Slide 1: Second Quarter 2022 Earnings
Second Quarter 2022 Earnings August 1, 2022 Earnings Call Presentation – 2Q 2022
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 Grow returns Strong capital/liquidity advantages and build and book value per positions; core capabilities share over time Disciplined appro
Slide 4: Second Quarter 2022 Highlights
Second Quarter 2022 Highlights Profit restoration actions accelerated; margins impacted by increased sequential inflation Inflation pressures continued to impact the insurance sector Macroeconomic • Supply chain issues and labor shortages continue to drive up loss costs Environment • Bodily injury s
Slide 5: Second Quarter Financial Highlights
Second Quarter Financial Highlights Underlying pressures persist, impacting financial performance Quarter Ended Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (Dollars in millions, except per share amounts) 2022 2022 2021 2021 2021 Net Income (Loss) – Per Diluted Share $(1.17) $(1.49) $(1.66) $(1.18) $(0.9
Slide 6: Strong Balance Sheet with Well-Funded Insurance Entities
Strong Balance Sheet with Well-Funded Insurance Entities Significant capital and liquidity positions Parent Company Liquidity Risk-Based Capital Ratios¹ (%) (MM) $1,433 $1,194 $867 $700 $938 $684 $641 $582 $918 415 430 410 405 $660 $704 335 355 365 340 355 $385 290 285 330 $385 $540 $733 220 245 $29
Slide 7: Diversified Investment Portfolio with Consistent Returns
Diversified Investment Portfolio with Consistent Returns Net Investment Income Highlights • Higher Net Investment Income driven by a (MM) $114 $108 $119 $102 $100 one-time valuation gain on a real estate $32 $23 $34 investment $22 $21 • New investment yields up 175-200 bps $82 $80 $85 $79 $85 relati
Slide 8: Specialty Property & Casualty Insurance Segment
Specialty Property & Casualty Insurance Segment1 Margins impacted by broad inflation pressures Highlights Specialty PPA (Rate Change Activity Since 2Q21) • Higher earned rates and non rate actions reduced the Rate Actions3 Overall Impact impact of incremental severity Filed Effective4 Written Earned
Slide 9: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Margins impacted by broad inflation pressures Highlights Preferred Personal Auto (Rate Change Activity Since 2Q21) • Higher earned rates and non rate actions reduced the Rate Actions2 Overall Impact impact of incremental severity Filed Effective3 Writt
Slide 10: Life & Health Insurance Segment
Life & Health Insurance Segment In line with national mortality trends, Pandemic continued to impact operating income Highlights • Annualized Life new business sales at pre-Pandemic levels • Consistent with national trends, mortality remains elevated but is moderating • Persistency remains above pre
Slide 11: Appendix
Appendix Earnings Call Presentation – 2Q 2022 11
Slide 12: 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 ~$14B ~6.2M ~34,500 ~10,400 Assets Policies Agents/Brokers Employees Specialty P&C insurance providing Preferred
Slide 13: Earned Rate and Loss Trend
Implementing Pricing and Underwriting Actions to Combat Trend Actions take time to earn into financials | illustrative earned rate vs. loss trend comparison Pre-Pandemic Lockdowns Re-Opening / Future Prior to 2020 2Q 2020 – 1Q 2021 Current+ Δ Earned Rate Significant, rapid Loss Trend (frequency & se
Slide 14: Inflationary Pressures Remain Persistent
Inflationary Pressures Remain Persistent Subcomponents of inflation continue to disproportionately impact insurers • Physical damage severity increased due to used car values, replacement parts, and labor costs • Value of used cars has significantly outpaced core inflation driving loss costs up when
Slide 15: 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 16: Solar Energy Investment: In Line with Environmental Impact Goals
Solar Energy Investment: In Line with Environmental Impact Goals $100 million commitment to solar energy investment generating attractive returns • In conjunction with Sunrun, invested in a diversified group of residential solar energy projects • Opportunity to provide renewable energy solutions for
Slide 17: 2022 Reinsurance Program
2022 Reinsurance Program Renewed programs and upsized our catastrophe reinsurance program Catastrophe Reinsurance Program (Multi-Year) Aggregate Catastrophe Program • Increased retention vs. 2021 program – Intended to reduce volatility from high- frequency, low severity events • Coverage – $50 milli
Slide 18: Net Operating Income Review
Net Operating Income Review Financial results continue to be pressured by environmental challenges Three Months Ended, As Reported Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Variance Dollars per Unrestricted Share - Diluted 2022 2022 2021 2021 2021 YoY Net Income (Loss) $ (1.17) $ (1.49) $ (1.66)
Slide 19: Non-GAAP Financial Measures
Non-GAAP Financial Measures Book Value Per Share Excluding Net Unrealized (Gains) Losses 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
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Book Value For the Periods Ended 2Q'22 1Q'22 4Q'21 3Q'21 2Q'21 1Q'21 Book Value Per Share $ 44.64 $ 53.21 $ 62.93 $ 65.22 $ 67.67 $ 66.74 Less: Net Unrealized (Gains) Losses on Fixed Maturities Per Share 7.39 0.21 (7.89) (8.28) (9.28) (6.74) Book Value Per Share Excluding
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures Return on Equity For the Periods Ended 2Q'22 1Q'22 4Q'21 3Q'21 2Q'21 1Q'21 Rolling 12 Month Return on Average Shareholders' Equity (5 Point Avg) (9.4)% (8.4)% (2.8)% 1.9% 6.4% 11.1% Less: Net Unrealized (Gains) Losses on Fixed Maturities (0.6)% (0.9)% (0.4)% 0.3% 1.1% 1.5
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Kemper believes that Adjusted Consolidated Net Operating Income (Loss) provides investors with a valuable measure of its ongoing performance because it reveals underlying operational performance trends that otherwise might be less apparent if the items were not excluded.
Slide 23: 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 24: 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 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 2Q22 1Q22 4Q21 3Q21 2Q21 Specialty P&C Insurance Combined Ratio as Reported 108.0% 108.6% 118.9% 111.6% 116.1% Current Year Catastrophe Loss and LAE Ratio (0.6)% (0.2)% (0.2)% (0.3)% (0.8)% Prior Years Non-C
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition amounts are non-GAAP financial measures. Subsequent to the applicable acquisitions, the As Adjusted for Acquisitions amounts are computed by subtracting the impact of purchase accounting adjustments from the comparable consolidated GAAP financi
Slide 27: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued ($ in millions, except per share data) Three Months Ended 30-Jun-22 31-Mar-22 31-Dec-21 30-Sep-21 30-Jun-21 Earned Premiums Kemper - GAAP As Reported $ 1,353.7 $ 1,338.6 $ 1,359.1 $ 1,356.1 $ 1,337.7 AAC - Prior to Acquisition - - -
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty P&C Insurance Segment ($ in millions) Three Months Ended 30-Jun-22 31-Mar-22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 1,043.7 $ 1,021.6 $ 1,032.3 $ 1,028.3 $ 1,010.3
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance ($ in millions) Three Months Ended 30-Jun-22 31-Mar-22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 905.8 $ 901.7 $ 918.1 $ 920.6 $ 909.6 $