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Executives

Greg Schroeter – Senior Vice President, Investor Relations and Corporate Development

David Cash – Chief Executive Officer

Mike McGuire – Chief Financial Officer

Analysts

Ian Gutterman – Adage Capital

Amit Kumar – Macquarie

Meyer Shields – Stifel Nicolaus

Endurance Specialty Holdings Ltd. (ENH) Q2 2012 Earnings Conference Call August 1, 2012 8:30 AM ET

Operator

Good morning everyone and welcome to the Endurance Specialty Holdings Second Quarter Earnings Results Conference Call. This call is being recorded. Your lines will be in a listen-only mode during the presentation. You will have the opportunity to ask questions after the presentation. Instructions will be given at that time.

I would now like to turn the call over to Greg, Senior Vice President of Investor Relations and Corporate Development. Please go ahead, sir.

Greg Schroeter – Senior Vice President, Investor Relations and Corporate Development

Thank you, Michele and welcome to our call. David Cash, Chief Executive Officer and Mike McGuire, Chief Financial Officer will deliver our prepared remarks. Before turning the call over to David, I would like to note that certain of the matters that will be discussed here today are forward-looking statements. These statements are based on current plans, estimates and expectations and include, but are not necessarily limited to various elements of our strategy, business trends, growth prospects, market conditions, capital management initiatives and information regarding our premiums, loss reserves, expenses and investment portfolio.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the markets in which we operate, the economy and other future conditions and involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in the forward-looking statements and we therefore caution you against relying on any of these forward-looking statements.

Forward-looking statements are sensitive to many factors, including those identified in Endurance’s most recent Annual Report on Form 10-K that could cause actual results to differ materially from those contained in forward-looking statements. Forward-looking statements speak only as of the date on which they are made and Endurance undertakes no obligation publicly to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

In addition, this presentation contains information regarding operating income and other measures that are non-GAAP financial measures. For reconciliation of these items to the most directly comparable GAAP financial measures, please refer to our press release, which can be found on our website at www.endurance.bm.

I’d now like to turn the call over to David Cash.

David Cash – Chief Executive Officer

Thank you, Greg. Good morning and welcome to our call. Endurance had a good second quarter and first half of 2012 generating improved net income, operating income and earnings per share while also delivering strong growth in book value per share. Book value per share grew 3% in the quarter ending up 5.8% from year ended 2011. Like catastrophes and an improved pricing environment in both our insurance and reinsurance segments contributed to the growth, market conditions and pricing continue to improve in most of our insurance lines of business as well as in key reinsurance lines such as catastrophe.

Against this pricing backdrop, the company was able to grow premiums in both its insurance and reinsurance segments and was able to improve the overall risk adjusted return potential of our portfolio. Finally, our investment portfolio generated a positive total return in the quarter and first half of the year even this financial market volatility and the low interest rate environment continue to suppress investment yields.

Later in the call, I’ll provide some detailed commentary and market conditions we’re seeing across our key lines of business as well as providing a review of our crop insurance portfolio in light of the challenging growing conditions that Midwestern farmers are facing this year. First, I’ll hand the call to Mike McGuire who will review our financial results in more detail.

Mike McGuire – Chief Financial Officer

Thanks, David and good morning everyone. In the second quarter, Endurance generated net income to common shareholders of $64.3 million and $1.48 per diluted share and operating income of $50.4 million and $1.18 per diluted share. Our diluted book value per share ended the quarter at $53.48 up 5.8% from year end 2011 and up 7% when excluding the $0.62 per share in dividends paid in the first half of 2012.

Compared to 2011, the improvement in our operating results reflected a lower level of catastrophe losses in our reinsurance segment and improved ex-cat accident year results in both our insurance and reinsurance segments which was partially offset by lower net investment income.

Net premiums written in the second quarter were $484.4 million, an increase of 9.7% over 2011 as we experienced strong growth in both our insurance and reinsurance segments. Within our insurance segment, second quarter net premiums written of $186.7 million increased 7.6% over 2011. Premium growth in our agricultural line of business was partially offset by reductions in our property line of business. Agricultural growth is driven by higher policy accounts, which was partially offset by higher sessions to the Federal Reinsurance Program.

Reduced property insurance premiums reflect a strategy of shifting US wind capacity from all risk insurance to catastrophe reinsurance which we believe has higher margin and return potential. Reinsurance segment net premiums written were $297.8 million in the quarter up 11% from 2011. Catastrophe premium growth was driven by improved pricing, strong retentions, expansion of existing client relationships and increased capacity allocated to our cat lines. The shift in US wind capacity from insurance to reinsurance enabled us to grow premiums while reducing overall PMLs for US wind.

Growth in causality reinsurance was driven by one large contract expanded at renewal, higher premium adjustments and one contract having the renewal date moved to the second quarter of 2012. Partially offsetting this growth was a reduction in aerospace and marine premiums as one large ceding company retained more net of renewal.

Our overall combined ratio for the second quarter was 92.5%, an improvement of 9.4 points from the second quarter of 2011. The key drivers of the improvement in our combined ratio were as follows. Catastrophe losses were significantly lower year-over-year. $14.4 million or 2.7 points of catastrophe losses were recognized in the second quarter of 2012 related to US tornadoes and the Italian earthquake compared to 13 percentage points of catastrophe losses recognized in the second quarter last year.

Ex-cat accident year margins improved in both segments. Both segments expense ratios benefited from a higher premium base and reduced compensation cost compared to a year ago. Our reinsurance segment showed improvements in the ex-cat accident year loss ratio from lower attritional losses and improved pricing year-over-year. Our insurance segment’s accident year loss ratio in the second quarter and first half showed improvements in our agricultural line as a much better winter wheat harvest this spring resulted in significant reductions in claims reported in the first half of 2012.

To that end in the first two quarters of 2012 Endurance reported an accident year loss ratio of 87% on a $220 million of agricultural premiums earned. However as David will describe later, we expected the drought conditions that have emerged subsequent to June 30th will negatively impact second half margins in our agriculture insurance business.

Improved accident year results were partially offset by lower levels of favorable reserve development. The second quarter combined ratio included 3.8 points of favorable development compared to 9.2 points a year ago. While favorable development was lower year-over-year, our first half results included the finalization of the 2011 crop year results which developed favorably by $6 million. When this positive emergence has factored in, Endurance generated a 90% net loss ratio on a 2011 crop year. Given that 50% or more of Texas was at the most extreme level of drought from May 31st through November 30th of last year, this is an encouraging result and should be borne in mind as we consider the impact of the current drought on the 2012 crop year.

Turning to investments, our portfolio’s total return was 90 basis points in the second quarter. Net investment income declined $8.1 million from the second quarter last year driven by declining yields on a fixed income portfolio as new money rates remained below our book yield which ended the quarter at 2.6%. Within our alternative investments, our return was breakeven which is slightly lower than the $1.2 million earned a year ago. Our fixed income portfolio duration remained short at 2.6 years and we continue to believe that the modest yield benefits that could be achieved with the longer duration portfolio did not justify the significant risks inherent in the current interest rate environment.

We ended the quarter strongly reserved with $328 million of IBNR for short-tailed lines. Excluding reserve for named catastrophes at quarter end we maintained $122 million of short-tailed IBNR for the 2012 accident year and $93 million for the 2011 accident year. In addition, $2 billion or 74% of our long-tailed reserves are IBNR.

Our capital position remains strong with total shareholders’ equity of $2.7 billion and total capital of $3.3 billion at quarter end. Capital levels remained comfortably above rating agency requirements and that buffer expanded in the current quarter.

With that I’ll turn the call back to David for some additional comments.

David Cash – Chief Executive Officer

Thank you, Mike. I’ll now take some time to discuss market conditions and recent underwriting activities and our crop insurance business and the current drought. As we fight for investors in our two most recent earnings calls we’re seeing positive pricing trends in many of our insurance lines of business as well as in key reinsurance lines. These trends started emerging a year ago in our catastrophe business and are now presented most of our non-crop insurance lines of business. It’s our sense that the combination of the 2011 catastrophes and the low interest rate environment is providing the impetus for both insurers and reinsurers to push for rate increases. More significantly, this push for rate increases is taking hold with producers, clients and underwriters and is beginning to take on a self-sustaining momentum.

Turning to Endurance’s reinsurance portfolio, we noted the following trends in the second quarter ended 7/1. In our Bermuda catastrophe severity business, in the second quarter we had significant underwriting activity both in Florida and in the Asia-Pacific region from Australia and New Zealand. In Florida we experienced pricing increases of 5% to 10% and increased opportunities to underwrite in the layers below the FHCF where we believe potential returns on equity are strongest.

Given our overall reduced corporate PMLs for US hurricane we did deploy additional reinsurance capacity in this market and Florida gross written premiums increased year-over-year from $75 million to $96 million. In Florida, we were very pleased to see that in most cases our clients preferred to place their programs with Endurance rather than past this risk on to collateralizing markets. This tendency for clients to place business with reinsurers rather than with the financial markets and investors should not be underestimated and bodes well for the traditional catastrophe business company model.

Turning to Australia and New Zealand at the 7/1 renewal we continued to see strong rate increases in both countries. These rate increases stemmed from the sizable losses from the earthquakes and floods in 2010 and 2011 and were generally in the range of 25% plus increases year-over-year. Over the last two renewal periods in this region, we’ve seen compounded rate increases on the order of 40 plus percent and it’s our belief that the Australia and New Zealand business in our portfolios now are appropriately priced and we anticipate these risks like a positive contribution to our ongoing portfolio.

In US casualty reinsurance, pricing continues to stabilize in this market. Thus insurers are able to achieve modest rate increases which in turn are passed on to the reinsurers. These price increases are then further enhanced by improved reinsurance terms and conditions and the combined impact of these rate increases are more than enough to compensate for loss trends. Notwithstanding this improving pricing environment, we do still remain cautious in the US casualty reinsurance market and the growth that we experience in the quarter was largely driven by contract switch inception dates and the expansion of one large contract at renewal.

Turning to Endurance’s insurance portfolio, we noted the following trends in the second quarter ended 7/1. US wholesale, our middle market wholesale business which includes our contract binding authority business experienced rate increases across the portfolio that exceeded loss cost trends. The effective rate changes across this portfolio were positive and averaged 7% across the different lines of business. The increases were driven by a contract binding unit and other casualty lines. We saw increases of 7% to 8% well ahead of loss trends.

Property rates were up 2% to 3% and the miscellaneous E&O line of business showed price increases of approximately 3% keeping pace with the loss cost trends. Global access in US retail, our largest retail insurance business showed mixed pricing trends in the quarter with average rates being flat for the second quarter. While this does not represent an increase in pricing or projected returns on equity, the flattening in prices and the long string of quarters with price declines this flattening shift towards the strengthening as other insurance markets have experienced that would be a very positive sign to this business. For now we continue to exercise caution in these product lines and consequently our premiums have edged down over time due to pricing reductions and non-renewals.

For the balance of this call, I’d like to take time to provide commentary around our crop insurance portfolio. As is evident in the news farmers have been experiencing unusually hot and dry growing conditions that commenced in early July. These challenging growing conditions will be every bit as bad as the conditions experienced in 2002 and are likely as bad as those experienced in 1988. Although it’s not possible at this time to predict what final crop yields and prices will be for the year, it’s safe to say that there is the potential for material losses to be incurred by the crop insurance industry in the back half of 2012.

While it is still too early to make any precise predictions as to the impact of the emerging drought we’ll have in our ultimate losses for the 2012 crop year, our internal scenario modeling today projects a full year net loss ratio of approximately 100%. This net loss ratio is based on an internal scenario that produces countrywide gross loss ratio of approximately 150% for our agricultural insurance business. By way of comparison, the countrywide gross loss ratio in 2002 was approximately 125% for the industry.

If the 2012 crop year does ultimately produce a 100% net loss ratio to Endurance this would result in Endurance recognizing a net underwriting loss of approximately 50 million for our agricultural insurance line of business in the second half of this year. In considering the preceding scenario modeling of potential impacts, it’s important to note that the scenario that we’ve used to project this potential loss is just an approximation that is being made at a time when weather conditions are still changeable and final harvest levels are uncertain.

To help provide some context for our current scenario modeling, there are few items we can point to. Today, we’ve received very few claim notices from farmers on the spring planted crops in the Midwest and harvest is not yet begun. Over the next three months these activities will ramp up and by our third quarter earnings call we would expect to have a more accurate indication of where the 2012 year could end up for our crop insurance business.

Future fluctuations in crop prices in the commodity markets will have an impact on our revenue based crop insurance policies further increasing the level of uncertainty associated with our current modeled loss ratio for crop insurance business. Our current scenario modeling contemplates the contractual maximum 500% loss ratio on the 66 million of net retained premiums coming from Illinois, Indiana, Kentucky, Missouri and Tennessee, which we consider to be the states most severely impacted by the current drought.

Endurance has a combined 190 million in net retained premiums from the states of Minnesota, North Dakota, South Dakota and Texas. These four states are having good years by historic standards and we believe they will contribute profits large enough to offset a good portion of the losses we expect to see from the most drought exposed states. Endurance has a combined 85 million in net retained premiums in the states of Nebraska and Iowa. Conditions are more mixed there and our working scenario contemplates a moderate level of losses from these states.

The remaining 169 million of net retained premiums is primarily spread across Group II states where farmers tend to purchase at lower attachment points and our geographic spread tends to dampen the potential for extreme overall outcomes. Finally, to provide some context for an absolute worst case scenario, even where all crops are lost in every state, our maximum possible net loss ratio for agricultural insurance business is 160%. This maximum is based on the contractual maximums given our state mix and the fund designations of our portfolio. To get to this level of loss would require losses in excess of 500% in every state.

Over the last 10 years only three states Alaska in 2003, Hawaii in 2010 and New Hampshire in 2011 have produced calendar year loss ratios in excess of 400%. To have all 50 states produce 500% gross loss ratios in the same year it’s all been impossible.

Just to close on crop insurance, we recognized there is considerable interest in this aspect of our business and we’re very focused on this risk and the potential source of losses in our portfolio. Beyond the concerns about this year’s growing season I would just emphasize that even if this year is shaping up to be a challenging one our current scenario modeling projects the crop insurance business to generate a full year combined ratio of approximately 105% that is a very manageable result given the very strong returns we’ve historically seen and what we’d expect to see in more normal years.

For that reason alone we continue to be very optimistic about this portion of our business. The silver-lining in the year such as 2012 is that we have excellent opportunity to showcase our industry leading technology in claims and service to farmers and agents and that in turn should lead to continued organic growth in the years ahead. As we think about our crop insurance business and the other 70% of our net premiums, we’re pleased with the overall strength and positioning of our business and we’re encouraged by the improvements in pricing terms and conditions that we’re seeing and with the opportunities ahead.

With that operator, I’d now like to open the lines for questions.

Question-and-Answer Session

Operator

Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions) And we’ll first hear from Ian Gutterman with Adage Capital.

Ian Gutterman – Adage Capital

I didn’t expect to be first here. David you went a little faster. What was the second half loss number you said?

David Cash

If we look at our crop insurance business based on what models today are showing potential outcome of loss, we would expect to book 50 million of losses from that portion of our business over the second half of the year.

Ian Gutterman – Adage Capital

Okay, good.

David Cash

That would mean running the whole year at a loss ratio of 100% and then also applying the five points of net expense ratio to the premium as well.

Ian Gutterman – Adage Capital

Okay. Just to clarify so I have it right that’s 50 million for the second half plus the properties booked in the first half, you’re saying 50 million loss for the full year 2012?

David Cash

That 50 million includes truing up what we’ve booked in the first half bringing that up to what we call the full year loss ratio. And then booking the back half of the year at the loss ratio that we expect for the full year, 100% plus applying the expense ratio of 5% on top of that, so based on our internal scenario that we’re working from that’s what we’d expect to show is sort of a bottom-line loss for the second half of the year for all items.

Ian Gutterman – Adage Capital

Alright, this might be a dumb question then if you’re projecting a 100% no loss ratio why wouldn’t that number be zero for the full year?

David Cash

We’re including our net expense ratio on that business as well.

Ian Gutterman – Adage Capital

Okay. That is with the expense ratio. I got it, got it, that’s right.

David Cash

The 100 is loss and then 105 includes the expense ratio.

Ian Gutterman – Adage Capital

Okay. I thought this is 50 million which is on your loss ratio, I got it.

David Cash

Really, it would be everything.

Ian Gutterman – Adage Capital

Okay, great. And just you know as you mentioned it’s hard to get 500 loss ratio in the state and based on what you’re seeing do you really think Illinois, Indiana, Kentucky etcetera are going to be 500 loss ratios based on what you’re seeing or do you feel that’s a pretty conservative estimate and you know even with 20%, 30% yield losses are more that that it’s still hard to get to 500?

David Cash

You know it is -- it’s a little soon to say. I mean I tend towards the side of optimism, but I think the important thing to note is as losses ratios come down from 500% the dollar sharing is that the federal government gets more of the benefit of that than we do, so if the loss ratio moved from 500 to 400 to 300 it wouldn’t hit our bottom line as quickly, so we’d hit the federal government’s bottom-line.

Ian Gutterman – Adage Capital

Okay, great. And then just last question on it is that 500 is for all product state wide right, so there is an implicit forecast on what soybeans do the rest of the summer here, is that correct?

David Cash

Yes, I mean the crop that people are most focused on is corn and the reality is this we have rain and we’ve had rain recently that can easily solve with your soy crop and so we don’t sort of break the soy and the corn apart when we look at in individual state for instance some of the distressed states we’re putting a 500% loss ratio on everything in those states. I think there is the potential for soybean to corn better, because we are starting to get rain and soybean is sort of a late we call it late whatever manifesting crop and so rain at the end of the season will help it much more than corn.

Ian Gutterman – Adage Capital

Right. That’s what I was wondering if any of this five states you mentioned the 500 are yield have you soy at any of those states, are your priorities still more balanced with corn in those?

David Cash

There is a bias towards that. What I can’t tell you is I would probably have on a net basis about 200 million of corn premium and about 100 million of soy premium, that’s the mix. And soy and corn tend to be in those same states. Farmers have a bias towards parting corn, planting corn if they can. It’s a higher value prop right now, but as the year look top right I suspect some people did rotate into soybean.

Ian Gutterman – Adage Capital

Okay, great. That’s all I had. Thanks for the extra disclosure.

David Cash

Thanks Ian.

Operator

(Operator Instructions) And we’ll move on to Amit Kumar with Macquarie.

Amit Kumar – Macquarie

Thanks and good morning. Just a few follow-ups on crop, when you talk about that 50 million number and I’m looking at slide I think 20 that showed the seasonality of the business, it -- will this number flow into Q3 or Q4 just remind us of the timing of you know when the losses will come through?

David Cash

I mean, historically the quarter that we’ve booked are sort of cotton, wheat and potatoes of our results has varied a little bit and here is where you have delayed harvest. It easily pushes into the fourth quarter and at times you start to find the final number out in the first quarter of the following year. This year a lot of the planting occurred early I think harvest will generally be early. So, I expect by the end of the third quarter we’ll have a better sense we’ve had historically as to where we are. Undoubtedly some portion of this will be sort of fully known in the fourth quarter. Our bias is towards trying to understand losses early and get them properly booked. And so if we feel we’re moving towards a set of a definitive number in the third quarter I would expect us to book it in the third quarter.

Amit Kumar – Macquarie

Thank you.

Mike McGuire

I’d just like to add on to that…

Amit Kumar – Macquarie

Yeah.

Mike McGuire

Yeah Amit we would also be earning a decent amount of premiums in the fourth quarter, so we would expect to apply our full year anticipated loss ratio to those premiums that would come through in the fourth quarter.

Amit Kumar – Macquarie

Okay, I got it. Okay on the timing. So, if I understand this correctly you’re saying that you know right now you expect it to be you know 105 currently right.

David Cash

Yes.

Amit Kumar – Macquarie

And…

David Cash

That does involve some sort of forward looking at the weather.

Amit Kumar – Macquarie

Right. And 2011 was 97, did I hear that correctly?

Mike McGuire

No, 2011 was a combined ratio of about 95%.

Amit Kumar – Macquarie

95. It just seems that I would you know I have to go back and look at the book for 2011, I would have assumed that the delta would have been higher and again I know how the program is and you know, but just intuitively I would have cut down the number or the delta would have been greater, but maybe the function…

Mike McGuire

Amit you’re missing an important point. If you look at the distribution of our premiums in this business, 22% of our net premiums were Texas.

Amit Kumar – Macquarie

Yeah.

Mike McGuire

Last year if you pull up a drought on that from last year, you’d see the entire state of Texas virtually was in the worst drought scenario, so that certainly impacted last year’s results.

Amit Kumar – Macquarie

Yeah.

Mike McGuire

And Texas what we retain this year actually looks pretty good for us. So, having 22% of our net premiums in Texas strange enough will actually help us this year.

David Cash

Actually last year…

Mike McGuire

Hence we lost $50 million. This year we’ll make a profit in Texas.

David Cash

Yes.

Mike McGuire

So, there is a big chunk in the swing right there.

Amit Kumar – Macquarie

And how much did you make in 2011 in Texas -- 2010 sorry?

David Cash

In 2010 to be honest I don’t have that number.

Mike McGuire

In 2010 our accident year combined ratio for 2010 in our crop business was about 78%.

David Cash

For everything?

Mike McGuire

For everything.

Amit Kumar – Macquarie

All right. We don’t have…

Mike McGuire

Texas was a big contributor of that as well.

Amit Kumar – Macquarie

Got it. And that is very helpful. And then just you know I’m just wondering remind us you know what are the thought process of I guess not having a stop loss cover you know was there any thought process or I guess if you looked at historical numbers and if you look at it crop has been a very good you know book, you know is that what drove you not having some sort of a reinsurance cover, just remind us you know what was the history behind it.

David Cash

You know when you look at the stop losses, historically we attached our stop loss for the first couple of years of the company’s life at about 105 and as we’re ramping up the business we felt like a reasonable thing to do. That 105 would not help us this year. In some ways you had this question as to whether you were really in the money with that stop loss or not. What you also saw the rates online for that stop loss it’s somewhere around 10% to 15% rate on line. And so we didn’t historically see it as having a lot of economic value.

What I will acknowledge on this call is this as we look at growing in the Midwest where we tend to keep more of the economics ourselves, and we’re more open to using stop losses and I certainly not update this to the fact that investors concern about this crop, the harvest this year pause them I think to trade our stock down considerably more than the actual sort of risk of loss was in this portfolio and so there may be some signaling to be done by having that stop loss there also, but we’ll certainly revisit that one. I think the math makes it seemed like a very sensible thing to do when you look at the stress that everyone has around this crop area this year will certainly rethink it.

Amit Kumar – Macquarie

Just in that you know you might revisit growing the book and then having a stop loss on top of it. You’re not pulling back or anything of that sort, right.

David Cash

No. I mean we certainly expect to keep growing. We were very pleased at how we grew this year and obviously it was a challenging year turned out in hindsight to grow in, but we definitely think that the winners in this business are the companies that achieved scale. We’re very open to looking at different ways to risk manage going forward stop loss may well be the tool. And we’ve looked in the past at other forms of we call contingent price hedging. It’s quite hard to make them work as to this, but again sometimes you can pull it off, sometimes you can’t, but in my mind I view this business is having relatively stable economics compared to some of our high volatility business clearly more volatility than motor insurance that we understand and acknowledge. And if we can drive both we should, we should that we open to other forms of this management going forward particularly if we grow in the Midwest.

Amit Kumar – Macquarie

Got it. Okay. I’ll stop here. Thanks so much and again as you know as noted you guys do have one of the best disclosures out there. So, we appreciate it.

David Cash

Well, thank you. I mean we know that given the size of this book we need to.

Amit Kumar – Macquarie

Yeah, thanks.

Operator

(Operator Instructions) And next we’ll move to Meyer Shields with Stifel Nicolaus.

Meyer Shields – Stifel Nicolaus

Thanks. I can just continue on the stop on the -- I’m sorry the crop team. How much -- what would be the appropriate tax rate for that $50 million sort of loss guidance that you’re talking about?

Mike McGuire

Meyer you know we had trouble hearing you. Did you ask what is the tax rate that you’d apply to that?

Meyer Shields – Stifel Nicolaus

I did yes. I don’t know how much is retained on US paper.

Mike McGuire

You know the majority of that business is retained within our US companies, so you’d use a US statutory tax rate that’s...

Meyer Shields – Stifel Nicolaus

Okay.

Mike McGuire

That’s very fast I think.

Meyer Shields – Stifel Nicolaus

Okay. And if I can change the topics just briefly, you just brought capital management question I guess you can give us your thoughts on that. I think that you had mentioned earlier that the capital buffer expanded in the quarter.

Mike McGuire

Sure. You know on my side when we look at our business our capital buffer has grown a bit this year. It’s not been a year where we generated through outsized returns. It’s not growing back quickly. And when I look at what we face in the third quarter which should be wind season and also what we just talked about earlier in the crop insurance business, I wouldn’t see a lot of capital management in the third quarter, obviously as we came out of the wind season and we come out we call the growing and harvest season was very well ready to look at that again. My bias is towards accumulating capital I’ve said that on other calls and say it again here, if valuations that we’ve seen in our stock recently persist and obviously very prepared to rethink that and I’d like to fuel that what we disclosed today will help people take a different view of the stock.

Meyer Shields – Stifel Nicolaus

Okay, thanks very much.

David Cash

Welcome.

Operator

And at this time there are no further questions. I would like to turn the call back over to David Cash for any additional or closing remarks.

David Cash – Chief Executive Officer

Thanks very much. Thank you for joining our call today and during the second quarter Mike will be presenting at the KBW Conference in New York and I would be presenting the Macquarie Conference in Boston. We hope to see you at these events. With that thank you operator. This concludes our call.

Operator

And that will conclude today’s conference. We thank you for your participation.

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