Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Joseph DeMarino.
Joseph DeMarino
What investments caused the impairments or write-downs in the quarter?
Steven E. English
The investments – the write-downs were primarily from our large cap stock portfolio and the international funds. And collectively they made up 95% of the $29 million.
Joseph DeMarino
And what is the criteria for realizing a write-down?
Steven E. English
Our general guideline is once a security is 15% below cost we put it on a watch list. Once it is 20% below cost and has been there for nine months we have to have a compelling story as to not consider an impairment.
Joseph DeMarino
And of your portfolio right now, what amount of what portion is 20% below cost?
Steven E. English
Very little. We’ve pretty much cleaned house.
Joseph DeMarino
On pricing can you kind of provide more details on renewal pricing versus new business?
Robert P. Restrepo Jr.
Yes. Renewal pricing is on a price per exposure continues to be down in the mid single-digit range. It varies by line. It’s not down as much in workers compensation. It tends to be down a little bit more on the liability line. But in the aggregate on commercial lines it’s price per exposure is down mid single digits.
Joseph DeMarino
And on the expense ratio, what would be a good run rate going forward from here? When do you expect to achieve the reduction in –
Robert P. Restrepo Jr.
Yes, we expect the reduction to begin in 2010. I think the run rate that we’ve been experiencing over the last several years in the 33 of 34 range is probably where we’re going to finish this year. We’re in the process of restructuring our personal lines, commercial lines and claim operations so we expect that we may incur – we don’t know yet, but we may expect we might incur some additional severance costs in 2009. And we’ll also be incurring some relocation costs as people move to the new locations.
And the third area is that some of the improvement in expenses and improvement in productivity require some technology investments that we’ll be making this year. So the cost to implement these ideas, we still have additional costs that we’ll be incurring in 2009. But beginning in 2010 that’s when we expect to see a lower expense ratio.
Joseph DeMarino
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