Kemper Corporation (NYSE: KMPR) reported net loss of $75.3
million, or $(1.18) per diluted share, for the third quarter of
2021, compared to net income of $122.3 million, or $1.83 per
diluted share, for the third quarter of 2020. As adjusted1 for the
acquisitions of American Access Casualty Company (“AAC”) and
Infinity Property and Casualty Corporation, net loss was $68.6
million, or $(1.08) per diluted share, for the third quarter of
2021, compared to net income of $139.9 million, or $2.10 per
diluted share, for the third quarter of 2020. In the third quarter
of 2021, net loss included a $0.5 million after-tax loss, or
$(0.01) per diluted share, attributable to the change in fair value
of equity and convertible securities.
Adjusted Consolidated Net Operating Loss1 was $75.8 million, or
$(1.19) per diluted share, for the third quarter of 2021, compared
to Adjusted Consolidated Net Operating Income1 of $90.9 million, or
$1.36 per diluted share, for the third quarter of 2020.
Key themes of the quarter include:
- Specialty P&C earned premiums increased 18% and
policies-in-force (ex. Classic Car) grew ~17.8%; AAC contributed
10.6% and 13.6% for earned premiums and policies-in-force,
respectively
- Specialty P&C underlying combined ratio1 was 108.9%, due
primarily to higher claim frequency and severity trends
- Specialty P&C experienced adverse prior year development of
$25M, or 2.4 points, primarily driven by legal developments and
increased severity in personal injury protection coverage in
Florida
- Consolidated catastrophe losses were $32.4 million, primarily
related to Hurricane Ida and several wind/hail events
- Net investment income results were strong for the quarter,
primarily driven by Alternative Investments
- Kemper remains well positioned to support customers and grow
long-term shareholder value
“Continued industry-related environmental pressures challenged
our financial results,” said President, CEO and Chairman Joseph P.
Lacher, Jr. “In our P&C segments, the strong post re-opening
economy led to additional increases in loss costs. In addition, an
atypical second surge in Florida personal injury protection
litigation led to an increase to prior year reserves of $25
million. Corrective actions including rate increases and non-rate
actions are in progress to return us to target profitability and
position us for growth in 2023. Further, our Life business saw
strong persistency improvements and generated an increase in earned
premiums of 5%, although we saw increased COVID-related mortality
due to the Delta variant.
“Our balance sheet provides appropriate financial stability for
the challenges faced by the industry. Our strong capital and
liquidity positions enable us to navigate and optimize the current
environment. Despite the current challenges, we remain financially
strong, and our team will continue to deliver on our promises to
our customers and provide attractive, long-term results and value
for our shareholders.”
1 Non-GAAP financial measure. All Non-GAAP financial measures
are denoted with footnote 1 throughout this release. See “Use of
Non-GAAP Financial Measures” for additional information.
Three Months Ended
Nine Months Ended
(Dollars in Millions, Except Per Share
Amounts) (Unaudited)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
Net Income (Loss)
$
(75.3
)
$
122.3
$
(14.7
)
$
312.4
Adjusted Consolidated Net Operating Income
(Loss) 1
$
(75.8
)
$
90.9
$
(88.0
)
$
333.0
Impact of Catastrophe Losses and Related
Loss Adjustment Expense (LAE) on Net Income
$
(25.7
)
$
(53.0
)
$
(75.0
)
$
(79.9
)
Diluted Net Income (Loss) Per Share
From:
Net Income (Loss)
$
(1.18
)
$
1.83
$
(0.23
)
$
4.67
Adjusted Consolidated Net Operating Income
(Loss) 1
$
(1.19
)
$
1.36
$
(1.36
)
$
4.98
Impact of Catastrophe Losses and Related
LAE on Net Income (Loss) Per Share
$
(0.40
)
$
(0.80
)
$
(1.16
)
$
(1.20
)
Capital
Total Shareholders’ Equity at the end of the quarter was
$4,151.2 million, a decrease of $412.2 million, or 9 percent, since
year-end 2020 primarily driven by a decrease in the valuation of
our fixed income bond portfolio, repurchases of common stock, and
cash dividends. Kemper and its direct non-insurance subsidiaries
ended the quarter with cash and investments of $330.6 million, and
the $400.0 million revolving credit agreement was undrawn.
During the third quarter of 2021, Kemper paid dividends of $19.7
million.
On August 4, 2021, Kemper announced that its Board of Directors
declared a quarterly dividend of $0.31 per share.
Kemper ended the quarter with a book value per share of $65.22,
a decrease of 6 percent from $69.74 at the end of 2020. Book Value
Per Share Excluding Net Unrealized Gains on Fixed Maturities1 was
$56.94, compared to $58.67 at the end of 2020.
Revenues
Total revenues for the third quarter of 2021 increased $101.7
million, or 8 percent, to $1,455.4 million, compared to the third
quarter of 2020, driven by $156.9 million of higher Specialty
P&C earned premiums, partially offset by a $45.8 million
decrease attributable to the change in fair value of equity and
convertible securities. Specialty P&C earned premiums increased
due primarily to higher premium volume. Net investment income
increased $9.8 million to $101.9 million in the third quarter of
2021 compared to the third quarter of 2020 due primarily to an
increase in return from Alternative Investments, higher levels of
investments in fixed income securities, and higher levels of
investments and rate on Company-Owned Life Insurance, partially
offset by lower yields on fixed income securities. Net realized
investment gains were $10.1 million in the third quarter of 2021,
compared to $10.0 million in the third quarter of 2020. Other
income increased from $0.9 million in the third quarter of 2020 to
$12.3 million in the third quarter of 2021.
Segment Results
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) loss ratio includes loss and LAE, and (v) all
comparisons are made to the prior year quarter unless otherwise
stated.
Three Months Ended
Nine Months Ended
(Dollars in Millions) (Unaudited)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
Segment Net Operating Income (Loss):
Specialty Property & Casualty
Insurance
$
(59.3
)
$
119.2
$
(70.9
)
$
246.8
Preferred Property & Casualty
Insurance
(6.4
)
(32.7
)
(5.1
)
(13.4
)
Life & Health Insurance
2.8
12.2
23.1
50.6
Total Segment Net Operating Income
(Loss)
(62.9
)
98.7
(52.9
)
284.0
Corporate and Other Net Operating Income
(Loss)
(12.9
)
(7.8
)
(35.1
)
49.0
Adjusted Consolidated Net Operating Income
(Loss) 1
(75.8
)
90.9
(88.0
)
333.0
Net Income (Loss) From:
Change in Fair Value of Equity and
Convertible Securities
(0.5
)
35.7
73.0
(0.8
)
Net Realized Gains on Sales of
Investments
7.9
7.9
34.0
30.2
Impairment Losses
(0.5
)
(0.8
)
(6.2
)
(15.8
)
Acquisition Related Transaction,
Integration and Other Costs
(6.4
)
(11.4
)
(27.5
)
(34.2
)
Net Income (Loss)
$
(75.3
)
$
122.3
$
(14.7
)
$
312.4
The Specialty Property & Casualty Insurance segment reported
net operating loss of $59.3 million for the third quarter of 2021,
compared to net operating income of $119.2 million in the third
quarter of 2020. Results decreased due primarily to higher
underlying loss ratio and adverse development of prior year loss
and LAE reserves. The segment’s Underlying Combined Ratio1 was
108.9 percent, compared to 85.9 percent in the third quarter of
2020.
The Preferred Property & Casualty Insurance segment reported
net operating loss of $6.4 million for the third quarter of 2021,
compared to net operating loss of $32.7 million in the third
quarter of 2020. Results improved due primarily to lower
catastrophe losses and LAE. The Preferred Property & Casualty
Insurance segment’s Underlying Combined Ratio1 deteriorated 11.5
percentage points from the third quarter of 2020 to 102.2 percent
in the third quarter of 2021 due primarily to higher incurred
losses and LAE.
The Life & Health Insurance segment reported net operating
income of $2.8 million for the third quarter of 2021, compared to
$12.2 million in the third quarter of 2020.
Unaudited condensed consolidated statements of income for the
three and nine months ended September 30, 2021 and 2020 are
presented below.
Three Months Ended
Nine Months Ended
(Dollars in Millions, Except Per Share
Amounts)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
Revenues:
Earned Premiums
$
1,356.1
$
1,206.5
$
3,894.6
$
3,458.2
Net Investment Income
101.9
92.1
318.9
245.5
Change in Value of Alternative Energy
Partnership Investments2
(23.8
)
—
(46.9
)
—
Other Income
12.3
0.9
20.8
92.7
Income (Loss) from Change in Fair Value of
Equity and Convertible Securities
(0.6
)
45.2
92.4
(1.0
)
Net Realized Gains on Sales of
Investments
10.1
10.0
43.1
38.2
Impairment Losses
(0.6
)
(1.0
)
(7.8
)
(20.0
)
Total Revenues
1,455.4
1,353.7
4,315.1
3,813.6
Expenses:
Policyholders’ Benefits and Incurred
Losses and Loss Adjustment Expenses
1,211.2
877.5
3,324.8
2,460.2
Insurance Expenses
311.3
276.9
909.0
821.2
Interest and Other Expenses
62.7
47.2
179.2
142.7
Total Expenses
1,585.2
1,201.6
4,413.0
3,424.1
Income (Loss) before Income Taxes
(129.8
)
152.1
(97.9
)
389.5
Income Tax Benefit (Expense)
54.5
(29.8
)
83.2
(77.1
)
Net Income (Loss)
$
(75.3
)
$
122.3
$
(14.7
)
$
312.4
Income (Loss) from Continuing
Operations Per Unrestricted Share:
Basic
$
(1.18
)
$
1.87
$
(0.23
)
$
4.75
Diluted
$
(1.18
)
$
1.83
$
(0.23
)
$
4.67
Net Income (Loss) Per Unrestricted
Share:
Basic
$
(1.18
)
$
1.87
$
(0.23
)
$
4.75
Diluted
$
(1.18
)
$
1.83
$
(0.23
)
$
4.67
Weighted-average Outstanding (Shares in
Thousands):
Unrestricted Shares - Basic
63,628.1
65,362.5
64,469.9
65,710.8
Unrestricted Shares and Equivalent Shares
- Diluted
63,628.1
66,633.5
64,469.9
66,797.4
Dividends Paid to Shareholders Per
Share
$
0.31
$
0.30
$
0.93
$
0.90
2 The Alternative Energy Partnership Investments results are
included as a pre-tax loss in the Change in Value of Alternative
Energy Partnership Investments of $23.8 million and $46.9 million
and benefit in income tax expense of $30.6 million and $67.8
million for a net income impact of $6.8 million and $20.9 million
for the three and nine months ended September 30, 2021,
respectively.
Unaudited business segment revenues for the three and nine
months ended September 30, 2021 and 2020 are presented
below.
Three Months Ended
Nine Months Ended
(Dollars in Millions)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
REVENUES:
Specialty Property & Casualty
Insurance:
Earned Premiums:
Specialty Automobile
$
920.6
$
792.2
$
2,615.6
$
2,235.2
Commercial Automobile
107.7
79.2
300.6
217.7
Total Earned Premiums
1,028.3
871.4
2,916.2
2,452.9
Net Investment Income
37.0
30.5
114.7
76.2
Change in Value of Alternative Energy
Partnership Investments
(11.3
)
—
(22.3
)
—
Other Income
1.2
0.4
3.1
1.4
Total Specialty Property & Casualty
Insurance Revenues
1,055.2
902.3
3,011.7
2,530.5
Preferred Property & Casualty
Insurance:
Earned Premiums:
Preferred Automobile
102.6
110.6
309.1
324.6
Homeowners
52.5
55.0
154.6
167.4
Other Personal
8.6
8.9
25.4
27.0
Total Earned Premiums
163.7
174.5
489.1
519.0
Net Investment Income
16.1
10.3
51.5
24.3
Change in Value of Alternative Energy
Partnership Investments
(6.4
)
—
(12.5
)
—
Other Income
—
—
—
0.1
Total Preferred Property & Casualty
Insurance Revenues
173.4
184.8
528.1
543.4
Life & Health Insurance:
Earned Premiums:
Life
101.5
96.3
300.2
289.2
Accident & Health
47.0
48.9
142.3
149.1
Property
15.6
15.4
46.8
48.0
Total Earned Premiums
164.1
160.6
489.3
486.3
Net Investment Income
48.4
50.7
151.9
146.0
Change in Value of Alternative Energy
Partnership Investments
(6.1
)
—
(12.1
)
—
Other Income
0.1
—
0.3
0.6
Total Life & Health Insurance
Revenues
206.5
211.3
629.4
632.9
Total Segment Revenues
1,435.1
1,298.4
4,169.2
3,706.8
Income (Loss) from Change in Fair Value of
Equity and Convertible Securities
(0.6
)
45.2
92.4
(1.0
)
Net Realized Gains on Sales of
Investments
10.1
10.0
43.1
38.2
Impairment Losses
(0.6
)
(1.0
)
(7.8
)
(20.0
)
Other
11.4
1.1
18.2
89.6
Total Revenues
$
1,455.4
$
1,353.7
$
4,315.1
$
3,813.6
KEMPER CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in Millions)
(Unaudited)
Sep 30, 2021
Dec 31, 2020
Assets:
Investments:
Fixed Maturities at Fair Value
$
7,885.1
$
7,605.9
Equity Securities at Fair Value
969.6
858.5
Equity Securities at Modified Cost
33.0
40.1
Equity Method Limited Liability
Investments at Cost Plus Cumulative Undistributed Earnings
255.1
204.0
Alternative Energy Partnership
Investments
54.2
21.3
Convertible Securities at Fair Value
44.1
39.9
Short-term Investments at Cost which
Approximates Fair Value
259.7
875.4
Other Investments
921.5
779.0
Total Investments
10,422.3
10,424.1
Cash
119.8
206.1
Receivables from Policyholders
1,481.2
1,194.5
Other Receivables
207.3
222.4
Deferred Policy Acquisition Costs
676.6
589.3
Goodwill
1,312.0
1,114.0
Current Income Tax Assets
138.7
15.6
Other Assets
619.3
575.9
Total Assets
$
14,977.2
$
14,341.9
Liabilities and Shareholders’
Equity:
Insurance Reserves:
Life & Health
$
3,524.1
$
3,527.5
Property & Casualty
2,596.2
1,982.5
Total Insurance Reserves
6,120.3
5,510.0
Unearned Premiums
1,965.7
1,615.1
Policyholder Contract Liabilities
481.8
467.0
Deferred Income Tax Liabilities
242.4
285.7
Accrued Expenses and Other Liabilities
893.7
727.9
Debt at Amortized Cost
1,122.1
1,172.8
Total Liabilities
10,826.0
9,778.5
Shareholders’ Equity:
Common Stock
6.4
6.5
Paid-in Capital
1,777.0
1,805.2
Retained Earnings
1,888.4
2,071.2
Accumulated Other Comprehensive Income
479.4
680.5
Total Shareholders’ Equity
4,151.2
4,563.4
Total Liabilities and Shareholders’
Equity
$
14,977.2
$
14,341.9
Unaudited selected financial information for the Specialty
Property & Casualty Insurance segment follows.
Three Months Ended
Nine Months Ended
(Dollars in Millions)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
Results
of Operations
Net Premiums Written
$
1,024.3
$
914.2
$
3,078.3
$
2,606.3
Earned Premiums
$
1,028.3
$
871.4
$
2,916.2
$
2,452.9
Net Investment Income
37.0
30.5
114.7
76.2
Change in Value of Alternative Energy
Partnership Investments
(11.3
)
—
(22.3
)
—
Other Income
1.2
0.4
3.1
1.4
Total Revenues
1,055.2
902.3
3,011.7
2,530.5
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE
924.4
589.0
2,451.8
1,724.6
Catastrophe Losses and LAE
3.4
2.1
13.2
6.8
Prior Years:
Non-catastrophe Losses and LAE
25.1
1.9
105.0
16.8
Catastrophe Losses and LAE
(0.1
)
(0.1
)
0.3
0.1
Total Incurred Losses and LAE
952.8
592.9
2,570.3
1,748.3
Insurance Expenses
194.2
159.5
570.1
472.8
Operating Income (Loss)
(91.8
)
149.9
(128.7
)
309.4
Income Tax Benefit (Expense)
32.5
(30.7
)
57.8
(62.6
)
Segment Net Operating Income (Loss)
$
(59.3
)
$
119.2
$
(70.9
)
$
246.8
Ratios
Based On Earned Premiums
Current Year Non-catastrophe Losses and
LAE Ratio
90.0
%
67.6
%
84.0
%
70.3
%
Current Year Catastrophe Losses and LAE
Ratio
0.3
0.2
0.5
0.3
Prior Years Non-catastrophe Losses and LAE
Ratio
2.4
0.2
3.6
0.7
Prior Years Catastrophe Losses and LAE
Ratio
—
—
—
—
Total Incurred Loss and LAE Ratio
92.7
68.0
88.1
71.3
Insurance Expense Ratio
18.9
18.3
19.5
19.3
Combined Ratio
111.6
%
86.3
%
107.6
%
90.6
%
Underlying Combined Ratio1
Current Year Non-catastrophe Losses and
LAE Ratio
90.0
%
67.6
%
84.0
%
70.3
%
Insurance Expense Ratio
18.9
18.3
19.5
19.3
Underlying Combined Ratio1
108.9
%
85.9
%
103.5
%
89.6
%
Non-GAAP
Measure Reconciliation
Combined Ratio
111.6
%
86.3
%
107.6
%
90.6
%
Less:
Current Year Catastrophe Losses and LAE
Ratio
0.3
0.2
0.5
0.3
Prior Years Non-catastrophe Losses and LAE
Ratio
2.4
0.2
3.6
0.7
Prior Years Catastrophe Losses and LAE
Ratio
—
—
—
—
Underlying Combined Ratio1
108.9
%
85.9
%
103.5
%
89.6
%
Unaudited selected financial information for the Preferred
Property & Casualty Insurance segment follows.
Three Months Ended
Nine Months Ended
(Dollars in Millions)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
Results
of Operations
Net Premiums Written
$
164.8
$
172.2
$
488.8
$
497.8
Earned Premiums
$
163.7
$
174.5
$
489.1
$
519.0
Net Investment Income
16.1
10.3
51.5
24.3
Change in Value of Alternative Energy
Partnership Investments
(6.4
)
—
(12.5
)
—
Other Income
—
—
—
0.1
Total Revenues
173.4
184.8
528.1
543.4
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE
115.6
102.8
328.0
293.8
Catastrophe Losses and LAE
23.4
61.9
71.6
87.3
Prior Years:
Non-catastrophe Losses and LAE
—
6.3
5.1
11.2
Catastrophe Losses and LAE
0.1
0.1
(3.6
)
(0.6
)
Total Incurred Losses and LAE
139.1
171.1
401.1
391.7
Insurance Expenses
51.7
55.5
154.8
169.7
Operating Income (Loss)
(17.4
)
(41.8
)
(27.8
)
(18.0
)
Income Tax Benefit (Expense)
11.0
9.1
22.7
4.6
Segment Net Operating Income (Loss)
$
(6.4
)
$
(32.7
)
$
(5.1
)
$
(13.4
)
Ratios
Based On Earned Premiums
Current Year Non-catastrophe Losses and
LAE Ratio
70.6
%
58.9
%
67.1
%
56.6
%
Current Year Catastrophe Losses and LAE
Ratio
14.3
35.5
14.6
16.8
Prior Years Non-catastrophe Losses and LAE
Ratio
—
3.6
1.0
2.2
Prior Years Catastrophe Losses and LAE
Ratio
0.1
0.1
(0.7
)
(0.1
)
Total Incurred Loss and LAE Ratio
85.0
98.1
82.0
75.5
Insurance Expense Ratio
31.6
31.8
31.6
32.7
Combined Ratio
116.6
%
129.9
%
113.6
%
108.2
%
Underlying Combined Ratio1
Current Year Non-catastrophe Losses and
LAE Ratio
70.6
%
58.9
%
67.1
%
56.6
%
Insurance Expense Ratio
31.6
31.8
31.6
32.7
Underlying Combined Ratio1
102.2
%
90.7
%
98.7
%
89.3
%
Non-GAAP
Measure Reconciliation
Combined Ratio
116.6
%
129.9
%
113.6
%
108.2
%
Less:
Current Year Catastrophe Losses and LAE
Ratio
14.3
35.5
14.6
16.8
Prior Years Non-catastrophe Losses and LAE
Ratio
—
3.6
1.0
2.2
Prior Years Catastrophe Losses and LAE
Ratio
0.1
0.1
(0.7
)
(0.1
)
Underlying Combined Ratio1
102.2
%
90.7
%
98.7
%
89.3
%
Unaudited selected financial information for the Life &
Health Insurance segment follows.
Three Months Ended
Nine Months Ended
(Dollars in Millions)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
Results
of Operations
Earned Premiums
$
164.1
$
160.6
$
489.3
$
486.3
Net Investment Income
48.4
50.7
151.9
146.0
Change in Value of Alternative Energy
Partnership Investments
(6.1
)
—
(12.1
)
—
Other Income
0.1
—
0.3
0.6
Total Revenues
206.5
211.3
629.4
632.9
Policyholders’ Benefits and Incurred
Losses and LAE
119.5
113.6
353.5
320.2
Insurance Expenses
92.9
82.5
269.4
251.1
Operating Income (Loss)
(5.9
)
15.2
6.5
61.6
Income Tax Benefit (Expense)
8.7
(3.0
)
16.6
(11.0
)
Segment Net Operating Income (Loss)
$
2.8
$
12.2
$
23.1
$
50.6
Use of Non-GAAP Financial Measures
Adjusted Consolidated Net Operating Income
(Loss) 1 is an after-tax, non-GAAP financial measure and is
computed by excluding from Net Income (Loss) the after-tax impact
of:
(i) Income (Loss) from Change in Fair
Value of Equity and Convertible Securities;
(ii) Net Realized Gains or Losses on Sales
of Investments;
(iii) Impairment Losses;
(iv) Acquisition Related Transaction,
Integration and Other Costs;
(v) Debt Extinguishment, Pension and Other
Charges; and
(vi) Significant non-recurring or
infrequent items that may not be indicative of ongoing
operations
Significant non-recurring items are excluded when (a) the nature
of the charge or gain is such that it is reasonably unlikely to
recur within two years, and (b) there has been no similar charge or
gain within the prior two years. The most directly comparable GAAP
financial measure is Net Income (Loss). There were no applicable
significant non-recurring items that Kemper excluded from the
calculation of Adjusted Consolidated Net Operating Income for the
nine and three months ended September 30, 2021 or 2020.
Kemper believes that Adjusted Consolidated Net Operating Income
(Loss) 1 provides investors with a valuable measure of its ongoing
performance because it reveals underlying operational performance
trends that otherwise might be less apparent if the items were not
excluded. Income (Loss) from Change in Fair Value of Equity and
Convertible Securities, Net Realized Gains or Losses on Sales of
Investments and Impairment Losses related to investments included
in Kemper’s results may vary significantly between periods and are
generally driven by business decisions and external economic
developments such as capital market conditions that impact the
values of the Kemper’s investments, the timing of which is
unrelated to the insurance underwriting process. Acquisition
Related Transaction and Integration Costs may vary significantly
between periods and are generally driven by the timing of
acquisitions and business decisions which are unrelated to the
insurance underwriting process. Debt Extinguishment, Pension and
Other Charges relate to (i) loss from early extinguishment of debt,
which is driven by Kemper’s financing and refinancing decisions and
capital needs, as well as external economic developments such as
debt market conditions, the timing of which is unrelated to the
insurance underwriting process; (ii) settlement of pension plan
obligations which are business decisions made by Kemper, the timing
of which is unrelated to the underwriting process; and (iii) other
charges that are non-standard, not part of the ordinary course of
business, and unrelated to the insurance underwriting process.
Significant non-recurring items are excluded because, by their
nature, they are not indicative of the Kemper’s business or
economic trends. The preceding non-GAAP financial measures should
not be considered a substitute for the comparable GAAP financial
measures, as they do not fully recognize the overall profitability
of the Kemper’s businesses.
A reconciliation of Net Income (Loss) to Adjusted
Consolidated Net Operating Income (Loss) 1 for the three and nine
months ended September 30, 2021 and 2020 is presented below.
Three Months Ended
Nine Months Ended
(Dollars in Millions) (Unaudited)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
Net Income (Loss)
$
(75.3
)
$
122.3
$
(14.7
)
$
312.4
Less Net Income (Loss) From:
Change in Fair Value of Equity and
Convertible Securities
(0.5
)
35.7
73.0
(0.8
)
Net Realized Gains on Sales of
Investments
7.9
7.9
34.0
30.2
Impairment Losses
(0.5
)
(0.8
)
(6.2
)
(15.8
)
Acquisition Related Transaction,
Integration and Other Costs
(6.4
)
(11.4
)
(27.5
)
(34.2
)
Adjusted Consolidated Net Operating Income
(Loss) 1
$
(75.8
)
$
90.9
$
(88.0
)
$
333.0
Diluted Adjusted Consolidated Net
Operating Income (Loss) Per Unrestricted Share1 is a
non-GAAP financial measure computed by dividing Adjusted
Consolidated Net Operating Income (Loss)1 attributed to
unrestricted shares by the weighted-average unrestricted shares and
equivalent shares outstanding. The most directly comparable GAAP
financial measure is Diluted Net Income (Loss) Per Unrestricted
Share.
A reconciliation of Diluted Net Income (Loss) Per Unrestricted
Share to Diluted Adjusted Consolidated Net Operating Income (Loss)
Per Unrestricted Share1 for the three and nine months ended
September 30, 2021 and 2020 is presented below.
Three Months Ended
Nine Months Ended
(Unaudited)
Sep 30, 2021
Sep 30, 2020
Sep 30, 2021
Sep 30, 2020
Diluted Net Income (Loss) Per Unrestricted
Share
$
(1.18
)
$
1.83
$
(0.23
)
$
4.67
Less Net Income (Loss) Per Unrestricted
Share From:
Change in Fair Value of Equity and
Convertible Securities
(0.01
)
0.53
1.13
(0.01
)
Net Realized Gains on Sales of
Investments
0.13
0.12
0.53
0.45
Impairment Losses
(0.01
)
(0.01
)
(0.10
)
(0.24
)
Acquisition Related Transaction,
Integration and Other Costs
(0.10
)
(0.17
)
(0.43
)
(0.51
)
Diluted Adjusted Consolidated Net
Operating Income (Loss) Per Unrestricted Share1
$
(1.19
)
$
1.36
$
(1.36
)
$
4.98
Book Value Per Share Excluding Net
Unrealized Gains on Fixed Maturities1 is a calculation that
uses a non-GAAP financial measure. It is calculated by dividing
shareholders’ equity after excluding the after-tax impact of net
unrealized gains on fixed income securities by total Common Shares
Issued and Outstanding. Book Value Per Share is the most directly
comparable GAAP financial measure. Kemper uses the trends in book
value per share, excluding the after-tax impact of net unrealized
gains on fixed income securities, in conjunction with book value
per share to identify and analyze the change in net worth
attributable to management efforts between periods. Kemper believes
the non-GAAP financial measure is useful to investors because it
eliminates the effect of items that can fluctuate significantly
from period to period and are generally driven by economic
developments, primarily capital market conditions, the magnitude
and timing of which are not influenced by management. Kemper
believes it enhances understanding and comparability of performance
by highlighting underlying business activity and profitability
drivers.
A reconciliation of the numerator used in the computation of
Book Value Per Share Excluding Net Unrealized Gains on Fixed
Maturities1 and Book Value Per Share at September 30, 2021 and
December 31, 2020 is presented below.
(Dollars in Millions) (Unaudited)
Sep 30, 2021
Dec 31, 2020
Shareholders’ Equity
$
4,151.2
$
4,563.4
Net Unrealized Gains on Fixed
Maturities
526.9
724.0
Shareholders’ Equity Excluding Net
Unrealized Gains on Fixed Maturities1
$
3,624.3
$
3,839.4
Underlying Combined Ratio1 is a
non-GAAP financial measure. It is computed by adding the Current
Year Non-catastrophe Losses and LAE Ratio with the Insurance
Expense Ratio. The most directly comparable GAAP financial measure
is the Combined Ratio, which is computed by adding Total Incurred
Losses and LAE Ratio, including the impact of catastrophe losses
and loss and LAE reserve development from prior years, with the
Insurance Expense Ratio.
Kemper believes Underlying Losses and LAE and the Underlying
Combined Ratio are useful to investors and uses these financial
measures to reveal the trends in Kemper’s Property & Casualty
Insurance segment that may be obscured by catastrophe losses and
prior-year reserve development. These catastrophe losses may cause
the Kemper’s loss trends to vary significantly between periods as a
result of their incidence of occurrence and magnitude and can have
a significant impact on incurred losses and LAE and the Combined
Ratio. Prior-year reserve developments are caused by unexpected
loss development on historical reserves. Because reserve
development relates to the re-estimation of losses from earlier
periods, it has no bearing on the performance of the Kemper’s
insurance products in the current period. Kemper believes it is
useful for investors to evaluate these components separately and in
the aggregate when reviewing the Kemper’s underwriting
performance.
As Adjusted for Acquisitions1
amounts are non-GAAP financial measures. Subsequent to the
applicable acquisitions, the As Adjusted for Acquisitions1 amounts
are computed by subtracting the impact of purchase accounting
adjustments from the comparable consolidated GAAP financial measure
reported by Kemper. Kemper believes computing and presenting
results on an adjusted basis are useful to investors and are used
by management to provide meaningful and comparable year-over-year
comparisons.
A reconciliation of the As Adjusted for Acquisitions1 non-GAAP
financial measures used in this press release to the comparable
GAAP financial measure for the three months ended September 30,
2021 is presented below.
(Dollars in Millions, Except Per Share
Amounts) (Unaudited)
Kemper Consolidated GAAP
Financial Measure
Less Impact of Purchase
Accounting Adjustments
As Adjusted for Acquisitions1
Net Income (Loss)
$
(75.3
)
$
(6.7
)
$
(68.6
)
Net Income (Loss) Per Share - Diluted
$
(1.18
)
$
(0.10
)
$
(1.08
)
Specialty Property & Casualty
Insurance Segment:
Earned Premiums
$
1,028.3
$
—
$
1,028.3
Segment Net Operating Income (Loss)
$
(59.3
)
$
(7.0
)
$
(52.3
)
Specialty Personal Automobile
Insurance:
Earned Premiums
$
920.6
$
—
$
920.6
Segment Net Operating Income (Loss)
$
(71.8
)
$
(6.6
)
$
(65.2
)
A reconciliation of the As Adjusted for Acquisitions1 non-GAAP
financial measures used in this press release to the comparable
GAAP financial measure for the three months ended September 30,
2020 is presented below.
(Dollars in Millions, Except Per Share
Amounts) (Unaudited)
Kemper Consolidated GAAP
Financial Measure
AAC Historical GAAP Financial
Measure
Less Impact of Purchase
Accounting Adjustments
As Adjusted for Acquisitions1
Net Income (Loss)
$
122.3
$
14.4
$
(3.2
)
$
139.9
Net Income (Loss) Per Share - Diluted
$
1.83
$
0.22
$
(0.05
)
$
2.10
Specialty Property & Casualty
Insurance Segment:
Earned Premiums
$
871.4
$
92.6
$
—
$
964.0
Segment Net Operating Income (Loss)
$
119.2
$
12.4
$
(3.6
)
$
135.2
Specialty Personal Automobile
Insurance:
Earned Premiums
$
792.2
$
92.6
$
—
$
884.8
Segment Net Operating Income (Loss)
$
100.1
$
12.4
$
(2.7
)
$
115.2
Conference Call
Kemper will host its conference call to discuss third quarter
2021 results on Thursday, October 28th, at 5:00 p.m. Eastern (4:00
p.m. Central). The conference call will be accessible via the
internet and by telephone at 844.200.6205, access code
208544. To listen via webcast, register online at the investor
section of kemper.com at least 15 minutes prior to the webcast to
download and install any necessary software.
A replay of the call will be available online at the investor
section of kemper.com.
More detailed financial information can be found in Kemper’s
Investor Financial Supplement and Earnings Call Presentation for
the third quarter of 2021, which is available at the investor
section of kemper.com.
About Kemper
The Kemper family of companies is one of the nation’s leading
specialized insurers. With approximately $15 billion in assets,
Kemper is improving the world of insurance by providing affordable
and easy-to-use personalized solutions to individuals, families and
businesses through its Auto, Personal Insurance, Life and Health
brands. Kemper serves over 6.6 million policies, is represented by
approximately 36,700 agents and brokers, and has approximately
10,100 associates dedicated to meeting the ever-changing needs of
its customers.
Learn more about Kemper at kemper.com.
Caution Regarding Forward-Looking Statements
This press release may contain or incorporate by reference
information that includes or is based on forward-looking statements
within the meaning of the safe-harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements give expectations or forecasts of future events and can
be identified by the fact that they relate to future actions,
performance or results rather than strictly to historical or
current facts. Any or all forward-looking statements may turn out
to be wrong, and, accordingly, readers are cautioned not to place
undue reliance on such statements, which speak only as of the date
of this press release. Forward-looking statements involve a number
of risks and uncertainties that are difficult to predict and are
not guarantees of future performance. Among the general factors
that could cause actual results and financial condition to differ
materially from estimated results and financial condition are those
factors listed in periodic reports filed by Kemper with the
Securities and Exchange Commission (“SEC”). The COVID-19 outbreak
and subsequent global pandemic (“Pandemic”) is an extraordinary
event that creates unique uncertainties and risks. Kemper cannot
provide any assurances as to the impacts of the Pandemic and
related economic conditions on the Company’s operating and
financial results.
No assurances can be given that the results and financial
condition contemplated in any forward-looking statements will be
achieved or will be achieved in any particular timetable. Kemper
assumes no obligation to publicly correct or update any
forward-looking statements as a result of events or developments
subsequent to the date of this press release, including any such
statements related to the Pandemic. The reader is advised, however,
to consult any further disclosures Kemper makes on related subjects
in its filings with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211028006128/en/
Investors: Michael Marinaccio, 312.661.4930 or
investors@kemper.com Media: Barbara Ciesemier, 312.661.4521 or
bciesemier@kemper.com
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