Kemper Corporation (NYSE:KMPR) Q4 2022 Earnings Call Transcript

Something changes, obviously, we’ll take note of it and react accordingly. But right now, if you’re thinking about trends, think about us, continue to make further enhancements on the underwriting front and frequency gains or maintaining what we have here. And then hopefully a continued normalization of the severity environment with, again, the significant rate that we’ve taken to match up to the severity environment earning in, in an accelerated way here to kind of return us to the traditional target profitability levels that are appropriate for the business.

Jon Newsome: That makes a lot of sense. I just — what I was trying to think about was you’re obviously trying to significantly improve the quality of the book, not just put-through pure rate. and whether or not that decline in the frequencies, primarily because of the mix change to a better book than versus sort of an environmental change.

Joseph Lacher: I think, Paul, when, I think, Matt gave you a roughly 10%, 11% decline in private passenger auto, I don’t think you’ve heard anywhere a suggestion that frequencies are down 10% or 11% environmentally. I’m trying to be careful not to be exactly precise which one is which. But if you add up all the conversations you’ve heard about frequencies and other spots, you have to assume it was something other than an environmental issue working under there, wouldn’t you?

Jon Newsome: I would imagine so. That would be my guess. But just trying to confirm.

Joseph Lacher: It’s a very material number.

Jon Newsome: Indeed, that’s good question. Just any thoughts further on sort of the competitive environment and how that works into your thinking about profit expectations next year. I would guess that we’re still in an environment where people are doing basically the same kind of things that you are. But just anything on — you’re seeing more recently from what your competitors are doing versus you guys?

Joseph Lacher: Sure, Paul. I’ll make a comment overall, and I’m pretty sure it covers all of PI and our Specialty Auto business. The bulk of the industry is still dealing with profit challenges. In some cases, they’re still recognizing that they have them and responding to them. We expect this will be the commercial equivalent of a hard market for a while. . We’re not — it’s not factoring into our calculus at this point to do anything other than be driving to restore the profitability. And I don’t see anything that impedes in the near term, our ability to make that focus. There’s not anything wonky going on from a competitive perspective that would restrict it.

Operator: Our next question is from Andrew Kligerman with Credit Suisse.

Andrew Kligerman: I’d like to drill down a little bit more on Paul’s frequency question because I’m thinking about Progressive’s call last quarter, and they talked about frequency potentially beating down as much as 20% at that operation. The question for you is gas prices. Is that potentially the reason for lower frequencies? Or is it just a permanent change in driving behaviors?

James McKinney: So I think I want to separate a couple of things. One, I want to be careful about our internalization of Progressive items. I think they were maybe referencing coverages or other elements in between. The number that we’re providing just to avoid confusion is the sum total in terms of the impact on our book. When we think about that, there’s probably — I wouldn’t say that we don’t — when we look across, you see people driving at a different periods potentially in the day or, but you don’t really see miles driven from a perspective down material in fact, in many cases, it’s up from the prepandemic norms. Associated with that, I think on a baseline component, if you’re just comparing — trying to compare as much apples-to-apples, I think the benefits from frequency from a pandemic perspective have largely been neutralized or gone away.