booked on a reported basis rather than the accrual basis. As we mentioned in the last quarter, these accounts are booked when the statements are received from clients. The revenue written trend in our view is following historical patterns. We anticipate growth in the revenue levels in the coming quarters. Earned premium for the quarter of $223.8 million reflects an increase over first quarter 2009 earned premium, and at this point we expect the trend to continue in line with the growth in revenue.

Of course, no discussion about revenue would be complete without some commentary on rate levels and overall market conditions in the reinsurance sector. Absent the strengthening of property catastrophe pricing, which has been well reported on, it is a segment that we do not participate in, and for the most part we believe that market pricing still today remains relatively flat. While we continue to feel good about our pricing levels on the accounts that we found, we do not believe that the markets experiencing a broad pricing recovery. We also continue to believe, however, that surplus relief demand will continue to grow and we continue to see deal flow related to surplus relief needs. This is an area where we had some success in the year and we are prepared to respond to the needs of our regional and specialty insurance target client base.

The other significant operational occurrence this quarter was preparation for the activation of Maiden RE US, the US underwriting platforms for Maiden Holdings. This business is now being underwritten directly into Maiden RE as opposed to utilizing GMAC Insurance as a front. The transition period has been completed and Maiden will no longer require the fronting capacity of GMAC Insurance. Coincidentally, GMACI did suffer a rating downgrade during the quarter. The GMACI underwritten business continues to be fully collateralized today, ensuring the clients' balances remain protected. In addition, Maiden is working with a number of clients to transition outstanding liabilities directly from GMACI to Maiden. And the shifting of those liabilities has been relatively seamless, and should have no adverse economic impact to either our clients or our earnings.

From an overall earnings perspective, net income for the quarter totaled $16 million while operating earnings for the quarter are $14 million. In comparison to the first quarter, operating earnings and net income are literally flip-flopped, reflecting stronger investment gains in this quarter but more normalized under underwriting results, versus stronger underwriting results but impact of realized losses in first quarter. On a year to date basis, operating earnings and net income stands at $29.4 million, and again, while these earnings do not reflect the full run rate potential, they do reflect continued progress towards our key business metrics.

The bottom line is that we are performing well across all key metrics with the exception of lower than anticipated investment earnings. Our plan of course is to continue to focus on rectifying this in the coming quarters as we deploy more cash. And I would like to turn things over now to our Chief Financial Officer, John Marshaleck, who will provide a bit more detail on the financial results. John?

Thank you, Art, and good afternoon. I'd like to spend a few minutes reviewing some of the financial highlights of the second quarter of 2009. In some cases, I will be comparing the second quarter of 2009 results with the second quarter of 2008. It's important to note that the second quarter of 2008 did not include the business acquired in the GMAC RE acquisition. Obviously some significant changes have taken place in the company since the second quarter of 2008. Therefore, some of the comparisons I will be making will be between the first and second quarters of 2009.

Our net premium written for the quarter was $238.3 million. This compares to $171.3 million for the second quarter of 2008. However, included in the second quarter of 2008 net written premium amount was an assumption of an unearned premium portfolio of $82 million. Our net premium written increased significantly over 2008 even with the one time non-recurring portfolio transaction in 2008. The net earned premium for the quarter increased significantly from $77 million in the second quarter of 2008 to $224 million in the second quarter of 2009. This increase was a result of both the increase in the earned premium from the AmTrust contract as well as the GMAC RE business acquired in November 2008. The written premium for the first six months of 2009 was $575 million, up substantially from the $274 million for the first six months of 2008, and in line with our net premium written estimate for 2009. Our combined ratio for the second quarter was 96.4% and for the first six months of 2009 was 95.9%, again in line with our target of 96%.

Our net investment income was $15.1 million for the second quarter, up from $7.8 million in the second quarter of 2008. The $15.1 million compares to $14.3 million for the first quarter of 2009. The increase from the first quarter of 2009 reflects the continued investment of our cash and cash equivalent balances. However, we continue to hold a high level of cash at June 30, 2009.

Our net investment income from the first six months of 2009 was $29.4 million as compared to $15.4 million for the first six months of 2008. We did have $1.5 million of net realized investment gains in the quarter as compared to a net realized loss in the first quarter of 2009 of $1.9 million. We also had a foreign currency gain of $2.4 million in the second quarter of 2009.

Our income from operations for the quarter was $24.6 million, up from $13.8 million in 2008 and $21.9 million for the first quarter of 2009. This amount reflects the growing potential of our balance sheet as we continue to invest our cash balances.

Our net income for the second quarter was $16.3 million as compared to $13.8 million in the second quarter of 2008. Our net income for the first six months of 2009 was $29.5 million. The net income for the first six months of 2008 was $26.3 million. While our net income included targeted underwriting results, as we continue to invest our cash resources we expect to increase the net investment income component of our net income in the future quarters.

Operating earnings also increased from 2008. The operating earnings for the first six months of 2009 were $30.8 million as compared to $26.1 million in 2008. Earnings per share for the quarter was $0.23.

Our fixed maturity investments increased to $1.3 billion at 6/30/2009 from $1.1 billion at 12/31/2008. This amount will continue to increase as we deploy our cash conservatively and cautiously for the rest of 2009. As of June 30, 2009, our fixed income securities portfolio had an average duration of 4.42 years and an average yield of 4.81%.

The most significant change in our balance sheet from the first quarter of 2009 is the increase in our book value per share. At 3/31 2009, our book value per share was $7.79. At June 30, 2009, the book value per share increased to $8.61. This improvement was a result of an increase in the market value of our investment portfolio as well as our net income for the quarter and is net of our dividends paid. Our shareholders' equity at 6/30/2009 was $605 million, an increase of $95 million from 12/31/2008.

Overall, we are very pleased with our results for the quarter. Our underwriting results are on plan. Our investment income will continue to increase as we deploy our cash.

Thanks, John. I'd like to emphasize additionally that since the close of the quarter, we have actually invested an additional $200 million of cash to date. So we've made a fairly significant level of headway since the end of the quarter. For the remaining half of the year, our focus is on maintaining a disciplined underwriting approach, delivering significant value to our clients, maintaining a high quality balance sheet, and continuing to deploy cash, all with the objective of strengthening the earnings run rate. We are extremely grateful for the loyalty of our staff, our clients, and our business partners as we continue to build momentum. I'd like to turn it back to Hilly now.

Thank you. I'd like to thank both Art Raschbaum and John Marshaleck, who have indicated their willingness to entertain questions from those of you who have joined us today. So to facilitate your access to us, I would turn it back momentarily to Central Control, which will outline for you the process in which you can reach us.

(Operator Instructions). We go first to Bob Farnam with Keefe, Bruyette & Woods.

Good afternoon. Just a couple of questions. What have you been investing in recently? What type of securities have you found?

Actually, most recently particularly that $200 million amount that I mentioned a few moments ago, was specifically invested in Ginnie Mae security. Over the course of the previous month, it was really a balance of investment grade corporate and government issued or government backed securities.

What types of yields have you been finding there?

Well, I guess if you look at the total amount of -- we were certainly getting yields as high as 7% on a number of the corporates, as I've alluded to in the discussion. When you look at the total amount of outstanding in fixed instrument invested securities, we were just under 5% in terms of the aggregate yield. The Ginnie Maes are probably in the 4% to 4.5% range.

Can you -- just to remind us again I know you mentioned during the call about the seasonality of premium being earned. Can you go into more detail there what we should be expecting quarter over quarter?

I think that we've talked about before and I think we spent a little bit of time on the last call pointing out the way our premium comes on the books. At the end of the first quarter, what we typically see are, one, deposit premium accounts that are written during the year and we write those -- we book full year premium estimate and then we earn it over that twelve-month period. With respect to [reporting] based contracts like [golden shares] in excess of loss contracts, those we book as reported. And the way most of these accounts work, the first quarter accounts would really be starting to come through in the second quarter and beyond. So we start to see most of our written revenue that comes from these reporting based contracts building in the second and third quarter and even fourth quarters. John, if you want to add to that?

We've increased some of these reporting based contracts as well, so you'll see not only normal increase in the second quarter, but there has been some increases in that type of contract as well.

Okay. All right.

I think that there are certainly approaches where accruals are booked at the beginning of the year with rough estimates, but we think this really produces the most accurate sense of what's going on in terms of reporting. But it does create this -- you can't really normalize or assume a flat amount of earnings quarter to quarter. We get a big first quarter, smaller second, then it starts to lift as the balance of the year comes through.

Okay. And last question for me and then I'll let some others ask, any reserve development during the quarter?

No unfavorable developments to speak of. In fact, the portfolio -- historical portfolio is performing well, as well as the business. I alluded to the higher than expected performance on the one chunk of the UBI transfer. Other than that, absent that movement, we would have been pretty much where we were in the last quarter.

Thanks.

Next, Dan Schlemmer with FPK.

Good afternoon. I want to make sure I understand the cash part that you are going through. And I know you said you had $450 million at Q1 and then you deployed about $100 million during the quarter. If I'm reading it right, you're still at about $100 million at the end of Q2, which I guess goes to whatever, how much new money you had coming in and/or maturing investments during the quarter. Am I reading that right or am I missing something there?

You are reading it right, but there is one item that does inflate the cash number, and that was a small repo that we took on in the second quarter. And these -- from time to time, we use them to balance out our cash needs as we are -- securities are maturing and we are reinvesting. That does sort of inflate the number by $100 million roughly.

As you go, as you said you are trying to deploy the cash over time. What will be the cash on the balance sheet when you feel that you fully deployed? Presumably you can't run at $0 of cash on the balance sheet, but do you need $50 million sitting there available for liquidity purposes? Or a couple hundred million? Or what's the target that you are trying to get to when you have your cash fully deployed?

That's a good question, Dan. I would say we would target approximately $100 million.

And then to the extent you're not fully deployed now, and I realize you don't want to ignore the $200 million you've already deployed during the quarter, but to the extent you're not fully deployed, what's holding you back? I mean, it's liquid market, so I guess I'm reading it as you don't see a risk/reward investment that fits your criteria, or are there other things that are holding you back? Or what's keeping you from being fully deployed more quickly than you have been?

I guess the way I would answer that is caution. I mean I'm not trying to be cute about the answer. The fact is that we are looking -- you said it best, we are looking for that right risk/reward equation. I think as an example, if you looked in the last quarter, you saw pretty good opportunities on the corporate side. A lot of those prices come back, and we don't see the same level of opportunity, and that's what took us to the decision to bring on some Ginnie Maes. We do not -- I think one of our greatest strengths is our balance sheet and the quality of our investment portfolio. Essentially we are 100% in bonds with high quality both on the corporate side and the government side, and we want to keep it that way. So we are happy that we've made the progress we have to date and we will continue to slug away with the expectation that we will get fully deployed and increase the run rate.

Okay. And then switching gears, just in both the release and in your prepared remarks, there was a general comment on the acquisition of GMAC RE and integration. What remains outstanding to be permanently done with that? Are there outstanding issues with regulators? Do you have concerns about client relationships, or do you really feel comfortable that you're past that and it's just a matter of winding up maybe some details? Or what is outstanding on that acquisition?

There's only actually one outstanding item to speak of and we've, we expect to close September 1 of a very small or significantly smaller part of our business. But it's what we will be calling the Maiden Specialty Business, which is our excess and surplus lines capability. That is what we have referred to as our SRS business. That is on track and scheduled for a September 1 closing. But by and large, the bulk of our business is pretty much active and moving forward, and the activation of the US company and beginning to issue paper on it really signifies in our view the completion of the process.

Great. Thank you.

Thank you, Dan, appreciate it.

We'll go next to Bijan Moazami with FBR Capital Markets.

Good afternoon. I have a number of questions. First of all, about the top line. Is there any impact on your loss ratio from the change in the business mix from AmTrust?

No, I think that --

This is John Marshaleck. Not necessarily from the mix of AmTrust, but I think just the overall mix of business it changes. I think you see some significant changes from the first to the second quarter. And that's due mainly to the mix of business both really from the GMAC RE portfolio as it's brought over in the Maiden RE (inaudible) ratios. So we don't really -- because that business mix does change, I think the best way to deal with it is to look at the combined ratio.

Basically looking at the -- excluding the operating expense, but looking at the loss ratio plus the [CD] commission expense and acquisition costs.

Because theoretically if the slowdown at AmTrust is from the warranty business, warranty business is a higher loss ratio business for you, so you should push down the loss ratio for Maiden, isn't it?

I think that's a fair point. Offsetting that a little bit is our own deterioration on the UBI piece, so we may not be fully enjoying the benefit of that in this quarter. But I believe that if that trend continues, yes, it should actually move the loss ratio down a little bit.

Okay. Could you quantify, Art, what is your organic growth rate? I mean if there's such a thing as organic growth rate, what would it be?

Let me just step back a little and talk about the business, what's gone on since it's come on, since the GMAC RE platform has come onboard. When we speak of organic growth it's kind of a definition or semantic argument, because as an example we have a number of accounts that increased our share of the programs after the closing of the transaction expressing confidence in a solid clean balance sheet moving forward. Is that organic growth or is that incremental additional growth? We have -- the best way I would define is we've grown our active client count in total by a handful of accounts, but if you just look at the revenue run rate on the business, that's up well north of 10%. So it's been combination of both. I'd say the bulk of it has probably come from expansion of existing client relationships.

Just a few months ago, you gave us some level of guidance in terms of what the top line is going to be. Are you adjusting those numbers given the economic environment and given the second quarter?

Not at this point, Bijan. Right now, in terms of the way the accounts are reporting to us, we don't see any need to pull down or our view of outlook. We feel pretty good about it, frankly. What we've seen so far -- we continue to see a very strong run rate in terms of business written levels month to month, and that trend continues. At this point, I wouldn't change our guidance.

If you want to quantify the impact of the UBI on the loss ratio, the impact would have been 1 point higher than what you thought or 2 points higher on the overall combined ratio? And I realize that the impact of that is not going to be any further than what we've already had, right? Are you seeing higher premium earned at this point?

I'd say it's probably about a 1 percentage point [building] on the quarter. So as I mentioned earlier, we probably would be at the same combined ratio we were at in the last quarter, which would have been a little bit ahead of plan. But as you know it's a diversified portfolio and one quarter it may be one segment, another quarter it might be another. But on balance, we still feel pretty good about it. But I'd say about 1 point on the quarter is a fair way to look at it.

Thank you.

You're welcome. Thank you.

Next, Ken Billingsley with Signal Hill.

Good afternoon. A number of the questions I had had been answered but I had a few, one follow up and two to just get your opinion. You mentioned there was no reserve releases on a net basis for the quarter. Is that correct?

That's correct.

Now when you talk about the UBI and the assumptions have changed and essentially about 1% impact in the quarter, wouldn't that be a deficiency impact?

Yes, and I mentioned that. John, you want to elaborate a little bit?

We do a quarterly actuarial review as we talked about before and we had some improvement in some of the portfolio. In some of the portfolio, the loss portfolio we've taken over from GMAC RE, we had some improvement there. And that has to be amortized and we did recognize some of that.

But on a net, it's zero, so the GMAC is offsetting the UBI for the most part?

Yes, except for the 1 point we talked about in the quarter.

Okay. Then you mentioned in the opening comments about the regionals and some of the other, your customers' need for surplus relief. How is that marketing looking? Are there opportunities? Are there doors starting to open up a little bit more or are they tending to utilize you or need you more than they did even six months ago?

I mean we had a pretty good first six months in terms of opportunities. We are still seeing deal flow as we saw in the first quarter, but it's fair to say that we don't write everything we see. But we are optimistic we are currently negotiating a couple of transactions that could bear some fruit. I wouldn't say that we've seen a drop in the demand. It's more these are not typically simple transactions. They require a lot of cooperative work with the clients to develop the right structure. Sometimes we get there. Sometimes we don't. But I wouldn't say that we've seen a marked change in what we saw in the first quarter in terms of demand.

What percentage of mix is proportional versus excess maybe that you're maybe doing with these clients?

Across the whole portfolio or on surplus relief?

On the surplus relief side. Well, I mean, across the whole portfolio.

The surplus relief are virtually all pro rata or proportional in some fashion. That's where the client gets the most relief.

Then across the whole book?

We don't have the current number on that right now, Ken. I think certainly our excess -- our pro rata business has increased over the last year.

Okay. On the excess side, could you answer how -- are your customers retaining more of the risk, trying to control obviously what they are paying out from a coverage standpoint?

We see that, a lot of that on sort of the new business deal flow. But yes, we have some, some clients that have decided to retain more. We've had others because of their own financial condition that they've decided to retain less. So it's not a sea change movement, but we definitely see customers that because of the revenue pressure are trying to retain more risk, no question.

Okay. Last question on the tax impact, what's been proposed in US House of Representatives, can you talk about the impact on your US business or overall on what the recent proposal for tax in Bermuda companies?

Clearly it's a proposal that still has to make its way through, and we've said repeatedly that the premise of our business, this was a company that was formed in Bermuda initially and acquired a US platform. I would say that with respect to the business underwritten in Bermuda, which is the AmTrust quota share, there is an underwritten account here in Bermuda as well as the portfolio of transfer that came over from GMAC. Those were all brought in directly to the Bermuda platform and they are underwritten and managed in Bermuda. The US platform, which is the developing piece of the business as we've said before, we do have a quota share relationship and if the Neal Bill passed, it could be subject to the provisions of that. Recognize, however, that in the US we also have the trust preferred securities. So essentially, the interest payments related to that have largely offset the income generated in the US subsidiary.

Over the long-term our view has always been that if something changes in our tax position, we are going to have to adjust from a pricing perspective, from an operational perspective, and I don't think we are alone in saying that. So we are prepared for whatever might come down the pike and will react accordingly. But as it stands now we believe that the vast majority of the loss reserves and the balance sheet is really resident in Bermuda today.

I'm sure someone will ask this, but I'll go ahead and be the one -- regarding the trust preferred itself, can you talk about plans or if anything has changed or your thoughts on where you are today versus obviously where you were three to six months ago?

I really don't think so. I mean from our perspective, the cost of equity capital is still higher than the cost of the trust preferred securities. Provided that we can perform well as we reach our run rate, it should be accretive to the shareholders and we expect that to continue for some time. I don't think we are at a point in the near future where there are options that are clearly available to us. But frankly, it's serving a very good role today, and it's -- as we say it is accretive to shareholders. I think that we don't see any imminent need to take it out.

Great, thank for taking my questions.

Thanks, Ken.

You have a follow-up question from Dan Schlemmer.

Hi, Dan.

Can you go into just a little more detail on the FX gain? Where is that coming from, what drives that?

This is John Marshaleck. It's coming from some investments -- or we have a letter of credit and some assets supporting that for a transaction we have in the UK. So there is -- as you know there is a sizeable change in the foreign currency valuations in the quarter and it really relates to the one contract.

The pound.

The pound and the dollar.

But it's all on the investment side, so it's not -- I guess my assumption, initial assumption was it was related to AmTrust's UK warranty business. That is.

It's not that at all.

It's related to business underwritten in Bermuda on the non AmTrust account.

And on the topic of AmTrust, and especially if Barry is in the room, is there any comments on the contract with AmTrust? I understand it's up next year. I'm not sure of the exact timing, sort of mid year. Has there been discussions on that or have you even determined what the timing will be to revisit the contract or go through it, consider the terms for the following period?

I mean, I will speak from my perspective and then I will turn it over to Barry as our client from his perspective. For our purposes it has performed well over time within the Maiden portfolio, and we have every intention of working with our client to continue that relationship. So we are in the process of looking at the historical data, looking at the needs of the client and determining whether there's any change required prospectively. But our view is that this is going to be a relationship we are going to keep for a long time.

From our standpoint it's the same. We did this for the long-term. It's working well for both parties and there's no intention in discussion we have had for any one side to cancel. There may be some tweaks to the contract to benefit both sides, but it's something that has to work for both parties, and it's our plan to continue with the relationship.

I wouldn't contrast it with any other significant treaty relationship that we have. I mean, when we come up to a renewal period, it's not unusual for us to mutually get to terms and move forward even before the anniversary period, which is obviously what we wanted here.

So I mean in terms of if there are tweaks or whatever, it's something that won't get probably revisited until next year or is that something that you will be talking this year in terms of the timing?

I think our view would be to do it as soon as we recognize the rates we need, and my hope would be we could get that done before the end of the year.

Okay. Last question, then -- you had really impressive book value growth in the quarter. Was there anything on the investment side? I mean obviously you had good net income that went to the bottom line, but on the investment side, was there any particular driver that you can identify or was it just across the board changes in valuations, et cetera, that overall affected book value?

It was across the board, Dan. I mean, we've been very carefully looking at diversifying the portfolio, and I mean we saw every component segment realizing gains over that period. As I mentioned they are holding up to this date and [we paid tax on] slight growth since the end of the quarter. So I can't really point to any one driving element of it at this point.

Okay. Great. Thank you.

Thank you very much.

Ladies and gentlemen, that will conclude our Q&A session. Mr. Gross, I'd like to turn the conference back to you, sir, for any closing comment.

Thank you, that concludes our 2009 Maiden Holdings second quarter earnings conference. On behalf of Chairman of the Board Barry Zyskind and Chief Executive Officer Art Raschbaum and Chief Financial Officer John Marshaleck, we thank you for taking the time to join us today and we wish you all a continued pleasant afternoon. Thank you.

That concludes our conference call. We thank you all for joining us and wish you a great day. Goodbye.