KEMPER Corp Q1 FY2025 earnings call

· Joe Lacher reported strong first quarter financial results with net income of $100 million, return on equity of 14%, and adjusted return on equity of 21%. Book value per share and adjusted book value per share grew significantly. The debt-to-cap ratio was returned to the low 20s, and trailing 12-month operating cash flow was ~$520 million. · Discussed tariff resilience factors including tariffs having a one-time upward impact, only about 1/3 of loss costs directly exposed to tariff-related increases, strong starting position with low combined ratio, and ability to quickly respond with 6-month policy terms. · Brad Camden discussed financials, balance sheet strength with $520 million operating cash flow over the past year, repayment of $450 million of senior debt, and share repurchase. Net investment income for the quarter was $101 million, below guidance due to lower alternative investment returns, but expected to average ~$105 million quarterly. · Matt Hunton detailed Specialty P&C segment results, with written premium growth 24%, PIF and earned premium growth ~14%, strong performance in California, competitive Florida market, positive momentum in Texas, and strong growth in Commercial Auto. The segment's book composition offers advantages for navigating tariffs.

The company's segments include Specialty Auto and Life. In the Specialty Auto segment, net income was driven by it. The Specialty P&C segment had a total underlying combined ratio of 92.2%, with Private Passenger Auto at 92.2% and Commercial Auto at 92.3%. Written premium grew 24%, while PIF and earned premium each grew around 14%. The Life segment's underlying business continued to generate stable operating results, with mortality and persistency in line with historical trends, and it continued to generate strong return on capital and distributable cash flows. Revenue contribution: Specialty Auto was a key driver with significant written premium growth and strong underwriting performance, while the Life segment contributed with stable results.

· Anticipate continued operating cash flow growth with trailing 12-month cash flows exceeding $600 million in the second quarter. · Net investment income expected to average around $105 million a quarter on a rolling 4-quarter basis and gradually increase throughout the end of the year. · Specialty Auto expected to continue to grow profitably while maintaining combined ratios below the 96% ceiling.

· Tariffs could impact vehicle damage component of auto loss cost, though only about 1/3 of loss costs are directly exposed. · Market volatility, particularly in the financial markets, could impact investment returns, such as lower returns from alternative investments.

Q: Focus on market conditions in Florida, Texas, California and durability of PIF growth.

A: Joe Lacher said California growth may temper slightly but sustain in double-digit range, Florida and Texas expected to move to high single-digit PIF growth. Matt Hunton added California has limited suppliers and good economic performance, Florida and Texas have enhancements taking hold.

Q: Thoughts on secondary impacts from home insurance crisis in California and investment income.

A: Joe Lacher said auto may benefit from multiline players tightening underwriting, Brad Camden said net investment income expected to average $105 million quarterly with reallocation to higher-yielding assets.

Q: Benefit in quarter from California minimum limits on written premium growth and thoughts on M&A.

A: Joe Lacher said written premium growth benefited from California minimum limits, with high teens go-forward expectation. On M&A, capital priorities are organic growth, exploring inorganic opportunities to expand franchise, and returning capital to shareholders.

Q: Competitor activity outside California and color on frequency and severity.

A: Matt Hunton said nonstandard companies entering back in non-California markets, near-normal competition. Brad Camden said frequency better this quarter, severity trending with expectations including California FR limit change.