Kemper Corporation · NYSE:KMPR
Kemper — Q2 2017 Earnings Presentation
26 slides from Kemper's earnings presentation, Aug 2, 2017
Slide 1: Second Quarter 2017 Earnings
August 2, 2017 Second Quarter 2017 Earnings
Slide 2: Preliminary Matters
Preliminary Matters Caution Regarding Forward-Looking Statements 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 Act of 1995. For
Slide 3: Create Long-term Shareholder Value
Create Long-term Shareholder Value 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 approach to capital mgmt Strategic focus: Consumer-related businesses
Slide 4: Progress on our Strategic Update
Progress on our Strategic Update Phase 1 Phase 2 Phase 3 Work / Effort Leverage, Grow Rebuild Build & Incubate Phase 1—Key Elements: Specific • Assemble top quality leadership team P • Resolve DMF/UCP issue P • Refocus & strengthen Non-standard Auto competency P • Restore Alliance United profitabili
Slide 5: Clear Path to Earnings Improvement Targets
Clear Path to Earnings Improvement Targets Claims Normalized Operating Earnings1 • Reduce claims cycle times (MM) • Leverage Guidewire Claims capabilities • Improve workflows/customer service • Dedicate staff with specialized skills, 9.0 modernize claims handling practices $33 - $42 • Enhance span o
Slide 6: Building Core Capabilities to Drive Enhanced Returns
Building Core Capabilities to Drive Enhanced Returns Continued to build core leadership competencies Life & Health • Mike Plazony – President, Kemper Home Service Companies • Charles Steele – President, Reserve National • Steve Froning – Life and Health Division CFO Property & Casualty • Kim Leggett
Slide 7: Second Quarter 2017 Highlights – Strong Results
Second Quarter 2017 Highlights – Strong Results Three Months Ended Six Months Ended (Dollars in millions, except per June 30, June 30, Variance June 30, June 30, Variance share amounts) 2017 2016 2017 2016 Net Income Per Share - Diluted $ 0.71 $ 0.08 $ 0.63 $ 0.70 $ 0.04 $ 0.66 Net Operating Income
Slide 8: Improving Underlying Operating Performance
Improving Underlying Operating Performance Three Months Ended Dollars per Unrestricted Share - Diluted June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Variance 2017 2017 2016 2016 2016 QoQ Income (Loss) from Continuing Operations $ 0.71 $ (0.01) $ 0.56 $ (0.36) $ 0.08 0.63 Net Realized Gains and Impai
Slide 9: Improved Alliance United Trends Dramatically
Improved Alliance United Trends Dramatically Alliance United Overview Improved AU Underlying CR1 • Acquired AU April 30, 2015; Increased frequency (%) seen through industry, specifically in California 120.1 117.7 • Implemented series of rate increases 107.4 106.8 • Tightened underwriting and agency
Slide 10: Stable and Predictable Life & Health Earnings
Stable and Predictable Life & Health Earnings (MM) Revenues Revenues $201 $207 $206 $206 $208 • Comparing 2Q16 to 2Q17, earned $50 $55 $54 $53 $55 premiums increased $2 million driven by higher A&H earned premiums; Life earned premiums were flat at $95 million $151 $152 $152 $153 $153 • Net investme
Slide 11: Growing and Improving Nonstandard Personal Auto
Growing and Improving Nonstandard Personal Auto Earned Premiums by Line (MM) $205 $207 $211 $216 $234 Legacy Nonstandard Personal Auto • 2Q17 underlying combined ratio improved $136 $149 $126 $130 $132 5.5 percentage points, primarily from higher average earned premiums $79 $77 $79 $80 $85 • Net wri
Slide 12: Preferred Auto Challenged—Taking Actions
Preferred Auto Challenged—Taking Actions (MM) $184 Earned Premiums by Line $183 Preferred Auto $187 $186 $181 • 2Q17 underlying combined ratio increased 1.1 $11 $11 $11 $11 $11 percentage points $68 $69 $68 $66 $67 • Preferred auto remains challenged by adverse loss cost trends and claims $105 $107
Slide 13: Cats Elevated but Remain within Pricing Expectations
Cats Elevated but Remain within Pricing Expectations Current Year Catastrophe Losses and LAE by Quarter 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Current Year Catastrophe Losses & LAE Short-term Average Long-term Projected Average Catastrophe Details •
Slide 14: Consistent Portfolio Returns: High Quality, Moderate Risk
Consistent Portfolio Returns: High Quality, Moderate Risk Strong Performance Despite Low Rates Overview • Investment portfolio produced an (MM) $80 $82 $77 annualized pre-tax equivalent book yield of $74 $78 $11 $15 5.2 percent in 2Q17, compared to 5.0 $7 $10 $9 percent in 2Q16 • Core portfolio prod
Slide 15: Strong Current Capital Position with Ample Liquidity
Strong Current Capital Position with Ample Liquidity Strong Parent Company Liquidity Risk-Based Capital Ratios (MM) Life & Health Legacy P&C (%) $734 $741 $684 $561 $572 $404 $400 $385 $404 $384 415 335 435 320 420 335 375 330 $330 $341 $299 $157 $188 2013 2014 2015 2016 2Q17 2014 2015 2016 2017E Bo
Slide 16: Achieving Expense Savings Targets
Achieving Expense Savings Targets Expense¹ Update Annualized 2017 Savings Achieved YTD • Committed to removing $50-$65MM (MM) $25 by year-end 2018 run-rate • Exceeding 2017 run-rate commitment $- $- of $20MM by $5MM $300 $275 $275 • Continue to streamline and automate processes, while investing for
Slide 17: Capital Deployment Priorities
Capital Deployment Priorities 1. Fund profitable organic growth • At appropriate risk-adjusted returns 2. Strategic acquisitions: • Strategically enhance our business • Meet or exceed our ROE targets over time 3. Return capital to shareholders: • Repurchase shares opportunistically • Maintain compet
Slide 18: KEMPER
KEMPER
Slide 19: Appendix
Appendix
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Operating Performance is a non-GAAP financial measure that is computed by excluding from the Diluted Income (Loss) from Continuing Operations Per Unrestricted Share the after-tax per unrestricted share impact of 1) net realized gains on sales of investments, 2)
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures Diluted Consolidated Net Operating Income (Loss) Per Unrestricted Share is an after-tax, non-GAAP financial measure computed by excluding from Diluted Income (Loss) from Continuing Operations Per Unrestricted Share the after-tax per unrestricted share impact of net realiz
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio is a non-GAAP financial measure that is computed by excluding the current year catastrophe and LAE ratio and the prior-year reserve development ratio (both non-catastrophe and catastrophes) from the combined ratio. The most directly comparable GA
Slide 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 2Q16 3Q16 4Q16 1Q17 2Q17 Legacy Nonstandard Personal Automobile Underlying Combined Ratio 99.1% 96.1% 97.8% 96.8% 93.6% Current Year Catastrophe Loss and LAE Ratio 2.9% 2.2% (0.1%) 1.4% 2.8% Prior Years Non-
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio – Continued Alliance United For the Three Months Ended 3Q15 4Q15 1Q16 2Q16 Underlying Combined Ratio 101.8% 120.1% 107.4% 117.7% Current Year Catastrophe Loss and LAE Ratio 0.0% 0.0% 0.0% 0.0% Prior Years Non-Catastrophe Losses and LAE Ratio 1.8%
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Normalized Earnings is an after-tax, non-GAAP financial measure that is most directly comparable to the GAAP financial measure of Income from Continuing Operations. Normalized Earnings is calculated by 1) excluding the after-tax impact of net realized gains on sales of in
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures Normalized Earnings - Continued Six Months ($ in millions) Annualized Full Year 6/30/2016 2015 2014 2013 2012 2011 Net Income - As Reported $ 3.8 $ 85.7 $ 114.5 $ 217.7 $ 103.4 $ 74.5 Less: Income from Discontinued Operations - 5.5 1.9 3.2 11.6 12.8 Income from Continuing