Slide 1: Second Quarter 2023 Earnings
Second Quarter 2023 Earnings August 7, 2023 Earnings Call Presentation – 2Q 2023
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: Leading Insurer Empowering Specialty and Underserved Markets
Leading Insurer Empowering Specialty and Underserved Markets Enabled by a dynamic, diverse, and innovative team who act like owners 1 Delivering appropriate 2 and affordable insurance and financial solutions Specialty auto insurance for Life insurance for underserved markets; Latino, low/modest inco
Slide 4: Second Quarter 2023 Summary
Second Quarter 2023 Summary Underlying combined ratios improved sequentially Profit restoration continues with improvement in underlying results • Net loss of $97 million ($1.52/sh), as reported – includes ~$46 million ($0.71/sh) of Personal Insurance goodwill impairment charge • Adjusted consolidat
Slide 5: Second Quarter 2023 Financial Summary
Second Quarter 2023 Financial Summary Focus remains on restoring business to profitability Quarter Ended Jun 30, Jun 30, ($ in millions, except per share amounts) 2023 2022 Net Loss – Per Diluted Share $(1.52) $(1.13) Adj. Consolidated Net Operating Loss – Per Diluted Share1 $(0.26) $(0.58) Tangible
Slide 6: Kemper P&C Business Reserve Update
Kemper P&C Business Reserve Update Unanticipated extension in claim reporting timelines with more claims closing with payment Prior year adverse development of approximately $26 million • Specialty P&C1 adverse development of $24 million ̶ Private Passenger Auto development was primarily the result
Slide 7: Specialty P&C Path to Underwriting Profit
Specialty P&C Path to Underwriting Profit Overcoming Fighting loss loss cost cost pressures pressures through through rate,rate, non-rate, non-rate, and and expense expense actions actions 1. Highlights • No change to earnings guidance • Business expected to reach target returns in 2024 • Balancing
Slide 8: Specialty P&C Path to Underwriting Profit
Specialty P&C Path to Underwriting Profit On track to deliver previously issued guidance • No change to earnings guidance • 3Q'23 underlying combined ratio between 99% – 101% • 2024 Return on Equity (ROE) equal to or greater than 10% 1H’23 Actuals and Assumptions Included in Combined Ratio Guidance1
Slide 9: Strategic Initiatives Update
Strategic Initiatives Update Projects proceeding to expectations 1. Establishment of Reciprocal Exchange Structure: • Approval received for the formation of Kemper Reciprocal • On track to write business in the structure during 3Q’23 2. Expect Bermuda Optimization effort to release an additional $20
Slide 10: Streamlining Our Cost Structure
Streamlining Our Cost Structure Advancing differentiated capabilities to strengthen systematic, sustainable competitive advantages • Restructuring and integration pre-tax Run Rate Program Savings ($ in millions) 150 charges of $150 – $200 million will produce annualized savings of $150 million or 11
Slide 11: Well-Capitalized Insurance Subsidiaries
Well-Capitalized Insurance Subsidiaries Continued access to significant sources of liquidity Parent Company Liquidity Risk-Based Capital Ratios¹ HoldCo Cash & Investments $1,433 Life2 Borrowings Available $1,336 P&C (ex. AACC) Under Credit Agreement & from Subs $418 (%) $733 $938 $970 $867 ($ in mil
Slide 12: Diversified Investment Portfolio with Consistent Returns
Diversified Investment Portfolio with Consistent Returns Net Investment Income Highlights $119 • High-quality and liquid portfolio provides ($ in millions) $106 $102 $106 $98 consistent net investment income; 72% of $34 $11 $4 $9 $8 fixed income portfolio rated A or higher • Strong ALM philosophy th
Slide 13: Specialty Property & Casualty Insurance Segment
Specialty Property & Casualty Insurance Segment Underlying combined ratio improved 6 pts sequentially Highlights Cumulative PPA Rate Activity Since 2Q’211 • Sequential improvement driven by normalizing 54.8% ~56% Filed Rate environment, additional earned rate, and benefits ~54% Written Rate from und
Slide 14: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Profit actions leading to sequential improvement in underlying combined ratio Highlights Cumulative PPA Rate Activity Since 2Q’211 • Underlying combined ratio improved Filed Rate ~43% sequentially due to additional earned rate, non- Written Rate 34.5%
Slide 15: Life & Health Insurance Segment
Life & Health Insurance Segment Business trends remain stable; mortality frequency below pre-pandemic levels Highlights • Effective January 1, 2023, financials reflect recently issued LDTI accounting pronouncement • Issued premium is up 0.5%; persistency is aligned with pre-pandemic levels • Lowest
Slide 16: On Track to Return to Profitability in 2023 / Target ROE in 2024
On Track to Return to Profitability in 2023 / Target ROE in 2024 Key Takeaways • Approximately 30 pts of Specialty PPA rate approved in California effective August 4th • Operating environment continues to be defined by dynamic / evolving behavior and severity patterns ̶ Pattern change examples: buyi
Slide 17: Appendix
Appendix Earnings Call Presentation – 2Q 2023 17
Slide 18: Elevated Auto Severity Persists Due to Continued Inflationary Pressures
Elevated Auto Severity Persists Due to Continued Inflationary Pressures • Physical damage severity remains elevated due to higher used car values, replacement parts, and labor costs – Body Work-related costs steadily increased in 2Q, growing nearly double the rate of US Core Inflation – Value of use
Slide 19: 2023 Reinsurance Program
2023 Reinsurance Program Renewed Catastrophe XoL Reinsurance; discontinued the Catastrophe Aggregate for 2023 Catastrophe Reinsurance Program (Multi-Year) Highlights Catastrophe Excess of Loss Program (XOL): • Total coverage: 95% of $275 million in excess of $50 million • Purchased limit was reduced
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Book Value Per Share Excluding Goodwill is a calculation that uses a non-GAAP financial measure. It is calculated by dividing shareholders’ equity excluding goodwill by total Common Shares Issued and Outstanding. Book value per share is the most directly comparable GAAP f
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Consolidated Net Operating Loss is an after-tax, non-GAAP financial measure and is computed by excluding from Net Loss the after-tax impact of: (i) Income (Loss) from Change in Fair Value of Equity and Convertible Securities; (ii) Net Realized Investment Gains (L
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Book Value As of ($ per share) June 30, 2023 June 30, 2022 Book Value $39.22 $44.54 Less: Net Unrealized Losses on Fixed Maturities 6.96 7.22 Book Value Excluding Net Unrealized Losses on Fixed Maturities and Changes in the Discount $46.18 $51.76 Rate on Future Life
Slide 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures Return on Equity As of June 30, 2023 June 30, 2022 Rolling 12 Months Return on Average Shareholders' Equity (5-point Average) (11.4)% (10.7)% Less: Net Unrealized Losses on Fixed Maturities 1.7 1.1 Rolling 12 Months Return on Average Shareholders' Equity Excluding Net
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures Diluted Adjusted Consolidated Net Operating Income (Loss) Per Unrestricted Share is a non-GAAP financial measure computed by dividing Adjusted Consolidated Net Operating Income (Loss) attributed to unrestricted shares by the weighted-average unrestricted shares and equiva
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio Three Months Ended 2Q'23 1Q’23 4Q'22 3Q'22 2Q'22 Specialty P&C Insurance Combined Ratio as Reported 106.5% 112.1% 108.8% 107.6% 108.0% Current Year Catastrophe Losses and LAE Ratio (1.9) (0.9) 0.0 (1.5) (0.6) Prior Years Non-Catastrophe Losses an
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures Life & Health Revenue Reconciliation Three Months Ended ($ in millions) 2Q'23 1Q'23 4Q'22 3Q'22 2Q'22 Earned Premiums Earned Premiums – As Reported $102.2 $99.3 $142.6 $142.1 $144.0 Less: Reserve National Earned Premiums - - 25.6 40.2 39.8 Adjusted Earned Premiums $102.2