Kemper Corporation · NYSE:KMPR
Kemper — Q1 2021 Earnings Presentation
30 slides from Kemper's earnings presentation, Apr 29, 2021
Slide 1: First Quarter 2021 Earnings
First Quarter 2021 Earnings April 29, 2021 Earnings Call Presentation – 1Q 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: First Quarter 2021 Highlights
First Quarter 2021 Highlights Despite top-line headwinds, produced solid returns and cash generation Delivered double-digit ROE and growth in book value per share ex. unrealized gain and goodwill • Net income of $123 million and adjusted consolidated net operating income 1 of $87 million; earnings p
Slide 5: First Quarter Financial Highlights
First Quarter Financial Highlights 18% ROATCE and 17% YoY growth in TBV per common share excluding unrealized gains1 As Reported Quarter Ended Mar 31, Mar 31, (Dollars in millions, except per share amounts) 2021 2020 Net Income $123 $64 Net Income – Per Diluted Share $1.85 $0.95 Adjusted Consolidate
Slide 6: Review of Net Operating Income
Review of Net Operating Income Continue to produce sound Operating Income Three Months Ended, As Reported Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Variance Dollars per Unrestricted Share - Diluted 2021 2020 2020 2020 2020 QoQ Net Income $ 1.85 $ 1.46 $ 1.83 $ 1.91 $ 0.95 0.90 (Income) Loss from
Slide 7: 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 63% • Strong execution and $46.76 $48.29 solid operating results $40.70 $42.58 $44.41 $40.27 have led to consi
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 $1,311 $867 $700 $684 $704 430 $641 415 410 $582 335 355 365 340 330 335 325 $385 $660 290 285 $385 $540 $733 $607 $299 $197 $101 $2
Slide 9: Capital Actions Taken in 2021
Capital Actions Taken in 2021 Nearly $500 million of capital management actions taken year-to-date • $47 million worth of common stock repurchased in the quarter • 590 thousand shares repurchased • Roughly 1% of outstanding shares • Repaid $50 million of our term loan due in 2023 • Third consecutive
Slide 10: Diversified Portfolio with Consistent Returns
Diversified Portfolio with Consistent Returns Net Investment Income¹ Overview • Net investment income and portfolio yield (MM) $86 $68 $92 $103 $103 benefitted from strong alternative $22 $27 investment performance $6 $11 • Investment portfolio is designed for growth of both income and total return
Slide 11: Solar Energy Investment: In Line with Environmental Impact Goals
Solar Energy Investment: In Line with Environmental Impact Goals $100 million commitment to solar energy tax credit equity generating attractive returns • In conjunction with Sunrun, invested in a diversified basket of residential solar energy projects • Opportunity to provide renewable energy solut
Slide 12: Specialty Auto Insurance Segment
Specialty Auto Insurance Segment1 Environment continues to normalize with state-specific geographic re-openings Key Highlights Written Premium Population CAGR • Slow state re-openings TTM YoY State Groupings ($ million) Growth ’16-’19 Est. ’20-’30 • 1.8% growth in PIF, excluding Classic Car Californ
Slide 13: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Ongoing efforts to bring segment to target profitability continue Key Highlights • Underlying combined ratio in the segment decreased to 90.7% for the quarter • Auto PIF and underlying combined ratio results reflect efforts to reposition the business f
Slide 14: Life & Health Insurance Segment
Life & Health Insurance Segment Positive momentum as “P&C catastrophe-like” impact declines Key Highlights • Business remains profitable, despite challenging pandemic impact - Increased mortality experience remains largely in line with country-wide trends - Stronger policy retention continues to ele
Slide 15: Appendix
Appendix Earnings Call Presentation – 1Q 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 ~$14B ~6.3M ~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: Below Investment Grade Fixed Maturities Portfolio of $450 Million
Below Investment Grade Fixed Maturities Portfolio of $450 Million Portfolio is diversified across different asset types $200 45.0% 40.9% $180 40.0% Below Investment Grade $ Amount (MM) $160 35.0% % of Fixed Maturity Portfolio $140 30.0% $120 25.0% $100 21.7% 20.9% $184 20.0% $80 12.5% 15.0% $60 $98
Slide 19: CLO Composition ($783 Million)
CLO Composition ($783 Million) CLOs represent 8% of investment portfolio $600 80.0% 67.5% 70.0% $500 60.0% % of CLO Portfolio $ Amount (MM) $400 50.0% $300 40.0% $529 30.0% $200 20.0% 12.4% 12.4% $100 10.0% $97 4.7% $97 2.9% $36 $23 $0 0.0% AAA AA A BBB High Yield Well-diversified CLO book with 85%
Slide 20: Alternative Investment Portfolio of $594 Million
Alternative Investment Portfolio of $594 Million Portfolio is highly diversified with strategies focused on private credit, private equity and hedge funds Private Credit ~3% of total investments (59% of Alts portfolio) $54.4 Diversification across date of investment, industry and geography $78.7 Pri
Slide 21: 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 22: 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 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures Return on Equity For the Periods Ended 1Q'21 4Q'20 3Q'20 2Q'20 1Q'20 2019 2018 2017 2016 Rolling 12 Month Return on Average Shareholders' Equity (5 Point Avg) 11.1% 9.8% 10.8% 11.4% 11.8% 14.8% 7.7% 5.9% 0.8% Less: Net Unrealized Gains on Fixed Maturities 1.5% 1.5% 1.5% 1
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of “All Other” Sources of Volatility Three Months Ended, As Reported Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Variance Dollars per Unrestricted Share - Diluted 2021 2020 2020 2020 2020 QoQ - - All Other Volatility Partial Satisfaction of Judgment - - -
Slide 25: 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 26: 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 27: 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 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 1Q21 4Q20 3Q20 2Q20 1Q20 Specialty P&C Insurance Combined Ratio as Reported 93.5% 91.7% 86.3% 91.0% 94.5% Current Year Catastrophe Loss and LAE Ratio (0.2%) (0.6%) (0.2%) (0.6%) 0.0% Prior Years Non-Catastro
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty P&C Insurance Segment Three Months Ended 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 877.6 $ 882.4 $ 871.4 $ 759.0 $ 822.5 Current Year Non-CAT Losses and LAE
Slide 30: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance Three Months Ended 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 Earned Premiums Kemper Specialty Auto - GAAP As Reported $ 785.4 $ 796.1 $ 792.2 $ 689.8 $ 753.2 Current Year Non-CAT Losse