Slide 1: Third Quarter 2023 Earnings
Third Quarter 2023 Earnings October 30, 2023 Earnings Call Presentation – 3Q 2023
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 1 Delivering appropriate 2 and affordable insurance and financial solutions Specialty auto insurance for Life insurance for underserved markets; Latino, low/modest incom
Slide 4: Third Quarter 2023 Summary
Third Quarter 2023 Summary Underlying combined ratio improved sequentially as expected Profit restoration continues with improvement in underlying results • Net loss attributable to Kemper Corporation of $146 million ($2.28/sh) – includes $56 million ($0.87/sh) related to termination of Kemper’s rem
Slide 5: Third Quarter 2023 Financial Summary
Third Quarter 2023 Financial Summary Focus remains on restoring business to profitability Quarter Ended Sep 30, Sep 30, ($ in millions, except per share amounts) 2023 2022 Net Loss Attributable to Kemper Corporation – Per Diluted Share $(2.28) $(1.17) Adj. Consolidated Net Operating Loss – Per Dilut
Slide 6: Specialty P&C Reserve Update
Specialty P&C Reserve Update Adverse development driven by PIP, Bodily Injury, and Property Damage coverages Specialty P&C1 adverse development of $78 million • Private Passenger Auto adverse development of $71 million related to: ̶ Florida Personal Injury Protection (PIP), mainly from policy period
Slide 7: Strategic Initiatives Summary
Strategic Initiatives Summary Projects proceeding to expectations 1. Bermuda Optimization: • Anticipate $250+ million in Life dividends to parent in 4Q'23 2. Pension Plan Termination: • Recognized $56 million after-tax non-cash charge to settle remaining pension plan obligations (previously recogniz
Slide 8: Streamlining Our Cost Structure
Streamlining Our Cost Structure Advancing differentiated capabilities to strengthen systematic, sustainable competitive advantages • Restructuring and integration pre-tax Run Rate Program Savings ($ millions) 150 charges of $150 million – $200 million will 137 produce an annualized savings of $150 1
Slide 9: Reciprocal Exchange
Reciprocal Exchange The Exchange began writing auto policies in Illinois during the quarter Creation Phase Complete • Reciprocal Exchange structure established and operating • First auto policies written in 3Q’23 • Special topic call on Reciprocal Exchange structure and financial reporting to be hel
Slide 10: Well-Capitalized Insurance Subsidiaries
Well-Capitalized Insurance Subsidiaries Continued access to significant sources of liquidity Parent Company Liquidity Risk-Based Capital Ratios¹ HoldCo Cash & Investments $1,433 Life2 Borrowings Available $1,336 P&C (ex. AACC) Under Credit Agreement & from Subs $418 (%) $733 $938 $867 $821 ($ in mil
Slide 11: Diversified Investment Portfolio with Consistent Returns
Diversified Investment Portfolio with Consistent Returns Net Investment Income1 Highlights $107 • High-quality and liquid portfolio provides ($ in millions) $106 $102 $106 $98 $11 $9 $10 consistent net investment income; 72% of $4 $8 fixed income portfolio rated A or higher • Strong ALM philosophy t
Slide 12: Specialty Property & Casualty Insurance Segment
Specialty Property & Casualty Insurance Segment Underlying combined ratio improved 6.3 points year-over-year and 1.5 points sequentially Highlights Cumulative PPA Rate Activity Since 2Q’211 • Sequential improvement driven by additional Filed Rate earned rate and non-rate actions ~58% Written Rate ~5
Slide 13: Specialty P&C Path to Underwriting Profit
Specialty P&C Path to Underwriting Profit Overcoming Benefits fromloss cost rate, pressures non-rate andthrough expenserate, non-rate, actions and loss exceeding expense trend 1. Expectations • Ongoing dynamic operating environment • Earned rate in excess of loss trend to drive continued improvement
Slide 14: Life Insurance Segment
Life Insurance Segment Business trends remain stable; consumer demand remains strong Highlights • Effective January 1, 2023, financials reflect LDTI accounting pronouncement • Profitability improved over prior year and sequential quarters • Policyholders continue to value our product; persistency re
Slide 15: Key Takeaways
Key Takeaways • Ongoing dynamic operating environment • Underlying results improving as expected due to rate and non-rate actions • Strategic initiatives are on track: ̶ Bermuda optimization is expected to provide additional liquidity to parent in 4Q’23 ̶ Reciprocal Exchange established and began wr
Slide 16: Appendix
Appendix Earnings Call Presentation – 3Q 2023 16
Slide 17: Elevated Auto Severity Persists Due to Continued Inflationary Pressures
Elevated Auto Severity Persists Due to Continued Inflationary Pressures • Physical damage severity remains elevated due to higher used car values, replacement parts, and labor costs – Body Work-related costs flattened in 3Q, but remain nearly double the rate of US Core Inflation – Value of used cars
Slide 18: 2023 Reinsurance Program
2023 Reinsurance Program Renewed Catastrophe XoL Reinsurance; discontinued the Catastrophe Aggregate for 2023 Catastrophe Reinsurance Program (Multi-Year) Highlights Catastrophe Excess of Loss Program (XOL): • Total coverage: 95% of $275 million in excess of $50 million • Purchased limit was reduced
Slide 19: Non-GAAP Financial Measures
Non-GAAP Financial Measures Book Value Per Share Excluding Goodwill is a calculation that uses a non-GAAP financial measure. It is calculated by dividing shareholders’ equity excluding goodwill by total Common Shares Issued and Outstanding. Book value per share is the most directly comparable GAAP f
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Consolidated Net Operating Loss is an after-tax, non-GAAP financial measure and is computed by excluding from Net Loss the after-tax impact of: (i) Income (Loss) from Change in Fair Value of Equity and Convertible Securities; (ii) Net Realized Investment (Losses)
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures Book Value Per Share As of ($ per share) Sep 30, 2023 Sep 30, 2022 Book Value Per Share $36.85 $42.18 Less: Net Unrealized Losses on Fixed Maturities 7.60 7.98 Book Value Per Share Excluding Net Unrealized Losses on Fixed Maturities and Changes in the $44.45 $50.16 Dis
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Return on Equity As of Sep 30, 2023 Sep 30, 2022 Rolling 12 Months Return on Average Kemper Corporation Shareholders' Equity (5-point (14.6)% (11.1)% Average) Less: Net Unrealized Losses on Fixed Maturities and Changes in the Discount Rate on Future 2.2 1.3 Life Policy
Slide 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures Diluted Adjusted Consolidated Net Operating Loss Per Unrestricted Share is a non-GAAP financial measure computed by dividing Adjusted Consolidated Net Operating Loss attributed to unrestricted shares by the weighted-average unrestricted shares and equivalent shares outsta
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures Underlying Combined Ratio Three Months Ended 3Q'23 2Q'23 1Q’23 4Q'22 3Q'22 Specialty P&C Insurance Combined Ratio as Reported 109.9% 106.5% 112.1% 108.8% 107.6% Current Year Catastrophe Losses and LAE Ratio (0.7) (1.9) (0.9) 0.0 (1.5) Prior Years Non-Catastrophe Losses an
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Life Revenue and Net Operating Income Reconciliation Three Months Ended ($ in millions) 3Q'23 2Q'23 1Q'23 4Q'22 3Q'22 Earned Premiums Earned Premiums – As Reported $102.1 $102.2 $99.3 $142.6 $142.1 Less: Reserve National Earned Premiums - - - 25.6 40.2 Adjusted Earned Pre