Slide 1: Fourth Quarter 2018 Earnings
Fourth Quarter 2018 Earnings February 11, 2019 Earnings Call Presentation – 4Q 2018
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: A Leading Specialized Multi-Line Insurer
A Leading Specialized Multi-Line Insurer Taking advantage of a diversified portfolio of niche businesses…. Founded in 1990 and headquartered in Chicago, with subsidiaries writing policies since 1911. ~$12B ~6.3M ~30,000 ~8,100 Assets Policies Agents/Brokers Employees Specialty P&C insurance providin
Slide 4: 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 5: Key 2018 Highlights
Key 2018 Highlights 2018 was a transformational year in Kemper’s journey of building on core capabilities Execution of strategy by proven leadership team • Materially enhanced operating and financial performance Acquisition and successful integration of Infinity • Closed acquisition of Infinity in J
Slide 6: Successful Execution on Infinity Acquisition
Successful Execution on Infinity Acquisition Achieving integration milestones and exceeding financial targets • Cultures, vision, brand and strategic direction aligned • Leveraging combined data to inform “go-to-market” and product strategy Integration • Claims platform and processes are aligning to
Slide 7: Fourth Quarter 2018 Highlights
Fourth Quarter 2018 Highlights Strong Specialty P&C growth and profitability drove overall results • Increased BVPS by 15% or 28% excluding net unrealized gains on fixed maturities 1 Shareholder Value • 7.7% rolling 12-month ROAE2, up 180 bps; 8.3% ROAE, excluding net unrealized gains on fixed Creat
Slide 8: Fourth Quarter Highlights
Fourth Quarter Highlights Strong operational results on both an as reported and as adjusted1 basis As Adjusted As Reported for Acquisition (1) Quarter Ended Quarter Ended (Dollars in millions, except per share amounts) Change Change Dec 31, from 4Q’17 Dec 31, from 4Q’17 2018 (%) 2018 (%) Earned Prem
Slide 9: Full Year Highlights
Full Year Highlights Strong financial results on both an as reported and as adjusted1 basis As Adjusted As Reported for Acquisition (1) Year Ended Year Ended (Dollars in millions, except per share amounts) Change Change Dec 31, from FY’17 Dec 31, from FY’17 2018 (%) 2018 (%) Earned Premiums $3,384 4
Slide 10: Operating Performance
Operating Performance Profitability achieved despite significant catastrophe activity and investment market volatility Three Months Ended, As Reported Year Ended, As Reported Dollars per Unrestricted Share - Diluted Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Variance Dec. 31, Dec. 31, Variance 201
Slide 11: Specialty Property & Casualty Insurance Segment
Specialty Property & Casualty Insurance Segment1 Improved Specialty P&C franchise driving strong profitable growth Key Highlights • PIF grew by ~974,000 or 140% compared to 4Q’17, as reported, or by ~192,000 policies or 13%, as adjusted2 • Underlying combined ratio remained strong, driven by scale b
Slide 12: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Progress made in improving Preferred Auto and Home franchise Key Highlights • Segment returned to profitability (2018 Segment Operating Profit $29 million) - Catastrophe exposure reduced via policy count and expanded reinsurance; Catastrophe aggregate
Slide 13: Life & Health Insurance Segment
Life & Health Insurance Segment Mixed quarterly results: Sales continue to increase, but benefits and expenses increased Key Highlights • Earned premiums continued to show modest growth • Increased frequency of claims led to an elevated benefits ratio • Expenses increased as follows: - About $2 mill
Slide 14: Consistent Portfolio Returns: High Quality & Diversified
Consistent Portfolio Returns: High Quality & Diversified Stable Net Investment Income Overview • Increase in core portfolio investment (MM) $83 $79 $78 $92 $91 $7 income primarily from the addition of $13 $13 $11 $7 Infinity’s portfolio and organic growth • Alternative investment income decreased $8
Slide 15: Strong Current Capital Position with Ample Liquidity
Strong Current Capital Position with Ample Liquidity Capital position and liquidity resources provide significant financial flexibility Strong Parent Company Liquidity Risk-Based Capital Ratios (%) (MM) $734 $741 Life & Health P&C¹ $684 $641 $582 $404 $400 $385 $385 $540 415 335 430 330 411 $330 $34
Slide 16: 2019 Reinsurance Program
2019 Reinsurance Program Aggregate stop-loss program intended to reduce volatility from high-frequency, low-severity events Catastrophe Reinsurance Program (Multi-Year) Aggregate Catastrophe Program • Same coverage as 2018 program • Coverage – $50 million in excess of $60 million – $500k deductible
Slide 17: Appendix
Appendix Earnings Call Presentation – 4Q 2018 17
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 our business and meet or exceed our ROE targets over time 2. Return capi
Slide 19: 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 C
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Consolidated Net Operating Income (Loss) is an after-tax, non-GAAP financial measure computed by excluding from Income (Loss) from Continuing Operations the after-tax impact of 1) income (loss) from change in fair value of equity and convertible securities, 2) ne
Slide 21: 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 22: 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 23: Underlying Combined Ratio – Continued
Non-GAAP Financial Measures Underlying Combined Ratio – Continued Specialty P&C Insurance For the Three Months Ended For the Year Ended 4Q17 1Q18 2Q18 3Q18 1 4Q18 1 2017 2018 1 Earned Premiums: Kemper Specialty P&C - As Reported $ 270.7 $ 278.4 $ 320.0 $ 711.2 $ 717.8 $ 1,005.7 $ 2,027.4 Infinity 34
Slide 24: Underlying Combined Ratio – Continued
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended For the Year Ended 4Q17 1Q18 2Q18 3Q18 4Q18 2017 2018 Preferred Personal Auto Combined Ratio as Reported 105.4% 101.4% 100.4% 97.5% 103.0% 110.0% 100.6% Current Year Catastrophe Loss and LAE Ratio 0.1% (0.6%
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures As Adjusted for Acquisition amounts are non-GAAP financial measures. For the three months ended December 31, 2018, as adjusted amounts are computed by subtracting the impact of purchase accounting adjustments from the comparable consolidated GAAP financial measure reporte
Slide 26: As Adjusted for Acquisition – Continued
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Consolidated Three Months Ended Year Ended 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17 Purchase Purchase As Accounting As As As Legacy Accounting As As 1 1 1 1 (Dollars in millions, except per share amounts) Reported Adjustments Adjuste
Slide 27: As Adjusted for Acquisition – Continued
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Property & Casualty Insurance Segment Three Months Ended Year Ended 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17 Purchase Purchase As Accounting As As As Legacy Accounting As As 1 1 1 1 (Dollars in millions, except per share am
Slide 28: As Adjusted for Acquisition – Continued
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance Three Months Ended Year Ended 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17 Purchase Purchase As Accounting As As As Legacy Accounting As As (Dollars in millions, except per share amounts) Reported