Acquisition of Business

6 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Acquisition of American Access Casualty Corporation

On April 1, 2021 Kemper completed the acquisition of American Access Casualty Company and its related captive insurance agency, Newins Insurance Agency Holdings, LLC, and its subsidiaries (collectively “AAC”). Pursuant to the agreement dated November 22, 2020, Kemper paid AAC’s equity holders total cash consideration of approximately $371.0 million.

AAC, headquartered in Downers Grove, Illinois, provides specialty private passenger auto insurance in Arizona, Illinois, Indiana, Nevada, and Texas. AAC wrote over $350.0 million of direct premiums in 2020 through a network of approximately 600 independent agents and its captive agency force.

The Company is in the process of finalizing the estimation of the fair value of acquired assets and assumed 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.

Note 3 - Acquisition of Business (continued)

Based on the Company’s allocation of the purchase price, the fair value of the assets acquired and liabilities assumed were:


(Dollars in Millions)
Fixed Maturities at Fair Value	$	151.2
Equity Securities at Fair Value	82.4
Short-term Investments at Cost which Approximates Fair Value	100.1
Cash	54.3
Receivables from Policyholders	148.9
Other Receivables	2.0
Goodwill	197.9
Current Income Tax Assets	0.3
Other Assets	81.5
Property and Casualty Insurance Reserves	(211.1)
Unearned Premiums	(177.8)
Deferred Income Tax Liabilities	(7.7)
Accrued Expenses and Other Liabilities	(51.0)
Total Purchase Price	$	371.0

The factors that contributed to the recognition of goodwill include synergies from economies of scale within the underwriting and claims operations, acquiring a talented workforce and cost savings opportunities.

Intangible Assets

Intangible assets consist of capitalized costs, primarily of the estimated fair value of distribution, customer relationships, policies in force, trade names and licenses, and technology. The estimated useful lives of these assets range from 1 to 8 years. These assets are reported in Other Assets in the Condensed Consolidated Balance Sheets.

Identifiable definite and indefinite lived intangible assets acquired consisted of the following:


(Dollars in Millions)
Definite Life Intangibles
Value of Business Acquired	$	42.9
Customer Relationships	4.8
Agent Relationships	7.2
Internal-Use Software	6.5
Trade Names	1.8
Indefinite Life Intangible Assets
Insurance Licenses	2.5

Unaudited Pro Forma Results

The following unaudited pro forma information presents the Company’s results of operations as if the acquisition of AAC occurred on January 1, 2020. 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 acquired intangible assets and the exclusion of certain acquisition related costs considered to be non-recurring in nature.

Note 3 - Acquisition of Business (continued)


	Six Months Ended				Three Months Ended
(Dollars in millions)	Jun 30, 2021		Jun 30, 2020		Jun 30, 2021		Jun 30, 2020
Total Revenues	$	2,950.9	$	2,643.3	$	1,507.7	$	1,332.8
Total Expenses	2,901.2		2,399.1		1,597.1		1,159.4
Income (Loss) from Continuing Operations before Income Taxes	49.7		244.2		(89.4)		173.4
Net Income (Loss)	$	74.3	$	198.5	$	(62.4)	$	139.1

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.