Question-and-Answer Session
Operator
Thank you. (Operator Instructions) Your first question comes from Doug Mewhirter - Ferris Baker Watts.
Doug Mewhirter - Ferris Baker Watts
Good afternoon. Shaun, do you intend to have someone backfill your previous position of CFO? I just noticed on the press release that you were still listed as the CFO.
Shaun Jackson
That is something, Doug, that I hope to make an announcement regarding relatively soon, but I do intend to have a replacement CFO.
Doug Mewhirter - Ferris Baker Watts
With Lincoln General, I know that last quarter the risk-based capital ratios were close to the 200% level and I know that you had to capitalize, inject some capital into that subsidiary. After this reserve charge, does that put it again in a position where it would need an additional capital injection? Where would the source of that capital be?
Shaun Jackson
We expect that Lincoln will require a further capital injection. In fact, we have made a capital injection over the last couple of weeks. We expect that those capital injections will come from sources within the group, Doug. We have a lot of companies that are over-capitalized and so we intend to fund that through internal sources.
Doug Mewhirter - Ferris Baker Watts
And that would be primarily from the cash on hand in Barbados or Bermuda? Not necessarily drawing on a line of credit?
Shaun Jackson
That is correct. We have over-capitalized companies throughout the group, and so of course, part of our structure is to be able to draw capital from, as you pointed out, the two captives relatively quickly, easily, and they are both over-capitalized in our view so that would be the primary source of the capital we would need to support Lincoln. In fact, some of the losses from this recent increase, a large portion of those losses will actually be recognized in theBarbados captive, and that is already contemplated inthe announcement we made in terms of quantifying the impact.
Operator
Your next question comes from Stephen Boland – CIBC World Markets.
Stephen Boland – CIBC World Markets
When you said the case reserves were developing differently, obviously there were more case reserves required. Is this a frequency problem or severity problem?
Shaun Jackson
Steve, I think the issue was the independent actuaries and management felt that the industry development factors, because of the inconsistency in the data, it has proven with experience that the company’s own case reserves didn’t develop inthe same way that the industry reserves were anticipated they would. Soit is really one of, I think as we come to realize that with the benefit of hindsight, the industry factors were not appropriate but again, we didn’t know that atthe time. We now know with the benefit of hindsight.
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