Kemper Q1 Earnings Call Highlights

Key Points

• Kemper posted a first-quarter 2026 GAAP net loss of $1.7 million, as results were hurt by elevated loss costs in California personal auto and statutory premium refunds in Florida. Excluding the Florida refund impact, adjusted net operating income would have been $34.6 million.
• California auto remains the company’s biggest headwind, but Kemper secured rate increases that should help in the second half of the year. Management is also pursuing underwriting, claims, and other non-rate actions to improve profitability.
• Commercial auto, Kemper Life, and growth in Florida and Texas helped offset weakness elsewhere, with commercial auto hitting record production and life income remaining stable. Management also said restructuring efforts are on track, with more than $60 million in run-rate savings identified.

Kemper NYSE: KMPR reported a first-quarter 2026 GAAP net loss of $1.7 million, or $0.03 per share, as management said results fell short of expectations due largely to elevated loss costs in California personal auto and statutory premium refunds in Florida.

Adjusted consolidated net operating income was $12.5 million, or $0.21 per share, according to Executive Vice President and Chief Financial Officer Brad Camden. Excluding the impact of the Florida refunds, adjusted net operating income was $34.6 million, or $0.59 per share. Net investment income was $107 million, up $4 million sequentially, primarily due to stronger alternative investment performance.

Interim Chief Executive Officer Tom Evans said the quarter was “disappointing” but emphasized that several parts of the business continued to perform well, including commercial auto, Kemper Life and personal auto growth in Florida and Texas.

California Personal Auto Remains Key Headwind

Management said the company’s California personal auto business continued to face pressure from higher loss costs following the increase in minimum liability insurance limits that took effect in January 2025. Evans said those changes have complicated and exacerbated loss costs, while Camden said the environment remains Kemper’s most significant headwind.

Matt Hunton, executive vice president and president of Kemper Auto, said the company is seeing elevated liability loss costs driven by broader legal system dynamics, including attorney involvement. Hunton said Kemper is taking both rate and non-rate actions, including underwriting refinements and claims process changes aimed at third-party claim management and attorney involvement.

Camden said Kemper received approval for a 6.9% rate increase on two-thirds of its California book, effective April 6, and approval for a 3% increase on the remaining third, effective in early June. He said the company expects initial benefits in the second quarter and a more meaningful impact in the second half of the year.

During the question-and-answer session, Hunton said Kemper has additional filings pending with the California Department of Insurance and expects multiple filings to affect the private passenger auto book during the year. He noted that while the 6.9% approved filing is the aggregate increase, the effect varies by coverage, including roughly 50 points on bodily injury within the April change.

Florida Refunds Weigh on Results, But Market Seen as Healthy

Kemper’s results were also affected by statutory premium refunds in Florida. Evans said the refunds are required under state law when insurer profits exceed certain thresholds over a three-year period. Management said Florida’s 2023 tort reform reduced loss costs and improved personal injury protection coverage performance, leading profitability to exceed regulatory thresholds.

Camden said Kemper increased its policyholder premium refund liability for accident years 2023 through 2025 and established a new liability for 2024 through 2026, based on current loss expectations.

Despite the refund impact, management said Florida remains a positive market for Kemper. Evans said the current auto business in Florida is performing well and that rate adjustments are leading to profitable growth. Camden said Florida and Texas, two key personal auto growth states, posted a 4.9% sequential increase in policies in force and an underlying combined ratio of 93.7%.

Commercial Auto and Life Provide Offsets

Commercial auto remained a bright spot in the quarter. Camden said the business achieved record production and exceeded $1 billion in trailing 12-month written premium for the first time. Policies in force increased 3.2% sequentially and 10% year over year, with an underlying combined ratio of 92.4%.

Hunton said Kemper’s commercial auto business has delivered a combined ratio in the low 90s while growing at a 23% annual rate since 2019. He said the business focuses on specialized products for small businesses and is becoming a larger contributor to the overall portfolio, helping diversify the specialty auto business across geographies and products.

Kemper Life also delivered stable results. Chris Flint, executive vice president and president of Kemper Life, said the segment generated adjusted consolidated net operating income of $18 million, up slightly from the prior-year period, supported by expense management and favorable mortality and lapse experience. The segment ended the quarter with approximately $19.7 billion of in-force face value.

Flint said earned premiums increased slightly year over year and that average premium per policy issued rose about 7%, reflecting pricing strength and business mix. He also said Kemper is modernizing its life distribution model to improve agent productivity, align incentives and support persistency.

Restructuring and Diversification Efforts Continue

Evans said Kemper is focused on improving profitability, reducing volatility and delivering shareholder value. He said the company’s restructuring program, launched last fall, is well underway, with cumulative run-rate savings of more than $60 million identified and the majority already actioned.

Camden said Kemper has actioned $50 million of those savings to date and is evaluating additional opportunities. The company’s medium-term goal is to reduce the specialty auto expense ratio to below 20%, compared with approximately 22% currently.

Management also said the company is working with a third party to review its end-to-end claims processes, beginning with third-party liability. Camden said even modest improvements in losses and loss adjustment expenses could create meaningful value because three-quarters of premium is allocated to losses and LAE.

Kemper is also expanding its Basic Value Plus, or BVP, product. Hunton said BVP has been in Arizona and Oregon for more than nine months, launched in Florida at the end of the first quarter and has been approved in Texas, with rollout planned for the second quarter. He said the product is designed to improve pricing precision, risk selection and alignment between rate and underlying risk.

Leadership Updates and Capital Discussion

Evans said Kemper’s board continues to make progress on its CEO search and has seen strong interest from qualified candidates. He also announced that Kelly Coomer is joining the company as chief information officer, bringing 25 years of insurance technology leadership experience.

In response to an analyst question about capital, Camden said Kemper remains within its normal operating range, citing an RBC range of 225% to 300%. He said the company has capital throughout the organization and expects results to improve from current levels.

Evans closed the call by saying Kemper remains focused on executing its priorities, improving performance and positioning the company for success, while acknowledging that the first quarter was challenging.

About Kemper NYSE: KMPR

Kemper Corporation NYSE: KMPR is a diversified insurance holding company headquartered in Chicago, Illinois. Formed through the rebranding of Unitrin in 2010, Kemper has established a nationwide presence by offering a broad array of property and casualty insurance products. The company distributes its products through independent agents, brokers and direct-to-consumer channels, serving both individual policyholders and commercial clients.

The personal insurance segment provides coverage for automobiles, homeowners, renters and umbrella lines, while the commercial business focuses on liability, workers' compensation and specialty property solutions tailored to small and mid-sized enterprises.

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