Mihir Bhatia: Excellent. Thank you. And then just switching gears, in terms of the health of the consumer, it sounds like stable, still feel pretty good about it. So I was wondering about your underwriting posture here. Clearly, soft landing is becoming more of a consensus view. I know you aren’t prone to big gyrations there, but how are you feeling about that underwriting posture? Maybe just talk about like what your standards look like today versus maybe one year ago or even 2019. Is this like 2024 like more of a normal year? Is it still a little on the tight side and the opportunity to loosen and drive growth? Just any comments there.
Brian Wenzel: Yeah, here we are again, it’s gotten a lot of issues and troubles they’ve tried to underwrite growth in ‘21 and ‘22 vintages, which people are paying the price for now. Some refer to it as growth mass. Some refer to it as losing standards and lower returns. So we’re not going to use credit as a mere growth lever for us, we are more proven than we were a year ago. Again, we talked about we do idiosyncratic actions on partners and channels, I don’t want to say every day, but most certainly we watch it every day. We took broader based actions both in 2Q and 3Q given the shared consumer and what other people have done from an underwriting basis. We were slightly encouraged in the fourth quarter as we’ve seen at the bureaus that other issuers have begun to take credit actions, which will benefit the industry in the latter part of 2024.
But I think we’re going to be cautious as we move throughout the year. We’re going to continue to watch the trends of the consumer. Again, we haven’t seen the consumer stretch. When we look at payment rates, the payment rate movements by credit rate have been relatively consistent, and probably the biggest mover has been in the [6.60 to 7.20] (ph) range, which you’d see in a non-prime person. So again, we look at it and say, okay, I don’t see the consumer stretching from a spending standpoint and struggling. We don’t see the payment rate changing. We’re going to continue to watch the flow and the delinquency. Again, entry rate continues to be better than 2019, which again, the flow to loss gets worse whenever entry rate goes down. But we generally — we’re generally cautiously optimistic on credit, and which is reflected in the guide of 5.75% to 6%.
Mihir Bhatia: Thank you.
Brian Wenzel: Thanks, Mihir. Have a good day.
Operator: Our next question comes from Sanjay Sakhrani with KBW. Please go ahead.
Sanjay Sakhrani: Thanks. Good morning. Brian Doubles, you were pretty active on the transactions front with the sale of the pet insurance business and part of the business and then the acquisition of the Ally Lending business. Could you just maybe a little bit more on what drove those decisions and then what the pipeline for other deals look like? I mean, I think there’s one big fish at least out there in terms of a portfolio. So, can you just talk about what the positioning is there?
Brian Doubles: Yeah, let me — well, why don’t I start with Ally because it’s the more recent of the two transactions. I mean, look, I think we’re super excited about this acquisition. I think it’s actually great for both companies. These were conversations that JB and I started back in the first half of ‘23. I think this wasn’t a scale business for Ally, but on our side, this is absolutely a scale business. This is exactly the type of acquisition that we look for. These are businesses and industries that we know really well. We obviously have a presence already in home improvement and health and wellness. In fact, as we got into this, we realized that we serve some of the same partners. So as I think about Ally, it really just complements and accelerates our current strategy.
I also think that, and Brian covered this, got a very attractive financial profile, it’s EPS accretive, it’s got a nice ROA that’ll be in line or maybe a little bit better than the company average. We get 2,500 new merchants. We get 500,000 new customers. So there’s really a lot to like here. I mean, this is a nice bolt-on acquisition for us and will be a nice ad for both Home & Auto, but also Health & Wellness. And then Pets Best was really more opportunistic. We weren’t looking to sell the pet insurance business. It’s been a great business for us. We’re obviously creating a lot of value in a relatively short period of time We did a great job growing the business. From 2019, we grew the pets in force over 5x. We took the business to number seven or number eight to the number four pet insurance provider in the US.
And when IPH approached us, it was a great offer, tough to turn it down. It’s over 10x our original investment. We’ll record a nice after-tax gain. But I think more importantly than that, it allows us to stay invested in the pet space and do it with someone, a great partner like IPH that has the scale, that has the expertise. And so we think there’s not only a nice financial gain, but a long-term strategic play here that will benefit us. So it’s a nice way to close out the year with two, I think, really great transactions.
Sanjay Sakhrani: Other deals? What else is out there?
Brian Doubles: Sorry, Sanjay, one more? Say that again?
Sanjay Sakhrani: Yeah, you were saying — I asked, sir, what else might be out there? One big portfolio out there right now.
Brian Doubles: Yeah. Look, we got a lot on our plate. I’d start with that. We got to get both of these transactions closed, which we hope to do in the first quarter. We got a lot going on in 2024, for sure. With that said, we typically get invited into most RFPs in this space and the things that are important to us haven’t changed. We look for a good risk adjusted return. We look for really good alignment with the partner. I think that’s probably the most important thing, particularly when you’re looking at large deals. You’ve got to make sure that both partners like the deal in good times and bad times, that our interests are aligned around marketing and credit and underwriting and really all aspects of the program. So we’ll always be in the market for opportunities that fit that screen.
Sanjay Sakhrani: Got it. And just one follow-up. I guess, Brian Wenzel, like in your reserve coverage, what do you — or for the year, what are you assuming for the unemployment rate specifically?
Brian Wenzel: The unemployment rate as we exit out of 2024 is 4%.
Sanjay Sakhrani: Got it. All right, great. Thank you.
Brian Doubles: Thanks, Sanjay. Have a good day.
Operator: Our next question comes from Jeff Adelson with Morgan Stanley. Please go ahead.
