Kemper's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Kemper (UTR)

Q1 2012 Earnings Call

May 08, 2012 11:00 am ET


Diana J. Hickert-Hill - Vice President of Investor Relations & Corporate Identity

Donald G. Southwell - Chairman, Chief Executive Officer, President, Member of Executive Committee and Member of Investment Committee

Dennis R. Vigneau - Chief Financial Officer and Senior Vice President


Steven D. Schwartz - Raymond James & Associates, Inc., Research Division

Ryan Byrnes - Macquarie Research

Paul Newsome

Chris Leikhim



Good morning, ladies and gentlemen, and welcome to Kemper's First Quarter 2012 Earnings Conference Call. My name is Tyrone, and I will be your coordinator today. [Operator Instructions] As a reminder, the conference is being recorded for replay purposes. I would now like to introduce your host for today's conference, Ms. Diana Hickert-Hill, Vice President, Investor Relations and Corporate Identity. Ms. Hickert-Hill, you may begin.

Diana J. Hickert-Hill

Thank you, operator. Good morning, everyone, and thank you for joining us. After the markets closed yesterday, we filed our Form 10-Q with the SEC and issued our press release and financial supplement. You can find these documents on the Investors section of our website, This morning, you will hear from 2 of our business executives, starting with Don Southwell, Kemper's Chairman, President and Chief Executive Officer; followed by Dennis Vigneau, Kemper's Senior Vice President and Chief Financial Officer. We will make a few opening remarks to provide some context around our first quarter results. We will then open up the call for a question-and-answer session.

Please note that our discussion today may contain forward-looking statements. Our actual results may differ materially from these statements. Please refer to our Form 10-K filed with the SEC on February 17, 2012, as well as our first quarter 2012 Form 10-Q and earnings release for financial information on potential risks associated with relying on forward-looking statements.

This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors. In our 10-Q, supplement and earnings release, non-GAAP financial measures have been reconciled to GAAP where required in accordance with SEC rules.

And now, I will turn the call over to Don Southwell.

Donald G. Southwell

Thank you, Diana, and welcome, everyone to our inaugural earnings call. We've been taking several steps over the past couple of years to expand communications with our shareholders. These quarterly earnings conference calls are part of our efforts to the increase interactions with both investors and analysts. On today's call, I'm going to talk about 3 topics: First, the status of our business priorities; second, an update on how each of our businesses performed, including our shared services functions and our investment results; and third, our progress on capital management.

Starting with our business priorities. We offer a suite of auto and home insurance products to a broad spectrum of consumers through a multichannel distribution. In addition, we sell basic life insurance and supplemental accident and health products for individuals and families through dedicated sales forces. Our priorities include, improving profitability in each of our businesses, optimizing our investment portfolio to maximize risk-adjusted returns, managing capital to deliver shareholder value and effectively implementing our Kemper brand.

We're making progress in several areas. While overall P&C markets are not yet firm, market conditions are improving, and we are positioning ourselves to take advantage. We are segmenting our markets to focus on the areas that best fit with our model. We have been able to get price increases through in key areas and remain diligent on that front.

And across our businesses, we closely monitor agency levels and effectiveness to ensure we have the right talent in place to support business growth and to serve our customers well. Our results for this quarter reflect the progress we are making as we implement our plan. Operating results were generally in line with our expectations, taking into account the market environment and the actions we are taking to drive profitability in each of our business units. Dennis will get into the details in just a moment, but let me walk through some high-level thoughts before I turn it over.

Starting with Kemper Preferred, we are seeing some positive signs of growth, particularly in our Package Plus offerings. These products combine auto with home or renter's coverages packaged together to give customers the convenience of a single bill, additional coverage features and attractive discounts. Package Plus policies tend to have lower losses and higher retention. We're focused on new agency appointments in states where we have an appetite for growth in these products.

Our nonstandard auto business announced its name change to Kemper Specialty in April. We're seeing the impact of earlier rate increases and continue this focus, taking additional rate actions at 9 states in the first quarter. In addition, we are seeing attractive growth in Specialty's commercial auto business as competition eases in select geographies. Our strategy in this segment is to tailor our personal and commercial auto products and services to the upper end of the nonstandard market, leveraging technology to deliver convenience and efficient quote and binding processes.

Our third P&C business changed its name just last week, Kemper Direct. We have undertaken significant actions to improve profitability in this business. We are shrinking the business until loss ratios and acquisition fundamentals improve. We are especially focused on the 3 states where we see the most loss pressure: Michigan, New York and Florida. We announced that we are not renewing our direct auto programs in Michigan and we stopped all marketing in Florida and New York. We are beginning to see some improvement in loss ratio.

Read the rest of this transcript for free on

More from Stocks

Markets Look Confused After Latest Beating

Markets Look Confused After Latest Beating

General Electric Expulsion From Dow Symbolizes Unsettled Week in Markets

General Electric Expulsion From Dow Symbolizes Unsettled Week in Markets

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In