Kemper Hit Hard As Claims Cost Rise Much Faster Than Rates

 

One of the challenges in the insurance sector is that companies price policies based upon forecasted losses, and if those losses exceed expectations, it takes time for rate corrections to patch the gap. That's even more true in the auto insurance space, where regulation can lead to longer gaps between actual loss experiences and rate changes (particularly when companies push for higher rates).

In a nutshell, that remains the biggest challenge for Kemper (KMPR) today.

Kemper saw even worse claims losses in the second half of 2022 than I'd expected, and the outlook for the next couple of years is pressured by rising claims severity and what will likely prove to be some sluggishness on the rate side, particularly in California. That all has contributed to a very weak stock since my last update. Although I do think Kemper can get back to more typical profitability in 2024 and the shares remain undervalued in the meantime, it's hard to find a catalyst for the shares without better-than-expected improvement in rates or losses.

 

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Kemper Hit Hard As Claims Cost Rise Much Faster Than Rates