Q1 2020 Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to campers first quarter 2020 earnings conference call. At this time, all participants are in listen a little bit later people conducted a question and answer session and instructions will follow at that time as a reminder, the cost interest being recorded for replay purposes.
Like to introduce your hopes for today's coal Christine Patrick Tempers, Vice President of Investor Relations missing Patrick you may be good.
Thank you operator, good afternoon, everyone and welcome to campers discussion of our first corner 2020 results.
This afternoon, and you'll hear from Joe locker, Kemper as President and Chief Executive Officer, Jim Mckinney, Campers Executive Vice President and Chief Financial Officer, and Dwayne Sanders Tempers Executive Vice President and the property and casualty Division President will make a few opening remarks to provide context around our first quarter 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 Bus Shelley Tempers Executive Vice President and Chief Investment Officer, and Eric Sternberg Tempers Executive Vice President then and life in Health Division present them. After the market close. This afternoon, we issued our earnings released and publish our first.
Earnings presentation financial supplement and form 10, Q. you can find these documents on the Investor section of our website at temper dot com or.
Our discussion today may contain so we're looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Statements include but are not limited to the company's outlook and its future results of operations on financial condition.
These statements May also include the impacts related to the coded 19 pandemic, our actual future results and financial condition may differ materially from these statements for information on potential risks associated with relying on forward looking statements. Please refer to our 2019 form 10, K., our first quarter 2020.
10, q. as well as our first quarter earnings release.
Afternoons discussion also includes Nongaap financial measures, we believe are meaningful to investors one touch measure I would like to highlight again is as adjusted for acquisition. It is clearly important to understand I recorded results, including the impact the Infinity acquisition has to come for overall. However, investors have also expressed an interest in under.
Standing the underlying organic department of the combined businesses.
Since our ads recorded financial don't include Infinitys historical information prior to the closing of the acquisition and our current results include the impact of purchase accounting the underlying trends or not easily visible in an effort to provide insight into the underlying performance of the combined businesses, we also display or financials as adjusted for acquisition.
This few removes the impact of purchased accounting and includes historical Infinity information for periods. Prior to the closing can be acquisition more easily provide a meaningful year over year comparison.
And our financial supplement presentation and earnings really it's we have to find and reconciled all of the non gap financial measures to gap where required in accordance with I.P.C. rules you couldn't find each of these documents on the investors section of our website temper dot com.
All comparative references will be made to the corresponding 2019 period unless otherwise stated.
Finally, I would like to note the due to the social distancing practices, but Kemper enacted in response to cope with nine P.M. crisis or call participants are not in the same location. This may cause the question and answer section of our call to feel disjointed at times, we apologize in advance and ask for understanding from or less nurse I will now turn mccall over it to Joe.
Oh.
Thank you Christine good afternoon, everyone. Thanks for joining us today before beginning or usual discussion, let's take a few minutes to recognize these unusual times.
My first like to acknowledge the human told US pandemic is taking and express our thoughts and compassion for the individuals and families that have been impacted what is your illness that unemployment or those working on the front lines.
We continue to move through the dynamic circumstances of the covert 19 crisis I want to acknowledge the efforts of our 9100 employees.
I'm very proud of the way our team is reason to the challenge and focused on supporting the wellbeing of all of our stakeholders.
On page three I'd like to highlight a few in a way campers responding to the current situation.
Our first priority continues to be the health and safety of our customers employees and partners as well as their family.
In the early phase of this crisis. The focus was on doing our part to help flat and the curve and protect the healthcare systems availability for those who might need it.
We acted quickly to engage in social distancing practices.
We have nearly 95% or employees working remotely or continuing to meet the needs of our customers at normal service levels.
Where employees in the office, where maintain inappropriate social distancing to keep everyone stays unhealthy.
The 15 per cent credit for auto policyholders towards their April and May premium work standing Grace period for any of our customers experiencing financial strain.
Instituted a commission stabilization program for our Kemper lights employee agent, who were forced to temporarily suspend new business sales due to the crisis.
We're also providing assistance to enable our community speak urgent needs created by the corporate 19 crisis.
Company recently announced the commitment of a million dollars to support organization focused on critical issues, including food insecurity and supporting front line medical personnel. These types of organizations are doing extraordinary work.
We're proud to support our customers employees and communities at the same time, you maintain a strong focus on affected execution and continue to grow our business to meet the needs of all our stakeholders.
Now, let's turn to page five to discuss our quarterly results.
Quarter with January and February continuing the solid top line growth we experience throughout 2019 before the impact of the covert 19 crisis started to appear in March.
Overall earn premiums grew nine per cent in the first quarter in line with growth rates, we experienced in 2019.
First quarter net income with $64 million were 95 cents per share adjusted consolidated another operating range were 163 million or $2.43 per share.
We generated a rolling for quarter return on tangible equity, excluding unrealized gains of 20%.
Or ability to generate that level of return through this environment speaks to strengthen performance of our model treaty ups and downs of business cycle.
Especially business on top line growth, a 13% driven by broad grows across all geography continued geographic expansion and enhanced new business opportunities in Florida, resulting from the exit of a competitor.
You were able to maintain solid top line growth attractive margins with an underlying as adjusted combine ratio of 93%.
Operating results from our preferred insurance segment improve this quarter is underwriting actions in the repositioning of our book continued in earnest.
Giving a modest size of the business in efforts to me into enhancing refined products. We offer we continue to expect the higher level of volatility and quarterly results.
That said, we are pleased with the progress reflected in this quarter's financials.
In our life and health segment, we welcome to Eric Sternberger, the divisions, New President, Eric breadth and depth of experience with in life and how will help us continue to thoughtfully grow these businesses.
From a financial standpoint, given the backdrop of the current environment. The segment deliver it another quarter of solid earnings and continues to provide diversifying cash flows to the organization.
Now, let's turn to Kemper financial strength.
Over the past few years kemper's developed into a strong and still organization that as a source of security first stakeholders and uncertain times like the one we currently fish.
Continue to be recognized by rating agencies for our improve performance on please during the quarter S. and p. upgraded or key financial string trading day, it'll be just follows the positive reading actions of fiction and best that I noted on our fourth quarter earnings cool.
Our balance sheet, a strong with a low debt the capital ratio, 17% no near term debt maturities, a diversified investment portfolio and significant committed contingent capital by institutions classified as cities.
April 1st we repurchased $110 million, just Kemper stock this roughly equates to both the shares issued in conjunction with the redemption at a hybrid notes and 2019 and the after tax of which we received rainbow.
This quarter.
With that altering the call over to jump to discuss our <unk>.
Thank you too.
Oh and good afternoon to everyone on the call I'd first like Taco Joe's comics acknowledging the human toll. This pen document continues to take an expression.
It's my sympathy for the many individuals and families that have been it affected.
Turning to the results for the come with 64 million compared with 155 million into prior year, just accounting adjusted <unk>.
The net income group to 163 million that by the decline and fair value of equity and.
Comfortable securities driven by the global financial markets sell off.
On page seven.
Isolate the keys sources of volatility, including 89 million, we received as satisfaction of the remaining bellman our results in a quarter dumb.
Straight that are business is strong and continues to perform well with solid financial results.
Turning to pay J.
<unk>.
Challenging time, I'd like to take a moment to remind individuals of our ongoing focus on risk management.
Big picture, we strive to maintain capital and liquidity sufficient to sustain this test to be clear the capital and liquidity levels referenced here are to uphold target credit ratings versus solvency.
More conservative framework to manage risk.
The first task isn't annual stress sufficient capital on liquidity to meet the needs of our operations through a wanting to have.
Hundred year about.
The second trust simulation isn't over the life of the liability assessment that is intended.
To capture the liquidity and capital needs through a one in 50 year about like the Federal reserve stress test our one in 201 range of stress events, including Mark could setbacks operational challenges regulatory uncertainties and catastrophes.
Approach helps ensure we are a strong.
And company through challenging economic periods.
Show touched on our focus on strengthening the Kemper franchise in a risk management capabilities over the past six months to ratings upgrades from S.N.P. and pitch and improved outlook for me and bust.
With those reference points I would love data points that highlight the strength of our balance sheet first.
And liquidity many multiples of are fixed costs.
Or diversified model is designed.
Little economic periods.
The quarter operating cash flow with 62 million.
Final item is our attractive capital stock is highlighted by strong capitalization of our insurance entities and that's a capital ratio, 17% and no near term debt maturities or balance sheet as strong with significant financial flexibility.
And important item to know is our recent stock repurchases.
Communicable first we were purchased 110 million of Kemper stock.
101 million of these repurchases occurred during the first quarter.
Has shown mentioned and his comments this amount roughly equates to the after tax amount of the C.S.C. payment and the shares issued in conjunction with the redemption of the hybrid notes in 2019.
When we issued those shares we were seeing and expected to continue to see tremendous growth and momentum in our specialty auto business and there was uncertainty around the timing and amount of the proceeds from the C.S.C. judgment that could help fund this growth.
But the proceeds in hand, we felt the right thing to do for our long term shareholders, which the repurchase D. shares did so at an 18% discount to issuance price.
We have not repurchased any share since April 1st we have roughly 130 million remaining on our 300 million share repurchase authorization from August 2014.
This quarter the board expanded this authorization by 200 million, providing roughly 330 million and repurchase capacity.
What we do not have near term plans to repurchase additional shares his temper trade significantly below what we believe the company's intrinsic value is we have the capacity and capabilities to capture this value for a long term shareholders.
Turning the page nine.
Again want to highlight some of the capital of metrics, we truck closely including tangible book value per share tangible return on equity in cash generation, which together reveal the efficiency of our capital appointment decisions and intrinsic value creation.
And the quarter tangible book value per share excluding on realize games was flat compared with the fourth quarter.
Solid operating performance was offset by mark to market impacts from market volatility.
Said are returned from Maine strong within industry, leading for quarter routing unrealized game of 20 per son.
That investment income grew slightly over the first quarter of 2019 to 86 million.
Grow in the first quarter.
<unk> investments and our core portfolio.
Collected on a historical basis and the charts on.
This page we made this presentation.
You can change as a result of the increase Alex stations, we have made to the investment class.
Yeah annualized book yield of the portfolio declined to 4%.
Decreased was largely a result of this quarter's global market movements.
Similar to many of our peers given the current market volatility we believe it would be helpful to expand our discussion to provide additional transparency into our investment portfolio.
Page 11 offers more detail on the fixed income categories of our portfolio that are most exposed to the economic impact of covert 19, we've identified these areas as retail energy transportation and leisure.
As you can see from the swine are exposure to these sectors is less than 1% of our total investment portfolio.
They just well diversified and concentrated and above investment grade assets.
Wanting to page 12, you can see more detail on our below investment grade portfolio is diversified across different acid types and at 5% of are fixed income investment is a relatively small portion of our overall portfolio.
Page 13 gives more detail on our C. O exposure.
A majority of the portfolio is invested in highly rated assets with 83% rated a. or higher.
Finally on page 14, we break down the largest components of our alternative holdings. The primary focus of our alternative portfolio is current income generation.
Diversified across strategies focused on private credit private equity and hedge funds.
Similar to others roughly 95% of this portfolio has eight reporting lag. This means that a portion of this quarter's global market disruption will lead into next quarter's investment we are well position to be a source of strength for our stakeholders through this environment.
And with that I'll turn the call over to Duane to discuss the results of R.P.M.C. segments.
Thank you Jim and good afternoon, everyone.
Let's begin with the specialty segment on page 15.
Well do segment was highlighted by another quarter of strong growth segment income or 60 million was driven by net earn premiums of 100 of 823 million.
An increase of 13% from the prior years quarter.
Policies imports increase 10 per cent, excluding the sale of classic car.
As you can see in the chart on the top right of the slide we continued to experience strong growth across all significant geography.
Are trailing 12 months growth with six per cent in California, 23 per cent in Florida, and Texas and 42% in our expansion States. As previously noted, Florida has been a robust growth market for us. It was further amplified in the corridor by the exit of a competitor.
Grows in the first two months of the quarter was robust and in line with our recent results. This growth rate slowed in March as stay at home orders related to that covert 19 crisis were implemented.
As part of our response to the crisis, we have provided 15% credit to our auto customers towards their April and May premiums totaling roughly 100 million.
Reflecting flute fewer miles driven and the resulting declining frequency.
We continued to experience grow at attractive margins.
Within as is adjusted underlying combined ratio in the quarter of 93%.
During the quarter losses in the segments were impacted by three items first in anticipation of increase binds with new business, we increased headcount with our claim staff to support this plan gross.
We expect this do normalized throughout the year.
Second we recognize they lost the very development due to the changing and macroeconomic environment.
This includes among other things changes in used car values changes and salvage values and the related impacts around repair costs. Lastly, we recognize day legal item related to Florida pet.
The long term growth outlook for their specialty segment remain strong.
Tailwinds, we have experienced over the past few quarters are intact, but to cope with 19 situation has created some near term watch items.
Burning two they preferred insurance segment on page 16.
Segment income was 18 million for the quarter within underlying combined ratio of 92%.
Compared with the segment income of 3 million was an underlying combined ratio of 96% and the first quarter of 2019.
Segment income increased do abroad array of profit improvement actions taken in our auto in home books that have resulted in lower overall lost activity.
While we continue to make strides towards reaching are preferred insurance segment profitability targets given the relative size of the book, we expect results to remain volatile for a period of time.
Altering the call back to Joe.
Thank you Duane turning to our life in health results on page 17, the first quarter to segment produce pretax income of $27 million, which reflects pressure and global economic markets in packing net investment income and a couple of one time items in the quarter. There was a 3 million dollar impact from new sales disruption an employee agent Commission stabilization.
As a result of covert 19.
This was offset by refinement and R.C.E.I.S.
Earned premiums increased two per cent, reflecting our focus on growing the platform is the diversification benefits from the combination of the life in T.N.T. businesses continue to provide strategic value through enhance capital efficiency.
Turning the page 18, I'd like to spend a few minutes walking through key areas in our business that have been it's been impacted by the code at 19 pandemic.
[noise], it's still too early to determine how long the crisis to laugh and the potential outcome.
Learn more in the coming months.
Turning to our especially in preferred segments at the end of the first quarter have had an adverse impact on new business written shopping behavior significantly decreased in the second half of March.
Decrease in miles driven coven 19 restrictions were put in place has resulted in a decrease in auto accident frequency.
This has been somewhat offset by an increase in severity.
We reflected the dropping frequency with a 15% premium credit for auto policy holders in April and May.
Given the market dynamics currently in place it is reasonable to expect modest expense ratio presser, driven by increases in bad debt and lower premium and see volumes.
There's a significant amount of opportunity for Kemper in our specialty auto segment growth prospects remain in both existing expanding geography is where competition is fragmented. We can take believe this provided growth tailwind, although the current social and economic environment make the near term timing around this less certain.
Turning or a life business, we temporarily suspended new business sales in late March with a gradual resumption expected in the second quarter.
At this point in the crisis, we have no meaningful information to communicate uncovered related changes to the mortality and morbidity expectations of our book.
In closing campers well positioned to perform through this environment with a strong capital of liquidity position.
We have a balance sheet highlighted by a low debt to capital ratio no near term debt maturities insignificant committed contingent capital. In addition to the mixed of our underwriting businesses provide strong cash flow diversification and added financial flexibility.
I'm proud we had the ability to continue to serve our customers and act as a source of strength for all our stakeholders through the covert 19 crisis.
Insurance is an essential function in crisis situation, we're here to deliver on our promise to our customers really need the most.
And now altering the call back to the operator to take your questions.
Yeah.
We will now be give the question and answer session.
The question you May press stars and one on your touched on but.
If you're using a speaker phone please pick up your headset for pressing the keys withdraw your.
That's right.
<unk>.
[laughter].
<unk>.
First question today comes from Great computers with Raymond James. Please go ahead.
Good afternoon. They can we just good while you're walking through the Kobe considerations first of all.
Can you walk through the mechanics of how the.
15% souls and we'll.
Spread across <unk>.
Flawed or or just special too hard.
Or if there was no so.
Sure happy to Greg, We we anticipate accounting for this as a a premium credit.
And it will go through the lines that it impacts so.
The auto line, where where appropriate.
Preferred auto specialty auto in commercial auto.
Now we may get guidance from individual states that they you know we we have to file a these items again, we we a file that as a premium a return.
And a premium if we get a particular state that had some objection that may that may move the the number a little bit but.
That is what we expect and in most cases the state to acknowledge that was okay.
So I guess it'd be another way to look at this is the the ordinary acquisition costs or ordinary lost for shows won't change, it's just the numerate or the stranger correct.
What we what we expect is it to return of premium for for the month of April and the month of May So the premium that would've been charged in that month, you will still get the losses that we get through will still get the commission. The expenses, we're not we're not reducing commissions as a result, so you're correct. The the the premium number will change.
Cause the ratios to change.
<unk> great. If you think about it you know we've historically provided kind of information in the past to help you get a normalization.
Well, we certainly haven't Pete up all of those items at this stage is we you know continue to kind of from things out. My guess is that will you know similar to what we did with purchase accounting. Another on his tried to give you. The pizza so that you've got kind of a normalize view and can appropriately assess the business.
God. Thanks, Thanks for that.
Or you also said in your prepared remarks that you're doing something for your wife pages are to me you send them in it all now.
I'm sure in our life business, we had employee agents as you imagine there's a fairly you know complex compensation program for those folks, it's a combination of new business and and retention measurement and they they are in a business, where they're collecting premiums as well so.
All of those things go together, there's differences in some cases by product a nuance is under there since we we suspended new business sales starting in late March that causes a significant compensation drop for them from a tiny perspective.
And do we put in some some commission stabilization programs. We've done this in the past, which is smaller groups of agents, we never had to do a country wide, but it's a hurricane came through a geography and we might have that group of aging <unk> shut down from a new business perspective for some period of time, we've done it done it there before and.
We're we're sort of running things through through that way again.
Oh, so let's just to.
The sale fronts, you know we're hearing.
Across the board that there's for for our new sales or maybe come at you know how the current <unk> or add additional color I know you to provide some initial comments on it but provide some additional color on how new business trends are working through April and May and.
Maybe tie that in my <unk>.
Oh I'm sure, we I think as as virtually everybody in the industry has seen or commented, we so I slow down a new business sales starting at the tail end of March he'd worked its way into April.
You know folks were staying at home they weren't shopping for new cars. They were focused on other things and in many cases agents may not have been ready to figure out from a service perspective, how to deal with those calls or they were dealing with their own issues as we've gotten through April and into May we're starting to see the economy.
Start to in different geography picked back up we're seeing people engage in more miles driven a little bit more shopping agents have adjusted their operational capability. So we're starting to see a gradual increase in that shopping.
During that time period we've.
We've seen modest you know changes and retention, but nothing I would've I would've brought to an attention to the the thought was worth worth note around retention and.
Again expect them to largely operate similarly, as we look at the second quarter.
Got it or my last question will be the the last page up your presentation.
Is it slide 32, and I'm going to focus on the it's just for us to personal auto slide and the bottom line, there, which is the ads adjusted the under long combined ratio.
You walk through where you know the trends why we're seeing it up or crime than the adjusted his no is that expected to stabilize would give us some color on what's going on there plus.
You know happy to <unk>.
I think is helpful is also to think about this page in.
In relation also took pages 37, and 38 of the supplement what you're going to get out or what you're going to see there is about.
60 to 70 basis points of it is just related to last quarter or last year's quarter had you know, which favorable purchase accounting and development Ah Ah 20 basis points are where you're looking through there on the combined ratio and then this quarter, it's minus 0.7.
So basically that 90 basis point changes one element that starts rolling through that makes those things a little bit confusing from a service level. The bigger elements that you're seeing is really just they change it a little bit of the development more one time in nature and others. If you look at the court or you know you've got to.
One point changing the overall underlying combined ratio for the versus last year for the private passion or auto.
Business, that's coming through and you saw it <unk>. We're last year, we had some favorable development. This year, you've got a little bit of unfavorable that unfavorable it's primarily driven by three things as Dwayne had mentioned, we with all of the growth that we'd been experiencing a as well as what we you know plan would continue to.
To be that wait for the remainder of the year. We wanted to get ahead of that growth to make sure that we had our training and other elements. That's resulted in a little bit of Ain't no pressure. That's inside of there that will normalized throughout the year and again was related to what we thought would be you know total new business volume throughout the year and what would be the best way.
For us to have our claims department prepared for that and get the best outcome Ah for shareholders again that item will normalize I would think about that in totality, you've kind of being you know where you're looking at maybe less than a half point is you're going cross.
You had some other elements that are out there one was essentially related to environmental factor in our picks a is dwayne mentioned on a total.
Losses in the salvage value that we saw in conjunction with this environment you've had a tremendous slowdown obviously in the used car market part demand other elements from that we thought it was prudent at this stage to you know refined and enhance our estimates in terms of what we.
Thought was the likely recoverability or our assumptions around that and you saw that roll through this quarter that was one of the bigger drivers then the other item that was going through their their Dwayne had mentioned as part of his comments was some development as it related to eight Florida, Pip legal case and a chain.
Engine interpretation again.
Really a one time item that would be out there and it getting kind of a affecting the prior year in summary, what you're looking at is that annual pick a that you're seeing instead our financial.
That 93, one that should be a good number that's how I would think about it I think about a stabilizing run that now we'll see what the environment brings certainly don't have anything that would update our numbers from that point, but again, if I were doing the comparison I'd be doing the 93, one over the prior years 90 to one and I'd be looking at.
One point difference in total you know kinda year over year, which we feel pretty good about giving both our growth and other underlying assumptions that are coming through.
Excellent thanks for answers or someone else has questions.
Thanks for reading the appendix.
And our next question <unk> with J.M.P. Please go ahead.
Yeah. Thanks, good afternoon.
So just two questions. One is just a clarification on greg's just on the first question about the the hundred million coming back April may. So just the bottom line is <unk>, we'll see that come out of both written and earned in the corridor you know spread across the auto lines is that that power.
You presented in the financials.
How I expected to be a present in the financial there are a few areas, Matt where a word making sure and confirming that you know from a state perspective, and other that it that it won't be an expense type item you've seen obviously a diversity of practice in terms of how this has been handled for others.
Either way, we'll make sure that it's called out so that you can get to watch effectively will be a normalize number Ah. So you can tell what's happening from both the relational perspective, another business, but if I were modeling and if I were starting I would be starting with the assumption that Joe said that it's coming through the premium we think that's the right place for it kind of given the research and that.
We've done today, but again items are still developing and if there's something that is different could come in on expensive sure, but we would call. It out is that that's the case.
And it would go through both written in and around in the quarter.
Right perfect wonderful or by other question I just wanted to go back to I guess some of your comments Joe on flight 18, and specifically on the the the comment about the the bad debt expense I was hoping you could go into that a little bit further and just kinda walk us through kind of the the puts and takes and how we should think about you know insurance Commissioner Amanda.
It's too not yep cancel anybody for non payment you know how you guys managed credit in terms of how much premium you might collect up on how much cash you might be holding versus particularly in specialty auto versus maybe more preferred where I'm guessing.
No more page ago anything you just help us there and how we should think about that.
Sure and I'll I'll I'll go and sort of reverse order on those from a preferred perspective.
We are building plans and prophecies that are generally consistent with most preferred care carriers.
While we do typically expect folks to make down payments. There there is a greater percentage of folks who are pay as you go.
The billing periods, often will have or that the only process will often to allow way grace period to occur there was somebody might be out of equity.
We don't tend to find that to be a large credit risk. The business. There's some you know very low level of bad debt, that's running through on a regular basis.
You know of a percent or so and we would not expect a.
Very large change we expect some change, but not very large change inside of that preferred you know environment. Maybe it's you know 50 basis points or something like that but not a ton inside of the specialty auto that business is is characterized typically by more credit challenge customers or customers who are more.
More price sensitive as a general rule.
We we work to not be out of equity inside of that business.
And and you try to avoid letting that happen.
Because states has required or encouraged carriers to be more responsive to customers that they are having some financial difficulty and allowing grace courage to occur we are recognizing the difficult economic times in the the crisis nature of this pandemic and are responding appropriately.
That will cause us to extend more credit than we've traditionally would have in our specialty auto business as a group the the that population tends to be less credit worthy and we would expect more bad debt to run through as a result.
Okay, and then just a a <unk> <unk> wherever the impact on the expense ratio wasn't the court or should we think about that as you guys put up in a cruel this quarter for what you think the whether it's for the year or some some amount of time beyond just the quarter is and and we'll see as we go for.
Word or is it more of you know that's what you pick it is for this quarter and we as long as this goes on we might have to live with that higher level of provision in your next quarter quarter. After as things get better it'll come back down in normal Yep, Yeah being good accountants met we can't actually right off premium that they know more than the credit we <unk>.
Tended. So all you can do in the corridors, what we had in the quarter.
So we we did ramp up our provisions for bad debt to some degree knowing that the that we were getting out of equity, but it was not not the full impact that we would expect to see in the second quarter and we would expect it to to occur only in the quarters, where it occurs it's those grace period.
Ads are extended beyond the second quarter, we might see that bad debt go up for for some period of time, if we really have a 60 day window or 90 day window that states are asking for this and we're we're executing on it you'll see all the bad debt in that time period, and then we'll move back to our normal practice of of looking to be inequity.
And being very time sensitive and responsive so.
Long answer they are the short answer.
Is you're gonna see a little bit of it in the first quarter, you'll see some some bad debt spike in the second and I would imagine we'll go back to more normal levels in the third and fourth.
Very helpful. Thank you and the best of luck.
Thank you appreciate it Matt.
And our next question come from Paul do so with Piper Sandler. Please go ahead.
Afternoon, Nice to you guys are season.
<unk>.
Yeah, Great got most of my questions, but the only one I have left is whether you could talk a little bit about the the March frequency differences between nonstandard the for for what we stand or business and the commercial businesses.
Difference.
Books experience amongst those classes about him.
Yeah, you know through through March we saw up frequencies declined in all of the businesses.
We saw a greater frequency declining preferred than we did nonstandard auto.
I think commercial cell somewhere in between in between those two they were were significant in all cases.
But again more more significant in preferred.
Right that's guys appreciate the agreement.
Terrific. Thanks, Paul.
And our next question comes from sets resin birds from U.B.S. Please go ahead.
Hey, guys, Thanks, and likewise in most of my questions and answers here, but in this one thinking about you mentioned the benefit from the carrier and Florida able to pick up that this nasty do you have a sense for how much of that business you were able to acquire no kind of looking ahead, if there's still more.
When from that or is that kind of behind us now.
Hmm.
It you cut out a tiny bits that this was the the wind hidden question on Florida.
Yes, yeah, how much of that business do you think you were able to pick up in it that sort of now behind us. There's there's still some benefits either I think that the the there's still probably some more kicking around in the marketplace.
The bulk of it would would've been behind it's just because those folks were nonrenewed on and had to go somewhere.
And and move move again somewhere or they are uninsured. So we would expect the bulk of that has worked its way way through the system you might see a little bit more running through through in April time period.
But the the the bulk of the extra to snake.
Gotcha, I mean, it it's hard and L. exactly what it was you know we might have had a a good shot at telling you that if it was sort of a normal quarter things got just got wacky from a new business volume perspective.
And it gets a little hard too hard to tell.
What it's exact impact was in the core.
Understandable I guess picking on the top line, they're thinking about sort of your your geographic expansion strategy.
They're in the impact that it'd be changed sort of your perspective on various states given cove it and maybe just your ability to work with regulators at this point is there anything to be kind of shouldn't thinking about there in terms of your expansion.
Yeah No. We're we're we're seeing no impact at all on our on our view of appetite of geography, no impact on at all on our relationship with regulators or their thought process. He's.
The only impact is it just a general market environment item, where where there's just a slowdown in new business in a change in activities. Those states. We'll all is is you know true all of US they've read will will restart it slightly different rates.
On and reemerge. So you know when when we get back to sort of a normal normal hell is not clear, but in in all of the cases.
You know, our Corestates, California, Florida, Texas in our expansion states or growing and all of them.
It's just at a slower slower rate, we we ultimately think the tailwind that we'd got behind us in this business is still there. We just think that the the entire environment will slow down for a little while.
Got it.
Okay, and then shifting to give a good good contacts on what's going on with salvage in personal likely us, but your whole favorable development and commercial auto think you're attributed in the in the computer liability trend.
Could you help us maybe think about what's going on there is that more of a <unk> settled or something we've heard from others or I guess, what's the sustainability of what you're sitting there.
Mm.
No I mean touches community of the the <unk> development.
Yeah, we had certain expectations both from a number of claims and other that we would.
Would come in the reality is we've.
If you look at this business line for the last two or three years, we've over picked to some degree there's no real difference here other than we're winding up in a a favorable position there, but there's not.
Yes, there's been some frequency improve it out but I think that's more driven just by overall underwriting practices other things than it than it really being a market trend per se.
That's flowing through the book.
Yeah. When you when you look at commercial vehicle, it's a smaller a smaller book a business. So when you try to just pick the the reserves in the development on those it just gets a tiny bit more a tiny bit more volatile from that perspective, you know we've had time periods, where there's been a little pressure we've seen some favorable development. There you know as most of us knows.
No actual rays are generally quick to spot trouble and react quickly and there are a little hesitant to just see capability.
Come through because they really want to prove it so that just works its way out a little a little slower and again, we're we're always making our best estimate, but anybody who spend any time working on claims knows they're more likely to get worse than they already get better. So that just just slows itself a little bit. So it's just a normal ordinary course stuff.
Sure got it makes sense I just bought quickly last one Jimmy I think you mentioned in your remarks, you guys report probably are also on the on the lag and there's still some so to roll through next quarter any kind of size you can give to US is how are we should be thinking about that for two or two.
Mm.
No it's a little bit hard to you know fully pick that you know what's going to end up being some combination.
Kind of equity market performance you know if you look at the yeah equities, you might think a little bit about a Russell 2000, and then use that as a proxy you know for the private credit high yield debt markets. I think you can use that is a proxy and.
<unk> that'll give you a a range a little hard to tell I think we're in a favorable potential position relative to other alternative equities in certain cases and others. We may see some unusual economic conditions. So it's a little hard so we actually have the data to be more specific that I don't mean to be.
Wishy washy on that I, just I think we're gonna have very much a industry like performance going through there.
And I think it's going to read pretty close to those indexes.
But until I actually C.D. data come in I I I hesitate to give you a specific answer given sometimes there's a disconnect between those things.
Mm.
<unk> so that that's that's helpful color that good.
And once again with you'd like to ask a question. Please press dogs and one.
And this will conclude or question and answer session I'd like to turn things back over to Christine Patrick for any close anymore.
[noise]. It again. This is this is Joe locker. Thank you all for for your time and attention today, we appreciated and then stay healthy. Thanks.
Mm.
The conference is not included thank you for attending say presentation human I'll just <unk>.
Yeah.
[laughter].
[laughter].