Joseph V. Taranto – Chairman and Chief Executive OfficerThanks, Beth. Good morning. There has never been a year-end where I've been so pleased to see the prior year over with and the new year begin. That is to have the losses behind us so we can move into the opportunities that those losses have created going forward. Despite dealing with historic high for industry catastrophe losses, our balance sheet remains strong with capital in excess of $6 billion. This strength will serve us well as we move into 2012. I'm optimistic about our prospects for 2012. Let me tell you why. First, our reinsurance portfolio will be much improved from the changes in our property catastrophe reinsurance portfolio. Property catastrophe rates, terms and conditions have improved throughout 2011, continued to improve at January 1, 2012, and I believe will continue to improve into April Japanese business. Property reinsurance has become an increasingly important part of our operation as we move towards the best opportunities in the marketplace. At January 1, we saw rate increases on the order of 15% for retro business, 5% to 10% for catastrophe clients around the world if they didn't have losses and much greater increases if they did. Churns improved as well. As a consequence, we have meaningfully increased our expected margin on this business and yet not increased our PMLs in any peak zones. Second, we have a significant transformation going on in our insurance operation that I believe will lead to much improved results in 2012. Roughly 20% of our 2012 insurance book will be written by Heartland, our crop insurance company. This book has made a profit the vast majority of years it has been in business and weather permitting should do so again in 2012. About 30% of our 2012 business will be workers' compensation, primarily in California.
Our year-end reserve review led to increased reserves which revised our view of 2011 profitability. We have achieved roughly 15% rate increases throughout 2011 and continue to get increases of that magnitude in January. I expect we will continue to achieve increases throughout the rest of 2012 as other companies top-up reserves. We project 2012 to generate an underwriting profit on the back of these increases.About 15% of our businesses is written our professional liability unit. This unit has produced an underwriting profit for the past three years, and I expect another good year in 2012. The remainder of our insurance book includes our medical stop-loss business, which has been running to an underwriting profit, and our general liability and property business where we are achieving our targeted rate increases. Put it all together and the expectation is for a good year ahead. Whereas I would not characterize the current market as a hard market, the positive changes in the property catastrophe reinsurance market, coupled with the improvements we anticipate in our insurance segment should make for a meaningful positive change for Everest. If you project catastrophes at a more normalized level, it should produce very solid earnings, much of which could be used for stock buyback. Dom? Dominic J. Addesso Thank you, Joe. Good morning. I will begin my comments this morning by outlining the major events that have impacted our earnings for the quarter and year-to-date. At this point, we are all familiar with the events that have affected our industry, which in total were in excess of $100 billion. For the year, our cat losses pre-tax were $1.3 billion, which is less than 1.5% of the projected industry losses. Given the size of these industry events, our share of losses were within modeled outcomes. And as reflected in our various risk management scenarios, our capital position remained intact as these events despite their significance were largely absorbed through earnings.
The details on the events for the year which highlights how unusual the year was are as follows; [indiscernible] earthquake, $532 million; New Zealand earthquake, $306 million; Thailand floods, $225 million; U.S. tornadoes, $61 million; Brisbane floods, $56 million; Hurricane Irene, $38 million; Cyclone Yasi, $20 million; Canadian fires, $13 million; and a cat IBNR of $50 million.Read the rest of this transcript for free on seekingalpha.com