Kemper Corporation Annual Report 2021

FY2021 Annual Report · Kemper Corporation

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Kemper Corporation
Annual Report

2021

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

Financial Highlights

Earned Premiums
Dollars in Millions

Earnings Per Diluted Share
Dollars Per Share

Book Value Per Share
Dollars Per Share

Net Income (Loss)

Adj. Net Operating Income (Loss)

BVPS

Adj. BVPS1

1 Adjusted Consolidated Net Operating Income (Loss)

1 Book value per share excluding net unrealized
gains on fixed maturities and goodwill

Return on Average
Shareholders’ Equity
Percentage

ROAE

Adj. ROAE1

Cash Flow From
Operating Activities
Dollars in Millions

1 Rolling 12 months return on book value per share excluding net
unrealized gains on fixed maturities and goodwill

A Message from Joe Lacher
President, Chief Executive Officer and Chairman
Kemper Corporation

To Our Shareholders,

In 2021, we continued to collectively witness and experience the extraordinary
catastrophe of a global pandemic. This resulted in an unpredictable and
challenging environment.

At Kemper, we did our best to navigate through the tough
conditions and address the challenges 2021 presented.
Unfortunately, our resulting earnings for the year were
disappointing. That said, I’m immensely proud of our team
and organization for not only how we’ve responded to the
circumstances of the last two years, but also for what we’ve
accomplished over the last six years to strengthen Kemper.

nearly all our systems to reduce expenses and improve
efficiency and service to our customers. We closed on two
significant acquisitions, achieving our integration milestones
and exceeding our financial targets on the first and are
well underway on the second. We’ve added over 4,500
employees to our team and created a culture of ownership
that encourages inspiration and motivation.

When I joined Kemper in late 2015, the company was facing
a set of challenges related to undefined strategic focus,
financial underperformance, and poor execution. We had
a great deal of unrealized potential and the opportunity
to unlock our true value to build systematic, sustainable,
competitive advantages. We set a clear direction, developed
a realistic strategic intent and plan, and focused on effective
execution to meet the needs of our stakeholders.

Since that time, a lot has changed for the better and we’ve
achieved a great deal to transform the company. Our stock
price at year-end 2015 was $37, and was $59 at year-end
2021. Our market cap was $1.9 billion and at year end was
over $3.7 billion. Our tangible book value per share, adjusted
for dividends, grew 41% from $28.83 at year-end 2015 to
$40.79 at year-end 2021. We’ve returned over $650 million
in capital to our shareholders and our revenues have grown
from $2.3 billion to over $5.8 billion over the past six years.
Our Specialty Auto business has become an industry leader
in its space and our Life & Health business has returned to a
growing franchise. We’ve replaced, upgraded and integrated

I note these achievements primarily because our ability to
create a stable financial foundation, strong balance sheet,
and resilient business model has enabled us to traverse
these unprecedented times. Property and casualty insurers
have had, and continue to have, some unique obstacles
to overcome. In auto insurance, historically, there has
been a rough balance between loss cost inflation and rate
increases. The dramatic frequency reductions at the start
of the pandemic masked the underlying loss inflation that
was building. While accident frequency was historically
low, Kemper, along with most major companies, delivered
premium rebates to customers and there was an extended
period with effectively no rate increases.

The 2021 emergence from lockdowns led to rapid increases
in auto accident frequency and severity which, coupled with
supply chain disruptions and labor shortages, has produced
loss cost inflation at levels not seen in 40 years. We’ve seen
COVID-related mortality spikes impact our life business
during the same time period. These macro economic factors,
although to a degree anticipated, have had wide-reaching

Kemper 2021 Annual Report | 1

implications and impacts for the insurance sector. Most
notably, we’ve experienced deep margin pressure due to
auto insurance rates that are not aligned with the sharp
increases in loss costs, and these factors are reflected in
our 2021 financial results.

Our cost advantage, attention
to this underserved market, and
increasing product sophistication are
the cornerstones for success in the

“
Specialty segment. “

Simply put, the system is out of equilibrium. In some ways,
it’s like turning off the water supply to your house during
a remodeling project. When you turn the supply back on,
water doesn’t immediately flow smoothly from each tap.
Instead, you hear some clanking, you get some air, some
spray, some gurgling and a few surges of water before the

normal flow is reestablished. You need to turn on all the
taps in the house to re-prime the pipes running to each
faucet. It requires some work and some time before
equilibrium is restored.

Among these events, we have seen steadily increasing
demand for our products. This is the result of our
strong focus on empowering specialty and underserved
consumer markets by providing affordable and easy-to-use
personalized financial protection to individuals, families,
and businesses. Our business model is built on dynamic
capabilities and tailored to our specialized consumer targets.
This not only protects existing market share but helps us
grow organically by serving a unique customer base with
segments experiencing population growth that exceeds the
U.S. average.

Our portfolio provides enhanced capital efficiency, reduced
costs, better returns over time, and the ability to achieve
enhanced organic growth, all at lower risk to stakeholders.
Our model is built to consistently overcome unprecedented
adversity—similar to what we’ve experienced over the last
two years—and outperform the competition in these crucial
metrics over time.

2 | Kemper 2021 Annual Report

2021 Results

We incurred adjusted operating losses of $219 million during
the year, or ($3.40) per diluted share, compared
with $439 million, or $6.57 per diluted share, in 2020.
The net loss was $121 million, or ($1.87) per diluted share,
compared to net income of $410 million, or $6.14 per diluted
share, in 2020. Despite these results, we continued to
produce strong cash flow, generating over $350 million
of cash from operations.

We remain strong, and our team will
continue to deliver on our promises
and provide attractive, long-term

“
intrinsic value for our shareholders.“

We enter 2022 with the ability to leverage a strong financial
foundation to produce a roadmap toward restoring our
return-on-equity to low double digits while continuing to
make key investments. We remain strong, and our team will
continue to deliver on our promises and provide attractive,
long-term intrinsic value for our shareholders.

Kemper 2021 Annual Report | 3

the year making significant progress in restoring equilibrium.
As we move through 2022, and the pandemic likely shifts
to an endemic, further corrective initiatives will return us
to profitability.

This process will take time to reflect in our book of
business through both new business and policy renewals.
We will meet these challenges by leveraging our robust
business model and financial position to meet the needs
of our customers.

In our Specialty Auto business, we focus on underserved
groups of customers whose demand for our products
remains strong. Our cost advantage, attention to this
underserved market, and increasing product sophistication
are the cornerstones for success in the Specialty segment.

We continue to work toward improving results in our
Preferred segment. Continued profit improvement actions
through underwriting, pricing and exposure management
will bring us closer to our desired results.

For a second year, our Life & Health segment results were
impacted by pandemic-related mortality which remains in
line with domestic trends. We are hopeful that increased
vaccination acceptance in 2022 and variants such as
Omicron with lower death rates will contribute toward
normalizing mortality. Our Life business did, however,
produce favorable results with high policy retention
and strong new policy sales. This demand sustains our
confidence in our outlook as we continue to emerge from
the pandemic.

Business Performance
In our Property & Casualty segments, as noted earlier, the
re-opening of our country led to additional increases in loss
costs due to frequency returning to pre-pandemic levels and
higher severity. The challenges of a disrupted supply chain,
labor shortages, and inflation have impacted vehicle repairs,
rental rates, and other expenses impacting claim costs
and future reserves. The nature of our business, combined
with our data superiority, has helped us identify the trends
impacting claims earlier than others and swiftly respond.

“

We’ve seen steadily increasing
demand for our products, the result
of our strong focus on empowering
specialty and underserved consumer
markets by providing affordable and
easy-to-use personalized financial
protection to individuals, families,
and businesses.

“

We immediately implemented non-rate actions and
took steps to obtain rate increases as the most effective
measures toward restoring profits. Following the regulatory
process in the states where we operate, in the third and
fourth quarter the P&C teams filed for approximately 11
points of rate on 56% of our personal auto books, and closed

4 | Kemper 2021 Annual Report

Social Responsibility and
our Communities
We continue to take a dedicated and focused approach
to address the environmental, social and governance
(ESG) aspects of our organization. There are numerous
opportunities in our operations to make an impact in each
of the ESG areas, and we made strong progress in 2021
in the areas of governance and oversight, sustainability,
and investing.

Providing needed support to the communities where we
live and work is not only a critical part of our values but our
responsibility as a good corporate citizen. In 2021, our total
impact to partner organizations and local communities
related to our Education, Health and Community
Development pillars was over $3 million. I encourage you to
read more about our efforts directed toward our community
support and ESG efforts on the following pages.

Kemper 2021 Annual Report | 5

Our People
Exceptional people are a vital component of exceptional
companies; strategies are only as good as the individuals
who execute them. The progress Kemper made during the
past year was a direct result of the collective dedication and
talent our employees bring to the company.

We consider our ability to attract, develop and retain great,
diverse people to our team to be a strength and meaningful
competitive advantage. In 2021, we continued to establish
Kemper as a great place to work by investing in the careers
and well-being of our associates. Our focus on providing
opportunities for our employees to enhance their abilities
and skill sets was evident in new and robust training and
development programs. In addition, we enhanced our
menu of employee benefits to ensure a comprehensive and
competitive offering.

Our ownership culture empowers our employees to take
accountability for their roles and responsibilities through

6 | Kemper 2021 Annual Report

I’m immensely proud of our team and
organization for not only how we’ve
responded to the circumstances of
the last two years, but also for what
we’ve accomplished over the last six

“
years to strengthen Kemper. “

key behaviors around analytic superiority, pervasive
intellectual curiosity and being world-class operators.
It is through this culture that emphasizes a meritocracy
and motivates our team to higher performance and
engagement, and in turn is recognized and rewarded by
our managers.

The Long Term
Those of us in the insurance industry know our business
has an important mission and purpose: when people have
their worst day, we help them put things back together. We
respond to their crises. We have a responsibility to be there
for them, to deliver on what we promised. There’s nobility
and dignity in that. It speaks to a higher purpose, and it’s an
honor and a privilege to fulfill that purpose.

We must be and remain strong to deliver on our promises to
customers. In 2022, we will be laser-focused on recovering
profitability and restoring margins. Implementing proactive
corrective measures over the near-term will ensure the
business remains well-positioned for attractive long-term
growth and value creation for our stakeholders.

Our balance sheet provides long-term financial stability, and
our substantial capital and liquidity positions will enable
us to navigate and optimize within changing environments.
Although we expect the journey to take time, we will
continue to make investments that make sense to bolster
our systematic, sustainable competitive advantages and
enable us to be ready for accelerated growth when we are
well-positioned to flip the switch.

I am honored to lead an organization that continues to
demonstrate the perseverance and energy to advance
our mission despite the short-term challenges created by
the pandemic. From our employees who have enduring
dedication and commitment to deliver on our strategic
intent, to our leadership that continues to stand alongside
our teams to elevate and inspire, and through the
unwavering support of our Board of Directors, I look forward
to our collective dedication in leading the company into a
successful future.

Joseph P. Lacher, Jr.
President, Chief Executive Officer and Chairman
Kemper Corporation

Kemper 2021 Annual Report | 7

Social Products and Services
Kemper serves growing specialty and underserved markets
by providing affordable and easy-to-use personalized
insurance and financial solutions to individuals, families,
and businesses. We earn and maintain customer loyalty
with competitive prices, consistent and timely product
availability matching unique and evolving needs, and delivery
on customer expectations in every interaction. Paramount
to Kemper’s success is ensuring that we understand risk
and how we can help customers manage risk, and in further
developing our expertise in risks related to catastrophes and
severe weather events.

Responsible Investing
As an insurer, the primary purpose of Kemper’s investment
portfolio is to fund future claim payments. As such, we take
a risk-adjusted approach to investing to ensure our capital
is adequate to support varying economic climates. Kemper
understands the value and potential impact to investment
returns of environmental, social and governance factors, and
they are considered when relevant in researching, analyzing,
and making investment decisions.

Talent Management, Diversity and Inclusion
We offer a positive work environment where employment
decisions are based on merit and free from explicit or implicit
biases. We strive to ensure this environment is free

Kemper and ESG
Kemper has a long-standing commitment to ensure we take
a meaningful approach to how we engage with customers,
employees, shareholders, suppliers and communities, how
we impact the environment, and how we lead and govern our
organization. Doing this well improves and strengthens who
we are as individuals and as an organization and how we do
business.

Our management and Board of Directors have a
responsibility to create shareholder value by thoughtful
stewardship of capital. This is accomplished by addressing
the needs of key stakeholders, including customers,
employees and our communities. Our Board takes a
proactive approach to monitoring the Company’s ESG
efforts to ensure decisions regarding business, operations
and financial strategy maximize long-term sustainability.
Kemper’s Board of Directors, in the form of the Governance
Committee, has oversight of the ESG program and receives
quarterly updates provided by senior leadership. Additionally,
our ESG Steering Committee is responsible for setting the
overall strategic direction of our ESG program, and our ESG
Program Office is responsible for day-to-day implementation,
development and application of best practices, and broad
reporting responsibilities.

Environmental Sustainability
Kemper’s Sustainability Committee reports to the ESG
Steering Committee and is composed of leadership
representing key functional areas across the organization.
This team sets the overall sustainability strategy by
reviewing short- and long-term objectives and opportunities
related to operational efficiency, enterprise risk, and
sustainability initiatives.

Doing Our Part
We continue to seek and find ways to run our business in
environmentally friendly ways. We lease or own more than
127,000 square feet of LEED-certified (Leadership in Energy
and Environmental Design) space. As we add new locations,
we strive to align with LEED certifications and utilize
efficient and renewable energy sources, including
installation of solar panels.

Currently, over 900,000 pounds of materials are recycled
annually in our locations, and our fleet of 550 vehicles is
stocked with newer models that feature improved fuel
economy and reduced CO2 emissions.

8 | Kemper 2021 Annual Report

of harassment of any type, and is fostered by compensation
programs that attract, motivate and retain high-performing
talent. Kemper’s “act like an owner” culture and pay-for-
performance stance provides awards based on individual and
enterprise performance, regardless of gender, race or any
other protected classification.

Our diversity and inclusion efforts include programs and
policies that encourage an inclusive workplace where all
colleagues have the opportunity to reach their potential
and own their career while contributing to the success
of the Company. Kemper is also committed to providing
opportunities for diverse suppliers to partner with us through
an inclusive approach to procurement. Our expanding
supplier diversity program allows us to create a stronger
universe of suppliers in the communities we serve and better
enables us to track progress and spends in the marketplace.

Governance
Kemper’s Board of Directors is composed of a majority of
independent directors and has been since 2003. The Board
believes a range of perspectives is important to effective
corporate governance and, accordingly, is committed to

diversity in the boardroom, as currently represented by
four directors. Contributing to the diversity of the Board
of Directors is one of the criteria considered in assessing
candidates for Board membership.

The Audit Committee of our Board of Directors oversees
the Company’s independent auditors, financial statement
integrity, internal control adequacy, and internal audit
function, while the Risk Committee of the Board of Directors
oversees the effectiveness of the Company’s compliance and
ethics programs.

Kemper’s Enterprise Risk Committee (ERC), composed of
senior management, provides oversight of enterprise and
business unit risk management activities, and establishes risk
appetites and tolerances. The ERC also reviews enterprise
principles, guidelines and limits for Kemper’s significant risks,
watches for emerging risks, and monitors the strategies and
actions management takes to control these risks. We factor
climate risks into our enterprise risk management framework,
which applies risk-return principles, governance, modeling
and analytics and transparent management dialogue.

Kemper 2021 Annual Report | 9

Giving Back to
Our Communities
Kemper is committed to strengthening the communities
where our employees and customers live and work. It’s not
only our responsibility as a good
corporate citizen, it’s at the heart
of our organizational values.

In 2021, the collective impact
of our philanthropic efforts totaled over $3 million. In
collaboration with our philanthropic partner, The Kemper
Foundation, we donated nearly $2 million to local
organizations through grants and sponsorships. Additionally,
our employees made donations and raised funds for their
community organizations, and also devoted their time and
talents to volunteering for community service projects and
nonprofit organizations.

The Pillars of Kemper Philanthropy
Kemper supports our local communities and nonprofits
through charitable grants, sponsorships and in-kind
contributions. We focus our philanthropic efforts on
improving the quality of people’s lives in three key areas:

• Education
• Community Development
• Health

Education
We aim to inspire and empower people of all ages to
achieve their full potential, and provide financially
supportive opportunities to develop the next generation
of business leaders.

To this end, in partnership with The Kemper Foundation, the
Kemper Scholars Program provides need-based scholarships
and career navigation resources for high-potential diverse
college students with a strong interest in insurance and
financial service careers. Further, Kemper Scholar partner
schools receive faculty grants and other diversity, equity
and inclusion support. The program also helps eligible
students develop into strong leaders with rewarding careers
by offering summer and academic-year paid internships at
Kemper’s local offices.

10 | Kemper 2021 Annual Report

Community Development
Kemper partners with organizations that advance social
justice, civil rights, and improve access to food and housing
for underserved Americans.

In 2021, Kemper supported national organizations to help
further advance racial equality and economic opportunities
for Latinos and African Americans in local communities.
UnidosUS is a national civil rights and advocacy organization
that works to promote the economic, political, and social
advancement of Latinos. The National Urban League has
been elevating living standards for African Americans and
other historically underserved groups for over 120 years.

Our commitment to improving access to food and housing
translated into Kemper employees building homes for
Habitat for Humanity and supporting Feeding America food
banks throughout the country. For instance, Kemper donated
$100,000 to 12 local food banks, providing more than 1.2
million meals to families. Thanks to employee donations and
corporate matches, our holiday food drives alone provided
30,000 meals to local children and families.

Health
Our health-focused philanthropic efforts gained
tremendous momentum in 2021. We partnered with leading
organizations—the American Cancer Society, the American
Heart Association, and the Juvenile Diabetes Research
Foundation—that accelerate medical research, address
patient and caregiver needs, and advance medical and
disease education.

American Cancer Society
Kemper proudly champions
the American Cancer Society’s
efforts to fight for a world
without cancer. In 2021, Kemper
supported the organization
through sponsored events for critical fundraising, charitable
grants, in-kind contributions, and employee giving and
volunteering. Our advocacy was extended by Kemper
employees in nine cities who participated in Making Strides
Against Breast Cancer walks.

JDRF International
Kemper stands with
JDRF International
in its fight against
type 1 diabetes
(T1D) through research funding, advocating for policies that
accelerate access to new therapies, and providing a support
network for millions of people impacted by T1D. Kemper is a
key supporter of T1 Detect, JDRF’s screening and monitoring
education and awareness program, which provides resources
and support for screening and monitoring for T1D, and
introduces a pathway for universal screening to increase
access for underserved, uninsured and under-insured
families. We are also a key sponsor for the Spanish Language
Care Kits campaign, a free resource providing information
and tools to educate, support and inspire newly diagnosed
children, caregivers and adults with T1D.

American Heart
Association
Kemper partners with the
American Heart Association
to help fight heart disease and
stroke with the goal of saving and improving lives.
We support the association’s Go Red for Women Movement
which includes its Go Red for STEM event. In 2021, Kemper
employees volunteered as virtual mentors to young women
of color in high school at Chicago public schools and
who have an interest in science, technology, engineering
and math.

Employee Volunteering
and Giving
Offering our employees the ability to connect with their
community elevates their work experience and engagement
within the community. Our colleagues make all the difference
in helping us strengthen our local communities through our
Kemper Cares employee volunteer program. Employees
are able to support not only Kemper-sponsored community
service events but those they have a personal interest in as
well through personal donation and volunteering efforts.

Our Kemper Cares Ambassador Program provides
opportunities for employees in Kemper locations across
the country to lead local community service events, act as a
liaison between Kemper and the community, and advocate
for local philanthropic efforts.

Kemper 2021 Annual Report | 11

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

☒

☐

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

For the fiscal year ended December 31, 2021

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

Commission file number: 001-18298
Kemper Corporation
(Exact name of registrant as specified in its charter)

DE
(State or other jurisdiction of
incorporation or organization)

95-4255452
(I.R.S. Employer
Identification No.)

200 E. Randolph Street
Suite 3300

Chicago

(Address of principal executive offices)

60601
(Zip Code)

(312) 661-4600
(Registrant’s telephone number, including area code)

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

Title of each class
Common Stock, $0.10 par value per share

Trading Symbol(s)
KMPR

Name of each exchange on which registered
NYSE

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

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

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

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

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

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

Large accelerated filer

☒ Accelerated filer

☐ Non-accelerated filer

☐

Smaller reporting company

☐ Emerging growth company

☐

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

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

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

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

Registrant had 63,688,550 shares of common stock outstanding as of February 8, 2022.

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

DOCUMENTS INCORPORATED BY REFERENCE

Table of Contents

Caution Regarding Forward-Looking Statements..................................................................................................

Part I

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

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities..............................................................................................................................
Item 6.
Selected Financial Data.......................................................................................................................
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations .............
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................................................
Item 8.
Financial Statements and Supplementary Data...................................................................................
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............
Item 9A. Controls and Procedures .....................................................................................................................
Item 9B. Other Information................................................................................................................................

Part III

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance..................................................................
Executive Compensation.....................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters.............................................................................................................................................
Certain Relationships and Related Transactions, and Director Independence....................................
Principal Accounting Fees and Services .............................................................................................

Part IV

Item 15.

Item 16.

Exhibits, Financial Statement Schedules ............................................................................................
Form 10-K Summary

Exhibit Index ..........................................................................................................................................................
Power of Attorney ..................................................................................................................................................
Signatures ...............................................................................................................................................................
Financial Statement Schedules:

4
18
26
26
26
26

27
29
30
66
68
138
138
139

140
140

140
141
141

142
142

143
148
148

Schedule 1 - Investments Other than Investments in Related Parties................................................................
Schedule 2 - Parent Company Financial Statements .........................................................................................
Schedule 3 - Supplementary Insurance Information..........................................................................................
Schedule 4 - Reinsurance Schedule ...................................................................................................................

SCH I-1
SCH II-1
SCH III-1

SCH IV-1

Caution Regarding Forward-Looking Statements

This 2021 Annual Report on Form 10-K (the “2021 Annual Report”), including, but not limited to, the accompanying
consolidated financial statements of Kemper Corporation (“Kemper” or the “Registrant”) and its subsidiaries (individually and
collectively referred to herein as the “Company”) and the notes thereto appearing in Item 8 herein (the “Consolidated Financial
Statements”), the Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Item 7
herein (the “MD&A”) and the other Exhibits and Financial Statement Schedules filed as a part hereof or incorporated by
reference herein, may contain or incorporate by reference information that includes or is based on forward-looking statements
within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.

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

Any or all forward-looking statements may turn out to be wrong, and, accordingly, Kemper cautions readers not to place undue
reliance on such statements. Kemper bases these statements on current expectations and the current economic environment as of
the date of this 2021 Annual Report. They involve a number of risks and uncertainties that are difficult to predict. These
statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied
in the forward-looking statements. Forward-looking statements can be affected by inaccurate assumptions or by known or
unknown risks and uncertainties that may be important in determining the Company’s actual future results and financial
condition.

In addition to the factors discussed below under Item 1A., “Risk Factors,” in this 2021 Annual Report, the reader should
consider the following list of 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 COVID-19
(“COVID-19”);

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

Governmental actions, including, but not limited to, implementation of new laws and regulations, and court decisions
interpreting existing and future laws and regulations or policy provisions;

Uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications,
dividends from insurance subsidiaries, acquisitions of businesses and other matters within the purview of state
insurance regulators;

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

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 COVID-19 and associated
governmental responses;

•

•
•

The impact of inflation on insurance claims, including, but not limited to, the effects on personal injury claims of
increasing medical costs and the effects on property claims attributed to scarcity of resources available to rebuild
damaged structures, including labor and materials and the amount of salvage value recovered for damaged property;

The rising costs of insurance claims from increased and more targeted litigation, higher jury awards, broader
definitions of liability, and other effects of societal trends referred to as social inflation;

Developments related to insurance policy claims and coverage issues, including, but not limited to, interpretations,
pronouncements or decisions by courts or regulators that may govern or influence losses incurred in connection with
hurricanes and other catastrophes, including COVID-19;

Orders, interpretations or other actions by regulators that impact the reporting, adjustment and payment of claims;
Changes in the pricing or availability of reinsurance, or in the financial condition of reinsurers and amounts
recoverable therefrom;

Factors related to the Company’s ability to compete

•

Changes in the ratings of Kemper and/or its insurance company subsidiaries by rating agencies with regard to credit,
financial strength, claims paying ability and other areas on which the Company is rated;

The level of success and costs incurred in realizing or maintaining economies of scale, integrating acquired businesses
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 related to the business environment in which Kemper and its subsidiaries operate

•

Changes in general economic conditions, including those related to, without limitation, performance of financial
markets, interest rates, inflation, unemployment rates, significant global catastrophes such as the COVID-19 outbreak
and subsequent global pandemic, and fluctuating values of particular investments held by the Company;

Absolute and relative performance of investments held by the Company;

Changes in insurance industry trends and significant industry developments;

Changes in consumer trends, including changes in number of miles driven by automobile insurance policyholders, and
significant consumer or product developments;

Changes in capital requirements, including the calculations thereof, used by regulators and rating agencies;

Regulatory, accounting or tax changes that may affect the cost of, or demand for, the Company’s products or services
or after-tax returns from the Company’s investments;
The impact of required participation in state windpools and joint underwriting associations, residual market
assessments and assessments for insurance industry insolvencies, 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, including impacts related to COVID-19. Kemper assumes no obligation to correct or update any forward-looking
statements publicly for any changes in events or developments or in the Company’s expectations or results subsequent to the
date of this 2021 Annual Report. Kemper advises the reader, however, to consult any further disclosures Kemper makes on
related subjects in its filings with the SEC.

Item 1.

Business.

PART I

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

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

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

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

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

General

Property and Casualty Insurance Business

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

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

Specialty Property & Casualty Insurance

The Specialty Property & Casualty Insurance segment, based in Chicago, Illinois, conducts business in 34 states under the
Kemper Auto brand. As shown in the following table, three states provided 90% of the segment’s premium revenues in 2021.

State
California ..................................................................................................................................................................

Florida ......................................................................................................................................................................
Texas ........................................................................................................................................................................

Percentage
of Total
Premiums

57 %

18 %
15 %

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

Preferred Property & Casualty Insurance

The Preferred Property & Casualty Insurance segment, based in Chicago, Illinois, conducts business in 45 states and the District
of Columbia. As shown in the following table, five states provided 64% of the segment’s premium revenues in 2021.

State
California ..................................................................................................................................................................

New York .................................................................................................................................................................

Texas ........................................................................................................................................................................

North Carolina ..........................................................................................................................................................

Connecticut ..............................................................................................................................................................

Percentage
of Total
Premiums

20 %

10 %

8 %

6 %

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

Property and Casualty Loss and Loss Adjustment Expense Reserves

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

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

DOLLARS IN MILLIONS
Business Segments:

2021

2020

Specialty Property & Casualty Insurance ............................................................................................. $ 2,319.7
Preferred Property & Casualty Insurance .............................................................................................
433.2
Life & Health Insurance........................................................................................................................
3.6
Total Business Segments...........................................................................................................................
2,756.5
Unallocated Reserves ................................................................................................................................
16.2
Total Property & Casualty Insurance Reserves......................................................................................... $ 2,772.7

$ 1,544.8
411.6
4.6
1,961.0
21.5
$ 1,982.5

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

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

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

Catastrophe Losses

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

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

Reinsurance

The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical
diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or
limitations to coverages and deductibles for certain perils in such regions and reinsurance. To limit its exposures to catastrophic
events, the Company maintains a catastrophe reinsurance program for the property and casualty insurance companies. Coverage
for the catastrophe reinsurance program is provided in various layers through multiple excess of loss reinsurance contracts and
an aggregate excess property catastrophe reinsurance contract. The Company’s insurance subsidiaries also purchase reinsurance
from the Florida Hurricane Catastrophe Fund (the “FHCF”) for hurricane losses in Florida at retentions lower than those
described below for the Company’s catastrophe reinsurance program.

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

Multi-year Excess of Loss Reinsurance Contracts

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

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

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

Annual Excess of Loss Reinsurance Contract

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

Summary of Excess of Loss Reinsurance Contracts

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

DOLLARS IN MILLIONS
Retained ........................................................................................................................ $
1st Layer of Coverage...................................................................................................

2nd Layer of Coverage .................................................................................................
3rd Layer of Coverage..................................................................................................
4th Layer of Coverage ..................................................................................................

Catastrophe Losses
and LAE

In Excess of

— $

50.0
150.0
250.0
325.0

Up to

50.0

150.0
250.0
325.0
350.0

Combined
Percentage
of Coverage

— %

95.0
95.0
95.0
95.0

The estimated annual premium in 2022 for the three multi-year excess of loss reinsurance contracts and the 2022 Annual
Excess of Loss Contracts presented in the preceding table is $16.7 million. In the event that the Company’s incurred catastrophe
losses and LAE covered by its catastrophe reinsurance program exceed the retention for a particular layer, the program allows
for one reinstatement of such coverage. In such an instance, the Company is required to pay a reinstatement premium to the
reinsurers to reinstate the full amount of the limit available under such layer. The reinstatement premium for the first layer of
coverage is a percentage of the full original premium based on the ratio of the losses in excess of the Company’s retention to
the reinsurers’ coverage limit. The reinstatement premium for the second, third, and fourth layers of coverage is a percentage of
half the original premium based on the ratio of the losses in excess of the Company’s retention to the reinsurers’ coverage limit.

Aggregate Property Catastrophe Reinsurance Contract

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

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

Aggregate Catastrophe
Losses and LAE

DOLLARS IN MILLIONS
Retained .................................................................................................................................................. $
Coverage .................................................................................................................................................

In Excess of

— $

65.0

Up to

65.0

115.0

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

Other

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

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

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

Pricing

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

Competition

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

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

Measurement
Net Admitted Assets ..............................................................................................................................

Net Written Premiums ...........................................................................................................................

Capital and Surplus................................................................................................................................

Ordinal

Percentile

Rank

95 %

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

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

Life and Health Insurance Business

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

As shown in the following table, five states provided 51% of the premium revenues in this segment in 2021.

State
Texas .........................................................................................................................................................................
Louisiana ...................................................................................................................................................................

Alabama .....................................................................................................................................................................

Mississippi .................................................................................................................................................................

Georgia ......................................................................................................................................................................

Percentage
of Total
Premiums

22 %
11

Kemper Home Service Companies

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

The Kemper Home Service Companies employ nearly 2,250 career agents to distribute insurance products in 26 states and the
District of Columbia. These career agents are full-time employees who call on customers in their homes to sell insurance
products, provide services related to policies in force and collect premiums, typically monthly. Premiums average
approximately $25 per policy per month with an average face value of $6,160. Permanent and term policies are offered
primarily on a non-participating, guaranteed-cost basis. These career agents also distribute and/or service certain property
insurance products for the Kemper Home Service Companies.

Reserve National

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

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

Reinsurance

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

Lapse Ratio

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

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

Pricing

Premiums for life and health insurance products are based on assumptions with respect to mortality, morbidity, investment
yields, expenses, and lapses and are also affected by state laws and regulations, as well as competition. Pricing assumptions are
based on the experience of Kemper’s life and health insurance subsidiaries, as well as the industry in general, depending on the
factor being considered. The actual profit or loss produced by a product will vary from the anticipated profit if the actual
experience differs from the assumptions used in pricing the product.

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

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

Competition

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

Measurement
Net Admitted Assets ..............................................................................................................................

Net Written Premiums ...........................................................................................................................

Capital and Surplus................................................................................................................................

Ordinal

Percentile

Rank

78 %

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

Investments

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

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

Overview of State Regulation

Regulation

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

Approval of Policy Rates and Forms

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

Restrictions on Withdrawal, Cancellation and Nonrenewal

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

Financial Reports and Standards

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

Guaranty Funds and Risk Pools

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

Privacy and Cybersecurity Regulation

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

Gramm-Leach-Bliley Act and HIPAA

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

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

State Laws and Regulations

In recent years, state insurance regulators have focused increasing attention on cybersecurity. For example, insurance
companies are required to maintain a cybersecurity program, incident response plan and information technology system
safeguards that protect customer information under extensive cybersecurity regulations implemented by the New York
Department of Financial Services and statutes adopted by a number of states based on a model data security law adopted by the
NAIC. In addition, state insurance regulators focus significant attention on data security during financial exams, and the NAIC
has strengthened and enhanced the cybersecurity guidance included in its handbook for state insurance examiners. Additional
state laws outside of the insurance industry impose notification requirements in the event of cybersecurity breaches affecting
their residents. On the privacy front, the California Consumer Privacy Act, which took effect in 2020, requires companies to
provide privacy notices and respond to any request made to the company by a California resident regarding his or her personal
information used or maintained by the company outside the scope of the GLBA and HIPAA privacy laws. The Company
anticipates a continuing focus on new regulatory and legislative proposals at the state and federal levels that further regulate
practices regarding privacy and security of personal information.

Holding Company Regulation, Including Enterprise Risk Management and Governance

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

Dividends

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

Change in Control Requirements

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

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

Many states have made, or are in the process of making, modifications to their holding company laws. These modifications
impose new reporting requirements and substantially expand the oversight and examination powers of state insurance regulators
to assess enterprise risks within the entire holding company system that may arise from both insurance and non-insurance
subsidiaries. They also impose new reporting requirements on affiliated transactions and divestiture of a controlling interest in
an insurance subsidiary.

Other Federal Government Regulation

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

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

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

Affordable Care Act

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

Company Culture

Human Capital Management

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

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

Diversity, Equity and Inclusion

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

• Workforce: attract, develop and retain high-quality, diverse talent
• Workplace: create an inclusive organizational culture
• Marketplace: serve diverse customers and communities

Compliance and Ethics

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

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

Employee Development

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

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

Engagement with Company Culture

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

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

Total Rewards

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

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

Health insurance including medical, dental, vision and prescription drug coverage
Life and disability insurance
Tax-advantaged Flexible Spending Accounts for health care and dependent care
Health Savings Accounts for the High-Deductible Health Plan, including a company match
401(k) retirement savings program, including a company match and 100% vesting upon hire
Employee Stock Purchase Program (ESPP)
Employee Assistance & Work/Life Program (EAP)
Tuition reimbursement
Adoption assistance
Employee discount programs
Voluntary benefit programs
Leave and time off programs
Flexible work arrangements based on function and role

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• Wellness resources, including diabetes, hypertension and pregnancy support
•

Commuter benefits

Community

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

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

Education: We seek to inspire and empower people of all ages to achieve their full potential and help develop the next
generation of leaders.
Health: We seek to encourage accelerated research, address patient and caregiver needs, and advance medical and
disease education among leading organizations.
Community Development: We seek to improve access to food and housing, and advance civil rights and advocacy for
underserved Americans.

•

COVID-19 Response

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

In the fourth quarter of 2021, the Company began returning employees to offices, guided by the top priorities of ensuring the
health, safety, and well-being of our employees, agents and customers. The Company continues to adhere to local, state and
federal safety guidelines in our return-to-office and field protocol.

Item 1A.

Risk Factors.

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

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

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

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

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

The process of estimating property and casualty insurance reserves is complex and imprecise. The reserves established by the
Company are inherently uncertain estimates and could prove to be inadequate to cover its ultimate losses and expenses. The
estimate of the ultimate cost of claims for insured events that have occurred must take into consideration many factors that are
dependent on the outcome of future events associated with the reporting, investigation and settlement of claims. The impacts on
the Company’s estimates of property and casualty insurance reserves from these factors are difficult to assess accurately. A
change in any one or more of the factors is likely to result in a projected ultimate loss that is different than the previous
projected ultimate loss and may have a material impact on the Company’s estimates. Increases in the estimates of ultimate
losses and LAE will decrease earnings, while decreases in these estimates will increase earnings, as reported by the Company in
the results of its operations for the periods in which the changes to the estimates are made. See MD&A, “Critical Accounting
Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” beginning
on page 62 for a discussion of the Company’s reserving process and the factors considered by the Company’s actuaries in
estimating the Company’s Property and Casualty Insurance Reserves.

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

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

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

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

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

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

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

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

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

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

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

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

Risks Relating to Competition

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

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

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

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

•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Competitiveness of prices charged for insurance policies;
Sophistication of pricing segmentation;
Design and introduction of insurance products to meet emerging consumer trends;
Ability to attract and retain experienced industry talent;
Selection and retention of agents and other business partners;
Compensation paid to agents;
Underwriting discipline;
Selectiveness of sales markets;
Effectiveness of marketing materials and name recognition;
Product and technological innovation;
Effectiveness of online servicing platforms;
Ability to settle claims timely and efficiently;
Ability to detect and prevent fraudulent insurance claims;
Effectiveness of deployment and use of information technology across all aspects of operations;
Ability to control operating expenses;
Financial strength ratings;
Quality of services provided to, and ease of doing business with, independent agents and brokers or policyholders.

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

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

Risks Relating to Legal and Regulatory Environment

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

Kemper’s insurance subsidiaries operate under an extensive insurance regulatory system. Current laws and regulations affect a
wide variety of matters, including policy forms, premium rates, licensing, market conduct, trade practices, claims handling

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

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

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

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

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

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

Kemper has a significant concentration of personal automobile insurance business in California and Florida, and negative
developments in the regulatory,
the Company’s
profitability.

legal or economic conditions in these states may adversely affect

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Relating to Investments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

General Risks Relating to Mergers, Acquisitions and/or Divestitures

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

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

Risks Relating to COVID-19

The impact of the COVID-19 pandemic and related economic conditions have had and could continue to have a material
effect on Kemper’s results of operations, financial position and/or liquidity.

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

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

•
•

•

Decrease in overall premium volumes due to economic disruption and rising unemployment rates
Adverse impact on economic conditions, including increased rate of inflation, negative impact on employment levels,
supply chain disruptions and changing consumer patterns that could impact Kemper’s businesses
Adverse impact on investment portfolio as a result of ratings downgrades, increased bankruptcies and credit spread
widening in distressed industries
Increase in estimated credit losses on fixed maturity investments held at fair value as well as other investments and
receivables from policyholders
Higher incurred losses and LAE in Life and Health lines of business related to an increase in frequency and/or severity
of claims
Regulatory actions imposing new requirements that could result in increased costs, reduced revenues, expansion of
coverage and other effects, and additional restrictions that could affect the Company’s pricing, risk selection and

particular rights and obligations under its insurance policies and with regard to its insureds, including the ability to
cancel policies and collect premiums
Increased cybersecurity risks due to remote working arrangements and resulting changes in certain operational controls

•

Risks Relating to General Economic and Market Factors

Changes in the global economy and capital markets could adversely impact the Company’s results of operations and
financial condition.

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

• Volatility in debt and equity markets
•
•
•
•
•

Changes in interest rates
Increases in inflation
Reduced availability of credit
Economic downturns
Increased unemployment and reduced consumer spending

Stressed conditions, volatility and disruptions in global capital markets or financial asset classes could adversely affect our
investment portfolio.

Item 1B.

Unresolved Staff Comments.

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

Item 2.

Properties.

Owned Properties

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

Leased Facilities

The Company leases four floors, or approximately 92,000 square feet, in an 83-story office building in Chicago, Illinois, for its
corporate headquarters. The lease expires on December 31, 2033. Kemper’s property and casualty insurance subsidiaries lease
facilities with an aggregate square footage of approximately 578,000 at 22 locations in nine states. The latest expiration date of
the existing leases is in June 2031. Kemper’s life and health insurance subsidiaries lease facilities with aggregate square footage
of approximately 460,000 at 121 locations in 27 states. The latest expiration date of the existing leases is in December 2026.

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

Item 3.

Legal Proceedings.

Proceedings

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

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

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

PART II

Market Information

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

Holders

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

Dividends

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

DOLLARS PER SHARE
Cash Dividends Paid to Shareholders (per share) ...... $

Mar 31, 2021
0.31

Jun 30, 2021
0.31
$

Sep 30, 2021
0.31
$

Dec 31, 2021
0.31
$

Dec 31, 2021
1.24
$

Three Months Ended

Year Ended

Three Months Ended

Year Ended

DOLLARS PER SHARE
Cash Dividends Paid to Shareholders (per share) ...... $

Mar 31, 2020
0.30

Jun 30, 2020
0.30
$

Sep 30, 2020
0.30
$

Dec 31, 2020
0.30
$

Dec 31, 2020
1.20
$

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

Issuer Purchases of Equity Securities

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

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

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

Kemper Common Stock Performance Graph

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

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

Comparison of Cumulative Five Year Total Return

$200

$180

$160

$140

$120

$100

$80

12/31/16

12/31/17

12/31/18

12/31/19

12/31/20

12/31/21

Kemper Corporation

S&P MidCap 400 Index

S&P Supercomposite Insurance Index

Company / Index
Kemper Corporation.................................................... $ 100.00
S&P MidCap 400 Index..............................................
100.00
S&P Supercomposite Insurance Index........................
100.00

2016

2017
$ 158.73
116.24
115.98

2018
$ 155.07
103.36
104.77

2019
$ 183.44
130.44
134.67

2020
$ 184.98
148.26
132.92

2021
$ 144.09
184.97
172.62

Item 6.

Selected Financial Data.

[Reserved]

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

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

Summary of Results ...............................................................................................................................................................
Catastrophes ...........................................................................................................................................................................
Loss and LAE Reserve Development.....................................................................................................................................
Non-GAAP Financial Measures.............................................................................................................................................
Specialty Property & Casualty Insurance...............................................................................................................................
Preferred Property & Casualty Insurance...............................................................................................................................
Life & Health Insurance .........................................................................................................................................................
Investment Results..................................................................................................................................................................
Investment Quality and Concentrations .................................................................................................................................
Investments in Limited Liability Companies and Limited Partnerships ................................................................................
Insurance, Interest and Other Expenses..................................................................................................................................
Income Taxes..........................................................................................................................................................................
Liquidity and Capital Resources ............................................................................................................................................
Contractual Obligations..........................................................................................................................................................
Critical Accounting Estimates ................................................................................................................................................
Recently Issued Accounting Pronouncements .......................................................................................................................

31
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Kemper Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

SUMMARY OF RESULTS

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

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

For the year ended December 31, 2021, the Company estimates that its net results were negatively impacted by $485 million
related to the effects of the COVID-19 pandemic and related economic conditions. The impact to net results was 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 year ended December 31, 2020, the Company estimated an improvement to net income of $70 million related to the
effects of the COVID-19 pandemic and related economic conditions. The increase to net income was primarily attributed to
improved underwriting results driven by lower frequency in the auto business of the P&C segments as a significant reduction in
miles driven occurred, partially offset by premium credits to policyholders in the P&C segments and excess mortality in the
Life & Health Insurance segment.

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

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

DOLLARS IN MILLIONS
Net Income (Loss).................................................................... $

2021
(120.5) $

Less:

Income from Change in Fair Value of Equity and

Convertible Securities ........................................................
Net Realized Gains on Sales of Investments .........................
Net Impairment Losses Recognized in Earnings...................
Acquisition Related Transaction, Integration and Other

90.5
51.2
(8.7)

Costs...................................................................................
Debt Extinguishment, Pension and Other Charges ...............
Adjusted Consolidated Net Operating Income (Loss) ............. $

(34.7)
—
(218.8) $

Components of Adjusted Consolidated Net Operating

Income (Loss):
Segment Net Operating Income (Loss): ................................

Specialty Property & Casualty Insurance ......................... $
Preferred Property & Casualty Insurance .........................
Life & Health Insurance....................................................
Segment Net Operating Income (Loss) ....................................
Corporate and Other Net Operating Income (Loss) From:

(196.1) $
(12.5)
28.2
(180.4)

Partial Satisfaction of Judgment ............................................
Other ......................................................................................
Corporate and Other Net Operating Income (Loss) .................
Adjusted Consolidated Net Operating Income (Loss) ............. $

—
(38.4)
(38.4)
(218.8) $

Increase
(Decrease)
in Income
from 2020
to 2021

2019

Increase
(Decrease)
in Income
from 2019
to 2020

2020

409.9

(530.4) $

531.1

(121.2)

57.0
30.1
(15.4)

(50.0)
(50.6)
438.8

337.9
3.5
60.0
401.4

70.6
(33.2)
37.4
438.8

33.5
21.1
6.7

15.3
50.6
(657.6) $

(534.0) $
(16.0)
(31.8)
(581.8)

(70.6)
(5.2)
(75.8)
(657.6)

109.7
33.1
(10.9)

(14.5)
(4.6)
418.3

283.1
41.9
98.7
423.7

15.9
(21.3)
(5.4)
418.3

(52.7)
(3.0)
(4.5)

(35.5)
(46.0)
20.5

54.8
(38.4)
(38.7)
(22.3)

54.7
(11.9)
42.8
20.5

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

SUMMARY OF RESULTS (Continued)

Net Income (Loss)

2021 Compared with 2020

Net Income decreased by $530.4 million in 2021, compared to 2020, due primarily to lower Adjusted Consolidated Net
Operating Income, partially offset by income from change in fair value of equity and convertible securities. Adjusted
Consolidated Net Operating Income (Loss) decreased by $657.6 million in 2021, compared to 2020, due primarily to lower
Specialty Property & Casualty Segment Insurance Net Operating Income, Corporate and Other Net Operating Income, Life &
Health Insurance Segment Net Operating Income, and Preferred Property & Casualty Insurance Segment Net Operating
Income.

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 (Loss) decreased
due primarily to a gain recognized in 2020 for the satisfaction 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”).

The Company’s investment results were favorable in 2021, compared to 2020, primarily driven by a $33.5 million after-tax
increase from the change in fair value of the equity and convertible securities, $21.1 million after-tax increase from net realized
gains on sales of investments, and $6.7 million after-tax of decreased impairment losses. See MD&A, “Investment Results,”
MD&A, “Income Taxes,” and Note 24, “Contingencies.” to the Consolidated Financial Statements for additional discussion.

Revenues

2021 Compared with 2020

Earned Premiums were $5,253.7 million in 2021, compared to $4,672.2 million in 2020, an increase of $581.5 million. Earned
Premiums in the Specialty Property & Casualty Insurance segment increased by $613.2 million for the year ended
December 31, 2021. Earned Premiums in the Preferred Property & Casualty Insurance segment decreased by $36.5 million for
the year ended December 31, 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 by $79.1 million in 2021 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 $61.2 million for the year ended
December 31, 2021. Tax benefits related to the Alternative Energy Partnership Investments were $79.0 million, resulting in net
income attributable to Alternative Energy Partnership Investments of $17.8 million for the year ended December 31, 2021.

Other Income decreased by $89.8 million for the year ended December 31, 2021, compared to the same period in 2020. Other
Income for the year ended December 31, 2020 included a gain of $89.4 million related to the partial satisfaction of a final
judgment against Computer Sciences Corporation.

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

See MD&A, “Investment Results,” under the sub-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.

CATASTROPHES

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

CATASTROPHES (Continued)

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

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

DOLLARS IN MILLIONS
Range of Losses and LAE Per Event:

Below $5.......................................................
$5 - $10 .........................................................

$10 - $15 .......................................................

$15 - $20 .......................................................

$20 - $25 .......................................................

Greater Than $25 ..........................................

Total..............................................................

Specialty Property & Casualty Insurance........

Preferred Property & Casualty Insurance........

Life & Health Insurance ..................................

Dec 31, 2021

Year Ended

Dec 31, 2020

Dec 31, 2019

Number of
Events

Losses and
LAE

Number of
Events

Losses and
LAE

Number of
Events

Losses and
LAE

65
2

—

56.1
16.5

—

35.2

—

107.8

15.7

79.1

13.0

60
5

—

51.2
40.2

—

15.3

—

106.7

12.3

82.0

12.4

56
3

—

42.4
20.8

14.0

—

77.2

11.1

63.0

3.1

77.2

Total Catastrophe Losses and LAE .................

107.8

106.7

Catastrophe Reinsurance

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

The Company had no material recoveries under its catastrophe reinsurance treaties for the years ended December 31, 2021 and
2020. See the “Reinsurance” subsection of the “Property and Casualty Insurance Business” and “Life and Health Insurance
Business” sections of Item 1(c), “Description of Business,” and Note 21, “Catastrophe Reinsurance,” to the Consolidated
Financial Statements for additional information on the Company’s reinsurance programs.

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

LOSS AND LAE RESERVE DEVELOPMENT

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

DOLLARS IN MILLIONS
Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years:

2021

2020

2019

Non-catastrophe................................................................................................................. $

112.1

Catastrophe........................................................................................................................
Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years ...................... $

(5.4)
106.7

36.2

0.2
36.4

(54.0)

(17.1)
(71.1)

See MD&A, “Specialty Property & Casualty Insurance,” MD&A, “Preferred Property & Casualty Insurance,” MD&A, “Life &
Health Insurance,” and Note 6, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for
additional information on the Company’s reserve development. See MD&A, “Critical Accounting Estimates,” of this 2021
Annual Report for additional information pertaining to the Company’s process of estimating property and casualty insurance
reserves for losses and LAE, and the estimated variability thereof, development of property and casualty insurance losses and
LAE, and a discussion of some of the variables that may impact them.

NON-GAAP FINANCIAL MEASURES

Pursuant to the rules and regulations of the SEC, the Company is required to file consolidated financial statements prepared in
accordance with the accounting principles generally accepted in the United States (“GAAP”). The Company is permitted to
include non-GAAP financial measures in its filings provided that they are defined along with an explanation of their usefulness
to investors, are no more prominent than the comparable GAAP financial measures and are reconciled to such GAAP financial
measures.

These 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.

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.

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;

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

NON-GAAP FINANCIAL MEASURES (Continued)

(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 years ended December 31,
2021, 2020 or 2019.

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.

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

SPECIALTY PROPERTY & CASUALTY INSURANCE

Selected financial information for the Specialty Property & Casualty Insurance segment is presented below.

DOLLARS IN MILLIONS
2021
Net Premiums Written...................................................................................................... $4,057.3

Earned Premiums ............................................................................................................. $3,948.5
152.5
Net Investment Income ....................................................................................................

Change in Value of Alternative Energy Partnership Investments....................................
Other Income....................................................................................................................
Total Revenues.................................................................................................................

(29.0)
4.1
4,076.1

2020
$3,435.5

$3,335.3
114.1

—
1.8
3,451.2

2019
$3,211.3

$3,078.4
107.5

—
7.0
3,192.9

Incurred Losses and LAE related to:

Current Year:

Non-catastrophe Losses and LAE ..........................................................................
Catastrophe Losses and LAE .................................................................................

3,480.3
15.7

2,350.8
12.3

2,302.4
11.1

Prior Years:

Non-catastrophe Losses and LAE ..........................................................................

Catastrophe Losses and LAE .................................................................................

97.4

0.3

Total Incurred Losses and LAE .......................................................................................

3,593.7

Insurance Expenses ..........................................................................................................

774.5

Other Expenses.................................................................................................................

—

Operating Income (Loss)..................................................................................................

(292.1)

Income Tax Benefit (Expense).........................................................................................

96.0

15.1

0.2

2,378.4

651.9

—

420.9

(83.0)

(35.1)

0.5

2,278.9

555.6

2.5

355.9

(72.8)

Segment Net Operating Income (Loss)............................................................................ $ (196.1)

$ 337.9

$ 283.1

Ratios Based On Earned Premiums

Current Year Non-catastrophe Losses and LAE Ratio ....................................................

88.1 %

70.4 %

74.7 %

Current Year Catastrophe Losses and LAE Ratio............................................................

Prior Years Non-catastrophe Losses and LAE Ratio .......................................................

Prior Years Catastrophe Losses and LAE Ratio ..............................................................

Total Incurred Loss and LAE Ratio .................................................................................

Insurance Expense Ratio ..................................................................................................

0.4

2.5

—

91.0

19.6

0.4

0.5

—

71.3

19.5

0.4

(1.1)

—

74.0

18.0

Combined Ratio ...............................................................................................................

110.6 %

90.8 %

92.0 %

Underlying Combined Ratio
Current Year Non-catastrophe Losses and LAE Ratio ....................................................

88.1 %

70.4 %

74.7 %

Insurance Expense Ratio ..................................................................................................

19.6

19.5

18.0

Underlying Combined Ratio ............................................................................................

107.7 %

89.9 %

92.7 %

Non-GAAP Measure Reconciliation

Combined Ratio ...............................................................................................................

110.6 %

90.8 %

92.0 %

Less:

Current Year Catastrophe Losses and LAE Ratio .......................................................

Prior Years Non-catastrophe Losses and LAE Ratio ..................................................

Prior Years Catastrophe Losses and LAE Ratio..........................................................

0.4

2.5

—

0.4

0.5

—

0.4

(1.1)

—

Underlying Combined Ratio ............................................................................................

107.7 %

89.9 %

92.7 %

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

SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued)

INSURANCE RESERVES

DOLLARS IN MILLIONS
Insurance Reserves:

Dec 31,
2021

Dec 31,
2020

Non-Standard Automobile .................................................................................................................. $ 1,985.8
333.9
Commercial Automobile.....................................................................................................................

$ 1,308.3
236.5

Total Insurance Reserves ....................................................................................................................... $ 2,319.7

$ 1,544.8

Insurance Reserves:
Loss and Allocated LAE Reserves:

Case and Allocated LAE..................................................................................................................... $ 1,157.9
953.0
Incurred But Not Reported..................................................................................................................

Total Loss and LAE Reserves ...........................................................................................................
Unallocated LAE Reserves .................................................................................................................

2,110.9
208.8

744.6
653.6

1,398.2
146.6

Total Insurance Reserves ....................................................................................................................... $ 2,319.7

$ 1,544.8

See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and
Loss Adjustment Expenses” 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

2021 Compared with 2020

The Specialty Property & Casualty Insurance segment reported Segment Net Operating Loss of $196.1 million for the year
ended December 31, 2021, compared to Net Operating Income of $337.9 million in 2020. Segment net operating results
decreased by $534.0 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. 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 $613.2 million in 2021, compared to
2020 driven by the acquisition of AAC, COVID-19 related premium credits in the prior period, 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 $38.4 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 $29.0 million for the year ended
December 31, 2021. Tax benefits related to the Alternative Energy Partnership Investments were $37.4 million, resulting in net
income attributable to Alternative Energy Partnership Investments of $8.4 million for the year ended December 31, 2021.

Underlying losses and LAE as a percentage of earned premiums were 88.1% in 2021, a deterioration of 17.7 percentage points,
compared to 2020, due primarily 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.
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 $97.7 million in 2021, compared to $15.3 million in

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

SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued)

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 $15.7 million in 2021, compared to $12.3 million in 2020, an increase of $3.4 million.

Insurance expenses were $774.5 million, or 19.6% of earned premiums, in 2021, compared to $651.9 million, or 19.5% of
earned premiums, in 2020. Insurance expenses as a percentage of earned premium in 2021 included the amortization of
intangible assets arising from the acquisition of AAC, which was offset by lower earned premium in 2020 due primarily to
premium credits.

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.

Specialty Personal Automobile Insurance

Selected financial information for the specialty personal automobile insurance product line for the years ended December 31,
2021, 2020 and 2019 is presented below.

DOLLARS IN MILLIONS
Net Premiums Written ....................................................................................................... $ 3,587.2

2021

2020
$3,086.5

2019
$2,941.1

Earned Premiums............................................................................................................... $ 3,533.7

$3,031.3

$2,825.6

Incurred Losses and LAE related to: .................................................................................

Current Year:

Non-catastrophe Losses and LAE ................................................................................. $ 3,173.9

$2,160.9

$2,131.5

Catastrophe Losses and LAE ........................................................................................

14.4

11.6

9.9

Prior Years:

Non-catastrophe Losses and LAE .................................................................................

Catastrophe Losses and LAE ........................................................................................

85.0

0.3

28.0

0.2

(24.3)

0.5

Total Incurred Losses and LAE......................................................................................... $ 3,273.6

$2,200.7

$2,117.6

Ratios Based On Earned Premiums

Current Year Non-catastrophe Losses and LAE Ratio......................................................

89.8 %

71.3 %

75.4 %

Current Year Catastrophe Losses and LAE Ratio .............................................................

Prior Years Non-catastrophe Losses and LAE Ratio ........................................................

Prior Years Catastrophe Losses and LAE Ratio................................................................

0.4

2.4

—

0.4

0.9

—

0.4

(0.9)

—

Total Incurred Loss and LAE Ratio...................................................................................

92.6 %

72.6 %

74.9 %

2021 Compared with 2020

Earned Premiums on specialty personal automobile insurance increased by $502.4 million in 2021, compared to 2020, due
primarily to the acquisition of AAC, premium credits in the prior period, and higher volume. Incurred losses and LAE were
$3,273.6 million, or 92.6% of earned premiums, in 2021, compared to $2,200.7 million, or 72.6% 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. Underlying losses and
LAE as a percentage of related earned premiums were 89.8% in 2021, compared to 71.3% in 2020, a deterioration of 18.5
points 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 was $85.3 million in 2021, compared to $28.2 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 $14.4 million in 2021, compared to $11.6 million in 2020.

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

SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued)

Commercial Automobile Insurance

Selected financial information for the commercial automobile insurance product line is presented below.

DOLLARS IN MILLIONS
2021
Net Premiums Written...................................................................................................... $ 470.1

2020
$ 349.0

2019
$ 270.2

Earned Premiums ............................................................................................................. $ 414.8

$ 304.0

$ 252.8

Incurred Losses and LAE related to:

Current Year:

Non-catastrophe Losses and LAE ............................................................................... $ 306.4
1.3
Catastrophe Losses and LAE.......................................................................................

$ 189.9
0.7

$ 170.9
1.2

Prior Years:
Non-catastrophe Losses and LAE ...............................................................................
Catastrophe Losses and LAE.......................................................................................

12.4
—

(12.9)
—

(10.8)
—

Total Incurred Losses and LAE ....................................................................................... $ 320.1

$ 177.7

$ 161.3

Ratios Based On Earned Premiums

Current Year Non-catastrophe Losses and LAE Ratio ....................................................

73.9 %

62.5 %

67.6 %

Current Year Catastrophe Losses and LAE Ratio............................................................

Prior Years Non-catastrophe Losses and LAE Ratio .......................................................

Prior Years Catastrophe Losses and LAE Ratio ..............................................................

0.3

3.0

—

0.2

(4.2)

—

0.5

(4.3)

—

Total Incurred Loss and LAE Ratio .................................................................................

77.2 %

58.5 %

63.8 %

2021 Compared with 2020

Earned premiums in commercial automobile insurance increased by $110.8 million in 2021, compared to 2020, due primarily to
higher volume and premium credits in the prior period. Incurred losses and LAE were $320.1 million, or 77.2% of earned
premiums, in 2021, compared to $177.7 million, or 58.5% 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 73.9% in 2021, compared to 62.5% in 2020, a deterioration of 11.4 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 $12.4 million in 2021, compared to favorable reserve development of $12.9 million in 2020.

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

PREFERRED PROPERTY & CASUALTY INSURANCE

Selected financial information for the Preferred Property & Casualty Insurance segment is presented below.

DOLLARS IN MILLIONS
2021
Net Premiums Written...................................................................................................... $ 642.0

Earned Premiums ............................................................................................................. $ 651.7
68.6
Net Investment Income ....................................................................................................

(16.3)
—
704.0

2020
$ 653.0

$ 688.2
37.7

—
0.1
726.0

2019
$ 739.3

$ 750.3
44.1

—
—
794.4

Incurred Losses and LAE related to:

Current Year:

450.4
79.1

Prior Years:

Non-catastrophe Losses and LAE ..........................................................................

Catastrophe Losses and LAE .................................................................................

Total Incurred Losses and LAE .......................................................................................

Insurance Expenses ..........................................................................................................

Operating Income (Loss)..................................................................................................

Income Tax Benefit (Expense).........................................................................................

13.5

(5.6)

537.4

206.4

(39.8)

27.3

Segment Net Operating Income (Loss)............................................................................ $ (12.5)

400.9
82.0

20.7

(0.5)

503.1

221.1

1.8

1.7

3.5

481.8
63.0

(17.6)

(18.4)

508.8

233.3

52.3

(10.4)

41.9

Ratios Based On Earned Premiums

Current Year Non-catastrophe Losses and LAE Ratio ....................................................

69.2 %

58.3 %

64.2 %

Current Year Catastrophe Losses and LAE Ratio............................................................

Prior Years Non-catastrophe Losses and LAE Ratio .......................................................

Prior Years Catastrophe Losses and LAE Ratio ..............................................................

Total Incurred Loss and LAE Ratio .................................................................................

Insurance Expense Ratio ..................................................................................................

12.1

2.1

(0.9)

82.5

31.7

11.9

3.0

(0.1)

73.1

32.1

8.4

(2.3)

(2.5)

67.8

31.1

Combined Ratio ...............................................................................................................

114.2 %

105.2 %

98.9 %

Underlying Combined Ratio
Current Year Non-catastrophe Losses and LAE Ratio ....................................................

69.2 %

58.3 %

64.2 %

Insurance Expense Ratio ..................................................................................................

31.7

32.1

31.1

Underlying Combined Ratio ............................................................................................

100.9 %

90.4 %

95.3 %

Non-GAAP Measure Reconciliation

Combined Ratio ...............................................................................................................

114.2 %

105.2 %

98.9 %

Less:

Current Year Catastrophe Losses and LAE Ratio .......................................................

Prior Years Non-catastrophe Losses and LAE Ratio ..................................................

Prior Years Catastrophe Losses and LAE Ratio..........................................................

12.1

2.1

(0.9)

11.9

3.0

(0.1)

8.4

(2.3)

(2.5)

Underlying Combined Ratio ............................................................................................

100.9 %

90.4 %

95.3 %

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

PREFERRED PROPERTY & CASUALTY INSURANCE (Continued)

CATASTROPHE FREQUENCY AND SEVERITY

DOLLARS IN MILLIONS
Range of Losses and LAE Per Event1:

Below $5 ................................................................................................

$5 - $10 ..................................................................................................
$10 - $15 ................................................................................................
$15 - $20 ................................................................................................

$20 - $25 ................................................................................................
Greater Than $25 ...................................................................................

Total .......................................................................................................

1 Current accident year net incurred catastrophe Losses and LAE only

Dec 31, 2021

Dec 31, 2020

Number of
Events

Losses and
LAE

Number of
Events

Losses and
LAE

3
1
—

—
—

42.6

21.5
15.0
—

—
—

79.1

5
—
—

—
—

42.0

40.0
—
—

—
—

82.0

DOLLARS IN MILLIONS
Insurance Reserves:

INSURANCE RESERVES

Dec 31,
2021

Dec 31,
2020

Preferred Automobile........................................................................................................................ $

308.6

Homeowners......................................................................................................................................

Other .................................................................................................................................................

95.4

29.2

281.3

104.0

26.3

Total Insurance Reserves ....................................................................................................................... $

433.2

411.6

Insurance Reserves:

Loss and Allocated LAE Reserves:

Case and Allocated LAE.............................................................................................................. $

272.5

Incurred But Not Reported...........................................................................................................

Total Loss and LAE Reserves ...........................................................................................................

Unallocated LAE Reserves ...............................................................................................................

131.9

404.4

28.8

262.2

122.0

384.2

27.4

Total Insurance Reserves ....................................................................................................................... $

433.2

411.6

See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and
Loss Adjustment Expenses” beginning on page 62 for 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

2021 Compared with 2020

The Preferred Property & Casualty Insurance segment reported Segment Net Operating Loss of $12.5 million for the year
ended December 31, 2021, compared to Segment Net Operating Income of $3.5 million in 2020. Segment net operating results
decreased by $16.0 million due primarily to higher underlying losses and LAE as a percentage of earned premiums, partially
offset by lower catastrophe losses and LAE, lower levels of adverse loss and LAE reserve development and higher net
investment income.

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

PREFERRED PROPERTY & CASUALTY INSURANCE (Continued)

Earned Premiums in the Preferred Property & Casualty Insurance segment decreased by $36.5 million in 2021, compared to
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 $30.9 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 $16.3 million for the year ended
December 31, 2021. Tax benefits related to the Alternative Energy Partnership Investments were $21.1 million, resulting in net
income attributable to Alternative Energy Partnership Investments of $4.8 million for the year ended December 31, 2021.

Underlying losses and LAE as a percentage of earned premiums were 69.2% and 58.3% in 2021 and 2020, respectively.
Underlying losses and LAE as a percentage of earned premiums increased primarily due to severity trends caused by ongoing
supply chain issues and rising inflation. Catastrophe losses and LAE (excluding reserve development) were $79.1 million in
2021, compared to $82.0 million in 2020, which is a decrease of $2.9 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 were
four catastrophic events 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 $7.9 million in 2021, compared to $20.2
million in 2020.

Insurance expenses were $206.4 million, or 31.7% of earned premiums, in 2021, an improvement of 0.4 percentage points
compared to 2020.

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

Preferred Personal Automobile Insurance

Selected financial information for the preferred personal automobile insurance product line is presented below.

DOLLARS IN MILLIONS
2021
Net Premiums Written...................................................................................................... $ 399.9

Earned Premiums ............................................................................................................. $ 410.5

2020
$ 407.5

$ 431.7

2019
$ 468.9

$ 470.2

Incurred Losses and LAE related to:

Current Year:

Non-catastrophe Losses and LAE ...............................................................................

Catastrophe Losses and LAE.......................................................................................

Prior Years:

Non-catastrophe Losses and LAE ...............................................................................

Catastrophe Losses and LAE.......................................................................................

330.4

7.4

12.2

(0.1)

279.9

4.4

27.7

(1.0)

332.5

7.8

(8.2)

—

Total Incurred Losses and LAE ....................................................................................... $ 349.9

$ 311.0

$ 332.1

Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio ....................................................

80.4 %

64.8 %

70.6 %

Current Year Catastrophe Losses and LAE Ratio............................................................

Prior Years Non-catastrophe Losses and LAE Ratio .......................................................

Prior Years Catastrophe Losses and LAE Ratio ..............................................................

1.8

3.0

—

Total Incurred Loss and LAE Ratio .................................................................................

85.2 %

1.0

6.4

(0.2)

72.0 %

1.7

(1.7)

—

70.6 %

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

PREFERRED PROPERTY & CASUALTY INSURANCE (Continued)

2021 Compared with 2020

Earned premiums in preferred personal automobile insurance decreased by $21.2 million in 2021, compared to 2020, due
primarily to lower volume and ongoing profit improvement actions. Incurred losses and LAE were $349.9 million, or 85.2% of
earned premiums, in 2021, compared to $311.0 million, or 72.0% 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 related earned
premiums were 80.4% in 2021, compared to 64.8% in 2020, a deterioration of 15.6 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. Catastrophe losses and LAE (excluding reserve
development) were $7.4 million in 2021, compared to $4.4 million in 2020. Adverse loss and LAE reserve development
(including catastrophe loss reserve development) was $12.1 million in 2021, compared to $26.7 million in 2020.

Homeowners Insurance

Selected financial information for the homeowners insurance product line is presented below.

DOLLARS IN MILLIONS
2021
Net Premiums Written...................................................................................................... $ 208.4

Earned Premiums ............................................................................................................. $ 207.3

2020
$ 211.1

$ 220.7

2019
$ 233.1

$ 241.3

Incurred Losses and LAE related to:

Current Year:

Non-catastrophe Losses and LAE ...............................................................................

Catastrophe Losses and LAE.......................................................................................

Prior Years:

Non-catastrophe Losses and LAE ...............................................................................

Catastrophe Losses and LAE.......................................................................................

104.1

70.2

(2.6)

(3.9)

108.7

71.2

(2.8)

0.7

131.6

54.0

(2.7)

(17.0)

Total Incurred Losses and LAE ....................................................................................... $ 167.8

$ 177.8

$ 165.9

Ratios Based On Earned Premiums

Current Year Non-catastrophe Losses and LAE Ratio ....................................................

50.2 %

49.3 %

54.5 %

Current Year Catastrophe Losses and LAE Ratio............................................................

Prior Years Non-catastrophe Losses and LAE Ratio .......................................................

Prior Years Catastrophe Losses and LAE Ratio ..............................................................

33.9

(1.3)

(1.9)

32.3

(1.3)

0.3

22.4

(1.1)

(7.0)

Total Incurred Loss and LAE Ratio .................................................................................

80.9 %

80.6 %

68.8 %

2021 Compared with 2020

Earned premiums in homeowners insurance decreased by $13.4 million in 2021, compared to 2020, due primarily to lower
volume and ongoing profit improvement actions. Incurred losses and LAE were $167.8 million, or 80.9% of earned premiums,
in 2021, compared to $177.8 million, or 80.6% of earned premiums, in 2020. Incurred losses and LAE as a percentage of
earned premiums increased 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 50.2% in 2021, compared to 49.3% in 2020, a deterioration of 0.9 percentage points. Catastrophe losses
and LAE (excluding reserve development) were $70.2 million in 2021, compared to $71.2 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 $6.5 million in 2021, compared to $2.1
million in 2020.

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

PREFERRED PROPERTY & CASUALTY INSURANCE (Continued)

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 is presented below.

DOLLARS IN MILLIONS
Net Premiums Written...................................................................................................... $
Earned Premiums ............................................................................................................. $

2021
33.7
33.9

2020
34.4
35.8

$
$

2019
37.3
38.8

$
$

Incurred Losses and LAE related to:

Current Year:

Non-catastrophe Losses and LAE ...............................................................................
Catastrophe Losses and LAE.......................................................................................

Prior Years:
Non-catastrophe Losses and LAE ...............................................................................

Catastrophe Losses and LAE.......................................................................................

15.9
1.5

3.9

(1.6)

12.3
6.4

(4.2)

(0.2)

17.7
1.2

(6.7)

(1.4)

Total Incurred Losses and LAE ....................................................................................... $

19.7

14.3

10.8

Ratios Based On Earned Premiums

Current Year Non-catastrophe Losses and LAE Ratio ....................................................

46.9 %

34.3 %

45.6 %

Current Year Catastrophe Losses and LAE Ratio............................................................

Prior Years Non-catastrophe Losses and LAE Ratio .......................................................

Prior Years Catastrophe Losses and LAE Ratio ..............................................................

4.4

11.5

(4.7)

17.9

(11.7)

(0.6)

3.1

(17.3)

(3.6)

Total Incurred Loss and LAE Ratio .................................................................................

58.1 %

39.9 %

27.8 %

2021 Compared with 2020

Earned premiums in other personal insurance decreased by $1.9 million in 2021, compared to 2020. Incurred losses and LAE
were $19.7 million, or 58.1% of earned premiums, in 2021, compared to $14.3 million, or 39.9% of earned premiums, in 2020.
Underlying losses and LAE as a percentage of earned premiums were 46.9% in 2021, compared to 34.3% in 2020, a
deterioration of 12.6 percentage points. Catastrophe losses and LAE (excluding reserve development) were $1.5 million in
2021, compared to $6.4 million in 2020. Adverse loss and LAE reserve development (including catastrophe loss reserve
development) was $2.3 million in 2021, compared to favorable development of $4.4 million in 2020.

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

LIFE & HEALTH INSURANCE

Selected financial information for the Life & Health Insurance segment is presented below.

DOLLARS IN MILLIONS
Earned Premiums ................................................................................................................... $
Net Investment Income ..........................................................................................................
Change in Value of Alternative Energy Partnership Investments .........................................
Other Income .........................................................................................................................
Total Revenues.......................................................................................................................
Policyholders’ Benefits and Incurred Losses and LAE .........................................................
Insurance Expenses................................................................................................................
Operating Income (Loss) .......................................................................................................
Income Tax Benefit (Expense) ..............................................................................................
Segment Net Operating Income (Loss).................................................................................. $

2021
653.5
202.7
(15.8)
(1.3)
839.1
469.7
358.9
10.5
17.7
28.2

2020
648.7
198.8
—
0.6
848.1
442.0
334.9
71.2
(11.2)
60.0

2019
643.7
206.4
—
8.5
858.6
402.7
334.0
121.9
(23.2)
98.7

DOLLARS IN MILLIONS
Insurance Reserves:

INSURANCE RESERVES

Dec 31,
2021

Dec 31,
2020

Future Policyholder Benefits ................................................................................................................ $ 3,454.1
Incurred Losses and LAE Reserves:

Life ..................................................................................................................................................
Accident and Health ........................................................................................................................
Property ...........................................................................................................................................
Total Incurred Losses and LAE Reserves.............................................................................................

60.7
26.1
3.6
90.4
Total Insurance Reserves........................................................................................................................... $ 3,544.5

$ 3,440.5

61.1
25.9
4.6
91.6
$ 3,532.1

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 $9.3 million was recognized during 2020.

See Note 2, “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial Statements under the
sub-caption “Insurance Reserves” for additional discussion.

2021 Compared with 2020

Earned Premiums in the Life & Health Insurance segment increased by $4.8 million for the year ended December 31, 2021,
compared to 2020. Earned Premiums increased 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.

Net Investment Income increased by $3.9 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 rate on Company-Owned Life
Insurance, partially offset by lower yields on fixed income securities.

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

LIFE & HEALTH INSURANCE (Continued)

Loss related to Changes in Value of Alternative Energy Partnership Investments was $15.8 million for the year ended
December 31, 2021. Tax benefits related to the Alternative Energy Partnership Investments were $20.4 million, resulting in net
income attributable to Alternative Energy Partnership Investments of $4.6 million for the year ended December 31, 2021.

Policyholders’ Benefits and Incurred Losses and LAE increased by $27.7 million in 2021, compared to 2020, due primarily to
higher 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
frequency and severity of accident and health insurance claims as utilization of supplemental accident and health insurance
products normalized to pre-pandemic levels.

Insurance Expenses in the Life & Health Insurance segment increased by $24.0 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 $28.2 million for the year ended December 31,
2021, compared to $60.0 million in 2020.

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.

Life Insurance

Selected financial information for the life insurance product line is presented below.

DOLLARS IN MILLIONS
Earned Premiums ............................................................................................................. $

Net Investment Income ....................................................................................................
Change in Value of Alternative Energy Partnership Investments....................................

Other Income....................................................................................................................

Total Revenues.................................................................................................................

Policyholders’ Benefits and Incurred Losses and LAE ...................................................

Insurance Expenses ..........................................................................................................

Operating Income (Loss)..................................................................................................

Income Tax Benefit (Expense).........................................................................................

Total Product Line Net Operating Income (Loss)............................................................ $

2021

2020

2019

401.7

385.7

196.8

(15.0)

(1.6)

581.9

345.3

235.6

1.0

18.7

19.7

193.3

—

579.0

318.2

218.8

42.0

(5.2)

36.8

384.6

198.8

—

8.1

591.5

270.1

215.3

106.1

(20.0)

86.1

2021 Compared with 2020

Earned premiums on life insurance increased by $16.0 million in 2021, compared to 2020, due primarily to increased new
business and higher persistency. Policyholders’ benefits and incurred losses and LAE on life insurance were $345.3 million in
2021, compared to $318.2 million in 2020, an increase of $27.1 million due primarily to higher 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.

Insurance Expenses increased by $16.8 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.

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

LIFE & HEALTH INSURANCE (Continued)

Accident and Health Insurance

Selected financial information for the accident and health insurance product line is presented below.

2021

2020

2019

DOLLARS IN MILLIONS
Earned Premiums ............................................................................................................. $
Net Investment Income ....................................................................................................
Change in Value of Alternative Energy Partnership Investments....................................

Other Income....................................................................................................................
Total Revenues.................................................................................................................

Policyholders’ Benefits and Incurred Losses and LAE ...................................................
Insurance Expenses ..........................................................................................................

Operating Income (Loss)..................................................................................................
Income Tax Benefit (Expense).........................................................................................

189.9
3.6

(0.3)
0.3
193.5

96.1
91.6

5.8
(0.9)

199.3
5.0

—
0.6
204.9

95.3
91.9

17.7
(3.6)

Total Product Line Net Operating Income (Loss)............................................................ $

4.9

14.1

190.9
6.0

—
0.4
197.3

109.8
88.7

(1.2)
0.3

(0.9)

2021 Compared with 2020

Earned premiums on accident and health insurance decreased by $9.4 million in 2021, compared to 2020. Earned premiums
decreased 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. Incurred accident and health insurance losses were $96.1 million, or 50.6%
of accident and health insurance earned premiums, in 2021, compared to $95.3 million, or 47.8% of accident and health
insurance earned premiums, in 2020, due primarily to higher frequency and severity of claims as utilization of supplemental
accident and health insurance products normalized to pre-pandemic levels.

Insurance expenses decreased by $0.3 million in 2021, compared to 2020.

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

LIFE & HEALTH INSURANCE (Continued)

Property Insurance

Selected financial information for the property insurance product line is presented below.

Total Revenues.................................................................................................................
Incurred Losses and LAE related to:

2021
61.9
2.3

(0.5)
63.7

2020
63.7
0.5

—
64.2

2019
68.2
1.6

—
69.8

Current Year:

Non-catastrophe Losses and LAE ..........................................................................

Catastrophe Losses and LAE .................................................................................

Prior Years:

Non-catastrophe Losses and LAE ..........................................................................

Catastrophe Losses and LAE .................................................................................

Total Incurred Losses and LAE .......................................................................................

Insurance Expenses ..........................................................................................................

Operating Income (Loss)..................................................................................................

Income Tax Benefit (Expense).........................................................................................

Total Product Line Net Operating Income (Loss)............................................................ $

14.2

13.0

1.2

(0.1)

28.3

31.7

3.7

(0.1)

3.6

15.2

12.4

0.4

0.5

28.5

24.2

11.5

18.1

3.1

0.8

22.8

30.0

17.0

(2.4)

9.1

(3.5)

13.5

Ratios Based On Earned Premiums

Current Year Non-catastrophe Losses and LAE Ratio ....................................................

23.0 %

23.8 %

26.5 %

Current Year Catastrophe Losses and LAE Ratio............................................................

Prior Years Non-catastrophe Losses and LAE Ratio .......................................................

Prior Years Catastrophe Losses and LAE Ratio ..............................................................

21.0

1.9

(0.2)

19.5

0.6

0.8

4.5

1.2

Total Incurred Loss and LAE Ratio .................................................................................

45.7 %

44.7 %

33.4 %

2021 Compared with 2020

Earned premiums on property insurance decreased by $1.8 million in 2021, compared to 2020, due primarily to a lower volume.
Incurred losses and LAE on property insurance were $28.3 million, or 45.7% of earned premiums, in 2021, compared to $28.5
million, or 44.7% earned premiums, in 2020. Underlying losses and LAE were $14.2 million, or 23.0% of property insurance
earned premiums, in 2021, compared to $15.2 million, or 23.8% of property insurance earned premiums, in 2020, a decrease of
0.8 percentage points due primarily to lower claim severity. Catastrophe losses and LAE (excluding loss reserve development)
were $13.0 million in 2021, compared to $12.4 million in 2020. Catastrophe losses and LAE increased $0.6 million due
primarily to higher frequency and severity of catastrophe claims. Adverse loss and LAE reserve development was $1.1 million
in 2021, compared to $0.9 million in 2020.

Insurance expenses increased $7.5 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.

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

INVESTMENT RESULTS

Net Investment Income

Net Investment Income for the years ended December 31, 2021, 2020 and 2019 is presented below.

DOLLARS IN MILLIONS
Investment Income:

2021

2020

2019

Interest on Fixed Income Securities .................................................................................. $
Dividends on Equity Securities Excluding Alternative Investments ................................
Alternative Investments:

277.7
15.9

289.8
15.4

299.4
22.9

Equity Method Limited Liability Investments.............................................................
Limited Liability Investments Included in Equity Securities ......................................
Total Alternative Investments ...........................................................................................
Short-term Investments .....................................................................................................
Loans to Policyholders ......................................................................................................
Real Estate.........................................................................................................................
Other..................................................................................................................................
Total Investment Income .......................................................................................................
Investment Expenses:

Real Estate.........................................................................................................................
Other Investment Expenses ...............................................................................................
Total Investment Expenses ....................................................................................................
Net Investment Income .......................................................................................................... $

56.7
46.9
103.6
1.0
21.7
9.3
32.4
461.6

9.7
24.6
34.3
427.3

4.9
22.1
27.0
5.5
22.1
9.6
13.2
382.6

8.8
25.6
34.4
348.2

1.0
18.0
19.0
8.2
22.6
9.8
1.5
383.4

9.6
9.5
19.1
364.3

2021 Compared with 2020

Net Investment Income was $427.3 million and $348.2 million for the years ended December 31, 2021 and 2020, respectively.
Net Investment Income increased by $79.1 million in 2021 due primarily to higher valuations of Equity Method Limited
Liability Investments and 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.

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.

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

INVESTMENT RESULTS (Continued)

Total Comprehensive Investment Gains (Losses)

The components of Total Comprehensive Investment Gains (Losses) for the years ended December 31, 2021, 2020 and 2019
are presented below.

DOLLARS IN MILLIONS
Recognized in Consolidated Statements of Income:

2021

2020

2019

Income (Loss) from Change in Fair Value of Equity and Convertible Securities....... $
Gains on Sales..............................................................................................................
Losses on Sales ............................................................................................................
Impairment Losses.......................................................................................................

114.6
68.0
(3.2)
(11.0)

Net Gain (Loss) Recognized in Consolidated Statements of Income .........................
Recognized in Other Comprehensive Income (Loss) ......................................................
Total Comprehensive Investment Gains (Losses)............................................................ $

168.4
(286.6)
(118.2) $

72.1
48.3
(10.2)
(19.5)

90.7
367.4
458.1

138.9
46.9
(5.0)
(13.8)

167.0
405.3
572.3

Total Comprehensive Investment Gains (Losses) decreased by $576.3 million primarily due to decline in fixed maturities
unrealized capital gains, partially offset by higher income from increased valuations of equity and convertible securities. Fixed
maturities valuations decreased primarily due to higher interest rates.

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 years ended
December 31, 2021 and 2020 are presented below.

DOLLARS IN MILLIONS
Preferred Stocks..................................................................................................................................... $
Common Stocks.....................................................................................................................................
Other Equity Interests:

2021

2020

1.9
1.7

(0.7)
(0.3)

Exchange Traded Funds ....................................................................................................................
Limited Liability Companies and Limited Partnerships ...................................................................

Total Other Equity Interests...................................................................................................................
Income (Loss) from Change in Fair Value of Equity Securities ...........................................................
Income (Loss) from Change in Fair Value of Convertible Securities ...................................................
Income (Loss) from Change in Fair Value of Equity and Convertible Securities................................. $

75.8
31.3

107.1
110.7
3.9
114.6

68.0
1.7

69.7
68.7
3.4
72.1

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

INVESTMENT RESULTS (Continued)

Net Realized Gains on Sales of Investments

The components of Net Realized Gains on Sales of Investments for the year ended December 31, 2021, 2020 and 2019 are
presented below.

DOLLARS IN MILLIONS
Fixed Maturities:

2021

2020

2019

Gains on Sales ................................................................................................................... $
Losses on Sales..................................................................................................................

63.4
(2.1)

40.6
(7.9)

41.1
(4.8)

Equity Securities:

Equity Method Limited Liability Investments:

Real Estate:

Gains on Sales ...................................................................................................................
Losses on Sales..................................................................................................................
Net Realized Gains on Sales of Investments ......................................................................... $

Gross Gains on Sales ............................................................................................................. $
Gross Losses on Sales............................................................................................................
Net Realized Gains on Sales of Investments ......................................................................... $

4.1
(0.7)

0.4
—

0.1
(0.4)
64.8

68.0
(3.2)
64.8

5.9
(1.9)

—
(0.4)

1.8
—
38.1

48.3
(10.2)
38.1

5.8
(0.2)

—
—

—
—
41.9

46.9
(5.0)
41.9

Fixed Maturities

Net Realized Gains on Sales of Fixed Maturities for the year ended December 31, 2021 primarily relate to normal portfolio
management and to a lesser extent, a repositioning of the portfolio for duration extension purposes.

Net Realized Gains on Sales of Fixed Maturities for the year ended December 31, 2020 primarily relate to a repositioning of the
portfolio for duration extension purposes.

Equity Securities

Net Realized Gains on Sales of Equity Securities for the year ended December 31, 2021 primarily relate to transactions
whereby the Company’s interests in Equity Securities at Modified Cost were acquired by other companies.

Net Realized Gains on Sales of Equity Securities for the year ended December 31, 2020 primarily relate to transactions
whereby the Company’s investments were acquired by other companies.

Other sales activity in 2021 and 2020 were due to normal portfolio management.

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

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
Consolidated Statements of Income in the period that the declines are evaluated. The components of Impairment Losses in the
Consolidated Statements of Income for the year ended December 31, 2021, 2020 and 2019 is presented below.

DOLLARS IN MILLIONS
Fixed Maturities ................................................................ $
Equity Securities................................................................

Amount

(6.4)
(4.2)

Real Estate.........................................................................
(0.4)
Net Impairment Losses Recognized in Earnings............... $ (11.0)

Fixed Maturities

2021

2020

2019

Number of
Issuers

Amount

Number of
Issuers

Amount

Number of
Issuers

17 $ (16.7)
(2.8)
13

—
$ (19.5)

14 $
2

—

(13.3)
(0.5)

—
(13.8)

14
1

—

Impairment Losses recognized in the Consolidated Statements of Income for the year ended December 31, 2021 related
primarily to investments in Fixed Maturities where the Company established an allowance for expected credit loss.

Impairment Losses recognized in the Consolidated Statements of Income for the year ended December 31, 2020 related
primarily to investments in Fixed Maturities where the Company had the intent to sell or requirement to sell.

Equity Securities

Impairment Losses recognized in the Consolidated Statements of Income for the years ended December 31, 2021 and 2020
related primarily to investments in Equity Securities at Modified Cost where the Company had the intent or requirement to sell.

Real Estate

Impairment Losses recognized in the Consolidated Statements of Income for the year ended December 31, 2021 related to
investments in Real Estate held with the intent to sell. No impairment losses were recognized for the year ended December 31,
2020.

INVESTMENT QUALITY AND CONCENTRATIONS

The Company’s fixed maturity investment portfolio is comprised primarily of corporate, high-grade corporate, municipal
agency bonds, and collateralized loan obligations. At December 31, 2021, approximately 95% 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 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.

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

INVESTMENT QUALITY AND CONCENTRATIONS (Continued)

The following table summarizes the credit quality of the Company’s fixed maturity investment portfolio at December 31, 2021
and 2020.

NAIC
Rating
1
2
3-4
5-6

Fair Value
Rating
in Millions
AAA, AA, A ............................................................................... $ 5,351.6
2,215.1
BBB ............................................................................................
331.0
BB, B ..........................................................................................
89.2
CCC or Lower.............................................................................
Total Investments in Fixed Maturities........................................................ $ 7,986.9

Percentage
of Total

Fair Value
in Millions
67.0 % $ 4,759.9
2,355.6
27.7
353.1
4.2
137.3
1.1
100.0 % $ 7,605.9

Percentage
of Total

62.6 %
31.0
4.6
1.8
100.0 %

Dec 31, 2021

Dec 31, 2020

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

The following table summarizes the fair value of the Company’s investments in governmental fixed maturities at December 31,
2021 and 2020.

Dec 31, 2021

Dec 31, 2020

DOLLARS IN MILLIONS
U.S. Government and Government Agencies and Authorities .................. $

Fair Value
637.4

States and Political Subdivisions:

Percentage
of Total
Investments

Fair Value
585.3

6.1 % $

Percentage
of Total
Investments
5.6 %

Revenue Bonds ........................................................................................

1,516.1

14.6

1,153.3

11.1

States........................................................................................................

Political Subdivisions ..............................................................................

Foreign Governments.................................................................................

235.8

138.2

5.5

2.3

1.3

0.1

333.5

102.6

5.2

3.2

1.0

—

Total Investments in Governmental Fixed Maturities................................ $ 2,533.0

24.4 % $ 2,179.9

20.9 %

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

Dec 31, 2021

Dec 31, 2020

DOLLARS IN MILLIONS
Fair Value
Finance, Insurance and Real Estate............................................................ $ 1,996.7

Percentage
of Total
Investments

Fair Value
19.2 % $ 1,916.3

Percentage
of Total
Investments
18.4 %

Manufacturing ............................................................................................

1,571.0

15.1

1,633.5

15.7

Transportation, Communication and Utilities ............................................

Services ......................................................................................................

Mining ........................................................................................................

Retail Trade ................................................................................................

Construction ...............................................................................................

Other...........................................................................................................

815.8

617.5

254.3

171.4

13.1

14.1

7.9

5.9

2.4

1.7

0.1

825.5

581.3

285.7

172.6

—

11.0

7.9

5.6

2.7

1.7

—

0.1

Total Investments in Non-governmental Fixed Maturities ........................ $ 5,453.9

52.4 % $ 5,425.9

52.1 %

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

INVESTMENT QUALITY AND CONCENTRATIONS (Continued)

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

DOLLARS IN MILLIONS
Below $5................................................................................................................................................
$5 -$10...................................................................................................................................................

$10 - $20................................................................................................................................................
$20 - $30................................................................................................................................................

Greater Than $30...................................................................................................................................
Total.......................................................................................................................................................

Number of
Issuers

611
200

121
30

9
971

Aggregate
Fair Value
$ 1,333.8
1,435.9

1,647.2
721.4

315.6
$ 5,453.9

The Company’s short-term investments primarily consist of money market funds, U.S. treasury bills, and short term bonds. At
December 31, 2021, the Company had $272.1 million invested in money market funds which primarily invest in U.S. Treasury
securities and $12.0 million invested in U.S. treasury bills and short-term bonds.

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 Investment, at December 31, 2021.

DOLLARS IN MILLIONS
Fixed Maturities:

States including their Political Subdivisions:

Fair
Value

Percentage
of Total
Investments

Texas............................................................................................................................................. $
California ......................................................................................................................................
Georgia..........................................................................................................................................
New York......................................................................................................................................

Florida...........................................................................................................................................
Louisiana.......................................................................................................................................
Colorado........................................................................................................................................
Pennsylvania .................................................................................................................................

151.4
107.6
98.0
95.1
74.8
74.7
70.8
68.6

1.5 %
1.0
0.9
0.9
0.7
0.7
0.7
0.7

Equity Securities at Fair Value—Other Equity Interests:

Vanguard Total World Stock ETF .....................................................................................................
iShares® Core MSCI Total International Stock ETF ........................................................................

226.9
86.1
Total........................................................................................................................................................ $ 1,054.0

2.2
0.8
10.1 %

Kemper Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations—(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, 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 December 31, 2021 and 2020 is presented
below.

Reported as Equity Method Limited Liability Investments:

Asset Class

Unfunded
Commitment
in Millions

Dec 31,
2021

Reported Value in Millions

Dec 31,
2021

Dec 31,
2020

Mezzanine Debt ............................................................................................... $
Senior Debt ......................................................................................................
Distressed Debt................................................................................................
Secondary Transactions ...................................................................................
Leveraged Buyout............................................................................................
Growth Equity .................................................................................................

Real Estate .......................................................................................................
Hedge Fund......................................................................................................

Other ................................................................................................................
Total Equity Method Limited Liability Investments............................................

43.3
46.7
100.1
8.3
0.1
—
—
—
—
198.5

120.0
27.5
21.7
11.7
8.7
0.7
29.9
8.7
13.0
241.9

102.5
28.6
14.5
11.2
3.5
0.7
29.9
—
13.1
204.0

Alternative Energy Partnership Investments........................................................

—

39.6

21.3

Reported as Other Equity Interests at Fair Value:

Mezzanine Debt ...............................................................................................
Senior Debt ......................................................................................................

Distressed Debt................................................................................................
Secondary Transactions ...................................................................................
Hedge Funds ....................................................................................................
Leveraged Buyout............................................................................................
Growth Equity .................................................................................................
Other ................................................................................................................
Total Reported as Other Equity Interests at Fair Value .......................................
Reported as Equity Securities at Modified Cost:

Other ................................................................................................................
Total Reported as Equity Securities at Modified Cost.........................................

53.7
15.1
20.0
6.8
—
6.0
0.7
—
102.3

—
—

129.3
29.9
44.9
4.0
82.7
32.2
2.0
—
325.0

7.7
7.7

Total Investments in Limited Liability Companies and Limited Partnerships .... $

300.8

614.2

118.3
33.9
31.8
4.2
71.6
30.7
—
1.5
292.0

15.7
15.7

533.0

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.

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

INSURANCE, INTEREST AND OTHER EXPENSES

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

DOLLARS IN MILLIONS
Insurance Expenses:

Commissions ....................................................................................................................... $
General Expenses ................................................................................................................
Taxes, Licenses and Fees ....................................................................................................
Total Costs Incurred ............................................................................................................
Net Policy Acquisition Costs Amortized (Deferred) ..........................................................
Amortization of Value of Business Acquired (“VOBA”)...................................................
Insurance Expenses................................................................................................................
Interest and Other Expenses:
Loss from Early Extinguishment of Debt ..............................................................................
Interest Expense .....................................................................................................................
Other Expenses:

2021

2020

2019

817.6
339.5
104.3
1,261.4
(88.3)
45.0
1,218.1

745.8
307.4
94.2
1,147.4
(51.6)
4.7
1,100.5

708.8
278.0
93.5
1,080.3
(66.9)
6.3
1,019.7

—
43.6

—
36.0

5.8
42.5

Acquisition Related Transaction, Integration and Other Costs...........................................
43.9
Pension Settlement Expense................................................................................................
—
Other....................................................................................................................................
131.9
Other Expenses ......................................................................................................................
175.8
Interest and Other Expenses...................................................................................................
219.4
Total Expenses ....................................................................................................................... $ 1,437.5

63.3
64.1
108.1
235.5
271.5
$ 1,372.0

18.4
—
102.9
121.3
163.8
$ 1,189.3

Insurance Expenses

Insurance Expenses increased by $117.6 million for the year ended December 31, 2021, compared to 2020, due primarily to
growth in business and increased amortization of VOBA with the acquisition of AAC.

Interest and Other Expenses

Interest expense increased by $7.6 million for the year ended December 31, 2021, compared to 2020, due primarily to the
addition of the 2030 Senior Notes in September 2020. See MD&A, “Liquidity and Capital Resources,” and Note 19, “Debt,” to
the Consolidated Financial Statements for additional discussion of debt activity.

Other Expenses decreased by $59.7 million for the year ended December 31, 2021, compared to 2020, due primarily to prior
year Pension Settlement Expenses related to purchasing annuities on behalf of certain plan participants and lump-sum payments
made to certain terminated vested participants and lower current year Acquisition Related Transaction, Integration and Other
Costs.

INCOME TAXES

The federal corporate statutory income tax rate was 21% for the year ended December 31, 2021 and 2020. 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 and dividends received deductions, (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 were $21.8 million and $19.0 million for the years ended
December 31, 2021 and 2020, respectively. The nontaxable increase in cash surrender value on COLI was $25.7 million and
$12.9 million for the years ended December 31, 2021 and 2020, respectively. The Company realized net investment tax credits
of $66.1 million and $3.2 million for the years ended December 31, 2021 and 2020, respectively. The amount of expense
recognized for long-term equity-based compensation expense under U.S. GAAP was $1.3 million and $10.5 million lower than
the amount that would be deductible under the Internal Revenue Code (the “IRC”) for the years ended December 31, 2021 and

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

INCOME TAXES (Continued)

2020, respectively. The amount of nondeductible executive compensation was $13.0 million and $13.0 million for years ended
December 31, 2021 and 2020, respectively.

See Note 23, “Income Taxes,” to the Consolidated Financial Statements for additional discussion of income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Shelf Registration Statement

The Company filed a universal shelf registration statement with the Securities and Exchange Commission in the first quarter of
2020. Under this shelf registration, the Company may issue an undetermined amount of securities including common stock,
preferred stock, depository shares, debt securities, warrants, subscription rights, purchase contracts, and purchase units. Specific
terms of any securities issued under this registration will be included in each applicable prospectus supplement.

Common Stock Offering

Kemper is authorized to issue 20 million shares of $0.10 par value preferred stock and 100 million shares of $0.10 par value
common stock. No preferred shares were issued or outstanding at December 31, 2021 and 2020. There were 63,684,628 shares
and 65,436,207 shares of common stock outstanding at December 31, 2021 and 2020, respectively.

Long-term Debt

From time to time, the Company looks to opportunistically raise capital in the debt markets. The Company designates debt
obligations as either short-term or long-term based on maturity date at issuance, or in the case of the 2022 Senior Notes, based
on the date of assumption. Total amortized cost of Long-term Debt outstanding at December 31, 2021 and December 31, 2020
was:

(Dollars in Millions)
Term Loan due July 5, 2023 .................................................................................................................... $

5.000% Senior Notes due September 19, 2022........................................................................................

4.350% Senior Notes due February 15, 2025...........................................................................................

2.400% Senior Notes due September 30, 2030........................................................................................

Dec 31,
2021

Dec 31,
2020

— $

276.7

449.0

396.2

49.9

278.3

448.8

395.8

Total Long-term Debt Outstanding .......................................................................................................... $ 1,121.9

$ 1,172.8

See Note 19, “Debt,” to the Consolidated Financial Statements for more information regarding the Company’s long-term debt.

Amended and Extended Credit Agreement and Term Loan Facility

From time to time, the Company looks to opportunistically raise capital in the credit markets and is considering an increase in
its existing credit facility. On June 8, 2018, the Company entered into an amended and extended credit agreement and term loan
facility. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit
agreement to $300.0 million and extended the maturity date to June 8, 2023. The term loan facility included a delayed draw
feature with borrowing capacity of $250.0 million and a maturity date two years from the borrowing date (see discussion below
under the heading, “Repayment of Term Loan Due 2020,” for additional information regarding the initial borrowing and
subsequent repayment of this delayed-draw term loan). On June 4, 2019, the Company utilized the accordion feature under the
credit agreement to increase its credit borrowing capacity by $100.0 million, resulting in the available credit commitments
increasing from $300.0 million to $400.0 million. The Company incurred $0.1 million in additional debt issuance costs in
connection with the utilization of the accordion feature, which in addition to the $0.5 million of remaining unamortized costs
under the credit agreement, will be amortized under the remaining term of the credit agreement. There were no outstanding
borrowings under the credit agreement at either December 31, 2021 or December 31, 2020.

Federal Home Loan Bank Agreements

Kemper’s subsidiaries, United Insurance, Trinity Universal Insurance Company (“Trinity”) and Alliance United Insurance
Company (“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 became a member of the FHLB of Chicago in March
2014. Trinity became a member of the FHLB of Dallas in December 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,

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

LIQUIDITY AND CAPITAL RESOURCES (Continued)

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 $11.8
million and $11.8 million at December 31, 2021 and December 31, 2020, respectively. The carrying value of FHLB of Dallas
common stock was $3.4 million and $3.4 million at December 31, 2021 and December 31, 2020, respectively. The carrying
value of FHLB of San Francisco common stock was $1.7 million and $1.7 million at December 31, 2021 and December 31,
2020, respectively. The Company periodically uses short-term FHLB borrowings for a combination of cash management and
risk management purposes. It also uses long-term FHLB borrowings for spread lending purposes.

During 2021, United Insurance received advances of $385.4 million from the FHLB of Chicago and made repayments of
$391.3 million. United Insurance had outstanding advances from the FHLB of Chicago totaling $401.9 million at December 31,
2021. 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 $556.6 million at December 31, 2021. 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 18, “Policyholder Obligations,” to the 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
common stock, in addition to the $133.3 million remaining under the previous authorization. The Company repurchased
approximately $161.7 million and $110.4 million of stock at an average cost per share of $77.58 and $68.29 in 2021 and 2020,
respectively. As of December 31, 2021, the remaining share repurchase authorization was $171.6 million under the repurchase
program. 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.

Dividends to Shareholders

Kemper paid a quarterly dividend of $0.31 per common share for each quarter of 2021 and $0.30 per common share for each
quarter of 2020, respectively. Dividends and dividend equivalents paid were $80.6 million and $78.9 million for the years
ended December 31, 2021 and 2020, respectively.

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
$347.0 million, $322.0 million and $239.0 million in dividends to Kemper in 2021, 2020 and 2019, respectively. In 2022,
Kemper estimates that its direct insurance subsidiaries would be able to pay approximately $191.2 million in dividends to
Kemper without prior regulatory approval.

Kemper made capital contributions to insurance subsidiaries of $126 million and $62 million during 2021 and 2020,
respectively.

Sources and Uses of Funds

Kemper directly held cash and investments totaling $233.9 million at December 31, 2021, compared to $733.2 million at
December 31, 2020.

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, 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.

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

LIQUIDITY AND CAPITAL RESOURCES (Continued)

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
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
be sold to fund payments, which could result in 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.

Information about the Company’s cash flows for the years ended December 31, 2021, 2020 and 2019 is presented below.

DOLLARS IN MILLIONS
Operating Activities ......................................................................................................... $
Investing Activities ..........................................................................................................
Financing Activities .........................................................................................................

2021

2020

2019

350.7
(118.2)
(290.4)

448.0
(757.0)
378.3

534.3
(633.4)
160.8

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 from Operating Activities

The Company generated $350.7 million of net cash from operating activities during 2021 compared to $448.0 million in 2020, a
decrease of $97.3 million. Cash from operating activities decreased primarily due to higher paid losses within the P&C business
in 2021 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 increased volume and a decrease in
income taxes paid due to lower net income and tax credits generated from the Company’s investment in Alternative Energy
Partnerships.

Cash used by Investing Activities

Net cash used by Investing Activities was $118.2 million in 2021, compared to $757.0 million in 2020, a year over year
decrease of $638.8 million. This was driven primarily by higher net sales of short-term investments in 2021. In 2020, the
Company purchased short-term investments toward the end of the year in anticipation of the purchase of AAC, which were
subsequently liquidated prior to the purchase. This is partially offset by the purchase of AAC and net purchases of fixed
maturities to support the growth in P&C business.

Cash used by Financing Activities

Net cash used by financing activities in 2021 was $290.4 million, compared to cash provided by financing activities of $378.3
million in 2020, a year over year change of $668.7 million. In 2021, the Company used cash to repay the $50.0 million term
loan and also repurchase a greater amount of shares. Cash provided by financing activities in 2020 consisted of $395.6 million
of proceeds from the issuance of the senior debt as well as $169.4 million higher proceeds from Policyholder Obligations for
the FHLB spread lending program.

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

CONTRACTUAL OBLIGATIONS

Estimated cash disbursements pertaining to the Company’s contractual obligations at December 31, 2021 are presented below.

DOLLARS IN MILLIONS
Long Term Debt Obligations...................................... $
Life and Health Insurance Policy Benefits .................
Property and Casualty Insurance Reserves.................
Total Contractual Obligations .................................... $

Jan 1, 2022 to
Dec 31, 2022
275.0
346.8
1,933.7
2,555.5

Jan 1, 2023 to
Dec 31, 2024
$

— $

577.7
660.6
1,238.3

Jan 1, 2025 to
Dec 31, 2026
450.0
548.4
134.9
1,133.3

After Dec 31,
2026

400.0
8,432.4
43.5
8,875.9

Total
1,125.0
9,905.3
2,772.7
$ 13,803.0

Amounts included in Life and Health Insurance Policy Benefits within the contractual obligations table above represent the
estimated cash payments to be made to policyholders and beneficiaries. Such cash outflows are based on the Company’s current
assumptions for mortality, morbidity and policy lapse, but are undiscounted with respect to interest. Policies must remain in
force for the policyholder or beneficiary to receive the benefit under the policy. Depending on the terms of a particular policy,
future premiums from the policyholder may be required for the policy to remain in force. The Company estimates that future
cash inflows would total $5.7 billion using the same assumptions used to estimate the cash outflows. The Company’s Life
Insurance Reserves in the Company’s Consolidated Balance Sheets are generally based on the historical assumptions for
mortality and policy lapse rates and are on a discounted basis. Accordingly, the sum of the amounts presented above for Life
and Health Insurance Policy Benefits significantly exceeds the amount of Life and Health Insurance Reserves reported on the
Company’s Consolidated Balance Sheet at December 31, 2021.

In addition to the purchase obligations included above, the Company had certain investment commitments totaling $300.8
million at December 31, 2021. The funding of such investment commitments is dependent on a number of factors, the timing of
which is indeterminate. The Company cannot make a reasonably reliable estimate of the amount and period of related future
payments, if any, for such liability.

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.

Valuation of Investments

The reported value of the Company’s investments was $10,387.4 million at December 31, 2021, of which $8,863.9 million, or
85%, was reported at fair value, $281.5 million, or 3%, was reported under the equity method of accounting, $383.0 million, or
4%, was reported at unpaid principal balance and $859.0 million, or 8%, was reported at cost, modified cost or depreciated cost.
Investments, in general, are exposed to various risks, such as interest rate risk, credit risk and overall market volatility risk.
Accordingly, it is reasonably possible that changes in the fair values of the Company’s investments reported at fair value will
occur in the near term and such changes could materially affect the amounts reported in the financial statements. Also, it is
reasonably possible that changes in the carrying values of the Company’s Equity Method Limited Liability Investments will
occur in the near term and such changes could materially affect the amounts reported in the financial statements because these
issuers follow specialized industry accounting rules which require that they report all of their investments at fair value (See Item
1A., “Risk Factors” under the title “The Company’s investment portfolio is exposed to a variety of risks that may negatively
impact net investment income and cause realized and unrealized losses”).

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

CRITICAL ACCOUNTING ESTIMATES (Continued)

As more fully described under the heading, “Fair Value Measurements,” in Note 2, “Summary of Accounting Policies and
Accounting Changes,” to the Consolidated Financial Statements, the Company uses a hierarchical framework which prioritizes
and ranks the market observability used in fair value measurements.

The fair value of the Company’s investments measured and reported at fair value was $8,863.9 million at December 31, 2021,
of which $8,287.5 million, or 93%, were investments that were based on quoted market prices or significant value drivers that
are observable, $251.4 million, or 3%, were investments where at least one significant value driver was unobservable and
$325.0 million or 4% were investments for which fair value is measured using the net asset value per share practical expedient.
Fair value measurements based on readily available, active, quoted market prices or for which fair value can be measured from
actively quoted prices generally are deemed to have a higher degree of market price observability and a lesser degree of
judgment, compared to fair value measurements based on significant unobservable inputs used in measuring fair value. The
prices that the Company might realize from actual sales of investments are likely to vary from their respective estimated fair
values at December 31, 2021 due to changing market conditions and limitations inherent in the estimation process.

The classification of a company’s investment in a financial instrument may affect its reported results. Under GAAP, a company
may elect to use the fair value option method of accounting for some or all of its investments in financial instruments. Under
the fair value option method of accounting, a company is required to recognize changes in fair values into income for the period
reported. The Company has elected the fair value option for investments in fixed maturities with equity conversion features
which are recorded on the Consolidated Balance Sheets as Convertible Securities. Accordingly, both the reported and fair
values of the Company’s investments in Convertible Securities accounted for under the fair value option method of accounting
were $46.4 million at December 31, 2021. For investments in fixed maturities classified as held to maturity, a company is
required to carry the investment at amortized cost, with only amortization occurring during the period recognized into income.
None of the Company’s investments in fixed maturities were classified as held to maturity at December 31, 2021. Changes in
the fair value of investments in fixed maturities classified as available for sale are not recognized in income during the period,
but rather are recognized as a separate component of Accumulated Other Comprehensive Income (“AOCI”) until realized. Both
the reported and fair values of the Company’s investments in fixed maturities classified as available for sale were $7,986.9
million at December 31, 2021.

Equity securities with readily determinable fair values are recorded as Equity Securities at Fair Value with changes in fair
values recognized into income for the period reported. Accordingly, both the reported and fair values of the Company’s
investments in Equity Securities at Fair Value were $830.6 million at December 31, 2021. The Company holds certain equity
investments without readily determinable fair values at cost, less impairment, if any, plus or minus changes resulting from
observable price changes in orderly transactions for identical or similar investments from the same issuer. Changes in the
carrying value of Equity Securities at Modified Cost due to observable price changes are recorded into income for the period
reported.

The Company’s portfolio also includes investments in Alternative Energy Partnerships that are accounted for under the
Hypothetical Liquidation at Book Value (“HLBV”) method. Under the HLBV method, the amounts of income and loss
attributed to investors reflect changes in the amounts the fund investors would hypothetically receive at each balance sheet date
under the liquidation provisions of the contractual agreements of these funds. Attributing income and loss under the HLBV
method requires the use of significant assumptions and forecasts to calculate the amounts that fund investors would receive
upon a hypothetical liquidation. See Note 1 “Basis of Presentation and Significant Estimates,” to the Consolidated Financial
Statements for additional information.

Had the Company elected the fair value option for all of its investments in financial instruments, the Company’s reported net
loss for the year ended December 31, 2021, would have increased by $226.4 million.

The Company regularly reviews its fixed maturity investment portfolio and holdings in Equity Securities at Modified Cost for
factors that may indicate a decline in the fair value of an investment below its amortized cost or modified cost basis. Such
reviews are inherently uncertain in that the value of the investment may not fully recover or may decline further in future
periods. Some factors considered in evaluating whether or not a decline in fair value of an investment exist include, but are not
limited to, the following:

Fixed Maturity Securities

•
•

The financial condition, credit rating and prospects of the issuer;
The magnitude of the unrealized loss;

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

CRITICAL ACCOUNTING ESTIMATES (Continued)

•
•

The ability of the issuer to make scheduled principal and interest payments;
The volatility of the investment;

Equity Securities at Modified Cost

•
•
•
•
•

Opinions of the Company’s external investment managers;
The financial condition and prospects of the issuer;
Current market conditions;
Changes in credit ratings; and
Changes in the regulatory environment.

Changes in these factors from their December 31, 2021 evaluation date could result in the Company determining that a decline
in the fair value exists for an investment held and evaluated at December 31, 2021. Such determination would result in an
impairment loss in the period such determination is made.

Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses

The Company’s Property and Casualty Insurance Reserves are reported using the Company’s estimate of its ultimate liability
for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid. The
Company had $2,772.7 million and $1,982.5 million of gross loss and LAE reserves at December 31, 2021 and 2020,
respectively.

Property and Casualty Insurance Reserves for the Company’s business segments at December 31, 2021 and 2020 were:

DOLLARS IN MILLIONS
Business Segments:

2021

2020

Specialty Property & Casualty Insurance........................................................................................... $ 2,319.7
Preferred Property & Casualty Insurance...........................................................................................
433.2
Life & Health Insurance.....................................................................................................................
3.6
Total Business Segments...........................................................................................................................
2,756.5
Unallocated Reserves ................................................................................................................................
16.2
Total Property and Casualty Insurance Reserves ...................................................................................... $ 2,772.7

$ 1,544.8
411.6
4.6
1,961.0
21.5
$ 1,982.5

The Company’s actuaries estimate reserves at least quarterly for most product lines and/or coverage levels using accident
quarters or years spanning 10 or more years, depending on the product line and/or coverage level or emerging issues relating to
them. The Company’s actuaries use a variety of generally accepted actuarial loss reserving estimation methodologies,
including, but not limited to, the following:

•
•
•
•
•

Incurred Loss Development Methodology;
Paid Loss Development Methodology;
Bornhuetter-Ferguson Incurred Loss Methodology;
Bornhuetter-Ferguson Paid Loss Methodology; and
Frequency and Severity Methodology.

The Company’s actuaries generally review the results of at least four of the estimation methodologies, two based on paid data
and two based on incurred data, to initially estimate the ultimate losses and LAE for the current accident quarter or year and re-
estimate the ultimate losses and LAE for previous accident quarters or years to determine if changes in the previous estimates of
the ultimate losses and LAE are indicated by the most recent data. In some cases, the methodologies produce a cluster of
estimates with a tight band of indicated possible outcomes. In other cases, however, the methodologies produce conflicting
results and wider bands of indicated possible outcomes, and the Company’s actuaries perform additional analyses before

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

CRITICAL ACCOUNTING ESTIMATES (Continued)

making their final selections. However, such bands do not necessarily constitute a range of outcomes, nor does the Company’s
management or the Company’s actuaries calculate a range of outcomes.

The ultimate impact of a single change in a business process is difficult to quantify and detect, and even more difficult if several
changes to business processes occur over several years. Initially after a change is implemented, there are fewer data points, as
compared to the historical data, for the Company’s actuaries to analyze. With fewer data points to analyze, the Company’s
actuaries cannot be certain that observed differences from the historical data trends are a result of the change in business
process or merely a random fluctuation in the data. As the Company’s actuaries observe more data points following the change
in business process, the Company’s actuaries can gain more confidence in whether the change in business process is affecting
the development pattern. The challenge for the Company’s actuaries is how much weight to place on the development patterns
based on the older historical data and how much weight to place on the development patterns based on more recent data.

For each accident quarter or year, the point estimate selected by the Company’s actuaries is not necessarily one of the points
produced by any particular one of the methodologies utilized, but often is another point selected by the Company’s actuaries,
using their professional judgment, that takes into consideration each of the points produced by the several loss reserving
estimation methodologies used. In some cases, for a particular product, the current accident quarter or year may not have
enough paid claims data to rely upon, leading the Company’s actuaries to conclude that the incurred loss development
methodology provides a better estimate than the paid loss development methodology. Therefore, the Company’s actuaries may
give more weight to the incurred loss development methodology for that particular accident quarter or year. As an accident
quarter or year ages for that same product, the actuary may gain more confidence in the paid loss development methodology
and begin to give more weight to the paid loss development methodology. The Company’s actuaries’ quarterly selections are
summed by product and/or coverage levels to create the actuarial indication of the ultimate losses. More often than not, the
actuarial indication for a particular product line and accident quarter or year is most heavily weighted toward the incurred loss
development methodology, particularly for short-tail lines such as personal automobile insurance. Historically, the incurred loss
development methodology has been more reliable in predicting ultimate losses for short-tail lines, especially in the more recent
accident quarters or years, compared with the paid loss development methodology. However, in some circumstances changes
can occur which impact numerous variables, including, but not limited to, those variables identified below that are difficult to
quantify and/or impact the predictive value of prior development patterns relied upon in the incurred loss development
methodology and paid loss development methodology. In those circumstances, the Company’s actuaries must make adjustments
to these loss reserving estimation methodologies or use additional generally accepted actuarial estimation methodologies. In
those circumstances, the Company’s actuaries, using their professional judgment, may place more weight on the adjusted loss
reserving estimation methodologies or other generally accepted actuarial estimation methodologies until the newer development
patterns fully emerge and the Company’s actuaries can fully rely on the unadjusted loss reserving estimation methodologies. In
the event of a wide variation among results generated by the different projection methodologies, the Company’s actuaries
further analyze the data using additional techniques.

In estimating reserves, the Company’s actuaries exercise professional judgment and must consider, and are influenced by, many
variables that are difficult to quantify, such as:

•
•

•

Changes in the level of minimum case reserves, and the automatic aging of those minimum case reserves;
Changes to claims practices, including, but not limited to, changes in the reporting and impact of large losses, timing
of reported claims, changes in claims closing and re-opening patterns, adequacy of case reserves, implementation of
new systems for handling claims, turnover of claims department staffs, timing and depth of the audit review of claims
handling procedures;
Changes in the mix of business by state, class and policy limit within product line;
Growth in new lines of business;
Changes in the attachment points of the Company’s reinsurance programs;

•
•
•
• Medical costs, including, but not limited to, the ability to assess the extent of injuries and the impact of inflation;
Repair costs, including, but not limited to, the impact of inflation and the availability of labor and materials;
•
Changes in the judicial environment, including, but not limited to, the interpretation of policy provisions, the impact of
•
jury awards and changes in case law; and

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

CRITICAL ACCOUNTING ESTIMATES (Continued)

•

Changes in state regulatory requirements.

A change in any one or more of the foregoing factors is likely to result in a projected ultimate net loss and LAE that is different
from the previously estimated reserve and/or previous frequency and severity trends. Such changes in estimates may be
material.

For example, the Company’s actuaries review frequency (number of claims per policy or exposure), severity (dollars of loss per
claim) and average premium (dollars of premium per exposure). Actual frequency and severity experienced will vary depending
on changes in mix by class of insured risk. Similarly, the actual frequency and rate of recovery from reinsurance will vary
depending on changes in the attachment point for reinsurance. In particular, in periods of high growth or expansion into new
markets, there may be additional uncertainty in estimating the ultimate losses and LAE. The contributing factors of this
potential risk are changes in the Company’s mix by policy limit and mix of business by state or jurisdiction.

Actuaries use historical experience and trends as predictors of how losses and LAE will emerge over time. However, historical
experience may not necessarily be indicative of how actual losses and LAE will emerge. Changes in case reserve adequacy,
changes in minimum case reserves and changes in internal claims handling procedures could impact the timing and recognition
of incurred claims and produce an estimate that is either too high or too low if not adjusted for by the actuary. For example, if,
due to changes in claims handling procedures, actual claims are settled more rapidly than they were settled historically, the
estimate produced by the paid loss development methodology would tend to be overstated if the actuary did not identify and
adjust for the impact of the changes in claims handling procedures. Similarly, if, due to changes in claims handling procedures,
actual claim reserves are set at levels higher than past experience, the estimate produced by the incurred loss development
methodology would tend to be overstated if the actuary did not identify and adjust for the impact of the changes in claims
handling procedures.

The final step in the quarterly loss and LAE reserving process involves a comprehensive review of the actuarial indications by
the Company’s chief reserving actuary and corporate management who apply their collective judgment and determine the
appropriate estimated level of reserves to record. Numerous factors are considered in this determination process, including, but
not limited to, the assessed reliability of key loss trends and assumptions that may be significantly influencing the current
actuarial indications, changes in claim handling practices or other changes that affect the timing of payment or development
patterns, changes in the mix of business, the maturity of the accident quarter or year, pertinent trends observed over the recent
past, the level of volatility within a particular line of business, the improvement or deterioration of actuarial indications in the
current period as compared to prior periods, and the amount of reserves related to third party pools for which the Company does
not have access to the underlying data and, accordingly, relies on calculations provided by such pools.

Estimated Variability of Property and Casualty Insurance Reserves

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

Although development will emerge in all of the Company’s product lines, development in the Company’s specialty personal
automobile insurance product line could have the most significant impact due to the relative size of its loss and LAE reserves.
To further illustrate the sensitivity of the Company’s reserves for specialty personal automobile insurance losses and LAE, the
Company measures the standard deviation of the mean reserve estimate using a bootstrapping methodology. The Company
believes that one standard deviation of variability is a reasonably likely scenario to measure variability for its loss and LAE
reserves for specialty personal automobile insurance. The Company estimates that the Company’s specialty personal
automobile insurance loss and LAE reserves could have varied by $145.3 million in either direction at December 31, 2021 for
all accident years combined under this scenario. In addition to the factors described above, other factors may also impact loss
reserve development in future periods. These factors include governmental actions, including court decisions interpreting
existing laws, regulations or policy provisions, developments related to insurance policy claims and coverage issues, adverse or
favorable outcomes in pending claims litigation, the number and severity of insurance claims, the impact of inflation on
insurance claims and the impact of required participation in windpools and joint underwriting associations and residual market

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

CRITICAL ACCOUNTING ESTIMATES (Continued)

assessments. Although the Company’s actuaries do not make specific numerical assumptions about these factors, changes in
these factors from past patterns will impact historical loss development factors and, in turn, future loss reserve development.
Significant favorable changes in one or more factors will lead to favorable future loss reserve development, which could result
in the actual loss developing closer to, or even below, the lower end of the Company’s estimated reserve variability. Significant
unfavorable changes in one or more factors will lead to unfavorable loss reserve development, which could result in the actual
loss developing closer to, or even above, the higher end of the Company’s estimated reserve variability. Accordingly, due to
these factors and the other factors enumerated throughout the MD&A and the inherent limitations of the loss reserving
estimation methodologies, the estimated and illustrated reserve variability may not necessarily be indicative of the Company’s
future reserve variability, which could ultimately be greater than the estimated and illustrated variability. In addition, as
previously noted, development will emerge in all of the Company’s product lines over time. Accordingly, the Company’s future
reserve variability could ultimately be greater than the illustrated variability. Additional information pertaining to the estimation
of, and development of, the Company’s Property and Casualty Insurance Reserves is contained in Item 1 of Part I of this 2021
Annual Report under the heading “Property and Casualty Loss and Loss Adjustment Expense Reserves.”

Goodwill Recoverability

The Company tests goodwill for recoverability at the reporting unit level on an annual basis, or whenever events or
circumstances indicate the fair value of a reporting unit may have declined below its carrying value. The Company performed a
qualitative goodwill impairment assessment for all reporting units with goodwill as of October 1, 2021. The qualitative
assessment takes into consideration changes in macroeconomic conditions, industry and market considerations, cost factors,
overall financial performance, changes in management or key personnel, changes in strategy, events impacting reporting units,
and changes in Kemper’s stock price since the last quantitative assessment, which was performed on December 31, 2017. Based
on its qualitative assessment, the Company concluded that the associated goodwill was recoverable for each reporting unit
tested.

Pension Benefit Obligations

The process of estimating the Company’s pension benefit obligations and pension benefit costs is inherently uncertain and the
actual cost of benefits may vary materially from the estimates recorded. These liabilities are particularly volatile due to their
long-term nature and are based on several assumptions. The main assumptions used in the valuation of the Company’s pension
benefit obligations and pension costs are:

•
•
•

Estimated mortality of the participants and beneficiaries eligible for benefits;
Estimated expected long-term rates of returns on investments; and
Estimated rate used to discount the expected benefit payment to a present value.

A change in any one or more of these assumptions is likely to result in a projected benefit obligation or pension cost that differs
from the actuarial estimates at December 31, 2021. Such changes in estimates may be material.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of
grandfathered standards, the FASB Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP
recognized by the Financial Accounting Standards Board (“FASB”) that is applicable to the Company. The FASB issues ASUs
to amend the authoritative literature in ASC.

The Company has adopted all recently issued accounting pronouncements with effective dates prior to January 1, 2022. See
Note 2, “Summary of Accounting Policies and Accounting Changes” to the Consolidated Financial Statements for discussion
on adoption of these ASUs and impacts to the Company’s financial statements, which were not material. For all recently issued
accounting pronouncements with effective dates after December 31, 2021, the Company does not expect adoption to have a
material impact on its financial statements, with the possible exception of ASU 2018-12, Financial Services - Insurance (Topic
944): Targeted Improvements to Accounting for Long-Duration Contracts.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

Quantitative Information About Market Risk

The Company’s consolidated balance sheets include three types of financial instruments subject to the material market risk
disclosures required by the SEC:

Investments in Fixed Maturities;
Investments in Equity Securities at Fair Value; and

1.
2.
3. Debt.

Investments in Fixed Maturities and Debt are subject to material interest rate risk. The Company’s Investments in Equity
Securities include common and preferred stocks and hedge funds and, accordingly, are subject to material equity price risk and
interest rate risk.

For purposes of this disclosure, market risk sensitive financial instruments are divided into two categories: financial instruments
acquired for trading purposes and financial instruments acquired for purposes other than trading. The Company’s market risk
sensitive financial instruments are generally classified as held for purposes other than trading. The Company has no significant
holdings of financial instruments acquired for trading purposes. The Company has no significant holdings of derivatives.

The Company measures its sensitivity to market risk by evaluating the change in its financial assets and liabilities relative to
fluctuations in interest rates and equity prices. The evaluation is made using instantaneous changes in interest rates and equity
prices on a static balance sheet to determine the effect such changes would have on the Company’s market value at risk and the
resulting pre-tax effect on Shareholders’ Equity. The changes chosen represent the Company’s view of adverse changes which
are reasonably possible over a one-year period. The selection of the changes chosen should not be construed as the Company’s
prediction of future market events, but rather an illustration of the impact of such possible events.

For the interest rate sensitivity analysis presented below, the Company assumed an adverse and instantaneous increase of 100
basis points in the yield curve at both December 31, 2021 and 2020 for Investments in Fixed Maturities. Such 100 basis point
increase in the yield curve may not necessarily result in a corresponding 100 basis point increase in the interest rate for all
investments in fixed maturities. For example, a 100 basis point increase in the yield curve for risk-free, taxable investments in
fixed maturities may not result in a 100 basis point increase for tax-exempt investments in fixed maturities. For Investments in
Fixed Maturities, the Company also anticipated changes in cash flows due to changes in the likelihood that investments would
be called or prepaid prior to their contractual maturity. All other variables were held constant. For preferred stock equity
securities, the Company assumed an adverse and instantaneous increase of 100 basis points in market interest rates from their
levels at both December 31, 2021 and 2020. All other variables were held constant. For Debt, the Company assumed an adverse
and instantaneous decrease of 100 basis points in market interest rates from their levels at December 31, 2021 and 2020. All
other variables were held constant. The Company measured equity price sensitivity assuming an adverse and instantaneous 30%
decrease in the Standard and Poor’s Stock Index (the “S&P 500”) from its level at December 31, 2021 and 2020, with all other
variables held constant. The Company’s investments in common stock equity securities were correlated with the S&P 500 using
the portfolio’s weighted-average beta of 0.68 and 0.73 at December 31, 2021 and 2020, respectively. Beta measures a stock’s
relative volatility in relation to the rest of the stock market, with the S&P 500 having a beta coefficient of 1.00. The Equity
Securities at Fair Value portfolio’s weighted-average beta was calculated using each security’s assumed forward looking betas
based on underlying investment characteristics weighted by the fair value of such securities as of December 31, 2021 and 2020.
For equity securities without observable market inputs, the Company assumed a beta of 1.00 at December 31, 2021 and 2020.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk. (Continued)

The estimated adverse effects on the fair value of the Company’s financial instruments at December 31, 2021 using these
assumptions were:

DOLLARS IN MILLIONS
ASSETS
Investments in Fixed Maturities ................................................................. $ 7,986.9
Investments in Equity Securities ................................................................
830.6
LIABILITIES
Debt ............................................................................................................ $ 1,152.1

Fair Value

Pro Forma Increase (Decrease)

Interest
Rate Risk

Equity
Price Risk

Total
Market Risk

(643.8) $
(2.1)

— $

(160.0)

(643.8)
(162.1)

47.1

— $

47.1

The estimated adverse effects on the fair value of the Company’s financial instruments at December 31, 2020 using these
assumptions were:

DOLLARS IN MILLIONS
ASSETS
Investments in Fixed Maturities ................................................................. $ 7,605.9
Investments in Equity Securities ................................................................
858.5
LIABILITIES
Debt ............................................................................................................ $ 1,247.8

Fair Value

Pro Forma Increase (Decrease)

Interest
Rate Risk

Equity
Price Risk

Total
Market Risk

(576.0) $
(2.5)

— $

(173.4)

(576.0)
(175.9)

41.2

— $

41.2

The market risk sensitivity analysis assumes that the composition of the Company’s interest rate sensitive assets and liabilities,
including, but not limited to, credit quality, and the equity price sensitive assets existing at the beginning of the period remains
constant over the period being measured. It also assumes that a particular change in interest rates is uniform across the yield
curve regardless of the time to maturity. Interest rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag behind changes in market interest rates. Also, any
future correlation, either in the near term or the long term, between the Company’s common stock equity securities and fair
value option portfolios and the S&P 500 may differ from the historical correlation as represented by the weighted-average
historical beta of the common stock equity securities and fair value option portfolios. Accordingly, the market risk sensitivity
analysis may not be indicative of, is not intended to provide, and does not provide, a precise forecast of the effect of changes of
market rates on the Company’s income or shareholders’ equity. Further, the computations do not contemplate any actions the
Company may undertake in response to changes in interest rates or equity prices.

To the extent that any adverse 100 basis point change occurs in increments over a period of time instead of instantaneously, the
adverse impact on fair values would be partially mitigated because some of the underlying financial instruments would have
matured. For example, proceeds from any maturing assets could be reinvested and any new liabilities would be incurred at the
then current interest rates.

Qualitative Information About Market Risk

Market risk is a broad term related to economic losses due to adverse changes in the fair value of a financial instrument and is
inherent to all financial instruments. SEC disclosure rules focus on only one element of market risk—price risk. Price risk
relates to changes in the level of prices due to changes in interest rates, equity prices, foreign exchange rates or other factors
that relate to market volatility of the rate, index, or price underlying the financial instrument. The Company’s primary market
risk exposures are to changes in interest rates and equity prices.

The Company manages its interest rate exposures with respect to Investments in Fixed Maturities by investing primarily in
investment-grade securities of moderate effective duration.

Item 8.

Financial Statements and Supplementary Data.

Index to the Consolidated Financial Statements of
Kemper Corporation and Subsidiaries

Consolidated Statements of Income for the Years Ended December 31, 2021, 2020 and 2019..........................................

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019 ....

Consolidated Balance Sheets at December 31, 2021 and 2020 ...........................................................................................

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019...................................

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019....................

Notes to the Consolidated Financial Statements

Note 1—Basis of Presentation and Significant Estimates ............................................................................................

Note 2—Summary of Accounting Policies and Accounting Changes .........................................................................

Note 3—Net Income per Unrestricted Share ................................................................................................................

Note 4—Acquisition of Business..................................................................................................................................

Note 5—Business Segments .........................................................................................................................................

Note 6—Property and Casualty Insurance Reserves ....................................................................................................

Note 7—Insurance Expenses ........................................................................................................................................

Note 8—Investments ....................................................................................................................................................

Note 9—Income from Investments...............................................................................................................................

Note 10—Fair Value Measurements ............................................................................................................................

Note 11—Goodwill and Intangibles .............................................................................................................................

Note 12—Variable Interest Entities..............................................................................................................................

Note 13—Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income ............................

Note 14—Shareholders’ Equity....................................................................................................................................

Note 15—Pension Benefits...........................................................................................................................................

Note 16—Postretirement Benefits Other Than Pensions..............................................................................................

Note 17—Long-term Equity-based Compensation ......................................................................................................

Note 18—Policyholder Obligations..............................................................................................................................

Note 19—Debt ..............................................................................................................................................................

Note 20—Leases...........................................................................................................................................................

Note 21—Catastrophe Reinsurance..............................................................................................................................

Note 22—Other Reinsurance........................................................................................................................................

Note 23—Income Taxes ...............................................................................................................................................

Note 24—Contingencies...............................................................................................................................................

Note 25—Related Parties..............................................................................................................................................

Report of Independent Registered Public Accounting Firm (Deloitte: PCAOB Firm ID - 34)...........................................

103

104

110

111

113

114

115

119

121

125

126

127

129

131

132

134

135

KEMPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Revenues:

For the Year Ended December 31,

2021

2020

2019

Earned Premiums .............................................................................................................. $ 5,253.7

$ 4,672.2

$ 4,472.4

Net Investment Income .....................................................................................................
Change in Value of Alternative Energy Partnership Investments.....................................
Other Income (Loss)..........................................................................................................

Income (Loss) from Change in Fair Value of Equity and Convertible Securities ............
Net Realized Gains on Sales of Investments.....................................................................

427.3
(61.2)
4.8

114.6
64.8

348.2
—
94.6

72.1
38.1

364.3
—
35.5

138.9
41.9

Impairment Losses ............................................................................................................
Total Revenues.......................................................................................................................

(11.0)
5,793.0

(19.5)
5,205.7

(13.8)
5,039.2

Expenses:

Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses .................

Insurance Expenses ...........................................................................................................
Loss from Early Extinguishment of Debt..........................................................................
Interest and Other Expenses ..............................................................................................

Total Expenses .......................................................................................................................

Income (Loss) before Income Taxes .....................................................................................

Income Tax Benefit (Expense) ..............................................................................................

4,600.8

1,218.1
—
219.4

6,038.3

(245.3)

124.8

3,323.6

1,100.5
—
271.5

4,695.6

510.1

3,188.3

1,019.7
5.8
163.8

4,377.6

661.6

(100.2)

(130.5)

Net Income (Loss).................................................................................................................. $ (120.5) $

409.9

Net Income (Loss) Per Unrestricted Share:

Basic .................................................................................................................................. $

(1.87) $

Diluted ............................................................................................................................... $

(1.87) $

6.24

6.14

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

531.1

8.04

7.96

KEMPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

DOLLARS IN MILLIONS
Net Income (Loss).................................................................................................................. $ (120.5) $

2021

2020
409.9

2019
531.1

For The Years Ended December 31,

Other Comprehensive Income (Loss) Before Income Taxes:

Changes in Net Unrealized Holding Gains (Losses) on Investment Securities with:
No Credit Losses Recognized in Consolidated Statements of Income .............................

(284.5)

369.9

405.3

Credit Losses Recognized in Consolidated Statements of Income ...................................
Decrease (Increase) in Net Unrecognized Postretirement Benefit Costs ............................
Gain on Cash Flow Hedges.................................................................................................

(2.0)
(8.8)
0.5

Other Comprehensive Income (Loss) Before Income Taxes.................................................
Other Comprehensive Income Tax Benefit (Expense) ..........................................................

(294.8)
62.4

Other Comprehensive Income (Loss), Net of Taxes .............................................................
Total Comprehensive Income (Loss)..................................................................................... $ (352.9) $

(232.4)

(2.6)
70.2
0.4

437.9
(93.5)

344.4
754.3

—
(7.8)
0.4

397.9
(83.6)

314.3
845.4

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

KEMPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
Assets:

Investments:

Fixed Maturities at Fair Value (Amortized Cost: 2021 - $7,358.2; 2020 - $6,692.7

Allowance for Credit Losses: 2021 - $7.5; 2020 - $3.3) ......................................................... $

Equity Securities at Fair Value (Cost: 2021 - $618.7; 2020 - $684.1).......................................

Equity Securities at Modified Cost.............................................................................................
Equity Method Limited Liability Investments ..........................................................................

Alternative Energy Partnership Investments ..............................................................................

Convertible Securities at Fair Value...........................................................................................
Short-term Investments at Cost which Approximates Fair Value..............................................

Other Investments.......................................................................................................................
Total Investments............................................................................................................................

Cash.................................................................................................................................................
Receivables from Policyholders (Allowance for Credit Losses: 2021 - $13.6 ; 2020 - $20.9) ......

Other Receivables ...........................................................................................................................

Deferred Policy Acquisition Costs..................................................................................................

December 31,

2021

2020

7,986.9
830.6

7,605.9
858.5

32.3
241.9

39.6

46.4
284.1

925.6
10,387.4

148.2
1,418.7

207.3

677.6

40.1
204.0

21.3

39.9
875.4

779.0
10,424.1

206.1
1,194.5

222.4

589.3

1,114.0

15.6

575.9

Goodwill .........................................................................................................................................

1,312.0

Current Income Tax Assets.............................................................................................................

Other Assets ....................................................................................................................................

173.1

592.2

Total Assets..................................................................................................................................... $

14,916.5

14,341.9

Liabilities and Shareholders’ Equity:

Insurance Reserves:

Life and Health........................................................................................................................... $

3,540.9

Property and Casualty ................................................................................................................

Total Insurance Reserves ................................................................................................................

Unearned Premiums........................................................................................................................

Policyholder Obligations ................................................................................................................

Deferred Income Tax Liabilities.....................................................................................................

Accrued Expenses and Other Liabilities.........................................................................................
Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2021 - $1,152.1;

2020 - $1,247.8) ..........................................................................................................................

Total Liabilities...............................................................................................................................

Shareholders’ Equity:

Common Stock, $0.10 Par Value, 100,000,000 Shares Authorized; 63,684,628 Shares Issued
and Outstanding at December 30, 2021 and 65,436,207 Shares Issued and Outstanding at
December 31, 2020 .................................................................................................................

Paid-in Capital............................................................................................................................

Retained Earnings.......................................................................................................................

Accumulated Other Comprehensive Income..............................................................................

Total Shareholders’ Equity .............................................................................................................

2,772.7

6,313.6

1,898.7

504.0

227.0

843.6

1,121.9

10,908.8

6.4

1,790.7

1,762.5

448.1

4,007.7

3,527.5

1,982.5

5,510.0

1,615.1

467.0

285.7

727.9

1,172.8

9,778.5

6.5

1,805.2

2,071.2

680.5

4,563.4

Total Liabilities and Shareholders’ Equity ..................................................................................... $

14,916.5

14,341.9

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

KEMPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended December 31,

DOLLARS IN MILLIONS
Cash Flows from Operating Activities:
Net Income (Loss) ................................................................................................................... $ (120.5) $
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating

2021

Net Realized Investment (Gains) Losses ..............................................................................
Impairment Losses ................................................................................................................
Depreciation and Amortization of Property, Equipment and Software ................................
Amortization of Intangible Assets Acquired ........................................................................
Settlement Costs Related to Defined Benefit Pension Plan..................................................
Contribution to Defined Benefit Pension Plan......................................................................
Loss from Early Extinguishment of Debt .............................................................................
Change in Accumulated Undistributed Earnings of Equity Method Limited Liability
Loss from Change in Value of Alternative Energy Partnership Investments .......................
(Increase) Decrease in Value of Equity and Convertible Securities .....................................
Changes in:

Receivables from Policyholders .........................................................................................
Reinsurance Recoverables..................................................................................................
Deferred Policy Acquisition Costs .....................................................................................
Insurance Reserves .............................................................................................................
Unearned Premiums ...........................................................................................................
Income Taxes......................................................................................................................
Other Assets and Liabilities................................................................................................
Net Cash Provided by Operating Activities ..............................................................................
Cash Flows from Investing Activities:

Proceeds from the Sales, Calls and Maturities of Fixed Maturities ........................................
Proceeds from the Sales or Paydowns of Investments:

Equity Securities.................................................................................................................
Real Estate Investments......................................................................................................
Mortgage Loans..................................................................................................................
Other Investments...............................................................................................................

Purchases of Investments:

Fixed Maturities..................................................................................................................
Equity Securities.................................................................................................................
Real Estate Investments......................................................................................................
Corporate-Owned Life Insurance .......................................................................................
Mortgage Loans..................................................................................................................
Other Investments...............................................................................................................
Net Sales (Purchases) of Short-term Investments...................................................................
Acquisition of Business, Net of Cash Acquired......................................................................
Acquisition of Software and Long-lived Assets......................................................................
Other........................................................................................................................................
Net Cash Used by Investing Activities......................................................................................
Cash Flows from Financing Activities:

2020

2019

409.9

531.1

(38.1)
19.5
36.2
18.8
64.1
—
—
(4.0)
—
(72.1)

(77.4)
16.8
(52.3)
38.3
69.6
46.5
(27.8)
448.0

(41.9)
13.8
32.8
29.7
—
(55.3)
5.8
10.9
—
(138.9)

(110.1)
35.6
(66.9)
102.3
121.2
58.8
5.4
534.3

(64.8)
11.0
46.3
53.5
—
—
—
(33.5)
61.2
(114.6)

(75.2)
20.6
(88.3)
623.1
105.9
(163.1)
89.1
350.7

1,388.9

972.4

1,229.1

316.6
8.0
70.8
47.5

(1,825.4)
(124.3)
(5.1)
(100.0)
(119.9)
(104.9)
687.2
(316.6)
(57.8)
16.8
(118.2)

434.4
5.4
25.5
45.2

(1,293.3)
(319.1)
(0.5)
(100.0)
(52.7)
(43.5)
(390.8)
—
(53.4)
13.4
(757.0)

217.3
—
17.2
29.5

(1,284.9)
(307.0)
(1.4)
(150.0)
(44.5)
(73.8)
(176.0)
—
(84.0)
(4.9)
(633.4)

Repayment of Long-term Debt .............................................................................................
Net Proceeds from Issuance of Long-term Debt...................................................................
Proceeds from Policyholder Contract Obligations................................................................
Repayment of Policyholder Contract Obligations ................................................................
Proceeds from Issuance of Common Stock, Net of Transaction Costs ................................
Proceeds from Shares Issued under Employee Stock Purchase Plan....................................
Common Stock Repurchases ................................................................................................
Dividends and Dividend Equivalents Paid............................................................................
Other .....................................................................................................................................
Net Cash Provided (Used) by Financing Activities...................................................................
Increase (Decrease) in Cash ......................................................................................................
Cash, Beginning of Year ...........................................................................................................
Cash, End of Year...................................................................................................................... $
$

(50.0)
—
386.8
(394.0)
—
5.4
(161.7)
(80.6)
3.7
(290.4)
(57.9)
206.1
148.2

$
$

—
395.6
467.0
(304.8)
—
4.4
(110.4)
(78.9)
5.4
378.3
69.3
136.8
206.1

$
$

(185.0)
49.9
615.8
(383.6)
127.5
1.6
—
(67.8)
2.4
160.8
61.7
75.1
136.8

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

KEMPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Year Ended December 31, 2021, 2020 and 2019

Number
of
Shares

Common
Stock

Paid-in
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareholders’
Equity

21.8
—

3,050.1
531.1

Retained
Earnings

$ 1,355.5
531.1

DOLLARS AND SHARES IN MILLIONS,
EXCEPT PER SHARE AMOUNTS
BALANCE, DECEMBER 31, 2018.........................

Net Income (Loss) ......................................................
Other Comprehensive Income (Loss), Net of Taxes
(Note 13).....................................................................
Cash Dividends and Dividend Equivalents to
Shareholders ($1.03 per share) ...................................

Issuances of Common Stock (Note 14) ......................

Shares Issued Under Employee Stock Purchase Plan
(Note 14).....................................................................
Equity-based Compensation Cost (Note 17) ..............

Equity-based Awards, Net of Shares Exchanged

(Note 17)...............................................................

BALANCE, DECEMBER 31, 2019.........................
Net Income (Loss) ......................................................
Other Comprehensive Income (Loss), Net of Taxes
(Note 13).....................................................................
Cash Dividends and Dividend Equivalents to

Shareholders ($1.20 per share) .............................

Repurchases of Common Stock (Note 14) .................
Shares Issued Under Employee Stock Purchase Plan
(Note 14).....................................................................
Equity-based Compensation Cost (Note 17) ..............
Equity-based Awards, Net of Shares Exchanged

(Note 17)...............................................................

BALANCE, DECEMBER 31, 2020.........................
Net Income (Loss) ......................................................
Other Comprehensive Income (Loss), Net of Taxes
(Note 13).....................................................................
Cash Dividends and Dividend Equivalents to

Shareholders ($1.24 per share) .............................

(Note 17)...............................................................

BALANCE, DECEMBER 31, 2021.........................

64.7
—

—

1.6

—

0.4
66.7
—

—

—
(1.6)

—
—

0.3
65.4
—

—

—
(2.1)

0.1
—

0.3
63.7

6.5
—

—

0.2

—

—
6.7
—

—

—
(0.2)

—
—

—
6.5
—

—

—
(0.2)

—
—

0.1
6.4

$ 1,666.3
—

—

127.0

1.9

25.3

—

(68.4)

—

(1.3)
$ 1,819.2
—

(7.9)
$ 1,810.3
409.9

—

—
(44.2)

4.4
24.9

(79.4)
(66.0)

—
—

314.3

—

—
336.1
—

344.4

—
—

314.3

(68.4)

127.2

1.9

25.3

(9.2)
3,972.3
409.9

344.4

(79.4)
(110.4)

4.4
24.9

(2.7)
4,563.4
(120.5)

0.9
$ 1,805.2
—

(3.6)
$ 2,071.2
(120.5)

—
680.5
—

—

(232.4)

—
(57.8)

5.4
37.0

(81.0)
(103.7)

—
—

(81.0)
(161.7)

5.4
37.0

0.9
$ 1,790.7

(3.5)
$ 1,762.5

—
448.1

(2.5)
4,007.7

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ESTIMATES

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

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

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

Use of Estimates

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

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

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

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES

Investments

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

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

Equity investments include common stocks, non-redeemable preferred stocks, exchange traded funds, money market mutual
funds and limited liability companies and investment partnerships in which the Company’s interests are deemed minor. Equity
investments with readily determinable fair values are recorded as Equity Securities at Fair Value on the Consolidated Balance
Sheets. The changes in the fair value of such equity securities are reported in the Consolidated Statements of Income. Dividend
income on investments in common and non-redeemable preferred stocks is recognized on the ex-dividend date. The Company
holds certain equity investments without readily determinable fair values at cost, less impairment, if any, plus or minus changes
resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer on the
Consolidated Balance Sheets as Equity Securities at Modified Cost. Changes in the carrying value of Modified Cost
investments due to observable price changes are recorded as Income (Loss) from Change in Fair Value of Equity and
Convertible Securities.

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 whereby changes in net asset values are recorded in Net Investment Income in the Consolidated Statements of
Income. Certain partnerships for which results are not available on a timely basis are reported on a lag.

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

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

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

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

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

Investments in Fixed Maturities - Allowance for Expected Credit Losses
For fixed maturity investments that the Company intends to sell or for which it is more likely than not that the Company will be
required to sell before an anticipated recovery of value, the full amount of the impairment is reported in Impairment
Losses. The Company writes down the investment’s amortized cost to its fair value, and will not adjust for any subsequent
recoveries.

For fixed maturity investments that the Company does not intend to sell or for which it is more likely than not that the
Company will not be required to sell before an anticipated recovery of value, the Company will evaluate whether a decline in
fair value below the amortized cost basis has occurred from a credit loss or other factors (non-credit related). Considerations in
the credit loss assessment include (1) extent to which the fair value has been less than amortized cost, (2) conditions related to
the security, an industry, or a geographic area, (3) payment structure of the investment and the likelihood of the issuer's ability
to make contractual cash flows, (4) defaults or other collectability concerns related to the issuer, (5) changes in the ratings
assigned by a rating agency and (6) other credit enhancements that affect the investment’s expected performance.

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

The Company reports accrued investment income separately for available-for-sale fixed maturity securities and has elected not
to measure an allowance for credit losses on accrued investment income. Accrued investment income is written off through
Impairment Losses at the time the issuer of the bond defaults or is expected to default on interest payments.

Fair Value Measurements

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

•
•

•

Level 1 — Quoted prices in an active market for identical assets or liabilities;
Level 2 — Observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted
prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose
inputs are observable or whose significant value drivers are observable; and
Level 3 — Significant unobservable inputs for the asset or liability being measured.

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

Deferred Policy Acquisition Costs

Costs directly associated with the successful acquisition of business, principally commissions and certain premium taxes and
policy issuance costs, are deferred. Costs deferred on property and casualty insurance contracts and short duration health
insurance contracts are amortized over the period in which premiums are earned. Costs deferred on traditional life insurance
products and other long-duration insurance contracts are primarily amortized over the anticipated premium-paying period of the
related policies in proportion to the ratio of the annual premiums to the total premiums anticipated, which is estimated using the
same assumptions used in calculating policy reserves.

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

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

Goodwill

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

Insurance Reserves

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

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

Policyholder Obligations

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

Receivables from Policyholders - Allowance for Expected Credit Losses

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

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

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

Other Receivables

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

Other Assets

Other Assets primarily include property and equipment, internal use software, right-of-use assets, insurance licenses acquired in
business combinations, the value of other intangible assets acquired and prepaid expenses. Property and equipment is
depreciated over the useful lives of the assets, generally using the straight-line or double declining balance methods of
depreciation depending on the asset involved. Internal use software is amortized over the useful life of the asset using the
straight-line method of amortization and is evaluated for recoverability upon identification of impairment indications. Insurance
licenses acquired in business combinations and other indefinite life intangibles are not amortized, but rather tested periodically
for recoverability.

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

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

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

Accrued Expenses and Other Liabilities

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

Recognition of Earned Premiums and Related Expenses

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

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

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

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

Reinsurance

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

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

Income Taxes

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

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

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 Consolidated Financial Statements and Notes to the
Consolidated Financial Statements.

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

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

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

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

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

The Company has adopted all other recently issued accounting pronouncements with effective dates prior to January 1, 2022.
There were no adoptions of such accounting pronouncements during the year ended December 31, 2021 that had a material
impact on the Company’s Consolidated Financial Statements and Notes to the 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 Consolidated Financial Statements

NOTE 3. NET INCOME PER UNRESTRICTED SHARE

The Company’s awards of deferred stock units granted to Kemper’s non-employee directors prior to 2019 contain rights to
receive non-forfeitable dividend equivalents and participate in the undistributed earnings with common shareholders.
Accordingly, the Company 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 years ended December 31, 2021, 2020 and 2019 is presented
below.

2021

2020

2019

DOLLARS IN MILLIONS
Net Income (Loss).................................................................................................................. $ (120.5) $

Less: Net Income Attributed to Participating Awards ...........................................................
Net Income (Loss) Attributed to Unrestricted Shares............................................................

—
(120.5)

Dilutive Effect on Income of Equity-based Compensation Equivalent Shares .....................
Diluted Net Income (Loss) Attributed to Unrestricted Shares............................................... $ (120.5) $
SHARES IN THOUSANDS
Weighted-average Unrestricted Shares Outstanding..............................................................

64,264.4

—

409.9

531.1

0.4
409.5

—
409.5

1.7
529.4

—
529.4

65,636.1

65,880.9

Equity-based Compensation Equivalent Shares.....................................................................
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming

Dilution...............................................................................................................................

— 1,093.7

667.2

64,264.4

66,729.8

66,548.1

PER UNRESTRICTED SHARE IN WHOLE DOLLARS
Basic Net Income (Loss) Per Unrestricted Share................................................................... $

(1.87) $

Diluted Net Income (Loss) Per Unrestricted Share................................................................ $

(1.87) $

6.24

6.14

8.04

7.96

The number of shares of Kemper common stock that were excluded from the calculations of Equity-based Compensation
Equivalent Shares and Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution for the
years ended December 31, 2021, 2020 and 2019, because the effect of inclusion would be anti-dilutive, is presented below.

SHARES IN THOUSANDS
Equity-based Compensation Equivalent Shares.....................................................................
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming

Dilution...............................................................................................................................

2021
2,180.1

2020
874.5

2019
556.4

2,180.1

874.5

556.4

NOTE 4. 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 of direct premiums in 2020 through a network of approximately
600 independent agents and its captive agency force.

The Company is in the process of finalizing the estimation of the fair value of acquired assets and assumed liabilities.
Accordingly, the Company’s preliminary estimates and the allocation of the purchase price to the assets acquired and liabilities
assumed 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.

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 4 - ACQUISITION OF BUSINESS (Continued)

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

(Dollars in Millions)
Fixed Maturities at Fair Value .................................................................................................................................. $
Equity Securities at Fair Value ................................................................................................................................

Short-term Investments at Cost which Approximates Fair Value ............................................................................
Cash...........................................................................................................................................................................
Receivables from Policyholders................................................................................................................................

Other Receivables .....................................................................................................................................................
Goodwill ...................................................................................................................................................................

Current Income Tax Assets.......................................................................................................................................
Other Assets ..............................................................................................................................................................

Property and Casualty Insurance Reserves ...............................................................................................................
Unearned Premiums..................................................................................................................................................

Deferred Income Tax Liabilities ...............................................................................................................................

Accrued Expenses and Other Liabilities...................................................................................................................

Total Purchase Price.................................................................................................................................................. $

151.2
82.4

100.1
54.3
148.9

2.0
198.0

0.3
81.4

(211.1)
(177.8)

(7.8)

(51.0)

370.9

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

Intangible Assets

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

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

(Dollars in Millions)
Definite Life Intangibles

Value of Business Acquired ................................................................................................................................... $

42.9

Customer Relationships..........................................................................................................................................

Agent Relationships ...............................................................................................................................................

Internal-Use Software.............................................................................................................................................

Trade Names ..........................................................................................................................................................

Indefinite Life Intangible Assets

Insurance Licenses.................................................................................................................................................. $

4.8

7.2

6.5

1.8

2.5

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 4 - ACQUISITION OF BUSINESS (Continued)

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.

(Dollars in millions)
Total Revenues........................................................................................................................................... $ 5,884.2
6,109.5
Total Expenses ...........................................................................................................................................
(225.3)
Income (Loss) before Income Taxes..........................................................................................................

Dec 31,
2021

Dec 31,
2020
$ 5,585.7
5,040.1
545.6

Net Income (Loss)...................................................................................................................................... $ (105.1) $

443.0

Year Ended

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 5. BUSINESS SEGMENTS

The Specialty Property & Casualty Insurance segment’s principal products are specialty automobile insurance and commercial
automobile insurance. The Preferred Property & Casualty Insurance segment’s principal products are preferred 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.

The Company’s earned premiums are derived in the United States. The accounting policies of the segments are the same as
those described in Note 2, “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial
Statements. Capital expenditures for long-lived assets by operating segment are immaterial.

It is the Company’s management practice to allocate certain corporate expenses, primarily compensation costs for corporate
employees and related facility costs, included in Interest and Other Expenses in the Consolidated Statements of Income to its
insurance operations. The amount of such allocated corporate expenses was $121.9 million, $109.5 million and $103.9 million
for the years ended December 31, 2021, 2020 and 2019, respectively. The Company does not allocate Income (Loss) from
Change in Fair Value of Equity and Convertible Securities, Net Realized Gains on Sales of Investments, Impairment Losses,
Acquisition Related Transaction, Integration and Other Costs, Loss from Early Extinguishment of Debt, interest expense on
debt or postretirement benefit plans, and actuarial gains and losses on its postretirement benefit plans to its operating segments.

Segment Assets at December 31, 2021 and 2020 were:

DOLLARS IN MILLIONS
Specialty Property & Casualty Insurance .............................................................................................. $ 5,936.5
Preferred Property & Casualty Insurance ..............................................................................................
1,230.1
Life & Health Insurance ........................................................................................................................
6,062.6
Corporate and Other, Net.......................................................................................................................
1,687.3
Total Assets............................................................................................................................................ $ 14,916.5

2021

2020
$ 4,897.1
1,711.2
6,457.0
1,276.6
$ 14,341.9

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 5. BUSINESS SEGMENTS (Continued)

Earned Premiums by product line for the years ended December 31, 2021, 2020 and 2019 were:

DOLLARS IN MILLIONS
Specialty Property & Casualty Insurance:

2021

2020

2019

Specialty Automobile.......................................................................................................... $ 3,533.7
Commercial Automobile .....................................................................................................
414.8

$ 3,031.3
304.0

$ 2,825.6
252.8

Preferred Property & Casualty Insurance:

Preferred Automobile..........................................................................................................
Homeowners .......................................................................................................................
Other Personal Lines ...........................................................................................................

410.5
207.3
33.9

431.7
220.7
35.8

470.2
241.3
38.8

Life & Health Insurance:

Life ......................................................................................................................................
Accident & Health...............................................................................................................
Property ...............................................................................................................................

401.7
189.9
61.9
Total Earned Premiums.......................................................................................................... $ 5,253.7

385.7
199.3
63.7
$ 4,672.2

384.6
190.9
68.2
$ 4,472.4

Segment Revenues, including a reconciliation to Total Revenues, for the years ended December 31, 2021, 2020 and 2019 were:

DOLLARS IN MILLIONS
Segment Revenues:
Specialty Property & Casualty Insurance:

2021

2020

2019

Earned Premiums .............................................................................................................. $ 3,948.5
Net Investment Income .....................................................................................................
152.5
Change in Value of Alternative Energy Partnership Investments.....................................
(29.0)
Other Income.....................................................................................................................
4.1
Total Specialty Property & Casualty Insurance ..................................................................
4,076.1

$ 3,335.3
114.1
—
1.8
3,451.2

$ 3,078.4
107.5
—
7.0
3,192.9

Preferred Property & Casualty Insurance:

Earned Premiums ..............................................................................................................
Net Investment Income .....................................................................................................
Change in Value of Alternative Energy Partnership Investments.....................................
Other Income.....................................................................................................................
Total Preferred Property & Casualty Insurance ..................................................................

651.7
68.6
(16.3)
—
704.0

688.2
37.7
—
0.1
726.0

750.3
44.1
—
—
794.4

Life & Health Insurance:

Earned Premiums ..............................................................................................................
653.5
Net Investment Income .....................................................................................................
202.7
Change in Value of Alternative Energy Partnership Investments.....................................
(15.8)
Other Income.....................................................................................................................
(1.3)
Total Life & Health Insurance ............................................................................................
839.1
Total Segment Revenues........................................................................................................
5,619.2
Income (Loss) from Change in Fair Value of Equity and Convertible Securities.................
114.6
Net Realized Gains on the Sales of Investments ...................................................................
64.8
Net Impairment Losses Recognized in Earnings ...................................................................
(11.0)
Other ......................................................................................................................................
5.4
Total Revenues....................................................................................................................... $ 5,793.0

648.7
198.8
—
0.6
848.1
5,025.3
72.1
38.1
(19.5)
89.7
$ 5,205.7

643.7
206.4
—
8.5
858.6
4,845.9
138.9
41.9
(13.8)
26.3
$ 5,039.2

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 5. BUSINESS SEGMENTS (Continued)

Segment Operating Income (Loss), including a reconciliation to Income (Loss) before Income Taxes, for the years ended
December 31, 2021, 2020 and 2019 was:

DOLLARS IN MILLIONS
Segment Operating Income (Loss):

2021

2020

2019

Specialty Property & Casualty Insurance............................................................................ $ (292.1) $
Preferred Property & Casualty Insurance............................................................................
Life & Health Insurance......................................................................................................
Total Segment Operating Income (Loss)...............................................................................
Corporate and Other Operating Income (Loss) From:

(39.8)
10.5
(321.4)

Partial Satisfaction of Judgment........................................................................................
Other..................................................................................................................................
Corporate and Other Operating Income (Loss) .....................................................................
Adjusted Consolidated Operating Income (Loss)..................................................................
Income (Loss) from Change in Fair Value of Equity and Convertible Securities ............
Net Realized Gains on Sales of Investments.....................................................................
Impairment Losses ............................................................................................................
Acquisition Related Transaction, Integration and Other Costs.........................................

Pension Obligation Settlement Costs ................................................................................

Loss from Early Extinguishment of Debt .........................................................................

—
(48.4)
(48.4)
(369.8)
114.6
64.8
(11.0)

(43.9)

—

420.9
1.8
71.2
493.9

89.4
(36.5)
52.9
546.8
72.1
38.1
(19.5)

(63.3)

(64.1)

—

355.9
52.3
121.9
530.1

20.1
(31.4)
(11.3)
518.8
138.9
41.9
(13.8)

(18.4)

—

(5.8)

Income (loss) before Income Taxes ...................................................................................... $ (245.3) $

510.1

661.6

Segment Net Operating Income (Loss), including a reconciliation to Net Income (Loss), for the years ended December 31,
2021, 2020 and 2019 was:

DOLLARS IN MILLIONS
Segment Net Operating Income (Loss):

2021

2020

2019

Specialty Property & Casualty Insurance............................................................................ $ (196.1) $
Preferred Property & Casualty Insurance............................................................................
Life & Health Insurance......................................................................................................
Total Segment Net Operating Income (Loss) ........................................................................
Corporate and Other Net Operating Income (Loss) From:....................................................
Partial Satisfaction of Judgment..........................................................................................
Other....................................................................................................................................
Total Corporate and Other Net Operating Income (Loss) .....................................................
Adjusted Consolidated Net Operating Income (Loss) ...........................................................
Net Income (Loss) From:

—
(38.4)
(38.4)
(218.8)

(12.5)
28.2
(180.4)

Change in Fair Value of Equity and Convertible Securities ...............................................

Net Realized Gains on Sales of Investments.......................................................................

Impairment Losses ..............................................................................................................
Acquisition Related Transaction, Integration and Other Costs...........................................
Pension Obligation Settlement Costs ..................................................................................
Loss from Early Extinguishment of Debt ...........................................................................

90.5

51.2
(8.7)
(34.7)
—
—

Net Income (Loss).................................................................................................................. $ (120.5) $

337.9
3.5
60.0
401.4

70.6
(33.2)
37.4
438.8

57.0

30.1
(15.4)
(50.0)
(50.6)
—
409.9

283.1
41.9
98.7
423.7

15.9
(21.3)
(5.4)
418.3

109.7

33.1
(10.9)
(14.5)
—
(4.6)
531.1

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES

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

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

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

The key assumption in these estimation methodologies is that patterns observed in prior periods are indicative of how losses
and LAE are expected to develop in the future and that such historical data can be used to predict and estimate ultimate losses
and LAE. However, changes in the Company’s business processes, by their very nature, are likely to affect the development
patterns, which generally results in the historical development factors becoming less reliable over time in predicting how losses
and LAE will ultimately develop. The Company’s actuaries use professional judgment in determining how much weight to
place on the development patterns based on the older historical data and how much weight to place on the development patterns
based on more recent data. In some cases, the Company’s actuaries make adjustments to the loss reserving estimation
methodologies to estimate ultimate losses and LAE. The Company’s actuaries’ quarterly or yearly selections are summed by
product and/or coverage levels to create the actuarial indication of the ultimate losses and LAE. Paid amounts are then
subtracted from the ultimates to compute the reserves for property and casualty insurance losses and LAE. These results are
reviewed by the Company’s actuaries and corporate management who apply their collective judgment and determine the
appropriate estimated level of reserves to record. Numerous factors are considered in this determination process, including, but
not limited to, the assessed reliability of key loss trends and assumptions that may be significantly influencing the current
actuarial indications, changes in claim handling practices or other changes that affect the timing of payment or development
patterns, changes in the mix of business, the maturity of the accident year, pertinent trends observed over the recent past, the
level of volatility within a particular line of business, the improvement or deterioration of actuarial indications in the current
period as compared to prior periods, and the amount of reserves related to third party pools for which the Company has limited
access to the underlying data and, accordingly, relies on calculations provided by such pools. The Company’s goal is to ensure
that its total reserves for property and casualty insurance losses and LAE are adequate to cover all costs, while sustaining
minimal variation from the time reserves for losses and LAE are initially estimated until losses and LAE are fully developed.
Changes in the Company’s estimates of these losses and LAE over time, also referred to as “development,” will occur and may
be material.

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Specialty Personal Automobile Insurance—Liability1

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS

As of December 31, 2021

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,

Accident Year
2017 ............. $

2017
1,170.2

2018
1,175.6

2018 .......................................
1,324.0
2019.................................................................

2019
1,185.6

1,310.5
1,461.5

2020
1,181.6

1,307.8
1,494.7

1,401.2
2020 ..........................................................................................
2021 ....................................................................................................................
Total....................................................................................................................

2021
1,197.4

1,314.5
1,506.1

1,406.4
1,856.9
7,281.3

Total of IBNR
Liabilities Plus
Expected
Development on
Reported
Claims

15.1

24.0
54.8

111.6
607.1

Cumulative
Number of
Reported
Claims

458,261

508,623
546,521

474,346
544,207

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance

For the Years Ended December 31,

Accident Year
2017 ............. $

2017

2018

498.3

945.5

2018 .......................................

541.3

2019.................................................................

2019
1,092.9

1,050.8

567.3

2020 ..........................................................................................

1,211.8

1,200.7

555.2

2020
1,141.9

2021
1,169.3

2021 ....................................................................................................................

Total....................................................................................................................
Outstanding Loss and Allocated LAE Reserves on Accident Years before
2017, Net of Reinsurance ..............................................................................
Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $

1,265.5

1,382.0

1,107.6

657.1

5,581.5

22.5

1,722.3

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Specialty Personal Automobile Insurance—Physical Damage1

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS

As of December 31, 2021

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,

2018

2019

2020

2021

2017

Accident Year
2017 ............. $
533.1
2018 .......................................

522.5
558.9

522.0
548.6

2019.................................................................
624.3
2020 ..........................................................................................

522.5
548.0

630.3
650.5

2021 ....................................................................................................................
Total....................................................................................................................

Total of IBNR
Liabilities Plus
Expected
Development on
Reported
Claims

522.4
547.8

629.6
659.5

958.0
3,317.3

(0.1)
(0.6)

(10.5)
(6.4)

2.1

Cumulative
Number of
Reported
Claims

296,392
309,577

324,321
296,167

348,244

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance

For the Years Ended December 31,

2017

2018

2019

2020

2021

493.2

525.6

523.0

522.7

Accident Year
2017 ............. $

2018 .......................................

509.4

2019.................................................................

553.1

570.8

2020 ..........................................................................................

549.0

634.8

585.5

2021 ....................................................................................................................

522.5

548.3

630.6

663.8

890.1

3,255.3

1.6

63.6

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Commercial Automobile Insurance—Liability1

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS

As of December 31, 2021

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,

2017

2018

2019

2020

2021

Total of IBNR
Liabilities Plus
Expected
Development on
Reported
Claims

Cumulative
Number of
Reported
Claims

120.5

120.0

118.3

114.3

114.4

Accident Year
2017 ............. $

2.3

4.7
11.5

25.5
99.1

19,967

20,195
19,572

19,354
24,690

2018.......................................
123.2
2019 ................................................................

116.5
128.4

113.0
126.1

140.5
2020..........................................................................................
2021....................................................................................................................

Total ...................................................................................................................

110.9
126.6

152.0
225.6

729.5

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification

For the Years Ended December 31,

2017

2018

2019

2020

2021

101.7

107.2

Accident Year
2017 ............. $

36.3

2018.......................................

72.3

36.8

2019 ................................................................

90.7

68.8

32.4

2020..........................................................................................

88.1

75.7

37.0

2021....................................................................................................................

Total ...................................................................................................................
Outstanding Loss and Allocated LAE Reserves on Accident Years before
2017, Net of Reinsurance .............................................................................
Loss and Allocated LAE Reserves, Net of Reinsurance.................................... $

98.1

99.5

87.6

50.8

443.2

14.1

300.4

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Commercial Automobile Insurance—Physical Damage1

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS

As of December 31, 2021

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,

2018

2019

2020

2021

2017

Accident Year
2017 ............. $
24.2
2018.......................................

23.5
23.6

23.5
23.5

26.0
2019 ................................................................
2020..........................................................................................

23.4
23.6

27.1
31.9

2021....................................................................................................................
Total ...................................................................................................................

Total of IBNR
Liabilities Plus
Expected
Development on
Reported
Claims

Cumulative
Number of
Reported
Claims

23.4
23.6

26.9
32.2

52.4
158.5

—
0.1

(0.5)
—

0.4

9,792
9,569

9,305
11,011

16,494

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification

For the Years Ended December 31,

2017

2018

2019

2020

2021

Accident Year
2017 ............. $

22.2

2018.......................................

23.5

21.7

2019 ................................................................

23.4

23.6

23.0

2020..........................................................................................

23.4

23.6

26.9

26.2

2021....................................................................................................................

23.4

23.6

26.8

31.9

43.3

149.0

0.4

9.9

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Preferred Personal Automobile Insurance—Liability

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS

As of December 31, 2021

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,

2017

2018

2019

2020

2021

Total of IBNR
Liabilities Plus
Expected
Development
on Reported
Claims

Cumulative
Number of
Reported
Claims

164.4

157.8

155.8

158.2

160.0

Accident Year
2017 ............. $

2018 .......................................
157.6
2019.................................................................

156.3
172.2

161.7
195.5

2020 ..........................................................................................
148.9
2021 ....................................................................................................................

Total....................................................................................................................

163.4
200.0

153.6
176.9

853.9

0.6

1.7
4.9

16.1
54.1

33,734

31,922
34,633

24,438
25,149

150.6

147.4

160.8

92.8

50.3

601.9

10.2

262.2

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance

For the Years Ended December 31,

2017

2018

2019

2020

2021

59.2

108.9

134.1

143.2

Accident Year
2017 ............. $

2018 .......................................

55.5

2019.................................................................

107.6

62.7

2020 ..........................................................................................

132.7

127.9

44.4

2021 ....................................................................................................................

Total....................................................................................................................
Outstanding Loss and Allocated LAE Reserves on Accident Years before
2017, Net of Reinsurance..............................................................................
Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Preferred Personal Automobile Insurance—Physical Damage

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS

As of December 31, 2021

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,

Total of IBNR
Liabilities Plus
Expected
Development
on Reported
Claims

Cumulative
Number of
Reported
Claims

105.2
110.4

125.9
98.0
118.5

558.0

—
0.1

0.3
(0.5)
(0.7)

62,685
61,921

67,181
47,603
50,533

105.2

110.3

125.6

98.4

113.1

552.6

—

5.4

2017

Accident Year
2017 ............. $
109.2
2018 .......................................

2018

2019

2020

2021

105.8
113.9

105.2
111.0

105.1
110.4

2019.................................................................
126.4
125.8
96.1
2020 ..........................................................................................
2021 ....................................................................................................................

Total....................................................................................................................

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance

For the Years Ended December 31,

2017

2018

2019

2020

2021

104.4

106.1

105.2

105.1

Accident Year
2017 ............. $

2018 .......................................

107.2

2019.................................................................

111.4

120.7

2020 ..........................................................................................

110.4

126.5

90.9

2021 ....................................................................................................................

Total....................................................................................................................
Outstanding Loss and Allocated LAE Reserves on Accident Years before
2017, Net of Reinsurance..............................................................................
Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Homeowners Insurance

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS

As of December 31, 2021

Incurred Losses and Allocated LAE, Net of Reinsurance
For the Years Ended December 31,

2018

2019

2020

2021

2017

Accident Year
2017 ............. $
261.2
2018 .......................................

259.5
185.9

245.2
183.0

2019.................................................................
162.9
2020 ..........................................................................................

243.8
183.6

161.8
157.0

Total of IBNR
Liabilities Plus
Expected
Development on
Reported
Claims

Cumulative
Number of
Reported
Claims

243.9
185.3

163.1
149.8

149.9
892.0

1.3
4.1

2.5
4.3

19.1

19,619
16,212

14,670
13,887

12,422

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance

For the Years Ended December 31,

2017

2018

2019

2020

2021

165.8

242.5

235.7

239.5

Accident Year
2017 ............. $

2018 .......................................

127.4

2019.................................................................

180.2

111.1

2020 ..........................................................................................

180.0

150.4

94.6

2021 ....................................................................................................................

Total....................................................................................................................
Outstanding Loss and Allocated LAE Reserves on Accident Years before
2017, Net of Reinsurance..............................................................................
Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $

241.7

183.1

157.7

130.8

100.6

813.9

3.3

81.4

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

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

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

DOLLARS IN MILLIONS
Property and Casualty Insurance Reserves, Net of Reinsurance:

2021

Specialty Personal Automobile Insurance—Liability............................................................................................... $ 1,722.3

Specialty Personal Automobile Insurance—Physical Damage ................................................................................
Commercial Automobile Insurance—Liability ........................................................................................................
Commercial Automobile Insurance—Physical Damage ..........................................................................................

Preferred Personal Automobile Insurance—Liability...............................................................................................
Preferred Personal Automobile Insurance—Physical Damage ................................................................................

Homeowners Insurance.............................................................................................................................................
Other .........................................................................................................................................................................

63.6
300.4
9.9

262.2
5.4

81.4
46.7

Total............................................................................................................................................................................... $ 2,491.9

Reinsurance Recoverables on Unpaid Losses and Allocated LAE:

Specialty Personal Automobile Insurance—Liability............................................................................................... $

10.3

Specialty Personal Automobile Insurance—Physical Damage ................................................................................

Commercial Automobile Insurance—Liability ........................................................................................................

Commercial Automobile Insurance—Physical Damage ..........................................................................................

Preferred Personal Automobile Insurance—Liability...............................................................................................

Preferred Personal Automobile Insurance—Physical Damage ................................................................................

Homeowners Insurance.............................................................................................................................................

Other .........................................................................................................................................................................

Total...............................................................................................................................................................................

Unallocated LAE ...........................................................................................................................................................

—

3.2

—

19.2

—

5.0

4.2

41.9

238.9

Property and Casualty Insurance Reserves, Gross of Reinsurance ............................................................................... $ 2,772.7

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

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)

3
39.1 % 79.3 % 91.7 % 95.8 % 97.7 %
91.9
27.5
87.2
31.9
96.1
67.0

100.0
93.7
100.0
94.2
100.0
99.1

100.1
88.7
100.0
89.9
99.9
98.5

100.2
79.1
99.9
81.8
99.9
96.8

100.8
60.7
99.9
64.6
100.7
94.0

Years
Specialty Personal Automobile Insurance—Liability..................................
Specialty Personal Automobile Insurance—Physical Damage....................
Commercial Automobile Insurance—Liability............................................
Commercial Automobile Insurance—Physical Damage .............................
Preferred Personal Automobile Insurance—Liability..................................
Preferred Personal Automobile Insurance—Physical Damage....................
Homeowners Insurance................................................................................

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Property and Casualty Insurance Reserve activity for the years ended December 31, 2021, 2020 and 2019 was:

DOLLARS IN MILLIONS
Property and Casualty Insurance Reserves:

2021

2020

2019

Gross of Reinsurance at Beginning of Year ...................................................................... $ 1,982.5
Less Reinsurance Recoverables at Beginning of Year ......................................................
50.1
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year.........

1,932.4

$ 1,969.8
65.6

$ 1,874.9
101.9

1,904.2

1,773.0

Property and Casualty Insurance Reserves Acquired, Net of Reinsurance............................
Incurred Losses and LAE related to:

Current Year ......................................................................................................................
Prior Years .........................................................................................................................
Total Incurred Losses and LAE .............................................................................................
Paid Losses and LAE related to:

Current Year: .....................................................................................................................
Prior Years .........................................................................................................................
Total Paid Losses and LAE....................................................................................................
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Year...............

Plus Reinsurance Recoverables at End of Year.................................................................

211.1

—

3.6

4,052.7
106.7
4,159.4

2,303.4
1,268.7
3,572.1

2,730.8
41.9

2,873.6
36.4
2,910.0

1,679.1
1,202.7
2,881.8

1,932.4
50.1

2,879.5
(71.1)
2,808.4

1,682.1
998.7
2,680.8

1,904.2
65.6

Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Year ............... $ 2,772.7

$ 1,982.5

$ 1,969.8

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

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

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

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

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

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

Receivables from Policyholders - Allowance for Expected Credit Losses

The following table presents receivables from policyholders, net of the allowance for expected credit losses including a
rollforward of changes in the allowance for expected credit losses for the year ended December 31, 2021.

(Dollars in Millions)
Balance at Beginning of Year ..................................................................................................... $

1,194.5

Provision for Expected Credit Losses ......................................................................................

Write-offs of Uncollectible Receivables from Policyholders ..................................................

Balance at End of Period............................................................................................................. $

1,418.7

Receivables from
Policyholders,
Net of Allowance
for Expected
Credit Losses

Allowance for
Expected Credit
Losses

Receivables from
Policyholders,
Net of Allowance
for Expected
Credit Losses

Allowance for
Expected Credit
Losses

20.9

50.5

(57.8)

13.6

22.3

45.5

(46.9)

20.9

(Dollars in Millions)
Balance at Beginning of Year ..................................................................................................... $

1,117.1

Provision for Expected Credit Losses ......................................................................................

Write-offs of Uncollectible Receivables from Policyholders ..................................................

Balance at End of Period............................................................................................................. $

1,194.5

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 7. INSURANCE EXPENSES

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

DOLLARS IN MILLIONS
Commissions.......................................................................................................................... $
General Expenses...................................................................................................................
Premium Tax Expense ...........................................................................................................
Total Costs Incurred...............................................................................................................
Policy Acquisition Costs:

2021
817.6
339.5
104.3
1,261.4

2020
745.8
307.4
94.2
1,147.4

2019
708.8
278.0
93.5
1,080.3

Deferred.............................................................................................................................
(772.6)
Amortized..........................................................................................................................
684.3
Net Policy Acquisition Costs Amortized...............................................................................
(88.3)
Amortization of VOBA..........................................................................................................
45.0
Insurance Expenses................................................................................................................ $ 1,218.1

(693.4)
641.8
(51.6)
4.7
$ 1,100.5

(475.2)
408.3
(66.9)
6.3
$ 1,019.7

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

NOTE 8. INVESTMENTS

Fixed Maturities

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

Gross Unrealized

Gains

Losses

29.2
144.6
—

481.4
0.4
0.9
12.4
668.9

(1.9) $
(7.0)
(1.2)

(16.0)
—
(4.8)
(1.8)
(32.7) $

Allowance
for
Expected
Credit
Losses

Fair Value
— $
637.4
— 1,890.1
5.5
—

(7.5)
—
—
—

4,386.9
7.4
752.1
307.5
(7.5) $ 7,986.9

DOLLARS IN MILLIONS
U.S. Government and Government Agencies and Authorities $
States and Political Subdivisions .............................................
Foreign Governments ..............................................................
Corporate Securities:

Amortized
Cost
610.1
1,752.5
6.7

Bonds and Notes .................................................................
Redeemable Preferred Stocks..............................................

3,929.0
7.0
756.0
296.9
Investments in Fixed Maturities .............................................. $ 7,358.2

Collateralized Loan Obligations..........................................
Other Mortgage- and Asset-backed.....................................

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 8. INVESTMENTS (Continued)

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

DOLLARS IN MILLIONS
U.S. Government and Government Agencies and Authorities........ $

Amortized
Cost
536.5

Gross Unrealized

Gains

Losses

Allowance
for
Expected
Credit
Losses

48.9

(0.1) $

— $

Fair Value
585.3

States and Political Subdivisions.....................................................
Foreign Governments ......................................................................

1,404.3
6.6

185.4
—

Corporate Securities:

Bonds and Notes .........................................................................

3,749.5

689.5

Redeemable Preferred Stocks .....................................................
Collateralized Loan Obligations .................................................

7.0
785.1

0.5
2.3

(0.2)
(1.1)

(10.6)

—
(19.7)

— 1,589.5
5.2

(0.3)

(3.0)

4,425.4

7.5
767.7

—

Other Mortgage- and Asset-backed ............................................

203.7
Investments in Fixed Maturities ...................................................... $ 6,692.7

21.6
948.2

—
(31.7) $

—

225.3
(3.3) $ 7,605.9

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

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

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

Fair Value
111.4
$
1,044.2
1,555.9
3,730.1
1,545.3
$ 7,986.9

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 December 31, 2021 consisted of
securities issued by the Government National Mortgage Association with a fair value of $406.4 million, securities issued by the
Federal National Mortgage Association with a fair value of $46.8 million, securities issued by the Federal Home Loan
Mortgage Corporation with a fair value of $32.6 million and securities of other non-governmental issuers with a fair value of
$1,059.5 million.

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 8. INVESTMENTS (Continued)

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

DOLLARS IN MILLIONS
Fixed Maturities:

Less Than 12 Months

12 Months or Longer

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

U.S. Government and Government Agencies and

Authorities......................................................... $

168.7

(1.8) $

States and Political Subdivisions............................
Foreign Governments .............................................
Corporate Securities:

Bonds and Notes ...............................................
Redeemable Preferred Stocks............................

Collateralized Loan Obligations........................
Other Mortgage- and Asset-backed...................

385.0
2.2

596.8
0.1

250.9
100.1

(6.9)
(0.6)

(13.1)
—

(2.6)
(1.8)

1.2

1.5
2.6

49.3
—

192.6
—

(0.1) $

169.9

(0.1)
(0.6)

(2.9)
—

(2.2)
—

386.5
4.8

646.1
0.1

443.5
100.1

(1.9)

(7.0)
(1.2)

(16.0)
—

(4.8)
(1.8)

Total Fixed Maturities................................................. $ 1,503.8

(26.8) $

247.2

(5.9) $ 1,751.0

(32.7)

The Company regularly reviews its fixed maturity investment portfolio for factors that may indicate that a decline in fair value
of an investment has resulted from an expected credit loss. The portions of the declines in the fair values of fixed maturity
investments that are determined to be due to expected credit losses are reported as losses in the Consolidated Statements of
Income in the periods when such determinations are made.

At December 31, 2021, the Company did not have the intent to sell these investments, and it was not more likely than not that
the Company would be required to sell these investments before an anticipated recovery of value. The Company evaluated these
investments for credit losses at December 31, 2021. The Company considers many factors in evaluating whether the unrealized
losses were credit related including, but not limited to, the extent to which the fair value has been less than amortized cost,
conditions related to the security, industry, or geographic area, payment structure of the investment and the likelihood of the
issuer’s ability to make contractual cash flows, defaults or other collectability concerns related to the issuer, changes in the
ratings assigned by a rating agency, and other credit enhancements that affect the investment’s expected performance. The
Company determined that the unrealized losses on these securities were due to non-credit related factors at the evaluation date.

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

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 8. INVESTMENTS (Continued)

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

DOLLARS IN MILLIONS
Fixed Maturities:

Less Than 12 Months

12 Months or Longer

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

U.S. Government and Government Agencies and

Authorities ......................................................... $

States and Political Subdivisions ............................
Foreign Governments..............................................
Corporate Securities:

Bonds and Notes................................................
Collateralized Loan Obligations........................

Other Mortgage- and Asset-backed...................

Total Fixed Maturities ................................................. $

10.5

23.3
0.5

132.9
145.2

6.3
318.7

(0.1) $

— $

(0.2)
(0.1)

(7.5)
(3.8)

—
(11.7) $

—
2.6

46.1
371.4

—
420.1

—
(1.0)

(3.1)
(15.9)

—
(20.0) $

10.5

23.3
3.1

179.0
516.6

6.3
738.8

(0.1)

(0.2)
(1.1)

(10.6)
(19.7)

—
(31.7)

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

Fixed Maturities - Expected Credit Losses

The following table sets forth the change in allowance for credit losses on fixed maturities available-for-sale by major security
type for year ended December 31, 2021.

(Dollars in Millions)
Beginning of the Year...................................................................................................... $

Foreign
Governments
0.3

Corporate
Bonds and
Notes

3.0

Additions for Securities for which No Previous Expected Credit Losses were

Recognized .................................................................................................................
Reduction Due to Sales .................................................................................................
Net Increase (Decrease) in Allowance on Securities for which Expected Credit
Losses were Previously Recognized .............................................................................
Write-offs Charged Against Allowance........................................................................
End of Year ...................................................................................................................... $

—
—

5.6
—

(0.3)
—
— $

(0.8)
(0.3)
7.5

Total

3.3

5.6
—

(1.1)
(0.3)
7.5

100

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 8. INVESTMENTS (Continued)

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

(Dollars in Millions)
Beginning of the Year...................................................................................................... $
Impact of Adopting ASU 2016-13 ................................................................................
Additions for Securities for which No Previous Expected Credit Losses were

Net Increase (Decrease) in Allowance on Securities for which Expected Credit
Losses were Previously Recognized .............................................................................
Write-offs Charged Against Allowance........................................................................
End of Year ...................................................................................................................... $

Equity Securities

Equity Securities at Fair Value

Foreign
Governments

Corporate
Bonds and
Notes

Total

— $
—

1.2
(0.7)

(0.2)
—
0.3

5.9
(1.3)

(0.2)
(1.4)
3.0

—
—

7.1
(2)

(0.4)
(1.4)
3.3

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

Equity Securities at Modified Cost

For Equity Securities at Modified Cost, the Company performs a qualitative impairment analysis on a quarterly basis consisting
of various factors such as earnings performance, current market conditions, changes in credit ratings, changes in the regulatory
environment and other factors. If the qualitative analysis identifies the presence of impairment indicators, the Company
estimates the fair value of the investment. If the estimated fair value is below the carrying value, the Company records an
impairment in the Consolidated Statement of Income to reduce the carrying value to the estimated fair value. When the
Company identifies observable transactions of the same or similar securities to those held by the Company, the Company
increases or decreases the carrying value to the observable transaction price. The Company recognized no decrease in the
carrying value due to observable transactions for the year ended December 31, 2021. The Company recognized an impairment
of $4.2 million on Equity Securities at Modified Cost for the year ended December 31, 2021 as a result of the Company’s
qualitative impairment analysis. The Company has recognized no cumulative increases in the carrying value due to observable
transactions, no cumulative decreases in the carrying value due to observable transactions and $10.0 million of cumulative
impairments on Equity Securities at Modified Cost held as of December 31, 2021.

Equity Method Limited Liability Investments

Equity Method Limited Liability Investments include investments in limited liability investment companies and limited
partnerships in which the Company’s interests are not deemed minor and are accounted for under the equity method of
accounting. The Company’s investments in Equity Method Limited Liability Investments are generally of a passive nature in
that the Company does not take an active role in the management of the investment entity.

In 2021 and 2020, aggregate investment income (losses) from Equity Method Limited Liability Investments exceeded 10% of
the Company’s pretax consolidated net income. Accordingly, the Company is disclosing aggregated summarized financial data
for its Equity Method Limited Liability Investments for all periods presented in the Consolidated Financial Statements. Such
aggregated summarized financial data does not represent the Company’s proportionate share of the Equity Method Limited
Liability Investment assets or earnings. Aggregate total assets of the Equity Method Limited Liability Investments in which the
Company invested totaled $5,042.5 million, $3,554.5 million and $2,368.1 million, as of December 31, 2021, 2020 and 2019,
respectively. Aggregate total liabilities of the Equity Method Limited Liability Investments in which the Company invested

101

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 8. INVESTMENTS (Continued)

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

Alternative Energy Partnership Investments

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

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

Other Investments

The carrying values of the Company’s Other Investments at December 31, 2021 and 2020 were:

DOLLARS IN MILLIONS
Company-Owned Life Insurance .............................................................................................................. $
Loans to Policyholders at Unpaid Principal ..............................................................................................
Real Estate at Depreciated Cost ................................................................................................................

Mortgage Loans and Other........................................................................................................................
Total........................................................................................................................................................... $

2021
448.1
286.2
94.0
97.3
925.6

2020
327.4
297.9
98.7
55.0
779.0

102

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 9. INCOME FROM INVESTMENTS

Net Investment Income for the years ended December 31, 2021, 2020 and 2019 was:

DOLLARS IN MILLIONS
Investment Income:

2021

2020

2019

Interest on Fixed Income Securities ............................................................................... $
Dividends on Equity Securities Excluding Alternative Investments..............................

277.7

289.8

299.4

15.9

15.4

22.9

Alternative Investments:

Equity Method Limited Liability Investments ...........................................................

Limited Liability Investments Included in Equity Securities.....................................

Total Alternative Investments.........................................................................................
Short-term Investments...................................................................................................

Loans to Policyholders ...................................................................................................
Real Estate ......................................................................................................................

Other ...............................................................................................................................

56.7

46.9

103.6
1.0

21.7
9.3

32.4

4.9

22.1

27.0
5.5

22.1
9.6

13.2

1.0

18.0

19.0
8.2

22.6
9.8

1.5

Total Investment Income .......................................................................................................

461.6

382.6

383.4

Investment Expenses:

Real Estate ......................................................................................................................

Other Investment Expenses ............................................................................................

Total Investment Expenses ....................................................................................................
Net Investment Income .......................................................................................................... $

9.7

24.6

34.3

8.8

25.6

34.4

9.6

9.5

19.1

427.3

348.2

364.3

Other Receivables includes accrued investment income of $79.6 million and $77.1 million at December 31, 2021 and 2020,
respectively.

103

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 9. INCOME FROM INVESTMENTS (Continued)

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

DOLLARS IN MILLIONS
Fixed Maturities:

2021

2020

2019

63.4
(2.1)

40.6
(7.9)

41.1
(4.8)

Equity Securities:

Gains on Sales ...................................................................................................................

Losses on Sales..................................................................................................................

Equity Method Limited Liability Investments:

Real Estate:

4.1
(0.7)

0.4
—

0.1
(0.4)
64.8

68.0
(3.2)
64.8

5.9
(1.9)

—
(0.4)

1.8
—
38.1

48.3
(10.2)
38.1

5.8
(0.2)

—
—

—
—
41.9

46.9
(5.0)
41.9

The components of Impairment Losses reported in the Consolidated Statements of Income for the years ended December 31,
2021, 2020 and 2019 were:

DOLLARS IN MILLIONS
Fixed Maturities ..................................................................................................................... $
Equity Securities ....................................................................................................................
Real Estate .............................................................................................................................
Net Impairment Losses Recognized in Earnings ................................................................... $

2021

2020

2019

(6.4) $
(4.2)
(0.4)
(11.0) $

(16.7) $
(2.8)
—
(19.5) $

(13.3)
(0.5)
—
(13.8)

NOTE 10. FAIR VALUE MEASUREMENTS

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

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

104

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

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

DOLLARS IN MILLIONS
Fixed Maturities:

Fair Value Measurements

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

U.S. Government and Government

Agencies and Authorities................ $

States and Political Subdivisions........
Foreign Governments.........................
Corporate Securities:

Bonds and Notes ...........................
Redeemable Preferred Stocks .......
Collateralized Loan Obligations ...
Other Mortgage- and Asset-

backed .......................................
Total Investments in Fixed Maturities....
Equity Securities at Fair Value:

Preferred Stocks:

Finance, Insurance and Real

Estate .........................................
Other Industries.............................

Common Stocks:

Finance, Insurance and Real

Estate .........................................
Other Industries.............................

Other Equity Interests:

Exchange Traded Funds................
Limited Liability Companies and
Limited Partnerships .................

Total Investments in Equity Securities

at Fair Value ......................................
Convertible Securities at Fair Value.......
Total........................................................ $

132.8
—
—

504.6
1,890.1
5.5

— $
—
—

637.4
1,890.1
5.5

—
—
—

—
132.8

—
—

18.9
2.9

432.0

—

453.8
—
586.6

4,150.1
1.3
752.1

300.5
7,604.2

34.2
16.1

—
—

—

236.8
6.1
—

7.0
249.9

—
1.5

—
—

—

50.3
46.4
7,700.9

1.5
—
251.4

—
—
—

—
—

—

325.0

325.0
—
325.0

4,386.9
7.4
752.1

307.5
7,986.9

34.2
17.6

18.9
2.9

432.0

325.0

830.6
46.4
8,863.9

105

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

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

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

Fair Value Measurements

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
Fixed Maturities:

U.S. Government and Government

Agencies and Authorities ............... $

States and Political Subdivisions.......

Foreign Governments ........................

Corporate Securities:

Bonds and Notes ..........................

Redeemable Preferred Stocks.......

Collateralized Loan Obligations...

Other Mortgage- and Asset-

backed.......................................
Total Investments in Fixed Maturities ...

Equity Securities at Fair Value:

Preferred Stocks:

Finance, Insurance and Real

Estate ........................................
Other Industries............................

Common Stocks:

Finance, Insurance and Real

Estate ........................................
Other Industries............................

Other Equity Interests:

Exchange Traded Funds ...............

Limited Liability Companies and
Limited Partnerships.................

Total Investments in Equity Securities

at Fair Value .....................................
Convertible Securities at Fair Value ......
Total ....................................................... $

134.0

451.3

— $

585.3

—

134.0

—

8.7

0.4

496.4

—

505.5

—
639.5

1,589.5

5.2

3,992.4

1.3

767.7

215.3

7,022.7

43.7

15.4

1.7

—

60.8

39.9
7,123.4

—

433.0

6.2

—

10.0

449.2

—

—
449.2

—

292.2

—
292.2

1,589.5

5.2

4,425.4

7.5

767.7

225.3

7,605.9

43.7

15.4

10.4

0.4

496.4

292.2

858.5

39.9
8,504.3

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

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

•

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

106

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

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

•

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

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

•

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

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

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

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

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

107

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

DOLLARS IN MILLIONS
Investment-grade .......................................................................... Market Yield
Non-investment-grade:

Unobservable
Input

Senior Debt ............................................................................... Market Yield
Junior Debt ............................................................................... Market Yield

Other.............................................................................................. Various

Total
Fair Value
87.9
$

Range of
Unobservable Inputs

Weighted-
average
Yield

2.3 % -

10.3 %

5.4 %

5.1
6.0

-
-

20.2
27.5

8.5
15.0

76.1
53.9

32.0

Total Level 3 Fixed Maturity Investments .................................

249.9

DOLLARS IN MILLIONS
Investment-grade .......................................................................... Market Yield

Unobservable
Input

Total
Fair Value
246.7
$

Range of
Unobservable Inputs

Weighted-
average
Yield

1.4 % -

13.0 %

3.8 %

Non-investment-grade:

Senior Debt ............................................................................... Market Yield

Junior Debt ............................................................................... Market Yield

Other.............................................................................................. Various

111.1

64.6

26.8

2.4

3.1

23.4

27.9

9.5

13.7

Total Level 3 Fixed Maturity Investments ............................

449.2

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

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

DOLLARS IN MILLIONS
Balance at Beginning of Year ................................... $ 433.0

Corporate
Bonds
and
Notes

Total Gains (Losses):

Included in Consolidated Statement of Income....
Included in Other Comprehensive Income (Loss)

2.8
1.2

Purchases...................................................................

104.6

Settlements ................................................................

—

Sales ..........................................................................

(128.1)

Transfers into Level 3 ...............................................

8.1

Transfers out of Level 3 ............................................

(184.8)

Redeemable
Preferred
Stocks

6.2

—
(0.1)

—

Fixed Maturities

Equity
Securities

Preferred
and
Common
Stocks

Other
Mortgage-
and Asset-
backed

Total

— $

10.0

— $ 449.2

Collateralized
Loan
Obligations
$

—
0.1

17.7

—

(10.0)

10.0

(17.8)

—
(0.5)

16.2

(0.1)

(0.2)

—

—
0.7

1.7

—

1.7

2.8
1.4

140.2

(0.1)

(138.3)

19.8

(18.4)

(2.6)

(223.6)

Balance at End of Year ............................................. $ 236.8

6.1

— $

7.0

1.5

$ 251.4

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

108

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

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

Fixed Maturities

States and
Political
Sub-
divisions
$

— $

Redeemable
Preferred
Stocks

DOLLARS IN MILLIONS
Balance at Beginning of Year .................................... $ 409.1
Total Gains (Losses):

Corporate
Bonds and
Notes

Included in Consolidated Statement of Income .......

(9.0)
3.2
Included in Other Comprehensive Income (Loss) ...
185.9
Purchases....................................................................
—
Settlements .................................................................
(165.2)
Sales ...........................................................................
9.0
Transfers into Level 3 ................................................
Transfers out of Level 3 .............................................
—
Balance at End of Year............................................... $ 433.0

—
0.1
0.6
—
—
—
(0.7)

— $

Collateralized
Loan
Obligations
618.2

Other
Mortgage-
and Asset-
backed

10.2

Total
$ 1,044.2

(0.3)
(9.3)
53.5
—
(26.4)
—
(635.7)

— $

—
0.4
—
(0.1)
(0.5)
—
—
10.0

(9.3)
(5.1)
240.2
(0.1)
(192.1)
9.0
(637.6)
$ 449.2

6.7

—
0.5
0.2
—
—
—
(1.2)
6.2

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

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

(Dollars in Millions)
Financial Assets:

December 31, 2021

December 31, 2020

Carrying
Value

Fair Value

Carrying
Value

Fair Value

Loans to Policyholders.......................................................................... $
Short-term Investments.........................................................................
Mortgage Loans ....................................................................................
Company-Owned Life Insurance..........................................................
Equity Securities at Modified Cost .......................................................

286.2
284.1
96.8
448.1
32.3

297.9
875.4
54.6
327.4
40.1

Financial Liabilities:

Long-term Debt, Current and Non-current ........................................... $ 1,121.9
401.9
Policyholder Contract Liabilities ..........................................................

$ 1,152.1
401.9

$ 1,172.8
407.8

$ 1,247.8
407.8

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

109

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 11. GOODWILL AND INTANGIBLE ASSETS

Goodwill balances by business segment at December 31, 2021 and 2020 were:

DOLLARS IN MILLIONS
Specialty Property & Casualty Insurance .................................................................................................. $ 1,043.0
49.6
Preferred Property & Casualty Insurance ..................................................................................................

2021

2020
845.0
49.6

Life & Health Insurance ............................................................................................................................
219.4
Total........................................................................................................................................................... $ 1,312.0

219.4
$ 1,114.0

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

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

(Dollars in Millions)
Definite Life Intangibles:

2021

2020

Gross
Carrying
Amount

Accumulated
Amortization

Net Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net Amount

Value of Business Acquired ............ $

237.5

218.5

19.0

194.5

174.2

Customer Relationships...................

Agent Relationships.........................

Trade Names....................................

Internal-Use Software......................

Total Definite Life Intangible Assets...

Indefinite Life Intangible Assets:

Trade Names....................................

Insurance Licenses...........................

Total Indefinite Life Intangible Assets

43.8

81.6

1.8

341.7

706.4

5.2

45.1

50.3

38.1

23.6

0.9

132.4

413.5

—

5.7

58.0

0.9

209.3

292.9

5.2

45.1

50.3

39.0

74.4

—

299.6

607.5

5.2

42.6

47.8

35.6

16.8

—

108.6

335.2

—

20.3

3.4

57.6

—

191.0

272.3

5.2

42.6

47.8

Total Intangible Assets......................... $

756.7

413.5

343.2

655.3

335.2

320.1

The Company records intangible assets acquired in business combinations and certain costs incurred developing and
customizing internal-use software within Other Assets on the Consolidated Balance Sheets. Definite life intangible assets are
amortized over the estimated profit emergence period or estimated useful life of the asset. Indefinite life intangible assets are
not amortized, but rather tested annually for impairment. In 2021 and 2020, the Company recognized amortization expense on
definite life intangible assets of $87.0 million and $42.3 million, respectively.

110

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 11. GOODWILL AND INTANGIBLE ASSETS (Continued)

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

DOLLARS IN MILLIONS
Definite Life Intangible Assets:

Value of Business Acquired . $

Customer Relationships........
Agent Relationships .............
Trade Names.........................

Internal-Use Software...........

Total

2022

2023

2024

2025

2026

3.6

3.0
7.3
0.9

33.3
48.1

2.0

1.1
7.3
—

30.4
40.8

1.9

0.4
5.5
—

23.9
31.7

1.8

0.4
4.9
—

18.9
26.0

1.7

0.3
4.9
—

16.2
23.1

NOTE 12. 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 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 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 Consolidated Statements of Income.

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

Year Ended

(Dollars in millions)
Fundings.............................................................................................................................................. $
Cash distribution from investment......................................................................................................
Gain (loss) on investments in Alternative Energy Partnership...........................................................
Income tax credits recognized ............................................................................................................
Tax benefit (expense) recognized from HLBV application................................................................

Dec 31, 2021

Dec 31, 2020
20.0
—
—
3.6
(0.4)

80.0 $
0.5
(61.2)
73.9
5.1

111

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 12. VARIABLE INTEREST ENTITIES (Continued)

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)
Cash................................................................................................................................................................... $
Equipment, net of depreciation .........................................................................................................................
Other assets .......................................................................................................................................................
Total unconsolidated assets...............................................................................................................................
Maximum loss exposure ...................................................................................................................................

Dec 31, 2021

21.5
310.5
3.0
335.0
39.6

The Company’s maximum loss exposure in the event that all of the assets in the Alternative Energy Partnership are deemed
worthless is $39.6 million, which is the carrying value of the investment at December 31, 2021.

112

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 13. 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 years ended
December 31, 2021, 2020 and 2019 were:

(Dollars in Millions)

Net Unrealized
Gains (Losses) on
Other Investments

Net Unrealized
Gains (Losses) on
Investments with
an Allowance for
Credit Losses

Net Unrecognized
Postretirement
Benefit Costs

Gain (Loss) on
Cash Flow Hedges

Total

Balance as of January 1, 2019

119.3

— $

(94.5) $

(3.0) $

21.8

Other Comprehensive Income (Loss)
Before Reclassifications
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss) Net
of Tax (Expense) Benefit of $5.8, $—,
$—, $— and $5.8

Other Comprehensive Income (Loss) Net
of Tax (Expense) Benefit of $(85.2), $—,
$1.7, $(0.1) and $(83.6)

342.4

(22.3)

320.1

—

Balance as of December 31, 2019

439.4

— $

(100.6) $

304.4

(2.1)

4.3

0.4

(6.1)

0.3

336.6

—

(22.3)

(6.1)

0.3

(2.7) $

314.3

336.1

307.0

(13.2)

—

50.6

—

37.4

Balance as of December 31, 2020

730.6

291.2

(2.1)

(2.1) $

54.9

(45.7) $

0.4

(2.3) $

344.4

680.5

Other Comprehensive Income (Loss)
Before Reclassifications
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss) Net
of Tax (Expense) Benefit of $3.6, $—,
$(13.5), $— and $(9.9)

Other Comprehensive Income (Loss) Net
of Tax (Expense) Benefit of $(78.7),
$0.5, $(15.3), $— and $(93.5)

Other Comprehensive Income (Loss)
Before Reclassifications
Amounts Reclassified from Accumulated
Other Comprehensive Income (Loss) Net
of Tax (Expense) Benefit of $11.3, $—,
$—, $(0.1) and $11.2

Other Comprehensive Income (Loss) Net
of Tax (Expense) Benefit of $59.7, $0.4,
$2.4, $(0.1) and $62.4

(182.0)

(1.6)

(6.5)

—

(190.1)

(42.8)

—

0.1

0.4

(42.3)

Balance as of December 31, 2021

505.8

(224.8)

(1.6)

(3.7) $

(6.4)

(52.1) $

0.4

(232.4)

(1.9) $

448.1

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

Components of AOCI
Net unrealized Gains (Losses) on Other Investments and Net Unrealized
Gains (Losses) on Investments with an Allowance for Credit Losses
Net Unrecognized Postretirement Benefit Costs

Gain (Loss) on Cash Flow Hedges

Consolidated Statements of Income Line Item Affected by
Reclassifications
Net Realized Gains on Sales of Investments and Impairment
Losses
Policyholders’ Benefits and Incurred Losses and Loss Adjustment
Expenses, Insurance Expenses, and Interest and Other Expenses
Interest and Other Expenses

113

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 14. SHAREHOLDERS’ EQUITY

Common Stock Issuance

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

Common Stock Repurchases

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

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

Employee Stock Purchase Plan

During the years ended December 31, 2021, 2020, and 2019, the Company issued 79,000, 61,000, and 24,000 shares under the
Kemper Employee Stock Purchase Plan (“ESPP”), respectively, at an average discounted price of $58.08, $61.57, and $66.08
per share. Compensation costs charged against income were $0.8 million, $0.7 million, and $0.3 million for the years ended
December 31, 2021, 2020, and 2019, respectively.

Dividends

Various state insurance laws restrict the amount that an insurance subsidiary may pay in the form of dividends, loans or
advances without the prior approval of regulatory authorities. Also, that portion of an insurance subsidiary’s net equity which
results from differences between statutory insurance accounting practices and GAAP would not be available for cash dividends,
loans or advances. Kemper’s insurance subsidiaries paid dividends of $347.0 million to Kemper in 2021. In 2022, Kemper’s
insurance subsidiaries would be able to pay $191.2 million in dividends to Kemper without prior regulatory approval. Kemper’s
insurance subsidiaries had net assets of $4.5 billion, determined in accordance with GAAP, that were restricted from payment
to Kemper without prior regulatory approval at December 31, 2021.

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

Kemper’s insurance subsidiaries are also required to hold minimum levels of statutory capital and surplus to satisfy regulatory
requirements. The minimum statutory capital and surplus, or company action level risk-based capital (“RBC”), necessary to
satisfy regulatory requirements for the Company’s life and health insurance subsidiaries collectively was $157.7 million at
December 31, 2021. The minimum statutory capital and surplus necessary to satisfy regulatory requirements for the Company’s

114

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 14. SHAREHOLDERS’ EQUITY (Continued)

property and casualty insurance subsidiaries collectively was $668.2 million at December 31, 2021. Company action level RBC
is the level at which a company is required to file a corrective action plan with its regulators and is equal to 200% of the
authorized control level RBC.

In 2021, Kemper issued dividends and dividend equivalents of $81.0 million, of which $80.6 million was paid to shareholders.
Except for certain financial covenants under Kemper’s credit agreement or during any period in which Kemper elects to defer
interest payments, there are no restrictions on Kemper’s ability to pay dividends to its shareholders. Certain financial covenants,
namely minimum net worth and a maximum debt to total capitalization ratio, under Kemper’s credit agreement could limit the
amount of dividends that Kemper may pay to shareholders at December 31, 2021. Kemper had the ability to pay without
restrictions of $1.2 billion in dividends to its shareholders and still be in compliance with all financial covenants under its credit
agreement at December 31, 2021.

NOTE 15. PENSION BENEFITS

Kemper sponsors a qualified defined benefit pension plan (the “Pension Plan”). The Pension Plan covers approximately 3,145
participants and beneficiaries. Effective January 1, 2006, the Pension Plan was closed to new hires and, effective June 30, 2016,
benefit accruals were frozen for substantially all of the participants under the Pension Plan. The Pension Plan is generally non-
contributory, but participation requires or required some employees to contribute 3% of pay, as defined, per year. Benefits for
participants who are or were required to contribute to the Pension Plan are based on compensation during plan participation and
the number of years of participation. Benefits for the vast majority of participants who are not required to contribute to the
Pension Plan are based on years of service and final average pay, as defined. The Company funds the Pension Plan in
accordance with the requirements of ERISA.

Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Pension Plan for the years ended
December 31, 2021 and 2020 is presented below.

DOLLARS IN MILLIONS
Fair Value of Plan Assets at Beginning of Year........................................................................................ $
Actual Return on Plan Assets....................................................................................................................
Employer Contributions ............................................................................................................................
Benefits Paid..............................................................................................................................................
Settlement Benefits....................................................................................................................................
Fair Value of Plan Assets at End of Year..................................................................................................
Projected Benefit Obligation at Beginning of Year ..................................................................................
Interest Cost...............................................................................................................................................
Benefits Paid..............................................................................................................................................
Settlement Benefits....................................................................................................................................
Plan Amendments......................................................................................................................................
Actuarial (Gains) Losses ...........................................................................................................................
Projected Benefit Obligation at End of Year.............................................................................................
Funded Status—Plan Assets in Excess (Deficit) of Projected Benefit Obligation ................................... $

2021
405.4
(0.7)
—
(13.0)
—
391.7
382.3
7.2
(13.0)
—
18.3
(16.0)
378.8
12.9

2020
664.6
92.1
—
(145.9)
(205.4)
405.4
660.5
16.5
(145.9)
(205.4)
—
56.6
382.3
23.1

Unamortized Amount Reported in AOCI at End of Year ......................................................................... $

(77.6) $

(68.2)

Accumulated Benefit Obligation at End of Year ...................................................................................... $

378.8

382.3

The measurement dates of the assets and liabilities at end of year presented in the preceding table under the headings, “2021”
and “2020” were December 31, 2021 and December 31, 2020, respectively.

In 2021, the Plan was amended to update the actuarial equivalence used to determine both the early retirement factors and the
optional form factors as of December 31, 2021. The result of this amendment was an increase to the Projected Benefit
Obligation of $18.3 million, which was recognized in Prior Service Cost for the year ended December 31, 2021.

115

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 15. PENSION BENEFITS (Continued)

The weighted-average discount rate and rate of increase in future compensation levels used to estimate the components of the
Projected Benefit Obligation for the Pension Plan at December 31, 2021 and 2020 were:

Discount Rate ............................................................................................................................................
Rate of Increase in Future Compensation Levels......................................................................................

2021
2.89 %
3.40

2020
2.56 %
3.40

Asset allocations for the Pension Plan at December 31, 2021 and 2020 by asset category were:

ASSET CATEGORY
Corporate Bonds and Notes.......................................................................................................................
Common and Preferred Stocks..................................................................................................................
Bond Exchange Traded Funds ..................................................................................................................
Cash and Short-term Investments..............................................................................................................
Other Assets ..............................................................................................................................................
Total...........................................................................................................................................................

2021

2020

30 %
—
32
36
2
100 %

37 %
24
27
2
10
100 %

The investment objective of the Pension Plan is to produce current income and long-term capital growth through a combination
of equity and fixed income investments which, together with appropriate employer contributions and any required employee
contributions, is adequate to provide for the payment of the benefit obligations of the Pension Plan. The assets of the Pension
Plan may be invested in fixed income and equity investments or any other investment vehicle or financial instrument deemed
appropriate. Fixed income investments may include cash and short-term instruments, U.S. Government securities, corporate
bonds, mortgages and other fixed income investments. Equity investments may include various types of stock, such as large-
cap, mid-cap and small-cap stocks, and may also include investments in investment companies, collective investment funds and
Kemper common stock (subject to Section 407 and other requirements of ERISA). The Pension Plan has not invested in
Kemper common stock.

The trust investment committee for the Pension Plan, along with its third party fiduciary advisor, periodically reviews the
performance of the Pension Plan’s investments and asset allocation. Several external investment managers, one of which is
Fayez Sarofim & Co. (see Note 25, “Related Parties,” to the Consolidated Financial Statements), manage the equity investments
of the trust for the Pension Plan. Each manager is allowed to exercise investment discretion, subject to limitations, if any,
established by the trust investment committee for the Pension Plan. All other investment decisions are made by the Company,
subject to general guidelines as set by the trust investment committee for the Pension Plan.

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

116

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 15. PENSION BENEFITS (Continued)

The fair values of pension plan assets are estimated using the same methodologies and inputs as those used to determine the fair
values for the respective asset category of the Company. These methodologies and inputs are disclosed in Note 10, “Fair Value
Measurements,” to the Consolidated Financial Statements. Fair value measurements for the Pension Plan’s assets at
December 31, 2021 are summarized below.

DOLLARS IN MILLIONS
Fixed Maturities:

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

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Measured at Net
Asset Value

Fair Value

U.S. Government and Government

Agencies and Authorities.................... $

States and Political Subdivisions............
Foreign Governments .............................
Corporate Bonds and Notes....................

Equity Securities:

Other Equity Interests:

Bond Exchange Traded Funds ..........
Limited Liability Companies and

Limited Partnerships......................
Short-term Investments...............................
Receivables and Other ................................
Total ............................................................ $

54.6
—
—
—

125.0

—
140.2
0.5
320.3

— $
0.1
0.6
62.3

—

—
—
—
63.0

— $
—
—
—

—

—
—
—
— $

— $
—
—
—

—

8.4
—
—
8.4

54.6
0.1
0.6
62.3

125.0

8.4
140.2
0.5
391.7

Fair value measurements for the Pension Plan’s assets at December 31, 2020 are summarized below.

DOLLARS IN MILLIONS
Fixed Maturities:

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

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Measured at Net
Asset Value

Fair Value

U.S. Government and Government

Agencies and Authorities................... $

States and Political Subdivisions...........

Corporate Bonds and Notes...................

Equity Securities:

Common Stocks:

Other Industries................................

Other Equity Interests:

Collective Investment Funds ...........

Bond Exchange Traded Funds.........

Limited Liability Companies and

Limited Partnerships ....................
Short-term Investments..............................

Receivables and Other ...............................
Total........................................................... $

68.3

— $

—

64.8

—

108.6

—

7.4

0.6

0.7

81.3

—

32.1

—

41.6

—

68.3

0.7

81.3

64.8

32.1

108.6

41.6

7.4

0.6

249.7

82.0

— $

73.7

405.4

117

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 15. PENSION BENEFITS (Continued)

The components of Comprehensive Pension Expense (Income) for the Pension Plan for the years ended December 31, 2021,
2020 and 2019 were:

DOLLARS IN MILLIONS
Service Cost Earned During the Year.................................................................................... $
Interest Cost on Projected Benefit Obligation .......................................................................
Expected Return on Plan Assets ............................................................................................
Amortization of Actuarial Loss .............................................................................................
Settlement Expense................................................................................................................
Pension Expense (Income) Recognized in Consolidated Statements of Income...................
Unrecognized Pension Gain (Loss) Arising During the Year ...............................................
Prior Service Credit Arising During the Year........................................................................
Amortization of Accumulated Unrecognized Pension Loss ..................................................
Comprehensive Pension Expense (Income)........................................................................... $

2021

2020

2019

— $
7.2
(9.5)
2.9
—
0.6
(6.0)
18.3
(2.9)
10.0

— $

16.5
(27.6)
5.6
64.1
58.6
(7.8)
—
(69.8)
(19.0) $

—
22.3
(30.6)
2.9
—
(5.4)
4.2
—
(2.9)
(4.1)

The actuarial loss included in AOCI at December 31, 2021 is being amortized over approximately 27 years, the remaining
average estimated life expectancy of participants. The Company estimates that Pension Income for the Pension Plan for the year
ended December 31, 2022 will include expense of $3.7 million resulting from the amortization of the related accumulated
actuarial loss included in AOCI at December 31, 2021.

Settlements

In the fourth quarter of 2020, the Company’s defined benefit pension plan purchased annuities on behalf of certain plan
participants currently receiving benefits and offered to make lump-sum payments to certain inactive, vested plan participants
that are not currently receiving benefit payments and elected to receive lump-sum payments. Group annuity contracts were
purchased from Banner Life Insurance Company (“Banner”) for $205.4 million for a portion of plan participants for whom
Banner irrevocably assumed the pension obligations. For plan participants who elected lump-sum payments during the election
window, a payment of $117.1 million was distributed. These transactions resulted in a partial settlement of the defined pension
plan and a $50.6 million noncash settlement charge to net income for the unamortized net unrecognized postretirement benefit
costs related to the settled obligations.

The weighted-average discount rate, service cost discount rate, interest cost discount rate, rate of increase in future
compensation levels and expected long-term rate of return on plan assets used to develop the components of Pension Expense
for the Pension Plan for the years ended December 31, 2021, 2020 and 2019 were:

Weighted-average Discount Rate ................................................................................
Service Cost Discount Rate .........................................................................................
Interest Cost Discount Rate .........................................................................................
Rate of Increase in Future Compensation Levels........................................................
Expected Long Term Rate of Return on Plan Assets ..................................................

2021

2020

2019

2.56 %
2.41
1.90
3.40
2.70

2.56 %
2.42
1.89
3.40
4.90

4.28 %
4.26
3.91
3.40
5.70

The Company did not contribute to the Pension Plan in 2020 or 2021. The Company does not expect that it will be required to
contribute to the Pension Plan in 2022, but could make a voluntary contribution pursuant to the maximum funding limits under
ERISA.

The following benefit payments (net of participant contributions), which consider expected future service of certain participants
that remain eligible for a benefit accrual, as appropriate, are expected to be paid from the Pension Plan:

DOLLARS IN MILLIONS
Estimated Pension Benefit Payments.......................... $

2022

2023

2024

2025

2026

17.0

16.5

17.3

18.1

18.7

2027-2031
97.9
$

Years Ending December 31,

118

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 15. PENSION BENEFITS (Continued)

The Company also sponsors a non-qualified supplemental defined benefit pension plan (the “Supplemental Plan”). Benefit
accruals for all participants in the Supplemental Plan were frozen effective June 30, 2016. The unfunded liability related to the
Supplemental Plan was $28.0 million and $30.7 million at December 31, 2021 and 2020, respectively. Pension expense for the
Supplemental Plan was $0.7 million, $0.8 million, and $1.0 million for the years ended December 31, 2021, 2020 and 2019,
respectively. An actuarial gain of $1.3 million before taxes, an actuarial loss of $2.7 million before taxes and an actuarial loss of
$5.6 million before taxes are included in Other Comprehensive Income (Loss) for the years ended December 31, 2021, 2020
and 2019, respectively.

The Company also sponsors several defined contribution benefit plans covering most of its employees. The Company made
contributions to those plans of $28.9 million, $26.1 million and $26.0 million in 2021, 2020 and 2019, respectively.

NOTE 16. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

Kemper and Infinity sponsor other than pension postretirement employee benefit plans (“OPEB”) that together provide medical,
dental and/or life insurance benefits to approximately 400 retired and 500 active employees.

Kemper has historically self-insured the benefits under the Kemper OPEB Plan. The Kemper medical plan generally provides
for a limited number of years of medical insurance benefits at retirement based on the participant’s attained age at retirement
and number of years of service until specified dates and generally has required participant contributions, with most
contributions adjusted annually. On December 30, 2016, Kemper amended the Kemper OPEB Plan and, effective December 31,
2016, will no longer offer coverage to post-65 Medicare-eligible retirees and Medicare-eligible spouses under the self-insured
portion of its coverage. Rather, beginning on January 1, 2017, the Kemper OPEB Plan offers access to a private, third-party
Medicare exchange and provides varying levels of a Company-determined subsidy via health reimbursement accounts to certain
Medicare-eligible retirees and spouses in order to help fund a portion of the participants’ cost. Further, the amendment
eliminates the requirement for such participants to contribute to the Kemper OPEB Plan.

In conjunction with the amendment, the Company recorded a pre-tax reduction to its Accumulated Postretirement Benefit
Obligation of $11.0 million through Other Comprehensive Income. This prior service credit is being amortized into income
over the remaining average life of the Kemper OPEB Plan’s participants.

Changes in Fair Value of Plans’ Assets and Changes in Accumulated Postretirement Benefit Obligation for the years ended
December 31, 2021 and 2020 were:

DOLLARS IN MILLIONS
Fair Value of Plans’ Assets at Beginning of Year..................................................................................... $
Employer Contributions ............................................................................................................................
Plan Participants’ Contributions................................................................................................................
Benefits Paid..............................................................................................................................................
Fair Value of Plan Assets at End of Year..................................................................................................
Accumulated Postretirement Benefit Obligation at Beginning of Year....................................................
Service Cost...............................................................................................................................................
Interest Cost...............................................................................................................................................
Plan Participants’ Contributions................................................................................................................
Benefits Paid..............................................................................................................................................
Actuarial (Gain) Loss ................................................................................................................................
Accumulated Postretirement Benefit Obligation at End of Year ..............................................................
Funded Status—Accumulated Postretirement Benefit Obligation in Excess of Plans’ Assets................. $

2021

2020

— $
1.1
0.1
(1.2)
—
13.7
0.3
0.1
0.1
(1.2)
(1.8)
11.2
(11.2) $

—
1.5
0.2
(1.7)
—
12.8
0.2
0.3
0.2
(1.7)
1.9
13.7
(13.7)

Unamortized Actuarial Gain Reported in AOCI at End of Year............................................................... $

17.5

18.7

The measurement dates of the assets and liabilities at end of year in the preceding table under the headings “2021” and “2020”
were December 31, 2021 and December 31, 2020, respectively.

119

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 16. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)

The weighted-average discount rate and rate of increase in future compensation levels used to develop the components of the
Accumulated Postretirement Benefit Obligation at December 31, 2021 and 2020 were:

2021
2.56 %
2.20

2020
2.13 %
2.20

The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31,
2021 was 6.29% for 2022, gradually declining to 4.8% in the year 2028 and remaining at that level thereafter for medical
benefits and 7.04% for 2022, gradually declining to 4.8% in the year 2029 and remaining at that level thereafter for prescription
drug benefits. The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at
December 31, 2020 was 6.5% for 2021, gradually declining to 4.8% in the year 2027 and remaining at that level thereafter for
medical benefits and 7.5% for 2021, gradually declining to 4.8% in the year 2028 and remaining at that level thereafter for
prescription drug benefits.

The components of Comprehensive OPEB Expense (Income) for the years ended December 31, 2021, 2020 and 2019 were:

DOLLARS IN MILLIONS
Service Cost Earned During the Year.................................................................................... $
Interest Cost on Accumulated Postretirement Benefit Obligation.........................................
Amortization of Prior Service Credit.....................................................................................
Amortization of Accumulated Unrecognized OPEB Gain ....................................................
OPEB Income Recognized in Consolidated Statements of Income ......................................
Unrecognized OPEB (Gain) Loss Arising During the Year..................................................
Amortization of Prior Service Credit.....................................................................................
Amortization of Accumulated Unrecognized OPEB Gain ....................................................
Comprehensive OPEB (Income) Expense ............................................................................. $

2021

2020

2019

0.3
0.1
(1.3)
(1.7)
(2.6)
(1.8)
1.3
1.7
(1.4) $

0.2
0.3
(1.3)
(1.9)
(2.7)
1.9
1.3
1.9
2.4

0.2
0.4
(1.3)
(2.4)
(3.1)
(1.7)
1.3
2.4
(1.1)

The Company estimates that OPEB Expense for the year ended December 31, 2022 will include income of $2.9 million
resulting from the amortization of the related accumulated actuarial gain and prior service credit included in AOCI at
December 31, 2021.

The weighted-average discount rate and rate of increase in future compensation levels used to develop OPEB Expense for the
years ended December 31, 2021, 2020 and 2019 were:

Weighted-average Discount Rate ..........................................................................................
Service Cost Discount Rate ...................................................................................................
Interest Cost Discount Rate ...................................................................................................
Rate of Increase in Future Compensation Levels ..................................................................

2021
1.99 %
2.06
1.19
2.20

2020
2.96 %
2.94
2.47
2.20

2019
4.08 %
4.16
3.69
2.20

The Company expects to contribute $1.2 million, net of the expected Medicare Part D subsidy, to its OPEB Plan to fund benefit
payments in 2022.

120

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 16. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)

The following benefit payments (net of participant contributions), which consider expected future service, as appropriate, are
expected to be paid:

DOLLARS IN MILLIONS
Estimated Benefit Payments:

2022

2023

2024

2025

2026

2027-2031

Years Ending December 31,

Excluding Medicare Part D Subsidy ...................... $
Expected Medicare Part D Subsidy ........................
Net Estimated Benefit Payments................................. $

1.2
—
1.2

1.1
—
1.1

1.0
—
1.0

3.8
—
3.8

NOTE 17. LONG-TERM EQUITY-BASED COMPENSATION

On May 5, 2020, Kemper’s shareholders approved the 2020 Omnibus Equity Plan (“2020 Omnibus Plan”). A maximum
number of 7,000,000 shares of Kemper common stock may be issued under the 2020 Omnibus Plan (the “Share
Authorization”). After the approval date of the 2020 Omnibus Plan, no new awards will be granted under the 2011 Omnibus
Equity Plan (“2011 Omnibus Plan”) that had been approved by Kemper’s Shareholders on May 4, 2011, but awards previously
granted under the 2011 Omnibus Plan remain outstanding in accordance with their original terms. As of December 31, 2021,
there were 5,253,076 common shares available for future grants under the 2020 Omnibus Plan, of which 1,814,274 shares were
reserved for future grants based on the performance results under the terms of outstanding performance share units (“PSUs”).

The design of the 2020 Omnibus Plan provides for fungible use of shares to determine the number of shares available for future
grants, with a fungible conversion factor of three to one, such that the Share Authorization will be reduced at two different
rates, depending on the type of award granted. Each share of Kemper common stock issuable upon the exercise of stock options
or stock appreciation rights will reduce the number of shares available for future grant under the Share Authorization by one
share, while each share of Kemper common stock issued pursuant to “full value awards” will reduce the number of shares
available for future grant under the Share Authorization by three shares. “Full value awards” are awards, other than stock
options or stock appreciation rights, that are settled by the issuance of shares of Kemper common stock and include time-based
restricted stock units (collectively “RSUs”) and PSUs.

Outstanding equity-based compensation awards at December 31, 2021 consisted of tandem stock option and stock appreciation
rights (“Tandem Awards”), RSUs, PSUs and Deferred Stock Units (“DSUs”). RSUs, PSUs and DSUs give the recipient the
right to receive one share of Kemper common stock for each RSU, PSU or DSU issued. Recipients of DSUs received full
dividend equivalents on the same basis as all other outstanding shares of Kemper common stock, but do not receive voting
rights until such shares are issued.

For grants under the 2020 Omnibus Plan, and for grants under the 2011 Plan beginning in November 2017, recipients of RSUs
and PSUs receive dividend equivalents on the same basis as all other outstanding shares of Kemper common stock only if, to
the extent, and at the time that they vest and on subsequent dividend payment dates after they vest until the awards are settled,
and do not receive voting rights until such shares are issued.

For grants under the 2011 Plan prior to November 2017, recipients of RSUs and PSUs receive full dividend equivalents on the
same basis as all other outstanding shares of Kemper common stock, but do not receive voting rights until such shares are
issued. Except as described below for certain equity-based compensation awards granted to each member of the Board of
Directors who is not employed by the Company (“Non-employee Directors”), all outstanding awards are subject to forfeiture
until certain restrictions have lapsed.

For awards subject to a performance condition, the Company recognizes compensation expense based upon the probable
outcome of the performance condition, which on the grant date reflects an estimate of attaining 100% of the performance units
granted. The estimate is revised if the actual number of PSUs expected to vest is likely to differ from the previous estimate.
Compensation expense for awards is recognized on a straight-line basis over the requisite service period. For equity-based
compensation awards with a graded vesting schedule, the Company recognizes compensation expense on a straight-line basis
over the requisite service period for each separately-vesting portion of the awards as if each award were, in substance, multiple
awards. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated at the date of
grant based on the Company’s historical experience and future expectations. Equity-based compensation expense was $28.0
million, $24.9 million and $25.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. Total

121

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 17. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

unamortized compensation expense related to unvested awards at December 31, 2021 was $23.6 million, which is expected to
be recognized over the next three years ending December 31, 2022, 2023 and 2024.

Human Resources and the Compensation Committee of the Board of Directors, or the Board’s authorized designee, has sole
discretion to determine the persons to whom awards under the 2020 Omnibus Plan are granted, and the material terms of the
awards. For Tandem Awards, material terms include the number of shares covered by such awards and the exercise price,
vesting and expiration dates of such awards. Tandem Awards are non-transferable. The exercise price of Tandem Awards is the
fair value of Kemper’s common stock on the date of grant. Tandem Awards and RSU awards granted to employees generally
vest in three equal annual installments over a period of three years, with the Tandem Awards expiring ten years from the date of
grant. Employee PSU awards generally vest over a period of three years, subject to performance results and other restrictions.

Under the Non-employee Director compensation program in effect for 2021, each Non-employee Director elected at the 2021
annual shareholder meeting received an annual RSU award with an aggregate grant date fair value of $130,000 (“Director
RSUs”) at the conclusion of the meeting, and new Non-employee Directors who joined the Board received an initial award of
Director RSUs valued at the percentage of the full grant date fair value of $130,000 that represents the number of quarterly

Board meetings the new director was expected to attend during the remaining portion of the then-current annual compensation
period that ends on the date of the next annual shareholder meeting. The Director RSUs vest over a period of one year, enable
the award holder to make an election to defer the conversion to shares of common stock in accordance with applicable deferral
rules, and include the right to receive dividend equivalents on the same basis as all other outstanding shares of Kemper common
stock only if, to the extent, and at the time that they vest and on subsequent dividend payment dates after they vest until the
awards are settled. Each Non-employee Director elected at the 2020 annual shareholder meeting received an annual Director
RSU award with an aggregate grant date fair value of $130,000 at the conclusion of the meeting, and, each Non-employee
Director elected at the 2019 annual shareholder meeting received an annual Director RSU award with an aggregate grant date
fair value of $130,000 at the conclusion of the meeting, under the Non-employee Director compensation program in effect for
the applicable year.

The Company uses the Black-Scholes option pricing model to estimate the fair value of each Tandem Award on the date of
grant. The expected terms of Tandem Awards are developed by considering the Company’s historical Tandem Award exercise
experience, demographic profiles, historical share retention practices of employees and assumptions about their propensity for
early exercise in the future. Expected volatility is estimated using weekly historical volatility. The Company believes that
historical volatility is currently the best estimate of expected volatility. The dividend yield in 2021, 2020 and 2019 was
calculated by taking the natural logarithm of the annualized yield divided by the Kemper common stock price on the date of
grant. The risk-free interest rate was the yield on the grant date of U.S. Treasury zero coupon issues with a maturity comparable
to the expected term of the option.

The assumptions used in the Black-Scholes pricing model for Tandem Awards granted during the years ended December 31,
2021, 2020 and 2019 are presented below.

2021

2020

2019

RANGE OF VALUATION ASSUMPTIONS
Expected Volatility.....................................................
Risk-free Interest Rate................................................
Expected Dividend Yield ...........................................
WEIGHTED-AVERAGE EXPECTED LIFE IN YEARS
Employee Grants ........................................................

33.67 % - 38.04 % 29.22 % - 37.27 % 28.97 % - 33.78 %
-
-

1.46
1.48

1.35
1.05

0.26
1.18

0.17
1.19

1.33
1.78

2.60
1.38

-
-

4 - 6

122

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 17. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Tandem Award activity for the year ended December 31, 2021 is presented below.

Outstanding at Beginning of the Year........................................
Granted.......................................................................................
Exercised ....................................................................................
Forfeited or Expired ...................................................................
Outstanding at December 31, 2021............................................
Vested and Expected to Vest at December 31, 2021 .................

Exercisable at December 31, 2021.............................................

Shares
Subject to
Awards
1,900,957
406,553
(75,802)
(127,729)
2,103,979

Weighted-
average
Exercise Price
Per Share ($)
60.97
$
69.88
60.84
73.59
61.93

2,039,134
1,389,206

$
$

61.57
56.26

Weighted-
average
Remaining
Contractual
Life (in Years)

Aggregate
Intrinsic
Value
($ In Millions)

6.50 $

6.44 $
5.50 $

12.1

12.1
12.0

The weighted-average grant-date fair values of Tandem Awards granted during 2021, 2020 and 2019 were $19.29, $19.24 and
$20.99, respectively. Total intrinsic value of Tandem Awards exercised was $1.3 million, $7.1 million and $7.7 million for the
years ended December 31, 2021, 2020 and 2019, respectively. Cash received from exercises of Tandem Awards was $3.7
million, $5.0 million and $2.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. Total tax benefit
realized for tax deductions from exercises of Tandem Awards was $0.3 million, $1.5 million and $1.6 million for the years
ended December 31, 2021, 2020 and 2019, respectively.

Information pertaining to Tandem Awards outstanding at December 31, 2021 is presented below.

Range of Exercise Prices ($)
-

20.01

30.00

30.01

40.01

50.01

60.01

70.01

80.01
20.01

-
-

40.00

50.00

60.00

70.00

80.00

90.00
90.00

Outstanding

Weighted-
average
Exercise Price
Per Share ($)
27.79
$

Weighted-
average
Remaining
Contractual
Life (in Years)
4.03

34.42

42.44

59.80

69.26

76.31

83.69
61.93

3.33

4.74

5.97

8.75

7.22

6.16
6.50

Shares
Subject to
Awards

108,562

122,906

345,616

335,000

405,923

749,520

36,452
2,103,979

Exercisable

Shares
Subject to
Awards

108,562

122,906

345,616

331,639

50,325

406,480

23,678
1,389,206

Weighted-
average
Exercise Price
Per Share ($)
27.79
$

34.42

42.44

59.87

66.90

76.31

84.23
56.26

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

Activity related to nonvested RSUs for the year ended December 31, 2021 is presented below.

Time-based Restricted Stock
Unit Awards

Nonvested Balance at Beginning of the Year........................................................................................

Number of
Restricted
Stock Units
132,026

Granted...................................................................................................................................................

38,375

Vested ....................................................................................................................................................
Forfeited.................................................................................................................................................

(81,967)
(6,733)

Nonvested Balance at December 31, 2021 ............................................................................................

81,701

123

Weighted-
average
Grant-date
Fair Value
Per Unit

72.30

68.38

72.85
73.40

69.82

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 17. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

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

•
award recipient;

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

•
originally issued to the award recipient will vest; or

is below the “target” performance level, but at or above a “minimum” performance level, only a portion of the PSUs

•

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

Activity related to nonvested PSU awards for the year ended December 31, 2021 is presented below.

PSU Awards

Nonvested Balance at Beginning of the Year........................................................................................

Number of
PSUs
502,857

Granted...................................................................................................................................................

385,244

Vested ....................................................................................................................................................

(195,847)

Forfeited.................................................................................................................................................

(91,933)

Nonvested Balance at December 31, 2021 ............................................................................................

600,321

Weighted-
average
Grant-date
Fair Value
Per PSU

78.12

72.07

62.18

79.96

79.15

The number of additional shares that would be granted if the Company were to meet or exceed the maximum performance
levels related to the outstanding PSU awards for the 2021, 2020 and 2019 three-year performance periods was 265,765 common
shares, 220,392 common shares and 118,601 common shares, respectively, (as “full value awards,” the equivalent of 797,295
shares, 661,176 shares, and 355,803 shares, respectively, under the Share Authorization) at December 31, 2021.

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

Sixty-seven percent of the PSU awards granted to employees in 2021, Sixty-seven percent of the PSU awards granted to
employees in 2020 and fifty percent of the PSU awards granted to employees in 2019 are measured using a market performance
condition. Fair value for these awards was estimated using the Monte Carlo simulation method described above. Final payout
for these awards, and any forfeitures of units for performance below the “target” performance level, will be based on Kemper’s
total shareholder return, relative to a peer group comprised of all the companies in the S&P Supercomposite Insurance Index,
over a three-year performance period. The three-year performance periods for the 2021, 2020 and 2019 awards end on January
31, 2024, January 31, 2023 and January 31, 2022, respectively. Compensation cost for these awards is recognized ratably over
the requisite service period. In the event that the market performance condition is not satisfied, previously recognized
compensation cost would not reverse, but it would reverse if the requisite service period is not met.

124

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 17. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Thirty-three percent of the PSU awards granted to employees and officers in 2021, Thirty-three percent of the PSU awards
granted to employees in 2020 and fifty percent of the PSU awards granted to employees in 2019 are measured solely using a
Company-specific metric. Final payout for these awards, and any forfeitures of shares for performance below the “target”
performance level, will be determined based on Kemper’s adjusted return on equity over a three-year performance period. The
three-year performance periods for the 2021, 2020 and 2019 awards end on December 31, 2023, December 31, 2022 and
December 31, 2021, respectively. Fair value for these awards was determined using the closing price of Kemper common stock
on the date of grant. Accruals of compensation cost for these awards are estimated based on the probable outcome of the
performance condition.

The total fair value of RSUs and PSUs that vested during the year ended December 31, 2021 was $19.6 million. The tax
benefits for tax deductions realized from such awards was $4.1 million. The total fair value of RSUs and PSUs that vested
during the year ended December 31, 2020 was $20.4 million. The tax benefits for tax deductions realized from such awards was
$4.3 million. The total fair value of RSUs and PSUs that vested during the year ended December 31, 2019 was $24.8 million.
The tax benefits for tax deductions realized from such awards was $5.2 million.

The grant-date fair values of DSU awards granted to Non-employee Directors were determined using the closing price of
Kemper common stock on the date of grant. Beginning in 2019 DSU awards are no longer issued to Non-employee Directors.
All previously granted shares had vested upon issuance and as such, no DSUs vested during the years ended December 31,
2021, 2020 and 2019.

Activity related to DSU awards for the year ended December 31, 2021 is presented below.

Vested Balance at Beginning of the Year ............................................................................................

Number of
DSUs
44,820

Reduction for Shares Issued on Conversion.........................................................................................

—

Vested Balance at December 31, 2021.................................................................................................

44,820

Weighted-
average
Grant-date
Fair Value
Per DSU

44.74

—

44.74

NOTE 18. POLICYHOLDER OBLIGATIONS

Policyholder Obligations at December 31, 2021 and 2020 were as follows:

DOLLARS IN MILLIONS
FHLB Funding Agreements......................................................................................................... $

Universal Life-type Policyholder Account Balances ...................................................................

Total ............................................................................................................................................. $

December 31,

2021

2020

401.9

102.1

504.0

407.8

59.2

467.0

Kemper’s subsidiary, United Insurance has entered into funding agreements with the FHLB of Chicago in exchange for cash,
which it uses for spread lending purposes. United Insurance received advances of $385.4 million from the FHLB of Chicago
and made repayments of $391.3 million under the spread lending program in 2021. United Insurance received advances of
$466.4 million and made repayments of $302.0 million from the FHLB of Chicago in 2020 under the spread lending program.

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.

125

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 18. POLICYHOLDER OBLIGATIONS (Continued)

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 December 31, 2021 and 2020 is presented
below.

DOLLARS IN MILLIONS
Liability under Funding Agreements......................................................................................................... $
Fair Value of Collateral Pledged ...............................................................................................................

FHLB of Chicago Common Stock Owned at Cost....................................................................................

2021
401.9
556.6

11.8

2020
407.8
530.5

11.8

NOTE 19. DEBT

Amended and Extended Credit Agreement and Term Loan Facility

On June 8, 2018, the Company entered into an amended and extended credit agreement and term loan facility. The amended
and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to $300.0 million
and extended the maturity date to June 8, 2023. On June 4, 2019, the Company utilized the accordion feature under the credit
agreement to increase its credit borrowing capacity by $100.0 million, resulting in the available credit commitments increasing
from $300.0 million to $400.0 million. The Company incurred $0.1 million in additional debt issuance costs in connection with
the utilization of the accordion feature which, in addition to the $0.5 million of remaining unamortized costs under the credit
agreement, will be amortized under the remaining term of the credit agreement. There were no outstanding borrowings under
the credit agreement at either December 31, 2021 or December 31, 2020.

Long-term Debt

The Company designates debt obligations as either short-term or long-term based on maturity date at issuance, or, in the case of
the 2022 Senior Notes, based on the date of assumption.

Total amortized cost of Long-term Debt outstanding at December 31, 2021 and 2020 was:

(Dollars in Millions)
Term Loan due July 5, 2023 .................................................................................................................... $

5.000% Senior Notes due September 19, 2022........................................................................................

4.350% Senior Notes due February 15, 2025...........................................................................................

2.400% Senior Notes due September 30, 2030........................................................................................

Dec 31,
2021

Dec 31,
2020

— $

276.7

449.0

396.2

49.9

278.3

448.8

395.8

Total Long-term Debt Outstanding .......................................................................................................... $ 1,121.9

$ 1,172.8

Term Loan Due 2023

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

126

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 19. DEBT (Continued)

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.

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 December 31, 2021 or December 31, 2020. For information on United Insurance’s funding agreement with the
FHLB of Chicago in connection with the spread lending program, see Note 18, “Policyholder Obligations,” to the 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
$43.6 million, $36.0 million and $42.5 million for the years ended December 31, 2021, 2020 and 2019 respectively. Interest
paid, including facility fees, was $43.9 million, $34.6 million and $44.0 million for the years ended December 31, 2021, 2020
and 2019 respectively.

NOTE 20. 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)
Operating Lease Right-of-Use Assets............................................................................................ $
Operating Lease Liabilities ............................................................................................................

2021

2020

64.4
84.8

68.6
89.6

127

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 20. LEASES (Continued)

Lease expenses are primarily included in insurance expenses in the Consolidated Statements of Income. Additional information
regarding the Company’s operating leases is presented below.

(Dollars in Millions)
Lease Cost:

2021

2020

Amortization of Right-of-Use Assets - Finance Leases.............................................................. $
Operating Lease Cost ..................................................................................................................
Variable Lease Cost.....................................................................................................................

Short-Term Lease Cost (1) ..........................................................................................................

Total Lease Expense ...................................................................................................................... $

Less: Sub-Lease Income ................................................................................................................
Total Lease Cost............................................................................................................................. $

0.2
22.3

0.2

5.0
27.7

0.3

27.4

0.3
20.9

—

4.6
25.8

—

25.8

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

Other Information on Operating Leases

Supplemental cash flow information related to the Company’s operating and finance leases for the year ended December 31,
2021 and 2020 is as follows:

(Dollars in Millions)
Operating Cash Flows from Operating Lease (Fixed Payments).................................................. $
Operating Cash Flows from Operating Lease (Liability Reduction) ............................................

Financing Cash Flows from Finance Leases .................................................................................

Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities .......................

2021

2020

23.6

20.6

0.2

15.5

15.8

17.5

0.3

11.0

Significant judgments and assumptions for determining lease asset and liability at December 31, 2021 and 2020 are presented
below.

Weighted-average Remaining Lease Term - Finance Leases ........................................................
Weighted-average Remaining Lease Term - Operating Leases.....................................................
Weighted-average Discount Rate - Finance Leases.......................................................................
Weighted-average Discount Rate - Operating Leases ...................................................................

2021
1.0 year
5.8 years
0.6 %
3.4 %

2020
0.7 years
6.7 years
4.0 %
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.

Future minimum lease payments under operating leases at December 31, 2021 are presented below. There are no significant
future minimum lease payments under finance leases.

(Dollars in Millions)
2022 ........................................................................................................................................................... $
2023 ...........................................................................................................................................................
2024 ...........................................................................................................................................................
2025 ...........................................................................................................................................................
2026 ...........................................................................................................................................................
2027 and Thereafter...................................................................................................................................
Total Future Payments............................................................................................................................... $
Less Imputed Interest.................................................................................................................................
Present Value of Minimum Lease Payments............................................................................................. $

23.8
21.1
15.2
9.9
4.2
20.5
94.7
9.9
84.8

128

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 21. CATASTROPHE REINSURANCE

Catastrophes and natural disasters are inherent risks of the property and casualty insurance business. These catastrophic events
and natural disasters include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds and
winter storms. Such events result in insured losses that are, and will continue to be, a material factor in the results of operations
and financial position of the Company’s property and casualty insurance companies. Further, because the level of these insured
losses occurring in any one year cannot be accurately predicted, these losses may contribute to material year-to-year
fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more
likely to occur at certain times within the year than others. This factor adds an element of seasonality to property and casualty
insurance claims. The Company has adopted the industry-wide catastrophe classifications of storms and other events
promulgated by the Insurance Services Office (“ISO”) to track and report losses related to catastrophes. ISO classifies a disaster
as a catastrophe when the event causes $25.0 million or more in direct insured losses to property and affects a significant
number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout
the insurance industry. The discussions that follow utilize ISO’s definition of catastrophes.

The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical
diversification, restrictions on the amount and location of new business production in certain regions, and reinsurance. To limit
its exposures to catastrophic events, the Company maintains a catastrophe reinsurance program for the property and casualty
insurance companies. In 2021, the property business written through the Life & Health segment was included in the catastrophe
reinsurance program. Coverage for the catastrophe reinsurance program is provided in various layers through multiple excess of
loss reinsurance contracts and an annual aggregate excess property catastrophe reinsurance contract.

Coverage on individual catastrophes provided under the excess of loss reinsurance contracts effective January 1, 2021 to
December 31, 2021 is provided in various layers as presented below.

DOLLARS IN MILLIONS
Retained ........................................................................................................................... $
1st Layer of Coverage......................................................................................................
2nd Layer of Coverage.....................................................................................................
3rd Layer of Coverage .....................................................................................................

Catastrophe Losses and
LAE

In Excess of

— $

50.0
150.0
250.0

Up to

50.0
150.0
250.0
275.0

Percentage
of Coverage
— %

95.0
95.0
95.0

Coverage on individual catastrophes provided under the excess of loss reinsurance contracts effective January 1, 2020 to
December 31, 2020 is provided in various layers as presented below.

Catastrophe Losses and
LAE

In Excess of

— $

50.0
150.0
250.0

Up to

50.0
150.0
250.0
275.0

Percentage
of Coverage
— %

95.0
95.0
95.0

Coverage on individual catastrophes provided under the excess of loss reinsurance contracts effective January 1, 2019 to
December 31, 2019 is provided in various layers as presented below.

Catastrophe Losses and
LAE

In Excess of

— $

50.0
150.0
250.0

Up to

50.0
150.0
250.0
275.0

Percentage
of Coverage
— %

95.0
95.0
95.0

In the event that the incurred catastrophe losses and LAE covered by the catastrophe reinsurance programs presented in the
three preceding tables exceed the retention for that particular layer, each of the programs allow for one reinstatement of such

129

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 21. CATASTROPHE REINSURANCE (Continued)

coverage. In such an instance, the Company is required to pay a reinstatement premium to the reinsurers to reinstate the full
amount of reinsurance available under such layer.

Coverage provided under the 2021 aggregate property catastrophe reinsurance contract is summarized below.

Aggregate Catastrophe
Losses and LAE

In Excess of

— $

60.0

Up to

60.0

110.0

Coverage provided under the 2020 aggregate property catastrophe reinsurance contract is summarized below.

Aggregate Catastrophe
Losses and LAE

In Excess of

— $

60.0

Up to

60.0

110.0

The catastrophe reinsurance in 2021, 2020 and 2019 for the property and casualty insurance companies also included
reinsurance coverage from the Florida Hurricane Catastrophe Fund (the “FHCF”) for hurricane losses in Florida at retentions
lower than those described above. The Life & Health Insurance segment also purchases reinsurance from the FHCF for
hurricane losses in Florida.

Reinsurance premiums for the Company’s catastrophe reinsurance programs and the FHCF Program reduced earned premiums
for the years ended December 31, 2021, 2020 and 2019 by the following:

DOLLARS IN MILLIONS
Specialty Property & Casualty Insurance .............................................................................. $
Preferred Property & Casualty Insurance ..............................................................................
Life & Health Insurance.........................................................................................................
Total Ceded Catastrophe Reinsurance Premiums.................................................................. $

2021

2020

2019

7.0
22.0
1.3
30.3

4.8
20.7
1.2
26.7

0.2
20.2
0.1
20.5

The Company did not pay any reinstatement premiums in 2021, 2020, or 2019.

Catastrophe losses and LAE (including reserve development), net of reinsurance recoveries, for the years ended December 31,
2021, 2020 and 2019 by business segment are presented below.

DOLLARS IN MILLIONS
Specialty Property & Casualty Insurance .............................................................................. $
Preferred Property & Casualty Insurance ..............................................................................
Life & Health Insurance.........................................................................................................
Total Catastrophe Losses and LAE........................................................................................ $

2021

2020

2019

16.0
73.5
12.9
102.4

12.5
81.5
12.9
106.9

11.6
44.6
3.9
60.1

The Company had no material recoveries under its catastrophe reinsurance treaties for the years ended December 31, 2021 and
2020.

Total prior year catastrophe loss and LAE reserves, net of reinsurance recoverables, developed favorably by $5.4 million in
2021, adversely by $0.2 million in 2020 and favorably by $17.1 million in 2019. The Specialty Property & Casualty Insurance
segment reported adverse catastrophe reserve development of $0.3 million, $0.2 million, and $0.5 million in 2021, 2020 and
2019, respectively. The Preferred Property & Casualty Insurance segment reported favorable catastrophe reserve development
of $5.6 million, $0.5 million and $18.4 million in 2021, 2020 and 2019, respectively. The Life & Health Insurance segment
reported favorable catastrophe reserve development of $0.1 million in 2021 and adverse development of $0.5 million and $0.8
million in 2020 and 2019, respectively.

130

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 21. CATASTROPHE REINSURANCE (Continued)

The process of estimating and establishing reserves for catastrophe losses is inherently uncertain and the actual ultimate cost of
a claim, net of actual reinsurance recoveries, may vary materially from the estimated amount reserved. The Company’s
estimates of direct catastrophe losses are generally based on inspections by claims adjusters and historical loss development
experience for areas that have not been inspected or for claims that have not yet been reported. The Company’s estimates of
direct catastrophe losses are based on the coverages provided by its insurance policies. The Company’s homeowners and
dwelling insurance policies do not provide coverage for losses caused by floods, but generally provide coverage for physical
damage caused by wind or wind-driven rain. Accordingly, the Company’s estimates of direct losses for homeowners and
dwelling insurance do not include losses caused by flood. Depending on the policy, automobile insurance may provide
coverage for losses caused by flood. Estimates of the number and severity of claims ultimately reported are influenced by many
variables, including, but not limited to, repair or reconstruction costs and determination of cause of loss that are difficult to
quantify and will influence the final amount of claim settlements. All these factors, coupled with the impact of the availability
of labor and material on costs, require significant judgment in the reserve setting process. A change in any one or more of these
factors is likely to result in an ultimate net claim cost different from the estimated reserve. The Company’s estimates of indirect
losses from wind pools and joint underwriting associations are based on a variety of factors, including, but not limited to, actual
or estimated assessments provided by or received from such entities, insurance industry estimates of losses, and estimates of the
Company’s market share in the assessable states. Actual assessments may differ materially from these estimated amounts.

NOTE 22. OTHER REINSURANCE

In addition to the reinsurance programs described in Note 21, “Catastrophe Reinsurance,” to the Consolidated Financial
Statements, Kemper’s insurance subsidiaries utilize other reinsurance arrangements to limit their maximum loss, provide
greater diversification of risk and to minimize exposures on larger risks. The ceding of insurance does not discharge the primary
liability of the original insurer. Accordingly, insurance reserve liabilities are reported gross of any estimated recovery from
reinsurers in the Consolidated Balance Sheets. Amounts recoverable from reinsurers are estimated in a manner consistent with
the insurance reserve liability and are included in Other Receivables in the Consolidated Balance Sheets.

Earned Premiums ceded on long-duration and short-duration policies were $36.1 million, $31.2 million and $27.4 million for
the years ended December 31, 2021, 2020 and 2019, respectively, of which $30.3 million, $26.7 million and $20.5 million,
respectively, was related to catastrophe reinsurance. See Note 21, “Catastrophe Reinsurance,” to the Consolidated Financial
Statements for additional information regarding the Company’s catastrophe reinsurance programs. Certain insurance
subsidiaries assume business from other insurance companies and involuntary pools. Earned Premiums assumed on long-
duration and short-duration policies were $56.7 million, $73.8 million and $92.3 million for the years ended December 31,
2021, 2020 and 2019, respectively.

Trinity and Capitol County Mutual Fire Insurance Company (“Capitol”) are parties to a quota share reinsurance agreement
whereby Trinity assumes 100% of the business written by Capitol, subject to a cap, for ceded losses for dwelling coverage.
Earned Premiums assumed by Trinity from Capitol were $17.3 million, $18.1 million and $19.4 million for the years ended
December 31, 2021, 2020 and 2019, respectively. Capitol is a mutual insurance company and, accordingly, is owned by its
policyholders. Trinity and Old Reliable Casualty Company (“ORCC”), a subsidiary of Capitol, are parties to a quota share
reinsurance agreement whereby Trinity assumes 100% of the business written by ORCC, subject to a cap, for ceded losses for
dwelling coverage. Earned Premiums assumed by Trinity from ORCC were $4.7 million, $4.9 million and $5.2 million for the
years ended December 31, 2021, 2020 and 2019, respectively.

Six employees of the Company serve as directors of Capitol’s six member board of directors. Nine employees of the Company
also serve as directors of ORCC’s nine member board of directors. Kemper’s subsidiary, United Insurance, provides claims and
administrative services to Capitol and ORCC. In addition, agents appointed by Kemper’s subsidiary, The Reliable Life
Insurance Company, and who are employed by United Insurance, are also appointed by Capitol and ORCC to sell property
insurance products for the Company’s Life & Health Insurance segment. The Company also provides certain investment
services to Capitol and ORCC.

131

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 23. INCOME TAXES

The tax effects of temporary differences that give rise to significant portions of the Company’s Net Deferred Income Tax Assets
and Deferred Income Tax Liabilities at December 31, 2021 and 2020 were:

DOLLARS IN MILLIONS
Deferred Income Tax Assets:

Insurance Reserves................................................................................................................................ $
Unearned Premium Reserves................................................................................................................
Tax Capitalization of Policy Acquisition Costs....................................................................................
Payroll and Employee Benefit Accruals ...............................................................................................
Net Operating Loss Carryforwards.......................................................................................................
Other .....................................................................................................................................................
Total Deferred Income Tax Assets............................................................................................................
Deferred Income Tax Liabilities:

Investments ...........................................................................................................................................
Deferred Policy Acquisition Costs........................................................................................................
Life VIF and P&C Customer Relationships .........................................................................................
Goodwill and Other Intangible Assets Acquired ..................................................................................
Depreciable Assets................................................................................................................................
Other .....................................................................................................................................................
Total Deferred Income Tax Liabilities ......................................................................................................
Net Deferred Income Tax Liabilities......................................................................................................... $

2021

2020

31.9
78.3
46.6
36.4
3.6
11.6
208.4

209.1
142.4
4.6
38.0
38.7
2.6
435.4
227.0

18.4
66.7
46.6
35.6
1.1
13.4
181.8

258.8
123.7
5.0
35.5
42.1
2.4
467.5
285.7

The expiration of federal net operating loss (“NOL”) carryforwards and their related deferred income tax assets at
December 31, 2021 is presented below by year of expiration.

DOLLARS IN MILLIONS
Expiring in:

NOL
Carry-
forwards

Deferred
Tax Asset

2027....................................................................................................................................................... $

2028.......................................................................................................................................................

No Expiration ........................................................................................................................................

Total All Years .......................................................................................................................................... $

0.8

4.4

12.3

17.5

0.2

0.9

2.5

3.6

The NOL carryforwards were acquired in connection with business acquisitions made in prior years and are subject to annual
usage limitations under the Internal Revenue Code. The Company expects to fully utilize these federal NOL carryforwards.

A reconciliation of the beginning and ending amount of Unrecognized Tax Benefits for the years ended December 31, 2021,
2020 and 2019 is presented below.

DOLLARS IN MILLIONS
Liabilities for Unrecognized Tax Benefits at Beginning of Year .......................................... $
Additions for Tax Positions of Current Year.........................................................................
Reductions for Tax Positions of Prior Years .........................................................................
Liabilities for Unrecognized Tax Benefits at End of Year .................................................... $

2021

2020

2019

— $
—
—
— $

4.4
—
(4.4)
—

There were no Unrecognized Tax Benefits at December 31, 2021 and 2020. The Company recognizes interest and penalties, if
any, related to unrecognized tax benefits in income tax expense. There were no liabilities for accrued interest and penalties as of
December 31, 2021 and 2020.

132

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 23. INCOME TAXES (Continued)

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 September 30, 2022. Tax years 2018, 2019
and 2020 are subject to a statute of three years from the extended due dates of October 15, 2019, 2020 and 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.

The components of Income Tax Expense from Operations for the years ended December 31, 2021, 2020 and 2019 were:

DOLLARS IN MILLIONS
Current Income Tax Benefit (Expense) ................................................................................. $
Deferred Income Tax Benefit (Expense) ...............................................................................
(Increase) Decrease Unrecognized Tax Benefits ...................................................................
Income Tax Benefit (Expense) .............................................................................................. $

2021
122.7
2.1
—
124.8

2020

2019

(86.6) $
(13.6)
—

(66.4)
(68.5)
4.4
$ (100.2) $ (130.5)

Income taxes paid, net of income tax refunds received, were $38.0 million, $55.8 million, and $68.1 million in 2021, 2020, and
2019, respectively.

A reconciliation of the Statutory Federal Income Tax Benefit (Expense) and Rate to the Company’s Effective Income Tax
Benefit (Expense) and Rate from Operations for the years ended December 31, 2021, 2020 and 2019 is presented below.

DOLLARS IN MILLIONS
Statutory Federal Income Tax Benefit (Expense)....... $
Tax-exempt Income and Dividends Received

Deduction ................................................................

Untaxed Earnings on Company-Owned Life
Insurance .....................................................................
Investment tax credits .................................................
Stock-Based Compensation ........................................
Nondeductible Executive Compensation ....................
Other, Net....................................................................
Effective Income Tax Benefit (Expense)....................

2021

2020

2019

Amount
51.5

Amount

Rate
21.0 % $ (107.1)

Amount

Rate
21.0 % $ (138.9)

Rate
21.0 %

4.6

1.9

4.0

(0.8)

4.3

(0.7)

5.4
66.1
0.3
(2.7)
(0.4)

2.2
27.0
0.1
(1.1)
(0.2)

2.7
3.2
2.2
(2.7)
(2.5)

(0.5)
(0.6)
(0.5)
0.5
0.5

1.6
—
4.4
(2.5)
0.6

(0.2)
—
(0.7)
0.4
(0.1)

124.8

50.9 % $ (100.2)

19.6 % $ (130.5)

19.7 %

Comprehensive Income Tax (Expense) Benefit included in the Consolidated Financial Statements for the years ended
December 31, 2021, 2020 and 2019 was:

DOLLARS IN MILLIONS
Income Tax Benefit (Expense):
Operations .............................................................................................................................. $
Unrealized Depreciation (Appreciation) on Securities ..........................................................
Tax Effects from Postretirement Benefit Plans .....................................................................
Tax Effects from Cash Flow Hedge.......................................................................................
Comprehensive Income Tax (Expense) Benefit .................................................................... $

2021

2020

2019

124.8
(60.1)
(2.4)
0.1
62.4

$ (100.2) $ (130.5)
(85.2)
1.7
(0.1)
$ (193.8) $ (214.1)

(78.3)
(15.3)
—

133

Kemper Corporation and Subsidiaries
Notes to the Consolidated Financial Statements

NOTE 24. CONTINGENCIES

In the ordinary course of its businesses, the Company is involved in legal proceedings including lawsuits, arbitrations,
regulatory examinations, audits and inquiries. Except with regard to the matters discussed below, 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 Consolidated Financial Statements and Notes to the 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 implementation of a comprehensive process to compare the records of its life insurance
subsidiaries against one or more death verification databases to determine if any of its insureds may be 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 25. 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.

As described in Note 22, “Other Reinsurance,” to the Consolidated Financial Statements, the Company also has certain
relationships with Capitol, a mutual insurance company that is owned by its policyholders, and its subsidiary, ORCC.

134

Report of Independent Registered
Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Kemper Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Kemper Corporation and subsidiaries (the “Company”) as of
December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income (loss), shareholders'
equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the
schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the
Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by
COSO.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company changed its method of accounting for measurement of credit
losses on financial instruments in 2020.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

135

Report of Independent Registered
Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.

Property and Casualty Insurance Reserves - Refer to Notes 2 and 6 to the consolidated financial statements

Critical Audit Matter Description

The estimation of property and casualty insurance reserves for losses and loss adjustment expenses (“property and casualty
insurance reserves”), including those claims that are incurred but not reported, requires significant judgment. Estimating
property and casualty insurance reserves is inherently uncertain as estimates are generally derived using a variety of actuarial
estimation techniques that are dependent on assumptions and expectations about future events, many of which are difficult to
quantify. The estimation process, particularly for claims with longer-tailed exposures that may not be discovered or reported
immediately, is an inherently subjective exercise and modest changes in judgments and assumptions can materially impact the
valuation of these reserves.

Given the significant judgments made by management in estimating property and casualty insurance reserves, auditing property
and casualty insurance reserves required a high degree of auditor judgment and an increased extent of effort, including the
involvement of our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to property and casualty insurance reserves included the following, among others:

• We tested the effectiveness of controls related to property and casualty insurance reserves, including those controls

related to the estimation of and management’s review of the property and casualty insurance reserves.

• We tested the underlying data, including historical claims, that served as the basis for the actuarial analyses to test that

the inputs to the actuarial estimates were accurate and complete.

• With the assistance of our actuarial specialists:

◦ We developed a range of independent estimates of the property and casualty insurance reserves and compared

our estimates to the recorded reserves.

◦ We compared our prior year estimates of expected incurred losses to actual experience during the most recent
year to identify potential bias in the Company’s determination of property and casualty insurance reserves.

Fixed Maturities at Fair Value - Refer to Notes 2, 8, and 10 to the consolidated financial statements

Critical Audit Matter Description

Investments in fixed maturity securities classified as available-for-sale are reported at fair value in the financial statements.
Fixed maturity securities without readily determinable market values are valued using significant unobservable inputs, such as
credit profile, credit spread and resulting market yield, which involve considerable judgment by management.

Given management uses significant unobservable inputs to estimate the fair value of fixed maturity securities without readily
determinable market values, performing audit procedures to evaluate these inputs required a high degree of auditor judgment
and an increased extent of effort, including the need to involve our fair value specialists.

136

Report of Independent Registered
Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the unobservable inputs used by management to estimate the fair value of fixed maturity
securities without readily determinable market values included the following, among others:

• We tested the effectiveness of controls related to fixed maturity securities, including those controls related to the

determination of fair value.

• We evaluated management’s ability to accurately estimate fair value by comparing management’s historical estimates

to recent or subsequent transactions, taking into account changes in market conditions.

• We evaluated the reasonableness of the models, methodologies, and unobservable inputs used by management to

estimate fair value.

• With the assistance of our fair value specialists, we compared management’s unobservable inputs to external sources,
and for a sample of the investments, developed independent estimates of the fair value and compared our estimates to
the Company’s estimates.

/s/ Deloitte & Touche LLP
Chicago, Illinois
February 10, 2022

We have served as the Company’s auditor since 2002.

137

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not Applicable

Item 9A.

Controls and Procedures.

Disclosure Controls and Procedures

The Company’s management, with 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.

Changes in Internal Controls 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 ended December 31, 2021 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management Report on Internal Control Over Financial Reporting

We, as management of the Company, are responsible for establishing and maintaining adequate internal control over financial
reporting. Pursuant to the rules and regulations of the SEC, internal control over financial reporting is a process designed by, or
under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar
functions, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and procedures that:

•

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of the company’s assets that could have a material effect on the financial statements.

Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2021, based on
the control criteria established in a report entitled Internal Control—Integrated Framework, issued in 2013 by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that the Company’s
internal control over financial reporting is effective as of December 31, 2021.

The independent registered public accounting firm of Deloitte & Touche LLP, as auditors of the consolidated financial
statements of Kemper and its subsidiaries, has issued an attestation report on the effectiveness of management’s internal control
over financial reporting based on criteria established in Internal Control—Integrated Framework, issued in 2013 by the
Committee of Sponsoring Organizations of the Treadway Commission.

JOSEPH P. LACHER, JR.

/s/
Joseph P. Lacher, Jr.

JAMES J. MCKINNEY

/s/
James J. McKinney

Chairman of the Board, President and Chief Executive Officer

Executive Vice President and Chief Financial Officer

Kemper Corporation

February 10, 2022

Kemper Corporation

138

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

The attestation report of the independent registered public accounting firm, Deloitte & Touche LLP, on the Company’s internal
control over financial reporting is included in Item 8 under the heading “Report of Independent Registered Public Accounting
Firm,” and is incorporated herein by reference.

Item 9B.

Other Information.

None

139

Item 10.

Directors, Executive Officers and Corporate Governance.

PART III

The information required by this Item is incorporated herein by reference to the sections captioned “Meetings and Committees
of the Board of Directors,” “Business Experience of Nominees,” “Executive Officers,” “Ownership of Kemper Common Stock”
and “Corporate Governance” in the Proxy Statement for Kemper’s 2022 Annual Meeting of Shareholders. Kemper plans to file
such proxy statement within 120 days after December 31, 2021, the end of Kemper’s fiscal year.

Kemper’s code of ethics applicable to its chief executive officer, chief financial officer and principal accounting officer (“Code
of Ethics for Senior Financial Executives”) is posted in the “Governance” section of Kemper’s website, kemper.com. Kemper
also intends to disclose any future amendments to, and any waivers from (though none are anticipated), the Code of Ethics for
Senior Financial Executives in the “Governance” section of its website.

Item 11.

Executive Compensation.

The information required by this Item is incorporated herein by reference to the sections captioned “Executive Officer
Compensation and Benefits,” “Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” and
“Compensation Committee Report” in the Proxy Statement for Kemper’s 2022 Annual Meeting of Shareholders. The
Compensation Committee Report to be included in such Proxy Statement shall be deemed to be furnished in this report and
shall not be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act as a result of such
furnishing in this Item 11.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is set forth in the table below and incorporated herein by reference to the section
captioned “Ownership of Kemper Common Stock” in the Proxy Statement for Kemper’s 2022 Annual Meeting of Shareholders.

Equity Compensation Plan Information

Plan Category
Equity Compensation Plans Approved by

Security Holders

Equity Compensation Plans Not Approved by

Security Holders

Total

Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
or Programs (1)

2,103,979

—
2,103,979

61.93

—
61.93

5,253,076

—
5,253,076

(1) Includes 1,814,274 shares reserved for future grants based on performance results under the terms of outstanding PSU
awards.

Kemper’s 2020 Omnibus Plan permits various stock-based awards including, but not limited to, stock options, stock
appreciation rights, RSUs, and PSUs.

140

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is incorporated herein by reference to the sections captioned “Related Person
Transactions” and “Director Independence” in the Proxy Statement for Kemper’s 2022 Annual Meeting of Shareholders.

Item 14.

Principal Accounting Fees and Services.

The information required by this Item is incorporated by reference to the section captioned “Independent Registered Public
Accountant” in the Proxy Statement for Kemper’s 2022 Annual Meeting of Shareholders.

141

Item 15.

Exhibits, Financial Statement Schedules.

(a) Documents filed as part of this Report

PART IV

1. Financial Statements. The consolidated balance sheets of Kemper and subsidiaries as of December 31, 2021 and 2020, and
the consolidated statements of income, comprehensive income (loss), cash flows and shareholders’ equity for the years
ended December 31, 2021, 2020 and 2019, together with the notes thereto and the report of Deloitte & Touche LLP thereon
appearing in Item 8 are included in this 2021 Annual Report.

2. Financial Statement Schedules. The following four financial statement schedules are included on the pages immediately
following the signature pages hereof. Schedules not listed here have been omitted because they are not applicable or not
material or the required information is included in the Consolidated Financial Statements.

Schedule I Investments Other Than Investments in Related Parties

Schedule II Parent Company Financial Statements

Schedule III Supplementary Insurance Information

Schedule IV Reinsurance Schedule

The Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP, with regards to the Financial
Statement Schedules listed above, is incorporated by reference to the Report of Independent Registered Public Accountant
included in Item 8.

3. Exhibits. An Exhibit Index has been filed as part of this report on pages 143 through 147.

(b) Exhibits. Included in Item 15(a)3 above

Item 16. Form 10-K Summary

None

142

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.

Exhibit Index

Exhibit
Number
3.1

Exhibit Description

Restated Certificate of Incorporation

Amended and Restated Bylaws of Kemper
Corporation
Indenture, dated as of February 27, 2014, by and
between Kemper Corporation and The Bank of
New York Mellon Trust Company, N.A., as
Trustee

Second Supplemental Indenture, dated as of
February 24, 2015, to the Indenture, dated as of
February 27, 2014, between Kemper
Corporation and The Bank of New York Mellon
Trust Company, N.A., as Trustee (including the
form of 4.350% Senior Notes due 2025)
Form of Senior Indenture, dated as of August 6,
2010, by and between Infinity Property and
Casualty Corporation and U.S. Bank National
Association, as Trustee

First Supplemental Indenture, dated as of
September 17, 2012, by and between Infinity
Property and Casualty Corporation and U.S.
Bank National Association, as Trustee

Guarantee by Kemper Corporation of the
5.000% Senior Notes due 2022 of Infinity
Property and Casualty Corporation

Indenture, dated as of September 29, 2020, by
and between the Company and U.S. Bank
National Association

First Supplemental Indenture, dated as of
September 29, 2020, by and between the
Company and U.S. Bank National Association

Filed or
Furnished
Herewith

Incorporated by Reference

Form

8-K

File Number
001-18298

Exhibit

Filing Date

3.2 August 8,
2014

8-K

001-18298

8-K

001-18298

3.1 August 5,
2021
4.1 February 27,
2014

8-K

001-18298

4.2 February 24,
2015

S-3

333-168605

4.4 August 6,
2010

8-K

000-50167

4.1 September

17, 2012

8-K

001-18298

4.1 December 3,
2018

8-K

001-18298

8-K

001-18298

4.1 September

29, 2020

4.2 September

29, 2020

Form of Certificate Representing Shares of
Kemper Corporation Common Stock

10-K

001-18298

4.7 February 20,
2019

Description of Capital Stock

8-K

001-18298

10.1

June 12, 2018

10-K

001-18298

10.2 February 14,
2014

Second Amended and Restated Credit
Agreement, by and among Kemper Corporation,
the lenders party thereto, JP Morgan Chase
Bank, N.A., as administrative agent and
syndication agent, and Bank of America, N.A.
and Wells Fargo Bank, National Association as
syndication agents

Advances and Security Agreement and
Addendum to Advances and Security
Agreement, effective as of December 31, 2013,
between Trinity Universal Insurance Company
and the Federal Home Loan Bank of Dallas

143

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

10.1

10.2

Exhibit
Number
10.3

10.4

10.5

10.6*

10.7*

10.8*

10.9*

10.10*

10.11*

10.12*

10.13*

10.14*

10.15*

10.16*

Exhibit Description

Advances, Collateral Pledge, and Security
Agreement, dated as of March 18, 2014,
between United Insurance Company of America
and the Federal Home Loan Bank of Chicago
Advances and Security Agreement, effective
August 14, 2020, between Alliance United
Insurance Company and the Federal Home Loan
Bank of San Francisco

Term Loan Credit Agreement, dated as of June
4, 2019, among Kemper Corporation, the
lenders party thereto, PNC Bank, National
Association, as Administrative Agent, PNC
Capital Markets LLC, as Sole Bookrunner and
Joint Lead Arranger, and BMO Capital Markets
Corp., as Joint Lead Arranger

Kemper Pension Equalization Plan, as amended
and restated effective August 25, 2011, as
amended by Amendment No. 2 effective
September 16, 2013
Kemper Supplemental Retirement Plan, as
amended and restated effective September 22,
2016

Kemper Non-Qualified Deferred Compensation
Plan, as amended and restated effective March
16, 2016

Incorporated by Reference

Form

8-K

File Number
001-18298

Exhibit

Filing Date

10.1 March 21,
2014

Filed or
Furnished
Herewith

8-K/A

001-18298

10.1 August 20,
2020

8-K

001-18298

10.1

June 7, 2019

10-K

001-18298

10.3 February 14,
2014

10-K

001-18298

10.5 February 13,
2017

10-Q

001-18298

10.3 May 5, 2016

Kemper 2011 Omnibus Equity Plan, as amended
and restated effective October 30, 2013

10-Q

001-18298

Kemper 2011 Omnibus Equity Plan, as amended
and restated effective February 8, 2017

Form of Stock Option and SAR Agreement for
Non-employee Directors, as of August 25, 2011,
under the Kemper 2011 Omnibus Equity Plan

10-K

001-18298

10-K

001-18298

10.1 October 31,
2013

10.17 February 13,
2017

10.13 February 17,
2012

Form of Stock Option and SAR Agreement for
Non-employee Directors, as of May 1, 2013,
under the Kemper 2011 Omnibus Equity Plan

Form of Deferred Stock Unit Agreement for
Non-employee Directors, as of May 1, 2013,
under the Kemper 2011 Omnibus Equity Plan

Form of Stock Option and SAR Agreement -
Installment-Vesting Form, as of February 4,
2014, under the Kemper 2011 Omnibus Equity
Plan

Form of Stock Option and SAR Agreement -
Installment-Vesting Form, as of February 7,
2017, under the Kemper 2011 Omnibus Equity
Plan

Form of Performance Share Unit Award
Agreement (Adjusted ROE), as of February 6,
2018, under the Kemper 2011 Omnibus Equity
Plan

10-Q

001-18298

10.1 May 2, 2013

10-Q

001-18298

10.2 May 2, 2013

10-K

001-18298

10.24 February 14,
2014

10-K

001-18298

10.31 February 13,
2017

10-K

001-18298

10.34 February 13,
2018

144

Exhibit
Number
10.17*

10.18*

10.19*

10.20*

10.21*

10.22*

Exhibit Description

Form of Performance Share Unit Award
Agreement (Relative TSR), as of February 6,
2018, under the Kemper 2011 Omnibus Equity
Plan

Form of Restricted Stock Unit Award
Agreement (Installment Vesting), as of February
6, 2018, under the Kemper 2011 Omnibus
Equity Plan

Form of Non-Qualified Stock Option and SAR
Award Agreement (Installment Vesting), as of
February 6, 2018, under the Kemper 2011
Omnibus Equity Plan
Kemper Executive Performance Plan, amended
and restated as of May 1, 2018

Form of Non-Employee Director Restricted
Stock Unit Award Agreement, as of April 30,
2019, under the Kemper 2011 Omnibus Equity
Plan
Form of individual Indemnification Agreements
between Kemper and its directors and executive
officers

10.23*

2020 Omnibus Plan

10.24*

10.25*

10.26*

10.27*

10.28*

10.29*

10.30*

10.31*

Form of Non-Employee Director Restricted
Stock Unit Award Agreement as of May 5, 2020
under the 2020 Omnibus Equity Plan

Form of Non-Qualified Stock Option and SAR
Award Agreement (Cliff-Vesting) as of May 5,
2020 under the 2020 Omnibus Equity Plan

Form of Non-Qualified Stock Option and SAR
Award Agreement (Installment-Vesting) as of
May 5, 2020 under the 2020 Omnibus Equity
Plan

Form of Restricted Stock Unit Award
Agreement (Cliff-Vesting) as of May 5, 2020
under the 2020 Omnibus Equity Plan

Form of Restricted Stock Unit Award
Agreement (Installment-Vesting) as of May 5,
2020 under the 2020 Omnibus Equity Plan

Form of Performance Share Unit Award
Agreement (Adjusted ROE) as of May 5, 2020
under the 2020 Omnibus Equity Plan

Form of Performance Share Unit Award
Agreement (Relative TSR) as of May 5, 2020
under the 2020 Omnibus Equity Plan

Form of individual change in control severance
agreements between Kemper and its executive
officers

Incorporated by Reference

Form

10-K

File Number
001-18298

Exhibit

Filing Date
10.35 February 13,
2018

Filed or
Furnished
Herewith

10-K

001-18298

10.37 February 13,
2018

10-K

001-18298

10.39 February 13,
2018

10-Q

001-18298

10.2

July 30, 2018

8-K

001-18298

10.1 May 1, 2019

8-K

001-18298

10.1 February 11,
2020

Schedule
14A

001-18298 Appendix
B

March 25,
2020

8-K

001-18298

10.1 May 11, 2020

8-K

001-18298

10.2 May 11, 2020

8-K

001-18298

10.3 May 11, 2020

8-K

001-18298

10.4 May 11, 2020

8-K

001-18298

10.5 May 11, 2020

8-K

001-18298

10.6 May 11, 2020

8-K

001-18298

10.7 May 11, 2020

10-K

001-18298

10.42 February 13,
2017

145

Exhibit
Number

Exhibit Description

Form

File Number

Exhibit

Filing Date

Filed or
Furnished
Herewith

Incorporated by Reference

Each of the agreements is identical except that
the multipliers for benefits related to bonus,
severance, life insurance and health insurance
are 150%, 3 years, 3 years and 36 months,
respectively, for the Chief Executive Officer and
110%, 2 years, 2 years and 24 months,
respectively, for the other officers.

Form of Non-Qualified Stock Option and SAR
Award Agreement (Cliff Vesting) as of
February 1, 2022 under the 2020 Equity
Omnibus Plan

Form of Non-Qualified Stock Option and SAR
Award Agreement (Installment Vesting) as of
February 1, 2022 under the 2020 Equity
Omnibus Plan

Form of Restricted Stock Unit Award
Agreement (Cliff Vesting) as of February 1,
2022 under the 2020 Equity Omnibus Plan

Form of Restricted Stock Unit Award
Agreement (Installment Vesting) as of February
1, 2022 under the 2020 Equity Omnibus Plan

Form of Performance Share Unit Award
Agreement (Adjusted ROE) as of February 1,
2022 under the 2020 Equity Omnibus Plan

Form of Performance Share Unit Award
Agreement (Relative TSR) as of February 1,
2022 under the 2020 Equity Omnibus Plan

Form of Special Equity Award Agreement as of
February 1, 2022 under the 2020 Omnibus
Equity Plan

Subsidiaries of Kemper Corporation

Consent of Deloitte & Touche LLP
Power of Attorney (included on the signature
page hereof)
Certification of Chief Executive Officer
Pursuant to SEC Rule 13a-14(a)
Certification of Chief Financial Officer Pursuant
to SEC Rule 13a-14(a)
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (furnished pursuant to Item
601(b)(32) of Regulation S-K)
Certification of Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002 (furnished pursuant to Item 601(b)(32) of
Regulation S-K)

XBRL Instance

XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation
Linkbase Document

10.32*

10.33*

10.34*

10.35*

10.36*

10.37*

10.38*

21
23

31.1

31.2

32.1

32.2

101.1

101.2

101.3

146

Incorporated by Reference

Exhibit Description

Form

File Number

Exhibit

Filing Date

XBRL Taxonomy Extension Label Linkbase
Document
XBRL Taxonomy Extension Presentation
Linkbase Document
XBRL Taxonomy Extension Definition
Linkbase Document

Exhibit
Number
101.4

101.5

101.6

Filed or
Furnished
Herewith
X

147

POWER OF ATTORNEY

Each person whose signature appears below on the following page hereby appoints each of Joseph P. Lacher, Jr., President and
Chief Executive Officer, James J. McKinney, Executive Vice President and Chief Financial Officer, and Anastasios Omiridis,
Senior Vice President and Deputy Chief Financial Officer, so long as such individual remains an executive officer of Kemper
Corporation, his or her true and lawful attorney-in-fact with authority together or individually to execute in the name of each
such signatory, and with authority to file with the SEC, any and all amendments to this 2021 Annual Report of Kemper
Corporation, together with any and all exhibits thereto and other documents therewith, necessary or advisable to enable Kemper
Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations, and requirements of
the SEC in respect thereof, which amendments may make such other changes in the 2021 Annual Report as the aforesaid
attorney-in-fact executing the same deems appropriate.

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Kemper Corporation has duly caused this
2021 Annual Report on Form 10-K for the fiscal year ended December 31, 2021 to be signed on its behalf by the undersigned,
thereunto duly authorized, on February 10, 2022.

KEMPER CORPORATION
(Registrant)

By:

JOSEPH P. LACHER, JR.

/s/
Joseph P. Lacher, Jr.

Chairman of the Board, President and Chief Executive Officer

148

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of Kemper Corporation in the capacities indicated on February 10, 2022.

Signature
JOSEPH P. LACHER, JR.

/s/

Joseph P. Lacher, Jr.

/s/

JAMES J. MCKINNEY

James J. McKinney

/s/ ANASTASIOS OMIRIDIS

Anastasios Omiridis

/s/ ROBERT J. JOYCE

Robert J. Joyce

/s/ TERESA A. CANIDA

Teresa A. Canida

/s/ GEORGE N. COCHRAN

George N. Cochran

/s/ KATHLEEN M. CRONIN

Kathleen M. Cronin

/s/ LACY M. JOHNSON

Lacy M. Johnson

/s/ GERALD LADERMAN

Gerald Laderman

/s/ STUART B. PARKER

Stuart B. Parker

/s/ CHRISTOPHER B. SAROFIM

Christopher B. Sarofim

/s/ DAVID P. STORCH

David P. Storch

/s/ SUSAN D. WHITING

Susan D. Whiting

Title
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Senior Vice President and Deputy Chief Financial Officer
(Principal Accounting Officer)

Director

149

KEMPER CORPORATION AND SUBSIDIARIES
INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2021
(Dollars in Millions)

SCHEDULE I

Amortized
Cost

Fair Value

Amount
Carried in
Balance Sheet

610.1
1,752.5
6.7

637.4
1,890.1
5.5

4,386.9
7.4
752.1
307.5
7,986.9

51.8
21.8
757.0
830.6

XXX.X

XXX.X
XXX.X
46.4
XXX.X
XXX.X

4,386.9
7.4
752.1
307.5
7,986.9

51.8
21.8
757.0
830.6

32.3

241.9
39.6
46.4
925.6
284.1
$ 10,387.4

Fixed Maturities:

Bonds and Notes:

United States Government and Government Agencies and Authorities.............. $
States and Political Subdivisions .........................................................................
Foreign Governments...........................................................................................
Corporate Securities:

Other Bonds and Notes....................................................................................

Redeemable Preferred Stocks..........................................................................
Collateralized Loan Obligations......................................................................
Other Mortgage- and Asset-backed.................................................................
Total Investments in Fixed Maturities ...........................................................................
Equity Securities at Fair Value:

Preferred Stocks ........................................................................................................
Common Stocks ........................................................................................................
Other Equity Interests................................................................................................
Total Investments in Equity Securities ..........................................................................
Equity Securities at Modified Cost................................................................................

3,929.0
7.0
756.0
296.9
7,358.2

51.8
21.8
757.0
830.6

32.3

Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed
Earnings......................................................................................................................
241.9
Alternative Energy Partnership Investments .................................................................
39.6
Convertible Securities at Fair Value..............................................................................
46.4
Loans, Real Estate and Other Investments ....................................................................
925.6
Short-term Investments..................................................................................................
284.1
Total Investments........................................................................................................... $ 9,758.7

See Accompanying Report of Independent Registered Public Accounting Firm.

KEMPER CORPORATION
PARENT COMPANY BALANCE SHEETS
(Dollars in Millions)

SCHEDULE II

December 31,

2021

2020

ASSETS
Investments in Subsidiaries ....................................................................................................................... $ 4,729.1
Fixed Maturities at Fair Value (Amortized Cost: 2021 – $0.3; 2020 - $91.8) ..........................................
0.4
Equity Securities at Fair Value (Cost: 2021 - $106.8; 2020 - $73.4) ........................................................
107.4
Short-term Investments..............................................................................................................................
96.9
Cash ...........................................................................................................................................................
27.7
Other Receivables......................................................................................................................................
2.3
Right-of-Use Assets...................................................................................................................................
12.8
Other Assets...............................................................................................................................................
18.9
Total Assets ............................................................................................................................................... $ 4,995.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Term Loan due July 5, 2023 (Fair Value: 2021 – $—; 2020 – $50.0) ...................................................... $
Senior Notes Payable, 4.35% due 2025 (Fair Value: 2021 – $481.4; 2020 – $499.5)..............................
Senior Notes Payable, 2.40% due 2030 (Fair Value: 2021 – $387.8, 2020 – $405.6) ..............................
Current Income Tax Liability ....................................................................................................................
Deferred Income Tax Liability ..................................................................................................................
Liabilities for Benefit Plans .......................................................................................................................
Right-of-Use Liabilities .............................................................................................................................
Accrued Expenses and Other Liabilities....................................................................................................
Total Liabilities..........................................................................................................................................
Shareholders’ Equity:

449.0
396.2
18.5
46.5
42.3
25.8
9.5
987.8

$ 4,896.0
99.8
78.8
508.2
46.0
1.1
13.4
29.2
$ 5,672.5

49.9
448.8
395.8
41.5
38.9
47.6
26.9
59.7
1,109.1

— $

Common Stock......................................................................................................................................
6.4
Additional Paid-in Capital.....................................................................................................................
1,790.7
Retained Earnings .................................................................................................................................
1,762.5
Accumulated Other Comprehensive Income ........................................................................................
448.1
Total Shareholders’ Equity ........................................................................................................................
4,007.7
Total Liabilities and Shareholders’ Equity ................................................................................................ $ 4,995.5

6.5
1,805.2
2,071.2
680.5
4,563.4
$ 5,672.5

See Accompanying Report of Independent Registered Public Accounting Firm.

KEMPER CORPORATION
PARENT COMPANY STATEMENTS OF INCOME
(Dollars in Millions)

For the Year Ended December 31,

2021

2020

2019

Net Investment Income .......................................................................................................... $
Income from Change in Fair Value of Equity Securities.......................................................
Net Realized Gains (Losses) on Sales of Investments...........................................................
Total Revenues.......................................................................................................................
Interest Expense .....................................................................................................................
Loss from Early Extinguishment of Debt ..............................................................................
Pension Settlement Expense ..................................................................................................
Other Operating (Benefits) Expenses ....................................................................................
Total Operating Expenses ......................................................................................................
Loss before Income Taxes and Equity in Net Income of Subsidiaries ..................................
Income Tax Benefit (Expense) ..............................................................................................
Loss before Equity in Net Income (Loss) of Subsidiaries .....................................................
Equity in Net Income (Loss) of Subsidiaries.........................................................................
Net Income (Loss).................................................................................................................. $ (120.5) $

3.4
10.0
10.6
24.0
32.0
—
—
5.9
37.9
(13.9)
(0.6)
(14.5)
(106.0)

1.4
4.3
0.1
5.8
24.2
—
64.1
(3.6)
84.7
(78.9)
13.4
(65.5)
475.4
409.9

2.1
1.6
0.3
4.0
28.5
5.8
—
4.0
38.3
(34.3)
9.4
(24.9)
556.0
531.1

See Accompanying Report of Independent Registered Public Accounting Firm.

KEMPER CORPORATION
PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Millions)

Net Income (Loss)..................................................................................................................................
Other Comprehensive Income (Loss):

Changes in Net Unrealized Gains (Losses) on Investment Securities:
Having No Credit Losses Recognized in Consolidated Statements of Income (Loss):

For the Year Ended December 31,

2021
(120.5) $

2020

2019

409.9

531.1

Securities Held by Subsidiaries ..................................................................................................
Securities Held by Parent............................................................................................................

(230.4)
—

378.7
8.0

433.2
0.2

Having Credit Losses Recognized in Consolidated Statements of Income (Loss):

Securities Held by Subsidiaries

(2.0)

(2.6)

—

Reclassification Adjustment for Amounts Included in Net Income (Loss):

Unrecognized Postretirement Benefit Costs Arising During the Year:

Reclassification Adjustments for Amounts Included in Net Income (Loss):

Changes in Net Unrealized Gains (Losses) on Investment Securities:

Having No Credit Losses Recognized in Consolidated Statements of Income (Loss):

Having Credit Losses Recognized in Consolidated Statements of Income (Loss):

Securities Held by Subsidiaries ..................................................................................................

Reclassification Adjustment for Amounts Included in Net Income (Loss):

Unrecognized Postretirement Benefit Costs Arising During the Year:

Reclassification Adjustments for Amounts Included in Net Income (Loss):

(43.5)
(10.6)

0.6
(9.5)

—
0.1
0.5
(294.8)

48.4
—

0.4

9.1
2.2

(0.1)
2.5

Pension Settlement Cost Recognized..........................................................................................
Amortization of Unrecognized Postretirement Benefit Costs ....................................................
Changes in Gain (Loss) on Cash Flow Hedges ................................................................................
Income Tax Benefit (Expense) ..............................................................................................................
Other Comprehensive Income (Loss) ....................................................................................................
Total Comprehensive Income (Loss).....................................................................................................

—
—
(0.1)
62.4
(232.4)
(352.9) $

(16.6)
(0.1)

—
3.6

64.1
2.5
0.4
438.0

(27.9)
(0.2)

(0.6)
(4.2)

—
(3.0)
0.4
397.9

(80.6)
(1.7)

(91.0)
—

0.5

3.5
—

—
(1.3)

(13.5)
(0.5)
—
(93.6)
344.4
754.3

—

5.8
—

—
1.0

—
0.7
(0.1)
(83.6)
314.3
845.4

See Accompanying Report of Independent Registered Public Accounting Firm.

KEMPER CORPORATION
PARENT COMPANY STATEMENTS OF CASH FLOWS
(Dollars in Millions)

For the Year Ended December 31,

2021

2020

2019

Operating Activities:

Net Income (Loss) ............................................................................................................. $ (120.5) $
Adjustment Required to Reconcile Net Income (Loss) to Net Cash Provided by
Operations:

409.9

531.1

Equity in Net Income (Loss) of Subsidiaries ...............................................................
Cash Dividends from Subsidiaries...............................................................................
Net Realized Investment (Gains) Losses .....................................................................
Settlement Costs Related to Defined Benefit Pension Plan.........................................
Contribution to Defined Benefit Pension Plan.............................................................
Loss from Early Extinguishment of Debt ....................................................................
Decrease (Increase) in Value of Equity and Convertible Securities at Fair Value ......
Other, Net.....................................................................................................................
Net Cash Provided by Operating Activities...........................................................................
Investing Activities:

Capital Contributed to Subsidiaries...................................................................................
Capital Distribution from Subsidiaries..............................................................................
Proceeds from Sales, Calls and Maturities of Fixed Maturities ........................................
Proceeds from the Sales or Paydowns of Investments: .....................................................
Equity Securities .............................................................................................................
Purchases of Investments: .................................................................................................
Equity Securities .............................................................................................................
Net Sales (Purchases) of Short-term Investments .............................................................
Acquisition of Business.....................................................................................................
Net Cash Provided (Used) by Investing Activities ................................................................
Financing Activities:

Net Proceeds from Issuance of Long-term Debt ...............................................................
Repayments of Long-term Debt ........................................................................................
Proceeds from Issuance of Common Stock, Net of Transaction Costs.............................

Proceeds from Shares Issued under Employee Stock Purchase Plan ................................
Common Stock Repurchases.............................................................................................
Dividends and Dividend Equivalents Paid ........................................................................

Other..................................................................................................................................
Net Cash Provided (Used) by Financing Activities...............................................................
Increase (Decrease) in Cash...................................................................................................
Cash, Beginning of Year........................................................................................................
Cash, End of Year .................................................................................................................. $

106.0
170.3
(10.6)
—
—
—
(10.0)
(35.3)
99.9

(36.5)
—
181.3

(475.4)
216.2
(0.1)
64.1
—
—
(4.3)
52.2
262.6

(62.0)
—
2.0

(556.0)
239.0
(0.3)
—
(55.3)
5.8
(1.6)
9.8
172.5

(83.0)
85.0
12.7

28.5

2.2

15.3

(48.7)
411.3
(370.9)
165.0

—
(50.0)

—
5.4
(161.7)

(80.6)
3.7
(283.2)
(18.3)
46.0
27.7

(21.0)
(415.7)
—
(494.5)

395.6
—

—
4.4
(110.4)

(78.9)
5.4
216.1
(15.8)
61.8
46.0

(48.9)
(23.3)
—
(42.2)

49.9
(185.0)

127.5
1.6
—

(67.8)
2.4
(71.4)
58.9
2.9
61.8

See Accompanying Report of Independent Registered Public Accounting Firm.

KEMPER CORPORATION

FINANCIAL INFORMATION OF KEMPER CORPORATION
NOTES TO FINANCIAL INFORMATION
(Dollars in Millions)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial information of Kemper Corporation (“Kemper” or the “Parent Company”) should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K. Kemper’s subsidiaries are
accounted for using the equity method of accounting. Equity in net income (loss) of these subsidiaries is presented on the
Statements of Operations as Equity in Net Income (Loss) of Subsidiaries.

NOTE 2. GUARANTEES

On November 30, 2018 Kemper executed a guarantee to fully and unconditionally guarantee the payment and performance
obligations of the 5.0% Senior Notes due September 19, 2022 of Infinity Property and Casualty Corporation, a wholly owned
subsidiary of Kemper.

NOTE 3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Kemper received $189.0 million and $106.0 million of securities in non-cash settlement of dividends from subsidiaries in 2021
and 2020, respectively. Kemper made non-cash capital contributions of $103.3 million to subsidiaries in 2021. Kemper did not
make any non-cash capital contributions in 2020.

NOTE 4. LEASES

Kemper leases certain office space for its current and former corporate headquarters under non-cancelable operating leases.

The following table presents operating lease ROU assets and lease liabilities at December 31, 2021 and 2020.

DOLLARS IN MILLIONS
Operating Lease Right-of-Use Assets.................................................................................. $
Operating Lease Liabilities..................................................................................................

2021

2020

12.8
25.8

13.4
26.9

Supplemental cash flow information related to Kemper’s operating leases for the year-ended December 31, 2021 and
December 31, 2020 respectively are presented follows.

DOLLARS IN MILLIONS
Operating Cash Flows from Operating Leases (Fixed Payments)....................................... $
Operating Cash Flows from Operating Leases (Liability Reduction) .................................
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities..............

2021

2020

2.2
1.1

—

(2.1)
0.3

—

Significant judgments and assumptions for determining lease asset and liability as December 31, 2021 and December 31, 2020
respectively are presented below.

DOLLARS IN MILLIONS
Weighted-average Remaining Lease Term - Operating Leases ..........................................

Weighted-average Discount Rate - Operating Leases .........................................................

2021
11.9 years

4.0 %

2020
13.0 years

4.0 %

Kemper’s leases do not provide an implicit rate. Accordingly, Kemper uses its incremental borrowing rate based on the
information available at the commencement date in determining the present value of its lease payments.

KEMPER CORPORATION

FINANCIAL INFORMATION OF KEMPER CORPORATION
NOTES TO FINANCIAL INFORMATION
(Dollars in Millions)

NOTE 4. LEASES (Continued)

Future minimum operating lease payments at December 31, 2021 were:

DOLLARS IN MILLIONS
2022 ........................................................................................................................................................... $
2023 ...........................................................................................................................................................
2024 ...........................................................................................................................................................
2025 ...........................................................................................................................................................
2026 ...........................................................................................................................................................
2027 and Thereafter...................................................................................................................................
Total Future Payments............................................................................................................................... $
Less Discount ............................................................................................................................................
Present Value of Minimum Lease Payments............................................................................................. $

Operating
Leases

2.4
2.4
2.5
2.6
2.6
20.4
32.9
7.1
25.8

NOTE 5. DEBT

4.350% Senior Notes Due 2025

2.400% Senior Notes Due 2030

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KEMPER CORPORATION
REINSURANCE SCHEDULE
(Dollars in Millions)

SCHEDULE IV

Gross
Amount

Ceded to
Other
Companies

Assumed
from Other
Companies

Net
Amount

Percentage
of Amount
Assumed to
Net

Year Ended December 31, 2021
Life Insurance in Force......................................................... $ 20,287.7
Premiums:

Life Insurance................................................................... $
Accident and Health Insurance ........................................
Property and Liability Insurance ......................................

401.9
185.8
4,667.4
Total Premiums..................................................................... $ 5,255.1
Year Ended December 31, 2020
Life Insurance in Force......................................................... $ 19,706.2
Premiums:

386.0
195.5
4,071.1
Total Premiums..................................................................... $ 4,652.6
Year Ended December 31, 2019
Life Insurance in Force......................................................... $ 19,479.9
Premiums:

383.6
188.5
3,835.4
Total Premiums..................................................................... $ 4,407.5

372.3

0.9
0.3
34.9
36.1

387.7

1.1
1.6
28.5
31.2

411.6

1.2
1.7
24.5
27.4

144.5

$ 20,059.9

0.7 %

0.7
4.4
29.6
34.7

401.7
189.9
4,662.1
$ 5,253.7

0.2 %
2.3
0.6
0.7 %

152.3

$ 19,470.8

0.8 %

0.8
5.4
44.6
50.8

385.7
199.3
4,087.2
$ 4,672.2

0.2 %
2.7
1.1
1.1 %

162.8

$ 19,231.1

0.8 %

0.9
5.3
86.1
92.3

383.3
192.1
3,897.0
$ 4,472.4

0.2 %
2.8
2.2
2.1 %

See Accompanying Report of Independent Registered Public Accounting Firm.

Kemper Corporation Board of Directors

Joseph P. Lacher, Jr.
Chairman of the Board, President and
Chief Executive Officer
Kemper Corporation

Teresa A. Canida
Principal and Portfolio Manager
Cito Capital Group, LLC

Kathleen M. Cronin
Senior Managing Director,
General Counsel and
Corporate Secretary
CME Group Inc.

Lacy M. Johnson
Partner
Taft Stettinius & Hollister LLP

Stuart B. Parker
Retired President and
Chief Executive Officer
USAA

David P. Storch
Chairman of the Board
AAR Corp.

Robert J. Joyce
Lead Director,
Kemper Corporation
Retired Chairman and
Chief Executive Officer
Westfield Group

George N. Cochran
Retired Chairman
Global Financial Institutions Group
Macquarie Capital

Jason N. Gorevic
Chief Executive Officer
Teladoc Health, Inc.

Gerald Laderman
Executive Vice President and
Chief Financial Officer
United Airlines

Christopher B. Sarofim
Vice Chairman
Fayez Sarofim & Co.

Susan D. Whiting
Retired Vice Chairman
Nielsen Holdings plc
Director and Trustee

Kemper Corporation Senior Executives

Joseph P. Lacher, Jr.
President, Chief Executive
Officer and Chairman

Ismat Aziz
Executive Vice President
Chief Human Resources Officer
Chief Administrative Officer

John M. Boschelli
Executive Vice President
Chief Investment Officer

Charles T. Brooks
Executive Vice President
Operations and Systems

C. Thomas Evans, Jr.
Executive Vice President
Secretary and General Counsel

James J. McKinney
Executive Vice President
Chief Financial Officer

Duane A. Sanders
Executive Vice President
President,
Property & Casualty Division

Erich Sternberg
Executive Vice President
President,
Life & Health Division

Kemper Corporation Information

Stock Listing
Kemper Corporation is traded
on the New York Stock Exchange
under the symbol KMPR.

Common Stock Transfer Agent/Registrar
Please direct questions regarding stock registration,
change of address, change of name or transfer to:

Computershare Trust Company, N.A.
P.O. Box 505000
Louisville, KY 40233

877.282.1168 (in the United States)
computershare.com/investor

Independent Registered Public Accounting Firm
Deloitte & Touche LLP
111 South Wacker Drive
Chicago, IL 60606

2022 Annual Meeting
Wednesday, May 4, 2022
8:00 a.m. Central Daylight Time
200 East Randolph Street
80th Floor
Chicago, IL 60601

Investor Relations
Karen Guerra
Kemper Corporation
200 East Randolph Street
Suite 3300
Chicago, IL 60601

312.661.4930
investors@kemper.com

200 East Randolph Street, #3300
Chicago, IL 60601
312.661.4600
kemper.com