Kemper Corporation

Good afternoon, ladies and gentlemen, and welcome to Kemper's second quarter 2023 earnings conference call. My name is JP, 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 conference call, Karen Guerra. Kemper's 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 2023 results. This afternoon, you'll hear from Joe Lager, 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 second quarter results, followed by a Q&A session. During the interactive portion of our call, our presenters will be joined by John Michelli, 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 in 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. For information on additional risks that may impact these forward-looking statements, please refer to our 2020 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 of the non-GAAP financial measures to GAAP where required in accordance with the SEC rules. You can find each of these documents on the investor 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.

Thanks, Karen. Good afternoon, everyone, and thank you for joining us today. The industry continues to operate in what I believe is the most disrupted personalized environment we've ever experienced. Recent competitors' earnings reports underscore this. While our financial results through the first half of 2023 fell short of our targets, we believe the actions we've taken and continue to take have positioned us to succeed in this difficult environment. Before talking about our results, I want to take a moment to explain a bit about this operating environment. Traditionally, historical patterns are used by the industry to predict future behavior, excuse me, used by the industry to predict future behavior, and they're producing patterns outside their historical norms. This variance is seen in broad aspects of consumer behavior. A few examples include buying triggers, price elasticity, and changes in driving patterns, propensities to file claims, seek medical treatments and repair vehicles, and the willingness to litigate. These pattern changes are exacerbated by subsequent broad swings in competitors' actions. We believe this environment will continue for at least the next couple of years. Correspondingly, it has created a hard market that will likely persist for an extended period of time. Our specialty market expertise and our nimble and efficient operating model position us to effectively navigate this environment. We're continuing to evolve our capabilities. This includes investing in broad enhancements in business intelligence and accelerating the speed that we digest and execute on insights. We have and continue to increase the forward-looking predictive analytics we use to operate our business. At the same time, we've increased our execution margin of safety. Our ultimate priority to achieve target returns and we are continuing to focus ourselves and our business to facilitate this and ultimately to position ourselves to grow profitably and safely at the right time against this backdrop let's discuss our results turning to our presentation I hope you'll take away the following first we had strong sequential improvement in the underlying profitability of each of our businesses second The strategic initiatives we announced last November are on track to realize their anticipated benefits and produce meaningful value for our stakeholders. Third, we reiterate our guidance. We expect to achieve an underwriting profit in the second half of 2023. And for 2024, we expect to generate a return on equity equal to or greater than 10%. Moving to page four. The consolidated results included strong underlying profitability improvement against the backdrop of elevated catastrophe losses and adverse prior year development, largely related to the second half of 2022. The six-point sequential improvement in specialty P&C was the result of accelerating impacts of earned rate and non-rate actions exceeding loss trend, as well as the normalizing of the episodic items we experienced last quarter. This improvement demonstrates that our actions are taking hold and producing the anticipated benefits. One final financial highlight I'd like to point out is our recent approval of approximately 30 points of rate by the California Department of Insurance for our specialty P&C private passenger auto book. The collaborative effort between our teams and the CDI enabled this successful outcome. The rate change was effective August 4th. I'd like to now move to our strategic projects. As a reminder, last November we announced a series of initiatives to unlock additional shareholder value. All these programs are on track to be completed on time and produce or exceed their financial targets and operational benefits. Key updates on these initiatives include we received approval from the Illinois Department of Insurance for the formation of our reciprocal. Phase two of our Bermuda optimization effort is outperforming initial benefit projections. We completed the strategic review of our preferred P&C segment and announced our decision to exit that business. This action will enhance our return on capital and support profitable growth in our core businesses. And finally, we are achieving the expected expense savings with our cost structure initiatives. We are highly focused on maximizing shareholder value, and this begins with returning the business to profitability. The solid progress we achieved this quarter is proof that the actions we have taken are generating the intended outcomes. All the while, we are advancing our long-term initiatives to enhance Kemper's strategic and financial profile. I'll now turn the call over to Jim to talk about more details.