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Reasons Why Investors Should Retain Kemper in Their Portfolio

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Kemper Corporation (KMPR - Free Report) is well-poised for growth on the back of compelling product portfolio, lower investment expenses, strong segmental performance and ample liquidity.

The stock has seen its estimates for 2021 move up 8.1% in the past 60 days, reflecting investor optimism.

It has a decent earnings surprise history too. Its earnings beat estimates in the last four quarters. Kemper has a trailing four-quarter earnings surprise of 24.01%, on average.

Higher levels of investments in fixed-income securities, higher yields on fixed income securities and lower investment expenses, and higher rate of return from Alternative Investments should continue to drive net investment income, one of the key components of revenue income. Its investment portfolio continues to be high quality and well diversified and its improved investment income supports long-term business objectives as well.

The insurer’s specialty auto business continues to generate significant market share gains with double-digit top-line growth and attractive underwriting profitability. The business further benefited from favorable frequency trends. Despite disruption from the current economic environment, this business’ low-cost operating model and understanding of customer needs have enabled it to sustain industry-leading levels of growth. The specialty property and casualty (P&C) segment continues to produce strong top-line growth and robust earnings further enhanced by favorable frequency trends.

The combined ratio in the preferred auto segment witnessed year-over-year improvement due to the macro environmental frequency trends recognized in specialty segment in combination with the profit improvement actions, underwriting, pricing and exposure. This segment absorbed catastrophe losses from multiple hurricanes and wildfires. Also, catastrophe aggregate retention level has been met.

The multi-line insurer’s capital and liquidity position remains strong, with over 1.4 billion of available liquidity. Over the past 12 months, it generated over $400 million in capital. At the third quarter end, it had debt to capital ratio of 21%, which indicated raised capital that took place in the third quarter. The company’s strong capital and liquidity are capable of supporting industry leading growth with stable returns.

Kemper’s strong cash flows have led to disciplined capital management strategies for returning shareholder value via dividend and repurchases. It has raised its dividend at a seven-year (2013-2017) CAGR of 3.24% and currently yields 1.6%, which makes the stock an attractive pick for yield-seeking investors. Currently, it has $333.3 million remaining under its share repurchase authorization.

Its diversified operations create sustainable earnings strength throughout economic cycles, delivering attractive returns to shareholders.

Moreover, the company’s 10.6% return on equity (ROE) is better than the industry average of 7.8%, reflecting its efficiency in utilizing shareholders’ funds.

Shares of this Zacks Rank #3 (Hold) multi-line insurer have lost 0.4% in a year compared with the industry's decrease of 8.9%.

Stocks to Consider

Some better-ranked stocks in the insurance space are SelectQuote, Inc. (SLQT - Free Report) , Horace Mann Educators Corporation (HMN - Free Report) and The Hartford Financial Services Group, Inc. (HIG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

SelectQuote surpassed estimates in two of the last four quarters, with the average surprise being 175%.

Horace Mann Educators surpassed earnings estimates in each of the last four quarters, with the average being 22.05%.

The Hartford Financial surpassed estimates in each of the last four quarters, with the average surprise being 18.35%.

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