Q4 2023 OneMain Holdings Inc Earnings Call

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Operator: OneMainHoldings.com Welcome to the OneMain Financial fourth quarter and full year 2023 earnings conference call and webcast. Hosting the call today from OneMain is Peter Poyon, Head of Investor Relations. Today's call is being recorded.

Welcome to the Onemain financial fourth quarter, and full year 2023 earnings conference call and webcast.

The call today from Onemain is Peter for you on that.

Speaker Change: Stir relations today's call is being recorded at this time all participants have been placed in a listen only mode and the floor will be open for your questions. Following the presentation.

Operator: At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two.

Speaker Change: If you would like to ask a question at that time. Please press star one on your telephone keypad.

Speaker Change: Point. Your question has been answered you may remove yourself from the queue by pressing star too. We do ask that you limit yourself to one question and one follow up and please pick up your handset pulled out optimal sound quality lastly, if you should require operator assistance. Please press star zero. It is now my pleasure to turn the floor over.

Operator: We do ask that you limit yourself to one question and one follow-up and please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Peter Poyon. You may begin. Thank you, Operator. Good morning, everyone, and thank you for joining us.

Speaker Change: G. Peter pointed out you may begin.

G. Peter: Thank you operator.

G. Peter: Morning, everyone and thank you for joining US let me begin by directing you to page two of the fourth quarter 2023, Investor presentation, which contains important disclosures concerning forward looking statements and the use of non-GAAP measures. The presentation can be found in the Investor Relations section of the Onemain website.

Peter Poyon: Let me begin by directing you to page two of the fourth quarter 2023 investor presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the investor relations section of the OneMain website. Our discussion today will contain certain forward-looking statements reflecting management's current beliefs about the company's future, financial performance, and business process. These forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release.

G. Peter: Our discussion today will contain certain forward looking statements, reflecting management's current beliefs about the company's future financial performance and business prospects and these forward looking statements are subject to inherent risks and uncertainties and speak only as of today.

G. Peter: Factors that could cause actual results to differ materially from these forward looking statements are set forth in our earnings press release.

Peter Poyon: We caution you not to place undue reliance on forward-looking statements. If you may be listening to this via replay at some point after today, we remind you that the remarks made herein are as of today, February 7th, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Shulman, our Chairman and Chief Executive Officer, and Micah Conrad, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer session. I'd like to now turn the call over to Doug.

G. Peter: We caution you not to place undue reliance on forward looking statements.

G. Peter: May be listening to this via replay at some point. After today, we remind you that the remarks made herein are as of today February 7th and have not.

G. Peter: Not been updated subsequent to this call.

G. Peter: Our call. This morning will include formal remarks from Doug Shulman, Our chairman and Chief Executive Officer, and Mike Conrad, Our Chief Financial Officer.

Speaker Change: After the conclusion of our formal remarks, we will conduct a question and answer session I.

Douglas H. Shulman: I'd like to now turn the call over to Doug.

Douglas H. Shulman: Thanks, Pete, and good morning, everyone. Thank you for joining us today. I'm going to provide a brief overview of 2023, and then I'll discuss our performance for the fourth quarter and our progress against key strategic initiatives. As many of you heard on investor day in December, while we continue to navigate the current credit environment, we feel that OneMain has never been better positioned for medium and long-term outperformance.

Douglas H. Shulman: Thanks, Pete and good morning, everyone. Thank you for joining us today.

Douglas H. Shulman: I'm going to provide a brief overview of 2023, and then I'll discuss our performance for the fourth quarter and our progress against key strategic initiatives.

Douglas H. Shulman: As many of you heard at Investor Day in December while we continue to navigate the current credit environment. We feel that one main has never been better positioned for medium and long term outperformance in 2023 capital generation was nearly $800 million.

Douglas H. Shulman: In 2023, capital generation was nearly $800 million, and our receivables reached $22 billion, bolstered by growth in our new product. In the year, we also grew our customer base to three million customers.

Douglas H. Shulman: And our receivables reached $22 billion supplemented by growth in our new products.

Douglas H. Shulman: In the year, we also grew our customer base to 3 million customers.

Douglas H. Shulman: We maintained our underwriting discipline in 2023, tightening our credit box throughout the year and increasing prices, and continue to feel very good about the loans we are originating today. In what was a difficult funding environment, the strength of our balance sheet and capital markets program was evident. We raised $4.6 billion, including issuing three times in the unsecured market.

Douglas H. Shulman: We maintained our underwriting discipline in 2023 tightening our credit box throughout the year and increasing pricing and continue to feel very good about the loans we are originating today.

Douglas H. Shulman: And what was a difficult funding environment, the strength of our balance sheet and capital markets program was evident we raised $4 $6 billion, including issuing three times in the unsecured market and.

Douglas H. Shulman: And we continue to strengthen our already industry-leading liquidity program. We made significant progress in the development and growth of our new products, most notably credit cards and auto fines, and also announced the acquisition of Foresight to give us a platform to access franchise auto deals. The nearly 800 million of capital generated in 2023 is a test to OneMain Strong Business.

Douglas H. Shulman: And we continued to strengthen our already industry, leading liquidity profile.

Douglas H. Shulman: We made significant progress in the development and growth of our new products, most notably credit cards and auto finance and also announced the acquisition of foresight to give us a platform to access franchise auto dealers.

Douglas H. Shulman: The nearly 800 million of capital generated in 2023 is a testament to Onemain strong business model. If you attended our Investor Day in December you heard that we have a line of sight to significant capital generation growth over the <unk>.

Douglas H. Shulman: If you attended our Investor Day in December, you heard that we have a line of sight to significant capital generation growth over the medium term as the economic environment stabilizes and our new product, In 2023, we remained cautious in our approach to growing the credit card business but still grew our book to $330 million in receivables and 430,000 customers. We're really pleased with the progress made last year in terms of maturing the business and customers. Our auto finance business grew more than $350 million in 2023. And with the acquisition of Foresight, which we expect to close this quarter, we're well positioned to drive profitable growth in this business in the years ahead. Trim by OneMain, our financial wellness platform, which helps customers save money on household bills and manage everyday expenses, continues to help our customers improve their financial wellness.

Douglas H. Shulman: Liam termed as the economic environment stabilizes and our new products scale.

Douglas H. Shulman: In 2023, we remained cautious in our approach to growing the credit card business, but still grew our book to $330 million in receivables and 430000 customers.

Douglas H. Shulman: We're really pleased with the progress made last year in terms of maturing the business and customer experience.

Douglas H. Shulman: Our auto finance business grew more than $350 million in 2023.

Douglas H. Shulman: With the acquisition of fore sight, which we expect to close this quarter, we're well positioned to drive profitable growth in this business in the years ahead.

Douglas H. Shulman: Trim by Onemain, our financial wellness platform, which helps customers save money on household bills and manage everyday expenses continues to help our customers improve their financial wellbeing.

Douglas H. Shulman: Creditworthy by OneMain, our community program that teaches young people the importance of responsible credit management, has now provided free financial education programs to over 275,000 students in more than 3,400 high schools across the country. And OneMain was certified as a Most Loved Workplace by the Best Practice Institute for the second year in a row, showcasing our deep commitment to our team members, who serve our customers so well every day. Let me now turn to the results of the court. Capital generation, the key metric against which we measure financial performance and manage our business, was $191 million. Competitive positioning Deep experience with the non-prime consumer and a broadened product offering allowed us to grow receivables and our customer base despite a markedly tightened credit.

Douglas H. Shulman: Credit worthy by Onemain, our community program that teaches young people the importance of responsible management of credit.

Douglas H. Shulman: Has now provided free financial education programs to over 275000 students and more than 3400 high schools across the country.

Douglas H. Shulman: And one main with certified as the most loved workplace by the best practice Institute for the second year in a row showcasing our deep commitment to our team members who serve our customers so well every day.

Douglas H. Shulman: Let me now turn to the results of the quarter cash.

Douglas H. Shulman: Capital generation.

Douglas H. Shulman: Key metric against which we measure of financial performance and manage our business was $191 million.

Douglas H. Shulman: Our competitive positioning.

Douglas H. Shulman: <unk> experienced with the non prime consumer and broadened product offering allowed us to grow receivables and our customer base. Despite a markedly tightened the credit box.

Douglas H. Shulman: Our originations in the quarter totaled $3 billion. Even though demand for our loan products remains very strong, we deliberately reduced the pace of originations as we have taken a conservative view on credit and continued to tighten our underwriting and increase pricing in certain sectors. Loan net charge-offs in the quarter were 7.7%, up seasonally from the third quarter and in line with our expectations for the quarter.

Douglas H. Shulman: Our originations in the quarter totaled $3 billion.

Douglas H. Shulman: Even though demand for our loan products remains very strong we deliberately reduced the pace of originations as we have taken a conservative view on credit and continued to tighten our underwriting and increase pricing in certain segments.

Douglas H. Shulman: Loan net charge offs in the quarter were seven 7% up seasonally from the third quarter and in line with our expectations for the quarter.

Douglas H. Shulman: Full-year net charge-offs were 7.4%, in line with our expectations at the beginning of the year. We feel good about the actions we have taken on credit over the past 18 months. Our front book continues to perform in line with expectations.

Douglas H. Shulman: Full year net charge offs were seven 4% in line with our expectations at the beginning of the year.

Douglas H. Shulman: We feel good about the actions we have taken on credit over the past 18 months.

Douglas H. Shulman: Our front book continues to perform in line with expectations and the majority of our elevated delinquency is coming from our back book.

Douglas H. Shulman: And the majority of our elevated delinquency is coming from our back book, which is running off but still represented over half of our delinquent receivables in December. Our pace of originations has slowed down the front book transition, resulting in a greater mix of higher delinquent back book receivables in our overall portfolio. This has created a dynamic in delinquency and loss metrics, which Micah will discuss later. Importantly, we feel very good about the performance of newer vintages.

Douglas H. Shulman: <unk> is running off but still represented over half of our delinquent receivables in December.

Douglas H. Shulman: Our pace of originations has slowed down the front book transition, resulting in a greater mix of higher delinquency back book receivables in our overall portfolio.

Douglas H. Shulman: This has created a dynamic in delinquency and loss metrics, which Michael will discuss later.

Douglas H. Shulman: Importantly, we feel very good about the performance of newer vintages. We are confident that this is moving the credit performance of our entire portfolio in the right direction and we expect losses to peak in 2024.

Douglas H. Shulman: We are confident that this is moving the credit performance of our entire portfolio in the right direction, and we expect losses to peak in 2024, as long as the current macro environment stays relatively stable. Operating expenses are a key lever we have control over in our business. And we are taking cost actions to ensure that we keep delivering operating leverage. We are driving efficiency across the business by closely examining every expense, making cuts where appropriate, but also investing in our future, whether it be in technology and digital, new products, data science, or other key areas. I am very pleased with our expense management in 2020, and we expect to reduce our operating expense ratio again in 2020. Turning now to our strategic initiative.

Douglas H. Shulman: As long as the current macro environment stays relatively stable.

Douglas H. Shulman: Operating expenses, Alright key lever, we have control over and our business and we are taking cost actions to ensure that we keep producing operating leverage.

Douglas H. Shulman: We are driving efficiency across the business by closely examining every expense, making cuts where appropriate but also investing in our future whether it be in technology and digital new products data science or other key areas.

Douglas H. Shulman: I am very pleased with our expense management in 2023, and we expect to reduce our operating expense ratio again in 2024.

Douglas H. Shulman: Turning now to our strategic initiatives during our Investor day, we spent some time discussing our plans to expand onemain business across two complementary products with attractive returns.

Douglas H. Shulman: During our investor day, we spent some time discussing our plans to expand OneMain's business across two complementary products with attractive returns, credit cards, and auto funds, both of which are key components of our long-term strategy. Our customer base grew 15% in 2020. A sizable portion of that was driven by our staged rollout of these new products. We like the continued metrics we are seeing across our credit card portfolio. The utilization rate is X, and the card continues to be used regularly for groceries, gas, and household goods.

Douglas H. Shulman: Credit cards, and auto finance, both of which are key components of our long term strategy.

Douglas H. Shulman: Our customer base grew 15% in 2023.

Douglas H. Shulman: A sizable portion of that was driven by our staged rollout of these new products.

We like the continued metrics, we are seeing across our credit card portfolio.

Utilization rate is excellent and the card continues to be used regularly for groceries gas and household goods or.

Douglas H. Shulman: Our customers also really like the product, and digital engagement is high, driving customer satisfaction and operating efficiency. Given the macroeconomic uncertainty, we have tilted our new originations towards our lower line cards with an annual fee and will continue to book business that meets our return threshold, even if the economic outlook changes. We're maintaining our disciplined approach to the rollout of cards as we enter 2024 but think we've built a great product and value proposition for customers, which we will be able to scale in future years. Our auto finance business, loaned at a growing network of independent dealerships across the United States, reached almost 750 million in receivables at year end.

Douglas H. Shulman: Our customers also really like the product and digital engagement is high driving customer satisfaction and operating efficiencies.

Douglas H. Shulman: Given the macroeconomic uncertainty we have tilted our new originations towards our lower line cards with an annual fee and continue to book business that meets our return thresholds, even if the economic outlook changes.

Douglas H. Shulman: We're maintaining our disciplined approach to the rollout of cards as we enter 2024.

Douglas H. Shulman: But I think we've built a great product and value proposition for customers, which we will be able to scale in future years.

Douglas H. Shulman: Our auto finance business loans sourced at a growing network of independent dealerships across the United States reached almost $750 million of receivables at year end.

Douglas H. Shulman: We expect that the business we have built, combined with the platform and network of franchise dealerships that we acquired with Foresight, will drive profitable growth long into the future. I'll close by briefly touching on capital allocation. Our long-stated strategy remains the same.

Douglas H. Shulman: We expect that the business, we've built combined with the platform and network of franchise dealerships that we acquired with foresight will drive profitable growth long into the future.

Douglas H. Shulman: I'll close by briefly touching on capital allocation.

Douglas H. Shulman: Our top priority remains investing in the business to position us for ongoing success. We will continue to invest in high-quality loans that meet our return hurdles, while also investing in new products and channels like card and auto, and in data science and digital capabilities that improve the customer experience and further advance our competitive position. We are committed to our strong regular dividend, which is $1 per share on a quarterly basis and $4.00 per share annually.

Douglas H. Shulman: Our long stated strategy remains the same our top priority remains investing in the business to position us for ongoing success, we will continue to invest in high quality loans that meet our return hurdles, while also investing in new products and channel.

Douglas H. Shulman: <unk> like card and auto and in data science and digital capabilities that improve the customer experience and further advance our competitive positioning.

Douglas H. Shulman: Our board will continue to consider raising the dividend, likely when the macro and credit environment is less uncertain. We purchased about 1.7 million shares of our stock for $65 million in 2020. And we expect to maintain a disciplined approach to repurchases in 2020. With that, let me turn the call over to Doug. Thanks, Doug, and good morning, everyone.

Douglas H. Shulman: We are committed to our strong regular dividend, which is $1 per share on a quarterly basis and $4 per share annually. Our board will continue to consider raising the dividend likely when the macro and credit environment is less uncertain.

Douglas H. Shulman: We purchased about one 7 million shares of our stock for $65 million in 2023.

Micah R. Conrad: Our final quarter of 2023 was highlighted by continued prudent execution of credit and pricing, ongoing expense discipline, and another quarter of strong funding and balance sheet management. Fourth quarter net income was $165 million, or $1.38 per diluted share, down 4% from $1.44 per diluted share in the fourth quarter of 2022. P&I adjusted net income was $1.39 per diluted share, down 9% from $1.53 per diluted share in the prior year quarter

Douglas H. Shulman: And we expect to maintain a disciplined approach to repurchases in 2024 with that let me turn the call over to Micah.

Micah: Thanks, Doug and good morning, everyone.

Micah: Our final quarter of 2023 was highlighted by continued prudent execution of credit and pricing.

Micah: Ongoing expense discipline, and another quarter of strong funding and balance sheet management.

Micah: Fourth quarter net income was $165 million or $1 38 per diluted share down 4% from $1 44 per diluted share in the fourth quarter of 2022.

Micah: C&I adjusted net income was $1 39 per diluted share down 9% from $1 53 per diluted share in the prior year quarter.

Micah R. Conrad: Capital generation was $191 million for the quarter, compared to $229 million a year ago, reflecting the impacts of the current macro environment on our interest expense, yield, and net charge-off. For full year 2023, net income was $641 million, C&I adjusted earnings were $5.43 per diluted share, and capital generation was $794 million.

Micah: Capital generation was $191 million for the quarter compared to $229 million a year ago, reflecting the impacts of the current macro environment on our interest expense yield and net charge offs.

Micah: For full year 2023, net income was $641 million.

Micah: C&I adjusted earnings were $5 43 per diluted share and capital generation was $794 million cap.

Micah R. Conrad: Capital generation return on receivables was just below 4%. Managed receivables finished the year at $22.2 billion, up $1.5 billion, or 7% from a year ago. Fourth quarter originations were down 13% year-over-year as we continue to tighten our underwriting and maintain a conservative approach to new originations. Part of our tightening has come through pricing actions that we've been taking throughout the year. The average APR on our loan originations is currently around 27% compared to 26% a year ago. Although higher pricing has naturally led to reductions in loan volume, the net earnings result is expected to be positive. We plan to maintain this conservative posture until we see sustained improvement in the macro environment. Interest income was $1.2 billion, up 6% year-over-year, driven by higher average receivables and partially offset by modestly lower yields.

Micah: Capital generation return on receivables was just below 4%.

Micah: Managed receivables finished the year at $22 2 billion up.

Micah: Up $1 5 billion or 7% from a year ago.

Micah: Fourth quarter originations were down 13% year over year as we've continued to tighten our underwriting and maintain a conservative approach to new originations.

Micah: Part of our tightening has come through pricing actions that we've been taking throughout the year.

Micah: The average APR on our loan originations.

Micah: Currently around 27% compared to 26% a year ago.

Micah: That higher pricing has naturally led to reductions in loan volume. However, the net earnings result is expected to be positive.

Micah: We plan to maintain this conservative posture until we see sustained improvement in the macro environment.

Interest income was $1 2 billion up 6% year over year, driven by higher average receivables and partially offset by modestly lower yield.

Micah R. Conrad: Yield in the fourth quarter was 22.1% versus 22.3% in the prior year quarter, as our pricing actions partially offset the impacts of what continues to be a challenging credit environment. Receivables from our auto finance business impacted yield by approximately 20 basis points in the fourth quarter. As we discussed in early December at Investor Day, the auto finance market is five times larger than the personal loan market and will be a significant growth product for us in the coming years. While auto finance has lower pricing, it also brings a stable, lower loss profile and attractive risk-adjusted return. Interest expense for the quarter was $271 million, up $41 million versus the prior year, driven by an increase in average debt to support receivables growth, as well as a higher cost of funds.

Micah: Yield in the fourth quarter was 22, 1% versus 22, 3% in the prior year quarter as our pricing actions, partially offset the impacts of what continues to be a challenging credit environment.

Micah: Receivables from our auto finance business impacted yields by approximately 20 basis points in the fourth quarter.

Micah: As we discussed in early December at Investor Day, The auto finance market is five times larger than the personal loan market and will be a significant growth product for us in the coming years.

Micah: While auto has lower pricing. It also brings a stable lower loss profile and attractive risk adjusted returns.

Micah: Interest expense for the quarter was $271 million up $41 million versus the prior year driven by an increase in average debt to support receivables growth as well as a higher cost of funds.

Micah R. Conrad: Interest expense as a percentage of receivables in 2023 was 4.9%, up just 30 basis points from 4.6% in 2022. This despite the considerable increase we saw in benchmark rates over the past two years. Fourth quarter interest expense of 5.0% was impacted by the excess cash we've been carrying on our balance sheet. Excluding these impacts, interest expense would have been around 4.8%.

Micah: Interest expense as a percentage of receivables in 2023 was four 9% up just 30 basis points from four 6% in 2022. Despite the considerable increase we saw in benchmark rates over the past two years.

Micah: Fourth quarter interest expense of 5.0% was impacted by the excess cash we've been carrying on our balance sheet.

Micah: Excluding these impacts interest expense would have been around four 8%.

Micah R. Conrad: Looking ahead, over 90% of our average debt for 2024 is on the books today at fixed rates, so we're confident in projecting a very manageable increase in interest expense in the year ahead, with an estimate of approximately 5.2% for 2024. Other revenue was $185 million, up $17 million or 10% from the prior year quarter. The increase was primarily driven by our excess cash balances, as well as the higher interest we're earning on our cash. Provision expense for the quarter was $446 million, comprising current period net charge-offs of $415 million and a $31 million increase to our allowance, which was driven by growth in receivables. Our allowance ratio is flat for the third quarter at 11.6%. Policyholder benefits and claims expense for the quarter were $49 million, compared to $39 million in the year-ago quarter.

Micah: Looking ahead over 90% of our average debt for 2024 is on the books today at fixed rates. So we're confident in projecting a very manageable increase in interest expense in the year ahead.

Micah: With an estimate of approximately five 2% for 2024.

Micah: Right.

Micah: Other revenue was $185 million up $17 million or 10% from the prior year quarter.

Micah: The increase was primarily driven by our excess cash balances as well as the higher interest we're earning on our cash.

Micah: Provision expense for the quarter was $446 million.

Micah: Comprising current period net charge offs of $415 million and a $31 million increase to our allowance, which was driven by growth in receivables our allowance ratio was flat to the third quarter at 11, 6%.

Micah: Policyholder benefits and claims expense for the quarter was $49 million compared.

Micah: Compared to $39 million in the year ago quarter.

Micah R. Conrad: The prior year period included some non-recurring reserve adjustments related to observed improvements in claims experience. We generally expect claims will be around $50 million per quarter in 2024. Let's now turn to the C&I credit trends highlighted on slide 10. Loan net charge-offs for the quarter were 7.7%, with the full year coming in at 7.4%; recoveries were 1.1% in the quarter. While recoveries fluctuate from period to period and can be impacted by the timing of charged-off loan sales and other factors, we expect recoveries to generally remain at or above this level in 2024. 30-89 delinquency at December 31 was 3.28%, and 90-plus delinquency finished the quarter at 2.88%.

Micah: The prior year period included some nonrecurring reserve adjustments related to observed improvements in claims experience. We generally expect claims will be around $50 million per quarter in 2024.

Micah: Let's now turn to the C&I credit trends highlighted on slide 10.

Micah: Loan net charge offs for the quarter were seven 7% with the full year coming in at seven 4%.

Micah: Recoveries were one 1% in the quarter, while recoveries fluctuate from period to period and can be impacted by the timing of charged off loan sales and other factors, we expect recoveries to generally remain at or above this level in 2024.

Micah: 30 to 89 delinquency at December 31 was $3, two 8% and 90 plus delinquency finished the quarter at 288%.

Micah: Yeah.

Micah R. Conrad: Delinquency remains elevated relative to pre-pandemic levels, driven primarily by our back book. While continuing to run off, our back book still represented 57% of our delinquent receivables at year end. Our front book is performing well and is continuing to grow, but at a slower pace due to our tighter credit box and pricing action. This has created a growth map dynamic in our delinquency and our loss metric. In fact, the 21 basis point year-over-year increase in our 30 to 89 delinquency is entirely driven by the slowdown in our origination. To explain this a little further, newer origination vintages carry relatively low delinquency levels.

Micah: Delinquency remains elevated relative to pre pandemic levels, driven primarily by our back book.

Micah: Continuing to run off our back book still represented 57% of our delinquent receivables at year end.

Micah: Our front book is performing well and is continuing to grow but at a slower pace due to our tighter credit box and pricing actions.

Micah: This has created a growth map dynamic in our delinquency in our loss metrics in fact, the 21 basis point year over year increase in our 30 to 89 delinquency is entirely driven by the slowdown in our originations.

Micah: To explain this a little further newer origination vintages carry relatively low delinquency levels for instance, the 30 to 89 delinquency you would expect to see at year end for loans originated in the last six months is around 1%.

Micah R. Conrad: For instance, the 30 to 89 delinquency rate you would expect to see at year end for loans originated in the last six months is around 1%. So when you reduce the pace of new vintages, as we've done in 2023, the overall portfolio will skew to a greater mix of older, higher delinquency receivables. Importantly, as Doug mentioned earlier, we like the performance of loans we're booking today, and assuming a stable macro environment, our losses are expected to peak in 2024 as the back book runs down and the better front book continues to grow. Turning to slide 13.

Micah: So when you reduce the pace of new vintages as we've done in 2023, the overall portfolio will skew to a greater mix of older higher delinquency receivables.

Micah: Importantly, as Doug mentioned earlier, we like the performance of loans, we are booking today and assuming a stable macro environment. Our losses are expected to peak in 2024 as the back book runs down and the better front book continues to grow.

Speaker Change: Turning to slide 13.

Micah R. Conrad: C&I operating expenses were $382 million in the quarter, up 4% year over year, driven by our investments in technology, data science, and growth in our new product. Our OPEX ratio was 6.8% in the fourth quarter, and for the full year, it was 7.0%, reflecting our disciplined expense management and the operating leverage inherent in our business. We expect the OPEX ratio to improve again in 2024 to approximately 6.7%. As Doug noted earlier, there are a set of cost savings initiatives we are currently driving across the organization. Growth in New Products. The pending Acquisition of Foresight and the Marginal Cost Structure of our Personal Loan Business will also contribute to Operating Efficiency Improvement. Let's now turn to slide 14.

Speaker Change: Operating expenses were $382 million in the quarter up 4% year over year, driven by our investments in technology data science and growth in our new products.

Speaker Change: Our opex ratio was six 8% in the fourth quarter and for the full year it was 7.0%.

Reflecting our disciplined expense management and the operating leverage inherent in our business.

Speaker Change: We expect the opex ratio to improve again in 2024 to approximately six 7%.

Speaker Change: As Doug noted earlier, there are a set of cost savings initiatives. We are currently driving across the organization.

Speaker Change: Growth in new products, depending acquisition of foresight and the marginal cost structure of our personal loan business will also contribute to operating efficiency improvements.

Let's now turn to slide 14.

Micah R. Conrad: We had another strong quarter of funding and balance sheet management. We completed two separate unsecured bond deals. The first was a $400 million add-on to the 2029 bond that we issued back in June. Note that this bond is callable starting in 2025. In December, we issued a new $700 million bond at 7 and 7 April, due in 2030 and callable starting in 2026. Both bonds were well oversubscribed with strong demand from both new and returning investors.

Speaker Change: We had another strong quarter of funding and balance sheet management, we completed two separate unsecured bond deals. The first was a $400 million add on to the 2029 bond that we issued back in June.

Speaker Change: Note. This bond is callable starting in 2025.

Speaker Change: In December we issued a new $700 million bond at seven and seven eighths.

Speaker Change: Due in 2030 and callable starting in 2026, both bonds were well oversubscribed with strong demand from both new and returning investors.

Micah R. Conrad: In the quarter, we redeemed what remained of our March 2024 unsecured maturity. Our next unsecured maturity is now March 2025. We also ended the year with $1 billion of cash on our ballot sheet, setting ourselves up for significant funding flexibility in 2025. Our liquidity profile is a differentiating strength of the company, and during the fourth quarter, we added $300 million of capacity, with $75 million in our unsecured revolver and $225 million in our secured facility. Our bank facilities totaled $7.7 billion across 16 diverse bank partners, with unencumbered receivables ending the quarter at $8.4 billion.

Speaker Change: In the quarter, we redeemed what remained of our March 2020 for unsecured maturity.

Our next unsecured maturity is now March of 2025.

Speaker Change: We also ended the year with a $1 billion of cash on our balance sheet setting ourselves up for significant funding flexibility in 2024.

Speaker Change: Our liquidity profile as a differentiating strength of the company and during the fourth quarter, we added $300 million of capacity.

Speaker Change: With $75 million, and our unsecured revolver and $225 million and our secured facilities.

Speaker Change: Our bank facilities totaled $7 7 billion.

Speaker Change: Across <unk> diverse bank partners with unencumbered receivables ending the quarter at $8 4 billion.

Micah R. Conrad: Wrapping up the balance sheet, our net leverage at the end of 2023 was 5.3 times, down from 5.5 times a year ago. Let's now turn to slide 16 and review our 2024 priorities. Let me first note that all financial metrics for 2024 reflect the expected first quarter closing of the Foresight Acquisition. We are projecting 2024 managed receivables of approximately $24 billion with strong contributions from auto finance and credit cards. Our estimates reflect a continued conservative credit posture that results in organic receivables growth of 3 to 5 percent as we focus on originating loans and cards that, even if the macro environment were to worsen, will still meet our return threshold. Note that this estimate also includes approximately 1 billion of acquired receivables from Foresight. In 2024, revenue growth is expected to be six to eight percent.

Speaker Change: Wrapping up the balance sheet, our net leverage at the end of 2023 was five three times down from five five times a year ago.

Speaker Change: Let's now turn to slide 16, and review our 2024 priorities.

Speaker Change: Let me first note that all financial metrics for 2024 reflect the expected first quarter closing of the fore sight acquisition.

Speaker Change: We are projecting 2024 managed receivables of approximately 24 billion with strong contributions from auto finance and credit card.

Speaker Change: Our estimates reflect the continued conservative credit posture that results in organic receivables growth of 3% to 5% as we focus on originating loans and cards that even if the macro environment were to worsen we will still meet our return thresholds.

Speaker Change: Note. The estimate also includes approximately $1 billion of acquired receivables from foresight.

Speaker Change: 2020 for revenue growth is expected to be 6% to 8%.

Micah R. Conrad: This includes both interest income and revenue and is driven by our expected receivables growth, a modest improvement in yield from our 2023 pricing actions, as well as contributions from Foresight. Interest expense is expected to be approximately 5.2% in 2024, illustrating the structural advantages in our balance sheet and our ability to shelter the impact of higher current funding. Full-year consolidated net charge-offs are expected to be within a range of 7.7 to 8.3 percent.

Speaker Change: This includes both interest income and other revenue and it's driven by our expected receivables growth a modest improvement in yield from our 2023 pricing actions as well as contributions from foresight.

Speaker Change: Interest expense is expected to be approximately five 2% in 2024 illustrating the structural advantages in our balance sheet and our ability to shelter the impact of higher current funding rates.

Full year consolidated net charge offs are expected to be within a range of seven 7% to eight 3%.

Micah R. Conrad: Please bear in mind this includes all products, personal loans, auto finance, and credit cards, and also reflects the growth math I discussed earlier. As we've noted, we expect losses to peak in 2024, and we expect to see normal seasonal patterns during the year, with higher net charge-offs in the first half and lower net charge-offs in the second. As previously discussed, we expect our full year 2024 operating expense ratio to improve from 7.0% to around 6.7%, www.

Speaker Change: Please bear in mind. This includes all products personal loans auto finance and credit cards.

Speaker Change: And also reflects the growth math I discussed earlier.

Speaker Change: As we've noted we expect losses to peak in 2024, and we expect to see normal seasonal patterns during the year with.

Speaker Change: With higher net charge offs in the first half and lower net charge offs in the second.

Speaker Change: As previously discussed we expect our full year 2020 for operating expense ratio to improve from 7.0% to around six 7%.

Micah R. Conrad: OneMainHoldings.com wrote: At Investor Day in December, we laid out a medium-term path to $30 billion in receivables and a 5% capital generation return on receivables, with charge-offs normalizing down to our strategic range of 6% to 7%. We are navigating the economic climate with great care, but at the same time, building the foundation for our future. And we remain very confident that we will achieve these objectives. Let me now turn the call back over to Doug.

Speaker Change: At Investor Day in December we laid out a medium term path to $30 billion in receivables and a 5% capital generation return on receivables with charge offs normalizing down to our strategic range of 6% to 7%.

Speaker Change: We are navigating the economic climate with great care, but at the same time building the foundation for our future and we remain very confident we will achieve these objectives.

Speaker Change: Now turn the call back over to Doug.

Douglas H. Shulman: Thanks, Micah. Hopefully, you will take away from our comments that we are confident about our competitive position, feel very good about our current underwriting posture and the management of our credit box, and are optimistic about the opportunities ahead. We remain well positioned to grow once the environment becomes less uncertain, with best-in-class underwriting, a unique business model, a fortress balance sheet, an expanding product set with a bigger addressable market, and all of the differentiating factors we laid out at our investor day two months ago. Most importantly, we remain highly committed to being the lender of choice to the non-prime, helping our customers meet their credit needs today, but also helping them With that said, let me open the floor to questions. The floor is now open. At this time, if you have a question or comment, please press star one on your touchtone phone. If at any point your question is answered, you may remove yourself from the queue by pressing star two.

Thanks, Mike.

Douglas H. Shulman: Hopefully you will take away from our comments that we are confident about our competitive positioning feel very good about our current underwriting posture in the management of our credit box and are optimistic about the opportunities ahead.

Douglas H. Shulman: We remain well positioned to grow once the environment becomes less uncertain.

Douglas H. Shulman: Best in class underwriting a unique business model, our fortress balance sheet.

Douglas H. Shulman: And expanding product set with a bigger addressable market.

Douglas H. Shulman: And all of the differentiating factors, we laid out at our Investor day, two months ago. Most importantly, we remain highly committed to being the lender of choice to the non prime consumer helping our customers meet their credit needs today, but also helping them progress two of <unk>.

Douglas H. Shulman: Better financial future.

Speaker Change: Let me end by thanking all the Onemain team members for their dedication and hard work throughout 2023 and their continued commitment to our customers each and every day.

Speaker Change: That let me open it up for questions.

Speaker Change: The floor is now open for questions. At this time, if you have a question or comment. Please press star one on your Touchtone phone if at any point. Your question is answered you may remove yourself from the queue by pressing star two and then we do ask that while you pose your question. Please pickup your handset to allow optimal sound quality.

Operator: Again, we do ask that while you pose your question, you pick up your handset to allow optimal sound quality. Thank you. Our first question is coming from Vincent Cantic with Stevens. Your line is now open. Hi, good morning.

Speaker Change: Our first question is coming from Vincent <unk> with Stephens. Your line is now open.

Vincent Caintic: Thank you for taking my questions. First question, if you wouldn't mind elaborating on that portfolio growth, math dynamics, I guess. How does the pace of originations and that makeshift between the front and the backbook affect how we should be thinking about the delinquencies and losses playing out over 2024? Thank you. Morning, Vince, and Micah.

Vincent: Hi, Good morning. Thank you for taking my questions I guess first question if you.

Vincent: Wouldn't mind elaborating on that portfolio growth mass dynamics, I guess, how does the pace of originations and that mix shift between the front and the back book.

Speaker Change: How we should be thinking about the delinquencies and losses playing out over 2024. Thank you.

Good morning, Vince Mike. Thanks, Thanks for the question I appreciate you joining us.

Micah R. Conrad: Thanks. Thanks for the question. I appreciate you joining us.

Micah R. Conrad: I think you hit it right. This is definitely more about the timing of new originations. We think this is an important concept, and we wanted to share with you guys how we analyze the portfolio at a granular level. We also wanted to, I think it's important to understand why we feel good that the credit performance that we're seeing in the portfolio is moving in the right direction. I touched on it a little bit in the prepared remarks, but I can lay it out a little bit further. Second half originations this year were, as we showed, 10% below the second half of 22.

Speaker Change: I think you hit it right. This is definitely more about the timing of new originations. We think this is an important concept.

Speaker Change: We wanted to share with you guys, how we analyze the portfolio at a granular level. We also wanted to I think it's important to understand why we feel good that the credit performance that we're seeing in the portfolio is moving in the right direction.

Speaker Change: Touched on it a little bit in the prepared remarks, but I can lay it out a little bit further.

Speaker Change: Second half originations this year.

Speaker Change: We're as we showed 10% below the second half of 'twenty two so we're down 8% in the third quarter.

Micah R. Conrad: So we're down 8% in the third quarter relative to the prior year period, and down 13% in the fourth quarter. This is, of course, due to our continued tightening and our pricing actions we've taken throughout the year. So what that results in is second half originations in 2023 making up just 27% of our year-end receivables. If you compare that to a year ago, that was 32%.

Speaker Change: Relative to the prior year period down 13% in the fourth quarter says of course be due to our continued tightening and our pricing actions we've taken throughout the year. So what that results in is second half originations in 2023, making up just 27% of our year end receivables.

Speaker Change: If you compare that to a year ago that was 32%.

Micah R. Conrad: Meaning second half originations in 22 made up 32% of our portfolio. So you can really see the impact there of the tightening that we've done this year. The 30 to 89 delinquency rate that you'd expect to see at year end for loans originated in the second half is about 1%. The rest of the portfolio has a delinquency rate closer to four. So when you blend that together, you get to our total of 30 to 89 delinquency.

Speaker Change: Meaning second half originations in 'twenty, two made up 32% of our portfolio. So you can really see the impact there of our tightening that we've done this year. The 30 to 89 delinquency rate that you would expect to see at year end for loans originated in the second half is about 1%.

Speaker Change: The rest of the portfolio have the delinquency rate closer to four so when you blend that together you get to our total 30 to 89 delinquency.

Micah R. Conrad: The takeaway here is that nothing's changed in the relative performance of our vintages and loans within our receivables base. We've just seen a mixed shift with a greater percentage of our current portfolio coming from the older originations as a result. www.OneMainHoldings.com Okay, that's a very helpful detail.

Speaker Change: The takeaway here is that nothing has changed in the relative performance of our vintages and loans within our receivables base. We've just seen a mix shift with a greater percentage of our current portfolio current coming from the older originations as a result of this this slowing down again purpose of.

Speaker Change: This whole discussion is really to reinforce our commentary that we think credits moving in the right direction and if you just look at the 30 to 89 year over year, it's not necessarily that evident.

Vincent Caintic: Thank you very much for that. And I guess just to follow up on that, when we think about that 2024 guidance, if you could explain the different assumptions between the NCO ranges, so when you think about that low end of 7.7% versus that high end of 8.3%. Thank you.

Speaker Change: Okay.

Speaker Change: Very helpful detail. Thank you very much for that and I guess, just a follow up on that.

Speaker Change: We think about that 2024 guidance. If you can explain the different assumptions between the NCO range. So when you think about that low end of seven 7% versus that high end of eight 3%. Thank you.

Micah R. Conrad: Yeah, so I mean, that's obviously a little bit with delinquency; we know exactly what that makes shift. Certainly, growth math and our slowdown will be part of our loss guide. You know, growth math and, and the pace of origination are certainly, are always present in any of these credit performance numbers. The 7.7 to 8.3, I would say, you know, certainly our pace of growth will influence where that, where that number ultimately ends. Of course, the just natural performance of loans within the portfolio. So does the back book continue to perform the same way that we've seen it perform over the last year? Same with the front book.

Speaker Change: Thanks, Yes, yes, so I mean, that's obviously a little bit.

Speaker Change: Delinquency, we know exactly what that mix shift is.

Speaker Change: Certainly growth math, and our slowdown will be a part of our last guide.

Speaker Change: Both Matt and and the pace of originations certainly as is always present in any of these credit performance numbers.

Speaker Change: The seven 7% to eight three I would say certainly our pace of growth will influence where that.

Speaker Change: Where that number as ultimately and of course, the just natural performance of loans within the portfolio. So it does the back book continue to perform the same way that we've seen it perform over the last year, saying with the front book So.

Micah R. Conrad: So those variations in our loss rate are accommodated for that, as we've talked about, and set in our prepared remarks and also in our presentation, we do anticipate seeing peak losses in 2024. So within that 7.7 to 8.3 guide, we also anticipate seeing normal seasonal patterns, so that higher in the 1st half and lower in the 2nd.

Speaker Change: Those variations in our loss rate or accommodate for that.

Speaker Change: As we've talked about and said in our prepared remarks and are.

Speaker Change: And also in our presentation, we do anticipate seeing peak losses in 2024, so within that 7% seven to eight three guide. We also anticipate seeing normal seasonal pattern, so that higher in the first half and lower in the second.

Speaker Change: Yeah.

Vincent Caintic: Okay, great. That's very helpful. Thanks very much.

Speaker Change: Okay, Great. That's very helpful. Thanks, so much.

Richard Shane: Thank you. Our next question comes from Rick Shane with J.P. Morgan. Your line is open.

Speaker Change: Thanks, I think you are.

Speaker Change: Our next question comes from Rick Shane with Jpmorgan. Your line is open.

Micah R. Conrad: Hey, guys, thanks for taking my questions this morning. Look, you know, essentially, the guidance suggests that charge-offs are going to hit a 10-year peak in the first half of this year and then start to, I'm curious how we should think about reserves, which are already reflecting that. Will your reserve rate start to come down before losses peak? And ultimately, as you go back to sort of a normal loss rate, more in line with your long-term targets, what do you think the reserve rate will be? Eric against Micah.

Richard Shane: Hey, guys. Thanks for taking my questions. This morning look at risks.

Richard Shane: Essentially the guidance suggests that charge offs are going to hit a 10 year peak and.

In the first half of this year and then start to recede.

Richard Shane: I'm curious, how we should think about reserves, which are.

Richard Shane: Already reflecting that will your reserve rate start to come down before losses, Pete and ultimately as you go back to sort of a normal loss rate more in line with your long term targets. What do you think the reserve rate will be.

Speaker Change: Hey, Rick dense Mike.

Micah R. Conrad: I think in terms of the timing of when the reserve will move around, it's a little tricky to call. Reserves are less sensitive to the periodic charge-offs than they are to delinquency levels and expectations for the future. As we talked about before, CECL is a very elaborate model with a lot of inputs and assumptions.

Richard Shane: I think in terms of the timing of when the reserve will move around.

Speaker Change: A little tricky to call.

Richard Shane: Our reserves are less sensitive to the periodic charge offs than they are the delinquency levels and the expectations for the future as.

Richard Shane: As we've talked about before <unk> is a very elaborate models a lot of inputs and assumptions.

Micah R. Conrad: It's also important to remember that it's a lifetime model. We expect the majority of our first half losses, which, as we talked about, are going to be elevated relative to the second half, both because of seasonal trends, but also because the majority of those first half losses are going to be coming from the underperforming back book, which is still 57% of our delinquent receivables at the end of the fourth quarter. These loss expectations have been reserved for and included in our model for quite some time, as you pointed out. The front book performing well, continuing to perform the way we like it and in line with expectations, that made up 65% of our receivables at year-end, and that's going to be what really drives most of the lifetime losses expected under CECL, given that it is that lifetime model that goes far beyond 2024.

Richard Shane: It's also important to remember that it's a lifetime model. So we expect the majority of our first half losses, which as we talked about are going to be elevated relative to second half both because of seasonal trends, but also because the majority of those first half losses are going to be coming from the underperforming.

Richard Shane: Back book, which is still 57% of our delinquent receivables at the end of fourth quarter and these loss expectations had been reserved for and been included in our model for for quite some time as you pointed out.

Richard Shane: The front book performing well continuing to perform the way, we like it and wait in line with expectations that made up 65% of our receivables at year end and thats going to be what really drives most of the lifetime losses expected under sea salt given that it is that that lifetime model that goes far beyond.

Micah R. Conrad: So again, there's some puts and takes there. I think as we see this transition continue to take place in our portfolio, we see delinquency levels start to move down, and then, of course, our expectations of the macro environment going forward are also part of that model. That's when we'll start to see the model move itself in the right direction, although it's hard to say exactly where that lands. A lot of this is makeshift in the portfolio. We've got cards now.

Richard Shane: 2024, so again theres some puts and takes there I think as we see this transition continue to take place in our portfolio, we see delinquency levels start to move down and then of course, our expectations of the macro environment going forward are also part of that model. That's when we'll start to see the model.

Richard Shane: Move itself move itself in the right direction.

Richard Shane: It's hard to say exactly where that lands a lot of this is mix shift in the in the portfolio. We've got cards now we've got an auto book that's growing.

Micah R. Conrad: We've got an auto book that's growing. But if you go back to the original days of CECL in early 2020, a relatively benign environment, we were around 10.7%. So I can certainly see us getting back to the 11 context over time. I think another way to look at it is that our allowance ratio today is 11.6, and we think about 60 basis points of that is due to our macro overlay. I think all of this triangulates around a general area of about 11% as a normal good environment CECL reserved for us. An incredibly helpful answer.

Richard Shane: But if you go back to the original days of Cecil in early 2020, a relatively benign environment were around 10, 7%. So I can certainly see us getting back to 11 11 context over time I think another way to look at it is our.

Richard Shane: Allowance ratio today is 11, six and we think about 60 basis points of that is due to our macro overlay. So I think all of this triangulates around a a general area of about 11% as kind of a normal good environment see some reserve for us.

Richard Shane: Thank you, guys. Yeah, thanks, Rick. Thanks, Rick.

Speaker Change: Incredibly helpful answer Thank you guys.

Michael Kay: Thank you. We'll take our next question from Michael Kay with Wells Fargo. Hi.

Speaker Change: Yeah. Thanks, Rick Thanks, Rick.

Speaker Change: Thank you we'll take our next question from Michael Kaye with Wells Fargo.

Douglas H. Shulman: You know, the year-over-year decline in originations, you know, it's accelerating, you mentioned, you know, the tightened underwriting, the pricing actions, but trying to understand, understand, and think, you know, how much origination volume are you leaving on the table from these actions, particularly on the core personal loan product? And, you know, if you do decide to ramp up again, how much does marketing need to increase to get the origination engine really fully hung again? Yeah, thanks, Michael. It's good to hear from you.

Speaker Change: Hi.

Michael Kaye: The year over year decline in originations.

Michael Kaye: Accelerating you mentioned the tightened underwriting.

Michael Kaye: Underwriting.

Michael Kaye: The pricing actions, but trying to understand to understand.

Michael Kaye: How much of our origination volume or you're leaving on the table from from these actions, particularly on our core personal loan product and.

Michael Kaye: If you do decide to ramp up again, how much does marketing need to increase to get the origination engine really fully hung again.

Michael Kaye: Yeah.

Speaker Change: Thanks, Michael.

Speaker Change: Good to hear from you.

Douglas H. Shulman: You know, as I said earlier in the call, we're just taking a conservative posture right now on credit. There's still a fair amount of uncertainty in the macro environment and a fair number of cross-currents. You know, unemployment's a bright spot, but some... People can't get as many hours as they used to, and, you know, some people are losing jobs, even though the overall picture is good.

Speaker Change: As I said in in earlier in the call. We're just taking a conservative posture right now on.

Speaker Change: Credit.

Speaker Change: There's still a fair amount of uncertainty in the macro environment and a fair number of crosscurrents unemployment's, a bright spot but.

Speaker Change: Some.

Speaker Change: People can't get as many hours as they had and some people are losing jobs, even though the overall picture is good.

Douglas H. Shulman: Inflation, while it's moderated, is still impacting customers because prices remain elevated, even though they're not growing as much year over year. And then we've still got interest rates. So there's still just a bunch of cross currents in the environment. You know, I also mentioned, and Micah mentioned, we really like the performance of our recent vintages. So where the box is now is that we're booking really good business. And it's a really good competitive environment.

Speaker Change: Inflation, while it's moderated is still impacting customers because prices remain elevated even though they're not growing as much year over year and then we've still got interest rates. So there's still just a bunch of crosscurrents in the environment.

Speaker Change: <unk>.

Speaker Change: I also mentioned and Mike mentioned, we really like the performance of our recent vintages, so where the boxes now.

Speaker Change: We're booking really good business and it's a really good competitive environment. So we're still able to pick our spots and book good business, where it is.

Douglas H. Shulman: So we're still able to pick our spots and book good business where it is. You know, we often talk about a Titan credit box, but I'll just repeat what I've said before. There is no big credit box.

Speaker Change: We often talk about the tightened credit box, but I will just repeat what I've said before there is no big credit box, it's very very granular by state by the risk of a customer buy the product that they choose or we offer them by the channel then it comes in.

Douglas H. Shulman: It's very, very granular by state, by the risk of a customer, by the product that they choose or we offer them, by the channel that it comes in. And so we are cutting the credit box more than we're opening, but we're doing some of both all the time at a very granular level. The net is cutting.

Speaker Change: And so.

Speaker Change: We are cutting the.

Speaker Change: The credit box more than we're opening but we're doing some of both all the time on a very granular level. The net is.

Douglas H. Shulman: We also have what we call a weather vane. So we're always booking a small amount of business right below our credit cutoff so we can see how that performs and get a sense, you know, if we're, like you said, leaving money on the table. I think the punchline is there's a decent chance we're leaving money on the table right now, but we're being conservative, and, you know, we take being stewards of our shareholders' capital very seriously. And when we're ready to ramp up, I don't think it's going to take a big turnaround. We already have, you know, our marketing. We've got direct mail campaigns.

Speaker Change: Cutting we also have.

Speaker Change: What we call weather vein. So we're always booking a small amount of business right below our credit cut off so we can see how that performs and get a sense.

Speaker Change: If we're like you said, leaving money on the table.

Speaker Change: I think the punch line is there is a decent chance, we're leaving money on the table right now, but we're being conservative.

Speaker Change: And we take being stewards of our shareholders' capital very seriously.

Speaker Change: And when we're ready to ramp up I don't think its going to take a big turnaround we already have our marketing we've got direct mail campaigns. We've got E Mail campaigns, we've got affiliate channels and partners, we now have auto.

Douglas H. Shulman: We've got email campaigns. We've got affiliate channels and partners. We now have auto dealers where we can have different things happening. We've got a lot of social media and digital, and so all those levers are still running at different levels, so it would be pretty easy for us to ramp them back up. What I would say is we still have very strong demand because of the competitive environment. We've been in the market for a long time. People like our product, and so we still have – we could be booking more business today if we wanted. We're just choosing not to.

Speaker Change: Dealers, where we can have different things happening, we've got a lot of social media and digital and so all of those levers are still running at different levels that would be pretty easy for us to ramp it back up but what I will say is we still have very strong demand because of the competitive environment. We've been in the market people like our product and so we.

Speaker Change: Still have we could be booking more business today, if we wanted we're just choosing not to.

Michael Kay: That's great. Second question, I apologize if I missed this, but the $1 billion of loans you're acquiring from Foresight. I don't know if Micah mentioned this, but what's the initial reserve on that? Is that going to hit the C&I segment? Or is that going to go through and Olgap separately?

Speaker Change: Okay.

Speaker Change: Right.

Speaker Change: My question and I apologize if I missed this but the 1 billion of loans, we're acquiring from <unk>.

Speaker Change: For our site.

Speaker Change: I don't know if Mike I mentioned about whats that initial reserving look like on that is that going to.

Speaker Change: The C&I segment or is that going to go through.

Speaker Change: GAAP.

Micah R. Conrad: Yeah, Michael. Fortunately, I've been around since the OneMain acquisition, so I kind of have a good sense for how this is going to work. We'll handle it the same way, which is to preserve within our C&I reporting the historical method of accounting. And I think that that works really well because it allows all of us to see the actual real performance that Foresight will contribute. There's a lot of noise that comes out of purchase accounting, as you know. We will hold all of that purchase accounting below C&I, so we'll give you transparency on it, of course.

Speaker Change: Currently.

Micah R. Conrad: Yes, Michael.

Michael Kaye: Fortunately I have been around since the Onemain acquisition. So it kind of have a good sense for how this is going to work.

Michael Kaye: We'll handle it the same way, which is to preserve within our C&I reporting the historical method of accounting and I think that that works really well because it allows all of us to see the actual real performance.

Michael Kaye: That that foresight will contribute a lot of noise that comes out of purchase accounting as you know we will hold all of that purchase accounting below C&I. So we'll give you transparency to it of course, but it is really all about timing and recognition of earnings and so both our mark.

Micah R. Conrad: But it is really all about timing and recognition of earnings. And so both our marks and adjustments to the balance sheet that will accrete or amortize over time associated with acquiring that balance sheet will move through the segment outside of or the area outside of C&I, as will what I'll call the Day 2 CECL Reserve, which is what you're referring to. The gap still requires you to book that Day 2 CECL Reserve on a portion of the acquired portfolio. I don't want to get into too many specifics.

Michael Kaye: And adjustments to the balance sheet that will accrete or amortized over time.

Michael Kaye: Associated with acquiring that balance sheet will move through outside of the segment outside of or the area outside of C&I as will what I'll call. The day, two seasonal reserve, which is what you're referring to.

Michael Kaye: The gap still requires you to book that day to cease a reserve on.

Michael Kaye: On a portion of the acquired portfolio I don't want to get into too. Many specifics we will hold that outside of C&I again, because its going to accrete up over time base.

Micah R. Conrad: We will hold that outside of C&I, again, because it's going to accumulate over time based on the runoff of those receivables. And so there's some accounting moving through the FASB to eliminate that concept, but for now, it still exists. But we're going to keep that pure for you and outside of the C&I numbers. But, I mean, how about, yeah?

Michael Kaye: Based on the run off of those receivables and so there is some accounting moving through the FASB to eliminate that concept, but for now it's still exists, but we're going to keep that pure vu and outside of the C&I numbers.

Micah R. Conrad: I mean, you have $1 billion in loans coming on the balance sheet. I mean, you know, what should we assume? The allowance goes up to account for that. If you know we assumed nothing, then your allowance ratio is gonna have a pretty big drop. Is that like fair? I think Yeah, again, Michael, we will basically assume that the opening balance sheet for C&I purposes associated with Foresight, those balances will already exist for them, so they will be in our CECL reserve. We're just going to have to make an adjustment to the starting point for you. It's not going to run through earnings like that. Yeah, okay. Okay. I got it.

Speaker Change: Hello, Jonathan.

Jonathan: I mean, you have 1 billion of loans coming on the balance sheet I mean it.

What should we assume that the allowance goes up to account for that if we assume nothing in your allowance ratio is going to have a pretty big drop.

Jonathan: I said that I think.

Speaker Change: Yeah again, Michael we will basically assume that the opening balance sheet for C&I purposes associated with foresight those balances will already exists for the C&I purpose.

Speaker Change: So they will be in our seasonal reserve, which is going to have to make an adjustment to the starting point for you, it's not going to run through earnings like that.

Michael Kaye: Yes, okay. Okay got it okay, yeah I.

Michael Kay: Okay. Yeah. Okay. Remember, the balance balance sheet concept is really only at a total. So. You know, we'll make the adjustment, you should feel comfortable, and we'll certainly be able to walk.

Michael Kaye: Remember the balance to balance sheet concept is really only at a total GAAP level. So.

Michael Kaye: We'll make the adjustments you should feel comfortable and we'll certainly be able to walk you through the math of that but how much of the adjustment is going to be what it is it fair to assume let's say you know mid single digits as a percent of the $1 billion.

Micah R. Conrad: But how much of the adjustment is going to be? Is it fair to assume, let's say, you know, a mid-single-digit percent of the billion? I, Micah, I don't, I don't know that yet. I think that's going to be a matter of how we build this model. I will give you the data. I don't have it yet.

Speaker Change: Mike I don't think I don't know that yet I think that's going to be a matter of how we built this model I will give you the day data I don't have it yet.

Speaker Change: Yet.

Micah R. Conrad: Okay, okay. Thank you. We'll take our next question from Moshe Orenbuch with TPCAL, and your line is open. Great, thanks.

Okay. Thank you.

Speaker Change: Yep.

Thank you we'll take our next question from Moshe Orenbuch with TD Cowen Your line is open.

Moshe Ari Orenbuch: Great. Thanks.

Moshe Ari Orenbuch: I guess first with respect to this.

Moshe Ari Orenbuch: And I guess first, with respect to this, you know, your front book, back book, you know, kind of performance, you talked a lot about delinquencies. You alluded to the, you know, the charge-off performance and difference. But is there a difference in terms of how those portfolios are rolling to charge off, you know, from delinquency? Ugh.

Moshe Ari Orenbuch: Your front book back book.

You know kind of performance you talk.

Moshe Ari Orenbuch: You did talk a lot about delinquencies you alluded to the charge off performance in difference, but is there a difference in terms of how those portfolios are rolling to charge offs from delinquency.

Micah R. Conrad: Not particularly Moshe, I think, you know, with our customer base. Once you get a couple payments past due, it's pretty challenging for them to move forward. I mean, we've done what we can with some of our borrower assistance tools to help customers lower payments in the later stages of delinquency. But I would say it's more the frequency of loans running into early-stage delinquency that is the differentiator between the front and the back. Cut.

Speaker Change: Uh huh.

Speaker Change: Not particularly Moshe I think you know with our customer base. Once you get a couple of payments past due its it's pretty challenging for them to move forward.

Speaker Change: We've done what we can with some of our borrower assistance tools to help customers lower payments in the later stages of delinquency, but I would say, it's more of the frequency of loans running into early stage delinquency that is the differentiator between the front and the back got.

Speaker Change: Got it.

Micah R. Conrad: And Micah, would you think that would improve to the extent that, you know, as time goes on, the inflationary environment is less painful or less likely to see any improvements? I think that is the case. You know, we're seeing, particularly with rents, for instance, rents are up significantly, as has been widely reported. You know, from 2019 levels, our average rent for a customer was about 600 bucks, and now it's closer to 900. So, you know, some of those pressures are certainly causing some trouble for certain non-prime consumers and, again, particularly the renter class.

Speaker Change: And Michael would you would you think that would improve to the extent that.

Michael Kaye: As time goes on the inflationary environment is is less painful or as they are less likely to see any improvement.

Michael Kaye: I think that is the case.

Seeing particularly with like rents for instance, rents are up significantly has been widely reported.

Michael Kaye: From 2019 levels, our average rent for a customer was about 600 Bucks and now it's closer to 900 so.

Michael Kaye: Some of those pressures are certainly causing.

Michael Kaye: Some trouble for certain non prime consumers and again, particularly the renter class, but if we start to see some of that come down I think that creates certainly immediate.

Moshe Ari Orenbuch: But if we start to see some of that come down, I think that creates immediate cash flow relief for our consumers. And we'll see that impact us all throughout our delinquency metrics, whether it's entry or back end or even recovery. Yeah, and just one last one for me, and that is that, you know, the growth expectations, you know, it's, and you've addressed this to some extent, and, you know, despite the fact that you say that it is, you know, a very favorable environment, the growth expectations are kind of, you know, kind of at the lower end of where you've been historically, particularly for the core product. Is there any way to kind of dimension, like, you know, how you would think it could be better or less good than that?

Cash flow relief for our consumers and we'll see that impact us all throughout our delinquency metrics, whether it's entry or back back and or even recovers.

Michael Kaye: Yeah.

Speaker Change: Last one for me and that is the meat of it.

Speaker Change: Growth expectations.

Speaker Change: And you've addressed this to some extent.

Speaker Change: Despite the fact that you say that it is a.

Speaker Change: Very favorable environment the growth expectations are kind of.

You know kind of at the lower end of where you've been historically, particularly for the core product.

Speaker Change: Is there any way to kind of dimension like how you would think it could be better or less good than that what what sort of external factors.

Douglas H. Shulman: What sort of, you know, external factors would we be able to see that would give us a sense as to whether you're turning that up or down a little bit? Yeah, look, Moshe, I've said over and over growth is an output, you know; we're going to make sure we book business with customers that we think can be successful, which means they pay us back, and they keep good credit, and we're going to err on the side of conservative. I mean, the factors that drive it are one, our marketing, you know; do we reach the right people? Two is our value proposition, and I think we have now really honed our value proposition around secured loans, unsecured loans, smaller dollar loans, two types of card, a fee card with a smaller line and no fee card, and now we've got auto distribution to add to the channel. So we've got a range of products we can offer. Then there's the customer experience. When someone actually comes, you know, what's it like?

Speaker Change: We would be able to see that would.

Speaker Change: Give us a sense as to whether you are turning that up or down a little bit.

Speaker Change: Yes look much I've, I've said over and over growth as an output.

Speaker Change: We're going to make sure we book business with customers.

Speaker Change: We think can be successful, which means they pay us back and they keep good credit and.

Speaker Change: We're going to err on the side of Conservative I mean, the factors that drive it is one our marketing.

Speaker Change: Do we reach the right people to is our value proposition and I think we have now really honed our value proposition around secured loans unsecured loans smaller dollar loans two types of card fee card with a smaller line and no fee card.

Speaker Change: And now we've got auto distribution to add to the channels that we've got a range of products. We can offer then there is the customer experience when someone actually.

Speaker Change: Comes whats it like either talking to one of our team members interacting digitally and we've done a lot of investment around that and we think we're really well positioned and then the overriding factor of that is our credit box, we've now for a while.

Douglas H. Shulman: Either talking to one of our team members, or interacting digitally, and we've done a lot of investment around that, and we think we're really well positioned. And then the overriding factor for that is our credit box. We've now for a while had a credit box that has the models we run, which is, you know, our historical performance, and what we're seeing with delinquency. And again, it's not just one credit box. It's the type of customer, the channel they come in through, whether they've done business with us before, the state they're in, because we can do different pricing.

Speaker Change: The credit box that has the models, we run which is.

Speaker Change: Our historical.

Speaker Change: Performance, what we're seeing with delinquency and again, it's not just one credit box. It's the type of customer the channel they come in and have they done business with us before.

Speaker Change: Date, they're in because we can do different.

Douglas H. Shulman: But right now, we have a macro overlay of an extra 30 percent stress. So, you know, all things being equal, we're basically saying we're only going to book business if credit gets 30 percent worse than we think it's going to get, because we want to be concerned. I think, you know, what we'll see is, depending on, you know, we'll see payments coming in, we'll see the credit results, we'll see what's happening with our weather vane, and we'll also see what's happening externally with the macro, you know, what's happening with employment, what's happening with inflation, or interest rates coming down, and, you know, are people spending more? There's all the external macros, so we're running it very tightly, but right now we're taking a conservative posture, because even though, you know, all the economic indicators, when you read the papers, and turn on CNBC, everyone thinks the economy's great, it's not so great for every person in the country, and the less money you have, the tighter it is for you, and so that's why we're running things, you know, very conservatively.

Speaker Change: Right thing, but right now we have a macro overlay of an extra 30% stress so.

Speaker Change: All things being equal, we're basically saying, we're only going to book business.

Speaker Change: If credit gets 30% worse than we think it's going to get because we want to be conservative.

Speaker Change: Thank you know what we'll see is <unk>.

Speaker Change: Depending on.

Speaker Change: See payments coming in we will see.

Speaker Change: The credit results, we'll see what's happening with our weather vein and we'll also see what's happening externally with the macro you know, what's happening with employment and what's happening with inflation or interest rates coming down and are people spending more there is all the all the external macro so we're running it very tightly but right now we're taking a conservative posture.

Speaker Change: Because even though all the economic indicators when you read the papers.

Speaker Change: And turn on CNBC, everyone thinks the economy's, great. It's not so great for every person.

Speaker Change: In the country and the last money you have the tighter it is for you and so that's why we're running things.

Speaker Change: Conservatively right now.

Douglas H. Shulman: Great. But let me just add, at the end, we are booking great business, and the business we're booking today, we feel really good about, and so what we're encouraged about is, you know, we talk about as our front book, our newer vintages, that is business that is meeting our historical return thresholds, that is, you know, the credits trending more towards historical norms, which gives us a lot of confidence that we can keep booking that business, incrementally, hopefully we'll be able to book more as some of those factors play, but whenever the economy turns, we're going to be really positioned. Great, thank you.

Thanks.

Speaker Change: But let me just add.

At the end, we are booking great business and the business. We're booking today, we feel really good about and so what we're encouraged about is we talked about it as a front book our newer vintages.

Speaker Change: That is business that is meeting our historical return thresholds that is.

Speaker Change: The credit is trending more towards historical norms, which gives us a lot of confidence.

Speaker Change: That we can keep booking that business incrementally hopefully, we'll be able to book more at some of those factors gley, but whenever the economy turns we're going to be really positioned for growth.

Speaker Change: Great. Thank you.

Terry MA: Thank you. We'll take our next question from Terry Ma with Barclays. Your line is open. Hey, thanks. Good morning.

Speaker Change: Thanks, so much.

Speaker Change: Thank you we'll take our next question from Terry MA with Barclays. Your line is open.

Terry MA: Hey, Thanks. Good morning can you, maybe just talk about your confidence level and timeframe for kind of drifting back to that target underwriting loss range of 6% to 7%.

Micah R. Conrad: Can you maybe just talk about your confidence level and time frame for kind of drifting back to that target underwriting loss range of 6 to 7 percent? Is that a 2025 event or kind of like post 2025? Good question, Terry. It's a very difficult one to pinpoint.

Terry MA: At a 2025 event or kind of like post 2025.

Speaker Change: Good question, Terry it's a very difficult one to pinpoint.

Micah R. Conrad: I think, you know, we're focused on 2024. We know that the book we're underwriting today, from a, from a, you know, front book perspective, we know that those balances are tracking to an expected loss in that six to seven percent time frame. So a lot of this is going to be determined as to how quickly that back book becomes the majority or the lion's share of our delinquency and loss. So I think you're certainly six to seven, based on our guide for 2024, you're certainly looking at a 2025 kind of event. Exactly when our quarterly results reflect that six to seven percent in 2025 will remain to be seen. But we still feel confident that it will get there. It's just a matter of, you know, which quarter we're going to see it. I got it.

Speaker Change: I think you know we're focused on 2024, we know that the book we're underwriting today from a from a front book perspective, we know that those balances are tracking to an expected loss in that 6% to 7% timeframe. So a lot of this is going to be determined as to how quickly that back book.

Speaker Change: Comes the majority or the lion's share of our delinquency and loss. So I think youre certainly six to seven based on our guide for 2024, you're certainly looking at a 2025 kind of events exactly when in 2025, our quarters reflect that six to seven percentages will.

Speaker Change: We will remain to be seen but we still feel confident that it will get there. It's just a matter of which quarter, we're going to see that.

Terry MA: And if I look at your net loss guidance range for this year, that assumes stable macro, but the high end of that range is actually pretty similar to what the legacy entity realized in 2008. So can you maybe just talk about what additional actions or measures you can take if the macro were to get a lot worse? Well, I think, as you just heard Doug say, even if the macro were to get worse, we're still going to be booking loans, the same loans we're booking today, because we've already incorporated that expected stress in our returns. I think as it relates to the net charge-off range, you know, certainly, I think our range is. We're comfortable enough that we feel we've got some movement, even if the macro changes. I think when we say stable macro, it doesn't mean it's completely unchanged. It just means it has to be somewhat like it is today.

Speaker Change: Got it.

Speaker Change: I look at your net loss guidance range of this year that assumes stable macro.

Speaker Change: But the high end of that range is actually pretty similar to what the legacy entity realized in 2008.

Speaker Change: So can you maybe just talk about what additional actions or measures you can take if the macro were to get worse.

Speaker Change: Yes.

Speaker Change: Well I think as you just heard Doug say, even if the macro were to get worse, we're still going to be booking loans. The same loans. We're booking today, because we've already incorporated that expected stress in our returns I think as it relates to the net charge off range.

Speaker Change:

Speaker Change: Certainly.

Speaker Change: Our range is is is.

Speaker Change: Comfortable enough that we feel we've got some movement, even if the macro changes I think when we say stable macro it doesn't mean, it's completely unchanged. It just means it has to be somewhat like it is today and you know if we were to see unemployment double for instance, I think that would be a change in the macro environment that I.

Lahir Batia: And if we were to see unemployment double, for instance, I think that would be a change in the macro environment that I wouldn't necessarily call stable. So that just gives us a little bit of room. Certainly, our pace of originations, as we've talked about this concept, could move us also within that range of 7.7 to 8.3.

Speaker Change: Wouldn't call necessarily stable so.

Speaker Change: That just gives us a little bit of room, certainly our pace of originations as we've talked about this.

Speaker Change: Excuse me this concept.

Speaker Change: That could move US also within that range of seven 7% to eight three so if we continue to say tighten in and reduce that denominator. We could end up at the high end of that range. If we start to grow towards the middle of the year. We will we can move towards the bottom and so there's a lot of factors that go into that.

Micah R. Conrad: So if we continue to, say, tighten and reduce that denominator, we could end up at the high end of that range. If we start to grow towards the middle of the year, we could move towards the bottom end. So there are a lot of factors that go into that.

Lahir Batia: And certainly, we wanted to call out that we've assumed in there that there's no large change to the macro environment within that range. Okay. Great. Thanks. Thank you. We will take our next question from Lahir Batia with Bank of America. Your line is open.

Speaker Change: But certainly we wanted to call out that we've assumed in there that theres no large change to the macro environment within that range.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thanks.

Speaker Change: Thank you we'll take our next question from Mihir Bhatia with Bank of America. Your line is open.

Mihir Bhatia: Good morning, and thank you for taking my question.

Douglas H. Shulman: I wanted to follow up on Rick's question, just given the credit profile of the portfolio is improving as more of the book is from the front. Why is the allowance ratio not declining? Is the macro function getting worse?

Mihir Bhatia: I just wanted to let me just stop I wanted to follow up on Rick's question.

Mihir Bhatia: Just given the credit profile of the portfolio is improving as malls to book.

Speaker Change: From the front.

Mihir Bhatia: Why is the allowance ratio not declining like has the macro assumptions that was like I understand you like.

Lahir Batia: Like I understand your life of loan losses, right? Presumably, the front book, which has a better credit profile, has a lower life of loan losses than the stuff that's running off from the back book. So why is the reserve ratio just stable and not improving right now? Yeah, so again, as I said earlier, CECL is a pretty elaborate model, and there are a ton of assumptions. And it is also lifetime.

Speaker Change: Life of loan losses, right. So presumably the front book, which has better credit profile has lower life of loan losses than the stuff that's running off from the back book. So why is the reserve ratio just stable if not improving right now.

Speaker Change: Yes, so again as I said earlier <unk> is a pretty elaborate model and there's a ton of assumptions in it and it is also lifetime and as I said the majority of our first half losses are coming from the underperforming back book. So that is certainly part of of our seasonal reserves.

Micah R. Conrad: And as I said, the majority of our first half losses are coming from the underperforming back book. So that is certainly part of our CECL reserves, as are the losses that will come from our underperforming back book in the second half. And I also mentioned that the front book makes up 65% of our receivables, so that's going to drive most of the lifetime losses. But those two things are sort of working against one another. We've also got a macro factor in our reserve that assumes we see continued stress. And so, you know, that macro factor is about 60 basis points. On a dollar basis, it's about $140 million.

Speaker Change: Is the losses that will come from our underperforming back book in the second half.

Speaker Change: And I also mentioned that the front books front book makes up 65% of our receivables that's going to drive most of the lifetime losses, but those two things are sort of working against one. Another we've also got a macro factor in our reserve that assumes we see continued stress and so you know that that macro factors.

Speaker Change: Bout 60 basis points on a dollar basis, it's about $140 million and that says we're going to continue to see some stress in our portfolio. We that is where we will once we start to see delinquencies come down once we feel more confident in the macro environment. We will then feel confident and moved.

Micah R. Conrad: And that says we're going to continue to see some stress in our portfolio. We will, that is where we will, once we start to see delinquencies come down, once we feel more confident in the macro environment, we will then feel confident in moving those reserves down. And here, I mean, I've said a number of times on these calls, I think there is, You know, we want to be really certain before we start moving reserves down that we're going to see sustained improvement. It does no one any good for us to move those things around from quarter to quarter to a great degree. Got it. No, I appreciate that.

Speaker Change: Those reserves down in Mihir, I mean, I've said number of times on these calls I think there is.

Speaker Change: We want to be really certain before we start moving reserves down that we're going to see sustained improvement does nobody any good for us to move those things around from quarter to quarter to a great degree.

Speaker Change: Got it no I appreciate that.

Speaker Change: Okay, maybe just taking a step back you know at a higher level can you talk a little bit about just the competitive intensity right now I mean, it sounds like you're tightening underwriting a little bit.

Lahir Batia: That makes sense. Okay. Maybe just taking a step back, you know, at a higher level, can you talk a little bit about just the competitive intensity right now? I mean, it sounds like you're tightening underwriting a little bit, but obviously, last year, you saw a big pullback from the FinTechs that used to play a lot in this space. Are you seeing them come back?

Speaker Change: Obviously last year, you've seen a big pull back from the fin techs that used to play a lot. In this space are you seeing them come back how are you thinking about that over the next year in your guidance do you expect the environment to continue to be similar where you have more demand than that.

Speaker Change: Microsoft's chill.

Douglas H. Shulman: How are you thinking about that over the next year? And, in your guidance, do you expect the environment to continue to be similar, where you have more demand than the actual stuff that you can actually book or you want to originate? Yeah, um, thanks, Mahir.

Speaker Change: That you can actually book that you wanted to originate.

Speaker Change: Yes.

Speaker Change: Thanks Me here, it's look it's a it's a really good competitive environment for us.

Speaker Change: You know what I would say is.

Going back to 'twenty one in early 2022, there was a ton of supply in the market and there was a.

Douglas H. Shulman: Look, it's a really good competitive environment for us. You know, what I would say is, going back to 21, in early 2022, there was a ton of supply in the market. And there was a fair amount of irrational pricing, meaning people were, you know, making loans to people with high expectations of losses at 10%, which just didn't make any sense. People, you know, lost a lot of money when that happened. In 22, early 23, a lot of our competitors just couldn't get funding, and so we had, you know, a pretty wide open market, but that shifted in, you know, by mid-2023. I think it was back to a more normal competitive environment where prices had risen, people with really strong balance sheets like us had plenty of money to lend, people who didn't have as much history or not as strong balance sheets, you know, both had tighter credit boxes, higher prices, and had to, you know, find funding, which was more expensive and harder to find.

Speaker Change: Fair amount of irrational pricing, meaning people were making loans to people with.

Speaker Change: High expectations of losses at 10%, which just didn't make any sense and people lost a lot of money when that happened.

Speaker Change: In 'twenty two early 'twenty three.

Speaker Change: A lot of our competitors just couldn't get funding and so we had a pretty wide open market, but thats shifted in by mid 2023, I think it was back to a more normal competitive environment, where prices had risen.

Speaker Change: People with really strong balance sheets like us had plenty of money to loan people, who didn't have as much history or not as strong balance sheets, both had tighter credit box higher pricing and had too.

Speaker Change: You know find funding, which was more expensive and harder to find.

Speaker Change: We've looked hard at the environment I think right now.

Speaker Change: Overall, the amount of loans being made is less than it was.

Speaker Change: Pre pandemic, but it's higher than it was.

Speaker Change: A couple of years ago. All of this leads us to say, we plan to win and we plan to do good business and we plan to serve customers regardless of what's happening with the competition I mean, we have a healthy amount of respect for the competition, but that's why we built out digital originations we have expanded our product.

Douglas H. Shulman: You know, we've looked hard at the environment. I think right now, overall, the amount of loans being made is less than it was, you know, pre-pandemic, but it's higher than it was, you know, a couple of years ago. All of this leads us to say we plan to win and we plan to do good business, and we plan to serve customers regardless of what's happening with the competition. I mean, we have a healthy amount of respect for the competition, but that's why we've built out our digital originations. We've expanded our products and, you know, our channels. And so, you know, your question, does the growth take into account the competitive environment? It would have to change a lot for us to, you know, have to change our strategy due to the competition. I mean, we kind of stick with our knitting.

Speaker Change: <unk> that we've expanded.

Speaker Change: Our channels and so on.

Speaker Change: Your question does the growth.

Speaker Change: Take into account the competitive environment.

Speaker Change: It would have to change a lot for us too.

You know to have have to change our strategy.

Speaker Change: Due to the competition I mean, we kind of stick with our knitting, we have a long term view, we stay in the market, we're incredibly disciplined around credit and it served US well, we continue to look and we have in our in our deck on slide 11.

Speaker Change: Our credit results continued to be better than competition.

Speaker Change: And so and it's I think it's because we have a long term view and we make sure that we're comfortable with the business where bus.

Douglas H. Shulman: We have a long-term view. We stay in the market. We're incredibly disciplined around credit, and it's served us well.

Speaker Change: Thank you for taking my question.

Lahir Batia: We continue to look, and you know, we have in our deck on slide 11, our credit results continue to be better than the competition. And so, and I think it's because we have a long-term view, and we make sure that we're comfortable with the business we're both in. Thank you for taking my question. Yeah, no, thank you. Thank you. We'll take our next question from Arren Cyganovich with Citi. Your line is open.

Speaker Change: Yes. Thank you.

Speaker Change: Thank you we will take our next question from Erin <unk> with Citi. Your line is open.

Speaker Change: Thanks.

Erin: Just hoping you could give a little.

Idea of the magnitude of it.

Erin: Net charge off rate increase in the first half versus the second half I think typical seasonality in the first quarter tends to be the highest and then it improves in the second quarter sounds like the dynamics will be maybe a little bit different this year.

Arren Cyganovich: Thanks. I was just hoping you could give a little idea of the magnitude of the net charge-off rate increase in the first half versus the second half. Typically, seasonality in the first quarter tends to be the highest, and it improves in the second quarter. Sounds like the dynamics will be maybe a little bit different this year. Yeah, I think generally speaking, Arren's, Micah, we typically see in the first half a loss rate that's about 100 basis points higher than what you will see in the third quarter, with something a little bit in the middle of those two and the fourth. So the natural trend of 30 to 89, which starts the clock on charge-offs, is for 30 to 89 to kind of bottom out in February and March, during tax season That's just a general seasonal trend. You would effectively follow charge-off, six months later, And as long as that relationship holds, then you would expect to see that the charge-offs will be lowest in the third quarter, second, lowest in the fourth, and then highest in the first.

Speaker Change: Yes, I think generally speaking Aaron's, Mike well, we will we're typically what we will see in the first half as a loss rate that's about 100 basis points higher than what you will see in the third quarter.

Speaker Change: With a with something a little bit in the middle of those two in the fourth so.

Speaker Change: The natural trend of 30 to 89.

Speaker Change: Which starts the clock on charge offs is for 30% to 89% kind of bottomed out in February March.

Speaker Change: During tax season, and then it begins to rise throughout the year. That's a just a general seasonal trends you would follow charge offs six months later effectively and as long as that relationship holds.

Speaker Change: Then you would expect to see that the charge offs will be lowest in the third quarter.

Speaker Change: Second lowest in the fourth and then highest in the first and second.

Speaker Change: Got it alright, thank you.

Speaker Change: Hey, everybody. Thanks, so much for joining us today as always we're available for follow up questions and we look forward to seeing everybody soon.

Speaker Change: Thank you.

Speaker Change: Conclude.

Speaker Change: Today's onemain financial fourth quarter and full year 2023 earnings Conference call. Please disconnect. Your line at this time and have a wonderful day.

Micah R. Conrad: All right. Thank you. Hey, everybody.

Speaker Change: Yeah.

Speaker Change: [music].

Douglas H. Shulman: Thanks so much for joining us today. As always, we're available for follow-up questions, and we look forward to seeing everybody soon. Thank you. This does conclude. Today is OneMain's financial fourth quarter and full year 2023 earnings conference call. Please disconnect your line at this time and have a wonderful day, www.OneMainHoldings.com.

Speaker Change: Oh.

Speaker Change: [music].

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Speaker Change: Okay.

Speaker Change: Uh huh.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

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Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Hum.

Yeah.

Speaker Change: Hum.