Attached files
| file | filename |
|---|---|
| EX-99.2 - FIRST QUARTER 2018 INVESTOR SUPPLEMENT OF KEMPER CORPORATION - KEMPER Corp | kmpr2018033118ex992supplem.htm |
| EX-99.1 - REGISTRANTS PRESS RELEASE DATED APRIL 30, 2018 - KEMPER Corp | kmpr2018033118ex991release.htm |
| 8-K - 8-K - KEMPER Corp | kmpr20180331188-kreleasean.htm |
First Quarter
2018 Earnings
April 30, 2018
2 Earnings Call Presentation – 1Q 2018
Preliminary Matters
Cautionary Statements Regarding Forward-Looking Information
This communication may contain or incorporate by reference statements or information that are, include or are 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,
intentions, beliefs or forecasts of future events or otherwise for the future, and can be identified by the fact that they relate to future actions,
performance or results rather than relating strictly to historical or current facts. Words such as “believe(s),” “goal(s),” “target(s),” “estimate(s),”
“anticipate(s),” “forecast(s),” “project(s),” “plan(s),” “intend(s),” “expect(s),” “might,” “may,” “could” and variations of such words and other words and
expressions of similar meaning are intended to identify such forward-looking statements. However, the absence of such words or other words and
expressions of similar meaning does not mean that a statement is not forward-looking.
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. Forward-looking statements involve a number of risks and uncertainties that are difficult to predict, and are not guarantees or assurances
of future performance. 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. Forward-looking statements involve a number of risks and uncertainties that are difficult to
predict, and can be affected by inaccurate assumptions or by known or unknown risks and uncertainties that may be important in determining actual
future results and financial condition. The general factors that could cause actual results and financial condition to differ materially from those
expressed or implied include, without limitation, the following: (a) the satisfaction or waiver of the conditions precedent to the consummation of the
proposed merger transaction involving Kemper Corporation (the “Company”), a wholly-owned subsidiary of the Company and Infinity Property and
Casualty Corporation (“Infinity”), including, without limitation, the receipt of stockholder and regulatory approvals (including approvals, authorizations
and clearance by insurance regulators necessary to complete such proposed merger transaction) on the terms desired or anticipated (and the risk that
such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of such proposed
merger transaction); (b) unanticipated difficulties or expenditures relating to such proposed merger transaction; (c) risks relating to the value of the
shares of the Company’s common stock to be issued in such proposed merger transaction; (d) disruptions of the Company’s and Infinity’s current plans,
operations and relationships with third persons caused by the announcement and pendency of such proposed merger transaction, including, without
limitation, the ability of the combined company to hire and retain any personnel; (e) legal proceedings that may be instituted against the Company and
Infinity in connection with such proposed merger transaction; and (f) those factors listed in annual, quarterly and periodic reports filed by the Company
and Infinity with the Securities and Exchange Commission (the “SEC”), whether or not related to such proposed merger transaction.
The Company assumes no, and expressly disclaims any, duty or obligation to update or correct any forward-looking statement as a result of events,
changes, effects, states of facts, conditions, circumstances, occurrences or developments subsequent to the date of this communication or otherwise,
except as required by law. Readers are advised, however, to consult any further disclosures the Company makes on related subjects in its filings with
the SEC.
3 Earnings Call Presentation – 1Q 2018
Preliminary Matters
Additional Information Regarding the Transaction and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This
communication relates to the proposed merger transaction involving the Company, a wholly-owned subsidiary of the Company and Infinity, among other
things. In connection therewith, the Company filed with the SEC a Registration Statement on Form S-4 that includes a definitive joint proxy statement of the
Company and Infinity and also constitutes a definitive prospectus of the Company, and each of the Company and Infinity may be filing with the SEC other
documents regarding the proposed transaction. The Company and Infinity commenced mailing of the definitive joint proxy statement/prospectus to the
Company’s stockholders and Infinity’s shareholders on April 30, 2018. BEFORE MAKING ANY VOTING OR ANY INVESTMENT DECISION, INVESTORS AND
SECURITYHOLDERS OF THE COMPANY AND/OR INFINITY ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE
PROPOSED MERGER TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. Investors and securityholders may obtain free copies of the
definitive joint proxy statement/prospectus, any amendments or supplements thereto and other documents filed with the SEC by the Company and Infinity
through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by the Company are available free of charge under the
“Investors” section of the Company’s website located at http://www.kemper.com or by contacting the Company’s Investor Relations Department at
312.661.4930 or investors@kemper.com. Copies of the documents filed with the SEC by Infinity are available free of charge under the “Investor Relations”
section of Infinity’s website located at http://www.infinityauto.com or by contacting Infinity’s Investor Relations Department at 205.803.8186 or
investor.relations@infinityauto.com.
Participants in the Solicitation
The Company and Infinity, and their respective directors and executive officers, certain other members of their respective management and certain of their
respective employees, may be considered participants in the solicitation of proxies in connection with the proposed merger transaction. Information about the
directors and executive officers of the Company is set forth in the definitive joint proxy statement/prospectus, which was filed with the SEC on April 27, 2018
and serves as the Company’s proxy statement for its 2018 annual meeting of stockholders, and its annual report on Form 10-K for the fiscal year ended
December 31, 2017, which was filed with the SEC on February 13, 2018. Information about the directors and executive officers of Infinity is set forth in its
annual report on Form 10-K for the fiscal year ended December 31, 2017, which was filed with the SEC on February 15, 2018, as amended on Form 10-K/A,
filed with the SEC on April 23, 2018. Each of the foregoing can be obtained free of charge from the sources indicated above. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the definitive joint
proxy statement/prospectus and other relevant materials to be filed 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, 2018 unless otherwise stated.
4 Earnings Call Presentation – 1Q 2018
Kemper Is a Leading Multi-Line Insurer
• Multi-line national insurance company
– Provide specialty auto and preferred personal
insurance (auto, home & umbrella)
– Provide basic life, accident & health products
– Founded in 1990 and headquartered in Chicago, with
subsidiaries writing policies since 1911
• Multi-channel distribution network
– 2,200 career agents
– 20,000 independent agents
• Strong balance sheet
– Insurance subsidiaries rated¹ ‘Excellent’ by A.M. Best
– ~90% of fixed maturity portfolio is investment grade
– Strong debt-to-capital ratio at 22.3 percent
• Successful execution by proven leadership
team
– Delivering on savings commitments
– Results have exceeded analysts’ expectations for
last 8 quarters
– Announced acquisition of Infinity P&C (Nasdaq:
IPCC) in February 2018
Key Metrics
Market Cap (4/26/18) $3.1 Billion
Debt-to-Capital Ratio 22.3%
A.M. Best Ratings¹ A-
Excess Capital >$225MM
Employees 5,550
In-force policies ~6MM
¹ Alliance United is not rated
$843 $832 $811 $821 $838
$1,069 $946 $835 $786 $786
$415
$376 $654 $902
$1,045
2013 2014 2015 2016 2017
Life & Health Preferred Home & Auto Nonstandard Auto
Operating Revenues: Historical Mix
$2,327 $2,155 $2,300 $2,509 $2,669
(M
M
)
5 Earnings Call Presentation – 1Q 2018
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 low double digit ROE¹ over time
1 Return on Equity
Consumer-related businesses with opportunities that:
• Target niche markets
• Have limited, weak or unfocused competition
• Require unique expertise (underwriting, claim, distribution, other)
Strategic focus:
6 Earnings Call Presentation – 1Q 2018
Majority of Phase 1 and Phase 2 initiatives are
complete or ahead of schedule
Shifting focus towards Phase 3 as a result of
improved operating performance
• Grow and enhance strategic position in key
focus markets
• Scale business platform and enhance product
suite
• Optimize data and analytics capabilities
• Continue to enhance operational efficiency
with claims initiatives
Taking the Next Step on Kemper’s Journey to Unlock Embedded Value
Grow
Build &
Leverage,
Rebuild
Incubate
W
o
rk
/
E
ff
o
rt
Phase 1 Phase 2 Phase 3
Continued Progress on Specialty Auto Strategic Plan Acquisition of Infinity Accelerates Momentum
• Combines two leading brands in specialty auto
insurance
• Increases scale in specialty auto and attractive
markets
‒ Improves presence in core markets
‒ Expands product offering and customer base
‒ Deepens agency relationships in urban and
Hispanic markets
‒ Bolsters growth opportunities
• Better positioned to serve combined customer base
‒ Specialization optimizes claims process
‒ Efficient expense base enables more competitive
pricing
‒ Enhanced customer experience
‒ Broader product offering enables cross-sell
• Enhances earnings profile and provides significant
financial flexibility
‒ Improved capital generation capabilities
‒ Deploys capital in a strategic acquisition that will
meaningfully enhance shareholder value
Combination of two leading specialty businesses improves our ability to provide
valuable products at reasonable costs to the combined customer base
7 Earnings Call Presentation – 1Q 2018
First Quarter 2018 Highlights
• Net Income increased from a loss of $0.3 million to a profit of $53.8 million resulting in EPS of
$(0.01) and $1.02, respectively
• Adj Consolidated Net Operating EPS increased from a loss of $0.08 to a profit of $1.10
• Earned Premiums increased $46 million, or 8 percent; improvements are primarily from
policies-in-force growth and higher average earned premium in the Nonstandard Auto business
• Nonstandard Auto increased earned premium by 23 percent and policies in force by 18 percent
while improving the Underlying Combined Ratio by 4.7 percentage points
• Life & Health net operating income increased $2 million
• Net Investment Income of $79 million continues to provide a consistent and predictable
revenue stream
1Q18
vs
1Q17
Operating
Results
• Ample liquidity at holding company — ~$570 million of available and contingent liquidity
• Greater than $225 million of excess capital
• Strong debt-to-capital ratio of 22.3 percent
Balance Sheet
• Duane Sanders – President, Property & Casualty Division effective January 2018
• Announced proposed acquisition of Infinity P&C (Nasdaq: IPCC) in February 2018
• Robert Otis – Senior Vice President, Preferred Home and Auto effective April 2018
Other
8 Earnings Call Presentation – 1Q 2018
First Quarter 2018 Highlights – Strong Results
¹ Non-GAAP financial measure; Please see reconciliation in the appendix
Strong 1Q18 results demonstrate continued improvement in operating trends
(Dollars in millions, except per share amounts) Mar. 31, Mar. 31, Variance
2018 2017
Net Income (Loss) 53.8$ (0.3)$ 54.1$
Net Income (Loss) Per Share - Diluted 1.02$ (0.01)$ 1.03$
Adj. Consolidated Net Operating Income (Loss) Per Share - Diluted¹ 1.10$ (0.08)$ 1.18$
Earned Premiums 609.8$ 563.4$ 46.4$
Net Investment Income 79.2 81.6 (2.4)
Net Realized Gains (Losses) & Other Income 4.0 6.4 (2.4)
Total Revenues 693.0$ 651.4$ 41.6$
Book Value Per Share 40.05$ 38.67$ 1.38$
Book Value Per Share Excluding Net Unrealized Gains on Fixed
Maturities¹ 36.35$ 34.81$ 1.54$
P&C Policies In Force (in thousands) 1,306 1,217 89
P&C Underlying Loss & LAE Ratio 71.8% 73.7% (1.9%)
P&C Expense Ratio 22.3% 23.1% (0.8%)
Three Months Ended
9 Earnings Call Presentation – 1Q 2018
Improving Underlying Operating Performance
¹ Includes Income from change in fair value of equity securities, net
realized gains on sales of investments and net impairment losses
recognized in earnings
2Non-GAAP financial measure; Please see reconciliation in the appendix
Delivered continued strong underlying operating performance;
Up 47 percent quarter-over-quarter
Dollars per Unrestricted Share - Diluted Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Variance
2018 2017 2017 2017 2017 QoQ
Income (Loss) from Continuing Operations 1.02$ 0.69$ 0.92$ 0.71$ (0.01)$ 1.03
Investment Related (Gains)/Losses1 0.04 0.09 0.07 0.30 0.07 (0.03)
Acquisition Related Transaction and Integration Costs (0.12) - - - - (0.12)
Adj. Consolidated Net Operating Income (Loss)¹ 1.10 0.60 0.85 0.41 (0.08) 1.18
Sources of Volatility:
Catastrophes (0.12) (0.64) (0.41) (0.44) (0.83) 0.71
Prior-year Reserve Development 0.02 (0.01) (0.01) (0.10) (0.14) 0.16
Alternative Investment Income 0.17 0.16 0.21 0.12 0.19 (0.02)
Tax Reform - 0.14 - - - -
Total from Sources of Volatility 0.07$ (0.35)$ (0.21)$ (0.42)$ (0.78)$ 0.85$
Underlying Operating Performance2 1.03$ 0.95$ 1.06$ 0.83$ 0.70$ 0.33$
Three Months Ended
10 Earnings Call Presentation – 1Q 2018
$22 $21
$24 $25 $24
1Q17 2Q17 3Q17 4Q17 1Q18
Net Operating Income
Stable and Predictable Life & Health Earnings
(M
M
)
(M
M
)
• Comparing 1Q18 to 1Q17, earned
premiums grew at a modest pace,
primarily due to growth in A&H premiums
• Net investment income remained
relatively unchanged compared to 1Q17
• L&H continues to provide strong,
predictable cash flows
• Overcame heighten mortality during active
flu season
Revenues
Net Operating Income
$153 $153 $155 $153 $155
$53 $55 $56 $58 $53
1Q17 2Q17 3Q17 4Q17 1Q18
Revenues
Earned Premiums Net Investment Income
$208 $211 $208 $206 $211
11 Earnings Call Presentation – 1Q 2018
97.9
94.5 91.3 95.4 93.2
1Q17 2Q17 3Q17 4Q17 1Q18
Underlying Combined Ratio¹
Profitably Growing Nonstandard Auto
• Business continues to expand market
share in core geographies
• Comparing 1Q18 to 1Q17, earned
premiums increased $40 million, or 23
percent, driven by higher volume and, to a
lesser extent, premium rate increases
• Underlying combined ratio improved 4.7
points in 1Q18 compared to 1Q17, driven
by rate, claims and underwriting actions
• On a sequential basis, underlying
combined ratio also improved; consistent
with typical seasonality
$216 $234
$247 $258 $266
1Q17 2Q17 3Q17 4Q17 1Q18
Earned Premiums
(%
)
(M
M
)
Revenues
Underwriting Results
¹ Non-GAAP financial measure; See reconciliation in the appendix.
Strong Nonstandard Auto franchise continuing to demonstrate profitable growth
12 Earnings Call Presentation – 1Q 2018
Preferred Lines Showing Improvement
• U/L CR improved 4.3 percentage points over
1Q17
• Preferred auto improving; still below targets
• Continued focus on profitability with claims,
rate and underwriting actions
104.6 103.1 99.3 104.3 100.3
82.6 79.6 85.8
69.0
88.1
1Q17 2Q17 3Q17 4Q17 1Q18
Underlying Combined Ratio¹
Auto Home Total Preferred Lines
• U/L CR increased by 5.5 percentage points
partially as a result of aggregate catastrophe
treaty
• Homeowners improving; still below targets
• Continued focus on profitability with claims,
rate and underwriting actions
$104 $106 $106 $107 $105
$66 $67 $67 $65 $62
$11 $11 $11 $10 $10
1Q17 2Q17 3Q17 4Q17 1Q18
Earned Premiums by Line
Auto Home Other
(%
)
(M
M
)
$177
$184 $184
$181
$182
Preferred Auto
Homeowners
¹Non-GAAP financial measure; Please see reconciliation in the appendix
Continuing to make progress on improving underlying profitability
13 Earnings Call Presentation – 1Q 2018
Consistent Portfolio Returns: High Quality, Moderate Risk
64%
25%
6%
4%
46%
23%
10%
5%
7%
3% 6%
Short-term
Diversified & Highly-Rated Portfolio
Portfolio Composition Fixed Maturity Ratings
$5.3 Billion $6.0 Billion
A or Higher
≤ CCC
B / BB
BBB
Other
Alternatives¹
Equity¹
U.S.
Gov’t
States/
Munis
Corporates
• Investment portfolio produced a pre-tax
equivalent annualized book yield of 5.0
percent in 1Q18 compared to 5.4 percent
in 1Q17
• Alternative investment portfolio, which is
designed to provide enhanced returns over
time, produced investment income of $11
million in 1Q18
• Core portfolio continues to provide
consistent and predictable cash flows. The
higher investment base is being generated
by growth in the Life and Specialty books
and offset by lower investment rates
• More than 80 percent of the total
investment portfolio remains comprised of
fixed maturity and short-term securities, of
which 90 percent is rated investment grade
1 Equity Securities excludes $247 million of Other Equity Interests of
LP/LLC’s that have been reclassified into Alternative Investments
$67 $68 $69 $70 $68
$15 $9
$17 $13 $11
1Q17 2Q17 3Q17 4Q17 1Q18
Alternative Investments Portfolio Core Portfolio
Strong Performance Despite Low Rates
(M
M
)
$82 $79 $83 $86 $77
Overview
14 Earnings Call Presentation – 1Q 2018
Strong Current Capital Position with Ample Liquidity
Debt
Cash Flow from Operating Activities Debt-to-Capital Historically <30%
2014 2015 2016 2017 1Q18
26.5%
$2.8B
22.3%
$2.7B
21.9%
$2.7B
27.6%
$2.7B
27.4%
$2.7B
Total
Capitalization
Strong Parent Company Liquidity Risk-Based Capital Ratios
$330 $341 $299
$197 $184
$404 $400 $385
$385 $385
2014 2015 2016 2017 1Q18
Borrowings available under credit agreement & from subs
HoldCo Cash & Investments
(M
M
)
375
415 430
360
330 335
290
310
2015 2016 2017 2018E
Life & Health Legacy P&C¹(%
)
$734
$569 $582
$684
$741
(M
M
)
Capital position and liquidity resources provide significant financial flexibility
$122 $134
$215 $241 $241
[VALUE]
2013 2014 2015 2016 2017 1Q18
¹Excludes Alliance United
Appendix
17 Earnings Call Presentation – 1Q 2018
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) income (loss) from change in
fair value of equity securities, 2) net realized gains on sales of investments, 3) net impairment losses recognized in earnings related
to investments, 4) acquisition related transaction and integration costs, 5) loss from early extinguishment of debt, and 6) significant
non-recurring or infrequent items that may not be indicative of ongoing operations. 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.
Mar. 31, 2018 Mar. 31, 2017
Book Value Per Share 40.05$ 38.67$
Less: Net Unrealized Gains on Fixed Maturities Per Share (3.70) (3.86)
Book Value Per Share Excluding Net Unrealized Gains on Fixed
Maturities 36.35$ 34.81$
For the Periods Ended
18 Earnings Call Presentation – 1Q 2018
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 securities, 2)
net realized gains on sales of investments, 3) net impairment losses recognized in earnings related to investments, 4) acquisition
related transaction and integration costs, 5) loss from early extinguishment of debt and 6) significant non-recurring or infrequent
items that may not be indicative of ongoing operations. Significant non-recurring items are excluded when (a) the nature of the
charge or gain is such that it is reasonably unlikely to recur within two years and (b) there has been no similar charge or gain within
the prior two years. The most directly comparable GAAP financial measure is Income (Loss) from Continuing Operations.
Kemper believes that Adjusted Consolidated Net Operating Income (Loss) 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 (loss) from change in fair value of equity securities, net realized gains on sales of investments and net
impairment losses recognized in earnings related to investments included in the Company’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. Loss from
early extinguishment of debt is driven by the Company’s financing and refinancing decisions and capital needs, as well as external
economic developments such as debt market conditions, the timing of which is unrelated to the insurance underwriting process.
Acquisition related transaction and integration costs may vary significantly between periods and are generally driven by the timing of
acquisitions and business decisions which are unrelated to the insurance underwriting process. Significant non-recurring items are
excluded because, by their nature, they are not indicative of the Company’s business or economic trends.
19 Earnings Call Presentation – 1Q 2018
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 equivalent shares outstanding. The most directly comparable GAAP financial measure is Diluted Income (Loss) from
Continuing Operations Per Unrestricted Share.
Kemper believes that Diluted Adjusted 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. Income from change in fair value of equity securities, 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 U restricted Share 1Q18 4Q17 3Q17 2Q17 1Q17
Adj. Co soli a d Net Operating Income (Loss) - Diluted 1.10$ 0.60$ 0.85$ 0.41$ (0.08)$
N t I om (L ss) From:
Inc me from Change in Fair Value of Equity Securities 0.01 - - - -
Net Realized Gains on Sales of Investments 0.04 0.14 0.10 0.33 0.13
Net Impairment Losses Recognized in Earnings (0.01) (0.05) (0.03) (0.03) (0.06)
Acquisition Related Transaction and Integration Costs (0.12) - - - -
Income (Loss) from Continuing Operations - Diluted 1.02$ 0.69$ 0.92$ 0.71$ (0.01)$
For the Three Months Ended
20 Earnings Call Presentation – 1Q 2018
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.
1Q17 2Q17 3Q17 4Q17 1Q18
Underlying Combined Ratio 97.9% 94.5% 91.3% 95.4% 93.2%
Current Year Catastrophe Loss and LAE Ratio 0.8% 1.0% 0.6% (0.3%) 0.1%
Prior Years Non-Catastrophe Losses and LAE Ratio (0.4%) (0.4%) 0.9% 1.1% 0.1%
Prior Years Catastrophe Losses and LAE Ratio 0.0% 0.0% 0.0% 0.0% (0.1%)
Combined Ratio as Reported 98.3% 95.1% 92.8% 96.2% 93.3%
For the Three Months Ended
T a N standard Personal Automobile
21 Earnings Call Presentation – 1Q 2018
Non-GAAP Financial Measures
Underlying Combined Ratio - Continued
1Q17 2Q17 3Q17 4Q17 1Q18
Preferred Personal Automobile
Underlying Combined Ratio 104.6% 103.1% 99.3% 104.3% 100.3%
Current Year Catastrophe Loss and LAE Ratio 4.5% 3.7% 2.6% (0.1%) 0.6%
Prior Years Non-Catastrophe Losses and LAE 10.4% 6.3% 0.8% 1.2% 0.5%
Prior Years Catastrophe Losses and LAE Ratio 0.0% (0.2%) 0.0% 0.0% 0.0%
Combined Ratio as Reported 119.5% 112.9% 102.7% 105.4% 101.4%
Hom owners
Underlying Combined Ratio 82.6% 79.6% 85.8% 69.0% 88.1%
Current Year Catastrophe Loss and LAE Ratio 85.2% 40.1% 37.2% 75.6% 10.5%
Prior Years Non-Catastrophe Losses and LAE 1.1% 2.3% 1.3% 2.5% 9.1%
Prior Years Catastrophe Losses and LAE Ratio (0.9%) (2.7%) (1.2%) (0.8%) (8.3%)
Combined Ratio as Reported 168.0% 119.3% 123.1% 146.3% 99.4%
For the Three Months Ended