Slide 1: Third Quarter 2019 Earnings
Third Quarter 2019 Earnings November 4, 2019 Earnings Call Presentation – 3Q 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: Third Quarter 2019 Highlights
Third Quarter 2019 Highlights Specialty P&C growth and profitability continues to drive strong results Continued double-digit return on equity and book value per share (BVPS) accretion • Net Income of $129 million and adjusted consolidated net operating income of $130 million • 23% increase in BVPS
Slide 5: Third Quarter Highlights
Third Quarter Highlights Strategy continuing to yield strong results As Adjusted As Reported for Acquisition (1) Quarter Ended Quarter Ended Change Change Sept 30, from 3Q’18 Sept 30, from 3Q’18 (Dollars in millions, except per share amounts) 2019 (%) 2019 (%) Net Income $129 39.9% $136 3.0% Adjuste
Slide 6: Third Quarter Highlights
Third Quarter Highlights 22% increase in Adjusted Consolidated Operating Income Excluding Discrete Items(1,2) As Adjusted for Acquisition (1,2) Quarter Ended Sept 30, Sept 30, Growth (Dollars in millions, except per share amounts) 2019 2018 (%) Adjusted Consolidated Net Operating Income (1) $ 137 $
Slide 7: Operating Performance
Operating Performance Continued to produce strong operating income Three Months Ended, As Reported Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Variance Dollars per Unrestricted Share - Diluted 2019 2019 2019 2018 2018 QoQ Income from Continuing Operations $ 1.91 $ 1.84 $ 2.35 $ 0.08 $ 1.40 0.51 (In
Slide 8: Specialty Property & Casualty Insurance Segment
Specialty Property & Casualty Insurance Segment1 Strong, profitable Specialty P&C growth demonstrates value of operating model Key Highlights • 6.7% growth in policies in-force, or 6.9% excluding Classic Collectors, compared to 3Q’18; • Growth one point higher than 2Q’19 • 75% of total growth outsid
Slide 9: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Efforts to restore Preferred P&C franchise to target profitability are ongoing Key Highlights • Underlying combined ratio increased 40 basis points to 94.9% - Auto underlying loss ratio remains elevated as focus to reposition business continues - Home
Slide 10: Life & Health Insurance Segment
Life & Health Insurance Segment Life & Health Segment demonstrated continued modest premium growth Key Highlights • Earned premiums grew 2.0% driven by continued focus on enhancements to distribution capabilities and process improvements • Benefits and incurred loss returned to a more typical level
Slide 11: High Quality & Diversified Portfolio with Consistent Returns
High Quality & Diversified Portfolio with Consistent Returns Stable Net Investment Income Overview • Core portfolio investment income in line (MM) $92 $91 $83 $96 $92 with the previous year, which did not $8 include the impact of investment in $13 $7 $7 Corporate owned life insurance (COLI) • COLI i
Slide 12: Strong Capital Position with Ample Liquidity
Strong Capital Position with Ample Liquidity Balance sheet strengthened through execution of pension risk mitigation action Strong Parent Company Liquidity Risk-Based Capital Ratios Life & Health P&C¹ (MM) (%) $829 $741 $684 $582 $641 $400 $385 $660 $385 $540 415 430 410 410 370 375 330 335 $341 $29
Slide 13: Appendix
Appendix Earnings Call Presentation – 3Q 2019 13
Slide 14: 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 >$12B ~6.4M ~30,000 >8,400 Assets Policies Agents/Brokers Employees Specialty P&C insurance providing Preferred
Slide 15: Surpassing Infinity Acquisition Financial Targets
Surpassing Infinity Acquisition Financial Targets Earnings accretion, ROE accretion, and book value earnback targets met Premium Outperformance1,2 Yield Enhancement2 Cost Savings2 >$220mm of written premium above combined Net inv. income benefit from repositioning Realized ~80% of revised target to
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: 2019 Reinsurance Program
2019 Reinsurance Program Aggregate stop-loss program intended to reduce volatility from high-frequency, low-severity events Catastrophe Reinsurance Program (Multi-Year) Aggregate Catastrophe Program • Same coverage as 2018 program • Coverage – $50 million in excess of $60 million – $500k deductible
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 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 20: 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 21: 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 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 3Q19 2Q19 1Q19 4Q18 3Q18 Specialty P&C Insurance Combined Ratio as Reported 91.6% 93.5% 89.3% 94.6% 99.1% Current Year Catastrophe Loss and LAE Ratio (0.3%) (0.6%) (0.1%) (0.1%) (0.2%) Prior Years Non-Catast
Slide 23: 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 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Three Months Ended 30-Sep-19 30-Sep-18 Net Income Kemper - GAAP As Reported $ 129.0 $ 92.2 Less: Impact of Purchase Accounting (6.6) (39.5) As Adjusted 1 $ 135.6 $ 131.7 As Adjusted 1 - Per Diluted Share $ 2.01 $ 2.01 Adjusted Conso
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty P&C Insurance Segment Three Months Ended 30-Sep-19 30-Jun-19 31-Mar-19 31-Dec-18 30-Sep-18 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 783.4 $ 766.0 $ 729.3 $ 717.8 $ 711.2 Current Year Non-CAT Losses and LAE
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance Three Months Ended 30-Sep-19 30-Jun-19 31-Mar-19 31-Dec-18 30-Sep-18 Earned Premiums Kemper Specialty Auto - GAAP As Reported $ 719.2 $ 703.7 $ 669.6 $ 660.5 $ 655.3 Current Year Non-CAT Losse