Kemper Corporation (NYSE: KMPR) reported today net income of $70.1
million, or $1.23 per diluted share, for the third quarter of 2013,
compared to $55.6 million, or $0.95 per diluted share, for the third
quarter of 2012. Consolidated net operating income1 was $38.9
million, or $0.69 per diluted share, for the third quarter of 2013,
compared to $24.6 million, or $0.42 per diluted share, for the third
quarter of 2012. Net operating income per diluted share increased for
the third quarter of 2013, compared to 2012, primarily from improved
underlying property and casualty results (excludes prior year reserve
development and catastrophe losses), higher net investment income and
the impact of share repurchases.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions, Except Per Share Amounts) (Unaudited)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Consolidated Net Operating Income1 |
|
$
|
38.9
|
|
|
$
|
24.6
|
|
|
$
|
112.9
|
|
|
$
|
57.2
|
|
|
Income from Continuing Operations
|
|
68.6
|
|
|
55.6
|
|
|
159.7
|
|
|
93.5
|
|
|
Net Income
|
|
70.1
|
|
|
55.6
|
|
|
162.5
|
|
|
101.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Catastrophe Losses and Related Loss Adjustment Expense
(LAE) on Net Income
|
|
$
|
(6.7
|
)
|
|
$
|
(8.0
|
)
|
|
$
|
(31.5
|
)
|
|
$
|
(51.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Net Income Per Share From:
|
|
|
|
|
|
|
|
|
|
Consolidated Net Operating Income1 |
|
$
|
0.69
|
|
|
$
|
0.42
|
|
|
$
|
1.95
|
|
|
$
|
0.96
|
|
|
Continuing Operations
|
|
1.21
|
|
|
0.95
|
|
|
2.76
|
|
|
1.56
|
|
|
Net Income
|
|
1.23
|
|
|
0.95
|
|
|
2.81
|
|
|
1.70
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Catastrophe Losses and Related LAE on Net Income Per
Share
|
|
$
|
(0.12
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(0.87
|
)
|
1 Consolidated net operating income is an after-tax, non-GAAP
financial measure. See “Use of Non-GAAP Financial Measures” for
additional information.
“We are pleased with Kemper's strong performance in the quarter, as net
operating income per diluted share increased 64 percent year-over-year,”
said Donald G. Southwell, Kemper's Chairman, President and Chief
Executive Officer. “The overall property and casualty group's combined
ratio and underlying combined ratio improved roughly 4 percentage
points, primarily from our strategic actions to implement rate increases
and tighten underwriting.”
“In the Life and Health segment, net income increased almost 20 percent
driven by strong returns on equity method investments and improved
results on property insurance sold by our home service agents,”
commented Southwell.
“We repurchased $36 million of common stock in the quarter, which brings
our 2013 total through September to $85 million. Since becoming a public
company, we have repurchased more than $2 billion of common stock, in
our continued effort to efficiently return capital to shareholders. In
addition, we completed the sale of our corporate headquarters building
in Chicago, resulting in a pre-tax gain of $44 million,” concluded
Southwell.
Capital
During the third quarter of 2013, Kemper repurchased more than 1 million
shares of common stock at a total cost of $36.3 million, or $34.64 per
share, and paid dividends of $13.6 million. Year-to-date, Kemper has
repurchased 2.5 million shares of common stock at a cost of $85.2
million.
Kemper ended the quarter with a book value per share excluding net
unrealized gains on fixed maturities of $32.93, up from $30.62 at the
end of 2012. Book value per share was $35.86, down from $36.98 at the
end of 2012, driven by the after-tax impact of higher interest rates on
the fair value of the fixed maturity portfolio, partially offset by net
income and share repurchases.
At the end of the third quarter, the holding company held cash and
investments of $152.6 million, and its $325 million revolving line of
credit was undrawn.
Revenues
Total revenues were $635.7 million for the third quarter of 2013,
compared to $645.6 million in 2012, driven by planned earned premiums
reductions at Kemper Direct and Kemper Specialty, partially offset by
higher net investment income.
Net investment income was $82.4 million in the third quarter of 2013,
compared to $70.4 million in 2012, primarily from $8.3 million higher
net investment income on equity method investments and higher levels of
investments. Excluding equity method investments, yields were fairly
flat as slightly lower returns on fixed maturities were offset by higher
returns on equity securities. The investment portfolio in total
generated a pre-tax equivalent annualized book yield of 5.9 percent for
the third quarter of 2013.
Net realized gains for the third quarter of 2013 were $49.1 million,
including a realized gain of $43.6 million on the sale of the Company’s
corporate headquarters, compared to $50.9 million in 2012.
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, (iii) catastrophe losses
exclude the impact of prior year development and (iv) underlying loss
ratio includes loss and loss adjustment expenses.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions) (Unaudited)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Segment Net Operating Income (Loss):
|
|
|
|
|
|
|
|
|
|
Kemper Preferred
|
|
$
|
11.2
|
|
|
$
|
8.4
|
|
|
$
|
40.5
|
|
|
$
|
8.5
|
|
|
Kemper Specialty
|
|
5.3
|
|
|
2.7
|
|
|
9.5
|
|
|
4.0
|
|
|
Kemper Direct
|
|
6.9
|
|
|
1.5
|
|
|
21.5
|
|
|
(2.7
|
)
|
|
Life and Health Insurance
|
|
22.9
|
|
|
19.2
|
|
|
64.4
|
|
|
66.5
|
|
|
Total Segment Net Operating Income
|
|
46.3
|
|
|
31.8
|
|
|
135.9
|
|
|
76.3
|
|
|
Corporate and Other Net Operating Loss
|
|
(7.4
|
)
|
|
(7.2
|
)
|
|
(23.0
|
)
|
|
(19.1
|
)
|
|
Consolidated Net Operating Income
|
|
38.9
|
|
|
24.6
|
|
|
112.9
|
|
|
57.2
|
|
|
Net Income (Loss) From:
|
|
|
|
|
|
|
|
|
|
Net Realized Gains on Sales of Investments
|
|
31.9
|
|
|
33.0
|
|
|
50.9
|
|
|
38.9
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(2.2
|
)
|
|
(2.0
|
)
|
|
(4.1
|
)
|
|
(2.6
|
)
|
|
Income from Continuing Operations
|
|
$
|
68.6
|
|
|
$
|
55.6
|
|
|
$
|
159.7
|
|
|
$
|
93.5
|
|
Kemper Preferred reported net operating income of $11.2 million for the
third quarter of 2013, compared to $8.4 million in 2012. Net operating
results improved $2.8 million primarily from $1.4 million higher net
investment income, an improvement in the underlying combined ratio and
$0.5 million higher favorable prior year reserve development. Kemper
Preferred’s underlying combined ratio of 96.3 percent was 0.8 points
better than the prior year, as a 1.6 point improvement in the underlying
loss ratio was partially offset by a 0.8 point increase in the insurance
expense ratio. The underlying loss ratio improved as a result of higher
average earned premiums for all lines, and lower frequency in the
homeowners and other personal insurance lines, partially offset by
higher severity in homeowners, and higher severity and frequency in auto
liability coverages. Insurance expenses increased primarily from higher
employee compensation and agent incentives related to improved
performance.
Kemper Specialty reported net operating income of $5.3 million for the
third quarter of 2013, compared to $2.7 million in 2012, driven by
improved underlying results of personal auto insurance. Kemper
Specialty’s underlying combined ratio improved to 100.6 percent in the
third quarter of 2013, compared to 103.2 percent in 2012. The underlying
loss ratio improved 3.0 points to 78.0 percent, driven by higher average
premium rates in personal auto.
Kemper Direct reported net operating income of $6.9 million for the
third quarter of 2013, compared to $1.5 million in 2012, largely from
improved underlying results. Results also include $3.7 million of
favorable reserve development in the third quarter of 2013, compared to
$3.5 million in 2012. The underlying combined ratio improved 22.6 points
to 94.3 percent in the third quarter of 2013, as both the underlying
loss ratio and expense ratio improved. The underlying loss ratio
improved 18.5 points to 65.4 percent, driven by lower severity and lower
frequency in auto liability coverages and higher average premium rates.
The expense ratio improvement was driven by lower marketing and
acquisition related expenses.
The Life and Health Insurance segment reported net operating income of
$22.9 million for the third quarter of 2013, compared to $19.2 million
in 2012. The $3.7 million improvement is driven by $5.5 million higher
net investment income and improved results from property insurance
products sold by the home service agents, offset by higher insurance
expenses. Expenses increased as initial start-up expenses to expand
distribution channels at Reserve National and higher legal expenses at
the Kemper Home Service Companies were partially offset by lower home
service agent commissions.
Unaudited condensed consolidated statements of income for the three
and nine months ended September 30, 2013 and 2012 are presented below:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions, Except Per Share Amounts)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Earned Premiums
|
|
$
|
507.5
|
|
|
$
|
527.3
|
|
|
$
|
1,530.2
|
|
|
$
|
1,586.3
|
|
|
Net Investment Income
|
|
82.4
|
|
|
70.4
|
|
|
237.8
|
|
|
223.0
|
|
|
Other Income
|
|
0.1
|
|
|
0.2
|
|
|
0.5
|
|
|
0.6
|
|
|
Net Realized Gains on Sales of Investments
|
|
49.1
|
|
|
50.9
|
|
|
78.3
|
|
|
59.9
|
|
|
Other-than-temporary Impairment Losses:
|
|
|
|
|
|
|
|
|
|
Total Other-than-temporary Impairment Losses
|
|
(3.5
|
)
|
|
(3.2
|
)
|
|
(8.2
|
)
|
|
(4.1
|
)
|
|
Portion of Losses Recognized in Other Comprehensive Income
|
|
0.1
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(3.4
|
)
|
|
(3.2
|
)
|
|
(6.3
|
)
|
|
(4.1
|
)
|
|
Total Revenues
|
|
635.7
|
|
|
645.6
|
|
|
1,840.5
|
|
|
1,865.7
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Policyholders’ Benefits and Incurred Losses and Loss Adjustment
Expenses
|
|
338.3
|
|
|
368.7
|
|
|
1,041.7
|
|
|
1,169.1
|
|
|
Insurance Expenses
|
|
170.1
|
|
|
172.7
|
|
|
491.5
|
|
|
502.8
|
|
|
Interest and Other Expenses
|
|
25.3
|
|
|
22.7
|
|
|
74.3
|
|
|
65.4
|
|
|
Total Expenses
|
|
533.7
|
|
|
564.1
|
|
|
1,607.5
|
|
|
1,737.3
|
|
|
Income from Continuing Operations before Income Taxes
|
|
102.0
|
|
|
81.5
|
|
|
233.0
|
|
|
128.4
|
|
|
Income Tax Expense
|
|
(33.4
|
)
|
|
(25.9
|
)
|
|
(73.3
|
)
|
|
(34.9
|
)
|
|
Income from Continuing Operations
|
|
68.6
|
|
|
55.6
|
|
|
159.7
|
|
|
93.5
|
|
|
Income from Discontinued Operations
|
|
1.5
|
|
|
—
|
|
|
2.8
|
|
|
8.0
|
|
|
Net Income
|
|
$
|
70.1
|
|
|
$
|
55.6
|
|
|
$
|
162.5
|
|
|
$
|
101.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Per Unrestricted Share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.21
|
|
|
$
|
0.95
|
|
|
$
|
2.77
|
|
|
$
|
1.57
|
|
|
Diluted
|
|
$
|
1.21
|
|
|
$
|
0.95
|
|
|
$
|
2.76
|
|
|
$
|
1.56
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Per Unrestricted Share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.24
|
|
|
$
|
0.95
|
|
|
$
|
2.82
|
|
|
$
|
1.71
|
|
|
Diluted
|
|
$
|
1.23
|
|
|
$
|
0.95
|
|
|
$
|
2.81
|
|
|
$
|
1.70
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average Outstanding (Shares in Thousands):
|
|
|
|
|
|
|
|
|
|
Unrestricted Shares - Basic
|
|
56,365.8
|
|
|
58,299.7
|
|
|
57,374.4
|
|
|
59,155.5
|
|
|
Unrestricted Shares and Equivalent Shares - Diluted
|
|
56,501.5
|
|
|
58,471.6
|
|
|
57,493.2
|
|
|
59,302.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Paid to Shareholders Per Share
|
|
$
|
0.24
|
|
|
$
|
0.24
|
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
Unaudited business segment revenues for the three and nine months
ended September 30, 2013 and 2012 are presented below:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
Kemper Preferred:
|
|
|
|
|
|
|
|
|
|
Earned Premiums
|
|
$
|
220.5
|
|
|
$
|
222.9
|
|
|
$
|
661.2
|
|
|
$
|
655.9
|
|
|
Net Investment Income
|
|
13.2
|
|
|
10.8
|
|
|
41.4
|
|
|
33.6
|
|
|
Other Income
|
|
0.1
|
|
|
0.1
|
|
|
0.2
|
|
|
0.3
|
|
|
Total Kemper Preferred
|
|
233.8
|
|
|
233.8
|
|
|
702.8
|
|
|
689.8
|
|
|
Kemper Specialty:
|
|
|
|
|
|
|
|
|
|
Earned Premiums
|
|
98.1
|
|
|
103.9
|
|
|
297.9
|
|
|
317.3
|
|
|
Net Investment Income
|
|
5.0
|
|
|
4.5
|
|
|
16.4
|
|
|
14.4
|
|
|
Other Income
|
|
—
|
|
|
0.1
|
|
|
0.2
|
|
|
0.2
|
|
|
Total Kemper Specialty
|
|
103.1
|
|
|
108.5
|
|
|
314.5
|
|
|
331.9
|
|
|
Kemper Direct:
|
|
|
|
|
|
|
|
|
|
Earned Premiums
|
|
30.1
|
|
|
40.3
|
|
|
95.6
|
|
|
131.2
|
|
|
Net Investment Income
|
|
3.1
|
|
|
3.4
|
|
|
10.1
|
|
|
10.7
|
|
|
Total Kemper Direct
|
|
33.2
|
|
|
43.7
|
|
|
105.7
|
|
|
141.9
|
|
|
Life and Health Insurance:
|
|
|
|
|
|
|
|
|
|
Earned Premiums
|
|
158.8
|
|
|
160.2
|
|
|
475.5
|
|
|
481.9
|
|
|
Net Investment Income
|
|
56.5
|
|
|
48.1
|
|
|
159.3
|
|
|
153.5
|
|
|
Other Income
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
Total Life and Health Insurance
|
|
215.3
|
|
|
208.3
|
|
|
634.9
|
|
|
635.5
|
|
|
Total Segment Revenues
|
|
585.4
|
|
|
594.3
|
|
|
1,757.9
|
|
|
1,799.1
|
|
|
Net Realized Gains on the Sales of Investments
|
|
49.1
|
|
|
50.9
|
|
|
78.3
|
|
|
59.9
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(3.4
|
)
|
|
(3.2
|
)
|
|
(6.3
|
)
|
|
(4.1
|
)
|
|
Other
|
|
4.6
|
|
|
3.6
|
|
|
10.6
|
|
|
10.8
|
|
|
Total Revenues
|
|
$
|
635.7
|
|
|
$
|
645.6
|
|
|
$
|
1,840.5
|
|
|
$
|
1,865.7
|
|
|
KEMPER CORPORATION AND SUBSIDIARIES
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(Dollars in Millions)
|
|
|
|
Sep 30,
2013
|
|
Dec 31,
2012
|
|
Assets:
|
|
(Unaudited)
|
|
|
|
Investments:
|
|
|
|
|
|
Fixed Maturities at Fair Value
|
|
$
|
4,645.0
|
|
|
$
|
4,860.2
|
|
Equity Securities at Fair Value
|
|
567.4
|
|
|
521.9
|
|
Equity Method Limited Liability Investments at Cost Plus Cumulative
Undistributed Earnings
|
|
231.4
|
|
|
253.0
|
|
Short-term Investments at Cost which Approximates Fair Value
|
|
286.8
|
|
|
327.5
|
|
Other Investments
|
|
446.2
|
|
|
497.5
|
|
Total Investments
|
|
6,176.8
|
|
|
6,460.1
|
|
Cash
|
|
76.1
|
|
|
96.3
|
|
Receivables from Policyholders
|
|
354.2
|
|
|
369.3
|
|
Other Receivables
|
|
203.9
|
|
|
206.1
|
|
Deferred Policy Acquisition Costs
|
|
308.5
|
|
|
303.4
|
|
Goodwill
|
|
311.8
|
|
|
311.8
|
|
Current and Deferred Income Tax Assets
|
|
61.6
|
|
|
5.4
|
|
Other Assets
|
|
253.0
|
|
|
256.7
|
|
Total Assets
|
|
$
|
7,745.9
|
|
|
$
|
8,009.1
|
|
Liabilities and Shareholders’ Equity:
|
|
|
|
|
|
Insurance Reserves:
|
|
|
|
|
|
Life and Health
|
|
$
|
3,201.5
|
|
|
$
|
3,161.6
|
|
Property and Casualty
|
|
884.6
|
|
|
970.6
|
|
Total Insurance Reserves
|
|
4,086.1
|
|
|
4,132.2
|
|
Unearned Premiums
|
|
635.3
|
|
|
650.9
|
|
Liabilities for Income Taxes
|
|
6.6
|
|
|
21.5
|
|
Notes Payable at Amortized Cost
|
|
606.7
|
|
|
611.4
|
|
Accrued Expenses and Other Liabilities
|
|
402.1
|
|
|
431.4
|
|
Total Liabilities
|
|
5,736.8
|
|
|
5,847.4
|
|
Shareholders’ Equity:
|
|
|
|
|
|
Common Stock
|
|
5.6
|
|
|
5.8
|
|
Paid-in Capital
|
|
698.0
|
|
|
725.0
|
|
Retained Earnings
|
|
1,184.4
|
|
|
1,118.2
|
|
Accumulated Other Comprehensive Income
|
|
121.1
|
|
|
312.7
|
|
Total Shareholders’ Equity
|
|
2,009.1
|
|
|
2,161.7
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
7,745.9
|
|
|
$
|
8,009.1
|
Unaudited selected financial information for the Kemper Preferred
segment follows:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written
|
|
$
|
222.5
|
|
|
$
|
237.9
|
|
|
$
|
654.6
|
|
|
$
|
677.9
|
|
|
Earned Premiums:
|
|
|
|
|
|
|
|
|
|
Automobile
|
|
$
|
126.5
|
|
|
$
|
130.5
|
|
|
$
|
381.1
|
|
|
$
|
385.1
|
|
|
Homeowners
|
|
80.2
|
|
|
78.4
|
|
|
238.4
|
|
|
229.4
|
|
|
Other Personal
|
|
13.8
|
|
|
14.0
|
|
|
41.7
|
|
|
41.4
|
|
|
Total Earned Premiums
|
|
220.5
|
|
|
222.9
|
|
|
661.2
|
|
|
655.9
|
|
|
Net Investment Income
|
|
13.2
|
|
|
10.8
|
|
|
41.4
|
|
|
33.6
|
|
|
Other Income
|
|
0.1
|
|
|
0.1
|
|
|
0.2
|
|
|
0.3
|
|
|
Total Revenues
|
|
233.8
|
|
|
233.8
|
|
|
702.8
|
|
|
689.8
|
|
|
Incurred Losses and LAE related to:
|
|
|
|
|
|
|
|
|
|
Current Year:
|
|
|
|
|
|
|
|
|
|
Non-catastrophe Losses and LAE
|
|
148.9
|
|
|
154.0
|
|
|
441.4
|
|
|
448.8
|
|
|
Catastrophe Losses and LAE
|
|
9.7
|
|
|
9.4
|
|
|
39.0
|
|
|
62.7
|
|
|
Prior Years:
|
|
|
|
|
|
|
|
|
|
Non-catastrophe Losses and LAE
|
|
(1.5
|
)
|
|
(0.8
|
)
|
|
(13.4
|
)
|
|
(3.1
|
)
|
|
Catastrophe Losses and LAE
|
|
(1.6
|
)
|
|
(1.6
|
)
|
|
(7.9
|
)
|
|
(6.0
|
)
|
|
Total Incurred Losses and LAE
|
|
155.5
|
|
|
161.0
|
|
|
459.1
|
|
|
502.4
|
|
|
Insurance Expenses
|
|
63.4
|
|
|
62.4
|
|
|
188.7
|
|
|
183.0
|
|
|
Operating Profit
|
|
14.9
|
|
|
10.4
|
|
|
55.0
|
|
|
4.4
|
|
|
Income Tax Benefit (Expense)
|
|
(3.7
|
)
|
|
(2.0
|
)
|
|
(14.5
|
)
|
|
4.1
|
|
|
Segment Net Operating Income
|
|
$
|
11.2
|
|
|
$
|
8.4
|
|
|
$
|
40.5
|
|
|
$
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios Based On Earned Premiums
|
|
|
|
|
|
|
|
|
|
|
|
Current Year Non-catastrophe Losses and LAE Ratio
|
|
67.5
|
%
|
|
69.1
|
%
|
|
66.7
|
%
|
|
68.4
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
|
|
4.4
|
|
|
4.2
|
|
|
5.9
|
|
|
9.6
|
|
|
Prior Years Non-catastrophe Losses and LAE Ratio
|
|
(0.7
|
)
|
|
(0.4
|
)
|
|
(2.0
|
)
|
|
(0.5
|
)
|
|
Prior Years Catastrophe Losses and LAE Ratio
|
|
(0.7
|
)
|
|
(0.7
|
)
|
|
(1.2
|
)
|
|
(0.9
|
)
|
|
Total Incurred Loss and LAE Ratio
|
|
70.5
|
|
|
72.2
|
|
|
69.4
|
|
|
76.6
|
|
|
Incurred Expense Ratio
|
|
28.8
|
|
|
28.0
|
|
|
28.5
|
|
|
27.9
|
|
|
Combined Ratio
|
|
99.3
|
%
|
|
100.2
|
%
|
|
97.9
|
%
|
|
104.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Combined Ratio
|
|
|
|
|
|
|
|
|
|
|
|
Current Year Non-catastrophe Losses and LAE Ratio
|
|
67.5
|
%
|
|
69.1
|
%
|
|
66.7
|
%
|
|
68.4
|
%
|
|
Incurred Expense Ratio
|
|
28.8
|
|
|
28.0
|
|
|
28.5
|
|
|
27.9
|
|
|
Underlying Combined Ratio
|
|
96.3
|
%
|
|
97.1
|
%
|
|
95.2
|
%
|
|
96.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measure Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Combined Ratio
|
|
96.3
|
%
|
|
97.1
|
%
|
|
95.2
|
%
|
|
96.3
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
|
|
4.4
|
|
|
4.2
|
|
|
5.9
|
|
|
9.6
|
|
|
Prior Years Non-catastrophe Losses and LAE Ratio
|
|
(0.7
|
)
|
|
(0.4
|
)
|
|
(2.0
|
)
|
|
(0.5
|
)
|
|
Prior Years Catastrophe Losses and LAE Ratio
|
|
(0.7
|
)
|
|
(0.7
|
)
|
|
(1.2
|
)
|
|
(0.9
|
)
|
|
Combined Ratio as Reported
|
|
99.3
|
%
|
|
100.2
|
%
|
|
97.9
|
%
|
|
104.5
|
%
|
Unaudited selected financial information for the Kemper Specialty
segment follows:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written
|
|
$
|
95.0
|
|
|
$
|
103.9
|
|
|
$
|
298.5
|
|
|
$
|
320.2
|
|
|
Earned Premiums:
|
|
|
|
|
|
|
|
|
|
Personal Automobile
|
|
$
|
84.6
|
|
|
$
|
92.9
|
|
|
$
|
259.2
|
|
|
$
|
285.6
|
|
|
Commercial Automobile
|
|
13.5
|
|
|
11.0
|
|
|
38.7
|
|
|
31.7
|
|
|
Total Earned Premiums
|
|
98.1
|
|
|
103.9
|
|
|
297.9
|
|
|
317.3
|
|
|
Net Investment Income
|
|
5.0
|
|
|
4.5
|
|
|
16.4
|
|
|
14.4
|
|
|
Other Income
|
|
—
|
|
|
0.1
|
|
|
0.2
|
|
|
0.2
|
|
|
Total Revenues
|
|
103.1
|
|
|
108.5
|
|
|
314.5
|
|
|
331.9
|
|
|
Incurred Losses and LAE related to:
|
|
|
|
|
|
|
|
|
|
Current Year:
|
|
|
|
|
|
|
|
|
|
Non-catastrophe Losses and LAE
|
|
76.5
|
|
|
84.2
|
|
|
235.5
|
|
|
259.4
|
|
|
Catastrophe Losses and LAE
|
|
0.3
|
|
|
0.9
|
|
|
3.8
|
|
|
4.7
|
|
|
Prior Years:
|
|
|
|
|
|
|
|
|
|
Non-catastrophe Losses and LAE
|
|
(3.0
|
)
|
|
(2.9
|
)
|
|
(1.8
|
)
|
|
(2.5
|
)
|
|
Catastrophe Losses and LAE
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
Total Incurred Losses and LAE
|
|
73.7
|
|
|
82.2
|
|
|
237.5
|
|
|
261.7
|
|
|
Insurance Expenses
|
|
22.2
|
|
|
23.1
|
|
|
65.3
|
|
|
67.7
|
|
|
Operating Profit
|
|
7.2
|
|
|
3.2
|
|
|
11.7
|
|
|
2.5
|
|
|
Income Tax Benefit (Expense)
|
|
(1.9
|
)
|
|
(0.5
|
)
|
|
(2.2
|
)
|
|
1.5
|
|
|
Segment Net Operating Income
|
|
$
|
5.3
|
|
|
$
|
2.7
|
|
|
$
|
9.5
|
|
|
$
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios Based On Earned Premiums
|
|
|
|
|
|
|
|
|
|
|
|
Current Year Non-catastrophe Losses and LAE Ratio
|
|
78.0
|
%
|
|
81.0
|
%
|
|
79.0
|
%
|
|
81.8
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
|
|
0.3
|
|
|
0.9
|
|
|
1.3
|
|
|
1.5
|
|
|
Prior Years Non-catastrophe Losses and LAE Ratio
|
|
(3.1
|
)
|
|
(2.8
|
)
|
|
(0.6
|
)
|
|
(0.8
|
)
|
|
Prior Years Catastrophe Losses and LAE Ratio
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total Incurred Loss and LAE Ratio
|
|
75.1
|
|
|
79.1
|
|
|
79.7
|
|
|
82.5
|
|
|
Incurred Expense Ratio
|
|
22.6
|
|
|
22.2
|
|
|
21.9
|
|
|
21.3
|
|
|
Combined Ratio
|
|
97.7
|
%
|
|
101.3
|
%
|
|
101.6
|
%
|
|
103.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Combined Ratio
|
|
|
|
|
|
|
|
|
|
|
|
Current Year Non-catastrophe Losses and LAE Ratio
|
|
78.0
|
%
|
|
81.0
|
%
|
|
79.0
|
%
|
|
81.8
|
%
|
|
Incurred Expense Ratio
|
|
22.6
|
|
|
22.2
|
|
|
21.9
|
|
|
21.3
|
|
|
Underlying Combined Ratio
|
|
100.6
|
%
|
|
103.2
|
%
|
|
100.9
|
%
|
|
103.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measure Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Combined Ratio
|
|
100.6
|
%
|
|
103.2
|
%
|
|
100.9
|
%
|
|
103.1
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
|
|
0.3
|
|
|
0.9
|
|
|
1.3
|
|
|
1.5
|
|
|
Prior Years Non-catastrophe Losses and LAE Ratio
|
|
(3.1
|
)
|
|
(2.8
|
)
|
|
(0.6
|
)
|
|
(0.8
|
)
|
|
Prior Years Catastrophe Losses and LAE Ratio
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Combined Ratio as Reported
|
|
97.7
|
%
|
|
101.3
|
%
|
|
101.6
|
%
|
|
103.8
|
%
|
Unaudited selected financial information for the Kemper Direct
segment follows:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written
|
|
$
|
27.5
|
|
|
$
|
35.9
|
|
|
$
|
86.2
|
|
|
$
|
115.5
|
|
|
Earned Premiums:
|
|
|
|
|
|
|
|
|
|
Automobile
|
|
$
|
28.0
|
|
|
$
|
37.9
|
|
|
$
|
89.1
|
|
|
$
|
123.9
|
|
|
Homeowners
|
|
2.1
|
|
|
2.4
|
|
|
6.4
|
|
|
7.2
|
|
|
Other Personal
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
Total Earned Premiums
|
|
30.1
|
|
|
40.3
|
|
|
95.6
|
|
|
131.2
|
|
|
Net Investment Income
|
|
3.1
|
|
|
3.4
|
|
|
10.1
|
|
|
10.7
|
|
|
Total Revenues
|
|
33.2
|
|
|
43.7
|
|
|
105.7
|
|
|
141.9
|
|
|
Incurred Losses and LAE related to:
|
|
|
|
|
|
|
|
|
|
Current Year:
|
|
|
|
|
|
|
|
|
|
Non-catastrophe Losses and LAE
|
|
19.7
|
|
|
33.8
|
|
|
65.6
|
|
|
111.5
|
|
|
Catastrophe Losses and LAE
|
|
0.4
|
|
|
0.4
|
|
|
2.2
|
|
|
4.8
|
|
|
Prior Years:
|
|
|
|
|
|
|
|
|
|
Non-catastrophe Losses and LAE
|
|
(5.7
|
)
|
|
(5.3
|
)
|
|
(19.2
|
)
|
|
(11.3
|
)
|
|
Catastrophe Losses and LAE
|
|
—
|
|
|
(0.1
|
)
|
|
(0.5
|
)
|
|
(0.2
|
)
|
|
Total Incurred Losses and LAE
|
|
14.4
|
|
|
28.8
|
|
|
48.1
|
|
|
104.8
|
|
|
Insurance Expenses
|
|
8.7
|
|
|
13.3
|
|
|
26.3
|
|
|
44.0
|
|
|
Operating Profit (Loss)
|
|
10.1
|
|
|
1.6
|
|
|
31.3
|
|
|
(6.9
|
)
|
|
Income Tax Benefit (Expense)
|
|
(3.2
|
)
|
|
(0.1
|
)
|
|
(9.8
|
)
|
|
4.2
|
|
|
Segment Net Operating Income (Loss)
|
|
$
|
6.9
|
|
|
$
|
1.5
|
|
|
$
|
21.5
|
|
|
$
|
(2.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Ratios Based On Earned Premiums
|
|
|
|
|
|
|
|
|
|
|
|
Current Year Non-catastrophe Losses and LAE Ratio
|
|
65.4
|
%
|
|
83.9
|
%
|
|
68.6
|
%
|
|
85.0
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
|
|
1.3
|
|
|
1.0
|
|
|
2.3
|
|
|
3.7
|
|
|
Prior Years Non-catastrophe Losses and LAE Ratio
|
|
(18.9
|
)
|
|
(13.2
|
)
|
|
(20.1
|
)
|
|
(8.6
|
)
|
|
Prior Years Catastrophe Losses and LAE Ratio
|
|
—
|
|
|
(0.2
|
)
|
|
(0.5
|
)
|
|
(0.2
|
)
|
|
Total Incurred Loss and LAE Ratio
|
|
47.8
|
|
|
71.5
|
|
|
50.3
|
|
|
79.9
|
|
|
Incurred Expense Ratio
|
|
28.9
|
|
|
33.0
|
|
|
27.5
|
|
|
33.5
|
|
|
Combined Ratio
|
|
76.7
|
%
|
|
104.5
|
%
|
|
77.8
|
%
|
|
113.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Combined Ratio
|
|
|
|
|
|
|
|
|
|
|
|
Current Year Non-catastrophe Losses and LAE Ratio
|
|
65.4
|
%
|
|
83.9
|
%
|
|
68.6
|
%
|
|
85.0
|
%
|
|
Incurred Expense Ratio
|
|
28.9
|
|
|
33.0
|
|
|
27.5
|
|
|
33.5
|
|
|
Underlying Combined Ratio
|
|
94.3
|
%
|
|
116.9
|
%
|
|
96.1
|
%
|
|
118.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measure Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Combined Ratio
|
|
94.3
|
%
|
|
116.9
|
%
|
|
96.1
|
%
|
|
118.5
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
|
|
1.3
|
|
|
1.0
|
|
|
2.3
|
|
|
3.7
|
|
|
Prior Years Non-catastrophe Losses and LAE Ratio
|
|
(18.9
|
)
|
|
(13.2
|
)
|
|
(20.1
|
)
|
|
(8.6
|
)
|
|
Prior Years Catastrophe Losses and LAE Ratio
|
|
—
|
|
|
(0.2
|
)
|
|
(0.5
|
)
|
|
(0.2
|
)
|
|
Combined Ratio as Reported
|
|
76.7
|
%
|
|
104.5
|
%
|
|
77.8
|
%
|
|
113.4
|
%
|
Unaudited selected financial information for the Life and Health
Insurance segment follows:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Earned Premiums:
|
|
|
|
|
|
|
|
|
|
Life
|
|
$
|
98.4
|
|
|
$
|
98.4
|
|
|
$
|
294.9
|
|
|
$
|
296.0
|
|
|
Accident and Health
|
|
40.7
|
|
|
41.3
|
|
|
121.2
|
|
|
124.2
|
|
|
Property
|
|
19.7
|
|
|
20.5
|
|
|
59.4
|
|
|
61.7
|
|
|
Total Earned Premiums
|
|
158.8
|
|
|
160.2
|
|
|
475.5
|
|
|
481.9
|
|
|
Net Investment Income
|
|
56.5
|
|
|
48.1
|
|
|
159.3
|
|
|
153.5
|
|
|
Other Income
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
Total Revenues
|
|
215.3
|
|
|
208.3
|
|
|
634.9
|
|
|
635.5
|
|
|
Policyholders’ Benefits and Incurred Losses and LAE
|
|
94.6
|
|
|
96.7
|
|
|
296.9
|
|
|
300.2
|
|
|
Insurance Expenses
|
|
85.5
|
|
|
82.2
|
|
|
239.7
|
|
|
232.6
|
|
|
Operating Profit
|
|
35.2
|
|
|
29.4
|
|
|
98.3
|
|
|
102.7
|
|
|
Income Tax Expense
|
|
(12.3
|
)
|
|
(10.2
|
)
|
|
(33.9
|
)
|
|
(36.2
|
)
|
|
Segment Net Operating Income
|
|
$
|
22.9
|
|
|
$
|
19.2
|
|
|
$
|
64.4
|
|
|
$
|
66.5
|
|
Use of Non-GAAP Financial Measures
Consolidated Net Operating Income
Consolidated Net Operating Income is an after-tax, non-GAAP financial
measure computed by excluding from income from continuing operations the
after-tax impact of 1) net realized gains (losses) on sales of
investments, 2) net impairment losses recognized in earnings related to
investments and 3) other 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 income
from continuing operations.
Kemper believes that Consolidated Net Operating Income 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. Net realized gains
(losses) on sales of investments and net impairment losses recognized in
earnings 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 company’s investments, the
timing of which is unrelated to the insurance underwriting process.
Significant non-recurring items are excluded because, by their nature,
they are not indicative of Kemper’s business or economic trends.
A reconciliation of Consolidated Net Operating Income to Income from
Continuing Operations for the three and nine months ended September 30,
2013 and 2012 is presented below:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions) (Unaudited)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Consolidated Net Operating Income
|
|
$
|
38.9
|
|
|
$
|
24.6
|
|
|
$
|
112.9
|
|
|
$
|
57.2
|
|
|
Net Income (Loss) From:
|
|
|
|
|
|
|
|
|
|
Net Realized Gains on Sales of Investments
|
|
31.9
|
|
|
33.0
|
|
|
50.9
|
|
|
38.9
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(2.2
|
)
|
|
(2.0
|
)
|
|
(4.1
|
)
|
|
(2.6
|
)
|
|
Income from Continuing Operations
|
|
$
|
68.6
|
|
|
$
|
55.6
|
|
|
$
|
159.7
|
|
|
$
|
93.5
|
|
Diluted Consolidated Net Operating Income Per
Unrestricted Share
Diluted Consolidated Net Operating Income Per Unrestricted Share is a
non-GAAP financial measure computed by dividing Consolidated Net
Operating Income attributed to unrestricted shares by the
weighted-average unrestricted shares and equivalent shares outstanding.
The most directly comparable GAAP financial measure is Income from
Continuing Operations Per Unrestricted Share-Diluted.
A reconciliation of Diluted Consolidated Net Operating Income Per
Unrestricted Share to Diluted Income from Continuing Operations Per
Unrestricted Share for the three and nine months ended September 30,
2013 and 2012 is presented below:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Unaudited)
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Sep 30,
2013
|
|
Sep 30,
2012
|
|
Diluted Consolidated Net Operating Income Per Unrestricted Share
|
|
$
|
0.69
|
|
|
$
|
0.42
|
|
|
$
|
1.95
|
|
|
$
|
0.96
|
|
|
Net Income (Loss) Per Unrestricted Share From:
|
|
|
|
|
|
|
|
|
|
Net Realized Gains on Sales of Investments
|
|
0.56
|
|
|
0.56
|
|
|
0.88
|
|
|
0.65
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(0.04
|
)
|
|
(0.03
|
)
|
|
(0.07
|
)
|
|
(0.05
|
)
|
|
Diluted Income from Continuing Operations Per Unrestricted Share
|
|
$
|
1.21
|
|
|
$
|
0.95
|
|
|
$
|
2.76
|
|
|
$
|
1.56
|
|
Book Value Per Share Excluding Net Unrealized
Gains on Fixed Maturities
Book Value Per Share Excluding Net Unrealized Gains on Fixed Maturities
is a ratio 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 trend 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 generally 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 Maturities and Book
Value Per Share at September 30, 2013 and December 31, 2012 is presented
below:
|
(Dollars in Millions) (Unaudited)
|
|
Sep 30,
2013
|
|
Dec 31,
2012
|
|
Shareholders’ Equity Excluding Net Unrealized Gains on Fixed
Maturities
|
|
$
|
1,845.1
|
|
|
$
|
1,789.9
|
|
Net Unrealized Gains on Fixed Maturities
|
|
164.0
|
|
|
371.8
|
|
Shareholders’ Equity
|
|
$
|
2,009.1
|
|
|
$
|
2,161.7
|
Underlying Combined Ratio
Underlying combined ratio is a non-GAAP financial measure, which is
computed by adding the current year non-catastrophe losses and LAE ratio
with the incurred expense ratio. The most directly comparable GAAP
financial measure is the combined ratio, which uses total incurred
losses and LAE, including the impact of catastrophe losses, and loss and
LAE reserve development. Kemper believes the underlying combined ratio
is useful to investors and is used by management to reveal the trends in
Kemper’s property and casualty insurance businesses that may be obscured
by catastrophe losses and prior-year reserve development. These
catastrophe losses may cause 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 development is 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 company’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 its
underwriting performance. The underlying combined ratio should not be
considered a substitute for the combined ratio and does not reflect the
overall underwriting profitability of our business.
Conference Call
Kemper will discuss its third quarter 2013 results in a conference call
on Friday, November 1 at 11 a.m. Eastern Time. Kemper’s conference call
will be accessible via the internet and by telephone. The phone number
for Kemper’s conference call is 866.393.1565. 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 through November 15, 2013 at
855.859.2056 using conference ID number 76680582.
More detailed financial information can be found in Kemper’s Investor
Financial Supplement for the third quarter of 2013 which is available at
kemper.com.
About Kemper
Kemper is a diversified insurance holding company with subsidiaries that
provide an array of products to the individual and small business
markets:
-
Auto insurance
-
Homeowners insurance
-
Renters insurance
-
Life insurance
-
Health insurance
Kemper markets to its customers through a network of independent agents,
brokers and career agents.
Additional information about Kemper, including its filings on Forms
10-K, 10-Q and 8-K and its investor supplement, is available by visiting
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
to differ materially from estimated results are those listed in periodic
reports filed by Kemper with the Securities and Exchange Commission (the
“SEC”). No assurances can be given that the results 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. The reader is
advised, however, to consult any further disclosures Kemper makes on
related subjects in its filings with the SEC.
Copyright Business Wire 2013