W R Berkley Corp (WRB) 2005 Q4 法說會逐字稿

Thank you for holding and welcome to today's W.R. Berkley Corporation fourth quarter 2005 earnings conference. This call is being recorded. On today's conference 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. We caution you that such forward-looking statements should not be regarded as a 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 10-K for the year ended December 31, 2004, and our other filings made with the 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. At this time I would like to turn the call over to William R. Berkley, CEO and Chairman of the Board. Please go ahead, sir.

Thank you all for joining us. We were real pleased with our year. It was an excellent year and the quarter was excellent. There's a lot of stuff that's gone on in the quarter. I thought before I get into the details I will give you an overview of our view of the business and where we stand and let Gene talk about the numbers and then I will come back and talk about our operating pieces.

Overall we are excited that the general tone of the market is competitive but thoughtful. We don't see irrational behavior across the board. There are some lines of business that are more competitive than others. Prices are not as high as we'd like them, but rarely if ever are they as high as we'd like them. We see lots of opportunities for good returns. Growth is harder to come by and requires greater effort and greater ingenuity. We are working hard to find not only ways to continue to grow our business as it is but to find new opportunities and we think that we will continue to be able to do that although clearly growing as we have in the past as far as policy count will probably be more difficult and certainly we wouldn't anticipate pricing flexibility to continue in most areas.

Overall I would say that business is still positive, opportunity for good returns. We are comfortable that we will be able to have a year where we will exceed our 20% comments for '06 and we even expect that '07 may well let us do the same. I am going to let Gene talk about the numbers and then I am going to try and sort of talk about each of our various segments of our business. Gene.

Okay. Thank you, Bill. Well, for the fourth quarter of 2005 we reported net operating income of 165 million, up 45% from 114 million in the prior year quarter. On a per share basis that's $1.23 in the fourth quarter of '05 compared with $0.86 in 2004. A little more than half of those earnings are a result of higher pretax underwriting profits which were up 44% to 156 million. And in addition to the ongoing improvement in our underlying underwriting profitability there are three specific underwriting items in the quarter that I want to point out and these items are the impact of the hurricanes, prior year reserve changes and audit premiums.

So first with respect to the hurricanes, our share of the industries Wilma loss was relatively modest. We estimate that our pretax loss from Wilma including our Lloyd's losses will be 20 million. In addition to this we increased our estimate for Katrina and Rita losses arising out of our Lloyd's participation by another 3 million. So for the full year that gives us total pretax losses from the three hurricanes of 74 million which compares with total losses from the four hurricanes in 2004 of 34 million. On a per share basis hurricanes cost $0.36 in 2005 compared with $0.17 in 2004. In addition to that our fourth quarter investment income includes a loss of approximately 7 million from our 20% investment in Kiln PLC due to the impact of hurricanes on Kiln's operations.

The second item reserve changes, when compared to the prior year our fourth quarter 2005 underwriting profits benefited from lower prior year reserve development. Prior year reserves increased 38 million in the fourth quarter of 2005, compared with 70 million in the prior year quarter. The fourth quarter underwriting results also benefited by another 11 million because our year end loss picks for to the 2005 accident year were lower than the amounts that had been recorded in the first nine months of this year.

And finally the third item has to do with the way we report premiums that result from audits of our insureds records. Previously these audit premiums were not recognized until the audits were completed and billed because the amount of premiums from audits that hadn't been completed was not readily determinable. In 2005 we developed sufficient new information to begin recording unbilled audit premiums as they are earned and as a result we recognized an accrual for what's called earned but unbilled audit premiums of 58 million in the fourth quarter. We also accrued the related estimates for losses and expenses associated with those premiums of 47 million. The overall impact of these accruals was an increase in pretax underwriting profits of 11 million or $0.05 per share after tax.

One other item that we described in more detail in the earnings release is that there were three operating companies that we moved from one segment to another. Although this did not impact our overall underwriting results, the prior period results for the individual segments have been reclassified in order to be presented on a comparable basis. So after giving effect to those items our overall net premiums written were up 4% to 1.15 billion in the fourth quarter as premiums from our primary businesses grew by 9% and our reinsurance premiums declined by 19%, primarily as a result of a long planned reduction in our Lloyd's participation. For the full year overall premiums written were up 8% to 4.6 billion and that's mostly as a result of a 22% increase in specialty premiums to over 1.8 billion.

The fourth quarter combined ratio improved by 3 percentage points to 87.0 from 89.9 in the prior year quarter. The loss ratio improved by 1 point to 60.4 and the expense ratio improved by 2 points to 26.6. The combined ratios by segment were specialty, 87.3, regional, 85.6, alternative markets, 69.8, reinsurance, 101.1, and international, 99.7. The alternative market segments combined ratio of under 70 was primarily a result of lower reserve estimates for our California Workers' Compensation business.

The fourth quarter paid loss ratio was 40.4% including hurricane loss payments but 36.6% if you exclude those payments. The full year paid loss ratio was 36.7%. Net loss reserves increased 24% during the year to approximately 5.9 billion at December 31, 2005. Our net investment income was 113 million in the quarter, up 38% over the prior year quarter. Total invested assets increased by over 2 billion from the beginning of the year to 10.4 billion at December 31. And in addition the average annualized yield on investments increased to 4.5% in the fourth quarter from 4.2% in the prior year quarter.

At December 31, 2005, 88% of our portfolio was invested in cash and bonds with an average duration of 3.8 years. The remainder was invested in equity securities including approximately 500 million in the arbitrage trading account. The annualized yield on equities including the trading account was 5.6% in the fourth quarters of both 2005 and 2004. Our effective tax rate declined to 29% of pretax income from 31% in the prior year due to higher investments in tax-exempt municipal bonds which increased to 4.3 billion at year end from 3.0 billion at the beginning of the year. That all adds up to a quarterly net income of 167 million, or $1.25 per share, and annualized return on equity of 31.7% and a book value per share at December 31 of $20.13.

Thanks, Gene. There's no such thing as an optimistic accountant. I think there are a couple of points that I should at least mention in passing and that is the results for the year are such without any take downs of prior year reserves we think that's a pretty outstanding result in addition to which if you look at our development you have to look at those in light of our basic book of business which in policy counters representatively flat up only slightly. In addition a 24% increase in our reserves within this low inflation environment gives you the idea that we are in fact well reserved and anticipate any adverse trends that might develop looking ahead.

We think we had an especially good year in our specialty area. I think almost across the board the one issue that we faced was the reunderwriting of Carolina Casualty where we feel like we've dealt with some issues that had been sitting there for a while. We've taken a thorough review of their loss reserves, put them where we think they ought to be and that's behind us. It makes us feel very comfortable with the management team led by Bill Murray that makes us feel confident that that company is going to be an excellent part of our specialty operation going forward. The rest of our specialty business had outstanding results both some level of growth and underwriting profitability that was truly exceptional.

The regional business continued to show that specialization pays off. They had modest growth and extraordinarily good underwriting profits. They have the discipline necessary to focus on making money and we think that continues as we go into a somewhat more competitive environment. They are focusing on service, delivering expertise and delivering claim service to the ultimate customer so the customer gets what they want when they buy insurance, which is claims payments in an appropriate fashion. Our parent to market business has been adversely impacted by really a slowing down of people going into the assigned risk plan as the environment gets more competitive and lowering prices in California Workers' Comp. This has been offset by growth in the alternative market self insurance business, the excess Workers' Comp. business and growth in policy count in our California comp business. Overall that business continues to do well, growing modestly, the fourth quarter was a difficult one. We expect we will be able to continue to grow although they will not grow as fast as our specialty business.

Reinsurance segment slowed down, slowed down primarily by plan, we laid out a plan when we initially participated as a quarter share reinsurer in London. The results of our cutting back in that market are visible in our financial statements. There was some decline, a small decline in our facultative operation premium volume as we continued being very selective in what we wrote. Many of our customers got more interested in keeping premium than protecting their net lines. The TRIA business overall had a very small decline in volume. The biggest piece of that reinsurance decline in the quarter though was about 24, $25 million of business that came from Lloyd's that wasn't in our book this year. We continue to think there are opportunities at Lloyd's as there are domestically our reinsurance business continues to specialize and find niches and customers who are interested in having a partner who will in fact view their relationship in a partnership way. We think that continues to offer opportunities. We have an excellent team there and we are pleased as we move ahead there. It is an integral part of our business.

Our international business, while small, is extremely profitable. We have one of the leading companies in Argentina and we are partners with Kiln and Company in Europe. We've expanded that business into Brazil and Spain and we continue to believe there are more opportunities overseas. Our underwriting business for our reinsurance business in Hong Kong, we have a small life business in the Philippines. Overall international business is still not a major part of our business but we see lots of opportunities and the opportunities are very independent of our activities in the U.S.

I think in summary we see continued opportunities, pricing I would say we see from flat to down 5%. We think that our volume will be up probably 6% with no new activity. We think with new activity we ought to be able to do better. We are excited about the new start-ups. We think they will all contribute to our growth and have their own cyclical tendencies and characteristics but those characteristics will let them behave somewhat independently of the rest of our business. So with that I would be glad to answer any questions before I finish up.

[OPERATOR INSTRUCTIONS] First up in the roster is Michael Grasher at Piper Jaffray.

Bill, just a couple questions. First of all on the Workers' Comp. business when you look at reserves, how long are you looking at those reserves before you are comfortable or determine redundancy or deficiency?

Michael, are you talking specifically about California where we brought reserves down?

Yes.

I think that our California reserves were conservative before the laws changed. And as the laws in California changed and razor definition became visible about what the results of the industry were for our periods of time we decided to reevaluate our reserves. You have to remember we started this business five or six years ago. So we didn't have a lot of long history of our own. So when you are in a new venture being conservative is really a requirement because you don't even know if your book of business is better or worse than the industry. In some ways it's an embarrassment of riches. The business has proved to be better than the industry and we have been cautious in reserving because frequently new start-ups don't ends up doing as well as the industry. We have continued to be very cautious in our reserving and at this point I think our results would say that we are probably on the cautious side still.

So we very well may see more of the same as the harder market years from '02 to say, '04, '05 start to flow through?

Well, first of all in '02 we didn't write much business. I think we wrote like 40 or $50 million in '02. Maybe it was 70 or 80 but not much. And even last year we only wrote a couple hundred million dollars of business. So this is not a big number. It's big when looked at a quarter in a segment, but when you look at it for us as a whole it's just not a huge number overall and I think that we are not, we are not sure at this point in time. It is a conservatively reserved book of business.

How conservative? You have to remember, California can -- what do they say, the Lord giveth the Lord taketh away. California can retroactively change the required obligations of a Workers' Comp. reinsurer, or insurer rather, and we all could have to put up reserves because the benefits are increased and not decreased. So all of a sudden everyone who has brought those reserves down can find out, oh, my gosh instead of paying $1,150 for this particular thing you are going to have to pay 2,500 we don't want to get caught. So I think if -- you have got to remember California Workers' Comp. is a political process and it's very hard to know what that is. The only thing I can tell you is its less than 5% of our company comfortably less than 5%. So even if it does great it's not going to be overwhelmingly plus or minus to our company. But I think we are cautiously reserved.

Okay. Understood. Thank you. And then in terms of the -- from a macro perspective I think you made some mention of '07 and expectations there. What are you seeing that makes you more comfortable to sort of begin to reflect on '07 potential?

Well, I think that that there's more reasoned competitive restraint at the moment and that is you have fewer idiots. I think people recognize the problem. I think that the benefits of Sarbanes-Oxley, the benefit of discipline is that people are being a bit more rational and I don't see totally crazy behavior in most companies. There are a few people who are out there doing really dumb things but not many. And most of the competitors are behaving rationally. So since we haven't seen that term I'm more optimistic about '07. You got to remember, whatever we write in January is one-twelfth can be earned next January. So the longer that continues the more confident you can become about next year. By the end of this year half of your premium is already done for the following year.

Sure.

Nest up is a question from Charles Gates, at Credit Suisse.

Hi, good afternoon. Two questions. My first question, in your introduction, Bill, you said I believe, the market is competitive but thoughtful. Could you elaborate on that?

It's a rationally until competitive market, i.e. people are thinking about what they are doing. They are trying to get more volume. And it is rationally competitive. As opposed to irrationally competitive where people will do whatever they need to get business. There are few places where there is less rational competition, in certain areas of the D&O area there are people that are not being very disciplined. But for the most part the vast majority of the market is aggressive but being rational in their behavior. There are a few exceptions but for the most part I think people are thinking about what they are doing and when they are making price cuts they want to get volume, they want to do things but it's thoughtfully competitive.

Would you take that down to the excess and surplus lines of the market, please?

Explain to me what you mean.

Oh, simply I believe a large portion of your, what you call your specialty business is excess and surplus lines and I was wondering if you could elaborate on competitive pressures there?

Well, something more than $1 billion of our business is excess and surplus lines business and I think that's generally speaking like the rest of the marketplace. It is rationally competitive for the most part. There are pieces here and there where you have somebody doing something crazy and a line of business in a state, there is always somebody who decides they are smarter than everybody else or has a particular answer to a problem. But I think -- what I'm saying to you, Charlie, is that the business is still a rational business. You don't have irrationality every place. So I'm more optimistic.

You indicated you thought D&O was possibly an exception?

Yes.

Could you elaborate on that.

I think that people are being more optimistic about outcomes and the consequence of Sarbanes-Oxley and D&O than they probably ought to be. I don't think prices especially in the excess limits have stayed up where they ought to and I think there's a bit more competition because there's bigger premiums on the line. That having been said I can't really comment across the board. I don't know what everybody does in every detail. Even if I did I wouldn't want to tell my competitors my own perception, but I think generally speaking it's a line of business where there are more people fighting over less business and are willing to do so at prices that we would say are somewhat more competitive and verge on irrationality.

My last question, historically the Company has principally been a casualty company. How would you see that evolving 2000 versus 2005?

We are still going to be principally a casualty company.

But I guess what I was trying to get at is wouldn't you think property would grow as a portion of total sales?

Wouldn't I think property would grow?

As a portion of total sales or is that a misconception? I think you are an opportunist--.

Yes, we are an opportunist but I don't think property -- we believe you don't get paid enough for volatility. So while prices are better they are not enough better across the board. I'm sure property will be a modestly larger part of our business. But that means property will go from 14% of our business to 16% of our business as opposed from 14% to 22%. Property will increase proportionately modestly because there will be some good opportunity but we are not interested in volatility. And we are not interested in what we see as the concomitant requirements of maintaining more capital.

One of the things that when everyone writes about us is they talk about our operating leverage and we feel comfortable with that increased operating leverage because we manage our business to avoid that volatility. So I don't think it's going to become a lot larger part of our business. It may increase by 1 point or 2 but that's about it.

Thank you.

Moving on now to a question from Joshua Shanker at Citigroup.

Hi, gentlemen. First thing is just a numbers question. I was wondering if I could get the reinsurance recoverable for the year end?

Why don't you go on while they look it up.

Very good. Additionally it's still low and low compared to a number of your legacy peers, but I noticed that filing of an estimate here, the paid losses ratio and your paid to incurred ratio has ticked up during the quarter. Is that related to some losses as few as they are with hurricanes? Or why does that happen?

Gene mentioned it was 36.6% without hurricanes. Hurricanes are paid and incurred quickly. One of our big efforts is to pay hurricane losses quickly. So 4 points was all as a result of hurricanes.

4 point was all hurricanes. Great. In terms of the prior quarter favorable development, did that also happen in '04? Or do you do a true-up at the end of the year?

There was no favorable development. There was net adverse development in the quarter of, how much, Gene?

It was 38 million prior year and then offset by 11 million from the prior quarters of this year. So the net impact on the quarter was actually the 27 million.

So net impact is 27. And do you normally do--. What was that, Bill?

That was 27 adverse. Total reinsurance recoveries are about 950 million, up from 850. But a big piece of that is having to do with our participation in Lloyd's. That represented a big part of that.

Okay. Very good. In terms of at the end of the year are you always doing a true-up for your development for the year in hand during the last quarter?

Yes.

Okay, this is a common. Very good All right. Well, thank you very much.

We have a question now from Meyer Shields of Stifel Nicolaus.

One quick numbers question if I can. Have you disclosed the reserve release for California Workers' Comp.?

No, we have not.

Okay. The new operations you are talking about in Spain and Brazil and Hong Kong, are those all property casualty?

Everything is property casualty that we do other than the business in the Philippines which is endowment life business.

Do you know yet what the cost to your first quarter investment -- first quarter '06 investment income will be from Kiln's fourth quarter hurricane losses?

No, we don't but investment income is a lag, but it comes from our share of Kiln's reported earnings.

And obviously their fourth quarter hurricane loss was significantly less than their third quarter hurricane loss was, so.

And I would not expect that they would have -- they would have wrapped that in I would have thought in the fourth quarter.

That was your first quarter, though.

Yes.

Okay. Last question. I don't expect it now, are we going to get a restate of the quarterly results by segment according to the new classification?

Can you repeat that?

I was wondering whether we were going to get results by quarter according to the reclassification by segments?

Yes. We have those so we didn't publish them in the earnings release but we have them restated back for five years so you can just give me a call and we will get them to you.

Thanks so much.

Next question from Sandler O'Neill at Mike Dion.

Bill, I just wanted to clarify what you said just before the Q&A session and compare that to what was indicated in the earnings release. I think just before the Q&A you mentioned that you expected pricing to be flat to down 5% in '06 and volume to be up 6% and that's exclude excluding any new business activity. And then in the earnings release it said you expected the Company's overall growth to be 6 to 12% in '06.

That is correct.

I'm just trying to get to the--.

When I said volume I meant aggregate premium volume. In other words that implicitly means policy account will either be up more or we will have bigger policies or whatever. What I'm suggesting is that pricing will be down. Our overall revenue premium volume without any of our new units will be up 6% and 6 to 12 gives us a range from what are we going to get from our new units.

Great. That's helpful. And maybe you can just expand a bit on the new units. I know there are a number of press releases at year end and beginning of this year. What do you expect to kind of grow the most or what are you most excited about with the new opportunities?

Okay. I think that -- first of all our aviation business we are pleased about. It's based in Santa Barbara, we are excited about the opportunity, it's led by some people who are based in -- out there who were with Xcel in the past. We think that that business will be a modest contributor to our overall premium volume this year. I think modest is a wide range and that 6 to 12 tells you we are not trying to get in the box, but I think that we feel like over the next two or three years that business can be a couple hundred million dollar business to us. How quickly that moves into that area I can't tell you.

Watch Hill Fac is a new casualty Fac operation, it's based in Sanford. It will probably give us an additional 25 to $50 million of premium in the Fac area, we felt that it was a new opportunity for us, some terrific people we've known for a long time. That will give us probably, that number probably this year but earned premium-wise it will probably be a third to a half of that.

Berkley net underwriters direct writer of Workers' Comp. through agents, brokers over the Internet. Hard to know how quickly they will be up and running. It's a systems related thing. And as everyone knows systems related opportunities are always difficult given the prognostication about of timing. We would hope that we would see 25 maybe as much as $50 million of written premium but again this is sort of a three-year couple of hundred million dollar opportunity. Not going to make a big impact on us probably until the third quarter when we will start to see something of consequence.

Our medical stop loss business, Berkley accident and health, we have a terrific team of people, we're just getting started. It shouldn't be much contribution in the first quarter, a little bit in the second. Again, it will be the second half of the year. That's the widest range of production. It could easily be 50 or $100 million this year. It could be several hundred million dollars next year. Those are big books of business opportunities that require lots of analysis. We think it offers us a good chance to do business that doesn't move in the same way as the rest of our property casualty business.

Our businesses is in Spain, Brazil, and Hong Kong will all be relatively modest size businesses, taken together this year we would be thrilled if they did 30 or $40 million of business. We think over the next few years they will become more important to us. So what we try to do is give us a wide range. We don't know just how much business they are going to produce. The timing of any start-up is uncertain. We are very enthusiastic about the people and we've had a lot of luck, virtually 80% of our businesses have been businesses we started from scratch. So we are enthusiastic about it, but how quickly we get started is not really the most important thing. How well they get started is the most important thing and we are pretty positive about all of this.

Great. That's helpful. Thank you.

We have a question now from Jay Cohen at Merrill Lynch.

The first question would be, is it possible to break out the prior year development by segment? Give us a better since of what the accident year numbers look like in each segment.

I think if you want to go through that with Gene, Jay, I'm sure we would be glad to. We don't have it right here.

That's fine. That's fine. And the hurricane impact with the Kiln relationship you said that was an investment income--?

Well, that -- the part of what have we do is we equity accounts for Kiln, are 20% equity in Kiln. That's the investment income piece.

So in other words, the investment income would have been $7 million higher had those losses not occurred?

That's correct. We recorded a loss of $7 million in our fourth quarter which is their results from their third quarter because we book Kiln on a one quarter lag. Right.

Now that really is -- is that after tax?

That's after tax.

It's an after tax. So in fact I think it was $11 million before taxes.

Okay. And then the last thing is the aviation business, we are getting all kinds of comments about that business. Some people seem to like it. Some people seem to hate it. What is it about the way you are approaching it that you like?

Well, first of all we think we have a terrific team of people. That's the beginning and the end for this business. Secondly our focus is not on big airlines. Our focus is on niches in the business. Finally we think there's lots of opportunities as long as you are not obsessed with writing big amounts of volume. This is a business that's dominated by a few people, primarily AIG and Berkshire dominate the business and then there's a tier of people who are major airline writers and then there are people who will be hopefully sort of like us and that will find niches in the commercial but nonjumbo airline business where you can underwrite effectively and find places to make money. I think that bit of the business is reasonably priced and as long as you underwrite selectively you will do fine.

Last question. The reinsurance business. What's the rationale for staying in that business longer term?

Well, I think that first of all it's the same rationale we have in everything else we do and that is we think we will make a good return. You have to recognize that we have a mix that is roughly $350 million, $300 million TRIA business. It's a specialty TRIA business. It's done well. We have good relationships with a lot of people who are no longer in what I call the commodity type reinsurance business where we offer capacity for people who make arbitrage decisions. That reinsurance business is something we don't do any more.

We then have round numbers $300 million in Facultative business. Facultative business is just like the excess and surplus lines business just on a wholesale business. That's a great business. The results have been terrific. We think it's business that -- you call it reinsurance but for us it's on an analytic basis it's just exactly like the E&S business. And the balance of the business is Lloyd's and other serve are usual kinds of pieces of business. But we aren't a standard market do property casualty reinsurance business across the board. So we think what we do is good and is profitable and we think there are lots of opportunities in it. And fundamentally this isn't a philosophic enterprise. This is a how do we make money and how do we do it with the lowest kind of returns -- risks rather, with the highest returns?

Got it. Thanks a lot.

We have a question from Mark Dwelle at Ferris, Baker Watts.

Two quick questions. The first is what was the dollar amount or proportion of cash and cash equivalents in your investment portfolio? And the second question is has your view of pricing changed since the last quarter we spoke?

I think the last quarter we spoke we felt pricing was closer to flat than down, I think it's more down than flat. So I would say that -- whereas I would tell you it was flat to down 5%, I would say now that the leaning is down as opposed to flat. The exception to that is some of the specialty areas where pricing is still fine and a few -- there are a few areas where pricing is still up. But I would say 70% of the business will be prices are flat down 5%, could even be 10%. For our own internal purposes I would sort of say that prices are going to be down 5% for the year. Roughly a shade over 20% of our portfolio is cash or short term money.

Thank you very much.

The last question we have is a return question from Charles Gates. Go ahead, please.

Bill, with the creation of these various companies is the analogy with American International Group 20 years ago, didn't Mr. Greenberg back then set up various companies and his position in part was basically allocation of capital and discipline?

I think that in many ways we are of a same mind and in many ways we are different. I think that we are a bit more people focused company. I think we are focused on the people and the discipline and the details. I think in understanding the insurance transaction we are the same. And that is what AIG did so well when they got started was they focused on understanding the insurance transaction and how you could manage it and understand it and do well. And how you could keep it from getting to be a bureaucratic process. I think in that way we are like AIG. I think we are trying to keep from becoming bureaucratic. We are trying to keep units flexible but we are a very people oriented and decentralized organization. AIG was a centralized organization. So I think how we run our business is very different. I think that the cornerstone that is similar is this focus on understanding the insurance transaction and understanding where the leverage to make money is.

Thank you.

Well, if there are no other questions, any other questions?

No other questions.

Okay. Then let me just say that we are very enthusiastic. We didn't expect quite to have as good a result for the year as we ended up. The new year is starting out to be better than we would have hoped. The hurricanes in fact did have a toll on people's attitudes and their concerns about capital at risk. The agencies and regulators have added a level of discipline that we think is helpful to the business. We really see 2006 as being a return, where -- a year where the returns will be excellent and we are quite optimistic. So thank you all very much. Have a great day.

Thanks again for joining us everyone. That will conclude the conference call. Have a good day.