Markel Group Inc (MKL) 2005 Q1 法說會逐字稿

Good morning ladies and gentlemen and welcome to the Markel Corporation first quarter 2005 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Steve Markel, Vice Chairman of Markel Corporation. Thank you, Mr. Markel, you may begin.

Thank you. I would like to welcome you all to the Markel first quarter conference call. Before we begin, I would like to call your attention to our Safe Harbor and cautionary statements set forth in our 10-Q and 10-K. Our discussions could be affected by the matters described in those statements and we encourage you to read those statements very carefully.

Our program today will be very much like our previous conference calls. After just a few comments, Darrell Martin will review the financial statements, Tony Markel will review the operations, Tom Gayner our investment results and then I'll moderate the questions and answers at the end.

The first quarter of 2005 had a very good start for the year. Underwriting results were great. Our investing results are facing some headwinds, but it's a good quarter and 2005 is looking to be a great year. With that, I will turn it over to Darrell.

Thank you, Steve, good morning. Let me draw your attention to the fact that we did in fact file our 10-Q late yesterday and it is available and you can review that for probably a more complete discussion about the first quarter than we may cover here. But it has complete financial statements and it is available to you at this point.

As usual, I'm going to start my conversation by focusing on the underwriting side of the house and I have a few comments on the investing side and then overall performance relative to book value per-share growth during the first quarter.

First on the underwriting side, consolidate gross premium volume was a little but in excess of $585 million in the first quarter compared to about 665 million for the same quarter in '04. That is a 12% drop in gross premium volume written and that drop can be attributable to a couple of different things. About two-thirds of that 12% drop is due to the disposition of core response (ph) in the quarter, reduction as a result of re-underwriting some of our casualty business that investors underwriting managers (ph), and the balance coming from net operations as it relates to some discontinued lines of business within the net (ph) business units, such as aviation.

The other third is I think of in terms of really market conditions, competition that we are seeing and various books of business and probably just simply fewer books at new business coming on the books. Tony I think will add a little color that during his comments.

On a net written basis, we retained about 85% of the gross premium we wrote, up from 81% a year a go. That increase is very much in line with our plans and expectations and it's due to real changes in both reinsurance treaties and the mix of business compared to the first quarter a year ago. On an earned basis, we had about $495 million of earned compared to 505 million a year ago. Again, the decline in gross premium that we have seen over the past several quarters is starting to show up on the earned's (ph) side. And as you know, earned's generally lags what's happening on the top line. So again, that's very much in line with our expectations.

As usual, the real story is in the profitability of the business that we write. Our combined ratio is 90% for the quarter compared to 96% a year ago. If you recall in 2004, there was a prior year reserve addition made of $30 million. So in that 96 of a year ago, there was about 6 points related to prior-year reserve strengthening. But as Steve mentioned, the first quarter is off to a great start from an underwriting perspective. 90 combined is very, very strong and we're real pleased with that.

On the investing side, our portfolio at the end of 2004 was about $6.3 billion. At the end of March the performance was approximately 6.2 billion, approximately a $100 million decline, and that decline is attributable to three major factors. First, we sold Corifrance Products in the quarter and there was approximately $90 million of portfolio and cash that went with that the disposition. So that is a reduction. Obviously, I will talk some more about this, but the change in unrealized gains and losses during the quarter, we had approximately $139 million unrealized loss on the portfolio, so that reduces it and those two items were offset by 109 million positive cash flow from operations. So those are the three major components for the drop during the quarter.

We will point out that the sale of Corifrance we did not receive cash at the date of sale. That cash was received in April, approximately $57 million, so that will come back into the portfolio in the second quarter.

Net investment income for the quarter was $58.8 million compared to 48.7 million a year ago. The increase is due to two factors. One is the higher invested assets but for the first time, we're actually seeing the yield increase a little bit in the current quarter and our average book yields actually did increase compared to the prior year. So that's perhaps a turning point in terms of the yields on our performance that are starting to pick up a little bit.

Our realized investment gains in the quarter were 16.7 million compared to 7.4 million a year ago. Again, we always say the timing of realized gains is highly variable and we're just as happy generally to keep those gains in the unrealized column (technical difficulty) but we did have realized gains of 16.7 million in the quarter. And again, the real story on the investment side of the house is the change in market value of the portfolio, a drop of 139 million split pretty much evenly between fixed securities and equity investments. Our total return was about $63.5 million in the quarter, a loss -- the total return was a loss of 63.5 million in the quarter and a total return of -- on a book basis of about 4% for the first quarter on an annualized basis. So as Steve said, we do like the securities in our portfolio, simply the mark-to-market at a point in time resulted in that total return for the quarter.

On a net income basis, the sum of the underwriting results and the investing results, our net income was $75.7 million compared to $42.3 million a year ago. Very strong results driven most by the underwriting results, plus the improved performance on the investment side of the house. We're pleased with that.

Other comprehensive income was a negative $101 million, 101.8 for the quarter, and that is driven by the change in unrealized gains and losses (inaudible). On a per-share basis, our net income per share was $7.47 for the quarter compared to $4.20 a year ago due to the factors that we've just discussed in terms of the underwriting and investing. We're very pleased with that result. Our book value per share did decline in the quarter approximately $3. It closed the quarter a little in excess of $165 a share compared to $168 at year end. And again, that decline is principally attributable to the unrealized losses in our investments. So with that, I will turn it over to Tony and he will add some commentary about the operating results.

Thanks, Darrel. Obviously we're very proud of our first quarter operational results. The reduction of a 10% underwriting profit of almost $500 million of earned premium is indicative of both our unwavering corporate focus on underwriting and the dedication of our troops through (ph) those targets. The 90% combined was made up of 84% from our five excess and circles lines companies, 91% from the two specialty admitted markets and 103% at Markel International. But I hasten to add as it relates to our overseas operations, we are actually more optimistic than that figure reflects but continue to consciously try to build a margin for safety net reserves over there.

Although the market has softened somewhat and continues to show signs of further weakening, and particularly on property risks, our net written premiums were $495 million, which although down 8% from the corresponding quarter in '04, we're actually up almost 6% compared to the net written premium last quarter. And the net earned at the same $495 million figure was only down 2% from the first quarter of '04 and 3% from last quarter. These moderate reductions in premium volume reflective of the more competitive arena as Darrell indicated were achieved in spite of the late 2004 exit from aviation in London and the sale Corifrance both of which had contributed premium volumes in the earlier quarters used for comparative purposes.

I might also add, Darrell mentioned new business in his opening remarks. Actually, our new business submissions in virtually all of our units are up I think reflective of our continued importance in the specialty marketplace, but our hit ratios, given the competitive nature of the market out there and the more competitive arena that we are down somewhat. We're still seeing a lot of activity, we're just continuing to be as selected as we have always been and our hit ratios are suffering somewhat as a result of it. I'm not suggesting that this marketplace is a walk in the park, but I am saying that our marketing initiatives and increased retentions, albeit judiciously applied, are minimizing the impact on premium and most importantly, our underwriting margins are still very strong.

In addition, as I touched on briefly in last quarter's discussion, given our continued confidence in underwriting, we're aggressively focusing on marketing and sales to limit volume erosion in the short run and to set up platforms for growth in the future. Those initiatives are many and varied, but let me highlight just a few.

Number one, our advertising and branding campaign has been dramatically stepped up this year using our 75th anniversary as the cornerstone. Secondly, we've had every division do an exhaustive analysis of everyone of our specialty products which throughout the organization amount to some 75 or 80 across our eight operating units, challenging the adequacy of our coverages, the viability of our current distribution systems, the adequacy of our promotional leverage as well as service levels and expertise. The process has proven to be extremely valuable and has resulted in a number of recommended changes that will clearly make us more meaningful to the marketplace and significantly stronger going forward.

Third, we have added some new products and new talent to the mix. Examples of those -- Essex Insurance Company has just recently brought in an experienced railroad liability underwriter to augment our highly profitable railroad property program. Investors have started a new surety initiative on the shoulders of a new (technical difficulty) 30-plus year veteran of that market segment. SMART, which is our alternative risk operation part of Markel Re, recently added a talented experienced team of three underwriters in our Atlanta office who will provide additional impetus to their already effective reduction efforts. And in addition, Investors (ph) also is recruiting an underwriter to be housed at Shand Morahan's office in Chicago, a neighboring investor stop (ph) of their highly attractive product mix to producer force (ph). All of these things we think are going to be terrifically effective in shoring up the volume and growing going forward.

Number four, in addition as mentioned previously, we have also had some exciting news with regard to geographic expansion. Our Toronto, Canada office is scheduled to open this quarter, the second quarter of '05. The Madrid, Spain office, part of Markel International, is already officially opened for business and by the end of the year again internationally we should have two new retail branches in England and one in Scotland, which will broaden the reach of that highly profitable subsidiary.

Last but not least, let me also reiterate that our interest in acquiring specialty books of business that are homogenaic (sic) in nature and can produce solid underwriting profits, the types of which we're looking for, continue under (inaudible). Although what we've seen so far this year has clearly been underwhelming in that regard.

In summary, I'm pleased to report that the operating sector of our company continues to show its maturity, discipline and profitability. And with that, I will turn it over to Mr. Gayner to give us the investment side of the house.

Thank you, Tony. Darrell reported the numbers with investment income of 58.7 million, up from 48 (technical difficulty) which largely reflected increased portfolio size as well as the beginning of showing up some of the higher yields that you see out there in higher interest rates. The total return on the portfolio, including FX, was down 1.1%, and that breaks down -- on the fixed-income side, we were down 0.1%. There was a slight rise in rates during the quarter but during that time, we maintained a very high-quality bond portfolio. We're not seeing spreads wide enough to encourage us to take more risk on the bonds. We remain at the short end of our duration range of between four and five years, so we're closer to four years in duration and the bulk of the new cash has been put into muni's, given our underwriting profitability and yields.

On the equity side, we were down 3.6% versus a 2% decline roughly in the S&P. Clearly the energy and commodity areas have been the best sectors over the last 12 to 15 months and that is not an area of concentration for us. In 2004, to get to the slightly longer timeframe from just the quarter, I will remind you we did outperform despite again minimal exposure in some of the more favored areas such as energy and commodities.

To gain some perspective and talk about things in a longer timeframe, over the course of the last five years our equity portfolio is up almost 100% versus an S&P decline of about 15% over that time. And since 1990, there have been 57 quarters in total -- 15 of those have experienced negative returns, so that's roughly about 26% or a little more than one a year. I'm hopeful that we got 2005's bad quarter out of the way. Nine of those 15 quarters have been more negative than this. In the long run, we've had a wonderful record of outperformance with the focus and the discipline that we have and we do not anticipate any changes to that.

To remind you our long-term discipline focuses on profitable businesses with good returns on capital run by honest and talented managers that have reinvestment opportunity and are available at a fair price. Clearly buy and hold investing does not work every quarter. If it did, I think everybody would do it. But quarters like this would dissuade some people and create the opportunities to build wonderful long-term returns to the buy and hold philosophy. I am reasonably optimistic about the current opportunities that are out there, both in terms of the future prospects of the businesses and the companies that we own and the price at which one can buy them at these days, so we continue to be steady and methodical purchasers of these securities and financial services, retailers, in consumer products and services that participate in global growth and rising worldwide affluence. And we continue to be methodical and consistent in putting dollars into the equity portfolio.

With that said, I'm confident and optimistic that the mix of growing earnings and reasonable valuations will produce pleasant investment returns that I look forward to reporting to you in future quarters and I will be happy to answer any questions later on. With that, let me turn it over back to Steve.

Thank you, Tom. Before I open the floor to questions, I would like to make a few comments about finite reinsurance. Like so many things, finite reinsurance is not a bad thing by itself, but clearly finite reinsurance can be badly used or misused or even abused, and it clearly has been. I think there are two important factors to think about that drive people to use and sometimes use finite reinsurance. The first of course is that GAAP financially accounting -- Generally Accepted Accounting Principles -- generally require that loss reserves be established at expected future cost. It's just not appropriate to discount your loss reserves.

These second factor is that some analysts, in fact maybe many analysts, maybe even most analysts, somehow believe that investment returns for some strange reason are less valuable than other operating income. Finite reinsurance is abused when its primary purpose is to mislead those who depend on our financial statements by discounting loss reserves or giving up future investment income to make the current operating results look unrealistically good.

At Markel of course, we have not used finite reinsurance. At Markel, our long-term business plan, our business model, is based upon the importance of both consistent underwriting profit and superior investment to build shareholder's value which we measure by building book value per share over the long haul, not just quarter to quarter, but year after year after year. We're real pleased that we have delivered on this promise and expect to do so in the future. We're very, very excited about the start to 2005 with the development in all of our underwriting units moving on a very positive direction. We're not the least bit dissuaded by what's happening in the equity markets today. In fact, our intent is that we will have greater opportunities today to build value for the future. And with that, I would like to again thank you for participating, thank you for being Markel shareholders and we look forward to answering any of your questions.

(Operator Instructions). Stephan Petersen, Citadel (ph).

Good morning. Two quick questions. One, both -- I guess they both focus on what's going on in the international arena. One, I'm wondering when we might or if you could quantify how much adverse development there was in the international book in terms of -- we're still running a fairly flat or (indiscernible) underwriting profits there yet and I'm wondering if you can provide any clarity as to when that might turn around. And second of all, any thoughts on kind of the compensation agreements that are being discussed between brokers and underwriters in London these days, in terms of replacing some contingent commission income that seems to be going away for the brokers?

Sure, Stephan. I will deal with the first question and let Tony talk about the compensation negotiations that are ongoing in London. First, as most of you will know, in the first quarter we reported a combined ratio from our international operations of 103%. We've now owned and operated the international business for five years and our expectation was certainly five years ago that by this point in time, we would be reporting consistent underwriting profits. In fact, the number in the first quarter this year is very much on track with what our budgets were for the year. And as you all know, our goal is to set loss reserves that are more likely redundant than deficient. What we've typically enjoyed in our more profitable operations is that redundancies that evolve from prior periods offset the margin of safety that we continually put up on our current book of business. In the case of Markel International, we do not have adverse development in the first quarter and it has been very, very modest in the last couple of quarters and we feel like we really have things well in hand. However, when it comes to our actuarial process and our loss reserving process, we're continuing to add a margin of safety when we make our loss reserve selections.

So from an operating perspective, I guess the answer is we believe and are very hopeful that the 103 will prove at some point in the future to be heavy-handed. But in the wisdom of conservatism and consistency and in maintaining our philosophy of making sure we have margin of safety, we are currently reporting 103. And quite frankly, that might last for the balance of the year. I think if we start seeing redundancies from prior periods, that could certainly come down and God willing, that will start to happening sooner rather than later. Likewise, if there are any unusual events -- hurricane, earthquakes or the like -- there's nothing guaranteed about anything. Tony, you want to deal with the London compensation (ph)?

Yes. Obviously, I think you're talking about the PSA's and specifically Marsh, Ayon (ph) and Willis's acknowledgment that they are no longer going to be involved in them. We had some involvement in London with PSA's with those three firms and a couple of others, although we characterized it as particularly meaningful. But we like many others had agreements with them. Obviously when they disavowed going forward income coming off of those things, we were affected in that regard positively and we have been in dialogue with those firms to effectively discuss compensation going forward. Nothing has effectively been tied down now. I don't think whatever agreements we reach are going to be particularly material to our results, but they're giving up income on that side, frankly needs to be addressed and we as partners with them in the business are perfectly prepared to address it. We haven't tied anything down now and I would not characterize it as being material either, internationally or in our overall results.

Tony, if I could just ask a quick follow-up. It may not be material, but I'm wondering what kinds of pressure that put on sort of the London market in terms of -- I know you guys can kind of play in a lot of different ways over there, but I am getting the sense that the brokers are sort of increasingly desperate to try to get some resolution to what's going on in there and I'm wondering how that may affect London in general and maybe Markel less specifically?

I think 1.7 is probably overriding (ph) what you might be thinking of as desperation, is they're probably focus on doing the best job for their clients than ever before. And if the market in London is doing the best job, they will be forced to stick with that market. If the market in the U.S. or Bermuda is going to do the best job, that's where they have to go. And that's quite frankly where they focus should stay, and I think it will stay, especially for the good ones.

Okay, (indiscernible) world. Thank you very much.

David West, Davenport & Company.

Good morning. First question I guess (indiscernible) the international area as well. I think typically you have for some understandable reason had a higher expense ratio in the international operations, and that's certainly true with this first quarter. Is that something you expect to continue around current levels, or do you think there's some ability to bring that down over time?

Dave, I will answer that. You know, we expect London in general will run with a higher expense ratio than ordinary given the types of distribution. But you know, our philosophy has always been focused primarily on the loss ratio. A point or two on the expense ratios, if it drives scrutiny of the business and oversight of the business we think is one hell of a good payback. And when the volume goes back up in London, you will see some moderation and some improvement in the expense ratio. But even in the states, our focus, we're not a low-cost provider even over here in any of our operations believing that the type of underwriting oversight that we apply, which is not what they have cost, pays strong dividends on the loss ratio side. So I would encourage you not to get particularly tied up on the expense ratios.

The other point I think David, we in fact have done a very good job of controlling expenses in the UK and in our fixed cost in London and pound terms are significantly lower in the first quarter than previously, but it's adversely affected by both foreign exchange and the decline in premium volume in the first quarter. And so you will see for those reasons a little bit more volatility over time in London because their large part of the premium base is in dollars but the expenses are in pounds. And so there's a timing and currency issue that creates some volatility there.

I think from our perspective, the more important point is that we expect the underwriting margins and the combined investment returns and underwriting margins to generate comparable returns on capital, whether it be in London or the U.S. Currently, we're not there with London but in the long run, we can't make the same return on capital in the business in London than we're making in the U.S., then we will be reducing our exposures there.

Turning to the tax rate, that was a little lower than expected. You've mentioned your purchase of municipals as a primary reason for that. Would a 30% effective from a modeling standpoint be a good estimate for the remainder of the year?

Yes. That's our expectation for the year and the tax-exempt, you're exactly right, is the primary differential.

And then lastly, a quick review of the numbers. I didn't see any mention of any particular book of business having a material positive development or redundancy emerge. Is that the case for the quarter?

Yes, there was no one area that we would point to there.

Great. Thanks, that's a great start to the year.

(Operator Instructions) Beth Malone, Advest.

Thank you. Good morning and congratulations on the quarter. I have a couple of questions. The Corifrance sale -- how much after-tax did that contribute to operating earnings in the first quarter?

It was about 5.5 million pretax, and so when you crank that down, it's probably $0.30, $0.35 probably.

Okay, that's kind of what I had. Also on the acquisitions of employees, as Tony mentioned, several very veteran people were added to Markel. And I was wondering, I understand in the previous year, it's been pretty difficult to recruit high-quality people from the property & casualty industry because so many players are trying to build up their underwriting. And I was wondering, what was -- how was it that Markel -- not that it's not a wonderful place to work -- was able to acquire these people given how tight the market is for talent?

You know Beth, I swear, I hate to sound cavalier about it, but we've really never had -- we have had difficulty finding people that we felt could adapt to our unwavering focus on underwriting profit in a homogenaic specialty and that type of thing. But once identified, I swear, we have really -- we have not really been unrequited with regard to being able to attract people to little old Richmond, Virginia. And I mean you go back to the establishment of the alternative risk side two years ago, we brought in an entire team of people there. And I can name you countless additions to staff on an ongoing basis. It really has not been a problem for us. So I would not characterize the two or three additions that we made this quarter as sort of a departure or a realization of anything different than what we've been able to do before.

Okay. And you spoke about, on the last several conference calls, you've talked about the competition and pricing competition you're seeing in some of your markets, but it looks like you increased your overall retentions. I was wondering, I guess the expectation is that the pricing, although more competitive, is deterring you from wanting to retain more of that business?

Well we've always wanted to retain more. If you go back and look at our history, we started of I think 1986 retaining $10,000 of risk of something. And since then, we have continued to increase our retentions as our capital and financial capability have gone up. And I want to make sure that we don't leave an impression that we're knee-jerk retentions up as a result of pressures on volume. There's just been a continual effort all the way along and our retentions are still very much within reasonable levels given our capital base. And it has not been a reaction to the slowing down at volume, it has just been a normal course of business. And if you go back and look at the almost 20 year history since we went public in the last 10 years, every year we've gone up in increased retentions. As a matter of fact, the majority of our reinsurance sessions now relate to property cat cover as opposed to more specific treaty-related product-related stuff. So I don't want to leave anybody with the impression that all of a sudden, the market slows down and we start making injudiciously increasing retentions.

And lastly on the acquisition front, any development there or anything that looks -- what does the market look like right now?

Send me something good, we'd love to look at it. We've looked at six or seven things starting in the fourth quarter of '04 and continuing in the first quarter of '05 and frankly, nothing has been particularly appealing at this stage. We haven't even taken a good swing at anything. But we seem to be generally high on everybody's agenda when specialty market opportunities arise, so I presume that we're getting a decent look-see at virtually anything that comes up and nothing has appealed, so how about bringing us some?

I will work on that. Thank you very much.

Mark Dwelle, Ferris, Baker & Watts.

Good morning. I just wanted to build on a couple of points on the Corifrance deal. If commented that it was a 5.5 million gain on the sale, but it also suggested that a reserve was set up in order to allow for any contingent losses on that. Would that offset -- should that offset the amount of gain in the quarter?

No, that 5.5 million is net of the reserve that was established, the contingency reserve, so that's a net number.

Alright, I understand. And then secondly, that was classified as an operating gain. Without getting into too much technical accounting discussion, why would that get operating treatment as compared to just being a capital gain since that segment had been previously discontinued?

Well, we considered the geography of where that should line up. There's a couple of reasons that we ended up in the other operating category. First of all, clearly, it is not material to anything relative to revenues or expenses at all. Secondly, it was consistent -- Corifrance has always been carried and its operating results and the results of its activities has been reflected in the other segment. And frankly, probably the key thing is that this indemnification reserve that we have out there, to the extent that that is over or underestimated at this point in time, that result will in fact go through the other operating segments. So we felt it was appropriate to book the net result there since any plus or minus coming down the road in the future would also show up there. That's sort of our line of thinking.

That's very helpful. Thank you.

(Operator Instructions). Jerry Heferman (ph), Lord Abbott.

Good morning everybody. Gentlemen, I was wondering if you could -- you talked about the expansion of geographies and you went through a couple of offices that you are looking to open. I was wondering if you could give us a little bit more detail as to what lines of business you are looking to operate from those various offices?

Jerry, sure. Specifically in Toronto, given the similarity of the Canadian marketplace up there, although it is going to be part of our international operations and report to London, we're starting off with some professional liability coverages that we have done extremely well with at Shand Morahan in the United States. We're going to start off with four or five professional products and then expand from there depending on the needs of the marketplace. Similarly in Madrid, if you look at our international operation, the flagship department we have over there is also professional liability, albeit non-U.S. and the Madrid operation is going to start off operating the litany of professional liability products that we offer in London and then again try to be sensitive to the market place and respond accordingly.

The three UK expansion branches that I mentioned will be up and running hopefully by the end of the year -- two in England and one in Scotland are the exact replicas of four branches that we currently have that produce about $90 million in premium volume in Leeds, Birmingham, Rygate and Manchester and been highly profitable, well-run, has a backbone of professional but also does some general liability and some property. So it's a broadly based of group of coverages and we will then be operating seven retail branches in the UK as opposed to the current four, which will give us greater spread and broader representation. So I'm glad you asked, because I had not intended, I did not want to burden my earlier remarks, but that is our way and both in Toronto in Madrid, we expect to use these products as the initial toe-hold, but then see what the specialty market needs are and grow from there.

Alright. When you're saying professional liability, are we talking lawyers and accountants here?

Well, not necessarily lawyers and accountants, but specifically that type of miscellaneous E&O lines, specified medical, sort of the clinics and that type of thing.

Okay. I guess I should have said lawyers, accountants and other criminals, but --. Very good, thank you very much.

I think we have time for one more question.

David West, Davenport & Company.

(indiscernible) for Tom. On the investment side of things, are the yields you are able to obtain now on the cap (indiscernible) and muni side of things, could you give us a rough magnitude of increase of what you're able to do on the investment side versus last year?

David, I'm actually calling in from on the road and I don't have those numbers in front of me. I don't really think about things that way. We would just look at the cash coming in the door now and what the best opportunities are. And given where munis are trading and our tax position on the fixed income side, that's really where we've been concentrating our efforts and I would expect that to continue to be the case for awhile.

And as a follow-up, I haven't heard anything suggest that you wouldn't -- you're probably not going to alter your allocation of incoming cash flow between equities and fixed income?

No, we will continue to be sort of a, as I would characterize it, a steady-eddy buyer of equities to take advantage of dollar cost averaging. And just as long as you're owning the right company over time, the ability to consistently be a buyer of the securities for the month in, month out, week in, week out, tends to soften and dampen judgments you have to make about price at any given instance. And that has been a wonderful advantage for Markel over a lot of years and I think the choppy kind of markets that we've been in in 2005, coupled with the cash flow that we have, really as long as we keep our conviction and keep our discipline and keep your nerve about things, that is really what creates good investment results over time. So we're not wavering or changing that idea or notion at all.

Thank you.

Thank you all. We really do appreciate your long-term support. And as always, if you have any further questions, we are pleased to answer the phone if you call us here in Richmond. Thank you all very, very much again and I wish you all a very good day.

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time.