Kemper Corp.’s Denise I. Lynch is leaving her position as Property/Casualty group executive, effective immediately, to pursue other opportunities, the insurer said.
The news comes after Kemper reported its P/C segment had a $5.1 million operating loss in the fourth quarter 2015, driven by the poor performance of its Alliance United, a non-standard auto provider Kemper acquired in May, 2015.
On an interim basis, Joseph W. Metz, president, Personal and Commercial Lines, will partner with Joseph P. Lacher Jr., Kemper’s president and CEO, to lead the Property/Casualty segment. Metz joined Kemper in November 2015, and he will report directly to Lacher in his interim role.
The company said it has begun a search for a replacement for Lynch.
Lynch joined the company in January 2009. She was named head of the Property & Casualty group in November, 2012, replacing James A. Schulte, who resigned. Prior to joining Kemper, Lynch served as vice president of Sales and Marketing for P/C insurance for The Hartford.
In February, 2014, Kemper reorganized its P/C group. The revamped P/C segment consists of private passenger and commercial auto and homeowners; Kemper Specialty California, Kemper’s largest non-standard private passenger auto market that includes Alliance United; Kemper Direct, consumer business operating in run-off mode; shared services supporting the P/C segment, including legal, claims, technology, human resources, project management and finance.
The Property/Casualty segment reported a net operating loss of $5.1 million in the fourth quarter of 2015, compared to net operating income of $25.3 million in 2014. In addition to poor results at Alliance United, the loss was also attributable to under-performance of the legacy book of business, the insurer said.
Since the acquisition, Alliance United experienced significantly higher frequency trends on all coverages and higher severity of losses on most coverages, particularly bodily injury. Additionally, Kemper said Alliance United’s premium rates have become inadequate, primarily from significant adverse changes in both the frequency and severity trends. The elevated combined ratio created a premium deficiency, and Alliance United wrote off $9.0 million pre-tax of deferred policy acquisition costs, according to the insurer’s recent financial report.
Alliance United reported an underlying loss and loss adjustment expense (LAE) ratio of 100.9 percent for the fourth quarter of 2015, which included $7.5 million pre-tax, or 6.7 percentage points, of adverse current year development. Additionally, Alliance United reported $4.6 million pre-tax of adverse prior year development.
Excluding Alliance United, results decreased primarily from higher catastrophes, lower levels of favorable reserve development and deteriorating underlying performance in the legacy book of business. Results included $9.2 million of catastrophe losses and $2.4 million of favorable reserve development in the fourth quarter of 2015, compared to $2.9 million and $5.8 million, respectively, in 2014.
Excluding Alliance United, the underlying loss and LAE ratio increased 3.3 percentage points in the fourth quarter of 2015, to 69.5 percent. The company experienced higher frequency in the nonstandard auto line, higher severity in homeowners and higher frequency and severity in commercial auto, partially offset by lower frequency in the preferred auto line. Excluding Alliance United, the insurance expense ratio increased a half a point, primarily from a lower premium base.
Last November, former Allstate executive Lacher joined Kemper Corp. as president and CEO. At the same time, Donald G. Southwell, who had previously announced his plans to retire, relinquished his positions as Kemper’s chairman, president and CEO as well as his position on the board of directors. He is serving as a senior advisor to the company until his retirement on May 26, 2016.