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Kemper Rises on Q4 Earnings Beat

Zacks Equity Research

Kemper Corp. (KMPR) reported fourth-quarter 2013 operating earnings per share of 83 cents, which significantly outpaced the Zacks Consensus Estimate of 57 cents and rebounded from the year-ago quarter loss of 6 cents. Consequently, shares modestly rose 1.6% post the earnings announcement on Friday, to $37.32 a share.

Accordingly, operating income rose to $46.3 million against a loss of $3.4 million in the year-ago quarter, primarily driven by lower catastrophe losses and higher operating income across segments. Excluding extraordinary items, reported net income was $55.2 million or 99 cents a share, up from $1.9 million or 3 cents per share.

However, total revenue fell 1.8% year over year to $586 million. While total earned premiums decreased 4.8% to $495.6 million, net investment income rose 5.5% to $76.9 million and net realized investment gains surged over 278% to $20.8 million. Meanwhile, higher impairment loss of $7.6 million (up 145%) also weighed on the top line.

Conversely, total expenses reduced 16.3% year over year to $504.6 million, reflecting lower loss and loss adjusted and insurance expenses, partially offset by higher interest costs. Hence, underlying combined ratio improved to 93.4% from 98.6% in the year-ago quarter.

Full-Year 2013 Highlights

For full-year 2013, Kemper recorded operating earnings per share of $2.78, remarkably up from 91 cents in 2012, driving operating net income by about 196% to $159.2 million. Moreover, reported net income stood at $217.7 million or $3.80 per share, surging from $103.4 million or $1.74 a share in 2012.

Total revenue decreased 1.5% year over year to $2.43 billion, driven by lower premiums and higher impairment losses. Yet, total expenses fell 9.7% to $2.11 billion in 2013. Underlying combined ratio improved to 94.9% in 2013 from 96.8% in 2012.

Financial Update

At the end of 2013, Kemper held an investment portfolio worth $6.15 billion, which deteriorated from $6.46 billion at 2012-end. As well, cash decreased to $66.5 million and total assets declined to $7.66 billion from 2012-end. Even shareholders’ equity deteriorated to $2.05 billion from 2012.

Subsequently, reported book value per share dipped to $36.86 in 2013 from $36.98 in 2012. However, excluding net unrealized gains on fixed maturities, book value per share rose 13% to $34.49 in 2013.

During the reported quarter, Kemper repurchased about 0.43 million shares worth $15.2 million, while a total of 3.0 million shares were bought back for $100.4 million in 2013.


Along with Kemper, Loews Corp. (L) has a Zacks Rank #2 (Buy). Other top-ranked insurers include CNO Financial Group Inc. (CNO) and Old Republic International Corp. (ORI), both of which sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on L
Read the Full Research Report on CNO
Read the Full Research Report on ORI
Read the Full Research Report on KMPR

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