Kemper Corporation (NYSE: KMPR) reported net income of $73.7 million, or $1.14 per diluted share, for the third quarter of 2024, compared to a net loss of $146.3 million, or $(2.28) per share, for the third quarter of 2023.

Adjusted Consolidated Net Operating Income¹ was $105.0 million, or $1.62 per diluted share, for the third quarter of 2024, compared to Adjusted Consolidated Net Operating Loss¹ of $27.8 million, or $(0.44) per share, for the third quarter of 2023.

Key themes of the quarter include:

• Delivered another quarter of strong financial results generating a 10.8% ROE and a 16.7% Adjusted ROE¹
• Specialty P&C continues to demonstrate strong profitable growth; underlying combined ratio¹ of 91.3%
• Specialty P&C achieved 4.5% sequential quarter PIF growth
• Life business continued to generate strong return on capital and distributable cash flows
• Parent liquidity remains strong at $1.3 billion; repurchased $25 million of stock, expect to retire $450 million of senior notes due February 2025

“We achieved another strong quarter of operating and financial results,” said Joseph P. Lacher, Jr., President and CEO. “This was led by our Specialty Auto business, which generated solid underwriting performance and sequential PIF growth. We are well positioned to continue to deliver on our promises and create long-term shareholder value.”

*NOTE: In third quarter 2023, the Company finalized the establishment of Kemper Reciprocal, an Illinois-domiciled reciprocal insurance exchange that began writing policies in September 2023. The results of Kemper Reciprocal are consolidated under US GAAP.

Unless specified otherwise, discussion of our third quarter 2024 results is focused on net income attributable to Kemper Corporation common shareholders, which does not include financial results from Kemper Reciprocal that are presented within the condensed consolidated financial results in this release.

Revenues

Total revenues for the third quarter of 2024 decreased $20.5 million, or 1.7 percent, to $1,178.9 million, compared to the third quarter of 2023, mostly driven by a $76.4 million decrease from our Preferred Insurance business, reported as Non-Core Operations, due primarily to lower volumes resulting from the decision to exit and run-off the business in the third quarter of 2023 as well as ongoing profit improvement actions. The decrease was partially offset by the absence of net realized losses on derivative transactions recorded in 2023 and a $28.6 million increase in Specialty Property & Casualty Insurance segment earned premiums driven by higher new business volumes and higher average earned premium per exposure resulting from rate increases.

Segment Results

Unless otherwise noted, (i) the segment results discussed below are presented on an after-tax basis, (ii) prior-year development includes both catastrophe and non-catastrophe losses and LAE, (iii) catastrophe losses and LAE exclude the impact of prior-year development, (iv) loss ratio includes loss and LAE, and (v) all comparisons are made to the prior year quarter unless otherwise stated.

The Specialty Property and Casualty Insurance segment reported adjusted net operating income of $103.6 million for the third quarter of 2024, compared to an adjusted net operating loss of $33.2 million in the third quarter of 2023. This increase was due primarily to lower adverse prior year development and an improvement in the Underlying Combined Ratio¹. The segment’s Underlying Combined Ratio¹ was 91.3 percent compared to 100.5 percent in the third quarter of 2023. The improvement was primarily driven by higher average earned premiums per exposure resulting from rate increases and lower underlying claim frequency.

The Life Insurance segment reported adjusted net operating income of $15.0 million for the third quarter of 2024, compared to an adjusted net operating income of $14.7 million in the third quarter of 2023.

Capital

Total Kemper Corporation Shareholders’ Equity at the end of the quarter was $2,773.3 million, an increase of $268.1 million, or 11 percent, since year-end 2023 primarily driven by net income for the year. Kemper and its direct non-insurance subsidiaries ended the quarter with cash and investments of $503.7 million, and $477.0 million of available borrowing capacity under the revolving credit agreement.

On August 6, 2024, Kemper announced that its Board of Directors declared a quarterly dividend of $0.31 per share, or $20.3 million. The dividend was paid on September 3, 2024, to its shareholders of record as of August 19, 2024.

Kemper ended the quarter with a book value per share of $43.30, an increase of 11 percent from $39.08 at the end of 2023. Adjusted book value per share¹ was $27.88 at the end of the quarter, compared to $25.39 at the end of 2023.

Unaudited Condensed Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2024 and 2023 are presented below.

Unaudited business segment revenues for the three and nine months ended September 30, 2024 and 2023 are presented below.

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

Unaudited selected financial information for the Life Insurance segment follows.

Use of Non-GAAP Financial Measures

Adjusted Consolidated Net Operating Income (Loss)¹ is an after-tax, non-GAAP financial measure and is computed by excluding from Net Income (Loss) attributable to Kemper Corporation the after-tax impact of:

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

(ii) Net Realized Investment Gains (Losses);

(iii) Impairment Losses;

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

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

(vi) Goodwill Impairment Charges;

(vii) Non-Core Operations; and

(viii) 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) attributable to Kemper Corporation. There were no applicable significant non-recurring items that Kemper excluded from the calculation of Adjusted Consolidated Net Operating Income (Loss)¹ for the three and nine months ended September 30, 2024 or 2023.

Kemper believes that Adjusted Consolidated Net Operating Income (Loss)¹ 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. Change in Fair Value of Equity and Convertible Securities, Net Realized Investment Gains (Losses) and Impairment Losses related to investments included in Kemper’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 Kemper’s investments, the timing of which is unrelated to the insurance underwriting process. Acquisition and Disposition Related Transaction, Integration, Restructuring and Other 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 Settlement and Other Charges relate to (i) loss from early extinguishment of debt, which is driven by Kemper’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 Kemper, 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. Goodwill Impairment Charges are excluded because they are infrequent and non-recurring charges. Non-Core Operations includes the results of our Preferred Insurance business which we expect to fully exit. These results are excluded because they are irrelevant to our ongoing operations and do not qualify for Discontinued Operations under Generally Accepted Accounting Principles ("GAAP"). Significant non-recurring items are excluded because, by their nature, they are not indicative of Kemper’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 profitability of Kemper’s businesses.

A reconciliation of Net Income (Loss) attributable to Kemper Corporation to Adjusted Consolidated Net Operating Income (Loss)¹ for the three and nine months ended September 30, 2024 and 2023 is presented below.

Diluted Adjusted Net Operating Income (Loss) per Unrestricted Share¹ is a non-GAAP financial measure computed by dividing Adjusted Net Operating Income (Loss)¹ attributed to unrestricted shares by the weighted-average unrestricted shares and equivalent shares outstanding. The most directly comparable GAAP financial measure is Diluted Net Loss per Unrestricted Share.

A reconciliation of Diluted Net Income (Loss) per Unrestricted Share to Diluted Adjusted Net Operating Income (Loss) per Unrestricted Share¹ for the three and nine months ended September 30, 2024 and 2023 is presented below.

Return on Adjusted Shareholders' Equity¹ is a calculation that uses a non-GAAP financial measure. It is calculated by dividing the period’s net income attributable to Kemper Corporation by the average shareholders’ equity excluding net unrealized gains and losses on fixed maturities, the change in discount rate on future life policyholder benefits and goodwill. Return on Shareholders’ Equity is the most directly comparable GAAP measure. We use this non-GAAP measure to identify and analyze the change in performance attributable to management efforts between periods. Kemper believes this non-GAAP financial measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily capital market conditions, the magnitude and timing of which are not influenced by management. Kemper believes it enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers. The “Return on Adjusted Shareholders’ Equity” metric was referred to as “Return on Tangible Shareholders’ Equity” in prior periods.

A reconciliation of Return on Shareholders’ Equity to Return on Adjusted Shareholders’ Equity¹ is presented below:

Underlying Combined Ratio¹ is a non-GAAP financial measure. It 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.

Kemper believes Underlying Losses and LAE and the Underlying Combined Ratio are useful to investors and uses these financial measures to reveal the trends in Kemper’s Property & Casualty Insurance segment that may be obscured by catastrophe losses and prior-year reserve development. These catastrophe losses may cause Kemper’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 Kemper’s insurance products in the current period. Kemper believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing Kemper’s underwriting performance.

Adjusted Book Value Per Share¹ is a calculation that uses a non-GAAP financial measure. It is calculated by dividing shareholders’ equity after excluding the after-tax impact of net unrealized gains and losses on fixed income securities, the change in discount rate on future life policyholder benefits and goodwill by total Common Shares Issued and Outstanding. Book value per share is the most directly comparable GAAP financial measure. Kemper uses the trends in book value per share excluding the after-tax impact of net unrealized gains and losses on fixed income securities, the change in discount rate on future life policyholder benefits and goodwill in conjunction with book value per share to identify and analyze the change in net worth excluding goodwill attributable to management efforts between periods. Kemper believes the non-GAAP financial measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily capital market conditions, the magnitude and timing of which are not influenced by management. Kemper believes it enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers. The “Adjusted Book Value Per Share” metric was referred to as “Tangible Book Value Per Share” in prior periods.

A reconciliation of Book Value Per Share to Adjusted Book Value Per Share¹ is presented below: