AmCOMP Incorporated Q2 2008 Earnings Call Transcript

AmCOMP Incorporated (AMCP)

Q2 2008 Earnings Call

August 8, 2008 8:00 am ET

Executives

Fred Lowe - President and Chief Executive Officer

Debra Ruedisili - Executive Vice President and Chief Operating Officer

Kumar Gursahaney - Senior Vice President, Chief Financial Officer and Treasurer

Analysts

Kenneth Billingsley - Signal Hill Group

David Lewis - Raymond James

Analyst for Jeffrey Newman - Chicago Capital Management

David Lewis - Raymond James

Presentation

Operator

Welcome to AmCOMP Incorporated’s second quarter 2008 financial results conference call. (Operator Instructions) The company released its financial results yesterday after the close of the financial markets. If you did not receive a copy of that announcement, you may retrieve it from AmCOMP’s website at www.amcomp.com under the Investor Relations link.

Prior to beginning the call, the company has asked that I read the following statement. Statement made during this conference call, including those about the company’s financial condition and results of operations and about its future plans and objectives that are not based on historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

The words believe, expect, plans, intend, project, estimate, may, should, will, continue, potential, forecast and anticipate, and similar expressions identify forward-looking statements. Any such statements involve known and unknown risks, uncertainties and other factors, including those set forth under the heading Risk Factors in the company’s filings with the Securities and Exchange Commission. Such factors may cause AmCOMP’s actual, performance, conditions and achievements to be materially different than any future performance, condition and achievement discussed during this conference call.

All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

On the call today from AmCOMP are Fred R. Lowe, President and Chief Executive Officer, Debra Ruedisili, Executive Vice President and Chief Operating Officer; and Kumar Gursahaney, Senior Vice President, Chief Financial Officer and Treasurer.

I will now turn the call over to Mr. Lowe.

Fred R. Lowe

I will begin with a brief overview of our 2008 second quarter results, then Debra will provide with some operating insides and then Kumar will provide an expanded view of our second quarter and our six months financial results and then we’ll open the call for your questions.

By second quarter of 2008 financial results included net income decreased by $3.5 million or 62.6% to $2.1 million compared to the $5.5 million in the same quarter of 2007. Our weighted average diluted shares outstanding as of June 30, 2008 were 15,409,000 compared to 15,776,000 as of June 30, 2007 resulting in $0.13 per diluted share in the second quarter of 2008 compared to $0.35 per diluted share for the same three months of 2007.

This would amount to an annualized return on equity for the quarter of 5.1%. A calendar year net loss ratio of 64.5% compared to 47.3% in the same quarter of 2007 and a combined ratio of 102.6% compared to 91.5% in the second quarter of 2007. An increased expense ratio of 34.3% compared to 32.7% in the same quarter of 2007.

Our expenses were up in the first six months of 2008 and part due to our pending transaction with Employers Holdings, Inc, thus far we’ve observed an excess of $1 million and out-of-pocket expenses related to the pending merger consisting of legal investment banking and other professional and filling fees as well as un-quantified internal costs.

Significant efforts were made by AmCOMP and employers to educated agents, insurers and employees in order to facilitate a smooth transition following the pending sale of the company. The uncertainty of the timing of the merger is interfered with the performance of our agents and employees has effected the perceptions of our company by insures and potential insures.

This has had a negative impact on our team’s ability to efficiently and effectively market our products and have been a significant factor in the reported decline in our net premiums earned. Although, we strongly maintained, and this acquisition as in the best interest of our stockholders and employees the transition activities though necessary have been a distraction to our short-term business. Net premiums earned a $48.4 million were $7 million or 12.7% decreased compared to net premiums earned of $55.4 million in the second quarter of 2007.

Consistently we’ve noted that we concentrate on underwriting profit not top line premium growth. The current questionable economic conditions, including employment losses and effected industries such as construction and manufacturing have resulted in an intense premium rate competition and erosion of underwriting discipline by some of our competitors.

This soft underwriting cycle has significantly reduced our ability to grow our premium while maintaining our profitability, but we have not capitulated to market pressures, instead we are holding in line and continuing to execute on our business model by focusing on moderate risk taking and discipline while securing adequate pricing commenced with the risk we take. We believe we will continue to recognize long-term success.

Another key ingredient to our business model has been our loss prevention specialists who insist our underwriters in determine the risk, which we used to insure. Our claims adjusters play an important part of our business too as they proactively manage claims, containing medical costs while ensuring that the injured worker receives prompt and fitting medical care.

Our adjusters work hard to close claims quickly, but appropriately, thereby reducing our exposure to unfavorable development from prior year’s claims. In deed this is AmCOMP’s 13^th straight year of favorable loss development for redundancies from prior period loss reserves. That’s an enviable record in our long tale business of workers compensation insurance. Our book value per share on a weighted basis as of June 30, 2008 was $10.71 compared $9.39 as of June 30, 2007.

Now, I’ll turn the call over to Debra, for our operational insights into our business. Debra.

Debra Cerre-Ruedisili

I’ll begin by following up on Fred’s point about our goal to be an underwriting profit company. In addition to careful consideration of our risk selection we continually monitor our underwriting results. As part of a monitoring process, we hole regular monthly underwriting review team or URT meetings of our underwriting loss prevention claims and audit personnel to review high loss ratio risks.

We engage in price and market trend monitoring with our independent agents, at quarterly agent advisory meeting with the national claims directed to conduct claims review as well as meetings with senior management to review serious and potentially serious claims and we perform periodic internal audits of the underwriting loss prevention and claims function.

We are vigilant about producing profitable underwriting results and as Fred said in our press release, we intend to ride this soft cycle out staying in course and maintaining underwriting discipline in our risk selection opting for only profitably business and providing industry leading customer service to our agents and policy holders.

This is the cornerstone of our corporate culture, it has been successful for the past 26 years and we believe it position us for future success too.

Turning now to an operational review of our six regions, I’ll start out with our largest market, which is Florida. The economy in Florida remains sluggish, especially in residential construction. The good news though is that the population continues to grow increasing the need for the goods and services.

Due to the positive results from the 2003 workers comp reforms, there are many new competitive entrants in the marketplace. In addition, very aggressive dividends are being offered on policies as small as $1000 in premium, some are offering as much as a 60% return. We choose not to compete at these unprofitable price levels. Although, there has been an additional rate decrease of 18.4% in Florida as of January of 2008, we’ve been able to continue to price accounts at a level where we can achieve an underwriting profit.

We began to offer two new dividend plans in January of 2008, which has been well received by our agents. In Florida and thought our all of our regions we are evaluating new agencies in an effort to appoint additional business partners to meet our high standards of service experience and performance. As always we are looking to build long term relationships with them.

We recognized that by selecting agents with the profile that fix our business model and has showed appreciation for our customer service oriented culture. We create the best opportunity from mutual success. In the second quarter of 2008 we appointed 51 new agencies company wide.

In the Mid-Atlantic region the market continues to be soft as well. Policy retention continue to be strong in the second quarter in this market, while premiums declines due to a loss of the merger renewals and aggressive competitive pricing in which we chose not to compete in order to hold the line on underwriting and pricing integrity.

We have appointed 16 new agencies in the Mid-Atlantic region and have another 30 or so agencies under consideration as we look to further develop our business in geographic areas in each state of the region where a more marketplace representation is needed. Our online coding and binding products AmCOMP Connect has been well received and we’ve written nearly a $1 million of business so far this year in the Mid-Atlantic region via this product. We are implementing a new and improved online product which should provide the regions with even more opportunities to compete for online coded business.

Moving on to the Midwest Region, we continue to experience very soft pricing conditions throughout this territory. The quarter started favorably with exceptional results in April, fueled by better than average retention and solid new business results in all three states, but production drop in the remaining two months of the quarter as price competition heated up, particularly in Missouri a state which continue to suffer form some of the heaviest price competition in the Midwest.

In Indiana, we experienced positive results from re-underwriting the business in 2007 and we continue to focus on improved account selection and more vigorous loss prevention particularly pre-inspection to improve our mix of business. We are currently focusing on a new release of AmCOMP Connect in the Midwest, there by helping to increase our small business slot. We are also refilling our rates in Missouri effective September 1, to make AmCOMP more price competitive, adding new agents particularly in Central and West Central Missouri, and utilizing excessive claims capacity to help grow our new business, as claims handlers and managers are visiting new business prospects to assist in our sales offered.

In the Northern Region, the marketplace remains unchanged and it’s soft in all states. We continue to focus there as elsewhere on maintaining underwriting and pricing integrity. Our premium for the first six months of 2008 is up in this market, largely due to growth in ’09 in Minnesota. We have successfully lowered our accident year loss ratio in the region also. The Southern Region secured the approvals of two additional deductible plans in Mississippi and has been successful in submitting and binding more business year-over-year as the underwriting environment has not softened here as it has in our other five regions.

Despite a difficult market in our sixth region, which is Texas, the territory maintained a strong premium retention rate. We anticipate a rate reduction effective August 1, which should allow us to retain more prominent renewal as well as to increased new business production.

Throughout all of our regions, we continue to focus on containing our costs to expense management, including an ongoing review of our over operational processes and implementation of technological solutions to provide for optimal productivity.

We are ever cognizant of the need to balanced conservative expense management against an investment in the areas of our business, which we believe are necessary to ensure positioning for AmCOMP’s long-term success.

Looking to continue the expansion of our geographic footprint, we obtain new certificates of authority during the second quarter of 2008 for Arizona, New Mexico and Iowa. We have application pending in Colorado, Nebraska and Minnesota.

I’ll now turn the call over to Kumar.

Kumar Gursahaney

Some of our peers have already reported our top line has also decreased, our gross premiums written decreased $11.4 million or 22.5% in the second quarter of 2008 as compared to the same quarter in 2007.

Direct premiums written decreased $10.7 million including a decrease in Florida of $5.5 million, net premiums earned also decreased during the second quarter of 2008 to $48.4 million from $55.4 million which is at 12.7% from the same quarter in 2007.

Our net loss ratio was 64.5% in the second quarter of 2008, compared to 47.3% in the second quarter of 2007. Excluding business assumed from sate mandated pools, we had reserve redundancies for prior accident years of $6.6 million for the three months ended June 2008, compared to $13.3 million during the second quarter of 2007.

Our expense ratio was 34.3% in the second quarter of 2008 compared to 32.7% in the same quarter of 2007. Including policyholder dividends, our combined ratio in the current quarter was a 102.6% compared to 91.5% in the previous year’s second quarter.

Our net investment income increased 2.6% to $5.1 million in the second quarter of 2008 as compared to $4.9 million in the prior period. This is primarily as a result of an increase in the average balance of invested assets, which is generated from operating activity. Net income for the second quarter in 2008 was $2.1 million or $0.13 per diluted share compared to $5.5 million or $0.35 per diluted share in the same quarter in 2007.

Turning on to the year-to-date results, gross premiums written for the first six months in 2008 decreased $23.3 million or 18.4% compared to the same period in 2007, direct premiums written decreased $22.2 million including a decrease in Florida of $15.8 million generally as a result of rate decrease mentioned by Debra.

Net premiums earned decreased $14 million or 12.2% for the first six months in 2008 as compared to the same period in 2007. Our net loss ratio was 58.4% in the six months ended June 30, 2008, compared to 53.3% in the first half of 2007. Excluding results from the involuntary pools, we have reserve redundancies of $14.2 million for the six months in 2008 relating to prior accident years compared to redundancies of $19.6 million during the same period in 2007.

Our expense ration was 36.4% for the first half of 2008 compared to 33.1% in the same period in 2007. The increased expense ratio was largely due to a decrease in the net premiums earned, also a decrease in bad debt expense in the second quarter of 2007 resulting from a change from a in the method used to determine the allowance for doubtful accounts taking into account non-cash items such as premium adjustments that was only (Inaudible) to the revenue line in our income statement. It also impacts merger related expenses as Fred pointed out.

Our combined ratio in the first half of 2008 including policyholder dividends was 99% compared to 93.9% in the same period in 2007. Our net investment income increased 600,000 or 5.9% for the six months in 2008 compared to the same period in the prior year primarily as a result of an increase in the average balance of our invested asset. Additionally, the current yield increased to 5.2% as of June 30, 2008 from 4.7% at June 30^th, 2007.

Federal and state income taxes were 33.4% and 34.9% of the pre-tax income for the six ended June 30, 2008 and 2007 respectively. The decrease in the tax rate is primarily due to an increase in tax exempted interest income as a percentage of a total pre-tax income. Net income for the first six months in 2008 were $6.5 million compared to $9.5 million for the same six months in 2007.

As we mentioned in our earnings release, we do not anticipate any material impact on our investment portfolio or financial position as a result of the problems currently facing bond insurers since we traditionally have not relied upon bond insurers for credit ratings, but purchase Born’s with underwriting ratings that are consider investment grade. Additionally, AmCOMP has no sub-prime, auction rate or credit default swap exposure at this time.

That concludes my prepared comments. Fred, Debra and I will now answer any questions that you may have; back to you Teresa.

Question and Answer Session

Operator

(Operator Instructions) Your first question comes from David Lewis - Raymond James.

David Lewis - Raymond James

Is there any new development out of Florida OIR discussions one and my understanding is that the merger agreements have been extended with employers till; I don’t know what the date is in September, If you could maybe tell us that and I guess is there been a change in appetite from employers given the delay.

Fred Lowe

There are no reportable activities from the Florida OIR, we are continuing to work diligently with them to try and reserves those particular issues. The merger acquisition contract had a date of October the 31, on it. So that really has not changed what the redeemer date that was at the Florida Insurance Department required that they give an answer to the Form A filing within a certain specified period of time, I think 60-days and they have extended that with employers approval to October 31, which is the contract expiration data. Was there any other question?

David Lewis - Raymond James

Change in appetite.

Fred Lowe

We haven’t observed any change in appetite from our discussions with employers.

David Lewis - Raymond James

On your current business trends, I see that Florida’s business declined $5.5 million; can we get what the actual numbers were in the second quarter versus the year ago period and then what percentage of the book is now coming from Florida and what percent overall is from construction?

Kumar Gursahaney

Florida for the first six month in 2008 was $24.6 million and for the first six month in 2008 the written premium numbers were $40.4 million and the earned premium in Florida this six months is $25.1 million and last year it was $36 million.

David Lewis - Raymond James

Kumar, was a gross premiums written the first number?

Kumar Gursahaney

Yes, this is directly premiums.

Fred Lowe

Which is about 25% of our overall premium, that’s now in Florida.

Kumar Gursahaney

It was 31% last six months in ’07.

David Lewis - Raymond James

What percentage of the overall book of business, not just Florida is from construction today versus maybe a year ago if you have that figure?

Fred Lowe

I don’t know the answer to that David. We'll have to do a little research and get back you as to how much of it is construction related, today versus what it was a year ago.

David Lewis - Raymond James

Did AmCOMP repurchase any shares in the quarter?

Fred Lowe

No.

Operator

Your next question comes from Ken Billingsley - Signal Hill.

Kenneth Billingsley - Signal Hill Group

I wanted to follow-up on the merger in a different direction. Are the contingency plans in place? Essentially what I’m asking is, what are you doing to prepare AmCOMP in the events that the merge doesn’t go through for one reason are not with your agents and since you were talking about how that has impacted your premiums for the quarter?

Fred Lowe

Really what you’re asking is if we are to go forward as an independent company are we prepared to do that and obviously we have always considered that an option that we had to look at.

Debra Ruedisili

Yes Ken of course we’re looking at both options and preparing for either option and particularly if the deal doesn’t close we have to be prepared for that, so in our discussions with our agents our focus has always been on both, that while if the deal closes it would be a great thing for AmCOMP and for the agent; if the deal doesn’t close AmCOMP is still the same great company it’s always been and we’ll continue servicing your business and delivering to you the way we always we have. So, yes we’re kind of walking both lines right now.

Kenneth Billingsley - Signal Hill Group

And based on the comments earlier, it sounded like you were being impacted though while there was a question on whether the deal is going to get completed or not with the agents; can you quantify whether it’s a percentage or even dollar amount how much you would believe you’ve been impacted on the premium side, because the agents just unsure whether the deal going to go through or not?

Debra Ruedisili

I think that’s a very difficult thing to quantify from a numbers perspective. Let further Kumar answer that, they would better answer on the quantity, but I’ll say that the impact has been more from the perspective of some of our agents and some of the new potential agents we’re looking forward to an A- minus rating and of course we’re not rated and so there was a potential for some additional business.

Yes, there is even some business that we would have written or did write that where our A-minus rating would have been helpful to us and so I think the impact’s been more from that. The other impact is certainly the uncertainty. It’s very difficult to live in the uncertain world of not knowing what's going forward, so I think agents are a little timid about that taking “well we don’t know which direction this company is heading.”

So, we’re trying to reassure them that either way that we go the company will be fine and we’ll move forward, but that takes a lot of work and effort, hence it’s natural that they would have a little concerned about that.

Fred Lowe

Ken, I don’t think there is anyway to quantify a number if you know. Every agent that one talks, you could use that as an excuse if they decided to give the business to somebody else, but it is a distraction and we wanted to mention that it is a distraction and hopefully we’ll have some resolution of this before the expiration of the contract date.

Kenneth Billingsley - Signal Hill Group

If the deal was to go through, will you seek an AM best rating in the current environment?

Fred Lowe

We probably would; we’re looking right now with our consultant to review the figures and I think with our premiums down to the level that their down to that our leverage would no longer be a problem, it used to be a problem for us and obviously the quality of our investment portfolio and the statutory result that we’ve had we think would qualify us for a secure AM Best rating.

Kumar Gursahaney

Also the lack of any quarterly share insurance which in the past was a detriment to the (Inaudible).

Kenneth Billingsley - Signal Hill Group

Regarding premium audits, do the bulk of them occur at any one particular time of the year or is it on a rolling basis based on the policy?

Debra Ruedisili

It’s on a rolling basis. We do have some states that have larger books of renewal at certain times; for instance, Florida has always had a larger amount of business come through in the first quarter of the year, so that would make the premium amount a little heavier right after the first quarter, but other than that it’s pretty well spread out throughout the year.

Kenneth Billingsley - Signal Hill Group

So, the decline that we are seeing right now is rate related and its natural business slowing down, it’s not you going back and finding out that there is a lot of less employed people with your customers?

Fred Lowe

We have reduced our estimate of premium audits significantly because we’ve probably experienced over the past year. I think right now we are assuming a premium of a minus 2% of our premiums. So, we’ve tried to stay ahead of that curve and not get blind sighted by it as they happen.

Kenneth Billingsley - Signal Hill Group

Looking at the accident in your loss ratio, it seems to have jumped up pretty high; is this all related to the 18% rate decline. I know it’s not fully impacted since we’re only about half way through the year, but it is related to the rate decline or there are other issues that maybe pushing the accident in your loss ratio up?

Fred Lowe

Basically it is the rate environment. Obviously Florida is easy to quantify and that you have got an 18.5% rate decrease this year and about 13 if I remember correctly, for the last year flowing through, but we’re seeing softer rates in many of the other regions. Also we monitor our effective rate very carefully and in other states it’s about 10% less rate than we were getting a year ago.

So, although the accident year is very green, we felt it prudent to pick up the accident year loss ratio in the second quarter and of course we needed to get the first quarter up also. So, that made the second quarter look a little bit worse for accident year loss ratio than it would, just on its own.

We’ve always said that it’s very difficult to measure I think any workers comp company on a quarter-to-quarter basis. Really a more accurate measurement would be the longer periods of time because of the adjustments that you have and current accident year loss ratio and redundancies and things like that.

Kenneth Billingsley - Signal Hill Group

Regarding the October date for the conclusion of the merger October 31, the deemer date and such, is essentially this FOIR, the Florida OIR have to respond by that date or the deal can be signed or in your opinion do you believe that by that date Florida will have made its decision?

Fred Lowe

Well, that was a decision made between AIG and the Florid Insurance Department, so I can’t really know what their mind is, but we feel like that we really need to bring this thing to a conclusion; probably early in September if we’re going to have a new shareholders vote to authorize a transaction. If it drags on longer than that well we are probably going to run out of time with it. The Insurance Department has been very sensitive to trying to work with us to resolve the issue, so hopefully we will see that continue and we’ll be able to bring this to a conclusion, before September 1.

Operator

Your next question is a follow-up from David Lewis - Raymond James.

David Lewis - Raymond James

Fred I think you mentioned that there were about $1 million of merger related expenses, how do we break that down and maybe just isolate well, what the expenses were for the second quarter only place?

Fred Lowe

I don’t know the answer for the second quarter and I know that we said approximately $1 million in our press release. I don’t remember, saying that in our conference call, but we have to do some work to break it down for U.S. as to how much was travel, how much was fair in opinions, how much legal fees, how much additional accounting fees, the filing fees and things like that David.

David Lewis - Raymond James

I assume the bulk of that came though in the second quarter, is that fair maybe probably 85%?

Fred Lowe

Debra is shaking her head, yes. I don’t have the figures in front of me as to whether it was mostly for the second quarter or first quarter.

Kumar Gursahaney

Yes, I think it’s a combination especially since the legal expenses were up.

David Lewis - Raymond James

Can you give us any sense of changes in frequency or severity as you saw in the second quarter, the incurred combined ratio as I calculated was 120.3% versus 116.4%; do you feel like that’s really just strictly the change in pricings in your major markets or is there any change in the frequency and severity trends?

Fred Lowe

I think like most companies we’re seeing a bit of increase in severity which is normal in our business; usually there’s a little more increase in severity than you see in medical inflation being higher than other types of inflation. In most of our states we’re seeing a little bit of increase in frequency. I think nationwide, that is NCCI still seeing a slight decrease, but in four of our states we’re seeing a decrease, but in about 8 or 10 states we’re seeing a slight increase in frequency.

David Lewis – Raymond James

I know some have indicated they don’t anticipate a slower economy to have a dramatic impact on overall claim trends; do you will share that same thought?

Fred Lowe

We do, we’ve always said that we feel that’s probably over exaggerated by observers of the industry. A really good claims operation picks up malingers relatively quickly and we felt like that we had a pretty good claims operation to prevent that.

David Lewis – Raymond James

Kumar do you know what the statutory capital level was at 6/30?

Kumar Gursahaney

Not in the 6/30, but as of March for the liens, the insurance company was about $178 million and the other company had a $104 million.

David Lewis – Raymond James

What level do you think you could write at, if you were to hope to get say an A minus rating; is that going to be one-to-one or can you write a little higher than that or?

Kumar Gursahaney

Probably 1.25 to 1 would be acceptable, but that’s a question better answered by consultants and experts and AM Best itself and I would think that 1.25 to 1 leverage wouldn’t be concerning as far as an A minus rating would be concerned.

David Lewis - Raymond James

How much capital is with the holding company and while you’re looking for that Kumar, I guess the other question is are you restricted from repurchasing stock just given the merger process or is there some reason that other than that you would not be in the repurchasing side?

Kumar Gursahaney

Our merger agreement prevents us from repurchasing stock during dependency of the contract. So, we haven’t repurchased any stock since probably a couple of months prior to executing the contract in January of 2008.

Fred Lowe

Stockholder’s equity as of June was a $164 million.

David Lewis - Raymond James

How much cash was at the holding company level?

Kumar Gursahaney

Cash, it’s about $4 million or $5 million of cash.

Operator

Your next question comes from Analyst for Jeffrey Newman - Chicago Capital Management.

Analyst for Jeffrey Newman - Chicago Capital Management

I just wanted to clarify on the Florida department of insurance, you keep referring to it as a process and I’ve seen numerous filings go in with regard to the excess profit calculation. Can you give me an idea of how far along you are in the process and maybe tell me have you resolved some of the issues, are you making progress; where do we stand, give us a little more color please?

Kumar Gursahaney

Although cash being any resolution of the issues till the Florida Insurance Department makes a decision and draws up a consent order and obviously we would not sign a consent order ourselves until the time that we have sought and received the approval of AIG. So, once we have a final negotiated resolution with the insurance department then we must seek AIG’s approval to consummate the process. So, I couldn’t tell you that we know exactly when to expect any kind of a resolution of it.

Analyst for Jeffrey Newman - Chicago Capital Management

But when you started it’s my understand that were several issues that you were going back and forth on; have you result any of them? Are you at the same point? Are you’re making any progress with Florida?

Fred Lowe

We haven’t received anything from the Florida Insurance Department in the way of a confirmation and until we do it’s merely a speculation on our part as to whether we have or haven’t resolved anything.

Analyst for Jeffrey Newman - Chicago Capital Management

Can you speculate for me?

Fred Lowe

No, not really. I think that would be kind of foolish, for us to do.

Analyst for Jeffrey Newman - Chicago Capital Management

Are we making progress?

Fred Lowe

I think so, but if you had asked the same question a month ago or two months ago or three months ago I would have thought that we would be done with the process by now. So, I’m not really the best judge of that it seems.

Operator

There are no additional questions.

Fred Lowe

Thank you very much for you participation in today’s call and your continued interest in AmCOMP. Despite the soft market and the distractions that posed a pending merger with employers, we are optimistic about our business. Ours is a service culture and we believe that although some agents may additionally sell on price and policy holders may initially by on price, a service oriented company with proactive claims handling, medical cost containment and superior loss prevention services will be better positioned in the long run to solve the workers comp insurance needs of our clients.

As we work our way through this soft under writing market cycle we are concentrating on occupations, class codes and industries that are not affected by the current economic conditions as well as searching for ways to control our administrate even reporting in expenses.

As a management team we are challenged to improve our technological and administrative infrastructures, adopting processes that are flexible and eliminate redundancies as well as inefficiencies. Through the management of these processes we will be better able to contain our costs as we continue to focus on our business model of pricing adequacy and superior customer service. Thanks, so much for you attention this morning.

Kumar Gursahaney

Thank you.

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