Kemper (KMPR) Surpasses Q2 Earnings and Revenue Estimates

Kemper Corporation KMPR reported second-quarter 2020 adjusted net earnings of $1.20 per share, which beat the Zacks Consensus Estimate by 27.6%. However, the bottom line declined 13% on a year-over-year basis.

Kemper witnessed poor performance across its segments and lower net investment incomes, offset by lower expenses. The insurer witnessed strong performance and industry-leading growth in its specialty auto business. Though new business sales were affected due to the pandemic, the company achieved significant policy growth for the business and enhanced franchise value.

Kemper Corporation Price, Consensus and EPS Surprise

Kemper Corporation price-consensus-eps-surprise-chart | Kemper Corporation Quote

Behind the Headlines

Kemper's total operating revenues of $1.1 billion decreased 6.6% year over year. However, the top line beat the Zacks Consensus Estimate by 0.3%. Lower earned premiums, net investment income and other income resulted in the downside.

Total expenses decreased nearly 4.9% year over year to $1.1 billion on lower policyholders' benefits and incurred losses and loss adjustment expenses.

Net investment income came in at $67.8 million in the quarter under review, down 29.4% year over year, primarily due to a lower rate of return from alternative investments, lower yields on fixed income securities and higher investment expenses.

Segment Details

Specialty Property & Casualty Insurance's revenues decreased 2.5% from the prior-year quarter to $776 million. Its total earned premiums decreased 0.9% from the prior-year quarter to $759 million due to lower earned premiums by the specialty automobile business. Net investment income decreased 41.5% year over year to $16.9 million. Combined ratio improved 250 basis points (bps) year over year to 91%.

Preferred Property & Casualty Insurance's revenues decreased 16.3% from the prior-year quarter to $168 million. Its total earned premiums decreased 13.2% from the prior-year quarter to $163.6 million due to poor performance of homeowners, preferred automobile and other personal business. Net investment income decreased 65% year over year to $ 4.3 million. Combined ratio improved 90 bps year over year to 102.2%.

Life & Health Insurance's revenues decreased 4.2% from the prior-year quarter to $207.5 million. Its total earned premiums decreased 0.4% from the prior-year quarter to $162.7 million due to lower earned premium by the life and property business. Net investment income decreased 16.4% year over year to $44.3 million.

Financial Update

As of Jun 30, 2020, Kemper had cash of $389.3 million, up 184.6% from the level as of Dec 31, 2019.

Total shareholders' equity was $4.2 billion as of Jun 30, 2020, up 5.4% from the level as of Dec 31, 2019, primarily driven by net income.

Book value per share as of Jun 30, 2020 was $64.15 per share, up 8% from $59.59 as of Dec 31, 2019.

Dividend Update

During the second quarter of 2020, Kemper paid out dividends of $19.7 million.

On May 6, 2020, Kemper board of directors declared a quarterly dividend of 30 cents per share.

The company is now left with $233 million worth of shares for repurchase under its existing share repurchase authorization at the end of the second quarter.

Zacks Rank

Currently, Kemper carries a Zacks Rank #4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players, which have reported second-quarter results so far, earnings of Arthur J. Gallagher & Co. AJG, First American Financial Corporation FAF and AXIS Capital Holdings Limited AXS beat the respective Zacks Consensus Estimate.

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