CHICAGO--(BUSINESS WIRE)--
Kemper Corporation (NYSE: KMPR) reported net income of $92.2 million, or
$1.40 per diluted share, for the third quarter of 2018, compared to
$47.7 million, or $0.92 per diluted share, for the third quarter of
2017. As adjusted for the acquisition of Infinity1, net
income was $131.7 million, or $2.01 per diluted share, for the third
quarter of 2018, compared to $62.7 million, or $0.96 per diluted share,
for the third quarter of 2017.
Adjusted consolidated net operating income2 was $104.5
million, or $1.59 per diluted share, for the third quarter of 2018,
compared to $44.4 million, or $0.85 per diluted share, for the third
quarter of 2017. These results increased primarily from the significant
growth in non-standard personal automobile insurance division, partially
offset by the amortization of the Infinity purchase accounting
adjustments.
Highlights of the quarter include:
- Property & Casualty earned premiums increased by 102 percent, or
$452 million in the quarter, as reported, or 14 percent, or $107
million, as adjusted 1
- Nonstandard personal automobile’s earned premiums increased by 166
percent, or $409 million in the quarter, as reported, or 18 percent,
or $101 million, as adjusted 1
- Investment portfolio generated a pre-tax equivalent annualized book
yield of 5.2 percent in the quarter
“I’m very pleased with our performance this quarter, including strong
earnings and double-digit growth in our specialty auto business,
continued stability in our life and health results, and solid gains in
investment income,” said Joseph P. Lacher, Jr., Kemper’s President and
Chief Executive Officer. “In addition, we achieved two important
milestones this quarter: the closing of our acquisition of Infinity,
accelerating our progress towards becoming the premiere specialty auto
franchise, and the introduction of our new brand identity, which will be
an important part of strengthening our purpose and our connections with
customers, employees, agents, and communities over the long term.”
|
|
| |
|
| |
| | |
Three Months Ended
| | |
Nine Months Ended
|
|
(Dollars in Millions, Except Per Share Amounts) (Unaudited)
| | | Sep 30,
2018
|
|
| Sep 30,
2017
| | | Sep 30,
2018
|
|
| Sep 30,
2017
|
|
Adjusted Consolidated Net Operating Income2 | | |
$
|
104.5
| | | |
$
|
44.4
| | | |
$
|
198.5
| | | |
$
|
61.5
| |
|
Income from Continuing Operations
| | |
92.3
| | | |
47.8
| | | |
183.4
| | | |
84.0
| |
|
Net Income
| | |
92.2
| | | |
47.7
| | | |
183.6
| | | |
84.0
| |
| | | | | | | | | | | |
|
| Impact of Catastrophe Losses and Related Loss Adjustment Expense
(LAE) on Net Income | | | $ | (15.9 | ) | | | $ | (21.5 | ) | | | $ | (56.3 | ) | | | $ | (87.2 | ) |
| | | | | | | | | | | |
|
|
Diluted Net Income Per Share From:
| | | | | | | | | | | | |
|
Adjusted Consolidated Net Operating Income2 | | |
$
|
1.59
| | | |
$
|
0.85
| | | |
$
|
3.49
| | | |
$
|
1.19
| |
|
Income from Continuing Operations
| | |
1.40
| | | |
0.92
| | | |
3.23
| | | |
1.62
| |
|
Net Income
| | |
1.40
| | | |
0.92
| | | |
3.23
| | | |
1.62
| |
| | | | | | | | | | | |
|
| Impact of Catastrophe Losses and Related LAE on Net Income Per
Share | | | $ | (0.24 | ) | | | $ | (0.41 | ) | | | $ | (0.99 | ) | | | $ | (1.68 | ) |
| | | | | | | | | | | | | | | | | | | |
|
|
| |
1 |
|
As Adjusted is a non-GAAP measure, which is computed by excluding
the impact of purchase accounting and including the historical
results of Legacy Kemper and Legacy Infinity in periods prior to the
acquisition date of July 2, 2018. See “Use of Non-GAAP Financial
Measures” for additional information.
|
2 |
|
Adjusted consolidated net operating income is an after-tax, non-GAAP
financial measure. See “Use of Non-GAAP Financial Measures” for
additional information.
|
| |
|
Capital
Total Shareholders’ Equity at the end of the quarter was $3,063.8
million, an increase of $948.2 million, or 45 percent, since year-end
2017 driven by our acquisition of Infinity and net income. Kemper ended
the quarter with cash and investments at the holding company of $91.3
million, and the $300 million revolving credit agreement was undrawn.
During the third quarter of 2018, Kemper paid dividends of $15.7 million.
Kemper ended the quarter with a book value per share of $47.33, an
increase of 15 percent from $41.11 at the end of 2017. Book value per
share excluding net unrealized gains on fixed maturities was $45.22, up
27 percent from $35.57 at the end of 2017, driven by the Infinity
acquisition and net income, partially offset by dividends paid to
shareholders.
Revenues
Total revenues for the third quarter of 2018 increased $505.2 million,
or 73 percent, to $1,195.5 million, compared to the third quarter of
2017, driven by $408.8 million higher nonstandard personal auto earned
premiums. On an as adjusted basis, revenues for the third quarter of
2018 increased $150.5 million, or 14 percent, to $1,195.5 million,
compared to the third quarter of 2017, driven by $101.5 million higher
nonstandard personal auto earned premiums. Nonstandard personal auto
earned premiums increased primarily from higher policies in force. Net
investment income increased $6.1 million to $92.0 million in the third
quarter of 2018, as an $8.8 million increase in interest on fixed income
securities was primarily offset by a $4.2 million reduction in net
investment income on the alternative investments portfolio. Net realized
investment gains were $3.6 million in the third quarter of 2018,
compared to $8.1 million last year. Other income increased $36.8 million
to $37.8 million in the third quarter of 2018 almost entirely due to a
gain from the partial satisfaction of a judgment against Computer
Services Corporation.
The investment portfolio in total generated a pre-tax equivalent
annualized book yield of 5.2 percent for the third quarter of 2018,
compared to 5.8 percent in 2017.
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)
underlying 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,
2018
|
|
| Sep 30,
2017
| | | Sep 30,
2018
|
|
| Sep 30,
2017
|
|
Segment Net Operating Income:
| | | | | | | | | | | | |
| Property & Casualty Insurance | | |
$
|
28.2
| | | |
$
|
22.9
| | | |
$
|
79.4
| | | |
$
|
5.7
| |
| Life & Health Insurance | | |
26.7
|
| | |
23.5
|
| | |
76.9
|
| | |
65.5
|
|
|
Total Segment Net Operating Income
| | |
54.9
| | | |
46.4
| | | |
156.3
| | | |
71.2
| |
|
Corporate and Other Net Operating Income (Loss)
| | |
49.6
|
| | |
(2.0
|
)
| | |
42.2
|
| | |
(9.7
|
)
|
|
Adjusted Consolidated Net Operating Income
| | |
104.5
| | | |
44.4
| | | |
198.5
| | | |
61.5
| |
|
Net Income (Loss) From:
| | | | | | | | | | | | |
|
Change in Fair Value of Equity Securities | | |
8.7
| | | |
—
| | | |
9.6
| | | |
—
| |
|
Net Realized Gains on Sales of Investments
| | |
2.8
| | | |
5.3
| | | |
7.9
| | | |
29.3
| |
|
Net Impairment Losses Recognized in Earnings
| | |
(1.4
|
)
| | |
(1.9
|
)
| | |
(1.8
|
)
| | |
(6.8
|
)
|
|
Acquisition Related Transaction and Integration Costs
| | |
(22.3
|
)
| | |
—
|
| | |
(30.8
|
)
| | |
—
|
|
|
Income from Continuing Operations
| | |
$
|
92.3
|
| | |
$
|
47.8
|
| | |
$
|
183.4
|
| | |
$
|
84.0
|
|
| | | | | | | | | | | | | | | | | | | |
|
The Property & Casualty Insurance segment reported net operating income
of $28.2 million for the third quarter of 2018, compared to $22.9
million in 2017. Results increased primarily from strong nonstandard
personal auto growth and profitability and lower catastrophe losses,
partially offset by the impact of the amortization of the Infinity
purchase accounting adjustments. Catastrophe losses were $19.7 million
before taxes in the third quarter of 2018, compared to $29.8 million
last year. On an as adjusted basis, the Property & Casualty Insurance
segment’s net operating income was $68.0 million in the third quarter of
2018, compared to $39.6 million in 2017.
The Property & Casualty Insurance segment’s underlying combined ratio
increased 5.4 percentage points to 98.0 percent in the third quarter of
2018, primarily from an increase in the insurance expense ratio due to
the amortization of the Infinity purchase accounting adjustments. The
underlying loss ratio increased 1.3 percentage points to 71.9 percent,
primarily from a deterioration in homeowners, partially offset by
improvements in nonstandard personal auto and preferred personal auto.
Nonstandard auto’s underlying loss ratio improved 1.1 percentage points
to 74.1 percent in the quarter, as average earned premium outpaced loss
cost trends. Preferred personal auto’s underlying loss ratio improved
2.5 percentage points to 67.2 percent, driven by increased earned rate
and moderating loss trends. The homeowners underlying loss ratio
increased 3.5 percentage points to 58.9 percent due to the cost related
to our aggregate catastrophe program and a single large fire loss.
The Property & Casualty Insurance segment’s expense ratio increased 4.1
percentage points primarily due to the amortization of the Infinity
purchase accounting adjustments.
The Life & Health Insurance segment reported net operating income of
$26.7 million for the third quarter of 2018, compared to $23.5 million
in 2017, primarily driven by higher earned premiums, an improved
benefits ratio and to a lesser extent, an improved expense ratio. These
gains were partially offset by a reduction in investment income in the
Life business.
Unaudited condensed consolidated statements of income for the three
and nine months ended September 30, 2018 and 2017 are presented below.
|
|
| |
|
| |
| | |
Three Months Ended
| | |
Nine Months Ended
|
|
(Dollars in Millions, Except Per Share Amounts)
| | | Sep 30,
2018
|
|
| Sep 30,
2017
| | | Sep 30,
2018
|
|
| Sep 30,
2017
|
| Revenues: | | | | | | | | | | | | |
|
Earned Premiums
| | |
$
|
1,052.9
| | | |
$
|
598.2
| | | |
$
|
2,320.8
| | | |
$
|
1,744.1
| |
|
Net Investment Income
| | |
92.0
| | | |
85.9
| | | |
249.6
| | | |
244.6
| |
|
Other Income
| | |
37.8
| | | |
1.0
| | | |
40.2
| | | |
2.9
| |
|
Income from Change in Fair Value of Equity Securities | | |
11.0
| | | |
—
| | | |
12.1
| | | |
—
| |
|
Net Realized Gains on Sales of Investments
| | |
3.6
| | | |
8.1
| | | |
10.0
| | | |
45.0
| |
|
Other-than-temporary Impairment Losses:
| | | | | | | | | | | | |
|
Total Other-than-temporary Impairment Losses
| | |
(1.8
|
)
| | |
(2.9
|
)
| | |
(2.3
|
)
| | |
(10.7
|
)
|
|
Portion of Losses Recognized in Other Comprehensive Income
| | |
—
|
| | |
—
|
| | |
—
|
| | |
0.2
|
|
|
Net Impairment Losses Recognized in Earnings
| | |
(1.8
|
)
| | |
(2.9
|
)
| | |
(2.3
|
)
| | |
(10.5
|
)
|
| Total Revenues | | |
1,195.5
|
| | |
690.3
|
| | |
2,630.4
|
| | |
2,026.1
|
|
| Expenses: | | | | | | | | | | | | |
|
Policyholders’ Benefits and Incurred Losses and Loss Adjustment
Expenses
| | |
757.3
| | | |
440.1
| | | |
1,693.7
| | | |
1,364.9
| |
|
Insurance Expenses
| | |
296.0
| | | |
163.7
| | | |
627.3
| | | |
485.2
| |
|
Interest and Other Expenses
| | |
61.7
|
| | |
18.2
|
| | |
116.4
|
| | |
59.1
|
|
| Total Expenses | | |
1,115.0
|
| | |
622.0
|
| | |
2,437.4
|
| | |
1,909.2
|
|
|
Income from Continuing Operations before Income Taxes
| | |
80.5
| | | |
68.3
| | | |
193.0
| | | |
116.9
| |
|
Income Tax Expense
| | |
11.8
|
| | |
(20.5
|
)
| | |
(9.6
|
)
| | |
(32.9
|
)
|
| Income from Continuing Operations | | |
92.3
| | | |
47.8
| | | |
183.4
| | | |
84.0
| |
|
Income from Discontinued Operations
| | |
(0.1
|
)
| | |
(0.1
|
)
| | |
0.2
|
| | |
—
|
|
| Net Income | | |
$
|
92.2
|
| | |
$
|
47.7
|
| | |
$
|
183.6
|
| | |
$
|
84.0
|
|
| | | | | | | | | | | |
|
| Income from Continuing Operations Per Unrestricted Share: | | | | | | | | | | | | |
|
Basic
| | |
$
|
1.42
|
| | |
$
|
0.92
|
| | |
$
|
3.26
|
| | |
$
|
1.63
|
|
|
Diluted
| | |
$
|
1.40
|
| | |
$
|
0.92
|
| | |
$
|
3.23
|
| | |
$
|
1.62
|
|
| | | | | | | | | | | |
|
| Net Income Per Unrestricted Share: | | | | | | | | | | | | |
|
Basic
| | |
$
|
1.42
|
| | |
$
|
0.92
|
| | |
$
|
3.26
|
| | |
$
|
1.63
|
|
|
Diluted
| | |
$
|
1.40
|
| | |
$
|
0.92
|
| | |
$
|
3.23
|
| | |
$
|
1.62
|
|
| | | | | | | | | | | |
|
| Weighted-average Outstanding (Shares in Thousands): | | | | | | | | | | | | |
|
Unrestricted Shares - Basic
| | |
64,580.4
|
| | |
51,366.8
|
| | |
55,925.7
|
| | |
51,308.7
|
|
|
Unrestricted Shares and Equivalent Shares - Diluted
| | |
65,349.5
|
| | |
51,566.4
|
| | |
56,495.5
|
| | |
51,480.3
|
|
| | | | | | | | | | | |
|
| 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, 2018 and 2017 are presented below.
|
|
| |
|
| |
| | |
Three Months Ended
| | |
Nine Months Ended
|
|
(Dollars in Millions)
| | | Sep 30,
2018
|
|
| Sep 30,
2017
| | | Sep 30,
2018
|
|
| Sep 30,
2017
|
| REVENUES: | | | | | | | | | | | | |
| Property & Casualty Insurance: | | | | | | | | | | | | |
|
Earned Premiums:
| | | | | | | | | | | | |
|
Personal Automobile
| | |
$
|
766.7
| | | |
$
|
353.0
| | | |
$
|
1,554.0
| | | |
$
|
1,012.8
| |
|
Homeowners
| | |
62.5
| | | |
66.7
| | | |
186.5
| | | |
199.6
| |
|
Other Personal
| | |
10.1
|
| | |
10.7
|
| | |
30.4
|
| | |
32.2
|
|
|
Total Personal
| | |
839.3
| | | |
430.4
| | | |
1,770.9
| | | |
1,244.6
| |
|
Commercial Automobile
| | |
55.9
|
| | |
13.1
|
| | |
80.6
|
| | |
38.5
|
|
|
Total Earned Premiums
| | |
895.2
| | | |
443.5
| | | |
1,851.5
| | | |
1,283.1
| |
|
Net Investment Income
| | |
34.0
| | | |
27.8
| | | |
79.4
| | | |
72.5
| |
|
Other Income
| | |
0.9
|
| | |
0.4
|
| | |
1.6
|
| | |
0.9
|
|
| Total Property & Casualty Insurance | | |
930.1
|
| | |
471.7
|
| | |
1,932.5
|
| | |
1,356.5
|
|
| Life & Health Insurance: | | | | | | | | | | | | |
|
Earned Premiums:
| | | | | | | | | | | | |
|
Life
| | |
95.2
| | | |
94.5
| | | |
284.3
| | | |
285.6
| |
|
Accident & Health
| | |
44.9
| | | |
42.0
| | | |
132.0
| | | |
120.6
| |
|
Property
| | |
17.6
|
| | |
18.2
|
| | |
53.0
|
| | |
54.8
|
|
|
Total Earned Premiums
| | |
157.7
| | | |
154.7
| | | |
469.3
| | | |
461.0
| |
|
Net Investment Income
| | |
50.5
| | | |
55.9
| | | |
157.9
| | | |
163.8
| |
|
Other Income
| | |
1.2
|
| | |
0.7
|
| | |
2.9
|
| | |
1.9
|
|
| Total Life & Health Insurance | | |
209.4
|
| | |
211.3
|
| | |
630.1
|
| | |
626.7
|
|
| Total Segment Revenues | | |
1,139.5
| | | |
683.0
| | | |
2,562.6
| | | |
1,983.2
| |
|
Income from Change in Fair Value of Equity Securities | | |
11.0
| | | |
—
| | | |
12.1
| | | |
—
| |
|
Net Realized Gains on Sales of Investments
| | |
3.6
| | | |
8.1
| | | |
10.0
| | | |
45.0
| |
|
Net Impairment Losses Recognized in Earnings
| | |
(1.8
|
)
| | |
(2.9
|
)
| | |
(2.3
|
)
| | |
(10.5
|
)
|
|
Other
| | |
43.2
|
| | |
2.1
|
| | |
48.0
|
| | |
8.4
|
|
| Total Revenues | | |
$
|
1,195.5
|
| | |
$
|
690.3
|
| | |
$
|
2,630.4
|
| | |
$
|
2,026.1
|
|
| | | | | | | | | | | | | | | | | | | |
|
|
|
| KEMPER CORPORATION AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (Dollars in Millions) |
| (Unaudited) |
|
|
|
|
| Sep 30,
2018
|
|
| Dec 31,
2017
|
| Assets: | | | | | | |
|
Investments:
| | | | | | |
|
Fixed Maturities at Fair Value
| | |
$
|
6,108.6
| | | |
$
|
5,382.7
|
| Equity Securities at Fair Value
| | |
815.8
| | | |
526.0
|
| Equity Securities at Modified Cost
| | |
50.9
| | | |
—
|
|
Equity Method Limited Liability Investments at Cost Plus Cumulative
Undistributed Earnings
| | |
170.0
| | | |
161.0
|
|
Fair Value Option Investments
| | |
—
| | | |
77.5
|
|
Short-term Investments at Cost which Approximates Fair Value
| | |
688.5
| | | |
235.5
|
|
Other Investments
| | |
412.8
|
| | |
422.2
|
|
Total Investments
| | |
8,246.6
|
| | |
6,804.9
|
|
Cash
| | |
92.8
| | | |
45.7
|
|
Receivables from Policyholders
| | |
1,029.9
| | | |
366.0
|
|
Other Receivables
| | |
243.1
| | | |
194.3
|
|
Deferred Policy Acquisition Costs
| | |
447.4
| | | |
365.3
|
| Goodwill | | |
1,091.2
| | | |
323.0
|
|
Current Income Tax Assets
| | |
58.1
| | | |
6.1
|
|
Other Assets
| | |
563.5
|
| | |
270.9
|
|
Total Assets
| | |
$
|
11,772.6
|
| | |
$
|
8,376.2
|
| Liabilities and Shareholders’ Equity: | | | | | | |
|
Insurance Reserves:
| | | | | | |
|
Life & Health
| | |
$
|
3,551.4
| | | |
$
|
3,521.0
|
|
Property & Casualty
| | |
1,819.1
|
| | |
1,016.8
|
|
Total Insurance Reserves
| | |
5,370.5
|
| | |
4,537.8
|
|
Unearned Premiums
| | |
1,470.9
| | | |
653.9
|
|
Deferred Income Tax Liabilities
| | |
40.4
| | | |
14.8
|
|
Liabilities for Unrecognized Tax Benefits
| | |
4.5
| | | |
8.1
|
|
Debt at Amortized Cost
| | |
1,123.7
| | | |
592.3
|
|
Accrued Expenses and Other Liabilities
| | |
698.8
|
| | |
453.7
|
|
Total Liabilities
| | |
8,708.8
|
| | |
6,260.6
|
| Shareholders’ Equity: | | | | | | |
|
Common Stock
| | |
6.5
| | | |
5.1
|
| Paid-in Capital | | |
1,661.3
| | | |
673.1
|
|
Retained Earnings
| | |
1,365.1
| | | |
1,243.0
|
|
Accumulated Other Comprehensive Income
| | |
30.9
|
| | |
194.4
|
|
Total Shareholders’ Equity
| | |
3,063.8
|
| | |
2,115.6
|
|
Total Liabilities and Shareholders’ Equity
| | |
$
|
11,772.6
|
| | |
$
|
8,376.2
|
| | | | | | | | |
|
Unaudited selected financial information for the Property & Casualty
Insurance segment follows.
|
| |
| |
| |
Three Months Ended
| |
Nine Months Ended
|
|
(Dollars in Millions)
| | Sep 30,
2018
|
| Sep 30,
2017
| | Sep 30,
2018
|
| Sep 30,
2017
|
Results of Operations |
|
Net Premiums Written
| |
$
|
931.0
|
| |
$
|
466.7
|
| |
$
|
1,956.8
|
| |
$
|
1,336.3
|
|
| | | | | | | |
|
|
Earned Premiums
| |
$
|
895.2
| | |
$
|
443.5
| | |
$
|
1,851.5
| | |
$
|
1,283.1
| |
|
Net Investment Income
| |
34.0
| | |
27.8
| | |
79.4
| | |
72.5
| |
|
Other Income
| |
0.9
|
| |
0.4
|
| |
1.6
|
| |
0.9
|
|
|
Total Revenues
| |
930.1
|
| |
471.7
|
| |
1,932.5
|
| |
1,356.5
|
|
|
Incurred Losses and LAE related to:
| | | | | | | | |
|
Current Year:
| | | | | | | | |
|
Non-catastrophe Losses and LAE
| |
644.2
| | |
313.1
| | |
1,325.7
| | |
924.5
| |
|
Catastrophe Losses and LAE
| |
19.7
| | |
29.8
| | |
69.6
| | |
128.2
| |
| Prior Years:
| | | | | | | | |
|
Non-catastrophe Losses and LAE
| |
(3.5
|
)
| |
1.6
| | |
4.9
| | |
23.0
| |
|
Catastrophe Losses and LAE
| |
(0.2
|
)
| |
(1.2
|
)
| |
(7.7
|
)
| |
(4.4
|
)
|
|
Total Incurred Losses and LAE
| |
660.2
| | |
343.3
| | |
1,392.5
| | |
1,071.3
| |
|
Insurance Expenses
| |
234.0
| | |
97.6
| | |
441.4
| | |
287.4
| |
|
Other Expenses
| |
1.7
|
| |
—
|
| |
1.7
|
| |
—
|
|
|
Operating Income (Loss)
| |
34.2
| | |
30.8
| | |
96.9
| | |
(2.2
|
)
|
|
Income Tax Benefit (Expense)
| |
(6.0
|
)
| |
(7.9
|
)
| |
(17.5
|
)
| |
7.9
|
|
|
Segment Net Operating Income
| |
$
|
28.2
|
| |
$
|
22.9
|
| |
$
|
79.4
|
| |
$
|
5.7
|
|
| | | | | | | |
|
Ratios Based On Earned Premiums |
|
Current Year Non-catastrophe Losses and LAE Ratio
| |
71.9
|
%
| |
70.6
|
%
| |
71.5
|
%
| |
72.0
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
| |
2.2
| | |
6.7
| | |
3.8
| | |
10.0
| |
| Prior Years Non-catastrophe Losses and LAE Ratio
| |
(0.4
|
)
| |
0.4
| | |
0.3
| | |
1.8
| |
|
Prior Years Catastrophe Losses and LAE Ratio
| |
—
|
| |
(0.3
|
)
| |
(0.4
|
)
| |
(0.3
|
)
|
|
Total Incurred Loss and LAE Ratio
| |
73.7
| | |
77.4
| | |
75.2
| | |
83.5
| |
|
Insurance Expense Ratio
| |
26.1
|
| |
22.0
|
| |
23.8
|
| |
22.4
|
|
|
Combined Ratio
| |
99.8
|
%
| |
99.4
|
%
| |
99.0
|
%
| |
105.9
|
%
|
| | | | | | | |
|
Underlying Combined Ratio |
|
Current Year Non-catastrophe Losses and LAE Ratio
| |
71.9
|
%
| |
70.6
|
%
| |
71.5
|
%
| |
72.0
|
%
|
|
Insurance Expense Ratio
| |
26.1
|
| |
22.0
|
| |
23.8
|
| |
22.4
|
|
|
Underlying Combined Ratio
| |
98.0
|
%
| |
92.6
|
%
| |
95.3
|
%
| |
94.4
|
%
|
| | | | | | | |
|
Non-GAAP Measure Reconciliation |
|
Underlying Combined Ratio
| |
98.0
|
%
| |
92.6
|
%
| |
95.3
|
%
| |
94.4
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
| |
2.2
| | |
6.7
| | |
3.8
| | |
10.0
| |
| Prior Years Non-catastrophe Losses and LAE Ratio
| |
(0.4
|
)
| |
0.4
| | |
0.3
| | |
1.8
| |
|
Prior Years Catastrophe Losses and LAE Ratio
| |
—
|
| |
(0.3
|
)
| |
(0.4
|
)
| |
(0.3
|
)
|
|
Combined Ratio as Reported
| |
99.8
|
%
| |
99.4
|
%
| |
99.0
|
%
| |
105.9
|
%
|
| | | | | | | | | | | |
|
Unaudited selected financial information for the Life & Health
Insurance segment follows.
|
| |
| |
| |
Three Months Ended
| |
Nine Months Ended
|
|
(Dollars in Millions)
| | Sep 30,
2018
|
| Sep 30,
2017
| | Sep 30,
2018
|
| Sep 30,
2017
|
Results of Operations |
|
Earned Premiums
| |
$
|
157.7
| | |
$
|
154.7
| | |
$
|
469.3
| | |
$
|
461.0
| |
|
Net Investment Income
| |
50.5
| | |
55.9
| | |
157.9
| | |
163.8
| |
|
Other Income
| |
1.2
|
| |
0.7
|
| |
2.9
|
| |
1.9
|
|
|
Total Revenues
| |
209.4
|
| |
211.3
|
| |
630.1
|
| |
626.7
|
|
|
Policyholders’ Benefits and Incurred Losses and LAE
| |
97.0
| | |
96.8
| | |
301.1
| | |
293.6
| |
|
Insurance Expenses
| |
79.4
|
| |
78.5
|
| |
232.7
|
| |
233.3
|
|
|
Operating Profit
| |
33.0
| | |
36.0
| | |
96.3
| | |
99.8
| |
|
Income Tax Expense
| |
(6.3
|
)
| |
(12.5
|
)
| |
(19.4
|
)
| |
(34.3
|
)
|
|
Segment Net Operating Income
| |
$
|
26.7
|
| |
$
|
23.5
|
| |
$
|
76.9
|
| |
$
|
65.5
|
|
| | | | | | | | | | | | | | | |
|
Use of Non-GAAP Financial Measures
Adjusted Consolidated Net Operating Income
Adjusted 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) income (loss) from change in fair
value of equity securities, 2) net realized gains on sales of
investments, 3) net impairment losses recognized in earnings related to
investments, 4) acquisition related transaction, integration and other
costs, 5) loss from early extinguishment of debt and 6) 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 Adjusted 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. Income (Loss) from
Change in Fair Value of Equity Securities, Net Realized Gains on Sales
of Investments and Net Impairment Losses Recognized in Earnings related
to investments included in the Company’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. Loss from Early
Extinguishment of Debt is driven by the Company’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. Acquisition Related
Transaction, Integration and Other 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. Significant non-recurring items are excluded because, by their
nature, they are not indicative of the Company’s business or economic
trends.
A reconciliation of Adjusted Consolidated Net Operating Income to Income
from Continuing Operations for the three and nine months ended
September 30, 2018 and 2017 is presented below.
|
|
| |
|
| |
| | |
Three Months Ended
| | |
Nine Months Ended
|
|
(Dollars in Millions) (Unaudited)
| | | Sep 30,
2018
|
|
| Sep 30,
2017
| | | Sep 30,
2018
|
|
| Sep 30,
2017
|
|
Adjusted Consolidated Net Operating Income
| | |
$
|
104.5
| | | |
$
|
44.4
| | | |
$
|
198.5
| | | |
$
|
61.5
| |
|
Net Income (Loss) From:
| | | | | | | | | | | | |
|
Income from Change in Fair Value of Equity Securities | | |
8.7
| | | |
—
| | | |
9.6
| | | |
—
| |
|
Net Realized Gains on Sales of Investments
| | |
2.8
| | | |
5.3
| | | |
7.9
| | | |
29.3
| |
|
Net Impairment Losses Recognized in Earnings
| | |
(1.4
|
)
| | |
(1.9
|
)
| | |
(1.8
|
)
| | |
(6.8
|
)
|
|
Acquisition Related Transaction, Integration and Other Costs
| | |
(22.3
|
)
| | |
—
|
| | |
(30.8
|
)
| | |
—
|
|
|
Income from Continuing Operations
| | |
$
|
92.3
|
| | |
$
|
47.8
|
| | |
$
|
183.4
|
| | |
$
|
84.0
|
|
| | | | | | | | | | | | | | | | | | | |
|
Diluted Adjusted Consolidated Net Operating Income
Per Unrestricted Share
Diluted Adjusted Consolidated Net Operating Income Per Unrestricted
Share is a non-GAAP financial measure computed by dividing Adjusted
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
Diluted Income from Continuing Operations Per Unrestricted Share.
A reconciliation of Diluted Adjusted 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,
2018 and 2017 is presented below.
|
|
| |
|
| |
| | |
Three Months Ended
| | |
Nine Months Ended
|
|
(Unaudited)
| | | Sep 30,
2018
|
|
| Sep 30,
2017
| | | Sep 30,
2018
|
|
| Sep 30,
2017
|
|
Diluted Adjusted Consolidated Net Operating Income Per Unrestricted
Share
| | |
$
|
1.59
| | | |
$
|
0.85
| | | |
$
|
3.49
| | | |
$
|
1.19
| |
|
Net Income (Loss) Per Unrestricted Share From:
| | | | | | | | | | | | |
|
Income from Change in Fair Value of Equity Securities | | |
0.13
| | | |
—
| | | |
0.17
| | | |
—
| |
|
Net Realized Gains on Sales of Investments
| | |
0.04
| | | |
0.10
| | | |
0.14
| | | |
0.56
| |
|
Net Impairment Losses Recognized in Earnings
| | |
(0.02
|
)
| | |
(0.03
|
)
| | |
(0.03
|
)
| | |
(0.13
|
)
|
|
Acquisition Related Transaction and Integration Costs
| | |
(0.34
|
)
| | |
—
|
| | |
(0.54
|
)
| | |
—
|
|
|
Diluted Income from Continuing Operations Per Unrestricted Share
| | |
$
|
1.40
|
| | |
$
|
0.92
|
| | |
$
|
3.23
|
| | |
$
|
1.62
|
|
| | | | | | | | | | | | | | | | | | | |
|
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 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 Maturities and Book
Value Per Share at September 30, 2018 and December 31, 2017 is presented
below.
|
|
| |
|
| |
|
(Dollars in Millions) (Unaudited)
| | | Sep 30,
2018
| | | Dec 31,
2017
|
|
Shareholders’ Equity Excluding Net Unrealized Gains on Fixed
Maturities
| | |
$
|
2,927.6
| | | |
$
|
1,830.4
|
|
Net Unrealized Gains on Fixed Maturities
| | |
136.2
|
| | |
285.2
|
|
Shareholders’ Equity
| | |
$
|
3,063.8
|
| | |
$
|
2,115.6
|
| | | | | | | | |
|
Underlying Combined Ratio
Underlying Combined Ratio is a non-GAAP financial measure that 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, including the impact of catastrophe
losses and loss and LAE reserve development from prior years, with the
insurance expense ratio. 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.
As Adjusted for Acquisition
As Adjusted for Acquisition amounts are non-GAAP financial measures. For
three months ended September 30, 2018, as adjusted amounts are computed
by subtracting the impact of purchase accounting adjustments from the
comparable consolidated GAAP financial measure reported by Kemper. For
the three months ended September 30, 2017, as adjusted amounts are
computed by adding the historical results of Infinity reported on a GAAP
basis to the comparable consolidated GAAP financial measure reported by
Kemper. Per share amounts on an acquisition-adjusted basis for the three
months ended September 30, 2017 are computed by adjusting the
denominator used in the calculation of diluted net income per share by
adding the number of shares issued by Kemper on July 2, 2018 in
connection with the acquisition to the diluted weighted-average shares
outstanding reported by Kemper on a GAAP basis for the three months
ended September 30, 2017. The Company 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 Acquisition non-GAAP financial
measures used in this press release to the comparable GAAP financial
measure for the three months ended September 30, 2018 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
Acquisition
|
|
Net Income
| | |
$
|
92.2
|
| | |
$
|
(39.5
|
)
| | |
$
|
131.7
|
|
Net Income Per Share - Diluted
| | |
$
|
1.40
|
| | |
$
|
(0.61
|
)
| | |
$
|
2.01
|
|
Property & Casualty Insurance Segment:
| | | | | | | | | |
|
Earned Premiums
| | |
$
|
895.2
|
| | |
$
|
—
|
| | |
$
|
895.2
|
|
Segment Net Income
| | |
$
|
28.2
|
| | |
$
|
(39.8
|
)
| | |
$
|
68.0
|
|
Non-standard Automobile:
| | | | | | | | | |
|
Earned Premiums
| | |
$
|
655.3
|
| | |
$
|
—
|
| | |
$
|
655.3
|
| | | | | | | | | | | | | |
|
A reconciliation of the As Adjusted for Acquisition non-GAAP financial
measures used in this press release to the comparable GAAP financial
measure for the three months ended September 30, 2017 is presented below.
|
|
| |
|
| |
|
| |
|
(Dollars in Millions) (Unaudited)
| | |
Kemper
Historical
GAAP
Financial
Measure
| |
|
Infinity
Historical
GAAP
Financial
Measure
| | |
As Adjusted
for
Acquisition
|
|
Net Income
| | |
$
|
47.7
|
| | |
$
|
15.0
|
| | |
$
|
62.7
|
|
Property & Casualty Insurance Segment:
| | | | | | | | | |
|
Earned Premiums
| | |
$
|
443.5
|
| | |
$
|
345.0
|
| | |
$
|
788.5
|
|
Segment Net Income
| | |
$
|
22.9
|
| | |
$
|
16.7
|
| | |
$
|
39.6
|
|
Non-standard Automobile:
| | | | | | | | | |
|
Earned Premiums
| | |
$
|
246.5
|
| | |
$
|
307.4
|
| | |
$
|
553.9
|
| | | | | | | | | | | | | |
|
A computation of Diluted Net Income Per Share - As Adjusted for
Acquisition for the three months ended September 30, 2017 is presented
below.
|
|
| |
|
(Dollars and Shares in Millions, Except Per Share Amounts)
(Unaudited)
| | |
As Adjusted
for
Acquisition
|
Dollars in Millions | | | |
|
Net Income - As Adjusted for Acquisition
| | |
$
|
62.7
|
|
Less Income from Continuing Operations Attributed to Participating
Awards - As Reported
| | |
0.4
|
|
Diluted Net Income Attributed to Unrestricted Shares - As Adjusted
for Acquisition
| | |
$
|
62.3
|
| | | |
|
Shares in Millions | | | |
|
Weighted-average Unrestricted Shares and Equivalent Shares
Outstanding Assuming Dilution - As Reported
| | |
51.6
|
|
Shares Issued in Connection with Acquisition of Infinity
| | |
13.2
|
|
Weighted-average Unrestricted Shares and Equivalent Shares
Outstanding Assuming Dilution - As Adjusted for Acquisition
| | |
64.8
|
| | |
|
In Dollars | | | |
|
Diluted Net Income Per Share - As Adjusted for Acquisition
| | |
$
|
0.96
|
| | | |
|
Conference Call
Kemper will discuss its third quarter 2018 results in a conference call
on Monday, November 5, at 4:15 p.m. Eastern (3:15 p.m. Central) Time.
Kemper’s conference call will be accessible via the internet and by
telephone. The phone number for Kemper’s conference call is 844.826.3041.
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 2018, which is available at the investor section of kemper.com.
About Kemper
The Kemper family of companies is one of the nation’s leading insurers.
With $11 billion in assets, Kemper is improving the world of insurance
by offering personalized solutions for individuals, families and
businesses. Through our businesses, Kemper:
-
Offers insurance for auto, home, life, health and valuables
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Services seven million policies
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Is represented by 30,000 agents and brokers
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Employs over 7,800 associates dedicated to providing exceptional
service
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Is licensed to sell insurance in 50 states and the District of Columbia
Learn more about Kemper.
Cautionary Statements Regarding Forward-Looking Information
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 the possibility that the anticipated benefits
and synergies from an acquisition may not be fully realized to the
extent or within the time frame previously expected and other factors
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20181105005284/en/
Kemper Corporation
Investors:
Michael Marinaccio, 312-661-4930
investors@kemper.com
or
Media:
Barbara
Ciesemier, 312-661-4521
bciesemier@kemper.com
Source: Kemper Corporation