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Ryan Greenier

Thanks, Marita. 1st quarter results are in line with our expectations and reflect solid business profitability and encouraging growth momentum.
Before I review the quarterly results, I would like to cover our updated core earnings guidance. Beginning this quarter, we revised our core earnings definition to exclude certain non-core items, including intangible asset amortization and changes in market risk benefits to better reflect the true operating earnings of our business.
In the past, we've reported this number as adjusted to core earnings.
We still expect the same business performance we laid out earlier this year, and our updated core EPS range of $3.85 to $4.15 reflects that.
Our supporting materials have been restated to reflect the year over year comparisons on this basis.
Our 2025 guidance assumptions remain the same. Roughly 90 million of catastrophe losses in line with our five-year historical average.
Total net investment income in the range of $470 to $480 million with managed portfolio income of $370 to $380 million.
And interest expense and other corporate items of $35 to $40 million.
Turning to the results, Core earnings of $45 million or $1.07 per share, was a 73% increase over the prior year.
Court return on equity of 10.6% was a 4.9% improvement over prior year, reflecting the profitability restoration work we completed in 2024.
Total net written premiums and contract deposits were up 7%, with total revenues up 8%.
In the property casualty segment, core earnings were $27 million more than double the prior year. Net written premiums of $185 million increased 8% over prior year, primarily on higher average written premiums. Of note, we recently received approvals for both auto and property rate increases in California.
The auto rate increase of 14.5% went into effect in mid-April. We are starting to see a marginal impact on auto new business as a result of the cumulative rate increases in California over the last two years, in line with our expectations.
The property increase of just under 20% will go into effect July 1st.
The P and C reported combined ratio of 89.4% and proved 10.5 points over prior year, reflecting improved underlying results in favorable prior year reserve development, partially offset by higher catastrophe costs.
The $5.3 million in prior year development included $3 million in property, reflecting favorable severity trends. The remaining $2.3 million in auto reflects better than expected physical damage loss costs.
Catastrophe losses of $16.4 million were slightly above prior year. Excluding the California wildfires, first quarter catastrophe losses were below prior year and our historical averages.
As a reminder, our 2nd quarter is typically our highest quarter for catastrophe costs.
PNC sales were strong at $25 million a 9% increase over prior year. In auto, net written premiums of $122 million increased 4% over prior year.
The combined ratio of 95% improved 5.8 points, primarily due to higher average premiums. Household retention decreased slightly to 84% in line with our expectations.
In property, net written premiums were $64 million a 15% increase over the prior year. The combined ratio of 79.9% improved 17.8 points, reflecting lower non-weather losses. Policyholder retention remained steady at 89%.
In life and retirement, core earnings of $8 million were below prior year, primarily due to higher mortality, which was within our expected actuarial range.
Net written premiums and contract deposits of $140 million were an increase of 7% over a prior year.
In the retirement business, net annuity contract deposits increased by 6% on the strength of our core 403b products. Persistency rose to 91.6%. In the life business, annualized life sales increased 4% over prior year, and persistency remained steady at nearly 96%.
Moving to individual supplemental and group benefits, the segment contributed $14 million to core earnings, a slight increase over prior year.
Net written and premiums of $67.6 million were an increase of 5% over prior year.
In individual supplemental net premiums of $31 million were a slight increase over prior year. The benefits ratio of 28.4% is below prior year as we continue to see favorable policyholder utilization trends relative to our longer-term expectations.
We also continue to see very strong customer demand for these products, with sales of $5 million in the quarter, 61% increase over prior year. Policyholder persistency is 90%.
In group benefits, covered lives modestly increased over the prior year. Net rate premiums of $37 million increased 7% over the prior year. The benefits ratio of 53.3% reflected typical first quarter seasonality, which we did not see in the prior year quarter.
Keep in mind for both individual supplemental and group benefits that our book size is relatively small. This can lead to outsized quarter over quarter variances on a short-term basis, while we continue to grow these businesses.
Total net investment income on the managed portfolio of $92 million was a 15% increase over the prior year.
We continue to see very strong results from our core fixed income portfolio.
The annualized pre-tax investment yield on the portfolio was 5.09% in the first quarter, with core new money yields of 5.51%. This is the 13th consecutive quarter that new money yields in the core portfolio have exceeded average book yield.
With the duration of about 7 years in this portfolio, we expect to see continued yield expansion from this trend.
Annualized limited partnership returns were 10% driven by infrastructure and private equity funds.
Turning to capital management, as Marita mentioned, we remain focused on driving shareholder value creation.
We increased our annual dividend by 3% in March, which was the 17th consecutive year of dividend increases.
And we remain actively engaged in executing on our share buyback program.
Year-to-date through May 2nd, we repurchased 179,000 shares at a total cost of $7 million and an average price of $40.12.
We have about 19 million remaining on our current share repurchase authorization. In closing, first quarter results underscore our ability to deliver strong results while positioning the company for sustained, profitable household growth.
Our multi-line business model provides earnings diversification and allows us to be profitable in a number of economic environments.
We delivered a record first quarter and are on track to deliver record core earnings in 2025, and a shareholder return on equity above 10%.
As we execute on our profitable growth strategy, we will accelerate shareholder value creation.
Thank you, operator, we are ready for questions.

Question and Answer Session

Operator

We will now begin the question and answer session. To ask a question, you may press then one on your telephone keypad. If you were using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then too. At this time, we will pause momentarily to assemble our roster.
Our first question comes from Wilma Burdis with Raymond James. Please go ahead.

Wilma Burdis

Hey, good morning. Could you talk a little bit about the run rate earnings power of the life and the supplemental group benefit segments? Was 2025 a good level? Thanks.

Ryan Greenier

Good morning, Wilma. It's Ryan. If I think about the life retirement business, we use the word ballast a lot to describe that business. Occasionally you'll see a mortality, blip, if you will, within actuarial expectations, and you saw that this quarter, so mortality was a little elevated.
In addition to that, this quarter for life and retirement, the commercial mortgage loan funds that are predominantly in that segment, we had underperformance related to one specific fund. We can talk more about that if you'd like, but if you normalize and take a, mid-single digit, think 6, 7% annual return assumption for the $600 million of CMLs, that gives you kind of a run rate, if you will, for that contribution. And that's mostly in life and retirement, a little bit in supplemental and group.
Turning to supplemental and group will. The benefit ratio overall was close to the blended benefit ratio that we would expect longer term. First quarter we have seasonality, particularly in the group business, but over a longer period of time, if you take like a run rate on that and you take multiple quarters and average it out, I think that gives you a good sense of where that business is. Does that answer your question?

Wilma Burdis

Yes, it does, and then could you talk about the cat activity in 2025 year-to-date and also remind us how we should account for seasonality going into the second quarter. Thanks.

Steve McAnenna

Thanks for the question, Wilma. This is Steve. So, for context, I think, you're aware, the major event for Q1, is California wildfires, and Ryan and Marita mentioned this, in their opening remarks.
Ultimate loss was 37, and that includes, a million bucks in a fair plan assessment. We looked at April cats, and I'd say, cats were in line with expectations, nothing outsized. And then I'd say, as we sort of look ahead for the full year, we're going to maintain our full year cat estimate. So, we feel pretty good about what we've seen thus far, feel good about what we, saw in California wildfires, and hopefully that answered your question.

Ryan Greenier

I'm going to just add on one thing, Wilma, it's Ryan, just as a reminder for folks, 2nd quarter has historically been our heaviest cat.
About 50% of our cat load is typically has historically been coming through in the 2nd quarter, and in my script, I gave you our annual guidance, $90 million for.

Merita Zuraitis

Catastrophes. Yeah, and this would be the 1st year where we would see the full effect. Of the roof schedules and other things that we have begun to put in place and have been working on to mitigate that property volatility and keep that number in check.

Operator

Thank you.
Our next question comes from John Barnidge with Piper Sandler. Please go ahead.

John Barnidge

Thank you for the opportunity. Curious about the individual supplemental distribution in the quarter. Were there any new school districts added that drove that growth in the quarter?

Steve McAnenna

Hey, John, it's, Steve. Thanks for the question. It's a big number, the 61%. So, I guess the first thing I'd say is we're having pretty good success with our benefit specialists, and, their selling is up, and we feel pretty good. I think the comparison to Q1 2024 is kind of interesting.
If you sort of look at the investor supplement. And go quarter by quarter. I think what you'll know is Q1 of 2024 was actually a relatively light sales quarter for us in the individual supplemental space. And so, the comparison year over year looks massive.
We tend to sort of look at, we'll look at quarter over quarter, but then we'll look at things on a 12-month rolling basis. And when we looked at things on a 12-month rolling basis, you'll, I think the math is around 12% of new business growth, and our expectation is that something. Around the number we're going to see for the remainder of the year. So, there were no new districts or schools.
This was sort of good, continued momentum, strong activity from the benefit specialists, coupled with a sort of a an interesting Q1 of 2024 that was a little light, making the year every year comparison a little challenging to look at.

John Barnidge

Thanks for that Steve and my follow up question is sticking with supplemental group benefits we've seen other companies begin to talk about increasing the reserves for supplemental group benefits products to assume some level of macro deterioration that would lead to increased utilization. Is that something you've begun to reserve for or how do you think through that?
Thank you.

Steve McAnenna

So I'll let Brian handle the reserving part of the question. What I'll tell you is, and I'll keep my remarks to group benefits, again, it's a similar story to what I just described on individual supplemental sales. 2024. It was abnormally favorable for us and so, when you compare it to 2025, it looks like there is a big increase, but we think 2025 is within expectations.
When we look at utilization for the quarter, We sort of looked at it by month. We saw January was slightly elevated. The book is small, the numbers are small, so all you need is a couple of extra claims to sort of distort some of the numbers.
But January was elevated. February and March looked pretty good. And so, from our perspective, we feel good about the, our expectations for group benefits, and don't really see anything on the horizon that's going to sort of change our opinion on that. I'll let Ryan comment on, how we reserve.

Ryan Greenier

Sure, John, this is Ryan. Thanks for the question. On the reserving side of things, a lot of the quarterly changes in supplemental and group reserves are related to claim counts, frequency, etc. We do an annual reserve assumption review where we're looking at more of the longer-term trends, there's nothing in our current utilization trends that gives us any cause for concern.
Historically, the public sector has performed well compared to other professions in recessionary environments.
We'll watch it and respond accordingly, but there's not, like I said, there's nothing that has us changing our assumption.

Merita Zuraitis

Yeah, I think that that's said well, guys. I, when you run the tapes on previous calls, we've said over and over again that our assumption.
Is that utilization will increase, and we had not seen that increase up to our expectations even in the numbers. So, none of this is unexpected for us. None of this is not contemplated in our planning and as Steve said, some of it, this business is small comparisons on any given quarter can be odd, but we are not surprised with what we're seeing and feel good about.
The earnings diversification that this business has brought to us and the way it has been performing, so we feel good about where we are in individual supplemental as well as for benefits.

Operator

Thanks.
This concludes our question-and-answer session. I would like to turn the conference back over to Brandan DeWall for any closing remarks.

Merita Zuraitis

I would just like to say before we close the call, I want to reiterate that this has been a record quarter for us and an excellent start to the year, and we're really looking forward to our investor day next week in New York, Brendan.

Brendan DeWall

Yeah, again, as a reminder, it's next Tuesday. Details are available on our website. Thanks, and we hope you have a great day.

Operator

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