Kemper Corporation (NYSE:KMPR) held its third quarter earnings call for 2023, where it reaffirmed its full-year 2024 guidance of a return on equity (ROE) equal to or greater than 10%. The company also discussed its strategic initiatives, liquidity position, and the outlook for its Specialty P&C and Life businesses.
Key takeaways from the earnings call include:
- Kemper Corporation reported an improvement in the Specialty P&C underlying combined ratio, indicating a favorable trend in underlying results.
- The company has made progress on its strategic initiatives, including the launch of the Kemper Reciprocal Exchange and the exit from the preferred home and auto business.
- The company expects to have over $1 billion in liquidity by the end of the year and can cover its cash usage for several years.
- Despite moderate catastrophe losses due to tropical storms and wind/hail events, the company's commercial vehicle underwriting and rate actions have positively impacted loss performance.
- In the Life business, net operating income for the third quarter was $15 million, with consumer demand for their products remaining strong.
- The company aims to generate a 10%+ return on equity (ROE) and clarified that they were not trying to hide anything in their communication.
During the call, Kemper Corporation observed moderate catastrophe losses in the Specialty P&C segment due to tropical storms and wind/hail events. However, its commercial vehicle underwriting and rate actions have positively impacted loss performance, resulting in an underlying combined ratio of 93.6% in the third quarter. The company plans to selectively write a modest amount of new business to test new customer cohorts and claim behavior, with a focus on achieving target returns.
In the Life business, net operating income for the third quarter was $15 million, indicating strong consumer demand for their products. The company made progress in improving underlying combined and loss ratios and reaffirmed their 2024 financial guidance of delivering an ROE of 10% or greater.
Addressing concerns about their balance sheet and liquidity, Kemper stated that they expect to have over $1 billion in liquidity by the end of the year and that they can cover their cash usage for several years. The company also expressed confidence in their reserves for personal auto and stated that adverse development in that segment over the past four quarters was related to the second half of 2022.
Finally, Kemper clarified changes to their reporting structure, stating that $14 million of catastrophe losses will no longer be reported as a separate segment, but will be included in the consolidated numbers. The company is consolidating its revenue and net investment income into one component called non-core operations. The discontinued operations section does not include all private passenger auto business. The company emphasized that they are sticking with their goal of a 10% plus return on equity (ROE) and that their communication is aimed at simplifying their message. The call concluded without further questions.
InvestingPro Insights
InvestingPro data highlights significant metrics for Kemper Corporation. As of Q2 2023, the company's market cap stood at $2.7 billion, with a negative P/E ratio of -8.43. Furthermore, the Revenue Growth for the same period was noted at -6.55%, indicating a decline in revenue.
Turning to InvestingPro Tips, it's important to note that Kemper Corporation is facing some difficulties. Analysts have revised their earnings downwards for the upcoming period, and the company's revenue has been declining at an accelerating rate. Moreover, the company's short-term obligations exceed its liquid assets, which could lead to financial strain.
Despite these challenges, Kemper Corporation has maintained dividend payments for 34 consecutive years, a testament to its commitment to shareholders. Yet, investors should be aware that the company's price has fallen significantly over the last three months, and it was not profitable over the last twelve months.
These insights are part of the hundreds of tips and real-time data metrics provided by InvestingPro, designed to help investors make informed decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.