Kestrel Group Ltd (KG) 2009 Q3 法說會逐字稿

Welcome to the Maiden Holdings third quarter 2009 earnings conference call. Just a quick reminder today's call is being recorded.

Now I will turn things over to Ms Ellen Taylor with Maiden Holdings Investor Relations. Please go ahead, Ms Taylor.

Thanks, good afternoon everyone and thanks for joining used today. This is Ellen Taylor in Investor Relations. I am sure by now, you have seen our earnings release as well as our announcements regarding the dividend increase. But if not you can access those on the website at MaidenREIT.com. Maiden's CEO, Art Raschbaum is going to king things off for us today and he will be followed by our CFO, John Marshaleck and after their comments we will be happy to take your questions. We are also very pleased to have our Chairman of the Board, Barry Zyskind, join us today to participate in our discussions. Now, before I begin, of course, we have got a few familiar reminders for you.

This call will contain forward-looking statements, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company's current expectations, and beliefs, concerning future developments and their potential effect on the Company. And 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, effect of the performance of financial markets on investment income and fair value of investments, developments of claims in the effect on loss reserve, accuracy and projecting loss reserve, the effective competition and pricing environment, changes in demand 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 environment, and changes in asset valuations. Of course the Company takes no obligation to publicly update any forward-looking statements. Also, some of the discussion about the Company's performance today will include reference to certain financial measure that are considered non-GAAP. We provided information that reconciles these measures to GAAP in our earnings release. With that I will turn it over to Art.

Thank you, Ellen. Good afternoon and welcome to Maiden Holdings third quarter call. Since the acquisition of the GMAC RE portfolio in November of last year, and each subsequent quarter, we are see continued strengthening of the earnings you power of the Company. I am pleased to report that this trend continued in the third quarter with significant progress made in deploying cash and increasing investable assets, also strong book value with significant year on year revenue growth, open investments earnings and solid under writing performance. Importantly, Maiden continues to successfully execute its focused, disciplined, and differentiated strategy of serving to non-catastrophe needs of regional and specialty insurers. We remain focused on achieving our performance objectives, a 96% combined ratio, or better, a return on equity of 50% or better at some rates, a 10% revenue and combined annual growth rate, and maintaining low operating expense relativities. As Ellen mentioned earlier this morning we also announced that the board approved an 8% increase in our quarterly common dividend to $0.065 per share beginning next year. We believe this is a great indication of the confidence that we all have in our ability to continue to execute on our strategy, as well as our prospects for future growth.

Our operating results for the quarter reflect continued underlying momentum in the earnings run rate of the Company and operating earnings have steadily claimed in each quarter of this year. Importantly, income from operations for the first nine months total $72.9 million, that's significantly greater than any prior nine month period, and reflects the substantial increase in the earnings power of the business with the acquisition of the GMAC RE and further business developments. This obviously, is before the cost of the interest on the trust preferred that we issued in connection with the GMAC transaction and while we value that part of the capital structure, we are certainly constantly evaluating opportunities to take this out at some point in the future and replace it with a more efficient and shareholder friendly option. We generated basic operating rings per share of $0.24, an increase of $0.04 per share from last quarter and on a year, year-to-date basis, both earnings per share and operating earnings per share compare favorably.

One of the key elements critical to strengthening the earnings power of Maiden which we have talked about in previous calls, is the full deployment of the significant cash generated through the GMAC RE acquisition as well as the trust preferred issuance. We have spoken over the prior two quarters of our very careful and deliberate approach to investing cash and we have reported steady progress. I am pleased to report today that our invested asset base has grown from $1.3 billion in the second quarter to over $1.55 billion in the first quarter. Between the second and third quarter invested assets grew $246.9 million, our cash balance has been reduced from $462.7 million in the second quarter down to $313.2 million in third quarter, and actually our cash balance net of the securities repurchased contract is $207.8 million. As a result of the increase in invested assets, quarter to quarter net investment income excluding realized gains and losses grew from $15.1 million to $16.8 million. Since funds were deployed throughout the quarter, we have not yet realized the full earnings power of the investment portfolio. The aggregate yield on investments held at September 30, 2009, was 4.24%, and we anticipate continued growth in investable assets consistent with the growth in the underwriting portfolio and also the additional deployment of a portion of the remaining cash.

We also continue to drive growth in shareholders equity, which now stands at almost $665 million and increased by over $59 million during the quarter and was up over 30% on nearly $155 million since year end. This increase has been significantly driven by unrealized gains reflecting our high quality asset portfolio, our continued growth in earnings and the impact on equity from the trust preferred securities. We believe this growth in shareholders equity positions the Company extremely well for the future.

From an underwriting perspective, our combined ratio for the quarter was 96.3% while the nine month combined stands at 96.1%, essentially on target. You may remember our stated combined target is a 96% combined ratio or better. As we have stated before we typically see some level of quarter to quarter variability in the combined, so there's no significant story here. The combined ratio is very much in line with expectations and it also reflects the different business mix associated with the addition of the GMAC RE portfolio. You've probably seen many reinsurers in the quarter, and the insurers in the quarter report extremely strong underwriting results. The majority of this activity stems from a relatively CAT free summer in North America. As we have stated before, catastrophe reinsurance is not a focus of Maiden and as a result our underwriting performance remains stable. Had the CAT season been an active one, we would still have anticipated relatively stable underwriting performance which we believe, as we said before, is a very critical differentiator of our model from our peers.

With regard to market conditions we believe that the competitive phase in the underwriting cycle will continue for the foreseeable future, not only are companies today benefiting from the very benign catastrophe season, but many of them are also enjoying a rebound in asset values which further intensifies the overall competitive landscape and despite that reality, we have strong confidence in our capabilities, and our differentiated strategies, that will enable us to continue to enjoy a strong flow of business opportunities. We remain focused on maintaining a very disciplined approach to underwriting in the current market environment. But we are optimistic about our prospects to continue to expand our business, we believe that Maiden specialist approach to the regional and specialty markets, our highly competitive operating expense levels, our proprietary collateral trust facility and our dedicated team of highly capable reinsurance professionals really position the Company well to continue to deliver differentiated values to our clients and prospects.

We posted revenue growth of over 2 -- 200% for first nine months of the year which reflects not only the addition of the GMAC RE portfolio, but the team's continued focus on developing new client relationships. We generated net written premium of over $220 million for the quarter, which was down some from the second quarter, and third quarter does not typically represent a strong period of robust new account growth. In addition for the quarter we did see several accounts where clients reported reduced revenues reflecting the effect of the weaker economic environment. We mentioned the possibility in past discussions around revenue trends. Despite this, overall, we continue to see significant year on year growth, in the US underwriting portfolio. We delivered earned premiums of nearly $238 million for quarter and $671 million year-to-date.

While on the subject of business development I am very pleased to announce the addition of an important new client. As you may have read recently, and in today's announcement, GMAC announced the sale of its $1 billion plus revenue personal lines business to American Capital Acquisition Corporation. Many of us at Maiden are quite familiar with the acquired portfolio and we are very excited to be participating in the significant opportunity. Today we are announcing that Maiden insurance intends to provide [medium before] capital support to ACAC with a multi-year 25% quota share reinsurance agreement. The reinsurance contract will accept on the close of the purchase of transaction which is expected some time in the first quarter. Going forward, we anticipate that this transaction will generate annual revenues of over $200 million of additional revenue with underwriting margins consistent with our overall portfolio underwriting target of a combined ratio of 96% or better, of course, revenue for the first year of that transaction will be dependent on the actual closing date. The addition of this important client is consistent with our strategic focus of providing long term capital solutions to regional and specialty companies, and will help further fuel the earnings power of Maiden Holdings in the coming years. Of course this transaction is subject to regulatory approval, and the final terms of the agreement are under development.

Overall the third quarter was a very solid quarter, both from a financial perspective and from a business development perspective, the integration of the GMAC RE business, is essentially complete and we continue to make significant progress across all of our key business objectives and metrics. This coupled with the ACAC transaction, as well as the previously announced extension of our agreement with AmTrust, really set the stage for continued growth and increased earnings as we look toward next year and beyond. I would like to turn the discussion over now to our Chief Financial Officer, John Marshaleck, who will focus on a few of our key financial highlights for the quarter.

Thanks, Art. Good afternoon, and thank you for being with us today. I'm happy to provide you with some additional details on our results this quarter. I think it is important to once again remind the third quarter and year-to-date results last year did not include the business acquired in the GMAC RE acquisition. So the year over year comparisons are somewhat distorted. In some cases I will provide a reference to our second quarter 2009 results, even though there are some seasonality affecting the quarter to quarter trends because it may provide a more useful reference point.

As you know, Maiden earned $0.21 a share on a GAAP basis compared with a loss of 46%, $0.46 in the third quarter of 2008, and $0.23 in the second quarter of this year. Our GAAP net income for quarter of $15 million was lower by the net cost of intangible amortization, realized investment losses, and foreign exchange adjustments, versus our operating earnings for the quarter of $16.5 million. Our operating earnings for the quarter reflected growth of over $1.1 million compared to the quarter a year ago and $2.5 million for the second quarter this year. Year-over-year reported earnings for the quarter, for quarter, compared very favorably with 2008, which included significantly higher realized investment impairments, and a net loss of $27.5 million. Our net premium written for the quarter was $221.4 million. We generated net earned premium of $237.4 million during the quarter, up significantly from the $113.6 million in the third quarter of 2008. Driven by the addition of the GMAC RE business and other growth. Net earned premium grew $1 million in the second quarter.

On a year-to-date basis, we generated net earned premium of $671.3 million up 162% over last years results of $256.2 million. Given the current market headwinds, we expect our net written premium for the full year of 2009 to be in the $1 billion to $1.2 billion range. As Art mentioned, we are continuing to invest our excess cash with the goal of driving and improve investment income as a result of increasing invested assets quarter to quarter net investment income grew 11% from $15.1 million to $16.8 million. And this reflects an additional excess cash deployed of approximately $230 million. At the end of September, the yield on the fixed income of portfolios stood at 4.2%. 61% of our fixed maturities portfolio was government issued or backed and 39% represented corporates. Of the 87, of this 87% are single A rated or better, with 65% rated AAA. The average duration of the portfolio for the quarter was 2.7 years, and approximately 26% of our investments represented floating rate securities.

Our cash balance net of [repo] is $208 million at the end of the quarter. Therefore we have approximately $100 million to $150 million of excess cash to deploy. And we will, we are fully optimistic that we will fully invest this by the end of the year. Thus far this year our net investment income has nearly doubled to $46.2 million versus $24.3 million from the same period last year. Additionally our realized investment losses were only $66,000 this quarter compared to $42.5 million a year ago, and modest gains of $1.5 million last quarter. Our expense levels increased this quarter in line with our premium increase from the GMAC RE transaction and other growth. For the quarter we generated income from operations of $25.6 million, and $72.1 million on a year-to-date basis. This compares to a loss of $27.2 million in the third quarter and $845,000 on the year-to-date basis last year. This again demonstrates our ability to leverage our solid capital position and maintain our disciplined underwriting standards. Net income for the nine months was $44.3 million up from a loss of $1.2 million in 2008.

So to recap we generated healthy operating earnings of $16.5 million for the quarter, and $44.3 million thus far this year, with operating earnings per share of $0.23 for the quarter, and $0.68 year-to-date. We continue to deliver growth in shareholders equity, which stood at nearly $665 million at quarter end, with book value per share up 9.8% from the second quarter to $9.45 per share. And despite the competitive landscape and economic environment, we continue to deliver underwriting results within our target range and we continue to focus on growing our investment income as we deploy our remaining excess cash. Thank you.

Thanks, John. I'd like to conclude by again emphasizing the significant progress that continues at Maiden. In the quarter, we produced continued strengthening of operating earnings, significant growth in shareholder equity, maintained our underwriting discipline, all while laying a solid foundation for the future. We believe today's dividend announcement is solid recognition of the strength, and earnings power of the Company, and we remain intently focused on creating significant value for our customers and our shareholders. Ellen? I think we are now ready to take some questions.

Sure thing, Ms Taylor. (Operator Instructions) We will pause for just one moment. We will go first to Bijan Moazami with FBR.

Good afternoon, everyone. I have a number of questions relating to the transaction that you made with ACAC. I assume this is a high frequency lure severity personalized business. So, the is it capital requirement in this business quite different than the capital requirement on the casualty lines you underwrite?

Yes. I think that if you think of a characteristics of the business, and it has been a fairly stable performing business, we would anticipate that on a risk adjusted basis there would be less capital required o support this transaction.

I would agree, and I think we have some of this type of business in our portfolio already. It is not a change from our existing portfolio.

Can you walk us through why you wouldn't need any additional level of capital to support almost $200 million of additional business?

We have significant growth in our capital base since the beginning of year and that alone would provide enough capital, I think to support this transaction. We expect to grow again in other quarter, and as this business comes on, in 2010, more than likely it is going to come on in the second quarter and again we will have additional capital generated through the first quarter. And as the business comes on we should be generating capital as well. So we feel comfortable with our position today, and as we expect that to grow.

There's no incoming portfolio on this, John. So we think that our capital base will grow organically through earnings and that in addition to the fact that John said before, we've had a significant amount of unrealized growth in our book value as well. We feel like we are in pretty good shape there.

Okay. (Inaudible) So we are very mindful of the strong rating, and it is something that we make sure we want to keep the strong rating, and it is something that when we look at the capital model, we feel good about the position we are in now that we can take on this business and keep a strong rating.

Okay. One last question, obviously the [teleby] liabilities are much shorter than their kind of business, you wrote in the past. So should it naturally target, you shouldn't target a lower combined ratio in this book of business than you are targeting for the rest of your book?

Well, as you know our book of business is a mix of different elements. Longer tail business, we have a bit higher combined in the average really that 96% combined target. We would expect this portfolio business will be at or below the 96%, given directly as you point, the relatively short duration liabilities. We were going to make our return on this business on underwriting.

Have you negotiated terms and conditions on the contract quite yet? We know it is multi-year contract, but have you decided it is going to similar to the transaction you had with AmTrust with three years or is it going to be a shorter contract term than this?

Yes, I would anticipate a multi-year contract. I think it is in everybody's best interest that it be a stable in terms of capital for an extended period of time. While we haven't defined the exact terms, I don't think it will be unrealistic to expect something along the lines of the initial AmTrust contract.

Great. Thank you.

Thank you.

We will go next to Ken Billingsley.

Good afternoon.

Hi, Ken.

Just a follow up on the Bijan's question there, regarding the agreement that you will be signing, will the seating commission be as favorable to them as it was to AFSI?

Well, it is going to be reflective of the cost structure and frankly the margin we need to underwrite to generate a good return on the business. It is going to be different, I would say, from AFSI, because the portfolio is different. Can't be much more specific about what the actual terms will be other than to say, like we do any auto portfolio, we look at the cost characteristics, we look at the expected characteristics and blend the structure that produces what we believe is a reasonable risk adjusted return for the business we produce.

I understand, and I guess I should ask the question a little better. When the original agreement with AFSI was announced it was a win-win for both of you at the time. Is it going to be on more even terms now that you are on fairly solid footing to do this transaction?

Yes, I would say much more even terms on this transaction.

Okay. Regarding that line of business, you said you have a little bit of this book of business already on your books, who will at Maiden will have the responsibility, since this is going to be a large new chunk of business.

I want to go back a second to something you said about the AmTrust Maiden, recognize that in the AmTrust Maiden transaction, this is underwritten by the Bermuda Company. As a result, it is, in its country of domicile, which does not have an income tax associated with it, so the difference, the variance in the seating commission is to some extent reflective of that difference. It is not necessarily that we are both getting different economics from the business, it is more reflective of the fact that our portfolio is reflective of the true economics of our business.

Okay.

So.

To add further to that, this as I mentioned, we have some this business in our portfolio, we have been writing this type of business for a number of years now, and our financial models take into account the pay out of the losses, the type of businesses obviously, the mix of business is really important, so it's really not that different from what our existing portfolio contains or has contained in the past.

The business will be managed by Maiden insurance in Bermuda. We will use our technical infrastructure here, including our [acturel] resources, our technical underwriting resources. We will also most likely leverage Maiden global services to provide the on sight, audit and client support activity as well.

Will you need to hire new people or will you be able to do it internally with the group you have.

We can do this internally, Ken.

Okay. This is something you were very familiar with before. Have there been some changes since you have been away from this book for a little bit of time now? Is there anything that's changed to different over the last year and a half from a competitive standpoint, pricing just market trends?

I don't think there are significant changes. If you think about when the Maiden transaction closed, it has been just barely a year. So, don't see any significant changes in the underlying business. It has been a business too Ken, give you a little color of the business, that has generated very stable underwriting results over market cycles, and this was from my experience there, and they have been a fairly good producer of solid underwriting results. They have very strong pricing analytic capabilities. We think they're among best in class, and in a business where you have to have strong multi-variant pricing capabilities, they're among the best, we think. So one of the challenges, as you heard the announcement, the original announcement, AmTrust is bringing a significant amount of technology capability to this group. One of the achilles heels of this business and it is affected the expense side of the business, has been the fact they have multiple legacy platforms. The idea is to build a single platform, that will generate significant efficiency. So the theory is keep maintaining the same disciplined approach on the loss ratio, but then attacking the cost side to improve the efficiency of the business.

What was the combined ratio from an average over the last two years?

It is a little, I mean -- I guess I would say it tends to -- this is a sub of a larger company, it was not a GAAP reporter on a stand alone basis. They have combined under 100, I can asure you that.

Under 100 even with the expense inefficiency.

Yes. Which is where we, where we think the great leverage is.

Great. Just a couple of more question, on the loss ratio side, we have seen a few companies that have already started to release some reserves from near years like 2007, early 2008. Are there any reserve adjustments at all in this number?

No. Remember, Ken, that the way our business is managed, is the business that came over, the portfolio of reserves that came over, under portfolio accounting we can't take the economic benefit of that, that has to be amortized over time. So we are generally living off of our more recent underwriting year results.

Very good. And on the balance sheet, for restricted cash, that number dropped quarter-over-quarter from about 312 to 219. Just to make sure I understand, I believe that restricted cash was, was that part of the asset that have been put up, for the benefit of your customers? Is that correct? Is that what that line item is?

That's correct. Those are assets that are in trusts for the benefit of our clients. Of course we generate all the earnings out of those trust accounts, but we do segregate them on the balance sheet.

Right, but so you can invest them how you wish?

Absolutely.

And we do replace that with securities from time to time as well. So the balance is well change, the maturity occurs during the quarter, there could be a cash balance sitting in there at the end of the quarter. But more than likely that's going to be replaced, and is replaced with a security, yes.

Okay. And so my question is, it seems like that was a selling point for some of your, your customers early on. But that balance has dropped from about $410 million at the end of 2009 to $219 million now. Are customers not demanding it? Are you not pushing that? I am trying to get an idea of what's the shift going on regarding the way you sold yourself.

No, we are still providing collateral through the trust and all that's really happening is balances that could be in restricted cash become securities, they are replaced with securities. So, the balance really doesn't representative of anything that's going on overall basis. It really happens to do with maturities in the individual trust. So you will see changes from time to time, just not really, does not reflect any change in what we are doing with the collateral.

Okay. So those segregated assets may actually be in the fixed investment line item? Is that correct?

Yes.

Very good. Thank you. Congratulations on the quarter.

Thank you, Ken.

We will go next to Dan Schlemmer with FPK.

Hi.

Hi.

You were just talking about the development, and I understand it doesn't flow through, prior development doesn't flow through in the way it would if the reserves were not acquired through acquisition. But you still have, the development does eventually hit your bottom line, if I understand the accounting correct. It just happens over time as opposed to in the quarter. Can you give us an update on when you have most recently reviewed those reserves, and what you're seeing and whether that is going to end up with some favorable or adverse numbers?

We do analyze our reserves quarterly. We do an actual overview each quarter and we have seen some positive development in the older years and in the portfolio coming over, but we need to amortize that, so there is a small portion amortized in the quarter, but it is amortized over the payment of the losses. So, we have that, it is going to flow into the next few years actually. It is a positive entity that we have seen so far.

And then just to be clear then on the 69.6 in the current quarter, that has no prior development from the reserves brought over in the acquisition, but you are also saying it has no prior development from prior quarters. Is that accurate or --

Well, the current period, since the portfolio moved over, there has been no development, plus or minus and that is pretty much on our loss mix. There is some amortization of the favorable development from the portfolio that we purchased from GMAC RE, but it is a smaller amount.

It is not an exact science, every quarter we get some reserve movement, but it is not significant, it is not $10 million, $20 million, it is not a big number.

Okay. Great. Thanks. And then on your top line, looking at the net written, it is down quarter-over-quarter, I was wondering if you can break that out for us a little bit. Are you seeing, are you seeing it on rate, or is it more just on business renewing or on the portions that are going -- being seated to Maiden, or what is driving that down, just a quarter over quarter comparison and to the extent it is also seasonality, et cetera, if you can break that down for us.

Sure. I can give you a rough approximation. We tend to think -- remember that a big chunk of our business is reporting basis, sort of contract business. So, we have an expectation of how much our clients are going to write in each quarter, but then when we finally get the settlements, those amounts are either going to be higher, lower or on the money. We talk about this in the last quarter, that the trend hasn't shown that any economic effect was influencing the amount of revenue we were seeing from clients on our active reporting basis contracts. We did actually see some movements in this quarter. There could be seasonality in that number, but we also have seen in some of our audited activity, some evidence that exposure units are down just given, particularly on commercial business where you just see parts of the country where you don't generate the same level of exposure units because businesses are smaller. So we see that affecting it. There's always a normal amount of churn in the business where we may not come to terms with a client and we non-renew, a little bit of that activity in the quarter. But, I wouldn't say that, I would say if I was going to focus on any one area, it would be those reporting basis contracts coming in a little less than our expectations.

Great, thanks. And you said, you made a comment about non-renewing and maybe if you can talk about that a little bit and in particular you are right at the upper bound to the 96%, the upper bound of what you are targeting. Are you getting into a situation where it is tougher to renew contracts than it was previously?

It is interesting, we have some interesting examples of situations where we believe that because of the rate actions we have taken, we would have trouble holding accounts, but remarkably we have seen quite honestly some logic and reason in our competitors set, nobody is doing anything totally crazy, and we found that in the vast majority of cases our clients have accepted needed rate where we can, we can show them the justification. As you know, we are pretty transparent in our relationship with our customers, we show them what our view of the performance is on a quarter to quarter basis. So it is rarely a surprise when we get to renewals. I think more often than not, we are finding that we are able to work with clients on, with additional rate needs. It doesn't always happen, and we have a client retention rate in the sort of 85% to 90% range. So we always see some still off that occurs. There's nothing, I don't think there's any big headline in terms of accounts that were non-renewed this quarter that suggest to us that we are seeing some seat change in the market. I think it is rather sort of business as usual right now. As I said before, with -- we expect that the competitive cycle will continue. But we are going to remain disciplined. We are not chasing revenue.

Great. Last question, can you talk about just a little bit, a little bit about any new opportunities, what you are seeing in terms of new opportunities coming in, and maybe how would you characterize the opportunities out there, whether it is different segments or what the competitive environment is.

We just attended two major industry conventions, one is NAMIC, which is the National Association of Mutual Insurance Companies, and the other is the PCIA, which is Property Casualty Insurance Association and both of those are very important generators of business opportunities for us. We have a lot of customers that are members of both of those associations. We had a tremendous reception at both of the conventions. If you think about the last several years that we have been going to these conventions, there has been a lot of headwind around some of the things of our former [parent] was having to deal with, and they spilled on to us. We had a great reception and we generated a number of active quoting opportunities that we're evaluating as we speak. We think we will see strong deal flow.

Characteristically, I don't think we will see the volume of surplus relief type transactions that we saw earlier in the year, but we still are seeing a couple. We are evaluating a couple of fairly substantial transactions right now, but we do expect submission CAT will be up, and that is our best indicator of how business will flow at the year end, the big variable is whether our price will match and our return requirement will match the client needs. But you know we are cautiously optimistic about the year end. We don't see anything that is suggesting that our deal flows will be down at all.

All right. I apologize. I said last question but I will do a follow up. You said you are still seeing, you are still seeing surplus relief, which I guess maybe is against what my intuition would lead me to believe, most companies are seeing favorable results on their own investment portfolio at the same time as competition means they're not seeing tons of growth. So, is there anything generally you can characterize as driving those needs?

These would be less around weakening of the investment portfolio and more around potentially companies that have had a bad run of CAT experience and they need capital, and we were looking at the non-CAT portion of the business to see whether we created some additional capital for them through financing reinsurance. They're kind of individually unique, they're not of the volume we saw earlier in the year, as I mentioned before, but we do have capability and an interest to sort of provide those needs if the circumstances meet our requirements.

That was my last question but nice quarter. Congratulations.

Thank you very much. Sure appreciate it.

The last question today from Bob Farnam with KBW.

Hi, Bob.

Hi there, Good afternoon. Just a couple of questions from here. Going back to one of the original questions was the capital needs getting to the GMAC book next next year. You currently retained all of your premiums on a gross basis, are you -- would you consider starting to retroseed some of that?

No, we don't really see a need to. And there are a couple of elements of our portfolio we do retroseed what limited CAT exposure we have. We do have areas where we do retroseed elements of it, but on balance, it is still a book of relatively stable, predictable frequency oriented business. So we really don't see the need.

It is certainly an option that we would if we would need it, but at this point, we don't see any, that we would need that.

Great. And any cyclicality in the GMAC book's premium coming on board?

Yes, it is kind of hard, the challenge is morphing the businesses together and understanding how they will behave in the aggregate. I don't, if there's any cyclicality, it is 1/1, is a big period for us, a lot of business renews and a lot of new business development occurs. We have talked about, we still have a reasonable flow of business throughout the year. By a fairly significant margin we see a lot of activity in January. So I would expect that if we have a good January 1 season, that would start to manifest itself in the early quarters of the year.

A long list of the additional, the quota share transaction, that was probably, the premium would start flowing in the second quarter. So, our first quarter typically is a fairly high premium quarter anyway because of our excessive loss contracts. We would expect that would happen again, and the new business would start flowing into second quarter.

Okay. Good. And last one is a number question, what was the operating cash flow for the quarter?

I don't have that with me right now. I don't have it. We will get back to you with that.

Thanks, a lot.

Thank you very much. Appreciate it.

Mr Raschbaum, I will turn the conference back to you for closing comments.

Thank you very much. We appreciate your participation and interest. We will see you next quarter.

And again that will conclude today's conference call. We thank you all for joining us and wish you all a great afternoon. Good-bye.