Harleysville Group, Inc. Q2 2008 Earnings Call Transcript

Harleysville Group, Inc. (HGIC)

Q2 2008 Earnings Call

August 5, 2008 8:00 am ET

Executives

Mark R. Cummins - Chief Investment Officer

Michael L. Browne - President, Chief Executive Officer & Director

Arthur E. Chandler - Chief Financial Officer & Senior Vice President

Robert G. Whitlock, Jr. - Senior Vice President & Chief Underwriting Officer

Allan R. Becker - Senior Vice President & Chief Actuary

Analysts

Ron Bobman - Capital Returns

Edin Imsirovic - KeyBanc Capital Markets

Scott Heleniak - RBC Capital Markets

Presentation

Operator

Welcome and thank you for standing by. At this time all participants are in a listen-only mode. After the presentation we will conduct a question and answer session. (Operator Instructions). Today’s conference is being recorded. If you have any objections you may disconnect at this time.

I would like now to turn the meeting over to Mr. Mark Cummins, Chief Investment Officer. Sir, you may begin.

Mark R. Cummins – Chief Investment Officer

Great, thank you, Tray and I’d like to welcome everyone today to our second quarter 2008 conference call. Our complete news release and financial supplement are posted in the investors section of our website at www.HarleysvilleGroup.com. A replay of this morning’s presentation will be available on our website later today. During this call Harleysville Group, Inc. may make remarks about future expectations, plans and prospects. These remarks constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual events or results may differ materially from those indicated via these forward-looking statements and our second quarter earnings release as a result of various important factors including those discussed in the 2007 Form 10-K and the first quarter Form 10-Q, which have been filed with the Securities & Exchange Commission.

You will hear us talk about operating results. Operating income is a non-GAAP financial measure defined by the company as net income excluding net after tax realized gains and losses on investments. For further definition we’ve included a chart titled reconciliation to operating income on the financial highlights page of our earnings release. Leading off the call today will be our President and CEO Michael Browne, Art Chandler our Chief Financial Officer will follow with some highlights of our financial results. Rob Whitlock, our Chief Underwriting Officer will follow with some comments online of business results. I’ll return to provide some remarks on investments and Michael Browne will then offer his closing comments. Allan Becker our Chief Actuary also is here to help us address your questions at the end of our planned remarks.

With that I’ll turn it over to Michael.

Michael L. Browne – President, Chief Executive Officer & Director

Thanks Mark. Good morning everyone. For Harleysville the second quarter was dominated by multiple catastrophic event, as we communicated last month the number and extent of catastrophe that struck much of our operating territory was really unprecedented in our history dating back 88 quarters to 1986 when Harleysville became the public company.

While the catastrophe losses was the headline story in the quarter, the underlying fundamentals of our business remains very strong as I will discuss in more detail later. While we were impacted by unusual high level catastrophe losses during the quarter, its apparent based on the latest published estimate that our strength in the quarter was not unique. But, to the industry as a whole is expected to pay up more than $6 billion for capacity related property losses in the second quarter which is nearly triple the amount paid in the second quarter of last year.

Also we paid 14 second quarter storms that were classified as catastrophe and they featured hail, tornadoes, and windstorms. One-third of our losses occurred in Minnesota predominately in personal line another 31% of the catastrophe losses were in Arkansas with all of those claims coming from our commercial lines insurance. The balance of the catastrophe losses were spread among nearly two dozen states illustrating the wide spread in random nature of this unprecedented string events during the second quarter. For many people these storms produce devastating and life-altering effects, forcing them from their homes and businesses and destroying their possession and I’m extremely proud of the fact that financial strength of our company and the outstanding service of our people, particularly our claims staff has combined to serve our policyholders and agency partners very well in their time of need during the past few months.

Touching on a few of our second quarter numbers we reported operating earnings of $0.31 per share with reflect the impact of the previously announced CAT losses during the quarter that reduced operating income by $0.55 per share after tax. Our statutory combined ratio for the quarter was 107.7 which include the 11 points from the catastrophe losses. Our operating return on equity for the trailing 12 months was a 11.8%. I’m pleased to report that our year-to-date accident yield combined ratio excluding CATS and reserve development was essentially flat compared to last year and excluding the impact of the CAT losses from the second quarters of this year and last year and the one time benefit from the office building sale in 2007 our underlying operating earnings per share improved over last year and our underlying statutory combined ratio remains below 100. Both of which indicate that we continue to perform well in the fundamental areas of our business which include maintaining our underwriting discipline in increasingly comparative environment.

As we announced previously on January 1, we amended our intercompany pooling arrangement to increase the aggregate share of the pool for the insurance subsidiaries of Harleysville Group to 80% from 72%. So that its easier for you to compare our performance this quarter to that of a year ago. The Impact of the pooling change again is broken out in our financial supplement.

In a few minutes Art Chandler our CFO will provide further information on our financial results as well as an additional comment on the affects of the severe weather while Bob Whitlock, our Chief Underwriting Officer will comment on underwriting results.

But before I turn the call over to them let me touch on a few other aspects of our performance during the quarter. Commercial lines net written premiums were up 8% in the quarter primarily because of the additional premium dollars of Harleysville Group received from Harleysville Mutual as part of the change in our pooling agreement. As we noted before this is seasoned business we know well because we already had it on our books. If you remove the affect of the pooling change commercial net written premiums are down about 3% reflecting our ongoing commitment to underwriting disciplines. The combined ratio for our commercial lines business for the second quarter was 106.1 which include 8 points from the quarter’s catastrophe losses.

In personal lines we sustained a greater impact in commercial lines from the greater frequency of severe weather during the quarter. We reported the second quarter combined ratio of 115.7 and that includes 25 points from the catalog.

In the second quarter personal lines grew by 11% again primarily as a result of the pooling changes still in the impact of the change in the pooling percentage, personal lines premiums were flat.

We are pleased to report that despite increasingly comparative pressures throughout the marketplace we continue to retain a very high percentage of our quality business and both commercial and personal lines which again points to our agents' ongoing support and our strong relationship with them. one of Harleysville's key differentiators in the marketplace.

Also differentiating us is our widespread use of predictive modeling, which is very important to particularly in the soft market that enables us to effectively assist risk quality and better match price to risk. It is one of the first regional companies to use it, we now model more than 80% of our commercial business both new renewal, which we believe makes us the leader among our peers.

Having excellent technology is something that is extremely important to independent agents. It enhances the ease of which they can transact business which again is important to them in a soft market. In that regard during the quarter, we continued to roll out access Harleysville, our new commercial and personal lines policy administration system, which replace a dozen legacy systems. And I would remind you that agents assisted us in the development of these systems and as we continue to roll them out the benefits of that partnership are clear. In New Jersey and Pennsylvania for example where our systems are fully up and running we have seen a greater than 20% increase in new small commercial lines business written in those states during the first six months in this year.

As we have noted in the past much of our strategy revolved around small business, because it is less price sensitive, with better loss ratios and retention. Not only are these new systems making it extremely easy for our agents to write business with us but going forward this platform also affords us enhanced flexibility to expand into new products, geographies and services quickly and effectively.

Looking at other highlights in the quarter, we continue to maintain our solid capital base and a strong balance sheet and reserve position, a modest debt to capital ratio of 14% and a high investment portfolio. We had a 7% increase in our book value and a premium to surplus ratio of 1.6:1. All of which provide the sound financial position for us to write our agents' best business.

Effective July 1, we renewed our property catastrophe treaty on favorable terms. The bottom line was that we were able to reduce the rate we paid for our CAT reinsurance but also buy more coverage at the same time. We think that reflects the fact that we have managed our catastrophe exposures very well, as a matter of fact we have had very few losses under our cat treaty here in the last 16 years. And obviously that solid track record is looked upon very favorably by our catastrophe re-insurers and remembers we have no property exposures in Florida or on the Gulf Coast.

Finally, as you likely saw in Friday’s earnings release we announced that our board has approved a 20% increase to our regular quarterly cash dividend, and that takes the quarterly payout to $0.30 per share and a $1.20 per share on an annual basis. That’s a significant increase, which impact is up nearly 6%, excuse me, it’s up nearly 60% over the last two years. And, we’re proud of the fact that during our 22 years as a public company, we paid our shareholders a dividend every quarter and our dividend has increased every quarter. And as further evidence of the confidence we have in the long term strength and stability of our organization, we continue to repurchase our stock and have brought back more than 12% of our outstanding shares since June of 2007.

So, with that, I’ll ask Art Chandler to provide some remarks on our second quarter financial results and then I’ll come back later to offer some closing comments and answer your question. Art?

Arthur E. Chandler - Chief Financial Officer & Senior Vice President

Thanks, Michael. My comments will relate to the four page financial supplement included with the press release. Starting with the first page you will note that we had operating income of $0.31 per share in the second quarter of 2008, compared to $0.81 per share in the prior year’s first quarter. The second quarter includes catastrophe losses of $0.55 per share compared to catastrophe losses of $0.09 per share for the second quarter of 2007. Year-to-date operating earnings per share were $1.11 with catastrophe losses accounting for $0.61 per share impact compared to $1.51 per share for the first six months of 2007 with cat losses accounting for a $0.13 per share impact.

The statutory combined ratio for the second quarter was 107.7 which includes about 11 point of catastrophe losses. The year-to-date statutory combined ratio was 102.2 and it includes about 6 points of catastrophe losses. As I reminder I would not that the change in the pooling percentage had about 0.8 point favorable impact on the year-to-date expense ratio and combined. There is no impact on the second quarter ratios. Again, this impact will diminish throughout the course of the year and we expect the full year impact to be about a half a point.

Adjusting for this re-pooling impact the statutory combined ratio was 102.9 year-to-date again with 6 points of catastrophe losses. This compares to a 2007 six months statutory combined ratio of 97.2 that included 1.6 points of catastrophe losses. Favorable prior development of about 2.3 points was noted in the quarter as compared to this 3.2 points noted in the second quarter of 2007. The underlying six current accident year loss ratio excluding catastrophe is about flat with the result posted in 2007.

Bob Whitlock will comment online of business results in more detail in a few minutes. The year-to-date statutory expense ratio of 32.7 again was favorably impacted by about 0.8 points as a result of the re-pooling transaction, adjusting for the re-pooling expense ratio of 33.5 improved about three-tenths as a point from the result posted in all of 2007 and is about flat with the result noted in the first six months of 2007.

Internal expenses are flat compared to last year and staffing levels have declined by approximately 4% over the last 12 months. Year-to-date operating cash flow was a $127 million including $83 million associated with the pooling change and the ratio of paid losses to incurred losses remained at a solid level of 90% on flat earned premiums.

Pre-tax investment income increased $2.4 million or about 4% versus the first six months last year continuing strong operating cash flow from 2007 in prior and the pooling change with the principal drivers of the higher investment income.

Turning to premium production net written premiums increased about 10% in the first six months of the year excluding the pool share change, net written premiums declined about 2% in the quarter and 1% year-to-date. For commercial lines where renewal pricing was down 3.5% year-to-date, written premiums were up about 10% including the pool share change and down 3% in the quarter and 1% year-to-date excluding the pool share change.

Renewal unit retentions have remained steady. Our year-to-date personal lines premium volume was up 12% including the pool share change and about flat excluding the pool share change as compared to last year. Growth was largely price driven in the homeowners’ line as a result of insurance value actions.

Our balance sheet remains strong, our cat book value with $24.48 per share up 7% from the second quarter of 2007. Our premium surplus ratio remained at a conservative 1.6:1 and debt-to-capital is the conservative 14%. During the quarter we repurchased approximately 635,000 shares at an average price of $36.62. Since the end of the quarter we have repurchased an additional 814,000 shares leaving 642,000 share remaining under the current authorization.

And with that I’ll turn the call over to Bob Whitlock. Bob?

Robert G. Whitlock, Jr. - Senior Vice President & Chief Underwriting Officer

Thanks, Art. Good morning everyone. I’ll discuss the line of business results that are on the last page of the financial supplement and when discussing the year-to-date figures I’ll be referring to the results excluding the impact of the pooling change. Let me start with commercial lines. Commercial lines produced the combined ratio of 106.1% in the second quarter that number includes 7.9 points from catastrophe losses. So, excluding catastrophe from our commercial lines combined ratio, the combined ratio was 98.2%. For the six months of 2008 the commercial lines combined ratio excluding the impact of the pooling change was 102.5%, which includes 4.5 points in catastrophe losses. So, excluding the impact of weather catastrophe as our commercial lines continues to produce an underwriting profit.

The commercial auto combined ratio for the quarter was 98.1% including 1.2 points of catastrophe impact. For the first six months the line remained profitable with the combined ratio of 95.9%. Both bodily injury and property damage liability frequency shows an ongoing improving trend and severity continue to be better than expected leading to favorable prior-year development. Our commercial multi peril combined ratio was impacted by catastrophe losses in the quarter of 107.1% combined ratio for the quarter includes 9.4 points of cat losses. The year-to-date combined ratio for CMP is 104.8% including 5.8 points from catastrophes. So again, without the impact from cats the CMP combined ratio is under 100 for both the quarter and for the first six months.

Prior year development is negligible meaning the underlying 2008 accident year combined ratio without cat is profitable. Property loss frequency has been stable while severity is higher this year. Property losses have been elevated this year partly due to catastrophes, party due to non catastrophe weather activity and probably due to the random nature of larger property clients.

And the liability side CMP frequency remained stable and the long severity trend is inline with their expectations. Pricing for CMP remains competitive but with the benefit our predictive models, we have been able to direct our best prices to the best quality risks. Our workers compensation combined was 111.9% in the quarter and 111.7% in the first six months. That represents a four-tenth of a point improvement from this point in 2007 and continues the positive trend we have seen for some time. Prior year development was negligible in both the quarter and for the first six months. We continued to loss frequency improve in both medical and indemnity and that’s the important measure as it suggest ongoing improvement in the quality of our book of business. Paid medical severity has increased while indemnity severity has been stable. Predictive modeling plays a very important role in the strategy to continue to improve our workers compensation results with these models in place we have more insights into risk quality and therefore make more important selection and pricing decisions.

Our personal lines profitability in the second quarter was heavily impacted by the catastrophe weather events we discussed. The combined for our personal lines in the quarter was 115.7% which includes more than 25 points of cat impact.

As in those events, our underlying personal lines performance for the quarter was strong. For the first six months, our personal lines combined ratio was 104.8% including 13.8 points of cat losses. Personal auto had a very profitable quarter with a combined ratio of 90.2 which brings the six month results to 94%. Prior year losses have developed more favorable event expected which has contributed to that result. Both bodily injury and property damage liability frequency have continued to improve, while severity has increased moderately. Similar to commercial auto the physical damage loss ratio was higher this year but the increase in physical damage frequency that we reported in the first quarter has proven to be a short term effect and has improved substantially in the second quarter. As a result physical damage frequency for the year-to-date has improved compared to 2007.

The homeowners combined ratio for the second quarter was clearly impacted by weather catastrophe in fact, the homeowners combined ratio for the quarter includes 53 points of cat losses. For the six months in 2008 cat contributed 29 points to the combined ratio. So, both for the quarter and year-to-date our underlying results in homeowners remain profitable. Underlying non catastrophe frequency and severity trends in homeowners have been stable and insurance to value efforts have helped to maintain the level of profitability we have seen in this line.

In general based on the favorable frequency trends we see, we believe we have a high quality book of business and with the predictive modeling tools we have in place we have the ability to maintain that quality and manage our business effectively in a competitive environment.

At this point I’ll turn the call back to Mark Cummins to comment on investments.

Mark R. Cummins – Chief Investment Officer

Thanks Bob. It has been a very turbulent actually unprecedented period in the financial markets with extreme volatility and illiquidity; we built on investment portfolio for this type of unpredictable worst case environment. It takes years to build a quality portfolio so when the tough times arrive its few late to reallocate your holdings. We have no need to reallocate ours. We always manage on investments to support our insurance operations and that means providing after tax net investment income while maintaining a conservative high quality portfolio and providing the necessary cash flow to avoid selling in the liquid markets.

Our after tax investment income was up 4.7% in the second quarter, 6.4% year-to-date. This increase was impacted by the $110 million of cash used for share repurchases during 2007 and the first six months of 2008 but benefited from our pooling change which we previously discussed.

Pre-tax yield excluding short-term investments was 4.84% down from 4.98% a year ago. Our after tax yield was 3.54% versus 3.58% with the shifting of assets to the pooling change we expect the after tax investment income to increase in the mid single digit range in 2008.

Our market value to amortized value on the fixed maturity portfolio was 100.6% at June 30, of 2008 down from 101.4 at year end 2007. Our duration was down slightly to 4.0 years at June 30 at 2008 compared to 4.1 a year ago. Our investments are of high quality with 97% of the fixed maturity portfolio rated A or better and 80% rated AA or better. Our average credit ratings are AA1 by Moody’s and AA+ by S&P. Our equity exposure is a conservative 17% of shareholders equity as of June 30, 2008.

Regarding liquidity the maturity ladder on our fixed maturity portfolio including investment income amounts to approximately $350 million per year over the next five years, which will result in predictable cash flow no matter of what the environment. Due to our tax position we will continue to purchase primarily tax exempt securities. I would like to point out that we are taking advantage of the attractiveness of the tax exempt markets and had some very advantageous purchases during the first six months of 2008. This has been one of the most attractive times in history by tax exempt securities. We liked them not only due to their after tax yield but also because of the strong credit quality.

And now I’ll turn it back over to Michael.

Michael L. Browne - President, Chief Executive Officer & Director

Thanks, Mark. Before we open the call to our questions let me just summarize this portion of the call with a few key point. First, excluding the effect of the unprecedented string of catastrophes then the sale of an office building, our underlying operating earnings per share continued to show improvement. And our underlying statutory combined ratio remains below 100%. Responding to catastrophe is an important part of our business and I want to reiterate how proud I’m with our company’s response and the needs of our policyholders. We remain committed through our professional claims staff to helping that policyholders as they seek to restore their lives.

One highlights of the quarter is the fact that our policy retention levels have continued to remain high reflecting our agents ongoing support and personal lines have continued to generate positive productions in the states we targeted for profitable growth. And our strong cash flow and increased losses are couple of a solid paid incurred ratio of 90% all continue to drive a high quality of earnings.

2nd July when we renewed our property catastrophe treaty on favorable terms. We saw a reduction in our reinsurance rates and we were able to buy more coverage at the same time. In addition we announced last week that we increased our dividend 20% continuing our string of quarterly dividend payouts and annual increases in the quarter and cash dividend. Coupled with a significant increase we announced last August, we have raised our dividend nearly 60% over the last two years. We also have bought back more than 12% of our outstanding shares since June of 2007. These actions further exemplify the strength of capital management strategy and the confidence we have in our company’s long term financial strength and stability.

As we progress to 2008 in a longer term we will remain focused on the basics of our business. As we seek to consistently produce quarterly results, improving our earnings, profitable underwriting and operating return on equity over 12%, but always maintaining a healthy balance sheet.

As I noted earlier the insurance marketplace continues to remain challenging and we are committed to retaining our best business as well as generating responsible profitable growth where we can achieve it.

So, let me conclude this portion with an important point you heard me make consistently over the last few years. That is we will not compromise underwriting quality to chase a near-term growth goal. Instead underwriting discipline will prevail, and we will use tools like predictive modeling to protect profitability in this market. We will work closely with our agency partners and we will remain disciplined despite the current soft market condition as we focus on our goal of maintaining a long term underwriting profit and continue to improving in our performance that will serve to differentiate us through 2008 and beyond.

And with that let’s open the call to your questions straight. We are ready to take questions.

Question-and-Answer Session

Operator

Thank you. (Operator instructions). Our first question does come from Ron Bobman of Capital Returns, you may ask you question.

Ron Bobman

Good morning.

Michael L. Browne

Good morning.

Ron Bobman

I had a question on the cat program I was wondering this most recent renewal that Michael you just mentioned as far as I guess, the going forward program, did you change the retentions at all?

Michael L. Browne

No, we did not change the retentions, we actually increased our ground up limit from 300 to 375 million and we also actually reduced our co-participation in the layers and we maintain the limit where it was.

Ron Bobman

I’m sorry, you lowered or you increased your participation? I missed that one.

Michael L. Browne

We lowered our participation so that does, re-insurers are picking up more of it.

Ron Bobman

Okay. I noticed last year, this time in last year that you increased the retention from $40 million to $50 million and I was wondering given what transpired in the second quarter of this year whether you should have analysis and sort of are happy with having made that business with a good decision to increase the retention to 50 or are they any regret?

Michael L. Browne

Actually I don’t think that would have made any difference with regard to the cat that we have this quarter that is for a single event, the property cat treaty is for a single event, we would not have had any kind of impact on what we experienced this quarter which is really a very large number of smaller again.

Ron Bobman

Got you. Still a gross losses from any one of these spring event that even get close to 40 or 50?

Michael L. Browne

Absolutely.

Ron Bobman

Got you. Okay, I understood. Okay, I’m sorry and an unrelated question it’s a little bit of an add ball question but I occasionally see these press releases I guess, there are also filings that the Mutual has sold shares, I presumably, I presume in effect selling them to the company, as the Mutual filed like a 10B5 like the company would normally do for when it sells stock of around earnings windows like I saw when a couple of days ago the Mutual had sold some stock.

Mark R. Cummins

This is Mark Cummins. There is 10B51 filed for the public company what happens is we have been buying back kind of prorata we buy from the public to Mutual also sells in a prorata amount back to the public company. So, when you see those filings those are related to the buyback activity and those are done under a 105B1 plan.

Ron Bobman

But I was wondering I mean in some respect doesn’t the Mutual have additional information that I and other third-parties don’t have. So, I would think they would be precluded from selling around earnings that’s what I was sort of getting at?

Mark R. Cummins

No, those plans were set up and approved by the board and they are set up in a open window period and the board actually authorized the buyback under the terms of a prorata sale and the plan was set up and filed during the window period. So that all of the public, there is no public information at that point when the plan was set up.

Ron Bobman

Okay, thanks a lot, best of luck.

Michael L. Browne

Thank you.

Mark R. Cummins

And actually the trades are done at the same price as the purchase we do from the public, the Mutual sells at the same price to the public company.

Operator

Our next question does come from Edin Imsirovic of KeyBanc Capital Markets. You may ask your question.

Edin Imsirovic

Hi, good morning.

Michael L. Browne

Good morning.

Edin Imsirovic

I have a question on pricing and if can disclose some color on what you are seeing in commercial and personal lines in terms of pricing on renewals and the new business?

Michael L. Browne

Sure. Well, commercial pricing, renewal pricing is down about 3.5%, for personal lines our private passenger auto is down about 2% but homeowners is up 6%. I know that answers your question.

Edin Imsirovic

Okay, thanks. Just to make sure from on the favorable reserve development was it 2.3 points this quarter?

Michael L. Browne

Yeah, actually.

Mark R. Cummins

Yeah, that’s correct.

Edin Imsirovic

Okay, thank you so much.

Michael L. Browne

Sure.

Operator

(Operator Instructions). The next question does come from Scott Heleniak of RBC Capital Markets. You may ask your question.

Scott Heleniak

Good morning.

Michael L. Browne

Good morning.

Scott Heleniak

Just a couple of quick questions here, can you talk about the -- you talked a little bit about the accessHarleysville, the technology platform. Can you talk about the timetable of the roll out, it sounds like you’re promising early results, when you expect that to be completed?

Michael L. Browne

We have rolled out of our 32 states, We expect that it will be in use for all 32 of our states by the end of year that’s just the pretty aggressive timetable but that’s our plan, we also wanted to get it rolled out our personal lines system not to all of the state by the end of the year.

Scott Heleniak

Okay, that’s for commercial and personal.

Michael L. Browne

Commercial and personal, yeah.

Scott Heleniak

Okay. The other question to you was you guys touched a little bit higher severity in a few lines, wondering if you could sort of quantify that will kind of increases you are seeing in severity and kind of sense certain lines are favorable but you have the lines that are not if you can talk little bit about those trends, what kind of increases are you seeing in the year-over-year and expect that to continue.

Michael L. Browne

Let me ask Bob Whitlock, our Chief Underwriting Officer to respond to that.

Robert G. Whitlock, Jr.

Sure, Scott. The comments about higher severity were really related more to large loss activity rather than in general overall severity trend that are -- our severity trend in general has been pretty well behaved sort of the in the range that you would expect, low single digit type of severity increases and then get as mostly on the property side which tend to be kind of random events. On the casualty side, it is pretty much inline with what you would expect low to mid single digit at the severity trend.

Scott Heleniak

Okay. So, its just mostly a recent phenomenon the past quarter or two then on the property as far as large loss property?

Robert G. Whitlock, Jr.

Exactly and largely weather related.

Scott Heleniak

And finally, last question where you guys talked a little bit about last quarter of shifting the equities, which you have done, is that essentially finished or will you continue to see that over the balance of the year?

Michael L. Browne

No that’s finished we did that in the first quarter, there is no activity in the second quarter.

Scott Heleniak

Okay, thanks.

Michael L. Browne

You’re welcome.

Operator

At this time we show no further questions.

Michael L. Browne

Okay. Well, thank you operator, thanks everybody for dialing in and we will talk to you next quarter. Good bye.

Operator

This conference has ended. You may disconnect at this time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you.