~~0000860748 us-gaap:ExternalCreditRatingNonInvestmentGradeMember us-gaap:SeniorDebtObligationsMember us-gaap:FairValueInputsLevel3Member us-gaap:MarketApproachValuationTechniqueMember 2019-12-31~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K



☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31, ~~2019~~2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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.)

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~~) (312) 661-4600

(Registrant’s telephone number, including area code)

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, $0.10 par value per share	KMPR	NYSE

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☒ No ☐

☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

☐No☒

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☒ No ☐

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

As of June 30, ~~2019,~~2021, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was ~~$5.7~~$4.7 billion based on the closing sale price as reported on the New York Stock Exchange. Solely for purposes of this calculation, all executive officers and directors of the registrant are considered affiliates.

Registrant had ~~66,668,172~~63,688,550 shares of common stock outstanding as of ~~January 31, 2020.~~February 8, 2022.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the ~~2020~~2022 Annual Meeting of Shareholders are incorporated by reference into Part III.

Table of Contents




Caution Regarding Forward-Looking Statements	1

		Part I

Item 1.		Business	4
Item 1A.		Risk Factors	1518
Item 1B.		Unresolved Staff Comments	2226
Item 2.		Properties	2226
Item 3.		Legal Proceedings	2326
Item 4.		Mine Safety Disclosures	2326

		Part II

Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2327
Item 6.		Selected Financial Data	2529
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	2630
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk	6766
Item 8.		Financial Statements and Supplementary Data	6968
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	138
Item 9A.		Controls and Procedures	138
Item 9B.		Other Information	139

		Part III

Item 10.		Directors, Executive Officers and Corporate Governance	140
Item 11.		Executive Compensation	140
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	140
Item 13.		Certain Relationships and Related Transactions, and Director Independence	~~140~~141
Item 14.		Principal Accounting Fees and Services	141

		Part IV

Item 15.		Exhibits, Financial Statement Schedules	142
Item 16.		Form 10-K Summary	142

Exhibit Index			143
Power of Attorney			~~147~~148
Signatures			~~147~~148
Financial Statement Schedules:
Schedule 1 - Investments Other than Investments in Related Parties			SCH ~~I-1~~I-1
Schedule 2 - Parent Company Financial Statements			SCH ~~II-1~~II-1
Schedule 3 - Supplementary Insurance Information			SCH ~~III-1~~III-1
Schedule 4 - Reinsurance Schedule			SCH ~~IV-1~~IV-1

Caution Regarding Forward-Looking Statements

This ~~2019~~2021 Annual Report on Form 10-K (the “~~2019~~“2021 Annual Report”), including, but not limited to, the accompanying consolidated financial statements of Kemper Corporation (“Kemper” or the “Registrant”) and its subsidiaries (individually and collectively referred to herein as the “Company”) and the notes thereto appearing in Item 8 herein (the “Consolidated Financial Statements”), the Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Item 7 herein (the “MD&A”) and the other Exhibits and Financial Statement Schedules filed as a part hereof or incorporated by reference herein, 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 ~~2019~~2021 Annual Report. 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 below under Item 1A., “Risk Factors,” in this ~~2019~~2021 Annual Report, the reader should consider the following list of ~~general~~ 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, including, but not limited to, ~~state~~ initiatives related to unclaimed property laws or claims handling practices with respect to life insurance policies and the proactive use of death verification ~~databases;~~databases, and developments related to the novel coronavirus COVID-19 (“COVID-19”);

•Adverse outcomes in litigation or other legal or regulatory proceedings involving Kemper or its subsidiaries or affiliates;

•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, dividends from insurance subsidiaries, acquisitions of businesses and other matters within the purview of state insurance regulators;

•Increased costs and initiatives required to address new legal and regulatory ~~requirements~~requirements;

•Liabilities, costs and other impacts arising from developments related to cybersecurity, privacy and data ~~governance;~~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 (including COVID-19) and terrorist attacks or other man-made events;

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

•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 ~~development patterns;~~the impacts of COVID-19 and associated governmental responses;

•The impact of inflation on insurance claims, including, but not limited to, the effects on ~~home and automobile property damage,~~ personal injury claims of increasing medical costs and the effects on property claims attributed to 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 societal trends referred to as social inflation;

•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;~~catastrophes, including COVID-19;

•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, divesting of~~ 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, 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 shift to work from home arrangements, such as the arrangements implemented for a vast majority of the Company’s employees and some business partners during the COVID-19 pandemic;

•The ability of the Company 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 and/or divestitures 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 ~~plans~~plan with regard to corporate strategy and significant operational changes;

Factors ~~relating~~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 ~~events,~~catastrophes such as the COVID-19 outbreak and subsequent global pandemic, 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 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;~~insolvencies, including the impact of COVID-19;

•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-incidents,~~cyber attacks, virus or malware attacks, or other ~~system hazards~~infiltrations or ~~infiltrations~~incidents affecting system integrity, availability and performance, and actions taken to minimize and remediate the risks ~~thereof; and~~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.~~inaccurate, including impacts related to COVID-19. 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 ~~2019~~2021 Annual Report. Kemper advises the reader, however, to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.

PART I

Item 1. Business.

Kemper is a diversified insurance holding company, with subsidiaries that provide automobile, homeowners, life, health, and other insurance products to individuals and businesses. Kemper’s annual reports on Form 10-K, quarterly reports on Form 10‑Q, current reports on Form 8-K and amendments thereto are accessible free of charge through Kemper’s website, kemper.com, and as soon as reasonably practicable after such materials are filed with, or furnished to, the SEC, which also maintains an Internet site at sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

~~(a) GENERAL DEVELOPMENT OF BUSINESS~~

Registrant is a holding company incorporated under the laws of the State of Delaware in 1990, with equity securities traded on the New York Stock Exchange (the “NYSE”). On August 25, 2011, Registrant adopted its current name, Kemper Corporation, and changed its NYSE ticker symbol to KMPR. Prior to the name change, the Registrant was known as Unitrin, Inc. and traded under the NYSE ticker symbol UTR.

The Kemper family of companies is one of the nation’s leading specialized insurers. With nearly ~~$13.0~~$14.9 billion in assets, Kemper is improving the world of insurance by providing affordable and easy-to-use personalized solutions to individuals, families and businesses through its Auto, Personal Insurance, Life and Health brands. Kemper serves over ~~6.4~~6.5 million policies, is represented by more than ~~30,000~~35,400 agents and brokers, and has approximately ~~8,900~~10,300 associates dedicated to meeting the ever-changing needs of its customers.

~~(c) DESCRIPTION OF BUSINESS~~

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 three operating segments: Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance and Life & Health Insurance. The Company conducts its operations solely in the United States.

Kemper’s subsidiaries employ approximately ~~8,900~~10,300 associates supporting their operations, of which approximately ~~3,300~~5,775 are employed in the Specialty Property & Casualty Insurance Segment, approximately ~~1,300~~125 are employed in the Preferred Property & Casualty Insurance segment, approximately ~~3,400~~3,250 are employed in the Life & Health Insurance segment and the remainder are employed in various corporate and other staff and shared functions.

Property and Casualty Insurance Business

General

The Company’s property & casualty insurance business operations are conducted primarily through the Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segments. The Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segments distribute their products primarily through independent agents and brokers who are paid commissions for their services. In addition, the Life and Health Insurance segment’s career agents also sell contents coverage for personal property to its customers. Collectively, these segments provide preferred automobile, specialty automobile, homeowners, renters, fire, umbrella, general liability as an endorsement to commercial automobile and other types of property and casualty insurance to individuals and commercial automobile insurance to businesses.

Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property. Casualty insurance primarily covers liability for damage to property of, or injury to, a person or entity other than the insured. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation arising out of events covered by the policy.

Specialty Property & Casualty Insurance

The Specialty Property & Casualty Insurance segment, based in Chicago, Illinois, conducts business in 3534 states under the Kemper Auto brand. As shown in the following table, three states provided ~~92%~~90% of the segment’s premium revenues in ~~2019.~~

2021.



State	Percentage of Total Premiums
California	6757	%
Florida	1418	%
Texas	1115	%

The Specialty Property & Casualty Insurance segment provides personal and commercial automobile insurance to consumers who have had difficulty obtaining standard or preferred risk insurance, usually because of their driving records, claims experience or premium payment history. The segment also meets the insurance needs of other specialty markets such as urban and Hispanic consumers. The segment’s insurance products accounted for ~~69%~~75%, ~~60%~~71% and ~~43%~~69% of the Company’s consolidated insurance premiums in ~~2019, 2018~~2021, 2020 and ~~2017,~~2019, respectively. The segment’s insurance products are marketed through approximately ~~21,000~~24,175 independent agents and brokers.

Preferred Property & Casualty Insurance

The Preferred Property & Casualty Insurance segment, based in Chicago, Illinois, conducts business in 45 states and the District of Columbia. As shown in the following table, five states provided ~~66%~~64% of the segment’s premium revenues in ~~2019.~~

2021.



State	Percentage of Total Premiums
California	2120	%
New York	1720	%
Texas	1510	%
North Carolina	98	%
~~Pennsylvania~~ Connecticut	46	%

The Preferred Property & Casualty Insurance segment primarily sells preferred automobile insurance, homeowners insurance and other personal insurance. The segment’s insurance products accounted for ~~17%~~12%, ~~22%~~15% and ~~31%~~17% of the Company’s consolidated insurance premiums in ~~2019, 2018~~2021, 2020 and ~~2017,~~2019, respectively. The segment’s insurance products are marketed by approximately ~~4,800~~5,600 independent insurance agents and brokers to individuals who have demonstrated favorable risk characteristics and loss history.

Property and Casualty Loss and Loss Adjustment Expense Reserves

The Company’s reserves for losses and LAE for property and casualty insurance (“Property and Casualty Insurance Reserves”) are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid.

Property and Casualty Insurance Reserves by business segment at December 31, ~~2019~~2021 and ~~2018~~2020 were:

DOLLARS IN MILLIONS 2019 2018
Business Segments:
Specialty Property & Casualty Insurance $ 1,551.0
$ 1,387.0
Preferred Property & Casualty Insurance 388.5
452.9
Life & Health Insurance 3.3
4.4
Total Business Segments 1,942.8

1,844.3
Unallocated Reserves 27.0
30.6
Total Property & Casualty Insurance Reserves $ 1,969.8

$ 1,874.9


DOLLARS IN MILLIONS	2021		2020
Business Segments:
Specialty Property & Casualty Insurance	$	2,319.7	$	1,544.8
Preferred Property & Casualty Insurance	433.2		411.6
Life & Health Insurance	3.6		4.6
Total Business Segments	2,756.5		1,961.0
Unallocated Reserves	16.2		21.5
Total Property & Casualty Insurance Reserves	$	2,772.7	$	1,982.5

In estimating the Company’s Property and Casualty Insurance Reserves, the Company’s actuaries exercise professional judgment and must consider, and are influenced by, many variables that are difficult to quantify. Accordingly, the process of estimating and establishing the Company’s Property and Casualty Insurance Reserves is inherently uncertain and the actual ultimate net cost of claims may vary materially from the estimated amounts reserved. See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” beginning on page 62 for a discussion of the Company’s reserving process and the factors considered by the Company’s actuaries in estimating the Company’s Property and Casualty Insurance Reserves.

The Company’s goal is to ensure that its total reserves for property and casualty insurance losses and LAE are adequate to cover all costs, while minimizing variation from the time reserves for losses and LAE are initially estimated until losses and LAE are fully paid. Changes in the Company’s estimates of these losses and LAE, also referred to as “development,” will occur over time and may be material. Favorable development is recognized and reported in the Consolidated Financial Statements when the Company decreases its previous estimate of ultimate losses and LAE and results in an increase in net income in the period recognized, whereas adverse development is recognized and reported in the Consolidated Financial Statements when the Company increases its previous estimate of ultimate losses and LAE and results in a decrease in net income.

See Note 6,~~, “Property~~ “Property and Casualty Insurance Reserves,,” to the Consolidated Financial Statements for information about incurred and paid claims development for the ~~2015-2018~~2017-2020 accident years as of December 31, ~~2019,~~2021, net of reinsurance and indemnification, as well as cumulative claim frequency and the total of incurred but not reported (“IBNR”) liabilities, including expected development on reported claims included within the net incurred losses and allocated LAE amounts as of December 31, ~~2019.~~2021. See Note 6,~~, “Property~~ “Property and Casualty Insurance Reserves,,” to the Consolidated Financial Statements for a tabular reconciliation of the three most recent annual periods setting forth the Company’s Property and Casualty Insurance Reserves as of the beginning of each year, incurred losses and LAE for insured events of the current year, changes in incurred losses and LAE for insured events of prior years, payments of losses and LAE for insured events of the current year, payments of losses and LAE for insured events of prior years and the Company’s Property and Casualty Insurance Reserves at the end of the year and additional information regarding the nature of adjustments to incurred losses and LAE for insured events of prior years.

Catastrophe Losses

Catastrophes and natural disasters are inherent risks of the property and casualty insurance business. These catastrophic events and natural disasters include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds and winter storms. Such events result in insured losses that are, and are expected to be, a material factor in the results of operations and financial position of Kemper’s property and casualty insurance companies. Further, because the level of insured losses that could occur in any one year cannot be accurately predicted, these losses contribute to material year-to-year fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more likely to occur at certain times within the year than others. This factor adds an element of seasonality to property and casualty insurance claims. The occurrence and severity of catastrophic events cannot be accurately predicted in any year. However, some geographic locations are more susceptible to these events than others. The Company has endeavored to manage its direct insurance exposures in certain regions that are prone to naturally occurring catastrophic events through a combination of geographic diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and reinsurance. The Company has adopted the industry-wide catastrophe classifications of storms and other events promulgated by Insurance Services Office, Inc. (“ISO”) to track and report losses related to catastrophes. ISO classifies a disaster as a catastrophe when the event causes $25 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. The discussions throughout this ~~2019~~2021 Annual Report utilize ISO’s definition of catastrophes.

The process of estimating and establishing reserves for catastrophe losses is inherently uncertain and the actual ultimate cost of a claim, net of reinsurance recoveries, may vary materially from the estimated amount reserved. See Item 1A., “Risk Factors,” under the caption “Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial condition” for a discussion of catastrophe risk. See Note 20~~, “Catastrophe~~21, “Catastrophe Reinsurance,,” to the Consolidated Financial Statements for a discussion of the factors that influence the process of estimating and establishing reserves for catastrophes.

Reinsurance

The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or

limitations to coverages and deductibles for certain perils in such regions and reinsurance. To limit its exposures to catastrophic events, the Company maintains a catastrophe reinsurance program for the property and casualty insurance companies. Coverage for the catastrophe reinsurance program is provided in various layers through multiple excess of loss reinsurance contracts and an aggregate excess property catastrophe reinsurance contract. The Company’s insurance subsidiaries also purchase reinsurance from the Florida Hurricane Catastrophe Fund (the “FHCF”) for hurricane losses in Florida at retentions lower than those described below for the Company’s catastrophe reinsurance program.

The ~~2020~~2022 catastrophe reinsurance program covering the property and casualty insurance companies is provided by (i) three multi-year excess of loss reinsurance contracts, (ii) antwo annual excess of loss reinsurance ~~contract~~contracts (the “~~2020~~“2022 Annual Excess of Loss ~~Contract”~~Contracts”) and (iii) an annual aggregate excess property catastrophe reinsurance contract (the “~~2020~~“2022 Aggregate Property Catastrophe Reinsurance Contract”).

Multi-year Excess of Loss Reinsurance Contracts

The first multi-year excess of loss reinsurance contract provides coverage over the three-year period of January 1, ~~2018~~2020 through December 31, ~~2020~~2022 (the ~~“2018~~“2020 Reinsurance Contract”). The ~~2018~~2020 Reinsurance Contract provides coverage in two layers, which together provide coverage for losses on individual catastrophes of $200 million in excess of $50 million. Under the ~~2018~~2020 Reinsurance Contract, the percentage of coverage is 31.66% for each year in the three-year period, and participation of each reinsurer remains the same over the entire three-year period. Accordingly, the ~~2018~~2020 Reinsurance Contract provides coverage for 31.66% of losses on individual catastrophes of $200 million in excess of $50 million in ~~2020~~.2022.

The second multi-year excess of loss reinsurance contract provides coverage over the three-year period of January 1, ~~2019~~2021 through December 31, ~~2021~~2023 (the ~~“2019~~“2021 Reinsurance Contract”). The ~~2019~~2021 Reinsurance Contract provides coverage in two layers, which together provide coverage for losses on individual catastrophes of $200 million in excess of $50 million, which is consistent with the coverage provided under the ~~2018~~2020 Reinsurance Contract. Under the ~~2019~~2021 Reinsurance Contract, the percentage of coverage is ~~31.66%~~27.66% for each year in the three-year period, and participation of each reinsurer remains the same over the entire three-year period. An additional 4% of the 2021 coverage was placed through a separate contract on an annual basis. Accordingly, the ~~2019~~2021 Reinsurance Contract provides coverage for ~~31.66%~~27.66% of losses on individual catastrophes of $200 million in excess of $50 million in 2022.

~~2020~~.

The third multi-year excess of loss reinsurance contract provides coverage over the three-year period of January 1, ~~2020~~2022 through December 31, ~~2022~~2024 (the “~~2020~~“2022 Reinsurance Contract”). The ~~2020~~2022 Reinsurance Contract provides coverage in two layers, which together provide coverage for losses on individual catastrophes of $200 million in excess of $50 million, which is consistent with the coverage provided under the ~~2018~~2020 Reinsurance Contract and ~~2019~~2021 Reinsurance Contract. Under the ~~2020~~2022 Reinsurance Contract, the percentage of coverage is ~~31.66%~~35.66% for each year in the three-year period, and participation of each reinsurer remains the same over the entire three-year period. Accordingly, the ~~2020~~2022 Reinsurance Contract provides coverage for ~~31.66%~~35.66% of losses on individual catastrophes of $200 million in excess of $50 million in 2022.

~~2020~~.

Annual Excess of Loss Reinsurance Contract

The ~~2020~~2022 Annual Excess of Loss ~~Contract provides~~Contracts provide coverage for the annual period of January 1, ~~2020~~2022 through December 31, ~~2020.~~2022. The ~~2020~~2022 Annual Excess of Loss ~~Contract provides~~Contracts provide coverage in two layers for losses on individual catastrophes of ~~$25~~$100 million in excess of $250 million.

Summary of Excess of Loss Reinsurance Contracts

Coverage on individual catastrophes provided under the three multi-year excess of loss reinsurance contracts for ~~2020~~2022 (January 1, ~~2020~~2022 to December 31, ~~2020)~~2022) and the ~~2020~~2022 Annual Excess of Loss ~~Contract~~Contracts is provided in various layers as summarized below.


	Catastrophe Losses and LAE				Combined Percentage of Coverage			Catastrophe Losses and LAE				Combined Percentage of Coverage
DOLLARS IN MILLIONS	In Excess of		Up to				DOLLARS IN MILLIONS	In Excess of		Up to
Retained	$	—	$	50.0	—	%	Retained	$	—	$	50.0	—	%
1st Layer of Coverage	50.0		150.0		95.0		1st Layer of Coverage	50.0		150.0		95.0
2nd Layer of Coverage	150.0		250.0		95.0		2nd Layer of Coverage	150.0		250.0		95.0
3rd Layer of Coverage	250.0		275.0		95.0		3rd Layer of Coverage	250.0		325.0		95.0
4th Layer of Coverage							4th Layer of Coverage	325.0		350.0		95.0

The estimated annual premium in ~~2020~~2022 for the three multi-year excess of loss reinsurance contracts and the ~~2020~~2022 Annual Excess of Loss ~~Contract~~Contracts presented in the preceding table is ~~$11.9~~$16.7 million. In the event that the Company’s incurred catastrophe losses

and LAE covered by its catastrophe reinsurance program exceed the retention for a particular layer, the program allows for one reinstatement of such coverage. In such an instance, the Company is required to pay a reinstatement premium to the reinsurers to reinstate the full amount of the limit available under such layer. The reinstatement premium for the first layer of coverage is a percentage of the full original premium based on the ratio of the losses in excess of the Company’s retention to the reinsurers’ coverage limit. The reinstatement premium for the second, layer of coverage is a percentage of half the original premium based on the ratio of the losses in excess of the Company’s retention to the reinsurers’ coverage limit. The reinstatement premium for the third, ~~layer~~and fourth layers of coverage is a percentage of half the original premium based on the ratio of the losses in excess of the Company’s retention to the reinsurers’ coverage limit.

Aggregate Property Catastrophe Reinsurance Contract

The ~~2020~~2022 Aggregate Property Catastrophe Reinsurance Contract is effective for the period of January 1, ~~2020~~2022 through December 31, ~~2020~~2022 and provides coverage for accumulated catastrophe losses of ~~$50~~$50.0 million in excess of ~~$60~~$65.0 million on property losses arising out of one or more of the following perils from storms or storm systems that are not named storms: (1) windstorm; (2) hail; (3) tornado and (4) fire; including ensuing collapse and water damage.

Coverage provided under the ~~2020~~2022 Aggregate Property Catastrophe Reinsurance Contract (January 1, ~~2020~~2022 to December 31, ~~2020)~~2022) is summarized below.


	Aggregate Catastrophe Losses and LAE					Aggregate Catastrophe Losses and LAE
DOLLARS IN MILLIONS	In Excess of		Up to		DOLLARS IN MILLIONS	In Excess of		Up to
Retained	$	—	$	60.0	Retained	$	—	$	65.0
Coverage	60.0		110.0		Coverage	65.0		115.0

The estimated annual premium for the ~~2020~~2022 Aggregate Property Catastrophe Reinsurance Contract is ~~$13.3~~$13.0 million. To maintain the same level and percentage of coverage in subsequent years as provided by the catastrophe reinsurance program in ~~2020,~~2022, the Company’s property and casualty insurance companies will need to purchase additional reinsurance in the future for the portion of coverage expiring at the end of ~~2020, 2021~~2022, 2023 and ~~2022.~~2024.

Other

In addition to the catastrophe loss exposures caused by natural events described above, Kemper’s property and casualty insurance companies are exposed to losses from catastrophic events that are not the result of acts of nature, such as acts of terrorism, the nature, occurrence and severity of which in any period cannot be accurately predicted. The companies have reinsurance coverage to address certain exposures to potential future terrorist attacks. The reinsurance coverage for certified events, as designated by the federal government, is from the Terrorist Risk Insurance Act and the coverage for non-certified events is available in the catastrophe reinsurance program for the property and casualty insurance companies. However, certain perils, such as biological, chemical, nuclear pollution or contamination, are excluded from the reinsurance coverage for non-certified events.

Under the various reinsurance arrangements, Kemper’s property and casualty insurance companies are indemnified by reinsurers for certain losses incurred under insurance policies issued by the reinsurers. As indemnity reinsurance does not discharge an insurer from its direct obligations to policyholders on risks insured, Kemper’s property and casualty insurance companies remain directly liable. However, provided that the reinsurers meet their obligations, the net liability for Kemper’s property and casualty insurance companies is limited to the amount of risk that they retain. Kemper’s property and casualty insurance companies purchase their reinsurance only from reinsurers rated “A-” or better by A. M. Best Co., Inc. (“A.M. Best”), at the time of purchase. A.M. Best is an organization that specializes in rating insurance and reinsurance companies.

For further discussion of the reinsurance programs, see Note 20~~, “Catastrophe~~21, “Catastrophe Reinsurance,,” and Note 21~~, “Other~~22, “Other Reinsurance,,” to the Consolidated Financial Statements.

Pricing

Pricing levels for property and casualty insurance products are influenced by many factors, including the frequency and severity of claims, state regulation and legislation, competition, general business and economic conditions, including market rates of interest, inflation, expense levels, and judicial decisions. In addition, many state regulators require consideration of investment income when approving or setting rates, which could reduce underwriting margins. Further, some states have regulations that limit the after-tax return on underwriting profit allowed for an insurer and may impact the price charged for premiums or result in premium refunds. The Company derives a significant portion of its earned premiums in two such states, California and

Florida. See MD&A under the caption “Specialty Property & Casualty Insurance” and “Preferred Property & Casualty Insurance.”

Competition

Based on the most recent annual data published by A.M. Best, as of the end of ~~2018,~~2020, there were ~~1,131~~1,109 property and casualty insurance groups in the United States. Kemper’s property and casualty group, adjusted for the inclusion of ~~Infinity Property and~~American Access Casualty ~~Corporation~~Company’s (“~~Infinity”~~AAC”) unaudited pro forma results for the entire year was among the top 6% of property and casualty insurance groups in the United States as measured by net written premiums, policyholders’ surplus and net admitted assets in ~~2018.~~2020. Among all personal lines automobile insurance writers, Kemper’s property and casualty group was the ~~13th~~11th largest writer as measured by net written premiums in ~~2018.~~2020.

Rankings by net admitted assets, net premiums written and capital and surplus were:


	Ordinal	Percentile			Ordinal	Percentile
Measurement	Rank	Rank		Measurement	Rank	Rank
Net Admitted Assets	50	95	%	Net Admitted Assets	50	95	%
Net Written Premiums	30	97		Net Written Premiums	27	98
Capital and Surplus	74	94		Capital and Surplus	62	94

In ~~2018,~~2020, the U.S. property and casualty insurance industry’s estimated net premiums written were ~~$622~~$659 billion, of which nearly 80% were accounted for by the top 50 groups of property and casualty insurance companies. Kemper’s property and casualty insurance companies ~~adjusted to include Infinity for the entire year,~~ wrote less than 1% of the industry’s ~~2018~~2020 premium volume.

The property and casualty insurance industry is highly competitive, particularly with respect to personal automobile insurance. Kemper’s property and casualty insurance companies compete on the basis of, among other measures, (i) using suitable pricing segmentation, (ii) maintaining underwriting discipline, (iii) settling claims timely and efficiently, (iv) offering products in selected markets or geographies, (v) utilizing technological innovations for the marketing and sale of insurance, (vi) controlling expenses, (vii) maintaining adequate ratings from A.M. Best and other ratings agencies and (viii) providing quality services to independent agents and policyholders. See Item 1A., “Risk Factors,” under the caption “The insurance industry is highly competitive, making it difficult to grow profitability and within expectations of investors.”

Life and Health Insurance Business

The Company’s Life & Health Insurance segment consists of Kemper’s wholly-owned subsidiaries, United Insurance Company of America (“United Insurance”), The Reliable Life Insurance Company (“Reliable”), Union National Life Insurance Company (“Union National Life”), Mutual Savings Life Insurance Company (“Mutual Savings Life”), United Casualty Insurance Company of America (“United Casualty”), Union National Fire Insurance Company (“Union National Fire”), Mutual Savings Fire Insurance Company (“Mutual Savings Fire”) and Reserve National Insurance Company (“Reserve National”). As discussed below, United Insurance, Reliable, Union National Life, Mutual Savings Life, United Casualty, Union National Fire and Mutual Savings Fire (the “Kemper Home Service Companies”) distribute their products through a network of employee, or “career” agents. Reserve National distributes its products through a network of independent agents and brokers. These career agents, independent agents and brokers are paid commissions for their services. Earned premiums from life insurance accounted for 9%8%, ~~11%~~8% and ~~16%~~9% of the Company’s consolidated insurance premiums earned in ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~,2019, respectively.

As shown in the following table, five states provided ~~48%~~51% of the premium revenues in this segment in ~~2019~~.

2021.



State	Percentage of Total Premiums
Texas	1922	%
Louisiana	11
Alabama	7
Mississippi	6
Georgia	5

Kemper Home Service Companies

The Kemper Home Service Companies, based in St. Louis, Missouri, focus on providing individual life and supplemental accident and health insurance products to customers of modest incomes who desire basic protection for themselves and their families. Their leading product is ordinary life insurance, including permanent and term insurance. Face amounts of these policies are lower than those of policies typically sold to higher income customers by other companies in the life insurance industry. Approximately ~~72%~~70% of the Life & Health Insurance segment’s premium revenues are generated by the Kemper Home Service Companies.

The Kemper Home Service Companies employ nearly ~~2,000~~2,250 career agents to distribute insurance products in 2526 states and the District of Columbia. These career agents are full-time employees who call on customers in their homes to sell insurance products, provide services related to policies in force and collect premiums, typically monthly. Premiums average approximately ~~$24~~$25 per policy per month with an average face value of ~~$5,600.~~$6,160. Permanent and term policies are offered primarily on a non-participating, guaranteed-cost basis. These career agents also distribute and/or service certain property insurance products for the Kemper Home Service Companies.

Reserve National

Reserve National, based in Oklahoma City, Oklahoma, is licensed in 49 states and the District of Columbia. The Company specializes in the sale of supplemental accident & health ~~and life~~ insurance products such as: Medicare Supplement, fixed hospital indemnity, home health care, specified disease, and accident-only plans.

Reserve National distributes products through two channels - Kemper Traditional and Kemper Benefits. The Traditional channel has historically served individuals in rural areas who often do not have access to a broad array of accident and health insurance products, though has more recently broadened to include ~~surburban~~suburban and urban areas. Insurance products can be tailored to meet individual and family needs and are distributed through approximately 600 independent agents. Kemper Benefits sells voluntary worksite products in the employer market place through Employee Benefit brokers and enrollers. In total, Reserve National currently has approximately ~~3,500~~3,400 independent agents appointed.

Reinsurance

Consistent with insurance industry practice, the Company’s life and health insurance subsidiaries utilize reinsurance arrangements to limit their maximum loss, provide greater diversification of risk and minimize exposures on larger risks. As the face amounts of the Company’s issued policies are relatively small, the ceded risks and corresponding premiums are also relatively small, particularly when compared to other companies in the industry. The segment is also exposed to losses from catastrophes arising from insurance policies distributed by career agents of the Kemper Home Service Companies. Over the last several years, the Kemper Home Service Companies have been intentionally reducing their exposure to catastrophic events through the run-off of their dwelling insurance business. The Kemper Home Services Companies are parties to the FHCF, the Property & Casualty catastrophe excess of loss reinsurance contracts, and the aggregate property catastrophe reinsurance contract.

Lapse Ratio

The lapse ratio is a measure of a life insurer’s loss of in-force policies. For a given year, this ratio is commonly computed as the total face amount of individual life insurance policies lapsed, surrendered, expired and decreased during such year, less policies increased and revived during such year, divided by the total face amount of policies at the beginning of the year plus the face amount of policies issued and reinsurance assumed in the prior year. The Life & Health Insurance segment’s lapse ratio for individual life insurance was 3%, 4%, and 6% in 2021, 2020 and 2019 ~~2018~~ ~~and~~ ~~2017~~.respectively.

The customer base served by the Kemper Home Service Companies and competing life insurance companies tends to have a higher incidence of lapse than other demographic segments of the population. Thus, to maintain or increase the level of its business, the Kemper Home Service Companies must write a higher volume of new policies than competitors serving other demographic segments of the population.

Pricing

Premiums for life and health insurance products are based on assumptions with respect to mortality, morbidity, investment yields, expenses, and lapses and are also affected by state laws and regulations, as well as competition. Pricing assumptions are based on the experience of Kemper’s life and health insurance subsidiaries, as well as the industry in general, depending on the

factor being considered. The actual profit or loss produced by a product will vary from the anticipated profit if the actual experience differs from the assumptions used in pricing the product.

Premiums for policies sold by the Kemper Home Service Companies are set at levels designed to cover the relatively high cost of “in-home” servicing of such policies. As a result, Kemper Home Service Companies’ premiums have a higher expense load than the life insurance industry average.

Premiums for Medicare supplement and other accident and health policies must take into account the rising costs of medical care. The annual rate of medical cost inflation has historically been higher than the general rate of inflation, necessitating frequent rate increases, most of which are subject to approval by state regulators.

Competition

Based on the most recent data published by A.M. Best, as of the end of ~~2018,~~2020, there were ~~369~~407 life and health insurance company groups in the United States. The Company’s Life & Health Insurance segment ranked in the top ~~25%~~24% of life and health insurance company groups, as measured by net admitted assets, net premiums written and capital and surplus. Rankings by net admitted assets, net premiums written and capital and surplus were:


	Ordinal	Percentile			Ordinal	Percentile
Measurement	Rank	Rank		Measurement	Rank	Rank
Net Admitted Assets	92	75	%	Net Admitted Assets	90	78	%
Net Written Premiums	92	75		Net Written Premiums	91	78
Capital and Surplus	93	75		Capital and Surplus	97	76

Kemper’s life and health insurance subsidiaries generally compete by using appropriate pricing, offering products to selected markets or geographies, controlling expenses, maintaining adequate ratings from A.M. Best and providing competitive services to agents and policyholders.

Investments

The quality, nature and amount of the various types of investments that can be made by insurance companies are regulated by state laws. Depending on the state, these laws permit investments in qualified assets, including, but not limited to, municipal, state and federal government obligations, corporate bonds, real estate, preferred and common stocks, investment partnerships, limited liability investment companies and limited partnerships. In addition, the quality, nature, amount and concentration of the various types of investments held by Kemper’s insurance subsidiaries affect the amount of asset risk calculated by regulators and rating agencies in determining required capital. See “Regulation” immediately following this subsection and Item 1A., “Risk Factors,” under the caption “The Company’s investment portfolio is exposed to a variety of risks that may negatively impact net investment income, the change in fair value of equity and convertible securities and cause realized and unrealized losses.”

The Company employs a total return investment strategy, with an emphasis on yield, while maintaining liquidity to meet both its short- and medium-term insurance obligations. See the discussions of the Company’s investments under the headings “Investment Results,” “Investment Quality and Concentrations,” “Investments in Limited Liability Companies and Limited Partnerships,” “Liquidity and Capital Resources” and “Critical Accounting Estimates,” in the MD&A, “Quantitative and Qualitative Disclosures about Market Risk,” in Item 7A and Note 4~~, “Investments~~,8, “Investments,” Note 14~~, “Income~~9, “Income from Investments,,” and Note 22~~, “Fair~~10, “Fair Value Measurements,,” to the Consolidated Financial Statements.

Regulation

Overview of State Regulation

Kemper’s insurance subsidiaries are subject to extensive regulation, primarily, but not exclusively, at the state level. Such regulation pertains to a variety of matters, including, but not limited to, policy forms, rate setting, licensing to transact business, market conduct, trade practices, underwriting standards, claims handling practices, transactions with affiliates, payment of dividends, nature and amount of investments, solvency, reserve adequacy, statutory accounting methods, risk management and corporate governance. In addition, insurance regulatory authorities perform periodic examinations of an insurer’s financial condition, market conduct activities and other affairs. Some of these matters are discussed in more detail below.

Approval of Policy Rates and Forms

The majority of Kemper’s insurance operations are in states requiring prior approval by regulators before proposed policy or coverage forms and rates for ~~property, casualty, or health~~ insurance policies may be implemented and used. The Company’s ability to take actions to address market developments or increased costs can be adversely impacted by lengthy delays in the approval process or the failure to receive the required approval of state regulators.

Restrictions on Withdrawal, Cancellation and Nonrenewal

Many states have laws restricting an insurer’s ability to withdraw from particular markets. Laws that limit an insurer’s ability to cancel or non-renew a block of policies by line of business, or that subject its withdrawal to prior approval requirements, may restrict the ability of our insurance subsidiaries to exit unprofitable markets.

Financial Reports and Standards

Insurance companies are required to report their financial condition and results of operations in accordance with statutory accounting principles prescribed or permitted by state insurance regulators in conjunction with the National Association of Insurance Commissioners (“NAIC”). State insurance regulators also prescribe the form and content of statutory financial statements, set minimum reserve and loss ratio requirements and establish standards for the types and amounts of investments. In addition, state laws and regulations require minimum capital and surplus levels and incorporate risk-based capital (“RBC”) standards developed by the NAIC. These RBC standards are intended to enable regulators to assess the level of risk inherent in an insurance company’s business based on asset risk, credit risk, underwriting risk and other business risks relevant to its operations. A company’s requirements are calculated based on an RBC formula and compared to its total adjusted capital to determine whether regulatory intervention is warranted. At December 31, ~~2019,~~2021, the total amount of capital held by each of Kemper’s insurance subsidiaries exceeded the minimum levels required under applicable RBC requirements.

Guaranty Funds and Risk Pools

Kemper’s insurance subsidiaries are required to pay assessments up to prescribed levels to fund policyholder losses or liabilities of insolvent insurance companies under the guaranty fund laws of most states in which they transact business. Kemper’s insurance subsidiaries are also required to participate in various involuntary pools or assigned risk pools, principally involving windstorms and high risk drivers. In most states, the involuntary pool participation of Kemper’s insurance subsidiaries is determined in proportion to their voluntary writings of related lines of business in such states.

Privacy and Cybersecurity Regulation

The Company is subject to numerous federal and state laws and state insurance regulations that impose significant requirements and standards for protecting personally identifiable information of insurance company policyholders and other individuals.

Gramm-Leach-Bliley Act and HIPAA

The federal Gramm-Leach-Bliley Act requires financial institutions, including insurers, to protect the privacy of non-public information, to restrict use of such information and disclosure to non-affiliated third parties, and to provide notices to customers regarding use of their non-public personal information and an opportunity to “opt out” of certain disclosures. State departments of insurance and certain federal agencies adopted implementing regulations as required by federal law.

The federal Health Insurance Portability and Accountability Act of 1996, as amended in 2009 by the HITECH Act, (“HIPAA”), and implementing regulations, impose extensive obligations regarding the privacy and security of protected health information. Covered entities subject to HIPAA, which include issuers of health insurance coverage and health benefit plan sponsors, must implement policies and procedures governing the use, storage and disclosure of such information and related employee training, breach notification procedures and other requirements.

State Laws and Regulations

In recent years, state insurance regulators have focused increasing attention on cybersecurity. ~~In 2017, the New York Department of Financial Services adopted a sweeping cybersecurity regulation that requires~~For example, insurance companies are required to maintain a cybersecurity program, incident response plan and information technology system safeguards that protect customer information under extensive cybersecurity regulations implemented by the New York Department of Financial Services and ~~some~~statutes adopted by a number of states ~~have subsequently enacted statutes imposing similar requirements on insurance companies~~ based on a model data security law adopted by the NAIC. In addition, state insurance regulators focus significant attention on data security during financial exams, and the NAIC has strengthened and enhanced the cybersecurity guidance included in its handbook for state

insurance examiners. Additional state laws outside of the insurance industry impose notification requirements in the event of cybersecurity breaches affecting their residents. On the privacy front, the California Consumer Privacy Act, which took effect in 2020, requires companies to provide privacy notices and respond to any request made to the company by a California resident regarding his or her personal information used or maintained by the company outside the scope of the GLBA and HIPAA privacy laws. The Company anticipates a continuing focus on new regulatory and legislative proposals at the state and federal levels that further regulate practices regarding privacy and security of personal information.

Holding Company Regulation, Including Enterprise Risk Management and Governance

The Company is regulated as an insurance holding company system and is subject to the insurance holding company acts of the states in which its insurance subsidiaries are domiciled and, in some case, additional states in which the insurance subsidiary is deemed commercially domiciled. These laws and related regulations contain certain reporting requirements as well as restrictions on transactions between an insurer and its affiliates. They also generally require insurance companies within an insurance holding company system to register with the insurance department of each state where they are domiciled and to file certain reports with those insurance departments describing capital structure, ownership, financial condition, certain intercompany transactions, an enterprise risk report and general business operations. In addition, various notice and reporting requirements generally apply to transactions between insurance companies and their affiliates within the insurance holding company system, depending on the size and nature of the transactions. Some insurance holding company laws and regulations require prior regulatory approval or, in certain circumstances, prior notice of certain material intercompany transfers of assets as well as certain transactions between insurance companies, their parent holding companies and affiliates.

Dividends

As a holding company with no significant business operations of its own, Kemper relies on dividends from its insurance subsidiaries to meet its obligations. Certain dividends and distributions by an insurance subsidiary are subject to prior approval by the insurance regulators of the state in which it is domiciled or commercially domiciled. See Item 1A., “Risk Factors,” under the caption, ~~“The~~“The ability of Kemper to service its debt, to pay dividends to its shareholders and/or make repurchases of its stock may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries.”

Change in Control Requirements

State insurance laws also impose requirements that must be met prior to a change of control of an insurance company or insurance holding company based on the insurer’s state of domicile and, in some cases, additional states in which the insurance subsidiary is deemed commercially domiciled. These requirements may include the advance filing of specific information with the state insurance regulators, a public hearing on the matter, and the review and approval of the change of control by such regulators. The Company has insurance subsidiaries domiciled or deemed commercially domiciled in Alabama, California, Florida, ~~Georgia,~~ Illinois, Indiana, Louisiana, Missouri, New York, Ohio, Oregon, Texas and Wisconsin. In these states, except Alabama, “control” generally is presumed to exist through the direct or indirect ownership of 10% or more of the voting securities of an insurance company. Control is presumed to exist in Alabama with a 5% or more ownership interest in such securities. Any purchase of Kemper’s shares that would result in the purchaser owning Kemper’s voting securities in the foregoing percentages for the states indicated would be presumed to result in the acquisition of control of the Company’s insurance subsidiaries in those states. Therefore, acquisitions subject to the 10% threshold generally would require the prior approval of insurance regulators in each state in which the Company’s insurance subsidiaries are domiciled or deemed commercially domiciled, including those in Alabama, while acquisitions subject to the 5% threshold generally would require the prior approval of only Alabama regulators. Similarly, consistent with the Model Holding Company Act, several of the states in which the Company’s insurance subsidiaries are domiciled have enacted legislation that requires either the divesting and/or acquiring company to notify regulators of, and in some cases to receive regulatory approval for, a change in control.

Many state statutes also require pre-acquisition notification to state insurance regulators of a change of control of an insurance company licensed in the state if specific market concentration thresholds would be triggered by the acquisition. Such statutes authorize the issuance of a cease and desist order with respect to the insurance company if certain conditions, such as undue market concentration, would result from the acquisition. These regulatory requirements may deter, delay or prevent transactions effecting control of Kemper or its insurance subsidiaries, or the ownership of Kemper’s voting securities, including transactions that could be advantageous to Kemper’s shareholders.

Many states have made, or are in the process of making, modifications to their holding company laws. These modifications impose new reporting requirements and substantially expand the oversight and examination powers of state insurance regulators to assess enterprise risks within the entire holding company system that may arise from both insurance and non-insurance

subsidiaries. They also impose new reporting requirements on affiliated transactions and divestiture of a controlling interest in an insurance subsidiary.

Other Federal Government Regulation

Dodd-Frank Wall Street Reform and Consumer Protection Act and Other Financial Reform Efforts

As part of an effort to strengthen the regulation of the financial services market, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted in 2010. The Dodd-Frank Act also created the Federal Insurance Office (“FIO”) within the U.S. Department of the Treasury (“Treasury”). The FIO monitors the insurance industry, provides advice to the Financial Stability Oversight Council (“FSOC”), represents the U.S. on international insurance matters, and studies the current regulatory system. The Dodd-Frank Act includes a number of financial reforms and regulations that may affect our business and financial reporting. However, there remains uncertainty regarding the future of the Dodd-Frank Act and how it may impact our business.

Additional regulations or new requirements may emerge from activities of various regulatory entities, including the Federal Reserve Board, FIO, FSOC, NAIC and the International Association of Insurance Supervisors (“IAIS”), that are evaluating solvency and capital standards for insurance company groups. The outcome of these actions is uncertain; however, these actions may result in an increase in the level of capital and liquidity required by insurance holding companies.

Affordable Care Act

In 2010, the Patient Protection and Affordable Care Act, ~~or ACA,~~ as ~~well as~~amended by the Health Care and Education Reconciliation Act of 2010 ~~(collectively, the “Health~~(“Affordable Care ~~Acts”~~Act”) became law, causing significant changes to the U.S. health care system. Since then, significant regulations have been enacted by the U.S. Department of Health and Human Services, ~~or HHS,~~ the Department of Labor and the Department of Treasury. The legislation and regulations are far-reaching ~~and are intended~~efforts to expand access to health insurance coverage over time by mandating that ~~most~~certain health benefit plans offered to individuals ~~obtain~~ and ~~certain~~small employers ~~offer to their employees health insurance coverage that meets~~meet prescribed minimum benefit requirements ~~as well as establishing~~and establish minimum loss ratios, rating restrictions, mandates for coverage of defined essential health benefits, restrictions or prohibitions on pre-existing condition exclusions and annual and lifetime policy limits. ~~As a result of the~~These requirements do not apply to specified limited or ancillary benefits referred to as “excepted benefits.” The complexity of the ~~law,~~Affordable Care Act, its impact on health care in the United States, ~~the~~its continuing modification and interpretation ~~of the Health Care Acts made~~ by statute, rule and/or executive order, and the numerous legal challenges and ongoing legislative efforts to repeal or replace the ~~ACA,~~Affordable Care Act, continues to make the impact to the Company’s business uncertain. Changes to the Affordable Care Act would directly affect the market in which the Company offers products and may make it more difficult to do business or impact the underlying economies of the business.

Human Capital Management

Company Culture

Kemper proudly serves growing niche and underserved markets through appropriate and affordable insurance and financial solutions. Kemper’s strategic intent is focused on empowering each employee on our team to Act Like an Owner. This concept describes one of the most important parts of executing on our purpose—our employees—and infuses our ownership culture in everything we do.

Our culture enables everyone, at every level, to take authority and accountability for their respective roles and responsibilities and strive towards high performance. We promote this through a dynamic, diverse and innovative team members who Act Like an Owner and are continually driven by intellectual curiosity, analytic superiority, and being world class operators.

Diversity, Equity and Inclusion

Diversity, equity and inclusion (“DE&I”) are fundamental to the Company’s success. Kemper is committed to driving our DE&I efforts within our workforce, workplace, and marketplace, as outlined below:

•Workforce: attract, develop and retain high-quality, diverse talent

•Workplace: create an inclusive organizational culture

•Marketplace: serve diverse customers and communities

Compliance and Ethics

A culture that includes compliance and ethical behaviors is key to protecting the Company from actions that could negatively impact our reputation and business results. These values are also critical to the sound operation of our business and contribute to a positive work experience for our employees. Kemper provides a variety of tools and resources to ensure that these values ultimately result in an environment that’s welcoming for every member of the Kemper community.

Kemper maintains an open communication environment to all employees that features multiple channels for reporting instances of fraud, theft, violence, and misconduct. Our compliance reporting protocol enhances our efforts to foster a culture of integrity and ethical behavior while facilitating corrective actions necessary to address identified problems. In addition, Kemper has an “open door” policy that encourages employees to reach out to their direct manager, another manager, or Human Resources with any compliance or ethical misconduct questions or concerns.

Employee Development

Kemper’s long-term success is inextricably linked to our employee’s development and engagement. Kemper promotes development at all stages of careers, from early career programs including internships and rotational development programs to leadership development. Kemper promotes individual growth and development through various programs and outlets, including the Own Your Career initiative. This program aims to provide employees with the resources and tools necessary to continue to build momentum toward career success and development. Kemper’s commitment to Own Your Career is closely tied to our Act

Like An Owner culture, and offers individuals the opportunity for skill building, developing talents, and opportunities to connect with peers and managers who will support employees on their path forward.

Engagement with Company Culture

Employee engagement is a critical element in driving the Company’s culture and success. Kemper encourages elevated engagement through various initiatives and programs, and reinforces behaviors through recognition to employees who consistently go above and beyond in their contributions to the Company’s success.

We measure engagement through an employee survey which offers all team members the opportunity to provide feedback on key drivers of overall work satisfaction, including career growth and development, company leadership, pay and benefits, recognition, resources, culture, DE&I, and ethics. The feedback is evaluated by our business and Human Resources leadership teams to understand employees’ emotional commitment to the most critical areas of employee engagement, further define and improve our culture, and address areas of opportunity to enhance the work experience.

Total Rewards

Total rewards represent investments Kemper makes to recognize and reward employees for their contributions. Kemper provides market competitive total rewards that enable us to attract and retain the talent we need to grow our company, and achieve our results. Our total rewards are a vital part of the employee experience at Kemper and are designed to add value to our business and promote the health and well-being of all employees.

Kemper is focused on investing in the physical, emotional and financial well-being of our people by providing a wide range of benefits. These benefits include, but are not limited to:

•Health insurance including medical, dental, vision and prescription drug coverage

•Life and disability insurance

•Tax-advantaged Flexible Spending Accounts for health care and dependent care

•Health Savings Accounts for the High-Deductible Health Plan, including a company match

•401(k) retirement savings program, including a company match and 100% vesting upon hire

•Employee Stock Purchase Program (ESPP)

•Employee Assistance & Work/Life Program (EAP)

•Tuition reimbursement

•Adoption assistance

•Employee discount programs

•Voluntary benefit programs

•Leave and time off programs

•Flexible work arrangements based on function and role

•Wellness resources, including diabetes, hypertension and pregnancy support

•Commuter benefits

Community

We are committed to strengthening the communities where our employees and customers live and work. That's more than part of our business strategy – it's at the heart of our philanthropic values.

Our focused efforts are making a significant and sustainable impact to improve the quality of lives and livelihoods in three areas:

•Education: We seek to inspire and empower people of all ages to achieve their full potential and help develop the next generation of leaders.

•Health: We seek to encourage accelerated research, address patient and caregiver needs, and advance medical and disease education among leading organizations.

•Community Development: We seek to improve access to food and housing, and advance civil rights and advocacy for underserved Americans.

COVID-19 Response

Kemper’s top priority in responding to the COVID-19 pandemic has been to ensure the health, safety, and well-being of our employees, agents, and customers. In March 2020, the Company shifted to a remote working environment for most employees.

In the fourth quarter of 2021, the Company began returning employees to offices, guided by the top priorities of ensuring the health, safety, and well-being of our employees, agents and customers. The Company continues to ~~analyze~~adhere to local, state and ~~refine its estimates of the ultimate impact of the Health Care Acts on its business, cash flows, financial condition~~federal safety guidelines in our return-to-office and ~~results of operations.~~field protocol.

1417

Item 1A. Risk Factors.

Kemper is exposed to numerous risk factors that could cause actual results to differ materially from recent results or anticipated future results. The following discussion details the significant risk factors that are specific to the Company. In addition to those described below, the Company’s business, financial condition and results of operations could be materially affected by other factors not presently known ~~by,~~ or considered material ~~to,~~by the Company. Readers are advised to consider all of these factors along with the other information included in this ~~2019~~2021 Annual Report, including the factors set forth under the caption “Caution Regarding Forward-Looking Statements” beginning on page 1, and to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.

Risks Relating to ~~Legal and Regulatory Environment~~

Kemper’s insurance subsidiaries are subject to significant regulation, and the evolving legal and regulatory landscape in which they operate could result in increased operating costs, reduced profitability and limited growth.

Kemper’s insurance subsidiaries operate under an extensive insurance regulatory system. Current laws and regulations affect a wide variety of matters, including policy forms, premium rates, licensing, market conduct, trade practices, claims handling practices, reserve and loss ratio requirements, investment standards, statutory capital and surplus requirements, restrictions on the payment of dividends, approvals of transactions involving a change in control of one or more insurance companies, restrictions on transactions among affiliates and consumer privacy and data security. They also require the filing of annual and quarterly financial reports and holding company reports. Pre-approval requirements often restrict or delay actions by the companies to implement premium rate changes for property, casualty and health insurance policies, or to introduce new, or make changes to existing, policy forms and many other actions. Insurance regulators conduct periodic examinations of Kemper’s insurance subsidiaries and can suspend or delay their operations or licenses, require corrective actions, and impose penalties or other remedies available for compliance failures. For a more detailed discussion of the regulations applicable to Kemper’s subsidiaries and related emerging developments, see “Regulation” in Item 1, beginning on page 11.

These laws and regulations, and their interpretation by the various regulators and courts, are subject to continual revision and expansion. The legal and regulatory landscape within which Kemper’s insurance subsidiaries conduct their businesses is often unpredictable. As industry practices and regulatory, judicial, political, social and other conditions change, issues may emerge, whether intended or not. These changes and emerging issues could adversely affect Kemper’s insurance subsidiaries in a variety of ways, including, for example, by expanding coverages beyond the underwriting intent, increasing the number or size of claims, accelerating the payment of claims or otherwise adding to operational costs or adversely affecting the Company’s competitive advantages. Practices in the industry or within the Company that were once considered approved, compliant and reasonable may suddenly be deemed unacceptable by virtue of a court or regulatory ruling or changes in regulatory enforcement policies and practices. It is not possible for the Company to predict such shifts in legal or regulatory enforcement or to accurately estimate the impact they may have on the Company and its operations.

One area where the legal and regulatory landscape has experienced significant change is in connection with the mandated use of death verification databases by life insurance companies in their policy administration and claims handling practices. Over the last decade, many states have adopted new laws requiring insurers to proactively use such databases, including the Social Security Administration’s Death Master File (the “DMF”), to varying degrees in order to ascertain if an insured may be deceased. More than half of the states have adopted such laws, and Kemper cannot predict whether additional states will enact similar legislation or, if enacted, what form such legislation may take. These laws require the insurer to initiate the claims process even though the insureds’ beneficiaries have not submitted a claim, including proof of death, as required by regulator-approved policy forms and the insurer was otherwise unaware of the insured’s death. In a related development, many states have expanded the application of their unclaimed property laws, particularly as they relate to life insurance proceeds, and many states have engaged audit firms to examine the practices of life insurance companies with respect to the reporting and remittance of such proceeds under unclaimed property laws. The push to alter practices that were previously considered lawful and appropriate relative to both claims handling and remittance of life insurance policy proceeds under unclaimed property laws has led to the Company’s involvement in compliance audits, market conduct examinations and litigation. In 2016, the Company initiated a voluntary, comprehensive process to compare life insurance records against the DMF and other databases to determine if any of its insured may be deceased. See Note 2, “Summary of Accounting Policies and Accounting Changes,” and Note 23, “Contingencies,” to the Consolidated Financial Statements for further details.

The financial services industry, including insurance companies and their holding company systems, remains under regulatory scrutiny. While it is not possible to predict how new laws or regulations or new interpretations of existing laws and regulations may impact the operations of Kemper’s insurance subsidiaries, several developments have the potential to significantly impact such operations. This includes increased legislative and regulatory focus on cybersecurity and adoption of extensive

modifications to state holding company laws that substantially expand the oversight and examination powers of insurance regulators beyond licensed insurance companies to their non-insurance affiliates and their organizations as a whole, particularly with respect to enterprise risk. In addition, the Health Care Acts have resulted in regulations affecting health insurers such as Reserve National, and potential changes to the state insurance regulatory system may result from the Dodd-Frank Act. See the discussion of these matters under “Regulation” in Item 1, beginning on page 11.

These new developments and significant changes in, or new interpretations of, existing laws and regulations could make it more expensive for Kemper’s insurance subsidiaries to conduct and grow their businesses which could materially impact the Company’s operating results.

Kemper has a significant concentration of personal automobile insurance business in California and Florida, and negative developments in the regulatory, legal or economic conditions in these states may adversely affect our profitability.

California and Florida represented 69% of our total personal automobile insurance gross written premiums in 2019. Consequently, the dynamic nature of regulatory, legal, competitive and economic conditions in these states affects our revenues and profitability. Further, both California and Florida have regulations that limit the after-tax return on underwriting profit allowed for an insurer. Changes in any of these conditions could negatively impact the Company's results of operations.

Legal and regulatory proceedings are unpredictable and could produce one or more unexpected verdicts against the Company that could materially and adversely affect the Company’s financial results for any given period.

Kemper and its subsidiaries are from time to time involved in lawsuits, regulatory inquiries and other legal proceedings arising out of the ordinary course of their businesses. Some of these proceedings may involve matters particular to Kemper or one or more of its subsidiaries, while others may pertain to business practices in the industry in which Kemper and its subsidiaries operate. Some lawsuits may seek class action status that, if granted, could expose the Company to potentially significant liability by virtue of the size of the putative classes. These matters often raise difficult factual and legal issues and are subject to uncertainties and complexities. The outcomes of these matters are difficult to predict, and the amounts or ranges of potential loss at particular stages in the proceedings are in most cases difficult or impossible to ascertain. A further complication is that even where the possibility of an adverse outcome is remote under traditional legal analysis, juries sometimes substitute their subjective views in place of facts and established legal principles. Given the unpredictability of the legal and regulatory landscape in which the Company operates, there can be no assurance that one or more of these matters will not produce a result that could materially and adversely affect the Company’s financial results for any given period.

~~For information about the Company’s pending legal proceedings, see Note 23, “Contingencies,” to the Consolidated Financial Statements.~~

~~Risks Relating to Catastrophes and~~ Estimating Property and Casualty Insurance Losses and Loss Adjustment Expenses and Catastrophes

Estimating losses and LAE for determining property and casualty insurance reserves ~~or determining premium rates,~~ is inherently uncertain, and the Company’s results of operations may be materially impacted if the Company’s insurance reserves ~~or premium rates~~ are insufficient.

The Company establishes loss and LAE reserves to cover estimated liabilities, which remain unpaid as of the end of each accounting period, and to investigate and settle all claims incurred under the property and casualty insurance policies that it has issued. Loss and LAE reserves are established for claims that have been reported to the Company as of the end of the accounting period, as well as for estimated claims that have occurred but have not yet been reported to the Company. The estimates of loss and LAE reserves are based on the Company’s assessment of the facts and circumstances known to it at the time, as well as estimates of the impact of future trends in the severity of claims, the frequency of claims and other factors.

These estimates can be inaccurate or may change over time due to many variables, including changes driven by the evolving legal and regulatory landscape and economic conditions in which the Company operates and the rising costs of insurance claims from increased litigation, higher jury awards, ~~the impact~~broader definitions of ~~process change and staffing levels~~liability and other effects of societal trends referred to as social inflation. In recent periods, these estimates have been impacted by the effect the COVID-19 pandemic and the related governmental responses have had on certain of these variables. See the risk factor below titled “The impact of COVID-19 and related economic conditions could materially affect Kemper’s results of operations, financial position and/or liquidity.”

The process of estimating property and casualty insurance reserves is complex and imprecise. The reserves established by the Company are inherently uncertain estimates and could prove to be inadequate to cover its ultimate losses and expenses. The estimate of the ultimate cost of claims for insured events that have occurred must take into consideration many factors that are dependent on the outcome of future events associated with the reporting, investigation and settlement of claims. The impacts on the Company’s estimates of property and casualty insurance reserves from these factors are difficult to assess accurately. A change in any one or more of the factors is likely to result in a projected ultimate loss that is different than the previous projected ultimate loss and may have a material impact on the Company’s ~~estimate of the projected ultimate loss.~~estimates. Increases in

the estimates of ultimate losses and LAE will decrease earnings, while decreases in ~~such~~these estimates will increase earnings, as reported by the Company in the results of its operations for the periods in which the changes to the estimates are ~~made by the Company.~~made. See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” beginning on page 62 for a discussion of the Company’s reserving process and the factors considered by the Company’s actuaries in estimating the Company’s Property and Casualty Insurance Reserves.

If the Company is unable to charge competitive yet profitable rates to its customers, the Company’s business, results of operations and financial condition could be materially and adversely affected.

The ~~Company’s actuaries also consider~~Company considers trends in the severity and frequency of claims and other factors when determining the premium rates to charge for its property and casualty insurance products. An unanticipated change in any one or more of these factors or trends, as well as a change in competitive conditions, may ~~also~~ result in inadequate premium rates charged for insurance policies issued by Kemper’s property and casualty insurance subsidiaries in the future. ~~Such~~Typically there is a time lag between when changes in frequency and severity are identified and when rate changes are approved, implemented and earned in. Material changes in frequency and severity and the time lag between when rates are approved, implemented and earned into the Company’s results of operations may have a material adverse impact on the Company’s operations. Because of restrictions placed on the Company’s ability to increase premium rates in certain states, including California, a pricing inadequacy may continue for a prolonged period. These pricing inadequacies have and could continue to have a material impact on the Company’s operating results. If the ~~Company’s pricing actuaries overestimate~~Company overestimates the severity or frequency of claims and other factors in determining the rates to charge for insurance products, the rates for the Company’s products could be ~~uncompetitive~~noncompetitive and result in loss of revenue and market share.

Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial ~~condition~~.condition.

Kemper’s property and casualty insurance subsidiaries are subject to claims arising out of catastrophes that may have a significant effect on their results of operations, liquidity and financial condition. Catastrophes can be caused by various events, including, but not limited to, hurricanes, tornadoes, windstorms, earthquakes, hailstorms, explosions, severe winter weather, ~~and~~ wildfires and pandemics, and may also include man-made events, such as terrorist attacks and hazardous material spills. The incidence, frequency and severity of catastrophes are inherently unpredictable and may be impacted by the uncertain effects of climate change. The extent of the Company’s losses from a catastrophe is a function of both the total amount of its insured exposure in the geographic area affected by the event and the severity of the event. The Company could experience more than one severe catastrophic event in any given period.

The property and casualty insurance subsidiaries use catastrophe modeling tools developed by third parties to project their potential exposure to property damage resulting from certain types of catastrophic events under various scenarios. These models are based on various assumptions and judgments which may turn out to be wrong. The actual impact of one or more catastrophic events could adversely and materially differ from these projections.

Kemper’s life and health insurance subsidiaries are particularly exposed to risks of catastrophic mortality, such as ~~pandemic~~pandemics or other events that result in large numbers of deaths.For example, the ongoing COVID-19 pandemic has resulted in increased mortality that has had an adverse impact on our life and health business. See the risk factor below titled “The impact of COVID-19 and related economic conditions could materially affect Kemper’s results of operations, financial position and/or liquidity.” In addition, the occurrence of such an event in a concentrated geographic area could have a severe disruptive effect on the Company’s workforce and business operations. The likelihood and severity of such events cannot be predicted and are difficult to estimate.

The property and casualty insurance subsidiaries use catastrophe modeling tools developed by third parties to project their potential exposure to property damage resulting from catastrophic events under various scenarios. Such models are based on various assumptions and judgments which may turn out to be wrong. The actual impact of one or more catastrophic events could adversely and materially differ from these projections.

Changes in the availability and cost of catastrophe reinsurance and in the ability of reinsurers to meet their obligations could result in Kemper’s insurance subsidiaries retaining more risk and could adversely and materially affect the Company’s results of operations, financial condition and/or liquidity.

Kemper’s property and casualty insurance subsidiaries seek to reduce their exposure to catastrophe losses through the purchase of catastrophe reinsurance. Catastrophe reinsurance does not relieve ~~such~~these subsidiaries of their direct liability to their policyholders. As long as the reinsurers meet their obligations, the net liability for ~~such subsidiaries~~each subsidiary is limited to the amount of risk ~~that they retain.~~it retains. While ~~such~~Kemper’s subsidiaries’ principal reinsurers are each rated “A-” or better by A.M. Best at the time reinsurance is purchased, the Company cannot be certain that reinsurers will pay the amounts due from them either now, in the future, or on a timely basis. A reinsurer’s insolvency or inability to make payments under the terms of its reinsurance agreement could materially and adversely affect the Company’s financial position, results of operations and liquidity.

In addition, market conditions beyond the Company’s control determine the availability and cost of the reinsurance protection that Kemper’s property and casualty insurance subsidiaries may purchase. A decrease in the amount of reinsurance coverage that ~~such~~these subsidiaries purchase generally should increase their risk of a more severe loss. If the amount of available reinsurance is reduced, ~~such subsidiaries incur additional expenses~~the cost to obtain reinsurance may increase or Kemper’s subsidiaries may be unable to obtain sufficient reinsurance on acceptable terms, which could adversely affect ~~the~~their ability ~~of such subsidiaries~~ to write future insurance policies or result in their retaining more risk with respect to ~~such~~those policies.

The extent to which Kemper’s insurance subsidiaries can manage their catastrophe exposure through underwriting strategies may be limited by law or regulatory action and could adversely and materially affect the Company’s results of operations, financial condition and/or liquidity.

Kemper’s property and casualty insurance subsidiaries also manage their exposure to catastrophe losses through underwriting strategies such as reducing exposures in, or withdrawing from, catastrophe-prone areas, establishing appropriate guidelines for insurable structures, and setting appropriate rates, deductibles, exclusions and policy limits. The extent to which ~~such~~Kemper’s subsidiaries can manage their exposure through ~~such~~these strategies may be limited by law or regulatory action. For example, laws and regulations may limit the rate or timing at which insurers may non-renew insurance policies in catastrophe-prone areas or require insurers to participate in wind pools and joint underwriting associations. Generally, ~~an insurer’s~~ participation in ~~such~~these pools and associations ~~are~~is based on ~~the~~an insurer’s market share determined on a state-wide basis. Accordingly, even though Kemper’s property and casualty insurance subsidiaries may not incur a direct insured loss as a result of managing direct catastrophe exposures, they may incur indirect losses from required participation in pools and associations. In addition, laws and regulations requiring prior approval of policy forms and premium rates may limit the ability of Kemper’s property and casualty insurance

subsidiaries to increase rates or deductibles on a timely basis, which may result in additional losses or lower returns than otherwise would have occurred in an unregulated market.

Risks Relating to Competition

A downgrade in the ratings of Kemper or its insurance subsidiaries below A- could materially and adversely affect the Company.

Third-party rating agencies assess the financial strength and rate the claims-paying ability of insurance companies based on criteria established by the rating agencies. Third-party ratings are important competitive factors in the insurance industry. Financial strength ratings are used to assess the financial strength and quality of insurers. Ratings agencies may downgrade the ratings of Kemper and/or its insurance subsidiaries or require Kemper to retain more capital in its insurance businesses to maintain existing ratings following developments that they deem negative. This can include factors directly related to the Company, such as an increase in the catastrophic risk retained by Kemper’s insurance subsidiaries, or developments in industry or general economic conditions. A downgrade by A.M. Best in the ratings of Kemper’s insurance subsidiaries below A-, particularly those operating in the preferred and standard market or offering homeowners insurance, could result in a substantial loss of business if independent agents and brokers or policyholders ~~of such subsidiaries~~ move to other companies with higher claims-paying and financial strength ratings. Any substantial loss of business could materially and adversely affect the financial condition and results of operations of such subsidiaries. A downgrade in Kemper’s credit rating by Standard & Poor’s (“S&P”), Moody’s Investors Services (“Moody’s”) or Fitch Ratings (“Fitch”) may reduce Kemper’s ability to cost-effectively access the capital markets or may increase the cost to refinance existing debt.

The insurance industry is highly competitive, making it difficult to grow profitability and within expectations of investors.

The Company’s insurance businesses face significant competition, and their ability to compete is affected by a variety of issues relative to others in the industry, such as management effectiveness, product pricing, service quality, ease of doing business, innovation, financial strength and name recognition. Competitive success is based on many factors, including, but not limited to, the following:

•Competitiveness of prices charged for insurance policies;

•Sophistication of pricing segmentation;

•Design and introduction of insurance products to meet emerging consumer trends;

•Ability to attract and retain experienced industry talent;

•Selection and retention of agents and other business partners;

•Compensation paid to agents;

•Underwriting discipline;

•Selectiveness of sales markets;

•Effectiveness of marketing materials and name recognition;

•Product and technological innovation;

•Effectiveness of online servicing ~~platforms~~platforms;

•Ability to settle claims timely and efficiently;

•Ability to detect and prevent fraudulent insurance claims;

•Effectiveness of deployment and use of information technology across all aspects of operations;

•Ability to control operating expenses;

•Financial strength ratings; ~~and~~

•Quality of services provided to, and ease of doing business with, independent agents and brokers or policyholders.

The inability to compete effectively in any of the Company’s insurance businesses could materially reduce the Company’s customer base and revenues and could materially and adversely affect the future results and financial condition of the Company.

See “Competition” in Item 1 of Part I beginning on page 9 and page 11 for more information on the competitive rankings in the property and casualty insurance markets and the life and health insurance markets, respectively, in the United States.

Risks Relating to ~~Technology Initiatives,~~Legal and Regulatory Environment

practices, reserve and loss ratio requirements, investment standards, statutory capital and surplus requirements, restrictions on the payment of dividends, approvals of transactions involving a change in control of one or more insurance companies, restrictions on transactions among affiliates and consumer privacy and data security. Kemper subsidiaries must also file annual and quarterly financial reports and holding company reports. Pre-approval requirements often restrict or delay actions to implement premium rate changes for insurance policies, or to introduce new, or make changes to existing, policy forms and many other actions. These delays can adversely impact Kemper’s business, especially where external factors, such as the COVID-19 pandemic, may result in a pricing imbalance for the Company’s insurance products.

Insurance regulators conduct periodic examinations of Kemper’s insurance subsidiaries and can suspend or delay operations or licenses, require corrective actions, and impose penalties or other remedies available for compliance failures. For a more detailed discussion of the regulations applicable to Kemper’s subsidiaries and related emerging developments, see “Regulation” in Item 1, beginning on page 12.

These laws and regulations, and their application by regulators and courts, are subject to continuous interpretation and revision. The legal and regulatory landscape within which Kemper’s insurance subsidiaries conduct their businesses is often unpredictable. As industry practices and regulatory, judicial, political, social and other conditions change, new issues may emerge. These changes and emerging issues could adversely affect Kemper’s business in a variety of ways, including, for example, by expanding coverages beyond the underwriting intent, increasing the number or size of claims, accelerating the payment of claims or otherwise adding to operational costs or adversely affecting the Company’s competitive advantages. Practices in the industry or within the Company that were once considered approved, compliant and reasonable may suddenly be deemed unacceptable by virtue of a court or regulatory ruling or changes in regulatory enforcement policies and practices. It is not possible for the Company to predict such shifts in legal or regulatory enforcement or to accurately estimate the impact they may have on the Company and its operations.

One area where the legal and regulatory landscape experienced significant change is in connection with the mandated use of death verification databases by life insurance companies. A majority of states now have laws requiring insurers to proactively use such databases, including the Social Security Administration’s Death Master File (the “DMF”), in order to ascertain if an insured may be deceased. Kemper cannot predict whether additional states will enact similar legislation. These laws require the insurer to initiate the claims process even though the insureds’ beneficiaries have not submitted a claim and the insurer was otherwise unaware of the insured’s death. In a related development, many states expanded their unclaimed property laws, particularly as they relate to life insurance proceeds, and have examined life insurance companies with respect to the reporting and remittance of such proceeds under these laws. The push to alter practices previously considered lawful and appropriate relative to both claims handling and remittance of life insurance proceeds has led to the Company’s involvement in compliance audits, market conduct examinations and litigation. The Company has a comprehensive process in place to compare life insurance records against the DMF and other databases to determine if any of its insureds may be deceased. See Note 2, “Summary of Accounting Policies and Accounting Changes,” and Note 24 “Contingencies,” to the Consolidated Financial Statements for further details.

In addition, there is increased legislative and regulatory focus on cybersecurity and on amendments to state holding company laws that expand the oversight and examination powers of insurance regulators beyond licensed insurance companies to include non-insurance affiliates and their organizations as a whole, particularly with respect to enterprise risk. See the discussion of these matters under “Regulation” in Item 1, beginning on page 12.

These developments and significant changes in, or new interpretations of, existing laws and regulations could make it more expensive for Kemper’s insurance subsidiaries to conduct and grow their businesses which could materially impact the Company’s operating results.

California and Florida represented 69% of the Company’s total personal automobile insurance gross written premiums in 2021. Consequently, the dynamic nature of regulatory, legal, competitive and economic conditions in these states affects Kemper’s revenues and profitability. For example, in Florida, increased severity in personal injury protection coverage has resulted in significant adverse loss and LAE reserve development in 2021. Further, both California and Florida have regulations that limit the after-tax return on underwriting profit allowed for an insurer. Changes in any of these conditions could negatively impact the Company's results of operations.

Legal and regulatory proceedings are unpredictable and could produce one or more unexpected outcomes that could materially and adversely affect the Company’s financial results for any given period.

Kemper and its subsidiaries are from time to time involved in lawsuits, regulatory inquiries and other legal proceedings arising out of the ordinary course of their businesses. Some of these proceedings may involve matters particular to Kemper or one or more of its subsidiaries, while others may pertain to industry business practices. Some lawsuits may seek class action status that, if granted, could expose the Company to potentially significant liability by virtue of the size of the putative classes. These matters often raise difficult factual and legal issues and are subject to uncertainties and complexities. The outcomes of these matters are difficult to predict, and the amounts or ranges of potential loss at particular stages in the proceedings are in most cases difficult or impossible to ascertain. Even where the possibility of an adverse outcome is remote under traditional legal analysis, juries sometimes substitute their subjective views in place of facts and established legal principles. Given the unpredictability of the legal and regulatory landscape in which the Company operates, there can be no assurance that one or more of these matters will not produce a result that could materially and adversely affect the Company’s financial results for any given period.

For information about the Company’s pending legal proceedings, see Note 24, “Contingencies,” to the Consolidated Financial Statements.

Changes in the availability of insurance coverage or in the ability of insurers to meet their obligations could result in the Company being exposed to significant losses.

Kemper maintains insurance coverage to limit its risk exposure to certain perils, including cybersecurity, errors and omissions, directors and officers liability insurance, and other financial indemnity coverages. The availability of these coverages could be significantly reduced in the future and there is no guarantee that if coverage is available it will be in an amount sufficient to cover the losses of one or more covered incidents or on terms that Kemper finds acceptable. An insurer’s insolvency or inability to make payments under the insurance coverage it provides to Kemper could also result in Kemper being exposed to significant losses.

Risks Relating to Security of Personal Data, ~~and~~ Availability of Critical Systems, and Technology Initiatives

Failure to protect against system security breaches that compromise personal data held by the Company or its business partners could result in business interruption, legal and consulting fees, regulatory penalties, litigation, lost business, reputational harm, and other liabilities and expenses.

Kemper’s insurance subsidiaries obtain, process and store vast amounts of personal data that can present significant risks to the Company and its customers, employees and other affected individuals. An increasing array of laws and regulations govern the use, transfer and storage of such data, including, for example, social security numbers, credit card data, driver’s license numbers and protected health information. The Company uses an array of sophisticated security measures and policies and procedures designed to enhance security of the Company’s data systems. Notwithstanding these efforts, the Company’s data systems, as well as those of third party administrators and other business partners working on behalf of the Company, are vulnerable to security breaches due to the increasing sophistication and frequency of cyber attacks, viruses, ransomware, spyware and other malware and infiltration methods, hackers and other external hazards, as well as equipment and system failures and inadvertent errors, negligence or intentional misconduct of employees and/or contractors. The Company also relies on the ability of its business partners to maintain secure systems and processes that comply with legal requirements and protect personal data. The Company and its third party administrators and other business partners regularly defend against and respond to data security threats and investigate and remediate breaches that have occurred.

System security breaches can result in data loss, business interruption, ransom demands, investigations and litigation. The Company has been and may continue to be exposed to damages, regulatory penalties and other liabilities, reputational risk and significant increases in compliance and litigation costs.

If Kemper is unable to send or accept electronic payments, our business and financial results could be adversely affected.

The Company relies increasingly on electronic payments from policyholders, including, but not limited to, payment by credit and debit cards. Kemper’s ability to use electronic payments depends on its ability to comply with applicable laws and regulations and with the rules of the various payment networks. Failure to maintain compliance with laws and industry rules and regulations governing such transactions could result in additional costs and damages. For example, in the event of non-compliance with the Payment Card Industry Data Security Standard, an information security framework for organizations that handle cardholder information for the major debit, credit, prepaid, and other payment card methods, Kemper’s insurance

subsidiaries could be prohibited from collecting premium payments from customers by way of such methods and be subject to significant fines.

Failure to maintain the availability of critical systems could result in business interruption, lost business, reputational harm, penalties and other costs.

The Company’s business operations rely on the continuous availability of its own computer systems, systems and software hosted by vendors, and computer systems used by third party administrators and contractors working on behalf of the Company. From time to time these systems have been, and may again be, adversely affected or disrupted by cyber attacks or other data breaches, natural and man-made catastrophes or other significant events. The failure of the Company, or its third party administrators or other business partners, to maintain business continuity in the wake of such events may prevent the timely performance of critical processes across its operations, including, for example, insurance policy administration, claims processing, billing, payment processing, treasury and investment operations and payroll and other employer-related functions. These failures could result in significant loss of business, increased costs, fines and other adverse consequences.

Technology initiatives could present significant economic and competitive challenges to the Company. Failure to complete and implement such initiatives in a timely manner could result in the loss of business and incurrence of internal use software development costs that may not be recoverable.

Data and analytics play an increasingly important role in the insurance industry. The Company may periodically initiate multi-year technology projects to enhance operations or replace ~~aging~~ systems. While technology developments can facilitate the use and enhance the value of data and analytics, streamline business processes and ultimately reduce the cost of operations, technology initiatives can present significant economic and organizational challenges to the Company and potential short-term cost and implementation risks. In addition, projections of expenses and implementation schedules could change materially and costs could escalate over time, while the ultimate utility of a technology initiative could deteriorate over time.

Due to the highly-regulated nature of the financial services industry, the Company also faces rising costs and competing time constraints in adapting technology to meet compliance requirements of new and proposed regulations. The costs to develop and implement systems to replace the Company’s existing systems and to comply with new regulatory requirements as needed ~~over time~~ are expected to be material. Due to the complexities involved, there can be no assurances that new system development and implementation projects will be successful, that the costs for such projects will not exceed estimates and that the incurred costs will be recoverable. Furthermore, failure to implement replacement systems in a timely manner could result in loss of business from the Company’s delay or inability to design and introduce new insurance products that meet emerging consumer needs and competitive trends.

~~Failure to maintain the security of personal data may result in lost business, reputational harm, legal costs and regulatory penalties.~~

Kemper’s insurance subsidiaries obtain, process and store vast amounts of personal data that can present significant risks to the Company and its customers, employees and other affected individuals. An increasing array of laws and regulations govern the use, transfer and storage of such data, including, for example, social security numbers, credit card data and protected health information. Despite the Company’s use of a sophisticated array of security measures and the maintenance of policies and procedures designed to enhance security, the Company’s data systems, and those of its third party administrators and other business partners working on behalf of the Company, may be vulnerable to security breaches due to the increasing sophistication of cyber attacks, viruses, malware and other infiltration, hackers and other external hazards, as well as equipment and system failures and inadvertent errors, negligence or intentional misconduct of employees and/or contractors. The Company also relies on the ability of its business partners to maintain secure systems and processes that comply with legal requirements and protect personal data.

These increased risks may result in data loss, business interruption, ransom demands and litigation, and together with expanding regulatory requirements related to personal data privacy and security, expose the Company to potential damages, regulatory fines and other liabilities, reputational risk and significant increases in compliance and litigation costs. There is no guarantee that the cyber risk insurance policies Kemper maintains will be sufficient to cover all of the costs of one or more data breach incidents that could occur.

The Company relies increasingly on electronic payments from policyholders, including, but not limited to, payment by credit and debit cards. Failure to maintain compliance with laws and industry regulations governing such transactions could result in additional costs and damages. For example, in the event of non-compliance with the Payment Card Industry Data Security Standard, an information security framework for organizations that handle cardholder information for the major debit, credit, prepaid, e-purse, ATM and point-of-sale cards, such organizations could prevent Kemper’s insurance subsidiaries from collecting premium payments from customers by way of such cards and impose significant fines on Kemper’s insurance subsidiaries.

~~Failure to maintain the availability of critical systems may result in lost business, reputational harm, legal costs and regulatory penalties.~~

The Company’s business operations rely on the continuous availability of its own computer systems, systems and software hosted by vendors, and computer systems used by third party administrators and contractors working on behalf of the Company. In addition to disruptions caused by cyber attacks or other data breaches, such systems may be adversely affected by natural and man-made catastrophes. The failure of the Company, or its third party administrators or other business partners, to maintain business continuity in the wake of such events may prevent the timely performance of critical processes across its operations, including, for example, insurance policy administration, claims processing, billing, payment processing, treasury and investment operations and payroll. These failures could result in significant loss of business, increased costs, fines and litigation.

Risks Relating to Investments

The Company’s investment portfolio is exposed to a variety of risks that may negatively impact net investment income, the change in fair value of equity and convertible securities and cause realized and unrealized losses.

The Company maintains a diversified investment portfolio that is exposed to significant financial and capital market risks, including interest rate (risk-free and spread), equity price, and liquidity, as well as risks from changes in tax laws and regulations and other risks from changes in general economic conditions.

The interest rate environment has a significant impact on the Company’s financial results and position. In recent years, rates have been at or near historic lows. A protracted low interest rate environment would continue to place pressure on net investment income, particularly related to fixed income securities, short-term investments and limited liability investment companies and limited partnerships accounted for under the equity method of accounting (“Equity Method Limited Liability Investments”) that invest in distressed and mezzanine debt of other companies. A decline in interest rates would generally increase the carrying value of the Company’s fixed income securities and its Equity Method Limited Liability Investments that exhibit debt-like characteristics, but it may adversely affect the Company’s investment income as it invests cash in new investments that may yield less than the portfolio’s average rate. In a declining interest rate environment, borrowers may seek to refinance their borrowings at lower rates and, accordingly, prepay or redeem securities the Company holds as investments more quickly than the Company initially expected. Such prepayment or redemption action may cause the Company to reinvest the redeemed proceeds in lower yielding investments. An increase in interest rates would generally reduce the carrying value of a substantial portion of the Company’s investment portfolio, particularly fixed income securities and Equity Method Limited Liability Investments.

Kemper’s Life and Health business writes long duration insurance contracts which are priced in consideration of the interest rate environment. If the Company is not able to purchase investments that match that duration of the liabilities and there is a

decline in interest rates, the Company could experience a significant deterioration in results.

The Company invests a portion of its investment portfolio in equity securities, which generally have more volatile returns than fixed income securities and may experience sustained periods of depressed values. There are multiple factors that could negatively impact the performance of the Company’s equity portfolio, including general economic conditions, industry or sector deterioration and issuer-specific concerns. A decline in equity values ~~may~~will result in ~~a decrease in dividend income and significant~~ losses being recognized by the Company in the period such ~~changes~~change in fair value occurs, which may be significant. In addition, a decline in equity values ~~occur.~~may result in a decrease in dividend income.

Interest rates and equity returns also have a significant impact on the Company’s pension and other ~~postretirement~~post-retirement employee benefit plans. In addition to the impact on carrying values and yields of the underlying assets of the funded plans, interest rates also impact the discounting of the projected and accumulated benefit obligations of the plans. A decrease in interest rates may have a negative impact on the funded status of the plans.

The nature and cash flow needs of the Company ~~and the insurance industry in general~~ present certain liquidity risks that may impact the return of the investment portfolio. If the Company were to experience several significant catastrophic events over a relatively short period of time, investments may have to be sold in advance of their maturity dates to fund payments to claimants, which could result in realized losses. Additionally, increases in illiquidity in the financial markets may increase uncertainty in the valuations of the Company’s investments. This increases the risk that the fair values reported in the Company’s consolidated financial statements may differ from the actual price that may be obtained in an orderly sales transaction.

The Company has also benefited from certain tax laws related to its investment portfolio, including dividends received deductions and tax-exempt investment income. Changes in tax laws may have a detrimental effect on the after-tax return of the Company’s investment portfolio. A reduction in income tax rates could also reduce the demand for tax-preferenced securities and result in a decline in the value of the Company’s investment portfolio of such securities.

The Company’s entire investment portfolio is subject to broad risks inherent in the financial markets, including, but not limited to, inflation, regulatory changes, inactive capital markets, governmental and social stability, economic outlooks, unemployment and recession. Changes to these risks and how the market perceives them may impact the financial performance of the Company’s investments.

Kemper and its insurance subsidiaries are subject to various capital adequacy measurements that are significantly impacted by various characteristics of their invested assets, including, but not limited to, asset type, class, duration and credit rating. The Company’s insurance subsidiaries are also subject to various limitations on the amounts at which they can invest in individual assets or certain asset classes in the aggregate. Asset risk is one factor used by insurance regulators and rating agencies to determine required capital for Kemper’s insurance subsidiaries. Accordingly, a deterioration in the quality of the investments held by Kemper’s insurance subsidiaries or an increase in the investment risk inherent in their investment portfolios could increase capital requirements.See the risk factor below ~~under the title~~titled “The ability of Kemper to service its debt, pay dividends to its shareholders and/or ~~make repurchases of its stock~~fund targeted transactions may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries.” These factors may inhibit the Company from shifting its investment mix to produce higher returns. The Company is also subject to concentration of investment risk to the extent that the portfolio is heavily invested, at any particular time, in specific asset types, classes, industries, sectors or collateral types, among other defining features. Developments and the market’s perception thereof in any of these concentrations may exacerbate the negative effects on the Company’s investment portfolio compared to other companies.

The determination of the fair values of the Company’s investments and whether a decline in the fair value of an investment is other-than-temporary are based on management’s judgment and may prove to be materially different than the actual economic outcome.

The Company holds a significant amount of assets without readily available, active, quoted market prices or for which fair value cannot be measured from actively quoted prices. These assets are generally deemed to require a higher degree of judgment in measuring fair value. The assumptions used by management to measure fair values could turn out to be different than the actual amounts that may be realized in an orderly transaction with a willing market participant could be either lower or higher than the Company’s estimates of fair value.

The Company reviews its investment portfolio for factors that may indicate that a decline in the fair value of an investment is other-than-temporary. This evaluation is based on subjective factors, assumptions and estimates and may be materially different than the actual economic outcome, which may result in the Company recognizing additional losses in the future as new information emerges or recognizing losses currently that may never materialize in the future in an orderly transaction with a willing market participant.

Risks Relating to Servicing Debt, Paying Dividends and/or ~~Repurchasing Stock~~Fund Targeted Transactions

The ability of Kemper to service its debt, pay dividends to its shareholders and/or ~~make repurchases of its stock~~fund targeted transactions may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries.

As a holding company, Kemper depends on the dividend income that it receives from its subsidiaries as ~~the~~a primary source of funds to meet its payment obligations. Kemper’s insurance subsidiaries are subject to ~~significant~~ regulatory restrictions under state insurance laws and regulations that limit their ability to declare and pay dividends. These laws and regulations impose minimum solvency and liquidity requirements on dividends between affiliated companies and require prior notice to, and may require approval from, state insurance regulators before dividends can be paid. In addition, third-party rating agencies monitor statutory capital and surplus levels for capital adequacy. Even though a dividend may be payable without regulatory approval, an insurance subsidiary may forgo paying a dividend to Kemper and retain the capital to maintain or improve ~~the~~ ratings ~~of Kemper’s insurance subsidiaries,~~ or to offset increases in required capital from increases in premium volume or investment risk. The inability of one or more of Kemper’s insurance subsidiaries to pay sufficient dividends to Kemper may materially affect Kemper’s ability to pay its debt obligations on time, to pay dividends to its shareholders or ~~make repurchases of its stock.~~

undertake funding for targeted transactions.

General Risks Relating to Mergers, Acquisitions and/or Divestitures

The expected benefits and synergies from mergers, acquisitions and/or divestitures may not be realized to the extent anticipated or within the anticipated time frames.

The Company routinely evaluates opportunities for transactions such as mergers, acquisitions and/or divestitures that would enhance its business and align with the Company’s strategic plans. Kemper’s ability to achieve the anticipated financial benefits from transactions may not be realized due to any number of factors, including, but not limited to, integration difficulties or failures, the loss of key agents/brokers, customers or employees, unexpected or underestimated liabilities, increased costs, fees, expenses and charges related to transactions, or may be delayed by factors outside of the Company’s control. Furthermore, ~~such~~these adverse events could result in a decrease in the estimated fair value of goodwill or other intangible assets established as a result of such transactions, triggering an impairment. These and other factors could have a negative impact on Kemper’s financial condition, profitability and results from operations.

Risks Relating to ~~the Infinity Merger~~COVID-19

~~Kemper could incur additional integration costs in connection with the Infinity Merger.~~

~~Kemper expects to incur additional costs associated with the continued integration~~The impact of the COVID-19 pandemic and related economic conditions have had and could continue to have a material effect on Kemper’s results of operations, financial position and/or liquidity.

Beginning in March 2020, the global pandemic related to the novel coronavirus that causes COVID-19 began to adversely impact the global economy and resulted in an enormous global economic downturn, including in the United States where the Company conducts its operations. While overall economic activity rebounded significantly in 2021, the effects of ~~Kemper~~the COVID-19 pandemic continued throughout 2021.

As the result of the COVID-19 pandemic and ~~Infinity. A substantial majority~~the related economic consequences, including governmental responses to the pandemic and the effects of ~~these costs will be non-recurring expenses~~the dramatic surge in economic activity as pandemic lockdowns ended, the Company experienced in 2021 a significant increase in loss frequency and severity in its Property and Casualty line of business. In addition, increased mortality resulting from the ~~transaction,~~pandemic adversely impacted the Life and Health line of business. As the impact of the pandemic continues to be felt, the Company could be subject to the following risks, any of which could individually or collectively have a material, adverse effect on its business, financial condition, liquidity, and results of operations:

•Decrease in overall premium volumes due to economic disruption and rising unemployment rates

•Adverse impact on economic conditions, including ~~(i) facilities~~increased rate of inflation, negative impact on employment levels, supply chain disruptions and ~~systems consolidation and integration costs and (ii) employment related costs. Kemper may incur additional unanticipated costs to integrate the businesses. As~~changing consumer patterns that could impact Kemper’s businesses

•Adverse impact on investment portfolio as a result of ~~such integration~~ratings downgrades, increased bankruptcies and ~~consolidation activities, the Company may abandon, or shorten the useful lives, of assets that are currently~~credit spread widening in ~~use, which may result~~distressed industries

•Increase in ~~us impairing an asset or accelerating depreciation and/or amortization of such assets. Although Kemper expects that the elimination of redundant costs,~~estimated credit losses on fixed maturity investments held at fair value as well as ~~the realization~~other investments and receivables from policyholders

•Higher incurred losses and LAE in Life and Health lines of ~~other efficiencies~~business related to an increase in frequency and/or severity of claims

•Regulatory actions imposing new requirements that could result in increased costs, reduced revenues, expansion of coverage and other effects, and additional restrictions that could affect the ~~integration of~~Company’s pricing, risk selection and

particular rights and obligations under its insurance policies and with regard to its insureds, including the ~~businesses, will offset such incremental, non-recurring costs over time, this net benefit may not be achieved~~ability to cancel policies and collect premiums

•Increased cybersecurity risks due to remote working arrangements and resulting changes in certain operational controls

Risks Relating to General Economic and Market Factors

Changes in the ~~near term, or at all.~~

~~To realize all~~global economy and capital markets could adversely impact the Company’s results of ~~the anticipated results contemplated by the Infinity Merger, the combined company must complete the successful integration of the Kemper and Infinity business~~ operations and ~~failure to do so~~financial condition.

Significant changes in the economic and capital market environment could ~~prevent~~adversely affect consumer demands for the ~~Company from achieving~~Company’s products, results of operations, investment returns and financial condition. The following are examples of economic market conditions that could adversely affect the ~~full benefits it had expected~~Company’s financial liquidity and results of operations:

•Volatility in ~~connection with the Infinity Merger.~~debt and equity markets

~~The success~~•Changes in interestrates

•Increases in inflation

•Reduced availability of ~~the integration,~~credit

•Economic downturns

•Increased unemployment and ~~of the combined company following the Infinity Merger, has been substantially dependent on the skills, experience~~reduced consumer spending

Stressed conditions, volatility and efforts of management and other key personnel for each of Kemper and Infinity. Although the dependency on specific individuals has decreased since the date of the acquisition as the businesses have been integrated, the Company will need to continue to devote significant management attention and resources to the integration of the operations of the businesses. There is no assurance that key managers will remain with the Company, and it is possible that unforeseen expensesdisruptions in global capital markets or delays may occur in connection with particular integration efforts. The anticipated benefits, including synergies, cost savings and growth opportunities, may not be achieved within the expected time frames, or at all. As a result, Kemper cannot assure shareholders that the Company will realize the full benefits anticipated from the Infinity Merger.financial asset classes could adversely affect our investment portfolio.

Item 1B. Unresolved Staff Comments.

The Company has no unresolved staff comments issued more than 180 days before December 31, ~~2019,~~2021, the date of this Annual Report on Form 10-K.

Item 2. Properties.

Owned Properties

Kemper’s subsidiaries together own and occupy ~~eleven~~twelve buildings located in seven states consisting of approximately ~~400,000~~403,000 square feet in the aggregate. Kemper’s subsidiaries hold, solely for investment purposes, additional properties that are not occupied by Kemper or its subsidiaries. Included in Kemper’s owned and occupied properties is a corporate data processing facility with aggregate square footage of approximately 110,000 square feet.

Leased Facilities

The Company leases four floors, or approximately 92,000 square feet, in an 83-story office building in Chicago, Illinois, for its corporate headquarters. The lease expires on December 31, 2033. Kemper’s property and casualty insurance subsidiaries lease facilities with an aggregate square footage of approximately ~~550,000~~578,000 at 2722 locations in nine states. The latest expiration date of the existing leases is in ~~May 2026.~~June 2031. Kemper’s life and health insurance subsidiaries lease facilities with aggregate square footage of approximately ~~465,000~~460,000 at ~~125~~121 locations in 2827 states. The latest expiration date of the existing leases is in ~~January 2025.~~

Kemper’s corporate data processing operation leases a facility with aggregate square footage of approximately 30,000 square feet at one location in one state. The expiration date of the existing lease is in June 2021.December 2026.

The properties described above are in good condition. The properties utilized in the Company’s operations consist of facilities suitable for general office space, call centers and data processing operations.

Item 3. Legal Proceedings.

Proceedings

Information concerning pending legal proceedings is incorporated herein by reference to Note 23,24, “Contingencies,” to the Consolidated Financial Statements.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II


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

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

Market Information

Kemper’s common stock is traded on the NYSE under the symbol of “KMPR.”

Holders

As of January 31, ~~2020,~~2022, the number of record holders of Kemper’s common stock was ~~3,160.~~2,841.

Dividends

Quarterly information pertaining to payment of dividends on Kemper’s common stock is presented below.


DOLLARS PER SHARE	Three Months Ended								Year Ended		DOLLARS PER SHARE	Three Months Ended								Year Ended
	Mar 31, 2019		Jun 30, 2019		Sep 30, 2019		Dec 31, 2019		Dec 31, 2019			Mar 31, 2021		Jun 30, 2021		Sep 30, 2021		Dec 31, 2021		Dec 31, 2021
Cash Dividends Paid to Shareholders (per share)	$	0.25	$	0.25	$	0.25	$	0.28	$	1.03	Cash Dividends Paid to Shareholders (per share)	$	0.31	$	0.31	$	0.31	$	0.31	$	1.24

	Three Months Ended								Year Ended			Three Months Ended								Year Ended
DOLLARS PER SHARE	Mar 31, 2018		Jun 30, 2018		Sep 30, 2018		Dec 31, 2018		Dec 31, 2018		DOLLARS PER SHARE	Mar 31, 2020		Jun 30, 2020		Sep 30, 2020		Dec 31, 2020		Dec 31, 2020
Cash Dividends Paid to Shareholders (per share)	$	0.24	$	0.24	$	0.24	$	0.24	$	0.96	Cash Dividends Paid to Shareholders (per share)	$	0.30	$	0.30	$	0.30	$	0.30	$	1.20

Kemper’s insurance subsidiaries are subject to various state insurance laws that may restrict the ability of these insurance subsidiaries to pay dividends without prior regulatory approval. See MD&A, “Liquidity and Capital Resources” and Note 10~~, “Shareholders’~~14, “Shareholders’ Equity,,” to the Consolidated Financial Statements for information on Kemper’s ability and intent to pay dividends.

Issuer Purchases of Equity Securities

On ~~August~~May 6, ~~2014,~~2020, Kemper’s Board of Directors authorized the repurchase of up to ~~$300.0~~an additional $200.0 million of ~~Kemper’s~~Kemper common ~~stock.~~stock, in addition to the $133.0 million remaining under the August 6, 2014 authorization, bringing the remaining share repurchase authorization to approximately $333.3 million as of December 31, 2020. As of December 31, ~~2019,~~2021, the remaining share repurchase authorization was ~~$243.7~~$171.6 million under the repurchase program. ~~The Company did not~~

During the years ended 2021 and 2020, Kemper repurchased and retired approximately 2,085,000 and 1,617,000 shares, respectively, of its common stock under its share repurchase ~~any shares during~~authorization for an aggregate cost of $161.7 million and $110.4 million and an average cost per share of $77.58 and $68.29, respectively.

These purchases were made in the ~~year ended December 31, 2019.~~open market in accordance with applicable federal securities laws, including Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934.

2327

Kemper Common Stock Performance Graph

The following graph assumes $100 invested on December 31, ~~2014~~2016 in (i) Kemper common stock, (ii) the S&P MidCap 400 Index and (iii) the S&P Supercomposite Insurance Index, in each case with dividends reinvested. Kemper is a constituent of each of these two indices.

The comparisons in the graph below are based on historical data and are not intended to forecast the possible future performance of Kemper common stock.


Company / Index	2016		2017		2018		2019		2020		2021
Kemper Corporation	$	100.00	$	158.73	$	155.07	$	183.44	$	184.98	$	144.09
S&P MidCap 400 Index	100.00		116.24		103.36		130.44		148.26		184.97
S&P Supercomposite Insurance Index	100.00		115.98		104.77		134.67		132.92		172.62

Company / Index 2014 2015 2016 2017 2018 2019
Kemper Corporation $ 100.00
$ 105.82
$ 129.75
$ 205.95
$ 201.20
$ 238.01
S&P MidCap 400 Index 100.00
97.82
118.11
137.30
122.08
154.07
S&P Supercomposite Insurance Index 100.00
103.64
123.20
142.89
129.08
165.91

Item 6. Selected Financial Data.

~~Selected financial information as of and for the years ended December 31,~~ ~~2019~~, ~~2018~~, ~~2017~~, ~~2016~~ ~~and~~ ~~2015~~ is presented below. See Note 2, “Summary of Accounting Policies and Accounting Changes”, and Note 3, “Acquisition of Business,” to the Consolidated Financial Statements for items which may affect comparability of selected financial information across the periods presented.[Reserved]

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2019 2018 2017 2016 2015
FOR THE YEAR
Earned Premiums $ 4,472.4
$ 3,384.4
$ 2,350.0
$ 2,220.0
$ 2,009.6
Net Investment Income 364.3
340.9
327.2
298.3
302.6
Other Income 35.5
42.2
4.0
3.2
3.7
Loss from Change in Fair value of Equity and Convertible Securities 138.9
(64.3 ) —
—
—
Net Realized Gains on Sales of Investments 41.9
26.4
56.5
33.1
52.1
Net Impairment Losses Recognized in Earnings (13.8 ) (4.5 ) (14.3 ) (32.7 ) (27.2 )
Total Revenues $ 5,039.2
$ 3,725.1
$ 2,723.4
$ 2,521.9
$ 2,340.8
Income from Continuing Operations $ 531.1
$ 188.4
$ 119.9
$ 12.7
$ 80.2
Income from Discontinued Operations —
1.7
1.0
4.1
5.5
Net Income $ 531.1
$ 190.1
$ 120.9
$ 16.8
$ 85.7
Per Unrestricted Share:
Income from Continuing Operations $ 8.04
$ 3.22
$ 2.32
$ 0.25
$ 1.55
Income from Discontinued Operations —
0.03
0.02
0.08
0.10
Net Income $ 8.04
$ 3.25
$ 2.34
$ 0.33
$ 1.65
Per Unrestricted Share Assuming Dilution:
Income from Continuing Operations $ 7.96
$ 3.19
$ 2.31
$ 0.25
$ 1.55
Income from Discontinued Operations —
0.03
0.02
0.08
0.10
Net Income $ 7.96
$ 3.22
$ 2.33
$ 0.33
$ 1.65
Dividends Paid to Shareholders Per Share $ 1.03
$ 0.96
$ 0.96
$ 0.96
$ 0.96
AT YEAR END
Total Assets $ 12,989.1
$ 11,544.9
$ 8,376.2
$ 8,210.5
$ 8,036.1
Insurance Reserves $ 5,471.8
$ 5,366.8
$ 4,470.8
$ 4,339.9
$ 4,137.7
Unearned Premiums 1,545.5
1,424.3
653.9
618.7
613.1
Policyholder Contract Liabilities 309.8
76.8
67.0
66.8
66.1
Long-term Debt, Current and Non-current 778.4
909.0
592.3
751.6
750.6
All Other Liabilities 911.3
717.9
476.6
458.3
476.2
Total Liabilities 9,016.8
8,494.8
6,260.6
6,235.3
6,043.7
Shareholders’ Equity 3,972.3
3,050.1
2,115.6
1,975.2
1,992.4
Total Liabilities and Shareholders’ Equity $ 12,989.1
$ 11,544.9
$ 8,376.2
$ 8,210.5
$ 8,036.1
Book Value Per Share $ 59.59
$ 47.10
$ 41.11
$ 38.52
$ 38.82

MDA Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Index to

Management’s Discussion and Analysis of

Financial Condition and Results of Operations




Summary of Results	2731
Catastrophes		3032
Loss and LAE Reserve Development		3134
Non-GAAP Financial Measures		3134
Specialty Property & Casualty Insurance		3336
Preferred Property & Casualty Insurance		3840
Life & Health Insurance		4445
Investment Results		4849
Investment Quality and Concentrations		5152
Investments in Limited Liability Companies and Limited Partnerships		5455
Insurance, ~~Expenses and~~ Interest and Other Expenses		5556
Income Taxes		5556
Liquidity and Capital Resources		5657
~~Off-Balance Sheet Arrangements~~
Contractual Obligations		5960
~~Contractual Obligations~~Critical Accounting Estimates		60
~~Critical Accounting Estimates~~		60
Recently Issued Accounting Pronouncements	6665

2630

Kemper Corporation and Subsidiaries

Management’s Discussion and Analysis of Financial Condition and Results of Operations

SUMMARY OF RESULTS

Net ~~Income~~Loss was ~~$531.1~~$120.5 million (~~$8.04~~ ($(1.87) per unrestricted common share) for the year ended December 31, ~~2019~~,2021, compared to ~~$190.1~~Net Income $409.9 million (~~$3.25~~ ($6.24 per unrestricted common share) for the year ended December 31, ~~2018. Income~~2020.

Beginning in March 2020, the global pandemic associated with COVID-19 and related economic conditions began to impact the Company’s results of operations. The numbers referenced in the following paragraphs are estimates. The actual impacts could ultimately differ from ~~Continuing Operations~~the stated estimates, although the Company believes any difference would likely not be material.

For the year ended December 31, 2021, the Company estimates that its net results were negatively impacted by $485 million related to the effects of the COVID-19 pandemic and related economic conditions. The impact to net results was ~~$531.1 million~~ (~~$8.04~~ ~~per unrestricted common share)~~primarily related to underwriting losses in ~~2019, compared~~the P&C business attributable to rising loss costs fueled by higher inflation, as well as pandemic-related auto industry shortages of supplies such as chips, high demand for used cars, and higher labor costs. Additionally, the Life & Health insurance segment continued to experience excess pandemic-related mortality.

~~$188.4~~

For the year ended December 31, 2020, the Company estimated an improvement to net income of $70 million (~~$3.22~~ ~~per unrestricted common share)~~ related to the effects of the COVID-19 pandemic and related economic conditions. The increase to net income was primarily attributed to improved underwriting results driven by lower frequency in the auto business of the P&C segments as a significant reduction in miles driven occurred, partially offset by premium credits to policyholders in the P&C segments and excess mortality in the Life & Health Insurance segment.

~~2018~~.

For further discussion regarding the potential impacts of COVID-19 and related economic conditions on the Company, see “Caution Regarding Forward-Looking Statements” beginning on page 1 and Item 1A, Risk Factors, of Part 1 of this Annual Report on Form 10-K.

A reconciliation of Net Income (Loss) to Adjusted Consolidated Net Operating Income (Loss) (a non-GAAP financial measure) for the years ended December 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~2019 is presented below.


DOLLARS IN MILLIONS	2019			2018			Increase (Decrease) in Income from 2018 to 2019			2017			Increase (Decrease) in Income from 2017 to 2018			DOLLARS IN MILLIONS	2021		2020		Increase (Decrease) in Income from 2020 to 2021		2019		Increase (Decrease) in Income from 2019 to 2020
Net Income	$	531.1		190.1			341.0			120.9			69.2
Income from Discontinued Operations	—			1.7			(1.7		)	1.0			0.7
Income from Continuing Operations	531.1			188.4			342.7			119.9			68.5
Net Income (Loss)																Net Income (Loss)	$	(120.5)	$	409.9	$	(530.4)	$	531.1	$	(121.2)
Less:																Less:
Income from Change in Fair Value of Equity and Convertible Securities	109.7			(50.8		)	160.5			—			(50.8		)	Income from Change in Fair Value of Equity and Convertible Securities	90.5		57.0		33.5		109.7		(52.7)
Net Realized Gains on Sales of Investments	33.1			20.9			12.2			36.7			(15.8		)	Net Realized Gains on Sales of Investments	51.2		30.1		21.1		33.1		(3.0)
Net Impairment Losses Recognized in Earnings	(10.9		)	(3.6		)	(7.3		)	(9.3		)	5.7			Net Impairment Losses Recognized in Earnings	(8.7)		(15.4)		6.7		(10.9)		(4.5)
Acquisition Related Transaction, Integration and Other Costs	(14.5		)	(36.5		)	22.0			—			(36.5		)	Acquisition Related Transaction, Integration and Other Costs	(34.7)		(50.0)		15.3		(14.5)		(35.5)
Loss from Early Extinguishment of Debt	(4.6		)	—			(4.6		)	—			—
Adjusted Consolidated Net Operating Income	418.3			258.4			159.9			92.5			165.9
Debt Extinguishment, Pension and Other Charges																Debt Extinguishment, Pension and Other Charges	—		(50.6)		50.6		(4.6)		(46.0)
Adjusted Consolidated Net Operating Income (Loss)																Adjusted Consolidated Net Operating Income (Loss)	$	(218.8)	$	438.8	$	(657.6)	$	418.3	$	20.5

Components of Adjusted Consolidated Net Operating Income:
Segment Net Operating Income:
Components of Adjusted Consolidated Net Operating Income (Loss):																Components of Adjusted Consolidated Net Operating Income (Loss):
Segment Net Operating Income (Loss):																Segment Net Operating Income (Loss):
Specialty Property & Casualty Insurance	$	283.1		$	115.8		167.3			$	56.3		59.5			Specialty Property & Casualty Insurance	$	(196.1)	$	337.9	$	(534.0)	$	283.1	$	54.8
Preferred Property & Casualty Insurance	41.9			25.7			$	16.2		(45.4		)	$	71.1		Preferred Property & Casualty Insurance	(12.5)		3.5		(16.0)		41.9		(38.4)
Life & Health Insurance	98.7			91.5			7.2			91.9			(0.4		)	Life & Health Insurance	28.2		60.0		(31.8)		98.7		(38.7)
Segment Net Operating Income	423.7			233.0			190.7			102.8			130.2
Segment Net Operating Income (Loss)																Segment Net Operating Income (Loss)	(180.4)		401.4		(581.8)		423.7		(22.3)
Corporate and Other Net Operating Income (Loss) From:																Corporate and Other Net Operating Income (Loss) From:
Effects of Tax Law Changes	—			26.4			(26.4		)	7.4			19.0

Partial Satisfaction of Judgment	15.9			28.2			(12.3		)	—			28.2			Partial Satisfaction of Judgment	—		70.6		(70.6)		15.9		54.7
Other	(21.3		)	(29.2		)	7.9			(17.7		)	(11.5		)	Other	(38.4)		(33.2)		(5.2)		(21.3)		(11.9)
Corporate and Other Net Operating Income (Loss)	(5.4		)	25.4			(30.8		)	(10.3		)	35.7			Corporate and Other Net Operating Income (Loss)	(38.4)		37.4		(75.8)		(5.4)		42.8
Adjusted Consolidated Net Operating Income	$	418.3		$	258.4		$	159.9		92.5			$	165.9
Adjusted Consolidated Net Operating Income (Loss)																Adjusted Consolidated Net Operating Income (Loss)	$	(218.8)	$	438.8	$	(657.6)	418.3		$	20.5

~~Net Income~~

~~2019 Compared with 2018~~

The Company’s net income increased by $341.0 million in 2019, compared to 2018, due primarily to higher Adjusted Consolidated Net Operating Income, higher investment results and lower acquisition related transaction, integration and other costs. Adjusted Consolidated Net Operating Income increased by $159.9 million in 2019, compared to 2018, due primarily to higher Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segment net operating income, partially offset by a reduction in Corporate and Other Net Operating Income. Specialty Property & Casualty Insurance segment net operating income increased by $167.3 million due primarily to the inclusion of Infinity for twelve months of 2019 versus six months in 2018 and favorable underlying loss and prior year development. See MD&A, “Specialty Property & Casualty Insurance,” beginning on page 33 for additional discussion of the segment’s results. In the Preferred Property & Casualty Insurance segment, segment net operating results increased by $16.2 million due primarily to lower incurred catastrophe losses and LAE (excluding loss and LAE reserve development) and favorable prior year loss and LAE development (including a one-

2731

Kemper Corporation and Subsidiaries

Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued)

SUMMARY OF RESULTS (Continued)

~~time recovery on prior year catastrophes),~~Net Income (Loss)

2021 Compared with 2020

Net Income decreased by $530.4 million in 2021, compared to 2020, due primarily to lower Adjusted Consolidated Net Operating Income, partially offset by income from change in fair value of equity and convertible securities. Adjusted Consolidated Net Operating Income (Loss) decreased by $657.6 million in 2021, compared to 2020, due primarily to lower ~~net investment income~~Specialty Property & Casualty Segment Insurance Net Operating Income, Corporate and ~~higher underlying losses and LAE as a percentage of earned premiums.~~

~~In the~~Other Net Operating Income, Life & Health Insurance ~~segment, segment net operating income increased by $7.2 million dueprimarily from a decrease in policyholders’ benefits~~Segment Net Operating Income, and ~~release in accrued reserves.~~ Preferred Property & Casualty Insurance Segment Net Operating Income.

See MD&A, “Specialty Property & Casualty Insurance”, “Preferred Property & Casualty Insurance” and “Life & Health Insurance,” ~~beginning on page 44~~ for ~~additional~~ discussion of ~~the~~each respective segment’s results. Corporate and Other ~~net operating income~~Net Operating Income (Loss) decreased due primarily to a ~~tax benefit as a result~~gain recognized in 2020 for the satisfaction of the finalization of certain effects of Public Law 115-97, more commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), on deferred income taxes recognized in the third quarter of 2018 as well as lower gain recognized for the partial satisfactionremaining balance of a final judgment received by the Company in connection with an arbitration award against Computer Sciences Corporation ~~(“CSC”~~(the “CSC Judgment”).

The Company’s investment results were ~~favorably impacted~~favorable in ~~2019, compared~~2021, compared to ~~2018,~~2020, primarily driven by a ~~$160.5~~$33.5 million after-tax increase from the change in fair value of the equity and convertible securities, ~~and a $12.2~~$21.1 million after-tax increase from net realized gains on sales of investments, ~~partially offset by $7.3~~and $6.7 million after-tax of ~~higher impairment losses recognized in earnings.~~decreased impairment losses. See MD&A, “Investment Results,” ~~beginning on page 48 and~~ MD&A, “Income Taxes,” ~~beginning on page 55~~ and Note ~~23,~~24, “Contingencies.” to the Consolidated Financial Statements for additional discussion.

~~2018~~Revenues

2021 Compared with ~~2017~~

The Company’s net income increased by $69.2 million in 2018, compared to 2017. In the Specialty Property & Casualty Insurance segment, segment net operating results increased by $59.5 million due primarily to the impact of lower underlying losses and LAE as a percentage of earned premiums on a higher level of earned premiums, higher net investment income and lower levels of adverse loss and LAE reserve development, partially offset by the impact of higher insurance expenses as a percentage of earned premiums on a higher level of earned premiums and driven by the amortization of purchase accounting adjustments associated with Kemper’s acquisition of Infinity. See MD&A, “Specialty Property & Casualty Insurance,” beginning on page 33 for additional discussion of the segment’s results. In the Preferred Property & Casualty Insurance segment, segment net operating results increased by $71.1 million due primarily to lower catastrophe losses and LAE (excluding reserve development) and the favorable impact of loss and LAE reserve development, partially offset by higher insurance expenses as a percentage of earned premiums. See MD&A, “Preferred Property & Casualty Insurance,” beginning on page 38 for additional discussion of the segment’s results. In the Life & Health Insurance segment, segment net operating income decreased by $0.4 million due primarily to higher policyholders’ benefits and incurred losses and LAE and lower net investment income, almost entirely offset by lower income tax expense due to the lower corporate income tax rate in 2018. See MD&A, “Life & Health Insurance,” beginning on page 44 for additional discussion of the segment’s results. Additionally, the Company’s results were impacted in 2018, compared to 2017, by transaction and integration costs associated with Kemper’s acquisition of Infinity and a loss from the change in the fair value of the Company’s equity security portfolio, for which such changes are recorded through the Consolidated Statement of Income in 2018, compared to Accumulated Other Comprehensive Income, in 2017, partially offset by the positive effects of tax law changes and the partial satisfaction of a legal judgment. See MD&A, “Investment Results,” beginning on page 48 and MD&A, “Income Taxes,” beginning on page 55 and Note 23, “Contingencies.” to the Consolidated Financial Statements for additional information.

~~Revenues~~

~~2019 Compared with 2018~~2020

Earned Premiums were ~~$4,472.4~~$5,253.7 million in ~~2019,~~2021, compared to ~~$3,384.4~~$4,672.2 million in ~~2018,~~2020, an increase of ~~$1,088.0~~$581.5 million. Earned Premiums ~~increased by $1,051.0 million, $19.6 million and $17.4 million~~ in the Specialty Property & Casualty Insurance segment increased by $613.2 million for the year ended December 31, 2021. Earned Premiums in the Preferred Property & Casualty Insurance ~~Segment and Life & Health Insurance~~ segment ~~respectively.~~decreased by $36.5 million for the year ended December 31, 2021. See MD&A, “Specialty Property & Casualty ~~Insurance,” beginning on page 33, MD&A,~~Insurance” and “Preferred Property & Casualty ~~Insurance,” beginning on page 38 and MD&A, “Life & Health Insurance,” beginning on page 44~~Insurance” for discussion of the changes in each segment’s earned premiums.

Net Investment Income increased by ~~$23.4~~$79.1 million in ~~2019~~2021 due primarily to an increase in return from Alternative Investments, higher levels of investments ~~largely due to the inclusion~~in fixed income securities, and higher levels of ~~the Infinity portfolio beginning in July 2018,~~investments and rate on Company-Owned Life Insurance, partially offset by a lower ~~rate~~yields on fixed income securities.

Loss from the change in value of ~~return from~~ Alternative ~~Investments. Net Investment Income from Alternative~~Energy Partnership Investments which consist of Equity Method Limited Liability Investments, and other limited liability investments included in Equity Securities at Fair Value or Equity Securities at Modified Cost, decreased by $18.4 million. Alternative investment income from Equity Method Limited Liability Investments decreased by $10.0 million. Alternative investment income from limited liability investments included in either Equity Securities at Fair Value or Equity Securities at Modified Cost decreased by $8.4was $61.2 million for the year ended December 31, ~~2019, compared~~2021. Tax benefits related to the ~~same period~~Alternative Energy Partnership Investments were $79.0 million, resulting in

~~Kemper Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis~~ net income attributable to Alternative Energy Partnership Investments of ~~Financial Condition and Results of Operations—(Continued)~~

~~SUMMARY OF RESULTS (Continued)~~

~~2018. See MD&A, “Investment Results,” under the sub-caption “Net Investment Income” beginning on page 48 for additional discussion.~~

~~Other Income decreased by $6.7~~$17.8 million for the year ended December 31, ~~2019,~~2021.

Other Income decreased by $89.8 million for the year ended December 31, 2021, compared to the same period in ~~2018.~~2020. Other Income for the year ended December 31, ~~2019 includes~~2020 included a gain of ~~$20.1~~$89.4 million ~~compared to a gain of $35.7 million for the same period in 2018~~ related to the partial satisfaction of a final judgment against CSC. The company cannot make any assurance as to the final judgment that will actually be collected or when that it may be received. The unpaid balance of the final judgment is treated as a gain contingency for accounting purposes and, accordingly, is not recognized in these Consolidated Financial Statements. See Note 23, “Contingencies.” to the Consolidated Financial Statements for additional discussion. In July 2019, the Company entered into a marketing agreement with Hagerty to transfer the Company’s Classic Collectors book of business to Hagerty. Other Income for the year ended December 31, 2019 includes a gain of $3.8 million related to this agreement. Other Income for the year ended December 31, 2019 includes income of $7.8 million, compared to income of $3.6 million for the same period in 2018 from the Company’s corporate-owned life insurance (“COLI”) policies. Other Income from COLI increased due in part to the purchase of additional life insurance in the second and fourth quarters of 2019.Computer Sciences Corporation.

Net Realized Gains on Sales of Investments were ~~$41.9~~$64.8 million in ~~2019,~~2021, compared to ~~$26.4~~$38.1 million in ~~2018.~~ 2020. Impairment Losses were $11.0 million in 2021, compared to $19.5 million for the same period in 2020.

See MD&A, “Investment Results,” under the ~~sub-caption~~sub-captions “Net Realized Gains on Sales of Investments” ~~beginning on page 50 for additional discussion. Net Impairment Losses Recognized in Earnings in 2019~~ and ~~2018 were $13.8 million and $4.5 million, respectively. See MD&A, “Investment Results,” under the sub-caption “Net Impairment Losses Recognized in Earnings” beginning on page 51~~“Impairment Losses” for additional discussion. The Company cannot predict ~~when~~if or ifwhen similar investment gains or losses may occur in the future.

~~2018 Compared with 2017~~

~~Earned Premiums were $3,384.4 million in~~ ~~2018~~, compared to $2,350.0 million in 2017, an increase of $1,034.4 million driven primarily by growth in Kemper’s legacy specialty personal automobile insurance and the acquisition of Infinity. Earned Premiums increased by $1,021.7 million, $0.4 million and $12.3 million in the Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance, and Life & Health Insurance segments, respectively. See MD&A “Specialty Property & Casualty Insurance,” beginning on page 33, MD&A, “Preferred Property & Casualty Insurance,” beginning on page 38, MD&A “Specialty Property & Casualty Insurance,” beginning on page 33, and MD&A, “Life & Health Insurance,” beginning on page 44 for discussion of the changes in each segment’s earned premiums.

Net Investment Income increased by $13.7 million in 2018 due primarily to a higher level of investments in fixed income securities and short-term securities, partially offset by a lower rate of return from Alternative Investments, lower yields on fixed income securities and the impact of presenting Fair Value Option Investments within Loss from Change in Fair Value of Equity and Convertible Securities (outside of Net Investment Income) as of January 1, 2018. Net Investment Income from Alternative Investments, which consist of Equity Method Limited Liability Investments, Fair Value Option Investments and other limited liability investments included in Equity Securities at Fair Value or Equity Securities at Modified Costs, decreased by $17.3 million. Alternative investment income from Equity Method Limited Liability Investments, decreased by $13.8 million. Alternative investment income from limited liability investments included in either Equity Securities at Fair Value or Equity Securities at Modified Costs, decreased by $2.2 million for the year ended December 31, 2018, compared to the same period in 2017. No Net Investment Income was recorded on Fair Value Option Investment for the year ended December 31, 2018, compared to $1.3 million, for the same period in 2017. See MD&A, “Investment Results,” under the sub-caption “Net Investment Income” beginning on page 48 for additional discussion.

Other Income increased by $38.2 million for the year ended December 31, 2018, compared to the same period in 2017, due primarily to the the partial satisfaction of a final judgment against CSC. See Note 23, “Contingencies.” to the Consolidated Financial Statements for additional discussion. The Company cannot make any assurance as to the additional amounts of the final judgment that will actually be collected or when they may be received. The unpaid balance of the final judgment is treated as a gain contingency for accounting purposes and accordingly, is not recognized in the Consolidated Financial Statements.

~~The Company adopted Accounting Standards Update (“ASU”) 2016-01,~~ ~~Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~,in ~~2018. As a result of adoption, beginning in~~ ~~2018~~, changes in the fair value of the Company’s investments in equity securities with readily determinable fair values are recognized in the Consolidated Statements of Income. Loss from Change in Fair Value of Equity and Convertible Securities recognized in the Consolidated Statements of Income was $64.3 million in ~~2018. Prior to~~ ~~2018, changes in the fair value of~~

~~Kemper Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued)~~

~~SUMMARY OF RESULTS (Continued)~~

equity securities were recognized in other comprehensive income. See MD&A, “Investment Results,” under the sub-caption “Loss from Change in Fair Value of Equity and Convertible Securities” beginning on page 49 for additional discussion.

~~Net Realized Gains on Sales of Investments were $26.4 million in~~ ~~2018~~, compared to $56.5 million in 2017. See MD&A, “Investment Results,” under the sub-caption “Net Realized Gains on Sales of Investments” beginning on page 50 for additional discussion. Net Impairment Losses Recognized in Earnings in ~~2018~~ and 2017 were $4.5 million and $14.3 million, respectively. See MD&A, “Investment Results,” under the sub-caption “Net Impairment Losses Recognized in Earnings” beginning on page 51 for additional discussion. The Company cannot predict when or if similar investment gains or losses may occur in the future.

CATASTROPHES

Kemper Corporation and Subsidiaries

Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued)

CATASTROPHES (Continued)

insurance claims. The Company has adopted the industry-wide catastrophe classifications of storms and other events promulgated by ISO to track and report losses related to catastrophes. ISO classifies a disaster as a catastrophe when the event causes ~~$25.0~~$25.0 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry.

The number of ISO-classified catastrophic events and catastrophe losses and LAE, net of reinsurance recoveries, (excluding loss and LAE reserve development) by range of loss and business segment for the years ended December 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~2019 are presented below.


	Year Ended										Year Ended
	Dec 31, 2019			Dec 31, 2018			Dec 31, 2017				Dec 31, 2021			Dec 31, 2020			Dec 31, 2019
DOLLARS IN MILLIONS	Number of Events	Losses and LAE		Number of Events	Losses and LAE		Number of Events	Losses and LAE		DOLLARS IN MILLIONS	Number of Events	Losses and LAE		Number of Events	Losses and LAE		Number of Events	Losses and LAE
Range of Losses and LAE Per Event:										Range of Losses and LAE Per Event:
Below $5	56	$	42.4	45	$	34.7	39	$	61.3	Below $5	65	$	56.1	60	$	51.2	56	$	42.4
$5 - $10	3	20.8		4	27.6		1	5.3		$5 - $10	2	16.5		5	40.2		3	20.8
$10 - $15	1	14.0		—	—		2	21.4		$10 - $15	—	—		—	—		1	14.0
$15 - $20	—	—		—	—		—	—		$15 - $20	2	35.2		1	15.3		—	—
$20 - $25	—	—		—	—		1	24.4		$20 - $25	—	—		—	—		—	—
Greater Than $25	—	—		1	33.7		2	72.5		Greater Than $25	—	—		—	—		—	—
Total	60	$	77.2	50	$	96.0	45	$	184.9	Total	69	$	107.8	66	$	106.7	60	$	77.2

Specialty Property & Casualty Insurance		11.1			4.7			5.5		Specialty Property & Casualty Insurance		15.7			12.3			11.1
Preferred Property & Casualty Insurance		63.0			87.3			173.5		Preferred Property & Casualty Insurance		79.1			82.0			63.0
Life & Health Insurance		3.1			4.0			5.9		Life & Health Insurance		13.0			12.4			3.1
Total Catastrophe Losses and LAE		$	77.2		$	96.0		$	184.9	Total Catastrophe Losses and LAE		$	107.8		$	106.7		$	77.2

Catastrophe Reinsurance

The Company primarily manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and a catastrophe reinsurance program for the Company’s Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segments. Coverage under the catastrophe reinsurance program is provided in various contracts and layers. The Company’s Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segments also purchase reinsurance from the FHCF for hurricane losses in Florida at retentions lower than its catastrophe reinsurance program. The Life & Health Insurance segment also purchases

~~Kemper Corporation and Subsidiaries~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued)~~

reinsurance from the FHCF for hurricane losses in Florida and is party to the Property & Casualty catastrophe reinsurance program for its Kemper Home Service companies.

~~In 2019,~~ ~~2018~~ ~~and 2017 the~~The Company had ~~catastrophe reinsurance~~no material recoveries ~~of $15.5 million, $31.8 million and $11.9 million~~ under its catastrophe reinsurance ~~programs, respectively. Catastrophe recoveries under~~treaties for the ~~FHCF were not material in 2019,~~ ~~2018, or 2017. In 2019,~~ ~~2018~~years ended December 31, 2021 and 2017 the Company paid $0.0 million, $0.4 million and $0.8 million in reinstatement premium, respectively. In 2019, the Company received a $0.9 million refund of reinstatement premiums related to the 2017 and 2018 wildfires.

2020. See the “Reinsurance” subsection of the “Property and Casualty Insurance Business” and “Life and Health Insurance Business” sections of Item 1(c), “Description of Business,” and Note 20~~, “Catastrophe~~21, “Catastrophe Reinsurance,,” to the Consolidated Financial Statements for additional information on the Company’s reinsurance programs.

Kemper Corporation and Subsidiaries

Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued)

LOSS AND LAE RESERVE DEVELOPMENT

Increases (decreases) in the Company’s property and casualty loss and LAE reserves for the years ended December 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~2019 to recognize adverse (favorable) loss and LAE reserve development from prior accident years in continuing operations, hereinafter also referred to as “reserve development” in the discussion of segment results, are presented below.


DOLLARS IN MILLIONS										DOLLARS IN MILLIONS	2021		2020		2019

DOLLARS IN MILLIONS	2019			2018			2017

Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years:										Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years:
Non-catastrophe	(54.0		)	1.0			23.4			Non-catastrophe	$	112.1	$	36.2	$	(54.0)
Catastrophe	(17.1		)	(8.4		)	(4.5		)	Catastrophe	(5.4)		0.2		(17.1)
Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years	$	(71.1	)	$	(7.4	)	$	18.9		Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years	$	106.7	$	36.4	$	(71.1)

KEMPER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended December 31,
DOLLARS IN MILLIONS 2019 2018 2017
Operating Activities:
Net Income $ 531.1
$ 190.1
$ 120.9
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Increase in Deferred Policy Acquisition Costs (66.9 ) (104.6 ) (33.3 )
Amortization of Intangible Assets Acquired 29.7
156.3
5.1
Equity in Earnings of Equity Method Limited Liability Investments (1.0 ) (11.0 ) (24.8 )
Contribution to Defined Benefit Pension Plan (55.3 ) (5.1 ) —
Distribution of Accumulated Earnings of Equity Method Limited Liability Investments 11.9
13.9
19.6
Decrease (Increase) in Value of Fair Value Option Investments reported in Investment Income —
—
(1.3 )
Decrease (Increase) in Value of Equity and Convertible Securities at Fair Value (138.9 ) 64.3
—
Amortization of Investment Securities and Depreciation of Investment Real Estate 0.5
7.7
16.7
Net Realized Gains on Sales of Investments (41.9 ) (26.4 ) (56.5 )
Net Impairment Losses Recognized in Earnings 13.8
4.5
14.3
Loss from Early Extinguishment of Debt 5.8
—
—
Depreciation and Amortization of Property, Equipment and Software 32.8
15.6
13.1
Increase in Receivables (84.3 ) (80.7 ) (29.2 )
Increase in Insurance Reserves 102.3
183.2
131.1
Increase in Unearned Premiums 121.2
54.7
35.2
Change in Income Taxes 58.8
13.1
28.9
Change in Accrued Expenses and Other Liabilities (16.0 ) 49.9
2.9
Other, Net 30.7
13.7
(2.1 )
Net Cash Provided by Operating Activities 534.3
539.2
240.6
Investing Activities:
Sales, Paydowns and Maturities of Fixed Maturities 1,229.1
2,643.3
528.2
Purchases of Fixed Maturities (1,284.9 ) (2,413.2 ) (710.1 )
Sales of Equity and Convertible Securities 217.3
351.9
342.0
Purchases of Equity and Convertible Securities (307.0 ) (478.5 ) (342.7 )
Acquisition and Improvements of Investment Real Estate (1.4 ) (1.5 ) (1.5 )
Sales of Investment Real Estate —
—
26.7
Sale of and Return of Investment of Equity Method Limited Liability Investments 29.5
14.1
48.1
Acquisitions of Equity Method Limited Liability Investments (73.7 ) (43.1 ) (27.9 )
Sales of Fair Value Option Investments —
—
42.2
Purchases of Fair Value Option Investments —
—
(7.0 )
Decrease (Increase) in Short-term Investments (176.0 ) 52.7
39.4
Acquisition of Business, Net of Cash Acquired —
(560.6 ) —
Acquisitions of Mortgage Loans (44.5 ) —
—
Paydowns of Mortgage Loans 17.2
—
—
Increase in Other Investments (0.1 ) (2.0 ) (4.5 )
Purchases of Corporate-owned Life Insurance (150.0 ) —
—
Acquisition of Software and Long-lived Assets (84.0 ) (65.3 ) (35.5 )
Other, Net (4.9 ) 4.6
(2.8 )
Net Cash Used by Investing Activities (633.4 ) (497.6 ) (105.4 )
Financing Activities:
Net Proceeds from Issuance of Long-term Debt 49.9
249.4
200.2
Repayment of Long-term Debt (185.0 ) (215.0 ) (360.0 )
Proceeds from Policyholder Contract Liabilities 615.8
11.4
3.0
Repayment of Policyholder Contract Liabilities (383.6 ) (2.5 ) (2.9 )
Proceeds from Issuance of Common Stock, Net of Transaction Costs 127.5
—
—
Dividends and Dividend Equivalents Paid (67.8 ) (56.4 ) (49.5 )
Proceeds from Shares Issued under Employee Stock Purchase Plan 1.6
—
—
Cash Exercise of Stock Options 2.4
0.9
4.0
Net Cash Provided (Used) by Financing Activities 160.8
(12.2 ) (205.2 )
Increase (Decrease) in Cash 61.7
29.4
(70.0 )
Cash, Beginning of Year 75.1
45.7
115.7
Cash, End of Year $ 136.8
$ 75.1
$ 45.7


	For The Years Ended December 31,
DOLLARS IN MILLIONS	2021		2020		2019
Cash Flows from Operating Activities:
Net Income (Loss)	$	(120.5)	$	409.9	$	531.1
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Net Realized Investment (Gains) Losses	(64.8)		(38.1)		(41.9)
Impairment Losses	11.0		19.5		13.8
Depreciation and Amortization of Property, Equipment and Software	46.3		36.2		32.8
Amortization of Intangible Assets Acquired	53.5		18.8		29.7
Settlement Costs Related to Defined Benefit Pension Plan	—		64.1		—
Contribution to Defined Benefit Pension Plan	—		—		(55.3)
Loss from Early Extinguishment of Debt	—		—		5.8
Change in Accumulated Undistributed Earnings of Equity Method Limited Liability Investments	(33.5)		(4.0)		10.9
Loss from Change in Value of Alternative Energy Partnership Investments	61.2		—		—
(Increase) Decrease in Value of Equity and Convertible Securities	(114.6)		(72.1)		(138.9)
Changes in:
Receivables from Policyholders	(75.2)		(77.4)		(110.1)
Reinsurance Recoverables	20.6		16.8		35.6
Deferred Policy Acquisition Costs	(88.3)		(52.3)		(66.9)
Insurance Reserves	623.1		38.3		102.3
Unearned Premiums	105.9		69.6		121.2
Income Taxes	(163.1)		46.5		58.8
Other Assets and Liabilities	89.1		(27.8)		5.4
Net Cash Provided by Operating Activities	350.7		448.0		534.3
Cash Flows from Investing Activities:
Proceeds from the Sales, Calls and Maturities of Fixed Maturities	1,388.9		972.4		1,229.1
Proceeds from the Sales or Paydowns of Investments:
Equity Securities	316.6		434.4		217.3
Real Estate Investments	8.0		5.4		—
Mortgage Loans	70.8		25.5		17.2
Other Investments	47.5		45.2		29.5
Purchases of Investments:
Fixed Maturities	(1,825.4)		(1,293.3)		(1,284.9)
Equity Securities	(124.3)		(319.1)		(307.0)
Real Estate Investments	(5.1)		(0.5)		(1.4)
Corporate-Owned Life Insurance	(100.0)		(100.0)		(150.0)
Mortgage Loans	(119.9)		(52.7)		(44.5)
Other Investments	(104.9)		(43.5)		(73.8)
Net Sales (Purchases) of Short-term Investments	687.2		(390.8)		(176.0)
Acquisition of Business, Net of Cash Acquired	(316.6)		—		—
Acquisition of Software and Long-lived Assets	(57.8)		(53.4)		(84.0)
Other	16.8		13.4		(4.9)
Net Cash Used by Investing Activities	(118.2)		(757.0)		(633.4)
Cash Flows from Financing Activities:
Repayment of Long-term Debt	(50.0)		—		(185.0)
Net Proceeds from Issuance of Long-term Debt	—		395.6		49.9
Proceeds from Policyholder Contract Obligations	386.8		467.0		615.8
Repayment of Policyholder Contract Obligations	(394.0)		(304.8)		(383.6)
Proceeds from Issuance of Common Stock, Net of Transaction Costs	—		—		127.5
Proceeds from Shares Issued under Employee Stock Purchase Plan	5.4		4.4		1.6
Common Stock Repurchases	(161.7)		(110.4)		—
Dividends and Dividend Equivalents Paid	(80.6)		(78.9)		(67.8)

Other	3.7		5.4		2.4



Net Cash Provided (Used) by Financing Activities	(290.4)		378.3		160.8
Increase (Decrease) in Cash	(57.9)		69.3		61.7
Cash, Beginning of Year	206.1		136.8		75.1
Cash, End of Year	$	148.2	$	206.1	$	136.8

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

KEMPER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

DOLLARS AND SHARES IN MILLIONS,
EXCEPT PER SHARE AMOUNTS
For the Years Ended December 31, 2019, 2018 and 2017
Number of
Shares

Common
Stock

Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareholders’
Equity
BALANCE, DECEMBER 31, 2016 51.3
$ 5.1
$ 660.3
$ 1,172.8
$ 137.0
$ 1,975.2
Cumulative Effect of Adoption of New Accounting Standard —
—
—
0.5
—
0.5
Net Income —
—
—
120.9
—
120.9
Other Comprehensive Income (Loss) (Note 13) —
—
—
—
57.4
57.4
Cash Dividends and Dividend Equivalents to Shareholders ($0.96 per share) —
—
—
(49.5 ) —
(49.5 )
Equity-based Compensation Cost (Note 11) —
—
9.4
—
—
9.4
Equity-based Awards, Net of Shares Exchanged (Note 11) 0.2
—
3.4
(1.7 ) —
1.7
BALANCE, DECEMBER 31, 2017 As Reported 51.5
$ 5.1
$ 673.1
$ 1,243.0
$ 194.4
$ 2,115.6
Cumulative Effect of Adoption of New Accounting Standards —
—
—
(18.2 ) 18.2
—
BALANCE, JANUARY 1, 2018 As Adjusted 51.5

5.1

673.1

1,224.8

212.6

2,115.6
Net Income —
—
—
190.1
—
190.1
Other Comprehensive Income (Loss) (Note 13) —
—
—
—
(190.8 ) (190.8 )
Cash Dividends and Dividend Equivalents to Shareholders ($0.96 per share) —
—
—
(56.4 ) —
(56.4 )
Issuances of Common Stock (Note 3) 13.1
1.4
977.2
—
—
978.6
Equity-based Compensation Cost (Note 11) —
—
18.6
—
—
18.6
Equity-based Awards, Net of Shares Exchanged (Note 11) 0.1
—
(2.6 ) (3.0 ) —
(5.6 )
BALANCE, DECEMBER 31, 2018 64.7
$ 6.5

$ 1,666.3

$ 1,355.5

$ 21.8
$ 3,050.1
Net Income —
—
—
531.1
—
531.1
Other Comprehensive Income (Loss) (Note 13) —
—
—
—
314.3
314.3
Cash Dividends and Dividend Equivalents to Shareholders ($1.03 per share) —
—
—
(68.4 ) —
(68.4 )
Issuances of Common Stock (Note 10) 1.6
0.2
127.0
—
—
127.2
Shares Issued Under Employee Stock Purchase Plan (Note 10) —
—
1.9
—
—
1.9
Equity-based Compensation Cost (Note 11) —
—
25.3
—
—
25.3
Equity-based Awards, Net of Shares Exchanged (Note 11) 0.4
—
(1.3 ) (7.9 ) —
(9.2 )
BALANCE, DECEMBER 31, 2019 66.7
$ 6.7
$ 1,819.2
$ 1,810.3
$ 336.1
$ 3,972.3


DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS	For the Year Ended December 31, 2021, 2020 and 2019
	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
BALANCE, DECEMBER 31, 2018	64.7	$	6.5	$	1,666.3	$	1,355.5	$	21.8	$	3,050.1
Net Income (Loss)	—	—		—		531.1		—		531.1
Other Comprehensive Income (Loss), Net of Taxes (Note 13)	—	—		—		—		314.3		314.3

Cash Dividends and Dividend Equivalents to Shareholders ($1.03 per share)	—	—		—		(68.4)		—		(68.4)
Issuances of Common Stock (Note 14)	1.6	0.2		127.0		—		—		127.2
Shares Issued Under Employee Stock Purchase Plan (Note 14)	—	—		1.9		—		—		1.9
Equity-based Compensation Cost (Note 17)	—	—		25.3		—		—		25.3
Equity-based Awards, Net of Shares Exchanged (Note 17)	0.4	—		(1.3)		(7.9)		—		(9.2)
BALANCE, DECEMBER 31, 2019	66.7	$	6.7	$	1,819.2	$	1,810.3	$	336.1	$	3,972.3
Net Income (Loss)	—	—		—		409.9		—		409.9
Other Comprehensive Income (Loss), Net of Taxes (Note 13)	—	—		—		—		344.4		344.4

Cash Dividends and Dividend Equivalents to Shareholders ($1.20 per share)	—	—		—		(79.4)		—		(79.4)
Repurchases of Common Stock (Note 14)	(1.6)	(0.2)		(44.2)		(66.0)		—		(110.4)
Shares Issued Under Employee Stock Purchase Plan (Note 14)	—	—		4.4		—		—		4.4
Equity-based Compensation Cost (Note 17)	—	—		24.9		—		—		24.9
Equity-based Awards, Net of Shares Exchanged (Note 17)	0.3	—		0.9		(3.6)		—		(2.7)
BALANCE, DECEMBER 31, 2020	65.4	$	6.5	$	1,805.2	$	2,071.2	$	680.5	$	4,563.4
Net Income (Loss)	—	—		—		(120.5)		—		(120.5)
Other Comprehensive Income (Loss), Net of Taxes (Note 13)	—	—		—		—		(232.4)		(232.4)

Cash Dividends and Dividend Equivalents to Shareholders ($1.24 per share)	—	—		—		(81.0)		—		(81.0)
Repurchases of Common Stock (Note 14)	(2.1)	(0.2)		(57.8)		(103.7)		—		(161.7)
Shares Issued Under Employee Stock Purchase Plan (Note 14)	0.1	—		5.4		—		—		5.4
Equity-based Compensation Cost (Note 17)	—	—		37.0		—		—		37.0
Equity-based Awards, Net of Shares Exchanged (Note 17)	0.3	0.1		0.9		(3.5)		—		(2.5)
BALANCE, DECEMBER 31, 2021	63.7	$	6.4	$	1,790.7	$	1,762.5	$	448.1	$	4,007.7

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

7473

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ESTIMATES

The Consolidated Financial Statements included the accounts of Kemper Corporation (“Kemper”) and its subsidiaries which include property and casualty and life and health subsidiaries (collectively referred to herein as the “Company”). The accompanying financial statements have been prepared ~~on the basis of~~in accordance with accounting principles generally accepted in the United States (“GAAP”) ~~and include the accounts of Kemper Corporation (“Kemper”) and its subsidiaries (individually and collectively referred to herein as the “Company”)~~. All significant intercompany accounts and transactions have been eliminated. ~~Certain~~

Periodically, Kemper may acquire an additional company which then becomes one of the various subsidiaries of Kemper. When an acquisition occurs, Kemper will include the results of the acquired company in the consolidated financial results from the date of its acquisition and forward.

During the first quarter of 2021, the Company elected to begin displaying its investments in Alternative Energy Partnerships in the Consolidated Statements of Income and Consolidated Balance Sheets as Change in Value of Alternative Energy Partnership Investments and Alternative Energy Partnership Investments, respectively. These were previously reported in Equity Method Limited Liability Investments on the Consolidated Balance Sheets. Impacts to prior ~~year amounts for policyholder contract amounts have been reclassified to conform to the current presentation.~~period presentation are not material.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Many of these estimates and assumptions are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ materially from those estimates and assumptions.

The fair values of the Company’s Investments in Fixed Maturities, Investments in Convertible Securities at Fair Value, Investments in Equity Securities at Fair Value and Debt are estimated using a hierarchical framework which prioritizes and ranks market price observability. The carrying amounts reported in the Consolidated Balance Sheets approximate fair value for Cash, Short-term Investments and certain other assets and other liabilities because of their short-term nature. The actual value at which financial instruments could be sold or settled with a willing buyer or seller may differ from estimated fair values depending on a number of factors, including, but not limited to, current and future economic conditions, the quantity sold or settled, the presence of an active market and the availability of a willing buyer or seller.

The Company’s portfolio also includes investments in Alternative Energy Partnerships that are accounted for under the Hypothetical Liquidation at Book Value (“HLBV”) method. Under the HLBV method, the amounts of income and loss attributed to investors reflect changes in the amounts the fund investors would hypothetically receive at each balance sheet date under the liquidation provisions of the contractual agreements of these funds. Attributing income and loss under the HLBV method requires the use of significant assumptions and forecasts to calculate the amounts that fund investors would receive upon a hypothetical liquidation.

The process of estimating and establishing reserves for losses and loss adjustment expenses ("LAE") for property and casualty insurance is inherently uncertain, and the actual ultimate net cost of known and unknown claims may vary materially from the estimated amounts reserved. The reserving process is particularly imprecise for claims involving long-tailed exposures, which may not be discovered or reported until years after the insurance policy period has ended. Management considers a variety of factors, including, but not limited to, past claims experience, current claim trends and relevant legal, economic and social conditions, in estimating reserves. A change in any one or more factors is likely to result in the ultimate net claim costs differing from the estimated reserve. Changes in such estimates may be material and would be recognized in the Consolidated Financial Statements when such estimates change.

The process of determining whether an asset is impaired or recoverable relies on projections of future cash flows, operating results and market conditions. Projections are inherently uncertain, and, accordingly, actual future cash flows may differ materially from projected cash flows. As a result, the Company’s assessment of the impairment of long-lived assets is susceptible to the risk inherent in making such projections.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES

Investments

Investments in Fixed Maturities include bonds, notes and redeemable preferred stocks. Investments in Fixed Maturities are classified as available for sale and reported at fair value. Net Investment Income, including amortization of purchased premiums and accretion of market discounts, on Investments in Fixed Maturities is recognized as interest over the period that it is earned using the effective yield method. Unrealized appreciation or depreciation, net of applicable deferred income taxes, on fixed maturities classified as available for sale is reported in Accumulated Other Comprehensive Income (“AOCI”) included in Shareholders’ Equity.

Investments in Convertible Securities include fixed maturities with equity conversion features. The Company has elected the fair value option method of accounting for investments in Convertible Securities and records Convertible Securities at fair value on the Consolidated Balance Sheets. Changes in fair value of Convertible Securities are recorded in the Consolidated Statements of Income during the period such changes occur.

Equity investments include common stocks, non-redeemable preferred stocks, exchange traded funds, money market mutual funds and limited liability companies and investment partnerships in which the Company’s interests are deemed minor. Equity investments with readily determinable fair values are recorded as Equity Securities at Fair Value on the Consolidated Balance Sheets. ~~Effective January 1, 2018,~~The changes in the fair value of such equity securities are reported in the Consolidated Statements of Income. ~~Prior to January 1, 2018, changes in the fair values of such equity securities were reported in AOCI.~~ Dividend income on investments in common and non-redeemable preferred stocks is recognized on the ex-dividend date. The Company

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)~~

holds certain equity investments without readily determinable fair values at cost, less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer on the Consolidated Balance Sheets as Equity Securities at Modified Cost. Changes in the carrying value of Modified Cost investments due to observable price changes are recorded as Income (Loss) from Change in Fair Value of Equity and Convertible Securities.

Investments in Alternative Energy Partnerships are measured using the “HLBV” method of equity method accounting whereby changes in the estimated amount the Company would receive upon the liquidation and distribution of the equity investment’s net assets, are recorded in Net Investment Income. Tax credits allocated from investments in Alternative Energy Partnerships are recognized using the flow-through method, where credits are recorded as a reduction to tax expense in the period earned. Differences in the basis calculated under tax law and U.S. GAAP are recognized using the income statement approach, where basis differences are recorded to Income Tax Expense immediately, rather than deferred as adjustments to the carrying value of the asset. Certain partnerships for which results are not available on a timely basis are reported on a lag.

Short-term Investments include certificates of deposit and other fixed maturities that mature within one year from the date of purchase, U.S. Treasury bills, money market mutual funds and overnight ~~interest bearing~~interest-bearing accounts. Short-term Investments are reported at cost, which approximates fair value.

Other Investments primarily include COLI, loans to policyholders, real estate and mortgage loans. COLI is reported at cash surrender value with changes due to cost of insurance and investment experience reported in Net Investment Income in the Consolidated Statements of Income. Loans to policyholders are carried at unpaid principal balance. Real estate is carried at cost, net of accumulated depreciation. Real estate is depreciated over the estimated useful life of the asset using the straight-line method of depreciation. Real estate is evaluated for impairment when events or circumstances indicate the carrying value may not be recoverable. An impairment loss on real estate is recognized when the carrying value exceeds the sum of undiscounted projected future cash flows as well as the fair value, or, in the case of a property classified as held for sale, when the carrying value exceeds the fair value, net of costs to sell. Mortgage loans are carried at amortized cost, net of a reserve for expected credit ~~losses.~~losses as applicable.

~~Gains~~The following accounting policy has been updated effective January 1, 2020 to reflect the Company's adoption of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments as described above.

Kemper Corporation and ~~losses on sales~~Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Investments in Fixed Maturities - Allowance for Expected Credit Losses

For fixed maturity investments that the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery of ~~investments are computed on~~value, the ~~specific identification method and are~~full amount of the impairment is reported in ~~the Consolidated Statements of Income in the period in which the sales occur.~~Impairment Losses. The Company ~~regularly reviews~~writes down the investment’s amortized cost to its ~~investment portfolio~~fair value, and will not adjust for ~~factors~~any subsequent recoveries.

For fixed maturity investments that ~~may indicate~~the Company does not intend to sell or for which it is more likely than not that the Company will not be required to sell before an anticipated recovery of value, the Company will evaluate whether a decline in fair value ~~of an investment is other than temporary. Losses are computed on~~below the specific identification method and reported in the Consolidated Statements of Income in the period that the decline is determined to be other than temporary. The portion of an impairment of an investment in a fixed maturity attributed toamortized cost basis has occurred from a credit loss or other factors (non-credit related). Considerations in the credit loss assessment include (1) extent to which the fair value has been less than amortized cost, (2) conditions related to the security, an industry, or a geographic area, (3) payment structure of the investment and the likelihood of the issuer's ability

to make contractual cash flows, (4) defaults or other collectability concerns related to the issuer, (5) changes in the ratings assigned by a rating agency and (6) other credit enhancements that affect the investment’s expected performance.

Any increase or decrease in the expected allowance for credit losses related to investments is recognized in Impairment Losses. The expected allowance for credit losses is limited by the amount that the fair value is less than the amortized cost basis and is adjusted for any additional expected credit losses or subsequent recoveries. The amortized cost basis of the investment is not adjusted for the expected allowance for credit loss. The impairment related to other factors (non-credit related) is reported in ~~Net~~Other Comprehensive Income, net of applicable taxes.

The Company reports accrued investment income separately for available-for-sale fixed maturity securities and has elected not to measure an allowance for credit losses on accrued investment income. Accrued investment income is written off through Impairment Losses ~~Recognized in Earnings in~~at the ~~Consolidated Statements of Income, with~~time the ~~portion~~issuer of the ~~impairment that~~bond defaults or is ~~not attributed~~expected to ~~a credit loss reported in AOCI.~~default on interest payments.

Fair Value Measurements

The Company uses a hierarchical framework which prioritizes and ranks the market observability of inputs used in fair value measurements. Market price observability is affected by a number of factors, including the type of asset or liability and the characteristics specific to the asset or liability being measured. Assets and liabilities with readily available, active, quoted market prices or for which fair value can be measured from actively quoted prices generally are deemed to have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The Company classifies the inputs used to measure fair value into one of three levels as follows:

•Level 1 — Quoted prices in an active market for identical assets or liabilities;

•Level 2 — Observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

•Level 3 — Significant unobservable inputs for the asset or liability being measured.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level of input that is significant to the entire measurement. Such determination requires significant management judgment.

Deferred Policy Acquisition Costs

Costs directly associated with the successful acquisition of business, principally commissions and certain premium taxes and policy issuance costs, are deferred. Costs deferred on property and casualty insurance contracts and short duration health

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)~~

insurance contracts are amortized over the period in which premiums are earned. Costs deferred on traditional life insurance products and other long-duration insurance contracts are primarily amortized over the anticipated premium-paying period of the related policies in proportion to the ratio of the annual premiums to the total premiums anticipated, which is estimated using the same assumptions used in calculating policy reserves.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Goodwill

The cost of an acquired entity over the fair value of net assets acquired is reported as Goodwill. Goodwill is not amortized, but rather is tested for recoverability annually or when certain triggering events require testing.

Insurance Reserves

Reserves for losses and LAE on property and casualty insurance coverage and health insurance coverage represent the estimated claim cost and loss adjustment expense necessary to cover the ultimate net cost of investigating and settling all losses incurred and unpaid at the end of any given accounting period. Such estimates are based on individual case estimates for reported claims and estimates for incurred but not reported (“IBNR”) losses, including expected development on reported claims. These estimates are adjusted in the aggregate for ultimate loss expectations based on historical experience patterns and current economic trends, with any change in the estimated ultimate liabilities being reported in the Consolidated Statements of Income in the period of change. Changes in such estimates may be material.

For traditional life insurance products, the reserves for future policy benefits are estimated on the net level premium method using assumptions as of the issue date for mortality, interest, policy lapses and expenses, including provisions for adverse deviations. These assumptions vary by such characteristics as plan, age at issue and policy duration. Mortality assumptions are based on the Company’s historical experience and industry standards. Interest rate assumptions principally range from 3% to 7%. Lapse rate assumptions are based on actual and industry experience. Insurance Reserves for life insurance products are comprised of reserves for future policy benefits plus an estimate of the Company’s liability for unpaid life insurance claims and claims adjustment expenses, which includes an estimate for IBNR life insurance claims. Prior to 2016, except when required by applicable law, the Company did not utilize the database of reported deaths maintained by the Social Security Administration or any other comparable database (a “Death Master File” or “DMF”) in its operations, including to determine its IBNR liability for life insurance products. Instead of using such a database, the Company calculated its IBNR liability for life insurance products using Company-specific historical information, which included analyzing average paid claims and the average lag between date of death and the date reported to the Company for claims for which proof of death had been provided. In 2016, the Company initiated a voluntary enhancement of its claims handling procedures for its life insurance policies. The Company is now utilizing a DMF to identify potential situations where the Company has yet to be notified of an insured’s death and, as appropriate, initiating an outreach process to identify and contact beneficiaries and settle claims. Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses for the year ended December 31, 2016 included a charge of $77.8 million to recognize the initial impact of using a DMF in the Company’s operations, including to determine its IBNR liability for unpaid claims and claims adjustment expenses for life insurance products. The Company reduced its estimate of the initial impact of using death verification databases by $21.0 million for the year ended December 31, 2019.

Policyholder ~~Contract Liabilities~~Obligations

Policyholder ~~contract liabilities~~Obligations include Federal Home Loan Bank (“FHLB”) funding agreements used for spread lending purposes and universal life-type policyholder contracts and are stated at account balances.

The following accounting policy has been updated effective January 1, 2020 to reflect the Company's adoption of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments as described below.

Receivables from Policyholders - Allowance for Expected Credit Losses

The allowance for credit losses is a valuation account that is deducted from the receivables from policyholders based on the net amount expected to be collected on the insurance contract. Receivables from policyholders are charged off against the allowance when management believes the uncollectability of the receivable is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience on the receivables from policyholders provide the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current environmental conditions, primarily unemployment rates that could impact an insured’s ability to pay premiums.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Other Receivables

Other Receivables primarily include reinsurance recoverables and accrued investment income. Reinsurance Recoverables were ~~$122.6~~$41.9 million and ~~$158.3~~$50.1 million at December 31, ~~2019~~2021 and ~~2018~~,2020, respectively. Accrued Investment Income was ~~$78.7~~$79.6 million and ~~$77.9~~$77.1 million at December 31, ~~2019~~2021 and ~~2018~~,2020, respectively.

Other Assets

Other Assets primarily include property and equipment, internal use software, right-of-use assets, insurance licenses acquired in business combinations, the value of other intangible assets acquired ~~corporate-owned life insurance (“COLI”)~~ and prepaid expenses. Property and equipment is depreciated over the useful lives of the assets, generally using the straight-line or double declining balance methods of depreciation depending on the asset involved. Internal use software is amortized over the useful life of the asset using the straight-line method of amortization and is evaluated for recoverability upon identification of

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)~~

impairment ~~indicators.~~indications. Insurance licenses acquired in business combinations and other indefinite life intangibles are not amortized, but rather tested periodically for recoverability.

COLI is reported at cash surrender value with changes due to cost of insurance and investment experience reported in Other Income in the Consolidated Statements of Income. COLI was $217.0 million and $59.3 million at December 31, 2019 and ~~2018, respectively.~~

The Company accounts for the value of business acquired (“VOBA”) based on actuarial estimates of the present value of future cash flows embedded in insurance in force as of an acquisition date. VOBA was ~~$24.1~~$19.0 million and ~~$30.2~~$20.3 million at December 31, ~~2019~~2021 and ~~2018~~,2020, respectively. VOBA is amortized over the expected profit emergence period of the policies in force as of the acquisition date. The Company evaluates VOBA assets for recoverability annually.

The Company accounts for the future profits embedded in customer relationships (“Customer Relationships”) acquired based on the present value of estimated future cash flows from such relationships. Customer Relationships was ~~$4.3~~$5.7 million and ~~$6.7~~$3.4 million at December 31, ~~2019~~2021 and ~~2018~~,2020, respectively, and are amortized on a straight-line basis over the estimated useful life of the relationship. Customer Relationships are tested for recoverability using undiscounted projections of future cash flows and written down to estimated fair value if the carrying value exceeds the sum of such projections of undiscounted cash flows.

The Company accounts for the present value of the future profits embedded in broker or agent relationships acquired (“Agent Relationships”) based on the present value of estimated future cash flows from such acquired relationships or, using the cost recovery method, which estimates the ultimate cost to build a comparable distribution network. Agent Relationships was ~~$62.5~~$58.0 million and ~~$68.0~~$57.6 million at December 31, ~~2019~~2021 and ~~2018~~,2020, respectively, and are amortized on a straight-line basis over the estimated useful life of the relationship. Agent Relationships are tested for recoverability using undiscounted projections of future cash flows and written down to estimated fair value if the carrying value exceeds the sum of such projections of undiscounted cash flows.

Accrued Expenses and Other Liabilities

Accrued Expenses and Other Liabilities primarily include drafts payable, accrued salaries and commissions, pension benefits, postretirement medical benefits, lease liability and accrued taxes, licenses and fees.

Recognition of Earned Premiums and Related Expenses

Property and casualty insurance and short duration health insurance premiums are deferred when written and recognized and earned ratably over the periods to which the premiums relate. Unearned Premiums represent the portion of the premiums written related to the unexpired portion of policies in force which has been deferred and is reported as a liability. The Company performs a premium deficiency analysis typically at a ~~product line~~segment level, namely ~~automobile insurance, homeowners insurance~~Specialty Property & Casualty Insurance and ~~other insurance,~~Preferred Property & Casualty Insurance, which is consistent with the manner in which the Company acquires and services policies and measures profitability. Anticipated investment income is excluded from such analysis. A premium deficiency is recognized when the sum of expected claim costs, claim adjustment expenses, unamortized deferred policy acquisition costs and maintenance costs exceeds the related unearned premiums by first reducing related deferred policy acquisition costs to an amount, but not below zero, at which the premium deficiency would not exist. If a premium deficiency remains after first reducing deferred policy acquisition costs, a premium deficiency reserve is established and reported as a liability in the Company’s financial statements.

Traditional life insurance premiums are recognized as revenue when due. Policyholders’ benefits are associated with related premiums to result in recognition of profits over the periods for which the benefits are provided using the net level premium method.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses include provisions for future policy benefits under life and certain accident and health insurance contracts and provisions for reported claims, estimates for IBNR claims and loss adjustment expenses. Benefit payments in excess of policy account balances are expensed.

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)~~

Reinsurance

In the normal course of business, Kemper’s insurance subsidiaries reinsure certain risks above certain retention levels with other insurance enterprises. These reinsurance agreements do not relieve Kemper’s insurance subsidiaries of their legal obligations to the policyholder. Amounts recoverable from reinsurers are included in Other Receivables.

Gains related to long-duration reinsurance contracts are deferred and amortized over the life of the underlying reinsured policies. Losses related to long-duration reinsurance contracts are recognized immediately. Any gain or loss associated with reinsurance agreements for which Kemper’s insurance subsidiaries have been legally relieved of their obligations to the policyholder is recognized in the period of relief.

Income Taxes

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance, if any, is maintained for the portion of deferred income tax assets that the Company does not expect to recover. Increases, if any, in the valuation allowance for deferred income tax assets are recognized as income tax expense. Decreases, if any, in the valuation allowance for deferred income tax assets are generally recognized as income tax benefit. The effect on deferred income tax assets and liabilities of a change in tax law including a change in tax rates is recognized in income from ~~continuing~~ operations in the period in which the change is enacted.

The Company reports a liability for unrecognized tax benefits, if any, resulting from uncertain tax positions taken, or expected to be taken, in an income tax return, if any. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

~~Discontinued Operations~~

In 2008, the Company sold its Unitrin Business Insurance operations and retained certain liabilities for unpaid insured losses that occurred prior to the date of the sale. Changes in the Company’s estimate of such retained liabilities after the sale are reported in Income from Discontinued Operations.

~~Change in Accounting and~~ Adoption of New Accounting ~~Standards~~Guidance

~~Accounting Standards~~Guidance Adopted in ~~2019~~

~~Effective January 1, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02,~~ ~~Leases—(Topic 842).~~ ASU 2016-02 introduced a lessee model that requires the recognition of a right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than twelve months. The Company adopted ASU 2016-02 using the modified retrospective method at the beginning of the period of the adoption and elected the permitted practical expedients to not reassess whether any expired or existing contracts contain leases, the lease classification for any expired or existing leases and initial direct costs for any existing leases. The adoption of ASU 2016-02 had no impact on the Company’s Shareholders’ Equity as of January 1, 2019, but resulted in the establishment of a ROU asset of $66.5 million, a lease liability of $82.5 million and an adjustment to deferred rent liability of $16.0 million. The ROU asset and related liabilities were included in Other Assets and Accrued Expenses and Other Liabilities, respectively, on the Consolidated Balance Sheet at December 31, 2019.

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Derivatives and Hedging Activities.~~ ASU 2017-12 aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments in ASU 2017-12 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Furthermore, the amendments make certain targeted improvements to simplify the application of hedge accounting guidance and ease the administration of hedge documentation requirements and assessing hedge effectiveness. ASU 2017-12 is effective for annual periods beginning after December 15, 2018 and interim periods. The impact of adoption of ASU 2017-12 on the Company’s consolidated financial position was not material.

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)~~

~~In August 2018, the SEC issued Final Rule Release No. 33-10532, “Disclosure Update and Simplification,~~” which made a number of changes meant to simplify interim disclosures. The new rule required a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods. In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update).” ASU 2019-07 codifies Final Rule Release No. 33-10532 and was effective immediately. The additional elements of this release did not have a material impact on the Company’s overall Consolidated Financial Statements.

~~Accounting Standards Not Yet Adopted~~

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~ ASU 2016-13 replaces the existing incurred loss impairment model with an expected credit loss impairment model. The expected credit loss impairment model requires the entity to recognize its estimate of expected credit losses for affected financial assets using an allowance for credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Theamendments in this ASU require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected. The income statement includes the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have occurred during the period. Credit losses on available-for-sale debt securities are measured in a manner similar to current GAAP, although ASU 2016-13 requires that they be presented as an allowance rather than as a write-down of the amortized cost. In situations where the estimate of credit loss on an available-for-sale debt security declines, entities will be able to record a reversal of the allowance to income in the current period, which was prohibited prior to the adoption of ASU 2016-13. ASU 2016-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. The impact of the initial adoption of ASU 2016-13 is not expected to be material.

~~In August 2018, the FASB issued ASU 2018-12,~~ ~~Financial Services—Insurance (Topic 944): Targeted Improvements to Accounting for Long-Duration Contracts~~. ASU 2018-12 amends the accounting model for certain long-duration insurance contracts and requires the insurer to provide additional disclosures in annual and interim reporting periods. ASU 2018-12 is effective for fiscal years beginning January 1, 2022. The amendments in ASU 2018-12 are intended to improve measurement of the liability for future policy benefits related to nonparticipating traditional and limited-payment contracts, measurement and presentation of market risk benefits, amortization of deferred acquisition costs, and enhance presentation and disclosures. The Company is currently evaluating the impact of this guidance on its financial statements.

~~In April 2019, the FASB issued ASU 2019-04,~~ ~~Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.~~ ~~ASU 2019-04 clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments, previously addressed by ASU 2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments,~~ ~~ASU 2017-12,~~ ~~Targeted Improvements to Derivatives and Hedging Activities,~~ ~~and ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities.~~ The Company adopted ASU 2017-12 in the first quarter of 2019. Accordingly, the amendments in ASU 2019-04 related to clarifications on accounting for hedging activities are effective for the Company in the first quarter of 2020. The amendments of ASU 2019-04 related to ASU 2016-01 and ASU 2016-13 are effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. The impact of the initial adoption of ASU 2019-04 is not expected to be material.

~~In May 2019, the FASB issued ASU 2019-05,~~ ~~Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief.~~ ASU 2019-05 provides transition relief for entities adopting the credit loss standard, ASU 2016-13. Specifically ASU 2019-05 amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for financial instruments that are: (i) within the scope of the credit loss guidance in Accounting Standards Codification (“ASC”) Topic 326, ~~Financial Instruments—Credit Losses; (ii) were previously recorded at amortized cost; (iii) are eligible for the fair value option under ASC Topic 825,~~ ~~Financial Instruments~~; and (iv) are not held to maturity debt. ASU 2019-05 is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. The Company does not intend to elect the fair value option upon adoption of ASU 2016-13 for financial instruments outlined above.

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)~~2021

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to simplify accounting for income taxes by eliminating certain exceptions to the guidance in ASC Topic 740,Income Taxes, related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. Further, ASU 2019-12 clarifies that single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods. The adoption of ASU 2019-12 did not have a material effect on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues), which clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods. The adoption of ASU 2020-01 did not have a material effect on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

criteria are met. The guidance in ASU 2020-04, if elected, shall apply to contract modifications if the terms that are modified directly replace, or have the potential to replace, a reference rate with another interest rate index. If other terms are contemporaneously modified in a manner that changes, or has the potential to change, the amount or timing of contractual cash flows, the guidance in ASU 2020-04 shall apply only if those modifications are related to the replacement of a reference rate. ASU 2020-04 is effective for contract modifications made between March 12, 2020 through December 31, 2022. The adoption of ASU 2020-04 did not have a material effect on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements. The Company ~~is currently evaluating~~will continue to evaluate the impact of this guidance on its financial statements.

In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs, which clarifies that an entity should re-evaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. ASU 2020-08 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods. The adoption of ASU 2020-08 did not have a material effect on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

The Company has adopted all other recently issued accounting pronouncements with effective dates prior to January 1, ~~2020. Other than the adoption of ASU 2016-02,~~ ~~Leases—(Topic 842),~~ ~~there~~2022. There were no adoptions of such accounting pronouncements during the year ended December 31, ~~2019~~2021 that had a material impact on the Company’s Consolidated Financial ~~Statements. With~~Statements and Notes to the ~~exception of~~Consolidated Financial Statements.

Guidance Not Yet Adopted

In August 2018, the FASB issued ASU 2018-12, Financial ~~Services—Insurance~~Services-Insurance (Topic 944):Targeted Improvements to Accounting for Long-Duration Contracts. ASU 2018-12 amends the accounting model for certain long-duration insurance contracts and requires the insurer to provide additional disclosures in annual and interim reporting periods. In November 2020, the FASB issued ASU 2020-11 which deferred the effective date of ASU 2018-12 by one year for public business entities. ASU 2018-12 is now effective for fiscal years beginning after December 15, 2022, and interim periods within those annual periods. The amendments in ASU 2018-12 (i) require cash flow assumptions used to measure the liability for future policy benefits for nonparticipating traditional and limited pay long duration contracts to be updated at least annually with the recognition and remeasurement recorded in net income, require the discount rate used in measuring the liability to be an upper-medium grade fixed-income instrument yield, which is to be updated at each reporting period, and recognized in other comprehensive income, (ii) simplify the amortization of deferred acquisition costs to be amortized on a constant level basis over the expected term of the contract, (iii) require all market risk benefits to be measured at fair value, and (iv) enhance certain presentation and disclosure requirements which include disaggregated rollforwards for liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, deferred acquisition costs, and information about significant inputs, judgments and methods used in the measurement. The Company plans to adopt using the modified retrospective transition method and is currently evaluating the impact of this guidance on its financial statements.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 3. NET INCOME PER UNRESTRICTED SHARE

The Company’s awards of deferred stock units granted to Kemper’s non-employee directors prior to 2019 contain rights to receive non-forfeitable dividend equivalents and participate in the undistributed earnings with common shareholders. Accordingly, the Company ~~does not expect~~is required to apply the ~~adoption~~two-class method of ~~recently issued accounting pronouncements with effective dates after~~computing basic and diluted earnings per 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 years ended December 31, 2021, 2020 and 2019 ~~to have a material impact on the Company’s financial statements and/or disclosures.~~is presented below.


	2021		2020		2019
DOLLARS IN MILLIONS
Net Income (Loss)	$	(120.5)	$	409.9	$	531.1
Less: Net Income Attributed to Participating Awards	—		0.4		1.7
Net Income (Loss) Attributed to Unrestricted Shares	(120.5)		409.5		529.4
Dilutive Effect on Income of Equity-based Compensation Equivalent Shares	—		—		—
Diluted Net Income (Loss) Attributed to Unrestricted Shares	$	(120.5)	$	409.5	$	529.4
SHARES IN THOUSANDS
Weighted-average Unrestricted Shares Outstanding	64,264.4		65,636.1		65,880.9
Equity-based Compensation Equivalent Shares	—		1,093.7		667.2
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	64,264.4		66,729.8		66,548.1
PER UNRESTRICTED SHARE IN WHOLE DOLLARS
Basic Net Income (Loss) Per Unrestricted Share	$	(1.87)	$	6.24	$	8.04
Diluted Net Income (Loss) Per Unrestricted Share	$	(1.87)	$	6.14	$	7.96

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 for the years ended December 31, 2021, 2020 and 2019, because the effect of inclusion would be anti-dilutive, is presented below.


SHARES IN THOUSANDS	2021	2020	2019
Equity-based Compensation Equivalent Shares	2,180.1	874.5	556.4
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	2,180.1	874.5	556.4

NOTE 3.4. ACQUISITION OF BUSINESS

Acquisition of ~~Infinity Property and~~American Access Casualty Corporation

On ~~July 2, 2018,~~April 1, 2021 Kemper ~~acquired 100%~~completed the acquisition of ~~the outstanding common stock of Infinity Property~~American Access Casualty Company and ~~Casualty Corporation (“Infinity”~~its related captive insurance agency, Newins Insurance Agency Holdings, LLC, and its subsidiaries (collectively “AAC”)~~, pursuant~~. Pursuant to the ~~terms of the merger~~ agreement dated ~~February 13, 2018, with~~November 22, 2020, Kemper paid AAC’s equity holders total cash ~~stock and equity-based compensation~~ consideration ~~paid to Infinity shareholders~~ of approximately $1.5 billion. In conjunction with closing the acquisition, Kemper issued 13,184,107 shares, with an aggregate fair value of $982.5 million based on Kemper’s July 2, 2018 stock price of $74.53 per share,$370.9 million.

AAC, headquartered in Downers Grove, Illinois, provides specialty private passenger auto insurance in Arizona, Illinois, Indiana, Nevada, and paid $564.6 million in cash consideration to Infinity’s shareholders. In addition, Kemper issued 44,010 restricted stock units under Kemper’s equity-based compensation plan to replace Infinity restricted shares that were outstanding immediately prior to the closing. The aggregate fair value of such Kemper restricted stock units granted was $3.3 million at July 2, 2018, of which $1.6 million is attributed to service provided prior to the closing and included in consideration paid. The remaining amount of $1.7 million is attributed to future service and will be recognized in compensation expense primarilyTexas. AAC wrote over ~~a period of two years. The cash consideration was funded by cash on hand as of July 2, 2018, inclusive of $250.0 million in borrowings under the Company’s delayed draw term loan facility and $110.0~~$350.0 million of ~~Kemper subsidiary borrowings from the FHLB~~direct premiums in 2020 through a network of ~~Dallas~~approximately 600 independent agents and FHLB of Chicago. On July 13, 2018, Kemper subsidiaries repaid in full the $110.0 million of FHLB borrowings, plus accrued interest. On December 28, 2018, Kemper repaid $215.0 million of the delayed draw term loan facility. See Note 8, “Debt,” to the Consolidated Financial Statements for additional information. Infinity is a national provider of auto insurance focused on serving the specialty automobile market.its captive agency force.

~~In 2019, the~~The Company ~~completed~~is in the process of ~~estimating~~finalizing the estimation of the fair value of acquired assets and assumed liabilities. Accordingly, the Company’s preliminary estimates and the allocation of the purchase price to the assets acquired and liabilities ~~assumed.~~assumed may change as the Company completes the process, which would also likely impact the Company’s allocation of the purchase price to Goodwill. In accordance with ~~ASC Topic~~Accounting Standards Codification (“ASC”) 805, Business Combinations, changes if any, to the preliminary estimates and allocation ~~as a result of events or conditions as of the acquisition date, are~~will be reported in the Company’s financial statements as an adjustment to the opening balance sheet.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 4 - ACQUISITION OF BUSINESS (Continued)

Based on the Company’s allocation of the purchase price, the fair value of the assets acquired and liabilities ~~assumed. The Company finalized its estimate of certain legal and tax accruals, increasing liabilities~~ assumed by $1.8 million, increasing current income tax assets by $0.2 million and increasing goodwill by $1.6 million compared with balances as of December 31, 2018. The Company has allocated all of the goodwill associated with the Infinity acquisition to the Specialty Property & Casualty Insurance segment. were:


(Dollars in Millions)
Fixed Maturities at Fair Value	$	151.2
Equity Securities at Fair Value	82.4
Short-term Investments at Cost which Approximates Fair Value	100.1
Cash	54.3
Receivables from Policyholders	148.9
Other Receivables	2.0
Goodwill	198.0
Current Income Tax Assets	0.3
Other Assets	81.4
Property and Casualty Insurance Reserves	(211.1)
Unearned Premiums	(177.8)
Deferred Income Tax Liabilities	(7.8)
Accrued Expenses and Other Liabilities	(51.0)
Total Purchase Price	$	370.9

The factors that contributed to the recognition of goodwill include synergies from economies of scale within the underwriting and claims operations, acquiring a talented workforce and cost savings opportunities.

Intangible Assets

Intangible assets consist of capitalized costs, primarily of the estimated fair value of distribution, customer relationships, policies in force, trade names and licenses, and technology. The estimated useful lives of these assets range from 1 to 8 years. These assets are reported in Other Assets in the Consolidated Balance Sheets.

Identifiable definite and indefinite lived intangible assets acquired consisted of the following:


(Dollars in Millions)
Definite Life Intangibles
Value of Business Acquired	$	42.9
Customer Relationships	4.8
Agent Relationships	7.2
Internal-Use Software	6.5
Trade Names	1.8
Indefinite Life Intangible Assets
Insurance Licenses	$	2.5

8182

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 3.4 - ACQUISITION OF BUSINESS (Continued)

~~Based~~Unaudited Pro Forma Results

The following unaudited pro forma information presents the Company’s results of operations as if the acquisition of AAC occurred on January 1, 2020. The adjustments to arrive at the pro forma information below included adjustments for the lost investment income on the ~~Company’s final allocation~~cash used to fund the acquisition, amortization of the ~~purchase price,~~acquired intangible assets and the ~~fair value~~exclusion of certain acquisition related costs considered to be non-recurring in nature.


	Year Ended
(Dollars in millions)	Dec 31, 2021		Dec 31, 2020
Total Revenues	$	5,884.2	$	5,585.7
Total Expenses	6,109.5		5,040.1
Income (Loss) before Income Taxes	(225.3)		545.6
Net Income (Loss)	$	(105.1)	$	443.0

The pro forma information is not necessarily indicative of the ~~assets acquired and liabilities assumed were:~~consolidated results of operations that might have been achieved had the transaction in fact occurred at the beginning of the periods presented, nor does the information project results for any future period. The pro forma information does not include the impact of any future cost savings or synergies that may be achieved as a result of the acquisition.

DOLLARS IN MILLIONS
Investments $ 1,569.3
Short-term Investments at Cost which Approximates Fair Value
Investments
98.8
Cash 4.0
Receivables from Policyholders 583.4
Other Receivables 31.7
Value of Intangible Assets Acquired (Reported in Other Assets) 262.7
Current Income Tax Assets 1.0
Goodwill¹
791.0
Other Assets 102.1
Property and Casualty Insurance Reserves (717.2 )
Unearned Premiums (715.6 )
Debt (282.1 )
Deferred Income Tax Liabilities (10.8 )
Accrued Expenses and Other Liabilities (169.6 )
Total Purchase Price $ 1,548.7

The expected maturities of the Company’s Investments in Fixed Maturities may differ from the contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

~~Investments in Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date at~~ ~~December 31, 2019~~ ~~consisted of securities issued by the~~ ~~Government National Mortgage Association~~ with a fair value of $575.9 million, securities issued by the Federal National Mortgage Association with a fair value of $7.1 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $12.2 million and securities of other non-governmental issuers with a fair value of $707.1 million.84

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

~~NOTE 4. INVESTMENTS (Continued)~~

~~An aging of unrealized losses on the Company’s Investments in Fixed Maturities at~~ ~~December 31, 2019~~ ~~is presented below.~~

DOLLARS IN MILLIONS Less Than 12 Months 12 Months or Longer Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
Fixed Maturities:
U.S. Government and Government Agencies and Authorities $ 118.5
$ (1.3 ) $ 5.1
$ —
$ 123.6
$ (1.3 )
States and Political Subdivisions 63.0
(0.7 ) 5.4
(0.4 ) 68.4
(1.1 )
Foreign Governments 1.0
(0.3 ) 3.1
(1.3 ) 4.1
(1.6 )
Corporate Securities:
Bonds and Notes 160.0
(2.1 ) 70.7
(5.0 ) 230.7
(7.1 )
Redeemable Preferred Stocks 5.5
(0.1 ) —
—
5.5
(0.1 )
Collateralized Loan Obligations 95.5
(1.9 ) 355.6
(6.6 ) 451.1
(8.5 )
Other Mortgage- and Asset-backed 72.8
(1.1 ) —
—
72.8
(1.1 )
Total Fixed Maturities 516.3
(7.5 ) 439.9
(13.3 ) 956.2
(20.8 )

~~The Company regularly reviews its fixed maturity investment portfolio~~

NOTE 5. BUSINESS SEGMENTS (Continued)

Segment Operating Income (Loss), including a reconciliation to Income (Loss) before Income Taxes, for ~~factors that may indicate that a decline in fair value of an investment is other than temporary. The portions of~~ the declines in the fair values of fixed maturity investments that are determined to be other than temporary are reported as losses in the Consolidated Statements of Income in the periods when such determinations are made.

~~Unrealized losses on fixed maturities, which the Company has determined to be temporary at~~ years ended December 31, 2021, 2020 and 2019 was:


DOLLARS IN MILLIONS	2021		2020		2019
Segment Operating Income (Loss):
Specialty Property & Casualty Insurance	$	(292.1)	$	420.9	$	355.9
Preferred Property & Casualty Insurance	(39.8)		1.8		52.3
Life & Health Insurance	10.5		71.2		121.9
Total Segment Operating Income (Loss)	(321.4)		493.9		530.1
Corporate and Other Operating Income (Loss) From:
Partial Satisfaction of Judgment	—		89.4		20.1
Other	(48.4)		(36.5)		(31.4)
Corporate and Other Operating Income (Loss)	(48.4)		52.9		(11.3)
Adjusted Consolidated Operating Income (Loss)	(369.8)		546.8		518.8
Income (Loss) from Change in Fair Value of Equity and Convertible Securities	114.6		72.1		138.9
Net Realized Gains on Sales of Investments	64.8		38.1		41.9
Impairment Losses	(11.0)		(19.5)		(13.8)
Acquisition Related Transaction, Integration and Other Costs	(43.9)		(63.3)		(18.4)
Pension Obligation Settlement Costs	—		(64.1)		—
Loss from Early Extinguishment of Debt	—		—		(5.8)
Income (loss) before Income Taxes	$	(245.3)	$	510.1	$	661.6

Segment Net Operating Income (Loss), ~~were $20.8 million, of which $13.3 million was related~~including a reconciliation to ~~fixed maturities that were in an unrealized loss position~~Net Income (Loss), for ~~12 months or longer. There were $0.3 million of unrealized losses at~~the years ended December 31, 2021, 2020 and 2019 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” There were 0 unrealized losses at December 31, 2019 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “12 Months or Longer.” Investment-grade fixed maturity investments comprised $9.1 million and below-investment-grade fixed maturity investments comprised $11.7 million of the unrealized losses on investments in fixed maturities at December 31, 2019. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 5% of the amortized cost basis of the investment. At December 31, 2019, the Company did not have the intent to sell these investments and it was not more likely than not that the Company would be required to sell these investments before it recovered the amortized cost of such investments, which may be at maturity. Based on the Company’s evaluation at was:


DOLLARS IN MILLIONS	2021		2020		2019
Segment Net Operating Income (Loss):
Specialty Property & Casualty Insurance	$	(196.1)	$	337.9	$	283.1
Preferred Property & Casualty Insurance	(12.5)		3.5		41.9
Life & Health Insurance	28.2		60.0		98.7
Total Segment Net Operating Income (Loss)	(180.4)		401.4		423.7
Corporate and Other Net Operating Income (Loss) From:
Partial Satisfaction of Judgment	—		70.6		15.9
Other	(38.4)		(33.2)		(21.3)
Total Corporate and Other Net Operating Income (Loss)	(38.4)		37.4		(5.4)
Adjusted Consolidated Net Operating Income (Loss)	(218.8)		438.8		418.3
Net Income (Loss) From:
Change in Fair Value of Equity and Convertible Securities	90.5		57.0		109.7
Net Realized Gains on Sales of Investments	51.2		30.1		33.1
Impairment Losses	(8.7)		(15.4)		(10.9)
Acquisition Related Transaction, Integration and Other Costs	(34.7)		(50.0)		(14.5)
Pension Obligation Settlement Costs	—		(50.6)		—
Loss from Early Extinguishment of Debt	—		—		(4.6)
Net Income (Loss)	$	(120.5)	$	409.9	$	531.1

~~December 31, 2019~~ of the prospects of the issuers, including, but not limited to, the credit ratings of the issuers of the investments in the fixed maturities, and the Company’s intention to not sell and its determination that it would not be required to sell before it recovered the amortized cost of such investments, the Company concluded that the declines in the fair values of the Company’s investments in fixed maturities presented in the preceding table were temporary at the evaluation date.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

~~NOTE 4. INVESTMENTS (Continued)~~

~~An aging of unrealized losses on the Company’s Investments in Fixed Maturities at~~ ~~December 31, 2018~~ ~~is presented below.~~

DOLLARS IN MILLIONS Less Than 12 Months 12 Months or Longer Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
Fixed Maturities:
U.S. Government and Government Agencies and Authorities $ 401.1
$ (7.6 ) $ 79.0
$ (7.4 ) $ 480.1
$ (15.0 )
States and Political Subdivisions 299.4
(5.0 ) 102.6
(3.6 ) 402.0
(8.6 )
Foreign Governments 4.9
(0.6 ) —
—
4.9
(0.6 )
Corporate Securities:
Bonds and Notes 1,326.0
(38.2 ) 116.8
(10.9 ) 1,442.8
(49.1 )
Collateralized Loan Obligations 439.2
(13.2 ) —
—
439.2
(13.2 )
Other Mortgage- and Asset-backed 0.2
—
4.5
(0.1 ) 4.7
(0.1 )
Total Fixed Maturities $ 2,470.8
$ (64.6 ) $ 302.9
$ (22.0 ) $ 2,773.7
$ (86.6 )

~~Unrealized losses on fixed maturities, which the Company determined to be temporary at~~ ~~December 31, 2018, were~~ ~~$86.6 million, of which~~ ~~$22.0 million~~ ~~was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were 0 unrealized losses at~~ ~~December 31, 2018~~ related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” There were 0 unrealized losses at December 31, 2018 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “12 Months or Longer.” ~~Investment-grade~~ ~~fixed maturity investments comprised $69.5 million and~~ ~~below-investment-grade~~ ~~fixed maturity investments comprised $17.1 million of the unrealized losses on investments in fixed maturities at~~ ~~December 31, 2018. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was less than~~ 5% ~~of the amortized cost basis of the investment. At~~ ~~December 31, 2018~~, the Company did not have the intent to sell these investments and it was not more likely than not that the Company would be required to sell these investments before recovery of its amortized cost basis, which may be at maturity. Based on the Company’s evaluation at ~~December 31, 2018~~ of the prospects of the issuers, including, but not limited to, the credit ratings of the issuers of the investments in the fixed maturities, and the Company’s intention to not sell and its determination that it would not be required to sell before recovery of the amortized cost of such investments, the Company concluded that the declines in the fair values of the Company’s investments in fixed maturities presented in the preceding table were temporary at the evaluation date.

The following table sets forth the pre-tax amount of other-than-temporary impairments (“OTTI”) credit losses, recognized in Retained Earnings for Investments in Fixed Maturities held by the Company as of the beginning and end of the periods presented for which a portion of the OTTI loss related to factors other than credit has been recognized in AOCI, and the corresponding changes in such amounts.

DOLLARS IN MILLIONS 2019 2018 2017
Cumulative Balance of Pre-tax Credit Losses Recognized in Retained Earnings at Beginning of Year $ 1.1
$ 1.6
$ 1.4
Pre-tax Credit Losses on Fixed Maturities without Pre-tax Credit Losses Included in Cumulative Balance at Beginning of Year 0.2
—
1.2
Reductions for Change in Impairment Status:
From Status of Credit Loss to Status of Intent-to-sell or Required-to-sell —
(0.5 ) (0.7 )
Reductions for Investments Sold During Year (0.1 ) —
(0.3 )
Cumulative Balance of Pre-tax Credit Losses Recognized in Retained Earnings at End of Year $ 1.2
$ 1.1
$ 1.6

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 4. INVESTMENTS (Continued)~~

~~Equity Securities~~

~~Equity Securities at Fair Value~~

Equity securities with readily-determinable fair values, including equity securities which the Company previously classified as Fair Value Option Investments, are classified as Equity Securities at Fair Value in the Consolidated Balance Sheets with changes in fair value recorded as Income from Change in Fair Value of Equity and Convertible Securities in the Consolidated Statements of Income. Net unrealized losses arising during the year-ended December 31, 2019 and recognized in earnings, related to such investments still held as of December 31, 2019 were $126.0 million.

~~Equity Securities at Modified Cost~~

For Equity Securities at Modified Cost, the Company performs a qualitative impairment analysis on a quarterly basis consisting of various factors such as earnings performance, current market conditions, changes in credit ratings, changes in the regulatory environment and other factors. If the qualitative analysis identifies the presence of impairment indicators, the Company estimates the fair value of the investment. If the estimated fair value is below the carrying value, the Company records an other-than-temporary impairment in the Consolidated Statements of Income to reduce the carrying value to the estimated fair value. When the Company identifies observable transactions of the same or similar securities to those held by the Company, the Company increases or decreases the carrying value to the observable transaction price. The Company recognized a decrease of ~~$0.5 million~~ in the carrying value due to observable transactions for the year ended December 31, 2019. The Company recognized an impairment of $0.1 million on Equity Securities at Modified Cost for the year ended December 31, 2019 as a result of the Company’s qualitative impairment analysis. The Company has recognized 0 cumulative increases in the carrying value due to observable transactions, 0 cumulative decreases in the carrying value due to observable transactions and $5.0 million of cumulative impairments on Equity Securities at Modified Cost held as of December 31, 2019.

~~Equity Method Limited Liability Investments~~

Equity Method Limited Liability Investments include investments in limited liability investment companies and limited partnerships in which the Company’s interests are not deemed minor and are accounted for under the equity method of accounting. The Company’s investments in Equity Method Limited Liability Investments are generally of a passive nature in that the Company does not take an active role in the management of the investment entity. In 2019 and 2018, aggregate investment income (losses) from Equity Method Limited Liability Investments exceeded 10% of the Company’s pretax consolidated net income. Accordingly, the Company is disclosing aggregated summarized financial data for its Equity Method Limited Liability Investments for all periods presented in the Consolidated Financial Statements. Such aggregated summarized financial data does not represent the Company’s proportionate share of the Equity Method Limited Liability Investment assets or earnings. Aggregate total assets of the Equity Method Limited Liability Investments in which the Company invested totaled $2,368.1 million, $2,805.3 million and $2,393.7 million, as of December 31, 2019, 2018 and 2017, respectively. Aggregate total liabilities of the Equity Method Limited Liability Investments in which the Company invested totaled $817.2 million, $1,030.7 million and $899.7 million, as of December 31, 2019, 2018 and 2017, respectively. Aggregate net income of the Equity Method Limited Liability Investments in which the Company invested totaled $78.0 million, $130.4 million and $209.3 million for the years ended December 31, 2019, 2018 and 2017, respectively. The aggregate summarized financial data is based on the most recent and sufficiently-timely financial information available to the Company as of the respective reporting dates and periods. The Company’s maximum exposure to loss at December 31, 2019 is limited to the total carrying value of $220.4 million. In addition, the Company had outstanding commitments totaling approximately $97.2 million to fund Equity Method Limited Liability Investments at December 31, 2019.

~~Other Investments~~

~~The carrying values of the Company’s Other Investments at~~ ~~December 31, 2019~~ ~~and~~ ~~2018~~ ~~were:~~

DOLLARS IN MILLIONS 2019 2018
Loans to Policyholders at Unpaid Principal $ 305.6
$ 300.6
Real Estate at Depreciated Cost 111.4
114.2
Mortgage Loans at Amortized Cost 27.5
—
Total $ 444.5
$ 414.8

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 5. GOODWILL AND INTANGIBLE ASSETS~~

~~Goodwill balances by business segment at~~ ~~December 31, 2019~~ ~~and 2018 were:~~

DOLLARS IN MILLIONS 2019 2018
Specialty Property & Casualty Insurance $ 845.0
$ 843.4
Preferred Property & Casualty Insurance 49.6
49.6
Life & Health Insurance 219.4
219.4
Total $ 1,114.0
$ 1,112.4

The Company tests goodwill for recoverability at the reporting unit level on an annual basis, or whenever events or circumstances indicate the fair value of a reporting unit may have declined below its carrying value. The Company performed a qualitative goodwill impairment assessment for all reporting units with goodwill as of October 1, 2019. The qualitative assessment takes into consideration changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy and changes in Kemper’s stock price since the last quantitative assessment, which was performed on January 1, 2017. Based on its qualitative assessment, the Company concluded that the associated goodwill was recoverable for each reporting unit tested.

~~Definite and indefinite life intangible assets at December 31, 2019 and 2018 were:~~

DOLLARS IN MILLIONS 2019 2018
Definite Life Intangible Assets:
Value of Business Acquired $ 24.1
$ 30.2
Customer Relationships 4.3
6.7
Agent Relationships 62.5
68.0
Trade Names —
7.0
Internal-Use Software 189.7
149.1
Total Definite Life Intangible Assets 280.6
261.0
Indefinite Life Intangible Assets:
Trade Names 5.2
5.2
Insurance Licenses 42.6
42.6
Total Indefinite Life Intangible Assets 47.8
47.8
Total Intangible Assets $ 328.4
$ 308.8

The Company records intangible assets acquired in business combinations and certain costs incurred developing and customizing internal-use software within Other Assets on the Consolidated Balance Sheets. Definite life intangible assets are amortized over the estimated profit emergence period or estimated useful life of the asset. Indefinite life intangible assets are not amortized, but rather tested annually for impairment. In 2019 and 2018, the Company recognized amortization expense on definite life intangible assets of $37.8 million and $166.4 million, respectively.

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 5. GOODWILL AND INTANGIBLE ASSETS (Continued)~~

~~The amount of amortization expense expected to be recorded in the next five years for definite life intangible assets is as follows:~~

DOLLARS IN MILLIONS 2020 2021 2022 2023 2024
Definite Life Intangible Assets:
Value of Business Acquired $ 4.0
$ 3.1
$ 2.7
$ 2.5
$ 2.4
Customer Relationships 0.9
0.8
0.6
0.5
0.4
Agent Relationships 5.0
5.0
5.0
5.0
5.0
Internal-Use Software 24.1
19.1
17.9
16.5
14.0
Total $ 34.0

$ 28.0

$ 26.2

$ 24.5

$ 21.8

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES

The Company’s Property and Casualty Insurance Reserves are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid. Such estimates are based on individual case estimates for reported claims and estimates for IBNR losses, including expected development on reported claims. Property and Casualty Insurance Reserves are recorded net of any expected salvage and subrogation recoveries.

The determination of individual case reserves differs by line of business. For ~~specialty~~ personal automobile insurance and commercial automobile insurance, case reserves are set primarily using statistical reserves that are based on studies of historical average paid amounts by state, coverage and product. However, when such reserves exceed certain thresholds they are set manually by adjusters. For preferred ~~personal automobile insurance,~~ homeowners insurance and other personal insurance, case reserves are set by adjusters and are based on the adjusters’ estimates of the amount for which the claims will ultimately be paid.

The Company’s actuaries ~~generally~~ estimate ultimate losses and LAE and, therefore, reserves at least quarterly for most product lines and/or coverage levels using accident quarters or years spanning 10 or more years, depending on the size of the product line and/or coverage level or emerging issues relating to them. The Company’s actuaries use a variety of generally accepted actuarial loss reserving estimation methodologies to estimate the ultimate losses and LAE for the current accident quarter or year and re-estimate the ultimate losses and LAE for previous accident quarters or years to determine if changes in the previous estimates of the ultimate losses and LAE are indicated by the most recent data.

The key assumption in these estimation methodologies is that patterns observed in prior periods are indicative of how losses and LAE are expected to develop in the future and that such historical data can be used to predict and estimate ultimate losses and LAE. However, changes in the Company’s business processes, by their very nature, are likely to affect the development patterns, which generally results in the historical development factors becoming less reliable over time in predicting how losses and LAE will ultimately develop. The Company’s actuaries use professional judgment in determining how much weight to place on the development patterns based on the older historical data and how much weight to place on the development patterns based on more recent data. In some cases, the Company’s actuaries make adjustments to the loss reserving estimation methodologies to estimate ultimate losses and LAE.

The Company’s actuaries’ quarterly or yearly selections are summed by product and/or coverage levels to create the actuarial indication of the ultimate losses and LAE. Paid amounts are then subtracted from the ultimates to compute the reserves for property and casualty insurance losses and LAE. These results are reviewed by the Company’s ~~corporate actuary~~actuaries and corporate management who apply their collective judgment and determine the appropriate estimated level of reserves to record. Numerous factors are considered in this determination process, including, but not limited to, the assessed reliability of key loss trends and assumptions that may be significantly influencing the current actuarial indications, changes in claim handling practices or other changes that affect the timing of payment or development patterns, changes in the mix of business, the maturity of the accident year, pertinent trends observed over the recent past, the level of volatility within a particular line of business, the improvement or deterioration of actuarial indications in the current period as compared to prior periods, and the amount of reserves related to third party pools for which the Company has limited access to the underlying data and, accordingly, relies on calculations provided by such pools.

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)~~

The Company’s goal is to ensure that its total reserves for property and casualty insurance losses and LAE are adequate to cover all costs, while sustaining minimal variation from the time reserves for losses and LAE are initially estimated until losses and LAE are fully developed. Changes in the Company’s estimates of these losses and LAE over time, also referred to as “development,” will occur and may be material.

The following tables contain information about incurred and paid claims development as of and for the year ended December 31, ~~2019,~~2021, net of reinsurance and indemnification, as well as cumulative claim frequency and the total of IBNR liabilities, including expected development on reported claims included within the net incurred losses and allocated LAE amounts. The tables are grouped by major product line and, if relevant, coverage. The information about incurred and paid claims development for the years ended December 31, ~~2015~~2017 through ~~2018~~2020 is presented as supplementary information and is unaudited.

~~Specialty Personal Automobile Insurance—Liability~~

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2019

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 965.1
$ 855.1
$ 965.1
$ 972.3
$ 969.6
$ 8.1
401,025
2016 969.4
1,021.6
1,027.2
1,026.0
22.5
417,016
2017 997.7
999.9
1,004.5
40.6
396,578
2018 1,128.1
1,119.1
93.0
445,229
2019 1,270.7
383.0
447,558
Total 5,389.9

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 450.5
$ 794.9
$ 898.9
$ 934.7
$ 954.0

2016 459.7
831.1
943.4
987.7

2017 441.9
808.6
926.7

2018 467.5
903.8

2019 497.2

Total 4,269.4

Outstanding Loss and Allocated LAE Reserves on Accident Years before 2015, Net of Reinsurance 20.4

Loss and Allocated LAE Reserves, Net of Reinsurance $ 1,140.9

¹ Table retrospectively includes Alliance United and Infinity’s historical incurred and paid accident year claim information for all periods presented.
86

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Specialty Personal Automobile Insurance—Liability1


DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS											As of December 31, 2021
	Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2017		2018		2019		2020		2021
2017	$	1,170.2	$	1,175.6	$	1,185.6	$	1,181.6	$	1,197.4	$	15.1	458,261
2018			1,324.0		1,310.5		1,307.8		1,314.5		24.0		508,623
2019					1,461.5		1,494.7		1,506.1		54.8		546,521
2020							1,401.2		1,406.4		111.6		474,346
2021									1,856.9		607.1		544,207
Total									7,281.3





	Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2017		2018		2019		2020		2021
2017	$	498.3	$	945.5	$	1,092.9	$	1,141.9	$	1,169.3
2018			541.3		1,050.8		1,211.8		1,265.5
2019					567.3		1,200.7		1,382.0
2020							555.2		1,107.6
2021									657.1
Total									5,581.5
Outstanding Loss and Allocated LAE Reserves on Accident Years before 2017, Net of Reinsurance									22.5
Loss and Allocated LAE Reserves, Net of Reinsurance									$	1,722.3

1Tables retrospectively include Infinity and AAC’s historical incurred and paid accident year claim information for all periods presented.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Specialty Personal Automobile Insurance—Physical Damage¹


DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS											As of December 31, 2021
	Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2017		2018		2019		2020		2021
2017	$	533.1	$	522.5	$	522.0	$	522.5	$	522.4	$	(0.1)	296,392
2018			558.9		548.6		548.0		547.8		(0.6)		309,577
2019					624.3		630.3		629.6		(10.5)		324,321
2020							650.5		659.5		(6.4)		296,167
2021									958.0		2.1		348,244
Total									3,317.3





	Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2017		2018		2019		2020		2021
2017	$	493.2	$	525.6	$	523.0	$	522.7	$	522.5
2018			509.4		553.1		549.0		548.3
2019					570.8		634.8		630.6
2020							585.5		663.8
2021									890.1
Total									3,255.3
Outstanding Loss and Allocated LAE Reserves on Accident Years before 2017, Net of Reinsurance									1.6
Loss and Allocated LAE Reserves, Net of Reinsurance									$	63.6

1Tables retrospectively include Infinity and AAC’s historical incurred and paid accident year claim information for all periods presented.

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2019

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 403.8
$ 407.1
$ 406.7
$ 406.5
$ 406.6
$ 0.9
231,007
2016 462.2
456.9
456.9
457.0
(0.1 ) 246,183
2017 475.6
465.6
465.1
—
251,872
2018 504.9
496.9
(1.6 ) 269,782
2019 574.7
47.5
276,797
Total 2,400.3

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 382.4
$ 408.8
$ 406.7
$ 406.4
$ 406.1

2016 436.4
460.2
458.0
457.5

2017 443.0
468.7
466.0

2018 463.6
501.5

2019 525.8

Total 2,356.9

Outstanding Loss and Allocated LAE Reserves on Accident Years before 2015, Net of Reinsurance (1.2 )
Loss and Allocated LAE Reserves, Net of Reinsurance $ 42.2

¹ Table retrospectively includes Alliance United and Infinity’s historical incurred and paid accident year claim information for all periods presented.
88

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Commercial Automobile Insurance—Liability¹


DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS											As of December 31, 2021
	Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2017		2018		2019		2020		2021
2017	$	120.5	$	120.0	$	118.3	$	114.3	$	114.4	$	2.3	19,967
2018			123.2		116.5		113.0		110.9		4.7		20,195
2019					128.4		126.1		126.6		11.5		19,572
2020							140.5		152.0		25.5		19,354
2021									225.6		99.1		24,690
Total									729.5





	Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification
	For the Years Ended December 31,
Accident Year	2017		2018		2019		2020		2021
2017	$	36.3	$	72.3	$	90.7	$	101.7	$	107.2
2018			36.8		68.8		88.1		98.1
2019					32.4		75.7		99.5
2020							37.0		87.6
2021									50.8
Total									443.2
Outstanding Loss and Allocated LAE Reserves on Accident Years before 2017, Net of Reinsurance									14.1
Loss and Allocated LAE Reserves, Net of Reinsurance									$	300.4

1Tables retrospectively include Infinity’s historical incurred and paid accident year claim information for all periods presented.

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2019

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 102.5
$ 106.9
$ 112.9
$ 112.3
$ 110.7
$ 0.6
19,292
2016 120.5
112.4
115.6
117.7
3.5
20,417
2017 120.5
120.0
118.3
9.1
19,925
2018 123.2
116.5
19.8
19,969
2019 128.4
59.2
17,772
Total 591.6

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification
For the Years Ended December 31,
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 34.8
$ 70.2
$ 88.6
$ 100.3
$ 107.6

2016 36.2
71.6
89.7
102.3

2017 36.3
72.3
90.7

2018 36.8
68.8

2019 32.4

Total 401.8

Outstanding Loss and Allocated LAE Reserves on Accident Years before 2015, Net of Reinsurance 1.4

Loss and Allocated LAE Reserves, Net of Reinsurance $ 191.2

¹ Table retrospectively includes Infinity’s historical incurred and paid accident year claim information for all periods presented.
89

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Commercial Automobile Insurance—Physical Damage¹


DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS											As of December 31, 2021
	Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2017		2018		2019		2020		2021
2017	$	24.2	$	23.5	$	23.5	$	23.4	$	23.4	$	—	9,792
2018			23.6		23.5		23.6		23.6		0.1		9,569
2019					26.0		27.1		26.9		(0.5)		9,305
2020							31.9		32.2		—		11,011
2021									52.4		0.4		16,494
Total									158.5





	Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification
	For the Years Ended December 31,
Accident Year	2017		2018		2019		2020		2021
2017	$	22.2	$	23.5	$	23.4	$	23.4	$	23.4
2018			21.7		23.6		23.6		23.6
2019					23.0		26.9		26.8
2020							26.2		31.9
2021									43.3
Total									149.0
Outstanding Loss and Allocated LAE Reserves on Accident Years before 2017, Net of Reinsurance									0.4
Loss and Allocated LAE Reserves, Net of Reinsurance									$	9.9

1Tables retrospectively include Infinity’s historical incurred and paid accident year claim information for all periods presented.

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2019

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 21.5
$ 21.6
$ 21.7
$ 21.7
$ 21.7
$ —
9,643
2016 24.2
24.2
24.1
24.2
—
10,560
2017 24.2
23.5
23.5
0.2
9,788
2018 23.6
23.5
0.3
9,558
2019 26.0
3.5
8,803
Total 118.9

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification
For the Years Ended December 31,
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 20.2
$ 21.6
$ 21.7
$ 21.7
$ 21.7

2016 22.4
24.2
24.1
24.2

2017 22.2
23.5
23.4

2018 21.7
23.6

2019 23.0

Total 115.9

Outstanding Loss and Allocated LAE Reserves on Accident Years before 2015, Net of Reinsurance —

Loss and Allocated LAE Reserves, Net of Reinsurance $ 3.0

¹ Table retrospectively includes Infinity’s historical incurred and paid accident year claim information for all periods presented.
90

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Preferred Personal Automobile Insurance—Liability

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2019

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 168.3
$ 171.8
$ 176.5
$ 177.6
$ 177.1
$ 0.9
38,961
2016 162.1
174.5
179.1
176.8
2.1
36,721
2017 164.4
157.8
155.8
4.5
33,663
2018 157.6
156.3
15.6
32,020
2019 172.2
51.3
32,848
Total 838.2

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 73.1
$ 122.4
$ 147.5
$ 163.1
$ 169.3

2016 61.2
114.6
145.6
161.1

2017 59.2
108.9
134.1

2018 55.5
107.6

2019 62.7

Total 634.8

Outstanding Loss and Allocated LAE Reserves on Accident Years before 2015, Net of Reinsurance 9.5

Loss and Allocated LAE Reserves, Net of Reinsurance $ 212.9


DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS											As of December 31, 2021
	Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2017		2018		2019		2020		2021
2017	$	164.4	$	157.8	$	155.8	$	158.2	$	160.0	$	0.6	33,734
2018			157.6		156.3		161.7		163.4		1.7		31,922
2019					172.2		195.5		200.0		4.9		34,633
2020							148.9		153.6		16.1		24,438
2021									176.9		54.1		25,149
Total									853.9





	Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2017		2018		2019		2020		2021
2017	$	59.2	$	108.9	$	134.1	$	143.2	$	150.6
2018			55.5		107.6		132.7		147.4
2019					62.7		127.9		160.8
2020							44.4		92.8
2021									50.3
Total									601.9
Outstanding Loss and Allocated LAE Reserves on Accident Years before 2017, Net of Reinsurance									10.2
Loss and Allocated LAE Reserves, Net of Reinsurance									$	262.2

9391

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Preferred Personal Automobile Insurance—Physical Damage

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2019

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 101.2
$ 100.7
$ 100.6
$ 100.6
$ 100.6
$ —
68,409
2016 106.6
106.6
106.3
106.2
(0.1 ) 65,348
2017 109.2
105.8
105.2
(0.1 ) 62,553
2018 113.9
111.0
(0.5 ) 60,749
2019 126.4
(0.9 ) 60,548
Total 549.4

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 100.1
$ 101.0
$ 100.7
$ 100.6
$ 100.6

2016 105.2
106.9
106.3
106.3

2017 104.4
106.1
105.2

2018 107.2
111.4

2019 120.7

Total 544.2

Outstanding Loss and Allocated LAE Reserves on Accident Years before 2015, Net of Reinsurance (0.1 )
Loss and Allocated LAE Reserves, Net of Reinsurance $ 5.1


DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS											As of December 31, 2021
	Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2017		2018		2019		2020		2021
2017	$	109.2	$	105.8	$	105.2	$	105.1	$	105.2	$	—	62,685
2018			113.9		111.0		110.4		110.4		0.1		61,921
2019					126.4		125.8		125.9		0.3		67,181
2020							96.1		98.0		(0.5)		47,603
2021									118.5		(0.7)		50,533
Total									558.0





	Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2017		2018		2019		2020		2021
2017	$	104.4	$	106.1	$	105.2	$	105.1	$	105.2
2018			107.2		111.4		110.4		110.3
2019					120.7		126.5		125.6
2020							90.9		98.4
2021									113.1
Total									552.6
Outstanding Loss and Allocated LAE Reserves on Accident Years before 2017, Net of Reinsurance									—
Loss and Allocated LAE Reserves, Net of Reinsurance									$	5.4

9492

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Homeowners Insurance

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2019

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 178.9
$ 164.9
$ 163.2
$ 164.3
$ 164.4
$ 0.5
19,731
2016 200.3
201.7
204.2
202.2
1.4
20,380
2017 261.2
259.5
245.2
0.9
20,982
2018 185.9
183.0
1.2
17,122
2019 162.9
19.2
13,931
Total 957.7

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,
Accident Year 2015
(Unaudited) 2016
(Unaudited) 2017
(Unaudited) 2018
(Unaudited) 2019
2015 $ 116.9
$ 154.4
$ 158.0
$ 161.3
$ 162.7

2016 141.2
190.1
195.8
198.9

2017 165.8
242.5
235.7

2018 127.4
180.2

2019 111.1

Total 888.6

Outstanding Loss and Allocated LAE Reserves on Accident Years before 2015, Net of Reinsurance 3.2

Loss and Allocated LAE Reserves, Net of Reinsurance $ 72.3


DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS											As of December 31, 2021
	Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2017		2018		2019		2020		2021
2017	$	261.2	$	259.5	$	245.2	$	243.8	$	243.9	$	1.3	19,619
2018			185.9		183.0		183.6		185.3		4.1		16,212
2019					162.9		161.8		163.1		2.5		14,670
2020							157.0		149.8		4.3		13,887
2021									149.9		19.1		12,422
Total									892.0





	Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2017		2018		2019		2020		2021
2017	$	165.8	$	242.5	$	235.7	$	239.5	$	241.7
2018			127.4		180.2		180.0		183.1
2019					111.1		150.4		157.7
2020							94.6		130.8
2021									100.6
Total									813.9
Outstanding Loss and Allocated LAE Reserves on Accident Years before 2017, Net of Reinsurance									3.3
Loss and Allocated LAE Reserves, Net of Reinsurance									$	81.4

The claim counts in the preceding tables are cumulative reported claim counts as of December 31, ~~2019~~2021 and are equal to the sum of cumulative open and cumulative closed claims, including claims closed without payment. Certain product lines, particularly the Company’s specialty personal automobile insurance, tend to have a higher percentage of claims closed without payment.

The Company's claims associated with automobile insurance are counted at the feature level. As such, each claimant and each coverage is counted separately. For example, if for one occurrence, the Company's policyholder is at fault for damage to his/her own vehicle, another party's vehicle and three injured parties, there may be five features—three for bodily injury liability, one for property damage liability and one for first-party collision coverage. There may also be another feature for first-party medical payments.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

The following table reconciles the net incurred and paid claims development tables presented above to the Company's liability for Property and Casualty Insurance Reserves included in the Consolidated Balance Sheet at December 31, ~~2019.~~2021.

DOLLARS IN MILLIONS 2019
Property and Casualty Insurance Reserves, Net of Reinsurance:
Specialty Personal Automobile Insurance—Liability 1,140.9
Specialty Personal Automobile Insurance—Physical Damage 42.2
Commercial Automobile Insurance—Liability 191.2
Commercial Automobile Insurance—Physical Damage 3.0
Preferred Personal Automobile Insurance—Liability 212.9
Preferred Personal Automobile Insurance—Physical Damage 5.1
Homeowners Insurance 72.3
Other 57.5
Total 1,725.1
Reinsurance Recoverables on Unpaid Losses and Allocated LAE:
Specialty Personal Automobile Insurance—Liability 8.7
Commercial Automobile Insurance—Liability 9.4
Preferred Personal Automobile Insurance—Liability 25.2
Homeowners Insurance 15.5
Other 6.8
Total 65.6
Unallocated LAE 179.1
Property and Casualty Insurance Reserves, Gross of Reinsurance $ 1,969.8


DOLLARS IN MILLIONS	2021
Property and Casualty Insurance Reserves, Net of Reinsurance:
Specialty Personal Automobile Insurance—Liability	$	1,722.3
Specialty Personal Automobile Insurance—Physical Damage	63.6
Commercial Automobile Insurance—Liability	300.4
Commercial Automobile Insurance—Physical Damage	9.9
Preferred Personal Automobile Insurance—Liability	262.2
Preferred Personal Automobile Insurance—Physical Damage	5.4
Homeowners Insurance	81.4
Other	46.7
Total	$	2,491.9
Reinsurance Recoverables on Unpaid Losses and Allocated LAE:
Specialty Personal Automobile Insurance—Liability	$	10.3
Specialty Personal Automobile Insurance—Physical Damage	—
Commercial Automobile Insurance—Liability	3.2
Commercial Automobile Insurance—Physical Damage	—
Preferred Personal Automobile Insurance—Liability	19.2
Preferred Personal Automobile Insurance—Physical Damage	—
Homeowners Insurance	5.0
Other	4.2
Total	41.9
Unallocated LAE	238.9
Property and Casualty Insurance Reserves, Gross of Reinsurance	$	2,772.7

The following is supplementary information about average historical claims duration as of December 31, ~~2019.~~2021.


Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)
Years	1		2		3		4		5
Specialty Personal Automobile Insurance—Liability	39.1	%	79.3	%	91.7	%	95.8	%	97.7	%
Specialty Personal Automobile Insurance—Physical Damage	91.9		100.8		100.2		100.1		100.0
Commercial Automobile Insurance—Liability	27.5		60.7		79.1		88.7		93.7
Commercial Automobile Insurance—Physical Damage	87.2		99.9		99.9		100.0		100.0
Preferred Personal Automobile Insurance—Liability	31.9		64.6		81.8		89.9		94.2
Preferred Personal Automobile Insurance—Physical Damage	96.1		100.7		99.9		99.9		100.0
Homeowners Insurance	67.0		94.0		96.8		98.5		99.1

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)
Years 1 2 3 4 5
Specialty Personal Automobile Insurance—Liability 43.2 % 81.1 % 92.3 % 96.3 % 98.4 %
Specialty Personal Automobile Insurance—Physical Damage 93.9 % 100.7 % 100.1 % 100.0 % 99.9 %
Commercial Automobile Insurance—Liability 29.9 % 61.1 % 77.6 % 88.8 % 97.2 %
Commercial Automobile Insurance—Physical Damage 92.2 % 100.0 % 99.7 % 100.0 % 100.0 %
Preferred Personal Automobile Insurance—Liability 37.2 % 68.2 % 83.9 % 91.6 % 95.6 %
Preferred Personal Automobile Insurance—Physical Damage 98.0 % 100.6 % 100.1 % 100.0 % 100.0 %
Homeowners Insurance 69.3 % 96.3 % 96.4 % 98.2 % 99.0 %

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Property and Casualty Insurance Reserve activity for the years endedDecember 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~2019 was:

DOLLARS IN MILLIONS 2019 2018 2017
Beginning Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year $ 1,874.9
$ 1,016.8
$ 931.4
Less Reinsurance Recoverables at Beginning of Year 101.9
53.1
50.2
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year 1,773.0
963.7
881.2
Property and Casualty Insurance Reserves Acquired, Net of Reinsurance 3.6
695.1
—
Incurred Losses and LAE related to:
Current Year 2,879.5
2,093.4
1,454.1
Prior Years (71.1 ) (7.4 ) 18.9
Total Incurred Losses and LAE 2,808.4
2,086.0
1,473.0
Paid Losses and LAE related to:
Current Year: 1,682.1
1,300.8
868.1
Prior Years 998.7
671.0
522.4
Total Paid Losses and LAE 2,680.8
1,971.8
1,390.5
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Year 1,904.2
1,773.0
963.7
Plus Reinsurance Recoverables at End of Year 65.6
101.9
53.1
Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Year $ 1,969.8
$ 1,874.9
$ 1,016.8


DOLLARS IN MILLIONS	2021		2020		2019
Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year	$	1,982.5	$	1,969.8	$	1,874.9
Less Reinsurance Recoverables at Beginning of Year	50.1		65.6		101.9
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year	1,932.4		1,904.2		1,773.0
Property and Casualty Insurance Reserves Acquired, Net of Reinsurance	211.1		—		3.6
Incurred Losses and LAE related to:
Current Year	4,052.7		2,873.6		2,879.5



Prior Years	106.7		36.4		(71.1)
Total Incurred Losses and LAE	4,159.4		2,910.0		2,808.4
Paid Losses and LAE related to:
Current Year:	2,303.4		1,679.1		1,682.1



Prior Years	1,268.7		1,202.7		998.7
Total Paid Losses and LAE	3,572.1		2,881.8		2,680.8
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Year	2,730.8		1,932.4		1,904.2
Plus Reinsurance Recoverables at End of Year	41.9		50.1		65.6
Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Year	$	2,772.7	$	1,982.5	$	1,969.8

Property and Casualty Insurance Reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends are likely to differ from these historical experience patterns and economic conditions. Loss experience and loss trends emerge over several years from the dates of loss inception. The Company monitors such emerging loss trends on a quarterly basis. Changes in such estimates are included in the Consolidated Statements of Income in the period of change.

In 2021, the Company increased its property and casualty insurance reserves by $106.7 million to recognize adverse development of loss and LAE reserves from prior accident years. Specialty Personal Automobile insurance loss and LAE reserves developed adversely by $85.3 million due primarily to legal developments and increased severity in personal injury protection coverage in Florida and other liability coverages. Specialty Commercial Automobile insurance loss and LAE reserves developed adversely by $12.4 million due primarily to the emergence of less favorable loss patterns than expected for liability insurance. Preferred Personal Automobile insurance loss and LAE reserves developed adversely by $12.1 million due primarily to the emergence of less favorable loss patterns than expected for liability insurance. Homeowners insurance loss and LAE reserves developed favorably by $6.5 million due primarily to the emergence of more favorable loss patterns than expected. Other personal lines loss and LAE reserves developed adversely by $3.4 million due primarily to the emergence of less favorable loss patterns than expected for prior accident years.

In 2020, the Company increased its property and casualty insurance reserves by $36.4 million to recognize adverse development of loss and LAE reserves from prior accident years. Specialty Personal Automobile insurance loss and LAE reserves developed adversely by $28.2 million due primarily to the emergence of less favorable loss patterns than expected for both liability and physical damage insurance. Specialty Commercial Automobile insurance loss and LAE reserves included favorable development of $12.9 million due primarily to the emergence of more favorable loss patterns than expected for liability insurance. Preferred Personal Automobile insurance loss and LAE reserves developed adversely by $26.7 million due primarily to the emergence of less favorable loss patterns than expected for liability insurance. Homeowners insurance loss and LAE reserves developed favorably by $2.1 million due primarily to the emergence of more favorable loss patterns than expected. Other personal lines loss and LAE reserves developed favorably by $3.5 million due primarily to the emergence of more favorable loss patterns than expected for prior accident years.

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

In 2019, the Company decreased its property and casualty insurance reserves by $71.1 million to recognize favorable development of loss and LAE reserves from prior accident years. Specialty Personal Automobile insurance loss and LAE reserves developed favorably by $23.8 million due primarily to the emergence of more favorable loss patterns than expected for both liability and physical damage insurance for the 2018 accident year. Commercial lines insurance loss and LAE ~~reserves~~ included favorable development of $12.9 million due primarily to the emergence of more favorable loss patterns than expected for commercial automobile liability insurance for 2018 and 2017 accident years. Preferred Personal Automobile insurance loss and LAE reserves developed favorably by $8.2 million due primarily to the emergence of more favorable loss patterns than expected for liability insurance for several prior accident years and for physical damage insurance for 2018 accident year. Homeowners insurance loss and LAE reserves developed favorably by $19.7 million due primarily to the net reinsurance impact from the sale of subrogation rights related to the 2017 and 2018 California Wildfires. Other personal lines loss and LAE reserves developed favorably by $6.5 million due primarily to the emergence of more favorable loss patterns than expected for prior accident years.

In 2018, the Company decreased its property and casualty insurance reserves by $7.4 million to recognize favorable development of loss and LAE reserves from prior accident years. Specialty Personal Automobile insurance loss and LAE reserves developed adversely by $5.5 million due primarily to the emergence of loss patterns that were worse than expected for both physical damage and liability insurance for the 2017 accident year, partially offset by the emergence of loss patterns that were better than expected for 2016 and prior accident years. Commercial lines insurance loss and LAE reserves developed favorably by $6.1 million. Preferred Personal Automobile insurance loss and LAE reserves developed favorably by $5.8 million due primarily to the emergence of loss patterns that were better than expected for both physical damage and liability insurance for the 2017 accident year and, to a lesser extent, for liability insurance for the 2015 and prior accident years, partially offset by the emergence of loss patterns that was worse than expected for the 2016 accident year. Homeowners insurance loss and LAE reserves developed adversely by $3.2 million due primarily to the emergence of non-catastrophe loss patterns that were worse than expected for the 2016 accident year. Other personal lines loss and LAE reserves developed favorably by $4.3 million due primarily to the emergence of more favorable loss patterns than expected for prior accident years.

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)~~

In 2017, the Company increased its property and casualty insurance reserves by $18.9 million to recognize adverse development of loss and LAE reserves from prior accident years. Specialty Personal automobile insurance loss and LAE reserves developed adversely by $2.9 million. Commercial lines insurance loss and LAE reserves included favorable development of $0.6 million. Preferred Personal automobile insurance loss and LAE reserves developed adversely by $19.3 million due primarily to the emergence of loss patterns that were worse than expected for both physical damage and liability insurance for the 2016 accident year and, to a lesser extent, for liability insurance for the 2015 and 2014 accident years, partially offset by the emergence of more favorable loss patterns than expected for the 2013 and prior accident years. Homeowners insurance loss and LAE reserves developed adversely by $1.0 million due primarily to the emergence of non-catastrophe loss patterns that were worse than expected for the 2016 accident year, and to a lesser extent, the 2013 and prior accident years, partially offset by $3.7 million of favorable development on catastrophes primarily for the 2016 accident year and, to a lesser extent, the 2015 accident year. Other personal lines loss and LAE reserves developed favorably by $3.7 million due primarily to the emergence of more favorable loss patterns than expected for the 2015, 2014, 2013 and prior accident years partially offset by the emergence of loss patterns that were worse than expected for the 2016 accident year.

The Company cannot predict whether loss and LAE reserves will develop favorably or unfavorably from the amounts reported in the Consolidated Financial Statements. The Company believes that any such development will not have a material effect on the Company’s consolidated financial position, but could have a material effect on the Company’s consolidated financial results for a given period.

Reinsurance recoverables on property and casualty insurance reserves were ~~$65.6~~$41.9 million and ~~$101.9~~$50.1 million at December 31, ~~2019~~2021 and ~~2018~~,2020, respectively. These recoverables are concentrated with several reinsurers, the ~~vast~~ majority of which are highly rated by one or more of the principal investor and/or insurance company rating agencies. While most of these recoverables were unsecured at December 31, ~~2019~~2021 and ~~2018~~,2020, the agreements with the reinsurers generally provide for some form of collateralization upon the occurrence of certain events.

Receivables from Policyholders - Allowance for Expected Credit Losses

~~NOTE 7. POLICYHOLDER CONTRACT LIABILITIES~~

~~Policyholder Contract Liabilities at~~The following table presents receivables from policyholders, net of the allowance for expected credit losses including a rollforward of changes in the allowance for expected credit losses for the year ended December 31, ~~2019 and 2018 were as follows:~~2021.


(Dollars in Millions)	Receivables from Policyholders, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
Balance at Beginning of Year	$	1,194.5	$	20.9
Provision for Expected Credit Losses			50.5
Write-offs of Uncollectible Receivables from Policyholders			(57.8)
Balance at End of Period	$	1,418.7	$	13.6

DOLLARS IN MILLIONS December 31,
2019 2018
FHLB Funding Agreements $ 243.4
$ 10.0
Other 66.4
66.8
Total $ 309.8
$ 76.8

~~United Insurance has entered into funding agreements with~~The following table presents receivables from policyholders, net of the ~~FHLB~~allowance for expected credit losses including a rollforward of Chicago in exchange for cash, which it uses for spread lending purposes. United Insurance received advances of $614.5 million from the FHLB of Chicago and made repayments of $381.1 million under the spread lending program in 2019. United Insurance received advances of $10.0 million from the FHLB of Chicago in 2018 under the spread lending program.

~~When a funding agreement is issued, United Insurance is then required to post collateral~~changes in the ~~form of eligible securities including mortgage-backed, government, and agency debt instruments~~allowance for ~~each of~~expected credit losses for the advances that are entered. The fair value of the collateral pledged must be maintained at certain specified levels above the borrowed amount, which can vary depending on the assets pledged. If the fair value of the collateral declines below these specified levels of the amount borrowed, United Insurance would be required to pledge additional collateral or repay outstanding borrowings. Upon any event of default by United Insurance, the FHLB’s recovery on the collateral is limited to the amount of United Insurance’s liability under the funding agreements to the FHLB of Chicago.year ended December 31, 2020.


(Dollars in Millions)	Receivables from Policyholders, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
Balance at Beginning of Year	$	1,117.1	$	22.3
Provision for Expected Credit Losses			45.5
Write-offs of Uncollectible Receivables from Policyholders			(46.9)
Balance at End of Period	$	1,194.5	$	20.9

9896

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 7. ~~POLICYHOLDER CONTRACT LIABILITIES (Continued)~~INSURANCE EXPENSES

Insurance Expenses for the years ended December 31, 2021, 2020 and 2019 were:


DOLLARS IN MILLIONS	2021		2020		2019
Commissions	$	817.6	$	745.8	$	708.8
General Expenses	339.5		307.4		278.0
Premium Tax Expense	104.3		94.2		93.5
Total Costs Incurred	1,261.4		1,147.4		1,080.3
Policy Acquisition Costs:
Deferred	(772.6)		(693.4)		(475.2)
Amortized	684.3		641.8		408.3
Net Policy Acquisition Costs Amortized	(88.3)		(51.6)		(66.9)
Amortization of VOBA	45.0		4.7		6.3
Insurance Expenses	$	1,218.1	$	1,100.5	$	1,019.7

Commissions for servicing policies are expensed as incurred, rather than deferred and amortized. The Company recorded amortization of Deferred Policy Acquisition Costs of $684.3 million, $641.8 million and $408.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

~~United Insurance’s liability under~~

NOTE 8. INVESTMENTS

Fixed Maturities

The amortized cost and estimated fair values of the ~~funding agreements with the FHLB of Chicago, the amount of collateral pledged under such agreements and FHLB of Chicago common stock owned by United Insurance~~Company’s Investments in Fixed Maturities at December 31, ~~2019 and 2018 is presented below.~~2021 were:

DOLLARS IN MILLIONS

2019 2018
Liability under Funding Agreements $ 243.4
$ 10.0
Fair Value of Collateral Pledged $ 287.8
$ 15.7
FHLB of Chicago Common Stock Owned at Cost $ 4.9
$ 0.8


DOLLARS IN MILLIONS	Amortized Cost		Gross Unrealized				Allowance for Expected Credit Losses		Fair Value
			Gains		Losses
U.S. Government and Government Agencies and Authorities	$	610.1	$	29.2	$	(1.9)	$	—	$	637.4
States and Political Subdivisions	1,752.5		144.6		(7.0)		—		1,890.1
Foreign Governments	6.7		—		(1.2)		—		5.5
Corporate Securities:
Bonds and Notes	3,929.0		481.4		(16.0)		(7.5)		4,386.9
Redeemable Preferred Stocks	7.0		0.4		—		—		7.4
Collateralized Loan Obligations	756.0		0.9		(4.8)		—		752.1
Other Mortgage- and Asset-backed	296.9		12.4		(1.8)		—		307.5
Investments in Fixed Maturities	$	7,358.2	$	668.9	$	(32.7)	$	(7.5)	$	7,986.9

~~NOTE 8. DEBT~~

~~Amended and Extended Credit Agreement and Term Loan Facility~~

On June 8, 2018, the Company entered into an amended and extended credit agreement and term loan facility. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to $300.0 million and extended the maturity date to June 8, 2023. The term loan facility included a delayed-draw feature with borrowing capacity of $250.0 million and a maturity date two years from the borrowing date (see discussion below under heading, “Term Loan Due 2020,” for additional information). On June 4, 2019, the Company utilized the accordion feature under the credit agreement to increase its credit borrowing capacity by $100.0 million, resulting in the available credit commitments increasing from $300.0 million to $400.0 million. The Company incurred $0.1 million in additional debt issuance costs in connection with the utilization of the accordion feature which, in addition to the $1.1 million of remaining unamortized costs under the credit agreement, will be amortized under the remaining term of the credit agreement. There were 0 outstanding borrowings under the credit agreement at either December 31, 2019 or December 31, 2018.

~~Long-term Debt~~

The Company designates debt obligations as either short-term or long-term based on maturity date at issuance, or in the case of the 2022 Senior Notes, based on the date of assumption. Total amortized cost of Long-term Debt outstanding at ~~December 31, 2019~~ ~~and~~ ~~2018~~ ~~was:~~

DOLLARS IN MILLIONS 2019 2018
Term Loan due June 29, 2020 $ —
$ 34.9
Term Loan due July 5, 2023 49.9
—
5.0% Senior Notes due September 19, 2022 279.9
281.5
4.35% Senior Notes due February 15, 2025 448.6
448.4
7.375% Subordinated Debentures due February 27, 2054 —
144.2
Total Long-term Debt Outstanding $ 778.4
$ 909.0

~~Term Loan Due 2020~~

On June 29, 2018, the Company borrowed $250.0 million under its delayed-draw term loan facility dated June 8, 2018, to facilitate the funding of the acquisition of Infinity. The proceeds from the term loan facility, net of debt issuance costs, were $249.4 million. On December 28, 2018, the Company repaid $215.0 million of the outstanding term loan. On May 31, 2019, remaining outstanding balance of $35.0 million was repaid.

~~Term Loan Due 2023~~

On June 4, 2019, the Company entered into a delayed-draw term loan facility with a borrowing capacity of $50.0 million and a maturity date four years from the borrowing date (the “2023 Term Loan”). On July 5, 2019, the Company borrowed $49.9 million, net of debt issuance costs, under the 2023 Term Loan, with a final maturity date of July 5, 2023. The agreement includes a mutual option to extend the maturity date by one year.

9997

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 8. ~~DEBT~~INVESTMENTS (Continued)

~~5.0% Senior Notes~~The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2020 were:


	Amortized Cost		Gross Unrealized				Allowance for Expected Credit Losses		Fair Value
DOLLARS IN MILLIONS			Gains		Losses
U.S. Government and Government Agencies and Authorities	$	536.5	$	48.9	$	(0.1)	$	—	$	585.3
States and Political Subdivisions	1,404.3		185.4		(0.2)		—		1,589.5
Foreign Governments	6.6		—		(1.1)		(0.3)		5.2
Corporate Securities:
Bonds and Notes	3,749.5		689.5		(10.6)		(3.0)		4,425.4
Redeemable Preferred Stocks	7.0		0.5		—		0		7.5
Collateralized Loan Obligations	785.1		2.3		(19.7)		—		767.7
Other Mortgage- and Asset-backed	203.7		21.6		—		—		225.3
Investments in Fixed Maturities	$	6,692.7	$	948.2	$	(31.7)	$	(3.3)	$	7,605.9

Other Receivables included $0.6 million and $5.1 million of unsettled sales of Investments in Fixed Maturities at December 31, 2021 and December 31, 2020, respectively. Accrued Expenses and Other Liabilities included unsettled purchases of Investments in Fixed Maturities of $12.7 million and $4.3 million at December 31, 2021 and 2020, respectively.

The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2021 by contractual maturity were:


DOLLARS IN MILLIONS	Amortized Cost		Fair Value
Due in One Year or Less	$	109.0	$	111.4
Due after One Year to Five Years	998.3		1,044.2
Due after Five Years to Ten Years	1,469.1		1,555.9
Due after Ten Years	3,255.6		3,730.1
Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date	1,526.2		1,545.3
Investments in Fixed Maturities	$	7,358.2	$	7,986.9

Investments in Mortgage- and Asset-backed Securities Not Due ~~2022~~

~~Infinity’s liabilities~~ at a Single Maturity Date at December 31, 2021 consisted of securities issued by the ~~acquisition date included $275.0 million principal amount, 5.0% Senior Notes due September 19, 2022 (“2022 Senior Notes”). The 2022 Senior Notes were recorded at~~Government National Mortgage Association with a fair value as of $406.4 million, securities issued by the ~~acquisition date, $282.1~~Federal National Mortgage Association with a fair value of $46.8 million, securities issued by the Federal Home Loan Mortgage Corporation with ~~the $7.1 million premium being amortized as~~ a ~~reduction to interest expense over the remaining term, resulting in an effective interest rate~~fair value of ~~4.36%. On November 30, 2018, Kemper executed a guarantee to fully and unconditionally guarantee the payment and performance obligations of the 2022 Senior Notes.~~

~~4.35% Senior Notes Due 2025~~

Kemper has $450.0 million aggregate principal of 4.35% senior notes due February 15, 2025 (the “2025 Senior Notes”) outstanding as of December 31, 2019. Kemper initially issued $250.0 million of the notes in February of 2015 and issued an additional $200.0 million of the notes in June of 2017. The additional notes are fungible with the initial notes issued in 2015, and together are treated as part of a single series for all purposes under the indenture governing the 2025 Senior Notes. The 2025 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time at Kemper’s option at specified redemption prices.

~~Redemption of 7.375% Subordinated Debentures Due 2054~~

On June 7, 2019, Kemper issued a notice of redemption for the entire $150.0 million aggregate principal outstanding of its 7.375% Subordinated Debentures due 2054 (the “7.375% Subordinated Debentures”) at a redemption price equal to 100% of their principal, plus accrued and unpaid interest on the redemption date. On July 8, 2019, Kemper completed the redemption, and the 7.375% Subordinated Debentures were repaid in full. The Company recognized a loss on early extinguishment of debt of $5.8 million in its December 31, 2019 Consolidated Statement of Income.

The Company used the proceeds received from Kemper’s common stock offering on June 7, 2019, as well as a portion of the proceeds from its July 5, 2019 borrowing under the 2023 Term Loan, to repay the 7.375% Subordinated Debentures. See Note 10, “Shareholders’ Equity,” for additional information regarding the common stock offering.

~~Interest Expense and Interest Paid~~

~~Interest Expense, including facility fees, accretion of discount, amortization of premium and amortization of issuance costs, was $42.5 million, $43.3~~$32.6 million and $34.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. Interest paid, including facility fees, was $44.0 million, $37.9 million and $34.7 million for the years ended December 31, 2019, 2018 and 2017, respectively.securities of other non-governmental issuers with a fair value of $1,059.5 million.

~~NOTE 9. LEASES~~

The Company leases certain office space under non-cancelable operating leases, with initial terms typically ranging from one to fifteen years, along with options that permit renewals for additional periods. The Company also leases certain equipment under non-cancelable operating leases, with initial terms typically ranging from one to five years. Minimum rent is expensed on a straight-line basis over the term of the lease. See Note 2, “Summary of Accounting Policies and Accounting Changes” under sub-caption “Adoption of New Accounting of New Accounting Guidance - Guidance Adopted in 2019” for additional information regarding the accounting for leases.

~~The following table presents operating lease ROU assets and lease liabilities.~~

DOLLARS IN MILLIONS 2019
Operating Lease Right-of-Use Assets $ 75.6
Operating Lease Liabilities 93.2

~~100~~98

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE ~~9. LEASES~~8. INVESTMENTS (Continued)

~~Lease expenses~~An aging of unrealized losses on the Company’s Investments in Fixed Maturities at December 31, 2021 is presented below.


DOLLARS IN MILLIONS	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	168.7	$	(1.8)	$	1.2	$	(0.1)	$	169.9	$	(1.9)
States and Political Subdivisions	385.0		(6.9)		1.5		(0.1)		386.5		(7.0)
Foreign Governments	2.2		(0.6)		2.6		(0.6)		4.8		(1.2)
Corporate Securities:
Bonds and Notes	596.8		(13.1)		49.3		(2.9)		646.1		(16.0)
Redeemable Preferred Stocks	0.1		—		—		—		0.1		—
Collateralized Loan Obligations	250.9		(2.6)		192.6		(2.2)		443.5		(4.8)
Other Mortgage- and Asset-backed	100.1		(1.8)		—		—		100.1		(1.8)
Total Fixed Maturities	$	1,503.8	$	(26.8)	$	247.2	$	(5.9)	$	1,751.0	$	(32.7)

The Company regularly reviews its fixed maturity investment portfolio for factors that may indicate that a decline in fair value of an investment has resulted from an expected credit loss. The portions of the declines in the fair values of fixed maturity investments that are ~~primarily included in insurance expenses~~determined to be due to expected credit losses are reported as losses in the Consolidated Statements of ~~Income. Additional information regarding the Company’s operating leases is presented below.~~

DOLLARS IN MILLIONS 2019
Lease Cost:
    Amortization of Right-of-Use Assets - Finance Leases $ 0.7
    Operating Lease Cost 20.7
    Short-Term Lease Cost (1) 0.1
Total Expense 21.5
Less: Sublease Income (2) 0.1
Total Lease Cost $ 21.4

~~(1) - Leases with an initial term of twelve months of less are not recorded on the balance sheet.~~

~~(2) - Sublease income consists of rent from third parties of office space and is recognized as part of other income~~Income in the ~~Consolidated Statements~~periods when such determinations are made.

At December 31, 2021, the Company did not have the intent to sell these investments, and it was not more likely than not that the Company would be required to sell these investments before an anticipated recovery of ~~Income.~~

~~Other Information on Operating Leases~~

~~Supplemental cash flow information~~value. The Company evaluated these investments for credit losses at December 31, 2021. The Company considers many factors in evaluating whether the unrealized losses were credit related including, but not limited to, the extent to which the fair value has been less than amortized cost, conditions related to the ~~Company’s operating leases for the year-ended December 31, 2019 is as follows:~~

DOLLARS IN MILLIONS 2019
Operating Cash Flows from Operating Leases (Fixed Payments) $ 20.0
Operating Cash Flows from Operating Leases (Liability Reduction) 17.6
Financing Cash Flows from Finance Leases 0.7
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities 25.9

~~Significant judgments and assumptions for determining lease asset and liability as December 31, 2019 are presented below.~~



~~Weighted-average Remaining Lease Term - Finance Leases~~	~~1.7 years~~
~~Weighted-average Remaining Lease Term - Operating Leases~~	~~7.0 years~~
~~Weighted-average Discount Rate - Finance Leases~~	~~4.0~~	%
~~Weighted-average Discount Rate - Operating Leases~~	~~3.9~~	%

~~Most~~security, industry, or geographic area, payment structure of the ~~Company’s leases do not provide an implicit rate. Accordingly,~~investment and the likelihood of the issuer’s ability to make contractual cash flows, defaults or other collectability concerns related to the issuer, changes in the ratings assigned by a rating agency, and other credit enhancements that affect the investment’s expected performance. The Company ~~uses its incremental borrowing rate based~~determined that the unrealized losses on ~~the information available~~these securities were due to non-credit related factors at the ~~commencement date~~evaluation date.

Investment-grade fixed maturity investments comprised $23.7 million and below-investment-grade fixed maturity investments comprised $9.0 million of the unrealized losses on investments in ~~determining the present value of its lease payments.~~

~~Future minimum lease payments under finance and operating leases~~fixed maturities at December 31, ~~2019 were:~~

DOLLARS IN MILLIONS
Finance
Leases

Operating
Leases
2020 $ 0.3
$ 20.5
2021 0.2
19.3
2022 —
17.0
2023 —
14.7
2024 —
8.3
2025 and Thereafter —
28.1
Total Future Payments $ 0.5
$ 107.9
Less Discount —
14.7
Present Value of Minimum Lease Payments $ 0.5
$ 93.2

2021. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 4% of the amortized cost basis of the investment.

~~101~~99

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE ~~9. LEASES~~8. INVESTMENTS (Continued)

~~Future minimum lease payments under finance and operating leases~~An aging of unrealized losses on the Company’s Investments in Fixed Maturities at December 31, ~~2018 were:~~

DOLLARS IN MILLIONS
Finance
Leases

Operating
Leases
2019 $ 0.7
$ 20.5
2020 0.7
18.4
2021 0.3
16.9
2022 0.2
15.0
2023 —
12.5
2024 and Thereafter —
27.1
Total Future Payments $ 1.9
$ 110.4
Less Imputed Interest —

Present Value of Minimum Lease Payments $ 1.9

2020 is presented below.

~~The total of minimum rentals to be received in the future under non-cancelable subleases was $0.8~~


DOLLARS IN MILLIONS	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	10.5	$	(0.1)	$	—	$	—	$	10.5	$	(0.1)
States and Political Subdivisions	23.3		(0.2)		—		—		23.3		(0.2)
Foreign Governments	0.5		(0.1)		2.6		(1.0)		3.1		(1.1)
Corporate Securities:
Bonds and Notes	132.9		(7.5)		46.1		(3.1)		179.0		(10.6)

Collateralized Loan Obligations	145.2		(3.8)		371.4		(15.9)		516.6		(19.7)
Other Mortgage- and Asset-backed	6.3		—		—		—		6.3		—
Total Fixed Maturities	$	318.7	$	(11.7)	$	420.1	$	(20.0)	$	738.8	$	(31.7)

Investment-grade fixed maturity investments comprised $8.0 million and ~~$0.0~~below-investment-grade fixed maturity investments comprised $23.7 million of the unrealized losses on investments in fixed maturities at December 31, ~~2019 and 2018, respectively.~~

~~NOTE 10. SHAREHOLDERS’ EQUITY~~

~~Common Stock Issuance~~

Kemper is authorized to issue 20 million shares of $0.10 par value preferred stock and 100 million shares of $0.10 par value common stock. No preferred shares were issued or outstanding at December 31, 2019 and 2018. There were 66,665,888 shares and ~~64,756,833~~ ~~shares of common stock outstanding at~~ ~~December 31, 2019~~ ~~and~~ ~~2018, respectively.~~

~~On June 7, 2019,~~2020. For below-investment-grade fixed maturity investments in an unrealized loss position, the Company completed a public offering of its common stock and issued 1,552,500 shares of common stock, at $83.00 per share. Gross proceeds from the offering were $128.9 million. Transaction costs, including the underwriting discount, were $1.7 million, of which $0.1 millionunrealized loss amount, on average, was accrued for and included in Accrued Expenses and Other Liabilities on the Company’s Consolidated Balance Sheet at December 31, 2019. In July 2019, the Company used the net proceeds of $127.2 million from the offering, together with a portionapproximately 11% of the ~~proceeds from the 2023 Term Loan (see Note 8, “Debt”~~) ~~to redeem all $150.0 million in aggregate outstanding principal of its 7.375% Subordinated Debentures due 2054.~~

~~In conjunction with the closing~~amortized cost basis of the ~~Infinity acquisition, Kemper issued 13,184,107 shares of common stock~~investment.

Fixed Maturities - Expected Credit Losses

The following table sets forth the change in allowance for credit losses on ~~July 2, 2018, at $74.53 per share. See Note 3, “Acquisition of Business,” to the Consolidated Financial Statements~~fixed maturities available-for-sale by major security type for ~~additional information.~~

~~Kemper did not repurchase any of its common stock in open market transactions in~~ ~~2019~~, ~~2018~~ or ~~2017~~.

~~Employee Stock Purchase Plan~~

During the second quarter of 2019, the Company’s stockholders approved the adoption of the Kemper Employee Stock Purchase Plan (“ESPP”) and the reservation of 1,300,000 shares for issuance under the ESPP. The purpose of the ESPP is to provide eligible employees of the Company and its subsidiaries with the opportunity to purchase shares of common stock at a discounted price through payroll deductions with the goal of enhancing employees’ sense of participation in the Company and further align employee interests with those of the Company’s shareholders.

Under the ESPP, eligible employees may purchase shares of Company common stock through payroll deductions of between 1% and 10% of after-tax compensation each pay period, with a maximum participation of $25,000 annually. The shares are purchased at the end of each three-month offering period at a 15% discount from the closing market price as reported on the New York Stock Exchange on the last trading day of the offering period. The Company issued 24,080 shares under the plan in 2019 at an average discounted price of $66.08 per share. Compensation costs charged against income were $0.3 million for the year ended December 31, ~~2019.~~2021.

~~Dividends~~


	Foreign Governments		Corporate Bonds and Notes		Total
(Dollars in Millions)
Beginning of the Year	$	0.3	$	3.0	$	3.3
Additions for Securities for which No Previous Expected Credit Losses were Recognized	—		5.6		5.6
Reduction Due to Sales	—		—		—
Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized	(0.3)		(0.8)		(1.1)
Write-offs Charged Against Allowance	—		(0.3)		(0.3)
End of Year	$	—	$	7.5	$	7.5

~~102~~100

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE ~~10. SHAREHOLDERS’ EQUITY~~8. INVESTMENTS (Continued)

~~insurance subsidiaries would be able~~The following table sets forth the change in allowance for credit losses on fixed maturities available-for-sale by major security type for year ended December 31, 2020.


	Foreign Governments		Corporate Bonds and Notes		Total
(Dollars in Millions)
Beginning of the Year	$	—	$	—	$	—
Impact of Adopting ASU 2016-13	—		—		—
Additions for Securities for which No Previous Expected Credit Losses were Recognized	1.2		5.9		7.1
Reduction Due to Sales	(0.7)		(1.3)		(2)
Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized	(0.2)		(0.2)		(0.4)
Write-offs Charged Against Allowance	—		(1.4)		(1.4)
End of Year	$	0.3	$	3.0	$	3.3

Equity Securities

Equity Securities at Fair Value

Equity securities with readily-determinable fair values, including equity securities which the Company previously classified as Fair Value Option Investments, are classified as Equity Securities at Fair Value in the Consolidated Balance Sheets with changes in fair value recorded as Income from Change in Fair Value of Equity and Convertible Securities in the Consolidated Statements of Income. Net unrealized gains arising during the year ended December 31, 2021 and recognized in earnings, related to ~~pay $435.4~~such investments still held as of December 31, 2021 were $111.9 million.

Equity Securities at Modified Cost

For Equity Securities at Modified Cost, the Company performs a qualitative impairment analysis on a quarterly basis consisting of various factors such as earnings performance, current market conditions, changes in credit ratings, changes in the regulatory environment and other factors. If the qualitative analysis identifies the presence of impairment indicators, the Company estimates the fair value of the investment. If the estimated fair value is below the carrying value, the Company records an impairment in the Consolidated Statement of Income to reduce the carrying value to the estimated fair value. When the Company identifies observable transactions of the same or similar securities to those held by the Company, the Company increases or decreases the carrying value to the observable transaction price. The Company recognized no decrease in the carrying value due to observable transactions for the year ended December 31, 2021. The Company recognized an impairment of $4.2 million on Equity Securities at Modified Cost for the year ended December 31, 2021 as a result of the Company’s qualitative impairment analysis. The Company has recognized no cumulative increases in ~~dividends~~the carrying value due to ~~Kemper without prior regulatory approval. Kemper’s insurance subsidiaries had~~observable transactions, no cumulative decreases in the carrying value due to observable transactions and $10.0 million of cumulative impairments on Equity Securities at Modified Cost held as of December 31, 2021.

Equity Method Limited Liability Investments

In 2021 and 2020, aggregate investment income (losses) from Equity Method Limited Liability Investments exceeded 10% of the Company’s pretax consolidated net income. Accordingly, the Company is disclosing aggregated summarized financial data for its Equity Method Limited Liability Investments for all periods presented in the Consolidated Financial Statements. Such aggregated summarized financial data does not represent the Company’s proportionate share of the Equity Method Limited Liability Investment assets or earnings. Aggregate total assets of ~~$3.9 billion, determined~~the Equity Method Limited Liability Investments in ~~accordance with GAAP, that were restricted from payment to Kemper without prior regulatory approval at~~which the Company invested totaled $5,042.5 million, $3,554.5 million and $2,368.1 million, as of December 31, ~~2019.~~2021, 2020 and 2019, respectively. Aggregate total liabilities of the Equity Method Limited Liability Investments in which the Company invested

101

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 8. INVESTMENTS (Continued)

totaled $2,074.8 million, $1,602.5 million and ~~$454.7~~$817.2 million, atas of December 31, 2021, 2020 and 2019, ~~and 2018,~~ respectively. ~~Statutory~~Aggregate net income ~~for~~of the ~~Company’s life~~Equity Method Limited Liability Investments in which the Company invested totaled $585.1 million, $74.9 million and ~~health insurance subsidiaries was $90.4~~$78.0 million~~$143.9 million~~ ~~and~~ ~~$84.1 million~~ for the years ended December 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~,2019, respectively. ~~Statutory capital~~The aggregate summarized financial data is based on the most recent and ~~surplus~~sufficiently-timely financial information available to the Company as of the respective reporting dates and periods. The Company’s maximum exposure to loss at December 31, 2021 is limited to the total carrying value of $241.9 million. In addition, the Company had outstanding commitments totaling approximately $198.5 million to fund Equity Method Limited Liability Investments at December 31, 2021. At December 31, 2021, 4.0% of Equity Method Limited Liability Investments were reported without a reporting lag. 12.3% of the total carrying value were reported with a one month lag and the remainder were reported with more than a one month lag.

Alternative Energy Partnership Investments

Alternative Energy Partnership Investments include partnerships formed to invest in newly installed residential solar leases and power purchase agreements. As a result of this investment, the Company has the right to certain investment tax credits and tax depreciation benefits, and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers for a fixed period of time. The Hypothetical Liquidation at Book Value (“HLBV”) equity method of accounting is used for the Company’s ~~property and casualty insurance subsidiaries was $1.6 billion and $1.4 billion~~investments in Alternative Energy Partnership Investments.

The Company’s maximum exposure to loss at December 31, ~~2019 and 2018, respectively. Statutory net income for~~2021 is limited to the total carrying value of $39.6 million. The Company has no outstanding commitments to fund Alternative Energy Partnership Investments as of December 31, 2021. Alternative Energy Partnership Investments are reported on a three month lag.

Other Investments

The carrying values of the Company’s ~~property and casualty insurance subsidiaries was $347.6 million,~~ ~~$236.4 million~~ ~~and~~ ~~$56.9 million~~ ~~for the years ended~~ ~~December 31, 2019~~, ~~2018~~ ~~and~~ ~~2017, respectively. Statutory capital and surplus and statutory net income exclude parent company operations.~~

Kemper’s insurance subsidiaries are also required to hold minimum levels of statutory capital and surplus to satisfy regulatory requirements. The minimum statutory capital and surplus, or company action level risk-based capital (“RBC”), necessary to satisfy regulatory requirements for the Company’s life and health insurance subsidiaries collectively was $122.0 million at ~~December 31, 2019. The minimum statutory capital and surplus necessary to satisfy regulatory requirements for the Company’s property and casualty insurance subsidiaries collectively was $641.9 million~~Other Investments at December 31, ~~2019. Company action level RBC is the level at which a company is required to file a corrective action plan with its regulators~~2021 and ~~is equal to~~ 2020 were:


DOLLARS IN MILLIONS	2021		2020
Company-Owned Life Insurance	$	448.1	$	327.4
Loans to Policyholders at Unpaid Principal	286.2		297.9
Real Estate at Depreciated Cost	94.0		98.7

Mortgage Loans and Other	97.3		55.0
Total	$	925.6	$	779.0

~~200%~~ ~~of the authorized control level RBC.~~

In ~~2019~~, Kemper paid dividends of $67.8 million to its shareholders. Except for certain financial covenants under Kemper’s credit agreement or during any period in which Kemper elects to defer interest payments, there are no restrictions on Kemper’s ability to pay dividends to its shareholders. Certain financial covenants, namely minimum net worth and a maximum debt to total capitalization ratio, under Kemper’s credit agreement could limit the amount of dividends that Kemper may pay to shareholders at ~~December 31, 2019. Kemper had the ability to pay without restrictions $1.3 billion in dividends to its shareholders and still be in compliance with all financial covenants under its credit agreement at~~ ~~December 31, 2019~~.

102

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE ~~11. LONG-TERM EQUITY-BASED COMPENSATION~~9. INCOME FROM INVESTMENTS

~~On May 4, 2011, Kemper’s shareholders approved~~Net Investment Income for the 2011 Omnibus Equity Plan (“2011 Omnibus Plan”). The 2011 Omnibus Plan replaced the Company’s previous employee stock option plans, director stock option plan and restricted stock plan (collectively, the “Prior Plans”). Awards previously granted under the Prior Plans remain outstanding in accordance with their original terms, but no new equity-based compensation awards can be granted under the Prior Plans. A maximum number of ~~10,000,000~~ ~~shares of Kemper common stock may be issued under the 2011 Omnibus Plan (the “Share Authorization”). As of~~ years ended December 31, 2021, 2020 and 2019~~, there were 3,254,822 common shares available for future grants under the 2011 Omnibus Plan,~~ was:


DOLLARS IN MILLIONS	2021		2020		2019
Investment Income:
Interest on Fixed Income Securities	$	277.7	$	289.8	$	299.4
Dividends on Equity Securities Excluding Alternative Investments	15.9		15.4		22.9
Alternative Investments:
Equity Method Limited Liability Investments	56.7		4.9		1.0

Limited Liability Investments Included in Equity Securities	46.9		22.1		18.0
Total Alternative Investments	103.6		27.0		19.0
Short-term Investments	1.0		5.5		8.2
Loans to Policyholders	21.7		22.1		22.6
Real Estate	9.3		9.6		9.8
Other	32.4		13.2		1.5
Total Investment Income	461.6		382.6		383.4
Investment Expenses:
Real Estate	9.7		8.8		9.6
Other Investment Expenses	24.6		25.6		9.5
Total Investment Expenses	34.3		34.4		19.1
Net Investment Income	$	427.3	$	348.2	$	364.3

Other Receivables includes accrued investment income of ~~which 1,082,460 shares were reserved for future grants based on the performance results under the terms of outstanding performance share units (“PSUs”).~~

The design of the 2011 Omnibus Plan provides for fungible use of shares to determine the number of shares available for future grants, with a fungible conversion factor of three to one, such that the Share Authorization will be reduced$79.6 million and $77.1 million at two different rates, depending on the type of award granted. Each share of Kemper common stock issuable upon the exercise of stock options or stock appreciation rights will reduce the number of shares available for future grant under the Share Authorization by one share, while each share of Kemper common stock issued pursuant to “full value awards” will reduce the number of shares available for future grant under the Share Authorization by three shares. “Full value awards” are awards, other than stock options or stock appreciation rights, that are settled by the issuance of shares of Kemper common stock and include time-based restricted stock units (collectively “RSUs”), PSUs and deferred stock units (“DSUs”).

~~Outstanding equity-based compensation awards at~~ December 31, ~~2019~~ ~~consisted of tandem stock option~~2021 and stock appreciation rights (“Tandem Awards”), RSUs, PSUs and DSUs. RSUs, PSUs and DSUs give the recipient the right to receive one share of Kemper common stock for each RSU, PSU or DSU issued. Recipients of DSUs receive full dividend equivalents on the same basis as all other outstanding shares of Kemper common stock, but do not receive voting rights until such shares are issued. For grants beginning in November 2017, recipients of RSUs and PSUs receive dividend equivalents on the same basis as all other outstanding shares of Kemper common stock only if, to the extent, and at the time that they vest and on subsequent dividend payment dates after they vest until the awards are settled, and do not receive voting rights until such shares are issued.

2020, respectively.

103

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

~~NOTE 11. LONG-TERM EQUITY-BASED COMPENSATION (Continued)~~

For grants prior to November 2017, recipients of RSUs and PSUs receive full dividend equivalents on the same basis as all other outstanding shares of Kemper common stock, but do not receive voting rights until such shares are issued. Except as described below for certain equity-based compensation awards granted to each member of the Board of Directors who is not employed by the Company (“Non-employee Directors”), all outstanding awards are subject to forfeiture until certain restrictions have lapsed.

For awards subject to a performance condition, the Company recognizes compensation expense based upon the probable outcome of the performance condition, which on the grant date reflects an estimate of attaining 100% of the performance units granted. The estimate is revised if the actual number of PSUs expected to vest is likely to differ from the previous estimate. Compensation expense for awards is recognized on a straight-line basis over the requisite service period. For equity-based compensation awards with a graded vesting schedule, the Company recognizes compensation expense on a straight-line basis over the requisite service period for each separately-vesting portion of the awards as if each award were, in substance, multiple awards. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. Equity-based compensation expense was $25.3 million, $18.6 million and $9.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Total unamortized compensation expense related to unvested awards at December 31, 2019 was $20.4 million, which is expected to be recognized over the next three years ending December 31, 2020, 2021 and 2022.

The Compensation Committee of the Board of Directors, or the Board’s authorized designee, has sole discretion to determine the persons to whom awards under the 2011 Omnibus Plan are granted, and the material terms of the awards. For Tandem Awards, material terms include the number of shares covered by such awards and the exercise price, vesting and expiration dates of such awards. Tandem Awards are non-transferable. The exercise price of Tandem Awards is the fair value of Kemper’s common stock on the date of grant. Tandem Awards and RSU awards granted to employees generally vest in 3 equal annual installments over a period of three years, with the Tandem Awards expiring ten years from the date of grant. Employee PSU awards generally vest over a period of three years, subject to performance results and other restrictions.

Under the Non-employee Director compensation program in effect for 2019, each non-employee director received an annual RSU award with an aggregate grant date fair value of $130,000 (“Director RSUs”) at the conclusion of the 2019 annual shareholder meeting. The Director RSUs vest over a period of one year, enable the award holder to make an election to defer the conversion to shares of common stock in accordance with applicable deferral rules, and include the right to receive dividend equivalents on the same basis as all other outstanding shares of Kemper common stock only if, to the extent, and at the time that they vest and on subsequent dividend payment dates after they vest until the awards are settled. Under the Non-employee Director compensation program in effect for 2018 and 2017, each non-employee director received an annual DSU award with an aggregate grant date fair value of $110,000 at the conclusion of each annual shareholder meeting. The DSUs granted to Non-employee Directors are fully vested on the date of grant and include the right to receive full dividend equivalents on the same basis as all other outstanding shares of Kemper common stock. Conversion of the DSUs into shares of Kemper’s common stock is deferred until the date a director’s board service terminates.

The Company uses the Black-Scholes option pricing model to estimate the fair value of each Tandem Award on the date of grant. The expected terms of Tandem Awards are developed by considering the Company’s historical Tandem Award exercise experience, demographic profiles, historical share retention practices of employees and assumptions about their propensity for early exercise in the future. Expected volatility is estimated using weekly historical volatility. The Company believes that historical volatility is currently the best estimate of expected volatility. The dividend yield in ~~2019~~, ~~2018~~ ~~and~~ ~~2017~~ was calculated by taking the natural logarithm of the annualized yield divided by the Kemper common stock price on the date of grant. The risk-free interest rate was the yield on the grant date of U.S. Treasury zero coupon issues with a maturity comparable to the expected term of the option.

~~104~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 11. LONG-TERM EQUITY-BASED COMPENSATION (Continued)~~

~~The assumptions used in the Black-Scholes pricing model for Tandem Awards granted during the~~ ~~years endedDecember 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~are presented below.~~

2019 2018 2017
RANGE OF VALUATION ASSUMPTIONS
Expected Volatility 28.97 % - 33.78 % 27.31 % - 32.15 % 26.17 % - 30.39 %
Risk-free Interest Rate 1.35
- 2.60
2.44
- 3.00
1.59
- 2.25
Expected Dividend Yield 1.05
- 1.38
1.16
- 1.72
1.39
- 2.43
WEIGHTED-AVERAGE EXPECTED LIFE IN YEARS
Employee Grants 4
- 6 4
- 6 4
- 6.5

~~Tandem Award activity for the~~ ~~year endedDecember 31, 2019~~ ~~is presented below.~~

Shares
Subject to
Awards

Weighted-
average
Exercise Price
Per Share ($)

Weighted-
average
Remaining
Contractual
Life (in Years)

Aggregate
Intrinsic
Value
($ In Millions)
Outstanding at Beginning of the Year 1,434,273
$ 46.48

Granted 578,375
76.96

Exercised (159,630 ) 36.92

Forfeited or Expired (44,203 ) 68.43

Outstanding at December 31, 2019 1,808,815
56.53
7.65 $ 38.3
Vested and Expected to Vest at December 31, 2019 1,718,559
$ 56.03
7.61 $ 37.2
Exercisable at December 31, 2019 803,769
$ 42.15
6.50 $ 28.4

The weighted-average grant-date fair values of Tandem Awards granted during 2019, 2018 and 2017 were $20.99, $15.14 and $8.89, respectively. Total intrinsic value of Tandem Awards exercised was $7.7 million, $3.9 million and $4.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. Cash received from exercises of Tandem Awards was $2.4 million, $0.9 million and $4.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. Total tax benefit realized for tax deductions from exercises of Tandem Awards was $1.6 million, $0.8 million and ~~$1.7 million~~ ~~for the years ended~~ ~~December 31, 2019~~, ~~2018~~ ~~and~~ ~~2017, respectively.~~

~~Information pertaining to Tandem Awards outstanding at~~ ~~December 31, 2019~~ ~~is presented below.~~

Outstanding Exercisable
Range of Exercise Prices ($)
Shares
Subject to
Awards

Weighted-
average
Exercise Price
Per Share ($)

Weighted-
average
Remaining
Contractual
Life (in Years)

Shares
Subject to
Awards

Weighted-
average
Exercise Price
Per Share ($)
$ 20.01
- 30.00
150,627
$ 27.77
5.63 150,627
$ 27.77
30.01
- 40.00
173,895
34.83
5.36 165,086
34.58
40.01
- 50.00
401,385
42.56
6.79 313,459
42.41
50.01
- 60.00
461,459
59.90
8.07 147,944
59.89
60.01
- 70.00
57,395
67.04
8.14 22,289
66.85
70.01
- 80.00
518,820
76.27
9.09 3,435
77.76
80.01
- 90.00
45,234
85.44
9.30 929
82.10
20.01
- 90.00
1,808,815
56.53
7.65 803,769
42.15

~~The grant-date fair values of RSUs are determined using the closing price of Kemper common stock on the date of grant.~~

~~105~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

NOTE ~~11. LONG-TERM EQUITY-BASED COMPENSATION (Continued)~~

~~Activity related to nonvested RSUs for the~~ ~~year endedDecember 31, 2019~~ ~~is presented below.~~

Time-based Restricted Stock Unit Awards
Number of Restricted Stock Units
Weighted-
average
Grant-date
Fair Value
Per Unit
Nonvested Balance at Beginning of the Year 316,241
$ 65.36
Granted 23,383
82.56
Vested (135,909 ) 61.59
Forfeited (21,527 ) 69.48
Nonvested Balance at December 31, 2019 182,188
$ 71.12

The initial number of PSUs awarded to each participant represents the number of Kemper common shares that would vest and be issued if the performance level attained were to be at the “target” performance level. For performance above the target level, each participant would receive a grant of additional shares of stock up to a maximum of 100% of the initial number of PSUs awarded to the participant. The final payout of these awards, and any forfeitures of PSUs for performance below the “target” performance level, will be determined based on the Company’s performance. If, at the end of the applicable performance period, the Company’s performance:

~~exceeds the “target” performance level, all of the PSUs will vest and additional shares of stock will be issued to the award recipient;~~

~~is below the “target” performance level, but at or above a “minimum” performance level, only a portion of the PSUs originally issued to the award recipient will vest; or~~

~~is below a “minimum” performance level, none of the PSUs originally issued to the award recipient will vest.~~

~~Activity related to nonvested PSU awards for the~~ ~~year endedDecember 31, 2019~~ ~~is presented below.~~

PSU Awards
Number of PSUs
Weighted-
average
Grant-date
Fair Value
Per PSU
Nonvested Balance at Beginning of the Year 327,300
$ 47.14
Granted 254,535
61.22
Vested (204,542 ) 29.20
Forfeited (16,473 ) 65.55
Nonvested Balance at December 31, 2019 360,820
$ 66.42

The number of additional shares that would be granted if the Company were to meet or exceed the maximum performance levels related to the outstanding PSU awards for the 2019, 2018 and 2017 three-year performance periods was 146,134 common shares, 137,343 common shares and 77,343 common shares, respectively, (as “full value awards,” the equivalent of 438,402 shares, 412,029 shares, and 232,029 shares, respectively, under the Share Authorization) at December 31, 2019.

The grant date fair values of the PSU awards with a market performance condition are determined using the Monte Carlo simulation method. The Monte Carlo simulation model produces a risk-neutral simulation of the daily returns on the common stock of Kemper and each of the other companies included in the peer group. Returns generated by the simulation depend on the risk-free interest rate used and the volatilities of, and the correlation between, these stocks. The model simulates stock prices and dividend payouts to the end of the three-year performance period. Total shareholder returns are generated for each of these stocks based on the simulated prices and dividend payouts. The total shareholder returns are then ranked, and Kemper’s simulated ranking is converted to a payout percentage based on the terms of the PSU awards. The payout percentage is applied to the simulated stock price at the end of the performance period, reinvested dividends are added back, and the total is

~~106~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 11. LONG-TERM EQUITY-BASED COMPENSATION (Continued)~~

discounted to the valuation date at the risk-free rate. This process is repeated approximately ten thousand times, and the grant date fair value is equal to the average of the results from these trials.

Fifty percent of the PSU awards granted to employees and officers in 2019, 2018 and 2017 are measured using a market performance condition. Fair value for these awards was estimated using the Monte Carlo simulation method described above. Final payout for these awards, and any forfeitures of units for performance below the “target” performance level, will be based on Kemper’s total shareholder return, relative to a peer group comprised of all the companies in the S&P Supercomposite Insurance Index, over a three-year performance period. The three-year performance periods for the 2019, 2018 and 2017 awards end on January 31, 2022, January 31, 2021 and January 31, 2020, respectively. Compensation cost for these awards is recognized ratably over the requisite service period. In the event that the market performance condition is not satisfied, previously recognized compensation cost would not reverse, but it would reverse if the requisite service period is not met.

Fifty percent of the PSU awards granted to employees and officers in 2019, 2018 and 2017 are measured solely using a Company-specific metric. Final payout for these awards, and any forfeitures of shares for performance below the “target” performance level, will be determined based on Kemper’s adjusted return on equity over a three-year performance period. The three-year performance periods for the 2019, 2018 and 2017 awards end on December 31, 2021, December 31, 2020 and December 31, 2019, respectively. Fair value for these awards was determined using the closing price of Kemper common stock on the date of grant. Accruals of compensation cost for these awards are estimated based on the probable outcome of the performance condition.

~~The total fair value of RSUs and PSUs that vested during the~~ ~~year endedDecember 31, 2019~~ was $24.8 million. The tax benefits for tax deductions realized from such awards was $5.2 million. The total fair value of RSUs and PSUs that vested during the year ended December 31, 2018 was $8.7 million. The tax benefits for tax deductions realized from such awards was ~~$1.8 million. The total fair value of RSUs and PSUs that vested during the~~ ~~year endedDecember 31, 2017~~ ~~was~~ ~~$3.2 million. The tax benefits for tax deductions realized from such awards was~~ ~~$1.1 million~~.

The grant-date fair values of DSU awards granted to Non-employee Directors are determined using the closing price of Kemper common stock on the date of grant. The total fair value of DSUs that vested during the years ended December 31, 2018 and 2017 was $1.0 million and $0.9 million, respectively.

~~Activity related to DSU awards for the~~ ~~year endedDecember 31, 2019~~ ~~is presented below.~~

Number of DSUs
Weighted-
average
Grant-date
Fair Value
Per DSU
Vested Balance at Beginning of the Year 57,340
$ 44.89
Reduction for Shares Issued on Conversion (12,520 ) 45.44
Vested Balance at December 31, 2019 44,820
$ 44.74

~~107~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 12. INCOME FROM CONTINUING OPERATIONS PER UNRESTRICTED SHARE~~

The Company’s awards of deferred stock units contain rights to receive non-forfeitable dividend equivalents and participate in the undistributed earnings with common shareholders, as did the Company’s awards of restricted stock units and performance share units prior to 2018. Accordingly, the Company is required to apply the two-class method of computing basic and diluted earnings per share. A reconciliation of the numerator and denominator used in the calculation of Basic Income from Continuing Operations Per Unrestricted Share and Diluted Income from Continuing Operations Per Unrestricted Share for the ~~years ended~~ ~~December 31, 2019,~~ ~~2018~~ ~~and~~ ~~2017~~ ~~is presented below.~~

2019 2018 2017
DOLLARS IN MILLIONS
Income from Continuing Operations $ 531.1
$ 188.4
$ 119.9
Less Income from Continuing Operations Attributed to Participating Awards 1.7
1.0
0.8
Income from Continuing Operations Attributed to Unrestricted Shares 529.4
187.4
119.1
Dilutive Effect on Income of Equity-based Compensation Equivalent Shares —
—
—
Diluted Income from Continuing Operations Attributed to Unrestricted Shares $ 529.4
$ 187.4
$ 119.1
SHARES IN THOUSANDS
Weighted-average Unrestricted Shares Outstanding 65,880.9
58,149.4
51,345.6
Equity-based Compensation Equivalent Shares 667.2
602.5
232.3
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution 66,548.1
58,751.9
51,577.9
PER UNRESTRICTED SHARE IN WHOLE DOLLARS
Basic Income from Continuing Operations Per Unrestricted Share $ 8.04
$ 3.22
$ 2.32
Diluted Income from Continuing Operations Per Unrestricted Share $ 7.96
$ 3.19
$ 2.31

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 for the ~~years ended~~ ~~December 31, 2019,~~ ~~2018~~ ~~and~~ ~~2017, because the effect of inclusion would be anti-dilutive, is presented below.~~

SHARES IN THOUSANDS 2019 2018 2017
Equity-based Compensation Equivalent Shares 556.4
231.3
346.6
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution 556.4
231.3
346.6

~~108~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 13. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME~~

~~The components of Other Comprehensive Income (Loss) Before Income Taxes for the~~ ~~years endedDecember 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~were:~~

DOLLARS IN MILLIONS 2019 2018 2017
Other Comprehensive Income (Loss) Before Income Taxes:
Unrealized Holding Gains (Losses) Arising During the Year Before Reclassification Adjustment $ 433.4
$ (214.2 ) $ 119.1
Reclassification Adjustment for Amounts Included in Net Income (28.1 ) (21.9 ) (35.3 )
Unrealized Holding Gains (Losses) 405.3
(236.1 ) 83.8
Foreign Currency Translation Adjustments Arising During the Year Before Reclassification Adjustment —
—
1.7
Reclassification Adjustment for Amounts Included in Net Income —
0.3
—
Foreign Currency Translation Adjustments —
0.3
1.7
Net Unrecognized Postretirement Benefit Costs Arising During the Year (4.8 ) (8.0 ) 3.9
Reclassification Adjustments for Amounts Included in Net Income:
Amortization of Net Unrecognized Postretirement Benefit Costs (3.0 ) 1.1
(0.6 )
Total Reclassification Adjustments for Amounts Included in Net Income (3.0 ) 1.1
(0.6 )
Net Unrecognized Postretirement Benefit Costs (7.8 ) (6.9 ) 3.3
Gains (Losses) on Cash Flow Hedges During the Year Before Reclassification Adjustment —
0.9
(8.0 )
Reclassification Adjustment for Amounts Included in Net Income 0.4
0.3
1.3
Gains (Losses) on Cash Flow Hedges 0.4
1.2
(6.7 )
Other Comprehensive Income (Loss) Before Income Taxes $ 397.9
$ (241.5 ) $ 82.1

~~109~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 13. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)~~

~~The components of Other Comprehensive Income Tax Benefit (Expense) for the~~ ~~years endedDecember 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~were:~~

DOLLARS IN MILLIONS 2019 2018 2017
Income Tax Benefit (Expense):
Unrealized Holding Gains (Losses) Arising During the Year Before Reclassification Adjustment $ (91.0 ) $ 45.0
$ (38.2 )
Reclassification Adjustment for Amounts Included in Net Income 5.8
4.6
12.3
Unrealized Holding Gains (Losses) (85.2 ) 49.6
(25.9 )
Foreign Currency Translation Adjustments Arising During the Year Before Reclassification Adjustment —
—
(0.6 )
Reclassification Adjustment for Amounts Included in Net Income —
(0.1 ) —
Foreign Currency Translation Adjustment —
(0.1 ) (0.6 )
Net Unrecognized Postretirement Benefit Costs Arising During the Year 1.0
1.7
(0.8 )
Reclassification Adjustments for Amounts Included in Net Income:
Amortization of Net Unrecognized Postretirement Benefit Costs 0.7
(0.2 ) 0.2
Total Reclassification Adjustments for Amounts Included in Net Income 0.7
(0.2 ) 0.2
Net Unrecognized Postretirement Benefit Costs 1.7
1.5
(0.6 )
Gains (Losses) on Cash Flow Hedges During the Year Before Reclassification Adjustment —
(0.2 ) 2.8
Reclassification Adjustment for Amounts Included in Net Income (0.1 ) (0.1 ) (0.4 )
Gains (Losses) on Cash Flow Hedges (0.1 ) (0.3 ) 2.4
Other Comprehensive Income Tax Benefit (Expense) $ (83.6 ) $ 50.7
$ (24.7 )

~~The components of AOCI at~~ ~~December 31, 2019~~ ~~and~~ ~~2018~~ ~~were:~~

DOLLARS IN MILLIONS 2019 2018
Net Unrealized Gains on Investments, Net of Income Taxes:
Other Net Unrealized Gains on Investments $ 439.4
$ 119.3
Net Unrecognized Postretirement Benefit Costs, Net of Income Taxes (100.6 ) (94.5 )
Losses on Cash Flow Hedges, Net of Income Taxes (2.7 ) (3.0 )
Accumulated Other Comprehensive Income $ 336.1
$ 21.8

~~110~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 13. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)~~

~~Components of AOCI were reclassified to the following lines of the Consolidated Statements of Income for the~~ ~~years endedDecember 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~:

DOLLARS IN MILLIONS 2019 2018 2017
Reclassification of AOCI from Net Unrealized Gains and Losses on Investments to:
Net Realized Gains on Sales of Investments $ 41.9
$ 26.4
$ 49.6
Net Impairment Losses Recognized in Earnings (13.8 ) (4.5 ) (14.3 )
Total Before Income Taxes 28.1
21.9
35.3
Income Tax Expense (5.8 ) (4.6 ) (12.3 )
Reclassification from AOCI, Net of Income Taxes 22.3
17.3
23.0
Reclassification of AOCI from Unrecognized Postretirement Benefit Costs to:
Interest and Other Expenses (Income) 3.0
(1.1 ) 0.6
Income Tax Benefit (Expense) (0.7 ) 0.2
(0.2 )
Reclassification from AOCI, Net of Income Taxes 2.3
(0.9 ) 0.4
Reclassification of AOCI from Loss on Cash Flow Hedges to:
Interest and Other Expenses (0.4 ) (0.3 ) (1.3 )
Income Tax Benefit 0.1
0.1
0.4
Reclassification from AOCI, Net of Income Taxes (0.3 ) (0.2 ) (0.9 )
Total Reclassification from AOCI to Net Income $ 24.3
$ 16.2
$ 22.5

~~NOTE 14. INCOME FROM INVESTMENTS~~

~~Net Investment Income for the years ended~~ ~~December 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~was:~~

DOLLARS IN MILLIONS 2019 2018 2017
Investment Income:
Interest on Fixed Income Securities $ 299.4
$ 268.9
$ 246.6
Dividends on Equity Securities Excluding Alternative Investments 22.9
13.6
9.3
Alternative Investments:
Equity Method Limited Liability Investments 1.0
11.0
24.8
Fair Value Option Investments —
—
1.3
Limited Liability Investments Included in Equity Securities 18.0
26.4
28.6
Total Alternative Investments 19.0
37.4
54.7
Short-term Investments 8.2
7.0
1.6
Loans to Policyholders 22.6
22.5
21.6
Real Estate 9.8
9.6
10.7
Other 1.5
0.9
0.5
Total Investment Income 383.4
359.9
345.0
Investment Expenses:
Real Estate 9.6
9.7
10.5
Other Investment Expenses 9.5
9.3
7.3
Total Investment Expenses 19.1
19.0
17.8
Net Investment Income $ 364.3
$ 340.9
$ 327.2

~~111~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 14.~~9. INCOME FROM INVESTMENTS (Continued)

~~Other Receivables includes accrued investment income of $78.7 million and $77.9 million at~~ ~~December 31, 2019~~ ~~and~~ ~~2018, respectively.~~

The components of Net Realized Gains on Sales of Investments for the years ended December 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~2019 were:

DOLLARS IN MILLIONS 2019 2018 2017
Fixed Maturities:
Gains on Sales $ 41.1
$ 25.3
$ 8.4
Losses on Sales (4.8 ) (11.1 ) (0.9 )
Equity Securities:
Gains on Sales 5.8
12.3
42.0
Losses on Sales (0.2 ) —
—
Real Estate:
Gains on Sales —
—
6.4
Other Investments:
Gains on Other Sales —
—
0.1
Losses on Sales —
(0.1 ) (0.1 )
Net Gains on Trading Securities —
—
0.6
Net Realized Gains on Sales of Investments $ 41.9
$ 26.4
$ 56.5

Gross Gains on Sales $ 46.9
$ 37.6
$ 56.9
Gross Losses on Sales (5.0 ) (11.2 ) (1.0 )
Net Gains on Trading Securities —
—
0.6
Net Realized Gains on Sales of Investments $ 41.9
$ 26.4
$ 56.5


DOLLARS IN MILLIONS	2021		2020		2019
Fixed Maturities:
Gains on Sales	$	63.4	$	40.6	$	41.1
Losses on Sales	(2.1)		(7.9)		(4.8)
Equity Securities:
Gains on Sales	4.1		5.9		5.8
Losses on Sales	(0.7)		(1.9)		(0.2)
Equity Method Limited Liability Investments:
Gains on Sales	0.4		—		—
Losses on Sales	—		(0.4)		—
Real Estate:
Gains on Sales	0.1		1.8		—
Losses on Sales	(0.4)		—		—





Net Realized Gains on Sales of Investments	$	64.8	$	38.1	$	41.9

Gross Gains on Sales	$	68.0	$	48.3	$	46.9
Gross Losses on Sales	(3.2)		(10.2)		(5.0)

Net Realized Gains on Sales of Investments	$	64.8	$	38.1	$	41.9

The components of ~~Net~~ Impairment Losses ~~Recognized in Earnings~~ reported in the Consolidated Statements of Income for the years ended December 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~2019 were:


DOLLARS IN MILLIONS	2021		2020		2019
Fixed Maturities	$	(6.4)	$	(16.7)	$	(13.3)
Equity Securities	(4.2)		(2.8)		(0.5)
Real Estate	(0.4)		—		—
Net Impairment Losses Recognized in Earnings	$	(11.0)	$	(19.5)	$	(13.8)

NOTE 10. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company is responsible for the determination of fair value of financial assets and liabilities, including the supporting assumptions and methodologies, and uses independent third-party valuation service providers, broker quotes and internal pricing methodologies to determine fair values. The Company obtains or estimates only one single quote or price for each financial instrument. The Company uses a hierarchical framework for inputs to determine fair value which prioritizes the use of observable inputs and minimizes the use of unobservable inputs. Additionally, the Company categorizes fair value measurements based on the lowest level of input that is considered to be significant to the entire measurement.

The Company classifies its investments in Fixed Maturities as available for sale and reports these investments at fair value. The Company reports equity investments with readily determinable fair values as Equity Securities at Fair Value. Certain investments that are measured at fair value using the net asset value practical expedient are not required to be classified using the fair value hierarchy, but are presented in the following two tables to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheet.

DOLLARS IN MILLIONS 2019 2018 2017
Fixed Maturities $ (13.3 ) $ (2.0 ) $ (12.1 )
Equity Securities (0.5 ) (2.5 ) (2.2 )
Net Impairment Losses Recognized in Earnings $ (13.8 ) $ (4.5 ) $ (14.3 )

104

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2021 is summarized below. The Company has no material liabilities that are measured and reported at fair value.


DOLLARS IN MILLIONS	Fair Value Measurements								Total Fair Value
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at Net Asset Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	132.8	$	504.6	$	—	$	—	$	637.4
States and Political Subdivisions	—		1,890.1		—		—		1,890.1
Foreign Governments	—		5.5		—		—		5.5
Corporate Securities:
Bonds and Notes	—		4,150.1		236.8		—		4,386.9
Redeemable Preferred Stocks	—		1.3		6.1		—		7.4
Collateralized Loan Obligations	—		752.1		—		—		752.1
Other Mortgage- and Asset-backed	—		300.5		7.0		—		307.5
Total Investments in Fixed Maturities	132.8		7,604.2		249.9		—		7,986.9
Equity Securities at Fair Value:
Preferred Stocks:
Finance, Insurance and Real Estate	—		34.2		—		—		34.2
Other Industries	—		16.1		1.5		—		17.6
Common Stocks:
Finance, Insurance and Real Estate	18.9		—		—		—		18.9
Other Industries	2.9		—		—		—		2.9
Other Equity Interests:
Exchange Traded Funds	432.0		—		—		—		432.0
Limited Liability Companies and Limited Partnerships	—		—		—		325.0		325.0
Total Investments in Equity Securities at Fair Value	453.8		50.3		1.5		325.0		830.6
Convertible Securities at Fair Value	—		46.4		—		—		46.4


Total	$	586.6	$	7,700.9	$	251.4	$	325.0	$	8,863.9

105

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

At December 31, 2021, the Company had unfunded commitments to invest an additional $102.3 million in certain limited liability investment companies and limited partnerships that will be included in Other Equity Interests when funded.

The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2020 is summarized below.


DOLLARS IN MILLIONS	Fair Value Measurements								Total Fair Value
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at Net Asset Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	134.0	$	451.3	$	—	$	—	$	585.3
States and Political Subdivisions	—		1,589.5		—		—		1,589.5
Foreign Governments	—		5.2		—		—		5.2
Corporate Securities:
Bonds and Notes	—		3,992.4		433.0		—		4,425.4
Redeemable Preferred Stocks	—		1.3		6.2		—		7.5
Collateralized Loan Obligations	—		767.7		—		—		767.7
Other Mortgage- and Asset-backed	—		215.3		10.0		—		225.3
Total Investments in Fixed Maturities	134.0		7,022.7		449.2		—		7,605.9
Equity Securities at Fair Value:
Preferred Stocks:
Finance, Insurance and Real Estate	—		43.7		—		—		43.7
Other Industries	—		15.4		—		—		15.4
Common Stocks:

Finance, Insurance and Real Estate	8.7		1.7		—		—		10.4
Other Industries	0.4		—		—		—		0.4
Other Equity Interests:
Exchange Traded Funds	496.4		—		—		—		496.4
Limited Liability Companies and Limited Partnerships	—		—		—		292.2		292.2
Total Investments in Equity Securities at Fair Value	505.5		60.8		—		292.2		858.5



Convertible Securities at Fair Value	—		39.9		—		—		39.9


Total	$	639.5	$	7,123.4	$	449.2	$	292.2	$	8,504.3

The fair value hierarchy by level is designed to distinguish between inputs that are observable in the marketplace, which are therefore more objective, and those that are unobservable, which are more subjective. This leveling helps to indicate the relative subjectivity and reliability of the fair value measurements. Assets and liabilities reported on the Consolidated Statement of Financial Position at fair value are categorized as follows:

Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.

•The Company classifies investments in US Treasury Bonds, actively traded exchange traded funds, mutual funds, and public common stock as Level 1 securities.

106

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

Level 2: Observable inputs other than Level 1: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active; or (c) valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

•The Company classifies investments in public corporate bonds, states and political subdivisions bonds, collateralized loan obligations, mortgage-backed securities, convertible bonds, majority of preferred stocks and certain private placement bonds and common stock as Level 2 securities.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect Company’s estimates of the assumptions that market participants would use in valuing the assets and liabilities.

•The Company classifies investments in certain private placement bonds, private asset backed securities and certain preferred stock as Level 3 securities.

The Company uses leading, nationally recognized valuation service providers of market data and analytics to price the vast majority of the Company’s investment portfolio. Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of proprietary models, produce valuation information in the form of a single fair value for individual fixed income and other securities for which a fair value has been requested under the terms of our agreements. The inputs used by the valuation service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, liquidity spreads, and other information, as applicable. Credit and liquidity spreads are typically implied from completed transactions and transactions of comparable securities. Valuation service providers also use proprietary discounted cash flow models that are widely accepted in the financial services industry and similar to those used by other market participants to value the same financial instruments. The valuation models take into account, among other things, market observable information as of the measurement date, as well as the specific attributes of the security being valued including its term, interest rate, credit rating, industry sector, and where applicable, collateral quality and other issue or issuer specific information. Executing valuation models effectively requires seasoned professional judgment and experience. For certain equity securities, valuation service providers provide market quotations for completed transactions on the measurement date. In cases where market transactions or other market observable data is limited, the extent to which judgment is applied varies inversely with the availability of market observable information.

For most of the Company’s financial assets measured at fair value, all significant inputs are based on or corroborated by market observable data, and significant management judgment does not affect the periodic determination of fair value. Fixed income and equity securities valued using independent valuation service providers are classified as either Level 1 or Level 2 depending on the security type. These service providers utilize evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information when developing prices. Due to most fixed maturity securities trading on less than a daily basis, the service providers’ evaluated pricing applications apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing.

The Company classifies investments as Level 3 in the fair value hierarchy when specific inputs significant to the fair value estimation models are not market observable. Significant unobservable inputs used by Company include credit profile, credit spread, and resulting market yield, which involve considerable judgment by management. This primarily occurs when fair value is derived using non-binding broker quotes where the inputs have not been corroborated to be market observable, or internal valuation estimates that use significant non-market observable inputs.

The table below presents quantitative information about the significant unobservable inputs utilized by the Company in determining fair values for fixed maturity investments in corporate securities classified as Level 3 at December 31, 2021.

107

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)


DOLLARS IN MILLIONS	Unobservable Input	Total Fair Value		Range of Unobservable Inputs					Weighted-average Yield
Investment-grade	Market Yield	$	87.9	2.3	%	-	10.3	%	5.4	%
Non-investment-grade:
Senior Debt	Market Yield	76.1		5.1		-	20.2		8.5
Junior Debt	Market Yield	53.9		6.0		-	27.5		15.0
Other	Various	32.0
Total Level 3 Fixed Maturity Investments		$	249.9


DOLLARS IN MILLIONS	Unobservable Input	Total Fair Value		Range of Unobservable Inputs					Weighted-average Yield
Investment-grade	Market Yield	$	246.7	1.4	%	-	13.0	%	3.8	%
Non-investment-grade:
Senior Debt	Market Yield	111.1		2.4		-	23.4		9.5
Junior Debt	Market Yield	64.6		3.1		-	27.9		13.7
Other	Various	26.8
Total Level 3 Fixed Maturity Investments		$	449.2

For an investment in a fixed maturity security, an increase in the yield used to determine the fair value of the security will decrease the fair value of the security. A decrease in the yield used to determine fair value will increase the fair value of the security, but for callable securities the fair value increase is generally limited to par, unless security is currently callable at a premium.

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the year ended December 31, 2021 is presented below.


DOLLARS IN MILLIONS	Fixed Maturities						Equity Securities
	Corporate Bonds and Notes		Redeemable Preferred Stocks		Collateralized Loan Obligations		Other Mortgage- and Asset- backed		Preferred and Common Stocks		Total
Balance at Beginning of Year	$	433.0	$	6.2	$	—	$	10.0	$	—	$	449.2
Total Gains (Losses):
Included in Consolidated Statement of Income	2.8		—		—		—		—		2.8
Included in Other Comprehensive Income (Loss)	1.2		(0.1)		0.1		(0.5)		0.7		1.4
Purchases	104.6		—		17.7		16.2		1.7		140.2
Settlements	—		—		—		(0.1)		—		(0.1)
Sales	(128.1)		—		(10.0)		(0.2)		—		(138.3)
Transfers into Level 3	8.1		—		10.0		—		1.7		19.8
Transfers out of Level 3	(184.8)		—		(17.8)		(18.4)		(2.6)		(223.6)
Balance at End of Year	$	236.8	$	6.1	$	—	$	7.0	$	1.5	$	251.4

The transfers into and out of Level 3 were due to changes in the availability of market observable inputs.

108

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the year ended December 31, 2020 is presented below.


DOLLARS IN MILLIONS	Fixed Maturities										Total
	Corporate Bonds and Notes		States and Political Sub-divisions		Redeemable Preferred Stocks		Collateralized Loan Obligations		Other Mortgage- and Asset- backed
Balance at Beginning of Year	$	409.1	$	—	$	6.7	$	618.2	$	10.2	$	1,044.2
Total Gains (Losses):
Included in Consolidated Statement of Income	(9.0)		—		—		(0.3)		—		(9.3)
Included in Other Comprehensive Income (Loss)	3.2		0.1		0.5		(9.3)		0.4		(5.1)
Purchases	185.9		0.6		0.2		53.5		—		240.2
Settlements	—		—		—		—		(0.1)		(0.1)
Sales	(165.2)		—		—		(26.4)		(0.5)		(192.1)
Transfers into Level 3	9.0		—		—		—		—		9.0
Transfers out of Level 3	—		(0.7)		(1.2)		(635.7)		—		(637.6)
Balance at End of Year	$	433.0	$	—	$	6.2	$	—	$	10.0	$	449.2

The transfers into and out of Level 3 were due to changes in the availability of market observable inputs.

Presented below are the carrying values and fair value estimates of financial instruments not carried at fair value.


	December 31, 2021				December 31, 2020
(Dollars in Millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Loans to Policyholders	$	286.2	$	286.2	$	297.9	$	297.9
Short-term Investments	284.1		284.1		875.4		875.4
Mortgage Loans	96.8		96.8		54.6		54.6
Company-Owned Life Insurance	448.1		448.1		327.4		327.4
Equity Securities at Modified Cost	32.3		32.3		40.1		40.1
Financial Liabilities:
Long-term Debt, Current and Non-current	$	1,121.9	$	1,152.1	$	1,172.8	$	1,247.8
Policyholder Contract Liabilities	401.9		401.9		407.8		407.8

The fair value measurement for loans to policyholders are categorized as Level 3 within the fair value hierarchy. The fair value measurement of Short-term Investments is estimated using inputs that are considered either Level 1 or Level 2 measurements. The Mortgage Loans fair value measurement is considered equal to amortized cost given the short-term nature of the investments. The fair value measurement of Equity Securities at Modified Cost is estimated using inputs that are considered Level 3 measurements. The fair value of Company-Owned Life Insurance approximates cash surrender value. The fair value of Long-term Debt is estimated using quoted prices for similar liabilities in markets that are not active. The inputs used in the valuation are considered Level 2 measurements. Policyholder Obligations presented in the preceding table consist of advances from the FHLB of Chicago, and the inputs used in the valuation are considered Level 2 measurements.

109

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE ~~15. INSURANCE EXPENSES~~11. GOODWILL AND INTANGIBLE ASSETS

~~Insurance Expenses for the~~ ~~years ended~~Goodwill balances by business segment at December 31, ~~2019~~, ~~2018~~2021 and ~~2017~~2020 were:

DOLLARS IN MILLIONS 2019 2018 2017
Commissions $ 708.8
$ 558.7
$ 425.6
General Expenses 278.0
231.9
196.2
Premium Tax Expense 93.5
71.0
50.7
Total Costs Incurred 1,080.3
861.6
672.5
Policy Acquisition Costs:
Deferred (475.2 ) (481.5 ) (351.6 )
Amortized 408.3
377.1
318.3
Net Policy Acquisition Costs Amortized (66.9 ) (104.4 ) (33.3 )
Amortization of VOBA 6.3
143.3
5.1
Insurance Expenses $ 1,019.7
$ 900.5
$ 644.3

~~Commissions~~


DOLLARS IN MILLIONS	2021		2020
Specialty Property & Casualty Insurance	$	1,043.0	$	845.0
Preferred Property & Casualty Insurance	49.6		49.6
Life & Health Insurance	219.4		219.4
Total	$	1,312.0	$	1,114.0

The Company tests goodwill for ~~servicing policies~~recoverability at the reporting unit level on an annual basis, or whenever events or circumstances indicate the fair value of a reporting unit may have declined below its carrying value. The Company performed a qualitative goodwill impairment assessment for all reporting units with goodwill as of October 1, 2021. The qualitative assessment takes into consideration changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, events impacting reporting units, and changes in Kemper’s stock price since the last quantitative assessment, which was performed on January 1, 2017. Based on its qualitative assessment, the Company concluded that the associated goodwill was recoverable for each reporting unit tested.

The Gross carrying amount and accumulated amortization of Definite and Indefinite life intangible assets at December 31, 2021 and 2020 were:


	2021						2020
(Dollars in Millions)	Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
Definite Life Intangibles:
Value of Business Acquired	$	237.5	$	218.5	$	19.0	$	194.5	$	174.2	$	20.3
Customer Relationships	43.8		38.1		5.7		39.0		35.6		3.4
Agent Relationships	81.6		23.6		58.0		74.4		16.8		57.6
Trade Names	1.8		0.9		0.9		—		—		—
Internal-Use Software	341.7		132.4		209.3		299.6		108.6		191.0
Total Definite Life Intangible Assets	706.4		413.5		292.9		607.5		335.2		272.3
Indefinite Life Intangible Assets:
Trade Names	5.2		—		5.2		5.2		—		5.2
Insurance Licenses	45.1		—		45.1		42.6		—		42.6
Total Indefinite Life Intangible Assets	50.3		—		50.3		47.8		—		47.8

Total Intangible Assets	$	756.7	$	413.5	$	343.2	$	655.3	$	335.2	$	320.1

The Company records intangible assets acquired in business combinations and certain costs incurred developing and customizing internal-use software within Other Assets on the Consolidated Balance Sheets. Definite life intangible assets are ~~expensed as incurred,~~amortized over the estimated profit emergence period or estimated useful life of the asset. Indefinite life intangible assets are not amortized, but rather ~~than deferred~~tested annually for impairment. In 2021 and ~~amortized.~~

2020, the Company recognized amortization expense on definite life intangible assets of $87.0 million and $42.3 million, respectively.

~~112~~110

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

~~NOTE 16. INCOME TAXES~~

~~The tax effects of temporary differences that give rise to significant portions of the Company’s Net Deferred Income Tax Assets and Deferred Income Tax Liabilities at December 31, 2019 and~~ ~~2018~~ ~~were:~~

DOLLARS IN MILLIONS 2019 2018
Deferred Income Tax Assets:
Insurance Reserves $ 16.2
$ 17.0
Unearned Premium Reserves 64.5
59.1
Tax Capitalization of Policy Acquisition Costs 44.6
44.0
Payroll and Employee Benefit Accruals 35.0
49.6
Net Operating Loss Carryforwards 3.3
5.5
Other 12.5
11.2
Total Deferred Income Tax Assets 176.1
186.4
Deferred Income Tax Liabilities:
Investments 155.6
33.2
Deferred Policy Acquisition Costs 112.9
98.7
Life VIF and P&C Customer Relationships 5.3
6.0
Goodwill and Other Intangible Assets Acquired 39.3
45.2
Depreciable Assets 37.6
27.1
Other 3.6
2.4
Total Deferred Income Tax Liabilities 354.3
212.6
Net Deferred Income Tax Liabilities $ 178.2
$ 26.2

NOTE 11. GOODWILL AND INTANGIBLE ASSETS (Continued)

The ~~expiration~~amount of ~~federal net operating loss (“NOL”) carryforwards and their related deferred income tax~~amortization expense expected to be recorded in the next five years for definite life intangible assets ~~at December 31, 2019~~ is ~~presented below by year of expiration.~~as follows:

DOLLARS IN MILLIONS NOL Carry-forwards Deferred Tax Asset
Expiring in:
2027 11.2
2.4
2028 4.4
0.9
Total All Years $ 15.6
$ 3.3


DOLLARS IN MILLIONS	2022		2023		2024		2025		2026
Definite Life Intangible Assets:
Value of Business Acquired	$	3.6	$	2.0	$	1.9	$	1.8	$	1.7
Customer Relationships	3.0		1.1		0.4		0.4		0.3
Agent Relationships	7.3		7.3		5.5		4.9		4.9
Trade Names	0.9		—		—		—		—
Internal-Use Software	33.3		30.4		23.9		18.9		16.2
Total	$	48.1	$	40.8	$	31.7	$	26.0	$	23.1

NOTE 12. VARIABLE INTEREST ENTITIES

The ~~NOL carryforwards were acquired~~Company invests in ~~connection with business acquisitions made~~an Alternative Energy Partnership formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits. This entity was formed to invest in ~~prior years~~newly installed residential solar leases and ~~are subject to annual usage limitations under the Internal Revenue Code. The Company expects to fully utilize these federal NOL carryforwards.~~

~~A reconciliation of the beginning and ending amount of Unrecognized Tax Benefits for the years ended December 31, 2019,~~ ~~2018~~ ~~and~~ ~~2017~~ ~~is presented below.~~

DOLLARS IN MILLIONS 2019 2018 2017
Liabilities for Unrecognized Tax Benefits at Beginning of Year $ 4.4
$ 8.1
$ 5.1
Additions for Tax Positions of Current Year —
0.7
3.1
Reductions for Tax Positions of Prior Years (4.4 ) (4.4 ) —
Reduction for Expiration of Federal Statute of Limitations —
—
(0.1 )
Liabilities for Unrecognized Tax Benefits at End of Year $ —
$ 4.4
$ 8.1

~~The statute of limitations related to Kemper and its eligible subsidiaries’ consolidated Federal income tax returns is closed for all tax years up to and including 2011.~~power purchase agreements. As a result of this investment, the Company ~~filing amended federal income~~has the right to certain investment tax ~~returns resulting~~credits and tax depreciation benefits, and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers.

The Company’s interest in the Alternative Energy Partnership Investment is considered an ~~election~~investment in a variable interest entity (“VIE”). To determine whether the investment should be consolidated in the Consolidated Financial Statements, the Company evaluates whether it is the primary beneficiary of the VIE. The primary beneficiary is the party that has both the power to ~~update interest rates used~~direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to ~~compute~~absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company has determined that it is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact the economic performance of the entity and therefore is not required to consolidate the VIE. The project sponsor governs the entity and the Company only has consent rights that have been deemed protective in nature and does not participate in key economic decisions of the entity.

The investment is accounted for using the equity method of accounting and included in Alternative Energy Partnership Investments in the Consolidated Balance Sheets. The Company uses the HLBV equity method to account for earnings and losses. This method provides an earnings allocation that appropriately reflects the substantive economics of the investment. Earnings and losses on the investment are reported in Change in Value of Alternative Energy Partnership Investments and investment tax ~~basis~~credits are recognized in Income Tax Expense (Benefit) on the Consolidated Statements of ~~reserves on life insurance contracts issued prior to 2018, tax years 2012 and 2013 are under limited examination with respect to carryback adjustments associated with~~Income.

The following table presents information regarding activity in the ~~amended returns. The statute~~Company’s Alternative Energy Partnership Investments as of ~~limitations related to tax years 2014 and 2015 has been extended to June 30, 2020.~~the periods indicated:


	Year Ended
(Dollars in millions)	Dec 31, 2021		Dec 31, 2020
Fundings	$	80.0	$	20.0
Cash distribution from investment	0.5		—
Gain (loss) on investments in Alternative Energy Partnership	(61.2)		—
Income tax credits recognized	73.9		3.6
Tax benefit (expense) recognized from HLBV application	5.1		(0.4)

~~113~~111

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE ~~16. INCOME TAXES~~12. VARIABLE INTEREST ENTITIES (Continued)

The ~~expiration~~following table represents the carrying value of the ~~statute~~associated assets and liabilities and the associated maximum loss exposure of ~~limitations related to~~ the ~~various state income tax returns~~Alternative Energy Partnership Investments as of the dates indicated:


(Dollars in millions)	Dec 31, 2021
Cash	$	21.5
Equipment, net of depreciation	310.5
Other assets	3.0
Total unconsolidated assets	335.0
Maximum loss exposure	39.6

The Company’s maximum loss exposure in the event that ~~Kemper and its subsidiaries file varies by state.~~

~~There were 0 Unrecognized Tax Benefits~~all of the assets in the Alternative Energy Partnership are deemed worthless is $39.6 million, which is the carrying value of the investment at December 31, ~~2019. Unrecognized Tax Benefits at December 31, 2018 and~~ ~~2017~~ include $3.7 million and $7.6 million, respectively, for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred income tax accounting, other than for interest and penalties, the disallowance of the shorter deductibility period would not affect the effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.2021.

~~The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The liability for Unrecognized Tax Benefits included accrued interest of~~ ~~$0.7 million~~ ~~and~~ ~~$0.5 million~~ ~~at December 31, 2018 and~~ ~~2017, respectively. Net interest related to unrecognized tax benefits for the years ended December 31, 2018 and~~ ~~2017~~ ~~were insignificant.~~

~~The components of Income Tax Expense from Continuing Operations for the years ended~~ ~~December 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~were:~~

DOLLARS IN MILLIONS 2019 2018 2017
Current Income Tax Benefit (Expense) $ (66.4 ) $ 32.2
$ (23.1 )
Deferred Income Tax Expense (68.5 ) (46.5 ) (15.1 )
(Increase) Decrease Unrecognized Tax Benefits 4.4
3.6
(3.0 )
Income Tax Expense $ (130.5 ) $ (10.7 ) $ (41.2 )

~~Income taxes paid, net of income tax refunds received, were $68.1 million, $0.2 million, and $13.0 million in 2019,~~ ~~2018, and~~ ~~2017, respectively.~~

~~A reconciliation of the Statutory Federal Income Tax Expense and Rate to the Company’s Effective Income Tax Expense and Rate from Continuing Operations for the years ended~~ ~~December 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~is presented below.~~

DOLLARS IN MILLIONS 2019 2018 2017
Amount Rate Amount Rate Amount Rate
Statutory Federal Income Tax Expense $ (138.9 ) 21.0 % $ (41.8 ) 21.0 % $ (56.4 ) 35.0 %
Tax-exempt Income and Dividends Received Deduction 4.3
(0.7 ) 4.8
(2.4 ) 9.8
(6.0 )
Stock-Based Compensation 4.4
(0.7 ) 1.4
(0.7 ) 0.4
(0.2 )
Nondeductible Executive Compensation (2.5 ) 0.4
(1.4 ) 0.7
—
—
Tax Reform —
—
26.4
(13.3 ) 7.4
(4.6 )
Other, Net 2.2
(0.3 ) (0.1 ) 0.1
(2.4 ) 1.4
Effective Income Tax Benefit (Expense) from Continuing Operations $ (130.5 ) 19.7 % $ (10.7 ) 5.4 % $ (41.2 ) 25.6 %

~~Comprehensive Income Tax (Expense) Benefit included in the Consolidated Financial Statements for the years ended~~
~~December 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~was:~~

DOLLARS IN MILLIONS 2019 2018 2017
Income Tax Benefit (Expense):
Continuing Operations $ (130.5 ) $ (10.7 ) $ (41.2 )
Discontinued Operations —
(0.6 ) (0.5 )
Unrealized Depreciation (Appreciation) on Securities (85.2 ) 49.6
(25.9 )
Foreign Currency Translation Adjustments on Investments —
(0.1 ) (0.6 )
Tax Effects from Postretirement Benefit Plans 1.7
1.5
(0.6 )
Tax Effects from Cash Flow Hedge (0.1 ) (0.3 ) 2.4
Comprehensive Income Tax (Expense) Benefit $ (214.1 ) $ 39.4
$ (66.4 )

~~114~~112

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE ~~17. PENSION BENEFITS~~13. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME

~~Kemper sponsors a qualified defined benefit pension plan (the “Pension Plan”).~~ The ~~Pension Plan covers approximately 8,650 participants and beneficiaries, of which 1,250 are active employees. Effective January 1, 2006~~tables below display the Pension Plan was closed to new hires, and effective June 30, 2016, benefit accruals were frozen for substantially all of the participants under the Pension Plan. The Pension Plan is generally non-contributory, but participation requires or required some employees to contribute 3% of pay, as defined, per year. Benefits for participants who are or were required to contribute to the Pension Plan are based on compensation during plan participation and the number of years of participation. Benefits for the vast majority of participants who are not required to contribute to the Pension Plan are based on years of service and final average pay, as defined. The Company funds the Pension Planchanges in ~~accordance with the requirements of ERISA.~~

~~Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Pension Plan~~Accumulated Other Comprehensive Income (Loss) by component for the years ended December 31, ~~2019~~2021, 2020 and ~~2018~~ ~~is presented below.~~2019 were:

DOLLARS IN MILLIONS 2019 2018
Fair Value of Plan Assets at Beginning of Year $ 525.3
$ 579.8
Actual Return on Plan Assets 113.2
(32.1 )
Employer Contributions 55.3
5.1
Benefits Paid (29.2 ) (27.5 )
Fair Value of Plan Assets at End of Year 664.6
525.3
Projected Benefit Obligation at Beginning of Year 580.5
637.2
Interest Cost 22.3
20.3
Benefits Paid (29.2 ) (27.5 )
Actuarial (Gains) Losses 86.9
(49.5 )
Projected Benefit Obligation at End of Year 660.5
580.5
Funded Status—Plan Assets in Excess (Deficit) of Projected Benefit Obligation $ 4.1
$ (55.2 )
Unamortized Amount Reported in AOCI at End of Year $ (145.7 ) $ (144.4 )
Accumulated Benefit Obligation at End of Year $ 660.4
$ 580.3


(Dollars in Millions)	Net Unrealized Gains (Losses) on Other Investments		Net Unrealized Gains (Losses) on Investments with an Allowance for Credit Losses		Net Unrecognized Postretirement Benefit Costs		Gain (Loss) on Cash Flow Hedges		Total
Balance as of January 1, 2019	$	119.3	$	—	$	(94.5)	$	(3.0)	$	21.8
Other Comprehensive Income (Loss) Before Reclassifications	342.4		—		(6.1)		0.3		336.6
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $5.8, $—, $—, $— and $5.8	(22.3)		—		—		—		(22.3)
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $(85.2), $—, $1.7, $(0.1) and $(83.6)	320.1		—		(6.1)		0.3		314.3
Balance as of December 31, 2019	$	439.4	$	—	$	(100.6)	$	(2.7)	$	336.1

Other Comprehensive Income (Loss) Before Reclassifications	304.4		(2.1)		4.3		0.4		307.0
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $3.6, $—, $(13.5), $— and $(9.9)	(13.2)		—		50.6		—		37.4
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $(78.7), $0.5, $(15.3), $— and $(93.5)	291.2		(2.1)		54.9		0.4		344.4
Balance as of December 31, 2020	$	730.6	$	(2.1)	$	(45.7)	$	(2.3)	$	680.5

Other Comprehensive Income (Loss) Before Reclassifications	(182.0)		(1.6)		(6.5)		—		(190.1)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $11.3, $—, $—, $(0.1) and $11.2	(42.8)		—		0.1		0.4		(42.3)
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $59.7, $0.4, $2.4, $(0.1) and $62.4	(224.8)		(1.6)		(6.4)		0.4		(232.4)
Balance as of December 31, 2021	$	505.8	$	(3.7)	$	(52.1)	$	(1.9)	$	448.1

~~The measurement dates of the assets and liabilities at end of year presented~~Amounts reclassified from Accumulated Other Comprehensive Income (Loss) shown above are reported in ~~the preceding table under the headings, “2019” and “2018” were~~ ~~December 31, 2019~~ ~~and~~ ~~December 31, 2018, respectively.~~Net Income (Loss) as follows:

~~The weighted-average discount rate and rate of increase in future compensation levels used to estimate the components of the Projected Benefit Obligation for the Pension Plan at~~ ~~December 31, 2019~~ ~~and~~ ~~2018~~ ~~were:~~


Components of AOCI			Consolidated Statements of Income Line Item Affected by Reclassifications
Net unrealized Gains (Losses) on Other Investments and Net Unrealized Gains (Losses) on Investments with an Allowance for Credit Losses			Net Realized Gains on Sales of Investments and Impairment Losses
Net Unrecognized Postretirement Benefit Costs			Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses, Insurance Expenses, and Interest and Other Expenses
Gain (Loss) on Cash Flow Hedges			Interest and Other Expenses

2019 2018
Discount Rate 3.21 % 4.28 %
Rate of Increase in Future Compensation Levels 3.40
3.40

~~Asset allocations for the Pension Plan at~~ ~~December 31, 2019~~ ~~and~~ ~~2018~~ ~~by asset category were:~~

ASSET CATEGORY 2019 2018
Cash and Short-term Investments 2 % 1 %
Corporate Bonds and Notes 40
41
Common and Preferred Stocks 35
37
Bond Exchange Traded Funds 14
6
Other Assets 9
15
Total 100 % 100 %

~~115~~

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE ~~17. PENSION BENEFITS (Continued)~~14. SHAREHOLDERS’ EQUITY

~~appropriate. Fixed income investments may include cash~~Common Stock Issuance

Kemper is authorized to issue 20 million shares of $0.10 par value preferred stock and ~~short-term instruments, U.S. Government securities, corporate bonds, mortgages~~100 million shares of $0.10 par value common stock. No preferred shares were issued or outstanding at December 31, 2021 and ~~other fixed income investments. Equity investments may include various types~~2020. There were 63,684,628 shares and 65,436,207 shares of common stock ~~such as large-cap, mid-cap~~outstanding at December 31, 2021 and ~~small-cap stocks,~~2020, respectively.

On June 7, 2019, the Company completed a public offering of its common stock and ~~may also include investments~~issued 1.6 million shares of common stock, at $83.00 per share. Gross proceeds from the offering were $128.9 million. Transaction costs, including the underwriting discount, were $1.7 million. In July 2019, the Company used the net proceeds of $127.2 million from the offering, together with a portion of the proceeds from the 2023 Term Loan (see Note 19, “Debt”) to redeem all $150.0 million in ~~investment companies, collective investment funds and~~aggregate outstanding principal of its 7.375% Subordinated Debentures due 2054.

Common Stock Repurchases

On May 6, 2020, Kemper’s Board of Directors authorized the repurchase of up to an additional $200.0 million of Kemper common stock, ~~(subject~~in addition to ~~Section 407~~the $133.0 million remaining under the August 6, 2014 authorization, bringing the remaining share repurchase authorization to approximately $333.3 million as of December 31, 2020. As of December 31, 2021, the remaining share repurchase authorization was $171.6 million under the repurchase program.

During the years ended 2021 and ~~other requirements~~2020, Kemper repurchased and retired approximately 2,085,000 and 1,617,000 shares, respectively, of ~~ERISA). The Pension~~its common stock under its share repurchase authorization for an aggregate cost of $161.7 million and $110.4 million and an average cost per share of $77.58 and $68.29, respectively.

These purchases were made in the open market in accordance with applicable federal securities laws, including Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934.

Kemper did not repurchase any of its common stock in open market transactions in the fourth quarter of 2021.

Employee Stock Purchase Plan ~~has not invested in~~

During the years ended December 31, 2021, 2020, and 2019, the Company issued 79,000, 61,000, and 24,000 shares under the Kemper ~~common stock.~~

~~The trust investment committee~~Employee Stock Purchase Plan (“ESPP”), respectively, at an average discounted price of $58.08, $61.57, and $66.08 per share. Compensation costs charged against income were $0.8 million, $0.7 million, and $0.3 million for the ~~Pension Plan, along~~years ended December 31, 2021, 2020, and 2019, respectively.

Dividends

Various state insurance laws restrict the amount that an insurance subsidiary may pay in the form of dividends, loans or advances without the prior approval of regulatory authorities. Also, that portion of an insurance subsidiary’s net equity which results from differences between statutory insurance accounting practices and GAAP would not be available for cash dividends, loans or advances. Kemper’s insurance subsidiaries paid dividends of $347.0 million to Kemper in 2021. In 2022, Kemper’s insurance subsidiaries would be able to pay $191.2 million in dividends to Kemper without prior regulatory approval. Kemper’s insurance subsidiaries had net assets of $4.5 billion, determined in accordance with its third party fiduciary advisor, periodically reviews the performance of the Pension Plan’s investments and asset allocation. Several external investment managers, one of which is Fayez Sarofim & Co. (see ~~Note 24, “Related Parties~~,”GAAP, that were restricted from payment to the Consolidated Financial Statements), manage the equity investments of the trust for the Pension Plan. Each manager is allowed to exercise investment discretion, subject to limitations, if any, established by the trust investment committee for the Pension Plan. All other investment decisions are made by the Company, subject to general guidelines as set by the trust investment committee for the Pension Plan.

The Company determines its Expected Long Term Rate of Return on Plan Assets based primarily on the Company’s expectations of future returns, with consideration to historical returns, for the Pension Plan’s investments, based on target allocations of the Pension Plan’s investments.

The fair values of pension plan assets are estimated using the same methodologies and inputs as those used to determine the fair values for the respective asset category of the Company. These methodologies and inputs are disclosed in Note 22, “Fair Value Measurements,” to the Consolidated Financial Statements. Fair value measurements for the Pension Plan’s assetsKemper without prior regulatory approval at December 31, 2021.

Kemper’s insurance subsidiaries are required to file financial statements prepared on the basis of statutory insurance accounting practices, a comprehensive basis of accounting other than GAAP. Statutory capital and surplus for the Company’s life and health insurance subsidiaries was $446.0 million and $430.4 million at December 31, 2021 and 2020, respectively. Statutory net income (loss) for the Company’s life and health insurance subsidiaries was $(12.4) million, $60.7 million and $90.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. Statutory capital and surplus for the Company’s property and casualty insurance subsidiaries was $1.5 billion and $1.7 billion at December 31, 2021 and 2020, respectively. Statutory net income (loss) for the Company’s property and casualty insurance subsidiaries was $(206.9) million, $361.6 million and $347.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. Statutory capital and surplus and statutory net income exclude parent company operations.

Kemper’s insurance subsidiaries are ~~summarized below.~~

DOLLARS IN MILLIONS
Quoted Prices
in Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Measured at Net Asset Value Fair Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities $ 158.4
$ —
$ —
—
$ 158.4
States and Political Subdivisions —
0.1
—
—
0.1
Corporate Bonds and Notes —
107.3
—
—
107.3
Equity Securities:
Common Stocks:
Other Industries 140.0
21.5
—
—
161.5
Other Equity Interests:
Collective Investment Funds —
—
—
71.8
71.8
Bond Exchange Traded Funds 92.8
—
—
—
92.8
Limited Liability Companies and Limited Partnerships —
—
—
63.7
63.7
Short-term Investments 10.0
—
—
—
10.0
Receivables and Other (1.0 ) —
—
—
(1.0 )
Total $ 400.2
$ 128.9
$ —
$ 135.5
$ 664.6

also required to hold minimum levels of statutory capital and surplus to satisfy regulatory requirements. The minimum statutory capital and surplus, or company action level risk-based capital (“RBC”), necessary to satisfy regulatory requirements for the Company’s life and health insurance subsidiaries collectively was $157.7 million at December 31, 2021. The minimum statutory capital and surplus necessary to satisfy regulatory requirements for the Company’s

~~116~~114

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

~~NOTE 17. PENSION BENEFITS (Continued)~~

~~Fair value measurements for the Pension Plan’s assets at~~ ~~December 31, 2018~~ ~~are summarized below.~~

DOLLARS IN MILLIONS
Quoted Prices
in Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Measured at Net Asset Value Fair Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities $ 110.9
$ —
$ —
—
$ 110.9
States and Political Subdivisions —
2.1
—
—
2.1
Corporate Bonds and Notes —
103.4
—
—
103.4
Equity Securities:
Preferred Stocks:
Finance, Insurance and Real Estate —
—
—
—
—
Common Stocks:
Manufacturing —
—
—
—
—
Other Industries 106.0
17.4
—
—
123.4
Other Equity Interests:
Collective Investment Funds —
—
—
68.6
68.6
Bond Exchange Traded Funds 34.1
—
—
—
34.1
Limited Liability Companies and Limited Partnerships —
—
—
77.1
77.1
Short-term Investments 4.4
—
—
—
4.4
Receivables and Other 1.0
—
0.3
—
1.3
Total $ 256.4
$ 122.9
$ 0.3
$ 145.7
$ 525.3

~~Additional information pertaining to the changes in the fair value of the Pension Plan’s assets classified as Level 3 in the two preceding tables for the years ended December 31, 2019 and~~ ~~2018~~ ~~is presented below.~~

DOLLARS IN MILLIONS 2019 2018
Balance at Beginning of Year $ 0.3
$ 0.3
Purchases, Sales and Settlements, Net (0.3 ) —
Balance at End of Year $ —
$ 0.3

~~The components of Comprehensive Pension Expense (Income) for the Pension Plan for the years ended~~ ~~December 31, 2019~~, ~~2018~~ ~~and~~ ~~2017~~ ~~were:~~

DOLLARS IN MILLIONS 2019 2018 2017
Service Cost Earned During the Year $ —
$ —
$ —
Interest Cost on Projected Benefit Obligation 22.3
20.3
20.6
Expected Return on Plan Assets (30.6 ) (28.9 ) (30.9 )
Amortization of Actuarial Loss 2.9
4.3
2.6
Pension Income Recognized in Consolidated Statements of Income (5.4 ) (4.3 ) (7.7 )
Unrecognized Pension Gain (Loss) Arising During the Year 4.2
11.5
(4.9 )
Amortization of Accumulated Unrecognized Pension Loss (2.9 ) (4.3 ) (2.6 )
Comprehensive Pension Expense (Income) $ (4.1 ) $ 2.9
$ (15.2 )

~~117~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

NOTE ~~17. PENSION BENEFITS~~14. SHAREHOLDERS’ EQUITY (Continued)

The actuarial loss included in AOCI at December 31, 2019 is being amortized over approximately 22 years, the remaining average estimated life expectancy of participants. The Company estimates that Pension Income for the Pension Plan for the year ended December 31, 2020 will include expense of $5.9 million resulting from the amortization of the related accumulated actuarial loss included in AOCI at ~~December 31, 2019~~.

~~The weighted-average discount rate, service cost discount rate, interest cost discount rate, rate of increase in future compensation levels~~property and ~~expected long-term rate of return on plan assets used to develop the components of Pension Expense for the Pension Plan for the years ended December 31, 2019,~~ ~~2018~~ ~~and~~ ~~2017~~ ~~were:~~

2019 2018 2017
Weighted-average Discount Rate 4.28 % 3.63 % 4.19 %
Service Cost Discount Rate 4.26
3.61
4.15
Interest Cost Discount Rate 3.91
3.26
3.52
Rate of Increase in Future Compensation Levels 3.40
3.40
2.56
Expected Long Term Rate of Return on Plan Assets 5.70
5.35
5.80

On August 22, 2019, the Company made a voluntary cash contribution of $55.3 million to the Pension Plan. On July 13, 2018, the Company made a voluntary cash contribution of $5.1 million to the Pension Plan. The Company did not contribute to the Pension Plan in 2017. The Company does not expect that it will be required to contribute to the Pension Plan in 2020, but could make a voluntary contribution pursuant to the maximum funding limits under ERISA.

The following benefit payments (net of participant contributions), which consider expected future service of certain participants that remain eligible for a benefit accrual, as appropriate, are expected to be paid from the Pension Plan:

DOLLARS IN MILLIONS Years Ending December 31,
2020 2021 2022 2023 2024 2025-2029
Estimated Pension Benefit Payments $ 31.4
$ 32.1
$ 33.2
$ 34.0
$ 34.7
$ 179.1

~~The Company also sponsors a non-qualified supplemental defined benefit pension plan (the “Supplemental Plan”). Benefit accruals for all participants in the Supplemental Plan were frozen effective June 30, 2016. The unfunded liability related to the Supplemental Plan~~casualty insurance subsidiaries collectively was ~~$28.9 million and $24.2~~$668.2 million at December 31, ~~2019~~2021. Company action level RBC is the level at which a company is required to file a corrective action plan with its regulators and ~~2018, respectively. Pension expense~~is equal to 200% of the authorized control level RBC.

In 2021, Kemper issued dividends and dividend equivalents of $81.0 million, of which $80.6 million was paid to shareholders. Except for certain financial covenants under Kemper’s credit agreement or during any period in which Kemper elects to defer interest payments, there are no restrictions on Kemper’s ability to pay dividends to its shareholders. Certain financial covenants, namely minimum net worth and a maximum debt to total capitalization ratio, under Kemper’s credit agreement could limit the ~~Supplemental Plan was $1.0 million, $0.8 million, and $0.8 million for the years ended~~amount of dividends that Kemper may pay to shareholders at December 31, ~~2019, 2018~~2021. Kemper had the ability to pay without restrictions of $1.2 billion in dividends to its shareholders and ~~2017, respectively. An actuarial loss of $5.6 million before taxes, an actuarial gain of $1.3 million before taxes and an actuarial loss of $1.6 million before taxes are included~~still be in ~~Other Comprehensive Income (Loss) for the years ended~~compliance with all financial covenants under its credit agreement at December 31, ~~2019, 2018 and 2017, respectively.~~2021.

~~The Company also sponsors several defined contribution benefit plans covering most of its employees. The Company made contributions to those plans of $26.0 million, $15.1 million and~~ ~~$10.6 million~~ in ~~2019~~, ~~2018~~ ~~and~~ ~~2017, respectively.~~

NOTE ~~18.~~15. PENSION BENEFITS

Kemper sponsors a qualified defined benefit pension plan (the “Pension Plan”). The Pension Plan covers approximately 3,145 participants and beneficiaries. Effective January 1, 2006, the Pension Plan was closed to new hires and, effective June 30, 2016, benefit accruals were frozen for substantially all of the participants under the Pension Plan. The Pension Plan is generally non-contributory, but participation requires or required some employees to contribute 3% of pay, as defined, per year. Benefits for participants who are or were required to contribute to the Pension Plan are based on compensation during plan participation and the number of years of participation. Benefits for the vast majority of participants who are not required to contribute to the Pension Plan are based on years of service and final average pay, as defined. The Company funds the Pension Plan in accordance with the requirements of ERISA.

Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Pension Plan for the years ended December 31, 2021 and 2020 is presented below.


DOLLARS IN MILLIONS	2021		2020
Fair Value of Plan Assets at Beginning of Year	$	405.4	$	664.6
Actual Return on Plan Assets	(0.7)		92.1
Employer Contributions	—		—

Benefits Paid	(13.0)		(145.9)
Settlement Benefits	—		(205.4)
Fair Value of Plan Assets at End of Year	391.7		405.4
Projected Benefit Obligation at Beginning of Year	382.3		660.5

Interest Cost	7.2		16.5

Benefits Paid	(13.0)		(145.9)

Settlement Benefits	—		(205.4)
Plan Amendments	18.3		—
Actuarial (Gains) Losses	(16.0)		56.6
Projected Benefit Obligation at End of Year	378.8		382.3
Funded Status—Plan Assets in Excess (Deficit) of Projected Benefit Obligation	$	12.9	$	23.1



Unamortized Amount Reported in AOCI at End of Year	$	(77.6)	$	(68.2)
Accumulated Benefit Obligation at End of Year	$	378.8	$	382.3

The measurement dates of the assets and liabilities at end of year presented in the preceding table under the headings, “2021” and “2020” were December 31, 2021 and December 31, 2020, respectively.

In 2021, the Plan was amended to update the actuarial equivalence used to determine both the early retirement factors and the optional form factors as of December 31, 2021. The result of this amendment was an increase to the Projected Benefit Obligation of $18.3 million, which was recognized in Prior Service Cost for the year ended December 31, 2021.

115

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 15. PENSION BENEFITS (Continued)

The weighted-average discount rate and rate of increase in future compensation levels used to estimate the components of the Projected Benefit Obligation for the Pension Plan at December 31, 2021 and 2020 were:


	2021		2020
Discount Rate	2.89	%	2.56	%
Rate of Increase in Future Compensation Levels	3.40		3.40

Asset allocations for the Pension Plan at December 31, 2021 and 2020 by asset category were:


ASSET CATEGORY	2021		2020
Corporate Bonds and Notes	30	%	37	%
Common and Preferred Stocks	—		24
Bond Exchange Traded Funds	32		27
Cash and Short-term Investments	36		2
Other Assets	2		10
Total	100	%	100	%

The investment objective of the Pension Plan is to produce current income and long-term capital growth through a combination of equity and fixed income investments which, together with appropriate employer contributions and any required employee contributions, is adequate to provide for the payment of the benefit obligations of the Pension Plan. The assets of the Pension Plan may be invested in fixed income and equity investments or any other investment vehicle or financial instrument deemed appropriate. Fixed income investments may include cash and short-term instruments, U.S. Government securities, corporate bonds, mortgages and other fixed income investments. Equity investments may include various types of stock, such as large-cap, mid-cap and small-cap stocks, and may also include investments in investment companies, collective investment funds and Kemper common stock (subject to Section 407 and other requirements of ERISA). The Pension Plan has not invested in Kemper common stock.

The trust investment committee for the Pension Plan, along with its third party fiduciary advisor, periodically reviews the performance of the Pension Plan’s investments and asset allocation. Several external investment managers, one of which is Fayez Sarofim & Co. (see Note 25, “Related Parties,” to the Consolidated Financial Statements), manage the equity investments of the trust for the Pension Plan. Each manager is allowed to exercise investment discretion, subject to limitations, if any, established by the trust investment committee for the Pension Plan. All other investment decisions are made by the Company, subject to general guidelines as set by the trust investment committee for the Pension Plan.

116

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 15. PENSION BENEFITS (Continued)

The fair values of pension plan assets are estimated using the same methodologies and inputs as those used to determine the fair values for the respective asset category of the Company. These methodologies and inputs are disclosed in Note 10, “Fair Value Measurements,” to the Consolidated Financial Statements. Fair value measurements for the Pension Plan’s assets at December 31, 2021 are summarized below.


DOLLARS IN MILLIONS	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at Net Asset Value		Fair Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	54.6	$	—	$	—	$	—	$	54.6
States and Political Subdivisions	—		0.1		—		—		0.1
Foreign Governments	—		0.6		—		—		0.6
Corporate Bonds and Notes	—		62.3		—		—		62.3
Equity Securities:





Other Equity Interests:

Bond Exchange Traded Funds	125.0		—		—		—		125.0
Limited Liability Companies and Limited Partnerships	—		—		—		8.4		8.4
Short-term Investments	140.2		—		—		—		140.2
Receivables and Other	0.5		—		—		—		0.5
Total	$	320.3	$	63.0	$	—	$	8.4	$	391.7

Fair value measurements for the Pension Plan’s assets at December 31, 2020 are summarized below.


DOLLARS IN MILLIONS	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at Net Asset Value		Fair Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	68.3	$	—	$	—	$	—	$	68.3
States and Political Subdivisions	—		0.7		—		—		0.7
Corporate Bonds and Notes	—		81.3		—		—		81.3
Equity Securities:


Common Stocks:

Other Industries	64.8		—		—		—		64.8
Other Equity Interests:
Collective Investment Funds	—		—		—		32.1		32.1
Bond Exchange Traded Funds	108.6		—		—		—		108.6
Limited Liability Companies and Limited Partnerships	—		—		—		41.6		41.6
Short-term Investments	7.4		—		—		—		7.4
Receivables and Other	0.6		—		—		—		0.6
Total	$	249.7	$	82.0	$	—	$	73.7	$	405.4

117

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 15. PENSION BENEFITS (Continued)

0The components of Comprehensive Pension Expense (Income) for the Pension Plan for the years ended December 31, 2021, 2020 and 2019 were:


DOLLARS IN MILLIONS	2021		2020		2019
Service Cost Earned During the Year	$	—	$	—	$	—
Interest Cost on Projected Benefit Obligation	7.2		16.5		22.3
Expected Return on Plan Assets	(9.5)		(27.6)		(30.6)
Amortization of Actuarial Loss	2.9		5.6		2.9
Settlement Expense	—		64.1		—
Pension Expense (Income) Recognized in Consolidated Statements of Income	0.6		58.6		(5.4)
Unrecognized Pension Gain (Loss) Arising During the Year	(6.0)		(7.8)		4.2
Prior Service Credit Arising During the Year	18.3		—		—
Amortization of Accumulated Unrecognized Pension Loss	(2.9)		(69.8)		(2.9)
Comprehensive Pension Expense (Income)	$	10.0	$	(19.0)	$	(4.1)

The actuarial loss included in AOCI at December 31, 2021 is being amortized over approximately 27 years, the remaining average estimated life expectancy of participants. The Company estimates that Pension Income for the Pension Plan for the year ended December 31, 2022 will include expense of $3.7 million resulting from the amortization of the related accumulated actuarial loss included in AOCI at December 31, 2021.

Settlements

In the fourth quarter of 2020, the Company’s defined benefit pension plan purchased annuities on behalf of certain plan participants currently receiving benefits and offered to make lump-sum payments to certain inactive, vested plan participants that are not currently receiving benefit payments and elected to receive lump-sum payments. Group annuity contracts were purchased from Banner Life Insurance Company (“Banner”) for $205.4 million for a portion of plan participants for whom Banner irrevocably assumed the pension obligations. For plan participants who elected lump-sum payments during the election window, a payment of $117.1 million was distributed. These transactions resulted in a partial settlement of the defined pension plan and a $50.6 million noncash settlement charge to net income for the unamortized net unrecognized postretirement benefit costs related to the settled obligations.

The weighted-average discount rate, service cost discount rate, interest cost discount rate, rate of increase in future compensation levels and expected long-term rate of return on plan assets used to develop the components of Pension Expense for the Pension Plan for the years ended December 31, 2021, 2020 and 2019 were:


	2021		2020		2019
Weighted-average Discount Rate	2.56	%	2.56	%	4.28	%
Service Cost Discount Rate	2.41		2.42		4.26
Interest Cost Discount Rate	1.90		1.89		3.91
Rate of Increase in Future Compensation Levels	3.40		3.40		3.40
Expected Long Term Rate of Return on Plan Assets	2.70		4.90		5.70

The Company did not contribute to the Pension Plan in 2020 or 2021. The Company does not expect that it will be required to contribute to the Pension Plan in 2022, but could make a voluntary contribution pursuant to the maximum funding limits under ERISA.


DOLLARS IN MILLIONS	Years Ending December 31,
DOLLARS IN MILLIONS	2022		2023		2024		2025		2026		2027-2031
Estimated Pension Benefit Payments	$	17.0	$	16.5	$	17.3	$	18.1	$	18.7	$	97.9

118

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 15. PENSION BENEFITS (Continued)

The Company also sponsors a non-qualified supplemental defined benefit pension plan (the “Supplemental Plan”). Benefit accruals for all participants in the Supplemental Plan were frozen effective June 30, 2016. The unfunded liability related to the Supplemental Plan was $28.0 million and $30.7 million at December 31, 2021 and 2020, respectively. Pension expense for the Supplemental Plan was $0.7 million, $0.8 million, and $1.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. An actuarial gain of $1.3 million before taxes, an actuarial loss of $2.7 million before taxes and an actuarial loss of $5.6 million before taxes are included in Other Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company also sponsors several defined contribution benefit plans covering most of its employees. The Company made contributions to those plans of $28.9 million, $26.1 million and $26.0 million in 2021, 2020 and 2019, respectively.

NOTE 16. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

Kemper and Infinity sponsor other than pension postretirement employee benefit plans (“OPEB”) that together provide medical, dental and/or life insurance benefits to approximately ~~650~~400 retired and ~~525~~500 active employees.

Kemper has historically self-insured the benefits under the Kemper OPEB Plan. The Kemper medical plan generally provides for a limited number of years of medical insurance benefits at retirement based on the participant’s attained age at retirement and number of years of service until specified dates and generally has required participant contributions, with most contributions adjusted annually. On December 30, 2016, Kemper amended the Kemper OPEB Plan and, effective December 31, 2016, will no longer offer coverage to post-65 Medicare-eligible retirees and Medicare-eligible spouses under the self-insured portion of its coverage. Rather, beginning on January 1, 2017, the Kemper OPEB Plan offers access to a private, third-party Medicare exchange and provides varying levels of a Company-determined subsidy via health reimbursement accounts to certain Medicare-eligible retirees and spouses in order to help fund a portion of the participants’ cost. Further, the amendment eliminates the requirement for such participants to contribute to the Kemper OPEB Plan.

In conjunction with the amendment,

~~118~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 18. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)~~

the Company recorded a pre-tax reduction to its Accumulated Postretirement Benefit Obligation of $11.0 million through Other Comprehensive Income. This prior service credit is being amortized into income over the remaining average life of the Kemper OPEB Plan’s participants.

Changes in Fair Value of Plans’ Assets and Changes in Accumulated Postretirement Benefit Obligation for the years ended December 31, ~~2019~~2021 and ~~2018~~2020 were:

DOLLARS IN MILLIONS
2019 2018
Fair Value of Plans’ Assets at Beginning of Year $ —
$ —
Employer Contributions 1.1
1.1
Plan Participants’ Contributions 0.3
0.3
Benefits Paid (1.4 ) (1.4 )
Fair Value of Plan Assets at End of Year —
—
Accumulated Postretirement Benefit Obligation at Beginning of Year 15.0
14.4
Obligation from Acquisition of Infinity —
3.9
Service Cost 0.2
0.2
Interest Cost 0.4
0.4
Plan Participants’ Contributions 0.3
0.3
Benefits Paid (1.4 ) (1.4 )
Medicare Part D Subsidy Received —
0.2
Actuarial Gain (1.7 ) (3.0 )
Accumulated Postretirement Benefit Obligation at End of Year 12.8
15.0
Funded Status—Accumulated Postretirement Benefit Obligation in Excess of Plans’ Assets $ (12.8 ) $ (15.0 )

Unamortized Actuarial Gain Reported in AOCI at End of Year $ 23.8
$ 24.9


DOLLARS IN MILLIONS
	2021		2020
Fair Value of Plans’ Assets at Beginning of Year	$	—	$	—
Employer Contributions	1.1		1.5
Plan Participants’ Contributions	0.1		0.2
Benefits Paid	(1.2)		(1.7)
Fair Value of Plan Assets at End of Year	—		—
Accumulated Postretirement Benefit Obligation at Beginning of Year	13.7		12.8
Service Cost	0.3		0.2
Interest Cost	0.1		0.3
Plan Participants’ Contributions	0.1		0.2
Benefits Paid	(1.2)		(1.7)


Actuarial (Gain) Loss	(1.8)		1.9
Accumulated Postretirement Benefit Obligation at End of Year	11.2		13.7
Funded Status—Accumulated Postretirement Benefit Obligation in Excess of Plans’ Assets	$	(11.2)	$	(13.7)

Unamortized Actuarial Gain Reported in AOCI at End of Year	$	17.5	$	18.7

The measurement dates of the assets and liabilities at end of year in the preceding table under the headings “~~2019~~”“2021” and “~~2018~~”“2020” were December 31, ~~2019~~2021 and December 31, ~~2018~~2020, respectively.

119

~~, respectively.~~

Kemper Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

NOTE 16. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)

The weighted-average discount rate and rate of increase in future compensation levels used to develop the components of the Accumulated Postretirement Benefit Obligation at December 31, ~~2019~~2021 and ~~2018~~2020 were:

2019 2018
Discount Rate 2.91 % 4.02 %
Rate of Increase in Future Compensation Levels 2.20
2.20


	2021		2020
Discount Rate	2.56	%	2.13	%
Rate of Increase in Future Compensation Levels	2.20		2.20

The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, ~~2019~~2021 was ~~7.50%~~6.29% for ~~2020,~~2022, gradually declining to 4.8% in the year ~~2025~~2028 and remaining at that level thereafter for medical benefits and ~~10.00%~~7.04% for ~~2020,~~2022, gradually declining to 4.8% in the year ~~2026~~2029 and remaining at that level thereafter for prescription drug benefits. The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, ~~2018~~2020 was ~~7.5%~~6.5% for ~~2019,~~2021, gradually declining to 4.8% in the year ~~2025~~2027 and remaining at that level thereafter for medical benefits and ~~10.0%~~7.5% for ~~2019,~~2021, gradually declining to 4.8% in the year ~~2026~~2028 and remaining at that level thereafter for prescription drug benefits.

A one-percentage point increase in the assumed health care cost trend rate for each year would have increased the Accumulated Postretirement Benefit Obligation at December 31, 2019 by $0.6 million and 2019 OPEB expense by an insignificant amount. A one-percentage point increase in the assumed health care cost trend rate for each year would have increased the Accumulated Postretirement Benefit Obligation at ~~December 31, 2018~~ by ~~$0.8 million~~ ~~and~~ ~~2018~~ ~~OPEB expense by an insignificant amount.~~

~~119~~

~~Kemper Corporation and Subsidiaries~~

~~Notes to the Consolidated Financial Statements~~

~~NOTE 18. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)~~

The components of Comprehensive OPEB Expense (Income) for the years ended December 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~2019 were:

DOLLARS IN MILLIONS 2019 2018 2017
Service Cost Earned During the Year $ 0.2
$ 0.2
$ 0.1
Interest Cost on Accumulated Postretirement Benefit Obligation 0.4
0.4
0.4
Amortization of Prior Service Credit (1.3 ) (1.3 ) —
Amortization of Accumulated Unrecognized OPEB Gain (2.4 ) (1.8 ) (1.8 )
OPEB Income Recognized in Consolidated Statements of Income (3.1 ) (2.5 ) (1.3 )
Unrecognized OPEB Gain Arising During the Year (1.7 ) (3.0 ) (0.5 )
Prior Service Credit Arising During the Year from Plan Amendments —
—
(1.3 )
Amortization of Prior Service Credit 1.3
1.3
—
Amortization of Accumulated Unrecognized OPEB Gain 2.4
1.8
1.8
Comprehensive OPEB Income $ (1.1 ) $ (2.4 ) $ (1.3 )


DOLLARS IN MILLIONS	2021		2020		2019
Service Cost Earned During the Year	$	0.3	$	0.2	$	0.2
Interest Cost on Accumulated Postretirement Benefit Obligation	0.1		0.3		0.4
Amortization of Prior Service Credit	(1.3)		(1.3)		(1.3)
Amortization of Accumulated Unrecognized OPEB Gain	(1.7)		(1.9)		(2.4)
OPEB Income Recognized in Consolidated Statements of Income	(2.6)		(2.7)		(3.1)
Unrecognized OPEB (Gain) Loss Arising During the Year	(1.8)		1.9		(1.7)

Amortization of Prior Service Credit	1.3		1.3		1.3
Amortization of Accumulated Unrecognized OPEB Gain	1.7		1.9		2.4
Comprehensive OPEB (Income) Expense	$	(1.4)	$	2.4	$	(1.1)

The Company estimates that OPEB Expense for the year ended December 31, ~~2020~~2022 will include income of ~~$3.3~~$2.9 million resulting from the amortization of the related accumulated actuarial gain and prior service credit included in AOCI at December 31, ~~2019~~.2021.

The weighted-average discount rate and rate of increase in future compensation levels used to develop OPEB Expense for the years ended December 31, ~~2019~~, ~~2018~~2021, 2020 and ~~2017~~2019 were:

2019 2018 2017
Weighted-average Discount Rate 4.08 % 3.36 % 3.61 %
Service Cost Discount Rate 4.16
3.52
3.79
Interest Cost Discount Rate 3.69
2.96
2.92
Rate of Increase in Future Compensation Levels 2.20
2.20
2.60


	2021		2020		2019
Weighted-average Discount Rate	1.99	%	2.96	%	4.08	%
Service Cost Discount Rate	2.06		2.94		4.16
Interest Cost Discount Rate	1.19		2.47		3.69
Rate of Increase in Future Compensation Levels	2.20		2.20		2.20

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Documents filed as part of this Report

1.Financial Statements. The consolidated balance sheets of Kemper and subsidiaries as of December 31, 2021 and 2020, and the consolidated statements of income, comprehensive income (loss), cash flows and shareholders’ equity for the years ended December 31, 2021, 2020 and 2019, together with the notes thereto and the report of Deloitte & Touche LLP thereon appearing in Item 8 are included in this 2021 Annual Report.

2.Financial Statement Schedules. The following four financial statement schedules are included on the pages immediately following the signature pages hereof. Schedules not listed here have been omitted because they are not applicable or not material or the required information is included in the Consolidated Financial Statements. ~~The consolidated balance sheets of Kemper and subsidiaries as of~~ ~~December 31, 2019~~ ~~and~~ ~~2018, and the consolidated statements of income, comprehensive income (loss), cash flows and shareholders’ equity for the years ended~~ ~~December 31, 2019~~, ~~2018~~ ~~and~~ ~~2017, together with the notes thereto and the report of Deloitte & Touche LLP thereon appearing in Item 8 are included in this~~ ~~2019~~ ~~Annual Report.~~


2.	Financial Statement Schedules. The following four financial statement schedules are included on the pages immediately following the signature pages hereof. Schedules not listed here have been omitted because they are not applicable or not material or the required information is included in the Consolidated Financial Statements.

Schedule I Investments Other Than Investments in Related Parties

Schedule II Parent Company Financial Statements

Schedule III Supplementary Insurance Information

Schedule IV Reinsurance Schedule

The Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP, with regards to the Financial Statement Schedules listed above, is incorporated by reference to the Report of Independent Registered Public Accountant included in Item 8.


3.	~~Exhibits. An Exhibit Index has been filed as part of this report on pages 144 through 147.~~


~~(b)~~	~~Exhibits. Included in Item 15(a)3 above~~


~~(c)~~	~~Financial Statement Schedules. Included in Item 15(a)2 above~~

3.Exhibits. An Exhibit Index has been filed as part of this report on pages 143 through 147.

(b)Exhibits. Included in Item 15(a)3 above

(c)Financial Statement Schedules. Included in Item 15(a)2 above

Item 16. Form 10-K Summary

None

142

Exhibit Index

The following exhibits are either filed as a part hereof or are incorporated by reference. Exhibit numbers followed by an asterisk (*) indicate exhibits that are management contracts or compensatory plans or arrangements.

Incorporated by Reference
Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
3.1

Restated Certificate of Incorporation
8-K 001-18298 3.2
August 8, 2014
3.2

Amended and Restated Bylaws of Kemper Corporation
8-K 001-18298 3.1
August 8, 2019
4.1

Indenture, dated as of February 27, 2014, by and between Kemper Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee
8-K 001-18298 4.1
February 27, 2014
4.2

Second Supplemental Indenture, dated as of February 24, 2015, to the Indenture, dated as of February 27, 2014, between Kemper Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee (including the form of 4.350% Senior Notes due 2025)
8-K 001-18298 4.2
February 24, 2015
4.3

Form of Senior Indenture, dated as of August 6, 2010, by and between Infinity Property and Casualty Corporation and U.S. Bank National Association, as Trustee

S-3 333-168605 4.4
August 6, 2010
4.4

First Supplemental Indenture, dated as of September 17, 2012, by and between Infinity Property and Casualty Corporation and U.S. Bank National Association, as Trustee
8-K 000-50167 4.1
September 17, 2012
4.5

Guarantee by Kemper Corporation of the 5.000% Senior Notes due 2022 of Infinity Property and Casualty Corporation
8-K 001-18298 4.1
December 3, 2018
4.6

Form of Certificate Representing Shares of Kemper Corporation Common Stock
10-K 001-18298 4.7
February 20, 2019
4.7

Description of Capital Stock
X
10.1

Second Amended and Restated Credit Agreement, by and among Kemper Corporation, the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent and syndication agent, and Bank of America, N.A. and Wells Fargo Bank, National Association as syndication agents
8-K 001-18298 10.1
June 12, 2018
10.2

Advances and Security Agreement and Addendum to Advances and Security Agreement, effective as of December 31, 2013, between Trinity Universal Insurance Company and the Federal Home Loan Bank of Dallas
10-K 001-18298 10.2
February 14, 2014
10.3

Advances, Collateral Pledge, and Security Agreement, dated as of March 18, 2014, between United Insurance Company of America and the Federal Home Loan Bank of Chicago
8-K 001-18298 10.1
March 21, 2014


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Filed or Furnished Herewith
3.1	Restated Certificate of Incorporation	8-K	001-18298	3.2	August 8, 2014
3.2	Amended and Restated Bylaws of Kemper Corporation	8-K	001-18298	3.1	August 5, 2021
4.1	Indenture, dated as of February 27, 2014, by and between Kemper Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee	8-K	001-18298	4.1	February 27, 2014
4.2	Second Supplemental Indenture, dated as of February 24, 2015, to the Indenture, dated as of February 27, 2014, between Kemper Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee (including the form of 4.350% Senior Notes due 2025)	8-K	001-18298	4.2	February 24, 2015
4.3	Form of Senior Indenture, dated as of August 6, 2010, by and between Infinity Property and Casualty Corporation and U.S. Bank National Association, as Trustee	S-3	333-168605	4.4	August 6, 2010
4.4	First Supplemental Indenture, dated as of September 17, 2012, by and between Infinity Property and Casualty Corporation and U.S. Bank National Association, as Trustee	8-K	000-50167	4.1	September 17, 2012
4.5	Guarantee by Kemper Corporation of the 5.000% Senior Notes due 2022 of Infinity Property and Casualty Corporation	8-K	001-18298	4.1	December 3, 2018
4.6	Indenture, dated as of September 29, 2020, by and between the Company and U.S. Bank National Association	8-K	001-18298	4.1	September 29, 2020
4.7	First Supplemental Indenture, dated as of September 29, 2020, by and between the Company and U.S. Bank National Association	8-K	001-18298	4.2	September 29, 2020
4.8	Form of Certificate Representing Shares of Kemper Corporation Common Stock	10-K	001-18298	4.7	February 20, 2019
4.9	Description of Capital Stock					X
10.1	Second Amended and Restated Credit Agreement, by and among Kemper Corporation, the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent and syndication agent, and Bank of America, N.A. and Wells Fargo Bank, National Association as syndication agents	8-K	001-18298	10.1	June 12, 2018
10.2	Advances and Security Agreement and Addendum to Advances and Security Agreement, effective as of December 31, 2013, between Trinity Universal Insurance Company and the Federal Home Loan Bank of Dallas	10-K	001-18298	10.2	February 14, 2014

143

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File Number

Exhibit

Filing Date

Filed or Furnished Herewith

10.3

Advances, Collateral Pledge, and Security Agreement, dated as of March 18, 2014, between United Insurance Company of America and the Federal Home Loan Bank of Chicago

8-K

001-18298

10.1

March 21, 2014

10.4

Advances and Security Agreement, effective August 14, 2020, between Alliance United Insurance Company and the Federal Home Loan Bank of San Francisco

8-K/A

001-18298

10.1

August 20, 2020

10.5

Term Loan Credit Agreement, dated as of June 4, 2019, among Kemper Corporation, the lenders party thereto, PNC Bank, National Association, as Administrative Agent, PNC Capital Markets LLC, as Sole Bookrunner and Joint Lead Arranger, and BMO Capital Markets Corp., as Joint Lead Arranger

8-K

001-18298

10.1

June 7, 2019

10.6*

Kemper Pension Equalization Plan, as amended and restated effective August 25, 2011, as amended by Amendment No. 2 effective September 16, 2013

10-K

001-18298

10.3

February 14, 2014

10.7*

Kemper Supplemental Retirement Plan, as amended and restated effective September 22, 2016

10-K

001-18298

10.5

February 13, 2017

10.8*

Kemper Non-Qualified Deferred Compensation Plan, as amended and restated effective March 16, 2016

10-Q

001-18298

10.3

May 5, 2016

10.9*

Kemper 2011 Omnibus Equity Plan, as amended and restated effective October 30, 2013

10-Q

001-18298

10.1

October 31, 2013

10.10*

Kemper 2011 Omnibus Equity Plan, as amended and restated effective February 8, 2017

10-K

001-18298

10.17

February 13, 2017

10.11*

Form of Stock Option and SAR Agreement for Non-employee Directors, as of August 25, 2011, under the Kemper 2011 Omnibus Equity Plan

10-K

001-18298

10.13

February 17, 2012

10.12*

Form of Stock Option and SAR Agreement for Non-employee Directors, as of May 1, 2013, under the Kemper 2011 Omnibus Equity Plan

10-Q

001-18298

10.1

May 2, 2013

10.13*

Form of Deferred Stock Unit Agreement for Non-employee Directors, as of May 1, 2013, under the Kemper 2011 Omnibus Equity Plan

10-Q

001-18298

10.2

May 2, 2013

10.14*

Form of Stock Option and SAR Agreement - Installment-Vesting Form, as of February 4, 2014, under the Kemper 2011 Omnibus Equity Plan

10-K

001-18298

10.24

February 14, 2014

10.15*

Form of Stock Option and SAR Agreement - Installment-Vesting Form, as of February 7, 2017, under the Kemper 2011 Omnibus Equity Plan

10-K

001-18298

10.31

February 13, 2017

10.16*

Form of Performance Share Unit Award Agreement (Adjusted ROE), as of February 6, 2018, under the Kemper 2011 Omnibus Equity Plan

10-K

001-18298

10.34

February 13, 2018

Incorporated by Reference
Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
10.4

Term Loan Credit Agreement, dated as of June 4, 2019, among Kemper Corporation, the lenders party thereto, PNC Bank, National Association, as Administrative Agent, PNC Capital Markets LLC, as Sole Bookrunner and Joint Lead Arranger, and BMO Capital Markets Corp., as Joint Lead Arranger
8-K 001-18298 10.1
June 7, 2019
10.5*

Kemper Pension Equalization Plan, as amended and restated effective August 25, 2011, as amended by Amendment No. 2 effective September 16, 2013
10-K 001-18298 10.3
February 14, 2014
10.6*

Kemper Supplemental Retirement Plan, as amended and restated effective September 22, 2016
10-K 001-18298 10.5
February 13, 2017
10.7*

Kemper Non-Qualified Deferred Compensation Plan, as amended and restated effective March 16, 2016
10-Q 001-18298 10.3
May 5, 2016
10.8*

Kemper 1995 Non-employee Director Stock Option Plan, as amended and restated effective February 3, 2009
10-K 001-18298 10.2
February 4, 2009
10.9*

Form of Stock Option Agreement, as of February 1, 2006, under the Kemper 1995 Non-employee Director Stock Option Plan
10-Q 001-18298 10.6
May 4, 2011
10.10*

Form of Stock Option Agreement, as of February 3, 2009, under the Kemper 1995 Non-employee Director Stock Option Plan
10-K 001-18298 10.7
February 4, 2009
10.11*

Kemper 2011 Omnibus Equity Plan, as amended and restated effective October 30, 2013
10-Q 001-18298 10.1
October 31, 2013
10.12*

Kemper 2011 Omnibus Equity Plan, as amended and restated effective February 8, 2017
10-K 001-18298 10.17
February 13, 2017
10.13*

Form of Stock Option and SAR Agreement for Non-employee Directors, as of August 25, 2011, under the Kemper 2011 Omnibus Equity Plan
10-K 001-18298 10.13
February 17, 2012
10.14*

Form of Stock Option and SAR Agreement for Non-employee Directors, as of May 1, 2013, under the Kemper 2011 Omnibus Equity Plan
10-Q 001-18298 10.1
May 2, 2013
10.15*

Form of Deferred Stock Unit Agreement for Non-employee Directors, as of May 1, 2013, under the Kemper 2011 Omnibus Equity Plan
10-Q 001-18298 10.2
May 2, 2013
10.16*

Form of Stock Option and SAR Agreement - Installment-Vesting Form, as of February 4, 2014, under the Kemper 2011 Omnibus Equity Plan
10-K 001-18298 10.24
February 14, 2014
10.17*

Form of Stock Option and SAR Agreement - Cliff-Vesting Form, as of February 4, 2014, under the Kemper 2011 Omnibus Equity Plan
10-K 001-18298 10.25
February 14, 2014
10.18*

Form of Time-Vested Restricted Stock Unit Award Agreement - Installment-Vesting Form, as of February 4, 2014, under the Kemper 2011 Omnibus Equity Plan
10-K 001-18298 10.26
February 14, 2014
10.19*

Form of Performance-Based Restricted Stock Unit Award Agreement (Relative TSR), as of February 7, 2017, under the Kemper 2011 Omnibus Equity Plan
10-K 001-18298
10.29
February 13, 2017

144

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File Number

Exhibit

Filing Date

Filed or Furnished Herewith

10.20*10.17*

~~Form of Performance-Based Restricted Stock Unit Award Agreement (Adjusted ROE), as of February 7, 2017, under the Kemper 2011 Omnibus Equity Plan~~

~~10-K~~

~~001-18298~~

~~10.30~~

~~February 13, 2017~~

10.21*

~~Form of Stock Option and SAR Agreement - Installment-Vesting Form, as of February 7, 2017, under the Kemper 2011 Omnibus Equity Plan~~

~~10-K~~

~~001-18298~~

~~10.31~~

~~February 13, 2017~~

10.22*

~~Form of Time-Vested Restricted Stock Unit Award Agreement - Installment-Vesting Form, as of February 7, 2017, under the Kemper 2011 Omnibus Equity Plan~~

~~10-K~~

~~001-18298~~

~~10.33~~

~~February 13, 2017~~

10.23*

~~Form of Performance Share Unit Award Agreement (Adjusted ROE), as of February 6, 2018, under the Kemper 2011 Omnibus Equity Plan~~

~~10-K~~

~~001-18298~~

~~10.34~~

~~February 13, 2018~~

10.24*

Form of Performance Share Unit Award Agreement (Relative TSR), as of February 6, 2018, under the Kemper 2011 Omnibus Equity Plan

10-K

001-18298

10.35

February 13, 2018

10.25*10.18*

~~Form of Restricted Stock Unit Award Agreement (Cliff Vesting), as of February 6, 2018, under the Kemper 2011 Omnibus Equity Plan~~

~~10-K~~

~~001-18298~~

~~10.36~~

~~February 13, 2018~~

10.26*

Form of Restricted Stock Unit Award Agreement (Installment Vesting), as of February 6, 2018, under the Kemper 2011 Omnibus Equity Plan

10-K

001-18298

10.37

February 13, 2018

10.27*10.19*

~~Form of Non-Qualified Stock Option and SAR Award Agreement (Cliff Vesting), as of February 6, 2018, under the Kemper 2011 Omnibus Equity Plan~~

~~10-K~~

~~001-18298~~

~~10.38~~

~~February 13, 2018~~

10.28*

Form of Non-Qualified Stock Option and SAR Award Agreement (Installment Vesting), as of February 6, 2018, under the Kemper 2011 Omnibus Equity Plan

10-K

001-18298

10.39

February 13, 2018

10.29*10.20*

Kemper Executive Performance Plan, amended and restated as of May 1, 2018

10-Q

001-18298

10.2

July 30, 2018

10.30*10.21*

Form of Non-Employee Director Restricted Stock Unit Award Agreement, as of April 30, 2019, under the Kemper 2011 Omnibus Equity Plan

8-K

001-18298

10.1

May 1, 2019

10.31*10.22*

Form of individual Indemnification Agreements between Kemper and its directors and executive officers

8-K

001-18298

10.1

February 11, 2020

10.23*

10.32*2020 Omnibus Plan

Schedule 14A

001-18298

Appendix B

March 25, 2020

10.24*

Form of Non-Employee Director Restricted Stock Unit Award Agreement as of May 5, 2020 under the 2020 Omnibus Equity Plan

8-K

001-18298

10.1

May 11, 2020

10.25*

Form of Non-Qualified Stock Option and SAR Award Agreement (Cliff-Vesting) as of May 5, 2020 under the 2020 Omnibus Equity Plan

8-K

001-18298

10.2

May 11, 2020

10.26*

Form of Non-Qualified Stock Option and SAR Award Agreement (Installment-Vesting) as of May 5, 2020 under the 2020 Omnibus Equity Plan

8-K

001-18298

10.3

May 11, 2020

10.27*

Form of Restricted Stock Unit Award Agreement (Cliff-Vesting) as of May 5, 2020 under the 2020 Omnibus Equity Plan

8-K

001-18298

10.4

May 11, 2020

10.28*

Form of Restricted Stock Unit Award Agreement (Installment-Vesting) as of May 5, 2020 under the 2020 Omnibus Equity Plan

8-K

001-18298

10.5

May 11, 2020

10.29*

Form of Performance Share Unit Award Agreement (Adjusted ROE) as of May 5, 2020 under the 2020 Omnibus Equity Plan

8-K

001-18298

10.6

May 11, 2020

10.30*

Form of Performance Share Unit Award Agreement (Relative TSR) as of May 5, 2020 under the 2020 Omnibus Equity Plan

8-K

001-18298

10.7

May 11, 2020

10.31*

Form of individual change in control severance agreements between Kemper and its executive officers

10-K

001-18298

10.42

February 13, 2017

145

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File Number

Exhibit

Filing Date

Filed or Furnished Herewith

Each of the agreements is identical except that the multipliers for benefits related to bonus, severance, life insurance and health insurance are 150%, 3 years, 3 years and 36 months, respectively, for the Chief Executive Officer and 110%, 2 years, 2 years and 24 months, respectively, for the other officers.

~~145~~

10.32*

Form of Non-Qualified Stock Option and SAR Award Agreement (Cliff Vesting) as of February 1, 2022 under the 2020 Equity Omnibus Plan

~~Incorporated by Reference~~

~~Exhibit Number~~10.33*

~~Exhibit Description~~

Form of Non-Qualified Stock Option and SAR Award Agreement (Installment Vesting) as of February 1, 2022 under the 2020 Equity Omnibus Plan

~~Form~~

~~File Number~~

~~Exhibit~~

~~Filing Date~~

~~Filed or Furnished Herewith~~X

10.34*

Form of Restricted Stock Unit Award Agreement (Cliff Vesting) as of February 1, 2022 under the 2020 Equity Omnibus Plan

10.35*

Form of Restricted Stock Unit Award Agreement (Installment Vesting) as of February 1, 2022 under the 2020 Equity Omnibus Plan

10.36*

Form of Performance Share Unit Award Agreement (Adjusted ROE) as of February 1, 2022 under the 2020 Equity Omnibus Plan

10.37*

Form of Performance Share Unit Award Agreement (Relative TSR) as of February 1, 2022 under the 2020 Equity Omnibus Plan

10.38*

Form of Special Equity Award Agreement as of February 1, 2022 under the 2020 Omnibus Equity Plan

Subsidiaries of Kemper Corporation

Consent of Deloitte & Touche LLP

Power of Attorney (included on the signature page hereof)

31.1

Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14(a)

31.2

Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14(a)

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K)

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K)

101.1

XBRL Instance

101.2

XBRL Taxonomy Extension Schema Document

101.3

XBRL Taxonomy Extension Calculation Linkbase Document

146

~~101.4~~

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File Number

Exhibit

Filing Date

Filed or Furnished Herewith

101.4

XBRL Taxonomy Extension Label Linkbase Document

101.5

XBRL Taxonomy Extension Presentation Linkbase Document

101.6

XBRL Taxonomy Extension Definition Linkbase Document

147

~~146~~

POWER OF ATTORNEY

Each person whose signature appears below on the following page hereby appoints each of Joseph P. Lacher, Jr., President and Chief Executive Officer, James J. McKinney, ~~Senior~~Executive Vice President and Chief Financial Officer, and Anastasios Omiridis, Senior Vice President and Deputy Chief Financial ~~Officer, and Richard Roeske, Vice President and Chief Accounting~~ Officer, so long as such individual remains an executive officer of Kemper Corporation, his or her true and lawful attorney-in-fact with authority together or individually to execute in the name of each such signatory, and with authority to file with the SEC, any and all amendments to this ~~2019~~2021 Annual Report of Kemper Corporation, together with any and all exhibits thereto and other documents therewith, necessary or advisable to enable Kemper Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations, and requirements of the SEC in respect thereof, which amendments may make such other changes in the ~~2019~~2021 Annual Report as the aforesaid attorney-in-fact executing the same deems appropriate.

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Kemper Corporation has duly caused this ~~2019~~2021 Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2021 to be signed on its behalf by the undersigned, thereunto duly authorized, on February ~~14, 2020~~.10, 2022.




KEMPER CORPORATION (Registrant)

By:						/S/s/ JOSEPH P. LACHER, JR.
						Joseph P. Lacher, Jr.
						Chairman of the Board, President and Chief Executive Officer ~~and Director~~

148

~~147~~

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Kemper Corporation in the capacities indicated on February ~~14, 2020~~.10, 2022.



Signature		Title
~~Signature~~/s/ JOSEPH P. LACHER, JR.		~~Title~~
~~/S/ ROBERT J. JOYCE~~	Chairman of the Board, ~~and Director~~
~~Robert J. Joyce~~

~~/S/ JOSEPH P. LACHER, JR.~~	President and Chief Executive Officer (Principal Executive Officer)
Joseph P. Lacher, Jr.

/S/s/ JAMES J. MCKINNEY		Executive Vice President and Chief Financial Officer (Principal Financial Officer)
James J. McKinney

/S/s/ ANASTASIOS OMIRIDIS		Senior Vice President and Deputy Chief Financial Officer (Principal Accounting Officer)
Anastasios Omiridis

/S/s/ ROBERT J. JOYCE		Director
Robert J. Joyce

/s/ TERESA A. CANIDA		Director
Teresa A. Canida

/S/s/ GEORGE N. COCHRAN		Director
George N. Cochran

/S/s/ KATHLEEN M. CRONIN		Director
Kathleen M. Cronin

/S/s/ LACY M. JOHNSON		Director
Lacy M. Johnson

/S/s/ GERALD LADERMAN		Director
Gerald Laderman

/s/ STUART B. PARKER		Director
Stuart B. Parker

/s/ CHRISTOPHER B. SAROFIM		Director
Christopher B. Sarofim

/S/s/ DAVID P. STORCH		Director
David P. Storch

/S/s/ SUSAN D. WHITING		Director
Susan D. Whiting

~~148~~149

SCHEDULE I

KEMPER CORPORATION AND SUBSIDIARIES

INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES

DECEMBER 31, ~~2019~~2021

(Dollars in Millions)


	Amortized Cost		Fair Value		Amount Carried in Balance Sheet			Amortized Cost		Fair Value		Amount Carried in Balance Sheet
Fixed Maturities:							Fixed Maturities:
Bonds and Notes:							Bonds and Notes:
United States Government and Government Agencies and Authorities	$	784.7	$	815.9	$	815.9	United States Government and Government Agencies and Authorities	$	610.1	$	637.4	$	637.4
States and Political Subdivisions	1,386.4		1,515.8		1,515.8		States and Political Subdivisions	1,752.5		1,890.1		1,890.1
Foreign Governments	17.2		16.8		16.8		Foreign Governments	6.7		5.5		5.5
Corporate Securities:							Corporate Securities:
Other Bonds and Notes	3,465.0		3,859.7		3,859.7		Other Bonds and Notes	3,929.0		4,386.9		4,386.9
Redeemable Preferred Stocks	6.8		6.7		6.7		Redeemable Preferred Stocks	7.0		7.4		7.4
Collateralized Loan Obligations	624.6		618.2		618.2		Collateralized Loan Obligations	756.0		752.1		752.1
Other Mortgage- and Asset-backed	88.0		89.0		89.0		Other Mortgage- and Asset-backed	296.9		307.5		307.5
Total Investments in Fixed Maturities	6,372.7		6,922.1		6,922.1		Total Investments in Fixed Maturities	7,358.2		7,986.9		7,986.9
Equity Securities at Fair Value:							Equity Securities at Fair Value:
Preferred Stocks	59.2		59.2		59.2		Preferred Stocks	51.8		51.8		51.8
Common Stocks	13.2		13.2		13.2		Common Stocks	21.8		21.8		21.8
Other Equity Interests	834.9		834.9		834.9		Other Equity Interests	757.0		757.0		757.0
Total Investments in Equity Securities	907.3		907.3		907.3		Total Investments in Equity Securities	830.6		830.6		830.6
Equity Securities at Modified Cost	41.9		XXX.X		41.9		Equity Securities at Modified Cost	32.3		XXX.X		32.3


Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings	220.4		XXX.X		220.4		Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings	241.9		XXX.X		241.9
Alternative Energy Partnership Investments							Alternative Energy Partnership Investments	39.6		XXX.X		39.6
Convertible Securities at Fair Value	37.3		37.3		37.3		Convertible Securities at Fair Value	46.4		46.4		46.4
Loans, Real Estate and Other Investments	444.5		XXX.X		444.5		Loans, Real Estate and Other Investments	925.6		XXX.X		925.6
Short-term Investments	470.9		XXX.X		470.9		Short-term Investments	284.1		XXX.X		284.1
Total Investments	$	8,495.0			$	9,044.4	Total Investments	$	9,758.7			$	10,387.4

See Accompanying Report of Independent Registered Public Accounting Firm.

~~SCH I-1~~

SCHEDULE II

KEMPER CORPORATION

PARENT COMPANY BALANCE SHEETS

(Dollars in Millions)


	December 31,
	2021		2020
ASSETS
Investments in Subsidiaries	$	4,729.1	$	4,896.0
Fixed Maturities at Fair Value (Amortized Cost: 2021 – $0.3; 2020 - $91.8)	0.4		99.8
Equity Securities at Fair Value (Cost: 2021 - $106.8; 2020 - $73.4)	107.4		78.8


Short-term Investments	96.9		508.2
Cash	27.7		46.0
Other Receivables	2.3		1.1

Right-of-Use Assets	12.8		13.4
Other Assets	18.9		29.2
Total Assets	$	4,995.5	$	5,672.5
LIABILITIES AND SHAREHOLDERS’ EQUITY

Term Loan due July 5, 2023 (Fair Value: 2021 – $—; 2020 – $50.0)	$	—	$	49.9
Senior Notes Payable, 4.35% due 2025 (Fair Value: 2021 – $481.4; 2020 – $499.5)	449.0		448.8
Senior Notes Payable, 2.40% due 2030 (Fair Value: 2021 – $387.8, 2020 – $405.6)	396.2		395.8

Current Income Tax Liability	18.5		41.5
Deferred Income Tax Liability	46.5		38.9
Liabilities for Benefit Plans	42.3		47.6
Right-of-Use Liabilities	25.8		26.9
Accrued Expenses and Other Liabilities	9.5		59.7
Total Liabilities	987.8		1,109.1
Shareholders’ Equity:
Common Stock	6.4		6.5
Additional Paid-in Capital	1,790.7		1,805.2
Retained Earnings	1,762.5		2,071.2
Accumulated Other Comprehensive Income	448.1		680.5
Total Shareholders’ Equity	4,007.7		4,563.4
Total Liabilities and Shareholders’ Equity	$	4,995.5	$	5,672.5

December 31,
2019 2018
ASSETS
Investments in Subsidiaries $ 4,383.7
$ 3,736.0
Fixed Maturities at Fair Value (Amortized Cost: 2018 – $12.6) —
12.6
Equity Securities at Fair Value 55.7
20.4
Short-term Investments 89.3
64.6
Cash 61.8
2.9
Other Receivables 21.9
5.7
Other Assets 21.9
14.4
Right-of-Use Assets 18.6
—
Total Assets $ 4,652.9
$ 3,856.6
LIABILITIES AND SHAREHOLDERS’ EQUITY
Term Loan due June 29, 2020 (Fair Value: 2018 – $35.0) —
34.9
Term Loan due July 5, 2023 (Fair Value: 2019 – $50.0) 49.9
—
Senior Notes Payable, 4.35% due 2025 (Fair Value: 2019 – $478.6; 2018 – $444.2) 448.6
448.4
Subordinated Debentures due 2054 (Fair Value: 2018 – $151.1) —
144.2
Current Income Tax Liability 55.3
40.5
Deferred Income Tax Liability 32.2
20.2
Liabilities for Benefit Plans 44.3
98.2
Right-of-Use Liabilities 31.3
—
Accrued Expenses and Other Liabilities 19.0
20.1
Total Liabilities 680.6
806.5
Shareholders’ Equity:
Common Stock 6.7
6.5
Additional Paid-in Capital 1,819.2
1,666.3
Retained Earnings 1,810.3
1,355.5
Accumulated Other Comprehensive Income 336.1
21.8
Total Shareholders’ Equity 3,972.3
3,050.1
Total Liabilities and Shareholders’ Equity $ 4,652.9
$ 3,856.6

See Accompanying Report of Independent Registered Public Accounting Firm.

~~SCH II-1~~1

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF INCOME

(Dollars in Millions)


	For the Year Ended December 31,										For the Year Ended December 31,
	2019			2018			2017				2021		2020		2019
Net Investment Income	$	2.1		$	2.5		$	3.0		Net Investment Income	$	3.4	$	1.4	$	2.1
Income from Change in Fair Value of Equity Securities	1.6			1.4			—			Income from Change in Fair Value of Equity Securities	10.0		4.3		1.6
Net Realized Gains (Losses) on Sales of Investments	0.3			(0.7		)	0.6			Net Realized Gains (Losses) on Sales of Investments	10.6		0.1		0.3

Total Revenues	4.0			3.2			3.6			Total Revenues	24.0		5.8		4.0
Interest Expense	28.5			37.6			36.6			Interest Expense	32.0		24.2		28.5
Loss from Early Extinguishment of Debt	5.8			—			—			Loss from Early Extinguishment of Debt	—		—		5.8
Pension Settlement Expense										Pension Settlement Expense	—		64.1		—
Other Operating (Benefits) Expenses	4.0			26.3			(5.1		)	Other Operating (Benefits) Expenses	5.9		(3.6)		4.0
Total Operating Expenses	38.3			63.9			31.5			Total Operating Expenses	37.9		84.7		38.3
Loss before Income Taxes and Equity in Net Income of Subsidiaries	(34.3		)	(60.7		)	(27.9		)	Loss before Income Taxes and Equity in Net Income of Subsidiaries	(13.9)		(78.9)		(34.3)
Income Tax Benefit	9.4			12.2			21.2
Loss before Equity in Net Income of Subsidiaries	(24.9		)	(48.5		)	(6.7		)
Equity in Net Income of Subsidiaries	556.0			238.6			127.6
Net Income	$	531.1		$	190.1		$	120.9
Income Tax Benefit (Expense)										Income Tax Benefit (Expense)	(0.6)		13.4		9.4
Loss before Equity in Net Income (Loss) of Subsidiaries										Loss before Equity in Net Income (Loss) of Subsidiaries	(14.5)		(65.5)		(24.9)
Equity in Net Income (Loss) of Subsidiaries										Equity in Net Income (Loss) of Subsidiaries	(106.0)		475.4		556.0
Net Income (Loss)										Net Income (Loss)	$	(120.5)	$	409.9	$	531.1

See Accompanying Report of Independent Registered Public Accounting Firm.

~~SCH II-2~~2

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Millions)


	For the Year Ended December 31,
	2021		2020		2019
Net Income (Loss)	$	(120.5)	$	409.9	$	531.1
Other Comprehensive Income (Loss):
Changes in Net Unrealized Gains (Losses) on Investment Securities:
Having No Credit Losses Recognized in Consolidated Statements of Income (Loss):
Securities Held by Subsidiaries	(230.4)		378.7		433.2
Securities Held by Parent	—		8.0		0.2
Having Credit Losses Recognized in Consolidated Statements of Income (Loss):
Securities Held by Subsidiaries	(2.0)		(2.6)		—
Reclassification Adjustment for Amounts Included in Net Income (Loss):
Securities Held by Subsidiaries	(43.5)		(16.6)		(27.9)
Securities Held by Parent	(10.6)		(0.1)		(0.2)
Unrecognized Postretirement Benefit Costs Arising During the Year:
Securities Held by Subsidiaries	0.6		—		(0.6)
Securities Held by Parent	(9.5)		3.6		(4.2)
Reclassification Adjustments for Amounts Included in Net Income (Loss):
Pension Settlement Cost Recognized	—		64.1		—
Amortization of Unrecognized Postretirement Benefits (Costs)	0.1		2.5		(3.0)





Gains (Losses) on Cash Flow Hedge	0.5		0.4		0.4
Other Comprehensive Income (Loss) before Income Taxes	(294.8)		438.0		397.9
Income Tax Benefit (Expense):
Changes in Net Unrealized Gains (Losses) on Investment Securities:
Having No Credit Losses Recognized in Consolidated Statements of Income (Loss):
Securities Held by Subsidiaries	48.4		(80.6)		(91.0)
Securities Held by Parent	—		(1.7)		—
Having Credit Losses Recognized in Consolidated Statements of Income (Loss):
Securities Held by Subsidiaries	0.4		0.5		—

Reclassification Adjustment for Amounts Included in Net Income (Loss):
Securities Held by Subsidiaries	9.1		3.5		5.8
Securities Held by Parent	2.2		—		—
Unrecognized Postretirement Benefit Costs Arising During the Year:
Securities Held by Subsidiaries	(0.1)		—		—
Securities Held by Parent	2.5		(1.3)		1.0
Reclassification Adjustments for Amounts Included in Net Income (Loss):
Pension Settlement Cost Recognized	—		(13.5)		—
Amortization of Unrecognized Postretirement Benefit Costs	—		(0.5)		0.7





Changes in Gain (Loss) on Cash Flow Hedges	(0.1)		—		(0.1)
Income Tax Benefit (Expense)	62.4		(93.6)		(83.6)
Other Comprehensive Income (Loss)	(232.4)		344.4		314.3
Total Comprehensive Income (Loss)	$	(352.9)	$	754.3	$	845.4

For the Year Ended December 31,
2019 2018 2017
Net Income $ 531.1
$ 190.1
$ 120.9
Other Comprehensive Income (Loss):
Unrealized Holding Gains (Losses) Arising During the Year:
Securities Held by Subsidiaries 433.2
(214.1 ) 119.5
Securities Held by Parent 0.2
(0.1 ) (0.4 )
Reclassification Adjustment for Amounts Included in Net Income:
Securities Held by Subsidiaries (27.9 ) (21.9 ) (35.3 )
Securities Held by Parent (0.2 ) —
—
Unrealized Holding Gains (Losses) 405.3
(236.1 ) 83.8
Unrecognized Postretirement Benefit Costs Arising During the Year:
Securities Held by Subsidiaries (0.6 ) —
—
Securities Held by Parent (4.2 ) (8.0 ) 3.9
Reclassification Adjustments for Amounts Included in Net Income:
Amortization of Unrecognized Postretirement Benefits (Costs) (3.0 ) 1.1
(0.6 )
Total Reclassification Adjustments for Amounts Included in Net Income (3.0 ) 1.1
(0.6 )
Net Unrecognized Postretirement Benefit Costs (7.8 )
(6.9 )
3.3
Foreign Currency Translation Adjustments on Investments Held by Subsidiaries —
0.3
1.7
Gains (Losses) on Cash Flow Hedge 0.4
1.2
(6.7 )
Other Comprehensive Income (Loss) before Income Taxes 397.9
(241.5 ) 82.1
Income Tax Benefit (Expense):
Unrealized Holding Gains and Losses Arising During the Year:
Securities Held by Subsidiaries (91.0 ) 45.0
(38.3 )
Securities Held by Parent —
—
0.1
Reclassification Adjustment for Amounts Included in Net Income:
Securities Held by Subsidiaries 5.8
4.6
12.3
Unrealized Holding Gains and Losses (85.2 ) 49.6
(25.9 )
Unrecognized Postretirement Benefit Costs Arising During the Year 1.0
1.7
(0.8 )
Reclassification Adjustments for Amounts Included in Net Income:
Amortization of Unrecognized Postretirement Benefit Costs 0.7
(0.2 ) 0.2
Total Reclassification Adjustments for Amounts Included in Net Income 0.7
(0.2 ) 0.2
Net Unrecognized Postretirement Benefit Costs 1.7
1.5
(0.6 )
Foreign Currency Translation Adjustments on Investments Held by Subsidiaries —
(0.1 ) (0.6 )
Gains (Losses) on Cash Flow Hedge (0.1 ) (0.3 ) 2.4
Income Tax Benefit (Expense) (83.6 ) 50.7
(24.7 )
Other Comprehensive Income (Loss) 314.3
(190.8 ) 57.4
Total Comprehensive Income (Loss) $ 845.4
$ (0.7 ) $ 178.3

See Accompanying Report of Independent Registered Public Accounting Firm.

~~SCH II-3~~

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF CASH FLOWS

(Dollars in Millions)


	For the Year Ended December 31,
	2021		2020		2019
Operating Activities:
Net Income (Loss)	$	(120.5)	$	409.9	$	531.1
Adjustment Required to Reconcile Net Income (Loss) to Net Cash Provided by Operations:
Equity in Net Income (Loss) of Subsidiaries	106.0		(475.4)		(556.0)
Cash Dividends from Subsidiaries	170.3		216.2		239.0

Net Realized Investment (Gains) Losses	(10.6)		(0.1)		(0.3)
Settlement Costs Related to Defined Benefit Pension Plan	—		64.1		—
Contribution to Defined Benefit Pension Plan	—		—		(55.3)

Loss from Early Extinguishment of Debt	—		—		5.8
Decrease (Increase) in Value of Equity and Convertible Securities at Fair Value	(10.0)		(4.3)		(1.6)
Other, Net	(35.3)		52.2		9.8
Net Cash Provided by Operating Activities	99.9		262.6		172.5
Investing Activities:
Capital Contributed to Subsidiaries	(36.5)		(62.0)		(83.0)
Capital Distribution from Subsidiaries	—		—		85.0

Proceeds from Sales, Calls and Maturities of Fixed Maturities	181.3		2.0		12.7
Proceeds from the Sales or Paydowns of Investments:
Equity Securities	28.5		2.2		15.3
Purchases of Investments:

Equity Securities	(48.7)		(21.0)		(48.9)
Net Sales (Purchases) of Short-term Investments	411.3		(415.7)		(23.3)
Acquisition of Business	(370.9)		—		—
Net Cash Provided (Used) by Investing Activities	165.0		(494.5)		(42.2)
Financing Activities:

Net Proceeds from Issuance of Long-term Debt	—		395.6		49.9


Repayments of Long-term Debt	(50.0)		—		(185.0)

Proceeds from Issuance of Common Stock, Net of Transaction Costs	—		—		127.5
Proceeds from Shares Issued under Employee Stock Purchase Plan	5.4		4.4		1.6
Common Stock Repurchases	(161.7)		(110.4)		—
Dividends and Dividend Equivalents Paid	(80.6)		(78.9)		(67.8)
Other	3.7		5.4		2.4

Net Cash Provided (Used) by Financing Activities	(283.2)		216.1		(71.4)
Increase (Decrease) in Cash	(18.3)		(15.8)		58.9
Cash, Beginning of Year	46.0		61.8		2.9
Cash, End of Year	$	27.7	$	46.0	$	61.8

For the Year Ended December 31,
2019 2018 2017
Operating Activities:
Net Income $ 531.1
$ 190.1
$ 120.9
Adjustment Required to Reconcile Net Income to Net Cash Provided by Operations:
Equity in Net Income of Subsidiaries (556.0 ) (238.6 ) (127.6 )
Cash Dividends from Subsidiaries 239.0
130.4
108.1
Cash Contribution to Defined Benefit Plan (55.3 ) (5.0 ) —
Increase in Value of Equity Securities at Fair Value (1.6 ) (1.4 ) —
Net Realized (Gains) Losses on Sales of Investments (0.3 ) 0.7
(0.6 )
Loss from Early Extinguishment of Debt 5.8
—
—
Other, Net 9.8
29.6
0.7
Net Cash Provided by Operating Activities 172.5
105.8
101.5
Investing Activities:
Capital Contributed to Subsidiaries (83.0 ) (20.0 ) —
Capital Distribution from Subsidiary 85.0
176.0
—
Sales, Paydowns and Maturities of Fixed Maturities 12.7
(0.2 ) 45.7
Purchases of Equity Securities (48.9 ) (2.3 ) —
Sales of Equity Securities 15.3
67.5
—
Sales of Fair Value Option Investments —
—
42.2
Purchases of Fair Value Option Investments —
—
(7.0 )
Acquisition of Business —
(564.6 ) —
Change in Short-term Investments (23.3 ) 253.4
15.6
Net Cash Provided (Used) by Investing Activities (42.2 ) (90.2 ) 96.5
Financing Activities:
Notes Payable Proceeds:
Net Proceeds from Issuance of Debt 49.9
249.4
200.2
Repayments of Debt (185.0 ) (215.0 ) (360.0 )
Proceeds from Issuance of Common Stock, Net of Transaction Costs 127.5
—
—
Cash Dividends Paid (67.8 ) (56.4 ) (49.5 )
Proceeds from Shares Issued under Employee Stock Purchase Plan 1.6
—
—
Cash Exercise of Stock Options 2.4
0.9
4.0
Net Cash Used by Financing Activities (71.4 ) (21.1 ) (205.3 )
Increase (Decrease) in Cash 58.9
(5.5 ) (7.3 )
Cash, Beginning of Year 2.9
8.4
15.7
Cash, End of Year $ 61.8
$ 2.9
$ 8.4

See Accompanying Report of Independent Registered Public Accounting Firm.

~~SCH II-4~~

KEMPER CORPORATION

~~Schedule II (Continued) - Financial Information of Kemper Corporation~~FINANCIAL INFORMATION OF KEMPER CORPORATION

~~Notes to Financial Information~~NOTES TO FINANCIAL INFORMATION

(Dollars in Millions)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial information of Kemper Corporation (“Kemper” or the “Parent Company”) should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K. Kemper’s subsidiaries are accounted for using the equity method of accounting. Equity in net income (loss) of these subsidiaries is presented on the Statements of Operations as Equity in Net Income (Loss) of Subsidiaries.

NOTE 2. GUARANTEES

On November 30, 2018 Kemper executed a guarantee to fully and unconditionally guarantee the payment and performance obligations of the 5.0% Senior Notes due September 19, 2022 of Infinity Property and Casualty Corporation, a wholly owned subsidiary of Kemper.

NOTE 3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Kemper ~~did 0t receive any~~received $189.0 million and $106.0 million of securities in non-cash settlement of dividends from subsidiaries 0rin 2021 and 2020, respectively. Kemper made non-cash capital contributions of $103.3 million to subsidiaries in 2021. Kemper did not make any non-cash capital contributions in ~~2019~~.

Kemper received non-cash dividends from subsidiaries, in the form of invested assets, of $574 million in 2018. Kemper made non-cash capital contributions, in the form of invested assets, of $350 million in 2018.2020.

NOTE 4. LEASES

Kemper leases certain office space for its current and former corporate headquarters under non-cancelable operating leases.

The following table presents operating lease ROU assets and lease liabilities at December 31, ~~2019.~~2021 and 2020.

DOLLARS IN MILLIONS 2019
Operating Lease Right-of-Use Assets $ 18.6
Operating Lease Liabilities 31.3


DOLLARS IN MILLIONS	2021		2020
Operating Lease Right-of-Use Assets	$	12.8	$	13.4
Operating Lease Liabilities	25.8		26.9

Supplemental cash flow information related to Kemper’s operating leases for the year-ended December 31, ~~2019~~2021 and December 31, 2020 respectively are presented follows.


DOLLARS IN MILLIONS	2021		2020
Operating Cash Flows from Operating Leases (Fixed Payments)	$	2.2	$	(2.1)
Operating Cash Flows from Operating Leases (Liability Reduction)	1.1		0.3
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	—		—

DOLLARS IN MILLIONS 2019
Operating Cash Flows from Operating Leases (Fixed Payments) $ 1.2
Operating Cash Flows from Operating Leases (Liability Reduction) 1.0
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities 7.9

Significant judgments and assumptions for determining lease asset and liability as December 31, ~~2019~~2021 and December 31, 2020 respectively are presented below.



~~Weighted-average Remaining Lease Term - Operating Leases~~	~~13.0 years~~
~~Weighted-average Discount Rate - Operating Leases~~	~~4.0~~	%

~~SCH II-5~~

~~NOTE 4. LEASES (Continued)~~


DOLLARS IN MILLIONS	2021		2020
Weighted-average Remaining Lease Term - Operating Leases	11.9 years		13.0 years
Weighted-average Discount Rate - Operating Leases	4.0	%	4.0	%

Kemper’s leases do not provide an implicit rate. Accordingly, Kemper uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of its lease payments.

KEMPER CORPORATION

FINANCIAL INFORMATION OF KEMPER CORPORATION

NOTES TO FINANCIAL INFORMATION

(Dollars in Millions)

NOTE 4. LEASES (Continued)

Future minimum operating lease payments at December 31, ~~2019~~2021 were:


DOLLARS IN MILLIONS	Operating Leases		DOLLARS IN MILLIONS	Operating Leases
2020	$	2.1
2021	3.5
2022	3.7		2022	$	2.4
2023	3.5		2023	2.4
2024	2.5		2024	2.5
2025 and Thereafter	25.6
2025			2025	2.6
2026			2026	2.6
2027 and Thereafter			2027 and Thereafter	20.4
Total Future Payments	$	40.9	Total Future Payments	$	32.9
Less Discount	9.6		Less Discount	7.1
Present Value of Minimum Lease Payments	$	31.3	Present Value of Minimum Lease Payments	$	25.8

NOTE 5. DEBT

4.350% Senior Notes Due 2025

Kemper has $450.0 million aggregate principal of 4.350% senior notes due February 15, 2025 (the “2025 Senior Notes”). Kemper initially issued $250.0 million of the notes in February of 2015 and issued an additional $200.0 million of the notes in June of 2017. The additional notes are fungible with the initial notes issued in 2015, and together are treated as part of a single series for all purposes under the indenture governing the 2025 Senior Notes. The 2025 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time at Kemper’s option at specified redemption prices.

2.400% Senior Notes Due 2030

Kemper has $400.0 million aggregate principal of 2.400% senior notes due September 30, 2030 (the “2030 Senior Notes”). The net proceeds of issuance were $395.8 million, net of discount and transaction costs for an effective yield of 2.52%. The 2030 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time, at Kemper’s option, at specified redemption prices.

~~SCH II-6~~

SCHEDULE III

KEMPER CORPORATION AND SUBSIDIARIES

SUPPLEMENTARY INSURANCE INFORMATION

(Dollars in Millions)

Year Ended Dec 31, At December 31
Earned Premiums
Premiums
Written

Other
Income

Net
Investment
Income

Insurance
Claims
and
Policy-
holders’
Benefits

Amortization
of Deferred
Policy
Acquisition
Costs

Other
Insurance
Expenses

Deferred
Policy
Acquisition
Costs

Insurance
Reserves

Unearned
Premiums
2019
Specialty Property & Casualty Insurance $ 3,078.4
$ 3,211.3
$ 7.0
$ 107.5
$ 2,278.9
$ 224.9
$ 330.7
$ 161.6
$ 1,551.0
$ 1,158.0
Preferred Property & Casualty Insurance 750.3
739.3
—
44.1
508.8
120.1
113.2
57.7
388.5
363.4
Life & Health Insurance (1) 643.7
N/A
8.5
206.4
402.7
63.3
270.7
318.4
3,505.3
24.1
Other —
N/A
20.0
6.3
(2.1 ) —
(103.2 ) —
27.0
—
Total $ 4,472.4
N/A
$ 35.5
$ 364.3
$ 3,188.3
$ 408.3
$ 611.4
$ 537.7
$ 5,471.8
$ 1,545.5
2018
Specialty Property & Casualty Insurance $ 2,027.4
$ 2,067.4
$ 2.4
$ 63.4
$ 1,523.8
$ 202.0
$ 219.7
$ 121.4
$ 1,387.0
$ 1,025.0
Preferred Property & Casualty Insurance 730.7
748.8
—
61.8
538.4
117.2
108.3
58.4
452.9
374.3
Life & Health Insurance (1) 626.3
N/A
4.0
210.9
404.2
57.9
263.2
290.2
3,496.3
25.0
Other —
N/A
35.8
4.8
0.1
—
(67.8 ) —
30.6
—
Total $ 3,384.4
N/A
$ 42.2
$ 340.9
$ 2,466.5
$ 377.1
$ 523.4
$ 470.0
$ 5,366.8
$ 1,424.3
2017
Specialty Property & Casualty Insurance $ 1,005.7
$ 1,043.5
$ 1.1
$ 39.2
$ 800.5
$ 150.2
$ 14.8

Preferred Property & Casualty Insurance 730.3
726.1
—
58.9
649.5
114.6
103.2

Life & Health Insurance (1) 614.0
N/A
2.6
223.2
387.4
53.5
258.7

Other —
N/A
0.3
5.9
—
—
(50.7 )
Total $ 2,350.0
N/A
$ 4.0
$ 327.2
$ 1,837.4
$ 318.3
$ 326.0


~~(1)~~	The Company’s Life & Health Insurance employee-agents also market certain property and casualty insurance products under common management. Accordingly, the Company includes the results of these property and casualty insurance products in its Life & Health Insurance segment.

~~See Accompanying Report of Independent Registered Public Accounting Firm.~~

~~SCH III-1~~

~~SCHEDULE IV~~

~~KEMPER CORPORATION~~

~~REINSURANCE SCHEDULE~~

~~FOR THE YEARS ENDED~~ ~~DECEMBER 31, 2019~~, ~~2018~~ ~~AND~~ ~~2017~~

~~(Dollars in Millions)~~


	Year Ended December 31,														At December 31
	Earned Premiums		Premiums Written		Other Income		Net Investment Income		Insurance Claims and Policy- holders’ Benefits		Amortization of Deferred Policy Acquisition Costs		Other Insurance Expenses		Deferred Policy Acquisition Costs		Insurance Reserves		Unearned Premiums
2021
Specialty Property & Casualty Insurance	$	3,948.5	$	4,057.3	$	4.1	$	152.5	$	3,593.7	$	546.7	$	227.8	$	219.0	$	2,319.7	$	1,545.9
Preferred Property & Casualty Insurance	651.7		642.0		—		68.6		537.4		103.8		102.6		49.2		433.2		331.6
Life & Health Insurance (1)	653.5		N/A		(1.3)		202.7		469.7		33.8		325.1		409.4		3,544.5		21.2
Other	—		N/A		2.0		3.5		—		—		(121.7)		—		16.2		—
Total	$	5,253.7	N/A		$	4.8	$	427.3	$	4,600.8	$	684.3	$	533.8	$	677.6	$	6,313.6	$	1,898.7
2020
Specialty Property & Casualty Insurance	$	3,335.3	$	3,435.5	$	1.8	$	114.1	$	2,378.4	$	497.5	$	154.4	$	177.4	$	1,544.8	$	1,262.9
Preferred Property & Casualty Insurance	688.2		653.0		0.1		37.7		503.1		111.2		109.9		51.2		411.6		329.2
Life & Health Insurance (1)	648.7		N/A		0.6		198.8		442.0		33.1		301.8		360.7		3,532.1		23.0
Other	—		N/A		92.1		(2.4)		0.1		—		(107.4)		—		21.5		—
Total	$	4,672.2	N/A		$	94.6	$	348.2	$	3,323.6	$	641.8	$	458.7	$	589.3	$	5,510.0	$	1,615.1
2019
Specialty Property & Casualty Insurance	$	3,078.4	$	3,211.3	$	7.0	$	107.5	$	2,278.9	$	224.9	$	330.7
Preferred Property & Casualty Insurance	750.3		739.3		—		44.1		508.8		120.1		113.2
Life & Health Insurance (1)	643.7		N/A		8.5		206.4		402.7		63.3		270.7
Other	—		N/A		20.0		6.3		(2.1)		—		(103.2)
Total	$	4,472.4	N/A		$	35.5	$	364.3	$	3,188.3	$	408.3	$	611.4

Gross
Amount

Ceded to
Other
Companies

Assumed
from Other
Companies

Net
Amount

Percentage
of Amount
Assumed to
Net
Year Ended December 31, 2019
Life Insurance in Force $ 19,479.9
$ 411.6
$ 162.8
$ 19,231.1
0.8 %
Premiums:
Life Insurance $ 383.6
$ 1.2
$ 0.9
$ 383.3
0.2 %
Accident and Health Insurance 188.5
1.7
5.3
192.1
2.8 %
Property and Liability Insurance 3,835.4
24.5
86.1
3,897.0
2.2 %
Total Premiums $ 4,407.5
$ 27.4
$ 92.3
$ 4,472.4
2.1 %
Year Ended December 31, 2018
Life Insurance in Force $ 19,435.1
$ 436.4
$ 172.7
$ 19,171.4
0.9 %
Premiums:
Life Insurance $ 378.2
$ 1.2
$ 1.0
$ 378.0
0.3 %
Accident and Health Insurance 174.3
1.7
5.3
177.9
3.0 %
Property and Liability Insurance 2,778.3
28.7
78.9
2,828.5
2.8 %
Total Premiums $ 3,330.8
$ 31.6
$ 85.2
$ 3,384.4
2.5 %
Year Ended December 31, 2017
Life Insurance in Force $ 19,208.7
$ 455.2
$ 184.0
$ 18,937.5
1.0 %
Premiums:
Life Insurance $ 366.8
$ 1.4
$ 1.1
$ 366.5
0.3 %
Accident and Health Insurance 171.0
1.5
5.4
174.9
3.1 %
Property and Liability Insurance 1,757.5
15.3
66.4
1,808.6
3.7 %
Total Premiums $ 2,295.3
$ 18.2
$ 72.9
$ 2,350.0
3.1 %
(1)The Company’s Life & Health Insurance employee-agents also market certain property and casualty insurance products under common management. Accordingly, the Company includes the results of these property and casualty insurance products in its Life & Health Insurance segment.

See Accompanying Report of Independent Registered Public Accounting Firm.

SCHEDULE IV

KEMPER CORPORATION

REINSURANCE SCHEDULE

(Dollars in Millions)

~~SCH IV-1~~


	Gross Amount		Ceded to Other Companies		Assumed from Other Companies		Net Amount		Percentage of Amount Assumed to Net
Year Ended December 31, 2021
Life Insurance in Force	$	20,287.7	$	372.3	$	144.5	$	20,059.9	0.7	%
Premiums:
Life Insurance	$	401.9	$	0.9	$	0.7	$	401.7	0.2	%
Accident and Health Insurance	185.8		0.3		4.4		189.9		2.3
Property and Liability Insurance	4,667.4		34.9		29.6		4,662.1		0.6
Total Premiums	$	5,255.1	$	36.1	$	34.7	$	5,253.7	0.7	%
Year Ended December 31, 2020
Life Insurance in Force	$	19,706.2	$	387.7	$	152.3	$	19,470.8	0.8	%
Premiums:
Life Insurance	$	386.0	$	1.1	$	0.8	$	385.7	0.2	%
Accident and Health Insurance	195.5		1.6		5.4		199.3		2.7
Property and Liability Insurance	4,071.1		28.5		44.6		4,087.2		1.1
Total Premiums	$	4,652.6	$	31.2	$	50.8	$	4,672.2	1.1	%
Year Ended December 31, 2019
Life Insurance in Force	$	19,479.9	$	411.6	$	162.8	$	19,231.1	0.8	%
Premiums:
Life Insurance	$	383.6	$	1.2	$	0.9	$	383.3	0.2	%
Accident and Health Insurance	188.5		1.7		5.3		192.1		2.8
Property and Liability Insurance	3,835.4		24.5		86.1		3,897.0		2.2
Total Premiums	$	4,407.5	$	27.4	$	92.3	$	4,472.4	2.1	%

See Accompanying Report of Independent Registered Public Accounting Firm.


DOLLARS IN MILLIONS	Dec 31, 2019		Dec 31, 2018		DOLLARS IN MILLIONS	Dec 31, 2021		Dec 31, 2020
Insurance Reserves:					Insurance Reserves:
Non-Standard Automobile	$	1,321.9	$	1,177.2	Non-Standard Automobile	$	1,985.8	$	1,308.3
Commercial Automobile	229.1		209.8		Commercial Automobile	333.9		236.5
Total Insurance Reserves	$	1,551.0	$	1,387.0	Total Insurance Reserves	$	2,319.7	$	1,544.8

Insurance Reserves:					Insurance Reserves:
Loss and Allocated LAE Reserves:					Loss and Allocated LAE Reserves:
Case and Allocated LAE	$	730.0	$	692.8	Case and Allocated LAE	$	1,157.9	$	744.6
Incurred But Not Reported	672.2		556.2		Incurred But Not Reported	953.0		653.6
Total Loss and LAE Reserves	1,402.2		1,249.0		Total Loss and LAE Reserves	2,110.9		1,398.2
Unallocated LAE Reserves	148.8		138.0		Unallocated LAE Reserves	208.8		146.6
Total Insurance Reserves	$	1,551.0	$	1,387.0	Total Insurance Reserves	$	2,319.7	$	1,544.8



Company / Index	2014		2015		2016		2017		2018		2019
Kemper Corporation	$	100.00	$	105.82	$	129.75	$	205.95	$	201.20	$	238.01
S&P MidCap 400 Index	100.00		97.82		118.11		137.30		122.08		154.07
S&P Supercomposite Insurance Index	100.00		103.64		123.20		142.89		129.08		165.91



NAIC Rating	Rating	Dec 31, 2019				Dec 31, 2018
NAIC Rating	Rating	Fair Value in Millions		Percentage of Total		Fair Value in Millions		Percentage of Total
1	AAA, AA, A	$	4,387.1	63.4	%	$	4,156.6	64.7	%
2	BBB	2,044.1		29.5		1,752.6		27.3
3-4	BB, B	319.2		4.6		333.7		5.2
5-6	CCC or Lower	171.7		2.5		181.3		2.8
Total Investments in Fixed Maturities		$	6,922.1	100.0	%	$	6,424.2	100.0	%


DOLLARS IN MILLIONS	Number of Issuers	Aggregate Fair Value		DOLLARS IN MILLIONS	Number of Issuers	Aggregate Fair Value
Below $5	457	$	992.6	Below $5	611	$	1,333.8
$5 -$10	181	1,224.5		$5 -$10	200	1,435.9
$10 - $20	122	1,653.5		$10 - $20	121	1,647.2
$20 - $30	28	667.7		$20 - $30	30	721.4
Greater Than $30	1	35.2		Greater Than $30	9	315.6
Total	789	$	4,573.5	Total	971	$	5,453.9


DOLLARS IN MILLIONS	Fair Value		Percentage of Total Investments
Fixed Maturities:
States including their Political Subdivisions:
Texas	$	151.4	1.5	%
California	107.6		1.0
Georgia	98.0		0.9
New York	95.1		0.9
Florida	74.8		0.7
Louisiana	74.7		0.7
Colorado	70.8		0.7
Pennsylvania	68.6		0.7
Equity Securities at Fair Value—Other Equity Interests:

Vanguard Total World Stock ETF	226.9		2.2

iShares® Core MSCI Total International Stock ETF	86.1		0.8
Total	$	1,054.0	10.1	%


	Unfunded Commitment in Millions		Reported Value in Millions					Unfunded Commitment in Millions		Reported Value in Millions
Asset Class	Dec 31, 2019		Dec 31, 2019		Dec 31, 2018		Asset Class	Dec 31, 2021		Dec 31, 2021		Dec 31, 2020
Reported as Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings:
Reported as Equity Method Limited Liability Investments:							Reported as Equity Method Limited Liability Investments:
Mezzanine Debt	$	59.9	$	129.3	$	99.6	Mezzanine Debt	$	43.3	$	120.0	$	102.5
Senior Debt	21.7		16.0		15.4		Senior Debt	46.7		27.5		28.6
Distressed Debt	—		22.7		34.5		Distressed Debt	100.1		21.7		14.5
Secondary Transactions	15.6		11.5		21.2		Secondary Transactions	8.3		11.7		11.2
Leveraged Buyout	—		0.1		4.2		Leveraged Buyout	0.1		8.7		3.5
Growth Equity	—		5.3		5.4		Growth Equity	—		0.7		0.7
Real Estate	—		29.9		—		Real Estate	—		29.9		29.9
Hedge Fund							Hedge Fund	—		8.7		—
Other	—		5.6		6.7		Other	—		13.0		13.1
Total Equity Method Limited Liability Investments	97.2		220.4		187.0		Total Equity Method Limited Liability Investments	198.5		241.9		204.0

Alternative Energy Partnership Investments							Alternative Energy Partnership Investments	—		39.6		21.3

Reported as Other Equity Interests at Fair Value:							Reported as Other Equity Interests at Fair Value:
Mezzanine Debt	94.7		126.1		111.7		Mezzanine Debt	53.7		129.3		118.3
Senior Debt	23.2		39.5		34.3		Senior Debt	15.1		29.9		33.9
Distressed Debt	18.7		16.8		14.5		Distressed Debt	20.0		44.9		31.8
Secondary Transactions	6.8		4.9		6.7		Secondary Transactions	6.8		4.0		4.2
Hedge Funds	—		48.2		14.7		Hedge Funds	—		82.7		71.6
Leveraged Buyout	2.2		4.4		4.2		Leveraged Buyout	6.0		32.2		30.7
Growth Equity							Growth Equity	0.7		2.0		—
Other	8.0		8.2		5.9		Other	—		—		1.5
Total Reported as Other Equity Interests at Fair Value	153.6		248.1		192.0		Total Reported as Other Equity Interests at Fair Value	102.3		325.0		292.0
Reported as Equity Securities at Modified Cost:							Reported as Equity Securities at Modified Cost:
Mezzanine Debt	—		1.6		1.5
Other	0.1		18.9		22.1		Other	—		7.7		15.7
Total Reported as Equity Securities at Modified Cost	0.1		20.5		23.6		Total Reported as Equity Securities at Modified Cost	—		7.7		15.7

Total Investments in Limited Liability Companies and Limited Partnerships	$	250.9	$	489.0	$	402.6	Total Investments in Limited Liability Companies and Limited Partnerships	$	300.8	$	614.2	$	533.0


DOLLARS IN MILLIONS	Jan 1, 2020 to Dec 31, 2020		Jan 1, 2021 to Dec 31, 2022			Jan 1, 2023 to Dec 31, 2024		After Dec 31, 2024		Total		DOLLARS IN MILLIONS	Jan 1, 2022 to Dec 31, 2022		Jan 1, 2023 to Dec 31, 2024		Jan 1, 2025 to Dec 31, 2026		After Dec 31, 2026		Total
Long Term Debt Obligations	$	—	$	275.0		$	50.0	$	450.0	$	775.0	Long Term Debt Obligations	$	275.0	$	—	$	450.0	$	400.0	$	1,125.0
Finance Lease Obligations	0.3		0.2			—		—		0.5
Operating Lease Obligations	20.5		36.3			23.0		28.1		107.9
Purchase Obligations	11.7		4.0			0.4		—		16.1
Life and Health Insurance Policy Benefits	294.5		516.3			493.4		7,408.9		8,713.1		Life and Health Insurance Policy Benefits	346.8		577.7		548.4		8,432.4		9,905.3
Property and Casualty Insurance Reserves	1,189.7		584.7			138.7		56.7		1,969.8		Property and Casualty Insurance Reserves	1,933.7		660.6		134.9		43.5		2,772.7
Other Contractual Obligations Reflected in Long Term Liabilities on the Consolidated Balance Sheet under GAAP	39.9		75.2		��	49.2		42.4		206.7
Total Contractual Obligations	$	1,556.6	$	1,491.7		$	754.7	$	7,986.1	$	11,789.1	Total Contractual Obligations	$	2,555.5	$	1,238.3	$	1,133.3	$	8,875.9	$	13,803.0


DOLLARS IN MILLIONS	Fair Value		Pro Forma Increase (Decrease)
			Interest Rate Risk		Equity Price Risk		Total Market Risk
ASSETS
Investments in Fixed Maturities	$	7,986.9	$	(643.8)	$	—	$	(643.8)
Investments in Equity Securities	830.6		(2.1)		(160.0)		(162.1)
LIABILITIES
Debt	$	1,152.1	$	47.1	$	—	$	47.1




Consolidated Statements of Income for the Years Ended December 31, ~~2019, 2018~~2021, 2020 and ~~2017~~ 2019	7069

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, ~~2019, 2018~~2021, 2020 and ~~2017~~ 2019		7170

Consolidated Balance Sheets at December 31, ~~2019~~2021 and ~~2018~~ 2020		7271

Consolidated Statements of Cash Flows for the Years Ended December 31, ~~2019, 2018~~2021, 2020 and ~~2017~~2019		7372

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, ~~2019, 2018~~2021, 2020 and ~~2017~~2019		7473

Notes to the Consolidated Financial Statements

Note 1—Basis of Presentation and Significant Estimates		7574

Note 2—Summary of Accounting Policies and Accounting Changes		75

Note 3—Net Income per Unrestricted Share		81

Note 4—Acquisition of Business		81

Note ~~4—Investments~~5—Business Segments		8283

~~Note 5—Goodwill and Intangible Assets~~		87

Note 6—Property and Casualty Insurance Reserves	8886

Note 7—~~Policyholder Contract Liabilities~~Insurance Expenses		9897

Note 8—~~Debt~~Investments		9997

Note 9—~~Leases~~Income from Investments		~~100~~103

Note 10—~~Shareholders’ Equity~~Fair Value Measurements		~~102~~104

Note 11—~~Long-term Equity-based Compensation~~Goodwill and Intangibles		~~103~~110

Note 12—~~Income from Continuing Operations per Unrestricted Share~~Variable Interest Entities		~~108~~111

Note 13—Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income		~~109~~113

Note 14—~~Income from Investments~~Shareholders’ Equity		~~111~~114

Note 15—~~Insurance Expenses~~Pension Benefits		~~112~~115

Note 16—~~Income Taxes~~		~~113~~

~~Note 17—Pension Benefits~~	~~115~~

~~Note 18—~~Postretirement Benefits Other Than Pensions	~~118~~119

Note ~~19—Business Segments~~17—Long-term Equity-based Compensation		~~120~~121

Note ~~20—Catastrophe Reinsurance~~18—Policyholder Obligations		~~123~~125

Note ~~21—Other Reinsurance~~19—Debt		126

Note ~~22—Fair Value Measurements~~20—Leases		~~126~~127

Note ~~23—Contingencies~~21—Catastrophe Reinsurance		~~132~~129

Note ~~24—Related Parties~~22—Other Reinsurance		~~133~~131

Note ~~25—Quarterly Financial Information (Unaudited)~~23—Income Taxes		~~133~~132

Note 24—Contingencies		134

Note 25—Related Parties		134

Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP: PCAOB Firm ID - 34)		135



DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS	For the Years Ended December 31, 2019, 2018 and 2017
DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS	Number of Shares	Common Stock		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
BALANCE, DECEMBER 31, 2016	51.3	$	5.1	$	660.3		$	1,172.8		$	137.0		$	1,975.2
Cumulative Effect of Adoption of New Accounting Standard	—	—		—			0.5			—			0.5
Net Income	—	—		—			120.9			—			120.9
Other Comprehensive Income (Loss) (Note 13)	—	—		—			—			57.4			57.4
Cash Dividends and Dividend Equivalents to Shareholders ($0.96 per share)	—	—		—			(49.5		)	—			(49.5		)
Equity-based Compensation Cost (Note 11)	—	—		9.4			—			—			9.4
Equity-based Awards, Net of Shares Exchanged (Note 11)	0.2	—		3.4			(1.7		)	—			1.7
BALANCE, DECEMBER 31, 2017 As Reported	51.5	$	5.1	$	673.1		$	1,243.0		$	194.4		$	2,115.6
Cumulative Effect of Adoption of New Accounting Standards	—	—		—			(18.2		)	18.2			—
BALANCE, JANUARY 1, 2018 As Adjusted	51.5	5.1		673.1			1,224.8			212.6			2,115.6
Net Income	—	—		—			190.1			—			190.1
Other Comprehensive Income (Loss) (Note 13)	—	—		—			—			(190.8		)	(190.8		)
Cash Dividends and Dividend Equivalents to Shareholders ($0.96 per share)	—	—		—			(56.4		)	—			(56.4		)
Issuances of Common Stock (Note 3)	13.1	1.4		977.2			—			—			978.6
Equity-based Compensation Cost (Note 11)	—	—		18.6			—			—			18.6
Equity-based Awards, Net of Shares Exchanged (Note 11)	0.1	—		(2.6		)	(3.0		)	—			(5.6		)
BALANCE, DECEMBER 31, 2018	64.7	$	6.5	$	1,666.3		$	1,355.5		$	21.8		$	3,050.1
Net Income	—	—		—			531.1			—			531.1
Other Comprehensive Income (Loss) (Note 13)	—	—		—			—			314.3			314.3
Cash Dividends and Dividend Equivalents to Shareholders ($1.03 per share)	—	—		—			(68.4		)	—			(68.4		)
Issuances of Common Stock (Note 10)	1.6	0.2		127.0			—			—			127.2
Shares Issued Under Employee Stock Purchase Plan (Note 10)	—	—		1.9			—			—			1.9
Equity-based Compensation Cost (Note 11)	—	—		25.3			—			—			25.3
Equity-based Awards, Net of Shares Exchanged (Note 11)	0.4	—		(1.3		)	(7.9		)	—			(9.2		)
BALANCE, DECEMBER 31, 2019	66.7	$	6.7	$	1,819.2		$	1,810.3		$	336.1		$	3,972.3



DOLLARS IN MILLIONS
Investments	$	1,569.3
Short-term Investments at Cost which Approximates Fair Value Investments	98.8
Cash	4.0
Receivables from Policyholders	583.4
Other Receivables	31.7
Value of Intangible Assets Acquired (Reported in Other Assets)	262.7
Current Income Tax Assets	1.0
Goodwill¹	791.0
Other Assets	102.1
Property and Casualty Insurance Reserves	(717.2		)
Unearned Premiums	(715.6		)
Debt	(282.1		)
Deferred Income Tax Liabilities	(10.8		)
Accrued Expenses and Other Liabilities	(169.6		)
Total Purchase Price	$	1,548.7



DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS											As of December 31, 2019
	Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2015 (Unaudited)		2016 (Unaudited)		2017 (Unaudited)		2018 (Unaudited)		2019
2015	$	965.1	$	855.1	$	965.1	$	972.3	$	969.6	$	8.1	401,025
2016			969.4		1,021.6		1,027.2		1,026.0		22.5		417,016
2017					997.7		999.9		1,004.5		40.6		396,578
2018							1,128.1		1,119.1		93.0		445,229
2019									1,270.7		383.0		447,558
Total									5,389.9


	Cumulative Paid Losses and Allocated LAE, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2015 (Unaudited)		2016 (Unaudited)		2017 (Unaudited)		2018 (Unaudited)		2019
2015	$	450.5	$	794.9	$	898.9	$	934.7	$	954.0
2016			459.7		831.1		943.4		987.7
2017					441.9		808.6		926.7
2018							467.5		903.8
2019									497.2
Total									4,269.4
Outstanding Loss and Allocated LAE Reserves on Accident Years before 2015, Net of Reinsurance									20.4
Loss and Allocated LAE Reserves, Net of Reinsurance									$	1,140.9

¹ Table retrospectively includes Alliance United and Infinity’s historical incurred and paid accident year claim information for all periods presented.



DOLLARS IN MILLIONS	2019
Lease Cost:
Amortization of Right-of-Use Assets - Finance Leases	$	0.7
Operating Lease Cost	20.7
Short-Term Lease Cost (1)	0.1
Total Expense	21.5
Less: Sublease Income (2)	0.1
Total Lease Cost	$	21.4



DOLLARS IN MILLIONS	Finance Leases		Operating Leases
2020	$	0.3	$	20.5
2021	0.2		19.3
2022	—		17.0
2023	—		14.7
2024	—		8.3
2025 and Thereafter	—		28.1
Total Future Payments	$	0.5	$	107.9
Less Discount	—		14.7
Present Value of Minimum Lease Payments	$	0.5	$	93.2



	Shares Subject to Awards		Weighted- average Exercise Price Per Share ($)		Weighted- average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value ($ In Millions)
Outstanding at Beginning of the Year	1,434,273		$	46.48
Granted	578,375		76.96
Exercised	(159,630	)	36.92
Forfeited or Expired	(44,203	)	68.43
Outstanding at December 31, 2019	1,808,815		56.53		7.65	$	38.3
Vested and Expected to Vest at December 31, 2019	1,718,559		$	56.03	7.61	$	37.2
Exercisable at December 31, 2019	803,769		$	42.15	6.50	$	28.4



				Outstanding				Exercisable
Range of Exercise Prices ($)				Shares Subject to Awards	Weighted- average Exercise Price Per Share ($)		Weighted- average Remaining Contractual Life (in Years)	Shares Subject to Awards	Weighted- average Exercise Price Per Share ($)
$	20.01	-	30.00	150,627	$	27.77	5.63	150,627	$	27.77
30.01		-	40.00	173,895	34.83		5.36	165,086	34.58
40.01		-	50.00	401,385	42.56		6.79	313,459	42.41
50.01		-	60.00	461,459	59.90		8.07	147,944	59.89
60.01		-	70.00	57,395	67.04		8.14	22,289	66.85
70.01		-	80.00	518,820	76.27		9.09	3,435	77.76
80.01		-	90.00	45,234	85.44		9.30	929	82.10
20.01		-	90.00	1,808,815	56.53		7.65	803,769	42.15



	Time-based Restricted Stock Unit Awards
	Number of Restricted Stock Units		Weighted- average Grant-date Fair Value Per Unit
Nonvested Balance at Beginning of the Year	316,241		$	65.36
Granted	23,383		82.56
Vested	(135,909	)	61.59
Forfeited	(21,527	)	69.48
Nonvested Balance at December 31, 2019	182,188		$	71.12



	PSU Awards
	Number of PSUs		Weighted- average Grant-date Fair Value Per PSU
Nonvested Balance at Beginning of the Year	327,300		$	47.14
Granted	254,535		61.22
Vested	(204,542	)	29.20
Forfeited	(16,473	)	65.55
Nonvested Balance at December 31, 2019	360,820		$	66.42



	Number of DSUs		Weighted- average Grant-date Fair Value Per DSU
Vested Balance at Beginning of the Year	57,340		$	44.89
Reduction for Shares Issued on Conversion	(12,520	)	45.44
Vested Balance at December 31, 2019	44,820		$	44.74



DOLLARS IN MILLIONS	NOL Carry-forwards		Deferred Tax Asset
Expiring in:
2027	11.2		2.4
2028	4.4		0.9
Total All Years	$	15.6	$	3.3


(Dollars in Millions)
2022	$	23.8
2023	21.1
2024	15.2
2025	9.9
2026	4.2
2027 and Thereafter	20.5
Total Future Payments	$	94.7
Less Imputed Interest	9.9
Present Value of Minimum Lease Payments	$	84.8


DOLLARS IN MILLIONS	Catastrophe Losses and LAE				Percentage of Coverage
	In Excess of		Up to

Retained	$	—	$	50.0	—	%
1st Layer of Coverage	50.0		150.0		95.0
2nd Layer of Coverage	150.0		250.0		95.0
3rd Layer of Coverage	250.0		275.0		95.0



	December 31, 2019				December 31, 2018
(Dollars in Millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Loans to Policyholders	$	305.6	$	612.4	$	300.6	$	542.6
Short-term Investments	470.9		470.9		286.1		286.1
Mortgage Loans	27.5		27.5		—		—
Financial Liabilities:
Debt	778.4		820.2		909.0		911.2
Policyholder Contract Liabilities	243.4		243.4		10.0		10.0



	Three Months Ended (Unaudited)												Year Ended
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS	Mar 31, 2019			Jun 30, 2019			Sep 30, 2019			Dec 31, 2019			Dec 31, 2019
Revenues:
Earned Premiums	$	1,074.8		$	1,116.6		$	1,135.2		$	1,145.8		$	4,472.4
Net Investment Income	82.7			96.0			91.7			93.9			364.3
Other Income	1.9			22.7			7.2			3.7			35.5
Income (Loss) from Changes in Fair Value of Equity and Convertible Securities	64.4			25.5			9.8			39.2			138.9
Net Realized Gains on Sales of Investments	16.1			21.3			1.7			2.8			41.9
Other-than-temporary Impairment Losses:
Total Other-than-temporary Impairment Losses	(3.5		)	(6.7		)	(1.8		)	(1.7		)	(13.7		)
Portion of Losses Recognized in Other Comprehensive Income	(0.1		)	—			—			—			(0.1		)
Net Impairment Losses Recognized in Earnings	(3.6		)	(6.7		)	(1.8		)	(1.7		)	(13.8		)
Total Revenues	1,236.3			1,275.4			1,243.8			1,283.7			5,039.2
Expenses:
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses	765.4			825.4			782.6			814.9			3,188.3
Insurance Expenses	234.8			263.5			256.0			265.4			1,019.7
Loss from Early Extinguishment of Debt	—			—			5.8			—			5.8
Interest and Other Expenses	41.4			38.0			37.9			46.5			163.8
Total Expenses	1,041.6			1,126.9			1,082.3			1,126.8			4,377.6
Income from Continuing Operations before Income Taxes	194.7			148.5			161.5			156.9			661.6
Income Tax Expense	(39.4		)	(26.4		)	(32.5		)	(32.2		)	(130.5		)
Net Income	$	155.3		$	122.1		$	129.0		$	124.7		$	531.1
Net Income (Loss) Per Unrestricted Share:
Basic	$	2.38		$	1.87		$	1.93		$	1.87		$	8.04
Diluted	$	2.35		$	1.84		$	1.91		$	1.85		$	7.96
Dividends Paid to Shareholders Per Share	$	0.25		$	0.25		$	0.25		$	0.28		$	1.03


◦	~~We developed a range of independent estimates of the property and casualty insurance reserves and compared our estimates to the recorded reserves.~~


◦	We compared our prior year estimates of expected incurred losses to actual experience during the most recent year to identify potential bias in the Company’s determination of property and casualty insurance reserves.


Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans or Programs (1)	Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans or Programs (1)
Equity Compensation Plans Approved by Security Holders	1,808,815	$	56.53	3,254,822	Equity Compensation Plans Approved by Security Holders	2,103,979	$	61.93	5,253,076
Equity Compensation Plans Not Approved by Security Holders	—	—		—	Equity Compensation Plans Not Approved by Security Holders	—	—		—
Total	1,808,815	$	56.53	3,254,822	Total	2,103,979	$	61.93	5,253,076



	Year Ended Dec 31,																At December 31
	Earned Premiums		Premiums Written		Other Income		Net Investment Income		Insurance Claims and Policy- holders’ Benefits			Amortization of Deferred Policy Acquisition Costs		Other Insurance Expenses			Deferred Policy Acquisition Costs		Insurance Reserves		Unearned Premiums
2019
Specialty Property & Casualty Insurance	$	3,078.4	$	3,211.3	$	7.0	$	107.5	$	2,278.9		$	224.9	$	330.7		$	161.6	$	1,551.0	$	1,158.0
Preferred Property & Casualty Insurance	750.3		739.3		—		44.1		508.8			120.1		113.2			57.7		388.5		363.4
Life & Health Insurance (1)	643.7		N/A		8.5		206.4		402.7			63.3		270.7			318.4		3,505.3		24.1
Other	—		N/A		20.0		6.3		(2.1		)	—		(103.2		)	—		27.0		—
Total	$	4,472.4	N/A		$	35.5	$	364.3	$	3,188.3		$	408.3	$	611.4		$	537.7	$	5,471.8	$	1,545.5
2018
Specialty Property & Casualty Insurance	$	2,027.4	$	2,067.4	$	2.4	$	63.4	$	1,523.8		$	202.0	$	219.7		$	121.4	$	1,387.0	$	1,025.0
Preferred Property & Casualty Insurance	730.7		748.8		—		61.8		538.4			117.2		108.3			58.4		452.9		374.3
Life & Health Insurance (1)	626.3		N/A		4.0		210.9		404.2			57.9		263.2			290.2		3,496.3		25.0
Other	—		N/A		35.8		4.8		0.1			—		(67.8		)	—		30.6		—
Total	$	3,384.4	N/A		$	42.2	$	340.9	$	2,466.5		$	377.1	$	523.4		$	470.0	$	5,366.8	$	1,424.3
2017
Specialty Property & Casualty Insurance	$	1,005.7	$	1,043.5	$	1.1	$	39.2	$	800.5		$	150.2	$	14.8
Preferred Property & Casualty Insurance	730.3		726.1		—		58.9		649.5			114.6		103.2
Life & Health Insurance (1)	614.0		N/A		2.6		223.2		387.4			53.5		258.7
Other	—		N/A		0.3		5.9		—			—		(50.7		)
Total	$	2,350.0	N/A		$	4.0	$	327.2	$	1,837.4		$	318.3	$	326.0