Kestrel Group Ltd (KG) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Maiden Holdings fourth-quarter 2013 earnings conference call. (Operator Instructions). As a reminder, today's conference is being recorded.

I would now like to introduce your host for today's conference call, Mr. Noah Fields. You may begin.

Good morning, and thank you for joining us today for Maiden's fourth-quarter and year-end 2013 earnings conference call. Presenting on the call today we have Art Raschbaum, Maiden's Chief Executive Officer; along with John Marshaleck, our Chief Financial Officer. Also in attendance is Karen Schmitt, President of Maiden Re; and Pat Haveron, Executive Vice President.

Before we begin, would like to note that the information presented here today contains projections or other forward-looking statements regarding future events or the future financial performance of the Company. These statements are based on current expectations and future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from these expectations. We refer you to the documents the Company files from time to time with the Securities and Exchange Commission, specifically the Company's annual report on Form 10-K and our quarterly reports on Form 10-Q.

Some of our discussions about the Company's performance today will include reference to both non-GAAP financial measures and information that reconciles those measures to GAAP as well as certain operating metrics that may be found in our filings with the SEC and in our news release located on Maiden's investor relations website.

Please also note that unless otherwise stated, all references to common share data in today's discussion are on a diluted share basis, and comparative comments will refer to Maiden's results in 2013 relative to the corresponding period in 2012.

I will now turn the call over to Art.

Thank you, Noah. Good morning and welcome. I'm very pleased to report strong results for the fourth quarter and for the 2013 year, with favorable trends across every key metric.

For the year we generated record operating earnings attributable to common shareholders of $87.5 million and diluted earnings per common share of $1.18, while improving our year-over-year combined ratio to 97.5%, down from 95.5% in 2012, and delivering an improved operating return on common equity of 10.5% for the year. Our focus remains on delivering value for all of our stakeholders as we continue developing our highly differentiated reinsurance business supporting the non-catastrophe needs of regional and specialty insurance companies.

We've improved underwriting margins and grown premium writings, while at the same time significantly reducing our exposure to extreme volatility from large catastrophic property events following the sale of our excess and surplus lines property business in 2013. Our financial strength continues to improve with the successful completion of two capital markets transactions with an eye to supporting our growing business and lowering our cost of capital.

In mid-January we repaid our 14% coupon trust preferred security. Going forward, operating returns and net income will benefit materially as Maiden's forward cost of capital improves.

Investment income has continued to grow as a result of the increasing invested assets that are associated with the growth in our underwriting portfolio and our capital base. In short, we believe that Maiden's efforts in [2003] (sic - 2013) position us well for continued profitable growth, and importantly, strengthening operating returns.

In an increasingly competitive environment for high-quality reinsurance programs, we have significantly benefited from growth in existing relationships while successfully expanding new client relationships, increasing net premiums written by 10% to $2.1 billion in 2013. While our year-on-year net premium written grew by 10%, in fact, we had a core premium growth rate of 22% from continuing operations, which excludes the NGHC quota share that was discontinued on August 1 and the divested E&S property business as of May 1.

The majority of the premium increase in 2013 has come from our largest client, AmTrust, which ceded $1.2 billion of premiums to Maiden. That was an increase of 39%. Much of AmTrust's premium growth has resulted from continued rate level increases in the US for most lines of business, with workers' compensation experiencing the most substantial increases. Combined ratios from the AmTrust Quota Share segment are essentially in line with the 2012 year, with a combined ratio of 95.7% for the year compared to 95.8% in 2012.

Our active client diligence process, which includes underwriting, accounting and claims auditing, actuarial reviews, and other activities, give us confidence in the high quality of the business we are receiving from our largest client. We expect continued profitable growth at AmTrust with the addition of the renewed business associated with the recently announced Tower renewal rights transaction, which is expected to close later this year.

In addition to the favorable dynamics in the AmTrust segment, we are very optimistic about the continued prospects for our diversified business segment, which includes our US-based reinsurance subsidiary, Maiden Re; and the non-AmTrust business underwritten at Maiden Insurance in Bermuda, which includes the business developed by our international insurance services platform. Although premium volume in the segment was down by 0.5% in 2013, if we exclude the loss of premiums following the renewal rights sale of our E&S property business in the diversified segment, our net premiums written would be up approximately 2.4% for 2013 -- with a growing trend line, as our fourth-quarter growth rate reflects -- largely from the expansion of existing relationships as well as the addition of several new client relationships throughout the year.

And while we are not suggesting that the 20% growth rate is our formal run rate, we do believe that there is a positive revenue trend in our diversified segment. Over the year in the US, net premium growth from active client relationships was 7%, and our active treaty client count in our diversified treaty segment increased to 99 from 92 on January 1 of 2013.

Importantly, with the divestiture of our E&S property business, it means exposure to catastrophic losses as measured by our 1 in 250 year per occurrence probable maximum loss as of December 31, 2013, has dropped 59% to $27.8 million, or 3.4% of common shareholders' equity, notwithstanding our growth in premium. We believe that this reduction both positions us to enhance earnings stability and will also enable us to us to continue to provide stable terms and conditions for our clients. While we are not immune to the impact of natural hazard catastrophes, we believe that our more modest exposure significantly reduces volatility.

In the fourth quarter of 2013 the diversified segment net premiums written grew by nearly 25%, reflecting successful marketing efforts. Throughout the year we have experienced elevated in-force premium levels. This, of course, represents a measurement of the ultimate premium that we expect to generate on all in-force accounts, which typically serves as a good indication of written premium trends. We are pleased that growth from our existing customers, as well as the addition of several new client relationships, continued to drive in-force premium growth during the fourth quarter.

As you may remember, last year we increased client count with new business at January 1, albeit at a relative modest premium level per account. As we had expected, at January 1, 2014, we were able to increase our share in 10 of the 17 new accounts from last year.

The combined ratio for the diversified segment was 97.6% for the full year, which is, of course, a dramatic improvement from the full year of 2012 results of 102.5%. As you may recall, the 2012 year was adversely affected by the impact of Sandy in the fourth quarter as well as higher-than-targeted results from our international business, largely driven by adverse performance in our German auto business.

I am pleased to say that not only have we dramatically reduced North American CAT exposure, but in addition, we're enjoying favorable underwriting trends in the US and in the German auto segment, reflecting significant underwriting actions that were taken in the prior year. We will continue to work towards further improving our combined ratio by continuing to take action on underperforming accounts; maintaining underwriting discipline; and continuing the expansion of high-margin segments, such as our specialty facultative business in the US.

In the US, Maiden Re's client focus was recognized in an industry survey conducted in 2013. In that survey Maiden Re was ranked best for ease of doing business by cedents in the most recent Flaspohler industry survey. Maiden Re also received the highest scores among all the insurers for client orientation and value-added services. Maiden received the top score in three of the categories evaluated in the survey. That is the largest number of top scores for any reinsurer.

These favorable rankings are encouraging to us, and we believe they reflect our efforts to deliver differentiated products and services to our clients. We believe that it is this continued orientation around delivering on our core value proposition to our customers and prospects that has developed and that has helped to drive new business opportunities and increased shares from existing customers.

From a balance sheet perspective, we're always evaluating our capital position and looking for ways to improve our financial strength and flexibility. In the past year we raised over $300 million in two transactions. At the beginning of October we issued $165 million of 7.25% coupon mandatory convertible shares to support the growth in our reinsurance business.

In November we took the opportunity to pre-fund the repurchase of our 14% coupon trust preferred securities with the offering of a $152.5 million 7.75% coupon 30-year senior notes. As of January 15 of 2014, we retired the trust preferred securities, which will reduce our cost of capital by lowering Maiden's interest expense by approximately $9.5 million on an annualized basis.

I will now turn the call over to John Marshaleck, our Chief Financial Officer, to review the fourth-quarter financial results in a bit more detail. John?

Thanks, Art, and good morning. As Noah said earlier, unless otherwise stated, all references to common share data are on a diluted share basis, and comparative amounts will refer to Maiden's results in 2013 relative to the corresponding period in 2012.

Net operating earnings for the fourth quarter of 2013 were $23.3 million or $0.30 per diluted common share compared with a loss of $10.1 million or $0.14 per diluted common share. Please note that when calculating the diluted earnings per share, the quarterly dividend on the mandatory convertible preference shares should be added back to the earnings.

Net income attributable to Maiden common shareholders was $20.8 million or $0.27 per diluted common share in the fourth quarter of 2013 compared with a net loss of $10.3 million or $0.14 per diluted common share. It is important to note that pre-funding the TRUPs repurchase reduced net income in the quarter by $1.2 million, but it is excluded from our operating costs, given the one-time nature of the duplicate funding costs.

In the fourth quarter of 2013, net premiums written totaled $446 million, an increase of 0.7%. Net premiums written in the diversified reinsured segment were up 25% to $174 million. The growth in the diversified segment's premium was a result of organic growth of the existing client accounts as well as the addition of new client relationships.

In the AmTrust quota share reinsurance segment, net premiums written increased by 18% to $275 million, and it was driven primarily by continued rate increases in lines of business such as worker's compensation. As of August 1, 2013, our contract with NGHC was canceled. It is in a run-off position, and we are no longer receiving net new premium.

In the fourth quarter of 2012 Maiden wrote net premiums of $71 million in the NGHC quota share segment. Excluding the divested E&S property business in the terminated NGHC quota share, Maiden's net premiums written in the fourth quarter of 2013 increased 22%.

Net premiums earned of $491 million increased 3% or $12 million. Earned premiums decreased 2% in the diversified reinsured segment to $189 million, reflecting underwriting actions taken in 2013 and the sale of the Company's E&S property business. The AmTrust quota share reinsurance segment earned premiums were up 23% to $264 million. The NGHC quota share segment earned premiums were $39 million in the fourth quarter of 2013, down 47%.

Net investment income of $25 million in the fourth quarter of 2013 increased 20%. Total investments of $3.2 billion increased $546 million or 21% compared to the year-end 2012.

The average yield on the fixed income portfolio, excluding cash, is 3.48%, with an average duration of 4.64 years. This compares to an average yield on the fixed income portfolio at the end of 2012 of 3.48% with an average duration of 3.55 years. The current duration of our loss reserves is 4.2 years.

General and administrative expenses for the fourth quarter of 2013 totaled $15 million compared with $11 million. The general and administrative expense ratio increased to 2.9% in the fourth quarter of 2013 versus 2.4%, largely reflecting increased variable compensation costs driven by improved results.

The combined ratio for the fourth quarter of 2013 totaled 97.3% compared with 103.7% fourth quarter of 2012. If we exclude the losses from Superstorm Sandy in the fourth quarter of 2012, the combined ratio would have been 97.3%, the same as in the fourth quarter of 2013.

Total assets increased 13.9% to $4.7 billion at the end of 2013 compared with $4.1 billion at the end of 2012. Shareholders' equity was $1.1 billion, up 11% compared to December 31, 2012.

Book value per common share was $11.14 at the end of the fourth quarter of 2013, or 2% a lower than at September 30, 2013, largely due to the unrealized changes in the value of the fixed-income securities. Our total capital at the end of 2013, which includes our senior notes and trust preferred securities as well as our stockholders' equity, was $1.6 billion. This compares to $1.4 billion at December 31, 2012. However, on January 15, 2014, we redeemed all the remaining 126 million trust preferred securities. On a pro forma basis, following the repurchase of the trust preferred securities, our total capital is $1.5 billion.

Also as a result of the redemption of the trust preferred securities in the first quarter of 2014, Maiden will incur an additional one-time noncash charge of $26 million, which represents the accelerated amortization of original issue discount associated with trust-preferred securities. As we have previously announced, Maiden issued $165 million of 7.25% mandatory convertible preference shares in October of 2013. The issuance of convertible shares has a significant impact on our fully diluted weighted average number of common shares.

As you will see on our most recent income statement, our fully diluted adjusted weighted average number of common shares for the fourth quarter of 2013 was 84.5 million. This compares to 73.2 million shares in the fourth quarter of 2012.

The increase in the number of diluted shares is a result of the issuance of the mandatory convertible shares. Because we issued the convertibles on October 1, 2013, the weighted average conversion for the fourth quarter includes the fully diluted impact. However, for the full year 2013, the weighted average computation lessens this impact. For the full year, adjusted fully diluted weighted average number of common shares was 76.4 million.

I will now turn it back over to Art for some additional comments.

Thank you, John. The US reinsurance marketplace remains highly competitive, with clients and brokers negotiating for better pricing and terms. While our non-catastrophe focus has insulated us from some of the most significant competitive pressures in the sector, even in our target segment the market remains competitive.

We believe that despite the competitive market, our lower operating costs; our greater capital efficiency; and importantly, our client-centered business strategy, as well as are many long-standing client relationships will serve us well. We're focused on providing differentiated value and support to our clients.

Importantly, as we have stated and evidenced many times before, we will not grow our portfolio solely for the sake of growth. Disciplined underwriting remains essential.

At the primary insurer level, pricing has continued to increase in the US, although the rate of increase has moderated. As always, there's a lack of consistency, with rate levels varying by line of business and geography. But in general, the trend remains positive.

At January 1, 2014, we saw premium growth in our US treaty business from new business written as well as increased writings from existing customers, resulting in about a 7% year-over-year increase. Of course, we are early in the year, and this number is likely to change based on new business acquired as well as renewal activity over the balance of the year. But at this point, we are pleased.

In Europe, several weather losses from hail and flood impacted the market and resulted in increased property pricing at 1/1. Fortunately for Maiden, our business was not significantly impacted by these losses.

In terms of auto insurance rates, prices have risen in the UK by about 5% and between 5% and 10% in Germany, which are our two largest markets in our international insurance services business. We believe that the market will remain favorable over the next 12 months for that segment. And overall, we believe that Maiden is well positioned to enhance operating performance and continue the expansion of the underwriting portfolio.

We're focused on expanding our product offerings in our core market segments. As an example, last year we enhanced our umbrella liability capabilities to assist our regional clients in addressing their client needs; and this year we're focused on further enhancing the value we provide to our clients.

We are actively also working on plans to enhance our global capabilities. While our European expansion, which was predicated on increased small- to mid-size insurer demand driven by the implementation of risk-based capital standards -- or Solvency II -- has been delayed, we believe that concern and interest is again growing, with a focus on implementing these standards in 2016.

We plan to strengthen our capabilities to provide meaningful capital solutions. As always, we will maintain a disciplined approach to underwriting, which is the cornerstone of everything we do. Importantly, we will continue our efforts to effectively manage risk and volatility across our platform, both on the liability and the asset side. Our balance sheet is strong and well positioned to drive enhanced returns.

We are committed to leverage our key competitive advantages, including our low-cost operating platform, our efficient balance sheet, and our client-centric operating platform. Our differentiated business model will continue to be a key driver of our success.

Importantly, our key operating objectives remain unchanged. We are focused on improving our underwriting performance towards our combined ratio target of 96%; continuing to enhance operating returns on equity towards our medium-term goal of 15%; maintaining our G&A operating expense relativities of 3% of earned premium or less; and achieving compound annual growth rates of 10%.

In closing, I would like to thank the entire Maiden team for their efforts in making 2013 a successful year; importantly, our clients, for placing their trust and confidence in Maiden; and of course, our shareholders for their continued support. This concludes our prepared remarks. Operator, could you please open the lines for Q&A?

(Operator Instructions) Randy Binner, FBR.

I just want to talk about diversified reinsurance growth and kind of what worked there this quarter, because that is a pretty big part of the story. So I guess I would pick up -- you said you increased share with 10 of 17 key accounts.

I just want to get a sense of if the opportunities you captured this quarter and the better trend you see for the rest of the year -- is it more in the US business? Is it more in the European business? I think OEM has been a big focus over there. So just trying to get a little bit better view of geography and product type, of what is working better, potentially, for diversified this year versus the last couple.

Sure. Let me first point out: the fourth quarter did include some comparisons to a relatively low base from the previous year. As I said earlier, we don't at this point anticipate that run rate will continue. We still see a positive trend. And as I have talked about, we see about a 7% year-on-year, kind of one-to-one growth rate.

The areas where we're seeing growth: our facultative business in the US has been expanding. That is really our highest-margin business segment. We have seen a fair amount of our growth coming from for-client relationships that are expanding. About half of our growth seems to come from the growth of core clients.

And I think that you commented about the new clients -- growing those relationships. I was really referring to the 1/1/2014 period, where we had the opportunity to again look at those accounts and offer to expand our position. And we were able to do that on the majority of those accounts.

The other aspect you talked about, the international -- we can see a little bit of growth there. Our outlook for this year is cautiously optimistic. We are developing relationships with other manufacturers, which should allow us to diversify our customer base. And we continue to see good penetration levels in Germany on the business there. And as I mentioned before, a good pricing trend.

But I would say if we look at 2014 from a diversified perspective, probably a realistic view would be to look at our 10% compound annual growth target as a reasonable target to shoot at for this year. As I mentioned, it's a very competitive markets. We saw a lot of submissions, probably a record number versus previous years. But we had to pick very carefully the ones that met our requirements. And on a relative hit ratio basis, we are probably a bit lower hit ratio but still produce net growth.

Okay, thanks for that. And just one other comment on Europe. You said that the pricing was better because of some weather-related activities last year. There has been, certainly, the UK floods; I think other Euro storm activities so far in first quarter.

So is that something that might affect Maiden? Is that something that is having a real-time impact to keep pricing still firm there?

We have the perfect situation in the sense that so far, we're not seeing that adverse effect in our results. And yet, clearly, the primary market is having to strengthen pricing to shore up their performance because of those CATs. So we do see 5% to 10% premium growth levels in Germany and roughly 5% in the UK.

I think that helps us in the pricing environment. And fortunately, up to this point, we're not seeing any adverse effect of that.

All right, great. Thanks.

Alex Lopez, Portales Partners.

Congrats on the year. Sticking with the notion of prospective growth, can you just share your thoughts on AmTrust's Tower acquisition and its impact on Maiden?

Yes, I think that as that transaction closes, and we see the effect of the renewal rights transaction taking place, that we expect to participate under our typical 40% quota share structure. At this point we are not involved in the assumption of the existing unearned, which AmTrust is involved in.

And we feel like the fact that the business is coming over to AmTrust -- it will be underwritten under their business model, with their pricing, their efficient platform, and their technical skill. We feel pretty comfortable about that business moving over.

I think the question remains is what the size of that portfolio will be at that point. But we feel pretty comfortable about our ability to absorb that.

And just one last question. What are your thoughts on retrocession? Does it make sense, given your business mix? And is it appealing to you?

I would say it is always an option for us. For instance, if we needed a lever to help support the growth of our business, that is always available. But for the most part, unless -- absent a leverage concern, typically -- unless it improved our economics, it probably doesn't make sense for us.

And given the fact that we have such a low net CAT PML, we do use retrocession in a number of areas to a small extent. We use it in some of our umbrella liability business in the US and there are a couple of other places. And we might even have some specific retrocessions that we do in some of our accounts. But by and large, retrocession isn't a big part of our business model at this point.

That is all I had. Thanks.

Bijan Moazami, Guggenheim.

A number of questions. First, on the AmTrust book of business, they are growing their small commercial accounts. There are -- on a relative basis, warranty business is shrinking as a percentage of what they do. You guys get a flat ceding commission from them.

Now, it is the percentage of the P&C business for them -- from them is going to be growing for you guys, would that mean that your loss ratio is going to drop? Because, obviously, the P&C business has a higher expense ratio and a lower loss ratio, and the warranty business has a lower expense ratio and higher loss ratio.

That is a good question. I think we have seen stable underwriting results there. That trend, if that continues, obviously has a beneficial effect on our overall results; you are correct.

In fact, as you know, we took away the adjustment, the ceding commission adjustment, because we saw the trend line being dominantly focused on the small commercial business. So we will see how the business develops prospectively, but the point you are making is a fair one, and we believe that -- it suggests, at least, that we will continue to see good performance on the AmTrust business going forward.

Then a follow-up on the Towers business. I understand that the business going forward from Tower is going to be very attractive, but how have you thought about how the ceding commission is going to work on the UPR transfer? Because obviously, what you pay AmTrust is very different than what AmTrust is going to be paying Tower.

I am sorry. I probably didn't clarify is enough. At this point we are not participating on the UPR transfer.

Okay, great. And then, finally, a last question for John. You said that the share count for 2014 would be 76.4 million. So the pro forma book value, adjusted for the payoff of the TRUPs -- is it going to be around 1080, or is it going to be different?

I am not quite following you with the 1080 --.

Because you paid the TRUPs on January 15, so the equity is going to drop by $26 million. So if I were to assume that the transaction would have taken place on December 31, what would the book value be? 1080?

Yes, it would be reduced, yes, by that, yes. It is -- certainly that is an impact. But now, when you look at the book value, the fully diluted shares don't impact the book value, because at this point they would be anti-dilutive.

Okay. Then what would be the basic share count going forward in 2014? So you gave us the diluted; what is the basic share count?

The basic share count on the financial statements going forward at December 31 was 72.6 million for the book value computation. And as you pointed out, that is different than the earnings-per-share computation. I know it is a bit confusing this quarter because of the way that convertible securities came on.

Okay, perfect. And the last question is that there was an increase in the commission payout. So if I look at the commission and other acquisition expenses, there was some movement there. Is there a change in the ceding commission, or is it just the way the accounting works? Or is there some kind of a change in the dynamic of that and shift in mix of business?

No, that is really just related to the business mix change, Bijan. There is really no change in the basic assumptions of business itself. It depends on the business mix. That number will fluctuate. But obviously, when we price an account, we still look at the combined ratio.

That is all I have. Thank you.

Ken Billingsley, Compass Point.

I just wanted to ask: were there any reserve releases or adjustments during the quarter?

Ken, this is John. They were very minor for the quarter. Overall for the year we're going to have a very minor, positive reserve release. But again, they are relatively insignificant.

And I know I have asked this question on some other calls, but just a clarification: when we look at AmTrust and what their loss ratio is on a blended basis, you guys tend to have a loss pick for what you retain. That tends to run 50 to 80 basis points lower. Can you talk about what you are excluding, what you are not covering, that allows you to have a loss ratio pick that's below what AmTrust is putting up?

First of all, Ken, we establish our loss picks independently, as we do with every client. And we are comfortable with the picks that we have established.

There are certainly elements of AmTrust business that, as you know, we don't reinsure. But I don't know what loss shifts booked on those segments actually are. So as it stands today, there are some of the professional lines that we don't participate on today. The first nonprofit we don't participate on. Those are a couple that come to mind.

And I believe that you might have answered this with Bijan's question, but just following up, the expense ratio itself on the acquisition side for AmTrust: it has been pretty steady throughout this year, but it is higher. And that's primarily just mix of business?

Art Raschbaum Yes, that is true, Ken. It's the mix of business. And then the -- in the prior year, we still had the impact of that adjustable commission impact. So it is really -- and certainly the mix of the business impacts that. But it is by far the biggest piece.

Number two, that is the hospital liability segment. We have a different ceding commission than we do for the --.

Yes. We have a much lower ceding commission on hospital liability. And depending on the premium and quarter of the year, that does have an impact on that ratio.

The last question is: from a capital standpoint, obviously you have did the capital raises at the end of the year. The growth coming out of the diversified segment was higher than we expected. And I know you have seen a temporary expectation in 2014. On a blended basis, does the capital that you raised anticipate the premiums that are likely to flow from diversified and the AmTrust growth/Tower Group deal? Or will you possibly need to tap the capital markets again?

We think we are in a pretty good position from a capital standpoint, Ken. We look at our ratios at year-end and project out what we expect to grow.

We think we have enough -- we're comfortable with capital today. Obviously, if there is more significant growth than we would anticipate, which would be a good problem, then we would have to do that. But at this point now, we feel pretty comfortable where we are at.

How high do you feel that you can take that ratio before you need to make adjustments?

Well, when we look at our -- we use our capital as a statutory proxy. It's not exact, so we don't have an exact statutory number. But the $1.5 billion of capital related to the $2 billion of writings, that is about a 1.3 ratio. And again, these are very high-level ratios. So keep in mind they are high level. And we have been operating a little bit above that in the past, so we feel -- in the past we have been about a 1.5.

So we have some, I think, ability to grow the premium base on that. We look at a GAAP basis -- same type of ratios. A little higher, but the same type of a relationship exists there. So I think we are pretty comfortable going into 2014 with the capital we have today.

Would you like for me to move on to the next question?

Yes. Please go ahead.

Bob Farnam, KBW.

With your ability to continue to invest your cash, we should basically expect that the investment yields will be going up from here? That is part of the question. The other part of the question is basically the new money rates versus what has been expiring. Just give us an idea how they compare.

It is hard to project on the rates. We would hope they would go up. We thought they were going -- and then they did go up in the fourth quarter, although it seems like now they have leveled off a little bit.

It's really, really hard to project that. The new money rate is 3.4%, very close to where we are at on the overall portfolio. Again, we really can't do much more than work with the cash we have; invest it as quickly as we can. And we have done that. You saw the big increase in investable assets in the quarter. We're just going to try to keep the portfolio invested as best we can. And rates will obviously, that would fare -- they would --.

I would say that from our perspective, Bob, we are not anticipating any significant expansion in yield, but that doesn't, in our view, put a damper on our view that earnings can grow this year, because our invested asset base is growing as well. So we're not making any heroic assumptions on expected investment yield.

Okay. And a numbers question: I don't recall if you provided it, but operating cash flow?

The operating cash flow for the year was a little over $360 million. So approximately $100 million in the quarter, a little over that. Very positive cash flow for the year and the quarter.

Good. Okay, thanks.

Matt Carletti, JMP Securities.

Most of my questions have been asked and answered -- just one, kind of a follow-on to Bob's in terms of the investments. Obviously, end of the year, kind of at a high point for cash balance -- about $140 million, which makes sense, given some of that capital raises. What is a comfortable run rate cash level for you? How much of that is yet to be put to work?

Well, most of it has been put to work. I think a comfortable level is the $100 million to $150 million range. But a lot of that really depends on the timing of the cash flows and so forth. That is what we target.

We did have the TRUPs repayment in January, so we had to keep some cash available for that. And now that is over with, obviously, we can have a more normalized cash position going forward. But I think if you use the $100 million to $150 million range, that is our target.

Got it. Perfect. Thanks a lot, and congrats on a nice quarter and year.

Thank you, Matt. Appreciate it.

And there are no further questions at this time. I'd like to turn the conference back to our host for closing remarks.

Thank you, everyone, for joining us today. We look forward to speaking with you in the future. Have a great day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.