Attached files
| file | filename |
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| EX-99.2 - FIRST QUARTER 2017 INVESTOR SUPPLEMENT OF KEMPER CORPORATION - KEMPER Corp | kmpr2017033117ex992supplem.htm |
| EX-99.1 - REGISTRANTS PRESS RELEASE DATED MAY 4, 2017 - KEMPER Corp | kmpr2017033117ex991release.htm |
| 8-K - FORM 8-K - KEMPER Corp | kmpr20170331178-kreleasean.htm |
First Quarter
2017 Earnings
May 4, 2017
Exhibit 99.3
2 Earnings Call Presentation – 1Q 2017
Preliminary Matters
Caution Regarding Forward-Looking Statements
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 Act of 1995. Forward-looking statements give expectations or forecasts of future events,
and can be identified by the fact that they relate to future actions, performance or results rather than
strictly to historical or current facts.
Any or all forward-looking statements may turn out to be wrong, and, accordingly, readers are cautioned
not to place undue reliance on such statements, which speak only as of the date of this report. Forward-
looking statements involve a number of risks and uncertainties that are difficult to predict, and are not
guarantees of future performance. Among the general factors that could cause actual results and financial
condition to differ materially from estimated results and financial condition are those listed in periodic
reports filed by Kemper Corporation with the Securities and Exchange Commission (SEC). No assurances
can be given that the results and financial condition contemplated in any forward-looking statements will
be achieved or will be achieved in any particular timetable. Kemper assumes no obligation to publicly
correct or update any forward-looking statements as a result of events or developments subsequent to the
date of this report. The reader is advised, however, to consult any further disclosures Kemper makes on
related subjects in its filings with the SEC.
Non-GAAP Financial Measures:
This presentation contains non-GAAP financial measures that the company believes are meaningful to
investors. Non-GAAP financial measures have been reconciled to the most comparable GAAP financial
measure.
All data in this presentation is as of and for the period ending March 31, 2017 unless otherwise stated.
3 Earnings Call Presentation – 1Q 2017
Create Long-term Shareholder Value
Sustainable competitive
advantages and build
core capabilities
Growing returns
and book value per
share over time
Diversified sources
of earnings;
Strong capital/liquidity
positions;
Disciplined approach
to capital mgmt
Deliver high single digit/low double digit ROE¹ over time
1 Return on Equity
Consumer-related businesses with niche opportunities that:
• Target underserved markets
• Have limited, weak or unfocused competition
• Require unique expertise (underwriting, claim, distribution, other)
Strategic focus:
4 Earnings Call Presentation – 1Q 2017
First Quarter 2017 Highlights
¹Non-GAAP financial measure; Please see reconciliation in the appendix
(Dollars in millions, except per Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
share amounts) 2017 2016 2016 2016 2016
Net Income (Loss) Per Share (0.01)$ 0.60$ (0.32)$ 0.08$ (0.04)$
Net Operating Income (Loss) Per Share¹ (0.08)$ 0.56$ (0.40)$ 0.09$ (0.01)$
Earned Premiums 563.4$ 561.4$ 558.9$ 553.7$ 546.0$
Net Investment Income 81.6$ 79.9$ 77.7$ 73.7$ 67.0$
Book Value Per Share 38.67$ 38.52$ 40.51$ 41.17$ 39.92$
Book Value Per Share Excluding Net
Unrealized Gains on Fixed Maturities¹
34.81$ 35.00$ 34.27$ 34.78$ 34.97$
Three Months Ended
5 Earnings Call Presentation – 1Q 2017
Dollars per Unrestricted Share - Diluted Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Variance
2017 2016 2016 2016 2016 QoQ
Income (Loss) from Continuing Operations (0.01)$ 0.56$ (0.36)$ 0.08$ (0.04)$ 0.03
Net Realized Gains and Impairments 0.07 - 0.04 (0.01) (0.03) 0.10
Net Operating Income (Loss)¹ (0.08) 0.56 (0.40) 0.09 (0.01) (0.07)
Sources of Volatility:
Catastrophes (0.83) (0.16) (0.16) (0.64) (0.49) (0.34)
Alternative Investment Income 0.19 0.14 0.12 0.08 0.01 0.18
Prior Year Reserve Development (0.14) (0.04) 0.02 0.24 (0.03) (0.11)
Voluntary Outreach Efforts - - (0.98) - - -
Total from Sources of Volatility (0.78)$ (0.06)$ (1.00)$ (0.32)$ (0.51)$ (0.27)$
Underlying Operating Performance¹ 0.70$ 0.62$ 0.60$ 0.41$ 0.50$ 0.20$
Three Months Ended
• Catastrophe losses significantly impacted 1Q16 and 1Q17 results. Loss expectations remain
in-line with long-term pricing expectations.
• Alternative investments performance exceeded expectations and prior year
• 2017 included adverse prior year reserve development primarily from the Preferred Auto line
• 2017 nonstandard auto results showed significant improvement
• Preferred auto continued to be challenged; team is addressing with claims, rate and
underwriting actions
Improving Underlying Operating Performance
¹Non-GAAP financial measure; Please see appendix for more information
6 Earnings Call Presentation – 1Q 2017
Stable and Predictable Life & Health Earnings
$150 $151 $152 $152 $153
$55 $50 $55 $54 $53
1Q16 2Q16 3Q16 4Q16 1Q17
Revenues
Earned Premiums Net Investment Income
(M
M
)
(M
M
)
• Earned premiums increased $3.2 million
over 1Q16
• Life increased $1.3 million, driven by
increased volume at Reserve National;
Home Service premiums increased slightly
as agent productivity increased
• A&H increased $2.2 million
• Comparing 1Q16 to 1Q17, net income
increased $2 million to $22 million
• Results remain stable and continue to
provide strong predictable cash flows
• Continue to focus on increasing
distribution capabilities
• Low interest rate environment continues
to pressure investment results
Revenues
Net Operating Income
$20
$16
$21 $23 $22
1Q16 2Q16 3Q16¹ 4Q16 1Q17
Net Operating Income
¹Excludes $50.6 million after-tax charge from implementing voluntary use of death verification databases
$206 $207 $201 $205 $206
7 Earnings Call Presentation – 1Q 2017
Preferred Auto Challenged—Taking Actions
• 1Q17 underlying combined ratio increased
5.3 percentage points
• Preferred auto remains challenged by
adverse loss cost trends and claims
• Team focused on claims, rate and
underwriting actions
• New business increased with retention
roughly flat
99.3 102.0 100.3
111.5 104.6
83.0
77.3
85.4 80.0 82.6
1Q16 2Q16 3Q16 4Q16 1Q17
Underlying Combined Ratio¹
Auto Home Total Preferred Lines
• Underlying combined ratio improved a half
a point
• Net written premiums decreased $1 million,
in line with expectations while retention
increased 2 percent
• Catastrophe loss expectations remain in line
with long-term pricing expectations
$106 $105 $107 $107 $104
$68 $68 $69 $68 $66
$11 $11 $11 $11 $11
1Q16 2Q16 3Q16 4Q16 1Q17
Earned Premiums by Line
Auto Home Other
(%
)
(M
M
)
$181 $187 $184 $185 $186
Preferred Auto
Homeowners
¹Non-GAAP financial measure; Please see reconciliation in the appendix
8 Earnings Call Presentation – 1Q 2017
Improving Trends in Nonstandard Personal Auto
• 1Q17 underlying combined ratio improved
5.7 percentage points, primarily from
higher average earned premiums
• Net written premiums increased 5 percent
over 1Q16
• Appropriately balancing continued profit
improvement actions and growth
102.5
99.1 96.1 97.8 96.8
107.4
117.7
106.8
100.9 98.6
1Q16 2Q16 3Q16 4Q16 1Q17
Underlying Combined Ratio¹
Legacy Alliance United Total
• Underlying combined ratio improved 8.8
points, driven by rate and underwriting
actions taken in 2016
• Average earned premiums increased 13
percent; implemented a 6.9 percent rate
increase on roughly half the book starting
March 1, 2017
• Net written premiums increased 17
percent over 1Q16
$77 $79 $77 $79 $80
$120 $126 $130 $132 $136
1Q16 2Q16 3Q16 4Q16 1Q17
Earned Premiums by Line
Legacy Alliance United
(%
)
(M
M
)
$216 $207 $205 $197 $211
Legacy Personal Auto
Alliance United
¹Non-GAAP financial measure; Please see reconciliation in the appendix
9 Earnings Call Presentation – 1Q 2017
Consistent Portfolio Returns: High Quality, Moderate Risk
63%
27%
6%
4%
47%
26%
5%
4%
7%
4%
7%
Short-term
Diversified & Highly Rated Portfolio
Portfolio Composition Fixed Maturity Ratings
$5.2 Billion $6.7 Billion
A or Higher
≤ CCC
B / BB
BBB
Other
Alternatives
Equity¹
U.S.
Gov’t
States/
Munis
Corporates
• Investment portfolio produced an
annualized pre-tax equivalent book yield
of 5.4 percent in 1Q17, compared to 4.6
percent in 1Q16
• More than 75 percent of the total
investment portfolio is comprised of fixed
maturity securities, of which 90 percent is
rated investment grade by S&P
• Equity securities are primarily preferred
stocks and ETF’s
• Core portfolio produces stable net
investment income results
• Alternative investment portfolio is
designed to provide enhanced returns
over time and primarily consists of
— Funds whose underlying investments
tend to be in fixed income securities
— Hedge funds that focus on liquidity
1 Excludes $202 million of Other Equity Interests of LP/LLC’s
$67 $67 $68 $69 $67
$7 $10 $11 $15
1Q16 2Q16 3Q16 4Q16 1Q17
Alternative Investments Portfolio Core Portfolio
Strong Performance Despite Low Rates
(M
M
)
$67
$82 $80 $78 $74
Overview
10 Earnings Call Presentation – 1Q 2017
Strong Current Capital Position with Ample Liquidity
Debt
Shareholder’s
Equity
Debt Debt-to-Capital Historically <30%
2013 2014 2015 2016 1Q17
22.8%
$2.7B
27.5%
$2.7B
27.6%
$2.7B
27.4%
$2.7B
26.5%
$2.8B
Total
Capitalization
$360
$248
$144
1Q17
Subordinated Debt Maturing in 2054
Senior Debt Maturing in 2025
Senior Debt Maturing in 2017
Strong Parent Company Liquidity Risk-Based Capital Ratios
$157
$330 $341 $299 $288
$225
$225 $225 $225 $225
2013 2014 2015 2016 1Q17
Borrowings available under Credit Agreement
HoldCo Cash & Investments
(M
M
)
420 375 415 415 335 330 335 325
2014 2015 2016 2017E
Life & Health Legacy P&C
(%
)
$382
$513 $524
$566 $555
(M
M
) $752
Appendix
13 Earnings Call Presentation – 1Q 2017
Non-GAAP Financial Measures
Diluted Consolidated Net Operating Income (Loss) Per Unrestricted Share is an after-tax, non-GAAP financial measure computed by
excluding from Diluted Income (Loss) from Continuing Operations Per Unrestricted Share the after-tax per unrestricted share impact
of net realized gains on sales of investments and net impairment losses recognized in earnings related to investments. The most
directly comparable GAAP financial measure is Diluted Income (Loss) from Continuing Operations Per Unrestricted Share.
Kemper believes that Diluted Consolidated Net Operating Income (Loss) Per Unrestricted Share provides investors with a valuable
measure of its ongoing performance because it reveals underlying operational performance trends that otherwise might be less
apparent if the items were not excluded. Net realized gains on sales of investments and net impairment losses recognized in earnings
related to investments included in Kemper’s results may vary significantly between periods and are generally driven by business
decisions and external economic developments such as capital market conditions that impact the values of the company’s
investments, the timing of which is unrelated to the insurance underwriting process.
Per Un es ricte Share 1Q17 4Q16 3Q16 2Q16 1Q16
C nsolidate Net Operating Income (Loss) - Diluted (0.08)$ 0.56$ (0.40)$ 0.09$ (0.01)$
Net In ome (Loss) From:
Net Realized Gains on Sales of Investments 0.13 0.11 0.15 0.07 0.09
Net Impairment Losses Recognized in Earnings (0.06) (0.11) (0.11) (0.08) (0.12)
Income (Loss) from Continuing Operations (0.01)$ 0.56$ (0.36)$ 0.08$ (0.04)$
For the Three Months Ended
14 Earnings Call Presentation – 1Q 2017
Non-GAAP Financial Measures
Underlying Operating Performance is a non-GAAP financial measure that is computed by excluding from the Diluted Income (Loss)
from Continuing Operations Per Unrestricted Share the after-tax per unrestricted share impact of 1) net realized gains on sales of
investments, 2) net impairment losses recognized in earnings related to investments, 3) current year catastrophe losses and LAE, 4)
net investment income from alternative investments, 5) prior-year reserve development (both catastrophe and non-catastrophe),
and 6) the initial impact of voluntary outreach efforts regarding life claims recorded in the third quarter of 2016. The most directly
comparable GAAP financial measure is Diluted Income (Loss) from Continuing Operations Per Unrestricted Share.
Kemper believes Underlying Operating Performance provides investors with a valuable measure of its ongoing performance because
it reveals underlying operational trends that otherwise might be less apparent if the items were not excluded. Underlying Operating
Performance should not be considered a substitute for the Diluted Income (Loss) from Continuing Operations Per Unrestricted Share
and does not reflect the overall profitability of our business.
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 Common Shares Issued and Outstanding. Book value per share is the most directly comparable GAAP financial measure. The
Company uses the trend in book value per share, excluding the after-tax impact of net unrealized gains on fixed income securities in
conjunction with book value per share to identify and analyze the change in net worth attributable to management efforts between
periods. The Company believes the non-GAAP financial measure is useful to investors because it eliminates the effect of items that
can fluctuate significantly from period to period and are generally driven by economic developments, primarily capital market
conditions, the magnitude and timing of which are generally not influenced by management. The Company believes it enhances
understanding and comparability of performance by highlighting underlying business activity and profitability drivers.
1Q17 4Q16 3Q16 2Q16 1Q16
Book Val e Per Share 38.67$ 38.52$ 40.51$ 41.17$ 39.92$
Less: Net Unrealized Gains on Fixed Maturities Per Share (3.86) (3.52) (6.24) (6.39) (4.95)
Book Value Per Share Excluding Net Unrealized Gains
on Fixed Maturities 34.81$ 35.00$ 34.27$ 34.78$ 34.97$
For the Period Ended
15 Earnings Call Presentation – 1Q 2017
1Q16 2Q16 3Q16 4Q16 1Q17
Preferred Personal Automobile
Underlying Combined Ratio 99.3% 102.0% 100.3% 111.5% 104.6%
Current Year Catastrophe Loss and LAE Ratio 4.6% 4.9% 1.1% 0.3% 4.5%
Prior Years Non-Catastrophe Losses and LAE Ratio 1.8% (0.7%) (0.4%) 3.8% 10.4%
Prior Years Catastrophe Losses and LAE Ratio (0.2%) (0.1%) 0.0% 0.0% 0.0%
Combined Ratio as Reported 105.5% 106.1% 101.0% 115.6% 119.5%
Homeowners
Underlying Combined Ratio 83.0% 77.3% 85.4% 80.0% 82.6%
Current Year Catastrophe Loss and LAE Ratio 43.9% 59.2% 11.4% 16.7% 85.2%
Prior Years Non-Catastrophe Losses and LAE Ratio (4.0%) (0.7%) (0.9%) 0.9% 1.1%
Prior Years Catastrophe Losses and LAE Ratio (3.5%) (12.4%) (5.1%) (3.7%) (0.9%)
Combined Ratio as Reported 119.4% 123.4% 90.8% 93.9% 168.0%
For the Three Months Ended
Non-GAAP Financial Measures
Underlying Combined Ratio is a non-GAAP financial measure that is computed by excluding the current year catastrophe and LAE
ratio and the prior-year reserve development ratio (both non-catastrophe and catastrophes) from the combined ratio. The most
directly comparable GAAP financial measure is the combined ratio, which is computed by adding the total incurred loss and LAE ratio,
including the impact of catastrophe losses and loss and LAE reserve development from prior years, with the insurance expense ratio.
Kemper believes the underlying combined ratio is useful to investors and is used by management to reveal the trends in Kemper ’s
property and casualty insurance businesses that may be obscured by catastrophe losses and prior-year reserve development. These
catastrophe losses may cause loss trends to vary significantly between periods as a result of their incidence of occurrence and
magnitude, and can have a significant impact on incurred losses and LAE and the combined ratio. Prior-year reserve development is
caused by unexpected loss development on historical reserves. Because reserve development relates to the re-estimation of losses
from earlier periods, it has no bearing on the performance of the company’s insurance products in the current period. Kemper
believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing its underwriting
performance. The underlying combined ratio should not be considered a substitute for the combined ratio and does not reflect the
overall underwriting profitability of our business.
16 Earnings Call Presentation – 1Q 2017
Non-GAAP Financial Measures
Underlying Combined Ratio – Continued
1Q16 2Q16 3Q16 4Q16 1Q17
Legacy Nonstandard Personal Automobile
Underlying Combined Ratio 102.5% 99.1% 96.1% 97.8% 96.8%
Current Year Catastrophe Loss and LAE Ratio 2.2% 2.9% 2.2% (0.1%) 1.4%
Prior Years Non-Catastrophe Losses and LAE Ratio 1.8% (3.4%) 4.4% (0.5%) 3.7%
Prior Years Catastrophe Losses and LAE Ratio 0.0% 0.0% (0.1%) 0.0% (0.1%)
Combined Ratio as Reported 106.5% 98.6% 102.6% 97.2% 101.8%
Underlying Combined Ratio 107.4% 117.7% 106.8% 100.9% 98.6%
Current Year Catastrophe Loss and LAE Ratio 0.0% 0.0% 0.1% 0.0% 0.4%
Prior Years Non-Catastrophe Losses and LAE Ratio 5.4% (0.3%) (1.0%) 0.2% (2.8%)
Prior Years Catastrophe Losses and LAE Ratio 0.0% 0.0% 0.0% 0.0% 0.0%
Combined Ratio as Reported 112.8% 117.4% 105.9% 101.1% 96.2%
Underlying Combined Ratio 105.4% 110.5% 102.8% 99.7% 97.9%
Curr nt Year Catastrophe Loss and LAE Ratio 0.9% 1.1% 0.9% 0.0% 0.8%
Prior Years Non-Catastrophe Losses and LAE Ratio 4.0% (1.5%) 1.0% 0.0% (0.4%)
Prior Years Catastrophe Losses and LAE Ratio 0.0% 0.0% 0.0% 0.0% 0.0%
Combined Ratio as Reported 110.3% 110.1% 104.7% 99.7% 98.3%
Alliance United
For the Three Months Ended
Total Nonstandard Personal Automobile