Question-and-Answer Session
Operator
(Operator instructions) Your first question comes from the line of Michael Phillips from Stifel Nicolaus. Your line is open.
Michael Phillips – Stifel Nicolaus
Thank you. Good morning, everybody.
Ken Stecher
Good morning.
Michael Phillips – Stifel Nicolaus
Couple of questions, first some on top line, you know the drop in exposure is unexpected and the south market clearly isn't – hopefully it is getting little bit better, but it is pretty sharp drop here in the quarter and is there anything that would cause it to fall of so quickly besides the drop in exposure that would make this second-quarter kind of more of an anomaly or – I guess I would expect this to be more of a gradual thing than what I saw here in the second quarter?
J.F. Scherer
Mike, this is J.F. I think it appeared to us as well kind of an abrupt decrease confluence of both the absence of contribution of audit income, as well as the effect – the double effect of not only are we giving back particularly in the construction area, returned premiums to contractors because the premiums – payrolls and sales they estimate last year this time are obviously coming in lower, but then also their outlook to the future in terms of the renewal premiums are having a double effect.
As we take a look at our book of business, were we are seeing price pressure are on the larger accounts as has been described in our release, as well as Ken's remarks, but also on our construction book of business. So, it appears to us that the effects of the economy seem to manifest itself more significantly here in the second quarter.
Michael Phillips – Stifel Nicolaus
Thank you. So, as you think about your entry into the new states, new business that you're getting out, are you cautiously thinking about trying to diversify a little bit more away from the construction and contractor type business that you're kind of heavily focused on now?
J.F. Scherer
We have been trying to do that for some time or really across the Board for us. In Texas, for example the economy and actually what we found working with our agency's down there, the economy is not as bad, the construction accounts that we are writing down there are fairly the survivors of quarter out there, we are not targeting contraction, we are continuing to right the balance book of business, part of which would be construction. So there is no effort to steer away from that particular line of business in places like Texas or Colorado, but certainly we are anxious to right a balance for the business.
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