AM Best revises outlook to negative for Kemper Corporation, its affiliates and subsidiaries

OLDWICK, NJ–(BUSINESS WIRE)–AM Best revised the outlook from stable to negative and affirmed the financial strength rating (FSR) of A (Excellent) and the long-term issuer credit rating (Long-term ICR) of “a” (Excellent) of the subsidiaries property and casualty insurance companies affiliated with Kemper Corporation (Kemper Corp.) [NYSE: KMPR], collectively referred to as Kemper Property & Casualty Group (Kemper P&C). AM Best also revised the outlook from stable to negative and affirmed the FSR of A (Excellent) and the long-term ICR of “a” (Excellent) for the life/health subsidiaries of Kemper Corp., collectively known as Kemper Life. & Health Group (Kemper L&H) (Chicago, IL). At the same time, AM Best revised the outlook from stable to negative and affirmed the long-term ICR and long-term issue credit ratings (long-term IR) of “bbb” (good) and long-term IR indicative terms of Kemper Corp. , the ultimate parent, headquartered in Chicago, IL. AM Best also revised the outlook from negative to stable and confirmed the long-term ICR and long-term IR of “bbb” (good) for Infinity Property and Casualty Corporation (Infinity) (headquarters in Birmingham, AL). See below for a detailed list of all companies and ratings.

Kemper P&C’s ratings reflect the strength of its balance sheet, which AM Best describes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). Kemper L&H’s ratings reflect the strength of its balance sheet, which AM Best rates as the strongest, as well as its adequate operating performance, neutral business profile and appropriate ERM.

Regarding the parent company, AM Best notes that Kemper Corp. continues to benefit from a leverage profile that remains within AM Best’s guidelines for current rating levels, as well as a favorable liquidity profile from the holding company. Additional financial flexibility through access to debt and equity capital markets, despite reduced dividend capacity of subsidiary businesses due to operating losses and lower statutory capitalization at the end of 2021, is another positive rating factor.

The negative rating outlook for Kemper P&Cthe main scoring unit of the groupand for Kemper Corp., as well as for Infinity, whose debt is guaranteed by Kemper Corp. and matures in September 2022, primarily consider the significant deterioration in earnings of Kemper P&C and Kemper Corp. overall in 2021. This deterioration in earnings has resulted in lower operating and holding company capital levels, and the likelihood of continued earnings weakness and the potential for further capital erosion in 2022 remain a concern for AM Best.

The sharp deterioration in underwriting performance was underpinned by a sharp increase in the severity of claims in the motor business, which accounts for approximately 95% of Kemper P&C’s premium volume, largely reflecting significant chain issues. supply, labor shortages and inflationary pressures. The automotive sector also experienced higher claims costs, as well as higher claims frequency, particularly in the second half of 2021. Kemper L&H reported a positive net profit of $28.2 million in 2021, down significant from $60.0 million in 2020, primarily reflecting higher pandemic-related life insurance mortality.

The negative outlook for Kemper Corp. follow those of Kemper P&C, the main rating unit.

The negative outlook for Kemper L&H primarily reflects the significantly smaller scale of this operation within the organization, and AM Best’s view that its credit profile is therefore a function of its intrinsic strength and that of its P&C insurance affiliate and holding company.

A return to stronger profitability and improved capital strength of Kemper P&C and Kemper Corp. could lead to a revision of the outlook to stable; conversely, continued earnings weakness or capital erosion at Kemper P&C and Kemper Corp. could lead to rating downgrades.

The FSR of A (Excellent) and the long-term ICRs of “a” (Excellent) have been confirmed with a revised outlook from negative to stable for members of the Kemper Property & Casualty Group:

  • Trinity Universal Insurance Company

  • Alpha P&C Insurance Company

  • Capitol County Mutual Fire Insurance Company

  • Charter Indemnity Company

  • Financial Compensation Society

  • Infinity Insurance Company

  • Infinity Assurance Insurance Company

  • Infinity Car Insurance Company

  • Infinity Property and Casualty Insurance Company

  • Infinity Indemnity Insurance Company

  • Infinity Preferred Insurance Company

  • Infinity Safeguard Insurance Company

  • Infinity Security Insurance Company

  • Infinity Select Insurance Company

  • Infinity Standard Insurance Company

  • Infinity County Mutual Insurance Company

  • Kemper Independence Insurance Company

  • Merastar Insurance Company

  • Fire Savings Mutual

  • Kemper Financial Compensation Society

  • Former reliable accident insurance company

  • Answer insurance company

  • Answer Worldwide Direct Auto Insurance Company

  • Response Global Insurance Company

  • National Union Fire Insurance Company

  • United Casualty Insurance Company of America

  • Unitrin Advantage Insurance Company

  • Unitrin Home and Auto Insurance Company

  • Unitrin County Mutual Insurance Company

  • Unitrin Direct Insurance Company

  • Unitrin Direct Property & Casualty Company

  • Unitrin Preferred Insurance Company

  • Unitrin Safeguard Insurance Company

  • Valley Damage Insurance Company

  • Warner Insurance Company

The FSR of A (Excellent) and the long-term KPIs of “a” (Excellent) have been confirmed with a revised outlook from negative to stable for members of Kemper Life & Health Group:

  • United Assurance Company of America

  • Life Savings Mutual

  • The Reliable Life Insurance Company

  • National Union Life Insurance Company

  • National Reserve Insurance Company

The following long-term IR has been confirmed, with the outlook revised from stable to negative:

Kemper Corporation—

— “bbb” (good) on $450 million 4.35% senior unsecured notes, due 2025

— “bbb” (good) on $400 million 2.4% senior unsecured notes, due 2030

The following indicative long-term IRs have been confirmed with the outlook revised to negative from stable for shelf check-in:

Kemper Corporation—

— “bbb” (good) on senior unsecured debt

— “bbb-” (Good) on subordinated debt

— “bb+” (fair) on preferred shares

The following long-term IR has been confirmed, with an outlook revised from stable to negative:

Infinity Property and Casualty Corporation—

— “bbb” (good) on $275 million 5% senior unsecured notes due September 2022

This press release relates to credit ratings that have been published on AM Best’s website. For all ratings information relating to the release and relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit AM Best’s Recent Ratings Activity webpage. For more information on the use and limitations of credit rating opinions, please see Best’s Guide to Credit Ratings. For more information on the proper use of Best’s Credit Scores, Best’s Preliminary Credit Scores, and AM Best’s press releases, please see Guide to the Proper Use of Best Scores and Ratings.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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