Kemper (KMPR) investor relations material

Executive summary

• Underlying operating performance improved sequentially, but reported GAAP results were significantly impacted by a $460 million non-cash goodwill impairment in the specialty auto segment and a $16.6 million after-tax allowance for credit losses on surplus notes.

• Leadership realignment and new board appointments were implemented to enhance accountability and execution, particularly in P&C.

• Profitability restoration is prioritized over growth, with growth to be pursued only when sustainable.

• Life segment continued to deliver stable profitability, with net operating income rising 38.5% year-over-year.

Financial highlights

• Net loss of $464.8 million ($7.90 per share) due to goodwill impairment; adjusted consolidated net operating income was $26.3 million ($0.45 per share).

• Net investment income totaled $105 million for the quarter; trailing 12-month cash flow was $434 million.

• Debt-to-capital ratio increased to 28.3%, primarily due to goodwill impairment.

• Insurance subsidiaries remain well-capitalized with $766 million in holding company liquidity.

• Adjusted book value per share was $27.55, down from $31.01 a year ago.

Outlook and guidance

• Continued focus on restoring profitability, especially in Personal Auto, with further rate and non-rate actions planned.

• Commercial Auto will emphasize profitability over growth, with additional rate actions and tighter underwriting.

• Ongoing initiatives to reduce expense ratio below 20% and further streamline operations.

• New catastrophe reinsurance program aligns with updated risk appetite and is expected to improve cost of capital.