Kemper Corporation

Good afternoon, ladies and gentlemen, and welcome to Kemper's second quarter 2022 earnings conference call. My name is Bethany, and I will be your coordinator today. At this time, all participants are in a 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 call, Karen Guerra-Kempers, Vice President of Investor Relations. Ms. Guerra, you may begin.

Thank you, operator. Good afternoon, everyone, and welcome to Kemper's discussion of our second quarter 2022 results. This afternoon, you'll hear from Joe Locker, Kemper's President, Chief Executive Officer and Chairman, Jim McKinney, Kemper's Executive Vice President, Chief Financial Officer, and Dwayne Sanders, Kempers Executive Vice President and the Property and Casualty Division President. We'll make a few opening remarks to provide context around our second quarter results and then open the call for a Q&A session. During the interactive portion of our call, our presenters will be joined by John Buscelli, Kempers 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 and form 10Q. You can find these documents on the investor 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 operations and financial conditions. Our actual future results and financial condition may differ materially from these statements. These statements may also be impacted by the COVID-19 pandemic. For information on additional risks that may impact these forward-looking statements, please refer to our 2021 Form 10-K, as well as our second 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 the non-GAAP financial measures to GAAP were required in accordance with the SEC rules. You can find each of these documents on the investors section of our website, temper.com. All comparative references will be to the corresponding 2021 period unless otherwise stated. I will now turn the call over to Joe.

Thank you, Karen. Good afternoon, everyone, and thank you for joining us. Before we discuss our second quarter results, earlier today we announced the sale of our Reserve National Insurance Company and its subsidiaries, which are predominantly focused on accident and health insurance to Medical Mutual of Ohio. This health business is smaller in scale and would require significant additional investment to meaningfully impact our portfolio. Medical Mutual is focused on the health insurance market. We're pleased to have engaged a buyer that understands the value of our talent and the Kemper Health team will be moving over in its entirety and joining the Medical Mutual team. We expect the transaction to close later this year or in early 2023, subject to regulatory approval. Moving to current results. Today we reported second quarter results that showed progress towards restoring profitability. We're pleased that our rate and non-rate actions accelerated in the quarter. The cumulative benefit of the actions taken over the past year continue to earn in. Unfortunately, the industry experienced increased severity inflation over this first quarter. This is particularly evident later in the quarter as supply chain and other disruptions increased. This pressure muted the benefits of our actions. As we've discussed previously, this inflationary launch environment is dynamic, and the path to target profitability is unlikely to be linear. We remain on the balls of our feet and are positioned to quickly adapt our business as appropriate. While we still have work to do, we are confident that over time our actions will return us to our long-term financial targets. Turning to page four, second quarter auto severity was driven by a number of factors. These include part costs, labor rates, rental car prices, time to resolve or remediate a claim, medical inflation and utilization, and increased attorney representation. The aggregate impact of the increase in sequential quarter severity was most visible late in the quarter. When we first spoke about the anticipated post-pandemic loss disruptions, we highlighted a couple key points. First, that rate increases with lag inflation increases. Second, the time to return to equilibrium would be driven most significantly by how long it took loss inflation to stabilize. And third, that the pressure on loss costs in any given quarter was likely to move around. Initially, it was driven most significantly by frequency and used car prices. The current quarter's increase in severity trend was driven largely by increased repair and remediation times and, to a lesser degree, bodily injury-related costs. To combat these effects, we again pushed forward with both our rate and non-rate profit restoration initiatives. We continue to believe that we are in a prolonged inflationary environment as both supply and demand remain out of balance. Our profit restoration activity corresponds to this assessment. This quarter, we exceeded the expectations we outlined in the first quarter for the number of rate filings submitted, the percentage of our book impacted, and the level of rate increases approved. Duane will provide more details later. We expect the cumulative actions taken since the second quarter of 2021 will result in meaningful acceleration in earned rate each quarter. This will contribute significantly toward establishing an equilibrium between earned premiums and lost costs, which have been out of balance due to the pandemic-induced inflationary environment. In the life and health segment, our financial results continue to be negatively impacted by the pandemic and excess benefit costs. This quarter, however, and largely in line with industry trends, we've seen a sequential decline in mortality. As mortality normalizes, our life business will see improved profitability. In summary, our profit improvement actions have taken hold and will help to offset the ongoing environmental pressures. We remain a source of strength for our stakeholders and are well positioned for long-term profitable growth. I'll now turn the call over to Jim to discuss our operating results in more detail.