Kemper(KMPR) - 2021 Q4 - Annual Report

Caution Regarding Forward-Looking Statements This section defines forward-looking statements as future expectations, cautioning against undue reliance due to inherent risks and uncertainties - Forward-looking statements are identified by words such as 'believe,' 'estimate,' 'anticipate,' and 'expect,' and relate to future events rather than historical facts[20] - Key risk factors include evolving legal and regulatory environments, adverse litigation outcomes, governmental actions, uncertainties in rate approvals, increased operating costs from new requirements, and liabilities related to cybersecurity and data governance[23][25] - Additional risks stem from inflation's impact on insurance claims, social inflation, changes in reinsurance availability and cost, rating agency downgrades, challenges in integrating acquired businesses, technology difficulties, heightened competition, and changes in general economic conditions[28][30] Part I Item 1. Business Overview Kemper Corporation is a diversified US insurance holding company offering auto, homeowners, life, and health products across three segments - Kemper Corporation is a diversified insurance holding company providing automobile, homeowners, life, health, and other insurance products to individuals and businesses[32] - The Company operates through three segments: Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance, and Life & Health Insurance, with approximately $14.9 billion in assets and serving over 6.5 million policies[34][35] - Kemper employs approximately 10,300 associates across its segments and corporate functions[36] Property and Casualty Insurance Business Kemper's P&C operations distribute auto and homeowners insurance via independent agents, managing catastrophe exposure with reinsurance - The Specialty Property & Casualty Insurance segment operates in 34 states, with California (57%), Florida (18%), and Texas (15%) contributing 90% of its 2021 premium revenues[41][42] - The Preferred Property & Casualty Insurance segment operates in 45 states and D.C., with California (20%), New York (20%), and Texas (10%) being major premium sources in 2021[43][44] Property and Casualty Insurance Reserves by Business Segment (2021 vs. 2020) | DOLLARS IN MILLIONS | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Specialty Property & Casualty Insurance | $2,319.7 | $1,544.8 | | Preferred Property & Casualty Insurance | $433.2 | $411.6 | | Life & Health Insurance | $3.6 | $4.6 | | Total Business Segments | $2,756.5 | $1,961.0 | | Unallocated Reserves | $16.2 | $21.5 | | Total Property & Casualty Insurance Reserves | $2,772.7 | $1,982.5 | - The 2022 catastrophe reinsurance program provides 95% coverage for individual catastrophes from $50 million to $350 million, with an estimated annual premium of $16.7 million for multi-year and annual excess of loss contracts[58][59] - Kemper's property and casualty group was the 11th largest personal lines automobile insurer by net written premiums in 2020 and ranked among the top 6% of P&C groups by net written premiums, policyholders' surplus, and net admitted assets[67][68] Life and Health Insurance Business The Life & Health segment offers individual life and supplemental A&H insurance through career and independent agents - The Life & Health Insurance segment's primary products are individual life and supplemental accident and health insurance, distributed through career agents (Kemper Home Service Companies) and independent agents (Reserve National)[72][75][78] - Top states for premium revenues in 2021 were Texas (22%), Louisiana (11%), Alabama (7%), Mississippi (6%), and Georgia (5%)[74] - The lapse ratio for individual life insurance improved from 6% in 2019 to 3% in 2021, indicating better policy retention[80] - The Life & Health Insurance segment ranked in the top 24% of life and health insurance company groups in the U.S. in 2020 by net admitted assets, net premiums written, and capital and surplus[85] Investments Kemper employs a total return investment strategy focused on yield and liquidity to meet insurance obligations - The Company employs a total return investment strategy, emphasizing yield and liquidity to meet short- and medium-term insurance obligations[87] - Investment activities are regulated by state laws concerning asset quality, nature, amount, and concentration, which also influence asset risk calculations by regulators and rating agencies[87] Regulation Kemper's insurance subsidiaries face extensive state regulation on policy forms, rates, solvency, and investments - Kemper's insurance subsidiaries are subject to extensive state regulation on matters including policy forms, rate setting, licensing, market conduct, investments, solvency, and corporate governance[89] - Financial condition and operations are reported under statutory accounting principles (NAIC), with minimum capital and surplus levels and Risk-Based Capital (RBC) standards enforced by state regulators[92] - The Company is subject to federal (Gramm-Leach-Bliley Act, HIPAA) and state laws (e.g., New York Department of Financial Services, California Consumer Privacy Act) imposing significant requirements for protecting personally identifiable information and cybersecurity[95][98] - As an insurance holding company, Kemper is regulated by state holding company acts, requiring registration, reporting on intercompany transactions, and regulatory approval for certain material asset transfers or changes in control[99] Human Capital Management Kemper fosters an 'Act Like an Owner' culture, prioritizing DE&I, employee development, and competitive rewards - Kemper's culture, 'Act Like an Owner,' empowers employees with authority and accountability, driven by intellectual curiosity, analytic superiority, and world-class operations[109][114] - Diversity, Equity, and Inclusion (DE&I) efforts focus on attracting diverse talent, creating an inclusive workplace, and serving diverse customers and communities[111][113] - The company provides market-competitive total rewards, including health, dental, vision, prescription drug coverage, 401(k) with company match, Employee Stock Purchase Program, and tuition reimbursement[117][118] - Kemper's COVID-19 response prioritized employee health and safety, transitioning most employees to remote work in March 2020 and beginning a phased return to offices in Q4 2021[119][120] Item 1A. Risk Factors Kemper faces significant risks from uncertain P&C reserves, catastrophe losses, reinsurance changes, and competition - Estimating property and casualty insurance reserves is inherently uncertain, with potential for material impact from evolving legal/regulatory landscapes, economic conditions, and 'social inflation' (increased litigation, higher jury awards)[122][123] - Catastrophe losses (e.g., hurricanes, pandemics like COVID-19) are unpredictable and can materially affect results, liquidity, and financial condition, with life and health segments exposed to catastrophic mortality[125][127] - Changes in reinsurance availability and cost, or reinsurer defaults, could force Kemper's insurance subsidiaries to retain more risk, adversely affecting financial results[128] - The insurance industry is highly competitive, requiring effective management, suitable pricing, service quality, and technological innovation to grow profitably[133] - Extensive state regulation and an unpredictable legal landscape can increase operating costs, reduce profitability, and limit growth, including new requirements for death verification databases for life insurers[135][138][139] - Failure to protect personal data against security breaches or maintain critical system availability could lead to business interruption, legal penalties, and reputational harm[146][150] - The investment portfolio is exposed to interest rate, equity price, and liquidity risks, with potential negative impacts on net investment income and realized/unrealized losses[153] - The COVID-19 pandemic negatively impacted 2021 results with increased P&C loss frequency/severity (due to inflation, supply chain issues) and higher mortality in the Life & Health business[168][193] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC that were issued more than 180 days prior to December 31, 2021 - As of December 31, 2021, the registrant had no unresolved staff comments issued more than 180 days prior to that date[173] Item 2. Properties Kemper owns twelve buildings and leases office space for operations, including data processing and headquarters - Kemper's subsidiaries own twelve buildings in seven states, totaling approximately 403,000 square feet, including a 110,000 sq ft corporate data processing facility[174] - The company leases approximately 92,000 square feet for its corporate headquarters in Chicago (lease expires December 31, 2033), 578,000 square feet for P&C subsidiaries, and 460,000 square feet for Life & Health subsidiaries[175] Item 3. Legal Proceedings Information regarding the company's pending legal proceedings is incorporated by reference from Note 24, 'Contingencies,' to the Consolidated Financial Statements - Information concerning pending legal proceedings is incorporated by reference to Note 24, 'Contingencies,' to the Consolidated Financial Statements[177] Item 4. Mine Safety Disclosures This item is not applicable to Kemper Corporation - This item is not applicable[178] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Kemper's common stock trades on NYSE, with quarterly dividends and significant share repurchases - Kemper's common stock is traded on the NYSE under the symbol 'KMPR', with 2,841 record holders as of January 31, 2022[180] Cash Dividends Paid to Shareholders (per share) | DOLLARS PER SHARE | Mar 31 | Jun 30 | Sep 30 | Dec 31 | Year Ended Dec 31 | | :-------------------------------- | :----- | :----- | :----- | :----- | :---------------- | | 2021 | $0.31 | $0.31 | $0.31 | $0.31 | $1.24 | | 2020 | $0.30 | $0.30 | $0.30 | $0.30 | $1.20 | Issuer Purchases of Equity Securities | Year | Shares Repurchased (approx.) | Aggregate Cost (Millions) | Average Cost Per Share | Remaining Authorization (Millions) | | :--- | :--------------------------- | :------------------------ | :--------------------- | :------------------------------- | | 2021 | 2,085,000 | $161.7 | $77.58 | $171.6 (as of Dec 31, 2021) | | 2020 | 1,617,000 | $110.4 | $68.29 | $333.3 (as of Dec 31, 2020) | Item 6. Selected Financial Data This item is reserved and contains no specific financial data - This item is reserved[187] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Kemper reported a net loss in 2021 due to COVID-19 impacts on P&C underwriting and Life & Health Net Income (Loss) and Adjusted Consolidated Net Operating Income (Loss) (2021 vs. 2020 vs. 2019) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :------------------------------------ | :------- | :------- | :------- | | Net Income (Loss) | $(120.5) | $409.9 | $531.1 | | Adjusted Consolidated Net Operating Income (Loss) | $(218.8) | $438.8 | $418.3 | - The COVID-19 pandemic negatively impacted 2021 net results by an estimated $485 million, primarily due to P&C underwriting losses (rising loss costs, inflation, supply shortages) and excess mortality in the Life & Health segment[193] - Earned Premiums increased by $581.5 million in 2021, reaching $5,253.7 million, driven by growth in the Specialty Property & Casualty Insurance segment and the acquisition of AAC[201] - Net Investment Income increased by $79.1 million in 2021, primarily due to higher returns from Alternative Investments and increased levels of fixed income securities[202] Summary of Results Kemper reported a $120.5 million net loss in 2021, a significant decline from $409.9 million net income in 2020 Net Income (Loss) and Per Share (2021 vs. 2020) | Metric | 2021 | 2020 | Change | | :-------------------------------- | :------- | :------- | :------- | | Net Income (Loss) (Millions) | $(120.5) | $409.9 | $(530.4) | | Basic Net Income (Loss) Per Share | $(1.87) | $6.24 | $(8.11) | | Diluted Net Income (Loss) Per Share | $(1.87) | $6.14 | $(8.01) | - The Company estimates a negative impact of $485 million on net results in 2021 due to COVID-19, primarily from P&C underwriting losses (rising loss costs, inflation, supply shortages) and excess mortality in Life & Health[193] - Earned Premiums increased by $581.5 million to $5,253.7 million in 2021, driven by the Specialty Property & Casualty Insurance segment and the acquisition of AAC[201] - Net Investment Income increased by $79.1 million in 2021, primarily due to higher returns from Alternative Investments and increased investments in fixed income securities[202] Catastrophes Catastrophic events are a material risk for Kemper's P&C business, causing fluctuations in results ISO-Classified Catastrophic Events and Losses (Net of Reinsurance, excluding development) | Year | Number of Events | Losses and LAE (Millions) | | :--- | :--------------- | :------------------------ | | 2021 | 69 | $107.8 | | 2020 | 66 | $106.7 | | 2019 | 60 | $77.2 | - Catastrophe exposure is managed through geographical diversification, restrictions on new business in prone regions, modifications to coverages, and a catastrophe reinsurance program[210] - The Company had no material recoveries under its catastrophe reinsurance treaties for the years ended December 31, 2021 and 2020[211] Loss and LAE Reserve Development In 2021, Kemper's property and casualty loss and LAE reserves saw an adverse development of $106.7 million from prior accident years Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :------------------------------------------------ | :----- | :----- | :----- | | Non-catastrophe | $112.1 | $36.2 | $(54.0) | | Catastrophe | $(5.4) | $0.2 | $(17.1) | | Total Increase (Decrease) | $106.7 | $36.4 | $(71.1) | Non-GAAP Financial Measures This section defines Kemper's non-GAAP financial measures for clearer operational performance insights - Underlying Losses and LAE (Current Year Non-catastrophe Losses and LAE) exclude catastrophe losses and prior-year loss and LAE reserve development from Incurred Losses and LAE (GAAP)[217] - The Underlying Combined Ratio is calculated by adding the Current Year Non-catastrophe Losses and LAE Ratio with the Insurance Expense Ratio, excluding catastrophe losses and prior-year reserve development[218] - Adjusted Consolidated Net Operating Income (Loss) is an after-tax measure that excludes the impact of changes in fair value of equity/convertible securities, net realized gains/losses on investments, impairment losses, acquisition-related costs, debt extinguishment/pension charges, and significant non-recurring items from Net Income (Loss) (GAAP)[220][224] Specialty Property & Casualty Insurance Segment Performance The Specialty P&C segment reported a $196.1 million net operating loss in 2021 due to a deteriorated loss ratio Specialty Property & Casualty Insurance Segment Net Operating Income (Loss) (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :-------------------------------- | :------- | :------- | :------- | | Segment Net Operating Income (Loss) | $(196.1) | $337.9 | $283.1 | - Earned Premiums increased by $613.2 million in 2021, driven by the acquisition of AAC, prior-period COVID-19 related premium credits, and higher volume in both Private Passenger Auto and Commercial Automobile product lines[230] - The Underlying Combined Ratio deteriorated to 107.7% in 2021 from 89.9% in 2020[226] - The Current Year Non-catastrophe Losses and LAE Ratio deteriorated by 17.7 percentage points to 88.1% in 2021, primarily due to higher claim frequency (return to pre-pandemic driving) and severity (rising inflation, supply chain constraints)[233] - Adverse loss and LAE reserve development was $97.7 million in 2021, up from $15.3 million in 2020, largely driven by legal developments and increased severity in Florida personal injury protection and other liability coverages[233][234] Specialty Property & Casualty Insurance Reserves (Millions) | DOLLARS IN MILLIONS | Dec 31, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Non-Standard Automobile | $1,985.8 | $1,308.3 | | Commercial Automobile | $333.9 | $236.5 | | Total Insurance Reserves | $2,319.7 | $1,544.8 | Preferred Property & Casualty Insurance Segment Performance The Preferred P&C segment reported a $12.5 million net operating loss in 2021 due to a deteriorated loss ratio Preferred Property & Casualty Insurance Segment Net Operating Income (Loss) (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :------------------------------------ | :------- | :------- | :------- | | Segment Net Operating Income (Loss) | $(12.5) | $3.5 | $41.9 | - Earned Premiums decreased by $36.5 million in 2021, primarily due to lower automobile and homeowners insurance volumes and ongoing profit improvement actions[251] - The Underlying Combined Ratio deteriorated to 100.9% in 2021 from 90.4% in 2020[245] - The Current Year Non-catastrophe Losses and LAE Ratio increased to 69.2% in 2021 from 58.3% in 2020, primarily due to severity trends caused by ongoing supply chain issues and rising inflation[254] - Catastrophe losses and LAE (excluding reserve development) decreased by $2.9 million to $79.1 million in 2021, compared to $82.0 million in 2020, due to a decrease in severity of catastrophic events[254] Preferred Property & Casualty Insurance Reserves (Millions) | DOLLARS IN MILLIONS | Dec 31, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Preferred Automobile | $308.6 | $281.3 | | Homeowners | $95.4 | $104.0 | | Other | $29.2 | $26.3 | | Total Insurance Reserves | $433.2 | $411.6 | Life & Health Insurance Segment Performance The Life & Health segment's net operating income decreased to $28.2 million in 2021 due to higher mortality and claims Life & Health Insurance Segment Net Operating Income (Loss) (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :------------------------------ | :------- | :------- | :------- | | Segment Net Operating Income (Loss) | $28.2 | $60.0 | $98.7 | - Earned Premiums increased by $4.8 million in 2021, primarily due to higher volume on life insurance products, partially offset by lower volume on accident and health and property insurance products[271] - Policyholders' Benefits and Incurred Losses and LAE increased by $27.7 million in 2021, mainly due to higher COVID-19 related mortality for life insurance and increased frequency and severity of accident and health claims[274] - Insurance Expenses increased by $24.0 million in 2021, driven by higher commission expense and investments to modernize and strengthen the distribution channel[275] Life & Health Insurance Reserves (Millions) | DOLLARS IN MILLIONS | Dec 31, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Future Policyholder Benefits | $3,454.1 | $3,440.5 | | Incurred Losses and LAE Reserves | $90.4 | $91.6 | | Total Insurance Reserves | $3,544.5 | $3,532.1 | - The Company voluntarily uses death verification databases (e.g., Death Master File) to identify deceased insureds and initiate claims, impacting its IBNR liability[269] Investment Results Net Investment Income increased to $427.3 million in 2021, but Total Comprehensive Investment Gains decreased Net Investment Income (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :-------------------- | :----- | :----- | :----- | | Net Investment Income | $427.3 | $348.2 | $364.3 | - Net Investment Income increased by $79.1 million in 2021, primarily due to higher valuations of Equity Method Limited Liability Investments and increased distributions from Limited Liability Investments, partially offset by lower yields from fixed maturities[293] - Total Comprehensive Investment Gains (Losses) decreased by $576.3 million to $(118.2) million in 2021, mainly due to a decline in fixed maturities unrealized capital gains from higher interest rates[297] Net Realized Gains on Sales of Investments (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :-------------------------------- | :----- | :----- | :----- | | Net Realized Gains on Sales of Investments | $64.8 | $38.1 | $41.9 | Net Impairment Losses Recognized in Earnings (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :-------------------------------- | :----- | :----- | :----- | | Net Impairment Losses Recognized in Earnings | $(11.0) | $(19.5) | $(13.8) | Investment Quality and Concentrations Kemper's fixed maturity portfolio is predominantly high-grade, with 95% rated investment-grade - Approximately 95% of the Company's fixed maturity investment portfolio was rated investment-grade (NAIC 1 or 2) at December 31, 2021[309] Credit Quality of Fixed Maturity Investment Portfolio (2021 vs. 2020) | NAIC Rating | Rating | 2021 Fair Value (Millions) | 2021 Percentage | 2020 Fair Value (Millions) | 2020 Percentage | | :---------- | :----- | :------------------------- | :-------------- | :------------------------- | :-------------- | | 1 | AAA, AA, A | $5,351.6 | 67.0 % | $4,759.9 | 62.6 % | | 2 | BBB | $2,215.1 | 27.7 % | $2,355.6 | 31.0 % | | 3-4 | BB, B | $331.0 | 4.2 % | $353.1 | 4.6 % | | 5-6 | CCC or Lower | $89.2 | 1.1 % | $137.3 | 1.8 % | | Total | | $7,986.9 | 100.0 % | $7,605.9 | 100.0 % | Non-governmental Fixed Maturities by Industry (2021 vs. 2020) | DOLLARS IN MILLIONS | 2021 Fair Value | 2021 Percentage | 2020 Fair Value | 2020 Percentage | | :-------------------------------- | :---------------- | :-------------- | :---------------- | :-------------- | | Finance, Insurance and Real Estate | $1,996.7 | 19.2 % | $1,916.3 | 18.4 % | | Manufacturing | $1,571.0 | 15.1 % | $1,633.5 | 15.7 % | | Transportation, Communication and Utilities | $815.8 | 7.9 % | $825.5 | 7.9 % | | Services | $617.5 | 5.9 % | $581.3 | 5.6 % | | Mining | $254.3 | 2.4 % | $285.7 | 2.7 % | | Retail Trade | $171.4 | 1.7 % | $172.6 | 1.7 % | | Construction | $13.1 | 0.1 % | $— | — | | Other | $14.1 | 0.1 % | $11.0 | 0.1 % | | Total | $5,453.9 | 52.4 % | $5,425.9 | 52.1 % | Ten Largest Investment Exposures (excluding US Gov, 2021) | DOLLARS IN MILLIONS | Fair Value | Percentage of Total Investments | | :-------------------------------- | :--------- | :------------------------------ | | Texas (States including Political Subdivisions) | $151.4 | 1.5 % | | California (States including Political Subdivisions) | $107.6 | 1.0 % | | Georgia (States including Political Subdivisions) | $98.0 | 0.9 % | | New York (States including Political Subdivisions) | $95.1 | 0.9 % | | Florida (States including Political Subdivisions) | $74.8 | 0.7 % | | Louisiana (States including Political Subdivisions) | $74.7 | 0.7 % | | Colorado (States including Political Subdivisions) | $70.8 | 0.7 % | | Pennsylvania (States including Political Subdivisions) | $68.6 | 0.7 % | | Vanguard Total World Stock ETF (Equity Securities) | $226.9 | 2.2 % | | iShares® Core MSCI Total International Stock ETF (Equity Securities) | $86.1 | 0.8 % | | Total | $1,054.0 | 10.1 % | Investments in Limited Liability Companies and Limited Partnerships Kemper holds $614.2 million in investments in various limited liability investment companies and partnerships, primarily focused on debt Investments in Limited Liability Companies and Limited Partnerships (2021 vs. 2020) | Asset Class | 2021 Unfunded Commitment (Millions) | 2021 Reported Value (Millions) | 2020 Reported Value (Millions) | | :------------------------------------------ | :---------------------------------- | :----------------------------- | :----------------------------- | | Equity Method Limited Liability Investments | $198.5 | $241.9 | $204.0 | | Alternative Energy Partnership Investments | $— | $39.6 | $21.3 | | Reported as Other Equity Interests at Fair Value | $102.3 | $325.0 | $292.0 | | Reported as Equity Securities at Modified Cost | $— | $7.7 | $15.7 | | Total Investments | $300.8 | $614.2 | $533.0 | - The investments primarily target mezzanine debt, distressed debt, and senior debt[321] - The Company has unfunded commitments of $300.8 million, expected to be funded over the next several years primarily from distributions from these investments[322] Insurance, Interest and Other Expenses Total expenses increased to $1,437.5 million in 2021, driven by higher insurance and interest Total Expenses (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :------------------ | :------- | :------- | :------- | | Total Expenses | $1,437.5 | $1,372.0 | $1,189.3 | - Insurance Expenses increased by $117.6 million in 2021, primarily due to business growth and increased amortization of VOBA from the AAC acquisition[324] - Interest expense increased by $7.6 million in 2021, mainly due to the addition of the 2030 Senior Notes[325] - Other Expenses decreased by $59.7 million in 2021, primarily due to prior-year Pension Settlement Expenses and lower current year Acquisition Related Transaction, Integration and Other Costs[326] Income Taxes Kemper's effective income tax rate deviates from the 21% federal statutory rate due to various factors - The federal corporate statutory income tax rate was 21% for the years ended December 31, 2021 and 2020[327] - The effective income tax rate differs from the statutory rate due to tax-exempt investment income, dividends received deductions, nontaxable income from Company-Owned Life Insurance (COLI), and Alternative Energy Partnership tax credits[327] - Net investment tax credits realized were $66.1 million in 2021, compared to $3.2 million in 2020[328] Liquidity and Capital Resources Kemper's liquidity is supported by subsidiary dividends and debt markets, with $1,121.9 million long-term debt Long-term Debt Outstanding (Millions) | (Dollars in Millions) | Dec 31, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Term Loan due July 5, 2023 | $— | $49.9 | | 5.000% Senior Notes due Sep 19, 2022 | $276.7 | $278.3 | | 4.350% Senior Notes due Feb 15, 2025 | $449.0 | $448.8 | | 2.400% Senior Notes due Sep 30, 2030 | $396.2 | $395.8 | | Total Long-term Debt Outstanding | $1,121.9 | $1,172.8 | - Kemper repurchased approximately 2,085,000 shares of common stock for $161.7 million in 2021, with $171.6 million remaining under the repurchase authorization as of December 31, 2021[338] - Cash dividends paid to shareholders totaled $80.6 million in 2021 ($0.31 per common share quarterly)[339] - Subsidiary dividends to Kemper totaled $347.0 million in 2021, with an estimated $191.2 million available in 2022 without prior regulatory approval[340] Cash Flows (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :-------------------------------- | :------- | :------- | :------- | | Operating Activities | $350.7 | $448.0 | $534.3 | | Investing Activities | $(118.2) | $(757.0) | $(633.4) | | Financing Activities | $(290.4) | $378.3 | $160.8 | - Net cash from operating activities decreased by $97.3 million in 2021 due to higher paid losses in the P&C business[348] Contractual Obligations Kemper's total estimated cash disbursements for contractual obligations amounted to $13,803.0 million as of December 31, 2021 Estimated Cash Disbursements for Contractual Obligations (as of Dec 31, 2021) | DOLLARS IN MILLIONS | Total | | :-------------------------------- | :-------- | | Long Term Debt Obligations | $1,125.0 | | Life and Health Insurance Policy Benefits | $9,905.3 | | Property and Casualty Insurance Reserves | $2,772.7 | | Total Contractual Obligations | $13,803.0 | - The Company had outstanding investment commitments totaling $300.8 million at December 31, 2021, with indeterminate timing for funding[354] Critical Accounting Estimates Kemper's financial statements rely on critical accounting estimates for investment valuation and P&C reserves - Critical accounting policies include the valuation of investments, property and casualty insurance reserves for losses and LAE, goodwill recoverability, and pension benefit obligations[356] - The reported value of investments was $10,387.4 million at December 31, 2021, with $8,863.9 million (85%) reported at fair value, and 93% of fair value measurements based on observable inputs[357][359] - Property and Casualty Insurance Reserves were $2,772.7 million at December 31, 2021, with estimation being inherently uncertain and subject to many difficult-to-quantify variables, potentially leading to material variations from estimated amounts[367][368] - Goodwill is tested annually for recoverability, with a qualitative assessment performed as of October 1, 2021, concluding that associated goodwill was recoverable for each reporting unit[383] - Pension benefit obligations are inherently uncertain and volatile, based on assumptions regarding participant mortality, expected long-term rates of return on investments, and the discount rate[384] Recently Issued Accounting Pronouncements Kemper adopted several ASUs in 2021 with no material impact, and is evaluating ASU 2018-12 for future effects - The Company adopted ASU 2019-12 (Income Taxes), ASU 2020-01 (Equity Securities), ASU 2020-04 (Reference Rate Reform), and ASU 2020-08 (Receivables) in 2021, with no material effect on its consolidated financial statements[458][459][461][462][463] - ASU 2018-12, 'Financial Services - Insurance (Topic 944): Targeted Improvements to Accounting for Long-Duration Contracts,' is effective for fiscal years beginning after December 15, 2022, and the Company is currently evaluating its potential material impact[386][464] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Kemper is exposed to market risks from interest rate and equity price fluctuations, quantifying sensitivity - Kemper's primary market risk exposures are to changes in interest rates (Investments in Fixed Maturities, Debt) and equity prices (Investments in Equity Securities)[394] Estimated Adverse Effects on Fair Value of Financial Instruments (Dec 31, 2021) | DOLLARS IN MILLIONS | Fair Value | Interest Rate Risk | Equity Price Risk | Total Market Risk | | :-------------------------------- | :--------- | :----------------- | :---------------- | :---------------- | | Investments in Fixed Maturities | $7,986.9 | $(643.8) | — | $(643.8) | | Investments in Equity Securities | $830.6 | $(160.0) | $(2.1) | $(162.1) | | Debt | $1,152.1 | $47.1 | — | $47.1 | - The market risk sensitivity analysis assumes a 100 basis point instantaneous increase in the yield curve for fixed maturities and preferred stock, a 100 basis point decrease for debt, and a 30% instantaneous decrease in the S&P 500 for equity securities[390] - The Company manages its interest rate exposures by investing primarily in investment-grade securities of moderate effective duration[395] Item 8. Financial Statements and Supplementary Data This item presents Kemper's audited consolidated financial statements with an unqualified opinion Consolidated Statements of Income (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :------------------------------------------------ | :------- | :------- | :------- | | Total Revenues | $5,793.0 | $5,205.7 | $5,039.2 | | Total Expenses | $6,038.3 | $4,695.6 | $4,377.6 | | Income (Loss) before Income Taxes | $(245.3) | $510.1 | $661.6 | | Income Tax Benefit (Expense) | $124.8 | $(100.2) | $(130.5) | | Net Income (Loss) | $(120.5) | $409.9 | $531.1 | | Basic Net Income (Loss) Per Unrestricted Share | $(1.87) | $6.24 | $8.04 | | Diluted Net Income (Loss) Per Unrestricted Share | $(1.87) | $6.14 | $7.96 | Consolidated Balance Sheets (Millions) | DOLLARS IN MILLIONS | Dec 31, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Total Assets | $14,916.5 | $14,341.9 | | Total Liabilities | $10,908.8 | $9,778.5 | | Total Shareholders' Equity | $4,007.7 | $4,563.4 | Consolidated Statements of Cash Flows (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :-------------------------------- | :------- | :------- | :------- | | Net Cash Provided by Operating Activities | $350.7 | $448.0 | $534.3 | | Net Cash Used by Investing Activities | $(118.2) | $(757.0) | $(633.4) | | Net Cash Provided (Used) by Financing Activities | $(290.4) | $378.3 | $160.8 | | Cash, End of Year | $148.2 | $206.1 | $136.8 | - Deloitte & Touche LLP issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[716] - Critical audit matters included the estimation of property and casualty insurance reserves and the fair value of fixed maturity securities without readily determinable market values, both requiring significant auditor judgment and effort[724][726] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item states that there are no changes in or disagreements with accountants on accounting and financial disclosure - Not Applicable[731] Item 9A. Controls and Procedures Management concluded Kemper's disclosure controls and internal control were effective - Management, with CEO and CFO participation, concluded that the Company's disclosure controls and procedures were effective as of December 31, 2021[731] - There were no material changes in the Company's internal control over financial reporting during the fiscal quarter ended December 31, 2021[732] - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2021, based on criteria established in the Internal Control—Integrated Framework (2013) issued by COSO[734] Item 9B. Other Information This item states that there is no other information to report - None[738] Part III Item 10. Directors, Executive Officers and Corporate Governance Information regarding Kemper's directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders[740] - Kemper's Code of Ethics for Senior Financial Executives is posted in the 'Governance' section of its website, kemper.com[741] Item 11. Executive Compensation Executive compensation information is incorporated by reference from the 2022 Proxy Statement - Information on executive compensation is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders[742] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership details are incorporated by reference from the 2022 Proxy Statement - Information on security ownership and related stockholder matters is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders[743] Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans or Programs | | :------------------------------------------ | :------------------------------------------------------------------------ | :------------------------------------------------------------------------ | :------------------------------------------------------------------------------------------------------- | | Equity Compensation Plans Approved by Security Holders | 2,103,979 | $61.93 | 5,253,076 | | Equity Compensation Plans Not Approved by Security Holders | — | — | — | | Total | 2,103,979 | $61.93 | 5,253,076 | - The 2020 Omnibus Plan allows for fungible use of shares, with a three-to-one conversion factor for 'full value awards' (RSUs, PSUs) compared to stock options or stock appreciation rights[747] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships and related transactions, as well as director independence, is incorporated by reference from the 2022 Proxy Statement - Information on related person transactions and director independence is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders[748] Item 14. Principal Accounting Fees and Services Information concerning principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the 'Independent Registered Public Accountant' section in the Proxy Statement for the 2022 Annual Meeting of Shareholders[749] Part IV Item 15. Exhibits, Financial Statement Schedules This item lists the consolidated financial statements, four supplementary financial statement schedules, and a comprehensive Exhibit Index - The report includes consolidated financial statements, four financial statement schedules (Investments Other Than Investments in Related Parties, Parent Company Financial Statements, Supplementary Insurance Information, and Reinsurance Schedule), and an Exhibit Index[755][756] Item 16. Form 10-K Summary This item indicates that no Form 10-K Summary is included in the report - None[754] Exhibit Index The Exhibit Index lists corporate organizational documents, debt instruments, and equity compensation plans - The Exhibit Index lists corporate documents (Restated Certificate of Incorporation, Amended and Restated Bylaws), debt instruments (Indentures, Supplemental Indentures), credit agreements, and numerous equity compensation plan agreements[759][760][761][762][763] Power of Attorney A Power of Attorney authorizes key executives to execute and file amendments to the 2021 Form 10-K - Joseph P. Lacher, Jr., James J. McKinney, and Anastasios Omiridis are appointed as attorneys-in-fact to execute and file amendments to the 2021 Annual Report on Form 10-K[766] Signatures The 2021 Annual Report on Form 10-K was signed by Kemper's Chairman, CEO, and CFO - The 2021 Annual Report on Form 10-K was signed on February 10, 2022, by Joseph P. Lacher, Jr. (Chairman, President, CEO), James J. McKinney (EVP, CFO), Anastasios Omiridis (SVP, Deputy CFO), and other directors[768][770] Financial Statement Schedules This section includes four supplementary financial statement schedules detailing investments, financials, and reinsurance Schedule I - Investments Other Than Investments in Related Parties This schedule provides a detailed breakdown of Kemper's investment portfolio as of December 31, 2021, showing amortized cost and fair value for various asset classes Total Investments (Millions) (Dec 31, 2021) | Investment Type | Amortized Cost | Fair Value | | :------------------------------------------ | :------------- | :--------- | | Fixed Maturities | $7,358.2 | $7,986.9 | | Equity Securities at Fair Value | $830.6 | $830.6 | | Equity Securities at Modified Cost | $32.3 | XXX.X | | Equity Method Limited Liability Investments | $241.9 | XXX.X | | Alternative Energy Partnership Investments | $39.6 | XXX.X | | Convertible Securities at Fair Value | $46.4 | $46.4 | | Loans, Real Estate and Other Investments | $925.6 | XXX.X | | Short-term Investments | $284.1 | XXX.X | | Total Investments | $9,758.7 | $10,387.4 | Schedule II - Parent Company Financial Statements This schedule presents the standalone financial statements for Kemper Corporation, reporting a net loss in 2021 Parent Company Balance Sheets (Millions) (Dec 31, 2021 vs. 2020) | DOLLARS IN MILLIONS | 2021 | 2020 | | :-------------------------------- | :------- | :------- | | Total Assets | $4,995.5 | $5,672.5 | | Total Liabilities | $987.8 | $1,109.1 | | Total Shareholders' Equity | $4,007.7 | $4,563.4 | Parent Company Statements of Income (Millions) | DOLLARS IN MILLIONS | 2021 | 2020 | 2019 | | :------------------------------------------ | :------- | :------- | :------- | | Net Income (Loss) | $(120.5) | $409.9 | $531.1 | Parent Company Long-term Debt (Millions) (Dec 31, 2021 vs. 2020) | (Dollars in Millions) | 2021 | 2020 | | :-------------------------------- | :------- | :------- | | Term Loan due July 5, 2023 | $— | $49.9 | | Senior Notes Payable, 4.35% due 2025 | $449.0 | $448.8 | | Senior Notes Payable, 2.40% due 2030 | $396.2 | $395.8 | Schedule III - Supplementary Insurance Information This schedule provides supplementary insurance information by segment for earned premiums, claims, and benefits Earned Premiums by Segment (Millions) (2021) | Segment | Earned Premiums | | :-------------------------------- | :-------------- | | Specialty Property & Casualty Insurance | $3,948.5 | | Preferred Property & Casualty Insurance | $651.7 | | Life & Health Insurance | $653.5 | | Total | $5,253.7 | Insurance Claims and Benefits by Segment (Millions) (2021) | Segment | Insurance Claims and Benefits | | :-------------------------------- | :---------------------------- | | Specialty Property & Casualty Insurance | $3,593.7 | | Preferred Property & Casualty Insurance | $537.4 | | Life & Health Insurance | $469.7 | | Total | $4,600.8 | Schedule IV - Reinsurance Schedule This schedule details Kemper's reinsurance activities for gross, ceded, assumed, and net premiums Total Premiums (Millions) (2021) | Premiums | Gross Amount | Ceded to Other Companies | Assumed from Other Companies | Net Amount | | :-------------------------- | :----------- | :----------------------- | :--------------------------- | :--------- | | Life Insurance | $401.9 | $0.9 | $0.7 | $401.7 | | Accident and Health Insurance | $185.8 | $0.3 | $4.4 | $189.9 | | Property and Liability Insurance | $4,667.4 | $34.9 | $29.6 | $4,662.1 | | Total Premiums | $5,255.1 | $36.1 | $34.7 | $5,253.7 | Life Insurance in Force (Millions) (2021) | Life Insurance in Force | Gross Amount | Ceded to Other Companies | Assumed from Other Companies | Net Amount | | :---------------------- | :----------- | :----------------------- | :--------------------------- | :--------- | | 2021 | $20,287.7 | $372.3 | $144.5 | $20,059.9 |