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Kemper Corporation Beats on Earnings, Revs

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Kemper Corporation (KMPR - Free Report) reported third quarter 2013 operating net income of 69 cents per share, surpassing the Zacks Consensus Estimate of 44 cents by 56.8%. The results also surged 64.3% from the quarter number.

The bottom line growth of Kemper Corporation was driven by better performances in underlying property and casualty and higher net investment income. Lower share count due to share buyback also boosted the bottom–line

Including net realized gains on sales of investments of 56 cents per share, income from discontinued operations of 2 cents per share and net impairment losses recognized in earnings of 4 cents per share, Kemper Corporation’s net income also improved 29.5% year over year in the reported quarter to $1.23 per share.

Quarterly Operational Updates

Total revenues of Kemper Corporation amounted to $635.7 million during the reported quarter surpassing the Zacks Consensus Estimate by 8.8%. However, the results slipped 1.5% from the previous year quarter results. Lower earned premiums in Kemper Specialty and Kemper Direct were attributable to the top line decline, which in turn was partially offset by higher net investment income.

Kemper Corporation’s net investment income totaled $82.4 million in the reported quarter improving 17% year over year. Higher net investment income from equity method investments and other higher investments drove the upside.

Total expenses of Kemper Corporation declined 5.4% year over year to $533.7 million. The improvement came on the back of lower Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses during the reported quarter. Lower insurance, interest and other expenses also aided the improvement.

Segment Update

Kemper Preferred: Total revenues stood at $233.8 million in the reported quarter, in line with the prior year quarter results.

This segment reported operating net income of $11.2 million, improving 33.3% year over year. The increase primarily came on the back of higher net investment income, improved combined ratio and higher previous year reserve development.

The underlying combined ratio improved 80 basis points (bps) year over year to 96.3% in the third quarter of 2013.

Kemper Specialty: total revenues of $103.1 million declined nearly 5% year over year in the reported quarter. The decrease was primarily due to lower earned premiums derived by the segment.

Operating net income of $5.3 million surged 96.3% year over year, riding on the back of better performances attributed to personal auto insurance.

Combined ratio improved 260 bps year over year to 100.6%.

Kemper Direct: Driven by lower earned premiums, total revenues of this segment slid 24% down to $33.2 million in the reported quarter.

Operating net income for the reported quarter skyrocketed to $6.9 million compared to $1.5 million reported in the year-ago quarter.

Combined ratio improved 2260 bps from the prior year quarter results to 94.3% in the third quarter of 2013. This improvement was driven by favorable expense ratio as well as loss ratio.

Life and Health Insurance: This segment of Kemper Corporation reported total revenues of $215.3 million in the reported quarter, up 3.4% year over year. The growth was primarily driven by higher net investment income.

Operating net income increased 19.3% year over year to $22.9 million during the  reported quarter. Higher net investment income and sales growth in property insurance products fueled the upside. However, higher insurance expenses were a partial offset.

Financial Updates

Kemper Corporation’s total assets stood at $7.7 billion at the end of the reported quarter. It decreased 3.3% from the 2012 year end level.

Kemper Corporation exited the quarter with total cash balance of $76.1 million slid 21% from the 2012 end level.

Total shareholders’ equity of Kemper Corporation also declined 7% from Dec 31, 2012 level to $2 billion as of Sep 30, 2013.

Business Update

During the reported quarter, Kemper Corporation derived a pre-tax gain of $44 million by selling its corporate headquarters buildings in Chicago.

Share Repurchase and Dividend Update

In the third quarter, Kemper Corporation spent $36.3 million to buyback over 1 million shares, taking the tally to 2.5 million shares repurchased for $85.2 million in the first nine months of 2013.

In the third quarter of 2013, Kemper Corporation paid total dividend of $13.6 million.

Performances by Other Multi Line Insurers

American International Group Inc. (AIG - Free Report) reported third-quarter 2013 operating earnings per share of 96 cents, comfortably beating the Zacks Consensus Estimate of 93 cents. However, results lagged the year-ago quarter figure of 99 cents per share.

MetLife Inc. (MET - Free Report) reported third-quarter 2013 operating earnings per share (EPS) of $1.34, which missed the Zacks Consensus Estimate of $1.36. However, results were slightly ahead of the year-ago quarter’s EPS of $1.32.

Assurant Inc.’s (AIZ - Free Report) third quarter earnings came in at $1.71 per share, significantly ahead of the Zacks Consensus Estimate of $1.45 per share. Earnings also increased 10.3% year over year.

Zacks Rank

Kemper Corporation presently carries a Zacks Rank #1 (Strong Buy).

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