Kemper Corporation · NYSE:KMPR
Kemper — Q4 2021 Earnings Presentation
29 slides from Kemper's earnings presentation, Jan 31, 2022
Slide 1: Fourth Quarter 2021 Earnings
Fourth Quarter 2021 Earnings January 31, 2022 Earnings Call Presentation – 4Q 2021
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 Grow returns Strong capital/liquidity advantages and build and book value per positions; core capabilities share over time Disciplined appro
Slide 4: Fourth Quarter 2021 Highlights
Fourth Quarter 2021 Highlights Pandemic headwinds continued to impact margins Environmental pressures challenged 4Q21 financial results • Net loss of $106 million ($1.66) per share, as reported, or $101 million ($1.59) per share, as adjusted3 • Adjusted consolidated net operating loss1 of $131 milli
Slide 5: Fourth Quarter Financial Highlights
Fourth Quarter Financial Highlights Environmental headwinds impacted profitability and TBVPS growth As Reported As Adjusted1 Quarter Ended Quarter Ended Dec 31, Dec 31, Dec 31, Dec 31, (Dollars in millions, except per share amounts) 2021 2020 2021 2020 Net Income (Loss) $(106) $98 $(101) $118 Net In
Slide 6: Review of Net Operating Income
Review of Net Operating Income 4Q21 financial results pressured by environmental challenges Three Months Ended, As Reported Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Variance Dollars per Unrestricted Share - Diluted 2021 2021 2021 2021 2020 QoQ Net Income (Loss) $ (1.66) $ (1.18) $ (0.97) $ 1.85
Slide 7: Environmental Factors Pressuring Capital Generation & Returns
Environmental Factors Pressuring Capital Generation & Returns Total Adjusted Return of BVPS Ex. Unrealized Gains on Fixed Maturities and Goodwill AAC Acq Growth 38% Closed 4/21 • AAC goodwill diluted $46.76 $40.79 TBVPS by $3.11 Infinity Acq $40.27 • Infinity transaction Closed 7/18 diluted TBVPS by
Slide 8: 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 Ratios¹ (MM) (%) $1,433 $867 $700 $938 $684 415 430 410 $582 $641 355 365 340 330 345 $660 $704 335 290 285 $385 $385 225 $540 $733 $299 $197 $101 $207 $23
Slide 9: 2022 Reinsurance Program Highlights
2022 Reinsurance Program Highlights1 Renewed programs and upsized our catastrophe excess of loss reinsurance program CAT XOL Program ▪ Catastrophe Excess of Loss (XOL) Reinsurance Program Coverage • Increased limits by $75M for 2022 commensurate with increased size of $75M 5% Retention 5% Retention
Slide 10: Diversified Portfolio with Consistent Returns
Diversified Portfolio with Consistent Returns Net Investment Income¹ Overview • Portfolio continues to provide stable net (MM) $103 $103 $114 $102 $108 investment income $22 $32 $22 $23 $27 - 4.6% PTE annualized book yield • Investment portfolio is designed for growth $81 $76 $82 $80 $85 of both inc
Slide 11: Implementing Pricing and Underwriting Actions to Combat Trend
Implementing Pricing and Underwriting Actions to Combat Trend Actions take time to earn into financials; illustrative earned rate vs. trend comparison Pre-Pandemic Lockdowns Re-Opening / Future Prior to 2020 2Q20 – 1Q21 Current+ Δ Earned Rate 10.0 % Significant, rapid Loss Trend (frequency & severit
Slide 12: Specialty Property & Casualty Segment
Specialty Property & Casualty Segment1 Environmental challenges continued to pressure near-term profitability Key Highlights Specialty PPA (Rate Change Activity Since 2Q21) • Inflation trends related to supply chain issues and Rate Actions3 Overall Impact labor shortages led to an increase in the un
Slide 13: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Primary focus on restoring profitability Key Highlights Preferred Personal Auto (Rate Change Activity Since 2Q21) • Underlying combined ratio1 in segment increased Rate Actions2 Overall Impact to 107% for the quarter Filed Effective3 Written Earned % P
Slide 14: Life & Health Insurance Segment
Life & Health Insurance Segment New Covid variants continue to impact Life results Key Highlights • Life Earned Premium increased $5.0 million (5%) in Q4’21 to $101.5 million, due to cumulative persistency improvement • Persistency remained elevated over pre-Pandemic levels (2017-2019) • Annualized
Slide 15: Appendix
Appendix Earnings Call Presentation – 4Q 2021 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 ~$15B ~6.5M ~35,400 ~10,300 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: Solar Energy Investment: In Line with Environmental Impact Goals
Solar Energy Investment: In Line with Environmental Impact Goals $100 million commitment to solar energy partnership investment generating attractive returns • In conjunction with Sunrun, invested in a diversified group of residential solar energy projects • Opportunity to provide renewable energy s
Slide 19: 2022 Reinsurance Program
2022 Reinsurance Program Renewed programs and upsized our catastrophe reinsurance program Catastrophe Reinsurance Program (Multi-Year) Aggregate Catastrophe Program • Increased retention vs. 2021 program – Intended to reduce volatility from high- frequency, low severity events • Coverage – $50 milli
Slide 20: 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 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures Return on Equity For the Periods Ended 2021 2020 2019 2018 2017 2016 Rolling 12 Month Return on Average Shareholders' Equity (5 Point Avg) (2.8)% 9.8% 14.8% 7.7% 5.9% 0.8% Less: Net Unrealized Gains on Fixed Maturities (0.4)% 1.5% 1.5% 0.6% 0.7% 0.1% Rolling 12 Month Retu
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Kemper believes that Adjusted Consolidated Net Operating Income (Loss) 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.
Slide 23: 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 24: 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 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 4Q21 3Q21 2Q21 1Q21 4Q20 Specialty P&C Insurance Combined Ratio as Reported 118.9% 111.6% 116.1% 93.5% 91.7% Current Year Catastrophe Loss and LAE Ratio (0.2)% (0.3)% (0.8)% (0.2)% (0.6)% Prior Years Non-Cat
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition amounts are non-GAAP financial measures. Subsequent to the applicable acquisitions, the As Adjusted for Acquisitions amounts are computed by subtracting the impact of purchase accounting adjustments from the comparable consolidated GAAP financi
Slide 27: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued ($ in millions, except per share data) Three Months Ended 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 Earned Premiums Kemper - GAAP As Reported $ 1,359.1 $ 1,356.1 $ 1,337.7 $ 1,200.8 $ 1,214.0 AAC - Prior to Acquisition - - -
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty P&C Insurance Segment ($ in millions) Three Months Ended 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 1,032.3 $ 1,028.3 $ 1,010.3 $ 877.6 $ 882.4 AAC - Prior t
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance ($ in millions) Three Months Ended 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 918.1 $ 920.6 $ 909.6 $ 785.4 $ 796.1 AAC - Prior