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Jun 30, 2021
Kemper Q2 2021 Earnings Report
Kemper reported a net loss due to industry-related environmental challenges, including increased auto frequency and severity, and social inflation.
Key Takeaways
Kemper Corporation reported a net loss of $62.6 million for the second quarter of 2021, compared to a net income of $126.1 million for the same period in 2020. The results were impacted by higher claim frequency and severity trends in the Specialty P&C segment, as well as adverse prior year development. However, the company saw rising demand for its products and remains well-positioned for long-term growth.
Specialty P&C earned premiums increased 33% and policies-in-force grew ~19.4%, with AAC contributing 12.2% and 14.0% respectively.
Specialty P&C underlying combined ratio was 107.3%, due primarily to higher claim frequency and severity trends.
Specialty P&C experienced adverse prior year development of $81M, primarily driven by legal developments and increased severity in personal injury protection coverage in Florida.
The company repurchased shares worth $112 million and finalized the acquisition of AAC.
Kemper
Kemper
Kemper Revenue by Segment
Revenue by Segment
Specialty P&C Insurance Revenue
CapyFin.comLife Insurance Revenue
CapyFin.com Forward Guidance
Kemper faces short-term challenges due to the faster-than-projected pandemic re-opening and social inflation impacts, but anticipates long-term growth through proactive corrective measures and rising demand for its products.
Positive Outlook
- Rising demand for products in specialty P&C with policies in force growing nearly 6% and direct written premium increasing 13%.
- Life business continues to experience increased demand and historically strong policy retention.
- Heightened level of mortality experienced earlier in the pandemic is beginning to subside, positioning the business for ongoing profitable growth.
- Acquisition of American Access closed on April 1.
- Roughly $160 million of shares repurchased through the end of the quarter, while maintaining a high level of financial flexibility.
Challenges Ahead
- Industry-related environmental challenges impacting earnings.
- Significant increase in auto frequency and severity due to the pandemic’s re-opening.
- Severity impacted by social inflation creeping into lower-limit policies.
- Florida personal injury protection court rulings impacted multiple policy years.
- Specialty P&C segment generated an as adjusted underwriting loss of $60 million and an as adjusted underlying combined ratio of 106%.
Revenue & Expenses
Visualization of income flow from segment revenue to net income