Schedule 2 - Parent Company Financial Statements (Tables)

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

Parent Company Balance Sheets

KEMPER CORPORATION

PARENT COMPANY BALANCE SHEETS

(Dollars in Millions)

	December 31,
	2019		2018
ASSETS
Investments in Subsidiaries	$	4,383.7	$	3,736.0
Fixed Maturities at Fair Value (Amortized Cost: 2018 – $12.6)	—		12.6
Equity Securities at Fair Value	55.7		20.4
Short-term Investments	89.3		64.6
Cash	61.8		2.9
Other Receivables	21.9		5.7
Other Assets	21.9		14.4
Right-of-Use Assets	18.6		—
Total Assets	$	4,652.9	$	3,856.6
LIABILITIES AND SHAREHOLDERS’ EQUITY
Term Loan due June 29, 2020 (Fair Value: 2018 – $35.0)	—		34.9
Term Loan due July 5, 2023 (Fair Value: 2019 – $50.0)	49.9		—
Senior Notes Payable, 4.35% due 2025 (Fair Value: 2019 – $478.6; 2018 – $444.2)	448.6		448.4
Subordinated Debentures due 2054 (Fair Value: 2018 – $151.1)	—		144.2
Current Income Tax Liability	55.3		40.5
Deferred Income Tax Liability	32.2		20.2
Liabilities for Benefit Plans	44.3		98.2
Right-of-Use Liabilities	31.3		—
Accrued Expenses and Other Liabilities	19.0		20.1
Total Liabilities	680.6		806.5
Shareholders’ Equity:
Common Stock	6.7		6.5
Additional Paid-in Capital	1,819.2		1,666.3
Retained Earnings	1,810.3		1,355.5
Accumulated Other Comprehensive Income	336.1		21.8
Total Shareholders’ Equity	3,972.3		3,050.1
Total Liabilities and Shareholders’ Equity	$	4,652.9	$	3,856.6

See Accompanying Report of Independent Registered Public Accounting Firm.

Parent Company Statements of Income

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF INCOME

(Dollars in Millions)

	For the Year Ended December 31,
	2019			2018			2017
Net Investment Income	$	2.1		$	2.5		$	3.0
Income from Change in Fair Value of Equity Securities	1.6			1.4			—
Net Realized Gains (Losses) on Sales of Investments	0.3			(0.7		)	0.6
Total Revenues	4.0			3.2			3.6
Interest Expense	28.5			37.6			36.6
Loss from Early Extinguishment of Debt	5.8			—			—
Other Operating (Benefits) Expenses	4.0			26.3			(5.1		)
Total Operating Expenses	38.3			63.9			31.5
Loss before Income Taxes and Equity in Net Income of Subsidiaries	(34.3		)	(60.7		)	(27.9		)
Income Tax Benefit	9.4			12.2			21.2
Loss before Equity in Net Income of Subsidiaries	(24.9		)	(48.5		)	(6.7		)
Equity in Net Income of Subsidiaries	556.0			238.6			127.6
Net Income	$	531.1		$	190.1		$	120.9

See Accompanying Report of Independent Registered Public Accounting Firm.

Parent Company Statements of Comprehensive Income

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Millions)

	For the Year Ended December 31,
	2019			2018			2017
Net Income	$	531.1		$	190.1		$	120.9
Other Comprehensive Income (Loss):
Unrealized Holding Gains (Losses) Arising During the Year:
Securities Held by Subsidiaries	433.2			(214.1		)	119.5
Securities Held by Parent	0.2			(0.1		)	(0.4		)
Reclassification Adjustment for Amounts Included in Net Income:
Securities Held by Subsidiaries	(27.9		)	(21.9		)	(35.3		)
Securities Held by Parent	(0.2		)	—			—
Unrealized Holding Gains (Losses)	405.3			(236.1		)	83.8
Unrecognized Postretirement Benefit Costs Arising During the Year:
Securities Held by Subsidiaries	(0.6		)	—			—
Securities Held by Parent	(4.2		)	(8.0		)	3.9
Reclassification Adjustments for Amounts Included in Net Income:
Amortization of Unrecognized Postretirement Benefits (Costs)	(3.0		)	1.1			(0.6		)
Total Reclassification Adjustments for Amounts Included in Net Income	(3.0		)	1.1			(0.6		)
Net Unrecognized Postretirement Benefit Costs	(7.8		)	(6.9		)	3.3
Foreign Currency Translation Adjustments on Investments Held by Subsidiaries	—			0.3			1.7
Gains (Losses) on Cash Flow Hedge	0.4			1.2			(6.7		)
Other Comprehensive Income (Loss) before Income Taxes	397.9			(241.5		)	82.1
Income Tax Benefit (Expense):
Unrealized Holding Gains and Losses Arising During the Year:
Securities Held by Subsidiaries	(91.0		)	45.0			(38.3		)
Securities Held by Parent	—			—			0.1
Reclassification Adjustment for Amounts Included in Net Income:
Securities Held by Subsidiaries	5.8			4.6			12.3
Unrealized Holding Gains and Losses	(85.2		)	49.6			(25.9		)
Unrecognized Postretirement Benefit Costs Arising During the Year	1.0			1.7			(0.8		)
Reclassification Adjustments for Amounts Included in Net Income:
Amortization of Unrecognized Postretirement Benefit Costs	0.7			(0.2		)	0.2
Total Reclassification Adjustments for Amounts Included in Net Income	0.7			(0.2		)	0.2
Net Unrecognized Postretirement Benefit Costs	1.7			1.5			(0.6		)
Foreign Currency Translation Adjustments on Investments Held by Subsidiaries	—			(0.1		)	(0.6		)
Gains (Losses) on Cash Flow Hedge	(0.1		)	(0.3		)	2.4
Income Tax Benefit (Expense)	(83.6		)	50.7			(24.7		)
Other Comprehensive Income (Loss)	314.3			(190.8		)	57.4
Total Comprehensive Income (Loss)	$	845.4		$	(0.7	)	$	178.3

See Accompanying Report of Independent Registered Public Accounting Firm.

Parent Company Statements of Cash Flows

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF CASH FLOWS

(Dollars in Millions)

	For the Year Ended December 31,
	2019			2018			2017
Operating Activities:
Net Income	$	531.1		$	190.1		$	120.9
Adjustment Required to Reconcile Net Income to Net Cash Provided by Operations:
Equity in Net Income of Subsidiaries	(556.0		)	(238.6		)	(127.6		)
Cash Dividends from Subsidiaries	239.0			130.4			108.1
Cash Contribution to Defined Benefit Plan	(55.3		)	(5.0		)	—
Increase in Value of Equity Securities at Fair Value	(1.6		)	(1.4		)	—
Net Realized (Gains) Losses on Sales of Investments	(0.3		)	0.7			(0.6		)
Loss from Early Extinguishment of Debt	5.8			—			—
Other, Net	9.8			29.6			0.7
Net Cash Provided by Operating Activities	172.5			105.8			101.5
Investing Activities:
Capital Contributed to Subsidiaries	(83.0		)	(20.0		)	—
Capital Distribution from Subsidiary	85.0			176.0			—
Sales, Paydowns and Maturities of Fixed Maturities	12.7			(0.2		)	45.7
Purchases of Equity Securities	(48.9		)	(2.3		)	—
Sales of Equity Securities	15.3			67.5			—
Sales of Fair Value Option Investments	—			—			42.2
Purchases of Fair Value Option Investments	—			—			(7.0		)
Acquisition of Business	—			(564.6		)	—
Change in Short-term Investments	(23.3		)	253.4			15.6
Net Cash Provided (Used) by Investing Activities	(42.2		)	(90.2		)	96.5
Financing Activities:
Notes Payable Proceeds:
Net Proceeds from Issuance of Debt	49.9			249.4			200.2
Repayments of Debt	(185.0		)	(215.0		)	(360.0		)
Proceeds from Issuance of Common Stock, Net of Transaction Costs	127.5			—			—
Cash Dividends Paid	(67.8		)	(56.4		)	(49.5		)
Proceeds from Shares Issued under Employee Stock Purchase Plan	1.6			—			—
Cash Exercise of Stock Options	2.4			0.9			4.0
Net Cash Used by Financing Activities	(71.4		)	(21.1		)	(205.3		)
Increase (Decrease) in Cash	58.9			(5.5		)	(7.3		)
Cash, Beginning of Year	2.9			8.4			15.7
Cash, End of Year	$	61.8		$	2.9		$	8.4

See Accompanying Report of Independent Registered Public Accounting Firm.

Lease, Cost

Supplemental cash flow information related to the Company’s operating leases for the year-ended December 31, 2019 is as follows:

DOLLARS IN MILLIONS	2019
Operating Cash Flows from Operating Leases (Fixed Payments)	$	20.0
Operating Cash Flows from Operating Leases (Liability Reduction)	17.6
Financing Cash Flows from Finance Leases	0.7
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	25.9

Significant judgments and assumptions for determining lease asset and liability as December 31, 2019 are presented below.

Weighted-average Remaining Lease Term - Finance Leases	1.7 years
Weighted-average Remaining Lease Term - Operating Leases	7.0 years
Weighted-average Discount Rate - Finance Leases	4.0	%
Weighted-average Discount Rate - Operating Leases	3.9	%

Lease expenses are primarily included in insurance expenses in the Consolidated Statements of Income. Additional information regarding the Company’s operating leases is presented below.

DOLLARS IN MILLIONS	2019
Lease Cost:
Amortization of Right-of-Use Assets - Finance Leases	$	0.7
Operating Lease Cost	20.7
Short-Term Lease Cost (1)	0.1
Total Expense	21.5
Less: Sublease Income (2)	0.1
Total Lease Cost	$	21.4

(1) - Leases with an initial term of twelve months of less are not recorded on the balance sheet.

(2) - Sublease income consists of rent from third parties of office space and is recognized as part of other income in the Consolidated Statements of Income.

The following table presents operating lease ROU assets and lease liabilities.

DOLLARS IN MILLIONS	2019
Operating Lease Right-of-Use Assets	$	75.6
Operating Lease Liabilities	93.2

The following table presents operating lease ROU assets and lease liabilities at December 31, 2019.

DOLLARS IN MILLIONS	2019
Operating Lease Right-of-Use Assets	$	18.6
Operating Lease Liabilities	31.3

Supplemental cash flow information related to Kemper’s operating leases for the year-ended December 31, 2019 follows.

DOLLARS IN MILLIONS	2019
Operating Cash Flows from Operating Leases (Fixed Payments)	$	1.2
Operating Cash Flows from Operating Leases (Liability Reduction)	1.0
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	7.9

Significant judgments and assumptions for determining lease asset and liability as December 31, 2019 are presented below.

Weighted-average Remaining Lease Term - Operating Leases	13.0 years
Weighted-average Discount Rate - Operating Leases	4.0	%

Schedule of Future Minimum Lease Payments for Operating Leases

Future minimum lease payments under finance and operating leases at December 31, 2019 were:

DOLLARS IN MILLIONS	Finance Leases		Operating Leases
2020	$	0.3	$	20.5
2021	0.2		19.3
2022	—		17.0
2023	—		14.7
2024	—		8.3
2025 and Thereafter	—		28.1
Total Future Payments	$	0.5	$	107.9
Less Discount	—		14.7
Present Value of Minimum Lease Payments	$	0.5	$	93.2

NOTE 9. LEASES (Continued)

Future minimum lease payments under finance and operating leases at December 31, 2018 were:

DOLLARS IN MILLIONS	Finance Leases		Operating Leases
2019	$	0.7	$	20.5
2020	0.7		18.4
2021	0.3		16.9
2022	0.2		15.0
2023	—		12.5
2024 and Thereafter	—		27.1
Total Future Payments	$	1.9	$	110.4
Less Imputed Interest	—
Present Value of Minimum Lease Payments	$	1.9

Future minimum operating lease payments at December 31, 2019 were:

DOLLARS IN MILLIONS	Operating Leases
2020	$	2.1
2021	3.5
2022	3.7
2023	3.5
2024	2.5
2025 and Thereafter	25.6
Total Future Payments	$	40.9
Less Discount	9.6
Present Value of Minimum Lease Payments	$	31.3