KMPR - Earnings call transcript Q2 2024

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Operator

Good afternoon, ladies and gentlemen, and welcome to Kemper's Second Quarter 2024 Earnings Conference Call. My name is Ina, and I will be your coordinator today. [Operator Instructions] 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. begin. may you Marinaccio,

Officer; Good Kemper's second and afternoon, quarter Lacher, of Officer; Chief from operator. President Auto. Executive discussion Chief Kemper Vice and you'll to President of Joe Financial Executive and President our XXXX Matt Kemper's Camden, afternoon, you, Kemper's welcome Vice Hunton, everyone, and Kemper's hear Brad Executive Thank results. President This and

by context a around to our a few Q&A results, quarter make session. We'll provide followed opening second remarks

presenters our President call, be the Duane of and portion interactive Kemper's Vice Executive and and the Chris John by President Sanders, President Executive Kemper's P&C; President of will Flint, Claims Vice During joined Life; Officer, and Chief Boschelli, Officer. Kemper's Chief Vice Executive Kemper Investment

we filed supplement. financial closed earnings SEC our the with markets our XX-Q published the our presentation release, and, After today, earnings Form and issued

You documents website, can find these kemper.com. the Investors our of section in

statements of Reform the contain outlook of within and the may meaning today company's XXXX. of its not Act Private discussion the but limited These statements to, results financial operation forward-looking condition. Our and are the of include, provisions Securities future harbor safe Litigation

from results future actual differ these materially financial condition Our statements. may and

impact these our information on additional second statements, risks that Form please refer release. For to XX-K earnings forward-looking may XXXX quarter our and

all our reconciled discussion rules. afternoon's and SEC earnings supplement, financial presentation required, In financial are also have in and GAAP, investors. defined where This includes release, with to non-GAAP believe financial measures we meaningful accordance earnings we to measures non-GAAP

period, comparative the All the each of find website, section quarterly unless references kemper.com. stated. be can these will in to otherwise Investors You of finding XXXX our

to call now Joe. will turn the over I

Matthew Hunton

joining and Thank thank everyone, you afternoon, you, us Michael. today. for Good

the of consecutive by start I'm our that represents of delivered we me Let this underlying quarter significant quarter. business. This in the strong improvement fifth proud results saying

of straight generating profitability. third the quarter It's operating

quarter target, results. objectively Specialty generated and delivered combined progress, Auto also about X.X%. Again, long-term while our we well ratio, sequential Specialty strong PIF strong Our growth a Auto great below are business of these delivered

Before driving, driving and delayed back environment do we pandemic-induced in reduction subsequent the with hard things: us supply significant these exists, the chain-induced massive into in market volatile I'd given The results, the highly and subsequent remind market impact and first, restrictions the was losses, to rapid moment of the guaranteed regulated rate to to restart step inflation, virtually deeper abrupt still three a industry. that increases underwriting discussing backdrop dive like of see of a market. a

to actions clearly for profitability would virtually The that this partially as was to needed work response marketplace rates. structure several to And institute take we've while we guaranteed restore non-rate before, years itself discussed out. our filed

normal return a those As actions gradually remove balance. we in, earned rates and the to non-rate would

long-term ratios ranges. This guide growth traditional here, continue is to was nonrate below and This temporarily business more to changes likely we now. From combined margin where historical ranges. actions, we'll produce maintenance are to and rate take back the remove right

late 'XX, In Second, said in a or ROE guidance. clarity XX% we our greater to I some would insight add to we and want XXXX achieve XXXX.

our trends the first half for annual giving guidance. quarter, too guidance to XXXX. If we'll Given industry. precise XX% for of do be year the we that This we that year. strong each effectively update solidly are to earnings our That is or beat this guidance. see not results, decline in be quarterly half we second meaningfully let me expect half deteriorating We would clear that said, updating cause not

ratio for produce within or Specialty as grow for is parameter that. long-term a combined quarter, our Third, that you Auto possible a XX% This as told operating last to we and goal better, long-term was this much business.

form creation any to of be shareholder increased delivered. as roughly value not business should to that the long-term better ratio it's XX% assume ratio, With earnings safe believe generating economically it can this if will the growth XX%, underlying we be guidance. drift closer You a served combined currently use allowing to combined by

be That it's our going to over combined ratio likely to for quarters. both movement X this will rapid, provides occur X current least results context and to forward. not you at results and to Hopefully, our backdrop project review

Now this to quarter's let's into X and results. jump Page move

an great ROE of very delivered sequential improvement a we ROE P&C net that Overall, to last PIF combined XX%. ratio, In million XX% sequentially. call, and of and a indicated year-over-year adjusted over stabilize we our of about $XX and expected generated quarter strong income XX.X% Specialty underlying we midyear.

able our saw resulted to were and X.X% our improve accelerate sequential this PIF results increase. we expansion, business underlying a we in quarter monthly, strong new As

a in This seasonality underscores of the PIF and said, Matt more will likely given rate, marketplace. That of the discuss more second is competitive in strength the we at detail our the this to produce our the franchise modest advantages have 'XX in business. growth half later.

the The produce stable, business business of and Life consistent underlying distributable to our cash continues remains fundamentals flow.

to this adjustment on However, real the the I'll that, by investment. a later. segment turn With this a call estate was touch on valuation quarter Brad. negatively Brad over impacted will

Bradley Camden

results. with financial Joe. X you, begin I'll Thank our on consolidated Page

Net per consolidated $X.XX improvement quarter generated underwriting adjusted solid in million and third income a $XX.X our and $X.XX quarter, or $XX.X diluted was of share. This net per straight quarterly operating a underlying million was share fifth we income diluted profits. operating consecutive results or

These return as described to XX.X% tangible on adjusted translate an equity equity. Previously, we ROE and on equity. a return XX.X% earnings return adjusted on

in align have are name details non-GAAP practices. Further industry our disclosures. more its provided to with We changed

the earnings solidly the the guidance and on that XXXX. beat XX% return equity half would As expect year indicated, not second Joe trends for to do in foresee decline we to meaningfully of cause

discipline Driving were of improvement expense in quarter results. and key Incremental sequential this a exceeding Specialty our consolidated loss combined was P&C's ratio. results drivers quarter's this trends financial X-point rate earned underlying

our efforts been the expanding margin and on from of quarter we As to restoration writings moving we our accelerated the while in the resulted during production call, underlying a new sufficient expansion quarter, focused combined improvement in X.X% ratio growth. PIF. intently the to in a Specialty in monthly increase profit business Due safety. we've This discussed maintaining during quarterly sequential P&C first

Our to seasonal the the swift return of PIF strength growth said, patterns, for sequential expect given franchise's buying quarter moderate highlights advantages. competitive remainder That year. our we growth to and

environment As migrate the quarters. X next back a over expanding range operating and writings, X business more ratio a to that we more the will we combined traditional return further anticipate to normal to

other provide further later. details Matt transition will due on seasonality market dynamics. However, this this will not be a linear to

to Turning Page X.

$X.X Companies Insurance liquidity. consisting company's capacity end of have At and the well are Our investments. capitalized significant and parent was of approximately quarter, liquidity intercompany lending and revolver of company billion, holding cash sources the and

payments subsidiaries. Our pay allow our shareholder dividends, interest healthy and operating support us to balance liquidity

The P&C to operating Life levels. and P&C their Preferred capital capital P&C to wind-down improve businesses are ratios. continue helping Specialty the increase profits P&C and

million second This exit second $XX the modestly of million XXXX. schedule released quarter, and over should year. $XXX P&C to the the released release of capital, half additional During $XX preferred exit capital this of is be during ahead expected of million and is an

additional going do to pace plan this Given forward, the not capital lease provide of we on this initiative details slower quarter. after

anticipate end in on previously including to by earnings the XXXX, be range. of ratio. and year-end mid-XX% And debt By will ratio our expect reduction, we of operating it remain achieved through the sheet, improvement balance our debt we Regarding the high XX% debt-to-capital first the XXXX for quarter This XXXX, discussed reducing the area. debt-to-capital we in the February that focused will our be be maturity. plans

Moving our equivalent book income to is X%. Slide yield for $XX the quarter million, X. Net and annualized investment pretax was

net were more by related a in periods. levels investment not rate estate valuation pretax item. negatively run investment. figures We quarter's This impacted income This to returning future million a $XX normal real is to adjustment anticipate

Given the we the and Slides of regarding estate, commercial market interest XX presentation. on further earnings XX provide detail real

about Overall, you to long-term XX% $X.X high-quality, changes we our execution. X% or portfolio notice of a continue estate, illiquid over maintain in philosophy real billion or short portfolio no Here, had have is is to term. of which, and will investment commercial well-diversified our

turn the Specialty to P&C the discuss over business. Matt I'll now to call

Matthew Hunton

Thank good Thank Brad, good everyone. you, afternoon, and everyone. you, afternoon, Brad, and

and X P&C business. Page our to Specialty Moving

sequentially. For improvement Private the Vehicle businesses a of segment, we XX% Auto produced Commercial and representing Both an underlying X-point our ratio or of combined combined underlying XX.X%, ratios better. Passenger reported

As we restored now quarter, to our we we've growth. PIF pivoted last discussed focus profitability, that

margin continue increase the pleased sequential X.X% quarter we practices. environment, incremental an our market PIF achieved We volatile to incorporate of with safety are and business this additional the in in progress. a Given

Auto environment. I'd overall comments like on to brief some the Specialty provide

we As have we tailwinds. few today, market a see the

and market our hard strong. to We remain in a continue operate for products demand

and we've These Our us rapidly businesses market advantages capabilities have of have PIF set strengthen. competitive a that growth challenges. to navigate enabled long-standing to continued increase

We methodical new are agile to a deploying business. approach yet

Our allowing and to analytics needed. early performance tools read adjust are as segment-level us

our increase policies appetite desired done our As was to our rapidly our in were of second more margin production coming observed in This safety. planned, quarter ratio we able better combined than we well expand performance and force. within

Page X details quarter, trends. policy-in-force Like last

increased annualized from PIF XX% sequential decline plus significant As in quarter. This this improvement an prior X.X% of shows to represents X.X% minus our by noted, an compared as to quarter XX%. a basis, progress. On

chart, the trails can year-over-year see that can bottom As you mask progress. in metric the

of half back year, remain our nimble production the diligent the with to we shift we approach. As and

in of lower patterns. We year expect sequential quarter to PIF due back see the part seasonal the shopping calendar low single-digit to growth

XXXX. expect to We growth for increase

on ongoing while businesses believe maintaining PPA business is and the focus or Finally, our that well market to positioned are back ratio. more we're the combined growth to CV a maximizing environment. both navigate traditional a pleased XX% moving We better

the to closing business Life turn comments. now to Joe I'll and over cover call the

Joseph Lacher

Thanks, Matt.

our XX. to on Life Page Turning business

on we impacted adjustment was real valuation second As estate earlier, the by the mentioned quarter a negatively investment.

adjustment, income for $XX.X million, relatively with segment the Excluding net been line in quarter. net have would last adjusted operating

in pressure inflationary line continues to new levels to Mortality year. levels. business While favorable in consumers, low persistency and our remains to slightly last pre-pandemic came modest impact production with moderate-income

XX. Turning to Page

do Overall reiterate consecutive business which I'd was fifth profitability the quarter our led us of strong improve. to was enabled things: underlying P&C first, underwriting results, strong quarter. three This closing, In improvement. the for by and highlights deliver to like continues to Specialty

a in production resulting for further exceeding of quarter. for X.X% remainder P&C's Specialty expectations year. discussed PIF, combined sequential ratio in the single-digit improved we PIF our low We increase anticipate of the expansion growth initiatives, last allowed

remains The business business Life net and portfolio, deliver of which ranges we investment to of normal fundamentals well-diversified, forward. we underlying income maintain going a our stable, investment expect high-quality

we're growth. consistent profitable I'm maintain our focus delivered the long-term of not delivering satisfied, we quarter, we results While this proud on

had we've practice quarters, of portion pre-releasing recent results. during our Second, a of

environment are variability. results to the Now and market more returning traditional

third, my our their entire the go efforts And quarter practice. Going possible in would results and forward, this thanks out as we for dedication. their These work will we discontinue and not Kemper without team to forward. move hard be

to With you take that, it that I'll so we operator, questions. turn over can

Operator

[Operator James. Instructions] of question line Gregory first comes from the Peters from Raymond Your

Charles Peters

PIF I'd the which a geographies some second us So additional wondering growth basis to market to for you're having could I'm result you back the question, more growing. and quarter. the success about provide like the first go in on if in sequential information

position And a how trying the marketplace. a much are so of competitive your land pricing in the to change been because from that's in happened just there's pricing positioned I'm terms of lay get from markets

half that into of all rolls second the how for your PIF up curious Just the year? guidance for

Joseph Lacher

the throw to I'm for guidance to last-tenth the to up into most our how the which roll just all do Greg, does going commentary your was I'm year? to second this. question, the take of going this of of Matt half over

of shopping, in guidance switching about for and the We're the -- this did piece for half the buying that less historically, just patterns. of around is our our business, consumers second of customer talked back the year And years. year. We've biggest half seasonal you in the to segment buying,

of the basis with I'm talked you in out our That And different, about that, this We that be possible in setting the turns going it talk commentary and to expectation about to for bulk and environment. that. with state but that process. Matt stays starts expectation, question. level It's our to forecast the last your that let that's quarter,

Matthew Hunton

Thanks, Great. Joe.

at a bang I the for continued overall comments as level we've We're From think products. on seen it perspective, the seeing demand well. side. So are demand agent our customer an on,

the varies about supply I markets from think market. there. all geographic carrier true perspective, think generally by perspective, that's underneath And a you across pretty think greatly I when the dynamics a story

from at really expand least We'll gate where in has our market where to a our function our production, think of as to markets. When you the other methodically a come out California, about we But competitiveness look from predominance it's the of Florida, grow continue continue business. the is perspective. of that's to

the are about competitors auto rates. marketplace, When different you think nonstandard reengaging at

I they to think some Whereas maybe more more rigorous feeling react still the confident about underwriting a some larger their players, maintain a the adequacy, than and players smaller are of slower the players regional marketplace. there. traditional bit that's discipline stabilize are yet

presented a perspective we Joe to but us. re-expansion in said, continue and from we'll And our by our forward of think to supply geography, are opportunities of feel to balance. lot texture so perspective, take advantage about generally, production, we as there's And about on the a be both we as march good demand how our a that ability opportunistic I

Charles Peters

growing the something Joe, on the else what drift the little -- your Can about going -- and the policy a and is that? new the business new of targets, combined ratio? concept driven inside of up One the ratio on you by of, is comments turn as spigot the talk you Well, the mindful start your a there combined about new your Is business that penalty, -- XX%. I'm Or penalty? in Okay. bit counts,

Joseph Lacher

we to business, and hover. again, XX% exceed much is XX% as ceiling Sure. would towards, will in as our XX% get then a possible. trying to a that generally of we what into And a penalty a a break cause the back new parts. partly than What We're trying as of see couple probably ratios I grow say, traditional not that nonrate XX%, drift XX%, will taking start to to part a combined would We're not are target. I'm is that Kemper I and new going XX%, range. say, actions drift business of more off. this

to and production and we extra off. We service allowed little those those restricted things rate, off which that were other those we get always were restricted did other opportunities. because Those said going growth, take to effectively we going come to customer a and

So we're getting to back a that balance.

because to that to we also combined despite taking is will bit excess that would us in the of some 'XX, in sometime loss get a rate, well below call inflation rate we likely now, of where expect a maintenance we're would We that be ratios. spot fact right what target there's just earned probably long-term

overshoot to for only little few bit. a a that's expected We hope quarters. We

What we I'm to X. grow whether trying specifying change XX%. pace do and is not but the I'm some slope we're I'm to is loss give largely picture of a moving. rate, being give we exactly few -- is, answer not what not while we penalty period trend, you below ability as we're actions to a tried deliberately we've as that I'm time, as some for new do going your difficult what you But saying it's to to business model a opportunistically the X, be as trying way. you do cute, X, non-rate much of to try help can on can't the of get even will be of and good you it because very guidance adjust because, to X,

Charles Peters

just a And Okay. clarification.

decreases said out quarter. out -- One largest they the visible think with -- their your they company, the rate nonstandard publicly company Q, I in of well, out a came traded there second couple of most called

at where terms downward the of the to rate revisions levels? still you first quarter? you do are quarter second end questions, in Just in guys of out my close did Or any the were you rate

Joseph Lacher

commentary? provide small was do Matt, in you one Yes. textured. to heavily more Florida, want We a that did

Matthew Hunton

that Yes. that aggregate only at rate textured up But out did going that In X% a this planned was us heavily rate was I minus way Florida, change. the have by a in segmented. next It point. It we change balanced prospect months. as small XX the XX, forward, in our more over negative we need sets optimally we coverage think

Joseph Lacher

move rate Greg, degree going that by market targets to these about loss what described. said to get year, into we phase, course more meaningfully we the downward And earnings this in not we're what We we to was and growth to in expect high earned over swings. time of expressed a that we're phase, this say a a again, 'XX, sort We're normal I've dynamic into back maintenance trajectory go back would goes this have were profitability the rebalancing period. as of trying more and where confidence we where And the didn't half as we're when normal back in what rate, talking disrupted of dynamics to going trend, we described we see be moving of a business. ordinary time our anything through

to back and numbers, we're of up they're either changes, They're coverage. down rate getting it little, part becomes So in sometimes in the sometimes hard X-month of inflation pick line that, by with a or a they're they're that little. little a tuned or maintenance category us quarterly

Operator

And Newsome Sandler. line the from your Piper of from question Paul comes next

Jon Paul Newsome

Just of action. like off to you're give spectrum would a you done? How pretty very you much do follow-up. you perspective? of maybe a in little taking yourself much non-rate bit terms that feel middle, the think the in of put Do a Where from

Joseph Lacher

from quarters we ourselves is. in And hard probably good X argue it It's XX%. Paul. where guess. -- somewhere We -- there's depending to were exactly range, that sometimes measure, talking times to a exactly with on that anywhere is we But about X/X how when about it's

Jon Paul Newsome

sense... Makes

Joseph Lacher

of it There's terms it to a in feel what is. lot of

Jon Paul Newsome

you right. maybe And not it than anything out a that company items too, outlook quantify, to particular, at The by estate the of when capital for would rate? you run a given bit is real investment Life a there. almost other that -- little moved it's that on the make -- in piece, hard Yes, look income lot definition, there

So of that assume, a changes to run affect investment? a the flow particularly you, cash -- overall, shifted Life, sort at Is rate I at are that investment there income sort that investment also happen over. Does lot of income perspective not? more we as of look for or we will

Joseph Lacher

right and on Brad, a don't to shot Paul, the we're the take we way. a why follow-up, ask about the overall may at make sure you thinking then Life

Bradley Camden

income overall, estate million you investment about at When net that respect investment. was look to real it with $XX down

you number, in close you're a back, So add we year. that like with were line to of if through XXX-ish type last where in QX QX

I'd expect to to there be and have back where continue been be us given rates forth. so and

as we'll your this but to not up historically. favor Can second be you were this where forward, a a And just part a the to of onetime, onetime question reask give me then with think So a of we going rate adjustment -- non-run quarter. and Life? back quick respect

Jon Paul Newsome

Sure. it as I'm not as should coherent sorry if I'm be.

company a run done from capital the the lot it but in made. But of in that you where, the onetime you this earnings I'm Life that needs also earnings rate I'm the operation to with investment not item if lot one estate shifting part certain perspective. So income because of at just you not of to were real the look more be right investment have the get line because write-off. capital other of in a down essentially, reduced have do line to Life in would a broadly, you've down that that given all quarter, the changes that -- trying income in a And what

Bradley Camden

that out Got the respect it. taken the capital And to optimization. we've with Bermuda referencing you're

result about run earnings be million up capital Life $XX million moved as by to that the expect I'd a of to in to parent. $XX the So rate lower

of the course rate. you valuation year. Over telling investment, adjustment clear, no full And the real to a really estate be run has we're on impact that

You're the way. will it parent. to capital The asking from right the question shift distribution the life

Operator

the Kligerman Andrew Instructions] of question Securities. comes from line Next from [Operator TD

Andrew Kligerman

Joe, few before clarifications really by way, too in quarter. questions, I Just progress my nice this ask and the

that you said to mean was by of Greg sure earlier, the a you XX% sort to meant wasn't I something to quite northern you asking overshoot over think would and XX%? expect bit. I what of XX%? Does you end

Joseph Lacher

we need. improved take We great combination inadequate then which non-rate exceed level, were add We the attractive actions till a and rate actions clarification. meant And action put would that we actions, confident in rate our we plus, of to direction. XXX% might other things were then that I That's the would ugly off. among would non-rate expected that the on were to themselves. in an were wait and we non-rate perhaps would we when ratio the the combined -- the

might off were going non-rate overshoot expect to move We're the that a having bad, work and bit trying the overshooting to XX%, of As get little we the we if after we the XX% to part we're too a in result, get down good to a the that get over much back themselves up. then to not I actions XX%. in been

part where think a overshot make target good. long-term we've we Does in the to that Did right sense? lose we're Andrew? you now, I would the I say

Andrew Kligerman

not. Can hear Absolutely me? you

Joseph Lacher

can. We

Andrew Kligerman

clarification. ton Okay. another makes Great.Yes. just And No, of sense. a

upcoming I think mention expect and you in low the heard PIF I you, that quarters. single-digit Joe, Matt

this something quarter. is that last -- and does with talked about you So align

the second the quarter and down And on quarters third is third seasonality, the fourth are or versus then than slightly is the typically, the said first. You actually, quarter based XX% And up the quarter, slightly, is first. versus then quarter first the less first XX%.

on... the pressure So is

Joseph Lacher

Yes.

I'm Let's apart. there interrupting frequency There's break seasonality. break loss them -- sales you, is seasonality and let's

activity the of the sees year more half of first the buying than year. second half The

and the business, are and and lowest. first for highest quarter third the are the two quarters The second fourth new

higher First another. one's sometimes close, are and than second

lower and of that's the all And X. is fourth second. lowest distinctively the than Third the first it's

spend season. a car in that in either They've first new saving that holidays kind or the It not their the second a It and And the the doing the to something. maybe they're to appears shopping be up not or less insurance causes They've they're in money paid money they appears on They're for shop for there's less less holiday sure, to that and they're nonstandard return, us around buying it's increases, fourth. holidays, car, auto quarters, degree, we're XXX% shopping some busy poll. off people tax buy more activity. shopping gotten of income third the and bills. in behaviors, that trigger those less even auto

we're expects May So fewer and and sales less and -- in Macy's expecting way the same more December June. in November

in first result. X We of X less PIF as in a shoppers, sequential just expect last more the months a of less greater fewer the year if might the but capture the And we there's actually quarter and growth share months. shoppers,

Andrew Kligerman

Great.

presence in up basically, I the understood growth single quarters. sequentially standard that Christmas could the to make no PIF digits? said, If be that saying, with you're you in But low auto though, want next correctly. So that still sure in low -- with December. because, still even no nonstandard sounds it X single-digit I like pressure,

Joseph Lacher

That's our expectation. general

Andrew Kligerman

It the last thinking second if that half. balance X in The X. Perfect. quarter looks it rates you'd in quarter X, maybe like the like half. you've then points second at And clarification. And then got in the X the looks Slide last and the about was looked in then I second in around points second X, and comes quarter earn the

of year? the So in. Is the think that for the way earn about there's still to balance X to it

Joseph Lacher

on we've for And upper believe, is earned provided the the to the fourth there's Andrew. got X, right-hand earned. of about be about which in quarter, points in is XX here What I Year-to-date, X X estimate or Slide we third area Close, points maybe X quarter. the points. another rate is

year, points the -- year. points got think to the the of this rates be I to -- we in. about in be the X we was And back left XX of question X earned we that first earned quarter, for expected half to So answered for in

how gets it that's broken So down.

Operator

remarks. for are time. questions Joe call I There this closing Mr. any hand back Lacher further no will to at the now

Joseph Lacher

now, them, thanks, for and pleased and continued Thank to you, talking operator, forward joining on look interest. have quarter. to us we your to you results and going Take improving Again, care. today everybody, to with for forward continue we're right that drive the we're again next and

Operator

Thank today. our you. participating. Thank for for conference you That concludes

You may all disconnect.

Kemper (KMPR) 5 Aug 242024 Q2 Earnings call transcript