CHICAGO, October 30, 2023 — Kemper Corporation (NYSE: KMPR) reported a net loss of $146.3 million, or $(2.28) per share, for the third quarter of 2023, compared to a net loss of $74.8 million, or $(1.17) per share, for the third quarter of 2022. Net loss for the third quarter 2023 included a $55.5 million after-tax non-cash charge related to the termination of Kemper’s remaining pension plan obligations, which was previously included within accumulated other comprehensive income (AOCI) and $22.9 million of after-tax net realized losses on investments.

Adjusted Consolidated Net Operating Loss1 was $27.9 million, or $(0.44) per share, for the third quarter of 2023, compared to Adjusted Consolidated Net Operating Loss1,2 of $27.0 million, or $(0.43) per share, for the third quarter of 2022.

•Specialty Auto Underlying Combined Ratio improved 1.5 points, sequentially

•Unfavorable prior year reserve development was largely associated with Florida Personal Injury Protection (PIP)

•Strategic initiatives on track to produce or exceed their targeted benefits

•Life business trends remain stable; consumer demand remains strong

“We continue to make strong progress toward profitability against an ongoing, dynamic operating environment.” said Joseph P. Lacher, Jr., President, CEO and Chairman. “We are encouraged by the incremental improvements in our underlying performance. The implementation of 30 points of California specialty auto rate, along with the cumulative benefits from our other actions, are providing a tailwind for the fourth quarter and full year 2024. In addition, this quarter we advanced our strategic initiatives, which are on track to produce or exceed the intended operational and financial targets.”

*NOTE: In third quarter 2023, the Company finalized the establishment of Kemper Reciprocal, an Illinois-domiciled reciprocal insurance exchange that began writing policies in September 2023. The results of Kemper Reciprocal are required to be consolidated under US GAAP.

Total revenues for the third quarter of 2023 decreased $162.1 million, or 11.9 percent, to $1,199.4 million, compared to the third quarter of 2022, mostly driven by $109.1 million of lower Specialty P&C earned premiums from a decrease in new business resulting from targeted actions to improve profitability, partially offset by higher average earned premium per exposure from rate increases. The decrease in total revenues was also driven by $40.0 million of lower Life earned premiums mostly due to the disposition of Kemper Health that was completed in December 2022, and a $23.1 million decrease in total revenues from Non-Core Operations.

Unless otherwise noted, (i) the segment results discussed below are presented on an after-tax basis, (ii) prior-year development includes both catastrophe and non-catastrophe losses and LAE, (iii) catastrophe losses and LAE exclude the impact of prior-year development, (iv) loss ratio includes loss and LAE, and (v) all comparisons are made to the prior year quarter unless otherwise stated.

The Specialty Property and Casualty Insurance segment reported net operating loss of $33.2 million for the third quarter of 2023, compared to net operating loss of $28.7 million in the third quarter of 2022. Results decreased due primarily to adverse prior year loss and LAE development, partially offset by an improvement in the Underlying Combined Ratio. Results for third quarter 2023 included $40.6 million of adverse prior year loss and LAE development from Florida personal injury protection driven by increased frequency and severity resulting from more litigated claim activity, mainly from policy years 2020 through 2022, and $23.9 million of adverse prior year loss and LAE development from bodily injury and property damage associated with claim activity from the second half of 2022. The segment’s Underlying Combined Ratio1 was 100.5 percent, compared to 106.8 percent in the third quarter of 2022. The improvement was primarily driven by higher average earned premiums per exposure resulting from rate increases and lower underlying claim frequency.

The Life Insurance segment reported net operating income of $14.7 million for the third quarter of 2023, compared to a net operating income of $14.0 million in the third quarter of 2022.

Total Shareholders’ Equity at the end of the quarter was $2,361.3 million, a decrease of $309.3 million, or 12 percent, since year-end 2022 primarily driven by the net loss for the year. Kemper and its direct non-insurance subsidiaries ended the quarter with cash and investments of $153.9 million, and $376.0 million of available borrowing capacity under the revolving credit agreement.

On August 2, 2023, Kemper announced that its Board of Directors declared a quarterly dividend of $0.31 per share, or $20.2 million. The dividend was paid on August 28, 2023 to its shareholders of record as of August 14, 2023.

Kemper ended the quarter with a book value per share of $36.85, a decrease of 12 percent from $41.79 at the end of 2022. Book Value Per Share Excluding Net Unrealized Losses on Fixed Maturities and Changes in the Discount Rate on Future Life Policyholder Benefits1 was $44.45, compared to $49.23 at the end of 2022.

4 Income related to Changes in Value of Alternative Energy Partnership Investments was $0.8 million for the three months ended September 30, 2023, compared to income of $0.4 million for the same period in 2022. Tax expense related to the Alternative Energy Partnership Investments was $0.2 million for the three months ended September 30, 2023, compared to tax expense of $0.1 million for the same period in 2022. This resulted in net income of $0.6 million and net income of $0.3 million attributable to Alternative Energy Partnership Investments for the three months ended September 30, 2023 and 2022, respectively.

4 Income related to Changes in Value of Alternative Energy Partnership Investments was $2.3 million for the nine months ended September 30, 2023, compared to a loss of $21.2 million for the same period in 2022. Tax expense related to the Alternative Energy Partnership Investments was $0.6 million for the nine months ended September 30, 2023, compared to tax benefit of $8.0 million for the same period in 2022. This resulted in net income of $1.7 million and a net loss of $13.2 million attributable to Alternative Energy Partnership Investments for the nine months ended September 30, 2023 and 2022, respectively.

Adjusted Consolidated Net Operating Loss1 is an after-tax, non-GAAP financial measure and is computed by excluding from Net Loss the after-tax impact of:

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 Net Loss. There were no applicable significant non-recurring items that Kemper excluded from the calculation of Adjusted Consolidated Net Operating Loss1 for the three and nine months ended September 30, 2023 or 2022.

Kemper believes that Adjusted Consolidated Net Operating Loss1 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 and Convertible Securities, Net Realized Investment (Losses) Gains and Impairment (Losses) Gains 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 Kemper’s investments, the timing of which is unrelated to the insurance underwriting process. Acquisition and Disposition Related Transaction, Integration, Restructuring and Other 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. Debt Extinguishment, Pension Settlement and Other Charges relate to (i) loss from early extinguishment of debt, which is driven by Kemper’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; (ii) settlement of pension plan obligations which are business decisions made by Kemper, the timing of which is unrelated to the underwriting process; and (iii) other charges that are non-standard, not part of the ordinary course of business, and unrelated to the insurance underwriting process.

Goodwill impairment charges are excluded because they are infrequent and non-recurring charges. Non-Core Operations includes the results of our Preferred Insurance business which we expect to fully exit. These results are excluded because they are irrelevant to our ongoing operations and do not qualify for Discontinued Operations under Generally Accepted Accounting Principles ("GAAP"). Significant non-recurring items are excluded because, by their nature, they are not indicative of Kemper’s business or economic trends.

The preceding non-GAAP financial measures should not be considered a substitute for the comparable GAAP financial measures, as they do not fully recognize the profitability of Kemper’s businesses.

A reconciliation of Net Loss to Adjusted Consolidated Net Operating Loss1 for the three and nine months ended September 30, 2023 and 2022 is presented below.

Diluted Adjusted Net Operating Loss Per Unrestricted Share1 is a non-GAAP financial measure computed by dividing Adjusted Net Operating Loss1 attributed to unrestricted shares by the weighted-average unrestricted shares and equivalent shares outstanding. The most directly comparable GAAP financial measure is Diluted Net Loss Per Unrestricted Share.

A reconciliation of Diluted Net Loss Per Unrestricted Share to Diluted Adjusted Net Operating Loss Per Unrestricted Share1 for the three and nine months ended September 30, 2023 and 2022 is presented below.

Book Value Per Share Excluding Net Unrealized Gains and Losses Losses on Fixed Maturities and the Change in Discount Rate on Future Life Policyholder Benefits1 is a calculation that uses a non-GAAP financial measure. It is calculated by dividing shareholders’ equity after excluding the after-tax impact of net unrealized gains and losses on fixed income securities and the change in discount rate on future life policyholder benefits by total Common Shares Issued and Outstanding. Book value per share is the most directly comparable GAAP financial measure. The Company uses the trends in book value per share excluding the after-tax impact of net unrealized gains and losses on fixed income securities and the change in discount rate on future life policyholder benefits 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 not influenced by management. The Company believes it enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers.

A reconciliation of the numerator used in the computation of Book Value Per Share Excluding Net Unrealized Gains and Losses on Fixed Maturities and the Change in Discount Rate on Future Life Policyholder Benefits1 and Book Value Per Share at September 30, 2023 and December 31, 2022 is presented below.

Underlying Combined Ratio1 is a non-GAAP financial measure. It is computed by adding the Current Year Non-catastrophe Losses and LAE Ratio with the Insurance Expense Ratio. The most directly comparable GAAP financial measure is the Combined Ratio, which is computed by adding Total Incurred Losses 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 Underlying Losses and LAE and the Underlying Combined Ratio are useful to investors and uses these financial measures to reveal the trends in Kemper’s Property & Casualty Insurance segment that may be obscured by catastrophe losses and prior-year reserve development. These catastrophe losses may cause Kemper’s 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 developments are 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 Kemper’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 Kemper’s underwriting performance.

Kemper will host its conference call to discuss third quarter 2023 results on Monday October 30th, at 5:00 p.m. Eastern (4:00 p.m. Central). The conference call will be accessible via the internet and by telephone at 888.259.6580, access code 15917686. To listen via webcast, register online at the investor section of kemper.com at least 15 minutes prior to the webcast to download and install any necessary software.

A replay of the call will be available online at the investor section of kemper.com.

More detailed financial information can be found in Kemper’s Investor Financial Supplement and Earnings Call Presentation for the third quarter of 2023, which is available at the investor section of kemper.com.

The Kemper family of companies is one of the nation’s leading specialized insurers. With approximately $13 billion in assets, Kemper is improving the world of insurance by providing affordable and easy-to-use personalized solutions to individuals, families and businesses through its Auto and Life brands. Kemper serves over 5.1 million policies, is represented by approximately 25,000 agents and brokers, and has approximately 8,400 associates dedicated to meeting the ever-changing needs of its customers.

Learn more about Kemper at kemper.com.

This press release 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. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Such statements involve known and unknown risks, uncertainties, and other factors, including but not limited to:

•changes in the frequency and severity of insurance claims;

•claim development and the process of estimating claim reserves;

•the impacts of inflation;

•changes in the interest rate environment;

•supply chain disruption;

•product demand and pricing;

•effects of governmental and regulatory actions;

•litigation outcomes and trends;

•investment risks;

•cybersecurity risks;

•impact of catastrophes; and

•other risks and uncertainties detailed in Kemper’s Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission (“SEC”).

Kemper assumes no obligation to publicly correct or update any forward-looking statements as a result of events or developments subsequent to the date of this press release.

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This Investor Supplement 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. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Such statements involve known and unknown risks, uncertainties, and other factors, including but not limited to:

•changes in the frequency and severity of insurance claims;

•claim development and the process of estimating claim reserves;

•the impacts of inflation;

•changes in the interest rate environment;

•supply chain disruption;

•product demand and pricing;

•effects of governmental and regulatory actions;

•litigation outcomes and trends;

•investment risks;

•cybersecurity risks;

•impact of catastrophes; and

•other risks and uncertainties detailed in Kemper’s Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission (“SEC”).

This document contains non-GAAP financial measures to analyze the Company’s operating performance for the periods presented. Because the Company’s calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company’s non-GAAP financial measures to those of other companies. For detailed disclosures on non-GAAP financial measures please refer to the “Definitions of Non-GAAP Financial Measures” on pages 31-34.

 

The Company has recast all prior period results included in this financial supplement to reflect a change in the calculation of Adjusted Consolidated Net Operating Loss to exclude the results of the Preferred Insurance business that we expect to fully exit. The results of this business, previously reported as a reportable segment, are now reflected as Non-Core Operations and presented as a reconciling item from Net Loss to Adjusted Consolidated Net Operating Loss. Prior period amounts have been recast to reflect the change in calculation of Adjusted Consolidated Operating Net Loss.

A reconciliation of reported and recasted measure of performance and metrics is provided below.