Slide 1: Fourth Quarter 2020 Earnings
Fourth Quarter 2020 Earnings February 1, 2021 Earnings Call Presentation – 4Q 2020
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: Fourth Quarter 2020 Highlights
Fourth Quarter 2020 Highlights Solid results and premium growth in a challenging environment Delivered double-digit ROE and 10% growth in adjusted consolidated net operating EPS • Net income of $98 million and adjusted consolidated net operating income 1 of $106 million; earnings per share of $1.46
Slide 5: American Access Will Accelerate Specialty Auto Growth
American Access Will Accelerate Specialty Auto Growth Company profile aligns with our strategy; 1Q 2021 expected close Enhancing Specialty Market Capabilities • $370 million cash transaction for a platform that has historically produced consistent and sustainable margins and cash flows • Expands cus
Slide 6: Fourth Quarter Financial Highlights
Fourth Quarter Financial Highlights 16% ROATCE and 15% YoY growth in TBV per common share excluding unrealized gains1 As Reported As Reported Quarter Ended Full Year Dec 31, Dec 31, Dec 31, Dec 31, (Dollars in millions, except per share amounts) 2020 2019 2020 2019 Net Income $98 $125 $410 $531 Net
Slide 7: Review of Net Operating Income
Review of Net Operating Income Adjusted Consolidated Net Operating Income Per Share Increased 10% Three Months Ended, As Reported Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Variance Dollars per Unrestricted Share - Diluted 2020 2020 2020 2020 2019 QoQ Net Income $ 1.46 $ 1.83 $ 1.91 $ 0.95 $ 1.85
Slide 8: Reduced Pension Liability Exposure
Reduced Pension Liability Exposure Further de-risked non-strategic pension obligation – Ongoing Plan funding > ~100% • During the quarter, took advantage of the favorable environment to further reduce Kemper’s pension benefit obligation to $382 million from $660 million at the end of 2019 • Exposure
Slide 9: Consistent Capital Generation and Attractive Returns
Consistent Capital Generation and Attractive Returns Steady growth through various economic cycles Total Adjusted Return of BVPS Ex. Unrealized Gains on Fixed Maturities and Goodwill Growth 58% • Strong execution and $44.41 $46.76 solid operating results $40.27 $40.70 $42.58 have led to consistent $
Slide 10: 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 Ratios (MM) (%) $1,433 $741 $867 $700 $684 $641 430 $582 375 330 415 335 410 355 365 340 330 $400 $385 $660 290 285 $385 $540 $733 $341 $299 $197 $207 $101
Slide 11: Diversified Portfolio with Consistent Returns
Diversified Portfolio with Consistent Returns Net Investment Income¹ Overview • Net investment income and portfolio yield (MM) $97 $86 $68 $92 $103 benefitted from strong alternative $6 $22 investment income $6 $11 • Investment portfolio is designed for growth $88 of both income and total return $80
Slide 12: Specialty Property & Casualty Insurance Segment
Specialty Property & Casualty Insurance Segment1 Sustainable competitive advantages position Specialty for growth at solid margins Key Highlights Written Premium Population CAGR TTM YoY • 2.5% growth in policies in-force, 4.3% excluding State Groupings ($ million) Growth ’16-’19 Est. ’20-’30 Classic
Slide 13: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Underlying combined ratio on a quarter-over-quarter basis decreased 3 points Key Highlights • Underlying combined ratio in the segment decreased to 93.6% for the quarter; 90.4% on a full year basis • Auto underlying combined ratio reflects efforts to r
Slide 14: Life & Health Insurance Segment
Life & Health Insurance Segment Business remains profitable while absorbing protracted “P&C catastrophe-like” pandemic Key Highlights • Business remains profitable, despite challenging macro environment - Increased mortality experience remains largely in-line with country-wide trends • Continued exp
Slide 15: Appendix
Appendix Earnings Call Presentation – 4Q 2020 15
Slide 16: 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 ~30,000 ~9,500 Assets Policies Agents/Brokers Employees Specialty P&C insurance providing Preferred
Slide 17: 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 18: Investment Portfolio Exposure to COVID Impacted Categories
Investment Portfolio Exposure to COVID Impacted Categories Fixed income investments in COVID exposed industry sectors is manageable $140 1.8% 1.6% 1.6% $120 % of Fixed Maturity Portfolio 1.4% $100 $ Amount (MM) 1.2% 1.2% $80 1.0% 0.9% 0.9% $60 $122 0.8% 0.6% $89 0.6% $40 0.5% 0.4% $69 $68 0.4% 0.3%
Slide 19: Below Investment Grade Fixed Maturities Portfolio of $490 Million
Below Investment Grade Fixed Maturities Portfolio of $490 Million Portfolio is diversified across different asset types $250 45.0% 40.0% 42.2% Below Investment Grade $ Amount (MM) $200 35.0% % of Fixed Maturity Portfolio 30.0% $150 25.0% 20.9% 20.0% $100 $207 19.4% 15.0% 12.6% $103 10.0% $50 $95 $62
Slide 20: CLO Composition ($768 Million)
CLO Composition ($768 Million) CLOs represent 7.4% of investment portfolio $600 80.0% 69.3% 70.0% $500 60.0% % of CLO Portfolio $ Amount (MM) $400 50.0% $300 40.0% $532 30.0% $200 20.0% $100 11.9% 12.4% 10.0% $92 3.0% 3.4% $95 $23 $26 $0 0.0% AAA AA A BBB High Yield Well-diversified CLO book with 84
Slide 21: Alternative Investment Portfolio of $533 Million
Alternative Investment Portfolio of $533 Million Portfolio is highly diversified with strategies focused on private credit, private equity and hedge funds Private Credit $21.3 ~3% of total investments (62% of Alts portfolio) Diversification across date of investment, industry $71.6 and geography Pri
Slide 22: 2021 Reinsurance Program
2021 Reinsurance Program Both programs were renewed with no significant change Catastrophe Reinsurance Program (Multi-Year) Aggregate Catastrophe Program • Same coverage as 2020 program 1-Year Term Placed 1/1/21 • Intended to reduce volatility from high- $25M xs $250M frequency, low severity events
Slide 23: 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 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures Return on Equity For the Periods Ended 4Q'20 3Q'20 2Q'20 1Q'20 4Q'19 3Q'19 2Q'19 1Q'19 2018 2017 2016 Rolling 12 Month Return on Average Shareholders' Equity (5 Point Avg) 9.8% 10.8% 11.4% 11.8% 14.8% 12.1% 12.4% 10.8% 7.7% 5.9% 0.8% Less: Net Unrealized Gains on Fixed Ma
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of “All Other” Sources of Volatility Three Months Ended, As Reported Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Variance Dollars per Unrestricted Share - Diluted 2020 2020 2020 2020 2019 QoQ - - All Other Volatility - Partial Satisfaction of Judgment - -
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of COLI investment into Net Investment Income. Prior to 1Q 2020, COLI was reported in “Other Income.” Starting in the 1Q 2020, COLI was reported in net investment income. For the Period Ended Consolidated 4Q'19 Reported Net Investment Income $ 93.9 COLI Inv
Slide 27: Non-GAAP Financial Measures
Non-GAAP Financial Measures Kemper believes that Adjusted Consolidated Net Operating Income 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. Income
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures Diluted Adjusted Consolidated Net Operating Income 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 equivalent sh
Slide 29: 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 30: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 4Q20 3Q20 2Q20 1Q20 4Q19 Specialty P&C Insurance Combined Ratio as Reported 91.7% 86.3% 91.0% 94.5% 93.8% Current Year Catastrophe Loss and LAE Ratio (0.6%) (0.2%) (0.6%) 0.0% (0.5%) Prior Years Non-Catastro
Slide 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty P&C Insurance Segment Three Months Ended 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-19 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 882.4 $ 871.4 $ 759.0 $ 822.5 $ 799.7 Current Year Non-CAT Losses and LAE
Slide 32: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance Three Months Ended 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-19 Earned Premiums Kemper Specialty Auto - GAAP As Reported $ 796.1 $ 792.2 $ 689.8 $ 753.2 $ 733.1 Current Year Non-CAT Losse