WRB
#<UNK>, it's <UNK>.
On the international front, first off, there are some expenses, as <UNK> referenced, associated with solvency, too, which we will be working our way through as we make our way to the end of the year.
We would expect that those expenses will begin to diminish at a material rate as we make our way to 2016.
And then we have some other plans as it relates to some reorganizations that we're doing within the segment.
Some of which was accomplished in the second quarter, some of it will occur in the third quarter and we would expect that, that component would be quieting down in the fourth quarter.
So I think the way that people should be looking at it is that the third quarter, you may see it tick up a little bit more from where it is now.
The fourth-quarter you should see somewhat of an improvement, we would hope, from the third quarter.
And by the time we're in 2016 we should be certainly in or on our way to a materially better place.
I think the answer is that we see opportunity on both fronts.
Obviously, we look at each opportunity individually and it needs to stand on its own two feet.
<UNK>, again, it depends on how you define greenfield.
But if you look at most of our activities, most of the business that we have started, it's been a situation where we have an individual or a team of people to come together that have a significant amount of expertise that they've developed over the years within a particular niche.
And we don't expect that we would deviate from that approach.
I'll make a comment.
It's definitely a combination of both.
There's a number of initiatives underway that we know are going to improve things from the expense side.
<UNK> could comment more on the premium side, but I think it's going to take a combination of both to get it where we'd like it to be.
So as <UNK> suggested, it's going to be a combination of both.
Certainly top line and earned premium levels have an impact, certainly.
Currency, to a certain extent, has an impact as well in some cases.
But fundamentally, much of the action that <UNK> was alluding to earlier that I touched on as well, has to do with quite frankly just trying to find ways to make the biggest better, to make it more productive, to make it more efficient and we think that we are getting some traction and doing so.
Really not because of what we're doing here, at the holding Company, as much as really a lot of the good things that our colleagues that run these businesses are doing.
Long story short, would more earned premium in the backing be helpful.
Absolutely.
But I think the way we're going to get to a better place is because of some of these deliberate activities that we referenced earlier.
I think the bottom line is, we would expect that, that expense ratio is going to come down and putting aside currency issues, we will, in fact, have somewhat improvement in the volume.
So I think that while in the short run, i.
e.
a quarter, you may not see much dramatic improvement, I think if you look at these numbers a year from now, it will be substantially better.
Why don't I let <UNK> talk about some of the opportunities he sees now from an operating point of view, and then I'll talk about it from a broader perspective.
Just to make sure we're clear, we're talking about the consolidation that we see going on in the marketplace, correct.
The investment for the energy investments, yes.
They're profitable this quarter and we expect them to be profitable next quarter.
The answer is, we're always willing to do what we think is in the best interest of our shareholders.
We think we have some level of obligation to this country, we just think at the moment the way the tax laws are, we won't be able to compete in the long run when we're paying taxes at 30%-plus and we have many competitors who are paying very low tax rates.
And they do it, forget about what they show on their statements, they do it in many ways, through loss portfolio transfers, because then they don't pay tax on the discounted value of their reserves, through all kinds of vehicles, some of which they feel are justified and some of which they don't.
But the bottom line is, how much cash taxes do you pay.
And it's a competitive disadvantage that in the long run, you can't continue with.
We look at it all the time.
We've worked on Congress.
I have no idea how come it has been so difficult to persuade Congress.
And I have no idea how some insurance commissioners think, for some reason or another, it's a good thing for people not to pay taxes in the country.
But <UNK>, we work at it every day.
We make that decision and we look at it all the time.
And at some point, we'll have to come to the conclusion, we can't continue in the current posture.
But each time they do something to make the differential less, it makes it less certain.
But we would look at every alternative, and we do every day.
We talk to people about it.
No.
I don't think so.
The fact is, our net ---+ you have to remember, first of all, we have $400 million of statutory capital because we carry health equity at fair market value, so our statutory capital and our GAAP capital aren't the same, so we've had an increase in the statutory capital that you don't see of $400 million from just health equity.
And there are other things that we've had increases in statutory capital because there, it's not a GAAP number so statutory capital has gone up, whereas GAAP capital has not.
We haven't bought more stock than our net earnings have, so if you look at our aggregate earnings, the amount of stock we bought basically matches our earnings.
So we don't think it's a problem.
I think that over any period of time, that would be a general thing.
<UNK> needs to make a comment about, he pulled up the numbers on his partnership things.
I misspoke on the energy fund.
I get a quarter ahead of myself with the one-quarter lag, but they actually in the quarter we just reported, they had a small loss, but we don't expect that to go forward.
I just wanted to correct that.
But at this point, I think they don't have a lot of our attention because the velocity of change now is much less.
Okay, <UNK>.
I think in the broadest sense, Latin America is a growing marketplace.
It has more volatility as every developing market does.
We have been successful in Argentina because we have great managers in Argentina and they've done a great job.
We have the same in Brazil and we're expanding in Columbia now.
The cornerstone of this business is great managers and great people.
And we think that we've been able to get those kinds of people to work for us.
Now, that said, it's a lot bumpier ride at the moment than it was 18 months ago.
But I think that we're pretty happy with our participation and if anything, we would like to use an opportunity of uncertainty for us to expand further.
No.
The way they do it is they set up domestic subsidiaries.
First of all, they can do loss portfolio transfers so they moved their reserves offshore, so they don't pay discount on the loss reserves.
And then they quota share a large percentage of what's left.
So they bring their tax rate down from 35% or 39% down to less than 10%.
So when you can do that, it's a pretty big competitive advantage.
I don't think it's the perception of being offshore.
I think they have all have great people.
But I think some of them have great people and do really well and others don't.
But I think being here, doing this now for almost 50 years, we have a competitive advantage, because we have people who are old and gray and have been doing it for a while and most of the others are young and spry.
So we're hopefully replacing the old and gray people with the young and spry people and we'll have accommodations that will be okay.
Maybe I miscommunicated, but from our perspective, commercial auto is very challenged.
While it would seem by and large there's opportunity for additional rate, I still think the economic result that will deliver is not particularly rewarding at this stage.
So while it may not be rapidly deteriorating, or deteriorating at all from a rate perspective, I think even with the rate increases that many in the industry are getting, it's not where it needs to be.
(Multiple speakers) correct.
I'm sorry if I misspoke.
Thank you.
Thank you all very much.
We are optimistic that this is the time that will give us great opportunities in many fronts.
The ability to be nimble and select the opportunities that reward our shareholders best is something we've always prided ourselves on.
You can only be sure of one thing.
We will always do we think is right for our shareholders and you can count on that in this Company no matter what.
Have a great day.
Thank you.
