KEMPER Corp Q1 FY2024 earnings call

• Overall, Kemper is pleased with Q1 results, with Specialty P&C exceeding target margins. New business expansion was initiated in late January, with new business apps growing nearly 2.6x Q4 2023 volume. - Financial results: Net income of $71.3 million ($1.10 per diluted share) and adjusted consolidated net operating income of $69.7 million ($1.07 per diluted share), annualized ROE 11.2%. - Specialty P&C production: New business apps growing, expecting PIF to stabilize midyear, using new business apps as a metric, and strategic initiatives mostly completed. - Life business: Well capitalized, stable earnings despite modest quarterly volatility, with mortality in line with pre-pandemic levels and modest inflation pressure.

Specialty P&C generated a 93.6% underlying combined ratio, a 4.6-point sequential improvement and 14.4-point year-over-year improvement, with net income including $5.3 million in adverse prior year development. The life business had net operating income of $12 million, with mortality in line with pre-pandemic levels, modest inflation pressure, and new business levels slightly down from Q1 2023. Specialty P&C contributed significantly to consolidated results with its underlying combined ratio improvement, while preferred P&C generated net income of $5 million including $12 million in current year catastrophe losses.

• 2024 ROE guidance reaffirmed at 10% or better. - Specialty P&C targets a 96 combined ratio and aims to grow the business, expecting PIF to stabilize midyear. - Preferred business exit expected to release over $130 million of capital, with over $45 million released in Q1, and on track to release over $85 million more by year-end.

Q: Additional color on new business apps and reconciling PIF stabilization with production growth A: Joe and Matt discuss seasonality in specialty auto, new business expansion being methodical with no negative surprises, and PIF expected to stabilize midyear with new business apps trending up.

Q: Retention rate stability A: Joe explains segment-based retention, noting consistent patterns despite changes in business mix, with retention generally stable in line with historical trends.

Q: Competitive environment by geography A: Matt talks about varying competition by state, with hard market conditions having texture by state, such as less competition in California and elastic competition in Florida and Texas.

Q: Rate earning cadence and new rate filings A: Brad explains that $24 million of rate is to be earned in 2024, with 9 points earned in Q1, half to be earned in Q2, and remaining in Q3-Q4, with ongoing assessments for rate adequacy.

Q: Reciprocal progress and geographic portfolio reshaping A: Joe discusses reciprocal population with new business, and geographic diversification strategy, aiming for balanced portfolio with California expected to be in 30-35% range long-term.

Q: Preferred business runoff and alternative investment portfolio A: Brad mentions preferred business runoff on track to release over $130 million, with over $85 million left this year, and alternative investment portfolio returns expected to stabilize from Q1 levels