Question-and-Answer Session
Operator
Thank you, sir. Today’s question-and-answer session will be conducted electronically. (Operator Instructions). We’ll go first to David Merkel of Finacorp Securities.
David Merkel - Finacorp Securities
Hi, Hello.
James V. Gorman
Good morning, David.
David Merkel - Finacorp Securities
Very good. I wanted to ask a little bit about the, you had a number of parties go over your reserves, three and all I believe and how, I would assume at this point you are rather certain that you have been able to clean up most of reserving problems particularly given what was happening in your claim department prior to, I guess September 2007? Can you walk us through that one more time?
James V. Gorman
Yes, we have taken a very hard look at the claim review process, within the claim department. We have modified the procedures, we have updated our diaries. And when you go through a change like this, your historical information and your typical loss development patterns are no longer appropriate to use.
David Merkel - Finacorp Securities
Right.
James V. Gorman
In estimating alternates. So, we had to rely heavily on projecting the open, ultimate number of claims that will be paid and the severity associated with those clients. And I think our review that was done as well as that done by our external auditors have focused on looking at average claim cost as opposed to looking at normal loss development methods.
We continue to look very closely, as part of our quality control process to make sure that the adjusters are in fact keeping claims up to date that we are managing them affectively and that we are in fact putting in place an aggressive settlement policy to move these claims off of our balance sheet. So, we are cautiously optimistic that we have our arms around, our ultimate liabilities. But, obviously there is no guarantee but we have scrubbed this thing it from many different angles.
David Merkel - Finacorp Securities
Great, well that’s good. The re-insurance recoverable change, it was $3.1 million or something like that? What was that about?
James V. Gorman
While we project our direct loses, we also project how much is going to commend in ceded loses and you know based upon our current retention as a company we’ve retained the first 500,000 of loss the emergence of ceded losses is very slow to develop.
David Merkel - Finacorp Securities
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