ProAssurance Corp (PRA) 2006 Q1 法說會逐字稿

Good morning, everyone, and welcome to today's ProAssurance first quarter earnings release conference call. As a reminder today's conference is being recorded. At this time for opening remarks and introductions, I'd like to turn the call over to Mr. Frank O'Neil. Please go ahead, sir.

Thank you, Abe. Thanks everyone for your interest in ProAssurance and your time this morning. Today we expect to discuss historical information and we'll make forward-looking statements and projections on this call that are based on our estimate and anticipation of future results and events. This is especially true for any discussion of the proposed transaction with PIC Wisconsin. We will not undertake and in fact expressly disclaim any obligation to update or alter forward-looking statements whether as a result of new information, future events or otherwise except as required by law. We expect our statements today to be reasonable, but you should review the contents of this call in conjunction with the caution regarding forward-looking statements in the news release we issued today, Tuesday, May 9, 2006. Further discussion of risk factors and uncertainties about our business will be contained in the form 10-K for the year ended December 31, 2005 and in the form 10-Q we expect to file for the current quarter.

We also present these risk factors in the registration statement we filed on February 15, 2006 in connection with the proposed PIC Wisconsin transaction. The registration statement includes a proxy statement, prospectus and other relevant documents concerning that proposed transaction. We urge you to read the registration statement and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents as they will contain important information. You may obtain a free copy of the prospectus, statement and proxy as well as other filings containing information about ProAssurance and PIC Wisconsin at the SEC's website, www.sec.gov. Those documents are also available without charge from ProAssurance's investor relations office at 100 Brookwood Place, Birmingham, Alabama, 35209. You may also call us at 205-877-4460 or send an e-mail to information@proassurance.com. Finally, you could go to our investor relations section on our website, which is proassurance.com. We are webcasting this call and will make it available for replay as described in our news release and 8K.

Today's content is time sensitive. It's accurate only on May 9, 2006, the date of first broadcast. This call is the property of ProAssurance and you may not disseminate its contents without our expressed written consent. If you're reading a transcript of this call, you should know that we have neither reviewed it nor approved it. Our executive team is assembled for today's call. Our Chairman, Dr. Derrill Crowe; President, Mr. Vic Adamo; our Chief Financial Officer, Mr. Ned Rand; our Chief Accounting Officer, Mr. Jim Morello; Chief Underwriting Officer, Mr. Howard Friedman; and Chief Claims Officer, Mr. Darryl Thomas. And batting lead-off today is Ned Rand who is going to talk about our financial.

Thanks, Frank. It bears repeating from last quarter, we are presenting the results of our personal line segment, the MEEMIC business, as discontinued operations. The sale of MEEMIC was effective January 1, 2006 and, in accordance with accounting regulations, the results of our personal lines operations are presented as discontinued operations. As I prepared my remarks, I realized that this quarter affirms our strategy in a number of ways. We'll all be addressing that, but let me hit a few high points. First, gross written premiums grew by over 10% or almost $19 million in the quarter to $182.2 million, as a result of the additional premiums added through the NCRIC transaction. We began recognizing NCRIC premium in the third quarter of 2005. But a significant portion of their policies renew in the first quarter, thus I would caution you on assuming that we will have this kind of growth throughout the year.

But it's a great start to 2006 and underscores our intention and ability to grow through M&A. Our bottom-line grew nicely as well and that's our main focus. Income from continuing operations, the result of our professional liability line, almost doubled to $27.8 million, as the full effect of rate increases, our high underwriting standards and rigorous defense philosophy flowed through. Continuing operations, combined with the $109 million of net income from discontinued operations as a result of the sale of MEEMIC, produced 137.3 million of total net income. But as you think ahead to the full year, please remember that the results for this quarter's discontinued operations are a one-time event. The current quarter was also favorably affected by reserve development and the commutation with one of our reinsured's. And I'll let Howard add color to these two items. One other important item to note in our income statement for the quarter is the adoption of FAS 123R.

In the quarter we began recognizing the expense related to stock awards as a component of other operating expense. For the quarter this resulted in a pre-tax charge of $1.9 million. Due to the manner in which FAS 123R deals with awards issued to retirement eligible employees, our expense for the year is somewhat front-end loaded. For the remainder of the year, we would expect this expense to average approximately $900,000 per quarter, with some variation from period to period. Book value grew by $4.01, even in a quarter with rising interest rates. Those rising interest rates are a double-edged sword. While higher rates do dampen growth and book value a bit, they helped push net investment income higher. It was 34.4 million in the quarter compared to 22.8 million in last year's first quarter. A large portion of the growth in book value came from the sale of our personal lines business, as we discussed on the year-end call. That sale generated an after tax gain of 109 million or $3.51 per share in increase in book value. Again, let me caution you this is a one-time gain.

But for those of you who share our belief that growth in book value is a strong measuring stick, it's an impressive addition. Cash flow is also helping drive investment income higher. In the quarter, cash flow from continuing operations was $115.8 million, an increase of a little more than $22 million year-over-year, as we began to see the greater effect from the NCRIC transaction. We look for cash flow to remain strong as we bring PIC Wisconsin on line and fully recognize the NCRIC contribution. Our ratios continue to show year-over-year improvement. The combined ratio in the first quarter was 96.6%, down 6 points from the same quarter last year. Given our strength in claims management and our expertise in underwriting, we expect to see continued improvement in the combined ratio, although future results may not be this dramatic.

Our return on equity in the quarter was 13.4%, but we still want to highlight the challenge we face this year as we lose the benefit of MEEMIC's earnings and look to put the additional capital created by the sale of MEEMIC to work. Finally, let me update you on the use of the proceeds from the MEEMIC transaction. As we reported last quarter, the sale of MEEMIC provided us with gross proceeds of $400 million, which includes $75 million that was paid out in dividends prior to the sale. The sale generated an after-tax gain of approximately $109 million and, as I said, gross proceeds of approximately $400 million in cash and invested assets. We expect to pay approximately $60 million in taxes and fees relating to the transaction, with the bulk of this being paid in June as we make our estimated tax payment. We are keeping approximately $140 million at ProNational to support its ongoing operations and we expect a dividend of approximately $200 million up to our holding Company. We're still awaiting regulatory approval for this action. Frank?

Thanks, Ned. Howard Friedman will now discuss reserves, premiums and related issues. Howard?

Thanks, Frank. Tangential to Ned's financial discussion, I'll touch on the favorable net loss reserve development of $4 million in the quarter. This development is the result of our slightly more optimistic view of the expected severity relating primarily to accident years 2003 and 2004. Let me again caution you that $4 million is a drop in the bucket compared to our overall reserve position of $2.3 billion, so please don't make any overly optimistic assumptions about loss trends. In the past month, we've also seen several multi-million dollar shock verdicts, so severity is still a wild card and the need for strong conservative reserving cannot be overstated. So we are sticking with our philosophy of reserving the current year above our pricing targets. This ensures our balance sheet enables us to respond when our policyholders need us. We did commute our outstanding reinsurance treaties with Converium during the quarter. We received $4.2 million in the commutation and realized a gain of $2.4 million in the transaction. This is a result of a $2.7 million decrease in seeded premiums in the quarter and a corresponding $250,000 decrease in seeded losses.

Overall our seeded premiums decreased by almost $1 million as compared to the first quarter last year. This reflects the effects of the commutation, offset by the effect of higher earned premiums which are largely attributable to the NCRIC acquisition. In the quarter our retention of renewing policies was 87%. We continue to re-underwrite and reprice our NCRIC book as policies renew, so our underwriting decisions probably cost us a percentage point or so in overall retention. However, because of our repricing of that book, our average rate increase on expiring policies was 5%, which is up a point or so from where it would be without NCRIC. Overall both retention rates and renewal increases are where we would expect them, maybe even a bit higher than expectations given the current state of the market. With moderate loss trends overall and with our rates at adequate levels, we continue to view 2006 as a stable year with no major rate increases needed to allow us to make our margins for the business we renew. Darryl Thomas will comment on frequency and severity trends and any new developments in that area. Darryl?

Thank you, Howard. Frequency is being widely reported as down, but as we mentioned in the last quarter's call, there may be some mitigating factors. First, it is still too early to tell if there was an artificial increase in 2004 and early 2005 because of the real or expected effects of tort reform. There is some evidence of a decrease in the number of lawsuits in which multiple defendants are named for whatever reason, meaning that the decrease in overall numbers may not be as great as it would seem at first review. As the plaintiffs' bar becomes more selective in accepting cases, there is some likelihood that the cases that are filed will have a greater chance of recovery. We're watching all these trends. As Howard highlighted, severity is always the wild card. And he mentioned some of the large verdicts that companies in our industry have absorbed in the quarter. When you see verdicts of 26 million, 10 million and several in the 1 to 6 million range in the course of a few months, you tend to view talk of moderating severity with a jaundiced eye.

Our conservative nature has served us well and we'll wait to see how overall loss trends workout rather than relying on snap judgments in response to positive or negative events. On the tort reform front, we can report that federal tort reform was rejected again by the senate last night. The bill fell short by just over 10 votes. There are too many republicans voting with the trial bar and not enough conservative republicans switching sides for tort reform to succeed in the senate. On the state front, there has been a string of disappointments in state legislatures in the past few weeks. Tort reform supporters have lost battles in Arizona, Hawaii and several other states, but none that affect our book of business. Florida's governor did sign the law repealing joint and several liability and that's widely viewed as a positive. But it would certainly be challenged by the plaintiffs' bar in Florida, so we're taking our usual wait and see attitude.

The Florida Supreme Court did set rules to allow plaintiffs to agree to pay higher contingency fees by waiving certain constitutional rights, so any companies that responded positively to this development before seeing how it played out could be in trouble. We believe tort reform would be a major step in the right direction to ultimately help control costs for our customers, but I want to reemphasize that our business plans do not depend on tort reform for us to succeed. Frank?

Thanks, Ned, Howard and Darryl. I'm now going to ask Vic Adamo to update us on PIC Wisconsin, the NCRIC integration and other corporate developments. Vic?

Thank you, Frank. The NCRIC story is short so let me touch on it first. I would again like to note how well the integration of NCRIC into ProAssurance has gone and to thank the NCRIC employees who stayed with us to help us close out year-end. We're seeing NCRIC's claims, underwriting and risk management employees become proficient in our operating philosophy and work well as our Mid-Atlantic hub. The savings from consolidating back office operations will start to flow through in the coming months. Turning to PIC Wisconsin, there is good news. Our form A, which is the change of control hearing, is set for later this week and we expect it to go smoothly. Once a ruling is made, we can hopefully advance this matter to the PIC Wisconsin shareholders for their vote in early summer. We expect a third quarter close if all goes as planned. I also want to highlight a new opportunity involving our excess and surplus lines carrier, Red Mountain Casualty Insurance.

Last week ProAssurance and the Podiatry Insurance Company of America, which is known as PICA, initiated a program in which Red Mountain will provide an excess in surplus lines program with PICA's assistance that is aimed at podiatrists that PICA had been referring to other E&S carriers. Although this is structured as a 50/50 quota share reinsurance program and is not expected to produce a significant revenue stream for us, certainly less than 5 million a year, it does allow us to put our capital to work and, more importantly, it helps us form an alliance with a leading provider in a medically related field where we have not had a large presence. So we're excited about it. Frank?

Thank you, Vic. At this point I'd like to give Dr. Crow a chance to make any observations on the year to date and give us his widely anticipated views of the future. Dr. Crow?

Thank you. I said last quarter that we'll find out a lot about our business in 2006 and so far we're seeing mixed signals. On one hand, everyone is talking about moderating frequency, which we are cautious about. There have also been a few comments about lower severity but recent shock verdicts have cast doubt on any absolute across the board decrease in severity. So if you need to be optimistic to back up your decision-making, there's something there to grab onto. If on the other hand, you prefer a cautious approach to a dangerous business, there's quite a bit of data to back that also. In our last call, I said that I expected to see the first cracks in some of the startups. Now I don't want you to take this the wrong way, but they're still tout there and they're still doing things we wouldn't do as far as pricing and risk selection. But we're also hearing from agents that some may have begun to lose the support of the cautious reinsurers. Agents are also telling us that adverse selection has forced some startups to be a bit more selective in their underwriting. That and more competition will put pressure on their expense ratios.

The lessons you learn in this business are pretty constant and you always have to pay the piper sooner or later. We are watching to see how this develops. Is the market hard or soft? It's certainly not at its peak as it was last year and my personal belief is that the pricing may be nearing a trough. Others may think there's further to go but that's my personal opinion. The question is how long will the market remain at these levels. Again, I guess that 2006 will tell us as it moves along. My commitment to you is that we'll remain just as conservative and cautious as we have always been, which means we can expect to have more of the same results we've had in the past, a good strong and steady operation with good cash flow, a growing book value, and a stable market presence. Everyone wants to know about M&A and I reiterate, we continue to hear more talk about opportunities than we've heard in a long time. But M&A in our business is driven by many noneconomic factors, such as the personalities of management and the views of the physician dominated boards. So it's episodic and it's unpredictable.

We've demonstrate our capabilities and continue to believe we'll have a look at anything major that comes along. We do have assets for M&A activity, especially with the completion of the MEEMIC deal, and we prefer to put that capital to work through M&A activity. It is more effective in the short and long-term than fighting our way into a market or battling for market share through pricing in an existing market. That's just not the way we do business. But we know that our investors expect us to do something besides sit on the money long-term. We're continually evaluating how to best deploy this capital we have, but we're in no rush to deploy the capital outside of our normal investment channels. Our time horizons may be a bit longer than some folks on Wall Street might like, but we've built a great Company by taking the long-term view since our founding over 30 years ago. Frank?

Thanks, Dr Crowe. Abe, that concludes our prepared remarks so we will allow you to instruct folks about the question and answer procedures and take questions as they come along.

Thank you, Mr. O'Neil. Pleasure to do that. [OPERATOR INSTRUCTIONS] We'll go first to David Lewis, SunTrust Robinson Humphrey. Good morning, David.

Good morning, thank you.. Dr. Crow, you say you think, in your opinion anyway, that pricing is near a trough. Are you implying that rates could actually start to turn back up in the coming next year or two?

No.

Explain to me when you say in a trough.

I think it's just my personal opinion. I think we're at the bottom or close to the bottom. Now, how long we'll stay here, I'm not sure.

So you don't think we'll see kind of a competitive environment like we did the late '90s where others start to move from state to state and price down 10 and in some cases 15%?

No, no. The problem that we've got now, David, is startup companies. People think that this is another opportunity in which there's a tight market and all you've got to do is go into business and start writing business. They forget that the prior cycle started with the lack of availability of insurance. And you could go into the business and charge the rate that you needed to charge, period. You can't do that this time. There's plenty of capacity. The only way you can get into the market now with a startup is by taking poor risk and number two, cutting prices. And in today's market, a startup cannot survive taking those tactics.

So the trough is going to last as long as the startups keep this market in a state of flux or confusion. Now, you know the long tail nature of our business means that that could be two, three or five years that we will be in this trough. But sooner or later, and we're already beginning to see some cracks in these startups, this situation will go away. Now, the next question is, okay, when will it go up. And the answer is, it will go up when the rates are indicated. Remember, I think all of the carriers now, or most of them, are charging rates that are adequate to make return on equities that we're looking for. So we can't justify the 20, 30% rate increases that we saw two or three years ago.

So it's fair to say outside of the startups, the major players are fairly rational in pricing and you don't see any change here including MedPro?

Well, MedPro is a good competitor and I'm sure that they're not charging -- I wouldn't think that they would be the type to charge rates that were below a decent return on equity. There are some of the larger companies that are being a little bit irrational. But again, I think they're just trying to keep their business. They're following the lead of the startup companies. The major source of the problem is the startup companies and the major source of those startup companies is the reinsurers.

Yeah, but I've heard some of the reinsurers are maybe backing off a little bit. Is that what you see?

Well, it's my experience that when one reinsurer backs off, another one will step up. The problem will be solved when all the reinsurers realize that this is a bad risk and get away from it. I think they're beginning to look at the situation on what are the rates filed and what are the actual rates charged on the part of some of these startup companies.

Okay. That's helpful. And Ned, can you talk a little bit about the expense ratio in the quarter? It was a little higher than what I'd anticipated. And Vic just indicated that we might start to see some of the benefits from NCRIC's integration flowing through. What's a good run rate off the 18.6% you reported in the first quarter? Can you give us -- ?

Sure, let me give you just a couple items. I don't know that I can necessarily give you a good run rate. Obviously the adoption of FAS 123 R is impacting it. And as I said this quarter it's about 1.9 million of expense and for the next three-quarters it will average around $900,000 a quarter. In addition to that, we overtime will see some significant increase or decrease in costs from NCRIC. A lot of the employees we kept until the end of the first quarter. Ultimately, we expect to see somewhere in the neighborhood of 3 to $5 million of savings out of NCRIC and on the expense area. And we have not seen near all of that yet.

One other item that we haven't mentioned, and it will be detailed more in our 10-Q, is that we have reclassified, so this impacts the prior year as well, we've reclassified the rental income and associated operating expenses of the real estate we own. We now occupy over half of the building we're in and feel it's more appropriate not to show that as investment income but as a part of our ongoing operations. And I don't have the numbers in front of me but the 10-Q will be filed a little later today and you'll have some more details on that. So those are the real things impacting the expense ratio for the quarter.

That's helpful. Thank you very much.

Sure.

And we'll go next to John Gwynn at Morgan Keegan.

Howard, would you mind going through the decomposition of that commutation again?

Sure. We commuted the various agreements that we had with Converium.

Converium N.A., right?

Converium, N.A., which was the former Zurich Reinsurance North America, and that resulted in a net effect for us of -- we received a little bit more than $4.2 million from Converium. The commutation itself resulted in about a $2.7 million reduction in reinsurance expense, premium that we had accrued for future payment, and a reduction of about $250,000 in seeded losses, or in other words an increase in net losses based on what we had previously booked. So essentially, I think, if you want to get down to the end result, Converium had a view in the long-term that this was going to be a more expensive set of reinsurance treaties for them than we did on our books.

Okay. And the 2.4 net benefit, is that entirely loss ratio or does it show up elsewhere?

Well, it's the two items, the $2.7 million reduction in reinsurance expense.

Right

And a $250,000 increase in net losses, so it affects both sides of the loss ratio.

Okay. Okay. Dr. Crow, in Florida, the joint and several development, obviously, was a positive. Was there any attempt to get bad faith changed?

I don't know. Paul, you got a comment on that?

There was not.

He says there was not.

Okay. One other quick one, Dr. Crow, in your letter to shareholders, you talk about a new more focused risk management program.

Yes

And in your proxy, you talk about a predictive underwriting model

Yes.

And the expenses associated with that. And I realize that your competition is probably on this call, but do you have anything particularly confusing you want to say about that for them?

Predictive underwriting, yes, we're doing some work in that area. I'm not prepared to say exactly what we're doing, but all I'll say is the informational systems that we have today gives us an opportunity to look at a lot of data. And hopefully use it for some ability to predict good risk and bad risk. It's an area that I'm very interested in and I love underwriting, anyway almost as much as I love claims management, and we're working on that. Howard's been doing a lot of work on it. We're working on it particularly in two states. We're using it in our marketing, that type of thing. We try to identify non-insureds that we think are good risk and go after them. That's one thing. The second thing you asked me was about what, John?

No, that covers it. I appreciate it.

Risk management. Hayes Whiteside, who is an M.D. that has joined us a couple years ago working with me and developing along in claims management and underwriting, has taken on a position of heading up our risk management program. We look at risk management twofold, number one -- or two or three fold really. Number one, it's the mechanism to get out to our insureds where the risk is, what they can do to fulfill -- I mean to create a better risk profile, et cetera, but we also use it as a marketing tool. We also use it as a tool to get to know our customers to get with our customers to get in the room with our customers. As you know, about half of our business, almost, is written through agents and we want to develop personal relationships with those doctors and that's the method that we use to do it. We're beginning to mind some of our databases to help us look at where our losses are and why and improve and enhance our risk management systems. That's an area of the Company that probably we will see more enhancement and effort in the next year or two. Did that answer your question John?

Yes, it does. Thank you very much.

[OPERATOR INSTRUCTIONS] Adam Klauber, CCW.

Good morning, Adam.

Thank you. You released a little reserves in the first quarter. That seems a bit of a departure. It seems like in the last couple years, the only times you've released is towards the end of the year, maybe the four quarter. Is that right? And can you give us any color around why you'd start releasing reserves in the first quarter as opposed to wait until the end of the year when you do the reserve study?

Actually, this is Howard, Adam. We've actually released reserves now in four straight quarters. We had small reserve releases in the second and third quarter last year. We obviously did a larger one at the year-end in conjunction with the overall full year evaluation and now again in the first quarter. That doesn't necessarily mean that we're starting a pattern or a trend here, it just means that the evaluation at this point in time showed that we were seeing a little bit better severity estimates for the overall book of business, primarily for 2003 and 2004. But we look at the reserves each quarter in terms of what the latest indications are and we obviously do a very thorough look at the end of the year. But as we become comfortable with these trends and results, we will likewise become possibly more comfortable with recognizing them on a quarterly basis. But it's really just a quarter to quarter evaluation.

Okay. And as far as the shock losses in Florida, is there any link between these few losses and are you seeing anything in those decisions that worry you?

Adam, I think that it's sort of a -- the analogy that Darryl Thomas has used from time to time that if you play in traffic, you get hit. And I'll point out that I think only one of those was ours. Most of those belonged to other companies. So we can only speak from our point of view that it was a case that we really felt like we were going to win. So it was one of those losses that by the fact that we lost it to begin with and the fact that we lost it for that much truly was a shock verdict. But the largest verdict was not one of ours and neither were a bunch of the other smaller ones. Darryl, anything you want to -- ?

No, the only thing I want to say is, Adam, we try a lot of cases. And with the jury system that we have in this country today, where you have laymen sitting on juries, you can expect that there will be juries at times that either, number one, cannot understand the facts of the case or number two, that come back with a verdict and an amount of money that you wonder where it came from. And that's just part of the system. You try cases, you're going to have those. On the other side of the coin, we also occasionally won a case that we didn't expect to and we also occasionally have a case that we lose that the verdict's lower. The jury system in this country and in several venues is just very, very unpredictable.

I'll also mention, that's why we have reinsurance.

Right. Okay. Thank you. And one last question. What's your paid loss ratio compared to -- first quarter this year compared to first quarter last year?

Adam, we'll look that up and hopefully before we get off the call be able to give that to you.

Okay. Thank you very much..

We'll next go to Brian Meredith of Banc of America Securities.

Good morning, gentlemen.

Good morning, Brian.

A couple questions here. First, Howard, I know your comments with respect to trying to be conservative with respect to your loss picks and severity assumptions, but it looks like the last couple of quarters your loss picks are coming down on an accident year basis. I'm wondering if I'm reading that correctly and should I continue to expect that happening? It looks like you had about an 80.8 this quarter versus 83.6 in the fourth quarter, 85.6 in the third quarter '05.

Well, I think two things. One is the 80.8 that you mentioned is if you take out the effect of the favorable development from prior years, but you still have the Converium effect in there. If you remove both items, the current year loss ratio is actually about 82.2.

Okay. Still improvement, though.

Yes, it's still improvement. Just not as much as you might first think or see when you do the numbers. Yeah, we have said for a while that we continue to be comfortable with the rate levels. We are still, as you heard in the presentation, we're still generating year-over-year increase on an effective basis in terms of our renewal rate levels. So we are and have brought the loss ratio for the current year down a bit. It is still above where we have it priced, and that's the key thing for us. So we're getting closer to the point, I think, where you're probably going to see some stabilization in that number.

Great. And I may have missed this, but was there anything unusual in the investment income this quarter? It seems awfully high.

It was good.

Yeah, I mean, why such a huge increase?

In investment income? We invest in some private equity limited partnerships, things of that nature. We did have one that had an exceptional quarter but that can happen from quarter to quarter, so -- .

If you exclude that, what's the kind of true yield on invested assets?

The other thing is just remember that we have from January 1st to [pricing] from the MEEMIC transactions. We've got $400 million sitting there that we're earning investment income on.

Right, exactly.

And it's hard to say on the limited partnership just because from quarter to quarter we're going to have ones that over-perform and ones that underperform. It may have accounted for -- definitely less than $1 million for the quarter.

Okay. Great, thank you.

Interest rates are going up.

And interest rates are going up.

[OPERATOR INSTRUCTIONS] We have a follow-up question from David Lewis, SunTrust, Robertson, Humphrey.

I didn't see it in the press release, but can you tell us what NCRIC provided in gross written premiums in the first quarter?

Just a minute. I believe it's around $32 million. We'll have a little more detail in our Q.

Okay. And --

And when we say this in the Q, as we integrate NCRIC, it becomes harder and harder to isolate what you would call the NCRIC business, because we are renewing business in different states onto different companies within our organization. And premiums we can track to a certain extent but losses, investment income, et cetera, becomes more part of the whole and harder to track, but we do give some guidance on that in the Q, but I believe it's $32 million.

And I think overall persistency was up a percentage point over the year ago period. Did your business benefit or was it negatively impacted from NCRIC?

It was a slight negative impact from NCRIC, actually, and as we're going through the underwriting review and the repricing, NCRIC's rates increased on average in the states where NCRIC is operating, those rates increased on average more than in some of the other states. So the overall retention rate was actually down about a point as a result of including NCRIC compared to what it would have been without it.

Okay. And then lastly, any new developments on the NCRIC Columbia Hospital case? I know you're fully reserved for it, but -- .

The case has been appealed and we're just awaiting any decision or action by the appeals court at this point in time.

But nothing's really developed over the past three months?

No.

Okay, great. Thank you.

And we have no other questions in the queue, so I'd like to turn the call back to the speakers for any closing comments.

Thanks, Abe. We're going to go back and pick up an answer that we owed, I believe, it was Adam.

Adam. He'd asked the paid loss ratio for the quarter compared to the prior year. The paid loss ratio is the net paid losses [INAUDIBLE] divided by net earned premium, just to make sure everyone knows how we're calculating it, for the first quarter was 44%. For the first quarter of '05, it was 38%. But again, to look at that as a single quarter, I think, don't try to read any trends into looking at a single quarter because variations in payments can happen.

Okay. With that, we'll pause just for a second, Abe, check to make sure nobody has follow-up question generated by that answer. And if not we will tell everyone thank you for their interest and we will see you in the next quarter.

And there are no other questions.

Goodbye everyone. Thank you for your interest.

That does conclude the call. We do appreciate your participation. At this time you may disconnect. Thank you.