Good afternoon, everybody, welcome to the UBS Financial Services Conference. My name is Brian Meredith, and I am the insurance analyst here at UBS. It gives me great pleasure in presenting our next fireside chat here in the insurance area. We've got Kemper Corporation with us. From Kemper, we've got the Chairman, President, CEO, Joe Lacher, and we've got Jim McKinney, who is EVP and Chief Financial Officer. I'm going to go through and ask a number of questions. In addition to that, you have the ability to ask questions yourself via the website. In your upper right-hand corner of your screen, you see a little area where you can type in your question. Type that in, I'll see it, and I'll be sure to ask it of the management team. With that, let's get started here. Let me start off with our first question here. Let's start off with the topic of the day, topic of the quarter, what happened in the specialty personal auto business with the second quarter. If you looked at your adjusted underlying combined ratio, 107.8 in the second quarter. That did include some intra-year development. As we think about it, what's the right baseline that we should be thinking of to improve upon? I think you hit the question the right way, Brian. We would point you to the six-month underlying combined ratio that takes the intra-year development out. Without looking at that, you'd be off. I do think the numbers you were referencing were private passenger auto, not the whole bucket. Yes. We'd start and point you to the specialty- Specialty personal, yeah We'd point you to the Specialty P&C and say, look at the 12-month-- I'm sorry, the six-month number, and that's the right one to start as a jumping-off point. Okay, perfect. Without the prior year impacts. Going on from that, claims frequency up 45%-50%. How much is claims frequency up from the same period in 2019, and what do you see as the long-term trend right now? Again, you're asking the right question. Measuring it off of 2020, there's a wonky base effect- Yeah going on there. It's probably up in the neighborhood of 3% from 2019. What I would tell you is that's a good way to look at it. There's a couple of things going on underneath that. We think that there's typically one and a half% frequency uptick in a given year that's largely driven by the population. 2019 to 2021, you get two years of that gets you in that zone. I think that's a reasonable tick to see. We're seeing that the loss frequency or the types of losses are a little different. This shouldn't shock anybody. There's almost no part of our economy that when you look at the pre-pandemic to the post-pandemic, that's running exactly the same. Just because we're not in lockdowns anymore and people are back out and about, you're not seeing a mirror reflection of the down and the up. The miles driven are up a little bit per trip. The time of day has shifted a little bit. The average speed has shifted a little bit. The simplest way I can describe it is in an old traditional environment where you had a big chunk of people that went to work every day. They left in the morning, they drove in rush hour traffic, they got to the office, they didn't leave till the end of the day, where they drove home in rush hour traffic. Those trips might have been shorter. They were at slower speeds because you were in rush hour. There wasn't something going on in the middle. With those same people, many of them working from home, they might run a couple errands in the middle of the day. They might be on the road at different hours of the day. There's not rush hour traffic, they're driving a bit faster. They might take a slightly longer trip because they ran that errand. If you're driving at 10 miles an hour versus 35 miles an hour, you're going to wind up with a different severity of the accident. The frequency number is a good one to match. It's generally in line with what we'd look at from a population and a regular frequency uptick when you take two years combined. They're a little different. Got you. I think what I would add on, Brian, is for folks who are trying to reconcile our frequency trends to maybe what would be the broader national averages- Yeah you're going to see some differences because the population growth rates across the country are just not commensurate with what the population growth rates are, quite frankly, in the territories that are our largest. That being California, Florida, and Texas. You continue to see significant population growth rates there versus what the national average. While you might be down from a national perspective, those areas actually have a little bit of a different trend, and we remain in line with the trend that you would see in those markets. Do you think the trend there is maybe a little elevated because it seems like, I know where I am, it seems like everybody's been spending COVID in Florida than nowhere in the Northeast. I think there's an uptick in those geographies for a couple of reasons. One, the population is growing faster than the rest of the U.S., there's just more bodies there. Two, you're finding a lot of people who are spending two months there or three months there, or they're renting a house there. One of the things that typically you'll see when you look at usage-based or attribution of risks or accidents, you're likely to have a higher number of auto accidents right after you've moved. That's not because you became a crummy driver, but it's because you're learning a new geography. You're learning which intersections are tough intersections. Where's the store? You might be checking a map more often. You might be checking your Google Maps or Waze or something more often, where once you've lived in a place for a certain while, you just know where these things are, and you work around it. You've introduced a learning process, which results in some minor uptick in accidents. To the extent that we've been concentrated in geographies, even if our insureds aren't the ones who have that experience, the tourists, if you will, even if they were two or three or four-month tourists or the newcomers are experiencing that, and they hit whoever's on the road. Yeah. there's some element of that that's increasing as a result. That I think normalizes itself over time. Does your demographic mix of business have any effect relative to the rest of the industry, at least in the near term, short-term timeframe? It does a little bit. Just because you're a specialty auto customer doesn't mean you're blue collar versus white collar. It's not an automatic requirement. As a general rule, our customer base tends to be a little more working class. Their jobs were less likely to be remote working. In the early days of the pandemic, specialty auto saw less frequency decline than, say, a Preferred Auto space because many of those folks were still, whatever the job was, maybe they were landscapers. Maybe they were working in a grocery store. Maybe they were doing things that had them out and about more. They didn't get all the frequency benefit. When people started coming back to work and coming back out, they were already out. You might see a really big pop in a preferred because they weren't doing anything, and now they're doing something. We also saw an uptick in that frequency because the roads were more congested, and the ability of our group, as on average, is a little less to be able to be hybrid and remote. Got you. Which makes some sense because if you look at some of the other preferred writers that have reported this quarter, they're still talking about claims frequency 20% below 2019 levels. You guys are saying we're basically there, right, and back. Again, that doesn't shock me because if there is a certain percentage of the population that's still working hybrid and they have a greater percentage of that population and we have a disproportionately less, you're going to see that. Many of them have their books in places where the population's actually declining. Fewer people. Even if the population wasn't declining, you've got perhaps folks who were living in the New York metropolitan area who rented a house in Florida for four months. Even if they're out a little more, they're not out in New York. Right. If they had an accident, that would go towards that preferred carrier. Everybody else in the N.Y. area saw an effective population decline, even if the resident didn't leave. They didn't see the same uptick. When those folks go back from Florida to their house, you'll see that ripple through. Got you. Interesting. Let's flip over to the severity side of things. You talked about 8%-10% severity. What is driving the severity, and what are your assumptions on how long this is going to last for the inflationary trends and stuff? Yeah, great question. I'm going to expand it slightly because what we've seen is some folks misunderstand a little bit. They heard most carriers at the beginning of the pandemic describe a frequency decline and then said severity went up because people were driving maybe a little COVID crazy. They were a little faster, a little more reckless because people weren't on the road. Because the largest, on a weighted average basis, most of the claims that dropped out were small claims. The weighted average severity went up. Okay. Many people instinctively say, "Oh, why doesn't the reverse happen?" Okay, maybe the COVID crazy driving went back to normal. You've added some more of the smaller losses that came back in, that might reverse itself. What happened after that is I already talked about this. The time of day changed when people drove. The average length of trip changed. The average speed changed because people who are now working hybrid are doing things in the middle of the day. That meant those tiny fender benders, some of them were replaced with slightly larger accidents. When you remixed, you didn't mix with the smallest, you mixed with one or two steps up. That pushes the average severity up. The last piece is the world didn't go back to the pre-pandemic supply chain. There were a certain number of rental cars pre-pandemic. All the rental car companies have smaller fleets. As a result, the cost per day is up in rental cars. The body shops may have fewer employees, and it's harder to get employees back. It takes another day or two to repair a car. Maybe there's a storage fee at the body shop. Maybe it's two more days of rental car expense at that higher cost. There's chip shortages. There may be a problem getting containers on ships, and as a result, the headlight for this particular vehicle is late getting back into the country. All of those labor costs, supply chain issues, all of those things are driving some piece of severity up. We also saw, I think much of the industry's been talking about social inflation. We have generally described that with our lower limits policies. Yep Most of the time the attorneys were looking at that and saying, "You know what? That's not worth working those policies over because there's not a lot of ROI for me." A lot of them said, seem to behaviorally, it appears that with fewer auto accidents to work from, they still had a certain staff, and they were looking for things to do. The ROI made more sense for them to go to smaller limit policies. We started to see an uptick in that social inflation that others had experienced that hadn't sort of worked its way into specialty auto. We're seeing it work more into those lower limit policies. Got you. Do you think that's temporary? I don't know whether that stays. Yeah. I don't know. It may be temporary. My instinct tells me that somebody's still going to do the ROI and going to conclude that they're working really hard for not a lot of dollars. Yeah. I'm not in that spot. I don't know exactly how the math works on the trial attorney side of the house. I know it doesn't do a lot for consumers. What it does is it adds cost to the system that doesn't usually end up in an insurance pocket. It ends up in a trial lawyer's pocket and then ultimately drives cost up in premium. It's not a social good in the process. I don't know where it ends up. To your full question was, how long does this occur? Yeah. I think the mix change of people driving midday or driving maybe longer trips, more speed, my guess is that's going to be a little more like a permanent change. I think we're going to wind up with more hybrid work environment. I think we're going to wind up with a lot of those changes that will be here for a while. I don't think we're ever going to go exactly back to normal, quote-unquote, pre-pandemic normal. If we do, it's going to be over a gradual pace. I think the mix of types of losses will stay. I don't know what's going to happen on social inflation. We're going to assume that it stays there. The supply chain issues, I think, are going to be here for a while. I haven't read anywhere where anybody thinks that the sort of the global pandemic vaccination rate and the global problems with shipping are going to be back to normal in under nine or 12 months. I don't think, importantly for us, if it's in that 8%-10% range, what causes us angst is when it changes quickly, and it changes by a large order of magnitude. Going from 0%-10% in two months, big challenge. Going from 10%-20% in two months, big challenge. Staying at 8 to 10 for 12 months and being relatively consistent, not ideal, but we actually, if we can somewhat forecast it, we can manage that. We can work it into pricing issues. We can work it into how we run and operate the business. It becomes a relatively consistent and stable environment. It takes us a number of quarters to work it in, but it's manageable. On that, Rajeev, how are you booking this stuff? Are you assuming that this inflationary environment stays with us for a while when you kind of book your loss picks? We have to date, in terms of our assumptions, That's one of the elements that led to a little bit of that Q1 intra-year development, if you will. We had an initial kind of expectation, if you listened to the Q1 call, closer to kind of a six to eight-point type severity trend range. We could see the severity or the pressures occurring in the supply chain at that point in time. It was an area that we spent some time on the call talking about, trying to highlight this to folks' attention. What we learned in the quarter, though, that brought that forward and further kind of moved us to that eight to 10 range was less about lockdowns in terms of people's behaviors, driving patterns, more about incremental per capita mortality impact. Once you saw the impact that vaccines had, ability to treat other elements, You saw those rates plummet in terms of the impact that it was happening on per capita death rates, you saw people come back and their behaviors migrate more to norms or whatever the new norms going to be very quickly. Once people had a certain level of comfort and they thought they were maybe dealing with something that would have more of an impact, like a flu, and that they would work through it, I'm not saying that's what this is, I'm just highlighting a trend. You saw a much quicker return to a normal behavior pattern, That's despite what's happening either for lockdowns or other elements. From what I've seen so far, it's really about that incremental mortality rate and how that's changing that drives human behaviors around it. Got you. You're booking it, though, that you're assuming it's going to be around for a little bit longer, the inflationary? Yeah. We're booking with an assumption at this stage that it's basically here for the year. Good. Okay. That's appropriate. That's part of the reason you had. Yep intra-year development. If there's an open claim, we're looking at what we think the ultimate severity will be on those claims and what will happen. Right. Many times, we know the claim's here, but we're going to settle it somewhere out in the future. We need to be putting up the number for the ultimate. Yep. Our sense is, Brian, that we've been out in front of the issue. We've been spotting the trend early and then responding to it. We talked about it in our first quarter call that we saw it coming. To Jim's point, it came more rapidly than we thought it was going to come because people got out and about more quickly, and because they were out and about more quickly, and the accidents happened more quickly, that put more stress on the supply chain, which then pushed the inflation up faster because it depleted the shelves, so to speak. Got you. We were describing it as a third and fourth quarter issue. It came in quicker. Yep. We're going to respond accordingly with every lever, whether it's booking our losses or what we do with underwriting or what we do on pricing or what we do with any other lever we have to manage through the issue. Yeah. Let's follow up on that a little bit here. You talked about two to four quarters for this to kind of get back to your mid-90s combined ratios. Typically, one to two quarters you can reprice pretty quickly. One, how receptive are regulators right now to kind of letting you take that rate? Is that the reason? Also, as you said, what other levers can you pull here to improve margins on your business without necessarily getting that rate? Yeah. There's three or four things under there. One, let me start with sort of a bogey. I think we're talking about not necessarily mid-90s, but we should be thinking in that 97, 98 range. That's probably the math you'd do if you got back to a 10 to 12 ROE. I start with that view. The second piece is what are the levers that we have? One lever is pure base rate. We can change the rate filings. In many of our companies, we have multiple pricing tiers that you move between the pricing tiers for underwriting reasons. We have the ability to change the underwriting rules in those, which when you move to a different tier, it moves you to a different rate level. There's the 1.0 rate, there's the 1.05, the 0.95, and there's different underwriting criteria that move you back and forth. We have the ability to adjust those relatively quickly. We have billing plan options that we have at a very granular level. If we decided that males under the age of 35 with an accident, if our data show that they were running a very hot combined ratio, we could change the billing plan to make it 100% down rather than a one-month down. Got you. That's likely to cause certain of those customers to say, "You know what? I might be willing to pay a higher premium somewhere else to get a better cash flow dynamic." That has an impact on sort of the mix of customers that we wind up with. All of those things, we can do all of those very quickly, and very locally, we are doing those, and would expect that. The last piece is regulators, or the second to last piece, excuse me, is regulators' receptivity. Regulators are very thoughtful, but they have a set of competing priorities. On one hand, they're worried about carrier solvency. They want to make sure you have enough dollars, that you're there to pay all the claims for the policyholders. On the other hand, they're worried about affordability and don't want insurance companies to be making sort of a usurious set of returns. They want a fair return for the customers and a fair return for the companies, and they're trying to find a balance between. The biggest problem they sometimes have is an availability problem. If they get too out of balance on affordability and solvency, or making sure the rates are high enough, what a company will do is if they're running 110 combined ratio, they just stop writing. If you get enough of them that way, you have an availability problem. When regulators are looking at a filing, all of us file our rates, and we use our historical experience and our projections of forward loss trend. Three months ago, we were all dealing with a big period of COVID, low frequency, lower severity, period of what some might describe as increased profitability. We thought there was frequency and severity coming, but it hadn't been seen yet. That's difficult from a regulator's perspective to be certain that's coming. What's happening now is that frequency and severity is here. It's impacting open losses. It's moving very rapidly. It's very visible. Most regulators will look at the last 12 months and say, "That was an anomaly. We shouldn't weight that heavily." They're going to look at the speed of the rising loss trend and say, "We don't want to have an availability problem or a solvency problem." I'm not suggesting we have a solvency issue, but those are the words a regulator would use. They want to avoid those two issues. My sense is they're going to be more amenable to the fact of needing to respond around it because the data shows that it's there. Now, we haven't been through all of the different geographies and all of the different regulatory environments. My sense is you're going to have most of us in the industry with a similar point of view. Some will be at the front of the line because we see it quicker. Some will be in the middle or the back of the line because we've seen it later. It's not going to be three or four months before everybody's seeing the same stuff. They're just going to recognize it a little later. Got you. Can I give you one more? Yeah, absolutely. Yeah. The fourth piece is, the last piece, which I think is actually probably the most important for people to digest and understand. Yep. There is a pace with which in a stable environment you can move and fix the profitability. Who here right now is certain how fast the global supply chain's going to open up? Whether or not there's going to be any more push from a severity perspective. Who here can tell me right now if we're going to see lockdowns further imposed as a Delta variant runs, or if we're going to see people, when the FDA quits emergency use, takes that off the label, if companies are going to mandate vaccines, then they're going to push people back into the office. If you see people push back into the office faster, and we might even see a little bit more pop in frequency, and you see a push in the supply chain problems, we could see combined ratios still go up a little bit. If you see people go back into a little bit of a lockdown mode and you see the supply chain catch up, we're going to see a little bit of help. None of those have anything to do with what any company does on underwriting or pricing. There's probably at least a three or four-point margin of combined ratio point margin of motion that we could see over the next couple of quarters that are purely environmental. Depending on where you project the number to be, you may get too much rate and too much underwriting help, or you may get too little. There's only so much a regulator is going to let you get right now. If you go to the point where you're pushing sort of where the edge of the regulators will let you get, and you get a little bit more environmental deterioration, things could actually get a little worse before they get better. I'm not telling you which way it's going to go. What I'm actually telling you is if you sat down with almost any economist Yep anybody who looks environmentally, you're going to find a range around that. People should be doing the math. This is us putting the surgeon general's warning label on the cigarettes. Exactly what we did at the first quarter when we said we expect a supply chain issue working. There's some range around that that's environmental in nature- Right that it's going to take a couple of quarters to know how it's playing out. Right. Like you said, it could get a little worse, could get a little better. We just don't know. Makes a lot of sense. The error bars around that are much more than what they normally are, and the options that you have to navigate that are more limited than what they normally would be, and I think is the big call out. Let me pose this question then. If there is this uncertainty as far as what the environment's going to look like here going forward, you guys are still driving for market share growth. We saw 13% organic growth in the quarter despite this kind of uncertainty. Why is this a good time right now to take market share, and how much of the growth you're putting on potentially hurting your profitability here? Let's back up and dismantle that a little bit. The 13%, I think you're picking up premium. Yep. Okay. What somebody did is he said, "I've got 2% less PIF, and I took 15 points of rate. Yeah. That's premium market share growth, but it's not unit count market share growth. What it is is you're doing a dramatic price difference. I think the right thing to look at is to start with PIF growth, which was on the order of five. Remember, when you look across our states, we're in states where the population is growing a couple, 3%. If the population's growing 3% and we grew 5% on a PIF basis, that's not a lot of market share growth. That's a little bit of market share growth, when you're talking about it on a unit basis in terms of what's there. What I would tell you is, and I'm not opining on the accuracy of Progressive's numbers, but they're the only one who gives monthly numbers, so it helps us all sort of see a temperature. If you take their April, May, and June results, you can see the deterioration. It wasn't much there in April. It started in May. It really popped in June. Okay. When we work our growth and we make those trades every day, the trades we were making in March affected April. The trades we were making in April affected May. The trades we were making in May affected June. You would have expected that the information through April affected two-thirds of the quarter that was reflective of a less challenging profitability environment. Got you. I've made comments that we're not going to take our foot off the gas. I want to help clarify them. What I mean by that is, as a team, we're going through the same granular conversation we do in a product management base in each local geography, and we're looking at the trades of the profitability of the book of business we're adding and the individual sells in the rating component. If we think it's an attractive, good long-term ROE trade, we're writing it. If we think it's not, we're tightening the underwriting, we're tightening the pricing, we're doing whatever we can to move it into that category. If there's nothing we can do to move it into that category, we're slowing the acquisition. My guess is that puts a little growth pressure on us in the next quarter or so. My guess is because I think we're earlier to solving the problem, we're going to get that tuned where we think it's more appropriate more rapidly. What you're going to see is when others are saying, "Oh, shucks, I'm off," and they start tightening their underwriting and tighten their pricing, our hope is that we're already there with a catcher's mitt waiting to catch the volume because we've already made the profitability adjustments to be appropriate. Right. I would expect some modest slowing, probably not to negative, but some modest slowing in the next quarter, two. Yeah. I would expect us to be healthier faster than most of the industry. When they're losing weight, that should be an opportunity for us to pick up the share. Got you. We're going to be very thoughtful capital allocators, we're going to be very thoughtful measurers of what's coming in the funnel. Is it generating the appropriate long-term return? Can we apply the right penicillin to get it there? If we can't, we're going to try to keep it out of the funnel. Got you. That makes sense. Brian, one thing that I would just highlight or add on to kind of what Joe was highlighting. Our growth that Joe's referencing, it's obviously very strong, but it's still kind of at the lower end of what our normal kind of range is. While we navigate this environment and continue to work through it, when you think about that overall growth story or other, if the normal return for applications and desire continues to kind of build to what our normalized level would be, even though we're taking actions and being more restrictive or other, there is some of that that's kind of a tailwind against or that counter some of the things that we're doing that would normally have a little bit of an impact on growth. While I think growth as a whole, to Joe's point, over this time, it would surprise me if we posted record growth numbers for us. I mean, that would be unusual in terms of what we're thinking. It would not surprise me if we continue to take a little bit of market share. It'd be disciplined market share if that comes through. Wouldn't be intentional because we're starting with what's appropriate for market access and making sure that we're balancing all the needs of our stakeholders. Just given how that funnel and the amount of business that has been coming into that funnel, there's the potential that you'll see a little bit of that in an unusual way relative to maybe other periods that you would have worked through. Makes sense. I guess one other just quick one here. American Access, you all just kind of acquired. Are you seeing similar trends at American Access with respect to frequency severity? Is that something that we could see a little bit of surprise here next quarter too, as you kind of get that integrated? We're seeing consistency in frequency and severity. I don't anticipate you're going to see a surprise from that. We were thoughtful about reviewing all the data and information, booking that. We've got it worked into our product management organization, so we're using I keep using the analogy of penicillin, but we got it in the same doctor's office with the same penicillin and the same tools and the same analytics working through it. It's not like we've got it hanging off separately and on an island and nobody's talking to them, and we'll see them in six months. That's good. Awesome. I think the other thing is, what Joe some of that is just, There are some of the elements that we highlighted in terms of some of the underlying BI or PIP elements that have kind of been out there, and we've seen some of the changes in patterns. The company is obviously not in Florida. You've got your primary underwriting some kind of Indiana, Arizona, Illinois. There's a component of that where we're just looking at kind of that base of business. It's aligned with kind of all of our trends, but some of those things that are a little bit different and nuanced in this period, it's not quite as impacted by just because of where its regional or geographic exposure is. Amplitude's a little bit lower. Yeah, I get it. That makes sense. Yes. Can we pivot just a little bit here? The reserve charge you took in the second quarter related to Florida PIP, something that I'm getting questions about. Maybe provide kind of the rationale behind the charge and maybe a little bit on the court decision and what led to the charge. Sure, happy to. Look, overall, Florida, particularly South Florida, is a challenging environment. That's one of the reasons you really want to be a specialist there. It has a lot of competitors who aren't specialists opting to be out of that environment. The reason it's a great place to be a specialist is because of the challenging environment. We're actually okay with that, and we know that sometimes those things are going to occur. We expect them. In this particular case, Florida's PIP law, and I'm going to oversimplify and use an example, this isn't perfectly precise. They had two standards in the law. One was effectively a fee schedule, and then one was a limit to the maximum amount a provider could charge. The fee schedule was sort of the participating limit, and this was supposed to be what an insurance carrier paid the provider. Let's make it up. Let's say that was $4,000 for whatever treatment it was. There was a limited amount that said the maximum the provider could charge was $4,200. The difference between the $4,000 and the $4,200 was $200 that they could charge the customer. The limited amount was intended to make sure the customer didn't get gouged. The participating amount was to make sure that the fee schedule was what the company had to pay the provider. They were designed to be that way. It appears that Florida changed something in their law at one point. However the drafting worked, I'm not opining on Florida's legislature or anything else, but it appeared that the court found that that sloppy drafting made it unclear which amount was to be paid. A provider was arguing the insurance company should pay them the limited amount, not the participating amount. That's totally illogical when you understand what's going on. Yeah. It's about, in these cases, about $100 or $120 per claim is what it was. The issue becomes, once that court ruling came out, we wind up with a choice. Do we go back and pay the extra $100 or $120 per claim? Or does a provider have the ability then to say, "You didn't pay me what you owed me, I'm going to sue you for it." Now we've got a bunch of litigation costs out of it. If we pay the limited amount, another provider might say, "You overpaid and you eroded the policy holder's limit. Because you've eroded the limit, that $120 wasn't available for me when I provided another service." Everybody's trying to figure out how they sue in the process. We started doing a set of calculus and said, you know what? We think that paying the $120 and then figuring out how to appropriately in those claims, make sure we haven't eroded a limit and navigate that was a better answer than driving into litigation. Other carriers have said, "You know what? That's irrational. We don't think that was the way it was intended. We're going to fight it in court, and we're going to hope to get another decision that says you shouldn't pay limited, you should pay participating, and then you get two out of three, or you hope for the Supreme Court." The longer these things stay open, the more you're going to get individual suits that you weren't dealing with what the court looked at. What this becomes is different specialty carriers, different folks in South Florida tactically are deciding how they deal with this discrepancy. For us, there's a five-year statute of limitations open that covers these things. In that time period, we wrote about $2.5 billion of premium. This is about $55 million of a charge. It's a de minimis number overall. It doesn't change our view on the accident year results of any of those periods, that they're all well below our target profitability, and we feel very comfortable that we like Florida, we are happy with every policy we wrote as a result. We're confident that an investor would say, "We wish you'd grown more there. Got you. Even after the decision. That's what hindsight would tell us. This is us making a tactical decision on what we think in what appears to be a court decision that's different than what would be a logical legislative intent when they're out of whack. What's the best imperfect answer to deal with in the short term, when likely litigation is going to occur on anything we do. Makes sense. Let's pivot over. Quick question here. Preferred Auto. Is it achieving your target return? When do you think- No You can potentially achieve it, potentially, and is that really a good strategic fit for you all? It's not achieving our target return. Yep. I think the Preferred Auto business we've said before is we've got a very strategic review focus on it. We're looking to enhance its ability to have a sustainable competitive advantage and focus it in a place that really does have some level of specialization in that market. That process was disrupted in a COVID environment, and slowed in a way that we're not thrilled about, but was slowed logically. We're continuing to work it and deal with it. It's seen all of the challenges that the rest of the market has seen on COVID, and it's done it from a less strong position than some other players. It gets it a little more wobbly. We're continuing to work it aggressively, and still have the same point of view that if it's not done with what would be a reasonably foreseeable time period, we're going to have to think about it differently. Got you. Makes sense. Here's another question, Joe, I get a lot from people when I talk about your company, and that is, what's the right ROE target for Kemper, right? They come back to me and I say, "Well, Joe talks about double digit, right? What's double digit mean?" They say, "Well, I look at Progressive at high teens ROE. I look at Allstate at 15%, 16% return on equity. Why isn't that the right target for Kemper? Yeah. I think those are great questions. There are a couple of different numbers that I might point you to, because there's a difference in terms of how we've each kind of achieved our end state or gotten to the current points that we're at. The first one is the 10% to 12% return on equity that we put out there. That's significantly above what our weighted average cost of capital. When we basically, depending on the metrics and what we went back into, outside of an ability on our end to maximize our ability to build claims functions and things of that nature to maintain the quality of experience that may slow an engine of growth at times or not, just in terms of maintaining our target offering, similar to what Progressive would look like in those areas. At that level, anything actually above that is basically decreasing what would be the present value of the future cash flows into the business. While you might get happy with a short-term higher ROE, your true intrinsic value is going down as a result of that higher ROE base, because you're effectively turning off growth that will have a renewal income stream that is substantially above what your cost of capital is. The perfect example of where that really comes out is the difference in the Progressive versus Allstate comparisons. Both are very successful companies, but you see where Progressive has really been focused on maximize growth at 96% or better from that. I imagine they went through similar calculus, or I don't know, but that's my guess. The reality is that you compound those renewal cash flows and what they're in, and the additional strategic value that they have to your business in terms of driver knowledge and behavior trends and other things. They more than compensate themselves on a risk-adjusted. As an investor, you're going to really want that just about any day of the week. The secondary component of that and that I would highlight to you, that's kind of the first chunk, is the return on average tangible common equity. That's where we would much more closely align with Progressive and you would see kind of deltas. We have some goodwill that is a residual of effectively the Infinity acquisition. I would highlight that about, I think, $400 million of it is what I would call fake goodwill, for lack of a word. When we agreed on our transaction phase, about $1.25 billion at that point in time, that's when we agreed to the exchange of tangible property against future cash flows and their match. Post that, obviously, our stock price appreciated as people came to value the synergies and the composition of business and the strategic impact that we could have. It's not like I actually created more equity or the shareholders who were with us on both companies on that day could actually fundamentally write premium or spend that in some way. While it's true from an accounting perspective, and I'm not trying to argue with FASB or others about how you would account for that's not my goal. I'm just saying some of that appreciation and where they're going, you can't really create cash. If you were to try to optimize around that, you would effectively decrease the total cash flow inside the organization. That's why when we provide our targets for that return on average tangible common equity, which tends to be in that 13%-14%, we've been closer to 16%-20%, if you look, I have a feeling that those returns on that tangible and the return, I think those look very similar to Progressive. If anything, I think when you look at us, you'll see that we operate with much greater capital efficiency and underwriting leverage because of the mixture of our business, which enables us to continue to take profitable market share, do really good things for policyholders, as well as do some really good things for our shareholders. That's why we point back, Brian, all the time to return on average tangible common equity and why we point back to the cash generation of the business. At the fundamental level, that's really what's driving it. You can get some quirky stuff on the acquisition accounting around the ROE. Yep. We think you get a much more appropriate view there. The folks who do the work and look underneath it usually find that they're really pleased with those results. That makes a lot of sense. The crossover on the intent in that dilution, so crossover, not payback, crossover was inside a year. Yeah. I just highlight that. That means we returned all the equity plus a return on that equity for that dilution, and then they had an entire business of cash flows to come in thereafter. We tend to try to be very thoughtful about that. They're both receiving compensation. In addition to that, they're now receiving, because we hold ourselves accountable for that incremental $200 that I would've suggested is kind of real goodwill throughout there. We hold ourselves accountable for that, and we can return. Not only did we go to that cash flow in our target, for that component, we've actually increased our return on that going forward by 2-3 points, effectively, in terms of what that means to our shareholders. There's been a nice reward, I think, for holders in terms of how we look at it and try to make sure we're doing the right things. Yeah. They just need to recognize it right now again. That'd be great. Terrific. Well, listen, we're at the closing point here. We've been going back to 45 minutes of time. I want to thank you, Joe, thanks, Jim, for all your time. Really helpful in kind of walking through the situation here. Really appreciate all your time. Thank you for everybody for joining. Thanks a lot. Thank you. Appreciate it.