Postretirement Benefits Other Than Pensions

12 Months Ended

Dec. 31, 2019

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

Postretirement Benefits Other Than Pensions

PENSION BENEFITS

Kemper sponsors a qualified defined benefit pension plan (the “Pension Plan”). The Pension Plan covers approximately 8,650 participants and beneficiaries, of which 1,250 are active employees. Effective January 1, 2006 the Pension Plan was closed to new hires, and effective June 30, 2016, benefit accruals were frozen for substantially all of the participants under the Pension Plan. The Pension Plan is generally non-contributory, but participation requires or required some employees to contribute 3% of pay, as defined, per year. Benefits for participants who are or were required to contribute to the Pension Plan are based on compensation during plan participation and the number of years of participation. Benefits for the vast majority of participants who are not required to contribute to the Pension Plan are based on years of service and final average pay, as defined. The Company funds the Pension Plan in accordance with the requirements of ERISA.

Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Pension Plan for the years ended December 31, 2019 and 2018 is presented below.

DOLLARS IN MILLIONS	2019			2018
Fair Value of Plan Assets at Beginning of Year	$	525.3		$	579.8
Actual Return on Plan Assets	113.2			(32.1		)
Employer Contributions	55.3			5.1
Benefits Paid	(29.2		)	(27.5		)
Fair Value of Plan Assets at End of Year	664.6			525.3
Projected Benefit Obligation at Beginning of Year	580.5			637.2
Interest Cost	22.3			20.3
Benefits Paid	(29.2		)	(27.5		)
Actuarial (Gains) Losses	86.9			(49.5		)
Projected Benefit Obligation at End of Year	660.5			580.5
Funded Status—Plan Assets in Excess (Deficit) of Projected Benefit Obligation	$	4.1		$	(55.2	)
Unamortized Amount Reported in AOCI at End of Year	$	(145.7	)	$	(144.4	)
Accumulated Benefit Obligation at End of Year	$	660.4		$	580.3

The measurement dates of the assets and liabilities at end of year presented in the preceding table under the headings, “2019” and “2018” were December 31, 2019 and December 31, 2018, respectively.

The weighted-average discount rate and rate of increase in future compensation levels used to estimate the components of the Projected Benefit Obligation for the Pension Plan at December 31, 2019 and 2018 were:

	2019		2018
Discount Rate	3.21	%	4.28	%
Rate of Increase in Future Compensation Levels	3.40		3.40

Asset allocations for the Pension Plan at December 31, 2019 and 2018 by asset category were:

ASSET CATEGORY	2019		2018
Cash and Short-term Investments	2	%	1	%
Corporate Bonds and Notes	40		41
Common and Preferred Stocks	35		37
Bond Exchange Traded Funds	14		6
Other Assets	9		15
Total	100	%	100	%

The investment objective of the Pension Plan is to produce current income and long-term capital growth through a combination of equity and fixed income investments which, together with appropriate employer contributions and any required employee contributions, is adequate to provide for the payment of the benefit obligations of the Pension Plan. The assets of the Pension Plan may be invested in fixed income and equity investments or any other investment vehicle or financial instrument deemed

NOTE 17. PENSION BENEFITS (Continued)

appropriate. Fixed income investments may include cash and short-term instruments, U.S. Government securities, corporate bonds, mortgages and other fixed income investments. Equity investments may include various types of stock, such as large-cap, mid-cap and small-cap stocks, and may also include investments in investment companies, collective investment funds and Kemper common stock (subject to Section 407 and other requirements of ERISA). The Pension Plan has not invested in Kemper common stock.

The trust investment committee for the Pension Plan, along with its third party fiduciary advisor, periodically reviews the performance of the Pension Plan’s investments and asset allocation. Several external investment managers, one of which is Fayez Sarofim & Co. (see Note 24, “Related Parties,” to the Consolidated Financial Statements), manage the equity investments of the trust for the Pension Plan. Each manager is allowed to exercise investment discretion, subject to limitations, if any, established by the trust investment committee for the Pension Plan. All other investment decisions are made by the Company, subject to general guidelines as set by the trust investment committee for the Pension Plan.

The Company determines its Expected Long Term Rate of Return on Plan Assets based primarily on the Company’s expectations of future returns, with consideration to historical returns, for the Pension Plan’s investments, based on target allocations of the Pension Plan’s investments.

The fair values of pension plan assets are estimated using the same methodologies and inputs as those used to determine the fair values for the respective asset category of the Company. These methodologies and inputs are disclosed in Note 22, “Fair Value Measurements,” to the Consolidated Financial Statements. Fair value measurements for the Pension Plan’s assets at December 31, 2019 are summarized below.

DOLLARS IN MILLIONS	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at Net Asset Value		Fair Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	158.4		$	—	$	—	—		$	158.4
States and Political Subdivisions	—			0.1		—		—		0.1
Corporate Bonds and Notes	—			107.3		—		—		107.3
Equity Securities:
Common Stocks:
Other Industries	140.0			21.5		—		—		161.5
Other Equity Interests:
Collective Investment Funds	—			—		—		71.8		71.8
Bond Exchange Traded Funds	92.8			—		—		—		92.8
Limited Liability Companies and Limited Partnerships	—			—		—		63.7		63.7
Short-term Investments	10.0			—		—		—		10.0
Receivables and Other	(1.0		)	—		—		—		(1.0		)
Total	$	400.2		$	128.9	$	—	$	135.5	$	664.6

NOTE 17. PENSION BENEFITS (Continued)

Fair value measurements for the Pension Plan’s assets at December 31, 2018 are summarized below.

DOLLARS IN MILLIONS	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at Net Asset Value		Fair Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	110.9	$	—	$	—	—		$	110.9
States and Political Subdivisions	—		2.1		—		—		2.1
Corporate Bonds and Notes	—		103.4		—		—		103.4
Equity Securities:
Preferred Stocks:
Finance, Insurance and Real Estate	—		—		—		—		—
Common Stocks:
Manufacturing	—		—		—		—		—
Other Industries	106.0		17.4		—		—		123.4
Other Equity Interests:
Collective Investment Funds	—		—		—		68.6		68.6
Bond Exchange Traded Funds	34.1		—		—		—		34.1
Limited Liability Companies and Limited Partnerships	—		—		—		77.1		77.1
Short-term Investments	4.4		—		—		—		4.4
Receivables and Other	1.0		—		0.3		—		1.3
Total	$	256.4	$	122.9	$	0.3	$	145.7	$	525.3

Additional information pertaining to the changes in the fair value of the Pension Plan’s assets classified as Level 3 in the two preceding tables for the years ended December 31, 2019 and 2018 is presented below.

DOLLARS IN MILLIONS	2019			2018
Balance at Beginning of Year	$	0.3		$	0.3
Purchases, Sales and Settlements, Net	(0.3		)	—
Balance at End of Year	$	—		$	0.3

The components of Comprehensive Pension Expense (Income) for the Pension Plan for the years ended December 31, 2019, 2018 and 2017 were:

DOLLARS IN MILLIONS	2019			2018			2017
Service Cost Earned During the Year	$	—		$	—		$	—
Interest Cost on Projected Benefit Obligation	22.3			20.3			20.6
Expected Return on Plan Assets	(30.6		)	(28.9		)	(30.9		)
Amortization of Actuarial Loss	2.9			4.3			2.6
Pension Income Recognized in Consolidated Statements of Income	(5.4		)	(4.3		)	(7.7		)
Unrecognized Pension Gain (Loss) Arising During the Year	4.2			11.5			(4.9		)
Amortization of Accumulated Unrecognized Pension Loss	(2.9		)	(4.3		)	(2.6		)
Comprehensive Pension Expense (Income)	$	(4.1	)	$	2.9		$	(15.2	)

NOTE 17. PENSION BENEFITS (Continued)

The actuarial loss included in AOCI at December 31, 2019 is being amortized over approximately 22 years, the remaining average estimated life expectancy of participants. The Company estimates that Pension Income for the Pension Plan for the year ended December 31, 2020 will include expense of $5.9 million resulting from the amortization of the related accumulated actuarial loss included in AOCI at December 31, 2019.

The weighted-average discount rate, service cost discount rate, interest cost discount rate, rate of increase in future compensation levels and expected long-term rate of return on plan assets used to develop the components of Pension Expense for the Pension Plan for the years ended December 31, 2019, 2018 and 2017 were:

	2019		2018		2017
Weighted-average Discount Rate	4.28	%	3.63	%	4.19	%
Service Cost Discount Rate	4.26		3.61		4.15
Interest Cost Discount Rate	3.91		3.26		3.52
Rate of Increase in Future Compensation Levels	3.40		3.40		2.56
Expected Long Term Rate of Return on Plan Assets	5.70		5.35		5.80

On August 22, 2019, the Company made a voluntary cash contribution of $55.3 million to the Pension Plan. On July 13, 2018, the Company made a voluntary cash contribution of $5.1 million to the Pension Plan. The Company did not contribute to the Pension Plan in 2017. The Company does not expect that it will be required to contribute to the Pension Plan in 2020, but could make a voluntary contribution pursuant to the maximum funding limits under ERISA.

The following benefit payments (net of participant contributions), which consider expected future service of certain participants that remain eligible for a benefit accrual, as appropriate, are expected to be paid from the Pension Plan:

DOLLARS IN MILLIONS	Years Ending December 31,
	2020		2021		2022		2023		2024		2025-2029
Estimated Pension Benefit Payments	$	31.4	$	32.1	$	33.2	$	34.0	$	34.7	$	179.1

The Company also sponsors a non-qualified supplemental defined benefit pension plan (the “Supplemental Plan”). Benefit accruals for all participants in the Supplemental Plan were frozen effective June 30, 2016. The unfunded liability related to the Supplemental Plan was $28.9 million and $24.2 million at December 31, 2019 and 2018, respectively. Pension expense for the Supplemental Plan was $1.0 million, $0.8 million, and $0.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. An actuarial loss of $5.6 million before taxes, an actuarial gain of $1.3 million before taxes and an actuarial loss of $1.6 million before taxes are included in Other Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017, respectively.

The Company also sponsors several defined contribution benefit plans covering most of its employees. The Company made contributions to those plans of $26.0 million, $15.1 million and $10.6 million in 2019, 2018 and 2017, respectively.

Other Postretirement Benefit Plan, Defined Benefit

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

Postretirement Benefits Other Than Pensions

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

Kemper and Infinity sponsor other than pension postretirement employee benefit plans (“OPEB”) that together provide medical, dental and/or life insurance benefits to approximately 650 retired and 525 active employees.

Kemper has historically self-insured the benefits under the Kemper OPEB Plan. The Kemper medical plan generally provides for a limited number of years of medical insurance benefits at retirement based on the participant’s attained age at retirement and number of years of service until specified dates and generally has required participant contributions, with most contributions adjusted annually. On December 30, 2016, Kemper amended the Kemper OPEB Plan and, effective December 31, 2016, will no longer offer coverage to post-65 Medicare-eligible retirees and Medicare-eligible spouses under the self-insured portion of its coverage. Rather, beginning on January 1, 2017, the Kemper OPEB Plan offers access to a private, third-party Medicare exchange and provides varying levels of a Company-determined subsidy via health reimbursement accounts to certain Medicare-eligible retirees and spouses in order to help fund a portion of the participants’ cost. Further, the amendment eliminates the requirement for such participants to contribute to the Kemper OPEB Plan. In conjunction with the amendment,

NOTE 18. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)

the Company recorded a pre-tax reduction to its Accumulated Postretirement Benefit Obligation of $11.0 million through Other Comprehensive Income. This prior service credit is being amortized into income over the remaining average life of the Kemper OPEB Plan’s participants.

Changes in Fair Value of Plans’ Assets and Changes in Accumulated Postretirement Benefit Obligation for the years ended December 31, 2019 and 2018 were:

DOLLARS IN MILLIONS
	2019			2018
Fair Value of Plans’ Assets at Beginning of Year	$	—		$	—
Employer Contributions	1.1			1.1
Plan Participants’ Contributions	0.3			0.3
Benefits Paid	(1.4		)	(1.4		)
Fair Value of Plan Assets at End of Year	—			—
Accumulated Postretirement Benefit Obligation at Beginning of Year	15.0			14.4
Obligation from Acquisition of Infinity	—			3.9
Service Cost	0.2			0.2
Interest Cost	0.4			0.4
Plan Participants’ Contributions	0.3			0.3
Benefits Paid	(1.4		)	(1.4		)
Medicare Part D Subsidy Received	—			0.2
Actuarial Gain	(1.7		)	(3.0		)
Accumulated Postretirement Benefit Obligation at End of Year	12.8			15.0
Funded Status—Accumulated Postretirement Benefit Obligation in Excess of Plans’ Assets	$	(12.8	)	$	(15.0	)
Unamortized Actuarial Gain Reported in AOCI at End of Year	$	23.8		$	24.9

The measurement dates of the assets and liabilities at end of year in the preceding table under the headings “2019” and “2018” were December 31, 2019 and December 31, 2018, respectively.

The weighted-average discount rate and rate of increase in future compensation levels used to develop the components of the Accumulated Postretirement Benefit Obligation at December 31, 2019 and 2018 were:

	2019		2018
Discount Rate	2.91	%	4.02	%
Rate of Increase in Future Compensation Levels	2.20		2.20

The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, 2019 was 7.50% for 2020, gradually declining to 4.8% in the year 2025 and remaining at that level thereafter for medical benefits and 10.00% for 2020, gradually declining to 4.8% in the year 2026 and remaining at that level thereafter for prescription drug benefits. The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, 2018 was 7.5% for 2019, gradually declining to 4.8% in the year 2025 and remaining at that level thereafter for medical benefits and 10.0% for 2019, gradually declining to 4.8% in the year 2026 and remaining at that level thereafter for prescription drug benefits.

A one-percentage point increase in the assumed health care cost trend rate for each year would have increased the Accumulated Postretirement Benefit Obligation at December 31, 2019 by $0.6 million and 2019 OPEB expense by an insignificant amount. A one-percentage point increase in the assumed health care cost trend rate for each year would have increased the Accumulated Postretirement Benefit Obligation at December 31, 2018 by $0.8 million and 2018 OPEB expense by an insignificant amount.

NOTE 18. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)

The components of Comprehensive OPEB Expense (Income) for the years ended December 31, 2019, 2018 and 2017 were:

DOLLARS IN MILLIONS	2019			2018			2017
Service Cost Earned During the Year	$	0.2		$	0.2		$	0.1
Interest Cost on Accumulated Postretirement Benefit Obligation	0.4			0.4			0.4
Amortization of Prior Service Credit	(1.3		)	(1.3		)	—
Amortization of Accumulated Unrecognized OPEB Gain	(2.4		)	(1.8		)	(1.8		)
OPEB Income Recognized in Consolidated Statements of Income	(3.1		)	(2.5		)	(1.3		)
Unrecognized OPEB Gain Arising During the Year	(1.7		)	(3.0		)	(0.5		)
Prior Service Credit Arising During the Year from Plan Amendments	—			—			(1.3		)
Amortization of Prior Service Credit	1.3			1.3			—
Amortization of Accumulated Unrecognized OPEB Gain	2.4			1.8			1.8
Comprehensive OPEB Income	$	(1.1	)	$	(2.4	)	$	(1.3	)

The Company estimates that OPEB Expense for the year ended December 31, 2020 will include income of $3.3 million resulting from the amortization of the related accumulated actuarial gain and prior service credit included in AOCI at December 31, 2019.

The weighted-average discount rate and rate of increase in future compensation levels used to develop OPEB Expense for the years ended December 31, 2019, 2018 and 2017 were:

	2019		2018		2017
Weighted-average Discount Rate	4.08	%	3.36	%	3.61	%
Service Cost Discount Rate	4.16		3.52		3.79
Interest Cost Discount Rate	3.69		2.96		2.92
Rate of Increase in Future Compensation Levels	2.20		2.20		2.60

The Company expects to contribute $1.3 million, net of the expected Medicare Part D subsidy, to its OPEB Plan to fund benefit payments in 2020.

The following benefit payments (net of participant contributions), which consider expected future service, as appropriate, are expected to be paid:

DOLLARS IN MILLIONS	Years Ending December 31,
	2020		2021		2022		2023		2024		2025-2029
Estimated Benefit Payments:
Excluding Medicare Part D Subsidy	$	1.3	$	1.3	$	1.3	$	1.2	$	1.2	$	4.5
Expected Medicare Part D Subsidy	—		—		—		—		—		—
Net Estimated Benefit Payments	$	1.3	$	1.3	$	1.3	$	1.2	$	1.2	$	4.5