The following is a discussion and analysis of our results of operations for the years ended December 31, 2004, 2003 and 2002 and financial condition as at December 31, 2004. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes thereto included in this filing.
This discussion contains forward-looking statements that are not historical facts, including statements about the Company’s beliefs and expectations. These statements are based upon current plans, estimates and projections. Our actual results may differ materially from those projected in these forward-looking statements as a result of various factors. See “Cautionary Statement under “Safe Harbor” Provision of the Private Securities Litigation Reform Act of 1995.” and “Risk Factors” contained in Item 1 “Business” of this filing.
To a lesser extent, we also write retrocessional coverage contracts, which provide reinsurance protection to other reinsurers, also called retrocedants. Coverage generally provides catastrophe protection for the property portfolios of other reinsurers. Retrocessional contracts typically carry a higher degree of volatility than reinsurance contracts as they protect against concentrations of exposures written by retrocedants, which in turn may experience an aggregation of losses from a single catastrophic event.
Other Specialty - Reinsurance contracts of aviation liability, aviation war, marine, personal accident catastrophe, workers’ compensation, terrorism, other casualty and other reinsurance business are included in this category. Marine and aviation contracts are primarily written on a retrocessional excess of loss basis.
Other significant accounting policies that we use to prepare our consolidated financial statements are included in Note 2 to the December 31, 2004 Consolidated Financial Statements included in this filing.
The extent of reliance on management judgment in the reserving process differs as to whether the business is insurance or reinsurance and as to whether the business is written on an excess of loss or on a pro-rata basis.
Loss reserve calculations for insurance business are not precise in that they deal with the inherent uncertainty of future contingent events. Estimating loss reserves requires us to make assumptions regarding future reporting and development patterns, frequency and severity trends, claims settlement practices, potential changes in the legal environment and other factors such as inflation.
There is a time lag inherent in reporting from the original claimant to the primary insurer to the reinsurer especially in the case of excess of loss reinsurance contracts. Also, the combination of low claim frequency and high severity make the available data more volatile and less useful for predicting ultimate losses. In the case of proportional contracts, we rely on an analysis of a contract’s historical experience, industry information, and the professional judgment of underwriters in estimating reserves for these contracts. In addition, if available, we also rely partially on ultimate loss ratio forecasts as reported by cedants, which are normally subject to a quarterly or six month lag.
As a result of the time lag described above, we must estimate IBNR reserves, which consist of a provision for additional development in excess of the case reserves reported by ceding companies, as well as a provision for claims which have occurred but which have not yet been reported to us by ceding companies. Because of the degree of reliance that we necessarily place on ceding companies for claims reporting, the associated time lag, the low frequency/high severity nature of much of the business that we underwrite, and the varying reserving practices among ceding companies, our reserve estimates are highly dependent on management judgment and therefore uncertain.
We are predominantly a reinsurance company specializing in short tail property reinsurance business, but we write a small proportion of longer tail casualty reinsurance business. We also write a small book of direct insurance business, all of which is comprised of short tail property risks.
In general, claims relating to short tail property risks are reported more promptly by third parties than those relating to long tail risks, including the majority of casualty risks. However, the timeliness of reporting can be affected by such factors as the nature of the event causing the loss, the location of the loss, and whether the losses
are from policies in force with primary insurers or with reinsurers.
Due to these factors, we do not normally expect to experience significant claims processing back-logs. At December 31, 2004, we did not have a significant back-log in either our insurance or reinsurance claims processing.
Because of these factors, management supplements our own claims experience with other information in setting reserves. For catastrophic events, we consider aggregate industry loss reports and catastrophe model projections in addition to ceding company estimates and other factors as described above. For other classes, we utilize industry loss ratio and development pattern information in conjunction with our own experience.
To the extent we rely on industry data to aid us in our reserve estimates there is a risk that the data may not match our risk profile or that the industry’s reserving practices overall differ from our own and our cedants. In addition, reserving can prove especially difficult should a significant loss event take place near the end of an accounting period, particularly if it involves a catastrophic event. These factors further contribute to the degree of uncertainty in the reserving process.
Management believes that the reserves for loss and loss adjustment expenses are sufficient to cover losses that fall within assumed coverages on the basis of the methodologies used to estimate those reserves. However, there can be no assurance that actual losses will not exceed our total reserves. Loss and loss adjustment expense reserve estimates and the methodology of estimating such reserves are regularly reviewed and updated as new information becomes known to us. Any resulting adjustments are reflected in income in the period in which they become known.
The following table sets forth a breakdown between case reserves and IBNR by line of business at December 31, 2004 ($ in millions):
We regularly evaluate the appropriateness of these premium estimates based on the latest information available, which includes actual reported premium to date, the latest premium estimates as provided by cedants and brokers, historical experience, management’s professional judgment, information obtained during the underwriting renewal process, as well as a continuing assessment of relevant economic conditions. Any adjustments to premium estimates are recorded in the period in which they become known. Adjustments to original premium estimates could be material and may significantly impact earnings in the period they are determined. The net income impact in 2004 of premium adjustments with respect to premiums estimated to have been earned in 2003 was immaterial. We expect the net income impact in 2005 of premium adjustments with respect to premiums estimated to have been earned in 2004 to be immaterial.
Management includes an assessment of the creditworthiness of cedants in the review process above, primarily based on market knowledge, the timeliness of cedants’ past payments and the status of current balances owing. In addition, management may also review the financial statements of ceding companies. Based on this
For the 2002-2004 cycle, the target combined ratio was 70% for a 100% harvest ratio. The target for a maximum harvest of 200% of the value of the units granted is a combined ratio of 50% or less. A combined ratio of 95% or more would have resulted in a harvest of nil. Straight line interpolation is used between these points. At December 31, 2004 the actual harvest ratio for this performance period was 132.0%, compared to the estimated harvest ratio at December 31, 2003 of 137.5%. On February 28, 2005, we paid out the 2002-2004 PUP accrual of approximately $14.0 million.
For the 2004-2006 cycle, the performance target for a 100% harvest ratio is the achievement of a combined ratio of 72% over the period or the achievement of an annual total return to shareholders of 18% as measured over the period. Consistent with our accounting policy, we are currently estimating the PUP liability and PUP expense using a 100% harvest ratio and will reassess the harvest ratio used in the calculation of the PUP liability at June 30, 2005 and each quarter thereafter.
In general, as it currently stands we estimate that our overall gross premiums written for 2005 will be lower by at least 10% as compared to 2004 as a result of the above factors and perhaps more if as the year develops we find that we do not like the way market rates are trending. See the gross premiums written discussion below for additional commentary. We continue to believe that superior long-term returns for shareholders will be driven by disciplined underwriting through the cycle.
The decrease in net income for the year ended December 31, 2004 year compared to 2003 was principally driven by losses incurred related to the four major U.S. hurricanes and two Japanese typhoons which occurred during the third quarter of 2004. There were no loss events of a comparable magnitude in the same period in 2003. As at December 31, 2004 we estimated the overall negative impact on net income related to these catastrophes to be approximately $240.0 million which is as a result of the increase in loss and loss adjustment expenses and related increase in reinstatement premium ceded, which was partially offset by reinstatement premium written and a reduction in profit commission and incentive compensation expenses.
Other factors contributing to the decrease in net income as compared to the prior year are as follows:
• An increase in general and administrative expenses due to increased professional fees and staffing costs.
Fully converted book value per share is a non-GAAP measure, based on total shareholder’s equity plus the assumed proceeds from the exercise of outstanding options and warrants of $157.5 million for 2004 and $168.1 million for 2003 and 2002, divided by the sum of shares, options and warrants outstanding (assuming their exercise) of 71,372,892 for 2004 and 73,261,757 for 2003 and 2002. The Company believes that fully converted book value per share more accurately reflects the value attributable to a common share.
As expected, our mix of business changed in 2004. As always envisaged we did not renew the QQS programs in 2004 and increased the level of Other Specialty business, consisting mainly of increases in casualty business and other miscellaneous classes of business. Consistent with 2003, for the three syndicates we did reinsure in 2003 and 2002, we negotiated substantial other reinsurance contracts for 2004 to partially replace the reduction in QQS premium in 2003 and the non-renewed QQS premium income in 2004.
The Property Catastrophe category has shown a slight increase in gross premiums written during the year ended December 31, 2004 as compared to the same period in 2003 mainly due to an increase in reinstatement premiums written as a result of the catastrophes which occurred during the third quarter of 2004. Offsetting this increase was a decrease due to the reduction in premium rate levels as discussed elsewhere.
As expected, we did not write QQS business for the 2004 underwriting year and as a result the gross premiums written for this category decreased as compared to the same period in 2003. The QQS gross premiums written in 2004 related to adjustments in estimates made to the 2003 and 2002 underwriting years mainly as a result of the movement in foreign exchange rates. We expect to commute all 2002 underwriting year contracts during the first or second quarter of 2005.
As expected, QQS gross premiums written accounted for less gross premiums written in 2003 than in 2002. Part of the reduction related to reduced premiums for the 2002 and 2003 underwriting years as during 2003 the receipt of new information indicated that the expected premiums for the QQS business for both these underwriting years was going to be lower than previous forecasts. The QQS results for both the 2002 and 2003 underwriting years are estimated on the basis of projections for the respective years supplied by the underlying syndicates, adjusted for actual reported results from the underlying syndicates.
The January 2005 renewal season saw increasing price deterioration and a reduced number of risks meeting our return criteria. However, while we believe pricing remains adequate on the business we have renewed, we have declined a significant number of programs in all categories where we believe pricing was inadequate. As a result, the January renewal season showed an initial reduction in our estimated premium income of approximately 20% by comparison to the same time last year. This will be reflected in our results for the first quarter of 2005 and is not necessarily indicative of our expectations of our level of gross premium income for 2005 as a whole. The final number will depend significantly upon the outcome of the opportunities we see for the renewal of the Japanese treaty accounts in April and the Florida programs in June, and, of course, any significant loss activity during 2005. As it currently stands we estimate our overall gross premium income for 2005 will be lower by at least 10% as compared to 2004 and perhaps more if as the year develops we find that we do not like the way the market rates are trending. We continue to believe that superior long-term returns for shareholders will be driven by disciplined underwriting through the cycle.
to the catastrophes which occurred during the third quarter of 2004. There was also a slight increase during 2004 in the amount of inuring reinsurance recorded as part of our reinsurance arrangements with certain ceding companies. For both the 2004 and 2003 years we have purchased reinsurance protecting ourselves against large risk losses on our direct and facultative book and small to medium-size catastrophes on our overall property writings. Excluding storm related reinsurance premiums ceded, we anticipate that reinsurance premiums ceded will rise slightly in 2005.
Net premiums earned increased in each of the three years ended December 31, 2004, 2003 and 2002 mainly due to the increase in premiums written for the majority of our lines of business in the current and prior year. Net premiums earned have also increased due to the acceleration of earned premiums related to certain policies affected by the catastrophes which occurred during the third quarter of 2004. We also earned a portion of the reinstatement premiums written and ceded related to the third quarter catastrophes. Offsetting these increases is a decrease in net earned premium as a result of the earning of the additional reinsurance purchased during the year. Net premiums earned increased by approximately $13.1 million as result of the effect of the third quarter catastrophes.
Net premiums earned are expected to decrease in 2005 due to the expected decline in gross and net premiums written during 2005 as discussed above.
The nature of our business means that loss ratios can vary widely from period to period depending on the occurrence and severity of natural and man-made catastrophes. During the year ended December 31, 2004, we incurred estimated gross and net losses of $369.6 million and $283.8 million, respectively, from four U.S. hurricanes, two Japanese typhoons, and the tsunami which occurred in southeast Asia in December 2004.
Net loss and loss adjustment expenses were $404.9 million, $164.1 million and $133.3 million for the years ended December 31, 2004, 2003 and 2002, respectively. Reinsurance recoveries of $88.5 million, $(8.4) million and $16.7 million were netted against loss and loss adjustment expenses for the years ended December 31, 2004, 2003 and 2002, respectively. Approximately 97% of the reinsurance recoveries for 2004 relates to the hurricanes and typhoons which occurred during the third quarter. The remainder relates to QQS business. Reinsurance recoveries for the years ended December 31, 2003 and 2002 related to QQS only. Based on additional information received from the syndicates, we reduced our estimated recovery ratio on reinsurance purchased by the QQS syndicates which resulted in the negative reinsurance recovery amount for the year ended December 31, 2003. We paid net losses of $192.0 million, $53.2 million and $4.2 million for the years ended December 31, 2004, 2003 and 2002, respectively. The majority of the increase in paid losses during 2004 as compared to 2003 related to payments made for the hurricane losses as discussed above. In addition, excluding the 2004 catastrophes, net paid losses have increased each year as our book of business has matured and we make claim payments related to multiple underwriting years. We expect that our paid losses will be higher than average during the first six months of 2005 as we continue to pay claims related to the 2004 catastrophes. At December 31, 2004 approximately 43% of our gross reserves related to the third quarter catastrophes.
The overall gross loss ratio for the year ended December 31, 2002 was 41.0%.
ratio projections for both the 2002 and the 2003 underwriting years. The third quarter catastrophes are expected to have minimal impact on the QQS business since these contracts were not renewed for the 2004 underwriting year.
The following tables set forth a reconciliation of our gross and net loss and loss adjustment expense reserves by line of business for the year ended December 31, 2004 ($ in millions):
The favorable development during the year ended December 31, 2004 of losses incurred during prior accident years primarily resulted from the following:
• In the Property Specialty Category, both the frequency and severity of reported losses have been lower than the assumed reporting pattern of losses established for this class of business at December 31, 2003. Many of the proportional contracts have continued to have little or no reported loss activity on the 2002 and 2003 accident years. Reported losses on 2002 and 2003 occurrences for our Property Facultative book of business decreased by $4.3 million during the year ended December 31, 2004. As these years develop, we place more weight in the reserving process on the actual loss experience compared with the initial loss ratio expectation. The low level of reported losses for 2002 and 2003 and the increasing weight on the actual experience have led to the reduction in the ultimate loss projection of $54.1 million during 2004.
• The lack of development in the year ended December 31, 2004, combined with the increasing weight placed on our actual experience in selecting a loss ratio, led to a decrease in our projected loss ratio attributable to the Other Specialty business during 2004. Claim frequency has been very low for these classes of business. In addition, we have given more weight to the actual loss experience compared to the initial expected loss ratios in our reserving process, resulting in reduced projections for 2002 and 2003. The lower selected loss ratios have resulted in a reduction of $15.3 million in net loss and loss adjustment expense reserves for our Other Specialty business.
• Due to the potential variability in ultimate premiums and the limited availability of underlying loss information with the QQS business, our actuaries selected an expected loss ratio based on a review of the information supplied by cedants and applied it to projected premiums. During the year ended December 31, 2004, we reduced our expected gross loss ratio based on information provided by ceding companies, which resulted in a reduction of $11.0 million in gross loss and loss adjustment expense reserves. This was largely due to decreases in the loss ratio estimates provided by the syndicates. Taking into account the effect of reinsurance purchased by the QQS syndicates with respect to the contracts in which we participate, our net loss and loss adjustment expense reserves decreased by $10.4 million for the year ended December 31, 2004. The development of ultimate loss ratios for the 2002 and 2003 underwriting years on QQS contracts continue to improve and we expect to commute the 2002 QQS contracts during the first quarter of 2005.
The following are management’s best estimate of a range of likely outcomes around their best estimate of gross and net loss and loss adjustment expense reserves by line of business ($ in millions):
Net loss and loss adjustment expense reserves at December 31, 2004
Profit commission expensed was $7.6 million, $19.6 million, and $1.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. Profit commission has declined substantially as compared to the same period in 2003 mainly due to the increase in loss and loss adjustment expenses related to the third quarter of 2004 catastrophes. The accrual for profit commission increased in 2003 as compared to 2002 as a result of favorable loss experience. Profit commission will fluctuate as our estimate of loss and loss adjustment expense reserves fluctuates.
For the year ended December 31, 2004, the performance unit plan (“PUP”) expense included in current and deferred incentive compensation was higher than the same period in 2003 as a result of a combination of factors. The factors that affect the calculation of the PUP expense in 2004 consist of a decrease in the harvest ratio used in calculating the expense for the 2002-2004 performance period from 137.5% at December 31, 2003 to 132.0% at December 31, 2004. This reduction resulted mainly from the effect of the third quarter of 2004 catastrophes, the effect of which was partially offset by an increase in our share price which includes an adjustment for any dividends paid out during the performance period from 2003 to 2004. For the 2003-2005
The current and deferred incentive compensation expense was higher in 2003 as compared to 2002 as the 2003 year included an accrual for both the 2002-2004 and the 2003-2005 performance periods as well as the fact that the share price at December 31, 2003 was significantly higher than at December 31, 2002. As our results evolve, we may need to increase or decrease our harvest ratio used in the expense calculation which could either reduce or increase the PUP expense.
We anticipate that our general and administrative expense ratio will increase during 2005 as we expect our general and administrative expenses to be at a similar level to 2004 but anticipate that our earned premium will decline as discussed above in the gross premiums written section.
The fair value of share options expense has decreased from 2002 to 2004 as a portion of the outstanding share options became fully vested and expensed.
Based on the weighted average monthly investments held, and including net unrealized gains of $1.3 million, $18.1 million and $33.6 million for the years ended December 31, 2004, 2003 and 2002, respectively, the total investment return was 3.3%, 4.0%, and 7.0%, respectively. In 2004, as expected, our investment income has increased as a result of our larger investment portfolio, but has been offset somewhat by the higher level of paid claims during the year related to the catastrophes that occurred during the third quarter of 2004. Net paid claims were $192.0 million in 2004 as compared to $53.2 million in 2003. During 2005 we expect to pay substantial additional claims related to the catastrophes and, as such, the portfolio may shrink which may lead to minimal growth or a reduction in net investment income for 2005. In addition, the level of the investment portfolio and related investment income will be affected by the special dividend we declared on February 25, 2005 of approximately $390.0 million, any catastrophes which could occur during 2005 and by other capital management initiatives enacted.
Proceeds from sales of available for sale securities for the years ended December 31, 2004, 2003 and 2002 were $1.1 billion, $1.3 billion and $1.2 billion, respectively. Gross realized losses in 2004 included a loss of $0.1 million relating to an equity security for a decline in value considered to be other than temporary. There were no such losses realized during 2003 or 2002. The aggregate fair value of securities in an unrealized loss position was $1.4 billion and $397.2 million at December 31, 2004 and 2003, respectively. Of the gross
The performance results of our fixed maturity portfolio, with a comparison to the Lehman Brothers Government/Credit 1-5 Year Index combined with the 1-3 month Treasury Bill rate, for the year ended December 31, 2004 was as follows:
We paid interest expense during the year ended December 31, 2004 of $15.8 million related to the Senior Notes. We expect to pay the same amount of interest in 2005 related to the Senior Notes as they bear a fixed interest rate of 6.125%. We paid interest expense during the years ended December 31, 2003 and 2002 of $2.8 million and $3.5 million, respectively, which related to the term loan facility and revolving loan facility only. The term loan facility and revolving credit facility were repaid and terminated during 2003.
Our shareholders’ equity at December 31, 2004 was $1,751.9 million, of which $585.0 million was retained earnings. Our capital base has increased by $94.2 million since December 31, 2003 as our retained earnings have increased by more than the dividends paid and net repurchases of our common shares. Our contractual obligations and commitments are set out below as at December 31, 2004.
On August 4, 2003, we issued $250.0 million aggregate principal amount of senior unsecured debt (the “Senior Notes”) at an issue price of 99.517% of their principal amount. The net proceeds were used to repay a term loan facility with the remainder used for general corporate purposes. The Senior Notes bear interest at a rate of 6.125%, payable semi-annually in arrears on February 15 and August 15 of each year. Unless previously redeemed, the Senior Notes will mature on August 15, 2013. We may redeem the Senior Notes at any time and from time to time, in whole or in part, at a “make-whole” redemption price. The Senior Notes do not contain any covenants regarding financial ratios or specified levels of net worth or liquidity to which we must adhere.
the potential future sale of up to $500.0 million of debt, trust preferred and/or equity securities. The registration statement was declared effective and should provide us with significant flexibility with respect to our access to the public capital markets. Also included in the registration statement were 31,665,460 common shares which may be offered for sale by our shareholders. We will not receive any proceeds from sales by our shareholders but may have to pay related expenses. We cannot assure you that additional financing under the universal shelf registration statement or elsewhere will be available at terms acceptable to us.
Effective December 23, 2004, Montpelier Re entered into a $50.0 million Letter of Credit Reimbursement and Pledge Agreement with HSBC Bank USA, National Association. The agreement is a one year secured facility that allows Montpelier Re to issue up to $50.0 million in letters of credit. The agreement’s covenants are
We expect these letter of credit facilities to be sufficient to support Montpelier Re’s estimated obligations for the next 12 months in the absence of a very major catastrophe. The Letter of Credit Facility Agreements contain covenants that limit our and Montpelier Re’s ability, among other things, to grant liens on their assets, sell assets, merge or consolidate. The Letter of Credit Facility Agreements also require us to maintain specific financial ratios and Montpelier Re to maintain certain credit ratings. If we or Montpelier Re fails to comply with these covenants or meet these financial ratios, the lenders could declare a default and begin exercising remedies against the collateral, Montpelier Re would not be able to request the issuance of additional letters of credit and we would not be able to borrow under the revolving line of credit. For the year ended December 31, 2004 we were in compliance with all covenants.
Montpelier Re is registered under The Insurance Act 1978 (Bermuda), Amendments Thereto and Related Regulations (the “Act”). Under the Act, Montpelier Re is required annually to prepare and file Statutory Financial Statements and a Statutory Financial Return. The Act also requires Montpelier Re to meet minimum solvency requirements. For the years ended December 31, 2004 and 2003, Montpelier Re satisfied these requirements.
Because a significant portion of our contracts provide short-tail reinsurance coverage for damages resulting mainly from natural and man-made catastrophes, we could become liable for a significant amount of losses on short notice. Accordingly, we have structured our investment portfolio to preserve capital and provide us with a high level of liquidity, which means that the large majority of our investment portfolio contains shorter term fixed maturity investments, such as U.S. government and agency bonds, U.S. government-sponsored corporate debt securities and mortgage-backed and asset-backed securities.
The market value of our portfolio of fixed maturity investments at December 31, 2004 comprises U.S. government securities (17.7%), Non U.S. government securities (0.9%), U.S. government-sponsored enterprises securities (41.0%), corporate debt securities (31.0%) and mortgage-backed and asset-backed securities (9.4%). All of the fixed maturity investments we currently hold were publicly traded at December 31, 2004. Based on the weighted average monthly investments held, and including net unrealized gains, our total return on investments for the year ended December 31, 2004 was 3.3%. This return was partially due to the unrealized gain on our investment in Aspen at December 31, 2004 of $13.7 million. The average duration of our invested asset portfolio was 2.2 years and the average rating of the portfolio was AA+ at December 31, 2004. If the right
conditions arise in 2005, we may deploy further capital in strategic investments or investment classes other than existing classes.
We have an investment in the common shares of Aspen Insurance Holdings Limited (“Aspen”), a Bermuda -based holding company of Aspen Insurance UK Limited (“Aspen Re”). At December 31, 2004, we owned 4.0 million shares of Aspen, which represented approximately 5.8% of Aspen on an undiluted basis. Aspen completed their initial public offering on December 4, 2003. Our investment in Aspen is carried at quoted market value at December 31, 2004. At December 31, 2003 the shareholders agreement and other restrictions presented significant obstacles and uncertainties in the determination of the number of shares that could be reasonably expected to qualify for sale within one year. As a result of this illiquidity, at December 31, 2003 a portion of the total investment was considered restricted and was discounted. The aggregate unrealized gain is included in accumulated other comprehensive income. On February 3, 2005, the Company sold 1.5 million of its Aspen shares at $24.80 per common share for total proceeds of $37.2 million, realizing a gain of $14.4 million. The Company currently owns 2.5 million shares, or approximately 3.6% of Aspen.
We have written certain business that has loss experience generally characterized as having low frequency and high severity. This may result in volatility in both our results of operations and operational cash flows. The potential for a large claim under one of our insurance or reinsurance contracts means that substantial and unpredictable payments may need to be made within relatively short periods of time. As a result, cash flows from operating activities may fluctuate, perhaps significantly, between individual quarters and years.
For the period from inception until December 31, 2004, we have had sufficient cash flow from operations to meet our liquidity requirements. We have generated cash flows from operations since our inception significantly in excess of our operating commitments. To the extent that capital is not utilized in our reinsurance operations we have used such capital to invest in new opportunities and returned additional capital to shareholders in the form of dividends or share repurchases under certain circumstances. As announced on February 25, 2005, we will return approximately $390.0 million of capital to shareholders and warrant holders by way of a special dividend to be paid on March 31, 2005 to shareholders of record as of March 15, 2005. We may take similar measures in the future.