Kemper Corporation (NYSE: NYSE:KMPR) has announced its financial outcomes for the second quarter of 2024, highlighting a robust net income of $75 million and a strong return on equity (ROE) figures. The company's Specialty Property & Casualty (P&C) business showed significant improvement, and despite a valuation adjustment in the Life business segment, Kemper's overall profitability is on the rise.
The management is optimistic about exceeding the 10% ROE guidance by the year-end and is committed to reaching a combined ratio of 96% or better in the Specialty Auto business.
Key Takeaways
- Kemper Corporation reported $75 million in net income with an ROE of 11.5% and an adjusted ROE of 17.6%.
- The Specialty P&C business achieved a 4-point improvement in the underlying combined ratio.
- Policies in-force (PIF) grew by 4.6% sequentially, with expectations of moderate growth for the rest of the year.
- The Life business encountered a negative impact due to a real estate investment adjustment.
- Kemper anticipates beating the 10% ROE guidance for the year and aims for a combined ratio of 96% or better in the Specialty Auto business.
Company Outlook
- Expectation of more normal earnings rate and growth dynamic by 2025.
- Anticipation of earning an additional 7-8 points of rate in the second half of the year.
- Company expects low-single-digit PIF growth in upcoming quarters, with less growth in the second half due to seasonal trends.
- Aim to maintain stable fundamentals and normal ranges of net investment income in the Life business.
Bearish Highlights
- The Life business segment was impacted by a valuation adjustment on a real estate investment.
- Potential $15-20 million decrease in run rate earnings due to capital moves on the life company's earnings.
Bullish Highlights
- Specialty P&C business showing a 4-point sequential improvement in the underlying combined ratio.
- Both private passenger auto and commercial vehicle businesses reported strong combined ratios of 90% or better.
- Positive outlook for beating the 10% ROE guidance by the end of the year.
Misses
- Despite the overall positive results, the company noted a one-time adjustment in net investment income due to a real estate investment.
Q&A Highlights
- Maintenance rate changes are subject to fluctuation and may be influenced by inflation or coverage.
- The company is approximately two-thirds to 80% through the implementation of non-rate actions.
- Sales seasonality affects new business, with the first and second quarters being the highest and the third and fourth quarters being the lowest.
Kemper Corporation's second-quarter performance indicates a positive trajectory for the company, with significant improvements in its Specialty P&C business and a strong commitment to achieving its long-term financial goals.
The management's confidence in surpassing the 10% ROE guidance and their strategic focus on maintaining a combined ratio of 96% or better in the Specialty Auto business underscores their dedication to driving profitability and shareholder value. Despite some headwinds in the Life business segment, Kemper's outlook remains optimistic as it navigates through seasonal trends and macroeconomic factors.
InvestingPro Insights
Kemper Corporation's (NYSE: KMPR) recent financial results reflect a company poised for growth, with a net income expected to rise this year. This forward-looking optimism is further supported by the fact that four analysts have revised their earnings estimates upwards for the upcoming period. This consensus among market watchers suggests that Kemper's profitability trends are gaining positive momentum.
In terms of financial health and shareholder returns, Kemper has a notable track record of maintaining dividend payments for 35 consecutive years, underscoring its commitment to returning value to its investors. This is particularly relevant for income-focused shareholders who prioritize steady dividend streams.
From a valuation perspective, Kemper's market capitalization stands at $3.97 billion, with a Price/Earnings (P/E) ratio of 77.04. When adjusted for the last twelve months as of Q1 2024, the P/E ratio slightly improves to 72.64, indicating a high valuation relative to earnings. However, the company's Price to Book ratio of 1.53 suggests that the stock is reasonably valued in terms of its assets.
InvestingPro Tips also highlight that while Kemper was not profitable over the last twelve months, analysts are predicting a return to profitability this year. This anticipated turnaround could be a key factor for potential investors evaluating the company's future performance.
For those interested in a deeper analysis, InvestingPro offers additional tips on Kemper Corporation, which can be accessed at https://www.investing.com/pro/KMPR. With these insights, investors can make more informed decisions about their investment in Kemper Corporation as it continues to navigate the dynamic insurance industry landscape.
Full transcript - Kemper Corp (KMPR) Q2 2024:
Operator: Good afternoon, ladies and gentlemen, and welcome to Kemper's Second Quarter 2024 Earnings Conference Call. My name is Ina, and I will be your coordinator today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded for replay purposes. I would now like to introduce your host for today's conference call, Michael Marinaccio, Kemper's Vice President of Corporate Development and Investor Relations. Mr. Marinaccio, you may begin.
Michael Marinaccio: Thank you, operator. Good afternoon, everyone, and welcome to Kemper's discussion of our second quarter 2024 results. This afternoon, you'll hear from Joe Lacher, Kemper's President and Chief Executive Officer; Brad Camden, Kemper's Executive Vice President and Chief Financial Officer; and Matt Hunton, Kemper's Executive Vice President and President of Kemper Auto. We'll make a few opening remarks to provide context around our second quarter results, followed by a Q&A session. During the interactive portion of the call, our presenters will be joined by Chris Flint, Kemper's Executive Vice President and President of Kemper Life; Duane Sanders, Kemper's Executive Vice President and Chief Claims Officer of P&C; and John Boschelli, Kemper's Executive Vice President and Chief Investment Officer. After the markets closed today, we issued our earnings release, filed our Form 10-Q with the SEC and published our earnings presentation and financial supplement. You can find these documents in the Investors section of our website, kemper.com. Our discussion today may contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the company's outlook and its future results of operation and financial condition. Our actual future results and financial conditions may differ materially from these statements. For information on additional risks that may impact these forward-looking statements, please refer to our 2023 Form 10-K and our second quarter earnings release. This afternoon's discussion also includes non-GAAP financial measures we believe are meaningful to investors. In our financial supplement, earnings presentation and earnings release, we've defined and reconciled all non-GAAP financial measures to GAAP where required in accordance with the SEC rules. You can find each of these documents in the Investors section of our website, kemper.com. All comparative references will be to the corresponding 2023 period, unless otherwise stated. I will now turn the call over to Joe.
Joseph Lacher, Jr.: Thank you, Michael. Good afternoon, everyone. Thank you for joining us today. Let me start by saying that I'm proud of the strong results we delivered this quarter. This represents the fifth consecutive quarter of significant improvement in our underlying business. It's the third straight quarter of generating operating profitability. Our specialty auto business delivered a strong combined ratio, well below our long-term target, and specialty auto generated sequential quarter PIF growth of about 4.5%. Again, while we delivered great progress, these are also objectively strong results. Before we dive deeper into discussing these results, I'd like to step back a moment and do three things. First, to remind us of the backdrop of the still volatile market environment that exists. Given the pandemic induced abrupt reduction in driving, the subsequent rapid driving restart with massive supply chain induced inflation and the delayed impact of rate increases in a highly regulated industry, the market was virtually guaranteed to see significant losses, underwriting restrictions in a subsequent hard market. The marketplace structure virtually guaranteed that this would take several years to work itself out. As we've discussed before, our response was to institute non-rate actions to partially restore profitability while we filed for clearly needed rates. As those rates earned in, we would gradually remove the non-rate actions and return to a normal balance. This was likely to temporarily produce combined ratios below long-term historical ranges. This is where we are right now. From here, we'll continue to remove non-rate actions, take maintenance rate changes and guide the business back to more traditional margin and growth ranges. Second, I'm going to add some clarity and insight to our 2024 guidance. In late 2023, we said we would achieve a 10% or greater ROE in 2024. Given our strong first half results, let me be clear that we expect to solidly beat that 10% for the year. We do not see deteriorating trends that would cause earnings to meaningfully decline in the second half of 2024. That said, we are not updating our guidance. If we update annual guidance each quarter, we'll effectively be giving half-year or quarterly guidance. This is too precise for this industry. Third, last quarter, we told you that our long-term goal for specialty auto was to produce a 96% combined ratio or better and grow as much as possible within that. This is a long-term operating parameter for this business. You should not use it as any form of earnings guidance. With this business currently generating a roughly 90% underlying combined ratio, it's safe to assume that we believe long-term shareholder value creation will be better served by allowing the combined ratio to drift closer to the 96% if increased growth can be economically delivered. That combined ratio movement will not be rapid and it's likely to occur over at least four to six quarters. Hopefully, this backdrop provides context to both review our current results and for you to project our results going forward. Now let's move to page four and jump into this quarter's results. Overall, we delivered $75 million of net income, an ROE of about 11.5%, and an adjusted ROE of over 17%. Specialty P&C generated a very strong 90% underlying combined ratio, a great improvement year-over-year and sequentially. In our last call, we indicated that we expected sequential quarter PIF to stabilize mid-year. As we saw our underlying results improve monthly, we were able to accelerate our new business expansion and this resulted in a strong 4.5% sequential quarter PIF increase. This underscores the strength of our franchise and the competitive advantages we have in the marketplace. That said, the second half of 2024 is likely to produce PIF growth at a more modest rate given the seasonality in our business. Matt will discuss this in more detail later. The underlying fundamentals of our life business remain stable and the business continues to produce consistent distributable cash flow. However, the segment was negatively impacted this quarter by a valuation adjustment on a real estate investment. Brad will touch on this later. With that, I'll turn the call over to Brad.
Bradley Camden: Thank you, Joe. I'll begin on page 5 with our consolidated financial results. This quarter, we generated a fifth consecutive quarterly improvement in our underlying results in a third straight quarter of solid operating underage profits. Net income was $75.4 million or a $1.16 per diluted share and adjusted consolidated operating income was $91.7 million or a $1.42 per diluted share. These earnings translate to an 11.5% return on equity and a 17.6% adjusted return on equity. Previously, we described adjusted ROE as return on tangible equity. We have changed its name to more aligned with industry practices. Further details are provided in our non-GAAP disclosures. As Joe indicated, we expect to solidly beat the 10% return on equity guidance for the year and do not foresee trends that would cause earnings to meaningfully decline in the second half of 2024. Driving our strong consolidated financial results this quarter was a 4-point sequential improvement in Specialty P&C underlying combined ratio. Incremental earned rate exceeding loss trends and expense discipline were key drivers of this quarter's results. As we discussed during the first quarter call, we've been intently focused on expanding our new business writing and moving from profit restoration to growth. Through the monthly improvement in the underlying combined ratio in Specialty P&C during the quarter, we accelerated our production expansion efforts while maintaining a sufficient margin of safety. This resulted in a 4.6% sequential quarterly increase in PIF. Our swift return to growth highlights our franchise's strengths and competitive advantages. That said, given seasonal buying patterns, we expect sequential quarter PIF growth to moderate for the remainder of the year. As we return to a more normal operating environment and further expanding business writings, we anticipate that the combined ratio will migrate back to a more traditional range over the next four to six quarters. However, this will not be a linear transition due to seasonality and other market dynamics. Matt will provide further details on this later. Turning to page 6, our insurance companies are well capitalized and have significant sources of liquidity. At the end of the quarter, parent company liquidity was approximately $1.1 billion, consisting of revolver and inter-company lending capacity and holding company cash and investments. Our healthy liquidity balance allows us to pay shareholder dividends, interest payments, and support our operating subsidiaries. The P&C and Life businesses continue to improve their capital ratios. Specialty P&C operating profits and the preferred P&C wind down are helping to increase P&C capital levels. During the second quarter, the preferred P&C exit released $44 million of capital and an additional $50 million is expected to be released during the second half of 2024. This exit is modestly ahead of schedule and should release over $130 million of capital this year. Given the slower pace of capital release going forward, we do not plan to provide additional details on this initiative after this quarter. Regarding our balance sheet, we remain focused on reducing our debt-to-capital ratio. By the end of the first quarter of 2025, we anticipate that our debt-to-capital ratio will be in the high 20% area and, by year-end 2025, we expect it to be in the mid-20% range. This improvement will be achieved through operating earnings and debt reduction, including the previously discussed plan for the February 2025 debt maturity. Moving to slide 7, net investment income for the quarter was $93 million and our pre-tax equivalent annualized book yield was 4%. This quarter's figures were negatively impacted by a $15 million pre-tax valuation adjustment related to real estate investment. This is not a run rate item. We anticipate net investment income returning to more normal levels in future periods. Given the market interest regarding commercial real estate, we provide further detail on slides 13 and 14 of the earnings presentation. Here you will notice about 8% of our portfolio is in commercial real estate, of which over 80% is liquid or short-term. Overall, we continue to maintain a high-quality, well-diversified $8.7 billion investment portfolio and have had no changes to our long-term philosophy or execution. I'll now turn the call over to Matt to discuss the Specialty P&C business.
Matthew Hunton: Thank you, Brad. And good afternoon, everyone. Moving to page 8 and our Specialty P&C business. For the segment, we produced an underlying combined ratio of 89.6%, representing a 4-point improvement sequentially. Both our private passenger auto and commercial vehicle businesses reported underlying combined ratios of 90% or better. As we discussed last quarter, now that we've restored profitability, we pivoted our focus to PIF growth. Given the volatile market environment, we continue to incorporate an additional margin of safety in our business practices. We achieved a 4.6% sequential increase in PIF this quarter and are pleased with the incremental progress. I'd like to provide some brief overall comments on the specialty auto environment. As we see the market today, we have a few tailwinds. We continue to operate in a hard market and demand for our products remains strong. Our businesses have a long-standing set of competitive advantages that we've continued to strengthen. These capabilities have enabled us to rapidly increase PIF growth and navigate market challenges. We're deploying a methodical yet agile approach to new business. Our analytics tools are allowing us to read segment level performance early and adjust as needed. As we observed our second quarter combined ratio coming in better than planned, we were able to increase our production appetite and will rapidly expand our policies in-force. This was done well within our desired margin of safety. Like last quarter, page 9 details policy in-force trends. As noted, our sequential quarter PIF increased by 4.6% as compared to a decline of 5.5% in the prior quarter. On an annualized basis, this represents an improvement from minus 20% to plus 20%. This shows significant progress. As you can see in the bottom chart, the year-over-year metric trails and maps that progress. As we shift to the back half of the year, we remain diligent and nimble with our production approach. We expect to see low-single-digit sequential quarter PIF growth in the back part of the calendar year due to lower seasonal shopping patterns. We expect growth to increase for 2025. Finally, we're pleased that the business is moving back to a more traditional focus on maximizing growth while maintaining a 96% or better combined ratio. We believe both our PPA and CV businesses are well positioned to navigate the ongoing market environment. I'll now turn the call over to Joe to cover the Life business and closing comments.
Joseph Lacher, Jr.: Thanks, Matt. Turning to our Life business on page 10. As we mentioned earlier, the second quarter was negatively impacted by evaluation adjustment on a real estate investment. Excluding that adjustment, adjusted net operating income for the segment would have been $11.7 million, relatively in line with last quarter. While modest inflationary pressure continues to impact low to moderate income consumers, our new business production and persistency levels came in slightly favorable the last year. Mortality remains in line with pre-pandemic levels. Turning to page 11. In closing, I'd like to do three things. First, reiterate the highlights for the quarter. Overall profitability was strong and continues to improve. This was led by Specialty P&C's strong underwriting results, which enabled us to deliver our fifth consecutive quarter of underlying business improvement. Specialty P&C's improved combined ratio allowed for further expansion of our production initiatives, resulting in a 4.6% sequential increase in PIF, exceeding expectations we discussed last quarter. We anticipate low single-digit PIF growth for the remainder of the year. The underlying business fundamentals of our Life business remain stable, and we maintain a well-diversified, high-quality investment portfolio, which we expect to deliver normal ranges of net investment income going forward. While I'm proud of the results we delivered this quarter, we're not satisfied. We maintain our focus on delivering consistent, long-term, profitable growth. Second, during recent quarters, we've had a practice of pre-releasing portions of our results. Now that the market environment and results are returning to more traditional variability, going forward, we will discontinue this practice. And third, my thanks go out to our entire Kemper team for their efforts in the quarter and as we move forward. These results would not be possible without their hard work and dedication. With that, operator, I'll turn it over to you so that we can take questions.
Operator: [Operator Instructions]. Your first question comes from the line of Gregory Peters from Raymond James.
Gregory Peters: For the first question, I'd like to go back to the PIF results and the growth on a sequential basis in the second quarter. I'm wondering if you could provide us some additional market information about which geographies you're having more success and growing. And I'm just trying to get a lay of the land in terms of how your markets are positioned from a competitive position from pricing because there's been so much pricing change that's happened in the marketplace. Just curious how that all rolls up into your guidance for PIF for the second half of the year.
Joseph Lacher, Jr.: I'm going to throw most of the commentary over to Matt to do this. I'm just going to take the last tenth of your question, which was how does this all roll up into our guidance for the second half of the year. The biggest piece of our guidance for the second half of the year is around seasonal buying patterns. And historically, in this business, our customer segment and consumers just did less shopping, buying, switching in the back half of the year. We've talked to you about that for years. We talked to you about it last quarter. That stays in our forecast and our expectation setting process. It's possible in this environment that that turns out to be different, but that's the basis for that expectation that starts with that. And with that, I'm going to let Matt talk about the state level commentary and the bulk of your question.
Matthew Hunton: I think the comments overall are bang on on the demand side. From a customer perspective, we've seen continued demand for our products. We're seeing it at an agent level as well. I think that's generally true across all markets when you think about the geographic dynamics that sit underneath there. And from a supply perspective, a carrier perspective, I think the story varies pretty greatly by market. When you think about California, Florida, that's where the predominance of our production, at least out of the gate has come from as we look to continue to methodically expand our business. We'll continue to grow on our other markets, but it's really a function of where the market is from a competitiveness perspective. When you think about the non-standard auto marketplace, competitors are re-engaging at different rates. I think some of the larger players are feeling more confident about their adequacy, yet they still maintain some underwriting discipline that's maybe more rigorous than a traditional marketplace, whereas the smaller players, the regional players, are a bit slower to react and stabilize there. And so, there's a lot of texture by geography, but both from a supply perspective and a demand perspective, I think generally feel good about our ability to balance. And as Joe said, as we continue to march forward on our re-expansion and our production, we'll be opportunistic about how we take advantage of the opportunities that are presented to us.
Gregory Peters: I'm mindful of, Joe, your comments about the combined ratio, targets to 96%. Can you talk a little bit about the concept of the new business penalty as you turn the spigot on and start growing your new, your policy counts? Is the drift up in the combined ratio, is that driven by a new business penalty or is there something else going on inside that?
Joseph Lacher, Jr.: I'm going to break this into a couple of parts. We will see a drift generally back towards what I would say are traditional Kemper combined ratios that are probably in that 93%, 94%, 95% range. 96%, I would say, is more of a ceiling than a target. We're not trying to get to a 96% and hover, we're trying not to exceed a 96% and then grow as much as possible. What will cause that drift is part of the new business penalty as we start new business again, partly taking non-rate actions off, those other things we did to restrict growth. And we said we were always going to take those off, we were going to get a little extra rate which allowed those to come off because those effectively restricted production and customer service and other opportunity. So we're getting that back to a balance. We would also expect that, sometime in 2025, despite us taking what we would call maintenance rate, we will get to a spot where there's likely to be some loss inflation, there's a bit in excess of earned rate, just because of the fact that right now we're probably well below long-term target combined ratios. We expected to overshoot a little bit. We hope that's only for a few quarters. I'm not specifying what a few is, I'm deliberately not saying whether it's one, two, three, four, but some period of time as we try to opportunistically grow as much as we can while being below a 96%. I'm not trying to be cute, but what I'm trying to do is your ability to exactly model rate, loss trend, new business penalty and non-rate actions will be largely very difficult for you to do because we can't even give you some good guidance on it because we're going to adjust as we're moving. What we've tried to do is give you a picture of the pace of the slope of change and help you get the answer that way.
Gregory Peters: Just a clarification. One of your – well, the largest non-standard, most visible company, publicly traded company out there came out with their Q and I think they said – they called out a couple rate decreases in the second quarter. Just to close out my questions, did you guys do any downward rate revisions in the second quarter or are you still where you were at the end of the first quarter in terms of rate levels?
Joseph Lacher, Jr.: Yeah, we did a small one in Florida that was heavily textured. Matt, do you want to provide more commentary?
Matthew Hunton: Yeah. In Florida, we did a small minus 2% in aggregate rate change. It was heavily textured, segmented. It balanced our rate need by coverage in a way that I think sets us up more optimally going forward as we prospect out over the next 12, 18 months. But that was the only negative change that we have planned at this point.
Joseph Lacher, Jr.: Again, Greg, this goes back to what we would have described. We're moving into a phase where we're going back to maintenance rate and more normal, ordinary course of business. We expressed a high degree of confidence in what our profitability targets were in the back half of this year when we said we didn't see anything that was going to meaningfully move earnings in a downward trajectory over that time period. And we're trying to say, as we go through what I've described as the rebalancing phase, by the time we get into 2025, we expect this to be a more normal earned rate, loss trend, growth dynamic where we're talking about market dynamics and not sort of these disrupted swings. So we're in the back part of that. It becomes a little hard to pick quarterly or six-month numbers. And that category of maintenance rate changes, sometimes they're up a little, sometimes they're down a little, they're either in line with inflation or they're getting us tuned by coverage.
Operator: And your next question comes from the line of Paul Newsome from Piper Sandler.
Paul Newsome: Just maybe a little bit of a follow-up. Where would you put yourself in terms of taking off the non-rate action? Do you feel like you're very much in the middle or pretty much done? How do you think of that from a spectrum perspective?
Joseph Lacher, Jr.: It's hard to exactly measure, Paul. Depending on how we were talking about, anywhere from two-thirds to 80%. And there's times when we sometimes argue with ourselves about where exactly it is. But it's somewhere in that range. Probably three-quarters is a good guess. And there's a lot of feel to it in terms of what it is.
Paul Newsome: Yeah. Almost by definition. It's hard to clarify, right? When you look at the outlook for net investment income other than that real estate item that would make it non-run rate, and maybe a little bit on the life company piece too, in particular, given that you have a lot of capital out of there, so you, I assume, shifted a lot of investment income over. Does that – as we look – particularly at the life company with also investment income overall, are we at sort of a run rate perspective for that or not? Are there more sort of cash flow changes to happen that will affect investment income?
Joseph Lacher, Jr.: Brad, why don't you take a shot at the overall and then we may ask a follow-up, Paul, to make sure we're thinking about the life in the right way.
Bradley Camden: When you look at net investment income overall, it was down about $12 million with respect to that real estate investment. So if you add that back, you're close to like a 105-ish type number, in line with where we were in Q2 through Q4 of last year. I'd expect us to be back there given where rates have been and continue to be and so forth. So think of this as a one-time – not a one-time, but a non-run rate adjustment this quarter. And then going forward, we'll be back up to where we were historically. Can you do me a quick favor and just re-ask the second part of your question with respect to Life?
Paul Newsome: Sure. I'm sorry if I'm not as coherent as I should be. So the Life operation earnings were down a lot in part because of that one write-off. But if you look at it more broadly, you have reduced a lot of the investment income in that item, in that line because of the capital moves you made. And I'm not certain where – I think I'm trying to get to a run rate of what the Life company earnings would be, given the changes in investment income in that line that have to do with not just the one time real estate write-down this quarter, but also all the other shifting done from a capital perspective.
Bradley Camden: And you're referencing the capital that we've taken out with respect to the Bermuda optimization. So I'd expect the run rate earnings in Life to be lower by about $15 million to $20 million as a result of that capital moved up to the parent over the course of a full year. And to be clear, the real estate investment, we're really telling you that that valuation adjustment has no impact on run rate. You're asking the question the right way. The capital distribution will shift it from Life to the parent.
Operator: [Operator Instructions]. Your next question comes in the line of Andrew Kligerman from TD (TSX:TD) Securities.
Andrew Kligerman: Just before I ask my two questions, clarification, Joe. And by the way, really nice progress in this quarter. I think Greg was asking something earlier and you said you expect to overshoot a bit. Does that mean you would drift sort of to the northern end of 93% to 95%? I wasn't quite sure what you meant by overshoot.
Joseph Lacher, Jr.: That's a great clarification. I meant the other direction. When things were ugly and we were 100-plus, we expected that we would add rate that perhaps the combination of rate actions and non-rate actions might exceed our need. We would put on the non-rate actions which were inadequate among themselves. We would wait till the combined ratio improved to an attractive level and we were confident in that, then we would take the non-rate actions off. As a result, if we were trying to get to a 95%, we might get down to a 90%, then the non-rate actions work themselves off and we move back up. We're in the overshoot part of overshooting a little bit too much to the good after having been in the bad. Not that I expect that we're going to get over the 96%. I think, right now, we're in the part where I would say we've overshot a long term target to the good.
Andrew Kligerman: Yeah, no, makes a ton of sense. And just another clarification. I think I heard Matt and you, Joe, mentioned that you expect low-single-digit PIF in the upcoming quarters. So is that a line with – and this is something you talked about last quarter. You said the second quarter versus the first quarter typically based on seasonality is up 25% and then the first and third quarters are slightly – or actually, the third quarter is slightly less than the first and then the fourth quarter is down 40% versus the first. So the pressure is…
Joseph Lacher, Jr.: Yeah, let's break them apart. There's loss frequency seasonality and there's sales seasonality. The first half of the year sees more buying activity than the second half of the year. The first and second quarter are the two highest quarters for new business and the third and fourth are the lowest. First and second are close. Sometimes one's higher than another. Third is distinctly lower than the first and second and the fourth is the lowest of all four. And to some degree – we're not 100% sure; there's not a poll. It appears to us that that people shop for auto insurance less and spend more money less money on that. In the holidays, either they're busy or they're saving up money for the holidays or they're doing something. They're shopping. It increases. Maybe it's car buying season. They've paid off the holiday bills. They've gotten their income tax return. They buy a new car that triggers shopping activity. It appears to be around those kinds of behaviors that causes more nonstandard auto shopping in the first and second quarters less than the third and even less than the fourth. So we're expecting fewer – the same way Macy's (NYSE:M) expects more sales in November and December and less in May and June. We expect more in the first six months of the year and less in the last six months. And if there's just fewer shoppers, we might actually capture a greater share of the shoppers, but less sequential quarter PIF growth.
Andrew Kligerman: So, basically, no non-standard auto Christmas presents in December. But with that said, you're still saying, though, low-single-digit PIF growth sequentially in the next two quarters. I want to make sure because, even with that pressure, it sounds like you could still be up in the low-single-digits if I understood that correctly.
Joseph Lacher, Jr.: That's our general expectation.
Andrew Kligerman: The last clarification, the thinking was last quarter that rates, you'd earn in about 7 points in the second quarter and 7 points in the second half. And then if I looked at slide 8, it looks like you got 8 points in the second quarter and then maybe the balance comes in the second half. It looked like around 5 points. So there's still 5 points to earn in. Is that the way to think about it for the balance of the year?
Joseph Lacher, Jr.: Close, Andrew. So far, year-to-date, we've got about 17 points of rate earned. What we provide there on slide 8, I believe is in the upper right hand area, is the estimate for the third quarter, which is about another 5 points. And maybe there's 2 or 3 points to be earned in in the fourth quarter. So we've got, for the back half of the year, 7 or 8 points left to be earned in. And that was – I think we answered this question in the first quarter. We expected about 24 points of rate to be earned in for the year. So that's how it gets broken down.
Operator: Thank you. There are no further questions at this time. I will now hand the call back to Mr. Joe Lacher for any closing remarks.
Joseph Lacher, Jr.: Thank you, operator. And thanks to everybody for joining us today and for your continued interest. Again, we're pleased with the results that we have right now, and we're going to continue to drive forward on improving them. I look forward to talking to you again next quarter. Take care.
Operator: Thank you. That concludes your conference for today. Thank you for participating. You may all disconnect.
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