Non-standard auto insurer Kemper (KMPR) has had a rougher time of it over the last two and a half years than I'd expected. While I thought the valuation was a little demanding back in 2018, I didn't expect basically flat performance since then and a meaningful lag versus larger auto insurance names like Allstate (ALL) and Progressive (PGR).
There have been setbacks along the way, but I take a little comfort in the fact that they've largely been outside of management's control - lower yields on the investment portfolio and higher COVID-19-related mortality prominent among them. In terms of core underwriting performance, there hasn't been much to complain about, and I believe that's the real story.
I believe that Kemper can continue to gain share in its core non-standard auto market, driving long-term earnings growth in the high single-digits, as well as getting an eventual boost from higher rates and more normalized returns in the life insurance business. It's a riskier than average stock, but I think the double-digit long-term prospective returns are worth it.
Read more here:
Kemper Under Pressure On Multiple Fronts, Obscuring The Core Value Of The Franchise
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