Kemper Corporation

Good afternoon, ladies and gentlemen, and welcome to Kemper's first quarter 2023 earnings conference call. My name is Jason, and I'll be the coordinator today. At this time, all participants are in listen mode only. 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 conference call, Karen Guerra, Kemper's Vice President of Investor Relations. Hey, Squira, you may begin.

Thank you, operator. Good afternoon, everyone, and welcome to Kemper's discussion of our first quarter 2023 results. This afternoon, you'll hear from Joe Locker, Kemper's President, Chief Executive Officer and Chairman, Jim McKinney, Kemper's Executive Vice President and Chief Financial Officer, and Matt Hunton, Kemper's Executive Vice President and President of Kemper Auto. We'll make a few opening remarks to provide context around our first quarter results, followed by a Q&A session. During the interactive portion of our call, our presenters will be joined by Duane Sanders, Kemper's Executive Vice President and President of the PNC Division, John Viscelli, Kemper's Executive Vice President and Chief Investment Officer. After the markets closed today, we issued our earnings release and published our earnings presentation financial supplement and Form 10-Q. 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 2022 form 10-K, as well as our first 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 non-GAAP financial measures to GAAP. We're required in accordance with the SEC rules. You can find each of these documents on the investor relations section of our website, Kemper.com. All comparative references will be to the corresponding 2022 period unless otherwise stated. I will now turn the call over to Joe.

Thank you, Karen. Thank you for joining the call today. I want to start by saying that I am and our entire team is disappointed with this quarter's results. I'm sure many of you are as well. We're going to spend time digging into the drivers. We believe the majority are episodic in nature, like near-term reporting timeline changes in weather, and others like severity impact our run rate. We are and continue to operate in a difficult and challenging environment. We experienced many of the same issues that our peers have voiced during this earnings season. Our first quarter results were below our expectations, but we see this as a temporary setback. The entire team remains highly focused on returning the business to profitability and achieving our financial targets. we are aggressively pursuing opportunities to improve results and position the company to deliver long-term shareholder value. Starting with pages four and five, this quarter, a combination of elevated catastrophe losses, prior year adverse development, and higher than anticipated frequency impacted financial results. The prior year reserve development was primarily driven by bodily injury, property damage, and collision coverages. The elevated frequency we experienced, we believe, was largely episodic. The frequency uptick was largely driven by weather and mixed changes related to state and coverage and new business seasoning. Unlike the short-term impact of higher frequency, we recognize that we are in a prolonged inflationary environment and elevated severity will continue. These impacts are being felt throughout the insurance industry. We're working relentlessly to restore profitability. The journey will not be linear. As we see components of inflation take different trajectories, loss curves can be difficult to predict. Against this environment, we're focused on mitigating the impacts. The levers we can control and continue to apply are cost reductions, tightened underwriting, and rate actions to ensure we're pricing to deliver our target profit margin. In addition, we continue to enhance tools and cost projection capabilities to improve our ability to navigate environmental uncertainties. The first quarter revealed several unanticipated trend changes. These caused us to modestly update our first half of 2023 guidance. We see this again as a temporary setback. We're reiterating our prior guidance of a return to underwriting profitability in the second half of 2023 and achieving our financial targets in 2024 of an ROE greater than 10%. The current environment continues to be difficult, and if we see further negative dynamics, we will react quickly and communicate our actions to shareholders accordingly. I'll now turn the call over to Jim to walk through the additional details of our first quarter results.