EX-99.2 3 kmpr2016123116ex992supplem.htm FOURTH QUARTER 2016 INVESTOR SUPPLEMENT OF KEMPER CORPORATION Exhibit
Exhibit 99.2


kemperlogoa05a01a07.jpg
Investor Supplement
Fourth Quarter 2016
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 31.
  



Kemper Corporation
Investor Supplement
Fourth Quarter 2016
Table of Contents
 
 
 
 
Page
Consolidated Financial Highlights
3
Consolidated Statements of Operations
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 (Loss)
11
Net Operating Income (Loss)
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 - Results of Operations and Selected Financial Information by Product:
 
Preferred Personal Automobile Insurance
16
Non-standard Personal Automobile Insurance
17
Total Personal Automobile Insurance
18
Commercial Automobile Insurance
19
Total Automobile Insurance
20
Homeowners Insurance
21
Other Personal Lines
22
Life & Health Insurance Segment - Results of Operations and Selected Financial Information
23
Life Insurance
24
Accident and Health Insurance
24
Property Insurance
25
Details of Investment Performance
26
Details of Invested Assets
27
Investment Concentration
28
Municipal Bond Securities
29
Investments in Limited Liability Companies and Limited Partnerships
30
Definitions of Non-GAAP Financial Measures
31-32
 

Page 2

Kemper Corporation
Consolidated Financial Highlights
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
For Period Ended
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
561.4

 
$
558.9

 
$
553.7

 
$
546.0

 
$
541.5

 
$
536.7

 
$
500.1

 
$
431.3

 
$
2,220.0

 
$
2,009.6

Net Investment Income
 
79.9

 
77.7

 
73.7

 
67.0

 
79.4

 
75.9

 
76.7

 
70.6

 
298.3

 
302.6

Net Investment Gains (Losses) and Other Income
 
1.4

 
4.1

 
(0.2
)
 
(1.7
)
 
(3.9
)
 
2.8

 
32.4

 
(2.7
)
 
3.6

 
28.6

Total Revenues
 
$
642.7

 
$
640.7

 
$
627.2

 
$
611.3

 
$
617.0

 
$
615.4

 
$
609.2

 
$
499.2

 
$
2,521.9

 
$
2,340.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Net Operating Income (Loss) 1
 
$
28.8

 
$
(20.4
)
 
$
4.6

 
$
(0.6
)
 
$
4.8

 
$
36.6

 
$
6.7

 
$
21.8

 
$
12.4

 
$
69.9

Income (Loss) from Continuing Operations
 
$
29.1

 
$
(18.3
)
 
$
4.1

 
$
(2.2
)
 
$
1.3

 
$
38.0

 
$
27.4

 
$
13.5

 
$
12.7

 
$
80.2

Net Income (Loss)
 
$
31.2

 
$
(16.3
)
 
$
4.0

 
$
(2.1
)
 
$
4.6

 
$
37.9

 
$
29.7

 
$
13.5

 
$
16.8

 
$
85.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Unrestricted Common Share Amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Net Operating Income (Loss) 1
 
$
0.56

 
$
(0.40
)
 
$
0.09

 
$
(0.01
)
 
$
0.09

 
$
0.70

 
$
0.13

 
$
0.42

 
$
0.25

 
$
1.35

Income (Loss) from Continuing Operations
 
$
0.56

 
$
(0.36
)
 
$
0.08

 
$
(0.04
)
 
$
0.03

 
$
0.73

 
$
0.53

 
$
0.26

 
$
0.25

 
$
1.55

Net Income (Loss)
 
$
0.60

 
$
(0.32
)
 
$
0.08

 
$
(0.04
)
 
$
0.09

 
$
0.73

 
$
0.57

 
$
0.26

 
$
0.33

 
$
1.65

Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Net Operating Income (Loss) 1
 
$
0.56

 
$
(0.40
)
 
$
0.09

 
$
(0.01
)
 
$
0.09

 
$
0.70

 
$
0.13

 
$
0.42

 
$
0.25

 
$
1.35

Income (Loss) from Continuing Operations
 
$
0.56

 
$
(0.36
)
 
$
0.08

 
$
(0.04
)
 
$
0.03

 
$
0.73

 
$
0.53

 
$
0.26

 
$
0.25

 
$
1.55

Net Income (Loss)
 
$
0.60

 
$
(0.32
)
 
$
0.08

 
$
(0.04
)
 
$
0.09

 
$
0.73

 
$
0.57

 
$
0.26

 
$
0.33

 
$
1.65

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends Paid to Shareholders Per Share
 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.96

 
$
0.96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At Period End
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
8,210.5

 
$
8,390.3

 
$
8,305.9

 
$
8,169.7

 
$
8,036.1

 
$
8,075.6

 
$
8,055.1

 
$
7,885.0

 
 
 
 
Insurance Reserves
 
$
4,406.7

 
$
4,382.2

 
$
4,293.6

 
$
4,258.8

 
$
4,203.8

 
$
4,180.7

 
$
4,187.2

 
$
4,019.6

 
 
 
 
Debt
 
$
751.6

 
$
751.3

 
$
751.1

 
$
750.9

 
$
750.6

 
$
750.4

 
$
750.2

 
$
750.0

 
 
 
 
Shareholders’ Equity
 
$
1,975.2

 
$
2,073.6

 
$
2,105.2

 
$
2,041.1

 
$
1,992.4

 
$
2,024.6

 
$
2,012.3

 
$
2,109.9

 
 
 
 
Shareholders’ Equity Excluding Goodwill
 
$
1,652.2

 
$
1,750.6

 
$
1,782.2

 
$
1,718.1

 
$
1,669.4

 
$
1,701.6

 
$
1,693.8

 
$
1,798.1

 
 
 
 
Common Shares Issued and Outstanding (In Millions)
 
51.271

 
51.185

 
51.133

 
51.133

 
51.327

 
51.318

 
51.803

 
51.826

 
 
 
 
Book Value Per Share2
 
$
38.52

 
$
40.51

 
$
41.17

 
$
39.92

 
$
38.82

 
$
39.45

 
$
38.85

 
$
40.71

 
 
 
 
Book Value Per Share Excluding Goodwill1,2
 
$
32.22

 
$
34.20

 
$
34.85

 
$
33.60

 
$
32.52

 
$
33.16

 
$
32.70

 
$
34.69

 
 
 
 
Book Value Per Share Excluding Net Unrealized Gains on Fixed Maturities1,2
 
$
35.00

 
$
34.27

 
$
34.78

 
$
34.97

 
$
35.13

 
$
35.04

 
$
34.71

 
$
34.64

 
 
 
 
Debt to Total Capitalization2
 
27.6
%
 
26.6
 %
 
26.3
%
 
26.9
%
 
27.4
%
 
27.0
%
 
27.2
%
 
26.2
%
 
 
 
 
Rolling 12 Months Return on 5-point Average Shareholders Equity2,3
 
0.8
%
 
(0.5
)%
 
2.2
%
 
3.4
%
 
4.2
%
 
7.1
%
 
5.4
%
 
4.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Non-GAAP Measure. See page 31 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 Operations
(Dollars in Millions, Except Per Share Amounts)
 (Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
561.4

 
$
558.9

 
$
553.7

 
$
546.0

 
$
541.5

 
$
536.7

 
$
500.1

 
$
431.3

 
$
2,220.0

 
$
2,009.6

Net Investment Income
 
79.9

 
77.7

 
73.7

 
67.0

 
79.4

 
75.9

 
76.7

 
70.6

 
298.3

 
302.6

Other Income
 
1.0

 
0.8

 
0.6

 
0.8

 
1.4

 
0.8

 
0.6

 
0.9

 
3.2

 
3.7

Net Realized Gains on Sales of Investments
 
9.1

 
11.6

 
5.6

 
6.8

 
9.4

 
5.3

 
34.0

 
3.4

 
33.1

 
52.1

Other-than-temporary Impairment Losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Other-than-temporary Impairment Losses
 
(8.7
)
 
(8.3
)
 
(6.4
)
 
(9.6
)
 
(14.9
)
 
(3.3
)
 
(2.2
)
 
(7.0
)
 
(33.0
)
 
(27.4
)
Portion of Losses Recognized in Other Comprehensive Income
 
—

 
—

 
—

 
0.3

 
0.2

 
—

 
—

 
—

 
0.3

 
0.2

Net Impairment Losses Recognized in Earnings
 
(8.7
)
 
(8.3
)
 
(6.4
)
 
(9.3
)
 
(14.7
)
 
(3.3
)
 
(2.2
)
 
(7.0
)
 
(32.7
)
 
(27.2
)
Total Revenues
 
642.7

 
640.7

 
627.2

 
611.3

 
617.0

 
615.4

 
609.2

 
499.2

 
2,521.9

 
2,340.8

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses
 
418.3

 
490.2

 
436.1

 
436.2

 
416.0

 
378.8

 
375.1

 
297.7

 
1,780.8

 
1,467.6

Insurance Expenses
 
158.5

 
161.7

 
167.8

 
159.3

 
177.0

 
161.1

 
162.1

 
144.9

 
647.3

 
645.1

Write-off of Long-lived Asset
 
—

 
—

 
—

 
—

 
—

 
—

 
11.1

 
—

 
—

 
11.1

Loss from Early Extinguishment of Debt
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
9.1

 
—

 
9.1

Interest and Other Expenses
 
25.3

 
22.0

 
20.7

 
22.3

 
25.6

 
25.7

 
26.6

 
29.7

 
90.3

 
107.6

Total Expenses
 
602.1

 
673.9

 
624.6

 
617.8

 
618.6

 
565.6

 
574.9

 
481.4

 
2,518.4

 
2,240.5

Income (Loss) from Continuing Operations before Income Taxes
 
40.6

 
(33.2
)
 
2.6

 
(6.5
)
 
(1.6
)
 
49.8

 
34.3

 
17.8

 
3.5

 
100.3

Income Tax Benefit (Expense)
 
(11.5
)
 
14.9

 
1.5

 
4.3

 
2.9

 
(11.8
)
 
(6.9
)
 
(4.3
)
 
9.2

 
(20.1
)
Income (Loss) from Continuing Operations
 
29.1

 
(18.3
)
 
4.1

 
(2.2
)
 
1.3

 
38.0

 
27.4

 
13.5

 
12.7

 
80.2

Discontinued Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) from Discontinued Operations before Income Taxes
 
3.2

 
3.1

 
(0.1
)
 
0.1

 
5.1

 
—

 
3.5

 
—

 
6.3

 
8.6

Income Tax Expense
 
(1.1
)
 
(1.1
)
 
—

 
—

 
(1.8
)
 
(0.1
)
 
(1.2
)
 
—

 
(2.2
)
 
(3.1
)
Income (Loss) from Discontinued Operations
 
2.1

 
2.0

 
(0.1
)
 
0.1

 
3.3

 
(0.1
)
 
2.3

 
—

 
4.1

 
5.5

Net Income (Loss)
 
$
31.2

 
$
(16.3
)
 
$
4.0

 
$
(2.1
)
 
$
4.6

 
$
37.9

 
$
29.7

 
$
13.5

 
$
16.8

 
$
85.7

Income (Loss) from Continuing Operations Per Unrestricted Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.56

 
$
(0.36
)
 
$
0.08

 
$
(0.04
)
 
$
0.03

 
$
0.73

 
$
0.53

 
$
0.26

 
$
0.25

 
$
1.55

Diluted
 
$
0.56

 
$
(0.36
)
 
$
0.08

 
$
(0.04
)
 
$
0.03

 
$
0.73

 
$
0.53

 
$
0.26

 
$
0.25

 
$
1.55

Net Income (Loss) Per Unrestricted Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.60

 
$
(0.32
)
 
$
0.08

 
$
(0.04
)
 
$
0.09

 
$
0.73

 
$
0.57

 
$
0.26

 
$
0.33

 
$
1.65

Diluted
 
$
0.60

 
$
(0.32
)
 
$
0.08

 
$
(0.04
)
 
$
0.09

 
$
0.73

 
$
0.57

 
$
0.26

 
$
0.33

 
$
1.65

Dividends Paid to Shareholders Per Share
 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.24

 
$
0.96

 
$
0.96

Weighted Average Unrestricted Common Shares Outstanding (in Millions)
 
51.203

 
51.123

 
51.108

 
51.192

 
51.215

 
51.612

 
51.728

 
51.873

 
51.156

 
51.607

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 4

Kemper Corporation
Consolidated Balance Sheets
(Dollars in Millions)
 (Unaudited)
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Maturities at Fair Value
 
$
5,124.9

 
$
5,170.1

 
$
5,084.3

 
$
4,917.4

 
$
4,852.3

 
$
4,844.9

 
$
4,764.0

 
$
4,803.1

Equity Securities at Fair Value
 
481.7

 
504.9

 
509.6

 
501.3

 
523.2

 
535.7

 
562.9

 
628.6

Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings
 
175.9

 
181.1

 
182.7

 
190.5

 
190.6

 
179.4

 
173.5

 
168.1

Fair Value Option Investments
 
111.4

 
126.1

 
134.1

 
161.9

 
164.5

 
166.1

 
160.0

 
54.2

Short-term Investments at Cost which Approximates Fair Value
 
273.7

 
324.2

 
365.2

 
367.4

 
255.7

 
295.9

 
338.4

 
357.3

Other Investments
 
439.9

 
438.8

 
440.8

 
443.8

 
443.2

 
451.0

 
451.0

 
450.1

Total Investments
 
6,607.5

 
6,745.2

 
6,716.7

 
6,582.3

 
6,429.5

 
6,473.0

 
6,449.8

 
6,461.4

Cash
 
115.7

 
171.1

 
159.8

 
160.4

 
161.7

 
147.1

 
93.8

 
87.7

Receivables from Policyholders
 
336.5

 
348.1

 
337.2

 
341.1

 
332.4

 
347.9

 
335.2

 
293.1

Other Receivables
 
198.6

 
197.9

 
192.7

 
193.9

 
193.2

 
198.9

 
267.1

 
197.0

Deferred Policy Acquisition Costs
 
332.0

 
328.2

 
321.9

 
319.3

 
316.4

 
325.8

 
317.5

 
305.6

Goodwill
 
323.0

 
323.0

 
323.0

 
323.0

 
323.0

 
323.0

 
318.5

 
311.8

Current Income Tax Assets
 
15.5

 
28.5

 
20.9

 
15.5

 
9.5

 
12.8

 
20.8

 
10.9

Deferred Income Tax Assets
 
25.8

 
—

 
—

 
—

 
31.9

 
9.5

 
13.4

 
—

Other Assets
 
255.9

 
248.3

 
233.7

 
234.2

 
238.5

 
237.6

 
239.0

 
217.5

Total Assets
 
$
8,210.5

 
$
8,390.3

 
$
8,305.9

 
$
8,169.7

 
$
8,036.1

 
$
8,075.6

 
$
8,055.1

 
$
7,885.0

Liabilities and Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life and Health
 
$
3,475.3

 
$
3,461.5

 
$
3,376.2

 
$
3,358.4

 
$
3,341.0

 
$
3,327.8

 
$
3,312.8

 
$
3,299.5

Property and Casualty
 
931.4

 
920.7

 
917.4

 
900.4

 
862.8

 
852.9

 
874.4

 
720.1

Total Insurance Reserves
 
4,406.7

 
4,382.2

 
4,293.6

 
4,258.8

 
4,203.8

 
4,180.7

 
4,187.2

 
4,019.6

Unearned Premiums
 
618.7

 
637.0

 
622.6

 
621.6

 
613.1

 
629.4

 
606.2

 
530.0

Liabilities for Income Taxes
 
5.1

 
33.2

 
42.4

 
10.2

 
3.8

 
3.7

 
3.6

 
58.2

Long-term Debt, Current and Non-current, at Amortized Cost
 
751.6

 
751.3

 
751.1

 
750.9

 
750.6

 
750.4

 
750.2

 
750.0

Accrued Expenses and Other Liabilities
 
453.2

 
513.0

 
491.0

 
487.1

 
472.4

 
486.8

 
495.6

 
417.3

Total Liabilities
 
6,235.3

 
6,316.7

 
6,200.7

 
6,128.6

 
6,043.7

 
6,051.0

 
6,042.8

 
5,775.1

Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
5.1

 
5.1

 
5.1

 
5.1

 
5.1

 
5.1

 
5.2

 
5.2

Paid-in Capital
 
660.3

 
656.9

 
654.6

 
652.6

 
654.0

 
651.9

 
657.1

 
655.1

Retained Earnings
 
1,172.8

 
1,155.5

 
1,184.4

 
1,192.7

 
1,209.0

 
1,218.6

 
1,204.7

 
1,189.3

Accumulated Other Comprehensive Income
 
137.0

 
256.1

 
261.1

 
190.7

 
124.3

 
149.0

 
145.3

 
260.3

Total Shareholders’ Equity
 
1,975.2

 
2,073.6

 
2,105.2

 
2,041.1

 
1,992.4

 
2,024.6

 
2,012.3

 
2,109.9

Total Liabilities and Shareholders’ Equity
 
$
8,210.5

 
$
8,390.3

 
$
8,305.9

 
$
8,169.7

 
$
8,036.1

 
$
8,075.6

 
$
8,055.1

 
$
7,885.0


Page 5

Kemper Corporation
Consolidated Statements of Cash Flows
(Dollars in Millions)
 (Unaudited)
 
 
Year Ended
 
 
Dec 31,
2016
 
Dec 31,
2015
 
Dec 31,
2014
Operating Activities:
 
 
 
 
 
 
Net Income
 
$
16.8

 
$
85.7

 
$
114.5

Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
 
 
 
 
 
 
Increase in Deferred Policy Acquisition Costs
 
(15.6
)
 
(13.1
)
 
(0.4
)
Amortization of Intangible Assets Acquired
 
5.9

 
15.4

 
7.2

Equity in Earnings of Equity Method Limited Liability Investments
 
(7.5
)
 
(19.0
)
 
(9.0
)
Distribution of Accumulated Earnings of Equity Method Limited Liability Investments
 
15.7

 
8.6

 
21.7

Decrease (Increase) in Value of Fair Value Option Investments Reported in Net Investment Income
 
1.9

 
(0.3
)
 
0.7

Amortization of Investment Securities and Depreciation of Investment Real Estate
 
16.2

 
16.1

 
15.4

Net Realized Gains on Sales of Investments
 
(33.1
)
 
(52.1
)
 
(39.1
)
Net Impairment Losses Recognized in Earnings
 
32.7

 
27.2

 
15.2

Loss from Early Extinguishment of Debt
 
—

 
9.1

 
—

Depreciation of Property and Equipment
 
13.6

 
13.5

 
16.0

Write-off of Long-lived Asset
 
—

 
11.1

 
54.6

Decrease (Increase) in Receivables
 
(11.0
)
 
49.6

 
46.2

Increase in Insurance Reserves
 
201.8

 
39.6

 
(54.7
)
Increase in Unearned Premiums
 
5.6

 
(9.4
)
 
(62.0
)
Change in Income Taxes
 
(6.5
)
 
(21.8
)
 
11.2

Increase in Accrued Expenses and Other Liabilities
 
3.3

 
22.6

 
(20.3
)
Other, Net
 
0.7

 
32.2

 
16.4

Net Cash Provided by Operating Activities (Carryforward to page 7)
 
240.5

 
215.0

 
133.6


Page 6

Kemper Corporation
Consolidated Statements of Cash Flows
(Dollars in Millions)
 (Unaudited)
 
 
Year Ended
 
 
Dec 31,
2016
 
Dec 31,
2015
 
Dec 31,
2014
Net Cash Provided by Operating Activities (Carryforward from page 6)
 
240.5

 
215.0

 
133.6

Investing Activities:
 
 
 
 
 
 
Sales, Paydowns and Maturities of Fixed Maturities
 
532.3

 
627.8

 
573.7

Purchases of Fixed Maturities
 
(850.3
)
 
(681.3
)
 
(553.0
)
Sales of Equity Securities
 
158.9

 
238.4

 
245.3

Purchases of Equity Securities
 
(90.1
)
 
(134.0
)
 
(235.2
)
Return of Investment of Equity Method Limited Liability Investments
 
41.0

 
32.9

 
55.2

Acquisitions of Equity Method Limited Liability Investments
 
(34.6
)
 
(32.4
)
 
(21.4
)
Sales of Fair Value Option Investments
 
72.2

 
—

 
6.9

Purchases of Fair Value Option Investments
 
(21.0
)
 
(111.0
)
 
(60.9
)
Decrease (Increase) in Short-term Investments
 
(18.0
)
 
104.9

 
(63.9
)
Improvements of Investment Real Estate
 
(2.2
)
 
(1.8
)
 
(2.1
)
Sales of Investment Real Estate
 
7.5

 
7.7

 
0.9

Acquisition of Business, Net of Cash Acquired
 
—

 
(57.6
)
 
—

Increase in Other Investments
 
(5.7
)
 
(3.2
)
 
(8.0
)
Purchase of Corporate-owned Life Insurance
 
(7.5
)
 
(7.5
)
 
(33.5
)
Acquisition of Software
 
(17.6
)
 
(8.9
)
 
(11.3
)
Disposition of Subsidiary, Net of Cash Disposed
 
—

 
—

 
8.9

Other, Net
 
(3.0
)
 
(2.6
)
 
(5.9
)
Net Cash Used by Investing Activities
 
(238.1
)
 
(28.6
)
 
(104.3
)
Financing Activities:
 
 
 
 
 
 
Net Proceeds from Issuances of Debt
 
10.0

 
345.8

 
144.0

Repayments of Debt
 
(10.0
)
 
(357.3
)
 
—

Common Stock Repurchases
 
(3.8
)
 
(45.0
)
 
(114.0
)
Dividends and Dividend Equivalents Paid
 
(49.2
)
 
(49.7
)
 
(51.8
)
Cash Exercise of Stock Options
 
3.5

 
3.9

 
0.5

Other, Net
 
1.1

 
1.5

 
1.6

Net Cash Used by Financing Activities
 
(48.4
)
 
(100.8
)
 
(19.7
)
Increase (Decrease) in Cash
 
(46.0
)
 
85.6

 
9.6

Cash, Beginning of Year
 
161.7

 
76.1

 
66.5

Cash, End of Period
 
$
115.7

 
$
161.7

 
$
76.1

 
 
 
 
 
 
 

Page 7

Kemper Corporation
Capital Metrics
(Dollars and Shares in Millions, Except Per Share Amounts)
(Unaudited)
 
 
Three Months Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
Book Value Per Share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders’ Equity
 
$
1,975.2

 
$
2,073.6

 
$
2,105.2

 
$
2,041.1

 
$
1,992.4

 
$
2,024.6

 
$
2,012.3

 
$
2,109.9

Less: Goodwill
 
(323.0
)
 
(323.0
)
 
(323.0
)
 
(323.0
)
 
(323.0
)
 
(323.0
)
 
(318.5
)
 
(311.8
)
Shareholders’ Equity Excluding Goodwill
 
$
1,652.2

 
$
1,750.6

 
$
1,782.2

 
$
1,718.1

 
$
1,669.4

 
$
1,701.6

 
$
1,693.8

 
$
1,798.1

Shareholders’ Equity
 
$
1,975.2

 
$
2,073.6

 
$
2,105.2

 
$
2,041.1

 
$
1,992.4

 
$
2,024.6

 
$
2,012.3

 
$
2,109.9

Less: Net Unrealized Gains on Fixed Maturities
 
(180.6
)
 
(319.3
)
 
(327.0
)
 
(253.0
)
 
(189.2
)
 
(226.2
)
 
(214.4
)
 
(314.6
)
Shareholders’ Equity Excluding Net Unrealized Gains on Fixed Maturities
 
$
1,794.6

 
$
1,754.3

 
$
1,778.2

 
$
1,788.1

 
$
1,803.2

 
$
1,798.4

 
$
1,797.9

 
$
1,795.3

Denominator
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Shares Issued and Outstanding
 
51.271

 
51.185

 
51.133

 
51.133

 
51.327

 
51.318

 
51.803

 
51.826

Book Value Per Share
 
$
38.52

 
$
40.51

 
$
41.17

 
$
39.92

 
$
38.82

 
$
39.45

 
$
38.85

 
$
40.71

Book Value Per Share Excluding Goodwill
 
$
32.22

 
$
34.20

 
$
34.85

 
$
33.60

 
$
32.52

 
$
33.16

 
$
32.70

 
$
34.69

Book Value Per Share Excluding Unrealized on Fixed Maturities
 
$
35.00

 
$
34.27

 
$
34.78

 
$
34.97

 
$
35.13

 
$
35.04

 
$
34.71

 
$
34.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rolling 12 Months Net Income
 
$
16.8

 
$
(9.8
)
 
$
44.4

 
$
70.1

 
$
85.7

 
$
146.5

 
$
113.3

 
$
92.9

Denominator (5-point Average)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5-point Average Shareholders’ Equity
 
$
2,037.5

 
$
2,047.4

 
$
2,035.1

 
$
2,036.1

 
$
2,046.0

 
$
2,068.4

 
$
2,091.2

 
$
2,117.7

Rolling 12 Months Return on Average Shareholders' Equity (5-point Average)
 
0.8
%
 
(0.5
)%
 
2.2
%
 
3.4
%
 
4.2
%
 
7.1
%
 
5.4
%
 
4.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt and Total Capitalization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt
 
$
751.6

 
$
751.3

 
$
751.1

 
$
750.9

 
$
750.6

 
$
750.4

 
$
750.2

 
$
750.0

Shareholders’ Equity
 
1,975.2

 
2,073.6

 
2,105.2

 
2,041.1

 
1,992.4

 
2,024.6

 
2,012.3

 
2,109.9

Total Capitalization
 
$
2,726.8

 
$
2,824.9

 
$
2,856.3

 
$
2,792.0

 
$
2,743.0

 
$
2,775.0

 
$
2,762.5

 
$
2,859.9

Ratio of Debt to Shareholders’ Equity
 
38.1
%
 
36.2
 %
 
35.7
%
 
36.8
%
 
37.7
%
 
37.1
%
 
37.3
%
 
35.5
%
Ratio of Debt to Total Capitalization
 
27.6
%
 
26.6
 %
 
26.3
%
 
26.9
%
 
27.4
%
 
27.0
%
 
27.2
%
 
26.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent Company Liquidity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kemper Holding Company Cash and Investments
 
$
298.7

 
$
310.3

 
$
344.2

 
$
295.7

 
$
341.2

 
$
343.3

 
$
378.8

 
$
290.2

Borrowings Available Under Credit Agreement
 
225.0

 
225.0

 
225.0

 
225.0

 
225.0

 
225.0

 
225.0

 
225.0

Parent Company Liquidity
 
$
523.7

 
$
535.3

 
$
569.2

 
$
520.7

 
$
566.2

 
$
568.3

 
$
603.8

 
$
515.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Returned to Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock Repurchased
 
$
—

 
$
—

 
$
—

 
$
3.8

 
$
2.2

 
$
17.6

 
$
1.8

 
$
21.9

Cash Dividends Paid
 
12.3

 
12.4

 
12.3

 
12.2

 
12.4

 
12.5

 
12.5

 
12.3

Total Capital Returned to Shareholders
 
$
12.3

 
$
12.4

 
$
12.3

 
$
16.0

 
$
14.6

 
$
30.1

 
$
14.3

 
$
34.2

 

Page 8

Kemper Corporation
Debt Outstanding and Ratings
(Dollars in Millions)
(Unaudited)
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Sep 30, 2015
 
Jun 30, 2015
 
Mar 31, 2015
Kemper Corporation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes Payable under Revolving Credit Agreement
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Senior Notes at Amortized Cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.00% Senior Notes due May 15, 2017
 
359.8

 
359.6

 
359.4

 
359.3

 
359.1

 
358.9

 
358.8

 
358.6

4.35% Senior Notes due February 15, 2025
 
247.7

 
247.6

 
247.6

 
247.5

 
247.4

 
247.4

 
247.3

 
247.3

7.375% Subordinated Debentures due February 27, 2054 at Amortized Cost
 
144.1

 
144.1

 
144.1

 
144.1

 
144.1

 
144.1

 
144.1

 
144.1

Debt Outstanding
 
$
751.6

 
$
751.3

 
$
751.1

 
$
750.9

 
$
750.6

 
$
750.4

 
$
750.2

 
$
750.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subsidiary Debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Bank of Dallas
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Federal Home Loan Bank of Chicago
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property & Casualty Insurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personal Automobile
 
$
317.2

 
$
313.8

 
$
310.3

 
$
303.3

 
$
296.8

 
$
288.5

 
$
252.6

 
$
189.8

 
$
1,244.6

 
$
1,027.7

Homeowners
 
67.7

 
68.5

 
67.6

 
68.1

 
70.0

 
72.1

 
71.6

 
72.6

 
271.9

 
286.3

Other Personal
 
11.1

 
11.3

 
11.3

 
11.3

 
11.5

 
11.8

 
11.7

 
11.7

 
45.0

 
46.7

Total Personal
 
396.0

 
393.6

 
389.2

 
382.7

 
378.3

 
372.4

 
335.9

 
274.1

 
1,561.5

 
1,360.7

Commercial Automobile
 
13.1

 
13.3

 
13.4

 
13.5

 
13.8

 
13.7

 
13.5

 
13.5

 
53.3

 
54.5

Total Earned Premiums
 
409.1

 
406.9

 
402.6

 
396.2

 
392.1

 
386.1

 
349.4

 
287.6

 
1,614.8

 
1,415.2

Net Investment Income
 
20.4

 
20.4

 
19.7

 
11.9

 
21.6

 
18.3

 
18.6

 
14.8

 
72.4

 
73.3

Other Income
 
0.1

 
0.1

 
0.1

 
0.2

 
0.1

 
0.1

 
0.1

 
0.3

 
0.5

 
0.6

Total Property & Casualty Insurance
 
429.6

 
427.4

 
422.4

 
408.3

 
413.8

 
404.5

 
368.1

 
302.7

 
1,687.7

 
1,489.1

Life & Health Insurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
 
95.9

 
95.8

 
95.5

 
94.4

 
94.6

 
95.5

 
96.0

 
88.0

 
381.6

 
374.1

Accident and Health
 
38.2

 
37.6

 
36.7

 
36.9

 
36.2

 
36.2

 
35.7

 
36.8

 
149.4

 
144.9

Property
 
18.2

 
18.6

 
18.9

 
18.5

 
18.6

 
18.9

 
19.0

 
18.9

 
74.2

 
75.4

Total Earned Premiums
 
152.3

 
152.0

 
151.1

 
149.8

 
149.4

 
150.6

 
150.7

 
143.7

 
605.2

 
594.4

Net Investment Income
 
53.6

 
54.5

 
50.1

 
55.0

 
55.2

 
55.1

 
53.5

 
50.4

 
213.2

 
214.2

Other Income
 
0.9

 
0.7

 
0.6

 
0.6

 
0.7

 
0.7

 
0.2

 
0.8

 
2.8

 
2.4

Total Life & Health Insurance
 
206.8

 
207.2

 
201.8

 
205.4

 
205.3

 
206.4

 
204.4

 
194.9

 
821.2

 
811.0

Total Segment Revenues
 
636.4

 
634.6

 
624.2

 
613.7

 
619.1

 
610.9

 
572.5

 
497.6

 
2,508.9

 
2,300.1

Net Realized Gains on Sales of Investments
 
9.1

 
11.6

 
5.6

 
6.8

 
9.4

 
5.3

 
34.0

 
3.4

 
33.1

 
52.1

Net Impairment Losses Recognized in Earnings
 
(8.7
)
 
(8.3
)
 
(6.4
)
 
(9.3
)
 
(14.7
)
 
(3.3
)
 
(2.2
)
 
(7.0
)
 
(32.7
)
 
(27.2
)
Other
 
5.9

 
2.8

 
3.8

 
0.1

 
3.2

 
2.5

 
4.9

 
5.2

 
12.6

 
15.8

Total Revenues
 
$
642.7

 
$
640.7

 
$
627.2

 
$
611.3

 
$
617.0

 
$
615.4

 
$
609.2

 
$
499.2

 
$
2,521.9

 
$
2,340.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 10

Kemper Corporation
Segment Operating Results
(Dollars in Millions)
 (Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Segment Operating Profit (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property & Casualty Insurance
 
$
7.2

 
$
15.6

 
$
(17.2
)
 
$
(22.8
)
 
$
(10.9
)
 
$
25.0

 
$
(8.4
)
 
$
18.0

 
$
(17.2
)
 
$
23.7

Life & Health Insurance
 
35.1

 
(45.7
)
 
25.3

 
31.0

 
27.3

 
35.4

 
22.2

 
24.8

 
45.7

 
109.7

Total Segment Operating Profit (Loss)
 
42.3

 
(30.1
)
 
8.1

 
8.2

 
16.4

 
60.4

 
13.8

 
42.8

 
28.5

 
133.4

Corporate and Other Operating Loss
 
(2.1
)
 
(6.4
)
 
(4.7
)
 
(12.2
)
 
(12.7
)
 
(12.6
)
 
(11.3
)
 
(12.3
)
 
(25.4
)
 
(48.9
)
Total Operating Profit (Loss)
 
40.2

 
(36.5
)
 
3.4

 
(4.0
)
 
3.7

 
47.8

 
2.5

 
30.5

 
3.1

 
84.5

Net Realized Gains on Sales of Investments
 
9.1

 
11.6

 
5.6

 
6.8

 
9.4

 
5.3

 
34.0

 
3.4

 
33.1

 
52.1

Net Impairment Losses Recognized in Earnings
 
(8.7
)
 
(8.3
)
 
(6.4
)
 
(9.3
)
 
(14.7
)
 
(3.3
)
 
(2.2
)
 
(7.0
)
 
(32.7
)
 
(27.2
)
Loss from Early Extinguishment of Debt
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(9.1
)
 
—

 
(9.1
)
Income (Loss) from Continuing Operations before Income Taxes
 
$
40.6

 
$
(33.2
)
 
$
2.6

 
$
(6.5
)
 
$
(1.6
)
 
$
49.8

 
$
34.3

 
$
17.8

 
$
3.5

 
$
100.3

Segment Net Operating Income (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property & Casualty Insurance
 
$
7.0

 
$
12.1

 
$
(8.9
)
 
$
(13.1
)
 
$
(5.1
)
 
$
21.0

 
$
(2.6
)
 
$
13.4

 
$
(2.9
)
 
$
26.7

Life & Health Insurance
 
23.0

 
(29.4
)
 
16.4

 
20.3

 
17.8

 
23.5

 
14.3

 
16.1

 
30.3

 
71.7

Total Segment Net Operating Income (Loss)
 
30.0

 
(17.3
)
 
7.5

 
7.2

 
12.7

 
44.5

 
11.7

 
29.5

 
27.4

 
98.4

Corporate and Other Net Operating Loss
 
(1.2
)
 
(3.1
)
 
(2.9
)
 
(7.8
)
 
(7.9
)
 
(7.9
)
 
(5.0
)
 
(7.7
)
 
(15.0
)
 
(28.5
)
Consolidated Operating Income (Loss)
 
28.8

 
(20.4
)
 
4.6

 
(0.6
)
 
4.8

 
36.6

 
6.7

 
21.8

 
12.4

 
69.9

Net Income (Loss) From:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Realized Gains on Sales of Investments
 
5.9

 
7.5

 
3.7

 
4.4

 
6.1

 
3.5

 
22.1

 
2.2

 
21.5

 
33.9

Net Impairment Losses Recognized in Earnings
 
(5.6
)
 
(5.4
)
 
(4.2
)
 
(6.0
)
 
(9.6
)
 
(2.1
)
 
(1.4
)
 
(4.6
)
 
(21.2
)
 
(17.7
)
Loss from Early Extinguishment of Debt
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(5.9
)
 
—

 
(5.9
)
Income (Loss) from Continuing Operations
 
$
29.1

 
$
(18.3
)
 
$
4.1

 
$
(2.2
)
 
$
1.3

 
$
38.0

 
$
27.4

 
$
13.5

 
$
12.7

 
$
80.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 11

Kemper Corporation
Segment Operating Results
(Dollars in Millions)
 (Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Earned Premiums by Product:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personal Automobile
 
$
317.2

 
$
313.8

 
$
310.3

 
$
303.3

 
$
296.8

 
$
288.5

 
$
252.6

 
$
189.8

 
$
1,244.6

 
$
1,027.7

Homeowners
 
67.7

 
68.5

 
67.6

 
68.1

 
70.0

 
72.1

 
71.6

 
72.6

 
271.9

 
286.3

Other Personal Property and Casualty Insurance
 
29.3

 
29.9

 
30.2

 
29.8

 
30.1

 
30.7

 
30.7

 
30.6

 
119.2

 
122.1

Commercial Automobile
 
13.1

 
13.3

 
13.4

 
13.5

 
13.8

 
13.7

 
13.5

 
13.5

 
53.3

 
54.5

Life
 
95.9

 
95.8

 
95.5

 
94.4

 
94.6

 
95.5

 
96.0

 
88.0

 
381.6

 
374.1

Accident and Health
 
38.2

 
37.6

 
36.7

 
36.9

 
36.2

 
36.2

 
35.7

 
36.8

 
149.4

 
144.9

Total Earned Premiums
 
$
561.4

 
$
558.9

 
$
553.7

 
$
546.0

 
$
541.5

 
$
536.7

 
$
500.1

 
$
431.3

 
$
2,220.0

 
$
2,009.6

Net Investment Income by Segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property & Casualty Insurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Limited Liability Investments
 
$
2.6

 
$
3.0

 
$
2.9

 
$
(3.9
)
 
$
4.0

 
$
4.7

 
$
3.0

 
$
0.2

 
$
4.6

 
$
11.9

All Other Net Investment Income
 
17.8

 
17.4

 
16.8

 
15.8

 
17.6

 
13.6

 
15.6

 
14.6

 
67.8

 
61.4

Net Investment Income
 
20.4

 
20.4

 
19.7

 
11.9

 
21.6

 
18.3

 
18.6

 
14.8

 
72.4

 
73.3

Life & Health Insurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Limited Liability Investments
 
0.9

 
1.7

 
(0.5
)
 
0.1

 
2.5

 
3.0

 
0.9

 
(1.0
)
 
2.2

 
5.4

All Other Net Investment Income
 
52.7

 
52.8

 
50.6

 
54.9

 
52.7

 
52.1

 
52.6

 
51.4

 
211.0

 
208.8

Net Investment Income
 
53.6

 
54.5

 
50.1

 
55.0

 
55.2

 
55.1

 
53.5

 
50.4

 
213.2

 
214.2

Total Segment Net Investment Income
 
74.0

 
74.9

 
69.8

 
66.9

 
76.8

 
73.4

 
72.1

 
65.2

 
285.6

 
287.5

Unallocated Net Investment Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Limited Liability Investments
 
0.3

 
0.5

 
0.4

 
(0.5
)
 
0.7

 
0.6

 
0.3

 
0.1

 
0.7

 
1.7

All Other Net Investment Income
 
5.6

 
2.3

 
3.5

 
0.6

 
1.9

 
1.9

 
4.3

 
5.3

 
12.0

 
13.4

Unallocated Net Investment Income
 
5.9

 
2.8

 
3.9

 
0.1

 
2.6

 
2.5

 
4.6

 
5.4

 
12.7

 
15.1

Net Investment Income
 
$
79.9

 
$
77.7

 
$
73.7

 
$
67.0

 
$
79.4

 
$
75.9

 
$
76.7

 
$
70.6

 
$
298.3

 
$
302.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Page 12

Kemper Corporation
Catastrophe Frequency and Severity
(Dollars in Millions)
(Unaudited)
 
 
Year Ended Dec 31, 2016
 
 
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
 
39

 
$
33.0

 
28

 
$
5.5

 
39

 
$
37.6

$5 - $10
 
2

 
13.2

 
—

 
—

 
2

 
13.5

$10 - $15
 
—

 
—

 
—

 
—

 
—

 
—

$15 - $20
 
—

 
—

 
—

 
—

 
—

 
—

$20 - $25
 
—

 
—

 
—

 
—

 
—

 
—

Greater Than $25
 
2

 
63.4

 
—

 
—

 
2

 
64.0

Total
 
43

 
$
109.6

 
28

 
$
5.5

 
43

 
$
115.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended Dec 31, 2015
 
 
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
 
37

 
$
40.9

 
24

 
$
3.8

 
37

 
$
43.6

$5 - $10
 
3

 
23.6

 
—

 
—

 
3

 
24.7

$10 - $15
 
—

 
—

 
—

 
—

 
—

 
—

$15 - $20
 
—

 
—

 
—

 
—

 
—

 
—

$20 - $25
 
—

 
—

 
—

 
—

 
—

 
—

Greater Than $25
 
—

 
—

 
—

 
—

 
—

 
—

Total
 
40

 
$
64.5

 
24

 
$
3.8

 
40

 
$
68.3


Page 13

Kemper Corporation
Property & Casualty Insurance Segment - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
390.1

 
$
422.7

 
$
404.7

 
$
403.4

 
$
374.7

 
$
403.6

 
$
348.2

 
$
279.7

 
$
1,620.9

 
$
1,406.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
409.1

 
406.9

 
402.6

 
396.2

 
392.1

 
386.1

 
349.4

 
287.6

 
1,614.8

 
1,415.2

Net Investment Income
 
20.4

 
20.4

 
19.7

 
11.9

 
21.6

 
18.3

 
18.6

 
14.8

 
72.4

 
73.3

Other Income
 
0.1

 
0.1

 
0.1

 
0.2

 
0.1

 
0.1

 
0.1

 
0.3

 
0.5

 
0.6

Total Revenues
 
429.6

 
427.4

 
422.4

 
408.3

 
413.8

 
404.5

 
368.1

 
302.7

 
1,687.7

 
1,489.1

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
310.6

 
306.7

 
309.2

 
297.4

 
307.4

 
283.2

 
245.5

 
198.5

 
1,223.9

 
1,034.6

Catastrophe Losses and LAE
 
11.7

 
11.3

 
49.1

 
37.5

 
14.1

 
4.7

 
35.4

 
10.3

 
109.6

 
64.5

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
6.2

 
3.1

 
(9.1
)
 
4.7

 
2.3

 
(0.9
)
 
(1.4
)
 
(5.0
)
 
4.9

 
(5.0
)
Catastrophe Losses and LAE
 
(3.0
)
 
(3.9
)
 
(9.6
)
 
(2.7
)
 
(1.4
)
 
(1.9
)
 
(2.4
)
 
(2.2
)
 
(19.2
)
 
(7.9
)
Total Incurred Losses and LAE
 
325.5

 
317.2

 
339.6

 
336.9

 
322.4

 
285.1

 
277.1

 
201.6

 
1,319.2

 
1,086.2

Insurance Expenses, Excluding Write-off of Long-lived Asset
 
96.9

 
94.6

 
100.0

 
94.2

 
102.3

 
94.4

 
88.3

 
83.1

 
385.7

 
368.1

Write-off of Long-lived Asset2
 
—

 
—

 
—

 
—

 
—

 
—

 
11.1

 
—

 
—

 
11.1

Operating Profit (Loss)
 
7.2

 
15.6

 
(17.2
)
 
(22.8
)
 
(10.9
)
 
25.0

 
(8.4
)
 
18.0

 
(17.2
)
 
23.7

Income Tax Benefit (Expense)
 
(0.2
)
 
(3.5
)
 
8.3

 
9.7

 
5.8

 
(4.0
)
 
5.8

 
(4.6
)
 
14.3

 
3.0

Segment Net Operating Income (Loss)
 
$
7.0

 
$
12.1

 
$
(8.9
)
 
$
(13.1
)
 
$
(5.1
)
 
$
21.0

 
$
(2.6
)
 
$
13.4

 
$
(2.9
)
 
$
26.7

Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
75.9
 %
 
75.4
 %
 
76.9
 %
 
75.0
 %
 
78.4
 %
 
73.3
 %
 
70.3
 %
 
69.0
 %
 
75.8
 %
 
73.2
 %
Current Year Catastrophe Losses and LAE Ratio
 
2.9

 
2.8

 
12.2

 
9.5

 
3.6

 
1.2

 
10.1

 
3.6

 
6.8

 
4.6

Prior Years Non-catastrophe Losses and LAE Ratio
 
1.5

 
0.8

 
(2.3
)
 
1.2

 
0.6

 
(0.2
)
 
(0.4
)
 
(1.7
)
 
0.3

 
(0.4
)
Prior Years Catastrophe Losses and LAE Ratio
 
(0.7
)
 
(1.0
)
 
(2.4
)
 
(0.7
)
 
(0.4
)
 
(0.5
)
 
(0.7
)
 
(0.8
)
 
(1.2
)
 
(0.6
)
Total Incurred Loss and LAE Ratio
 
79.6

 
78.0

 
84.4

 
85.0

 
82.2

 
73.8

 
79.3

 
70.1

 
81.7

 
76.8

Insurance Expense Ratio, Excluding Write-off of Long-lived Asset
 
23.7

 
23.2

 
24.8

 
23.8

 
26.1

 
24.4

 
25.3

 
28.9

 
23.9

 
26.0

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

 
—

 
—

 
—

 
—

 
—

 
3.2

 
—

 
—

 
0.8

Combined Ratio
 
103.3
 %
 
101.2
 %
 
109.2
 %
 
108.8
 %
 
108.3
 %
 
98.2
 %
 
107.8
 %
 
99.0
 %
 
105.6
 %
 
103.6
 %
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
75.9
 %
 
75.4
 %
 
76.9
 %
 
75.0
 %
 
78.4
 %
 
73.3
 %
 
70.3
 %
 
69.0
 %
 
75.8
 %
 
73.2
 %
Insurance Expense Ratio, Excluding write-off of Long-lived Asset
 
23.7

 
23.2

 
24.8

 
23.8

 
26.1

 
24.4

 
25.3

 
28.9

 
23.9

 
26.0

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

 
—

 
—

 
—

 
—

 
—

 
3.2

 
—

 
—

 
0.8

Underlying Combined Ratio
 
99.6
 %
 
98.6
 %
 
101.7
 %
 
98.8
 %
 
104.5
 %
 
97.7
 %
 
98.8
 %
 
97.9
 %
 
99.7
 %
 
100.0
 %
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
99.6
 %
 
98.6
 %
 
101.7
 %
 
98.8
 %
 
104.5
 %
 
97.7
 %
 
98.8
 %
 
97.9
 %
 
99.7
 %
 
100.0
 %
Current Year Catastrophe Losses and LAE Ratio
 
2.9

 
2.8

 
12.2

 
9.5

 
3.6

 
1.2

 
10.1

 
3.6

 
6.8

 
4.6

Prior Years Non-catastrophe Losses and LAE Ratio
 
1.5

 
0.8

 
(2.3
)
 
1.2

 
0.6

 
(0.2
)
 
(0.4
)
 
(1.7
)
 
0.3

 
(0.4
)
Prior Years Catastrophe Losses and LAE Ratio
 
(0.7
)
 
(1.0
)
 
(2.4
)
 
(0.7
)
 
(0.4
)
 
(0.5
)
 
(0.7
)
 
(0.8
)
 
(1.2
)
 
(0.6
)
Combined Ratio as Reported
 
103.3
 %
 
101.2
 %
 
109.2
 %
 
108.8
 %
 
108.3
 %
 
98.2
 %
 
107.8
 %
 
99.0
 %
 
105.6
 %
 
103.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.
2 The Write-off of Long-lived Asset has not been allocated to product lines. Accordingly, Results of Operations and Selected Financial Information presented on pages 16 to 22 of this Investor Supplement exclude the write-off.

Page 14


Kemper Corporation
Property & Casualty Insurance Segment - Results of Operations and Selected Financial Information (continued)
(Dollars in Millions)
(Unaudited)
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Sep 30, 2015
 
Jun 30, 2015
 
Mar 31, 2015
Insurance Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
$
754.1

 
$
729.9

 
$
709.6

 
$
678.8

 
$
656.3

 
$
630.2

 
$
631.8

 
$
483.4

Homeowners
 
88.9

 
95.4

 
105.9

 
115.4

 
98.9

 
103.1

 
119.4

 
108.1

Other Personal
 
41.1

 
41.9

 
44.1

 
46.1

 
45.3

 
50.0

 
50.3

 
48.5

Insurance Reserves
 
$
884.1

 
$
867.2

 
$
859.6

 
$
840.3

 
$
800.5

 
$
783.3

 
$
801.5

 
$
640.0

Insurance Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Case
 
$
598.0

 
$
596.6

 
$
589.1

 
$
563.3

 
$
537.1

 
$
532.1

 
$
540.5

 
$
426.8

Incurred but Not Reported
 
158.2

 
147.6

 
150.1

 
157.9

 
147.6

 
135.9

 
142.8

 
124.1

Total Loss Reserves
 
756.2

 
744.2

 
739.2

 
721.2

 
684.7

 
668.0

 
683.3

 
550.9

LAE Reserves
 
127.9

 
123.0

 
120.4

 
119.1

 
115.8

 
115.3

 
118.2

 
89.1

Insurance Reserves
 
$
884.1

 
$
867.2

 
$
859.6

 
$
840.3

 
$
800.5

 
$
783.3

 
$
801.5

 
$
640.0



Page 15

Kemper Corporation
Property & Casualty Insurance Segment
Preferred Personal Automobile Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
102.5

 
$
114.1

 
$
109.8

 
$
99.7

 
$
102.4

 
$
113.4

 
$
112.2

 
$
106.5

 
$
426.1

 
$
434.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
106.6

 
$
106.6

 
$
105.3

 
$
106.1

 
$
109.0

 
$
111.6

 
$
113.4

 
$
115.9

 
$
424.6

 
$
449.9

Net Investment Income
 
5.6

 
5.8

 
5.7

 
3.4

 
6.8

 
6.2

 
6.7

 
5.6

 
20.5

 
25.3

Other Income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
0.2

 
—

 
0.2

Total Revenues
 
112.2

 
112.4

 
111.0

 
109.5

 
115.8

 
117.8

 
120.1

 
121.7

 
445.1

 
475.4

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
85.7

 
74.0

 
75.0

 
73.3

 
83.1

 
76.5

 
78.1

 
81.8

 
308.0

 
319.5

Catastrophe Losses and LAE
 
0.3

 
1.2

 
5.2

 
4.9

 
0.4

 
0.1

 
2.3

 
0.2

 
11.6

 
3.0

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
4.1

 
(0.4
)
 
(0.7
)
 
1.9

 
(1.1
)
 
(2.7
)
 
(4.0
)
 
(7.2
)
 
4.9

 
(15.0
)
Catastrophe Losses and LAE
 
—

 
—

 
(0.1
)
 
(0.2
)
 
0.1

 
(0.1
)
 
(0.1
)
 
(0.1
)
 
(0.3
)
 
(0.2
)
Total Incurred Losses and LAE
 
90.1

 
74.8

 
79.4

 
79.9

 
82.5

 
73.8

 
76.3

 
74.7

 
324.2

 
307.3

Insurance Expenses
 
33.1

 
32.8

 
32.3

 
32.0

 
32.6

 
33.6

 
33.1

 
34.4

 
130.2

 
133.7

Operating Profit (Loss)
 
(11.0
)
 
4.8

 
(0.7
)
 
(2.4
)
 
0.7

 
10.4

 
10.7

 
12.6

 
(9.3
)
 
34.4

Income Tax Benefit (Expense)
 
4.6

 
(1.2
)
 
0.8

 
1.4

 
0.3

 
(3.1
)
 
(2.9
)
 
(3.7
)
 
5.6

 
(9.4
)
Total Product Line Net Operating Income (Loss)
 
$
(6.4
)
 
$
3.6

 
$
0.1

 
$
(1.0
)
 
$
1.0

 
$
7.3

 
$
7.8

 
$
8.9

 
$
(3.7
)
 
$
25.0

Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
80.4
%
 
69.5
 %
 
71.3
 %
 
69.1
 %
 
76.2
 %
 
68.5
 %
 
68.9
 %
 
70.6
 %
 
72.6
 %
 
70.9
 %
Current Year Catastrophe Losses and LAE Ratio
 
0.3

 
1.1

 
4.9

 
4.6

 
0.4

 
0.1

 
2.0

 
0.2

 
2.7

 
0.7

Prior Years Non-catastrophe Losses and LAE Ratio
 
3.8

 
(0.4
)
 
(0.7
)
 
1.8

 
(1.0
)
 
(2.4
)
 
(3.5
)
 
(6.2
)
 
1.2

 
(3.3
)
Prior Years Catastrophe Losses and LAE Ratio
 
—

 
—

 
(0.1
)
 
(0.2
)
 
0.1

 
(0.1
)
 
(0.1
)
 
(0.1
)
 
(0.1
)
 
—

Total Incurred Loss and LAE Ratio
 
84.5

 
70.2

 
75.4

 
75.3

 
75.7

 
66.1

 
67.3

 
64.5

 
76.4

 
68.3

Insurance Expense Ratio
 
31.1

 
30.8

 
30.7

 
30.2

 
29.9

 
30.1

 
29.2

 
29.7

 
30.7

 
29.7

Combined Ratio
 
115.6
%
 
101.0
 %
 
106.1
 %
 
105.5
 %
 
105.6
 %
 
96.2
 %
 
96.5
 %
 
94.2
 %
 
107.1
 %
 
98.0
 %
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
80.4
%
 
69.5
 %
 
71.3
 %
 
69.1
 %
 
76.2
 %
 
68.5
 %
 
68.9
 %
 
70.6
 %
 
72.6
 %
 
70.9
 %
Insurance Expense Ratio
 
31.1

 
30.8

 
30.7

 
30.2

 
29.9

 
30.1

 
29.2

 
29.7

 
30.7

 
29.7

Underlying Combined Ratio
 
111.5
%
 
100.3
 %
 
102.0
 %
 
99.3
 %
 
106.1
 %
 
98.6
 %
 
98.1
 %
 
100.3
 %
 
103.3
 %
 
100.6
 %
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
111.5
%
 
100.3
 %
 
102.0
 %
 
99.3
 %
 
106.1
 %
 
98.6
 %
 
98.1
 %
 
100.3
 %
 
103.3
 %
 
100.6
 %
Current Year Catastrophe Losses and LAE Ratio
 
0.3

 
1.1

 
4.9

 
4.6

 
0.4

 
0.1

 
2.0

 
0.2

 
2.7

 
0.7

Prior Years Non-catastrophe Losses and LAE Ratio
 
3.8

 
(0.4
)
 
(0.7
)
 
1.8

 
(1.0
)
 
(2.4
)
 
(3.5
)
 
(6.2
)
 
1.2

 
(3.3
)
Prior Years Catastrophe Losses and LAE Ratio
 
—

 
—

 
(0.1
)
 
(0.2
)
 
0.1

 
(0.1
)
 
(0.1
)
 
(0.1
)
 
(0.1
)
 
—

Combined Ratio as Reported
 
115.6
%
 
101.0
 %
 
106.1
 %
 
105.5
 %
 
105.6
 %
 
96.2
 %
 
96.5
 %
 
94.2
 %
 
107.1
 %
 
98.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 16

Kemper Corporation
Property & Casualty Insurance Segment
Non-standard Personal Automobile Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
204.1

 
$
211.4

 
$
197.6

 
$
219.5

 
$
185.8

 
$
189.3

 
$
135.3

 
$
85.6

 
$
832.6

 
$
596.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
210.6

 
$
207.2

 
$
205.0

 
$
197.2

 
$
187.8

 
$
176.9

 
$
139.2

 
$
73.9

 
$
820.0

 
$
577.8

Net Investment Income
 
7.3

 
6.3

 
5.8

 
4.0

 
5.8

 
4.4

 
3.8

 
2.6

 
23.4

 
16.6

Other Income
 
0.1

 
—

 
0.1

 
0.1

 
0.1

 
0.1

 
0.1

 
0.1

 
0.3

 
0.4

Total Revenues
 
218.0

 
213.5

 
210.9

 
201.3

 
193.7

 
181.4

 
143.1

 
76.6

 
843.7

 
594.8

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
174.3

 
179.7

 
187.0

 
173.3

 
174.3

 
151.4

 
115.9

 
59.3

 
714.3

 
500.9

Catastrophe Losses and LAE
 
(0.1
)
 
1.8

 
2.3

 
1.7

 
0.5

 
—

 
3.0

 
0.2

 
5.7

 
3.7

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
(0.1
)
 
2.1

 
(3.1
)
 
7.9

 
4.8

 
3.6

 
2.9

 
2.2

 
6.8

 
13.5

Catastrophe Losses and LAE
 
—

 
(0.1
)
 
—

 
—

 
—

 
—

 
(0.1
)
 
—

 
(0.1
)
 
(0.1
)
Total Incurred Losses and LAE
 
174.1

 
183.5

 
186.2

 
182.9

 
179.6

 
155.0

 
121.7

 
61.7

 
726.7

 
518.0

Insurance Expenses
 
35.7

 
33.4

 
39.6

 
34.7

 
40.2

 
31.2

 
25.5

 
18.5

 
143.4

 
115.4

Operating Income (Loss)
 
8.2

 
(3.4
)
 
(14.9
)
 
(16.3
)
 
(26.1
)
 
(4.8
)
 
(4.1
)
 
(3.6
)
 
(26.4
)
 
(38.6
)
Income Tax Benefit (Expense)
 
(2.1
)
 
2.0

 
6.1

 
6.2

 
9.8

 
5.1

 
2.5

 
1.5

 
12.2

 
18.9

Total Product Line Net Operating Income (Loss)
 
$
6.1

 
$
(1.4
)
 
$
(8.8
)
 
$
(10.1
)
 
$
(16.3
)
 
$
0.3

 
$
(1.6
)
 
$
(2.1
)
 
$
(14.2
)
 
$
(19.7
)
Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
82.7
%
 
86.7
%
 
91.2
 %
 
87.8
%
 
92.7
%
 
85.6
%
 
83.2
 %
 
80.2
%
 
87.1
%
 
86.8
%
Current Year Catastrophe Losses and LAE Ratio
 
—

 
0.9

 
1.1

 
0.9

 
0.3

 
—

 
2.2

 
0.3

 
0.7

 
0.6

Prior Years Non-catastrophe Losses and LAE Ratio
 
—

 
1.0

 
(1.5
)
 
4.0

 
2.6

 
2.0

 
2.1

 
3.0

 
0.8

 
2.3

Prior Years Catastrophe Losses and LAE Ratio
 
—

 
—

 
—

 
—

 
—

 
—

 
(0.1
)
 
—

 
—

 
—

Total Incurred Loss and LAE Ratio
 
82.7

 
88.6

 
90.8

 
92.7

 
95.6

 
87.6

 
87.4

 
83.5

 
88.6

 
89.7

Insurance Expense Ratio
 
17.0

 
16.1

 
19.3

 
17.6

 
21.4

 
17.6

 
18.3

 
25.0

 
17.5

 
20.0

Combined Ratio
 
99.7
%
 
104.7
%
 
110.1
 %
 
110.3
%
 
117.0
%
 
105.2
%
 
105.7
 %
 
108.5
%
 
106.1
%
 
109.7
%
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
82.7
%
 
86.7
%
 
91.2
 %
 
87.8
%
 
92.7
%
 
85.6
%
 
83.2
 %
 
80.2
%
 
87.1
%
 
86.8
%
Insurance Expense Ratio
 
17.0

 
16.1

 
19.3

 
17.6

 
21.4

 
17.6

 
18.3

 
25.0

 
17.5

 
20.0

Underlying Combined Ratio
 
99.7
%
 
102.8
%
 
110.5
 %
 
105.4
%
 
114.1
%
 
103.2
%
 
101.5
 %
 
105.2
%
 
104.6
%
 
106.8
%
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
99.7
%
 
102.8
%
 
110.5
 %
 
105.4
%
 
114.1
%
 
103.2
%
 
101.5
 %
 
105.2
%
 
104.6
%
 
106.8
%
Current Year Catastrophe Losses and LAE Ratio
 
—

 
0.9

 
1.1

 
0.9

 
0.3

 
—

 
2.2

 
0.3

 
0.7

 
0.6

Prior Years Non-catastrophe Losses and LAE Ratio
 
—

 
1.0

 
(1.5
)
 
4.0

 
2.6

 
2.0

 
2.1

 
3.0

 
0.8

 
2.3

Prior Years Catastrophe Losses and LAE Ratio
 
—

 
—

 
—

 
—

 
—

 
—

 
(0.1
)
 
—

 
—

 
—

Combined Ratio as Reported
 
99.7
%
 
104.7
%
 
110.1
 %
 
110.3
%
 
117.0
%
 
105.2
%
 
105.7
 %
 
108.5
%
 
106.1
%
 
109.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 17

Kemper Corporation
Property & Casualty Insurance Segment
Total Personal Automobile Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
306.6

 
$
325.5

 
$
307.4

 
$
319.2

 
$
288.2

 
$
302.7

 
$
247.5

 
$
192.1

 
$
1,258.7

 
$
1,030.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
317.2

 
$
313.8

 
$
310.3

 
$
303.3

 
$
296.8

 
$
288.5

 
$
252.6

 
$
189.8

 
$
1,244.6

 
$
1,027.7

Net Investment Income
 
12.9

 
12.1

 
11.5

 
7.4

 
12.6

 
10.6

 
10.5

 
8.2

 
43.9

 
41.9

Other Income
 
0.1

 
—

 
0.1

 
0.1

 
0.1

 
0.1

 
0.1

 
0.3

 
0.3

 
0.6

Total Revenues
 
330.2

 
325.9

 
321.9

 
310.8

 
309.5

 
299.2

 
263.2

 
198.3

 
1,288.8

 
1,070.2

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
260.0

 
253.7

 
262.0

 
246.6

 
257.4

 
227.9

 
194.0

 
141.1

 
1,022.3

 
820.4

Catastrophe Losses and LAE
 
0.2

 
3.0

 
7.5

 
6.6

 
0.9

 
0.1

 
5.3

 
0.4

 
17.3

 
6.7

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
4.0

 
1.7

 
(3.8
)
 
9.8

 
3.7

 
0.9

 
(1.1
)
 
(5.0
)
 
11.7

 
(1.5
)
Catastrophe Losses and LAE
 
—

 
(0.1
)
 
(0.1
)
 
(0.2
)
 
0.1

 
(0.1
)
 
(0.2
)
 
(0.1
)
 
(0.4
)
 
(0.3
)
Total Incurred Losses and LAE
 
264.2

 
258.3

 
265.6

 
262.8

 
262.1

 
228.8

 
198.0

 
136.4

 
1,050.9

 
825.3

Insurance Expenses
 
68.8

 
66.2

 
71.9

 
66.7

 
72.8

 
64.8

 
58.6

 
52.9

 
273.6

 
249.1

Operating Profit (Loss)
 
(2.8
)
 
1.4

 
(15.6
)
 
(18.7
)
 
(25.4
)
 
5.6

 
6.6

 
9.0

 
(35.7
)
 
(4.2
)
Income Tax Benefit (Expense)
 
2.5

 
0.8

 
6.9

 
7.6

 
10.1

 
2.0

 
(0.4
)
 
(2.2
)
 
17.8

 
9.5

Total Product Line Net Operating Income (Loss)
 
$
(0.3
)
 
$
2.2

 
$
(8.7
)
 
$
(11.1
)
 
$
(15.3
)
 
$
7.6

 
$
6.2

 
$
6.8

 
$
(17.9
)
 
$
5.3

Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
81.9
%
 
80.8
%
 
84.4
 %
 
81.3
 %
 
86.8
%
 
79.0
%
 
76.8
 %
 
74.4
 %
 
82.1
%
 
79.7
 %
Current Year Catastrophe Losses and LAE Ratio
 
0.1

 
1.0

 
2.4

 
2.2

 
0.3

 
—

 
2.1

 
0.2

 
1.4

 
0.7

Prior Years Non-catastrophe Losses and LAE Ratio
 
1.3

 
0.5

 
(1.2
)
 
3.2

 
1.2

 
0.3

 
(0.4
)
 
(2.6
)
 
0.9

 
(0.1
)
Prior Years Catastrophe Losses and LAE Ratio
 
—

 
—

 
—

 
(0.1
)
 
—

 
—

 
(0.1
)
 
(0.1
)
 
—

 
—

Total Incurred Loss and LAE Ratio
 
83.3

 
82.3

 
85.6

 
86.6

 
88.3

 
79.3

 
78.4

 
71.9

 
84.4

 
80.3

Insurance Expense Ratio
 
21.7

 
21.1

 
23.2

 
22.0

 
24.5

 
22.5

 
23.2

 
27.9

 
22.0

 
24.2

Combined Ratio
 
105.0
%
 
103.4
%
 
108.8
 %
 
108.6
 %
 
112.8
%
 
101.8
%
 
101.6
 %
 
99.8
 %
 
106.4
%
 
104.5
 %
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
81.9
%
 
80.8
%
 
84.4
 %
 
81.3
 %
 
86.8
%
 
79.0
%
 
76.8
 %
 
74.4
 %
 
82.1
%
 
79.7
 %
Insurance Expense Ratio
 
21.7

 
21.1

 
23.2

 
22.0

 
24.5

 
22.5

 
23.2

 
27.9

 
22.0

 
24.2

Underlying Combined Ratio
 
103.6
%
 
101.9
%
 
107.6
 %
 
103.3
 %
 
111.3
%
 
101.5
%
 
100.0
 %
 
102.3
 %
 
104.1
%
 
103.9
 %
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
103.6
%
 
101.9
%
 
107.6
 %
 
103.3
 %
 
111.3
%
 
101.5
%
 
100.0
 %
 
102.3
 %
 
104.1
%
 
103.9
 %
Current Year Catastrophe Losses and LAE Ratio
 
0.1

 
1.0

 
2.4

 
2.2

 
0.3

 
—

 
2.1

 
0.2

 
1.4

 
0.7

Prior Years Non-catastrophe Losses and LAE Ratio
 
1.3

 
0.5

 
(1.2
)
 
3.2

 
1.2

 
0.3

 
(0.4
)
 
(2.6
)
 
0.9

 
(0.1
)
Prior Years Catastrophe Losses and LAE Ratio
 
—

 
—

 
—

 
(0.1
)
 
—

 
—

 
(0.1
)
 
(0.1
)
 
—

 
—

Combined Ratio as Reported
 
105.0
%
 
103.4
%
 
108.8
 %
 
108.6
 %
 
112.8
%
 
101.8
%
 
101.6
 %
 
99.8
 %
 
106.4
%
 
104.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 18

Kemper Corporation
Property & Casualty Insurance Segment
Commercial Automobile Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
11.0

 
$
12.5

 
$
13.3

 
$
14.2

 
$
12.1

 
$
13.5

 
$
14.5

 
$
14.0

 
$
51.0

 
$
54.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
13.1

 
$
13.3

 
$
13.4

 
$
13.5

 
$
13.8

 
$
13.7

 
$
13.5

 
$
13.5

 
$
53.3

 
$
54.5

Net Investment Income
 
1.2

 
1.4

 
1.2

 
0.7

 
1.4

 
1.2

 
1.1

 
1.0

 
4.5

 
4.7

Other Income
 
—

 
0.1

 
—

 
0.1

 
—

 
—

 
—

 
—

 
0.2

 
—

Total Revenues
 
14.3

 
14.8

 
14.6

 
14.3

 
15.2

 
14.9

 
14.6

 
14.5

 
58.0

 
59.2

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
12.2

 
10.4

 
10.5

 
10.9

 
11.6

 
13.3

 
10.0

 
10.8

 
44.0

 
45.7

Catastrophe Losses and LAE
 
(0.1
)
 
0.4

 
0.4

 
0.1

 
—

 
—

 
0.2

 
—

 
0.8

 
0.2

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
2.4

 
4.2

 
(1.7
)
 
(2.4
)
 
1.1

 
1.5

 
(0.6
)
 
(0.2
)
 
2.5

 
1.8

Catastrophe Losses and LAE
 
—

 
(0.1
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(0.1
)
 
—

Total Incurred Losses and LAE
 
14.5

 
14.9

 
9.2

 
8.6

 
12.7

 
14.8

 
9.6

 
10.6

 
47.2

 
47.7

Insurance Expenses
 
3.2

 
3.4

 
3.6

 
3.1

 
3.6

 
3.7

 
3.6

 
3.8

 
13.3

 
14.7

Operating Profit (Loss)
 
(3.4
)
 
(3.5
)
 
1.8

 
2.6

 
(1.1
)
 
(3.6
)
 
1.4

 
0.1

 
(2.5
)
 
(3.2
)
Income Tax Benefit (Expense)
 
1.3

 
1.3

 
(0.5
)
 
(0.8
)
 
0.5

 
1.3

 
(0.4
)
 
0.1

 
1.3

 
1.5

Total Product Line Net Operating Income (Loss)
 
$
(2.1
)
 
$
(2.2
)
 
$
1.3

 
$
1.8

 
$
(0.6
)
 
$
(2.3
)
 
$
1.0

 
$
0.2

 
$
(1.2
)
 
$
(1.7
)
Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
93.2
 %
 
78.2
 %
 
78.4
 %
 
80.8
 %
 
84.0
%
 
97.1
%
 
74.0
 %
 
80.0
 %
 
82.6
 %
 
83.8
%
Current Year Catastrophe Losses and LAE Ratio
 
(0.8
)
 
3.0

 
3.0

 
0.7

 
—

 
—

 
1.5

 
—

 
1.5

 
0.4

Prior Years Non-catastrophe Losses and LAE Ratio
 
18.3

 
31.6

 
(12.7
)
 
(17.8
)
 
8.0

 
10.9

 
(4.4
)
 
(1.5
)
 
4.7

 
3.3

Prior Years Catastrophe Losses and LAE Ratio
 
—

 
(0.8
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(0.2
)
 
—

Total Incurred Loss and LAE Ratio
 
110.7

 
112.0

 
68.7

 
63.7

 
92.0

 
108.0

 
71.1

 
78.5

 
88.6

 
87.5

Insurance Expense Ratio
 
24.4

 
25.6

 
26.9

 
23.0

 
26.1

 
27.0

 
26.7

 
28.1

 
25.0

 
27.0

Combined Ratio
 
135.1
 %
 
137.6
 %
 
95.6
 %
 
86.7
 %
 
118.1
%
 
135.0
%
 
97.8
 %
 
106.6
 %
 
113.6
 %
 
114.5
%
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
93.2
 %
 
78.2
 %
 
78.4
 %
 
80.8
 %
 
84.0
%
 
97.1
%
 
74.0
 %
 
80.0
 %
 
82.6
 %
 
83.8
%
Insurance Expense Ratio
 
24.4

 
25.6

 
26.9

 
23.0

 
26.1

 
27.0

 
26.7

 
28.1

 
25.0

 
27.0

Underlying Combined Ratio
 
117.6
 %
 
103.8
 %
 
105.3
 %
 
103.8
 %
 
110.1
%
 
124.1
%
 
100.7
 %
 
108.1
 %
 
107.6
 %
 
110.8
%
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
117.6
 %
 
103.8
 %
 
105.3
 %
 
103.8
 %
 
110.1
%
 
124.1
%
 
100.7
 %
 
108.1
 %
 
107.6
 %
 
110.8
%
Current Year Catastrophe Losses and LAE Ratio
 
(0.8
)
 
3.0

 
3.0

 
0.7

 
—

 
—

 
1.5

 
—

 
1.5

 
0.4

Prior Years Non-catastrophe Losses and LAE Ratio
 
18.3

 
31.6

 
(12.7
)
 
(17.8
)
 
8.0

 
10.9

 
(4.4
)
 
(1.5
)
 
4.7

 
3.3

Prior Years Catastrophe Losses and LAE Ratio
 
—

 
(0.8
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(0.2
)
 
—

Combined Ratio as Reported
 
135.1
 %
 
137.6
 %
 
95.6
 %
 
86.7
 %
 
118.1
%
 
135.0
%
 
97.8
 %
 
106.6
 %
 
113.6
 %
 
114.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 19

Kemper Corporation
Property & Casualty Insurance Segment
Total Automobile Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
317.6

 
$
338.0

 
$
320.7

 
$
333.4

 
$
300.3

 
$
316.2

 
$
262.0

 
$
206.1

 
$
1,309.7

 
$
1,084.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
330.3

 
$
327.1

 
$
323.7

 
$
316.8

 
$
310.6

 
$
302.2

 
$
266.1

 
$
203.3

 
$
1,297.9

 
$
1,082.2

Net Investment Income
 
14.1

 
13.5

 
12.7

 
8.1

 
14.0

 
11.8

 
11.6

 
9.2

 
48.4

 
46.6

Other Income
 
0.1

 
0.1

 
0.1

 
0.2

 
0.1

 
0.1

 
0.1

 
0.3

 
0.5

 
0.6

Total Revenues
 
344.5

 
340.7

 
336.5

 
325.1

 
324.7

 
314.1

 
277.8

 
212.8

 
1,346.8

 
1,129.4

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
272.2

 
264.1

 
272.5

 
257.5

 
269.0

 
241.2

 
204.0

 
151.9

 
1,066.3

 
866.1

Catastrophe Losses and LAE
 
0.1

 
3.4

 
7.9

 
6.7

 
0.9

 
0.1

 
5.5

 
0.4

 
18.1

 
6.9

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
6.4

 
5.9

 
(5.5
)
 
7.4

 
4.8

 
2.4

 
(1.7
)
 
(5.2
)
 
14.2

 
0.3

Catastrophe Losses and LAE
 
—

 
(0.2
)
 
(0.1
)
 
(0.2
)
 
0.1

 
(0.1
)
 
(0.2
)
 
(0.1
)
 
(0.5
)
 
(0.3
)
Total Incurred Losses and LAE
 
278.7

 
273.2

 
274.8

 
271.4

 
274.8

 
243.6

 
207.6

 
147.0

 
1,098.1

 
873.0

Insurance Expenses
 
72.0

 
69.6

 
75.5

 
69.8

 
76.4

 
68.5

 
62.2

 
56.7

 
286.9

 
263.8

Operating Profit (Loss)
 
(6.2
)
 
(2.1
)
 
(13.8
)
 
(16.1
)
 
(26.5
)
 
2.0

 
8.0

 
9.1

 
(38.2
)
 
(7.4
)
Income Tax Benefit (Expense)
 
3.8

 
2.1

 
6.4

 
6.8

 
10.6

 
3.3

 
(0.8
)
 
(2.1
)
 
19.1

 
11.0

Total Product Line Net Operating Income (Loss)
 
$
(2.4
)
 
$
—

 
$
(7.4
)
 
$
(9.3
)
 
$
(15.9
)
 
$
5.3

 
$
7.2

 
$
7.0

 
$
(19.1
)
 
$
3.6

Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
82.5
%
 
80.8
 %
 
84.2
 %
 
81.4
 %
 
86.7
%
 
79.8
%
 
76.6
 %
 
74.7
 %
 
82.1
%
 
80.1
%
Current Year Catastrophe Losses and LAE Ratio
 
—

 
1.0

 
2.4

 
2.1

 
0.3

 
—

 
2.1

 
0.2

 
1.4

 
0.6

Prior Years Non-catastrophe Losses and LAE Ratio
 
1.9

 
1.8

 
(1.7
)
 
2.3

 
1.5

 
0.8

 
(0.6
)
 
(2.6
)
 
1.1

 
—

Prior Years Catastrophe Losses and LAE Ratio
 
—

 
(0.1
)
 
—

 
(0.1
)
 
—

 
—

 
(0.1
)
 
—

 
—

 
—

Total Incurred Loss and LAE Ratio
 
84.4

 
83.5

 
84.9

 
85.7

 
88.5

 
80.6

 
78.0

 
72.3

 
84.6

 
80.7

Insurance Expense Ratio
 
21.8

 
21.3

 
23.3

 
22.0

 
24.6

 
22.7

 
23.4

 
27.9

 
22.1

 
24.4

Combined Ratio
 
106.2
%
 
104.8
 %
 
108.2
 %
 
107.7
 %
 
113.1
%
 
103.3
%
 
101.4
 %
 
100.2
 %
 
106.7
%
 
105.1
%
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
82.5
%
 
80.8
 %
 
84.2
 %
 
81.4
 %
 
86.7
%
 
79.8
%
 
76.6
 %
 
74.7
 %
 
82.1
%
 
80.1
%
Insurance Expense Ratio
 
21.8

 
21.3

 
23.3

 
22.0

 
24.6

 
22.7

 
23.4

 
27.9

 
22.1

 
24.4

Underlying Combined Ratio
 
104.3
%
 
102.1
 %
 
107.5
 %
 
103.4
 %
 
111.3
%
 
102.5
%
 
100.0
 %
 
102.6
 %
 
104.2
%
 
104.5
%
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
104.3
%
 
102.1
 %
 
107.5
 %
 
103.4
 %
 
111.3
%
 
102.5
%
 
100.0
 %
 
102.6
 %
 
104.2
%
 
104.5
%
Current Year Catastrophe Losses and LAE Ratio
 
—

 
1.0

 
2.4

 
2.1

 
0.3

 
—

 
2.1

 
0.2

 
1.4

 
0.6

Prior Years Non-catastrophe Losses and LAE Ratio
 
1.9

 
1.8

 
(1.7
)
 
2.3

 
1.5

 
0.8

 
(0.6
)
 
(2.6
)
 
1.1

 
—

Prior Years Catastrophe Losses and LAE Ratio
 
—

 
(0.1
)
 
—

 
(0.1
)
 
—

 
—

 
(0.1
)
 
—

 
—

 
—

Combined Ratio as Reported
 
106.2
%
 
104.8
 %
 
108.2
 %
 
107.7
 %
 
113.1
%
 
103.3
%
 
101.4
 %
 
100.2
 %
 
106.7
%
 
105.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 20

Kemper Corporation
Property & Casualty Insurance Segment
Homeowners Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
62.2

 
$
73.1

 
$
72.2

 
$
59.9

 
$
63.5

 
$
75.2

 
$
74.2

 
$
63.1

 
$
267.4

 
$
276.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
67.7

 
$
68.5

 
$
67.6

 
$
68.1

 
$
70.0

 
$
72.1

 
$
71.6

 
$
72.6

 
$
271.9

 
$
286.3

Net Investment Income
 
5.3

 
5.9

 
5.9

 
3.2

 
6.3

 
5.5

 
5.9

 
4.8

 
20.3

 
22.5

Other Income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total Revenues
 
73.0

 
74.4

 
73.5

 
71.3

 
76.3

 
77.6

 
77.5

 
77.4

 
292.2

 
308.8

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
32.6

 
36.8

 
30.9

 
35.2

 
32.5

 
36.3

 
36.5

 
39.8

 
135.5

 
145.1

Catastrophe Losses and LAE
 
11.3

 
7.8

 
40.0

 
29.9

 
12.6

 
4.8

 
28.4

 
9.6

 
89.0

 
55.4

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
0.6

 
(0.6
)
 
(0.5
)
 
(2.7
)
 
(0.5
)
 
(2.5
)
 
0.1

 
(0.4
)
 
(3.2
)
 
(3.3
)
Catastrophe Losses and LAE
 
(2.5
)
 
(3.5
)
 
(8.4
)
 
(2.4
)
 
(1.5
)
 
(1.7
)
 
(2.1
)
 
(2.2
)
 
(16.8
)
 
(7.5
)
Total Incurred Losses and LAE
 
42.0

 
40.5

 
62.0

 
60.0

 
43.1

 
36.9

 
62.9

 
46.8

 
204.5

 
189.7

Insurance Expenses
 
21.6

 
21.7

 
21.4

 
21.3

 
22.3

 
22.4

 
22.9

 
23.0

 
86.0

 
90.6

Operating Profit (Loss)
 
9.4

 
12.2

 
(9.9
)
 
(10.0
)
 
10.9

 
18.3

 
(8.3
)
 
7.6

 
1.7

 
28.5

Income Tax Benefit (Expense)
 
(2.7
)
 
(3.8
)
 
4.1

 
4.0

 
(3.3
)
 
(5.8
)
 
3.6

 
(2.1
)
 
1.6

 
(7.6
)
Total Product Line Net Operating Income (Loss)
 
$
6.7

 
$
8.4

 
$
(5.8
)
 
$
(6.0
)
 
$
7.6

 
$
12.5

 
$
(4.7
)
 
$
5.5

 
$
3.3

 
$
20.9

Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
48.1
 %
 
53.7
 %
 
45.6
 %
 
51.7
 %
 
46.4
 %
 
50.4
 %
 
50.9
 %
 
54.9
 %
 
49.9
 %
 
50.7
 %
Current Year Catastrophe Losses and LAE Ratio
 
16.7

 
11.4

 
59.2

 
43.9

 
18.0

 
6.7

 
39.7

 
13.2

 
32.7

 
19.4

Prior Years Non-catastrophe Losses and LAE Ratio
 
0.9

 
(0.9
)
 
(0.7
)
 
(4.0
)
 
(0.7
)
 
(3.5
)
 
0.1

 
(0.6
)
 
(1.2
)
 
(1.2
)
Prior Years Catastrophe Losses and LAE Ratio
 
(3.7
)
 
(5.1
)
 
(12.4
)
 
(3.5
)
 
(2.1
)
 
(2.4
)
 
(2.9
)
 
(3.0
)
 
(6.2
)
 
(2.6
)
Total Incurred Loss and LAE Ratio
 
62.0

 
59.1

 
91.7

 
88.1

 
61.6

 
51.2

 
87.8

 
64.5

 
75.2

 
66.3

Insurance Expense Ratio
 
31.9

 
31.7

 
31.7

 
31.3

 
31.9

 
31.1

 
32.0

 
31.7

 
31.6

 
31.6

Combined Ratio
 
93.9
 %
 
90.8
 %
 
123.4
 %
 
119.4
 %
 
93.5
 %
 
82.3
 %
 
119.8
 %
 
96.2
 %
 
106.8
 %
 
97.9
 %
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
48.1
 %
 
53.7
 %
 
45.6
 %
 
51.7
 %
 
46.4
 %
 
50.4
 %
 
50.9
 %
 
54.9
 %
 
49.9
 %
 
50.7
 %
Insurance Expense Ratio
 
31.9

 
31.7

 
31.7

 
31.3

 
31.9

 
31.1

 
32.0

 
31.7

 
31.6

 
31.6

Underlying Combined Ratio
 
80.0
 %
 
85.4
 %
 
77.3
 %
 
83.0
 %
 
78.3
 %
 
81.5
 %
 
82.9
 %
 
86.6
 %
 
81.5
 %
 
82.3
 %
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
80.0
 %
 
85.4
 %
 
77.3
 %
 
83.0
 %
 
78.3
 %
 
81.5
 %
 
82.9
 %
 
86.6
 %
 
81.5
 %
 
82.3
 %
Current Year Catastrophe Losses and LAE Ratio
 
16.7

 
11.4

 
59.2

 
43.9

 
18.0

 
6.7

 
39.7

 
13.2

 
32.7

 
19.4

Prior Years Non-catastrophe Losses and LAE Ratio
 
0.9

 
(0.9
)
 
(0.7
)
 
(4.0
)
 
(0.7
)
 
(3.5
)
 
0.1

 
(0.6
)
 
(1.2
)
 
(1.2
)
Prior Years Catastrophe Losses and LAE Ratio
 
(3.7
)
 
(5.1
)
 
(12.4
)
 
(3.5
)
 
(2.1
)
 
(2.4
)
 
(2.9
)
 
(3.0
)
 
(6.2
)
 
(2.6
)
Combined Ratio as Reported
 
93.9
 %
 
90.8
 %
 
123.4
 %
 
119.4
 %
 
93.5
 %
 
82.3
 %
 
119.8
 %
 
96.2
 %
 
106.8
 %
 
97.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 21

Kemper Corporation
Property & Casualty Insurance Segment
Other Personal Lines - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Premiums Written
 
$
10.3

 
$
11.6

 
$
11.8

 
$
10.1

 
$
10.9

 
$
12.2

 
$
12.0

 
$
10.5

 
$
43.8

 
$
45.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
11.1

 
$
11.3

 
$
11.3

 
$
11.3

 
$
11.5

 
$
11.8

 
$
11.7

 
$
11.7

 
$
45.0

 
$
46.7

Net Investment Income
 
1.0

 
1.0

 
1.1

 
0.6

 
1.3

 
1.0

 
1.1

 
0.8

 
3.7

 
4.2

Other Income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total Revenues
 
12.1

 
12.3

 
12.4

 
11.9

 
12.8

 
12.8

 
12.8

 
12.5

 
48.7

 
50.9

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
5.8

 
5.8

 
5.8

 
4.7

 
5.9

 
5.7

 
5.0

 
6.8

 
22.1

 
23.4

Catastrophe Losses and LAE
 
0.3

 
0.1

 
1.2

 
0.9

 
0.6

 
(0.2
)
 
1.5

 
0.3

 
2.5

 
2.2

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
(0.8
)
 
(2.2
)
 
(3.1
)
 
—

 
(2.0
)
 
(0.8
)
 
0.2

 
0.6

 
(6.1
)
 
(2.0
)
Catastrophe Losses and LAE
 
(0.5
)
 
(0.2
)
 
(1.1
)
 
(0.1
)
 
—

 
(0.1
)
 
(0.1
)
 
0.1

 
(1.9
)
 
(0.1
)
Total Incurred Losses and LAE
 
4.8

 
3.5

 
2.8

 
5.5

 
4.5

 
4.6

 
6.6

 
7.8

 
16.6

 
23.5

Insurance Expenses
 
3.3

 
3.3

 
3.1

 
3.1

 
3.6

 
3.5

 
3.2

 
3.4

 
12.8

 
13.7

Operating Profit
 
4.0

 
5.5

 
6.5

 
3.3

 
4.7

 
4.7

 
3.0

 
1.3

 
19.3

 
13.7

Income Tax Expense
 
(1.3
)
 
(1.8
)
 
(2.2
)
 
(1.1
)
 
(1.5
)
 
(1.5
)
 
(0.9
)
 
(0.4
)
 
(6.4
)
 
(4.4
)
Total Product Line Net Operating Income
 
$
2.7

 
$
3.7

 
$
4.3

 
$
2.2

 
$
3.2

 
$
3.2

 
$
2.1

 
$
0.9

 
$
12.9

 
$
9.3

Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
52.2
 %
 
51.4
 %
 
51.3
 %
 
41.6
 %
 
51.3
 %
 
48.3
 %
 
42.8
 %
 
58.1
%
 
49.1
 %
 
50.1
 %
Current Year Catastrophe Losses and LAE Ratio
 
2.7

 
0.9

 
10.6

 
8.0

 
5.2

 
(1.7
)
 
12.8

 
2.6

 
5.6

 
4.7

Prior Years Non-catastrophe Losses and LAE Ratio
 
(7.2
)
 
(19.5
)
 
(27.4
)
 
—

 
(17.4
)
 
(6.8
)
 
1.7

 
5.1

 
(13.6
)
 
(4.3
)
Prior Years Catastrophe Losses and LAE Ratio
 
(4.5
)
 
(1.8
)
 
(9.7
)
 
(0.9
)
 
—

 
(0.8
)
 
(0.9
)
 
0.9

 
(4.2
)
 
(0.2
)
Total Incurred Loss and LAE Ratio
 
43.2

 
31.0

 
24.8

 
48.7

 
39.1

 
39.0

 
56.4

 
66.7

 
36.9

 
50.3

Insurance Expense Ratio
 
29.7

 
29.2

 
27.4

 
27.4

 
31.3

 
29.7

 
27.4

 
29.1

 
28.4

 
29.3

Combined Ratio
 
72.9
 %
 
60.2
 %
 
52.2
 %
 
76.1
 %
 
70.4
 %
 
68.7
 %
 
83.8
 %
 
95.8
%
 
65.3
 %
 
79.6
 %
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
52.2
 %
 
51.4
 %
 
51.3
 %
 
41.6
 %
 
51.3
 %
 
48.3
 %
 
42.8
 %
 
58.1
%
 
49.1
 %
 
50.1
 %
Insurance Expense Ratio
 
29.7

 
29.2

 
27.4

 
27.4

 
31.3

 
29.7

 
27.4

 
29.1

 
28.4

 
29.3

Underlying Combined Ratio
 
81.9
 %
 
80.6
 %
 
78.7
 %
 
69.0
 %
 
82.6
 %
 
78.0
 %
 
70.2
 %
 
87.2
%
 
77.5
 %
 
79.4
 %
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
81.9
 %
 
80.6
 %
 
78.7
 %
 
69.0
 %
 
82.6
 %
 
78.0
 %
 
70.2
 %
 
87.2
%
 
77.5
 %
 
79.4
 %
Current Year Catastrophe Losses and LAE Ratio
 
2.7

 
0.9

 
10.6

 
8.0

 
5.2

 
(1.7
)
 
12.8

 
2.6

 
5.6

 
4.7

Prior Years Non-catastrophe Losses and LAE Ratio
 
(7.2
)
 
(19.5
)
 
(27.4
)
 
—

 
(17.4
)
 
(6.8
)
 
1.7

 
5.1

 
(13.6
)
 
(4.3
)
Prior Years Catastrophe Losses and LAE Ratio
 
(4.5
)
 
(1.8
)
 
(9.7
)
 
(0.9
)
 
—

 
(0.8
)
 
(0.9
)
 
0.9

 
(4.2
)
 
(0.2
)
Combined Ratio as Reported
 
72.9
 %
 
60.2
 %
 
52.2
 %
 
76.1
 %
 
70.4
 %
 
68.7
 %
 
83.8
 %
 
95.8
%
 
65.3
 %
 
79.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 22

Kemper Corporation
Life & Health Insurance Segment - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
152.3

 
$
152.0

 
$
151.1

 
$
149.8

 
$
149.4

 
$
150.6

 
$
150.7

 
$
143.7

 
$
605.2

 
$
594.4

Net Investment Income
 
53.6

 
54.5

 
50.1

 
55.0

 
55.2

 
55.1

 
53.5

 
50.4

 
213.2

 
214.2

Other Income
 
0.9

 
0.7

 
0.6

 
0.6

 
0.7

 
0.7

 
0.2

 
0.8

 
2.8

 
2.4

Total Revenues
 
206.8

 
207.2

 
201.8

 
205.4

 
205.3

 
206.4

 
204.4

 
194.9

 
821.2

 
811.0

Policyholders’ Benefits and Incurred Losses and LAE
 
92.8

 
173.0

 
96.5

 
99.3

 
93.5

 
93.7

 
98.0

 
96.1

 
461.6

 
381.3

Insurance Expenses
 
78.9

 
79.9

 
80.0

 
75.1

 
84.5

 
77.3

 
84.2

 
74.0

 
313.9

 
320.0

Operating Profit (Loss)
 
35.1

 
(45.7
)
 
25.3

 
31.0

 
27.3

 
35.4

 
22.2

 
24.8

 
45.7

 
109.7

Income Tax Benefit (Expense)
 
(12.1
)
 
16.3

 
(8.9
)
 
(10.7
)
 
(9.5
)
 
(11.9
)
 
(7.9
)
 
(8.7
)
 
(15.4
)
 
(38.0
)
Segment Net Operating Income (Loss)
 
$
23.0

 
$
(29.4
)
 
$
16.4

 
$
20.3

 
$
17.8

 
$
23.5

 
$
14.3

 
$
16.1

 
$
30.3

 
$
71.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Sep 30, 2015
 
Jun 30, 2015
 
Mar 31, 2015
Insurance Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future Policyholder Benefits
 
$
3,311.5

 
$
3,298.5

 
$
3,310.3

 
$
3,294.4

 
$
3,278.4

 
$
3,267.3

 
$
3,255.7

 
$
3,238.9

Incurred Losses and LAE Reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life
 
141.9

 
142.1

 
43.8

 
42.1

 
41.2

 
39.4

 
37.5

 
40.2

Accident and Health
 
21.9

 
20.9

 
22.1

 
21.9

 
21.4

 
21.1

 
19.6

 
20.4

Property
 
4.5

 
5.5

 
5.4

 
6.0

 
5.2

 
4.4

 
5.2

 
3.7

Total Incurred Losses and LAE Reserves
 
168.3

 
168.5

 
71.3

 
70.0

 
67.8

 
64.9

 
62.3

 
64.3

Insurance Reserves
 
$
3,479.8

 
$
3,467.0

 
$
3,381.6

 
$
3,364.4

 
$
3,346.2

 
$
3,332.2

 
$
3,318.0

 
$
3,303.2


 


Page 23

Kemper Corporation
Life & Health Insurance Segment
Life Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
95.9

 
$
95.8

 
$
95.5

 
$
94.4

 
$
94.6

 
$
95.5

 
$
96.0

 
$
88.0

 
$
381.6

 
$
374.1

Net Investment Income
 
51.7

 
52.7

 
48.4

 
53.5

 
53.4

 
53.3

 
51.7

 
48.8

 
206.3

 
207.2

Other Income
 
0.7

 
0.6

 
0.5

 
0.5

 
0.5

 
0.6

 
0.1

 
0.7

 
2.3

 
1.9

Total Revenues
 
148.3

 
149.1

 
144.4

 
148.4

 
148.5

 
149.4

 
147.8

 
137.5

 
590.2

 
583.2

Policyholders’ Benefits and Incurred Losses and LAE
 
68.0

 
146.5

 
70.5

 
71.3

 
66.3

 
66.2

 
70.6

 
71.8

 
356.3

 
274.9

Insurance Expenses
 
53.1

 
54.9

 
53.2

 
50.1

 
60.4

 
52.8

 
59.6

 
48.9

 
211.3

 
221.7

Operating Profit (Loss)
 
27.2

 
(52.3
)
 
20.7

 
27.0

 
21.8

 
30.4

 
17.6

 
16.8

 
22.6

 
86.6

Income Tax Benefit (Expense)
 
(9.4
)
 
18.6

 
(7.3
)
 
(9.4
)
 
(7.6
)
 
(10.2
)
 
(6.4
)
 
(5.9
)
 
(7.5
)
 
(30.1
)
Total Product Line Operating Income (Loss)
 
$
17.8

 
$
(33.7
)
 
$
13.4

 
$
17.6

 
$
14.2

 
$
20.2

 
$
11.2

 
$
10.9

 
$
15.1

 
$
56.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Kemper Corporation
Life & Health Insurance Segment
Accident & Health Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
38.2

 
$
37.6

 
$
36.7

 
$
36.9

 
$
36.2

 
$
36.2

 
$
35.7

 
$
36.8

 
$
149.4

 
$
144.9

Net Investment Income
 
1.4

 
1.4

 
1.3

 
1.3

 
1.4

 
1.4

 
1.4

 
1.3

 
5.4

 
5.5

Other Income
 
0.2

 
0.1

 
0.1

 
0.1

 
0.2

 
0.1

 
0.1

 
0.1

 
0.5

 
0.5

Total Revenues
 
39.8

 
39.1

 
38.1

 
38.3

 
37.8

 
37.7

 
37.2

 
38.2

 
155.3

 
150.9

Policyholders’ Benefits and Incurred Losses and LAE
 
19.6

 
19.9

 
20.3

 
20.5

 
20.1

 
21.2

 
20.4

 
19.1

 
80.3

 
80.8

Insurance Expenses
 
17.3

 
16.4

 
17.1

 
16.8

 
15.9

 
15.8

 
15.3

 
16.8

 
67.6

 
63.8

Operating Profit
 
2.9

 
2.8

 
0.7

 
1.0

 
1.8

 
0.7

 
1.5

 
2.3

 
7.4

 
6.3

Income Tax Expense
 
(0.9
)
 
(1.0
)
 
(0.3
)
 
(0.3
)
 
(0.6
)
 
(0.3
)
 
(0.5
)
 
(0.8
)
 
(2.5
)
 
(2.2
)
Total Product Line Net Operating Income
 
$
2.0

 
$
1.8

 
$
0.4

 
$
0.7

 
$
1.2

 
$
0.4

 
$
1.0

 
$
1.5

 
$
4.9

 
$
4.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 24

Kemper Corporation
Life & Health Insurance Segment
Property Insurance - Results of Operations and Selected Financial Information
(Dollars in Millions)
(Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned Premiums
 
$
18.2

 
$
18.6

 
$
18.9

 
$
18.5

 
$
18.6

 
$
18.9

 
$
19.0

 
$
18.9

 
$
74.2

 
$
75.4

Net Investment Income
 
0.5

 
0.4

 
0.4

 
0.2

 
0.4

 
0.4

 
0.4

 
0.3

 
1.5

 
1.5

Other Income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total Revenues
 
18.7

 
19.0

 
19.3

 
18.7

 
19.0

 
19.3

 
19.4

 
19.2

 
75.7

 
76.9

Incurred Losses and LAE related to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
4.3

 
5.5

 
4.6

 
5.2

 
4.8

 
5.8

 
4.5

 
5.3

 
19.6

 
20.4

Catastrophe Losses and LAE
 
0.9

 
1.4

 
1.6

 
1.6

 
1.9

 
0.1

 
1.7

 
0.1

 
5.5

 
3.8

Prior Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-catastrophe Losses and LAE
 
—

 
(0.3
)
 
(0.1
)
 
0.4

 
0.2

 
0.5

 
0.7

 
(0.1
)
 
—

 
1.3

Catastrophe Losses and LAE
 
0.1

 
(0.1
)
 
(0.4
)
 
0.3

 
0.2

 
(0.1
)
 
0.1

 
(0.1
)
 
(0.1
)
 
0.1

Total Incurred Losses and LAE
 
5.3

 
6.5

 
5.7

 
7.5

 
7.1

 
6.3

 
7.0

 
5.2

 
25.0

 
25.6

Insurance Expenses
 
8.5

 
8.6

 
9.7

 
8.2

 
8.2

 
8.7

 
9.3

 
8.3

 
35.0

 
34.5

Operating Profit
 
4.9

 
3.9

 
3.9

 
3.0

 
3.7

 
4.3

 
3.1

 
5.7

 
15.7

 
16.8

Income Tax Expense
 
(1.8
)
 
(1.3
)
 
(1.3
)
 
(1.0
)
 
(1.3
)
 
(1.4
)
 
(1.0
)
 
(2.0
)
 
(5.4
)
 
(5.7
)
Total Product Line Net Operating Income
 
$
3.1

 
$
2.6

 
$
2.6

 
$
2.0

 
$
2.4

 
$
2.9

 
$
2.1

 
$
3.7

 
$
10.3

 
$
11.1

Ratios Based On Earned Premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
23.7
%
 
29.5
 %
 
24.3
 %
 
28.1
%
 
25.8
%
 
30.7
 %
 
23.7
%
 
28.0
 %
 
26.4
 %
 
27.2
%
Current Year Catastrophe Losses and LAE Ratio
 
4.9

 
7.5

 
8.5

 
8.6

 
10.2

 
0.5

 
8.9

 
0.5

 
7.4

 
5.0

Prior Years Non-catastrophe Losses and LAE Ratio
 
—

 
(1.6
)
 
(0.5
)
 
2.2

 
1.1

 
2.6

 
3.7

 
(0.5
)
 
—

 
1.7

Prior Years Catastrophe Losses and LAE Ratio
 
0.5

 
(0.5
)
 
(2.1
)
 
1.6

 
1.1

 
(0.5
)
 
0.5

 
(0.5
)
 
(0.1
)
 
0.1

Total Incurred Loss and LAE Ratio
 
29.1

 
34.9

 
30.2

 
40.5

 
38.2

 
33.3

 
36.8

 
27.5

 
33.7

 
34.0

Insurance Expense Ratio
 
46.7

 
46.2

 
51.3

 
44.3

 
44.1

 
46.0

 
48.9

 
43.9

 
47.2

 
45.8

Combined Ratio
 
75.8
%
 
81.1
 %
 
81.5
 %
 
84.8
%
 
82.3
%
 
79.3
 %
 
85.7
%
 
71.4
 %
 
80.9
 %
 
79.8
%
Underlying Combined Ratio 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Year Non-catastrophe Losses and LAE Ratio
 
23.7
%
 
29.5
 %
 
24.3
 %
 
28.1
%
 
25.8
%
 
30.7
 %
 
23.7
%
 
28.0
 %
 
26.4
 %
 
27.2
%
Insurance Expense Ratio
 
46.7

 
46.2

 
51.3

 
44.3

 
44.1

 
46.0

 
48.9

 
43.9

 
47.2

 
45.8

Underlying Combined Ratio
 
70.4
%
 
75.7
 %
 
75.6
 %
 
72.4
%
 
69.9
%
 
76.7
 %
 
72.6
%
 
71.9
 %
 
73.6
 %
 
73.0
%
Non-GAAP Measure Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underlying Combined Ratio
 
70.4
%
 
75.7
 %
 
75.6
 %
 
72.4
%
 
69.9
%
 
76.7
 %
 
72.6
%
 
71.9
 %
 
73.6
 %
 
73.0
%
Current Year Catastrophe Losses and LAE Ratio
 
4.9

 
7.5

 
8.5

 
8.6

 
10.2

 
0.5

 
8.9

 
0.5

 
7.4

 
5.0

Prior Years Non-catastrophe Losses and LAE Ratio
 
—

 
(1.6
)
 
(0.5
)
 
2.2

 
1.1

 
2.6

 
3.7

 
(0.5
)
 
—

 
1.7

Prior Years Catastrophe Losses and LAE Ratio
 
0.5

 
(0.5
)
 
(2.1
)
 
1.6

 
1.1

 
(0.5
)
 
0.5

 
(0.5
)
 
(0.1
)
 
0.1

Combined Ratio as Reported
 
75.8
%
 
81.1
 %
 
81.5
 %
 
84.8
%
 
82.3
%
 
79.3
 %
 
85.7
%
 
71.4
 %
 
80.9
 %
 
79.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 25

Kemper Corporation
Details of Investment Performance
(Dollars in Millions)
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Net Investment Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest on Fixed Income Securities
 
$
61.5

 
$
61.4

 
$
59.8

 
$
60.0

 
$
60.0

 
$
58.4

 
$
58.3

 
$
59.5

 
$
242.7

 
$
236.2

Dividends on Equity Securities Excluding Alternative Investments
 
2.8

 
2.7

 
3.5

 
2.8

 
3.5

 
3.4

 
4.5

 
3.4

 
11.8

 
14.8

Alternative Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Limited Liability Investments
 
3.8

 
5.2

 
2.8

 
(4.3
)
 
7.2

 
8.3

 
4.2

 
(0.7
)
 
7.5

 
19.0

Fair Value Option Investments
 
2.0

 
(1.4
)
 
0.1

 
(2.6
)
 
(1.6
)
 
(0.9
)
 
1.8

 
0.9

 
(1.9
)
 
0.2

Limited Liability Investments Included in Equity Securities
 
5.4

 
5.7

 
3.6

 
7.3

 
6.1

 
3.0

 
4.2

 
4.3

 
22.0

 
17.6

Total Alternative Investments
 
11.2

 
9.5

 
6.5

 
0.4

 
11.7

 
10.4

 
10.2

 
4.5

 
27.6

 
36.8

Short-term Investments
 
0.1

 
0.2

 
0.1

 
0.1

 
0.1

 
0.2

 
0.1

 
—

 
0.5

 
0.4

Real Estate
 
2.9

 
3.0

 
2.9

 
3.0

 
3.0

 
3.0

 
3.0

 
2.9

 
11.8

 
11.9

Loans to Policyholders
 
5.5

 
5.4

 
5.3

 
5.4

 
5.4

 
5.3

 
5.1

 
5.3

 
21.6

 
21.1

Other
 
0.3

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
0.3

 
—

Total Investment Income
 
84.3

 
82.2

 
78.1

 
71.7

 
83.7

 
80.7

 
81.2

 
75.6

 
316.3

 
321.2

Investment Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
2.6

 
2.9

 
2.8

 
2.7

 
2.8

 
2.9

 
2.9

 
2.7

 
11.0

 
11.3

Other Investment Expenses
 
1.8

 
1.6

 
1.6

 
2.0

 
1.5

 
1.9

 
1.6

 
2.3

 
7.0

 
7.3

Total Investment Expenses
 
4.4

 
4.5

 
4.4

 
4.7

 
4.3

 
4.8

 
4.5

 
5.0

 
18.0

 
18.6

Net Investment Income
 
$
79.9

 
$
77.7

 
$
73.7

 
$
67.0

 
$
79.4

 
$
75.9

 
$
76.7

 
$
70.6

 
$
298.3

 
$
302.6

Net Realized Gains on Sales of Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on Sales
 
$
2.9

 
$
2.7

 
$
4.3

 
$
7.1

 
$
6.6

 
$
3.6

 
$
3.9

 
$
2.0

 
$
17.0

 
$
16.1

Losses on Sales
 
(3.5
)
 
(0.8
)
 
—

 
(0.3
)
 
(0.4
)
 
(0.1
)
 
(0.5
)
 
(0.1
)
 
(4.6
)
 
(1.1
)
Equity Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on Sales
 
10.1

 
9.3

 
0.5

 
—

 
3.5

 
2.8

 
31.4

 
1.5

 
19.9

 
39.2

Losses on Sales
 
(0.2
)
 
—

 
(0.1
)
 
—

 
(0.2
)
 
(0.7
)
 
(0.7
)
 
—

 
(0.3
)
 
(1.6
)
Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on Sales
 
0.1

 
0.1

 
0.9

 
—

 
—

 
—

 
—

 
—

 
1.1

 
—

Losses on Sales
 
—

 
—

 
—

 
—

 
(0.2
)
 
—

 
—

 
—

 
—

 
(0.2
)
Other Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses on Sales
 
(0.1
)
 
—

 
(0.1
)
 
—

 
0.1

 
—

 
(0.1
)
 
—

 
(0.2
)
 
—

Trading Securities Net Gains (Losses)
 
(0.2
)
 
0.3

 
0.1

 
—

 
—

 
(0.3
)
 
—

 
—

 
0.2

 
(0.3
)
Net Realized Gains on Sales of Investments
 
$
9.1

 
$
11.6

 
$
5.6

 
$
6.8

 
$
9.4

 
$
5.3

 
$
34.0

 
$
3.4

 
$
33.1

 
$
52.1

Net Impairment Losses Recognized in Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Maturities
 
$
(4.8
)
 
$
(8.3
)
 
$
(5.7
)
 
$
(7.8
)
 
$
(6.3
)
 
$
(1.2
)
 
$
(1.6
)
 
$
(2.4
)
 
$
(26.6
)
 
$
(11.5
)
Equity Securities
 
(3.4
)
 
—

 
(0.7
)
 
(1.5
)
 
(8.4
)
 
(2.1
)
 
(0.6
)
 
(4.6
)
 
(5.6
)
 
(15.7
)
Real Estate
 
(0.5
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(0.5
)
 
—

Net Impairment Losses Recognized in Earnings
 
$
(8.7
)
 
$
(8.3
)
 
$
(6.4
)
 
$
(9.3
)
 
$
(14.7
)
 
$
(3.3
)
 
$
(2.2
)
 
$
(7.0
)
 
$
(32.7
)
 
$
(27.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    

Page 26

Kemper Corporation
Details of Invested Assets
(Dollars in Millions)
(Unaudited)
 
 
Dec 31, 2016
 
Dec 31, 2015
 
Dec 31, 2014
 
 
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
 
$
336.3

 
5.1
%
 
$
320.6

 
5.0
%
 
$
345.5

 
5.4
%
States and Political Subdivisions
 
1,714.9

 
26.0

 
1,622.6

 
25.2

 
1,477.1

 
22.9

Foreign Governments
 
3.4

 
0.1

 
—

 
—

 
—

 
—

Corporate Securities:
 
 
 

 
 
 

 
 
 

Bonds and Notes
 
2,944.8

 
44.6

 
2,812.8

 
43.7

 
2,878.5

 
44.7

Redeemable Preferred Stocks
 
0.6

 
—

 
3.8

 
0.1

 
6.7

 
0.1

Collaterized Loan Obligations
 
122.8

 
1.9

 
87.3

 
1.4

 
64.4

 
1.0

Other Mortgage- and Asset-backed
 
2.1

 
—

 
5.2

 
0.1

 
5.4

 
0.1

Subtotal Fixed Maturities Reported at Fair Value
 
5,124.9

 
77.6

 
4,852.3

 
75.5

 
4,777.6

 
74.2

Equity Securities Reported at Fair Value:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stocks
 
82.5

 
1.2

 
103.9

 
1.6

 
109.5

 
1.7

Common Stocks
 
45.2

 
0.7

 
36.7

 
0.6

 
133.8

 
2.1

Other Equity Interests:
 
 
 
 
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
144.4

 
2.2

 
177.1

 
2.8

 
202.7

 
3.1

Limited Liability Companies and Limited Partnerships
 
209.6

 
3.2

 
205.5

 
3.2

 
186.2

 
2.9

Subtotal Equity Securities Reported at Fair Value
 
481.7

 
7.3

 
523.2

 
8.1

 
632.2

 
9.8

Equity Method Limited Liability Investments
 
175.9

 
2.7

 
190.6

 
3.0

 
184.8

 
2.9

Fair Value Option Investments
 
111.4

 
1.7

 
164.5

 
2.6

 
53.3

 
0.8

Short-term Investments at Cost which Approximates Fair Value
 
273.7

 
4.1

 
255.7

 
4.0

 
342.2

 
5.3

Other Investments:
 
 
 
 
 
 
 
 
 
 
 
 
Loans to Policyholders at Unpaid Principal
 
294.2

 
4.5

 
288.4

 
4.5

 
283.4

 
4.4

Real Estate at Depreciated Cost
 
140.2

 
2.1

 
149.8

 
2.3

 
160.9

 
2.5

Trading Securities at Fair Value
 
5.3

 
0.1

 
4.7

 
0.1

 
4.9

 
0.1

Other
 
0.2

 
—

 
0.3

 
—

 
0.4

 
—

Subtotal Other Investments
 
439.9

 
6.7

 
443.2

 
6.9

 
449.6

 
7.0

Total Investments
 
$
6,607.5

 
100.0
%
 
$
6,429.5

 
100.0
%
 
$
6,439.7

 
100.0
%
S&P Equivalent Rating for Fixed Maturities
 
 
 
 
 
 
 
 
 
 
 
 
AAA, AA, A
 
$
3,280.4

 
64.0
%
 
$
3,222.5

 
66.4
%
 
$
3,249.3

 
68.0
%
BBB
 
1,338.2

 
26.1

 
1,149.0

 
23.7

 
1,156.4

 
24.2

BB, B
 
321.6

 
6.3

 
222.4

 
4.6

 
166.7

 
3.5

CCC or Lower
 
184.7

 
3.6

 
258.4

 
5.3

 
205.2

 
4.3

Total Investments in Fixed Maturities
 
$
5,124.9

 
100.0
%
 
$
4,852.3

 
100.0
%
 
$
4,777.6

 
100.0
%
Duration (in Years)
 
 
 
 
 
 
 
 
 
 
 
 
Total Investments in Fixed Maturities
 
6.3

 
 
 
6.5

 
 
 
6.9

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



Page 27

Kemper Corporation
Investment Concentration
(Dollars in Millions)
(Unaudited)
 
 
Dec 31, 2016
 
Dec 31, 2015
 
Dec 31, 2014
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
 
$
1,227.8

 
18.6
%
 
$
1,160.4

 
18.0
%
 
$
1,247.4

 
19.4
%
Finance, Insurance and Real Estate
 
742.6

 
11.2

 
707.4

 
11.0

 
785.6

 
12.2

Services
 
391.6

 
5.9

 
374.4

 
5.8

 
305.0

 
4.7

Transportation, Communication and Utilities
 
364.1

 
5.5

 
334.4

 
5.2

 
312.9

 
4.9

Mining
 
157.2

 
2.4

 
139.7

 
2.2

 
139.7

 
2.2

Retail Trade
 
101.9

 
1.5

 
91.1

 
1.4

 
74.5

 
1.2

Wholesale Trade
 
69.2

 
1.0

 
80.6

 
1.3

 
69.7

 
1.1

Agriculture, Forestry and Fishing
 
14.4

 
0.2

 
20.6

 
0.3

 
15.3

 
0.2

Other
 
1.5

 
—

 
0.5

 
—

 
4.9

 
0.1

Total Fair Value of Non-governmental Fixed Maturities
 
$
3,070.3

 
46.3
%
 
$
2,909.1

 
45.2
%
 
$
2,955.0

 
46.0
%
 
 
 
 
 
Dec 31, 2016
Ten Largest Investment Exposures 1
 
Fair
Value
 
Percent
of Total
Investments
Fixed Maturities:
 
 
 
 
States and Political Subdivisions:
 
 
 
 
Texas
 
$
101.5

 
1.5
%
Michigan
 
86.0

 
1.3

Ohio
 
82.6

 
1.3

Louisiana
 
81.7

 
1.2

Georgia
 
80.7

 
1.2

Colorado
 
65.5

 
1.0

Virgina
 
65.3

 
1.0

Florida
 
63.5

 
1.0

Wisconsin
 
57.2

 
0.9

Equity Securities - Other Equity Interests:
 
 
 
 
Vanguard Total Stock Market ETF
 
73.4

 
1.1

Total
 
$
757.4

 
11.5
%
 
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 December 31, 2016.

 


Page 28

Kemper Corporation
Municipal Bond Securities
(Dollars in Millions)
(Unaudited)
 
 
Dec 31, 2016
 
 
State
General
Obligation
 
Political
Subdivision
General
Obligation
 
Revenue
 
Total Fair
Value
 
Percent
of Total
Muni Bond1
 
Percent
of Total
Investments1
Texas
 
$
9.0

 
$
23.6

 
$
68.9

 
$
101.5

 
5.9
%
 
1.5
%
Michigan
 
37.4

 
—

 
48.6

 
86.0

 
5.0

 
1.3

Ohio
 
38.6

 
5.1

 
38.9

 
82.6

 
4.8

 
1.3

Louisiana
 
44.4

 
7.5

 
29.8

 
81.7

 
4.8

 
1.2

Georgia
 
51.1

 
10.8

 
18.8

 
80.7

 
4.7

 
1.2

Colorado
 
—

 
15.5

 
50.0

 
65.5

 
3.8

 
1.0

Virginia
 
25.7

 
19.1

 
20.5

 
65.3

 
3.8

 
1.0

Florida
 
48.4

 
—

 
15.1

 
63.5

 
3.7

 
1.0

Wisconsin
 
48.7

 
7.1

 
1.4

 
57.2

 
3.3

 
0.9

New York
 
6.1

 
2.6

 
46.7

 
55.4

 
3.2

 
0.8

Washington
 
17.0

 
0.3

 
34.7

 
52.0

 
3.0

 
0.8

Arkansas
 
50.6

 
—

 
—

 
50.6

 
3.0

 
0.8

Minnesota
 
25.6

 
0.4

 
24.6

 
50.6

 
3.0

 
0.8

North Carolina
 
18.0

 
3.1

 
28.5

 
49.6

 
2.9

 
0.8

Indiana
 
—

 
—

 
45.8

 
45.8

 
2.7

 
0.7

Massachusetts
 
2.7

 
2.5

 
40.1

 
45.3

 
2.6

 
0.7

Oregon
 
35.4

 
—

 
3.4

 
38.8

 
2.3

 
0.6

Utah
 
16.5

 
1.5

 
18.6

 
36.6

 
2.1

 
0.6

Nevada
 
28.3

 
7.0

 
—

 
35.3

 
2.1

 
0.5

Arizona
 
—

 
0.8

 
31.7

 
32.5

 
1.9

 
0.5

California
 
0.3

 
—

 
30.5

 
30.8

 
1.8

 
0.5

Pennsylvania
 
11.5

 
2.7

 
15.4

 
29.6

 
1.7

 
0.4

Connecticut
 
24.3

 
—

 
5.1

 
29.4

 
1.7

 
0.4

Mississippi
 
28.7

 
—

 
0.5

 
29.2

 
1.7

 
0.4

Maryland
 
2.7

 
21.2

 
3.6

 
27.5

 
1.6

 
0.4

Delaware
 
17.1

 
—

 
9.5

 
26.6

 
1.6

 
0.4

Tennessee
 
7.9

 
7.2

 
10.6

 
25.7

 
1.5

 
0.4

New Jersey
 
—

 
5.3

 
19.6

 
24.9

 
1.5

 
0.4

South Carolina
 
19.0

 
3.0

 
2.3

 
24.3

 
1.4

 
0.4

New Mexico
 
—

 
—

 
24.2

 
24.2

 
1.4

 
0.4

Illinois
 
—

 
2.4

 
19.6

 
22.0

 
1.3

 
0.3

Alaska
 
4.1

 
2.9

 
14.5

 
21.5

 
1.3

 
0.3

Alabama
 
9.3

 
—

 
10.8

 
20.1

 
1.2

 
0.3

Iowa
 
—

 
—

 
19.5

 
19.5

 
1.1

 
0.3

Missouri
 
—

 
—

 
18.7

 
18.7

 
1.1

 
0.3

Rhode Island
 
4.9

 
—

 
13.6

 
18.5

 
1.1

 
0.3

Idaho
 
—

 
10.3

 
7.6

 
17.9

 
1.0

 
0.3

District of Columbia
 
—

 
4.9

 
11.9

 
16.8

 
1.0

 
0.3

Kentucky
 
—

 
1.0

 
15.6

 
16.6

 
1.0

 
0.3

All Other States
 
22.0

 
6.9

 
65.7

 
94.6

 
5.5

 
1.4

Total (1)
 
$
655.3

 
$
174.7

 
$
884.9

 
$
1,714.9

 
100.0
%
 
26.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Sum of percentages for individual lines may not equal total due to rounding.
 
 
 
 
 
 
 

Page 29

Kemper Corporation
Investments in Limited Liability
Companies and Limited Partnerships
(Dollars in Millions)
(Unaudited)
 
 
Unfunded
Commitment
 
Reported Value
Asset Class
 
Dec 31,
2016
 
Dec 31,
2016
 
Dec 31,
2015
Reported as Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings:
 
 
 
 
 
 
Distressed Debt
 
$
—

 
$
65.4

 
$
90.5

Mezzanine Debt
 
56.2

 
63.2

 
38.8

Secondary Transactions
 
19.6

 
27.3

 
38.5

Senior Debt
 
0.5

 
6.6

 
10.8

Growth Equity
 
—

 
4.6

 
4.8

Leveraged Buyout
 
—

 
—

 
2.8

Other
 
—

 
8.8

 
4.4

Total Equity Method Limited Liability Investments
 
76.3

 
175.9

 
190.6

Reported as Other Equity Interests at Fair Value:
 
 
 
 
 
 
Mezzanine Debt
 
85.6

 
97.6

 
83.8

Senior Debt
 
33.5

 
36.4

 
37.9

Distressed Debt
 
4.6

 
18.8

 
18.9

Secondary Transactions
 
10.6

 
11.9

 
14.2

Leveraged Buyout
 
0.9

 
6.5

 
5.9

Other
 
—

 
38.4

 
44.8

Total Reported as Other Equity Interests at Fair Value
 
135.2

 
209.6

 
205.5

Reported as Fair Value Option Investments:
 
 
 
 
 
 
Hedge Funds
 
—

 
111.4

 
164.5

Total Investments in Limited Liability Companies and Limited Partnerships
 
$
211.5

 
$
496.9

 
$
560.6



Page 30

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 (Loss) is an after-tax, non-GAAP financial measure and is computed by excluding from Income (Loss) 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;
3) Loss from Early Extinguishment of Debt; and
4) 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 (Loss) from Continuing Operations.
The Company believes that Consolidated Net Operating Income (Loss) 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. Loss from Early Extinguishment of Debt is driven by the Company’s financing and refinancing decisions and capital needs, as well as, external economic developments such as debt market conditions, 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.

Page 31

Kemper Corporation
Definitions of Non-GAAP Financial Measures (continued)
A reconciliation of Consolidated Net Operating Income (Loss) to Income (Loss) from Continuing Operations is presented below:
 
 
Three Months Ended
 
Year Ended
Dollars in Millions (Unaudited)
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Consolidated Net Operating Income (Loss)
 
$
28.8

 
$
(20.4
)
 
$
4.6

 
$
(0.6
)
 
$
4.8

 
$
36.6

 
$
6.7

 
$
21.8

 
$
12.4

 
$
69.9

Net Income (Loss) From:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Realized Gains on Sales of Investments
 
5.9

 
7.5

 
3.7

 
4.4

 
6.1

 
3.5

 
22.1

 
2.2

 
21.5

 
33.9

Net Impairment Losses Recognized in Earnings
 
(5.6
)
 
(5.4
)
 
(4.2
)
 
(6.0
)
 
(9.6
)
 
(2.1
)
 
(1.4
)
 
(4.6
)
 
(21.2
)
 
(17.7
)
Loss from Early Extinguishment of Debt
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(5.9
)
 
—

 
(5.9
)
Income (Loss) from Continuing Operations
 
$
29.1

 
$
(18.3
)
 
$
4.1

 
$
(2.2
)
 
$
1.3

 
$
38.0

 
$
27.4

 
$
13.5

 
$
12.7

 
$
80.2

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

A reconciliation of Consolidated Net Operating Income (Loss) Per Unrestricted Share-basic to Income (Loss) from Continuing Operations Per Unrestricted Share-basic is presented below:
 
 
Three Months Ended
 
Year Ended
(Unaudited)
 
Dec 31,
2016
 
Sep 30,
2016
 
Jun 30,
2016
 
Mar 31,
2016
 
Dec 31,
2015
 
Sep 30,
2015
 
Jun 30,
2015
 
Mar 31,
2015
 
Dec 31,
2016
 
Dec 31,
2015
Consolidated Net Operating Income (Loss) Per Unrestricted Share
 
$
0.56

 
$
(0.40
)
 
$
0.09

 
$
(0.01
)
 
$
0.09

 
$
0.70

 
$
0.13

 
$
0.42

 
$
0.25

 
$
1.35

Net Income (Loss) Per Unrestricted Share From:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Realized Gains on Sales of Investments
 
0.11

 
0.15

 
0.07

 
0.09

 
0.12

 
0.07

 
0.43

 
0.04

 
0.41

 
0.65

Net Impairment Losses Recognized in Earnings
 
(0.11
)
 
(0.11
)
 
(0.08
)
 
(0.12
)
 
(0.18
)
 
(0.04
)
 
(0.03
)
 
(0.09
)
 
(0.41
)
 
(0.34
)
Loss from Early Extinguishment of Debt
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(0.11
)
 
—

 
(0.11
)
Income (Loss) from Continuing Operations Per Unrestricted Share
 
$
0.56

 
$
(0.36
)
 
$
0.08

 
$
(0.04
)
 
$
0.03

 
$
0.73

 
$
0.53

 
$
0.26

 
$
0.25

 
$
1.55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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-off of long-lived asset) Ratio. The most directly comparable GAAP financial measure is the Combined Ratio, which is computed by adding total incurred losses and LAE, including the impact of catastrophe losses and loss and LAE reserve development from prior years, with the Insurance Expense (including write-off of long-lived asset) Ratio. 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 32