KEMPER Corp Q4 FY2024 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to Kemper's Fourth Quarter 2024 Earnings Conference Call. My name is Constantin, 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 now begin.

Thank you, Operator. Good afternoon, everyone, and welcome to Kemper's discussion of our fourth 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 fourth 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 for P&C; and John Boschelli, Kemper's Executive Vice President and Chief Investment Officer. After the markets closed today, we issued our earnings release and published our earnings presentation and financial supplement. We intend to file our Form 10-K with the SEC in the coming days. 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 condition may differ materially from these statements. For information on additional risks that may impact these forward-looking statements, please refer to our Form 10-K and our fourth 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 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.

Thank you, Michael. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report that we delivered very strong results for the year and even stronger results for the fourth quarter. We're excited to dig into these in more detail. Before we do that, I'd like to make a few broader marketplace comments. We've been experiencing a hard market due to the massive COVID-related inflation spike, which led to a meaningful imbalance between premiums charged and underlying loss trend. Against that backdrop, carriers with competitive advantages and quick responsiveness would be able to rebalance rate and loss trends sooner and realize two things. First, better than normal underwriting profitability and combined ratios. And second, growth rates exceeding long-term averages. You don't have to look further than Progressive to see this play out over numerous market cycles in the broader standard and preferred auto market. Given our strong competitive advantages and responsiveness, we rebounded sooner than most of our specialty auto competitors. Because of this, we are capitalizing on the benefits and achieving strong profitability and growth in this business. Clearly, there's some texture when you break this down by geography. Florida and Texas have displayed a more economically balanced regulatory environment and their markets are moving towards longer-term norms more rapidly. California is different. Between its unique regulatory approach, the doubling of auto minimum policy limits that began January 1st, and the associated premium increases, and the second derivative impacts of wildfires, we expect the hard market to remain there for some time. To be clear, we believe we are priced appropriately in California. Our competitive advantages position us very well to continue to meet the needs of an underserved market, grow the business, and deliver strong financial results. Overall, we expect the financial benefits from our competitive advantages in this hard market to continue. Before we turn to our results in more detail, I'd like to take a moment to comment on the recent California wildfires. Kemper is deeply connected to the broader communities impacted. It's where many of our customers, employees, and agents live and work. Our thoughts and support are with all those impacted, and we wish for everyone's safety and resilience throughout the recovery process. That said, relative to our results, these events are not expected to have a meaningful impact on our financials. Now let's move to Page 4 and jump into some specifics on our results. As I said earlier, we delivered a strong year and an even stronger quarter. For the year, we delivered net income of $318 million, and for the quarter, it was $97 million. Our core businesses are performing very well. This is led by our specialty auto business, where our underlying combined ratio was a very strong 91.5% for both the year and the fourth quarter. Matt will dive into this in more detail later, but I want to note that we're very pleased with our PIF growth. Historically, we have seen seasonally low shopping behavior in the fourth quarter. This has usually resulted in a sequential quarter PIF decline around 2%. However, this time we delivered 2% growth. This continues the pattern of attractive growth we've seen since early 2024. On a year-over-year basis, PIF grew over 5%. We expect robust growth trends to continue as we enter the 2025 specialty auto buying season. For our Life segment, the underlying business fundamentals remain stable, and the business continued to produce strong return on capital and distributable cash flows. Overall, for the year, we generated a strong return on equity of 12% and return on adjusted equity of just over 18%. We have continued to strengthen our balance sheet. We repurchased additional shares during the quarter. We increased our quarterly dividend, and we are retiring $450 million of debt next week. Brad will have more on all of these later. With that, I'll turn it over to Brad.

Thank you, Joe. I'll begin on Page 5 with our consolidated financials. We generated another quarter of solid operating profit, resulting in the highest level of adjusted consolidated net operating income in over 4 years. Net income was $97.4 million or $1.51 per diluted share and adjusted consolidated net operating income was $115.1 million or $1.78 per diluted share. For the year, net income was $317.8 million or $4.91 per diluted share, and adjusted consolidated operating income was $381.5 million, or $5.89 per diluted share. These earnings translate to a 14% return on equity and a 21.4% adjusted return on equity for the quarter, or 11.9% and 18.3%, respectively for the year. We expect continued strong profitability. Our performance this quarter was driven by the results of our two core businesses. Specialty Auto delivered an attractive 91.7% underlying combined ratio and generated $101 million of adjusted net operating income. Given the current market environment and the strength of our Specialty Auto franchise, we expect continued profitable growth. Matt will provide further details later. Moving to Life, this business delivered $24 million of adjusted net operating income, an increase of $9 million from last quarter. Approximately $6 million of the sequential quarter increase was related to the annual LDTI assumption update. Recall we update our actuarial assumptions in the fourth quarter each year. Looking forward, we anticipate an annual adjusted net operating income run rate of roughly $55 million or $13 million to $14 million per quarter. Turning to Page 6. Net investment income for the quarter was $103 million and in line with the guidance we provided last quarter. Our pre-tax annualized book yield was 4.4%. As operating earnings continue to improve, we are adjusting our asset allocation and moving further out along the risk spectrum. This change will occur incrementally over the next 3 to 5 quarters and will help increase net investment income to support operational growth. That said, we will continue to maintain a high-quality, well-diversified investment portfolio. Moving to Page 7. Our insurance companies are well-capitalized and maintain significant sources of liquidity. Parent company liquidity was approximately $1.3 billion at the end of the quarter. This liquidity balance allows us to pay shareholder dividends, interest payments and support our operating subsidiaries. Our strong financial performance delivered over the past year has allowed us to return capital to shareholders while simultaneously increasing our financial flexibility. This quarter, we repurchased $14 million of common stock, bringing the remaining share repurchase authorization to $133 million. We will continue to opportunistically repurchase shares. Additionally, today we increased our quarterly dividend by $0.01 to $0.32 quarterly, or $1.28 annually. This is our first dividend increase in 4 years and represents the continued confidence in our ability to deliver sustained, long-term profitable growth for our shareholders. And lastly, and as previously announced, next week we will retire $450 million of debt using cash on hand. This will bring our debt to capital ratio back into the low 20s and further strengthen our balance sheet and financial flexibility. Next on Slide 8. Here we provide an update on our January 1, 2025, reinsurance renewal. Our Catastrophe Excess of Loss program is a one-year term that covers 95% of losses in excess of $50 million up to $175 million. This year's limit is approximately 30% lower than last year, driven by the reduction of total insured value due to the Kemper preferred exit. The takeaway from this is that our business is less prone to catastrophe risk. I'll now turn the call over to Matt to discuss the specialty P&C business.

Thank you, Brad, and good afternoon, everyone. Turning to Page 9 and our Specialty P&C business. We closed 2024 with a strong fourth quarter. Margins continue to outperform long-term expectations with an overall combined ratio of 91.7%. Private passenger produced a 91.4% and commercial auto produced 93%. As Joe mentioned, the current period of rapid price increases and more restrained carrier underwriting has meaningfully increased customer shopping activity. The specialty auto market has a more fragmented group of smaller competitors. With this environment and our distinct competitive advantages, we are significantly growing our book. We expect these conditions to continue for some time. The growth we achieved in the fourth quarter was outstanding. Traditionally, PIF would have shrunk about 2% from the third to the fourth quarter, but instead we grew units by 1.7%. This growth is in line with our production outperformance of the last two quarters. We have now achieved year-over-year PIF growth of 5%. This business tends to have seasonal shopping patterns, and we have historically experienced large swings in quarterly production. Therefore, we've traditionally used year-over-year metrics as they adjust for the seasonality. As we were shifting from declining PIFs to growing PIFs, that metric became less helpful, so we directed your focus to a quarter-over-quarter growth metric. As we are now reaching more consistent production levels, we will be pivoting back to a year-over-year view. For now, we will continue to share both views on this slide. Let's click down into some state-level texture. Starting with California, our largest market, we continue to see pricing disruption driven by both the delayed rate increases in response to inflation and mandated increases in minimum limits. This pricing volatility is driving increased consumer shopping. We are optimally positioned to capitalize on this dislocation and have a very positive outlook. In Florida, we continue to achieve profitable growth. This market is behaving more normally than California and in many ways is back to business as usual. We are well-positioned there for further growth. Our commercial business continues its success with another strong quarter. For the last 6 years, this business has generated an underlying combined ratio below 96, with only one of the last 24 quarters being above 100. The differentiating capabilities of this business are enabling us to expand profitably in the markets we serve. It remains a reliable source of profitable growth across market cycles. In closing, we are very pleased with our results and confident in the position of both our private passenger auto and commercial businesses. The environmental backdrop remains favorable and we are determined to continue to capitalize on this opportunity. We remain fully committed to sustaining profitable growth. I'll now turn the call over to Joe to cover the Life business and closing comments.

Thank you, Matt. Turning to our Life business on Page 10. As noted earlier, the underlying business continued to generate stable operating results. Mortality was modestly better than historical experience, while persistency remained in line with historical trends. The Life business continues to generate strong return on capital and distributable cash flows. As Brad mentioned, the 2023 LDTI accounting change requires an annual actuarial assumption update. For Kemper, this review occurs in the fourth quarter. It updates assumptions for the entire enforced book, and as a result, the financial impact is not a run rate item. We've provided the income statement impact for your reference. Turning to Page 11. In closing, I'd like to reiterate our highlights for the quarter and year end. First, Kemper delivered strong operating performance led by Specialty P&C's underwriting profitability. Second, Specialty P&C returned to year-over-year PIF growth and is well-positioned for significant growth going forward. Third, the underlying fundamentals of our life business remain stable. And finally, we continue to strengthen our balance sheet. We repurchased $14 million of stock in the quarter, raised our quarterly dividend, and will retire $450 million of debt next week. As we move through 2025, we remain well-positioned to deliver on our promises of empowering growing specialty and underserved markets with affordable and easy-to-use insurance and financial solutions. We continue to anticipate meaningful profitable growth in our specialty auto business for the foreseeable future and are confident in our ability to create long-term shareholder value. Before we wrap up, I want to take a moment to thank all of our employees for their hard work and dedication to achieve these results. Their commitment has been instrumental in delivering on our promises to our customers and ultimately driving our success, and we truly appreciate everything they do to help us achieve our goals. With that, operator, we will now take questions.

Your first question comes from the line of Gregory Peters from Raymond James. Please go ahead.

Good afternoon, everyone. For my first question, I'm curious about the consequences of the fire in California on other lines of business, particularly auto. And you said, Joe, I think in your opening comments, it's a hard market there. Can you give us an update on like the number of companies that are showing up in the comparative raters in your agency plant inside California? And have you seen any change in that just because of the fires?

Sure, I will make a brief overall comment and then let Matt provide the details. At this moment, we are not observing any significant changes in any of our businesses. There could be some indirect effects, but we are not experiencing any financial impact. Sales and retention rates remain steady. There is nothing noticeable stemming from the fire. Matt, would you like to elaborate on some of the questions?

Yes, Greg, just a little bit more texture in California. We talk about it being a hard market. Our definition of a hard market is you have strong pricing and fewer competitors. And what we're seeing is that price dislocation that's happening across the entire auto market is generating more shopping activity. And we see that as an opportunity for us. We feel strong about our rate adequacy, about our pricing, and we're doing our best to take advantage of this opportunity while it exists. I think the property market and the L's that that market is working through is, over time, has helped in suppressing the auto supply market. That's an advantage to us. We generally see between 4 and 6 competitors per quote, that's been consistent over the last year and a half or so. We're not seeing that metric move materially.

Got it. In your comments, you talked about the seasonality of production in PIF. I'm wondering, now that profitability has been restored, is there going to be a return to seasonality and sort of the underlying loss ratios? And how do you think about that as we work through a normalized year?

Yes, at some point, Greg, there will be some sort of return to that. I'm not sure we're ready to forecast that yet. You're going to see through our pieces, there's some piece of seasonality. You're going to get a little bit of different view on where new business penalties are. You get a little bit of state-by-state mix on it. If it's really a modeling question, we can try to help you with that a little more offside. If it's a general view, I think we maintain the process. We're running a little better than a 92 combined ratio now. Over a number of quarters, that's going to generally migrate towards a more traditional 93, 94, 95 range. We can't give you an exact precision on that. We described that I think several quarters ago as 4 to 6. It's going to work its way over time. The longer the market stays harder, the slower that migration will be. It'll adjust as it works. We expect some of that seasonality on loss ratios will come back. I just think for the next 12 months, it'll be harder to try to go quarter to quarter projecting that loss ratio with a boatload of precision because of the big swings in production over the last 12 months.

Okay, fair enough. Just to clarify, I didn't anticipate share repurchase activities in the fourth quarter. You've made several capital decisions, so how should we view the raised dividend in relation to share repurchase plans for 2025 while considering growth opportunities?

Greg, this is Brad. Thanks for the question. I'll go back to the principles we have with respect to capital usage. The number one source of capital usage is obviously we want to grow PIF. We want to grow organically. The second is look at anything inorganic. And I'll tell you right now, we're not in that spot right now. And then third is obviously return capital to shareholders. We've done a little bit with the dividend, and we've been opportunistically buying back shares when we think the stock is undervalued, and we'll continue to do so, but don't anticipate any significant buyback program in the near-term. And as I indicated, we've got about $133 million left on the share repurchase authorization issued a couple of years ago.

Got it.

I fully agree with them. The key point is that we are currently experiencing strong organic profitable growth opportunities, and most of the capital we expect to generate from earnings can be invested in that organic growth. This is our primary focus and our main priority. We have enough capital to buy back shares when it makes sense, but our main emphasis is on achieving profitable organic growth.

Got it. Makes sense. Thanks for the answers.

Your next question comes from the line of Brian Meredith from UBS. Please go ahead.

Thanks. Joe, just one quick one here to begin with. Any way to quantify the lift we'll see on that billion aid of California auto premium from these minimum limits as we look into 2025?

Yes, our minimum limit policies saw a little more than a 30% increase on it, and they represent about between 50% and 60% of our California policies. I'm sorry, I misspoke on that one. It's a higher percentage. Our minimum limit policies in California are north of 90% in that process. I was doing a broader countrywide view. So, I think the majority of the California premium gets another 30.

Wow. Okay. But like you think you said last quarter ...

I was thinking I was doing the numbers on the liability only, not the minimum limits.

Got you. Got you. And like you said last year, last quarter, you don't expect it to have a material impact on profitability because you're trying to kind of keep your rates where you're going to keep that kind of mid combined, mid 90s combined ratio, is correct?

That's still accurate. We effectively transitioned our limit profiles from the old minimum limits to a staggered limit curve, providing options for our policyholders. We removed the lower limits, adjusted the limits upward, and modified them based on our expected loss mix. It's important to differentiate between premiums; we have first-party and third-party coverages. The minimum limits primarily impact the liability aspect, not the first-party coverages. For instance, if you have full coverage, it encompasses your vehicle as well as damage caused to others. The components covering your car, such as comprehensive and collision, do not increase by 30%. The increases are specifically in the bodily injury and property damage coverages. Most of our customers with these coverages hold minimum limits policies, which experienced about a 30% rise. Therefore, it's necessary to analyze this separately. In simpler terms, this likely represents around 15% to 16% of the total California premium. For a more accurate assessment, one could break it down by coverage line, but we do not believe this will significantly alter our margins.

Got you. Okay. Second question, just curious and I know we've talked about this before, but some adverse development on the commercial auto line. I know you've got a different commercial auto book than your typical kind of commercial auto book that we think about. But what's going on there? Is it the same kind of attorney rep going on?

So, I have two points to address. First, our commercial auto portfolio differs significantly from the typical market competitors. Over the past few years, we've only experienced one quarter with an underwriting loss. This segment has demonstrated consistent underlying profitability and growth. With only that one period of difficulty, we are not involved in areas like trucking or sand and gravel hauling, which often carry higher risks. Instead, we focus on smaller operations, which is why our performance varies from others. Occasionally, we may encounter a large, unexpected loss, but given the size of our portfolio, it's not a cause for concern. Our rolling loss ratio and combined ratio indicate strong performance. Brad, would you like to discuss some of the underlying trends?

Yes, I think just to give you a view of our overall reserving philosophy, if you take a step back up and you look at KA in total, we had adverse development of about $1.9 million. And so our first philosophy is to make sure from a KA, or especially auto perspective, we have more than enough reserves to pay for what we owe. And then at the end of the year, we looked at the development coming through. We decided to bolster the CV side, some favorability on the PPA side. Where we were bolstering mainly was a result of the extracurricular obligations, ECOs, extra contractual obligations, the ECO stuff, where we're seeing a little bit higher development. So it's just really end of the year cleanup. No significant change in trends or anything that we're seeing.

Great. Thank you. Appreciate it.

Your next question comes from the line of Andrew Kligerman from TD Securities. Your line is now open.

Hey, thanks a lot. Good evening. So I'm looking at Slide 9 in the top right-hand corner at the PIF growth Q over Q. And when I think about 5% year-over-year, and for the first three quarters of last year, you saw year-over-year drops. So it sounds like, and correct me if I'm wrong, the comps just get easier and easier, especially if the three areas, where you have those three kind of rows, California, Florida, Texas, and then other, it kind of continue at that sequential rate, then we should just see increasingly better year-over-year numbers. So, just want to make sure that observation is right. And then …

Yes, that observation is 100% right, Andrew. If you look back two or maybe three quarters, you'll recall we presented a slide that illustrated both year-over-year and sequential quarter trends, highlighting the challenges we faced. Historically, we've experienced seasonality in this business on a sequential quarterly basis. If you examine the PIF numbers from 2016 to 2019, you'll notice that the transition from the third to the fourth quarter usually results in a drop in PIF, followed by significant numbers in the first and second quarters. This pattern complicates the interpretation of sequential quarter results. Therefore, we advised you to focus on year-over-year comparisons, which allow you to view a rolling four-quarter period, making it easier to assess changes. When we shifted from slowing new business and declining PIF to a growth phase, year-over-year metrics were insufficient to convey that change, prompting us to direct attention to sequential quarters. The first quarter of 2024 experienced a decline, followed by two consecutive quarters of growth, with the fourth quarter showing a modest positive change compared to historical performance. As we approach the first quarter of next year, I anticipate that the 12-month trend will align more consistently. I expect the second quarter of 2025 to outperform the second quarter of 2024. For the next one or two quarters, it may be beneficial to analyze both year-over-year and sequential quarter results, as year-over-year figures are likely to show gradual improvement. By mid-next year, it should be more straightforward to base evaluations on year-over-year comparisons, as they will account for seasonal adjustments. Therefore, both types of analysis are valuable for at least a couple more quarters, and the underlying year-over-year performance is expected to continue improving, at least until the middle of next year.

Yes, that's very encouraging. Could you provide some additional details? Are the trends shown on Slide 9 a reflection of what we can expect in 2025? You mentioned California, Florida, and Texas, highlighting the hard market and a more balanced market in the other two major states. What factors are contributing to the strength in other markets? Should we anticipate these trends to continue at the current rate, and what is driving the strong performance in other markets?

I want to break this into two parts. Matt will address the other part. I'll start with the overall picture. Looking at the quarter-over-quarter number of 1.8, that's not at all what we anticipate for sequential quarter PIF growth in the first quarter. It's significantly lower than our expectations. The fourth quarter typically has low numbers seasonally, and we're expecting much higher figures. If you assumed a sequential quarter PIF growth of 1.8 for the next few quarters, you would be mistaken. Growth will be significantly higher in the first and second quarters, particularly in non-standard auto, which we refer to as buying season. This period benefits from factors like tax refunds and individuals paying off holiday debt, resulting in more disposable income. Additionally, after the winter months, many people start looking forward to summer, contributing to increased activity in the early months of the year. To answer your questions, yes, we expect to outperform our historical run rate, but no, the 1.8 run rate will not continue. It reflects a traditionally low seasonal number, and I'm expecting a considerable increase in the first part of next year. On a relative basis, California is performing well, while Florida and Texas are slightly behind but expected to catch up. Other regions should also see growth, with California maintaining a higher rate than Florida and Texas, which will be above their levels, and all other areas exceeding both Florida and Texas. This is the trend we anticipate as things rebalance, which is still in progress. Does that clarify the first part of your question?

Yes, super helpful.

Okay. Matt, you want to give us some color on Florida and Texas and other, you're interested about other, but there's a little Texas too.

Yes, I mentioned the factors in California that are influencing production. I would describe Florida as a typical market. The responsiveness of the OIR in Florida has been impressive, and there is encouragement regarding rates. We are observing that some companies have overreacted in Florida, and the tort reform seems to be making an impact. Therefore, we're seeing the usual adjustments in pricing, with some companies raising rates and others lowering them. In Texas, it is more of a traditionally soft market due to the high number of competitors, nearly 1,000 in that area. We are in the process of repositioning our product in Texas, which will be launched soon. You will begin to notice changes in Texas as we progress over the next few quarters. In the smaller states, we have a limited presence, but as Joe mentioned, we anticipate substantial growth in those markets as the rebalancing continues. Overall, I'm optimistic about production in all markets, though they are at different stages of maturity in the rebalancing process.

That’s super helpful. And just quick for Brad. The earned rate, should we expect about 2 to 3 points of earned rate in the first half of the year.

Well, Andrew, we've gotten away from really forecasting that earned rate, and we haven't supplied it in a while. What I would tell you is it's going to be higher than that in general, just given the California FR limit changes coming through. I think the best way to look at it is we expect earned rate and loss trend to be relatively equal. And maybe auto a little bit higher as we've told you slowly over the next several quarters. The underlying combined ratio move up ever so slightly. But that's the best way to think about it. Just looking at the earned rate now, we've gotten through that journey in the last couple of years and it could be more stable.

To expand on Brian's question regarding the FR limits, if you track rate filings, you will notice a significant filing and approval process in California concerning the FR limits. This does not affect margin. If you simply consider all the filed and earned rates to protect margin, your conclusions will be inaccurate, as that approach is misleading. Brad's observation is completely accurate. From a modeling standpoint, you should disregard the FR limit when assessing margin and instead focus on it for revenue. The other rates will generally align with the loss trend.

Thanks very much.

Your last question comes from the line of Paul Newsome from Piper Sandler. Your line is now open.

Good evening. I've got a couple of simple questions. The one is looking at the California wildfire exposures, is it really kind of just as simple as the fact that people drive their cars away and wildfires is the reason for the relatively small amount of claims for you folks?

Yes, there are a couple of key points, Paul. First, we do not have significant exposure to homeowners' insurance, which is a concern for some. Second, the areas affected by the fires are not where our customers reside. Lastly, people typically evacuate away from those situations, which benefits us. So, it's about the lack of homeowners' exposure, our customers not living in those areas, and a bit of the fact that they are moving away from the fires.

One question I keep hearing is whether there will be any disruptions at the distribution level due to regulatory issues or because L.A. is currently experiencing some challenges. Do you have any thoughts on that? Or do you think there could be any changes at the distribution level considering the situation?

Help us understand what you mean on distribution level, you mean the agents or something else.

Agents being able to actually do the sales and sometimes agents are more focused on claims or other things during this kind of …

We're not considering the markets for a moment; in a high net worth business, agents might be preoccupied with settling claims. An agent selling a homeowners policy to a customer in Pacific Palisades isn't also selling a specialty auto policy to our specialty auto customers. There's really no overlap in these issues. Our agents are in the communities where our customers reside, and there isn't a significant intersection. If a disruption occurs, we will not see it affecting agents who are focused on other matters.

Yes. Joe, just one big picture one just thinking about, and you may have talked about this before. But longer term, how wise is it to have California being 50%, 51% of your overall business mix? Just I know it's a good environment right now. But longer term, how do you think about that and diversifying away from it?

Yes. If you back up prior to the Infinity acquisition for Kemper, California was roughly 90% of our specialty auto business. The Infinity acquisition brought it down. And every piece of material we've shown you since then has shown us systematically writing more new business in other places, and having growth rates higher outside of California than inside of California. Right now, our new business volumes as a percentage of total, are smaller for California than our total PIF count is for California. I'm not going to give you those exact numbers, but that suggests there's a diversification. You can see it if you look at the growth rates, the overall books in the quarter grew 1.8%, California was 1.5%. I think Matt told you that Florida and Texas had a slight slowdown in the quarter that will change next quarter as that happens. And you put those in a more traditional level with California was 1.5% and Florida, Texas were 2.5% and the others were 3.5. You'd be systematically watching us change that mix. We make a lot of money in this business inside of California. So it's a good business for us. We are really good there. And we are systematically diversifying the portfolio. In addition, if you look at our commercial vehicle book, which is a fairly significant part of CV, its share of California is more like a third, between 33% and 37%. So it's more geographically diversified. So we are working on it. The only way to do it more rapidly would be to shrink California. And I remember how anxious these calls were when the PIF was shrinking, the more appropriate and thoughtful way to do it is to grow more rapidly in the other geographies, which is what we are doing. And I'm sure every year for the next 5 years, you're going to see other geographies be bigger?

Makes sense. Thank you.

There are no further questions at this time. I'd like to turn the call over to Joe Lacher for closing remarks. Sir, please go ahead.

Thank you, guys, for your time and your attention today and your thoughtful questions. We appreciate it. I'm very excited about the results we delivered this quarter and very optimistic as we roll into the buying season for what we are going to see in the early part of next year, and we look forward to talking to you then. Thanks a lot.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.