Kemper Corporation (KMPR - Free Report) and property/casualty units plus affiliated insurance companies — collectively called Kemper Property & Casualty Group (Kemper P&C) — have recently received rating action from the credit rating giant A.M. Best. The rating agency has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” for Kemper P&C.
Concurrently, the credit rating giant has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” for Kemper’s life/health units, together known as Kemper Life & Health Group (Kemper L&H). Additionally, the rating agency has affirmed the Long-Term ICR of “bbb-” and the Long-Term Issue Credit Ratings (Long-Term IR) to the ultimate parent company, Kemper. The outlook of the aforementioned credit ratings remained stable. Shares of Kemper gained 2.8% in the last two trading sessions.
Ratings Representation of Kemper P&C
The ratings and outlooks of Kemper P&C represent the insurer’s robust risk-adjusted capitalization, sustained operational performance, risk management and the continuous efforts to minimize exposure to catastrophic loss.
However, Kemper P&C’s weak operational performance and underwriting volatility in the past few years might partially offset the aforementioned positive rating factors.
Substantial decline in operating results plus capitalization levels that do not meet the rating agency’s current rating level expectations along with prudent strategies and inability to generate material improvement in performance may result in negative rating action.
Nonetheless, Kemper P&C might witness rating upgrades or outlook revisions in the future on the back of decent earnings and organic surplus growth across all phases of underwriting cycle without making any kind of curtailment in business profile.
Details Behind the Ratings of Kemper L&H
Kemper L&H’s ratings and outlooks represent their comprehensive long-term presence as protection insurance providers within Kemper apart from their solid risk-adjusted capitalization level and profitable operational performance to name a few.
The positive rating factors can be offset by the existing high levels of dividends, which may curb absolute capital growth as well as the result in difficulty to grow total net premium.
A considerable decline in consolidated adjusted capital or deterioration in quality of capital, weak earnings performance with increased volatility and the rating agency’s diminished view of Kemper P&C’s financial strength are a few factors that might prompt negative rating action.
Nonetheless, a substantial improvement in the rating giant’s perspective toward Kemper P&C’s financial strength may leave a positive effect on Kemper L&H’s ratings.
Notably, Kemper’s adjusted debt-to-total capital ratio, which was 21.2% as of Jun 30, 2017, came within A.M. Best’s guidelines for the company’s ratings. Further, Kemper’s interest coverage was appropriate for its assigned ratings.
Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence plus maintaining a stock’s credit worthiness. On the other hand, rating downgrades not only damage business but also increase the cost of future debt issuances. We believe that such ratings will help Kemper retain investors’ trust and write more businesses going forward.
Zacks Rank and Share Price Movement
Currently, Kemper sports a Zacks Rank #1 (Strong Buy). Shares of the company have rallied 23.0% year to date, significantly outperforming the industry’s increase of 6.6%. We expect sustained operational performance as well as robust capital position to drive the stock higher in the near term.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry may consider FBL Financial Group, Inc. (FFG - Free Report) , CNO Financial Group, Inc. (CNO - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
FBL Financial sells individual life insurance and annuity products. The company delivered positive surprises in three of the last four quarters with an average beat of 6.23%.
CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%.
Cincinnati Financial deals in property casualty insurance business in the United States. The company delivered positive surprises in all the last four quarters with an average beat of 14.97%.
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