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Best’s News & Research Service - August 24, 2023 10:48 AM (EDT)

AM Best Affirms Credit Ratings of Kemper Corporation, Its Affiliates and Subsidiaries

  • August 24, 2023 10:48 AM (EDT)
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Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “a-” (Excellent) of the property/casualty subsidiaries and affiliated insurance companies of Kemper Corporation (Kemper Corp.) [NYSE: KMPR], collectively referred to as Kemper Property & Casualty Group (Kemper P&C). AM Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) of Kemper Corp.’s life/health subsidiaries, collectively referred to as Kemper Life & Health Group (Kemper L&H) (Chicago, IL). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” (Good) and the Long-Term Issue Credit Ratings (Long-Term IRs) and indicative Long-Term IRs of Kemper Corp., the ultimate parent, headquartered in Chicago, IL. The outlook of these Credit Ratings (ratings) is stable. See below for further discussion and a detailed listing of all companies and ratings.

The ratings of Kemper P&C reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Kemper P&C – lead rating unit of the group – and Kemper Corp. have suffered substantial operating losses over the past two years primarily due to inflation-driven severity increases and prolonged supply chain disruptions, faced by virtually all auto insurers. Additionally, Kemper P&C’s operations were exacerbated further by the group’s business concentration in California, where the regulatory environment has been more challenging, limiting the ability to achieve rate increases in line with increasing costs until recently. This combination resulted in reduced risk-adjusted capitalization levels, although still remaining within the appropriate rating guidelines. AM Best notes that the California Department of Insurance began approving rate increases for Kemper Corp. in late 2022. Kemper Corp. also has announced recently that it was approved for an additional 30 points of rate in all private passenger auto in California, effective August 4, 2023. AM Best expects these rate filings to begin earning into the group’s book of business and improve results while assisting management’s other strategic non-rate actions in restoring profitability.

While Kemper P&C and Kemper Corp. have continued reporting consolidated net losses through 2023 thus far, AM Best notes that there has been a gradual improvement in performance. Additionally, management has announced that it is exiting the preferred home and auto insurance market, sold through its Kemper Personal Insurance Brand, and actively will reduce the business immediately. This is expected to enable the redeployment of capital to Kemper Corp.’s core segments.

The ratings of Kemper L&H reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile, appropriate ERM, and consideration of the group’s affiliation with lead rating unit, Kemper P&C.

In 2022, Kemper L&H announced that it was entering into an agreement with Kemper Bermuda to cede 80% of its life business to its offshore affiliate. This has resulted in increased risk-adjusted capitalization metrics for the statutory Kemper L&H group and the release of roughly $300 million in dividends to the parent company, Kemper Corp., during the third quarter of 2022. However, AM Best also considers the consolidated risk-adjusted capitalization of the two entities to ensure Kemper L&H’s economic overall balance sheet strength remains appropriately assessed.

The stable outlooks for Kemper Corp., its affiliates and subsidiaries reflect AM Best’s view that consolidated results will continue to stabilize as management’s initiatives take hold. However, given Kemper Corp.’s overall enterprise-wide focus on increasing capital efficiency – in part to satisfy shareholder return expectations – through the dividends of subsidiary capital to the parent company, and through intra-group reinsurance – AM Best acknowledges the potential that the group’s overall consolidated risk-adjusted capitalization, and that of its principal operating units, may constrain the group’s go-forward credit profile.

The FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) have been affirmed with stable outlooks for the members of Kemper Property & Casualty Group:

  • Trinity Universal Insurance Company

  • Alpha Property & Casualty Insurance Company

  • Capitol County Mutual Fire Insurance Company

  • Charter Indemnity Company

  • Financial Indemnity Company

  • Infinity Insurance Company

  • Infinity Assurance Insurance Company

  • Infinity Auto Insurance Company

  • Infinity Casualty Insurance Company

  • Infinity Indemnity Insurance Company

  • Infinity Preferred Insurance Company

  • Infinity Safeguard Insurance Company

  • Infinity Select Insurance Company

  • Infinity Standard Insurance Company

  • Infinity County Mutual Insurance Company

  • Kemper Independence Insurance Company

  • Merastar Insurance Company

  • Mutual Savings Fire Insurance Company

  • Kemper Financial Indemnity Company

  • Old Reliable Casualty Company

  • Response Insurance Company

  • Response Worldwide Direct Auto Insurance Company

  • Response Worldwide Insurance Company

  • Union National Fire Insurance Company

  • United Casualty Insurance Company of America

  • Unitrin Advantage Insurance Company

  • Unitrin Auto and Home Insurance Company

  • Unitrin County Mutual Insurance Company

  • Unitrin Direct Insurance Company

  • Unitrin Direct Property & Casualty Company

  • Unitrin Preferred Insurance Company

  • Unitrin Safeguard Insurance Company

  • Valley Property & Casualty Insurance Company

  • Warner Insurance Company

The FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) have been affirmed with stable outlooks for the members of Kemper Life & Health Group:

  • United Insurance Company of America

  • Mutual Savings Life Insurance Company

  • The Reliable Life Insurance Company

  • Union National Life Insurance Company

The following Long-Term IRs have been affirmed with stable outlooks:

Kemper Corporation—

— “bbb-” (Good) on $450 million 4.35% senior unsecured notes, due 2025

— “bbb-” (Good) on $400 million 2.4% senior unsecured notes, due 2030

— “bbb-” (Good) on $400 million 3.8% senior unsecured notes, due 2032

— “bb” (Fair) on $150 million junior subordinated debentures, due 2062

The following indicative Long-Term IRs under the shelf registration have been affirmed with stable outlooks for the shelf registration:

Kemper Corporation—

— “bbb-” (Good) on senior unsecured debt

— “bb+” (Fair) on subordinated debt

— “bb” (Fair) on preferred stock

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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