Slide 1: Strategic Update for Investors
September 21, 2016 Strategic Update for Investors
Slide 2: Caution Regarding Forward-looking Statements
Caution Regarding Forward-looking Statements 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 Act of 1995. Forward-looking stateme
Slide 3: Strategy Outline
Strategy Outline • Current State • Resetting the Table – Strategic focus – Senior executive team – Our businesses • Our Path Forward • Progress Made in 2016 • The Case for Kemper Strategic Update for Investors – September 21, 2016 3
Slide 4: Baseline: Year End 2015
Baseline: Year End 2015 • Unclear strategic framework & focus Average Normalized Earnings from 2011-20151 – Limited external focus 30% Bubble sized with avg. of Alliance United Earned Premium from – Constrained analytical curiosity 20% 2011-2015 (AU last 12 months) • Financial underperformance Growt
Slide 5: Current State
Current State Tangible Strengths Fixable Weaknesses Strong capital position Poor execution • More than $200MM of excess capital Limited strategic focus • Steady capital creation from life businesses • Overall and within specific businesses Distinguished brand • Recognized in market Culture of compla
Slide 6: Resetting the Table
Resetting the Table
Slide 7: Strategic Focus
Strategic Focus Utilize scale and nimbleness as advantage • Focus on consumer-related businesses with niche opportunities that: – Target underserved markets – Have limited, weak or unfocused competition – Require unique expertise (underwriting, claim, distribution, other) • Build and leverage key co
Slide 8: Senior Executive Team
Senior Executive Team Experienced leadership team with proven history of delivering results Joe Lacher • 20+ years of insurance industry experience President and • Joined Kemper in 2015; Track record of turning around under- Chief Executive Officer performing businesses to realize their full potenti
Slide 9: Life & Health
Life & Health Life Insurance Our Results Market & consumer focus ($MM) • Modest income consumers 100 Normalized Earnings¹ • Simple “final expense” type life product • Limited, diffused, smaller competition • Consistently profitable segment Keys to success • Efficient and consistent pricing, underwri
Slide 10: Property & Casualty: Preferred Personal Lines
Property & Casualty Preferred Personal Lines1 Our Results Market & consumer focus 110% Normalized Combined Ratio² • Regional independent agency player • Main Street consumer focus • Historically leveraged package product strength 95% Keys to success • Product/pricing sophistication • Claims effectiv
Slide 11: Property & Casualty: Non-standard Auto
Property & Casualty Non-standard Auto1 Our Results Normalized Combined Ratio2,3 Market & consumer focus AU—pre acquisition • Major competition is smaller/regional carriers; limited and 115% AU—post acquisition Legacy Non-standard Auto often ineffective results from large carriers • Specialized exper
Slide 12: Investments
Investments Goal Investment Portfolio ($MM) Balance risk and return to maximize investment portfolio’s 441 Other1 after-tax yield and total return 532 Alternative Inv.2 542 295 Approach to Investment Management Equities3 365 • Take advantage of multi-line businesses allowing for greater Short-term 4
Slide 13: Path Forward to Unlock Embedded Value
Path Forward to Unlock Embedded Value Phase 1 Phase 2 Phase 3 Work / Effort Leverage, Grow Rebuild Build & Incubate Phase 1—Key Elements: Specific • Assemble top quality leadership team • Redesign P&C claim service delivery model • Resolve DMF/UCP issue • Complete IT re-platforming in P&C and Life •
Slide 14: Life Insurance Claims—DMF/Unclaimed Property Issue
Life Insurance Claims—DMF/Unclaimed Property Issue Background • Some insurers used Social Security Death Master File (DMF) to halt annuities but failed to see if person also had life policy—had notice of death but did not pay claim • Kemper was not one of those companies • Officials imposed penaltie
Slide 15: Restore Alliance United Profitability
Restore Alliance United Profitability Corrective actions visible—several Our Results pricing cycles to complete 60 AU Claims Pending & Staffing 700 55 650 Increase rates Pending Features (1000s) 50 600 • Millennium program 6.9% effective 4/1/16 45 550 • Gold program 6.9% effective 10/1/16 FTEs 40 50
Slide 16: P&C Claims Effectiveness
P&C Claims Effectiveness Re-building service delivery model with strong Impact of Improving Claim Effectiveness focus on key metrics and initiatives: • Reducing claims cycle time • More fully leveraging Guidewire Claim Today Center capabilities for more efficient Loss & LAE processes and better anal
Slide 17: Property & Casualty—Key Technology Investments
Property & Casualty—Key Technology Investments • Multi-year effort to upgrade key P&C Technology Framework components of core legacy systems • Enterprise claims system upgrade completed—in process of being fully Agency Front End Policyholder Experience leveraged • Finished 2 of 4 development phases
Slide 18: Expense Management
Expense Management Competitively priced products require further expense discipline Goal: Expenses1 Reduce expenses $50MM - $65MM by YE18 ($MM) Expenses Savings 400 420505 405 490 5050 50-65 355 235-250 200 440 350 300 2016-2017 Actions 0 Initiatives: 2015 1H16 Initiatives Pro Forma • Increase utili
Slide 19: Capital Deployment Priorities
Capital Deployment Priorities 1. Fund profitable organic growth—improve margins in all lines 2. Strategic acquisitions: • Bolt-on Non-standard Auto and Preferred opportunities • Leverage scale in Life operations • Other niche specialized businesses 3. Return capital to shareholders: • Maintain compe
Slide 20: Significant Progress Made During 2016
Significant Progress Made During 2016 • Senior leadership team established • Life & Health – DMF/UCP resolution defined and being executed – IT system upgrade reset and on track • Preferred Personal Lines – New business production and retention stabilized – IT system re-platforming on track • Redesi
Slide 21: The Case for Kemper
The Case for Kemper • Superior platform to leverage Return on Equity1 – Distinguished brand – Strong capital position – Diversified business portfolio – Strong investment function 1.5- 7.5- 9.0 – Proven executive team 2.0% 8.0% • Fixable weaknesses—significant 2.5% actions underway – Issues largely
Slide 22: Strategic Update for Investors – September 21, 2016
Strategic Update for Investors – September 21, 2016 22
Slide 23: Appendix
Appendix
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures Normalized Earnings is an after-tax, non-GAAP financial measure that is most directly comparable to the GAAP financial measure of Segment or Product Line Net Operating Income. For the company’s Life & Health business, Normalized Earnings is calculated by 1) normalizing ca
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Normalized Earnings (continued) Six Months Year Ended December 31, Ended (Dollars in Millions) 2011 2012 2013 2014 2015 1H 2016 Preferred Personal Lines Net Operating Income (Loss) $ (45.1) $ (12.1) $ 90.4 $ 57.3 $ 55.2 $ (6.2) Adjustments, After-Tax: Normalize Catastroph
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures Normalized Combined Ratio is a non-GAAP financial measure that is most directly comparable to the GAAP financial measure of the Combined Ratio. The Combined Ratio is computed by dividing the sum of total incurred losses and LAE and insurance expenses by earned premiums. T