Kemper Managing Through A Tough Situation, But Catalysts Still Lacking

When writing about Kemper (NYSE:KMPR) back in March, I said that I saw long-term value in the shares of this beaten-up non-standard auto insurance underwriter, but that the near-term prospects weren't so attractive as the company would continue to face elevated claims expenses and inadequate rate relief. So it has been, with the shares down another 10% on ongoing operating losses despite some progress on non-rate mitigation efforts.

I believe Kemper can return to profitability in FY'23 and double-digit ROE in FY'24, but is still going to require further rate hikes, and there's no guarantee that regulators will cooperate. Better-than-expected losses don't appear to be enough for the Street for now, and I do think the company will need to announce more progress with rates in California to really shift sentiment. For long-term value hounds, I still see some attractive long-term upside, but the risk of these shares heading back to $40 or below before that recovery is not insignificant.

 

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Kemper Managing Through A Tough Situation, But Catalysts Still Lacking