Kemper Reports Strong Second Quarter 2018 Results
Jul. 30, 2018
CHICAGO--(BUSINESS WIRE)--Jul 30, 2018--Kemper Corporation (NYSE: KMPR) reported net income of $37.6 million, or $0.73 per diluted share, for the second quarter of 2018, compared to $36.6 million, or $0.71 per diluted share, for the second quarter of 2017. Adjusted consolidated net operating income 1 was $36.5 million, or $0.70 per diluted share, for the second quarter of 2018, compared to $21 million, or $0.41 per diluted share, for the second quarter of 2017. These results increased primarily from significant growth and improved underlying performance in personal automobile insurance division.
“Our strong second quarter results indicate sustained, positive momentum on the execution of our strategy,” said Joseph P. Lacher, Jr., Kemper’s President and Chief Executive Officer. “We’ve achieved steady, quarter-over-quarter growth that demonstrates the value of Kemper’s strategy of building strength in core businesses which focus on growing niche and undeserved markets. Our recent acquisition of Infinity is an important milestone in accelerating our position in one of these businesses—to become the premiere specialty auto franchise.”
1 Adjusted consolidated net operating income is an after-tax, non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for additional information.
Total Shareholders’ Equity at the end of the quarter was $2,045.7 million, a decrease of $69.9 million, or 3 percent, since year-end 2017 driven by the impact of higher market yields on the value of our fixed maturity portfolio, partially offset by net income. Kemper ended the quarter with cash and investments at the holding company of $708.6 million, and the $300 million revolving credit agreement was undrawn.
During the second quarter of 2018, Kemper paid dividends of $12.4 million.
Kemper ended the quarter with a book value per share of $39.68, down 3 percent from $41.11 at the end of 2017. Book value per share excluding net unrealized gains on fixed maturities was $36.85, up 4 percent from $35.57 at the end of 2017, driven by net income, partially offset by dividends paid to shareholders.
Total revenues for the second quarter of 2018 increased $57.5 million, or 8 percent, to $741.9 million, compared to the second quarter of 2017, driven by $73.9 million higher nonstandard personal auto earned premiums. Nonstandard personal auto earned premiums increased primarily from higher policies in force. Net investment income increased $1.3 million to $78.4 million in the second quarter of 2018, a $2.3 million increase in interest on fixed income securities was primarily offset by a $2.2 million reduction in net investment income on the alternative investments portfolio. Net realized investment gains were $3.8 million in the second quarter of 2018, compared to $26.4 million last year.
The investment portfolio in total generated a pre-tax equivalent annualized book yield of 5.0 percent for the second quarter of 2018, compared to 5.2 percent in 2017.
Unless otherwise noted, (i) the segment results discussed below are presented on an after-tax basis, (ii) prior-year development includes both catastrophe and non-catastrophe losses and LAE, (iii) catastrophe losses and LAE exclude the impact of prior-year development, (iv) underlying loss ratio includes loss and LAE, and (v) all comparisons are made to the prior year quarter unless otherwise stated.
The Property & Casualty Insurance segment reported net operating income of $15.2 million in the second quarter of 2018, compared to $4.9 million in 2017. Results increased primarily from strong nonstandard personal auto growth and profitability and a reduction in loss and LAE as a percentage of earned premium in preferred personal auto, partially offset by higher catastrophe losses. Catastrophe losses were $42.4 million before taxes in the second quarter of 2018, compared to $34.5 million last year.
The Property & Casualty Insurance segment’s underlying combined ratio improved 2.2 percentage points to 92.0 percent in the second quarter of 2018. The underlying loss ratio improved 1.2 percentage points to 70.9 percent, primarily from improvement in nonstandard personal auto, preferred personal auto and homeowners. Nonstandard auto's underlying loss ratio improved 1.4 percentage points to 77.3 percent in the quarter, as average earned premium outpaced loss cost trends. Preferred personal auto’s underlying loss ratio improved 4.1 percentage points to 68.7 percent, driven by increased earned rate and moderating loss trends. The homeowners underlying loss ratio improved 2.3 percentage points to 46.4 percent due to a lower frequency of claims and increased earned rate partially offset by the cost related to our aggregate catastrophe program.
The Property & Casualty Insurance segment’s expense ratio improved 1.0 percentage points as an even larger percentage of earned premiums were generated by the nonstandard auto business, which grew at 32 percent and runs at a lower expense ratio. Additionally, the larger premium base also generated expense ratio improvement as premium growth outpaced fixed expenses.
The Life & Health Insurance segment reported net operating income of $26.4 million for the second quarter of 2018, compared to $20.5 million in 2017, primarily due to growth in supplemental A&H business. These gains were partially offset by higher policyholders’ benefits in both supplemental A&H and Life products. Both the supplemental A&H and Life businesses witnessed an increase in operating profit which was further enhanced by the impact of tax code changes.
Unaudited condensed consolidated statements of income for the three and six months ended June 30, 2018 and 2017 are presented below.
Unaudited business segment revenues for the three and six months ended June 30, 2018 and 2017 are presented below.
This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20180730005181/en.