W R Berkley Corp (WRB) 2003 Q1 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the W.R. Berkley first quarter earnings release. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers following the presentation.

The speakers' remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward looking words including, without limitation, "Believes, expects, or estimates." The caution that such forward-looking statements should not be regarded as representation by us that the future plans, estimates, or expectations contemplated by us will, in fact, be achieved. Please refer to our annual report on form 10K for the year ended December 31, 2002 and our other filings made with SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. W. R. Berkley Corporation is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

I'll now turn the conference over to Mr. Berkley. Please go ahead, sir.

Thank you. Good morning.

In other times we might add forward-looking statements are "Imagine, wishes, and hopes." Fortunately here we're in the environment where they are less necessary. We were very happy with our quarter. We think it was terrific. Both the loss ratio and expense ratio continue getting better, basically driven by price increases. I think that one of the key elements to take note of is that our policy count increased by roughly 5%. We think that gives you a pretty good idea of what our average price increases are. I think this clearly -- some past issues coming up now and again with loss reserves but they are not particularly significant. What we're really seeing is 90% of the business earned in the quarter '03 was written in either '02 or '03 and by the second quarter that will be 100%. The fact is that we're pretty enthusiastic about not only the rest of this year but certainly the next several years. We've been able to maintain the discipline in keeping expenses in line and as prices have gone up, that expense ratio has continued to drop. I think the cornerstone of our business starts when you look at that loss ratio in pricing. And it's across the board.

Let me try and talk about each piece, and then we can come back to specifics if you have any questions. And that is, the price increases that we're seeing in our specialty area continue to be very strong, with the exception of transportation where they are still in double digits but not 30-40%. On the other hand, that business is extremely profitable already. Our regional business continues to show very substantial price increases in the mid teens and while there are places here and there where people are saying they want to grow, we're not having much problem gaining market share and increasing prices. I might add that in our regional business we're trying to be careful given how good the results are, not to price ourselves out of the market. We want to write as much business at these prices as we can. Alternative market business continues to, especially, California comp is very strong. Our access workers' comp business is very strong. Our fee-for-service business led by Berkley Risk and Key Risk is excellent. So we're really quite pleased there. International business continues to do well. We've seen improving results in the issues we've had with respect to Argentina seems to have been put behind us. Our reinsurance business, facultative business is absolutely outstanding, doing extremely well, and our treating business, in the current year, is showing underwriting profits, although overall we still don't have profits in our preview reinsurance business. As to the Berkley underwriting partners, that business is growing a bit and so is Berkley capital. But the core business that's driving that, the facultative business, the treating business, both current and actual years we were pleased with, especially with facultative.

So when we look at our business as a whole, we're quite pleased. Our paid loss ratio for the first time was comfortably under 40%. Paid to incurred was just under 62%. So we're really looking forward to a lot of opportunity to greater growth and improved profitability. We have, as we announced before, gotten in place to setup we hope effective with the beginning of the third quarter a London market casualty underwriting operations, which will write non-U.S. business. And just last week we announced Bill Murray has joined us to be president of Admiral Excess which will write excess liability insurance through the admiral. We're pleased and enthusiastic about both of these opportunities, and we continue to evaluate every segment of the business to ensure we're not using our capital in places that aren't giving us returns that we expect.

I'll let Gene go through the numbers and then we'll take questions. Gene?

Okay. Thanks, Bill.

I'm going to start by reviewing the financial summary on Page 4 of the earnings release. Our consolidated net premiums written increased 41% over the prior year quarter to $892 million. Premiums grew by 66% for the reinsurance segment, 62% for the alternative markets, 49% for specialty, and 29% for regional. The growth for all of those was driven by rate increases and a slight increase in new business. The highest growth rates for our individual operating units were 118% for our facultative reinsurance business, 115% for Preferred Employer, our California workers' compensation company, and 80% for Nautilus, one of our excess and surplus lines companies. First quarter premiums also included about $14 million from our two new units, Berkley Medical Excess and B.F Reed, as well as 62 million from Lloyds Quote Share Reinsurance. Only the international segment reported a decline in premiums, and this was as a result of the withdrawal in light business in Argentina as well as the lower exchange rates for the Argentine peso in 2003.

Investment income was $52 million in the quarter, up 17% from the prior period. Our total invested assets increased $400 million during the first quarter to nearly $5.1 billion at March 31st. That increase includes $276 million from operating cash flow and another $136 million from the net increase in long-term debt. That net increase in debt reflects primarily the issuance of $200 million of 10-year notes in February of this year. Most of our new cash flow was invested in municipal securities. Municipals now comprise 27% of our portfolio. That's up 5 percentage points from the beginning of this year and up 10 percentage points from the beginning of 2002. As our tax situation has changed, we've increased that allocation. On a pretax basis, our average annualized yield for the overall portfolio declined 3/10 percentage point to 5.1% for the quarter. However on an after-tax basis the average annualized yield was essentially unchanged at 3.7% for both this quarter and the first quarter of 2002. At March 31st, 2003, the duration of our fixed income portfolio was down slightly from the beginning of the year and is just under five years. Our total investment in Arbitrage securities remain unchanged at around $300 million at the end of the quarter, and the annualized yield on the Arbitrage account was also unchanged at 3.4% in 2003 compared with 3.3% in the 2002 quarter. Realized investment gains were $14.5 million, and that's primarily a result of the sale of fixed income securities as we continued to build up our municipal allocation. Service fee revenues increased 26% to $25 million and that's primarily a result of growth in service fees for managing assigned risk pools. We managed the pools in nine states. Pretax profits on the insurance services business were up 64% to $5.7 million in the quarter. Overall underwriting profits for the risk-bearing business increased to $57 million in the first quarter from 19 million in the prior quarter. That's the result of a 1 1/2 point decrease in the loss ratio and a nearly 3 point decrease in the expense ratio, as well as a higher level of earned premiums.

Even as our earned premiums increased 46%, our paid losses actually decreased from $281 million in the first quarter of 2002 to $273 million in the first quarter 2003. The paid loss ratio was only 39% in the first quarter and the paid to incurred was just 62%. Our net loss reserves increased $165 million from the beginning of the year to just under $2.5 billion at March 31, 2003. Income tax expense was $33 million in the first quarter, which was an overall effective tax rate of 31.5%. The effective tax rate on our investment income actually decrease the from 27.4% from 32.3% in the prior year period due to the high level of municipal securities. That all adds up to net income of $71.7 million, which is an increase of 108% over 2002 and to net income per share, an increase in net income per share of 89% to $1.25.

The operating results for the individual segments are on Pages 5 and 6 of the earnings release. We did restate the prior year segment data as we explained in footnote 2 to the schedule. We changed where we report one of our separating units, Vella insurance services which is an excess and surplus lines underwriting manager. Although Vella has been part of the reinsurance group since we started it 1996, its current business profile has more in common with the E&S that we write in the specialty segment and as a result we decided to transfer management responsibility and financial reporting for Vella to the financial specialty segment, effective January 1, 2003. We included a five-year history of our segment results in the earnings release with Vella reclassified for the specialty segment for the entire period.

Pretax income increased in all five of our business segments. Specialties pretax earns grew by 138%. Alternative markets by 54%, and regional by 44% when compared to the prior year quarter. For all three of the earnings improvement reflects a decrease in the combined ratio and a higher level of earned premiums. Reinsurance pretax earnings increased 18% primarily as a result of higher investment income. The reinsurance combined ratio increased slightly as improvement and results for the current business was offset by increased losses for prior years. In the international segment, earnings increased to $1.2 million as the economic situation in Argentina stabilized and we completed the repositioning of this business. In the aggregate, pretax earnings for all segments increased 106% to approximately $105 million and after-tax operating earnings more than doubled to $62.8 million, which is a return on equity of 4.7% for the quarter. Finally, stockholders equity increased 4.5% the beginning of the year to just under $1.4 billion at March 31 and book value per share increased $1.09 to $25.27.

Thanks, Gene.

I think there are two issues I would like to address before we start, given the view that, leading questions in people's minds. First of all we currently -- and "Currently" does not mean one day. Currently means certainly for the next several months -- have any plans to raise any additional common equity. While we're examining alternatives to raising capital, as our premiums surplus is over 2.5 to 1, we think we have several opportunities that don't include equity and we're examining them now. We've always taken the position we want to have equity when it's there, but we want to be sure that our premium volume continues like it is and if we get through the second quarter, we may reconsider that with this level of increase, but that's our plan for now. We think that it's premature to raise money until you are really confident the business is going to stay and the growth is going to stay. With our criteria for returns and our constantly reviewing the business as we do, we need to be sure that we need the capital and if we do, we'll go out and get it, but that's not where we are at the moment. At the moment growth is more than we forecasting, we wouldn't want to be premature to take any action.

The second issue is reinsurance recoveries. Two years ago we addressed reinsurance recoveries by changing a lot of the reinsurance buying habits that we had, and we put together effectively a self-funding reinsurance program which reduced the amount of premiums that we seed out to probably somewhere between 5-8% of the premiums that we write. In that process, while we technically are seeding business out, most of that money is being held by us. So there is no exposure on it as to our ability to collect. And for most of the people who are having financial difficulties and an inability to perform, we have withheld funds. So while we're certainly not bulletproof, I don't think anyone who is in the insurance business can say they are if you buy any reinsurance. We think we're reasonably protected and we don't see any significant exposures. If you go down on the list of our total amount of reinsurance recoveries, excluding states, assigned risk funds and so forth, it's about $700 million, and out of that $700 million, probably all but about $150 million of it we would define as very well secured, which are basically A rated carriers. If they are not rated A level or better, we have some level of security. We take this very seriously and in fact we have someone whose full-time job it is to oversee this activity now.

So with that, Debbie, I'm happy to take any questions.

Thank you, Mr. Berkley. The question-and-answer session will begin at this time. If you are using a speakerphone, please pick up the hand set before pressing any numbers. Should you have a question, please press 1, followed by 4 on your push-button telephone. If you like to withdraw your question, please press 1, followed by 3. Your questions will be taken in the order they are received. Please stand by for your first question. Thank you. Our first question comes from Jay Cohen. Please state your affiliation followed by your question.

I'm with Merrill Lynch. I've got, I guess several questions. The first is, related to the capital, you know, I guess I think of this as your growth being driven mostly by price. So the risk you are taking clearly hasn't gone up nearly as much as your revenues have. Have you been able to sort of convince the rating agencies that this is the case? I mean, what's the pushback?

Jay, the answers to that question is, in 1986 we did. We were successful. They allowed us to go up to three, a little over three to one. It's another piece of the puzzle that you've got to deal with. It's why I don't want to rush to raise capital. You know, I think the rating agencies are behaving a prudent way. We will be cautious to ignoring this premium growth. So I think if we can give them the right information and show them what's going on, they will be more understanding, but I think that, you know, if you get up there where you are pushing three to one, I think they are going to tell you that you are going to have to do something. So it's one of those issues that we think we need to address.

Okay. Second question, paid-to-incurred ration, 62%, where did it --

61.6, but who is counting?

In the mid '80s, the last cycle turn, on a calendar year basis when you were reporting the numbers, how low did that number go? If you can recall?

I don't even think -- I don't even know if I calculated the number then. Jay, I can't tell you, but just thinking about what the mix of our business was, it didn't get this low.

Okay.

We were making a lot of profits from Admiral and in fact, we had just started. So, you know, factory was a small part of the business. You know, in the '87 we got to be a $500 million company. In '85 I think we were a $138 million company. So I mean, I don't remember the numbers, but the mix of our business was substantially different. We have more personal lines, we have more property business. So I don't know, but even if I did, it wouldn't really be comparable.

Okay. Fair enough. Just, I guess going back again to the last cycle, one thing you've said in the past is that one mistake you made was not being as aggressive in the later '80s when pricing was still good going down but still very good. Is that something you are keeping in mind over the next several years is, as the pricing environment levels off?

To be precise, I tell people the greatest mistake I've made since I've been in this business, which is now 35 years, is that we stopped expanding in 1988. And the reason for that is prices were down about 8 or 10% in 1988. What we didn't understand is how profitable the business was in '87 with loss ratios, you know, in the 30s, and you booked a much higher loss ratio, but there was not good evaluation as to how profitable the business was. You understated your reported profits not by plan but by accident. I think whenever business gets very good, just as when business gets very bad, people tend to overshoot in their estimates, being optimistic or cautious. So when things are good, I think we have people who are being cautious. When things are bad, we have people who are being optimistic. So we remind people that, you know, if we're going to be able to generate returns like this, we ought to be getting as much business as we can handle. And at this point last year, if you may recall on the call, we said there's no growth in policy count, and I think I said we had about a 5% growth in policy count this year. So we're trying to take advantage of it.

Okay. I'll shut up now and let others ask questions. Thanks.

Thank you. Our next question comes from Jeff Thompson. Please state your affiliation followed by your question.

Hi, KBW. I wanted to focus on the paid loss number. Can you talk about why you think it's so low? Is it something going on in claims trends? Is it the way you are settling claims? Just simply a matter of pricing?

Obviously we have not changed how we pay losses at all. We pay losses the same way now as we did a year ago or two years ago. Paid loss ratio always is a reflection of some degree of the profitability of the business. I think that when you look at the numbers, you are inclined to say that people would tell you the current profitability of the business is a little better than you might have thought, and it's a good indicator. I would hesitate to suggest that it's going to be a reflection of our future loss ratio, but certainly I think you start to see that paid loss ratio come down; it's telling you, at least relatively speaking, how much improvement there is. The paid loss ratio a year ago, I think it was about 70%. I'm just checking the numbers.

Well, actually I was just thinking more of the growth of paid losses. It was actually down a little and is there anything in, you know, claims, trends, frequencies, severity?

No.

Inflation, nothing unusual?

No. If anything, I would tell you there's more big claims that are occurring, but I think that price increases are only half the issue in terms and conditions of improvement are very important.

Okay. And secondly, on the expense ratio, do you view that as sustainable or even possibly could it get better from here?

We would hope it could continue to get better. Obviously one never can be confident that 28.4 -- we honestly don't think that's a competitive number. We think we have to drive it down more from the point of view of where the business is and what is going on in the industry. So we just think -- you know, internally we've set as a goal 25%. So, you know, we are going to have to work at it.

Okay. Then just one final question. Do you have reserves up or letters of credit against reinsurance recoverables you could share with us?

I think that we have, for most of the problem reinsurers, we have trustees' funds or segregated funds in some way or another. It doesn't take care of everything bad that can happen, but we think we're pretty comfortable at the moment. It's an issue that -- as I say, we have just added person who is spending his full time going through reinsurer by reinsurer, recovery by recovery, reconciling our reinsurance accounting and our regular ordinary business accounting going through in great detail. So you may have a different view at the end of the second quarter, but at this point we think we're in pretty good shape.

Okay. Thanks. Very good quarter.

Thank you.

Thank you. Our next question comes from Charles Geese. Please state your affiliation followed by your question.

I work for Credit Suisse First Boston. Congratulations on a great quarter, Bill.

Thanks.

Two questions. My first question, could you speak to additions to reserves for earlier losses in this year's quarter versus last year's?

Sure. You know, I think that you see our loss, loss ratio went up, or our reserves went up by 23.9%, and in fact, our effective reserves increased relative to our premium base by more than our policy count. Our reserves went up for the existing business. So our reserves are becoming somewhat more conservative. I think that it is appropriate, and that there still is some adverse development you are seeing from our reinsurance business and with increased reserves for that by around, between around -- a little over $20 million.

So that would have been $20 million pretax of adverse development per company?

No, you're using a term that I didn't use.

Okay.

And that is the -- we have seen our development in our reinsurance business which caused us to put $20 million additional aside.

But that would be a different number for the total company? For the period?

Not a lot.

I was just looking for the numbers, say that you reported in your 10K at the end of the year, in addition to reserves for -- or reductions to reserves for earlier losses.

We never have reductions when times are so good. We only have increases. And I don't have the number offhand.

So that was my first question. My second question, sir, you said that there are some lines, I believe you said, that people want to write. I think that was specific for regional business. Could you elaborate on what that meant?

Yeah. I shouldn't have said some lines. If I said some lines, I meant some places. There are places in the country where people are being more aggressive than other places. So we've seen -- and that could be in eastern Massachusetts they may be more competitive; in central Iowa they may be more competitive, and in other places they are less competitive. I was just trying to make a point, Charlie, not so much about the competition areas but in fact that there are other people out there trying to get business, some of whom are being, you know, intelligently more anxious to get business. And at least at this point, other than a few random places, most everybody's pretty responsible. There are a few random places where we have people who are lunatics and not doing smart things but, you know, in 1986 you had lunatics, too.

Would you say that the environment -- this is my last question -- is akin in these places, to what it was, say, November, December of '86?

No. I would say that the market is a little bit different. I think smaller companies are having more pressures now. In cornerstone of the markets where people were expanding were smaller companies. I think smaller companies are having more pressure now. I think that the reinsurance market which drove the tightening of '86 is just beginning to drive the pricing now, and I think that if you talk to the reinsurance brokerage community, they will tell you there are very few companies that are writing casualty reinsurance business today. We think that's a competitive advantage. So no, I think that it's a little different. Now, that having been said, I would say we are, from a pricing, cyclical point of view, your view of this sort of being the end of '86, early '87 is probably right. So, you know, I would guess that we have, you know, probably 18 months or two years of very substantial rate increases. I think the big difference, though, is it will '86 market was driven initially by reinsurers. This market was driven by the insurance companies and the reinsurers are just feeling all of those pressures now. So I think that the bad financial results aren't behind us for a lot of people and that by the end of '86 most everyone's bad financial results were behind them, and I don't think they are. I think in 2003 we'll have some companies showing quite poor results.

Thank you, sir.

Thank you. Our next question comes from Sam Kiston. Please state your affiliation followed by your question.

Yeah. Hi, I'm with Black Rock Just a couple of quick ones here. One is, could you give us a little guidance on what you think your tax rate will be for the rest of the year?

Yeah, 27.4 for the quarter. It may get slightly better than that, but I would use something like a 27.

27? Okay. And then in terms of the reinsurance areas, could you talk about paid-to-incurreds there and also how much prior year development impacted at the combined ratio?

We're really not able to talk about paids-to-incurreds. At least we're not prepared to by unit. The paid to incurred for the reinsurance business is a little more distorted because they are large amounts individually. But I think what I said about development was $20 million.

Okay.

By the way, paid-to-incurred is still under 50 -- comfortably under 50. But paid to incurred in the reinsurance business looked at alone can be a really quarter-to-quarter misleading thing. So that's only a matter of information, because you get a big losses settled, you have issues where you settle big numbers in a quarter. So that can be a little distorted in any quarter.

Okay. Thank you.

Thank you. Our next question comes from Mike Bianchi. Please state your affiliation followed by your question.

Sandler O'Neal. My question is concerning workers' comp issues. Could you just expand on the trend you are seeing on the primary and the excess workers' comp side given some of your competitors, as well as on the primary side?

Generally speaking, pricing is still pretty good. We're still seeing price increases. California where we had a start-up four years ago, that business is, you know, it's all we can handle, and at very good prices, and we have an advantage that we didn't. You know, until last year, we didn't write that much business. So we're pretty pleased with that. But overall pricing is good. In our alternative market business, it's interesting. In Minnesota at least we're seeing a bit more competitive marketplace there for comp, but other than that, strong prices, good margin, excess comp business in general. Pricing is still very strong. It's growing a lot. Lots and lots of opportunities. So I would say that the business overall, with a couple of regional exceptions, is still very strong.

Great. Thank you.

Thank you. Our next question comes from John Keise. Please state your affiliation followed by your question.

Hi, Bill. I'm with Ferris Baker Watts. Would you talk about what you are seeing in your directors and officers with the business and trends that you see for that segment going forward?

First of all, our D&O book of business is not what -- it's not, if you will, AIG chub book where by and large, smaller companies, we're not-for-profits, we're not for Fortune 500, nor are we much of even the Fortune 1000. We're really a notch below that. We're seeing strong pricing. Not a huge amount of competition but there are a couple of other people who are entering the business. Here and there you'll see some. Again, you know, you'll see a little bit here or there. There is a guy in California who is writing through Lloyd's who is doing all kinds of silly things. You know, sometimes it's not apparent to people what goes on because, for instance, we have a $25,000 deductible at X dollars. They might write the first dollar coverage at the same price, and they claim they are charging the same price, but the deductible or the terms and conditions vary. And that's a particular line of business where deductible and terms and conditions are very important. Today I think prices are good, strong, and I don't see that changing a lot. Most of the competition is very responsible.

Thanks, Bill. Could you put a number on growth that you are seeing in that line?

Monitored growth in the first quarter for all monitored liability was 43%. But remember partly lawyers -- let's just say half of the amount. But I don't think it's varying much from that.

Okay. Fine. Thanks.

Thank you. Our next question comes from Alice Schroeder. Please state your affiliation followed by your question.

Hi. Yes, Morgan Stanley. Hopefully these haven't been asked. I got pulled off the call for a couple of minutes a little while ago. But I am still confused a little bit on the reinsurance combined ratio and what is the accident versus calendar year. And also whether you're running at a higher loss tick this year versus maybe a one-time addition to reserves this quarter or what you think would be one-time. And then second, give how credit-sensitive reinsurance buyers have gotten, could you talk a little bit about your competitive positioning in the market and where you stand?

First of all, we have not brought our loss tick down. We're keeping it where it was. We think it's an area of the business where bad things have tended to happen, companies who try to buy reinsurance cheap don't always report accident numbers to the reinsurers. So we expect to maintain a pretty conservative loss on the (inaudible) business. We did mention that the adverse -- that what we did is we increased for prior years by $20 million in the reinsurance business.

Okay. And I'm gathering, though, Bill, that you are saying that that was not necessarily a one-quarter event?

What I'm suggesting is we think that we are booking conservatively at the moment for the current years, and we keep getting surprised by late reporting events.

Right.

And we are in the process of examining that and it wouldn't surprise us if some of it continues, but the numbers obviously reflect that already and I think that our conservative booking of the current period is such that I don't think it would have any adverse impact on our reported results for the year.

So you have tried to prepare for the future prices, in other words?

But understand that you have a different relationship. It goes to the other question you raised. Reinsureds are believing reinsurers' relationships are no longer the same, and whereas people used to generally try to be somewhat accurate in what they reported, there is a mutual level of adversity development, and that adversarial relationship has to do with reinsureds not appropriately notifying the reinsurer about losses and developed losses. It has to do with reinsurers not paying promptly whereas it used to be people might not pay promptly because they didn't agree about a claim. Now -- or they didn't have the money. Now many reinsurers are failing to pay because they just don't like it, and so the whole reinsurer/reinsuree relationship is changing. We think we're a reasonably good chain compared to the rest of the world. Our surplus and our reinsurance company is over $800 million, and it's going up. And we expect that we would increase it further as the year goes along. We have had, in general, no particular issues. AIG is putting together a list of reinsurers who are acceptable. We're in discussions with AIG but, in fact, the only AIG business we do is facultative business. They are an excellent facultative customer, and hopefully we'll be able to continue on doing that business but it's not a huge issue if we can't. We would like to. You know, they were one of our first customers in 1986 when we got into the business. And I've talked to Mr. Greenberg about the issues, and they are working out their own issues with their own reinsurers. So hopefully we'll be on that list. There are ongoing discussions I think about what makes up the list and how it is. As far as I know, we have no problems about paying promptly about any issues I guess, at the moment. I assume we'll find a way to do that. If not, it's not a problem. I can assure you there is a huge volume of facultative business out there.

I know that you don't have any really meaningful asbestos exposure, but do you look at the New York State ruling regarding General Electric and excess casualty deductible that occurred as having any impact on reinsurance credit sensitivity? It would seem that it would have an impact on some of the recoverables that might have been taken, for asbestos, for example. I don't know if you've even thought about this.

The answer is we've thought about it, but we read the ruling and our lawyers are looking out, but -- unlike most things where I have a point of view, you know, I think that the only thing I can say about this, you know, I think everything having to do with asbestos is slowly moving into the political realm, and the question is can we get a political settlement of the whole thing. If we can't, I think there are going to be lots of changes, this just being one of them. I think that, you know, the whole fundamental issue of people claiming they may have a problem is just a giant issue for insurance overall. I mean, could you imagine if somebody in the car had an accident and nothing's wrong with them but they are worried that they might get something wrong with them? I mean, it's a huge problem, and I do believe that the courts are going to have to address that. But, in fact, you know, if somebody had an accident walks away and fine now but I'm worried about it. So I think this is an issue that's going to be more complicated and we'll have lots more issues in the courts.

Okay. Thank you.

As a reminder, ladies and gentlemen, if you do have a question, please press 1, followed by 4 on your push-button telephone at this time. If there are no further questions, I'll turn the conference back to Mr. Berkley for closing comments.

Well, thank you all. We appreciate it. We think it's going to be a great year. We're very optimistic as we continue to see the numbers improving. We're extremely enthusiastic. So thanks a lot and have a great day.

Ladies and gentlemen, if you would like to access a replay for this conference call, you may do so by dialing 1-800-428-6051, or 973-709-2089 with an ID number of 288826. This concludes our conference call for today. Thank you all for participating and have a wonderful day. All participants may now disconnect.