Q2 2022 Kemper Corp Earnings Call
Good afternoon, ladies and gentlemen.
And welcome to Kemper's second quarter 2022 earnings conference call. My name is Bethany and I will be your coordinator today.
At this time all participants are in a 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.
I'd now like to introduce your host for today's call Karen Garuda temporary.
<unk> President of Investor Relations Ms. <unk> you may begin.
Thank you operator, good afternoon, everyone and welcome to Kemper's discussion of our second quarter 2022 result, this afternoon, you'll hear from Joe Lacher, Kemper's, President and Chief Executive Officer, and Chairman and Jim Mckinney, Kemper's Executive Vice President Chief Financial Officer, and Duane Sanders Kemper's Executive Vice.
President and the property and casualty Division President.
We'll make a few opening remarks to provide context around our second quarter results and then open the call for a Q&A session.
During the interactive portion of our call our presenters will be joined by John Shelley Kemper's Executive Vice President and Chief Investment Officer.
After the market close today, we issued our earnings release and published our earnings presentation and financial supplement and Form 10-Q, you can find these documents on the investors section of our web site Kemper Dotcom.
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 and its future results of operations and financial condition.
Our actual future results and financial condition may differ materially from these statements. These statements may also be impacted by the COVID-19 pandemic for information and additional risks that may impact. These forward looking statements. Please refer to our 2021 Form 10-K, as well as 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 have defined and reconciled all the non-GAAP financial measures to GAAP, where required in accordance with the SEC.
You can find each of these documents on the investors section of our web site Kemper Dot com.
All comparative references will be to the corresponding 2021 period, unless otherwise stated I will now turn the call over to Joe.
Thank you Karen and good afternoon, everyone and thank you for joining us before we discuss our second quarter results earlier today, we announced the sale of our reserve National Insurance Company unit subsidiaries, which are predominantly focused on accident and health insurance and medical mutual of Ohio.
Health business is smaller in scale, we would require significant additional investment to meaningfully impact our portfolio.
Medical mutual is focused on the health insurance market. We're pleased to have engaged your buyer that understands the value of our talent and the Kimball health team will be moving over in its entirety enjoining the medical mutual G. We expect the transaction to close later this year or in early 2023 subject to regulatory approval.
Moving to current results today.
Today, we reported second quarter results that showed progress towards restoring profitability, we're pleased that our rate and non rate actions accelerated in the quarter. The cumulative benefit of the actions taken over the past year continue to earn it. Unfortunately, the industry experienced increased severity inflation over the first quarter. This is.
Evident later in the quarter as supply chain and other disruptions increased this pressure muted the benefits of our actions.
As we've discussed previously this inflationary launch environment is dynamic and a path to target profitability is unlikely to be linear.
We remain on the balls of our feet in a position to quickly adapt our business as appropriate.
Well, we still have work to do we are confident that overtime, our actions will return us to our long term financial targets.
Turning to page four.
Second quarter auto severity was driven by a number of factors. These include part cost labor rates rental car prices kind of resolved are remediated clean medical inflation and utilization and increased attorney representation.
I agree that impact of the increase in sequential quarters severity was most visible late in the quarter.
When we first spoke about the anticipated post pandemic loss disruptions, we highlighted a couple of key points.
First it rate increases with lag inflation increases.
Second the time to return to equilibrium would be driven most significantly by how long it took loss inflation to stabilize and third but the pressure on loss cost in any given quarter was likely to move around.
Initially it was driven most significantly by frequency and used car prices. The current quarter's increase in severity trend was driven largely by increased repair and remediation times and to a lesser degree bodily injury related costs.
Combat. These attacks, we again pushed forward with both our rate and non rate profit restoration initiatives. We continue to believe that we are in a prolonged inflationary environment is both supply and demand remain out of balance.
Profit restoration activity corresponds to this assessment.
This quarter, we exceeded the expectations, we outlined in the first quarter because the number of rate filings submitted the percentage of our book impacted and the level of rate increases approved Duane will provide more details later.
We expect the cumulative actions taken since the second quarter of 2021 rolls off and meaningful acceleration and earned rate each quarter.
This will contribute significantly toward establishing an equilibrium between earned premiums and loss costs, which have been out of balance due to the pandemic induced inflationary environment.
In the life and health segment, our financial results continued to be negatively impacted by the pandemic and excess benefit costs. This.
This quarter, however, and largely in line with industry trends, we've seen a sequential decline in mortality.
There's mortality normalizes, our life business will see improved profitability.
In summary, our profit improvement actions have taken hold and will help to offset the ongoing environmental pressures will remain a source of strength for our stakeholders and are well positioned for long term profitable growth.
I'll now turn the call over to Jim to discuss our operating results in more detail.
Thank you Joe I will begin on page five with our consolidated financial results.
For the quarter, we generated a net loss of $1 17 per diluted share and an adjusted consolidated net operating loss of 62 cents per diluted share.
While the earn in of profit restoration items continues to accelerate.
Obviously mentioned environmental challenges facing the P&C and life insurance industry continued to impact financial results during the back half of the quarter. The P&C businesses incurred it further uptick in loss cost severity trends that reduce the impact of previous actions.
Claims activity largely mitigated the impact on prior year accident texts that youre seeing through the quarters modest favorable prior year development.
For the current accident year loss trend increase delayed the expected financial improvement this quarter, yes.
We achieved increase in rate and non rate activities is expected to offset the impact on 2020 financial results.
In terms of our life and health segment National mortality trends moderated in the quarter and have continued to do so.
This coupled with strong investment income improved the segment's reported financial results going forward, we expect mortality trends to continue to align with national trends to the extent that these remain favorable we expect underwriting profitability to continue to improve.
From a priority perspective until we return to target profitability. Our focus is on profit restoration initiatives in home improvement projects.
Turning to page six this.
Slide highlights the strength of our balance sheet, we maintain a healthy liquidity balance of $1 2 billion.
And our insurance entities are well capitalized.
Turning to page seven.
Net investment income for the quarter was $119 million.
This included a $13 million one time gain on a real estate investment in the quarter. We took several actions to reduce risk and increase liquidity in our portfolio. These actions provide us with additional flexibility to navigate a dynamic market environment and capture the benefit of increasing interest rates.
Overall, our portfolio construction philosophy remains unchanged, we continue to match our assets with our liabilities and allocate capital to sectors, where we believe we will be compensated for the risk we take.
In closing as indicated in past quarters. It will take time for restoration actions to fully earn in to our results. Although the company's quarterly financial performance continues to be pressured by various environmental factors. We remain confident the corrective actions, we have and are taking will overtime return us to our financial targets.
I'll now turn the call over to Duane to provide the details on our P&C segments.
Thank you Jim and good afternoon, everyone as Joe mentioned profit restoration progress accelerated but its impact was offset by increased sequential inflation pressure.
Moving to page eight we will begin with our specialty P&C business details.
For the segment policies in force declined about 9% while earned premium was up three 4% in the second quarter for private passenger auto we exceeded our filed rate expectations filing for an additional 19% of rate on roughly one third of the book.
We plan to file for an additional 11% from 6% of the book in the third quarter.
At this point, we have two four points of earned rate representing 26% of the accumulative average written rate increase there.
Earned impact of our rate actions will accelerate over the coming quarters and together with non rate actions will further offset the impact of the current environmental pressures and put us on the path to profitability.
Finally, our commercial vehicle business continues to operate within our financial targets.
Due to its underlying core capabilities and targeted market approach for Mercury vehicle as experienced growth in policies in force every quarter. Following the 2018 Infinity acquisition year.
Year over year, we have seen net written premium growth of 42% and policies in force growth of 58% given the strength of the underlying business model and our ability to continue to achieve great. We will continue to grow the commercial vehicle business.
Now, let's turn to page nine.
Preferred auto experienced a sequential underlying combined ratio decrease of three points.
We continue to make progress towards offsetting severity through rate and non rate actions in the quarter in.
In addition, we're experiencing benefits from the geographic repositioning of the book, which should support long term profitable growth.
Looking at the chart on the upper right, we filed for an additional 7% of rate on roughly one third of the preferred auto book during the second quarter.
Planning to file an additional 15% of rate on 8% of the book in the third quarter.
Like the specialty business the benefit lag from written to earned rate from the filings over the last 12 months is also significant in.
In the second quarter, we have 1.3 points of earned rate representing 20% of the cumulative written rate increase Inc.
In closing despite the incremental pressures in the second quarter were close to written rate adequacy in most states outside of California.
We've been responsive to rate needs driven by identifying the pressure points early in the cycle. We're in the top quartile in our industry for restoration actions, although our actions will take time to earn into the book the pace will accelerate throughout the balance of the year.
Now I'll turn the call back to Joe.
Thank you Duane turning to our life and health segment on page 10.
Profitability improved due to declining COVID-19 related mortality solid investment performance income benefited from higher net investment spread and a one time valuation gain on a real estate investment.
Notable trends within the quarter include life, new business sales at pre pandemic levels, despite significant inflationary pressures the disproportionately impact our customer segment.
Persistency above 2017 to 2019 results.
Rising interest rates and corresponding new money spreads new money yields over crediting rates.
These items provide a favorable tailwind to restoring the business to its pre pandemic levels of profitability.
Finally, I'd like to thank all our employees for their continued contributions and support as we continue to navigate this environment.
Overall, our profit restoration actions are working we have more work to do but we're confident in our approach will provide steady improvement.
I'll now turn the call over to the operator for questions.
Thank you.
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First question comes from the line of Greg Peters with Raymond James. Please go ahead.
Good afternoon, everyone I I I'd like to begin.
The question I thought the slide.
In your Investor deck.
I think it's slide the one that group. So just lastly, the one that does inflation stats, which is slide 14.
What's interesting in the context of your comments around filed rate actions outpacing projections because in this chart. It does look like as you've highlighted Joe in the comments that motor vehicle body work inflation trends are working against you.
So I am trying to.
Match, what we see in this chart versus the rhetoric around filed rate actions and the lag.
When are we going to cross that threshold, where you start to see these rate actions drive match, what you're seeing in the inflation stats and when will we see you know when do you think that it will start to see improvement in the underlying combined ratio.
So a couple of them will do a tag team on this one Greg.
There's a couple of there's a couple of pieces going on in page.
Eight and nine we try to give you a view of filed rates effective than how they will get written into the book and then earned into the book.
Because there's a lag and what we've been trying to do on those slides is show you. We may file, let's look at the second quarter.
Or even in the first quarter for specialty auto we filed for 59%.
59% of our book, we had an 8% increase.
Those there was a 21% of the book kind of an effective rate of 10, but that only translated into a 6% written in a 1% earned theres a lag on that.
What that is is.
Once it's approved.
Typically well go in to new business immediately but in some states. There is a lag renewals have a 45 or 60 day lag and then you've got to have the book.
Turnover on one every month, it's got to be written and then you start to earning in process.
So you really just have to sort of lay out the parallelogram and watch those come through it's just a math exercise.
Timing.
<unk> immediately impacts loss results because there is no lag on it every every claim immediately gets it.
That's what we were trying to convey on on what now is slide 13 that illustrative example.
And very specifically on 13, we gave you a couple of lines and Blue in a couple of lines in Red.
And those aren't meant to be exact lines. Those are meant to be a spread what we've said in the past is we're not 100% sure when they're going to cross because it's a function of what are the regulators approve and what's the actual inflation going on in the market.
We've seen regulators outside of California, New York.
Be very rational and understanding the economic reality of what's going on.
And moving rates up.
And an appropriate pace to preserve their market stability.
We've seen inflation be lumpier in spots.
And it will work it will work at page 14 is giving you inflation by component.
It's not waiting those in terms of how they work back into a total loss content. So it's intended to give you a little bit of an illustrative view on how the components are moving around.
Hey, Greg Jimmy Kitty I would just add on top of them some of the comments.
I mean, I think it's a combination of things that youre talking about right at your underwriting actions that you've taken plus the earned rate.
If I think about this particular quarter.
We were initially thinking that there would likely be a little bit more of a combined ratio improvement.
And then what ended up transpiring over the corner you don't align with my comment.
Basically what we saw is about another incremental two to three points of.
Severity pressure coming through to.
To give you an idea of what we run these aren't small numbers, we were projecting more like a 9% number and we got something that was closer to 12, depending on which coverage and what youre looking at and how you're mixing.
So when you think about that that ate up some of the anticipated improvement that we had no. We also outpaced from a rate filing perspective. Another so when I think about kind of the run rate number say for the 2023 period or not.
I'm not seeing any change in what I actually would anticipate reporting or currently and I'm not trying to get into that right right. Now for Q1 of 2023, I do see a quarter or a little bit longer of a pushback in some of that improvement they came through.
This quarter.
My statements, though kind of with where I continue to think in terms of what I would be if I were trying to start with an underlying assumption and then make adjustments up or down I would start with underwriting actions kind of continuing to try to either be driven to offset some of the trend or worked out at this stage outside of kind of Pops and I would think.
About the incremental earned rate. So if we're going from two to four I think about that as maybe the baseline.
Combined ratio improvement that you might anticipate on a quarter over quarter basis than needing to adjust if we get a pop like late.
You know we do the best we can to forecast those things, but there's a little bit. There's just only so much that we can do on that front again, we're trying to give you the best estimates that we have.
But at that same point in time absent those things. We would generally you don't think that our underwriting actions and that they were going to youre going to hold serve on that inflationary front end and that will be the incremental improvement.
Coming through on a quarter over quarter basis.
Hopefully that's helpful. I'm happy to go deeper or talk if I have answered that.
That's good detail I guess I, you know on the underwriting our non rate actions that you've taken.
Where are we what inning are we in in that or is that just a continuous cycle, that's going to that's going to persist until you get to underwriting profitability.
Well I think in terms of the earning component of that right or legacy backup here for a moment like in terms of the actions that we've taken.
We continue to take more we can do to work those and that will they will stay until we are hitting the underwriting profitability targets in that the.
We intend to achieve or need to achieve right that are appropriate for the business now in terms of their earning which is different than when we've actually taken them, they're earning into the book right. So if you have underwriting tiers or other things that have changed and let's say that that slots up let's say 10 points right well on a 12 month policy.
Probably take you anywhere it's going to take you 23 to 24 months for that to fully earn into the book.
And it'll be 14 to 16 on a six month policy basis, where you make those type of adjustments. So long story short I would say, we're in the third or fourth inning maybe.
Fifth inning in terms of seeing them earn their way into the book for that improvement, but those decisions have been so we're probably six or seventh inning and Duane correct me if I'm wrong in terms of the actions that we've taken in and maybe you could even later than that in terms of where we're at on all the underwriting things we've done.
I'll add on that.
What Jim said.
Greg to the extent inflation continues to incrementally deteriorate.
We will need to incrementally take more rate and potentially more non rate actions if inflation stabilizes at eight or nine points for the next three years than those those actions will catch up and eventually we'll handle it all with rate and we might take some of those actions off.
If things continue to deteriorate. If we you know we saw nine jumped a 11 or 12. This next quarter jumps to 14 or 15.
And then we're going to wind up having to take further actions and we will continue to do that.
Really what we were trying to express in that old slide 13.
Eight.
Eight eight.
Stable, but high level of inflation is irritating, but we will eventually get back into equilibrium.
Volatile up and down on inflation is one of the more challenging environment to deal with just because of the lag there.
Is it pricing comes back with any earned lag in any of the earned lag isn't anymore, and just saying how long does it take the policies to renew at the new price.
And what's the exposure you're dealing with.
Okay.
Yeah.
Thanks for that clarification that's helpful.
The final question I realized there's others, probably waiting to ask questions I just wanted to touch on California, It's a big state. There's you know there's.
A lot of trucks out there regarding whether the commissioner is going to approve any rate at all think geico. There was in the news. This morning about pouring are pulling out of its agencies.
Can you give us an update sort of where we are as of the end of the quarter as it relates to the pending rate requests in California.
Yeah, right request do appear short answer it would be stuck in California, we've had a variety of discussions back and forth.
With the insurance Department some of those have been at high levels. Some of those have been deep.
Deeper with folks asking questions about the individual filings. So there's actually some work that's going on there.
The Commissioner has expressed a point of view that he thinks that that rate rebates or rate refunds to customers in the COVID-19 period.
Where were inadequate we've expressed a point of view that the insurance department looks at an eight quarter time period, when they're looking at rates. So even if you picked three or four months that might have looked like a rate refund was inadequate if you take a rolling eight quarter.
Then the refunds of rebates, we're more than adequate.
And right now there's a disagreement on that and I think the commissioners have got that disagree with the entire insurance industry.
What we're increasingly seen.
Is carriers ourselves included that are becoming increasingly less willing to write new business more restrict you from an underwriting perspective tightening everything they can.
And we will in a relative short order my personal belief is we'll start to see the markets seize up.
And they're gonna have a.
Social and cultural problem, where they're not going to able to have people.
Bind or change your auto insurance so.
I worry about it from that perspective from the customers. We think our data clearly shows that were justified for further rate increases.
It's unambiguous from that perspective I.
I know the commissioner has a point of view, but I do think that you are starting to see more and more carriers respond and more restricted fashion.
And at some point.
You know when when nobody's selling in certain segments. That's when it's completely obvious that the market is frozen and I just hope the commissioner doesn't push it to that point, because it'll take a long time to restart.
Okay.
Thanks for the detail.
Thank you Mr. Peter.
Our next question comes from the line of Matt <unk> with JMP Securities. Please go ahead.
Hey, Thanks, good afternoon.
Greg covered a lot of what I had.
Joe I wanted to.
And to clarify something I think you mentioned, a couple times and Jim might have as well about kind of the accelerating.
Premium impact as we go forward and how some of the nuances and inflation this quarter, but I'm, just kind of pushed that off by a quarter.
What I hear you say that what I also be right in concluding that.
We should expect an acceleration in accident year loss ratio improvement in the specialty auto book.
Absent further degradation in inflation.
Yeah, you should what I'd tell Ya man and let's let's take this simply let's let's let's normalize everything let's just say you had a book of business and you got a 12% rate increase on it and it was effective January one.
112th if all your policies were 12 month policies 112th of your book would be renewing that in January and would get get the 12%. So you'd basically get 1% premium I assume everything is the first of the month.
And then in February you know you'd have two months and so you get 2% of the 12 would be working its way through and it would take you till December to get all of the all of the 12 points written.
So so you would earn it.
And that pattern. So what we're telling you and the reason we built the slides the way we did on <unk> nine is we were showing you the filed an effective.
So that when you see that effective you can then say Oh now that this is effective and approved but for the passage of time. This will be written and earned into the book and it's just a matter of when those renewal dates pop up.
So so the fact that these rate increases have layered on top of each other every month. Another set of new business is getting that and another set of renewals have gotten that in the written and then that comes into the earn so what.
What was getting a lower rate last month is going to get a higher rate next month, all else being equal. So so it will accelerate as a result.
Okay, Great and then just.
Kind of along the lines of the inflationary environment.
Obviously gas prices have been quite high I would say most so in California, which is your largest state have you have you seen anything in your data, suggesting people driving less because of that or or just because of the.
The economy in general or or is that not youre not seeing that.
Were not seen.
Very significant changes in frequency that I would attribute to that there is normal volatility around frequency, but theres.
There's nothing that we'd point to and say a wholesale adjustment there.
From a frequency perspective.
Okay, Matt what I might.
Hum.
I'm, saying is I would separate environmental frequency from the frequency enhancements that we continue to bring into the book both through our underwriting actions and our pricing sophistication.
Our.
Frequency from an underwriting and pricing is.
Continues to trend.
Significantly better than say 2019 as an example, it is further better this quarter than it was actually last quarter. So you see the impact of the auctions are not going through whereas I would say that environmental frequency that you would see coming through could be anywhere from zero to say, 1%.
Many people get different estimates, but that would be kind of holding serve to I think a little bit up versus what is actually happening in our book because of the actions and the sophistication that we continue to build out.
Got you thanks, Jim that's helpful.
Thank you.
Thank you Mister car Lady.
Our next question comes from the line of Paul Newsome with Piper Sandler. Please go ahead.
Mr. Newsome, please check to see if your line is on mute it.
Good afternoon, thanks for the call it.
It's great to see the RBC ratios rise.
In the quarter.
I was wondering if you could remind us the components of the.
The liquidity at the parent company, particularly the borrowing capacity and how that all those pieces work.
You know I noticed in the debt to cap is.
Up a little bit as you would expect.
Is there a.
Perhaps there's a maximum component of that debt to cap.
So if you can kind of walk through those pieces. So we can better understand them.
Liquidity capacity.
Sure. So you know the.
The first piece is the 275 million in cash and investments that we have in our holdco.
That's just cash and investments. So obviously, we can move that around and use that to cover.
Fixed expenditures or rather as we deem appropriate.
And we've got obviously the revolving line of credit.
600 million that comes across from there that particular line, obviously, we can draw and remain in good standing.
One of the elements.
It's important to remember is that when youre thinking about some of the covenants are that that we might have on debt to cap at 35%.
That is based on an amortized cost.
Associated with that debt. So the move that you're seeing basically you're talking about the change in the fair value of debt being greater than a $1 billion through a OCI that youre looking at right in the statement, which is largely driving those numbers those numbers don't come into account with our borrowing capacity.
From that perspective, so that provides a lot of flexibility and then we have another about $300 million in access of that between of liquidity in our subsidiaries can provide to the holdco and we can move across the plate.
Needed.
On top of that we have additional dividend capacity and other elements with inside our subsidiaries I think.
If I were someone D wave, we have a lot of capital two tranches and then to eventually grow when we have effectively achieved rate adequacy across the books and then we've got a balanced curve between risk and reward for doing that.
And we've got obviously a lot of liquidity to optimize kind of the the entity structures and not that we have I'm happy to go deeper in any particular area.
I think over the top if I had to take away would be we have plenty of capital and liquidity to continue to grow and optimize the business.
But I think that that gets me where I need to go.
I wanted to ask you.
Some questions on reserve National.
Any indication I don't think you've broken that out from a profit perspective.
Certainly at least on a GAAP basis.
And I was just wondering if the.
The.
GAAP gain.
Jones, who are models is.
The basis is similar to the statutory surplus or.
Materially different number as we think about the game from reserve action.
Yeah, So think.
I think plus or minus $5 million of profit actually you know kind of run a couple of million dollars here or there.
I would is it won't be an earnings element it won't be something that.
We notice or they you noticed because that capital will be redeployed into other earning activities when frankly at a higher Roe.
For us as we move forward, so I would expect it to be accretive over the medium to longer term from an earnings perspective in terms of the additional investments we needed to make in that business for it to become meaningful for us in.
In terms of the gap.
Versus the stack view, we expect to gain from a GAAP perspective, it will be less than the statutory perspective.
No.
We'll see where everything kind of moves forward their commissions to that but you know.
Think about maybe half a turn a corner of that as a rough estimate now again I don't want I'm not confirming numbers this way or that way because there's a lot of pieces that can move between now and 12 31 Buddy.
We anticipate a gain from a GAAP perspective, as well as the statutory perspective.
Yeah.
Great and just one final.
I'll, let some other folks there.
You mentioned.
New York was.
She resisting rate early wasn't onboard as much as other.
Regulators also California, I hadn't heard of New York is doing anything different.
Different.
This is a huge state for you guys, but.
Any thoughts on those.
Why you called out New York in particular.
It's not an issue at all for us and our specialty business.
We've got a a part of our preferred business is there and they are being a little bit of a challenge in preferred auto.
Yes, the same Duane.
They've kind of shut down anything outside of the annual 4.9 that they just normally let ROE through they've they've just kind of put a hold on on additional rate filings beyond that so again, that's isolated to the New York on the preferred side.
Okay.
Great. Thank you for the health of those.
Thanks, Paul.
Thank you Mr. Nelson.
Our next question comes from the line of Brian Meredith with UBS. Please go ahead.
Yes, thanks, good evening.
A couple of questions here for you. All first just curious was there any current year development in the especially personal or preferred no segment. This quarter. So a catch up from the or at least catch up from first quarter given the deterioration verity.
Sure.
A couple of million Bucks, so and it is favorable but I.
Again that kind of couple of million dollars definitely not changing the numbers on a 1 billion dollar number.
So it's it's favorable actually interesting okay. Yeah, because that was my other question I had was just a little curious about the prior year development that you're seeing the favorable.
It was a little surprised by that given your comments about the deteriorating severity situations, whereas whereas that favorable development coming from.
So.
<unk> has been enhancing their claim processes and they've gone through and so if you think about running an inflationary number if you thought it was going to take you eight quarters to resolve a particular item and it came in in six quarters, you've got two quarters lots of inflation that came in and so.
We've had some favorable experience in terms of some of the things that we've been doing on the total loss side, we've had some.
Benefits in terms of the buy side PD in terms of bringing things to resolution.
And so that acceleration of doing things on that front.
Does produce some positive results for us.
And I would suggest that when you think about the totality of our balance sheet, obviously, having those trends were aware of the trends that we've had today, we've had several quarters here of modest favorable development.
You know I would suggest that we are picking in and trying to pick our numbers with the same consistency and view such that we are getting it right.
<unk>.
You know in terms of what's taking place in the environment.
It comes down to the operational pieces that Jim was talking about.
We saw some of the same pressures of Euro people did unclaimed staffing.
We push to add folks there to make sure we had an adequacy there and did a good job when you get a little bit of a you know an extra set of bodies. There then the claim team can again alter those prices you can get after things and work the inventory down.
And that helps.
Makes sense and then Joe you did mentioned that you are seeing you know some pressure on the severity side of things as well if you can dive a little bit more into that is that medical cost inflation is where you're seeing the pressures I mean, some companies have cut chip.
Shouldn't that but most companies I'm talking I think its relatively benign.
Yeah, I'll, let Duane provide a little more color on it.
<unk>.
Where we're seeing a modest uptick in there's a little bit of a little bit in medical treatment and a little bit of attorney Rep, we're not calling it out anywhere near the uptick where you've been seeing on metal coverages, but it's not it's not non zero.
I think Joe's is bang on that it's you know there's a little bit of an uptick on treatments are there was a reluctance in the past I think for folks to treat but now that folks are more comfortable in getting out. So theres just an uptick on treatment and then theres a slight bump in some of the costs associated with that and then.
Again, a small amount.
Out of attorney Rep. So nothing to Joe's point that as is obvious as metal, but we are seeing a little bit on the buy side trickle in.
Gotcha and just last question John I think I've asked this before but just wanted to get your view.
Given what we're seeing happen this inflation and persistent and getting worse has it made you rethink your view with respect to <unk> 12 versus six month policies and being able to catch this quicker with a six month policy.
Yes, that's obviously part of what we've been doing in some of our non rate activities.
<unk> is making shifts in those pieces and.
You know if we ever thought that there'd been I think anybody who's got a 12 month policy anywhere right now.
The standard or preferred or non standard.
In a rapidly changing inflation environment would prefer to be at six months policies. There, there's clearly a trade to get rate.
That's better than retention.
Sure for everybody.
That would be a point of view and in this environment.
Got you, so you're saying you're actually switching over from call. It the six month policies on renewals for stuff right now.
There's places, where we can and there's places where we can't.
As a change in some stages of change in term and condition. So you can do that so you can adjust on new business.
So it will not be a one policy.
Michael term to change the book.
I'll move slower than any of us want because again in some states going from a 12 month for a six month policy you'd actually be effectively canceling them or non renewing them and rewriting and that's in some states you're not allowed to do that just to change our policy duration.
So we do have affected that into our points of view.
That's a case, where you can make that change on new business.
But we've also slowed new business in many geographies.
Trying to that's another one where you you improve your underwriting results as new business tends to have a higher loss ratio.
So we've been slowing that down so I'm trying to answer to your question, but it winds up being a unit very question when Theres, a multivariate equation we're balancing.
What was that one variable I prefer to be all six month, but when you put the other variables involved.
We wind up with a slightly different answer.
Gotcha is California, one of the states you can or cannot do it.
You cannot you cannot switch.
In California.
You can change your point of view on new but not on the in force.
Gotcha.
Yeah.
Thank you Mr. Meredith.
There are no additional questions waiting at this time.
I would like to pass the conference back to the management team for any closing remarks.
Thank you again for everybody's time and attention.
And thoughtful questions as we collectively work our way through.
The very fun environment of inflation in a post pandemic world I really wish that the fed had been already knew was transient but I think we're gonna be dealing with it for a while thanks everybody.
That concludes the Kemper's second quarter 2022 earnings Conference call I Hope you all enjoy the rest of your day you may now disconnect your lines.
Yeah.
Uh huh.
Right.