EX-99.2 3 kmpr2014093014ex992supplem.htm THIRD QUARTER 2014 INVESTOR SUPPLEMENT OF KEMPER CORPORATION KMPR 2014 09.30.14 EX 99.2 Supplement
Exhibit 99.2


Investor Supplement
Third Quarter 2014
The financial statements and financial exhibits included herein are unaudited. These financial statements and exhibits should be read in conjunction with the Company’s periodic reports on Form 10-K, Form 10-Q and Form 8-K. The results of operations for interim periods should not be considered indicative of results to be expected for the full year.
Non-GAAP Financial Measures
This document contains non-GAAP financial measures to analyze the Company’s operating performance for the periods presented. Because the Company’s calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company’s non-GAAP financial measures to those of other companies. For detailed disclosures on non-GAAP financial measures please refer to the “Definitions of Non-GAAP Financial Measures” on Page 27.
 



Kemper Corporation
Investor Supplement
Third Quarter 2014
Table of Contents
 
 
 
 
Page
Consolidated Financial Highlights
3
Consolidated Statements of Income
4
Consolidated Balance Sheets
5
Consolidated Statements of Cash Flows
6 - 7
Capital Metrics
8
Debt Outstanding and Ratings
9
Segment Summary Results:
 
Revenues
10
Operating Profit
11
Net Operating Income
11
Earned Premiums by Product
12
Net Investment Income by Segment
12
Catastrophe Frequency and Severity
13
Property & Casualty Insurance Segment - Results of Operations and Selected Financial Information
14-15
Property & Casualty Insurance Segment - Premiums and Losses and LAE by Product:
 
Personal Automobile Insurance
16
Commercial Automobile Insurance
17
Total Automobile Insurance
18
Homeowners Insurance
19
Other Personal Lines
20
Life & Health Insurance Segment - Results of Operations and Selected Financial Information
21
Investment Performance
22
Invested Assets
23
Investment Concentration
24
Municipal Bond Securities
25
Investments in Limited Liability Companies and Limited Partnerships
26
Definitions of Non-GAAP Financial Measures
27-28
 

Page 2

Kemper Corporation
Consolidated Financial Highlights
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
For Period Ended
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
462.8

 
$
470.3

 
$
477.6

 
$
495.6

 
$
507.5

 
$
512.8

 
$
509.9

 
$
1,410.7

 
$
1,530.2

Net Investment Income
 
72.3

 
72.6

 
71.1

 
76.9

 
82.4

 
74.6

 
80.8

 
216.0

 
237.8

Net Investment Gains (Losses) and Other Income
 
4.7

 
(0.4
)
 
5.9

 
13.5

 
45.8

 
1.5

 
25.2

 
10.2

 
72.5

Total Revenues
 
$
539.8

 
$
542.5

 
$
554.6

 
$
586.0

 
$
635.7

 
$
588.9

 
$
615.9

 
$
1,636.9

 
$
1,840.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Net Operating Income 1
 
$
2.1

 
$
9.6

 
$
31.5

 
$
46.3

 
$
38.9

 
$
31.7

 
$
42.3

 
$
43.2

 
$
112.9

Income from Continuing Operations
 
$
4.8

 
$
9.3

 
$
35.2

 
$
54.8

 
$
68.6

 
$
32.5

 
$
58.6

 
$
49.3

 
$
159.7

Net Income
 
$
4.7

 
$
9.3

 
$
35.1

 
$
55.2

 
$
70.1

 
$
34.0

 
$
58.4

 
$
49.1

 
$
162.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Unrestricted Common Share Amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Net Operating Income 1
 
$
0.04

 
$
0.18

 
$
0.56

 
$
0.83

 
$
0.69

 
$
0.55

 
$
0.72

 
$
0.79

 
$
1.96

Income from Continuing Operations
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.98

 
$
1.21

 
$
0.56

 
$
1.00

 
$
0.90

 
$
2.77

Net Income
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.99

 
$
1.24

 
$
0.59

 
$
1.00

 
$
0.90

 
$
2.82

Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Net Operating Income 1
 
$
0.04

 
$
0.18

 
$
0.56

 
$
0.83

 
$
0.69

 
$
0.55

 
$
0.72

 
$
0.79

 
$
1.95

Income from Continuing Operations
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.98

 
$
1.21

 
$
0.56

 
$
1.00

 
$
0.90

 
$
2.76

Net Income
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.99

 
$
1.23

 
$
0.59

 
$
1.00

 
$
0.90

 
$
2.81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends Paid to Shareholders Per Share
 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.72

 
$
0.72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At Period End
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
7,905.3

 
$
7,969.8

 
$
7,944.2

 
$
7,656.4

 
$
7,745.9

 
$
7,820.8

 
$
8,056.2

 
 
 
 
Insurance Reserves
 
$
4,041.7

 
$
4,064.2

 
$
4,067.3

 
$
4,061.0

 
$
4,086.1

 
$
4,108.6

 
$
4,117.1

 
 
 
 
Debt
 
$
751.9

 
$
751.7

 
$
751.4

 
$
606.9

 
$
606.7

 
$
611.9

 
$
611.6

 
 
 
 
Shareholders’ Equity
 
$
2,104.5

 
$
2,138.6

 
$
2,144.7

 
$
2,051.5

 
$
2,009.1

 
$
2,005.0

 
$
2,172.4

 
 
 
 
Shareholders’ Equity Excluding Goodwill
 
$
1,792.7

 
$
1,826.8

 
$
1,832.9

 
$
1,739.7

 
$
1,697.3

 
$
1,693.2

 
$
1,860.6

 
 
 
 
Common Shares Issued and Outstanding (In Millions)
 
52.666

 
53.497

 
55.408

 
55.653

 
56.025

 
57.061

 
58.322

 
 
 
 
Book Value Per Share2
 
$
39.96

 
$
39.98

 
$
38.71

 
$
36.86

 
$
35.86

 
$
35.14

 
$
37.25

 
 
 
 
Book Value Per Share Excluding Goodwill1,2
 
$
34.04

 
$
34.15

 
$
33.08

 
$
31.26

 
$
30.30

 
$
29.67

 
$
31.90

 
 
 
 
Book Value Per Share Excluding Net Unrealized Gains on Fixed Maturities1,2
 
$
35.31

 
$
35.32

 
$
35.13

 
$
34.49

 
$
32.93

 
$
31.91

 
$
31.55

 
 
 
 
Debt to Total Capitalization2
 
26.3
%
 
26.0
%
 
25.9
%
 
22.8
%
 
23.2
%
 
23.4
%
 
22.0
%
 
 
 
 
Rolling 12 Months Return on 5-point Average Shareholders Equity2,3
 
5.0
%
 
8.2
%
 
9.4
%
 
10.5
%
 
7.8
%
 
7.0
%
 
5.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Non-GAAP Measure. See page 27 for definition.
 
 
 
 
2 See Capital Metrics on page 8 for detail calculations.
 
 
 
 
3 Rolling 12 Months Return on 5-point Average Shareholders Equity is calculated by taking the last 12 months of Net Income (Loss) divided by the 5-point average Shareholders’ Equity. The 5-point Average Shareholders’ Equity is calculated by using a 5-point quarter average of Shareholders’ Equity for the 12 month period.
 

Page 3

Kemper Corporation
Consolidated Statements of Income
(Dollars in Millions, Except Per Share Amounts)
 (Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
462.8

 
$
470.3

 
$
477.6

 
$
495.6

 
$
507.5

 
$
512.8

 
$
509.9

 
$
1,410.7

 
$
1,530.2

Net Investment Income
 
72.3

 
72.6

 
71.1

 
76.9

 
82.4

 
74.6

 
80.8

 
216.0

 
237.8

Other Income
 
0.5

 
0.2

 
0.1

 
0.3

 
0.1

 
0.2

 
0.2

 
0.8

 
0.5

Net Realized Gains on Sales of Investments
 
8.0

 
3.5

 
6.6

 
20.8

 
49.1

 
2.3

 
26.9

 
18.1

 
78.3

Other-than-temporary Impairment Losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Other-than-temporary Impairment Losses
 
(3.8
)
 
(4.1
)
 
(0.8
)
 
(7.6
)
 
(3.5
)
 
(2.3
)
 
(2.4
)
 
(8.7
)
 
(8.2
)
Portion of Losses Recognized in Other Comprehensive Income
 
—

 
—

 
—

 
—

 
0.1

 
1.3

 
0.5

 
—

 
1.9

Net Impairment Losses Recognized in Earnings
 
(3.8
)
 
(4.1
)
 
(0.8
)
 
(7.6
)
 
(3.4
)
 
(1.0
)
 
(1.9
)
 
(8.7
)
 
(6.3
)
Total Revenues
 
539.8

 
542.5

 
554.6

 
586.0

 
635.7

 
588.9

 
615.9

 
1,636.9

 
1,840.5

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses
 
300.5

 
347.5

 
327.9

 
315.5

 
338.3

 
354.2

 
349.2

 
975.9

 
1,041.7

Insurance Expenses
 
158.6

 
161.3

 
152.1

 
162.9

 
170.1

 
163.1

 
158.3

 
472.0

 
491.5

Write-off of Long-lived Asset
 
54.6

 
—

 
—

 
—

 
—

 
—

 
—

 
54.6

 
—

Interest and Other Expenses
 
22.1

 
22.5

 
22.7

 
26.2

 
25.3

 
25.2

 
23.8

 
67.3

 
74.3

Total Expenses
 
535.8

 
531.3

 
502.7

 
504.6

 
533.7

 
542.5

 
531.3

 
1,569.8

 
1,607.5

Income from Continuing Operations before Income Taxes
 
4.0

 
11.2

 
51.9

 
81.4

 
102.0

 
46.4

 
84.6

 
67.1

 
233.0

Income Tax Benefit (Expense)
 
0.8

 
(1.9
)
 
(16.7
)
 
(26.6
)
 
(33.4
)
 
(13.9
)
 
(26.0
)
 
(17.8
)
 
(73.3
)
Income from Continuing Operations
 
4.8

 
9.3

 
35.2

 
54.8

 
68.6

 
32.5

 
58.6

 
49.3

 
159.7

Discontinued Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) from Discontinued Operations before Income Taxes
 
(0.2
)
 
—

 
(0.2
)
 
0.6

 
2.2

 
2.5

 
(0.4
)
 
(0.4
)
 
4.3

Income Tax Benefit (Expense)
 
0.1

 
—

 
0.1

 
(0.2
)
 
(0.7
)
 
(1.0
)
 
0.2

 
0.2

 
(1.5
)
Income (Loss) from Discontinued Operations
 
(0.1
)
 
—

 
(0.1
)
 
0.4

 
1.5

 
1.5

 
(0.2
)
 
(0.2
)
 
2.8

Net Income
 
$
4.7

 
$
9.3

 
$
35.1

 
$
55.2

 
$
70.1

 
$
34.0

 
$
58.4

 
$
49.1

 
$
162.5

Income from Continuing Operations Per Unrestricted Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.98

 
$
1.21

 
$
0.56

 
$
1.00

 
$
0.90

 
$
2.77

Diluted
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.98

 
$
1.21

 
$
0.56

 
$
1.00

 
$
0.90

 
$
2.76

Net Income Per Unrestricted Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.99

 
$
1.24

 
$
0.59

 
$
1.00

 
$
0.90

 
$
2.82

Diluted
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.99

 
$
1.23

 
$
0.59

 
$
1.00

 
$
0.90

 
$
2.81

Dividends Paid to Shareholders Per Share
 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.72

 
$
0.72

Weighted Average Unrestricted Common Shares Outstanding (in Millions)
 
52.605

 
54.667

 
55.313

 
55.412

 
56.366

 
57.519

 
58.131

 
54.246

 
57.374

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 4

Kemper Corporation
Consolidated Balance Sheets
(Dollars in Millions)
 (Unaudited)
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Maturities at Fair Value
 
$
4,697.2

 
$
4,680.0

 
$
4,619.5

 
$
4,575.0

 
$
4,645.0

 
$
4,701.1

 
$
4,856.5

Equity Securities at Fair Value
 
661.4

 
646.2

 
648.3

 
598.5

 
567.4

 
545.0

 
554.1

Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings
 
222.8

 
227.1

 
239.0

 
245.1

 
231.4

 
241.7

 
248.1

Fair Value Option Investments
 
50.6

 
40.3

 
—

 
—

 
—

 
—

 
—

Short-term Investments at Cost
 
316.2

 
480.1

 
506.9

 
284.7

 
286.8

 
239.3

 
362.8

Other Investments
 
450.5

 
448.3

 
448.2

 
448.0

 
446.2

 
496.0

 
494.8

Total Investments
 
6,398.7

 
6,522.0

 
6,461.9

 
6,151.3

 
6,176.8

 
6,223.1

 
6,516.3

Cash
 
93.1

 
61.8

 
65.0

 
66.5

 
76.1

 
69.5

 
97.5

Receivable from Policyholders
 
314.4

 
313.5

 
319.5

 
331.6

 
354.2

 
357.5

 
363.2

Other Receivables
 
247.5

 
190.5

 
225.5

 
193.1

 
203.9

 
206.2

 
202.7

Deferred Policy Acquisition Costs
 
306.7

 
304.8

 
301.8

 
302.9

 
308.5

 
308.4

 
304.5

Goodwill
 
311.8

 
311.8

 
311.8

 
311.8

 
311.8

 
311.8

 
311.8

Current and Deferred Income Tax Assets
 
4.3

 
10.1

 
—

 
31.8

 
61.6

 
85.7

 
—

Other Assets
 
228.8

 
255.3

 
258.7

 
267.4

 
253.0

 
258.6

 
260.2

Total Assets
 
$
7,905.3

 
$
7,969.8

 
$
7,944.2

 
$
7,656.4

 
$
7,745.9

 
$
7,820.8

 
$
8,056.2

Liabilities and Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life and Health
 
$
3,260.8

 
$
3,249.0

 
$
3,237.7

 
$
3,217.5

 
$
3,201.5

 
$
3,189.6

 
$
3,174.8

Property and Casualty
 
780.9

 
815.2

 
829.6

 
843.5

 
884.6

 
919.0

 
942.3

Total Insurance Reserves
 
4,041.7

 
4,064.2

 
4,067.3

 
4,061.0

 
4,086.1

 
4,108.6

 
4,117.1

Unearned Premiums
 
568.2

 
571.8

 
582.5

 
598.9

 
635.3

 
640.3

 
646.8

Liabilities for Income Taxes
 
48.7

 
53.4

 
30.6

 
8.3

 
6.6

 
6.5

 
25.8

Debt at Amortized Cost
 
751.9

 
751.7

 
751.4

 
606.9

 
606.7

 
611.9

 
611.6

Accrued Expenses and Other Liabilities
 
390.3

 
390.1

 
367.7

 
329.8

 
402.1

 
448.5

 
482.5

Total Liabilities
 
5,800.8

 
5,831.2

 
5,799.5

 
5,604.9

 
5,736.8

 
5,815.8

 
5,883.8

Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
5.3

 
5.3

 
5.5

 
5.6

 
5.6

 
5.7

 
5.8

Paid-in Capital
 
662.2

 
671.3

 
693.5

 
694.8

 
698.0

 
709.1

 
722.5

Retained Earnings
 
1,155.6

 
1,183.4

 
1,231.5

 
1,215.8

 
1,184.4

 
1,151.7

 
1,158.0

Accumulated Other Comprehensive Income
 
281.4

 
278.6

 
214.2

 
135.3

 
121.1

 
138.5

 
286.1

Total Shareholders’ Equity
 
2,104.5

 
2,138.6

 
2,144.7

 
2,051.5

 
2,009.1

 
2,005.0

 
2,172.4

Total Liabilities and Shareholders’ Equity
 
$
7,905.3

 
$
7,969.8

 
$
7,944.2

 
$
7,656.4

 
$
7,745.9

 
$
7,820.8

 
$
8,056.2

 


Page 5

Kemper Corporation
Consolidated Statements of Cash Flows
(Dollars in Millions)
 (Unaudited)
 
 
Nine Months Ended
 
Year Ended
 
 
Sep 30,
2014
 
Sep 30,
2013
 
Dec 31,
2013
Operating Activities:
 
 
 
 
 
 
Net Income
 
$
49.1

 
$
162.5

 
$
217.7

Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:
 
 
 
 
 
 
Decrease (Increase) in Deferred Policy Acquisition Costs
 
(3.8
)
 
(5.1
)
 
0.5

Amortization of Life Insurance in Force Acquired and Customer Relationships Acquired
 
5.4

 
6.3

 
8.3

Equity in Earnings of Equity Method Limited Liability Investments
 
(9.7
)
 
(19.9
)
 
(26.4
)
Distribution of Accumulated Earnings of Equity Method Limited Liability Investments
 
14.4

 
15.1

 
15.4

Appreciation on Fair Value Option Investments
 
(0.6
)
 
—

 
—

Amortization of Investment Securities and Depreciation of Investment Real Estate
 
11.3

 
12.4

 
16.2

Net Realized Gains on Sales of Investments
 
(18.1
)
 
(78.3
)
 
(99.1
)
Net Impairment Losses Recognized in Earnings
 
8.7

 
6.3

 
13.9

Depreciation of Property and Equipment
 
13.0

 
12.7

 
17.4

Write-off of Long-lived Asset
 
54.6

 
—

 
—

Decrease in Receivables
 
21.0

 
13.5

 
43.5

Decrease in Insurance Reserves
 
(20.1
)
 
(47.3
)
 
(72.5
)
Decrease in Unearned Premiums
 
(30.7
)
 
(15.6
)
 
(52.0
)
Change in Income Taxes
 
(12.9
)
 
34.3

 
57.9

Increase (Decrease) in Accrued Expenses and Other Liabilities
 
0.1

 
(36.2
)
 
(54.8
)
Other, Net
 
17.7

 
32.2

 
36.1

Net Cash Provided by Operating Activities (Carryforward to page 7)
 
99.4

 
92.9

 
122.1


Page 6

Kemper Corporation
Consolidated Statements of Cash Flows
(Dollars in Millions)
 (Unaudited)
 
 
Nine Months Ended
 
Year Ended
 
 
Sep 30,
2014
 
Sep 30,
2013
 
Dec 31,
2013
Net Cash Provided by Operating Activities (Carryforward from page 6)
 
99.4

 
92.9

 
122.1

Investing Activities:
 
 
 
 
 
 
Sales, Paydowns and Maturities of Fixed Maturities
 
454.1

 
578.5

 
664.4

Purchases of Fixed Maturities
 
(404.3
)
 
(667.4
)
 
(744.5
)
Sales of Equity Securities
 
84.4

 
107.3

 
182.1

Purchases of Equity Securities
 
(95.1
)
 
(136.0
)
 
(213.4
)
Sales of and Return of Investment of Equity Method Limited Liability Investments
 
37.4

 
26.5

 
31.3

Acquisitions of Equity Method Limited Liability Investments
 
(19.8
)
 
(8.3
)
 
(20.5
)
Sales of Fair Value Option Investments
 
2.9

 
—

 
—

Purchases of Fair Value Option Investments
 
(52.9
)
 
—

 
—

Decrease (Increase) in Short-term Investments
 
(34.1
)
 
39.7

 
41.8

Acquisition and Improvements of Investment Real Estate
 
(1.9
)
 
(4.9
)
 
(5.4
)
Sales of Investment Real Estate
 
0.9

 
102.5

 
102.7

Increase in Other Investments
 
(5.4
)
 
(6.5
)
 
(9.1
)
Purchase of Corporate-owned Life Insurance
 
(33.5
)
 
—

 
—

Acquisition of Software
 
(8.5
)
 
(12.5
)
 
(15.2
)
Disposition of Business, Net of Cash Disposed
 
8.9

 
3.8

 
3.8

Other, Net
 
(5.4
)
 
(8.5
)
 
(13.2
)
Net Cash Provided (Used) by Investing Activities
 
(72.3
)
 
14.2

 
4.8

Financing Activities:
 
 
 
 
 
 
Net Proceeds from Issuance of Subordinated Debentures
 
144.2

 
—

 
—

Repayments of Debt
 
—

 
(5.5
)
 
(5.5
)
Common Stock Repurchases
 
(106.5
)
 
(82.9
)
 
(100.4
)
Dividends and Dividend Equivalents Paid
 
(39.2
)
 
(41.5
)
 
(54.9
)
Cash Exercise of Stock Options
 
—

 
0.6

 
1.7

Other, Net
 
1.0

 
2.0

 
2.4

Net Cash Used by Financing Activities
 
(0.5
)
 
(127.3
)
 
(156.7
)
Increase (Decrease) in Cash
 
26.6

 
(20.2
)
 
(29.8
)
Cash, Beginning of Year
 
66.5

 
96.3

 
96.3

Cash, End of Period
 
$
93.1

 
$
76.1

 
$
66.5

 
 
 
 
 
 
 


Page 7

Kemper Corporation
Capital Metrics
(Dollars and Shares in Millions, Except Per Share Amounts)
(Unaudited)
 
 
Three Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
Book Value Per Share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders’ Equity
 
$
2,104.5

 
$
2,138.6

 
$
2,144.7

 
$
2,051.5

 
$
2,009.1

 
$
2,005.0

 
$
2,172.4

Less: Goodwill
 
(311.8
)
 
(311.8
)
 
(311.8
)
 
(311.8
)
 
(311.8
)
 
(311.8
)
 
(311.8
)
Shareholders’ Equity Excluding Goodwill
 
$
1,792.7

 
$
1,826.8

 
$
1,832.9

 
$
1,739.7

 
$
1,697.3

 
$
1,693.2

 
$
1,860.6

Shareholders’ Equity
 
$
2,104.5

 
$
2,138.6

 
$
2,144.7

 
$
2,051.5

 
$
2,009.1

 
$
2,005.0

 
$
2,172.4

Less: Net Unrealized Gains on Fixed Maturities
 
(244.9
)
 
(249.0
)
 
(198.3
)
 
(132.2
)
 
(164.0
)
 
(184.2
)
 
(332.4
)
Shareholders’ Equity Excluding Net Unrealized Gains on Fixed Maturities
 
$
1,859.6

 
$
1,889.6

 
$
1,946.4

 
$
1,919.3

 
$
1,845.1

 
$
1,820.8

 
$
1,840.0

Denominator
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Shares Issued and Outstanding
 
52.666

 
53.497

 
55.408

 
55.653

 
56.025

 
57.061

 
58.322

Book Value Per Share
 
$
39.96

 
$
39.98

 
$
38.71

 
$
36.86

 
$
35.86

 
$
35.14

 
$
37.25

Book Value Per Share Excluding Goodwill
 
$
34.04

 
$
34.15

 
$
33.08

 
$
31.26

 
$
30.30

 
$
29.67

 
$
31.90

Book Value Per Share Excluding Unrealized on Fixed Maturities
 
$
35.31

 
$
35.32

 
$
35.13

 
$
34.49

 
$
32.93

 
$
31.91

 
$
31.55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rolling 12 Months Net Income
 
$
104.3

 
$
169.7

 
$
194.4

 
$
217.7

 
$
164.4

 
$
149.9

 
$
118.2

Denominator (5-point Average)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5-point Average Shareholders’ Equity
 
$
2,089.7

 
$
2,069.8

 
$
2,076.5

 
$
2,079.9

 
$
2,110.5

 
$
2,138.5

 
$
2,163.8

Rolling 12 Months Return on Average Shareholders Equity (5-point Average)
 
5.0
%
 
8.2
%
 
9.4
%
 
10.5
%
 
7.8
%
 
7.0
%
 
5.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt and Total Capitalization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt
 
$
751.9

 
$
751.7

 
$
751.4

 
$
606.9

 
$
606.7

 
$
611.9

 
$
611.6

Shareholders’ Equity
 
2,104.5

 
2,138.6

 
2,144.7

 
2,051.5

 
2,009.1

 
2,005.0

 
2,172.4

Total Capitalization
 
$
2,856.4

 
$
2,890.3

 
$
2,896.1

 
$
2,658.4

 
$
2,615.8

 
$
2,616.9

 
$
2,784.0

Ratio of Debt to Shareholders’ Equity
 
35.7
%
 
35.1
%
 
35.0
%
 
29.6
%
 
30.2
%
 
30.5
%
 
28.2
%
Ratio of Debt to Total Capitalization
 
26.3
%
 
26.0
%
 
25.9
%
 
22.8
%
 
23.2
%
 
23.4
%
 
22.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company Liquidity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kemper Holding Company Cash and Investments
 
$
302.4

 
$
302.7

 
$
255.9

 
$
156.7

 
$
152.6

 
$
124.3

 
$
187.4

Borrowings Available Under Credit Agreement
 
225.0

 
225.0

 
225.0

 
225.0

 
325.0

 
325.0

 
325.0

Parent Company Liquidity
 
$
527.4

 
$
527.7

 
$
480.9

 
$
381.7

 
$
477.6

 
$
449.3

 
$
512.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Returned to Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock Repurchased
 
$
29.9

 
$
68.3

 
$
8.3

 
$
15.2

 
$
36.3

 
$
42.4

 
$
6.5

Cash Dividends Paid
 
12.6

 
13.3

 
13.3

 
13.4

 
13.6

 
13.9

 
14.0

Total Capital Returned to Shareholders
 
$
42.5

 
$
81.6

 
$
21.6

 
$
28.6

 
$
49.9

 
$
56.3

 
$
20.5

 

Page 8

Kemper Corporation
Debt Outstanding and Ratings
(Dollars in Millions)
(Unaudited)
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31, 2014
 
Dec 31, 2013
 
Sep 30, 2013
 
Jun 30, 2013
 
Mar 31, 2013
Notes Payable under Revolving Credit Agreements
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Senior Notes at Amortized Cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.00% Senior Notes due November 30, 2015
 
249.4

 
249.3

 
249.2

 
249.0

 
248.9

 
248.8

 
248.7

6.00% Senior Notes due May 15, 2017
 
358.3

 
358.2

 
358.0

 
357.9

 
357.8

 
357.6

 
357.4

7.375% Subordinated Debentures due February 27, 2054 at Amortized Cost
 
144.2

 
144.2

 
144.2

 
—

 
—

 
—

 
—

Mortgage Note Payable at Amortized Cost
 
—

 
—

 
—

 
—

 
—

 
5.5

 
5.5

Debt Outstanding
 
$
751.9

 
$
751.7

 
$
751.4

 
$
606.9

 
$
606.7

 
$
611.9

 
$
611.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A.M. Best
 
Moody’s
 
S&P
 
Fitch
 
 
 
 
 
 
As of Date of Financial Supplement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kemper Debt Ratings:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Notes Payable
 
bbb-
 
Baa3
 
BBB-
 
BBB-
 
 
 
 
 
 
Subordinated Debentures
 
bb+
 
Ba1
 
BB
 
BB
 
 
 
 
 
 
Insurance Company Financial Strength Ratings:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trinity Universal Insurance Company
 
A-
 
A3
 
A-
 
A-
 
 
 
 
 
 
United Insurance Company of America
 
A-
 
A3
 
A
 
A-
 
 
 
 
 
 
Reserve National Insurance Company
 
A-
 
NR
 
NR
 
NR
 
 
 
 
 
 



NR - Not Rated


Page 9

Kemper Corporation
Segment Revenues
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property & Casualty Insurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personal Automobile
 
$
205.1

 
$
212.0

 
$
216.3

 
$
229.7

 
$
239.1

 
$
244.6

 
$
245.7

 
$
633.4

 
$
729.4

Homeowners
 
77.9

 
79.0

 
79.7

 
81.4

 
82.3

 
82.1

 
80.4

 
236.6

 
244.8

Other Personal
 
12.6

 
12.9

 
13.2

 
13.5

 
13.8

 
14.1

 
13.9

 
38.7

 
41.8

Total Personal
 
295.6

 
303.9

 
309.2

 
324.6

 
335.2

 
340.8

 
340.0

 
908.7

 
1,016.0

Commercial Automobile
 
14.1

 
13.6

 
13.1

 
13.6

 
13.5

 
13.1

 
12.1

 
40.8

 
38.7

Total Earned Premiums
 
309.7

 
317.5

 
322.3

 
338.2

 
348.7

 
353.9

 
352.1

 
949.5

 
1,054.7

Net Investment Income
 
18.5

 
19.5

 
17.6

 
23.0

 
21.3

 
21.5

 
25.1

 
55.6

 
67.9

Other Income
 
0.1

 
0.2

 
0.1

 
0.1

 
0.1

 
0.1

 
0.2

 
0.4

 
0.4

Total Property & Casualty Insurance
 
328.3

 
337.2

 
340.0

 
361.3

 
370.1

 
375.5

 
377.4

 
1,005.5

 
1,123.0

Life & Health Insurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
 
96.8

 
97.2

 
97.6

 
97.8

 
98.4

 
98.6

 
97.9

 
291.6

 
294.9

Accident and Health
 
37.1

 
36.2

 
38.8

 
40.2

 
40.7

 
40.3

 
40.2

 
112.1

 
121.2

Property
 
19.2

 
19.4

 
18.9

 
19.4

 
19.7

 
20.0

 
19.7

 
57.5

 
59.4

Total Earned Premiums
 
153.1

 
152.8

 
155.3

 
157.4

 
158.8

 
158.9

 
157.8

 
461.2

 
475.5

Net Investment Income
 
49.2

 
48.0

 
50.2

 
50.6

 
56.5

 
49.8

 
53.0

 
147.4

 
159.3

Other Income
 
0.4

 
—

 
—

 
0.1

 
—

 
0.1

 
—

 
0.4

 
0.1

Total Life & Health Insurance
 
202.7

 
200.8

 
205.5

 
208.1

 
215.3

 
208.8

 
210.8

 
609.0

 
634.9

Total Segment Revenues
 
531.0

 
538.0

 
545.5

 
569.4

 
585.4

 
584.3

 
588.2

 
1,614.5

 
1,757.9

Net Realized Gains on Sales of Investments
 
8.0

 
3.5

 
6.6

 
20.8

 
49.1

 
2.3

 
26.9

 
18.1

 
78.3

Net Impairment Losses Recognized in Earnings
 
(3.8
)
 
(4.1
)
 
(0.8
)
 
(7.6
)
 
(3.4
)
 
(1.0
)
 
(1.9
)
 
(8.7
)
 
(6.3
)
Other
 
4.6

 
5.1

 
3.3

 
3.4

 
4.6

 
3.3

 
2.7

 
13.0

 
10.6

Total Revenues
 
$
539.8

 
$
542.5

 
$
554.6

 
$
586.0

 
$
635.7

 
$
588.9

 
$
615.9

 
$
1,636.9

 
$
1,840.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 10

Kemper Corporation
Segment Operating Results
(Dollars in Millions)
 (Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Segment Operating Profit (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property & Casualty Insurance
 
$
(23.9
)
 
$
(4.3
)
 
$
19.3

 
$
41.6

 
$
32.2

 
$
25.6

 
$
40.2

 
$
(8.9
)
 
$
98.0

Life & Health Insurance
 
31.4

 
24.7

 
34.6

 
38.6

 
35.2

 
31.2

 
31.9

 
90.7

 
98.3

Total Segment Operating Profit
 
7.5

 
20.4

 
53.9

 
80.2

 
67.4

 
56.8

 
72.1

 
81.8

 
196.3

Corporate and Other Operating Loss
 
(7.7
)
 
(8.6
)
 
(7.8
)
 
(12.0
)
 
(11.1
)
 
(11.7
)
 
(12.5
)
 
(24.1
)
 
(35.3
)
Total Operating Profit (Loss)
 
(0.2
)
 
11.8

 
46.1

 
68.2

 
56.3

 
45.1

 
59.6

 
57.7

 
161.0

Net Realized Gains on Sales of Investments
 
8.0

 
3.5

 
6.6

 
20.8

 
49.1

 
2.3

 
26.9

 
18.1

 
78.3

Net Impairment Losses Recognized in Earnings
 
(3.8
)
 
(4.1
)
 
(0.8
)
 
(7.6
)
 
(3.4
)
 
(1.0
)
 
(1.9
)
 
(8.7
)
 
(6.3
)
Income from Continuing Operations before Income Taxes
 
$
4.0

 
$
11.2

 
$
51.9

 
$
81.4

 
$
102.0

 
$
46.4

 
$
84.6

 
$
67.1

 
$
233.0

Segment Net Operating Income (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property & Casualty Insurance
 
$
(13.6
)
 
$
(1.2
)
 
$
14.4

 
$
29.1

 
$
23.4

 
$
19.1

 
$
29.0

 
$
(0.4
)
 
$
71.5

Life & Health Insurance
 
20.3

 
15.9

 
22.1

 
24.9

 
22.9

 
20.3

 
21.2

 
58.3

 
64.4

Total Segment Net Operating Income
 
6.7

 
14.7

 
36.5

 
54.0

 
46.3

 
39.4

 
50.2

 
57.9

 
135.9

Corporate and Other Net Operating Loss
 
(4.6
)
 
(5.1
)
 
(5.0
)
 
(7.7
)
 
(7.4
)
 
(7.7
)
 
(7.9
)
 
(14.7
)
 
(23.0
)
Consolidated Operating Income
 
2.1

 
9.6

 
31.5

 
46.3

 
38.9

 
31.7

 
42.3

 
43.2

 
112.9

Net Income (Loss) From:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Realized Gains on Sales of Investments
 
5.2

 
2.4

 
4.2

 
13.5

 
31.9

 
1.5

 
17.5

 
11.8

 
50.9

Net Impairment Losses Recognized in Earnings
 
(2.5
)
 
(2.7
)
 
(0.5
)
 
(5.0
)
 
(2.2
)
 
(0.7
)
 
(1.2
)
 
(5.7
)
 
(4.1
)
Income from Continuing Operations
 
$
4.8

 
$
9.3

 
$
35.2

 
$
54.8

 
$
68.6

 
$
32.5

 
$
58.6

 
$
49.3

 
$
159.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 11

Kemper Corporation
Segment Operating Results
(Dollars in Millions)
 (Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Earned Premiums by Product:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personal Automobile
 
$
205.1

 
$
212.0

 
$
216.3

 
$
229.7

 
$
239.1

 
$
244.6

 
$
245.7

 
$
633.4

 
$
729.4

Homeowners
 
77.9

 
79.0

 
79.7

 
81.4

 
82.3

 
82.1

 
80.4

 
236.6

 
244.8

Other Personal Property and Casualty Insurance
 
31.8

 
32.3

 
32.1

 
32.9

 
33.5

 
34.1

 
33.6

 
96.2

 
101.2

Commercial Automobile
 
14.1

 
13.6

 
13.1

 
13.6

 
13.5

 
13.1

 
12.1

 
40.8

 
38.7

Life
 
96.8

 
97.2

 
97.6

 
97.8

 
98.4

 
98.6

 
97.9

 
291.6

 
294.9

Accident and Health
 
37.1

 
36.2

 
38.8

 
40.2

 
40.7

 
40.3

 
40.2

 
112.1

 
121.2

Total Earned Premiums
 
$
462.8

 
$
470.3

 
$
477.6

 
$
495.6

 
$
507.5

 
$
512.8

 
$
509.9

 
$
1,410.7

 
$
1,530.2

Net Investment Income by Segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property & Casualty Insurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Limited Liability Investments
 
$
4.3

 
$
2.1

 
$
2.5

 
$
5.0

 
$
3.4

 
$
2.3

 
$
5.8

 
$
8.9

 
$
11.5

All Other Net Investment Income
 
14.2

 
17.4

 
15.1

 
18.0

 
17.9

 
19.2

 
19.3

 
46.7

 
56.4

Net Investment Income
 
18.5

 
19.5

 
17.6

 
23.0

 
21.3

 
21.5

 
25.1

 
55.6

 
67.9

Life & Health Insurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Limited Liability Investments
 
0.1

 
(1.1
)
 
0.7

 
1.2

 
3.8

 
1.1

 
2.3

 
(0.3
)
 
7.2

All Other Net Investment Income
 
49.1

 
49.1

 
49.5

 
49.4

 
52.7

 
48.7

 
50.7

 
147.7

 
152.1

Net Investment Income
 
49.2

 
48.0

 
50.2

 
50.6

 
56.5

 
49.8

 
53.0

 
147.4

 
159.3

Total Segment Net Investment Income
 
67.7

 
67.5

 
67.8

 
73.6

 
77.8

 
71.3

 
78.1

 
203.0

 
227.2

Unallocated Net Investment Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Limited Liability Investments
 
0.5

 
0.3

 
0.3

 
0.3

 
0.5

 
0.2

 
0.5

 
1.1

 
1.2

All Other Net Investment Income
 
4.1

 
4.8

 
3.0

 
3.0

 
4.1

 
3.1

 
2.2

 
11.9

 
9.4

Unallocated Net Investment Income
 
4.6

 
5.1

 
3.3

 
3.3

 
4.6

 
3.3

 
2.7

 
13.0

 
10.6

Net Investment Income
 
$
72.3

 
$
72.6

 
$
71.1

 
$
76.9

 
$
82.4

 
$
74.6

 
$
80.8

 
$
216.0

 
$
237.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 12

Kemper Corporation
Catastrophe Frequency and Severity
(Dollars in Millions)
(Unaudited)
 
 
Nine Months Ended Sep 30, 2014
 
 
Property & Casualty Insurance Segment
 
Life & Health Insurance Segment
 
Consolidated
 
 
Number of Events
 
Losses and LAE
 
Number of Events
 
Losses and LAE
 
Number of Events
 
Losses and LAE
Range of Losses and LAE Per Event:
 
 
 
 
 
 
 
 
 
 
 
 
Below $5
 
21

 
$
26.0

 
15

 
$
1.6

 
21

 
$
26.7

$5 - $10
 
3

 
19.9

 
—

 
—

 
3

 
20.4

$10 - $15
 
1

 
12.7

 
—

 
—

 
1

 
13.0

$15 - $20
 
—

 
—

 
—

 
—

 
—

 
—

$20 - $25
 
—

 
—

 
—

 
—

 
—

 
—

Greater Than $25
 
1

 
33.5

 
—

 
—

 
1

 
33.6

Total
 
26

 
$
92.1

 
15

 
$
1.6

 
26

 
$
93.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended Sep 30, 2013
 
 
Property & Casualty Insurance Segment
 
Life & Health Insurance Segment
 
Consolidated
 
 
Number of Events
 
Losses and LAE
 
Number of Events
 
Losses and LAE
 
Number of Events
 
Losses and LAE
Range of Losses and LAE Per Event:
 
 
 
 
 
 
 
 
 
 
 
 
Below $5
 
25

 
$
45.0

 
17

 
$
3.4

 
24

 
$
41.9

$5 - $10
 
—

 
—

 
—

 
—

 
1

 
6.5

$10 - $15
 
—

 
—

 
—

 
—

 
—

 
—

$15 - $20
 
—

 
—

 
—

 
—

 
—

 
—

$20 - $25
 
—

 
—

 
—

 
—

 
—

 
—

Greater Than $25
 
—

 
—

 
—

 
—

 
—

 
—

Total
 
25

 
$
45.0

 
17

 
$
3.4

 
25

 
$
48.4


Page 13

Kemper Corporation
Property & Casualty Insurance Segment - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
307.0

 
$
308.7

 
$
304.3

 
$
302.9

 
$
345.0

 
$
348.9

 
$
345.4

 
$
920.0

 
$
1,039.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
309.7

 
317.5

 
322.3

 
338.2

 
348.7

 
353.9

 
352.1

 
949.5

 
1,054.7

Net Investment Income
 
18.5

 
19.5

 
17.6

 
23.0

 
21.3

 
21.5

 
25.1

 
55.6

 
67.9

Other Income
 
0.1

 
0.2

 
0.1

 
0.1

 
0.1

 
0.1

 
0.2

 
0.4

 
0.4

Total Revenues
 
328.3

 
337.2

 
340.0

 
361.3

 
370.1

 
375.5

 
377.4

 
1,005.5

 
1,123.0

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
206.8

 
209.4

 
230.4

 
237.7

 
245.1

 
246.3

 
251.1

 
646.6

 
742.5

Catastrophe Losses and LAE
 
14.2

 
61.9

 
16.0

 
2.1

 
10.4

 
25.9

 
8.7

 
92.1

 
45.0

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
(3.3
)
 
(14.5
)
 
(12.7
)
 
(11.1
)
 
(10.2
)
 
(12.2
)
 
(12.0
)
 
(30.5
)
 
(34.4
)
Catastrophe Losses and LAE
 
(7.2
)
 
(5.1
)
 
(2.7
)
 
(4.1
)
 
(1.7
)
 
(5.2
)
 
(1.5
)
 
(15.0
)
 
(8.4
)
Total Incurred Losses and LAE
 
210.5

 
251.7

 
231.0

 
224.6

 
243.6

 
254.8

 
246.3

 
693.2

 
744.7

Insurance Expenses, Excluding Write-off of Long-lived Assets
 
87.1

 
89.8

 
89.7

 
95.1

 
94.3

 
95.1

 
90.9

 
266.6

 
280.3

Write-off of Long-lived Asset
 
54.6

 
—

 
—

 
—

 
—

 
—

 
—

 
54.6

 
—

Operating Profit (Loss)
 
(23.9
)
 
(4.3
)
 
19.3

 
41.6

 
32.2

 
25.6

 
40.2

 
(8.9
)
 
98.0

Income Tax Benefit (Expense)
 
10.3

 
3.1

 
(4.9
)
 
(12.5
)
 
(8.8
)
 
(6.5
)
 
(11.2
)
 
8.5

 
(26.5
)
Segment Net Operating Income (Loss)
 
$
(13.6
)
 
$
(1.2
)
 
$
14.4

 
$
29.1

 
$
23.4

 
$
19.1

 
$
29.0

 
$
(0.4
)
 
$
71.5

Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
66.8
 %
 
66.0
 %
 
71.4
 %
 
70.3
 %
 
70.3
 %
 
69.6
 %
 
71.3
 %
 
68.1
 %
 
70.4
 %
Current Year Catastrophe Losses and LAE Ratio
 
4.6

 
19.5

 
5.0

 
0.6

 
3.0

 
7.3

 
2.5

 
9.7

 
4.3

Prior Years Non-catastrophe Losses and LAE Ratio
 
(1.1
)
 
(4.6
)
 
(3.9
)
 
(3.3
)
 
(2.9
)
 
(3.4
)
 
(3.4
)
 
(3.2
)
 
(3.3
)
Prior Years Catastrophe Losses and LAE Ratio
 
(2.3
)
 
(1.6
)
 
(0.8
)
 
(1.2
)
 
(0.5
)
 
(1.5
)
 
(0.4
)
 
(1.6
)
 
(0.8
)
Total Incurred Loss and LAE Ratio
 
68.0

 
79.3

 
71.7

 
66.4

 
69.9

 
72.0

 
70.0

 
73.0

 
70.6

Insurance Expense Ratio, Excluding Write-off of Long-lived Asset
 
28.1

 
28.3

 
27.8

 
28.1

 
27.0

 
26.9

 
25.8

 
28.1

 
26.6

Impact on Ratio from Write-off of Long-lived Asset
 
17.6

 
—

 
—

 
—

 
—

 
—

 
—

 
5.8

 
—

Combined Ratio
 
113.7
 %
 
107.6
 %
 
99.5
 %
 
94.5
 %
 
96.9
 %
 
98.9
 %
 
95.8
 %
 
106.9
 %
 
97.2
 %
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
66.8
 %
 
66.0
 %
 
71.4
 %
 
70.3
 %
 
70.3
 %
 
69.6
 %
 
71.3
 %
 
68.1
 %
 
70.4
 %
Insurance Expense Ratio, Excluding write-off of Long-lived Asset
 
28.1

 
28.3

 
27.8

 
28.1

 
27.0

 
26.9

 
25.8

 
28.1

 
26.6

Impact on Ratio from Write-off of Long-lived Asset
 
17.6

 
—

 
—

 
—

 
—
 %
 
—

 
—

 
5.8

 
—

Underlying Combined Ratio
 
112.5
 %
 
94.3
 %
 
99.2
 %
 
98.4
 %
 
97.3
 %
 
96.5
 %
 
97.1
 %
 
102.0
 %
 
97.0
 %
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
112.5
 %
 
94.3
 %
 
99.2
 %
 
98.4
 %
 
97.3
 %
 
96.5
 %
 
97.1
 %
 
102.0
 %
 
97.0
 %
Current Year Catastrophe Losses and LAE Ratio
 
4.6

 
19.5

 
5.0

 
0.6

 
3.0

 
7.3

 
2.5

 
9.7

 
4.3

Prior Years Non-catastrophe Losses and LAE Ratio
 
(1.1
)
 
(4.6
)
 
(3.9
)
 
(3.3
)
 
(2.9
)
 
(3.4
)
 
(3.4
)
 
(3.2
)
 
(3.3
)
Prior Years Catastrophe Losses and LAE Ratio
 
(2.3
)
 
(1.6
)
 
(0.8
)
 
(1.2
)
 
(0.5
)
 
(1.5
)
 
(0.4
)
 
(1.6
)
 
(0.8
)
Combined Ratio as Reported
 
113.7
 %
 
107.6
 %
 
99.5
 %
 
94.5
 %
 
96.9
 %
 
98.9
 %
 
95.8
 %
 
106.9
 %
 
97.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Underlying Combined Ratio is a non-GAAP measure, which is computed as the difference between three operating ratios: the combined ratio, the effect of catastrophes (excluding development of prior-year catastrophes) on the combined ratio and the effect of prior-year reserve development at the reporting date (including development on prior-year catastrophes) on the combined ratio.


Page 14

Kemper Corporation
Property & Casualty Insurance Segment - Results of Operations and Selected Financial Information (continued)
(Dollars in Millions)
(Unaudited)
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31, 2014
 
Dec 31, 2013
 
Sep 30, 2013
 
Jun 30, 2013
 
Mar 31, 2013
Insurance Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
$
524.2

 
$
545.4

 
$
568.9

 
$
595.1

 
$
614.9

 
$
638.4

 
$
649.3

Homeowners
 
118.8

 
128.3

 
114.4

 
99.9

 
118.2

 
122.6

 
122.4

Other Personal
 
47.5

 
47.2

 
47.9

 
47.6

 
47.1

 
46.9

 
50.3

Insurance Reserves
 
$
690.5

 
$
720.9

 
$
731.2

 
$
742.6

 
$
780.2

 
$
807.9

 
$
822.0

Insurance Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Case
 
$
447.6

 
$
460.8

 
$
468.1

 
$
471.2

 
$
491.8

 
$
509.0

 
$
514.7

Incurred but Not Reported
 
148.9

 
162.5

 
164.2

 
169.0

 
180.5

 
184.6

 
190.2

Total Loss Reserves
 
596.5

 
623.3

 
632.3

 
640.2

 
672.3

 
693.6

 
704.9

LAE Reserves
 
94.0

 
97.6

 
98.9

 
102.4

 
107.9

 
114.3

 
117.1

Insurance Reserves
 
$
690.5

 
$
720.9

 
$
731.2

 
$
742.6

 
$
780.2

 
$
807.9

 
$
822.0



Page 15

Kemper Corporation
Property & Casualty Insurance Segment
Personal Automobile Insurance - Premiums and Losses and LAE
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
202.1

 
$
200.1

 
$
207.7

 
$
204.2

 
$
232.9

 
$
233.0

 
$
244.1

 
$
609.9

 
$
710.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
205.1

 
$
212.0

 
$
216.3

 
$
229.7

 
$
239.1

 
$
244.6

 
$
245.7

 
$
633.4

 
$
729.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and LAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
$
149.8

 
$
153.1

 
$
163.1

 
$
189.5

 
$
181.3

 
$
184.0

 
$
186.9

 
$
466.0

 
$
552.2

Catastrophe Losses and LAE
 
1.6

 
9.8

 
0.9

 
0.1

 
0.8

 
4.2

 
2.5

 
12.3

 
7.5

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
(3.1
)
 
(11.9
)
 
(11.3
)
 
(7.6
)
 
(6.9
)
 
(8.5
)
 
(6.9
)
 
(26.3
)
 
(22.3
)
Catastrophe Losses and LAE
 
(0.3
)
 
(0.1
)
 
(0.2
)
 
0.1

 
(0.1
)
 
(0.3
)
 
0.1

 
(0.6
)
 
(0.3
)
Total Incurred Losses and LAE
 
$
148.0

 
$
150.9

 
$
152.5

 
$
182.1

 
$
175.1

 
$
179.4

 
$
182.6

 
$
451.4

 
$
537.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
73.0
 %
 
72.2
 %
 
75.4
 %
 
82.6
 %
 
75.8
 %
 
75.2
 %
 
76.1
 %
 
73.7
 %
 
75.7
 %
Current Year Catastrophe Losses and LAE Ratio
 
0.8

 
4.6

 
0.4

 
—

 
0.3

 
1.7

 
1.0

 
1.9

 
1.0

Prior Years Non-catastrophe Losses and LAE Ratio
 
(1.5
)
 
(5.6
)
 
(5.2
)
 
(3.3
)
 
(2.9
)
 
(3.5
)
 
(2.8
)
 
(4.2
)
 
(3.1
)
Prior Years Catastrophe Losses and LAE Ratio
 
(0.1
)
 
—

 
(0.1
)
 
—

 
—

 
(0.1
)
 
—

 
(0.1
)
 
—

Total Incurred Loss and LAE Ratio
 
72.2
 %
 
71.2
 %
 
70.5
 %
 
79.3
 %
 
73.2
 %
 
73.3
 %
 
74.3
 %
 
71.3
 %
 
73.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 16

Kemper Corporation
Property & Casualty Insurance Segment
Commercial Automobile Insurance - Premiums and Losses and LAE
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
13.7

 
$
15.3

 
$
14.3

 
$
12.3

 
$
12.7

 
$
14.4

 
$
14.3

 
$
43.3

 
$
41.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
14.1

 
$
13.6

 
$
13.1

 
$
13.6

 
$
13.5

 
$
13.1

 
$
12.1

 
$
40.8

 
$
38.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and LAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
$
11.5

 
$
11.6

 
$
11.1

 
$
10.6

 
$
10.9

 
$
12.8

 
$
9.4

 
$
34.2

 
$
33.1

Catastrophe Losses and LAE
 
0.1

 
0.1

 
—

 
(0.1
)
 
0.1

 
0.1

 
—

 
0.2

 
0.2

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
(0.6
)
 
0.4

 
(0.5
)
 
(1.0
)
 
(2.0
)
 
(0.7
)
 
0.7

 
(0.7
)
 
(2.0
)
Catastrophe Losses and LAE
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total Incurred Losses and LAE
 
$
11.0

 
$
12.1

 
$
10.6

 
$
9.5

 
$
9.0

 
$
12.2

 
$
10.1

 
$
33.7

 
$
31.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
81.6
 %
 
85.4
%
 
84.7
 %
 
78.0
 %
 
80.8
 %
 
97.6
 %
 
77.7
%
 
83.8
 %
 
85.6
 %
Current Year Catastrophe Losses and LAE Ratio
 
0.7

 
0.7

 
—

 
(0.7
)
 
0.7

 
0.8

 
—

 
0.5

 
0.5

Prior Years Non-catastrophe Losses and LAE Ratio
 
(4.3
)
 
2.9

 
(3.8
)
 
(7.4
)
 
(14.8
)
 
(5.3
)
 
5.8

 
(1.7
)
 
(5.2
)
Prior Years Catastrophe Losses and LAE Ratio
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total Incurred Loss and LAE Ratio
 
78.0
 %
 
89.0
%
 
80.9
 %
 
69.9
 %
 
66.7
 %
 
93.1
 %
 
83.5
%
 
82.6
 %
 
80.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 17

Kemper Corporation
Property & Casualty Insurance Segment
Total Automobile Insurance - Premiums and Losses and LAE
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
215.8

 
$
215.4

 
$
222.0

 
$
216.5

 
$
245.6

 
$
247.4

 
$
258.4

 
$
653.2

 
$
751.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
219.2

 
$
225.6

 
$
229.4

 
$
243.3

 
$
252.6

 
$
257.7

 
$
257.8

 
$
674.2

 
$
768.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and LAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
$
161.3

 
$
164.7

 
$
174.2

 
$
200.1

 
$
192.2

 
$
196.8

 
$
196.3

 
$
500.2

 
$
585.3

Catastrophe Losses and LAE
 
1.7

 
9.9

 
0.9

 
—

 
0.9

 
4.3

 
2.5

 
12.5

 
7.7

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
(3.7
)
 
(11.5
)
 
(11.8
)
 
(8.6
)
 
(8.9
)
 
(9.2
)
 
(6.2
)
 
(27.0
)
 
(24.3
)
Catastrophe Losses and LAE
 
(0.3
)
 
(0.1
)
 
(0.2
)
 
0.1

 
(0.1
)
 
(0.3
)
 
0.1

 
(0.6
)
 
(0.3
)
Total Incurred Losses and LAE
 
$
159.0

 
$
163.0

 
$
163.1

 
$
191.6

 
$
184.1

 
$
191.6

 
$
192.7

 
$
485.1

 
$
568.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
73.5
 %
 
73.0
 %
 
75.9
 %
 
82.3
 %
 
76.0
 %
 
76.4
 %
 
76.1
 %
 
74.2
 %
 
76.2
 %
Current Year Catastrophe Losses and LAE Ratio
 
0.8

 
4.4

 
0.4

 
—

 
0.4

 
1.7

 
1.0

 
1.9

 
1.0

Prior Years Non-catastrophe Losses and LAE Ratio
 
(1.7
)
 
(5.1
)
 
(5.1
)
 
(3.5
)
 
(3.5
)
 
(3.6
)
 
(2.4
)
 
(4.0
)
 
(3.2
)
Prior Years Catastrophe Losses and LAE Ratio
 
(0.1
)
 
—

 
(0.1
)
 
—

 
—

 
(0.1
)
 
—

 
(0.1
)
 
—

Total Incurred Loss and LAE Ratio
 
72.5
 %
 
72.3
 %
 
71.1
 %
 
78.8
 %
 
72.9
 %
 
74.4
 %
 
74.7
 %
 
72.0
 %
 
74.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 18

Kemper Corporation
Property & Casualty Insurance Segment
Homeowners Insurance - Premiums and Losses and LAE
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
78.6

 
$
80.5

 
$
70.9

 
$
74.2

 
$
85.4

 
$
87.0

 
$
74.3

 
$
230.0

 
$
246.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
77.9

 
$
79.0

 
$
79.7

 
$
81.4

 
$
82.3

 
$
82.1

 
$
80.4

 
$
236.6

 
$
244.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and LAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
$
38.1

 
$
37.9

 
$
49.1

 
$
30.9

 
$
47.6

 
$
43.1

 
$
48.8

 
$
125.1

 
$
139.5

Catastrophe Losses and LAE
 
12.3

 
50.4

 
14.3

 
2.2

 
8.8

 
21.2

 
6.0

 
77.0

 
36.0

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
1.5

 
(1.6
)
 
(0.7
)
 
(3.0
)
 
(0.3
)
 
(1.0
)
 
(4.6
)
 
(0.8
)
 
(5.9
)
Catastrophe Losses and LAE
 
(6.0
)
 
(4.4
)
 
(2.1
)
 
(3.8
)
 
(1.6
)
 
(4.2
)
 
(1.6
)
 
(12.5
)
 
(7.4
)
Total Incurred Losses and LAE
 
$
45.9

 
$
82.3

 
$
60.6

 
$
26.3

 
$
54.5

 
$
59.1

 
$
48.6

 
$
188.8

 
$
162.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
48.9
 %
 
48.0
 %
 
61.6
 %
 
38.0
 %
 
57.8
 %
 
52.5
 %
 
60.6
 %
 
52.9
 %
 
57.0
 %
Current Year Catastrophe Losses and LAE Ratio
 
15.8

 
63.8

 
17.9

 
2.7

 
10.7

 
25.8

 
7.5

 
32.5

 
14.7

Prior Years Non-catastrophe Losses and LAE Ratio
 
1.9

 
(2.0
)
 
(0.9
)
 
(3.7
)
 
(0.4
)
 
(1.2
)
 
(5.7
)
 
(0.3
)
 
(2.4
)
Prior Years Catastrophe Losses and LAE Ratio
 
(7.7
)
 
(5.6
)
 
(2.6
)
 
(4.7
)
 
(1.9
)
 
(5.1
)
 
(2.0
)
 
(5.3
)
 
(3.0
)
Total Incurred Loss and LAE Ratio
 
58.9
 %
 
104.2
 %
 
76.0
 %
 
32.3
 %
 
66.2
 %
 
72.0
 %
 
60.4
 %
 
79.8
 %
 
66.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 19

Kemper Corporation
Property & Casualty Insurance Segment
Other Personal Lines - Premiums and Losses and LAE
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
12.6

 
$
12.8

 
$
11.4

 
$
12.2

 
$
14.0

 
$
14.5

 
$
12.7

 
$
36.8

 
$
41.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
12.6

 
$
12.9

 
$
13.2

 
$
13.5

 
$
13.8

 
$
14.1

 
$
13.9

 
$
38.7

 
$
41.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and LAE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
$
7.4

 
$
6.8

 
$
7.1

 
$
6.7

 
$
5.3

 
$
6.4

 
$
6.0

 
$
21.3

 
$
17.7

Catastrophe Losses and LAE
 
0.2

 
1.6

 
0.8

 
(0.1
)
 
0.7

 
0.4

 
0.2

 
2.6

 
1.3

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
(1.1
)
 
(1.4
)
 
(0.2
)
 
0.5

 
(1.0
)
 
(2.0
)
 
(1.2
)
 
(2.7
)
 
(4.2
)
Catastrophe Losses and LAE
 
(0.9
)
 
(0.6
)
 
(0.4
)
 
(0.4
)
 
—

 
(0.7
)
 
—

 
(1.9
)
 
(0.7
)
Total Incurred Losses and LAE
 
$
5.6

 
$
6.4

 
$
7.3

 
$
6.7

 
$
5.0

 
$
4.1

 
$
5.0

 
$
19.3

 
$
14.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
58.6
 %
 
52.8
 %
 
53.7
 %
 
49.6
 %
 
38.3
 %
 
45.5
 %
 
43.2
 %
 
55.1
 %
 
42.3
 %
Current Year Catastrophe Losses and LAE Ratio
 
1.6

 
12.4

 
6.1

 
(0.7
)
 
5.1

 
2.8

 
1.4

 
6.7

 
3.1

Prior Years Non-catastrophe Losses and LAE Ratio
 
(8.7
)
 
(10.9
)
 
(1.5
)
 
3.7

 
(7.2
)
 
(14.2
)
 
(8.6
)
 
(7.0
)
 
(10.0
)
Prior Years Catastrophe Losses and LAE Ratio
 
(7.1
)
 
(4.7
)
 
(3.0
)
 
(3.0
)
 
—

 
(5.0
)
 
—

 
(4.9
)
 
(1.7
)
Total Incurred Loss and LAE Ratio
 
44.4
 %
 
49.6
 %
 
55.3
 %
 
49.6
 %
 
36.2
 %
 
29.1
 %
 
36.0
 %
 
49.9
 %
 
33.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 20

Kemper Corporation
Life & Health Insurance Segment - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
 
$
96.8

 
$
97.2

 
$
97.6

 
$
97.8

 
$
98.4

 
$
98.6

 
$
97.9

 
$
291.6

 
$
294.9

Accident and Health
 
37.1

 
36.2

 
38.8

 
40.2

 
40.7

 
40.3

 
40.2

 
112.1

 
121.2

Property
 
19.2

 
19.4

 
18.9

 
19.4

 
19.7

 
20.0

 
19.7

 
57.5

 
59.4

Total Earned Premiums
 
153.1

 
152.8

 
155.3

 
157.4

 
158.8

 
158.9

 
157.8

 
461.2

 
475.5

Net Investment Income
 
49.2

 
48.0

 
50.2

 
50.6

 
56.5

 
49.8

 
53.0

 
147.4

 
159.3

Other Income
 
0.4

 
—

 
—

 
0.1

 
—

 
0.1

 
—

 
0.4

 
0.1

Total Revenues
 
202.7

 
200.8

 
205.5

 
208.1

 
215.3

 
208.8

 
210.8

 
609.0

 
634.9

Policyholders’ Benefits and Incurred Losses and LAE
 
89.9

 
95.8

 
97.0

 
91.0

 
94.6

 
99.4

 
102.9

 
282.7

 
296.9

Insurance Expenses
 
81.4

 
80.3

 
73.9

 
78.5

 
85.5

 
78.2

 
76.0

 
235.6

 
239.7

Operating Profit
 
31.4

 
24.7

 
34.6

 
38.6

 
35.2

 
31.2

 
31.9

 
90.7

 
98.3

Income Tax Expense
 
(11.1
)
 
(8.8
)
 
(12.5
)
 
(13.7
)
 
(12.3
)
 
(10.9
)
 
(10.7
)
 
(32.4
)
 
(33.9
)
Segment Net Operating Income
 
$
20.3

 
$
15.9

 
$
22.1

 
$
24.9

 
$
22.9

 
$
20.3

 
$
21.2

 
$
58.3

 
$
64.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
Sep 30, 2014
 
Jun 30, 2014
 
Mar 31, 2014
 
Dec 31, 2013
 
Sep 30, 2013
 
Jun 30, 2013
 
Mar 31, 2013
Insurance Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future Policyholder Benefits
 
$
3,202.5

 
$
3,189.5

 
$
3,173.8

 
$
3,157.7

 
$
3,146.7

 
$
3,133.3

 
$
3,119.4

Incurred Losses and LAE Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
 
38.7

 
39.4

 
42.6

 
37.6

 
33.1

 
34.3

 
35.0

Accident and Health
 
19.6

 
20.1

 
21.3

 
22.2

 
21.7

 
22.0

 
20.4

Property
 
4.3

 
5.3

 
5.6

 
5.3

 
4.7

 
5.7

 
8.0

Total Incurred Losses and LAE Reserves
 
62.6

 
64.8

 
69.5

 
65.1

 
59.5

 
62.0

 
63.4

Insurance Reserves
 
$
3,265.1

 
$
3,254.3

 
$
3,243.3

 
$
3,222.8

 
$
3,206.2

 
$
3,195.3

 
$
3,182.8


 


Page 21

Kemper Corporation
Details of Investment Performance
(Dollars in Millions)
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Net Investment Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and Dividends on Fixed Maturities
 
$
56.1

 
$
56.9

 
$
57.0

 
$
58.3

 
$
59.5

 
$
58.6

 
$
59.1

 
$
170.0

 
$
177.2

Dividends on Equity Securities
 
7.7

 
10.8

 
7.3

 
8.9

 
11.3

 
9.0

 
8.8

 
25.8

 
29.1

Equity Method Limited Liability Investments
 
4.9

 
1.3

 
3.5

 
6.5

 
7.7

 
3.6

 
8.6

 
9.7

 
19.9

Fair Value Option Investments
 
0.3

 
0.3

 
—

 
—

 
—

 
—

 
—

 
0.6

 
—

Short-term Investments
 
0.1

 
0.2

 
0.2

 
0.1

 
—

 
—

 
—

 
0.5

 
—

Real Estate
 
3.1

 
2.9

 
3.2

 
3.1

 
3.7

 
6.6

 
7.4

 
9.2

 
17.7

Loans to Policyholders
 
5.2

 
5.0

 
5.1

 
5.1

 
5.0

 
4.8

 
4.9

 
15.3

 
14.7

Total Investment Income
 
77.4

 
77.4

 
76.3

 
82.0

 
87.2

 
82.6

 
88.8

 
231.1

 
258.6

Investment Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
3.1

 
2.7

 
2.8

 
3.0

 
3.0

 
6.0

 
6.3

 
8.6

 
15.3

Other Investment Expenses
 
2.0

 
2.1

 
2.4

 
2.1

 
1.8

 
2.0

 
1.7

 
6.5

 
5.5

Total Investment Expenses
 
5.1

 
4.8

 
5.2

 
5.1

 
4.8

 
8.0

 
8.0

 
15.1

 
20.8

Net Investment Income
 
$
72.3

 
$
72.6

 
$
71.1

 
$
76.9

 
$
82.4

 
$
74.6

 
$
80.8

 
$
216.0

 
$
237.8

Net Realized Gains on Sales of Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on Sales
 
$
0.2

 
$
0.4

 
$
4.4

 
$
1.3

 
$
2.5

 
$
1.4

 
$
25.7

 
$
5.0

 
$
29.6

Losses on Sales
 
—

 
—

 
—

 
(0.4
)
 
—

 
—

 
—

 
—

 
—

Equity Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on Sales
 
7.9

 
3.0

 
0.8

 
19.9

 
0.7

 
0.8

 
0.4

 
11.7

 
1.9

Losses on Sales
 
—

 
—

 
—

 
(0.2
)
 
(0.2
)
 
—

 
(0.1
)
 
—

 
(0.3
)
Equity Method Limited Liability Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on Sales
 
—

 
—

 
—

 
—

 
2.3

 
0.2

 
—

 
—

 
2.5

Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on Sales
 
—

 
—

 
—

 
—

 
43.6

 
—

 
0.6

 
—

 
44.2

Losses on Sales
 
—

 
—

 
(0.2
)
 
—

 
—

 
—

 
—

 
(0.2
)
 
—

Other Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on Sale of Subsidiary
 
—

 
—

 
1.6

 
—

 
—

 
—

 
—

 
1.6

 
—

Gains on Sales
 
—

 
—

 
—

 
—

 
—

 
—

 
0.1

 
—

 
0.1

Losses on Sales
 
—

 
(0.1
)
 
—

 
—

 
—

 
(0.1
)
 
—

 
(0.1
)
 
(0.1
)
Trading Securities Net Gains
 
(0.1
)
 
0.2

 
—

 
0.2

 
0.2

 
—

 
0.2

 
0.1

 
0.4

Net Realized Gains on Sales of Investments
 
$
8.0

 
$
3.5

 
$
6.6

 
$
20.8

 
$
49.1

 
$
2.3

 
$
26.9

 
$
18.1

 
$
78.3

Net Impairment Losses Recognized in Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Maturities
 
$
(2.2
)
 
$
(3.1
)
 
$
(0.3
)
 
$
(5.9
)
 
$
(2.2
)
 
$
(0.5
)
 
$
(1.7
)
 
$
(5.6
)
 
$
(4.4
)
Equity Securities
 
(1.6
)
 
(1.0
)
 
(0.5
)
 
(1.7
)
 
(1.2
)
 
(0.5
)
 
(0.2
)
 
(3.1
)
 
(1.9
)
Net Impairment Losses Recognized in Earnings
 
$
(3.8
)
 
$
(4.1
)
 
$
(0.8
)
 
$
(7.6
)
 
$
(3.4
)
 
$
(1.0
)
 
$
(1.9
)
 
$
(8.7
)
 
$
(6.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 22

Kemper Corporation
Details of Invested Assets
(Dollars in Millions)
(Unaudited)
 
 
Sep 30, 2014
 
Dec 31, 2013
 
Dec 31, 2012
 
 
Carrying
Value
 
Percent
of Total1
 
Carrying
Value
 
Percent
of Total1
 
Carrying
Value
 
Percent
of Total1
Fixed Maturities Reported at Fair Value:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and Government Agencies and Authorities
 
$
343.5

 
5.4
%
 
$
362.2

 
5.9
%
 
$
428.9

 
6.6
%
States and Political Subdivisions
 
1,439.2

 
22.5

 
1,361.0

 
22.1

 
1,401.4

 
21.7

Corporate Securities:
 
 
 

 
 
 

 
 
 

Bonds and Notes
 
2,839.0

 
44.4

 
2,793.7

 
45.4

 
2,993.4

 
46.3

Redeemable Preferred Stocks
 
7.4

 
0.1

 
7.4

 
0.1

 
32.6

 
0.5

Collaterized Loan Obligations
 
62.5

 
1.0

 
44.7

 
0.7

 
—

 
—

Other Mortgage- and Asset-backed
 
5.6

 
0.1

 
6.0

 
0.1

 
3.9

 
0.1

Subtotal Fixed Maturities Reported at Fair Value
 
4,697.2

 
73.4

 
4,575.0

 
74.3

 
4,860.2

 
75.2

Equity Securities Reported at Fair Value:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stocks
 
115.1

 
1.8

 
110.2

 
1.8

 
100.5

 
1.6

Common Stocks
 
198.8

 
3.1

 
189.5

 
3.1

 
154.2

 
2.4

Other Equity Interests:
 
 
 
 
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
129.8

 
2.0

 
124.9

 
2.0

 
125.9

 
1.9

Limited Liability Companies and Limited Partnerships
 
217.7

 
3.4

 
173.9

 
2.8

 
141.3

 
2.2

Subtotal Equity Securities Reported at Fair Value
 
661.4

 
10.3

 
598.5

 
9.7

 
521.9

 
8.1

Equity Method Limited Liability Investments
 
222.8

 
3.5

 
245.1

 
4.0

 
253.0

 
3.9

Fair Value Option Investments
 
50.6

 
0.8

 
—

 
—

 
—

 
—

Short-term Investments at Cost which Approximates Fair Value
 
316.2

 
4.9

 
284.7

 
4.6

 
327.5

 
5.1

Other Investments:
 
 
 
 
 
 
 
 
 
 
 
 
Loans to Policyholders at Unpaid Principal
 
280.8

 
4.4

 
275.4

 
4.5

 
266.3

 
4.1

Real Estate at Depreciated Cost
 
164.3

 
2.6

 
167.1

 
2.7

 
226.2

 
3.5

Trading Securities at Fair Value
 
5.0

 
0.1

 
5.0

 
0.1

 
4.5

 
0.1

Other
 
0.4

 
—

 
0.5

 
—

 
0.5

 
—

Subtotal Other Investments
 
450.5

 
7.1

 
448.0

 
7.3

 
497.5

 
7.7

Total Investments
 
$
6,398.7

 
100.0
%
 
$
6,151.3

 
100.0
%
 
$
6,460.1

 
100.0
%
S&P Equivalent Rating for Fixed Maturities
 
 
 
 
 
 
 
 
 
 
 
 
AAA, AA, A
 
$
3,199.9

 
68.1
%
 
$
3,128.1

 
68.4
%
 
$
3,319.1

 
68.3
%
BBB
 
1,160.6

 
24.7

 
1,119.9

 
24.5

 
1,199.0

 
24.7

BB, B
 
163.6

 
3.5

 
144.6

 
3.1

 
158.9

 
3.2

CCC or Lower
 
173.1

 
3.7

 
182.4

 
4.0

 
183.2

 
3.8

Total Investments in Fixed Maturities
 
$
4,697.2

 
100.0
%
 
$
4,575.0

 
100.0
%
 
$
4,860.2

 
100.0
%
Duration (in Years)
 
 
 
 
 
 
 
 
 
 
 
 
Total Investments in Fixed Maturities
 
6.9

 
 
 
6.8

 
 
 
7.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Sum of percentages for individual lines may not equal subtotals and grand total due to rounding.
 
 
 
 
 
 



Page 23

Kemper Corporation
Investment Concentration
(Dollars in Millions)
(Unaudited)
 
 
Sep 30, 2014
 
Dec 31, 2013
 
Dec 31, 2012
Fair Value of Non-governmental Fixed Maturities by Industry
 
Amount
 
Percent
of Total
Investments
 
Amount
 
Percent
of Total
Investments
 
Amount
 
Percent
of Total
Investments
Manufacturing
 
$
1,216.0

 
19.0
%
 
$
1,196.9

 
19.5
%
 
$
1,371.1

 
21.2
%
Finance, Insurance and Real Estate
 
785.6

 
12.3

 
767.9

 
12.5

 
780.8

 
12.1

Transportation, Communication and Utilities
 
313.7

 
4.9

 
306.7

 
5.0

 
289.2

 
4.5

Services
 
289.8

 
4.5

 
277.5

 
4.5

 
298.6

 
4.6

Mining
 
142.9

 
2.2

 
143.1

 
2.3

 
143.4

 
2.2

Retail Trade
 
79.3

 
1.2

 
75.6

 
1.2

 
66.5

 
1.0

Wholesale Trade
 
67.1

 
1.0

 
60.7

 
1.0

 
57.8

 
0.9

Agriculture, Forestry and Fishing
 
15.5

 
0.2

 
18.8

 
0.3

 
19.2

 
0.3

Other
 
4.6

 
0.1

 
4.6

 
0.1

 
3.3

 
0.1

Total Fair Value of Non-governmental Fixed Maturities
 
$
2,914.5

 
45.4
%
 
$
2,851.8

 
46.4
%
 
$
3,029.9

 
46.9
%
 
 
 
 
 
Sep 30, 2014
Ten Largest Investment Exposures 1
 
Fair
Value
 
Percent
of Total
Investments
Fixed Maturities:
 
 
 
 
States and Political Subdivisions:
 
 
 
 
Texas
 
$
94.5

 
1.5
%
Ohio
 
78.6

 
1.2

Michigan
 
64.4

 
1.0

Florida
 
63.2

 
1.0

Georgia
 
63.0

 
1.0

Wisconsin
 
59.4

 
0.9

Colorado
 
58.6

 
0.9

Washington
 
56.6

 
0.9

Louisiana
 
56.5

 
0.9

Equity Method Limited Liability Investments:
 
 
 
 
Tennenbaum Opportunities Fund V, LLC
 
69.3

 
1.1

Total
 
$
664.1

 
10.4
%
 
1 
Excluding Investments in U.S. Government and Government Agencies and Authorities and Obligations of States and Political Subdivisions pre-refunded with U.S. government and government agencies obligations held in Trust at September 30, 2014.

 


Page 24

Kemper Corporation
Municipal Bonds (excluding Pre-refunded Bonds)
(Unaudited)
 
 
Sep 30, 2014
 
 
State
General
Obligation
 
Political
Subdivision
General
Obligation
 
Revenue
 
Total Fair
Value
 
Percent
of Total
Muni Bond1
 
Percent
of Total
Investments1
Texas
 
$
30.8

 
$
18.4

 
$
45.3

 
$
94.5

 
6.9
%
 
1.5
%
Ohio
 
40.5

 
4.7

 
33.4

 
78.6

 
5.7

 
1.2

Michigan
 
36.8

 
—

 
27.6

 
64.4

 
4.7

 
1.0

Florida
 
52.2

 
—

 
11.0

 
63.2

 
4.6

 
1.0

Georgia
 
49.1

 
6.7

 
7.2

 
63.0

 
4.6

 
1.0

Wisconsin
 
51.2

 
6.8

 
1.4

 
59.4

 
4.3

 
0.9

Colorado
 
—

 
15.7

 
42.9

 
58.6

 
4.3

 
0.9

Washington
 
27.7

 
0.3

 
28.6

 
56.6

 
4.1

 
0.9

Louisiana
 
33.2

 
0.2

 
23.1

 
56.5

 
4.1

 
0.9

Arkansas
 
52.6

 
—

 
—

 
52.6

 
3.8

 
0.8

New York
 
6.2

 
—

 
37.5

 
43.7

 
3.2

 
0.7

North Carolina
 
17.7

 
2.0

 
22.9

 
42.6

 
3.1

 
0.7

Utah
 
28.8

 
—

 
10.6

 
39.4

 
2.9

 
0.6

Minnesota
 
27.0

 
4.3

 
3.5

 
34.8

 
2.5

 
0.5

Oregon
 
30.1

 
—

 
1.1

 
31.2

 
2.3

 
0.5

Virginia
 
—

 
19.0

 
11.3

 
30.3

 
2.2

 
0.5

Nevada
 
22.6

 
7.2

 
—

 
29.8

 
2.2

 
0.5

Connecticut
 
24.4

 
—

 
5.4

 
29.8

 
2.2

 
0.5

Indiana
 
—

 
—

 
28.3

 
28.3

 
2.1

 
0.4

Mississippi
 
24.5

 
—

 
3.1

 
27.6

 
2.0

 
0.4

Delaware
 
17.6

 
—

 
9.3

 
26.9

 
2.0

 
0.4

Massachusetts
 
—

 
—

 
26.0

 
26.0

 
1.9

 
0.4

New Jersey
 
—

 
5.3

 
20.4

 
25.7

 
1.9

 
0.4

South Carolina
 
20.2

 
3.2

 
—

 
23.4

 
1.7

 
0.4

Maryland
 
—

 
18.1

 
3.6

 
21.7

 
1.6

 
0.3

Tennessee
 
4.5

 
7.4

 
9.4

 
21.3

 
1.6

 
0.3

Missouri
 
—

 
—

 
18.9

 
18.9

 
1.4

 
0.3

Iowa
 
—

 
—

 
17.3

 
17.3

 
1.3

 
0.3

Kentucky
 
—

 
1.1

 
15.2

 
16.3

 
1.2

 
0.3

Rhode Island
 
10.6

 
—

 
5.1

 
15.7

 
1.1

 
0.2

Pennsylvania
 
11.5

 
2.5

 
1.3

 
15.3

 
1.1

 
0.2

Illinois
 
—

 
5.8

 
9.2

 
15.0

 
1.1

 
0.2

Hawaii
 
14.9

 
—

 
—

 
14.9

 
1.1

 
0.2

Idaho
 
—

 
7.6

 
5.4

 
13.0

 
0.9

 
0.2

District of Columbia
 
—

 
—

 
11.9

 
11.9

 
0.9

 
0.2

Nebraska
 
—

 
6.6

 
5.3

 
11.9

 
0.9

 
0.2

Alabama
 
6.2

 
—

 
5.6

 
11.8

 
0.9

 
0.2

California
 
0.4

 
—

 
10.8

 
11.2

 
0.8

 
0.2

Oklahoma
 
—

 
—

 
10.7

 
10.7

 
0.8

 
0.2

All Other States
 
22.4

 
—

 
35.9

 
58.3

 
4.2

 
0.9

Total (1)
 
$
663.7

 
$
142.9

 
$
565.5

 
$
1,372.1

 
100.0
%
 
21.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Sum of percentages for individual lines may not equal total due to rounding.
 
 
 
 
 
 
 

Page 25

Kemper Corporation
Investments in Limited Liability
Companies and Limited Partnerships
(Dollars in Millions)
(Unaudited)
 
 
Unfunded
Commitment
 
Reported Value
Asset Class
 
Sep 30,
2014
 
Sep 30,
2014
 
Dec 31,
2013
Reported as Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings:
 
 
 
 
 
 
Distressed Debt
 
$
—

 
$
105.4

 
$
126.1

Secondary Transactions
 
17.7

 
54.5

 
54.0

Mezzanine Debt
 
16.3

 
46.6

 
46.0

Growth Equity
 
—

 
5.3

 
7.8

Senior Debt
 
5.0

 
5.0

 
7.5

Leveraged Buyout
 
0.1

 
4.2

 
3.7

Other
 
—

 
1.8

 
—

Total Equity Method Limited Liability Investments
 
39.1

 
222.8

 
245.1

Reported as Other Equity Interests at Fair Value:
 
 
 
 
 
 
Mezzanine Debt
 
68.1

 
68.3

 
63.8

Senior Debt
 
20.4

 
20.4

 
15.0

Distressed Debt
 
3.2

 
17.9

 
14.4

Secondary Transactions
 
13.0

 
15.7

 
13.7

Hedge Fund
 
—

 
12.3

 
12.5

Leveraged Buyout
 
2.7

 
7.8

 
9.9

Real Estate
 
—

 
6.9

 
6.3

Other
 
1.5

 
68.4

 
38.3

Total Reported as Other Equity Interests at Fair Value
 
108.9

 
217.7

 
173.9

Reported as Fair Value Option Investments:
 
 
 
 
 
 
Hedge Fund
 
—

 
50.6

 
—

Total Investments in Limited Liability Companies and Limited Partnerships
 
$
148.0

 
$
491.1

 
$
419.0



Page 26

Kemper Corporation
Definitions of Non-GAAP Financial Measures
The Company believes that investors’ understanding of Kemper’s performance is enhanced by the disclosure of the following non-GAAP financial measures. The methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.
Book Value Per Share Excluding Net Unrealized Gains on Fixed Maturities, is a ratio that uses a non-GAAP financial measure. It is calculated by dividing shareholders’ equity after excluding the after-tax impact of net unrealized gains on fixed income securities by total Common Shares Issued and Outstanding. Book value per share is the most directly comparable GAAP financial measure. The Company uses the trend in book value per share, excluding the after-tax impact of net unrealized gains on fixed income securities in conjunction with book value per share to identify and analyze the change in net worth attributable to management efforts between periods. The Company believes the non-GAAP financial measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily capital market conditions, the magnitude and timing of which are generally not influenced by management. The Company believes it enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers. 
Book Value Per Share Excluding Goodwill, is a ratio that uses a non-GAAP financial measure. It is calculated by dividing shareholders’ equity after excluding the recorded Goodwill asset by total Common Shares Issued and Outstanding. Book value per share is the most directly comparable GAAP financial measure. Book Value Per Share Excluding Goodwill, also referred to as Tangible Book Value Per Share, is a common measure used by analysts and investors to compare similar companies.
Consolidated Net Operating Income is an after-tax, non-GAAP financial measure and is computed by excluding from Income from Continuing Operations the after-tax impact of 1) Net Realized Gains on Sales of Investments, 2) Net Impairment Losses Recognized in Earnings related to investments and 3) significant non-recurring or infrequent items that may not be indicative of ongoing operations. Significant non-recurring items are excluded when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, and (b) there has been no similar charge or gain within the prior two years. The most directly comparable GAAP financial measure is Income from Continuing Operations.
The Company believes that Consolidated Net Operating Income provides investors with a valuable measure of its ongoing performance because it reveals underlying operational performance trends that otherwise might be less apparent if the items were not excluded. Net Realized Gains on Sales of Investments and Net Impairment Losses Recognized in Earnings related to investments included in the Company’s results may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions that impact the values of the Company’s investments, the timing of which is unrelated to the insurance underwriting process. Significant non-recurring items are excluded because, by their nature, they are not indicative of the Company’s business or economic trends.
A reconciliation of Consolidated Net Operating Income to Income from Continuing Operations is presented below:
 
 
Three Months Ended
 
Nine Months Ended
Dollars in Millions (Unaudited)
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Consolidated Net Operating Income
 
$
2.1

 
$
9.6

 
$
31.5

 
$
46.3

 
$
38.9

 
$
31.7

 
$
42.3

 
$
43.2

 
$
112.9

Net Income (Loss) From:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Realized Gains on Sales of Investments
 
5.2

 
2.4

 
4.2

 
13.5

 
31.9

 
1.5

 
17.5

 
11.8

 
50.9

Net Impairment Losses Recognized in Earnings
 
(2.5
)
 
(2.7
)
 
(0.5
)
 
(5.0
)
 
(2.2
)
 
(0.7
)
 
(1.2
)
 
(5.7
)
 
(4.1
)
Income from Continuing Operations
 
$
4.8

 
$
9.3

 
$
35.2

 
$
54.8

 
$
68.6

 
$
32.5

 
$
58.6

 
$
49.3

 
$
159.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 27

Consolidated Net Operating Income Per Unrestricted Share is a non-GAAP financial measure. It is computed by dividing Consolidated Net Operating Income by the weighted average unrestricted shares outstanding. The most directly comparable GAAP financial measure is Income from Continuing Operations Per Unrestricted Share‐basic.

A reconciliation of Consolidated Net Operating Income Per Unrestricted Share-basic to Income from Continuing Operations Per Unrestricted Share-basic is presented below:
 
 
Three Months Ended
 
Nine Months Ended
(Unaudited)
 
Sep 30,
2014
 
Jun 30,
2014
 
Mar 31,
2014
 
Dec 31,
2013
 
Sep 30,
2013
 
Jun 30,
2013
 
Mar 31,
2013
 
Sep 30,
2014
 
Sep 30,
2013
Consolidated Net Operating Income Per Unrestricted Share
 
$
0.04

 
$
0.18

 
$
0.56

 
$
0.83

 
$
0.69

 
$
0.55

 
$
0.72

 
$
0.79

 
$
1.96

Net Income (Loss) Per Unrestricted Share From:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Realized Gains on Sales of Investments
 
0.10

 
0.04

 
0.08

 
0.24

 
0.56

 
0.02

 
0.30

 
0.21

 
0.88

Net Impairment Losses Recognized in Earnings
 
(0.05
)
 
(0.05
)
 
(0.01
)
 
(0.09
)
 
(0.04
)
 
(0.01
)
 
(0.02
)
 
(0.10
)
 
(0.07
)
Income from Continuing Operations Per Unrestricted Share
 
$
0.09

 
$
0.17

 
$
0.63

 
$
0.98

 
$
1.21

 
$
0.56

 
$
1.00

 
$
0.90

 
$
2.77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio is a non-GAAP financial measure. It is computed by adding the Current Year Non-catastrophe Losses and LAE Ratio with the Insurance Expense (including write-offs of long-lived assets) Ratio. The most directly comparable GAAP financial measure is the combined ratio, which uses total incurred losses and LAE, including the impact of catastrophe losses and loss and LAE reserve development. The Company believes the underlying combined ratio is useful to investors and is used by management to reveal the trends in the Company’s property and casualty insurance businesses that may be obscured by catastrophe losses and prior-year reserve development. These catastrophe losses cause loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the combined ratio. Prior-year reserve developments are caused by unexpected loss development on historical reserves. Because reserve development relates to the re-estimation of losses from earlier periods, it has no bearing on the performance of our insurance products in the current period. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company’s underwriting performance. The underlying combined ratio should not be considered a substitute for the combined ratio and does not reflect the overall underwriting profitability of our business.



 


Page 28