Kemper Corporation (NYSE: KMPR)
reported today net income of $4.7 million, or $0.09 per diluted share,
for the third quarter of 2014, compared to $70.1 million, or $1.23 per
diluted share, for the third quarter of 2013. Consolidated net operating
income1 was $2.1 million, or $0.04 per diluted share, for the
third quarter of 2014, compared to $38.9 million, or $0.69 per diluted
share, for the third quarter of 2013. Net operating income per diluted
share decreased primarily from the write-off of software and lower net
investment income, partially offset by improved underlying loss results
in the Property & Casualty Insurance segment.
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Three Months Ended
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Nine Months Ended
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|
(Dollars in Millions, Except Per Share Amounts) (Unaudited)
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|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Consolidated Net Operating Income 1
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$
|
2.1
|
|
|
$
|
38.9
|
|
|
$
|
43.2
|
|
|
$
|
112.9
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|
Income from Continuing Operations
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|
4.8
|
|
|
68.6
|
|
|
49.3
|
|
|
159.7
|
|
|
Net Income
|
|
4.7
|
|
|
70.1
|
|
|
49.1
|
|
|
162.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Impact of Catastrophe Losses and Related Loss Adjustment Expense
(LAE) on Net Income
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$
|
(9.2
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)
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$
|
(6.7
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)
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$
|
(60.9
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)
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|
$
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(31.5
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)
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Diluted Net Income Per Share From:
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Consolidated Net Operating Income 1
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$
|
0.04
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|
|
$
|
0.69
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|
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$
|
0.79
|
|
|
$
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1.95
|
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|
Continuing Operations
|
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0.09
|
|
|
1.21
|
|
|
0.90
|
|
|
2.76
|
|
|
Net Income
|
|
0.09
|
|
|
1.23
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|
|
0.90
|
|
|
2.81
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|
|
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|
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|
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Impact of Catastrophe Losses and Related LAE on Net Income Per
Share
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$
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(0.17
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)
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$
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(0.12
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)
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$
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(1.12
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)
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$
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(0.55
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)
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1 Consolidated net operating income is an after-tax, non-GAAP
financial measure. See “Use of Non-GAAP Financial Measures” for
additional information.
“Kemper’s third quarter results included a $35 million after-tax
software write-off in the Property & Casualty segment that overshadowed
improvements in many areas,” commented Donald G. Southwell, Kemper’s
Chairman, President and Chief Executive Officer. “In the Property &
Casualty segment, these improvements included a lower underlying loss
ratio and increased agent engagement on the new business front.
“Our Life & Health segment fundamentals continued to be stable, although
profits were lower as a result of the volatility in our alternative
investments portfolio.
“Once again, we returned capital to shareholders with $13 million in
dividends and $30 million in share repurchases in the quarter,” said
Southwell.
Capital
During the third quarter of 2014, Kemper repurchased more than 800,000
shares of its common stock at a total cost of $29.9 million, or $36.51
per share, and paid dividends of $12.6 million. During the first nine
months of 2014, Kemper repurchased nearly 3.0 million shares of its
common stock at a cost of $106.5 million and paid dividends of $39.2
million.
Kemper ended the quarter with a book value per share excluding net
unrealized gains on fixed maturities of $35.31, up 2 percent from $34.49
at the end of 2013. Book value per share was $39.96, up 8 percent from
$36.86 at the end of 2013, largely from the impact of lower yields on
the fixed maturities portfolio.
Revenues
Total revenues were $539.8 million for the third quarter of 2014,
compared to $635.7 million in 2013. Revenues decreased primarily from
$41.1 million lower net realized gains, a $39.0 million decrease in
earned premiums in the Property & Casualty Insurance segment and $10.1
million lower net investment income.
Net realized gains in the third quarter of 2013 included a realized gain
of $43.6 million on the sale of the Company’s corporate headquarters.
The Property & Casualty Insurance segment continued to feel the impact
of lower new and renewal business due to the profit improvement actions
taken over the past couple of years. Consistent with growth and
profitability objectives, the company implemented additional actions to
increase new business sales. However, the company anticipates it will
take several quarters to see the impact of these actions.
Net investment income was $72.3 million in the third quarter of 2014,
compared to $82.4 million in 2013. Net investment income from equity
method and fair value option investments was $5.2 million for the third
quarter of 2014, compared to $7.7 million in 2013. Excluding equity
method and fair value option investments, net investment income
decreased $7.6 million as lower yields more than offset a higher level
of investments. The investment portfolio in total generated a pre-tax
equivalent annualized book yield of 5.1 percent for the third quarter of
2014.
Segment Results
In the first quarter of 2014, Kemper realigned its property and casualty
insurance businesses. As a result of the realignment, the company is now
reporting the property and casualty businesses in a single segment named
the Property & Casualty Insurance segment. Kemper has reclassified
certain prior-year amounts in its segment results to conform to the
current presentation.
Unless otherwise noted, (i) the segment results discussed below are
presented on an after-tax basis, (ii) prior-year development includes
both catastrophe and non-catastrophe losses, (iii) catastrophe losses
exclude the impact of prior-year development and (iv) underlying loss
ratio includes loss and loss adjustment expenses.
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Three Months Ended
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Nine Months Ended
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(Dollars in Millions) (Unaudited)
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Sep 30,
2014
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Sep 30,
2013
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Sep 30,
2014
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Sep 30,
2013
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Segment Net Operating Income (Loss):
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|
|
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|
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|
|
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Property & Casualty Insurance
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$
|
(13.6
|
)
|
|
$
|
23.4
|
|
|
$
|
(0.4
|
)
|
|
$
|
71.5
|
|
|
Life & Health Insurance
|
|
20.3
|
|
|
22.9
|
|
|
58.3
|
|
|
64.4
|
|
|
Total Segment Net Operating Income
|
|
6.7
|
|
|
46.3
|
|
|
57.9
|
|
|
135.9
|
|
|
Corporate and Other Net Operating Loss
|
|
(4.6
|
)
|
|
(7.4
|
)
|
|
(14.7
|
)
|
|
(23.0
|
)
|
|
Consolidated Net Operating Income
|
|
2.1
|
|
|
38.9
|
|
|
43.2
|
|
|
112.9
|
|
|
Net Income (Loss) From:
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Net Realized Gains on Sales of Investments
|
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5.2
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|
|
31.9
|
|
|
11.8
|
|
|
50.9
|
|
|
Net Impairment Losses Recognized in Earnings
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|
(2.5
|
)
|
|
(2.2
|
)
|
|
(5.7
|
)
|
|
(4.1
|
)
|
|
Income from Continuing Operations
|
|
$
|
4.8
|
|
|
$
|
68.6
|
|
|
$
|
49.3
|
|
|
$
|
159.7
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The Property & Casualty Insurance segment reported a net operating loss
of $13.6 million in the third quarter of 2014, compared to net operating
income of $23.4 million in 2013. Results decreased primarily from a
$35.5 million software write-off and higher insurance expenses as a
percentage of earned premiums, partially offset by improved underlying
loss and LAE results. Results also included catastrophe losses of $9.2
million in the third quarter of 2014, compared to $6.7 million in the
prior year. The insurance expense ratio increased to 45.7 percent in the
third quarter of 2014, compared to 27.0 percent in 2013, driven by the
software write-off. Excluding the write-off, the insurance expense ratio
increased 1.1 percentage points to 28.1 percent, driven by the lower
premium base. The underlying loss and LAE ratio for the third quarter of
2014 improved 3.5 percentage points to 66.8 percent, primarily from
higher average earned premium rates in personal auto and homeowners.
The Life & Health Insurance segment reported net operating income of
$20.3 million for the third quarter of 2014, compared to $22.9 million
in 2013. Results decreased largely from lower net investment income and
lower earned premiums, partially offset by lower expenses. Insurance
expenses decreased primarily from lower home service agent commissions
and lower legal fees, partially offset by start-up expenses to expand
distribution channels at Reserve National.
Corporate and Other net operating loss improved $2.8 million over the
third quarter of 2013, driven by lower employee retirement benefits and
higher unallocated net investment income, partially offset by higher
interest expense.
Unaudited condensed consolidated statements of income for the three
and nine months ended September 30, 2014 and 2013 are presented below:
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Three Months Ended
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Nine Months Ended
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(Dollars in Millions, Except Per Share Amounts)
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned Premiums
|
|
$
|
462.8
|
|
|
$
|
507.5
|
|
|
$
|
1,410.7
|
|
|
$
|
1,530.2
|
|
|
Net Investment Income
|
|
72.3
|
|
|
82.4
|
|
|
216.0
|
|
|
237.8
|
|
|
Other Income
|
|
0.5
|
|
|
0.1
|
|
|
0.8
|
|
|
0.5
|
|
|
Net Realized Gains on Sales of Investments
|
|
8.0
|
|
|
49.1
|
|
|
18.1
|
|
|
78.3
|
|
|
Other-than-temporary Impairment Losses:
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|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other-than-temporary Impairment Losses
|
|
(3.8
|
)
|
|
(3.5
|
)
|
|
(8.7
|
)
|
|
(8.2
|
)
|
|
Portion of Losses Recognized in Other Comprehensive Income
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
1.9
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(3.8
|
)
|
|
(3.4
|
)
|
|
(8.7
|
)
|
|
(6.3
|
)
|
|
Total Revenues
|
|
539.8
|
|
|
635.7
|
|
|
1,636.9
|
|
|
1,840.5
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policyholders’ Benefits and Incurred Losses and Loss Adjustment
Expenses
|
|
300.5
|
|
|
338.3
|
|
|
975.9
|
|
|
1,041.7
|
|
|
Insurance Expenses
|
|
158.6
|
|
|
170.1
|
|
|
472.0
|
|
|
491.5
|
|
|
Write-off of Long-lived Asset
|
|
54.6
|
|
|
—
|
|
|
54.6
|
|
|
—
|
|
|
Interest and Other Expenses
|
|
22.1
|
|
|
25.3
|
|
|
67.3
|
|
|
74.3
|
|
|
Total Expenses
|
|
535.8
|
|
|
533.7
|
|
|
1,569.8
|
|
|
1,607.5
|
|
|
Income from Continuing Operations before Income Taxes
|
|
4.0
|
|
|
102.0
|
|
|
67.1
|
|
|
233.0
|
|
|
Income Tax Benefit (Expense)
|
|
0.8
|
|
|
(33.4
|
)
|
|
(17.8
|
)
|
|
(73.3
|
)
|
|
Income from Continuing Operations
|
|
4.8
|
|
|
68.6
|
|
|
49.3
|
|
|
159.7
|
|
|
Income (Loss) from Discontinued Operations
|
|
(0.1
|
)
|
|
1.5
|
|
|
(0.2
|
)
|
|
2.8
|
|
|
Net Income
|
|
$
|
4.7
|
|
|
$
|
70.1
|
|
|
$
|
49.1
|
|
|
$
|
162.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Per Unrestricted Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.09
|
|
|
$
|
1.21
|
|
|
$
|
0.90
|
|
|
$
|
2.77
|
|
|
Diluted
|
|
$
|
0.09
|
|
|
$
|
1.21
|
|
|
$
|
0.90
|
|
|
$
|
2.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Per Unrestricted Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.09
|
|
|
$
|
1.24
|
|
|
$
|
0.90
|
|
|
$
|
2.82
|
|
|
Diluted
|
|
$
|
0.09
|
|
|
$
|
1.23
|
|
|
$
|
0.90
|
|
|
$
|
2.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average Outstanding (Shares in Thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrestricted Shares - Basic
|
|
52,605.3
|
|
|
56,365.8
|
|
|
54,245.7
|
|
|
57,374.4
|
|
|
Unrestricted Shares and Equivalent Shares - Diluted
|
|
52,699.9
|
|
|
56,501.5
|
|
|
54,356.2
|
|
|
57,493.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2014 and 2013 are presented below:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions)
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property & Casualty Insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Automobile
|
|
$
|
205.1
|
|
|
$
|
239.1
|
|
|
$
|
633.4
|
|
|
$
|
729.4
|
|
|
Homeowners
|
|
77.9
|
|
|
82.3
|
|
|
236.6
|
|
|
244.8
|
|
|
Other Personal
|
|
12.6
|
|
|
13.8
|
|
|
38.7
|
|
|
41.8
|
|
|
Total Personal
|
|
295.6
|
|
|
335.2
|
|
|
908.7
|
|
|
1,016.0
|
|
|
Commercial Automobile
|
|
14.1
|
|
|
13.5
|
|
|
40.8
|
|
|
38.7
|
|
|
Total Earned Premiums
|
|
309.7
|
|
|
348.7
|
|
|
949.5
|
|
|
1,054.7
|
|
|
Net Investment Income
|
|
18.5
|
|
|
21.3
|
|
|
55.6
|
|
|
67.9
|
|
|
Other Income
|
|
0.1
|
|
|
0.1
|
|
|
0.4
|
|
|
0.4
|
|
|
Total Property & Casualty Insurance
|
|
328.3
|
|
|
370.1
|
|
|
1,005.5
|
|
|
1,123.0
|
|
|
Life & Health Insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
|
|
96.8
|
|
|
98.4
|
|
|
291.6
|
|
|
294.9
|
|
|
Accident and Health
|
|
37.1
|
|
|
40.7
|
|
|
112.1
|
|
|
121.2
|
|
|
Property
|
|
19.2
|
|
|
19.7
|
|
|
57.5
|
|
|
59.4
|
|
|
Total Earned Premiums
|
|
153.1
|
|
|
158.8
|
|
|
461.2
|
|
|
475.5
|
|
|
Net Investment Income
|
|
49.2
|
|
|
56.5
|
|
|
147.4
|
|
|
159.3
|
|
|
Other Income
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|
0.1
|
|
|
Total Life & Health Insurance
|
|
202.7
|
|
|
215.3
|
|
|
609.0
|
|
|
634.9
|
|
|
Total Segment Revenues
|
|
531.0
|
|
|
585.4
|
|
|
1,614.5
|
|
|
1,757.9
|
|
|
Net Realized Gains on Sales of Investments
|
|
8.0
|
|
|
49.1
|
|
|
18.1
|
|
|
78.3
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(3.8
|
)
|
|
(3.4
|
)
|
|
(8.7
|
)
|
|
(6.3
|
)
|
|
Other
|
|
4.6
|
|
|
4.6
|
|
|
13.0
|
|
|
10.6
|
|
|
Total Revenues
|
|
$
|
539.8
|
|
|
$
|
635.7
|
|
|
$
|
1,636.9
|
|
|
$
|
1,840.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KEMPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
|
|
|
Sep 30,
2014
|
|
Dec 31,
2013
|
|
Assets:
|
(Unaudited)
|
|
|
|
Investments:
|
|
|
|
|
|
Fixed Maturities at Fair Value
|
$
|
4,697.2
|
|
|
$
|
4,575.0
|
|
Equity Securities at Fair Value
|
661.4
|
|
|
598.5
|
|
Equity Method Limited Liability Investments at Cost Plus Cumulative
Undistributed Earnings
|
222.8
|
|
|
245.1
|
|
Fair Value Option Investments
|
50.6
|
|
|
—
|
|
Short-term Investments at Cost which Approximates Fair Value
|
316.2
|
|
|
284.7
|
|
Other Investments
|
450.5
|
|
|
448.0
|
|
Total Investments
|
6,398.7
|
|
|
6,151.3
|
|
Cash
|
93.1
|
|
|
66.5
|
|
Receivables from Policyholders
|
314.4
|
|
|
331.6
|
|
Other Receivables
|
247.5
|
|
|
193.1
|
|
Deferred Policy Acquisition Costs
|
306.7
|
|
|
302.9
|
|
Goodwill
|
311.8
|
|
|
311.8
|
|
Current and Deferred Income Tax Assets
|
4.3
|
|
|
31.8
|
|
Other Assets
|
228.8
|
|
|
267.4
|
|
Total Assets
|
$
|
7,905.3
|
|
|
$
|
7,656.4
|
|
Liabilities and Shareholders’ Equity:
|
|
|
|
|
|
Insurance Reserves:
|
|
|
|
|
|
Life and Health
|
$
|
3,260.8
|
|
|
$
|
3,217.5
|
|
Property and Casualty
|
780.9
|
|
|
843.5
|
|
Total Insurance Reserves
|
4,041.7
|
|
|
4,061.0
|
|
Unearned Premiums
|
568.2
|
|
|
598.9
|
|
Liabilities for Income Taxes
|
48.7
|
|
|
8.3
|
|
Debt at Amortized Cost
|
751.9
|
|
|
606.9
|
|
Accrued Expenses and Other Liabilities
|
390.3
|
|
|
329.8
|
|
Total Liabilities
|
5,800.8
|
|
|
5,604.9
|
|
Shareholders’ Equity:
|
|
|
|
|
|
Common Stock
|
5.3
|
|
|
5.6
|
|
Paid-in Capital
|
662.2
|
|
|
694.8
|
|
Retained Earnings
|
1,155.6
|
|
|
1,215.8
|
|
Accumulated Other Comprehensive Income
|
281.4
|
|
|
135.3
|
|
Total Shareholders’ Equity
|
2,104.5
|
|
|
2,051.5
|
|
Total Liabilities and Shareholders’ Equity
|
$
|
7,905.3
|
|
|
$
|
7,656.4
|
|
|
|
|
|
|
|
|
Unaudited selected financial information for the Property & Casualty
Insurance segment follows:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions)
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
|
|
Net Premiums Written
|
|
$
|
307.0
|
|
|
$
|
345.0
|
|
|
$
|
920.0
|
|
|
$
|
1,039.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Earned Premiums
|
|
$
|
309.7
|
|
|
$
|
348.7
|
|
|
$
|
949.5
|
|
|
$
|
1,054.7
|
|
|
Net Investment Income
|
|
18.5
|
|
|
21.3
|
|
|
55.6
|
|
|
67.9
|
|
|
Other Income
|
|
0.1
|
|
|
0.1
|
|
|
0.4
|
|
|
0.4
|
|
|
Total Revenues
|
|
328.3
|
|
|
370.1
|
|
|
1,005.5
|
|
|
1,123.0
|
|
|
Incurred Losses and LAE related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe Losses and LAE
|
|
206.8
|
|
|
245.1
|
|
|
646.6
|
|
|
742.5
|
|
|
Catastrophe Losses and LAE
|
|
14.2
|
|
|
10.4
|
|
|
92.1
|
|
|
45.0
|
|
|
Prior Years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe Losses and LAE
|
|
(3.3
|
)
|
|
(10.2
|
)
|
|
(30.5
|
)
|
|
(34.4
|
)
|
|
Catastrophe Losses and LAE
|
|
(7.2
|
)
|
|
(1.7
|
)
|
|
(15.0
|
)
|
|
(8.4
|
)
|
|
Total Incurred Losses and LAE
|
|
210.5
|
|
|
243.6
|
|
|
693.2
|
|
|
744.7
|
|
|
Insurance Expenses, Excluding Write-off of Long-lived Asset
|
|
87.1
|
|
|
94.3
|
|
|
266.6
|
|
|
280.3
|
|
|
Write-off of Long-lived Asset
|
|
54.6
|
|
|
—
|
|
|
54.6
|
|
|
—
|
|
|
Operating Profit (Loss)
|
|
(23.9
|
)
|
|
32.2
|
|
|
(8.9
|
)
|
|
98.0
|
|
|
Income Tax Benefit (Expense)
|
|
10.3
|
|
|
(8.8
|
)
|
|
8.5
|
|
|
(26.5
|
)
|
|
Segment Net Operating Income (Loss)
|
|
$
|
(13.6
|
)
|
|
$
|
23.4
|
|
|
$
|
(0.4
|
)
|
|
$
|
71.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios Based On Earned Premiums
|
|
Current Year Non-catastrophe Losses and LAE Ratio
|
|
66.8
|
%
|
|
70.3
|
%
|
|
68.1
|
%
|
|
70.4
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
|
|
4.6
|
|
|
3.0
|
|
|
9.7
|
|
|
4.3
|
|
|
Prior Years Non-catastrophe Losses and LAE Ratio
|
|
(1.1
|
)
|
|
(2.9
|
)
|
|
(3.2
|
)
|
|
(3.3
|
)
|
|
Prior Years Catastrophe Losses and LAE Ratio
|
|
(2.3
|
)
|
|
(0.5
|
)
|
|
(1.6
|
)
|
|
(0.8
|
)
|
|
Total Incurred Loss and LAE Ratio
|
|
68.0
|
|
|
69.9
|
|
|
73.0
|
|
|
70.6
|
|
|
Insurance Expense Ratio, Excluding Write-off of Long-lived Asset
|
|
28.1
|
|
|
27.0
|
|
|
28.1
|
|
|
26.6
|
|
|
Impact on Ratio from Write-off of Long-lived Asset
|
|
17.6
|
|
|
—
|
|
|
5.8
|
|
|
—
|
|
|
Combined Ratio
|
|
113.7
|
%
|
|
96.9
|
%
|
|
106.9
|
%
|
|
97.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Combined Ratio
|
|
Current Year Non-catastrophe Losses and LAE Ratio
|
|
66.8
|
%
|
|
70.3
|
%
|
|
68.1
|
%
|
|
70.4
|
%
|
|
Insurance Expense Ratio, Excluding Write-off of Long-lived Asset
|
|
28.1
|
|
|
27.0
|
|
|
28.1
|
|
|
26.6
|
|
|
Impact on Ratio from Write-off of Long-lived Asset
|
|
17.6
|
|
|
—
|
|
|
5.8
|
|
|
—
|
|
|
Underlying Combined Ratio
|
|
112.5
|
%
|
|
97.3
|
%
|
|
102.0
|
%
|
|
97.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measure Reconciliation
|
|
Underlying Combined Ratio
|
|
112.5
|
%
|
|
97.3
|
%
|
|
102.0
|
%
|
|
97.0
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
|
|
4.6
|
|
|
3.0
|
|
|
9.7
|
|
|
4.3
|
|
|
Prior Years Non-catastrophe Losses and LAE Ratio
|
|
(1.1
|
)
|
|
(2.9
|
)
|
|
(3.2
|
)
|
|
(3.3
|
)
|
|
Prior Years Catastrophe Losses and LAE Ratio
|
|
(2.3
|
)
|
|
(0.5
|
)
|
|
(1.6
|
)
|
|
(0.8
|
)
|
|
Combined Ratio as Reported
|
|
113.7
|
%
|
|
96.9
|
%
|
|
106.9
|
%
|
|
97.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited selected financial information for the Life & Health
Insurance segment follows:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions)
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
|
|
$
|
96.8
|
|
|
$
|
98.4
|
|
|
$
|
291.6
|
|
|
$
|
294.9
|
|
|
Accident and Health
|
|
37.1
|
|
|
40.7
|
|
|
112.1
|
|
|
121.2
|
|
|
Property
|
|
19.2
|
|
|
19.7
|
|
|
57.5
|
|
|
59.4
|
|
|
Total Earned Premiums
|
|
153.1
|
|
|
158.8
|
|
|
461.2
|
|
|
475.5
|
|
|
Net Investment Income
|
|
49.2
|
|
|
56.5
|
|
|
147.4
|
|
|
159.3
|
|
|
Other Income
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|
0.1
|
|
|
Total Revenues
|
|
202.7
|
|
|
215.3
|
|
|
609.0
|
|
|
634.9
|
|
|
Policyholders’ Benefits and Incurred Losses and LAE
|
|
89.9
|
|
|
94.6
|
|
|
282.7
|
|
|
296.9
|
|
|
Insurance Expenses
|
|
81.4
|
|
|
85.5
|
|
|
235.6
|
|
|
239.7
|
|
|
Operating Profit
|
|
31.4
|
|
|
35.2
|
|
|
90.7
|
|
|
98.3
|
|
|
Income Tax Expense
|
|
(11.1
|
)
|
|
(12.3
|
)
|
|
(32.4
|
)
|
|
(33.9
|
)
|
|
Segment Net Operating Income
|
|
$
|
20.3
|
|
|
$
|
22.9
|
|
|
$
|
58.3
|
|
|
$
|
64.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 on sales of investments, 2)
net impairment losses recognized in earnings related to investments and
3) 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 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,
2014 and 2013 is presented below:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Dollars in Millions) (Unaudited)
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Consolidated Net Operating Income
|
|
$
|
2.1
|
|
|
$
|
38.9
|
|
|
$
|
43.2
|
|
|
$
|
112.9
|
|
|
Net Income (Loss) From:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Realized Gains on Sales of Investments
|
|
5.2
|
|
|
31.9
|
|
|
11.8
|
|
|
50.9
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(2.5
|
)
|
|
(2.2
|
)
|
|
(5.7
|
)
|
|
(4.1
|
)
|
|
Income from Continuing Operations
|
|
$
|
4.8
|
|
|
$
|
68.6
|
|
|
$
|
49.3
|
|
|
$
|
159.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
2014 and 2013 is presented below:
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(Unaudited)
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Sep 30,
2014
|
|
Sep 30,
2013
|
|
Diluted Consolidated Net Operating Income Per Unrestricted Share
|
|
$
|
0.04
|
|
|
$
|
0.69
|
|
|
$
|
0.79
|
|
|
$
|
1.95
|
|
|
Net Income (Loss) Per Unrestricted Share From:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Realized Gains on Sales of Investments
|
|
0.10
|
|
|
0.56
|
|
|
0.21
|
|
|
0.88
|
|
|
Net Impairment Losses Recognized in Earnings
|
|
(0.05
|
)
|
|
(0.04
|
)
|
|
(0.10
|
)
|
|
(0.07
|
)
|
|
Diluted Income from Continuing Operations Per Unrestricted Share
|
|
$
|
0.09
|
|
|
$
|
1.21
|
|
|
$
|
0.90
|
|
|
$
|
2.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2014 and December 31, 2013 is presented
below:
|
(Dollars in Millions) (Unaudited)
|
|
Sep 30,
2014
|
|
Dec 31,
2013
|
|
Shareholders’ Equity Excluding Net Unrealized Gains on Fixed
Maturities
|
|
$
|
1,859.6
|
|
|
$
|
1,919.3
|
|
Net Unrealized Gains on Fixed Maturities
|
|
244.9
|
|
|
132.2
|
|
Shareholders’ Equity
|
|
$
|
2,104.5
|
|
|
$
|
2,051.5
|
|
|
|
|
|
|
|
|
|
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 insurance expense (including write-offs of long-lived assets)
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 2014 results in a conference call
on Friday, November 7, 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 21, 2014 at
855.859.2056 using conference ID number 18629795.
More detailed financial information can be found in Kemper’s Investor
Financial Supplement for the third quarter of 2014, which is available
at the investor section of 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:
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
and financial condition to differ materially from estimated results and
financial condition 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 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. The reader
is advised, however, to consult any further disclosures Kemper makes on
related subjects in its filings with the SEC.
Copyright Business Wire 2014