Paul Sarvadi: Yes, I think if you go back to kind of our discussion from last quarter, it was, seven large accounts that moved at the end of the year. Four of those moved specifically for technology reasons. And so it’s our success penalty. And another two of those were due to, just the businesses being sold. So, your question of contrasting the two, don’t really connect that well. We know that we’re providing a powerfully good service to an underserved community now. And we believe that once we have this new option for this new solution, this new option for these clients in this category, it’s going to secure them for a much longer period of time. And in fact, I really have this mindset around ultimate scalability in both technology and service.
That’s what we’re about to bring to the market. And, even the dialogue with all these customers over the first quarter, we’ve got prospects in the pipeline that are already there. Not only their interest is elevated, but we’ll talk more about this in a couple of weeks, some of the interaction with not just the business owner or the Chief Financial Officer, but even the technology people and the HR people within these larger accounts. Their energy around the potential of this solution is very high. And so, I know we’ve peaked the interest just among the few that we’ve gotten out to put this in front of. But I see this as a really dramatic change in our ultimate issue around both sales and retention of accounts in that target.
Andrew Nicholas: That makes a lot of sense. So, is it fair to say that the customers that churned were probably larger than the new sales achieved in recent quarters? So it’s kind of a size difference?
Paul Sarvadi: Yes, on average, of course, these were accounts that we brought on at a smaller size and grew them substantially over half a dozen years or more. And they ended up, you know, two of them actually went to a work-based solution and two went to, I guess, it was a UKG. But, you know, the very interesting part of, you know, I went out to talk to other clients that are large that have also fit that description and ran into some that had actually evaluated those two. And it was very interesting. We’ll talk more about this in a couple of weeks. But their view of having to choose between this significant investment to deal with the scalable technology solution, and they saw that having to give up some important service capabilities that we have with us.
So, this solution carries those two together and those customers don’t have to make that decision. So, I feel good about it at this point even from, although it’s anecdotal feedback, but it is among those types of customers that are good — a good sample of those that we want to understand their thinking.
Andrew Nicholas: Terrific. I just have two more questions. Could you sort of dimensionalize the change in your assumption for healthcare expenses throughout the year as a result of change, whatever that commentary you could give? And then, Paul, from a strategic standpoint, I wanted to ask, how significant could Insperity’s Workday implementation be in a handful of years? And do you envision the company performing implementations for non-PEO customers? So, I’m trying to get a sense for the TAM. Thanks.
Paul Sarvadi: Yes. You know, that’s a great question that we’re going to spend a little more time on in a couple weeks. So I won’t stay with some thunder out there, but I will just tell you that. There’s no question in my mind that, you know, when we look at that total addressable market of this mid-market accounts, 40 million worksite employees and more. We’ve always said, hey, we can attack some of that market with what we’ve already been doing. But it’s an appreciable percentage of that market now that this will be the best solution in the marketplace and no one else will have anything like it. So, because, like I say, it’s the ultimate scalable solution in both technology and services. Now, some clients will get to a size where they want their own more customized version of workday.
But at that point, we will already have been their support infrastructure. And it’s going to be a very natural progression for us to be that team that not only helps them implement their new solution, which will be much more readily definable and developed because they’ve already been on it, we’re the ones who’ve been servicing them. So, for us to continue to be their service provider going forward is a very natural progression. And so, will we go out to the market to be an implementer for those kinds? That’s not really the strategy. We don’t. Could we do that? We would have that capability, but that’s not the plan. The plan is to bring them onto our service and then be able to keep them much longer and have a little different version of the service when they’re ready to go out into their own instance of workday and us remain that service support that they need even though they’ve grown to that size.
Operator: Okay. Thank you very much. Our next question is coming from Jeff Martin of ROTH MKM. Jeff, your line is live.
Jeff Martin: Thanks. Good morning. Doug, I’ll let you answer the question and then I’ll ask mine.
Douglas Sharp: Appreciate that. Okay. No problem. So, what we saw on the healthcare side, you know, specific to Q1, was the upside in that particular area not only had to do with the cost side, but the pricing side. So, the pricing side, it’s been a focus of ours because of recent experience on cost trends. And we’ve been able to exceed our pricing targets. And so, that’s a part of the equation. On the cost side, the upside that we got from the first quarter, you got to look at it really in two different pieces. The upside for the first quarter really had to do with our reserves at the end of last year, in hindsight, being conservative. And we had reasons for doing that because of some of the volatility we experienced in 2023.
And then we looked at subsequent claim runoffs to measure against those reserves. And yes, at the end of the day, the claim runoff was favorable relative to those reserves that were set up. And a lot of that, you’re looking at claim runoff through the end of February for that. Now, we all know that in March, there was a breach at Change Healthcare, which is sort of the intermediary between the providers and the insurance companies. And therefore, would expect some sort of rupture in the claim payment pattern. We did a deep dive into details of that. We’ve also had conversations with the insurance carriers. And because of that, we felt it appropriate to provide some incremental reserve at the end of the first quarter for claims that were incurred but not reported yet as a result of that cybersecurity breach.
