Kemper Corporation

Good afternoon, ladies and gentlemen, and welcome to CAMPR's first quarter 2024 earnings conference call. My name is Ina, and I will be your coordinator today. At this time, all participants are in 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, Michael Marinaccio, Kemper's Vice President of Corporate Development and Investor Relations. Mr. Marinaccio, you may begin.

Thank you, operator. Good afternoon, everyone, and welcome to Kemper's discussion of our first quarter 2024 results. This afternoon, you'll hear from Joe Locker, Kemper's President and Chief Executive Officer, Brad Camden, 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 the call, our presenters will be joined by Chris Flint, Kemper's Executive Vice President and President of Kemper Life, Dwayne Sanders, Kemper's Executive Vice President and Chief Claims Officer, P&C, and John Buscelli, Kemper's Executive Vice President and Chief Investment Officer. After the markets closed today, we issued our earnings release, filed our Form 10-Q with the SEC, and published our earnings presentation and financial supplement. You can find these documents in 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 operation and financial conditions. Our actual future results and financial conditions may differ materially from these statements. For information on additional risks that may impact these forward-looking statements, please refer to our 2023 Form 10-K and 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, where required in accordance with SEC rules. You can find each of these documents in the investor section of our website, Kemper.com. Lastly, all comparative references will be to the corresponding 2023 periods, unless otherwise stated. I will now turn the call over to Joe.

Thank you, Michael. Good afternoon, everyone, and thanks for joining us today. I'll start by noting that, overall, we're pleased with our results and the progress we've made this quarter. We continue to deliver significantly improved profitability in our specialty P&C business, where we're now exceeding target margins. While, as expected, policies in force continue to decline, we initiated our new business expansion activities and are on track to return to more typical new business rates by mid-year. As pricing, loss trend, and new business levels return to a more normal balance, our underlying competitive advantages are becoming more visible. With our story and results becoming clearer and simpler, we believe the underlying strength and long-term value creation of the franchise will be consistently apparent. Let's move to page four and jump into results. Overall, we delivered $71 million of net income, an annualized ROE of over 11%, and a tangible ROE of over 17%. we are once again achieving or exceeding our target returns. Specialty P&C generated a 93.6% underlying combined ratio. That is a 4.6 point improvement sequentially, a 14.4 point improvement year over year, and the fourth consecutive quarter of underlying improvement. We're pleased that once again, we're exceeding our target combined ratio of 96% in this business. Let me acknowledge that historically, We've only provided a long-term consolidated ROE target and not a specific specialty P&C target combined ratio. We recognize this has caused some confusion and we're fixing that now. Brad's going to comment further on that a little later. Relative to our life business, while demonstrating modest quarterly volatility, we continue to deliver consistent returns. I'll spend more time talking about this later in the call. Shifting to specialty P&C production. We're acutely aware that PIF growth, or rather lack thereof, is the most significant issue on investors' minds at the moment. We made significant progress in this area during the quarter. While Matt will dig into this in much greater detail, I'm going to hit a few highlights and offer an overriding perspective. Throughout 2023, we committed to a nearly exclusive focus on restoring underwriting profitability, deliberately foregoing new business and potential growth. As we discussed last quarter, we did not rev the new business engine, if you will, until we delivered a sub-100 combined ratio. When it was clear that this had been accomplished with fourth quarter results and we had optimism about the margin outlook, we initiated our new business expansion. This decision was made in late January. There are two key points that will help you interpret our numbers and see why we have confidence in our ability to stabilize PIF quickly. Since the execution of the new business expansion began in mid-February, only half the quarter realized the benefit. And second, consider the prudent nature of the expansion we're utilizing. We did not turn new business on similar to flipping on a light switch and going from zero to 100% immediately. We're expanding new business more analogously to driving a stick shift. You don't go from first gear to fifth gear without stalling. The first quarter represented perhaps moving through first and early second gear. This resulted in new business apps written growing by nearly 2.6 times the fourth quarter 2023 volume. For the month of April, we wrote about as many new business apps as we did in all of the first quarter. On a run rate basis, this suggests the second quarter approaching roughly three times the first quarter volumes. This might be characterized as the new business engine moving through third and perhaps fourth gear. The takeaway? We have confidence that PIP will stabilize mid-year. Growth will follow, subject to traditional seasonality patterns. In the six quarters prior to the pandemic disruption, this business generated unit growth between 6 and 13%. We expect our competitive advantages will allow us to deliver similar results for 2025 and beyond. For a short time, we're going to profile a new, more responsive metric, new business apps, to help you measure the speed of PIF stabilization. Matt's going to go through more detail on slides 9 and 10. As discussed last quarter, the bulk of the strategic initiatives we've been profiling have either been completed or require less frequent updates given their long-term nature, so there's not much to discuss on those this quarter. I'll leave you with one last thought. We remain committed to delivering an overall low double-digit ROE throughout the cycle. Within our specialty P&C business, we're targeting a 96 combined ratio and then growing the business as much as possible. We've successfully corrected a major profitability challenge and are now exceeding our target combined ratio. We're addressing declining PIF and expected to stabilize mid-year. We hope you leave today sharing our confidence that we will return to a more traditional, consistent, long-term profitable growth profile by early next year. With that, I'll turn it over to Brad.