Q4 2023 Kemper Corp Earnings Call
Ludi: And thank you for watching. Good afternoon, ladies and gentlemen, and welcome to KMPR's 4th Quarter 2023 Earnings Conference Call. My name is Ludi, and I will be your coordinator today. At this time, all participants are in a listen-only mode.
Yeah.
[music].
Good afternoon, ladies and gentlemen, and welcome to Concord fourth quarter 2023 earnings Conference call. My name is Jody and I will be a coordinator today.
Ludi: 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 would now like to introduce your host for today's conference call, Karen Guerra, KMPR's Vice President of Investor Relations. Ms. Guerra, you may begin. Thank you, operator. Good afternoon, everyone.
At this time all participants are in a listen only mode.
We will conduct a question and answer session and instructions will follow at that time.
Minder. This conference call is being recorded for replay purposes, I would now like to introduce your host for today's conference call carrying Gara Kemper's, Vice President of Investor Relations Ms. <unk> you may begin.
Thank you operator, good afternoon, everyone and welcome to Kemper's discussion of our fourth quarter 2020 results. This afternoon, you'll hear from Joe Lacher, Kemper's, President and Chief Executive Officer, and Chairman, Brad Camden, Kemper's, Senior Vice President and interim Chief Financial Officer, and Matt Hudson, Kemper's Executive Vice President and press.
Karen Guerra: And welcome to Kemper's discussion of our fourth quarter 2022 results. This afternoon, you'll hear from Joe Lacher, KMPR's President, Chief Executive Officer, and Chairman, Brad Camden, KMPR's Senior Vice President and Interim Chief Financial Officer, and Matt Hunton, KMPR's Executive Vice President and President of KMPR Auto. We'll make a few opening remarks to provide context around our fourth quarter results, followed by Q&A sessions. During the interactive portion of our call, our presenters will be joined by Duane Sanders, KMPR's Executive Vice President and President of the PNC Division, John Boschelli, KMPR's Executive Vice President and Chief Investment Officer, and Chris Flint, KMPR's Executive Vice President and President of KMPR. After the markets closed today, we issued our earnings release and published our earnings presentation and financial supplement. We expect to file our Form 10-K with the SEC within the next week. You can find these documents in the investor section of our website, Kemper.com.
Kemper Auto will make a few opening remarks to provide context around our fourth quarter results followed by Q&A session. During the interactive portion of our call. Our presenters will be joined by Duane Sanders Kemper's Executive Vice President and President of the P&C Division Jamba, Shelly Kemper's Executive Vice President and Chief Investment Officer.
And Chris Flynn, Kemper's Executive Vice President and President of Kemper life.
After the market's close today, we issued our earnings release and published our earnings presentation and financial supplement we expect to file our Form 10-K with the SEC within the next week you can find these documents in the investors section of our website <unk> Dot com. Our discussion today may contain forward looking statements within the meaning of the safe Harbor.
Karen Guerra: 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 results and financial condition may differ materially from these statements.
Provisions of the private Securities Litigation Reform Act of 1095. These statements include but are not limited to the company's outlook and its future results of operations and financial condition, our actual results and financial condition may differ materially from these statements for information on additional risks that may impact. These forward looking statements.
Karen Guerra: For information on additional risks that may impact these forward-looking statements, please refer to our 2020 Form 10-K and our fourth quarter earnings. 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 the 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 22 period unless otherwise stated.
Please refer to our 2020 Form 10-K, and our fourth 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 non-GAAP financial measures to GAAP, where required in accordance with the SEC.
SEC rules you can find each of these documents in the investors section of our website <unk> Dot com all comparative references will be to the corresponding 'twenty two period, unless otherwise stated I will now turn the call over to Joe.
Joseph P. Lacher: I will now turn the call over to Joe. Thank you, Karen. Good afternoon, and thank you for joining us today.
Thank you Karen good afternoon, and thank you for joining us today.
Joseph P. Lacher: We're obviously going to spend time on our quarterly results on the call, but before we jump in, I want to make some comments about the overall environment. A number of quarters ago, we referenced a slide that looked at rate and loss trends over time. It showed a pre-pandemic period where rate and loss inflation were in balance. An early pandemic period where rate increases dropped to zero with loss inflation negative, driven by lower frequency from less driving.
We're obviously going to spend time on our quarterly results on the call, but before we jump in I want to make some comments about the overall environment.
Number of quarters ago, we referenced the slide that looked at rate and loss trend over time.
It showed a pre pandemic period, where rate in loss inflation where imbalance.
And early pandemic period, where rate increases dropped to zero with loss inflation negative driven by lower frequency from less driving.
Joseph P. Lacher: And a recovery period where earned rates lagged inflation, profitability was pressured, and significant underwriting and non-rate actions were needed to combat the lag and earned rate impact. We're exiting this recovery phase now. Cumulative earned rate increases have exceeded cumulative loss inflation, and underwriting profitability has been reliably restored. We're now moving into the next phase in this journey, from recovery to a rebalancing phase. This period will be characterized by three key items. 1.
And a recovery period, where earned rate lagged inflation profitability was pressured and significant underwriting and non rate actions where needed to combat the lag in earned rate impact.
We're exiting this recovery phase now.
<unk> earned rate increases have exceeded cumulative loss inflation and underwriting profitability has been reliably restored.
We're now moving into the next phase in this journey.
From recovery to a rebalancing phase.
This period will be characterized by three key items.
One rate increases will continue but will largely match to inflation back to maintenance rate changes if you will.
Joseph P. Lacher: Rate increases will continue, but they will largely be matched to inflation. Back to maintenance rate changes, if you will.
Two the significant underwriting and non rate actions implemented during the recovery phase will thoughtfully be removed.
Joseph P. Lacher: The significant underwriting and non-rate actions implemented during the recovery phase will thoughtfully be removed. Recall that these actions were taken to improve profitability when rate changes were lagging. As residual rate increases earn in, non-rate actions will be reversed, effectively trading their impact. And three, the components of PIF growth, new business, and retention will be rebalanced to more traditional levels. We're excited to be shifting to this next phase, and we expect this rebalancing period to run for several quarters. I'm sure we'll talk more about it today and in the future.
Recall that these actions were taken to improve profitability when rate changes were lagging as residual rate increases earn in non rate actions will be reversed effectively trading their impacts.
And three the components of Pip growth, new business and retention will be rebalanced to more traditional levels.
We're excited to be shifting into this next phase we expect this rebalancing period will run several quarters I'm sure, we'll talk more about it today and in the future.
Joseph P. Lacher: Our life business has already moved through both the recovery and rebalancing phases. We continue to expect consistent earnings and distributable cash flow from this business. Now, let's shift to our quarterly performance. We're going to communicate a few key points that I'll group into three topics. First, as previously communicated, our priority has been to restore profitability, and we've done that. This quarter, it's clear that our cumulative actions have been effective at offsetting the elevated severity we've experienced in the last several years.
Our life business has already moved through both the recovery and rebalancing phases. We continue to expect consistent earnings and distributable cash flow from this business.
Now, let's shift to our quarterly performance.
We're going to communicate a few key points that I'll group into three topics.
First as previously communicated our priority has been to restore profitability and we've done that.
This quarter. It is clear that our cumulative actions have been effective at offsetting the elevated severity was experienced in the last several years.
Joseph P. Lacher: The benefits from the actions taken have generated improvements in our specialty PNC underlying combined ratio for three consecutive quarters, and we've reached the important milestone of returning our specialty PNC business to an underwriting profit. Results to date, in combination with our significant approved but unearned rate, make us highly confident in achieving target margins in 2024. Second, we continue to advance our differentiated capabilities through a number of strategic initiatives. During the pandemic recovery phase, I mentioned that we'd focus on home improvement projects, initiatives that would both enable us to navigate that challenging time and strengthen our competitive advantages going forward.
The benefits from the actions taken have generated improvements in our specialty P&C underlying combined ratio for three consecutive quarters and we reached the important milestone of.
Returning our specialty P&C business to an underwriting profit.
Results to date in combination with significant approve but on earned rate make us highly confident in achieving target margins in 2024.
Second we continue to advance our differentiated capabilities through a number of strategic initiatives during.
During the pandemic recovery phase I mentioned that we'd focus on home improvement projects initiatives that will both enable us to navigate the challenging time and strengthen our competitive advantages going forward.
Joseph P. Lacher: These operating model enhancements have been successful and positioned the company for long-term profitable growth. We completed two major initiatives this quarter, our Bermuda Optimization and our Cost Reduction Program, both of which exceeded projected benefits.
These operating model enhancements have been successful in positioning the company for long term profitable growth.
We completed two major initiatives this quarter, our Bermuda optimization in our cost reduction program.
Both exceeded projected benefits, we remain focused on further strengthening our systematic sustainable competitive advantages by reducing our long term risk improving our capital and liquidity and enhancing our ability to generate stable long term distributable cash flow and earnings.
Joseph P. Lacher: We remain focused on further strengthening our systematic, sustainable, competitive advantages by reducing our long-term risk, improving our capital and liquidity, and enhancing our ability to generate stable, long-term, distributable cash flow and earnings. And third, we're laser focused on success in this rebalancing period and beyond. Here, success will be defined by achieving and maintaining long-term profit margins and returning our business to healthy growth. We anticipate further progress on all aspects of this rebalancing over the coming year. Let's move to page four for details of the results.
And third we're laser focused on success and this rebalancing period and beyond.
Here success will be defined by achieving and maintaining long term profit margins and returning our business to healthy growth we.
We anticipate further progress on all aspects of this rebalancing over the coming year.
Let's move to page four with details of the results.
Joseph P. Lacher: Specialty P&C generated a 98% underlying combined ratio, a material 10 point improvement over the last three quarters. We've been making consistent progress and are pleased with the incremental 2.3 point benefit in the fourth quarter. As rate action surpassed lost trend, we plan to ease underwriting restrictions, including new business restrictions, so we can pivot to restoring policy and premium growth. Expectations here should be consistent with what I described for this rebalancing phase. Maintenance rate increases to balance loss trends.
Specialty P&C generated a 98% underlying combined ratio are material 10 point improvement over the last three quarters, we've been making consistent progress and are pleased with the incremental two three point benefit in the fourth quarter.
As rate actions surpass loss trend, we plan to ease underwriting restrictions, including new business restrictions. So we can pivot to restoring policy and premium growth.
Expectations here should be consistent with what I described for this rebalancing phase.
Maintenance rate increases to balance loss trend.
Joseph P. Lacher: EARNED RATE IMPACTS to continue progress to restore long-term margins and to permit the reversal of non-rate actions. And lastly, an increase in new business to restore more normal long-term growth. Our priority going forward will be to briskly restore this balance of long-term profitable growth while positioning the company toward an enhanced valuation through the various strategic initiatives we introduced in November of 2022. Reflecting on those initiatives, this quarter, we successfully completed and exceeded the goals related to the Bermuda Optimization and the Multi-Year Cost Structure Initiative. We remain on track with the execution of the Reciprocal Exchange Project and the preferred PNC exit. Each of these home improvement projects increases our long-term competitive advantages and strengthens our financial position. And now, I'll turn the call over to Brad to provide you with additional color. Thank you, Joe.
Earned rate impacts to continue progress to restore long term margins and to permit reversal of non rate actions and lastly, an increase in new business to restore a more normal long term growth.
Our priority going forward will be to briskly restore this balance of long term profitable growth, while positioning the company toward an enhanced valuation through the various strategic initiatives. We introduced in November of 2022.
Reflecting on those initiatives this quarter, we successfully completed and exceeded the goals related to the Bermuda optimization and the multiyear cost structure initiatives.
<unk> on track with the execution of the reciprocal exchange project and the preferred P&C exit.
Each of these home improvement projects increases our long term competitive advantages and strengthens our financial position.
And now I'll turn the call over to Brad to provide you with additional color.
Thank you Joe I'll begin on page five with our consolidated financial results.
Brad Camden: I'll begin on page five with our consolidated financial results. As Joe highlighted, we had another sequential quarter of underlying improvement and generated both an operating and underwriting profit. Our rate and non-rate actions taken, combined with the completion of several strategic initiatives, led to this positive outcome. We're excited to enter 2024 after achieving solid results and are intently focused on keeping the momentum and returning the specialty auto business to target margins. For the quarter, we had net income of $51 million, or $0.80 per diluted share, and adjusted net, consolidated net operating income of $51 million, or $0.78 per diluted share.
As Joe highlighted we had another sequential quarter of underlying improvement and generated both an operating underwriting profit.
Our rate and non rate actions taken combined with the completion of several strategic initiatives led to this positive outcome.
We're excited to enter 2024 after achieving solid results and are intently focused on keeping the momentum and returning the specialty auto business to target margins.
For the quarter, we had net income of $51 million or <unk> <unk> per diluted share and adjusted consolidated net operating income of $51 million or <unk> 78 per diluted share.
Brad Camden: Additionally, I'd like to highlight that we had no prior year reserve development. Net income included $15 million in realized investment gains, partially offset by $14 million in restructuring and integration costs. The Preferred P&C Business, reported below the line as non-core operations, generated a net income of $3 million, including approximately $6 million in catastrophe losses. Turning to pages six and seven, we provide an update on our strategic initiatives, which we've grouped into two categories, completed and ongoing. Let's start with the projects completed during the quarter. First, the Bermuda project we launched in 2022 enabled approximately $330 million in dividends to the parent company in the quarter, exceeding our prior estimate of $250 million.
Additionally, I'd like to highlight that we had no prior year reserve development.
Net income included $15 million unrealized investment gains, partially offset by $14 million restructuring and integration costs.
The preferred P&C business reported below the line as non core operations generated a net income of $3 million, including approximately $6 million in catastrophe losses.
Turning to pages six and seven we provide an update on our strategic initiatives, which we've grouped into two categories completed and ongoing.
Let's start with the projects completed during the quarter first the Bermuda project, we launched in 2022 enabled approximately $330 million in dividends to the parent in the quarter exceeding our prior estimate of $250 million.
This bolstered parent liquidity and strengthen our ecosystem.
Brad Camden: This bolstered Parental Liquidity and strengthened our ecosystem. Next, related to our expense reduction efforts, we exceeded our dollar target and the pace at which we accomplished them. We achieved the multi-year target of $150 million in expense savings in the program's first year.
<unk> related to our expense reduction efforts, we exceeded our dollar target and the pace in which we accomplished then we achieve the multiyear target of $150 million expense savings in the program's first year gas.
After this quarter, we will no longer report on this initiative, but we'll continue to further optimize our cost structure.
Brad Camden: After this quarter, we'll no longer report on this initiative, but we'll continue to further optimize our cost structure. This will allow us to preserve our low cost competitive advantages and set ourselves up for future growth and profit margin improvement. Moving to Ongoing Projects, the exit of the preferred P&C business is on track.
It will allow us to preserve our low cost competitive advantages and set ourselves up for future growth and profit margin improvements.
Moving to ongoing projects.
We exited the preferred P&C business is on track.
During the second half of 2023, we freed up approximately 45 million of capital and anticipate freeing up an additional $130 million by the end of 2024 and another $100 million by the end of 2025.
This capital will be redeployed in our core businesses and initiatives that meet or exceed our return targets.
Brad Camden: During the second half of 2023, we freed up approximately $45 million of capital and anticipate freeing up an additional $130 million by the end of 2024 and another $100 million by the end of 2025. This capital will be redeployed in our core businesses and initiatives that meet or exceed our return target. And finally, as Joe mentioned, the reciprocal premium population is on track. Growth will initially be slow but is expected to ramp up as we receive approval to expand into new states. We will provide details as we hit key milestones for this initiative. Turning to page eight.
Finally, as Joe mentioned, the reciprocal premium population is on track.
<unk> will initially be slow, but is expected to ramp up as we receive approval to expand into these states. We will provide details as we hit key milestones for this initiative.
Turning to page eight our.
Our insurance companies are well capitalized and have significant sources of liquidity at the end of the quarter liquidity increased by approximately $325 million to $1 1 billion, consisting of a revolver capacity intercompany lending capacity and hopefully in company cash and investments our healthy liquidity balance allows us to pay holding company dividends and interest payments and to.
To support our operating subsidiaries as needed.
Moving to page nine net investment income for the quarter was $105 million and our pretax equivalent annualized book yield was four 5%.
We continue to maintain a high quality investment portfolio that generates stable income to support our operating businesses and is aligned with our liabilities.
Brad Camden: Our insurance companies are well capitalized and have significant sources of liquidity. At the end of the quarter, liquidity increased by approximately $325 million to $1.1 billion, consisting of revolver capacity, intercompany lending capacity, and holding company cash and investments. Our healthy liquidity balance allows us to pay holding company dividends and interest payments and to support our operating subsidiaries as needed. Moving to page 9, net investment income for the quarter was $105 million, and our pre-tax equivalent annualized book yield was 4.5%. We continue to maintain a high-quality investment portfolio that generates stable income to support our operating businesses and is aligned with our liabilities. I'll now turn the call over to Matt to discuss the specialty PNC business. Thank you, Brad, and good afternoon, everyone.
I'll now turn the call over to Matt to discuss our specialty P&C business.
Thank you Brad and good afternoon, everyone moving to page 10, and our specialty P&C business.
Let me start with some comments on the quarter for both PPA and PV and then I'll shift to overall comments going forward.
For the segment, we closed the fourth quarter with underlying combined ratio improvement to three points sequentially and nine eight points year over year as the cumulative benefit of our profit actions exceeded incremental loss trend.
In the quarter incremental earned rate continues to improve and severity trends remained stable but elevated.
The majority of the improvement as expected was driven by private passenger auto.
As this line was the most challenged I'm pleased that we generated an underwriting profit in the quarter.
Our commercial vehicle business remains a source of strength producing an underlying combined ratio of 93, 2%.
We remain confident about our ability to generate long term value in this area.
Turning to production consistent with last quarter, we continue to observe hard market conditions, especially in California, as we renewed policies at higher rates persistency remained in line with prior periods, creating favorable premium retention.
As Joe mentioned, a return to underwriting profitability is allowing us to shift our 2024 focus to what he described as the rebalancing phase.
Matt Hunton: Moving to page 10 in our specialty P&T book, let me start with some comments on the quarter for both PPA and PV, and then I'll shift to overall comments going forward. For the segment, we close the fourth quarter with an underlying combined ratio improvement of 2.3 points sequentially and 9.8 points year-over-year as the cumulative benefit of profit actions exceeds an incremental loss. In the quarter, incremental earned rate continues to improve, and severity trends remain stable, but elevated. The majority of the improvement, as expected, was driven by private passenger automobile, as this line was the most challenged.
In anticipation of this shift we selectively road a modest amounts of incremental new business to test new customer cohort buying and claimed behavior.
It wasn't a material amount for the quarter, but a good start towards re expanding new business heading into 2024.
We have strong and differentiated tools and capabilities to compete in our market segment over the last few years, we have enhanced and continue to enhance these capabilities. Given this we're confident in our ability to understand the performance of business sub segments.
This includes the impact of the easing of the underwriting restrictions put in place to improve profitability following the pandemic.
As we look forward our priorities will remain on first achieving target margins and second restoring growth in that order.
We'll execute with a thoughtful balance between underwriting profitability and new business writings, as we look to optimize long term profitable growth.
I'll now turn the call over to Joe to cover the life business and closing comments.
Matt Hunton: I'm pleased that we generated an underwriting profit in the quarter. Our commercial vehicle business remains a source of strength, producing an underlying combined ratio of 93.2%. We remain confident about our ability to generate long-term value in this area. Turning to production, consistent with last quarter, we continue to observe hard market conditions, especially in California. However, as we renewed policies at higher rates, persistency remained in line with prior periods, creating favorable premium retention
Thanks, Matt.
Turning to our life business on page 11.
Net operating income was $15 million for the fourth quarter. Despite the impact of persistent inflation on our charter customers disposable income consumer demand for our products remained consistent as life issued policies were up slightly and persistency was stable.
You should note. This quarter's results include the annual actuarial assumption and reserve calculation updates required under the new accounting standard known as <unk>.
And as expected these updates appear in multiple lines in the financial statements in aggregate they favorably impacted our operating earnings for the quarter.
Matt Hunton: As Joe mentioned, a return to underwriting profitability is allowing us to shift our 2024 focus to what he described as the rebalancing phase. In anticipation of this shift, we selectively wrote a modest amount of incremental new business to test new customer cohort buying and claim behavior. It wasn't a material amount for the quarter, but a good start towards re-expanding new business heading into 2024. We have strong and differentiated tools and capabilities to compete in our market segment. Over the last few years, we've enhanced and continue to enhance these capabilities. Given this, we're confident in our ability to understand the performance of business subsegments.
Overall, the underlying life business continues to generate consistent returns on capital and distributable cash flow.
Turning to page 12.
As we wrap up let me reiterate our highlights for the quarter.
We achieved both an operating and underwriting profit and generated sequential underlying results improvement for the third consecutive quarter.
We expect to reach specialty P&C target margins in 2024 and are shifting our focus to rebalancing long term profitability and growth.
Our strategic initiatives are working well and outperforming expectations together they are enhancing our financial profile, increasing our focus and strengthening our organization.
We ended the year with a robust financial foundation and a clear roadmap to restore return on equity of 10% or higher we have a strong company with a team dedicated to delivering on our promises which include providing attractive long term intrinsic growth to our shareholders and value to all stakeholders.
Matt Hunton: This includes the impact of the easing of the underwriting restrictions put in place to improve profitability following the pandemic. As we look forward, our priorities will remain first, achieving target margins, and second, restoring growth in that order. We'll execute with a thoughtful balance between underwriting profitability and new business writing as we look to optimize long-term profitable growth. I'll now turn the call over to Joe to cover the life business in closing comments. Thanks, Matt.
In closing, we're pleased with the results for the quarter and our ability to achieve profitability. We remain optimistic as we look to 2024 and beyond I'd like to thank our entire Kemper team for their ongoing dedication to executing on our priorities in 2023 and as we move into 2024.
Joseph P. Lacher: Turning to our life business on page 11, net operating income was $15 million for the fourth quarter. Despite the impact of persistent inflation on our target customers' disposable income, consumer demand for our products remained consistent, as life-issued policies were up slightly, and persistency was stable. You should know, this quarter's results include the annual actuarial assumption and reserve calculation updates required under the new accounting standard known as LDTI. As expected, these updates appear on multiple lines in the financial statements. In aggregate, they favorably impacted our operating earnings for the quarter. Overall, the underlying life business continues to generate consistent returns on capital and distributable cash flow.
Operator, I'll now turn it back to you. So we can take questions.
Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad, you will hear it from a clogging your request and Youre questions will be followed into order D. I received should you wish to decline from the calling process.
Please press star followed by the number two and if you are using a speaker phone. Please lift the handset before pressing any Keith one moment. Please for your first question.
And your first question comes from the line of Gregory <unk> from Raymond James Your line is open.
Good afternoon.
I'm going to.
Joseph P. Lacher: Turning to page 12, as we wrap up, let me reiterate our highlights for the quarter. We achieved both an operating and underwriting profit and generated sequential underlying results improvement for the third consecutive quarter. We expect to reach specialty PNC target margins in 2024 and are shifting our focus to rebalancing long-term profitability and growth. Our strategic initiatives are working well and outperforming expectations.
Go back to the comments about.
Rebalancing between.
Restoring profitability getting to your target margins and then rebalancing on getting back to traditional growth metrics.
And I'm, just curious how rebalancing getting back to traditional growth that's going to look when you also have the rollout of the reciprocal ongoing.
And does this mean that youre only going to be growing in the reciprocal piece and not growing and the other piece or.
Joseph P. Lacher: Together they are enhancing our financial profile, increasing our focus, and strengthening our organization. We enter the year with a robust financial foundation and a clear roadmap to restore return on equity of 10% or higher. We have a strong company with a team dedicated to delivering on our promises, which include providing attractive long-term intrinsic growth to our shareholders and value to all stakeholders. In closing, we're pleased with the results for the quarter and our ability to achieve profitability. We remain optimistic as we look to 2024 and beyond. I'd like to thank our entire Kemper team for their ongoing dedication to executing on our priorities in 2023 and as we move into 2024. Operator, I'm going to turn it back to you so we can take questions.
Maybe you can provide some clarity around how these pieces are going to be moving around over the course of the year.
Sure sure happy to Greg This is Joe and I'll take a shot at it and then.
And Brad and Matt May add some pieces.
The first thing I would suggest to you is.
Almost ignore the reciprocal and the thought process. There is a couple of big things moving.
We made an underwriting profit in the quarter.
We've got Cigna.
Significant unearned rate coming in which has us highly confident we will hit our target margin.
Excuse me.
And we will be begin.
To begin reversing some of the non rate actions, we took to improve profitability that will consume some of that on earned rate. Some of those rate that was non rate actions included tightening.
New business underwriting restrictions. So we will we will re expand those to where they were and that will allow us to.
Putting new business on move back towards the process.
Joseph P. Lacher: Thank you. And ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your telephone keypad. You will hear a three-tone prompt acknowledging your request, and your questions will be answered in the order they are received. Should you wish to end the call, please press the star followed by the number two.
Growing and that rebalancing if you will is really the reversal of those.
<unk> items and going back to that more normal maintenance rate, we're going to start doing that across all geographies all distribution lines the entire ecosystem.
As briskly as reasonably possible they won't occur on a day and won't occur in a minute, but it will take a little bit of timing over work its way through.
Regardless of whether we're dealing with it on Kemper paper or on the exchange or anything else, we're going to do that.
Operator: And if you're using a speakerphone, please leave the handset before pressing any keys. One moment, please, for your first question. And your first question comes from the line of Gregory Peters from Raymond James. Your line is open. Good afternoon.
As a separate and distinct item.
We are working on rolling out the reciprocal that process will in and of itself a little bit slower.
Gregory Peters: I'm going to go back to the comments about rebalancing between restoring profitability and getting to your target margins and then rebalancing on getting back to traditional growth metrics. And I'm just curious how rebalancing on getting back to traditional growth is going to look when you also have the rollout of the reciprocal ongoing. And does this mean that you're only going to be growing in the reciprocal piece and not growing in the other piece?
What we have to do in those cases is get.
Yet products filed and approved in individual states in the exchange entities oriented subsidiaries.
In order to move that new business and we might in some cases use some reinsurance from where tempur fronts and moves in but really that will be a paced it's more measure.
Measured by.
The approvals on those individual states for that activity to occur and less a function of us.
Joseph P. Lacher: Or maybe you can provide some clarity around how these pieces are going to be moving around over the course of the year? Sure, sure. Happy to, Greg. This is this is Joe, and I'll take a shot at it.
Restoring and rebalancing our underwriting criteria. So I think mentally you should think about them differently.
That rebalancing can occur more briskly.
Joseph P. Lacher: And then, you know, Brad and Matt may add some pieces. The first thing I'd suggest to you is to almost ignore the reciprocal in the thought process. There are a couple of big things moving. We made an underwriting profit in the quarter. We've got a significant unearned rate coming in, which has us highly confident we'll hit our target margins, and excuse me. And we will begin reversing some of the non-rate actions we took to improve profitability that will consume some of that unearned rate. Some of those non-rate actions included tightening new business underwriting restrictions.
Youll see it occur over.
Significantly a bit over the first quarter and more significantly over the second quarter.
Typical population pace will be necessarily slower because of the regulatory nature of those approvals does.
Does that help.
Yeah that does I guess correlated.
Investor focus around where your policy count numbers settle out and start growing too and what the right basis. When you when you talk about the cost saving program.
Joseph P. Lacher: So we will re-expand those to where they were, and that will allow us to put new business on, and move back towards the process of growing. And that rebalancing, if you will, is really the reversal of those things and going back to that more normal maintenance rate. We're going to start doing that across all geographies, all distribution lines, the entire ecosystem, as briskly as reasonably possible. It won't occur in a day, it won't occur in a minute, but it will take a little bit of time, and it will work its way through.
I assume that those are back office those are not forward facing cost saves that you've deployed in other words, what im getting at is you haven't cut.
You haven't limited your opportunity to grow going forward by these cost savings.
Correct the cost savings none of them were related to two business acquisition forward forward items and the like all of them.
We're more back office are infrastructure related.
Joseph P. Lacher: Regardless of whether we're dealing with it on Kemper paper or on the exchange or anything else, we're going to do that. As a separate and distinct item, we are working on rolling out the reciprocal. That process will, in and of itself, go a little bit slower. What we have to do in those cases is get products filed and approved in individual states, in the exchange entities, or in its subsidiaries, in order to move that new business in.
Okay.
I do not in any way shape or form impair our ability to write new business order growth.
And then the final question on the just.
The policy count how do you view.
California is your largest state and <unk> got.
The substantial rate increase that was approved last year, how do you view your rate adequacy across the markets at this point in time, because you did highlight there was.
Some rate that you filed for additional rate could spin filed so just curious where you see your position relative to the market.
Joseph P. Lacher: We might, in some cases, use some reinsurance from where Kemper fronts and moves in. But really, that will be a pace that's more measured by the approvals in those individual states for that activity to occur and less a function of us restoring and rebalancing our underwriting criteria. So I think mentally, you should think about them differently.
So I'm going to make a broad comment it's not precise.
Broadly.
We view our rates is adequate.
As we move to hit these margins.
Joseph P. Lacher: That rebalancing can occur more briskly. You'll see it occur significantly a bit over the first quarter and more significantly over the second quarter. The reciprocal population pace will, however, necessarily be slower because of the regulatory nature of those approvals.
Bit of a forward looking view recognizing the rate that has to be earned in.
By nature as you look at forward inflation, we're going to go back to where we are having maintenance rates. So if we file rate for that maintenance perspective that means we think theres, an additional rate need we need to take it that's sort of an ordinary course, so theres a perpetual.
Gregory Peters: Does that help? Yeah, that's us. I guess, correlated, there is investor focus around where your policy count numbers settle out and start growing to and what the right base is. When you talk about the cost-saving program, I assume that those are back office cost-savings that you've deployed. In other words, what I'm getting at is you haven't cut.
If you will modest maintenance rate need that works its way through when you go into individual cells and individual geographies. There is always a combination.
The rating factors the local geography, the line mix, the underwriting mix, where some things are more or less adequate.
And so there's always some part of the ratings cells that we don't we're not satisfied with or something that we think we're more than satisfied with.
Joseph P. Lacher: You haven't limited your opportunity to grow going forward by these cost savings. Correct. The cost savings, none of them were related to business acquisition, forward items, and the like.
So we've got a mix of those I think there is ample opportunity as we've restored our underwriting profitability and get that confidence.
Joseph P. Lacher: All of them were more back office or infrastructure related. Okay. And the final question on just the policy count: how do you view, you know, California is your largest state, and where you've got, you know, the substantial rate increase that was approved last year? How do you view your rate adequacy across the markets at this point in time? Because you did highlight, you know, there was some rate that you filed for additional rates that's been filed. So I'm just curious where you see your position relative to the market. So I'm going to make a broad comment that's not precise.
Of of hitting target margins, there is ample opportunity for us to to re expand our new business to get back to more traditional new business levels in more traditional growth levels over several quarters.
Okay.
I appreciate the detail to help me frame pit going forward. The last question relates just you said specialty PC target margins in 'twenty four is that for the full year or is it by the end of the year do you have any sort of timing on that that's my last question. Thank you.
Joseph P. Lacher: Broadly, we view our rates as adequate as we move to hit these margins, and that is a bit of a forward-looking view, recognizing the rate that is to be earned in, um, By nature, as you look at forward inflation, we're going to go back to where we have maintenance rates. So if we file a rate request for that maintenance perspective, that means we think there's an additional rate need, and we need to take it; that's sort of an ordinary course. So there's a perpetual, if you will, modest maintenance rate need that works its way through. When you go into individual cells and individual geographies, there's always a combination of the rating factors, the local geography, the line mix, and the underwriting mix where some things are more or less adequate. And so there's always some part of the rating cells that we're not satisfied with or some that we think we're more than satisfied with. So we've got a mix of those.
You could think of it as both Greg will hit it for the full year.
Thank you very much.
Okay.
Thank you and your next question comes from the line of Andrew Quail Goldman from TD Cowen Your line is open.
Hey, good evening and congrats on a really solid results.
My first question is around the.
Maybe you could go to slide 10 nationally.
My first question is around the rate change.
Prior discussions we're around 27% rate.
Earned rate coming into 2024, and if I look at that gap in the upper right corner of the slide here is about 19 points. So should I think about that rate increase is about <unk>.
Joseph P. Lacher: I think there's ample opportunity, as we've restored our underwriting profitability and gained that confidence of hitting target margins, there's ample opportunity for us to re-expand our new business, to get back to more traditional new business levels and more traditional growth levels over several quarters. Okay, I appreciate the detail to help me frame PIF going forward. The last question relates to, just you said specialty PC target margins for 24. Is that for the full year? Is it by the end of the year? Do you have any sort of timing on that?
Kevin ish points, a quarter, given give or take earning in.
That's correct. When you look at I think Youre looking back at Q3 slide deck looking transitioning from Q3 to Q4.
About seven points it will accelerate a little bit as we enter 2024, then a level off.
So you expect a steeper curve here in the first half of the year and kind of leveling off in the back half of the year.
And is that how it was.
Yes.
How youre modeling.
Gregory Peters: That's my last question. Thank you. You could think of it as both, Greg.
Yes, absolutely.
Yes, maybe I'm, a little lower than that which is which is good to hear but.
But it sounds like all the and Youre kind of coming out at that 27 ish number that's been talked about.
Joseph P. Lacher: We'll hit it for the full year. Thank you very much. Thank you. And your next question comes from the line of Andrew Kilgerman from TD Cowen. Your line is open.
So thats great.
And then I just wanted to make about that.
Andrew Kilgerman: Hey, good evening, and congratulations on the really solid result. My first question is around the, Maybe you can go to slide 10, actually. My first question is around the rate change, and I think, you know, prior discussions were around 27% of rates, earned rate coming into 2024. And if I look at that gap in the upper right corner of the slide, there's about 19 points.
And remember to think about that from the fourth quarter, the fourth quarter through 'twenty four and so we are already.
<unk>.
Earn some of that now you have what's remaining in 'twenty four.
Got it.
And.
And then if you look at the.
The loss cost on slides 15, and 16 I just want to make sure.
And clear on those I'm.
I'm just kind of go to those slides.
<unk>.
Maybe you could just kind of talk about.
What youre seeing you said it remains elevated inflation.
What is elevated but you said it's also stable.
Brad Camden: So should I think about that rate increase as about, Seven-ish points a quarter, give or take, earning it? That's correct. You know, when you look at, I think you're looking back at the Q3 slide deck, you're looking at transitioning from Q3 to Q4, about seven points. It'll accelerate a little bit as we enter 2024, and then it'll level off. So you expect a steeper curve here in the first half of the year and kind of leveling off in the back half of the year. Andrew, does that help with what you're thinking, what you're modeling?
As I kind of look at the slides how should I think about.
What youre seeing in terms of loss cost inflation.
Early into 2024, what have you seen in the first months.
And what are you expecting if it stays elevated.
Yes. This is Matt.
I guess I would break apart loss costs into two sub components frequency and severity when we say.
Inflation remains elevated but really talking about that on the severity side and.
The range is sort of mid mid mid single digits on the higher end side to five to seven points somewhere in that range.
Brad Camden: Yeah, absolutely. And maybe I'm a little lower than that, which is good to hear. But, But it sounds like, you know, all in, you're kind of coming out at that 27-ish number that's been talked about. So that's great. And then I just want to make a point about that. And remember to think about that from the fourth quarter through 24. And so we've already earned some of that. Now you have what's remaining. Got it, and And then if you look at the loss costs on slides 15 and 16, I just want to make sure and be clear on those. I'm just going to go to those slides. And maybe you could just kind of talk about it.
And obviously the texture varies a bit by your metal coverages, which which are flattened out a bit as we've seen some of the inflationary pressures runoff and bodily injury.
The geographies there is various split but generally on the lower side of the single digit view.
And on the frequency front right Thats really influenced by the underwriting actions that we that we've put in place and as we start to <unk>.
<unk> some of the new business and remove some of those underwriting restrictions.
On a period over period basis, we'll see some of that mix starts to drive the frequency number a bit but frequency is heavily influenced favorably by the underwriting actions that are that are earning into the book.
Andrew Kilgerman: What you're seeing, you said it remains elevated inflation. What is elevated, but you said it's also stable. So as I kind of look at these slides, what should I think about? What you're seeing in terms of lost cost inflation early into 2024. What have you seen in the first month? And what are you expecting if it stays elevated? This is Matt.
Alright, I think the way to think about it if I can if I can add to that Matt.
The underlying frequency we are seeing this environmental was on the low side of what we would think of from a seasonal perspective and I completely agree with Matt we're going to see some things in our in our actuals that are a function of our mix that will move up and down I think the most important and thats normal and as expected.
Matt Hunton: I guess I would break apart the loss cost into two sub-components, frequency and severity. When we say, you know, inflation remains elevated, we're really talking about that on the severity side. And, you know, the range is sort of mid-single digits, right, on the higher end, five to seven points, somewhere in that range. And obviously, the texture varies a bit by your metal coverage, which has flattened out a bit as we've seen some of the inflationary pressures run off. And bodily injury, you know, by geography, it varies a bit, but generally on the lower side of the single-digit view.
And it's in our pricing I think what you're really looking for is the underlying question.
And yes, we saw the fourth quarter.
Within at least our version of seasonal.
But it was at the low end of the seasonal expectation.
And then maybe to wrap a bow on this Andrew just one last comment for you.
Elevated as Matt alluded to mid to high single digits or 5% to 7% elevated means.
Historically from 3% to 5% I'll remember elevated and stable is fine for us we can price to that.
Matt Hunton: And on the frequency front, right, that's really influenced by the underwriting actions that we put in place. And as we start to re-expand some of the new business and remove some of those underwriting restrictions, you know, on a period-over-period basis, we'll see some of that mix start to drive the frequency numbers a bit. But frequency is heavily influenced favorably by the underwriting actions that are earning. I think the way to think about it, if I can add to that, Matt. The underlying frequency we're seeing that's environmental was on the low side of what we would think of from a seasonal perspective. And I completely agree with Matt.
And we have done so.
So that shouldn't be a worry to you from a modeling standpoint.
I just wanted to highlight that for you.
Yes.
Sounds very manageable in the context of the rates that you are getting I guess just on the frequency because it sounds like there is some offsetting factors.
Going on I mean would it be safe to be modeling for kind of the very low single digits.
Frequency into 2024.
We're looking at each other Andrew I'm going to answer your question in two ways.
I think that would be a reasonable way to think about it.
I think if I were doing the modeling.
In my head I stop and I go Okay, there's frequency and severity that generate loss inflation.
Joseph P. Lacher: We're gonna see some things in our actuals that are a function of our mix that'll move up and down. But, I think the most important thing is that it's normal, and it's expected, and it's in our pricing. I think what you're really looking for is the underlying question. And we saw the fourth quarter within at least our version of the seasonal expectation, but it was at the low end of the seasonal expectation. And maybe to wrap this up, Andrew, just one last comment for you.
As earned rate that's coming in that will more than offset it if I only looked at those two items I would then be projecting a very very significant profit margin increase.
And if you only looked at those items you would miss the fact that we've said we're taking off some of their non rate actions, we've put on during the pandemic.
The early phase of the recovery.
Restricted new business.
And they did a tightened underwriting.
Brad Camden: You know, elevated, you know, as Matt alluded to, mid to high single digits or five to seven percent elevated means, you know, where it was historically from three to five. Now, remember, elevated and stable is fine for us. We can price to that, and we have done so. So that shouldn't be a worry to you from a modeling standpoint.
We're there to improve profitability, but they also restrict growth as we take those off.
There isn't.
There is an earned rate cost to them.
That's why we put them on us because they hadn't.
<unk> of a positive earned rate earlier as we take them off you will not see the full impact of the earned rate running through the P&L. So we're trying to give you a little more guidance towards a <unk> target margins and.
Brad Camden: I just want to highlight that for you. Yeah, no, that sounds very manageable in the context of the rate that you're getting, I guess, just on the frequency, because it sounds like there are some offsetting factors going on. I mean, would I be safe to be modeling for, you know, kind of the very low single digits for frequency into 2024? We're looking at each other, Andrew.
And youre going to have to put some model in of what that non right is to get the pest growing again, we have to take those off and let the past move in so some of that earned rate will go there you will get if youre worried about one or two or three points of frequency and Thats. Your primary focus you will miss the forest through the trees because of another.
Joseph P. Lacher: I'm going to answer your question in two ways. I think that would be a reasonable way to think about it. I think if I were doing the modeling,
Actions that are reversing.
Got it.
Makes a lot of sense.
Joseph P. Lacher: In my head, I'd stop, and I'd go, okay, there's frequency and severity that generate loss inflation. But there's an earned rate that's coming in that will more than offset it. If I only looked at those two items, I would then be projecting a very, very significant profit margin. And if you only looked at those two items, you would miss the fact that we've said we're taking off some of the non-rate actions we put on during the pandemic or the early phase of the recovery that restricted new business. And they tighten underwriting. They were there to improve profitability, but they also restrict growth. As we take those off,
And then maybe lastly.
As I looked at slide seven with DLA.
It looks like per your program, you've got another $20 million to $40 million of savings there.
Is that something that we should think about going forward I mean, you've achieved your 150 plus.
But it looks like there might be another 20% to 40 versus budget. So I'm.
Kind of wondering.
How to look at that going forward.
We gave you a range right.
$50 million plus.
What I would tell you is we're always going to be looking to optimize our cost structure, we want to be at a low cost provider in the industry and the nonstandard space.
<unk>.
Salt life insurance at affordable cost so.
Joseph P. Lacher: There is an earned rate cost to them, and that's why we put them on because they had the effect of a positive earned rate earlier. As we take them off, you will not see the full impact of the earned rate running through the P&L.
We're always looking to optimize it.
I would expect us to take out some additional costs as we move forward.
But we're not going to as I mentioned in my comments, we're not going to write.
Joseph P. Lacher: So we're trying to give you a little more guidance towards target margins, and you're going to have to put some models in of what that non-rate is to get the pith growing again. We have to take those out and let the pith move in.
Continued updating on it because we believe we've achieved our objective and what you're going to see from here is incremental.
Alright very helpful. Thanks, a lot.
Thank you and your next question comes from the line of Brian Meredith from UBS. Your line is open.
Andrew Kilgerman: So some of that earned rate will go there. You will get, if you're worried about one or two or three points of frequency, and that's your primary focus, you will miss the forest through the trees because of the non-rate actions that are reversing. Got it. That makes a lot of sense. And then maybe lastly, as I looked at slide seven with the LAE, it looked like, you know, per your program, you've got another 20 to $40 million of savings there. Is that something that we should think about going forward? I mean, you've achieved your 150 plus, but it looks like there might be another 20 to 40 versus your budget. So I'm kind of wondering.
Yes. Thanks.
Joe I wanted to dive a little back back into the pole policies enforced situation and kind of what's going on here, maybe you can kind of.
Highlight or kind of talk about the competitive landscape in and.
How difficult or easy it will be to kind of ramp that that picks up when you get to kind of rate adequacy I was just I'm just looking at your Pip count it looks like you've lost.
Five years' worth of Tiff growth.
And the underwriting actions if not more.
What is the competitive dynamics right now and how challenging do you think will it be to kind of recover some of that and then maybe on that talk about a little bit about the distribution and distribution relationships through this whole thing.
Brad Camden: How to look at that going forward. We gave you, you know, a range, right, you know, 150 million plus. What I would tell you is we're always going to be looking to optimize our cost structure. We want to be a low-cost provider in the industry in a non-standard space and sell life insurance at an affordable cost.
Sure.
I'll provide some and then Matt I'm sure we'll have some some adds to it.
I'll make it maybe an overall comment.
And two spots.
We clearly had.
Brad Camden: So we're always looking to optimize it. I would expect us to take out some additional costs as we move forward. But we're not going to, as I mentioned in my comments, we're not going to continue updating it because we believe, you know, we've achieved our objective. And what you're going to see from here is incremental. All right, very helpful, thanks a lot.
Profitability issues ours might've been more exacerbated than some because of our.
High volume of business, we had in California.
And the delay that California had.
In.
The delay that California had been coming in right. So what we did is we had to push harder on some of those non rate actions.
Brian Robert Meredith: Thank you. And your next question comes from the line of Brian Meredith from UBS. Your line is open.
What that effectively is is it means it's restricting restricting underwriting in some cases it might be lowering commissions it might be.
Joseph P. Lacher: Yeah, thanks. I want to dive a little bit back into the whole policies in force situation and kind of what's going on here. Maybe you can kind of highlight or kind of talk about the competitive landscape and, you know, how difficult or easy it will be to kind of ramp up that piff when you get to kind of rate adequacy. I mean, just looking at your piff count, it looks like you've lost probably five years worth of PIF growth in these underwriting actions, if not more. You know, what is the competitive dynamics right now and how challenging do you think it will be to kind of recover some of that? And then maybe on that, talk a little bit about the distribution and just distribution relationships through this whole thing. Sure, and I'll provide some, and then Matt, I'm sure we'll have some adds for it.
Tightening our pay plans any number of things.
Where we are right now is a pretty hard market.
A hard market characteristic wise typically means is there is less availability most competitors have tightened their underwriting most are doing something similar try trying to enhance profitability.
As a result.
Our typical agent has fewer product offerings and fewer choices and less availability than they've historically had.
As we come back in and we have the ability to do it fairly briskly.
Those distributors don't think we did something idiosyncratic I don't think that we were the only one who had a problem. We havent damaged a relationship we haven't broken something we can come back into that that environment and they're happy.
Joseph P. Lacher: I'll make it maybe an overall comment in two spots. We clearly had. Profitability issues, and ours might have been more exacerbated than some because of the high volume of business we had in California and the delay that California had in coming in. So what we did is we had to push harder on some of those non-rate actions. What that effectively means is it means it's restricting underwriting in some cases.
We're happy to have the capacity returning because theyre looking for capacity.
So we have.
A high degree of confidence in the relationships, we have a high degree of confidence that there is market demand.
Our relative price competitiveness was strong before we went into this disrupted environment.
Joseph P. Lacher: It might be lowering commissions. It might be tightening up pay plans, any number of things. Where we are right now is a pretty hard market. What a hard market typically means is there is less availability, most competitors have tightened their underwriting, most are doing something similar to enhance profitability, and as a result, your typical agent has fewer product offerings and fewer choices and less availability than they've historically had.
We dealt with the same inflationary environment everybody else did so we think we applied comparable competitive.
Responses to the inflation. So we think we'll be competitive on the back side.
And Thats what were expecting to see as we opened the markets.
The only thing I would add on that is in the fourth quarter through the test and learns.
We learned a bit about customer buying patterns were a little bit about loss trend and sort of what's happening there, but overall, we've built a nice baseline to continue to enhance our capabilities and accelerate this in Q1 and two and so just as Joe mentioned earlier I think the ability for us in the <unk>.
Joseph P. Lacher: As we come back in, and we have the ability to do it fairly briskly, those distributors don't think that we did something idiosyncratic. They don't think that we were the only one who had a problem. We haven't damaged a relationship. We haven't broken anything.
First half of 2024 to accelerate production in a thoughtful way is there and distributions ready for it I think credibility has been enhanced over the last couple of years in terms of those relationships and the hard market continues to present, an opportunity for the time being so we'll look to take advantage of that in a thoughtful way.
Joseph P. Lacher: We can come back into that environment, and they're happy to have the capacity returning because they're looking for capacity. So we have a high degree of confidence in the relationships. We have a high degree of confidence that there's market demand. Our relative price competitiveness was strong before we went into this disrupted environment. We dealt with the same inflationary environment everybody else did.
Great. That's helpful. Thanks, and then just another one just quickly here Joe are we are we seeing any benefits yet from the legislative actions that happened in Florida beginning of last year.
I would tell you and I'm going to answer it in two ways, we're starting to see some.
Modest impacts and what I see are some of the pieces of the loss costs.
Joseph P. Lacher: So we think we applied comparable competitive, you know, responses to inflation. So we think we'll be competitive on the backside. And that's what we're expecting to see as we open the market. Yeah, the only thing I would add on that is in the fourth quarter, through the test and learns, we learned a bit about, you know, customer buying patterns; we learned a bit about loss trends and sort of what's happening there. But overall, we built a nice baseline to continue to enhance our capabilities and accelerate this in Q1 and Q2. And so, just as Joe mentioned earlier, I think the ability for us in the first half of 2024 to accelerate production in a thoughtful way is there, and distribution is ready for it. I think credibility has been enhanced over the last couple years in terms of those relationships, and the hard market continues to present an opportunity for the time being.
As we've said before we're not reflecting those.
Our loss picks yet.
Because we want to let them fully aged fully baked see if things reopen.
And we will continue to adopt that posture.
To have a higher degree of certainty that it's actually materializing before we reflected.
I can do than you generally cautiously optimistic about what we're seeing in the environment.
And.
A little more prove it to me in terms of how we book it at.
If that helps.
Very helpful. Thank you.
Thank you and ladies and gentlemen, <unk> session has now ended I would like to turn it back to Joe Lacher, Kemper's, President and CEO for closing remarks.
Again, thank you to everybody for your time and your attention today your thoughtful questions.
We're excited.
Candidly about moving back more towards a rebalancing phase, where we're spending more time talking about.
Matt Hunton: So we'll look to take advantage of that in a thoughtful way. Great, that's helpful, thanks. And then just another one just quickly here. Joe, are we seeing any benefits yet from the legislative actions that happened in Florida at the beginning of last year? I would tell you, and I'm going to answer it in two ways. We're starting to see some modest impacts in what I would see are some of the pieces of the loss cost. But, as we've said before, we're not reflecting those in our loss picks yet because we want to let them fully age, fully bake, see if things reopen, and we will continue to adopt that posture to have a higher degree of certainty that it I would tend to then be generally cautiously optimistic about what we're seeing in the environment, and a little more prove it to me in terms of how we manage it.
Growing pest and leveraging our competitive advantage in the marketplace and we look forward to future discussions in the next couple of quarters. Thanks again.
Thank you and thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
Thanks.
Thanks.
Okay.
Yes.
Yes.
Okay.
Okay.
Yes.
Yes.
[music].
Yes.
Okay.
[music].
Okay.
Uh huh.
Sure.
[music].
Yes.
Right.
[music].
Okay.
[music].
Thank you.
Sure.
[music].
Joseph P. Lacher: That helps. Very helpful. Thank you. Thank you, and ladies and gentlemen, our Q&A session has now ended. I would like to turn it back to Joe Lacher, KMPR's president and CEO, for closing remarks. Again, thank you to everybody for your time and your attention today and your thoughtful questions. We're excited, candidly, about moving back more towards a rebalancing phase where we spend more time talking about growing PIF and leveraging a competitive advantage in the marketplace, and we look forward to future discussions in the next couple of quarters. Thanks again. Thank you and thank you, presenters, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.
Yes.
Yeah.
Okay.
Yes.
Okay.
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Okay great.
Yes.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.
Yes.
Okay.
Yes.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
[music].