Kemper Q2 2025 Earnings Report

Kemper EPS Results

• Actual EPS: $1.30
• Consensus EPS: $1.52
• Beat/Miss: Missed by -$0.22
• One Year Ago EPS: $1.42

Kemper Revenue Results

• Actual Revenue: $1.23 billion
• Expected Revenue: $1.23 billion
• Beat/Miss: Missed by -$1.77 million
• YoY Revenue Growth: +8.50%

Kemper Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 5:00PM ET

Kemper (NYSE:KMPR), a diversified insurance holding company, engages in the provision of insurance products to individuals and businesses in the United States. The company operates through three segments: Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance, and Life & Health Insurance. It provides preferred and specialty automobile, homeowners, renters, fire, umbrella, general liability, and various other property and casualty insurance to individuals, as well as commercial automobile insurance to businesses. The company also offers life insurance, including permanent and term insurance; and supplemental accident and health insurance products, such as Medicare supplement insurance, fixed hospital indemnity, home health care, specified disease, and accident-only plans to individuals in rural, suburban, and urban areas. It distributes its products through independent agents and brokers. The company was formerly known as Unitrin, Inc. and changed its name to Kemper Corporation in August 2011. Kemper Corporation was incorporated in 1990 and is headquartered in Chicago, Illinois.

Kemper Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Kemper reported adjusted consolidated net operating income of $84.1 million ($1.30 per diluted share), driving an adjusted ROE of 14.9%, 14.3% adjusted book value per share growth, and a record $587 million in operating cash flow.
• Positive Sentiment: The Specialty Auto segment achieved a 93.6% underlying combined ratio with 8% year-over-year policies in force growth and 17% earned premium growth, while Commercial Auto delivered a 90.1% combined ratio with 18% PIF growth.
• Negative Sentiment: The company recorded a $19 million adverse prior-year development in Commercial Auto due to social inflation–driven bodily injury losses and saw alternative investment volatility pressure net investment income down to $96 million for the quarter.
• Positive Sentiment: With $1.1 billion in available liquidity and a 22.7% debt-to-capital ratio, Kemper has repurchased $80 million of common stock since April and received board authorization for up to $550 million in future buybacks as shares trade below intrinsic value.
• Neutral Sentiment: Management highlighted that while the Specialty Auto market is normalizing from recent hard conditions, it remains distinct—anticipating steady 3–7% PIF growth and combined ratios around 93.5–95% in a normalized environment.

Presentation

[Operator]

Afternoon, ladies and gentlemen, and welcome to Kemper's Second Quarter twenty twenty five Earnings Conference Call. My name is Constantine, and I will be your coordinator today. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded for replay purposes.

[Operator]

I would now like to introduce your host for today's conference call, Michael Marinaccio, Kemper's Vice President of Corporate Development and Investor Relations. Mr. Mainnatchou, you may begin.

[Michael Marinaccio, VP - Corporate Development at Kemper]

Thank you. Good afternoon, everyone, and welcome to Kemper's discussion of our second quarter twenty twenty five results. This afternoon, you'll hear from Joe Locker, Kemper's President and Chief Executive Officer Brad Camden, Kemper's Executive Vice President and Chief Financial Officer and Matt Hunton, Kemper's Executive Vice President and President of Kemper Auto. We'll make a few opening remarks to provide context around our second quarter results followed by a Q and A session. During the interactive portion of the call, our presenters will be joined by Chris Flint, Kemper's Executive Vice President and President of Kemper Life Duane Sanders, Kemper's Executive Vice President and Chief Claims Officer for P and C and John Bischelli, Kemper's Executive Vice President and Chief Investment Officer.

[Michael Marinaccio, VP - Corporate Development at Kemper]

After the markets closed today, we issued our earnings release, filed our Form 10 Q with the SEC and published our earnings presentation and financial supplement. You can find these documents in the Investors section of our website, kemper.com. Our discussion today may contain forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the company's outlook on its future results of operation and financial condition. Our actual future results and financial condition may differ materially from these statements.

[Michael Marinaccio, VP - Corporate Development at Kemper]

For information on additional risks that may impact these forward looking statements, please refer to our 2024 Form 10 ks and our second quarter earnings release. This afternoon's discussion also includes non GAAP financial measures we believe are meaningful to investors. In our financial supplement, earnings presentation and earnings release, we've defined and reconciled all non GAAP financial measures to GAAP where required in accordance with SEC rules. You can find each of these documents in the Investors section of our website, kemper.com. All comparative references will be to the corresponding 2024 period unless otherwise stated. I will now turn the call over to Joe.

[Joseph Lacher, President & CEO at Kemper]

Thank you, Michael. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report that we delivered another quarter of strong underlying operating results. This was led by our Specialty Auto business, which once again produced a solid underlying combined ratio and meaningful year over year PIF growth. Before we dig into the specifics of our results, I'd like to provide some context around the overall auto market competitiveness and more specifically the Specialty Auto segment.

[Joseph Lacher, President & CEO at Kemper]

I believe we're all aware that there's been a hard market for auto in general. Over the first half of this year, there's been clear evidence that markets are softening and reverting to more normalized conditions. As most carriers see combined ratios recovering to acceptable profitability levels, they're not taking major rate increases. In some cases, they're decreasing rates and increasing underwriting appetites to more aggressively compete for new business. The result is a combination of reduced consumer shopping and more available options when they do shop.

[Joseph Lacher, President & CEO at Kemper]

Accordingly, the high levels of growth seen by the strongest players are naturally normalizing to more traditional levels. Most of us in the industry think and talk about hard, normal, and soft market conditions. These descriptions work overall for commercial lines as well as the standard preferred personal auto market, but they don't really work for the specialty auto segment. As I stated in the past, within Specialty Auto, you generally see either a hard market or a more normalized market. Overall, we don't typically experience a traditional soft market because of our segment's unique characteristics.

[Joseph Lacher, President & CEO at Kemper]

First, there are many smaller competitors who only operate in a few local geographies. Second, the speed of loss development is typically faster than the standard market. And third, customer policy lifetime tenures are much shorter than the standard market. The combination of these characteristics has several implications. You can't recover short term irrational pricing over the lifetime of a customer.

[Joseph Lacher, President & CEO at Kemper]

Aggressive pricing is seen in results more rapidly, and no single competitor can typically soften the overall market with irrationally aggressive activity. In specialty auto, we may experience short term softness in select geographies, but in general, it does not last long or impact the overall market. Recall our competitive advantages. We deliver a low cost value proposition tailored to our unique customer needs. We bring a distinct scale advantage and a deep understanding of our market.

[Joseph Lacher, President & CEO at Kemper]

This enables us to deliver leading differentiated product sophistication, claims effectiveness and ease of use. We are confident that our competitive advantages will continue to produce attractive long term profitable growth in a more normal market environment. With this as a backdrop, let's move to Page four and jump into this quarter's financial results. We delivered a return on adjusted equity of 15%, adjusted book value per share growth of 14 year over year, and an all time high trailing twelve month operating cash flow of nearly $600,000,000 Our core businesses continue to perform very well. Specialty auto generated a 93.5% underlying combined ratio, while producing 8% year over year PIF growth and earned premium growth of 17%.

[Joseph Lacher, President & CEO at Kemper]

Our private passenger auto business produced an underlying combined ratio and year over year growth better than long term norms, but with somewhat off the hard market highs. Our commercial auto business continued to perform well and produced an underlying combined ratio of 90%, while growing PIF by 18%. Here we reported adverse prior year development of approximately $19,000,000 which was driven by the general effect of social inflation. When viewed over a rolling four or eight quarter basis, this business consistently produces attractive combined ratios and growth and is a source of continued reliable strength. The performance of our alternative investments negatively impacted both our Specialty Auto and Life segments.

[Joseph Lacher, President & CEO at Kemper]

This quarter, we had some modest noise, which I generally categorize as consistent with the broad marketplace investments volatility. We continue to maintain a high quality investment portfolio, and Brad will get into the specifics around this shortly. The business fundamentals underlying our Life segment remained stable. The business continued to produce a strong return on capital and distributable cash flows. Lastly, we continued to execute on our multi quarter balance sheet strengthening.

[Joseph Lacher, President & CEO at Kemper]

Last quarter we retired four fifty million dollars of debt bringing our debt to cap ratio near our long term target and our cash flow from operations hit an all time high. With a strong balance sheet and healthy liquidity, we've repurchased $80,000,000 of common stock since April 1. Given our expectations around future growth and strong operating metrics, the Board approved an additional $500,000,000 of repurchase authorization, bringing the total available to $550,000,000 Brad will discuss our financials and share repurchases in more detail. Overall, we're pleased with our second quarter results. With that, I'll turn the call over to Brad.

[Bradley Camden, EVP & CFO at Kemper]

Thank you, Joe, and good afternoon to everyone. I'll begin with our financial results on Page five. For the quarter, we reported net income of $72,600,000 or $1.12 per diluted share and adjusted consolidated net operating income of $84,100,000 or $1.3 per diluted share. These results led to an attractive return on adjusted equity of 14.9% and growth in adjusted book value per share of 14.3% year over year. As Joe discussed, our businesses continue to deliver strong underlying performance.

[Bradley Camden, EVP & CFO at Kemper]

Specialty auto produced strong growth in policies in force and earned premium, and life continued to provide steady returns. Overall, our core businesses are performing well. But this quarter, our results were impacted by a few infrequent items. First, Specialty Auto recorded $14,000,000 in adverse prior year development driven by a $19,000,000 reserve increase in our commercial vehicle business. This was primarily related to bodily injury losses.

[Bradley Camden, EVP & CFO at Kemper]

Second, volatility in our alternative investment portfolio pressured net investment income. Let's turn to page six to discuss the investment portfolio in more detail. Quarterly net investment income totaled 96,000,000, coming in below expectations due to lower returns from alternative investments. Not surprisingly, performance in this asset class can be volatile. Valuation gains tend to align with marketplace deal activity, which slowed in the second quarter amid broader macroeconomic pressures.

[Bradley Camden, EVP & CFO at Kemper]

As market conditions stabilize, we expect alternative investment performance to improve in the coming quarters. The core portfolio, which excludes alternatives, continues to perform well, delivering 98,000,000 of net investment income this quarter. Overall, we continue to maintain a high quality, well diversified investment portfolio. As the investment portfolio grows and with favorable new money rates, we anticipate net investment income to rebound in the second half of the year, averaging approximately 100 to a $105,000,000 per quarter. Moving to page seven.

[Bradley Camden, EVP & CFO at Kemper]

Here, we highlight the strength of our balance sheet and significant financial flexibility. We maintain 1,100,000,000.0 in available liquidity and continue to have well capitalized insurance subsidiaries. Our debt to capital ratio stands at 22.7%, aligning closely with our long term target. Notably, we generated 587,000,000 in operating cash flow over the past year, marking an all time high for the company. Given our strong financial position, let me remind you of our capital deployment priorities.

[Bradley Camden, EVP & CFO at Kemper]

First, we utilize capital to support organic growth. Next, we will fund inorganic opportunities to enhance our platform. And lastly, we will return excess capital to shareholders. As Joe discussed earlier, the specialty auto segment is transitioning to a more normal marketplace with attractive but somewhat slower profitable growth opportunities. This evolving environment will require less capital to fund organic growth.

[Bradley Camden, EVP & CFO at Kemper]

With significant financial strength and flexibility and the belief our stock is trading below intrinsic value, we repurchased 80,000,000 common stock since April 1, leaving 50,000,000 available under our current authorization. This week, the board approved an additional 500,000,000 share repurchase authorization, bringing the total amount for repurchase to 550,000,000. This will enable us to deliver on our capital priorities in this environment. That said, we have no preset timeline for share repurchases and plan to execute on them opportunistically. Finally, I want to reiterate that we're well positioned for sustained profitable growth.

[Bradley Camden, EVP & CFO at Kemper]

The strategic investments we made over the past five years have strengthened our capabilities and reinforced our confidence in driving shareholder value. I'll now turn the call over to Matt to discuss the Specialty C segment.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

Thank you, Brad, and good afternoon, everyone. Turning to Page eight. Our Specialty P and C segment produced another quarter of quality underlying results. This business generated a solid underlying combined ratio of 93.6%, up modestly from the first quarter, largely driven by normal seasonal patterns. Private passenger auto produced 94.5%, while commercial a 90.1%.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

Overall, PIF growth for the specialty business was nearly 8% year over year, directing our focus to private passenger auto. As Joe mentioned, the hard market in the specialty auto business has been receding, and we are moving to an overall more normal competitive environment. As you would expect, each state is moving at its own pace. California remains a modestly hard market. Given its unique regulatory environment and the challenges that exist in other lines of business, we do not expect California auto to move to a fully soft market.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

The marketplace is structured in a way that doesn't drive sustained irrational behavior. We are, however, seeing competitors increasingly reopen. Our products are well positioned and our scale and understanding of this unique state are enabling continued profitable growth. Florida continues to be a very competitive market. When we talked in May, we commented on some aggressive competitor actions and our plans to respond.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

That response came in June and had the intended positive impact of increasing new business. We saw the benefits in June and they continued through July. We will continue to build on this momentum to drive profitable growth. In Texas, the market conditions continue to operate in a traditionally normal fashion on a relative basis sitting somewhere between California and Florida. Our production has been steadily gaining momentum since we fine tuned our pricing plans earlier this year.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

All other states continue to see attractive growth and profitability in normalizing market conditions. Overall, we recognize the ongoing market dynamics and are proactively positioning ourselves for long term profitable growth. Shifting to Commercial Auto. This business again saw very strong underlying profitability with PIF growth of nearly 18%. The market backdrop remains consistent and success in this line requires a deep understanding of underwriting dynamics.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

Our long term competitive advantages continue to position us well to capitalize here. We are confident in our ability to profitably grow this business. Again, overall, we are positioning ourselves to compete in a more normalized market environment. That said, as a reminder, Auto has a more pronounced seasonal shopping pattern than standard auto. Customer shopping activity decreases in the second half of the year, particularly in the fourth quarter.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

This is normal and we anticipate that it will occur this year. With that said, the business is delivering solid, profitable growth enabled by our competitive advantages, scale and focus. We are in a position of strength and remain optimistic in our long term outlook. I'll now turn the call back to Joe to cover the Life business and closing comments.

[Joseph Lacher, President & CEO at Kemper]

Thank you, Matt. Turning to our Life business on Page nine. As noted earlier, the underlying business continued to generate stable operating results. Mortality and persistency remained in line with historical trends, and the Life business continues to generate strong return on capital and distributable cash flows. Turning to Page 10.

[Joseph Lacher, President & CEO at Kemper]

In closing, I'd like to reiterate our highlights for the quarter. First, Kemper delivered solid operating results with an adjusted ROE of 15% and year over year adjusted book value per share growth of 14%. Specialty auto continued to produce strong underlying results with solid year over year PIF growth and an underlying combined ratio of 93.6%. Our competitive advantages continue to give us confidence in our ability to navigate the normalization of the auto market. And finally, our capital and liquidity position provides significant financial flexibility.

[Joseph Lacher, President & CEO at Kemper]

Our debt to cap ratio is near our long term target range. Operating cash flows hit an all time high. We repurchased $80,000,000 of stock since April 1 and now have the authorization to repurchase up to another $550,000,000 I want to take a moment to thank our entire Kemper team for their efforts. These results would not be possible without their commitment and hard work towards achieving our goals. We remain confident in our ability to create long term shareholder value. With that, operator, we may now take questions.

[Operator]

Ladies and gentlemen, we will now begin the question and answer session. Session. Your first question comes from the line of Andrew Kligerman from TD Cowen. Please go ahead.

[Andrew Kligerman, Managing Director at TD Securities]

Hey. Good afternoon. So the first question is around TIF growth. I and pricing, kind of a a dual dual question. With with written premium up 7% and if up 8% year over year, the question is, one, does that imply pricing came down and could you give color on that?

[Andrew Kligerman, Managing Director at TD Securities]

And two, PIF is actually down 70 basis points sequentially. Are you are you kinda putting the brakes on things a little bit as we move into the second half?

[Joseph Lacher, President & CEO at Kemper]

Sure, Andrew. This is Joe. I'll I'll take those. Couple of different things. Let's break them apart.

[Joseph Lacher, President & CEO at Kemper]

The the PIF versus written premium difference is really modest issues around geographic mix. It's no no significant material change in any in any premium rate filings. There there's modest changes in certain geographies, but no no significant change. View that as more of an anomaly. Second, we've continued we've historically talked to you guys about year over year PIF growth and encourage you not to be looking at sequential quarter because there's such seasonality differences in specialty auto.

[Joseph Lacher, President & CEO at Kemper]

We specifically pointed you to sequential quarter pip when we were going from declining to growing so that you would see that as a leading indicator of a material change, not a a sort of rolling four quarter. We we are past that. We mentioned that last quarter. If you spend your time looking at sequential quarter PIP growth, you're gonna get tied up in seasonality issues. Matt made a couple comments on that.

[Joseph Lacher, President & CEO at Kemper]

The back half of the year in specialty auto has a significant seasonality difference to the first half of the year. That's normal. That's happened for the last twenty years. We expect it to continue to happen. It will occur.

[Joseph Lacher, President & CEO at Kemper]

It's got nothing to do with us putting on the brakes. We're not putting on the brakes. We're still, you know, happy, open for business, and anticipate that that we're going to be a profitably growing business. What you're seeing in PIF is exactly what most of our competitors have been talking about. We've been shifting as an industry from a hard market to a more normal market.

[Joseph Lacher, President & CEO at Kemper]

The the double digit growth that that folks experienced, in the last year or year and a half are not long term normal environments. They're an anomaly of a hard market. I think Progressive had a call this morning and very aggressively reminded everybody of that, and we're competing in the same markets. Carriers are opening again. They're active, and that will cause that outsized growth to normalize.

[Joseph Lacher, President & CEO at Kemper]

What we expect to see is what we've described long term to in the investor community, that in a normal specialty auto environment, we expect to see, you know, low to mid single digit PIF growth on year over year basis. That's somewhere in a three to 7% range depending on sort of where we are in any given, you know, in any given 90 period. And we would expect that as a good modeling view long term from a PIF perspective. We would expect maintenance rate largely to be continuing to work its way through the system. And we would expect, as we said, combined ratios over a number of quarters will migrate their way back into that 93 and a half to 94 and a half, 95 range, which was where they've been in the long term.

[Joseph Lacher, President & CEO at Kemper]

As as, again, a reminder, if we were thinking, you know, pre pandemic, seventeen, eighteen, nineteen, twenty, a '93 and a half and an 8% PIF growth, we all have been doing a happy dance. It's a and it's attractive set of numbers for a long term normal market. It just looks a little off compared to exceptionally high numbers, which we've pointed out to folks is not gonna continue. So and then not because we didn't want it to, because the market will normalize and competitors will work their way in. So it's it's no in no way, shape, or form us tapping breaks or intending to slow down.

[Andrew Kligerman, Managing Director at TD Securities]

That was super helpful, Joe. And then just my follow-up is around your your confidence in the loss results going forward. So private passenger auto at $94.04 calendar year, is getting close to that 95. Do you think you could hold it there? And then with the 19,000,000 ish charge in commercial auto, are you confident that you've kind of nipped it and we won't see see much of anything, there going forward? Thank you.

[Joseph Lacher, President & CEO at Kemper]

Sure. I'm gonna break those apart into two distinct buckets. The general combined ratio guidance we give of maybe a 93 and a half, 95 normal range. If it peaks above 95, we don't start, you know, getting any enormous angst for a quarter or two. We we've got a really an aggressive hard stop at a 96.

[Joseph Lacher, President & CEO at Kemper]

There's normally, in this business, fifty, seventy basis points on any given quarter that can move around. I'd expect us to be in that range and in that zone and don't have a particular angst around, you know, one quarter being at the edge of that. It will it will sort of stay in that zone, and I would expect it to be there. The the second piece is around the 19,000,000 that we talked about largely in commercial vehicle. We saw a modest uptick in a a range of accident years, probably driven by the what we're collectively, as an industry, we've described as social inflation.

[Joseph Lacher, President & CEO at Kemper]

We made some balance sheet adjustments for that. It was an abnormally active quarter. We made some adjustments as a result of that, and that includes our current accident year pick in both CV and private passenger auto to reflect that environment. So that may have been you know, if you think about the combined ratio in private passenger auto, a little bit of normal seasonality in the second quarter. That's normal to see it up a bit.

[Joseph Lacher, President & CEO at Kemper]

And a bit of us pushing that current accident year up a bit to take into account that that environmental environmental issue. We believe we've got it right there. Could there be a little bit more noise in any given quarter? Yeah. Maybe.

[Joseph Lacher, President & CEO at Kemper]

But what we tried to discuss and tried to comment on in commercial vehicle is it seems like every four, six, eight quarters, you get one or two in there that have a has a little bit of a pop. If you look at it on a rolling four to eight quarter basis, that's a very attractive business for us. We have a high degree of comfort in it, and we respond, if we get a little bit of, you know, anomalous noise, in a quarter appropriately, but it doesn't change our fundamental positive view on the outlook of that business.

[Andrew Kligerman, Managing Director at TD Securities]

Very helpful. Thank you.

[Operator]

The next question comes from the line of Mitch Rubin from Raymond James. Please go ahead.

[Mitchell Rubin, Equity Research Associate at Raymond James]

Hey, thank you guys for taking my call. This is Mitch on behalf of Greg Peters. So I wanted to ask about the, higher minimum limits in California, and I was wondering if you could quantify the impact on premiums this quarter. Thank you.

[Joseph Lacher, President & CEO at Kemper]

Sure. The the minimum limits in California, that would have had and and I apologize, and we're trying to get you the exact number. It would have had roughly the same impact you would have seen in the first quarter for that. And our policies are running six month policies so that that largely its impact will have worked its way through the book. This is the last quarter that anomaly will have occurred.

[Joseph Lacher, President & CEO at Kemper]

I mean that and and I apologize, Mitch. We're gonna have to get back to you on the specific number on that. I I'm I'm thinking I've got it at the top of my head, but I'm certain I'm gonna be off on a little bit. Let us get back to you. It's consistent with what we saw in the first quarter.

[Joseph Lacher, President & CEO at Kemper]

And given our policies are virtually a hundred percent six month in California, it's it's worked its way through.

[Mitchell Rubin, Equity Research Associate at Raymond James]

Alright. Thank you for the color on that. My follow-up is on retention and how that's been differing by state.

[Joseph Lacher, President & CEO at Kemper]

Yeah, Matt. Why don't you go ahead and take a take a shot at that?

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

Yeah, Mitch.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

You know, the texture varies a bit by by state. Some of the commentary we left with we started with earlier on California. California market, you know, continues to be, you know, on a relatively hard basis. We're we're seeing limited supply relative to historical trends there. So retention generally is holding, in that marketplace.

[Matthew Hunton, EVP & President - Kemper Auto at Kemper]

You know, Florida is, we're seeing a modest, maybe a modest decline in in policy life expectancy. That's that's normal as agents are are reshopping books as carrier premiums are are shifting down, but it's it's not moving materially and changing our perspectives on that state. Texas is is pretty stable. We are seeing, you know, less shopping in the marketplace more recently, so we're you know, likely that will that will abate a bit as as, you know, the business sort of rolls forward. But retention overall is is has been pretty stable.

[Mitchell Rubin, Equity Research Associate at Raymond James]

Alright. Thank you for the answers.

[Operator]

Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number one on your touch tone phone. The next question is from the line of Paul Newsome from Piper Sandler. Please go ahead.

[Paul Newsome, MD & Senior Research Analyst at Piper Sandler Companies]

Good afternoon. One maybe follow-up on the adverse development. Was there any anything besides just severity going up that like, was there any geographic pattern to it? Was there anything was was it just purely liability related things, or was there some health care inflation where you I think you said bodily injury. Just wanna make sure we got all the pieces there on the adverse development.

[Bradley Camden, EVP & CFO at Kemper]

Sure, Paul. This is Brad. Great question. You know, specifically in CVBI where we're seeing the adverse development, it was in our large large loss bucket, which is a very low frequency, higher severity, coverage or loss bucket. It's important to articulate those those items because it's not an underwriting issue.

[Bradley Camden, EVP & CFO at Kemper]

There's no significant increase in frequency. It's simply a result of social inflation over time, and these things are tend to be two or three years old as they develop. And in the more recent accident years, we, you know, strengthened the balance sheet as a result of that. So, you know, the business overall continues to perform extremely well, grew significantly year over year, and the underlying combined ratio in the low nineties, very strong overall. Just more episodic, large loss events.

[Bradley Camden, EVP & CFO at Kemper]

And as Joe said, more litigation activity in the second quarter than we've seen in the past.

[Paul Newsome, MD & Senior Research Analyst at Piper Sandler Companies]

And then a related question and and a big picture question really to the the combined ratio thoughts that you've had over the cycle. We're kinda in the zone for a normal underwriting profitability, and I think we're sort of in the zone from a debt to capital perspective. Are there pieces there that would suggest that maybe this is sort of essentially in the zone for return on equity as well, or is there some possibility for improved ROE or or anyway over the cycle?

[Joseph Lacher, President & CEO at Kemper]

Yeah. It's you know, there's always some variation in there, Paul. I we look at our adjusted ROE because there's a a significant amount of goodwill on the balance sheet at at being roughly 15%. You know, that's a a reasonably attractive spot. I think it can be and can and has over time moved up a bit.

[Joseph Lacher, President & CEO at Kemper]

And and I think it's in a, you know, in a reasonable zone with with some expected volatility there. The other thing I'd point you to, and and maybe you were gonna ask about it next, and I maybe jump in the gun, but there's a a significant share repurchase authorization that that came out with the board. I think it's actually at $500,000,000, it's equal to the the last two reauthorizations or authorizations combined. It amounts to when you include the 50,000,000 remaining and the the 80,000,000 we bought in the last ninety days, roughly 16% of of the current market cap of the company. So it's a fairly significant opportunity there.

[Joseph Lacher, President & CEO at Kemper]

We we believe the returns are good in this business. We we have a healthy balance sheet, a healthy liquidity, and think the the stock's somewhat undervalued. And we're gonna opportunistically buy and aggressively defend it in the marketplace because we think there there's sort of an unrecognized upside there.

[Paul Newsome, MD & Senior Research Analyst at Piper Sandler Companies]

Thank you. Appreciate the help.

[Operator]

Thank you. There are no further questions at this time. I'd like to turn the call over to Joe Locker for closing comments. Sir, please go ahead.

[Joseph Lacher, President & CEO at Kemper]

Hey, thank you again for everybody for your time and your attention. We look forward to talking to you next quarter and look forward to continue to be strong, thoughtful competitors in the marketplace.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Participants

Executives

• Michael Marinaccio, VP - Corporate Development
• Joseph Lacher, President & CEO
• Bradley Camden, EVP & CFO
• Matthew Hunton, EVP & President - Kemper Auto

Analysts

• Andrew Kligerman, Managing Director at TD Securities
• Mitchell Rubin, Equity Research Associate at Raymond James
• Paul Newsome, MD & Senior Research Analyst at Piper Sandler Companies