KEMPER Corp Q2 FY2020 Earnings Call

Good day, ladies and gentlemen. And welcome to Kemper Corp's Second Quarter 2020 Earnings Conference Call. My name is Cole, 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 call Christine Patrick, Kemper's Vice President of Investor Relations. Mrs. Patrick, you may begin.

Thank you, operator. Good afternoon, everyone, and welcome to Kemper's discussion of our second quarter 2020 results. This afternoon, you'll hear from Joe Lacher, Kemper's President and Chief Executive Officer; Jim McKinney, Kemper's Executive Vice President and Chief Financial Officer; and Duane Sanders, Kemper's Executive Vice President and the Property and Casualty Division President. We'll make a few opening remarks to provide context around our second quarter results, and then open up the call for a question-and-answer session. During the interactive portion of the call, our presenters will be joined by John Boschelli, Kemper's Executive Vice President and Chief Investment Officer; and Erich Sternberg, Kemper's Executive Vice President and Life and Health Division President. After the markets closed this afternoon, we issued our earnings release and published our second quarter earnings presentation financial supplement and Form 10-Q. You can find these documents on the Investors section of our website at 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 operations and financial conditions. These statements may also include impacts related to the COVID-19 pandemic. Our actual future results and financial condition may differ materially from these statements. For information on potential risks associated with relying on forward-looking statements, please refer to our 2019 Form 10-K, our second quarter 2020 Form 10-Q, as well as our second quarter earnings release. This afternoon's discussion also includes non-GAAP financial measures we believe are meaningful to investors. One such measure I would like to highlight again is as adjusted for acquisition. It is important to understand our reported results, including the impact the Infinity acquisition has on Kemper overall. However, investors have also expressed an interest in understanding the underlying organic performance of the combined businesses. Since our as-reported financials don't include Infinity's historical information prior to the closing of the acquisition, and our current results include the impact of purchase accounting, the underlying trends are not easily visible. To provide insight into the underlying performance of the combined businesses, we also display our financials as adjusted for acquisition. This view removes the impact of purchase accounting, and includes historical Infinity information for periods prior to the closing of the acquisition to more easily provide a meaningful year-over-year comparison. In our financial supplement, presentation, and earnings release, we have defined and reconciled all the non-GAAP financial measures to GAAP, where required in accordance with SEC rules. You can find each of these documents on the Investors section of our website at kemper.com. All comparative references will be to the corresponding 2019 period unless otherwise stated. Finally, I would like to note that, due to the social distancing practices Kemper is following in response to the COVID-19 crisis, our call participants are not in the same location. This may cause the question-and-answer section of our call to feel disjointed at times. We apologize in advance and ask for understanding from our listeners. I will now turn the call over to Joe.

Thank you, Christine. Good afternoon, everyone, and thank you for joining us today. We continue to find ourselves in unique times. The pandemic is impacting consumer behavior, the macro economy, the investment environment, and how we conduct our business operations. We expect that to be the case for the foreseeable future. While the effect of these items can be seen in various parts of our financials, in aggregate, we continue to deliver strong results. We remain confident in our business model, our financial position, and our ability to continue to serve our customers and deliver value for our shareholders. Let's now turn to page 4 to discuss our results this quarter. We recorded strong results in the second quarter in spite of the environmental challenges we faced. Net income was $126 million or $1.91 per fully diluted share, adjusted consolidated net operating earnings were $79 million or $1.20 per fully diluted share. We generated a rolling four-quarter return on tangible equity, excluding unrealized gains of 19%. We've talked a lot over the last few years about the value of our diversified model, and how it enables us to deliver consistent returns. The positive investments and enhancements we've made across our businesses have resulted in significantly improved earnings and stable cash flows, through both favorable and challenged economic environments. Additionally, the model provides meaningful capital efficiency. Together with strong execution, these advantages enable us to consistently generate attractive returns for our shareholders. Our results in the current environment highlight the benefits of that model. As we previously disclosed, our specialty and preferred auto businesses provided customers approximately $100 million in premium credits during the second quarter. Our thought process follows a simple principle of providing attractively priced policies to our customers while delivering reasonable returns to our shareholders. This matches customer expectations and allows us to significantly grow the business and to maximize shareholder value over time. The pandemic has impacted most of the inputs in the auto pricing equation to some degree, and the credits allow us to deliver pricing consistent with that principle. We will continue to monitor the impacts of the pandemic and consistently apply this concept going forward. Our Specialty Auto business continued its trend of strong performance in the quarter; margins remained solid and we were able to provide attractive pricing to our customers. This resulted in significant policy growth and further strengthened our market position. Additionally, we continue to invest in our platform and capabilities, which will allow us to better meet the needs of our customers and drive future market share gains. Our preferred segment also delivered a solid quarter. Both our auto and home and other lines showed continued improvement in underlying combined ratios as a result of ongoing profit improvement actions across the segment. While we are pleased with our progress, we continue to evaluate a number of actions that will lead to sustainable and profitable growth. Similar to our other businesses, Life & Health was also impacted by the pandemic. Increased mortality experience was offset by reduced morbidity in our health book, and net investment income was down, as first quarter market challenges were recognized in the quarter. While we expect some near-term volatility and benefit costs related to the pandemic, we remain positive about the long-term prospects and the strategic diversification benefits the Life & Health business brings to our organization. Our strong balance sheet and ample capital and liquidity provide significant financial flexibility. This not only allows us to support our businesses through turbulent times but also enables us to act on the opportunities that may present themselves in the current environment. In summary, we successfully delivered profitable growth in an uncertain macro environment. We made important investments and enhancements to our capabilities, we strengthened our competitive advantages and we delivered significant value to our shareholders. With that, I'll turn the call over to Jim to discuss our consolidated operating results in more detail.

Thank you, Joe, and good afternoon, everyone. Turning to our results on Page 5. Net income for the quarter was $126 million or $1.91 per diluted share. This represents a 3% increase in net income versus the second quarter of 2019. Adjusted consolidated net operating income was $79 million. Our ability to deliver strong top line growth, solid margins and attractive returns in an uncertain operating environment is a testament to the resiliency of our business model. On Page 6, we isolate the key sources of volatility. This was marked by pressure on alternative investments, seasonally elevated catastrophe activity and increased prior year development. Duane will touch on catastrophe activity and the development later in the discussion. One additional item of note is this quarter's strong equity market performance. It resulted in the recovery of a significant portion of the losses we experienced in Q1 within our equity portfolio. Turning to Page 7. Net investment income including COLI for the quarter was $68 million, down from $97 million in the quarter of 2019. Approximately 66% of the decrease was driven by our alternative investments, which put pressure on our annualized portfolio yield. I'll remind you that many of these investments report on a lag, so the reduction reflects the pressure we saw in financial markets during the first quarter. Our portfolio composition and strategy remains consistent and focused on high-quality fixed income investments. As of the second quarter, 93% of our fixed income portfolio consists of investment-grade securities. From a credit perspective, the portfolio continues to perform. Impairments were roughly 10 basis points, broadly speaking, the quality and the diversity of the portfolio continues to effectively support our businesses. Page 8 provides a walk of net investment income from 2Q 2019 to 2Q 2020. Aside from the impact of alternatives, our net investment income yielded solid returns. While rate movements were stark over the quarter, our portfolio remained relatively resilient. This is in large part due to actions we've taken over prior quarters to address the risk of a lower for longer interest rate environment, which included extending the duration on a large portion of our fixed income portfolio. As of the second quarter, our weighted average maturity was 12 years with an effective duration of seven years. Turning to Page 9. Our capital and liquidity remain strong. We have $943 million of committed and contingent liquidity, an increase of over $75 million compared with the end of 2019. We generated over $200 million of cash in the quarter and have generated over $560 million over the last 12 months. This is a testament to our diversified model which is designed to produce stable cash flows through both favorable and challenging economic cycles. Broadly speaking, our capital management strategy remains unchanged. Our capital stack continues to provide significant financial flexibility to support our businesses and take advantage of market opportunities. Our insurance entities remain well capitalized. Our debt-to-capital ratio is below 16% and we have no near-term debt maturities. On Page 10, I'd like to highlight some of the capital metrics we track closely including growth in intangible book value per share and tangible return on equity. Together these metrics demonstrate the efficiency of our capital deployment decisions and intrinsic value creation. Over the last year, we have increased shareholder value by approximately 17% as measured by growth in tangible book value and cumulative dividends. This is driven by the team's strong execution capabilities and business model. Our operating model continued to generate strong returns over the quarter with a rolling four-quarter return on tangible equity excluding unrealized gains of 19%. This is the fifth consecutive quarter of delivering tangible returns in the high teens to low 20s area. In summary, we are pleased with our financial performance over the quarter. Our strong balance sheet, financial flexibility, and diversified operating model position us to deliver continued growth amid economic uncertainty and serve as a source of strength for all our stakeholders. I would now like to turn the call over to Duane to discuss the results of our Property & Casualty segments.

Thank you, Jim, and good afternoon, everyone. Let's begin with the specialty segment on page 11. The segment continues to perform exceptionally well despite a challenging backdrop that included a reduction in consumer shopping activity and other pandemic items that impacted the P&L. We generated approximately $68 million of earnings in the quarter. We continue to achieve industry-leading growth as we execute on opportunities to expand in both new and established geographies. Policies in force increased 7.5%, compared to 2Q 2019 when excluding the sale of classic cars. Net earned premiums grew 10% year-over-year excluding the impact of $87 million of premium credits. The reported combined ratio was 91%. The underlying combined ratio on an as-adjusted basis was 89%. Our performance benefited from changes in driving behavior due to shelter-in-place orders that led to a decrease in frequency. This was partially offset by an increase in severity and bad debt, as well as pressure on investment income. The long-term outlook for the specialty segment remains attractive. We continue to deliver competitive pricing for our customers and generate consistently strong profitable growth. Investments in our business continue to strengthen our capabilities and low-cost operating model. These investments will enable us to enhance our value proposition to our customers and generate consistent attractive returns for our shareholders. Turning to the preferred segment on page 12. We continue to make good progress in preferred. The second quarter underlying combined ratio for the segment was 84%. Preferred auto reported an underlying combined ratio of 89%. Core performance continued to improve and the book benefited from similar favorable trends as our specialty auto portfolio. Our home and other underlying combined ratio also improved as we see continued benefits from our profitability improvement actions. During the second quarter, we experienced seasonally elevated catastrophes largely as a result of weather-related events in the Southeast. Catastrophe losses for the quarter were in line with 2Q 2019 and significantly better on a year-to-date basis. One additional item I'd like to note is the $9 million of adverse development we recorded in our auto book. The primary driver of this was an increase in demand notices in UMBI. At this point, it is unclear if this represents an increase in volume or an acceleration of timing. For reserving purposes, we took the view that it's an increase in volume. It is important to note that we are not seeing similar activity in other parts of our preferred or specialty books. In summary, we're pleased with the progress we've made over the last few quarters. The actions we've taken to enhance underwriting, pricing, and exposures are paying off, and we continue to evaluate additional opportunities to deliver sustainable profitable growth. I'll now turn the call back to Joe.

Thanks, Duane. Turning to our Life & Health results on page 13. Segment income was $16 million, compared to $13 million in the second quarter of 2019. Please recall that the year ago quarter had roughly $6 million of one-time items. Performance in the quarter was impacted by pandemic-related mortality that was elevated but in line with national experience. This was offset by lower morbidity in our health book and a couple of one-time items. In addition, segment earnings were impacted by lower net investment income. Going forward to the extent that the nation continues to see elevated pandemic-related mortality, we would expect to see a parallel impact in our business. During the quarter, we temporarily suspended new life sales due to stay-at-home orders, we have since resumed new business production and are continuing to adapt to the pandemic environment. In summary, we remain positive about the long-term outlook for our Life & Health business, we continue to assess new growth opportunities and we expect the segment to continue to play an important strategic role in providing diversification benefits and enhanced capital efficiency. Turning to page 14. I'd like to spend a few minutes discussing how the current environment is impacting different areas of our business. The situation with the pandemic remains fluid as widespread state re-openings in June were followed by enhanced restrictions across some geographies as infection rates began to rise. The movement in and out of state recovery phases has implications for both the overall health of the economy as well as consumer behavior. Looking at our Specialty and Preferred segments, the degree of lockdown that states are experiencing, as well as the potential to shift between phases of reopening will impact driving as well as insurance shopping behavior. In our Life & Health segment, we expect mortality experience to increase as COVID-related deaths increase, which remain in line with national trends. We expect increased market volatility and sustained low interest rates resulting from continued economic uncertainty to impact our investment portfolio. Despite these challenges, our business continues to be well-positioned to deliver value to all of our stakeholders. Our capital and liquidity are strong. We have a high-quality and diversified investment portfolio that is built to support our businesses and our diversified business model provides consistent cash flow and returns. Before I close, I'd like to acknowledge our employees. These have been challenging times for everyone, but every day I'm reminded of the resiliency, dedication, and focus of our entire team, their commitment to meeting the needs of our customers while delivering value to our shareholders makes me proud to be part of this organization. And now, we'll turn the call back to the operator to take your questions.

We will now begin the question-and-answer session. Our first question today will come from Greg Peters with Raymond James. Please go ahead.

Good afternoon everyone. I have a couple of questions. First, regarding the Specialty business, could you provide more details about the policy count? From the data you shared, it appears that the number of policies in force decreased slightly sequentially. I'm curious if this reflects the situation in the second quarter compared to the first quarter. Considering what you've mentioned, it seems like you're experiencing growth. Therefore, my follow-up question is which markets are you growing in compared to a year ago?

Sure Greg. Let me confirm that we're looking at the same numbers. Where are you seeing the sequential data?

So I'm on page 11 and it shows a policy count of 1,902. Then if you go to slide 15 for specialty, it mentions 1,914, and this is for the first quarter.

Got it. For last year, yes, last year. Okay. I understand exactly. I’m just looking at it.

No. This is not last year this is the first quarter.

I mean, yes. I'm sorry. Last quarter. Yes, I misspoke. First quarter of this year.

Correct.

Yes, there is a slight decrease in that compared to the previous quarter. You are right in noting that a significant part of this can be attributed to a marked decline in shopping behavior during this period. This does have some effect on the sequential aspect. We are, however, seeing an increase in policy counts year-over-year. Thinking about it from that perspective, I also see your point regarding shopping behavior. What we are observing is a slight variation in the mix over those timeframes due to the disruption between six-month policies and one-year policies.

Got it.

You should remember that the right way to look at it probably is ex-classic car. And that number in the first quarter was 1,879 versus in the current quarter 1,877. So they're essentially flat. The decline you're seeing is largely driven by the classic car piece.

Got it. Mercury announced their results this morning. And obviously they're a different market than you are, but they are in California. And they did announce that they intend to extend their premium refunds for the month of July. I know you guys have been given a very generous program in the second quarter. Has there been any discussion about extending it beyond the second quarter, or where do you think you're sitting with that at this moment?

Sure. And I tried to address those comments early on and I'll sort of point back to those comments. We announced a 15% auto premium credit for the first two months of the quarter. We ultimately added some additional credits in June. The bulk of those additional credits were related to California. When we took those additional credits in the month of June, we looked by line. So for auto, we looked by product. We look at individual states and we look at the individual behavior that we were seeing underlying that. You were starting to see stay-at-home orders lifted and activity return in different cases. We're looking at all the pricing variables that go into the auto equation. Some of that is frequency. There's been severity impacts. There were bad debt impacts when we were extending grace periods. Net investment income has obviously been impacted. So we were looking at the totality of those and taking a view that we wanted to rebalance the equation if you will. We had a point of view from a pricing perspective of where we thought was an appropriate relationship with the customer, generating a reasonable return for shareholders, and our goal is to grow the business as much as possible, because we thought that provided the best answer for customers and it provided the greatest shareholder value creation by growing the organization over the long-term. We're going to take that same point of view as we look at the rest of the pandemic. So if we see all of those variables coming together where the equation is out of balance, we'll think about additional premium credits. As appropriate, and we'll do it on a surgical basis at an individual product and state level. Maybe the best way for you to think about it, Greg, if I were in your shoes, might be to say, we're not expecting to see a high degree of favorable benefits just in frequency work their way into the bottom line. We're looking to keep that equation largely balanced with the upfront intent.

Got it. When discussing it this way, I'm looking at the underlying combined ratio for the specialty, which clearly came in below 90%, a great result for you. However, it seems like the target is more in the low 90s rather than below 90%. Is that an accurate understanding or am I overthinking this?

It depends on your expectations regarding the investment income environment and how it interacts with the pricing equation. We need to consider factors like frequency, severity, bad debt, and service expenses related to these items. There may be variations in how often we quote and service policies and the current investment income situation. Given the uncertain environment, the variability around each of these factors is wider, making it challenging to predict definitive outcomes since they are all fluctuating in different directions and experiencing more volatility than usual. We are not fundamentally altering our underwriting or our return on equity targets because of this situation, and we acknowledge that a different investment income environment may slightly modify the underwriting targets. However, these aspects should remain connected as we evaluate the right pricing for customers and the appropriate returns for shareholders.

That makes total sense. Just the final question. And I know you discussed it in your opening remarks, but can you just revisit the prior year development and give us some more color around what you think is going on there and just some additional data, so we can help process this?

Sure. Maybe I'll let Duane start talk about it and then a couple of us may provide a little color as we go.

Got it. Thanks, Joe. So, are you speaking to on the specialty side or preferred side? I want to make sure I'm addressing the question.

Well, specifically you talked about the UMB notices. So that's what I was specifically focused on.

What we're observing with the UMBI segment is a notable increase in activity. We believe we are taking the appropriate steps to address this and will continue to monitor it closely. Historically, we have seen demand notices come in with certain patterns, and we could predict their timing. Recently, however, it appears that these notices have increased unexpectedly. We are trying to determine if this indicates a change in patterns. Typically, with UMBI cases, the simpler matters, such as some PIP actions, come in first, followed by BI, and then UMBI. I'm uncertain if there is a shift in the usual process on the attorney side, possibly causing an uptick in cases. Right now, it seems to be confined to the preferred segment, and we will keep an eye on it to see how it develops.

Was it concentrated in a specific state or region, or was it more widespread?

No, it is not. We've done some deep dives on that to better understand it. At this point, if I had to say, it seems to be more environmental in nature and is not limited to specific states like California, New York, or North Carolina. It appears to be generally widespread.

Greg, Duane has done a great job highlighting some of the uncertainty. From my perspective, I noticed a change in the pattern regarding the speed at which things are coming in. You might interpret this as an increased volume, or it could be similar to past events but possibly influenced by fewer global incidents, leading attorneys to address some of these matters earlier in the cycle than they typically would. This trend has become apparent only recently, in the last two quarters. Initially, we assumed that there would be an increase, so we aimed for a solid number on our balance sheet, expecting to resolve this potential issue soon. Ultimately, it may just be an acceleration related to the current environment. The key takeaway is that we have a robust balance sheet, and we don't expect this situation to persist; it appears to be short-term based on what we've seen over the past couple of quarters.

Great. Thank you for the answer. I guess I should add congratulations to Christine and you guys got to sit down and talk to her about her definition of maternity leave.

We did have a couple of discussions around optionality and she reminded us that she was more than an adult, but we do congratulate her on the newest addition to her family.

Our next question will come from Paul Newsome with Piper Sandler. Please go ahead.

Thank you. Good afternoon everyone. Could you give us a few more words on just the general competitive environment in the auto business in particular? There are at least concerns within, I guess the standard auto business that state farm and maybe some others. I've seen some others are lowering rates under the assumption that some of this frequency trend might be somewhat permanent. My sense is, that's not happening in nonstandard, but I could be wrong. Just some thoughts as to what you see out there.

Do you want me to....

Go ahead Duane. Give it a shot and then I'll jump in too.

Sure, certainly. So I would have to say, I think you're thinking about it right. It is nuanced. It's nuanced into specialty versus preferred and you see the gamut in terms of activity. For the most part in most states, regulators have really clamped down on any rate increases, but there is a smattering of rate decreases probably ranging from the nominal minus 1%, 2% all the way up to minus 4% depending on the market. There still seems to be an uptick in rate, in the Florida market in particular, driven by PIP and the BI side, so not as much on the downside there. So all in all, we find ourselves in a good spot. We monitor the marketplace. We're watching for all that rate activity as it manifests its way through the process. But I think it depends on where you are, who you're competing against and then where each competitor finds themselves. So it's vast and varied, I would say at this point.

I think the thing I'd add to it, Paul, and I agree with Duane is, the bulk of our business is in the specialty auto space and we are not seeing a meaningful difference in the competitive environment inside of that space. I know what you're talking about relative to a couple of the big guys in the preferred auto and home or the preferred auto space potentially behaving differently. We're not seeing that kind of change in activity inside of the specialty auto space.

I'm also curious about any early reads on change in demand in the life insurance side of the house. I would expect there's some crosscurrents there with renewed obviously – renewed showing why the product is valuable, but then that's a segue into the economy...

Can I ask you to pause for a moment? Could you just repeat the part of the question? I missed a few words and I don’t want you to start over. I heard you mention life insurance.

So on the life insurance side, I was wondering if there had been any early reads on changes in demand for your product. I would imagine there's some crosscurrents there with obviously the product having some value, but also it's a market segment that was pretty hard hit from an economic perspective.

Yes. What we're seeing particularly in our market segment. And I don't know how it works across all of life insurance. But in our segment, we're seeing if anything a positive view. We suspended life sales for part of the quarter just because we're a fairly high-touch kind of environment and we modified some of our processes around that, but we wanted to be respectful of shelter-in-place orders. Even if we were an essential business, we didn't see new sales as at the top of the urgent list. So we slowed those down. We actually saw improvements in our lapse rates. Meaning that people were making sure they paid their bills because they value the product. So that was a positive sign. And in terms of once we've restarted the sales, we're seeing very strong and healthy new business sales. There's a little bit of pressure there, but I would describe it. It appears to us to be more operational in nature of just the ability to get out and about and talk with people than it is any reticence or lack of interest from a demand perspective. Sometimes you see macroeconomic pressure or some sort of property-related CAD that may have some pressure on demand. I think the fact that this is a pandemic-related issue has people thinking about issues and valuing the products differently. So I think it's probably a plus.

Hi. This is Abhishek. Thanks for taking my question. In light of the fact that most of the insurance companies are issuing refunds on the auto side, at least. How should we think about your expenses especially around the commissions that you pay in the agency channel to create more policies? Does that typically go down with the lower revenue, or should we expect that number to stay static?

Yes. I will revisit the points I made at the beginning of the presentation in line with Greg Peters. Our approach to any premium returns to customers focuses on the overall balance rather than considering each factor in isolation. We are looking at all elements as a whole. For example, if we aimed for a combined ratio of 95%, expecting a specific investment income return to yield a certain profit margin, we now see that investment income has declined slightly. This means we need that 95% combined ratio to be a bit more favorable. We are analyzing frequency, severity, potential bad debt, and how we manage commissions, among other factors. Then, we evaluate what the appropriate premium credit should be in order to return to a largely neutral position, while acknowledging the variability in each of our assumptions. We take into account commissions, operating expenses, overhead, and everything relevant as we work to rebalance the pricing equation. As an investor, this might complicate creating an exact line item model, but it also clarifies our projections for the expected end outcome. If you're determining that the margin is significantly different as a result, there may be an error in your modeling, as our goal is to return to a balanced state.

The one thing I would add to what Joe said that I think adds a little bit of clarity to this as well is, remember, this isn't a kind of one-period or one-point-in-time type of analysis. When you think about the investment rate environment, when you think about some of the reserves and what's going to happen. That is a multi-quarter, multi-year view that we have to have in terms of doing the right things, both by our customers and our shareholders.

That's a great point, Jim, and I should have mentioned this earlier. When we establish our pricing, we don't do it on a monthly basis but rather over the entire term of the policy, which could be six months or twelve months. Therefore, when we adjust the pricing, we consider the total income generated over the entire policy period, including investment earnings. Even if we have a strong performance in one month, we still need to evaluate the investment income across the full period. This means we're taking a comprehensive view rather than focusing solely on individual quarters, which can fluctuate.

Got it. And just to follow-up, if I may. When you say you provided the refund for, let's say, the month of April and May and maybe even in the month of June. Is that a prorated refund, or how should I, let's say, a policy cost $600 for six months, is the refund going to be only for those three months, or is it going to extend more than that? How should I calculate the refund?

The way we handled it was customers that were active at the end of April got a 15% credit for their April premium in their May bill, then customers who were active at the end of May got a 15% credit on their May premium delivered in their June bill. We did that for all of our auto customers. Then we came back and in a couple of states on a couple of products, it appeared to us that the data going through the same process I described warranted an additional credit; it was not 15%, it was a smaller number in those circumstances. And we applied that for customers who had been customers as of the end of June, we applied it as a credit to their July bill.

Got it. Understood. Thanks a lot.

No problem. Happy to help. I know it's a little bit confusing on all of these and every company seems to do it a little bit differently, which is why we're trying to describe for you all the principles around what we're doing and how we're approaching it, because then that helps you understand what the answer is at the end and why.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Lacher for any closing remarks.

Thank you, operator. I appreciate it. And thank you all for being with us and for your interest. We're pleased with our results this quarter and look forward to talking to you again next quarter. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.