Slide 1: Third Quarter 2022 Earnings
Third Quarter 2022 Earnings November 2, 2022 Earnings Call Presentation – 3Q 2022
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 Delivering appropriate and affordable insurance and financial solutions Specialty auto insurance for Life insurance for underserved markets; Latino, low/modest income Hi
Slide 4: Go Forward Strategy to Maximize Value Creation
Go Forward Strategy to Maximize Value Creation Strengthening capabilities in our core businesses • $92.8% average, underlying Executing On-Plan combined ratio pre- pandemic1 1. Improving Combined Ratio – 12.5 pt. improvement since 4Q’21 Auto • 12.5 pts combined ratio improvement since 4Q’212 2. Stre
Slide 5: Third Quarter 2022 Highlights
Third Quarter 2022 Highlights Lower incremental severity combined with profit actions drove sequential improvement Inflation pressures continued to impact the insurance sector Macroeconomic • Elevated severity trend continued to impact auto insurers, albeit at a slower rate of change Environment • N
Slide 6: Third Quarter 2022 Financial Highlights
Third Quarter 2022 Financial Highlights Improvement driven by ongoing profit restoration actions Quarter Ended Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, ($ in millions, except per share amounts) 2022 2022 2022 2021 2021 Net Income (Loss) – Per Diluted Share $(1.19) $(1.17) $(1.49) $(1.66) $(1.18) Adj.
Slide 7: Third Quarter 2022 – Key Updates
Third Quarter 2022 – Key Updates Increasing capital flexibility and growing liquidity positions 1. Offshore captive • Completed the cessation of 80% of Kemper’s Life business to Kemper Bermuda Ltd. • Enabled $300M extraordinary dividend to the parent 2. Capital deployment actions • Focused on deleve
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 $1,368 $867 $700 $938 $684 535 $582 $641 $918 430 415 410 $660 $704 335 355 365 340 355 $385 290 285 330 265 $385 $540 $733 220 $29
Slide 9: Diversified Investment Portfolio with Consistent Returns
Diversified Investment Portfolio with Consistent Returns Net Investment Income Highlights • High quality and liquid portfolio provides safety and (mm) $119 $102 $108 opportunity in volatile markets $100 $98 $23 $34 $22 $21 $8 • New investment yields at 10-year highs2 up 250- 275 bps over prior-year
Slide 10: Specialty Property & Casualty Insurance Segment
Specialty Property & Casualty Insurance Segment1 Margins impacted by broad inflation pressures Highlights Specialty PPA (Rate Change Activity Since 2Q’21)) • Earned rate and non-rate actions exceeded incremental Rate Actions3 Overall Impact severity Filed Effective4 Written Earned • Filed rate actio
Slide 11: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Margin improvement impacted by seasonality during the quarter Highlights Preferred Personal Auto (Rate Change Activity Since 2Q21) • Higher earned rates and non-rate actions reduced the Rate Actions2 Overall Impact impact of incremental severity Filed
Slide 12: Life & Health Insurance Segment
Life & Health Insurance Segment On path to return to pre-pandemic profitability as COVID-related headwinds subside Highlights • Annualized Life new business sales at pre-Pandemic levels • Excess mortality continues to moderate • Pre-tax profitability improvement driven by subsiding COVID-related hea
Slide 13: Operating Model Enhancements to Enable Productivity & Growth
Operating Model Enhancements to Enable Productivity & Growth Advancing differentiated capabilities strengthen systematic, sustainable competitive advantages • Restructuring and integration to produce annualized savings of greater than $150M • Over the next three years, expect to incur pre-tax charge
Slide 14: Corporate Structure Initiatives
Corporate Structure Initiatives Offshore Captive has been established, Reciprocal Structure set-up is underway 1. Offshore captive improves short and long-term capital efficiency • Established Bermuda captive as a wholly-owned subsidiary • Reinsured 80% of existing Life business to the captive, unlo
Slide 15: Appendix
Appendix Earnings Call Presentation – 3Q 2022 15
Slide 16: 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. loss trend comparison Pre-Pandemic Lockdowns Re-Opening / Future Prior to 2020 2Q 2020 – 1Q 2021 Current+ Δ Earned Rate Significant, rapid Loss Trend (frequency & se
Slide 17: Inflationary Pressures Remain Persistent
Inflationary Pressures Remain Persistent Subcomponents of inflation continue to disproportionately impact insurers • Physical damage severity increased due to higher used car values, replacement parts, and labor costs • Body Work-related costs moderated in 3Q, but have grown at approximately double
Slide 18: 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 19: Solar Energy Investment: In Line with Environmental Impact Goals
Solar Energy Investment: In Line with Environmental Impact Goals $100 million commitment to solar energy investment generating attractive returns • In conjunction with Sunrun, invested in a diversified group of residential solar energy projects • Opportunity to provide renewable energy solutions for
Slide 20: 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 – $50M in e
Slide 21: Net Operating Income Review
Net Operating Income Review Financial results continue to be pressured by environmental challenges Three Months Ended, As Reported Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Variance Dollars per Unrestricted Share - Diluted 2022 2022 2022 2021 2021 YoY Net Income (Loss) $ (1.19) $ (1.17) $ (1.49)
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Book Value Per Share Excluding Net Unrealized (Gains) Losses 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
Slide 23: 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 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures Book Value For the Periods Ended 3Q'22 2Q'22 1Q'22 4Q'21 3Q'21 Book Value Per Share $ 38.16 $ 44.64 $ 53.21 $ 62.93 $ 65.22 Less: Net Unrealized (Gains) Losses on Fixed Maturities Per Share 12.25 7.39 0.21 (7.89) (8.28) Book Value Per Share Excluding Net Unrealized (Gains
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Return on Equity For the Periods Ended 3Q'22 2Q'22 1Q'22 4Q'21 3Q'21 Rolling 12 Month Return on Average Shareholders' Equity (5 Point Avg) (10.4)% (9.4)% (8.4)% (2.8)% 1.9% Less: Net Unrealized (Gains) Losses on Fixed Maturities 0.1% (0.6)% (0.9)% (0.4)% 0.3% Rolling 12 M
Slide 26: 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 27: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 3Q22 2Q22 1Q22 4Q21 3Q21 Specialty P&C Insurance Combined Ratio as Reported 107.6% 108.0% 108.6% 118.9% 111.6% Current Year Catastrophe Loss and LAE Ratio (1.5)% (0.6)% (0.2)% (0.2)% (0.3)% Prior Years Non-C
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Consolidated Financial Highlights ($ in millions, except per share data) Three Months Ended 30-Sep-22 30-Jun-22 31-Mar-22 31-Dec-21 30-Sep-21 Earned Premiums Kemper - GAAP As Reported $ 1,307.0 $ 1,353.7 $ 1,338.6 $ 1,359.1 $ 1,356.
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty P&C Insurance Segment ($ in millions) Three Months Ended 30-Sep-22 30-Jun-22 31-Mar-22 31-Dec-21 30-Sep-21 30-Jun-21 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 999.5 $ 1,043.7 $ 1,021.6 $ 1,032.3 $ 1,028.3 $
Slide 30: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance ($ in millions) Three Months Ended 30-Sep-22 30-Jun-22 31-Mar-22 31-Dec-21 30-Sep-21 30-Jun-21 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 858.8 $ 905.8 $ 901.7 $ 918.1 $ 920.6 $