Kemper Corporation (NYSE:KMPR) Q4 2020 Earnings Conference Call February 1, 2021 5:00 PM ET Company Participants Christine Patrick - Vice President, Investor Relations Joe Lacher - President and Chief Executive Officer Jim McKinney - Executive Vice President and Chief Financial Officer Duane Sanders - Executive Vice President and Property and Casualty Division President John Boschelli - Executive Vice President and Chief Investment Officer Erich Sternberg - Executive Vice President and Life and Health Divis ...

Third Quarter 2020 Earnings November 2, 2020 KEMPER Earnings Call Presentation – 3Q 2020 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 Act of 1995. Forward-looking statements give expectations or forecasts of future events and can be identified by the fact th ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________________________________________ FORM 10-Q ______________________________________________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended 09/30/2020 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to Commission file number 001-18298 Kemper Corporation (Exact name ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________________________________________ 200 E. Randolph Street Suite 3300 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to Commission file number 001-18298 FORM 10-Q ______________________________________________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended June 30, 20 ...

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents Kemper Corporation's unaudited condensed consolidated financial statements for Q1 2020 and 2019, along with detailed notes on accounting policies and financial line items [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income significantly decreased to $64.0 million in Q1 2020 from $155.3 million in Q1 2019, primarily due to a $117.8 million loss from fair value changes in equity and convertible securities Condensed Consolidated Statements of Income (Q1 2020 vs Q1 2019) | Financial Metric | Three Months Ended Mar 31, 2020 (in millions) | Three Months Ended Mar 31, 2019 (in millions) | | :--- | :--- | :--- | | **Total Revenues** | **$1,229.0** | **$1,236.3** | | Earned Premiums | $1,166.4 | $1,074.8 | | Net Investment Income | $85.6 | $82.7 | | Income (Loss) from Change in Fair Value of Equity and Convertible Securities | $(117.8) | $64.4 | | **Total Expenses** | **$1,151.3** | **$1,041.6** | | Policyholders' Benefits and Incurred Losses and LAE | $835.2 | $765.4 | | Insurance Expenses | $271.6 | $234.8 | | **Net Income** | **$64.0** | **$155.3** | | **Diluted Net Income Per Unrestricted Share** | **$0.95** | **$2.35** | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Total comprehensive loss was $97.2 million in Q1 2020, a reversal from $284.4 million income in Q1 2019, driven by $161.2 million in other comprehensive losses from unrealized investment losses Condensed Consolidated Statements of Comprehensive Income (Loss) (Q1 2020 vs Q1 2019) | Metric | Three Months Ended Mar 31, 2020 (in millions) | Three Months Ended Mar 31, 2019 (in millions) | | :--- | :--- | :--- | | Net Income | $64.0 | $155.3 | | Other Comprehensive Income (Loss) | $(161.2) | $129.1 | | **Total Comprehensive Income (Loss)** | **$(97.2)** | **$284.4** | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased to $12,932.3 million as of March 31, 2020, while total liabilities increased and shareholders' equity decreased, reflecting the comprehensive loss Condensed Consolidated Balance Sheets (As of Mar 31, 2020 vs Dec 31, 2019) | Balance Sheet Item | March 31, 2020 (in millions) | December 31, 2019 (in millions) | | :--- | :--- | :--- | | Total Investments | $8,939.1 | $9,261.4 | | **Total Assets** | **$12,932.3** | **$12,989.1** | | Total Insurance Reserves | $5,442.4 | $5,471.8 | | Long-term Debt | $778.1 | $778.4 | | **Total Liabilities** | **$9,171.5** | **$9,016.8** | | **Total Shareholders' Equity** | **$3,760.8** | **$3,972.3** | | **Total Liabilities and Shareholders' Equity** | **$12,932.3** | **$12,989.1** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to $62.3 million in Q1 2020, while investing activities provided $94.0 million, a reversal from prior year, and financing activities significantly decreased due to share repurchases Condensed Consolidated Statements of Cash Flows (Q1 2020 vs Q1 2019) | Cash Flow Activity | Three Months Ended Mar 31, 2020 (in millions) | Three Months Ended Mar 31, 2019 (in millions) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $62.3 | $89.0 | | Net Cash Provided (Used) by Investing Activities | $94.0 | $(219.7) | | Net Cash Provided by Financing Activities | $8.2 | $162.6 | | **Increase in Cash** | **$164.5** | **$31.9** | [Notes to the Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail financial statement presentation, accounting policies, investment portfolio, insurance reserves, debt, segment performance, and key disclosures including COVID-19 impact and a legal settlement gain - The company adopted ASU 2016-13 (Financial Instruments—Credit Losses) effective January 1, 2020, replacing the incurred loss model with an expected credit loss model, resulting in **no cumulative-effect adjustment to retained earnings**[34](index=34&type=chunk) - In February 2020, the company received **$89.4 million** from a legal judgment against DXC Technology Company, recognized in Other Income[142](index=142&type=chunk) - In response to the COVID-19 pandemic, the company announced approximately **$100 million** in personal auto premium credits for April and May 2020[145](index=145&type=chunk) - On May 6, 2020, the Board authorized an additional **$200 million** for the common stock repurchase program, bringing the total remaining authorization to approximately **$333 million**[146](index=146&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 financial results, noting decreased net income due to investment losses but increased adjusted net operating income from a legal settlement, alongside segment performance, investment results, liquidity, and capital resources - Net Income for Q1 2020 was **$64.0 million**, a decrease from **$155.3 million** in Q1 2019, primarily due to lower investment results, including a **$144.0 million** after-tax decrease from fair value changes in equity and convertible securities[147](index=147&type=chunk)[152](index=152&type=chunk) - Adjusted Consolidated Net Operating Income increased by **$64.0 million** to **$162.9 million** in Q1 2020, driven by a **$70.6 million** after-tax gain from a judgment against CSC and improved Preferred P&C performance[151](index=151&type=chunk)[152](index=152&type=chunk) - The COVID-19 pandemic began impacting results in March 2020, contributing to **$4.2 million** in net pre-tax insurance expenses and significant net realized investment losses[148](index=148&type=chunk) [Specialty Property & Casualty Insurance](index=46&type=section&id=Specialty%20Property%20%26%20Casualty%20Insurance) Specialty P&C net operating income decreased to $60.1 million in Q1 2020 due to higher incurred losses and adverse reserve development, despite earned premium growth, leading to a deteriorated combined ratio Specialty P&C Segment Performance (Q1 2020 vs Q1 2019) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Earned Premiums | $822.5M | $729.3M | | Segment Net Operating Income | $60.1M | $79.6M | | Combined Ratio | 94.5% | 89.3% | | Underlying Combined Ratio | 93.9% | 91.7% | - The segment experienced **adverse prior year loss and LAE reserve development of $5.5 million** in Q1 2020, compared to **favorable development of $18.1 million** in Q1 2019, significantly impacting profitability[171](index=171&type=chunk) - Specialty personal automobile insurance saw **adverse reserve development of $18.0 million**, while commercial automobile insurance had **favorable development of $12.5 million**[71](index=71&type=chunk) [Preferred Property & Casualty Insurance](index=49&type=section&id=Preferred%20Property%20%26%20Casualty%20Insurance) Preferred P&C net operating income significantly improved to $18.4 million in Q1 2020, driven by a sharp reduction in catastrophe losses, resulting in an improved combined ratio Preferred P&C Segment Performance (Q1 2020 vs Q1 2019) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Earned Premiums | $180.9M | $185.6M | | Segment Net Operating Income | $18.4M | $2.8M | | Combined Ratio | 92.6% | 102.7% | | Underlying Combined Ratio | 92.3% | 96.0% | - Catastrophe losses decreased significantly to **$4.8 million** from **$16.6 million** in Q1 2019, driving profitability improvement[190](index=190&type=chunk) [Life & Health Insurance](index=54&type=section&id=Life%20%26%20Health%20Insurance) Life & Health net operating income remained stable at $22.3 million in Q1 2020, with decreased policyholder benefits offset by increased insurance expenses due to COVID-19 related accruals Life & Health Segment Performance (Q1 2020 vs Q1 2019) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Earned Premiums | $163.0M | $159.9M | | Segment Net Operating Income | $22.3M | $23.1M | | Policyholders' Benefits and Incurred Losses | $100.7M | $105.4M | - Policyholders' Benefits and Incurred Losses and LAE decreased by **$4.7 million**, primarily due to a **$4.5 million** reduction of the initial reserve associated with the death verification database[207](index=207&type=chunk) - Insurance expenses increased by **$8.9 million**, partly due to an accrual for distribution expenses anticipated from COVID-19 disruption and investments to modernize the distribution channel[207](index=207&type=chunk)[208](index=208&type=chunk) [Investment Results](index=58&type=section&id=Investment%20Results) Investment results were significantly impacted by Q1 2020 market volatility, leading to a $117.8 million pre-tax loss from fair value changes in equity and convertible securities, despite a slight increase in net investment income Total Comprehensive Investment Gains (Losses) (Q1 2020 vs Q1 2019) | Component (in millions) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Income (Loss) from Change in Fair Value of Equity and Convertible Securities | $(117.8) | $64.4 | | Net Realized Gains on Sales of Investments | $16.5 | $16.1 | | Impairment Losses | $(12.0) | $(3.6) | | **Net Gains (Losses) Recognized in Net Income** | **$(113.3)** | **$76.9** | | Recognized in Other Comprehensive Income (Loss) | $(204.8) | $162.8 | | **Total Comprehensive Investment Gains (Losses)** | **$(318.1)** | **$239.7** | - At March 31, 2020, **94%** of the company's fixed maturity investment portfolio was rated investment-grade (NAIC 1 or 2)[225](index=225&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2020, Kemper maintained $199.1 million in holding company cash and investments, with no outstanding credit facility borrowings, while repurchasing $101.2 million in shares and receiving $135 million in subsidiary dividends - The company had a **$400.0 million** credit facility with **no outstanding borrowings** as of March 31, 2020[242](index=242&type=chunk) - During Q1 2020, Kemper repurchased **1.5 million shares** of its common stock for an aggregate cost of **$101.2 million**[249](index=249&type=chunk) - Kemper's direct insurance subsidiaries paid **$135 million** in dividends to the parent company in Q1 2020 and could pay an additional **$308.1 million** in 2020 without prior regulatory approval[252](index=252&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes to the company's market risk disclosures since its 2019 Annual Report on Form 10-K - There have been **no material changes** to the Company's disclosures about market risk from the 2019 Annual Report[264](index=264&type=chunk) [Item 4. Controls and Procedures](index=69&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2020, following the implementation of a new ERP solution that resulted in validated changes to internal controls over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the period[265](index=265&type=chunk) - During Q1 2020, the company implemented a new enterprise resource planning (ERP) solution, including a new general ledger and consolidation process, resulting in changes to related internal controls[265](index=265&type=chunk) [PART II. OTHER INFORMATION](index=70&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=70&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 14, "Contingencies," within the financial statements section of this report - Information regarding legal proceedings is detailed in Note 14, "Contingencies," of the Condensed Consolidated Financial Statements[269](index=269&type=chunk) [Item 1A. Risk Factors](index=70&type=section&id=Item%201A.%20Risk%20Factors) A new significant risk factor addresses the material impact of the COVID-19 pandemic on operations, financial position, and liquidity, including decreased premiums, investment portfolio impacts, and increased claims - A new risk factor was added to address the potential **material adverse effects of the COVID-19 pandemic** on the company's business[271](index=271&type=chunk) - Specific risks from COVID-19 include: decreased premium volumes, adverse investment portfolio impact, higher Life & Health claims, new regulatory requirements, business disruptions, and heightened cybersecurity risks[273](index=273&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2020, Kemper repurchased 1,488,668 shares of common stock for $101.2 million, with $142.5 million remaining under the share repurchase authorization Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Remaining Authorization (in millions) | | :--- | :--- | :--- | :--- | | January 2020 | — | — | $243.7 | | February 2020 | — | — | $243.7 | | March 2020 | 1,488,668 | $67.98 | $142.5 | [Item 6. Exhibits](index=72&type=section&id=Item%206.%20Exhibits) This section indexes exhibits filed with Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - Filed exhibits include CEO and CFO certifications pursuant to SEC Rules 13a-14(a) and 18 U.S.C. Section 1350 (Sarbanes-Oxley Act of 2002)[281](index=281&type=chunk) - XBRL Instance Document and related taxonomy files were also filed as exhibits[281](index=281&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Commission file number: 001-18298 Kemper Corporation ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Exact name of registrant as specified in its charter) DE 95-4255452 (I.R.S. Employer Identification No.) (State or other jurisdiction of incorporation ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________________________________________ FORM 10-Q ______________________________________________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended September 30, 2019 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to Commission file number 001-18298 Kemper Corporation (Exa ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________________________________________ FORM 10-Q ______________________________________________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended June 30, 2019 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to Commission file number 001-18298 Kemper Corporation (Exact na ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________________________________________ FORM 10-Q ______________________________________________________ x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended March 31, 2019 OR ¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to Commission file number 001-18298 ___________________________ ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Kemper is a diversified insurance holding company that expanded its Specialty P&C segment through the $1.5 billion acquisition of Infinity - On July 2, 2018, Kemper acquired Infinity Property and Casualty Corporation for approximately **$1.5 billion**, a key strategic move to expand its specialty insurance business[32](index=32&type=chunk) - The company operates through three primary segments: **Preferred Property & Casualty Insurance**, **Specialty Property & Casualty Insurance**, and **Life & Health Insurance**[33](index=33&type=chunk) Employee Distribution by Segment | Segment | Number of Employees | | :--- | :--- | | Preferred Property & Casualty | ~1,300 | | Specialty Property & Casualty | ~2,600 | | Life & Health Insurance | ~3,300 | | Corporate & Other | Remainder of 8,100 total | [Property and Casualty Insurance Business](index=6&type=section&id=Property%20and%20Casualty%20Insurance%20Business) The P&C business operates through Preferred and Specialty segments, managing catastrophe risk via diversification and reinsurance - The P&C business provides automobile, homeowners, and other personal and commercial insurance through two main segments: **Preferred** and **Specialty**[36](index=36&type=chunk)[38](index=38&type=chunk) - The company manages catastrophe risk through geographic diversification, underwriting restrictions, and a comprehensive reinsurance program covering events up to **$275 million** in excess of a **$50 million** retention[50](index=50&type=chunk)[51](index=51&type=chunk)[59](index=59&type=chunk) P&C Insurance Segment Premium Contribution (2018) | Segment | % of Consolidated Premiums | | :--- | :--- | | Preferred P&C | 22% | | Specialty P&C | 60% | Property and Casualty Insurance Reserves by Segment (2018 vs 2017) | Business Segment | 2018 ($M) | 2017 ($M) | | :--- | :--- | :--- | | Preferred Property & Casualty | $452.9 | $461.9 | | Specialty Property & Casualty | $1,387.0 | $514.4 | | Life & Health Insurance | $4.4 | $4.1 | | **Total Business Segments** | **$1,844.3** | **$980.4** | [Life and Health Insurance Business](index=11&type=section&id=Life%20and%20Health%20Insurance%20Business) This segment provides individual life and supplemental health products through a network of career and independent agents - The Life & Health segment focuses on individual life and supplemental accident and health products, primarily for customers with modest incomes[72](index=72&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Earned premiums from life insurance accounted for **11%** of the company's consolidated insurance premiums in 2018, down from 16% in 2017[72](index=72&type=chunk) - The lapse ratio for individual life insurance has remained stable at **6%** for 2018, 2017, and 2016[81](index=81&type=chunk) [Investments](index=13&type=section&id=Investments) The company pursues a total return investment strategy focused on yield and liquidity to meet its insurance obligations - The company employs a total return investment strategy with an emphasis on yield, while maintaining liquidity to meet insurance obligations[88](index=88&type=chunk) [Regulation](index=13&type=section&id=Regulation) The company's insurance operations are subject to extensive state and federal regulations governing solvency, rates, and market conduct - Kemper's insurance subsidiaries are subject to extensive state-level regulation covering policy forms, rates, licensing, market conduct, investments, solvency, and dividend payments[90](index=90&type=chunk)[93](index=93&type=chunk) - As a holding company, Kemper relies on dividends from its insurance subsidiaries to meet its obligations, which are subject to regulatory restrictions[97](index=97&type=chunk) - The company is also subject to federal regulations, including the Dodd-Frank Act, the Affordable Care Act, and HIPAA, which impact financial services, health insurance, and data privacy[101](index=101&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from regulation, catastrophe losses, reserve estimation uncertainty, and investment volatility - The evolving legal and regulatory landscape could **increase operating costs** and limit growth[108](index=108&type=chunk)[109](index=109&type=chunk) - Catastrophe losses from events like hurricanes and wildfires are unpredictable and could **materially affect results**, liquidity, and financial condition[116](index=116&type=chunk) - Estimating property and casualty loss reserves is complex and inherently uncertain; **inadequate reserves** could materially impact operating results[122](index=122&type=chunk)[123](index=123&type=chunk) - A downgrade in financial strength ratings below 'A-' could result in a **substantial loss of business**[125](index=125&type=chunk) - The investment portfolio is exposed to interest rate, equity price, and liquidity risks, which can impact investment income and cause **realized/unrealized losses**[135](index=135&type=chunk) - As a holding company, Kemper's ability to service debt and pay dividends depends on receiving sufficient dividends from its **regulated insurance subsidiaries**[146](index=146&type=chunk) [Properties](index=23&type=section&id=Item%202.%20Properties) Kemper owns eleven buildings and leases numerous other facilities for its corporate and operational needs across the country - The company owns eleven buildings totaling approximately **400,000 square feet**[153](index=153&type=chunk) - Leased facilities include the corporate headquarters in Chicago (~65,000 sq ft), P&C operations (~490,000 sq ft), and Life & Health operations (~450,000 sq ft)[155](index=155&type=chunk) [Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding pending legal proceedings is incorporated by reference from the Consolidated Financial Statements - Details on legal proceedings are found in **Note 23** of the financial statements[157](index=157&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE, with consistent quarterly dividends paid and significant capacity remaining under its share repurchase program - The Board of Directors authorized a **$300.0 million** share repurchase program, with **$243.7 million** remaining available as of December 31, 2018[164](index=164&type=chunk) Quarterly Dividends Paid Per Share | Year | Q1 | Q2 | Q3 | Q4 | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | 2018 | $0.24 | $0.24 | $0.24 | $0.24 | $0.96 | | 2017 | $0.24 | $0.24 | $0.24 | $0.24 | $0.96 | [Selected Financial Data](index=27&type=section&id=Item%206.%20Selected%20Financial%20Data) Financial performance grew significantly in 2018, driven by the Infinity acquisition, with substantial increases in revenues, net income, and total assets Selected Financial Data (2016-2018) | Metric ($ in Millions, except per share) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Total Revenues | $3,725.1 | $2,723.4 | $2,521.9 | | Net Income | $190.1 | $120.9 | $16.8 | | Net Income Per Share (Diluted) | $3.22 | $2.33 | $0.33 | | Total Assets | $11,544.9 | $8,376.2 | $8,210.5 | | Shareholders' Equity | $3,050.1 | $2,115.6 | $1,975.2 | | Book Value Per Share | $47.10 | $41.11 | $38.52 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income increased in 2018 due to improved P&C segment performance and the Infinity acquisition, supported by strong liquidity - The increase in 2018 net income was primarily due to a **$71.1 million** improvement in the Preferred P&C segment and a **$59.5 million** increase in the Specialty P&C segment[179](index=179&type=chunk)[180](index=180&type=chunk) - Earned premiums surged by **$1,034.4 million** in 2018, primarily driven by growth in the Specialty P&C segment following the acquisition of Infinity[183](index=183&type=chunk) Net Income and Adjusted Consolidated Net Operating Income (2017 vs 2018) | Metric ($ in Millions) | 2018 | 2017 | | :--- | :--- | :--- | | Net Income | $190.1 | $120.9 | | Income from Continuing Operations | $188.4 | $119.9 | | Adjusted Consolidated Net Operating Income | $258.4 | $92.5 | [Preferred Property & Casualty Insurance](index=36&type=section&id=Preferred%20Property%20%26%20Casualty%20Insurance) The segment's performance improved significantly due to a sharp reduction in catastrophe losses and favorable reserve development - The segment's significant improvement in 2018 was driven by an **$86.2 million decrease** in catastrophe losses and LAE[212](index=212&type=chunk)[215](index=215&type=chunk) - The segment experienced **favorable loss and LAE reserve development of $8.3 million** in 2018, a significant turnaround from the $15.7 million of adverse development in 2017[215](index=215&type=chunk) Preferred P&C Segment Performance (2017 vs 2018) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Segment Net Operating Income (Loss) ($M) | $25.7 | $(45.4) | | Combined Ratio | 104.6% | 118.7% | | Underlying Combined Ratio | 93.8% | 92.7% | | Catastrophe Losses and LAE ($M) | $87.3 | $173.5 | [Specialty Property & Casualty Insurance](index=43&type=section&id=Specialty%20Property%20%26%20Casualty%20Insurance) The Infinity acquisition drove substantial growth in earned premiums and improved the underlying loss ratio - The acquisition of Infinity was the primary driver of growth, contributing **$758.1 million** to the increase in earned premiums for 2018[240](index=240&type=chunk)[242](index=242&type=chunk) - The underlying loss and LAE ratio **improved by 3.8 percentage points** in 2018, driven by the inclusion of Infinity's lower-loss-ratio business[244](index=244&type=chunk) Specialty P&C Segment Performance (2017 vs 2018) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Segment Net Operating Income ($M) | $115.8 | $56.3 | | Earned Premiums ($M) | $2,027.4 | $1,005.7 | | Combined Ratio | 96.0% | 96.0% | | Underlying Combined Ratio | 95.7% | 95.1% | [Life & Health Insurance](index=48&type=section&id=Life%20%26%20Health%20Insurance) Segment net operating income remained stable as lower income tax expense offset higher benefits and lower investment income - Segment net operating income remained stable, decreasing by only **$0.4 million** in 2018, as lower income tax expense offset other pressures[181](index=181&type=chunk)[269](index=269&type=chunk) - In 2016, this segment took a pre-tax charge of **$77.8 million** related to death verification databases, which significantly impacted year-over-year comparisons with 2017[265](index=265&type=chunk) Life & Health Segment Performance (2017 vs 2018) | Metric ($ in Millions) | 2018 | 2017 | | :--- | :--- | :--- | | Segment Net Operating Income | $91.5 | $91.9 | | Total Earned Premiums | $626.3 | $614.0 | | Net Investment Income | $210.9 | $223.2 | [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company utilized new credit facilities and cash to fund the Infinity acquisition and maintains significant dividend capacity from its subsidiaries - To facilitate the Infinity acquisition, the company increased its credit facility to **$300.0 million** and added a **$250.0 million** term loan[331](index=331&type=chunk) - The Infinity acquisition was funded with **$564.6 million in cash** and the issuance of **13.2 million shares** of Kemper stock[340](index=340&type=chunk) - In 2019, Kemper's direct insurance subsidiaries are estimated to be able to pay **$351 million** in dividends to the parent holding company without prior regulatory approval[338](index=338&type=chunk) [Critical Accounting Estimates](index=65&type=section&id=Critical%20Accounting%20Estimates) Key estimates involve valuing investments, P&C reserves, goodwill, and pension obligations, with P&C reserves being inherently uncertain - Key critical accounting estimates include the valuation of investments, estimation of **property and casualty insurance reserves**, and assessment of **goodwill recoverability**[358](index=358&type=chunk) - The process of estimating P&C reserves is inherently uncertain; at year-end 2018, gross P&C reserves stood at **$1,874.9 million**[368](index=368&type=chunk)[369](index=369&type=chunk)[371](index=371&type=chunk) - Goodwill is tested for impairment annually; qualitative assessments in 2018 indicated that the **fair value of each unit significantly exceeded its carrying value**[382](index=382&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate and equity price changes, with significant potential fair value impact from adverse movements Market Risk Sensitivity Analysis (as of Dec 31, 2018) | Financial Instrument | Fair Value ($M) | Pro Forma Decrease from 100bp Rate Rise ($M) | Pro Forma Decrease from 30% Equity Price Drop ($M) | | :--- | :--- | :--- | :--- | | Investments in Fixed Maturities | $6,424.2 | $(393.5) | — | | Investments in Equity Securities | $684.4 | $(7.4) | $(175.6) | [Financial Statements and Supplementary Data](index=74&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the audited consolidated financial statements and supplementary data for the fiscal year ended December 31, 2018 Consolidated Statement of Income Highlights (2018) | Metric | Amount ($M) | | :--- | :--- | | Total Revenues | $3,725.1 | | Total Expenses | $3,526.0 | | Income from Continuing Operations | $188.4 | | Net Income | $190.1 | | Diluted EPS | $3.22 | Consolidated Balance Sheet Highlights (as of Dec 31, 2018) | Metric | Amount ($M) | | :--- | :--- | | Total Investments | $8,069.5 | | Total Assets | $11,544.9 | | Total Insurance Reserves | $5,433.6 | | Total Liabilities | $8,494.8 | | Total Shareholders' Equity | $3,050.1 | [Controls and Procedures](index=148&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2018 - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the fiscal year[693](index=693&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2018, based on the COSO framework[696](index=696&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=150&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy Statement - Required information is **incorporated by reference** from the 2019 Proxy Statement[702](index=702&type=chunk) [Executive Compensation](index=150&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the 2019 Proxy Statement - Required information is **incorporated by reference** from the 2019 Proxy Statement[704](index=704&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=150&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the 2019 Proxy Statement - Required information is **incorporated by reference** from the 2019 Proxy Statement[705](index=705&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=151&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related person transactions and director independence is incorporated by reference from the 2019 Proxy Statement - Required information is **incorporated by reference** from the 2019 Proxy Statement[710](index=710&type=chunk) [Principal Accounting Fees and Services](index=151&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information concerning principal accounting fees and services is incorporated by reference from the 2019 Proxy Statement - Required information is **incorporated by reference** from the 2019 Proxy Statement[711](index=711&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=151&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section includes the consolidated financial statements, four financial statement schedules, and an index of all exhibits filed with the report[713](index=713&type=chunk)[714](index=714&type=chunk)[715](index=715&type=chunk)