CHICAGO--(BUSINESS WIRE)--
Kemper Corporation (NYSE: KMPR) reported
net income of $6.5 million, or $0.10 per diluted share, for the fourth
quarter of 2018, compared to $36.9 million, or $0.71 per diluted share,
for the fourth quarter of 2017. In the fourth quarter of 2018, net
income included a $60.4 million after-tax loss, or $0.93 per diluted
share, attributable to the change in fair value of equity and
convertible securities. As adjusted for the acquisition of Infinity
Property and Casualty Corporation1, net income was $27.0
million, or $0.41 per diluted share, for the fourth quarter of 2018,
compared to $51.6 million, or $0.79 per diluted share, for the fourth
quarter of 2017.
Adjusted consolidated net operating income2 was $59.9
million, or $0.91 per diluted share, for the fourth quarter of 2018,
compared to $31.0 million, or $0.60 per diluted share, for the fourth
quarter of 2017. These results increased primarily from the continued
profitable growth in Specialty Property & Casualty Insurance segment and
continued improvement in Preferred Property & Casualty Insurance
segment, partially offset by the amortization of the Infinity purchase
accounting adjustments.
Highlights of the quarter include:
- Consolidated earned premiums increased by 76 percent, or $457.7
million in the quarter, as reported, 12 percent, or $111.9 million, as
adjusted 1
- Specialty Property & Casualty Insurance segment’s earned
premiums increased by 165 percent, or $447.1 million in the quarter,
as reported, or 16 percent, or $101.3 million, as adjusted 1
- Investment portfolio generated a pre-tax equivalent annualized book
yield of 4.6 percent in the quarter
“Kemper had a great 2018 with strong earnings and solid operating
performance in our core businesses, and the achievement of several
notable milestones,” said Joseph P. Lacher, Jr., President and CEO.
“Investments in our franchise resulted in record-setting sales and
premium growth in our specialty personal auto business, with
consistently strong results in our health and life businesses and
improving results in our preferred auto and homeowners lines. The close
of our acquisition of Infinity and our refreshed brand represent
meaningful steps forward in the progress on our strategic plan to focus
on long-term, profitable growth.”
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(Dollars in Millions, Except Per Share Amounts) (Unaudited)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
|
Net Income
| |
$
|
6.5
| | |
$
|
36.9
| | |
$
|
190.1
| | |
$
|
120.9
| |
|
Income from Continuing Operations
| |
$
|
5.0
| | |
$
|
35.9
| | |
$
|
188.4
| | |
$
|
119.9
| |
|
Adjusted Consolidated Net Operating Income2 | |
$
|
59.9
| | |
$
|
31.0
| | |
$
|
258.4
| | |
$
|
92.5
| |
| | | | | | | |
|
| Impact of Catastrophe Losses and Related Loss Adjustment Expense
(LAE) on Net Income | | $ | (19.5 | ) | | $ | (33.0 | ) | | $ | (75.8 | ) | | $ | (120.2 | ) |
| | | | | | | |
|
|
Diluted Net Income Per Share From:
| | | | | | | | |
|
Net Income
| |
$
|
0.10
| | |
$
|
0.71
| | |
$
|
3.22
| | |
$
|
2.33
| |
|
Income from Continuing Operations
| |
$
|
0.08
| | |
$
|
0.69
| | |
$
|
3.19
| | |
$
|
2.31
| |
|
Adjusted Consolidated Net Operating Income2 | |
$
|
0.91
| | |
$
|
0.60
| | |
$
|
4.37
| | |
$
|
1.78
| |
| | | | | | | |
|
| Impact of Catastrophe Losses and Related LAE on Net Income Per
Share | | $ | (0.30 | ) | | $ | (0.64 | ) | | $ | (1.30 | ) | | $ | (2.32 | ) |
| | | | | | | | | | | | | | | |
|
| 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 $3,050.1
million, an increase of $934.5 million, or 44 percent, since year-end
2017 driven by the acquisition of Infinity and net income. During the
fourth quarter of 2018, Kemper repaid $215 million of the $250 million
term loan facility that was used to facilitate the funding of the
acquisition of Infinity. Kemper ended the quarter with cash and
investments at the holding company of $100.6 million, and the $300
million revolving credit agreement was undrawn.
During the fourth quarter of 2018, Kemper paid dividends of $15.6
million.
Kemper ended the quarter with a book value per share of $47.10, 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 $45.40, up
28 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 fourth quarter of 2018 increased $397.4 million,
or 57 percent, to $1,094.7 million, compared to the fourth quarter of
2017, driven by $447.1 million of higher Specialty earned premiums. On
an as adjusted basis, revenues for the fourth quarter of 2018 increased
$41.2 million, or 4 percent, to $1,094.7 million, compared to the fourth
quarter of 2017, driven by $101.3 million of higher Specialty earned
premiums primarily from higher policies in-force, partially offset by
$76.4 million of lower revenues from the decrease in the fair values of
equity and convertible securities. Net investment income increased $8.7
million to $91.3 million in the fourth quarter of 2018, primarily from
an $8.9 million increase in interest on fixed income securities and a
$4.3 million increase in dividends on equity securities, partially
offset by a $6.6 million reduction in net investment income on the
alternative investments portfolio. Net realized investment gains were
$16.4 million in the fourth quarter of 2018, compared to $11.5 million
last year. Other income increased $0.9 million to $2.0 million in the
fourth quarter of 2018.
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
|
|
Year Ended
|
|
(Dollars in Millions) (Unaudited)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
|
Segment Net Operating Income (Loss):
| | | | | | | | |
| Preferred Property & Casualty Insurance | |
$
|
6.0
| | |
$
|
(11.7
|
)
| |
$
|
25.7
| | |
$
|
(45.4
|
)
|
| Specialty Property & Casualty Insurance | |
48.5
| | |
14.3
| | |
115.8
| | |
56.3
| |
| Life & Health Insurance | |
13.6
|
| |
25.7
|
| |
91.5
|
| |
91.9
|
|
|
Total Segment Net Operating Income
| |
68.1
| | |
28.3
| | |
233.0
| | |
102.8
| |
|
Corporate and Other Net Operating Income (Loss)
| |
(8.2
|
)
| |
2.7
|
| |
25.4
|
| |
(10.3
|
)
|
|
Adjusted Consolidated Net Operating Income
| |
59.9
| | |
31.0
| | |
258.4
| | |
92.5
| |
|
Net Income (Loss) From:
| | | | | | | | |
|
Change in Fair Value of Equity and Convertible Securities | |
(60.4
|
)
| |
—
| | |
(50.8
|
)
| |
—
| |
|
Net Realized Gains on Sales of Investments
| |
13.0
| | |
7.4
| | |
20.9
| | |
36.7
| |
|
Net Impairment Losses Recognized in Earnings
| |
(1.8
|
)
| |
(2.5
|
)
| |
(3.6
|
)
| |
(9.3
|
)
|
|
Acquisition Related Transaction, Integration and Other Costs
| |
(5.7
|
)
| |
—
|
| |
(36.5
|
)
| |
—
|
|
|
Income from Continuing Operations
| |
$
|
5.0
|
| |
$
|
35.9
|
| |
$
|
188.4
|
| |
$
|
119.9
|
|
| | | | | | | | | | | | | | | |
|
The Preferred Property & Casualty Insurance segment reported net
operating income of $6.0 million for the fourth quarter of 2018,
compared to a loss of $11.7 million in 2017. Results increased primarily
from Personal Automobile Insurance premium growth and underlying loss
ratio improvements, and lower net catastrophe losses in Homeowners
Insurance, largely due to recoveries from the aggregate catastrophe
reinsurance program. The Preferred Property & Casualty Insurance
segment’s combined ratio improved 13.9 percentage points to 103.9
percent, while the underlying combined ratio increased 4.7 percentage
points to 94.6 percent in the fourth quarter of 2018. The increase in
the underlying combined ratio was driven mainly by an increase in the
underlying loss ratio in Homeowners associated with both the additional
reinsurance purchased and the strong fourth quarter 2017 comparative
underlying results.
The Specialty Property & Casualty Insurance segment reported net
operating income of $48.5 million for the fourth quarter of 2018,
compared to $14.3 million in 2017. Results increased primarily from
strong Personal Automobile growth and profitability, partially offset by
the impact of the amortization of the Infinity purchase accounting
adjustments. On an as adjusted basis, the segment’s net operating income
was $69.3 million in the fourth quarter of 2018, compared to $26.4
million in 2017. The segment’s underlying combined ratio improved 1.1
percentage points to 94.5 percent in the fourth quarter of 2018,
primarily from an improvement in the underlying loss and LAE ratio in
both Personal Automobile and Commercial Automobile, partially offset by
an increase in the insurance expense ratio due to the amortization of
the Infinity purchase accounting adjustments.
The Life & Health Insurance segment reported net operating income of
$13.6 million for the fourth quarter of 2018, compared to $25.7 million
in 2017, primarily driven by higher benefits costs, an increase in
expenses and a reduction in investment income. The Benefits’ ratio was
impacted by an increase in the frequency of claims in comparison to the
fourth quarter of 2017. In terms of the expense increase, about $2
million of the expense increase is related to one-time items. Most of
the remaining increase in expense is tied to volume and non-run rate
business investments that are expensed on as occurred basis.
Unaudited condensed consolidated statements of income for the three
months and year ended December 31, 2018 and 2017 are presented below.
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(Dollars in Millions, Except Per Share Amounts)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
| Revenues: | | | | | | | | |
|
Earned Premiums
| |
$
|
1,063.6
| | |
$
|
605.9
| | |
$
|
3,384.4
| | |
$
|
2,350.0
| |
|
Net Investment Income
| |
91.3
| | |
82.6
| | |
340.9
| | |
327.2
| |
|
Other Income
| |
2.0
| | |
1.1
| | |
42.2
| | |
4.0
| |
|
Loss from Change in Fair Value of Equity and Convertible Securities | |
(76.4
|
)
| |
—
| | |
(64.3
|
)
| |
—
| |
|
Net Realized Gains on Sales of Investments
| |
16.4
| | |
11.5
| | |
26.4
| | |
56.5
| |
|
Other-than-temporary Impairment Losses:
| | | | | | | | |
|
Total Other-than-temporary Impairment Losses
| |
(2.2
|
)
| |
(3.7
|
)
| |
(4.5
|
)
| |
(14.4
|
)
|
|
Portion of Losses Recognized in Other Comprehensive Income
| |
—
|
| |
(0.1
|
)
| |
—
|
| |
0.1
|
|
|
Net Impairment Losses Recognized in Earnings
| |
(2.2
|
)
| |
(3.8
|
)
| |
(4.5
|
)
| |
(14.3
|
)
|
| Total Revenues | |
1,094.7
|
| |
697.3
|
| |
3,725.1
|
| |
2,723.4
|
|
| Expenses: | | | | | | | | |
|
Policyholders’ Benefits and Incurred Losses and Loss Adjustment
Expenses
| |
772.8
| | |
472.5
| | |
2,466.5
| | |
1,837.4
| |
|
Insurance Expenses
| |
273.2
| | |
159.1
| | |
900.5
| | |
644.3
| |
|
Interest and Other Expenses
| |
42.6
|
| |
21.5
|
| |
159.0
|
| |
80.6
|
|
| Total Expenses | |
1,088.6
|
| |
653.1
|
| |
3,526.0
|
| |
2,562.3
|
|
|
Income from Continuing Operations before Income Taxes
| |
6.1
| | |
44.2
| | |
199.1
| | |
161.1
| |
|
Income Tax Expense
| |
(1.1
|
)
| |
(8.3
|
)
| |
(10.7
|
)
| |
(41.2
|
)
|
| Income from Continuing Operations | |
5.0
| | |
35.9
| | |
188.4
| | |
119.9
| |
|
Income from Discontinued Operations
| |
1.5
|
| |
1.0
|
| |
1.7
|
| |
1.0
|
|
| Net Income | |
$
|
6.5
|
| |
$
|
36.9
|
| |
$
|
190.1
|
| |
$
|
120.9
|
|
| | | | | | | |
|
| Income from Continuing Operations Per Unrestricted Share: | | | | | | | | |
|
Basic
| |
$
|
0.08
|
| |
$
|
0.69
|
| |
$
|
3.22
|
| |
$
|
2.32
|
|
|
Diluted
| |
$
|
0.08
|
| |
$
|
0.69
|
| |
$
|
3.19
|
| |
$
|
2.31
|
|
| | | | | | | |
|
| Net Income Per Unrestricted Share: | | | | | | | | |
|
Basic
| |
$
|
0.10
|
| |
$
|
0.71
|
| |
$
|
3.25
|
| |
$
|
2.34
|
|
|
Diluted
| |
$
|
0.10
|
| |
$
|
0.71
|
| |
$
|
3.22
|
| |
$
|
2.33
|
|
| | | | | | | |
|
| Weighted-average Outstanding (Shares in Thousands): | | | | | | | | |
|
Unrestricted Shares - Basic
| |
64,748.2
|
| |
51,456.3
|
| |
58,149.4
|
| |
51,345.6
|
|
|
Unrestricted Shares and Equivalent Shares - Diluted
| |
65,448.8
|
| |
51,870.8
|
| |
58,751.9
|
| |
51,577.9
|
|
| | | | | | | |
|
| Dividends Paid to Shareholders Per Share | |
$
|
0.24
|
| |
$
|
0.24
|
| |
$
|
0.96
|
| |
$
|
0.96
|
|
| | | | | | | | | | | | | | | |
|
Unaudited business segment revenues for the three months and year
ended December 31, 2018 and 2017 are presented below.
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(Dollars in Millions)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
| REVENUES: | | | | | | | | |
| Preferred Property & Casualty Insurance: | | | | | | | | |
|
Earned Premiums:
| | | | | | | | |
|
Preferred Automobile
| |
$
|
115.2
| | |
$
|
106.5
| | |
$
|
440.2
| | |
$
|
422.8
| |
|
Homeowners
| |
63.6
| | |
65.2
| | |
250.1
| | |
264.8
| |
|
Other Personal
| |
10.0
|
| |
10.5
|
| |
40.4
|
| |
42.7
|
|
|
Total Earned Premiums
| |
188.8
| | |
182.2
| | |
730.7
| | |
730.3
| |
|
Net Investment Income
| |
14.0
|
| |
13.0
|
| |
61.8
|
| |
58.9
|
|
|
Total Preferred Property & Casualty Insurance Revenues
| |
202.8
|
| |
195.2
|
| |
792.5
|
| |
789.2
|
|
| Specialty Property & Casualty Insurance: | | | | | | | | |
|
Earned Premiums:
| | | | | | | | |
|
Specialty Personal Automobile
| |
660.5
| | |
257.8
| | |
1,889.5
| | |
954.3
| |
| Commercial Automobile Insurance | |
57.3
|
| |
12.9
|
| |
137.9
|
| |
51.4
|
|
|
Total Earned Premiums
| |
717.8
| | |
270.7
| | |
2,027.4
| | |
1,005.7
| |
|
Net Investment Income
| |
22.6
| | |
9.4
| | |
63.4
| | |
39.2
| |
|
Other Income
| |
0.8
|
| |
0.2
|
| |
2.4
|
| |
1.1
|
|
|
Total Specialty Property & Casualty Insurance Revenues
| |
741.2
|
| |
280.3
|
| |
2,093.2
|
| |
1,046.0
|
|
| Life & Health Insurance: | | | | | | | | |
|
Earned Premiums:
| | | | | | | | |
|
Life
| |
94.1
| | |
94.1
| | |
378.4
| | |
379.7
| |
|
Accident & Health
| |
45.5
| | |
41.1
| | |
177.5
| | |
161.7
| |
|
Property
| |
17.4
|
| |
17.8
|
| |
70.4
|
| |
72.6
|
|
|
Total Earned Premiums
| |
157.0
| | |
153.0
| | |
626.3
| | |
614.0
| |
|
Net Investment Income
| |
51.7
| | |
58.3
| | |
210.9
| | |
223.2
| |
|
Other Income
| |
1.1
|
| |
0.7
|
| |
4.0
|
| |
2.6
|
|
|
Total Life & Health Insurance Revenues
| |
209.8
|
| |
212.0
|
| |
841.2
|
| |
839.8
|
|
| Total Segment Revenues | |
1,153.8
| | |
687.5
| | |
3,726.9
| | |
2,675.0
| |
|
Loss from Change in Fair Value of Equity and Convertible Securities | |
(76.4
|
)
| |
—
| | |
(64.3
|
)
| |
—
| |
|
Net Realized Gains on Sales of Investments
| |
16.4
| | |
11.5
| | |
26.4
| | |
56.5
| |
|
Net Impairment Losses Recognized in Earnings
| |
(2.2
|
)
| |
(3.8
|
)
| |
(4.5
|
)
| |
(14.3
|
)
|
|
Other
| |
3.1
|
| |
2.1
|
| |
40.6
|
| |
6.2
|
|
| Total Revenues | |
$
|
1,094.7
|
| |
$
|
697.3
|
| |
$
|
3,725.1
|
| |
$
|
2,723.4
|
|
| | | | | | | | | | | | | | | |
|
|
|
| KEMPER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Millions) (Unaudited) |
|
| Dec 31,
2018
|
| Dec 31,
2017
|
| Assets: | | | | |
|
Investments:
| | | | |
|
Fixed Maturities at Fair Value
| |
$
|
6,424.2
| | |
$
|
5,382.7
|
| Equity Securities at Fair Value
| |
684.4
| | |
526.0
|
| Equity Securities at Modified Cost
| |
41.5
| | |
—
|
|
Equity Method Limited Liability Investments at Cost Plus Cumulative
Undistributed Earnings
| |
187.0
| | |
161.0
|
| Convertible Securities at Fair Value
| |
31.5
| | |
—
|
|
Fair Value Option Investments
| |
—
| | |
77.5
|
|
Short-term Investments at Cost which Approximates Fair Value
| |
286.1
| | |
235.5
|
|
Other Investments
| |
414.8
|
| |
422.2
|
|
Total Investments
| |
8,069.5
|
| |
6,804.9
|
|
Cash
| |
75.1
| | |
45.7
|
|
Receivables from Policyholders
| |
1,007.1
| | |
366.0
|
|
Other Receivables
| |
245.4
| | |
194.3
|
|
Deferred Policy Acquisition Costs
| |
470.0
| | |
365.3
|
| Goodwill | |
1,112.4
| | |
323.0
|
|
Current Income Tax Assets
| |
38.9
| | |
6.1
|
|
Other Assets
| |
526.5
|
| |
270.9
|
|
Total Assets
| |
$
|
11,544.9
|
| |
$
|
8,376.2
|
| | | | | | |
|
| Liabilities and Shareholders’ Equity: | | | | |
|
Insurance Reserves:
| | | | |
|
Life & Health
| |
$
|
3,558.7
| | |
$
|
3,521.0
|
|
Property & Casualty
| |
1,874.9
|
| |
1,016.8
|
|
Total Insurance Reserves
| |
5,433.6
|
| |
4,537.8
|
|
Unearned Premiums
| |
1,424.3
| | |
653.9
|
|
Deferred Income Tax Liabilities
| |
26.2
| | |
14.8
|
|
Liabilities for Unrecognized Tax Benefits
| |
4.4
| | |
8.1
|
|
Debt at Amortized Cost
| |
909.0
| | |
592.3
|
|
Accrued Expenses and Other Liabilities
| |
697.3
|
| |
453.7
|
|
Total Liabilities
| |
8,494.8
|
| |
6,260.6
|
| Shareholders’ Equity: | | | | |
|
Common Stock
| |
6.5
| | |
5.1
|
| Paid-in Capital | |
1,666.3
| | |
673.1
|
|
Retained Earnings
| |
1,355.5
| | |
1,243.0
|
|
Accumulated Other Comprehensive Income
| |
21.8
|
| |
194.4
|
|
Total Shareholders’ Equity
| |
3,050.1
|
| |
2,115.6
|
|
Total Liabilities and Shareholders’ Equity
| |
$
|
11,544.9
|
| |
$
|
8,376.2
|
| | | | | | |
|
Unaudited selected financial information for the Preferred Property &
Casualty Insurance segment follows.
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(Dollars in Millions)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
Results of Operations |
|
Net Premiums Written
| |
$
|
184.7
|
| |
$
|
172.9
|
| |
$
|
748.8
|
| |
$
|
726.1
|
|
| | | | | | | |
|
|
Earned Premiums
| |
$
|
188.8
| | |
$
|
182.2
| | |
$
|
730.7
| | |
$
|
730.3
| |
|
Net Investment Income
| |
14.0
|
| |
13.0
|
| |
61.8
|
| |
58.9
|
|
|
Total Revenues
| |
202.8
|
| |
195.2
|
| |
792.5
|
| |
789.2
|
|
|
Incurred Losses and LAE related to:
| | | | | | | | |
|
Current Year:
| | | | | | | | |
|
Non-catastrophe Losses and LAE
| |
120.8
| | |
112.4
| | |
459.4
| | |
460.3
| |
|
Catastrophe Losses and LAE
| |
21.4
| | |
51.6
| | |
87.3
| | |
173.5
| |
| Prior Years:
| | | | | | | | |
|
Non-catastrophe Losses and LAE
| |
(3.0
|
)
| |
(0.2
|
)
| |
(0.1
|
)
| |
20.4
| |
|
Catastrophe Losses and LAE
| |
(0.8
|
)
| |
(0.6
|
)
| |
(8.2
|
)
| |
(4.7
|
)
|
|
Total Incurred Losses and LAE
| |
138.4
| | |
163.2
| | |
538.4
| | |
649.5
| |
|
Insurance Expenses
| |
57.8
|
| |
51.3
|
| |
225.5
|
| |
217.8
|
|
|
Operating Income (Loss)
| |
6.6
| | |
(19.3
|
)
| |
28.6
| | |
(78.1
|
)
|
|
Income Tax Benefit (Expense)
| |
(0.6
|
)
| |
7.6
|
| |
(2.9
|
)
| |
32.7
|
|
|
Segment Net Operating Income
| |
$
|
6.0
|
| |
$
|
(11.7
|
)
| |
$
|
25.7
|
| |
$
|
(45.4
|
)
|
| | | | | | | |
|
Ratios Based On Earned Premiums |
|
Current Year Non-catastrophe Losses and LAE Ratio
| |
64.0
|
%
| |
61.7
|
%
| |
62.9
|
%
| |
62.9
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
| |
11.3
| | |
28.3
| | |
11.9
| | |
23.8
| |
| Prior Years Non-catastrophe Losses and LAE Ratio
| |
(1.6
|
)
| |
(0.1
|
)
| |
—
| | |
2.8
| |
|
Prior Years Catastrophe Losses and LAE Ratio
| |
(0.4
|
)
| |
(0.3
|
)
| |
(1.1
|
)
| |
(0.6
|
)
|
|
Total Incurred Loss and LAE Ratio
| |
73.3
| | |
89.6
| | |
73.7
| | |
88.9
| |
|
Insurance Expense Ratio
| |
30.6
|
| |
28.2
|
| |
30.9
|
| |
29.8
|
|
|
Combined Ratio
| |
103.9
|
%
| |
117.8
|
%
| |
104.6
|
%
| |
118.7
|
%
|
| | | | | | | |
|
Underlying Combined Ratio |
|
Current Year Non-catastrophe Losses and LAE Ratio
| |
64.0
|
%
| |
61.7
|
%
| |
62.9
|
%
| |
62.9
|
%
|
|
Insurance Expense Ratio
| |
30.6
|
| |
28.2
|
| |
30.9
|
| |
29.8
|
|
|
Underlying Combined Ratio
| |
94.6
|
%
| |
89.9
|
%
| |
93.8
|
%
| |
92.7
|
%
|
| | | | | | | |
|
Non-GAAP Measure Reconciliation |
|
Combined Ratio
| |
103.9
|
%
| |
117.8
|
%
| |
104.6
|
%
| |
118.7
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
| |
11.3
| | |
28.3
| | |
11.9
| | |
23.8
| |
| Prior Years Non-catastrophe Losses and LAE Ratio
| |
(1.6
|
)
| |
(0.1
|
)
| |
—
| | |
2.8
| |
|
Prior Years Catastrophe Losses and LAE Ratio
| |
(0.4
|
)
| |
(0.3
|
)
| |
(1.1
|
)
| |
(0.6
|
)
|
|
Underlying Combined Ratio
| |
94.6
|
%
| |
89.9
|
%
| |
93.8
|
%
| |
92.7
|
%
|
| | | | | | | | | | | |
|
Unaudited selected financial information for the Specialty Property &
Casualty Insurance segment follows.
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(Dollars in Millions)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
Results of Operations |
|
Net Premiums Written
| |
$
|
674.7
|
| |
$
|
260.4
|
| |
$
|
2,067.4
|
| |
$
|
1,043.5
|
|
| | | | | | | |
|
|
Earned Premiums
| |
$
|
717.8
| | |
$
|
270.7
| | |
$
|
2,027.4
| | |
$
|
1,005.7
| |
|
Net Investment Income
| |
22.6
| | |
9.4
| | |
63.4
| | |
39.2
| |
|
Other Income
| |
0.8
|
| |
0.2
|
| |
2.4
|
| |
1.1
|
|
|
Total Revenues
| |
741.2
|
| |
280.3
|
| |
2,093.2
|
| |
1,046.0
|
|
|
Incurred Losses and LAE related to:
| | | | | | | | |
|
Current Year:
| | | | | | | | |
|
Non-catastrophe Losses and LAE
| |
530.3
| | |
214.6
| | |
1,517.4
| | |
791.2
| |
|
Catastrophe Losses and LAE
| |
1.0
| | |
(0.8
|
)
| |
4.7
| | |
5.5
| |
| Prior Years:
| | | | | | | | |
|
Non-catastrophe Losses and LAE
| |
—
| | |
1.7
| | |
2.0
| | |
4.1
| |
|
Catastrophe Losses and LAE
| |
—
|
| |
—
|
| |
(0.3
|
)
| |
(0.3
|
)
|
|
Total Incurred Losses and LAE
| |
531.3
| | |
215.5
| | |
1,523.8
| | |
800.5
| |
|
Insurance Expenses
| |
148.0
| | |
44.1
| | |
421.7
| | |
165.0
| |
|
Other Expenses
| |
0.4
|
| |
—
|
| |
2.1
|
| |
—
|
|
|
Operating Income (Loss)
| |
61.5
| | |
20.7
| | |
145.6
| | |
80.5
| |
|
Income Tax Benefit (Expense)
| |
(13.0
|
)
| |
(6.4
|
)
| |
(29.8
|
)
| |
(24.2
|
)
|
|
Segment Net Operating Income
| |
$
|
48.5
|
| |
$
|
14.3
|
| |
$
|
115.8
|
| |
$
|
56.3
|
|
| | | | | | | |
|
Ratios Based On Earned Premiums |
|
Current Year Non-catastrophe Losses and LAE Ratio
| |
73.9
|
%
| |
79.3
|
%
| |
74.9
|
%
| |
78.7
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
| |
0.1
| | |
(0.3
|
)
| |
0.2
| | |
0.5
| |
| Prior Years Non-catastrophe Losses and LAE Ratio
| |
—
| | |
0.6
| | |
0.1
| | |
0.4
| |
|
Prior Years Catastrophe Losses and LAE Ratio
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Total Incurred Loss and LAE Ratio
| |
74.0
| | |
79.6
| | |
75.2
| | |
79.6
| |
|
Insurance Expense Ratio
| |
20.6
| | |
16.3
| | |
20.8
| | |
16.4
| |
|
Impact on Ratio from Write-off of Long-lived Asset
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Combined Ratio
| |
94.6
|
%
| |
95.9
|
%
| |
96.0
|
%
| |
96.0
|
%
|
| | | | | | | |
|
Underlying Combined Ratio |
|
Current Year Non-catastrophe Losses and LAE Ratio
| |
73.9
|
%
| |
79.3
|
%
| |
74.9
|
%
| |
78.7
|
%
|
|
Insurance Expense Ratio
| |
20.6
|
| |
16.3
|
| |
20.8
|
| |
16.4
|
|
|
Underlying Combined Ratio
| |
94.5
|
%
| |
95.6
|
%
| |
95.7
|
%
| |
95.1
|
%
|
| | | | | | | |
|
Non-GAAP Measure Reconciliation |
|
Combined Ratio
| |
94.6
|
%
| |
95.9
|
%
| |
96.0
|
%
| |
96.0
|
%
|
|
Current Year Catastrophe Losses and LAE Ratio
| |
0.1
| | |
(0.3
|
)
| |
0.2
| | |
0.5
| |
| Prior Years Non-catastrophe Losses and LAE Ratio
| |
—
| | |
0.6
| | |
0.1
| | |
0.4
| |
|
Prior Years Catastrophe Losses and LAE Ratio
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Underlying Combined Ratio
| |
94.5
|
%
| |
95.6
|
%
| |
95.7
|
%
| |
95.1
|
%
|
| | | | | | | | | | | |
|
Unaudited selected financial information for the Life & Health
Insurance segment follows.
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(Dollars in Millions)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
Results of Operations |
|
Earned Premiums
| |
$
|
157.0
| | |
$
|
153.0
| | |
$
|
626.3
| | |
$
|
614.0
| |
|
Net Investment Income
| |
51.7
| | |
58.3
| | |
210.9
| | |
223.2
| |
|
Other Income
| |
1.1
|
| |
0.7
|
| |
4.0
|
| |
2.6
|
|
|
Total Revenues
| |
209.8
|
| |
212.0
|
| |
841.2
|
| |
839.8
|
|
|
Policyholders’ Benefits and Incurred Losses and LAE
| |
103.1
| | |
93.8
| | |
404.2
| | |
387.4
| |
|
Insurance Expenses
| |
88.4
|
| |
78.9
|
| |
321.1
|
| |
312.2
|
|
|
Operating Profit
| |
18.3
| | |
39.3
| | |
115.9
| | |
140.2
| |
|
Income Tax Expense
| |
(4.7
|
)
| |
(13.6
|
)
| |
(24.4
|
)
| |
(48.3
|
)
|
|
Segment Net Operating Income
| |
$
|
13.6
|
| |
$
|
25.7
|
| |
$
|
91.5
|
| |
$
|
91.9
|
|
| | | | | | | | | | | | | | | |
|
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) loss from change in fair value of
equity and convertible 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. Loss from Change in
Fair Value of Equity and Convertible 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 Income from Continuing Operations to Adjusted
Consolidated Net Operating Income for the three months and year ended
December 31, 2018 and 2017 is presented below.
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(Dollars in Millions) (Unaudited)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
|
Income (Loss) from Continuing Operations
| |
$
|
5.0
| | |
$
|
35.9
| | |
$
|
188.4
| | |
$
|
119.9
| |
|
Less Net Income (Loss) From:
| | | | | | | | |
|
Loss from Change in Fair Value of Equity and Convertible Securities | |
(60.4
|
)
| |
—
| | |
(50.8
|
)
| |
—
| |
|
Net Realized Gains on Sales of Investments
| |
13.0
| | |
7.4
| | |
20.9
| | |
36.7
| |
|
Net Impairment Losses Recognized in Earnings
| |
(1.8
|
)
| |
(2.5
|
)
| |
(3.6
|
)
| |
(9.3
|
)
|
|
Acquisition Related Transaction, Integration and Other Costs
| |
(5.7
|
)
| |
—
|
| |
(36.5
|
)
| |
—
|
|
|
Adjusted Consolidated Net Operating Income
| |
$
|
59.9
|
| |
$
|
31.0
|
| |
$
|
258.4
|
| |
$
|
92.5
|
|
| | | | | | | | | | | | | | | |
|
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 Income from Continuing Operations Per
Unrestricted Share to Diluted Adjusted Consolidated Net Operating Income
Per Unrestricted Share for the three months and year ended December 31,
2018 and 2017 is presented below.
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(Unaudited)
| | Dec 31,
2018
|
| Dec 31,
2017
| | Dec 31,
2018
|
| Dec 31,
2017
|
|
Diluted Income from Continuing Operations Per Unrestricted Share
| |
$
|
0.08
| | |
$
|
0.69
| | |
$
|
3.19
| | |
$
|
2.31
| |
|
Less Net Income (Loss) Per Unrestricted Share From:
| | | | | | | | |
|
Loss from Change in Fair Value of Equity and Convertible Securities | |
(0.92
|
)
| |
—
| | |
(0.86
|
)
| |
—
| |
|
Net Realized Gains on Sales of Investments
| |
0.20
| | |
0.14
| | |
0.35
| | |
0.71
| |
|
Net Impairment Losses Recognized in Earnings
| |
(0.02
|
)
| |
(0.05
|
)
| |
(0.06
|
)
| |
(0.18
|
)
|
|
Acquisition Related Transaction and Integration Costs
| |
(0.09
|
)
| |
—
|
| |
(0.61
|
)
| |
—
|
|
|
Diluted Adjusted Consolidated Net Operating Income Per Unrestricted
Share
| |
$
|
0.91
|
| |
$
|
0.60
|
| |
$
|
4.37
|
| |
$
|
1.78
|
|
| | | | | | | | | | | | | | | |
|
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 December 31, 2018 and December 31, 2017 is presented
below.
|
|
|
(Dollars in Millions) (Unaudited)
|
| Dec 31,
2018
|
| Dec 31,
2017
|
|
Shareholders’ Equity
| |
$
|
3,050.1
| | |
$
|
2,115.6
|
|
Net Unrealized Gains on Fixed Maturities
| |
110.4
|
| |
285.3
|
|
Shareholders’ Equity Excluding Net Unrealized Gains on Fixed
Maturities
| |
$
|
2,939.7
|
| |
$
|
1,830.3
|
| | | | | | |
|
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 December 31, 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 December 31, 2018, 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 December 31, 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 December 31, 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 December 31, 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
| |
$
|
6.5
|
|
|
$
|
(20.5
|
)
| |
$
|
27.0
|
|
Net Income Per Share - Diluted
| |
$
|
0.10
|
| |
$
|
(0.31
|
)
| |
$
|
0.41
|
|
Specialty Property & Casualty Insurance Segment:
| | | | | | |
|
Segment Net Income
| |
$
|
48.5
|
| |
$
|
(20.8
|
)
| |
$
|
69.3
|
| | | | | | | | | | |
|
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 December 31, 2017 is presented below.
|
| |
| |
| |
|
(Dollars in Millions) (Unaudited)
| |
Kemper
Historical
GAAP
Financial
Measure
|
|
Infinity
Historical
GAAP
Financial
Measure
| |
As Adjusted
for
Acquisition
|
|
Net Income
| |
$
|
36.9
|
| |
$
|
14.7
|
| |
$
|
51.6
|
|
Specialty Property & Casualty Insurance Segment:
| | | | | | |
|
Earned Premiums
| |
$
|
270.7
|
| |
$
|
345.8
|
| |
$
|
616.5
|
|
Segment Net Income
| |
$
|
14.3
|
| |
$
|
12.1
|
| |
$
|
26.4
|
|
Non-standard Automobile:
| | | | | | |
|
Earned Premiums
| |
$
|
257.8
|
| |
$
|
307.2
|
| |
$
|
565.0
|
|
Commercial Vehicle:
| | | | | | |
|
Earned Premiums
| |
$
|
12.9
|
| |
$
|
38.6
|
| |
$
|
51.5
|
| | | | | | | | | | |
|
A computation of Diluted Net Income Per Share - As Adjusted for
Acquisition for the three months ended December 31, 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
| |
$
|
51.6
|
|
Less Income from Continuing Operations Attributed to Participating
Awards - As Reported
| |
0.2
|
|
Diluted Net Income Attributed to Unrestricted Shares - As Adjusted
for Acquisition
| |
$
|
51.4
|
| | |
|
Shares in Millions | | |
|
Weighted-average Unrestricted Shares and Equivalent Shares
Outstanding Assuming Dilution - As Reported
| |
51.9
|
|
Shares Issued in Connection with Acquisition of Infinity
| |
13.2
|
|
Weighted-average Unrestricted Shares and Equivalent Shares
Outstanding Assuming Dilution - As Adjusted for Acquisition
| |
65.1
|
| |
|
In Dollars | | |
|
Diluted Net Income Per Share - As Adjusted for Acquisition
| |
$
|
0.79
|
| | |
|
Conference Call
Kemper will discuss its fourth quarter 2018 results in a conference call
on Monday, February 11, 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 fourth
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 nearly $12 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
-
Services 6.3 million policies
-
Is represented by 30,000 agents and brokers
-
Employs over 8,100 associates dedicated to providing exceptional
service
-
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/20190211005272/en/
Investors: Michael Marinaccio
312.661.4930 or investors@kemper.com
Media: Barbara Ciesemier
312.661.4521 or bciesemier@kemper.com
Source: Kemper Corporation