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Bull of the Day

As a result of excellent quarterly performance and improved outlook for the industry, estimates for this insurer have been on the uptrend sending the company to Zacks rank #1 (Strong Buy).

About the Company

Kemper Corporation (KMPR - Snapshot Report) is a diversified insurance holding company with subsidiaries that provide property & casualty, health and life insurance products to individuals and small businessesKemper serves its customers through a network of agents as well as directly. Kemper currently has more than $8 billion in assets.

Excellent Quarterly Results

On May 2, 2013, Kemper reported its Q1 2013 results. Net income for the quarter increased 29% from Q1 2012, to $0.72 per share. Results were substantially better than the Zacks Consensus Estimate of $0.53 per share, mainly as a result of rate increases, higher than planned retention and favorable reserve development.

Estimates Revisions

As a result of strong results, Zacks consensus estimate for the quarter ended June 30 now stands at $0.36 per share up from $0.31 per share, 60 days ago. The estimate for the current year is also up to $2.01 per share from $1.75 per share earlier.

Strong Ratings affirmed by A.M.Best

Recently A.M. Best reiterated the financial strength ratings of “A-“ (Excellent) and issuer credit ratings of “a-” of the property and casualty subsidiaries and affiliated insurance companies as well as life/health subsidiaries of Kemper.

The rating affirmation came on the back of sustained operating profitability, diversified product portfolio, sufficient risk-adjusted capitalization and liquidity.

Improving outlook for the Insurance Industry

Improving economic picture is positive for all insurers as their business volume is highly correlated to the health of the economy. Further, improvement in the labor market is also positive for all insurers.

Insurers also stand to benefit from the rising rate scenario. Many insurance companies—life insurance companies in particular—invest in longer-duration bonds and have thus been hurt by low interest rates. Higher interest rates will enable these companies to earn higher returns on their investment portfolio.

At the same time, the value of long duration bonds in insurers’ portfolio will go down as rates go up, however since these companies have very long-term investment horizons, they can hold investments till maturity and no losses are actually realized.

The Bottom Line

KMPR is a Zacks Rank#1 (Strong Buy) stock. It also has a Zacks recommendation of “Outperform”.  Further, Zacks industry rank of 18 out of 265 also indicates a strong possibility of outperformance in the short term.

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