旅行家集團 (TRV) 2007 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the third-quarter earnings review for Travelers.

We ask that you hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session.

At this time, I'd like to turn the call over to Mr.

Michael Connelly, Vice President of Investor Relations.

Mr.

Connelly, you may begin.

Thank you.

Good morning and welcome to the Travelers' discussion of third-quarter results.

Hopefully, all of you have seen our press release, financial supplement and webcast presentation released earlier this morning.

All these materials can be found on our website at www.travelers.com under the Investor section.

Today with me is Jay Fishman, CEO; Jay Benet, CFO; Brian MacLean, COO; Joe Lacher, Head of our Personal and Select Businesses; as well as other members of senior management.

They will discuss the financial results for our business and the current market environment.

They will refer to the webcast presentation as they go through their prepared remarks and then we will open it up for questions.

Before I turn it over to Jay, I'd like to draw your attention to the following.

Our presentation today includes certain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical facts may be forward-looking statements.

Specifically, our earnings guidance is forward-looking, and we may make other forward-looking statements about the Company's results of operation, financial condition and liquidity, the sufficiency of the Company's reserves, and other topics.

The Company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance.

Actual results may differ materially from our current expectations due to a variety of factors.

These factors are described in our earnings press release and in our most recent 10-Q and 10-K, filed with the Securities and Exchange Commission.

We do not undertake any obligation to update forward-looking statements.

Also in our remarks or responses to questions, we may mention Travelers' operating income, which we use as a measure of profit, and other measures that may be non-GAAP financial measures.

Reconciliations are included in our recent earnings press release, financial supplement and other materials that are available in the Investor section of our website at travelers.com.

With that, I'm going to turn it over to Jay.

Thank you, Mike.

Good morning, everyone, and thanks for joining us today.

As you can see from our announcement this morning, we had another strong quarter, with impressive earnings per share growth and a very solid return on equity.

This is another in a series of strong quarters, and Jay, Brian and Joe are going to go into more detail about our performance.

But I'd like to take the opportunity this morning to share with you our perspective on the strategies that have allowed us to achieve this performance and that will serve us well as we seek to deliver consistent, market-leading results.

First, let me spend a minute talking specifically about a few of the investments we have made in our business over the last several years.

We talk about these investments frequently because they are important and have been successful.

One of our earliest but most significant efforts began almost five years ago when Joe and Brian began a series of initiatives to improve our Personal Lines' claim performance.

That mission has now been embraced by Doreen Spadorcia, our EVP of Claim, and we have continued to make real progress.

The substance of the investment began as a series of blocking and tackling initiatives in Personal Lines claim that now enable us to respond faster and more efficiently, with superior results and improved customer service.

Specifically, you see the success of this initiative in the fact that the change in our Personal Auto claim severity has outperformed the industry.

While claim frequency is largely an industrywide dynamic, severity varies more by company, and our results have been impressive.

We then further our leveraged this investment by using it to support our investment in QuantumAuto.

As we've explained to you previously, QuantumAuto appeals to a much broader group of insureds, and we needed a first-rate claim capacity to respond to the activity driven by Quantum.

While the investment in Quantum has been a real success at the revenue line, with annualized premiums now exceeding $1 billion, we're especially pleased that the loss experience has met our expectations.

The combination of our improved claim performance and Quantum sophistication has driven our ability to profitably grow our share of the business.

Now, as we further roll out QuantumHome, we are optimistic that it will also have a meaningful impact on our business.

Another important example of successful investment is TravelersExpress.

The early results from this state-of-the-art, multivariate small commercial business platform are very positive with respect to new business flow.

Flow from agents having access to TravelersExpress is up 74%; quotes per agents are up 25%, and yet as a result of our disciplined growth philosophy, our hit ratio has remained generally the same.

We couldn't be more pleased with these results, and even in these early days, these initiatives are meeting our expectations.

Another investment example is our new product development process in middle market.

This process, which produces industry-specific insurance programs under the IndustryEdge brand name, is also having a significant impact.

Brian will speak more specifically about this in a moment, but much of the gain we have achieved in our middle market business over the last few quarters is directly from new product introductions from this program.

This investment further builds out one of our key competitive advantages, our product breadth.

We are not aware of any other Property/Casualty company that can respond to distributors' needs as successfully, as broadly, or with as much expertise as we.

We believe this is a critical competitive advantage, and while I've said this before, it bears repeating.

Our experience has been that as we continue to meet more of a producer's needs in value-added ways, we gain share over time.

So we are going to continue to invest in finding areas of opportunity and continue to build our business.

Next, let me spend a few minutes speaking about capital management.

For us, it is a strategy rather than an opportunistic action.

The profitability of our business remains quite high, as you can see from the results we posted this quarter, as well as the last several quarters.

Consequently, we've generated far more capital than we currently need to support our growth, and we are committed to an ongoing strategy of rightsizing our capital by returning the excess to our shareholders.

The power of that strategy is evidenced in our earnings per share growth and our return on equity.

And we're hopeful that the consistency of these results and this strategy will be increasingly valued by investors.

Lastly, let me make a few comments on the conditions in the market.

What we will share with you today, as we always do, is what we are experiencing in our market.

We are going to give you data on renewal, as well as new business, our retention rates and rate changes.

And the data indicates that the market has continued to become modestly more competitive.

That may be somewhat inconsistent with what you are hearing elsewhere, but the numbers speak to our business dynamics, not other companies'.

Now in the event that marketplace conditions change, we will change our underwriting enthusiasm accordingly.

Fundamentally, our strategy is very disciplined growth.

This organization consists of thousands of in-the-field underwriters, most with many years of experience, that may have worked in hard markets as well as challenging ones, and we have the leadership and orientation to respond to more difficult markets thoughtfully.

We focus on giving our people the analytics, tools and skills they need to seek out the opportunities that exist in markets like these.

Those of you have followed us over the years certainly know that we have a well-earned and well-deserved reputation for running businesses productively and efficiently, and that is very much in our DNA.

Things may get more challenging, but with a combined ratio of approximately 90 after eliminating the positive reserve development, and with retention rates at historical highs, we still consider this an attractive market.

With that, I'll turn it over to Jay.

Thank you, Jay.

Turning to Page 3 of the webcast, page 3 summarizes our third-quarter financial performance, where you can see that net earned premiums continue to grow, increasing 3% quarter over quarter to $5.4 billion.

Third-quarter operating income per diluted share increased 24% to $1.81, while operating income increased by 16% to $1.2 billion.

These differing income growth rates reflect the favorable impact of repurchasing 51.4 million common shares at a total cost of $2.7 billion during the past 12 months under our share repurchase program.

And that represents approximately 7.5% of the outstanding shares as of the beginning of that period of time.

Operating income for the current quarter benefited from strong growth in net investment income, along with reported combined ratios in the 84% to 85% range for each of our business segments.

Each segment experienced strong current accident year underwriting results, net favorable prior-year reserve development, and little or nothing in the way of catastrophe losses.

Our weighted average diluted share count has now dropped to 662 million shares in the current quarter from 715 million shares in the prior-year quarter, primarily due to share repurchase activity.

Since the inception of our $5 billion share repurchase program in the second quarter of 2006, we've repurchased 59.8 million shares at a total cost of $3.1 billion.

Given our very strong third-quarter operating performance, coupled with the financial strength of the Company, as measured by our operating company capital ratios and holding company leverage and liquidity, we now expect to complete the current share repurchase program near the end of the first quarter of 2008, a quarter earlier than previously anticipated.

And we expect to ask our Board to approve another increase in the program prior to exhausting the current authorization.

The data provided on page 4 highlights several items that have contributed to variances within our consolidated operating income and GAAP combined ratios, certain of which I'd like to highlight.

First, net favorable prior year's development was $145 million after-tax in the current quarter, $90 million more than in the prior-year quarter.

Importantly, the third-quarter completion of both our annual in-depth asbestos claim reviews and quarterly asbestos reserve reviews resulted in no change to our asbestos reserves.

And that is in contrast to a third-quarter charge of $102 million after-tax in the prior-year quarter.

Second, cat losses were very modest for both periods.

And lastly, the current quarter included a $19 million after-tax timing benefit due to the previously announced transition to our fixed value-based agent compensation program.

And the year-to-date timing benefit of this new program now stands at $104 million after-tax.

Turning to Page 5, we have a summary of our asbestos reserves and related information, consistent with what we provided to you in the past.

We continue to experience the same trends noted at the completion of the 2006 review, including the emergence of more stable payment trends for a large proportion of policyholders; a decrease in the number of new claims received; a decrease in the number of large asbestos exposures confronting the company due to additional settlement activity; a decrease in the number and volatility of asbestos-related bankruptcies; and the absence of new theories of liability or new classes of defendants.

The annual claim review consisted of the same procedures that we performed in prior years.

We considered active policyholders and litigation cases to potential product and non-product liability, and analyzed developing payment trends among policyholders in the home office, field office and assumed and international categories.

The home office and field office categories, which account for the vast majority of policyholders with active asbestos-related claims, continued to experience an overall reduction in new claim filings.

In addition, the number of policyholders tendering asbestos claims for the first time also declined.

However, defense costs in these categories remain at similar levels to what the Company has experienced in recent years due to the level of trial activity involving impaired individuals.

And with that, let me turn the mic over to Brian.

Thanks, Jay.

Before I get into reviewing the numbers for the quarter, I'd like to summarize how we see the P&C market.

And I can only speak anecdotally about what our competitors are experiencing, so I'm not going to try.

But I can give you a fairly factual look at how we see our marketplace, that is, based on the business that we're writing right now.

For starters, it's important to emphasize that our margins are strong and we have a very profitable book of business.

Relatively, frequency has deteriorated slightly.

But what that means is the unprecedented decline in frequency that we'd been seeing for several years is beginning to slow, and it's doing so at historically low levels.

On the severity side, results remain very benign, in the low single digits.

We attribute this in part to the claim initiatives Jay spoke about, which we started about five years ago and are clearly having a significant impact on the results.

Turning to our production data on page 6.

The table on the upper left shows that our retentions continue to stay at exceptionally high levels.

Given our excellent margins, we're obviously working hard to keep the business we have, and the fact that we've been this successful is a pretty good indication of the strength of our franchise.

The table on the upper right shows pure rate change by business.

We show you renewal price change data for these businesses each quarter, and that is included later in this package.

But for this purpose, we wanted to show you the pure rate change for our commercial business.

Looking at this rate change on the renewal book, we do see modest softening, but on a very consistent basis.

In the small commercial business, rate changes have been slightly negative, but have changed only negligibly over the past seven quarters.

In our middle market commercial and international and Lloyd's businesses over the same period, rates have come down about five points, but again on a very gradual basis.

And in personal, auto and homeowners, overall price change on our renewal business has actually risen.

So in the aggregate this quarter, rate is about 1 point lower than the second quarter.

Turning to new business, just like in our renewal pricing, we're seeing a more competitive market, which has been shifting very gradually.

We've had some degree of new business success, and we are very excited about the results, but we remained steadfast on ensuring that the new business we write is appropriate for our book and is profitable.

We have numerous analytics to continually assess that profitability, and one of the key measures, and one you frequently ask us about, is the new versus renewal pricing differential.

The graph on page 6 illustrates for our commercial accounts business this price differential since the beginning of 2006.

It shows a modest softening, with this quarter essentially equal to the fourth quarter of last year.

We intentionally left the scale off this graph, but we are confident that these new business pricing levels are generating acceptable returns, and by that, we mean nicely positive returns.

Again, this is just for our commercial accounts business, but it is representative of the basic trends that we are seeing across the middle market.

Another frequently asked question -- and it's a good one -- is what about terms and conditions?

And it's a great question, because a sloppy underwriter can give a lot more away with terms than they can with price, and terms are much harder to measure, at least in the short term.

One data point that we can measure, and we believe is illustrative of what we are doing in the marketplace, is the percentage of our middle market property accounts with fire deductibles.

And obviously, higher deductibles imply tighter terms.

Measured on a total insured value basis, in 1999, which was the depth of the last soft market, about 46% of our TIV for our middle market had fire deductibles between 5 and $25,000.

By 2001, that was up to 61%, and by 2006 it was 81%.

Currently, it is at 79%, still about that peak level.

Granted, we cannot track as crisply all other changes in terms and conditions, but we are very disciplined when it comes to our policy language and structure, and we are not making changes of any significance here.

I do want to emphasize one thing.

When you compare this perspective on the market to different companies' comments, you have to be aware of what each company writes.

For example, we clearly see a significant movement in both price and terms in what -- more significant movement in both price and terms in larger account markets for both Property and Casualty risks.

And for these larger accounts, we see more change at excess layers as opposed to the primary.

Conversely, as our data shows, the small accounts market is much more stable.

So in this context, it is important to remember the vast majority of our business is flow or middle market, and our relative share in large account businesses is very small.

So the bottom line, for our marketplace, it is softening, but very gradually.

Our results in the third quarter were not dramatically different from the second, and we're very confident that we are well-positioned to continue to compete effectively.

On pages 7, 8 and 9, we see our Business Insurance performance metrics.

I won't go into these in detail, but consistent with my previous comments, you can see retentions that are strong, pricing that is consistent with recent quarters and new business results that are up due to various initiatives.

It is worth noting that operating income grew 31% from last quarter.

I would like to take a minute to highlight initiatives in two of our businesses, small commercial and commercial accounts.

In Select, new business is up about 20% from a year ago, due in part to the ongoing rollout of TravelersExpress that Jay mentioned.

Page 10 gives you an update on the flow statistics we talked about last quarter, and the platform is now operational in 29 states.

TravelersExpress has broadened product reach and ease-of-use in our small-business market and has gained wide acceptance by our agents.

We are experiencing a significant increase in both the number of agents quoting and the number of quotes per agents.

Flow is up significantly and is lifting our new business results.

In commercial accounts, premiums grew 7%.

And you can see on page 9 that new business continues to be the driver here.

Underlying the new business written is a significant increase in the new business submissions, which is shown on page 11.

This significant increase in new business submissions is a new result of a combination of strategies focused on finding opportunities while maintaining pricing and underwriting discipline.

Over the course of the last 12 months, we've introduced several new industry-focused products that have helped fuel this growth.

And in addition to these IndustryEdge products, we have appointed new distributors and added marketing and underwriting staff.

And as a result, we've sold more products, such as commercial auto and workers, to our existing customers.

All of this is helping to drive our new business flow without competing aggressively on price.

Moving to page 12, the Financial, Professional & International insurance segment continued to produce business at healthy profit margins, with operating income of $183 million, which did include a $7 million provision of non-cat weather losses related to the UK flooding in July.

The loss ratio, excluding prior-year development, improved to 53.1.

Overall, this was a great quarter for our commercial insurance business.

Margins are excellent and the investments in our business are having a very positive impact.

We continue to grow our top line in a disciplined manner despite an increasingly competitive market and are comfortable with our production, given these market conditions.

In short, another terrific quarter.

Before I turn it over to Joe, let me make a few comments on the California fires.

Obviously, with the fires still burning, we don't have any real data or any real loss estimates.

So I am going to share with you our market share, so as industry estimates of the loss come in, you can scope potential losses for us.

Our personal market share for homeowners in the state of California and in the affected area is about 2%, and our perspective -- and it seems to be consistent with other industry information that is out so far -- is that this will be primarily a personal lines event.

On the Business Insurance side, our property market share for the state of California -- and again we think that is fundamentally similar in the affected areas -- is about 6%.

So that will give you a range for where we are.

Obviously, there is a randomness to the events that could move that one way or another, but that gives you a feel for where we stand overall in the California market.

With that, let me turn it over to Joe to go through Personal Insurance.

Thanks a lot, Brian.

And I will provide comments on pages 14 and 15 of the webcast.

The Personal Insurance business delivered excellent results in the quarter; good, strong retention, effective segmentation and disciplined pricing continue to drive our results.

For the quarter, we reported operating income of $276 million and a combined ratio of 85%.

Our earnings benefited from low catastrophe activity.

Catastrophe losses for the quarter were consistent with the third quarter of 2006.

We also experienced slightly favorable prior-year reserve development of $16 million after-tax.

Our new business production is consistent with recent quarters and down from the prior-year quarter.

Looking specifically to the homeowners segment, we continue to produce strong results.

We have maintained a robust retention rate at 86%, while renewal price change was consistent with prior quarter at 9%.

Policies in-force grew 4% versus the prior-year quarter.

Growth is being driven across our entire book of business with the exception of warm water hurricane-exposed areas.

Consistent with recent periods, we experienced moderate loss trends that were in line with the industry.

We remain pleased with our rollout of QuantumHome.

During the quarter, we implemented nine additional markets, bringing our total to date to 25 states plus the District of Columbia.

We remain on track to roll out the majority of the target states during the balance of 2007 and early 2008.

We're pleased with the early sales and the program's reception in the market.

Results remain in line with our expectations, and we will continue to monitor them closely.

Our Auto segment combined ratio was 91% for the quarter.

This is consistent with the third quarter of 2006 and reflects a continuation of moderate auto loss trends.

Relative to the third quarter of 2006, we saw frequency slightly up, a little less than 1%, after adjusting for the anticipated impact of the QuantumAuto rollout.

Severity remained relatively flat, resulting in a slightly increasing pure premium trend that was in line with our expectations.

Production results also continue to be solid.

Policies in-force grew 2% versus the prior-year quarter, and net written premium, excluding Mendota, grew 1%.

Retention remained strong at 83%, while renewal price change increased 3%.

As Jay mentioned earlier, QuantumAuto annualized written premiums passed the $1 billion level within the quarter.

The product now represents over 30% of our countrywide annualized premiums, and we remain pleased with the program's successful performance.

Brian has already provided a broad commentary on the marketplace, so I won't go into much more detail here.

We do continue to see a competitive market, particularly in the auto lines.

Industry returns are strong and most carriers appear to want to write more business.

A full range of competitive tools are being deployed, including in some cases rate changes.

Jay opened by broadly describing some key initiatives to driving competitive advantages and results in our personal insurance business.

We continue to expand and leverage these major initiatives as well as building out more focused capabilities.

As an example (technical difficulty)

Please stand by.

Your conference will resume momentarily.

Again, please stand by.

Sir, you are back in the main call.

Thank you.

We apologize for the technical difficulties.

This is Joe Lacher again.

I will continue where I think we lost you.

We continue to invest in being a partner of choice for our customers and agents.

This year, we launched insynchtools.com, a suite of sales and marketing tools that will help our agents drive new business and retention.

One of these tools, One2One, is a turnkey loyalty marketing communication program which enables our agents to be more consultative and connected with their customers.

1-to-1 has demonstrated retention improvement and has been recognized by the Direct Marketing Association with an ECHO award for strategy, creativity and, most importantly, results.

I'd like to just swing back to one additional comment, expanding on some of Brian's comments relative to the California fires and provide just a reminder.

Our Personal Insurance business is not a major writer of high-valued homes.

In fact, in the affected areas, we believe we only have five insureds with homes valued over $2 million.

So it is a different profile of risks for us than perhaps some of other competitors.

With that, I will just recap, our results this quarter have been very strong.

We are pleased by our demonstrated ability to both grow and maintain profitability levels in a challenging market, and we anticipate capitalizing on and expanding our strengths and continue to profitably grow this business.

With that, I'll turn it back over to Jay Benet.

Thanks, Joe.

If you look at page 16, you can see that average invested assets grew to $74.5 billion in the quarter, increasing over 3% when compared to the prior-year quarter.

Operating cash flows were $2 billion in the current quarter and over $3.9 billion year-to-date.

The average quality rating of a fixed maturity investment portfolio remains very strong at Aa1 or AA+.

Below investment grade securities still comprise only 2.6% of the portfolio, and the duration of the portfolio decreased slightly to 4.0 in the third quarter.

The total investment portfolio had a net unrealized gain of $330 million at the end of the quarter, while impairments for the quarter and year-to-date were negligible.

Third-quarter net investment income, as shown on page 17, increased 8% to $724 million after-tax, mostly due to the increased invested asset base.

NII for the fixed-income portfolio also benefited from higher reinvestment rates.

And while the non-fixed-income portfolio did not achieve the very high returns of the first half of 2007, it did perform well during the current quarter, exceeding the performance of the prior-year quarter.

Overall, our after-tax yield was 3.9% for the quarter, despite the turbulent market conditions.

Page 18 updates the overview of our investment portfolio's exposure to subprime and Alt-A mortgages, which for Travelers remains negligible.

During the quarter, asset-backed securities collateralized by subprime mortgages decreased to $96 million, due entirely to cash received.

These securities have an average credit rating of AAA, and 94% are from vintage years 2003 and prior.

Cash received during the quarter also reduced CMO securities backed by Alt-A collateral to $96 million.

We continue to have no exposure to CDOs backed by subprime mortgages, and in total, all of these categories of investments represent only 0.3% of our total fixed income portfolio.

It's also worth noting that no securities in our entire residential mortgage portfolio have been downgraded or placed on credit watch during 2007, and we continue to believe that we have negligible exposure to subprime and Alt-A mortgages in the hedge fund portion of our investment portfolio.

And what I'd like to do is just ask Brian to make a couple of comments on the insurance side.

Jay, we have thought as broadly and as comprehensively as possible about the potential impacts from the credit market disruptions in our bond, our D&O and all other financial products and insurance businesses.

And our assessment is that given everything we know at this time, our current year loss estimates remain sufficient to absorb loss activity that may arise, and we will obviously continue to be closely monitoring the situation.

With that, Jay.

Turning to page 19, we ended the third quarter of 2007 with almost $26 billion of common equity, ex FAS 115.

That is up 6% since the beginning of the year, and book value per share, ex FAS 115, of $40.20, up 11% since the beginning of the year.

And each of those are after the impact of almost $2 billion of share repurchases and $554 million of common stock dividends year-to-date.

Book value per share, ex FAS 115, increased 15% from a year ago, again, despite the very significant share repurchase activity.

Our debt-to-total capital ratio of 19.3% was below our target of 20%.

Stat surplus was just over $22 billion and holding company liquidity was $1.8 billion, exceeding our $1.1 billion target of one year's worth of interest and dividends.

Given current market conditions and barring unforeseen events, we expect to continue to generate more than enough capital to support our business, and we will continue to return excess capital to our shareholders.

Our strong financial position is allowing us to accelerate our share repurchase activity in the coming quarters, as previously discussed.

Page 20 summarizes our updated guidance for full-year 2007, which we are increasing for the third time this year.

We now expect fully-diluted earnings per share will be in the range of $6.52 to $6.62, versus the guidance we provided last quarter of $5.80 to $6.05.

Our revised EPS range assumes fourth-quarter catastrophe losses of $90 million pretax, or $57 million after-tax, which includes very preliminary estimates of potential losses for the California wildfires.

This cat estimate takes into account the $50 million or so of losses we experienced in connection with similar fires in 2003, as well as the potential for other cats occurring in the quarter, such as early winter freezes.

Our guidance also assumes no additional prior-year reserve development, either favorable or unfavorable, and weighted average diluted shares of approximately 673 million after share repurchases and employee equity awards.

And with that, Jay Fishman would like to make some closing remarks before we turn it to Q and A.

Thank you, Jay.

Just quickly before we turn to questions.

I just want to make you all aware that we have engaged in the public policy debate related to the availability and affordability of wind insurance on coastal exposed areas.

We think it is very appropriate that the leadership of this industry take an active role in being creative and thoughtful of different suggestions and ideas of ways in which we can begin to mediate the crisis that really is upon so many of the coastal communities.

We have come forth with a private market proposal.

We outlined that in an op-ed piece that ran in the Wall Street Journal on August 27th of this year.

For those of you who have any questions about the concepts, we would be more to happy to take your calls and engage you any way that would be helpful to you about what our proposal is.

And so with that, Tonya, we will open it up to questions, and see if we can be helpful.

(OPERATOR INSTRUCTIONS) Jay Gelb with Lehman Brothers.

Thank you.

I believe you mentioned in the earnings release about lower reinsurance costs.

And it also looks like your net-to-gross relationship on the premiums line also went down a bit.

Can you give us a sense of how much -- I'm sorry it actually went up a bit.

Can you give us a sense of how much more room to rise that net-to-gross relationship has going forward if reinsurance rates continue to drop?

Jay, let me make sure we're really answering -- understanding the question that you are asking.

Are you asking us would we purchase substantially more amounts of reinsurance should rates in the marketplace change significantly?

No, I'm looking at page 7 of the supplement, where the net-to-gross relationship went up to about 88.5 -- to about 86.8%.

Up to 88%.

So I'm just looking to see if we should continue to expect you to retain more business.

This is Jay Benet.

I don't think there is a fundamental change in our reinsurance philosophy or what we are retaining.

There are some things that are altering that ratio on a quarter-to-quarter basis.

One of them is that we entered into the transaction for the cat bond in the second quarter of this year.

And when we talk about the timing of reinsurance purchases, that is really what we are referring to.

We didn't have a similar transaction in the second quarter of the prior year, and what that did was it caused the absolute dollars of reinsurance purchases in the third quarter of this year to be different than the third quarter of last year.

So that is one element of it.

Another element of it is, as we had indicated, the cost of reinsurance has changed a little bit.

And of course, we adjust the program on the margin each year based on that cost.

It is not a real substantial difference there.

And as it relates to the underlying business, we do have certain businesses, like our national accounts business, that has different dynamics about size of account and retention than the rest of the business.

And changes in the absolute volumes of the national account business will have some impact on how the overall statistics look, but it doesn't change the fundamentals of what we are doing as it relates to gross versus potential.

Our non-catastrophe treaties are basically unchanged, our property per risk, our casualty treaties are largely unchanged and have been for some time, and really are not particularly price-driven.

We are not heavily reliant on catastrophe reinsurance.

We've been through this before, but we have $1 billion retention, and we buy, actually, above the $1 billion, less than $600 million of coverage on a national basis.

We do have the northeast cat covered on the wind cover that we bought in that.

But we're not a heavy user of cat cover, and I wouldn't anticipate changes in the price of catastrophe reinsurance to in any way dramatically change our catastrophe reinsurance profile.

Okay, thank you.

And then two other quick follow-ups.

First, on page 17 of the presentation, partnership income dropped sequentially.

I'm just trying to get a sense of -- first, is that on a one-quarter lag?

And second, what do you think a reasonable run rate is going forward?

And then separately, if you can just update us on your comfort with reserves for legacy issues, like lead paint, and also if there is any change in your outlook from surety exposure to homebuilders, given the problems that industry is suffering?

This is Jay Benet again.

As it relates to the other investments that show up on page 17 of the webcast, that is a grouping of investments.

It's private equities, it's hedge funds, it's real estate investment; so it's a very diversified portfolio.

We did have very good performance across the board in all of those categories in the first and second quarters.

We thought those were pretty high, and actually, I think they are historically high for us.

When you look at the third quarter, it is more in line with -- I'm sorry, the third and fourth quarter of last year and really the average of last year.

So I don't have a crystal ball.

If I did, I probably wouldn't be in this business.

In terms of how we look at it, we generally look at the quarterly performance, come up with some averages and then just overlay on that some expectation of what the market looks like.

And I think that is an individual choice.

Our hedge fund reporting is generally 30 days -- on a 30-day lag.

Our private equity reporting is generally a quarter lag.

But you have some comments about what we do on an interim basis as well.

We have pretty constant dialog with our investment managers as it relates to what is taking place in any of our investments where there are lags.

We recognize that while the information flows allows you, for accounting purposes, to use a lag, we're still required to update our views.

So those dialogues are intended to isolate any kind of issues that might have arisen subsequent to the reporting date.

And there has been nothing that we've been made aware of that would suggest that the valuations that we placed on these things and the income that we've recorded is in any way inappropriate given even more current market conditions.

And then again, only because I suspect others will have similar questions, I will let Jay comment on the legacy reserves -- just a quick answer on your question about the surety exposure to homebuilders.

Brian's comments about the comprehensive look that we've taken in respect of changes in the marketplace broadly -- and I'm speaking now about all of the credit changes -- really incorporate all of the events and issues that we could think of, whether it be surety to homebuilders for development exposures or D&O or E&O or other professional liability coverages.

And as Brian said, given everything we know at the moment, our loss estimates, our current year loss picks, are sufficient to incorporate any losses that might emerge from that.

So there really is no particular new news on any of those fronts, but we are going to continue to watch it carefully.

I think as far as the legacy reserves are concerned, I think the net favorable prior-year development that we've been experiencing in our business segments really speaks to that.

The legacy reserves are part of the quarterly and ongoing reserve reviews that we do as a practice around here.

And looking at how they've been performing, we're comfortable, as we are with all of our reserves, as to the valuations that exist as of this balance sheet date.

And we'll continue to monitor them, but at this point in time, they are behaving okay.

Thanks very much.

David Small with Bear Stearns.

Good morning.

Just quickly, amortization of DAC was higher this quarter than it had been and higher than we expected.

Could you just comment on that -- what drove that?

The amortization of DAC is being impacted by the change in the supplemental commission program.

So what you are seeing is when we talk about the timing differential of the new program versus the old program, the timing is really being such that the new program gets capitalized as part of DAC and then it gets amortized as part of the amortization.

So that is really all you are seeing there.

Okay.

And then just secondly --

And again, what is important there is that the disclosure that we are providing on the benefit related to the change in the compensation program incorporates the change in DAC that you just asked about; it's not additive.

The disclosure incorporates all of those changes.

And that is why the number has been decreasing quarter to quarter and will effectively eliminate itself as a differential next year.

Okay.

And then just separately, maybe you could just -- you talked about new programs as one of the ways that you are growing.

It looks like workers' comp has grown quite a bit in the first nine months of the year.

You mentioned that as one of your new programs.

Could you just give some color on -- and maybe use workers' comp as an example -- of how you're growing, what are you adding, what does the new product look like and maybe what stage you are growing in?

This is Brian.

Let me take a shot at that.

And I apologize for confusing the issue, because really the programs in the comp are a little bit separate dynamics.

From a program perspective, what we're talking about there is really -- and examples, we have delved into the printing world, the auto dealers' world, are examples of two that we've rolled out in the last 12 months.

It really is a process where we, in a very, very in-depth way, examine an industry.

We're obviously looking at it from a marketshare perspective, but most importantly what we're doing is we're going into an industry like printing that has changed fairly dramatically in the last ten years with technology and said, given the changes in that industry and how they do business, what should the insurance product be, what should the coverages be, and how can we make sure they appropriately deal with that industry's concerns.

So it really is doing the fundamentals of what we do as an industry.

And we've had several of those where we've gone in in a very in-depth way, developed programs that we think clearly have enhancements from what have traditionally been offered in the marketplace.

And then we have a pretty thorough marketing/sales effort with our agents, looking at marketshares, targeting specific companies, partnering with agents and going out and trying to write business.

And our success rates there have been very, very strong.

So when we talk about an industry-focused product, we are talking about a pretty in-depth process.

The comp dynamic is a little bit different, and that is that we are a company which on the national account loss sensitive side are a major -- the major claims servicer for large insureds' pools, etc., for the workers' comp.

Again, not on a guaranteed cost basis, on a loss sensitive basis.

So we have lots and lots of comp experience.

We traditionally, relative to our comp claim competencies and industry knowledge, have been a fairly minimal player in guaranteed cost comp, specifically on the small commercial side.

So we have been much more proactively on a state-by-state basis going out -- and by state-by-state, I mean in states that we think the comp market is a positive one -- and gone out and tried to grow that business.

So it has really been trying to leverage writing more comp, a lot of it for customers that we already have a packaged product on.

So some of that is in small commercial, some of that is a part of the whole TravelersExpress concept, and some of it is in our core middle market stuff.

Okay, and maybe just on the comp side some of the states that you've targeted or some of the states where you've seen growth?

I'd have to look up exactly where we are getting the most growth.

Let me look up something and we'll keep going and I'll come back to it.

Great, thank you very much.

Alain Karaoglan with Banc of America Securities.

Good morning.

I have a couple of questions.

The first one is in terms of loss cost trends.

What are you assuming in your pricing going forward?

Are you assuming the same favorable trends that we've experienced this year and in the past couple of years, or are you assuming an uptick over the next couple of years?

The reason we're hesitating a little bit is the precision of our forward-looking comments are what I'm debating here as we think this through.

We are certainly not -- the assumption just to costing related to the pricing that we're dealing with today -- and let's break this down a little bit.

In the personal lines arena, particularly in auto, clearly envisions that what we've begun to see in frequency will continue, meaning the uptick that we're seeing in frequency.

And again, this is a fairly modest uptick.

I've asked Joe to really try and characterize it.

But round numbers, we're talking about a 1% increase in frequency.

So that is a relatively small number.

But as opposed to what we've seen for the last several years, where it has been declining.

So we are not assuming that it will decline; we are assuming the continuation.

And severity has always been single-digit inflation.

And when you put those two together, you get some loss cost trend.

And that is what we're assuming in Personal Lines and that is what our current-year loss picks and, ultimately, our pricing dynamics are really based on.

In commercial lines, you can get a lot of different results, depending on the particular business that you are asking.

It's a pretty complex question to answer in a comprehensive way.

But we are assuming positive loss trend.

There are some businesses where severity is a little more, some where it's a little less.

There are some where frequency is a little more and some where there's a little less.

But our pricing and our loss picks assume a positive loss trend in the commercial line businesses broadly.

Actually, that is very helpful.

In personal auto, the expense ratio is around 26%.

Could you -- I assume long-term that is not a very competitive expense ratio.

Could you tell us how much the investments are costing you in that expense ratio and where do you think ultimately you should get to?

When we look at it, to some degree, we are watching the combined ratio on this one -- because ultimately, that is the measure of the cash register at the bottom line -- and find that we've got a reasonably competitive combined ratio, and with that can generate growth that is superior to most of the competition.

So that is really the measurement we watch on it.

There are some underlying investments running in there that are on the order of a point or so that will over time work their way through, but I don't think that is the ultimate driver of how we watch it or look at the number.

Obviously, we consider the component parts, but we are looking at the bottom line.

Only we don't -- actually, quite the contrast.

Let's just say we don't feel at a competitive disadvantage with respect to our overall costing structure in personal lines.

Meaning, again, what Joe's speaking about, our total combined ratio.

It's obviously a blend; it's a blend from more legacy systems and some Quantum, and you get differences in those different products.

But on an overall basis, we don't feel at all at a cost -- either loss or expense combined -- disadvantage.

I mean, we will continue to make investments in improving loss performance, and our experience is where we do that well, they are very attractive investment returns.

We spend $1, we get a lot more than $1 dollar back if we spend it right.

So we just -- we stopped some time ago looking at the individual segments of the cost structure so precisely.

It's not hard to drive the expense ratio down; we can obviously stop spending in a lot of ways.

And over time, what we'll see is a deteriorating loss performance if we are not very thoughtful about it.

So we do look at it that way.

Great.

Thank you very much and congratulations on the excellent results.

Thank you.

Dan Johnson with Citadel.

Thank you very much.

Could we talk a little bit about the development trends in the personal lines business?

Obviously, maybe middle of '06 through end of '06 we saw substantially larger prior-period development than we're certainly seeing this quarter.

First of all, can you give us a sense, if we were only to pare that back to the Auto side, would we come up with the same conclusion, that there is a lot less reserve releases over the last couple of quarters than there were a year ago?

Before Joe answers -- and I'm not preempting him -- but what is important to realize is that most of the positive reserve development occurred because loss experience turned out to be better than we anticipated it would be when those original loss estimates were established.

And that was driven in some measure by the decline in frequency that we spoke about earlier.

Clearly, that is a piece of it.

A big chunk of it has something to do with the claim initiatives that we've been running and we spoke about before.

And I think, as we've described them historically, we would anticipate the results of the claim initiatives, we know what the costs were coming out to be, and booked initial results assuming that there was a modest return on those investments.

And what happened, and what we had hoped for, was that they were generating more significant returns.

They in fact have, and we've displayed for you the impact on severities in prior displays.

And as those severity improvements rippled through, they caused us to reestimate those losses and generated some more significant reserve changes.

And that is what I think you see in that bubble over the last year and a half that is written through there -- it's heavily influenced by those claim initiatives.

Were those claim initiatives more heavily weighted on homeowner endeavors or auto?

They were more heavily weighted on auto.

And I think you specifically were trying to unpack the auto versus home.

We don't specifically describe that.

I will point back to last year, we did make some adjustments in the quarter relative to our Katrina losses.

So that would have a disproportionate homeowners bias in that timeframe, and we will at least call that one out because of the relative size of that and the cat relativity of that.

Great, that was my question.

Thank you very much.

Brian Meredith with UBS.

Good morning.

Two questions here for you.

First, in your Business Insurance operations, wondering if it's possible to give us a sense of what the reserve releases you've see there for the first nine months, what impact that has had on your loss picks -- [actual] loss picks this year?

In other words, what does your fully-developed actual loss picks look like from '06 and '05, and what has the impact been on what your loss picks are right now?

Brian, this is Brian.

Obviously, it has a favorable impact as we go through.

And probably just like everybody in the business, we build our current-year loss picks at the beginning of the year with a baseline of where we think we're coming out for prior years.

And as those improve, it adjusts the starting point and has a favorable impact.

I think it has been relatively small in the results so far this year, and relatively -- we don't expect it to change dramatically.

But there has been an impact running through there.

Okay, so on kind of a year-over-year basis, if I'm trying to compare -- because your accident loss ex cats was down in Business Insurance on a year-over-year basis, right -- if I look at it from what you reported.

But I guess the question is, what is the real developed number in the third quarter?

Was it actually up on a year-over-year basis if we kind of -- on a comparable basis?

Do you see what I'm saying?

Yes, it's a very complicated question.

We know the question because we ask ourselves this all the time.

And if I got it -- I think what you're asking -- and I will probably at the risk of being redundant -- if you take our current year and adjust it for any favorable impact from the prior year, and you try to compare year-over-year where are we and what is happening with margins.

Yes, exactly.

This is Jay Benet.

This may be helpful, but looking at some of the details in our supplement and then just making some of these adjustments.

If you look at the combined ratios year-to-date, ex cats and ex prior-year development for Business Insurance, third quarter year-to-date in '06 was 91%; third quarter year-to-date in '07 is 90.8%.

So very, very slight difference.

And then if you go back to the fourth quarter of '06, where we had some prior-year development, and I think your question is how much of that influences the combined ratio, that combined ratio, ex cats and prior-year development, was also very similar, 91.4.

So I think there really isn't a whole lot of change that is taking place here.

Okay, great.

And next question, I'm wondering if it is possible to or if you measure how much of the Business Insurance new businesses you are getting, you are getting it from the surplus lines marketplace.

And maybe you can add onto that what is happening with your surplus lines operation as far as the premium volume goes.

Again, this is Brian.

The first question, as we have said in the past, very, very little to nonexistent is what we are writing from the surplus lines in our core businesses.

And we know pretty well who the carrier was before we write a piece of business.

And so we are very confident that we are not taking anything of significance out of those markets.

And from our perspective, we are a very small player in those lines.

We have some businesses -- our experience is probably consistent with what you are seeing in the market place, and undoubtedly as the market softens, businesses move out of those, and we're experiencing some of that in ours.

But we just are not a big player.

So we wouldn't even be a good barometer of what is really happening in the marketplace there.

Thank you.

Jay Cohen with Merrill Lynch.

Yes, I guess maybe a little bit of a follow-up on that one.

Was there any favorable current year development in this quarter?

When I'm looking at the -- specifically in Business Insurance -- when I'm looking at the accident year ex cats combined ratio, the adjusted number, was there any current year favorable or unfavorable development?

There was a small movement in our current year picks this quarter.

Not -- and I don't have a number off the top of my head but --

Historically, what we have provided you -- and obviously, if we had the case in this quarter we would be providing it too -- when we have reestimated current year loss picks and its impact has been cumulative -- so if we've gone back and we've reflected in the current quarter changes that would have -- that would, had we known, shown up in previous quarters, we've disclosed that to you when we have had that.

We haven't --

When they've been significant.

I mean, we move the current year picks as appropriate all the time.

If you are asking is there a benefit in the current quarter, in the third quarter, from reestimating first and second quarter loss picks, it is very small.

Great.

That is helpful.

And I guess, second one, it does seem that the --

Small, very small?

We're comfortable with small.

Okay, small it is.

Again, in the interest of giving you complete data, doing that same calculation that I was referring to before, if you take the third quarter and you back out the cats and the prior-year development from the combined ratio, the third quarter combined ratios for Business Insurance is 89.9 versus 90.8 year-to-date.

So that is why we are saying what we are saying.

Great.

And then the second question, in Business Insurance, this favorable prior-year development was, I'd say, materially higher than what you had been seeing.

And I'm wondering if there was any change in trends that you noticed or what caused that notable increase?

First of all, the reserve base in that business is huge.

When you look at the overall reserves that we carry, the lion's share of that number is in the Business Insurance segment.

So it doesn't take very much to swing that number.

It's still a very, very small percentage of the total reserves.

I think what we saw was just in this quarter good behavior in the reserves across all of the businesses.

And as I mentioned, the legacy type reserves also performed very well.

So I think net-net, you are just seeing a little bit larger number than we've seen before.

Great, thanks for the answers.

Larry Greenberg with Langen McAlenney.

Thank you and good morning.

I was wondering, Brian, if you could just talk a little bit about where retention levels perhaps have -- would have gone in past cycles, maybe comparable periods in past cycles, relative to the stability that you are seeing today?

Middle market -- this is Jay -- middle market business in the '90s was approaching 70% in retentions.

We can go back and we can -- there is information that was disclosed then; we can certainly go back and get it.

But I think I have a recollection of middle market retentions actually dipping into the high 60s before the market finally bottomed out.

It's one of the reasons why we say that the retention levels really are an important leading indicator of the stability of the marketplace.

Yes, and we could again -- like Jay just said -- we could go back and look at a bunch of years.

But middle market at mid-80s to higher 80s is phenomenally strong.

In a softer market, mid 70s would not be unusual at all.

And it could certainly go lower than that.

Small commercial, somewhat similar to personal lines, is going to be fundamentally less volatile, but consistently running 82%, 83% is very good.

And again, that would dip -- into the higher 70s wouldn't be unusual, to have a 77%, 78% retention ratio in a small commercial business.

And then as you move up in size, the larger account stuff is going to be more volatile.

So you get into larger property risks, for example; I mean, those retentions will bounce all over the place.

And ours do, to some degree, not nearly as dramatically.

But that gives you a feel for, I think, where about they'd be.

Yes, that is helpful.

And just when you evaluate your national advertising campaign, are you getting more or less bang for the buck than you initially expected?

Just wondering if maybe that is helping volume, but I don't think you expected it would.

Yes, I doubt it, Larry.

I'm not sure we're getting any bang.

But again, you say, well, why are we doing it?

We made a conscious decision that it was worth investing in the recognition of the brand name, and that over time, that that would matter.

We do measure -- and there are people around this table who actually measure it constantly -- recognition aided, unaided and everything else.

And I can certainly share with you that we are encouraged by those results, but I don't think it matters -- at this stage, we are so early into the process of really building true brand-name recognition that matters, that differentiates, that we don't put -- I don't put it a lot of stock in it personally yet.

But we are going to continue with it.

Thank you.

Charlie Gates with Credit Suisse.

Good morning.

I have two questions.

My first question, with the change in name of your Massachusetts company, could you comment as to how you see that regulatory environment changing and to what extent it's conducive to growth?

I think -- and I'm sure you're talking about our personal lines subsidiary in Massachusetts.

And for those of you who hadn't seen it, it was formerly named the Premier Insurance Company of Massachusetts, and we've now changed it to incorporate the Travelers' name.

The state of Massachusetts has historically had a complicated and highly regulated and very unique auto marketplace, and they've changed some of those rules and regulations and are opening up to competition.

It's a little early to tell how that marketplace is going to work and function because there's a fair amount of the operating regulations and rules that need to the described before we will know exactly how it's going to function and work.

We've long been supporters of opening up the marketplace to competition and are excited that the state is moving in that direction and optimistic that they will have as much success as we've seen, perhaps, in a New Jersey or other areas that have opened up broadly to competition.

But it's a little early to tell what exactly will happen until they define a little more how the marketplace will function.

It's encouraging.

It is.

It's returned to capitalism.

My second question, my only other question, could one of you drill down as to exactly what TravelersExpress is?

Charlie, this is Joe Lacher; I will take a shot at that.

TravelersExpress at first, it's the branding name or the trade name that we use to describe our new, small commercial product, and, as importantly, business platform.

It's a -- the coverages are essentially the same as what we provided before.

We've got a more sophisticated rating methodology that employs multivariant rating programs and really an objective pricing orientation.

But what it does when you package it together with the technology platform and instead of automated underwriting rules, is it allows the business to move through agents' offices more efficiently and effectively; it broadens our appetite for risk types, for what we will call classes or programs, whether apartments or stores or buildings or garages, or all the different kind of industry classifications that you'd expect.

So it gives us a broader appetite and more sophisticated pricing program and an ease of doing business that facilitates transactions moving more quickly through an agent's office.

And you can see that on the webcast on page 10.

In the top right corner, the percentage of policies issued via our automated underwriting, prelaunch, they were 10%, 15%, 20%, depending on the state and the geography.

And now post-launch, they are approaching 80% of the policies being issued through that program.

What it really does is it changes the way the economics work for an agent when they are dealing and quoting with the business, that they can handle and move that business through their office more efficiently and effectively.

And it ultimately lets us win ties, because it creates a more compelling product offering.

And when we add in the workers' comp and auto breadth that we're bringing, that Brian touched on a little bit earlier, we can really deal with an entire account inside of that agent's office.

There is some real sophistication in moving from a 20% automated to an 80%, and it's not because we're just -- we're just not looking at 60% anymore.

It really takes an underwriting platform that is based upon, again, different characteristics.

And to trust it adequately to eliminate the human intervention -- and that is what is really going on here, is speed -- speed is significant and the classes of business are meaningfully different from what we were able to achieve before.

It really begins to rely on the technology to do much more of the underwriting, rather than kind of the human bias.

Thank you.

Matt Heimermann with JPMorgan.

Good morning, everyone.

I guess my question is on the new-to-loss ratio.

And I'm curious what your expectation of that ratio would be going forward?

In other words, it seems like in the market, new business is moving at a significant discount to renewal business.

Would you expect that to -- would you expect the same impact on your book?

And if so, should we expect that ratio actually to increase going forward?

And I assume, Matt, you're looking specifically at that little chart we threw on page 6.

Correct.

Yes, I think we would not expect that differential to be moving dramatically down from where it is.

Let's try and answer it differently.

The market has one dynamic to it, and other companies will do whatever it is they are going to do.

And then the question is, what do we do?

What you are looking at on this page is not a New York Stock Exchange indication; it's an indication of our underwriting appetite and our willingness to make price accommodations to bring new business in.

One of the very important things that Brian mentioned -- and we didn't put a number on it because it is competitively significant -- is that at the levels you are seeing on this page, this business is still nicely positive from a return perspective.

So depending upon what happens in the marketplace, we certainly have the capacity, still within our target ranges and our target pricing, to be able to continue to compete.

We haven't hit a line yet -- and that's what I make the comment, that some of the anecdotal dynamics of the marketplace conditions are inconsistent with our market and what we're doing.

So there is certainly room for us to continue to be competitive.

There will come a point where that won't happen anymore, and -- maybe -- maybe it will and maybe it won't.

But if the market drives us there, then we will begin to make that decision.

But right now, given the analytics that we have, given the tools, the ability to slice and dice the business, there is plenty of opportunity to continue to take on new business and to do so and support our agents and build our business and grow our share and to do so profitably.

That is what is the jugular issue.

We know where we are.

This isn't -- what I mean by that is we're not running this by the seat of our trousers; we are running it based on the analytics, and will continue to do that.

And will be competitive where there is room to be and when there isn't anymore, we will stop.

And we are comfortable stopping.

That is fair.

And just to follow up on that, you don't have a Y axis on this chart.

But I mean, what type of move -- running the Company, what type of move in this ratio, up or down, would be concerning at this point?

The magnitude of the move?

We've talked historically about the nature of the change between new and renewal of being between -- and we've used this at a very broad range and not -- there is an axis; there just aren't numbers on it, by the way.

We've talked about a 5% to 10% discount over a long period of time of being what we believe the difference is between new and renewal.

So now you are asking really two separate questions.

One, what will happen to renewal pricing, and will that continue to change?

And then will the spread relative to the renewal pricing change?

And one, to some extent, is a little more market-driven.

Renewal book, as Brian said, is exceptionally -- is really our bread and butter, and we will do what we need to do to defend our position and defend our book.

Our new business, we can determine what that appetite is much more readily.

And I don't think we're prepared to make predictions of what's going to happen to renewal pricing.

I have for some time been --

Jay, not to cut you off.

I guess I was more trying to get at where you are within that historical kind of 5% to 10% range.

Are we closer to the top or closer to the bottom, just to give a sense of the flexibility?

I think that really gets to a competitive positioning and profiling that would be inappropriate for us to share.

You're really talking about our pricing strategy, and it's not appropriate for us to really share that with you.

Maybe -- this is kind of a left field question, I admit.

You've obviously had a big reinsurance company buying a small U.S.

company.

You have a lot of reinsurance capacity out there that also is primary business.

I'm just curious if when you are looking at your reinsurance program, does it bias you one way or another whether or not the potential seller of reinsurance competes with you on the insurance side?

No.

I was thinking -- I wasn't struggling to answer; I was thinking as broadly as I could.

The answer is no.

We don't include or exclude companies that write reinsurance because they write primary business as well.

Okay.

Appreciate it.

Thank you.

This concludes the Q&A session for today.

I would like to turn the call back over to management for closing remarks.

Folks, thank you all.

We appreciate your time and attention as always.

And Mike and the rest of the folks are available to answer any questions you have.

And we appreciate your patience and apologize again for the technical difficulty that we had during the call this morning.

So, thank you.

This concludes the presentation.

You may now disconnect and have a great day.