Hard insurance market to last for a few more years

Kemper hosted its Q2’23 earnings call on Aug 7, 2023. Select highlights:

• H1’23 financial results didn’t meet targets.
• The industry traditionally relies on historical patterns to predict future behaviors.
  Recently, these patterns are deviating from their historical norms, particularly in various aspects of consumer behavior (e.g., buying habits, claim filings, litigation tendencies).
• These deviations are further intensified by significant changes in competitor actions.
• This unpredictable environment is expected to persist for the next few years, leading to a prolonged “hard market.”
• Despite these challenges, Kemper believes its specialized market expertise and agile operational model equip it to handle and navigate this shifting landscape effectively.
• Kemper is investing in business intelligence and faster assimilation and execution of insights.
• Expect to achieve an underwriting profit in the second half of 2023. And for 2024, we expect to generate a return on equity equal to or greater than 10%.
• The California Department of Insurance approved a rate increase of approximately 30 points for Specialty P&C private passenger auto book, effective August 4.
• The Illinois Department of Insurance approved Kemper Reciprocal formation. Expect to write business within the reciprocal in the third quarter.
• After reviewing Preferred P&C segment, Kemper decided to exit that business. Starting in Q3, segment reporting will only reflect our Specialty P&C and Life & Health businesses.
• Kemper lost money this quarter. Part of this loss is due to a decrease in value from a part of the business and another part is because of high costs from major unexpected events. It also set aside $26 million more than expected for future expenses.
• Since mid-2021, Kemper had a total rate increase of 54 points, which includes recent approvals in California. So far, 17 of those points have been implemented, and this will go up to about 23 points by the end of the next quarter. As more policies in California are renewed, this rate will increase faster. Kemper will also apply for more rate increases in other states if necessary.
• Had the fewest number of death-related claims in the past 10 years. It’s 12% lower than the average from 2018 and 2019. Paid out a bit less in benefits compared to last year, but the amount earned from policy sales has increased slightly. People are continuing with their life insurance at levels similar to before the pandemic. All these factors mean L&H business is set to keep making more profit and have a good cash flow.