Q1 2020 Earnings Call
Good morning.
Welcome to the horse man educators, Q1, 2020 investor call.
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I would now like turn the conference over Heather Whetsel Vice President of Investorrelations. Please go ahead.
Thank you in good morning, everyone. Welcome departments discussion of our first Spider was out yesterday, we should already released an industry supplement puppies are available on the investors page of our website, along with our Investor presentation, which was posted this morning.
Right as President and Chief Executive Officer, but Conklin Executive Vice President and Chief Financial Officer will give the final remarks on today's huh.
Turning it over to Merida I want to know that our presentation today and puts forward looking statements as defined in the private security litigation Reformat 1995.
Company cautions investors that any forward looking statements include what's been uncertainty and are not guarantees get your performance.
Forward looking statements are based on management current expectation and we see no obligation to update them.
Actual results make different materially due to a variety factors, which are described in our news release and Dusty see firemen.
You know prepared remarks, we use them non got measures reconciliation of these measures to the most comparable got measures are available in our news really.
Trying to call ever to Maria.
Thanks, Heather good morning, everyone and welcome to our call.
As many of you know this this horse man 75th year, serving educators, we started in 1945 selling auto insurance to teachers.
In a decade since we have continually added more solutions health educators protect what they have today and prepare for successful tomorrow.
At the heart of what we do is a deep appreciation and respect for the impact that educators have on our children and our communities.
Today marks the end of the first virtual teacher appreciation week to show our support in 2020 from an appropriate social distance.
We adjusted some of our annual appreciation events. We traditionally hosts during the first week of May for example, instead of hosting a lunch at a school, we're delivering launched two teachers working from home instead of thanking teachers in person. We printed thank you teacher assigns to spread across.
Our communities.
As we continue to live work and learn and evolving shelter in home environment to slow the spread of covert 19, what is being asked of teachers at this moment is monumental <unk>.
To provide meaningful online teaching virtually overnight to balance the needs of students with varying degrees of stability at home, which can include lack of access to remote learning equipment or even the internet.
Oh, well keeping parents and students up to speed with what's happening on a daily basis. They are doing incredible work.
I believe across the country, there's now and even deeper appreciation for what educators do.
And just how vital they are to the growth in success of our communities.
So while we always make it a point to thank teachers for the work. They do this week's activities have taken on a special significance and reinforce for us at worst man why we're here while our teachers are focused on preparing our children for the future. We believe they deserve someone to focus on them.
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Which brings us to the unprecedented challenges our country is facing because of covert 19, before I discussed or quarterly financial results and how we are thinking about the rest of 2020 I want to talk about what horse man has done to support all of our stakeholder groups. During these past two months.
I'm, especially proud of our company's nimble efficient response to ensure we continued to serve our educator customers uninterrupted.
Before most states had enacted stay at home orders in March we had already begun to transition our employee base to work from home environment to protect their health and ensure we could continue to meet aging in customer needs over a matter of weeks, we transition 95% of our workforce to read.
Boat working without disrupting service levels. We've also provided new resources to help employees personally.
Are planning for returned to office is equally deliberate focusing on the same objective.
For our educator customers, we provided a 15 per cent credit on two months auto premium because they're driving last.
For customer spacing financial difficulties due to cope with 19 were offering a payment grace period through June on auto property supplemental and life insurance payments.
We're also extending personal auto coverage to those delivering food medicine and other essential goods.
We don't want adjust tell our customers that were here for them. During this difficult time, we want to prove it through our actions.
Further to support our teachers in their professional capacity, we are providing resources or online lesson planning to educate students in a remote learning environment.
To enable our agents to work more effectively in a virtual environment, we accelerated plans technology solutions, including video meetings software enhance ease signature capabilities and dynamic online appointment studying tools.
These upgrades make it easier for both agents and customers to conduct business online, including annual policy reviews, where our agents address any new or additional coverage needs.
Combined with existing agent tools. These capabilities have made it possible for agents to have it to a completely virtual model.
To support the communities in which we live in work, we contributed $100000 to keep kids learning a donors choose initiative to help teachers get educational materials to students at home in the highest need areas. We've also provided funding to this central Illinois food back to help keep.
Kids Fed during school closures. In addition, we contributed to the local United Way Covert 19 response fund and a small business relief fund for the chamber of Commerce.
Our long term success will rely on continuing to keep the wellbeing of our customers employees agents and the community at the forefront of our conversations and decisions about business strategy.
As we navigate this unique environment, we are learning valuable lessons that we can apply even after we returned to a more normal work and school routine.
Well the specific timeline for when the country can return to that more normal daily schedule is unclear. The horse man business model remains unusually resilient for several reasons.
Most importantly, educators are integral to the growth and success of our communities.
As the country suffers from this pandemic educators are still teaching just now from home.
In addition, the insurance and retirements solutions, we provide to educators remain important to their financial well being regardless of whether they're teaching from school or home.
Educators are Jen generally more financially conservative by nature and in times of economic disruption tend to prepare more not less for the unexpected protecting dependents and assets remain a priority.
Of course educators are experiencing the same changes to their day to day life is others and they aren't immune from broader economic trends are first quarter results show. Some early impact of the pandemic unrelated economic conditions. In particular, we are seeing fewer auto plants due to decrease driving.
As I noted earlier, we responded with premium credit for our customers.
Growth in new sales have slowed, particularly those generated from in person events that schools in March and April schools cancelled many in person events as they coped with urgent hoven 19 challenges.
We are seeing very early signs that school officials now have the bandwidth to work with us undo ways to give their teachers access to the financial solutions, we provide.
For example schools frequently asked our agents to present onsite financial wellness workshops, which cover topics such as managing student loan debt state pension programs classroom crowdfunding and saving for retirement agents are now conducting these sessions as webinars with.
Early signs of success.
Turning briefly to the quarter core earnings were up 25% over last year's first quarter slightly ahead of what we had expected overall, our property and casualty performance with strong and we also benefited from solid earnings from the new supplemental business.
These were partially offset by lower net investment income generally our results reflected the strategic actions. We've taken in recent years first the comprehensive product distribution and infrastructure improvements.
We've made over the past five years to better serve educators.
Second the transformational actions, we completed in 2019, including the acquisitions of N.T.A.N.B.C.G. as well as our legacy annuity reinsurance transaction and third recently completed profit improvement initiatives that met or exceeded our targets for example, we achieve.
6.6 points of improvement in the underlying auto loss ratio between 2017, and 2019 ahead of our five point target and we're seeing lower expenses across our businesses due to exceeding last year's 15 million dollar expense reduction target.
Looking ahead are full year core E.S. guidance range remains at $2.55 to $2.75.
Right. We'll go into details first quarter results and the conservative approach. We've used to look ahead, but we remain confident that we are well position for longterm profitable growth.
Further the transformative events of recent years have been supported by our ongoing thoughtful conservative approach to capital management, we had been preparing for an economic downturn for some time, even if we didn't know what my closet and we have taken deliberate actions position horse man to.
Maintain our financial strength.
We've been increasing the quality of our investment portfolio. Since 2017. It is now a plus rated with 95% of our core investment portfolio in investment grade holdings that continue to hold their value. Despite market volatility we ended the quarter with about 190 million.
<unk> unrealized gains.
Are consistent financial strength combined with the strength of our multi line business model and dedication to the educator market is what has made us successful for the past 75 years in business and.
And it's why we remain confident today that we are well positioned to reach our long term objectives of a double digit return on equity, while bringing our solutions to even more educators. Thank you in with that altering the call over to Brett.
Thanks, Merida and good morning, everyone is Marina noted are poor earnings were up 25% over last year's first quarter.
Lately head of our expectations. Despite cobin 19 impacts that'll cover when I talk about each business.
Overall property and Kathleen performance was strong the new supplemental business made a larger than expected contribution in its third quarter as part of horse man and we saw a growth in annuity contract deposits in retirement.
Marina commented are educator customers remain working and they continue to need the financial solutions Horace Mann provides.
In addition.
Managed investment portfolio his held up well despite the current economic stresses.
The modest decline in that investment income from the fourth quarter, primarily impacted the retirement in life segments and was due to lower limited partnership income.
I'll cover investments in more detail after I talk about segment performance, but her outlook for the remainder of the year includes our expectation for some additional mark to market adjustments in the alternative portfolio. We're recording for most funds is on a one quarter lag.
Our whole year 2020 core Atps guidance range remains at $2.55 to $2.75 with a conservative analysis of cope with 900 scenarios that led to some changes in what we expect by segment.
Due to the level of uncertainty that needs to be considered we will recliner scenario analysis. After the second quarter and would expect to update guidance, when we announced second quarter results.
Looking at the business by segment for property and casualty quarter earnings were $26.6 million versus $15 million last year.
Remains were down slightly is rate increases largely offset lower policy counts, while earning thawed tax benefit due to the care that treatment of carry backs of net operating losses.
The reported combined ratio improves 6.9 points from last year's first quarter, partially because cat losses were about one point lower.
More importantly, the improvement reflected a 2.8 point benefit from the progress we've made on the underlying auto loss ratio.
A 1.3 point benefit to the property under lighting loss ratio largely from lower Noncat weather related and fire losses, and lastly, 1.3 point benefit from the plan reduction in Runrate expenses.
The fundamental progress we've made in our property casually segment supports our strong outlook for the full year and beyond.
The total combine ratio also benefited by about one point from temporary changes in policy holder behavior due to cope with 19 largely in the final weeks of the quarter in continuing in April.
We know you've heard this for many other insurers so to quickly recap stay at home and other guidelines implemented across the United States in March and April changed driving behavior a lot.
Miles driven correlates directly to auto law frequency <unk>.
According to data from H.M. drive, our telematics App daily customer miles driven were roughly flat during January and most of February.
Miles rose a bit until mid March when stayed home orders became common.
After mid March we saw a sharp decline in miles driven the correlates directly with our dropping auto loss frequency.
We continue to watch this data closely spaced begin to open up their economies to monitor new impacts on driving behavior.
We recognize the lower level of driving with a 15% premium credit for two months for current policy holders.
The timing and manner of that credit will vary depending on regulatory approval.
I'll revise outlook for $61 million to $66 million in P.N.C. segment earnings for the year also anticipates less driving in these early weeks of the second quarter.
Generally every 10% deviation in monthly auto frequency from our expectations represents about 2 million in pretax earnings.
Our analysis does not include offsets from other factors such as the potential for higher severity.
While we continue to assume retention remained steady and new rate increases averaging the low single digits across auto one property that written premiums for 2020 are likely to be below 2019.
This reflects premium refunds in floor, new business due to the pandemic.
We expect this to reverse overtime with policy pounds, beginning to rise in 2021.
We also continue to assume the full your cat load will again be in the range of $45 million to $55 million for about seven and a half point on the full year combined ratio about half of which would typically occur in the second quarter.
Turning to the supplemental segment and T.A. has been part of horse man since last July.
This quarter, they added $33 million in premiums representing approximately 14% of total first quarter premiums in contract charges.
Segment income with $10.5 million, what about a third of core earnings illustrating the diversification value. It provides.
Net investment income on the supplemental portfolio with three and a half million dollars in the first quarter.
Supplemental sales were $3.7 million in the first quarter, primarily added that in January and February.
New relationships at N.T.A. have traditionally come from in person events at school.
In this environment, where accelerating the integration of the N.T. Asians into our distribution system. So they have access to more tools to reach customers.
We expect sales for return to a more normal trajectory in the coming months.
Premium persistency with stable at about 89% with almost 300000 policies and force as we said policyholder retention for this business is relatively stable quarter to quarter.
For the quarter, we saw favorable trends in reserve on the acquired book a business. In addition, we believe policyholders have temporarily change their behavior, because a covert 19.
For example, policyholders may have opted to treat minor accidental injuries at home rather than visit the health care facility.
We saw some of this near the end of the first and into the second quarter, Although we expect to return to normal lost patterns at some point.
Due to these factors the pretax profit margin was above or longer term expectations at 36%.
For the remainder of the year, we continue to expect the pre tax margin will be in the low to mid twenties with full year quarter earnings in the range of 31 to 33 million slightly ahead of a previous the expectations because of the strong first quarter.
For the life segment sales were below last year's first quarter, primarily because of lower sales of single premium products.
Sales of recurring premium products were stable.
Quarter earnings for the corridor also reflected lower net investment income.
We now expect the segments should deliver tend to 12 million in <unk> earnings in 2020 with mortality remaining near expectations.
For the retirement segment. This was the final quarter in which we have complex year over year comparisons because of our annuity reinsurance transaction.
That transaction in 2019 address the interest rate risk of a legacy block of individual annuities with a minimum crediting rate, 4.5% and also release capital used to purchase N.T.A.
Or supplemental retirement solutions remain a core need for educators.
Nobody contract deposits were up nearly 10 per cent for the quarter and they continue to be an important part of our products that.
Annuities appeal to the financial objectives over educator customers, while complimenting are growing suite of P. based products.
For the first quarter retirement earnings X. back where $2.3 million below our expectations entirely because of the lower than expected net investment income, which I will cover in a moment.
We now expect quarter earnings for 2020 to be in the range of 22 $24 million.
Runrate expenses are lower which will be a long term positive.
Turning to investments the events of the first quarter may two things very clear one our portfolio is well position to whether the near term market volatility and cobin 19 induced economic downturn.
In two we will be able to capitalize on the market disruptions in a manner similar to what we did in the financial crisis.
Over the past two years, we have significantly reduced risk in the portfolio by taking actions to prepare for a turn in the credit cycle.
We believe corporate leverage, particularly for triple be corporate credit and high yield was excessive.
Over this period, we reduced our historical allocation to investment grade corporates by nearly 15% to about 20% of our current portfolio.
The focus celo investments on double and triple A. areas of the capital structure, where credit enhancement levels prevent principle losses, even an extremely severe stress scenarios.
We remain disciplined and allocated purchases to government agency securities and highly rated investment grade corporate in municipal issuers.
To enhance yield we modestly expanded our senior commercial mortgage loan fund allocations, they comprise less than 2% of our portfolio at March 31st.
We also continue to increase the size of our private credit limited partnership portfolio.
These actions have created a resilient portfolio that we believe will perform well on a relative basis in the current environment.
We have about $450 million of exposures to the asset classes, most impacted by the covert 19 induced economic downturn specifically energy.
Retail aviation and leisure and travel.
Spread across nearly 200 issuers nearly all of which are investment grade with an average rating of a minus.
They represent less than seven per cent of our portfolio with the average price for the holdings at the end of March it 93% of amortize cost.
We remain comfortable holding these securities based on our current views, which are informed by our rigorous highly sophisticated stress testing of the portfolio.
The stress testing informs our portfolio selection in two ways, one dispositions to avoid emerging risk into purchases that will boost portfolio yields for years to calm.
During the first quarter, we recorded net realized trading gains a $4.3 million somewhat offset by $3.7 million of impairment losses.
The majority of the impairment losses weren't tend to sell decisions related to energy positions.
In addition, we had mark to market losses of 14, and a half million dollars on equity securities primarily in the P.N.C. portfolio.
We expect these the reverse is equity markets recover and saw about an 8 million dollar rebound in April.
The core fixed income portfolio had a yield a 4.51% and the first quarter up slightly from 4.36%. It your end.
Our new money rate was nearly 4% and based on current market conditions, we anticipate purchases near that level for the remainder of the year.
This is above our previous guidance of three and a half per cent.
We expect to maintain a spread in our retirement portfolio of about 200 to 220 bits for the full year. Despite the first quarter dip to about 150 bits.
The decline in the first quarter was largely related to lower limited partnership income.
Are limited partnership portfolio experience Mark to market price volatility in a handful of funds that have a structured credit focus as a result of the spread widening that occurred in March.
We do not view these as permanent credit losses, and I've seen a modest rebound in April results.
The remainder of our limited partnership in commercial mortgage loan fund portfolio continues to perform well we have reduced our outlook given market volatility.
Our long term target return for this asset class is 6% to 7% we have now tempered expectations for this year two around 4%.
As a result, we now expect limited partnership earnings to total $10 million to $15 million for the full year.
We now expect total 2020 net investment income from the managed investment portfolios will be around $260 million.
Accreted investment income on the deposit acid on reinsurance is on track.
You will recall this amount as an actuarial driven calculation and should not be effected in the short term by market volatility or prevailing interest rates.
Putting the pieces together total 2020 net investment income is now expected to be between 350 and $355 million.
That expectation is reflected in the segment by segment outlook summarize in our investor presentation in in our core E.P.F. guidance range of $2.55 to $2.75.
Before closing it's important to remember that the solid foundation, we have put in place over the past several years continues to support US is we face the challenges of this unprecedented period.
We're pleased with a strong results of the first quarter and are favorable outlook.
We continue to manage our capital conservatively, knowing that we will be able to move forward with three creative uses for access capital when the time is right.
Number one growing our business it returns that meet or exceed our our we target.
Number two returning a significant portion of annual earnings back to shareholders be a compelling dividend.
And third Opportunistically buying back shares when market conditions warrant.
We continue to believe that are are B.C. target, 425% for each of our subsidiaries is appropriate and along with a debt to total capitalization ratio under 25% support the insurance financial strength ratings of aid or equivalent from each of our four rating age.
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As we look beyond the next few quarters, we continue to see opportunity to expand return on equity through the integration of N.T.A. as we fulfill our cross l. objectives in align their investment portfolio with our current strategies.
Further the solid foundation, we've built in the past few years will support market share expansion with our we'd benefiting from growth across the businesses.
Q and with that.
I'll turn it back over to Merida.
Thank you for at Bretton I will handle the majority of the Q. in a in this virtual environment for detailed questions on the line are Matt sharp distribution and business development weighed Rubenstein operations and supplemental and Ryan Grenier Corporate Finance in addition embarked or rocher and Mike <unk>.
Joined our call group for the first time, Mark has been horse man's chief corporate actuary for about five years and formerly ran the personal lines operations for the Hanover insurance group. He's taken the range of our property and casualty business effective April 1st Mike has been running our retirement business for two years.
And added our life business to his responsibilities last fall.
Now, let me turn the call back to how they're just start the q. in a.
We will now begin our question answer session.
To ask a question you may pressed star mid one on your Touchtone phone.
We're using the speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press star than to at this time, we will paused momentarily to assemble a roster.
Our first question comes from Gary Remson Windowing and partners. Please go ahead.
That's good morning, everyone.
And Gary Oh, well.
I was wondering if you would get a little more color on.
On the frequency trends around the severity trend yeah. Maybe my question is actually more about since they're already just wondering what you're seeing both on the auto repair side as well as on the injury sides.
Sure Gary the this is breath violent a while and I start and then I'll have mark out a little color commentary. After my opening remarks, but just to share our auto frequency was actually down about 10% for the full month of March which that's equal.
Two roughly the the $2 million or about one point on the first quarter combined P.N.C. ratio, but you really can't think about that as a blended full month datapoint, we do know from our data that miles driven did pick up in early March before dropping off so.
Annually for the last two weeks miles driven definitely remain lower in April but may and June are more uncertain because of the more variables as people you know in various geography is across the company a country get back on the road on different schedules, obviously are obviously.
There could be increases and severity to offset those decreases in frequency, but mark you may want to talk more about that on what you're seeing and the data.
Sure. Thanks, Brett Yeah, and you know first I'll start with you know we've been able to leverage the information from H.M. dry or telematics up to.
You know get better much better real time understanding of driving behavior is bred mentioned we saw.
Miles driven pretty flat January and February.
First half a march kind of a run up Oh quite frankly until mid March and then you know we saw a pretty sharp decline over the next couple of weeks until it it flattened out as this you know the stay at home orders.
Took place.
I'd say, we do expect to see miles driven increase.
You know from its bottoming out point, especially as summer approaches and families are going on vacation and engaging in other activities.
And you know they may be reluctant to use other forms of transportation and driving they become more common.
In fact, some of the early data, we're seeing with H.M. drive would indicate in the last couple of weeks, we've actually seen an uptick in driving behavior, that's starting to.
Drive a little bit of a bounce back in the frequency.
Oh, you bring up a good point about the severity.
While we you know we look at that $2 million of impact from a 10% frequency savings. We you know we can't look at that in a vacuum and there is some potential severity impact it's a little early to tell exactly how that's impacting else, you know, especially where that to drop off.
He happened over the first couple of weeks of of the last couple of weeks of March and we're just starting to to Judicate all those claims.
You know, but I would say that.
Given the you know lack of traffic density what we expect to see.
Is that the the average severity is likely to be kicking up given that there's certainly less Fender Bender type accidents out there and that you know the accidents that are happening tend to be a little bit more severe.
The other thing we have to think about you know and the longer term is the you know the impact of the economy. For example, with unemployment is high as it is I have some expectation that.
Will start to see some cream and the level of uninsured or underinsured motors coverage in our clients as teachers they tend to be employed more.
More often they tend to buy more coverage, so they'll have that those higher limits or uninsured motorist coverage and that's something I expect that we could see some uptick in the near future.
So I hope that address question.
Yes. It does this one whole up on injury claims that may have been fill out standing are you seeing any.
And he a trend toward trying to settle those you know.
We are we are complete.
<unk> certainly attorneys in clients are more available and more anxious to to to settle claims. So there. There is obviously been some impact in the acceleration of settlement Liberals claims and so will continue to watch that pretty closely.
Okay. Thank you and then.
All this stuff one more on a different subject, but you you mention <unk>, 4%.
Yeah.
We had previously been guided three yeah can you do all it a little bit more on.
On what actually changed to get that or maybe I misunderstood, but maybe a little collar on that.
Yeah, well actually have Ryan Grenier take that.
Morning, Kerry you know really was that's Halo two house in the quarter, you know our new money <unk> have been running in the high choose to load trees for most of January and February but when we saw the market volatility creep into the market. We saw multiple opportunities to put money into working yields north works that very high.
Quality paper seeing new issuances double A. rated companies you know issue at four and half as well as a very modest allocations you.
We'll be in high yield paper at yields north up by the now just 6%. So we like the trends were seeing were being disciplined and we do you think that the current spread environment will per says for most of 2020.
[noise] alright, well, thank you very much that.
Thanks, Gary.
Our next question comes from John Barnidge, with saying we were O'neill. Please go ahead.
Yeah.
Thank you.
What is your sensitivity on an earnings perspective to 100000, you ask <unk> is that something other companies have offered.
Yeah. John this is bread I can I I can take that and and let me just start with some general comments, you know with respect to mortality exposure and I think it's safe to say our life business. You know them mortality exposure is minimal you know we are conservative life in.
Turns company and we're well prepared to handle any increase and claims in yes. We have done a stress testing you know to confirm you know for the record. We've only had two claims you know related to to cope with through through today.
And I would say the first one only mentioned you know Corona virus on the death Certificate you know what could you know vantages blue, but either way it's been the obviously very insignificant you know when we look at our annual you know claims volume there about 50.
The to $55 million per year, you know a 10% increase in that mortality would be about you know additional $5 million at claims you know on well within our you know surplus surplus levels, but you know with current that's on the U.S. you know at about 70000, if we took our.
Who claims gross them up and extrapolated you'd probably come to about three so it's really minimal at this point you know maybe a couple other you know color commentary points.
The average phase of the age 70, plus you know population on our books is only about $30000 and 5% of the phase of our our book you know is over 70 years old you know, we're not licenses in New York educate.
Later Bayes is not focused and you know the major urban areas and educators have been you know working from home. So I think our our fact patterns pretty good as it relates to the exposure to to cope at 19.
That's fantastic. Thank you <unk> the tax benefit from the cares Act will that return to a lesser extend the remaining quarters of the year is that something a couple other companies had suggested could happen yeah, John John for US, it's kind of a once in done that benefit of roughly just south of $3 million.
You know is discrete item, we were allowed to carry back some net operating losses from the 2018 years back to you know older attach years that had the 35% rate versus 21. So we were obviously able to generate a larger benefit but that's.
That's a one time item.
Oh, that's fantastic My last question no requeue is there any commentary you'd offer around cat loss activity. So far to 20, thanks for the answers.
Sure. You know is you recall and I think I even had it in my prepared remarks in the script. Two q. is usually are heaviest cat quarter of the year, you know roughly 50 per cent the cats occur in the second quarter, you know April cats.
Today, you know have been consistent with our expectations you know for the second quarter. So nothing nothing unusual there and I believe in my prepared remarks in confirming our guidance. We said the cat mode would still be at 7.5% for the full year and that's knowing what we know already you're correct.
About April correct.
Thank you very much for the answers.
Sure.
As a reminder, if you would like to ask a question. Please superstar then one.
Our next question comes from Mayor Shields with KBW. Please go ahead.
Great. Thank you good morning, right now.
Hi.
I I think you mentioned that the part of the improvement in the home or loss ratio with dogs have to see whether you talk about the impact of children play ordered on frequency because the <unk> theory going in both directions.
I'm going to I'm going to turn out over to Mark since I know he has the specific detail mark.
Yeah, I mean <unk> early on we haven't seen any significant changes from a frequency standpoint on homeowners. It's.
You know our our daily claims volume bounce around within that normal range that seems so we've we've yet to see any anything significant directly related to cope with.
Okay perfect. The second question.
If one of the again you see that's out there that we're going to the left shopping for insurance overall. It was helping you can talk about how that impacts.
Specifically the business that you.
Transfer to other carriers say nonstandard rather unusual over it.
Yeah marriage, it's Merida I you know I, we are seeing absolutely that trend as far as the last shopping when you think about our business. You know the constant reminder, that you've got a homogeneous set of customers. They know who we are we actually.
We have seen because these teachers are home working from home virtually we have obviously made more outbound calls and our agents are seeing the response rate from the educators higher because they're able to take those calls because they have a little more flexibility in their schedules.
We also with the work we did with our virtual it teachers appreciation week for example in our increase in social media outreach, we're actually seeing an increase of inbound calls for quote but we we are not you know are the retention is holding quite well I think at the beginning.
[noise] of all of this the last thing on People's Minds was shopping for auto insurance, but I think as people fall into a more comfortable schedule some up that shopping might actually return as they get more comfortable with their surroundings and the situation, but we're finding good access to our.
Customers in this time and they're certainly finding us.
Okay excellent, but you so much.
Mm.
Our next question comes from.
Ransone from doing in partners. Please go ahead.
Yeah, I have one more on on that.
Objective sopping and teaching from home and I may be a longer term question, but the way that gelding or maybe some changes now.
He he actually harping on the future maybe this is a big test for.
Virtual classrooms.
Yes, I do find out how the clunky about that kind of mmm sure how like that.
Change what you'd need to prepare for.
Yeah, I mean, it there's two things I think about the first thing I think about is our business model and I think we've learned a lot already due to this very unusual situation for all of US. It. It certainly has reinforced for us that although school accessed is beneficial it's not require.
<unk>.
We're we're we're learning a lot about I mentioned, the social media the inbound calls the outbound calls, but you know we are finding that a virtual tools that we already had and in many cases accelerated new tools are working well we're seeing some early success whether it's.
Zoom access webinars for for three B. enrollment or it student loans solutions workshops on line, we're reaching many of our educators quite efficiently I mean, obviously, we do have some agents who might be more heavily reliant on in schools.
Sales, but this is an interesting, forcing mechanism even for them, where they're learning to new technology in bracing things like electronic calendars that we had out there for awhile and you know some of them more traditional agents harder to get them to use these tools now they are and they're learning to like them.
And they're learning to see the value of how many educators they can actually attract with these tools. So in some way for some it's been a forcing mechanism. You know you also have to think about the fact that all though this did a quick in our summer schedule. You know our agents are used to having a certain.
Routine over the summer when teachers aren't teaching so it's it's a little bit of an early summer for US no doubt about it I think that in our supplemental world you will see some stress on sales tend to be more heavily worksite and that's an industry phenomenon.
Yeah, not just tourist man N.T.A. was however building in rolling out remote yeah process sees online applications systems direct mail campaigns. Many of those were already built and we're working really hard to accelerate the deployment, we do expect to see.
Some stress on the N.T.A. sales in the short term, but you know that we believe that's gonna be temporary we also thinks that there's potentially pent up demand for these types of products, especially you know people feeling the effect of of what out of pocket expenses do driven by.
Unexpected.
Events, I think you're seeing a lot of advertising from some of our larger competitors and actually that's helpful for us with our products as well on another front I'm thinking about you know educators in what this little due to educators that large you know, we we spend a lot of time with school districts with soup.
Her intentions with principles and we're hearing the whole gamut from some school districts actually have to hire more teachers in the fall if they're going to shrink classroom size and provide you know appropriate social distancing all the way to some districts may add.
Actually have some financial constraints, where they'll shrink the amount of their teachers, because you know a budgetary constraints and May go to you know bore of of a split schedule type of environment in kind of everything in between but for US we although we have.
You know about a million or so educator customers, they're still an an awful lot of headroom for us, but we're we're we're watching that we're watching that pretty closely.
Mm.
That's great thanks, very much <unk>.
Did you one follow up on on Telematics also have you seen.
And the opportunity for pushing out a little bit harder or greater acceptance about product, which has been noted by a couple of your auto peers.
Yeah, absolutely and with the onset of this really have talked an awful lot on to our agents and our customers about a great opportunity to drive penetration their mark any any additional comment.
Yeah, <unk>, what I that is I mean, obviously, we're operating off a small base. We we you know just got it started with this in the last year, but we have seen you know user data with the first four months of the year about a 25% increase in.
The number of registered users and half of that or nearly half of that has come in the last month. So we are certainly seeing I'm more interested in and not tick.
Interesting just as an aside did you know the you don't drive your score goes to 100%.
No I was not aware that.
[laughter].
Usually the houses on your phone.
[laughter].
I do I actually I have it I have I do have it now my phone, but have not been able to dry [laughter] [laughter].
Yeah anyway, thank you very much.
Thank you.
[noise] Oh next question comes from met Carletti with J.M.P. Please go ahead.
Hey, Thanks, good morning.
<unk>.
Gary snack one of mine there on the kind of operating in this environment, but I have one other and it relates to the investment income, particularly the the the guidance writing was about down about 15 year over year and the alternatives. Just hope you could help us the timing a little bit in terms of you is is there a lot.
Back on those alternatives what does it look like and kinda just trying to get the shape of the next few quarters right within that items.
Yeah, I'll have Ryan tape that that map, but there is definitely timing to that and obviously you're even in my remarks. You know we were operating with one you know with a one one month flag. So I'll I'll have Ryan expand upon that sure <unk>, you know or morals or oleo is comprised.
A little bit more than 30 bonds and it's spread across various strategies and structures <unk>, what I would say the vast majority of those ones are out of one quarter lag.
So when we look at the results and the first border the laws that we posted a 4.1 million on the limited partnership portfolio was comprised of one specific fun strategy across three funds that strategy is they invest opportunistically in public investment grade structured credit that sector of the fixed income.
Market has significant volatility in March and we still have significant spread widening.
The we mark that to market and it was 6.4 million of losses on those funds, we didn't see some rebounds in April, but obviously not that magnitude.
When I think about the remainder of the L.P. portfolio, which will be reporting on a one quarter lags. Those funds includes senior commercial mortgage loan funds or more typical alternative asset classes like infrastructure that inequity private credit private equity you know and these these are different strategies and they're they're exposed to.
Different drivers from from a valuation perspective, we've reduced our annual limited partnership earning songs into a range of 10 to 15 million I'm down from about 25 million previously because that does incorporate some expectations for evaluation pressure, which we would expect to see in second quarter.
Alright, perfect. The that's very helpful for the second second quarter Elsie most of what happened at first quarter and that.
Any yeah, I mean I'd heard of that is out of body part of that on a rebound you know.
Right up already recorded he's coming up so forth that would whatever that might be you would probably be more two three and then we've got to see what happens for now.
Yeah, I mean, the biggest drivers are gonna be raise premiums lower public market calms, both in the equity in debt markets and you know just challenges in commercial real estate in general economic stress or really you know the drivers of it but you don't from where we sit today things look better now than they did it again tomorrow.
Yeah. Perfect. Then then I'm going to follow on I apologize if it was I missed the very early comments <unk> <unk> did you guys. You know there was a lot of dislocation I mean did you did you find a lot opportunities to you know you guys have directs you talked about it a lot you know kind of you been you didn't know when it was going to calm, but you position the portfolio for.
Yeah, something like this the more recessionary time I'm over the past several years when it arrives can you talk at all about maybe some the actions you took opportunistically as you saw.
Assets in the market that you viewed as very mispriced or or so forth or or or was that really due to the quality and otherwise not really an opportunity.
No amount, we clearly saw an opportunity, but we approached it in a disappointment manner. We do believe that there will continue to be significantly more volatility as the economic stress is a pandemic become more <unk> more fully apparent that will translate volatility in a fixed income markets our longer term expectation.
For interest rates to remain at the low level, we see today or perhaps even go lower however, we do expects to just get spread whitening two 2%.
We put about $85 million to work Opportunistically and you can see that's a fraction of our overall portfolio value. Most of that was in highly rated investment grade portraits, where we thought yields north of four and a half on household names like Exxon and Bryson in names that we like I mean, <unk> opportunistically to Triple V.
Don't fallen Angels, we start yields north of 6.5% on craft type foods for instance, another really resilient pay for the portfolio. We also do that there's some structured credit and saw yields protein, 10% that was all high quality structured credit that if you're committed price based on our stress testing <unk>.
And you too you know take the same approach. This is the approach that we use back you know wait no nine we were disciplined and we layered in higher yielding assets. Some of the benefit of that continues the day in the portfolio and in light of those you know opportunities that Ryan just went through we did increase our original.
You know new money rate plan of three and a half to to four so we feel good about where we are there based on the money that Ryan and teams, but to work here recently.
Great well. Thank you for the color and you know congrats I start to there.
Thank you thanks ma'am.
This concludes our question and answer session I would now like turn the conference back over to Heather Whetsel for any closing remarks.
Thank you brand and yeah.
<unk>, we are absolutely looking forward to connecting the dollar you know in the coming days, a week <unk>, but it'll be a good chance through what we're doing.
<unk> <unk> <unk>, we'll do it again, thank you again.
The conferences now concluded. Thank you for attending today's presentation you may know disconnect.
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Oh.
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Yeah.
Hmm.
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Yeah.
Yeah.
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