Kemper Corporation -- Moody’s rates Kemper's senior notes Baa3
Rating Action:
Moody’s rates Kemper's senior notes Baa3
15 February 2022
New York, February 15, 2022 – Moody’s Investors Service (“Moody’s”) has assigned a Baa3 rating
to $400 million of senior unsecured notes being issued by Kemper Corporation (NYSE: KMPR) off
its multi-purpose shelf registration. Net proceeds from the offering are expected to be used to repay
approximately $275 million of senior notes due September 2022 of Infinity Property and Casualty
Corporation and for general corporate purposes. The rating outlook for Kemper remains unchanged
at stable.
RATINGS RATIONALE
According to Moody's, Kemper’s ratings and stable outlook reflect Kemper's diversified revenues
and earnings from its nonstandard personal auto insurance and life businesses, its profitable home
service insurance business, solid risk-adjusted subsidiary capitalization, and high-quality fixed
income portfolio. Credit challenges include the group's limited scale relative to larger competitors,
weak profitability in its personal auto business given higher auto repair costs, higher used vehicle
prices and increasing miles driven as the economy reopens. Other challenges include the group's
exposure to natural catastrophes in its homeowners business as well as low growth opportunities in
the home service life insurance business.
For 2021, Kemper reported a net loss of $120.5 million compared to net income of $409.9 million
in 2020, primarily driven by poor performance in its nonstandard auto insurance business. The
Specialty P&C segment, which primarily consists of nonstandard personal auto business, produced
progressively higher underlying combined ratios over the course of 2021, reaching 119.4% in the
fourth quarter. Kemper Specialty P&C's results were driven by higher auto parts and labor repair
costs, by higher used vehicle prices, and by the reopening of the economy following a suspension
of rate increases during the pandemic. The company began filing for rate increases in Q3 2021 and
expects to continue to raise rates in 2022 to help offset rising loss costs.
Moody's expects Kemper's earnings to improve gradually as it will take time for rate increases
to be approved by regulators, for policies to be renewed at higher rates, and for higher premium
rates to be earned over time. Kemper's financial leverage remains moderate, with strong long-term
earnings coverage. The holding company maintains good liquidity with cash and investments of
$233.9 million, $191.2 million of dividend capacity from insurance subsidiaries without regulatory
approval, and $400 million available under the company's revolving credit facility as of year-end
2021. Following the issuance and subsequent maturity of the September 2022 notes, the company's
pro forma financial leverage will remain in the mid-20% range, within Moody’s expectations.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Factors that could lead to a rating upgrade include: an upgrade of the financial strength ratings of
the P&C and/or Life and Health companies; strong P&C operating performance with combined ratios
in the mid-90s or lower; adjusted financial leverage below 25% and interest coverage 6x or greater.
Factors that could lead to a rating downgrade include: a downgrade of the financial strength ratings
of the P&C and/or Life and Health companies; sustained combined ratios greater than 105%; or,
adjusted financial leverage above 35% and interest coverage below 4x.
Moody's has assigned the following ratings:
Kemper Corporation:
Senior Unsecured Debt at Baa3
The rating outlook for Kemper remains unchanged at stable.
Kemper Corporation, based in Chicago, Illinois, is a publicly-traded, diversified company with
subsidiaries engaged in Property & Casualty Insurance and Life and Health Insurance. For 2021,
Kemper reported total revenue of $5.8 billion and a net loss of $120.5 million. Shareholders' equity
as of December 31, 2021 was about $4.0 billion.
The methodologies used in this rating were Property and Casualty Insurers Methodology published
in September 2021 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBC_1254163
, and Life Insurers Methodology published in September 2021 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1254133
. Alternatively,
please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
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researchdocumentcontentpage.aspx?docid=PBC_79004
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Financial Institutions Group
Moody's Investors Service, Inc.
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Sarah Hibler
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
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