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KEMPER Corp (KMPR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered strong profitability: diluted EPS $1.54 and diluted adjusted operating EPS $1.65, ROE 14% and adjusted ROE 21%, with total revenues $1.193B . EPS was above Wall Street consensus by ~$0.16*, while revenue was modestly below by ~$13M* [Q1 2025 comparison table below].
  • Specialty Auto remained the primary driver: underlying combined ratio 92.2%, written premium +24% YoY, PIF +13.6% YoY; commercial auto also solid at 92.3% underlying combined ratio .
  • Capital strength improved: ~$520M trailing-12-month operating cash flow, debt-to-capital ratio reduced to 22.9% after February senior debt repayment; parent liquidity ≈$1B; $4M share repurchases in Q1 .
  • Management emphasized tariff resiliency and responsiveness (6‑month policies, pricing tools) and expects growth and margins to remain within long‑term ranges (combined ratio ceiling 96%) .

Note: Values marked with an asterisk (*) are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Specialty Auto profitability and growth: underlying combined ratio 92.2%; written premium +24% and PIF +14% YoY, with strong demand and pricing adequacy, notably in California .
  • Capital and liquidity: TTM operating cash flow ~$520M approaching all‑time peaks; debt-to-capital improved to 22.9% after $450M debt repayment; ~$130M remaining share repurchase authorization .
  • Clear macro stance on tariffs: “we do not believe tariffs to be a material earnings impact for us…handled with ordinary course rate changes and filings” .

What Went Wrong

  • Net investment income ($101M) came in below the $105M quarterly guidance due to lower alternative investment returns; management still targets ~$105M run-rate, gradually increasing .
  • Florida near-term production modestly pressured by competitive pricing actions from some peers, though KMPR expects profitable growth as reforms and tariffs earn in .
  • Revenue slightly under consensus while EPS beat*: actual revenue $1.193B vs ~$1.206B*; EPS $1.65 vs ~$1.49* [Q1 2025 comparison table below].

Financial Results

Core financials vs prior quarters

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Billions)$1.179 $1.187 $1.193
Diluted EPS (GAAP)$1.14 $1.51 $1.54
Diluted Adjusted Operating EPS (Non-GAAP)$1.62 $1.78 $1.65
Specialty P&C Combined Ratio (reported)91.7% 92.1% 92.7%
Specialty P&C Underlying Combined Ratio91.3% 91.7% 92.2%

Q1 2025 vs Wall Street consensus (S&P Global)

MetricConsensusActual
Diluted Adjusted Operating EPS$1.49*$1.65
Total Revenues ($USD Billions)$1.206*$1.193
EPS estimates count6*—
Revenue estimates count4*—

Note: Values marked with an asterisk (*) are retrieved from S&P Global.

Segment breakdown

MetricQ3 2024Q4 2024Q1 2025
Specialty P&C Earned Premiums ($USD Millions)$919.0 $954.8 $962.2
• Personal Auto Earned Premiums$731.3 $753.3 $753.7
• Commercial Auto Earned Premiums$187.7 $201.5 $208.5
Specialty P&C Adj. Net Operating Income ($USD Millions)$103.6 $101.2 $97.9
Life Revenues ($USD Millions)$151.1 $141.1 $148.8
Life Adj. Net Operating Income ($USD Millions)$15.0 $23.5 $17.2

KPIs

KPIQ3 2024Q4 2024Q1 2025
Specialty P&C PIF YoY change+13.6% (TTM table shows YoY at 13.6% at Q1’25; reference trend) +5.1% +13.6%
Specialty P&C PIF sequential change+1.7% +1.7% +2.2%
Written Premium YoY (Specialty P&C)——+24%
Net Investment Income ($USD Millions)$111.1 $103.0 $101.2
Debt-to-Capital (ex-AOCI)~31.0% FY2024 31.0% 22.9%
TTM Operating Cash Flow ($USD Millions)$383 FY2024 $520 ~$520
Book Value Per Share$43.30 $43.68 $45.60
Adjusted BVPS$27.88 $29.04 $30.31

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Investment Income (quarterly run-rate)FY 2025~$105M per quarter ~$105M per quarter; gradually increasing through YE Maintained (tone slightly positive)
Specialty Auto combined ratio targetOngoingMaintain below 96% ceiling Maintain below 96% ceiling; expect to remain within long-term ranges Maintained
Operating cash flow (TTM)Q2 2025—Expect TTM to exceed $600M in Q2 Newly positive
DividendQ2 2025$0.32 declared Feb 5, paid Mar 4 $0.32 declared May 7, payable Jun 3 Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (prev)Q4 2024 (prev)Q1 2025 (current)Trend
Tariffs/macroNot a major focus; cats modest; hard market backdrop Wildfire impacts expected immaterial; continued hard market Detailed tariff resiliency; minimal expected earnings impact; quick repricing Elevated focus; confidence sustained
California marketHard market; increased shopping; California growth expected Pricing disruption; minimum limits increase; PIF positive Strong growth; minimum limits helped written premiums; pricing adequacy Continued strength; still hard
Florida/TexasGrowth accelerating over coming quarters Florida “back to normal”; Texas re-pricing underway Florida competitive pressure; Texas momentum after refresh Improving; near-term competitive noise
Capital allocationPlan to retire $450M Feb 2025 debt; buybacks Dividend increased to $0.32; $14M buybacks; debt reduction imminent Debt-to-cap 22.9%; $4M buybacks; ~$130M authorization remaining Balance sheet strengthening
Investment income~$105M quarterly expectation $103M; pretax book yield 4.4%; gradual increase planned $101M; below guidance due to alternatives; ~$105M rolling average Stable base; alternatives volatile
Commercial auto severitySolid margins; +5.5% PIF seq Watching BI; no significant trend change Underlying 92.3%; strong growth and profitability Stable/healthy

Management Commentary

  • “We delivered net income of $100 million, a return on equity of 14% and a return on adjusted equity of 21%…Specialty Auto generated a healthy 92% underlying combined ratio while producing strong PIF growth of nearly 14% YoY. Written premiums grew a very significant 24%.”
  • “We believe we are reasonably tariff resilient…only about 1/3 of our loss costs are directly exposed…over 90% of our in-force are 6‑month policies…we can respond quickly.”
  • “Net investment income for the quarter was $101 million…below our quarterly guidance of $105 million due to lower returns from alternative investments…we continue to believe NII will average around $105 million a quarter.”
  • “Specialty Auto…written premium grew 24%, while PIF and earned premium each grew around 14%…California continues to see very strong growth; Florida becoming increasingly competitive…Texas refreshed pricing plans mid‑Q1.”

Q&A Highlights

  • Market durability by state: California growth may temper, offset by Florida/Texas moving to high single-digit PIF growth; double‑digit PIF growth for total expected to persist (directional) .
  • Pricing/filings and tariffs: Management reiterated tariffs are not a material earnings impact; loss trend priced with ordinary course filings; combined ratio drift back to 93.5–94.5% over 3–4 quarters expected .
  • California minimum limits impact: ~30% increase on minimum limit liability coverages; total California written premium benefit high‑teens percent; not expected to materially change margins .
  • Investment income outlook: Alternative investments lag; maintain ~$105M per quarter rolling average, increasing in back half driven by asset allocation into high‑quality private credit/CLOs .
  • Competition: Nonstandard markets competitive ex‑California; California supply limited; frequency slightly better YoY; severity mid‑ to high‑single digits as expected .

Estimates Context

  • Q1 2025 results vs consensus: EPS $1.65 vs ~$1.49* (beat); revenue $1.193B vs ~$1.206B* (slight miss). With strong underwriting and improved capital metrics, EPS estimates may shift up, while revenue expectations could normalize given state-mix and competitive dynamics .
  • Forward context: Management expects Specialty Auto combined ratio to remain below 96% and NII to average ~$105M/quarter, implying stable profitability drivers against consensus run‑rate assumptions .

Note: Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Profitability remains resilient with Specialty P&C underlying CR at 92.2% and strong PIF and written premium growth; expect margins within long‑term ranges despite tariff noise .
  • Capital trajectory is favorable: debt-to-cap now 22.9% after retiring $450M notes; liquidity (~$1B) supports organic growth, dividends, and opportunistic buybacks .
  • Near-term state mix matters: California hard market continues to support growth; Florida/Texas resetting amid competitive pricing—watch volume trajectory and rate filings .
  • Investment income variability from alternatives is the key swing factor vs guidance; base NII ~$105M quarterly still intact .
  • Non-core operations wind-down and reinsurance program adjustments reduce catastrophe risk tail, aiding earnings quality .
  • Tactical setup: Strong operating results and balanced growth/margin narrative are supportive; watch combined ratio drift toward mid‑90s as new business scales, and monitor tariff pass-through and regulatory timing .
  • Medium term: Continued profitable growth, improving book value metrics, and disciplined capital deployment underpin the thesis for compounding adjusted ROE in the high teens .