Q3 2021 Kemper Corp Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to Compass that quota 2021 earnings conference call. My name is Charlie and I will be coordinating your call today.
At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
As a reminder, this conference is being recorded for replay purposes, I would now like to introduce your host for today's conference Cool Micro merchant Ivory campus, Vice President corporate development and Investor Relations.
Mr. Marinaccio you may begin.
Thank you Charlie good afternoon, everyone and welcome to Kemper's discussion about third quarter 2021 results. This afternoon, you'll hear from Joe Lacher, Kemper's, President Chief Executive Officer, and Chairman, Jim Mckinney, Kemper's Executive Vice President and Chief Financial Officer, and Duane Sanders, Kemper's Executive Vice President and.
Property and casualty Division President.
I'll make a few opening remarks to provide context around our third quarter results and then open the call for a question and answer session.
The interactive portion of the call.
Sensors will be joined by Jamba, Shelly Kemper's Executive Vice President and Chief Investment Officer, and Erich Sternberg, Kemper's Executive Vice President and life and Health Division President.
After the market close this afternoon, we issued our earnings release and published our third quarter earnings presentation financial supplement and Form 10-Q, you can find these documents on the investors section of our web site Kemper Dot com.
Our discussion today may contain forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
These statements include but are not limited to the company's outlook and its future results of operation and financial condition. These statements May also include impacts related to the COVID-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 2020 Form 10-K, as well as our third quarter earnings release.
This afternoon's discussion also includes non-GAAP financial measures, we believe are meaningful to investors one such measure is as adjusted for acquisition.
No I understand our reported results, including the impact of the American access acquisition has to Kemper. Overall. However, investors have also expressed an interest in understanding the underlying organic performance of the combined businesses.
Since our as reported financials don't include American access as this historical information prior to closing of the acquisition and current results include the impact of purchase accounting the underlying trends are not easily discernible.
In an effort to provide insight into the underlying performance of the combined businesses. We also display our financials as adjusted for acquisition. This view removes the impact of purchase accounting and includes historical American access information for periods. Prior prior to the acquisition to more readily provide.
A meaningful year over year comparison.
And our financial supplement presentation and earnings release, we have defined and reconciled all the non-GAAP financial measures to GAAP, where required in accordance with SEC rules.
Can find each of these documents on the investors section of our web site Kemper Dot com.
All comparative references will be to the corresponding 2020 period, unless otherwise stated I will now turn the call over to Joe.
Thank you Mike Good afternoon, everyone. Thanks for joining us today.
Earlier today, we reported results that continued to be impacted by the pandemic reopening.
The earnings were below our long term expectations and as a result disappointing.
We previously discussed the anticipated challenges of the current environment, which is dynamic and changing rapidly.
Against this backdrop, we're focusing on minimizing these impacts and optimizing the business.
There are two groupings of items impacting our results this quarter.
One the pandemic and the integrated impact of restarting and economy post lockdown and to a group of items, which are expected through cycles, but unpredictable on a quarterly basis.
A few broad comments on the first grouping before we dive into details will cover the second grouping throughout the call.
Well when you look at the impact of the pandemic.
These are unprecedented times for the industry.
Historically in P&C theres been a rough balance between loss cost inflation and rate inflation.
The dramatic frequency reductions at the start of the pandemic led to an extended period with effectively no rate increases.
Well accident volume was historically low Kemper along with most major companies delivered premium rebates to auto customers.
The reopening led to rapid increases in auto frequency. It also saw global disruptions in supply chain.
Together, leading to severity and combined loss cost inflation at levels, we haven't seen in the industry for over 30 years.
Across the industry Theres currently no significant rate in the system to offset this loss inflation.
Our system is out of equilibrium and.
In some ways, it's like turning off the water supply to your house during our remodeling project, it's fine while you're working but when you turned the water supply back on water doesn't immediately flow from each tap you.
Can you hear some clanking you get some are some spray some gurgling and a few surges of water before normal flow was reestablished.
And you have to turn on all the taps in the house to clear the pipes running to each faucet.
It requires some work some time and a little spray to restore the equilibrium.
That's where we are right now.
We're all asking a few big questions. What's the overall level of loss cost inflation or severity increase when will it stabilize to a new normal and how quickly will rate increases be approved and be earned into results.
I know that last quarter, there was a broad view that inflation was hopefully transitory.
Like most we revised our view in the last 90 days and see it as something we will be dealing with for a more extended period of time.
In our life business, the delta varying increased mortality to levels last seen near the height of the pandemic.
Our results remain in line with National experience with increased vaccination rates advancements in medical care and strengthen natural immunity, we anticipate moving from a pandemic to an endemic resulting in a return to more normalized mortality rates.
I'll offer some additional thoughts on these macro issues later in the call.
Moving to a few specifics on the quarter, Please turn to page four.
We generated a net loss of $75 million or $1 18 per share as reported.
And 69 million or a dollar eight per share as adjusted.
We also produced an adjusted consolidated net operating loss of 76 million dollar for dollar <unk> 19 per diluted share as reported and $69 million or $1 eight per share as adjusted.
Return on tangible equity, excluding unrealized gains was 3%.
This is below our target return.
As highlighted earlier the impact of the reopening and other environmental challenges continued to negatively impact these.
We are actively deploying corrective actions to restore our target margins and returns our.
Our balance sheet and business model remain well positioned to navigate through these challenges.
Turning to segment results.
As discussed given the environmental headwinds impacting our P&C segments, our focus is on restoring them to target profitability.
Our life and health segment, we are seeing higher demand for our products and strong policy retention.
Although we experienced a reduction in COVID-19 related mortality last quarter, we saw a spike this quarter as a result of the Delta variant.
Overall, the business remains positioned for long term profitable growth.
In summary, we are taking the actions necessary to combat the environmental challenges the P&C industry and our businesses.
We along with the rest of the industry are repricing, the pipes and restoring equilibrium in the system.
The benefits benefits of these actions will take time to fully worked their way into our book.
And on the life side, the Delta Varian has caused another spike in COVID-19 related mortality.
Our strong balance sheet and business model enable us to continue to navigate the current environment and position the business for growth in 2023.
I'll now turn the call over to Jim to discuss our third quarter operating results in more detail.
Thank you Joe turning to page five environmental headwinds led to challenged financial results, we reported a net loss of $75 million and as adjusted loss of $69 million to reported consolidated net operating loss of 76 million and an <expletive>.
Adjusted net loss of $69 million. The corrective actions, we have taken and are taking in response to higher frequency and severity will over time return our auto business to target profitability. In addition, as the health impacts of Covid Savant subside life mortality and benefit costs will revert to normalized levels.
Turning now to tangible book value per share, excluding unrealized gains tangible book value per share declined $3 and 27 tons compared to last September $3.11 of the changes related to AC and a corresponding goodwill. The transaction created we continue to believe this transaction is accretive to franchise value.
On page six.
We highlight our view of operating income, which continued to be negatively impacted by environmental challenges as mentioned earlier this quarter experienced higher frequency and severity leading to our specialty P&C segment reporting and as adjusted underlying combined ratio of 108% a further strengthening of reserves due to an atypical second Serge.
Florida, Pip related litigation and elevated life cost due to excess delta variant related mortality higher new business sales and persistency games.
On the bottom half of the table, we indicate sources of volatility.
Except for prior year Reserve development, the remaining items are relatively consistent with past periods.
On page seven.
We review some of the key capital metrics, we use to track our performance, including growth in tangible book value per share and tangible return on equity over the past 12 months return on tangible equity excluding unrealized gains was 2%. This was a direct result of the environmental challenges impacting the industry.
This is disappointing and below our target we've instituted and we will continue to institute corrective measures to return the business to target profitability.
Continuing on page eight.
We highlight the strength of our balance sheet, we continue to produce strong cash flow generating over $500 million over the past 12 months.
Our insurance entities are well capitalized liquidity remained strong and our debt to capital ratio of 21, 3% remains within our stated target range of 17% to 22%.
This business profile provides us with financial flexibility to navigate this environment.
Turning to page nine.
Net investment income for the quarter was $102 million our portfolio construction is designed to match liabilities and provide stable income through various cycles. This quarter, we generated a pretax equivalent yield of four 4%.
In closing the company's quarterly financial performance continues to be pressured by various environmental factors.
We are confident that the corrective actions, we have taken and are taking will overtime. We're trying to star financial targets I'd now like to turn the call over to Duane to discuss the results of our P&C segments.
Thank you Jim and good afternoon, everyone to start I will make a few comments about the current environmental challenges impacting our businesses as well as the relationship between earned rate and loss trend.
Turning to page 10, there continues to be several environmental challenges impacting auto loss cost on the frequency side miles driven continue to increase leading to an 18% to 20% increase in claim activity.
At the same time severity increased 8% to 10% due to supply chain challenges labor shortages and social inflation.
We are taking actions to address these challenges.
Last quarter, we discussed the impact of some recent Florida Pip related court rulings and the related increase to our prior year reserves typically significant Florida Pip related court decisions resulted in a single surge of litigation.
This time, we witnessed an atypical second Serge therefore, we are further strengthening reserves by $25 million.
Let's turn to page 11.
Based on some questions we've received over the quarter and discussions taken place within the industry. We thought we'd take a moment to review the interaction between earned rate and loss trend for various periods in and around the pandemic.
This is an illustrative display intended to bring context to those discussions.
Pre pandemic the relationship between loss costs and earned rate had maintained a long steady equilibrium there've been times of modest divergence, creating either increased profitability or margin compression, but over the long term they were largely balanced during the pandemic related lockdowns. There was a dramatic drop in frequency result.
And a significant reduction in loss trend and noticeably improvement and profitability. This eliminated the need and ability to raise rates.
When the economy reopens.
Frequency increases miles driven surge. In addition challenges to an already stressed supply change were exacerbated increasing severity together. These items drove a surge in loss trend that escalated at unprecedented levels.
Since there is little to no rate running through the system margins were in immediately and adversely impacted.
Given that rate changes are subject to a regulatory approval process. It will take at least several quarters for their earned impact to be seen in results.
Moving to page 12, I'll start with specialty P&C.
Against this backdrop the segment experienced an underlying combined ratio year over year increase of 22 points of sequential quarter increase of two points in an underwriting loss of approximately $80 million.
Despite this recent performance we remain comfortable with the profile of the business the frequency change versus 2019 is about 1%.
This quarter's loss and temporary rate loss cost imbalance doesn't impact our view of the long term profitability of the business.
Over time, we anticipate a favorable outcome from our ability to address recent challenges through pricing and other profit improvement actions given the environment. We are prioritizing profit restoration overgrowth. The chart on the upper right should help you see how rate actions will migrate through our book of business that is.
Example, during the third quarter, we filed an approximately 3% rate increase on roughly 34% of our business and it is already effective.
Are you in the process of filing for an additional 6% of rate on 38% of our business in the fourth quarter.
Understandably It takes time for file an effective rate to be written and earned into our results.
Over multiple quarters rate and non rate actions will return the business to target profitability.
Turning to the preferred segment on page 13.
The preferred P&C segment continues to face similar environmental challenges and was further impacted by Hurricane Ida.
Similar to specialty we are prioritizing profit restoration over.
Looking at the chart on the upper right during the third quarter, we filed for approximately 4% rate increase on roughly 39% of our business and 31% is already effective we are in the process of filing for an additional 13 points of rate on 57% of our business in the fourth quarter.
Overall for the preferred segment, we continue to expect ongoing profit improvement actions to bring us closer to our desired level of performance I'll now turn the call back to Joe.
Thanks Duane.
Turning to our life and health segment on page 14.
Overall this business was negatively impacted by increased mortality related to the Delta variant and Hurricane Ida.
For the quarter segment net income was $3 million.
Our mortality results continue to remain in line with countrywide trends, we continue to see and are encouraged by strong consumer demand for our products. This is evidenced through high new issuance rates and policy retention remain above pre pandemic levels.
Overall, the outlook for the life and health segment remains positive.
In summary, this quarter's financial results were disappointing.
As we stated earlier, it's going to take time for corrective actions to earn into our book and returns to target profitability.
We believe our actions will position us for growth in 2023.
Our balance sheet provides appropriate financial stability for these types of challenges, our strong capital and liquidity positions enable us to navigate and optimize the current environment.
Despite the continued challenges we remain financially strong our team will continue to deliver on our promises to our customers and provide attractive long term results and value for our shareholders I'll now turn the call over to the operator for questions.
If you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. It is star followed by Te.
Our first question comes from Greg Peters of Raymond James Your line is open. Please go ahead.
Hi, This is Alex Bolton, calling in on behalf of Greg.
Take some time and I guess Debbie out how.
How labor shortages materials, then I get the time of a pair affecting severity.
Sure Alex.
To.
What ends up happening when you're repairing a vehicle.
Is anything you know if you if you get in an accident and due 2000 worth of dollars worth of damage to the bumper. That's the minimum that's going to get paid.
From that point effectively leakage starts and we've got a repair that vehicle if you've got a labor shortage and it takes longer at the body shop that might cause another day or two of rental car expense.
If the rental car companies don't have all the inventory they had pre pandemic they might have their rates up. So now in addition to a day or.
You got it is actually at a higher cost.
If you're you're finding out theres labor shortages in the supply chain, so trucks aren't moving.
From ports in California, you might find it the headlight you needed that was manufactured overseas isn't there and it's taking a little extra time in that car sitting in the body shop, and there might be storage charges, because it's waiting for the parts to come in all of these things add up to incremental increased costs I'm in the process. It.
Might be that those parts cost more.
You know because they had to pay the truck driver higher wages to get them, there or they're they're running 24, seven so there's overtime.
Run through the process.
Yeah, I guess I was just asking you know from.
From a portion standpoint, I guess, there's more labor cost is it more material costs.
Hum it really is across them.
We're not.
At this point.
We don't have our feelers out with enough sensitivity to really try to get each of the different components of them Theres something and all of them that's running through my sense.
Is that.
The that the issues. These are high single digit low double digits overall.
It may vary a little bit by local geography.
So the precision of that is is I'm not sure the biggest driver.
I'd, probably point you, Alex because I assume what you're trying to do is project.
Projected turn or a trend shift.
I'd point, you back to maybe page 11. The illustrative example, Duane was using where what you see is there's these change in loss trend.
Whether it's labor or supply chain or social inflation.
You know, whether it's technology issues in the car and the fact that Theres chip shortage.
Those changes in loss inflation occur immediately in there immediately and you earned across the entire book right.
Right right changes, whether it's loss inflation going down or loss inflation going up or rate changes have to be filed and approved.
And then they roll onto the book of business at renewal.
So they are earned over the policy term rate is always going to lag inflationary trend the gap between rate and inflationary trend I think is the story rather than the subtle differences between whether it's labor or steel.
Or or different geographic differences, though those are gonna be small error bars.
Of of the fact that rate effectively got shut down for most of the auto industry.
And everybody's got to see it you know you didnt see rate increases.
Up period.
And you saw a rapid increase in inflation that gap is going to what should be going to overshadow everything for awhile.
Okay I appreciate that and maybe can you touch on the regulatory environment, you know it seems like you're getting some rate.
But you know I guess, maybe what's your expectation of regulators lose inside of you know a profitable 2020.
Yeah, It's a great question and there's sort of two things underneath it.
<unk>.
And in the question one is the regulatory environment in the second one is the activity we're having.
Regulators go through a normal process. They look at your historic results and they look at it at the current loss trend that youre dealing in in the current period of time their responsibility is to have fair and appropriate rates for consumers and to ensure companies are making a reasonable return to ensure their solvency.
It's a little confusing for all of them when they look back and say how do we account for 'twenty 'twenty, but how how much do you weight that I'm in a process and different states are looking at that in different ways. I think every month that we put out a new set of results as an industry in it.
It's becoming more and more apparent to those folks that 'twenty 'twenty was an anomaly and really does in fact need to be discounted.
I think you can see that to some degree with our activity Duane pointed out that that in the second quarter, we had rate activity on roughly a third of our book.
In the fourth quarter, we had rate activity on a nearly 40% of our book you know six points.
Or are you anticipating in the fourth quarter I'm, sorry in the third quarter, we had the third and the fourth quarter. We're anticipating roughly 40 I'll tell you we may get a closer to a 100% the big dog for US as California, California has a unique set of rules and rating templates and you'd have to go through their rules and ratings.
Templates the second that those templates are showing that we have a need for a rate increase will be in their filing at I'd expect that on some of the programs. We have in California that may occur in the fourth quart. It almost certainly will in the first quarter.
That's roughly half of our book if you assume it's roughly 50% of that specialty auto book, we're at roughly 90% of the activity you should be walking away with the fact that we saw this issue early.
We were responding with it right briskly.
And where we're taking those rates and where we've been reasonably successful.
And expect to be more so my guess is most of these states will require a second round.
On it so we will get through the first round and then we'll go back for will.
Well, we'll go for two as quick as we can.
Okay I appreciate that and then maybe in life and health you know I noticed the expense ratio jumped up a little bit maybe you can touch on what's happening there.
No happy to actually I think it's a little bit misleading I'd point, you to pages 38, and 39 of the supplement.
If you look there what you'll see in terms of what's driving that is the amateurs.
Of essentially the Volvo asset from the acquisition of a C. If you remove that which is about a point for the quarter I think you'll end up seeing that it's down a little bit on a quarter over quarter basis and on a year over year basis.
So not really much to report happy to go deeper if you want but that's effectively what you're seeing going through there is a little bit of amortization associated with Volvo.
Correct me, if I'm wrong, Jim, but I think if you go back to right. After the Infinity acquisition you'd see the same thing running through our numbers. The boba gets put up after an acquisition and amortizing as soon as an expense and works its way out. So you saw the exact same pattern in the first couple of quarters after the Infinity acquisition.
Yeah, that's that's correct Joe.
And again that's just.
For folks to you know just because I know, it's an unusual item there that you.
You get an asset right its intangible basically and this is how you essentially bring it cashes you receive it.
Related into a tangible asset.
It's not.
Per se necessarily expense because you've got the revenue at the top you got the expense offsetting it for that transfer and it's it's intended just to be the mechanics for how something on your balance sheet turned from an intangible tangible so net results to us or nothing in the quarter, we outlined it on 38 and 39, specifically so you can see this fun right.
Of the businesses, because we think that's likely to kind of give you the best comparable.
Yeah.
Okay. I appreciate you pointing that out I appreciate the answers as well.
The next question comes from Brian Meredith of UBS. Your line is open. Please go ahead.
Yeah. Thanks, good evening.
A couple of questions here first I'm just curious is there any way to kind of break down what loss trend looks like in your especially auto versus 2019, Alright, I think that would probably be a better comparison than looking at some of the frequency in.
Severity statistics, you've got up there right now.
Sure, Brian let us, let's we'll do alone.
Okay, I'm, just curious like frequency isn't well above.
Yeah, Yeah, well, well well will take you through the reminder, before the guys coming in into the deep that'll give you a directional items the precision of it doesn't.
It doesn't work exactly the same but it'll give you a directional.
Great Great and then Joe.
We're going through that I guess my next question do you have sorry for that one for you why don't you go ahead on one and then yep.
Yeah, and it's a big picture if I were to take US back to 2019, and you think about frequency in our specialty auto business for where were at.
We're roughly within about one percentage point from where we were in 2019 at this stage.
When you think about that from you know the ultimate perspective, obviously that has some assumptions here in terms of how these things go out.
You do see a little bit of a difference in terms of the driving patterns in this period relative to 19, but there's at this stage going to probably be not not a whole lot of movement not so we feel pretty good with that.
That should tell you is our profile is basically kind of the same from that perspective.
Similar if not maybe even improving because there's some differences in the feature counts in terms of how we establish those they're higher in terms of what it is today than maybe what they would've been historically, so that 1% is kind of a high number.
When you think about the severity side.
When I'm looking at that that's really in that double digit range that we've talked about that you've both seen in that 10% to 12% range and then we've ended up seeing on some of those things that have a little bit longer tail, there's not a real long tail on this business, but things like B I claims and others that would come through you've seen the <unk>.
Verity trends without inflation trend that we're talking about now go back and impact some of those claims essentially that were opened there, which we talked a little bit about last quarter and this quarter and so when you break that up you are seeing basically kind of double digit type inflationary trends on a year over year basis over the last couple of years, both due to the mixed differences to driving.
As they come through there in terms of their impact on the severity.
Cost of the same item are you know last year versus this year and the year before those costs are up and that again in that inflationary range that we talked about that as you know high single digits low double digits.
Right. That's helpful. And then the next question Joe I'm, just curious so last quarter I know, we're going through talking about this it sounded like that you are comfortable continuing to grow your business through this kind of loss cost situation right now now you're talking about returning to growth in 2023.
Is that simply because you think that the inflation is about transitory anymore or is there something else. That's happened and does that also mean that we won't see normalized profitability till 2023.
Yeah, the couple of pieces underneath and I'll try to unbundle and Brian when.
When we were sitting last quarter, we had growth in the business.
And there was a view that the inflationary trend was lower and it was going to be more transitory that would suggest a a a a profit challenge, but one that would be corrected more rapidly.
What's happened. Since then is I think I know, we have changed our view on that I believe broadly in the environment has changed I mean every time I pick up or a wall Street journal or turn on CNBC. The mood is certainly different in the last 90 days of the severity of the inflation and its duration.
That is going to put more pressure on on profitability.
Which will take longer to unwind for me.
And match with the pricing perspective, that's really part of what we were trying to show on page 11 that gap and part of the reason on the right side of that.
You helped me if if you tell me those two red lines that are dotted is the inflation going to stay up and stay that way in London, you know stabilize and an eight nine.
And persist there or is it going to start tapering back into 456 range, where it was before theres a cone of opera potential there and then theres going to be a the cone of what rates are and are they at the higher end or the lower end that presents a fair amount of uncertainty in sort of that circle on that right side of windows.
Start exceeding loss cost and corrected given that.
That uncertainty we are tapping the brakes on growth initiatives. We we we are intentionally slowing that down because of that imbalance not because we're troubled by or long term prospects not because we're troubled by our underwriting for no. Other reason than it's unclear how long that inflationary pieces going.
Go in the last signals we've gotten it.
I would tell you that that we're very diligent about how we're thinking about that one where when we're reserving and we're booking our results and I. Thank you.
Look at numbers Youre going to see our paid losses in our reserves and youre going to see that there's a a.
A strengthening bias there, that's saying where we're anticipating that problem.
And you're seeing a speed of response from us in terms of how fast we're attacking right and moving I think you've heard other folks talk about you know their intent to raise rates, but they are moving with a different level of speed. We we believe we saw this early and we're moving on it early.
And what we believe is it's gonna have of a temperature that anybody who's writing auto is going to happen. So we're tapping the brakes in a different way than we thought we needed to 90 days ago. What you should see if you look at what's going on in the third quarter from our activity is not only do we see it not only we tapped the brakes, but we actually got rate filings moving quickly.
Quickly after that it's it's a nimble and responsive organization that when when Theres, a nail up that needs to be hit we hit it.
Gotcha makes it makes sense and obviously, you're probably taking other initiatives to kind of improve that profitability as well.
Aside from just rate.
Yes, right non rate if there's a lever to pull we're looking to pull it.
And in working with the caveat that.
You know when when when it's cold outside you don't burn the furniture in the house for heat that's gonna cause long term damage, we're not doing anything that's causing long term damage, we're being very thoughtful.
If there are investments that we can make that are gonna go to enhance and strengthen our interest and expense infrastructure that put us in a better position going forward.
You know, we'll get we'll continue those but you know we're not we're not gonna be trying to figure out how to rollout new states for growth or how to do it or other things like that where were.
Tapping the brakes in closing the shutters and you know run through the storm.
Great Great and then just one last question here, the Florida Pip charge I got kind of felt left the last quarter that we were done with that and then and obviously it happened again it sounds like you had a resurgence of suits.
Where are we with that.
Or is that behind us.
Yeah, Hey, this is Duane. Good question you know I think it's always you know there's a there's a challenge to make sure that your understanding completely that that environment in the litigation that comes out of there certainly around Pip, but our comfort level has has increased significantly from where we were.
We're starting to see that trend the direction that we're feeling comfortable with what's coming in.
The other thing that we're doing is we're working to what I'll call the mitigation.
Process around that for any of the outstanding bills.
To get ahead of what could be potentially a problem in the future.
Duane.
Let me add a clarification that we ask you to add some of the anecdote. We were talking about earlier, we were highly comfortable we had the right number last quarter given the normal pattern of surges in suit after a significant court.
We had a second surge can you talk a little bit that second surge without a pattern. It was atypical that caused us to have a different point of view. We believe we have it set now, but you've got a little bit of local market anecdote in terms of weight.
Yeah, there's a there's a couple of dynamics that that takes place you know in that process. There. There there are things in I'll say that patterns that historically would come through to what we're speaking of where you get a you get a onetime hit there.
There seems to be an arbitrary lull in this one where they had slowed down for some reason and maybe some of the bulk bulk billing that takes place that that seem to reoccur at a later day. There was also I think some angst around the potential repeal are in the marketplace of the AR of Pip. So you know you.
Got you know you've got people there that were anxious about well if I'm going to do anything to it. So they you know they sped up that process a little bit and then you've also got you know we mentioned earlier about just staffing shortages across many dimensions in that you know certainly the firms there I know they're not exempt.
So their ability to try to push things through at a normal pace starts to wane. So they you know there's a breather in there and then they they reemerged, but as I commented earlier, we've we've very proactively been working what I'll call. The front end of that on our side to make sure that we're not you know, we're trying to be able to position ourselves to avoid.
Future litigation on that type of claim.
Terrific. Thanks for the answers I think by and Joe gave some good commentary about the only other thing I might add Brian is.
You know I there was a lot of commentary obviously loss quarter, both on our call on on other calls you know specifically related to the limiting versus participating in some of the other challenges that.
That's right.
Duane you mentioned some potential pause items, you know, there's a bunch of different hypothesis and are out there. We're not this is a new pattern in terms of having having two humps that that's not something that we've seen before don't really know if it was related in and what effectively happened as we woke some folks up between the call or in some of the process that it got not just in Russia, but.
Boss from an industry perspective, or a fitch to Duane the other points are a potentially you know their deal with labor challenges or other stuff that potentially lead to you know a different kind of reporting pattern or other hard to tell but either way you know we move forward and thought it was prudent to try to put a bow on this well I'm not anticipating anything else.
Can't give you 100% confidence in this but but again highly feel really good and confident about the numbers that we have put up in our ability to kind of recognize this.
Great. Thanks.
Thanks, Brian.
As a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad now.
There are no further questions on the lines at this time, so I'll hand, the call back over to the team.
Thank you operator and.
Thank you to everybody for joining the call today. We appreciate it I appreciate your interest we're gonna continue banging away and working to.
Reestablishing reignite the profitability inside the joint and get back to delivering on our results for our customers and our shareholders. Thanks for being with us.
Okay.
This concludes today's call. Thank you for joining you may now disconnect your lines.
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Yeah.
Yeah.
Yeah.
Okay.
Uh huh.
[music].
Okay.
[music].
Yeah.
Yeah.
Okay.
Okay.
Okay.
Yeah.
Yes.
Okay.
Okay.
Yeah.
Okay.
Sure.
Okay.
Yeah.
Uh huh.
Uh huh.
Yes.
Yeah.
Yeah.
Okay.
Okay.
Yeah.
Yeah.
Yeah.
Okay.
Okay.