Slide 1: Second Quarter 2021 Earnings
Second Quarter 2021 Earnings July 29, 2021 Earnings Call Presentation – 2Q 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: Second Quarter 2021 Highlights
Second Quarter 2021 Highlights Swift re-opening from Pandemic creates short-term headwinds to auto insurance businesses Near-term environmental pressures but well positioned to produce long-term shareholder value • Net loss of $63 million ($0.97 per share), as reported, or $53 million ($0.82 per sha
Slide 5: Second Quarter Financial Highlights
Second Quarter Financial Highlights 11% ROATCE and TBV per common share excluding unrealized gains1 decreased 1% primarily due to AAC As Reported As Adjusted1 Quarter Ended Quarter Ended Jun 30, Jun 30, Jun 30, Jun 30, (Dollars in millions, except per share amounts) 2021 2020 2021 2020 Net Income $(
Slide 6: Review of Net Operating Income
Review of Net Operating Income Environmental challenges pressured short-term operating income Three Months Ended, As Reported Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Variance Dollars per Unrestricted Share - Diluted 2021 2021 2020 2020 2020 QoQ Net Income $ (0.97) $ 1.85 $ 1.46 $ 1.83 $ 1.91 (2
Slide 7: Consistent Capital Generation and Attractive Returns
Consistent Capital Generation and Attractive Returns Despite recent pressure, positioned for steady long-term growth Total Adjusted Return of BVPS Ex. Unrealized Gains on Fixed Maturities and Goodwill Growth 47% • AAC goodwill diluted $46.76 $48.29 TBVPS by $3.07 $44.41 $43.50 $40.27 $40.70 $42.58 •
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 $867 $700 $919 $684 415 430 410 $582 $641 355 365 340 330 355 $660 $704 335 290 285 $385 275 $385 $540 $733 $299 $197 $101 $207 $215
Slide 9: Capital Actions Taken in 2021
Capital Actions Taken in 2021 Approximately $580 million of capital management actions taken through June 30, 2021 • $159 million worth of common stock repurchased through 2Q’21 - 2.0 million shares repurchased - Roughly 3% of outstanding shares • Repaid $50 million of our term loan due in 2023 in 1
Slide 10: Diversified Portfolio with Consistent Returns
Diversified Portfolio with Consistent Returns Net Investment Income¹ Overview • Net investment income and portfolio yield (MM) $68 $92 $103 $103 $114 benefitted from strong alternative $32 investment performance $11 $22 $27 • Investment portfolio is designed for growth of both income and total retur
Slide 11: Solar Energy Investment: In Line with Environmental Impact Goals
Solar Energy Investment: In Line with Environmental Impact Goals $100 million commitment to solar energy partnership investment generating attractive returns • In conjunction with Sunrun, invested in a diversified basket of residential solar energy projects • Opportunity to provide renewable energy
Slide 12: Environmental Challenges Impacting P&C Segments
Environmental Challenges Impacting P&C Segments Re-opening and other factors are driving up frequency and severity Impacts on Current Accident Year • Frequency up 45% - 50% vs 2Q’20 (low due to Pandemic) - QTD May’21 miles driven up 40%1 vs QTD May‘20 (low due to Pandemic) - Driving patterns have ch
Slide 13: Specialty Property & Casualty Segment
Specialty Property & Casualty Segment1 Environmental challenges pressuring short-term profitability Key Highlights PPA (ex. CC) DWP2 Population CAGR TTM YoY • Re-opening led to a 17.3 point increase in State Groupings ($ million) Growth ’16-’19 Est. ’20-’30 underlying combined ratio3 California $2,0
Slide 14: Preferred Property & Casualty Insurance Segment
Preferred Property & Casualty Insurance Segment Environmental pressure impacting current results as repositioning of business continues Key Highlights • Underlying combined ratio in segment increased to 103% for the quarter - Primarily driven by re-opening auto frequency and severity trends • Home &
Slide 15: Life & Health Insurance Segment
Life & Health Insurance Segment Environment beginning to normalize Key Highlights • Benefits and incurred losses returning to pre-pandemic levels, in-line with national trends • Life Earned Premium increased $4.9M (5%) in Q2’21 to $100.6M, due to increased persistency and new sales - Historically hi
Slide 16: Appendix
Appendix Earnings Call Presentation – 2Q 2021 16
Slide 17: 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 ~34,000 ~10,000 Assets Policies Agents/Brokers Employees Specialty P&C insurance providing Preferred
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 the business and meet or exceed our ROE targets over time 2. Return capi
Slide 19: Below Investment Grade Fixed Maturities Portfolio of $408 Million
Below Investment Grade Fixed Maturities Portfolio of $408 Million Portfolio is diversified across different asset types $200 50.0% $180 43.2% 45.0% % of Below Investment Grade Fixed Maturities Below Investment Grade $ Amount (MM) $160 40.0% $140 35.0% $120 30.0% $100 23.6% 25.0% 22.2% $176.1 $80 20.
Slide 20: CLO Composition ($770 Million)
CLO Composition ($770 Million) CLOs represent 7.4% of investment portfolio $600 80.0% 67.3% 70.0% $500 60.0% % of CLO Portfolio $ Amount (MM) $400 50.0% $300 40.0% $518 30.0% $200 20.0% 11.5% 11.7% $100 6.5% 10.0% $89 $50 3.0% $90 $23 $0 0.0% AAA AA A BBB High Yield Well-diversified CLO book with 85
Slide 21: Alternative Investment Portfolio of $618 Million
Alternative Investment Portfolio of $618 Million Portfolio is highly diversified with strategies focused on private credit, private equity and hedge funds Private Credit ~3% of total investments (57% of Alts portfolio) $46.6 Diversification across date of investment, industry and geography Private E
Slide 22: 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 23: 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 24: Non-GAAP Financial Measures: Return on Equity
Non-GAAP Financial Measures Return on Equity For the Periods Ended 2Q'21 1Q'21 4Q'20 3Q'20 2Q'20 2019 2018 2017 2016 Rolling 12 Month Return on Average Shareholders' Equity (5 Point Avg) 6.4% 11.1% 9.8% 10.8% 11.4% 14.8% 7.7% 5.9% 0.8% Less: Net Unrealized Gains on Fixed Maturities 1.1% 1.5% 1.5% 1.
Slide 25: Non-GAAP Financial Measures: All Other Volatility
Non-GAAP Financial Measures All Other Volatility Three Months Ended, As Reported Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Variance Dollars per Unrestricted Share - Diluted 2021 2021 2020 2020 2020 QoQ - - All Other Volatility Refinement of CEI Estimate - - - - 0.06 (0.06) Impact of Purchase Acco
Slide 26: 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 27: 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 28: 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 29: Non-GAAP Financial Measures: Underlying Combined Ratio
Non-GAAP Financial Measures Underlying Combined Ratio – Continued For the Three Months Ended 2Q21 1Q21 4Q20 3Q20 2Q20 Specialty P&C Insurance Combined Ratio as Reported 116.1% 93.5% 91.7% 86.3% 91.0% Current Year Catastrophe Loss and LAE Ratio (0.8%) (0.2%) (0.6%) (0.2%) (0.6%) Prior Years Non-Catas
Slide 30: 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 31: Non-GAAP Financial Measures: As Adjusted for Acquisition
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Three Months Ended 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 Earned Premiums Kemper - GAAP As Reported $ 1,337.7 $ 1,200.8 $ 1,214.0 $ 1,206.5 $ 1,085.3 AAC - Prior to Acquisition - 87.9 91.2 92.6 92.0 As Adjusted 1 $ 1,337.
Slide 32: Non-GAAP Financial Measures: Specialty P&C Segment
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty P&C Insurance Segment Three Months Ended 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 $ 1,010.3 $ 877.6 $ 882.4 $ 871.4 $ 759.0 $ 822.5 AAC - Prior to
Slide 33: Non-GAAP Financial Measures: Specialty Personal Auto
Non-GAAP Financial Measures As Adjusted for Acquisition – Continued Specialty Personal Automobile Insurance Three Months Ended 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 Earned Premiums Kemper Specialty P&C - GAAP As Reported $ 909.6 $ 785.4 $ 796.1 $ 792.2 $ 689.8 AAC - Prior to Acquisition