Kemper Q4 2025 Kemper Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Kemper Corp Earnings Call
Speaker #1: Good afternoon, ladies and gentlemen, and welcome to KEMPER Sport Corp 2025 earnings conference coordinator for today. At this time, all participants are in a listen-only mode.
Operator: Good afternoon, ladies and gentlemen, and welcome to Kemper's Q4 2025 Earnings Conference Call. My name is John, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a Q&A 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, Michael Marinaccio, Kemper's Vice President of Corporate Development and Investor Relations. Mr. Marinaccio, you may begin.
Speaker #1: Later, we will conduct a question-and-answer session. And instructions will follow at that time. As a call. My name is John, and I will be your replay purposes.
Speaker #1: I would now reminder, this conference call is being recorded for like to introduce your host for today's conference call, Michael Development and Investor Relations.
Speaker #1: Mr. Marinaccio, you may Marinaccio, KEMPER's Vice President of Corporate
Speaker #1: begin. Thank
Michael Marinaccio: Thank you. Good afternoon, everyone, and welcome to Kemper's discussion of our Q4 2025 results. This afternoon, you'll hear from Tom Evans, Kemper's Interim CEO, Brad Camden, Kemper's Executive Vice President and Chief Financial Officer, Matt Hunton, Kemper's Executive Vice President and President of Kemper Auto, and Chris Flint, Kemper's Executive Vice President and President of Kemper Life.
Speaker #2: you. Good afternoon, everyone, and welcome to KEMPER's discussion of our fourth quarter 2025 results. This afternoon, you'll hear from Tom Evans, KEMPER's Interim CEO.
Speaker #2: Executive Vice President and Chief Financial Officer, Matt Hunton; Kemper's Brad Camden, Kemper Auto; and Chris Flint, Kemper's Executive Vice President and President of Kemper Life.
Speaker #2: We'll make a few opening remarks to provide context around our fourth quarter results, followed by a Q&A session. During the interactive portion of the call, our presenters will be joined by John Biscelli, Kemper's Executive Vice President and Chief Investment Officer.
David Brown: We'll make a few opening remarks to provide context around our Q4 results, followed by a Q&A session. During the interactive portion of the call, our presenters will be joined by John Boschelli, Kemper's Executive Vice President and Chief Investment Officer. After the markets closed today, we issued our earnings release and published our earnings presentation and financial supplement. We intend to file our Form 10-K with the SEC in the coming days. You can find these documents in the Investors section of our website, kemper.com. 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 on its future results of operation and financial condition. Our future results and financial condition may differ materially from these statements.
Michael Marinaccio: We'll make a few opening remarks to provide context around our Q4 results, followed by a Q&A session. During the interactive portion of the call, our presenters will be joined by John Boschelli, Kemper's Executive Vice President and Chief Investment Officer. After the markets closed today, we issued our earnings release and published our earnings presentation and financial supplement. We intend to file our Form 10-K with the SEC in the coming days. You can find these documents in the Investors section of our website, kemper.com. 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 on its future results of operation and financial condition. Our future results and financial condition may differ materially from these statements.
Speaker #2: After the markets closed today, we issued our earnings release and published our earnings presentation and financial supplement. We intend to file our Form 10-K with the SEC in the coming days.
Speaker #2: You can find these documents in the investor section of our website, kemper.com. 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.
Speaker #2: These statements include but are not limited to the company's outlook on its future results condition. Our future results and financial condition may differ materially from these statements.
Speaker #2: of operation and financial For information on additional risk that may impact these forward-looking statements, please refer to our Form release. This 10-K and our fourth quarter earnings afternoon's discussion also includes meaningful to investors.
David Brown: For information on additional risks that may impact these forward-looking statements, please refer to our Form 10-K and our Q4 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've defined and reconciled all non-GAAP financial measures to GAAP, where required in accordance with 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 2024 period unless otherwise stated. I'll now turn the call over to Tom. Thank you, Michael, and good afternoon, everyone. I'll start with a simple appraisal. Our results this quarter did not meet expectations. We'll walk through the underlying drivers and the actions we're taking to improve the performance in our auto business and increase shareholder value.
Michael Marinaccio: For information on additional risks that may impact these forward-looking statements, please refer to our Form 10-K and our Q4 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've defined and reconciled all non-GAAP financial measures to GAAP, where required in accordance with 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 2024 period unless otherwise stated. I'll now turn the call over to Tom.
Speaker #2: In our financial supplement, earnings presentation, and earnings release, non-GAAP financial measures we believe are we've defined and reconciled all non-GAAP financial measures to GAAP, where required in accordance with SEC rules.
Speaker #2: You can find each of these documents in the investor section of our website, kemper.com. All comparative references will be to the corresponding 2024 period unless to call over to Tom.
Tom Evans: Thank you, Michael, and good afternoon, everyone. I'll start with a simple appraisal. Our results this quarter did not meet expectations. We'll walk through the underlying drivers and the actions we're taking to improve the performance in our auto business and increase shareholder value.
Speaker #3: Thank otherwise stated.
Speaker #3: you, Michael, and good afternoon, everyone. I'll start with a simple appraisal. Our results this quarter did not meet On the outturn expectations. We'll walk through the underlying drivers and the actions we're taking to improve increase shareholder value.
Speaker #3: Before that, I want to offer some context on both the businesses and the operating environment we're presently navigating today. We're a specialty insurer focused on niche underserved markets.
David Brown: Before that, I want to offer some context on both the businesses and the operating environment we're presently navigating today. We're a specialty insurer focused on niche, underserved markets. We are focused on these markets because they are attractive and there's a continuing need for our products. We know these markets and have the scale, experience, and competitive advantages to succeed. Our portfolio of specialty auto and life insurance businesses may address different customer needs, but both are managed with the same core principles: disciplined underwriting, risk management, and long-term value creation. We have identified and are acting on a number of strategic and tactical priorities that will get us to target profitability with growth to follow. We'll discuss these priorities in more detail today. As we've noted before, the specialty auto market is a fast-moving segment.
Tom Evans: Before that, I want to offer some context on both the businesses and the operating environment we're presently navigating today. We're a specialty insurer focused on niche, underserved markets. We are focused on these markets because they are attractive and there's a continuing need for our products. We know these markets and have the scale, experience, and competitive advantages to succeed. Our portfolio of specialty auto and life insurance businesses may address different customer needs, but both are managed with the same core principles: disciplined underwriting, risk management, and long-term value creation. We have identified and are acting on a number of strategic and tactical priorities that will get us to target profitability with growth to follow. We'll discuss these priorities in more detail today. As we've noted before, the specialty auto market is a fast-moving segment.
Speaker #3: We are focused on these markets because they are attractive and there's a continuing need for our products. We know these markets and have the scale, experience, and competitive advantages to succeed.
Speaker #3: Our life insurance businesses may portfolio of specialty auto and address different customer needs, but both are managed with the same core principles. risk management, and long-term Disciplined underwriting, value creation.
Speaker #3: We have identified and are acting on a number of strategic and tactical priorities that will get to follow. We'll discuss these today. As we've noted before, the specialty auto market is a fast-moving segment.
Speaker #3: Market shifts often appear in this segment before showing up in other parts of the auto insurance most important drivers of our long-term landscape. success is our ability to accurately us to target profitability with growth As an auto underwriter, one of the business appropriately.
David Brown: Market shifts often appear in this segment before showing up in other parts of the auto insurance landscape. As an auto underwriter, one of the most important drivers of our long-term success is our ability to accurately predict loss costs and price our business appropriately. This has been more challenging of late because of significant structural changes in key states in which we operate. For example, in California last year, minimum liability insurance limits for auto increased for the first time since 1967, with bodily injury limits doubling and property damage limits tripling. When markets are stable, predicting future costs is more straightforward. However, when changes of this magnitude occur, particularly against the backdrop of social inflation and legal system abuse, loss cost predictability becomes more difficult and complex.
Tom Evans: Market shifts often appear in this segment before showing up in other parts of the auto insurance landscape. As an auto underwriter, one of the most important drivers of our long-term success is our ability to accurately predict loss costs and price our business appropriately. This has been more challenging of late because of significant structural changes in key states in which we operate. For example, in California last year, minimum liability insurance limits for auto increased for the first time since 1967, with bodily injury limits doubling and property damage limits tripling. When markets are stable, predicting future costs is more straightforward. However, when changes of this magnitude occur, particularly against the backdrop of social inflation and legal system abuse, loss cost predictability becomes more difficult and complex.
Speaker #3: This has been more challenging of late because of significant structural changes in key states in which we operate, where we predict loss costs and price our business.
Speaker #3: For example, in California last year, minimum liability insurance limits for auto increased for the first time since 1967, with bodily injury limits doubling and property damage limits tripling.
Speaker #3: When markets are stable, predicting future costs is more straightforward. magnitude occur, particularly against the However, when changes of this legal system abuse, complex. While we loss-cost predictability becomes more difficult and anticipated the need to adapt to the new requirements in California, the scale of the disruption, exacerbated by elevated severity trends, created pressure on our results over the past several quarters.
David Brown: While we anticipated the need to adapt to the new requirements in California, the scale of the disruption, exacerbated by elevated severity trends, created pressure on our results over the past several quarters. In Florida, our second-largest market, the tort reforms enacted in 2023 have reduced loss costs and made the market more attractive for carriers and affordable for consumers. The result is a significantly more competitive marketplace. This improvement in loss costs led to our $35 million charge this quarter for refunds to personal auto customers under the state's statutory profit limit rules. We view these refunds, which other carriers are also undertaking, as clear evidence of the benefits of tort reform. We have a strong-performing book in Florida, and we're making targeted rate adjustments there to be more competitive and support growth. Away from specialty auto, I'd highlight that our life insurance business continues to deliver solid performance.
Tom Evans: While we anticipated the need to adapt to the new requirements in California, the scale of the disruption, exacerbated by elevated severity trends, created pressure on our results over the past several quarters. In Florida, our second-largest market, the tort reforms enacted in 2023 have reduced loss costs and made the market more attractive for carriers and affordable for consumers. The result is a significantly more competitive marketplace. This improvement in loss costs led to our $35 million charge this quarter for refunds to personal auto customers under the state's statutory profit limit rules. We view these refunds, which other carriers are also undertaking, as clear evidence of the benefits of tort reform. We have a strong-performing book in Florida, and we're making targeted rate adjustments there to be more competitive and support growth. Away from specialty auto, I'd highlight that our life insurance business continues to deliver solid performance.
Speaker #3: In Florida, our second-largest market, the tort reforms enacted in 2023 have more attractive for carriers and affordable for consumers. The result is a significantly more competitive marketplace.
Speaker #3: This improvement in loss costs led to our $35 million charge this quarter for refunds to personal auto customers under the state's statutory profit limit view these refunds, which other carriers are also undertaking, as clear rules.
Speaker #3: evidence of the benefits of tort reform. strong-performing book in Florida and we're making We have a We targeted rate adjustments there to be more competitive and support growth.
Speaker #3: Away from Specialty Auto, I’d highlight that our Life Insurance business continues to deliver solid performance. This business provides stability and diversification within our overall portfolio, and Chris will provide additional details shortly.
David Brown: This business provides stability and diversification within our overall portfolio, and Chris will provide additional detail shortly. While our auto business faces near-term challenges impacting our consolidated results, we're acting quickly and taking purposeful steps to improve financial performance. On slide 5, we outline the priorities and actions underway to improve results, enhance operations, and reduce earnings volatility through diversification. In particular, I'll note the recent restructuring initiatives, our focus to enhance claims processes, and the introduction of new products to support the acceleration of geographic diversification. Together, these actions will protect and advance our competitive advantages, drive growth, enhance profitability, and ultimately create value for our shareholders. Our objective as a management team is continuous improvement that strengthens performance and positions the company for long-term success. Before turning it over to Brad, Matt, and Chris, I'll provide a brief update on the CEO search.
Tom Evans: This business provides stability and diversification within our overall portfolio, and Chris will provide additional detail shortly. While our auto business faces near-term challenges impacting our consolidated results, we're acting quickly and taking purposeful steps to improve financial performance. On slide 5, we outline the priorities and actions underway to improve results, enhance operations, and reduce earnings volatility through diversification. In particular, I'll note the recent restructuring initiatives, our focus to enhance claims processes, and the introduction of new products to support the acceleration of geographic diversification. Together, these actions will protect and advance our competitive advantages, drive growth, enhance profitability, and ultimately create value for our shareholders. Our objective as a management team is continuous improvement that strengthens performance and positions the company for long-term success. Before turning it over to Brad, Matt, and Chris, I'll provide a brief update on the CEO search.
Speaker #3: While our auto business faces near-term challenges impacting our consolidated results, we're acting quickly and taking purposeful steps to improve financial performance. On slide five, we outline the priorities and actions underway to improve results, enhance operations, and reduce earnings volatility through diversification.
Speaker #3: In particular, I'll note the recent restructuring initiatives, our focus to and the introduction of new products to support the acceleration of geographic enhance claims processes, diversification.
Speaker #3: Together, these actions will protect and advance our competitive advantages to drive growth, enhance profitability, and ultimately create value for our shareholders. Our objective is a management team is continuous improvement that strengthens performance and positions the company for long-term success.
Speaker #3: Before turning it over to Brad Matt and Chris, I'll provide a brief update on the CEO search. The board search process is well underway, and they have developed a pipeline of highly qualified independent executive search firm.
David Brown: The board search process is well underway, and they have developed a pipeline of highly qualified candidates with the help of a leading independent executive search firm. The board is actively evaluating those candidates with deliberate speed as the board focuses on identifying the right leader for Kemper's next phase. Thank you, and with that, I'll turn it over to Brad. Thank you, Tom. Good afternoon, everyone. Before discussing the quarter, I want to expand on what Tom just shared. At a high level, the primary goals of our initiatives are threefold. First, to restore and improve profitability in our specialty auto business. Second, to reduce earnings volatility through portfolio and geographic diversification. And third, to improve execution and operating efficiency by simplifying operations and capturing meaningful expense savings through restructuring and cost discipline.
Tom Evans: The board search process is well underway, and they have developed a pipeline of highly qualified candidates with the help of a leading independent executive search firm. The board is actively evaluating those candidates with deliberate speed as the board focuses on identifying the right leader for Kemper's next phase. Thank you, and with that, I'll turn it over to Brad.
Speaker #3: The board is actively evaluating those candidates with deliberate speed, as the board focuses on identifying the right candidates with the help of a leading leader for Kemper's next phase.
Speaker #3: Thank you, and with that, I'll turn it over to Brad.
Brad Camden: Thank you, Tom. Good afternoon, everyone. Before discussing the quarter, I want to expand on what Tom just shared. At a high level, the primary goals of our initiatives are threefold. First, to restore and improve profitability in our specialty auto business. Second, to reduce earnings volatility through portfolio and geographic diversification. And third, to improve execution and operating efficiency by simplifying operations and capturing meaningful expense savings through restructuring and cost discipline.
Speaker #4: Thank you, Tom. Good afternoon, everyone. Before discussing the quarter, I want to expand on what Tom just shared. At a high level, the primary goals of our initiatives are threefold.
Speaker #4: First, to restore and improve profitability in our specialty auto business. Second, to reduce earnings volatility through portfolio and geographic diversification. And third, to improve execution and operating efficiency by simplifying operations and capturing meaningful expense savings through restructuring and cost discipline.
Speaker #4: Taken together, these initiatives are designed to strengthen near-term performance, while positioning the business for more consistent, profitable growth. With that context, I'll now walk through our quarterly results.
David Brown: Taken together, these initiatives are designed to strengthen near-term performance while positioning the business for more consistent, profitable growth. With that context, I'll now walk through our quarterly results. I'll begin on slide 6. For the quarter, we reported net loss of $8 million or $0.13 per share and adjusted consolidated net operating income of $14.6 million or $0.25 per share. These results produced a negative 1.2% return on equity and year-over-year book value per share growth of 4.6%. Despite these results, our trailing 12-month operating cash flow remained strong at $585 million. In our P&C segment, the underlying combined ratio increased 5.4 points sequentially to 105%, driven by elevated bodily injury claim severity in California and statutory refunds in Florida. Excluding the impact of refunds, the underlying combined ratio was 101.2%. The statutory refunds reflect improved loss cost experience following Florida's 2023 tort reform.
Brad Camden: Taken together, these initiatives are designed to strengthen near-term performance while positioning the business for more consistent, profitable growth. With that context, I'll now walk through our quarterly results. I'll begin on slide 6. For the quarter, we reported net loss of $8 million or $0.13 per share and adjusted consolidated net operating income of $14.6 million or $0.25 per share. These results produced a negative 1.2% return on equity and year-over-year book value per share growth of 4.6%. Despite these results, our trailing 12-month operating cash flow remained strong at $585 million. In our P&C segment, the underlying combined ratio increased 5.4 points sequentially to 105%, driven by elevated bodily injury claim severity in California and statutory refunds in Florida. Excluding the impact of refunds, the underlying combined ratio was 101.2%. The statutory refunds reflect improved loss cost experience following Florida's 2023 tort reform.
Speaker #4: I'll begin on slide six. For the quarter, we reported net loss of 8 million, or 13 cents per share, and of 14.6 million, or adjusted consolidated net operating income 25 cents per 1.2% return on equity, and year-over-year book value per share growth of 4.6%.
Speaker #4: Despite these results, our trailing 12-month operating cash flow remained strong at 585 million. In our share. P&C segment, the underlying combined ratio These results produced a negative points, sequentially to increased 5.4 105%, driven by elevated bodily injury claim severity in California, and statutory refunds in Florida.
Speaker #4: Excluding the impact of refunds, the underlying combined ratio was 101.2%. The statutory refunds reflect improved loss-cost experience following Florida's 2023 tort reform. Policies enforced and written premium declined 7.3% and 9.3% year-over-year, respectively.
David Brown: Policies in force and written premium declined 7.3% and 9.3% year-over-year, respectively. This decline reflects typical Q4 seasonality as well as non-rate actions to moderate new business writings in certain markets. Our life business delivered solid results driven by disciplined expense management. This business continues to provide stable contribution to earnings and cash flow. And lastly, our balance sheet continues to provide flexibility to support organic growth initiatives and strategic investments. Turning to slide 7. This slide provides additional detail on the drivers of our quarterly results. We recorded a $15.5 million charge related to restructuring, integration, and other costs. A portion of this relates to the restructuring initiative announced last quarter, bringing the cumulative annualized run rate savings to approximately $33 million, up $3 million from last quarter. This initiative is building momentum, and we expect to realize additional savings over time.
Brad Camden: Policies in force and written premium declined 7.3% and 9.3% year-over-year, respectively. This decline reflects typical Q4 seasonality as well as non-rate actions to moderate new business writings in certain markets. Our life business delivered solid results driven by disciplined expense management. This business continues to provide stable contribution to earnings and cash flow. And lastly, our balance sheet continues to provide flexibility to support organic growth initiatives and strategic investments. Turning to slide 7. This slide provides additional detail on the drivers of our quarterly results. We recorded a $15.5 million charge related to restructuring, integration, and other costs. A portion of this relates to the restructuring initiative announced last quarter, bringing the cumulative annualized run rate savings to approximately $33 million, up $3 million from last quarter. This initiative is building momentum, and we expect to realize additional savings over time.
Speaker #4: This decline reflects typical fourth-quarter seasonality as well as non-rate actions to moderate new business writings in certain markets. Our life business delivered solid results.
Speaker #4: Driven by disciplined expense management, this business continues to provide stable contribution to earnings and cash flow. Lastly, our balance sheet continues to provide flow for initiatives and strategic investments.
Speaker #4: Turning to slide seven, this slide provides additional detail on the drivers of our quarterly $15.5 million charge related to results costs. A portion of this relates to the restructuring initiative announced last quarter, bringing the cumulative annualized run-rate savings to approximately $33 million.
Speaker #4: Up 3 million from last quarter. This initiative is building momentum, and we expect to realize additional savings over time. Also, included in this charge is a valuation adjustment for a tax credit equity investment that reflects its updated fair market value.
David Brown: Also, included in this charge is a valuation adjustment for a tax credit equity investment that reflects its updated fair market value. This quarter, we also had two noteworthy items that impacted operating income: the Florida statutory refunds and reserve strengthening. The Florida statutory refunds were recognized as a reduction to earned premium and added 3.8 points to the Specialty Auto underlying combined ratio. Excluding this item, the underlying combined ratio was 101.2%. Finally, we strengthened loss reserves within Specialty Auto, primarily in Commercial Auto, reflecting updated loss experience related to Bodily Injury severity and defense costs, primarily stemming from accident years 2023 and prior. Turning to Slide 8. Our balance sheet provides financial flexibility. At quarter-end, we maintained over $1 billion in available liquidity, and our insurance subsidiaries remained well capitalized.
Brad Camden: Also, included in this charge is a valuation adjustment for a tax credit equity investment that reflects its updated fair market value. This quarter, we also had two noteworthy items that impacted operating income: the Florida statutory refunds and reserve strengthening. The Florida statutory refunds were recognized as a reduction to earned premium and added 3.8 points to the Specialty Auto underlying combined ratio. Excluding this item, the underlying combined ratio was 101.2%. Finally, we strengthened loss reserves within Specialty Auto, primarily in Commercial Auto, reflecting updated loss experience related to Bodily Injury severity and defense costs, primarily stemming from accident years 2023 and prior. Turning to Slide 8. Our balance sheet provides financial flexibility. At quarter-end, we maintained over $1 billion in available liquidity, and our insurance subsidiaries remained well capitalized.
Speaker #4: had two noteworthy items that impacted This quarter, we also operating income. The Florida statutory refunds and reserve strengthening. The Florida statutory refunds were recognized as a reduction to earn premium and added 3.8 points to the specialty auto underlying combined ratio.
Speaker #4: Excluding this item, the underlying combined ratio was 101.2%. Finally, we strengthened loss reserves within specialty auto primarily in experience related to bodily injury severity and defense costs.
Speaker #4: commercial auto, reflecting updated loss Primarily stemming from accident years 2023 and prior. Turning to slide eight, our balance sheet provides financial in available liquidity and our insurance well-capitalized.
Speaker #4: Over the past year, our operating cash flow enabled the retirement of 450 million in debt and the repurchase of approximately 300 subsidiaries remained million of common stock.
David Brown: Over the past year, our operating cash flow enabled the retirement of $450 million in debt and the repurchase of approximately $300 million of common stock. As a result, our debt-to-capital ratio improved by 6.4 points to 24.6%, modestly above our long-term target of 22%. Moving to slide 9. Our quarterly net investment income totaled $103 million, down $2 million sequentially due to lower returns within alternative investments. Our core portfolio, comprised of high-quality investments, continues to generate stable and gradually increasing net investment income. This income will continue to support our businesses. Overall, we maintain a high-quality, well-diversified investment portfolio supported by thoughtful asset allocation and prudent risk management. Next, on slide 10. Here we provide an update on our 1 January 2026 reinsurance renewal.
Brad Camden: Over the past year, our operating cash flow enabled the retirement of $450 million in debt and the repurchase of approximately $300 million of common stock. As a result, our debt-to-capital ratio improved by 6.4 points to 24.6%, modestly above our long-term target of 22%. Moving to slide 9. Our quarterly net investment income totaled $103 million, down $2 million sequentially due to lower returns within alternative investments. Our core portfolio, comprised of high-quality investments, continues to generate stable and gradually increasing net investment income. This income will continue to support our businesses. Overall, we maintain a high-quality, well-diversified investment portfolio supported by thoughtful asset allocation and prudent risk management. Next, on slide 10. Here we provide an update on our 1 January 2026 reinsurance renewal.
Speaker #4: As a result, our debt-to-capital ratio improved by 6.4 points to 24.6%, modestly above our long-term target of 22%. Moving to slide nine, our quarterly net investment income totaled 103 million down 2 million investments.
Speaker #4: Our corporate portfolio comprised of high-quality sequentially, due to lower returns within alternative investments continues to generate stable and gradually increasing net investment income. This income will continue to support our businesses.
Speaker #4: Overall, we maintain a high-quality, well-diversified investment portfolio supported by thoughtful asset allocation and prudent risk management. Next, on slide 10, here we provide an update on our January 1, 2026, reinsurance renewal.
Speaker #4: Our catastrophe excessive loss program is a one-year structure that provides 95% coverage for losses in excess of 50 million up to 160 million. The total limit is 15 million lower than last year, reflecting the continued reduction in total insured value due to the wind-down of a preferred business.
David Brown: Our Catastrophe Excess of Loss Program is a one-year structure that provides 95% coverage for losses in excess of $50 million up to $160 million. The total limit is $15 million lower than last year, reflecting the continued reduction in total insured value due to the wind-down of a preferred business. This program structure is appropriate and reflects our exposure profile. The key takeaway is that our catastrophe exposure is meaningfully lower than it was several years ago. In summary, Q4 results reflect near-term pressure in specialty auto from elevated claim severity and Florida statutory refunds, and we are taking deliberate actions to improve results. We continue to maintain a well-capitalized and liquid balance sheet and are executing extensive initiatives to enhance profitability. Our life business delivers stable results.
Brad Camden: Our Catastrophe Excess of Loss Program is a one-year structure that provides 95% coverage for losses in excess of $50 million up to $160 million. The total limit is $15 million lower than last year, reflecting the continued reduction in total insured value due to the wind-down of a preferred business. This program structure is appropriate and reflects our exposure profile. The key takeaway is that our catastrophe exposure is meaningfully lower than it was several years ago. In summary, Q4 results reflect near-term pressure in specialty auto from elevated claim severity and Florida statutory refunds, and we are taking deliberate actions to improve results. We continue to maintain a well-capitalized and liquid balance sheet and are executing extensive initiatives to enhance profitability. Our life business delivers stable results.
Speaker #4: This program structure is appropriate and reflects our exposure profile. The key takeaway is that our catastrophe exposure is meaningfully lower than it was several years ago.
Speaker #4: In summary, fourth-quarter results reflect near-term pressure in specialty auto Florida statutory refunds. And we are taking deliberate actions to improve from elevated claim severity and results.
Speaker #4: We continue to maintain a well-capitalized and liquid balance sheet and are executing expense initiatives to enhance profitability. Our life business delivered stable results core portfolio investment income is positioned to benefit from higher reinvestment yields and our reinsurance program remains aligned with our current risk profile.
David Brown: Core portfolio investment income is positioned to benefit from higher reinvestment yields, and our reinsurance program remains aligned with our current risk profile. I'll now turn it over to Matt to discuss the Specialty P&C segment. Thank you, Brad, and good afternoon, everyone. Turning to slide 11. Adjusted for Florida statutory refunds, the Specialty P&C segment produced an underlying combined ratio of 101, while Personal Auto produced a 105, and commercial remained relatively stable at 90%. Personal Auto's performance continues to be adversely impacted by bodily injury severity trends. This trend is particularly pronounced in California. As Tom mentioned, the recent doubling of state minimum limits is driving a structural change in BI costs. In response, we have taken decisive non-rate actions resulting in the slowing of new business in the state.
Brad Camden: Core portfolio investment income is positioned to benefit from higher reinvestment yields, and our reinsurance program remains aligned with our current risk profile. I'll now turn it over to Matt to discuss the Specialty P&C segment.
Speaker #4: I'll now turn it over to Matt to discuss the Specialty P&C.
Speaker #4: segment. Thank you, Brad, and good
Matt Hunton: Thank you, Brad, and good afternoon, everyone. Turning to slide 11. Adjusted for Florida statutory refunds, the Specialty P&C segment produced an underlying combined ratio of 101, while Personal Auto produced a 105, and commercial remained relatively stable at 90%. Personal Auto's performance continues to be adversely impacted by bodily injury severity trends. This trend is particularly pronounced in California. As Tom mentioned, the recent doubling of state minimum limits is driving a structural change in BI costs. In response, we have taken decisive non-rate actions resulting in the slowing of new business in the state.
Speaker #2: Good afternoon, everyone. Turning to slide 11, adjusted for Florida statutory refunds, the Specialty P&C segment produced an underlying combined ratio of 101, while Personal Auto produced a 105, and Commercial remained relatively stable at 90%.
Speaker #2: Personal auto loss performance continues to be adversely impacted by bodily injury severity trends. This trend is California. As Tom mentioned, the recent doubling of state minimum limits is driving a structural change in BI costs.
Speaker #2: In response, we have taken decisive non-rate actions, resulting in a slowing of new business in the state. We are actively working with the California Department of Insurance on rate filings to address this liability rate need.
David Brown: We are actively working with the California Department of Insurance on rate filings to address this liability rate need. In addition to underwriting and pricing actions, we continue to enhance our claims management processes. Over the last few years, we focused our efforts primarily on material damage management, which has been instrumental in offsetting the cost pressures of rising tariffs. More recently, our focus has shifted to third-party liability management. By leveraging advanced analytics and AI-enabled workflows, we are more quickly and accurately assessing claims, getting them in front of the right skill sets, and driving resolution. Our efforts are beginning to reduce excess attorney involvement and mitigate costs associated with legal system abuse. The result is lower optimal claim settlement costs and an improved customer experience. A high priority for the PPA business is achieving a more geographically balanced book.
Matt Hunton: We are actively working with the California Department of Insurance on rate filings to address this liability rate need. In addition to underwriting and pricing actions, we continue to enhance our claims management processes. Over the last few years, we focused our efforts primarily on material damage management, which has been instrumental in offsetting the cost pressures of rising tariffs. More recently, our focus has shifted to third-party liability management. By leveraging advanced analytics and AI-enabled workflows, we are more quickly and accurately assessing claims, getting them in front of the right skill sets, and driving resolution. Our efforts are beginning to reduce excess attorney involvement and mitigate costs associated with legal system abuse. The result is lower optimal claim settlement costs and an improved customer experience. A high priority for the PPA business is achieving a more geographically balanced book.
Speaker #2: In addition to underwriting and pricing actions, we continue to enhance our claims management processes. Over the last few years, we focused our efforts primarily on material damage management, which has been instrumental in offsetting the cost pressures of rising tariffs.
Speaker #2: More recently, our focus has shifted to third-party liability management. By leveraging advanced analytics and AI-enabled workflows, we are more quickly and accurately assessing claims, getting them in front of the right skill sets, and driving resolution.
Speaker #2: Our efforts are beginning to reduce excess attorney involvement and mitigate costs associated with legal system abuse. The result is lower costs and an improved customer experience.
Speaker #2: A high priority for the PPA business is achieving more optimal claim settlement costs and a geographically balanced book. The more balanced portfolio will enable us to more effectively navigate market cycles, better manage state-specific dynamics, and reduce underwriting income volatility.
David Brown: A more balanced portfolio will enable us to more effectively navigate market cycles, better manage state-specific dynamics, and reduce underwriting income volatility. Over the last few years, the concentration of our PPA business in California has increased, primarily driven by the post-COVID hard market in that state. This can be seen on slide 12. This slide is intended to provide transparency into our current position and the direction we are taking. Over time, our book should reflect a composition more aligned with our target customer base, with greater than 50% residing in non-California states. While California will always be our largest market, we are looking to accelerate profitable growth in other states. Accordingly, the restructuring initiative we mentioned is designed to lower our expense ratio and enhance overall price competitiveness. Additionally, we are in the process of launching a new personal auto product in our non-California states.
Matt Hunton: A more balanced portfolio will enable us to more effectively navigate market cycles, better manage state-specific dynamics, and reduce underwriting income volatility. Over the last few years, the concentration of our PPA business in California has increased, primarily driven by the post-COVID hard market in that state. This can be seen on slide 12. This slide is intended to provide transparency into our current position and the direction we are taking. Over time, our book should reflect a composition more aligned with our target customer base, with greater than 50% residing in non-California states. While California will always be our largest market, we are looking to accelerate profitable growth in other states. Accordingly, the restructuring initiative we mentioned is designed to lower our expense ratio and enhance overall price competitiveness. Additionally, we are in the process of launching a new personal auto product in our non-California states.
Speaker #2: Over the last few years, the concentration of our PPA business in California has increased, primarily driven by the post-COVID hard market in that state.
Speaker #2: This can be seen on slide 12. This slide is intended to provide transparency into our current position and the direction we are taking. Over time, our book should reflect a composition more aligned with our target customer base, with greater than 50% residing in non-California states.
Speaker #2: While California will always be our largest market, we are looking to accelerate profitable growth in other states. Accordingly, the restructuring initiative we mentioned is designed to lower our Additionally, we are in the process of launching a new price competitiveness.
Speaker #2: personal auto product in our non-California states. This new product includes modernized contracts, more sophisticated pricing, and a seamless agent quoting experience. The primary goal of this new product is to improve competitiveness across the portfolio through better rate-to-risk matching.
David Brown: This new product includes modernized contracts, more sophisticated pricing, and a seamless agent quoting experience. The primary goal of this new product is to improve competitiveness across the portfolio through better rate-to-risk matching. We have been piloting this product in Arizona and Oregon, with early production and segmentation results meeting our expectations. We are currently in advanced discussions with the Florida and Texas departments of insurance with the goal of the product going live in both states within the next few quarters. Together, a lower expense ratio and enhanced pricing precision is expected to support profitable growth in our non-California markets. In commercial auto, underlying margins remain strong while producing double-digit policy growth. We continue to be optimistic about the profitable expansion of this business. We have a series of differentiating competitive advantages that have driven consistent and predictable results.
Matt Hunton: This new product includes modernized contracts, more sophisticated pricing, and a seamless agent quoting experience. The primary goal of this new product is to improve competitiveness across the portfolio through better rate-to-risk matching. We have been piloting this product in Arizona and Oregon, with early production and segmentation results meeting our expectations. We are currently in advanced discussions with the Florida and Texas departments of insurance with the goal of the product going live in both states within the next few quarters. Together, a lower expense ratio and enhanced pricing precision is expected to support profitable growth in our non-California markets. In commercial auto, underlying margins remain strong while producing double-digit policy growth. We continue to be optimistic about the profitable expansion of this business. We have a series of differentiating competitive advantages that have driven consistent and predictable results.
Speaker #2: We have been piloting this product in Arizona and Oregon, with early production and segmentation results meeting our expectations. We are in discussions with the Florida and Texas departments of insurance, with the goal of the product going live in both states within the next few quarters.
Speaker #2: Together, a lower expense ratio and enhanced pricing precision is expected to support profitable growth in our non-California market. In commercial auto, underlying margins remain strong while producing double-digit policy growth.
Speaker #2: We continue to be optimistic about the profitable expansion of this business. We have a series of differentiating competitive advantages that have driven consistent and predictable results.
Speaker #2: With that said, we are opportunistically increasing rates where justified, with a specific focus on addressing liability cost increases. Overall, this business remains well-positioned, and we are confident in our ability to profitably grow.
David Brown: With that said, we are opportunistically increasing rates where justified, with the specific focus on addressing liability cost increases. Overall, this business remains well-positioned, and we are confident in our ability to profitably grow. In conclusion, we are focused on restoring California profitability and building a more diversified personal auto portfolio. We remain committed to our target market segments, disciplined execution, and continuous improvement of our existing capabilities to drive consistent value over time. I'll now turn the call over to Chris to cover the life business. Thank you, Matt, and good afternoon, everyone. Turning to our life insurance segment on slide 13. The life segment continues to deliver a consistent return on capital and reliable distributable cash flow. Earned premiums were stable year-over-year, and we finished the quarter with the face value of our in-force business at approximately $19.6 billion.
Matt Hunton: With that said, we are opportunistically increasing rates where justified, with the specific focus on addressing liability cost increases. Overall, this business remains well-positioned, and we are confident in our ability to profitably grow. In conclusion, we are focused on restoring California profitability and building a more diversified personal auto portfolio. We remain committed to our target market segments, disciplined execution, and continuous improvement of our existing capabilities to drive consistent value over time. I'll now turn the call over to Chris to cover the life business.
Speaker #2: In conclusion, we are profitability and building a more diversified personal auto portfolio. We remain committed to our target market segments. Disciplined execution and continuous improvement of our existing capabilities to drive consistent value focused on restoring California over time.
Speaker #2: I'll now turn the call over to Chris to cover the life business.
Chris Flint: Thank you, Matt, and good afternoon, everyone. Turning to our life insurance segment on slide 13. The life segment continues to deliver a consistent return on capital and reliable distributable cash flow. Earned premiums were stable year-over-year, and we finished the quarter with the face value of our in-force business at approximately $19.6 billion.
Speaker #3: Thank you, Matt, and good afternoon, everyone. Turning to our life insurance segment on slide 13, the life segment continues to deliver a consistent return on capital and reliable distributable cash flow.
Speaker #3: Earned premiums were stable year over year, and we finished the quarter with the face value of our enforced business at approximately $19.6 billion. Adjusted net operating income was $20 million in the quarter, driven by ongoing expense management.
David Brown: Adjusted net operating income was $20 million in the quarter, driven by ongoing expense management. Importantly, we continue to experience favorable policy economics. Our average face value per policy increased modestly, while our average premium per policy issued rose 6%. To support continued growth and increase cash flow over time, we successfully launched an updated product portfolio and expanded the distribution of our liability offering. In closing, the life business is performing well and continues to provide stable and consistent results to the overall portfolio. I'll now turn the call back to Tom to cover closing comments. Tom? Thanks, Chris. To wrap things up, we know our results this quarter weren't where we want them to be. We believe in our businesses and in the markets we serve, and we are confident in our capabilities and competitive advantages to be successful.
Chris Flint: Adjusted net operating income was $20 million in the quarter, driven by ongoing expense management. Importantly, we continue to experience favorable policy economics. Our average face value per policy increased modestly, while our average premium per policy issued rose 6%. To support continued growth and increase cash flow over time, we successfully launched an updated product portfolio and expanded the distribution of our liability offering. In closing, the life business is performing well and continues to provide stable and consistent results to the overall portfolio. I'll now turn the call back to Tom to cover closing comments. Tom?
Speaker #3: Importantly, we continue to experience favorable policy economics. Our average face value per policy increased modestly, while our average premium per policy issued rose 6%.
Speaker #3: To support continued growth and increased cash flow over time, we successfully launched an updated product portfolio and expanded the distribution of our liability offering.
Speaker #3: In closing, the life business's performing well and continues to provide stable and consistent results to the overall portfolio. I'll now turn the call back to Tom.
Speaker #3: To cover closing comments. Tom?
Tom Evans: Thanks, Chris. To wrap things up, we know our results this quarter weren't where we want them to be. We believe in our businesses and in the markets we serve, and we are confident in our capabilities and competitive advantages to be successful.
Speaker #4: Thanks, Chris. To wrap things up, we know our results this quarter weren't where we want them to be. We believe that our businesses and in the markets we serve and we are confident in our capabilities and competitive advantages to be successful.
David Brown: We're focused on executing the actions we've laid out today. This work takes discipline, and we're committed to making the improvements necessary to deliver stronger, more consistent performance. Before we close, I want to thank our colleagues throughout the organization for their hard work and commitment. They show up every day for our customers to deliver on our promises. Thanks for your time today, and we will now take questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press * followed by the number 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press * followed by the number 2. If you're using a speakerphone, please flip the handset before pressing any keys. One moment, please, for your first question.
Tom Evans: We're focused on executing the actions we've laid out today. This work takes discipline, and we're committed to making the improvements necessary to deliver stronger, more consistent performance. Before we close, I want to thank our colleagues throughout the organization for their hard work and commitment. They show up every day for our customers to deliver on our promises. Thanks for your time today, and we will now take questions.
Speaker #4: Actions we've laid out today—we're focused on executing the work. It takes discipline, and we're committed to making the improvements necessary to deliver stronger, more consistent performance.
Speaker #4: Before we close, I want to thank our colleagues throughout the organization for their hard work and commitment. They show up every day for our customers to deliver on our promises.
Speaker #4: Thanks for your time today, and we will now take questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press * followed by the number 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press * followed by the number 2. If you're using a speakerphone, please flip the handset before pressing any keys. One moment, please, for your first question.
Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the number one on your touchstone phone.
Speaker #1: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the number two.
Speaker #1: If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Brian Meredith from UBS.
David Brown: Your first question comes from the line of Brian Meredith from UBS. Your line is now open. Yeah, thank you. A couple of them here. First, I'm wondering if you could tell us what the profitability kind of breakdown is between California and then Florida, Texas, just to get a sense of what the profitability looks like in your core non-problem states. Hey, Brian. This is Matt. California combined ratio is about a 105, around there. Florida sits in that target combined ratio, in that 95 to 97 range, as does Texas. The issue from a profitability perspective, as we highlighted in the prepared comments, is earned rate catching up to sort of the BI cost in California. So the PPA profit issues are driven predominantly by California. The other states are in pretty healthy standing. Okay. That makes sense.
Operator: Your first question comes from the line of Brian Meredith from UBS. Your line is now open.
Speaker #1: Your line is now
Speaker #1: open.
Brian Meredith: Yeah, thank you. A couple of them here. First, I'm wondering if you could tell us what the profitability kind of breakdown is between California and then Florida, Texas, just to get a sense of what the profitability looks like in your core non-problem states.
Speaker #5: Yes, thank you. A couple of them here.
Speaker #5: First, I'm wondering if you could tell us what the profitability kind of breakdown is between California and then Florida, Texas. Just to get a sense of what the profitability looks like in your cult non-problem
Speaker #5: states. Hey, Brian, this
Matt Hunton: Hey, Brian. This is Matt. California combined ratio is about a 105, around there. Florida sits in that target combined ratio, in that 95 to 97 range, as does Texas. The issue from a profitability perspective, as we highlighted in the prepared comments, is earned rate catching up to sort of the BI cost in California. So the PPA profit issues are driven predominantly by California. The other states are in pretty healthy standing.
Speaker #6: is Matt. In California, combined ratio is about a 105 around there, Florida sits in that target combined ratio in that 95 to 97 range as does Texas.
Speaker #6: The issue from a profitability perspective, as we highlighted in the prepared comments, is rate earned rate catching up to sort of the BI cost in California.
Speaker #6: So, the PPA profit issues are driven predominantly by California. The other states are in pretty healthy standing.
Brian Meredith: Okay. That makes sense. And then I guess the next question then, Matt, is why are you shrinking in the other states right now if your profitability is fine?
Speaker #5: Okay. That makes sense. And then I guess the next question then, Matt, is why are you shrinking in the other states right now if your profitability is
Speaker #5: Okay. That makes sense. And then I guess the next question then, Matt, is why are you shrinking in the other states right now if your profitability is fine?
David Brown: And then I guess the next question then, Matt, is why are you shrinking in the other states right now if your profitability is fine? The profitability is in a good place from a pricing perspective. In those markets, Brian, Florida and Texas specifically, they softened pretty dramatically last year, and we wanted to ensure in Florida specifically that the benefits of tort reform were durable. We didn't want to be too aggressive from a pricing perspective. That was one reason. The other is from a structure perspective, which we talked about last quarter, is we need to drive more expense efficiency to get our products to a more competitive level. We did that partially. We took a step forward in those states in the fourth quarter, third and fourth quarter.
Matt Hunton: The profitability is in a good place from a pricing perspective. In those markets, Brian, Florida and Texas specifically, they softened pretty dramatically last year, and we wanted to ensure in Florida specifically that the benefits of tort reform were durable. We didn't want to be too aggressive from a pricing perspective. That was one reason. The other is from a structure perspective, which we talked about last quarter, is we need to drive more expense efficiency to get our products to a more competitive level. We did that partially. We took a step forward in those states in the fourth quarter, third and fourth quarter.
Speaker #6: The profitability is in a good We in those markets, Brian, Florida and Texas specifically, they soften pretty dramatically last year, and we specifically that the benefits of tort reform were wanted to ensure in Florida durable.
Speaker #6: We didn't want to be too aggressive from a pricing perspective. That was one reason. The other is from a structure perspective, which we talked about last quarter, is we need to drive more expense efficiency to get our products to a more competitive level.
Speaker #6: We did that partially. We took a step forward in those states in the fourth quarter, third and fourth quarter. We saw that our new business, when we made those pricing adjustments, took a meaningful pop in the direction that we want it to.
David Brown: We saw that our new business, when we made those pricing adjustments, took a meaningful pop in the direction that we want it to. We've stabilized PIF in Florida. We're seeing sequential growth in Texas. And like we said in the prepared comments, we have a new product we're looking to launch sometime in the next quarter or two, which should further accelerate our competitiveness and ultimately our PIF production. Great. Thanks. And then one more quick one, if I could. Commercial Auto, I'm just curious, given the consistent adverse development you've been seeing, how comfortable are you with current year profitability and the fact that that's actually one area that's growing? Yeah. So current year profitability, I'll just take a step back for a second. The segments that we focus on, we stay away from the Nuclear Verdict segments, the long-haul trucking, the dirt, sand, gravel.
Matt Hunton: We saw that our new business, when we made those pricing adjustments, took a meaningful pop in the direction that we want it to. We've stabilized PIF in Florida. We're seeing sequential growth in Texas. And like we said in the prepared comments, we have a new product we're looking to launch sometime in the next quarter or two, which should further accelerate our competitiveness and ultimately our PIF production.
Speaker #6: We've stabilized PIF in Florida. We're seeing sequential growth in Texas. And like we said in the prepared comments, we have a new product we're looking to launch sometime in the next quarter or two, which should further accelerate our competitiveness and ultimately our PIF production.
Brian Meredith: Great. Thanks. And then one more quick one, if I could. Commercial Auto, I'm just curious, given the consistent adverse development you've been seeing, how comfortable are you with current year profitability and the fact that that's actually one area that's growing?
Speaker #5: Great. Thanks. And one more quick one, if I could. Commercial auto, I'm just curious, given the consistent adverse development you've been seeing, how comfortable are you with current year profitability and the fact that that's actually one area that's
Speaker #5: growing? Yeah.
Matt Hunton: Yeah. So current year profitability, I'll just take a step back for a second. The segments that we focus on, we stay away from the Nuclear Verdict segments, the long-haul trucking, the dirt, sand, gravel.
Speaker #6: profitability, I'll just take a step back for a second. The segments that we focus on, we stay away from the nuclear verdict segments, the long-haul trucking, the dirt sand gravel.
Speaker #6: We generally have a fair mix of limit profile that's evenly spread across large limit to small limit. Artisan contractors, landscapers, delivery, that's really where we focus.
David Brown: We generally have a fair mix of limit profile that's evenly spread across large limit to small limit, artisan contractors, landscapers, delivery. That's really where we focus. From an underlying perspective, we feel confident that we're getting the pricing and we have the rate adequacy. That said, again, in the prepared comments, we are appropriately opportunistic in terms of strengthening our rate position, specifically on BI, where we can justify it. So we feel good about our adequacy. Underlying performance has remained very consistent there, and we continue to opportunistically take rate where we can support it. Great. Thanks. Your next question comes from the line of Andrew Kligerman from TD Cowen. Your line is now open. Hey, good evening, everyone. I need a little help with kind of a roadmap, if you will, in personal auto.
Matt Hunton: We generally have a fair mix of limit profile that's evenly spread across large limit to small limit, artisan contractors, landscapers, delivery. That's really where we focus. From an underlying perspective, we feel confident that we're getting the pricing and we have the rate adequacy. That said, again, in the prepared comments, we are appropriately opportunistic in terms of strengthening our rate position, specifically on BI, where we can justify it. So we feel good about our adequacy. Underlying performance has remained very consistent there, and we continue to opportunistically take rate where we can support it.
Speaker #6: From an underlying perspective, we feel confident that we're getting the pricing and we have the rate adequacy. That said, again, in the prepared comments, we are appropriately opportunistic in terms of strengthening our rate position, specifically on BI.
Speaker #6: Where we can justify it. So we feel good about our adequacy underlying performance has remained very consistent there. And we continue to opportunistically take rate where we can support it.
Brian Meredith: Great. Thanks.
Speaker #5: Great.
Speaker #5: Thanks. Your next question comes from the line of
Operator: Your next question comes from the line of Andrew Kligerman from TD Cowen. Your line is now open.
Speaker #1: Andrew Kligerman from TD Cowen. Your line is now
Speaker #1: open. Hey, good evening.
Andrew Kligerman: Hey, good evening, everyone. I need a little help with kind of a roadmap, if you will, in personal auto. So if you're starting with a 110 Underlying Combined Ratio, and then maybe I could take off the table 4 points from the Florida refund, so then I'm at 106. And then I think Brad mentioned some seasonality, so maybe there's another point or 2. So I want to make sure, A, am I at the right starting point of maybe more normalized at 105? B, given 70% of the book is in California, how soon can you get that fixed? How can you get California to that kind of targeted 95-ish that you're seeing in Florida and Texas? And with that, we saw a PIF decrease of 7%.
Speaker #7: Everyone. I want to I need a little help with kind of a roadmap, if you will. In personal auto, so if you're starting with a 110 underlying combined ratio and then maybe I could take off the table 4 points from the Florida refund, so then I'm at 106.
David Brown: So if you're starting with a 110 Underlying Combined Ratio, and then maybe I could take off the table 4 points from the Florida refund, so then I'm at 106. And then I think Brad mentioned some seasonality, so maybe there's another point or 2. So I want to make sure, A, am I at the right starting point of maybe more normalized at 105? B, given 70% of the book is in California, how soon can you get that fixed? How can you get California to that kind of targeted 95-ish that you're seeing in Florida and Texas? And with that, we saw a PIF decrease of 7%. I was kind of surprised premium dropped more than that, at 9+%. So bottom line, how soon can you get to normal on that combined ratio, and what's likely to happen with PIF?
Speaker #7: And then I think Brad mentioned some seasonality, so maybe there’s another point or two. So I want to make sure, A, am I at the right starting point of maybe more normalized at 105?
Speaker #7: B, given 70% of the book is in California, how soon can you get that fixed? How can you get California to a to that kind of targeted 95-ish that you're seeing in Florida and Texas?
Speaker #7: And with that, we saw a PIF decrease of 7%. I was kind of surprised premium dropped more than that. At 9-plus percent. So bottom line, how soon can you get to normal on that combined ratio?
Andrew Kligerman: I was kind of surprised premium dropped more than that, at 9+%. So bottom line, how soon can you get to normal on that combined ratio, and what's likely to happen with PIF? Should we see more quarters like the one we just saw with PIF down 7%?
Speaker #7: And what's likely to happen with PIF? Should we see more quarters like the one we just saw with PIF down 7%?
David Brown: Should we see more quarters like the one we just saw with PIF down 7%? So this is Matt again. Thanks for the question. I just want to first comment on the rate activity in California. So we saw the severity pop higher than what we had initially priced to in our FR filing. Immediately, we took new business non-rate actions and underwriting actions to make sure we weren't putting unprofitable business onto the books. We filed with the Department of Insurance for a 6.9% rate increase. That said, the filing hits bodily injury much more significantly than that. We had redundancy on our metal coverages, and so we're hitting bodily injury pretty heavily north of 40 points of rate that we're looking to get approved. We believe we're in the final stages of approval. We have good back-and-forth dialogue.
Matt Hunton: So this is Matt again. Thanks for the question. I just want to first comment on the rate activity in California. So we saw the severity pop higher than what we had initially priced to in our FR filing. Immediately, we took new business non-rate actions and underwriting actions to make sure we weren't putting unprofitable business onto the books. We filed with the Department of Insurance for a 6.9% rate increase. That said, the filing hits bodily injury much more significantly than that. We had redundancy on our metal coverages, and so we're hitting bodily injury pretty heavily north of 40 points of rate that we're looking to get approved. We believe we're in the final stages of approval. We have good back-and-forth dialogue.
Speaker #6: So this is Matt again. Thanks for the question. I just want to first comment on the rate activity in California. So we saw severity pop higher than what we had initially priced to in our FR filing.
Speaker #6: Immediately, we took new business non-rate actions and underwriting actions to make sure we weren't putting unprofitable business onto the books. We filed with the Department of Insurance for a 6.9% rate increase.
Speaker #6: That said, the filing hits bodily injury much more significantly than that. We had redundancy on our metal coverages. And so we're hitting bodily injury pretty heavily north of 40 points of rate that we're looking to get approved.
Speaker #6: We believe we're in the final stages of approval. We have good back-and-forth dialogue. We had a conversation with the department even this morning talking about that.
David Brown: We had a conversation with the department even this morning talking about that. We will hope to get that effective as soon as we can. And 100% of our policies in California are six-month policies. And so, rate will earn in over a 12-month period, and we'll accelerate over that time to the file levels that we're hoping to get effective ASAP. And Andrew, this is Brad. I know you're looking at doing your modeling. You're starting off at the right point, the 105-ish combined ratio on the personal auto business. When you think about what Matt's talking about, some of it is in our control, and some of it's not. We can respond very quickly to the regulator. We can work through the process with them as effectively as we can, but we're waiting for that approval.
Matt Hunton: We had a conversation with the department even this morning talking about that. We will hope to get that effective as soon as we can. And 100% of our policies in California are six-month policies. And so, rate will earn in over a 12-month period, and we'll accelerate over that time to the file levels that we're hoping to get effective ASAP.
Speaker #6: We will hope to get that effective as soon as we can. And 100% of our policies in California are six-month policies. And so rate will earn in over a 12-month period, and we'll accelerate over that time to the file levels that we're hoping to get effective ASAP.
Brad Camden: And Andrew, this is Brad. I know you're looking at doing your modeling. You're starting off at the right point, the 105-ish combined ratio on the personal auto business. When you think about what Matt's talking about, some of it is in our control, and some of it's not. We can respond very quickly to the regulator. We can work through the process with them as effectively as we can, but we're waiting for that approval.
Speaker #6: And Andrew, this is Brad. I know you're looking at doing your modeling. You're starting off at the right point. The 105-ish combined ratio on the personal auto business.
Speaker #6: When you think about what Matt's talking about, some of it is in our control and some of it's not. We can respond very quickly to the regulator.
Speaker #6: We can work through the process with them as effectively as we can, but we're waiting for that approval. As we wait for that approval, we still have severity trends each quarter.
David Brown: As we wait for that approval, we still have severity trends each quarter. So if you have a 6-point severity trend year-over-year or an 8-point severity trend, you pick it. You've got some headwinds until we get that rate approved, and it becomes effective in the marketplace, and then it's earned in. So it will be some time before you start marching back towards that mid-90s combined ratio. It's highly predicated on getting that rate 1, and 2, how we're managing the claims process related to the liability coverages. There, as we've talked about in the past, it's all BI, and loss costs are ballooning mainly due to higher attorney attachment rates and higher claims settling at limit. And so we're working on that process. It's very sensitive. As you know, a repped claim is 4 or 5 times more expensive than an unrepped claim.
Brad Camden: As we wait for that approval, we still have severity trends each quarter. So if you have a 6-point severity trend year-over-year or an 8-point severity trend, you pick it. You've got some headwinds until we get that rate approved, and it becomes effective in the marketplace, and then it's earned in. So it will be some time before you start marching back towards that mid-90s combined ratio. It's highly predicated on getting that rate 1, and 2, how we're managing the claims process related to the liability coverages. There, as we've talked about in the past, it's all BI, and loss costs are ballooning mainly due to higher attorney attachment rates and higher claims settling at limit. And so we're working on that process. It's very sensitive. As you know, a repped claim is 4 or 5 times more expensive than an unrepped claim.
Speaker #6: So if you have a 6-point severity trend year over year or an 8-point severity trend, you pick it. You've got some headwinds until we get that rate.
Speaker #6: That rate is approved and it becomes effective in the marketplace, and then it's earned in. So it will be some time before you start marching back towards that mid-90s combined ratio.
Speaker #6: It's highly predicated on getting that rate won and, two, how we're managing the claims process related to the liability coverages. There, as we've talked about in the past, it's all BI.
Speaker #6: And loss costs are ballooning mainly due to higher attorney attachment rates, and higher claims settling at limit. And so we're working on that process.
Speaker #6: It's a very sensitive as you know, a wrepped claim is four or five times more expensive than an unwrapped claim. And so we'll work through that process to enhance that as well as working on our underwriting to mitigate frequency to bring down overall loss
David Brown: And so we'll work on that process to enhance that, as well as working on our underwriting to mitigate frequency to bring down overall loss cost. That was very helpful. And with that, just kind of, part of that question was PIF decline. It feels like PIF will need to decline or continue to decline until you actually do get those rates approved. And then maybe when you get them approved, you won't be as competitive, so maybe PIF will continue to decline. So I just wanted to kind of clarify on that part of the question. Am I thinking about that the right way? You're generally thinking about the right way, Andrew. We anticipate further declines in California, and we expect some growth both in Florida, and Texas given some of the reinvestment we've made in those states.
Brad Camden: And so we'll work on that process to enhance that, as well as working on our underwriting to mitigate frequency to bring down overall loss cost.
Speaker #6: cost. That was very helpful.
Andrew Kligerman: That was very helpful. And with that, just kind of, part of that question was PIF decline. It feels like PIF will need to decline or continue to decline until you actually do get those rates approved. And then maybe when you get them approved, you won't be as competitive, so maybe PIF will continue to decline. So I just wanted to kind of clarify on that part of the question. Am I thinking about that the right way?
Speaker #7: And with that, just kind of part of that question was PIF decline. It feels like PIF will need to decline, or continue to decline, until you actually do get those rates approved.
Speaker #7: And then maybe when you get them approved, you won't be as competitive. So maybe PIF will continue to decline. So I just wanted to kind of clarify on that part of the question.
Speaker #7: Am I thinking about that the right
Speaker #7: Way? You're generally thinking about the right way.
Matt Hunton: You're generally thinking about the right way, Andrew. We anticipate further declines in California, and we expect some growth both in Florida, and Texas given some of the reinvestment we've made in those states. Later, maybe in the first half of the year, Q2-ish, we'll launch a new product there that'll become effective to help, as Matt said, with competitiveness. That is in late-stage negotiations with those regulators. But I wouldn't expect in Q1 to see California be growing. I'd expect to see some additional growth in Florida as we've seen some stability there in Florida at the end of the year, and we saw actually sequential growth in Texas on a quarter-over-quarter basis.
Speaker #1: Andrew. We anticipate further declines in California and we expect some growth both in Florida and Texas given some of the reinvestment we've made in that and those states.
Speaker #1: And later in the maybe in the first half of the year, second quarter-ish, we'll launch a new product there. That'll become effective to help, as Matt said, with competitiveness.
David Brown: Later, maybe in the first half of the year, Q2-ish, we'll launch a new product there that'll become effective to help, as Matt said, with competitiveness. That is in late-stage negotiations with those regulators. But I wouldn't expect in Q1 to see California be growing. I'd expect to see some additional growth in Florida as we've seen some stability there in Florida at the end of the year, and we saw actually sequential growth in Texas on a quarter-over-quarter basis. Got it. Then just the last question. The commercial auto prior year development, the adverse development of 3.8 points, I believe it started to become adverse like six, seven quarters ago. So the question for you, and I know Brian had kind of touched on it just before me, but it seemed like last quarter you'd kind of finally gotten your arms around it.
Speaker #1: That is in late-stage negotiations with those regulators. But I wouldn't expect in the first quarter to see California be growing. I'd expect to see some additional growth in Florida, as we've seen some stability there in Florida at the end of the year.
Speaker #1: And we saw, actually, sequential growth in Texas on a quarter-over-quarter basis.
Andrew Kligerman: Got it. Then just the last question. The commercial auto prior year development, the adverse development of 3.8 points, I believe it started to become adverse like six, seven quarters ago. So the question for you, and I know Brian had kind of touched on it just before me, but it seemed like last quarter you'd kind of finally gotten your arms around it. But just to kind of come back at it a little differently, what's different this time that would make you feel confident that there won't be another adverse PYD next quarter or the quarter after?
Speaker #7: Got it. And then just the last question. The commercial auto prior year development, the adverse development of 3-point, 8-point, I believe it started to become adverse like 6, 7 quarters ago.
Speaker #7: So the question for you—and I know Brian had kind of touched on it just before me—but it seemed like last quarter you'd kind of finally gotten your arms around it.
Speaker #7: But what just to kind of come back at it a little differently, what's different this time that would make you feel confident that there won't be another adverse PYD next quarter or the quarter
David Brown: But just to kind of come back at it a little differently, what's different this time that would make you feel confident that there won't be another adverse PYD next quarter or the quarter after? Great question, Andrew. Again, the adverse development's coming from large losses, mainly stemming from accident years 2023 and prior. As we continue to move forward in time, there's less claims out there. And so the claim count now has come down. It's gone from accident years 2020 through 2023. So there's less count. I think we're in pretty good shape, but there's been obviously adverse development's always a surprise because we're looking at reserving the best we can. My expectation, though, is I think we've got most of that. And when I think about accident year 2024 and 2025, as I mentioned previously, we changed our reserving practices for large losses in mid-2023.
Speaker #7: after? Great
Matt Hunton: Great question, Andrew. Again, the adverse development's coming from large losses, mainly stemming from accident years 2023 and prior. As we continue to move forward in time, there's less claims out there. And so the claim count now has come down. It's gone from accident years 2020 through 2023. So there's less count. I think we're in pretty good shape, but there's been obviously adverse development's always a surprise because we're looking at reserving the best we can. My expectation, though, is I think we've got most of that. And when I think about accident year 2024 and 2025, as I mentioned previously, we changed our reserving practices for large losses in mid-2023.
Speaker #1: Andrew. Again, the adverse development's coming from large losses mainly question, stemming from accident years 2023 and prior. As we continue to move forward in time, there's less claims out there.
Speaker #1: And so the claim count now has come down as we've gone from accident years 2020 through 2023. So there's less count. I think we're in pretty good shape, but there's been obviously adverse development's always a surprise because we're looking at reserving the best we can.
Speaker #1: My expectation though is I think we've got most of that. And when I think about accident year '24 and '25, as I mentioned previously, we changed our reserving practices for large losses.
Speaker #1: In mid-'23, what I'm seeing develop in '24 and '25 actually looks favorable. So I think we got most of the development in '23 and prior and '24 and '25 looks significantly better than those other accident years.
David Brown: What I'm seeing develop in 2024 and 2025 actually looks favorable. So I think we got most of the development in 2023 and prior, and 2024 and 2025 looks significantly better than those other accident years. Hey, thanks for the helpful insights. Your next question comes from the line of Paul Newsome from Piper Sandler. Your line is now open. Good evening. Thanks for the call. I was hoping you'd talk a little bit about the Florida situation a little bit more with respect to the potential rate filings. If you had obviously, you had extremely good profitability there. Did you need to lower rates further in response to that as well? So should we expect, respectively, a little bit lower profitability if you need to reduce the run rate of your profitability, or is that already sort of in the run rate right now? Great question. This is Matt.
Matt Hunton: What I'm seeing develop in 2024 and 2025 actually looks favorable. So I think we got most of the development in 2023 and prior, and 2024 and 2025 looks significantly better than those other accident years.
Andrew Kligerman: Hey, thanks for the helpful insights.
Speaker #7: Hey, thanks for the helpful insights.
Operator: Your next question comes from the line of Paul Newsome from Piper Sandler. Your line is now open.
Speaker #1: Your next question comes from the line of Paul Newsom from Piper Sandler. Your line is now open.
Paul Newsome: Good evening. Thanks for the call. I was hoping you'd talk a little bit about the Florida situation a little bit more with respect to the potential rate filings. If you had obviously, you had extremely good profitability there. Did you need to lower rates further in response to that as well? So should we expect, respectively, a little bit lower profitability if you need to reduce the run rate of your profitability, or is that already sort of in the run rate right now?
Speaker #8: Good evening. Thanks for the call. I was hoping you'd talk a little bit about the Florida situation a little bit more with respect to the potential rate filings.
Speaker #8: If you had—obviously, you had extremely good profitability there. Did you need to lower rates further in response to that as well? So, should we expect prospectively a little bit lower profitability?
Speaker #8: If you need to reduce the run rate of your profitability or is that already sort of in the run right now?
Matt Hunton: Great question. This is Matt. Like I said earlier, we wanted to ensure that the benefits of tort reform were durable. It's a stroke of the pen that things can reverse back on you. So we wanted to make sure they were durable. Additionally, once we saw that the performance was sticking, as we were looking to file rate in the marketplace, you have to, with the OIR, the Department of Insurance there, justify decreases as well as increases, right, the same level of scrutiny. And so had we taken rates down dramatically this year, which, by the way, would have put non-economical business on from a pricing perspective, yeah, we could have mitigated a little bit of the refund, but we would have put a cohort of business on the books that was uneconomical, right, because you had such good performance periods over the three-year waiting.
Speaker #1: Great. Great question. This is Matt. Like I said earlier, we wanted to ensure that the benefits of tort reform were durable. It's a stroke of the pen, and things can reverse back on you.
David Brown: Like I said earlier, we wanted to ensure that the benefits of tort reform were durable. It's a stroke of the pen that things can reverse back on you. So we wanted to make sure they were durable. Additionally, once we saw that the performance was sticking, as we were looking to file rate in the marketplace, you have to, with the OIR, the Department of Insurance there, justify decreases as well as increases, right, the same level of scrutiny. And so had we taken rates down dramatically this year, which, by the way, would have put non-economical business on from a pricing perspective, yeah, we could have mitigated a little bit of the refund, but we would have put a cohort of business on the books that was uneconomical, right, because you had such good performance periods over the three-year waiting.
Speaker #1: So we wanted to make sure they were durable. Additionally, once we saw that the performance was sticking, as we were looking to file rate in the marketplace, you have to, with the OIR—the Department of Insurance there—justify decreases as well as increases, right?
Speaker #1: The same level of scrutiny. And so, had we taken rates down dramatically this year—which, by the way, would have put non-economical business on from a pricing perspective—yeah, we could have mitigated a little bit of the refund, but we would have put a cohort of business on the books that was uneconomical, right?
Speaker #1: Because you had such good periods performance periods over the three-year waiting. And so we made the decision not to make that rate investment. It was a good trade economically for us.
David Brown: And so we made the decision not to make that rate investment. It was a good trade economically for us. But as we march forward and we have the ability to support rate adjustments, which we are doing now, we're making those pricing changes, and we're driving the production that we feel good about on a vintage basis. So I guess, to clarify that sort of mid-90s combined ratio you mentioned to Brian in Florida, that incorporates rates as we have them today or rates as they will be filed in the near future? That does not include future rates. That's performance as of today. Pricing is done on a prospective basis, which takes your current underlying performance and you roll that forward based on prospective trends, which you justify with the Department of Insurance, and then you set your rates off of that prospective outlook. That's really helpful.
Matt Hunton: And so we made the decision not to make that rate investment. It was a good trade economically for us. But as we march forward and we have the ability to support rate adjustments, which we are doing now, we're making those pricing changes, and we're driving the production that we feel good about on a vintage basis.
Speaker #1: But as we marched forward and we have the ability to support rate adjustments, which we are doing now, we're making those pricing changes and we're driving the production that we feel good about on a vintage basis.
Paul Newsome: So I guess, to clarify that sort of mid-90s combined ratio you mentioned to Brian in Florida, that incorporates rates as we have them today or rates as they will be filed in the near future?
Speaker #8: So I guess to clarify that sort of mid-'90s combined ratio you mentioned, to Brian in Florida, that incorporates rates as we have them today or rates as they will be filed in the near
Speaker #8: So, I guess to clarify that sort of mid-90s combined ratio you mentioned to Brian in Florida, that incorporates rates as we have them today, or rates as they will be filed in the near future?
Matt Hunton: That does not include future rates. That's performance as of today. Pricing is done on a prospective basis, which takes your current underlying performance and you roll that forward based on prospective trends, which you justify with the Department of Insurance, and then you set your rates off of that prospective outlook. That's really helpful.
Speaker #1: That does not include future rates. Those are that's performance as of today. Pricing is done on a prospective basis, which takes your current underlying performance and you roll that forward based on prospective trends—which you justify with the Department of Insurance.
Speaker #1: And then you set your rates off of that perspective.
Speaker #1: outlook. That's really
Speaker #8: Helpful. And then, second question, I wanted to ask about cash flow and the liquidity situation. Obviously, you get the caps back down. There's obviously good levels at the parent company levels.
David Brown: And then second question, I wanted to ask about cash flow and the liquidity situation. Obviously, you get the caps back down. There's obviously good levels of parent company levels. But I did notice that the RBC ratio for the property casualty business ticked down during the quarter, but, and it's not that far above the sort of 200 level. Do you anticipate putting more capital into the property casualty operation, or is the thought that you'll shrink to make that RBC ratio go up? I guess I'm supposing, if I'm wrong, that a 230 RBC capital ratio is not your target. Hey, Paul. This is Brad. Great question. When you look at that RBC information that's on the chart, that is a window into our legal entity point of view from a P&C and life standpoint.
Paul Newsome: And then second question, I wanted to ask about cash flow and the liquidity situation. Obviously, you get the caps back down. There's obviously good levels of parent company levels. But I did notice that the RBC ratio for the property casualty business ticked down during the quarter, but, and it's not that far above the sort of 200 level. Do you anticipate putting more capital into the property casualty operation, or is the thought that you'll shrink to make that RBC ratio go up? I guess I'm supposing, if I'm wrong, that a 230 RBC capital ratio is not your target.
Speaker #8: But I did notice that the RBC ratio for the property casualty business ticked down during the quarter a bit. And it's not that far above the sort of 200 level.
Speaker #8: Do you anticipate putting more capital into the property casualty operation or is the thought that you'll shrink to make that RBC ratio go up?
Speaker #8: I guess I'm supposing if we were on that a 230 RBC capital ratio is not your
Speaker #8: target. Hey, Paul, this is Brad.
Brad Camden: Hey, Paul. This is Brad. Great question. When you look at that RBC information that's on the chart, that is a window into our legal entity point of view from a P&C and life standpoint. When you think about capital available for Kemper, it includes not only the holding company capital as well as the capital in our legal entities. So yes, the 230 is a little bit lower than we've ran historically. It's not outside our normal ranges, but it is on the lower end of what we have been historically. But we still have plenty of capital and are well above our buffers from a rating agency standpoint as well as a regulatory standpoint. At this time, I'm not planning on dropping more capital down there. I expect us to make money and to generate more capital in those legal entities over time to further rebuild that capital base. Hope that helps.
Speaker #1: Great question. When you look at that RBC information that's on the chart, that is a window into our legal entity point of view from a P&C and Life standpoint.
Speaker #1: When you think about capital available for Kemper, it includes not only the holding company capital, as well as the capital in our legal entities.
David Brown: When you think about capital available for Kemper, it includes not only the holding company capital as well as the capital in our legal entities. So yes, the 230 is a little bit lower than we've ran historically. It's not outside our normal ranges, but it is on the lower end of what we have been historically. But we still have plenty of capital and are well above our buffers from a rating agency standpoint as well as a regulatory standpoint. At this time, I'm not planning on dropping more capital down there. I expect us to make money and to generate more capital in those legal entities over time to further rebuild that capital base. Hope that helps. Yep. Absolutely. Appreciate the help. Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone keypad.
Speaker #1: So yes, the 230 is a little bit lower than we ran historically. It's not outside our normal ranges, but it is on the lower end of what we have been historically.
Speaker #1: But we still have plenty of capital and are well above our buffers, from a rating agency standpoint as well as a regulatory standpoint. At this time, I'm not planning on dropping more capital down there.
Speaker #1: I expect us to make money to generate more capital in those legal entities over time, to further rebuild that capital base. Hopefully, that helps.
Paul Newsome: Yep. Absolutely. Appreciate the help. Thank you.
Speaker #8: Yep, absolutely. Appreciate the help. Thank you.
Operator: As a reminder, if you wish to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Mitch Rubin from Raymond James. Your line is now open.
Speaker #1: As a reminder, if you wish to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Mitch Rubin from Raymond James.
David Brown: Your next question comes from the line of Mitch Rubin from Raymond James. Your line is now open. Hey, good afternoon, guys. Thanks for taking my questions. This is Mitch on for Greg. On the new personal auto products in Arizona and Oregon, can you provide some additional color on those competitive market dynamics and the timeframe you would expect the decision for a broader rollout to be made? Yeah, great question. This is something we've had in the works for the last couple of years. Again, it's the first time in over a decade that Kemper is launching a new personal lines product. We piloted in Arizona and Oregon in Q2 2025. And so we've empirically got to see how the product performs. We've tuned it a bit. We're seeing production in those environments are very competitive.
Speaker #1: Your line is now
Speaker #1: open. Hey, good afternoon,
Mitch Rubin: Hey, good afternoon, guys. Thanks for taking my questions. This is Mitch on for Greg. On the new personal auto products in Arizona and Oregon, can you provide some additional color on those competitive market dynamics and the timeframe you would expect the decision for a broader rollout to be made?
Speaker #9: Guys, thanks for taking my question. This is Mitch on for Greg. On the new personal auto products in Arizona and Oregon, can you provide some additional color on those competitive market dynamics, and the timeframe you would expect the decision for a broader rollout to be made?
Brad Camden: Yeah, great question. This is something we've had in the works for the last couple of years. Again, it's the first time in over a decade that Kemper is launching a new personal lines product. We piloted in Arizona and Oregon in Q2 2025. And so we've empirically got to see how the product performs. We've tuned it a bit. We're seeing production in those environments are very competitive.
Speaker #1: Yeah, great question. This is something we've had in the works for the last couple of years. Again, it's the first time in over a decade that Kemper is launching a new personal lines product.
Speaker #1: We piloted in Arizona and Oregon in the second quarter of 2025. And so we've empirically got to see how the product performs. We've tuned it a bit.
Speaker #1: We're seeing production in those environments is very competitive. We're seeing production lift right in line with where we would expect it to. We're generally, from a pricing perspective, in line with the levels that we want to be. The segmentation is working as expected in the spreading of risk.
David Brown: We're seeing production lift right in line with where we would expect it to. We're generally, from a pricing perspective, in line with the levels that we want to be. The segmentation is working as expected in the spreading of risk. So we feel generally pretty good about it. That product has gotten us meaningfully more competitive in those marketplace, upwards of 30 points more competitive just through better segmentation. So that's working as intended, and we're looking to scale in those states. The states that we currently have that we're working through approval processes are Florida and Texas. Florida, we've gotten some of the product approved. We're in the final stages of sort of the last bit of rubber stamping, working with the department there. And Texas, we're working through contracts and forms right now. And we have great working relationships with those departments.
Brad Camden: We're seeing production lift right in line with where we would expect it to. We're generally, from a pricing perspective, in line with the levels that we want to be. The segmentation is working as expected in the spreading of risk. So we feel generally pretty good about it. That product has gotten us meaningfully more competitive in those marketplace, upwards of 30 points more competitive just through better segmentation. So that's working as intended, and we're looking to scale in those states. The states that we currently have that we're working through approval processes are Florida and Texas. Florida, we've gotten some of the product approved. We're in the final stages of sort of the last bit of rubber stamping, working with the department there. And Texas, we're working through contracts and forms right now. And we have great working relationships with those departments.
Speaker #1: So we feel generally pretty good about it. That product has gotten us meaningfully more competitive in those marketplace upwards of 30 points more competitive, just through better segmentation.
Speaker #1: So that's working as intended, and we're looking to scale in those states. The states that we currently have we're working through approval processes are Florida and Texas.
Speaker #1: Florida, we've gotten some of the product approved. We're in the final stages of sort of the last bit of rubber-stamping, working with the department there.
Speaker #1: And Texas—we're working through contracts and forms right now. We have great working relationships with those departments, and the process is moving along really well.
David Brown: The process is moving along really well. And as I mentioned, our intention is to roll out those products in Florida and Texas as soon as possible, our goals in the next few quarters. Thank you. That's helpful. So my follow-up with the debt-to-capital ratio coming down to 24.6, can you provide us with an update on your capital allocation philosophy heading into 2026 and how you plan to balance additional paydown versus your purchases or increased dividends? Thanks. Sure. This is Brad. Our capital philosophy remains the same. First and foremost, make sure all of our legal entities have enough capital. Second, have enough capital to support organic growth. Third would be any inorganic acquisitions, which I will clearly say are not on the table at this point in time. And then third is to return cash to shareholders or pay down debt.
Brad Camden: The process is moving along really well. And as I mentioned, our intention is to roll out those products in Florida and Texas as soon as possible, our goals in the next few quarters.
Speaker #1: And as I mentioned, our intention is to roll out those products in Florida and Texas as soon as possible. Our goals in the next few quarters.
Mitch Rubin: Thank you. That's helpful. So my follow-up with the debt-to-capital ratio coming down to 24.6, can you provide us with an update on your capital allocation philosophy heading into 2026 and how you plan to balance additional paydown versus your purchases or increased dividends? Thanks.
Speaker #9: Thank you, that's helpful. So, my follow-up: with the debt-to-capital ratio coming down to 24.6%, can you provide us with an update on your capital allocation philosophy heading into 2026, and how you plan to balance additional debt paydown versus share repurchases or increased dividends?
Speaker #9: Thanks.
Brad Camden: Sure. This is Brad. Our capital philosophy remains the same. First and foremost, make sure all of our legal entities have enough capital. Second, have enough capital to support organic growth. Third would be any inorganic acquisitions, which I will clearly say are not on the table at this point in time. And then third is to return cash to shareholders or pay down debt.
Speaker #1: Sure, this is Brad. Our capital philosophy remains the same. First and foremost, make sure all of our legal entities have enough capital. Second, have enough capital to support organic growth.
Speaker #1: Third would be any inorganic acquisitions, which I will clearly say are not on the table at this point in time. And then, third is to return cash to shareholders or pay down debt.
Speaker #1: It's always been that order. So there's no change in that. And as Matt indicated earlier, we're trying to grow in certain geographies, namely Florida, Texas, and other non-California states.
David Brown: It's always been that order, so there's no change in that. As Matt indicated earlier, we're trying to grow in certain geographies, namely Florida, Texas, and other non-California states. We have enough capital to support that organic growth, and that's what we're focused on in the near term. Thank you. There are no further questions at this time. I will now turn the call over to Tom Evans. Please continue. Thank you. We appreciate everybody's time today and your continued interest in Kemper. We look forward to continuing the conversation with you when we release our Q1 results in 12 weeks or so. So take care, and thanks for your time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Brad Camden: It's always been that order, so there's no change in that. As Matt indicated earlier, we're trying to grow in certain geographies, namely Florida, Texas, and other non-California states. We have enough capital to support that organic growth, and that's what we're focused on in the near term.
Speaker #1: And we have enough capital to support that organic growth, and that's what we're focused on in the near term.
Speaker #1: term. Thank There
Mitch Rubin: Thank you.
Speaker #9: you.
Operator: There are no further questions at this time. I will now turn the call over to Tom Evans. Please continue.
Speaker #1: are no further questions at this time. I will now turn the call over to Tom Evans. Please
Speaker #1: continue. Thank
Tom Evans: Thank you. We appreciate everybody's time today and your continued interest in Kemper. We look forward to continuing the conversation with you when we release our Q1 results in 12 weeks or so. So take care, and thanks for your time.
Speaker #10: you. We appreciate everybody's time today and your continued interest in Kemper. And we look forward to continuing the conversation with you. When we release our first quarter results, in 12 weeks or so.
Speaker #10: So take care, and thanks for your...
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
