Kemper Corporation

Good afternoon, ladies and gentlemen, and welcome to Kemper's first Corker 2025 earnings conference call. My name is Konstantin, 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 our host for today's conference call, Michael Marinaccio, Kemper's Vice President of Corporate Development Investor Relations. Mr. Marinaccio, you may begin.

Thank you, Operator. Good afternoon, everyone, and welcome to Kemper's discussion of our first quarter of 2025 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 for 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 Investors 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 on 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 2024 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. All comparative references will be to the corresponding 2024 period unless otherwise stated. I will now turn the call over to Joe.

Thank you, Michael. Good afternoon, everyone, and thank you for joining us today. I'm proud to report that we delivered another quarter of very strong financial results led by continued, robust, profitable growth in our specialty auto business. While we'll spend time drilling into these results, I know we're all aware that right now we live in interesting times. We'll talk about that, too. So today we're going to do three things. First, review our first quarter results. Second, discuss the current economic environment, including tariffs, our capacity to respond, and our associated resilience. And third, discuss our near-term outlook. Now let's move to page four and jump into our first quarter results. We delivered net income of $100 million, a return on equity of 14%, and a return on adjusted equity of 21%. Book value per share and adjusted book value per share grew by approximately 13% and 16% year over year, respectively. We returned our debt-to-cap ratio to the low 20s, and we delivered a trailing 12-month operating cash flow of roughly $520 million, which is quickly returning to our all-time peak levels. Our core businesses continue to perform very well. Specialty Auto generated a healthy 92% underlying combined ratio, while producing strong PIF growth of nearly 14% year over year. Written premiums grew a very significant 24%, foreshadowing a similar increase in earned premiums in future periods. We continue to see strong demand for our products and expect significant growth to persist. Matt will provide more texture on this later. The business fundamentals underlying our life segment remain stable. The business continued to produce strong return on capital and distributable cash flows. As mentioned earlier, we continue to further strengthen our capital and liquidity position. Brad will discuss our financial results in more detail later, but overall, we're very pleased with our first quarter results. Moving to our second topic, I want to acknowledge there's a lot of macroeconomic noise in the market, especially regarding tariffs. The president made clear his affinity for tariffs while on the campaign trail. As such, we've been taking their potential impact into account since his election last November. We believe Kemper is fairly tariff resilient for several reasons. Now let's walk through them. First, tariffs do not change long-term ongoing inflation, but rather have a one-time upward movement. Tariff delays, existing parts inventories, and similar factors should spread the lost cost impact over several quarters allowing for a reasonable response time. Second, tariffs principally impact the vehicle damage component of auto loss costs and not bodily injury. In broad terms, about half of our loss costs relate to bodily injury and therefore are not tariff impacted. Of the half related to vehicle damage, about two-thirds of that is related to the vehicle itself and replacement parts. The balance relates to things like body shop labor rates, rental car expenses, towing charges, and other non-part costs. Together, this means that only about a third of our lost costs are directly exposed to potential tariff related cost increases. This weighting is both driven by and further enhanced by the nature of our specialty auto book of business. About half of our customers buy liability only coverage, meaning we do not cover first party vehicle damage. The majority of our customers buy policies with minimum limits, thus further capping our exposure to third party damage. Third, we are starting from a very strong position with a low 90s combined ratio and significant growth. We are very well prepared to navigate the pressure and remain within our long term margin and growth ranges. And finally, We are well positioned to quickly respond to ultimate lost cost impacts. In private passenger auto, we utilize six-month policy terms for over 90% of our in-force and 95% of our new business policies. This means our book is highly responsive to any necessary price increases. There's broad market awareness, including within insurance departments, of tariffs and their potential impact on lost costs. This impact will be readily visible, and we are confident that insurance departments will respond appropriately with ordinary course rate filings. And substantially, all the non-rate tools we utilized in recent years are currently available to protect the book as any needed rate increases move through the system. We can respond quickly. Matt will further comment on some of these topics later. Again, we believe we are reasonably tariff resilient, and are well positioned to successfully navigate these interesting times. Turning to our third topic, let me comment on our outlook. We have a very focused set of specialty businesses with refined, sustainable competitive advantages. These businesses are favorably positioned to deliver profitable growth throughout all parts of the underwriting cycle. They're in a strong financial position. a low 90s combined ratio, 24% written premium growth, strong returns on capital, and growth in book value per share. Our auto businesses have solid tariff resiliency and possess the capacity to nimbly and swiftly respond to any likely tariff-related cost impacts. Bringing these factors all together, we remain confident in our ability to manage the business within our long-term margin and growth ranges. With that, I'll turn the call over to Brad.