Question-and-Answer Session
Operator
(Operator Instructions). Our first question comes from Beth Malone from Wunderlich Securities. Please pose your question.
Beth Malone - Wunderlich Securities
Good morning and congratulations on the quarter. I've a couple of questions. On the reserve development, how much of the favorable reserve development came from the ProCentury books?
Bob Cubbin
3.73 pre-tax.
Beth Malone - Wunderlich Securities
What was the dollar amount of the reserve development from 2008 first quarter so we can compare it?
Bob Cubbin
Yes, that was $2.9 million pre-tax.
Beth Malone - Wunderlich Securities
That wouldn't have included any ProCentury? ProCentury is all this year?
Bob Cubbin
That is correct.
Beth Malone - Wunderlich Securities
Then just a question on your 15% return on equity goal that you have for the company; that would probably require a greater lever of your surplus than you currently are doing. Is that going to need a better pricing environment for you to see the opportunities to leverage your capital to get to that level?
Bob Cubbin
Absolutely. You really have to adjust your thinking when the market doesn't allow you to grow like it hasn't in 2007 and 2008. So as the market does turn over the next couple of years, we will be able to leverage the balance sheet a little bit more. So that will get us up to that 15% or 16% range. What we're really trying to do, Beth, is make sure that when the market is soft we can still deliver double-digit ROEs and then when the market is harder we can get up to that 15% or 16% range.
We really don't think it's worth taking the extra risk to either take more risk in the investment portfolio or to over-leverage the balance sheet, so that liquidity becomes an issue. So, we have been very cautious about that and I think that has served us well during this very difficult time.
Beth Malone - Wunderlich Securities
Then one last question. On the cross-selling, you are going to start offering wind risk to the Southeast; that sounds like a pretty risky category given the hurricane exposure that Florida has. What kind of expertise are you employing to be able to write this?
Bob Cubbin
The current Century book has a lot of coverages that exclude wind and that book of business will remain the way it is. We're not going to add wind protection in areas that you would find to be extremely risky. We're adding it in areas that are much less risky in order to support their GA business in general. So this is more inland and less wind exposed than the historic E&S business that Century has written.
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