Old Republic International Corp (ORI) 2006 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Old Republic International second quarter 2006 earnings conference call. [OPERATOR INSTRUCTIONS] And at this time I would like to turn the conference over to Ms. [Leslie Loyer]. Please go ahead.

Good afternoon and thank you all for joining us today for Old Republic's conference call to discuss second quarter 2006 results. This morning we distributed a copy of the press release. Hopefully you've all had a chance to review it. If there is anyone on line who did not receive a copy you may access it at Old Republic's website at www.oldrepublic.com or call you can call [Deanna Walcott] at 312-640-6771, and she will send you a copy immediately. Before I turn the call over to Al Zucaro, Old Republic's Chairman and CEO, please be advised this call may involve forward-looking statements as discussed on the add 5 and add 6 page of the press release. Risks associated with these statements can be found on the Company's latest SEC filing.s With that, I'd like to turn the call over to Al for his opening remarks. Please go ahead.

Thank you, Leslie, and welcome to everyone, again. As usual, we---I won't waste your time by simply rehashing what's in this morning's release. You can read it as well as I can. Instead, we'll just add some details, or color as you all say, and then open it up to any questions that you may have that are pertinent to business.

So far for 2006, I have to say it's shaping up pretty much as we thought it would earlier this year. Though I have to say that the make up of our bottom line has not come together in the same proportions that we originally believed would happen segment by segment. Of the three regulatory segments we have here, title insurance is, as a matter of fact, performing quite a bit worse than we had assumed it would. Mortgage Guaranty, if anything, looks a little better than we anticipated. And mortgage -- and general insurance is delivering I would say much better powerful results than we thought possible earlier this year.

So taking it by the pieces, and starting with the last, namely general insurance book of business. It's really exceeding our expectations in terms of both the underwriting profitability of the business as well as the investment income growth we are obtaining. We started this year thinking we might get earned premium growth as may recall our mentioning earlier in January or February of this year, we thought we might get premium growth in the neighborhood of 6% to 9%. But in the first three months of this year, net premiums were up by roughly 6.7%, and in the second quarter as you saw in this morning's release it shows an increase of just 2.5%.

To some degree, though, I have to say that this is a bit illusory since we are comparing this year's second quarter with a related period of last year, and that period did contain a greater than usual level of what we refer to as retrospective premium credits, which are premiums that are adjusted base on the loss experience of individual customers, as well as some earned premium adjustments due to the ongoing process we have of annualizing our premiums receivable. The combination of those two types of adjustments, if you will, which bounce around from quarter to quarter, was about $13.5 million in the 2Q of '05. And if we adjust for these inconsistencies, it would produce apples to apples year-over-year premium growth of about 5.7% to say, for the second quarter of 2006. And 6.2% year to date. So admittedly, even after taking these adjustments into account, we'd still show earned premium growth at the bottom of that 6% to 9% range. So these comparisons are probably, after the adjustment, are probably pointing to a somewhat slower than 6% growth rate for the remainder of 2006. I've been around long enough to know that this is just the midpoint of the year and good things can still happen for the remainder of 2006, but at this point in time, as I say, I don't think that we'll come anywhere close to the 9%.

As we noted in this morning's release, there are a few pockets of our general insurance business which account for maybe 45%, 46% of our total volume, and we mentioned them in the release, namely our trucking business, our extended automobile warranty business, and our home warranty business, which have so far delivered aggregate premium growth in the mid teens year to date. And this more positive contribution, if you will, is taking place in those parts of our business that are still expanding geographically. On the other hand, the nongrowing parts reflect relatively minor slippage in overall pricing levels. And I'm talking still, as we have for several quarters now, slippage into 2%, 3% level, as well as much greater competitive pressures that are beginning to make the acquisition of new accounts much more difficult than was the case through, let's say, mid-year of last year.

Leaving aside, therefore, the less than stellar top-line performance in our general insurance business, the other metrics of this business continue to produce, we think, very favorable trends, both paid as well as incurred loss costs. Again, as you see, in the statistical tables this morning, have remained very stable, and to a large degree, the stability of the incurred loss as part of that statistics is being aided by a continuation of very favorable development of prior year's claim reserves. In a similar vein, production and administrative costs, as you see, have remained lodged within a range of 23% to 24%. So when you put all these factors together, it produces a very positive composite ratio of 89%, or thereabouts.

And to put this in perspective, I've got some statistics in front of me here that show that this would---this does represent the 17th consecutive quarter of general insurance underwriting profitability for Old Republic and that the average composite ratio during that 17---17 quarters was about 93.2%. So we're coming in well within that average and are producing almost historically high underwriting profits at Old Republic.

At this point in time, therefore, I don't think it's -- I think it is a reasonably safe bet that 2006 underwriting results are probably going to pencil out at a composite ratio ranging between 90% and 92%. And those are higher numbers than obviously the 89 that we have produced so far, but you have to remember that the winter months, given the amount of truck insurance business that we have at Old Republic, that the winter months can be pretty treacherous for us. So I think, if anything, the loss ratio will edge up as the year progresses.

Let's see. We've talked about--some about production and underwriting trends. I might take a quick look at what's taking place on the investment side of the books, and in this segment, again as you can see, investment income has been rising fairly consistently in the past several quarters, and most of the increase in our case, at least, when you look at the total yield of about 4.5%, most of the increase -- and that yield, incidentally, has been pretty level now for several quarters. Most of the increase is reflective of the positive operating cash flow which has been and continues to be additive to the invested base---invest asset base of this business. I might add, though, that while the indicated yields of 4.5%, as I say, have remained consistent at that level, the effective post-tax yield has been trending up from that level, in as much as we are getting more investment income from tax exempt securities and dividends on common stocks both of which, as you know, are partially tax sheltered. And this factor is, incidentally, is a significant reason for us to be able to produce a lower than 35% tax rate, in the income statement.

Turning to Mortgage Guaranty insurance, the stats, again, in this morning's release continue to reflect a slight downward slope to the bottom line. On the positive side, the underwriting account, we're experiencing a fairly consistent improvement in business persistency for our core traditional primary business. But again, this benefit, as has been the case for a number of quarters now, is being countered, if you will, by lower overall mortgage originations, which obviously are reducing our opportunities to write new business. And lending greater negativity to the top-line trends for the time being at least is a significant drop in bulk business production in this latest quarter.

The story here is rather simple, and it is that we continue to participate in this part of the M I territory, and on a very opportunistic mode, and, therefore, this production source tends to be and is inherently more volatile than the core traditional primary portion of this insurance line. From an underwriting profitability standpoint, the M I segment produced, what, slightly better results in the second quarter than it did in the first three months of this year? But year-over-year, using the composite ratio as a backdrop, if you will, for the underwriting performance of this segment, this ratio is up about 9% to 10% in the latest quarter and year to date periods.

Looking to the near term in mortgage guarantee insurance, we're expecting our loss costs and we intimated as much in the press release this morning, we're expecting those loss costs to trend a little higher, particularly if you look at recent years, seasonality trends, and if they should repeat themselves, obviously we shouldn't be witnessing something of an up trend in the loss ratio as I say for the remainder of this year. Expense ratio-wise, however, those should remain under good control, and within range of their existing levels of, what, 22%, 23%. I might note briefly, again, with respect to Mortgage Guaranty, that investment income yields in this segment are about the same as they are in the rest of our business. Namely, gross of roughly 4.5%, and that operating cash flow also remains very positive, but investment income is currently growing at a much slower pace than it is in our general insurance business, and that's, in this case, due to the greater capital reductions we've been exacting in this segment for a couple of three years. And these reductions in capital reflect basically the lower risk levels that have evolved over recent years in this major part of our business for both ourselves and, as you know, for the rest of the M I industry.

Finally, I don't believe that we need to say much more about our title business than has already been highlighted through this morning's press release. This has been, and it continues to be, a transaction driven business, and as housing and mortgage lending trends go, so goes the title industry and Old Republic's participation in it. In our case, we're currently getting almost 68% of our title business through independent agency channels, and the remainder is produced directly through our own stores. Our agency driven business is actually doing reasonably well in a down housing market in most parts of the country. But our directly produced business, however, with -- given its large west coast orientation, it continues to be our biggest operating issue in this down market. We've made significant progress which we indicated we would make earlier in the year in rationalizing our expense structure in that business, but we now believe that the drop-off in volume in that western part of the United States is beyond redemption through much more expense reductions, at least for our business.

Our current thinking, which reflects mostly our interpretation of the trends in interest rates, mortgage extensions, housing starts, resales, employment, is that the title part of the insurance industry is likely to settle into a somewhat extended period when it's likely to deliver a flat to moderately negative top line. For what it's worth, we think that that period is probably going to stretch through year end 2007 when the U.S. economy should start to rev up again. At least that's our view of where that part of the insurance business is headed.

So there you have some additional color again about what's happened with our business and our current expectations as to what we think is ahead for the near term. And even though most of our pretax operating earnings are still being generated by the underwriting and related services side of our operations, investment income is beginning, as you can see, to bear a greater share of the bottom line. Operating cash flow for the first six months of this year was about $325.5 million, and that number was nearly identical to that generated for the first half of 2005, and each of our three major segments are producing that very high, very good level of operating cash flow, which, therefore, continues to be additive to the invested asset base of the Company. So together with the upward tilt of investment yields, it seems logical that the business should continue to benefit from greater input by the investment side of the equation.

So now with this first half of the year under our belt, we're looking forward to a second half that reflects the trends and the happenings that we've just alluded to. If I were to describe our business, as I will, I would say steady as she goes is the best way that our business can be defined at this moment. And having said that, I can get my notes here, I think that's the extent of my comments, and as we said initially, we'll now make room for questions you may have.

Thank you. [OPERATOR INSTRUCTIONS] We'll take our first question from Stephen Petersen with Citadel Investments. Please go ahead.

Good afternoon Al. I was wondering. Two quick questions. One's a numbers question. The roughly four-point uptick in the paid loss ratio in the mortgage segment, I'm wondering how we should think about that. Some of the other M I's that we've listened to have talked about sort of a backlog that was created with new bankruptcy is legislation, et cetera, et cetera, that kind of worked through the system last fall, and the results may have shown up just in the first half of this year.

I don't think we have that issue as a reason for the uptick in the paid losses. There were any number of reasons for that, and, incidentally, that's one of the reasons, Stephen, why I indicated before that when we look at those paid loss trends, we think that their effect on incurred losses for the next couple of quarters is going to be on the up side, and that's why we think we might have a higher loss ratio. But again, we can't attribute that increase, you see the uptick, as you put it, to any one major significant reason.

Okay. And if you might comment a little bit on what you're seeing in the risk management field, we've had some other companies talk about how competitive that arena has become, especially in the large accounts segment. I'm wondering if you can provide any additional insight to kind of what you're seeing, knowing that that's a significant part of what you guys tried to do in the G I book.

Yes. Well, again, as I tried to say before, getting accounts has become much more problematical, and getting large accounts, including accounts in the -- because as you know, we do do large accounts, only traditional risk transfer mode as well, but it's true also that the vast majority of our larger accounts are done on a risk management or loss sensitive type of approach that they're -- we're on the slippery slope. A great deal of the competition for those accounts seems to be affected in terms of the amount of risk that the fronting or risk-carrying company is willing to take, and, of course, when you start dealing with that, and I don't think I'm telling you anything new, Stephen, given your background in reinsurance, that when you start having the reinsurance protection be a factor in pricing, then you know that judgment enters into play to a much larger degree, and, therefore, if anything, does not auger well for the profitability of the business.

That's really a function of credit exposure or credit risk that some of the players in that market are willing to take a bigger credit exposure?

No, I think it's a function of taking bigger risk on the product itself. For example, if somebody comes along with a -- a customer comes along with a $2 million retention, and the reinsurance company -- the fronting company might agree to cost, let's say, the next $3 million of protection at X, and another company does it at X minus, you know who is going to get the business, right?

Yes.

So we think, for what it's worth, that particularly with large accounts, that the pricing of the true range of true risk assumption is where the game is being played increasingly. And, of course, you might say that that's also a reflection of what's happening to investment yields. Nothing has changed. As investment yields go up, there's going to be a tendency to loosen up on the underwriting side of the equation.

Terrific. Thank you.

Yes, sir.

And we'll go next to Kelly Nash with Keybanc. Please go ahead.

Hi, Kelly.

Hi, Al. How are you?

Okay.

I just wondered if we could dig into the property casualty side a little bit more. In terms of the prior year reserve development can you quantify that a little more or give us some guidance as to how we should think of that going forward?

I think, Kelly, we're still looking at the same type of experience we've had in the past, which has been roughly a 2% or 3% reserve redundancy or favorable development year-over-year. The thing that is the fly in the ointment for us for several years has been the little bit of relatively little bit, I should say, of A & E, asbestos and environmental types of issues, that we've had to deal with, but those so far this year have not been an issue for us, so that we have had a little bit more favorable development than we did in the first half of last year. But again, it's not a huge portion of the incurred loss ratio.

Okay. And then thinking about the growth even excluding the impact of those items, we are seeing pricing continue to come down. You mentioned a couple lines in particular. Are you seeing new competitors come into the market, or is it still kind of the same folks out there?

I think it's the same folks out there, particularly going back to the question that was just raised by Stephen, large accounts, as you might well imagine, people are very interested in those for the obvious reasons that they tend to bring in huge amounts of premiums. At little additional incremental cost, as you know. But when you go to your mid-size accounts, or at least what we would qualify as mid-size, let's say anything in the $75,000 to $200,000 area, that's becoming also more competitive. So there's no question that there is some loosening, as I think I recall saying, we've had some pricing slippage since mid-year last year. Last year was running maybe a point or so overall aggregate. Now for us it's running maybe 2%, 3% aggregate. It's not a whole lot. I don't think it destroys the good underwriting fundamentals we've been fortunate to have at Old Republic. But nonetheless it's going to create a downward pressure, and the only thing that is positive in all of that is, as I said, the investment income is beginning to kick in and hopefully is -- becomes something of an offsetting factor to override at least part of what's occurring on the pricing front.

Okay. And then finally, I wonder, on the title insurance operations, as far as expense ratio, obviously certainly tied to volume, are there initiatives you have in place or that you are working towards so that the expense ratio we see improve going forward even with volume where it is?

No, I think I said quite the opposite. I believe I said that we've done pretty much everything we can do in terms of reducing expenses on the direct side of our business, which is where most of the expense ratio issue lies, at least in terms of controllable expenses. Our agency business is not as general expense intensive, obviously, as our direct business. But you have to make a decision as a manager as to how much of the bone marrow you take down -- take out, I should say, and we think we are there. We also think that probably the west coast states in particular, that we've reached bottom, almost bottom, let's say in terms of housing activity. And that I think it's pretty much going to stabilize for the next several quarters.

Okay. And you did mention that. I just was trying to think if there was anything other on the agency side.

No, no.

Is there---are you seeing improvement in some of the areas that, over the last couple of quarters you've seen some claims pressure in the Midwest, for example, the southeast.

In terms of title?

No, I'm sorry, in terms of Mortgage Guaranty.

Yes, I think the Midwest has been an issue for the entire M I industry. But the job situation is still very good in this country, and inflation is not going totally berserk, so I think the business is going to be okay, but by the same token, as I say, we should expect some uptick in the loss ratio in the next couple of quarters. Again, if the past is any indication. There seems to be some seasonality to that business, and we don't quite understand at all times why that is, but it is.

Thanks, Al.

[OPERATOR INSTRUCTIONS] We'll go next to Geoffrey Dunn from KBW. Please go ahead, sir.

Hello, Geoff.

Actually, it's Nat Otis. Geoff had to step away for a sec. Good afternoon, Al. Just one quick question for you, in the press release for mortgage insurance business you talked about the concept of greater paid claim frequency going forward, yet today you actually lowered -- you actually released reserves in that segment. Can you just rectify the two together, please?

I think it's just a matter of what I said two or three times already now, which is the seasonal aspects of the business, and also when you look at reserves, as I'm sure you know, we look at reserves, and it's in terms of the components of the types of claims, their longevity as potential claims on the books, and as that changes, the mix of those claims changes, the reserves that are -- and the frequency in particular that's attributed to each category of claim obviously has got an impact on the reserve that you set up. We don't have too much of a severity issue to deal with. Our average claim costs have been pretty level of late. So we're looking primarily at frequency, and as I say, the mix of those reported cases at the end of June is what leads someone such as yourself to imagine that we are reducing reserves.

Okay. Actually, just one other question, just on the title business. You talked about the agency levels. Thoughts on whether that might have to do with maybe a higher reduction in west coast business, which would be more directly related. Could that have any type of -- would that be a result of that?

Yes, I think you're on point. I think you have a combination of both. We have been able to do very well with our agency in terms of retentions, signing up new agents, latching on to agents that have been better producers than others, but admittedly, you also have the effect of the significant, was it 25%, 26%, reduction in volume which changes, therefore, the mix between our direct and agency, which leads to that 68%. That's entirely correct.

Thank you.

Yes, sir.

We'll take our next question from Greg Peters from Raymond James. Please go ahead.

Hello, Greg.

Good afternoon,Al. I thought I would follow up with your prepared remarks specifically on title I think you said that you're looking for some slippage through 2007, and I'm wondering what -- in that, specifically, I think in the context of revenue or premiums, I was wondering what your expectations might be, if it continues to shrink what the combined ratio might look like at the worst point. I mean, are we returning -- are we on the slippery slope towards 1994, where the combined ratio actually goes above 100? How should I be thinking about this?

Well, the comment was intended to address primarily top line considerations, and then in answer to -- I think it was Kelly's question just now, I indicated that the west coast was probably -- had probably reached bottom, that it might be a little more slippage, but not as accentuated as we have so far. So to answer your question directly on the combined ratio, one, as I say, we're not -- we don't see much more room for expense cutting.

Right.

At least any immediate cut. We think that the loss ratio in the business is going to stay within that 5.5% to 7% range, so that's not going to be -- not going to have a significant impact on the combined. We think that our agency book of business is not going to lead to any significant drop in expenses other than the expenses directly associated with production, and, of course, that part of the expense ratio goes up and down with production. It's very self-adjusting.

Right.

So, in answer to your question, unless there is a significant drop in volume, and that would mean, in our case, on an annualized basis, significantly below $1 billion, which is where it is currently, or thereabouts, I don't think that our combined ratio is going to go above the 100% level.

All right.

But between where we are now and 100, that's quite a bit of room.

Absolutely. Now, are you --

Excuse me. One other point. When you look at it in the context of our total business at Old Republic, I don't think you're talking about a huge impact on the consolidated bottom line.

No.

Right?

You're talking about -- no, you're not talking about --

---pretax contribution.

You're anticipating for it to shrink, but your largest contributors continue to be first General Insurance, and secondly, Mortgage Guaranty.

Exactly.

Now, shifting gears for a second, you also, in your opening comments, perhaps in one of your answers, talked about the slippage in pricing on general insurance, and you talked about or mentioned, I believe -- and I don't want to put words in your mouth, but I believe you said something to the effect that it's been ongoing now for several quarters.

Since mid-year '05.

Mid-year '05, okay, so if we're getting slippage in pricing, and I'm trying to figure out, when will we start to see the slippage in the combined ratio? I guess you sort of hinted to that in the balance of your year's guidance in expecting the combined ratio not to be as good as it has been.

Well, I think, up, again, one of the issues with a company such as ourselves, any company in the general insurance business in particular, looking at quarters doesn't mean very much.

No, I understand that.

So that's why we -- as minimum, you need to take a look at a whole year. And I believe what you're referring to is the fact that I was intimating that for the second half of the year, it's not unlikely for you to expect that the loss ratio portion of the combined and general insurance should go higher if only by virtue of the fact that in our large trucking operation we tend to get some losses in the winter months.

So that was more of a seasonal issue rather than --

Seasonal, right, exactly.

That was more of a seasonal comment. Let's talk about just pure pricing. On the slippage in pricing, when will we start to see that affect the reported, not the actual, because I'm sure your loss picks are as conservative as they can be. When will we tart to see that in the reported calendar year?

Well, I think that---you know this, it takes anywhere between 16, 18 months before you get the full effect of pricing changes, whether they're up or down, right. So that means that the stuff we started writing at, let's say, 1% or 2% less premium on an average last year, that starts showing up mid-year this year, going forward, and on, so, my gut, for what it's worth, is that absent -- or leaving aside for the moment the issue you just mentioned of seasonality, that maybe the second quarter of next year, you start seeing a little slippage.

More fever. I don't know what you want to call fever when you're running sub --

[Overlapping speakers] 98 point what? [laughter]

Anything sub 90, I don't know if you want to call it a fever, but that's --

Higher temperature.

Yes. I hate to ask you this question -- [laughter]

But will you anyway.

Well, yes, because it just is -- it's really bothering me, and I've been sitting here, and I try and, as many of your other people, shareholders and analysts do, we try and model out your Company, and I tell you something. It's a very small immaterial line, but I'm having a very difficult time trying to figure out what it's supposed to look like, and that's, of course, the Corporate Other and the Life Line. And I just can't get it right, period. And I'm just trying to figure if I should be anticipating -- should I be looking for that to run at a quarterly loss, or should I be looking -- what should I be thinking?

We have a small life insurance company tucked in there. I know you've heard me say before that really that life company of ours, because it is primarily involved nowadays in short-term type of products, travel insurance and credit insurance, that are sold primarily in tandem with our general insurance business, that it should really be tucked into our general insurance.

Why don't you do that, then?

We don't do that because of all sorts of hang-ups that accountants have got. Life insurance is life insurance, and property and casualty insurance is property and casualty.

Is it written in the life insurance subsidiary or --

Oh, no, we have two small life companies. One in the U.S., one in Canada. And the U.S. writes primarily occupational accident, which is sold in conjunction with our trucking business.

Right.

And is similar to Workers' Compensation. That's about a $16 million, $17 million book of business. We did write some credit life and disability business. That's another $6 million, $7 million book of business; it's got a runoff of our term life product. In Canada the lion's share of our so-called life business is a little bit of term life product little on a runoff basis, and the rest is travel, accident, and similar types of product, relatively short term.

It's a small business line.

It is.

But you combine that with the corporate overhead line --

Now, and I was going to address that. So what's in corporate? What's in corporate are, one, the cost of the little bit of debt that we have, interest on that. For example, my salary gets charged there. Stock option costs, relative, in particular to our executives gets charged there. So that typically -- there's no income. It's just a service---

I thought you used to generate investment income out of --

---and you do to some degree, right, but that comes and goes. It's not a permanent type of thing.

Okay.

And then you've got a couple of service subsidiaries, one of which is an asset management corporation, which is -- which operates at a little bit of a profit, but it manages the various investment portfolios. And you've got a general services operation that provides I T service. It's a polyglot that don't fit neatly anywhere in the three major segments we have. So, the answer to your question, si that it should typically operate at a loss, sometimes break even, but it's going to bounce around quite a bit. Like this past quarter we had those option costs impacted it. So who knows what the next excuse is going to but there will be one, right? [laughter]

Yes.

But it's not a big deal.

Excuses, you sound like a sell side insurance analyst.

I should have said reason.

Yes. The final question is, a couple of the other larger AA-rated insurance companies that are in similar situations, that being, limited top-line growth, I think that would be a fair characterization for your organization at this point, very good solid results from an underwriting perspective, they're electing to take their cash flow and balance it out both in terms of dividends and cash---stock repurchases, and I know you just reload it on your stock repurchase plan, but you've been relatively inactive because of special dividend policies. Is there any thought at the board level of changing the approach on that at this point? Are you going to keep it as she goes, I guess, for the foreseeable future?

As you know we typically look at our dividend policy once a year, February meeting, although for a couple of years now in the last three or four years, we have had a special dividend that you're alluding to in the month of December, and so the best answer I can give you is that so far we have not seen fit to buy back stock.

That is probably the answer I expected, so thank you very much for your answers.

Okay, Greg.

We'll go next to Bill Laemmel from Divine Capital Markets.

Bill Laemmel, how are you, sir?

Very good, sir. Nice solid quarter. On the revenue and the -- or in the premium growth.

Oh, the general side, Bill?

General. About 3% to 5%?

Well, as I said I ran you all through a little bit of an exercise to try and get more of an apples to apples comparison. I don't have the notes here, but I think we came out with about a 5.7% year to date. Right? I also said that for the rest of the year we are more likely than not to be on the low side of the range of 6.6% to 9% that we threw up as an objective at the beginning of this year.

No this is revenues we're talking about.

Premiums earned, right.

And this is in general insurance.

This is general insurance.

Just wanted to get it straight, because there's a bunch of lines.

Right.

Thank you, Al.

You're welcome.

Bye-bye.

At this time we have no further questions. I'd like to turn it back over to the moderator for any closing remarks.

Well, I don't have any other point to make. Again, I appreciate the interest of y'all participating in this update on our Company's business, and look forward to visiting with you after the next quarter. And having said that, I bid you a good afternoon.

Once again, ladies and gentlemen, this will conclude today's conference. We thank you for your participation. You may now disconnect.