Slide 1: Fourth Quarter 2019 Earnings
Fourth Quarter 2019 Earnings February 10, 2020 Earnings Call Presentation – 4Q 2019
Slide 2: Preliminary Matters
Preliminary Matters Cautionary Statements Regarding Forward-Looking Information This presentation may contain or incorporate by reference information that includes or is based on forward-looking statements within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform A
Slide 3: Create Long-Term Shareholder Value
Create Long-Term Shareholder Value Leverage competitive advantages to grow returns and BVPS1 over time Diversified sources of earnings; Sustainable competitive Growing returns Strong capital/liquidity advantages and build and book value per positions; core capabilities share over time Disciplined ap
Slide 4: Fourth Quarter 2019 Highlights
Fourth Quarter 2019 Highlights Specialty P&C growth and stable Life earnings continue to drive strong results Continued double-digit return on equity and book value per share (BVPS) accretion • Net Income of $125 million and adjusted consolidated net operating income of $98 million • 27% increase in
Slide 5: Fourth Quarter Highlights
Fourth Quarter Highlights Strategy continuing to yield strong results As Adjusted As Reported for Acquisition (1) Quarter Ended Quarter Ended Change Change Dec 31, from 4Q’18 Dec 31, from 4Q’18 (Dollars in millions, except per share amounts) 2019 (%) 2019 (%) Net Income $125 1,818% $129 378% Adjuste
Slide 6: Operating Performance
Operating Performance Continued to produce strong operating income Three Months Ended, As Reported Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Variance Dollars per Unrestricted Share - Diluted 2019 2019 2019 2019 2018 QoQ Income from Continuing Operations $ 1.85 $ 1.91 $ 1.84 $ 2.35 $ 0.08 1.77 (In
Slide 7: High Quality & Diversified Portfolio with Consistent Returns
High Quality & Diversified Portfolio with Consistent Returns Stable Net Investment Income Overview • Core portfolio investment income largely in (MM) $93 $84 $98 $95 $98 line with the previous year, which did not $1 $1 $2 $4 $4 $8 $6 include the impact of investment in $7 ($1) $7 Corporate owned lif
Slide 8: Capital Generation Metrics
Capital Generation Metrics Capital generation continues to grow as we deliver on strategic objectives Total Adjusted Return of BVPS Ex. Unrealized Gains on Fixed Maturities and Goodwill Growth 36% Book value cross-over from Infinity acquisition Infinity acquisition $40.27 • TBVPS ex. unrealized $38.
Slide 9: Strong Capital Position with Ample Liquidity
Strong Capital Position with Ample Liquidity Strong balance sheet with returns and capital generation in excess of long-term targets Strong Parent Company Liquidity Risk-Based Capital Ratios Life & Health P&C¹ (MM) (%) $867 $741 $684 $582 $641 $400 $385 $660 $385 $540 415 430 410 380 375 330 335 $34
Slide 10: Infinity Acquisition a Proven Success
Infinity Acquisition a Proven Success Financial targets achieved with continued upside expected Premium Outperformance1,2 Yield Enhancement2 Total Synergies2 (Cost Savings + Yield) ~$250mm of written premium above combined Net inv. income benefit from repositioning Revised synergy target achieved; e
Slide 11: Specialty Property & Casualty Insurance Segment
Specialty Property & Casualty Insurance Segment1 Strong, profitable Specialty P&C growth driven by strong foundations of the operating model Key Highlights Written Premium Population CAGR State Groupings 2019 Growth ’16-’19 Est. ’20-’30 • 9.0% growth in policies in-force, or 9.3% excluding ($ millio
Slide 12: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Efforts to bring the Preferred segment to target profitability are ongoing Key Highlights • Underlying combined ratio increased 150 basis points to 95.3% for the year - Auto underlying combined ratio remains elevated as we continue to reposition the bu
Slide 13: Life & Health Insurance Segment
Life & Health Insurance Segment Life & Health Segment demonstrated stable earnings and continued modest premium growth Key Highlights • Earned premiums grew 2.5% driven by continued focus on enhancements to distribution capabilities and process improvements • Refinement of CEI estimate had a $5 mill
Slide 14: Appendix
Appendix Earnings Call Presentation – 4Q 2019 14
Slide 15: A Leading Specialized Insurer
A Leading Specialized Insurer Taking advantage of a diversified portfolio of niche businesses…. Founded in 1990 and headquartered in Chicago, with subsidiaries writing policies since 1911 ~$13B ~6.4M ~30,000 ~8,900 Assets Policies Agents/Brokers Employees Specialty P&C insurance providing Preferred
Slide 16: Capital Deployment Priorities
Capital Deployment Priorities Dedicated to being good stewards of capital 1. Investment in the business • Fund profitable organic growth at appropriate risk-adjusted returns • Strategic investments and acquisitions that enhance the business and meet or exceed our ROE targets over time 2. Return capi
Slide 17: 2020 Reinsurance Program
2020 Reinsurance Program Both programs were renewed with no significant change Catastrophe Reinsurance Program (Multi-Year) Aggregate Catastrophe Program • Same coverage as 2019 program 1-Year Term Placed 1/1/20 • Intended to reduce volatility from high- $25M xs $250M 95% Placed frequency, low sever
Slide 18: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 Co
Slide 19: Non-GAAP Financial Measures
Non-GAAP Financial Measures Return on Equity For the Periods Ended 4Q'19 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 2Q'18 1Q'18 2017 2016 Rolling 12 Month Return on Average Shareholders' Equity (5 Point Avg) 14.8% 12.1% 12.4% 10.8% 7.7% 9.7% 8.5% 8.5% 5.9% 0.8% Less: Net Unrealized Gains on Fixed Maturities 1.5%
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Consolidated Net Operating Income (Loss) is an after-tax, non-GAAP financial measure computed by excluding from Income (Loss) from Continuing Operations the after-tax impact of 1) income (loss) from change in fair value of equity and convertible securities, 2) ne
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures Diluted Adjusted Consolidated Net Operating Income (Loss) Per Unrestricted Share is a non-GAAP financial measure computed by dividing Adjusted Consolidated Net Operating Income (Loss) attributed to unrestricted shares by the weighted-average unrestricted shares and equiva
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 Ratio. The most directly comparable GAAP financial measure is the Combined Ratio, which is computed by addi
Slide 23: Underlying Combined Ratio – Continued
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 4Q19 3Q19 2Q19 1Q19 4Q18 Specialty P&C Insurance Combined Ratio as Reported 93.8% 91.6% 93.5% 89.3% 94.6% Current Year Catastrophe Loss and LAE Ratio (0.5%) (0.3%) (0.6%) (0.1%) (0.1%) Prior Years Non-Catast
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition amounts are non-GAAP financial measures. For the three months ended September 30, 2019, as adjusted amounts are computed by subtracting the impact of purchase accounting adjustments from the comparable consolidated GAAP financial measure report
Slide 25: As Adjusted for Acquisition – Continued
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty P&C Insurance Segment Three Months Ended 31-Dec-19 30-Sep-19 30-Jun-19 31-Mar-19 31-Dec-18 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 799.7 $ 783.4 $ 766.0 $ 729.3 $ 717.8 Current Year Non-CAT Losses and LAE
Slide 26: As Adjusted for Acquisition – Continued
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance Three Months Ended 31-Dec-19 30-Sep-19 30-Jun-19 31-Mar-19 31-Dec-18 Earned Premiums Kemper Specialty Auto - GAAP As Reported $ 733.1 $ 719.2 $ 703.7 $ 669.6 $ 660.5 Current Year Non-CAT Losse