Kemper Corporation KMPR is poised for growth, given a compelling product portfolio and solid capital position.
The company’s return on equity of 12.8% is higher than 8.3% for the industry, reflecting the company’s efficiency in using shareholder funds. The company remains focused on generating low double-digit ROE over the longer term.
The stock carries a favorable VGM Score of B. VGM Score reflects combined weighted styles, helping to identify stocks with the most attractive value, best growth, and most promising momentum.
The insurer has been increasing its revenues over the last several years driven by higher premiums earned and investment income. The momentum is expected to continue, given the company’s focus on sharpening core capabilities, targeting niche market and diversifying global presence. The company continues to expect growth and momentum in specialty auto business.
Notably, investment income contributed about 7% to operating income. Thus market and interest rate risk is limited. Also, 90% of its fixed maturities and short-term securities investment portfolio is investment grade.
The company’s Specialty Property and Casualty Insurance Segment remains strong, given solid margins and global expansion. At its Preferred Property and Casualty Insurance Segment, the focus is on repositioning the business to improve profitability. Its Life and Health Insurance segment continues to provide diversified cash flow generation.
The company has an active catastrophe reinsurance program to lower volatility from high frequency and low severity events to limit loss from catastrophes.
This Zacks Rank #3 (Hold) insurer has a strong balance sheet with significant financial flexibility. As on Mar 31, 2020, the company had $871 million of available committed contingent liquidity and no near-term debt maturities. Its debt to capital ratio of 17.1 compares favorably with the industry average of 30.3.
Given its sustained operational performance, the company enjoys strong ratings from credit rating agencies.
This company has a stellar history of delivering positive surprise in each of the last 14 quarters, which reflects operational excellence.
The company remains focused on effectively deploying its capital to enhance shareholders’ value, fund profitable organic growth at suitable risk-adjusted returns or make strategic investment and acquisitions that boosts business and meet or exceed its ROE targets over time. Kemper has $333 million remaining under its share buyback authorization as of May 6, 2020. Also, the company has raised its dividend thrice since last year.
The Zacks Consensus Estimate for 2020 has moved up nearly 2% in past last 60 days, reflecting analysts optimism.
Shares of Kemper have lost 7.8% year to date compared with the industry’s decline of 25.9%. Solid fundamentals like compelling product portfolio and strong liquidity position should continue to drive the stock going forward.
Stocks to Consider
Some belter-ranked insurers are Old Republic International Corporation ORI, Horace Mann Educators Corporation HMN and Cigna Corporation CI.
Old Republic engages in the insurance underwriting and related services business primarily in the United States and Canada. The company delivered positive surprise of 104.35% in the last reported quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Horace Mann Educators operates as a multiline insurance company in the United States. The company delivered positive surprise of 16.42% in the last reported quarter. The stock caries a Zacks Rank #2 (Buy).
Cigna provides insurance and related products and services. It surpassed estimates in each of the last four quarters, with the average positive surprise being 6.92%. The stock caries a Zacks Rank #2.
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