AM Best

JULY 29, 2016 03:49 PM (EDT)

A.M. Best Affirms Ratings of Kemper Corporation, Its Affiliates and Subsidiaries

 Michael T Venezia
Senior Financial Analyst—P/C
+1 908 439 2200, ext. 5034

Joan Sullivan
Senior Financial Analyst—L/H
+1 908 439 2200, ext. 5144
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439 2200, ext. 5644


OLDWICK - JULY 29, 2016 03:49 PM (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 of Kemper Corporation (Kemper Corp.) [NYSE: KMPR], collectively referred to as Kemper Property & Casualty Group (Kemper P&C). 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 issue ratings of “bbb-” on $250.0 million 4.35% senior unsecured notes due 2025, “bbb-” on $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. Additionally, A.M. Best has affirmed the indicative issue 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 each of these 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 rating affirmations of Kemper P&C, led by Trinity Universal Insurance Company (Trinity) (Dallas, TX), reflects its solid risk-adjusted capitalization, generally favorable operating performance and the actions taken to reduce exposure to catastrophic loss and manage risks. Kemper P&C continues to increase rates, enhance risk selection and further develop a formalized enterprise risk management program. Kemper P&C maintains a diverse business profile, good geographic spread of risk 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 homeowners’ composites. Kemper P&C continues to face challenges from strong competitive market pricing and increasing loss trends in its main lines of private passenger auto, potential catastrophic losses from increased severity of weather events and continued low interest rates and equity market volatility, which is pressuring investment returns. However, following adverse underwriting performance in earlier periods, results have been near break-even over the past three years, which has enabled Kemper P&C to report more favorable operating earnings in recent years.

The rating affirmations of Kemper L&H recognize its important role within the Kemper organization, its strong niche presence in the home service life insurance market, 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 Insurance Company legal entity, the company offers final expense, and other health related supplement products.

Kemper L&H’s consolidated risk-adjusted capitalization is viewed as adequate for its current insurance and investment risks, and 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 below investment grade fixed income and real estate relative to total capital that remain above industry averages. The company is impacted by unclaimed property statutes, which vary by state and in some instances require insurance companies to use the Social Security Administration Death Master File as part of their claims settlement and policy administration practices. A.M. Best notes that Kemper L&H is aggressively managing the impact and implementation of this new requirement, and working directly with each state regulator to be in compliance, and to clarify the guidelines where appropriate.

For a complete listing of Kemper Corporation, its subsidiaries and affiliates’ financial strength, issuer credit and issue ratings, please visit Kemper Corporation.

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 see A.M. Best’s Recent Rating Activity web page.

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