Q3 2024 Horace Mann Educators Corp Earnings Call
Good day and welcome to the Horst Man Educators 3rd Quarter 2024 Investor Fall. All participants will be in listen on mode.
Good you need a system, please signal a conference specialist to the press in the start key, follow the baby route.
After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. Be with draw your question, please press star then two.
Please note that the event is being recorded.
Speaker Change: I would now like to hand the call to Brendan Dawal, Vice President of the Duster Relations. Please go ahead.
Brendan Dawal: Thank you. Welcome to Horace Leamp discussion of our third quarter results.
Brendan Dawal: Yes, today we issued our earnings release. 10Q, investor supplement, and investor presentation. Copy's are available on the investor stage on our website.
Marita's the rightest president and chief executive officer in Ryan Grineer, executive vice president and chief financial officer. We'll give the formal remarks on today's call.
with us for Q&A. We have Brett Conklin, Steve McInner, and Mark D'Rosher.
Before turning it over to Marita, I want to note that our presentation today includes forward-looking statements as defined in the private security litigation reform act of 1995. The company caution investors that any forward-looking statements include risks and uncertainties in our not guarantees of future performance.
Brendan Dawal: We forward looking statements are based on management's current expectations and we assume no obligation to update them.
Brendan Dawal: Actual results meet different materially due to variety of factors which are described in our news release and SEC filings.
and our prepare-of-marks we use some non-gap measures. Reconciliation of these measures to the most comparable gap measures are available in our investor supplement. I'll now turn the call over to Marita.
Marita: Thanks, Brendan, and hello, everyone. Yesterday we reported third quarter core earnings of 76 cents per diluted share, a 73% increase over prior year, and in line with the guidance we set at mid-year.
Marita: Revenue's were up to 9% and we saw double digits, sales increases in auto, life and individual supplemental lines.
Marita: We are maintaining guidance and continue to expect Core EPS.
Marita: in the range of $2.40 to $2.70 for the full year. And remain on a solid track to meet our strategic goals of a larger share of the education market and a sustainable double-digit shareholder return on equity in 2025.
Speaker Change: I want to start today by thanking our claims team for their tireless efforts to take care of our customers affected by Hurricane Haleen.
Marita: We estimate the storm cause 22.5 million in damages for our policy holders primarily in the Carolinas and Georgia.
Because of our frontline team's compassionate and swift response, we were able to deliver on the promise of distinctive service to our customers in their time of need.
Marita: There's a lot of moving parts in the property and casualty results, but what I want to highlight is the progress we have made in our underlying loss ratios due to our multi-year P&C profitability restoration strategy of rate and non-rate actions.
Marita: A 8.2 point improvement over prior year. In property it was 41.4%, a 20.4 point improvement over prior year.
Marita: In the bigger picture, it means even in a quarter like this one, when a single catastrophe event adds 12 points to the combined ratio, we are able to remain profitable in the segment.
Our reported combined ratio of just under 98% was nearly a 19-point improvement over third quarter 2023.
Marita: With additional rate planned in the fourth quarter, our profit restoration actions will be largely complete and we will be rate adequate in aggregate across the country. That progress combined with the steady revenue and earnings diversification provided by the life and retirement and supplemental and group benefits segments
Marita: reinforces our efforts to accelerate growth. We expect to reach the inflection point in auto policy growth by the latter part of 2025.
Marita: With target profitability levels expected in 2025, we expect that mid-single-digit rate increases will keep pace with anticipated loss trends, but we will continually monitor and react as necessary.
Speaker Change: Before I speak to this quarter's business performance, I want to take a step back to highlight the strength of Horace Mann's value proposition and what makes this unique in the marketplaces we serve.
Marita: Our multi-line approach enables us to empower educators and others who serve their communities to achieve lifelong financial success.
with solutions and support for each stage of their careers. For us, the value of a lifelong loyal customer with multiple lines of business is greater than the sum of the parts.
Marita: From a business perspective, this means earnings and revenue diversification to profitably grow through various economic cycles and conditions, as well as deliver consistent and reliable value to our shareholders.
Marita: Third quarter encompasses the back-to-school season and our dedicated agency force spent that time in schools hosting events and providing support to local educators and school districts.
Marita: In retail, we saw strong results, including 24% increase in auto sales and a 14% increase in life sales.
Marita: 403B deposits, which include our Retirement Advantage Mutual Fund Platform accounts, were up 9% over prior year.
Marita: It is worth noting that our close ratio in property and casualty remains consistent, which means the increases in sales volume is directly related to increased quote activity.
Marita: In addition, our agency recruiting efforts remain healthy. We see continued success with our agency mentorship program where we pair high potential new recruits with an established successful agent.
Marita: We are seeing more new agents reach key milestones faster, and we continue to be strategic with agent geographic placement to maximize key opportunities.
Marita: At the same time, we are seeing an increase in digital leads as we continue to invest in our omni-channel marketing approach.
Marita: Following upgrades to our website and quoting functionality that were implemented earlier this year, we realized a 50% increase in quotes started online. We continue to optimize our processes to further improve digital quoting effectiveness.
Marita: In the worksite division we are pleased with the strong sales activity in the individual supplemental line. We saw a 20% increase in sales over prior year and continue to surpass pre-pandemic sales levels.
Marita: Our customers and agents are responding well to our product features and enhancements which meet specific customer demand and provide higher average premiums. Agent productivity is up and agent enthusiasm is high.
Marita: We continue to build on our relationship with the International Association of Firefighters. Our strategic partnership with this group has continued to expand over the last three years and now accounts for more than 20% of new individual supplemental sales.
Marita: In the employer-sponsored business, our number of covered lives grew to 842,000, a 2% increase over prior year, although new business sales were behind a very good 2023 result.
Marita: In this relatively small book, a handful of cases can skew comparisons quarter over quarter. Our persistency remains strong at over 94 percent, and the specific timing of new cases can make quarter over quarter comparisons challenging.
Marita: In addition, we continue to leverage our existing broker partnerships to expand distribution and are adding more partners.
Marita: From a corporate perspective, our net investment income remains in line with the guidance we provided at mid-year. If you recall, in the second quarter we recorded unfavorable mark-to-market valuation adjustments.
Marita: related to our Commercial Mortgage Fund portfolio, the majority of which is held in our life and retirement segment.
Marita: As we noted at the time, improving market factors could create a tailwind for CMLs in future quarters, and third quarter results reflect early signs of stabilization in the results.
Marita: We are well on our way to booking the $10-12 million of commercial loan mortgage income we estimated for the second half of the year.
Marita: Before I close, I'd also like to acknowledge Horace Mann's continued commitment to supporting educators' financial wellness.
Marita: Last month, in partnership with TransUnion, we launched HMScore, an online platform to help educators across the country build strong credit habits through practical credit education and interactive credit tools.
Marita: Among its offerings, HMScore provides access to individuals' TransUnion credit report and score, credit monitoring, and a score simulation tool.
Marita: Any educator can sign up for the online service for free.
Marita: This product fits into our already robust complimentary financial wellness offerings for educators, including individualized student loan solutions, online accounts, and workshops covering topics like comprehensive retirement planning and financial literacy.
Speaker Change: In closing, we have successfully executed our plan to reach rate adequacy across the PNC book.
Marita: and are on track to achieve segment underwriting profitability on a full-year basis in 2024. With a clear line of sight to target profitability in all businesses, we will continue to invest in growth opportunities in 2025 while maintaining expense discipline.
Marita: I look forward to achieving our 2025 goals of a double-digit shareholder return on equity and a larger share of the education market and building on those achievements in the years ahead.
Marita: One last note, as many of you know, last month Ryan Grenier was promoted to Chief Financial Officer of Horseman.
Marita: He and Bret Conklin have been working closely together over the past year to ensure a successful transition. I deeply appreciate Bret's commitment and leadership as CFO over the past eight years. Thank you. And with that, I'll turn the call over to Ryan.
Ryan Grenier: Thanks Marita. I am excited to take on the new role and continue to partner with the executive leadership team to support the educational community and drive long-term shareholder value creation.
Ryan Grenier: Now to the results. Third quarter core earnings were $31.3 million or $0.76 per diluted share, well above the prior year result of $0.44.
Ryan Grenier: We continue to expect full year 2024 core EPS in the range of $2.40 to $2.70.
Ryan Grenier: Today I'll talk through results by segment and close with a recap of our capital management strategy.
Ryan Grenier: burst in property casualty.
Ryan Grenier: Net written premiums of $212 million increased by 13% over prior year, primarily on higher average written premiums.
Ryan Grenier: The reported combined ratio of 97.9% improved 19 points over the prior year. Higher catastrophe losses were more than offset by strong underlying results and favorable prior year development.
Ryan Grenier: taking each of those components
Ryan Grenier: Catastrophe losses were $34 million, including $22.5 million from Hurricane Helene, compared to $28.7 million in catastrophe losses in third quarter 2023.
Ryan Grenier: We believe our Helene losses, which added 12 points to the combined ratio, were in line with our market share and comparable to others in the industry.
Ryan Grenier: Hurricane Milton was a fourth quarter event, but because we have an immaterial amount of exposure in Florida, we expect losses to be close to zero.
Ryan Grenier: www.cdc.gov.au
Ryan Grenier: The P&C underlying loss ratio of 60.7% improved 12.6 points over prior year, reflecting the rate and non-rate actions we've taken to restore P&C profitability.
Ryan Grenier: We released $13 million in prior year development, the majority of which is from lower-than-expected severity and auto liability claims from accident year 2022 and prior.
Speaker Change: Thank you.
Speaker Change: In auto, net written premiums of $129 million increased 9% over prior year, primarily on rate actions.
Speaker Change: The combined ratio of 92.8% improved 16 points over prior year, split nearly evenly between underlying loss ratio improvement and favorable reserve development.
Ryan Grenier: Policyholder retention remains strong at 86.6% despite significant rate actions.
Ryan Grenier: In property, net written premiums were $83 million, an 18% increase over prior year.
Ryan Grenier: The underlying combined ratio of 66.9% improved 20 points over the prior year.
Ryan Grenier: Total combined ratio improvement over the prior year also included 7 points of favorable prior year development, partially offset by 4 points of higher catastrophe losses.
Ryan Grenier: Despite higher premiums, our policyholder retention remains strong at 90.1%.
Ryan Grenier: Looking ahead, the fourth quarter has historically been a seasonally high frequency quarter for auto.
Ryan Grenier: However, we are on track to achieve underwriting profitability in property casualty on a full-year basis.
Ryan Grenier: We remain confident in our guidance range of $36 to $39 million in full year core earnings for the segment.
Ryan Grenier: The life and retirement segment contributed $14.8 million to core earnings below prior year primarily due to lower net interest margins.
Ryan Grenier: I'll discuss the full net investment income picture in a minute, but we remain confident in reaching our full year guidance of $50 to $56 million in core earnings for this segment.
Ryan Grenier: Net written premiums and contract deposits of $156 million were a slight increase over prior year. In the retirement business, deposits in our core 403B products increased by 9% and persistency remained steady at 91.5%.
Ryan Grenier: Annualized life sales increased 14% over prior year. Mortality costs for the quarter were higher than the previous year but within actuarial expectations. Persistency remained strong at 96%.
Ryan Grenier: Moving to Worksite, the Supplemental and Group Benefits segment contributed $14.8 million to core earnings, a decrease of 6% due to a 3.7 point increase in the blended benefits ratio over the prior year.
Ryan Grenier: We anticipate the blended benefit ratio will continue to move towards guided levels.
Ryan Grenier: Premiums and contract charges earned were $63 million, down slightly from prior year.
Ryan Grenier: Total segment sales of $7.5 million were down over a strong prior year. However, individual supplemental sales were up 20% in the third quarter, and we continue to see strong momentum.
Ryan Grenier: For the full year, we remain confident in our guidance of $49-52 million in core earnings for this segment.
Ryan Grenier: Turning to investments, total net investment income of 113 million dollars was down 5% in flat year-to-date.
Ryan Grenier: In our core fixed maturities portfolio, which represents about 80% of our total investments, income was up slightly over prior year.
Ryan Grenier: Our core fixed income new money yield in the third quarter was 5.48%, which exceeded the portfolio book yield by 122 basis points.
Ryan Grenier: The portfolio remains high quality at single A+, with an average duration of 7 years.
Ryan Grenier: It is concentrated in investment-grade corporates, municipals, and high-quality agency and agency MBS securities.
Ryan Grenier: Last quarter we took unfavorable mark-to-market valuation adjustments on several of these funds which follow the equity method of accounting.
Ryan Grenier: These adjustments did not impact cash returns, and we noted at the time that as the underlying loans mature and pay off or refinance at par, we would expect to see a corresponding tailwind in investment income.
Ryan Grenier: We are beginning to see early signs of this positive trend with a $9.9 million contribution to net investment income in the quarter.
Ryan Grenier: For comparison, we booked $4.2 million in the first half of the year.
Ryan Grenier: The Limited Partnership Portfolio represents about 7% of total investments. In the quarter, income declined due to negative performance in some equity-related funds.
Ryan Grenier: For the full year we remain comfortable with the guidance range provided of 440 to 450 million dollars in total net investment income.
Ryan Grenier: I would like to end today's remarks underscoring Horace Mann's commitment to improve long-term shareholder value creation and reach a consistent and sustainable double-digit ROE.
Ryan Grenier: Our third quarter core annualized return on equity is 8.4%, a 3.4 point improvement over the prior year, and it reflects continued progress towards our goal of a sustainable double-digit return on equity in 2025.
Ryan Grenier: Our annual shareholder dividend provides a compelling yield and we are committed to annual increases. We've done so for the past 16 years.
Ryan Grenier: Additionally, we continue to opportunistically buy back shares when market conditions are favorable. Year-to-date, we have repurchased 256,000 shares at a total cost of $8.5 million and an average gross price of $33.31.
Ryan Grenier: We have about $26 million left on our current share repurchase authorization.
Ryan Grenier: Most importantly, when operating at target profitability, the most accretive use of capital to drive shareholder value creation is profitable growth.
Ryan Grenier: Looking ahead to 2025, we are confident in our ability to generate a sustainable double-digit ROE and will be at or above target profitability in all segments.
Ryan Grenier: I'm excited for what's ahead and energized by our growth opportunities.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the key.
Speaker Change: To withdraw your question, please press star then 2.
Speaker Change: And our first question comes from Myer Shields of KVW. Please go ahead.
Myer Shields: just the moderating loss trends in the current year hiring, I think I was expecting a bit more core loss ratio and improvement within auto. Anything you could say on that and how should we expect those initial loss picks as well going forward.
Speaker Change: Thank you for your question. There's a lot in that, and I break it down into two pieces.
Speaker Change: First, we probably should tackle the prior year development piece.
Speaker Change: From a prior year development standpoint, I'll have Ryan give you a few more details in a minute, but I want to start with the fact that, and I think you all know this, we have a strong and consistent reserve process.
Speaker Change: As you know, we reported some prior-year development in the second quarter in other than BI. And also in the second quarter, we started to see some early signs of what I'd call potential favorable development trends in the injury lines from 2022 and prior.
Myer Shields: And also, in the third quarter process, we start to see this favorable trend clearly, which is why we reported what we reported in the third quarter.
Speaker Change: I don't know what you have to add to that, Ryan. Sure. I guess I'd just add a little bit of color on auto. So auto was an $8 billion prior year reserve release. And as Marita said,
Ryan: That's injury liability from accident year 22 and earlier. Paid severity is emerging lower than we initially expected. And so what we're seeing is we're seeing claims severity settling in trends in the low to mid-single digits.
Myer Shields: And so we reacted to that this quarter. Importantly, we did not make any adjustments for exiting year 23. And then finally, the other component of it, property, was $5 million of the release.
Myer Shields: and similar to auto we're seeing paid severity emerging lower than we initially expected and we think that's clearly tied to the inflationary pressure you know that we're seeing cooling off.
Speaker Change: Yeah, thanks Ryan. And the other half of your question revolves around loss ratio, combined ratio, which probably
Speaker Change: has more to do with auto rate adequacy than anything else.
Myer Shields: But even there, I think you have to remember our strategy. We're a niche, multi-line writer. I think the strength of our customer retention and how strong those retention numbers are and how strong they're holding up in this pricing environment is really key for us.
Myer Shields: We may be a quarter or two behind the Giants, if you will, in the auto line as our rate changes burn in, but we're clearly on track. I don't know if you want to add anything to that, Mark. Yeah, I think, Marita, you're...
Mark D'Rosher: focused on the right thing, that we were probably a quarter or two behind some of the larger folks in the industry, so our
Mark D'Rosher: earn in time frame is lasting a little bit longer, but I'd add to that a little bit, as we've seen this.
Mark D'Rosher: increasing rate environment over the last couple years we've seen a shift
Mark D'Rosher: in our book of business, which if you go back a couple years ago was probably 70% or a little bit north six-month policies.
Mark D'Rosher: and right now we're probably a tad under 60%. So, that shift alone is probably driving a difference in what your expectations might be by as much as about a point on the loss ratio. So, one, we will see that earn-in continue
Mark D'Rosher: into the rest of this year and into next year, but also when you look at just the additional rate actions we've been taking probably a little bit, like we said, a quarter or two behind the rest of the industry, you know, we have expectation that
Mark D'Rosher: you know, are earned.
Myer Shields: impact going into next year will still be a double-digit year-over-year change and probably even more when we look at early in the year closer to you know
Myer Shields: mid-teens level year-over-year change in earned premiums. So we believe it's coming. We believe we're rate adequate because the rate actions that we've needed are all in place and they just kind of have to earn their way through.
Mark D'Rosher: and pretty much coming in very close to what our internal plans have been for quite a while.
Speaker Change: Awesome, that's great, that was very comprehensive.
Speaker Change: For my follow-up, I want to shift to the life and retirement segment. I noticed that deposits were up year over year for the variable annuities, but they were down for your fixed and your fixed index annuities. How do you expect that trend to play out over time, or how should we think about that into 2025?
Speaker Change: Thank you.
Speaker Change: Sure, this is Ryan. I'll take your question. You know, our mix of business in the 403b and annuity space is pretty consistent.
Speaker Change: The K-12 educator demographic, which forms the bulk of our annuity customer base, tends to prefer a lower-risk, fixed, and fixed-indexed type of product.
Myer Shields: Even when they select our variable annuity products, they still tend to have a sizable component in the fixed account. I think it's important to note that our variable annuity products don't have living benefits. They're pretty simple asset accumulation tools for our demographic that we target.
Speaker Change: So you'll see quarter-over-quarter, you know, variability, if you will, depending on, you know, case size, etc. But overall, it's a pretty consistent.
Speaker Change: Brian, well said. I mean, we've been in the 403B business since there have been 403Bs. We're one of the largest writers.
Speaker Change: in the country, and for decades, you can see that consistency in retention of assets in 403B core.
Speaker Change: products that we offer and in the other products they tend to move a little bit with the economy as some people might chase
Speaker Change: interest rates, but for our segment our core book tends to be, you know, we use the word ballast.
Ryan Grenier: Some folks can say that's not a very exciting word, but it is our ballast, and it does provide consistent earnings year over year and tends not to move and a big part of our customer retention.
Speaker Change: Thank you.
Speaker Change: The next question comes from John Barnage of Piper Sandler. Please go ahead.
John Barnage: Good morning, or good afternoon. Thank you for the opportunity. Can you talk about the growth opportunity and the segments across the organization now that you're approaching re-advocacy, both in the educator and those adjacent markets you're looking to grow in? Thank you.
Speaker Change: So John, I think you weren't coming through really clear. I think what I heard you say was you want us to talk about the growth opportunity we see in the educator and non-educator segments as we approach rate adequacy. Is that, did I frame that right?
John Barnage: Ryan, you heard great, yes.
John Barnage: Okay, yeah, let me kind of break this down between auto first and then maybe supplemental and group benefits after that. Before I turn it over to Mark to see if he has any comments on auto growth, I want to start with the fact that we have more agents.
John Barnage: Our agents are more productive.
Ryan Grenier: We've got increased web traffic.
Ryan Grenier: We have better digital tools and our sales numbers are very strong.
Ryan Grenier: and we are clearly on track for pith growth.
Ryan Grenier: in the latter half of 2025 in auto, but I know Mark probably has some more details to add to that. Yeah, I mean, I think that the important thing to remember here is that we are clearly entering
Mark D'Rosher: an environment where many of the competitors feel like the profitability issues are behind them and you know
Ryan Grenier: competition will keyed up.
Speaker Change: But right now, as Marita said in the opening script, our close rates are actually holding pretty strong. I would have actually predicted given, you know, where I thought the competition would go that that we might have seen some drop off, but we haven't.
Ryan Grenier: You know, but we're going to have to watch that closely. And I think the most important factor for us is going to be.
Ryan Grenier: you know, can we keep that quote volume up? And I think some of the investments that Marita just alluded to...
Ryan Grenier: whether it be in our distribution plant and hiring more agents or driving digital lead activity, you know, it's going to help us.
Speaker Change: you know, not only maintain pace, but hopefully as we go into 2025, increase that lead funnel. Yeah, well said, Mark. And, you know, if you look at the J.D. Power studies or any of the other shopping behavior is still at an all-time high, and we've certainly been a benefit of that shopping behavior.
Ryan Grenier: So, if you want to turn to supplemental and group benefits, before I turn it over to Steve for a few more details...
Ryan Grenier: We continue to see clear value in this business. I think it's important for us to reiterate the fact that the earnings power and earnings diversification of this business is clear. The customer acquisition benefit continues to pull through.
Ryan Grenier: And if you think about our individual business, we're now seeing record sales. In our group business, as we mentioned in the script, we're seeing a nice increase in covered lives. And I think it's important for us to remember that the M&L acquisition
Ryan Grenier: that brought us the group capability was two-and-a-half years ahead of, I mean, behind the NTA acquisition that gave us the individual capabilities.
Ryan Grenier: And we've been in this individual business now for two and a half years longer than the group business. And make no mistake, we are excited about the value and the future that these businesses bring us. Steve?
Steve McInner: Yeah, thanks for the question, John, and I think...
Steve McInner: Building on what Marita said, I'll just talk about
Steve McInner: I'll divide my comments into two parts because the businesses are fundamentally different.
Ryan Grenier: And Marita said it, on the individual supplemental side, we continue to see really strong new business growth. And there's a couple things going on there. One is we're increasing the number of specialists or agents selling the products.
Ryan Grenier: We see some improvements in productivity.
Ryan Grenier: and we're adding a few additional schools and emergency services, etc.
Ryan Grenier: I think our view there is...
Ryan Grenier: steady, strong growth as we go forward. Employer-sponsored room sales, it's a totally different business, totally different model, and I think given our book size and sort of what I would say is the inherent variability in our case sizes, it can sometimes make comparisons when we look at the numbers in the supplement.
Ryan Grenier: pretty challenging quarter-to-quarter. In fact, it can be challenging year-over-year, kind of to make that real.
Ryan Grenier: By way of example, third quarter of 23, I think our largest case was somewhere around 800,000.
Ryan Grenier: comparisons year-over-year are tricky. When I sort of look back and think about the overall health performance of the business
Ryan Grenier: We obviously start with new business sales.
Ryan Grenier: But then we also look at, and Marita references, growth and bias, and that's up around 2%.
Ryan Grenier: resistance is strong, 95%. So we feel when we look at those measures and the sales on the group side gives us a pretty complete view of the performance of the business.
Ryan Grenier: that the fundamentals are in pretty good shape, sort of a strong foundation to be able to grow the business going forward. I think the last thing I'd say is as we peer ahead to 2025,
Ryan Grenier: given the nature of the sales cycle.
Ryan Grenier: for Employer Sponsored, meaning we sell policies, or sorry, cases today that are effective three, six, nine months down the road. We see pretty strong activity and successes and that gives us a pretty decent degree of confidence.
Ryan Grenier: as we ramp up the 2025 sales cycle. So in short.
Ryan Grenier: on the worksite side. Individual supplemental continues to grow at a healthy clip.
Ryan Grenier: employer-sponsored, benefits-producing, healthy growth. Near-term activity looks pretty good and we feel pretty good about 25 as we hit into that. Extremely encouraging numbers that we see coming up for 25.
Speaker Change: Thank you.
Speaker Change: Thank you. My follow-up question, Ryan, you had some comments about commercial real estate and commercial loan income stabilizing and seeing some early signs there. As we think about annual marks that would come in in the first quarter, should we begin thinking about those becoming gains as opposed to losses or write-downs?
Ryan: Thanks. Thanks for your question, John.
Speaker Change: You know look it was it was a good quarter for CMLs You know the annualized quarterly return was six point four percent, and we did still see a little bit of drag
Speaker Change: of unrealized losses on that return, about a 2% drag versus the cash base, the cash return, but that drag is starting to slow.
Ryan Grenier: So, I'm encouraged at the early signs of stabilization we're seeing, but
Ryan Grenier: At the same time, it's too soon to say with certainty exactly how these are going to come in and over what period.
Ryan Grenier: We left our forecast for the second half at 10 to 12 million. We have nearly 10 of that in hand with the third quarter number.
Ryan Grenier: So, I hope that gives you a little bit of color of how we're thinking about it.
Speaker Change: The next question comes from Wilma Burtis of Raymond James. Please go ahead.
Wilma Burtis: Hey, good morning. Can you talk a little bit about how you think about sharing purchases going into 4Q, given the CAT results have been pretty much in line for the first three quarters of the year? Thanks.
Ryan Grenier: Hey Wilma, this is Ryan. Thanks for the question. You know, when I think about, you know, the share buyback and use of capital, you know, since you heard in the script, we have a clear line of sight to sustainable double-digit ROEs.
Ryan Grenier: in 2025. And so this clearly increases our level of conviction in capital deployment. Our first priority is growth.
Ryan Grenier: Our second, if you will, we're committed to a compelling dividend. And finally, our approach on the buyback has been opportunistic. But I'll point out that we've purchased at various price points. So it's not a static equation.
Ryan Grenier: We're taking a multi-year view and continue to have optimism for a higher share price commensurate with earnings growth and multiple expansion as we execute on our goal of a sustainable double-digit ROE. So, you know, we are tracking ahead of last year.
Ryan Grenier: and we're comfortable using that lever when it makes sense. Yeah, well said, Ryan, and on a run rate basis, our capital accumulation is right on track with what we had talked about and where we thought we would be at this point.
Speaker Change: Okay, great. And then maybe you could dive a little bit more into the PYDs, the favorable PYDs, and just, I guess, a little bit more detail on the drivers and any expectations.
Speaker Change: or, I guess, continue the views there going forward. Thanks.
Speaker Change: Yeah, I don't know if there's too much more to add. I mean, we have a consistent process. It's a strong process, as we've said before. When we looked in the second quarter, we released what was appropriate in the other than injury lines. Like I said, we started to see
Speaker Change: development in the injury lines.
Speaker Change: We wanted to see it clearly. We saw that clearly in the third quarter, which is why we released what we released. And there's not much more to say other than the fact that you go through that consistent process. You call it when you see it, and we clearly saw it in the third quarter.
Speaker Change: Thank you. I mean, if you have anything specific, we'd be glad to address your question.
Speaker Change: No, I think that helps. Thank you.
Ryan Grenier: Yep.
Speaker Change: This concludes our question and answer session. I'd like to turn the call over to Brendan Dawal for any closing remarks.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.