Question-and-Answer Session
Operator
Thank you. (Operator Instructions). Our first question comes from Mr. Bob Glasspiegel of Langen McAlenney. Your line is open.
Bob Glasspiegel - Langen McAlenney
Please pass on to Art best wishes for him to get back quickly so we can give him heck again on these conference calls.
Michael Browne
I am sure he will be eager to get back.
Bob Glasspiegel - Langen McAlenney
Mark, you mentioned taking away some equities. With yield spreads widening -- I mean congratulations on having such a high quality portfolio. It’s positioned well for what’s happened, but are you tempted to take advantage of the wider spreads and dip into a little bit lower quality assets on the fixed income side?
Mark Cummins
I mean the reason our portfolio is such high quality is we haven’t been tempted in the past to overextend for yield and sometimes that can get you into trouble. What we are doing is, as I mentioned, we are buying a lot of munis, and munis are very attractive in this environment. We are buying them at historically cheap levels at high 90% of treasury. So, they are very conservative, good credit quality and good after tax yield in this environment. So, you know we are doing some of that and we think the equity markets look attractive also. So that’s what we are doing in this environment.
Bob Glasspiegel - Langen McAlenney
So, our tax rate on investment income on the margin should be going down and you were giving guidance on pretax investment income growth, right?
Mark Cummins
I mean the after-tax is going to be in the mid single digit also, but you’re right. As we shift that mix, which actually started to shift at the end of the year and moving into January, you will start to see that effective tax rate move down. It didn’t shake much last year because we used some of our cash for the buyback, so it didn’t change the mix that much.
Bob Glasspiegel - Langen McAlenney
On the underwriting side, you are one of the few companies to still be showing underlying accident year improvement ex-cats. Do you have a feel for how much longer you think that can continue or are we close to the inflection point where you start deteriorating along with other companies?
Michael Browne
I will let Bob Whitlock, our Chief Underwriting Officer, respond to that one.
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