KEMPER Corp Q3 FY2024 earnings call

• Delivered strong financial results led by Specialty Auto, with sequential quarter PIF growth and low 90s underlying combined ratio.
• Life segment had stable underlying operating results.
• Capital and liquidity position enabled share repurchase of $25 million and plan to fully retire $450 million debt due in February.
• Catastrophes in third quarter had minimal impact on financials, with total catastrophe losses ~$16 million.
• Net investment income for the quarter was $111 million, with pre-tax equivalent annualized book yield of 4.8%.

Specialty P&C: Generated $74 million of net income, an ROE of approximately 11% and an adjusted ROE of about 17%. Specialty P&C generated a healthy underlying combined ratio of 91.3%. Private passenger auto business produced an underlying combined ratio of 91.2% and commercial auto produced 91.8%. Sequential quarter PIF growth for private passenger auto and commercial auto increased by 4.4% and 5.5% respectively, resulting in an overall growth rate of 4.5%. Life: The underlying business fundamentals remained stable and continued to produce strong return on capital and distributable cash flows.

• Expect continued significant profitable growth in Auto business due to hard market and consumer shopping behavior.
• Plan to fully retire $450 million debt maturing in February.
• Expect net investment income to be around $105 million per quarter.
• Continue to opportunistically buy back shares as stock is believed to trade below intrinsic value.

• Market conditions and consumer shopping behavior could impact growth.
• Potential impact of future catastrophes on financials.

Q: Focus on Slide 8 regarding growth and hard market, asking for texture on hard market and significant growth in near-term.

A: Joe Lacher and Matt Hunton discuss that it's a rebalancing phase, with California, Florida, Texas having different dynamics, and expect growth to tick up in first half of next year.

Q: Surprised about retiring $450 million debt, asking about balancing act of retiring debt and supporting growth.

A: Brad Camden explains using holdco cash and investments, with ample capital for growth, and retiring debt reduces costly capital.

Q: Talk of remaining below 96% combined ratio, asking about cadence of moving into 93%-95% zone.

A: Joe Lacher explains migration back to normal range as new business normalizes, with rate roughly offsetting inflation.

Q: About commercial auto pricing and acceleration of growth, Matt Hunton discusses specialized underwriting and focus on target appetite.

Q: Updated thoughts on investment income trajectory, Brad Camden says expect run rate in 105%-107% range.

Q: Competitive environment in big states, Matt Hunton says residual markets not a significant competitor yet.

Q: Trajectory of growth in second half, Joe Lacher says historical buying patterns offset by hard market, first half of next year expected robust.

Q: Frequency trends and impact on combined ratios, Brad Camden says frequency year-over-year attractive and expected to remain so.

Q: Update on exchanges rollout, Joe Lacher says continuing to work with modest new business and plumbing, volumes modest for a year or two.

Q: Rate in private passenger and commercial auto, Joe Lacher and Brad Camden discuss rate filing and matching loss exposure.