RenaissanceRe Holdings Ltd. (RNR) Q1 2008 Earnings Report, Transcript and Summary

Good morning, my name is Rich and I will be your conference operator today. At this time, I would like to welcome everyone to the RenaissanceRe First Quarter 2008 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. [Operator Instructions]. It is now my pleasure to turn the floor over to Mr. David Lilly. Sir, you may begin your conference.

Good morning. Thank you for joining our first quarter 2008 financial results conference call. Yesterday, after the market close, we issued our quarterly release. If you didn't get a copy please call me at 212-521-4800 and we'll make sure to provide you with one. There will be an audio replay of the call available at 2:00 PM Eastern Time today through May 14 at 8 PM. The replay can be accessed by dialing 800-642-1687 or 706-645-9291. The pass code you will need for both numbers is 43078699. Today's call is also available through the investor section of www.renre.com and will be archived on RenaissanceRe's website through midnight on July 11, 2008. Before we begin, I'm obliged to caution that today's discussion may contain forward-looking statements and actual results may differ materially from those discussed. Additional information regarding the factors shaping these outcomes can be found in RenaissanceRe's SEC filings to which we direct you. With me to discuss today's results are Neill Currie, Chief Executive Officer; Fred Donner, Chief Financial Officer; Kevin O'Donnell, President of RenaissanceRe Insurance Limited; Bill Ashley, President and Chief Executive Officer of Glencoe Group Holdings Limited and Todd Fonner, Senior Vice President, Chief Risk Officer, and Chief Investment Officer. I'd now like to turn the call over to Neill. Neill?

Thank you, David. Good morning everyone. I'm pleased to report another quarter of strong financial results for RenaissanceRe. I'd like to frame this quarter's results in the context of our strategy, which has been consistent throughout our history. The first element of the strategy is to maintain strong underwriting discipline in both hard and soft market cycles. We are committed to stable, consistent, exposure-based pricing, and that’s been the foundation upon which we have built our strong client and broker relationships. This commitment to discipline is integral to the performance we have achieved over the past 15 years. Also integral to this strategy is taking advantage of the opportunities we have in soft markets to invest in our franchise, look for new opportunities, and as appropriate, return capital to shareholders. This strategic focus has enabled us to deliver superior value to our customers and shareholders during the various market cycles that have occurred since our formation in 1993. Today, our strategy is helping us navigate through the turmoil in the capital markets in addition to the softening underwriting environment. Our disciplined approach to our business, combined with minimal catastrophe losses, enabled us to achieve a 51% combined ratio and a 21% operating return on equity this quarter. The light loss activity and profitability our industry has enjoyed over the past several quarters has put some pressure on pricing. We expect to reduce our top-line in this kind of environment. But, given our excellent tools and talented underwriters, we know it is possible to put together a strong portfolio of attractive business. Our reputation for responsiveness, creativity, and fair dealing help us to keep and obtain the business that we find attractive. So, all in all, we feel good about the quality of our book of business and what we see in the pipeline. As we continue to execute on the blocking and tackling, we are taking important steps to strengthen our franchise and position ourselves for future growth. We recently acquired Claims Management Services, a privately held provider of claims services, and this significantly strengthens our internal organization. We also agreed to acquire Agrinational, which is a premier program manager of crop insurance. This acquisition increases our opportunities in the agricultural marketplace. We have also recruited and continue to recruit talented executives to support our entrance into attractive new markets and build our businesses in existing markets. And our ventures unit was integrally involved in Agrinational acquisition and continues to be active in sourcing new joint venture opportunities. We are tracking legislative proposal surrounding the Florida market, and Kevin O'Donnell, who is with us on the call today, will comment on that in more detail in just a moment. Briefly, while we are encouraged that the benefits of the private markets are being recognized, we acknowledge there are complexities and challenges surrounding this debate. As we monitor these developments, we continue to research and promote risk management or risk mitigation rather. We believe that widespread use of effective mitigation in catastrophe prone areas is likely to have the greatest impact on protecting families and properties and on reducing the overall cost of insurance. Switching to investments. From an investment standpoint, we are comfortable with how our portfolio is positioned, especially in light of the recent turbulence in the capital markets. Our goal is to deliver above-average returns on our underwriting book, while remaining relatively liquid and less volatile in our investment portfolio. We seek to balance risk and reward, and in light of the conservative risk profile in our portfolio, we are pleased with the 1% total return we generated this quarter. Investments are certainly on everyone's minds these days. So, I am pleased to say that Todd Fonner, our Chief Investment Officer, is on the call this morning and available to answer questions. So, in summary, I feel good both about our performance in a softening underwriting environment, as well as our progress in positioning our company for future growth. And with that, I'll turn the call over to Kevin to discuss our reinsurance operations.

Thanks, Neil. I will start with the overall cat market and then move into Florida more specifically, which is where we are spending most of our time right now. As we discussed in the previous call, after several years of growth, the overall US market has really stopped growing, which is having the expected effect on pricing. Although that's generally true, Florida is discussing legislation that would reduce the FHCF and potentially increase demand for private market reinsurance. We monitor all the legislative initiatives in Florida very closely as they can have a significant impact on the way in which we build and shape our portfolio. To better understand the impacts of these changes, we have stress tested our portfolio and have made adjustments on a pro forma basis to represent the impact of any potential legislative changes. All in all, we remain comfortable that we will have an attractive portfolio whatever the outcome. As far as reinsurance supply, the private reinsurance market has significant capacity to respond to any of the proposed changes. So, don't expect any dislocation and the market should remain orderly. It is our believe that, because of our market positions and our overall relationships in Florida, if the proposed legislation is adopt, we're will positioned to capitalize on the changes. With regard to pricing in Florida, it is still very early in the process and want to be careful not to set expectations too high. Florida is a unique market and although many of the proposed changes may appear to increase demand due to the structure of the market, not all the increase in demand will transfer directly to the private market. Having said all that, we don't expect to see material impact with or without legislative changes on our portfolio in Florida. Moving outside the US, we saw moderate deterioration of the international markets over the quarter and although the reductions were not large on a percentage basis, in some cases, they moved deals from acceptable, non-acceptable, and we had to exit them. On the retro side, as we discussed many time, this is not a particularly efficient market, and with that said, it's sometimes difficult to categorize the market one way or another. We are an active participator in the market and seeing opportunities both inwards and outwards and have added to the portfolio as appropriate. On the specialty side, we are continuing to see aggressive pricing in many lines of business, which we’re currently participating. We are spending a lot of time looking at new products and markets to seek new opportunities to Florida capital, but have not yet identified any new areas from a reinsurance perspective that warrant committing additional capacity. However, we continue to monitor certain markets where we believe there is an increased likelihood of dislocation due to heightened loss activity or a sense of increased risk in some lines of business. Thanks, and with that, I would like to turn the call over to Bill Ashley.

Thank you Kevin and good morning. It’s been a very busy, but exciting quarter for the first quarter for the Individual Risk Unit. As Neill mentioned earlier, in softer stages of the cycle, we have focused historically on underwriting discipline and building out our infrastructure. And you can see the strategy very much in evidence this quarter. We have been diligent about maintaining the quality of our book, sourcing the best in the business and to exit accounts that did not meet our requirements. We are pleased to announce the signing of a binding letter of intent to acquire Agrinational, our program partner for multi-peril crop business for several years. This transaction will give us a first class platform from which to operate in the agricultural insurance business. We have been driving this business for several years now, and we see the agricultural space as a long-term franchise for us with great potential for future expansion. The multi-peril crop business fits very well with our analytical and data driven approach to underwriting, and is diversifying for Renaissance. In addition, we believe we will be able to leverage the modeling, scientific, and climatological expertise within our organization to great effect in this space. The Agrinational management employees will continue to stay in place. They have a proven track record of being among the best in the business and we cannot be more pleased that they will soon be joining the Renaissance family. We are also pleased to announce the acquisition of Claims Management Services this quarter. CMS has been our third-party claims administrator for some more years, handling a significant portion of our property and casualty reserves. They have done an outstanding job for us and have proven expertise and abilities as claims management organization. CMS has approximately 55 personnel who will now make up the Glencoe Claims Service Group and will be based out of Atlanta. These two acquisitions will give us greater certainty and control over operations and distribution, which will contribute greatly to our profitability. We are still seeing opportunities to write hurricane exposed commercial property business. The upcoming months of May and June are very heavy renewal months. So, we will have a better understanding of whether the market is going to remain disciplined at the end of next quarter. Just a quick bit of background on the results for the quarter, which Fred will discuss in detail in a minute. We typically expect the first quarter to have slightly higher combined ratio than for the full year due to some seasonality in the program business. So, the combined ratio for this quarter was entirely within our expectations. In summary, we continue to build for the future. We have been pleased thus far with our ability to navigate today's softening market conditions, while strengthening infrastructure and talent we need tomorrow. Thank you, and I will now turn the call over to Fred.

Thanks Bill and good morning everyone. After the market closed last evening, we reported operating income for the quarter of $148 million or $2.21 per share. We achieved the 21% annualized operating return on common equity and grew our book value per share by almost 3%, including the impact of our share repurchases. Overall, our top-line declined by 17% for the quarter, driven primarily by our disciplined underwriting approach in this softening market. However, our underwriting profits remained strong and we generated a 51% combined ratio benefiting from another quarter of low level of insured events. Let me move on to the segment operating results, starting with the catastrophe unit of our reinsurance segment. Our catastrophe unit generated gross written premiums of $364 million, as compared to $399 billion [ph] for the same period last year. On a managed basis, our premiums were down about 7%, which is in line with our full year forecast of down approximately 10%. Underwriting income during the quarter for our cat unit amounted to $123 million, up from $74 million for the same period last year. This period’s results were favorably impacted by a lower level of current year losses, compared with last year's results that, as you may recall, included the impact of windstorm Kyrill. Our expense ratio is 11% versus 18% last year, driven by a decrease in acquisition expenses resulting from higher profit commissions on ceded business. Overall, we generated a combined ratio of 29% versus 63% for the same period last year. In our specialty unit, gross premiums written was $80 million versus $117 million last year. The decrease results from continuing softening and our decision not to renew certain contracts given the present market conditions, in addition to certain clients electing to retain more risk. But, we still believe our full year gross premiums written in this unit would be down approximately 25%, there is some uncertainty, given the fact that specialties impacted by a relatively small number of large transactions. For the quarter, underwriting income was $23 million versus $42 million last year. This year's results reflect a higher level of current year losses and a lower level of favorable loss development. Our individual risk business unit produced gross written premiums of $81 million, compared to $123 million for the first quarter of '07. The decline is a reflection of our decision to reduce participation on certain commercial property and personnel property reinsurance treaties last year, combined with overall softening market conditions. The individual risk segment top-line is somewhat lumpy and with the additional of two new programs late last year and the anticipated growth in our multi-peril crop business, at this time, we continue to feel comfortable with our top-line forecast of down 5% for the full year. Favorable development amounted to $22 million this quarter, of which $16 million relates to the 2007 crop year. We closed at our 2007 crop year this quarter, and it came a little better than expected, earning about $3 million to underwriting income. Our results reflect this on a gross basis as favorable development of $16 million, offset by about $12 million of ceded earned premium. Turning to investment results. It was a fairly choppy quarter in general for the fixed income and equity markets. Recognizing the volatility in our underwriting business, we try to keep things less volatile in our core investment portfolio. For us, managing our overall risk portfolio means taking into account the risk on both sides of the balance sheet. As Neil mentioned, overall, given the market conditions, we are fairly happy with the way the portfolio held up, returning just under 1% for the quarter. We have added to our financial supplement a more detailed breakout of our investment returns. As you can see, our hedge fund and private equity investments were down slightly for the quarter, which is quite a contrast to last year's exceptional first quarter. While this quarter's results were disappointing, we believe these allocations will deliver strong risk adjusted returns over the long term. You may have also noticed the negative returns in the other category of other investments. These are predominantly high-yield investments where we hold shares in a fund structure. So, we classify them as other investments and net investment income includes both realized and unrealized market value changes on them. A large portion of these are in bank loan funds, which had a tough first quarter, but which we believe will offer good risk reward profile going forward. Lastly, we have added some additional disclosure to our earnings release on our securitized asset holdings as of the end of March. We have disclosed in the past our holdings by rating, but recognizing that there is a broad spectrum of securitized assets rated AAA, we've provided some additional detail this quarter. As you can see, we have selectively added to our holdings of highly rated securitized assets over the last 12 months. Taking our allocation to MBS and ABS from 13% to 28%. But, we have been deliberate in terms of where have invested. We only own AAA rated tranches, and our investment portfolio is not positioned to have direct subprime exposures, and we do not directly hold CDOs or CLOs. We have not directly invested in any home equity loan sector and we have not purchased securities wrapped by financial guarantee companies. Roughly, 70% of our MBS exposure is to agency mortgages, and we have a balanced distribution across vintages. In CMBS and non-agency mortgages, 60% of what we own is 2005 vintage or prior. In terms of the overall portfolio, we remain conservatively positioned with over 90% of the portfolio rated AA or higher. We are also continuing to maintain a shorter duration of just under two years and we are comfortable with the expected risk reward construction of the portfolio. In these volatile markets, we believe we are well positioned to expect adequate returns with an appropriate risk adjusted basis. Let me turn now to income tax expense. As you all know, we have incurred $8 million of tax expense this quarter. During the first quarter last year, we maintained a valuation allowance relating to our net deferred tax asset. As a result, tax expense was reduced last year by a reduction in our allowance. At year-end 2007, we substantially reduced the valuation allowance, as we are profitable in the United States and our financial statements are now reflecting the income tax expense incurred by our profitable US operations. And lastly, during the quarter, we purchased approximately 4.3 million common shares at an aggregate cost of approximately $240 million. Since we began our program in the first quarter of 2007, we have repurchased approximately 8.3 million shares representing about 12% of our outstanding shares. Our philosophy around capital management has not changed. We will continue to manage capital properly across the market cycle and we will continue to buyback our stock when we believe the prices are attractive. Thank you, and with that I'll turn the call back over to Neill.

Thank you Fred. Operator, let’s open it up to questions now. Question and Answer

[Operator Instructions] Your first question comes from Brian Meredith of UBS.

Yes, good morning. Couple of questions here for you. First, Kevin, I am wondering if you could talk a little bit about HB 983 in Florida, it’s actually Windstorm Insurance Coverage Bill, would impact if that bill does happen to go through, would it have on the property cat reinsurance market you think, and what liklehood do you think the bill... how is it going through?

Okay. You are talking about the Out-Water [ph] Bill I think, right?

Yes, and they call it the windstorm insurance coverage, yes, exactly, it's not the cap fund bill.

Yes. There are a bunch of features to that bill, the one that… some of which I think are… actually, let me address it from the reinsurance perspective. From a reinsurance perspective, the one that is most likely to have an impact on our market is if they do these surplus notes for $250 million and then the matched funds, because of the… if you break that all out, within a couple of years, they supposed to be writing six-to-one against that money, so that's matched funds, the $250 million becomes $500 million, six-to-one becomes $3 billion of premium, would move into to takeout companies specific. If that would happen, the potential for additional reinsurance purchases is pretty significant. So, I think there is an element there that from the reinsurance perspective there could be an increase in demand coming from companies taking [inaudible] the matching funds. With that, on the insurance side, it can lead to potentially significant price competition, because all this capital needs to be fed basically from the Florida market. There are a bunch of other features in there as far as whether million-dollar homes are covered and things. But, the main impact really comes from that one element of the bill as far as the reinsurance companies. So, it should have a...

Actually, I think of talking about [inaudible], this is the one that creates a windstorm facility inside the FAC basically that pick up all wind exposure?

Okay.

We can talk about it later.

Okay, yes. I think we are not sure exactly what you told that is.

Okay it's it HB 983, if you want to know, it's called the Windstorm Insurance Covered Bill. Actually, that second question, big drop in cat fund investments in the quarter, any particular reason for it?

No. Again, we look at cat funds very similar to the reinsurance business. So, as far as our appetite for them, it is consistent with what it has been, it is just a matter of whether the bill… the funds are currently available at our portfolio. As far as the specific and what the changes are, I will flip it over to Fred.

Yes, Brain, this is Fred. There are a couple of things going on there. First thing is, we have a total return swap in place for cat funds, which provides us with liquidity. So, the accounting for that is a shift from other investments in cat funds to a line on our balance sheet called other securitized assets. So, I think, when you are thinking about our position in cat funds, you have to take that line into consideration. But, having said that, in addition to that there was some activity in the cat fund area. This quarter, we did have about $48 million of maturities coming due, but we also took on about $17 million of additional cat funds. So, it is not like we are selling them, we did have some short-term ones that matured. And for liquidity purposes, we have entered into a total return swap.

Great. And then the last question is, if I look at your other income expense line, there was a big other income this quarter versus we have been seeing some fairly large expenses there, any thing unusual this quarter?

Yes. A large component of the other income line this year is a $13 million swing in trading gains realized from our weather trading activities. What we do there is, we have a group that does weather-related trades, energy and weather-related trading activities linked to things like heating and cooling degree days and energy production. It's a relatively small group, it's seasonal, they had a pretty good first quarter. So, that's the one difference coming through this quarter. Brian Meredith – UBS: Great thank you.

Thank you. The next question is coming from Tom Cholnoky of Goldman Sachs.

Yes, thank you. I just want to clarify a couple of things. Number one, the other loss of $14 million in investment, $14.4 million in the quarter, exactly, which… if I look at page ten of your release, which funds would that get allocated or which types of investments?

Hi Tom, it's Todd Fonner. The hedge funds in the private equity [inaudible] private equity, and then everything else you are seeing in the schedule for other investments is rolling through to the other stuff. So, it is senior secured bank loan funds, some non-US fixed income funds, which are primarily high yield, cat funds, and then some miscellaneous other investments.

Do you think kind of prorated by asset size?

You got the size of the assets in the schedule and then the $14 million in terms of how it spread out, the stuff that’s high yield had a rough quarter. So, that's the majority of the loss.

Okay. Okay. And then, this may be a little bit more clarification on the tax rate spread. What kind of guidance would you give us on that? I mean, I know it is tough depending on where your losses occur, but if you have another clean quarter in the second quarter without much loss, should we expect the tax rate, kind of that 4% to 4.5% range, because that just seems to jump up pretty high?

Tom, let me give you a sense for where the tax expense is coming from and it's been driven primarily by the trading profits from our weather and energy derivatives trading group, which I just mentioned. Again, a seasonal business. While we like the profits, I don't think we expect those profits going forward, and as such, we don't anticipate significant tax expense going forward either.

Okay. Why would these guys be trading in Bermuda?

Why wouldn't they?

If they are trading in Bermuda, why would there be a tax on that then?

No, they are trading in the United States.

Okay. If they keep making money, maybe you should move them.

I will make a note of that, thank you.

And then just once again, basically, we should think about this other income line as kind of going back to a more normal loss scenario in the next couple of quarters, is that kind of what you are saying? A little surprise because don’t you expect these guys to make money or they are just making outsized amount of money? I assume you are not trading for a loss.

No. These guys do client origination trades and a lot of it’s hedged and they really had an exceptional quarter. So, while we do expect them to make profits, this was a very good quarter. Going forward, there is a lot of moving parts in other expense, other income line, and it's pretty clear that I wouldn't expect the $13 million of income to continue to come through, particularly in the near term.

Okay great, thank you.

Thank you. Our next question is coming from Jay Cohen of Merrill Lynch.

My question is, are you saying, I guess, either a big difference or a changing difference between the pricing in the cat fund market, which seems to have grown dramatically and the more traditional reinsurance market?

One thing is, they tend to be a different levels oftentimes where the reinsurance market is participating below the cat fund market. I think over time we have seen cat fund spreads… cat funds are looked largely as multiple of expected loss and that multiple has reduced a bit from… which cannot [ph] be transferred to a loss ratio, from a loss ratio perspective and cat fund loss ratios have gone up a bit. So, with the market moving the way it is in the reinsurance, reinsurance rates are decreasing. So, you are getting higher loss ratio there as well. So, I think, yes, we have seen movements on a relative basis, it hasn't been one moving much more extreme than the other.

Okay. That's helpful, thanks.

Thank you. Your next question is coming from Alain Karaoglan of Banc Of America.

Good morning. Just a few questions. Fred, on the other income line, so you had $13 million of profits from that, the other income line was $8 million. Is the difference what would be a normalized rate or is there anyway to think about that going forward, a negative four or negative five?

Yes, that's probably still pretty high. Again, what I focused on was the biggest component of it, it’s things going both ways. So, I would say if you look back over time and you average it out, you will probably get a better run rate over the long-term. There is a lot of detail in there that we’ll provide to you in our 10-Q and I will be happy to take you through the details after the 10-Q is out.

Okay. The next question is on your AOCI, went from a gain of $44 million to gain of $65 million in this environment. What's leading to that? Could you go through whether you account for things differently?

One of the things that we do that might be different than some others is that we take our OTTI, our unrealized losses through income. So, we realize the unrealized loses. So, all you see in the OCI is the unrealized gains.

Okay. And in terms of the other items that Todd mentioned in terms of the investment portfolios losses from the other investments, you mentioned it's coming from the high yield, is that the non... that would be the non-US fixed income funds that you were referring to?

Hi, Alain, it’s Todd again. It's the bank loans and the non-US fixed income, that's almost entirely high yield, which as you know, had a rough first quarter.

Okay. The bank loans are high yields as well or high grades?

It's senior secured bank loans, most of them are high yield.

Okay. Thank you very much.

Thank you. [Operator Instructions]. Your next question is coming from Vinay Misquith of Credit Suisse.

Hi, good morning. I was wondering whether you could elaborate a little bit more on the Florida impact? I think Kevin said that your private reinsurance market has a sufficient amount of capacity and you see no material impact with or without the legislation on your premium. So, trying to reconcile that with the down 10% top-line in the property cat division that you had before, I am trying to see whether we have some upside or what is the upside, should that legislation go through?

There's a couple pieces employed. I touched a little bit on the Out-Water Bill, the other one people are speculating on is whether the reduction in tickle [ph] will go through. There is a lot of legislation being discussed as to having a $3 billion reduction to the tickle layer, which sits above FHCF. Those changes when you lock it off through the way the market is set up between other public entities and then some large players who purchase reinsurance, again it doesn't all come to the private reinsurance market. So, the combination of the increase there, some changes in private market buying habits and the... generally, the kind of the healthy supply of Florida capacity right now. I think, there is a lot of balancing influences that will come to play, no matter what the changes are that come through. So, that's the reason we are saying it's not going to be a massive change to how the market behaves in the very near term for this renewal.

Fair enough. So, do you still maintain a down 10% or do you think there could be some slight upside to that?

Again, it's early days as to how the market is going to shape out as far as whether people are going to buy additional lower layers, but I would say, at this point, it’s fair to hold this with the guidance we already gave.

All right, fair enough. And on the reinsurance purchase, that's on a retro purchases, they seem to have picked up this quarter in your reinsurance division, plus you also seemed to have to bought more reinsurance on the primary insurance division. I am just curious as to whether you are buying more reinsurance now that the market is softening?

Inwards and outwards, retro really is... again, it’s just tools that we use to optimize our portfolio. If the pricing is right, we will write the deal. A lot of times it’s in the gray area where we will do nothing. And if we think by adding it to the portfolio it enhances the overall return of the book, we will buy it. That philosophy hasn’t changed. We have seen some opportunities to actually to write a few deals and to buy a few, often in different territories. And then we had some... and I think that that will continue to go forward. But, I wouldn't say that there is a change in philosophy, Mr. Howard looking at retro at this point, that needs to be highlighted at this time.

And finally on the specialty re side, I believe the accident here, combined ratio was 102%. I was just wondering if you could shed some light on that? Was there some one-time items in that?

It's not something I would look to have as a trend in the book. There has been a pretty active risk last quarter. We put up some reserves for some risk losses. Other than that there is not much that I would identify for that book. As far as the specifics on how it’s reported, if Fred wants to add something?

The only other thing that's slightly driving that up is, you will know, it includes an increase in expense ratio, as you may recall, last year we entered into a large quota share deal and that generally carries a higher commission rate than the traditional business in the specialty book. So, that's closing up, increasing the expense ratio as well.

All right, thank you.

Thank you. Your final question is coming from Chuck Hamilton of FTN Midwest.

Good morning everyone. The question for Kevin, I guess it follows on from the previous question in terms of the reinsurance purchase in the catastrophe business seems like your retentions have typically been in the low 90s in the first quarter of the years in terms of retaining the reinsurance gross written and now we are down to 72% this quarter. What I think I heard was an opportunistic purchase of reinsurance this quarter. Do you expect to get back toward more historic trends of past years?

I don't know. We are really depend on... we don't necessarily look at what percent of the premium we are spending, we look at what percent of the premium we are making. It’s overall by adding retro and it changes the ratio of what we are ceding [ph] increases the expected profit we are going to do it. As far as the overall market, I think, at this time of the cycle there tends to be more opportunities to purchase reinsurance. But, I wouldn't want to forecast that that's what we are going to see on a going-forward basis. But, we have the opportunities there, we will continue to buy.

Okay. Thank you.

This is Neill. Thank you all for joining us today. In closing, let me say that I am really happy with the position we have in the market right now. We've got a disciplined and talented team. We’re laying the foundation for the future and we’ve got a great portfolio. So, thanks for joining us and we look forward to talking to you next quarter.

This concludes today's RenaissanceRe first quarter 2008, financial results conference call. You may now disconnect.