Good day and welcome to the ProAssurance Fourth Quarter Earnings call. Today’s call is being recorded. I would now like to turn the call over to Mr. Frank O’Neil. Please go ahead, sir. Frank O’Neil: Thank you, Kyle. Good morning everyone. Thank you for your interest and participation in our call to discuss ProAssurance’s Fourth Quarter and Full-Year 2013 Results. On Thursday, February 20, 2014, we issued a news release reporting our results for the year and quarter ended December 31, 2013. Subsequently, we filed our 10-K and a current report on Form 8-K with the SEC, which we subsequently amended. These documents, along with our other SEC filings, provide you with important information about our company and our industry. Each discusses significant risks and other factors that could affect future results and thus cause actual results to differ materially from current projections and expectations. Please read and understand these cautions and please be aware that statements we make today on this call dealing with projections, estimates and expectations are explicitly identified as forward-looking statements subject to Safe Harbor protections reserved for these statements. Except as required by law or regulation, we will not undertake and in fact we expressly disclaim any obligation to update or alter information disclosed as part of these forward-looking statements. The content of this call is accurate only on Friday, February 21, 2014. If you happen to be reading a transcript, please know that we have not reviewed it for accuracy and that it may contain errors that could materially alter the intent or meaning of our statements. We will be referencing non-GAAP items in our call today. Please refer to our recent filing on Form 10-K and our recent news release for a reconciliation of these non-GAAP numbers to their GAAP counterparts. Participating in today’s call are Howard Friedman, the President of our Healthcare Professional Liability Group, our Chief Financial Officer and Executive Vice President, Ned Rand, and our Chairman and CEO, Stan Starnes, who will start us off with some opening thoughts. Stan?

Thanks Frank, and my thanks to everyone for joining us to discuss a year and a quarter that we view as a financial and operational success. Financially, we grew the top line with important contributions from acquired companies. Our combined ratio was 70.6% for the year, a result we view as exceptional. We strengthened our balance sheet, increasing shareholders equity and total assets by about 5.5% while book value per share increased a little more than 6% year-over-year, and we achieved an ROE of 11.4% for the year. Our shareholders saw a 20% increase in the quarterly dividend and we have been actively buying back shares as we view our stock as a solid investment. Operationally, as we’ll hear shortly, we made great strides in integrating our 2013 acquisitions into our group, and we identified and closed an important acquisition that we believe will play a vital role in our future success. That said, there are a number of moving parts for the quarter which bear closer examination and explanation, and for that we’ll go to Ned and Howard. First, Ned.

Thanks Stan. At the top, we note that growth rate in premiums were up 8% for the quarter and 6% for the year, primarily due to the success of our acquisitions. The larger acquisition, Medmarc, produced just over $9 million of new premium in the medical technology and life sciences business in the quarter and $34 million for the year. Medmarc also contributed $1.6 million in new legal premium in the quarter and $9.4 million for the year. Our medical professional liability acquisition in Nevada, IND, added $2 million of MPL premium in the quarter and almost $11 million for the year. We believe the success of these acquisitions demonstrates the value of adding disciplined, successful companies to our group as opportunities arise. At the same time, our historical MPL business did experience a slight decline to the quarter and the year, and I’ll ask Howard to go into more detail there. Howard?

Thanks Ned. The decline in healthcare professional liability direct written premium was about 3% in the quarter compared to Q4 of 2012. That comes from slightly reduced rate levels driven by the continuing deny in loss (ph) environment and the competitive nature of the market resulting from the significant capital in our line of business. Several notable items in the core MPL business there are highlighted. We generated $7 million of new physician business in the quarter, $2 million of which was generated by IND in Nevada. Our Certitude program with Ascension has reached several milestones, including $22 million in annualized premium. That program continues on track to roll out in two additional states in the near future with more to come by year-end. Our CAPAssurance partnership in California is producing new business that will makes its way into written premiums starting in this quarter, and I am pleased to report that in January we wrote our first California hospital policy in this program. Ned?

Thanks Howard. We’ll get back to you for more market commentary in a minute, but I want to touch on net premiums earned. You will notice an increase in ceded premiums for the quarter that results in a decrease in net earned premium of $26 million or 17%. The increase in ceded premiums has three main components: first, as we participate in more programs with strategic partners where we are sharing risk, we are ceding an increasing amount of premium related to these programs. We view this positively in that it is allowing us to attract new business and strengthen these partnerships. Next, we cede a greater portion of the premium in our medical device and product liability line, which is new this year, than in our traditional MPL business; and finally, there is the effect of the swing-rated provisions of our core MPL reinsurance treaties. As you will recall, our primary MPL treaty is swing-rated and a reduction in ceded losses can be accompanied by a reduction in premiums ceded under the treaties. For the year, we saw $26 million in favorable development of our ceded losses compared to $50 million last year. This decrease resulted in a lower change in our swing-rated accrual for prior year losses. Here, I want to be sure that everyone saw the correction we issued last night. That correction updated our original press release. We originally reported that this change in the swing-rated accrual had a 6.4 percentage point impact to the loss ratio on a comparative basis. The correct number is 15 points. Our calendar year net loss ratio also moved higher with the decrease in net earned premium and period-over-period decrease in reserve development. And at this point, we go back to Howard for some commentary on reserve development. Howard?

Thanks Ned. We recognized $81.8 million in net favorable reserve development in the quarter compared to $114.5 million in the fourth quarter of 2012. For 2013, favorable development was $223 million as compared to $272 million in 2012. That’s a significant amount of development, but the difference from last year deserves some commentary. First, the lower fourth quarter development is the result of our more timely recognition of loss indications as we proceeded through the first three quarters of the year. As we’ve said several times over the past year, we are becoming more sensitive to current indications on a quarterly basis and with each quarter we have greater perspective on our reserves in the aggregate. Second, the lower favorable development on an annual basis is simply a natural progression given the decline in overall MPL loss costs over the past several years. We are charging lower premiums, establishing lower initial reserves in dollar terms, and therefore even with the same great results, we’ll produce fewer dollars of development. None of this signifies any reserve deficiency and we’re pleased with our results across all lines of business. With respect to our MPL line, I think it’s fair to say that this progression will continue, although given the nature of reserve evaluation and the unpredictability of loss trends, we are unable to make any predictions. A number of other notes – this reserve development is primarily from accident years 2005 through 2011, and we did see a favorable development from our medical device and product liability line and from our historical MPL subsidiaries, including the podiatric component of that business. A comment on the MPL market – as I said, it remains very competitive and we are pleased to be able to report premium retention of 89% for the year and for the quarter, essentially level with last year and a remarkable accomplishment given market conditions. Our retention rate demonstrates the loyalty of our insureds, who see value in our products in a very competitive marketplace. We continue to follow a disciplined approach to underwriting and pricing and are willing to let go of underpriced business. Renewal pricing is flat year-over-year and down 1% quarter-over-quarter, again a product of the competitive market and loss trends that remain largely benign, with frequency unchanged overall and severity continuing to increase at 2% to 3% per year.

Thanks Howard. Now to some other items of note. Net investment income was down 12% quarter-over-quarter and 5% year-over-year as we continue to see the effects of lower yields in our fixed income portfolio; however, our overall investment results was buoyed by a change in the classification of one of our alternative investments that resulted in our recognition of the previously unrecognized gain on this investment. This change in classification was driven by a reevaluation given our increasing ownership of the investment in question. I’m sure you all have noted that the expense ratio was up in the quarter. During the quarter, we incurred approximately $4.3 million of non-recurring expenses principally related to acquisitions and start-up costs for our Lloyd’s syndicate 1729. Adjusted for these items, our expense ratio in the quarter would have been closer to 29%, which reflects stable costs in our MPL business and the addition of Medmarc. As we continue to position ProAssurance for success in the future, we will no doubt record additional costs such as these and we view them as a solid investment in continuing our success. Net income was $71 million in Q4 of 2013 compared to $101 million in the fourth quarter of 2012. For the year, net income was up 8% to $298 million due to the one-time gain associated with the Medmarc acquisition, which was $32 million. Operating income in the fourth quarter was $61 million or $0.99 per diluted share. 2013 operating income was $221 million or $3.56 per diluted share. Return on equity was 11.4% for the year, and remember that calculation excludes the one-time gain from the Medmarc acquisition. Book value per share was up approximately 6% for the year, now at $39.13, marking our 22nd straight year of increasing book value per share. Tangible book value per share, which excludes intangible assets and goodwill, was $35.64, up 7% in 2013. Stan mentioned that we have been active in buying back shares. In the fourth quarter, we bought back 507,000 shares of our stock at a cost of $24.5 million. In this quarter through yesterday’s close, we have spent approximately $39 million to repurchase an additional 848,000 shares. We obviously see value in our shares at this level and believe that repurchases at these prices is consistent with our view of the long-term value we are creating for shareholders. We have approximately $163 million left on our authorization. Frank? Frank O’Neil: Thanks Ned and Howard. With the year behind us, will each of you comment on the integrations you helped to oversee for the year, and then we’ll get an update on Eastern and Lloyd’s? Howard, first, commentary on IND?

Sure, Frank. The update is pretty short. IND was so much like our other healthcare MPL operations that bringing it into ProAssurance has been relatively simple. It’s functioning well as our Nevada office and we’re pleased with the business. Frank O’Neil: Thanks. Ned, Medmarc?

Thanks Frank. The process at Medmarc has been more of an onboarding process because, like Pica, Medmarc’s management and operations remain in place and back office functions such as accounting, investments, reinsurance, human resources and IT are working smoothly with ProAssurance. Mary Todd Peterson and her management team continue to lead Medmarc and have made great contributions to the company. I would say that the Medmarc onboarding is all but finished and has been very successful. Frank O’Neil: And we’re following the same process with Eastern, right?

Correct. Mike Boguski and his team have done a superb job over the years with Eastern, and we’re taking the lessons learned with the onboarding of Medmarc and applying them at Eastern. We believe the process is proceeding well. We have seen some of the expected cross-selling attention and the segregated sale business is attracting a lot of interest from participants who would like to explore bringing their medical professional liability captains into that arrangement. So all in all, we are pleased with the process at Eastern and think it’s on track. Frank O’Neil: Thanks Ned. And Howard, Lloyd’s?

Frank, the syndicate was approved in late November and began writing business effective January 1 as planned, and there is significant activity. Staff is coming onboard as appropriate and it will be fully staffed soon. Duncan Dale is leveraging his considerable contacts in the casualty market and has experienced underwriters for the other lines of business, so everything is going as expected. Frank O’Neil: Thanks Howard. Stan, closing comments before we take questions?

Well Frank, I’d close by stressing the confidence we have in our long-term vision for ProAssurance. You know, this company has been a leader in our line since our founding and we’ve done that by evolving as new challenges have arisen, and we’ve always anticipated those challenges and been prepared to meet them. I think back to the 80’s when we were the first of the physician-founded companies to begin insuring hospitals. That was a revolutionary change for our founding physicians and frankly raised some eyebrows among our physician-insurer competitors, but it proved to have a lot of foresight and serves us well today. The same can be said for our decision to de-mutualize so that we could have access to the capital we need to build the balance sheet, to protect our insureds, and to extend our reach to meet them at their point of need, so our broad strategic vision of an evolved ProAssurance should not surprise anyone. In fact, if we were not becoming a larger, broader, more geographically diverse healthcare-centric company, we would be subjecting the organization to a diminished future. While we will always maintain our commitment to individual physicians and those practicing in small groups, we must broaden our commitment to the expanding needs of the larger healthcare world. We have the vision, the capital and the experience that will enable us to successfully navigate this very challenging environment. Our acquisitions are expanding our reach in healthcare and are adding new, well underwritten business that meets our profitability targets. Eastern will help cement our relationship with large healthcare risks seeking a continuity of liability coverage, and all of this will position us to cover a wide variety of risks that will present themselves in the future. We are continuing to move ProAssurance forward and we’re convinced that our long-term future will be very bright. Our track record in not only creating shareholder value but sustaining it in challenging times gives us great confidence. Frank, let’s take questions. Frank O’Neil: All right, Stan, thank you. Kyle, we’re ready for questions, please.

Thank you. [Operator instructions] We’ll take our first question from Matt Carletti with JMP Securities. Matt Carletti – JMP Securities: All right, thanks. Good morning. This is probably a question for Ned. It relates to the integration of Eastern and just as we kind of think about modeling going forward. Their business had historically run at accident year loss ratios a bit below the loss picks that you guys have put up in your traditional medical business. As I kind of put the two together, should we just kind of blend the two approaches and something close to what they had been putting up as loss picks on their premium and what you’ve done on your premium, and the net result is probably a slightly lower overall company loss pick, or am I thinking about that wrong?

I think you’re thinking about that correctly. As I told Mike Boguski the other day, our first thing with the onboarding of Eastern is to do no harm. They’ve got a very successful organization and we expect and anticipate they will continue to run it in the manner that they always have, so do not anticipate any changes in their business or in the way that they’re pricing or reserving that business. Matt Carletti – JMP Securities: Okay, great. Thanks a lot, and best of luck in ’14.

We’ll take our next question from Amit Kumar with Macquarie Capital. Amit Kumar – Macquarie Capital: Thanks and good morning, and congrats on another strong quarter. Just a few follow-up questions. First of all, going back to the discussion on capital management, clearly you talked about the value in buyback. You’ve been buying back in Q1 to date. Ned, how should we think about, I guess, the pace of the buyback for the remainder of the year versus the integration of acquisitions?

Sure. Amit, I’m not sure if you meant when you said the integration of acquisitions, do you mean future acquisition opportunities? There’s really no capital requirement for Eastern – that’s all taken care of, so as we look forward and you think about the pace, I think what you saw us do in the fourth quarter and so far this year is pretty indicative of the pace we would expect to be at, but that obviously depends on where our stock price is. And the closer we fall to book value, if that were to happen, then the more aggressive we would be at buying back our stock. Amit Kumar – Macquarie Capital: Got it. Okay, that’s helpful. The other question I had was obviously the adjustments to the tax rate. How should we—maybe I missed this. How should we think about what’s used for sort of a normalized tax rate going forward?

So, a couple of things. I would look at our year-to-date effective tax rate and I would take out the impact of the Medmarc acquisition, so the $32 million gain from the acquisition of Medmarc was a non-taxable gain, so it’s disruptive to the effective tax rate that we show on a year-to-date basis. Beyond that, the other items that impact that effective tax rate, which are principally our investment in municipal bonds, the dividend received deduction on our dividend-paying equities, and our tax credits, I think the year is pretty representative of that. Amit Kumar – Macquarie Capital: Got it.

Maybe one other thing. The other thing that can impact that is the level of favorable development and the level of realized gains in a given period or a given year, because those are going to come in at the marginal tax rate of 35%. If we have a big run-up in equities and very large realized gains in our trading portfolio, that will push up the effective tax rate. Amit Kumar – Macquarie Capital: Yes, that makes sense. The final question I have is, and you talked about this a bit in the opening, I guess related to the same thing – the expense ratio and the impact on, I guess, one-time or some expense ratio. What sort of normalized expense ratio should we be thinking of for 2014?

That’s a good question, and it becomes a little more challenging because obviously we’ll have Eastern coming in and there are purchase accounting considerations that impact with Eastern. For the year, Amit, we’ve got about $8.8 million, I believe, in non-recurring expenses, something in that neighborhood. So I might take a look at expenses and back that 8.8 out, and that would get you to kind of what the normal run rate was for the year. But obviously, two things – one, bringing Eastern in will have some impact. The other is what is—the other thing that’s in the year-to-date numbers for 2013 is the purchase accounting impacts for Medmarc, and you recall – this will happen with Eastern as well – that one of the things that happens when you do your opening balance sheet is you write off all the deferred acquisition costs for the acquired company. Normally, those would amortize over the course of the year and that results in, for that acquisition target, a lower than normalized expense load. Amit Kumar – Macquarie Capital: Got it. Okay, that’s all I have for now. Thanks for the answers.

We’ll take our next question from Mark Hughes with SunTrust. Mark Hughes – SunTrust: Thank you very much. Good morning. Ned, could you go through the reinsurance situation one more time, how it impacted the fourth quarter, and based on that, is there going to be any change in approach here for 2014 that might impact the current accident year loss pick?

So first, the impact on the ceded does not really impact the current accident year picks, so I assume you’re talking, Mark, about the swing provision. Mark Hughes – SunTrust: Yes, yes.

So let me walk back through that. So on the biggest component of our MPL reinsurance treaty, which is the largest of our reinsurance programs, the premium that we cede under that treaty can vary depending upon the losses that go to that treaty. Because of the conservative approach that we take to reserving, when we set up our initial reserves for a given accident year and therefore for a given treaty, we are booking the premium at the maximum premium we would cede under the treaty. So the loss ratio pick that we establish for ceded losses initially is such that the premium being ceded to the treaty is at the maximum level. As development happens up or down, as is in this case down, we have the potential for that loss ratio to go below that upper threshold, and if we go below that upper threshold we begin to see premium returned back to us, and that’s what we’re seeing this quarter and what we saw, really, all four quarters of this year. Howard mentioned the fact that on a quarterly basis, we’ve been able to be more sensitive on our loss development this year, and that is true for the ceded losses as well. In the fourth quarter of last year, there was a very large adjustment to the swing provision. Because the ceded losses—in principal, those are losses in excess of $1 million, and there’s a lot more volatility up within that range, and because of that, historically we have not made adjustments to ceded losses except when we do our deep dive, annual fourth quarter reserve review. So in the fourth quarter of last year, you saw a very large development number but nothing in the three quarters that preceded it. This year, we have more confidence in what we’re seeing in the ceded layer, and as a result of that you’ve seen reductions to ceded premium along the year for the first three quarters and into the fourth quarter, and I think depending on what happens in that layer, that’s what we would expect to see going forward. Mark Hughes – SunTrust: Right, so will you begin again, assuming you’re going to be booking those at the maximum level, or are you going to—

Yeah, so where we book will depend upon kind of where we reserve the business, and assuming that we reserve that 10 points above our pricing, that would put us at the maximum level on the initial year. But keep in mind that what you’re seeing in this favorable development on the premium swing is the impact of treaties 2011 and prior, based on the development of those losses 2011 and prior, but none of our process will change. Mark Hughes – SunTrust: Right. On the operating expenses in the quarter in the high 20’s, what’s a good—with Eastern incorporated into your business, what’s a good way to think about that going forward?

Again, as I just told Amit, I think what I’d do is I’d look at our year-to-date numbers, and there’s about $8.8 million or so of non-recurring expenses and then you’ve got Medmarc where the DAC was written off, and then with Eastern for 2014 their DAC will be written off, so you kind of have to factor that into your model. I don’t have a good run rate number for you, Mark – I’m sorry. Mark Hughes – SunTrust: And when I do that, what will I come up with?

As I say, I don’t have that. I don’t have that in front of me. I apologize. Mark Hughes – SunTrust: I understand. How about the Lloyd’s spending? Will that continue?

Yeah, we continue to incur costs relative to that start-up, and I think we’ll see that at least through the first six months of this as we incur some additional costs there. I think they won’t be at the level that they were at for last year, but we will continue to see some start-up costs associated with that. Mark Hughes – SunTrust: Thank you.

We’ll take our next question form Ryan Barnes with Janney Capital. Ryan Barnes – Janney Capital: Great. Thanks for taking my questions, guys. Just wanted to see if you guys could give maybe some bare-bones results for EIHI’s fourth quarter? Again, as we try to model you guys going forward, it certainly would be helpful to see maybe what kind of net premiums they wrote and what kind of combined ratio they had in the fourth quarter. Frank O’Neil: Mike Boguski, I think has joined us on the call, Ryan. Mike, could you give us a little color there?

Yeah, I may defer back to Ned here because I think we were going to put that into the opening balance sheet in the first quarter results. Is that correct, Ned?

That’s correct, Mike. Maybe you could just give some top line numbers, kind of what premium looks like.

Yeah, absolutely. We finished 2013 at $199 million in direct written premium. Just from a rate trend, we had 4.8% rate increases during the year which generated about $8.8 million in additional premium to our book of business. Our new business plan was relatively on target and we had premium retention of about 84.2% for the year. So from a top line perspective, we’re really on target to what we expected, and the company continues to grow with respect to its geographic expansion plans and its business model moving forward. So that would give you some insight on that. We also—when we look at rate that was above the plan we had expected, we had expected about 2.7% in our states and territories. We were at 4.8% and the—when we kind of looked at overall frequency, it was relatively flat. Our claim severity was a little bit higher this year – 10 claims over 300,000 relative to roughly half of that last year, and our general expenses were right on target as far as how we operated the business during the year.

That’s great, Mike, thanks. And Ryan, when we produce our first quarter results, we’ll have an opening balance sheet for Eastern and that will reflect kind of where we think reserves are, et cetera. Ryan Barnes – Janney Capital: Okay, great. Yeah, thanks for that color there, guys. Again, I was just kind of speed-reading through the 10-K, and it looks like there was maybe some modest adverse development from the 2012 accident year. Just want to see if you guys could add any color to that.

Yes Ryan, it’s Howard. We always do a little bit of adjustment. Some of it relates to just the true-up on what we had seen last year, loss adjustment expense primarily. If you go back, you would have seen that in some prior years as well. It was very minimal and I would call it just more fine-tuning than anything else. No indication there, nothing that we would say is any kind of a change in our assumptions, just a matter of getting the numbers where we think they should be right now. Ryan Barnes – Janney Capital: Okay, great. And quickly—sorry, going back to the swing rate adjustment, guys, just mechanically, to get—obviously it kind of elevated the quarter’s loss ratio by 15 points. Mechanically, does that mean that it’s lowered earn premium by $15 million? I just want to make sure I understand the mechanics of how it became—of how it elevated it.

Yeah, so that elevation is trying to look at a comparison of the impact that the swing rate had in the fourth quarter of ’12 to the impact it had in the fourth quarter of ’13, so in the fourth quarter of ’12 we had, I want to say $32 million of reduction to ceded premium, or a $32 million increase in earned premium in the quarter. In the fourth quarter of this year, the number was more like $4 million, and so what we’re saying is kind of that difference in earned premium accounts for 15 points of the difference in the loss ratio when you’re looking at the quarters. Ryan Barnes – Janney Capital: Got you. And then obviously the swing rate, it sounds like obviously it’s getting adjusted more often. What was the impact in the first, I guess, three quarters? Did that have an impact or elevate earned premium as well?

Yeah, you had the same thing going through the—yeah. I think it was about $12 million. I think we were close to $4 million a quarter. It might not have run quite that smoothly, but every quarter you’d see the same sort of impact. Ryan Barnes – Janney Capital: And then thinking about 2012, it was all in the fourth quarter whereas this year it was kind of 4-4-4?

That’s correct. Ryan Barnes – Janney Capital: Okay, great. Appreciate that color, guys.

We’ll take our next question from Paul Newsome with Sandler O’Neill. Paul Newsome – Sandler O’Neill: Good morning. Sorry – a follow-up on the swing factor. If you don’t change loss picks and the recognition patterns as you did, should in theory we expect a similar type of impact from the swing factor next year? So are we really just talking about the fact that there was a change from 2012 to 2013, and we’re—I don’t want to use the word run rate, but the same sort of similar pattern would happen next year?

You know, I don’t know exactly the guidance to give, Paul, because there’s—again, because of the volatility in that ceded layer, there’s just a lot more volatility in what comes through. I think it’s safe to say that 2013 was a fairly normal year and that we continue to approach things in the same manner, but you just have to recognize that there’s just more volatility up in that excess layer. I mean, the losses are less frequent and when they come, they’re bigger, so I think that what you will—you know, obviously the change fourth quarter this year to fourth quarter last year, I don’t think we’ll see a repeat of next year. I would expect next year to be more in line with what we did this year from a process standpoint. It’s just harder to say what the end result of that process is going to be because of the volatility. Paul Newsome – Sandler O’Neill: Okay. A second question – on the Lloyd’s operation, how do you anticipate sort of when we’ll start to see premium results from them, and is there anything that we should know about in terms of how that will show up in your financial statements that might be different from it was? Mechanically, it works a little bit differently than—

Yeah, absolutely Paul. So there will be a one quarter lag on that premium, so it will show up in the second quarter of this year, and we are going to disclose it as a separate segment in our financial statements. So maybe worth noting – with Eastern coming on board, the way that we present financial information on a go-forward basis, starting with the first quarter too, we’ll have four segments. We’ll have the healthcare professional liability segment, we’ll have the specialty P&C segment which will include Medmarc and Eastern, we’ll have Lloyd’s as a segment, and then we’ll have a corporate segment. This is actually what we anticipate right now. We’ll obviously refine that, and we’ll consolidate the syndicates so the premiums will show up as premiums. But we will have kind of these four segments and investments will show up in that corporate segment. That’s what we anticipate right now. So the Lloyd’s results, you’ll be able to see on their own, but you will not see anything reflected until second quarter. The one caveat is if a large loss were to occur in the first quarter, we would reflect that. Paul Newsome – Sandler O’Neill: Okay, okay, so you’re not going to try to U.S. GAAP the Lloyd’s premiums by—because essentially what you’re—to my understanding, Lloyd’s does write, sort of report stuff on a one-quarter lag normally, right? So some companies try to guesstimate, estimate, included in the first quarter this is with GAAP.

Yeah, it’s not really material at this point. At this point, it’s not terribly material, Paul, so we don’t anticipate doing that. If we ever get to the point where that is material, then we will put an estimation process in place. Paul Newsome – Sandler O’Neill: Okay, great. Thank you.

We’ll take our next question from Bob Farnam with KBW. Bob Farnam – KBW: Thanks and good morning. Most of my questions have been answered, but I have maybe a couple of numbers questions to pose. Statutory surplus at year-end, do you happen to have that number?

I do – just one second. We’ve got to find it, so while they’re finding that, why don’t you ask the next question and we’ll see what we get. Bob Farnam – KBW: Okay. In the balance sheet, the other assets picked up in the fourth quarter, and I’m just curious if there was something behind that.

Let’s look at that. So to go back to the surplus number spend, this does not include Eastern because Eastern is not in the year-end results. It’s $1.6 billion. Bob Farnam – KBW: Okay.

And other assets, give us a chance to take a look at that. Oh, I know what it is. Yeah, so it is basically the—so the Eastern transaction closed on January 1. We transferred the proceeds of that transaction prior to year-end, so there’s kind of a deposit out there waiting on the transaction to close. Bob Farnam – KBW: Okay, all right. Probably something—looked like a similar thing happened maybe in the fourth quarter last year.

That’s correct – with Medmarc. That’s absolutely right. Bob Farnam – KBW: Okay. And I guess the overall encompassing—you know, have you had any change in your thoughts on the Affordable Care Act as it’s coming through?

You know, no changes. It remains a bit of a mystery as to exactly what the impact will be. It will have an impact. We don’t foresee the world reverting to its prior state. It remains a very politicized topic, but it’s having an impact on the way medicine is being practiced today and it has an even greater impact on the plans for medicine for the future. So what we emphasize to people is that the healthcare system in the United States would have had to change if the Affordable Care Act had never been enacted, and it would have to change simply because as a country, we can’t afford to spend what’s approaching 20% of the gross domestic product of the United States on healthcare. So that fact alone would result in significant changes to our healthcare system, and that fact alone will result in these changes. So I think probably you’ll see changes attributed to the Affordable Care Act that would have taken place in large measure. It’s going to be very interesting to see, but it is impacting the healthcare system today. It is impacting our business, it is impacting our customers, and we spend a lot of time talking and thinking about what we need to do to prepare ourselves for that impact. The fact of the matter is that individual and small group positions are not going to disappear, but there are going to be fewer of them, and that fact alone will change the business we’re in and will change the healthcare system. The forces that are moving positions out of small groups toward engagement with mega-physician groups of 1,000 physicians or more, with integrated clinical networks, with large hospitals in the form of clinical relationships or employment relationships, those forces are unabated. The reimbursement patterns create the need for that. The demographics of the medical school and residency programs create the need for that. The increasing regulation and bureaucratization of medicine creates the need for that, and all of these things are going to have significant impacts on healthcare. That’s why we think the company of 20 years ago has to continue to evolve as we have for the last 20 years, and it presents great challenges but it presents greater opportunities for us. Bob Farnam – KBW: Okay, thanks for that, Stan. That’s it for me.

And once again, for any further questions, please press star, one. We’ll take our next question from Ron Bobman from Capital Returns. Ron Bobman – Capital Returns: Hi, good morning everybody. When I printed off the press release last night, I was surprised – I’d never seen it before, but a photograph of Stan popped up on the first page of the press release. Was that intentional? Can we attribute the stock’s fall this morning to that?

Probably so, yeah, I would think. Ron Bobman – Capital Returns: Okay.

I’ll never be as old as I look. Ron Bobman – Capital Returns: No, you look sharp, at least in the photograph I got. On a serious note, there’s obviously been a lot of discussion about the reinsurance markets getting more aggressive. At one point, it was largely just property cat related, but now it’s extending into casualty lines and even specifically professional lines, although I’m not really talking about the sub-segment of medical. But I’m curious as to whether that’s sort of a material opportunity, and would you take a meaningfully different look and approach in utilization towards reinsurance if the costs and the terms were to change materially from where they were in years past, because I believe in the past you’ve largely utilized it solely to dampen sort of severity exposure.

Hey Ron, it’s Howard. Yeah, you’re right – in the past, we pretty much have used reinsurance to stabilize and to give us the ability to write very high limits of coverage for hospitals and other larger risks. And sure, as the market—if the market continues to soften on the reinsurance side and we see the costs of reinsurance below what we think is the cost of actually covering that layer or area of business itself, we would certainly try to do that. If you go back into the 1990’s, we had much lower retentions than we do now, and part of that was the size of the company but even at that point in time we could have retained a lot more than we did. But the reinsurance markets were quite good and we got some very good buys on reinsurance, and we were able to economically benefit, so we’ll continue to look at that. Ron Bobman – Capital Returns: Thanks. What’s the timing of your, I guess primary MPL treaty or program renewal?

The main program is October 1. That’s for the MPL with physicians and hospital business. Frank O’Neil: You might comment on this year’s treaty.

Yeah, you know, this past renewal we were able to improve terms marginally. We had done the same the prior year, but you’re right – we do see more reinsurers having an interest in the casualty lines, I think because of all the capital that’s flown in on the property side, and they are looking for other opportunities and because of that, the casualty area is becoming more competitive as well. Ron Bobman – Capital Returns: Thanks. I had a question on Eastern. I recognize the closing date was early in January. Frank O’Neil: Yeah – 1/1. Ron Bobman – Capital Returns: Right. But I’m wondering qualitatively if—I think it’s Michael, if you could just talk about the underwriting margins in the fourth quarter of ’13. Were they largely in line with the earlier period? Did they improve, did they worsen? Could you give us some direction? I mean, we can obviously look at that statement once that comes out, but maybe an inkling as to how they did.

Yeah Rob, thank you for your question. The accident fourth quarter was at 66.1, I believe. We were really pleased also with our expenses in the quarter. We were starting to run our workers’ comp business in the kind of 23.5 to 24 range, which is really, really attractive. From a margin perspective, I would characterize the year as obviously a significant outperformance to the industry – I mean, the industry ran a 109 and you’re aware of our results through 9/30. We’re definitely—you know, we were encouraged about the rate increases this year at 4.8%. We did see in January the pricing was a bit—it was a little bit more competitive, particularly in our mid-Atlantic and southeast areas. Our January renewals, we had a kind of 3% increase on rates, so when you look at it long-term, for us it’s all about claim closure patterns and really keeping a strong check on medical inflation, and that’s really what we work on within our business model to return employees early to work, close clams, and overlay that model in our geographic expansion plan. So the—I do believe that there was probably a little bit more competition in this January than last January coming off the 2012 year, but I think the company is well positioned as we move forward. Ron Bobman – Capital Returns: Thanks, and congratulations to you, Michael.

Hey Ron, one thing I would add when you look at their stat results, and one of the things obviously that we do as the acquiring company is we come in and we take a very hard look at the balance sheet, and some of those may be reflected in their statutory results. So don’t read too much into their fourth quarter. Ron Bobman – Capital Returns: Okay, understood, noted.

And once again, for any questions please press star, one. We have no further questions in queue at this time. I would now like to turn the call back over to our speakers for any additional or closing remarks. Frank O’Neil: Stan, anything final?

No. We thank everybody for joining us. We look forward to talking to you again in May. Frank O’Neil: All right, thanks everyone.

This does conclude today’s conference call. Thank you all for your participation.