On July 2, 2018, Kemper acquired 100% of the outstanding common stock of Infinity Property and Casualty Corporation (“Infinity”), pursuant to the terms of the merger agreement dated February 13, 2018, with total cash, stock and equity-based compensation consideration paid to Infinity shareholders of approximately $1.5 billion. In conjunction with closing the acquisition, Kemper issued 13,184,107 shares, with an aggregate fair value of $982.5 million based on Kemper’s July 2, 2018 stock price of $74.53 per share, and paid $564.6 million in cash consideration to Infinity’s shareholders. In addition, Kemper issued 44,010 restricted units under Kemper’s equity-based compensation plan to replace Infinity restricted shares that were outstanding immediately prior to the closing. The aggregate fair value of such Kemper restricted units granted was $3.3 million at July 2, 2018, of which $1.6 million is attributed to service provided prior to the closing and included in consideration paid. The remaining amount of $1.7 million is attributed to future service and will be recognized in compensation expense primarily over a period of two years. The cash consideration was funded by cash on hand as of July 2, 2018, inclusive of $250.0 million in borrowings under the Company’s delayed draw term loan facility and $110.0 million of Kemper subsidiary borrowings from the FHLB of Dallas and FHLB of Chicago. On July 13, 2018, Kemper subsidiaries repaid in full the $110.0 million of FHLB borrowings, plus accrued interest. See Note 5, Debt for additional information. Infinity is a national provider of auto insurance focused on serving the specialty, nonstandard segment. With approximately 10,600 independent agents and $1.4 billion in 2017 direct written premiums, Infinity is one of the largest nonstandard auto insurers in the United States.

The Company has not yet completed the process of estimating the fair value of assets acquired and liabilities assumed, including, but not limited to, receivables, intangible assets, unearned premium reserves, certain tax-related balances and certain other asset and liabilities. Accordingly, the Company’s preliminary estimates and the allocation of the purchase price to the assets acquired and liabilities assumed may change as the Company completes the process, which would also likely impact the Company’s allocation of the purchase price to Goodwill. In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, changes if any, to the preliminary estimates and allocation will be reported in the Company’s financial statements as an adjustment to the opening balance sheet. Based on the Company’s preliminary allocation of the purchase price, the fair values of the assets acquired and liabilities assumed were:



(Dollars in Millions)
Investments	$	1,569.3
Short Term Investments	98.8
Cash	4.0
Receivables from Policyholders	582.3
Other Receivables	31.9
Value of Intangible Assets Acquired (Reported in Other Assets)	262.7
Goodwill	768.2
Other Assets	102.1
Property and Casualty Insurance Reserves	(701.4		)
Unearned Premiums	(714.6		)
Debt	(282.1		)
Current Income Tax Liabilities	(1.8		)
Deferred Income Tax Liabilities	(12.2		)
Accrued Expenses and Other Liabilities	(158.5		)
Total Purchase Price	1,548.7

Unaudited Pro Forma Results

The following unaudited pro forma information presents the Company’s results of operations as if the acquisition of Infinity occurred on January 1, 2017. The adjustments to arrive at the pro forma information below included adjustments for the lost investment income on the cash used to fund the acquisition, amortization of the fair value adjustment on Infinity investments, amortization of the acquired intangible assets, interest expense on debt incurred to finance the acquisition and the exclusion of

Note 2 - Acquisition of Business (continued)

certain acquisition related costs considered to be non-recurring in nature. Shares used to calculate the basic and diluted earnings per share were adjusted to reflect the additional shares of common stock issued to fund the acquisition.



	Nine Months Ended				Three Months Ended
(Dollars in millions, except per share amounts)	Sep 30, 2018		Sep 30, 2017		Sep 30, 2018		Sep 30, 2017
Total Revenues	$	3,375.2	$	3,080.3	$	1,194.9	$	1,044.4
Total Expenses	3,065.7		2,995.8		1,044.4		966.6
Income from Continuing Operations before Income Taxes	309.5		84.5		150.5		77.8
Net Income	$	275.5	$	54.8	$	147.5	$	53.0

Net Income Per Unrestricted Share:
Basic	$	4.26	$	0.85	$	2.28	$	0.82
Diluted	$	4.23	$	0.85	$	2.26	$	0.82

The pro forma information is not necessarily indicative of the consolidated results of operations that might have been achieved had the transaction in fact occurred at the beginning of the periods presented, nor does the information project results for any future period. The pro forma information does not include the impact of any future cost savings or synergies that may be achieved as a result of the acquisition.