KEMPER Corp [KMPR] Filings

10-Q 1 kmpr-20240630.htm 10-Q kmpr-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________________

FORM 10-Q

______________________________________________________


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended 6/30/2024


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from to

Commission file number 001-18298

______________________________________________________

Kemper Corporation

(Exact name of registrant as specified in its charter)

______________________________________________________


DE		95-4255452
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 E. Randolph Street
Suite 3300
Chicago	IL	60601
(Address of principal executive offices)		(Zip Code)

(312) 661-4600

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	KMPR	NYSE
5.875% Fixed-Rate Reset Junior Subordinated Debentures due 2062	KMPB	NYSE

______________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “ accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

64,426,693 shares of common stock, $0.10 par value, were outstanding as of August 1, 2024.

KEMPER CORPORATION

INDEX


		Page
Caution Regarding Forward-Looking Statements		1

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statements of Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	5

	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited)	8

	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	10

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	71

Item 4.	Controls and Procedures	72

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	72

Item 1A.	Risk Factors	72

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72

Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	72

Item 6.	Exhibits	73

Exhibit Index		73

Signatures		74

Caution Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including, but not limited to, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), Risk Factors and the accompanying unaudited Condensed Consolidated Financial Statements (including the notes thereto) of Kemper Corporation (“Kemper”) and its subsidiaries (individually and collectively referred to herein as the “Company”), as well as a variable interest entity (“VIE”) in which the Company is considered the primary beneficiary, may contain or incorporate by reference information that includes or is based on forward-looking statements within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements give expectations or forecasts of future events. The reader can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “believe(s),” “goal(s),” “target(s),” “estimate(s),” “anticipate(s),” “forecast(s),” “project(s),” “plan(s),” “intend(s),” “expect(s),” “might,” “may,” “could” and other terms of similar meaning. Forward-looking statements, in particular, include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong, and, accordingly, Kemper cautions readers not to place undue reliance on such statements. Kemper bases these statements on current expectations and the current economic environment as of the date of this Quarterly Report on Form 10-Q. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties that may be important in determining the Company’s actual future results and financial condition.

In addition to the factors discussed under Item 1A., “Risk Factors,” of Part I of Kemper’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”), for the year ended December 31, 2023 (the “2023 Annual Report”), the reader should consider the following list of factors that, among others, could cause the Company’s actual results and financial condition to differ materially from estimated results and financial condition.

Factors related to the legal and regulatory environment in which Kemper and its subsidiaries operate

•Evolving policies, practices and interpretations by regulators and courts that increase operating costs and potential liabilities, particularly any that involve retroactive application of new requirements;

•Adverse outcomes in litigation, investigations or other legal or regulatory proceedings involving Kemper or its subsidiaries or affiliates, including proceedings related to its business practices or business practices in the insurance industry;

•Governmental actions, including, but not limited to, implementation of new laws and regulations, and court decisions interpreting existing and future laws and regulations or policy provisions;

•Uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications, business withdrawals, dividends from insurance subsidiaries, acquisitions of businesses or strategic initiatives and other matters within the purview of insurance regulators;

•Increased costs required to address new legal and regulatory requirements; liabilities, costs and other impacts arising from investigations or developments related to cybersecurity, privacy and data governance, including, without limitation, cyber incidents that have occurred or could occur;

Factors relating to insurance claims and related reserves in the Company’s insurance businesses

•The incidence, frequency and severity of catastrophes occurring in any particular reporting period or geographic area, including natural disasters, pandemics and terrorist attacks or other man-made events;

•The frequency and severity of insurance claims (including those associated with catastrophe losses and pandemics);

•The interest rate environment, including proposed rate changes by the U.S. Federal Reserve, which may cause material fluctuations in our life policyholder benefit reserves;

•Changes in facts and circumstances affecting assumptions used in determining loss and loss adjustment expenses (“LAE”) reserves, including, but not limited to, the frequency and severity of insurance claims, changes in claims handling procedures and closure patterns, development patterns and the impacts of technological and other environmental conditions;

•The impact of inflation on insurance claims, including, but not limited to, the effects on material costs, personal injury claims of increasing medical costs and the severity of claims resulting from a catastrophe;

•The effects on property claims attributed to supply chain disruption and scarcity of resources available to rebuild damaged structures, including labor and materials and the amount of salvage value recovered for damaged property;

•The rising costs of insurance claims from increased and more targeted litigation, higher jury awards, broader definitions of liability, and other effects of legal system abuse and societal trends referred to as social inflation or legal system abuse;

•Developments related to insurance policy claims and coverage issues, including, but not limited to, interpretations, pronouncements or decisions by courts or regulators that may govern or influence losses incurred in connection with hurricanes and other catastrophes;

•Orders, interpretations or other actions by regulators that impact the reporting, adjustment and payment of claims;

•Changes in the pricing or availability of reinsurance, or in the financial condition of reinsurers and amounts recoverable therefrom;

Factors related to the Company’s ability to compete

•Changes in the ratings of Kemper and/or its insurance company subsidiaries by rating agencies with regard to credit, financial strength, claims paying ability and other areas on which the Company is rated;

•The level of success and costs incurred in realizing or maintaining economies of scale, integrating acquired businesses and implementing significant business initiatives and the timing of the occurrence or completion of such events, including, but not limited to, those related to expense and claims savings, the establishment and operation of Kemper Reciprocal, consolidations, reorganizations and technology;

•Absolute and relative performance of the Company’s products and services, including, but not limited to, the level of success achieved in designing and introducing new insurance products and services;

•Difficulties with technology, data and network security (including as a result of cyber attacks that have occurred or could occur), outsourcing relationships or cloud-based technology that could negatively impact the Company’s ability to conduct business, a heightened risk when substantial numbers of employees utilize work from home arrangements;

•The ability of the Company and its third-party service providers to maintain the availability and required performance of critical systems and manage technology initiatives cost-effectively to address insurance industry developments and regulatory requirements;

•Heightened competition, including, with respect to pricing, consolidations of existing competitors or entry of new competitors and alternate distribution channels, introduction of new technologies, use and enhancements of telematics, refinements of existing products and development of new products by current or future competitors;

•Expected benefits and synergies from mergers, acquisitions, divestitures and/or strategic initiatives that may not be realized to the extent anticipated, within expected time frames or at all, due to a number of factors including, but not limited to, the loss of key agents/brokers, customers or employees, increased costs, fees, expenses and related charges and delays caused by unanticipated developments or factors outside of the Company’s control;

•The successful formulation and execution of the Company’s plan with regard to corporate strategy and significant operational changes;

•Increase in competition as a result of new competitors to the property and casualty insurance industry or existence of competitors that receive substantial infusion of capital or access to third-party capital;

Factors related to the business environment in which Kemper and its subsidiaries operate

•Changes in general economic conditions, including those related to, without limitation, performance of financial markets, interest rates, inflation, unemployment rates, significant global catastrophes and/or pandemics, and fluctuating values of particular investments held by the Company;

•Absolute and relative performance of investments held by the Company;

•Changes in insurance industry trends and significant industry developments;

•Changes in consumer trends, including changes in number of miles driven by automobile insurance policyholders, and significant consumer or product developments;

•Changes in capital requirements, including the calculations thereof, used by regulators and rating agencies;

•Regulatory, accounting or tax changes that may affect the Company’s earnings, the cost of, or demand for, the Company’s products or services or after-tax returns from the Company’s investments;

•The impact of required participation in state windpools and joint underwriting associations, residual market assessments and assessments for insurance industry insolvencies;

•Changes in distribution channels, methods or costs resulting from changes in laws or regulations, legal proceedings or market forces;

•Increasing competition and higher costs for executive talent and employees with necessary skills and industry experience;

•Increased costs and risks related to cybersecurity that could materially affect the Company’s operations including, but not limited to, data breaches, cyber attacks, virus or malware attacks, or other infiltrations or incidents affecting system integrity, availability and performance, and actions taken to minimize and remediate the risks of such events that have occurred or could occur;

Other risks and uncertainties described from time to time in Kemper’s filings with the U.S. Securities and Exchange Commission (“SEC”)

Kemper cannot provide any assurances that the results and outcomes contemplated in any forward-looking statements will be achieved or will be achieved in any particular timetable or that future events or developments will not cause such statements to be inaccurate. Kemper assumes no obligation to correct or update any forward-looking statements publicly for any changes in events or developments or in the Company’s expectations or results subsequent to the date of this Quarterly Report on Form 10-Q. Kemper advises the reader, however, to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Dollars in millions, except per share amounts)

(Unaudited)


	Three Months Ended				Six Months Ended

	Jun 30, 2024		Jun 30, 2023		Jun 30, 2024		Jun 30, 2023
Revenues:
Earned Premiums (Changes in Deferred Profit Liability for the Three Months Ended: 2024 - $16.7; 2023 - $16.5 and Six Months Ended: 2024 - $36.4; 2023 - $35.7)	$	1,033.7	$	1,166.9	$	2,065.6	$	2,347.8
Net Investment Income	93.0		106.3		193.4		208.1
Change in Value of Alternative Energy Partnership Investments	0.6		0.8		1.0		1.5
Other Income	2.4		1.7		4.2		2.9
Change in Fair Value of Equity and Convertible Securities	(1.2)		2.4		2.2		4.1
Net Realized Investment Gains (Losses)	1.5		(14.4)		8.1		(8.0)
Impairment Losses	(0.1)		(0.9)		(1.6)		1.2
Total Revenues	1,129.9		1,262.8		2,272.9		2,557.6
Expenses:
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses (Changes in Liability for Future Policyholder Benefits for the Three Months Ended: 2024 - $1.6; 2023 - $0.6 and Six Months Ended: 2024 - $7.6; 2023 - $2.5)	744.4		984.7		1,500.4		2,036.7
Insurance Expenses	244.3		266.1		485.0		535.4


Interest and Other Expenses	49.3		78.3		109.0		155.7
Goodwill Impairment	—		49.6		—		49.6
Total Expenses	1,038.0		1,378.7		2,094.4		2,777.4
Income (Loss) before Income Taxes	91.9		(115.9)		178.5		(219.8)
Income Tax (Expense) Benefit	(17.5)		18.8		(33.9)		42.6





Net Income (Loss)	74.4		(97.1)		144.6		(177.2)
Less: Net Loss attributable to Noncontrolling Interest	(1.0)		—		(2.1)		—
Net Income (Loss) attributable to Kemper Corporation	$	75.4	$	(97.1)	$	146.7	$	(177.2)

Net Income (Loss) attributable to Kemper Corporation per Unrestricted Share:
Basic	$	1.17	$	(1.52)	$	2.28	$	(2.77)
Diluted	$	1.16	$	(1.52)	$	2.26	$	(2.77)

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

(Unaudited)


	Three Months Ended				Six Months Ended
	Jun 30, 2024		Jun 30, 2023		Jun 30, 2024		Jun 30, 2023
Net Income (Loss)	$	74.4	$	(97.1)	$	144.6	$	(177.2)

Other Comprehensive Income (Loss) Before Income Taxes
Changes in Net Unrealized Holding (Losses) Gains on Investment Securities with:
No Credit Losses Recognized in Condensed Consolidated Statements of Income (Loss)	(79.2)		(83.2)		(188.2)		104.0
Credit Losses Recognized in Condensed Consolidated Statements of Income (Loss)	(3.0)		(0.1)		(1.7)		(0.1)

Change in Net Unrecognized Postretirement Benefit Costs	(0.8)		(0.6)		(1.7)		(1.1)
Net Loss on Cash Flow Hedges	(3.6)		(0.1)		(3.6)		(0.1)
Change in Discount Rate on Future Life Policyholder Benefits	108.8		50.6		249.9		(59.2)
Other Comprehensive Income (Loss) Before Income Taxes	22.2		(33.4)		54.7		43.5
Other Comprehensive Income Tax (Expense) Benefit	(4.5)		7.3		(11.2)		(9.4)
Other Comprehensive Income (Loss), Net of Taxes	17.7		(26.1)		43.5		34.1
Total Comprehensive Income (Loss)	92.1		(123.2)		188.1		(143.1)

Less: Net Loss attributable to Noncontrolling Interest	(1.0)		—		(2.1)		—
Less: Other Comprehensive Income attributable to Noncontrolling Interest	—		—		—		—
Less: Total Comprehensive Loss attributable to Noncontrolling Interest	(1.0)		—		(2.1)		—

Comprehensive Income (Loss) attributable to Kemper Corporation	$	93.1	$	(123.2)	$	190.2	$	(143.1)

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)

(Unaudited)


	Jun 30, 2024		Dec 31, 2023
Assets:
Investments:
Fixed Maturities at Fair Value (Amortized Cost: 2024 - $7,546.9; 2023 - $7,565.8 Allowance for Credit Losses: 2024 - $7.5; 2023 - $8.2)	$	6,674.7	$	6,881.9
Equity Securities at Fair Value (Cost: 2024 - $211.6; 2023 - $209.3)	226.6		225.8
Equity Method Limited Liability Investments	205.1		221.7
Alternative Energy Partnership Investments	17.3		17.3
Short-term Investments at Cost which Approximates Fair Value	539.1		520.9
Company-Owned Life Insurance	523.3		513.5
Loans to Policyholders	279.8		281.2
Other Investments	202.4		241.9
Total Investments	8,668.3		8,904.2
Cash	107.4		64.1
Receivables from Policyholders (Allowance for Credit Losses: 2024 - $4.8; 2023 - $13.9)	988.0		959.5
Other Receivables	191.5		200.5
Deferred Policy Acquisition Costs	608.0		591.6
Goodwill	1,250.7		1,250.7
Current Income Tax Assets	56.5		64.5
Deferred Income Tax Assets	185.0		210.4

Other Assets	476.4		492.6
Assets of Consolidated Variable Interest Entity
Fixed Maturities at Fair Value (Amortized Cost: 2024 - $1.6; 2023 - $1.7 Allowance for Credit Losses: 2024 - $—; 2023 - $—)	1.6		1.7

Short-term Investments at Cost which Approximates Fair Value	4.8		2.0
Receivables from Policyholders (Allowance for Credit Losses: 2024 - $—; 2023 - $—)	5.2		0.7
Deferred Policy Acquisition Costs	0.3		0.1

Deferred Income Tax Assets	0.6		—
Other Assets	—		0.1
Total Assets	$	12,544.3	$	12,742.7

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in millions, except per share amounts)

(Unaudited)


	June 30, 2024		Dec 31, 2023

Liabilities and Shareholders’ Equity:
Insurance Reserves:
Life and Health	$	3,202.0	$	3,422.4
Property and Casualty	2,567.2		2,680.5
Total Insurance Reserves	5,769.2		6,102.9
Unearned Premiums	1,301.5		1,300.8

Policyholder Obligations	644.4		655.7
Deferred Income Tax Liabilities	68.3		50.6


Accrued Expenses and Other Liabilities	693.8		737.7
Long-term Debt, Current, at Amortized Cost (Fair Value: 2024 - $444.9; 2023 - $—)	449.8		—
Long-term Debt, Non-Current, at Amortized Cost (Fair Value: 2024 - $801.4; 2023 - $1,213.4)	940.6		1,389.2
Liabilities of Consolidated Variable Interest Entity
Insurance Reserves	2.4		—
Unearned Premiums	4.9		0.5
Accrued Expenses and Other Liabilities	0.1		0.3
Total Liabilities	9,875.0		10,237.7
Kemper Corporation Shareholders’ Equity:
Common Stock, $0.10 Par Value, 100,000,000 Shares Authorized; 64,426,521 Shares Issued and Outstanding at June 30, 2024 and 64,111,555 Shares Issued and Outstanding at December 31, 2023	6.4		6.4
Paid-in Capital	1,860.9		1,845.3
Retained Earnings	1,121.2		1,014.3
Accumulated Other Comprehensive Loss	(317.3)		(360.8)
Total Kemper Corporation Shareholders’ Equity	2,671.2		2,505.2
Noncontrolling Interest	(1.9)		(0.2)
Total Shareholders’ Equity	2,669.3		2,505.0
Total Liabilities and Shareholders’ Equity	$	12,544.3	$	12,742.7

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(Unaudited)


	Six Months Ended
	Jun 30, 2024		Jun 30, 2023
Cash Flows from Operating Activities:
Net Income (Loss)	$	144.6	$	(177.2)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities
Net Realized Investment (Gains) Losses	(8.1)		8.0
Impairment Losses	1.6		(1.2)
Depreciation and Amortization of Property, Equipment and Software	22.4		26.2
Amortization of Intangibles Assets Acquired	5.3		7.9
Settlement Related to Defined Benefit Pension Plan	(2.7)		—


Change in Accumulated Undistributed Earnings of Equity Method Limited Liability Investments	23.2		(1.3)
Change in Value of Alternative Energy Partnership Investments	(1.0)		(1.5)
Change in Fair Value of Equity and Convertible Securities	(2.2)		(4.1)
Goodwill Impairment	—		49.6
Changes in:
Receivables from Policyholders	(32.6)		40.3
Reinsurance Recoverables	4.1		11.6
Deferred Policy Acquisition Costs	(16.6)		(10.6)
Insurance Reserves	(80.7)		(47.7)
Unearned Premiums	5.1		(39.2)
Income Taxes	38.7		72.6
Other Assets and Liabilities	(35.2)		0.7
Net Cash Provided by (Used in) Operating Activities	65.9		(65.9)
Cash Flows from Investing Activities:
Proceeds from the Sales, Calls and Maturities of Fixed Maturities	629.2		353.0
Proceeds from the Sales or Paydowns of Investments:
Equity Securities	19.3		32.5

Mortgage Loans	71.9		42.5
Other Investments	8.6		5.1
Purchases of Investments:
Fixed Maturities	(578.4)		(334.8)
Equity Securities	(6.3)		(26.2)
Real Estate Investments	(0.6)		(0.3)

Mortgage Loans	(55.3)		(44.1)
Other Investments	(30.2)		(11.6)
Net Purchases of Short-term Investments	(12.6)		(126.9)


Acquisition of Software and Long-lived Assets	(33.0)		(25.4)
Settlement Proceeds from Company-Owned Life Insurance	6.2		102.2
Other	13.8		(1.1)
Net Cash Provided by (Used in) Investing Activities	32.6		(35.1)

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in millions)

(Unaudited)


	Six Months Ended
	Jun 30, 2024		Jun 30, 2023
Net Cash Provided by (Used in) Investing Activities (Carryforward from page 8)	32.6		(35.1)
Cash Flows from Financing Activities:







Proceeds from Policyholder Contract Obligations	59.1		114.5
Repayment of Policyholder Contract Obligations	(70.7)		(115.8)
Proceeds from Shares Issued under Employee Stock Purchase Plan	2.0		2.2

Dividends Paid	(39.8)		(39.6)
Other	(5.8)		0.9
Net Cash Used in Financing Activities	(55.2)		(37.8)









Net increase (decrease) in cash1	43.3		(138.8)
Cash, Beginning of Year1	64.1		212.4
Cash, End of Period1	$	107.4	$	73.6
1Includes amounts attributable to Kemper Reciprocal reported as non-controlling interest.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

(Dollars in millions)

(Unaudited)


	Six Months Ended
	Jun 30, 2024		Jun 30, 2023
Cash (paid) received during the year for:
Interest	$	(27.3)	$	(27.3)
Taxes	5.1		114.5
Operating Leases	(11.2)		(13.4)

Non-Cash Activities:
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	$	7.4	$	2.4

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended June 30, 2024
	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest		Total Shareholders’ Equity
Balance, March 31, 2024	64.4	$	6.4	$	1,852.3	$	1,066.1	$	(335.0)	$	(1.1)	$	2,588.7


Net Income	—	—		—		75.4		—		(1.0)		74.4
Other Comprehensive Income, Net of Taxes (Note 12)	—	—		—		—		17.7		—		17.7
Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)	—	—		—		(20.3)		—		—		(20.3)


Shares Issued Under Employee Stock Purchase Plan (Note 13)	—	—		1.1		—		—		—		1.1
Equity-based Compensation Cost	—	—		7.3		—		—		—		7.3
Equity-based Awards, Net of Shares Exchanged	—	—		0.2		—		—		—		0.2
Other Changes in Non-Controlling Interest	—	—		—		—		—		0.2		0.2
Balance, June 30, 2024	64.4	$	6.4	$	1,860.9	$	1,121.2	$	(317.3)	$	(1.9)	$	2,669.3


	Three Months Ended June 30, 2023
	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Shareholders’ Equity
Balance, March 31, 2023	64.0	$	6.4	$	1,828.9	$	1,266.3	$	(454.7)	$	—	$	2,646.9


Net Loss	—	—		—		(97.1)		—		—		(97.1)
Other Comprehensive Loss, Net of Taxes (Note 12)	—	—		—		—		(26.1)		—		(26.1)
Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)	—	—		—		(20.2)		—		—		(20.2)


Shares Issued Under Employee Stock Purchase Plan (Note 13)	—	—		1.2		—		—		—		1.2
Equity-based Compensation Cost	—	—		7.1		—		—		—		7.1
Equity-based Awards, Net of Shares Exchanged	—	—		0.4		—		—		—		0.4

Balance, June 30, 2023	64.0	$	6.4	$	1,837.6	$	1,149.0	$	(480.8)	$	—	$	2,512.2

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)

(In millions, except per share amounts)

(Unaudited)


	Six Months Ended June 30, 2024
	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest		Total Shareholders’ Equity
Balance, December 31, 2023	64.1	$	6.4	$	1,845.3	$	1,014.3	$	(360.8)	$	(0.2)	$	2,505.0


Net Income	—	—		—		146.7		—		(2.1)		144.6
Other Comprehensive Income, Net of Taxes (Note 12)	—	—		—		—		43.5		—		43.5
Cash Dividends and Dividend Equivalents to Shareholders ($0.62 per share)	—	—		—		(39.8)		—		—		(39.8)


Shares Issued Under Employee Stock Purchase Plan (Note 13)	—	—		2.0		—		—		—		2.0
Equity-based Compensation Cost	—	—		19.5		—		—		—		19.5
Equity-based Awards, Net of Shares Exchanged	0.3	—		(5.9)		—		—		—		(5.9)
Other Changes in Non-Controlling Interest	—	—		—		—		—		0.4		0.4
Balance, June 30, 2024	64.4	$	6.4	$	1,860.9	$	1,121.2	$	(317.3)	$	(1.9)	$	2,669.3


	Six Months Ended June 30, 2023
	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest		Total Shareholders’ Equity
Balance, December 31, 2022	63.9	$	6.4	$	1,812.7	$	1,366.4	$	(514.9)	$	—	$	2,670.6


Net Loss	—	—		—		(177.2)		—		—		(177.2)
Other Comprehensive Income, Net of Taxes (Note 12)	—	—		—		—		34.1		—		34.1
Cash Dividends and Dividend Equivalents to Shareholders ($0.62 per share)	—	—		—		(39.6)		—		—		(39.6)

Shares Issued Under Employee Stock Purchase Plan (Note 13)	—	—		2.2		—		—		—		2.2
Equity-based Compensation Cost	—	—		22.7		—		—		—		22.7
Equity-based Awards, Net of Shares Exchanged	0.1	—		—		(0.6)		—		—		(0.6)

Balance, June 30, 2023	64.0	$	6.4	$	1,837.6	$	1,149.0	$	(480.8)	$	—	$	2,512.2

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of Presentation and Accounting Policies

The unaudited Condensed Consolidated Financial Statements include the accounts of Kemper Corporation (“Kemper”) and its subsidiaries which include property and casualty insurance subsidiaries, life insurance subsidiaries (collectively referred to herein as the “Company”), and a variable interest entity (“VIE”) in which the Company is considered the primary beneficiary.

The unaudited Condensed Consolidated Financial Statements included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) on a basis consistent with reporting interim financial information pursuant to the rules and regulations for Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and include the accounts of Kemper Corporation, its subsidiaries, and a VIE in which the Company is considered the primary beneficiary. All intercompany accounts and transactions have been eliminated.

Certain financial information that is included in the annual financial statements, including certain financial statement footnote disclosures prepared in accordance with GAAP, is not required by the rules and regulations of the SEC for interim financial reporting and has been condensed or omitted. In the opinion of the Company’s management, the Condensed Consolidated Financial Statements include all adjustments necessary to fairly present the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements requires significant management estimates. Due to this factor and other factors, such as the seasonal nature of some portions of the insurance business, annualizing the results of operations for the six months ended June 30, 2024 would not necessarily be indicative of the results expected for the full fiscal year. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements and related notes included in Kemper’s Annual Report for the year ended December 31, 2023.

Adoption of New Accounting Guidance

The Company has adopted all recently issued accounting pronouncements with effective dates prior to June 30, 2024.

Guidance Adopted in 2024

In March 2023, the FASB issued ASU 2023-02 Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, which expands the use of the proportional amortization method of accounting to equity investments in other tax credit structures that meet certain criteria. The proportional amortization method results in the tax credit investment being amortized in proportion to the allocation of tax credits and other tax benefits in each period, and a net presentation within the income tax line item. ASU 2023-02 is effective for annual periods beginning after December 15, 2023 and interim periods within those annual periods. The Company adopted the new standard on January 1, 2024. The adoption did not have a material impact on the Company's Condensed Consolidated Financial Statements.

Guidance Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06 Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. For SEC registrants, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but does not anticipate the adoption of the new guidance will have a material impact on the Company’s Condensed Consolidated Financial Statements. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07 Improvements to Reportable Segment Disclosures, which enhances disclosures about significant segment expenses. The new standard does not change the definition or aggregation of operating segments but will add required disclosures of significant expenses for each reportable segment as well as certain other disclosures to help financial statement users understand how the chief operating decision maker evaluates segment expenses and operating results. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 Improvements to Income Tax Disclosures, which improves the transparency of income tax disclosures by requiring companies to use consistent categories and greater disaggregation of information in the

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 1 - Basis of Presentation and Accounting Policies (Continued)

tax rate reconciliation as well as requiring disaggregation of income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In March 2024, the SEC adopted a final rule requiring registrants to disclose certain climate-related information in their registration statements and annual reports. The rule requires the disclosure of qualitative and quantitative information, with certain information, such as financial statement effects of severe weather events, included in the notes to the audited financial statements. Other disclosure requirements include material climate-related risks, processes to manage and govern those risks, disclosure of targets if the targets materially affect or are reasonably likely to materially affect the Company, and, if material, disclosure of certain greenhouse gas emissions. On April 4, 2024, the SEC issued a voluntary stay of the final rule, pending the outcome of pending litigation. The requirements will be applied prospectively and have phased-in effective dates. For the Company, the Form 10-K for the year ended December 31, 2025, will be the first annual report with new climate-related disclosures. The Company is currently evaluating the impact of adopting the final rule.

Note 2 - Net Income (Loss) Per Unrestricted Share

A reconciliation of the numerator and denominator used in the calculation of Basic Net Income (Loss) Per Unrestricted Share and Diluted Net Income (Loss) Per Unrestricted Share for the three and six months ended June 30, 2024 and 2023 is presented below.


	Three Months Ended				Six Months Ended
(Dollars in Millions, except per share amounts)	Jun 30, 2024		Jun 30, 2023		Jun 30, 2024		Jun 30, 2023
Net Income (Loss) attributable to Kemper Corporation	$	75.4	$	(97.1)	$	146.7	$	(177.2)




Shares in Thousands
Weighted-average Unrestricted Shares Outstanding	64,395.0		64,008.5		64,324.7		63,977.7
Equity-based Compensation Equivalent Shares	496.6		—		507.4		—
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	64,891.6		64,008.5		64,832.1		63,977.7

Net Income (Loss) attributable to Kemper Corporation per Unrestricted Share:
(Per Unrestricted Share in Whole Dollars)
Basic Net Income (Loss) Per Unrestricted Share	$	1.17	$	(1.52)	$	2.28	$	(2.77)
Diluted Net Income (Loss) Per Unrestricted Share	$	1.16	$	(1.52)	$	2.26	$	(2.77)

The number of shares of Kemper common stock that were excluded from the calculations of Equity-based Compensation Equivalent Shares and Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution because the effect of inclusion would be anti-dilutive was 1.6 million and 2.6 million for the three months ended June 30, 2024 and 2023, respectively.

The number of shares of Kemper common stock that were excluded from the calculations of Equity-based Compensation Equivalent Shares and Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution because the effect of inclusion would be anti-dilutive was 1.7 million and 2.6 million for the six months ended June 30, 2024 and 2023, respectively.

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3 - Business Segments

The Company is engaged, through its subsidiaries, in the property and casualty insurance and life and health insurance businesses. The Company conducts its operations through two operating segments: Specialty Property & Casualty Insurance and Life Insurance.

The Specialty Property & Casualty Insurance segment’s principal products are specialty automobile and commercial automobile insurance. These products are distributed primarily through independent agents and brokers. The Life Insurance segment’s principal products are individual life, accident, supplemental health and property insurance. Career agents employed by the Company distribute these products. Corporate and Other operations include interest expense, board of directors fees, and general corporate expenses incurred by the Company which are not allocated to other businesses. Non-Core Operations includes the results of our Preferred Insurance business which we expect to fully exit.

Segment Adjusted Operating Income (Loss)

The Company analyzes the operating performance of each segment using segment adjusted operating income (loss). Segment adjusted operating income (loss) does not equate to “income (loss) before income taxes” or “net income (loss)” as determined in accordance with U.S. GAAP but is the measure of segment profit or loss used by the Company’s Chief Operating Decision Maker (“CODM”) to evaluate segment performance and allocate resources, and consistent with authoritative guidance, is the measure of segment performance presented below. Segment adjusted operating income (loss) is calculated by adjusting each segment’s income (loss) before income taxes for the following items:

(i) Change in Fair Value of Equity and Convertible Securities;

(ii) Net Realized Investment Gains (Losses);

(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 Charge;

(vii) Non-Core Operations; and

(viii) Significant non-recurring or infrequent items that may not be indicative of ongoing operations

These items are important to an understanding of overall results of operations. Segment adjusted operating income (loss) is not a substitute for income determined in accordance with U.S. GAAP, and the Company’s definition of segment adjusted operating income (loss) may differ from that used by other companies. The Company, however, believes that the presentation of segment adjusted operating income (loss), as measured for management purposes, enhances the understanding of results of operations by highlighting the underlying profitability factors of its businesses.

Earned Premiums by product line, including a reconciliation to Total Earned Premiums, for the three and six months ended June 30, 2024 and 2023 were:


	Three Months Ended				Six Months Ended
(Dollars in Millions)	Jun 30, 2024		Jun 30, 2023		Jun 30, 2024		Jun 30, 2023
Specialty Property & Casualty Insurance:
Personal Automobile	$	691.5	$	766.6	$	1,366.8	$	1,554.5
Commercial Automobile	171.1		165.7		335.8		322.0
Life Insurance:
Life	84.4		84.8		165.0		167.0
Accident and Health	5.6		5.8		11.2		11.7
Property	10.8		11.6		21.9		22.8
Total Segment Earned Premiums	963.4		1,034.5		$	1,900.7	$	2,078.0
Non-Core Operations	70.3		132.4		164.9		269.8
Total Earned Premiums	$	1,033.7	$	1,166.9	$	2,065.6	$	2,347.8

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3 - Business Segments (Continued)

Segment Revenues, including a reconciliation to Total Revenues, for the three and six months ended June 30, 2024 and 2023 were:


	Three Months Ended				Six Months Ended
(Dollars in Millions)	Jun 30, 2024		Jun 30, 2023		Jun 30, 2024		Jun 30, 2023
Segment Revenues:
Specialty Property & Casualty Insurance:
Earned Premiums	$	862.6	$	932.3	$	1,702.6	$	1,876.5
Net Investment Income	46.6		44.5		87.7		83.0
Change in Value of Alternative Energy Partnership Investments	0.3		0.4		0.6		0.8
Other Income	1.3		0.7		2.4		1.6
Total Specialty Property & Casualty Insurance	910.8		977.9		1,793.3		1,961.9
Life Insurance:
Earned Premiums	100.8		102.2		198.1		201.5
Net Investment Income	30.5		47.1		74.8		96.9
Change in Value of Alternative Energy Partnership Investments	0.1		0.2		0.2		0.4
Other Income (Loss)	0.1		0.1		0.3		(0.3)
Total Life Insurance	131.5		149.6		273.4		298.5
Total Segment Revenues	1,042.3		1,127.5		2,066.7		2,260.4
Change in Fair Value of Equity and Convertible Securities	(1.2)		2.4		2.2		4.1
Net Realized Investment Gains (Losses)	1.5		(14.4)		8.1		(8.0)
Net Impairment Losses Recognized in Earnings	(0.1)		(0.9)		(1.6)		1.2
Non-Core Operations	83.8		145.7		190.0		293.7
Other	3.6		2.5		7.5		6.2
Total Revenues	$	1,129.9	$	1,262.8	$

KEMPER Corp [KMPR] Filings

KEMPER Corp [KMPB] Filings