Q4 2019 Earnings Call

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Good afternoon, ladies and gentlemen and welcome to campers fourth quarter 2019 earnings conference call. My name is Shawn and I will be your coordinator today at this time. All participants are in a listen-only mode later. We will conduct a question-and-answer session and instructions will follow at that time. As a reminder. The conference call is being recorded for replay purposes. I would now like to introduce your host for today's conference call Christine Patrick tempers vice president of investor relations. This is Patrick wage in

Thank you Shawn.

Good afternoon, everyone and welcome to campers discussion of our fourth quarter 2019 results this afternoon. You'll hear from Joe Locker tempers president and Chief Executive Officer. Jim McKinney temperature vice president and Chief Financial Officer and Dwayne Sanders campers Executive Vice President and the Property and Casualty division president will make a few opening remarks to provide context around our fourth-quarter and full-year results and then open up the call for a question-and-answer session during the interactive portion of the call. Our presenters will be joined by John de Chelly campers Executive Vice President and chief investment officer and Mark Greene mobile device president and life and health division presidents after the markets close this afternoon. We issued our earnings release and published our fourth quarter earnings presentation and financial supplements. We intend to file our form 10-K with the SEC on or about February 13th. You can find these documents on the investors section of our website at Kemper our discussion today may contain forward-looking statements are a club.

results May differ materially from these

Statements for information on potential risks associated with relying on forward-looking statements. Please refer to our 2018 form 10-K as well as our fourth quarter 2019 earnings release Thursday afternoon's discussion also includes non-gaap Financial measures that we believe are meaningful to investors one such measure that I would like to highlight again is as adjusted for acquisition. It is clearly important to understand our reported results including the impact. The infinity acquisition has to Kemper overall. However investors have also expressed an interest in understanding the underlying organic performance of the combined businesses sick as reported financials don't include infiniti's historical information prior to the closing of the acquisition and our current results include the impact of purchase accounting. The underlying Trends are not easily visible in an effort to provide insight into the underlying performance of the combined businesses. We also display our financials as adjusted for acquisition. This view removes the impact of purchase accounting and includes historical Infinity information.

for periods prior to the closing of the a quiz

Some more easily provide a meaningful year-over-year comparison and our financial supplement presentation and earnings release. We have defined and reconciled all the non-gaap financial measures to Gap where required issue with the FEC rules. You can find each of these documents on the investors section of our website at Kemper. Finally all comparative references will be to the corresponding 2018. Unless otherwise stated I'll now turn the call over to jail. Thank you Christine. Good afternoon everyone and thanks for joining us today. I'll start my comments referencing page four of our presentation took a reviewer results. I'd like to touch on a few recent developments. We're pleased the two rating agencies have recently recognized Kemper for our improved performance strong capitalization and risk management capabilities, as well as the success of the Infiniti acquisition such upgraded our key financial strength rating to a and the holding company senior debt ratings to triple-b while and best revised our Outlook to positive from stable job.

And reaffirmed our a minus rating.

Last week we announced a 7% or $0.02 per share increase over the previous quarter's dividend. The increase is another demonstration of the strength of our business model in addition last month announced that our board of directors has elected Jerry lanterman as a director effective February 20th, Jerry currently serves as the Chief Financial Officer and Executive Vice President of United Airlines has experience and financial expertise complements our current board and will be an asset to the company as we continue to grow. Our entire temper team looks forward to working with him.

Now let's turn to a discussion of our results.

We operate a portfolio of specialty businesses utilize a wide range of both financial and non-financial metrics to measure our performance often when talking to investors. We get questions about how to evaluate potential success of the company. I wish it could be as simple as just a combined ratio, but that doesn't tell the full story with this in mind. I'll highlight a few metrics that we use to manage our business and measure success. Obviously, there's not an operating income and overall growth Beyond this growth and tangible Book value return on tangible equity and cash generation, give a good indication performance of our overall business and how the long-term intrinsic value is increasing over time, more on some of these metrics in in a few moments.

Let's discuss some.

Civics on this quarter fourth quarter net income was $125 million or $129 adjusting for the acquisition of infinity which translates on a per-share basis than a dollar eighty five and a dollar ninety-two respectively growth and tangible book value per share excluding unrealized gains was 29% and we generated a return on tangible digital Equity excluding unrealized gains of 25% our ability to generate this level of return speaks to the strength and performance of our business and business model.

Burn premiums and profitability and our specialty segment remains strong which reported top-line growth of 11% and a combined ratio of 94% for the quarter recently. We've all heard pigs are described as increasing the competitive while we generally agree. It's important to know this is almost exclusively driven by the standard and preferred segment the Specialty Auto Market, we focus on a less concentrated and therefore somewhat insulated from the escalating level of competition seen nationally in the standard and preferred markets. We are outperforming our competition by better understanding our customers needs and for our increasing cost Advantage. We're producing industry-leading growth and an exceptional combined ratio. Our growth prospects remain strong. We're focused on geographies and customer segments that growing significantly faster than the US population and we expect this Focus to continue. We're using our Specialty Auto competitive advantages and our new geographies this new store opportunity if you will is dead.

Kon to further enhance our growth

To summarize we have significant competitive advantages and Specialty Auto we're concentrated in geographies and customer segments that are going faster than the overall market and our competitive advantages are allowed to expand into new geographies the combination of these three Dynamics uniquely positioned us for very attractive growth prospects and Specialty Auto for the foreseeable future.

Dwayne provide further detail in his commentary on on the aforementioned we continue to work towards improving results in our Preferred Insurance segment over the past few years. We've introduced oil changes to improve our operating performance reduce the volatility of our results and enhance the products we offer the turnaround at this business continues our life and health segments delivered another quarter of stable learning off strong cash flow and valuable diversification benefits to the overall business with that. I'll turn the call over to Jim discuss our Consolidated Financial results in more detail. Thank you Joe. Good afternoon to everyone on the call that income for the fourth quarter was $125 million versus seven million in the prior year quarter, excluding the impact of purchase accounting adjusted consolidating net income grew to $129 million. This quarter was positively impacted from a refinement of our basement which was five million after-tax benefit to our life and help business for the quarterback.

Net income was $531 Million.

More than double the hundred ninety million in the prior year, excluding the impact of purchase accounting adjusted Consolidated. Net income grew 16% to 431 million. The incorrect. Both measures is primarily driven by the continued outperformance of our Specialty Auto segment and the consistent results in our life and health segment.

On page six, we isolate the key sources of volatility in our earnings adjusting for the sources of volatility. Our underlying operating performance has increased on a year-over-year basis.

Turning to page 7 total net investment income increased 5% over the fourth quarter of 2018 to $98 million. Our investments in corporate owned life insurance or contributed 3.66 through the other income line compared with 1.3 million in the prior year. We continue to view this asset classes having attractive risk-return profile and during the quarter. We increased our investment in Kohli Assam a hundred million, the annualized book yield of the portfolio was flat on a year-over-year basis at 4.6% moving to page a returning to a point that Joe touched down there a handful of performance metrics that we track closely these include but are not limited to tangible book value per share tangible return on Equity cash generation and business growth relative to Market averages together these points reveal the efficiency of our Capital deployment decisions and intrinsic value changes.

for the year

Tangible book value per share, excluding unrealized gains was 29% return on tangible Equity excluding unrealized gains was 25% and earned premiums grew 9% these represent industry-leading returns with above Market average growth.

Looking at page nine and the upper and lower left hand corner. We present parent company liquidity and cash flow from operating activities on the right side. We present our risk-based capital and leverage ratios with greater than eight hundred million in liquidity operating cash flow of $538 million a strong Capital position and a sub 17% debt-to-capital ratio. We have substantial Financial flexibility and balance sheet strength and a low cost of capital on page ten. We're pleased to report that we've exceeded our initial and revised targets as such this will be the last time we review the financial targets. We announced with the Infiniti transaction going forward additional combination benefits will be invested in operations of business and in pricing to walk further Drive profitable growth.

to summarize

Written and earned premiums are more than two hundred and fifty million and 230 million respectively above-target our total synergies, which includes cost savings and yield enhancement is above 8,000 targets of seventy-five to eighty five million. We have operating earnings accretion of over 20% The Infiniti acquisition has clearly been a success showing have talked for many quarters about the significant strategic value and the positive impact. This has had on our customers as the financial metrics above highlight. This is also been a home run out for both companies shareholders.

In closing we are well-positioned to continue to deliver strong intrinsic value growth to shareholders and to meet our customer needs with that. I'll now turn the call over to Dwayne to discuss the results of our P&C segments.

Thank you, Jim and good afternoon. Everyone. Let's begin with the specialty segment on page eleven the specialty segments delivered another impressive quarter highlighted by strong growth and returns home segment income of 62 million reflected earn premiums increasing to eight hundred million up 11% from the prior-year quarter with an as adjusted underlying combined ratio of ninety-three page at the expense ratio reflects an increase in commission expense as the company sees on an opportunity to profitably capture and expand agent relationships a portion of his benefit may be seen in the acceleration of this quarter's premium and piss growth for the full-year segment income of 283 million and an adjusted underlying combined ratio of 92% off line with the prior year and the nine months number reported in the third quarter adjusting for the acquisition of Infiniti earned premiums increased 12% policies enforced. Yep.

Is 9% as we continue to take advantage?

Opportunities in both existing and expanding geographies referring to the chart on the upper right-hand side of the page. You'll note that we Target geographies and segments of the market wage would have an average growth rate above the overall US population in California. Our largest state. We grew written premiums 8% over the past year that significantly exceeds the state wage population growth rate in Florida and Texas premium growth has accelerated to 13% Also well, in excess of the population growth rate Although our market share outside of California remains small our groceries significant and accelerating also worth noting our specialty segment has a significant focus on the Hispanic market. The Hispanic population is expected to grow at a rate almost three times that of the overall population.

These factors combined to form a set of Tailwind that we expect to continue to drive industry-leading growth and operating performance.

Turning to the preferred segment on page twelve segment income was $13 for the quarter with an underlying combined ratio of 97% versus income of six billion with an underlying combined ratio of ninety-seven or excuse me, ninety-five in the year-ago quarter for the full-year segment income was $42 million, but then underline combined ratio of $95 versus income of $26 with an update and combined ratio of 94 and 2018 segment income increased due to fewer cat losses and favorable prior-year development. The underlying combined ratio deteriorated by 1.5. While the broad repositioning of this business is largely on track the short-term Financial results were hindered by Texas and New York Prime new business the early fourth quarter of 2019. And how long did non cat large losses in home turning to reinsurance. The market is seen as challenges and pricing pressure. We are pleased that on January 1st. We renewed our catastrophe in, New Jersey.

shower and aggregate coverage with

Inconsequential rate increase and no significant changes to terms while we are not where we want to be in the business. We continue to make strides in reducing earnings volatility and positioning this segment to reach our profit Thursday goals and I'll turn the call back to Jim. Thank you Dewayne turning to our life and health results on page thirteen for the fourth quarter the segment produced $29 income and ninety nine million of income for the full year the full results your results benefited from some discreet CI adjustments in 2019. Earn premiums grew 50% This is a distinct change from a long history of declining premiums. We're optimistic about our ability to further grow this business profitably this segment is cord to the success of the organization the diversification benefits from the combination of life and continue to provide significant strategic value to enhance Capital efficiency with that. I'll turn the call back to Joe for closing remarks dead.

I'd like to thank the ongoing effort to the entire Kemper team the passion and ownership of our employees that our employees have for what they do is delivering outstanding value to our customers or shareholders and took over all now I'll turn the call back to the operator to take your questions. Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 month touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star then to our first question will come from Greg Peters with Raymond James, please go ahead good afternoon a couple of questions for you. First of all on slide eleven. I was looking at your growth by state or region.

Thanks.

And I was struck by the expansion States and the substantial growth there. Can you give us some more color about just how it's going outside of California? Obviously, including some comments on Florida and Texas cuz we're hearing about some other competitors reporting challenges in Florida in particular. So any perspective there would be helpful.

Yeah, Dwayne and I'll tag team a little bit Greg and and I'll ask Duane to just order to go into a little more more perspective on an individual states wage. What I tell you overall is when we look at those expansion States, they're obviously coming off a modest base. So so premium broke percentage becomes very large. We're finding that those are states where we we believed we could very thoughtfully enter enter the geographies. We thought our existing cost advantages provided a buffer for us and we thought that we had a sufficient Knowledge from other geographies that we could apply in those geographies. That would let us, you know, the good starting point from a product in a pricing perspective. So we feel great about um, you know in South Florida in particular we heard similar similar competitive challenges in the environment. There was one carrier out there Windhaven who had some some meaningful problem.

Actually his shut down their new business and is pushing a chunk of that into the market much like we saw.

Access a couple of years ago and candidly. We've been a little bit more aggressive in the marketplace because we feel good about it and we have great results and we think we've got a competitive Advantage there. So you may be feeling some folks are hearing some folks with with our weight being moved in the market.

Yeah, I don't this is Duane and Gregg. I don't know that I'd had a lot of additional color on it that other than as Joe mentioned we've been you know kind of in these spaces are in these states for a period of time. We've got to where he's got a fairly strong, you know understanding of what's going on. I do agree in particular in Florida. There's been some slips by some of the competition and you know, we've been able to take advantage of that and and and position our thoughts are offering accordingly and and and you know, we're you know, also, you know, in other states, you know where we've got a presence and we're continuing to push on on place where we've got where we feel like we've got some drove opportunity and we continue to you know to take advantage of that. So I you know, we're watching this particular the Florida and the Texas for the obvious reasons, but we're we're feeling pretty good about Thursday. We are we're we're going excellent answer thank you for the color there. Can I pivot to I think in the appendix page twenty-six and twenty-five. Just wanted Dead.

Spend a minute, and I know you talked a little bit about this and the prepared comments just about the trends.

The underlying combined ratio. I think you called out for for example, a hundred basis point hit to the expenses for a one-time agent relationship situation. Can you give us an idea of how you know, if I look at the the the quarter for the fourth quarter results relative to the year over your comparison how I should be thinking about this as I looked at twenty twenty.

You know great great question. Let me start by saying, you know top side. I would look at essentially our you know, our full-year results when you're trying to forecast and kind of think about what are maybe some of the expense metrics or others that you might model us out on similar to the way think about what would be the starting price for an annual loss pick that you might be triangulating off of us if you look at last quarter and I'll give an example, you know, we are lost picked for the year for the cable came down and the net result of that is while we see a similar loss pick right for the fourth quarter and for the third quarter from a year perspective, you should see a little bit of volatility from a quarter perspective. So no change there. Those are basically the same numbers from a loss perspective in terms of what's going through that business wage.

in terms of the expenses we had a

Great opportunity both with Windhaven and some others to take advantage of a market opportunity to further cement some relationships with some agents this quarter and a little bit odd last quarter and what you saw is us being in a very good profitable position with very good risk characteristics associated with those with the driver's Thursday. We could potentially acquire and you saw be a little you know, opportunistic inside this quarter and and continue to cement those relationships really not much else you kind of Point too but but happy to answer any other questions you might have on that. Well, let's be clear in 18.2% expense ratio, you know is still a well a much better than the industry averages but you know, should I look at that fourth-quarter expense ratio and sort of use that as the run-rate anticipating that this this agent, you know, the new opportunities our goal.

lead to an elevated expensive

Sure for the next couple of quarters, or was that truly that got a one-time in nature type of transaction?

No, no that it's I would describe it necessarily as one-time in nature the way I might think about that is there's opportunities like that that come out throughout the year and if we're in the right position or that we might try to essentially capture that the benefit of that will be had essentially in the 2020. So you see the expense rolling through effectively in this quarter or there's Edition, but you don't see the benefit necessarily which will essentially kind of roll out in previous quarters, which will help moderate that a little bit the second element Greg that you're seeing a little bit of a change in mix. You see really good underlying margins or you know loss ratios, but you've got a little bit of a switch in terms of just how States operate em where you know different expense ratios commission ratios might be for those. So you see a little bit of a mix change. That's there. You might think about that in, you know, Thirty forty kind of wage.

This is points there and another half point.

Three-quarters of a point as it relates to that the commission's that we talked about those things are going to kind of Evan flow a little bit as again the opportunity to present themselves and has wage, um, you know kind of the mix shifts a little bit here there but overall I might think about a very strong margin in a you know, really having a lot of benefits and great momentum going forward is the thing the thing that if I can a little bit Greg and I agree one hundred percent with with what Jim said clearly about the mix. I know you're looking at page twenty-five and it was one you pointed out you're you're picking on the fourth quarter number part of the reason we pointed you to think about the full-year look at the third quarter number that was a little low, you know in in a little bit of some of the expense peace and in some of the if it's it's much more clear and lost pieces where you might get some entry your developer know that my car those issues but that's part of the reason Jim was pointing you towards towards more of a full-year number when you were thinking about modeling going forward.

Got it. That makes sense the final question and I'll just pivot back to I guess it's slides 16 of your presentation can and given the success you've had within 15 property casually, can you give us?

And and you're you're obviously very well-capitalized at the moment. Can you give us a sense of what the m&a environment looks like? You know, I I give the same answer all the time it Greg. It's like my college dating career. Just cuz somebody wanted to I want to go out with somebody to me and want to go out with me. You know, we we see what what happens when it happens there.

You know, we never have any specific comments on on anything cuz it's just not it's not productive. Okay fair enough. Thanks for answers. Hey Greg, if I could just maybe God no one element to that and when we think about the business as a whole and you've heard us say this many times, but for the benefit of the collective group as it relates them in a it would have to be something that needs better. Right? We're we're not striving to be bigger for the sake of being bigger. We've got really good scale. We've got great organic growth opportunities that are behind us. There's nothing provides or pushes us for pressure to need to do something. So from that front, it's great that we've really strong balance sheets allowing us to continue to invest in the organic growth to capture those opportunities. We're going to continue to be focused on making sure that we can capture those opportunities and if something like an Infiniti or that were to come along that makes great sense for girls

besides customers and our shareholders other things we've I think that

And traded the capabilities that we can execute and we have the balance sheet that liquidity and the capital generation to be able to take advantage of that. But at that same point in time our first and foremost concern is making sure that we make good decisions both for our shareholders and our our customers and we're we're in a really good position with what we have right now to continue to build off of that month. We start with that bias that we're going to build sustainable competitive advantages in each of the businesses where in and allow us to better serve our customers and grow organically if something else happens, that's great. But otherwise, we think we can deliver great results for for shareholders and customers doing what we're doing.

Got it. Thank you.

Our next question will come from Paula Newsome with Piper Sandler, please go ahead.

Good afternoon. Congratulations on the quarter. I wanted to ask a little bit more about the preferred segments. Do you need a market change of our special Standard Market to to turn the combined ratio around or under leverage there that you could talk about that you think would move it. We were having a little trouble hearing the first part of your question. I know it was about about preferred and and I missed the first sentence after that. I apologize One Day asked if you need to change in the Standard Market to to move the preferred underlying combined ratio to a better position or if there if you can talk about some other levers their wage according to 2020 about potentially improving profitability with

so your your question was do we need something to change in the

Marketplace or do we have enough leverage ourselves?

That's exactly right. Okay. Yeah, and I apologize. It's probably something on our side Paul cuz you're doing it where we just struggling with your line. So, I'm sure it's on our end. Yeah, you know we talked about this this before I am business is is her us. Anyway a modest-sized business which creates a challenge for us relative some of the bigger competitors. We think we have a couple of opportunities there with a lot of the work we're doing inside of our claim environment to strengthen our capability and Specialty Auto actually helps us inside of the preferred space there clears is a segment of that of that business and and there's clean population has higher limits and we have a specialized team that works on that but the lower limits the metal coverages wage pieces of that the strength were building and our Specialty Auto actually well will provide us some lift and some benefit on that side that which will help us out.

We get benefits similarly from the analytics we get benefits as we're growing.

The business overall literally just spreading spreading fixed costs for the organization actually helps reduce some of the expense pressure pressure inside of that business. So those are those are owned by being part of the portfolio are helping that business. So we see opportunities there. We've got a a very thoughtful team who's working on in many ways what our base blocking and tackling pricing underwriting agency management capabilities what I think's important to notice in that business and one of the things we're we're fairly proud of em, if you back up three years ago four years ago, there was a lot more earnings volatility in that business. We had we saw a lot of CAD volatility. We improved the margins in the business office in we use some of that margin Improvement to buy an aggregate catastrophe treaty when you buy that that immediately takes premium out of the the top line and it actually puts pressure on them.

Shoreline combined ratio cuz the premium goes away and underlying combined ratio doesn't include cats. So that appears to be an underlying combined ratio pressure all of the benefits that we spend that way and it took dramatically reduced the earnings volatility inside of that business. So that is a huge risk reward return benefit to shareholders and we feel that's easy to miss it. If all you're looking at his underlying combined ratio, but it's a big plus inside of the business. So we think we can continue to March forward. We had a little bit of a challenge inside of that business name last 12 months. We we had rolled out our Prime new business products. It had rolled out in particular in Texas in New York and and had a few age challenges in the underlying pricing. We generated some growth there and have a little temperature on the loss ratio. We we expect a new business penalty to run through there. It was running hot bath.

Normally should we have shut off the things that were causing?

Problem, but it's got to work its way through the book and it's got to work its way thru renewals. It's definitely one that's got us a little irritated internally that it was there. It's not entirely surprising with the new product but we seen it we stopped it were applying the measurement or the the the medication the fix it but it's going to take you know, the 12 months. They would normally take on a book like that to Thursday through the renewals, but we're highly confident with it identified and the new business it was causing the problem stopped that it will it will improve

I'll make sense.

My second question is about today that seems to be replaced and seems to be the topic of the quarter. Could you just broadly talk about what you folks or seeing your various businesses with respect to severity increases obviously. It's not the biggest deal for short tail lines, but I'm sure the data point would be helpful to all of us off. Yeah, you know, we're we're seeing a little bit of some of the things people people talk about Paul, but just not not in a way that would cause us to have raised them up as a topic wage. Um, and and I don't know what what's the exact cause of that we do have shorter tail lines of business. We have a meaningfully lower limits profile in general our customers, perhaps wage tend to to have a little less economic wherewithal so perhaps they're not the same the same targets. I'm not sure if that's in fact the case. We're we're just you know, we're dead.

modest inflation in different spots, but as as we look across every

Line of Auto and property, you know sub lines whether it's Collision or comprehensive or or bi or you know every piece it's it's not something that that we would have called out and said, you know, it's it's really important to put in front of you and worthy of note it it's you know, we're we're consciously watching for it cuz we here everybody else talking about it, Um,

but but again, nothing that we would have raised our hand to push towards the Forefront.

Thank you very much. Appreciate it.

As a reminder, if you would like to ask a question, please press * then 1 hour. Next question will come from Seth Rosenberg with UBS, please go ahead. Hey, thanks guys. In fact that's on the quarter Circle back on the on the comments around Windhaven and you know thinking back to when you when you benefit from access it was it was a relatively kind of like pick up and premiums. I guess given the nature of non-standard Auto. Is that something that you know, we should be thinking about in numbers for the next couple of quarters. Yes. Maybe you could you size that a little bit off.

Yeah, this is Dwayne.

So, you know, I I think you're thinking about it. Similarly, you know actions really started taking place late last year then November timeframe. So we started seeing the volume come in, it'll continue to come in. There was a I think a call to action on their part by February 5th in terms of where they had to get off policies. So that business will find its way into the marketplace, you know over the next five days and then it'll start to yeah one to two quarters at most I would say and you know, we'll continue to manage, you know to it and and and watch it but I think the way thinking about it would be would would would be correct and then you know, we're we're being as responsive as we can.

Gotcha, great. And then from a strategic standpoint, I think you know there someone that you probably Benchmark yourselves against in the state the absence of having them there. Does that give me a change the competitive landscape in Florida?

Yeah, your questions that is you know about Windhaven specifically. Yeah the absence of them in that market. I mean, does that give more money pricing power to you over time in Florida? I think what we we've seen in in in across most geographies is there's a reasonable level of competitiveness. What what we found with with Jeff from California. What we found was Windhaven in Florida was they might have been a little irrational in terms of what they were doing and and we're sort of spoiling the pool for everybody and said you had to be disciplined to not chase some some folks may have chased them and that may give them a little bit of a temperature if that was in fact the case they're going to have to fix that but you know, we we think it's still a competitive environment. It's just perhaps more rationally competitive and you know candidly from our perspective. Um, we were we were growing our business. Yep.

Were doing a nice job at very attractive margins enough. So

That we were becoming, you know, increasingly competitive and and taking them out or them taking themselves out. We think is is an opportunity opportunity that the discipline.

Got it. That's helpful. And then so you renewed the reinsurance treaty for next year. It looks like there's no major changes could just highlight if there are any changes we should be aware of and wage. Is there is there a change in the cost of the program? Yeah happy to no real major change in the overall cost of the program one thing that you'll kind of see in terms of the appendix slide that's in there basically are firing contents business that is inside kind of our life and health distribution channel is also covered this year through the aggregate treaty again, not overly material to note that we think it's a nice thing to add in there that'll further dampen volatility the very marginally wage um, and you know, nothing other than that to note.

fifth grade and then

If I could just get one on the life side, you know, I think one Q is usually when you have the impact from from flu season if there's going to be one it based on what you've seen so far is this a normal flu season or or maybe better or worse than you know, otherwise expect I would love to tell you set that the 1/4 we we had volatility was only the first quarter. We usually bring one in a rolling 4-quarter basis, if not always the first so so we may may see it sometimes in the you know, sometimes the four sometimes it's the first sometimes it's a flu season. So it rolls into the second. So there there's a little bit of a little bit of noise in terms of where it's slides. We're not seeing anything right now that suggest anything extraordinarily out of pattern with what we what we normally expect, you know, if anything a minus minor elevation, but nothing that that we'd be sort of calling out to Telegraph

Got it. Okay. Thanks for grabbing the corner.

Again, if you would like to ask a question, please press * then 1 hour. Next question will come from Gary Ransom with dialing and partners, please go ahead good afternoon. I'm curious whether you think there's any correlation between some of the economic Trends whether it's low unemployment with any aspects of your specialty business, whether wage pretensions are low unemployment. People are keeping their insurance longer, you know, if they're a little bit different what you detect on fraud and I'm just interested in anything you have to say on that topic.

Yeah Gary there.

I'm certain that there are economic correlations to some of the trends we see underneath the example of giving me talked about a lot is that that when you see the co-signing unemployment or more people getting jobs, they're more people on the road. They have more disposable income. There's more miles driven and it usually has a cause it's an up taking frequency. Right? So so we got the good example of of where we see it. I know there are other underlying components that we see some of them. I'm sure there's more than we see there's a number that we see that we we feel a little more comfortable keeping to ourselves and working into our pricing and our underwriting and our claim settlement processes because I think that helps us be more effective in the marketplace a.m. And we're constantly looking and exploring for more opportunities to give us that that insight and perhaps that edge you doing a better job of serving our customers and being more thoughtful about how we price and under eight our business hour.

Thanks.

It one thing I might add just from a standpoint Gary of kind of relevance. At least at the

Stage in our journey. I think what you're seeing is and if you just look at last quarter and kind of the increasing growth that we had again for the second quarter of row relative to piss in or premium package. I think the actions in the decisions that were making as a business in the way. They're playing our probably a bigger influence of our end outcomes right now than some of the additional kind of macrolife metal macro elements is that not a probably won't always be the case. But at this stage, I think we're I think to get a better indication of where we're headed. You probably want to look at our what are the successes wage were having and and what are we doing from a competitive standpoint? And I think that's going to give you a better indication of where we're headed. Yeah and depends on which one of the things you're trying to cover a hundred percent agree with Jim right now, and that's what we try to give you a little bit more the data that Dwayne was talking about our ability to be effective in the markets where in and to to expand into newer markets. It's going to be a better measure wage.

More Effectiveness over the next few years if your question was more generally, you know applied to your your whole book of busy.

Since I was kind of answering it more the way you started but I think that maybe a better way to think about us overall. Okay, that's fair. Thank you very much for that. Just the only other thing I had was just whether you had any update on the whole strategy of homeowners leading and the preferred businesses or anything more to say about success in that strategy. Yeah, we we continue Gary Volk to to work that project where we're learning more about how we're doing it. We've got a series of of you know hypotheses and things we're testing. In fact what we're doing, you know, it's it's still not something where you're going to see meaningful stuff running through the numbers in the next, you know quarter or two, but we're hopeful by the time we get to the back end of the year. We're I have a a very strong point of view about about how effective were going to be able to to, you know handle the handle that and and what we'll do marching forward.

Fair enough. Thank you very much then.

This will conclude today's question-and-answer session. I would now like to turn the conference back over to mister Locker for any closing remarks. Thank you operator and thanks everyone in the call today your time and interesting temperature. Look forward to talking with you next quarter. Thank you. The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Dead dead dead dead.