4Q 2023 Earnings Call Presentation
Fourth Quarter 2023 Earnings
Earnings Call Presentation - 4Q 2023
Preliminary Matters
Cautionary Statements Regarding Forward-Looking Information
This presentation may contain or incorporate by reference information that includes or is based on forward-looking statements within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Such statements involve known and unknown risks, uncertainties, and other factors, including but not limited to:
- changes in the frequency and severity of insurance claims;
- claim development and the process of estimating claim reserves;
- the impacts of inflation;
- changes in interest rate environment;
- supply chain disruption;
- product demand and pricing;
- effects of governmental and regulatory actions;
- litigation outcomes and trends;
- investment risks;
- cybersecurity risks;
- impact of catastrophes; and
- other risks and uncertainties detailed in Kemper's Annual Report on Form 10-K and subsequent filings with the
Securities and Exchange Commission ("SEC").
Kemper assumes no obligation to publicly correct or update any forward-looking statements as a result of events or developments subsequent to the date of this presentation.
Non-GAAP Financial Measures
This presentation contains non-GAAP financial measures that the company believes are meaningful to investors. Non-GAAP financial measures have been reconciled to the most comparable GAAP financial measure.
Earnings Call Presentation - 4Q 2023
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Leading Insurer Empowering Specialty and Underserved Markets
Enabled by a dynamic, diverse and innovative team who act like owners
Delivering appropriate |
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and affordable |
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insurance and financial |
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Specialty auto insurance1 for |
solutions |
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Life insurance2 for |
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underserved markets; Latino, |
low/modest income |
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Hispanic and urban areas |
customers |
Market
Characteristics
Differentiated
Capabilities
Sizable |
Require Unique |
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Enable Systematic, Sustainable |
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Market |
Expertise |
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Competitive Advantages (SSCAs) |
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Low-Cost Management |
Ease of Use |
Distribution |
Product Sophistication |
Target top quartile value creation for customers, employees and shareholders
1 Kemper Auto is equivalent to the Specialty Property & Casualty Insurance Segment
2 |
Earnings Call Presentation - 4Q 2023 |
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Fourth Quarter 2023 Summary
Achieved underwriting profit as earned rate exceeding loss inflation drove margin improvement
4th Quarter
Results
Retuto profitability driven by rate and non-rate actions, and cost structure initiatives
- Net income attributable to
Kemper Corporation of$51.4 million or$0.80 /sh - Adjusted consolidated net operating income1 of
$50.5 million or$0.78 /sh - Specialty P&C underlying combined ratio improved 2.3% sequentially to 98.2%
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- No prior year reserve development
- Life business continues to produce stable earnings
- Total pre-tax current year catastrophe losses of $3 million2
Actions Taken & Completed
Balance Sheet
Strength
Continued profit actions and strategic initiatives enabled retuto profitability and financial strength
- Specialty P&C Private Passenger Auto actions:
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- Filed an additional 9% rate increase on 9% of the book
- Reciprocal Exchange premium growth strategy is on track
- Achieved multi-year target of $150+ million expense savings in first year of program
Bermuda optimization generated approximately$330 million of dividends to parent company- Preferred P&C2 exit on track, released
$45 million of capital during the 2H'23 and anticipate an additional $130+ million by year-end 2024
Capital and liquidity positions enable the company to navigate the current market
- Parent company liquidity of approximately
$1.1 billion remains a source of strength for subsidiaries - Insurance companies are well capitalized
1 Non-GAAP financial measure; please see reconciliation in appendix on pages 17-22 |
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2 Excludes |
Earnings Call Presentation - 4Q 2023 |
Operations |
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Fourth Quarter 2023 Financial Summary
Delivered third consecutive quarter of underlying improvement
($ in millions, except per share amounts)
Net Income (Loss) Attributable to
Adj. Consolidated Net Operating Income (Loss) - Per Diluted Share1
Tangible Book Value - Per Diluted Share1
Retuon Shareholders' Equity
Retuon Tangible Shareholders' Equity1
Life Face Value of In-Force YoY Growth / (Decline)
Specialty P&C Earned Premium YoY Growth / (Decline)
Specialty P&C PIF YoY Growth / (Decline)
Quarter Ended |
Year Ended |
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2023 |
2022 |
2023 |
2022 |
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8.4% |
(7.9)% |
(10.7)% |
(10.0)% |
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12.7% |
(11.4)% |
(15.9)% |
(14.4)% |
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(0.7)% |
(0.5)% |
(0.7)% |
(0.5)% |
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(11.8)% |
(4.9)% |
(10.2)% |
2.5% |
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(31.7)% |
(19.2)% |
(31.7)% |
(19.2)% |
On track to retuto target margins
1 Non-GAAP financial measure; please see reconciliation in appendix on pages 17-22
Earnings Call Presentation - 4Q 2023
5
Strategic Initiatives Summary
Significant benefits realized during the quarter from completed initiatives
Completed Initiatives
- Bermuda Optimization:
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- Enabled approximately
$330 million in dividends to parent in 4Q'23, exceeding last quarter's estimate of $250+ million
- Enabled approximately
- Streamlining Cost Structure:(see page 7)
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- Achieved multi-year target of $150+ million in savings in the first year of the program
Ongoing Initiatives
- Preferred P&C¹ Exit:
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- Proceeding as planned; will generate greater than
$300 million in capital to be redeployed - Released
$45 million in capital during 2H'23; anticipate a release of $130+ million in capital by year-end 2024 and additional $100+ million by year-end 2025
- Proceeding as planned; will generate greater than
- Reciprocal Exchange:
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- Population strategy work ongoing; anticipate expanding state and product offerings in late 2024 and early 2025 as forms are filed and approved
Initiatives on track to realize or exceed intended benefits
1 Preferred P&C is represented by the |
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Earnings Call Presentation - 4Q 2023 |
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Expense Savings Exceed $150
Advancing differentiated capabilities to strengthen systematic, sustainable competitive advantages
- Restructuring and integration pre-tax charges of
$150 -$200 million will produce an annualized savings of$150 million or greater
• Since its inception, program has driven total |
61 |
run-rate savings of
Run-Rate Program Savings ($ millions)
137 153
117
87
150 + |
4Q'22 |
1Q'23 |
2Q'23 |
3Q'23 |
4Q'23 FY'24-FY'25 Proj. Prog. |
Total |
(Pre-tax, $ in millions) |
4Q'23 Run-Rate |
Total Program |
% Reached |
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Savings |
Loss Adjustment Expense (LAE) |
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50% - 75% |
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Improvements |
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116% - 135% |
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Enterprise Expense Initiatives |
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-Rate |
(ex- |
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Real Estate Optimization |
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150% |
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Run |
Total Run-Rate Program Savings |
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$150+ |
78% - 104% |
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Cumulative Earned on Run-Rate Savings |
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Cumulative Associated Charges |
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78% - 104% |
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Expense optimization will continue
Earnings Call Presentation - 4Q 2023
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Well-Capitalized Insurance Subsidiaries
Continued access to significant sources of liquidity
Parent Company Liquidity
HoldCo Cash & Investments |
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Borrowings Available |
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Under Credit Agreement |
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& from Subs |
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millions) |
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in |
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($ |
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2018 2019 2020 2021 2022 2023
Cash Flow from Operating Activities
millions) |
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in |
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($ |
2018 2019 2020 2021 2022 2023
Risk-Based Capital Ratios¹
Life2
P&C (ex. AACC)
(%)
645 |
535 |
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410 |
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355 |
365 |
340 |
330 |
355 |
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285 |
220 |
240 |
275 |
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2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
Debt-to-Capital3
30.3% 32.6%
23.1% |
23.2% |
24.1% |
17.6% |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
Initiatives underway to further improve financial metrics
1 4Q'23 Risk-Based Capital Ratios are calculated at the Company Action Level and are estimated; actual RBC levels are likely to
differ, but will not be known prior to |
Earnings Call Presentation - 4Q 2023 |
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Diversified Investment Portfolio with Consistent Returns
Net Investment Income1
Highlights
($ in millions)
- High-qualityportfolio provides consistent net investment income; 72% of fixed income portfolio rated A or higher
- Strong ALM philosophy that mitigates long- term economic and short-term valuation mismatches
- 4.5% PTE annualized book yield
- Average investment grade new money yields approximately 6% for the quarter
4Q'22 |
1Q'23 |
2Q'23 |
3Q'23 |
4Q'23 |
Core Portfolio |
Alternative Inv. Portfolio |
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Diversified and Highly-Rated Portfolio |
Pre-Tax Equiv. Annualized Book Yield |
Portfolio Composition2 |
Fixed Maturity Ratings |
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COLI |
Short Term |
B / BB ≤ CCC |
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Alternatives |
6% |
3% |
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6% |
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5% |
Corporates |
1% |
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6% |
24% |
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Other |
5% |
56% |
BBB |
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16% |
72% |
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States/ |
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Munis |
A or Higher |
4.6% |
4.4% |
4.5% |
4.6% |
4.5% |
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4Q'22 |
1Q'23 |
2Q'23 |
3Q'23 |
4Q'23 |
1 Non-Core Operations reflects
4Q'23, respectively |2 Other category includes
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Specialty Property & Casualty Insurance Segment
Underlying combined ratio improved 9.6% year-over-year and 2.3% sequentially
Highlights
- Sequential improvement driven by additional earned rate in excess of loss trend
- Severity trends have stabilized but remain elevated
- Filed 9% of rate on 9% of the book
- Focus remains on improving margins and then restoring new business production
Cumulative PPA Rate Activity Since 2Q'211
Filed Rate |
~60% |
Written Rate |
~59% |
Earned Rate |
~40% |
Metrics |
Change |
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($ in millions) |
4Q'23 |
4Q'22 |
vs. 4Q'22 |
Earned Premiums |
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(11.8)% |
Underlying Loss & LAE Ratio2 |
77.7% |
87.6% |
(9.9)pts |
Expense Ratio |
20.5% |
20.2% |
0.3pts |
Policies In-Force (000s) |
1,215 |
1,779 |
(31.7)% |
Underlying Combined Ratio2
107.8 108.0
(%)
102.0 100.5
98.2
4Q'22 |
1Q'23 |
2Q'23 |
3Q'23 |
4Q'23 |
On track to reach target profitability enabling restoration of new business
1 Represents the cumulative weighted average rate impact of actual filings on the total book
2 Non-GAAP financial measure; see reconciliation in appendix on pages 17-22 |
Earnings Call Presentation - 4Q 2023 |
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Attachments
Disclaimer
Enact Completes Forward XOL Reinsurance Transaction as Part of its Diversified Credit Risk Transfer Program
4Q23 Financial Results Presentation Slides
Advisor News
Annuity News
Health/Employee Benefits News
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