Kemper Corporation

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. 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 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 second 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 second 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 condition 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 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 non-GAAP financial measures to GAAP, where required in accordance with SEC rules. You can find each of these in the investor section of our website, Kemper.com. All comparative references will be to the corresponding 2023 period unless otherwise stated. I will now turn the call over to Joe. Thank you, Michael.

Good afternoon, everyone. Thank you for joining us today. Let me start by saying that I'm proud of the strong results we delivered this quarter. This represents the fifth consecutive quarter of significant improvement in our underlying business. It's the third straight quarter of generating operating profitability. Our specialty auto business delivered a strong combined ratio, well below our long-term target, and specialty auto generated sequential quarter PIF growth of about 4.5%. Again, while we delivered great progress, these are also objectively strong results. Before we dive deeper into discussing these results, I'd like to step back a moment and do three things. First, to remind us of the backdrop of the still volatile market environment that exists. Given the pandemic-induced abrupt reduction in driving, the subsequent rapid driving restart with massive supply chain-induced inflation, and the delayed impact of rate increases in a highly regulated industry, the market was virtually guaranteed to see significant losses, underwriting restrictions, and a subsequent hard market. The marketplace structure virtually guaranteed that this would take several years to work itself out. As we've discussed before, our response was to institute non-rate actions to partially restore profitability while we filed for clearly needed rates. As those rates earned in, we would gradually remove the non-rate actions and return to a normal balance. This was likely to temporarily produce combined ratios below long-term historical ranges. This is where we are right now. From here, we'll continue to remove non-rate actions, take maintenance rate changes, and guide the business back to more traditional margin and growth ranges. Second, I want to add some clarity and insight to our 2024 guidance. In late 23, we said we would achieve a 10% or greater ROE in 2024. Given our strong first half results, let me be clear that we expect to solidly beat that 10% for the year. We do not see deteriorating trends that would cause earnings to meaningfully decline in the second half of 2024. That said, we are not updating our guidance. If we update annual guidance each quarter, we'll effectively be giving half-year or quarterly guidance. This is too precise for this industry. Third, last quarter we told you that our long-term goal for specialty auto was to produce a 96% combined ratio or better and grow as much as possible within that. This is a long-term operating parameter for this business. You should not use it as any form of earnings guidance. With this business currently generating a roughly 90 percent underlying combined ratio, it's safe to assume that we believe long-term shareholder value creation would be better served by allowing the combined ratio to drift closer to the 96 if increased growth can be economically delivered. that combined ratio movement will not be rapid, and it's likely to occur over at least four to six quarters. Hopefully, this backdrop provides context to both review our current results and for you to project our results going forward. Now let's move to page four and jump into this quarter's results. Overall, we delivered 75 million of net income, an ROE of about 11.5 percent, and an adjusted ROE of over 17%. Specially P&C generated a very strong 90% underlying combined ratio, a great improvement year-over-year and sequentially. In our last call, we indicated that we expected sequential quarter PIF to stabilize mid-year. As we saw our underlying results improve monthly, we were able to accelerate our new business expansion, and this resulted in a strong 4.5% sequential quarter PIF increase. This underscores the strength of our franchise and the competitive advantages we have in the marketplace. That said, the second half of 24 is likely to produce PIF growth at a more modest rate, given the seasonality in our business. Matt will discuss this in more detail later. The underlying fundamentals of our life business remain stable, and the business continues to produce consistent distributable cash flow. However, the segment was negatively impacted this quarter by a valuation adjustment on a real estate investment. Brad will touch on this later. With that, I'll turn the call over to Brad.