Entering text into the input field will update the search result below

Execution At Kemper Still Offers Upside

Apr. 12, 2018 8:40 AM ETKemper Corporation (KMPR)IPCC
Stephen Simpson profile picture
Stephen Simpson


  • Halfway through a turnaround launched with a new CEO in late 2015, Kemper has started delivering better underwriting results, but there is still ample room for improvement.
  • Acquiring IPCC will double the company's non-standard auto business, a fragmented, faster-growing segment of the auto insurance market that rewards scale, and improve its expense ratio.
  • Kemper shares could head back into the mid-$60s on the prospect for improved earnings from the IPCC deal and ongoing turnaround efforts.

A lot has changed at Kemper (NYSE:KMPR) since CEO Joe Lacher was brought in to turn around this lackluster multi-line P&C and life insurance company late in 2015. While the company is by no means an industry leader in terms of its profitability, management has already delivered progress on improved underwriting quality and is in the midst of an acquisition that should meaningfully improve its position in the fast-growing non-standard auto insurance market.

Valuing Kemper is a little challenging, in part because the company’s ability to successfully integrate its acquisition and continue to improve underwriting quality are significant swing factors in the valuation. Today’s premium to book value of 1.4x looks fair in isolation, but this could readily be a $75 stock in a couple of years if management continues to execute well.

Non-Standard Auto Is The Driver

Kemper has long been a multi-line P&C insurer focused on personal lines, but non-standard auto has always been a sizable part of the business. With the pending acquisition of Infinity Property & Casualty (IPCC), it will become even larger, accounting for around 70% of the P&C business and close to 60% of overall earned premiums.

Non-standard auto is an imprecise term, which creates some challenges in sizing the market, but it generally means insurance sold to drivers whose risk factors are such that auto insurers won’t insure them at their standard or preferred rates. Drivers with bad driving histories are the most obvious example of non-standard customers, but it can also include those who lack prior coverage, those are on the far edges of the age spectrum, and/or those with subpar credit. These policies are often paid on a month-to-month basis, with average policy lengths below six months and retention rates below 50% - non-standard customers are often in tougher economic circumstances and will sometimes let their coverage lapse due to insufficient

This article was written by

Stephen Simpson profile picture
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.