UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended ~~9/30/2021~~3/31/2022


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

For the Transition Period from to

Commission file number 001-18298

Kemper Corporation

(Exact name of registrant as specified in its charter)


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

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

(312) 661-4600

(Registrant’s telephone number, including area code)

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

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


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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

~~63,653,144~~63,800,711 shares of common stock, $0.10 par value, were outstanding as of ~~October 26, 2021.~~April 28, 2022.

KEMPER CORPORATION

INDEX


		Page
Caution Regarding Forward-Looking Statements		1

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statements of Income for the ~~Nine~~ ~~and~~ Three Months Ended ~~September~~March ~~30, 2021~~3 1 , 202 2 and ~~2020~~202 1 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the ~~Nine~~ ~~and~~ Three Months Ended ~~September~~March ~~30, 2021~~3 1 , 202 2 and ~~2020~~202 1 (Unaudited)	5

	Condensed Consolidated Balance Sheets as of ~~September~~March 3 01 , ~~2021~~202 2 and December 31, ~~2020~~202 1 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September~~March ~~30, 2021~~3 1 , 202 2 and ~~2020~~202 1 (Unaudited)	7

	Condensed Consolidated Statements of Shareholders’ Equity for the ~~Nine~~ ~~and~~ Three Months Ended ~~September~~Marc h ~~30, 2021~~3 1 , 202 2 and ~~2020~~202 1 (Unaudited)	8

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	109

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3935

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6961

Item 4.	Controls and Procedures	6961

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	7061

Item 1A.	Risk Factors	7061

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7061

Item 6.	Exhibits	7162

Exhibit Index		7162

Signatures		7264

Caution Regarding Forward-Looking Statements

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

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

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

In addition to those factors discussed under Item 1A., “Risk Factors,” of Part I of Kemper’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”), for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“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, initiatives related to unclaimed property laws or claims handling practices with respect to life insurance policies and the proactive use of death verification databases, and developments related to the novel coronavirus ~~that caused the~~ COVID-19 ~~pandemic;~~(“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;

•Liabilities, costs and other impacts arising from developments related to cybersecurity, privacy and data governance, including, without limitation, cyber incidents that have occurred or could occur;

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

•The incidence, frequency and severity of catastrophes occurring in any particular reporting period or geographic area, including natural disasters, pandemics (including COVID-19) and terrorist attacks or other man-made events;

•The frequency and severity of insurance claims (including those associated with catastrophe 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 the impacts of ~~the~~ COVID-19 ~~pandemic;~~and associated governmental responses;

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

•The effects on property claims attributed to supply chain disruption and scarcity of resources available to rebuild damaged structures, including labor and materials and the amount of salvage value recovered for damaged ~~property, and the~~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, including ~~the COVID-19 pandemic;~~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 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 plan with regard to corporate strategy and significant operational changes;

Factors relating 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, geopolitical events, 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;

•~~Changes related to the phase out of the London Interbank Offered Rate (“LIBOR”) reference rates beginning after 2021;~~

•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 ~~mandated wind pools~~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 attacks, virus or malware attacks, or other infiltrations or incidents affecting system integrity, availability and performance, and actions taken to minimize and remediate the risks of such events that have occurred or could occur;

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

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in millions, except per share amounts)

(Unaudited)


		Nine Months Ended				Three Months Ended					Three Months Ended
		Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020			Mar 31, 2022		Mar 31, 2021
Revenues:	Revenues:									Revenues:
Earned Premiums	Earned Premiums	$	3,894.6	$	3,458.2	$	1,356.1	$	1,206.5	Earned Premiums	$	1,338.6	$	1,200.8
Net Investment Income	Net Investment Income	318.9		245.5		101.9		92.1		Net Investment Income	100.0		103.1
Change in Value of Alternative Energy Partnership Investments	Change in Value of Alternative Energy Partnership Investments	(46.9)		—		(23.8)		—		Change in Value of Alternative Energy Partnership Investments	(16.7)		(15.4)
Other Income (Loss)	Other Income (Loss)	20.8		92.7		12.3		0.9		Other Income (Loss)	2.4		1.5
Income (Loss) from Change in Fair Value of Equity and Convertible Securities	Income (Loss) from Change in Fair Value of Equity and Convertible Securities	92.4		(1.0)		(0.6)		45.2		Income (Loss) from Change in Fair Value of Equity and Convertible Securities	(28.2)		52.2
Net Realized Gains on Sales of Investments	Net Realized Gains on Sales of Investments	43.1		38.2		10.1		10.0		Net Realized Gains on Sales of Investments	1.5		13.8
Impairment Losses	Impairment Losses	(7.8)		(20.0)		(0.6)		(1.0)		Impairment Losses	(8.9)		(4.0)
Total Revenues	Total Revenues	4,315.1		3,813.6		1,455.4		1,353.7		Total Revenues	1,388.7		1,352.0
Expenses:	Expenses:									Expenses:
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses	Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses	3,324.8		2,460.2		1,211.2		877.5		Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses	1,153.4		889.5
Insurance Expenses	Insurance Expenses	909.0		821.2		311.3		276.9		Insurance Expenses	304.0		283.7

Loss from Early Extinguishment of Debt										Loss from Early Extinguishment of Debt	3.7		—
Interest and Other Expenses	Interest and Other Expenses	179.2		142.7		62.7		47.2		Interest and Other Expenses	54.1		57.2
Total Expenses	Total Expenses	4,413.0		3,424.1		1,585.2		1,201.6		Total Expenses	1,515.2		1,230.4
Income (Loss) before Income Taxes	Income (Loss) before Income Taxes	(97.9)		389.5		(129.8)		152.1		Income (Loss) before Income Taxes	(126.5)		121.6
Income Tax Benefit (Expense)	Income Tax Benefit (Expense)	83.2		(77.1)		54.5		(29.8)		Income Tax Benefit (Expense)	31.7		1.6

Net Income (Loss)	Net Income (Loss)	$	(14.7)	$	312.4	$	(75.3)	$	122.3	Net Income (Loss)	$	(94.8)	$	123.2
Net Income (Loss) Per Unrestricted Share:	Net Income (Loss) Per Unrestricted Share:									Net Income (Loss) Per Unrestricted Share:
Basic	Basic	$	(0.23)	$	4.75	$	(1.18)	$	1.87	Basic	$	(1.49)	$	1.88
Diluted	Diluted	$	(0.23)	$	4.67	$	(1.18)	$	1.83	Diluted	$	(1.49)	$	1.85

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

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

(Unaudited)


		Nine Months Ended				Three Months Ended					Three Months Ended
		Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020			Mar 31, 2022		Mar 31, 2021
Net Income (Loss)	Net Income (Loss)	$	(14.7)	$	312.4	$	(75.3)	$	122.3	Net Income (Loss)	$	(94.8)	$	123.2
Other Comprehensive Income (Loss) Before Income Taxes:	Other Comprehensive Income (Loss) Before Income Taxes:									Other Comprehensive Income (Loss) Before Income Taxes:
Changes in Net Unrealized Holding Gains (Losses) on Investment Securities with:	Changes in Net Unrealized Holding Gains (Losses) on Investment Securities with:									Changes in Net Unrealized Holding Gains (Losses) on Investment Securities with:
No Credit Losses Recognized in Condensed Consolidated Statements of Income	No Credit Losses Recognized in Condensed Consolidated Statements of Income	(254.0)		269.3		(80.8)		63.1		No Credit Losses Recognized in Condensed Consolidated Statements of Income	(644.6)		(364.0)
Credit Losses Recognized in Condensed Consolidated Statements of Income	Credit Losses Recognized in Condensed Consolidated Statements of Income	(1.9)		(2.4)		0.5		1.3		Credit Losses Recognized in Condensed Consolidated Statements of Income	(7.4)		(2.1)

Decrease (Increase) in Net Unrecognized Postretirement Benefit Costs	Decrease (Increase) in Net Unrecognized Postretirement Benefit Costs	0.3		2.3		(0.1)		0.9		Decrease (Increase) in Net Unrecognized Postretirement Benefit Costs	(0.1)		0.3
Gain (Loss) on Cash Flow Hedges	Gain (Loss) on Cash Flow Hedges	0.3		0.3		0.1		0.2		Gain (Loss) on Cash Flow Hedges	6.1		0.1
Other Comprehensive Income (Loss) Before Income Taxes	Other Comprehensive Income (Loss) Before Income Taxes	(255.3)		269.5		(80.3)		65.5		Other Comprehensive Income (Loss) Before Income Taxes	(646.0)		(365.7)
Other Comprehensive Income Tax Benefit (Expense)	Other Comprehensive Income Tax Benefit (Expense)	54.2		(56.6)		16.7		(13.8)		Other Comprehensive Income Tax Benefit (Expense)	135.6		75.7
Other Comprehensive Income (Loss), Net of Taxes	Other Comprehensive Income (Loss), Net of Taxes	(201.1)		212.9		(63.6)		51.7		Other Comprehensive Income (Loss), Net of Taxes	(510.4)		(290.0)
Total Comprehensive Income (Loss)	Total Comprehensive Income (Loss)	$	(215.8)	$	525.3	$	(138.9)	$	174.0	Total Comprehensive Income (Loss)	$	(605.2)	$	(166.8)

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

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)

(Unaudited)


		Sep 30, 2021		Dec 31, 2020			Mar 31, 2022		Dec 31, 2021
Assets:	Assets:					Assets:
Investments:	Investments:					Investments:
Fixed Maturities at Fair Value (Amortized Cost: 2021 - $7,222.5; 2020 - $6,692.7 Allowance for Credit Losses: 2021 - $4.4; 2020 - $3.3)		$	7,885.1	$	7,605.9
Equity Securities at Fair Value (Cost: 2021 - $725.1; 2020 - $684.1)		969.6		858.5
Fixed Maturities at Fair Value (Amortized Cost: 2022 - $7,810.4; 2021 - $7,358.2 Allowance for Credit Losses: 2022 - $9.1; 2021 - $7.5)						Fixed Maturities at Fair Value (Amortized Cost: 2022 - $7,810.4; 2021 - $7,358.2 Allowance for Credit Losses: 2022 - $9.1; 2021 - $7.5)	$	7,783.9	$	7,986.9
Equity Securities at Fair Value (Cost: 2022 - $466.0; 2021 - $618.7)						Equity Securities at Fair Value (Cost: 2022 - $466.0; 2021 - $618.7)	571.5		830.6
Equity Securities at Modified Cost	Equity Securities at Modified Cost	33.0		40.1		Equity Securities at Modified Cost	35.2		32.3
Equity Method Limited Liability Investments	Equity Method Limited Liability Investments	255.1		204.0		Equity Method Limited Liability Investments	230.0		241.9
Alternative Energy Partnership Investments	Alternative Energy Partnership Investments	54.2		21.3		Alternative Energy Partnership Investments	22.4		39.6
Convertible Securities at Fair Value	Convertible Securities at Fair Value	44.1		39.9		Convertible Securities at Fair Value	46.1		46.4
Short-term Investments at Cost which Approximates Fair Value	Short-term Investments at Cost which Approximates Fair Value	259.7		875.4		Short-term Investments at Cost which Approximates Fair Value	243.8		284.1
Other Investments	Other Investments	921.5		779.0		Other Investments	1,035.2		925.6
Total Investments	Total Investments	10,422.3		10,424.1		Total Investments	9,968.1		10,387.4
Cash	Cash	119.8		206.1		Cash	297.3		148.2
Receivables from Policyholders (Allowance for Credit Losses: 2021 - $12.7 ; 2020 - $20.9)		1,481.2		1,194.5
Receivables from Policyholders (Allowance for Credit Losses: 2022 - $13.0; 2021 - $13.6)						Receivables from Policyholders (Allowance for Credit Losses: 2022 - $13.0; 2021 - $13.6)	1,404.5		1,418.7
Other Receivables	Other Receivables	207.3		222.4		Other Receivables	203.4		207.3
Deferred Policy Acquisition Costs	Deferred Policy Acquisition Costs	676.6		589.3		Deferred Policy Acquisition Costs	680.0		677.6
Goodwill	Goodwill	1,312.0		1,114.0		Goodwill	1,312.0		1,312.0
Current Income Tax Assets	Current Income Tax Assets	138.7		15.6		Current Income Tax Assets	183.0		173.1

Other Assets	Other Assets	619.3		575.9		Other Assets	566.4		592.2
Total Assets	Total Assets	$	14,977.2	$	14,341.9	Total Assets	$	14,614.7	$	14,916.5
Liabilities and Shareholders’ Equity:	Liabilities and Shareholders’ Equity:					Liabilities and Shareholders’ Equity:
Insurance Reserves:	Insurance Reserves:					Insurance Reserves:
Life and Health	Life and Health	$	3,524.1	$	3,527.5	Life and Health	$	3,556.3	$	3,540.9
Property and Casualty	Property and Casualty	2,596.2		1,982.5		Property and Casualty	2,760.1		2,772.7
Total Insurance Reserves	Total Insurance Reserves	6,120.3		5,510.0		Total Insurance Reserves	6,316.4		6,313.6
Unearned Premiums	Unearned Premiums	1,965.7		1,615.1		Unearned Premiums	1,890.5		1,898.7

Policyholder Obligations	Policyholder Obligations	481.8		467.0		Policyholder Obligations	655.0		504.0
Deferred Income Tax Liabilities	Deferred Income Tax Liabilities	242.4		285.7		Deferred Income Tax Liabilities	69.6		227.0

Accrued Expenses and Other Liabilities	Accrued Expenses and Other Liabilities	893.7		727.9		Accrued Expenses and Other Liabilities	903.5		843.6
Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2021 - $1,166.1; 2020 - $1,247.8)		1,122.1		1,172.8
Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2022 - $1,343.9; 2021 - $1,152.1)						Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2022 - $1,343.9; 2021 - $1,152.1)	1,385.2		1,121.9
Total Liabilities	Total Liabilities	10,826.0		9,778.5		Total Liabilities	11,220.2		10,908.8
Shareholders’ Equity:	Shareholders’ Equity:					Shareholders’ Equity:
Common Stock, $0.10 Par Value, 100,000,000 Shares Authorized; 63,651,526 Shares Issued and Outstanding at September 30, 2021 and 65,436,207 Shares Issued and Outstanding at December 31, 2020		6.4		6.5
Common Stock, $0.10 Par Value, 100,000,000 Shares Authorized; 63,800,041 Shares Issued and Outstanding at March 31, 2022 and 63,684,628 Shares Issued and Outstanding at December 31, 2021						Common Stock, $0.10 Par Value, 100,000,000 Shares Authorized; 63,800,041 Shares Issued and Outstanding at March 31, 2022 and 63,684,628 Shares Issued and Outstanding at December 31, 2021	6.4		6.4
Paid-in Capital	Paid-in Capital	1,777.0		1,805.2		Paid-in Capital	1,803.1		1,790.7
Retained Earnings	Retained Earnings	1,888.4		2,071.2		Retained Earnings	1,647.3		1,762.5
Accumulated Other Comprehensive Income		479.4		680.5
Accumulated Other Comprehensive Income (Loss)						Accumulated Other Comprehensive Income (Loss)	(62.3)		448.1
Total Shareholders’ Equity	Total Shareholders’ Equity	4,151.2		4,563.4		Total Shareholders’ Equity	3,394.5		4,007.7
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	14,977.2	$	14,341.9	Total Liabilities and Shareholders’ Equity	$	14,614.7	$	14,916.5

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

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(Unaudited)


		Nine Months Ended					Three Months Ended
		Sep 30, 2021		Sep 30, 2020			Mar 31, 2022		Mar 31, 2021
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net Income (Loss)	Net Income (Loss)	$	(14.7)	$	312.4	Net Income (Loss)	$	(94.8)	$	123.2
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:						Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:
Net Realized Investment (Gains) Losses	Net Realized Investment (Gains) Losses	(43.1)		(38.2)		Net Realized Investment (Gains) Losses	(1.5)		(13.8)
Impairment Losses	Impairment Losses	7.8		20.0		Impairment Losses	8.9		4.0
Depreciation and Amortization of Property, Equipment and Software	Depreciation and Amortization of Property, Equipment and Software	32.8		26.6		Depreciation and Amortization of Property, Equipment and Software	13.4		11.1
Amortization of Intangibles Assets Acquired	Amortization of Intangibles Assets Acquired	46.4		14.1		Amortization of Intangibles Assets Acquired	6.2		3.2

Loss from Early Extinguishment of Debt						Loss from Early Extinguishment of Debt	3.7		—
Change in Accumulated Undistributed Earnings of Equity Method Limited Liability Investments	Change in Accumulated Undistributed Earnings of Equity Method Limited Liability Investments	(50.9)		5.6		Change in Accumulated Undistributed Earnings of Equity Method Limited Liability Investments	(5.8)		(18.1)
(Income) Loss from Change in Value of Alternative Energy Partnership Investments	(Income) Loss from Change in Value of Alternative Energy Partnership Investments	46.9		—		(Income) Loss from Change in Value of Alternative Energy Partnership Investments	16.7		15.4
(Increase) Decrease in Value of Equity and Convertible Securities	(Increase) Decrease in Value of Equity and Convertible Securities	(92.4)		1.0		(Increase) Decrease in Value of Equity and Convertible Securities	28.2		(52.2)
Changes in:	Changes in:					Changes in:
Receivables from Policyholders	Receivables from Policyholders	(137.7)		(132.2)		Receivables from Policyholders	14.2		(66.7)
Reinsurance Recoverables	Reinsurance Recoverables	24.4		13.8		Reinsurance Recoverables	(0.3)		5.0
Deferred Policy Acquisition Costs	Deferred Policy Acquisition Costs	(87.3)		(40.5)		Deferred Policy Acquisition Costs	(2.4)		(21.3)
Insurance Reserves	Insurance Reserves	429.8		(10.3)		Insurance Reserves	2.9		29.8
Unearned Premiums	Unearned Premiums	172.9		136.1		Unearned Premiums	(8.2)		97.9
Income Taxes	Income Taxes	(121.5)		22.0		Income Taxes	(30.5)		(37.3)
Other Assets and Liabilities	Other Assets and Liabilities	94.2		(79.1)		Other Assets and Liabilities	31.1		60.4
Net Cash Provided by Operating Activities		307.6		251.3
Net Cash Provided by (Used in) Operating Activities						Net Cash Provided by (Used in) Operating Activities	(18.2)		140.6
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Proceeds from Sales, Calls and Maturities of Fixed Maturities	Proceeds from Sales, Calls and Maturities of Fixed Maturities	1,015.6		707.0		Proceeds from Sales, Calls and Maturities of Fixed Maturities	128.6		291.2
Proceeds from the Sales or Paydowns of Investments:	Proceeds from the Sales or Paydowns of Investments:					Proceeds from the Sales or Paydowns of Investments:
Equity Securities	Equity Securities	139.7		436.5		Equity Securities	249.7		27.3
Real Estate Investments		6.2		5.4

Mortgage Loans	Mortgage Loans	53.1		18.6		Mortgage Loans	22.8		12.8
Other Investments	Other Investments	39.7		26.5		Other Investments	20.5		7.0
Purchases of Investments:	Purchases of Investments:					Purchases of Investments:
Fixed Maturities	Fixed Maturities	(1,322.2)		(1,009.7)		Fixed Maturities	(527.2)		(503.2)
Equity Securities	Equity Securities	(106.0)		(324.4)		Equity Securities	(21.3)		(12.5)
Real Estate Investments	Real Estate Investments	(3.6)		(0.5)		Real Estate Investments	—		(0.2)
Company-Owned Life Insurance	Company-Owned Life Insurance	(100.0)		(100.0)		Company-Owned Life Insurance	(100.0)		(100.0)
Mortgage Loans	Mortgage Loans	(94.0)		(22.7)		Mortgage Loans	(21.3)		(33.7)
Other Investments	Other Investments	(92.1)		(17.9)		Other Investments	(1.9)		(50.1)
Net Sales (Purchases) of Short-term Investments	Net Sales (Purchases) of Short-term Investments	715.1		(147.9)		Net Sales (Purchases) of Short-term Investments	40.3		677.4
Acquisition of Business, Net of Cash Acquired		(316.6)		—

Acquisition of Software and Long-lived Assets	Acquisition of Software and Long-lived Assets	(43.9)		(46.2)		Acquisition of Software and Long-lived Assets	(16.0)		(9.2)
Other	Other	10.0		6.0		Other	0.7		4.9
Net Cash Provided by (Used in) Investing Activities	Net Cash Provided by (Used in) Investing Activities	(99.0)		(469.3)		Net Cash Provided by (Used in) Investing Activities	(225.1)		311.7
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Repayment of Long-term Debt	Repayment of Long-term Debt	(50.0)		—		Repayment of Long-term Debt	(280.0)		(50.0)
Net Proceeds from Issuance of Long-term Debt		—		395.6
Proceeds from Issuance of 3.800% Senior Notes due February 23, 2032						Proceeds from Issuance of 3.800% Senior Notes due February 23, 2032	396.3		—
Issuance Fees on 3.800% Senior Notes due February 23, 2032						Issuance Fees on 3.800% Senior Notes due February 23, 2032	(1.2)		—
Proceeds from Issuance of 5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062						Proceeds from Issuance of 5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062	145.6		—
Issuance Fees on 5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062						Issuance Fees on 5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062	(0.9)		—
Proceeds from Policyholder Obligations	Proceeds from Policyholder Obligations	298.1		391.8		Proceeds from Policyholder Obligations	208.6		60.7
Repayment of Policyholder Obligations	Repayment of Policyholder Obligations	(328.1)		(192.4)		Repayment of Policyholder Obligations	(57.8)		(61.5)
Proceeds from Shares Issued under Employee Stock Purchase Plan	Proceeds from Shares Issued under Employee Stock Purchase Plan	3.9		3.1		Proceeds from Shares Issued under Employee Stock Purchase Plan	1.3		1.2
Common Stock Repurchases	Common Stock Repurchases	(161.7)		(110.4)		Common Stock Repurchases	—		(42.1)
Dividends and Dividend Equivalents Paid	Dividends and Dividend Equivalents Paid	(60.8)		(59.3)		Dividends and Dividend Equivalents Paid	(19.8)		(21.0)
Other	Other	3.7		5.0		Other	0.3		1.7
Net Cash (Used in) Provided by Financing Activities		(294.9)		433.4
Net Cash Provided by (Used in) Financing Activities						Net Cash Provided by (Used in) Financing Activities	392.4		(111.0)
Increase (Decrease) in Cash	Increase (Decrease) in Cash	(86.3)		215.4		Increase (Decrease) in Cash	149.1		341.3
Cash, Beginning of Year	Cash, Beginning of Year	206.1		136.8		Cash, Beginning of Year	148.2		206.1
Cash, End of Period	Cash, End of Period	$	119.8	$	352.2	Cash, End of Period	$	297.3	$	547.4

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

KEMPER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in millions)

(Unaudited)


		Nine Months Ended September 30, 2021												Three Months Ended March 31, 2022
(Dollars and Shares in Millions, Except Per Share Amounts)	(Dollars and Shares in Millions, Except Per Share Amounts)	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity		(Dollars and Shares in Millions, Except Per Share Amounts)	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
Balance, December 31, 2020		65.4	$	6.5	$	1,805.2	$	2,071.2	$	680.5	$	4,563.4
Balance, December 31, 2021													Balance, December 31, 2021	63.7	$	6.4	$	1,790.7	$	1,762.5	$	448.1	$	4,007.7

Net Income (Loss)	Net Income (Loss)	—	—		—		(14.7)		—		(14.7)		Net Income (Loss)	—	—		—		(94.8)		—		(94.8)
Other Comprehensive Income (Loss), Net of Taxes (Note 9)	Other Comprehensive Income (Loss), Net of Taxes (Note 9)	—	—		—		—		(201.1)		(201.1)		Other Comprehensive Income (Loss), Net of Taxes (Note 9)	—	—		—		—		(510.4)		(510.4)
Cash Dividends and Dividend Equivalents to Shareholders ($0.93 per share)		—	—		—		(61.1)		—		(61.1)
Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)													Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)	—	—		—		(19.6)		—		(19.6)
Repurchases of Common Stock (Note 10)	Repurchases of Common Stock (Note 10)	(2.1)	(0.2)		(57.8)		(103.7)		—		(161.7)		Repurchases of Common Stock (Note 10)	—	—		—		—		—		—

Shares Issued Under Employee Stock Purchase Plan		0.1	—		3.9		—		—		3.9
Shares Issued Under Employee Stock Purchase Plan (Note 10)													Shares Issued Under Employee Stock Purchase Plan (Note 10)	—	—		1.3		—		—		1.3
Equity-based Compensation Cost	Equity-based Compensation Cost	—	—		24.6		—		—		24.6		Equity-based Compensation Cost	—	—		11.9		—		—		11.9
Equity-based Awards, Net of Shares Exchanged	Equity-based Awards, Net of Shares Exchanged	0.3	0.1		1.1		(3.3)		—		(2.1)		Equity-based Awards, Net of Shares Exchanged	0.1	—		(0.8)		(0.8)		—		(1.6)

Balance, September 30, 2021		63.7	$	6.4	$	1,777.0	$	1,888.4	$	479.4	$	4,151.2
Balance, March 31, 2022													Balance, March 31, 2022	63.8	$	6.4	$	1,803.1	$	1,647.3	$	(62.3)	$	3,394.5


		Nine Months Ended September 30, 2020												Three Months Ended March 31, 2021
(Dollars and Shares in Millions, Except Per Share Amounts)	(Dollars and Shares in Millions, Except Per Share Amounts)	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity		(Dollars and Shares in Millions, Except Per Share Amounts)	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
Balance, December 31, 2019		66.7	$	6.7	$	1,819.2	$	1,810.3	$	336.1	$	3,972.3
Balance, December 31, 2020													Balance, December 31, 2020	65.4	$	6.5	$	1,805.2	$	2,071.2	$	680.5	$	4,563.4

Net Income (Loss)	Net Income (Loss)	—	—		—		312.4		—		312.4		Net Income (Loss)	—	—		—		123.2		—		123.2
Other Comprehensive Income (Loss), Net of Taxes (Note 9)	Other Comprehensive Income (Loss), Net of Taxes (Note 9)	—	—		—		—		212.9		212.9		Other Comprehensive Income (Loss), Net of Taxes (Note 9)	—	—		—		—		(290.0)		(290.0)
Cash Dividends and Dividend Equivalents to Shareholders ($0.90 per share)		—	—		—		(59.6)		—		(59.6)
Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)													Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)	—	—		—		(21.0)		—		(21.0)
Repurchases of Common Stock (Note 10)	Repurchases of Common Stock (Note 10)	(1.6)	(0.2)		(44.2)		(66.0)		—		(110.4)		Repurchases of Common Stock (Note 10)	(0.6)	—		(16.4)		(30.7)		—		(47.1)
Shares Issued Under Employee Stock Purchase Plan		—	—		3.1		—		—		3.1
Shares Issued Under Employee Stock Purchase Plan (Note 10)													Shares Issued Under Employee Stock Purchase Plan (Note 10)	—	—		1.2		—		—		1.2
Equity-based Compensation Cost	Equity-based Compensation Cost	—	—		19.7		—		—		19.7		Equity-based Compensation Cost	—	—		12.3		—		—		12.3
Equity-based Awards, Net of Shares Exchanged	Equity-based Awards, Net of Shares Exchanged	0.3	—		0.7		(3.6)		—		(2.9)		Equity-based Awards, Net of Shares Exchanged	0.2	—		(0.2)		(2.7)		—		(2.9)

Balance, September 30, 2020		65.4	$	6.5	$	1,798.5	$	1,993.5	$	549.0	$	4,347.5
Balance, March 31, 2021													Balance, March 31, 2021	65.0	$	6.5	$	1,802.1	$	2,140.0	$	390.5	$	4,339.1

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

~~KEMPER CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~

~~(Dollars in millions)~~

~~(Unaudited)~~

Three Months Ended September 30, 2021
(Dollars and Shares in Millions,
Except Per Share Amounts) Number of
Shares Common
Stock Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income Total
Shareholders’
Equity
Balance, June 30, 2021 63.6 $ 6.4 $ 1,770.9 $ 1,985.9 $ 543.0 $ 4,306.2
Net Income (Loss) — — — (75.3) — (75.3)
Other Comprehensive Income (Loss), Net of Taxes (Note 9) — — — — (63.6) (63.6)
Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share) — — — (19.7) — (19.7)
Repurchases of Common Stock (Note 10) (0.1) — (1.1) (1.9) — (3.0)
Shares Issued Under Employee Stock Purchase Plan 0.1 — 1.4 — — 1.4
Equity-based Compensation Cost — — 6.1 — — 6.1
Equity-based Awards, Net of Shares Exchanged 0.1 — (0.3) (0.6) — (0.9)
Balance, September 30, 2021 63.7 $ 6.4 $ 1,777.0 $ 1,888.4 $ 479.4 $ 4,151.2

Three Months Ended September 30, 2020
(Dollars and Shares in Millions,
Except Per Share Amounts) Number of
Shares Common
Stock Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income Total
Shareholders’
Equity
Balance, June 30, 2020 65.3 $ 6.5 $ 1,792.5 $ 1,891.6 $ 497.3 $ 4,187.9
Net Income (Loss) — — — 122.3 — 122.3
Other Comprehensive Income (Loss), Net of Taxes (Note 9) — — — — 51.7 51.7
Cash Dividends and Dividend Equivalents to Shareholders ($0.30 per share) — — — (19.7) — (19.7)
Shares Issued Under Employee Stock Purchase Plan — — 1.2 — — 1.2
Equity-based Compensation Cost — — 6.1 — — 6.1
Equity-based Awards, Net of Shares Exchanged 0.1 — (1.3) (0.7) — (2.0)
Balance, September 30, 2020 65.4 $ 6.5 $ 1,798.5 $ 1,993.5 $ 549.0 $ 4,347.5

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

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of Presentation and Accounting Policies

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

Certain financial information that is included in annual financial statements, including certain financial statement footnote disclosures, prepared in accordance with GAAP is not required by the rules and regulations of the SEC for interim financial reporting and has been condensed or omitted. In the opinion of the Company’s management, the Condensed Consolidated Financial Statements include all adjustments necessary to fairly present the financial position, results of operations and cash flows for the interim periods presented. The preparation of interim financial statements requires significant management estimates. Due to this factor and other factors, such as the seasonal nature of some portions of the insurance business, as well as market conditions and the impacts of COVID-19, annualizing the results of operations for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 would not necessarily be indicative of the results expected for the full fiscal year. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements and related notes included in Kemper’s Annual Report for the year ended December 31, ~~2020.~~2021.

During the first quarter of ~~2021,~~2022, the Company ~~elected to begin displaying its investments in Alternative Energy Partnerships~~began including anticipated net investment income in the ~~Condensed Consolidated Statements~~premium deficiency analysis performed at the Specialty Property & Casualty Insurance and Preferred Property & Casualty Insurance segments. The Company believes the accounting principle change is preferable as it best reflects the ultimate profitability of ~~Income~~an insurance contract in using all cash flows from the in-force policies, inclusive of related investment income, and Condensed 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 Investmentsprovides improved comparability with industry peers. This accounting principle change had no impact on the ~~Condensed Consolidated Balance Sheets. Impacts to~~results of the premium deficiency analysis in the current or prior ~~period presentation are not material.~~periods presented.

Adoption of New Accounting Guidance

~~Guidance Adopted in 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 interim Condensed 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 interim Condensed 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 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

~~KEMPER CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

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

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 interim Condensed Consolidated Financial Statements. The Company 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 interim Condensed Consolidated Financial Statements.

Guidance Not Yet Adopted

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. 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2 - 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 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 Net Income (Loss) Per Unrestricted Share and Diluted Net Income (Loss) Per Unrestricted Share for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is presented below.

~~KEMPER CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

~~Note 2 - Net Income Per Unrestricted Share (Continued)~~


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions, except per share amounts)	(Dollars in Millions, except per share amounts)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions, except per share amounts)	Mar 31, 2022		Mar 31, 2021
Net Income (Loss)	Net Income (Loss)	$	(14.7)	$	312.4	$	(75.3)	$	122.3	Net Income (Loss)	$	(94.8)	$	123.2
Less: Net Income Attributed to Participating Awards	Less: Net Income Attributed to Participating Awards	—		0.3		—		0.1		Less: Net Income Attributed to Participating Awards	—		0.1
Net Income (Loss) Attributed to Unrestricted Shares	Net Income (Loss) Attributed to Unrestricted Shares	(14.7)		312.1		(75.3)		122.2		Net Income (Loss) Attributed to Unrestricted Shares	(94.8)		123.1
Dilutive Effect on Income of Equity-based Compensation Equivalent Shares	Dilutive Effect on Income of Equity-based Compensation Equivalent Shares	—		—		—		—		Dilutive Effect on Income of Equity-based Compensation Equivalent Shares	—		—
Diluted Net Income (Loss) Attributed to Unrestricted Shares	Diluted Net Income (Loss) Attributed to Unrestricted Shares	$	(14.7)	$	312.1	$	(75.3)	$	122.2	Diluted Net Income (Loss) Attributed to Unrestricted Shares	$	(94.8)	$	123.1
(Number of Shares in Thousands)	(Number of Shares in Thousands)									(Number of Shares in Thousands)
Weighted-average Unrestricted Shares Outstanding	Weighted-average Unrestricted Shares Outstanding	64,469.9		65,710.8		63,628.1		65,362.5		Weighted-average Unrestricted Shares Outstanding	63,743.7		65,424.6
Equity-based Compensation Equivalent Shares	Equity-based Compensation Equivalent Shares	—		1,086.6		—		1,271.0		Equity-based Compensation Equivalent Shares	—		1,128.2
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	64,469.9		66,797.4		63,628.1		66,633.5		Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	63,743.7		66,552.8
(Per Unrestricted Share in Whole Dollars)	(Per Unrestricted Share in Whole Dollars)									(Per Unrestricted Share in Whole Dollars)
Basic Net Income (Loss) Per Unrestricted Share	Basic Net Income (Loss) Per Unrestricted Share	$	(0.23)	$	4.75	$	(1.18)	$	1.87	Basic Net Income (Loss) Per Unrestricted Share	$	(1.49)	$	1.88
Diluted Net Income (Loss) Per Unrestricted Share	Diluted Net Income (Loss) Per Unrestricted Share	$	(0.23)	$	4.67	$	(1.18)	$	1.83	Diluted Net Income (Loss) Per Unrestricted Share	$	(1.49)	$	1.85

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 ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ because the effect of inclusion would be anti-dilutive, is presented below.


		Nine Months Ended		Three Months Ended			Three Months Ended
(Number of Shares in Thousands)	(Number of Shares in Thousands)	Sep 30, 2021	Sep 30, 2020	Sep 30, 2021	Sep 30, 2020	(Number of Shares in Thousands)	Mar 31, 2022	Mar 31, 2021
Equity-based Compensation Equivalent Shares	Equity-based Compensation Equivalent Shares	2,205.4	873.3	2,170.2	876.1	Equity-based Compensation Equivalent Shares	2,550.8	1,212.8
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	2,205.4	873.3	2,170.2	876.1	Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution	2,550.8	1,212.8

Note 3 - Acquisition of Business

Acquisition of American Access Casualty Corporation

On April 1, 2021 Kemper completed the acquisition of American Access Casualty Company and its related captive insurance agency, Newins Insurance Agency Holdings, LLC, and its subsidiaries (collectively “AAC”). Pursuant to the agreement dated November 22, 2020, Kemper paid AAC’s equity holders total cash consideration of approximately $370.9 million.

~~AAC, headquartered in Downers Grove, Illinois, provides specialty private passenger auto insurance in Arizona, Illinois, Indiana, Nevada, and Texas. AAC wrote over $350.0 million~~During the first quarter of ~~direct premiums in 2020 through a network of approximately 600 independent agents and~~2022, the Company finalized its ~~captive agency force.~~

~~The Company is in the process of finalizing the estimation~~estimates of the fair value of assets acquired ~~assets~~ and ~~assumed liabilities. Accordingly,~~liabilities assumed. There were no changes to the Company’s preliminary estimates ~~and the~~or allocation of the purchase price to the assets acquired and liabilities 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 Accounting Standards Codification (“ASC”) 805, ~~Business Combinations, changes, if any, to the preliminary estimates and allocation will be reported in the Company’s financial statements as an adjustment to the opening balance sheet.~~assumed.

1210

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3 - Acquisition of Business ~~(continued)~~(Continued)

Based on the Company’s final allocation of the purchase price, the fair value of the assets acquired and liabilities assumed 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 Condensed 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

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 cash used to fund the acquisition, amortization of the acquired intangible assets and the exclusion of certain acquisition related costs considered to be non-recurring in nature.

1311

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3 - Acquisition of Business ~~(continued)~~(Continued)


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in millions)	(Dollars in millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in millions)	Mar 31, 2022		Mar 31, 2021
Total Revenues	Total Revenues	$	4,406.3	$	4,094.0	$	1,455.4	$	1,449.9	Total Revenues	$	1,388.7	$	1,443.2
Total Expenses	Total Expenses	4,484.9		3,685.9		1,583.6		1,293.5		Total Expenses	1,515.9		1,303.9
Income (Loss) from Continuing Operations before Income Taxes	Income (Loss) from Continuing Operations before Income Taxes	(78.6)		408.1		(128.2)		156.4		Income (Loss) from Continuing Operations before Income Taxes	(127.2)		139.3
Net Income (Loss)	Net Income (Loss)	$	0.1	$	331.6	$	(74.1)	$	127.4	Net Income (Loss)	$	(95.3)	$	136.8

The pro forma information is not necessarily indicative of the 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.

Note 4 - Business Segments

The Company is engaged, through its subsidiaries, in the property and casualty insurance and life and health insurance businesses. The Company conducts its operations through 3 operating segments: Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance and Life & Health Insurance.

The Specialty Property & Casualty Insurance segment’s principal products are ~~specialty~~personal automobile insurance and commercial automobile insurance. The Preferred Property & Casualty Insurance segment’s principal products are ~~preferred~~personal automobile insurance, homeowners insurance and other personal insurance. These products are distributed primarily through independent agents and brokers. The Life & Health Insurance segment’s principal products are individual life, accident, supplemental health and property insurance. These products are distributed by career agents employed by the Company and independent agents and brokers.

Earned Premiums by product line for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Specialty Property & Casualty Insurance:	Specialty Property & Casualty Insurance:									Specialty Property & Casualty Insurance:
Specialty Automobile		$	2,615.6	$	2,235.2	$	920.6	$	792.2
Personal Automobile										Personal Automobile	$	901.7	$	785.4
Commercial Automobile	Commercial Automobile	300.6		217.7		107.7		79.2		Commercial Automobile	119.9		92.2
Preferred Property & Casualty Insurance:	Preferred Property & Casualty Insurance:									Preferred Property & Casualty Insurance:
Personal Automobile	Personal Automobile	309.1		324.6		102.6		110.6		Personal Automobile	96.0		103.0
Homeowners	Homeowners	154.6		167.4		52.5		55.0		Homeowners	51.3		50.8
Other Personal Lines	Other Personal Lines	25.4		27.0		8.6		8.9		Other Personal Lines	8.3		8.4
Life & Health Insurance:	Life & Health Insurance:									Life & Health Insurance:
Life	Life	300.2		289.2		101.5		96.3		Life	101.3		98.1
Accident and Health	Accident and Health	142.3		149.1		47.0		48.9		Accident and Health	45.8		47.4
Property	Property	46.8		48.0		15.6		15.4		Property	14.3		15.5
Total Earned Premiums	Total Earned Premiums	$	3,894.6	$	3,458.2	$	1,356.1	$	1,206.5	Total Earned Premiums	$	1,338.6	$	1,200.8

1412

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 4 - Business Segments ~~(continued)~~(Continued)

Segment Revenues, including a reconciliation to Total Revenues, for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Segment Revenues:	Segment Revenues:									Segment Revenues:
Specialty Property & Casualty Insurance:	Specialty Property & Casualty Insurance:									Specialty Property & Casualty Insurance:
Earned Premiums	Earned Premiums	$	2,916.2	$	2,452.9	$	1,028.3	$	871.4	Earned Premiums	$	1,021.6	$	877.6
Net Investment Income	Net Investment Income	114.7		76.2		37.0		30.5		Net Investment Income	34.9		35.0
Change in Value of Alternative Energy Partnership Investments	Change in Value of Alternative Energy Partnership Investments	(22.3)		—		(11.3)		—		Change in Value of Alternative Energy Partnership Investments	(8.4)		(7.3)
Other Income	Other Income	3.1		1.4		1.2		0.4		Other Income	1.7		0.9
Total Specialty Property & Casualty Insurance	Total Specialty Property & Casualty Insurance	3,011.7		2,530.5		1,055.2		902.3		Total Specialty Property & Casualty Insurance	1,049.8		906.2
Preferred Property & Casualty Insurance:	Preferred Property & Casualty Insurance:									Preferred Property & Casualty Insurance:
Earned Premiums	Earned Premiums	489.1		519.0		163.7		174.5		Earned Premiums	155.6		162.2
Net Investment Income	Net Investment Income	51.5		24.3		16.1		10.3		Net Investment Income	12.5		15.9
Change in Value of Alternative Energy Partnership Investments	Change in Value of Alternative Energy Partnership Investments	(12.5)		—		(6.4)		—		Change in Value of Alternative Energy Partnership Investments	(3.9)		(4.1)
Other Income		—		0.1		—		—

Total Preferred Property & Casualty Insurance	Total Preferred Property & Casualty Insurance	528.1		543.4		173.4		184.8		Total Preferred Property & Casualty Insurance	164.2		174.0
Life & Health Insurance:	Life & Health Insurance:									Life & Health Insurance:
Earned Premiums	Earned Premiums	489.3		486.3		164.1		160.6		Earned Premiums	161.4		161.0
Net Investment Income	Net Investment Income	151.9		146.0		48.4		50.7		Net Investment Income	49.4		51.1
Change in Value of Alternative Energy Partnership Investments	Change in Value of Alternative Energy Partnership Investments	(12.1)		—		(6.1)		—		Change in Value of Alternative Energy Partnership Investments	(4.4)		(4.0)
Other Income	Other Income	0.3		0.6		0.1		—		Other Income	—		0.1
Total Life & Health Insurance	Total Life & Health Insurance	629.4		632.9		206.5		211.3		Total Life & Health Insurance	206.4		208.2
Total Segment Revenues	Total Segment Revenues	4,169.2		3,706.8		1,435.1		1,298.4		Total Segment Revenues	1,420.4		1,288.4
Income (Loss) from Change in Fair Value of Equity and Convertible Securities	Income (Loss) from Change in Fair Value of Equity and Convertible Securities	92.4		(1.0)		(0.6)		45.2		Income (Loss) from Change in Fair Value of Equity and Convertible Securities	(28.2)		52.2
Net Realized Gains on Sales of Investments	Net Realized Gains on Sales of Investments	43.1		38.2		10.1		10.0		Net Realized Gains on Sales of Investments	1.5		13.8
Impairment Losses		(7.8)		(20.0)		(0.6)		(1.0)
Net Impairment Losses Recognized in Earnings										Net Impairment Losses Recognized in Earnings	(8.9)		(4.0)
Other	Other	18.2		89.6		11.4		1.1		Other	3.9		1.6
Total Revenues	Total Revenues	$	4,315.1	$	3,813.6	$	1,455.4	$	1,353.7	Total Revenues	$	1,388.7	$	1,352.0

1513

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 4 - Business Segments ~~(continued)~~(Continued)

Segment Operating Income (Loss), including a reconciliation to Income (Loss) before Income Taxes, for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Segment Operating Income (Loss):	Segment Operating Income (Loss):									Segment Operating Income (Loss):
Specialty Property & Casualty Insurance	Specialty Property & Casualty Insurance	$	(128.7)	$	309.4	$	(91.8)	$	149.9	Specialty Property & Casualty Insurance	$	(60.2)	$	85.2
Preferred Property & Casualty Insurance	Preferred Property & Casualty Insurance	(27.8)		(18.0)		(17.4)		(41.8)		Preferred Property & Casualty Insurance	(9.5)		3.0
Life & Health Insurance	Life & Health Insurance	6.5		61.6		(5.9)		15.2		Life & Health Insurance	1.2		(0.8)
Total Segment Operating Income (Loss)	Total Segment Operating Income (Loss)	(150.0)		353.0		(115.1)		123.3		Total Segment Operating Income (Loss)	(68.5)		87.4
Corporate and Other Operating Income (Loss) From:	Corporate and Other Operating Income (Loss) From:									Corporate and Other Operating Income (Loss) From:

Partial Satisfaction of Judgment		—		89.4		—		—

Other	Other	(40.8)		(26.8)		(15.5)		(11.0)		Other	(14.0)		(11.5)
Corporate and Other Operating Income (Loss)	Corporate and Other Operating Income (Loss)	(40.8)		62.6		(15.5)		(11.0)		Corporate and Other Operating Income (Loss)	(14.0)		(11.5)
Adjusted Consolidated Operating Income (Loss)	Adjusted Consolidated Operating Income (Loss)	(190.8)		415.6		(130.6)		112.3		Adjusted Consolidated Operating Income (Loss)	(82.5)		75.9
Income (Loss) from Change in Fair Value of Equity and Convertible Securities	Income (Loss) from Change in Fair Value of Equity and Convertible Securities	92.4		(1.0)		(0.6)		45.2		Income (Loss) from Change in Fair Value of Equity and Convertible Securities	(28.2)		52.2
Net Realized Gains on Sales of Investments	Net Realized Gains on Sales of Investments	43.1		38.2		10.1		10.0		Net Realized Gains on Sales of Investments	1.5		13.8
Impairment Losses	Impairment Losses	(7.8)		(20.0)		(0.6)		(1.0)		Impairment Losses	(8.9)		(4.0)
Acquisition Related Transaction, Integration and Other Costs	Acquisition Related Transaction, Integration and Other Costs	(34.8)		(43.3)		(8.1)		(14.4)		Acquisition Related Transaction, Integration and Other Costs	(4.7)		(16.3)
Loss from Early Extinguishment of Debt										Loss from Early Extinguishment of Debt	(3.7)		—
Income (Loss) before Income Taxes	Income (Loss) before Income Taxes	$	(97.9)	$	389.5	$	(129.8)	$	152.1	Income (Loss) before Income Taxes	$	(126.5)	$	121.6

Segment Net Operating Income (Loss), including a reconciliation to Net Income (Loss), for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions and Net of Income Taxes)	(Dollars in Millions and Net of Income Taxes)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions and Net of Income Taxes)	Mar 31, 2022		Mar 31, 2021
Segment Net Operating Income (Loss):	Segment Net Operating Income (Loss):									Segment Net Operating Income (Loss):
Specialty Property & Casualty Insurance	Specialty Property & Casualty Insurance	$	(70.9)	$	246.8	$	(59.3)	$	119.2	Specialty Property & Casualty Insurance	$	(44.7)	$	80.1
Preferred Property & Casualty Insurance	Preferred Property & Casualty Insurance	(5.1)		(13.4)		(6.4)		(32.7)		Preferred Property & Casualty Insurance	(6.1)		9.6
Life & Health Insurance	Life & Health Insurance	23.1		50.6		2.8		12.2		Life & Health Insurance	3.1		7.3
Total Segment Net Operating Income (Loss)	Total Segment Net Operating Income (Loss)	(52.9)		284.0		(62.9)		98.7		Total Segment Net Operating Income (Loss)	(47.7)		97.0
Corporate and Other Net Operating Income (Loss) From:	Corporate and Other Net Operating Income (Loss) From:									Corporate and Other Net Operating Income (Loss) From:

Partial Satisfaction of Judgment		—		70.6		—		—

Other	Other	(35.1)		(21.6)		(12.9)		(7.8)		Other	(12.4)		(9.8)
Total Corporate and Other Net Operating Income (Loss)	Total Corporate and Other Net Operating Income (Loss)	(35.1)		49.0		(12.9)		(7.8)		Total Corporate and Other Net Operating Income (Loss)	(12.4)		(9.8)
Adjusted Consolidated Net Operating Income (Loss)	Adjusted Consolidated Net Operating Income (Loss)	(88.0)		333.0		(75.8)		90.9		Adjusted Consolidated Net Operating Income (Loss)	(60.1)		87.2
Net Income (Loss) From:	Net Income (Loss) From:									Net Income (Loss) From:
Change in Fair Value of Equity and Convertible Securities	Change in Fair Value of Equity and Convertible Securities	73.0		(0.8)		(0.5)		35.7		Change in Fair Value of Equity and Convertible Securities	(22.3)		41.2
Net Realized Gains on Sales of Investments	Net Realized Gains on Sales of Investments	34.0		30.2		7.9		7.9		Net Realized Gains on Sales of Investments	1.2		10.9
Impairment Losses	Impairment Losses	(6.2)		(15.8)		(0.5)		(0.8)		Impairment Losses	(7.0)		(3.2)
Acquisition Related Transaction, Integration and Other Costs	Acquisition Related Transaction, Integration and Other Costs	(27.5)		(34.2)		(6.4)		(11.4)		Acquisition Related Transaction, Integration and Other Costs	(3.7)		(12.9)
Loss from Early Extinguishment of Debt										Loss from Early Extinguishment of Debt	(2.9)		—
Net Income (Loss)	Net Income (Loss)	$	(14.7)	$	312.4	$	(75.3)	$	122.3	Net Income (Loss)	$	(94.8)	$	123.2

1614

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5 - Property and Casualty Insurance Reserves

Property and casualty insurance reserve activity for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was:


		Nine Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Property and Casualty Insurance Reserves:	Property and Casualty Insurance Reserves:					Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year	Gross of Reinsurance at Beginning of Year	$	1,982.5	$	1,969.8	Gross of Reinsurance at Beginning of Year	$	2,772.7	$	1,982.5
Less Reinsurance Recoverables at Beginning of Year	Less Reinsurance Recoverables at Beginning of Year	50.1		65.6		Less Reinsurance Recoverables at Beginning of Year	41.9		50.1
Property and Casualty Insurance Reserves - Net of Reinsurance at Beginning of Year	Property and Casualty Insurance Reserves - Net of Reinsurance at Beginning of Year	1,932.4		1,904.2		Property and Casualty Insurance Reserves - Net of Reinsurance at Beginning of Year	2,730.8		1,932.4
Property and Casualty Insurance Reserves Acquired, Net of Reinsurance		211.1		—

Incurred Losses and LAE Related to:	Incurred Losses and LAE Related to:					Incurred Losses and LAE Related to:

Current Year	Current Year	2,885.7		2,132.3		Current Year	1,041.9		777.0

Prior Years	Prior Years	107.9		28.3		Prior Years	(2.7)		0.1
Total Incurred Losses and LAE	Total Incurred Losses and LAE	2,993.6		2,160.6		Total Incurred Losses and LAE	1,039.2		777.1
Paid Losses and LAE Related to:	Paid Losses and LAE Related to:					Paid Losses and LAE Related to:

Current Year	Current Year	1,503.9		1,133.7		Current Year	373.9		258.0

Prior Years	Prior Years	1,080.4		1,032.9		Prior Years	676.9		500.3
Total Paid Losses and LAE	Total Paid Losses and LAE	2,584.3		2,166.6		Total Paid Losses and LAE	1,050.8		758.3
Property and Casualty Insurance Reserves - Net of Reinsurance at End of Period	Property and Casualty Insurance Reserves - Net of Reinsurance at End of Period	2,552.8		1,898.2		Property and Casualty Insurance Reserves - Net of Reinsurance at End of Period	2,719.2		1,951.2
Plus Reinsurance Recoverables at End of Period	Plus Reinsurance Recoverables at End of Period	43.4		51.8		Plus Reinsurance Recoverables at End of Period	40.9		48.3
Property and Casualty Insurance Reserves - Gross of Reinsurance at End of Period	Property and Casualty Insurance Reserves - Gross of Reinsurance at End of Period	$	2,596.2	$	1,950.0	Property and Casualty Insurance Reserves - Gross of Reinsurance at End of Period	$	2,760.1	$	1,999.5

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 Condensed Consolidated Statements of Income in the period of change.

For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company ~~increased~~decreased its property and casualty insurance reserves by ~~$107.9~~$2.7 million to recognize ~~adverse~~favorable development of loss and LAE reserves from prior accident years. Specialty personal automobile insurance loss and LAE reserves developed ~~adversely~~favorably by ~~$97.0~~$8.3 million due primarily to the emergence of more ~~adverse~~favorable loss patterns than expected for liability and physical damage insurance. Commercial automobile insurance loss and LAE reserves developed adversely by ~~$8.3~~$5.2 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Preferred personal automobile insurance loss and LAE reserves developed adversely by ~~$4.9~~$1.6 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Homeowners loss and LAE reserves developed favorably by ~~$4.3~~$4.4 million due primarily to the emergence of more favorable loss patterns than expected. Other lines loss and LAE reserves developed adversely by ~~$2.0~~$3.2 million due primarily to the emergence of more adverse loss patterns than expected for prior accident years.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company increased its property and casualty insurance reserves by ~~$28.3~~$0.1 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 $31.3 million due primarily to the emergence of more adverse loss patterns than expected. Commercial automobile loss and LAE reserves developed~~ favorably by ~~$14.4~~$4.0 million due primarily to the emergence of more favorable loss patterns than expected for ~~commercial~~liability insurance. Commercial automobile insurance loss and LAE reserves developed adversely by $3.0 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Preferred personal automobile insurance loss and LAE reserves developed adversely by ~~$17.2~~$1.3 million due primarily to the emergence of more adverse loss patterns than ~~expected.~~expected for liability insurance. Homeowners loss and LAE reserves developed favorably by ~~$3.0~~$2.6 million due primarily to the emergence of more favorable loss patterns than expected. Other lines loss and LAE reserves developed ~~favorably~~adversely by ~~$2.8~~$2.3 million due primarily to the emergence of more ~~favorable~~adverse loss patterns than expected for prior accident years.

1715

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5 - Property and Casualty Insurance Reserves ~~(continued)~~(Continued)

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

Receivables from Policyholders - Allowance for Expected Credit Losses

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 ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.


(Dollars in Millions)	(Dollars in Millions)	Receivables from Policyholders, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses		(Dollars in Millions)	Receivables from Policyholders, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
Balance at Beginning of Year	Balance at Beginning of Year	$	1,194.5	$	20.9	Balance at Beginning of Year	$	1,418.7	$	13.6
Provision for Expected Credit Losses	Provision for Expected Credit Losses			36.7		Provision for Expected Credit Losses			11.3
Write-offs of Uncollectible Receivables from Policyholders	Write-offs of Uncollectible Receivables from Policyholders			(44.9)		Write-offs of Uncollectible Receivables from Policyholders			(11.9)
Balance at End of Period	Balance at End of Period	$	1,481.2	$	12.7	Balance at End of Period	$	1,404.5	$	13.0

(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 31.9
Write-offs of Uncollectible Receivables from Policyholders (33.8)
Balance at End of Period $ 1,249.3 $ 20.4


(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			12.8
Write-offs of Uncollectible Receivables from Policyholders			(22.4)
Balance at End of Period	$	1,260.9	$	11.3

Note 6 - Investments

Fixed Maturities

The amortized cost ~~gross unrealized gains and losses, allowance for expected credit loss,~~ and estimated fair values of the Company’s Investments in Fixed Maturities at ~~September 30, 2021~~March 31, 2022 were:


		Amortized Cost		Gross Unrealized				Allowance for Expected Credit Losses		Fair Value			Amortized Cost		Gross Unrealized				Allowance for Expected Credit Losses		Fair Value
(Dollars in Millions)	(Dollars in Millions)			Gains		Losses						(Dollars in Millions)			Gains		Losses
U.S. Government and Government Agencies and Authorities	U.S. Government and Government Agencies and Authorities	$	472.0	$	31.4	$	(0.8)	$	—	$	502.6	U.S. Government and Government Agencies and Authorities	$	644.8	$	10.7	$	(25.1)	$	—	$	630.4
States and Political Subdivisions	States and Political Subdivisions	1,780.3		148.8		(11.8)		—		1,917.3		States and Political Subdivisions	1,808.6		64.4		(102.8)		—		1,770.2
Foreign Governments	Foreign Governments	6.7		0.1		(1.1)		—		5.7		Foreign Governments	6.2		—		(1.2)		—		5.0
Corporate Securities:	Corporate Securities:											Corporate Securities:
Bonds and Notes	Bonds and Notes	3,948.8		504.7		(15.8)		(4.4)		4,433.3		Bonds and Notes	4,103.5		192.6		(130.9)		(9.1)		4,156.1
Redeemable Preferred Stocks	Redeemable Preferred Stocks	7.0		0.4		—		—		7.4		Redeemable Preferred Stocks	7.0		—		(0.2)		—		6.8
Collateralized Loan Obligations	Collateralized Loan Obligations	738.6		2.0		(4.7)		—		735.9		Collateralized Loan Obligations	909.7		0.6		(12.4)		—		897.9
Other Mortgage- and Asset-backed	Other Mortgage- and Asset-backed	269.1		14.5		(0.7)		—		282.9		Other Mortgage- and Asset-backed	330.6		2.4		(15.5)		—		317.5
Investments in Fixed Maturities	Investments in Fixed Maturities	$	7,222.5	$	701.9	$	(34.9)	$	(4.4)	$	7,885.1	Investments in Fixed Maturities	$	7,810.4	$	270.7	$	(288.1)	$	(9.1)	$	7,783.9

1816

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6 - Investments ~~(continued)~~(Continued)

The amortized cost ~~gross unrealized gains and losses, allowance for expected credit loss,~~ and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, ~~2020~~2021 were:


		Amortized Cost		Gross Unrealized				Allowance for Expected Credit Losses				Fair Value					Amortized Cost		Gross Unrealized				Allowance for Expected Credit Losses		Fair Value
(Dollars in Millions)	(Dollars in Millions)			Gains		Losses				(Dollars in Millions)				Gains					Losses
U.S. Government and Government Agencies and Authorities	U.S. Government and Government Agencies and Authorities	$	536.5	$	48.9	$	(0.1)			$	—				$	585.3		U.S. Government and Government Agencies and Authorities	$	610.1	$	29.2	$	(1.9)	$	—	$	637.4
States and Political Subdivisions	States and Political Subdivisions	1,404.3		185.4		(0.2)		—				1,589.5		States and Political Subdivisions			1,752.5		144.6		(7.0)		—		1,890.1
Foreign Governments	Foreign Governments	6.6		—		(1.1)		(0.3)				5.2		Foreign Governments			6.7		—		(1.2)		—		5.5
Corporate Securities:	Corporate Securities:													Corporate Securities:
Bonds and Notes	Bonds and Notes	3,749.5		689.5		(10.6)		(3.0)				4,425.4		Bonds and Notes			3,929.0		481.4		(16.0)		(7.5)		4,386.9
Redeemable Preferred Stocks	Redeemable Preferred Stocks	7.0		0.5		—		—				7.5		Redeemable Preferred Stocks			7.0		0.4		—		—		7.4
Collateralized Loan Obligations	Collateralized Loan Obligations	785.1		2.3		(19.7)		—				767.7		Collateralized Loan Obligations			756.0		0.9		(4.8)		—		752.1
Other Mortgage- and Asset-backed	Other Mortgage- and Asset-backed	203.7		21.6		—		—				225.3		Other Mortgage- and Asset-backed			296.9		12.4		(1.8)		—		307.5
Investments in Fixed Maturities	Investments in Fixed Maturities	$	6,692.7	$	948.2	$	(31.7)	$	(3.3)			$	7,605.9	Investments in Fixed Maturities			$	7,358.2	$	668.9	$	(32.7)	$	(7.5)	$	7,986.9

Other Receivables included ~~$6.8~~$1.9 million and ~~$5.1~~$0.6 million of unsettled sales of Investments in Fixed Maturities at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Accrued Expenses and Other Liabilities included unsettled purchases of Investments in Fixed Maturities of ~~$38.7~~$73.4 million and ~~$4.3~~$12.7 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at ~~September 30, 2021~~March 31, 2022 by contractual maturity were:


(Dollars in Millions)	(Dollars in Millions)	Amortized Cost		Fair Value		(Dollars in Millions)	Amortized Cost		Fair Value
Due in One Year or Less	Due in One Year or Less	$	67.5	$	69.4	Due in One Year or Less	$	154.3	$	155.8
Due after One Year to Five Years	Due after One Year to Five Years	1,004.2		1,065.5		Due after One Year to Five Years	1,055.8		1,059.2
Due after Five Years to Ten Years	Due after Five Years to Ten Years	1,581.3		1,700.6		Due after Five Years to Ten Years	1,578.8		1,549.2
Due after Ten Years	Due after Ten Years	3,228.2		3,682.2		Due after Ten Years	3,275.8		3,318.2
Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date	Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date	1,341.3		1,367.4		Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date	1,745.7		1,701.5
Investments in Fixed Maturities	Investments in Fixed Maturities	$	7,222.5	$	7,885.1	Investments in Fixed Maturities	$	7,810.4	$	7,783.9

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 ~~September 30, 2021~~March 31, 2022 consisted of securities issued by the Government National Mortgage Association with a fair value of ~~$293.8~~$390.7 million, securities issued by the Federal National Mortgage Association with a fair value of ~~$28.8~~$65.8 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of ~~$26.0~~$29.5 million, and securities issued by other non-governmental issuers with a fair value of ~~$1,018.8~~$1,215.5 million.

1917

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6 - Investments ~~(continued)~~(Continued)

An aging of unrealized losses on the Company’s Investments in Fixed Maturities at ~~September 30, 2021~~March 31, 2022 is presented below.


		Less Than 12 Months				12 Months or Longer				Total					Less Than 12 Months				12 Months or Longer				Total
(Dollars in Millions)	(Dollars in Millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(Dollars in Millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed Maturities:	Fixed Maturities:													Fixed Maturities:
U.S. Government and Government Agencies and Authorities	U.S. Government and Government Agencies and Authorities	$	45.0	$	(0.7)	$	1.2	$	(0.1)	$	46.2	$	(0.8)	U.S. Government and Government Agencies and Authorities	$	410.7	$	(24.5)	$	4.0	$	(0.6)	$	414.7	$	(25.1)
States and Political Subdivisions	States and Political Subdivisions	468.1		(11.8)		0.2		—		468.3		(11.8)		States and Political Subdivisions	822.9		(98.1)		26.8		(4.7)		849.7		(102.8)
Foreign Governments	Foreign Governments	0.5		(0.5)		2.7		(0.6)		3.2		(1.1)		Foreign Governments	2.1		(0.7)		2.1		(0.5)		4.2		(1.2)
Corporate Securities:	Corporate Securities:													Corporate Securities:
Bonds and Notes	Bonds and Notes	495.1		(14.0)		26.5		(1.8)		521.6		(15.8)		Bonds and Notes	1,488.5		(107.2)		168.4		(23.7)		1,656.9		(130.9)

Redeemable Preferred Stocks														Redeemable Preferred Stocks	5.3		(0.2)		—		—		5.3		(0.2)
Collateralized Loan Obligations	Collateralized Loan Obligations	206.1		(2.4)		234.9		(2.3)		441.0		(4.7)		Collateralized Loan Obligations	533.4		(6.5)		228.6		(5.9)		762.0		(12.4)
Other Mortgage- and Asset-backed	Other Mortgage- and Asset-backed	63.2		(0.7)		—		—		63.2		(0.7)		Other Mortgage- and Asset-backed	222.9		(15.5)		0.1		—		223.0		(15.5)
Total Fixed Maturities	Total Fixed Maturities	$	1,278.0	$	(30.1)	$	265.5	$	(4.8)	$	1,543.5	$	(34.9)	Total Fixed Maturities	$	3,485.8	$	(252.7)	$	430.0	$	(35.4)	$	3,915.8	$	(288.1)

Investment-grade fixed maturity investments comprised ~~$27.2~~$270.9 million and below-investment-grade fixed maturity investments comprised ~~$7.7~~$17.2 million of the unrealized losses on investments in fixed maturities at ~~September 30, 2021.~~March 31, 2022. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 5%6% of the amortized cost basis of the investment.

An aging of unrealized losses on the Company’s Investments in Fixed Maturities at December 31, ~~2020~~2021 is presented below.


		Less Than 12 Months				12 Months or Longer				Total					Less Than 12 Months				12 Months or Longer				Total
(Dollars in Millions)	(Dollars in Millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(Dollars in Millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed Maturities:	Fixed Maturities:													Fixed Maturities:
U.S. Government and Government Agencies and Authorities	U.S. Government and Government Agencies and Authorities	$	10.5	$	(0.1)	$	—	$	—	$	10.5	$	(0.1)	U.S. Government and Government Agencies and Authorities	$	168.7	$	(1.8)	$	1.2	$	(0.1)	$	169.9	$	(1.9)
States and Political Subdivisions	States and Political Subdivisions	23.3		(0.2)		—		—		23.3		(0.2)		States and Political Subdivisions	385.0		(6.9)		1.5		(0.1)		386.5		(7.0)
Foreign Governments	Foreign Governments	0.5		(0.1)		2.6		(1.0)		3.1		(1.1)		Foreign Governments	2.2		(0.6)		2.6		(0.6)		4.8		(1.2)
Corporate Securities:	Corporate Securities:													Corporate Securities:
Bonds and Notes	Bonds and Notes	132.9		(7.5)		46.1		(3.1)		179.0		(10.6)		Bonds and Notes	596.8		(13.1)		49.3		(2.9)		646.1		(16.0)
Redeemable Preferred Stocks														Redeemable Preferred Stocks	0.1		—		—		—		0.1		—
Collateralized Loan Obligations	Collateralized Loan Obligations	145.2		(3.8)		371.4		(15.9)		516.6		(19.7)		Collateralized Loan Obligations	250.9		(2.6)		192.6		(2.2)		443.5		(4.8)
Other Mortgage- and Asset-backed	Other Mortgage- and Asset-backed	6.3		—		—		—		6.3		—		Other Mortgage- and Asset-backed	100.1		(1.8)		—		—		100.1		(1.8)
Total Fixed Maturities	Total Fixed Maturities	$	318.7	$	(11.7)	$	420.1	$	(20.0)	$	738.8	$	(31.7)	Total Fixed Maturities	$	1,503.8	$	(26.8)	$	247.2	$	(5.9)	$	1,751.0	$	(32.7)

Investment-grade fixed maturity investments comprised ~~$8.0~~$23.7 million and below-investment-grade fixed maturity investments comprised ~~$23.7~~$9.0 million of the unrealized losses on investments in fixed maturities at December 31, ~~2020.~~2021. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately ~~11%~~4% of the amortized cost basis of the investment.

2018

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6 - Investments ~~(continued)~~(Continued)

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~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 value. The Company evaluated these investments for credit losses at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~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 security, industry, or geographic area, payment structure of the investment and the likelihood of the issuer’s ability to make contractual cashflows, 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 determined that the unrealized losses on these securities were due to non-credit related factors at the evaluation date.

Fixed Maturities - Expected Credit Losses

The following table sets forth the change in allowance for ~~expected~~ credit losses on fixed maturities available-for-sale by major security type for ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.


			Foreign Governments		Corporate Bonds and Notes			Total			Corporate Bonds and Notes		Total
(Dollars in Millions)	(Dollars in Millions)	Foreign Governments					Corporate Bonds and Notes			Total
Beginning of the Year	Beginning of the Year		$	0.3	$	3.0		$	3.3		$	7.5	$	7.5
Additions for Securities for which No Previous Expected Credit Losses were Recognized	Additions for Securities for which No Previous Expected Credit Losses were Recognized		—		2.2			2.2		Additions for Securities for which No Previous Expected Credit Losses were Recognized	3.8		3.8

Reduction Due to Sales										Reduction Due to Sales	—		—
Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized	Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized		(0.3)		(0.6)			(0.9)		Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized	1.3		1.3
Write-offs Charged Against Allowance	Write-offs Charged Against Allowance		—		(0.2)			(0.2)		Write-offs Charged Against Allowance	(3.5)		(3.5)
End of the Period	End of the Period		$	—	$	4.4		$	4.4	End of the Period	$	9.1	$	9.1

The following table sets forth the change in allowance for ~~expected~~ credit losses on fixed maturities available-for-sale by major security type for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021.


			Foreign Governments		Corporate Bonds and Notes			Total				Foreign Governments		Corporate Bonds and Notes		Total
(Dollars in Millions)	(Dollars in Millions)	Foreign Governments					Foreign Governments			Corporate Bonds and Notes	Total
Beginning of the Year	Beginning of the Year		$	—	$	—		$	—			$	0.3	$	3.0	$	3.3
Impact of Adopting ASU 2016-13			—		—			—

Additions for Securities for which No Previous Expected Credit Losses were Recognized	Additions for Securities for which No Previous Expected Credit Losses were Recognized		0.6		5.0			5.6		Additions for Securities for which No Previous Expected Credit Losses were Recognized		—		1.3		1.3
Reduction Due to Sales	Reduction Due to Sales		(0.1)		(0.4)			(0.5)		Reduction Due to Sales		—		(0.3)		(0.3)
Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized	Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized		0.1		(0.1)			—		Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized		0.2		0.3		0.5
Write-offs Charged Against Allowance	Write-offs Charged Against Allowance		—		(0.3)			(0.3)		Write-offs Charged Against Allowance		(0.2)		—		(0.2)
End of the Period	End of the Period		$	0.6	$	4.2		$	4.8	End of the Period		$	0.3	$	4.3	$	4.6

Equity Securities

Investments in Equity Securities at Fair Value were ~~$969.6~~$571.5 million and ~~$858.5~~$830.6 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Net unrealized ~~gains~~losses arising during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and recognized in earnings, related to such investments still held as of ~~September 30, 2021,~~March 31, 2022, were ~~$107.3~~$24.0 million.

Investments in Equity Securities at Modified Cost were ~~$33.0~~$35.2 million and ~~$40.1~~$32.3 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. 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

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6 - Investments (Continued)

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

~~Note 6 - Investments (continued)~~

impairment in the Condensed 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 did not recognize any ~~increases~~changes in ~~the~~ carrying value due to observable transactions for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The Company ~~recognized an~~did not recognize any impairment ~~of $0.7 million and $4.1 million~~ on Equity Securities at Modified Cost for three ~~and nine~~ months ended ~~September 30, 2021, respectively~~March 31, 2022 as a result of the Company’s impairment analysis. The Company ~~has~~ recognized ~~$0.5 million of~~no cumulative increases or decreases in the carrying value due to observable transactions ~~no cumulative increases in the carrying value due to observable transactions~~ and ~~$9.9~~$10.0 million of cumulative impairments on Equity Securities at Modified Cost held as of ~~September 30, 2021.~~March 31, 2022.

There were ~~$0.2 million and~~ no unsettled purchases of Investments in Equity Securities at ~~September 30, 2021 and~~March 31, 2022. There were $2.7 million of unsettled purchases of Investments in Equity Securities at December 31, ~~2020, respectively.~~2021. There were no unsettled sales of Investments in Equity Securities at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

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.

The Company’s maximum exposure to loss at ~~September 30, 2021~~March 31, 2022 is limited to the total carrying value of ~~$255.1~~$230.0 million. In addition, the Company had outstanding commitments totaling approximately ~~$83.7~~$92.2 million to fund Equity Method Limited Liability Investments at ~~September 30, 2021.~~March 31, 2022. At ~~September 30, 2021, 7.0%~~March 31, 2022, 3.2% of Equity Method Limited Liability Investments were reported without a reporting lag. Of the total carrying value, ~~17.5%~~10.8% was reported with a one month lag and the remainder was reported with more than a one month lag.

There were $0.5 million of unsettled purchases of Equity Method Limited Liability Investments at March 31, 2022. There were no unsettled purchases of Equity Method Limited Liability Investments at December 31, 2021. There were $4.7 million and $1.2 million unsettled sales of Equity Method Limited Liability Investments at March 31, 2022 and December 31, 2021, respectively.

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 investments in Alternative Energy Partnership Investments.

The Company’s maximum exposure to loss at ~~September 30, 2021~~March 31, 2022 is limited to the total carrying value of ~~$54.2~~$22.4 million. The Company has no outstanding commitments to fund Alternative Energy Partnership Investments as of ~~September 30, 2021.~~March 31, 2022. Alternative Energy Partnership Investments are reported on a three month lag.

Other Investments

The carrying values of the Company’s Other Investments at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were:

(Dollars in Millions) Sep 30,
2021 Dec 31,
2020
Company-Owned Life Insurance $ 440.7 $ 327.4
Loans to Policyholders at Unpaid Principal 289.6 297.9
Real Estate at Depreciated Cost 95.8 98.7
Mortgage Loans and Other 95.4 55.0
Total $ 921.5 $ 779.0


(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021
Company-Owned Life Insurance	$	556.4	$	448.1
Loans to Policyholders at Unpaid Principal	284.7		286.2
Real Estate at Depreciated Cost	93.3		94.0

Mortgage Loans and Other	100.8		97.3
Total	$	1,035.2	$	925.6

2220

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6 - Investments ~~(continued)~~(Continued)

Net Investment Income

Net Investment Income for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Investment Income:	Investment Income:									Investment Income:
Interest on Fixed Income Securities	Interest on Fixed Income Securities	$	207.1	$	218.0	$	68.4	$	72.7	Interest on Fixed Income Securities	$	68.7	$	69.0
Dividends on Equity Securities Excluding Alternative Investments	Dividends on Equity Securities Excluding Alternative Investments	9.8		10.7		2.9		2.8		Dividends on Equity Securities Excluding Alternative Investments	1.5		2.1
Alternative Investments:	Alternative Investments:									Alternative Investments:
Equity Method Limited Liability Investments	Equity Method Limited Liability Investments	50.9		(2.7)		12.0		8.2		Equity Method Limited Liability Investments	13.3		22.5

Limited Liability Investments Included in Equity Securities	Limited Liability Investments Included in Equity Securities	29.3		7.3		9.5		2.4		Limited Liability Investments Included in Equity Securities	7.6		4.5
Total Alternative Investments	Total Alternative Investments	80.2		4.6		21.5		10.6		Total Alternative Investments	20.9		27.0
Short-term Investments	Short-term Investments	0.6		4.2		0.2		2.3		Short-term Investments	0.1		1.2
Loans to Policyholders	Loans to Policyholders	16.3		16.6		5.4		5.5		Loans to Policyholders	5.5		5.5
Real Estate	Real Estate	7.1		7.1		2.3		2.3		Real Estate	2.2		2.4
Other	Other	23.1		9.3		9.1		2.7		Other	10.0		4.7
Total Investment Income	Total Investment Income	344.2		270.5		109.8		98.9		Total Investment Income	108.9		111.9
Investment Expenses:	Investment Expenses:									Investment Expenses:
Real Estate	Real Estate	6.8		6.5		2.6		1.2		Real Estate	2.5		2.1
Other Investment Expenses	Other Investment Expenses	18.5		18.5		5.3		5.6		Other Investment Expenses	6.4		6.7
Total Investment Expenses	Total Investment Expenses	25.3		25.0		7.9		6.8		Total Investment Expenses	8.9		8.8
Net Investment Income	Net Investment Income	$	318.9	$	245.5	$	101.9	$	92.1	Net Investment Income	$	100.0	$	103.1

Gross gains and losses on sales of investments in fixed maturities for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Fixed Maturities:	Fixed Maturities:									Fixed Maturities:
Gains on Sales	Gains on Sales	$	42.7	$	38.7	$	10.3	$	11.9	Gains on Sales	$	0.4	$	13.2
Losses on Sales	Losses on Sales	(1.7)		(3.5)		(0.4)		(1.9)		Losses on Sales	(0.8)		(1.1)

2321

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7 - Fair Value Measurements

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 Condensed Consolidated Balance Sheets.

The valuation of assets measured at fair value in Company’s Condensed Consolidated Balance Sheets at ~~September 30, 2021~~March 31, 2022 is summarized below. The Company has no material liabilities that are measured and reported at fair value.


		Fair Value Measurements											Fair Value Measurements
(Dollars in Millions)	(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		Total Fair Value		(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		Total Fair Value
Fixed Maturities:	Fixed Maturities:											Fixed Maturities:
U.S. Government and Government Agencies and Authorities	U.S. Government and Government Agencies and Authorities	$	135.1	$	367.5	$	—	$	—	$	502.6	U.S. Government and Government Agencies and Authorities	$	127.3	$	503.1	$	—	$	—	$	630.4
States and Political Subdivisions	States and Political Subdivisions	—		1,917.3		—		—		1,917.3		States and Political Subdivisions	—		1,770.2		—		—		1,770.2
Foreign Governments	Foreign Governments	—		5.7		—		—		5.7		Foreign Governments	—		5.0		—		—		5.0
Corporate Securities:	Corporate Securities:											Corporate Securities:
Bonds and Notes	Bonds and Notes	—		4,219.7		213.6		—		4,433.3		Bonds and Notes	—		3,950.5		205.6		—		4,156.1
Redeemable Preferred Stock	Redeemable Preferred Stock	—		1.3		6.1		—		7.4		Redeemable Preferred Stock	—		1.2		5.6		—		6.8
Collateralized Loan Obligations	Collateralized Loan Obligations	—		735.9		—		—		735.9		Collateralized Loan Obligations	—		897.9		—		—		897.9
Other Mortgage and Asset-backed	Other Mortgage and Asset-backed	—		268.6		14.3		—		282.9		Other Mortgage and Asset-backed	—		311.3		6.2		—		317.5
Total Investments in Fixed Maturities	Total Investments in Fixed Maturities	135.1		7,516.0		234.0		—		7,885.1		Total Investments in Fixed Maturities	127.3		7,439.2		217.4		—		7,783.9
Equity Securities at Fair Value:	Equity Securities at Fair Value:											Equity Securities at Fair Value:
Preferred Stocks:	Preferred Stocks:											Preferred Stocks:
Finance, Insurance and Real Estate	Finance, Insurance and Real Estate	—		34.6		—		—		34.6		Finance, Insurance and Real Estate	—		33.0		—		—		33.0
Other Industries	Other Industries	—		16.0		1.1		—		17.1		Other Industries	—		14.9		1.5		—		16.4
Common Stocks:	Common Stocks:											Common Stocks:
Finance, Insurance and Real Estate	Finance, Insurance and Real Estate	39.0		—		—		—		39.0		Finance, Insurance and Real Estate	0.9		—		—		—		0.9
Other Industries	Other Industries	3.1		—		0		—		3.1		Other Industries	1.4		0.4		0		—		1.8
Other Equity Interests:	Other Equity Interests:											Other Equity Interests:
Exchange Traded Funds	Exchange Traded Funds	546.9		—		—		—		546.9		Exchange Traded Funds	201.6		—		—		—		201.6
Limited Liability Companies and Limited Partnerships	Limited Liability Companies and Limited Partnerships	—		—		—		328.9		328.9		Limited Liability Companies and Limited Partnerships	—		—		—		317.8		317.8
Total Investments in Equity Securities at Fair Value	Total Investments in Equity Securities at Fair Value	589.0		50.6		1.1		328.9		969.6		Total Investments in Equity Securities at Fair Value	203.9		48.3		1.5		317.8		571.5

Convertible Securities at Fair Value	Convertible Securities at Fair Value	—		44.1		—		—		44.1		Convertible Securities at Fair Value	—		46.1		—		—		46.1

Total	Total	$	724.1	$	7,610.7	$	235.1	$	328.9	$	8,898.8	Total	$	331.2	$	7,533.6	$	218.9	$	317.8	$	8,401.5

At ~~September 30, 2021,~~March 31, 2022, the Company had unfunded commitments to invest an additional ~~$111.0~~$101.2 million in certain limited liability investment companies and limited partnerships that will be included in Other Equity Interests ifwhen funded.

2422

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7 - Fair Value Measurements ~~(continued)~~(Continued)

The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheets at December 31, ~~2020~~2021 is summarized below.


		Fair Value Measurements											Fair Value Measurements
(Dollars in Millions)	(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		Total Fair Value		(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		Total Fair Value
Fixed Maturities:	Fixed Maturities:											Fixed Maturities:
U.S. Government and Government Agencies and Authorities	U.S. Government and Government Agencies and Authorities	$	134.0	$	451.3	$	—	$	—	$	585.3	U.S. Government and Government Agencies and Authorities	$	132.8	$	504.6	$	—	$	—	$	637.4
States and Political Subdivisions	States and Political Subdivisions	—		1,589.5		—		—		1,589.5		States and Political Subdivisions	—		1,890.1		—		—		1,890.1
Foreign Governments	Foreign Governments	—		5.2		—		—		5.2		Foreign Governments	—		5.5		—		—		5.5
Corporate Securities:	Corporate Securities:											Corporate Securities:
Bonds and Notes	Bonds and Notes	—		3,992.4		433.0		—		4,425.4		Bonds and Notes	—		4,150.1		236.8		—		4,386.9
Redeemable Preferred Stocks	Redeemable Preferred Stocks	—		1.3		6.2		—		7.5		Redeemable Preferred Stocks	—		1.3		6.1		—		7.4
Collateralized Loan Obligations	Collateralized Loan Obligations	—		767.7		—		—		767.7		Collateralized Loan Obligations	—		752.1		—		—		752.1
Other Mortgage and Asset-backed	Other Mortgage and Asset-backed	—		215.3		10.0		—		225.3		Other Mortgage and Asset-backed	—		300.5		7.0		—		307.5
Total Investments in Fixed Maturities	Total Investments in Fixed Maturities	134.0		7,022.7		449.2		—		7,605.9		Total Investments in Fixed Maturities	132.8		7,604.2		249.9		—		7,986.9
Equity Securities at Fair Value:	Equity Securities at Fair Value:											Equity Securities at Fair Value:
Preferred Stocks:	Preferred Stocks:											Preferred Stocks:
Finance, Insurance and Real Estate	Finance, Insurance and Real Estate	—		43.7		—		—		43.7		Finance, Insurance and Real Estate	—		34.2		—		—		34.2
Other Industries	Other Industries	—		15.4		—		—		15.4		Other Industries	—		16.1		1.5		—		17.6
Common Stocks:	Common Stocks:											Common Stocks:

Finance, Insurance and Real Estate	Finance, Insurance and Real Estate	8.7		1.7		—		—		10.4		Finance, Insurance and Real Estate	18.9		—		—		—		18.9
Other Industries	Other Industries	0.4		—		—		—		0.4		Other Industries	2.9		—		—		—		2.9
Other Equity Interests:	Other Equity Interests:											Other Equity Interests:
Exchange Traded Funds	Exchange Traded Funds	496.4		—		—		—		496.4		Exchange Traded Funds	432.0		—		—		—		432.0
Limited Liability Companies and Limited Partnerships	Limited Liability Companies and Limited Partnerships	—		—		—		292.2		292.2		Limited Liability Companies and Limited Partnerships	—		—		—		325.0		325.0
Total Investments in Equity Securities at Fair Value	Total Investments in Equity Securities at Fair Value	505.5		60.8		—		292.2		858.5		Total Investments in Equity Securities at Fair Value	453.8		50.3		1.5		325.0		830.6

Other Investments:	Other Investments:											Other Investments:

Convertible Securities at Fair Value	Convertible Securities at Fair Value	—		39.9		—		—		39.9		Convertible Securities at Fair Value	—		46.4		—		—		46.4

Total	Total	$	639.5	$	7,123.4	$	449.2	$	292.2	$	8,504.3	Total	$	586.6	$	7,700.9	$	251.4	$	325.0	$	8,863.9

The Company’s investments in Fixed Maturities that are classified as Level 1 primarily consist of U.S. Treasury Bonds and Notes. The Company’s investments in Equity Securities at Fair Value that are classified as Level 1 consist of either investments in publicly-traded common stocks or exchange traded funds. The Company’s investments in Fixed Maturities that are classified as Level 2 primarily consist of investments in corporate bonds, obligations of states and political subdivisions, collateralized loan obligations, and mortgage-backed securities of U.S. government agencies. The Company’s investments in Equity Securities at Fair Value that are classified as Level 2 primarily consist of investments in preferred stocks. The Company uses a leading, nationally recognized provider of market data and analytics to price the vast majority of the Company’s Level 2 measurements. The provider utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information. Because many fixed maturity securities do not trade on a daily basis, the provider’s evaluated pricing

2523

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7 - Fair Value Measurements ~~(continued)~~(Continued)

applications apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. In addition, the provider uses model processes to develop prepayment and interest rate scenarios.

The pricing provider’s models and processes also take into account market convention. For each asset class, teams of its evaluators gather information from market sources and integrate relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models. The Company generally validates the measurements obtained from its primary pricing provider by comparing them with measurements obtained from one additional pricing provider that provides either prices from recent market transactions, quotes in inactive markets or evaluations based on its own proprietary models.

The Company investigates significant differences related to the values provided. On completion of its investigation, management exercises judgment to determine the price selected and whether adjustments, if any, to the price obtained from the Company’s primary pricing provider would warrant classification of the price as Level 3. In instances where a measurement cannot be obtained from either pricing provider, the Company generally will evaluate bid prices from one or more binding quotes obtained from market makers to value investments in inactive markets and classified by the Company as Level 2. The Company generally classifies securities when it receives non-binding quotes or indications as Level 3 securities unless the Company can validate the quote or indication against recent transactions in the market.

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 ~~September 30, 2021.~~March 31, 2022.


(Dollars in Millions)	(Dollars in Millions)	Unobservable Input	Total Fair Value		Range of Unobservable Inputs				Weighted-average Yield		(Dollars in Millions)	Unobservable Input	Total Fair Value		Range of Unobservable Inputs					Weighted-average Yield
Investment-grade	Investment-grade	Market Yield	$	89.7	1.9	%	10.0	%	5.3	%	Investment-grade	Market Yield	$	98.5	3.5	%	-	11.0	%	6.7	%
Non-investment-grade:	Non-investment-grade:										Non-investment-grade:
Senior Debt	Senior Debt	Market Yield	40.9		5.1		18.5		9.2		Senior Debt	Market Yield	40.1		5.9		-	26.0		10.1
Junior Debt	Junior Debt	Market Yield	68.0		5.9		29.0		14.7		Junior Debt	Market Yield	51.6		6.0		-	28.5		16.0

Other	Other	Various	35.4								Other	Various	27.2
Total Level 3 Fixed Maturity Investments	Total Level 3 Fixed Maturity Investments		$	234.0							Total Level 3 Fixed Maturity Investments		$	217.4


(Dollars in Millions)	(Dollars in Millions)	Unobservable Input	Total Fair Value		Range of Unobservable Inputs				Weighted-average Yield		(Dollars in Millions)	Unobservable Input	Total Fair Value		Range of Unobservable Inputs					Weighted-average Yield
Investment-grade	Investment-grade	Market Yield	$	246.7	1.4	%	13.0	%	3.8	%	Investment-grade	Market Yield	$	87.9	2.3	%	-	10.3	%	5.4	%
Non-investment-grade:	Non-investment-grade:										Non-investment-grade:
Senior Debt	Senior Debt	Market Yield	111.1		2.4		23.4		9.5		Senior Debt	Market Yield	76.1		5.1		-	20.2		8.5
Junior Debt	Junior Debt	Market Yield	64.6		3.1		27.9		13.7		Junior Debt	Market Yield	53.9		6.0		-	27.5		15.0
Other	Other	Various	26.8								Other	Various	32.0
Total Level 3 Fixed Maturity Investments	Total Level 3 Fixed Maturity Investments		$	449.2							Total Level 3 Fixed Maturity Investments		$	249.9

2624

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7 - Fair Value Measurements ~~(continued)~~(Continued)

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.~~premium..

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 is presented below.


		Fixed Maturities						Equity Securities				Fixed Maturities								Equity Securities
(Dollars in Millions)	(Dollars in Millions)	Corporate Bonds and Notes		Redeemable Preferred Stocks		Collateralized Loan Obligations		Other Mortgage- and Asset- backed		Preferred and Common Stocks			Total		(Dollars in Millions)	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
Balance at Beginning of Period															Balance at Beginning of Period	$	236.8	$	6.1		$	—	$	7.0	$	1.5	$	251.4
Total Gains (Losses):	Total Gains (Losses):														Total Gains (Losses):
Included in Condensed Consolidated Statement of Income	Included in Condensed Consolidated Statement of Income	0.9		—		—		—		0.3			1.2		Included in Condensed Consolidated Statement of Income	(5.7)		—			—		—		—		(5.7)
Included in Other Comprehensive Income (Loss)	Included in Other Comprehensive Income (Loss)	5.5		(0.1)		0.1		(0.5)		—			5.0		Included in Other Comprehensive Income (Loss)	(1.7)		(0.5)			—		(0.8)		—		(3.0)
Purchases	Purchases	46.9		—		17.7		16.2		1.7			82.5		Purchases	13.7		—			—		—		—		13.7
Settlements	Settlements	—		—		—		(0.1)		—			(0.1)		Settlements	—		—			—		—		—		—
Sales	Sales	(94.4)		—		(10.0)		(0.2)		—			(104.6)		Sales	(42.8)		—			—		—		—		(42.8)
Transfers into Level 3	Transfers into Level 3	2.5		—		10.0		—		1.7			14.2		Transfers into Level 3	5.3		—			—		—		—		5.3
Transfers out of Level 3	Transfers out of Level 3	(180.8)		—		(17.8)		(11.1)		(2.6)			(212.3)		Transfers out of Level 3	—		—			—		—		—		—
Balance at End of Period	Balance at End of Period	$	213.6	$	6.1	$	—	$	14.3	$	1.1		$	235.1	Balance at End of Period	$	205.6	$	5.6		$	—	$	6.2	$	1.5	$	218.9

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

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the three months ended ~~September 30,~~March 31, 2021 is presented below.

Fixed Maturities Equity Securities
(Dollars in Millions) Corporate
Bonds
and Notes Redeemable
Preferred
Stocks Collateralized Loan Obligations Other Mortgage-
and Asset-
backed Preferred
and
Common
Stocks Total
Balance at Beginning of Period $ 409.2 $ 6.2 $ 27.8 $ 18.2 $ 3.4 $ 464.8
Total Gains (Losses):
Included in Condensed Consolidated Statement of Income 0.9 — — — 0.3 1.2
Included in Other Comprehensive Income (Loss) 4.7 (0.1) — — — 4.6
Purchases 7.4 — — 7.2 — 14.6
Settlements — — — — — —
Sales (28.4) — (10.0) — — (38.4)
Transfers into Level 3 — — — — — —
Transfers out of Level 3 (180.2) — (17.8) (11.1) (2.6) (211.7)
Balance at End of Period $ 213.6 $ 6.1 $ — $ 14.3 $ 1.1 $ 235.1

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

~~Note 7 - 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 nine months ended September 30, 2020 is presented below.~~


		Fixed Maturities												Fixed Maturities
(Dollars in Millions)	(Dollars in Millions)	Corporate Bonds and Notes		States and Political Sub- divisions		Redeemable Preferred Stocks		Collateralized Loan Obligations		Other Mortgage- and Asset- backed		Total			(Dollars in Millions)	Corporate Bonds and Notes		States and Political Sub- divisions		Redeemable Preferred Stocks		Collateralized Loan Obligations		Other Mortgage- and Asset- backed		Total
Balance at Beginning of Year	Balance at Beginning of Year	$	409.1	$	—	$	6.7	$	618.2	$	10.2	$	1,044.2		Balance at Beginning of Year	$	433.0	$	—	$	6.2	$	—	$	10.0	$	449.2
Total Gains (Losses):	Total Gains (Losses):														Total Gains (Losses):
Included in Condensed Consolidated Statement of Income	Included in Condensed Consolidated Statement of Income	(6.3)		—		—		(0.3)		—		(6.6)			Included in Condensed Consolidated Statement of Income	(1.1)		—		—		—		—		(1.1)
Included in Other Comprehensive Income (Loss)	Included in Other Comprehensive Income (Loss)	(1.0)		0.1		0.6		(9.4)		0.3		(9.4)			Included in Other Comprehensive Income (Loss)	(3.7)		—		(0.5)		—		(0.8)		(5.0)
Purchases	Purchases	150.1		0.6		—		53.5		—		204.2			Purchases	17.8		—		—		—		—		17.8
Settlements	Settlements	—		—		—		—		(0.1)		(0.1)			Settlements	—		—		—		—		—		—
Sales	Sales	(77.5)		—		(0.1)		(26.4)		(0.2)		(104.2)			Sales	(30.9)		—		—		—		(0.2)		(31.1)
Transfers into Level 3	Transfers into Level 3	7.4		—		—		—		—		7.4			Transfers into Level 3	—		—		—		—		—		—
Transfers out of Level 3	Transfers out of Level 3	—		(0.7)		(1.2)		(635.6)		—		(637.5)			Transfers out of Level 3	(0.6)		—		—		—		—		(0.6)
Balance at End of Period	Balance at End of Period	$	481.8	$	—	$	6.0	$	—	$	10.2	$	498.0		Balance at End of Period	$	414.5	$	—	$	5.7	$	—	$	9.0	$	429.2

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

~~Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the three months ended September 30, 2020 is presented below.~~

Fixed Maturities
(Dollars in Millions) Corporate
Bonds
and Notes States and Political Sub- divisions Redeemable
Preferred
Stocks Collateralized Loan Obligations Other Mortgage-
and Asset-
backed Total
Balance at Beginning of Period $ 452.3 $ — $ 5.4 $ — $ 10.3 $ 468.0
Total Gains (Losses):
Included in Condensed Consolidated Statement of Income (1.3) — — — — (1.3)
Included in Other Comprehensive Income (Loss) 5.1 — 0.7 — (0.1) 5.7
Purchases 69.5 — — — — 69.5
Settlements — — — — — —
Sales (43.8) — (0.1) — — (43.9)
Transfers into Level 3 — — — — — —
Transfers out of Level 3 — — — — — —
Balance at End of Period $ 481.8 $ — $ 6.0 $ — $ 10.2 $ 498.0

2825

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7 - Fair Value Measurements ~~(continued)~~(Continued)

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


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
(Dollars in Millions)	(Dollars in Millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		(Dollars in Millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:	Financial Assets:									Financial Assets:
Loans to Policyholders	Loans to Policyholders	$	289.6	$	289.6	$	297.9	$	297.9	Loans to Policyholders	$	284.7	$	284.7	$	286.2	$	286.2
Short-term Investments	Short-term Investments	259.7		259.7		875.4		875.4		Short-term Investments	243.8		243.8		284.1		284.1
Mortgage Loans	Mortgage Loans	94.0		94.0		54.6		54.6		Mortgage Loans	99.8		99.8		96.8		96.8
Company-Owned Life Insurance	Company-Owned Life Insurance	440.7		440.7		$	327.4	$	327.4	Company-Owned Life Insurance	556.4		556.4		$	448.1	$	448.1
Equity Securities at Modified Cost	Equity Securities at Modified Cost	33.0		37.7		40.1		40.1		Equity Securities at Modified Cost	35.2		35.2		32.3		32.3
Financial Liabilities:	Financial Liabilities:									Financial Liabilities:
Long-term Debt	Long-term Debt	$	1,122.1	$	1,166.1	$	1,172.8	$	1,247.8	Long-term Debt	$	1,385.2	$	1,343.9	$	1,121.9	$	1,152.1
Policyholder Obligations	Policyholder Obligations	378.9		378.9		407.8		407.8		Policyholder Obligations	553.1		553.1		401.9		401.9

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 isapproximates 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.

Note 8 - Variable Interest Entities

The Company invests in 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 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.

The Company’s interest in the Alternative Energy Partnership Investment is considered an investment in a variable interest entity (“VIE”). To determine whether the investment should be consolidated in the ~~Condensed~~ 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 direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to 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 ~~Condensed~~ 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 credits are recognized in Income Tax Expense (Benefit) on the Condensed Consolidated Statements of Income.

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 8 - Variable Interest Entities ~~(continued)~~(Continued)

The following table presents information regarding activity in the Company’s Alternative Energy Partnership Investments as of the periods indicated:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in millions)	(Dollars in millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in millions)	Mar 31, 2022		Mar 31, 2021
Fundings	Fundings	$	80.0	$	—	$	31.5	$	—	Fundings	$	—	$	48.5
Cash distribution from investment	Cash distribution from investment	0.2		—		0.2		—		Cash distribution from investment	0.4		—
Gain (loss) on investments in Alternative Energy Partnership	Gain (loss) on investments in Alternative Energy Partnership	(46.9)		—		(23.8)		—		Gain (loss) on investments in Alternative Energy Partnership	(16.7)		(15.4)
Income tax credits recognized	Income tax credits recognized	64.8		—		28.7		—		Income tax credits recognized	3.9		28.4
Tax benefit (expense) recognized from Alternative Energy Partnership	Tax benefit (expense) recognized from Alternative Energy Partnership	3.0		—		1.9		—		Tax benefit (expense) recognized from Alternative Energy Partnership	3.1		0.2

The following table represents the carrying value of the associated assets and liabilities and the associated maximum loss exposure of the Alternative Energy Partnership Investments as of the dates indicated:

(Dollars in millions)

~~Sep 30, 2021~~Mar 31, 2022

Cash

~~17.2~~19.3

Equipment, net of depreciation

~~245.4~~271.1

Other assets

~~3.4~~2.9

Total unconsolidated assets

~~266.0~~293.3

Maximum loss exposure

~~54.2~~22.4

The Company’s maximum loss exposure in the event that all of the assets in the Alternative Energy Partnership are deemed worthless is ~~$54.2~~$22.4 million, which is the carrying value of the investment at ~~September 30, 2021.~~

March 31, 2022.

Note 9 - Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income

~~The tables below display the changes in Accumulated Other Comprehensive Income~~ (Loss) ~~by component for the nine months ended September 30, 2021 and 2020~~

(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, 2021 730.6 (2.1) (45.7) (2.3) 680.5
Other Comprehensive Income (Loss) Before Reclassifications (172.8) (1.5) — — (174.3)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $7.4, $—, $0.5, $(0.1) and $7.8 (27.8) — 0.7 0.3 (26.8)
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $53.4, $0.4, $0.5, $(0.1) and $54.2 (200.6) (1.5) 0.7 0.3 (201.1)
Balance as of September 30, 2021 530.0 (3.6) (45.0) (2.0) 479.4

~~Note 9 - Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (continued)~~

(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, 2020 439.4 — (100.6) (2.7) 336.1
Other Comprehensive Income (Loss) Before Reclassifications 225.8 (1.9) 1.8 0.2 225.9
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $3.4, $—, $—, $— and $3.4 (13.0) — — — (13.0)
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $(56.5), $0.5, $(0.5), $(0.1) and $(56.6) 212.8 (1.9) 1.8 0.2 212.9
Balance as of September 30, 2020 652.2 (1.9) (98.8) (2.5) 549.0

The tables below display the changes in Accumulated Other Comprehensive Income (Loss) by component for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

(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 July 1, 2021 594.0 (4.0) (44.9) (2.1) 543.0
Other Comprehensive Income (Loss) Before Reclassifications (56.5) 0.4 — — (56.1)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $2.0, $—, $0.1, $(0.1) and $2.0 (7.5) — (0.1) 0.1 (7.5)
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $16.8, $(0.1), $0.1, $(0.1) and $16.7 (64.0) 0.4 (0.1) 0.1 (63.6)
Balance as of September 30, 2021 530.0 (3.6) (45.0) (2.0) 479.4


(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, 2022	505.8	(3.7)	(52.1)	(1.9)	448.1
Other Comprehensive Income (Loss) Before Reclassifications	(515.1)	(5.8)	—	4.7	(516.2)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $(1.5), $—, $—, $— and $(1.5)	5.8	—	—	—	5.8
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $135.2, $1.6, $—, $(1.2) and $135.6	(509.3)	(5.8)	—	4.7	(510.4)
Balance as of March 31, 2022	(3.5)	(9.5)	(52.1)	2.8	(62.3)

3127

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 9 - Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income ~~(continued)~~(Continued)

(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 July 1, 2020 602.3 (2.9) (99.5) (2.6) 497.3
Other Comprehensive Income (Loss) Before Reclassifications 57.0 1.0 0.7 0.1 58.8
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $1.9, $—, $—, $— and $1.9 (7.1) — — — (7.1)
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $(13.2), $(0.3), $(0.2), $(0.1) and $(13.8) 49.9 1.0 0.7 0.1 51.7
Balance as of September 30, 2020 652.2 (1.9) (98.8) (2.5) 549.0


(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, 2021	730.6	(2.1)	(45.7)	(2.3)	680.5
Other Comprehensive Income (Loss) Before Reclassifications	(281.5)	(1.7)	0.8	0.1	(282.3)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $2.1, $—, $—, $— and $2.1	(7.7)	—	—	—	(7.7)
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $74.8, $0.4, $0.5, $— and $75.7	(289.2)	(1.7)	0.8	0.1	(290.0)
Balance as of March 31, 2021	441.4	(3.8)	(44.9)	(2.2)	390.5

Amounts reclassified from Accumulated Other Comprehensive Income (Loss) shown above are reported in Net Income (Loss) as follows:


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

Note 10 - Shareholders’ Equity

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’s common stock, in addition to $133.3 million remaining under the August 6, 2014 authorization, bringing the remaining share repurchase authorization to approximately $333.3 ~~million as of December 31, 2020.~~million. As of ~~September 30, 2021,~~March 31, 2022 the remaining share repurchase authorization was $171.6 million under the repurchase program.

During the ~~nine~~three months ended ~~September 30, 2021 and 2020,~~March 31, 2022 Kemper ~~repurchased and retired approximately 2,085,000 and 1,617,000~~did not repurchase any shares ~~respectively,~~ of 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.~~

stock. During the three months ended ~~September 30,~~March 31, 2021 Kemper repurchased and retired approximately ~~40,000~~590,000 shares of its common stock under its share repurchase authorization for an aggregate cost of ~~$3.0~~$47.1 million and an average cost per share of ~~$74.79. Kemper did not repurchase any shares for the three months ended September 30, 2020.~~$79.36.

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.

~~Note 10 - Shareholders’ Equity (continued)~~

Employee Stock Purchase Plan

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company issued ~~54,000~~approximately 22,000 and ~~44,000~~15,000 shares under the Kemper Employee Stock Purchase Plan (“ESPP”), respectively, at an average discounted price of ~~$61.74~~$48.06 and ~~$60.17 per share. Compensation costs charged against income were $0.6 million and $0.5 million for the nine months ended September 30, 2021 and 2020, respectively.~~

~~During the three months ended September 30, 2021 and 2020, the Company issued 22,000 and 18,000 shares under the ESPP, respectively, at a discounted price of $56.77 and $56.81~~$67.76 per share. Compensation costs charged against income were $0.2 million and $0.2 million for the ~~three months~~year ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Note 11 - Pension Benefits and Postretirement Benefits Other Than Pensions

The Company sponsors a qualified defined benefit pension plan (the “Pension Plan”) that covers approximately 3,145 participants and beneficiaries. Effective January 1, 2006, the Pension Plan was closed to new hires and, effective June 30, 2016,

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 11 - Pension Benefits and Postretirement Benefits Other Than Pensions (Continued)

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 the Employee Retirement Income Security Act of 1974 (“ERISA”).

The components of Pension (Benefit) Expense for the Pension Plan for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021

Interest Cost on Projected Benefit Obligation	Interest Cost on Projected Benefit Obligation	$	5.3	$	13.5	$	1.8	$	4.5	Interest Cost on Projected Benefit Obligation	$	2.2	$	1.8
Expected Return on Plan Assets	Expected Return on Plan Assets	(7.0)		(22.0)		(2.3)		(7.3)		Expected Return on Plan Assets	(1.9)		(2.3)
Amortization of Prior Service Cost										Amortization of Prior Service Cost	0.2		—
Amortization of Net Actuarial Loss	Amortization of Net Actuarial Loss	2.2		4.6		0.7		1.6		Amortization of Net Actuarial Loss	0.4		0.7

Total Pension (Benefit) Expense	Total Pension (Benefit) Expense	$	0.5	$	(3.9)	$	0.2	$	(1.2)	Total Pension (Benefit) Expense	$	0.9	$	0.2

The Company sponsors two other than pension postretirement benefit (“OPEB”) plans (together the “OPEB Plans”) that together provide medical, dental and/or life insurance benefits to approximately 400 retired and 500 active employees.

The components of OPEB benefits for the OPEB Plans for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Service Cost	Service Cost	$	0.2	$	0.1	$	0.1	$	—	Service Cost	$	0.1	$	0.1
Interest Cost on Accumulated Postretirement Benefit Obligation	Interest Cost on Accumulated Postretirement Benefit Obligation	0.1		0.2		—		—		Interest Cost on Accumulated Postretirement Benefit Obligation	—		—
Amortization of Prior Service Credit	Amortization of Prior Service Credit	(1.0)		(0.9)		(0.3)		(0.2)		Amortization of Prior Service Credit	(0.3)		(0.3)
Amortization of Net Gain	Amortization of Net Gain	(1.3)		(1.4)		(0.6)		(0.4)		Amortization of Net Gain	(0.4)		(0.4)
Total OPEB (Benefit) Expense	Total OPEB (Benefit) Expense	$	(2.0)	$	(2.0)	$	(0.8)	$	(0.6)	Total OPEB (Benefit) Expense	$	(0.6)	$	(0.6)

The non-service cost components of the Pension Plan and OPEB Plans are presented within the Interest and Other Expenses line item in the Condensed Consolidated Statements of Income.

Note 12 - Policyholder Obligations

Policyholder Obligations at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were as follows:


(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Dec 31, 2020		(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021
FHLB Funding Agreements	FHLB Funding Agreements	$	378.9	$	407.8	FHLB Funding Agreements	$	553.1	$	401.9
Universal Life-type Policyholder Account Balances	Universal Life-type Policyholder Account Balances	102.9		59.2		Universal Life-type Policyholder Account Balances	101.9		102.1
Total	Total	$	481.8	$	467.0	Total	$	655.0	$	504.0

Kemper’s subsidiary, United Insurance Company of America ("United Insurance") has entered into funding agreements with the Federal Home Loan Bank (“FHLB”) of Chicago in exchange for cash, which it uses for spread lending purposes. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, United Insurance received advances of ~~$296.9~~$208.4 million from the FHLB of Chicago and made repayments of ~~$326.0~~$57.1 million under the spread lending program.

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 12 - Policyholder Obligations (Continued)

When a funding agreement is issued, United Insurance is then required to post collateral in the form of eligible securities including mortgage-backed, government, and agency debt instruments for each of 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.

United Insurance’s liability under 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 at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 is presented below.

(Dollars in Millions) Sep 30,
2021 Dec 31,
2020
Liability under Funding Agreements $ 378.9 $ 407.8
Fair Value of Collateral Pledged 547.8 530.5
FHLB of Chicago Common Stock Owned at Cost 11.8 11.8


(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021
Liability under Funding Agreements	$	553.1	$	401.9
Fair Value of Collateral Pledged	622.5		556.6
FHLB of Chicago Common Stock Owned at Cost	14.7		11.8

Note 13 - Debt

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

On ~~June 8, 2018,~~March 15, 2022, the Company entered into an amended and extended credit ~~agreement and term loan facility.~~agreement. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to ~~$300.0~~$600.0 million and extended the maturity date to ~~June 8, 2023. On June 4, 2019,~~March 15, 2027. Furthermore, the amended and extended credit agreement provides for an accordion feature whereby the Company ~~utilized~~can increase the ~~accordion feature under the credit agreement to increase its~~revolving credit borrowing capacity by ~~$100.0 million, resulting in the available credit commitments increasing from $300.0~~$200.0 million to ~~$400.0~~a total of $800.0 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 $0.8 million of remaining unamortized costs under the credit agreement, is being amortized over the remaining term of the credit agreement. There were no outstanding borrowings under the credit agreement at either ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021.

The Company incurred $2.2 million debt issuance costs in relation to the amended agreement. As of March 31, 2022 there were $2.6 million of remaining unamortized costs under the credit agreement, which will be amortized under the remaining term of the credit agreement.

~~Note 13 - Debt (continued)~~

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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was:


(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Dec 31, 2020		(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021

Term Loan due July 5, 2023		$	—	$	49.9
Senior Notes:						Senior Notes:
5.000% Senior Notes due September 19, 2022	5.000% Senior Notes due September 19, 2022	277.1		278.3		5.000% Senior Notes due September 19, 2022	$	—	$	276.7
4.350% Senior Notes due February 15, 2025	4.350% Senior Notes due February 15, 2025	448.9		448.8		4.350% Senior Notes due February 15, 2025	449.1		449.0
2.400% Senior Notes due September 30, 2030	2.400% Senior Notes due September 30, 2030	396.1		395.8		2.400% Senior Notes due September 30, 2030	396.3		396.2
3.800% Senior Notes due February 23, 2032						3.800% Senior Notes due February 23, 2032	395.1		—
5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062						5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062	144.7		—
Total Long-term Debt Outstanding	Total Long-term Debt Outstanding	$	1,122.1	$	1,172.8	Total Long-term Debt Outstanding	$	1,385.2	$	1,121.9

~~Term Loan Due 2023~~

~~On June 4, 2019, the Company entered into a delayed-draw term loan facility with a borrowing capacity~~

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 13 - Debt (Continued)

Redemption 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 (and a mutual option to extend the maturity date by one year). On March 16, 2021, the Company repaid all $50.0 million outstanding borrowings and accrued interest on the 2023 Term Loan.

5.000% Senior Notes Due 2022

The liabilities of Infinity Property and Casualty Corporation (“Infinity”) at the date of Infinity’s acquisition included $275.0 million principal amount, 5.000% Senior Notes due September 19, 2022 (the “2022 Senior Notes”). The 2022 Senior Notes were recorded at fair value as of the acquisition date, $282.1 million, with the $7.1 million premium being amortized as a reduction to interest expense over the remaining term, resulting in an effective interest rate 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.

On February 23, 2022, Kemper issued a notice of redemption for the entire $275.0 million aggregate principal outstanding of the 2022 Senior Notes at a redemption price equal to 100% of their principal, plus accrued and unpaid interest on the redemption date. On March 25, 2022, Kemper completed the redemption, and the 2022 Senior Notes were repaid in full. The Company recognized a Loss from Early Extinguishment of Debt of $3.7 million in its March 31, 2022 Condensed Consolidated Statement of Income.

The Company used the proceeds received from Kemper’s 2032 Senior Notes offering to repay the 2022 Senior Notes. See “3.800% Senior Notes Due 2032” below for additional information regarding the debt issuance.

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.

3.800% Senior Notes Due 2032

On February 15, 2022, Kemper offered and sold $400.0 million aggregate principal of 3.800% senior notes due February 23, 2032 (the “2032 Senior Notes”). The net proceeds of issuance were $395.1 million, net of discount and transaction costs for an effective yield of 3.950%. The 2032 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.

In anticipation of the issuance of the 2032 Senior Notes and for risk management purposes, the Company entered into a derivative transaction to hedge the risk of changes in the debt cash flows attributable to changes in the benchmark U.S. Treasury interest rate during the period leading up to the debt issuance (“Treasury Lock”). The effective portion of the gain on the derivative instrument upon discontinuance was $5.9 million before taxes, and is reported as a component of Accumulated Other Comprehensive Income (Loss). Beginning with the issuance of the 2032 Senior Notes described in the preceding paragraph, such gain is being amortized into earnings and reported in Interest and Other Expenses in the same periods that the hedged items affect earnings. Amortization, reported in Interest and Other Expenses, was $0.1 million for the three months ended March 31, 2022. The Company expects to reclassify $0.5 million of net gain on derivative instruments from AOCI to earnings for the twelve months ended March 31, 2023 as interest expense on the debt is recognized.

5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062

On March 10, 2022, Kemper issued $150.0 million aggregate principal amount of 5.875% Fixed-Rate Reset Junior Subordinated Debentures due March 15, 2062 (the “2062 Junior Debentures”). The net proceeds from issuance were $144.7 million, net of discount and transaction costs. The 2062 Junior Debentures will bear interest from and including the date

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 13 - Debt (Continued)

of original issue to, but excluding, March 15, 2027 (the “First Reset Date”) at the fixed rate of 5.875% per annum. The interest rate on the First Reset Date, and subsequent Reset Dates, will be equal to the Five-Year Treasury Rate as of the most recent Reset Date plus 4.140% to be reset on each Reset Date. Interest is due quarterly in arrears beginning on June 15, 2022. The Company has the option to defer interest payments for one or more optional deferral periods of up to five consecutive years, provided that no optional deferral period shall extend beyond March 15, 2062, or any earlier accelerated maturity date arising from an event of default or any earlier redemption of the 2062 Junior Debentures.

The 2062 Junior Debentures are unsecured and may be redeemed in whole or in part on the First Reset Date or any time thereafter, at a redemption price equal to the principal amount of the debentures being redeemed plus any accrued and unpaid interest.

Short-term Debt

Kemper’s subsidiaries, United Insurance, Trinity Universal Insurance Company (“Trinity”) and Alliance are members of the FHLBs of Chicago, Dallas and San Francisco, respectively. As a requirement of membership in the FHLBs, United Insurance, Trinity and Alliance maintain a certain level of investment in FHLB stock. The Company periodically uses short-term FHLB borrowings for a combination of cash management and risk management purposes, in addition to long-term FHLB borrowings for spread lending purposes. There were no short-term debt advances from the FHLBs of Chicago, Dallas or San Francisco outstanding at ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021. For information on United Insurance’s funding agreement with the

~~Note 13 - Debt (continued)~~

FHLB of Chicago in connection with the spread lending program, see Note 12, “Policyholder Obligations,” to the Condensed Consolidated Financial Statements.

Interest Expense and Interest Paid

Interest Expense, including facility fees, accretion of discount, amortization of premium and amortization of issuance costs, was ~~$33.0 million and $10.7~~$12.7 million for the ~~nine and~~ three months ended ~~September 30, 2021.~~March 31, 2022. Interest paid, including facility fees, was ~~$43.7 million and $21.6~~$22.0 million for the ~~nine and~~ three months ended ~~September 30, 2021.~~March 31, 2022. Interest Expense, including facility fees, accretion of discount and amortization of issuance costs, was ~~$24.7 million and $8.3~~$11.1 million for the ~~nine and~~ three months ended ~~September 30, 2020.~~March 31, 2021. Interest paid, including facility fees, was ~~$34.4 million and $16.9~~$21.7 million for the ~~nine and~~ three months ended ~~September 30, 2020.~~March 31, 2021.

Note 14 - 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.

The following table presents operating lease right-of-use assets and lease liabilities.


(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Dec 31, 2020		(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021
Operating Lease Right-of-Use Assets	Operating Lease Right-of-Use Assets	$	73.3	$	68.6	Operating Lease Right-of-Use Assets	$	60.4	$	64.4
Operating Lease Liabilities	Operating Lease Liabilities	97.9		89.6		Operating Lease Liabilities	80.1		84.8

KEMPER CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 14 - Leases (Continued)

Lease expenses are primarily included in Insurance Expenses in the Condensed Consolidated Statement of Income. Additional information regarding the Company’s lease cost is presented below.


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Lease Cost:	Lease Cost:									Lease Cost:
Amortization of Right-of-Use Assets - Finance Leases	Amortization of Right-of-Use Assets - Finance Leases	$	0.2	$	0.2	$	0.1	$	—	Amortization of Right-of-Use Assets - Finance Leases	$	—	$	0.1
Operating Lease Cost	Operating Lease Cost	16.8		15.9		5.8		5.1		Operating Lease Cost	5.6		5.1
Variable Lease Cost	Variable Lease Cost	0.1		—		—		—		Variable Lease Cost	0.1		—
Short-Term Lease Cost (1)	Short-Term Lease Cost (1)	2.4		—		0.8		—		Short-Term Lease Cost (1)	1.2		0.9
Total Lease Expense	Total Lease Expense	$	19.5	$	16.1	$	6.7	5.1		Total Lease Expense	$	6.9	$	6.1
Less: Sub-Lease Income	Less: Sub-Lease Income	0.2		—		0.2		—		Less: Sub-Lease Income	0.1		—
Total Lease Cost	Total Lease Cost	$	19.3	$	16.1	$	6.5	$	5.1	Total Lease Cost	$	6.8	$	6.1

(1) - Leases with an initial term of twelve months or less are not recorded on the Condensed Consolidated Balance Sheets.

~~Note 14 - Leases (continued)~~

Other Information on Operating Leases

Supplemental cash flow information related to the Company’s operating and finance leases for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:


		Nine Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Operating Cash Flows from Operating Lease (Fixed Payments)	Operating Cash Flows from Operating Lease (Fixed Payments)	$	17.5	$	14.8	Operating Cash Flows from Operating Lease (Fixed Payments)	$	6.2	$	5.4
Operating Cash Flows from Operating Lease (Liability Reduction)	Operating Cash Flows from Operating Lease (Liability Reduction)	15.6		14.0		Operating Cash Flows from Operating Lease (Liability Reduction)	5.5		4.6
Financing Cash Flows from Finance Leases	Financing Cash Flows from Finance Leases	0.2		0.2		Financing Cash Flows from Finance Leases	—		0.1
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	19.4		8.2		Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	1.0		2.3

Significant judgments and assumptions for determining lease asset and liability at ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ are presented below.

Nine Months Ended

Three Months Ended

Sep 30,
2021

Sep 30,
2020

Mar 31,
2022

Mar 31,
2021

Weighted-average Remaining Lease Term - Finance Leases

1.3 years

1.0 year

Weighted-average Remaining Lease Term - Finance Leases

0.8 years

0.5 years

Weighted-average Remaining Lease Term - Operating Leases

6.5 years

Weighted-average Remaining Lease Term - Operating Leases

5.8 years

6.6 years

Weighted-average Discount Rate - Finance Leases

0.6

4.0

Weighted-average Discount Rate - Finance Leases

0.6

4.0

Weighted-average Discount Rate - Operating Leases

3.3

3.7

Weighted-average Discount Rate - Operating Leases

3.4

4.0

Most of the Company’s leases do not provide an implicit rate. Accordingly, the Company 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 AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 14 - Leases (Continued)

Future minimum lease payments under operating leases at ~~September 30, 2021~~March 31, 2022 are presented below. There are no significant future minimum lease payments under finance leases.

(Dollars in Millions)
Remainder of 2021 $ 6.3
2022 24.1
2023 21.2
2024 15.4
2025 10.3
2026 and Thereafter 34.4
Total Future Payments $ 111.7
Less Imputed Interest 13.8
Present Value of Minimum Lease Payments $ 97.9


(Dollars in Millions)
Remainder of 2022	$	18.2
2023	21.7
2024	15.7
2025	10.2
2026	4.5
2027 and Thereafter	20.5
Total Future Payments	$	90.8
Less Imputed Interest	10.7
Present Value of Minimum Lease Payments	$	80.1

Note 15 - Income Taxes

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. As a result of the Company filing amended federal income tax returns, tax years 2012 and 2013 are under limited examination with respect to carryback adjustments associated with the amended returns. The statute of limitations related to tax years 2014, 2015, 2016 and 2017 has been extended to ~~March 31,~~September 30, 2022. Tax years 2018, 2019 and ~~2019~~2020 are subject to a statute of three years from the extended due dates of October 15, 2019, 2020, and ~~2020,~~2021, respectively.

The expiration of the statute of limitations related to the various state income tax returns that Kemper and its subsidiaries file varies by state.

~~Note 15 - Income Taxes (continued)~~

There were no unrecognized tax benefits at ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Income taxes paid, net of refunds received, were ~~$38.0~~less than $0.1 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Income taxes paid, ~~to state taxing authorities,~~ net of refunds received, were ~~$55.2~~$30.1 million for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021.

Note 16 - Contingencies

In the ordinary course of its businesses, the Company is involved in legal ~~proceedings,~~proceedings- including lawsuits, ~~arbitrations,~~arbitration, regulatory examinations, audits and inquiries. ~~Except with regard to the matters discussed below, based~~Based on currently available information, the Company does not believe that it is reasonably possible that any of its pending legal proceedings will have a material effect on the Company’s interim Condensed Consolidated Financial Statements and Notes to the interim Condensed Consolidated Financial Statements.

Over the last decade there have been multiple initiatives that intend, in various ways, to impose new duties on life insurance companies to proactively search for information related to the deaths of their insureds. These initiatives, which include legislation, audits, regulatory examinations and litigation, seek to alter the terms of life insurance contracts by imposing requirements that did not exist and were not contemplated at the time the issuing companies entered into such contracts.

In 2016, the Company voluntarily began ~~implementing~~implementation of a comprehensive process to compare the ~~life insurance~~ records of its life insurance subsidiaries against one or more death verification databases to determine if any of its insureds may be ~~deceased; the process is continuing.~~deceased.

Attempts to estimate the ultimate outcomes of the aforementioned initiatives entail uncertainties including but not limited to the (i) scope and interpretation of pertinent statutes, including the matching criteria and methodologies to be used in comparing policy records against a death verification database, (ii) universe of policies affected, (iii) results of audits, examinations and other actions by regulators, (iv) results of the Company’s voluntary process, and (v) outcomes of any related litigation.

~~Note 17 - Related Parties~~

Christopher B. Sarofim, a director of Kemper, is Vice Chairman and a member of the board of directors of Fayez Sarofim & Co. (“FS&C”), a registered investment advisory firm. FS&C provided investment management services to the Pension Plan. As part of the Pension Plan’s partial settlement of the pension obligations in 2020, the Pension Plan disposed of all assets managed by FS&C. Accordingly, the agreement between the Pension Plan and FS&C was terminated effective January 31, 2021.

3834

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

Summary of Results

Net ~~Income (Loss)~~Loss was ~~$(14.7)~~$94.8 million ($~~(0.23)~~(1.49) per unrestricted common share) for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$312.4~~Net Income of $123.2 million ($~~4.75~~1.88 per unrestricted common share) for the same period in ~~2020.~~

Net Income (Loss) was $(75.3) million ($(1.18) per unrestricted common share) for the three months ended September 30, 2021, compared to $122.3 million ($1.87 per unrestricted common share) for the same period in 2020.2021.

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

For the three months ended March 31, 2022, the Company estimates that its net results were negatively impacted by $120 million related to the effects of the COVID-19 pandemic and related economic conditions. The impact to net results was primarily related to underwriting losses in 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.

For the three months ended March 31, 2021, the Company estimated that its net results were negatively impacted by $5 million related to the effects of the COVID-19 pandemic and related economic conditions. The decrease to net income was primarily attributed to excess mortality in the Life & Health Insurance segment, partially offset by favorable underwriting results driven by lower frequency in the auto business of the P&C segments as a significant reduction in miles driven occurred.

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 III of ~~this Quarterly~~the Company’s 2021 Annual Report on Form ~~10-Q.~~10-K.

A reconciliation of Net Income (Loss) to Adjusted Consolidated Net Operating Income (Loss) (a non-GAAP financial measure) for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is presented below.


		Nine Months Ended						Three Months Ended							Three Months Ended
(Dollars in Millions and Net of Income Taxes)	(Dollars in Millions and Net of Income Taxes)	Sep 30, 2021		Sep 30, 2020		Increase (Decrease)		Sep 30, 2021		Sep 30, 2020		Increase (Decrease)		(Dollars in Millions and Net of Income Taxes)	Mar 31, 2022		Mar 31, 2021		Increase (Decrease)
Net Income (Loss)	Net Income (Loss)	$	(14.7)	$	312.4	$	(327.1)	$	(75.3)	$	122.3	$	(197.6)	Net Income (Loss)	$	(94.8)	$	123.2	$	(218.0)

Less:	Less:													Less:
Income (Loss) from Change in Fair Value of Equity and Convertible Securities	Income (Loss) from Change in Fair Value of Equity and Convertible Securities	73.0		(0.8)		73.8		(0.5)		35.7		(36.2)		Income (Loss) from Change in Fair Value of Equity and Convertible Securities	(22.3)		41.2		(63.5)
Net Realized Gains on Sales of Investments	Net Realized Gains on Sales of Investments	34.0		30.2		3.8		7.9		7.9		—		Net Realized Gains on Sales of Investments	1.2		10.9		(9.7)
Impairment Losses	Impairment Losses	(6.2)		(15.8)		9.6		(0.5)		(0.8)		0.3		Impairment Losses	(7.0)		(3.2)		(3.8)
Acquisition Related Transaction, Integration and Other Costs	Acquisition Related Transaction, Integration and Other Costs	(27.5)		(34.2)		6.7		(6.4)		(11.4)		5.0		Acquisition Related Transaction, Integration and Other Costs	(3.7)		(12.9)		9.2
Loss from Early Extinguishment of Debt														Loss from Early Extinguishment of Debt	(2.9)		—		$	(2.9)
Adjusted Consolidated Net Operating Income (Loss)	Adjusted Consolidated Net Operating Income (Loss)	$	(88.0)	$	333.0	$	(421.0)	$	(75.8)	$	90.9	$	(166.7)	Adjusted Consolidated Net Operating Income (Loss)	$	(60.1)	$	87.2	$	(147.3)

Components of Adjusted Consolidated Net Operating Income (Loss):	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):													Segment Net Operating Income (Loss):
Specialty Property & Casualty Insurance	Specialty Property & Casualty Insurance	$	(70.9)	$	246.8	$	(317.7)	$	(59.3)	$	119.2	$	(178.5)	Specialty Property & Casualty Insurance	$	(44.7)	$	80.1	$	(124.8)
Preferred Property & Casualty Insurance	Preferred Property & Casualty Insurance	(5.1)		(13.4)		8.3		(6.4)		(32.7)		26.3		Preferred Property & Casualty Insurance	(6.1)		9.6		(15.7)
Life & Health Insurance	Life & Health Insurance	23.1		50.6		(27.5)		2.8		12.2		(9.4)		Life & Health Insurance	3.1		7.3		(4.2)
Total Segment Net Operating Income (Loss)	Total Segment Net Operating Income (Loss)	(52.9)		284.0		(336.9)		(62.9)		98.7		(161.6)		Total Segment Net Operating Income (Loss)	(47.7)		97.0		(144.7)
Corporate and Other Net Operating Income (Loss) From:	Corporate and Other Net Operating Income (Loss) From:													Corporate and Other Net Operating Income (Loss) From:

Partial Satisfaction of Judgment		—		70.6		(70.6)		—		—		—

Other	Other	(35.1)		(21.6)		(13.5)		(12.9)		(7.8)		(5.1)		Other	(12.4)		(9.8)		(2.6)
Corporate and Other Net Operating Income (Loss)	Corporate and Other Net Operating Income (Loss)	(35.1)		49.0		(84.1)		(12.9)		(7.8)		(5.1)		Corporate and Other Net Operating Income (Loss)	(12.4)		(9.8)		(2.6)
Adjusted Consolidated Net Operating Income (Loss)	Adjusted Consolidated Net Operating Income (Loss)	$	(88.0)	$	333.0	$	(421.0)	$	(75.8)	$	90.9	$	(166.7)	Adjusted Consolidated Net Operating Income (Loss)	$	(60.1)	$	87.2	$	(147.3)

Summary of Results (Continued)

Net Income

Net Income decreased by ~~$327.1~~$218.0 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to lower Adjusted Consolidated Net Operating Income ~~partially offset by income~~and loss from ~~change~~Change in ~~fair value~~Fair Value of ~~equity~~Equity and ~~convertible securities.~~Convertible Securities. Adjusted Consolidated Net Operating Income decreased by ~~$421.0~~$147.3 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to lower Specialty Property & Casualty Segment Insurance Net Operating Income, ~~Corporate and Other~~Preferred Property & Casualty Segment Insurance Net Operating Income, Life & Health Insurance Segment Net Operating Income, ~~partially offset by lower Preferred Property & Casualty Insurance Segment~~and Corporate and Other Net Operating ~~Loss.~~Income.

~~Summary of Results (continued)~~

See MD&A, “Specialty Property & Casualty Insurance”, “Preferred Property & Casualty Insurance” and “Life & Health Insurance,” for discussion of each respective segment’s results. Corporate and Other Net Operating Income decreased due primarily to ~~a gain recognized in 2020 for~~increased interest expense resulting from the ~~satisfaction~~issuance of the ~~remaining balance of a final judgment received by the Company in connection with an arbitration award against Computer Sciences Corporation (the “CSC Judgment”).~~2032 Senior Notes. The Company’s investment results ~~were favorable~~deteriorated for the three months ended March 31, 2022, compared to the same period in 2021, ~~compared to 2020,~~ due primarily to a ~~$73.8~~$63.5 million after-tax ~~increase~~decrease in income from the change in fair value of ~~the~~ equity and convertible securities, a ~~$9.6~~$9.7 million after-tax decrease in ~~impairment losses~~net realized gains on sales of investments, and a $3.8 million after-tax increase ~~from net realized gains on sales of investments.~~in impairment losses. See MD&A, “Investment Results,” for additional discussion.

~~Net Income decreased by $197.6~~

Revenues

Earned Premiums were $1,338.6 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in 2020, due primarily to lower Adjusted Consolidated Net Operating Income and lower income from change in fair value of equity and convertible securities. Adjusted Consolidated Net Operating Income decreased by $166.7 million for the three months ended September 30, 2021, compared to the same period in 2020, due primarily to lower Specialty Property & Casualty Segment Insurance Net Operating Income, Corporate and Other Net Operating Income, and Life & Health Insurance Segment Net Operating Income, partially offset by lower Preferred Property & Casualty Insurance Segment Net Operating Loss. See MD&A, “Specialty Property & Casualty Insurance”, “Preferred Property & Casualty Insurance” a nd “Life & Health Insurance,” for discussion of each respective segment’s results.

~~Revenues~~

~~Earned Premiums were $3,894.6 million for the nine months ended September 30, 2021, compared to $3,458.2~~$1,200.8 million for the same period in ~~2020,~~2021, an increase of ~~$436.4~~$137.8 million. Earned Premiums in the Specialty Property & Casualty Insurance segment increased by ~~$463.3~~$144.0 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020.~~2021. Earned Premiums in the Preferred Property & Casualty Insurance segments decreased by ~~$29.9~~$6.6 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020. See MD&A, “Specialty Property & Casualty Insurance” and “Preferred Property & Casualty Insurance”, for discussion of the changes in each segment’s earned premiums.~~

Earned Premiums were $1,356.1 million for the three months ended September 30, 2021, compared to $1,206.5 million for the same period in 2020, an increase of $149.6 million. Earned Premiums in the Specialty Property & Casualty Insurance segment increased by $156.9 million for the three months ended September 30, 2021, compared to the same period in 2020. Earned Premiums in the Preferred Property & Casualty Insurance segments decreased by $10.8 million for the three months ended September 30, 2021, compared to the same period in 2020.2021. See MD&A, “Specialty Property & Casualty Insurance” and “Preferred Property & Casualty Insurance”, for discussion of the changes in each segment’s earned premiums.

Net Investment Income ~~increased~~decreased by ~~$73.4~~$3.1 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to ~~an increase in~~lower return from Alternative Investments, lower yields on fixed income securities, partially offset by higher levels of ~~investments in~~ fixed ~~income securities,~~maturities and higher levels ~~of investments~~ and rate on Company-Owned Life ~~Insurance, partially offset by lower yields on fixed income securities.~~Insurance.

~~Net Investment Income increased by $9.8~~Loss from the Change in Value of Alternative Energy Partnership Investments was $16.7 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in 2020, due primarily to an increase in return from Alternative Investments, higher levels of investments in fixed income securities, and higher levels of investments and rate on Company-Owned Life Insurance, partially offset by lower yields on fixed income securities.

~~Loss from the change in value of Alternative Energy Partnership Investments was $46.9~~$15.4 million for the ~~nine months ended September 30,~~same period 2021. Tax benefits related to the Alternative Energy Partnership Investments were ~~$67.9~~$7.0 million ~~resulting~~and $28.6 million for the three months ended March 31, 2022 and 2021, respectively. This resulted in a net loss of $9.7 million and net income of $13.2 million attributable to Alternative Energy Partnership Investments ~~of $21.0 million~~ for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022 and 2021, respectively.

~~Loss from the change in value of Alternative Energy Partnership Investments~~Other Income was ~~$23.8~~$2.4 million for the three months ended September 30, 2021. Tax benefits related to the Alternative Energy Partnership Investments were $30.6 million, resulting in net income attributable to Alternative Energy Partnership Investments of $6.8 million for the three months ended September 30, 2021.

~~Other Income was $20.8 million for the nine months ended September 30, 2021,~~March 31, 2022, compared to ~~$92.7~~$1.5 million for the same period in ~~2020. Other Income for the nine months ended September 30, 2020 included a gain of $89.4 million related to the satisfaction of the CSC Judgment.~~

~~Summary of Results (continued)~~

~~Other Income was $12.3 million for the three months ended September 30, 2021, compared to $0.9 million for the same period in 2020.~~2021.

Net Realized Gains on Sales of Investments were ~~$43.1~~$1.5 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$38.2~~$13.8 million for the same period in ~~2020. Net Realized Gains on Sales of Investments~~2021.

Impairment Losses were ~~$10.1~~$8.9 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$10.0~~$4.0 million for the same period in ~~2020.~~

Impairment Losses were $7.8 million for the nine months ended September 30, 2021, compared to $20.0 million for the same period in 2020. Impairment Losses were $0.6 million for the three months ended September 30, 2021, compared to $1.0 million for the same period in 2020.2021.

See MD&A, “Investment Results,” under the sub-captions “Net Realized Gains on Sales of Investments” and “Impairment Losses” for additional discussion. The Company cannot predict if or when similar investment gains or losses may occur in the future.

Non-GAAP Financial Measures

Underlying Losses and LAE and Underlying Combined Ratio

The following discussion of segment results uses the non-GAAP financial measures of (i) Underlying Losses and LAE and (ii) Underlying Combined Ratio. Underlying Losses and LAE (also referred to in the discussion as “Current Year Non-catastrophe Losses and LAE”) exclude the impact of catastrophe losses and loss and LAE reserve development from prior years from the Company’s Incurred Losses and LAE, which is the most directly comparable GAAP financial measure.

Non-GAAP Financial Measures (Continued)

The Underlying Combined Ratio is computed by adding the Current Year Non-catastrophe Losses and LAE Ratio with the Insurance Expense Ratio. The most directly comparable GAAP financial measure is the Combined Ratio, which is computed by adding Total Incurred Losses and LAE Ratio, including the impact of catastrophe losses and loss and LAE reserve development from prior years, with the Insurance Expense Ratio.

The Company believes Underlying Losses and LAE and the Underlying Combined Ratio are useful to investors and uses these financial measures to reveal the trends in the Company’s Property & Casualty Insurance segment that may be obscured by catastrophe losses and prior-year reserve development. These catastrophe losses may cause the Company’s loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude and can have a significant impact on incurred losses and LAE and the Combined Ratio. Prior-year reserve developments are caused by unexpected loss development on historical reserves. Because reserve development relates to the re-estimation of losses from earlier periods, it has no bearing on the performance of the Company’s insurance products in the current period. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company’s underwriting performance.

Adjusted Consolidated Net Operating Income (Loss)

Adjusted Consolidated Net Operating Income (Loss) is an after-tax, non-GAAP financial measure and is computed by excluding from Net Income (Loss) the after-tax impact of:

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

(ii) Net Realized Gains or Losses on Sales of Investments;

(iii) Impairment Losses;

(iv) Acquisition Related Transaction, Integration and Other Costs;

(v) Debt Extinguishment, Pension and Other Charges; and

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

Significant non-recurring items are excluded when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, and (b) there has been no similar charge or gain within the prior two years. The most directly comparable GAAP financial measure is Net Income (Loss). There were no applicable significant non-recurring items that the Company excluded from the calculation of Adjusted Consolidated Net Operating Income for the ~~nine and~~ three months ended ~~September 30, 2021~~March 31, 2022 or ~~2020.~~

~~Non-GAAP Financial Measures (continued)~~2021.

The Company believes that Adjusted Consolidated Net Operating Income provides investors with a valuable measure of its ongoing performance because it reveals underlying operational performance trends that otherwise might be less apparent if the items were not excluded. Income (Loss) from Change in Fair Value of Equity and Convertible Securities, Net Realized Gains or Losses on Sales of Investments and Impairment Losses related to investments included in the Company’s results may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions that impact the values of the Company’s investments, the timing of which is unrelated to the insurance underwriting process. Acquisition Related Transaction and Integration Costs may vary significantly between periods and are generally driven by the timing of acquisitions and business decisions which are unrelated to the insurance underwriting process. Debt Extinguishment, Pension and Other Charges relate to (i) loss from early extinguishment of debt, which is driven by the Company’s financing and refinancing decisions and capital needs, as well as external economic developments such as debt market conditions, the timing of which is unrelated to the insurance underwriting process; (ii) settlement of pension plan obligations which are business decisions made by the Company, the timing of which is unrelated to the underwriting process; and (iii) other charges that are non-standard, not part of the ordinary course of business, and unrelated to the insurance underwriting process. Significant non-recurring items are excluded because, by their nature, they are not indicative of the Company’s business or economic trends.

The preceding non-GAAP financial measures should not be considered a substitute for the comparable GAAP financial measures, as they do not fully recognize the overall profitability of the Company’s businesses.

4237

Specialty Property & Casualty Insurance

Selected financial information for the Specialty Property & Casualty Insurance segment follows.


		Nine Months Ended						Three Months Ended							Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			(Dollars in Millions)		Mar 31, 2022			Mar 31, 2021
Net Premiums Written	Net Premiums Written	$	3,078.3		$	2,606.3		$	1,024.3		$	914.2		Net Premiums Written		$	1,023.7		$	972.0

Earned Premiums	Earned Premiums	$	2,916.2		$	2,452.9		$	1,028.3		$	871.4		Earned Premiums		$	1,021.6		$	877.6
Net Investment Income	Net Investment Income	114.7			76.2			37.0			30.5			Net Investment Income		34.9			35.0
Change in Value of Alternative Energy Partnership Investments	Change in Value of Alternative Energy Partnership Investments	(22.3)			—			(11.3)			—			Change in Value of Alternative Energy Partnership Investments		(8.4)			(7.3)
Other Income	Other Income	3.1			1.4			1.2			0.4			Other Income		1.7			0.9
Total Revenues	Total Revenues	3,011.7			2,530.5			1,055.2			902.3			Total Revenues		1,049.8			906.2
Incurred Losses and LAE related to:	Incurred Losses and LAE related to:													Incurred Losses and LAE related to:
Current Year:	Current Year:													Current Year:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	2,451.8			1,724.6			924.4			589.0			Non-catastrophe Losses and LAE		911.7			650.0
Catastrophe Losses and LAE	Catastrophe Losses and LAE	13.2			6.8			3.4			2.1			Catastrophe Losses and LAE		2.1			1.7
Prior Years:	Prior Years:													Prior Years:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	105.0			16.8			25.1			1.9			Non-catastrophe Losses and LAE		(3.8)			(1.4)
Catastrophe Losses and LAE	Catastrophe Losses and LAE	0.3			0.1			(0.1)			(0.1)			Catastrophe Losses and LAE		0.7			0.4
Total Incurred Losses and LAE	Total Incurred Losses and LAE	2,570.3			1,748.3			952.8			592.9			Total Incurred Losses and LAE		910.7			650.7
Insurance Expenses	Insurance Expenses	570.1			472.8			194.2			159.5			Insurance Expenses		199.3			170.3
Other Expenses		—			—			—			—

Operating Income (Loss)	Operating Income (Loss)	(128.7)			309.4			(91.8)			149.9			Operating Income (Loss)		(60.2)			85.2
Income Tax Benefit (Expense)	Income Tax Benefit (Expense)	57.8			(62.6)			32.5			(30.7)			Income Tax Benefit (Expense)		15.5			(5.1)
Segment Net Operating Income (Loss)	Segment Net Operating Income (Loss)	$	(70.9)		$	246.8		$	(59.3)		$	119.2		Segment Net Operating Income (Loss)		$	(44.7)		$	80.1

Ratios Based On Earned Premiums	Ratios Based On Earned Premiums													Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	84.0		%	70.3		%	90.0		%	67.6		%	Current Year Non-catastrophe Losses and LAE Ratio		89.2		%	74.1		%
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	0.5			0.3			0.3			0.2			Current Year Catastrophe Losses and LAE Ratio		0.2			0.2
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	3.6			0.7			2.4			0.2			Prior Years Non-catastrophe Losses and LAE Ratio		(0.4)			(0.2)
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	—			—			—			—			Prior Years Catastrophe Losses and LAE Ratio		0.1			—
Total Incurred Loss and LAE Ratio	Total Incurred Loss and LAE Ratio	88.1			71.3			92.7			68.0			Total Incurred Loss and LAE Ratio		89.1			74.1
Insurance Expense Ratio	Insurance Expense Ratio	19.5			19.3			18.9			18.3			Insurance Expense Ratio		19.5			19.4

Combined Ratio	Combined Ratio	107.6		%	90.6		%	111.6		%	86.3		%	Combined Ratio		108.6		%	93.5		%
Underlying Combined Ratio	Underlying Combined Ratio													Underlying Combined Ratio
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	84.0		%	70.3		%	90.0		%	67.6		%	Current Year Non-catastrophe Losses and LAE Ratio		89.2		%	74.1		%
Insurance Expense Ratio	Insurance Expense Ratio	19.5			19.3			18.9			18.3			Insurance Expense Ratio		19.5			19.4

Underlying Combined Ratio	Underlying Combined Ratio	103.5		%	89.6		%	108.9		%	85.9		%	Underlying Combined Ratio		108.7		%	93.5		%
Non-GAAP Measure Reconciliation	Non-GAAP Measure Reconciliation													Non-GAAP Measure Reconciliation
Combined Ratio	Combined Ratio	107.6		%	90.6		%	111.6		%	86.3		%	Combined Ratio		108.6		%	93.5		%
Less:	Less:													Less:
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	0.5			0.3			0.3			0.2			Current Year Catastrophe Losses and LAE Ratio		0.2			0.2
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	3.6			0.7			2.4			0.2			Prior Years Non-catastrophe Losses and LAE Ratio		(0.4)			(0.2)
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	—			—			—			—			Prior Years Catastrophe Losses and LAE Ratio		0.1			—
Underlying Combined Ratio	Underlying Combined Ratio	103.5		%	89.6		%	108.9		%	85.9		%	Underlying Combined Ratio		108.7		%	93.5		%

4338

Specialty Property & Casualty Insurance ~~(continued)~~(Continued)

Insurance Reserves


(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Dec 31, 2020		(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021
Insurance Reserves:	Insurance Reserves:					Insurance Reserves:
Non-Standard Automobile		$	1,841.1	$	1,308.3
Personal Automobile						Personal Automobile	$	1,952.3	$	1,985.8
Commercial Automobile	Commercial Automobile	302.4		236.5		Commercial Automobile	356.5		333.9
Insurance Reserves	Insurance Reserves	$	2,143.5	$	1,544.8	Insurance Reserves	$	2,308.8	$	2,319.7
Insurance Reserves:	Insurance Reserves:					Insurance Reserves:
Loss and Allocated LAE Reserves:	Loss and Allocated LAE Reserves:					Loss and Allocated LAE Reserves:
Case and Allocated LAE	Case and Allocated LAE	$	1,071.1	$	744.6	Case and Allocated LAE	$	1,166.0	$	1,157.9
Incurred But Not Reported	Incurred But Not Reported	881.6		653.6		Incurred But Not Reported	934.0		953.0
Total Loss and LAE Reserves	Total Loss and LAE Reserves	1,952.7		1,398.2		Total Loss and LAE Reserves	2,100.0		2,110.9
Unallocated LAE Reserves	Unallocated LAE Reserves	190.8		146.6		Unallocated LAE Reserves	208.8		208.8
Insurance Reserves	Insurance Reserves	$	2,143.5	$	1,544.8	Insurance Reserves	$	2,308.8	$	2,319.7

See MD&A, “Critical Accounting Estimates,” of the ~~2020~~2021 Annual Report for additional information pertaining to the Company’s process of estimating property and casualty insurance reserves for losses and LAE, development of property and casualty insurance losses and LAE from prior accident years, also referred to as “reserve development” in the discussion of segment results, estimated variability of property and casualty insurance reserves for losses and LAE, and a discussion of some of the variables that may impact development of property and casualty insurance losses and LAE and the estimated variability of property and casualty insurance reserves for losses and LAE.

Overall

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

The Specialty Property & Casualty Insurance segment reported a Segment Net Operating Loss of ~~$70.9~~$44.7 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to Segment Net Operating Income of ~~$246.8~~$80.1 million for the same period in ~~2020.~~2021. Segment Net Operating Income decreased by ~~$317.7~~$124.8 million due primarily to an increase in underlying losses and LAE as a percentage of earned premiums related to higher claim frequency and severity ~~trends and adverse loss reserve development, partially offset by higher net investment income.~~trends. Underlying losses and LAE exclude the impact of catastrophes and loss and LAE reserve development.

Earned Premiums in the Specialty Property & Casualty Insurance segment increased by ~~$463.3~~$144.0 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, driven by the acquisition of AAC ~~premium credits in the prior period,~~ and higher ~~volume. Volumes~~average earned premium per exposure resulting from rate increases associated with higher loss trends. Policies-in-force were ~~higher~~lower in ~~both the~~ Private Passenger Auto, ~~and Commercial Automobile product lines.~~excluding AAC, as a result of ongoing profit improvement actions.

Net Investment Income in the Specialty Property & Casualty Insurance segment ~~increased~~decreased by ~~$38.5~~$0.1 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to ~~an increase in~~lower return from Alternative Investments, ~~higher levels of investments in fixed income securities, and~~partially offset by higher levels of investments and rate on Company-Owned Life Insurance, ~~partially offset by lower yields on~~and higher levels of investments in fixed income securities.

Loss related to ~~Changes~~Change in Value of Alternative Energy Partnership Investments was ~~$22.3~~$8.4 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, compared to $7.3 million for the same period in 2021. Tax benefits related to the Alternative Energy Partnership Investments were ~~$32.2~~$3.6 million ~~resulting~~and $13.6 million for the three months ended March 31, 2022 and 2021, respectively. This resulted in a net loss of $4.8 million and net income of $6.3 million attributable to Alternative Energy Partnership Investments ~~of $9.9 million~~ for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022 and 2021, respectively.

Underlying losses and LAE as a percentage of earned premiums were ~~84.0% in 2021,~~89.2% for the three months ended March 31, 2022, a deterioration of ~~13.7~~15.1 percentage points, compared to ~~2020,~~the same period in 2021, due primarily to higher claim frequency and severity trends. Frequency trends increased as a result of driving activity returning to near pre-pandemic levels. Severity trends increased due to rising inflation and supply chain constraints. Underlying losses and LAE exclude the impact of catastrophes and loss and LAE reserve development. ~~Adverse~~Favorable loss and LAE reserve development (including catastrophe reserve development) was ~~$105.3~~$3.1 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~adverse development of $16.9~~$1.0 million for the same period in 2020. Adverse loss and LAE reserve development in 2021 was largely driven by legal developments and increased severity in personal injury protection coverage in Florida and other liability coverages. Catastrophe losses and LAE (excluding reserve development) were $13.2 million in 2021, compared to $6.8 million in 2020, a deterioration of $6.4 million.

4439

Specialty Property & Casualty Insurance ~~(continued)~~(Continued)

2021. Catastrophe losses and LAE (excluding reserve development) were $2.1 million for the three months ended March 31, 2022, compared to $1.7 million for the same period in 2021, a deterioration of $0.4 million. Insurance Expenses were ~~$570.1~~$199.3 million, or 19.5% of earned premiums, ~~in 2021,~~for the three months ended March 31, 2022, a deterioration of ~~0.2~~0.1 percentage ~~point~~points compared to ~~2020, driven primarily by~~ the ~~amortization of intangible assets arising from the acquisition of AAC~~same period in ~~2021 partially offset by lower earned premium in 2020 due primarily to premium credits.~~2021.

The Specialty Property & Casualty Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investment tax credits, tax-exempt investment income and dividends received deductions.

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

The Specialty Property & Casualty Insurance segment reported a Segment Net Operating Loss of $59.3 million for the three months ended September 30, 2021, compared to Segment Net Operating Income of $119.2 million for the same period in 2020. Segment Net Operating Income decreased by $178.5 million due primarily to an increase in underlying losses and LAE as a percentage of earned premiums and adverse loss reserve development, partially offset by higher net investment income. Underlying losses and LAE exclude the impact of catastrophes and loss and LAE reserve development.

Earned Premiums in the Specialty Property & Casualty Insurance segment increased by $156.9 million for the three months ended September 30, 2021, compared to the same period in 2020, driven by the acquisition of AAC and higher volume. Volumes were higher in both the Private Passenger Auto and Commercial Automobile product lines.

Net Investment Income in the Specialty Property & Casualty Insurance segment increased by $6.5 million for the three months ended September 30, 2021, compared to the same period in 2020, due primarily to an increase in return from Alternative Investments, higher levels of investments in fixed income securities, and higher levels of investments and rate on Company-Owned Life Insurance, partially offset by lower yields on fixed income securities.

Loss related to Change in Value of Alternative Energy Partnership Investments was $11.3 million for the three months ended September 30, 2021. Tax benefits related to the Alternative Energy Partnership Investments were $14.4 million, resulting in net income attributable to Alternative Energy Partnership Investments of $3.1 million for the three months ended September 30, 2021.

Underlying losses and LAE as a percentage of earned premiums were 90.0% in 2021, a deterioration of 22.4 percentage points, compared to 2020, due primarily to higher claim frequency and severity trends. Underlying losses and LAE exclude the impact of catastrophes and loss and LAE reserve development. Adverse loss and LAE reserve development (including catastrophe reserve development) was $25.0 million in 2021, compared to adverse development of $1.8 million in 2020. Adverse loss and LAE reserve development in 2021 was largely driven by legal developments and increased severity in personal injury protection coverage in Florida and other liability coverages. Catastrophe losses and LAE (excluding reserve development) were $3.4 million in 2021, compared to $2.1 million in 2020, a deterioration of $1.3 million.

Insurance Expenses were $194.2 million, or 18.9% of earned premiums, in 2021, a deterioration of 0.6 percentage points compared to 2020, driven primarily by amortization of intangible assets arising from the AAC acquisition.

~~Specialty Property & Casualty Insurance (continued)~~

~~Specialty~~ Personal Automobile Insurance

Selected financial information for the ~~specialty~~ personal automobile insurance product line follows.


		Nine Months Ended						Three Months Ended							Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			(Dollars in Millions)		Mar 31, 2022			Mar 31, 2021
Net Premiums Written	Net Premiums Written	$	2,728.5		$	2,350.2		$	902.7		$	819.4		Net Premiums Written		$	884.8		$	861.5
Earned Premiums	Earned Premiums	$	2,615.6		$	2,235.2		$	920.6		$	792.2		Earned Premiums		$	901.7		$	785.4

Incurred Losses and LAE related to:	Incurred Losses and LAE related to:													Incurred Losses and LAE related to:
Current Year:	Current Year:													Current Year:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	$	2,235.4		$	1,591.8		$	843.9		$	543.4		Non-catastrophe Losses and LAE		$	827.7		$	586.4
Catastrophe Losses and LAE	Catastrophe Losses and LAE	12.1			6.4			3.1			2.0			Catastrophe Losses and LAE		2.0			1.6
Prior Years:	Prior Years:													Prior Years:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	96.7			31.1			25.1			2.1			Non-catastrophe Losses and LAE		(9.0)			(4.4)
Catastrophe Losses and LAE	Catastrophe Losses and LAE	0.3			0.2			(0.1)			(0.1)			Catastrophe Losses and LAE		0.7			0.4
Total Incurred Losses and LAE	Total Incurred Losses and LAE	$	2,344.5		$	1,629.5		$	872.0		$	547.4		Total Incurred Losses and LAE		$	821.4		$	584.0

Ratios Based On Earned Premiums	Ratios Based On Earned Premiums													Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	85.4		%	71.2		%	91.7		%	68.5		%	Current Year Non-catastrophe Losses and LAE Ratio		91.8		%	74.7		%
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	0.5			0.3			0.3			0.3			Current Year Catastrophe Losses and LAE Ratio		0.2			0.2
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	3.7			1.4			2.7			0.3			Prior Years Non-catastrophe Losses and LAE Ratio		(1.0)			(0.6)
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	—			—			—			—			Prior Years Catastrophe Losses and LAE Ratio		0.1			0.1
Total Incurred Loss and LAE Ratio	Total Incurred Loss and LAE Ratio	89.6		%	72.9		%	94.7		%	69.1		%	Total Incurred Loss and LAE Ratio		91.1		%	74.4		%

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums from ~~specialty~~ personal automobile insurance increased by ~~$380.4~~$116.3 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to the acquisition of AAC ~~premium credits in the prior period,~~ and higher ~~volume.~~average earned premium per exposure resulting from rate increases associated with higher loss costs, partially offset by a decrease in new business driven by targeted underwriting actions focused on improving profitability. Incurred losses and LAE were ~~$2,344.5~~$821.4 million, or ~~89.6%~~91.1% of earned premiums ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$1,629.5~~$584.0 million, or ~~72.9%~~74.4% of earned premiums, for the same period in ~~2020.~~2021. Incurred losses and LAE as a percentage of earned premiums increased due primarily to a deterioration in underlying losses and LAE as a percentage of earned premium as well as higher adverse loss and LAE reserve development. Underlying losses and LAE as a percentage of earned premiums were 85.4% in 2021, compared to 71.2% in 2020, a deterioration of 14.2 points due to higher claim frequency and severity trends. Adverse loss and LAE reserve development was $97.0 million in 2021, compared to adverse development of $31.3 million in 2020, primarily driven by legal developments and increased severity in personal injury protection coverage in Florida and other liability coverages. Catastrophe losses and LAE (excluding reserve development) were $12.1 million in 2021, compared to $6.4 million in 2020.

~~Three Months EndedSeptember 30, 2021 Compared to the Same Period in 2020~~

Earned Premiums from specialty personal automobile insurance increased by $128.4 million for the three months ended September 30, 2021, compared to the same period in 2020, due primarily to the acquisition of AAC and higher volume. Incurred losses and LAE were $872.0 million, or 94.7% of earned premiums in 2021, compared to $547.4 million, or 69.1% of earned premiums, in 2020. Incurred losses and LAE as a percentage of earned premiums increased due primarily to a deterioration in underlying losses and LAE as a percentage of earned premium as well as higher adverse loss and LAE reserve development.premium. Underlying losses and LAE as a percentage of related earned premiums were ~~91.7%~~91.8% for the three months ended March 31, 2022, compared to 74.7% for the same period in 2021, ~~compared to 68.5% in 2020,~~ a deterioration of ~~23.2~~17.1 points due to higher claim frequency and severity trends. ~~Adverse~~Frequency trends increased as a result of driving activity returning to near pre-pandemic levels. Severity trends increased due to rising inflation and supply chain constraints. Favorable loss and LAE reserve development was ~~$25.0~~$8.3 million ~~in 2021, primarily driven by legal developments and increased severity in personal injury protection coverage in Florida and other liability coverages,~~for the three months ended March 31, 2022, compared to ~~adverse development of $2.0~~$4.0 million for the same period in ~~2020.~~2021. Catastrophe losses and LAE (excluding reserve development) were ~~$3.1~~$2.0 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$2.0~~$1.6 million for the same period in ~~2020.~~

2021.

4640

Specialty Property & Casualty Insurance ~~(continued)~~(Continued)

Commercial Automobile Insurance

Selected financial information for the commercial automobile insurance product line follows.


		Nine Months Ended						Three Months Ended							Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			(Dollars in Millions)		Mar 31, 2022			Mar 31, 2021
Net Premiums Written	Net Premiums Written	$	349.8		$	256.1		$	121.6		$	94.8		Net Premiums Written		$	138.9		$	110.5
Earned Premiums	Earned Premiums	$	300.6		$	217.7		$	107.7		$	79.2		Earned Premiums		$	119.9		$	92.2

Incurred Losses and LAE related to:	Incurred Losses and LAE related to:													Incurred Losses and LAE related to:
Current Year:	Current Year:													Current Year:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	$	216.4		$	132.8		$	80.5		$	45.6		Non-catastrophe Losses and LAE		$	84.0		$	63.6
Catastrophe Losses and LAE	Catastrophe Losses and LAE	1.1			0.4			0.3			0.1			Catastrophe Losses and LAE		0.1			0.1
Prior Years:	Prior Years:													Prior Years:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	8.3			(14.3)			—			(0.2)			Non-catastrophe Losses and LAE		5.2			3.0
Catastrophe Losses and LAE	Catastrophe Losses and LAE	—			(0.1)			—			—			Catastrophe Losses and LAE		—			—
Total Incurred Losses and LAE	Total Incurred Losses and LAE	$	225.8		$	118.8		$	80.8		$	45.5		Total Incurred Losses and LAE		$	89.3		$	66.7

Ratios Based On Earned Premiums	Ratios Based On Earned Premiums													Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	71.9		%	61.0		%	74.7		%	57.6		%	Current Year Non-catastrophe Losses and LAE Ratio		70.1		%	68.9		%
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	0.4			0.2			0.3			0.1			Current Year Catastrophe Losses and LAE Ratio		0.1			0.1
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	2.8			(6.6)			—			(0.3)			Prior Years Non-catastrophe Losses and LAE Ratio		4.3			3.3
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	—			—			—			—			Prior Years Catastrophe Losses and LAE Ratio		—			—
Total Incurred Loss and LAE Ratio	Total Incurred Loss and LAE Ratio	75.1		%	54.6		%	75.0		%	57.4		%	Total Incurred Loss and LAE Ratio		74.5		%	72.3		%

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums from commercial automobile insurance increased by ~~$82.9~~$27.7 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to higher ~~volume.~~volume and higher average earned premium per exposure. Incurred losses and LAE were ~~$225.8~~$89.3 million, or ~~75.1%~~74.5% of earned premiums in ~~2021,~~2022, compared to ~~$118.8~~$66.7 million, or ~~54.6%~~72.3% of earned premiums in ~~2020.~~2021. Incurred losses and LAE as a percentage of earned premiums increased due primarily to a deterioration in underlying losses and LAE as a percentage of earned premiums as well as adverse loss and LAE reserve development. Underlying losses and LAE as a percentage of earned premiums were ~~71.9%~~70.1% in ~~2021,~~2022, compared to ~~61.0%~~68.9% in ~~2020,~~2021, a deterioration of ~~10.9~~1.2 percentage points due primarily to higher claim severity trends. Severity trends increased due to rising inflation and supply chain constraints. Adverse loss and LAE reserve development was ~~$8.3 million in 2021, compared to favorable reserve development of $14.4 million in 2020.~~

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

~~Earned Premiums from commercial automobile insurance increased by $28.5~~$5.2 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to $3.0 million for the same period in 2020, due primarily to higher volume. Incurred losses and LAE were $80.8 million, or 75.0% of earned premiums in 2021, compared to $42.0 million, or 57.4% of earned premiums in 2020. Incurred losses and LAE as a percentage of earned premiums increased due primarily to a deterioration in underlying losses and LAE as a percentage of earned premiums as well as adverse loss and LAE reserve development. Underlying losses and LAE as a percentage of earned premiums were 74.7% in 2021, compared to 57.6% in 2020, a deterioration of 17.1 percentage points due primarily to higher claim severity trends. There was no loss and LAE reserve development in 2021, compared to favorable reserve development of $0.2 million in 2020.2021.

4741

Preferred Property & Casualty Insurance

Selected financial information for the Preferred Property & Casualty Insurance segment follows.


		Nine Months Ended						Three Months Ended							Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			(Dollars in Millions)	Mar 31, 2022			Mar 31, 2021
Net Premiums Written	Net Premiums Written	$	488.8		$	497.8		$	164.8		$	172.2		Net Premiums Written	$	137.4		$	154.4

Earned Premiums	Earned Premiums	$	489.1		$	519.0		$	163.7		$	174.5		Earned Premiums	$	155.6		$	162.2
Net Investment Income	Net Investment Income	51.5			24.3			16.1			10.3			Net Investment Income	12.5			15.9
Changes in Value of Alternative Energy Partnership Investments	Changes in Value of Alternative Energy Partnership Investments	(12.5)			—			(6.4)			—			Changes in Value of Alternative Energy Partnership Investments	(3.9)			(4.1)
Other Income	Other Income	—			0.1			—			—			Other Income	—			—
Total Revenues	Total Revenues	528.1			543.4			173.4			184.8			Total Revenues	164.2			174.0
Incurred Losses and LAE related to:	Incurred Losses and LAE related to:													Incurred Losses and LAE related to:
Current Year:	Current Year:													Current Year:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	328.0			293.8			115.6			102.8			Non-catastrophe Losses and LAE	112.2			96.2
Catastrophe Losses and LAE	Catastrophe Losses and LAE	71.6			87.3			23.4			61.9			Catastrophe Losses and LAE	11.4			24.0
Prior Years:	Prior Years:													Prior Years:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	5.1			11.2			—			6.3			Non-catastrophe Losses and LAE	2.1			0.1
Catastrophe Losses and LAE	Catastrophe Losses and LAE	(3.6)			(0.6)			0.1			0.1			Catastrophe Losses and LAE	(3.2)			(0.3)
Total Incurred Losses and LAE	Total Incurred Losses and LAE	401.1			391.7			139.1			171.1			Total Incurred Losses and LAE	122.5			120.0
Insurance Expenses	Insurance Expenses	154.8			169.7			51.7			55.5			Insurance Expenses	51.2			51.0

Operating Income (Loss)	Operating Income (Loss)	(27.8)			(18.0)			(17.4)			(41.8)			Operating Income (Loss)	(9.5)			3.0
Income Tax Benefit (Expense)	Income Tax Benefit (Expense)	22.7			4.6			11.0			9.1			Income Tax Benefit (Expense)	3.4			6.6
Segment Net Operating Income (Loss)	Segment Net Operating Income (Loss)	$	(5.1)		$	(13.4)		$	(6.4)		$	(32.7)		Segment Net Operating Income (Loss)	$	(6.1)		$	9.6

Ratios Based On Earned Premiums	Ratios Based On Earned Premiums													Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	67.1		%	56.6		%	70.6		%	58.9		%	Current Year Non-catastrophe Losses and LAE Ratio	72.2		%	59.3		%
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	14.6			16.8			14.3			35.5			Current Year Catastrophe Losses and LAE Ratio	7.3			14.8
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	1.0			2.2			—			3.6			Prior Years Non-catastrophe Losses and LAE Ratio	1.3			0.1
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	(0.7)			(0.1)			0.1			0.1			Prior Years Catastrophe Losses and LAE Ratio	(2.1)			(0.2)
Total Incurred Loss and LAE Ratio	Total Incurred Loss and LAE Ratio	82.0			75.5			85.0			98.1			Total Incurred Loss and LAE Ratio	78.7			74.0
Insurance Expense Ratio	Insurance Expense Ratio	31.6			32.7			31.6			31.8			Insurance Expense Ratio	32.9			31.4

Combined Ratio	Combined Ratio	113.6		%	108.2		%	116.6		%	129.9		%	Combined Ratio	111.6		%	105.4		%
Underlying Combined Ratio	Underlying Combined Ratio													Underlying Combined Ratio
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	67.1		%	56.6		%	70.6		%	58.9		%	Current Year Non-catastrophe Losses and LAE Ratio	72.2		%	59.3		%
Insurance Expense Ratio	Insurance Expense Ratio	31.6			32.7			31.6			31.8			Insurance Expense Ratio	32.9			31.4

Underlying Combined Ratio	Underlying Combined Ratio	98.7		%	89.3		%	102.2		%	90.7		%	Underlying Combined Ratio	105.1		%	90.7		%
Non-GAAP Measure Reconciliation	Non-GAAP Measure Reconciliation													Non-GAAP Measure Reconciliation
Combined Ratio	Combined Ratio	113.6		%	108.2		%	116.6		%	129.9		%	Combined Ratio	111.6		%	105.4		%
Less:	Less:													Less:
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	14.6			16.8			14.3			35.5			Current Year Catastrophe Losses and LAE Ratio	7.3			14.8
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	1.0			2.2			—			3.6			Prior Years Non-catastrophe Losses and LAE Ratio	1.3			0.1
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	(0.7)			(0.1)			0.1			0.1			Prior Years Catastrophe Losses and LAE Ratio	(2.1)			(0.2)
Underlying Combined Ratio	Underlying Combined Ratio	98.7		%	89.3		%	102.2		%	90.7		%	Underlying Combined Ratio	105.1		%	90.7		%

4842

Preferred Property & Casualty Insurance ~~(continued)~~(Continued)

~~Catastrophe Frequency and Severity~~CATASTROPHE FREQUENCY AND SEVERITY


		Nine Months Ended							Three Months Ended
		Sep 30, 2021			Sep 30, 2020				Mar 31, 2022			Mar 31, 2021
(Dollars in Millions)	(Dollars in Millions)	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
Range of Losses and LAE Per Event:	Range of Losses and LAE Per Event:							Range of Losses and LAE Per Event:
Below $5	Below $5	45	$	36.5	48	$	38.4	Below $5	11	$	11.4	11	$	8.9
$5 - $10	$5 - $10	3	20.4		3	21.4		$5 - $10	—	—		—	—
$10 - $15	$10 - $15	1	14.7		1	10.6		$10 - $15	—	—		—	—
$15 - $20	$15 - $20	—	—		1	16.9		$15 - $20	—	—		1	15.1
$20 - $25	$20 - $25	—	—		—	—		$20 - $25	—	—		—	—
Greater Than $25	Greater Than $25	—	—		—	—		Greater Than $25	—	—		—	—
Total	Total	49	$	71.6	53	$	87.3	Total	11	$	11.4	12	$	24.0

~~Insurance Reserves~~INSURANCE RESERVES


(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Dec 31, 2020		(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021
Insurance Reserves:	Insurance Reserves:					Insurance Reserves:
Preferred Automobile		$	290.0	$	281.3
Personal Automobile						Personal Automobile	$	307.9	$	308.6
Homeowners	Homeowners	108.5		104.0		Homeowners	93.1		95.4
Other	Other	30.1		26.3		Other	30.6		29.2
Insurance Reserves	Insurance Reserves	$	428.6	$	411.6	Insurance Reserves	$	431.6	$	433.2
Insurance Reserves:	Insurance Reserves:					Insurance Reserves:
Loss and Allocated LAE Reserves:	Loss and Allocated LAE Reserves:					Loss and Allocated LAE Reserves:
Case and Allocated LAE	Case and Allocated LAE	$	280.8	$	262.2	Case and Allocated LAE	$	271.1	$	272.5
Incurred But Not Reported	Incurred But Not Reported	120.4		122.0		Incurred But Not Reported	131.8		131.9
Total Loss and LAE Reserves	Total Loss and LAE Reserves	401.2		384.2		Total Loss and LAE Reserves	402.9		404.4
Unallocated LAE Reserves	Unallocated LAE Reserves	27.4		27.4		Unallocated LAE Reserves	28.7		28.8
Insurance Reserves	Insurance Reserves	$	428.6	$	411.6	Insurance Reserves	$	431.6	$	433.2

Overall

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

The Preferred Property & Casualty Insurance segment reported a Segment Net Operating Loss of ~~$5.1~~$6.1 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to Segment Net Operating ~~Loss~~Income of ~~$13.4~~$9.6 million for the same period in ~~2020.~~2021. Segment Net Operating Loss decreased by ~~$8.3~~$15.7 million due primarily to ~~lower catastrophe losses and LAE, lower levels of adverse loss and LAE reserve development and higher net investment income, partially offset by~~ higher underlying losses and LAE as a percentage of earned ~~premiums.~~premiums, partially offset by lower catastrophe losses and LAE.

Earned Premiums in the Preferred Property & Casualty Insurance segment decreased by ~~$29.9~~$6.6 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to lower personal automobile ~~and homeowners~~ insurance volumes ~~and~~as a result of ongoing profit improvement actions.

Preferred Property & Casualty Insurance ~~(continued)~~(Continued)

Net Investment Income in the Preferred Property & Casualty Insurance segment ~~increased~~decreased by ~~$27.2~~$3.4 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to ~~an increase in~~lower return from Alternative Investments, ~~higher levels of investments in fixed income securities, and~~partially offset by higher levels of investments and rate on Company-Owned Life Insurance, ~~partially offset by lower yields on~~and higher levels of investments in fixed income securities.

Loss related to Changes in Value of Alternative Energy Partnership Investments was ~~$12.5~~$3.9 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, compared to $4.1 million for the same period in 2021. Tax benefits related to the Alternative Energy Partnership Investments were ~~$18.1~~$1.6 million ~~resulting~~and $7.6 million for the three months ended March 31, 2022 and 2021, respectively. This resulted in a net loss of $2.3 million and net income of $3.5 million attributable to Alternative Energy Partnership Investments ~~of $5.6 million~~ for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022 and 2021, respectively.

Underlying losses and LAE as a percentage of earned premiums were ~~67.1% in~~72.2% and 59.3% for the three months ended March 31, 2022 and 2021, respectively. Underlying losses and LAE as a ~~deterioration~~percentage of ~~10.5 percentage points, compared~~earned premiums increased primarily due to ~~2020.~~severity trends caused by ongoing supply chain issues and rising inflation. Catastrophe losses and LAE (excluding reserve development) were ~~$71.6~~$11.4 million in 2022, compared to $24.0 million in 2021, ~~compared to $87.3 million in 2020,~~ a ~~decrease~~decreased of ~~$15.7~~$12.6 million. Catastrophe losses and LAE (excluding reserve development) decreased due primarily to a decrease in severity of catastrophic events in ~~2021~~2022, compared to ~~2020.~~2021. There ~~were four~~was zero catastrophic event above $5 million in 2022, compared to one catastrophic events above $5 million in ~~2021, compared to five catastrophic events above $5 million in 2020. Adverse~~2021. Favorable loss and LAE reserve development (including catastrophe reserve development) was ~~$1.5~~$1.1 million in ~~2021,~~2022, compared to ~~$10.6~~$0.2 million in ~~2020.~~2021.

Insurance expenses were ~~$154.8~~$51.2 million, or ~~31.6%~~32.9% of earned premiums in ~~2021, an improvement~~2022, a deterioration of ~~1.1%~~1.5% percentage points compared to ~~2020.~~2021.

The Preferred Property & Casualty Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investment tax credits, tax-exempt investment income and dividends received deductions.

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

The Preferred Property & Casualty Insurance segment reported a Segment Net Operating Loss of $6.4 million for the three months ended September 30, 2021, compared to Segment Net Operating Loss of $32.7 million for the same period in 2020. Segment Net Operating Loss decreased by $26.3 million due primarily to lower catastrophe losses and LAE (excluding loss reserve development) and higher net investment income, partially offset by higher underlying losses and LAE as a percentage of earned premiums.

Earned Premiums in the Preferred Property & Casualty Insurance segment decreased by $10.8 million for the three months ended September 30, 2021, compared to the same period in 2020, due primarily to lower automobile and homeowners insurance volumes and ongoing profit improvement actions.

Net Investment Income in the Preferred Property & Casualty Insurance segment increased by $5.8 million for the three months ended September 30, 2021, compared to the same period in 2020, due primarily to an increase in return from Alternative Investments, higher levels of investments in fixed income securities, and higher levels of investments and rate on Company-Owned Life Insurance, partially offset by lower yields on fixed income securities.

Loss related to Changes in Value of Alternative Energy Partnership Investments was $6.4 million for the three months ended September 30, 2021. Tax benefits related to the Alternative Energy Partnership Investments were $8.2 million, resulting in net income attributable to Alternative Energy Partnership Investments of $1.8 million for the three months ended September 30, 2021.

~~Underlying losses and LAE as a percentage of earned premiums were 70.6% in 2021, a deterioration of 11.7 percentage points, compared to 2020, primarily from~~ Preferred Personal Automobile Insurance and Other Personal Insurance. Catastrophe losses and LAE (excluding reserve development) were $23.4 million in 2021, compared to $61.9 million in 2020, an increase of $38.5 million. Catastrophe losses and LAE (excluding reserve development) decreased due primarily to a decrease in severity of catastrophic events in 2021, compared to 2020. There was one catastrophic event above $5 million in 2021, compared to five catastrophic events above $5 million in 2020. Adverse loss and LAE reserve development (including catastrophe reserve development) was $0.1 million in 2021, compared to $6.4 million in 2020.

~~Insurance expenses were $51.7 million, or 31.6% of earned premiums in 2021, an improvement of 0.2% percentage points compared to 2020.~~Selected financial information for the personal automobile insurance product line follows.


	Three Months Ended
(Dollars in Millions)	Mar 31, 2022			Mar 31, 2021
Net Premiums Written	$	84.2		$	100.4
Earned Premiums	$	96.0		$	103.0

Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	$	80.5		$	67.8
Catastrophe Losses and LAE	0.5			0.6
Prior Years:
Non-catastrophe Losses and LAE	1.5			1.2
Catastrophe Losses and LAE	0.1			0.1
Total Incurred Losses and LAE	$	82.6		$	69.7

Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	83.8		%	65.8		%
Current Year Catastrophe Losses and LAE Ratio	0.5			0.6
Prior Years Non-catastrophe Losses and LAE Ratio	1.6			1.2
Prior Years Catastrophe Losses and LAE Ratio	0.1			0.1
Total Incurred Loss and LAE Ratio	86.0		%	67.7		%

5044

Preferred Property & Casualty Insurance ~~(continued)~~(Continued)

~~Preferred Personal Automobile Insurance~~

~~Selected financial information for the preferred personal automobile insurance product line follows.~~

Nine Months Ended Three Months Ended
(Dollars in Millions) Sep 30,
2021 Sep 30,
2020 Sep 30,
2021 Sep 30,
2020
Net Premiums Written $ 304.7 $ 308.7 $ 99.9 $ 107.2
Earned Premiums $ 309.1 $ 324.6 $ 102.6 $ 110.6
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE $ 234.2 $ 201.9 $ 84.8 $ 72.2
Catastrophe Losses and LAE 6.1 4.0 2.7 1.8
Prior Years:
Non-catastrophe Losses and LAE 4.9 17.8 0.1 5.9
Catastrophe Losses and LAE — (0.6) 0.1 (0.2)
Total Incurred Losses and LAE $ 245.2 $ 223.1 $ 87.7 $ 79.7
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio 75.7 % 62.2 % 82.7 % 65.4 %
Current Year Catastrophe Losses and LAE Ratio 2.0 1.2 2.6 1.6
Prior Years Non-catastrophe Losses and LAE Ratio 1.6 5.5 0.1 5.3
Prior Years Catastrophe Losses and LAE Ratio — (0.2) 0.1 (0.2)
Total Incurred Loss and LAE Ratio 79.3 % 68.7 % 85.5 % 72.1 %

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums onin preferred personal automobile insurance decreased by ~~$15.5~~$7.0 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to lower volume ~~and~~as a result of ongoing profit improvement actions. Incurred losses and LAE were ~~$245.2~~$82.6 million, or ~~79.3%~~86.0% of earned premiums, ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$223.1~~$69.7 million, or ~~68.7%~~67.7% of earned premiums, for the same period in ~~2020.~~2021. Incurred losses and LAE as a percentage of earned premiums increased due primarily to a deterioration in the underlying loss and LAE ~~ratio, partially offset by lower levels of adverse loss and LAE reserve development.~~ratio. Underlying losses and LAE as a percentage of earned premiums were ~~75.7%~~83.8% for the three months ended March 31, 2022, compared to 65.8% for the same period in 2021, ~~compared to 62.2% in 2020,~~ a deterioration of ~~13.5~~18.0 percentage points primarily due to higher claim frequency and severity trends. Frequency trends increased as a result of driving activity returning to pre-pandemic levels. Severity trends increased due to rising inflation and supply chain constraints. Adverse loss and LAE reserve development (including catastrophe loss reserve development) was ~~$4.9~~$1.6 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$17.2~~$1.3 million for the same period in ~~2020.~~2021. Catastrophe losses and LAE (excluding reserve development) were ~~$6.1 million in 2021, compared to $4.0 million in 2020.~~

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

~~Earned Premiums on preferred automobile insurance decreased by $8.0~~$0.5 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to $0.6 million for the same period in 2020, due primarily to lower volume and ongoing profit improvement actions. Incurred losses and LAE were $87.7 million, or 85.5% of earned premiums, in 2021, compared to $79.7 million, or 72.1% of earned premiums, in 2020. Incurred losses and LAE as a percentage of earned premiums increased due primarily to a deterioration in the underlying loss and LAE ratio, partially offset by lower levels of adverse loss and LAE reserve development. Underlying losses and LAE as a percentage of earned premiums were 82.7% in 2021, compared to 65.4% in 2020, a deterioration of 17.3 percentage points primarily due to higher claim frequency and severity trends. Adverse loss and LAE reserve development (including catastrophe loss reserve development) was $0.2 million in 2021, compared to $5.7 million in 2020. Catastrophe losses and LAE (excluding reserve development) were $2.7 million in 2021, compared to $1.8 million in 2020.

~~Preferred Property & Casualty Insurance (continued)~~2021.

Homeowners Insurance

Selected financial information for the homeowners insurance product line follows.


		Nine Months Ended						Three Months Ended							Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			(Dollars in Millions)	Mar 31, 2022			Mar 31, 2021
Net Premiums Written	Net Premiums Written	$	158.5		$	162.8		$	56.1		$	55.7		Net Premiums Written	$	45.5		$	46.1
Earned Premiums	Earned Premiums	$	154.6		$	167.4		$	52.5		$	55.0		Earned Premiums	$	51.3		$	50.8

Incurred Losses and LAE related to:	Incurred Losses and LAE related to:													Incurred Losses and LAE related to:
Current Year:	Current Year:													Current Year:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	$	81.3		$	82.2		$	26.6		$	28.1		Non-catastrophe Losses and LAE	$	27.5		$	24.2
Catastrophe Losses and LAE	Catastrophe Losses and LAE	64.2			81.3			20.4			58.6			Catastrophe Losses and LAE	10.8			22.0
Prior Years:	Prior Years:													Prior Years:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	(2.5)			(3.1)			(0.2)			2.0			Non-catastrophe Losses and LAE	(1.6)			(2.5)
Catastrophe Losses and LAE	Catastrophe Losses and LAE	(1.8)			0.1			0.1			0.2			Catastrophe Losses and LAE	(2.8)			(0.1)
Total Incurred Losses and LAE	Total Incurred Losses and LAE	$	141.2		$	160.5		$	46.9		$	88.9		Total Incurred Losses and LAE	$	33.9		$	43.6

Ratios Based On Earned Premiums	Ratios Based On Earned Premiums													Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	52.6		%	49.1		%	50.6		%	51.1		%	Current Year Non-catastrophe Losses and LAE Ratio	53.6		%	47.6		%
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	41.5			48.6			38.9			106.5			Current Year Catastrophe Losses and LAE Ratio	21.1			43.3
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	(1.6)			(1.9)			(0.4)			3.6			Prior Years Non-catastrophe Losses and LAE Ratio	(3.1)			(4.9)
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	(1.2)			0.1			0.2			0.4			Prior Years Catastrophe Losses and LAE Ratio	(5.5)			(0.2)
Total Incurred Loss and LAE Ratio	Total Incurred Loss and LAE Ratio	91.3		%	95.9		%	89.3		%	161.6		%	Total Incurred Loss and LAE Ratio	66.1		%	85.8		%

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums in homeowners insurance ~~decreased~~increased by ~~$12.8~~$0.5 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020, due primarily to lower volume and ongoing profit improvement actions.~~2021. Incurred losses and LAE were ~~$141.2~~$33.9 million, or ~~91.3%~~66.1% of earned premiums, in 2021, compared to $160.5 million, or 95.9% of earned premiums, in 2020. Incurred losses and LAE as a percentage of earned premiums decreased due primarily to lower incurred catastrophe losses (excluding loss reserve development), partially offset by higher underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 52.6% in 2021, compared to 49.1% in 2020, a deterioration of 3.5 percentage points. Catastrophe losses and LAE (excluding reserve development) were $64.2 million in 2021, compared to $81.3 million in 2020. There were four catastrophic events above $5 million in 2021, compared to five catastrophic events above $5 million in 2020. Favorable loss and LAE reserve development (including catastrophe loss reserve development) was $4.3 million in 2021, compared to $3.0 million in 2020.

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

~~Earned Premiums in homeowners insurance decreased by $2.5 million~~ for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to $43.6 million, or 85.8% of earned premiums, for the same period in 2020, due primarily to lower volume and ongoing profit improvement actions. Incurred losses and LAE were $46.9 million, or 89.3% of earned premiums, in 2021, compared to $88.9 million, or 161.6% of earned premiums, in 2020.2021. Incurred losses and LAE as a percentage of earned premiums decreased due primarily to lower incurred catastrophe losses (excluding loss reserve development) and ~~lower~~increased favorable prior year development, partially offset by higher underlying losses and LAE as a percentage of earned ~~premiums.~~premiums . Underlying losses and LAE as a percentage of earned premiums were ~~50.6%~~53.6% for the three months ended March 31, 2022, compared to 47.6% for the same period in 2021, ~~compared to 51.1% in 2020, a decrease~~an increase of ~~0.5~~6.0 percentage points. Catastrophe losses and LAE (excluding reserve development) were ~~$20.4~~$10.8 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$58.6~~$22.0 million for the same period in ~~2020.~~2021. There ~~was~~were zero catastrophic event above $5 million for the three months ended March 31, 2022, compared to one catastrophic event above $5 million for the same period in ~~2021, compared to five catastrophic events above $5 million in 2020.~~2021. Favorable

Preferred Property & Casualty Insurance (Continued)

loss and LAE reserve development (including catastrophe loss reserve development) was ~~$0.1~~$4.4 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~adverse loss and LAE development of $2.2~~$2.6 million for the same period in ~~2020.~~

~~Preferred Property & Casualty Insurance (continued)~~2021.

Other Personal Insurance

Other personal insurance products include umbrella, dwelling fire, inland marine, earthquake, boat owners and other liability coverages. Selected financial information for other personal insurance product lines follows.


		Nine Months Ended						Three Months Ended							Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			(Dollars in Millions)	Mar 31, 2022			Mar 31, 2021
Net Premiums Written	Net Premiums Written	$	25.6		$	26.3		$	8.8		$	9.3		Net Premiums Written	$	7.7		$	7.9
Earned Premiums	Earned Premiums	$	25.4		$	27.0		$	8.6		$	8.9		Earned Premiums	$	8.3		$	8.4

Incurred Losses and LAE related to:	Incurred Losses and LAE related to:													Incurred Losses and LAE related to:
Current Year:	Current Year:													Current Year:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	$	12.5		$	9.7		$	4.2		$	2.5		Non-catastrophe Losses and LAE	$	4.2		$	4.2
Catastrophe Losses and LAE	Catastrophe Losses and LAE	1.3			2.0			0.3			1.5			Catastrophe Losses and LAE	0.1			1.4
Prior Years:	Prior Years:													Prior Years:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	2.7			(3.5)			0.1			(1.6)			Non-catastrophe Losses and LAE	2.2			1.4
Catastrophe Losses and LAE	Catastrophe Losses and LAE	(1.8)			(0.1)			(0.1)			0.1			Catastrophe Losses and LAE	(0.5)			(0.3)
Total Incurred Losses and LAE	Total Incurred Losses and LAE	$	14.7		$	8.1		$	4.5		$	2.5		Total Incurred Losses and LAE	$	6.0		$	6.7

Ratios Based On Earned Premiums	Ratios Based On Earned Premiums													Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	49.3		%	36.0		%	48.8		%	28.1		%	Current Year Non-catastrophe Losses and LAE Ratio	50.6		%	50.0		%
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	5.1			7.4			3.5			16.9			Current Year Catastrophe Losses and LAE Ratio	1.2			16.7
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	10.6			(13.0)			1.2			(18.0)			Prior Years Non-catastrophe Losses and LAE Ratio	26.5			16.7
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	(7.1)			(0.4)			(1.2)			1.1			Prior Years Catastrophe Losses and LAE Ratio	(6.0)			(3.6)
Total Incurred Loss and LAE Ratio	Total Incurred Loss and LAE Ratio	57.9		%	30.0		%	52.3		%	28.1		%	Total Incurred Loss and LAE Ratio	72.3		%	79.8		%

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums onin other personal insurance decreased by ~~$1.6~~$0.1 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020.~~2021. Incurred losses and LAE were ~~$14.7~~$6.0 million, or ~~57.9%~~72.3% of earned premiums, ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$8.1~~$6.7 million, or ~~30.0%~~79.8% of earned premiums, for the same period in ~~2020.~~2021. Underlying losses and LAE as a percentage of earned premiums were ~~49.3%~~50.6% for the three months ended March 31, 2022, compared to 50.0% for the same period in 2021, ~~compared to 36.0% in 2020,~~ a deterioration of ~~13.3~~0.6 percentage points. Catastrophe losses and LAE (excluding loss reserve development) were ~~$1.3~~$0.1 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$2.0~~$1.4 million for the same period in ~~2020.~~2021. Adverse loss and LAE reserve development (including catastrophe losses development) ~~was $0.9 million in 2021, compared to favorable development of $3.6 million in 2020.~~

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

~~Earned Premiums on other personal insurance decreased by $0.3 million~~ for the three months ended ~~September 30, 2021,~~March 31, 2022 was $1.7 million, compared to $1.1 million for the same period in 2020. Incurred losses and LAE were $4.5 million, or 52.3% of earned premiums, in 2021, compared to $2.5 million, or 28.1% of earned premiums, in 2020. Underlying losses and LAE as a percentage of earned premiums were 48.8% in 2021, compared to 28.1% in 2020, a deterioration of 20.7 percentage points. Catastrophe losses and LAE (excluding loss reserve development) were $0.3 million in 2021, compared to $1.5 million in 2020. There was no loss and LAE reserve development (including catastrophe losses development) in 2021, compared to favorable development of $1.5 million in 2020.2021.

5346

Life & Health Insurance

Selected financial information for the Life & Health Insurance segment follows.


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)		Mar 31, 2022		Mar 31, 2021

Earned Premiums	Earned Premiums	$	489.3	$	486.3	$	164.1	$	160.6	Earned Premiums		$	161.4	$	161.0
Net Investment Income	Net Investment Income	151.9		146.0		48.4		50.7		Net Investment Income		49.4		51.1
Changes in Value of Alternative Energy Partnership Investments	Changes in Value of Alternative Energy Partnership Investments	(12.1)		—		(6.1)		—		Changes in Value of Alternative Energy Partnership Investments		(4.4)		(4.0)
Other Income	Other Income	0.3		0.6		0.1		—		Other Income		—		0.1
Total Revenues	Total Revenues	629.4		632.9		206.5		211.3		Total Revenues		206.4		208.2
Policyholders’ Benefits and Incurred Losses and LAE	Policyholders’ Benefits and Incurred Losses and LAE	353.5		320.2		119.5		113.6		Policyholders’ Benefits and Incurred Losses and LAE		120.1		118.7
Insurance Expenses	Insurance Expenses	269.4		251.1		92.9		82.5		Insurance Expenses		85.1		90.3

Operating Income (Loss)	Operating Income (Loss)	6.5		61.6		(5.9)		15.2		Operating Income (Loss)		1.2		(0.8)
Income Tax Benefit (Expense)	Income Tax Benefit (Expense)	16.6		(11.0)		8.7		(3.0)		Income Tax Benefit (Expense)		1.9		8.1
Segment Net Operating Income (Loss)	Segment Net Operating Income (Loss)	$	23.1	$	50.6	$	2.8	$	12.2	Segment Net Operating Income (Loss)		$	3.1	$	7.3

~~Insurance Reserves~~INSURANCE RESERVES


(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Dec 31, 2020		(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021
Insurance Reserves:	Insurance Reserves:					Insurance Reserves:
Future Policyholder Benefits	Future Policyholder Benefits	$	3,436.1	$	3,440.5	Future Policyholder Benefits	$	3,467.5	$	3,454.1
Incurred Losses and LAE Reserves:	Incurred Losses and LAE Reserves:					Incurred Losses and LAE Reserves:
Life	Life	62.3		61.1		Life	63.6		60.7
Accident and Health	Accident and Health	25.7		25.9		Accident and Health	25.2		26.1
Property	Property	7.4		4.6		Property	3.1		3.6
Total Incurred Losses and LAE Reserves	Total Incurred Losses and LAE Reserves	95.4		91.6		Total Incurred Losses and LAE Reserves	91.9		90.4
Insurance Reserves	Insurance Reserves	$	3,531.5	$	3,532.1	Insurance Reserves	$	3,559.4	$	3,544.5

Use of Death Verification Databases

In the third quarter of 2016, the Company’s Life & Health segment voluntarily began implementing a comprehensive process under which it cross-references its life insurance policies against the Death Master File maintained by the Social Security Administration and other death verification databases to identify potential situations where the beneficiaries may not have filed a claim following the death of an insured and initiate 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 pre-tax charge of $77.8 million to recognize the initial impact of using death verification databases in the Company’s operations, including to determine its IBNR liability for unpaid claims and claims adjustment expenses for life insurance products. Subsequently, the Company ~~has~~ reduced its estimate of the initial impact of using death verification databases by $30.3 million, of which ~~$4.5 million and $4.8~~$9.3 million was recognized during ~~the first~~2020 and ~~second quarters of 2020.~~$21.0 million was recognized during 2019.

Overall

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums in the Life & Health Insurance segment increased by ~~$3.0~~$0.4 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020. Earned Premiums increased~~2021. This is due primarily to higher volume on life insurance products partially offset by lower volume on accident and health insurance products and property insurance ~~products as well as a reduction in the estimated return premium reserve for insurance products subject to minimum loss ratio (“MLR”) in 2020.~~products.

Net Investment Income ~~increased~~decreased by ~~$5.9~~$1.7 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~2020,~~the same period in 2021, due primarily to ~~an increase in~~lower return from Alternative Investments, ~~higher levels of investments in~~lower yields on fixed income securities, ~~and~~partially offset by higher levels of investments and rate on Company-Owned Life ~~Insurance, partially offset by lower yields on fixed income securities.~~Insurance.

5447

Life & Health Insurance ~~(continued)~~(Continued)

Loss related to Changes in Value of Alternative Energy Partnership Investments was ~~$12.1~~$4.4 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, compared to $4.0 million for the same period in 2021. Tax benefits related to the Alternative Energy Partnership Investments were ~~$17.6~~$1.8 million ~~resulting~~and $7.4 million for the three months ended March 31, 2022 and 2021, respectively. This resulted in a net loss of $2.6 million and net income of $3.4 million attributable to Alternative Energy Partnership Investments ~~of $5.5 million~~ for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022 and 2021, respectively.

Policyholders’ Benefits and Incurred Losses and LAE increased by ~~$33.3~~$1.4 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~2020,~~the same period in 2021, due primarily to higher persistency and mortality for life insurance related to COVID-19, ~~higher persistency on life insurance, the impact of reducing the Company’s estimate of the ultimate cost of using death verification databases in the Company’s operations in 2020, and higher~~partially offset by lower frequency ~~and severity~~ of accident and health insurance claims.

Insurance Expenses in the Life & Health Insurance segment ~~increased~~decreased by ~~$18.3~~$5.2 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~2020,~~the same period in 2021, due primarily to ~~higher commission expense driven by increased persistency and~~lower levels of initiative spend on investments made to modernize ~~and strengthen the distribution channel~~ and enhance the capabilities of the business.

Segment Net Operating Income in the Life & Health Insurance segment was ~~$23.1~~$3.1 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$50.6~~$7.3 million in ~~2020.~~2021.

The Life & Health Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investment tax credits, tax-exempt investment income and dividends received deductions.

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

Earned Premiums in the Life & Health Insurance segment increased by $3.5 million for the three months ended September 30, 2021, compared to the same period in 2020, due primarily to higher volume on life insurance products, partially offset by lower volume on accident and health insurance products.

Net Investment Income decreased by $2.3 million in 2021, compared to 2020, due primarily to an increase in return from Alternative Investments, higher levels of investments in fixed income securities, and higher levels of investments and rate on Company-Owned Life Insurance, partially offset by lower yields on fixed income securities.

Loss related to Changes in Value of Alternative Energy Partnership Investments was $6.1 million for the three months ended September 30, 2021. Tax benefits related to the Alternative Energy Partnership Investments were $8.0 million, resulting in net income attributable to Alternative Energy Partnership Investments of $1.9 million for the three months ended September 30, 2021.

Policyholders’ Benefits and Incurred Losses and LAE increased by $5.9 million in 2021, compared to 2020, due primarily to higher persistency, higher frequency and severity of claims in accident and health insurance, and higher catastrophe losses in property insurance.

Insurance Expenses in the Life & Health Insurance segment increased by $10.4 million in 2021, compared to 2020, due primarily to higher commission expense driven by increased persistency and investments made to modernize and strengthen the distribution channel and enhance the capabilities of the business.

~~Segment Net Operating Income in the Life & Health Insurance segment was $2.8 million for the three months ended September 30, 2021, compared to $12.2 million in 2020.~~

~~Life & Health Insurance (continued)~~

Life Insurance

Selected financial information for the life insurance product line follows.


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)		Mar 31, 2022		Mar 31, 2021
Earned Premiums	Earned Premiums	$	300.2	$	289.2	$	101.5	$	96.3	Earned Premiums		$	101.3	$	98.1
Net Investment Income	Net Investment Income	147.5		141.0		47.0		47.5		Net Investment Income		47.9		49.6
Changes in Value of Alternative Energy Partnership Investments	Changes in Value of Alternative Energy Partnership Investments	(11.5)		—		(5.8)		—		Changes in Value of Alternative Energy Partnership Investments		(4.0)		(3.8)
Other Income		—		0.1		—		—

Total Revenues	Total Revenues	436.2		430.3		142.7		143.8		Total Revenues		145.2		143.9
Policyholders’ Benefits and Incurred Losses and LAE	Policyholders’ Benefits and Incurred Losses and LAE	257.1		228.8		87.3		84.0		Policyholders’ Benefits and Incurred Losses and LAE		90.6		87.9
Insurance Expenses	Insurance Expenses	175.1		165.9		61.5		54.7		Insurance Expenses		57.4		58.0

Operating Income (Loss)	Operating Income (Loss)	4.0		35.6		(6.1)		5.1		Operating Income (Loss)		(2.8)		(2.0)
Income Tax Benefit (Expense)	Income Tax Benefit (Expense)	16.3		(5.5)		8.4		(0.8)		Income Tax Benefit (Expense)		2.6		8.0
Total Product Line Net Operating Income (Loss)	Total Product Line Net Operating Income (Loss)	$	20.3	$	30.1	$	2.3	$	4.3	Total Product Line Net Operating Income (Loss)		$	(0.2)	$	6.0

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums from life insurance increased by ~~$11.0~~$3.2 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to increased new business and higher persistency. Policyholders’ Benefits and Incurred Losses and LAE on life insurance were ~~$257.1~~$90.6 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$228.8~~$87.9 million for the same period in ~~2020,~~2021, an increase of ~~$28.3~~$2.7 million due primarily to higher persistency and mortality related to ~~COVID-19, higher persistency, and the impact of reducing the Company’s estimate of the ultimate cost of using death verification databases in the Company’s operation in 2020.~~COVID-19.

Insurance Expenses ~~increased~~decreased by ~~$9.2~~$0.6 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~2020,~~the same period in 2021, due primarily to ~~higher commission expense driven by increased persistency and~~lower levels of initiative spend on investments made to modernize ~~and strengthen the distribution channel~~ and enhance the capabilities of the business.

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

Earned Premiums from life insurance increased by $5.2 million for the three months ended September 30, 2021, compared to the same period in 2020, due primarily to higher persistency. Policyholders’ Benefits and Incurred Losses and LAE on life insurance were $87.3 million in 2021, compared to $84.0 million in 2020, an increase of $3.3 million due primarily to higher persistency.

Insurance Expenses increased by $6.8 million in 2021, compared to 2020, due primarily to higher commission expense driven by increased persistency and investments made to modernize and strengthen the distribution channel and enhance the capabilities of the business.

5648

Life & Health Insurance ~~(continued)~~(Continued)

Accident and Health Insurance

Selected financial information for the accident and health insurance product line follows.


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)		Mar 31, 2022		Mar 31, 2021
Earned Premiums	Earned Premiums	$	142.3	$	149.1	$	47.0	$	48.9	Earned Premiums		$	45.8	$	47.4
Net Investment Income	Net Investment Income	2.7		4.7		0.9		3.1		Net Investment Income		0.7		1.0
Changes in Value of Alternative Energy Partnership Investments	Changes in Value of Alternative Energy Partnership Investments	(0.2)		—		(0.1)		—		Changes in Value of Alternative Energy Partnership Investments		(0.1)		(0.1)
Other Income	Other Income	0.3		0.5		0.1		—		Other Income		—		0.1
Total Revenues	Total Revenues	145.1		154.3		47.9		52.0		Total Revenues		46.4		48.4
Policyholders’ Benefits and Incurred Losses and LAE	Policyholders’ Benefits and Incurred Losses and LAE	74.2		70.8		22.9		20.7		Policyholders’ Benefits and Incurred Losses and LAE		23.5		24.5
Insurance Expenses	Insurance Expenses	70.1		66.8		23.5		22.1		Insurance Expenses		20.8		24.4

Operating Income (Loss)	Operating Income (Loss)	0.8		16.7		1.5		9.2		Operating Income (Loss)		2.1		(0.5)
Income Tax Expense (Benefit)		0.1		(3.6)		(0.2)		(2.0)
Income Tax Benefit (Expense)										Income Tax Benefit (Expense)		(0.4)		0.2
Total Product Line Net Operating Income (Loss)	Total Product Line Net Operating Income (Loss)	$	0.9	$	13.1	$	1.3	$	7.2	Total Product Line Net Operating Income (Loss)		$	1.7	$	(0.3)

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums from accident and health insurance decreased by ~~$6.8~~$1.6 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020. Earned premiums decreased~~2021. This is due primarily to lower volume on new business ~~sales and a reduction in the estimated return premium reserve for certain insurance products subject to MLR in 2020.~~sales. Policyholders’ Benefits and Incurred Losses and LAE on accident and health insurance were ~~$74.2 million in 2021, compared to $70.8 million in 2020, due primarily to higher frequency and severity of claims.~~

Insurance Expenses increased by $3.3 million in 2021, compared to 2020, due primarily to investments made to modernize and strengthen the distribution channel and enhance the capabilities of the business.

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

~~Earned Premiums from accident and health insurance decreased by $1.9~~$23.5 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to $24.5 million for the same period in 2021. This is due primarily to lower frequency of claims.

Insurance Expenses decreased by $3.6 million for the three months ended March 31, 2022, compared to the same period in ~~2020. Earned premiums decreased~~2021, due primarily to lower ~~volume~~levels of initiative spend on new business sales. Policyholders’ Benefit and Incurred Losses and LAE on accident and health insurance were $22.9 million in 2021, compared to $20.7 million in 2020, due primarily to higher frequency and severity of claims.

~~Insurance Expenses increased by $1.4 million in 2021, compared to 2020, due primarily to~~ investments made to modernize ~~and strengthen the distribution channel~~ and enhance the capabilities of the business.

5749

Life & Health Insurance ~~(continued)~~(Continued)

Property Insurance

Selected financial information for the property insurance product line follows.


		Nine Months Ended						Three Months Ended							Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			(Dollars in Millions)		Mar 31, 2022			Mar 31, 2021
Earned Premiums	Earned Premiums	$	46.8		$	48.0		$	15.6		$	15.4		Earned Premiums		$	14.3		$	15.5
Net Investment Income (Loss)	Net Investment Income (Loss)	1.7			0.3			0.5			0.1			Net Investment Income (Loss)		0.8			0.5
Changes in Value of Alternative Energy Partnership Investments	Changes in Value of Alternative Energy Partnership Investments	(0.4)			—			(0.2)			—			Changes in Value of Alternative Energy Partnership Investments		(0.3)			(0.1)

Total Revenues	Total Revenues	48.1			48.3			15.9			15.5			Total Revenues		14.8			15.9
Incurred Losses and LAE related to:	Incurred Losses and LAE related to:													Incurred Losses and LAE related to:
Current Year:	Current Year:													Current Year:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	11.0			12.7			3.6			5.2			Non-catastrophe Losses and LAE		4.1			3.2
Catastrophe Losses and LAE	Catastrophe Losses and LAE	10.1			7.1			5.7			3.1			Catastrophe Losses and LAE		0.4			1.9
Prior Years:	Prior Years:													Prior Years:
Non-catastrophe Losses and LAE	Non-catastrophe Losses and LAE	1.2			0.3			0.4			0.4			Non-catastrophe Losses and LAE		0.6			0.7
Catastrophe Losses and LAE	Catastrophe Losses and LAE	(0.1)			0.5			(0.4)			0.2			Catastrophe Losses and LAE		0.9			0.5
Total Incurred Losses and LAE	Total Incurred Losses and LAE	22.2			20.6			9.3			8.9			Total Incurred Losses and LAE		6.0			6.3
Insurance Expenses	Insurance Expenses	24.2			18.4			7.9			5.7			Insurance Expenses		6.9			7.9

Operating Income (Loss)	Operating Income (Loss)	1.7			9.3			(1.3)			0.9			Operating Income (Loss)		1.9			1.7
Income Tax Benefit (Expense)	Income Tax Benefit (Expense)	0.2			(1.9)			0.5			(0.2)			Income Tax Benefit (Expense)		(0.3)			(0.1)
Total Product Line Net Operating Income (Loss)	Total Product Line Net Operating Income (Loss)	$	1.9		$	7.4		$	(0.8)		$	0.7		Total Product Line Net Operating Income (Loss)		$	1.6		$	1.6
Ratios Based On Earned Premiums	Ratios Based On Earned Premiums													Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	Current Year Non-catastrophe Losses and LAE Ratio	23.4		%	26.5		%	23.1		%	33.8		%	Current Year Non-catastrophe Losses and LAE Ratio		28.7		%	20.6		%
Current Year Catastrophe Losses and LAE Ratio	Current Year Catastrophe Losses and LAE Ratio	21.6			14.8			36.5			20.1			Current Year Catastrophe Losses and LAE Ratio		2.8			12.3
Prior Years Non-catastrophe Losses and LAE Ratio	Prior Years Non-catastrophe Losses and LAE Ratio	2.6			0.6			2.6			2.6			Prior Years Non-catastrophe Losses and LAE Ratio		4.2			4.5
Prior Years Catastrophe Losses and LAE Ratio	Prior Years Catastrophe Losses and LAE Ratio	(0.2)			1.0			(2.6)			1.3			Prior Years Catastrophe Losses and LAE Ratio		6.3			3.2
Total Incurred Loss and LAE Ratio	Total Incurred Loss and LAE Ratio	47.4		%	42.9		%	59.6		%	57.8		%	Total Incurred Loss and LAE Ratio		42.0		%	40.6		%

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Same Period in ~~2020~~2021

Earned Premiums from property insurance decreased by $1.2 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to the same period in ~~2020,~~2021, due primarily to a lower ~~volume.~~volume of property insurance products. Incurred losses and LAE on property insurance were ~~$22.2~~$6.0 million, or ~~47.4%~~42.0% of earned premiums, ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$20.6~~$6.3 million, or ~~42.9%~~40.6% of earned premiums for the same period in ~~2020.~~2021. Underlying losses and LAE were ~~$11.0~~$4.1 million, or ~~23.4%~~28.7% of earned premiums ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$12.7~~$3.2 million, or ~~26.5%~~20.6% of earned premiums for the same period in ~~2020, a decrease~~2021, an increase of ~~3.1~~8.1 percentage points due primarily to ~~lower~~higher claim frequency. Catastrophe losses and LAE (excluding loss reserve development) were ~~$10.1~~$0.4 million ~~in 2021,~~for the three months ended March 31, 2022, compared to ~~$7.1~~$1.9 million for the same period in ~~2020.~~2021. Catastrophe losses and LAE ~~increased $3.0~~decreased $1.5 million due primarily to ~~higher frequency and~~lower severity of catastrophe claims. Adverse loss and LAE reserve development was ~~$1.1 million in 2021, compared to adverse development of $0.8 million in 2020. Insurance expenses increased $5.8 million in 2021, compared to 2020.~~

~~Three Months Ended September 30, 2021 Compared to the Same Period in 2020~~

~~Earned Premiums from property insurance increased by $0.2~~$1.5 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to an adverse development of $1.2 million in the same period in 2021.

Insurance expenses decreased $1.0 million for the three months ended March 31, 2022, compared to the same period in ~~2020, due primarily to higher volume. Incurred losses and LAE on property insurance were $9.3 million, or 59.6% of earned premiums, in~~ 2021 compared to $8.9 million, or 57.8% of earned premiums in 2020. Underlying losses and LAE were $3.6 million, or 23.1% of earned premiums in 2021, compared to $5.2 million, or 33.8% of earned premiums in 2020, a decrease of 10.7 percentage points due primarily to lower ~~claim frequency. Catastrophe losses~~levels of initiative spend on investments made to modernize and ~~LAE (excluding loss reserve development) were $5.7 million in 2021, compared to $3.1 million in 2020. Catastrophe losses and LAE increased $2.6 million due primarily to higher severity~~enhance the capabilities of ~~catastrophe events and higher frequency and severity of catastrophe claims. There~~the business.

5850

~~Life & Health Insurance (continued)~~

~~was no loss and LAE reserve development in 2021, compared to adverse development of $0.6 million in 2020. Insurance expenses increased $2.2 million in 2021, compared to 2020.~~

Investment Results

Net Investment Income

Net Investment Income for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)		Mar 31, 2022		Mar 31, 2021
Investment Income:	Investment Income:									Investment Income:
Interest on Fixed Income Securities	Interest on Fixed Income Securities	$	207.1	$	218.0	$	68.4	$	72.7	Interest on Fixed Income Securities		$	68.7	$	69.0
Dividends on Equity Securities Excluding Alternative Investments	Dividends on Equity Securities Excluding Alternative Investments	9.8		10.7		2.9		2.8		Dividends on Equity Securities Excluding Alternative Investments		1.5		2.1
Alternative Investments:	Alternative Investments:									Alternative Investments:
Equity Method Limited Liability Investments	Equity Method Limited Liability Investments	50.9		(2.7)		12.0		8.2		Equity Method Limited Liability Investments		13.3		22.5

Limited Liability Investments Included in Equity Securities	Limited Liability Investments Included in Equity Securities	29.3		7.3		9.5		2.4		Limited Liability Investments Included in Equity Securities		7.6		4.5
Total Alternative Investments	Total Alternative Investments	80.2		4.6		21.5		10.6		Total Alternative Investments		20.9		27.0
Short-term Investments	Short-term Investments	0.6		4.2		0.2		2.3		Short-term Investments		0.1		1.2
Loans to Policyholders	Loans to Policyholders	16.3		16.6		5.4		5.5		Loans to Policyholders		5.5		5.5
Real Estate	Real Estate	7.1		7.1		2.3		2.3		Real Estate		2.2		2.4
Other	Other	23.1		9.3		9.1		2.7		Other		10.0		4.7
Total Investment Income	Total Investment Income	344.2		270.5		109.8		98.9		Total Investment Income		108.9		111.9
Investment Expenses:	Investment Expenses:									Investment Expenses:
Real Estate	Real Estate	6.8		6.5		2.6		1.2		Real Estate		2.5		2.1
Other Investment Expenses	Other Investment Expenses	18.5		18.5		5.3		5.6		Other Investment Expenses		6.4		6.7
Total Investment Expenses	Total Investment Expenses	25.3		25.0		7.9		6.8		Total Investment Expenses		8.9		8.8
Net Investment Income	Net Investment Income	$	318.9	$	245.5	$	101.9	$	92.1	Net Investment Income		$	100.0	$	103.1

Net Investment Income was ~~$318.9~~$100.0 million and ~~$245.5~~$103.1 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Net Investment Income ~~increased~~decreased by ~~$73.4~~$3.1 million in ~~2021~~2022 due primarily to ~~higher~~lower valuations of Equity Method Limited Liability Investments ~~and~~partially offset by higher volume of distributions received from appreciated Limited Liability Investments included in Equity Securities, partially offset by lower yields from the Fixed Maturities portfolio reflecting lower reinvestment yields. Increase in Other Net Investment Income is driven by income from Company-Owned Life Insurance due to higher average investment balance and rate.

Net Investment Income was $101.9 million and $92.1 million for the three months ended September 30, 2021 and 2020, respectively. Net Investment Income increased by $9.8 million in 2021 due primarily to higher volume of distributions received from appreciated Limited Liability Investments included in Equity Securities and higher valuation of Equity Method Limited Liability Investments, partially offset by lower yields from the Fixed Maturities portfolio reflecting lower reinvestment yields.Securities. Increase in Other Net Investment Income is driven by income from Company-Owned Life Insurance due to higher average investment balance and rate.

Income and distributions on Alternative Investments can fluctuate significantly between periods as they are influenced by operating performance of the underlying investments, changes in market or economic conditions or the timing of asset sales.

~~Investment Results (continued)~~

Total Comprehensive Investment Gains (Losses)

The components of Total Comprehensive Investment Gains (Losses) for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Recognized in Condensed Consolidated Statements of Income:	Recognized in Condensed Consolidated Statements of Income:									Recognized in Condensed Consolidated Statements of Income:
Income (Loss) from Change in Fair Value of Equity and Convertible Securities	Income (Loss) from Change in Fair Value of Equity and Convertible Securities	$	92.4	$	(1.0)	$	(0.6)	$	45.2	Income (Loss) from Change in Fair Value of Equity and Convertible Securities	$	(28.2)	$	52.2
Gains on Sales	Gains on Sales	45.0		42.0		10.7		12.0		Gains on Sales	2.4		14.9
Losses on Sales	Losses on Sales	(1.9)		(3.8)		(0.6)		(2.0)		Losses on Sales	(0.9)		(1.1)
Impairment Losses	Impairment Losses	(7.8)		(20.0)		(0.6)		(1.0)		Impairment Losses	(8.9)		(4.0)

Net Gains (Losses) Recognized in Condensed Consolidated Statements of Income	Net Gains (Losses) Recognized in Condensed Consolidated Statements of Income	127.7		17.2		8.9		54.2		Net Gains (Losses) Recognized in Condensed Consolidated Statements of Income	(35.6)		62.0
Recognized in Other Comprehensive Income (Loss)	Recognized in Other Comprehensive Income (Loss)	(255.9)		266.9		(79.3)		64.4		Recognized in Other Comprehensive Income (Loss)	(651.9)		(366.1)
Total Comprehensive Investment Gains (Losses)	Total Comprehensive Investment Gains (Losses)	$	(128.2)	$	284.1	$	(70.4)	$	118.6	Total Comprehensive Investment Gains (Losses)	$	(687.5)	$	(304.1)

Investment Results (Continued)

Total Comprehensive Investment Gains (Losses) decreased by ~~$412.3~~$383.4 million primarily due to ~~decline~~a decrease in the fair value of the Company’s fixed ~~maturities unrealized capital gains, partially offset by higher~~ income bond portfolio and a loss from ~~increased valuations~~the change in fair value of the Company’s fair value method equity and convertible securities. ~~Fixed maturities valuations decreased primarily due to wider credit spreads.~~

Income (Loss) from Change in Fair Value of Equity and Convertible Securities

The components of Income (Loss) from Change in Fair Value of Equity and Convertible Securities for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Preferred Stocks	Preferred Stocks	$	1.8	$	(3.1)	$	0.1	$	2.3	Preferred Stocks	$	(2.4)	$	0.5
Common Stocks	Common Stocks	3.2		(1.5)		(1.1)		—		Common Stocks	0.4		0.4
Other Equity Interests:	Other Equity Interests:									Other Equity Interests:
Exchange Traded Funds	Exchange Traded Funds	50.1		6.1		(7.1)		35.5		Exchange Traded Funds	(30.9)		25.9
Limited Liability Companies and Limited Partnerships	Limited Liability Companies and Limited Partnerships	35.5		(1.9)		7.9		6.2		Limited Liability Companies and Limited Partnerships	4.5		23.2
Total Other Equity Interests	Total Other Equity Interests	85.6		4.2		0.8		41.7		Total Other Equity Interests	(26.4)		49.1
Income (Loss) from Change in Fair Value of Equity Securities	Income (Loss) from Change in Fair Value of Equity Securities	90.6		(0.4)		(0.2)		44.0		Income (Loss) from Change in Fair Value of Equity Securities	(28.4)		50.0
Income (Loss) from Change in Fair Value of Convertible Securities	Income (Loss) from Change in Fair Value of Convertible Securities	1.8		(0.6)		(0.4)		1.2		Income (Loss) from Change in Fair Value of Convertible Securities	0.2		2.2
Income (Loss) from Change in Fair Value of Equity and Convertible Securities	Income (Loss) from Change in Fair Value of Equity and Convertible Securities	$	92.4	$	(1.0)	$	(0.6)	$	45.2	Income (Loss) from Change in Fair Value of Equity and Convertible Securities	$	(28.2)	$	52.2

~~Investment Results (continued)~~

Net Realized Gains on Sales of Investments

The components of Net Realized Gains on Sales of Investments for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Fixed Maturities:	Fixed Maturities:									Fixed Maturities:
Gains on Sales	Gains on Sales	$	42.7	$	38.7	$	10.3	$	11.9	Gains on Sales	$	0.4	$	13.2
Losses on Sales	Losses on Sales	(1.7)		(3.5)		(0.4)		(1.9)		Losses on Sales	(0.8)		(1.1)
Equity Securities:	Equity Securities:									Equity Securities:
Gains on Sales	Gains on Sales	1.8		1.5		0.1		0.1		Gains on Sales	2.0		1.7
Losses on Sales	Losses on Sales	(0.2)		(0.2)		(0.2)		—		Losses on Sales	(0.1)		—
Equity Method Limited Liability Investments:
Gains on Sales		0.4		—		0.4		—
Losses on Sales		—		(0.1)		—		(0.1)
Real Estate:
Gains on Sales		0.1		1.8		(0.1)		—

Net Realized Gains on Sales of Investments	Net Realized Gains on Sales of Investments	$	43.1	$	38.2	$	10.1	$	10.0	Net Realized Gains on Sales of Investments	$	1.5	$	13.8

Gross Gains on Sales	Gross Gains on Sales	$	45.0	$	42.0	$	10.7	$	12.0	Gross Gains on Sales	$	2.4	$	14.9
Gross Losses on Sales	Gross Losses on Sales	(1.9)		(3.8)		(0.6)		(2.0)		Gross Losses on Sales	(0.9)		(1.1)

Net Realized Gains on Sales of Investments	Net Realized Gains on Sales of Investments	$	43.1	$	38.2	$	10.1	$	10.0	Net Realized Gains on Sales of Investments	$	1.5	$	13.8

Investment Results (Continued)

Impairment Losses

The Company regularly reviews its investment portfolio to determine whether a decline in the fair value of an investment has occurred from credit or other, non-credit related factors. If the decline in fair value is due to credit factors and the Company does not expect to receive cash flows sufficient to support the entire amortized cost basis, the credit loss is reported in the Condensed Consolidated Statements of Income in the period that the declines are evaluated. The components of Impairment Losses in the Condensed Consolidated Statements of Income for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended						Three Months Ended							Three Months Ended
		Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020				Mar 31, 2022			Mar 31, 2021
(Dollars in Millions)	(Dollars in Millions)	Amount		Number of Issuers	Amount		Number of Issuers	Amount		Number of Issuers	Amount		Number of Issuers	(Dollars in Millions)	Amount		Number of Issuers	Amount		Number of Issuers
Fixed Maturities	Fixed Maturities	$	(3.3)	15	$	(18.0)	23	$	0.5	—	$	(1.0)	3	Fixed Maturities	$	(8.9)	17	$	(3.2)	6
Equity Securities	Equity Securities	(4.1)		13	(2.0)		4	(0.7)		2	—		—	Equity Securities	—		—	(0.8)		1
Real Estate		(0.4)		1	—		—	(0.4)		1	—		—

Impairment Losses	Impairment Losses	$	(7.8)		$	(20.0)		$	(0.6)		$	(1.0)		Impairment Losses	$	(8.9)		$	(4.0)

Investment Quality and Concentrations

The Company’s fixed maturity investment portfolio is comprised primarily of high-grade corporate, municipal and agency bonds. At ~~September 30, 2021,~~March 31, 2022, 94.9% of the Company’s fixed maturity investment portfolio was rated investment-grade, which the Company defines as a security issued by a high quality obligor with at least a relatively stable credit profile and where it is highly likely that all contractual payments of principal and interest will timely occur and carry a rating from the National Association of Insurance Commissioners (“NAIC”) of 1 or 2. Securities with a rating of 1 or 2 from the NAIC typically are

~~Investment Quality and Concentrations (continued)~~

rated by one of more Nationally Recognized Statistical Rating Organizations and either have a rating of AAA, AA, A or BBB from Standard & Poor’s (“S&P”); a rating of Aaa, Aa, A or Baa from Moody’s Investors Service (“Moody’s”); or a rating of AAA, AA, A or BBB from Fitch Ratings.

The following table summarizes the credit quality of the Company’s fixed maturity investment portfolio at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


(Dollars in Millions)	(Dollars in Millions)		Sep 30, 2021				Dec 31, 2020				(Dollars in Millions)		Mar 31, 2022				Dec 31, 2021
NAIC Rating	NAIC Rating	Rating	Fair Value		Percentage		Fair Value		Percentage		NAIC Rating	Rating	Fair Value		Percentage		Fair Value		Percentage
1	1	AAA, AA, A	$	5,181.5	65.8	%	$	4,759.9	62.6	%	1	AAA, AA, A	$	5,302.9	68.1	%	$	5,351.6	67.0	%
2	2	BBB	2,294.9		29.1		2,355.6		31.0		2	BBB	2,087.4		26.8		2,215.1		27.7
3-4	3-4	BB, B	295.0		3.7		353.1		4.6		3-4	BB, B	307.0		4.0		331.0		4.2
5-6	5-6	CCC or Lower	113.7		1.4		137.3		1.8		5-6	CCC or Lower	86.6		1.1		89.2		1.1
Total Investments in Fixed Maturities	Total Investments in Fixed Maturities		$	7,885.1	100.0	%	$	7,605.9	100.0	%	Total Investments in Fixed Maturities		$	7,783.9	100.0	%	$	7,986.9	100.0	%

Gross unrealized losses on the Company’s investments in below-investment-grade fixed maturities were ~~$7.7~~$17.2 million and ~~$23.7~~$9.0 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Investment Quality and Concentrations (Continued)

The following table summarizes the fair value of the Company’s investments in governmental fixed maturities at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		Sep 30, 2021				Dec 31, 2020					Mar 31, 2022				Dec 31, 2021
(Dollars in Millions)	(Dollars in Millions)	Fair Value		Percentage of Total Investments		Fair Value		Percentage of Total Investments		(Dollars in Millions)	Fair Value		Percentage of Total Investments		Fair Value		Percentage of Total Investments
U.S. Government and Government Agencies and Authorities	U.S. Government and Government Agencies and Authorities	$	502.6	4.8	%	$	585.3	5.6	%	U.S. Government and Government Agencies and Authorities	$	630.4	6.3	%	$	637.4	6.1	%
States and Political Subdivisions:	States and Political Subdivisions:									States and Political Subdivisions:

Revenue Bonds	Revenue Bonds	1,511.4		14.5		1,153.3		11.1		Revenue Bonds	1,421.4		14.3		1,516.1		14.6
States	States	261.9		2.5		333.5		3.2		States	219.3		2.2		235.8		2.3
Political Subdivisions	Political Subdivisions	144.0		1.4		102.6		1.0		Political Subdivisions	129.5		1.3		138.2		1.3
Foreign Governments	Foreign Governments	5.7		0.1		5.2		—		Foreign Governments	5.0		0.1		5.5		0.1
Total Investments in Governmental Fixed Maturities	Total Investments in Governmental Fixed Maturities	$	2,425.6	23.3	%	$	2,179.9	20.9	%	Total Investments in Governmental Fixed Maturities	$	2,405.6	24.2	%	$	2,533.0	24.4	%

The following table summarizes the fair value of the Company’s investments in non-governmental fixed maturities by industry at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Sep 30, 2021 Dec 31, 2020
(Dollars in Millions) Fair Value Percentage
of Total
Investments Fair Value Percentage
of Total
Investments
Finance, Insurance and Real Estate $ 1,955.8 18.8 % $ 1,916.3 18.4 %
Manufacturing 1,613.8 15.5 1,633.5 15.7
Transportation, Communication and Utilities 827.8 7.9 825.5 7.9
Services 622.1 6.0 581.3 5.6
Mining 269.8 2.6 285.7 2.7
Retail Trade 157.4 1.5 172.6 1.7
Construction 10.4 0.1 — —
Wholesale Trade — — 0.5 —
Other 2.4 — 10.5 0.1
Total Investments in Non-governmental Fixed Maturities $ 5,459.5 52.4 % $ 5,425.9 52.1 %

~~Investment Quality and Concentrations (continued)~~


	Mar 31, 2022				Dec 31, 2021
(Dollars in Millions)	Fair Value		Percentage of Total Investments		Fair Value		Percentage of Total Investments
Finance, Insurance and Real Estate	$	2,135.8	21.4	%	$	1,996.7	19.2	%
Manufacturing	1,445.9		14.5		1,571.0		15.1
Transportation, Communication and Utilities	769.1		7.7		815.8		7.9
Services	597.7		6.0		617.5		5.9
Mining	239.0		2.4		254.3		2.4
Retail Trade	162.4		1.6		171.4		1.7
Construction	20.4		0.2		13.1		0.1
Other	7.9		0.1		14.1		0.1
Wholesale Trade	0.2		—		—		—
Total Investments in Non-governmental Fixed Maturities	$	5,378.4	53.9	%	$	5,453.9	52.4	%

The following table summarizes the fair value of the Company’s investments in non-governmental fixed maturities by range of amount invested at ~~September 30, 2021.~~March 31, 2022.


(Dollars in Millions)	(Dollars in Millions)	Number of Issues	Aggregate Fair Value		(Dollars in Millions)	Number of Issues	Aggregate Fair Value
Below $5	Below $5	599	$	1,283.7	Below $5	669	$	1,405.8
$5 -$10	$5 -$10	189	1,329.0		$5 -$10	211	1,549.2
$10 - $20	$10 - $20	134	1,798.2		$10 - $20	116	1,541.9
$20 - $30	$20 - $30	29	698.5		$20 - $30	30	730.8
Greater Than $30	Greater Than $30	10	350.1		Greater Than $30	4	150.6
Total	Total	961	$	5,459.5	Total	1,030	$	5,378.3

The Company’s short-term investments primarily consist of money market funds ~~U.S. treasury bills, overnight interest-bearing accounts~~ and ~~certificate of deposits.~~short term bonds. At ~~September 30, 2021,~~March 31, 2022, the Company had ~~$243.9~~$243.5 million invested in money market funds which primarily invest in U.S. Treasury securities ~~$12.4~~and $0.4 million invested in U.S. treasury bills and short-term ~~bonds, $3.2 million invested in an overnight interest bearing account with one of the Company’s custodial banks~~bonds.

Investment Quality and ~~$0.2 million invested in certificate of deposits.~~

Concentrations (Continued)

The following table summarizes the fair value of the Company’s ten largest investment exposures in a single issuer, excluding investments in U.S. Government and Government Agencies and Authorities and Short-term Investments, at ~~September 30, 2021:~~March 31, 2022:


(Dollars in Millions)	(Dollars in Millions)	Fair Value		Percentage of Total Investments		(Dollars in Millions)	Fair Value		Percentage of Total Investments
Fixed Maturities:	Fixed Maturities:					Fixed Maturities:
States including their Political Subdivisions:	States including their Political Subdivisions:					States including their Political Subdivisions:
Texas	Texas	$	149.7	1.4	%	Texas	$	136.6	1.4	%
California	California	106.7		1.0		California	103.7		1.0
New York	New York	95.2		0.9		New York	91.4		0.9
Georgia	Georgia	92.4		0.9		Georgia	89.8		0.9
Michigan						Michigan	76.6		0.8
Florida						Florida	70.8		0.7
Louisiana						Louisiana	69.7		0.7
Colorado	Colorado	81.9		0.8		Colorado	65.2		0.7
Louisiana		75.5		0.7
Florida		72.4		0.7
Pennsylvania		71.1		0.7
Equity Securities at Fair Value—Other Equity Interests:	Equity Securities at Fair Value—Other Equity Interests:					Equity Securities at Fair Value—Other Equity Interests:

Vanguard Total World Stock ETF	Vanguard Total World Stock ETF	215.0		2.1		Vanguard Total World Stock ETF	112.1		1.1
iShares® Core MSCI Total International Stock ETF	iShares® Core MSCI Total International Stock ETF	86.1		0.8		iShares® Core MSCI Total International Stock ETF	75.6		0.8

Total	Total	$	1,046.0	10.0	%	Total	$	891.5	9.0	%

6355

~~Investment Quality and Concentrations (continued)~~

Investments in Limited Liability Companies and Limited Partnerships

The Company owns investments in various limited liability investment companies and limited partnerships that primarily invest in mezzanine debt, distressed debt, real estate and senior debt. The Company’s investments in these limited liability investment companies and limited partnerships are reported either as Equity Method Limited Liability Investments, Other Equity Interests and included in Equity Securities at Fair Value, or Equity Securities at Modified Cost depending on the accounting method used to report the investment. Additional information pertaining to these investments at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 is presented below.


		Unfunded Commitment		Reported Value					Unfunded Commitment		Reported Value
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2021		Dec 31, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2022		Dec 31, 2021
Reported as Equity Method Limited Liability Investments:	Reported as Equity Method Limited Liability Investments:							Reported as Equity Method Limited Liability Investments:
Mezzanine Debt	Mezzanine Debt	$	48.3	$	111.3	$	102.5	Mezzanine Debt	$	40.2	$	121.0	$	120.0
Senior Debt	Senior Debt	26.8		28.5		28.6		Senior Debt	49.0		25.8		27.5
Distressed Debt	Distressed Debt	—		22.3		14.5		Distressed Debt	—		18.9		21.7
Secondary Transactions	Secondary Transactions	8.5		14.0		11.2		Secondary Transactions	2.1		12.9		11.7
Leveraged Buyout	Leveraged Buyout	0.1		7.9		3.5		Leveraged Buyout	0.9		9.2		8.7
Growth Equity	Growth Equity	—		0.7		0.7		Growth Equity	—		1.3		0.7
Real Estate	Real Estate	—		30.0		29.9		Real Estate	—		29.7		29.9
Hedge Funds		—		25.6		—
Hedge Fund								Hedge Fund	—		0.5		8.7
Other	Other	—		14.8		13.1		Other	—		10.7		13.0
Total Equity Method Limited Liability Investments	Total Equity Method Limited Liability Investments	83.7		255.1		204.0		Total Equity Method Limited Liability Investments	92.2		230.0		241.9

Alternative Energy Partnership Investments	Alternative Energy Partnership Investments	—		54.2		21.3		Alternative Energy Partnership Investments	—		22.4		39.6

Reported as Other Equity Interests at Fair Value:	Reported as Other Equity Interests at Fair Value:							Reported as Other Equity Interests at Fair Value:
Mezzanine Debt	Mezzanine Debt	58.3		133.2		118.3		Mezzanine Debt	52.5		131.8		129.3
Senior Debt	Senior Debt	18.5		29.2		33.9		Senior Debt	15.7		30.2		29.9
Distressed Debt	Distressed Debt	19.9		42.2		31.8		Distressed Debt	18.6		45.2		44.9
Secondary Transactions	Secondary Transactions	6.8		4.0		4.2		Secondary Transactions	5.6		3.7		4.0
Hedge Funds	Hedge Funds	—		82.1		71.6		Hedge Funds	—		68.1		82.7
Leveraged Buyout	Leveraged Buyout	6.8		35.6		30.7		Leveraged Buyout	8.3		34.8		32.2

Growth Equity								Growth Equity	0.5		4.0		2.0
Other	Other	0.7		2.6		1.5		Other	—		—		—
Total Reported as Other Equity Interests at Fair Value	Total Reported as Other Equity Interests at Fair Value	111.0		328.9		292.0		Total Reported as Other Equity Interests at Fair Value	101.2		317.8		325.0
Reported as Equity Securities at Modified Cost:	Reported as Equity Securities at Modified Cost:							Reported as Equity Securities at Modified Cost:

Other	Other	0.2		8.3		15.7		Other	—		7.6		7.7
Total Reported as Equity Securities at Modified Cost	Total Reported as Equity Securities at Modified Cost	0.2		8.3		15.7		Total Reported as Equity Securities at Modified Cost	—		7.6		7.7

Total Investments in Limited Liability Companies and Limited Partnerships	Total Investments in Limited Liability Companies and Limited Partnerships	$	194.9	$	646.5	$	533.0	Total Investments in Limited Liability Companies and Limited Partnerships	$	193.4	$	577.8	$	614.2

The Company expects that it will be required to fund its commitments over the next several years. The Company expects that the proceeds from distributions from these investments will be the primary source of funding of such commitments.

6456

Expenses

Expenses for the ~~nine and~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were:


		Nine Months Ended				Three Months Ended					Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020		(Dollars in Millions)	Mar 31, 2022		Mar 31, 2021
Insurance Expenses:	Insurance Expenses:									Insurance Expenses:
Commissions	Commissions	$	625.3	$	562.5	$	210.0	$	195.5	Commissions	$	191.9	$	195.2
General Expenses	General Expenses	252.0		224.3		85.1		74.6		General Expenses	87.1		84.6
Taxes, Licenses and Fees	Taxes, Licenses and Fees	79.1		71.2		26.5		23.3		Taxes, Licenses and Fees	25.4		25.4
Total Costs Incurred	Total Costs Incurred	956.4		858.0		321.6		293.4		Total Costs Incurred	304.4		305.2
Net Policy Acquisition Costs Amortized (Deferred)	Net Policy Acquisition Costs Amortized (Deferred)	(87.3)		(40.5)		(23.8)		(17.4)		Net Policy Acquisition Costs Amortized (Deferred)	(2.5)		(22.4)
Amortization of Value of Business Acquired (“VOBA”)	Amortization of Value of Business Acquired (“VOBA”)	39.9		3.7		13.5		0.9		Amortization of Value of Business Acquired (“VOBA”)	2.1		0.9

Insurance Expenses	Insurance Expenses	909.0		821.2		311.3		276.9		Insurance Expenses	304.0		283.7
Loss from Early Extinguishment of Debt										Loss from Early Extinguishment of Debt	3.7		—
Interest and Other Expenses:	Interest and Other Expenses:									Interest and Other Expenses:
Interest Expense	Interest Expense	33.0		24.7		10.7		8.3		Interest Expense	12.7		11.1
Other Expenses:	Other Expenses:									Other Expenses:

Acquisition Related Transaction, Integration and Other Costs	Acquisition Related Transaction, Integration and Other Costs	34.7		43.3		8.0		14.4		Acquisition Related Transaction, Integration and Other Costs	4.7		16.3
Other	Other	111.5		74.7		44.0		24.5		Other	36.7		29.8
Other Expenses	Other Expenses	146.2		118.0		52.0		38.9		Other Expenses	41.4		46.1
Interest and Other Expenses	Interest and Other Expenses	179.2		142.7		62.7		47.2		Interest and Other Expenses	54.1		57.2
Total Expenses	Total Expenses	$	1,088.2	$	963.9	$	374.0	$	324.1	Total Expenses	$	361.8	$	340.9

Insurance Expenses

Insurance Expenses ~~were $909.0 million for the nine months ended September 30, 2021, compared to $821.2 million for the same period in 2020. Insurance Expenses~~ increased by ~~$87.8 million in 2021 due primarily to growth in business and increased amortization of VOBA with the acquisition of AAC.~~

~~Insurance Expenses were $311.3~~$20.3 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$276.9 million for~~ the same period ~~in 2020. Insurance Expenses increased by $34.4 million~~ in 2021, due primarily to a lower net deferral of policy acquisition costs as premium growth slowed due to ongoing profit improvement actions.

Loss from Early Extinguishment of Debt

Loss from Early Extinguishment of Debt increased by $3.7 million for the three months ended March 31, 2022, compared to the same period in ~~business and increased amortization~~2021 due to the redemption of ~~VOBA with~~ the ~~acquisition of AAC.~~2022 Senior Notes.

Interest and Other Expenses

Interest ~~and Other Expenses was $179.2~~expense increased by $1.6 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$142.7 million for~~ the same period ~~in 2020. Interest expense increased by $8.3 million~~ in 2021, due primarily to the addition of the ~~2030~~2032 Senior Notes ~~in September 2020.~~ and the 2062 Junior Debentures during the three months ended March 31, 2022.

Other expenses ~~increased~~decreased by ~~$28.2 million in 2021.~~

~~Interest and Other Expenses was $62.7~~$4.7 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$47.2 million for~~ the same period ~~in 2020. Interest expense increased by $2.4 million~~ in 2021, due primarily to ~~the addition of the 2030 Senior Notes~~a decrease in ~~September 2020. Other~~acquisition-related integration expenses, ~~increased~~partially offset by ~~$13.1 million~~an increase in ~~2021.~~miscellaneous corporate expenses.

Income Taxes

The federal corporate statutory income tax rate was 21% for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~September 30, 2020.~~March 31, 2021. The Company’s effective income tax rate differs from the federal corporate income tax rate due primarily to (1) the effects of tax-exempt investment income, (2) nontaxable income associated with the change in cash surrender value on Company-Owned Life Insurance, (3) Alternative Energy Partnership Investment tax credits, (4) a permanent difference between the amount of long-term equity-based compensation expense recognized under GAAP and the amount deductible in the computation of Federal taxable income, and (5) a permanent difference associated with nondeductible executive compensation.

Tax-exempt investment income and dividends received deductions collectively were ~~$16.4~~$6.3 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$14.3~~$5.0 million for the same period in 2020. Tax-exempt investment income and dividends received deductions collectively were $5.0 million for the three months ended September 30, 2021, compared to $4.7 million for the same period in 2020.

~~Income Taxes (continued)~~

~~The~~2021.The nontaxable increase in cash surrender value on Company-Owned Life Insurance was $18.2 million for the nine months ended September 30, 2021, compared to $9.1 million for the same period in 2020. The nontaxable increase in cash surrender value on Company-Owned Life Insurance was $7.2$8.3 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$3.3~~$4.6 million for the

Income Taxes (Continued)

same period in ~~2020.~~

2021. The Company realized net investment tax credits of ~~$58.0 million and $25.7~~$3.5 million for the ~~nine months ended and~~ three months ended ~~September 30, 2021, respectively. No investment tax credits were realized~~March 31, 2022, compared to $25.4 million for the same ~~periods~~period in ~~2020.~~

2021. The amount of expense recognized for long-term equity-based compensation expense under GAAP was $1.6 million lower than the amount that would be deductible under the Internal Revenue Code (the “IRC”) for the nine months ended September 30, 2021, compared to $10.6 million lower for the same period in 2020. The amount of expense recognized for long-term equity-based compensation expense under GAAP was $0.2$3.6 million higher than the amount that would be deductible under the IRC for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$3.5~~$1.5 million lower for the same period in ~~2020.~~

2021. The amount of nondeductible executive compensation was ~~$10.5~~$3.1 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$9.8~~$3.5 million for the same period in ~~2020. The amount of nondeductible executive compensation was $3.5 million for the three months ended September 30, 2021, compared to $2.7 million for the same period in 2020.~~2021.

Recently Issued Accounting Pronouncements

The Company has adopted all ~~other~~ recently issued accounting pronouncements with effective dates prior to January 1, ~~2021.~~2022. There were no adoptions of such accounting pronouncements during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 that had a material impact on the Company’s Condensed Consolidated Financial Statements. ~~See Note 1, “Basis of Presentation and Accounting Policies,” to the Condensed Consolidated Financial Statements for additional discussion of recently adopted accounting pronouncements.~~

Liquidity and Capital Resources

~~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. 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.

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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was:


(Dollars in Millions)	(Dollars in Millions)	Sep 30, 2021		Dec 31, 2020		(Dollars in Millions)	Mar 31, 2022		Dec 31, 2021

Term Loan due July 5, 2023		$	—	$	49.9
Senior Notes:						Senior Notes:
5.000% Senior Notes due September 19, 2022	5.000% Senior Notes due September 19, 2022	277.1		278.3		5.000% Senior Notes due September 19, 2022	$	—	$	276.7
4.350% Senior Notes due February 15, 2025	4.350% Senior Notes due February 15, 2025	448.9		448.8		4.350% Senior Notes due February 15, 2025	449.1		449.0
2.400% Senior Notes due September 30, 2030	2.400% Senior Notes due September 30, 2030	396.1		395.8		2.400% Senior Notes due September 30, 2030	396.3		396.2

3.800% Senior Notes due February 23, 2032						3.800% Senior Notes due February 23, 2032	395.1		—
5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062						5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062	144.7		—
Total Long-term Debt Outstanding	Total Long-term Debt Outstanding	$	1,122.1	$	1,172.8	Total Long-term Debt Outstanding	$	1,385.2	$	1,121.9

~~Term Loan Due 2023~~SeeNote 13, “Debt,” to the Consolidated Financial Statements for more information regarding the Company’s long-term debt.

Amended and Extended Credit Agreement

On ~~June 4, 2019,~~March 15, 2022, the Company entered into ~~a delayed-draw term loan facility with a~~an amended and extended credit agreement. The amended and extended credit agreement increased the borrowing capacity of ~~$50.0~~the existing unsecured credit agreement to $600.0 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 (and a mutual option to extendextended the maturity date ~~by one year). On~~to March ~~16, 2021,~~15, 2027. Furthermore, the amended and extended credit agreement provides for an accordion feature whereby the Company ~~repaid all~~can increase the revolving credit borrowing capacity by $200.0 million to a total of $800.0 million. There were no outstanding borrowings ~~and accrued interest on the 2023 Term Loan in the amount of $50.0 million.~~

~~Liquidity and Capital Resources (continued)~~

~~5.000% Senior Notes Due 2022~~

Infinity’s liabilities at the acquisition date included $275.0 million principal amount, 5.000% Senior Notes due September 19, 2022 (the “2022 Senior Notes”). The 2022 Senior Notes were recorded at fair value as of the acquisition date, $282.1 million, with the $7.1 million premium being amortized as a reduction to interest expense over the remaining term, resulting in an effective interest rate 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.

~~4.350% Senior Notes Due 2025~~

Kemper has $450.0 million aggregate principal of 4.350% senior notes due February 15, 2025 (the “2025 Senior Notes”) outstanding as of September 30, 2021. Kemper initially issued $250.0 million of the notes in February of 2015 and issued an additional $200 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~~credit agreement at ~~any time~~either March 31, 2022 or ~~in part from time to time at Kemper’s option at specified redemption prices.~~

~~2.400% Senior Notes Due 2030~~

On September 22, 2020, Kemper offered and sold $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. Kemper is using the net proceeds from the issuance for general corporate purposes.December 31, 2021.

Federal Home Loan Bank Agreements

Kemper’s subsidiaries, United Insurance, Trinity and Alliance are members of the FHLB of Chicago, Dallas and San Francisco, respectively. Alliance became a member of the FHLB of San Francisco in August 2020. United Insurance and Trinity became members of the FHLBs of Chicago and Dallas, respectively, in 2013. Under their memberships, United, Trinity and Alliance may borrow through the advance program of their respective FHLB. As a requirement of membership in the FHLB, United Insurance, Trinity and Alliance must maintain certain levels of investment in FHLB common stock and additional amounts based on the level of outstanding borrowings. The Company’s investments in FHLB common stock are reported at cost and included in Equity Securities at Modified Cost. The carrying value of FHLB of Chicago common stock was $14.7 million and $11.8 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The carrying value of FHLB of Dallas common stock was $3.4 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The carrying value of FHLB of San Francisco common stock was $1.7 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The Company periodically uses short-term FHLB borrowings for a combination of cash management and risk management purposes, in addition to long-term FHLB borrowings for spread lending purposes.

Liquidity and Capital Resources (Continued)

During the first ~~nine~~three months of ~~2021,~~2022, United Insurance received advances of ~~$296.9~~$208.4 million from the FHLB of Chicago and made repayments of ~~$326.0~~$57.1 million. United Insurance had outstanding advances from the FHLB of Chicago totaling ~~$378.9~~$553.1 million at ~~September 30, 2021.~~March 31, 2022. These advances were made in connection with the Company’s spread lending program. The proceeds related to these advances were used to purchase fixed maturity securities to earn incremental net investment income.

With respect to these advances, United Insurance held pledged securities in a custodial account with the FHLB of Chicago with a fair value of ~~$547.8~~$622.5 million at ~~September 30, 2021.~~March 31, 2022. 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. See Note 12, “Policyholder Obligations,” to the Condensed Consolidated Financial Statements for additional information about the United Insurance advances and related funding agreements.

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~~Kemper’s common stock, in addition to ~~the~~ $133.3 million remaining under the ~~previous authorization. The Company repurchased approximately $110.4 million and $161.7 million in 2020 and 2021, respectively, so that, as of September 30, 2021,~~August 6, 2014 authorization, bringing the remaining share repurchase authorization ~~was $171.6 million~~to approximately $333.3 million. As of March 31, 2022 the remaining share repurchase authorization under the repurchase ~~program.~~program was $171.6 million. The amount and timing of any future share repurchases under the authorization will depend on a variety of factors, including market conditions, the Company’s financial condition, results of operations, available liquidity, particular circumstances and other considerations.

~~Liquidity and Capital Resources (continued)~~

During the nine months ended September 30, 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 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.

During the three months ended ~~September 30,~~March 31, 2022 the Company did not repurchase any shares of its common stock. During the three months ended March 31, 2021 ~~Kemper~~the Company repurchased ~~and retired~~ approximately ~~40,000~~590,000 shares of its common stock under its share repurchase authorization for an aggregate cost of ~~$3.0~~$47.1 million and an average cost per share of ~~$74.79. Kemper did not repurchase any shares for the three months ended September 30, 2020.~~$79.36.

Dividends to Shareholders

Kemper paid a quarterly dividend to shareholders of $0.31 per common share in the ~~third~~first quarter of ~~2021. Cash dividends~~2022. Dividends and dividend equivalents paid were ~~$60.8~~$19.8 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Subsidiary Dividends and Capital Contributions

Various state insurance laws restrict the ability of Kemper’s insurance subsidiaries to pay dividends without regulatory approval. Such insurance laws generally restrict the amount of dividends paid in an annual period to the greater of statutory net income from the previous year or 10% of statutory capital and surplus. Kemper’s insurance subsidiaries collectively ~~paid $319.0 million in~~did not pay any dividends to Kemper during the first ~~nine~~three months of ~~2021.~~2022. Kemper estimates that its direct insurance subsidiaries would be able to pay approximately ~~$101.3~~$128.6 million in additional dividends to Kemper during the remainder of ~~2021~~2022 without prior regulatory approval.

Sources and Uses of Funds

Kemper and its direct non-insurance subsidiaries directly held cash and investments totaling ~~$330.6~~$318.3 million at ~~September 30, 2021,~~March 31, 2022, compared to ~~$733.2~~$233.9 million at December 31, ~~2020.~~2021.

The primary sources of funds available for repayment of Kemper’s indebtedness, repurchases of common stock, future shareholder dividend payments and the payment of interest on Kemper’s senior notes and term loan, include cash and investments directly held by Kemper, receipt of dividends from Kemper’s insurance subsidiaries and borrowings under the credit agreement and from subsidiaries.

The primary sources of funds for Kemper’s insurance subsidiaries are premiums, investment income, proceeds from the sales and maturity of investments, advances from the FHLBs of Chicago, Dallas and San Francisco, and capital contributions from Kemper. The primary uses of funds are the payment of policyholder benefits under life insurance contracts, claims under property and casualty insurance contracts and accident and health insurance contracts, the payment of commissions and general expenses, the purchase of investments and repayments of advances from the FHLBs of Chicago, Dallas and San Francisco.

Generally, there is a time lag between when premiums are collected and when policyholder benefits and insurance claims are paid. During periods of growth, property and casualty insurance companies typically experience positive operating cash flows and are able to invest a portion of their operating cash flows to fund future policyholder benefits and claims. During periods in which premium revenues decline, insurance companies may experience negative cash flows from operations and may need to

Liquidity and Capital Resources (Continued)

sell investments to fund payments to policyholders and claimants. In addition, if the Company’s property and casualty insurance subsidiaries 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, which could result in either investment gains or losses. Management believes that its property and casualty insurance subsidiaries maintain adequate levels of liquidity in the event that they were to experience several future catastrophic events over a relatively short period of time.

~~Net Cash Provided by Operating Activities was $307.6 million~~Information about the Company’s cash flows for ~~the nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~compared to $251.3 million for the same period in 2020.~~is presented below.

Net Cash Used by Financing Activities was $294.9 million for the nine months ended September 30, 2021, compared to net cash provided of $433.4 million for the same period in 2020. Repayments of long-term debt used $50.0 million of cash for the nine months ended September 30, 2021. Policyholder Obligations used $30.0 million of cash for the nine months ended September 30, 2021, compared to net cash provided of $199.4 million for the same period of 2020. Cash of $161.7 million for the nine months ended September 30, 2021 was used to repurchase common stock, compared to $110.4 million used for the same period of 2020.

~~Liquidity and Capital Resources (continued)~~

Kemper used $60.8 million of cash to pay dividends for the nine months ended September 30, 2021, compared to $59.3 million of cash used to pay dividends in the same period of 2020. The quarterly dividend rate was $0.31 per common share for the third quarter of 2021, compared to $0.30 per common share in the same period of 2020.


DOLLARS IN MILLIONS	March 31, 2022		March 31, 2021
Net Cash Provided by (Used in) Operating Activities	$	(18.2)	$	140.6
Net Cash Provided by (Used in) Investing Activities	(225.1)		311.7
Net Cash Provided by (Used in) Financing Activities	392.4		(111.0)

Cash available for investment activities in total is dependent on cash flow from Operating Activities and Financing Activities and the level of cash the Company elects to maintain.

Cash Provided by (Used in) Operating Activities

Net ~~Cash Used in Investing~~cash used by Operating Activities was ~~$99.0~~$18.2 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$469.3~~generating $140.6 million of net cash for the same period in 2021, a decrease of $158.8 million. Cash from operating activities decreased primarily due to higher paid losses within the P&C business in 2022 due to an increase in frequency and rising loss costs from increased severity trends caused by rising inflation and supply chain constraints. This is partially offset by higher premium collections due to the acquisition of AAC in the second quarter of 2021.

Cash Provided by (Used in) Investing Activities

Net cash used by Investing Activities for the three months ended March 31, 2022 was $225.1 million, compared to cash provided of $311.7 million for the same period in ~~2020. Short-term investing activities~~2021, a decrease of $536.8 million. This was primarily due to the sale of short-term investments in 2021 to fund the cash acquisition of AAC. The Company also had increased net purchases of fixed maturities, mostly funded by higher proceeds from sales, calls and maturities of the existing fixed maturity portfolio and sales of equity securities.

Cash Provided by (Used in) Financing Activities

Net cash provided ~~$715.1 million of cash~~by Financing Activities for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022 was $392.4 million, compared to cash used of ~~$147.9~~$111.0 million for the same period in ~~2020. Fixed Maturities investing activities used cash~~2021, an increase of ~~$306.6 million for~~$503.4 million. This was primarily due to the nine months ended September 30, 2021, compared to $302.7 million for the same period in 2020. Investing activities associated with Equity Securities used cash of $18.7 million for the nine months ended September 30, 2021, compared to net cash provided of $120.7 million for the same period in 2020. The Company used $100.0 million of cash to purchase company-owned life insurance during eachissuance of the ~~nine months ended September 30, 2021~~2032 Senior Notes and ~~2020. Net cash used for~~2062 Junior Debentures, partially of offset by the ~~acquisition and development~~redemption of ~~software and long-lived assets was $43.9 million for~~ the ~~nine months ended September 30, 2021, compared~~2022 Senior Notes. Additionally, the Company increased its net advances under the FHLB spread-lending program due to ~~$46.2 million for the same period~~a more attractive interest rate environment in ~~2020.~~2022.

Critical Accounting Estimates

Kemper’s subsidiaries conduct their operations in two industries: property and casualty insurance and life and health insurance. Accordingly, the Company is subject to several industry-specific accounting principles under GAAP. The preparation of financial statements in accordance 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. The process of estimation is inherently uncertain. Accordingly, actual results could ultimately differ materially from the estimated amounts reported in a company’s financial statements. Different assumptions are likely to result in different estimates of reported amounts.

The Company’s critical accounting policies most sensitive to estimates include the valuation of investments, the valuation of reserves for property and casualty insurance incurred losses and LAE, the assessment of recoverability of goodwill and the valuation of pension benefit obligations. The Company’s critical accounting policies are described in the MD&A included in the ~~2020~~2021 Annual Report. There have been no material changes to the information disclosed in the ~~2020~~2021 Annual Report with respect to these critical accounting estimates and the Company’s critical accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company’s disclosures about market risk in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk of Part II of the ~~2020~~2021 Annual Report. Accordingly, no disclosures about market risk have been made in Item 3 of this Form 10-Q.

Item 4. Controls and Procedures

(a)Evaluation of disclosure controls and procedures.

The Company’s management, with the participation of Kemper’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on such evaluation, Kemper’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by Kemper in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC’s rules and forms, and accumulated and communicated to the Company’s management, including Kemper’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)Changes in internal control over financial reporting.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Items not listed here have been omitted because they are inapplicable or the answer is negative.

Item 1. Legal Proceedings

Information concerning pending legal proceedings is incorporated herein by reference to Note 16, “Contingencies,” to the Condensed Consolidated Financial Statements in Part I of this Form 10-Q.

Item 1A. Risk Factors

For a discussion of the Company’s significant risk factors, see Item 1A. of Part I of the ~~2020~~2021 Annual Report. Readers are also advised to consider other factors not presently known by, or considered material to, the Company that could materially affect the Company’s business, financial condition and results of operations, along with other information disclosed in the ~~2020~~2021 Annual Report and this Quarterly Report on Form 10-Q, including the factors set forth under the caption “Caution Regarding Forward-Looking Statements” beginning on page 1 of the ~~2020~~2021 Annual Report and on page 1 of this Quarterly Report on Form 10-Q, and to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.

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

AsOn May 6, 2020, Kemper’s Board of ~~January 1, 2021,~~Directors authorized the ~~Company had $333.3~~repurchase of up to an additional $200.0 million of ~~remaining shares authorized under the repurchase program. During the three months ended September 30, 2021,~~ Kemper ~~repurchased and retired approximately 40,000 shares of its~~ common stock, in ~~open market transactions~~addition to the $133.3 million remaining under ~~its~~the August 6, 2014 authorization, bringing the remaining share repurchase authorization ~~for an aggregate cost of $3.0 million and average cost per share of $74.79.~~to approximately $333.3 million. As of ~~September 30,~~December 31, 2021, the remaining share repurchase authorization was $171.6 million under the repurchase program. During the quarter ended March 31, 2022, Kemper did not repurchase any shares. As of March 31, 2022, the remaining share repurchase authorization was $171.6 million under the repurchase program.

~~Shares purchased during~~All purchases were made in the ~~three months ended September 30, 2021 were as follows:~~

Total Maximum
Number of Shares Dollar Value of Shares
Average Purchased as Part that May Yet Be
Total Price of Publicly Purchased Under
Number of Shares Paid per Announced Plans the Plans or Programs
Period Purchased Share or Programs (Dollars in Millions)
July 2021 40,123 $ 74.79 40,123 $ 171.6
August 2021 — $ — — $ 171.6
September 2021 — $ — — $ 171.6
open market in accordance with applicable federal securities laws, including Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934.

7061

Item 6. Exhibits

The Exhibit Index that follows has been filed as part of this report. Exhibit numbers correspond to the numbering system in Item 601 of Regulation S-K.

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
Kemper Corporation Amended and Restated Bylaws, effective August 4, 2021
8-K 001-18298 3.1 August 5, 2021
31.1
Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14(a)
X
31.2
Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14(a)
X
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
X
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
X
101.1 XBRL Instance Document X
101.2 XBRL Taxonomy Extension Schema Document X
101.3 XBRL Taxonomy Extension Calculation Linkbase Document X
101.4 XBRL Taxonomy Extension Label Linkbase Document X
101.5 XBRL Taxonomy Extension Presentation Linkbase Document X
101.6 XBRL Taxonomy Extension Definition Linkbase Document X
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File Number

Exhibit

Filing Date

Filed or Furnished Herewith

4.1

Second Supplemental Indenture, dated as of February 23, 2022, by and between the Company and U.S. Bank Trust Company, National Association

8-K

001-18298

4.2

February 23, 2022

4.2

Third Supplemental Indenture, dated as of March 10, 2022, by and between the Company and U.S. Bank Trust Company, National Association

8-K

001-18298

4.2

March 10, 2022

10.1

Third Amended and Restated Credit Agreement, dated as of March 15, 2022, by and among the Company, as the borrower, the lenders and issuing banks from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent

8-K

001-18298

10.1

March 17, 2022

18.1

Preferability letter from Deloitte & Touche LLP regarding change in accounting principle

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

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

101.1

XBRL Instance Document

101.2

XBRL Taxonomy Extension Schema Document

101.3

XBRL Taxonomy Extension Calculation Linkbase Document

101.4

XBRL Taxonomy Extension Label Linkbase Document

101.5

XBRL Taxonomy Extension Presentation Linkbase Document

101.6

XBRL Taxonomy Extension Definition Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

7163

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Kemper Corporation

Date:	~~October 28, 2021~~May 2, 2022	/s/ JOSEPH P. LACHER, JR.
		Joseph P. Lacher, Jr.
		Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

Date:	~~October 28, 2021~~May 2, 2022	/s/ JAMES J. MCKINNEY
		James J. McKinney
		Executive Vice President and Chief Financial Officer ~~(Principal~~ (Principal Financial Officer)

Date:	~~October 28, 2021~~May 2, 2022	/s/ ANASTASIOS OMIRIDIS
		Anastasios Omiridis
		Senior Vice President and Deputy Chief Financial Officer (Principal Accounting Officer)

7264


	Three Months Ended September 30, 2021
(Dollars and Shares in Millions, Except Per Share Amounts)	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
Balance, June 30, 2021	63.6	$	6.4	$	1,770.9	$	1,985.9	$	543.0	$	4,306.2


Net Income (Loss)	—	—		—		(75.3)		—		(75.3)
Other Comprehensive Income (Loss), Net of Taxes (Note 9)	—	—		—		—		(63.6)		(63.6)
Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)	—	—		—		(19.7)		—		(19.7)
Repurchases of Common Stock (Note 10)	(0.1)	—		(1.1)		(1.9)		—		(3.0)

Shares Issued Under Employee Stock Purchase Plan	0.1	—		1.4		—		—		1.4
Equity-based Compensation Cost	—	—		6.1		—		—		6.1
Equity-based Awards, Net of Shares Exchanged	0.1	—		(0.3)		(0.6)		—		(0.9)

Balance, September 30, 2021	63.7	$	6.4	$	1,777.0	$	1,888.4	$	479.4	$	4,151.2


	Three Months Ended September 30, 2020
(Dollars and Shares in Millions, Except Per Share Amounts)	Number of Shares	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
Balance, June 30, 2020	65.3	$	6.5	$	1,792.5	$	1,891.6	$	497.3	$	4,187.9


Net Income (Loss)	—	—		—		122.3		—		122.3
Other Comprehensive Income (Loss), Net of Taxes (Note 9)	—	—		—		—		51.7		51.7
Cash Dividends and Dividend Equivalents to Shareholders ($0.30 per share)	—	—		—		(19.7)		—		(19.7)


Shares Issued Under Employee Stock Purchase Plan	—	—		1.2		—		—		1.2
Equity-based Compensation Cost	—	—		6.1		—		—		6.1
Equity-based Awards, Net of Shares Exchanged	0.1	—		(1.3)		(0.7)		—		(2.0)

Balance, September 30, 2020	65.4	$	6.5	$	1,798.5	$	1,993.5	$	549.0	$	4,347.5


(Dollars in Millions)
Remainder of 2021	$	6.3
2022	24.1
2023	21.2
2024	15.4
2025	10.3
2026 and Thereafter	34.4
Total Future Payments	$	111.7
Less Imputed Interest	13.8
Present Value of Minimum Lease Payments	$	97.9


				Total	Maximum
				Number of Shares	Dollar Value of Shares
		Average		Purchased as Part	that May Yet Be
	Total	Price		of Publicly	Purchased Under
	Number of Shares	Paid per		Announced Plans	the Plans or Programs
Period	Purchased	Share		or Programs	(Dollars in Millions)
July 2021	40,123	$	74.79	40,123	$	171.6
August 2021	—	$	—	—	$	171.6
September 2021	—	$	—	—	$	171.6