Kemper Corporation · NYSE:KMPR
Kemper — NYSSA 16th Annual Insurance Conference 2012
37 slides from Kemper's conference presentation, Mar 20, 2012
Slide 1: NYSSA 16th Annual Insurance Conference March 20, 2012
NYSSA 16th Annual Insurance Conference March 20, 2012
Slide 2: Caution Regarding Forward-Looking Statements
2 NYSSA 16th Annual Insurance Conference– March 20, 2012 Caution Regarding Forward-Looking Statements This report 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 Lit
Slide 3: Kemper Overview
3 NYSSA 16th Annual Insurance Conference– March 20, 2012 Kemper Overview Multi-line national insurer • Top 25 personal lines property & casualty writer in United States • Auto, home & basic protection products • Multi-channel distribution network Conservative balance sheet with strong liquidity • $8
Slide 4: Business Profile: Kemper Family of Companies
4 NYSSA 16th Annual Insurance Conference– March 20, 2012 Business Profile: Kemper Family of Companies Property & Casualty Insurance $845MM1 statutory surplus Life & Health Insurance $475MM1 statutory surplus Overall Business Preferred Specialty Direct Home Service Companies Reserve National ~6,500 e
Slide 5: Earned Premiums
5 NYSSA 16th Annual Insurance Conference– March 20, 2012 Earned Premiums ($ M M ) Accident & Health Fire & Other Commercial Auto Homeowners 298 Life 397 Personal Auto 1,249 44 162 139 Personal Auto 1,130 Life 395 Homeowners 304 Accident & Health 166 Fire & Other 139 Commercial Auto 40 2010: $2,289 2
Slide 6: The Kemper Brand
6 NYSSA 16th Annual Insurance Conference– March 20, 2012 The Kemper Brand A unifying approach for the company & its businesses to leverage a well-recognized name, build on the best aspects of our heritage & grow our businesses. Acquired ownership rights to Kemper name June 2010 Bought Kemper Persona
Slide 7: Kemper Property & Casualty Group Earned Premiums
7 NYSSA 16th Annual Insurance Conference– March 20, 2012 Kemper Property & Casualty Group Earned Premiums1 56% 15% 29% $1,528 1 P&C Group includes Preferred, Specialty and Direct. See Non-GAAP measures for more information. Specialty Preferred Direct ($ M M )
Slide 8: Preferred
8 NYSSA 16th Annual Insurance Conference– March 20, 2012 Preferred Headquartered in Jacksonville, FL Products sold: • Personal auto (59% of sales ) • Homeowners/other (41% of sales) Lead product: Package Plus 2,700 independent agents in 38 states Top premium states: NY, NC, CA & TX Net Written Premi
Slide 9: Preferred Advantages
9 NYSSA 16th Annual Insurance Conference– March 20, 2012 Preferred Advantages Strong brand name well-recognized by agents and target market Auto and home package policies specifically designed for target market Proprietary multi-variant pricing model Automation and service built for agency convenien
Slide 10: Specialty
10 NYSSA 16th Annual Insurance Conference– March 20, 2012 Specialty Headquartered in Dallas, TX Non-standard auto—personal & commercial ~8,000 independent agents in 21 states Target market is top tier of insureds ineligible for Preferred &/or Standard Focused on automation & agent convenience Top pr
Slide 11: Specialty Advantages
11 NYSSA 16th Annual Insurance Conference– March 20, 2012 Specialty Advantages Recognized carrier in the non-standard auto market for over 60 years Strong regional presence expandable to more states Point of sale systems designed for ease of placement Proprietary multivariate pricing model Claims ha
Slide 12: Direct
12 NYSSA 16th Annual Insurance Conference– March 20, 2012 Direct Headquartered in Chicago, IL Direct to consumer auto, renters and homeowners Focused on margin improvement Recent enhancements: • Redesigned customer website • New proprietary product (now active in 14 states) • Expanding social networ
Slide 13: Direct Advantages
13 NYSSA 16th Annual Insurance Conference– March 20, 2012 Direct Advantages Experienced in the direct, worksite & affinity marketplace Complete on-line life cycle access for ease of doing business • Targeting middle market to standard consumers—renters with above average underwriting characteristics
Slide 14: Life & Health Insurance Group
14 NYSSA 16th Annual Insurance Conference– March 20, 2012 Life & Health Insurance Group ~2,600 career agents Target modest income consumers Basic protection for individuals and families Leading product is ordinary life insurance, including permanent & term insurance No exposure to variable annuities
Slide 15: Home Service Companies
15 NYSSA 16th Annual Insurance Conference– March 20, 2012 Home Service Companies Career agency-driven home service life insurance business Total earned premiums: $511MM Competitive advantages: • Leader in moderate income segment • Significant scale • Limited sensitivity to interest rate or stock mar
Slide 16: Reserve National
16 NYSSA 16th Annual Insurance Conference– March 20, 2012 Reserve National ~275 exclusive independent agents supporting underserved rural markets Total earned premiums: $135MM Earned premiums by product Other / Supplemental Medicare Supplement Hospitalization 22% 25% 53% Products & Distribution: • M
Slide 17: Kemper Investment Portfolio
17 NYSSA 16th Annual Insurance Conference– March 20, 2012 Kemper Investment Portfolio Total return investment strategy with an emphasis on yield No direct exposure to: • Enhanced money market funds • Commercial paper investments • Foreign sovereign governments • Securities lending • Credit or other
Slide 18: Fixed Income Portfolio
18 NYSSA 16th Annual Insurance Conference– March 20, 2012 Fixed Income Portfolio 492 1,853 2,342 87 U.S. Government & Agencies Muni's Corporate Bonds & Notes Corporate Redeemable Preferred & Other Fair Value: $4,774 ($507 unrealized gain) Rating Fair Value % AAA, AA, A $3,592 75% BBB $839 18% Total
Slide 19: Operating Results
Operating Results
Slide 20: Property & Casualty Group Results
20 NYSSA 16th Annual Insurance Conference– March 20, 2012 Property & Casualty Group¹ Results Premium decline largely due to margin improvement actions 2011 Net Operating Income adversely impacted by catastrophes and Direct’s results Earned Premiums Net Operating Income (Loss) GAAP Combined Ratio 0 5
Slide 21: Life & Health Insurance Results
21 NYSSA 16th Annual Insurance Conference– March 20, 2012 2009 2010 2011 $( M M ) Life & Health Insurance Results Earned Premiums trend reflects stable customer base and focus on agent retention and productivity Equity method investments have performed over cycle; annual/quarterly results varied Ear
Slide 22: Fireside Bank
22 NYSSA 16th Annual Insurance Conference– March 20, 2012 Fireside Bank • Wind-down plan nearing completion and ahead of schedule • Sale of active loan receivables closed 9/14/2011 • Sale of substantial portion of non-active loan receivables closed 3/9/2012 • $250MM of capital returned to parent Oct
Slide 23: Kemper Corporation Results
23 NYSSA 16th Annual Insurance Conference– March 20, 2012 1See Non-GAAP measures for more information 2009 2010 2011 $( M M ) Kemper Corporation Results Earned Premiums Consolidated Net Operating Income¹ 2009 2010 2011 $( M M ) 2,456 2,289 2,174 184 152 56 Net Operating EPS Details ($) 2009 2010 201
Slide 24: Liquidity and Capital
Liquidity and Capital
Slide 25: Strong Liquidity & Capital Profiles
25 NYSSA 16th Annual Insurance Conference– March 20, 2012 0.6 0.6 0.6 1.9 2.1 2.2 2009 2010 2011 Strong Liquidity & Capital Profiles Max ordinary dividend capacity1 (Insurance Companies) ¹ Calculated as the greater of 10% of insurance statutory surplus or insurance statutory net income from the prio
Slide 26: Shareholders' Equity, Book Value and Dividends
26 NYSSA 16th Annual Insurance Conference– March 20, 2012 2009 2010 2011 Shareholders’ Equity ¹ Accumulated Other Comprehensive ² Computed by annualizing 4th quarter dividend and dividing by year-end market price ($ MM ) 1,859 1,918 1,956 2,113 1,958 2,216 2009 2010 2011 BVPS ($) 30.75 34.61 36.78 S
Slide 27: Capital Redeployment Priorities
27 NYSSA 16th Annual Insurance Conference– March 20, 2012 1. Fund organic growth—improve margins in all lines 2. Acquisitions—bolt-on standard & preferred opportunities, geographic expansion of non-standard auto and leverage scale in life operations 3. Maintain competitive dividends 4. Share repurch
Slide 28: The Case for Kemper
28 NYSSA 16th Annual Insurance Conference– March 20, 2012 The Case for Kemper Multi-line national insurer with diverse products, multi-channel distribution and experienced management team Conservative balance sheet with strong liquidity History of creating shareholder value through • Solid earnings
Slide 29: Kemper
IY KEMPER
Slide 30: Appendix
Appendix
Slide 31: Preferred Results
31 NYSSA 16th Annual Insurance Conference– March 20, 2012 Preferred Results Net Operating Income (Loss) varied based on weather, investment income and loss development 2011 Net Operating Loss driven by catastrophes Earned Premiums Net Operating Income (Loss) GAAP Combined Ratio 0 200 400 600 800 100
Slide 32: Specialty Results
32 NYSSA 16th Annual Insurance Conference– March 20, 2012 Specialty Results Driven by margin preservation efforts & shrinking commercial vehicle market Current actions focused on improving private passenger automobile loss ratio to improve 2011 combined ratio Earned Premiums Net Operating Income GAA
Slide 33: Direct Results
33 NYSSA 16th Annual Insurance Conference– March 20, 2012 Direct Results Earned Premium reduction from corrective actions implemented 2011 impacted by: • Increased severity in auto liability coverages in MI, FL & NY • Intangible asset write-off of $9MM Earned Premiums Net Operating Loss GAAP Combine
Slide 34: Consolidated Results of Operations
34 NYSSA 16th Annual Insurance Conference– March 20, 2012 (Millions) 2011 2010 Change Revenues: Earned Premiums: Property & Casualty Group¹ 1,528$ 1,645$ -7.1% Focus on preserving margins Life and Health 646 644 0.3% Net Investment Income 298 326 -8.6% Equity method fluctuations Other Income 1 1 0.0
Slide 35: Consolidated Balance Sheet
35 NYSSA 16th Annual Insurance Conference– March 20, 2012 Consolidated Balance Sheet Kemper Corporation & subsidiaries (Millions) 2011 2010 Change Assets: Cash and Investments: Fixed Maturities at Fair Value $ 4,774 $ 4,475 6.7% Equity Method LLC/LP 306 328 -6.7% Equity Securities 397 551 -27.9% Red
Slide 36: Non-GAAP Measures
36 NYSSA 16th Annual Insurance Conference– March 20, 2012 Non-GAAP1 Measures Underlying Combined Ratio is a non-GAAP measure, which is computed by adding the Current Year Non-catastrophe Losses and LAE Ratio with the Incurred Expense Ratio. The most directly comparable GAAP financial measure is the
Slide 37: Non-GAAP Measures - Continued
37 NYSSA 16th Annual Insurance Conference– March 20, 2012 Non-GAAP Measures - Continued Consolidated Net Operating Income is an after-tax, non-GAAP measure, which is computed by excluding from income (loss) from continuing operations the after-tax impact of 1) net realized gains (losses) on sales of