Q4 2019 Earnings Call

And Chief Financial Officer also available for the Q&A our bill Caldwell product Matt Sharp EVP distribution and Business Development Wade Rubinstein operation and rice SCP Corporate Finance before turning it over to Marita. I want to note that our presentation today includes forward-looking statements as defined in the private Securities litigation Reform Act of 1995. The company cautions investors that any forward-looking statements include risks and uncertainties and are not guarantees of future performance. These forward-looking statements are based on Management's current expectations. And we assume no obligation to update them actual results May differ materially due to a variety of factors, which are described in our news release and SEC filings in our prepared remarks. We use some non-gaap measures recommendations of these measures to the most comfortable Gap measures are available in our news release.

finally we wanted to let you

Know that we will be attending in early March. We're hoping to see many of you there that turn the call over to Marita.

Thanks Heather morning everyone and Welcome to our call last night. We reported full year 2019 earnings of $2.20 per diluted share surpassing our guidance wage. Strong results across all our business lines year of your earnings were up threefold reflecting lower catastrophe losses improved underlying profitability in the PNC bank statement without sacrificing market share better margins in the retirement business the addition of the new supplemental segment and we accomplished all of this while funding for our future wage further twenty nineteen s results show the potential of our strategic initiatives by building on our transformational work in 2020. We expanded our market research to provide Solutions off or Educators and further accelerate shareholder value creation. Brett will cover the details of our 2020 guidance later in the call at a high level. We're confident that we can

can grow our core EPS by

At least 20% over 2019 without projecting a significant increase in sales. We expect at least a full point of our we Improvement and remain focused on reaching a double-digit return on Equity over. The next few years are strong Outlook reflects the Investments. We had made over the past five years in the company's products distribution and infrastructure combined with the impact of transformational steps. We completed in 2019 the acquisition of national teachers Associates and benefit Consultants group home as well as the Legacy annuity reinsurance transaction.

Before I expand on that Outlook, let me touch on a few highlights of our operations in 2019 first. We achieved our best auto combined ratio since 2010. We not only met but exceeded our underlying Auto loss ratio goal, which was a cumulative Five Point Improvement since 2017. We actually achieved 6.6 points of improvement over the three years through a combination of underwriting initiatives and rate actions at the same time. We've been able to retain preferred policy holders in Target markets. So premiums are up modestly over the three years.

with the property

Business also profitable. We are well-positioned for the challenges facing the PNC Market we continue to work closely with agents to add new P&C business in a growing number of profitable geographies further. We're seeing tangible benefits of our infrastructure Investments. Our expense reduction initiatives successfully reduced our 2026 rating expense run rate by at least $15 related Severance costs affected fourth-quarter earnings by eight cents per share or a total of 4.1 million.

These savings include efficiency advantages do two systems upgrades. We have already made across every segment of our business and the second phase of our guide wire implementation currently underway will generate benefits in future years similar to the guide wire claim system implementation the new P&C Administration system offers substantial benefits in terms of data segmentation analysis digital capabilities, and he's abused.

the transaction

As we completed in 2019 also play an important role in our strong Outlook reinsuring the Legacy block of annuities, which had a higher crediting rate. I improved are fixed annuity interest spread despite the sustained low interest rate environment that is expected to continue through 2020 in addition to reducing the companies in a straight exposure. The transaction freed up Capital that was used to acquire the higher-margin supplemental business.

We ended 2019 with a significantly improved business mix due to both the risking of the retirement portfolio and the addition of supplemental Products off the performance of the new supplemental segment is not correlated to whether seasonality like the PNC business or to mortality risk of the life business. It is also not subject to interest rate fluctuations, like the retirement segment with it's more predictable Returns. The earning diversification is even more valuable and another three months into the integration. We remain very pleased with every aspect of the transaction.

today we have a

Full complement of solutions that address Educators unique needs in expanded agency force and modernized systems that provide the type of customer experience are Educators want and deserve considering that progress in tandem with the profitability initiatives. We've completed in 2019. It is clear that we are well-equipped to substantially increase our market share in the coming years.

In 2020, we expect to make progress on further expense energies and efficiencies as well as gaining the first benefits of aligning the supplemental Investment Portfolio with our current strategies long as we've said before these achievements are part of our path to a double-digit r o e as we look Beyond 2020 are we will benefit from additional that investment income from the supplemental portfolio as well as growth and supplemental product sales including cross-selling these two Horsemen households month.

The supplemental product line fits perfectly into our Solutions orientation aimed at helping Educators achieve lifelong financial success. There's something that we've been asked about by Educators concerned with the cost of an unexpected medical emergency or accident that it could derail their long-term savings plans before we joined forces NTA had a fifty-year history as a very successful business offering these important solutions to Educators our first objective and bringing the two companies together was to undertake a thoughtful staged approach to ensure. We're building a base of sustainable growth. I'm very pleased with what we've seen so far including the focus of the agents who achieved their sales targets for the year.

at

This stage. Most Horace Mann agents have the appropriate licensing and have been appointed by NTA so they can sell the supplemental products. We are collectively working to reinforce the training that helps them incorporate the new products into their repeatable sales processes.

Last month, we hosted our annual national sales meeting. And for the first time we brought our best Agents from both companies together with management to share best practices. It was rewarding to watch the knowledge embedded in our expanded agency Force by bringing together to such similar Mission Centric groups experienced in the same niche market. We truly are able to utilize the best of each company to achieve greater success.

Our path to a double-digit r o e relies on factors largely under our control while growth in our existing businesses offers additional potential with the addition of supplemental. Once we now have a presence in roughly half of the school locations in the country, excluding the handful of states in which Horace Mann currently does not do business. There is significant opportunity in the schools where our current presence is as low as well as those where we do not have an active presence.

Before I turn the call over.

I wanted to highlight Horseman's commitment to corporate social responsibility as a fundamental element of our business success. For example, we believe that an inclusive culture in which individual differences are recognized respected and appreciated provides value to all of our constituents.

In 2019, we undertook several company-wide events and actions to strengthen our inclusive culture these included a day of understanding encouraging meaningful conversations about bias in the workplace and a week of diversity workshops featuring experts from throughout the country last month these efforts and others were globally-recognized wage for the second year in a row Horace. Mann was named to the Bloomberg gender equality index which includes public companies committed to more equal and inclusive workplaces off. We're very pleased to be among 325 companies named to the index. It's a group of some of the best and brightest while we can always do more to strengthen our inclusive culture off and we're planning on it. It's good to have external confirmation that were on the right track.

to sum up

2019 was a strong year that Illustrated the strength of our corporate strategy and vision and worked confident. We will continue to build on that success in 2020 this year. I'm celebrating the 75th anniversary of Horace Mann our continued success as a company has and will continue to be largely due to the unwavering commitment to Educators that inspired our Founders and our vision to be the company of choice to provide Financial Solutions to all Educators to help them protect what they have today and prepare for a successful tomorrow. Thanks and with that. I'll turn the call over to Brett.

Thanks, Marita and good morning. Everyone is Marita noted 2019 results confirmed that we are better equipped than ever before to meet the financial needs of educators bank.

We have become a larger more diverse company on the path to a double-digit roee we expect to see the earnings potential of our business even more clearly in 2020 is we built our transformational work Marita covered the highlights of 2019 results. So let me dive right into the performance and outlook for each segment. Then I will finish up a few comments on how it all comes together in our EPS guidance.

Let me start with.

Channel NCAA has been part of Horace Mann since July 1st and added sixty five point eight million dollars in premiums with 8.2 million dollars in new business the segment represented approximately 14% of total second-half premiums and contract charges and about 30% of second-half core earnings illustrating the diversification value it brings.

Premium persistency was 89.3% with almost 300,000 policies enforced as we've said premiums for this business are relatively stable founded a quarter net investment income on the supplemental portfolio with 7 and 1/2 million dollars in the second half.

For the six months, the benefits ratio was 37.5% reflecting favorable Reserve changes in the operating expense ratio was 27.3% off.

Operating expenses included six point six million dollars in non-cash amortization of intangible assets. The annual run rate for intangible amortization should be 12 and 1/2 to $13 pre tax which could be relatively constant for the foreseeable future.

Tax profit margin for the 6 months benefited from a better-than-expected benefit ratio. So the segment contribute $18 to core earnings in the second half of the year ahead of our guidance of twelve to fourteen million dollars.

Going forward we expect the full year pre-tax profit margin to be in the low to mid-20s with supplemental adding between $28 and $30 to $20 off during the year segments investment income will start to benefit from portfolio repositioning.

Turning to the Property and Casualty segment core earnings were fifty four point three million dollars for 2019 versus a loss of 14.3 million dollars last year off the reported combined ratio of 96.5 improved substantially over last year to the best of this been since 2015.

The full year reported combined ratio benefited from cat losses that were less than half of our net cap cost in 2018 largely because last year's fourth-quarter package included the campfire this year 13 Kath events resulted in four point four million in losses in Q4 on the campfire or part of the ad hoc subrogation wage that recent an eleven billion dollar agreement with PG&E for subrogation claims, the timing of the final settlement from the bankruptcy court is unclear but the process that would allow us to recover some of those losses continues to move forward.

full year

Team cat losses total 52 million or 7.6 points to the combined ratio, and we're in line with the guidance. We offered last quarter.

Turning to auto performance were very pleased with the results for the full year the auto underlying loss ratio improved by Four Points while the reported combined ratio by 5.5 points for the year is Marie denoted are cumulative loss ratio Improvement is well ahead of our original objective and it has been a key driver of our only Improvement.

Rate increases average in the low to mid-single digits across the auto book and continue to keep Pace with boss boss in Lost friends remain consistent throughout property also generated strong results for the full year. The property combined ratio was 94.2. Although we are pleased with the profitability of the line. We will continue to take long to mid-single-digit rates in our focus on underwriting and claims initiatives that we expect will bring the line closer to our Target of around a 90% combined ratio.

the full year

PNC combined ratio benefited by 1.1 points from favorable Reserve releases in both the auto and property books earlier in the year total property. Casually Reserve or remain solidly in the upper half of the independent actuaries range. The PNC expense ratio was 26.9 points for the year in line with our guidance.

For 2020 we expect full-year PNC core earnings of $55 to $60 with a combined ratio between $95 and $97 as we expect to maintain the progress. We've made on the underlying loss ratios and make some additional Improvement in the expense ratio. And this Guidance presumes the cat load would again be in the range of 45 to 55 million dollars or about 7 and 1/2 points on the full year combined ratio.

Net written premiums for 2020 should be in line with 2019 on the plus side rate increases continue and we are seeing positive Trends in new business in the growing number of geographies that are achieving our profitability targets. We expect this will accelerate over time leading to growth and policy counts and improve retention as the year progresses.

for the lights

Segment the number of policy issued increased 2% over prior year life sales were lower than prior year primarily because of lower sales of single premium products in the introduction of products with pricing based on the updated mortality table quarter earnings for the year. We're in line with our guidance is lower mortality costs helped offset higher expenses phone number net investment income. We anticipate full year. Total life sales will be flat in twenty-twenty our agents continued to help more of our customers, see how life insurance off to the financial well-being of their families.

We continue to expect long-term sales growth of our recurring premium products. The segment should deliver 14 to 16 million in X Tax earnings in 2028 with a returned to model mortality.

Before I turn to the retirement segment just a reminder that our results since April 1st reflect the annuity reinsurance transaction. We completed in the second quarter the transaction addressed interest rate risk of a legacy block of individual annuities with a minimum crediting rate of four and half percent the transaction released two hundred million dollars of capital took $85 million of which was redeployed to purchase NTA reducing retirement segment invested assets effective, July 1st.

under the required

Accounting treatment for the transaction elements of the transaction continue to flow through our financials, even though they are the responsibility of the reinsurer r g a r balance now shows a deposit asset on reinsurance and total net investment income includes an entry for a created investment income. The investor supplement shows some of the retirement age tricks excluding the reinsured block 2 more clearly illustrate the result of ongoing operations for the retained retirement business your end. We had four point four billion dollars in assets under management in eight point three billion in assets under Administration.

Annuity sales deposits were up for both the quarter and the year and they continue to be an important part of our product set annuity is appealed to the financial objectives of our educator customers off while complimenting are growing sweet of fee-based products after the reinsurance transaction. The average crediting rate on traditional fixed annuities is now two and half percent versus the 3.6% previously the 194 basis point net interest spread for full-year 2019 includes the hundred and forty two basis points spread for the first quarter Choice prior to the transaction.

I'll talk more about.

The interest rate environment a moment, but we expect a net interest spread between 220 and 230 basis points in 2020.

For the full year retirement earnings were $26 in line with our guidance.

Fourth quarter quarter earnings reflected higher expenses including Severance costs as well as lower alternative investment income and prepayments compared to the strong third-quarter third-quarter earnings for 2020 to be in the range of 27 to $29. The segment will benefit from a lower expense run rate offset somewhat by lower investment.

Turning to the Investment Portfolio total investment income for full-year 2019 came in very close to our guidance. Despite the challenging interest rate environment total income loss on the managed Investment Portfolio in the fourth quarter was lower than are expected run rate of sixty two million dollars alternative investment income and three payments were below the very wage levels of the second and third quarters as a result. The pre-tax shield on the portfolio in the fourth quarter was 4.28% with the FED reducing rates by a total of $75 bibs over the second half of 2019 yields for public fixed income securities continue to be challenging the new many rate. And the fourth quarter was 380000 basis points. We expect further spread compression in 2020 with the new money rate around three and a half percent for the core fixed income portfolio.

we continue to see

This portfolio was $380 and it contributed nearly $26 million dollars to investment income. We expect to fund in additional hundred and fifty million dollars of alternative investments in twenty-twenty with our Target return for 2020 on this portfolio between six and seven percent its contribution to 20 20 investment income should bring up to 2019.

We expect total 20/20 net investment income from the managed investment portfolios. Including will be around $275 million dollars generally in line with the quarterly run rate. We've seen since the reinsurance transaction. We expect Returns on the fixed maturity portfolio will be constrained due to the rate environment, but we will benefit from a contribution of our alternative portfolio and the repositioning of the n t a portfolio a created investment income on the deposit asset on reinsurance should be approximately 52 million or about twenty-three million four quarter.

putting the pieces together

Total 20/20 net investment income should be flat with 2019. Although retirement net investment income will reflect the segment smaller portfolio after the reinsurance took action and acquisition ntas investment. Income is the primary offset in total net investment income in summary. Our 2019 results were solid across all segments in line with our Gardens fourth-quarter results included a sense of severance charges as we noted yesterday in the release. We expect full-year 2024 EPS to rise about 20% to the range of $2.55 to $2.75 with our lead up at least a point to above 8% off.

Each segment contributes to our strong Outlook our guidance for each reflects the 20/20 benefit. They will see from their share of the $15 in expense reductions off to recap Property and Casualty should contribute fifty five to sixty million dollars to core earnings assuming cat losses at about 7 and 1/2 points on the combined ratio wage. Supplemental should contribute between 28 and 30 million dollars with Rising net investment income retirement should contribute $27 to $29,000 benefiting from a lower expense run rate and lastly life should contribute between 14 and 16 dollars and twenty twenty reflecting a return model mortality.

looking

We'll support market share expansion with are we benefiting from growth across the businesses? Of course while there are many positive drivers a future are they may be partially offset by factors such as the sustained low interest rate environment and the additional Capital again being created by the business are intent for the excess Capital generated by our service organization remains focused on the most creative uses. This includes one growing our business. It returns that meet or exceed r r o e targets to return a significant portion of annual earnings back to shareholders via a compelling dividend and third opportunistically buying back shares when market conditions warrant.

To close the results we achieved in 2019 set the stage for continued Improvement in 2020 and beyond our P&C profitability initiatives have been successful supplemental is delivering the intended benefits of Revenue and earnings diversification. And finally r r o e profile is strong in more than capable of reaching double-digits in the next few years. Thank you. And with that I'll turn it back to Heather for Q&A.

Welcome everyone. We're we're ready in need of for the Q&A if you want to pull.

Thank you to ask a question. If a star then one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing piece to withdraw your question, please press down into at this time. We will pause momentarily to assemble our roster.

The first question today comes from Matt car with JMP, please. Go ahead.

Just have a couple questions. You know first is Marita is hoping you could give us an update on the supplemental business just being a few things one is just maybe a little more detail on the positive Reserve changes in the quarter and and how we should think about those but but higher level um, you know how the integration has gone so far and and and kind of how you feel about it in any any dates are things knew about how you think about it going forward in 2020? Yeah, man, I couldn't be more pleased with where we are with. I think the most important point to point out is that, you know, despite the distraction that comes with a major transaction like this the agents actually made their sales plan for the year. I'll let wage time and on the specifics to your question, but overall on every front were extremely pleased that the transaction is going very well from an integration standpoint and clearly wage.

Producing the results we expected.

During our due diligence weighed. Yeah Matt on the comment on the reserves is Brett mentioned the benefits ratio for the first six months, you know, reflected favorable Reserve changes that's driven by money, you know better morbidity on some of our products that we've seen in the past and in in addition, we had a non educator really kind of a non-strategic payroll slot with some older policies that lapsed in that can cause a small favorable spike in the reserves also, so that's really what makes up that change.

Great, and then just my other question actually going to shift it to P&C for a second. I mean you made great progress there. I mean Autos in in in a very good spot and and sounds like you expect to be stable, you know property, you know been performing well and and and sounds like you'd expect maybe a little bit better, you know, I'm focused on pissed and and I just want to kind of your your thoughts on you know, that's been under pressure for a while and and that's not surprising. You know, when you're when you're pushing a lot of rate through a book and and kind of underwriting it. How how do you think about kind of that inflection point or or when should we think about the PNC business starting to grow again on a v, basis Hey Matt before Bill gets specific with PNC. I think the growth question is a great question and it clearly is our Focus, but I think it's important for us to recap a little bit again what we saw in 2019. We're really proud of the heavy lifting and the name.

Also we had in 2019. I mean

Across-the-board a five point increase in our we book value up 11% We added a hundred and fifty thousand educator household. We added 220 new Agents from n t a m three major transactions including a reinsurance transaction that are you know interest rate sensitivity. We added a brand new new business segment and sub spite all that activity. We help market share. I think that's you know, that's a pretty strong result. And then when we look at twenty twenty, we have an over a 20% increase in earnings without planning for significant growth. I think that's pretty I think that's pretty solid and with all that said it it really does set a solid foundation for growth when you think about our PDI strategy our product game boards complete NTA was really with the addition of the supplemental products the last big product Edition that wage

Wanted to do from a distribution stamp.

Point our sales force is much stronger we mentioned in the script that we're in half of the school locations across the country some with relatively low penetration. So we have the opportunity there as well as the ones that were not even in and from an infrastructure standpoint our guidewire implementation really positions us. Well there with decreased expect is an increased efficiency. So clearly the opportunities there. We just don't want to get ahead of ourselves and and with that bill, you know with the guide wire implementation can talk a little bit about how he's feeling about PNC. Yeah, man, just a little bit on the sales front. So we are expecting a significant increase in sales in in 2020. As you said, well some of that is offset by retention. We still have some rape flowing in from from prior years from from 2018 and 2019 also significantly underwriting actions in Colorado, although Colorado have in Goodyear log.

Dirt came up of many years of high.

Certainly, California with the Wildfire underwriting when the property goes there goes the auto and a lot of good work in Florida. We sprung Florida significantly and you'll hear a lot of our cohorts talk about social inflation. And and I think we're somewhat insulated from that do to our our smaller smaller Florida book. So despite the increase in sales. We are coming off the bottom of our home number on the positive side. We did see three consecutive increases in retention coming into 2020 and we expect that to continue but the reality is that's just we're just coming out of that retention home lastly on guide wire that goes live in the next few weeks significant improvements into our pricing capabilities our product offering he's about five business or digital capabilities. So we also expect that to provide growth. But remember the way we're implementing that system is on a state-by-state policy by policy basis. So our first date of birth

at those policies expire

On our old system or renew onto the new system, but certainly the new business will be available for the whole statement when we go live.

Great, and then just one kind of relate a PNC question see the guidance for kind of Flat Top Line over all and any thoughts on kind of how that might look Auto versus property would it would be a a little bit like 2019 where you property grew a little bit Auto trunk. The tiny bit is kind of flat overall, but just the question about the component pieces.

Yeah, I'm sorry. I was looking at my numbers. I think I mean will be similar to 2019. Certainly. We've been very steady with weight right in property in auto rate is decelerating. So maybe a slight change in Mexico not anything significant right? Well, thank you for the answers. I'm congrats on I think what will be look back at as a very transformational 2019 and congrats on board best of luck going forward off. We think so, too. Thanks, Matt. Thank you.

the next

Question comes from John barnidge with Piper Sandler, please. Go ahead.

Analyst modeling considerations around a return to modeled mortality and life. Is that more just about favorable mortality in 2019 that you think is prudent to start a base off of or is there any additional commentary?

Yeah, that's that's exactly one hundred percent accurate John. We obviously experienced some favorable results in nineteen coming down from what we experienced an 18in is basically just kind of getting back to the back to the norm. So, you know, it's an aging block of business and you'd expect that. So nothing unusual if you get a favorable one year, you're most likely to see a wage increase in the following year and this is Bill done. I would just add that certainly would in our Actuarial ranges in our expectations, but just the Lower Side so as you plan for next year, we normalize that to to account off the the favorable mortality in in 2019, right? And then can you maybe talk about new product development with an NTA? Is that something we should expect or really? Not for the near-term? Yeah. I can I can let Wade chime in if if he'd like, but from my perspective, I think NTA has the base portfolio of the products that we need em.

And you know from our perspective.

I wouldn't expect any heavy lifting from a product development perspective. One of the really cool things in the due diligence is when we looked at what our customers were looking for. When you look up the fact that his current portfolio is 80% educator just like our portfolio. They obviously have the products that are educate educate. Our customers are looking for a fact we wouldn't expect a significant amount of product development. I don't know if you have anything to add to that. Wait. Yeah. No, I think that's fair. I mean we always you know on a year-by-year basis look for Trends off and cancer and heart and and you know how those are being treated and you know might make some minor adjustments but I agree we have we have the products that we feel comfortable with and certainly support the education community.

Great, and then just one quick one. Have you changed the underwriting standards in your life insurance products for teachers that Vape or use e-cigs?

No, there's been no change, right we get the question a lot around marijuana, and that's just considered tobacco. We have it Tobacco right and that's included there as with the cigarettes, but no significant. Okay. Thank you very much congrats on the quarter. Thanks. Thank you.

the next question

Mr. Myers Shields with KBW, please. Go ahead great. Thanks. Good morning. One basic question. We're not seeing it in the numbers, but I'm wondering as the general employment numbers off. Basically roommate very strong. Is there any under the surface impact on either new agent recruitment or retention?

No, we don't we don't really see that as a matter of fact, when we looked at our agency plant across the bifurcation that we use. We've got three swim Lanes. We have a new agent segment. We have a growing and developing segment. And then we have a well-established segment in our new agent segment. We've put a lot of focused on new agent recruiting obviously that's also a place where we're looking to make sure that the NTA agents overtime have the ability to sell who are some and products and the Horace Mann agents getting up to speed on the supplemental products in that new agent swimlane. We have been able to attract the new agents that we want according to our numbers in that model and we feel good about the new the new agent recruitment. There's

Okay, fantastic, and I think we touched on this.

Just want to confirm that the reserve release and supplemental in the fourth quarter that doesn't have any implications for current pricing. Does it in other words doesn't suggest the current pricing is is too high margins to home. Whatever that's correct. Yes. Ya no related to Mobility which ties into loss ratios.

Perfect. Thank you so much.

The next question comes from Gary Ransom with dialing and partners, please. Go ahead.

Yes, good morning. I wanted to ask about the the the supplemental reserving. Also just more from a qualitative point of view of whether this is a you know, or the reserve or being run similarly to the way they were under the priority ownership where where I viewed it as conservative and maybe overly conservative and I wasn't sure if that life has changed at all or if there's any way you could describe your strategy of reserving in that in that category or that segment Gary. This is Brett and let me start and if Wade wants to you know off-color, you know, I'll let him do that as well. But kind of a couple pieces to your to your question certainly with the acquisition of NTA. We're basically required to update the the reserve factors if you will to reflect experience and I would say similarly to Horace Mann ntas reserving pack practices in the past have been on the conservative.

And we don't really intend to change that practice at all. We're not.

I'm going to run thin Reserve. So we did have a portion of the reserves that had to be trued up as required by purchase accounting fee gap on acquisition way to also add some color about losing an an educator group that or morbidity. So all in you know, there was some benefits of nineteen and probably expect the the factors going forward as well add, you know new business new products that those would be set with a certain level of conservatism but built into those so no, we're not intending to change the reserving practice wage practices of NTA in the past and you know, like like like the nonentity a reserves here that we intend to carry those on the conservative end of the range.

Just so I understand the the nature of this. I I think of these products as largely having fixed payments that if you put it in the property casually terms the severity is fairly well-known and we're talking about frequency. Is that a reasonable way to think about it or is there more to it than that? No, I think that's a very fair description Gary and I think this is Marie think that's why when we were looking to either build by or both on a supplemental product offering this fifty-year-old company that's been in the market place with education is doing it this way for a very long period of time was a nice cleaned bit, you know, because of some of the things that we're talking about now very clear off, um, understanding of the products, you know are Educators buy these products because they can't afford the out-of-pocket expenses from an unexpected event, but it's very clear cut off.

um and easy for us to get our arms and

Thank you for that. Just another question on the frequency and severity Transit Auto. Also, if you could I assume your frequency Trends are still going down as in what we see in the industry, but I'm the boss the severity side there. There are a lot of signs of acceleration and some of the industry numbers and I just wondered if you could, I know that I guess I'm thinking of both, you know be mostly bi but there's a little bit in the house Auto Repair side as well. Sure. I'd say certainly severities are a higher than what I would call an inflationary. A lot of that is due to the social inflation that's being talked about as well as the technology and vehicles but we are still seeing improved frequencies, which is an offset to that. So I would say I don't think we're seeing it as high as much Social implications of other companies. A lot of that is because of the midst issues that we've been forced over the last couple of years as well as a very tight early identification program with respect.

Unlike a lot of our competitors.

We can engage with our sales force very quickly to get engaged with the claim process early on and it tends to be those small fender benders that could go sideways pretty fast. So often agents are engaged. They're getting us that information faster the quicker you can document the claim the less chance are that that it kind of spiraled out of control. So we think we have with the processes in place to control it, but I'm at a high level. There are some some more than inflationary increases in an injury.

All right. Thank you. And and just one last question on the implementation of of guide wire is you mentioned a couple of times that this will provide some additional Linux and capabilities and I'm trying to understand how how big of a change that is. Well this really be able to give you better selection and pricing power as a you Market the auto product or is it any qualitative there? I would say our analytics are very strong. A lot of work goes into our pricing segmentation. I would say that the translation of that into our technology. We don't have I'll use a simple example as many fields as you might need so that have the most sophisticated product and guidewire. We open that up the ability to tie in multiple third party data sources, you know on demand, you know greater discounts around being paperless and Thursday.

Expenses. There's just a whole slew of benefits that we get because

The system is just more flexible.

Okay, that's helpful. Thank you very much.

Thank you.

This concludes our question-and-answer session. I would not like to turn the conference back over to other White Sulphur any closing remarks?

Thank you everyone for joining us today. We look forward to seeing many of you in the coming couple of months, and if there are any questions in the interim, feel free to give me a call. Appreciate it. Thank you.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.