Slide 1: Third Quarter 2021 Earnings
Third Quarter 2021 Earnings October 28, 2021 Earnings Call Presentation – 3Q 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 Growing returns Strong capital/liquidity advantages and build and book value per positions; core capabilities share over time Disciplined ap
Slide 4: Third Quarter 2021 Highlights
Third Quarter 2021 Highlights Pandemic re-opening and Delta variant create margin headwinds Environmental pressures challenged 3Q21 financial results • Net loss of $75 million ($1.18 per share), as reported, or $69 million ($1.08 per share), as adjusted Shareholder • Adjusted consolidated net operat
Slide 5: Third Quarter Financial Highlights
Third Quarter Financial Highlights Environmental headwinds impacting profitability and TBVPS growth As Reported As Adjusted1 Quarter Ended Quarter Ended Sept 30, Sept 30, Sept 30, Sept 30, (Dollars in millions, except per share amounts) 2021 2020 2021 2020 Net Income (Loss) $(75) $122 $(69) $140 Net
Slide 6: Review of Net Operating Income
Review of Net Operating Income 3Q21 financial results 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 2021 2021 2021 2020 2020 QoQ Net Income (Loss) $ (1.18) $ (0.97) $ 1.85 $ 1.46 $
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 43% Closed 4/21 • AAC goodwill diluted $46.76 $48.29 TBVPS by $3.11 $43.50 $42.37 Infinity Acq $40.27 • Infinity transaction Closed 7/18 di
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 Ratios (MM) (%) $1,433 $1,035 $867 $700 $684 415 430 410 $582 $641 $704 355 365 340 330 315 $660 335 290 285 $385 $385 240 $540 $733 $299 $197 $101 $207 $3
Slide 9: Diversified Portfolio with Consistent Returns
Diversified Portfolio with Consistent Returns Net Investment Income¹ Overview • Portfolio continues to provide stable net (MM) $92 $103 $103 $114 $102 investment income $22 $32 $22 $11 $27 - 4.4% PTE annualized book yield • Investment portfolio is designed for growth $81 $81 $76 $82 $80 of both inco
Slide 10: Environmental Challenges Impacting P&C Segments
Environmental Challenges Impacting P&C Segments Re-opening and other factors are continuing to drive up frequency and severity Impacts on Current Accident Year • Frequency up 18% - 20% vs 3Q’20 (low due to Pandemic shut-downs) - QTD August’21 miles driven up 10%1 vs QTD August‘20 - Driving patterns
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 2Q 2020 – 1Q 2021 Current+ Δ Earned Rate 10.0 % Significant, rapid Loss Trend (frequency &
Slide 12: Specialty Property & Casualty Segment
Specialty Property & Casualty Segment1 Environmental challenges pressuring profitability Key Highlights Specialty PPA (Rate Change Activity Since 2Q21) • Re-opening leading to significant increases in Rate Actions3 Overall Impact underlying combined ratio2 Filed Effective4 Written Earned % Prem Wtd
Slide 13: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Environmental challenges pressuring profitability amid repositioning Key Highlights Preferred Personal Auto (Rate Change Activity Since 2Q21) • Underlying combined ratio1 in segment Rate Actions2 Overall Impact increased to 102% for the quarter Filed E
Slide 14: Life & Health Insurance Segment
Life & Health Insurance Segment Delta variant increased Life benefit costs to near pandemic high Key Highlights • Life claim activity mirroring national mortality trends; subsided in 2Q21 but re-emerged with Delta variant in 3Q21 • Life Earned Premium increased $5.2M (5%) in Q3’21 to $101.5M, due to
Slide 15: Appendix
Appendix Earnings Call Presentation – 3Q 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 ~6.6M ~36,700 ~10,100 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 basket of residential solar energy projects • Opportunity to provide renewable energy
Slide 19: 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 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 3Q'21 2Q'21 1Q'21 4Q'20 3Q'20 2019 2018 2017 2016 Rolling 12 Month Return on Average Shareholders' Equity (5 Point Avg) 1.9% 6.4% 11.1% 9.8% 10.8% 14.8% 7.7% 5.9% 0.8% Less: Net Unrealized Gains on Fixed Maturities 0.3% 1.1% 1.5% 1.5
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 3Q21 2Q21 1Q21 4Q20 3Q20 Specialty P&C Insurance Combined Ratio as Reported 111.6% 116.1% 93.5% 91.7% 86.3% Current Year Catastrophe Loss and LAE Ratio (0.3%) (0.8%) (0.2%) (0.6%) (0.2%) Prior Years Non-Cata
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 Consolidated Financial Highlights ($ in millions, except per share data) Three Months Ended 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 Earned Premiums Kemper - GAAP As Reported $ 1,356.1 $ 1,337.7 $ 1,200.8 $ 1,214.0 $ 1,206.
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 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 1,028.3 $ 1,010.3 $ 877.6 $ 882.4 $ 8
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance ($ in millions) Three Months Ended 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 920.6 $ 909.6 $ 785.4 $ 796.1 $ 792.2 AAC - Prior