Sep 21, 2008
Executives
Ken Dennard – DRG&E C. Allen Bradley, Jr.
– Chairman of the Board, President & Chief Executive Officer Geoffrey R. Banta – Chief Financial Officer & Executive Vice President
Analysts
Matthew Carletti – Fox-Pitt Kelton Mark Hughes – Suntrust Robinson Humphrey Mark Lane – William Blair & Company, LLC Bijan Moazami – Friedman, Billings, Ramsey & Co. [Alco Christino – Maddox Investments]
Operator
Welcome to the Amerisafe second quarter 2008 earnings conference call. (Operator Instructions) I would now like to turn the conference over to Mr.
Ken Dennard of DRG&E.
Ken Dennard
Good morning everyone. We appreciate you joining us for Amerisafe’s conference call to review 2008 second quarter results.
We’d also like to welcome our Internet participants as this call is being simulcast live over the web. Before I turn the call to management, I have the normal housekeeping details to run through.
You could have received an email of the earnings release yesterday afternoon but occasionally there are technical difficulties so if you didn’t receive your release or you would like to be placed on the email distribution list, please call our office at DRG&E and that number is 713-529-6600. Also, there will be a replay of today’s call.
It will be available via webcast by going to the company’s website and that address is www.Amerisafe.com. And, there will be a telephonic recorded replay available for seven days until August 14th.
Details on how to access that feature are in yesterday’s press release. Please note that information reported on this call speaks only as of today, August 7, 2008 and therefore you are advised that time sensitive information may no longer be accurate as of the time of any replay listening.
Also statements made in the press release or in this conference call that are not historical facts, including statements accompanied by words such as will, believe, anticipate, expect, estimate or similar words are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Amerisafe’s plans and performance. These statements are based upon management’s estimates, assumptions and projections as of the date of this call and is not guarantees of future performance.
Actual results may differ from the results expressed or implied in these statements as a result of risks, uncertainties and other factors including, but not limited to, the factors set forth in the company’s filings with the Securities & Exchange Commission including Amerisafe’s 10K for the year ended December 31, 2007 and future and other filings. Amerisafe cautions that you do not place undue reliance upon forward-looking statements contained in the release or in this conference call.
Amerisafe does not undertake any obligation to update or publicly revise any forward-looking information or statements to reflect future events, information or circumstances that may arise after the date of the release and call. For further information, please see the company’s filings with the SEC.
Now, with me this morning are Allen Bradley the company’s Chairman, President and Chief Executive Officer and Geoff Banta, the company’s Executive Vice President and Chief Financial Officer. I’ll now turn the call over to Allen.
C. Allen Bradley, Jr.
Good morning ladies and gentlemen. Thank you for joining us for our quarterly investor conference call.
As usual, I’m going to make a few comments about the quarter before turning it over to Geoff to discuss the numbers in great detail. We reported excellent results especially given the current state of the workers’ compensation market.
As you know the insurance industry has been experiencing a soft market which is illustrated by increased competition and lower pricing and in this environment carrier risk tolerance has increased with some insurers accepting risks now that previously had been unacceptable. We believe that the principal challenge in a soft market is to remain focused on risk selection and pricing discipline.
Maintaining this focus end result in lower written premium and we have not been a immune to that result. Our gross premiums written in the second quarter declined by 8.8% from a year ago.
However, we’re pleased with the rate premium decline has slowed from the 10.5% decline in the first quarter of 2008. While it’s too early to declare this a trend, it is certainly worthy of noting.
Our pricing – our effective LCM in the second quarter was 1.45 or 145% of the approved loss cost of the state that use that mechanism for pricing. In the first quarter of 2008 our effective LCM was 148 and we are pleased that the sequential drop in the effective LCM was only three percentage points.
This is the third consecutive quarter in which we have had favorable reserve development. This recognition of favorable development reflects the continuing improvement of our underwriting risk selection and effective claims management and adjudication.
We do continue to see trends that may indicate further favorable prior year development. However, we are in the business of insuring hazardous occupations and considering the potential variability of outcomes in these severe injuries, we want to exercise caution in reducing prior year reserves and only do so when it is prudent and appropriate.
In addition to favorable reserve development, our expense management efforts continue to produce benefits as is demonstrated by our 19.6% expense ratio. This exceptionally low expense ratio reflects the impact of our 2008 working layer reinsurance treaty as well as the impact of a previously announced commutation of approximately $991,000 which was completed during this quarter.
Overall, in spite of market challenges, the insurance professionals of Amerisafe have produced net income growth of 12.9%, a solid annualized return on equity of 20.6% and a combined ratio of 85.4%. There really is very little I can say to add to those numbers.
At this time I’m going to turn it over to Geoff.
Geoffrey R. Banta
Good morning everyone. As Allen mentioned, in the second quarter of 2008 our net income increased 12.9% over last year’s second quarter even though we experienced an 8.8% decline in gross premiums written.
Net premiums earned decreased by 6.4% from the comparable 2007 quarter while our other major component of revenue, net investment income, was essentially flat. As was the case in our first quarter, a significant contribution to our increase in net income came from the expense side of our P&L.
Our incurred loss and loss adjustment expenses decreased 11.1% from last year’s second quarter. Our net loss ratio declined to 65.6% from 69% in the second quarter of 2007.
The 69% overall ration includes current accident year ratio of 69.5% and favorable prior year development of 3.9%. The favorable prior year loss development was primarily from accident years 2003 through 2006.
Our underwriting expenses declined from $14.8 million in the second quarter of 2007 to $14.1 million in this year’s second quarter, a reduction of 4.6%. This decrease was primarily due to $2.4 million of experience rated commission for certain of our 2008 reinsurance agreements.
Such commissions acting as offsets to our expenses and a $1.5 million decrease in insurance related assessments. Offsetting these decreases, agents’ commission increased by $1.4 million due to the introduction of certain incentive programs.
Additionally, income from commutations which acts as an offset to overall expenses decreased by $719,000 in the second quarter 2008 when compared to the same quarter in 2007. In total, our expense ratio for the second quarter of 2008 was 19.6% compared to 19.2% for the same period in 2007 and our combined ratio was 85.4% in the second quarter of 2008 versus 88.4% for the same period in 2007.
We’re obviously very pleased with these operating results. In terms of earnings per share, our second quarter 2008 diluted earnings per share allocable to common shareholders were $0.63 compared to $0.56 for the second quarter in 2007.
Book value per share was $12.71 in the second quarter representing a year-to-date growth of 9% in book value per share through June 30, 2008. Our book value calculation includes the after tax effect of unrealized losses incurred in our equity portfolio during the quarter.
That concludes my prepared remarks on the financials. I’ll now turn the discussion back to Allen.
C. Allen Bradley, Jr.
I would like to briefly comment on competition and the current market cycle. The marketplace continues to be highly competitive.
While there is an abundance of competition from publicly traded companies, we find the most aggressive behavior comes from privately held insurers, self-insurance funds and competitive state funds that are exempt from income taxation. Looking at the account themselves, generally speaking the larger accounts, those over $100,000 are more competitive in pricing than smaller accounts.
There is a significant variance of competition from state-to-state and industry-to-industry but in the aggregate you can observe the impact of competition as it is reflected in our effective LCM which has dropped from 1.51 or 151% of the approved loss cost in the second quarter of 2007 to 1.45% in the second quarter of 2008, a pricing decline of approximately 4%. Despite competition in the marketplace we will continue to price our policies commensurate with the risk that we insure rather than the prices offered by our competitors.
With regard to the market cycle, many have asked over the last few months how long this market cycle will last. I wish I knew the answer to that question.
There are some factors out there that I think are worthy of note. For example, first of all the property and casualty insurance industry is flush with capital that’s been generated over the past three years, $126 billion has been added the statutory surplus in just that period of time.
As has been the case in the past, the industry is demonstrating its inability to exercise discipline in pricing and risk tolerance. Second, the underwriting margins are under pressure and expense ratios are rising.
The property and casualty industry was able to reduce underwriting income in 2007 by almost 40% when compared to 2006. The workers’ compensation industry was projected to have a combined ratio of 99% in 2007 with NCCI state fund carriers projected at 108% and non-NCCI state fund carriers at 115%.
I would suggest that I do not believe that calendar year 2008 will be as good as calendar year 2007. Thirdly, unlike recent cycles, high investment returns are not available to mask poor underwriting decisions.
As we all are painfully aware, the credit market difficulties have placed the asset side of many carriers’ balance sheets under pressure. It is very interesting to look at the property and casualty industry for 2005, 2006 and 2007 to note that during those three years $126 billion was added to surplus and that 81% of the pre-tax contributions to surplus over those period of time came from investment incomes.
So, to the extent that investment incomes are challenged, that is the major source of contributions to capital. In the workers’ compensation market, five successive years of aggregate loss cost and rate decreases have lead, in my opinion, to a certain irrational exuberance on the part of a number of writers.
That irrational exuberance is driving the lower pricing which I think will result in adverse combined ratios in the future. With all of these factors coming to play, it is difficult to predict the timing with which the market will turn but I do believe that the period of the soft market will be shorter and hopefully less severe than in previous cycles.
That concludes my prepared remarks and we want to try and answer your questions.
Operator
(Operator Instructions) Your first question comes from Matthew Carletti – Fox-Pitt Kelton.
Matthew Carletti – Fox-Pitt Kelton
A couple of questions, I’ll keep them quick, first is Allen or Geoff do you have the payrolls enforce data, what it did year-over-year in the quarter? And then if you can just comment on the trends a little, I followed the comment in the press release on kind of audit premium and just maybe what you’re seeing there and kind of the impact of the economy?
And, if there’s any follow through on that to losses or if that’s just from your view point held to a premium issue.
C. Allen Bradley, Jr.
First of all with respect to insured payroll and the written premium. On an in force basis, premium was down 4.9% at 6/30/08 versus 6/30/07 and insured payroll was up one-half of 1%.
Second of all, with respect to the decline in premium during the second quarter of 08 versus the second quarter of 07, the drop in voluntary premium and that’s largely what I’m referring to of course, there is a drop in assigned risk premium but most of the drop was , $7.6 million, was in the voluntary part of our market. About $5 million was in written premium and about $2.7 million was in audit premium.
We do still continue to see audit premium as somewhat of a drag in terms of gross premiums written. I would look for that to narrow some in the second half of the year as employers adjust their expectations of payrolls and that then shows up in the audit premium changes.
You also raised one other issue I want to comment about and that is that we had from 6/30/07 to 6/30/08, about a 3.6% increase in the number of bound polices in the voluntary market. That is kind of remarkable because the average policy size has fallen reflecting lower loss cost and increased competition.
But, something did occur in the second quarter that was interesting and that was that our retention of our renewal policies increased from 90.9% to 92.9% on a policy count basis and we were very pleased with that result. I don’t know that it necessarily indicates a trend but it certainly was a favorable result.
Geoffrey R. Banta
It may indicate to us that maybe for our customers, I don’t think this is too much of a stretch, that factors other than price may govern some of their decisions in our market.
Matthew Carletti – Fox-Pitt Kelton
One last question, the stock has performed very nicely here and is getting up in the neighborhood of the strike on the converts. Can you talk a little bit about what options, if any, you have right now with those converts?
And, is my understanding correct that that is maybe the impediment or one of the only impediments in the way of tying your hands a little bit with capital management should you need to do it in the future?
C. Allen Bradley, Jr.
We have several options relative to capital management that to not necessarily involve the convert of any redeemable preferred shares we have. We have not had any conversations with our shareholders, those shareholders during the quarter.
We do not have, at this point, any immediate plans of converting or redeeming of the shares. The conversion price should those shareholders want to convert to common is $20.58, the same it was at our IPO and then there’s a redemption provision that allows us to redeem those shares at 103.5% of $25 million or $25,875,000.
We have no immediate plans to exercise that redemption option.
Operator
Your next question comes from Mark Hughes – Suntrust Robinson Humphrey.
Mark Hughes – Suntrust Robinson Humphrey
What’s the outlook for commissions? You talked about commissions being up a bit because of some new initiatives, could you flush that out a little bit?
Is it going to have much impact on premiums in the third and fourth quarter?
C. Allen Bradley, Jr.
Let me talk about the initiatives, we have agents that generate large portions of our business that we have very good relationships with and when prices decline, agents and brokers are put under pressure. So, in an effort to maintain those relationships we have offered incentives to those agencies who have continued to produce business for us.
It will result in some increase of the aggregate cost of commissions. I’m not sure that I can tell you exactly what it will mean but it’s about 80% of our business is brought to us by these agents that are receiving these incentives and the incentives raise the commission to about 8%.
I will tell you that we are experiencing a healthier flow of applications for new business as a result of these incentives and other incentives launched by our sales and marketing department and that’s good because currently in the soft marketplace and considering our pricing, our success ratio and hit ratio on the businesses we choice to quote, has fallen some.
Geoffrey R. Banta
Mark, as you know, if you want to pay attention to that metric in terms of the past and going forward, its commission expense divided by gross earned.
Mark Hughes – Suntrust Robinson Humphrey
You’d shared the retention on the policy count basis, do you have that on a premium basis?
C. Allen Bradley, Jr.
That retention is 83.1% in 2008 versus 80.4% in 2007. That’s clearly an interesting metric because loss costs are down, work activity is down and competition is high so those are pretty nice numbers.
Mark Hughes – Suntrust Robinson Humphrey
Just to clarify, you had described the 3.6% increase in the number of bound policies, was that a year-over-year number?
C. Allen Bradley, Jr.
That was quarter-over-quarter. It was second quarter 07 versus second quarter 08.
Operator
Our next question comes from Mark Lane – William Blair & Company, LLC.
Mark Lane – William Blair & Company, LLC
My question has to do with loss ratios and reserves. Geoff, you’ve not taken down any reserves from 07, is that correct?
Geoffrey R. Banta
That’s correct.
Mark Lane – William Blair & Company, LLC
Can you give us some idea what the developed loss ratios look like for 03 through 06? Was that something we could follow up on that you would give?
Geoffrey R. Banta
We’ll need to follow up on that Mark. I’ll just say that the only accident year that has really taken a marked change is 2006 which continues to look like one of the best years in our history.
All the rest have just been on the margins in terms of estimated loss ratios for those accident years.
Mark Lane – William Blair & Company, LLC
Do you know the total absolute dollar amount you’ve taken down from 06?
Geoffrey R. Banta
I do not but I can get that for you.
Mark Lane – William Blair & Company, LLC
Then Allen, just as a follow up to that, you stated in your prepared remarks that you’re seeing some signs that the favorable development will continue. What exactly are those signs?
C. Allen Bradley, Jr.
Mark, we’re seeing continuation of closure of our claims at rates that are to me, quite frankly, a little surprising. Let me give you a couple of numbers, open workers’ comp claim inventory as of the end of the second quarter 2007 was 5,718, at the end of the second quarter this year it was 5,062 or a drop of 11.5%.
That’s an excellent drop but when you do the diagnostic that looks on the aging of the accounts, there was a good drop, a notable drop of the older claims. That is in response to an initiative that Dave [Nargon] in our claims department initiated to target the oldest 75 claims in each jurisdiction and to get those claims closed.
Those claims, a number have been closed and a goodly part of take downs are a result of the fact that those claims have been closed and many closed for significantly less than the reserve value. Having said that, you’ve probably seen the [Conning] Report and realized that the industry needs to be cautious relative to taken too many reserves down relative to medical inflation in the older claims.
So, we’re trying to exercise that caution in making these reserve reductions.
Geoffrey R. Banta
Janelle just showed me the ratio and we’re at a 57.1 for 2006 not including AO. That’s the lowest ratio since 1998 accident year not including the abnormally, I’ll say net ratios when we have the [Unicover].
Mark Lane – William Blair & Company, LLC
What did you say that was excluding?
Geoffrey R. Banta
AO.
Mark Lane – William Blair & Company, LLC
AO?
Geoffrey R. Banta
[Ulay].
Mark Lane – William Blair & Company, LLC
Then finally, the incentive commissions are you paying that on new and renewal business?
C. Allen Bradley, Jr.
Yes, sir.
Mark Lane – William Blair & Company, LLC
Could that explain the bump in the retention ratio?
C. Allen Bradley, Jr.
It certainly can but I wouldn’t think it would be solely that issue.
Operator
Our next question comes from Bijan Moazami – Friedman, Billings, Ramsey & Co.
Bijan Moazami – Friedman, Billings, Ramsey & Co.
A few questions, Allen could you remind us what is your targeted LCM because it appears that despite the softening of the market environment, the LCM you’re achieving, 145, it is still above what you’re targeting?
C. Allen Bradley, Jr.
Well, actually there’s no top end on our target. I’m serious, [inaudible] competitors to keep that down.
The math is a 143 without any enhancement by your risk selection should produce a 69.98% loss ratio. So, we want to in the aggregate keep our pricing with that thought in mind.
However, we do believe we do, through our risk selection process improve on that significantly but we would say 140 to 143 would be able the floor where we would want to go.
Bijan Moazami – Friedman, Billings, Ramsey & Co.
So why do you think despite all this additional competition the rates still remains above that level?
C. Allen Bradley, Jr.
Well, the largest contributor to that is an 8.8% drop in gross premiums written. As you know, Bijan we can make the top line anything we want it to be.
The problem is 18 months from now the bottom line is not going to look very good. So, I think we’re walking that line between achieving the appropriate pricing for the risk that we have and being reasonably competitive in the marketplace.
Bijan Moazami – Friedman, Billings, Ramsey & Co.
Could you just spend some time on the loss cost trend, in particular with the recession and with decrease in payroll, have you seen any significant change in either the frequency or severity of accidents?
C. Allen Bradley, Jr.
I’m very glad you asked that question because I think that is something that people need to understand. If you look at the Bureau of Labor Statistics relative to the drop in frequency you’ll note that the measure of that drop in frequency is payroll dollars.
So, there is clearly a safer workplace and that safer workplace continues to trend down but, they’re measuring it by payroll dollars and therefore wage inflation is partially offsetting that. The relevance to me in the workers’ compensation industry is the frequency of claims per million dollars of earned premium because that is what really determines whether frequency is dropping or not.
I can tell you that frequency measured in that basis in pretty much flat and has been flat for about 18 months or so. I think we needn’t get overly excited about the drops in frequency and the fact that frequency is declining.
There is a point at which frequency is not going to go any lower. In my way of explaining it, people aren’t going to go to work to get well, people are still going to get injured at work.
There’s a point at which, like full employment, the frequency will not drop below a given number. I think we need to be mindful, as the loss costs have come down Bijan, as the competition has heated up, the frequency per million of earned premium has flatten and I expect will soon rise.
Geoffrey R. Banta
Unless the cycle changes.
C. Allen Bradley, Jr.
Unless the cycle changes. And, I think it will be one of the things quite frankly, that drives the cycle.
I would anticipate in 2009 that aggregate loss costs and rate changes across the United States will show an increase as opposed to the last five years of decreases.
Bijan Moazami – Friedman, Billings, Ramsey & Co.
One last question, one of your competitors who is focusing on California, in their prepared remarks pointed out the fact that the State of California is asking for a higher indemnity claim and it just seems that with democrats more likely to take over both at the state level as well as the federal level, is there much of a chance that the benefit, especially benefit in the states that have been cut back quite significantly, to start to go up?
C. Allen Bradley, Jr.
Absolutely. Because the California market is so large, people focus on it.
I think you’ll see loss costs increases probably increased, I think later this month they filed their recommended loss cost changes, the WCRB does for the state of California. But Bijan, let’s back out of California and talk about another state because it’s a great question you asked.
In Oklahoma, the judiciary has basically, according to the NCCI, undone 50% to 70% of the reforms that were passed a few years ago. So, while their loss cost initially went down because of the passage of the reforms, as those reforms have been peeled back, those rates and loss cost now are going up.
I think you’re going to see that across the company, you’re going to see the legislative pendulum swing the other direction and you’ll see pressure on the benefit side which will drive the loss cost. All of that together Bijan is exactly the reason you don’t get overly aggressive on your pricing, you don’t get overly aggressive on thinking the results will continue in a favorable direction forever.
The road will turn.
Operator
Our next question is from the line of [Alco Christino – Maddox Investments].
[Alco Christino – Maddox Investments]
I had two quick questions, the first is Allen, how much visibility and at what point do you all get visibility say in to 2009 medical costs inflation by way of provider contracts you have and things like that? When do you get a sense of what that might be?
C. Allen Bradley, Jr.
I don’t know that I’m prepared – Al, that’s a great question and I don’t know the answer to that. I would tell you that insurance companies is an interesting sort of vehicle, it’s steered by an actuary looking in the rear view mirror.
I would tell you that the rear view mirror indicates that medical cost increases in the most recent year we have statistics on was 6%. I would assume that they would continue to accelerate group health costs or medical CPI was at about 4.4% and workers’ comp medical costs were up about 6%.
Al, I think you’ve probably seen the NCCI data that indicates now that I want to say 59% of the claims dollars that go out go out for medical expenses. So, it is appropriate to focus on medical cost inflation since that’s exactly the opposite from what the expenditures were 20 years ago.
But, I can’t give you a number, I can tell you that we’re going to assume that it’s going to continue in inflation like it has in the past. I don’t see anything slowing it down quite frankly.
[Alco Christino – Maddox Investments]
If you wouldn’t mind if I asked you a broader question, if that’s okay. You obviously talked about some of the pressures or coming pressures on the industry as a whole and I’m not talking about Amerisafe or even workers’ comp, just the [inaudible] industry, the investment side, the regulatory side, potentials for inflation, all things that could potentially stop some of the downward pricing pressure.
On the other hand, of course we have quite a bit more surplus in the industry than we had in the beginning of the decade. I’m just curious, do you think it’s possible that the industry could have a positive pricing turn despite the excess capital position that it current has?
Or, do you think the industry just structurally needs to see some surplus destruction, lower ROEs before pricing turns?
C. Allen Bradley, Jr.
Well, I think you can see some pricing terms and I will tell you I think the capital degradation is going on even as we speak. I think you can see it in the returns, there’s been a pattern over the last few years of a lot of reserve releases or a lot of reserve redundancies and I think you’re going to see that reverse and I think you will actually see some adverse development very quickly.
I’ve noted that some carriers, not necessarily in workers’ comp, in this last cycle have already started reporting combined ratios that are north of 100. One thing is clear right now, you’re not going to make it up on investments.
Operator
Our next question comes from Matthew Carletti – Fox-Pitt Kelton.
Matthew Carletti – Fox-Pitt Kelton
I just wanted to follow up on kind of prior capital management. As I look forward, I’m just looking out at 09 and kind of using consensus what is right, wrong, or otherwise, coming up with something in the ballpark of one to one premium equity leverage as we approach year end 09.
Can you talk a little bit about what your options are for capital management assuming that the redeemable preferred stock is still around and then just how you view capital management, you know ROE hurdles or appropriate leverage where you would like to be.
Geoffrey R. Banta
Obviously we’d like to be north of one and right now we’re right around a 1.2 and I think we’ve stated in meetings with you and others that 1.7 to 1.8 would probably get the engines running about as nicely as we could run them for our model as an A- company. As we have pressure on both investment leverage which will decrease as capital increases and operating leverage, the 15% will be a tougher target to hit.
We’ve got a very strong model, we are generating very nice operating margins, it’s not out of the realm of possibility but as we approach a mathematically derived 15% the pressure on returning capital in other ways will bring itself to bear and we will, as that pressure increases, I can assure you the pressure to resolve something with the preferred shareholders will also increase and I can’t predict either when we’re going to hit that period or how we’re going to bring that pressure to bear. We have the unilateral right to convert at 2058 but we will up the pressure as our model starts to – as our leverages start to make the 15% more difficult.
Matthew Carletti – Fox-Pitt Kelton
Do I recall correctly that the terms of that preferred really just the handcuffs are on a share repurchase that you have – can you institute a dividend?
C. Allen Bradley, Jr.
No.
Matthew Carletti – Fox-Pitt Kelton
But you can make acquisitions, that’s correct?
C. Allen Bradley, Jr.
Matt, let me mention, remember the one truly unique thing about that security is that even a stock-based acquisition is not capable of being blocked. So an acquisition activity, mergers and activity acquisitions are outside of that situation.
Also, we have some debt which we could chose [inaudible] as an option of capital management so we’re not totally without tools at our disposal. The really good news about it is there’s very little stick up value with only $875,000 penalty being subject to the difference between the nominal value and the redemption value.
Matthew Carletti – Fox-Pitt Kelton
And I think this all falls in the category of very high quality problems to have to deal with?
C. Allen Bradley, Jr.
It certainly beats some of the alternatives.
Operator
There are no further questions at this time. I would like to turn the call back over to Allen Bradley for any closing remarks.
C. Allen Bradley, Jr.
Thank you and thank you ladies and gentlemen for joining us today. We appreciate your interest in Amerisafe.
As I said earlier, despite competition in the marketplace we’ll continue to price our policies commensurate with the risk that we insure rather than prices offered by our competitors. If there’s one thing I’ve learned during my period of time in the insurance industry, it is that poor underwriting and poor risk selection can leave a mark upon a company that doesn’t go away easy.
It’s kind of a mark that reminds me of a tattoo and you know, I don’t have any interest in getting at tattoo. When I think about tattoos that brings to mind the description that was offered by Jimmy Buffett in his album Beach House on the Moon where he described a tattoo as a permanent reminder of a temporary feeling.
Thank you very much for your participation today.