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Kemper(KMPR) - 2021 Q3 - Earnings Call Transcript
KMPRKemper(KMPR)2021-10-28 23:29
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Financial Data and Key Metrics Changes - The company reported a net loss of 75millionor75 million or 1.18 per share as reported, and an adjusted loss of 69millionor69 million or 1.08 per share [21] - Adjusted consolidated net operating loss was 76million,withanadjustednetlossof76 million, with an adjusted net loss of 69 million [27] - Return on tangible equity, excluding unrealized gains, was 3%, below the target return [22][32] Business Line Data and Key Metrics Changes - The Property and Casualty (P&C) segments faced environmental headwinds, with a focus on restoring profitability [23] - The Life and Health segment saw higher demand for products and strong policy retention, despite a spike in COVID-related mortality due to the Delta variant [23][49] Market Data and Key Metrics Changes - Auto claim activity increased by 18% to 20%, while severity rose by 8% to 10% due to supply chain challenges and labor shortages [36] - The specialty P&C segment reported an underlying combined ratio increase of 22 points year-over-year, with an underwriting loss of approximately 80million[42]CompanyStrategyandDevelopmentDirection−Thecompanyisprioritizingprofitrestorationovergrowthinresponsetocurrentenvironmentalchallenges[44]−Rateincreasesarebeingfiledtoaddresstheimbalancebetweenlosscostsandearnedrates,withafocusonrestoringequilibriuminthesystem[45][70]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgedthatthepandemic′simpactcontinuestoaffectresults,withexpectationsofprolongedinflationarypressures[13][19]−Thecompanyanticipatesareturntonormalizedmortalityratesasthepandemictransitionstoanendemicphase[20]OtherImportantInformation−Thecompanygeneratedover80 million [42] Company Strategy and Development Direction - The company is prioritizing profit restoration over growth in response to current environmental challenges [44] - Rate increases are being filed to address the imbalance between loss costs and earned rates, with a focus on restoring equilibrium in the system [45][70] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the pandemic's impact continues to affect results, with expectations of prolonged inflationary pressures [13][19] - The company anticipates a return to normalized mortality rates as the pandemic transitions to an endemic phase [20] Other Important Information - The company generated over 500 million in cash flow over the past twelve months, maintaining a strong balance sheet and liquidity [32] - The debt to capital ratio was reported at 21.3%, within the target range [32] Q&A Session Summary Question: How are labor shortages and materials affecting severity? - Management explained that labor shortages and supply chain issues lead to increased repair times and costs, contributing to overall severity increases [56][60] Question: What is the regulatory environment like regarding rate increases? - Management indicated that regulators are assessing historical results and current loss trends, with expectations for rate increases to be filed in various states [64][70] Question: Can you break down the loss trend in specialty auto? - Management noted that frequency is roughly within 1% of pre-pandemic levels, while severity has seen double-digit inflationary trends [88][90] Question: Is the company still comfortable growing the business amid loss cost challenges? - Management clarified that growth initiatives are being slowed due to the uncertainty of inflation duration, not due to long-term concerns about profitability [92][96] Question: What is the status of the Florida PIP charge? - Management expressed increased comfort with the current situation, noting proactive measures to mitigate future litigation risks [100][110]