Kemper Corporation (NYSE: KMPR) reported net loss of $62.6
million, or $(0.97) per diluted share, for the second quarter of
2021, compared to net income of $126.1 million, or $1.91 per
diluted share, for the second quarter of 2020. As adjusted1 for the
acquisitions of American Access Casualty Company (“AAC”) and
Infinity Property and Casualty Corporation, net loss was $52.5
million, or $(0.82) per diluted share, for the second quarter of
2021, compared to net income of $149.3 million, or $2.25 per
diluted share, for the second quarter of 2020. In the second
quarter of 2021, net loss included a $32.3 million after-tax gain,
or $0.50 per diluted share, attributable to the change in fair
value of equity and convertible securities.
Adjusted Consolidated Net Operating Loss1 was $99.4 million, or
$1.54 per diluted share, for the second quarter of 2021, compared
to adjusted Consolidated Net Operating Income1 of $79.2 million, or
$1.20 per diluted share, for the second quarter of 2020.
Key themes of the quarter include:
- Specialty P&C earned premiums increased 33% and
policies-in-force (ex. Classic Car) grew ~19.4%; AAC contributed
12.2% and 14.0% for earned premiums and policies-in-force,
respectively
- Specialty P&C underlying combined ratio1 was 107.3%, due
primarily to higher claim frequency and severity trends
- Specialty P&C experienced adverse prior year development of
$81M, or 8 points, primarily driven by legal developments and
increased severity in personal injury protection coverage in
Florida
- Repurchased shares worth $112 million and finalized acquisition
of AAC
- Net investment income results were strong for the quarter,
primarily driven by Alternative Investments
- Kemper remains well positioned to support customers and grow
long-term shareholder value
“Our second quarter results demonstrated strong topline growth
offset by a number of industry-related environmental challenges
that impacted earnings,” said President, CEO and Chairman Joseph P.
Lacher, Jr. “The pandemic’s re-opening is happening faster than
projected, resulting in a significant increase in auto frequency
and severity. Although these effects were mostly anticipated, the
speed of the re-opening magnified their financial impact in this
quarter’s results. In addition, severity was impacted by social
inflation creeping into lower-limit policies and Florida personal
injury protection court rulings that impacted multiple policy
years. As a result, the Specialty P&C segment generated an as
adjusted underwriting loss of $60 million and an as adjusted
underlying combined ratio of 106%. We believe this to be short-term
in nature extending a few quarters while we take appropriate
corrective measures.
“That said, this quarter we saw rising demand for our products.
In specialty P&C, as adjusted, policies in force grew nearly 6%
and direct written premium increased 13%. The business remains well
positioned for attractive long-term growth and, through proactive
corrective measures, appropriate long-term returns. Our life
business continues to experience increased demand and historically
strong policy retention. The heightened level of mortality we
experienced earlier in the pandemic is beginning to subside,
positioning the business for ongoing profitable growth.
“Related to capital deployment, we continue to take actions that
enhance the long-term intrinsic value of the company. We closed on
our acquisition of American Access on April 1 and repurchased
roughly $160 million of shares through the end of the quarter,
while maintaining a high level of financial flexibility. Despite
this quarter’s challenges, our balance sheet and business model
remain strong and well-positioned to navigate the re-opening. We’re
taking the right measures to ensure we improve results and continue
to deliver on our promises to our customers, as well as attractive
long-term results and value creation for our stakeholders.”
1 Non-GAAP financial measure. All Non-GAAP financial measures
are denoted with footnote 1 throughout this release. See “Use of
Non-GAAP Financial Measures” for additional information.
Three Months Ended
Six Months Ended
(Dollars in Millions, Except Per Share
Amounts) (Unaudited)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
Net Income (Loss)
$
(62.6
)
$
126.1
$
60.6
$
190.1
Adjusted Consolidated Net Operating Income
(Loss) 1
$
(99.4
)
$
79.2
$
(12.2
)
$
242.1
Impact of Catastrophe Losses and Related
Loss Adjustment Expense (LAE) on Net Income
$
(27.5
)
$
(22.3
)
$
(49.3
)
$
(26.9
)
Diluted Net Income Per Share From:
Net Income (Loss)
$
(0.97
)
$
1.91
$
0.92
$
2.85
Adjusted Consolidated Net Operating Income
(Loss) 1
$
(1.54
)
$
1.20
$
(0.19
)
$
3.63
Impact of Catastrophe Losses and Related
LAE on Net Income Per Share
$
(0.43
)
$
(0.34
)
$
(0.75
)
$
(0.41
)
Capital
Total Shareholders’ Equity at the end of the quarter was
$4,306.2 million, a decrease of $257.2 million, or 6 percent, since
year-end 2020 primarily driven by a decrease in the valuation of
our fixed income bond portfolio, repurchases of common stock, and
cash dividends. Kemper and its direct non-insurance subsidiaries
ended the quarter with cash and investments of $214.8 million, and
the $400.0 million revolving credit agreement was undrawn.
During the second quarter of 2021, Kemper paid dividends of
$20.4 million.
On May 5, 2021, Kemper announced that its Board of Directors
declared a quarterly dividend of $0.31 per share.
Kemper ended the quarter with a book value per share of $67.67,
a decrease of 3 percent from $69.74 at the end of 2020. Book Value
Per Share Excluding Net Unrealized Gains on Fixed Maturities1 was
$58.39, compared to $58.67 at the end of 2020.
Revenues
Total revenues for the second quarter of 2021 increased $276.8
million, or 22 percent, to $1,507.7 million, compared to the second
quarter of 2020, driven by $251.3 million of higher Specialty
P&C earned premiums and a $30.8 million decrease attributable
to the change in fair value of equity and convertible securities.
Specialty P&C earned premiums increased due primarily to higher
premium volume. Net investment income increased $46.1 million to
$113.9 million in the second quarter of 2021 due primarily to the
continued outperformance of Alternative Investments and higher
levels of investments in fixed income securities, partially offset
by lower yields on fixed income securities. Net realized investment
gains were $19.2 million in the second quarter of 2021, compared to
$11.7 million in the second quarter of 2020. Other income increased
from $1.5 million to $7.0 million in the second quarter of
2021.
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) loss ratio includes loss and LAE, and (v) all
comparisons are made to the prior year quarter unless otherwise
stated.
Three Months Ended
Six Months Ended
(Dollars in Millions) (Unaudited)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
Segment Net Operating Income (Loss):
Specialty Property & Casualty
Insurance
$
(91.7
)
$
67.5
$
(11.6
)
$
127.6
Preferred Property & Casualty
Insurance
(8.3
)
0.9
1.3
19.3
Life & Health Insurance
13.0
16.1
20.3
38.4
Total Segment Net Operating Income
(Loss)
(87.0
)
84.5
10.0
185.3
Corporate and Other Net Operating Income
(Loss)
(12.4
)
(5.3
)
(22.2
)
56.8
Adjusted Consolidated Net Operating Income
(Loss) 1
(99.4
)
79.2
(12.2
)
242.1
Net Income (Loss) From:
Change in Fair Value of Equity and
Convertible Securities
32.3
56.6
73.5
(36.5
)
Net Realized Gains on Sales of
Investments
15.2
9.3
26.1
22.3
Impairment Losses
(2.5
)
(5.5
)
(5.7
)
(15.0
)
Acquisition Related Transaction,
Integration and Other Costs
(8.2
)
(13.5
)
(21.1
)
(22.8
)
Net Income (Loss)
$
(62.6
)
$
126.1
$
60.6
$
190.1
The Specialty Property & Casualty Insurance segment reported
net operating loss of $91.7 million for the second quarter of 2021,
compared to net operating income of $67.5 million in the second
quarter of 2020. Results decreased due primarily to higher
underlying loss ratio and adverse development of prior year loss
and LAE reserves. The segment’s Underlying Combined Ratio1 was
107.3 percent, compared to 89.1 percent in the second quarter of
2020.
The Preferred Property & Casualty Insurance segment reported
net operating loss of $8.3 million for the second quarter of 2021,
compared to net operating income of $0.9 million in the second
quarter of 2020. Results decreased due primarily to higher
underlying losses and LAE, partially offset by improved prior year
development. The Preferred Property & Casualty Insurance
segment’s Underlying Combined Ratio1 deteriorated 18.7 percentage
points to 103.1 percent in the second quarter of 2021 due primarily
to higher incurred losses and LAE.
The Life & Health Insurance segment reported net operating
income of $13.0 million for the second quarter of 2021, compared to
$16.1 million in the second quarter of 2020.
Unaudited condensed consolidated statements of income for the
three and six months ended June 30, 2021 and 2020 are presented
below.
Three Months Ended
Six Months Ended
(Dollars in Millions, Except Per Share
Amounts)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
Revenues:
Earned Premiums
$
1,337.7
$
1,085.3
$
2,538.5
$
2,251.7
Net Investment Income
113.9
67.8
217.0
153.4
Change in Value of Alternative Energy
Partnership Investments2
(7.7
)
—
(23.1
)
—
Other Income
7.0
1.5
8.5
91.8
Income (Loss) from Change in Fair Value of
Equity and Convertible Securities
40.8
71.6
93.0
(46.2
)
Net Realized Gains on Sales of
Investments
19.2
11.7
33.0
28.2
Impairment Losses
(3.2
)
(7.0
)
(7.2
)
(19.0
)
Total Revenues
1,507.7
1,230.9
2,859.7
2,459.9
Expenses:
Policyholders’ Benefits and Incurred
Losses and Loss Adjustment Expenses
1,224.1
747.5
2,113.6
1,582.7
Insurance Expenses
314.0
272.7
597.7
544.3
Interest and Other Expenses
59.3
51.0
116.5
95.5
Total Expenses
1,597.4
1,071.2
2,827.8
2,222.5
Income (Loss) before Income Taxes
(89.7
)
159.7
31.9
237.4
Income Tax Benefit (Expense)
27.1
(33.6
)
28.7
(47.3
)
Net Income (Loss)
$
(62.6
)
$
126.1
$
60.6
$
190.1
Income from Continuing Operations Per
Unrestricted Share:
Basic
$
(0.97
)
$
1.93
$
0.93
$
2.88
Diluted
$
(0.97
)
$
1.91
$
0.92
$
2.85
Net Income Per Unrestricted
Share:
Basic
$
(0.97
)
$
1.93
$
0.93
$
2.88
Diluted
$
(0.97
)
$
1.91
$
0.92
$
2.85
Weighted-average Outstanding (Shares in
Thousands):
Unrestricted Shares - Basic
64,376.8
65,257.6
64,897.8
65,886.8
Unrestricted Shares and Equivalent Shares
- Diluted
64,376.8
66,020.8
66,051.5
66,667.9
Dividends Paid to Shareholders Per
Share
$
0.31
$
0.30
$
0.62
$
0.60
2 The Alternative Energy Partnership Investments results are
included as a pre-tax loss in the Change in Value of Alternative
Energy Partnership Investments of $7.7 million and $23.1 million
and benefit in income tax expense of $8.6 million and $37.2 million
for a net income impact of $0.9 million and $14.1 million for the
three and six months ended June 30, 2021, respectively.
Unaudited business segment revenues for the three and six
months ended June 30, 2021 and 2020 are presented below.
Three Months Ended
Six Months Ended
(Dollars in Millions)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
REVENUES:
Specialty Property & Casualty
Insurance:
Earned Premiums:
Specialty Automobile
$
909.6
$
689.8
$
1,695.0
$
1,443.0
Commercial Automobile
100.7
69.2
192.9
138.5
Total Earned Premiums
1,010.3
759.0
1,887.9
1,581.5
Net Investment Income
42.7
16.9
77.7
45.7
Change in Value of Alternative Energy
Partnership Investments
(3.7
)
—
(11.0
)
—
Other Income
1.0
0.1
1.9
1.0
Total Specialty Property & Casualty
Insurance Revenues
1,050.3
776.0
1,956.5
1,628.2
Preferred Property & Casualty
Insurance:
Earned Premiums:
Preferred Automobile
103.5
99.1
206.5
214.0
Homeowners
51.3
55.6
102.1
112.4
Other Personal
8.4
8.9
16.8
18.1
Total Earned Premiums
163.2
163.6
325.4
344.5
Net Investment Income
19.5
4.3
35.4
14.0
Change in Value of Alternative Energy
Partnership Investments
(2.0
)
—
(6.1
)
—
Other Income
—
0.1
—
0.1
Total Preferred Property & Casualty
Insurance Revenues
180.7
168.0
354.7
358.6
Life & Health Insurance:
Earned Premiums:
Life
100.6
95.7
198.7
192.9
Accident & Health
47.9
50.8
95.3
100.2
Property
15.7
16.2
31.2
32.6
Total Earned Premiums
164.2
162.7
325.2
325.7
Net Investment Income
52.4
44.3
103.5
95.3
Change in Value of Alternative Energy
Partnership Investments
(2.0
)
—
(6.0
)
—
Other Income
0.1
0.5
0.2
0.6
Total Life & Health Insurance
Revenues
214.7
207.5
422.9
421.6
Total Segment Revenues
1,445.7
1,151.5
2,734.1
2,408.4
Income (Loss) from Change in Fair Value of
Equity and Convertible Securities
40.8
71.6
93.0
(46.2
)
Net Realized Gains on Sales of
Investments
19.2
11.7
33.0
28.2
Impairment Losses
(3.2
)
(7.0
)
(7.2
)
(19.0
)
Other
5.2
3.1
6.8
88.5
Total Revenues
$
1,507.7
$
1,230.9
$
2,859.7
$
2,459.9
KEMPER CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in Millions)
(Unaudited)
Jun 30, 2021
Dec 31, 2020
Assets:
Investments:
Fixed Maturities at Fair Value
$
7,835.0
$
7,605.9
Equity Securities at Fair Value
957.7
858.5
Equity Securities at Modified Cost
32.5
40.1
Equity Method Limited Liability
Investments at Cost Plus Cumulative Undistributed Earnings
245.5
204.0
Alternative Energy Partnership
Investments
46.6
21.3
Convertible Securities at Fair Value
43.6
39.9
Short-term Investments at Cost which
Approximates Fair Value
370.6
875.4
Other Investments
910.8
779.0
Total Investments
10,442.3
10,424.1
Cash
105.1
206.1
Receivables from Policyholders
1,479.9
1,194.5
Other Receivables
214.9
222.4
Deferred Policy Acquisition Costs
652.7
589.3
Goodwill
1,311.9
1,114.0
Current Income Tax Assets
94.2
15.6
Other Assets
649.7
575.9
Total Assets
$
14,950.7
$
14,341.9
Liabilities and Shareholders’
Equity:
Insurance Reserves:
Life & Health
$
3,551.6
$
3,527.5
Property & Casualty
2,430.8
1,982.5
Total Insurance Reserves
5,982.4
5,510.0
Unearned Premiums
1,968.1
1,615.1
Policyholder Contract Liabilities
442.7
467.0
Deferred Income Tax Liabilities
269.6
285.7
Accrued Expenses and Other Liabilities
859.4
727.9
Debt at Amortized Cost
1,122.3
1,172.8
Total Liabilities
10,644.5
9,778.5
Shareholders’ Equity:
Common Stock
6.4
6.5
Paid-in Capital
1,770.9
1,805.2
Retained Earnings
1,985.9
2,071.2
Accumulated Other Comprehensive Income
543.0
680.5
Total Shareholders’ Equity
4,306.2
4,563.4
Total Liabilities and Shareholders’
Equity
$
14,950.7
$
14,341.9
Unaudited selected financial information for the Specialty
Property & Casualty Insurance segment follows.
Three Months Ended
Six Months Ended
(Dollars in Millions)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
Results
of Operations
Net Premiums Written
$
1,082.0
$
780.9
$
2,054.0
$
1,692.1
Earned Premiums
$
1,010.3
$
759.0
$
1,887.9
$
1,581.5
Net Investment Income
42.7
16.9
77.7
45.7
Change in Value of Alternative Energy
Partnership Investments
(3.7
)
—
(11.0
)
—
Other Income
1.0
0.1
1.9
1.0
Total Revenues
1,050.3
776.0
1,956.5
1,628.2
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE
877.4
515.8
1,527.4
1,135.6
Catastrophe Losses and LAE
8.1
4.5
9.8
4.7
Prior Years:
Non-catastrophe Losses and LAE
81.3
9.6
79.9
14.9
Catastrophe Losses and LAE
—
—
0.4
0.2
Total Incurred Losses and LAE
966.8
529.9
1,617.5
1,155.4
Insurance Expenses
205.6
161.2
375.9
313.3
Other Expenses
—
0.4
—
—
Operating Income (Loss)
(122.1
)
84.5
(36.9
)
159.5
Income Tax Benefit (Expense)
30.4
(17.0
)
25.3
(31.9
)
Segment Net Operating Income (Loss)
$
(91.7
)
$
67.5
$
(11.6
)
$
127.6
Ratios
Based On Earned Premiums
Current Year Non-catastrophe Losses and
LAE Ratio
86.9
%
67.9
%
81.0
%
71.9
%
Current Year Catastrophe Losses and LAE
Ratio
0.8
0.6
0.5
0.3
Prior Years Non-catastrophe Losses and LAE
Ratio
8.0
1.3
4.2
0.9
Prior Years Catastrophe Losses and LAE
Ratio
—
—
—
—
Total Incurred Loss and LAE Ratio
95.7
69.8
85.7
73.1
Insurance Expense Ratio
20.4
21.2
19.9
19.8
Combined Ratio
116.1
%
91.0
%
105.6
%
92.9
%
Underlying Combined Ratio1
Current Year Non-catastrophe Losses and
LAE Ratio
86.9
%
67.9
%
81.0
%
71.9
%
Insurance Expense Ratio
20.4
21.2
19.9
19.8
Underlying Combined Ratio1
107.3
%
89.1
%
100.9
%
91.7
%
Non-GAAP
Measure Reconciliation
Combined Ratio
116.1
%
91.0
%
105.6
%
92.9
%
Less:
Current Year Catastrophe Losses and LAE
Ratio
0.8
0.6
0.5
0.3
Prior Years Non-catastrophe Losses and LAE
Ratio
8.0
1.3
4.2
0.9
Prior Years Catastrophe Losses and LAE
Ratio
—
—
—
—
Underlying Combined Ratio1
107.3
%
89.1
%
100.9
%
91.7
%
Unaudited selected financial information for the Preferred
Property & Casualty Insurance segment follows.
Three Months Ended
Six Months Ended
(Dollars in Millions)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
Results
of Operations
Net Premiums Written
$
169.6
$
161.5
$
324.0
$
325.6
Earned Premiums
$
163.2
$
163.6
$
325.4
$
344.5
Net Investment Income
19.5
4.3
35.4
14.0
Change in Value of Alternative Energy
Partnership Investments
(2.0
)
—
(6.1
)
—
Other Income
—
0.1
—
0.1
Total Revenues
180.7
168.0
354.7
358.6
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE
116.2
82.5
212.4
191.0
Catastrophe Losses and LAE
24.2
20.6
48.2
25.4
Prior Years:
Non-catastrophe Losses and LAE
5.0
8.2
5.1
4.9
Catastrophe Losses and LAE
(3.4
)
0.4
(3.7
)
(0.7
)
Total Incurred Losses and LAE
142.0
111.7
262.0
220.6
Insurance Expenses
52.1
55.5
103.1
114.2
Operating Income (Loss)
(13.4
)
0.8
(10.4
)
23.8
Income Tax Benefit (Expense)
5.1
0.1
11.7
(4.5
)
Segment Net Operating Income (Loss)
$
(8.3
)
$
0.9
$
1.3
$
19.3
Ratios
Based On Earned Premiums
Current Year Non-catastrophe Losses and
LAE Ratio
71.2
%
50.5
%
65.2
%
55.4
%
Current Year Catastrophe Losses and LAE
Ratio
14.8
12.6
14.8
7.4
Prior Years Non-catastrophe Losses and LAE
Ratio
3.1
5.0
1.6
1.4
Prior Years Catastrophe Losses and LAE
Ratio
(2.1
)
0.2
(1.1
)
(0.2
)
Total Incurred Loss and LAE Ratio
87.0
68.3
80.5
64.0
Insurance Expense Ratio
31.9
33.9
31.7
33.1
Combined Ratio
118.9
%
102.2
%
112.2
%
97.1
%
Underlying Combined Ratio1
Current Year Non-catastrophe Losses and
LAE Ratio
71.2
%
50.5
%
65.2
%
55.4
%
Insurance Expense Ratio
31.9
33.9
31.7
33.1
Underlying Combined Ratio1
103.1
%
84.4
%
96.9
%
88.5
%
Non-GAAP
Measure Reconciliation
Combined Ratio
118.9
%
102.2
%
112.2
%
97.1
%
Less:
Current Year Catastrophe Losses and LAE
Ratio
14.8
12.6
14.8
7.4
Prior Years Non-catastrophe Losses and LAE
Ratio
3.1
5.0
1.6
1.4
Prior Years Catastrophe Losses and LAE
Ratio
(2.1
)
0.2
(1.1
)
(0.2
)
Underlying Combined Ratio1
103.1
%
84.4
%
96.9
%
88.5
%
Unaudited selected financial information for the Life &
Health Insurance segment follows.
Three Months Ended
Six Months Ended
(Dollars in Millions)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
Results
of Operations
Earned Premiums
$
164.2
$
162.7
$
325.2
$
325.7
Net Investment Income
52.4
44.3
103.5
95.3
Change in Value of Alternative Energy
Partnership Investments
(2.0
)
—
(6.0
)
—
Other Income
0.1
0.5
0.2
0.6
Total Revenues
214.7
207.5
422.9
421.6
Policyholders’ Benefits and Incurred
Losses and LAE
115.3
105.9
234.0
206.6
Insurance Expenses
86.2
81.7
176.5
168.6
Operating Income (Loss)
13.2
19.9
12.4
46.4
Income Tax Benefit (Expense)
(0.2
)
(3.8
)
7.9
(8.0
)
Segment Net Operating Income (Loss)
$
13.0
$
16.1
$
20.3
$
38.4
Use of Non-GAAP Financial Measures
Adjusted Consolidated Net Operating Income
(Loss) 1
Adjusted Consolidated Net Operating Income (Loss) 1 is an
after-tax, non-GAAP financial measure computed by excluding from
Net Income (Loss) the after-tax impact of 1) income (loss)
from change in fair value of equity and convertible securities, 2)
net realized gains on sales of investments, 3) impairment losses,
4) acquisition related transaction, integration and other costs, 5)
debt extinguishment, pension and other charges 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 Net Income
(Loss).
Kemper believes that Adjusted Consolidated Net Operating Income
(Loss) 1 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 and
convertible securities, net realized gains on sales of investments
and impairment losses 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 Net Income (Loss) to Adjusted
Consolidated Net Operating Income (Loss) 1 for the three and six
months ended June 30, 2021 and 2020 is presented below.
Three Months Ended
Six Months Ended
(Dollars in Millions) (Unaudited)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
Net Income (Loss)
$
(62.6
)
$
126.1
$
60.6
$
190.1
Less Net Income (Loss) From:
Change in Fair Value of Equity and
Convertible Securities
32.3
56.6
73.5
(36.5
)
Net Realized Gains on Sales of
Investments
15.2
9.3
26.1
22.3
Impairment Losses
(2.5
)
(5.5
)
(5.7
)
(15.0
)
Acquisition Related Transaction,
Integration and Other Costs
(8.2
)
(13.5
)
(21.1
)
(22.8
)
Adjusted Consolidated Net Operating Income
(Loss) 1
$
(99.4
)
$
79.2
$
(12.2
)
$
242.1
Diluted Adjusted Consolidated Net
Operating Income Per Unrestricted Share1
Diluted Adjusted Consolidated Net Operating Income Per
Unrestricted Share1 is a non-GAAP financial measure computed by
dividing Adjusted Consolidated Net Operating Income (Loss) 1
attributed to unrestricted shares by the weighted-average
unrestricted shares and equivalent shares outstanding. The most
directly comparable GAAP financial measure is Diluted Net
Income.
A reconciliation of Diluted Net Income to Diluted Adjusted
Consolidated Net Operating Income Per Unrestricted Share1 for the
three and six months ended June 30, 2021 and 2020 is presented
below.
Three Months Ended
Six Months Ended
(Unaudited)
Jun 30, 2021
Jun 30, 2020
Jun 30, 2021
Jun 30, 2020
Diluted Net Income
$
(0.97
)
$
1.91
$
0.92
$
2.85
Less Net Income (Loss) Per Unrestricted
Share From:
Change in Fair Value of Equity and
Convertible Securities
0.50
0.86
1.12
(0.55
)
Net Realized Gains on Sales of
Investments
0.24
0.14
0.40
0.33
Impairment Losses
(0.04
)
(0.08
)
(0.09
)
(0.22
)
Acquisition Related Transaction,
Integration and Other Costs
(0.13
)
(0.21
)
(0.32
)
(0.34
)
Diluted Adjusted Consolidated Net
Operating Income Per Unrestricted Share1
$
(1.54
)
$
1.20
$
(0.19
)
$
3.63
Book Value Per Share Excluding Net
Unrealized Gains on Fixed Maturities1
Book Value Per Share Excluding Net Unrealized Gains on Fixed
Maturities1 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
Maturities1 and Book Value Per Share at June 30, 2021 and December
31, 2020 is presented below.
(Dollars in Millions) (Unaudited)
Jun 30, 2021
Dec 31, 2020
Shareholders’ Equity
$
4,306.2
$
4,563.4
Net Unrealized Gains on Fixed
Maturities
590.5
724.0
Shareholders’ Equity Excluding Net
Unrealized Gains on Fixed Maturities1
$
3,715.7
$
3,839.4
Underlying Combined Ratio1
Underlying Combined Ratio1 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
Ratio1 should not be considered a substitute for the combined ratio
and does not reflect the overall underwriting profitability of our
business.
As Adjusted for Acquisitions1
As Adjusted for Acquisitions1 amounts are non-GAAP financial
measures. Subsequent to the applicable acquisitions, the As
Adjusted for Acquisitions1 amounts are computed by subtracting the
impact of purchase accounting adjustments from the comparable
consolidated GAAP financial measure reported by Kemper. 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 Acquisitions1 non-GAAP
financial measures used in this press release to the comparable
GAAP financial measure for the three months ended June 30, 2021 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 Acquisitions1
Net Income
$
(62.6
)
$
(10.1
)
$
(52.5
)
Net Income Per Share - Diluted
$
(0.97
)
$
(0.15
)
$
(0.82
)
Specialty Property & Casualty
Insurance Segment:
Earned Premiums
$
1,010.3
$
—
$
1,010.3
Segment Net Operating Income (Loss)
$
(91.7
)
$
(10.4
)
$
(81.3
)
Specialty Personal Automobile
Insurance:
Earned Premiums
$
909.6
$
—
$
909.6
Segment Net Operating Income (Loss)
$
(101.3
)
$
(10.0
)
$
(91.3
)
A reconciliation of the As Adjusted for Acquisitions1 non-GAAP
financial measures used in this press release to the comparable
GAAP financial measure for the three months ended June 30, 2020 is
presented below.
(Dollars in Millions, Except Per Share
Amounts) (Unaudited)
Kemper Consolidated GAAP
Financial Measure
AAC Historical GAAP Financial
Measure
Less Impact of Purchase
Accounting Adjustments
As Adjusted for Acquisitions1
Net Income
$
126.1
$
18.8
$
(4.4
)
$
149.3
Net Income Per Share - Diluted
$
1.91
$
0.28
$
(0.06
)
$
2.25
Specialty Property & Casualty
Insurance Segment:
Earned Premiums
$
759.0
$
92.0
$
—
$
851.0
Segment Net Operating Income (Loss)
$
67.5
$
13.3
$
(4.2
)
$
85.0
Specialty Personal Automobile
Insurance:
Earned Premiums
$
689.8
$
92.0
$
—
$
781.8
Segment Net Operating Income (Loss)
$
55.9
$
13.3
$
(3.2
)
$
72.4
Conference Call
Kemper will discuss its second quarter 2021 results in a
conference call on Thursday, July 29th, at 5:00 p.m. Eastern (4:00
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 second quarter of 2021, which is available at the investor
section of kemper.com.
About Kemper
The Kemper family of companies is one of the nation’s leading
specialized insurers. With approximately $15 billion in assets,
Kemper is improving the world of insurance by providing affordable
and easy-to-use personalized solutions to individuals, families and
businesses through its Auto, Personal Insurance, Life and Health
brands. Kemper serves over 6.6 million policies, is represented by
approximately 34,000 agents and brokers, and has approximately
10,000 associates dedicated to meeting the ever-changing needs of
its customers.
Learn more about Kemper at 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
factors listed in periodic reports filed by Kemper with the
Securities and Exchange Commission (“SEC”). The COVID-19 outbreak
and subsequent global pandemic (“Pandemic”) is an extraordinary
event that creates unique uncertainties and risks. Kemper cannot
provide any assurances as to the impacts of the Pandemic and
related economic conditions on the Company’s operating and
financial results.
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, including any such
statements related to the Pandemic. 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/20210729006109/en/
Investors: Michael Marinaccio, 312.661.4930 or investors@kemper.com Media: Barbara Ciesemier,
312.661.4521 or bciesemier@kemper.com
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