{"id":40016,"date":"2023-07-24T23:10:01","date_gmt":"2023-07-25T03:10:01","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/kemper-stock-losses-continue-and-investors-are-wise-to-stay-away-nysekmpr\/"},"modified":"2023-07-24T23:10:03","modified_gmt":"2023-07-25T03:10:03","slug":"kemper-stock-losses-continue-and-investors-are-wise-to-stay-away-nysekmpr","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=40016","title":{"rendered":"Kemper Stock: Losses Continue And Investors Are Wise To Stay Away (NYSE:KMPR)"},"content":{"rendered":"
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Introduction<\/h2>\n

It hasn’t been easy for Kemper Corporation (NYSE:KMPR<\/span>) this year, in Q1 the results showed a significant net loss of $80.1 million. Margins are poor for the company even in a higher interest environment which should be benefiting them. Seeing as they are an insurance company with operations in the United States I think investors are right to be disappointed in the recent results from the company.<\/span><\/p>\n

The results were below the company’s expectations and the blame was put on elevated catastrophe losses. It seems that if KMPR isn’t successful in handling these losses, which are part of being an insurance company then the risk presented here is far too high. Time will tell if increased interest earnings can bring margins back on track. KMPR has been able to achieve a positive net margin before, and if they get back to that then the current valuation could make sense. But neglecting that fact, there is still the uncertainty of continued poor results and then you aren’t invested in a company with a resilient business model. I am skeptical about future reports from KMPR and will be rating them a sell now actually. There seem to be better insurance companies out there to invest in instead.<\/span><\/p>\n

Company Structure<\/h2>\n

Kemper hasn’t been an insurance company for that long when compared to other giants in the space, it was founded back in 1990 and has grown into an over $3 billion valuation. As for the structure of the company it has divided its operations into three different segments right now. These are as follows, Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance, and lastly Life & Health Insurance.<\/p>\n

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Business Overview (Earnings Presentation)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

In terms of the largest segment in KMPR Life & Health Insurance was the only profitable part of the business last quarter, getting $13.2 in operating income. This is a very decent improvement from the prior year of $11.6 million. But this segment can’t be the sole driver for growth and profits in the business. The other two insurance segments need to perform very well too.<\/p>\n

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Disasters (climate.gov)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

But what is setting hurdles in KMPR’s growth path is the fact we are seeing more natural disasters and weather-related accidents. In 2022 there were a large number of natural disasters and weather-related incidents that resulted in over $1 billion in damages. For insurance companies, this is introducing a lot of risk in the common quarters and even years.<\/p>\n

Fundamentals<\/h2>\n

Without solid fundamentals, an investment case quickly disappears. That seems to be the case with KMPR right now. The company has quite honestly horrible margins, which of course has been affected by the recent surge of catastrophic losses the company was faced with.<\/p>\n

Net margins are negative and cash flows are negative, a big shift from the positive $1.7 billion generated in 2022. With such a lack of consistency, a much lower premium should be applied to the company.<\/p>\n

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EPS History (Seeking Alpha)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Up until 2021, the results for the company were very good. But afterward, they have taken a deep dive and now sit in the negatives. It seems that 2023 will be a consolidation year with a largely flat bottom line. Seeing the difficulties the company had in Q1 though, if Q2 produces similarly poor results then 2023 will most likely result in a negative EPS. In the picture above thought the EPS estimates sit at $4.92, which would value the company at a p\/e under 10. That still isn’t low enough given the risks I have discussed.<\/p>\n

Earnings Transcript<\/h2>\n

From the last earnings call that KMPR posted some important comments from the CEO Joe Lacher shed some light on the management’s views on the performance.<\/p>\n