) reported second-quarter 2014 net operating earnings of 18 cents
per share, lagging the Zacks Consensus Estimate of 41 cents by
56.1%. Results also declined 67.2% year over year.
Including income from discontinued operations, net income at Kemper
came in at 17 cents per diluted share, down 71.2% from the
The lackluster performance was largely due to rise in both
catastrophe (CAT) losses and expenses. However, better underlying
property and casualty results partly mitigated the decline.
Kemper generated revenues of $542.5 million, missing the Zacks
Consensus Estimate by 1.7% and lower than the year-ago quarter
figure by 7.9%. Revenues declined due to lower premiums earned in
the Property and Casualty segment, stemming from the undertaken
profit improvement that resulted in lower new and renewal business.
Kemper's earned premiums and net investment income declined 8.3%
and 3% respectively, on a year-over-year basis due to soft
performance at Property and Casualty as well as Life and Health
Total expense fell 2.1% year over year due to decreased
policyholders' benefits, along with incurred losses and loss
adjustment expenses, insurance expenses, and interest and other
expenses in the reported quarter.
Property and Casualty
segment recorded a net operating loss of $1.2 million against an
income of $19.1 million in the year-ago quarter. The deterioration
stemmed mainly from a rise in CAT losses and insurance expense.
However, improved underlying loss and LAE ratio partly offset the
decline. LAE ratio improved 360 basis points (bps) year over year
to 66.0%, due to higher average earned premium rates in personal
auto and homeowners.
Revenues declined 10.3% year over year to $337.2 million, owing to
a fall in both earned premiums and net investment income.
The combined ratio deteriorated further by 870 bps to 107.6% year
over year due to higher CAT losses in the said quarter.
Life and Health
segment reported net operating income of $15.9 million, down 22%
year over year due to increased insurance expense and lower net
investment income. The insurance expense increased as a result of
start-up expense incurred at Reserve National to expand
distribution channels, along with higher legal fees. These factors
were partly offset by lower home service agent commissions.
Revenues declined 3.8% to $200 million due to decrease in earned
premiums and net investment income.
Kemper exited the quarter with cash of $61.8 million, down 7.1%
from Dec 31, 2013.
As of Jun 30, 2014, the Kemper's total assets were worth $7.96
billion, up 4.1% from 2013 end-level.
Kemper's shareholders' equity amounted to $2.14 billion, up 4.2%
from 2013 end-level.
Book value as on Jun 30, 2014 was $39.98 per share, up 8% from Dec
31, 2013. This rise was driven by lower yields on the fixed
maturities portfolio and net income.
Dividend and Share Repurchase Update
Kemper repurchased more than 1.9 million of shares for $68 million
and exhausted the $300 million buyback program. Subsequently the
board of directors approved a new $300 million share repurchase
The company also paid dividends worth $13.3 million to shareholders
in the reported quarter.
Kemper currently holds a Zacks Rank #4 (Sell).
Performance of Other Multi-line Insurers
CNO Financial Group Inc. (
) reported second-quarter 2014 operating earnings of 29 cents per
share that missed the Zacks Consensus Estimate by 6.5%. However,
the figure improved from the year-ago quarter earnings by a penny.
FBL Financial Group, Inc. (
) posted second-quarter 2014 operating earnings of $1.05 per share,
outperforming the Zacks Consensus Estimate by 9.4% and rising 7.1%
year over year.
American International Group Inc. (
) reported operating earnings per share of $1.25, which surpassed
the Zacks Consensus Estimate of $1.05 by 19% and rose 11.6% from
the year-ago quarter figure of $1.12 per share by 11.6%.
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