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FOR IMMEDIATE RELEASE
OLDWICK - JULY 15, 2015 09:47 AM (EDT)
A.M. Best has affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit ratings (ICR) of "a-" of the property/casualty subsidiaries and affiliated insurance companies (collectively referred to as Kemper Property & Casualty Group) (Kemper P&C) of Kemper Corporation (Kemper Corp.) [NYSE: KMPR]. A.M. Best also has affirmed the FSR of A- (Excellent) and the ICRs of "a-" of Kemper Corp.'s life/health subsidiaries, collectively referred to as Kemper Life & Health Group (Kemper L&H).
Concurrently, A.M. Best has affirmed the ICR of "bbb-" and the senior debt ratings of "bbb-" on $250.0 million 4.35% senior unsecured notes due 2025, $360.0 million 6.0% senior unsecured notes due 2017 and "bb+" on $150.0 million 7.375% subordinated debt due 2054 of Kemper Corp. Furthermore, A.M. Best has affirmed the indicative ratings of "bbb-" on senior unsecured debt, "bb+" on subordinated debt and "bb" on preferred stock in the automatic shelf of Kemper Corp. The outlook for all ratings is stable. All companies are headquartered in Chicago, IL, unless otherwise specified. (See link below for a detailed listing of the companies and ratings.)
The affirmation of the ratings of Kemper P&C, led by Trinity Universal Insurance Company (Trinity) (Dallas, TX), is reflective of its solid risk-adjusted capitalization, improved operating performance, diverse business profile and the continual actions being taken to reduce exposure to catastrophic loss and manage risks. These actions include increasing rates, enhancing risk selection, reducing exposure in catastrophe-prone areas and further development of a formalized enterprise risk management program. Kemper P&C maintains a diverse business profile with a strong market presence, good geographic spread of risk, multi-channel distribution and long-standing agency relationships. Trinity reinsures the other members through a 100% quota share reinsurance agreement.
Partially offsetting these positive rating factors are Kemper P&C's underwriting variability and negative operating cash flows in most of the past five years. In addition, underwriting leverage, while improved, remains above average when compared with the private passenger automobile and homeowner composite. Kemper P&C continues to face challenges by strong competitive market pricing in its main private passenger auto lines of business, potential catastrophic losses from increased severity of weather events and continuation of low interest rates and equity market volatility, which is putting pressure on investment returns. However, following adverse underwriting performance in earlier periods, Kemper P&C has reported favorable operating earnings in recent years.
The affirmation of the ratings of Kemper L&H recognizes its important role within the Kemper organization, its strong niche presence in the home service life insurance market, as well as its well-established employee agency field force and strong operating performance. The life/health subsidiaries are among the market leaders in the mature home service life insurance segment, predominantly marketing low face amount permanent and term life policies. Through Kemper Senior Solutions and Kemper Benefits, under its Reserve National legal entity, the company offers final expense and other health-related supplement products.
Kemper L&H's consolidated risk-adjusted capitalization is enhanced by its strong profitability, which historically has offset the large dividend payments made to Kemper Corp. Furthermore, A.M. Best notes Kemper L&H's stable liability structure relative to its life/annuity peers is facilitated by the sale of straightforward, lower risk product offerings through career agents.
Partially offsetting these strengths is A.M. Best's belief that Kemper L&H may be challenged to meaningfully grow its businesses given the limited growth potential in the mature home service market. A.M. Best also notes the continued high concentration of real estate and Schedule BA assets—limited liability investment companies and limited partnerships—relative to total capital that remain above industry averages.
For a complete listing of Kemper Corporation, its subsidiaries and affiliates' financial strength, issuer credit and debt ratings, please visit Kemper Corp.
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
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