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What changed in KEMPER Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of KEMPER Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+473 added−390 removedSource: 10-K (2024-02-07) vs 10-K (2023-02-09)

Top changes in KEMPER Corp's 2023 10-K

473 paragraphs added · 390 removed · 322 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

76 edited+23 added−23 removed53 unchanged
Biggest changeOther In addition to the catastrophe loss exposures caused by natural events described above, Kemper’s property and casualty insurance companies are exposed to losses from catastrophic events that are not the result of acts of nature, such as acts of terrorism, the nature, occurrence and severity of which in any period cannot be accurately predicted.
Biggest changeFor each amount reinstated the Company shall pay additional premiums equal to the percentage of the reinsurer's loss limit for the excess layer exhausted for the loss occurrence multiplied by 100% of the reinsurance premium paid or payable for the excess layer for the term of the contract (50% of the reinsurance premium paid for $100 million excess of $150 million of the 2022 Reinsurance Contract). 7 Other In addition to the catastrophe loss exposures caused by natural events described above, Kemper’s property and casualty insurance companies are exposed to losses from catastrophic events that are not the result of acts of nature, such as acts of terrorism, the nature, occurrence and severity of which in any period cannot be accurately predicted.
See Item 1A., “Risk Factors,” under the caption, “ The ability of Kemper to service its debt, to pay dividends to its shareholders and/or make repurchases of its stock may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries. ” 12 Change in Control Requirements State insurance laws also impose requirements that must be met prior to a change of control of an insurance company or insurance holding company based on the insurer’s state of domicile and, in some cases, additional states in which the insurance subsidiary is deemed commercially domiciled.
See Item 1A., “Risk Factors,” under the caption, “ The ability of Kemper to service its debt, to pay dividends to its shareholders and/or make repurchases of its stock may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries. ” Change in Control Requirements State insurance laws also impose requirements that must be met prior to a change of control of an insurance company or insurance holding company based on the insurer’s state of domicile and, in some cases, additional states in which the insurance subsidiary is deemed commercially domiciled.
Kemper’s property and casualty insurance companies compete on the basis of, among other measures, (i) using suitable pricing 8 segmentation, (ii) maintaining underwriting discipline, (iii) settling claims timely and efficiently, (iv) offering products in selected markets or geographies, (v) utilizing technological innovations for the marketing and sale of insurance, (vi) controlling expenses, (vii) maintaining adequate ratings from A.M.
Kemper’s property and casualty insurance companies compete on the basis of, among other measures, (i) using suitable pricing segmentation, (ii) maintaining underwriting discipline, (iii) settling claims timely and efficiently, (iv) offering products in selected markets or geographies, (v) utilizing technological innovations for the marketing and sale of insurance, (vi) controlling expenses, (vii) maintaining adequate ratings from A.M.
On the privacy front, the California Consumer Privacy Act, as amended, by the California Privacy Rights Act (“CPRA”), which went into effect in January 2023, among other things, requires companies to provide privacy notices and respond to any request made to the company by a California resident regarding his or her personal information used or maintained by the company outside the scope of the GLBA privacy laws.
On the privacy front, the California Consumer Privacy Act, as amended, by the California Privacy Rights Act (“CPRA”), which went into effect in January 2023, among other things, requires companies to provide privacy notices and 12 respond to any request made to the company by a California resident regarding his or her personal information used or maintained by the company outside the scope of the GLBA privacy laws.
Further, because the level of insured losses that could occur in any one year cannot be accurately predicted, these losses contribute to material year-to-year fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more likely to occur at certain times within the year than others.
Further, because the level of insured losses that could occur in any one year cannot be accurately predicted, these losses contribute to material year-to-year fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more likely to occur at 6 certain times within the year than others.
Our total rewards are a vital part of the employee experience at Kemper and are designed to add value to our business and promote the health and well-being of all employees. 14 Kemper is focused on investing in the physical, emotional, financial and social well-being of our people by providing a wide range of benefits.
Our total rewards are a vital part of the employee experience at Kemper, and are designed to add value to our business and promote the health and well-being of all employees. Kemper is focused on investing in the physical, emotional, financial and social well-being of our people by providing a wide range of benefits.
Gramm-Leach-Bliley Act The federal Gramm-Leach-Bliley Act requires financial institutions, including insurers, to protect the privacy of non-public information, to restrict use of such information and disclosure to non-affiliated third parties, and to provide notices to customers regarding use of their non-public personal information and an opportunity to “opt out” of certain disclosures.
Federal Regulation The federal Gramm-Leach-Bliley Act requires financial institutions, including insurers, to protect the privacy of non-public information, to restrict use of such information and disclosure to non-affiliated third parties, and to provide notices to customers regarding use of their non-public personal information and an opportunity to “opt out” of certain disclosures.
Privacy and Cybersecurity Regulation The Company is subject to numerous federal and state laws and state insurance regulations that impose significant requirements and standards for protecting personally identifiable information of insurance company policyholders, employees, and other individuals.
Privacy and Cybersecurity Regulation and Oversight The Company is subject to numerous federal and state laws and state insurance regulations that impose significant requirements and standards for protecting personally identifiable information of insurance company policyholders, employees, and other individuals.
Best and providing competitive services to agents and policyholders. 10 Investments The quality, nature and amount of the various types of investments that can be made by insurance companies are regulated by state laws.
Best and providing competitive services to agents and policyholders. Investments The quality, nature and amount of the various types of investments that can be made by insurance companies are regulated by state laws.
See the discussions of the Company’s investments under the headings “Investment Results,” “Investment Quality and Concentrations,” “Investments in Limited Liability Companies and Limited Partnerships,” “Liquidity and Capital Resources” and “Critical Accounting Estimates,” in the MD&A, “Quantitative and Qualitative Disclosures about Market Risk,” in Item 7A and Note 9, “Investments,” Note 10, “Income from Investments,” Note 11, “Derivatives,” and Note 12, “Fair Value Measurements,” to the Consolidated Financial Statements.
See the discussions of the Company’s investments under the headings “Investment Results,” “Investment Quality and Concentrations,” “Investments in Limited Liability Companies and Limited Partnerships,” “Liquidity and Capital Resources” and “Critical Accounting Estimates,” in the MD&A, “Quantitative and Qualitative Disclosures about Market Risk,” in Item 7A and Note 10, “Investments,” Note 11, “Income from Investments,” Note 12, “Derivatives,” and Note 13, “Fair Value Measurements,” to the Consolidated Financial Statements.
See Note 7, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for a tabular reconciliation of the three most recent annual periods setting forth the Company’s Property and Casualty Insurance Reserves as of the beginning of each year, incurred losses and LAE for insured events of the current year, changes in incurred losses and LAE for insured events of prior years, payments of losses and LAE for insured events of the current year, payments of losses and LAE for insured events of prior years and the Company’s Property and Casualty Insurance Reserves at the end of the year and additional information regarding the nature of adjustments to incurred losses and LAE for insured events of prior years.
See Note 6, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for a tabular reconciliation of the three most recent annual periods setting forth the Company’s Property and Casualty Insurance Reserves as of the beginning of each year, incurred losses and LAE for insured events of the current year, changes in incurred losses and LAE for insured events of prior years, payments of losses and LAE for insured events of the current year, payments of losses and LAE for insured events of prior years and the Company’s Property and Casualty Insurance Reserves at the end of the year and additional information regarding the nature of adjustments to incurred losses and LAE for insured events of prior years.
ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. The discussions throughout this 2022 Annual Report utilize ISO’s definition of catastrophes. The process of estimating and establishing reserves for catastrophe losses is inherently uncertain and the actual ultimate cost of a claim, net of reinsurance recoveries, may vary materially from the estimated amount reserved.
ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. The discussions throughout this 2023 Annual Report utilize ISO’s definition of catastrophes. The process of estimating and establishing reserves for catastrophe losses is inherently uncertain and the actual ultimate cost of a claim, net of reinsurance recoveries, may vary materially from the estimated amount reserved.
Item 1. Business. Kemper is a diversified insurance holding company, with subsidiaries that provide automobile, homeowners, life, and other insurance products to individuals and businesses.
Item 1. Business. Kemper is a diversified insurance holding company, with subsidiaries that provide automobile, life, and other insurance products to individuals and businesses.
The Company’s insurance subsidiaries also purchase reinsurance from the Florida Hurricane Catastrophe Fund (the “FHCF”) for hurricane losses in Florida at retentions lower than those described below for the Company’s catastrophe reinsurance program. The 2023 catastrophe reinsurance program covering the property and casualty insurance companies is provided by a combination of annual and multi-year excess of loss reinsurance contracts.
The Company’s insurance subsidiaries also purchase reinsurance from the Florida Hurricane Catastrophe Fund (the “FHCF”) for hurricane losses in Florida at retentions lower than those described below for the Company’s catastrophe reinsurance program. The 2024 catastrophe reinsurance program covering the property and casualty insurance companies is provided by a combination of the annual and multi-year excess of loss reinsurance contracts.
Total rewards includes both benefits and compensation (base salary, short- and long-term incentives). Kemper is committed to providing a robust and market competitive total rewards package that enable us to attract and retain the talent we need to grow our company, and achieve our results.
Total rewards includes both benefits and compensation (base salary, short- and long-term incentives). Kemper is committed to providing a robust and market competitive total rewards package that enables us to attract and retain the talent we need to grow our company, and achieve our results.
Under the 2022 Reinsurance Contract, the percentage of coverage is 31.66% for each year in the three-year period, and participation of each reinsurer remains the same over the entire three-year period. Accordingly, the 2022 Reinsurance Contract provides coverage for 31.67% of losses on individual catastrophes of $200 million in excess of $50 million in 2023.
Under the 2022 Reinsurance Contract, the percentage of coverage is 31.66% for each year in the three-year period, and participation of each reinsurer remains the same over the entire three-year period. Accordingly, the 2022 Reinsurance Contract provides coverage for 31.67% of losses on individual catastrophes of $200 million in excess of $50 million in 2024.
Financial Reports and Standards Insurance companies are required to report their financial condition and results of operations in accordance with statutory accounting principles prescribed or permitted by state insurance regulators in conjunction with the National Association of Insurance Commissioners (“NAIC”).
Financial Reports and Standards Insurance companies are required to report their financial condition and results of operations in accordance with statutory accounting practices prescribed or permitted by state insurance regulators in conjunction with the National Association of Insurance Commissioners (“NAIC”).
Kemper’s property and casualty insurance companies wrote less than 1% of the industry’s 2021 premium volume. The property and casualty insurance industry is highly competitive, particularly with respect to personal automobile insurance.
Kemper’s property and casualty insurance companies wrote less than 1% of the industry’s 2022 premium volume. The property and casualty insurance industry is highly competitive, particularly with respect to personal automobile insurance.
Kemper’s strategic intent is focused on empowering each employee on our team to Act Like an Owner. This concept describes one of the most important parts of executing on our purpose—our employees—and infuses our ownership culture in everything we do.
Kemper’s strategic intent is focused on empowering each employee on our team to Act Like an Owner to deliver on our promises to our stakeholders. This concept describes one of the most important parts of executing on our purpose—our employees—and infuses our ownership culture in everything we do.
See Note 7, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for information about incurred and paid claims development for the 2018-2022 accident years as of December 31, 2022, net of reinsurance and indemnification, as well as cumulative claim frequency and the total of incurred but not reported (“IBNR”) liabilities, including expected development on reported claims included within the net incurred losses and allocated LAE amounts as of December 31, 2022.
See Note 6, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for information about incurred and paid claims development for the 2019-2022 accident years as of December 31, 2023, net of reinsurance and indemnification, as well as cumulative claim frequency and the total of incurred but not reported (“IBNR”) liabilities, including expected development on reported claims included within the net incurred losses and allocated LAE amounts as of December 31, 2023.
These benefits include, but are not limited to: • Health insurance including medical, dental, vision and prescription drug coverage • Life and disability insurance • Tax-advantaged Flexible Spending Accounts for health care and dependent care • Health Savings Accounts for the High-Deductible Health Plan, including a company match • 401(k) retirement savings program, including a company match and 100% vesting upon hire • Employee Stock Purchase Program (ESPP) • Employee Assistance & Work/Life Program (EAP) • Tuition reimbursement • Adoption assistance • Employee discount programs • Voluntary benefit programs • Leave and time off programs • Flexible work arrangements based on function and role • Wellness resources, including diabetes, hypertension, weight management and pregnancy support • Commuter benefits • Benefits navigation COVID-19 Response and Future Working Model Kemper’s top priority in responding to the COVID-19 pandemic over the past three years has been to ensure the health, safety, and well-being of our employees, agents, and customers.
These include, but are not limited to: • Health insurance including medical, dental, vision and prescription drug coverage • Life and disability insurance • Tax-advantaged Flexible Spending Accounts for health care and dependent care • Health Savings Accounts for the High-Deductible Health Plan, including a company match • 401(k) retirement savings program, including a company match and 100% vesting upon hire • Employee Stock Purchase Program (ESPP) • Employee Assistance & Work/Life Program (EAP) • Tuition reimbursement • Adoption assistance • Employee discount programs • Voluntary benefit programs • Leave and time off programs • Flexible work arrangements based on function and role • Wellness resources, including diabetes, hypertension, weight management and pregnancy support • Commuter benefits • Benefits navigation Future of Work Kemper’s top priority in responding to the COVID-19 pandemic was to ensure the health, safety, and well-being of our employees, agents, and customers.
Changes in the Company’s estimates of these losses and LAE, also referred to as “development,” will occur over time and may be material.
Changes in the Company’s estimates of these losses and LAE, also referred to as “development,” will occur over time and have been and in the future may be material.
Premiums for policies sold by the Kemper Home Service Companies are set at levels designed to cover the relatively high cost of “in-home” servicing of such policies. As a result, Kemper Home Service Companies’ premiums have a higher expense load than the life insurance industry average. Competition Based on the most recent data published by A.M.
Premiums for policies sold by the Life Insurance segment are set at levels designed to cover the relatively high cost of “in-home” servicing of such policies. As a result, the Life Insurance segment premiums have a higher expense load than the life insurance industry average. Competition Based on the most recent data published by A.M.
Pricing assumptions are based on the experience of Kemper’s life and health insurance subsidiaries, as well as the industry in general, depending on the factor being considered. The actual profit or loss produced by a product will vary from the anticipated profit if the actual experience differs from the assumptions used in pricing the product.
Pricing assumptions are based on the experience of the Life Insurance segment, as well as the industry in general, depending on the factor being considered. The actual profit or loss produced by a product will vary from the anticipated profit if the actual experience differs from the assumptions used in pricing the product.
State Percentage of Total Premiums California 53 % Florida 19 % Texas 16 % The Specialty Property & Casualty Insurance segment provides personal and commercial automobile insurance to consumers who have had difficulty obtaining standard or preferred risk insurance, usually because of their driving records, claims experience or premium payment history.
State Percentage of Total Premiums California 53 % Florida 20 % Texas 15 % The Specialty Property & Casualty Insurance segment provides personal automobile insurance to consumers who have had difficulty obtaining standard or preferred risk insurance, usually because of their driving records, claims experience or premium payment history.
Kemper’s commitment to Own Your Career is closely tied to our Act Like An Owner culture, and offers individuals the opportunity for skill building, developing talents, and opportunities to connect with peers and managers who will support employees on their path forward. Engagement with Company Culture Employee engagement is a critical element in driving the Company’s culture and success.
Kemper’s commitment 14 to Own Your Career is closely tied to our Act Like an Owner culture, and offers individuals the opportunity for skill building, talent development, and opportunities to connect with peers and managers to support employees on their path forward. Engagement with Company Culture Employee engagement is a critical element in driving the Company’s culture and success.
With nearly $13.4 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, Personal Insurance, and Life brands.
With nearly $12.7 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 Kemper Auto and Kemper Life brands.
Best, as of the end of 2021, there were 402 life and health insurance company groups in the United States. The Company’s Life & Health Insurance segment ranked in the top 25% of life and health insurance company groups, as measured by net admitted assets, net premiums written and capital and surplus.
Best, as of the end of 2022, there were 389 life and health insurance company groups in the United States. The Company’s Life Insurance segment ranked in the top 29% of life and health insurance company groups, as measured by net admitted assets, net premiums written and capital and surplus.
The Company conducts its operations through three operating segments: Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance and Life & Health Insurance. The Company conducts its operations solely in the United States.
The Company conducts its operations through two operating segments: Specialty Property & Casualty Insurance and Life Insurance. The Company conducts its operations solely in the United States.
For further discussion of the reinsurance programs, see Note 23, “Catastrophe Reinsurance,” and Note 24, “Other Reinsurance,” to the Consolidated Financial Statements.
For further discussion of the reinsurance programs, see Note 25, “Catastrophe Reinsurance,” and Note 26, “Other Reinsurance,” to the Consolidated Financial Statements.
Annual Excess of Loss Reinsurance Contract The 2023 Annual Excess of Loss Contracts provide coverage for the annual period of January 1, 2023 through December 31, 2023. The 2023 Annual Excess of Loss Contracts provide coverage in four layers for losses on individual catastrophes of $275 million in excess of $50 million.
Annual Excess of Loss Reinsurance Contract The 2024 Annual Excess of Loss Contracts provide coverage for the annual period of January 1, 2024 through December 31, 2024. The 2024 Annual Excess of Loss Contracts provide coverage in two layers for losses on individual catastrophes of $190 million in excess of $50 million.
Multi-year Excess of Loss Reinsurance Contracts The first multi-year excess of loss reinsurance contract provides coverage over the three-year period of January 1, 2021 through December 31, 2023 (the “2021 Reinsurance Contract”). The 2021 Reinsurance Contract provides coverage in two layers, which together provide coverage for losses on individual catastrophes of $200 million in excess of $50 million.
Multi-year Excess of Loss Reinsurance Contract The multi-year excess of loss reinsurance contract provides coverage over the three-year period of January 1, 2022 through December 31, 2024 (the “2022 Reinsurance Contract”). The 2022 Reinsurance Contract provides coverage in two layers, which together provide coverage for losses on individual catastrophes of $200 million in excess of $50 million.
Rankings by net admitted assets, net premiums written and capital and surplus were: Ordinal Percentile Measurement Rank Rank Net Admitted Assets 91 77 % Net Written Premiums 89 78 Capital and Surplus 99 75 Kemper’s life and health insurance subsidiaries generally compete by using appropriate pricing, offering products to selected markets or geographies, controlling expenses, maintaining adequate ratings from A.M.
Rankings by net admitted assets, net premiums written and capital and surplus were: Ordinal Percentile Measurement Rank Rank Net Admitted Assets 96 75 % Net Written Premiums 107 72 Capital and Surplus 112 71 Kemper’s life and health insurance subsidiaries generally compete by using appropriate pricing, offering products to selected markets or geographies, controlling expenses, maintaining adequate ratings from A.M.
Property and Casualty Insurance Business General The Company’s property & casualty insurance business operations are conducted primarily through the Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segments. The Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segments distribute their products primarily through independent agents and brokers who are paid commissions for their services.
Property and Casualty Insurance Business General The Company’s property & casualty insurance business operations are conducted primarily through the Specialty Property & Casualty Insurance segment. The Specialty Property & Casualty Insurance segment distributes these products primarily through independent agents and brokers who are paid commissions for their services.
Property and Casualty Loss and Loss Adjustment Expense Reserves The Company’s reserves for losses and LAE for property and casualty insurance (“Property and Casualty Insurance Reserves”) are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid.
This rate cannot exceed 30% of the Exchange’s gross written and assumed premiums. 5 Property and Casualty Loss and Loss Adjustment Expense Reserves The Company’s reserves for losses and LAE for property and casualty insurance (“Property and Casualty Insurance Reserves”) are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid.
Approval of Policy Rates and Forms The majority of Kemper’s insurance operations are in states requiring prior approval by regulators before proposed policy or coverage forms and rates for insurance policies may be implemented and used.
Some of these matters are discussed in more detail below. 11 Approval of Policy Rates and Forms The majority of Kemper’s insurance operations are in states requiring prior approval by regulators before proposed policy or coverage forms and rates for insurance policies may be implemented and used.
In addition, the Life and Health Insurance segment’s career agents also sell contents coverage for personal property to its customers. Collectively, these segments provide preferred automobile, specialty automobile, homeowners, renters, fire, umbrella, general liability as an endorsement to commercial automobile and other types of property and casualty insurance to individuals and commercial automobile insurance to businesses.
In addition, the Life Insurance segment’s career agents also sell contents coverage for personal property to its customers against loss resulting from fire, lighting and other causes. Collectively, these segments provide specialty automobile, fire/contents, and other types of property and casualty insurance to individuals and commercial automobile insurance, and general liability as an endorsement to commercial automobile, to businesses.
Kemper serves over 5.3 million policies, is represented by more than 29,000 agents and brokers, and has approximately 9,500 associates dedicated to meeting the ever-changing needs of its customers. The Company is engaged, through its subsidiaries, in the property and casualty insurance and life and health insurance businesses.
Kemper serves over 4.9 million policies, is represented by more than 23,700 agents and brokers, and has approximately 8,100 associates dedicated to meeting the ever-changing needs of its customers. The Company is engaged, through its subsidiaries, in the property and casualty insurance and life insurance businesses.
State departments of insurance and certain federal agencies adopted implementing regulations as required by federal law. State Laws and Regulations In recent years, state insurance regulators have focused increasing attention on cybersecurity.
State departments of insurance and certain federal agencies adopted implementing regulations as required by federal law. In addition, SEC rules require disclosure regarding cybersecurity oversight and incidents. State Laws and Regulations In recent years, state insurance regulators have focused increasing attention on cybersecurity.
Rankings by net admitted assets, net premiums written and capital and surplus were: Ordinal Percentile Measurement Rank Rank Net Admitted Assets 49 96 % Net Written Premiums 29 97 Capital and Surplus 75 93 In 2021, the U.S. property and casualty insurance industry’s estimated net premiums written were $720.1 billion, of which nearly 81% were accounted for by the top 50 groups of property and casualty insurance companies.
Rankings by net admitted assets, net premiums written and capital and surplus were: Ordinal Percentile Measurement Rank Rank Net Admitted Assets 49 96 % Net Written Premiums 32 97 Capital and Surplus 69 94 In 2022, the U.S. property and casualty insurance industry’s estimated net premiums written were $782.3 billion, of which nearly 81% were accounted for by the top 50 groups of property and casualty insurance companies.
The Company derives a significant portion of its earned premiums in two such states, California and Florida. See MD&A under the caption “Specialty Property & Casualty Insurance” and “Preferred Property & Casualty Insurance.” Competition Based on the most recent annual data published by A.M.
The Company derives a significant portion of its earned premiums in two such states, California and Florida. See MD&A under the caption “Specialty Property & Casualty Insurance”. Competition Based on the most recent annual data published by A.M. Best, as of the end of 2022, there were 1,110 property and casualty insurance groups in the United States.
The Life & Health Insurance segment’s lapse ratio for individual life insurance was 6%, 3%, and 4% in 2022, 2021 and 2020 respectively. The customer base served by the Kemper Home Service Companies and competing life insurance companies tends to have a higher incidence of lapse than other demographic segments of the population.
The Life Insurance segment’s lapse ratio for individual life insurance was 5%, 6%, and 3% in 2023, 2022 and 2021 respectively. The customer base served by the Life Insurance segment tends to have a higher incidence of lapse than other demographic segments of the population.
As the face amounts of the Company’s issued policies are relatively small, the ceded risks and corresponding premiums are also relatively small, particularly when compared to other companies in the industry. The segment is also exposed to losses from catastrophes arising from insurance policies distributed by career agents of the Kemper Home Service Companies.
As the face amounts of the Company’s issued policies are relatively small, the ceded risks and corresponding premiums are also relatively small, particularly when compared to other companies in the industry. The segment is also exposed to losses from catastrophes arising from insurance policies for contents coverage for personal property.
These modifications impose new reporting requirements and substantially expand the oversight and examination powers of state insurance regulators to assess enterprise risks within the entire holding company system that may arise from both insurance and non-insurance subsidiaries. They also impose new reporting requirements on affiliated transactions and divestiture of a controlling interest in an insurance subsidiary.
These modifications impose new reporting requirements and substantially expand the oversight and examination powers of state insurance regulators to assess enterprise risks within the entire holding company system that may arise from both insurance and non-insurance subsidiaries.
However, there remains uncertainty regarding the future of the Dodd-Frank Act and how it may impact our business. Additional regulations or new requirements may emerge from activities of various regulatory entities, including the Federal Reserve Board, FIO, FSOC, NAIC and the International Association of Insurance Supervisors (“IAIS”), that are evaluating solvency and capital standards for insurance company groups.
Additional regulations or new requirements may emerge from activities of various regulatory entities, including the Federal Reserve Board, FIO, FSOC, NAIC and the International Association of Insurance Supervisors (“IAIS”), that are evaluating solvency and capital standards for insurance company groups.
In addition, insurance regulatory authorities perform periodic examinations of an insurer’s financial condition, market conduct activities and other affairs. Some of these matters are discussed in more detail below.
In addition, insurance regulatory authorities perform periodic examinations of an insurer’s financial condition, market conduct activities and other affairs.
At December 31, 2022, the total amount of capital held by each of Kemper’s insurance subsidiaries exceeded the minimum levels required under applicable RBC requirements. 11 Guaranty Funds and Risk Pools Kemper’s insurance subsidiaries are required to pay assessments up to prescribed levels to fund policyholder losses or liabilities of insolvent insurance companies under the guaranty fund laws of most states in which they transact business.
Guaranty Funds and Risk Pools Kemper’s insurance subsidiaries are required to pay assessments up to prescribed levels to fund policyholder losses or liabilities of insolvent insurance companies under the guaranty fund laws of most states in which they transact business.
See Note 23, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for a discussion of the factors that influence the process of estimating and establishing reserves for catastrophes. 6 Reinsurance The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and reinsurance.
Reinsurance The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and reinsurance.
See Item 1A., “Risk Factors,” under the caption “ Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial condition ” for a discussion of catastrophe risk.
See Item 1A., “Risk Factors,” under the caption “ Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial condition ” for a discussion of catastrophe risk. See Note 25, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for a discussion of the factors that influence the process of estimating and establishing reserves for catastrophes.
Kemper provides valuable opportunities for personal development and professional challenge at all stages of careers, from early career programs including internships and rotational development programs to leadership development. Kemper promotes individual growth and development through various programs and outlets, including the Own Your Career initiative.
Employee Development Kemper’s long-term success is inextricably linked to our employees’ development and engagement. Kemper provides valuable opportunities for personal development and professional challenge at all career stages, from early career programs including internships and rotational development programs to leadership development. Individual growth and development are promoted through various programs and outlets, including the Own Your Career initiative.
The approach is supported by three key work models: Office-based, Hybrid, and Remote-Based. This is designed to continue to attract and retain a high performing workforce, cultivate a culture that supports teamwork and collaboration, remain highly adaptive to environmental changes, and continue to deliver promises to customers. 15
This is designed to continue to attract and retain a high performing workforce, cultivate a culture that supports teamwork and collaboration, remain highly adaptive to environmental changes, and continue to deliver on our promises to customers. 15
Department of the Treasury (“Treasury”). The FIO monitors the insurance industry, provides advice to the Financial Stability Oversight Council (“FSOC”), represents the U.S. on international insurance matters, and studies the current regulatory system. The Dodd-Frank Act includes a number of financial reforms and regulations that may affect our business and financial reporting.
The Dodd-Frank Act also created the Federal Insurance Office (“FIO”) within the U.S. Department of the Treasury (“Treasury”). The FIO monitors the insurance industry, provides advice to the Financial Stability Oversight Council (“FSOC”), represents the U.S. on international insurance matters, and studies the current regulatory system.
Kemper’s subsidiaries employ approximately 9,500 associates supporting their operations, of which approximately 4,700 are employed in the Specialty Property & Casualty Insurance Segment, approximately 550 are employed in the Preferred Property & Casualty Insurance segment, approximately 3,150 are employed in the Life & Health Insurance segment and the remainder are employed in various corporate and other staff and shared functions.
Kemper’s subsidiaries employ approximately 8,100 associates supporting their operations, of which approximately 2,900 are employed in the Specialty Property & Casualty Insurance Segment, approximately 3,000 are employed in the Life Insurance segment and the remainder are employed in various corporate and other functions.
The Company specialized in the sale of supplemental accident & health insurance products such as: Medicare Supplement, fixed hospital indemnity, home health care, specified disease, and accident-only plans. Reserve National distributed products through two channels, Kemper Traditional and Kemper Benefits.
Reserve National was based in Oklahoma City, Oklahoma, and was licensed in 49 states and the District of Columbia. The Company specialized in the sale of supplemental accident & health insurance products such as: Medicare Supplement, fixed hospital indemnity, home health care, specified disease, and accident-only plans.
Other Federal Government Regulation Dodd-Frank Wall Street Reform and Consumer Protection Act and Other Financial Reform Efforts As part of an effort to strengthen the regulation of the financial services market, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted in 2010. The Dodd-Frank Act also created the Federal Insurance Office (“FIO”) within the U.S.
They also impose new reporting requirements on affiliated transactions and divestiture of a controlling interest in an insurance subsidiary. 13 Other Federal Government Regulation Dodd-Frank Wall Street Reform and Consumer Protection Act and Other Financial Reform Efforts As part of an effort to strengthen the regulation of the financial services market, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted in 2010.
Among all personal lines automobile insurance writers, Kemper’s property and casualty group was the 11th largest writer as measured by net written premiums in 2021.
Kemper’s property and casualty group was among the top 6% of property and casualty insurance groups in the United States as measured by net written premiums, policyholders’ surplus and net admitted assets in 2022. Among all personal lines automobile insurance writers, Kemper’s property and casualty group was the 12th largest writer as measured by net written premiums in 2022.
Property and Casualty Insurance Reserves by business segment at December 31, 2022 and 2021 were: DOLLARS IN MILLIONS 2022 2021 Business Segments: Specialty Property & Casualty Insurance $ 2,321.1 $ 2,319.7 Preferred Property & Casualty Insurance 419.1 433.2 Life & Health Insurance 2.3 3.6 Total Business Segments 2,742.5 2,756.5 Unallocated Reserves 14.4 16.2 Total Property & Casualty Insurance Reserves $ 2,756.9 $ 2,772.7 5 In estimating the Company’s Property and Casualty Insurance Reserves, the Company’s actuaries exercise professional judgment and must consider, and are influenced by, many variables that are difficult to quantify.
Property and Casualty Insurance Reserves at December 31, 2023 and 2022 were: DOLLARS IN MILLIONS 2023 2022 Business Segments: Specialty Property & Casualty Insurance: Personal Automobile Insurance $ 1,711.9 $ 1,875.8 Commercial Automobile Insurance 596.8 445.3 Life Insurance: Fire/Contents Protection 2.9 2.3 Total Segment Property and Casualty Insurance Reserves 2,311.6 2,323.4 Non-Core Operations 356.4 419.1 Unallocated Reserves 12.5 14.4 Total Property and Casualty Insurance Reserves $ 2,680.5 $ 2,756.9 In estimating the Company’s Property and Casualty Insurance Reserves, the Company’s actuaries exercise professional judgment and must consider, and are influenced by, many variables that are difficult to quantify.
In the event that the Company’s incurred catastrophe losses and LAE covered by its catastrophe reinsurance program exceed the retention for a particular layer, the program allows for one reinstatement of such coverage. In such an instance, the Company must pay a reinstatement premium to the reinsurers to reinstate the full amount of the limit available under such layer.
Reinstatement of Excess of Loss Reinsurance Contracts In the event that the Company’s incurred catastrophe losses and LAE covered by its catastrophe reinsurance program exceed the retention for a particular layer, the program allows for one reinstatement of such coverage.
State Percentage of Total Premiums Texas 22 % Louisiana 11 Alabama 8 Mississippi 6 Georgia 5 Kemper Home Service Companies The Kemper Home Service Companies, based in St. Louis, Missouri, focus on providing individual life and supplemental accident and health insurance products to customers of modest incomes who desire basic protection for themselves and their families.
The Life Insurance segment, primarily based in St. Louis, Missouri, focuses on providing individual life and supplemental accident and health insurance products to customers of modest incomes who desire basic protection for themselves and their families.
Preferred Property & Casualty Insurance The Preferred Property & Casualty Insurance segment, based in Chicago, Illinois, conducts business in 45 states and the District of Columbia. As shown in the following table, five states provided 66% of the segment’s premium revenues in 2022.
Specialty Property & Casualty Insurance The Specialty Property & Casualty Insurance segment, based in Chicago, Illinois, conducts business in 31 states under the Kemper Auto brand. As shown in the following table, three states provided 88% of the segment’s premium revenues in 2023.
The Company continues to adhere to local, state and federal safety guidelines. As the business landscape has shifted, Kemper has pro-actively responded by evolving to more defined working models to stay competitive. The Future of Work initiative was deployed in 2022 to focus on creating a framework for how the company drives a multifaceted approach to work location.
As the business landscape has shifted following the pandemic, Kemper has proactively responded by evolving our working models to stay competitive. Kemper’s Future of Work initiative was deployed in 2022 to focus on creating a framework for a multifaceted approach to work location. The approach is supported by three key work models: Office-based, Hybrid, and Remote-based.
A company’s requirements are calculated based on an RBC formula and compared to its total adjusted capital to determine whether regulatory intervention is warranted.
A company’s requirements are calculated based on an RBC formula and compared to its total adjusted capital to determine whether regulatory intervention is warranted. At December 31, 2023, the total amount of capital held by each of Kemper’s insurance subsidiaries exceeded the minimum levels required under applicable RBC requirements.
Pricing Premiums for life and health insurance products are based on assumptions with respect to mortality, morbidity, investment yields, expenses, and lapses and are also affected by state laws and regulations, as well as competition.
Thus, to maintain or increase the level of its business, the Life Insurance segment must write a higher volume of new policies than competitors serving other demographic segments of the population. 10 Pricing Premiums for life insurance products are based on assumptions with respect to mortality, morbidity, investment yields, expenses, and lapses and are also affected by state laws and regulations, as well as competition.
These values are also critical to the sound operation of our business and contribute to a positive work experience for our employees. Kemper provides a variety of tools and resources to ensure that these values ultimately result in an environment that’s welcoming for every member of the Kemper community.
Kemper provides a variety of tools and resources to ensure that these values ultimately result in an environment that’s welcoming for every member of the Kemper community. Kemper maintains an open communication environment to all employees that features multiple channels for reporting instances of fraud, theft, violence, and misconduct.
Kemper is committed to driving our DE&I efforts within our workforce, workplace, and marketplace, as outlined below: • Workplace: Maintain an inclusive workplace culture where all colleagues believe they can own their career while contributing to the success of the company • Workforce: Our workforce reaches its fullest potential by attracting, developing, and retaining diverse talent • Marketplace: Our business growth in the marketplace is driven by our ability to grow the Kemper brand in diverse communities throughout our footprint Compliance and Ethics A culture that includes compliance and ethical behaviors is key to protecting the Company from actions that could negatively impact our reputation and business results.
Kemper is committed to driving our DE&I efforts within our workforce, workplace , and marketplace, as outlined below: • Workplace: Maintain an inclusive “Act Like an Owner” workplace culture where all employees can own their career while contributing to the success of the company • Workforce: Our workforce reaches its fullest potential by attracting, developing , and retaining diverse talent • Marketplace: Sustain a competitive advantage in the underserved markets we serve via strategic partnerships and community engagement.
In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation arising out of events covered by the policy. 4 Specialty Property & Casualty Insurance The Specialty Property & Casualty Insurance segment, based in Chicago, Illinois, conducts business in 28 states under the Kemper Auto brand.
Casualty insurance primarily covers liability for damage to property of, or injury to, a person or entity other than the insured. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation arising out of events covered by the policy.
In addition, Kemper encourages employees to reach out to their direct manager, another manager, the Kemper Corporate Responsibility Hotline or Human Resources with any compliance or ethical misconduct questions or concerns. Employee Development Kemper’s long-term success is inextricably linked to our employee’s development and engagement.
Our compliance reporting protocol enhances our efforts to foster a culture of integrity and ethical behavior while facilitating corrective actions necessary to address identified problems. In addition, Kemper encourages employees to reach out to their direct manager, another manager, the Kemper Corporate Responsibility Hotline , or Human Resources with any compliance or ethical misconduct questions or concerns.
The Kemper Home Service Companies employ nearly 2,350 career agents, operating in 25 states and the District of Columbia. These career agents are full-time employees who call on customers in their homes to sell insurance products, provide services related to policies in force and collect premiums, typically monthly.
These career agents are full-time employees who call on customers in their homes to sell insurance products, provide services related to policies in force and collect premiums, typically monthly. These career agents also distribute and/or service contents coverage for personal property providing coverage against loss resulting from fire, lightning, and other causes.
See Item 1A., “Risk Factors,” under the caption “ The insurance industry is highly competitive, making it difficult to grow profitability and within expectations of investors. ” Life and Health Insurance Business The Company’s Life & Health Insurance segment consists of Kemper’s wholly-owned subsidiaries, United Insurance Company of America (“United Insurance”), The Reliable Life Insurance Company (“Reliable”), Union National Life Insurance Company (“Union National Life”), Mutual Savings Life Insurance Company (“Mutual Savings Life”), United Casualty Insurance Company of America (“United Casualty”), Union National Fire Insurance Company (“Union National Fire”), Mutual Savings Fire Insurance Company (“Mutual Savings Fire”), Kemper Bermuda Ltd.
See Item 1A., “Risk Factors,” under the caption “ The insurance industry is highly competitive, making it difficult to grow profitability and within expectations of investors. ” 8 Life Insurance Business General The Company’s life & health insurance business operations are conducted primarily through the Life Insurance segment.
Our culture enables everyone, at every level, to take authority and accountability for their respective roles and responsibilities and strive towards high performance.
Our culture enables everyone, at every level, to take authority and accountability for their respective roles and responsibilities and strive towards high performance. We promote this through dynamic, diverse , and innovative team members who act like owners and are continually driven by intellectual curiosity, analytic superiority, and being world class operators.
Reserve National Reserve National, which was sold on December 1, 2022, is based in Oklahoma City, Oklahoma, and licensed in 49 states and the District of Columbia. For further discussion of the Reserve National Disposition, see Note 5, “Dispositions,” to the Consolidated Financial Statements.
For further discussion of the Reserve National Disposition, see Note 4, “Dispositions,” to the Consolidated Financial Statements. The Life Insurance segment employs nearly 2,300 career agents, operating in 26 states and the District of Columbia.
Their leading product is ordinary life insurance, including permanent and term insurance. Face amounts of these policies are lower than those of policies typically sold to higher income customers by other companies in the life insurance industry. During 2022, approximately 74% of the Life & Health Insurance segment’s premium revenues are generated by the Kemper Home Service Companies.
Face amounts of these policies are lower than those of policies typically sold to higher income customers by other companies in the life insurance industry. Premiums average approximately $28 per policy per month with an average face value of $6,308.
Kemper Benefits sold voluntary worksite products in the employer market place through Employee Benefit brokers and enrollers. In total, Reserve National had approximately 3,100 independent agents appointed. 9 Reinsurance Consistent with insurance industry practice, the Company’s life and health insurance subsidiaries utilize reinsurance arrangements to limit their maximum loss, provide greater diversification of risk and minimize exposures on larger risks.
Reinsurance Consistent with insurance industry practice, the Company’s Life insurance segment utilizes reinsurance arrangements to limit its maximum loss, provide greater diversification of risk and minimize exposures on larger risks.
The 2023 Annual Excess of Loss Contract provides 35.67% coverage in two layers of losses on individual catastrophes of $200 million in excess of $50 million. The 2023 Annual Excess of Loss Contract then provides 95% coverage in two layers of losses on individual catastrophes of $75 million in excess of $250 million.
The 2024 Annual Excess of Loss Contract provides 53.33% coverage on the first layer of losses on individual catastrophes of $100 million in excess of $50 million. The second layer provides 63.33% coverage on the losses on individual catastrophes of $90 million in excess of $150 million.
As discussed below, United Insurance, Reliable, Union National Life, Mutual Savings Life, United Casualty, Union National Fire and Mutual Savings Fire (the “Kemper Home Service Companies”) distribute their products through a network of employee, or “career” agents. These career agents are paid commissions for their services.
The Life Insurance segment distributes its products through a network of employee, or “career” agents. These career agents are paid commissions for their services. Earned premiums from the life insurance segment accounted for 7%, of the Company’s consolidated insurance premiums earned in 2023 and 2022, respectively, and 6% of the Company’s insurance premium earned in 2021.
The segment also meets the insurance needs of other specialty markets such as urban and Hispanic consumers. The segment’s insurance products accounted for 77%, 75% and 71% of the Company’s consolidated insurance premiums in 2022, 2021 and 2020, respectively. The segment’s insurance products are marketed through approximately 21,100 independent agents and brokers.
The segment’s insurance products accounted for 80%, 78% and 76% of the Company’s consolidated insurance premiums in 2023, 2022 and 2021, respectively. The segment’s insurance products are marketed through approximately 16,800 independent agents and brokers. In the third quarter of 2023 the Company established Kemper Reciprocal (the “Reciprocal Exchange” or “Exchange”), an Illinois-domiciled reciprocal insurance exchange.
Removed
Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property. Casualty insurance primarily covers liability for damage to property of, or injury to, a person or entity other than the insured.
Added
In the third quarter of 2023, the Company announced that it will exit the Preferred Property and Casualty Insurance business and will actively reduce the business beginning in third quarter 2023, with all policies being non-renewed or canceled in accordance with applicable state regulations.
Removed
As shown in the following table, three states provided 88% of the segment’s premium revenues in 2022.
Added
As a result, the Company will no longer provide preferred automobile, homeowners insurance or other personal insurance. 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNotwithstanding these efforts, the Company’s data systems, as well as those of third party administrators and other business partners working on behalf of the Company, are vulnerable to security breaches due to the increasing sophistication and frequency of cyber attacks, viruses, ransomware, spyware and other malware and infiltration methods, hackers and other external hazards, as well as equipment and system failures and inadvertent errors, negligence or intentional misconduct of employees and/or contractors.
Biggest changeCyber attacks feature increasing sophistication and frequency and include the use of viruses, ransomware, spyware and other malware and infiltration methods. In addition, the Company has exposure through equipment and system failure and as a result of the conduct of our employees and contractors (through inadvertent error, negligence or intentional misconduct).
If the Company overestimates the severity or frequency of claims and other factors in determining the rates to charge for insurance products, the rates for the Company’s products could be noncompetitive and result in loss of revenue and market share. 16 Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial condition.
If the Company overestimates the severity or frequency of claims and other 16 factors in determining the rates to charge for insurance products, the rates for the Company’s products could be noncompetitive and result in loss of revenue and market share. Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial condition.
If our controls designed to ensure compliance with guidelines, policies and legal and regulatory standards are not effective, the Company could be adversely affected. Kemper’s business is highly dependent on its ability engage on a real-time basis in a large number of insurance underwriting, claim processing and investment activities, and these are highly sophisticated yet complicated and constantly evolving.
If our controls designed to ensure compliance with guidelines, policies and legal and regulatory standards are not effective, the Company could be adversely affected. Kemper’s business is highly dependent on its ability to engage on a real-time basis in a large number of insurance underwriting, claim processing and investment activities, and these are highly sophisticated, complicated and constantly evolving.
It is not possible for the Company to predict such shifts in legal or regulatory enforcement or to accurately estimate the impact they may have on the Company and its operations. One area where the legal and regulatory landscape experienced significant change is in connection with the mandated use of death verification databases by life insurance companies.
It is not possible for the Company to predict such shifts in legal or regulatory enforcement or to accurately estimate the impact they may have on the Company and its operations. 19 One area where the legal and regulatory landscape experienced significant change is in connection with the mandated use of death verification databases by life insurance companies.
In addition, laws and regulations 17 requiring prior approval of policy forms and premium rates may limit the ability of Kemper’s property and casualty insurance subsidiaries to increase rates or deductibles on a timely basis, which may result in additional losses or lower returns than otherwise would have occurred in an unregulated market.
In addition, laws and regulations requiring prior approval of policy forms and premium rates may limit the ability of Kemper’s property and casualty insurance subsidiaries to increase rates or deductibles on a timely basis, which may result in additional losses or lower returns than otherwise would have occurred in an unregulated market.
In addition, projections of expenses and implementation schedules could change materially and costs could escalate over time, while the ultimate utility of a technology initiative could deteriorate over time or system development 21 projects may not deliver the benefits or perform as expected.
In addition, projections of expenses and implementation schedules could change materially and costs could escalate over time, while the ultimate utility of a technology initiative could deteriorate over time or system development projects may not deliver the benefits or perform as expected.
Risks Relating to Servicing Debt, Paying Dividends and/or Fund Targeted Transactions The ability of Kemper to service its debt, pay dividends to its shareholders and/or fund targeted transactions may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries.
Risks Relating to Servicing Debt, Paying Dividends and/or Funding Targeted Transactions The ability of Kemper to service its debt, pay dividends to its shareholders and/or fund targeted transactions may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries.
Increases in the estimates of ultimate losses and LAE will decrease earnings, while decreases in these estimates will increase earnings, as reported by the Company in the results of its operations for the periods in which the changes to the estimates are made.
For example, increases in the estimates of ultimate losses and LAE will decrease earnings, while decreases in these estimates will increase earnings, as reported by the Company in the results of its operations for the periods in which the changes to the estimates are made.
Kemper’s ability to achieve 23 the anticipated financial benefits from transactions may not be realized due to any number of factors, including, but not limited to, integration or execution difficulties or failures that may result in substantial disruptions, costs, or delays and adversely affect the Company’s ability to compete, the loss of key agents/brokers, customers or employees, unexpected or underestimated liabilities, increased costs, fees, expenses and charges related to transactions, or may be delayed by factors outside of the Company’s control.
Kemper’s ability to achieve 24 the anticipated financial benefits from transactions may not be realized due to any number of factors, including, but not limited to, integration or execution difficulties or failures that may result in substantial disruptions, costs, or delays and adversely affect the Company’s ability to compete, the loss of key agents/brokers, customers or employees, unexpected or underestimated liabilities, increased costs, fees, expenses and charges related to transactions, or may be delayed by factors outside of the Company’s control.
General Risks Relating to Mergers, Acquisitions, Divestitures, and/or other Strategic Initiatives The expected benefits and synergies from mergers, acquisitions, divestitures, and/or other new strategic initiatives may not be realized to the extent anticipated or within the anticipated time frames.
General Risks Relating to Mergers, Acquisitions, Divestitures, and/or other Strategic Initiatives The expected benefits and synergies from mergers, acquisitions, divestitures, and/or other strategic initiatives may not be realized to the extent anticipated or within the anticipated time frames.
A reduction in income tax rates could also reduce the demand for tax-preferenced securities and result in a decline in the value of the Company’s investment portfolio of such securities. 22 The Company’s entire investment portfolio is subject to broad risks inherent in the financial markets, including, but not limited to, inflation, regulatory changes, inactive capital markets, governmental and social stability, economic outlooks, unemployment, and recession.
A reduction in income tax rates could also reduce the demand for tax-preferenced securities and result in a decline in the value of the Company’s investment portfolio of such securities. 23 The Company’s entire investment portfolio is subject to broad risks inherent in the financial markets, including, but not limited to, inflation, regulatory changes, inactive capital markets, governmental and social stability, economic outlooks, unemployment, and recession.
If the Company were to experience several significant catastrophic events over a relatively short period of time, investments may have to be sold in advance of their maturity dates to fund payments to claimants, which could result in realized losses. Additionally, increases in illiquidity in the financial markets may increase uncertainty in the valuations of the Company’s investments.
For example, if the Company were to experience several significant catastrophic events over a relatively short period of time, investments may have to be sold in advance of their maturity dates to fund payments to claimants, which could result in realized losses. Additionally, increases in illiquidity in the financial markets may increase uncertainty in the valuations of the Company’s investments.
Developments and the market’s perception thereof in any of these concentrations may exacerbate the negative effects on the Company’s investment portfolio compared to other companies.
Developments in and the market’s perception of any of these concentrations may exacerbate the negative effects on the Company’s investment portfolio compared to other companies.
Readers are advised to consider all of these factors along with the other information included in this 2022 Annual Report, including the factors set forth under the caption “Caution Regarding Forward-Looking Statements”, and to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.
Readers are advised to consider all of these factors along with the other information included in this 2023 Annual Report, including the factors set forth under the caption “Caution Regarding Forward-Looking Statements”, and to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.
Competitive success is based on many factors, including, but not limited to, the following: • Competitiveness of prices charged for insurance policies; • Sophistication of pricing segmentation; • Design and introduction of insurance products to meet emerging consumer trends; • Ability to attract and retain experienced industry talent; • Selection and retention of agents and other business partners; • Compensation paid to agents; • Underwriting discipline; • Selectiveness of sales markets; • Effectiveness of marketing materials and name recognition; • Product and technological innovation; • Effectiveness of online servicing platforms; • Ability to settle claims timely and efficiently; • Ability to detect and prevent fraudulent insurance claims; • Effectiveness of deployment and use of information technology across all aspects of operations; • Ability to control operating expenses; • Financial strength ratings; and • Quality of services provided to, and ease of doing business with, independent agents and brokers or policyholders.
Competitive success is based on many factors, including, but not limited to, the following: • Competitiveness of prices charged for insurance policies; • Sophistication of pricing segmentation; • Design and introduction of insurance products to meet emerging consumer trends; • Ability to attract and retain experienced industry talent; • Selection and retention of agents and other business partners; • Compensation paid to agents; • Underwriting discipline; • Selectiveness of sales markets; • Effectiveness of marketing materials and name recognition; • Product and technological innovation; • Effectiveness of online servicing platforms; • Ability to settle claims timely, efficiently, and without incurring extra-contractual liability; • Ability to detect and prevent fraudulent insurance claims; • Effectiveness of deployment and use of information technology across all aspects of operations; • Ability to control operating expenses; • Financial strength ratings; and • Quality of services provided to, and ease of doing business with, independent agents, brokers, or policyholders.
Because of restrictions placed on the Company’s ability to increase premium rates in certain states, including California, a pricing inadequacy may continue for a prolonged period. These pricing inadequacies have had and could continue to have a material impact on the Company’s operating results in recent periods.
Because of restrictions placed on the Company’s ability to increase premium rates in certain states, including California, a pricing inadequacy may continue for a prolonged period. These pricing inadequacies have had a material impact on the Company’s operating results in recent periods and may impact operating results in future periods.
An increase in interest rates or credit spreads would generally reduce the carrying value of the Company’s investment portfolio, particularly fixed income securities, and limited liability investment companies and limited partnerships accounted for under the equity method of accounting (“Equity Method Limited Liability Investments”) that invest in distressed and mezzanine debt of other companies that exhibit debt-like characteristics.
An increase in interest rates or credit spreads generally reduces the carrying value of the Company’s investment portfolio, particularly fixed income securities, and limited liability investment companies and limited partnerships accounted for under the equity method of accounting (“Equity Method Limited Liability Investments”) that invest in distressed and mezzanine debt of other companies that exhibit debt-like characteristics.
For example, in recent periods, the effects of inflation, including as a result of post-event damage surge, have increased catastrophe losses, and this could continue in the future. Furthermore, the Company could experience more than one severe catastrophic event in any given period.
The effects of inflation could increase the severity of claims resulting from a catastrophe. For example, in recent periods, the effects of inflation, including as a result of post-event damage surge, have increased catastrophe losses, and this could continue in the future. Furthermore, the Company could experience more than one severe catastrophic event in any given period.
If the Company’s controls are not effective (including with respect to the prevention or identification of misconduct by employees or others with whom we do business), it could lead to financial loss, unanticipated risk exposure (including 20 underwriting, credit and investment risk), errors in financial reporting, litigation, regulatory proceedings or damage to our reputation.
If the Company’s controls are not effective (including with respect to the prevention or identification of misconduct by employees or others with whom we do business), it could lead to financial loss, unanticipated risk exposure (including underwriting, credit and investment risk), errors in financial reporting, litigation (including actions seeking extra-contractual damages), regulatory proceedings or damage to our reputation.
Risks Relating to Security of Personal Data, Availability of Critical Systems, and Technology Initiatives Failure to protect against system security breaches that compromise personal data held by the Company or its business partners could result in business interruption, legal and consulting fees, regulatory penalties, litigation, lost business, reputational harm, and other liabilities and expenses.
Risks Relating to Security of Personal Data, Availability of Critical Systems, and Technology Initiatives Failure to protect against cyber attacks or other exposures that compromise data, including personal data, held by the Company could result in business interruption, legal and consulting fees, regulatory penalties, litigation, lost business, reputational harm, and other liabilities and expenses.
For information about the Company’s pending legal proceedings, see Note 26, “Contingencies,” to the Consolidated Financial Statements. Changes in the availability of insurance coverage or in the ability of insurers to meet their obligations could result in the Company being exposed to significant losses.
For information about the Company’s pending legal proceedings, see Note 28, “Commitments and Contingencies,” to the Consolidated Financial Statements. 20 Changes in the availability of insurance coverage or in the ability of insurers to meet their obligations could result in the Company being exposed to significant losses.
A change in any one or more of the factors is likely to result in a projected ultimate loss that is different than the previous projected ultimate loss and may have a material impact on the Company’s estimates.
A change in any one or more of the factors, such as that relating to Florida PIP coverage, will likely result in a projected ultimate loss that is different than the previous projected ultimate loss and may have a material impact on the Company’s estimates.
The realization of deferred tax assets depends on the recognition of sufficient taxable income and character. If future events differ from our current forecasts, it is possible we could determine that some or all of our gross deferred tax assets cannot be realized and a deferred tax valuation allowance would be recorded as an adverse charge.
If future events differ from our current forecasts, it is possible we could determine that some or all of our gross deferred tax assets cannot be realized and a deferred tax valuation allowance would be recorded as an adverse charge.
The following are examples of economic market conditions that could adversely affect the Company’s financial condition, liquidity, and results of operations: • Volatility in debt and equity markets • Changes in interest rates • Increases in inflation • Reduced availability of credit • Economic downturns • Increased unemployment and reduced consumer spending Stressed conditions, volatility and disruptions in global capital markets or financial asset classes could adversely affect our investment portfolio. 24 The Company’s deferred tax assets could become impaired which would adversely impact the Company’s results of operations and financial condition .
The following are examples of economic market conditions that could adversely affect the Company’s financial condition, liquidity, and results of operations: • Volatility in debt and equity markets • Changes in interest rates • Increases in inflation • Reduced availability of credit • Economic downturns • Increased unemployment and reduced consumer spending Stressed conditions, volatility and disruptions in global capital markets or financial asset classes could adversely affect our investment portfolio and the Company’s ability to access the capital markets.
Financial strength ratings are used to assess the financial strength and quality of insurers. Ratings agencies may downgrade the ratings of Kemper and/or its insurance subsidiaries or require Kemper to retain more capital in its insurance businesses to maintain existing ratings following developments that they deem negative.
Ratings agencies may downgrade the ratings of Kemper and/or its insurance subsidiaries or require Kemper to retain more capital in its insurance businesses to maintain existing ratings following developments that they deem negative.
While technology developments can facilitate the use and enhance the value of data and analytics, streamline business processes and ultimately reduce the cost of operations, technology initiatives can present significant economic and organizational challenges to the Company and potential short-term cost and implementation risks.
The Company may periodically initiate multi-year technology projects to enhance operations or replace systems. While technology developments can facilitate the use and enhance the value of data and analytics, streamline business processes and ultimately reduce the cost of operations, technology 22 initiatives can present significant economic and organizational challenges to the Company and potential short-term cost and implementation risks.
The actual impact of one or more catastrophic events could adversely and materially differ from these projections. Kemper’s life insurance subsidiaries are particularly exposed to risks of catastrophic mortality, such as pandemics or other events that result in large numbers of deaths. For example, the COVID-19 pandemic resulted in increased mortality that had an adverse impact on our Life business.
The actual impact of one or more catastrophic events could adversely and materially differ from these projections. Kemper’s life insurance subsidiaries are particularly exposed to risks of catastrophic mortality, such as pandemics or other events that result in large numbers of deaths.
If Kemper is unable to send or accept electronic payments, our business and financial results could be adversely affecte d. The Company relies increasingly on electronic payments from policyholders, including, but not limited to, payment by credit and debit cards.
These failures could result in significant loss of business, increased costs, fines and other adverse consequences. If Kemper is unable to send or accept electronic payments, our business and financial results could be adversely affecte d. The Company relies increasingly on electronic payments from policyholders, including, but not limited to, payment by credit and debit cards.
Additionally, in recent years, various types of investors have increasingly sought to participate in the insurance industry. Well-capitalized new entrants to the property and casualty insurance industry, or existing competitors that receive substantial infusions of capital or access to third-party capital, provide increasing competition, which may adversely impact our business and profitability.
Well-capitalized new entrants to the property and casualty insurance industry, or existing competitors that receive substantial infusions of capital or access to third-party capital, provide increasing competition, 18 which may adversely impact our business and profitability.
Generally, participation in these pools and associations is based on an insurer’s market share determined on a state-wide basis. Accordingly, even though Kemper’s property and casualty insurance subsidiaries may not incur a direct insured loss as a result of managing direct catastrophe exposures, they may incur indirect losses from required participation in pools and associations.
Accordingly, even though Kemper’s property and casualty insurance subsidiaries may not incur a direct insured loss as a result of managing direct catastrophe exposures, they may incur indirect losses from required participation in pools and associations.
Kemper’s property and casualty insurance subsidiaries also manage their exposure to catastrophe losses through underwriting strategies such as reducing exposures in, or withdrawing from, catastrophe-prone areas, establishing appropriate guidelines for insurable structures, and setting appropriate rates, deductibles, exclusions and policy limits.
Kemper’s property and casualty insurance subsidiaries also manage their exposure to catastrophe losses through underwriting strategies such as reducing exposures in, or withdrawing from, catastrophe-prone areas, establishing underwriting guidelines, and setting appropriate rates, deductibles, exclusions and policy limits. The extent to which Kemper’s subsidiaries can manage their exposure through these strategies may be limited by law or regulatory action.
See the risk factor below titled “ The impact of COVID-19 and related economic conditions could materially affect Kemper’s results of operations, financial position and/or liquidity. ” The process of estimating property and casualty insurance reserves is complex and imprecise.
See the risk factor below titled “ The impact of COVID-19 and related economic conditions could materially affect Kemper’s results of operations, financial position and/or liquidity .” The process of estimating life insurance reserves is complex and imprecise. The reserves established by the Company are inherently uncertain estimates and could prove to be inadequate.
The insurance industry is highly competitive, making it difficult to grow profitability and within expectations of investors. The Company’s insurance businesses face significant competition, and their ability to compete is affected by a variety of issues relative to others in the industry, such as management effectiveness, product pricing, service quality, ease of doing business, innovation, financial strength and name recognition.
The Company’s insurance businesses face significant competition, and their ability to compete is affected by a variety of issues relative to others in the industry, such as management effectiveness, product pricing, service quality, ease of doing business, innovation, financial strength and name recognition. Additionally, in recent years, various types of investors have increasingly sought to participate in the insurance industry.
These failures could result in significant loss of business, increased costs, fines and other adverse consequences. Technology initiatives could present significant economic and competitive challenges to the Company. Failure to complete and implement such initiatives in a timely manner could result in the loss of business and incurrence of internal use software development costs that may not be recoverable.
Technology initiatives could present significant economic and competitive challenges to the Company. Failure to complete and implement such initiatives in a timely manner could result in the loss of business and incurrence of internal use software development costs that may not be recoverable. Data and analytics play an increasingly important role in the insurance industry.
Best in the ratings of Kemper’s insurance subsidiaries below A-, particularly those operating in the preferred and standard market or offering homeowners insurance, could result in a substantial loss of business if independent agents and brokers or policyholders move to other companies with higher claims-paying and financial strength ratings.
Best in the ratings of Kemper’s insurance subsidiaries below A- could result in a substantial loss of business if independent agents and brokers or policyholders move to other companies with higher claims-paying and financial strength ratings. Any substantial loss of business could materially and adversely affect the financial condition and results of operations of such subsidiaries.
These developments and significant changes in, or new interpretations of, existing laws and regulations could make it more expensive for Kemper’s insurance subsidiaries to conduct and grow their businesses which could materially impact the Company’s operating results. 19 Kemper has a significant concentration of personal automobile insurance business in California and Florida, and negative developments in the regulatory, legal or economic conditions in these states may adversely affect the Company’s profitability.
These developments and significant changes in, or new interpretations of, existing laws and regulations could make it more expensive for Kemper’s insurance subsidiaries to conduct and grow their businesses which could materially impact the Company’s operating results.
A decrease in interest rates may have a negative impact on the funded status of the plans. The nature and cash flow needs of the Company present certain liquidity risks that may impact the return of the investment portfolio.
The nature and cash flow needs of the Company present certain liquidity risks that may impact the return of the investment portfolio.
Risks Relating to Competition A downgrade in the ratings of Kemper or its insurance subsidiaries below A- could materially and adversely affect the Company. Third-party rating agencies assess the financial strength and rate the claims-paying ability of insurance companies based on criteria established by the rating agencies. Third-party ratings are important competitive factors in the insurance industry.
Third-party rating agencies assess the financial strength and rate the claims-paying ability of insurance companies based on criteria established by the rating agencies. Third-party ratings are important competitive factors in the insurance industry. Financial strength ratings are used to assess the financial strength and quality of insurers.
The availability of these coverages could be significantly reduced in the future and there is no guarantee that if coverage is available it will be in an amount sufficient to cover the losses of one or more covered incidents or on terms that Kemper finds acceptable.
There is no guarantee that if coverage is available it will be in an amount sufficient to cover the losses of one or more covered incidents or on terms that Kemper finds acceptable. An insurer’s insolvency or inability to make payments under the insurance coverage it provides to Kemper could also result in Kemper being exposed to significant losses.
An insurer’s insolvency or inability to make payments under the insurance coverage it provides to Kemper could also result in Kemper being exposed to significant losses. The Company could be adversely affected by future changes in U.S. Federal income tax laws Changes to tax laws or interpretation of such laws could increase Kemper’s corporate tax and reduce earnings.
The Company could be adversely affected by future changes in U.S. Federal or Bermuda income tax laws. Changes to tax laws or interpretation of such laws could increase Kemper’s corporate tax and reduce earnings.
From time to time these systems have been, and may again be, adversely affected or disrupted by cyber attacks or other data breaches, natural and man-made catastrophes or other significant events.
Certain technology-based service providers provide a sizable portion of our IT infrastructure, platforms software and related IT services. From time to time these systems have been, and may again be, adversely affected or disrupted by cyber attacks, other data breaches, natural and man-made catastrophes, human action or error or other significant events.
Any substantial loss of business could materially and adversely affect the financial condition and results of operations of such subsidiaries. A downgrade in Kemper’s credit rating by Standard & Poor’s (“S&P”), Moody’s Investors Services (“Moody’s”) or Fitch Ratings (“Fitch”) may reduce Kemper’s ability to cost-effectively access the capital markets or may increase the cost to refinance existing debt.
A downgrade in Kemper’s credit rating by Standard & Poor’s (“S&P”), Moody’s Investors Services (“Moody’s”) or Fitch Ratings (“Fitch”) may reduce Kemper’s ability to cost-effectively access the capital markets or may increase the cost to refinance existing debt. The insurance industry is highly competitive, making it difficult to grow profitability and within expectations of investors.
Changes in any of these conditions could negatively impact the Company's results of operations. Legal and regulatory proceedings are unpredictable and could produce one or more unexpected outcomes that could materially and adversely affect the Company’s financial results for any given period.
Legal and regulatory proceedings are unpredictable and could produce one or more unexpected outcomes that could materially and adversely affect the Company’s financial results for any given period. Kemper and its subsidiaries are from time to time involved in lawsuits, regulatory inquiries and other legal proceedings arising out of the ordinary course of their businesses.
See “Competition” in Item 1 of Part I for more information on the competitive rankings in the property and casualty insurance markets and the life insurance markets, respectively, in the United States. 18 Risks Relating to Legal and Regulatory Environment Kemper’s insurance subsidiaries are subject to significant regulation, and the evolving legal and regulatory landscape in which they operate could result in increased operating costs, reduced profitability and limited growth.
Risks Relating to Legal and Regulatory Environment Kemper’s insurance subsidiaries are subject to significant regulation, and the evolving legal and regulatory landscape in which they operate could result in increased operating costs, reduced profitability and limited growth. Kemper’s insurance subsidiaries operate under an extensive insurance regulatory system.
Kemper maintains insurance coverage to limit its risk exposure to certain perils, including cybersecurity, errors and omissions, directors and officers liability insurance, and other financial indemnity coverages.
Kemper maintains insurance coverage to limit its risk exposure to certain perils, including cybersecurity, errors and omissions, directors and officers liability insurance, fiduciary, insurance company professional liability and other financial indemnity coverages. The market for certain of these coverages has tightened over recent periods and the availability of these coverages could be significantly reduced in the future.
The extent of the Company’s losses from a catastrophe is a function of both the total amount of its insured exposure in the geographic area affected by the event and the severity of the event. The effects of inflation could increase the severity of claims resulting from a catastrophe.
The extent of the Company’s losses from a catastrophe is a function of both the total amount of its insured exposure in the geographic area affected by the event and the severity of the event. In recent periods, the Company has experienced significant catastrophe losses relating to tropical storm activity as well as rain and hail events.
For a more detailed discussion of the regulations applicable to Kemper’s subsidiaries and related emerging developments, see “Regulation” in Item 1. These laws and regulations, and their application by regulators and courts, are subject to continuous interpretation and revision. The legal and regulatory landscape within which Kemper’s insurance subsidiaries conduct their businesses is often unpredictable.
These laws and regulations, and their application by regulators and courts, are subject to continuous interpretation and revision. The legal and regulatory landscape within which Kemper’s insurance subsidiaries conduct their businesses is often unpredictable. As industry practices and regulatory, judicial, political, social and other conditions change, new issues may emerge.
The extent to which Kemper’s subsidiaries can manage their exposure through these strategies may be limited by law or regulatory action. For example, laws and regulations may limit the rate or timing at which insurers may not renew insurance policies in catastrophe-prone areas or require insurers to participate in wind pools and joint underwriting associations.
For example, laws and regulations may limit the rate or timing at which insurers may not renew insurance policies in catastrophe-prone areas or require insurers to participate in wind pools and joint underwriting associations. Generally, participation in these pools and associations is based 17 on an insurer’s market share determined on a state-wide basis.
Some lawsuits may seek class action status that, if granted, could expose the Company to potentially significant liability by virtue of the size of the punitive classes. These matters often raise difficult factual and legal issues and are subject to uncertainties and complexities.
Some of these proceedings may involve matters particular to Kemper or one or more of its subsidiaries, while others may pertain to industry business practices. Some lawsuits may seek class action status that, if granted, could expose the Company to potentially significant liability by virtue of the size of the punitive classes.
The Company uses an array of sophisticated security measures and policies and procedures designed to enhance security of the Company’s data systems.
These exposures can create or increase the Company’s vulnerability to the loss or misuse of its data. The Company uses an array of security measures, with policies and procedures designed to secure this information and the Company’s data systems.
California and Florida represented 69% of the Company’s total personal automobile insurance gross written premiums in 2022. Consequently, the dynamic nature of regulatory, legal, competitive and economic conditions in these states affects Kemper’s revenues and profitability.
Kemper has a significant concentration of personal automobile insurance business in California and Florida, and negative developments in the regulatory, legal or economic conditions in these states may adversely affect the Company’s profitability. California and Florida represented 71% of the Company’s total personal automobile insurance gross written premiums in 2023.
Furthermore, these adverse events could result in a decrease in the estimated fair value of goodwill or other intangible assets established as a result of such transactions, triggering an impairment. Failure to successfully and timely realize the anticipated benefits of these transactions or initiatives could have a negative impact on Kemper’s financial condition, profitability, and results from operations.
These adverse events could result in a decrease in the estimated fair value of goodwill or other intangible assets established as a result of such transactions, triggering an impairment. In addition, the Company’s strategic initiatives, such as the establishment of Kemper Reciprocal, may not perform as expected or deliver the expected benefits to the Company.
These delays can adversely impact Kemper’s business, especially where external factors, such as the COVID-19 pandemic, may result in a pricing imbalance for the Company’s insurance products. Insurance regulators conduct periodic examinations of Kemper’s insurance subsidiaries and can suspend or delay operations or licenses, require corrective actions, and impose penalties or other remedies available for compliance failures.
Insurance regulators conduct periodic examinations of Kemper’s insurance subsidiaries and can suspend or delay operations or licenses, require corrective actions, and impose penalties or other remedies available for compliance failures. For a more detailed discussion of the regulations applicable to Kemper’s subsidiaries and related emerging developments, see “Regulation” in Item 1.
System security breaches can result in data loss, business interruption, reputational damages, ransom demands, investigations and litigation. The Company has been and may continue to be exposed to damages, regulatory penalties and other liabilities, reputational risk and significant increases in compliance and litigation costs.
The Company has been and will continue to be exposed to damages, regulatory penalties and other liabilities, reputational risk and significant increases in compliance and litigation costs as a result of these occurrences, which could have a material adverse impact on our financial condition and results of operations.
See the risk factor below titled “The impact of COVID-19 and related economic conditions could materially affect Kemper’s results of operations, financial position and/or liquidity.” In addition, the occurrence of such an event in a concentrated geographic area could have a severe disruptive effect on the Company’s workforce and business operations.
For example, during the COVID-19 pandemic, the Company experienced increased mortality that had an adverse impact on our Life business. In addition, the occurrence of a pandemic or other catastrophes in a concentrated geographic area could have a severe disruptive effect on the Company’s workforce and business operations.
Kemper subsidiaries must also file annual and quarterly financial reports and holding company reports. Pre-approval requirements often restrict or delay actions to implement premium rate changes for insurance policies, or to introduce new, or make changes to existing, policy forms and many other actions.
Pre-approval requirements often restrict or delay actions to implement premium rate changes for insurance policies, or to introduce new, or make changes to existing, policy forms and many other actions. These delays can adversely impact Kemper’s business, especially where external factors, such as inflation, may result in a pricing imbalance for the Company’s insurance products.
For example, in Florida, recent unfavorable court decisions to the insurance industry for Florida personal injury protection (“PIP”) resulting in increased severity in PIP coverage has resulted in significant adverse loss and LAE reserve development in 2021. Further, both California and Florida have regulations that limit the after-tax return on underwriting profit allowed for an insurer.
Consequently, the dynamic nature of regulatory, legal, competitive and economic conditions in these states affects Kemper’s revenues and profitability. For example, in Florida, recent court decisions were unfavorable to the insurance industry relating to Florida PIP coverage and have resulted in increased severity in PIP coverage and significant adverse loss and LAE reserve development in 2023.
Removed
Kemper’s insurance subsidiaries operate under an extensive insurance regulatory system.
Added
In recent periods, these estimates have been impacted by reserve developments related to Florida personal injury protection (“PIP”) coverage.
Removed
As industry practices and regulatory, judicial, political, social and other conditions change, new issues may emerge.
Added
See the risk factor below titled “ Kemper has a significant concentration of personal automobile insurance business in California and Florida, and negative developments in the regulatory, legal or economic conditions in these states may adversely affect the Company’s profitability. ” The process of estimating property and casualty insurance reserves is complex and imprecise.
Removed
Kemper and its subsidiaries are from time to time involved in lawsuits, regulatory inquiries and other legal proceedings arising out of the ordinary course of their businesses. Some of these proceedings may involve matters particular to Kemper or one or more of its subsidiaries, while others may pertain to industry business practices.
Added
Risks Relating to Estimating Life Insurance Reserves Estimating future policyholder benefits for determining life insurance reserves is inherently uncertain, and the Company’s results of operations may be materially impacted if the Company’s Life Insurance Reserves are insufficient.
Removed
Kemper’s insurance subsidiaries obtain, process and store vast amounts of personal data that can present significant risks to the Company and its customers, employees and other affected individuals. An increasing array of laws and regulations govern the use, transfer and storage of such data, including, for example, social security numbers, credit card data, driver’s license numbers and protected health information.
Added
The estimates of future policyholder benefits are based on the Company’s assessment of the facts and circumstances known to it at the time and are estimating losses many years into the future. Significant assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapses, and discount rates (both accretion and current).
Removed
The Company also relies on the ability of its business partners to maintain secure systems and processes that comply with legal requirements and protect personal data. The Company and its third party administrators and other business partners regularly defend against and respond to data security threats and investigate and remediate breaches that have occurred.
Added
These estimates can be inaccurate or may change over time due to many variables, including changes driven by the evolving legal and regulatory landscape and economic, technological, and other environmental conditions in which the Company operates.
Removed
Data and analytics play an increasingly important role in the insurance industry. The Company may periodically initiate multi-year technology projects to enhance operations or replace systems.
Added
The estimates underlying future policyholder benefits must take into consideration many factors that are dependent on the outcome of future events including, but not limited to, the reporting and settlement of claims and policyholder behavior.
Removed
Interest rates and equity returns also have a significant impact on the Company’s pension and other post-retirement employee benefit plans. In addition to the impact on carrying values and yields of the underlying assets of the funded plans, interest rates also impact the discounting of the projected and accumulated benefit obligations of the plans.
Added
Certain events may not occur until many years in the future so the impacts on the Company’s estimates of life insurance reserves from these factors are difficult to assess accurately.
Removed
Risks Relating to COVID-19 The impact of the COVID-19 pandemic and related economic conditions have had and could continue to have a material effect on Kemper’s results of operations, financial position and/or liquidity.
Added
A change in any one or more of the factors is likely to result in projected future policyholder benefits that are different than the previous projections and may have a material impact on the Company’s estimates.
Removed
Beginning in March 2020, the global pandemic related to the novel coronavirus that causes COVID-19 began to adversely impact the global economy and resulted in an enormous global economic downturn, including in the United States where the Company predominantly conducts its operations. While overall economic activity rebounded significantly in 2022, the effects of the COVID-19 pandemic continued throughout 2022.
Added
Increases in the estimates of future policyholder benefits will decrease earnings, while decreases in these estimates will increase earnings, as reported by the Company in the results of its operations for the periods in which the changes to the estimates are made.
Removed
As the result of the COVID-19 pandemic and the related economic consequences, including governmental responses to the pandemic and the effects of the dramatic surge in economic activity as pandemic lockdowns ended, the Company experienced in 2022 a significant increase in loss frequency and severity in its Property and Casualty line of business.
Added
See MD&A, “Critical Accounting Estimates,” under the caption “Life Insurance Reserves” for a discussion of the Company’s reserving process and the factors considered by the Company’s actuaries in estimating the Company’s Life Insurance Reserves. Risks Relating to Competition A downgrade in the ratings of Kemper or its insurance subsidiaries below A- could materially and adversely affect the Company.
Removed
In addition, COVID’s emerging variants, now and in the future, may result in increased mortality, which may adversely affect the Life business.
Added
See “Competition” in Item 1 of Part I for more information on the competitive rankings in the property and casualty insurance markets and the life insurance markets, respectively, in the United States.
Removed
As the impact of the pandemic continues to be felt, the Company could be subject to the following risks, any of which could individually or collectively have a material, adverse effect on its business, financial condition, liquidity, and results of operations as a result of COVID-19: • Adverse impact on economic conditions, including increased rate of inflation, negative impact on employment levels, supply chain disruptions, and changing consumer patterns that could impact Kemper’s businesses • Adverse impact on investment portfolio as a result of ratings downgrades, increased bankruptcies and credit spread widening in distressed industries • Increase in estimated credit losses on fixed maturity investments held at fair value as well as other investments and receivables from policyholders • Increased cybersecurity and business interruption risk resulting from an increased overall reliance on our IT infrastructure due to a distributed workforce • Increased risk to key employees should a variant emerge and dominate a region of the United States Risks Relating to General Economic and Market Factors Changes in the global economy and capital markets could adversely impact the Company’s results of operations and financial condition.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeKemper’s property and casualty insurance subsidiaries lease facilities with an aggregate square footage of approximately 581,000 at 18 locations in nine states. The latest expiration date of the existing leases is in June 2031. Kemper’s life and health insurance subsidiaries lease facilities with aggregate square footage of approximately 376,000 at 98 locations in 23 states.
Biggest changeKemper’s property and casualty insurance subsidiaries lease facilities with an aggregate square footage of approximately 624,000 at 92 locations in eleven states. The latest expiration date of the existing leases is in June 2031. Kemper’s life insurance subsidiaries lease facilities with aggregate square footage of approximately 379,000 at 96 locations in 23 states.
Leased properties with aggregate square footage of 280,000 are not currently utilized in the Company's operations and are not expected to be utilized by the Company throughout the remainder of their respective lease terms.
Leased properties with aggregate square footage of 335,000 are not currently utilized in the Company's operations and are not expected to be utilized by the Company throughout the remainder of their respective lease terms.
Item 2. Properties. Owned Properties Kemper’s subsidiaries together own and occupy twelve buildings located in seven states consisting of approximately 403,000 square feet in the aggregate. Kemper’s subsidiaries hold, solely for investment purposes, additional properties that are not occupied by Kemper or its subsidiaries.
Item 2. Properties. Owned Properties Kemper’s subsidiaries together own and occupy eleven buildings located in seven states consisting of approximately 337,000 square feet in the aggregate. Kemper’s subsidiaries hold, solely for investment purposes, additional properties that are not occupied by Kemper or its subsidiaries.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−2 removed2 unchanged
Biggest changeMarket Information Kemper’s common stock is traded on the NYSE under the symbol of “KMPR.” Holders As of January 31, 2023, the number of record holders of Kemper’s common stock was 2,715. 25 Dividends Quarterly information pertaining to payment of dividends on Kemper’s common stock is presented below.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Kemper’s common stock is traded on the NYSE under the symbol of “KMPR.” Holders As of January 31, 2024, the number of record holders of Kemper’s common stock was 2,575.
DOLLARS PER SHARE Three Months Ended Year Ended Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Dec 31, 2022 Cash Dividends Paid to Shareholders (per share) $ 0.31 $ 0.31 $ 0.31 $ 0.31 $ 1.24 Three Months Ended Year Ended DOLLARS PER SHARE Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Dec 31, 2021 Dec 31, 2021 Cash Dividends Paid to Shareholders (per share) $ 0.31 $ 0.31 $ 0.31 $ 0.31 $ 1.24 Kemper’s insurance subsidiaries are subject to various state insurance laws that may restrict the ability of these insurance subsidiaries to pay dividends without prior regulatory approval.
DOLLARS PER SHARE Three Months Ended Year Ended Mar 31, 2023 Jun 30, 2023 Sep 30, 2023 Dec 31, 2023 Dec 31, 2023 Cash Dividends Paid to Shareholders (per share) $ 0.31 $ 0.31 $ 0.31 $ 0.31 $ 1.24 Three Months Ended Year Ended DOLLARS PER SHARE Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Dec 31, 2022 Cash Dividends Paid to Shareholders (per share) $ 0.31 $ 0.31 $ 0.31 $ 0.31 $ 1.24 Kemper’s insurance subsidiaries are subject to various state insurance laws that may restrict the ability of these insurance subsidiaries to pay dividends without prior regulatory approval.
These purchases were made in the open market in accordance with applicable federal securities laws, including Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934. 26 Kemper Common Stock Performance Graph The following graph assumes $100 invested on December 31, 2017 in (i) Kemper common stock, (ii) the S&P MidCap 400 Index and (iii) the S&P Supercomposite Insurance Index, in each case with dividends reinvested.
These purchases were made in the open market in accordance with applicable federal securities laws, including Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934. 27 Kemper Common Stock Performance Graph The following graph assumes $100 invested on December 31, 2018 in (i) Kemper common stock, (ii) the S&P MidCap 400 Index and (iii) the S&P Supercomposite Insurance Index, in each case with dividends reinvested.
See MD&A, “Liquidity and Capital Resources” and Note 16, “Shareholders’ Equity,” to the Consolidated Financial Statements for information on Kemper’s ability and intent to pay dividends.
See MD&A, “Liquidity and Capital Resources” and Note 17, “Shareholders’ Equity,” to the Consolidated Financial Statements for information on Kemper’s ability and intent to pay dividends.
As of December 31, 2022, the remaining share repurchase authorization was $171.6 million under the repurchase program. During the year ended 2022 Kemper did not repurchase any of its common stock.
As of December 31, 2023, the remaining share repurchase authorization was $171.6 million under the repurchase program. During the years ended 2023 and 2022, Kemper did not repurchase any of its common stock.
During the years ended 2021 and 2020 Kemper repurchased and retired approximately 2,085,000 and 1,617,000 shares, respectively, of its common stock under its share repurchase authorization for an aggregate cost of $161.7 million and $110.4 million and an average cost per share of $77.58 and $68.29, respectively.
During 2021, Kemper repurchased and retired approximately 2,085,000 shares of its common stock under its share repurchase authorization for an aggregate cost of $161.7 million and an average cost per share of $77.58.
Removed
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Added
Dividends Quarterly information pertaining to payment of dividends on Kemper’s common stock is presented below.
Removed
Company / Index 2017 2018 2019 2020 2021 2022 Kemper Corporation $ 100.00 $ 97.70 $ 115.57 $ 116.54 $ 90.78 $ 77.89 S&P MidCap 400 Index 100.00 88.92 112.21 127.54 159.12 138.34 S&P Supercomposite Insurance Index 100.00 90.33 116.11 114.60 148.83 162.71 27
Added
Company / Index 2018 2019 2020 2021 2022 2023 Kemper Corporation $ 100.00 $ 118.29 $ 119.29 $ 92.92 $ 79.73 $ 80.96 S&P MidCap 400 Index 100.00 126.20 143.44 178.95 155.58 181.15 S&P Supercomposite Insurance Index 100.00 128.53 126.87 164.76 180.12 198.03 28

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

178 edited+100 added−31 removed89 unchanged
Biggest changeDOLLARS IN MILLIONS 2022 2021 Change in Loss from 2021 to 2022 2020 Change in (Loss) Income from 2020 to 2021 Net (Loss) Income $ (301.2) $ (120.5) $ (180.7) $ 409.9 $ (530.4) Less: (Loss) Income from Change in Fair Value of Equity and Convertible Securities (63.1) 90.5 (153.6) 57.0 33.5 Net Realized Investment Gains 3.4 51.2 (47.8) 30.1 21.1 Impairment Losses (20.4) (8.7) (11.7) (15.4) 6.7 Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs (61.3) (34.7) (26.6) (50.0) 15.3 Debt Extinguishment, Pension and Other Charges (2.9) — (2.9) (50.6) 50.6 Adjusted Consolidated Net Operating (Loss) Income $ (156.9) $ (218.8) $ 61.9 $ 438.8 $ (657.6) Components of Adjusted Consolidated Net Operating (Loss) Income: Segment Net Operating (Loss) Income: Specialty Property & Casualty Insurance $ (147.4) $ (196.1) $ 48.7 $ 337.9 $ (534.0) Preferred Property & Casualty Insurance (25.9) (12.5) (13.4) 3.5 (16.0) Life & Health Insurance 54.2 28.2 26.0 60.0 (31.8) Segment Net Operating (Loss) Income (119.1) (180.4) 61.3 401.4 (581.8) Corporate and Other Net Operating (Loss) Income From: Partial Satisfaction of Judgment — — — 70.6 (70.6) Other (37.8) (38.4) 0.6 (33.2) (5.2) Corporate and Other Net Operating (Loss) Income (37.8) (38.4) 0.6 37.4 (75.8) Adjusted Consolidated Net Operating (Loss) Income $ (156.9) $ (218.8) $ 61.9 438.8 $ (657.6) Net (Loss) Income 2022 Compared with 2021 Net Loss increased by $180.7 million in 2022, compared to 2021, due primarily to increased losses from Change in Fair Value of Equity and Convertible securities, decreased Net Realized Investment Gains, and increased Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs, partially offset by lower Adjusted Consolidated Net Operating Losses.
Biggest changeDOLLARS IN MILLIONS 2023 2022 Change from 2022 to 2023 2021 Change from 2021 to 2022 Net Loss Attributable to Kemper Corporation $ (272.1) $ (286.6) $ 14.5 $ (123.7) $ (162.9) Less: Income (Loss) from Change in Fair Value of Equity and Convertible Securities $ 3.7 $ (63.1) $ 66.8 $ 90.5 $ (153.6) Net Realized Investment (Losses) Gains (14.7) 3.4 (18.1) 51.2 (47.8) Impairment Losses (0.9) (20.4) 19.5 (8.7) (11.7) Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs (95.0) (61.3) (33.7) (34.7) (26.6) Debt Extinguishment, Pension Settlement and Other Charges (55.5) (2.9) (52.6) — (2.9) Goodwill Impairment Charge (45.5) — (45.5) — — Non-Core Operations (17.0) (25.9) 8.9 (12.5) (13.4) Adjusted Consolidated Net Operating Loss $ (47.2) $ (116.4) $ 69.2 $ (209.5) $ 93.1 Components of Adjusted Consolidated Net Operating Loss: Segment Adjusted Net Operating (Loss) Income: Specialty Property & Casualty Insurance $ (57.1) $ (147.4) $ 90.3 $ (196.1) $ 48.7 Life Insurance 51.8 68.8 (17.0) 25.0 43.8 Total Segment Adjusted Net Operating Loss (5.3) (78.6) 73.3 (171.1) 92.5 Corporate and Other Adjusted Net Operating Loss (42.1) (37.8) (4.3) (38.4) 0.6 Less: Net Loss Attributable to Noncontrolling Interest (0.2) — (0.2) — — Adjusted Consolidated Net Operating Loss $ (47.2) $ (116.4) $ 69.2 $ (209.5) $ 93.1 31 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SUMMARY OF RESULTS (Continued) Net Loss attributable to Kemper Corporation 2023 Compared with 2022 Net Loss attributable to Kemper Corporation decreased by $14.5 million in 2023, compared to 2022, due primarily to lower Adjusted Consolidated Net Operating Losses and favorable changes in the Change in Fair Value of Equity and Convertible Securities.
Debt Extinguishment, Pension and Other Charges relate to (i) loss from early extinguishment of debt, which is driven by the Company’s financing and refinancing decisions and capital needs, as well as external economic developments such as debt market conditions, the timing of which is unrelated to the insurance underwriting process; (ii) settlement of pension plan obligations which are business decisions made by the Company, 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.
Debt Extinguishment, Pension Settlement and Other Charges relate to (i) loss from early extinguishment of debt, which is driven by the Company’s financing and refinancing decisions and capital needs, as well as external economic developments such as debt market conditions, the timing of which is unrelated to the insurance underwriting process; (ii) settlement of pension plan obligations which are business decisions made by the Company, 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.
Cash Provided by (Used in) Financing Activities Net cash provided by Financing Activities was $382.9 million in 2022, compared to cash used by financing activities of $290.4 million in 2021, a year over year increase of $673.3 million.
Net cash provided by Financing Activities was $382.9 million in 2022, compared to cash used by Financing Activities of $290.4 million in 2021, a year over year increase of $673.3 million.
Under their memberships, United Insurance, Trinity, AAC, and Alliance may borrow through the advance program of their respective FHLB. As a requirement of membership in the FHLB, United Insurance, Trinity, AAC, and Alliance must maintain certain levels of investment in FHLB common stock and additional amounts based on the level of outstanding borrowings.
Under their memberships, United Insurance, Trinity and AAC may borrow through the advance program of their respective FHLB. As a requirement of membership in the FHLB, United Insurance, Trinity and AAC must maintain certain levels of investment in FHLB common stock and additional amounts based on the level of outstanding borrowings.
Securities with a rating of 1 or 2 from the NAIC typically are rated by one of more Nationally Recognized Statistical Rating Organizations and either have a rating of AAA, AA, A or BBB from Standard & Poor’s (“S&P”); a rating of Aaa, Aa, A or Baa from Moody’s Investors Service (“Moody’s”); or a rating of AAA, AA, A or BBB from Fitch Ratings. 50 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT QUALITY AND CONCENTRATIONS (Continued) The following table summarizes the credit quality of the Company’s fixed maturity investment portfolio at December 31, 2022 and 2021.
Securities with a rating of 1 or 2 from the NAIC typically are rated by one or more Nationally Recognized Statistical Rating Organizations and either have a rating of AAA, AA, A or BBB from Standard & Poor’s (“S&P”); a rating of Aaa, Aa, A or Baa from Moody’s Investors Service (“Moody’s”); or a rating of AAA, AA, A or BBB from Fitch Ratings. 50 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT QUALITY AND CONCENTRATIONS (Continued) The following table summarizes the credit quality of the Company’s fixed maturity investment portfolio at December 31, 2023 and 2022.
Cash Used in Investing Activities Net cash used by Investing Activities was $108.4 million in 2022, compared to $118.2 million used in 2021, a year over year increase of $9.8 million. This was primarily due to lower net sales of short term investments.
Net cash used in Investing Activities was $108.4 million in 2022, compared to $118.2 million used in 2021, a year over year increase of $9.8 million. This was primarily due to lower net sales of short term investments.
Additional information pertaining to the estimation of, and development of, the Company’s Property and Casualty Insurance Reserves is contained in Item 1 of Part I of this 2022 Annual Report under the heading “Property and Casualty Loss and Loss Adjustment Expense Reserves.” Goodwill Recoverability The Company tests goodwill for recoverability at the reporting unit level on an annual basis, or whenever events or circumstances indicate the fair value of a reporting unit may have declined below its carrying value.
Additional information pertaining to the estimation of, and development of, the Company’s Property and Casualty Insurance Reserves is contained in Item 1 of Part I of this 2023 Annual Report under the heading “Property and Casualty Loss and Loss Adjustment Expense Reserves.” Goodwill Recoverability The Company tests goodwill for recoverability at the reporting unit level on an annual basis, or whenever events or circumstances indicate the fair value of a reporting unit may have declined below its carrying value.
Management believes that its property and casualty insurance subsidiaries maintain adequate levels of liquidity in the event that they were to experience several future catastrophic events over a relatively short period of time. Information about the Company’s cash flows for the years ended December 31, 2022, 2021 and 2020 is presented below.
Management believes that its property and casualty insurance subsidiaries maintain adequate levels of liquidity in the event that they were to experience several future catastrophic events over a relatively short period of time. Information about the Company’s cash flows for the years ended December 31, 2023, 2022 and 2021 is presented below.
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 overall profitability of the Company’s businesses. 34 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE Selected financial information for the Specialty Property & Casualty Insurance segment is presented below.
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 overall profitability of the Company’s businesses. 36 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE Selected financial information for the Specialty Property & Casualty Insurance segment is presented below.
The prices that the Company might realize from actual sales of investments are likely to vary from their respective estimated fair values at December 31, 2022 due to changing market conditions and limitations inherent in the estimation process. The classification of a company’s investment in a financial instrument may affect its reported results.
The prices that the Company might realize from actual sales of investments are likely to vary from their respective estimated fair values at December 31, 2023 due to changing market conditions and limitations inherent in the estimation process. The classification of a company’s investment in a financial instrument may affect its reported results.
Insurance expenses decreased by $12.5 million in 2022, compared to 2021, due primarily to lower volume of accident and health insurance products. 46 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE & HEALTH INSURANCE (Continued) Property Insurance Selected financial information for the property insurance product line is presented below.
Insurance expenses decreased by $12.5 million in 2022, compared to 2021, due primarily to lower volume of accident and health insurance products. 45 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE INSURANCE (Continued) Property Insurance Selected financial information for the property insurance product line is presented below.
LOSS AND LAE RESERVE DEVELOPMENT Increases (decreases) in the Company’s property and casualty loss and LAE reserves for the years ended December 31, 2022, 2021 and 2020 to recognize adverse (favorable) loss and LAE reserve development from prior accident years in continuing operations, hereinafter also referred to as “reserve development” in the discussion of segment results, are presented below .
LOSS AND LAE RESERVE DEVELOPMENT Increases (decreases) in the Company’s property and casualty loss and LAE reserves for the years ended December 31, 2023, 2022 and 2021 to recognize adverse (favorable) loss and LAE reserve development from prior accident years in continuing operations, hereinafter also referred to as “reserve development” in the discussion of segment results, are presented below .
If the fair value of the collateral declines below these specified levels of the amount borrowed, United Insurance would be required to pledge additional collateral or repay outstanding borrowings. See Note 20, “Policyholder Obligations,” to the Consolidated Financial Statements for additional information about the United Insurance advances and related funding agreements.
If the fair value of the collateral declines below these specified levels of the amount borrowed, United Insurance would be required to pledge additional collateral or repay outstanding borrowings. See Note 22, “Policyholder Obligations,” to the Consolidated Financial Statements for additional information about the United Insurance advances and related funding agreements.
The primary sources of funds available for repayment of Kemper’s indebtedness, repurchases of common stock, future shareholder dividend payments, and the payment of interest on Kemper’s senior notes and term loan, include cash and investments directly held by Kemper, receipt of dividends from Kemper’s insurance subsidiaries and borrowings under the credit agreement and from subsidiaries.
The primary sources of funds available for repayment of Kemper’s indebtedness, repurchases of common stock, future shareholder dividend payments, and the payment of interest on Kemper’s senior notes, include cash and investments directly held by Kemper, receipt of dividends from Kemper’s insurance subsidiaries and borrowings under the credit agreement and from subsidiaries.
Generally, there is a time lag between when premiums are collected and when policyholder benefits and insurance claims are paid. During periods of growth, property and casualty insurance companies typically experience positive operating cash flows and are able to invest a portion of their operating cash flows to fund future policyholder benefits and claims.
Generally, there is a time lag between when premiums are collected and when policyholder benefits and insurance claims are paid. During periods of growth, property and casualty insurance companies typically experience positive operating cash flows and can invest a portion of their operating cash flows to fund future policyholder benefits and claims.
Depending on the terms of a particular policy, future premiums from the policyholder may be required for the policy to remain in force. The Company estimates that future cash inflows would total $5.3 billion using the same assumptions used to estimate the cash outflows.
Depending on the terms of a particular policy, future premiums from the policyholder may be required for the policy to remain in force. The Company estimates that future cash inflows would total $4.5 billion using the same assumptions used to estimate the cash outflows.
For preferred stock equity securities, the Company assumed an adverse and instantaneous increase of 100 basis points in market interest rates from their levels at both December 31, 2022 and 2021. All other variables were held constant.
For preferred stock equity securities, the Company assumed an adverse and instantaneous increase of 100 basis points in market interest rates from their levels at both December 31, 2023 and 2022. All other variables were held constant.
ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. 31 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CATASTROPHES (Continued) The number of ISO-classified catastrophic events and catastrophe losses and LAE, net of reinsurance recoveries, (excluding loss and LAE reserve development) by range of loss and business segment for the years ended December 31, 2022, 2021 and 2020 are presented below.
ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. 33 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CATASTROPHES (Continued) The number of ISO-classified catastrophic events and catastrophe losses and LAE, net of reinsurance recoveries, (excluding loss and LAE reserve development) by range of loss and business segment for the years ended December 31, 2023, 2022 and 2021 are presented below.
The Company measured equity price sensitivity assuming an adverse and instantaneous 30% decrease in the Standard and Poor’s Stock Index (the “S&P 500”) from its level at December 31, 2022 and 2021, with all other variables held constant.
The Company measured equity price sensitivity assuming an adverse and instantaneous 30% decrease in the Standard and Poor’s Stock Index (the “S&P 500”) from its level at December 31, 2023 and 2022, with all other variables held constant.
Estimated Variability of Property and Casualty Insurance Reserves The Company’s goal is to ensure that its total reserves for property and casualty insurance losses and LAE are adequate to cover all costs, while sustaining minimal variation from the time reserves for losses and LAE are initially estimated until losses and LAE are fully paid.
The Company’s goal is to ensure that its total reserves for property and casualty insurance losses and LAE are adequate to cover all costs, while sustaining minimal variation from the time reserves for losses and LAE are initially estimated until losses and LAE are fully paid.
For Debt, the Company assumed an adverse and instantaneous decrease of 100 basis points in market interest rates from their levels at December 31, 2022 and 2021. All other variables were held constant.
For Debt, the Company assumed an adverse and instantaneous decrease of 100 basis points in market interest rates from their levels at December 31, 2023 and 2022. All other variables were held constant.
See MD&A, “Specialty Property & Casualty Insurance”, “Preferred Property & Casualty Insurance” and “Life & Health Insurance,” for discussion of each respective segment’s results. Corporate and Other Net Operating Loss decreased due primarily to increased Net Investment Income.
See MD&A, “Specialty Property & Casualty Insurance” and “Life Insurance,” for discussion of each respective segment’s results. Corporate and Other Net Operating Loss decreased due primarily to increased Net Investment Income.
The primary uses of funds are the payment of policyholder benefits under life insurance contracts, claims under property and casualty insurance contracts and accident and health insurance contracts, the payment of commissions and general expenses, the purchase of investments and repayments of advances from the FHLBs of Chicago, Dallas and San Francisco.
The primary uses of funds are the payment of policyholder benefits under life insurance contracts, claims under property and casualty insurance contracts and accident and health insurance contracts, the payment of commissions and general expenses, the purchase of investments and repayments of advances from the FHLBs of Chicago and Dallas.
For the interest rate sensitivity analysis presented below, the Company assumed an adverse and instantaneous increase of 100 basis points in the yield curve at both December 31, 2022 and 2021 for Investments in Fixed Maturities.
For the interest rate sensitivity analysis presented below, the Company assumed an adverse and instantaneous increase of 100 basis points in the yield curve at both December 31, 2023 and 2022 for Investments in Fixed Maturities.
(Loss) Income from Change in Fair Value of Equity and Convertible Securities, Net Realized Gains or Losses on Sales of Investments and Impairment Losses related to investments included in the Company’s results may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions that impact the values of the Company’s investments, the timing of which is unrelated to the insurance underwriting process.
Income (Loss) from Change in Fair Value of Equity and Convertible Securities, Net Realized Investment (Losses) Gains and Impairment Losses related to investments included in the Company’s results may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions that impact the values of the Company’s investments, the timing of which is unrelated to the insurance underwriting process.
The primary sources of funds for Kemper’s insurance subsidiaries are premiums, investment income, proceeds from the sales, and maturity of investments, advances from the FHLBs of Chicago, Dallas and San Francisco, and capital contributions from Kemper.
The primary sources of funds for Kemper’s insurance subsidiaries are premiums, investment income, proceeds from the sales and maturity of investments, advances from the FHLBs of Chicago and Dallas, and capital contributions from Kemper.
The FASB issues Accounting Standards Updates (“ASUs”) to amend the authoritative literature in the FASB ASC. The Company has adopted all recently issued accounting pronouncements with effective dates prior to January 1, 2023.
The FASB issues Accounting Standards Updates (“ASUs”) to amend the authoritative literature in the FASB ASC. The Company has adopted all recently issued accounting pronouncements with effective dates prior to January 1, 2024.
The following table summarizes the fair value of the Company’s investments in governmental fixed maturities at December 31, 2022 and 2021. Dec 31, 2022 Dec 31, 2021 DOLLARS IN MILLIONS Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments U.S.
The following table summarizes the fair value of the Company’s investments in governmental fixed maturities at December 31, 2023 and 2022. Dec 31, 2023 Dec 31, 2022 DOLLARS IN MILLIONS Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments U.S.
Common Stock Repurchases On May 6, 2020, Kemper’s Board of Directors authorized the repurchase of up to an additional $200.0 million of Kemper common stock, in addition to the $133.3 million remaining under the previous authorization. The Company did not repurchase any of its common stock in 2022.
Common Stock Repurchases On May 6, 2020, Kemper’s Board of Directors authorized the repurchase of up to an additional $200.0 million of Kemper common stock, in addition to the $133.3 million remaining under the previous authorization. The Company did not repurchase any of its common stock in 2023 or 2022, respectively.
(Loss) Income From Change in Fair Value of Equity and Convertible Securities The components of (Loss) Income from Change in Fair Value of Equity and Convertible Securities for the years ended December 31, 2022 and 2021 are presented below.
Income (Loss) from Change in Fair Value of Equity and Convertible Securities The components of Income (Loss) from Change in Fair Value of Equity and Convertible Securities for the years ended December 31, 2023 and 2022 are presented below.
The Company estimates that its specialty personal automobile insurance loss and LAE reserves could have varied by $178.9 million in either direction at December 31, 2022 for all accident years combined under this scenario. In addition to the factors described above, other factors may also impact loss reserve development in future periods.
The Company estimates that its specialty personal automobile insurance loss and LAE reserves could have varied by $57.9 million in either direction at December 31, 2023 for all accident years combined under this scenario. In addition to the factors described above, other factors may also impact loss reserve development in future periods.
See the “Reinsurance” subsection of the “Property and Casualty Insurance Business” and “Life and Health Insurance Business” sections of Item 1(c), “Description of Business,” and Note 23, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for additional information on the Company’s reinsurance programs.
See the “Reinsurance” subsection of the “Property and Casualty Insurance Business” and “Life Insurance Business” sections of Item 1(c), “Description of Business,” and Note 25, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for additional information on the Company’s reinsurance programs.
The Company’s investments in common stock equity securities were correlated with the S&P 500 using the portfolio’s weighted-average beta of 0.41 and 0.68 at December 31, 2022 and 2021, respectively. Beta measures a stock’s relative volatility in relation to the rest of the stock market, with the S&P 500 having a beta coefficient of 1.00.
The Company’s investments in common stock equity securities were correlated with the S&P 500 using the portfolio’s weighted-average beta of 0.35 and 0.41 at December 31, 2023 and 2022, respectively. Beta measures a stock’s relative volatility in relation to the rest of the stock market, with the S&P 500 having a beta coefficient of 1.00.
The Equity Securities at Fair Value portfolio’s weighted-average beta was calculated using each security’s assumed forward looking betas based on underlying investment characteristics weighted by the fair value of such securities as of December 31, 2022 and 2021. For equity securities without observable market inputs, the Company assumed a beta of 1.00 at December 31, 2022 and 2021. 65
The Equity Securities at Fair Value portfolio’s weighted-average beta was calculated using each security’s assumed forward looking betas based on underlying investment characteristics weighted by the fair value of such securities as of December 31, 2023 and 2022. For equity securities without observable market inputs, the Company assumed a beta of 1.00 at December 31, 2023 and 2022. 70
Quantitative Information About Market Risk The Company’s consolidated balance sheets include three types of financial instruments subject to the material market risk disclosures required by the SEC: 1. Investments in Fixed Maturities; 2. Investments in Equity Securities at Fair Value; and 3. Debt. Investments in Fixed Maturities and Debt are subject to material interest rate risk.
Quantitative and Qualitative Disclosures About Market Risk. Quantitative Information About Market Risk The Company’s consolidated balance sheets include three types of financial instruments subject to the material market risk disclosures required by the SEC: 1. Investments in Fixed Maturities; 2. Investments in Equity Securities at Fair Value; and 3. Debt.
Amended and Extended Credit Agreement and Term Loan Facility On March 15, 2022, the Company entered into an amended and extended credit agreement. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to $600.0 million and extended the maturity date to March 15, 2027.
Amended and Extended Credit Agreement On March 15, 2022, the Company entered into an amended and extended credit agreement. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to $600.0 million and extended the maturity date to March 15, 2027.
Recoverability of Deferred Tax Assets The evaluation of the recoverability of our deferred tax assets and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be realized.
Recoverability of Deferred Tax Assets The evaluation of the recoverability of deferred tax assets and the need for a valuation allowance requires the Company to weigh all positive and negative evidence to reach a conclusion whether it is more likely than not that all or some portion of the deferred tax asset will not be realized.
DOLLARS IN MILLIONS 2022 2021 2020 Earned Premiums $ 50.5 $ 61.9 $ 63.7 Net Investment Income 3.2 2.3 0.5 Change in Value of Alternative Energy Partnership Investments (0.3) (0.5) — Total Revenues 53.4 63.7 64.2 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE 12.5 14.2 15.2 Catastrophe Losses and LAE 1.8 13.0 12.4 Prior Years: Non-catastrophe Losses and LAE 1.3 1.2 0.4 Catastrophe Losses and LAE 1.5 (0.1) 0.5 Total Incurred Losses and LAE 17.1 28.3 28.5 Insurance Expenses 26.5 31.7 24.2 Operating Income 9.8 3.7 11.5 Income Tax Expense (1.9) (0.1) (2.4) Total Product Line Net Operating Income $ 7.9 $ 3.6 $ 9.1 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 24.7 % 23.0 % 23.8 % Current Year Catastrophe Losses and LAE Ratio 3.6 21.0 19.5 Prior Years Non-catastrophe Losses and LAE Ratio 2.6 1.9 0.6 Prior Years Catastrophe Losses and LAE Ratio 3.0 (0.2) 0.8 Total Incurred Loss and LAE Ratio 33.9 % 45.7 % 44.7 % 2022 Compared with 2021 Earned premiums from property insurance decreased by $11.4 million in 2022, compared to 2021, due primarily to lower volume of property insurance products.
DOLLARS IN MILLIONS 2023 2022 2021 Earned Premiums $ 45.3 $ 50.5 $ 61.9 Net Investment Income 1.6 3.2 2.3 Change in Value of Alternative Energy Partnership Investments — (0.3) (0.5) Total Revenues 46.9 53.4 63.7 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE 8.9 12.5 14.2 Catastrophe Losses and LAE 2.2 1.8 13.0 Prior Years: Non-catastrophe Losses and LAE 1.3 1.3 1.2 Catastrophe Losses and LAE 0.8 1.5 (0.1) Total Incurred Losses and LAE 13.2 17.1 28.3 Insurance Expenses 23.6 26.5 31.7 Adjusted Operating Income 10.1 9.8 3.7 Income Tax Expense (2.1) (1.9) (0.1) Total Product Line Adjusted Net Operating Income $ 8.0 $ 7.9 $ 3.6 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 19.5 % 24.7 % 23.0 % Current Year Catastrophe Losses and LAE Ratio 4.9 3.6 21.0 Prior Years Non-catastrophe Losses and LAE Ratio 2.9 2.6 1.9 Prior Years Catastrophe Losses and LAE Ratio 1.8 3.0 (0.2) Total Incurred Loss and LAE Ratio 29.1 % 33.9 % 45.7 % 2023 Compared with 2022 Earned Premiums from property insurance decreased by $5.2 million in 2023, compared to 2022, due primarily to lower volume of property insurance products.
Item 6. Selected Financial Data. [Reserved] 28 MDA Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 6. Selected Financial Data. [Reserved] 29 MDA Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cash (Used in) Provided by Operating Activitie s Net cash used by Operating Activities was $210.3 million in 2022, compared to $350.7 million generated in 2021, a decrease of $561.0 million.
Net cash used by Operating Activities was $210.3 million in 2022, compared to $350.7 million generated in 2021, a decrease of $561.0 million.
Adjusted Consolidated Net Operating (Loss) Income Adjusted Consolidated Net Operating (Loss) Income is an after-tax, non-GAAP financial measure and is computed by excluding from Net (Loss) Income the after-tax impact of: (i) (Loss) Income from Change in Fair Value of Equity and Convertible Securities; (ii) Net Realized Gains or Losses on Sales of Investments; (iii) Impairment Losses; (iv) Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs; (v) Debt Extinguishment, Pension and Other Charges; and (vi) Significant non-recurring or infrequent items that may not be indicative of ongoing operations Significant non-recurring items are excluded when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, and (b) there has been no similar charge or gain within the prior two years.
Adjusted Consolidated Net Operating Loss Adjusted Consolidated Net Operating Loss is an after-tax, non-GAAP financial measure and is computed by excluding from Net Loss attributable to Kemper Corporation the after-tax impact of: (i) Income (Loss) from Change in Fair Value of Equity and Convertible Securities; (ii) Net Realized Investment (Losses) Gains; (iii) Impairment Losses; (iv) Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs; (v) Debt Extinguishment, Pension Settlement and Other Charges; (vi) Goodwill Impairment Charges; (vii) Non-Core Operations; and (viii) Significant non-recurring or infrequent items that may not be indicative of ongoing operations Significant non-recurring items are excluded when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, and (b) there has been no similar charge or gain within the prior two years.
Additional information pertaining to these investments at December 31, 2022 and 2021 is presented below.
Additional information pertaining to these investments at December 31, 2023 and 2022 is presented below.
The Company’s critical accounting policies most sensitive to estimates include the valuation of investments, the valuation of reserves for property and casualty insurance incurred losses and LAE, the assessment of recoverability of goodwill, valuation of pension benefit obligations, and recoverability of deferred tax assets.
The Company’s critical accounting policies most sensitive to estimates include the valuation of investments, the valuation of life insurance reserves, the valuation of reserves for property and casualty insurance incurred losses and LAE, the assessment of recoverability of goodwill, and the recoverability of deferred tax assets.
Such changes in estimates may be material. For example, the Company’s actuaries review frequency (number of claims per policy or exposure), severity (dollars of loss per claim) and average premium (dollars of premium per exposure). Actual frequency and severity experienced will vary depending on changes in mix by class of insured risk.
For example, the Company’s actuaries review frequency (number of claims per policy or exposure), severity (dollars of loss per claim) and average premium (dollars of premium per exposure). Actual frequency and severity experienced will vary depending on changes in mix by class of insured risk.
Adverse loss and LAE reserve development was $3.6 million in 2022, compared to adverse reserve development of $12.4 million in 2021. 38 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) PREFERRED PROPERTY & CASUALTY INSURANCE Selected financial information for the Preferred Property & Casualty Insurance segment is presented below.
Adverse loss and LAE reserve development was $3.6 million in 2022, compared to adverse reserve development of $12.4 million in 2021. 41 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE INSURANCE Selected financial information for the Life Insurance segment is presented below.
United Insurance had outstanding advances from the FHLB of Chicago totaling $601.0 million at December 31, 2022. These advances were made in connection with the Company’s spread lending program. The proceeds related to these advances were used to purchase fixed maturity securities to earn incremental net investment income.
United Insurance had outstanding advances from the FHLB of Chicago totaling $557.4 million at December 31, 2023. These advances were made in connection with the Company’s spread lending program. The proceeds related to these advances were used to purchase fixed maturity securities to earn incremental net investment income.
Total amortized cost of Long-term Debt outstanding at December 31, 2022 and December 31, 2021 was: (Dollars in Millions) Dec 31, 2022 Dec 31, 2021 Senior Notes 5.000% Senior Notes due September 19, 2022 $ — $ 276.7 4.350% Senior Notes due February 15, 2025 449.3 449.0 2.400% Senior Notes due September 30, 2030 396.6 396.2 3.800% Senior Notes due February 23, 2032 395.5 — 5.875% Fixed-Rate Reset Junior Subordinated Debentures due 2062 145.5 — Total Long-term Debt Outstanding $ 1,386.9 $ 1,121.9 See Note 21, “Debt,” to the Consolidated Financial Statements for more information regarding the Company’s long-term debt.
Total amortized cost of Long-term Debt outstanding at December 31, 2023 and December 31, 2022 was: (Dollars in Millions) Dec 31, 2023 Dec 31, 2022 Senior Notes 4.350% Senior Notes due February 15, 2025 $ 449.6 $ 449.3 2.400% Senior Notes due September 30, 2030 397.0 396.6 3.800% Senior Notes due February 23, 2032 396.0 395.5 5.875% Fixed-Rate Reset Junior Subordinated Debentures due 2062 146.6 145.5 Total Long-term Debt Outstanding $ 1,389.2 $ 1,386.9 See Note 23, “Debt,” to the Consolidated Financial Statements for more information regarding the Company’s long-term debt.
Both the reported and fair values of the Company’s investments in fixed maturities classified as available for sale were $6,894.8 million at December 31, 2022. Equity securities with readily determinable fair values are recorded as Equity Securities at Fair Value with changes in fair values recognized into income for the period reported.
Both the reported and fair values of the Company’s investments in fixed maturities classified as available for sale were $6,881.9 million at December 31, 2023. Equity securities with readily determinable fair values are recorded as Equity Securities at Fair Value with changes in fair values recognized into income for the period reported.
Impairment Losses recognized in the Consolidated Statements of (Loss) Income for the year ended December 31, 2021 primarily related to investments in Equity Securities at Modified Cost where the Company had the intent or requirement to sell.
Equity Securities The Company recognized Impairment Losses in the Consolidated Statements of Loss for the year ended December 31, 2023 primarily related to investments in Equity Securities at Modified Cost where the Company has the intent or requirement to sell.
Real Estate The Company did not recognize any Impairment Losses in the Consolidated Statements of (Loss) Income for the year ended December 31, 2022. Impairment Losses recognized in the Consolidated Statements of (Loss) Income for the year ended December 31, 2021 related to investments in Real Estate held with the intent to sell.
Real Estate The Company did not recognize any Impairment Losses on Real Estate Held for Investment in the Consolidated Statements of Loss for the years ended December 31, 2023 and 2022. Impairment Losses recognized in the Consolidated Statements of Loss for the year ended December 31, 2021 related to investments in Real Estate held with the intent to sell.
Government and Government Agencies and Authorities and Short-term Investment, at December 31, 2022.
Government and Government Agencies and Authorities and Short-term Investment, at December 31, 2023.
DOLLARS IN MILLIONS 2022 2021 2020 Investment Income: Interest on Fixed Income Securities $ 300.1 $ 277.7 $ 289.8 Dividends on Equity Securities Excluding Alternative Investments 6.3 15.9 15.4 Alternative Investments: Equity Method Limited Liability Investments 31.3 56.7 4.9 Limited Liability Investments Included in Equity Securities 42.1 46.9 22.1 Total Alternative Investments 73.4 103.6 27.0 Short-term Investments 3.7 1.0 5.5 Loans to Policyholders 21.5 21.7 22.1 Real Estate 10.1 9.3 9.6 Company-Owned Life Insurance 37.9 25.7 12.9 Other 7.7 6.7 0.3 Total Investment Income 460.7 461.6 382.6 Investment Expenses: Real Estate 7.9 9.7 8.8 Other Investment Expenses 30.2 24.6 25.6 Total Investment Expenses 38.1 34.3 34.4 Net Investment Income $ 422.6 $ 427.3 $ 348.2 2022 Compared with 2021 Net Investment Income was $422.6 million and $427.3 million for the years ended December 31, 2022 and 2021, respectively.
DOLLARS IN MILLIONS 2023 2022 2021 Investment Income: Interest on Fixed Income Securities $ 346.0 $ 300.1 $ 277.7 Dividends on Equity Securities Excluding Alternative Investments 4.4 6.3 15.9 Alternative Investments: Equity Method Limited Liability Investments 10.5 31.3 56.7 Limited Liability Investments Included in Equity Securities 19.0 42.1 46.9 Total Alternative Investments 29.5 73.4 103.6 Short-term Investments 18.0 3.7 1.0 Loans to Policyholders 20.9 21.5 21.7 Real Estate 8.9 10.1 9.3 Company-Owned Life Insurance 29.2 37.9 25.7 Other 12.9 7.7 6.7 Total Investment Income 469.8 460.7 461.6 Investment Expenses: Real Estate 8.8 7.9 9.7 Other Investment Expenses 41.3 30.2 24.6 Total Investment Expenses 50.1 38.1 34.3 Net Investment Income $ 419.7 $ 422.6 $ 427.3 2023 Compared with 2022 Net Investment Income was $419.7 million and $422.6 million for the years ended December 31, 2023 and 2022, respectively.
Accordingly, the sum of the amounts presented above for Life and Health Insurance Policy Benefits significantly exceeds the amount of Life and Health Insurance Reserves reported on the Company’s Consolidated Balance Sheets at December 31, 2022. In addition to the purchase obligations included above, the Company had certain investment commitments totaling $192.2 million at December 31, 2022.
Accordingly, the sum of the amounts presented above for Life and Health Insurance Policy Benefits significantly exceeds the amount of Life and Health Insurance Reserves reported on the Company’s Consolidated Balance Sheets at December 31, 2023. In addition to the contractual obligations included above, the Company had certain investment commitments totaling $195.7 million at December 31, 2023.
Had the Company elected the fair value option for all of its investments in financial instruments, the Company’s reported net loss for the year ended December 31, 2022, would have increased by $1,216.3 million.
Had the Company elected the fair value option for all of its investments in financial instruments, the Company’s reported net loss for the year ended December 31, 2023, would have increased by $1,030.2 million.
Also, it is reasonably possible that changes in the carrying values of the Company’s Equity Method Limited Liability Investments will occur in the near term and such changes could materially affect the amounts reported in the financial statements because these issuers follow specialized industry accounting rules which require that they report all of their investments at fair value (See Item 58 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CRITICAL ACCOUNTING ESTIMATES (Continued) 1A., “Risk Factors” under the title “The Company’s investment portfolio is exposed to a variety of risks that may negatively impact net investment income and cause realized and unrealized losses”).
Also, it is reasonably possible that changes in the carrying values of the Company’s Equity Method Limited Liability Investments will occur in the near term and such changes could materially affect the amounts reported in the financial statements because these issuers follow specialized industry accounting principles which require that they report all of their investments at fair value (See Item 1A., “Risk Factors” under the title “The Company’s investment portfolio is exposed to a variety of risks that may negatively impact net investment income and cause realized and unrealized losses”).
At December 31, 2022, approximately 95.5% of the Company’s fixed maturity investment portfolio was rated investment-grade, which the Company defines as a security issued by a high quality obligor with at least a relatively stable credit profile and where it is highly likely that all contractual payments of principal and interest will timely occur and carry a rating from the NAIC of 1 or 2.
At December 31, 2023, approximately 96.2% of the Company’s fixed maturity investment portfolio was rated investment-grade, which the Company defines as a security issued by a high quality obligor with at least a relatively stable credit profile and where it is highly likely that all contractual payments of principal and interest will timely occur and carry a rating from the National Association of Insurance Commissioners (“NAIC”) of 1 or 2.
Some factors considered in evaluating whether or not a decline in fair value of an investment exist include, but are not limited to, the following: 59 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CRITICAL ACCOUNTING ESTIMATES (Continued) Fixed Maturity Securities • The financial condition, credit rating and prospects of the issuer; • The magnitude of the unrealized loss; • The ability of the issuer to make scheduled principal and interest payments; • The volatility of the investment; Equity Securities at Modified Cost • Opinions of the Company’s external investment managers; • The financial condition and prospects of the issuer; • Current market conditions; • Changes in credit ratings; and • Changes in the regulatory environment.
Some factors considered in evaluating whether or not a decline in fair value of an investment exist include, but are not limited to, the following: Fixed Maturity Securities • The financial condition, credit rating and prospects of the issuer; • The magnitude of the unrealized loss; • The ability of the issuer to make scheduled principal and interest payments; • The volatility of the investment; Equity Securities at Modified Cost • Opinions of the Company’s external investment managers; • The financial condition and prospects of the issuer; • Current market conditions; • Changes in credit ratings; and • Changes in the regulatory environment.
Overall 2022 Compared with 2021 The Specialty Property & Casualty Insurance segment reported Segment Net Operating Loss of $147.4 million for the year ended December 31, 2022, compared to Net Operating Loss of $196.1 million in 2021.
Overall 2023 Compared with 2022 The Specialty Property & Casualty Insurance segment reported Total Segment Adjusted Net Operating Loss of $57.1 million for the year ended December 31, 2023, compared to Total Segment Adjusted Net Operating Loss of $147.4 million in 2022.
The Company’s investments in FHLB common stock are reported at cost and included in Other Investments. The carrying value of FHLB of Chicago common stock was $17.5 million and $11.8 million at December 31, 2022 and December 31, 2021, respectively.
The Company’s investments in FHLB common stock are reported at cost and included in Other Investments. The carrying value of FHLB of Chicago common stock was $16.6 million and $17.5 million at December 31, 2023 and December 31, 2022, respectively.
Year Ended Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 DOLLARS IN MILLIONS Number of Events Losses and LAE Number of Events Losses and LAE Number of Events Losses and LAE Range of Losses and LAE Per Event: Below $5 59 $ 54.6 65 $ 56.1 60 $ 51.2 $5 - $10 2 10.2 2 16.5 5 40.2 $10 - $15 1 14.5 — — — — $15 - $20 — — 2 35.2 1 15.3 $20 - $25 — — — — — — Greater Than $25 — — — — — — Total 62 $ 79.3 69 $ 107.8 66 $ 106.7 Specialty Property & Casualty Insurance 23.0 15.7 12.3 Preferred Property & Casualty Insurance 54.5 79.1 82.0 Life & Health Insurance 1.8 13.0 12.4 Total Catastrophe Losses and LAE $ 79.3 $ 107.8 $ 106.7 Catastrophe Reinsurance The Company primarily manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and a catastrophe reinsurance program for the Company’s Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segments.
Year Ended Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 DOLLARS IN MILLIONS Number of Events Losses and LAE Number of Events Losses and LAE Number of Events Losses and LAE Range of Losses and LAE Per Event: Below $5 68 $ 77.7 59 $ 54.6 65 $ 56.1 $5 - $10 3 19.0 2 10.2 2 16.5 $10 - $15 — — 1 14.5 — — $15 - $20 — — — — 2 35.2 $20 - $25 — — — — — — Greater Than $25 — — — — — — Total 71 $ 96.7 62 $ 79.3 69 $ 107.8 Specialty Property & Casualty Insurance $ 34.5 $ 23.0 $ 15.7 Life Insurance 2.2 1.8 13.0 Non-Core Operations 60.0 54.5 79.1 Total Catastrophe Losses and LAE $ 96.7 $ 79.3 $ 107.8 Catastrophe Reinsurance The Company primarily manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and a catastrophe reinsurance program for the Company’s Property & Casualty Insurance business.
With respect to these advances, United Insurance held pledged securities in a custodial account with the FHLB of Chicago with a fair value of $744.6 million at December 31, 2022. The fair value of the collateral pledged must be maintained at certain specified levels above the borrowed amount, which can vary depending on the assets pledged.
For these advances, United Insurance held pledged securities in a custodial account with the FHLB of Chicago with a fair value of $629.3 million at December 31, 2023. The fair value of the collateral pledged must be maintained at certain specified levels above the borrowed amount, which can vary depending on the assets pledged.
The carrying value of FHLB of Dallas common stock was $3.4 million and $3.4 million at December 31, 2022 and December 31, 2021, respectively. The carrying value of FHLB of San Francisco common stock was $1.4 million and $1.7 million at December 31, 2022 and December 31, 2021, respectively.
The carrying value of FHLB of Dallas common stock was $3.6 million and $3.4 million at December 31, 2023 and December 31, 2022, respectively. The carrying value of FHLB of San Francisco common stock was $0.0 million and $1.4 million at December 31, 2023 and December 31, 2022, respectively.
A reconciliation of Net (Loss) Income to Adjusted Consolidated Net Operating (Loss) Income (a non-GAAP financial measure) for the years ended December 31, 2022, 2021 and 2020 is presented below.
A reconciliation of Net Loss Attributable to Kemper Corporation to Adjusted Consolidated Net Operating Loss (a non-GAAP financial measure) for the years ended December 31, 2023, 2022 and 2021 is presented below.
Equity Securities Net Realized Gains on Sales of Equity Securities for the year ended December 31, 2022 primarily relate disposals of equity method limited liability investments and preferred stock.
Equity Securities Net Realized Gains and Losses on Sale of Equity Securities for the year ended December 31, 2023 primarily related to disposals of equity securities and preferred stock. Net Realized Gains and Losses on Sale of Equity Securities for the year ended December 31, 2022 primarily relate disposals of equity method limited liability investments and preferred stock.
At December 31, 2022, the Company had $250.3 million invested in money market funds which primarily invest in U.S. Treasury securities and $28.1 million invested in U.S. treasury bills and short-term bonds. The following table summarizes the fair value of the Company’s ten largest investment exposures in a single issuer, excluding investments in U.S.
At December 31, 2023, the Company had $219.5 million invested in money market funds which primarily invest in U.S. Treasury securities and $301.4 million invested in U.S. Treasury bills and short-term bonds. The following table summarizes the fair value of the Company’s ten largest investment exposures in a single issuer, excluding investments in U.S.
Favorable loss and LAE reserve development was $17.6 million in 2022, compared to adverse loss and LAE reserve developments of $85.3 million in 2021, Catastrophe losses and LAE (excluding reserve development) were $20.7 million in 2022, compared to $14.4 million in 2021, due primarily to losses arising from Hurricane Ian. 37 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued) Commercial Automobile Insurance Selected financial information for the commercial automobile insurance product line is presented below.
Favorable loss and LAE reserve development was $17.6 40 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued) million in 2022, compared to adverse loss and LAE reserve developments of $85.3 million in 2021, Catastrophe losses and LAE (excluding reserve development) were $20.7 million in 2022, compared to $14.4 million in 2021, due primarily to losses arising from Hurricane Ian.
Life Insurance Selected financial information for the life insurance product line is presented below.
Commercial Automobile Insurance Selected financial information for the commercial automobile insurance product line is presented below.
NAIC Rating Rating Dec 31, 2022 Dec 31, 2021 Fair Value in Millions Percentage of Total Fair Value in Millions Percentage of Total 1 AAA, AA, A $ 4,896.4 71.0 % $ 5,351.6 67.0 % 2 BBB 1,687.4 24.5 2,215.1 27.7 3-4 BB, B 239.7 3.5 331.0 4.2 5-6 CCC or Lower 71.3 1.0 89.2 1.1 Total Investments in Fixed Maturities $ 6,894.8 100.0 % $ 7,986.9 100.0 % Gross unrealized losses on the Company’s investments in below-investment-grade fixed maturities were $32.8 million and $9.0 million at December 31, 2022 and 2021, respectively.
NAIC Rating Rating Dec 31, 2023 Dec 31, 2022 Fair Value in Millions Percentage of Total Fair Value in Millions Percentage of Total 1 AAA, AA, A $ 4,962.0 72.1 % $ 4,896.4 71.0 % 2 BBB 1,657.3 24.1 1,687.4 24.5 3-4 BB, B 204.4 3.0 239.7 3.5 5-6 CCC or Lower 58.2 0.8 71.3 1.0 Total Investments in Fixed Maturities $ 6,881.9 100.0 % $ 6,894.8 100.0 % Gross unrealized losses on the Company’s investments in below-investment-grade fixed maturities were $25.5 million and $32.8 million at December 31, 2023 and 2022, respectively.
Impairment Losses recognized in the Consolidated Statements of (Loss) Income for the year ended December 31, 2021 related primarily to investments in Fixed Maturities where the Company established an allowance for expected credit loss. Equity Securities The Company did not recognize any Impairment Losses in the Consolidated Statements of (Loss) Income for the year ended December 31, 2022.
Impairment Losses recognized in the Consolidated Statements of Loss for the year ended December 31, 2021 related primarily to investments in Fixed Maturities where the Company established an allowance for expected credit loss.
Dec 31, 2022 Dec 31, 2021 DOLLARS IN MILLIONS Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments Finance, Insurance and Real Estate $ 2,007.5 22.8 % $ 1,996.7 19.2 % Manufacturing 1,085.9 12.4 1,571.0 15.1 Transportation, Communication and Utilities 733.7 8.3 815.8 7.9 Services 602.4 6.9 617.5 5.9 Mining 173.3 2.0 254.3 2.4 Retail Trade 165.1 1.9 171.4 1.7 Construction 11.7 0.1 13.1 0.1 Other 14.2 0.2 14.1 0.1 Total Investments in Non-governmental Fixed Maturities $ 4,793.8 54.6 % $ 5,453.9 52.4 % 51 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT QUALITY AND CONCENTRATIONS (Continued) The following table summarizes the fair value of the Company’s investments in non-governmental fixed maturities by range of amount invested at December 31, 2022.
Dec 31, 2023 Dec 31, 2022 DOLLARS IN MILLIONS Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments Finance, Insurance and Real Estate $ 2,070.5 23.3 % $ 2,007.5 22.8 % Manufacturing 1,077.6 12.1 1,085.9 12.4 Transportation, Communication and Utilities 807.3 9.1 733.7 8.3 Services 639.4 7.2 602.4 6.9 Mining 174.3 2.0 173.3 2.0 Retail Trade 156.0 1.8 165.1 1.9 Construction 4.4 — 11.7 0.1 Other 35.2 0.4 14.2 0.2 Total Investments in Non-governmental Fixed Maturities $ 4,964.7 55.9 % $ 4,793.8 54.6 % 51 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT QUALITY AND CONCENTRATIONS (Continued) The following table summarizes the fair value of the Company’s investments in non-governmental fixed maturities by range of amount invested at December 31, 2023.
DOLLARS IN MILLIONS 2022 2021 2020 Net Premiums Written $ 3,934.4 $ 4,057.3 $ 3,435.5 Earned Premiums $ 4,046.4 $ 3,948.5 $ 3,335.3 Net Investment Income 140.7 152.5 114.1 Change in Value of Alternative Energy Partnership Investments (9.9) (29.0) — Other Income 6.0 4.1 1.8 Total Revenues 4,183.2 4,076.1 3,451.2 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE 3,569.2 3,480.3 2,350.8 Catastrophe Losses and LAE 23.0 15.7 12.3 Prior Years: Non-catastrophe Losses and LAE (14.6) 97.4 15.1 Catastrophe Losses and LAE 0.6 0.3 0.2 Total Incurred Losses and LAE 3,578.2 3,593.7 2,378.4 Insurance Expenses 801.9 774.5 651.9 Operating (Loss) Income (196.9) (292.1) 420.9 Income Tax Benefit (Expense) 49.5 96.0 (83.0) Segment Net Operating (Loss) Income $ (147.4) $ (196.1) $ 337.9 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 88.2 % 88.1 % 70.4 % Current Year Catastrophe Losses and LAE Ratio 0.6 0.4 0.4 Prior Years Non-catastrophe Losses and LAE Ratio (0.4) 2.5 0.5 Prior Years Catastrophe Losses and LAE Ratio — — — Total Incurred Loss and LAE Ratio 88.4 91.0 71.3 Insurance Expense Ratio 19.8 19.6 19.5 Combined Ratio 108.2 % 110.6 % 90.8 % Underlying Combined Ratio Current Year Non-catastrophe Losses and LAE Ratio 88.2 % 88.1 % 70.4 % Insurance Expense Ratio 19.8 19.6 19.5 Underlying Combined Ratio 108.0 % 107.7 % 89.9 % Non-GAAP Measure Reconciliation Combined Ratio 108.2 % 110.6 % 90.8 % Less: Current Year Catastrophe Losses and LAE Ratio 0.6 0.4 0.4 Prior Years Non-catastrophe Losses and LAE Ratio (0.4) 2.5 0.5 Prior Years Catastrophe Losses and LAE Ratio — — — Underlying Combined Ratio 108.0 % 107.7 % 89.9 % 35 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued) INSURANCE RESERVES DOLLARS IN MILLIONS Dec 31, 2022 Dec 31, 2021 Insurance Reserves: Personal Automobile $ 1,875.8 $ 1,985.8 Commercial Automobile 445.3 333.9 Total Insurance Reserves $ 2,321.1 $ 2,319.7 Insurance Reserves: Loss and Allocated LAE Reserves: Case and Allocated LAE $ 1,099.9 $ 1,157.9 Incurred But Not Reported 1,041.2 953.0 Total Loss and LAE Reserves 2,141.1 2,110.9 Unallocated LAE Reserves 180.0 208.8 Total Insurance Reserves $ 2,321.1 $ 2,319.7 See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” for additional information pertaining to the Company’s process of estimating property and casualty insurance reserves for losses and LAE, development of property and casualty insurance losses and LAE from prior accident years, also referred to as “reserve development” in the discussion of segment results, estimated variability of property and casualty insurance reserves for losses and LAE, and a discussion of some of the variables that may impact development of property and casualty insurance losses and LAE and the estimated variability of property and casualty insurance reserves for losses and LAE.
DOLLARS IN MILLIONS 2023 2022 2021 Net Premiums Written $ 3,305.4 $ 3,934.4 $4,057.3 Earned Premiums $ 3,632.5 $ 4,046.4 $ 3,948.5 Net Investment Income 168.3 140.7 152.5 Change in Value of Alternative Energy Partnership Investments 1.6 (9.9) (29.0) Other Income 4.5 6.0 4.1 Total Revenues 3,806.9 4,183.2 4,076.1 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE 2,974.5 3,569.2 3,480.3 Catastrophe Losses and LAE 34.5 23.0 15.7 Prior Years: Non-catastrophe Losses and LAE 135.2 (14.6) 97.4 Catastrophe Losses and LAE (2.3) 0.6 0.3 Total Incurred Losses and LAE 3,141.9 3,578.2 3,593.7 Insurance Expenses 741.3 801.9 774.5 Segment Adjusted Operating Loss (76.3) (196.9) (292.1) Income Tax Benefit 19.2 49.5 96.0 Total Segment Adjusted Net Operating Loss $ (57.1) $ (147.4) $ (196.1) Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 82.0 % 88.2 % 88.1 % Current Year Catastrophe Losses and LAE Ratio 0.9 0.6 0.4 Prior Years Non-catastrophe Losses and LAE Ratio 3.7 (0.4) 2.5 Prior Years Catastrophe Losses and LAE Ratio (0.1) — — Total Incurred Loss and LAE Ratio 86.5 88.4 91.0 Insurance Expense Ratio 20.4 19.8 19.6 Combined Ratio 106.9 % 108.2 % 110.6 % Underlying Combined Ratio Current Year Non-catastrophe Losses and LAE Ratio 82.0 % 88.2 % 88.1 % Insurance Expense Ratio 20.4 19.8 19.6 Underlying Combined Ratio 102.4 % 108.0 % 107.7 % Non-GAAP Measure Reconciliation Combined Ratio 106.9 % 108.2 % 110.6 % Less: Current Year Catastrophe Losses and LAE Ratio 0.9 0.6 0.4 Prior Years Non-catastrophe Losses and LAE Ratio 3.7 (0.4) 2.5 Prior Years Catastrophe Losses and LAE Ratio (0.1) — — Underlying Combined Ratio 102.4 % 108.0 % 107.7 % 37 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued) INSURANCE RESERVES DOLLARS IN MILLIONS Dec 31, 2023 Dec 31, 2022 Insurance Reserves: Personal Automobile $ 1,711.9 $ 1,875.8 Commercial Automobile 596.8 445.3 Total Insurance Reserves $ 2,308.7 $ 2,321.1 Insurance Reserves: Loss and Allocated LAE Reserves: Case and Allocated LAE $ 999.9 $ 1,099.9 Incurred But Not Reported 1,132.8 1,041.2 Total Loss and LAE Reserves 2,132.7 2,141.1 Unallocated LAE Reserves 176.0 180.0 Total Insurance Reserves $ 2,308.7 $ 2,321.1 See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” for additional information pertaining to the Company’s process of estimating property and casualty insurance reserves for losses and LAE, development of property and casualty insurance losses and LAE from prior accident years, also referred to as “reserve development” in the discussion of segment results, estimated variability of property and casualty insurance reserves for losses and LAE, and a discussion of some of the variables that may impact development of property and casualty insurance losses and LAE and the estimated variability of property and casualty insurance reserves for losses and LAE.
The Company repurchased approximately $161.7 million and $110.4 million of stock at an average cost per share of $77.58 and $68.29 in 2021 and 2020, respectively. As of December 31, 2022, the remaining share repurchase authorization was $171.6 million under the repurchase program.
The Company repurchased approximately $161.7 million of stock at an average cost per share of $77.58 in 2021. As of December 31, 2023, the remaining share repurchase authorization was $171.6 million under the repurchase program.
The Company periodically uses short-term FHLB borrowings for a combination of cash management and risk management purposes, in addition to long-term FHLB borrowings for spread lending purposes. During 2022, United Insurance received advances of $415.8 million from the FHLB of Chicago and made repayments of $216.7 million.
The Company periodically uses short-term FHLB borrowings for a combination of cash management and risk management purposes, in addition to long-term FHLB borrowings for spread lending purposes. During 2023, United Insurance received advances of $122.5 million from the FHLB of Chicago and made repayments of $166.1 million.
Changes in the fair value of investments in fixed maturities classified as available for sale are not recognized in income during the period, but rather are recognized as a separate component of Accumulated Other Comprehensive (Loss) Income (“AOCI”) until realized.
None of the Company’s investments in fixed maturities were classified as held to maturity at December 31, 2023. Changes in the fair value of investments in fixed maturities classified as available for sale are not recognized in income during the period, but rather are recognized as a separate component of Accumulated Other Comprehensive Loss (“AOCI”) until realized.
Accordingly, both the reported and fair values of the Company’s investments in Equity Securities at Fair Value were $243.2 million at December 31, 2022.
Accordingly, both the reported and fair values of the Company’s investments in Equity Securities at Fair Value were $225.8 million at December 31, 2023.
DOLLARS IN MILLIONS 2022 2021 2020 Net Premiums Written $ 629.3 $ 470.1 $ 349.0 Earned Premiums $ 549.7 $ 414.8 $ 304.0 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 415.3 $ 306.4 $ 189.9 Catastrophe Losses and LAE 2.3 1.3 0.7 Prior Years: Non-catastrophe Losses and LAE 3.5 12.4 (12.9) Catastrophe Losses and LAE 0.1 — — Total Incurred Losses and LAE $ 421.2 $ 320.1 $ 177.7 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 75.6 % 73.9 % 62.5 % Current Year Catastrophe Losses and LAE Ratio 0.4 0.3 0.2 Prior Years Non-catastrophe Losses and LAE Ratio 0.6 3.0 (4.2) Prior Years Catastrophe Losses and LAE Ratio — — — Total Incurred Loss and LAE Ratio 76.6 % 77.2 % 58.5 % 2022 Compared with 2021 Earned premiums in commercial automobile insurance increased by $134.9 million in 2022, compared to 2021, due primarily to higher volume and higher average earned premium per exposure.
DOLLARS IN MILLIONS 2023 2022 2021 Net Premiums Written $ 627.9 $ 629.3 $ 470.1 Earned Premiums $ 654.7 $ 549.7 $ 414.8 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 510.5 $ 415.3 $ 306.4 Catastrophe Losses and LAE 4.9 2.3 1.3 Prior Years: Non-catastrophe Losses and LAE 24.2 3.5 12.4 Catastrophe Losses and LAE — 0.1 — Total Incurred Losses and LAE $ 539.6 $ 421.2 $ 320.1 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 78.0 % 75.6 % 73.9 % Current Year Catastrophe Losses and LAE Ratio 0.7 0.4 0.3 Prior Years Non-catastrophe Losses and LAE Ratio 3.7 0.6 3.0 Prior Years Catastrophe Losses and LAE Ratio — — — Total Incurred Loss and LAE Ratio 82.4 % 76.6 % 77.2 % 2023 Compared with 2022 Earned premiums from commercial automobile insurance increased by $105.0 million in 2023, compared to 2022, due primarily to higher volume and higher average earned premium per exposure resulting from rate increases.
DOLLARS IN MILLIONS Fair Value Percentage of Total Investments Fixed Maturities: States including their Political Subdivisions: Texas $ 139.0 1.6 % California 126.7 1.4 New York 85.8 1.0 Michigan 83.9 1.0 Georgia 78.5 0.9 Louisiana 64.3 0.7 Pennsylvania 60.9 0.7 Florida 57.1 0.6 Colorado 50.5 0.6 Massachusetts 47.9 0.5 Total $ 794.6 9.0 % 52 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENTS IN LIMITED LIABILITY COMPANIES AND LIMITED PARTNERSHIPS The Company owns investments in various limited liability investment companies and limited partnerships that primarily invest in mezzanine debt, distressed debt, and senior debt.
DOLLARS IN MILLIONS Fair Value Percentage of Total Investments Fixed Maturities: States including their Political Subdivisions: California $ 137.4 1.5 % Texas 116.6 1.3 Michigan 83.7 0.9 New York 76.5 0.9 Georgia 73.7 0.8 Louisiana 62.4 0.7 Pennsylvania 57.9 0.7 Florida 57.6 0.6 Colorado 49.1 0.6 Missouri 42.1 0.5 Total $ 757.0 8.5 % 52 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENTS IN LIMITED LIABILITY COMPANIES AND LIMITED PARTNERSHIPS The Company owns investments in various limited liability investment companies and limited partnerships that primarily invest in mezzanine debt, distressed debt, real estate and senior debt.
This resulted in a net loss of $3.2 million and a net income of $4.6 million attributable to Alternative Energy Partnership Investment for the year ended December 31, 2022 and 2021, respectively.
This resulted in a net income of $2.4 million and a net loss of $11.9 million attributable to Alternative Energy Partnership Investments for the year ended December 31, 2023 and 2022, respectively.
DOLLARS IN MILLIONS 2022 2021 2020 Earned Premiums $ 168.2 $ 189.9 $ 199.3 Net Investment Income 3.3 3.6 5.0 Change in Value of Alternative Energy Partnership Investments (0.1) (0.3) — Other Income 0.5 0.3 0.6 Total Revenues 171.9 193.5 204.9 Policyholders’ Benefits and Incurred Losses and LAE 86.5 96.1 95.3 Insurance Expenses 79.1 91.6 91.9 Operating Income 6.3 5.8 17.7 Income Tax Expense (1.1) (0.9) (3.6) Total Product Line Net Operating Income $ 5.2 $ 4.9 $ 14.1 2022 Compared with 2021 The financial information for the Accident and Health Insurance product line includes the results of Reserve National through December 1, 2022, the date it was sold.
DOLLARS IN MILLIONS 2023 2022 2021 Earned Premiums $ 23.1 $ 168.2 $ 189.9 Net Investment Income — 3.3 3.6 Change in Value of Alternative Energy Partnership Investments — (0.1) (0.3) Other Income 0.2 0.5 0.3 Total Revenues 23.3 171.9 193.5 Policyholders’ Benefits and Incurred Losses and LAE 11.5 86.5 96.1 Insurance Expenses 11.2 79.1 91.6 Adjusted Operating Income 0.6 6.3 5.8 Income Tax Expense (0.2) (1.1) (0.9) Total Product Line Adjusted Net Operating Income $ 0.4 $ 5.2 $ 4.9 44 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE INSURANCE (Continued) 2023 Compared with 2022 The financial information for the Accident and Health Insurance product line includes the results of Reserve National through December 1, 2022, the date it was sold.
DOLLARS IN MILLIONS 2022 2021 2020 Net Premiums Written $ 3,305.1 $ 3,587.2 $ 3,086.5 Earned Premiums $ 3,496.7 $ 3,533.7 $ 3,031.3 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 3,153.9 $ 3,173.9 $ 2,160.9 Catastrophe Losses and LAE 20.7 14.4 11.6 Prior Years: Non-catastrophe Losses and LAE (18.1) 85.0 28.0 Catastrophe Losses and LAE 0.5 0.3 0.2 Total Incurred Losses and LAE $ 3,157.0 $ 3,273.6 $ 2,200.7 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 90.2 % 89.8 % 71.3 % Current Year Catastrophe Losses and LAE Ratio 0.6 0.4 0.4 Prior Years Non-catastrophe Losses and LAE Ratio (0.5) 2.4 0.9 Prior Years Catastrophe Losses and LAE Ratio — — — Total Incurred Loss and LAE Ratio 90.3 % 92.6 % 72.6 % 2022 Compared with 2021 Earned Premiums on specialty personal automobile insurance decreased by $37.0 million in 2022, compared to 2021, due primarily to the decrease in new business driven by targeted underwriting actions to improve profitability partially offset by the acquisition of AAC and higher average earned premium per exposure resulting from rate increases.
DOLLARS IN MILLIONS 2023 2022 2021 Net Premiums Written $ 2,677.5 $ 3,305.1 $ 3,587.2 Earned Premiums $ 2,977.8 $ 3,496.7 $ 3,533.7 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 2,464.0 $ 3,153.9 $ 3,173.9 Catastrophe Losses and LAE 29.6 20.7 14.4 Prior Years: Non-catastrophe Losses and LAE 111.0 (18.1) 85.0 Catastrophe Losses and LAE (2.3) 0.5 0.3 Total Incurred Losses and LAE $ 2,602.3 $ 3,157.0 $ 3,273.6 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 82.8 % 90.2 % 89.8 % Current Year Catastrophe Losses and LAE Ratio 1.0 0.6 0.4 Prior Years Non-catastrophe Losses and LAE Ratio 3.7 (0.5) 2.4 Prior Years Catastrophe Losses and LAE Ratio (0.1) — — Total Incurred Loss and LAE Ratio 87.4 % 90.3 % 92.6 % 2023 Compared with 2022 Earned Premiums on personal automobile insurance decreased by $518.9 million in 2023, compared to 2022, due to a decrease in new business driven by targeted underwriting actions to improve profitability, partially offset by higher average earned premium per exposure resulting from rate increases.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest change(Continued) The estimated adverse effects on the fair value of the Company’s financial instruments at December 31, 2022 using these assumptions were: DOLLARS IN MILLIONS Fair Value Pro Forma Increase (Decrease) Interest Rate Risk Equity Price Risk Total Market Risk ASSETS Investments in Fixed Maturities $ 6,894.8 $ (503.3) $ — $ (503.3) Investments in Equity Securities 243.2 (1.2) (24.7) (25.9) LIABILITIES Debt $ 1,195.1 $ 58.7 $ — $ 58.7 The estimated adverse effects on the fair value of the Company’s financial instruments at December 31, 2021 using these assumptions were: DOLLARS IN MILLIONS Fair Value Pro Forma Increase (Decrease) Interest Rate Risk Equity Price Risk Total Market Risk ASSETS Investments in Fixed Maturities $ 7,986.9 $ (643.8) $ — $ (643.8) Investments in Equity Securities 830.6 (2.1) (160.0) (162.1) LIABILITIES Debt $ 1,152.1 $ 47.1 $ — $ 47.1 The market risk sensitivity analysis assumes that the composition of the Company’s interest rate sensitive assets and liabilities, including, but not limited to, credit quality, and the equity price sensitive assets existing at the beginning of the period remains constant over the period being measured.
Biggest change(Continued) The estimated adverse effects on the fair value of the Company’s financial instruments at December 31, 2023 using these assumptions were: DOLLARS IN MILLIONS Fair Value Pro Forma Increase (Decrease) Interest Rate Risk Equity Price Risk Total Market Risk ASSETS Investments in Fixed Maturities $ 6,883.6 $ (513.5) $ — $ (513.5) Investments in Equity Securities 225.8 (0.6) (21.5) (22.1) LIABILITIES Debt $ 1,213.4 $ 50.6 $ — $ 50.6 The estimated adverse effects on the fair value of the Company’s financial instruments at December 31, 2022 using these assumptions were: DOLLARS IN MILLIONS Fair Value Pro Forma Increase (Decrease) Interest Rate Risk Equity Price Risk Total Market Risk ASSETS Investments in Fixed Maturities $ 6,894.8 $ (503.3) $ — $ (503.3) Investments in Equity Securities 243.2 (1.2) (24.7) (25.9) LIABILITIES Debt $ 1,195.1 $ 58.7 $ — $ 58.7 The market risk sensitivity analysis assumes that the composition of the Company’s interest rate sensitive assets and liabilities, including, but not limited to, credit quality, and the equity price sensitive assets existing at the beginning of the period remains constant over the period being measured.
The Company’s primary market risk exposures are to changes in interest rates and equity prices. The Company manages its interest rate exposures with respect to Investments in Fixed Maturities by investing primarily in investment-grade securities of moderate effective duration. 66
The Company’s primary market risk exposures are to changes in interest rates and equity prices. The Company manages its interest rate exposures with respect to Investments in Fixed Maturities by investing primarily in investment-grade securities of moderate effective duration. 71

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