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KMPR

Kemper NYSE:KMPR Stock Report

Last Price

US$41.26

Market Cap

US$2.6b

7D

-6.6%

1Y

-39.5%

Updated

30 Sep, 2022

Data

Company Financials +
KMPR fundamental analysis
Snowflake Score
Valuation2/6
Future Growth3/6
Past Performance0/6
Financial Health1/6
Dividends3/6

KMPR Stock Overview

Kemper Corporation, a diversified insurance holding company, provides property and casualty, and life and health insurance in the United States.

Kemper Corporation Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Kemper
Historical stock prices
Current Share PriceUS$41.26
52 Week HighUS$70.65
52 Week LowUS$40.90
Beta0.77
1 Month Change-10.30%
3 Month Change-15.97%
1 Year Change-39.54%
3 Year Change-45.46%
5 Year Change-24.78%
Change since IPO159.91%

Recent News & Updates

Aug 23

Kemper Managing Through A Tough Situation, But Catalysts Still Lacking

Kemper has seen some progress on rate increases, but getting California regulators to sign off on the higher rates Kemper needs will be a tougher process. Increased claims severity has mitigated some of the benefits of higher rates and non-rate activities from management, as well as higher investment income. I believe Kemper can return to a 10%-plus ROE in FY'24 and generate attractive long-term earnings growth, but there are ongoing risks to rate actions and claims severity to consider. Kemper looks undervalued below the $50s and could generate a long-term double-digit annualized return, but near-term sentiment is still a headwind. When writing about Kemper (KMPR) back in March, I said that I saw long-term value in the shares of this beaten-up non-standard auto insurance underwriter, but that the near-term prospects weren't so attractive as the company would continue to face elevated claims expenses and inadequate rate relief. So it has been, with the shares down another 10% on ongoing operating losses despite some progress on non-rate mitigation efforts. I believe Kemper can return to profitability in FY'23 and double-digit ROE in FY'24, but is still going to require further rate hikes, and there's no guarantee that regulators will cooperate. Better-than-expected losses don't appear to be enough for the Street for now, and I do think the company will need to announce more progress with rates in California to really shift sentiment. For long-term value hounds, I still see some attractive long-term upside, but the risk of these shares heading back to $40 or below before that recovery is not insignificant. Mixed Progress On Rates The main issue for Kemper remains the same - in this post-pandemic recovery period, claims frequency (the number of accidents) and claims severity (the cost of those accidents) have risen significantly, but rates have not kept pace. While I don't want to completely absolve the company of blame from an underwriting perspective, the reality is that auto insurance rates have to be approved by regulators, so companies like Kemper (as well as Allstate (ALL), Mercury (MCY), Progressive (PGR), et al) can't just raise rates unilaterally. In the core specialty auto business, Kemper reported 3% cumulative rate increases through the second quarter, and that's with no contributions from California (more on this in a moment). Management has filed for 19% increases on a further 30% of the book and expects 4.5% improvement in the third quarter as prior rate approvals work their way through. In the Preferred auto business, rates have risen more than 1%, and management expects a further improvement of nearly 3% in the third quarter. It takes time for these rate increases to work into the book, but it will help the business over the next 12-24 months. The biggest challenge for Kemper remains California, which has accounted for as much as a two-thirds of premiums in past years (closer to 55% to 60% in recent quarters). Not only is this an election year for the insurance commissioner in California (and my understanding is that there has been some campaigning against the incumbent accusing him of being too close to the industry), but consumer advocacy groups are arguing that not only should higher rates not be approved, but that the industry owes California drivers larger rebates for lower miles driven during the pandemic. Politicking aside, sooner or later rates are going to have to increase or insurers will reduce their exposure to the market. Overall policies in force in Kemper's Specialty declined 9% in the second quarter, despite 15% growth in commercial policies in force (so the auto business declined more than 9%), and I would expect further decreases if the rates aren't adequate to generate a worthwhile return. Doing What It Can Outside Of Rates Rates are the most straightforward way of addressing loss frequency and severity issues, but management does have other tools at their disposal, and Kemper has been using these tools to further mitigate the pressures. These "tools" include non-rate actions like tighter underwriting standards, more stringent payment/billing frequency requirements, stricter non-renewal policies, and different tiers of coverage. Boiling this all down, it basically means that Kemper is being more attentive to making sure that drivers are in their proper risk tiers (less "benefit of the doubt"), reducing discounts on payment terms, and generally working to maximize their allowed revenue. I've seen some analysts estimate that these actions could contribute as much as 50% to a return to profitability, and thus far through 2022, I would say that management has been executing well on these efforts. While there is a longer-term risk that such moves could alienate customers, non-standard auto insurance buyers tend to have fewer options (particularly here of late given the rate/loss imbalances in many states), and so I see relatively less risk here. Waiting For The Bungee To Snap Back It may not be the best analogy, but one way to think about Kemper's business today is like a bungee cord. The company is currently losing money (an adjusted post-tax operating loss of $36M in the second quarter, and a $124M underwriting loss) as increased frequency and severity are hitting today and rate actions are working their way in. As those rate actions mature, though, they will more meaningfully boost net earned premiums, leading to a rebound in reported underwriting profits, with some potential additional upside if and when claims inflation eases off. At that point, further down the road, there will then be pressures on Kemper (regulatory and competitive) to dial back on rates. The Outlook Kemper has done modestly better than expected for the first six months of the year, with better rate and non-rate performance and better net interest income helping, but partly offset by higher loss costs on claims inflation. While the announced rate actions should continue to help reported results, the company really does need to see improvements in the California business to get back to sustainably profitable operations. I've roughly doubled my loss expectations for FY'22 ($2.19 versus $1.10), but I expect a return to profitability in FY'23 (with a mid-single-digit ROE of 6%) and a 10% ROE in FY'24. Beyond that point, I believe Kemper can generate core earnings growth in the high single-digits as the company benefits from those booked rate actions and benefits from its strong competitive position in the non-standard auto market and its growing presence in the commercial insurance market. Clearly a lot can still go wrong - claims frequency and severity could get even worse, and/or the company could see regulators push back on proposed increases. In such a situation, the company really has no good alternatives once non-rate mitigation efforts are exhausted; they either pull back from business or they write loss-making business.

Shareholder Returns

KMPRUS InsuranceUS Market
7D-6.6%-1.1%-2.5%
1Y-39.5%-3.8%-23.2%

Return vs Industry: KMPR underperformed the US Insurance industry which returned -7.5% over the past year.

Return vs Market: KMPR underperformed the US Market which returned -21.5% over the past year.

Price Volatility

Is KMPR's price volatile compared to industry and market?
KMPR volatility
KMPR Average Weekly Movement4.8%
Insurance Industry Average Movement4.5%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: KMPR is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: KMPR's weekly volatility (5%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
199010,300Joe Lacherhttps://www.kemper.com

Kemper Corporation, a diversified insurance holding company, provides property and casualty, and life and health insurance in the United States. The company operates through three segments: Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance, and Life & Health Insurance. It provides automobile, homeowners, renters, fire, umbrella, general liability, and various other property and casualty insurance to individuals, as well as commercial automobile insurance to businesses.

Kemper Corporation Fundamentals Summary

How do Kemper's earnings and revenue compare to its market cap?
KMPR fundamental statistics
Market CapUS$2.63b
Earnings (TTM)-US$350.50m
Revenue (TTM)US$5.76b

0.5x

P/S Ratio

-7.5x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
KMPR income statement (TTM)
RevenueUS$5.76b
Cost of RevenueUS$4.81b
Gross ProfitUS$945.30m
Other ExpensesUS$1.30b
Earnings-US$350.50m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-5.49
Gross Margin16.42%
Net Profit Margin-6.09%
Debt/Equity Ratio48.6%

How did KMPR perform over the long term?

See historical performance and comparison

Dividends

3.0%

Current Dividend Yield

-23%

Payout Ratio