US insurer Kemper Corporation has announced it is exiting the preferred home and auto insurance market, while also reporting an improved net operating loss of $16.9m in the second quarter of 2023, compared to the $37.2m reported in the same period last year.
Kemper’s exit of its preferred business will enable the company to release capital and increase the resources available to support its core specialty auto and life businesses, according to Joseph P. Lacher, Jr., Kemper’s President, CEO and Chairman.
The company’s preferred property and casualty business includes eight underwriting companies which comprise approximately $500m of written premium.
The company announced the preferred business was under strategic review in November 2022.
“The decision to exit the business was made after thoughtful evaluation of our options and considered the most effective and efficient way to support our stakeholders,” Lacher added.
According to the insurer, this announcement has no impact on the company’s specialty auto business, Kemper Auto, and its life business, Kemper Life.
At the same time, Kemper has published its financial results for Q2 2023, reporting a net loss of $97.1m, compared to a net loss of $72.2 million in the same period the year prior.
Net loss for second quarter 2023 included a $45.5 million after-tax charge from the impairment of the goodwill asset related to the Preferred Property and Casualty Insurance segment.
Total revenues for Q2 2023 decreased 0.9%, to $1,262.8m, compared to Q2 2022, mostly driven by $111.4m of lower Specialty P&C earned premiums due to a decrease in new business resulting from targeted underwriting actions to improve profitability, partially offset by higher average earned premium per exposure from rate increases.
The decrease in total revenues, Kemper explained, was also driven by $41.8m of lower Life & Health earned premiums mostly due to the disposition of Kemper Health that was completed in December 2022.
This also includes a $25.4m increase in Net Realized Investment Losses, partially offset by favourable changes in the Change in Fair Value of Equity and Convertible Securities from Q2 2022.
Kemper also reported that the Specialty Property and Casualty Insurance segment reported net operating loss of $10.8m for the second quarter of 2023, compared to net operating loss of $38.9m in the same period last year.
Results improved due primarily to a lower underlying loss ratio, partially offset by adverse prior year loss and LAE development and higher catastrophe losses.
The segment’s Underlying Combined Ratio was 102.0%, compared to 108.8% in Q2 2022.
The improvement was primarily driven by higher average earned premiums per exposure resulting from rate increases and lower underlying claim frequency.
The Preferred Property and Casualty Insurance segment reported net operating loss of $2.7m for Q2 2023, which compares to the $16.8m in net operating loss reported in Q2 2022.
According to Kemper, these results improved due primarily to a lower underlying loss ratio. The segment’s Underlying Combined Ratio was 95.6%, compared to 105.3 % in Q2 2022. Improvement was driven by rate increases and other targeted underwriting actions to improve profitability.
The Life and Health Insurance segment reported net operating income of $8.9m for the second quarter of 2023, compared to a net operating income of $20.2m in the same period last year.
This decrease was primarily due to lower Net Investment Income driven by lower returns from Equity Method Limited Liability Investments, partially offset by higher rate earned on Fixed Income Securities.
