Kemper Q3 Earnings Call Highlights

Key Points

• Kemper reported Q3 net income of $52.4 million ($0.88 per diluted share) and adjusted operating income of $59.9 million ($1.01 per share), as improving personal auto results helped offset ongoing claims pressure.
• Personal auto’s underlying combined ratio improved to 103.3%, but the business remains unprofitable as policies in force fell about 10% in the quarter to roughly 835,000. Kemper expects California’s underlying ratio to move below 100% during 2027.
• Commercial auto premiums and policies grew, but rising bodily injury costs pushed its underlying combined ratio 4.1 points higher to 97.8%. Restructuring actions have generated about $90 million in annualized savings.

Kemper NYSE: KMPR reported third-quarter 2026 net income of $52.4 million as improving personal auto underwriting results helped offset continued pressure from bodily injury claims and declining policy counts.

Net income was $0.88 per diluted share, while adjusted consolidated net operating income was $59.9 million, or $1.01 per diluted share. President and CEO Steve McAnena said the insurer’s actions to improve profitability were taking hold, but cautioned that personal auto had not yet reached an underwriting profit.

“We’re encouraged by our progress, but we’re not declaring victory,” McAnena said. “There’s much work ahead.”

Personal Auto Improves as Policies Decline

Kemper’s specialty property and casualty segment reported a combined ratio of 99.2%, down 4.8 percentage points from the second quarter. The result benefited from $23 million of favorable prior-year reserve development. Its underlying combined ratio improved to 101.7% from 102.3%.

In personal auto, the reported combined ratio fell to 99.3% from 105% in the prior quarter. The underlying ratio improved 2.2 points to 103.3%. A combined ratio below 100% indicates an underwriting profit.

California, Kemper’s largest personal auto market, accounted for much of the improvement. Its underlying combined ratio fell 5.2 points sequentially to 102.1%. CFO Brad Camden said the company had received approval for cumulative California personal auto rate increases of approximately 13% since the beginning of 2025, including about 50% for bodily injury coverage.

Camden said bodily injury had been the greatest source of margin pressure following last year’s increase in California’s financial responsibility limits. The company expects more recent rate increases to continue earning into the book.

The profitability measures came with lower production. Personal auto earned premiums fell 7% sequentially to $600 million, and policies in force declined approximately 10% during the quarter. McAnena said Kemper had about 835,000 personal auto policies in force, down from 1.1 million a year earlier.

McAnena said the company expects to make progress toward an underlying combined ratio below 100% in California during 2027, although he could not identify an exact quarter when profitability would be restored. Policy counts typically stabilize a couple of quarters after profitability improves, he said, with the timing also dependent on competitors’ pricing actions.

Kemper is working to reduce its concentration in California, which represented 63% of personal auto policies, down from 67% earlier this year. Florida and Texas accounted for 28% of policies and approximately 79% of new business direct written premium.

Florida Rebates and Commercial Auto Pressure

Camden said a $10 million increase in Kemper’s Florida excess-profit liability reduced earned premium and negatively affected the third-quarter combined ratio. Adjusting for that item, the specialty P&C segment’s underlying combined ratio would have been 100.5%, compared with the reported 101.7%, he said.

Kemper recently announced $46.2 million in rebates to eligible Florida policyholders for accident years 2023 through 2025. Camden said the amount had previously been recorded as a liability and had no impact on third-quarter results. The company also established a $29 million liability for the current open measurement period covering accident years 2024 through 2026.

In commercial auto, earned premiums rose 3.6% sequentially to $258 million, while policies in force increased 0.7%. The reported combined ratio improved to 99% from 101.2%, but the underlying ratio rose 4.1 points to 97.8% as bodily injury loss costs increased.

Eric Kappler, Kemper’s head of P&C, said approximately 43% of the commercial auto business is in California, where profitability has been more challenging. A 6.9% rate increase took effect in July, including a 15% increase for bodily injury coverage, and the company filed another 6.9% increase in September. Camden said Kemper had strengthened reserves in response to severity trends and rising defense and cost-containment expenses.

Expenses, Capital and Growth Plans

Kemper Life generated $20 million in adjusted net operating income, up from $18 million in the second quarter and $19 million a year earlier. Net investment income rose to $107 million from $105 million sequentially.

Camden said restructuring actions launched in 2025 had generated approximately $90 million in annualized run-rate savings, up $10 million from the amount reported last quarter. Parent-company liquidity totaled $727 million at quarter-end, including $636 million in available borrowing capacity.

Debt to capital was 28%, a level Camden said was higher than the company would like following a goodwill impairment in the prior quarter. Kemper aims to reduce the ratio toward the low 20s over time, he said. The estimated risk-based capital ratio for P&C was 230%, which Camden described as within the company’s tolerances.

To prepare for growth once profitability improves, Kemper formed a distribution and marketing organization in September under Chris Flint. McAnena said the company plans to strengthen its agent channel, build lead-generation and digital capabilities, and conduct limited tests involving emerging AI tools.

About Kemper (NYSE:KMPR)

Kemper Corporation is an insurance holding company that provides property and casualty, life, and health insurance products in the United States. Its offerings include personal auto coverage, with a focus on drivers served by specialty insurance markets, as well as life and supplemental health policies. The company distributes insurance through independent agents and other channels. Its businesses include Kemper Auto and Kemper Life, serving individuals and families across the country. Kemper traces its roots to 1912, when Lumbermens Mutual Casualty Company was founded.

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