Kemper Annual Report 2023

Plain-text annual report

2023 Annual Report Kemper at a Glance The Kemper (NYSE: KMPR) family of companies is one of the nation’s leading specialized insurers. With approximately $13 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 Kemper Auto and Kemper Life brands. Kemper serves over 4.9 million policies, is represented by 23,700 agents and brokers, and has approximately 8,100 associates dedicated to meeting the ever-changing needs of its customers. Financial Highlights Earned Premiums Dollars in Millions $5,179 $5,213 Earnings Per Share Dollars Per Share Book Value Per Share Dollars Per Share Net Loss Adj. Consolidated Net Operating Loss1 BVPS Adj. BVPS1 $(0.74) $49.14 $33.99 $41.79 $39.08 $28.88 $25.39 $4,529 $(1.92) $(1.82) $(3.45) $(4.50) $(4.25) 2021 2022 2023 2021 2022 2023 2021 2022 2023 Return on Shareholders’ Equity Percentage Cash Flow From Operating Activities Dollars in Millions Return on Equity Return on Tangible Equity 1 $351 (3.6)% (5.0)% (10.0)% (10.7)% (14.4)% (15.9)% $(134) $(210) 2021 2022 2023 2021 2022 2023 1 Adjusted Consolidated Net Operating Loss Per Unrestricted Share, Book Value Per Share Excluding Net Unrealized Losses on Fixed Maturities and Changes in the Discount Rate on Future Life Policyholder Benefits and Goodwill, and Return on Tangible Shareholders’ Equity are non-GAAP measures of performance. Refer to the Investor Supplement for more information. A Message from Joe Lacher President, Chief Executive Officer and Chairman Kemper Corporation To Our Shareholders, In 2023, we remained steadfast in our commitment to empower growing specialty and underserved markets with affordable and easy-to-use solutions that make a meaningful difference in our customer’s lives. This long-term mission is achieved through the creation and cultivation of a set of systematic, sustainable competitive advantages, and has the resilience to guide us through both routine and challenging times. The past four years have been far from normal for the insurance industry, particularly in our focus areas—auto and low face amount life insurance. In particular, the last three years produced ﬁnancial results well below our long-term targets. While many of the drivers of these results were outside our control, I am disappointed in our inability to meet the challenges faster. We have had to navigate through a landscape marked by signiﬁcant upheaval, notably in personal auto insurance. At the onset of the pandemic, premium rates and loss inﬂation were largely in balance. In the early pandemic period, rate increases dropped to zero and total loss inﬂation was negative, driven by lower frequency from less driving. Then, we quickly shifted to a period where the balance between premium rates and inﬂation was disrupted with inﬂation vastly outpacing rate increases. As a result, proﬁtability was pressured, and signiﬁcant underwriting and non-rate actions were needed to offset that imbalance. We indicated that it would take time to restore balance, and by mid-2023 cumulative earned rate exceeded loss cost, generating three sequential quarters of underlying improvement during the year. By the end of 2023, our actions enabled the Specialty P&C business to achieve an underwriting proﬁt in the fourth quarter of 2023. Beyond restoring proﬁtability, our goals also included making signiﬁcant progress on the strategic initiatives we announced in November 2022, aimed at enhancing our operating model and increasing ﬁnancial ﬂexibility. We made signiﬁcant progress on key strategic initiatives, and exceeded the goals related to both the Bermuda optimization and the multi-year cost structure initiatives. These initiatives helped restore proﬁtability and strengthen our capital and liquidity positions. The reciprocal exchange project and the exit from the preferred home and auto business are on track. The preferred exit will release capital and increase the resources available to support our core specialty auto and life businesses. Kemper 2023 Annual Report | 1 By the end of 2023, our actions enabled the Specialty P&C business to achieve an underwriting proﬁt in the fourth quarter of 2023.” 2023 Results We generated a net loss of $272 million, or ($4.25) per share, compared to a net loss of $287 million, or ($4.50) per share in 2022. The adjusted consolidated net operating loss1 was $47 million, or ($0.74) per share, compared to an adjusted consolidated net operating loss1 of $116 million, or ($1.82) per share, in 2022. Although overall ﬁnancial results were below our long- term expectations, we met or exceeded the targets communicated for our strategic initiatives. • The Bermuda optimization project enabled approximately $330 million in dividends to the parent, exceeding our prior estimate of $250 million; this bolstered liquidity and strengthened our ecosystem. • Our expense reduction efforts exceeded our target of $150 million and we achieved that goal in the program’s ﬁrst year, well ahead of schedule. These savings will allow us to preserve our low-cost competitive advantages and set ourselves up for future growth and proﬁt margin improvements. 1 Non-GAAP ﬁnancial measure. All Non-GAAP ﬁnancial measures are denoted with footnote 1. See “Use of Non-GAAP Financial Measures” within the Investor Supplement for additional information. • We began writing business in our reciprocal structure in 2023; growth will initially be slow but is expected to ramp up over the next several years as we receive approval to expand into new states. • We made substantial progress on the exit of the Preferred P&C business, freeing up approximately $45 million of capital in 2023, with an additional $130 million expected in 2024 and another $100 million in 2025. This capital will be redeployed into our core businesses and initiatives that meet or exceed our return targets. Our insurance companies are well capitalized and have signiﬁcant sources of liquidity. At the end of 2023, we had $1.1 billion of holding company liquidity. This ensures our ability to pay holding company dividends and interest payments and support our operating subsidiaries as needed. We made signiﬁcant progress on key strategic initiatives, and exceeded the goals related to both the Bermuda optimization and the multi-year cost structure initiatives.” 2 | Kemper 2023 Annual Report Business Performance Our top priority for the Specialty Auto segment was to restore the business to proﬁtability. We closed 2023 with an underlying combined ratio of 98.2%, an improvement of 2.3 points sequentially, and 9.6 points year-over-year. This was the result of relentless efforts to execute proﬁt improvement actions. Severity stabilized yet remained elevated—as it did for the industry—throughout 2023, and incremental earned rate continued to increase. Most of the improvement was driven by private passenger auto, our most challenged line. Our Commercial Vehicle business remains a source of strength, and produced an underlying combined ratio of 93% at year-end; we remain conﬁdent about our ability to generate long-term value in this area. Related to production, policies in force declined signiﬁcantly as a result of the restrictive new business underwriting actions we took to restore proﬁtability. We continued to observe hard market conditions, especially in California— policies renewed with higher premium rates and retention We have well-capitalized insurance businesses, a healthy liquidity balance, and the capital needed to navigate this operating environment and appropriately invest in our core capabilities.“ remained consistent. Against this backdrop, we remain optimistic about our ability to increase new business writings and return to policies-in-force growth. In our Life segment, despite the impact of continuing inﬂation on our target customer’s disposable income, consumer demand for our products remained consistent and persistency was stable. We also successfully adopted the new accounting standard on long-duration insurance contracts (LDTI), primarily impacting the annual actuarial assumption and reserve calculations. Kemper 2023 Annual Report | 3 Looking Forward As we move into 2024, we are optimistic about our prospects as we transition to the next phase of our journey, focused on a thoughtful balance between continued improvement in underwriting proﬁtability and new business generation. The inputs that drive further proﬁtability are trending positively, including earned rate in excess of a moderating loss trend. We will apply a balanced approach centered on three key priorities: 1) maintain our long-term target margins while increasing policies in force; 2) remain an active player in the marketplace with the ability to capture market share; and 3) continue to make strategic investments to enhance our systematic, sustainable competitive advantages. Together, these priorities will continue to enhance our ﬁnancial proﬁle and strengthen our organization. Our balance sheet will continue to provide long-term ﬁnancial stability. We have well-capitalized insurance businesses, a healthy liquidity balance, and the capital needed to navigate this operating environment and appropriately invest in our core capabilities. Kemper is a strong company with a team dedicated to delivering on our promises. These promises include providing attractive, long-term intrinsic growth to our shareholders, and value to all our stakeholders. Thank you for being part of the Kemper journey. Joseph P. Lacher, Jr. President, CEO and Chairman Kemper Corporation 4 | Kemper 2023 Annual Report Kemper and ESG Kemper’s ownership culture is the cornerstone of our sustainability approach. We have an obligation to our stakeholders to operate responsibly, with a focus on improving our communities through a continued emphasis on environmental, social and governance (ESG) factors. In doing so, we ensure we continue to be a responsible business partner to our customers, an attractive option to investors, and an employer of choice in a competitive labor market. ESG Governance and Areas of Focus The Governance Committee of Kemper’s Board of Directors oversees the ESG program to ensure proper governance and accountability. In 2023, Kemper refreshed our key areas of focus, prioritizing areas of greatest importance to our key stakeholders. Our approach to disclosure was informed by leading global standards, including the Sustainability Accounting Standards Board and Global Reporting Initiative. By embracing these standards, we emphasized our commitment to responsible corporate stewardship, shareholder value creation, and long- term stability. Below are our key areas of focus: ESG Governance Structure BOARD OF DIRECTORS D OF DIREC RNANCE COMM GOVERNANCE COMMITTEE ESG STEERING COMMITTEE ESG PROGRAM MANAGEMENT OFFICE AND SUBJECT MATTER EXPERTS Kemper’s Key Areas of Focus for ESG ENVIRONMENTAL SOCIAL GOVERNANCE • Energy Efficiency and Waste Management • ESG Product Features • Human Capital Development • Governance and Ethics • Employee Engagement and Culture • Talent Management and • Climate Risk Management and Development Enterprise Risk Management • Health and Wellness • Diversity, Equity and Inclusion • Philanthropy and Community Support • Corporate Governance • Ethics and Compliance • Anti-Money Laundering • Human Rights • Health and Safety • Executive Compensation • Data Security and Privacy • Customer Experience Kemper 2023 Annual Report | 5 Environmental We are committed to responsible environmental management and conservation of resources. Our environmental programs are focused on reducing waste, managing energy consumption, and minimizing climate risk. This focus has delivered improvements in energy efficiency across our business footprint. Energy Efficiency and Waste Management Kemper is committed to mitigating climate change, conserving natural resources, and taking steps to reduce our overall carbon footprint. We understand our responsibility to the environment and have developed a multi-year environmental approach that represents our commitment to sustainability. Kemper’s environmental approach is structured to drive impactful change in addressing climate change, while aligning to our overall enterprise strategy. ESG Insurance Product Features Kemper’s environmental approach includes product and service offerings that promote sustainability throughout the supply chain, encompassing insurance products tailored for renewable energy, eco-friendly vehicles, and coverage against climate-related risks. Examples include Kemper Co- Pilot™ and discounts for going paperless. Climate Risk Management and Underwriting We understand the risks posed by climate change to our company, our stakeholders, and the insurance industry of which we are part. Kemper identiﬁes and models risks from covered perils to assess the total risk exposure. Kemper also manages its exposure to catastrophes and other natural disasters through a combination of geographical 6 | Kemper 2023 Annual Report 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. Social Kemper’s successes are driven by our most important asset, our employees. We are committed to equal pay and an inclusive, equitable work environment. The focus on sustainability across our businesses not only improves our own competitiveness and drives returns for shareholders, but also helps us attract, motivate, and retain the best people. Human Capital Development Employee Engagement Kemper utilizes a focused and thoughtful approach to positively impact the connection between our employees and the workplace. Our hybrid work environment prioritizes purposeful time in the office where engagement through collaboration and team meetings is optimized. Kemper’s ability to deliver on our commitments is dependent on our capacity to identify, attract, develop, and retain a robust pipeline of talent, capable of supporting the changing needs of our business. To achieve this goal, we focus on the following: • Talent Acquisition • Leadership, Learning and Development • Performance Management Diversity Equity and Inclusion (DEI) Creating a workplace environment that is diverse, equitable and inclusive is imperative to the success of our company. Cultivating a welcoming work environment that allows employees to thrive by being their authentic selves is part of our culture. Our ownership culture integrates well with our focus on creating a sense of belonging and provides our employees the opportunity to reach their full potential while contributing to the success of the company. Kemper Philanthropy Commitment to supporting philanthropic initiatives, causes and organizations is an integral part of the Kemper culture. Through outreach, employee volunteerism, and ﬁnancial support, we aim to make a meaningful difference in the lives of our customers, employees and the communities where we live and work. Governance At Kemper, we are committed to earning the trust and conﬁdence of our stakeholders, and a key means of achieving that goal is through good corporate governance. We ensure that strong governance, ethics and compliance practices are followed, thereby increasing shareholder value over the long term. Our Governance practices include areas such as (but not limited to) the following: • Corporate Governance • Ethics and Compliance • Responsible Investing • Health and Safety • Executive Compensation • Human Rights • Data Security and Privacy • Transparent Information and Fair Advice for Customers • Ongoing Review of Claims Handling Kemper 2023 Annual Report | 7 Building Stronger Communities Kemper is dedicated to supporting the development of resilient and thriving communities where our customers and employees live and work. We help build stronger communities by focusing our support on education, health and community development, through our owned programs, national partnerships, ﬁnancial donations and generous employee volunteerism. THE FOUNDATION In 2023, the total impact of our philanthropic efforts was $3.1 million. In collaboration with our philanthropic partner, The Kemper Foundation, we provided $2.4 million to local organizations through donations, grants and sponsorships. Our employees alone contributed over $84,000 to local charities through our matching gift program and dedicated nearly 3,000 hours to volunteering in their communities. 2023 Community Impact by the Numbers In 2023, the collective impact of our philanthropic efforts was $3.1 million and included: $1.1M in donations to our health partners $1.5M in donations to our education partners $377K in donations to community development organizations $95K in volunteer hour impact value in our communities Education In partnership with The Kemper Foundation, we provide ﬁnancial support to the next generation of talent and business leaders as well as to education programs that advance bilingual literacy in Hispanic and Latino children and families. Kemper Scholars Program The Kemper Scholars Program partners with 10 universities, including six Historically Black Colleges and Universities and Hispanic-Serving Institutions to deliver need-based scholarships, funding for on-campus organizations, and support for diversity, equity and inclusion academic 8 | Kemper 2023 Annual Report research. In 2023, the program awarded over $1.1 million in scholarships to diverse, promising college students, including faculty research grants. The program also partnered with Kemper corporate offices across the country to offer over 50 internships to Kemper Scholars. Read Conmigo Bilingual Educator Grant Program Since 2022, the Read Conmigo grant program has empowered bilingual educators and their Latino and Hispanic elementary students. The program helps teachers provide engaging and equitable learning experiences for their students by providing $3,000 grants to assist them with classroom resources, tools, materials and professional development. Grant recipients report measurable improvement in students’ bilingual literacy skills and classroom engagement, observed in both formal and informal assessments. (cid:53)(cid:72)(cid:68)(cid:71) (cid:38)(cid:82)(cid:81)(cid:80)(cid:76)(cid:74)(cid:82) THE FOUNDATION In 2023, the Read Conmigo grant program awarded a total of $300,000 to bilingual educators in the Dallas, Los Angeles and Miami areas. The program has provided over $600,000 in grants since 2022. Health Kemper provides funding for leading national organizations at the forefront of medical research, improving patient and caregiver outcomes, and advancing health and wellness education to make substantial progress on the nation’s most prevalent diseases. American Cancer Society Kemper is a proud supporter of the American Cancer Society and their work to improve the lives of people with cancer and their families through advocacy, research, and patient support. Kemper employees organized several fundraisers for mission-driven events in 2023, including Making Strides Against Breast Cancer, Men Wear Pink, and Relay for Life. They also gave their time to support Hope Lodge® communities, which offer a home away from home for people facing cancer and their caregivers when cancer treatment is far away. Additionally, Kemper was a sponsor of ACS’ Discovery Ball, Taste of Hope, and Walk & Roll, the longest running cancer fundraiser in Illinois. In 2023, our collective impact totaled approximately $500,000. In Jacksonville, FL Kemper employees raised money for essential type 1 diabetes research and advocacy by taking part in JDRF’s One Walk Jacksonville. JDRF Kemper partners with JDRF, the leading international organization advancing life-changing discoveries for type 1 diabetes (T1D). In 2023, through employee volunteerism and charitable contributions, we supported JDRF’s Spanish Care Kit program, a free resource offering support and information to more than 2,000 newly diagnosed Hispanic and Latino children, caregivers, and adults. Other programs we supported included the JDRF One Walk and T1 Detect, a screening and education awareness program that reached 1,100 healthcare professionals. In 2023, our collective impact totaled approximately $390,000. American Heart Association Kemper is proud to support the American Heart Association’s work to ﬁght heart disease and stroke, with the goal of saving and improving lives. In 2023, the Association’s Nation of Lifesavers initiative supported emergency cardiovascular care, including the distribution of CPR Anytime and Anywhere kits in at-risk communities. Our support helped the Go Red For Women movement improve women’s lives globally and raise awareness of women’s heart health. Employees at Kemper also rallied for heart health in 2023 by participating in National Wear Red Day to increase awareness of heart disease in women, organizing fundraisers for events like the Heart Walk and distributing heart-healthy meals during the holidays. Our collective impact in 2023 was nearly $120,000. Kemper 2023 Annual Report | 9 Community Development We partner with organizations that share our values in creating a better world for our employees, customers and our communities. We believe access to healthy food, affordable housing, and support for organizations that advocate for civil rights, and racial and economic justice, are crucial to building an equitable future. In 2023, Kemper supported Feeding America partner food banks in 11 cities across the U.S. Through charitable contributions totaling more than $100,000, we helped distribute 341,000 pounds of food and provided 383,000 meals. We also continued support for two key national civil rights organizations: the National Urban League and UnidosUS, by funding programs and services to advance equality and improve economic progress for Hispanics and Latinos, and African Americans. We supported initiatives such as UnidosUS’ Financial Empowerment Network and the HOME: Home Ownership Means Equity initiative, in addition to the National Urban League’s education programs that promote youth entrepreneurship and empowerment. Kemper Cares: Employee Volunteering and Giving At Kemper, we enable opportunities for our employees to use their skills and backgrounds to give back to the communities in which they live and work. Employees can take part in our 1:1 matching donation program, including 2:1 match days for initiatives like Giving Tuesday, and virtual and in-person volunteer opportunities for Kemper-sponsored community service events and those in which they have a personal interest. Thanks to the Kemper Cares program, committed philanthropy ambassadors, and our generous employees, we make a real impact on the communities we serve, whether through fundraising for a worthy cause or volunteering for a local charity. 3,000 Volunteer hours logged $156K Total giving (employee donations plus matches) 110 Company-sponsored community support events Kemper employees in Alpharetta, GA volunteered their time, energy and enthusiasm during a food drive for Meals by Grace, a local organization focused on relieving food insecurity. 10 | Kemper 2023 Annual Report 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, 2023 OR TRANSRR ITION 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 IL (Address of principal executive offiff ces) 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 u 5.875% Fixed-Rate Reset Junior Subor dinated Debenturt es due 2062 Trading Symbol(s) KMPR KMPB Name of each exchange on which registered NYSE 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 subju ect to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submu S-T during the preceding 12 months (or for such shorter period that the registrant was required to submu itted electronically everyr Interactive Data File required to be submu itted pursuant to Rule 405 of Regulation it 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 Smaller reporting company ☒ Accelerated filer ☐ Emerging growth company ☐ Non-accelerated filer ☐ ☐ 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 effeff ctiveness 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. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive offiff cers during the relevant recovery period pursuant to §240.10D-1(b). ☐ 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, 2023, the aggregate market value of the registrant’s common stock held by non-affiff liates of the registrant was $2.9 billion based on the closing sale price as reported on the New York Stock Exchange. Solely for purpos affiff liates. es of this calculation, all executive offiff cers and directors of the registrant are considered rr Registrant had 64,323,693 shares of common stock outstanding as of Februarr ry 5, 2024. DOCUMENTS INCORPORATRR ED BY REFERENCE Portions of the Proxy Statement for the 2024 Annual Meeting of Shareholders are incorporated by reference into Part III. Tabla e of Contents Caution Regarding Forward-Looking Statements.................................................................................................. Part I Item 1. Business .............................................................................................................................................. Item 1A. Risk Factors......................................................................................................................................... Item 1B. Unresolved Staffff Comments ............................................................................................................... Item 1C. Cybersecurity ...................................................................................................................................... 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. ementary Data................................................................................... Financial Statements and Supplu Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............. Item 9A. Controls and Procedurd es ..................................................................................................................... Item 9B. Other Information................................................................................................................................ Part III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Offiff cers 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 Summaryr Exhibit Index .......................................................................................................................................................... Power of Attorney .................................................................................................................................................. Signatures ............................................................................................................................................................... Financial Statement Schedules: 1 4 16 25 25 26 26 27 27 29 30 70 72 152 152 153 154 154 154 154 154 155 155 156 160 160 Schedule 1 - Investments Other than Investments in Related Parties................................................................ Schedule 2 - Parent Company Financial Statements ......................................................................................... Schedule 3 - Supplu ementary Insurance Information.......................................................................................... Schedule 4 - Reinsurance Schedule ................................................................................................................... SCH I-1 SCH II-2 SCH III-1 SCH IV-1 Caution Regarding Forward-Looking Statements This 2023 Annual Report on Form 10-K (the “2023 Annual Report”), including, but not limited to, the accompanying consolidated financial statements of Kemper Corporation (“Kemper” or the “Registrant”) and its subsu idiaries (individuad lly and collectively referred to herein as the “Company”) as well as a variable interest entity (“VIE”) in which the Company is considered the primary beneficiaryrr 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. r Forward-looking statements give expectations or forecasts of future events. The reader can identifyff 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),” “forff ecast(s),” “projeo ct(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 effoff rts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results. these statements by the fact 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 2023 Annual Report. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance, and actuat in the forward-looking statements. Forward-looking statements can be affeff cted 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. l results could differ materially from those expressed or implied In addition to the factors discussed below under Item 1A., “Risk Factors,” in this 2023 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 regulatoryr environment in which Kemper and its subsu idiaries 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 lifeff ses; the proactive use of death verification databaa insurance policies and Adverse outcomes in litigation or other legal or regulatoryrr proceedings involving Kemper or its subsu idiaries or affiff liates or related to its business practices or business practices in the insurance industry;r 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 regulatoryr approval of insurance rates, policy forms, insurance products, license applications, business withdrawals, dividends from insurance subsu idiaries, acquisitions of businesses or strategic initiatives and other matters within the purview of insurance regulators; Increased costs and initiatives required to address new legal and regulatoryr impacts arising from developments related to cybersecurity, privacy and data governance, including, without limitation, cyber incidents that have occurred or could occur; requirements; liabilities, costs and other 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 and terrorist attacks or other man-made events; The frequency and severity of insurance claims (including those associated with catastrophe losses and pandemics); The interest rate environment, including proposed rate changes by the U.S. Federal Reserve, which may cause material fluctuations in our life policyholder benefit reserves; Changes in facts and circumstances affeff cting assumptions used in determining loss and loss adjud stment expenses (“LAE”) reserves, including, but not limited to, the frequency and severity of insurance claims, changes in claims 1 handling procedurd es and closure patterns, development patterns and the impacts of technological and other environmental conditions; The impact of inflation on insurance claims, including, but not limited to, the effeff cts on material costs, personal injun ry claims of increasing medical costs and the severity of claims resulting from a catastrophe; The effeff cts on property claims attributed to supplu damaged structurt es, including labor a y chain disrupt r ion and scarcity of resources availabla e to rebuild 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 effeff cts of legal system abuse and 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; Orders, interpretations or other actions by regulators that impact the reporting, adjud stment and payment of claims; Changes in the pricing or availabia lity of reinsurance, or in the financial condition of reinsurers and amounts recoverabla e therefroff m; • • • • • • Factors related to the Company’s ability to compete • • • • • • • • • Changes in the ratings of Kemper and/or its insurance company subsu idiaries 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, the establa ishment and operation of the Kemper Reciprocal Exchange, 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 producd ts and services; Diffiff culties 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 subsu tantial numbers of employees utilize work from home arrangements; The ability of the Company and its third-party service providers to maintain the availabia lity and required performance of critical systems and manage technology initiatives cost-effectively to address insurance industryr developments and regulatoryrr requirements; Heightened competition, including, with respect to pricing, consolidations of existing competitors or entryrr 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, divestitures and/or strategic initiatives 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 successfulff operational changes; formulation and execution of the Company’s plan with regard to corporate strategy and significant Increase in competition as a result of new competitors to the property and casualty insurance industryrr or existence of competitors that receive subsu tantial infusion of capital or access to third-party capia tal; Factors related to the business environment in which Kemper and its subsu idiaries operate • • • • • Changes in general economic conditions, including those related to, without limitation, performance of financial markets, interest rates, inflation, unemployment rates, significant global catastrophes and/or pandemics, and fluctuating values of particular investments held by the Company; Absolute and relative performance of investments held by the Company; Changes in insurance industryrr trends and significant industryr developments; Changes in consumer trends, including changes in number of miles driven by automobile insurance policyholders, and significff ant consumer or product developments; Changes in capital requirements, including the calculations thereof, used by regulators and rating agencies; 2 • • • • • accounting or tax changes that may affeff ct the Company’s earnings, the cost of,ff or demand for, the Regulatory,rr Company’s products or services or afteff The impact of required participation in state windpools and joint underwriting associations, residual market assessments and assessments for insurance industryr r-tax returns from the Company’s investments; insolvencies; 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 industryr experience; Increased costs and risks related to cybersecurity that could materially affeff ct the Company’s operations including, but not limited to, data breaches, cyber attacks, virus or malware attacks, or other infiltrations or incidents affeff cting system integrity, availabia lity 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 timetabla e or that future events or developments will not cause such statements to be inaccurate. Kemper assumes no obligation to correct or update any forward-looking statements publicly for any changes in events or developments or in the Company’s expectations or results subsu equent to the date of this 2023 Annual Report. Kemper advises the reader, however, to consult any further disclosures Kemper makes on related subju ects in its filings with the SEC. 3 Item 1. Business. PART I Kemper is a diversifieff d insurance holding company, with subsu idiaries that provide automobile, life, 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 reasonabla y practicable afteff r 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 $12.7 billion in assets, Kemper is improving the world of insurance by providing affoff families and businesses through its Kemper Auto and Kemper Life brands. Kemper serves over 4.9 million policies, is represented by more than 23,700 agents and brokers, and has approximately 8,100 associates dedicated to meeting the ever- changing needs of its customers. rdable and easy-to-use personalized solutions to individuals, The Company is engaged, through its subsu idiaries, in the property and casualty insurance and lifeff Company conducts its operations through two operating segments: Specialty Property & Casualty Insurance and Life Insurance. The Company conducts its operations solely in the United States. insurance businesses. The Kemper’s subsu idiaries employ approximately 8,100 associates suppor ting their operations, of which approximately 2,900 are employed in the Specialty Property & Casualty Insurance Segment, approximately 3,000 are employed in the Life Insurance segment and the remainder are employed in various corporate and other functions. u General Property and Casualty Insurance Business The Company’s property & casualty insurance business operations are conducted primarily through the Specialty Property & Casualty Insurance segment. The Specialty Property & Casualty Insurance segment distributes these products primarily through independent agents and brokers who are paid commissions for their services. In addition, the Life Insurance segment’s career agents also sell contents coverage for personal property to its customers against loss resulting from fire, lighting and other causes. Collectively, these segments provide specialty automobile, fire/contents, and other types of property and casualty insurance to individuals and commercial automobile insurance, and general liability as an endorsement to commercial automobile, to businesses. In the third quarter of 2023, the Company announced that it will exit the Preferff and will actively reduce the business beginning in third quarter 2023, with all policies being non-renewed or canceled in accordance with applicable state regulations. As a result, the Company will no longer provide preferff homeowners insurance or other personal insurance. The results of this business, previously reported as a reportabla e segment, are now reflected as Non-Core Operations and presented as a reconciling item from Net Loss to Adjud sted Consolidated Net Operating Loss. Prior periods have been recast to reflect the change in calculation of Adjud sted Consolidated Operating Net Loss. red Property and Casualty Insurance business red automobile, 4 Net Written Premiums for the Property and Casualty Business were as follows: DOLLARS IN MILLIONS Business Segments: II Specialty Property & Casualty Insurance Segment: 2023 2022 2021 Specialty Personal Automobile Insurance ......................................................... $ Commercial Automobile Insurance ................................................................... 2,677.5 627.9 $ $ 3,305.1 629.3 3,587.2 470.1 Life Insurance Segment: Fire/Contents Protection ..................................................................................... 45.3 50.0 61.6 Total Segment Net Written Premiums.......................................................................... 3,350.7 3,984.4 4,118.9 Non-Core Operations.................................................................................................... 435.5 527.1 642.0 Total Property and Casualty Net Written Premiums .................................................... $ 3,786.2 $ 4,511.5 $ 4,760.9 Property insurance indemnifieff s an insured with an interest in physical property for loss of,ff or damage to, such property. Casualty insurance primarily covers liability for damage to property of,ff or injun ry 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 31 states under the Kemper Auto brand. As shown in the following tabla e, three states provided 88% of the segment’s premium revenues in 2023. State Califorff nia .................................................................................................................................................................. Florida ...................................................................................................................................................................... Texas ........................................................................................................................................................................ Percentage of Total Premiums 53 % 20 % 15 % The Specialty Property & Casualty Insurance segment provides personal automobile insurance to consumers who have had difficulty obtaining standard or preferff payment history.r The segment also provides commercial automobile coverage to targeted markets and industries, with a focus on contractors, short-haul delivery, and sales/services that is closely aligned to personal automobile insurance from both a footprt red risk insurance, usually because of their driving records, claims experience or premium int and distribution perspective. The segment also meets the insurance needs of other specialty automobile markets such as urbar n and Hispanic consumers. The segment’s insurance products accounted for 80%, 78% and 76% of the Company’s consolidated insurance premiums in 2023, 2022 and 2021, respectively. The segment’s insurance products are marketed through approximately 16,800 independent agents and brokers. In the third quarter of 2023 the Company establa ished Kemper Reciprocal (the “Reciprocal Exchange” or “Exchange”), an Illinois-domiciled reciprocal insurance exchange. The Exchange principally writes specialty automobile policies sold to subsu cribers of the Exchange. Net written premiums and net earned premiums reported through the Exchange were $0.6 million and $0.1 million, respectively, for the year ended December 31, 2023. The Exchange is operated by a management company owned by Kemper that acts as the attorney-in-fact (“AIF”). The AIF receives a management fee for the services provided to the Reciprocal Exchange. The management fee revenues are based upon all premiums written or assumed by the Exchange. The AIF determines the management fee rate to be paid by the Exchange. This rate cannot exceed 30% of the Exchange’s gross written and assumed premiums. 5 Property and Casualty Loss and Loss Adjud stment 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 at December 31, 2023 and 2022 were: DOLLARS IN MILLIONS Business Segments: II Specialty Property & Casualty Insurance: 2023 2022 Personal Automobile Insurance ......................................................................................................... $ 1,711.9 Commercial Automobile Insurance ................................................................................................... 596.8 $ 1,875.8 445.3 Life Insurance: Fire/Contents Protection..................................................................................................................... 2.9 Total Segment Property and Casualty Insurance Reserves ....................................................................... 2,311.6 Non-Core Operations ................................................................................................................................ 356.4 Unallocated Reserves ................................................................................................................................ 12.5 Total Property and Casualty Insurance Reserves ...................................................................................... $ 2,680.5 2.3 2,323.4 419.1 14.4 $ 2,756.9 In estimating the Company’s Property and Casualty Insurance Reserves, the Company’s actuat judgment and must consider, and are influenced by, many variables that are difficult to quantify.ff Accordingly, the process of estimating and establa ishing 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 Adjud stment Expenses” 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. ries exercise profesff sional 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 have been and in the future 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, “Propertyy andd Casu lal yty Insurance Reserves,” to the Consolidated Financial Statements for information about incurred and paid claims development for the 2019-2022 accident years as of December 31, 2023, net of reinsurance and indemnificff ation, 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, 2023. See Note 6, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for a ar reconciliation of the three most recent annual periods setting forth the Company’s Property and Casualty Insurance a tabul 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 adjud stments 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. Specificff types of catastrophic events are more likely to occur at 6 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 diversificff ation, restrictions on the amount and location of new business production in such regions, modifications of,ff and/or limitations to coverages and deducd tibles for certain perils in such regions and reinsurance. The Company has adopted the industry-r wide catastrophe classifications of storms and other events promulgated by Insurance Services Offiff ce, 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 affeff cts a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry.r The discussions throughout this 2023 Annual Report utilize ISO’s definition of catastrophes. The process of estimating and establa ishing 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 “Catastrott pho and/or// Financial Statements for a discussion of the factors that influence the process of estimating and establa ishing reserves for catastrophes. finaii ncial conditidd on” for a discussion of catastrophe risk. See Note 25, “Catastrophe Reinsurance,” to the Consolidated ly affeff ct the Company’n s’ results of operations,s liquidii e losses couldll materiali lyll and adverserr tyii Reinsurance The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversificff ation, restrictions on the amount and location of new business production in such regions, modifications of,ff and/or limitations to coverages and deducd tibles for certain perils in such regions and reinsurance. To limit its exposure to catastrophic events, the Company maintains a catastrophe reinsurance program for its property and casualty insurance companies. Coverage for the catastrophe reinsurance program is provided in various layers through multiple excess of loss reinsurance contracts. The Company’s insurance subsu idiaries 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 2024 catastrophe reinsurance program covering the property and casualty insurance companies is provided by a combination of the annual and multi-year excess of loss reinsurance contracts. Multi-year Excess of Loss Reinsurance Contract The 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. Under the 2022 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 2022 Reinsurance Contract provides coverage for 31.67% of losses on individual catastrophes of $200 million in excess of $50 million in 2024. Annual Excess of Loss Reinsurance Contract The 2024 Annual Excess of Loss Contracts provide coverage for the annual period of January 1, 2024 through December 31, 2024. The 2024 Annual Excess of Loss Contracts provide coverage in two layers for losses on individual catastrophes of $190 million in excess of $50 million. The 2024 Annual Excess of Loss Contract provides 53.33% coverage on the first layer of losses on individual catastrophes of $100 million in excess of $50 million. The second layer provides 63.33% coverage on the losses on individual catastrophes of $90 million in excess of $150 million. Reinstatement of Excess of Loss Reinsurance Contracts 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 must pay a reinstatement premium to the reinsurers to reinstate the full amount of the limit availabla e under such layer. For each amount reinstated the Company shall pay additional premiums equal to the percentage of the reinsurer's loss limit for the excess layer exhausted for the loss occurrence multiplied by 100% of the reinsurance premium paid or payabla e for the excess layer for the term of the contract (50% of the reinsurance premium paid for $100 million excess of $150 million of the 2022 Reinsurance Contract). 7 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 certifieff d events, as designated by the federal government, is from the Terrorist Risk Insurance Act. The coverage for non-certifieff d events is availabla e in the catastrophe reinsurance program for property and casualty insurance companies. However, certain perils, such as biological, chemical, nuclear pollution or contamination, are excluded from the reinsurance coverage for non-certifieff d events. Under the various reinsurance arrangements, Kemper’s property and casualty insurance companies are indemnifieff d 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 liabia lity 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 25, “Catastrophe Reinsurance,” and Note 26, “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 afteff in premium refunds. The Company derives a significant portion of its earned premiums in two such states, Califorff nia and Florida. See MD&A under the caption “Specialty Property & Casualty Insurance”. r-tax return on underwriting profitff allowed for an insurer and may impact the price charged for premiums or result Competition Based on the most recent annual data published by A.M. Best, as of the end of 2022, there were 1,110 property and casualty insurance groups in the United States. Kemper’s property and casualty group 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 2022. Among all personal lines automobile insurance writers, Kemper’s property and casualty group was the 12th largest writer as measured by net written premiums in 2022. Rankings by net admitted assets, net premiums written and capia tal and surplus were: Measurement Net Admitted Assets .............................................................................................................................. Net Written Premiums ........................................................................................................................... Capia tal and Surplus................................................................................................................................ Ordinal Percentile Rank Rank 49 32 69 96 % 97 94 s estimated net premiums written were $782.3 billion, of which In 2022, the U.S. property and casualty insurance industry’r nearly 81% 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’rr s 2022 premium volume. The property and casualty insurance industryrr is highly competitive, particularly with respect to personal automobile insurance. Kemper’s property and casualty insurance companies compete on the basis of,ff among other measures, (i) using suitabla e pricing segmentation, (ii) maintaining underwriting discipline, (iii) settling claims timely and effiff ciently, (iv) offeff 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 industrytt liii tyii and withii competitivtt cult to grow profitff abi iott ns of investors.” ring products in in expexx ctattt e, makingii is highi i it diffi ly tt 8 General Life Insurance Business The Company’s life & health insurance business operations are conducted primarily through the Life Insurance segment. The Life Insurance segment distributes its products through a network of employee, or “career” agents. These career agents are paid commissions for their services. Earned premiums from the life insurance segment accounted for 7%, of the Company’s consolidated insurance premiums earned in 2023 and 2022, respectively, and 6% of the Company’s insurance premium earned in 2021. The Life Insurance segment, primarily based in St. Louis, Missouri, focuses on providing individual lifeff and suppl accident and health insurance products to customers of modest incomes who desire basic protection for themselves and their families. Their leading product is individual lifeff red on a limited or red primarily on a non- recurring pay basis, term insurance and guaranteed issue insurance. Individual life insurance is offeff participating, guaranteed-cost basis. Face amounts of these policies are lower than those of policies typically sold to higher income customers by other companies in the lifeff with an average face value of $6,308. insurance, including permanent insurance that can be offeff insurance industry.r Premiums average approximately $28 per policy per month emental u As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts have been recast to reflect application of the new guidance. See Note 2, “Summary of Accounting Policies and Accounting Changes” to the Consolidated Financial Statements for additional information. DOLLARS IN MILLIONS II Life Insurance Segment: 2023 2022 2021 Life Insurance ..................................................................................................... $ Accident and Health Insurance1.......................................................................... 517.1 Total Earned Premiums ................................................................................................ $ 1 The Company sold Reserve National on December 1, 2022. Reserve National was based in Oklahoma City, Oklahoma, and was licensed in 49 states and the District of Columbia. The Company specialized in the sale of supplu ement, fixed hospital indemnity, home health care, specified disease, and accident-only plans. For further discussion of the Reserve National Disposition, see Note 4, “Dispositions,” to the Consolidated Financial Statements. emental accident & health insurance products such as: Medicare Supplu 327.2 189.9 352.8 168.2 319.2 23.1 521.0 342.3 $ $ $ $ The Life Insurance segment employs nearly 2,300 career agents, operating 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. These career agents also distribute and/or service contents coverage for personal property providing coverage against loss resulting from fire, lightning, and other causes. As shown in the following tabla e, five states provided 69% of the premium revenues in this segment in 2023. State Texas .......................................................................................................................................................................... Louisiana .................................................................................................................................................................... Alabama....................................................................................................................................................................... Florida ........................................................................................................................................................................ Georgia ........................................................................................................................................................................ Percentage of Total Premiums 30 % 15 11 7 6 9 Life Insurance Reserves The Company’s Life Insurance Reserves are reported using the Company’s estimate of its liabia lity for future policyholder benefits. Life Insurance Reserves by business segment at December 31, 2023 and 2022 were: II DOLLARS IN MILLIONS Business Segments: Life Insurance: 2023 2022 Life Insurance................................................................................................................................... $ 3,417.7 4.7 Accident & Health Insurance ........................................................................................................... Total Life Insurance Reserves.................................................................................................................... $ 3,422.4 $ 3,271.9 4.3 $ 3,276.2 es, and ries use a variety of generally accepted actuarial methodologies, in e assumptions. These assumptions are Significant assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapsa discount rates (both accretion and current). Kemper groups together policies with similar types of business for its cohorts, which typically vary by issue year. The Company’s actuat accordance with Actuarial Standards of Practice, in determining the mortality and lapsa based on judgments that consider the Company’s historical experience, industryrr data, and other relevant factors. The Company reviews and updates its estimate of cash flows expected over the lifetime of a group of contracts using actual historical experience quarterly and current future cash flow assumptions at least annually to calculate its revised net premium ratio. The revised net premium ratios are then used to calculate an updated liabia lity for future policyholder benefits for the current reporting period, discounted at the original contract issuance discount rate. The Company has elected to use expense assumptions that are locked in at contract inception and are not subsu equently reviewed or updated. Resulting changes in the liabia lity due to differences in actual versus expected experience, changes in current cash flow assumptions, and prefundi ng and payout of benefits compared to the carrying amount of the liability as of that same date are recorded as a separate component of benefit expense in the Consolidated Statements of Loss. The current discount rate assumption is an equivalent spot rate curve of annually compounded rates at monthly increments that is derived based on A-credit rated fixed-income instruments reflecting the duration characteristics of the liability. The discount rate assumption is updated quarterly and used to remeasure the liabia lity at the reporting date, with the resulting change reflected in Accumulated Other Comprehensive Loss on the Consolidated Balance Sheets. ff sional judgment and must In estimating the Company’s Life Insurance Reserves, the Company’s actuat consider, and are influenced by, many variables that are difficult to quantify.ff Accordingly, the process of estimating and establa ishing the Company’s Life Insurance Reserves is inherently uncertain. See MD&A, “Critical Accounting Estimates,” under the caption “Lifeff the Company’s actuat Insurance Reserves” for more details on the Company’s reserving process and the factors considered by ries in estimating the Company’s Life Insurance Reserves. ries exercise profesff Reinsurance Consistent with insurance industryrr practice, the Company’s Life insurance segment utilizes reinsurance arrangements to limit its maximum loss, provide greater diversificff ation 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.r The segment is also exposed to losses from catastrophes arising from insurance policies for contents coverage for personal property. The Life Insurance segment is a party to the FHCF and the Property & Casualty catastrophe excess of loss reinsurance contracts. Lapse Ratio The lapsa e 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 lapsa ed, 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 Insurance segment’s lapsa insurance was 5%, 6%, and 3% in 2023, 2022 and 2021 respectively. e ratio for individual lifeff The customer base served by the Life Insurance segment tends to have a higher incidence of lapsa e than other demographic segments of the population. Thus, to maintain or increase the level of its business, the Life Insurance segment must write a higher volume of new policies than competitors serving other demographic segments of the population. 10 Pricing insurance producd ts are based on assumptions with respect to mortality, morbidity, investment yields, Premiums for lifeff expenses, and lapsa es and are also affeff cted by state laws and regulations, as well as competition. Pricing assumptions are based on the experience of the Life Insurance segment, as well as the industryrr in general, depending on the factor being considered. The actuat assumptions used in pricing the product. l profitff or loss produced by a product will vary from the anticipated profitff l experience differs from the if the actuat Premiums for policies sold by the Life Insurance segment are set at levels designed to cover the relatively high cost of “in- home” servicing of such policies. As a result, the Life Insurance segment premiums have a higher expense load than the lifeff insurance industryr average. Competition Based on the most recent data published by A.M. Best, as of the end of 2022, there were 389 life and health insurance company groups in the United States. The Company’s Life Insurance segment ranked in the top 29% of life and health insurance company groups, as measured by net admitted assets, net premiums written and capia tal and surplus. Rankings by net admitted assets, net premiums written and capia tal and surplus were: Measurement Net Admitted Assets .............................................................................................................................. Net Written Premiums ........................................................................................................................... Capia tal and Surplus................................................................................................................................ Ordinal Percentile Rank Rank 96 107 112 75 % 72 71 Kemper’s lifeff and health insurance subsu idiaries generally compete by using appropriate pricing, offeff markets or geographies, controlling expenses, maintaining adequate ratings from A.M. Best and providing competitive services to agents and policyholders. ring products to selected 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 qualifieff d assets, including, but not limited to, municipal, state and federal government obligations, corporate bonds, real estate, preferff red and common stocks, investment partnerships, limited liabia lity investment companies and limited partnerships. In addition, the quality, nature, amount and concentration of the various types of investments held by Kemper’s insurance subsu idiaries affeff ct the amount of asset risk calculated by regulators and rating agencies in determining required capital. See “Regulation” immediately following this subsu ection and Item 1A., “Risk Factors,” under the caption “The Company’n s’ investmett skk that maya negat s and cause realizll ed e and unrealized losses.” nt income,e the change in fair value of equityii and convertibli ell securitieii ed to a varietytt of riskii impact net investmett nt portfolff is exposxx ivtt elyll ioll 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 Capia tal Resources” and “Critical Accounting Estimates,” in the MD&A, “Quantitative and Qualitative Disclosures about Market Risk,” in Item 7A and Note 10, “Investments,” Note 11, “Income from Investments,” Note 12, “Derivatives,” and Note 13, “Fair Value Measurements,” to the Consolidated Financial Statements. Overview of State Regulation Regulation Kemper’s insurance subsu idiaries are subju ect 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 affiff liates, payment of dividends, nature and amount of investments, solvency, reserve adequacy, statutt oryr accounting methods, risk management and corporate governance. In addition, insurance regulatoryr authorities perform periodic examinations of an insurer’s financial condition, market conduct activities and other affaff irs. Some of these matters are discussed in more detail below. 11 Approval of Policy Rates and Forms The majoa rity 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 subju ect its withdrawal to prior approval requirements, may restrict the ability of our insurance subsu idiaries to exit unprofitaff bla e markets. Financial Reports and Standards Insurance companies are required to report their financial condition and results of operations in accordance with statutt oryr accounting practices 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 statutt oryr financial statements, set minimum reserve and loss ratio requirements and establa ish standards for the types and amounts of investments. In addition, state laws and regulations require minimum capital and surplus levels and incorporate risk-based capia tal (“RBC”) standards developed by the NAIC. Similar reporting obligations and requirements are imposed under Bermuda law on Kemper Bermuda Ltd., Kemper’s offsff hore subsu idiary. 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 adjud sted capital to determine whether regulatoryr Kemper’s insurance subsu idiaries exceeded the minimum levels required under applicable RBC requirements. intervention is warranted. At December 31, 2023, the total amount of capital held by each of Guaranty Funds and Risk Pools Kemper’s insurance subsu idiaries 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 subsu idiaries are also required to participate in various involuntaryr pools or assigned risk pools, principally involving windstorms and high risk drivers. In most states, the involuntaryr pool participation of Kemper’s insurance subsu idiaries is determined in proportion to their voluntaryr writings of related lines of business in such states. Privacy and Cybersecurity Regulation and Oversight The Company is subju ect to numerous federal and state laws and state insurance regulations that impose significant requirements and standards for protecting personally identifiaff bla e information of insurance company policyholders, employees, and other individuals. Federal Regul e ation The federal Gramm-Leach-Bliley Act requires financial institutt information, to restrict use of such information and disclosure to non-affiff liated 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. In addition, SEC rules require disclosure regarding cybersecurity oversight and incidents. ions, including insurers, to protect the privacy of non-public State Laws and Regul e ations 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 statutt es 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 industryrr impose notificff ation requirements in the event of cybersecurity breaches affeff cting their residents. On the privacy front, the Califorff nia Consumer Privacy Act, as amended, by the Califorff nia Privacy Rights Act (“CPRA”), which went into effeff ct in January 2023, among other things, requires companies to provide privacy notices and 12 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 privacy laws. The Company anticipates a continuing focus on new regulatoryrr 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 subju ect to the insurance holding company acts of the states in which its insurance subsu idiaries are domiciled and, in some cases, additional states in which the insurance subsu idiary is deemed commercially domiciled. These laws and related regulations contain certain reporting requirements as well as restrictions on transactions between an insurer and its affiff liates. 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 capia tal structurt e, 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 affiff liates within the insurance holding company system, depending on the size and nature of the transactions. Some insurance holding company laws and regulations require prior regulatoryr approval or, in certain circumstances, prior notice of certain material intercompany transferff s of assets as well as certain transactions between insurance companies, their parent holding companies and affiff liates. Dividends As a holding company with no significant business operations of its own, Kemper relies on dividends from its insurance subsu idiaries to meet its obligations. Certain dividends and distributions by an insurance subsu idiary are subju ect to prior approval by the insurance regulator in which it is domiciled or commercially domiciled. See Item 1A., “Risk Factors,” under the capta ion, “The abilityii materiallyll rs and/or// make repuee ient dividei ndsdd received from its subsidiadd ries.” of Kemper to service its debt,tt to pay dividei ndsdd to itstt shareholdell rchases of itstt stoctt k maya be impacm ted by lack of timeii ly and/or// suffu icff Change in Controt l Requirementstt 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 subsu idiary is deemed commercially domiciled. These requirements may include the advance filing of specificff 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 subsu idiaries domiciled or deemed commercially domiciled in Alabama, Califorff nia, 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 subsu idiaries in those states. Thereforff e, acquisitions subju ect to the 10% threshold generally would require the prior approval of insurance regulators in each state in which the Company’s insurance subsu idiaries are domiciled or deemed commercially domiciled, including those in Alabama, while acquisitions subju ect 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 subsu idiaries are domiciled have enacted legislation that requires either the divesting and/or acquiring company to notifyff regulators of,ff and in some cases to receive regulatoryr approval for, a change in control. Many state statutt es also require pre-acquisition notificff ation to state insurance regulators of a change of control of an insurance company licensed in the state if specificff market concentration thresholds would be triggered by the acquisition. Such statutt es authorize the issuance of a cease and desist order with respect to the insurance company if certain conditions, such as undue requirements may deter, delay or prevent transactions market concentration, would result from the acquisition. These regulatoryr effeff cting control of Kemper or its insurance subsu idiaries, 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 subsu tantially 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 subsu idiaries. They also impose new reporting requirements on affiff liated transactions and divestiture of a controlling interest in an insurance subsu idiary. 13 Other Federal Government Regulation Dodd-Frank Wall Stret et Refoe rm and Consumer Protection Act and Othett r Financial Refoe rm Effoff rtstt rt to strengthen the regulation of the financial services market, the Dodd-Frank Wall Street Reform and As part of an effoff Consumer Protection Act (“Dodd-Frank Act”) was enacted in 2010. The Dodd-Frank Act also created the Federal Insurance Offiff ce (“FIO”) within the U.S. Department of the Treasury (“Treasury”rr provides advice to the Financial Stability Oversight Council (“FSOC”), represents the U.S. on international insurance matters, and studi es the current regulatoryrr system. The Dodd-Frank Act includes a number of financial reforms and regulations that may t affeff ct our business and financial reporting. However, there remains uncertainty regarding the future of the Dodd-Frank Act and how it may impact our business. ). The FIO monitors the insurance industry,rr Additional regulations or new requirements may emerge from activities of various regulatoryr entities, including the Federal Reserve Board, FIO, FSOC, NAIC and the International Association of Insurance Supeu rvisors (“IAIS”), that are evaluating solvency and capia tal standards for insurance company groups. The outcome of these actions is uncertain; however, these actions may result in an increase in the level of capia tal and liquidity required by insurance holding companies. Company Culture Human Capital Management Kemper proudly serves growing niche and underserved markets through appropriate and affoff solutions. Kemper’s strategic intent is focused on empowering each employee on our team to Act Like an Owner to deliver on our promises to our stakeholders. This concept describes one of the most important parts of executing on our purpos employees—and infuses our ownership culturt e in everytr hing we do. rdable insurance and financial e—our r Our culture enables everyone level, to take authority and accountability for their respective roles and responsibilities and strive towards high performance. We promote this through dynamic, diverse, and innovative team members who act like owners and are continually driven by intellectuat l curiosity, analytic supeu riority, and being world class operators. , at everyr r Diversirr ty,yy Equity and Inclusion Diversity, equity and inclusion (“DE&I”) are fundamental to the Company’s success. Kemper is committed to driving our DE&I effoff rts within our workforce, workplkk ace, and marketplt ace, as outlined below: • Workplace: Maintain an inclusive “Act Like an Owner” workplk ace culture where all employees can own their career while contributing to the success of the company • Workforff ce: Our workforce reaches its fullest potential by attracting, developing, and retaining diverse talent • Marketplace: Sustain a competitive advantage in the underserved markets we serve via strategic partnerships and community engagement. Compliance and Ethitt cs 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 everyr member of the Kemper community. Kemper maintains an open communication environment to all employees that featurt es multiple channels for reporting instances of fraud, theft,ff violence, and misconduct. Our compliance reporting protocol enhances our effoff rts to foster a culture of integrity and ethical behavior while facilitating corrective actions necessary to address identifieff d problems. In addition, Kemper encourages employees to reach out to their direct manager, another manager, the Kemper Corporate Responsibility Hotline, or Human Resources with any compliance or ethical misconduct questions or concerns. Emplm oyee Development Kemper’s long-term success is inextricably linked to our employees’ development and engagement. Kemper provides valuable opportunities for personal development and profesff internships and rotational development programs to leadership development. Individual growth and development are promoted through various programs and outlets, including the Own Your Career initiative. This program provides employees with the resources and tools necessary to continue to build momentumt sional challenge at all career stages, from early career programs including toward career success and development. Kemper’s commitment 14 rs individuals the opportunity for skill building, to Own Your Career is closely tied to our Act Like an Owner culture, and offeff t employees on their path forward. u talent development, and opportunities to connect with peers and managers to suppor 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 offeff key drivers of overall work satisfact ff recognition, collabor a functional and Human Resources leadership teams to understand employees’ emotional commitment to the most critical areas of employee engagement, further define and improve our culturt e, and address areas of opportunity to enhance the work experience. ation, communication, resources, culturt e, DE&I, and ethics. The feedbad ck is evaluated by our business, ion, including career growth and development, company leadership, pay and benefits, rs all team members the opportunity to provide feedbad ck on Total Rewardsdd Total rewards represent investments Kemper makes to recognize and reward employees for their contributions. Total rewards includes both benefits and compensation (base salary, short- and long-term incentives). Kemper is committed to providing a robust and market competitive total rewards package that enables us to attract and retain the talent we need to grow our company, and 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, financial and social well-being of our people by providing a wide range of benefits. These include, but are not limited to: coverage Health insurance including medical, dental, vision and prescription drugr Lifeff and disabia lity 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/Lkk ifeff Program (EAP) Tuition reimbursement Adoption assistance Employee discount programs Voluntaryr benefit programs Leave and time offff programs Flexible work arrangements based on function and role • • • • • • • • • • • • • t • Wellness resources, including diabetes, hypertension, weight management and pregnancy suppor • • Commuter benefits navigation Benefitsff u Future of Work Kemper’s top priority in responding to the COVID-19 pandemic was to ensure the health, safety, and well-being of our employees, agents, and customers. As the business landscapea responded by evolving our working models to stay competitive. Kemper’s Future of Work initiative was deployed in 2022 to focus on creating a framework for a multifaceted approach to work location. The approach is suppor models: Offiff ce-based, Hybrid, and Remote-based. This is designed to continue to attract and retain a high performing workforce, cultivate a culture that suppor continue to deliver on our promises to customers. ts teamwork and collaboration, remain highly adaptive to environmental changes, and has shifteff d following the pandemic, Kemper has proactively ted by three key work u u 15 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 specificff to the Company. In addition to those described below, the Company’s business, financial condition and results of operations could be materially affeff cted 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 2023 Annual Report, including the factors set forth under the capta ion “Caution Regarding Forward-Looking Statements”, and to consult any further disclosures Kemper makes on related subju ects in its filings with the SEC. Risks Relating to Estimating Property and Casualty Insurance Losses and Loss Adjud stment Expenses and Catastrophes Estimating losses and LAE for determining propertytt and casualtyll Company’n s’ resultstt of operations maya be materiali lyll insurance reserves is inherentlytt uncertain, and the impacm ted if the Company’n s’ insurance reserves are insuffiu cient. The Company establa ishes loss and LAE reserves to cover estimated liabia lities, 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 establa ished 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. landscapea and economic, technological, and other environmental conditions in which the Company These estimates can be inaccurate or may change over time due to many variables, including changes driven by the evolving legal and regulatoryr operates and the rising costs of insurance claims from increased litigation (in part as a result of proliferff ation of class-action suits and growth in third party litigation funding), increase in so-called "nuclear verdicts" leading to higher jury awards, broader definitions of liabia lity, other effeff cts of legal system abuse and societal trends referred to as social inflation. In recent periods, these estimates have been impacted by reserve developments related to Florida personal injun ry protection (“PIP”) coverage. See the risk factor below titled “Kemper has a signi and Florida,dd Company’s profitff ability.” fii cant concentration of peff e rsonal automobile insurance business in California or economic conditions in these states maya adverserr ive developmentstt latory,yy legal ly affeff ct the in the regue e and negat i The process of estimating property and casualty insurance reserves is complex and imprecise. The reserves establa ished 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, such as that relating to Florida PIP coverage, will likely 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. For example, 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 capta ion “Property and Casualty Insurance Reserves for Losses and Loss Adjud stment Expenses” 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 Companyn is unable to charger operations and finaii ncial conditdd iott n couldll be materiali competitivtt lyll and adverserr .dd ly affeff ctedtt e yet profitff abl tt ell rates to its customtt ers,rr the Company’n s’ busineii ss, results of 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 subsu idiaries in the future. Typically there is a time lag between when changes in frequency and severity are identifieff d 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 had a material impact on the Company’s operating results in recent periods and may impact operating results in future periods. If the Company overestimates the severity or frequency of claims and other 16 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. Catastrott pho conditdd iott n. e losses couldll matertt ially and adverserr ly affeff ct the Company’n s’ results of operations,s liquii iditydd and/or// finaii ncial Kemper’s property and casualty insurance subsu idiaries are subju ect to claims arising out of catastrophes that may have a significant effeff ct 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 cyber events, terrorist attacks, and hazardous material spills. The incidence, frequency and severity of catastrophes are inherently unpredictabla e and may be impacted by the uncertain effeff cts of climate change, which could cause increases in hurricanes, floods, wildfires, and other risks that could produce losses affeff cting our business. 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 affeff cted by the event and the severity of the event. In recent periods, the Company has experienced significant catastrophe losses relating to tropical storm activity as well as rain and hail events. The effeff cts of inflation could increase the severity of claims resulting from a catastrophe. For example, in recent periods, the effeff cts of inflation, including as a result of post-event damage surge, have increased catastrophe losses, and this could continue in the future. Furthermore, the Company could experience more than one severe catastrophic event in any given period. The property and casualty insurance subsu idiaries 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 or materially different than our actual results. The actuat l impact of one or more catastrophic events could adversely and materially differ from these projections. insurance subsu idiaries are particularly exposed to risks of catastrophic mortality, such as pandemics or other Kemper’s lifeff events that result in large numbers of deaths. For example, during the COVID-19 pandemic, the Company experienced increased mortality that had an adverse impact on our Life business. In addition, the occurrence of a pandemic or other catastrophes in a concentrated geographic area could have a severe disrupt operations. The likelihood and severity of such events cannot be predicted and are difficult to estimate. ive effeff ct on the Company’s workforce and business rr Changes in the availaii bilitii ytt and cost of catastrott pho couldll result in Kemper’s insurance subsidiadd ries retaining more riskii Company’n s’ resultstt of operations,s finaii ncial conditidd on and/or// liqui iditydd .yy e reinsurance and in the abilityii of reinsurers to meet theirii obligll atiott ns and couldll adverserr ly and materiali lyll affeff ct the Kemper’s property and casualty insurance subsu idiaries seek to reduce their exposure to catastrophe losses through the purchase of catastrophe reinsurance. Catastrophe reinsurance does not relieve these subsu idiaries of their direct liabia lity to their policyholders. As long as the reinsurers meet their obligations, the net liability for each subsu idiary is limited to the amount of risk it retains. While Kemper’s subsu idiaries’ 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 affeff ct the Company’s financial position, results of operations and liquidity. In addition, market conditions beyond the Company’s control determine the availabia lity and cost of the reinsurance protection that Kemper’s property and casualty insurance subsu idiaries may purchase. A decrease in the amount of reinsurance coverage that these subsu idiaries purchase generally should increase their risk of a more severe loss. If the amount of availabla e reinsurance ient reinsurance is reduced, the cost to obtain reinsurance may increase or Kemper’s subsu idiaries may be unabla e to obtain sufficff on acceptabla e terms, which could adversely affeff ct 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 subsidiadd ries can managea stratt ii operations,s finaii ncial conditdd iott n and/or// latory action and couldll adverserr liquidii teii d by law or regue tegie es maya be limi .yy tyii theiri catastrott pho ure throughgg underdd writing xx e expos lyll affeff ct the Company’n s’ results of ly and materiali Kemper’s property and casualty insurance subsu idiaries also manage their exposure to catastrophe losses through underwriting strategies such as reducing exposures in, or withdrawing from, catastrophe-prone areas, establa ishing underwriting guidelines, and setting appropriate rates, deducd tibles, exclusions and policy limits. The extent to which Kemper’s subsu idiaries can manage their exposure through these strategies may be limited by law or regulatoryr action. For example, laws and regulations may limit the rate or timing at which insurers may not 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 17 on an insurer’s market share determined on a state-wide basis. Accordingly, even though Kemper’s property and casualty insurance subsu idiaries 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 subsu idiaries 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 Estimating Life Insurance Reserves Estimating future policll yhc oldell results of operations maya be matertt r benefie tsii iallyll for determining lifei impacted if the Company’n s’ Lifei insurance reserves is inherentlytt uncertain, and the Company’n s’ Insurance Reserves are insuffiu cient. landscapea and economic, technological, and other environmental conditions in which the Company The estimates of future policyholder benefits are based on the Company’s assessment of the facts and circumstances known to it at the time and are estimating losses many years into the future. Significant assumption inputs to the calculation of the liabia lity for future policyholder benefits include mortality, lapsa es, and discount rates (both accretion and current). These estimates can be inaccurate or may change over time due to many variables, including changes driven by the evolving legal and regulatoryr operates. In recent periods, these estimates have been impacted by the effeff ct the COVID-19 pandemic and the related II governmental responses have had on certain of these variables. See the risk factor below titled “The impacm t of COVID- related economic conditions couldll materially affeff ct Kemper’s resultstt of operations, financial position and/or// liquidity.” The process of estimating lifeff inherently uncertain estimates and could prove to be inadequate. The estimates underlying future policyholder benefits must take into consideration many factors that are dependent on the outcome of future events including, but not limited to, the reporting and settlement of claims and policyholder behavior. Certain events may not occur until many years in the future so the impacts on the Company’s estimates of life 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 projected future policyholder benefits that are different than the previous projections and may have a material impact on the Company’s estimates. Increases in the estimates of future policyholder benefits 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 “Lifeff considered by the Company’s actuaries in estimating the Company’s Life Insurance Reserves. insurance reserves is complex and imprecise. The reserves establa ished by the Company are Insurance Reserves” for a discussion of the Company’s reserving process and the factors 19 and Risks Relating to Competition A downgrade in the ratings of Kemper or itstt Company.n insurance subsidiadd ries below A- couldll materiallyll and adverserr ly affeff ct the Third-party rating agencies assess the financial strength and rate the claims-paying ability of insurance companies based on criteria establa ished by the rating agencies. Third-party ratings are important competitive factors in the insurance industry.r 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 subsu idiaries 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 subsu idiaries, or developments in industryrr or general economic conditions. A downgrade by A.M. Best in the ratings of Kemper’s insurance subsu idiaries below A- could result in a subsu tantial loss of business if independent agents and brokers or policyholders move to other companies with higher claims-paying and financial strength ratings. Any subsu tantial loss of business could materially and adversely affeff ct the financial condition and results of operations of such subsu idiaries. 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-effect ively access the capital markets or may increase the cost to refinance existing debt. ff The insurance industrytt is highi ly competitivtt e, makingii i it diffi cult to grow profitaff bilityii and withii in expexx ctattt iott ns of investors. The Company’s insurance businesses face significant competition, and their ability to compete is affeff cted by a variety of issues relative to others in the industry,r innovation, financial strength and name recognition. Additionally, in recent years, various types of investors have increasingly sought to participate in the insurance industry.r Well-capitalized new entrants to the property and casualty insurance industry,r or existing competitors that receive subsu tantial infusions of capital or access to third-party capia tal, provide increasing competition, such as management effeff ctiveness, product pricing, service quality, ease of doing business, 18 which may adversely impact our business and profitaff bia lity. Competitive success is based on many factors, including, but not limited to, the following: • • • • • • • • • • • • • • • • • talent; 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 industryr 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, effiff ciently, and without incurring extra-contractuat 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; and Quality of services provided to, and ease of doing business with, independent agents, brokers, or policyholders. l liabia lity; The inability to compete effeff ctively in any of the Company’s insurance businesses could materially reduce the Company’s customer base and revenues and could materially and adversely affeff ct the future results and financial condition of the Company. See “Competition” in Item 1 of Part I for more information on the competitive rankings in the property and casualty insurance markets and the life insurance markets, respectively, in the United States. Risks Relating to Legal and Regulatory Environment Kemper’s insurance subsidiadd ries are subject to signi which they operate couldll result in increased operatingii ificff ant regue costs,tt lation, and the evolvill ngii reduced profitaff bilityii e legal and regue and limited growth. latory landscdd ape in Kemper’s insurance subsu idiaries operate under an extensive insurance regulatoryrr system. Current laws and regulations affeff ct 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, statutt oryr capia tal 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 affiff liates, climate change, and consumer privacy and data security. Pre-approval requirements ofteff n restrict or delay actions to implement premium rate changes for insurance policies, or to introducd e 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 inflation, may result in a pricing imbalance for the Company’s insurance products. Insurance regulators conduct periodic examinations of Kemper’s insurance subsu idiaries and can suspend or delay operations or licenses, require corrective actions, and impose penalties or other remedies availabla e for compliance failures. For a more detailed discussion of the regulations applicable to Kemper’s subsu idiaries and related emerging developments, see “Regulation” in Item 1. landscapea within which Kemper’s insurance subsu idiaries conduct their businesses is ofteff n These laws and regulations, and their application by regulators and courts, are subju ect to continuous interpretation and revision. The legal and regulatoryr unpredictabla e. As industryrr practices and regulatory,rr judicial, political, social and other conditions change, new issues may emerge. These changes and emerging issues could adversely affeff ct 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 increasing the likelihood of class-action suits and other legislative and judicial actions, accelerating the payment of claims, repealing or weakening tort reforms or otherwise adding to operational costs or adversely affeff cting the Company’s competitive advantages. Practices in the industryr or within the Company that were once considered approved, compliant and reasonabla e may suddenly be deemed unacceptabla e by virtuet is not possible for the Company to predict such shiftsff they may have on the Company and its operations. of a court or regulatory ruling or changes in regulatoryrr enforcement policies and practices. It in legal or regulatoryrr enforcement or to accurately estimate the impact 19 landscape experienced significant change is in connection with the mandated use of ses by life insurance companies. A majoa rity of states now have laws requiring insurers to proactively ses, including the Social Security Administration’s Death Master File (the “DMF”), in order to ascertain if an One area where the legal and regulatoryr death verification databaa use such databaa 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 submu 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 lifeff and remittance of such proceeds under these laws. The push to alter practices previously considered lawfulff 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 lifeff insurance records against the DMF and other databaa ses to determine if any of its insureds may be deceased. See Note 2, “Summary of Accounting Policies and Accounting Changes” to the Consolidated Financial Statements for further details. insurance companies with respect to the reporting itted a claim and the insurer was and appropriate In addition, there is increased legislative and regulatoryrr laws that expand the oversight and examination powers of insurance regulators beyond licensed insurance companies to include non-insurance affiff liates and their organizations as a whole, particularly with respect to enterprise risk. See the discussion of these matters under “Regulation” in Item 1. focus on cybersecurity and on amendments to state holding company These developments and significant changes in, or new interpretations of,ff existing laws and regulations could make it more expensive for Kemper’s insurance subsu idiaries to conduct and grow their businesses which could materially impact the Company’s operating results. Kemper has a signi developmll profitaff .yy bilityii ificff ant concentratiott n of peff ents in the regue latory,yy legal e rsonal automobileii or economic conditiodd insurance busineii ns in these stattt estt maya ss in Califorff niai and Florll ly affeff ct adverserr ida,dd ivtt e and negat the Company’n s’ e Califorff nia and Florida represented 71% of the Company’s total personal automobile insurance gross written premiums in 2023. Consequently, the dynamic nature of regulatory,rr revenues and profitff ability. For example, in Florida, recent court decisions were unfavff orable to the insurance industryrr Florida PIP coverage and have resulted in increased severity in PIP coverage and significant adverse loss and LAE reserve development in 2023. Significant legislative changes relating to Florida PIP coverage have recently become effeff ctive, but it is too early to determine the ultimate impact of these changes. Further, both Califorff nia and Florida have regulations that limit the afteff r-tax return on underwriting profitff allowed for an insurer. Changes in any of these conditions could negatively impact the Company's results of operations. legal, competitive and economic conditions in these states affeff cts Kemper’s relating to Legal and regue e materiallyll and adverserr latory proceedingii sgg are unpredictabl ell and couldll produce one or more unexpe ee tt ctedtt outcomes that couldll ly affeff ct the Company’n s’ finaii ncial results for anyn given period. inquiries and other legal proceedings arising Kemper and its subsu idiaries are from time to time involved in lawsuits, regulatoryr out of the ordinary course of their businesses. Some of these proceedings may involve matters particular to Kemper or one or more of its subsu idiaries, while others may pertain to industryr business practices. Some lawsuits may seek class action statust that, if granted, could expose the Company to potentially significant liability by virtuet of the size of the punitive classes. In addition, the Company’s insurance subsu idiaries are subju ect to litigation relating to claims handling practices in connection with otherwise routine claims, including actions that make allegations of bad faith and seek extra-contractuat l and legal issues and are subju ect to uncertainties and complexities. The outcomes of these matters ofteff n raise difficult factuat 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 subsu titute their subju ective views in place of facts and establa ished legal principles. Given the unpredictabia lity of the legal and regulatoryr 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 affeff ct the Company’s financial results for any given period. l damages. These landscapea For information about the Company’s pending legal proceedings, see Note 28, “Commitments and Contingencies,” to the Consolidated Financial Statements. 20 Changes in the availaii bilitii ytt of insurance coverage or in the abilityii Companyn being exposxx ificff ant losses. ed to signi of insurers to meet theirii obligll atiott ns couldll result in the Kemper maintains insurance coverage to limit its risk exposure to certain perils, including cybersecurity, errors and omissions, directors and offiff cers liability insurance, fiduciary, insurance company profesff coverages. The market for certain of these coverages has tightened over recent periods and the availabia lity of these coverages could be significantly reduced in the future. There is no guarantee that if coverage is availabla e it will be in an amount sufficient to cover the losses of one or more covered incidents or on terms that Kemper finds acceptabla e. 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. sional liability and other financial indemnity The Companyn couldll be adverserr ly affeff ctedtt by future changes in U.S. Federal or Bermudadd income taxaa laws. Changes to tax laws or interpretation of such laws could increase Kemper’s corporate tax and reduce earnings. It is possible that tax law could be changed through a technical corrections bill or with entirely new legislation or be interpreted by regulatoryr authorities in a manner different than the Company’s interpretation. It is difficult to predict whether there will be any tax law changes, guidance issued by tax authorities or other interpretations which would have a material adverse effeff ct on our business or financial condition, as the impact of proposals on our business can vary subsu tantially depending upon the specificff changes or further guidance made and how the changes or guidance are implemented by the taxing authorities. If our contrott the Companyn couldll be adverserr ed to ensure compliall nce withii .dd ly affeff ctedtt ls designi guideldd inll es,s policll ies and legal e and regue latory stantt dards are not effeff ctivtt e, Kemper’s business is highly dependent on its ability to engage on a real-time basis in a large number of insurance underwriting, claim processing and investment activities, and these are highly sophisticated, complicated and constantly evolving. These activities are frequently subju ect to internal guidelines and policies, as well as legal and regulatoryr standards. A control system, no matter how well designed and operated, can provide only reasonabla e assurance that the control system’s objectives will be met. If the Company’s controls are not effeff ctive (including with respect to the prevention or identificff ation of misconduct by employees or others with whom we do business), it could lead to financial loss, unanticipated risk exposure (including underwriting, credit and investment risk), errors in financial reporting, litigation (including actions seeking extra-contractuat l damages), regulatoryr proceedings or damage to our reputation. Risks Relating to Security of Personal Data, Availability of Critical Systems, and Technology Initiatives t againsii Failure to protectt Companyn couldll result in busineii ii r liabi litie i tational harm, and othett repuee ss interruptu iott n, legal s and expexx nses. e t cyber attatt ckskk or othett r exposxx ures that compromiseii and consultinll g fees,s regue includindd g personal data,tt held by the ss, atiott n, lost busineii latory penalties, litigii data,tt es, including marketing, policy origination, claims and payment processing, and competitive differentiation. The data has Kemper’s insurance subsu idiaries obtain, process and store large amounts of data, including personal data, for various business purpos r significant value and Kemper is regularly targeted by cyber attacks seeking to misappropriate the information. Cyber attacks featurt e increasing sophistication and frequency and include the use of viruses, ransomware, spyware and other malware and infiltration methods. In addition, the Company has exposure through equipment and system failure and as a result of the conduct of our employees and contractors (through inadvertent error, negligence or intentional misconduct). These exposures can create or increase the Company’s vulnerabia lity to the loss or misuse of its data. The Company uses an array of security measures, with policies and procedurd es designed to secure this information and the Company’s data systems. Notwithstanding these effoff security breaches or other exposures. Successfulff reputational damage, ransom demands, investigations and litigation. The Company has been and will continue to be exposed to damages, regulatoryrr penalties and other liabilities, reputational risk and significant increases in compliance and litigation costs as a result of these occurrences, which could have a material adverse impact on our financial condition and results of operations. rts, the Company’s data systems, have been breached or otherwise exposed in the past and remain vulnerabla e to future breaches or other exposures could result in data loss, business interruptu ion, Kemper’s busineii of our direii ct contrott l. ss operations rely on third parties, which are inherentlytt prone to technologyo and cybersecurityii riskii skk outsidedd Kemper relies on third parties to provide services that are essential to business operations, such as policy origination, claims processing, procurement, payments, back-office functions, and IT hosting. The software, systems and services provided by our third-party providers may not meet our expectations, contain errors or weaknesses, become compromised or experience breaches or outages. The Company’s ability to prevent or remediate such an occurrence is limited. A failure of such third-party 21 systems to perform effeff ctively, maintain information security, or provide uninterruptu ed service and access to those systems, could materially adversely affeff ct Kemper’s business. For example, the Company could be prevented from conducting business functions, including the timely payment and/or processing of claims, or the information of customers could be compromised. Any such failures could adversely impact the ability to serve existing customers and attract new business, and could create regulatoryrr and litigation exposure. We are subject to extensive cybersecurityii and privacyc regue federal authoritiett s. These policll findii adverserr indd g that the Companyn has breached these regue ly impact finaii ncial conditiodd n or resultstt of operations. ies and regue lation throughgg policll ies and requirements imposed by stattt ett and lations are complex,ee diffi lations couldll result in litigatiott n, fineii icff ultll to implement and sometimes contratt dictortt y.r A lyll s, and expexx nses that materiali Kemper operates under multiple cybersecurity and privacy regulations, imposed at both the state and federal level. While Kemper seeks to comply with each of those mandates, frequent and recent changes in the legal and regulatoryr environment create a difficulty in implementation, a lack of clarity and some requirements that may be overlapping or inconsistent. These difficulties increase the risk that the Company will be subju ect to regulatoryr proceedings, litigation, fines, and other adverse consequences that may have a material impact on the Company’s financial condition and results of operations. Cybersecurityii withii an adverserr impact finaii ncial conditdd iott n or results of operations. events,s busineii ss interruptu iott ns or othett xx r expos ures maya cause potentt tial deterioratiott n in Kemper’s repuee tation Kemper’s business depends on its reputation with agents and customers. The Company or its third party services providers may experience cybersecurity or business disrupt brand image. It may be difficult to control or effeff ctively manage negative publicity or regulatoryr consequences. Negative events and publicity or regulatoryr action could quickly and materially damage perceptions of Kemper and its business, which, in turn, could negatively impact the Company through loss of customers or agents, loss of business opportunities, employee retention or other difficulties. ion events beyond our control that could affeff ct our reputation or our corporate or rr Failure to maintaitt nii penalties and othett r costs.tt the availaii bilityii of critictt al systemtt s couldll result in busineii ss interruptu iott n, lost busineii ss, repuee tational harm, The Company’s business operations rely on the continuous availabia lity 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. Certain technology-based service providers provide a sizable portion of our IT infrastructurt e, platforms software and related IT services. From time to time these systems have been, and may again be, adversely affeff cted or disrupt ed by cyber attacks, other data breaches, natural and man-made catastrophes, human action or error 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, treasuryrr 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. r If Kemper is unablell to send or accept elect rott nic payments,tt our busineii ll ss and finaii ncial results couldll be adverserr ly affeff ctett d. 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 rules regulations and with the rules of the various payment networks. Failure to maintain compliance with laws and industryrr and regulations governing such transactions could result in additional costs and damages. For example, in the event of non- compliance with the Payment Card Industryr Data Security Standard, an information security framework for organizations that handle cardholder information for the maja or debit, credit, prepaid, and other payment card methods, Kemper’s insurance subsu idiaries could be prohibited from collecting premium payments from customers by way of such methods and be subju ect to significant fines. initiatt Technologyo and implement such initiatt ent coststt re developmll softo watt tives couldll present signi tives in a timeii that maya not be recoverable.ll ificff ant economic and competitivtt ly manner couldll result in the loss of busineii e challell nges to the Company.n Failure to complete ss and incurrence of internal use Data and analytics play an increasingly important role in the insurance industry.r 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 22 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 or system development projects may not deliver the benefits or perform as expected. If the Company does not effeff ctively and effiff ciently manage and upgrade our technology portfolff competitive services to, and conduct business with, new and existing customers in a cost effeff ctive manner and the Company’s ability to implement our strategic initiatives could be adversely impacted. io, or if the costs of doing so are higher than expected, the Company’s ability to provide Due to the highly-regulated nature of the financial services industry,r constraints in adapta ing 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 regulatoryr expected to be material. Due to the complexities involved, there can be no assurances that new system development and implementation projects will be successfulff , that the costs for such projects will not exceed estimates and that the incurred costs will be recoverabla e. 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. the Company also faces rising costs and competing time requirements as needed are Risks Relating to Investments The Company’n s’ investmett change in fair value of equityii and convertible securitiii es and cause realizll ed and unrealizeii d losses. ed to a varietytt of riskii skk that maya negat nt portfolff is exposxx ivtt elyll ioll e impact net investment income,e the The Company maintains a diversifieff d investment portfolff 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. io that is exposed to significant financial and capital market risks, The interest rate environment has a significant impact on the Company’s financial results and position. An increase in interest io, particularly fixed income rates or credit spreads generally reduces the carrying value of the Company’s investment portfolff securities, and limited liabia lity 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 that exhibit debt-like characteristics. A decline in interest rates would adversely affeff ct the Company’s investment income as it io’s average rate. In a declining interest rate environment, invests cash in new investments that may yield less than the portfolff 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. Kemper’s Life 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 portfolff 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 portfolff 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. io in equity securities, which generally have more volatile returns than io, including general economic conditions, industryr or io. For example, if the Company were to experience several significant catastrophic events over a relatively short period The nature and cash flow needs of the Company present certain liquidity risks that may impact the return of the investment portfolff 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 actuat l price that may be obtained in an orderly sales transaction. The Company has also benefited from certain tax laws related to its investment portfolff deductions and tax-exempt investment income. Changes in tax laws may have a detrimental effeff ct on the afteff Company’s investment portfolff and result in a decline in the value of the Company’s investment portfolff io. A reduction in income tax rates could also reduce the demand for tax-preferff enced securities io, including dividends received io of such securities. r-tax return of the 23 The Company’s entire investment portfolff to, inflation, regulatoryrr 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, and in such cases, more securities may require additional subju ectivity and management judgment. io is subju ect to broad risks inherent in the financial markets, including, but not limited Kemper and its insurance subsu idiaries are subju ect to various capia tal 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 subsu idiaries are also subju ect 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 capia tal for Kemper’s insurance subsu idiaries. Accordingly, a deterioration in the quality of the investments held by Kemper’s insurance subsu idiaries or an increase in the investment risk inherent in their investment portfolff increase capital requirements. See the risk factor below titled “The ability of Kemper to service its debt,t pay dividends to itstt fund targeted transactions maya be materially impacm ted by lack of timely and/or// shareholdell received from its subsidiaries.” These factors may inhibit the Company from shiftiff ng its investment mix to produce higher returns. The Company is also subju ect to concentration of investment risk to the extent that the portfolff any particular time, in specific asset types, classes, industries, sectors or collateral types, among other defining featurt es. te the negative effeff cts on the Developments in and the market’s perception of any of these concentrations may exacerbar Company’s investment portfolff io compared to other companies. io is heavily invested, at ient dividends rs and/or// ios could sufficu The determinatiott n of the fair values of the Company’n s’ investments and whethett is othett economic outcome. porm aryr are based on managea ment’s judgment and maya prove to be materiali r-than-temtt r a declinll e in the fair value of an investmett nt lyll diffei rent than the actual The Company holds a significant amount of assets without readily availabla e, 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 actuat l 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 portfolff other-than-temporary.r This evaluation is based on subju ective factors, assumptions and estimates and may be materially different than the actuat new information emerges or recognizing losses currently that may never materialize in the future in an orderly transaction with a willing market participant. l economic outcome, which may result in the Company recognizing additional losses in the future as io for factors that may indicate that a decline in the fair value of an investment is Risks Relating to Servicing Debt, Paying Dividends and/or Funding Targeted Transactions The abilityii materiallyll of Kemper to service its debt,tt pay dividendsdd to its shareholdell impacm ted by lack of timeii fund targetedtt ient dividei ndsdd received from its subsidiadd ries. rs and/or// ly and/or// suffu icff transactiott ns maya be As a holding company, Kemper depends on the dividend income that it receives from its subsu idiaries as a primaryrr source of funds to meet its payment obligations. Kemper’s insurance subsu idiaries are subju ect to regulatoryr restrictions under 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 affiff liated 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 statutt oryr capital and surplus levels for capital adequacy. Even though a dividend may be payabla e without regulatoryrr approval, an insurance subsu idiary may forgo paying a dividend to Kemper and retain the capia tal to maintain or improve ratings or to offsff et increases in required capia tal from increases in premium volume or investment risk. The inability of one or more of Kemper’s insurance subsu idiaries to pay sufficient dividends to Kemper may materially affeff ct 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, Divestitures, and/or other Strategic Initiatives The expexx ctedtt realizll ed to the extent anticipatedtt or withii in the anticipat edtt ii timeii frames. benefie tsii and synergies from mergers,rr acquisitiott ns,s divestitutt res, and/or// othett r stratt tegie c initiatives maya not be The Company routinely evaluates opportunities for transactions such as mergers, acquisitions, divestitures, and/or other strategic initiatives that would enhance its business and align with the Company’s strategic plans. Kemper’s ability to achieve 24 the anticipated financial benefits from transactions may not be realized due to any number of factors, including, but not limited to, integration or execution difficulties or failures that may result in subsu tantial disrupt ions, costs, or delays and adversely affeff ct the Company’s ability to compete, the loss of key agents/brokers, customers or employees, unexpected or underestimated liabia lities, increased costs, fees, expenses and charges related to transactions, or may be delayed by factors outside of the Company’s control. These adverse events could result in a decrease in the estimated fair value of goodwill or other intangible assets establa ished as a result of such transactions, triggering an impairment. In addition, the Company’s strategic initiatives, such as the establa ishment of Kemper Reciprocal, may not perform as expected or deliver the expected benefits to the Company. Failure to successfully and timely realize the anticipated benefits of these transactions or initiatives could have a negative impact on Kemper’s financial condition, profitff ability, and results from operations. r Risks Relating to General Economic and Market Factors Changes in the global ll finaii ncial conditiodd n. economy and capia taii l marketstt couldll adverserr ly impact the Company’n s’ resultstt of operations and Significant changes in the economic and capia tal market environment could adversely affeff ct 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 affeff ct the Company’s financial condition, liquidity, and results of operations: • • • • • • Volla iltilityity iin ddebbt andd eq iui yty ma krkets Changes in interest rates Increases in inflation Reducd ed availability of credit Economic downturt ns Increased unemployment and reduced consumer spending Stressed conditions, volatility and disrupt investment portfolff rr io and the Company’s ability to access the capia tal markets. ions in global capital markets or financial asset classes could adversely affeff ct our The Company’n s’ defee rred taxaa assets couldll become impaim reii d which wouldll adverserr operations and finaii ncial conditdd iott n. ly impacm t the Company’n s’ results of ient taxabla e income and character. If future events The realization of deferred tax assets depends on the recognition of sufficff differ from our current forecasts, it is possible we could determine that some or all of our gross deferred tax assets cannot be realized and a deferred tax valuation allowance would be recorded as an adverse charge. Item 1B. Unresolved Staffff Comments. The Company has no unresolved staffff comments issued more than 180 days before December 31, 2023, the date of this Annual Report on Form 10-K. Item 1C. Cybersecurity. The Company has developed an information security program to assess, identify,ff and monitor cybersecurity risks. Each year, the Company assesses cybersecurity risks arising from the operating environment. In developing the assessment process, the Company reviews guidance from national standards organizations such as the NIST and the Center for Internet Security. In evaluating the risks identifieff d as a part of this assessment, the Company’s information security team considers the likelihood and severity of the risk and the possible impact of the risk on the Company, its customers, and its employees. These risks are then monitored by the Company’s information security team. The Company conducts periodic testing of software, hardware, defensive capaa bia lities, and other information security systems. Tests are conducted by both internal security teams and third-party consultants. In developing the testing procedurd es, the Company considers its individual risks and industryr standards. Testing procedurd es are supplu exercises and employee training. Executive exercises such as “tabletops” are used to develop and refine the Company’s incident response plans. Employees undergo security awareness training annually and upon hire. emented by executive cyber threat As a part of its inforff mation security program, the Company addresses cyber risks posed by its relationships with third-party service and application providers. The Company assesses third parties as a part of the procurement process, including through pre-acquisition diligence. Contractuat requirements and industryr standards are used in the l provisions based on regulatoryrr 25 contracting process, and the Company conducts on-going performance monitoring of key vendors. Security audits are also performed on certain vendors to review compliance with contractuat l requirements and industryrr standards. The Company maintains an incident response plan that includes procedurd es for evaluating and addressing a cybersecurity event. The initial impact of each cybersecurity event is evaluated by a designated team using pre-establa ished risk criteria. If an event meets certain parameters, it is escalated to a cross-functional core team of executives, including the Company’s Chief Information Security Offiff cer (“CISO”) and designated internal legal counsel. The Company has a cyber incident disclosure committee that evaluates and considers whether public disclosure of an event is required. The incident response plan identifies certain third-party advisors, consultants and legal counsel who have been designated to assist if necessary. The plan contains procedurd es for escalating cybersecurity incidents to the Board of Directors. The Company’s CISO is primarily responsible for management of the Company’s information security program. The Company’s current CISO has significant experience in information security, as do members of the information security team. The Company participates in certain industryrr cybersecurity intelligence and risk sharing organizations, such as FS-ISAC and the Domestic Security Alliance Council. Kemper’s information security program is an element of the Company’s broader Enterprise Risk Management (ERM) framework. This framework employs a management committee structurt e to review technology, compliance, and operational risks. The Company’s Enterprise Risk Committee (“ERC”), composed of the Chief Executive Offiff cer, the Chief Risk Offiff cer, all executive vice presidents and the head of internal audit, meets at least quarterly to oversee the Company’s ERM framework. This committee monitors the implementation of the ERM framework and makes modifications to the program from time to time as it believes appropriate. The ERC has several subcu ommittees that oversee particular risks, including cyber and information security. Through its role in providing oversight for the Company’s ERM framework, the Risk Committee of the Kemper Board of Directors (the “Risk Committee”) provides oversight of the Company’s information security program. On a quarterly basis, management discusses Kemper’s information security program, cybersecurity risks, and related developments with the Risk Committee. The Risk Committee periodically reviews and evaluates information security and cybersecurity risks and provides oversight of events that have been escalated as a part of the incident response plan. Item 2. Properties. Owned Properties Kemper’s subsu idiaries together own and occupyu square feet in the aggregate. Kemper’s subsu idiaries hold, solely for investment purpos occupiu ed by Kemper or its subsu idiaries. Included in Kemper’s owned and occupiu ed properties is a corporate data processing facility with aggregate square footage of approximately 110,000 square feet. eleven buildings located in seven states consisting of approximately 337,000 es, additional properties that are not rr Leased Facilities The Company leases four floors, or approximately 92,000 square feet, in an 83-storyrr offiff ce building in Chicago, Illinois, for its corporate headquarters. The lease expires on December 31, 2033. Kemper’s property and casualty insurance subsu idiaries lease facilities with an aggregate square footage of approximately 624,000 at 92 locations in eleven states. The latest expiration date of the existing leases is in June 2031. Kemper’s lifeff approximately 379,000 at 96 locations in 23 states. The latest expiration date of the existing leases is in September 2029. insurance subsu idiaries lease facilities with aggregate square footage of The properties described above are in good condition. The properties utilized in the Company’s operations consist of facilities suitabla e for general offiff ce space, call centers and data processing operations. Leased properties with aggregate square footage of 335,000 are not currently utilized in the Company's operations and are not expected to be utilized by the Company throughout the remainder of their respective lease terms. Item 3. Legal Proceedings. Proceedings Information concerning pending legal proceedings is incorporated herein by reference to Note 28, “Commitments and Contingencies,” to the Consolidated Financial Statements. 26 Item 4. Mine Safetff y Disclosures. Not applicable. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Kemper’s common stock is traded on the NYSE under the symbol of “KMPR.” Holders As of January 31, 2024, the number of record holders of Kemper’s common stock was 2,575. Dividends Quarterly information pertaining to payment of dividends on Kemper’s common stock is presented below. DOLLARS PEREE SHAREHH Cash Dividends Paid to Shareholders (per share) ...... $ Mar 31, 2023 0.31 Jun 30, 2023 0.31 $ Sep 30, 2023 0.31 $ Dec 31, 2023 0.31 $ Dec 31, 2023 1.24 $ Three Months Ended Year Ended Three Months Ended Year Ended DOLLARS PEREE SHAREHH Cash Dividends Paid to Shareholders (per share) ...... $ Mar 31, 2022 0.31 Jun 30, 2022 0.31 $ Sep 30, 2022 0.31 $ Dec 31, 2022 0.31 $ Dec 31, 2022 1.24 $ Kemper’s insurance subsu idiaries are subju ect to various state insurance laws that may restrict the ability of these insurance subsu idiaries to pay dividends without prior regulatoryrr approval. See MD&A, “Liquidity and Capia tal Resources” and Note 17, “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 $133.3 million remaining under the August 6, 2014 authorization, bringing the remaining share repurchase authorization to approximately $333.3 million. As of December 31, 2023, the remaining share repurchase authorization was $171.6 million under the repurchase program. During the years ended 2023 and 2022, Kemper did not repurchase any of its common stock. During 2021, Kemper repurchased and retired approximately 2,085,000 shares of its common stock under its share repurchase authorization for an aggregate cost of $161.7 million and an average cost per share of $77.58. 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. 27 Kemper Common Stock Perforff mance Graph The following graph assumes $100 invested on December 31, 2018 in (i) Kemper common stock, (ii) the S&P MidCap 400 Index and (iii) the S&P Supeu rcomposite 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 $225 $200 $175 $150 $125 $100 $75 $50 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Kemper Corporation S&P MidCap 400 Index S&P Supeu rcomposite Insurance Index Company / Index Kemper Corporation.................................................... $ 100.00 S&P MidCap 400 Index.............................................. 100.00 S&P Supeu rcomposite Insurance Index........................ 100.00 2018 2019 $ 118.29 126.20 128.53 2020 $ 119.29 143.44 126.87 $ 2021 92.92 178.95 164.76 $ 2022 79.73 155.58 180.12 $ 2023 80.96 181.15 198.03 28 Item 6. Selected Financial Data. [Reserved] 29 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............................................................................................................................... fe Insurance......................................................................................................................................................................... Investment Results.................................................................................................................................................................. Investment Quality and Concentrations ................................................................................................................................. Investments in Limited Liability Companies and Limited Partnerships ................................................................................ Insurance, Interest and Other Expenses.................................................................................................................................. Income Taxes.......................................................................................................................................................................... Suppl emental Financial Information ...................................................................................................................................... u Liquidity and Capia tal Resources ............................................................................................................................................ Contractuat l Obligations.......................................................................................................................................................... Critical Accounting Estimates ................................................................................................................................................ Recently Issued Accounting Pronouncements ....................................................................................................................... 31 33 34 35 37 42 47 50 53 54 55 56 59 62 63 69 30 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations SUMMARY OF RESULTS As discussed in Note 2, “Summary of Accounting Policies and Accounting Changes”, to the Consolidated Financial Statements effeff ctive January 1, 2023, the Company adopted Accounting Standards Update No. 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts and related amendments” (“LDTI”) under the modified retrospective method. Prior period amounts in the financial statements have been adjud sted to reflect application of the new guidance. Related financial data shown in Management's Discussion and Analysis of Financial Condition and Results of Operations also have been adjud sted. In the third quarter of 2023, the Company announced that it will exit the Preferff and will actively reduce the business beginning in third quarter 2023, with all policies being non-renewed or canceled in accordance with applicable state regulations. In connection with the exit, the Company changed its calculation of Adjud sted red Property and Casualty Insurance business effeff ctive July 1, 2023, Consolidated Net Loss to exclude the results of the Preferff since the results are irrelevant to ongoing operations of the Company and do not qualifyff for discontinued operations under U.S. GAAP. The results of this business, previously reported as a reportabla e segment, are now reflected as Non-Core Operations and presented as a reconciling item between Segment Adjud sted Operating Net Loss and Net Loss. Prior period amounts have been recast to reflect the change in reportabla e segments and the segment measure of performance. red Property and Casualty Insurance business Net Loss Attributable to Kemper Corporation was $272.1 million ($(4.25) per unrestricted common share) for the year ended December 31, 2023, compared to Net Loss Attributable to Kemper Corporation of $286.6 million ($(4.50) per unrestricted common share) for the year ended December 31, 2022. A reconciliation of Net Loss Attributable to Kemper Corporation to Adjud sted Consolidated Net Operating Loss (a non-GAAP financial measure) for the years ended December 31, 2023, 2022 and 2021 is presented below. LARS IN MILLIONS II Net Loss Attributable to Kemper Corporation ......................... $ Less: Income (Loss) from Change in Fair Value of Equity and Convertible Securities ........................................................ $ Net Realized Investment (Losses) Gains............................... Impairment Losses................................................................. Acquisition and Disposition Related Transaction, Integration, Restructurt ing and Other Costs........................ 2023 (272.1) $ 2022 (286.6) $ 14.5 $ Change from 2022 to 2023 Change from 2021 to 2022 (162.9) 2021 (123.7) $ $ 3.7 (14.7) (0.9) (63.1) $ 3.4 (20.4) $ 66.8 (18.1) 19.5 $ 90.5 51.2 (8.7) (153.6) (47.8) (11.7) (95.0) (61.3) (33.7) (34.7) (26.6) Debt Extinguishment, Pension Settlement and Other Charges............................................................................... Goodwill Impairment Charge................................................ Non-Core Operations............................................................. Adjud sted Consolidated Net Operating Loss ............................. $ (55.5) (45.5) (17.0) (47.2) $ (2.9) — (25.9) (116.4) $ (52.6) (45.5) 8.9 69.2 Components of Adjud sted Consolidated Net Operating Loss: Segment Adjud sted Net Operating (Loss) Income:................. Specialty Property & Casualty Insurance ......................... $ Life Insurance.................................................................... Total Segment Adjud sted Net Operating Loss........................... Corporate and Other Adjud sted Net Operating Loss ................. Less: Net Loss Attributable to Noncontrolling Interest ........... Adjud sted Consolidated Net Operating Loss ............................. $ (57.1) $ 51.8 (5.3) (42.1) (0.2) (47.2) $ (147.4) $ 68.8 (78.6) (37.8) — (116.4) $ 90.3 (17.0) 73.3 (4.3) (0.2) 69.2 — — (12.5) (209.5) $ (2.9) — (13.4) 93.1 (196.1) $ 25.0 (171.1) (38.4) — (209.5) $ 48.7 43.8 92.5 0.6 — 93.1 $ $ $ 31 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SUMMARY OF RESULTS (Continued) Net Loss attrtt ell ibutabl tt to Kemper Corporatiott n 2023 Compared withii 2022 Net Loss attributable to Kemper Corporation decreased by $14.5 million in 2023, compared to 2022, due primarily to lower Adjud sted Consolidated Net Operating Losses and favorable changes in the Change in Fair Value of Equity and Convertible Securities. These improvements were partially offsff et by a $55.5 million afteff Company’s pension obligations, a $45.5 million afteff the Preferff Integration, Restructurt r-tax noncash charge related to the settlement of the r-tax charge from the impairment of the goodwill asset related to the exit of red Property & Casualty Insurance business and increased Acquisition and Disposition Related Transaction, ing and Other Costs incurred in connection with the multi-year cost structurt e optimization initiatives. Adjud sted Consolidated Net Operating Loss decreased by $69.2 million in 2023, compared to 2022, due primarily to an improvement in the Specialty Property & Casualty Segment mostly due to personal automobile insurance driven by higher average earned premiums per exposure resulting from rate increases and lower underlying claim frequency that was partially offsff et by unfavff orable prior year loss and LAE development. The Life Insurance Segment also contributed to the decrease in Adjud sted Consolidated Net Operating Loss due primarily to a decrease in net investment income driven by lower returns from equity method limited liabia lity investments. See MD&A, “Specialty Property & Casualty Insurance” and “Lifeff results. Corporate and Other Adjud sted Net Operating Loss increased in 2023, compared to 2022, due primarily to a decrease in Net Investment Income. The loss from Non-Core Operations decreased by $8.9 million in 2023, compared to 2022, mostly due to improvements from Homeowners Insurance that were impacted by higher average earned premium per exposure resulting from rate increases and lower underlying claim frequency. Insurance,” for discussion of each respective segment’s 2022 Compared withii 2021 Net Loss attributable to Kemper Corporation increased by $162.9 million in 2022, compared to 2021, due primarily to increased losses from Change in Fair Value of Equity and Convertible Securities, decreased Net Realized Investment Gains, and increased Acquisition and Disposition Related Transaction, Integration, Restructurt lower Adjud sted Consolidated Net Operating Losses. ing and Other Costs, partially offsff et by Adjud sted Consolidated Net Operating Loss decreased by $93.1 million in 2022, compared to 2021, due primarily to lower Specialty Property & Casualty Segment Insurance Net Operating Loss and higher Life Insurance Segment Net Operating Income, partially offsff et by higher Non-Core Operations Net Operating Losses. See MD&A, “Specialty Property & Casualty Insurance” and “Lifeff results. Corporate and Other Net Operating Loss decreased due primarily to increased Net Investment Income. The loss from Non-Core Operations increased by $13.4 million due primarily to higher underlying losses and LAE as a percentage of earned premiums and lower net investment income, partially offsff et by lower catastrophe losses and lower levels of adverse prior year reserve development. Insurance,” for discussion of each respective segment’s Revenues 2023 Compared withii 2022 Earned Premiums were $4,529.4 million in 2023, compared to $5,213.4 million in 2022, a decrease of $684.0 million. Earned Premiums in the Specialty Property & Casualty Insurance segment decreased by $413.9 million for the year ended December 31, 2023. Earned Premiums in the Life segment decreased by $183.9 million for the year ended December 31, 2023. Earned Premiums from Non-Core operations decreased by $86.2 million due primarily to lower volumes resulting from the decision to exit and run-offff the business in third quarter 2023 as well as ongoing profitff improvement actions. See MD&A, “Specialty Property & Casualty Insurance” and “Lifeff premiums. Insurance” for discussion of the changes in each segment’s earned Net Investment Income decreased by $2.9 million in 2023 due primarily to lower returns on Equity Method Limited Liabia lity Investments and Equity Securities offsff et by higher rate earned on Fixed Income Securities. Income related to Changes in Value of Alternative Energy Partnership Investments was $2.9 million for the year ended December 31, 2023, compared to a net loss of $19.9 million for the same period in 2022. Tax expense related to the Alternative 32 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SUMMARY OF RESULTS (Continued) Energy Partnership Investments were $0.5 million, compared to tax benefit of $8.0 million for the year ended December 31, 2023 and 2022, respectively. This resulted in a net income of $2.4 million and a net loss of $11.9 million attributable to Alternative Energy Partnership Investments for the year ended December 31, 2023 and 2022, respectively. Revenues for 2023 included $3.7 million of Income from Change in Fair Value of Equity and Convertible Securities compared to a loss of $63.1 million from Change in Fair Value of Equity and Convertible Securities in 2022. The improvement was due primarily to the absence of unrealized losses from equity securities. Net Realized Investment Losses were $18.6 million in 2023, compared to Net Realized Investment Gains of $4.3 million for the same period in 2022 primarily due to fair value changes on derivative transactions. Impairment Losses were $1.1 million in 2023, compared to Impairment Losses of $25.8 million for the same period in 2022. See MD&A, “Investment Results,” under the sub-u capta ions capta ions “Net Investment Income”, “Income (Loss) from Change in Fair Value of Equity and Convertible Securities”, “Net Realized (Losses) 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. 2022 Compared withii 2021 Earned Premiums were $5,213.4 million in 2022, compared to $5,179.2 million in 2021, an increase of $34.2 million. Earned Premiums in the Specialty Property & Casualty Insurance segment increased by $97.9 million for the year ended December 31, red Property & Casualty Insurance segment decreased by $56.2 million for the year ended 2022. Earned Premiums in the Preferff December 31, 2022. 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 decreased by $4.7 million in 2022 due primarily to lower valuations on Equity Method Limited Liability Investments, lower balances in Equity Securities, and lower rate on Fixed Income Securities, partially offsff et by higher levels of investments in Fixed Income Securities and Company-Owned Life Insurance. Loss related to Changes in Value of Alternative Energy Partnership Investments was $19.9 million for the year ended December 31, 2022, compared to a net loss of $61.2 million for the same period in 2021. Tax benefits related to the Alternative Energy Partnership Investments were $8.0 million, compared to tax benefits of $79.0 million for the year ended December 31, 2022 and 2021, respectively. This resulted in a net loss of $11.9 million and net income of $17.8 million attributable to Alternative Energy Partnership Investments for the year ended December 31, 2022 and 2021, respectively. Other Income increased by $4.4 million for the year ended December 31, 2022, compared to the same period in 2021. Net Realized Gains on Sales of Investments were $4.3 million in 2022, compared to $64.8 million in 2021. Impairment Losses were $25.8 million in 2022, compared to $11.0 million for the same period in 2021. See MD&A, “Investment Results,” under the sub-u capta ions “Net Realized (Losses) 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 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. Specificff 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-r 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 affeff cts a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry.rr types of catastrophic events are more 33 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CATASTROPHES (Continued) 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, 2023, 2022 and 2021 are presented below. DOLLARS IN MILLIONS II 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........ Life Insurance.................................................. Non-Core Operations ...................................... Total Catastrophe Losses and LAE ................. Catastrott pho e Reinsurance Dec 31, 2023 Year Ended Dec 31, 2022 Dec 31, 2021 Number of Events Losses and LAE Number of Events Losses and LAE Number of Events Losses and LAE 68 3 — — — — 71 $ $ $ $ 77.7 19.0 — — — — 96.7 34.5 2.2 60.0 96.7 59 $ 2 1 — — — 62 $ $ $ 54.6 10.2 14.5 — — — 79.3 23.0 1.8 54.5 79.3 65 2 — 2 — — 69 $ $ $ $ 56.1 16.5 — 35.2 — — 107.8 15.7 13.0 79.1 107.8 The Company primarily manages its exposure to catastrophes and other natural disasters through a combination of geographical diversificff ation, restrictions on the amount and location of new business production in such regions, modifications of,ff and/or limitations to coverages and deducd tibles for certain perils in such regions and a catastrophe reinsurance program for the Company’s Property & Casualty Insurance business. Coverage under the catastrophe reinsurance program is provided in various contracts and layers. The Company’s Property & Casualty Insurance business also purchase reinsurance from the FHCF for hurricane losses in Florida at retentions lower than its catastrophe reinsurance program. The Company had no material recoveries under its catastrophe reinsurance treaties for the years ended December 31, 2023, 2022 and 2021. See the “Reinsurance” subsu ection of the “Property and Casualty Insurance Business” and “Lifeff Insurance Business” sections of Item 1(c), “Description of Business,” and Note 25, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for additional information on the Company’s reinsurance programs. LOSS AND LAE RESERVE DEVELOPMENT Increases (decreases) in the Company’s property and casualty loss and LAE reserves for the years ended December 31, 2023, 2022 and 2021 to recognize adverse (favorable) loss and LAE reserve development from prior accident years in continuing r also referred to as “reserve development” in the discussion of segment results, are presented below. operations, hereinafteff DOLLARS IN MILLIONS II 2023 2022 2021 Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years: Non-catastrophe................................................................................................................. $ Catastrophe........................................................................................................................ Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years ...................... $ 168.9 (9.1) 159.8 $ $ (10.5) $ (4.1) (14.6) $ 112.1 (5.4) 106.7 See MD&A, “Specialty Property & Casualty Insurance,” MD&A, “Lifeff Insurance Reserves,” to the Consolidated Financial Statements for additional information on the Company’s reserve development. See MD&A, “Critical Accounting Estimates,” of this 2023 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 Insurance,” and Note 6, “Property and Casualty 34 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LOSS AND LAE RESERVE DEVELOPMENT (Continued) 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 usefulff ness 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 subsu titute for the comparable GAAP financial measures, as they do not fully recognize the overall profitff ability of the Company’s businesses. Underlyill ngii Losses and LAE and Underlyill ngii 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 usefulff 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 usefulff for investors to evaluate these components separately and in the aggregate when reviewing the Company’s underwriting performance. to investors and uses these Adjudd stedtt Consolidll atdd edtt Net Operatintt g Loss Adjud sted Consolidated Net Operating Loss is an afteff Net Loss attributable to Kemper Corporation the afteff r-tax, non-GAAP financial measure and is computed by excluding from r-tax impact of:ff (i) Income (Loss) from Change in Fair Value of Equity and Convertible Securities; (ii) Net Realized Investment (Losses) Gains; (iii) Impairment Losses; (iv) Acquisition and Disposition Related Transaction, Integration, Restructurt ing and Other Costs; (v) Debt Extinguishment, Pension Settlement and Other Charges; (vi) Goodwill Impairment Charges; (vii) Non-Core Operations; and (viii) Significant non-recurring or infrequent items that may not be indicative of ongoing operations Significff ant non-recurring items are excluded when (a) the nature of the charge or gain is such that it is reasonabla y 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 Loss attributable to Kemper Corporation. There were no applicable significff ant non- 35 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) NON-GAAP FINANCIAL MEASURES (Continued) recurring items that the Company excluded from the calculation of Adjud sted Consolidated Net Operating Loss for the years ended December 31, 2023, 2022 or 2021. The Company believes that Adjud sted Consolidated Net Operating Loss 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 Investment (Losses) Gains 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 and Disposition Related Transaction Costs, Integration Costs, and Restructurt and Other Costs may vary significantly between periods and are generally driven by the timing of acquisitions and business decisions which are unrelated to the insurance underwriting process. Debt Extinguishment, Pension Settlement and Other Charges relate to (i) loss from early extinguishment of debt, which is driven by the Company’s financing and refinancing decisions and capia tal 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. Goodwill impairment charges are excluded because they are infrequent and non-recurring charges. Non-Core Operations includes the results of our Preferff Insurance business which we expect to fully exit. These results are excluded because they are irrelevant to our ongoing operations and do not qualify for Discontinued Operations under Generally Accepted Accounting Principles ("GAAP"). Significff ant non-recurring items are excluded because, by their nature, they are not indicative of the Company’s business or economic trends. ing red The preceding non-GAAP financial measures should not be considered a subsu titute for the comparable GAAP financial measures, as they do not fully recognize the overall profitff ability of the Company’s businesses. 36 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. LARS IN MILLIONS II 2023 2022 2021 Net Premiums Written...................................................................................................... $3,305.4 $3,934.4 $4,057.3 Earned Premiums ............................................................................................................. $3,632.5 $4,046.4 $3,948.5 Net Investment Income .................................................................................................... 168.3 140.7 Change in Value of Alternative Energy Partnership Investments.................................... Other Income.................................................................................................................... 1.6 4.5 (9.9) 6.0 152.5 (29.0) 4.1 Total Revenues................................................................................................................. Incurred Losses and LAE related to: 3,806.9 4,183.2 4,076.1 Current Year: Non-catastrophe Losses and LAE .......................................................................... Catastrophe Losses and LAE ................................................................................. 2,974.5 34.5 3,569.2 23.0 3,480.3 15.7 Prior Years: Non-catastrophe Losses and LAE .......................................................................... 135.2 Catastrophe Losses and LAE ................................................................................. (2.3) (14.6) 0.6 97.4 0.3 Total Incurred Losses and LAE ....................................................................................... 3,141.9 3,578.2 3,593.7 Insurance Expenses .......................................................................................................... Segment Adjud sted Operating Loss .................................................................................. Income Tax Benefit.......................................................................................................... 741.3 (76.3) 19.2 801.9 (196.9) 49.5 774.5 (292.1) 96.0 Total Segment Adjud sted Net Operating Loss .................................................................. $ (57.1) $ (147.4) $ (196.1) Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio .................................................... 82.0 % 88.2 % 88.1 % 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 .................................................................................................. 0.9 3.7 (0.1) 86.5 20.4 0.6 (0.4) — 88.4 19.8 0.4 2.5 — 91.0 19.6 Combined Ratio ............................................................................................................... 106.9 % 108.2 % 110.6 % Underlying Combined Ratio Current Year Non-catastrophe Losses and LAE Ratio .................................................... Insurance Expense Ratio .................................................................................................. 82.0 % 20.4 88.2 % 19.8 88.1 % 19.6 Underlying Combined Ratio ............................................................................................ Non-GAAP Measure Reconciliation Combined Ratio ............................................................................................................... Less: 102.4 % 108.0 % 107.7 % 106.9 % 108.2 % 110.6 % Current Year Catastrophe Losses and LAE Ratio ....................................................... Prior Years Non-catastrophe Losses and LAE Ratio .................................................. Prior Years Catastrophe Losses and LAE Ratio.......................................................... 0.9 3.7 (0.1) 0.6 (0.4) — 0.4 2.5 — Underlying Combined Ratio ............................................................................................ 102.4 % 108.0 % 107.7 % 37 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 II Insurance Reserves: Dec 31, 2023 Dec 31, 2022 Personal Automobile........................................................................................................................... $ 1,711.9 596.8 Commercial Automobile..................................................................................................................... $ 1,875.8 445.3 Total Insurance Reserves ....................................................................................................................... $ 2,308.7 $ 2,321.1 Insurance Reserves: Loss and Allocated LAE Reserves: Case and Allocated LAE..................................................................................................................... $ 999.9 $ 1,099.9 Incurred But Not Reported.................................................................................................................. Total Loss and LAE Reserves......................................................................................................... Unallocated LAE Reserves ................................................................................................................. 1,132.8 2,132.7 176.0 1,041.2 2,141.1 180.0 Total Insurance Reserves ....................................................................................................................... $ 2,308.7 $ 2,321.1 See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjud stment 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. Overallll 2023 Compared withii 2022 The Specialty Property & Casualty Insurance segment reported Total Segment Adjud sted Net Operating Loss of $57.1 million for the year ended December 31, 2023, compared to Total Segment Adjud sted Net Operating Loss of $147.4 million in 2022. Total Segment Adjud sted Net Operating Loss improved by $90.3 million mostly driven by a $104.4 million improvement from personal automobile insurance due primarily to higher average earned premiums per exposure resulting from rate increases and lower underlying claim frequency that was partially offsff et by unfavff orable prior year loss and LAE development. The improvement in segment adjud sted net operating loss was partially offsff et by a $14.1 million decrease from the commercial automobile insurance business due primarily to an increase in the underlying loss ratio from higher claim average severity and unfavff orable prior year development. Earned Premiums in the Specialty Property & Casualty Insurance segment decreased by $413.9 million in 2023, compared to 2022 due to a decrease in new business resulting from targeted actions to improve profitff ability, partially offsff et by higher average earned premium per exposure resulting from rate increases. Net Investment Income in the Specialty Property & Casualty Insurance segment increased by $27.6 million in 2023, compared to 2022, due primarily to higher rates on Fixed Income Securities and Short Term Investments partially offsff et by lower returns on Equity Securities. Income related to Changes in Value of Alternative Energy Partnership Investments was $1.6 million for the year ended December 31, 2023, compared to a loss of $9.9 million for the same period in 2022. Tax expenses related to the Alternative Energy Partnership Investments were $0.0 million and tax benefits of $4.1 million for the year ended December 31, 2023 and 2022, respectively. This resulted in net income of $1.6 million and a net loss of $5.8 million attributable to Alternative Energy Partnership Investments for the year ended December 31, 2023 and 2022, respectively. Underlying losses and LAE as a percentage of earned premiums were 82.0% in 2023, an improvement of 6.2 percentage points, compared to 2022, driven by higher average earned premium per exposure resulting from rate increases and lower underlying claims frequency, partially offsff et by higher claims average severity from rising inflation and supplu y chain constraints. 38 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued) 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 $132.9 million for 2023 compared to favorable development of $14.0 million for 2022 due primarily to higher than expected emergence in loss patterns related to third and fourth accident quarters of 2022 within the bodily injun ry and physical damage coverages as well as an increase in Florida personal injun ry protection driven by higher than expected frequency and severity resulting from an increase in litigated claim activity, mainly from policy years 2020 through 2022. Catastrophe losses and LAE (excluding reserve development) were $34.5 million for 2023 compared to $23.0 million for 2022, an increase of $11.5 million. Insurance Expenses were $741.3 million, or 20.4 percent of earned premiums, in 2023 a deterioration of 0.6 percent compared to 2022. The $60.6 million decrease is primarily due to a reduction in new business, as discussed above. The Specialty Property & Casualty Insurance segment’s 2023 effeff ctive income tax rate was 25.3% compared to 25.1% in 2022. income tax rate due primarily to investments The effeff ctive income tax rate for 2023 and 2022 differs from the federal statutt oryrr in Company-Owned Life Insurance, tax-exempt investment income and dividends received deductions. 2022 Compared withii 2021 The Specialty Property & Casualty Insurance segment reported Segment Net Operating Loss of $147.4 million for the year ended December 31, 2022, compared to Net Operating Loss of $196.1 million in 2021. Segment net operating losses decreased by $48.7 million due primarily to favorable prior year loss and LAE reserve development in 2022 of $14.6 million compared to adverse development in 2021 of $97.4 million. Earned Premiums in the Specialty Property & Casualty Insurance segment increased by $97.9 million in 2022, compared to 2021 driven by the acquisition of American Access Casualty Company (“AAC”) and higher average earned premium per exposure resulting from rate increases. Policies-in-force were lower in Private Passenger Auto as a result of lower levels of new business due to ongoing profitff improvement actions. Net Investment Income in the Specialty Property & Casualty Insurance segment decreased by $11.8 million in 2022, compared to 2021, due primarily to lower returns from Alternative Investments and Equity Securities, partially offsff et by higher yields and levels of investments in fixed income securities. Loss related to Changes in Value of Alternative Energy Partnership Investments was $9.9 million for the year ended December 31, 2022, compared to a loss of $29.0 million for the same period in 2021. Tax benefits related to the Alternative Energy Partnership Investments were $4.1 million and tax benefits of $37.4 million for the year ended December 31, 2022 and 2021, respectively. This resulted in a net loss of $5.8 million and a net income of $8.4 million attributable to Alternative Energy Partnership Investments for the year ended December 31, 2022 and 2021, respectively. Underlying losses and LAE as a percentage of earned premiums were 88.2% in 2022, a deterioration of 0.1 percentage points, compared to 2021, due primarily to higher severity trends partially offsff et by earned rate increases and lower claim frequency. Severity trends increased due to rising inflation and supplu catastrophes and loss and LAE reserve development. Favorable loss and LAE reserve development (including catastrophe reserve development) was $14.0 million in 2022, compared to adverse reserve development of $97.7 million in 2021. y chain constraints. Underlying losses and LAE exclude the impact of Catastrophe losses and LAE (excluding reserve development) were $23.0 million in 2022, compared to $15.7 million for the same period in 2021, a deterioration of $7.3 million. Insurance Expenses were $801.9 million, or 19.8% of earned premiums, for the year ended December 31, 2022, a deterioration of 0.2 percentage point compared to the same period in 2021. The Specialty Property & Casualty Insurance segment’s 2022 effeff ctive income tax rate was 25.1% compared to 32.9% in 2021. income tax rate due primarily to investments The effeff ctive income tax rate for 2022 and 2021 differs from the federal statutt oryrr in Company-Owned Life Insurance, tax-exempt investment income and dividends received deductions. The change in the effeff ctive tax rate between 2022 and 2021 is largely due to fewer investment tax credits generated during 2022 as compared to 2021. 39 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued) Speciali tyll Personal Automobileii Insurance Selected financial information for the specialty personal automobile insurance product line for the years ended December 31, 2023, 2022, and 2021 is presented below. DOLLARS IN MILLIONS II 2023 2022 2021 Net Premiums Written........................................................................................................ $ 2,677.5 $3,305.1 $3,587.2 Earned Premiums ............................................................................................................... $ 2,977.8 $3,496.7 $3,533.7 Incurred Losses and LAE related to:.................................................................................. Current Year: Non-catastrophe Losses and LAE.................................................................................. $ 2,464.0 $3,153.9 $3,173.9 Catastrophe Losses and LAE......................................................................................... 29.6 20.7 14.4 Prior Years: Non-catastrophe Losses and LAE.................................................................................. 111.0 Catastrophe Losses and LAE......................................................................................... (2.3) (18.1) 0.5 85.0 0.3 Total Incurred Losses and LAE.......................................................................................... $ 2,602.3 $3,157.0 $3,273.6 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio ...................................................... 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 ................................................................................... % 82.8 1.0 3.7 (0.1) 87.4 % % 9 0.2 0.6 (0.5) — 0.3 9 % 8 9.8 % 0.4 2.4 — 2.6 % 9 2023 Compared withii 2022 Earned Premiums on personal automobile insurance decreased by $518.9 million in 2023, compared to 2022, due to a decrease in new business driven by targeted underwriting actions to improve profitff ability, partially offsff et by higher average earned premium per exposure resulting from rate increases. Incurred losses and LAE were $2,602.3 million, or 87.4% of earned premiums, in 2023, compared to $3,157.0 million, or 90.3% of earned premiums, in 2022. Incurred losses and LAE as a percentage of earned premiums decreased driven by higher average earned premiums per exposure resulting from rate increases and a lower frequency of claims, partially offsff et by adverse prior year loss and LAE development. Underlying losses and LAE as a percentage of related earned premiums were 82.8% in 2023, compared to 90.2% in 2022, an improvement of 7.4 points. Adverse loss and LAE reserve development was $108.7 million in 2023, compared to favorable loss and LAE reserve developments of $17.6 million in 2022. The adverse loss and LAE reserve development was primarily driven by higher than expected emergence in loss patterns related to third and fourth accident quarters of 2022 within the bodily injun ry and physical damage coverages as well as an increase in Florida personal injun ry protection driven by higher than expected frequency and severity resulting from an increase in litigated claim activity, mainly from policy years 2020 through 2022. Catastrophe losses and LAE (excluding reserve development) were $29.6 million in 2023 compared to $20.7 million in 2022. 2022 Compared withii 2021 Earned Premiums on specialty personal automobile insurance decreased by $37.0 million in 2022, compared to 2021, due primarily to the decrease in new business driven by targeted underwriting actions to improve profitff ability partially offsff et by the acquisition of AAC and higher average earned premium per exposure resulting from rate increases. Incurred losses and LAE were $3,157.0 million, or 90.3% of earned premiums, in 2022, compared to $3,273.6 million, or 92.6% of earned premiums, in 2021. Incurred losses and LAE as a percentage of earned premiums improved primarily due to a favorable change in prior year loss and LAE reserve development, partially offsff et by deterioration in underlying losses and LAE as a percentage of earned premium. 2021’s adverse prior year loss and LAE reserve development was primarily driven by legal developments and increased severity in personal injun ry protection coverages in Florida and liabia lity coverages. Underlying losses and LAE as a percentage of related earned premiums were 90.2% in 2022, compared to 89.8% in 2021, a deterioration of 0.4 points due to higher claim severity trends partially offsff et by earned premium per exposure increases and lower claim frequency. Severity trends increased due to rising inflation and supplu y chain constraints. Favorable loss and LAE reserve development was $17.6 40 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SPECIALTY PROPERTY & CASUALTY INSURANCE (Continued) million in 2022, compared to adverse loss and LAE reserve developments of $85.3 million in 2021, Catastrophe losses and LAE (excluding reserve development) were $20.7 million in 2022, compared to $14.4 million in 2021, due primarily to losses arising from Hurricane Ian. Commercial Automobileii Insurance Selected financial information for the commercial automobile insurance product line is presented below. DOLLARS IN MILLIONS II 2023 2022 2021 Net Premiums Written...................................................................................................... $ 627.9 Earned Premiums ............................................................................................................. $ 654.7 $ 629.3 $ 549.7 $ 470.1 $ 414.8 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE ............................................................................... $ 510.5 $ 415.3 $ 306.4 Catastrophe Losses and LAE....................................................................................... 4.9 Prior Years: Non-catastrophe Losses and LAE ............................................................................... Catastrophe Losses and LAE....................................................................................... 24.2 — 2.3 3.5 0.1 1.3 12.4 — Total Incurred Losses and LAE ....................................................................................... $ 539.6 $ 421.2 $ 320.1 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio .................................................... 78.0 % 75.6 % 73.9 % 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 ................................................................................. 0.7 3.7 — 82.4 % 0.4 0.6 — 76.6 % 0.3 3.0 — 77.2 % 2023 Compared withii 2022 Earned premiums from commercial automobile insurance increased by $105.0 million in 2023, compared to 2022, due primarily to higher volume and higher average earned premium per exposure resulting from rate increases. Incurred losses and LAE were $539.6 million, or 82.4% of earned premiums, in 2023, compared to $421.2 million, or 76.6% of earned premiums, in 2022. Incurred losses and LAE as a percentage of earned premiums increased due to both a deterioration in underlying losses and LAE as a percentage of earned premiums, as well as higher levels of adverse loss and LAE reserve development. Underlying losses and LAE as a percentage of earned premiums were 78.0% in 2023, compared to 75.6% in 2022, a deterioration of 2.4 percentage points due primarily to higher severity trends from rising inflation and supplu Adverse loss and LAE reserve development was $24.2 million in 2023, compared to $3.6 million in 2022 due primarily to higher than expected emergence in loss patterns related to policy years 2021 and 2022 bodily injun ry coverages. y chain constraints. 2022 Compared withii 2021 Earned premiums in commercial automobile insurance increased by $134.9 million in 2022, compared to 2021, due primarily to higher volume and higher average earned premium per exposure. Incurred losses and LAE were $421.2 million, or 76.6% of earned premiums, in 2022, compared to $320.1 million, or 77.2% of earned premiums, in 2021. Incurred losses and LAE as a percentage of earned premiums improved due primarily to lower levels of adverse prior year development on prior year claims offsff et by an increase in underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 75.6% in 2022, compared to 73.9% in 2021, a deterioration of 1.7 percentage points due primarily to higher claim severity trends. Severity trends increased due to rising inflation and supplu loss and LAE reserve development was $3.6 million in 2022, compared to adverse reserve development of $12.4 million in 2021. y chain constraints. Adverse 41 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE INSURANCE Selected financial information for the Life Insurance segment is presented below. II DOLLARS IN MILLIONS Earned Premiums ................................................................................................................... $ Net Investment Income .......................................................................................................... Change in Value of Alternative Energy Partnership Investments ......................................... Other Loss ............................................................................................................................. Total Revenues....................................................................................................................... Policyholders’ Benefits and Incurred Losses and LAE ......................................................... Insurance Expenses................................................................................................................ Segment Adjud sted Operating Income .................................................................................... Income Tax (Expense) Benefit ............................................................................................. Total Segment Adjud sted Net Operating Income.................................................................... $ 2023 387.6 193.4 0.7 (0.2) 581.5 243.4 275.8 62.3 (10.5) 51.8 2022 571.5 216.5 (5.3) (0.6) 782.1 360.8 343.3 78.0 (9.2) 68.8 $ $ 2021 579.0 202.7 (15.8) (1.3) 764.6 388.5 369.6 6.5 18.5 25.0 $ $ DOLLARS IN MILLIONS Insurance Reserves: II INSURANCE RESERVES Dec 31, 2023 Dec 31, 2022 Future Policyholder Benefits ................................................................................................................ $ 3,375.6 Incurred Losses and LAE Reserves: Life .................................................................................................................................................. Accident and Health ........................................................................................................................ Property ........................................................................................................................................... Total Incurred Losses and LAE Reserves............................................................................................. 42.1 4.7 2.9 49.7 Total Insurance Reserves........................................................................................................................... $ 3,425.3 $ 3,218.5 53.3 4.3 2.3 59.9 $ 3,278.4 See Note 2 “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial Statements under the sub-u caption “Insurance Reserves” for additional discussion. 2023 Compared withii 2022 Total Segment Adjud sted Net Operating Income in the Life Insurance segment was $51.8 million in 2023, compared to $68.8 million in 2022. Earned Premiums in the Life Insurance segment decreased by $183.9 million for the year ended December 31, 2023, compared to 2022 due primarily to the disposition of Reserve National in December 2022 ($146.2 million) and changes in assumptions as part of the annual assumption update for Deferred Profitff Liability in 2023 ($15.0 million reduction in earned premium) as compared to 2022 ($12.7 million increase in earned premium). Excluding these impacts, Earned Premiums decreased by $10.0 million due primarily to lower volume on accident & health and property insurance products. Net Investment Income decreased by $23.1 million in 2023, compared to 2022, due primarily to lower returns from equity method limited liability investments. Income related to Changes in Value of Alternative Energy Partnership Investments was $0.7 million for the year ended December 31, 2023 compared to a loss of $5.3 million for the same period in 2022. Tax expense related to the Alternative Energy Partnership Investments were $0.0 million and tax benefits of $2.1 million for the year ended December 31, 2023 and 2022, respectively. This resulted in net income of $0.7 million and a net loss of $3.2 million attributable to Alternative Energy Partnership Investment for the year ended December 31, 2023 and 2022, respectively. Policyholders’ Benefits and Incurred Losses and LAE decreased by $117.4 million in 2023, compared to 2022, due primarily to the disposition of Reserve National in December 2022 ($76.5 million) and changes resulting from the annual assumption update in 2023 ($23.3 million reduction) compared to 2022 ($8.7 million increase). Excluding these impacts, Policyholders’ Benefits 42 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE INSURANCE (Continued) and Incurred Losses and LAE decreased by $8.9 million primarily driven by changes in mortality experience and lower current year property non-catastrophe losses and LAE. Insurance Expenses in the Life Insurance segment decreased by $67.5 million in 2023, compared to 2022, due primarily to the disposition of Reserve National in December 2022. The Life Insurance segment’s 2023 effeff ctive income tax rate was 16.9% compared to 11.8% in 2022. The effeff ctive income tax income tax rate due primarily to investments in Company-Owned Life rate for 2023 and 2022 differs from the federal statutt oryr Insurance, tax-exempt investment income and dividends received deductions. The increase in the effeff ctive tax rate from 2022 is primarily due to less tax-exempt investment income in 2023 and compared to 2022. 2022 Compared withii 2021 The financial information for the Life Insurance Segment includes the results of Reserve National through December 1, 2022, the date it was sold. Earned Premiums in the Life Insurance segment decreased by $7.5 million for the year ended December 31, 2022, compared to 2021. Excluding the impact of changes resulting from the annual assumption update for Deferred Profitff Liability in 2022 ($12.7 million increase) compared to 2021 ($4.6 million increase), Earned Premiums decreased by $15.6 million, due primarily to lower volume on accident and health insurance products and property insurance products, partially offsff et by increased average premium rate on life insurance products. Net Investment Income increased by $13.8 million in 2022, compared to 2021, due primarily to higher levels of investments in Fixed Income Securities, higher returns from Alternative Investments and higher levels of investments and rate on Company- Owned Life Insurance, partially offsff et by lower yields on Fixed Income Securities and lower levels of investments and yields on Equity Securities. Loss related to Changes in Value of Alternative Energy Partnership Investments was $5.3 million for the year ended December 31, 2022 compared to a loss of $15.8 million for the same period in 2021. Tax benefits related to the Alternative Energy Partnership Investments were $2.1 million and $20.4 million for the year ended December 31, 2022 and 2021, respectively. This resulted in a net loss of $3.2 million and a net income of $4.6 million attributable to Alternative Energy Partnership Investment for the year ended December 31, 2022 and 2021, respectively. Policyholders’ Benefits and Incurred Losses and LAE decreased by $27.7 million in 2022, compared to 2021. Excluding the impact from the annual assumption updates for Insurance Reserves in 2022 ($8.7 million increase) compared to 2021 ($5.7 million increase), Policyholders’ Benefits and Incurred Losses and LAE decreased by $30.7 million. This was due primarily to lower mortality for lifeff insurance and lower frequency of accident and health insurance claims. Insurance Expenses in the Life Insurance segment decreased by $26.3 million in 2022, compared to 2021, due primarily to lower commission expense and a reduction in expenses due to lower volume of accident and health insurance products and property insurance products. The Life Insurance segment’s 2022 effeff ctive income tax rate was 11.8% compared to 284.6% in 2021. The effeff ctive income tax rate for 2022 and 2021 differs from the federal statutt oryr income tax rate due primarily to investments in Company-Owned Life Insurance, tax-exempt investment income and dividends received deductions and investment tax credits. The change in the effeff ctive tax rate between 2022 and 2021 is largely due to increased pre-tax income in 2022 as compared to 2021 as well fewer investment tax credits generated during 2022 than in 2021. 43 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE INSURANCE (Continued) Lifei Insurance Selected financial information for the lifeff insurance product line is presented below. DOLLARS IN MILLIONS II 2023 2022 2021 Earned Premiums ............................................................................................................. $ 319.2 $ 352.8 $ Net Investment Income .................................................................................................... Change in Value of Alternative Energy Partnership Investments.................................... Other Loss ........................................................................................................................ Total Revenues................................................................................................................. Policyholders’ Benefits and Incurred Losses and LAE ................................................... Insurance Expenses .......................................................................................................... Adjud sted Operating Income (Loss) .................................................................................. Income Tax (Expense) Benefit......................................................................................... 191.8 210.0 0.7 (0.4) 511.3 218.7 241.0 51.6 (8.2) (4.9) (1.1) 556.8 257.2 237.7 61.9 (6.2) Total Product Line Adjud sted Net Operating Income ....................................................... $ 43.4 $ 55.7 $ 327.2 196.8 (15.0) (1.6) 507.4 264.1 246.3 (3.0) 19.5 16.5 2023 Compared withii 2022 Earned Premiums from lifeff from the annual assumption update for Deferred Profitff Liability. Policyholders’ Benefits and Incurred Losses and LAE on life insurance were $218.7 million in 2023, compared to $257.2 million in 2022, a decrease of $38.5 million. This was due primarily to changes resulting from the annual assumption update in 2023 ($32.0 million) and changes in mortality experience. insurance decreased by $33.6 million in 2023, compared to 2022, due primarily to changes resulting 2022 Compared withii 2021 Earned premiums on life insurance increased by $25.6 million in 2022, compared to 2021. Excluding the impact of changes resulting from the annual assumption updates, Earned Premiums increased by $17.5 million, due primarily to increased average insurance were $257.2 million in 2022, compared to premium rate. Policyholders’ benefits and incurred losses and LAE on lifeff $264.1 million in 2021, a decrease of $6.9 million. Excluding the impact from the annual assumption updates, Policyholders’ Benefits and Incurred Losses and LAE decreased by $9.9 million, due primarily to lower mortality. Accidei nt and Healthll Insurance Selected financial information for the Accident and Health Insurance product line is presented below. DOLLARS IN MILLIONS II 2023 2022 2021 Earned Premiums ............................................................................................................. $ 23.1 $ 168.2 $ 189.9 Net Investment Income .................................................................................................... Change in Value of Alternative Energy Partnership Investments.................................... Other Income.................................................................................................................... Total Revenues................................................................................................................. Policyholders’ Benefits and Incurred Losses and LAE ................................................... Insurance Expenses .......................................................................................................... Adjud sted Operating Income ............................................................................................. Income Tax Expense ........................................................................................................ Total Product Line Adjud sted Net Operating Income ....................................................... $ — — 0.2 23.3 11.5 11.2 0.6 (0.2) 0.4 $ 3.3 (0.1) 0.5 171.9 86.5 79.1 6.3 (1.1) 5.2 $ 3.6 (0.3) 0.3 193.5 96.1 91.6 5.8 (0.9) 4.9 44 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE INSURANCE (Continued) 2023 Compared withii 2022 The financial information for the Accident and Health Insurance product line includes the results of Reserve National through December 1, 2022, the date it was sold. Earned Premiums from accident and health insurance decreased by $145.1 million in 2023, compared to 2022. This is due primarily to the disposition of Reserve National in December 2022. Policyholders’ Benefits and Incurred Losses and LAE on accident and health insurance were $11.5 million in 2023, compared to $86.5 million in 2022. This is due primarily to the disposition of Reserve National in December 2022. Insurance expenses decreased by $67.9 million in 2023, compared to 2022, due primarily to the disposition of Reserve National in December 2022. 2022 Compared withii 2021 The financial information for the Accident and Health Insurance product line includes the results of Reserve National through December 1, 2022, the date it was sold. Earned premiums on accident and health insurance decreased by $21.7 million in 2022, compared to 2021. This is due primarily to a lower volume of sales and the disposition of Reserve National. Policyholders’ Benefits and Incurred Losses and LAE on accident and health insurance were $86.5 million in 2022, compared to $96.1 million in 2021 due primarily to lower frequency of claims. Insurance expenses decreased by $12.5 million in 2022, compared to 2021, due primarily to lower volume of accident and health insurance products. 45 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIFE INSURANCE (Continued) Propertytt Insurance Selected financial information for the property insurance product line is presented below. DOLLARS IN MILLIONS II 2023 2022 2021 Earned Premiums ............................................................................................................. $ 45.3 $ 50.5 $ 61.9 Net Investment Income .................................................................................................... Change in Value of Alternative Energy Partnership Investments.................................... Total Revenues................................................................................................................. 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 ................................................................................. Total Incurred Losses and LAE ....................................................................................... Insurance Expenses .......................................................................................................... Adjud sted Operating Income ............................................................................................. Income Tax Expense ........................................................................................................ Total Product Line Adjud sted Net Operating Income ....................................................... $ Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio .................................................... Current Year Catastrophe Losses and LAE Ratio............................................................ Prior Years Non-catastrophe Losses and LAE Ratio ....................................................... Prior Years Catastrophe Losses and LAE Ratio .............................................................. 1.6 — 46.9 8.9 2.2 1.3 0.8 13.2 23.6 10.1 (2.1) 8.0 3.2 (0.3) 53.4 12.5 1.8 1.3 1.5 17.1 26.5 9.8 (1.9) 7.9 $ 2.3 (0.5) 63.7 14.2 13.0 1.2 (0.1) 28.3 31.7 3.7 (0.1) $ 3.6 19.5 % 24.7 % 23.0 % 4.9 2.9 1.8 3.6 2.6 3.0 21.0 1.9 (0.2) Total Incurred Loss and LAE Ratio ................................................................................. 29.1 % 33.9 % 45.7 % 2023 Compared withii 2022 Earned Premiums from property insurance decreased by $5.2 million in 2023, compared to 2022, due primarily to lower volume of property insurance products. Incurred losses and LAE on property insurance were $13.2 million, or 29.1% of earned premiums, in 2023, compared to $17.1 million, or 33.9% earned premiums, in 2022. Underlying losses and LAE were $8.9 million, or 19.5% of property insurance earned premiums, in 2023, compared to $12.5 million, or 24.7% of property insurance earned premiums, in 2022, due primarily to lower claim frequency and severity. Catastrophe losses and LAE (excluding loss reserve development) were $2.2 million in 2023, compared to $1.8 million in 2022. Catastrophe losses and LAE increased $0.4 million due primarily to higher frequency partially offsff et by lower severity of catastrophe claims. Adverse loss and LAE reserve development was $2.1 million in 2023, compared to adverse development of $2.8 million in 2022. 2022 Compared withii 2021 Earned premiums from property insurance decreased by $11.4 million in 2022, compared to 2021, due primarily to lower volume of property insurance products. Incurred losses and LAE on property insurance were $17.1 million, or 33.9% of earned premiums, in 2022, compared to $28.3 million, or 45.7% earned premiums, in 2021. Underlying losses and LAE were $12.5 million, or 24.7% of property insurance earned premiums, in 2022, compared to $14.2 million, or 23.0% of property insurance earned premiums, in 2021, an increase of 1.7 percentage points due primarily to higher claim severity. Catastrophe losses and LAE (excluding loss reserve development) were $1.8 million in 2022, compared to $13.0 million in 2021. Catastrophe losses and LAE decreased $11.2 million due primarily to both lower frequency of catastrophe claims and lower claim severity. Adverse loss and LAE reserve development was $2.8 million in 2022, compared to adverse development of $1.1 million in 2021. 46 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, 2023, 2022 and 2021 is presented below. LARS IN MILLIONS II Investment Income: 2023 2022 2021 Interest on Fixed Income Securities .................................................................................. $ Dividends on Equity Securities Excluding Alternative Investments ................................ Alternative Investments: $ 346.0 4.4 $ 300.1 6.3 277.7 15.9 Equity Method Limited Liability Investments............................................................. Limited Liability Investments Included in Equity Securities ...................................... Total Alternative Investments ........................................................................................... Short-term Investments ..................................................................................................... Loans to Policyholders ...................................................................................................... Real Estate......................................................................................................................... Company-Owned Life Insurance ...................................................................................... Other.................................................................................................................................. Total Investment Income ....................................................................................................... Investment Expenses: Real Estate......................................................................................................................... Other Investment Expenses ............................................................................................... Total Investment Expenses .................................................................................................... Net Investment Income .......................................................................................................... $ 10.5 19.0 29.5 18.0 20.9 8.9 29.2 12.9 469.8 8.8 41.3 50.1 419.7 $ 31.3 42.1 73.4 3.7 21.5 10.1 37.9 7.7 460.7 7.9 30.2 38.1 422.6 $ 56.7 46.9 103.6 1.0 21.7 9.3 25.7 6.7 461.6 9.7 24.6 34.3 427.3 2023 Compared withii 2022 Net Investment Income was $419.7 million and $422.6 million for the years ended December 31, 2023 and 2022, respectively. Net Investment Income decreased by $2.9 million in 2023 due primarily to lower returns on Alternative Investments partially offsff et by higher rate earned on Fixed Income Securities and Short-term Investments. 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. 2022 Compared withii 2021 Net Investment Income was $422.6 million and $427.3 million for the years ended December 31, 2022 and 2021, respectively. Net Investment Income decreased by $4.7 million in 2022 due primarily to lower valuations on Equity Method Limited Liability Investments, lower balances in Equity Securities, and lower rate on Fixed Income Securities, partially offsff et by higher levels of investments in Fixed Income Securities and Company-Owned Life Insurance. 47 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT RESULTS (Continued) Total Comprehensive Investmett nt Gains (Losses) The components of Total Comprehensive Investment Gains (Losses) for the years ended December 31, 2023, 2022 and 2021 are presented below. DOLLARS IN MILLIONS Recognized in Consolidated Statements of Loss: II 2023 2022 2021 Income (Loss) from Change in Fair Value of Equity and Convertible Securities....... $ Gains on Sales ................................................................................................................ Losses on Sales .............................................................................................................. (Losses) Gains on Hedging Activity .............................................................................. Impairment Losses ......................................................................................................... Net (Losses) Gains Recognized in Consolidated Statements of Loss........................... Recognized in Other Comprehensive Income (Loss) ...................................................... Total Comprehensive Investment Gains (Losses)............................................................ $ 4.7 6.7 (13.4) (11.9) (1.1) (15.0) 237.1 222.1 $ (79.9) $ 41.3 (38.7) 1.7 (25.8) (101.4) (1,541.2) $ (1,642.6) $ 114.6 68.0 (3.2) — (11.0) 168.4 (286.6) (118.2) Total Comprehensive Investment Gains were $222.1 million in 2023, compared to Total Comprehensive Investment Losses of $1,642.6 million in 2022. The increase of $1,864.7 million was primarily due to a decrease in the Company’s unrealized loss position on the fixed income bond portfolff io. Total Comprehensive Investment Losses were $1,624.6 million in 2022, compared to $118.2 million in 2021. The increase in losses of $1,524.4 million primarily due to a decrease in the fair value of the Company’s fixed income bond portfolff io. s Income (Loss) from Change in Fair Value of Equityii and Convertible Securitieii The components of Income (Loss) from Change in Fair Value of Equity and Convertible Securities for the years ended December 31, 2023 and 2022 are presented below. 2023 2022 1.8 — 0.6 2.3 2.9 4.7 — 4.7 $ $ (8.9) (0.4) (46.5) (21.2) (67.7) (77.0) (2.9) (79.9) II red Stocks..................................................................................................................................... $ DOLLARS IN MILLIONS Preferff Common Stocks..................................................................................................................................... Other Equity Interests: 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................................. $ 48 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT RESULTS (Continued) Net Realizll ed (Losses) Gains on Sales of Investmentstt The components of Net Realized Investment (Losses) Gains for the year ended December 31, 2023, 2022 and 2021 are presented below. DOLLARS IN MILLIONS Fixed Maturities: II 2023 2022 2021 Gains on Sales ................................................................................................................... $ Losses on Sales.................................................................................................................. (Losses) Gains on Hedging Activity $ 5.9 (10.9) (11.9) $ 31.6 (31.9) 1.7 Equity Securities: Gains on Sales ................................................................................................................... Losses on Sales.................................................................................................................. 0.6 (2.5) 9.7 (6.8) Equity Method Limited Liability Investments: Gains on Sales ................................................................................................................... Real Estate: Gains on Sales ................................................................................................................... Losses on Sales.................................................................................................................. Other Investments: — — — Gains on Sales ................................................................................................................... Net Realized Investment (Losses) Gains ............................................................................... $ 0.2 (18.6) $ — — — — 4.3 Gross Gains on Sales ............................................................................................................. $ Gross Losses on Sales............................................................................................................ (Losses) Gains on Hedging Activity...................................................................................... Net Realized Investment (Losses) Gains ............................................................................... $ $ 6.7 (13.4) (11.9) (18.6) $ 41.3 (38.7) 1.7 4.3 $ $ $ 63.4 (2.1) — 4.1 (0.7) 0.4 0.1 (0.4) — 64.8 68.0 (3.2) — 64.8 Fixedii Maturities Net Realized Gains and Losses on Sale of Fixed Maturities for the year ended December 31, 2023 primarily relate to normal portfolff io management. Net Realized Gains and Losses on Sale of Fixed Maturities for the year ended December 31, 2022 primarily relate to normal portfolff io management and to a lesser extent, a repositioning of the portfolff io for duration extension purpos es. rr Net Realized Gains on Sales of Fixed Maturities for the year ended December 31, 2021 primarily relate to normal portfolff management and to a lesser extent, a repositioning of the portfolff io for duration extension purpos es. r io Equity Securities Net Realized Gains and Losses on Sale of Equity Securities for the year ended December 31, 2023 primarily related to disposals of equity securities and preferff red stock. Net Realized Gains and Losses on Sale of Equity Securities for the year ended December 31, 2022 primarily relate disposals of equity method limited liabia lity investments and preferff red stock. 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. Impaim rmii ent Losses The Company regularly reviews its investment portfolff 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 suppor io to determine whether a decline in the fair value of an investment has t the entire amortized cost basis, the credit loss is reported in the u 49 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT RESULTS (Continued) Consolidated Statements of Loss in the period that the declines are evaluated. Conversely, an increase in the fair value or disposal of an investment with a previously establa ished credit allowance will result in the reversal of impairment losses reported in the Consolidated Statements of Loss in the period. The components of Impairment Losses in the Consolidated Statements of Loss for the year ended December 31, 2023, 2022, 2021 were: DOLLARS IN MILLIONS II 2023 2022 2021 Amount Number of Issuers Amount Number of Issuers Amount Number of Issuers Fixed Maturities ................................................................ $ Equity Securities at Modified Cost.................................... Real Estate......................................................................... Other.................................................................................. Impairment Losses1 ........................................................... $ I Includes losses from intent-to-sell securities of $(2.0) million, $(23.8) million and $(6.6) million for the years ended December 31, 2023, 2022 and 2021, respectively. 21 $ (25.8) — — — $ (25.8) (6.4) (4.2) (0.4) — (11.4) (0.1) (0.5) — (0.5) (1.1) 57 $ — — — 1 — 6 $ 17 13 1 — Fixedii Maturities Impairment Losses recognized in the Consolidated Statements of Loss for the year ended December 31, 2023 related primarily to investments in Intent-to-Sell securities. Impairment Losses recognized in the Consolidated Statements of Loss for the year ended December 31, 2022 related primarily to investments in Fixed Maturities where the Company establa ished an allowance for expected credit loss. Impairment Losses recognized in the Consolidated Statements of Loss for the year ended December 31, 2021 related primarily to investments in Fixed Maturities where the Company establa ished an allowance for expected credit loss. Equity Securities The Company recognized Impairment Losses in the Consolidated Statements of Loss for the year ended December 31, 2023 primarily related to investments in Equity Securities at Modified Cost where the Company has the intent or requirement to sell. The Company did not recognize any Impairment Losses in the Consolidated Statements of Loss for the year ended December 31, 2022. Impairment Losses recognized in the Consolidated Statements of Loss for the year ended December 31, 2021 primarily related to investments in Equity Securities at Modified Cost where the Company had the intent or requirement to sell. Real Estate The Company did not recognize any Impairment Losses on Real Estate Held for Investment in the Consolidated Statements of Loss for the years ended December 31, 2023 and 2022. Impairment Losses recognized in the Consolidated Statements of Loss for the year ended December 31, 2021 related to investments in Real Estate held with the intent to sell. INVESTMENT QUALITY AND CONCENTRATIONS io is comprised primarily of high-grade corporate, municipal and agency The Company’s fixed maturity investment portfolff bonds. At December 31, 2023, approximately 96.2% of the Company’s fixed maturity investment portfolff investment-grade, which the Company defines as a security issued by a high quality obligor with at least a relatively stable l payments of principal and interest will timely occur and carry a credit profileff 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 or 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. and where it is highly likely that all contractuat io was rated 50 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT QUALITY AND CONCENTRATIONS (Continued) The following tabla e summarizes the credit quality of the Company’s fixed maturity investment portfolff and 2022. io at December 31, 2023 NAIC Rating 1 2 3-4 5-6 Fair Value Rating in Millions AAA, AA, A ............................................................................... $ 4,962.0 1,657.3 BBB ............................................................................................ 204.4 BB, B .......................................................................................... 58.2 CCC or Lower............................................................................. Total Investments in Fixed Maturities........................................................ $ 6,881.9 Percentage of Total Fair Value in Millions 72.1 % $ 4,896.4 1,687.4 24.1 239.7 3.0 71.3 0.8 100.0 % $ 6,894.8 Percentage of Total 71.0 % 24.5 3.5 1.0 100.0 % Dec 31, 2023 Dec 31, 2022 Gross unrealized losses on the Company’s investments in below-investment-grade fixed maturities were $25.5 million and $32.8 million at December 31, 2023 and 2022, respectively. The following tabla e summarizes the fair value of the Company’s investments in governmental fixed maturities at December 31, 2023 and 2022. DOLLARS IN MILLIONS II Dec 31, 2023 Dec 31, 2022 Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments U.S. Government and Government Agencies and Authorities................... $ States and Political Subdiu visions: 511.5 5.7 % $ 528.0 6.0 % Revenue Bonds........................................................................................ 1,235.2 States ....................................................................................................... visions .............................................................................. Political Subdi u 99.8 66.9 13.9 1.1 0.8 1,324.3 143.8 100.8 3.8 Foreign Governments ................................................................................. Total Investments in Governmental Fixed Maturities ................................ $ 1,917.2 — 4.1 21.5 % $ 2,101.0 15.1 1.6 1.1 — 23.8 % The following tabla e summarizes the fair value of the Company’s investments in non-governmental fixed maturities by industryr at December 31, 2023 and 2022. DOLLARS IN MILLIONS II Dec 31, 2023 Dec 31, 2022 Fair Value Percentage of Total Investments Fair Value Percentage of Total Investments ff urt Finance, Insurance and Real Estate............................................................ $ 2,070.5 1,077.6 Manufact ing ............................................................................................ 807.3 Transportation, Communication and Utilities ............................................ 639.4 Services ...................................................................................................... 23.3 % $ 2,007.5 1,085.9 12.1 733.7 9.1 602.4 7.2 Mining ........................................................................................................ Retail Trade ................................................................................................ tion ............................................................................................... Construcrr Other........................................................................................................... 174.3 156.0 4.4 35.2 2.0 1.8 — 0.4 173.3 165.1 11.7 14.2 22.8 % 12.4 8.3 6.9 2.0 1.9 0.1 0.2 Total Investments in Non-governmental Fixed Maturities ........................ $ 4,964.7 55.9 % $ 4,793.8 54.6 % 51 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INVESTMENT QUALITY AND CONCENTRATIONS (Continued) The following tabla e summarizes the fair value of the Company’s investments in non-governmental fixed maturities by range of amount invested at December 31, 2023. DOLLARS IN MILLIONS II Below $5................................................................................................................................................ $5 -$10................................................................................................................................................... $10 - $20................................................................................................................................................ $20 - $30................................................................................................................................................ Greater Than $30................................................................................................................................... Number of Issuers Aggregate Fair Value 669 192 110 20 6 $ 1,361.7 1,424.2 1,491.7 476.1 211.0 Total....................................................................................................................................................... 997 $ 4,964.7 The Company’s short-term investments primarily consist of money market funds and short term bonds. At December 31, 2023, the Company had $219.5 million invested in money market funds which primarily invest in U.S. Treasury securities and $301.4 million invested in U.S. Treasuryr bills and short-term bonds. The following tabla e 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, 2023. DOLLARS IN MILLIONS Fixed Maturities: II States including their Political Subdiu visions: Fair Value Percentage of Total Investments Califorff nia ......................... Texas............................................................................................................................................. $ Michigan .......................... New York...................................................................................................................................... Georgia.......................................................................................................................................... Louisiana ...................................................................................................................................... Pennsylvania ................................................................................................................................. Florida........................................................................................................................................... Colorado........................................................................................................................................ Missouri ........................................................................................................................................ Total........................................................................................................................................................ $ 137.4 116.6 83.7 76.5 73.7 62.4 57.9 57.6 49.1 42.1 757.0 1.5 % 1.3 0.9 0.9 0.8 0.7 0.7 0.6 0.6 0.5 8.5 % 52 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, real estate and senior debt. The Company’s investments in these limited liability investment companies and limited partnerships are reported either as Equity Method Limited Liability Investments, Other Equity Interests and included in Equity Securities at Fair Value, or Equity Securities at Modified Cost, depending on the accounting method used to report the investment. Additional information pertaining to these investments at December 31, 2023 and 2022 is presented below. Reported as Equity Method Limited Liability Investments: Asset Class Unfunded Commitment in Millions Dec 31, 2023 Reported Value in Millions Dec 31, 2023 Dec 31, 2022 Mezzanine Debt ............................................................................................... $ Real Estate ....................................................................................................... Senior Debt ...................................................................................................... Leveraged Buyout............................................................................................ Secondary Transactions ................................................................................... Distressed Debt................................................................................................ Growth Equity ................................................................................................. Hedge Fund...................................................................................................... Other ................................................................................................................ Total Equity Method Limited Liability Investments............................................ Alternative Energy Partnership Investments........................................................ Reported as Other Equity Interests at Fair Value: Mezzanine Debt ............................................................................................... Senior Debt ...................................................................................................... Leveraged Buyout............................................................................................ Distressed Debt................................................................................................ Growth Equity ................................................................................................. Secondary Transactions ................................................................................... Hedge Funds .................................................................................................... Real Estate ....................................................................................................... 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......................................... $ 43.1 — 39.9 0.6 1.7 — — — — 85.3 — 67.0 10.6 10.0 13.0 6.5 3.1 — 0.2 — 110.4 — — $ 125.4 41.9 19.0 8.6 7.9 7.9 1.2 0.1 9.7 221.7 17.3 124.0 24.8 19.0 12.4 6.4 2.8 1.9 0.1 — 191.4 4.8 4.8 114.3 43.3 21.6 8.9 9.3 9.4 1.2 0.5 8.5 217.0 16.3 106.0 21.9 21.6 12.5 5.4 3.5 18.1 — 0.1 189.1 8.3 8.3 Total Investments in Limited Liability Companies and Limited Partnerships .... $ 195.7 $ 435.2 $ 430.7 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. 53 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, 2023, 2022 and 2021 were: LARS IN MILLIONS II Insurance Expenses: 2023 2022 2021 Commissions ....................................................................................................................... $ General Expenses ................................................................................................................ Taxes, Licenses and Fees .................................................................................................... Total Costs Incurred ............................................................................................................ Net Policy Acquisition Costs Amortized (Deferff red) .......................................................... Amortization of Value of Business Acquired (“VOBA”)................................................... Insurance Expenses................................................................................................................ Loss from Early Extinguishment of Debt .............................................................................. Interest and Other Expenses: 584.2 342.8 79.6 1,006.6 43.8 2.0 1,052.4 — $ 724.8 358.4 99.5 1,182.7 14.2 4.1 1,201.0 3.7 $ 817.6 339.5 104.3 1,261.4 (77.5) 45.0 1,228.9 — Interest Expense ................................................................................................................ Other Expenses: 56.1 54.7 43.6 Acquisition and Disposition Related Transaction, Integration, Restructurt Other Costs..................................................................................................................... Pension Settlement Expense........................................................................................... Other............................................................................................................................... 120.3 70.2 122.7 313.2 Interest and Other Expenses................................................................................................... 369.3 Goodwill Impairment............................................................................................................. 49.6 Total Expenses ....................................................................................................................... $ 1,471.3 Other Expenses ing and 62.9 — 140.0 202.9 257.6 — $ 1,462.3 43.9 — 131.9 175.8 219.4 — $ 1,448.3 Insurance Expenses Insurance Expenses were $1,052.4 million in 2023 compared to $1,201.0 million in 2022. Insurance Expenses decreased by $148.6 million in 2023 due primarily to lower expenses from less business being written. Insurance Expenses were $1,201.0 million in 2022 compared to $1,228.9 million in 2021. Insurance Expenses decreased by $27.9 million for the year ended December 31, 2022, compared to 2021, due primarily to net amortization of policy acquisition costs as the acquisition of AAC led to higher deferrals in 2021. This was partially offsff et by a corresponding decrease in the amortization of VOBA from the acquisition of AAC and lower commissions as premium growth had slowed due to ongoing profitff improvement actions. Loss from Early Extinguishment of Debt Loss from Early Extinguishment of Debt for 2022 was due to the redemption of the 2022 Senior Notes. Interest and Other Expenses Interest expense increased by $1.4 million in 2023, compared to 2022, primarily due to the addition of the 2032 Senior Notes and the 2062 Junior Debenturt es. Interest expense increased by $11.1 million for the year ended December 31, 2022, compared to 2021, due primarily to the addition of the 2032 Senior Notes and the 2062 Junior Debenturt es in 2022. Other Expenses increased by $110.3 million in 2023, compared to 2022, and included a $70.2 million noncash charge related to the settlement of the Company’s pension obligations. The increase in Acquisition and Disposition Related Transaction, Integration, Restructurt ing and Other Costs included $28.6 million of higher integration related expenses due to continued investments in information technology, $14.8 million of real estate exit costs related to the impairment of the Company’s corporate offiff ce lease in Chicago, Illinois, and $6.4 million of accruer d severance expenses, mostly associated with the decision to run-offff and exit the Preferff red Insurance business. Other Expenses increased by $27.1 million in 2022, compared to 2021, due primarily to higher restructurt loss on the sale of Reserve National. ing expenses and the 54 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) INSURANCE, INTEREST AND OTHER EXPENSES (Continued) Goodwill Impairment Goodwill Impairment increased by $49.6 million in 2023, compared to 2022, due to the impairment of goodwill related to the Preferff Statements for more information. red Property & Casualty Insurance segment. See Note 14 “Goodwill and Intangibles,” to the Consolidated Financial INCOME TAXES income tax rate was 21% for the year ended December 31, 2023, 2022 and 2021. The The federal corporate statutt oryr Company’s effeff ctive income tax rate, which was 21.6%, 22.7% and 50.9% for 2023, 2022, and 2021 respectively, differs from the federal corporate income tax rate due primarily to (1) the effeff cts of tax-exempt investment income, (2) nontaxable income associated with the change in cash surrender value on Company-Owned Life Insurance, (3) Alternative Energy Partnership Investment and general business tax credits, (4) a permanent differff ence between the amount of long-term equity-based compensation expense recognized under GAAP and the amount deductible in the computation of Federal taxabla e income (5) a permanent difference associated with nondeductible executive compensation, (6) an impairment of non-tax deductible goodwill, (7) impact of tax legislation in foreign jurisdictions, and (8) a change in valuation allowance. On December 27, 2023, legislation implementing a corporate income tax (“CIT”) in Bermuda was enacted into law. The CIT imposes a 15% income tax that applies to Bermuda businesses which are part of multinational enterprise groups with annual revenue of €750 million or more and will be effeff ctive for fiscal years beginning on or afteff r January 1, 2025, with a five-year deferred effeff ctive date for certain groups with a limited international footprt tax provision, the estimated impact of the Bermuda CIT on its Bermuda based reinsurance company at the effeff ctive date. The Company will continue to monitor guidance as it is released from the Government of Bermuda. int. Kemper has recorded, as part of its total income The Inflation Reduction Act (the "Law") was signed into law on August 16, 2022 and became generally effeff ctive on January 1, 2023. Included in the provisions of the Law are various changes to the tax code, including the establa ishment of a Corporate Alternative Minimum Tax (“CAMT”). The Company, at this time, is not subju ect to the CAMT. Tax-exempt investment income and dividends received deductions were $22.7 million in 2023, compared to $25.1 million in 2022, and $21.8 million in 2021. The nontaxable increase in cash surrender value on Company-Owned Life Insurance was $29.2 million in 2023, compared to $37.9 million in 2022, and $25.7 million in 2021. The Company realized investment tax credits and other federal income tax credits of $3.1 million in 2023, compared to realized investment tax credits and other federal tax credits of $6.5 million for the same period in 2022, and $66.1 million in 2021. The amount of expense recognized for long-term equity-based compensation expense under GAAP was $1.4 million higher than the amount that would be deductible under the IRC in 2023, compared to $6.3 million higher in 2022 and $1.3 million lower in 2021. The amount of nondeductible executive compensation was $8.5 million in 2023, compared to $7.3 million in 2022, and $13.0 million in 2021. The total impairment of non-tax-deductible goodwill was $30.0 million in 2023, compared to none in 2022 and 2021. No tax expense was recognized related to sold and availabla e for sale subsu idiaries in 2023, compared to $11.5 million in 2022 and none in 2021. As a result of recently enacted tax legislation in jurisdictions in which the Company operates, a tax benefit of $27.4 million was recorded. No tax expense or benefit was recorded in 2022 or 2021 as a result of enacted tax legislation. The Company recorded a change in valuation allowance of $27.4 million in 2023 for those foreign deferred tax assets it determined were not more-likely-than-not to be realized. No valuation allowance was recorded in 2022 or 2021. 55 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SUPPLEMENTAL FINANCIAL INFORMATION As discussed in Note 2, “Summary of Accounting Policies and Accounting Changes”, to the Consolidated Financial Statements effeff ctive January 1, 2023, the Company adopted Accounting Standards Update No. 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts and related amendments” (“LDTI”) under the modified retrospective method. Prior period amounts in the financial statements have been adjud sted to reflect application of the new guidance. The below tabla e provides the Consolidated Statements of Income (Loss) results under LDTI for 2023. II MM STT AMOUNT ,SS EXCEPT PEREE SHAREHH DOLLARS IN MILLIONS Revenues: Earned Premiums.................................................................................... $ 1,063.8 104.6 0.6 1.9 Net Investment Income ...................................................................... Change in Value of Alternative Energy Partnership Investments...... Other Income...................................................................................... Income (Loss) from Change in Fair Value of Equity and Dec 31, 2023 Quarter Ended Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 $ 1,117.8 107.0 0.8 2.4 $ 1,166.9 106.3 0.8 1.7 $ 1,180.9 101.8 0.7 1.2 Convertible Securities................................................................... Net Realized Investment (Losses) Gains ........................................... Impairment Losses ............................................................................. Total Revenues ....................................................................................... Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjud stment Expenses ............................................................................................ Insurance Expenses ............................................................................ Loss from Early Extinguishment of Debt .......................................... Interest and Other Expenses............................................................... Goodwill Impairment ........................................................................ Total Expenses........................................................................................ Income (Loss) before Income Taxes ...................................................... Income Tax (Expense) Benefit ............................................................... Net Income (Loss) .................................................................................. Less: Net Loss attributable to Noncontrolling Interest........................... Net Income (Loss) attributable to Kemper Corporation......................... $ Net Income (Loss) attributable to Kemper Corporation Per Unrestricted Share: Basic................................................................................................... $ Diluted................................................................................................ $ (2.2) 19.7 (1.2) 1,187.2 808.1 258.0 — 57.6 — 1,123.7 63.5 (12.2) 51.3 (0.1) 51.4 0.80 0.80 $ $ $ 2.8 (30.3) (1.1) 1,199.4 2.4 (14.4) (0.9) 1,262.8 975.2 259.0 — 156.0 — 1,390.2 (190.8) 44.4 (146.4) (0.1) (146.3) $ 984.7 266.1 — 78.3 49.6 1,378.7 (115.9) 18.8 (97.1) — (97.1) $ 1.7 6.4 2.1 1,294.8 1,052.0 269.3 — 77.4 — 1,398.7 (103.9) 23.8 (80.1) — (80.1) (2.28) $ (2.28) $ (1.52) $ (1.52) $ (1.25) (1.25) 56 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SUPPLEMENTAL FINANCIAL INFORMATION (Continued) The below tabla e provides the Consolidated Statements of Comprehensive Income (Loss) results under LDTI for 2023. arter Ended DOLLARS IN MILLIONS Net Loss ..................................................................................................... $ II Dec 31, 2023 Sep 30, 2023 51.3 $ (146.4) $ Jun 30, 2023 Mar 31, 2023 (80.1) (97.1) $ 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 (Loss) ..................................................................................... Credit Losses Recognized in Consolidated Statements of Income (Loss) .................................................................................................. Change in Net Unrecognized Postretirement Benefit Costs ................... Loss on Cash Flow Hedges..................................................................... Change in Discount Rate on Future Life Policyholder Benefits............. Other Comprehensive Income (Loss) Before Income Taxes..................... Other Comprehensive Income Tax (Expense) Benefit .............................. Other Comprehensive Income (Loss), Net of Taxes ................................. Total Comprehensive Income (Loss)......................................................... Less: Net Loss attributable to Noncontrolling Interest ............................. Less: Other Comprehensive Loss attributable to Noncontrolling Interest Less: Total Comprehensive Loss attributable to Noncontrolling Interest . 462.7 (327.9) (83.2) 187.2 1.1 (1.1) (0.1) (319.3) 143.3 (30.7) 112.6 163.9 (0.1) — (0.1) (1.5) 61.4 — 276.8 8.8 (1.4) 7.4 (139.0) (0.1) — (0.1) (0.1) (0.6) (0.1) 50.6 (33.4) 7.3 (26.1) (123.2) — — — — (0.5) — (109.8) 76.9 (16.7) 60.2 (19.9) — — — Comprehensive Income (Loss) attributable to Kemper Corporation......... $ 164.0 $ (138.9) $ (123.2) $ (19.9) 57 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SUPPLEMENTAL FINANCIAL INFORMATION (Continued) The below tabla e provides the Consolidated Statements of Loss results under LDTI for 2022. II MM STT AMOUNT ,SS EXCEPT PEREE SHAREHH DOLLARS IN MILLIONS Revenues: Earned Premiums.................................................................................... $ 1,264.9 106.3 1.3 1.9 Net Investment Income ...................................................................... Change in Value of Alternative Energy Partnership Investments...... Other Income...................................................................................... Loss from Change in Fair Value of Equity and Convertible Dec 31, 2022 Quarter to Date Ended Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 $ 1,290.9 97.8 0.4 4.0 $ 1,337.6 118.5 (4.9) 0.9 $ 1,320.0 100.0 (16.7) 2.4 Securities....................................................................................... Net Realized Investment Gains (Losses) .......................................... Impairment Losses ............................................................................. Total Revenues ....................................................................................... Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjud stment Expenses ............................................................................................ Insurance Expenses ............................................................................ Loss from Early Extinguishment of Debt .......................................... Interest and Other Expenses............................................................... Goodwill Impairment ........................................................................ Total Expenses........................................................................................ Loss before Income Taxes ...................................................................... Income Tax Benefit ................................................................................ Net Loss .................................................................................................. Less: Net Loss attributable to Noncontrolling Interest........................... Net Loss attributable to Kemper Corporation ........................................ $ Net Loss attributable to Kemper Corporation Per Unrestricted Share: — 3.9 (3.7) 1,374.6 (11.2) (12.1) (8.3) 1,361.5 (40.5) 11.0 (4.9) 1,417.7 1,073.0 288.0 — 86.5 — 1,447.5 (72.9) 19.6 (53.3) — (53.3) $ 1,085.3 300.5 — 63.5 — 1,449.3 (87.8) 13.0 (74.8) — (74.8) $ 1,151.1 307.7 — 53.5 — 1,512.3 (94.6) 22.4 (72.2) — (72.2) $ (28.2) 1.5 (8.9) 1,370.1 1,123.2 304.8 3.7 54.1 — 1,485.8 (115.7) 29.4 (86.3) — (86.3) Basic................................................................................................... $ Diluted................................................................................................ $ (0.84) $ (0.84) $ (1.17) $ (1.17) $ (1.13) $ (1.13) $ (1.36) (1.36) 58 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) SUPPLEMENTAL FINANCIAL INFORMATION (Continued) The below tabla e provides the Consolidated Statements of Comprehensive Income (Loss) results under LDTI for 2022. arter Ended DOLLARS IN MILLIONS Net Loss ..................................................................................................... $ II Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 (86.3) (72.2) $ (74.8) $ 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 Loss ... Credit Losses Recognized in Consolidated Statements of Loss ......... Change in Net Unrecognized Postretirement Benefit Costs ................... (Loss) Gain on Cash Flow Hedges ......................................................... Change in Discount Rate on Future Life Policyholder Benefits............. Other Comprehensive Income (Loss) Before Income Taxes..................... Other Comprehensive Income Tax (Expense) Benefit .............................. Other Comprehensive Income (Loss), Net of Taxes ................................. Total Comprehensive Income (Loss)......................................................... Less: Net Loss attributable to Noncontrolling Interest ............................. Less: Other Comprehensive Loss attributable to Noncontrolling Interest Less: Total Comprehensive Loss attributable to Noncontrolling Interest . (53.3) $ 92.1 3.2 19.2 — (40.2) 74.3 (15.4) 58.9 5.6 — — — (411.5) (0.8) (0.2) — 330.9 (81.6) 17.2 (64.4) (139.2) — — — (587.1) 6.9 — (0.2) 527.7 (52.7) 11.1 (41.6) (113.8) — — — (644.6) (7.4) (0.1) 6.1 562.3 (83.7) 17.5 (66.2) (152.5) — — — Comprehensive Loss attributable to Kemper Corporation ........................ $ 5.6 $ (139.2) $ (113.8) $ (152.5) LIQUIDITY AND CAPITAL RESOURCES Shelf Regie stii rat tion Statement The Company filed a universal shelf registration statement with the Securities and Exchange Commission in the first quarter of 2023. Under this shelf registration, the Company may issue an undetermined amount of securities including common stock, preferff terms of any securities issued under this registration will be included in each applicable prospectust red stock, depositoryrr shares, debt securities, warrants, subsu cription rights, purchase contracts, and purchase units. Specificff ement. supplu Amended and Extendeddd Credit Agreg ement On March 15, 2022, the Company entered into an amended and extended credit agreement. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to $600.0 million and extended the maturity date to March 15, 2027. Furthermore, the amended and extended credit agreement provides for an accordion featurt e whereby the Company can increase the revolving credit borrowing capaa maximum capacity of $800.0 million. Financial covenants within the agreement limit the Company from accessing the maximum capacity. The amount availabla e as of December 31, 2023 was $393.0 million. There were no outstanding borrowings under the credit agreement on either December 31, 2023 or December 31, 2022. city by an additional $200.0 million for a total of Common Stock Offeff ring Kemper is authorized to issue 20 million shares of $0.10 par value preferff common stock. No preferff and 63,912,762 shares of common stock outstanding at December 31, 2023 and 2022, respectively. red shares were issued or outstanding at December 31, 2023 and 2022. There were 64,111,555 shares red stock and 100 million shares of $0.10 par value 59 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) Long-term Debt The Company designates debt obligations as either short-term or long-term based on maturity date at issuance. Total amortized cost of Long-term Debt outstanding at December 31, 2023 and December 31, 2022 was: (Dollars in Millions) Dec 31, 2023 Dec 31, 2022 Senior Notes ............................................................................................................................................. 4.350% Senior Notes due Februar ry 15, 2025...................................................................................... $ 449.6 $ 2.400% Senior Notes due September 30, 2030................................................................................... 3.800% Senior Notes due Februar 5.875% Fixed-Rate Reset Junior Suboru ry 23, 2032...................................................................................... dinated Debenturt es due 2062..................................................... 397.0 396.0 146.6 449.3 396.6 395.5 145.5 Total Long-term Debt Outstanding .......................................................................................................... $ 1,389.2 $ 1,386.9 See Note 23, “Debt,” to the Consolidated Financial Statements for more information regarding the Company’s long-term debt. Federal Home Loan Bank Agreg ements Kemper’s subsu idiaries, United Insurance Company of America (“United Insurance”), Trinity Universal Insurance Company (“Trinity”), and AAC are members of the Federal Home Loan Banks (“FHLBs”) of Chicago, Dallas and Chicago, respectively. Alliance United Insurance Company (“Alliance”) was a member of the FHLB of San Francisco until it surrendered all Califorff nia licenses on January 30, 2023, and ceased to exist as an insurance company. AAC became a member of the FHLB of Chicago in May 2022. United Insurance and Trinity became members of the FHLBs of Chicago and Dallas, respectively, in 2013. Under their memberships, United Insurance, Trinity and AAC may borrow through the advance program of their respective FHLB. As a requirement of membership in the FHLB, United Insurance, Trinity and AAC 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 Other Investments. The carrying value of FHLB of Chicago common stock was $16.6 million and $17.5 million at December 31, 2023 and December 31, 2022, respectively. The carrying value of FHLB of Dallas common stock was $3.6 million and $3.4 million at December 31, 2023 and December 31, 2022, respectively. The carrying value of FHLB of San Francisco common stock was $0.0 million and $1.4 million at December 31, 2023 and December 31, 2022, respectively. The Company periodically uses short-term FHLB borrowings for a combination of cash management and risk management purpos for spread lending purposes. es, in addition to long-term FHLB borrowings r During 2023, United Insurance received advances of $122.5 million from the FHLB of Chicago and made repayments of $166.1 million. United Insurance had outstanding advances from the FHLB of Chicago totaling $557.4 million at December 31, 2023. These advances were made in connection with the Company’s spread lending program. The proceeds related to these advances were used to purchase fixed maturt ity securities to earn incremental net investment income. For these advances, United Insurance held pledged securities in a custodial account with the FHLB of Chicago with a fair value of $629.3 million at December 31, 2023. 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 22, “Policyholder Obligations,” to the Consolidated Financial Statements for additional information about the United Insurance advances and related funding agreements. Common Stock Repur e chases 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 did not repurchase any of its common stock in 2023 or 2022, respectively. The Company repurchased approximately $161.7 million of stock at an average cost per share of $77.58 in 2021. As of December 31, 2023, 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 various factors, including market conditions, the Company’s financial condition, results of operations, availabla e liquidity, particular circumstances and other considerations. 60 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) Dividends to Shareholdell rs Kemper paid a quarterly dividend of $0.31 per common share for each quarter of 2023 and $0.31 per common share for each quarter of 2022, respectively. Dividends and dividend equivalents paid were $80.1 million, $79.7 million and $80.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. Subsidiary Dividends and Capia tal Contrit butions Various insurance laws restrict the ability of Kemper’s insurance subsu idiaries to pay dividends without regulatoryr approval. Such insurance laws applicable to the Company’s US based subsu idiaries generally restrict the amount of dividends paid in an annual period to the greater of statutt oryr net income from the previous year or 10% of statutt oryr capia tal and surplus. Kemper’s insurance subsu idiaries collectively paid $640.9 million, $311.7 million and $347.0 million in dividends to Kemper in 2023, 2022 and 2021, respectively. In 2024, Kemper’s US based insurance subsu idiaries capaa prior regulatoryr approval is estimated to be zero as of the filing date. city to pay dividends to Kemper without Kemper made capia tal contributions to insurance subsu idiaries of $489.1 million, $270.0 million and $126.0 million during 2023, 2022 and 2021, respectively. Sources and Uses of Funds The Company directly held cash and investments totaling $464.5 million at December 31, 2023, compared to $417.6 million at December 31, 2022. The primary sources of funds availabla e 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 subsu idiaries and borrowings under the credit agreement and from subsu idiaries. The primary sources of funds for Kemper’s insurance subsu idiaries are premiums, investment income, proceeds from the sales and maturity of investments, advances from the FHLBs of Chicago and Dallas, 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 and Dallas. 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 can 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 subsu idiaries 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 subsu idiaries 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, 2023, 2022 and 2021 is presented below. II DOLLARS IN MILLIONS Net Cash (Used in) Provided by Operating Activities ..................................................... $ Net Cash Provided by (Used in) Investing Activities ...................................................... Net Cash (Used in) Provided by Financing Activities ..................................................... 2023 (134.2) $ 107.9 (122.0) 2022 (210.3) $ (108.4) 382.9 2021 350.7 (118.2) (290.4) Cash availabla e for investment activities is dependent on cash flow from Operating Activities and Financing Activities and the level of cash the Company elects to maintain. 61 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) Net Cash (UseUU d in)n Provideddd by Operating Activities Net cash used in Operating Activities was $134.2 million in 2023, compared to $210.3 million used in 2022, a decrease of $76.1 million. The improvement in cash used in Operating Activities was primarily due to a $124.7 million federal income tax refund that was received in first quarter 2023, partially offsff et by the timing of paid claims and a decrease in new business written from our Property and Casualty operations. Net cash used by Operating Activities was $210.3 million in 2022, compared to $350.7 million generated in 2021, a decrease of $561.0 million. Cash from operating activities decreased primarily due to higher paid losses within the P&C business in 2022 due to an increase in frequency and rising loss costs from increased severity trends caused by rising inflation and supplu y chain constraints. Net Cash Provideddd by (UseUU d in)n Investing Activities Net cash provided by Investing Activities was $107.9 million in 2023, compared to $108.4 million used in 2022, a year over year increase of $216.3 million. The decrease in cash used in Investing Activities was primarily driven by the ongoing management of our investment portfolff explained above. io that was impacted by a decrease in cash from our Property and Casualty operations, as Net cash used in Investing Activities was $108.4 million in 2022, compared to $118.2 million used in 2021, a year over year increase of $9.8 million. This was primarily due to lower net sales of short term investments. Net sales of short term investments in 2021 were primarily used to fund the purchase of AAC and the repurchase of Kemper common stock. Proceeds from the sale of equity securities increased as the Company shifteff d its investment portfolff This was partially offsff et by proceeds from the sale of Reserve National and Infinity Security. io more heavily to fixed maturities. Net Cash (UseUU d in)n Provideddd by Financing Activities Net cash used in Financing Activities was $122.0 million in 2023, compared to cash generated by financing activities of $382.9 million in 2022, a year over year decrease of $504.9 million. This was primarily due to a decrease in debt raising activities in 2023 and a decrease in the advances from the Company’s borrowing arrangement with the FHLB used for spread lending rr purpos es. Net cash provided by Financing Activities was $382.9 million in 2022, compared to cash used by Financing Activities of $290.4 million in 2021, a year over year increase of $673.3 million. This was primarily due to the issuance of the 2032 Senior Notes and 2062 Junior Debenturt es, share repurchases in 2021, and increased net advances under the FHLB spread-lending program due to a more attractive interest rate environment in 2022. These were partially of offsff et by the redemption of the 2022 Senior Notes. CONTRACTUAL OBLIGATIONS Estimated cash disbursements pertaining to the Company’s contractuat l obligations at December 31, 2023 are presented below. II DOLLARS IN MILLIONS Long Term Debt Obligations...................................... $ Life and Health Insurance Policy Benefits ................. Property and Casualty Insurance Reserves................. Total Contractuat l Obligations .................................... $ Jan 1, 2024 to Dec 31, 2024 — $ 250.3 1,493.5 1,743.8 Jan 1, 2025 to Dec 31, 2026 449.6 487.7 894.1 1,831.4 $ Jan 1, 2027 to Dec 31, 2028 $ — $ 470.9 246.0 716.9 $ $ Afteff r Dec 31, 2028 939.6 8,370.1 46.9 9,356.6 $ Total 1,389.2 9,579.0 2,680.5 $ 13,648.7 Amounts included in Life and Health Insurance Policy Benefits within the contractuat 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 lapsa force for the policyholder or beneficiaryr 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 $4.5 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 e, but are undiscounted with respect to interest. Policies must remain in l obligations tabla e above represent the 62 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CONTRACTUAL OBLIGATIONS (Continued) mortality and policy lapsa e 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 Sheets at December 31, 2023. In addition to the contractuat million at December 31, 2023. The funding of such investment commitments is dependent on a number of factors, the timing of which is indeterminate. The Company cannot make a reasonabla y reliabla e estimate of the amount and period of related future payments, if any, for such liabia lity. l obligations included above, the Company had certain investment commitments totaling $195.7 CRITICAL ACCOUNTING ESTIMATES Kemper’s subsu idiaries conduct their operations in two industries: property and casualty insurance and lifeff Accordingly, the Company is subju ect to several industry-rr financial statements in accordance with GAAP requires the use of estimates and assumptions that affeff ct the reported amounts of assets and liabia lities, 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, l results could ultimately differ materially from the estimated amounts reported in a company’s financial statements. actuat Different assumptions are likely to result in different estimates of reported amounts. accounting principles under GAAP. The preparation of insurance. specificff The Company’s critical accounting policies most sensitive to estimates include the valuation of investments, the valuation of lifeff recoverabia lity of goodwill, and the recoverabia lity of deferred tax assets. insurance reserves, the valuation of reserves for property and casualty insurance incurred losses and LAE, the assessment of Valuation of Investments The reported value of the Company’s investments was $8,904.2 million at December 31, 2023, of which $7,122.4 million, or 80%, was reported at fair value, $239.0 million, or 3%, was reported under the equity method of accounting, $381.0 million, or 4%, was reported at unpaid principal balance and $1,161.8 million, or 13%, 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 reasonabla y 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 affeff ct the amounts reported in the financial statements. Also, it is reasonabla y 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 affeff ct the amounts reported in the financial statements because these issuers follow specialized industryr accounting principles which require that they report all of their investments at fair value (See Item 1A., “Risk Factors” under the title “The Company’s investment portfolff negatively impact net investment income and cause realized and unrealized losses”). io is exposed to a variety of risks that may 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 observabia lity used in fair value measurements. The fair value of the Company’s investments measured and reported at fair value was $7,122.4 million at December 31, 2023, of which $6,738.7 million, or 94%, were investments that were based on quoted market prices or significant fair value inputs that are observabla e, $192.3 million, or 3%, were investments where at least one significant fair value inputs was unobservabla e and $191.4 million or 3% were investments for which fair value is measured using the net asset value (“NAV”) per share practical expedient. Fair value measurements based on readily availabla e, 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 observabia lity and a lesser degree of judgment, compared to fair value measurements based on significant unobservabla e inputs used in measuring fair value. The prices that the Company might realize from actuat l sales of investments are likely to vary from their respective estimated fair values at December 31, 2023 due to changing market conditions and limitations inherent in the estimation process. The classification of a company’s investment in a financial instrument may affeff ct 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 featurt es. As of December 31, 2023, the Company no longer holds any investments with equity conversion featurt es. For investments in 63 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CRITICAL ACCOUNTING ESTIMATES (Continued) fixed maturities classified as held to maturity, a company is required to carryrr 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, 2023. Changes in the fair value of investments in fixed maturities classified as availabla e for sale are not recognized in income during the period, but rather are recognized as a separate component of Accumulated Other Comprehensive Loss (“AOCI”) until realized. Both the reported and fair values of the Company’s investments in fixed maturt ities classified as availabla e for sale were $6,881.9 million at December 31, 2023. the investment at amortized cost, with only 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 $225.8 million at December 31, 2023. The Company holds certain equity investments without readily determinable fair values at cost, less impairment, if any, plus or minus changes resulting from observabla e 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 observabla e price changes are recorded into income for the period reported. The Company’s portfolff io 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 contractuat l 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, 2023, would have increased by $1,030.2 million. The Company regularly reviews its fixed maturt 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: io and holdings in Equity Securities at Modified Cost for ity investment portfolff Fixedii Maturity Securities • • • • The financial condition, credit rating and prospects of the issuer; The magnitude The ability of the issuer to make scheduled principal and interest payments; The volatility of the investment; of the unrealized loss; t Equity Securities at Modifii ed 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 regulatoryrr environment. Changes in these factors from their December 31, 2023 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, 2023. Such determination would result in an impairment loss in the period such determination is made. 64 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CRITICAL ACCOUNTING ESTIMATES (Continued) Lifei Insurance Reserves Company’s Life Insurance Reserves are reported using the Company’s estimate of its liabia lity for future policyholder benefits. Life Insurance Reserves by business segment at December 31, 2023 and 2022 were: II DOLLARS IN MILLIONS Business Segments: Life Insurance: 2023 2022 Life Insurance................................................................................................................................... $ 3,417.7 4.7 Accident & Health Insurance ........................................................................................................... Total Life Insurance Reserves.................................................................................................................... $ 3,422.4 $ 3,271.9 4.3 $ 3,276.2 ries use a variety of generally accepted actuarial methodologies, in e assumptions. These assumptions are These assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapsa es, and discount rates (both accretion and current). Kemper groups together policies with similar types of business for its cohorts, which typically vary by issue year. The Company’s actuat accordance with Actuarial Standards of Practice, in determining the mortality and lapsa based on judgments that consider the Company’s historical experience, industryrr data, and other relevant factors. The Company reviews and updates its estimate of cash flows expected over the lifetime of a group of contracts using actual historical experience quarterly and current future cash flow assumptions at least annually to calculate its revised net premium ratio. The revised net premium ratios are then used to calculate an updated liabia lity for future policyholder benefits for the current reporting period, discounted at the original contract issuance discount rate. The Company has elected to use expense assumptions that are locked in at contract inception and are not subsu equently reviewed or updated. Resulting changes in the liabia lity due to differences in actual versus expected experience, changes in current cash flow assumptions, and prefundi ng and payout of benefits compared to the carrying amount of the liability as of that same date are recorded as a separate component of benefit expense in the Consolidated Statements of Loss. The current discount rate assumption is an equivalent spot rate curve of annually compounded rates at monthly increments that is derived based on A-credit rated fixed-income instruments reflecting the duration characteristics of the liability. The discount rate assumption is updated quarterly and used to remeasure the liabia lity at the reporting date, with the resulting change reflected in Accumulated Other Comprehensive Loss on the Consolidated Balance Sheets. ff In estimating the Company’s Life Insurance Reserves, the Company’s actuat sional judgment and must consider, and are influenced by, many variables that are difficult to quantifyff and are estimating losses many years into the future. Accordingly, the process of estimating and establa ishing the Company’s Life Insurance Reserves is inherently uncertain. Experience may develop adversely such that additional reserves must be establa ished. Adverse experience could arise out of a number of factors, including, but not limited to, severe short-term events, such as a pandemic or changes to policyholder behavior during stressed economic periods, or due to misestimation of long-term assumptions such as mortality, interest rates and lapsa impact on reserves. e assumptions. Certain variables, such as policyholder behavior, are difficult to estimate and can have a significff ant ries exercise profesff Propertytt and Casualty Insurance Reserves for Losses and Loss Adjudd stmett nt Expex nses 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 $2,680.5 million andd $$2,756.9 respectively. imillillion of gross loss and LAE reserves at December 31, 2023 and 2022, 65 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CRITICAL ACCOUNTING ESTIMATES (Continued) Property and Casualty Insurance Reserves for the Company’s business segments at December 31, 2023 and 2022 were: DOLLARS IN MILLIONS Business Segments: II 2023 2022 Specialty Property & Casualty Insurance........................................................................................... $ 2,308.7 Life Insurance..................................................................................................................................... 2.9 Total Business Segments........................................................................................................................... 2,311.6 Non-Core Operations ................................................................................................................................ 356.4 Unallocated Reserves ................................................................................................................................ 12.5 Total Property and Casualty Insurance Reserves ...................................................................................... $ 2,680.5 $ 2,321.1 2.3 2,323.4 419.1 14.4 $ 2,756.9 In estimating the Company’s Property and Casualty Insurance Reserves, the Company’s actuat judgment and must consider, many variables that are difficult to quantify.ff Accordingly, the process of estimating and establa ishing the Company’s Property and Casualty Insurance Reserves is inherently uncertain, and the actual ultimate cost of known and unknown claims may vary materially from the estimated amounts reserved. ries exercise profesff sional The Company’s actuat variety of methodologies in accordance with Actuarial Standards of Practice. A reasonabla e range of unpaid loss estimates is derived from, but not limited to, the following methodologies: ries conduct a comprehensive quarterly loss reserve review for each product line of business based on a • • • • • Incurred Loss Development Methodology; Paid Loss Development Methodology; Bornhuetter-Ferguson Incurred Loss Methodology; Bornhuetter-Ferguson Paid Loss Methodology; and Frequency and Severity Methodology. The actuat rial best estimate for each product line of business for ultimate losses and LAE represents an expected value considering a range of reasonabla e outcomes. The actuarial best estimate includes an offsff et for expected salvage and subru ogation recoveries. 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 affeff ct the development patterns, which means the Company’s actuaries must routinely make assumptions about how changes in business practices would affeff ct historical patterns. The ultimate impact of a single change in a business process is difficult to quantifyff and detect, and even more difficult if several changes to business processes occur over several years. Initially afteff compared to the historical data, for the Company’s actuat actuat ries 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 actuat the development pattern. The challenge for the Company’s actuat based on the older historical data and how much weight to place on the development patterns based on more recent data. ries can gain more confidff ence in whether the change in business process is affeff cting ries is how much weight to place on the development patterns ries to analyze. With fewer data points to analyze, the Company’s r a change is implemented, there are fewer data points, as For each accident quarter or year, the point estimate selected by the Company’s actuaries is not necessarily one of the points ries, produced by any particular one of the methodologies utilized, but ofteff n is another point selected by the Company’s actuat using their profesff sional 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. Thereforff e, 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 actuat ry may gain more confidff ence 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 actuat rial indication of the ultimate losses. More ofteff n than not, the 66 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CRITICAL ACCOUNTING ESTIMATES (Continued) rial indication for a particular product line and accident quarter or year is most heavily weighted toward the incurred loss actuat development methodology, particularly for short-tail lines such as personal automobile insurance. Historically, the incurred loss development methodology has been more reliabla e 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 quantifyff 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 adjud stments to these loss reserving estimation methodologies or use additional generally accepted actuat those circumstances, the Company’s actuaries, using their profesff reserving estimation methodologies or other generally accepted actuat rial 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 differff ent projection methodologies, the Company’s actuaries further analyze the data using additional techniques. sional judgment, may place more weight on the adjud sted loss rial estimation methodologies. In Subru ogation & salvage recoveries, which predominately impact the material damage coverages, are independently evaluated each quarter using generally accepted actuat recoveries the methodologies use paid/rdd ecovered amounts. Once this is completed, it is combined with the ultimate gross loss and LAE analyses. rial methodologies. Since claim adjud sters do not establa ish case reserves for potential In estimating reserves, the Company’s actuat variables that are difficult to quantify,ff such as: ries exercise profesff sional judgment and must consider, and are influenced by, many • • • 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 staffsff audit review of claims handling procedurd es; 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 injun ries and the impact of inflation; • • Repair costs, including, but not limited to, the impact of inflation and the availabia lity of labor 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 requirements. Changes in state regulatoryrr , timing and depth of the and materials; a • 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 procedurd es could impact the timing and recognition of incurred claims and produce an estimate that is either too high or too low if not adjud sted for by the actuary.r For example, if,ff due to changes in claims handling procedurd es, actuat estimate produced by the paid loss development methodology would tend to be overstated if the actuaryrr did not identifyff and adjud st for the impact of the changes in claims handling procedurd es. Similarly, if,ff due to changes in claims handling procedurd es, l claim reserves are set at levels higher than past experience, the estimate produced by the incurred loss development actuat methodology would tend to be overstated if the actuat ry did not identifyff and adjud st for the impact of the changes in claims handling procedurd es. l claims are settled more rapia dly than they were settled historically, the 67 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CRITICAL ACCOUNTING ESTIMATES (Continued) 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 actuaryrr 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 actuat patterns, changes in the mix of business, the maturt ity 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. rial indications, changes in claim handling practices or other changes that affeff ct the timing of payment or development 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 bootstrappi ng methodology. The Company believes that one standard deviation of variability is a reasonabla y likely scenario to measure variability for its loss and LAE reserves for specialty personal automobile insurance. The Company estimates that its specialty personal automobile insurance loss and LAE reserves could have varied by $57.9 million in either direction at December 31, 2023 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 assessments. a ries do not make specificff numerical assumptions about these factors, changes in these factors Although the Company’s actuat from past patterns will impact historical loss development factors and, in turn, future loss reserve development. Significff ant 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 unfavff orable changes in one or more factors will lead to unfavff orable 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,ff and development of,ff the Company’s Property and Casualty Insurance Reserves is contained in Item 1 of Part I of this 2023 Annual Report under the heading “Property and Casualty Loss and Loss Adjud stment Expense Reserves.” Goodwill Recoverability The Company tests goodwill for recoverabia lity 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 carryirr ng value. During the second quarter of 2023, the Company identifieff d impairment indicators impacting the fair value of the Preferff Property & Casualty Insurance business in connection with ongoing evaluation of strategic alternatives for the Preferff red Insurance business. As a result, the business’s fair value was determined using a combination of availabla e market information, market comparisons and a discounted cash flow valuation method based on the present value of future earnings. The fair value calculated in the second quarter of 2023 was lower than the carrying value of the business, resulting in a pre-tax impairment red 68 Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Continued) CRITICAL ACCOUNTING ESTIMATES (Continued) charge of $49.6 million and an afteff information. r-tax impairment charge of $45.5 million. See Note 14, “Goodwill and Intangibles,” for more The Company performed a qualitative goodwill impairment assessment for all remaining reporting units with goodwill as of October 1, 2023. The qualitative assessment takes into consideration changes in the macroeconomic conditions, industryr 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 October 1, 2022. Recoverability of Defee rred Taxaa Assets The evaluation of the recoverabia lity of deferred tax assets and the need for a valuation allowance requires the Company to weigh all positive and negative evidence to reach a conclusion whether it is more likely than not that all or some portion of the deferred tax asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is u to suppor t a conclusion that a valuation allowance is not needed. When making such determination, the Company considers various factors, including: • • • • • • • the nature, frequency, and amount of cumulative financial reporting income and losses in recent years; the jurisdiction in which the deferred tax asset was generated; the length of time that carryforward can be utilized in the relevant taxing jurisdictions; futff urt e taxabla e income exclusive of reversing temporaryr differences and carryforwards; futff urt e reversals of existing taxabla e temporaryrr differences; taxable income in prior carryback years; and availabia lity of tax planning strategies. As a result of the analysis, the Company determined that a valuation allowance was required as of December 31, 2023 against certain foreign deferred tax assets which had been recorded during 2023. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfatff hered standards, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP recognized by the FASB that is applicable to the Company. The FASB issues Accounting Standards Updates (“ASUs”) to amend the authoritative literature in the FASB ASC. The Company has adopted all recently issued accounting pronouncements with effeff ctive dates prior to January 1, 2024. 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. For all recently issued accounting pronouncements with effeff ctive dates afteff on its financial statements. r December 31, 2023, the Company is currently evaluating the impact of this guidance 69 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Quantitative Infon rmation About Marketkk Riskii The Company’s consolidated balance sheets include three types of financial instruments subju ect 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 subju ect to material interest rate risk. The Company’s Investments in Equity Securities include common and preferff interest rate risk. red stocks and hedge funds and, accordingly, are subju ect to material equity price risk and es of this disclosure, market risk sensitive financial instruments are divided into two categories: financial instruments rr For purpos acquired for trading purpos rr sensitive financial instruments are generally classified as held for purpos holdings of financial instruments acquired for trading purpos notional amount of derivatives holdings. es and financial instruments acquired for purpos r r r es other than trading. The Company’s market risk es other than trading. The Company has no significant es. As of December 31, 2023, the Company had $149.7 million The Company measures its sensitivity to market risk by evaluating the change in its financial assets and liabia lities 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 effeff ct such changes would have on the Company’s market value at risk and the resulting pre-tax effeff ct on Shareholders’ Equity. The changes chosen represent the Company’s view of adverse changes which are reasonabla y possible over a one-year period. The selection of the changes chosen should not be construer d as the Company’s prediction of future market events, but rather an illustration of the impact of such possible events. l maturity. All other variables were held constant. For preferff 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, 2023 and 2022 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 maturt ities. For example, a 100 basis point increase in the yield curve for risk-freff e, taxabla e 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 contractuat securities, the Company assumed an adverse and instantaneous increase of 100 basis points in market interest rates from their levels at both December 31, 2023 and 2022. 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, 2023 and 2022. 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, 2023 and 2022, with all other variables held constant. The Company’s investments in common stock equity securities were correlated with the S&P 500 using the portfolff relative volatility in relation to the rest of the stock market, with the S&P 500 having a beta coeffiff cient of 1.00. The Equity Securities at Fair Value portfolff io’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, 2023 and 2022. For equity securities without observabla e market inputs, the Company assumed a beta of 1.00 at December 31, 2023 and 2022. io’s weighted-average beta of 0.35 and 0.41 at December 31, 2023 and 2022, respectively. Beta measures a stock’s red stock equity 70 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. (Continued) The estimated adverse effeff cts on the fair value of the Company’s financial instruments at December 31, 2023 using these assumptions were: II DOLLARS IN MILLIONS ASSETS Investments in Fixed Maturities ................................................................. $ 6,883.6 Investments in Equity Securities ................................................................ 225.8 LIABILITIES Debt ............................................................................................................ $ 1,213.4 Fair Value Pro Forma Increase (Decrease) Interest Rate Risk Equity Price Risk Total Market Risk $ $ (513.5) $ (0.6) — $ (21.5) (513.5) (22.1) 50.6 $ — $ 50.6 The estimated adverse effeff cts on the fair value of the Company’s financial instruments at December 31, 2022 using these assumptions were: II DOLLARS IN MILLIONS ASSETS Investments in Fixed Maturities ................................................................. $ 6,894.8 Investments in Equity Securities ................................................................ 243.2 LIABILITIES Debt ............................................................................................................ $ 1,195.1 Fair Value Pro Forma Increase (Decrease) Interest Rate Risk Equity Price Risk Total Market Risk $ $ (503.3) $ (1.2) — $ (24.7) (503.3) (25.9) 58.7 $ — $ 58.7 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 liabia lities 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 portfolff ios 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 portfolff analysis may not be indicative of,ff is not intended to provide, and does not provide, a precise forecast of the effeff ct 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. ios. Accordingly, the market risk sensitivity 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 maturt then current interest rates. ing assets could be reinvested and any new liabilities would be incurred at the Qualitative Infon rmation About Marketkk Riskii 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—pr 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. ice risk. Price risk kk The Company manages its interest rate exposures with respect to Investments in Fixed Maturities by investing primarily in investment-grade securities of moderate effeff ctive duration. 71 Item 8. Financial Statements and Supplementary Data. Index to the Consolidated Financial Statements of Kemper Corporation and Subsidiaries Consolidated Statements of Loss for the Years Ended December 31, 2023, 2022 and 2021.............................................. Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2023, 2022 and 2021.................... Consolidated Balance Sheets at December 31, 2023 and 2022 ........................................................................................... Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021................................... Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021.................... 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 Loss per Unrestricted Share .................................................................................................................... Note 4—Dispositions.................................................................................................................................................... Note 5—Business Segments ......................................................................................................................................... Note 6—Property and Casualty Insurance Reserves .................................................................................................... Note 7—Liabia lity for Future Policyholder Benefits ..................................................................................................... Note 8—Deferff red Policy Acquisition Costs................................................................................................................. Note 9—Insurance Expenses ........................................................................................................................................ Note 10—Investments .................................................................................................................................................. Note 11—Income from Investments............................................................................................................................. Note 12—Derivatives ................................................................................................................................................... Note 13—Fair Value Measurements ............................................................................................................................ Note 14—Goodwill and Intangibles ............................................................................................................................. Note 15—Variabla e Interest Entities.............................................................................................................................. Note 16—Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss................................. Note 17—Shareholders’ Equity.................................................................................................................................... Note 18—Statutory Information and Dividend Limitations......................................................................................... Note 19—Pension Benefits........................................................................................................................................... Note 20—Postretirement Benefits Other Than Pensions.............................................................................................. Note 21—Long-term Equity-based Compensation ...................................................................................................... Note 22—Policyholder Obligations.............................................................................................................................. Note 23—Debt .............................................................................................................................................................. Note 24—Leases........................................................................................................................................................... Note 25—Catastrophe Reinsurance.............................................................................................................................. Note 26—Other Reinsurance........................................................................................................................................ Note 27—Income Taxes ............................................................................................................................................... Note 28—Contingencies............................................................................................................................................... Note 29—Related Parties.............................................................................................................................................. Report of Independent Registered Publu ic Accounting Firm (Deloitte & Touche LLP: PCAOB Firm ID - 34)................ 73 74 75 77 79 80 81 90 90 91 94 105 108 108 109 114 115 117 124 125 127 128 128 130 133 135 139 140 141 143 145 146 148 148 149 72 KEMPER CORPORATRR ION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF LOSS (Dollars in millions, except per share amounts) DOLLARS IN MILLIONS ,SS EXCEPT PEREE SHAREHH II AMOUNT MM STT For the Year Ended December 31, 20211 20221 2023 Revenues: Earned Premiums (Changes in Deferred Profitff Liability: 2023 - $84.2, 2022 - $60.2 and 2021 -$80.7)........................................................................................................................... $ 4,529.4 $ 5,213.4 $ 5,179.2 Net Investment Income ..................................................................................................... 419.7 Change in Value of Alternative Energy Partnership Investments..................................... Other Income..................................................................................................................... Income (Loss) from Change in Fair Value of Equity and Convertible Securities ............ Net Realized Investment (Losses) Gains........................................................................... Impairment Losses ............................................................................................................ 2.9 7.2 4.7 (18.6) (1.1) 422.6 (19.9) 9.2 (79.9) 4.3 (25.8) 427.3 (61.2) 4.8 114.6 64.8 (11.0) Total Revenues....................................................................................................................... 4,944.2 5,523.9 5,718.5 Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjud stment Expenses (Changes in Liability for Future Policyholder Benefits: 2023 - $33.5, 2022 - $12.0 and 2021 - $30.2) ..................................................................................................................... Insurance Expenses ........................................................................................................... 3,820.0 1,052.4 Loss from Early Extinguishment of Debt.......................................................................... Interest and Other Expenses .............................................................................................. Goodwill Impairment ....................................................................................................... — 369.3 49.6 4,432.6 1,201.0 3.7 257.6 — 4,519.6 1,228.8 — 219.4 — Total Expenses ....................................................................................................................... Loss before Income Taxes ..................................................................................................... 5,291.3 (347.1) 5,894.9 (371.0) 5,967.8 (249.3) Income Tax Benefit................................................................................................................ 74.8 84.4 125.6 Net Loss ................................................................................................................................. (272.3) (286.6) (123.7) Less: Net Loss attributable to Noncontrolling Interest .......................................................... (0.2) — — Net Loss attributable to Kemper Corporation........................................................................ $ (272.1) $ (286.6) $ (123.7) Net Loss attributable to Kemper Corporation Per Unrestricted Share: Basic .................................................................................................................................. $ (4.25) $ (4.50) $ Diluted ............................................................................................................................... $ (4.25) $ (4.50) $ (1.92) (1.92) 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes The Notes to the Consolidatdd ed Financial Statements are an integre al part of these financial statements. 73 KEMPER CORPORATRR ION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Dollars in millions) DOLLARS IN MILLIONS II For The Years Ended December 31, 2023 2022 2021 Net Loss ................................................................................................................................. $ (272.3) $ (286.6) $ (123.7) 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 Loss ............................... 238.8 (1,551.1) (284.5) Credit Losses Recognized in Consolidated Statements of Loss ..................................... Change in Net Unrecognized Postretirement Benefit Costs ............................................... (Loss) Gain on Cash Flow Hedges...................................................................................... Change in Discount Rate on Future Life Policyholder Benefits......................................... Other Comprehensive Income (Loss) Before Income Taxes................................................. Other Comprehensive Income Tax (Expense) Benefit .......................................................... Other Comprehensive Income (Loss), Net of Taxes ............................................................. (0.5) 59.2 (0.2) (101.7) 195.6 (41.5) 154.1 Total Comprehensive Loss .................................................................................................... (118.2) 1.9 18.9 5.9 1,380.7 (143.7) 30.4 (113.3) (399.9) (2.0) (8.8) 0.5 228.5 (66.3) 14.5 (51.8) (175.5) Less: Total Comprehensive Loss attributable to Noncontrolling Interest ............................. (0.2) — — Comprehensive Loss attributable to Kemper Corporation .................................................... $ (118.0) $ (399.9) $ (175.5) The Notes to the Consolidatdd ed Financial Statements are an integre al part of these financial statements. 74 KEMPER CORPORATRR ION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in millions, except per share amounts) II ,SS EXCEPT PEREE SHAREHH DOLLARS IN MILLIONS Assets: Investments: Fixed Maturities at Fair Value (Amortized Cost: 2023 - $7,565.8; 2022 - $7,811.8 AMOUNT STT MM Allowance for Credit Losses: 2023 - $8.2; 2022 - $9.6) ............................................................. $ Equity Securities at Fair Value (Cost: 2023 - $209.3; 2022 - $247.6) ........................................... Equity Method Limited Liability Investments ........................................................................... Alternative Energy Partnership Investments .............................................................................. Short-term Investments at Cost which Approximates Fair Value.............................................. Company-Owned Life Insurance ............................................................................................... Loans to Policyholders .............................................................................................................. Other Investments....................................................................................................................... Total Investments............................................................................................................................ Cash................................................................................................................................................. Receivabla es from Policyholders (Allowance for Credit Losses: 2023 - $13.9; 2022 - $13.1) ....... Other Receivabla es ........................................................................................................................... Deferred Policy Acquisition Costs.................................................................................................. Goodwill ......................................................................................................................................... Current Income Tax Assets............................................................................................................. Deferred Income Tax Assets........................................................................................................... Other Assets .................................................................................................................................... Assets of Consolidated Variable Interest Entity: December 31, 2023 20221 $ 6,881.9 225.8 221.7 17.3 520.9 513.5 281.2 241.9 8,904.2 64.1 959.5 200.5 591.6 1,250.7 64.5 210.4 492.6 6,894.8 243.2 217.0 16.3 278.4 586.5 283.4 269.9 8,789.5 212.4 1,286.6 262.6 635.6 1,300.3 167.6 129.0 530.0 Fixed Maturities at Fair Value (Amortized Cost 2023 - $1.7; 2022 - $— Allowance for Credit Losses 2023 - $—; 2022 - $—)............................................................ Short-term Investments at Cost which Approximates Fair Value ............................................. Receivabla es from Policyholders................................................................................................. Deferred Policy Acquisition Costs............................................................................................. Deferred Income Tax Assets...................................................................................................... Total Assets..................................................................................................................................... $ 1.7 2.0 0.7 0.1 0.1 12,742.7 $ — — — — — 13,313.6 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes The Notes to the Consolidatdd ed Financial Statements are an integre al part of these financial statements. 75 KEMPER CORPORATRR ION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) (Dollars in millions, except per share amounts) ,SS EXCEPT PEREE SHAREHH DOLLARS IN MILLIONS II Liabilities and Shareholders’ Equity: Insurance Reserves: AMOUNT MM STT Life and Health........................................................................................................................... $ Property and Casualty ................................................................................................................ Total Insurance Reserves ................................................................................................................ Unearned Premiums........................................................................................................................ Policyholder Obligations ................................................................................................................ Deferred Income Tax Liabilities..................................................................................................... Accruerr d Expenses and Other Liabilities......................................................................................... Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2023 - $1,213.4; 2022 - $1,195.1).............................................................................................................................. Liabilities of Consolidated Variable Interest Entity: Unearned Premiums ................................................................................................................... Accruerr d Expenses and Other Liabilities .................................................................................... Total Liabilities............................................................................................................................... Kemper Corporation Shareholders’ Equity: Common Stock, $0.10 Par Value, 100,000,000 Shares Authorized; 64,111,555 Shares Issued and Outstanding at December 31, 2023 and 63,912,762 Shares Issued and Outstanding at December 31, 2022 ......................................................................................................................... Paid-in Capia tal............................................................................................................................ Retained Earnings....................................................................................................................... Accumulated Other Comprehensive Loss .................................................................................. Total Kemper Corporation Shareholders’ Equity ........................................................................... Noncontrolling Interest................................................................................................................. Total Shareholders’ Equity ............................................................................................................. Total Liabilities and Shareholders’ Equity ..................................................................................... $ December 31, 2023 20221 $ 3,422.4 2,680.5 6,102.9 1,300.8 655.7 50.6 737.7 3,276.2 2,756.9 6,033.1 1,704.4 701.3 — 817.3 1,389.2 1,386.9 0.5 0.3 10,237.7 — — 10,643.0 6.4 1,845.3 1,014.3 (360.8) 2,505.2 (0.2) 2,505.0 12,742.7 $ 6.4 1,812.7 1,366.4 (514.9) 2,670.6 — 2,670.6 13,313.6 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes The Notes to the Consolidatdd ed Financial Statements are an integre al part of these financial statements. 76 KEMPER CORPORATRR ION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Millions) For The Years Ended December 31, 20211 20221 II 2023 IN MILLIONS DOLLOO ARS LL Cash Flows from Operating Activities: Net Loss................................................................................................................................... $ (272.3) $ (286.6) $ (123.7) Adjud stments to Reconcile Net Loss to Net Cash (Used in) Provided by Operating Activities: ................................................................................................................................ Net Realized Investment Losses (Gains) .............................................................................. Impairment Losses ................................................................................................................ Depreciation and Amortization of Property, Equipment and Software ................................ Amortization of Intangible Assets Acquired ........................................................................ Settlement Costs Related to Defined Benefit Pension Plan.................................................. Loss from Early Extinguishment of Debt ............................................................................. Change in Accumulated Undistributed Earnings of Equity Method Limited Liability Investments ........................................................................................................................... (Income) Loss from Change in Value of Alternative Energy Partnership Investments ....... (Increase) Decrease in Value of Equity and Convertible Securities ..................................... Goodwill Impairment Changes in: (64.8) 11.0 46.3 53.5 — — (4.3) 25.8 50.5 20.4 — 3.7 (33.5) 61.2 (114.6) — 18.6 1.1 44.4 14.2 70.2 — (1.1) (2.9) (4.7) 49.6 (9.5) 19.9 79.9 — Receivabla es from Policyholders ......................................................................................... Reinsurance Recoverabla es.................................................................................................. Deferred Policy Acquisition Costs ..................................................................................... Insurance Reserves ............................................................................................................. Unearned Premiums ........................................................................................................... Income Taxes...................................................................................................................... Other Assets and Liabilities................................................................................................ Net Cash (Used in) 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 (Purchases) Sales of Short-term Investments................................................................... Acquisition of Business, Net of Cash Acquired...................................................................... Sales of Businesses, Net of Cash Disposed............................................................................. Acquisition of Software and Long-lived Assets...................................................................... Settlement Proceeds from Company-Owned Life Insurance .................................................. Other........................................................................................................................................ Net Cash Provided by (Used in) Investing Activities................................................................ 326.4 12.1 43.9 (30.8) (403.1) 33.2 (33.0) (134.2) 129.4 (1.9) 14.2 26.5 (183.5) (83.6) (11.2) (210.3) (75.2) 20.6 (77.6) 616.4 105.9 (163.9) 89.1 350.7 673.0 1,295.5 1,388.9 149.0 — 95.2 18.3 (447.4) (44.4) (1.0) — (104.1) (19.8) (238.4) — — (53.8) 102.2 (20.9) 107.9 536.0 — 91.3 52.1 (1,815.8) (58.9) (3.1) (110.0) (81.1) (13.0) 6.1 — 14.8 (30.8) — 8.5 (108.4) 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) 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt addidd tional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes The Notes to the Consolidatdd ed Financial Statements are an integre al part of these financial statements. 77 KEMPER CORPORATRR ION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Dollars in Millions) II IN MILLIONS DOLLOO ARS LL Net Cash Provided by (Used in) Investing Activities (Carryforward from page 77) Cash Flows from Financing Activities: Repayment of Long-term Debt ............................................................................................... Proceeds from Issuance of 3.800% Senior Notes due Februar ry 23, 2032.............................. ry 23, 2032 ............................................. Issuance Fees on 3.800% Senior Notes due Februar Proceeds from Issuance of 5.875% Fixed-Rate Reset Junior Suboru dinated Debenturt es Due 2062 ........................................................................................................................................ Issuance Fees on 5.875% Fixed-Rate Reset Junior Suboru dinated Debenturt es Due 2062 ...... Proceeds from Policyholder Contract Obligations ................................................................. Repayment of Policyholder Contract Obligations .................................................................. Proceeds from Shares Issued under Employee Stock Purchase Plan ..................................... Common Stock Repurchases .................................................................................................. Dividends Paid........................................................................................................................ Other ....................................................................................................................................... Net Cash (Used in) Provided by Financing Activities .............................................................. r The Years Ended December 31, 20211 20221 (118.2) (108.4) 2023 107.9 — — — — — 123.3 (169.0) 4.3 — (80.1) (0.5) (122.0) (280.0) 396.3 (1.2) 145.6 (0.9) 335.5 (138.2) 4.9 — (79.7) 0.6 382.9 (50.0) — — — — 386.8 (394.0) 5.4 (161.7) (80.6) 3.7 (290.4) Net (decrease) increase in cash.................................................................................................. Cash, Beginning of Year ........................................................................................................... Cash, End of Year...................................................................................................................... $ (148.3) 212.4 64.1 $ 64.2 148.2 212.4 $ (57.9) 206.1 148.2 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt addidd tional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes The Notes to the Consolidatdd ed Financial Statements are an integre al part of these financial statements. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (Dollars in Millions) DOLLARS IN MILLIONS Cash (paid) received during the year for: II For The Years Ended December 31, 2022 2021 2023 Interest .................................................................................................................................... $ Taxes....................................................................................................................................... Operating Leases..................................................................................................................... (54.5) $ 106.7 (25.4) (51.5) $ (0.7) (24.0) (43.9) (38.0) (23.6) Non-Cash Activities: Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities................. $ 13.8 $ 9.7 $ 15.5 78 KEMPER CORPORATRR ION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY For the Year Ended December 31, 2023, 2022 and 2021 Paid-in Capital $ 1,805.2 — Retained Earnings $ 2,046.1 (123.7) Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shareholders’ Equity $ (349.8) $ — — $ — Number of Shares 65.4 — — — Common Stock $ 6.5 — — — — (51.8) — — (81.0) (2.1) (0.2) (57.8) (103.7) — — — — — — — — — — — — — — — — — — — — $ 1,790.7 — $ 1,734.2 (286.6) $ (401.6) $ — — $ — — (113.3) 5.4 37.0 0.9 — — (3.5) — — 4.9 17.7 (80.4) — — (0.6) (0.8) $ $ 0.1 — 0.3 63.7 — — — 0.1 — 0.1 63.9 — — — 0.1 — 0.1 — — 0.1 6.4 — — — — — — 6.4 — — — — — — $ 1,812.7 — $ 1,366.4 (272.1) $ (514.9) $ — — $ (0.2) — — 4.3 29.0 (0.7) — 154.1 (80.1) — — 0.1 — — — — — — — — — 3,508.0 (123.7) (51.8) (81.0) (161.7) 5.4 37.0 (2.5) 3,129.7 (286.6) (113.3) (80.4) 4.9 17.7 (1.4) 2,670.6 (272.3) 154.1 (80.1) 4.3 29.0 (0.6) HH MM IN STT DOLLARS ANDNN SHARES MILLIONS ,SS II EXCEPT PEREE SHAREHH AMOUNT BALANCE, JANUARY 1, 20211. Net Loss.......................................... Other Comprehensive Loss, Net of Taxes (Note 16).............................. Cash Dividends and Dividend Equivalents to Shareholders ($1.24 per share)............................. Repurchases of Common Stock (Note 17) ........................................ Shares Issued Under Employee Stock Purchase Plan (Note 17)....... Equity-based Compensation Cost (Note 21) ........................................ Equity-based Awards, Net of Shares Exchanged (Note 21) .... BALANCE, DECEMBER 31, 20211............................................... Net Loss.......................................... Other Comprehensive Loss, Net of Taxes (Note 16).............................. Cash Dividends and Dividend Equivalents to Shareholders ($1.24 per share)....................... Shares Issued Under Employee Stock Purchase Plan (Note 17)....... Equity-based Compensation Cost (Note 21) ........................................ Equity-based Awards, Net of Shares Exchanged (Note 21) .... BALANCE, DECEMBER 31, 20221............................................... Net Loss.......................................... Other Comprehensive Income, Net of Taxes (Note 16).......................... Cash Dividends and Dividend Equivalents to Shareholders ($1.24 per share)....................... Shares Issued Under Employee Stock Purchase Plan (Note 17)....... Equity-based Compensation Cost (Note 21) ........................................ Equity-based Awards, Net of Shares Exchanged (Note 21) .... BALANCE, DECEMBER 31, 2023................................................ 64.1 $ 6.4 $ 1,845.3 $ 1,014.3 $ (360.8) $ (0.2) $ 2,505.0 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes The Notes to the Consolidatdd ed Financial Statements are an integre al part of these financial statements. 79 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ESTIMATES The Consolidated Financial Statements include the accounts of Kemper Corporation (“Kemper”) and its subsu idiaries which include property and casualty insurance subsu idiaries, life insurance subsu idiaries, a health insurance subsu idiary through the date of its sale of December 1, 2022 (collectively referred to herein as the “Company”), and a variable interest entity (“VIE”) in which the Company is considered the primaryrr beneficiary.r The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany accounts and transactions have been eliminated. Prior period amounts in the financial statements have been recasted to reflect the Company’s adoption of Accounting Standards Update (“ASU”) 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to Accounting for Long-Duration Contracts (“ASU 2018-12”) on January 1, 2023 (See Note 2, “Summary of Accounting Policies and Accounting Changes”). Periodically, Kemper may acquire an additional company which then becomes one of the various subsu idiaries 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. When a disposition occurs, Kemper will include the results of the disposed subsu idiary in the consolidated financial results up to the date of sale. Use of Estimates The preparation of financial statements in conforff mity with GAAP requires the use of estimates and assumptions that affeff ct the reported amounts of assets and liabia lities, the disclosure of contingent assets and liabia lities 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 specificff results could differ materially from those estimates and assumptions. to the Company’s business and operations. Actual 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 observabia lity of inputs used in fair value measurements. The carryir ng 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 actuat 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 availabia lity of a willing buyer or seller. l value at which financial instruments could be sold or settled with a willing buyer or seller The Company’s portfolff io 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 contractuat l 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. The process of estimating and establa ishing reserves for losses and loss adjud stment 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 r the insurance policy period has ended. Management considers a variety of may not be discovered or reported until years afteff 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 recoverabla e relies on projections of future cash flows, operating results and market conditions. Projections are inherently uncertain, and, accordingly, actual future cash flows and operating results may differ materially from those projected. As a result, the Company’s assessment of the impairment of long-lived assets and recoverabia lity of deferred tax assets is susceptible to the risk inherent in making such projections. 80 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES Investmentstt Investments in Fixed Maturities include bonds, notes and redeemable preferff classified as availabla e 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 effeff ctive yield method. Unrealized appreciation or depreciation, net of applicable deferred income taxes, on fixed maturities classified as availabla e for sale is reported in Accumulated Other Comprehensive (Loss) Income (“AOCI”) included in Shareholders’ Equity. red stocks. Investments in Fixed Maturities are Equity investments include common stocks, non-redeemable preferff 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 (Loss) Income. Dividend income on investments in common and non-redeemable preferff red stocks, exchange traded funds, money market mutual red stocks is recognized on the ex-dividend date. Equity Method Limited Liability Investments include investments in limited liabia lity 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 (“NAV”) are recorded in Net Investment Income in the Consolidated Statements of (Loss) Income. Partnerships for which results are not availabla e 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 GAAP are recognized using the income statement approach, where basis differences are recorded to Income Tax Benefit (Expense) immediately, rather than deferred as adjud stments to the carrying value of the asset. Partnerships for which results are not availabla e on a timely basis are reported on a lag. Short-term Investments include certificff ates 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. Company-Owned Life Insurance (“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 (Loss) Income. Loans to Policyholders are carried at unpaid principal balance. Other Investments primarily include Equity Securities at Modified Cost, Convertible Securities at Fair Value, Real Estate and Mortgage Loans. Equity Securities at Modified Cost do not have readily determinable fair values and are held at cost, less impairment, if any, plus or minus changes resulting from observabla e price changes in orderly transactions for the identical or similar investment of the same issuer. Investments in Convertible Securities include fixed maturities with equity conversion featurt es. 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. Real Estate is carried at cost, net of accumulated depreciation. Real Estate is depreciated over the estimated usefulff depreciation. Real Estate is evaluated for impairment when events or circumstances indicate the carrying value may not be recoverabla e. An impairment loss on real estate is recognized when the carryirr ng 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 appl life of the asset using the straight-line method of icable. a Investments in Fixeii d Maturities - Impaim rment 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 adjud st for any subsu equent recoveries. 81 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) 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,rr or a geographic area, (3) payment structurt e of the investment and the likelihood of the issuer's ability to make contractuat assigned by a rating agency and (6) other credit enhancements that affeff ct the investment’s expected performance. l cash flows, (4) defaults or other collectability concerns related to the issuer, (5) changes in the ratings 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 adjud sted for any additional expected credit losses or subsu equent recoveries. The amortized cost basis of the investment is not adjud sted for the expected allowance for credit loss. The impairment related to other factors (non-credit related) is reported in Other Comprehensive Income (Loss), net of income taxes. The Company reports accruerr d investment income separately for availabla e-for-sale fixed maturity securities and has elected not to measure an allowance for credit losses on accruer d investment income. Accruer d investment income is written offff 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 observabia lity of inputs used in fair value measurements. Market price observabia lity is affeff cted by a number of factors, including the type of asset or liability and the characteristics specificff 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 observabia lity 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: to the asset or liability being measured. Assets and liabia lities with readily availabla e, active, quoted • • • 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 observabla e or whose significant value drivers are observabla e; and Level 3 — Significant unobservabla e inputs for the asset or liabia lity being measured. Observable inputs are based on market data obtained from independent sources, while unobservabla e inputs are based on the Company’s market assumptions. Unobservabla e inputs require significff ant 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. Defee rred Policyc Acquisitiott n Coststt acquisition of business, principally commissions and certain premium taxes and Costs directly associated with the successfulff policy issuance costs, are deferred. Costs deferred on property and casualty insurance contracts and short-duration health insurance insurance contracts are amortized over the period in which premiums are earned. Deferred costs on traditional lifeff products and other long duration insurance contracts are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liabia lity. These deferred costs are amortized on a constant level basis for grouped contracts over the expected term of the related contracts to approximate straight-line amortization. The expected term of the contract used for amortization is determined using mortality and termination assumptions that are based on the Company’s experience, industryrr data, and other factors and are consistent with those used for the liability for future policyholder benefits. If those projected assumptions change in future periods, they will be reflected in the straight-line amortization horizon at that time. Unexpected terminations, dued period as a reduction of the capitalized balances. Amortization of deferred policy acquisition costs is included in Insurance Expenses in the Condensed Consolidated Statements of Loss. to higher mortality and termination experience than expected, are recognized in the current 82 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) Defee rred Profitff Liabi i liii tyii For limited-payment lifeff products, gross premiums received in excess of net premiums are deferred at initial recognition as a deferred profitff measurement of the liability for future policyholder benefits, including discount rate, mortality, lapsa es, and expenses. liabia lity (“DPL”). Gross premiums are measured using assumptions consistent with those used in the The DPL is amortized and recognized as premium revenue in proportion to insurance in force for nonparticipating limited- payment contracts. Interest is accreted on the balance of the DPL using the discount rate determined at contract issuance. The Company reviews and updates its estimates of cash flows for the DPL at the same time as the estimates of cash flows for the liabia lity for future policyholder benefits. When cash flows are updated, the updated estimates are used to recalculate the DPL at contract issuance. The recalculated DPL as of the beginning of the current reporting period is compared to the carryir ng amount of the DPL as of the beginning of the current reporting period, and any difference is recognized as either an increase or decrease to Earned Premiums. 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 recoverabia lity 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 adjud stment 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 adjud sted in the aggregate for ultimate loss expectations based on historical experience patterns and current economic trends, with any change in the estimated ultimate liabia lities being reported in the Consolidated Statements of (Loss) Income in the period of change. Changes in such estimates may be material. es and expenses. These current assumptions are based on judgments that consider the Company’s historical For lifeff insurance products, the liabia lity for future policyholder benefits is the present value of estimated future policyholder benefits to be paid to or on behalf of policyholders and certain related expenses, less the present value of estimated future net premiums to be collected from policyholders. The liability is estimated using current assumptions that include discount rate, mortality, lapsa experience, industryrr data, and other factors. The liability is adjud sted for differences between actuat The Company reviews and updates its estimate of cash flows expected over the lifetff historical experience quarterly and current future cash flow assumptions at least annually to calculate its revised net premium ratio. The revised net premium ratios are then used to calculate an updated liabia lity for future policyholder benefits for the current reporting period, discounted at the original contract issuance discount rate. The Company has elected to use expense assumptions that are locked in at contract inception and are not subsu equently reviewed or updated. Resulting changes in the ng and liabia lity due to differences in actual versus expected experience, changes in current cash flow assumptions, and prefundi payout of benefits compared to the carrying amount of the liability as of that same date are recorded as a separate component of benefit expense in the Consolidated Statements of (Loss) Income. l and expected experience. ime of a group of contracts using actual ff The current discount rate assumption is an equivalent spot rate curve of annually compounded rates at monthly increments that is derived based on A-credit rated fixed-income instruments reflecting the duration characteristics of the liabia lity. The Company utilizes published corporate yield curves from Bloomberg’s BVAL Investment Grade Corporate Sector curve. The discount rate assumption is updated quarterly and used to remeasure the liabia lity at the reporting date, with the resulting change reflected in Other Comprehensive Income (Loss). For liability cash flows that are projected beyond the maximum observabla e point on the yield curve, the yield grades to an ultimate forward rate. Insurance Reserves for life insurance products are comprised of reserves for future policy benefits plus an estimate of the Company’s liabia lity for unpaid life insurance claims and claims adjud stment expenses, which includes an estimate for IBNR lifeff insurance claims. The Company utilizes the databaa other comparable databaa se (a “Death master File” or “DMF”) to identifyff potential situations where the Company has yet to be notifieff d of an insured’s death and, as appropriate, initiating an outreach process to identifyff and contact beneficiaries and settle claims. se of reported deaths maintained by the Social Security Administration or 83 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) Policyhc oldell i r Obligat iott ns Policyholder Obligations include Federal Home Loan Bank (“FHLB”) funding agreements used for spread lending purposes and universal life-ff type policyholder contracts and are stated at account balances. Receivablesll from Policyholderdd srr - Alloll wance for Expexx ctedtt Creditdd 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. Receivabla es from policyholders are charged offff against the allowance when management believes the receivable is uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-offff and expected to be charged-off.ff Management estimates the allowance using relevant availabla e information, from internal and external sources, related to past events, current conditions, and reasonabla e and suppor tabla e forecasts. Historical credit loss experience on the receivabla es from policyholders provide the basis for the estimation of expected credit losses. Adjud stments 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. u The following tabla e presents a rollforff ward of changes in the allowance for expected credit losses for the year ended December 31, 2023. (Dollars in Millions) Balance at Beginning of Year ............................................... $ Provision for Expected Credit Losses ................................ Write-offs of Uncollectible Receivabla es from Policyholders...................................................................... Balance at End of Year ......................................................... $ Specialty Life Total Segments Non-Core Operations 12.3 $ 39.3 — $ 0.5 12.3 $ 39.8 0.8 $ 1.8 Total Allowance for Expected Credit Losses 13.1 41.6 (38.7) 12.9 $ (0.5) — $ (39.2) 12.9 $ (1.6) 1.0 $ (40.8) 13.9 Receivabla e Balance at End of Year....................................... $ 875.4 $ 11.3 $ 886.7 $ 73.5 $ 960.2 The following tabla e presents a rollforff ward of changes in the allowance for expected credit losses for the year ended December 31, 2022. (Dollars in Millions) Balance at Beginning of Year............................................... $ Provision for Expected Credit Losses................................ Write-offs of Uncollectible Receivabla es from Policyholders...................................................................... Balance at End of Year ......................................................... $ 12.8 $ 44.4 (44.9) 12.3 $ Specialty Life Total Segments Non-Core Operations — $ 1.1 12.8 $ 45.5 0.8 $ 2.5 Total Allowance for Expected Credit Losses 13.6 48.0 (1.1) — $ (46.0) 12.3 $ (2.5) 0.8 $ (48.5) 13.1 Receivabla e Balance at End of Year ...................................... $ 1,166.9 $ 11.0 $ 1,177.9 $ 108.7 $ 1,286.6 Othett r Receivablesll Other Receivabla es primarily include reinsurance recoverabla es, accruer d investment income, and receivabla es from limited liabia lity investments and investments in partnerships. Reinsurance Recoverabla es were $27.8 million and $39.6 million at December 31, 2023 and 2022, respectively. Accruer d Investment Income was $88.4 million and $94.3 million at December 31, 2023 and 2022, respectively. Receivabla es from limited liability investments and investments in partnerships were $0.0 million and $35.2 million at December 31, 2023 and 2022, respectively. 84 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) Othett r Assets Other Assets primarily include property and equipment, internal use software, right-of-use assets, insurance licenses acquired in business combinations, other intangible assets acquired in a business combination and prepaid expenses. Property and equipment is depreciated over the usefulff methods of depreciation depending on the asset involved. Internal use software is amortized over the usefulff using the straight-line method of amortization and is evaluated for recoverabia lity upon identificff ation of impairment indications. Insurance licenses acquired in business combinations and other indefinite life intangibles are not amortized, but rather tested periodically for recoverabia lity. lives of the assets, generally using the straight-line or double declining balance lifeff of the asset 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 $13.8 million and $15.4 million at December 31, 2023 and 2022, respectively. VOBA is amortized over the expected profitff emergence period of the policies in force as of the acquisition date. The Company evaluates VOBA assets for recoverabia lity annually. The Company accounts for the future profitff s embedded in customer relationships (“Customer Relationships”) acquired based on the present value of estimated future cash flows from such relationships. Customer Relationships were $1.7 million and $2.7 million at December 31, 2023 and 2022, respectively, and are amortized on a straight-line basis over the estimated usefulff life of the relationship. Customer Relationships are tested for recoverabia lity using undiscounted projections of future cash flows and are 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 profitff s 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 were $43.4 million and $50.6 million at December 31, 2023 and 2022, respectively, and are amortized on a straight-line basis over the life of the relationship. Agent Relationships are tested for recoverabia lity using undiscounted projections of estimated usefulff future cash flows and are written down to estimated fair value if the carryir ng value exceeds the sum of such projections of undiscounted cash flows. Accrued Expexx nses and Othett s litie ii r Liabi i Accruerr d Expenses and Other Liabilities primarily include draftsff payabla e, accruer d salaries and commissions, pension benefits, postretirement medical benefits, lease liabia lity and accruer d taxes, licenses and fees. Recogno itiott n of Earned Premiums and Related Expexx nses Property and casualty insurance and short-duration health insurance premiums are deferred when written and recognized and earned ratabla y 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 liabia lity. The Company performs a premium deficiency analysis typically at a business level, namely Specialty Property & Casualty Insurance and Non- Core Operations, which is consistent with the manner in which the Company acquires and services policies and measures profitaff bia lity. Anticipated investment income is included in this analysis. A premium deficiency is recognized when the sum of expected claim costs, claim adjud stment 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 afteff costs, a premium deficiency reserve is establa ished and reported as a liabia lity in the Consolidated Financial Statements. r first reducing deferred policy acquisition Traditional lifeff insurance premiums are recognized as revenue when due. Policyholders’ benefits are associated with related premiums to result in recognition of profitff s over the periods for which the benefits are provided using the net level premium method. Policyholders’ Benefits and Incurred Losses and Loss Adjud stment Expenses include provisions for future policy benefits under lifeff and certain accident and health insurance contracts and provisions for reported claims, estimates for IBNR claims and loss adjud stment expenses. Benefit payments in excess of policy account balances are expensed. 85 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) Reinsurance In the normal course of business, Kemper’s insurance subsu idiaries reinsure certain risks above certain retention levels with other insurance enterprises. These reinsurance agreements do not relieve Kemper’s insurance subsu idiaries of their legal obligations to the policyholder. Amounts recoverabla e from reinsurers are included in Other Receivabla es. Gains related to long-duration reinsurance contracts are deferred and amortized over the life of the underlying reinsured policies. Losses related to long-durd ation reinsurance contracts are recognized immediately. Any gain or loss associated with reinsurance agreements for which Kemper’s insurance subsu idiaries have been legally relieved of their obligations to the policyholder is recognized in the period of relief. Income Taxeaa s Deferred income tax assets and liabia lities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabia lities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effeff ct for the year in which those temporaryr 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 Benefit (Expense). Decreases, if any, in the valuation allowance for deferred income tax assets are generally recognized as income tax benefit. The effeff ct on deferred income tax assets and liabia lities 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 Benefit (Expense). Premium Defie ciency Commencing in 2022, the Company began including anticipated net investment income in the premium deficiency analysis performed on the Specialty Property & Casualty Insurance Segment and Non-Core Operations business. The Company believes this accounting principle change is preferff able as it best reflects the ultimate profitff ability of an insurance contract in using all cash flows from the in-force policies, inclusive of related investment income, and provides improved comparability with industryrr peers. This accounting principle change had no impact on the results of the premium deficiency analysis in prior periods presented. i Variabl ell Interest Entitiii es u t or is structurt ed such that equity investors lack the ability to make significant decisions relating to the entity's A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional suboru financial suppor operations through voting rights or do not subsu tantively participate in the gains and losses of the entity. The Company consolidates VIEs in which the Company is deemed the primary beneficiary.r The primaryrr beneficiaryrr (1) the power to direct the activities of the VIE that most significantly affeff ct that entity's economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. is the entity that has both dinated Noncontrollinll g Intereststt Noncontrolling interest is the portion of equity (net assets) not attributable, directly or indirectly, to a parent. The Company has no ownership interest in Kemper Reciprocal, but consolidates it as the Company is considered the primaryr beneficiary.r dd Adopt iott n of New Accountintt g Guidandd ce dd Guidanc dd e Adopt ed in 2023 The Company adopted ASU 2018-12 for the liability for future policyholder benefits and deferred acquisition costs on a modified retrospective basis as of January 1, 2023, such that those balances were adjud sted to conforff m to ASU 2018-12 on January 1, 2021. 86 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) The new standard requires cash flow assumptions used to measure the liability for future policyholder benefits for nonparticipating traditional and limited pay long-duration contracts to be reviewed at least annually, and if there is a change, updated with the recognition and remeasurement recorded in net income. It also requires the discount rate used in measuring the liabia lity 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. ASU 2018-12 simplifies the amortization of deferred acquisition costs to a constant level basis over the expected term of the contract, requires all market risk benefits to be measured at fair value, and enhances certain presentation and disclosure requirements, as discussed in Note 7 and Note 8. As a result of the adoption of ASU 2018-12, beginning retained earnings was reduced by $25.1 million and Accumulated Other Comprehensive Income (“AOCI”) reduced by $1,030.3 million as of January 1, 2021. The tabla e below presents the transition adjud stment for the adoption of ASU 2018-12: Retained Earnings AOCI Pre-Adoption Balance 12/31/2020 $ $ 2,071.2 680.5 Adjud stments to AOCI — (1,030.3) Adjud stments to Retained Earnings Post- Adoption Balance 1/1/2021 (25.1) $ — $ 2,046.1 (349.8) For the liabia lity for future policyholder benefits, the net transition adjud stment is related to the difference in the historical discount rates used pre-transition and the discount rate at December 31, 2020. At transition, there were no adjud stments related to premium deficiencies, as the balance is only applicable to Kemper’s universal life contracts which are stated at account value. The effeff cts of adoption of ASU 2018-12 on the Consolidated Statement of Loss for the years ended December 31, 2022 and 2021 were as follows: 2022 2021 Prior to Adoption Effeff ct of Adoption Post- Adoption Balance Prior to Adoption Effeff ct of Adoption Post- Adoption Balance Earned Premiums ............................................. $ 5,266.3 Policyholders’ Benefits and Incurred Losses and Loss Adjud stment Expenses......................... $ 4,504.4 Insurance Expenses ........................................... $ 1,200.6 88.3 Income Tax Benefit........................................... $ (301.2) Net Loss attributable to Kemper Corporation ... $ (52.9) $ 5,213.4 $ 5,253.7 (74.5) $ 5,179.2 (71.8) $ 4,432.6 $ 4,600.8 0.4 $ 1,201.0 $ 1,218.1 124.8 84.4 $ (3.9) $ (120.5) (286.6) $ 14.6 $ (81.2) $ 4,519.6 10.7 $ 1,228.8 125.6 0.8 $ (123.7) (3.2) $ Net Loss Per Unrestricted Share attributable to Kemper Corporation: Basic ............................................................. $ Diluted .......................................................... $ (4.72) $ (4.72) $ 0.22 $ 0.22 $ (4.50) $ (4.50) $ (1.87) $ (1.87) $ (0.05) $ (0.05) $ (1.92) (1.92) 87 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) The effeff cts of adoption of ASU 2018-12 on the Consolidated Balance Sheet as of December 31, 2022 were as follows: Deferred Policy Acquisition Costs Prior to Adoption 625.6 $ 189.4 Deferred Income Tax Assets........................................................................... $ 13,364.0 Total Assets..................................................................................................... $ 3,554.0 Life and Health Insurance Reserves................................................................ $ 10,920.8 Total Liabilities ............................................................................................... $ 1,380.1 Retained Earnings ........................................................................................... $ Accumulated Other Comprehensive Loss....................................................... $ (756.0) Total Shareholders’ Equity attributable to Kemper Corporation.................... $ 2,443.2 Effeff ct of Adoption Post- Adoption Balance 10.0 $ (60.4) $ (50.4) $ (277.8) $ (277.8) $ (13.7) $ 241.1 $ 227.4 $ 635.6 129.0 13,313.6 3,276.2 10,643.0 1,366.4 (514.9) 2,670.6 The effeff cts of adoption of ASU 2018-12 on the Consolidated Statement of Comprehensive Loss for the years ended December 31, 2022 and 2021 were as follows: 2022 2021 Prior to Adoption Effeff ct of Adoption Post- Adoption Balance Prior to Adoption Effeff ct of Adoption Post- Adoption Balance Change in Discount Rate on Future Life Policyholder Benefits Other Comprehensive Loss Before Income Taxes ................................................................. $ (1,524.4) Other Comprehensive Income Tax Benefit....... $ 320.3 Other Comprehensive Loss, Net of Taxes ........ $ (1,204.1) Total Comprehensive Loss................................ $ (1,505.3) — $ 1,380.7 $ 1,380.7 $ — $ 228.5 $ 228.5 1,380.7 $ (289.9) $ 1,090.8 $ 1,105.4 $ (143.7) $ 30.4 $ (113.3) $ (399.9) $ (294.8) $ 62.4 $ (232.4) $ (352.9) $ 228.5 $ (47.9) $ 180.6 $ 177.4 $ (66.3) 14.5 (51.8) (175.5) The effeff cts of adoption of ASU 2018-12 on the Consolidated Statement of Cash Flows for the years ended December 31, 2022 and 2021 were as follows: 2022 2021 Prior to Adoption Effeff ct of Adoption Post- Adoption Balance Prior to Adoption Effeff ct of Adoption Post- Adoption Balance Cash Flows from Operating Activities: Net Loss ......................................................... $ Change in Deferred Policy Acquisition Costs $ Change in Insurance Reserves........................ $ Change in Income Taxes ................................ $ Net Cash Used in Operating Activities............. $ (301.2) 13.8 45.4 (87.5) (210.3) 14.6 $ 0.4 $ (18.9) $ 3.9 $ — $ (286.6) $ 14.2 $ 26.5 $ (83.6) $ (210.3) $ (120.5) (88.3) 623.1 (163.1) 350.7 (3.2) $ 10.7 $ (6.7) $ (0.8) $ — $ (123.7) (77.6) 616.4 (163.9) 350.7 ing Liabilities from Equity (TopiTT In July 2023, the FASB issued ASU 2023-03 Presentation of Financial Statements (TopiTT inguishii Comprehensive Income (TopTT ic 220), Distii —StoS ck Compensation (TopTT ic 718), which codifies amendments to certain SEC paragraphs pursuant to SEC Staffff Accounting Bulletin No. 120, SEC Staffff Announcement at the March 24, 2022 EITF Meeting, and Staffff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. This ASU predominately codifies guidance for public companies to consider when entering into share-based payment arrangements while in possession of material non-public information. As this ASU does not provide any new guidance, there is no transition or effeff ctive date associated with it. The Company adopted this ASU as of the third quarter of 2023 with no material impact to the consolidated financial statements. c 205), Income Statement—Rep— orting c 505), and Compensation c 480), Equity (TopiTT 88 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) dd Guidanc e Not Yet Adopt dd ed In March 2023, the FASB issued ASU 2023-02 Accounting for Investments in Taxaa Credit Strutt ctures Using the Proportional Amortization Method, which expands the use of the proportional amortization method of accounting to equity investments in other tax credit structurt es that meet certain criteria. The proportional amortization method results in the tax credit investment being amortized in proportion to the allocation of tax credits and other tax benefits in each period, and a net presentation within the income tax line item. ASU 2023-02 is effeff ctive for annual periods beginning afteff within those annual periods. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. r December 15, 2023 and interim periods losure Imprm ovements: Codifii cation Amendments in Response to the In October 2023, the FASB issued ASU 2023-06 Discii SEC’s Discii losure Update and Simplifici ation Initiative. This ASU amends the disclosure or presentation requirements related to various subtu opics in the FASB Accounting Standards Codification. For SEC registrants, the effeff ctive date for each amendment will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effeff ctive, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but does not anticipate the adoption of the new guidance will have a material impact on the Company’s Consolidated Financial Statements. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements. In November 2023, the FASB issued ASU 2023-07 Imprm ovements to Repor disclosures about significant segment expenses. The new standard does not change the definition or aggregation of operating segments but will add required disclosures of significff ant expenses for each reportabla e segment as well as certain other disclosures to help financial statement users understand how the chief operating decision maker evaluates segment expenses and operating results. ASU 2023-07 is effeff ctive for annual periods beginning afteff within fiscal years beginning afteff consolidated financial statements. r December 15, 2024. The Company is currently evaluating the impact of this guidance on its r December 15, 2023 and interim periods losures, which enhances table Segme ent Discii e In December 2023, the FASB issued ASU 2023-09 Imprm ovements to Income Taxaa Discii of income tax disclosures by requiring companies to use consistent categories and greater disaggregation of information in the tax rate reconciliation as well as requiring disaggregation of income taxes paid by jurisdiction. ASU 2023-09 is effeff ctive for annual periods beginning afteff yet been issued or made availabla e for issuance. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. r December 15, 2024, with early adoption permitted for annual financial statements that have not losures, which improves the transparency 89 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 3. NET LOSS PER UNRESTRICTED SHARE A reconciliation of the numerator and denominator used in the calculation of Basic Net Loss Per Unrestricted Share and Diluted Net Loss Per Unrestricted Share for the years ended December 31, 2023, 2022 and 2021 is presented below. DOLLARS IN MILLIONS II 2023 2022 2021 Net Loss attributable to Kemper Corporation ........................................................................ $ (272.1) $ (286.6) $ (123.7) HH SHARES IN THOUSHH ANSS DSNN Weighted-average Unrestricted Shares Outstanding.............................................................. 64,025.6 63,825.5 64,264.4 Equity-based Compensation Equivalent Shares..................................................................... Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution............................................................................................................................... — — — 64,025.6 63,825.5 64,264.4 Net Loss attributable to Kemper Corporation per Unrestricted Share: PEREE UNRESR TRICRR TEDEE SHAREHH IN WHOLHH E DOLLARS Basic Net Loss Per Unrestricted Share .................................................................................. $ (4.25) $ (4.50) $ Diluted Net Loss Per Unrestricted Share ............................................................................... $ (4.25) $ (4.50) $ (1.92) (1.92) 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 because the effeff ct of inclusion would be anti-dilutive was 3.6 million, 2.4 million, and 2.2 million for the years ended December 31, 2023, 2022, and 2021, respectively. NOTE 4. DISPOSITIONS Dispii osition of Reserve National Insurance Company In July 2022, the Company entered into a definitive agreement to sell Reserve National Insurance Company and its wholly- owned subsu idiaries (collectively, “Reserve National”) to Medical Mutual of Ohio for approximately $90.0 million in total consideration. The sale closed on December 1, 2022 and a loss of $1.6 million, net of income tax, was recorded for the year ended December 31, 2022. The Company reported Reserve National’s results of operations in the Life Insurance segment through December 1, 2022. 90 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 4. DISPOSITIONS (Continued) The following tabla e summarizes the assets and liabilities included in the sale on December 1, 2022: (Dollars in millions) Assets: Investments: Fixed Maturities at Fair Value (Amortized Cost: $43.3)................................................................................ $ Short-term Investments at Cost which Approximates Fair Value.................................................................. Loans to Policyholders ................................................................................................................................... Total Investments................................................................................................................................................ Cash..................................................................................................................................................................... Receivabla es from Policyholders.......................................................................................................................... Other Receivabla es ............................................................................................................................................... Deferred Policy Acquisition Costs...................................................................................................................... Goodwill ............................................................................................................................................................. Other Assets ........................................................................................................................................................ Investment in Subsu idiaries .................................................................................................................................. Dec 1, 2022 36.7 0.7 0.7 38.1 81.0 2.6 1.6 38.7 0.3 3.1 0.2 Total Assets.............................................................................................................................................................. $ 165.6 Liabilities: Insurance Reserves: Health Insurance Reserves .................................................................................................................................. $ Unearned Premiums............................................................................................................................................ Deferred Income Tax Liabilities ......................................................................................................................... Accruerr d Expenses and Other Liabilities............................................................................................................. Total Liabilities........................................................................................................................................................ $ 48.2 10.8 1.8 13.8 74.6 NOTE 5. BUSINESS SEGMENTS In the third quarter of 2023, the Company announced that it will exit the Preferff and will actively reduce the business beginning in third quarter 2023, with all policies being non-renewed or canceled in accordance with applicable state regulations. In connection with the exit, the Company changed its segment measure of performance to exclude the results of the Preferff Operating Loss effeff ctive July 1, 2023, since the results are irrelevant to ongoing operations of the Company and do not qualifyff for Discontinued Operations under U.S. GAAP. The results of this business, previously reported as a reportabla e segment, are now reflected as Non-Core Operations and presented as a reconciling item between Segment Adjud sted Operating Net Loss and Net Loss. Prior period amounts have been reclassified to reflect the change in reportabla e segments and the segment measure of performance. red Property and Casualty Insurance business from Segment Adjud sted Net red Property and Casualty Insurance business The Company is engaged, through its subsu idiaries, in the property and casualty insurance and lifeff and health insurance businesses. The Company conducts its operations through two operating segments: Specialty Property & Casualty Insurance, and Life Insurance. The Specialty Property & Casualty Insurance segment’s principal products are specialty automobile and commercial automobile insurance. These products are distributed primarily through independent agents and brokers. The Life Insurance segment’s (formerly referred to as “Lifeff & Health Insurance”) principal products are individual life,ff emental health and property insurance. Career agents employed by the Company distribute these products. Corporate and Other operations include interest expense, board of director fees, and general corporate expenses incurred by the Company which are not allocated to other businesses. accident, supplu 91 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 5. BUSINESS SEGMENTS (Continued) Segme ent Adjudd sted Operating (Loss) Income hThe Companyy an lalyyzes hthe opera iti gng performance of ea hch seggment usiingg seggment dadjujudd st ded opera itingg (l(los )s) iincome. Seggment iwi hth dadjujudd st ded opera itingg (l(los )s) iincome ddoes not equate to l“loss bbefore iincome taxes” or “net lloss” as ddetermiin ded iin acco drdance U.S. GAAP bbut iis hthe measure of seggment profiitff or lloss us ded byby hthe Companyy’s hChiief Operatiingg De ici ision Makker ((“CODM )”) to ev laluate seggment performance a dnd lalllocate resources, andd consiistent pperformance presentedd bbellow. Seggment dadjujudd st ded opera iti gng (l(los )s) iincome iis iincome taxes for hthe follllo iwi gng iitems: iwi hth au hthoriita itive guiguiddance, iis hthe measure of seggment heach seggment’s lloss bbefore lcalcullatedd byby dadjujudd stiingg iqui isi ition andd iDisposiitiion Rellatedd Transactiion, Integgratiion, Restructurt (i) Income (Loss) from Change in Fair Value of Equity and Convertible Securities; (ii) Net Realized Investment (Losses) Gains; (iii) Impairment Losses; (i(i )v) Ac ((v)) Debbt Ex iti gnguiishhment, Pensiion Se lttlement andd Othher hChargges; ((vi)i) Go dodwililll Impaiirment hChargge; ((vii)ii) Non-Core Operatiions; andd ((viii)iii) iSignignifificant non-recu irri gng or iinfrequent iitems hthat mayy not bbe iindidicatiive of ongoi iingg andd Othher Costs; ongoi gng opera itions dundersta dindi gng of overallll resullts of opera itions. Seggment dadjujudd st ded opera itingg (l(los )s) iincome is not hThese iitems are iimportant to an a subsu titute for income determined in accordance wiithh U.S. GAAP, andd hthe Companyy’s ddefifi ini ition of seggment dadjujudd st ded opera itingg (l(los )s) iincome mayy didifferff of seggment dadjujudd st ded cons lolididat ded opera itingg (l(los )s) iincome as measured for management purpos results of operations by highlighting the results from ongoing operations and the underlying profitff ability factors of its businesses. from hthat us ded byby othher companiies. hThe Companyy, hhowever, bbelilieves hthat hthe presenta ition es enhances the understanding of r 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. Capia tal 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 (Loss) Income to its insurance operations. The amount of such allocated corporate expenses was $114.4 million, $127.8 million and $121.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company does not allocate Income (Loss) from Change in Fair Value of Equity and Convertible Securities, Net Realized Investment (Losses) Gains, Impairment Losses, Ac Se lttlement andd Othher hChargge ,s Go dodwililll Impaiirment hChargge, Non-Core Operatiions, andd iSignignifificant non-recu irri gng or iinfrequent iitems hthat mayy not bbe iindidica itive of ongoi iqui isi ition andd iDisposi iition Rellatedd Transactiion, Integgratiion, Restructurt iingg andd Othher Cost ,s Debbt Ex itinguigui hshment, Pensiion ongoi gng opera itions to its operating segments. Total Segment, Non-Core Operations, and Corporate and Other assets at December 31, 2023 and 2022 were: DOLLARS IN MILLIONS Segment Assets: II 2023 2022 Specialty Property & Casualty Insurance............................................................................................ $ 6,145.9 Life Insurance...................................................................................................................................... 4,898.1 Total Segment Assets............................................................................................................................. 11,044.0 Corporate and Other............................................................................................................................... 623.7 Non-Core Operations............................................................................................................................. 1,075.0 Total Assets............................................................................................................................................ $ 12,742.7 $ 6,535.3 5,008.0 11,543.3 545.4 1,224.9 $ 13,313.6 92 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, 2023, 2022 and 2021 were: DOLLARS IN MILLIONS Specialty Property & Casualty Insurance: II 2023 2022 2021 Personal Automobile........................................................................................................... $ 2,977.8 Commercial Automobile ..................................................................................................... 654.7 $ 3,496.7 549.7 $ 3,533.7 414.8 Life Insurance: Life ...................................................................................................................................... 319.2 Accident and Health ............................................................................................................ 23.1 Property ............................................................................................................................... 45.3 Total Segment Earned Premiums........................................................................................... 4,020.1 Non-Core Operations ............................................................................................................. 509.3 Total Earned Premiums.......................................................................................................... $ 4,529.4 352.8 168.2 50.5 4,617.9 595.5 $ 5,213.4 327.2 189.9 61.9 4,527.5 651.7 $ 5,179.2 Segment Revenues, including a reconciliation to Total Revenues, for the years ended December 31, 2023, 2022 and 2021 were: II DOLLARS IN MILLIONS Segment Revenues: Specialty Property & Casualty Insurance: 2023 2022 2021 Earned Premiums .............................................................................................................. $ 3,632.5 Net Investment Income ..................................................................................................... 168.3 Change in Value of Alternative Energy Partnership Investments..................................... 1.6 Other Income..................................................................................................................... 4.5 Total Specialty Property & Casualty Insurance .................................................................. 3,806.9 $ 4,046.4 140.7 (9.9) 6.0 4,183.2 $ 3,948.5 152.5 (29.0) 4.1 4,076.1 Life Insurance: Earned Premiums .............................................................................................................. 387.6 Net Investment Income ..................................................................................................... 193.4 Change in Value of Alternative Energy Partnership Investments..................................... 0.7 Other Income..................................................................................................................... (0.2) Total Life Insurance ............................................................................................................ 581.5 Total Segment Revenues........................................................................................................ 4,388.4 Income (Loss) from Change in Fair Value of Equity and Convertible Securities................. 4.7 Net Realized Investment (Losses) Gains ............................................................................... (18.6) Net Impairment Losses Recognized in Earnings ................................................................... (1.1) Non-Core Operations ............................................................................................................. 558.4 Other ...................................................................................................................................... 12.4 Total Revenues....................................................................................................................... $ 4,944.2 571.5 216.5 (5.3) (0.6) 782.1 4,965.3 (79.9) 4.3 (25.8) 640.5 19.5 $ 5,523.9 579.0 202.7 (15.8) (1.3) 764.6 4,840.7 114.6 64.8 (11.0) 704.0 5.4 $ 5,718.5 93 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 5. BUSINESS SEGMENTS (Continued) Adjud sted Consolidated Operating Loss, including a reconciliation to Loss before Income Taxes attributable to Kemper Corporation, for the years ended December 31, 2023, 2022 and 2021 was: DOLLARS IN MILLIONS Segment Adjud sted Operating (Loss) Income: II Specialty Property & Casualty Insurance............................................................................ Life Insurance...................................................................................................................... Total Segment Adjud sted Operating Loss ............................................................................... Corporate and Other Adjud sted Operating Loss...................................................................... Less: Loss before Income Taxes attributable to Noncontrolling Interest .............................. Adjud sted Consolidated Operating Loss ................................................................................. Income (Loss) from Change in Fair Value of Equity and Convertible Securities ............ Net Realized Investment (Losses) Gains .......................................................................... Impairment Losses ............................................................................................................ Acquisition and Disposition Related Transaction, Integration, Restructurt ing and Other Costs.................................................................................................................................. Debt Extinguishment, Pension Settlement, and Other Charges........................................ Goodwill Impairment Charge ........................................................................................... Non-Core Operations ........................................................................................................ (43.9) — — (39.8) Loss before Income Taxes attributable to Kemper Corporation............................................ $ (346.8) $ (371.0) $ (249.3) (120.3) (70.2) (49.6) (22.8) (62.9) (3.7) — (36.4) 2023 2022 2021 (76.3) $ (196.9) $ (292.1) 6.5 78.0 62.3 (285.6) (118.9) (14.0) (48.4) (47.7) (55.2) — — (0.3) (334.0) (166.6) (68.9) 114.6 (79.9) 4.7 64.8 4.3 (18.6) (11.0) (25.8) (1.1) Adjud sted Consolidated Net Operating Loss, including a reconciliation to Net Loss attributable to Kemper Corporation, for the years ended December 31, 2023, 2022 and 2021 was: DOLLARS IN MILLIONS Segment Adjud sted Net Operating (Loss) Income: II Specialty Property & Casualty Insurance............................................................................ Life Insurance...................................................................................................................... Total Segment Adjud sted Net Operating Loss ....................................................................... Corporate and Other Adjud sted Net Operating Loss............................................................... Less: Net Loss attributable to Noncontrolling Interest .......................................................... Adjud sted Consolidated Net Operating Loss........................................................................... Net Income (Loss) From: 2023 2022 2021 (57.1) $ (147.4) $ (196.1) 25.0 68.8 51.8 (171.1) (78.6) (5.3) (38.4) (37.8) (42.1) — — (0.2) (209.5) (116.4) (47.2) 3.7 (14.7) (0.9) (63.1) 3.4 (20.4) 90.5 51.2 (8.7) Change in Fair Value of Equity and Convertible Securities ............................................... Net Realized Investment (Losses) Gains ............................................................................ Impairment Losses .............................................................................................................. Acquisition and Disposition Related Transaction, Integration, Restructurt Costs.................................................................................................................................... Debt Extinguishment, Pension Settlement, and Other Charges .......................................... Goodwill Impairment Charges ............................................................................................ Non-Core Operations .......................................................................................................... (34.7) — — (12.5) Net Loss Attributable to Kemper Corporation....................................................................... $ (272.1) $ (286.6) $ (123.7) (95.0) (55.5) (45.5) (17.0) (61.3) (2.9) — (25.9) ing and Other 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 subru ogation 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 studi es of historical average paid amounts by state, coverage and product. However, when such reserves exceed certain thresholds they are set manually by t 94 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) adjud sters. For preferff the adjud sters’ estimates of the amount for which the claims will ultimately be paid. red homeowners insurance and other personal insurance, case reserves are set by adjud sters and are based on ries estimate ultimate losses and LAE and, thereforff e, reserves at least quarterly for most product lines The Company’s actuat 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 actuat rial 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. sional judgment in determining how much weight to ries make adjud stments to the loss reserving estimation 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 affeff ct the development patterns, which generally results in the historical development factors becoming less reliabla e over time in predicting how losses and LAE will ultimately develop. The Company’s actuaries use profesff 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 actuat methodologies to estimate ultimate losses and LAE. The Company’s actuat product and/or coverage levels to create the actuarial indication of the ultimate losses and LAE. Paid amounts are then subtu racted 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 rial indications, changes in claim handling practices or other changes that affeff ct the timing of payment or development actuat patterns, changes in the mix of business, the maturt ity 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. ries’ quarterly or yearly selections are summed by The following tabla es contain information about incurred and paid claims development as of and for the year ended December 31, 2023, net of reinsurance and indemnificff ation, as well as cumulative claim frequency and the total of IBNR liabia lities, including expected development on reported claims included within the net incurred losses and allocated LAE amounts. The tabla es are grouped by majoa r product line and, if relevant, coverage. The information about incurred and paid claims development for the years ended December 31, 2019 through 2022 is presented as suppl ementary information and is unaudited. u 95 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) Speciali tyll Personal Automobileii Insurance—Li— abi ilitll ytt 1 DOLLARS IN MILLIONS ,SS EXCEPT CUMUUU LAUU TIVE INCUNN RRED UU II CLAILL MSII As of December 31, 2023 Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 Total of IBNR Liabilities Plus Expected Development on Reported Claims 1,461.5 2019 ............. $ 2020 ....................................... $ $ 1,494.7 1,401.2 2021................................................................. $ 1,506.1 1,406.4 1,856.9 2022 .......................................................................................... $ 1,508.3 1,407.8 1,824.7 1,765.9 2023 .................................................................................................................... Total.................................................................................................................... $ 1,516.1 1,415.9 1,844.2 1,848.7 1,448.7 8,073.6 20.0 29.9 75.9 169.3 537.1 Cumulative Number of Reported Claims 547,437 475,894 585,665 471,990 282,423 Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 2019 ............. $ 567.3 2020 ....................................... $ $ 1,200.7 555.2 2021................................................................. $ 1,382.0 1,107.6 657.1 2022 .......................................................................................... $ 1,452.3 1,287.8 1,429.4 738.2 2023 .................................................................................................................... Total.................................................................................................................... Outstanding Loss and Allocated LAE Reserves on Accident Years before 2019, Net of Reinsurance .............................................................................. Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $ 1,482.1 1,350.0 1,680.8 1,463.3 580.4 6,556.6 27.9 1,544.9 1 Tabla es retrospectively include American Access Casualty Company’s (“AAC”) historical incurred and paid accident year claim information for all periods presented. 96 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) Speciali tyll Personal Automobileii Insurance—Ph— ysh ical Damagea 1 DOLLARS IN MILLIONS ,SS EXCEPT CUMUUU LAUU TIVE INCUNN RRED UU II CLAILL MSII As of December 31, 2023 Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 Total of IBNR Liabilities Plus Expected Development on Reported Claims 2019 ............. $ 624.3 $ 630.3 $ 629.6 $ 629.7 $ 629.5 $ 2020 ....................................... 650.5 659.5 958.0 2021................................................................. 2022 .......................................................................................... 659.5 967.5 993.5 2023 .................................................................................................................... 659.0 967.2 989.5 722.6 Total.................................................................................................................... 3,967.8 (9.2) (0.5) (1.9) (9.7) (6.2) Cumulative Number of Reported Claims 324,516 296,411 361,864 308,705 199,413 Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 2019 ............. $ 570.8 $ 634.8 $ 630.6 $ 630.0 $ 2020 ....................................... 585.5 663.8 890.1 2021................................................................. 2022 .......................................................................................... 659.7 977.5 921.9 2023 .................................................................................................................... Total.................................................................................................................... Outstanding Loss and Allocated LAE Reserves on Accident Years before 2019, Net of Reinsurance .............................................................................. Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $ 629.8 658.8 968.3 997.8 699.2 3,953.9 (2.8) 11.1 1 Tabla es retrospectively include AAC’s historical incurred and paid accident year claim information for all periods presented. 97 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) Commercial Automobileii Insurance—Li— abi i liii tyii II DOLLARS IN MILLI II ONS ,SS EXCEPT CUMUUU LAUU TIVE INCUNN RRED UU CLAILL MSII As of December 31, 2023 Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims 2019 ............. $ 128.4 $ 126.1 $ 126.6 $ 128.1 $ 129.8 $ 2020....................................... 140.5 2021 ................................................................ 152.0 225.6 154.0 228.6 2022.......................................................................................... 305.1 2023.................................................................................................................... 155.6 240.4 309.1 379.9 Total ................................................................................................................... 1,214.8 5.7 7.4 24.8 67.1 201.4 19,641 19,627 27,382 32,102 31,970 Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnificff ation For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 2019 ............. $ 32.4 $ 75.7 $ 2020....................................... 37.0 2021 ................................................................ 99.5 87.6 50.8 $ 113.1 $ 111.7 128.0 2022.......................................................................................... 72.2 2023.................................................................................................................... Total ................................................................................................................... Outstanding Loss and Allocated LAE Reserves on Accident Years before 2019, Net of Reinsurance ............................................................................. Loss and Allocated LAE Reserves, Net of Reinsurance.................................... $ 121.9 129.7 168.6 159.0 87.5 666.7 11.4 559.5 98 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) Commercial Automobileii Insurance—Ph— ysh ical Damagea II DOLLARS IN MILLI II ONS ,SS EXCEPT CUMUUU LAUU TIVE INCUNN RRED UU CLAILL MSII As of December 31, 2023 Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims 2019 ............. $ 26.0 $ 2020....................................... $ 27.1 31.9 $ 26.9 32.2 52.4 2021 ................................................................ 2022.......................................................................................... $ 26.8 32.1 51.9 74.5 2023.................................................................................................................... $ 26.8 32.1 51.6 74.7 90.0 Total ................................................................................................................... 275.2 (0.5) — 0.2 (0.2) 4.8 9,317 11,044 17,724 21,541 19,056 Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnificff ation For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 2019 ............. $ 23.0 $ 2020....................................... $ 26.9 26.2 2021 ................................................................ $ 26.8 31.9 43.3 $ 26.8 32.0 51.9 2022.......................................................................................... 66.8 2023.................................................................................................................... Total ................................................................................................................... Outstanding Loss and Allocated LAE Reserves on Accident Years before 2019, Net of Reinsurance ............................................................................. Loss and Allocated LAE Reserves, Net of Reinsurance.................................... $ 26.9 32.0 51.4 74.6 80.6 265.5 — 9.7 99 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) Non-Core Personal Automobileii Insurance—Li— abi i litii ytt DOLLARS IN MILLIONS ,SS EXCEPT CUMUUU LAUU TIVE INCUNN RRED UU II CLAILL MSII As of December 31, 2023 Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims 2019 ............. $ 172.2 2020 ....................................... $ $ 195.5 148.9 2021................................................................. $ 200.0 153.6 176.9 2022 .......................................................................................... $ 201.8 151.8 179.8 165.0 2023 .................................................................................................................... Total.................................................................................................................... $ 204.8 158.8 180.6 172.4 135.0 851.6 1.6 3.1 9.3 19.9 47.1 34,622 24,664 27,173 24,019 15,795 Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 2019 ............. $ 62.7 $ 127.9 $ 160.8 $ 181.1 $ 2020 ....................................... 44.4 92.8 2021................................................................. 50.3 2022 .......................................................................................... 117.7 106.1 55.0 2023 .................................................................................................................... Total.................................................................................................................... Outstanding Loss and Allocated LAE Reserves on Accident Years before 2019, Net of Reinsurance.............................................................................. Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $ 193.5 141.4 144.1 111.0 43.7 633.7 8.2 226.1 100 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) Non-Core Personal Automobileii Insurance—Ph— ysh ical Damagea DOLLARS IN MILLIONS ,SS EXCEPT CUMUUU LAUU TIVE INCUNN RRED UU II CLAILL MSII As of December 31, 2023 Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims 2019 ............. $ 126.4 $ 125.8 $ 125.9 $ 125.8 $ 125.4 $ 2020 ....................................... 96.1 2021................................................................. 98.0 118.5 2022 .......................................................................................... 97.9 117.9 110.9 2023 .................................................................................................................... Total.................................................................................................................... 97.5 117.1 113.5 86.6 540.1 — — (0.2) (1.1) (1.3) 67,108 47,589 53,477 48,108 32,552 Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 2019 ............. $ 120.7 $ 126.5 $ 125.6 $ 125.4 $ 2020 ....................................... 90.9 2021................................................................. 98.4 113.1 97.6 118.1 108.7 2022 .......................................................................................... 2023 .................................................................................................................... Total.................................................................................................................... Outstanding Loss and Allocated LAE Reserves on Accident Years before 2019, Net of Reinsurance.............................................................................. Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $ 125.4 97.5 117.2 114.6 84.8 539.5 — 0.6 101 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) Non-Core Homeownersrr Insurance DOLLARS IN MILLIONS ,SS EXCEPT CUMUUU LAUU TIVE INCUNN RRED UU II CLAILL MSII As of December 31, 2023 Incurred Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims 2019 ............. $ 162.9 $ 161.8 $ 163.1 $ 162.8 $ 161.6 $ 2020 ....................................... 157.0 2021................................................................. 149.8 149.9 2022 .......................................................................................... 144.6 149.8 142.7 2023 .................................................................................................................... Total.................................................................................................................... 141.2 143.9 152.7 126.6 726.0 0.4 0.4 0.9 1.7 12.8 14,531 14,074 13,620 11,463 8,913 Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident Year 2019 2020 2021 2022 2023 2019 ............. $ 111.1 $ 150.4 $ 157.7 $ 159.5 $ 2020 ....................................... 94.6 2021................................................................. 130.8 100.6 2022 .......................................................................................... 137.4 132.6 97.0 2023 .................................................................................................................... Total.................................................................................................................... Outstanding Loss and Allocated LAE Reserves on Accident Years before 2019, Net of Reinsurance.............................................................................. Loss and Allocated LAE Reserves, Net of Reinsurance .................................... $ 160.6 139.8 139.7 141.2 84.7 666.0 1.5 61.5 102 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) The claim counts in the preceding tabla es are cumulative reported claim counts as of December 31, 2023 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 featurt e 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 injun red parties, there may be five featurt es—three for bodily injun ry liability, one for property damage liability and one for first-party collision coverage. There may also be another featurt e for first-party medical payments. The following tabla e reconciles the net incurred and paid claims development tabla es presented above to the Company's liability for Property and Casualty Insurance Reserves included in the Consolidated Balance Sheets at December 31, 2023. LARS IN MILLIONS II Property and Casualty Insurance Reserves, Net of Reinsurance: 2023 Specialty Personal Automobile Insurance—Liability............................................................................................... $ 1,544.9 Specialty Personal Automobile Insurance—Physical Damage ................................................................................ Commercial Automobile Insurance—Liability ........................................................................................................ Commercial Automobile Insurance—Physical Damage .......................................................................................... Non-Core Personal Automobile Insurance—Liability ............................................................................................. Non-Core Personal Automobile Insurance—Physical Damage ............................................................................... Non-Core Homeowners Insurance............................................................................................................................ 559.5 9.7 226.1 0.6 61.5 Other ......................................................................................................................................................................... 37.4 Total............................................................................................................................................................................... $ 2,450.8 Reinsurance Recoverabla es on Unpaid Losses and Allocated LAE: Specialty Personal Automobile Insurance—Liability............................................................................................... $ Non-Core Preferff red Personal Automobile Insurance—Liability.............................................................................. Non-Core Homeowners Insurance............................................................................................................................ Other ......................................................................................................................................................................... Total............................................................................................................................................................................... 6.0 18.7 0.2 2.9 27.8 Unallocated LAE ........................................................................................................................................................... 201.9 Property and Casualty Insurance Reserves, Gross of Reinsurance ............................................................................... $ 2,680.5 The following is supplu ementary information about average historical claims duration as of December 31, 2023. Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited) Years Specialty Personal Automobile Insurance—Liability.................................. Specialty Personal Automobile Insurance—Physical Damage.................... Commercial Automobile Insurance—Liability............................................ Commercial Automobile Insurance—Physical Damage ............................. red Personal Automobile Insurance—Liability................. Non-Core Preferff Non-Core Preferff red Personal Automobile Insurance—Physical Damage... Non-Core Homeowners Insurance............................................................... 1 2 38.5 % 78.5 100.0 92.3 54.8 23.3 100.0 86.1 61.0 30.1 100.0 96.0 92.6 67.2 103 3 1.1 % 95.6 % 97.8 % 5 4 9% 100.0 72.9 100.0 77.5 100.0 97.3 100.0 85.3 100.0 88.7 100.0 98.8 100.0 93.9 100.0 94.5 100.0 99.4 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, 2023, 2022 and 2021 was: DOLLARS IN MILLIONS Property and Casualty Insurance Reserves: II 2023 2022 2021 Gross of Reinsurance at Beginning of Year ...................................................................... $ 2,756.9 Less Reinsurance Recoverabla es at Beginning of Year ...................................................... 39.6 Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year......... Property and Casualty Insurance Reserves Acquired, Net of Reinsurance............................ Incurred Losses and LAE related to: $ 2,772.7 41.9 $ 1,982.5 50.1 2,730.8 — 1,932.4 211.1 2,717.3 — 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 Recoverabla es at End of Year................................................................. 3,429.9 159.8 3,589.7 1,965.3 1,689.0 3,654.3 2,652.7 27.8 4,103.3 (14.6) 4,088.7 2,460.5 1,641.7 4,102.2 2,717.3 39.6 4,052.7 106.7 4,159.4 2,303.4 1,268.7 3,572.1 2,730.8 41.9 Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Year ............... $ 2,680.5 $ 2,756.9 $ 2,772.7 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 Loss in the period of change. In 2023, the Company increased its property and casualty insurance reserves by $159.8 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 $108.7 million due primarily to higher than expected emergence in loss patterns related to third and fourth accident quarters of 2022 within the bodily injun ry and physical damage coverages as well as an increase in Florida personal injun ry protection driven by higher than expected frequency and severity resulting from an increase in litigated claim activity, mainly from policy years 2020 through 2022. Commercial Automobile insurance loss and LAE reserves developed adversely by $24.2 million due to higher than expected emergence in loss patterns related to policy years 2021 and 2022 bodily injun ry coverages. Non-Core personal automobile insurance loss and LAE reserves developed adversely by $21.6 million due to higher than expected emergence in loss patterns related to the third and fourth accident quarters of 2022 within the bodily injun ry and physical damage coverages. Homeowners insurance loss and LAE reserves developed adversely by $1.5 million. Other personal lines loss and LAE reserves developed adversely by $3.8 million. In 2022, the Company decreased its property and casualty insurance reserves by $14.6 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 $17.6 million due primarily to the emergence of more favorable loss patterns than expected for liabia lity and physical damage insurance. Commercial Automobile insurance loss and LAE reserves included adverse development of $3.6 million due primarily to the emergence of less favorable loss patterns than expected for liability insurance. Non-Core personal automobile insurance loss and LAE reserves developed adversely by $1.8 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 $7.6 million due primarily to the emergence of more favorable loss patterns than expected. Other personal lines loss and LAE reserves developed adversely by $5.2 million due primarily to the emergence of less favorable loss patterns than expected for prior accident years. 104 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) 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 injun ry protection coverage in Florida and other liability coverages. Commercial Automobile insurance loss and LAE reserves included adversely development of $12.4 million due primarily to the emergence of less favorable loss patterns than expected for liabia lity insurance. Non-Core 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 less favorable loss patterns than expected for liabia lity insurance. 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. The Company cannot predict whether loss and LAE reserves will develop favorably or unfavff orably from the amounts reported in the Consolidated Financial Statements. The Company believes that any such development will not have a material effeff ct on the Company’s consolidated financial position, but could have a material effeff ct on the Company’s consolidated financial results for a given period. Reinsurance recoverabla es on property and casualty insurance reserves were $27.8 million and $39.6 million at December 31, 2023 and 2022, respectively. These recoverabla es are concentrated with several reinsurers, the majoa rity of which are highly rated by one or more of the principal investor and/or insurance company rating agencies. While most of these recoverabla es were unsecured at December 31, 2023 and 2022, the agreements with the reinsurers generally provide for some form of collateralization upon the occurrence of certain events. NOTE 7. LIABILITY FOR FUTURE POLICYHOLDER BENEFITS The Company’s Life Insurance Reserves are reported using the Company’s estimate of its liabia lity for future policyholder benefits. The liabia lity for futff urt e policyholder benefits is grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. Significant assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapsa es, and discount rates (both accretion and current). The Company’s actuaries review assumptions used to measure the liability for future policyholder benefits for nonparticipating traditional and limited pay long- duration contracts at least annually. If there is a change, assumptions are updated with the recognition and remeasurement recorded in net income. The Company’s actuat with Actuarial Standards of Practice, in determining the assumptions. ries use a variety of generally accepted actuarial methodologies, in accordance The key assumption in these estimation methodologies is that patterns observed in prior periods are indicative of how policyholder benefits are expected to develop in the future and that such historical data can be used to predict and estimate future losses. However, changes in the Company’s business processes and the macroeconomic environment, by their very nature, are likely to affeff ct the actual to expected experience which generally results in the historical experience factors becoming less reliable over time in predicting how cash flows will ultimately develop. The Company’s actuaries use profesff sional judgment in determining how much weight to place on the actual to expected experience based on the older historical data and how much weight to place on more recent experience data. In some cases, the Company’s actuaries make adjud stments to the assumptions to estimate losses. These assumptions are reviewed by the Company’s actuat management who apply their collective judgment and determine the appropriate assumptions to adopt for the underlying business. Numerous factors are considered in this determination process, including, but not limited to, the assessed reliabia lity of key assumptions that may be significantly influencing the current actuat offeff policyholder behaviors observed over the recent past, the level of volatility within a particular line of business, and the improvement or deterioration of actuarial indications in the current period as compared to prior periods. Changes in the Company’s assumptions underlying these liabia lities over time will occur and may be material. rings, changes in customer base, changes in agency operations or other changes that affeff ct the timing of payments, the rial indications, changes in pricing and product ries and corporate 105 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 7. LIABILITY FOR FUTURE POLICYHOLDER BENEFITS (Continued) The following tabla es summarize balances and changes in the present value of expected net premiums, present value of expected future policyholder benefits and net liabia lity for future policyholder benefits as of and for the years ended December 31, 2023, 2022 and 2021 was: DOLLARS IN MILLIONS II Year Ended Dec 31, 2023 Dec 31, 2022 Balance, Beginning of Period....................................................... $ 688.6 $ 669.0 $ Dec 31, 2021 396.0 Present Value of Expected Net Premiums Present Value of Expected Future Policyholder Benefits Beginning Balance at Original Discount Rate.............................. $ Effeff ct of Changes in Cash Flow Assumptions ..................... Effeff ct of Actual Variances from Expected Experience........ Adjud sted Beginning of Period Balance ........................................ Issuances.............................................................................. Interest Accruar l ................................................................... Net Premiums Collected...................................................... Ending Balance at Original Discount Rate................................... Effect of Changes in Discount Rate Assumptions............... Balance, End of Period ................................................................. $ Balance, Beginning of Period....................................................... $ Beginning Balance at Original Discount Rate.............................. $ Effeff ct of Changes in Cash Flow Assumptions ..................... Effeff ct of Actual Variances From Expected Experience....... Adjud sted Beginning of Period Balance ........................................ Issuances ............................................................................. Interest Accruar l ................................................................... Benefitff Payments................................................................. Ending Balance at Original Discount Rate................................... Effect of Changes in Discount Rate Assumptions............... Balance, End of Period ................................................................. $ Net Liability for Future Policyholder Benefits............................. $ Less: Reinsurance Recoverabla e .................................................... Net Liability for Future Policyholder Benefits, Afteff r Reinsurance Recoverabla e ............................................................. $ 728.9 $ (35.7) (38.5) 654.7 105.2 29.7 (94.9) 694.7 (19.3) 675.4 $ 3,561.0 $ 3,906.2 $ (59.0) (45.5) 3,801.7 104.6 171.0 (241.4) 3,835.9 (222.7) 3,613.2 $ 2,937.8 $ — 599.8 $ 68.5 (6.4) 661.9 133.2 21.9 (88.1) 728.9 (40.3) 688.6 $ 4,933.1 $ 3,788.1 $ 77.2 (7.0) 3,858.3 133.2 164.0 (249.3) 3,906.2 (345.2) 3,561.0 $ 2,872.4 $ — 325.6 124.3 64.7 514.6 133.2 17.4 (65.4) 599.8 69.2 669.0 4,924.9 3,550.3 130.0 65.1 3,745.4 134.4 162.1 (253.8) 3,788.1 1,145.0 4,933.1 4,264.1 — 2,937.8 $ 2,872.4 $ 4,264.1 e weighted-average liability duration of the liabia lity for future policyholder benefits as calculated under current rates is as follows: Weighted-Average Liability Duration of the Liability for Future Policyholder Benefits (Years)...................................................................................................... 15.3 14.6 18.2 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 106 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 7. LIABILITY FOR FUTURE POLICYHOLDER BENEFITS (Continued) The reconciliation of the net liability for future policyholder benefits to Life and Health Insurance Reserves in the Consolidated Balance Sheets is as follows: II DOLLARS IN MILLIONS Net Liability for Future Policyholder Benefits ................................................................................... $ Deferred Profitff Liability ..................................................................................................................... Other1 ....................................................................................................................................................................................... Total Life and Health Insurance Reserves.......................................................................................... $ 1 Other primarily consists of Accident and Health and Universal Life reserves Dec 31, 2023 2,937.8 $ 337.8 146.8 3,422.4 $ Dec 31, 2022 2,872.4 253.6 150.2 3,276.2 The amounts of expected undiscounted future benefit payments, expected undiscounted future gross premiums and expected discounted future gross premiums, were as follows: II DOLLARS IN MILLIONS Dec 31, 2022 Expected Future Benefit Payments, undiscounted ............................................................................. $ 10,185.2 $ 10,137.2 4,436.8 Expected Future Gross Premiums, undiscounted ............................................................................... $ 2,844.4 Expected Future Gross Premiums, discounted ................................................................................... $ 4,107.9 $ 2,800.6 $ Dec 31, 2023 The amount of revenue and interest recognized in the Consolidated Statements of Loss is as follows: II DOLLARS IN MILLIONS Gross Premiums or Assessments .............................................................................. $ Interest Expense ........................................................................................................ $ 399.0 $ 141.3 $ Dec 31, 2021 380.3 144.9 392.1 $ 142.1 $ Dec 31, 2023 Year Ended Dec 31, 2022 The weighted-average interest rate is as follows: Interest Accretion Rate ....................................................................................................................... Current Discount Rate ........................................................................................................................ 4.57 % 5.08 % 4.60 % 5.30 % Dec 31, 2023 Dec 31, 2022 Significant assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapsa discount rates (both accretion and current). The Company reviewed and updated mortality and lapsa fourth quarter of 2023. Market data that underlies current discount rates was updated from September 30, 2023. es, and e assumptions during the The balances of and changes in Deferred Profitff Liability as of and for the years indicated are as follows: DOLLARS IN MILLIONS II Balance, beginning of period Annual assumption changes Profitsff deferred Interest accrual Amortization Effeff ct of actuat l variances from expected experience and other changes Balance, end of period Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 $ 253.6 $ 193.4 $ 112.7 15.0 163.1 13.2 (12.7) 164.7 10.4 (111.2) (101.6) 4.1 (0.6) (4.6) 176.3 6.8 (97.6) (0.2) $ 337.8 $ 253.6 $ 193.4 107 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 8. DEFERRED POLICY ACQUISITION COSTS The following tabla e presents the balances and changes in Deferred Policy Acquisition Costs for the Property and Casualty and Life and Health business for the years ended December 31, 2023, 2022 and 2021: DOLLARS IN MILLIONS II Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Property and Casualty Life and Health Total Property and Casualty Life and Health Total Property and Casualty Life and Health Total Balance, Beginning of Year .... $ 231.1 $ 404.5 $ 635.6 $ 268.7 $ 419.3 $ 688.0 $ 229.1 $ 381.3 $ 610.4 Capitalizations...................... 505.6 57.7 563.3 630.9 60.6 691.5 697.0 75.6 772.6 Amortization Expense ......... (571.8) (19.9) (591.7) (668.5) (28.0) (696.5) (657.4) (35.7) (693.1) Experience Adjud stment ........ — (15.6) (15.6) — (8.7) (8.7) — (1.9) (1.9) Balance .................................... 164.9 426.7 591.6 231.1 443.2 674.3 268.7 419.3 688.0 Less: Deferred Policy Acquisition Costs Asset Divested............. — Balance, End of Period............ $ 164.9 $ 426.7 $ 591.6 $ 231.1 $ 404.5 $ 635.6 $ 268.7 $ 419.3 $ 688.0 38.7 38.7 — — — — — — acquisition of business, principally commissions and certain premium taxes and Costs directly associated with the successfulff policy issuance costs, are deferred. Costs deferred on property and casualty insurance contracts are amortized over the period in which premiums are earned. Costs deferred on traditional lifeff are amortized on a constant level basis over the expected lifeff of the contracts in accordance with the assumptions used to estimate the liabia lity for future policyholder benefits for nonparticipating traditional and limited-payment contracts. The underlying assumptions for deferred policy acquisition costs and the liabia lity for future policyholder benefits were updated concurrently. insurance products and other long-duration insurance contracts The Company made changes to future assumptions in the fourth quarter for the Life and Health business for both the years ended December 31, 2023 and 2022. NOTE 9. INSURANCE EXPENSES Insurance Expenses for the years ended December 31, 2023, 2022 and 2021 were: II DOLLARS IN MILLIONS Commissions.......................................................................................................................... $ General Expenses................................................................................................................... Taxes, Licenses, and Fees...................................................................................................... Total Costs Incurred............................................................................................................... Policy Acquisition Costs: 2023 584.2 342.8 79.6 1,006.6 $ 2022 724.8 358.4 99.5 1,182.7 $ 2021 817.6 339.5 104.3 1,261.4 Deferred............................................................................................................................. (563.3) Amortized.......................................................................................................................... 607.1 Net Policy Acquisition Costs Amortized (Deferff red) ............................................................. 43.8 Amortization of Value of Business Acquired........................................................................ 2.0 Insurance Expenses................................................................................................................ $ 1,052.4 (691.5) 705.7 14.2 4.1 $ 1,201.0 (772.6) 695.1 (77.5) 45.0 $ 1,228.9 Commissions for servicing policies are expensed as incurred, rather than deferred and amortized. The Company recorded amortization of Deferred Policy Acquisition Costs of $607.1 million, $705.7 million and $695.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. 108 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 10. INVESTMENTS Fixedii Maturities The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2023 were: Gross Unrealized Gains Losses Allowance for Expected Credit Losses II DOLLARS IN MILLIONS U.S. Government and Government Agencies and Authorities........ $ States and Political Subdiu visions..................................................... Foreign Governments ...................................................................... Corporate Securities: Amortized Cost 594.1 1,575.9 4.4 Bonds and Notes ......................................................................... red Stocks ..................................................... Redeemable Preferff 4,046.8 9.0 973.6 362.0 Investments in Fixed Maturities ...................................................... $ 7,565.8 Collateralized Loan Obligations ................................................. Other Mortgage- and Asset-backed ............................................ $ $ 1.9 16.3 — 35.5 0.1 0.7 0.1 54.6 $ (84.5) $ — $ (189.8) (0.6) (0.5) — Fair Value 511.5 1,401.9 3.8 (383.8) (0.8) (24.5) (46.3) $ (730.3) $ (7.7) — — — 3,690.8 8.3 949.8 315.8 (8.2) $ 6,881.9 The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2022 were: DOLLARS IN MILLIONS II Amortized Cost Gross Unrealized Gains Losses Allowance for Expected Credit Losses Fair Value U.S. Government and Government Agencies and Authorities........ $ 612.5 $ 1.3 $ (85.8) $ — $ 528.0 States and Political Subdiu visions..................................................... Foreign Governments ...................................................................... 1,797.6 5.0 Corporate Securities: Bonds and Notes ......................................................................... red Stocks ..................................................... Redeemable Preferff Collateralized Loan Obligations ................................................. Other Mortgage- and Asset-backed ............................................ 4,030.3 9.0 1,014.7 342.7 10.3 — 17.7 — — 0.1 (238.3) (0.9) (499.7) (1.0) (60.8) (50.3) (0.7) — (8.9) — — — 1,568.9 4.1 3,539.4 8.0 953.9 292.5 Investments in Fixed Maturities ...................................................... $ 7,811.8 $ 29.4 $ (936.8) $ (9.6) $ 6,894.8 Other Receivabla es included $0.9 million and $5.8 million of unsettled sales of Investments in Fixed Maturities at December 31, 2023 and December 31, 2022, respectively. There were no unsettled purchases of Investments in Fixed Maturities included in Accruerr d Expenses and Other Liabilities as of December 31, 2023. There were $25.9 million of unsettled purchases of Investments in Fixed Maturities included in Accruer d Expenses and Other Liabilities as of December 31, 2022. The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2023 by contractuat l maturity were: II Amortized Cost DOLLARS IN MILLIONS 173.8 Due in One Year or Less ........................................................................................................................... $ 903.0 r One Year to Five Years ............................................................................................................. Due afteff 1,069.5 r Five Years to Ten Years ............................................................................................................ Due afteff 3,615.5 r Ten Years................................................................................................................................... Due afteff Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date ............................................ 1,804.0 Investments in Fixed Maturities ................................................................................................................ $ 7,565.8 Fair Value 169.9 $ 876.3 940.1 3,235.4 1,660.2 $ 6,881.9 109 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 10. INVESTMENTS (Continued) The expected maturities of the Company’s Investments in Fixed Maturities may differ from the contractuat issuers may have the right to call or prepay obligations with or without call or prepayment penalties. l maturities because Investments in Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date at December 31, 2023 consisted of securities issued by the Government National Mortgage Association with a fair value of $237.8 million, securities issued by the Federal National Mortgage Association with a fair value of $92.5 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $64.3 million and securities of other non-governmental issuers with a fair value of $1,265.6 million. An aging of unrealized losses on the Company’s Investments in Fixed Maturities at December 31, 2023 is presented below. DOLLARS IN MILLIONS II Fixed Maturities: U.S. Government and Government Agencies and Authorities .................................................. $ States and Political Subdiu visions ....................... Foreign Governments ........................................ Corporate Securities: Less Than 12 Months 12 Months or Longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses $ 52.0 112.9 — (0.8) $ (2.3) — 401.6 928.3 1.9 $ (83.7) $ (187.5) 453.6 1,041.2 $ (0.6) 1.9 (84.5) (189.8) (0.6) Bonds and Notes ............................................... 198.4 Redeemabla e Preferff red Stocks............................ Collateralized Loan Obligations........................ Other Mortgage- and Asset-backed................... — 38.8 15.7 (5.5) — (0.4) (0.1) 2,813.0 (378.3) 3,011.4 (383.8) 7.9 747.7 287.3 (0.8) (24.1) (46.2) 7.9 786.5 303.0 (0.8) (24.5) (46.3) Total Fixed Maturities................................................. $ 417.8 $ (9.1) $ 5,187.7 $ (721.2) $ 5,605.5 $ (730.3) The Company regularly reviews its fixed maturt 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 Loss in the periods when such determinations are made. io for factors that may indicate that a decline in fair value ity investment portfolff Investment-grade fixed maturity investments comprised $704.8 million and below-investment-grade fixed maturity investments comprised $25.5 million of the unrealized losses on investments in fixed maturities at December 31, 2023. For below- investment-grade fixed maturt of the amortized cost basis. ity investments in an unrealized loss position, the unrealized loss amount, on average, was 8.8% An aging of unrealized losses on the Company’s Investments in Fixed Maturities at December 31, 2022 is presented below. DOLLARS IN MILLIONS II Fixed Maturities: U.S. Government and Government Agencies and Authorities .................................................. $ visions ....................... States and Political Subdiu Foreign Governments......................................... Corporate Securities: Less Than 12 Months 12 Months or Longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses 337.3 854.7 0.1 $ (49.3) $ (140.6) — 126.5 276.8 2.6 $ (36.5) $ (97.7) (0.9) 463.8 1,131.5 2.7 $ (85.8) (238.3) (0.9) Bonds and Notes................................................ 2,730.6 (373.9) Redeemabla e Preferff red Stocks............................ Collateralized Loan Obligations........................ Other Mortgage- and Asset-backed................... 7.7 568.2 205.4 (1.0) (34.2) (28.9) 424.4 — 373.9 79.5 (125.8) 3,155.0 (499.7) — (26.6) (21.4) 7.7 942.1 284.9 (1.0) (60.8) (50.3) Total Fixed Maturities ................................................. $ 4,704.0 $ (627.9) $ 1,283.7 $ (308.9) $ 5,987.7 $ (936.8) 110 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 10. INVESTMENTS (Continued) Investment-grade fixed maturity investments comprised $904.0 million and below-investment-grade fixed maturity investments comprised $32.8 million of the unrealized losses on investments in fixed maturities at December 31, 2022. For below- investment-grade fixed maturt approximately 11% of the amortized cost basis of the investment. ity investments in an unrealized loss position, the unrealized loss amount, on average, was At December 31, 2023 and 2022, 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, 2023 and 2022. 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,r investment and the likelihood of the issuer’s ability to make contractuat related to the issuer, changes in the ratings assigned by a rating agency, and other credit enhancements that affeff ct 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. or geographic area, payment structurt e of the l cashfloff ws, defaults or other collectability concerns Fixedii Maturities - Expex cted Credit Losses The following tabla e sets forth the change in allowance for credit losses on fixed maturities availabla e-for-sale by majoa r security type for year ended December 31, 2023. (Dollars in Millions) States and Political u Subdi visions Corporate Bonds and Notes Total Beginning of the Year...................................................................................................... $ 0.7 $ 8.9 $ 9.6 Additions for Securities for which No Previous Expected Credit Losses were Recognized................................................................................................................. Reductions 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 the Year ................................................................................................................ $ — — 0.2 .4) 0.5 $ 2.9 (2.6) (1.1) (0.4) 7.7 $ 2.9 (2.6) (0.9) (0.8) 8.2 The following tabla e sets forth the change in allowance for credit losses on fixed maturities availabla e-for-sale by majoa r security type for year ended December 31, 2022. (Dollars in Millions) States and Political u Subdi visions Corporate Bonds and Notes Beginning of the Year...................................................................................................... $ — $ 7.5 $ Additions for Securities for which No Previous Expected Credit Losses were Recognized................................................................................................................. Net Increase in Allowance on Securities for which Expected Credit Losses were Previously Recognized.................................................................................................. Write-offs Charged Against Allowance........................................................................ End of the Year ................................................................................................................ $ 0.7 — 0.7 $ Equity Securities Equity Securities at Fair Value Total 7.5 7.0 6.3 5.8 (10.7) 8.9 $ 5.8 (10.7) 9.6 Equity securities with readily-determinabla e fair values, iin lcl diudi gng eq iui yty secu iri ities hwhiichh hthe Companyy hhas lelectedd to report at faiir vallue 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 Loss. Net unrealized gains arising during the year ended December 31, 2023 and recognized in earnings, related to such investments still held as of December 31, 2023 were $3.0 million. 111 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 10. INVESTMENTS (Continued) There were no unsettled purchases of Investments in Equity Securities at Fair Value at December 31, 2023 or December 31, 2022. There were $0.1 million in unsettled sales of Investments in Equity Securities at Fair Value at December 31, 2023. There were no unsettled sales of Investments in Equity Securities at Fair Value at December 31, 2022. Equity Method Limited Liability Investments Equity Method Limited Liability Investments include investments in limited liabia lity 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 2023 and 2022, aggregate investment income 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 $5,720.9 million and $5,585.9 million, as of December 31, 2023 and 2022, respectively. Aggregate total liabia lities of the Equity Method Limited Liability Investments in which the Company invested totaled $2,565.5 million and $2,367.0 million, as of December 31, 2023 and 2022, respectively. Aggregate net income of the Equity Method Limited Liability Investments in which the Company invested totaled $244.5 million, $381.8 million and $585.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. The aggregate summarized financial data is based on the most recent and sufficiently-timely financial information availabla e to the Company as of the respective reporting dates and periods. The Company’s maximum exposure to loss at December 31, 2023 is limited to the total carrying value of $221.7 million. In addition, the Company had outstanding commitments totaling approximately $85.3 million to fund Equity Method Limited Liability Investments at December 31, 2023. At December 31, 2023, 2.9% of Equity Method Limited Liability Investments were reported without a reporting lag, 5.4% of the total carrying value were reported with a one month lag, and the remainder were reported with more than a one month lag. There were no unsettled purchases of Equity Method Limited Liability Investments as of December 31, 2023 and 2022. There were no unsettled sales of Equity Method Limited Liability Investments at December 31, 2023. There were $35.2 million in unsettled sales of Equity Method Limited Liability Investments at December 31, 2022. Alternative Energyr Partnett rship 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 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, 2023 is limited to the total carrying value of $17.3 million. The Company has no outstanding commitments to fund Alternative Energy Partnership Investments as of December 31, 2023. Alternative Energy Partnership Investments are reported on a three month lag. Company-Owned Lifei Insurance The carrying values of the Company’s COLI investment at December 31, 2023 and 2022 were $513.5 million and $586.5 million, respectively. Loans to Policyhc oldell rs Loans to Policyholders represents funds loaned to policyholders up to the cash surrender value of the associated insurance policies and are carried at the unpaid principal balances due to the Company from the policyholders. Interest income on policy loans is recognized in Net Investment Income at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policies. The carrying values of the Company’s Loans to Policyholders at Unpaid Principal investment at December 31, 2023 and 2022 were $281.2 million and $283.4 million, respectively. 112 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 10. INVESTMENTS (Continued) Othett r Investments The carrying values of the Company’s Other Investments at December 31, 2023 and 2022 were: II DOLLARS IN MILLIONS Equity Securities at Modified Cost............................................................................................................ $ Convertible Securities at Fair Value.......................................................................................................... Real Estate at Depreciated Cost ................................................................................................................ Mortgage Loans......................................................................................................................................... Other.......................................................................................................................................................... Total........................................................................................................................................................... $ 2023 2022 32.6 — 94.7 99.8 14.8 241.9 $ $ 38.4 43.3 93.6 91.1 3.5 269.9 Investments in Equity Securities at Modified Cost were $32.6 million and $38.4 million at December 31, 2023 and 2022, respectively. The Company perforff ms 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 regulatoryr environment and other factors. If the qualitative analysis identifieff s 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 Statements of Loss to reduce the carrying value to the estimated fair value. When the Company identifieff s observabla e transactions of the same or similar securities to those held by the Company, the Company increases or decreases the carrying value to the observabla e transaction price. The Company did not recognize any changes in carryirr ng value due to observabla e transactions for the year ended December 31, 2023 and 2022. The Company recognized an impairment of $0.5 million, $— million and $4.2 million on Equity Securities at Modified Cost for the years ended December 31, 2023, 2022 and 2021, respectively, as a result of the Company’s impairment analysis. The Company recognized no cumulative increases or decreases in the carrying value due to observabla e transactions and $8.0 million of cumulative impairments on Equity Securities at Modified Cost held as of December 31, 2023. 113 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 11. INCOME FROM INVESTMENTS Net Investment Income for the years ended December 31, 2023, 2022 and 2021 was: LARS IN MILLIONS II Investment Income: 2023 2022 2021 Interest on Fixed Income Securities ............................................................................... $ Dividends on Equity Securities Excluding Alternative Investments.............................. $ 346.0 4.4 $ 300.1 6.3 277.7 15.9 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 ...................................................................................................................... Company-Owned Life Insurance.................................................................................... Other ............................................................................................................................... 5 19.0 29.5 18.0 20.9 8.9 29.2 12.9 31.3 42.1 73.4 3.7 21.5 10.1 37.9 7.7 56.7 46.9 103.6 1.0 21.7 9.3 25.7 6.7 Total Investment Income ....................................................................................................... 469.8 460.7 461.6 Investment Expenses: Real Estate ...................................................................................................................... Other Investment Expenses ............................................................................................ Total Investment Expenses .................................................................................................... Net Investment Income .......................................................................................................... $ 8.8 41.3 50.1 7.9 30.2 38.1 9.7 24.6 34.3 419.7 $ 422.6 $ 427.3 Other Receivabla es includes accruerr d investment income of $88.4 million and $94.3 million at December 31, 2023 and 2022, respectively. 114 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 11. INCOME FROM INVESTMENTS (Continued) The components of Net Realized (Losses) Gains on Sales of Investments for the years ended December 31, 2023, 2022 and 2021 were: DOLLARS IN MILLIONS Fixed Maturities: II 2023 2022 2021 Gains on Sales ................................................................................................................... $ Losses on Sales.................................................................................................................. (Losses) Gains on Hedging Activity $ 5.9 (10.9) (11.9) $ 31.6 (31.9) 1.7 Equity Securities: Gains on Sales ................................................................................................................... Losses on Sales.................................................................................................................. 0.6 (2.5) 9.7 (6.8) Equity Method Limited Liability Investments: Gains on Sales ................................................................................................................... Real Estate: Gains on Sales ................................................................................................................... Losses on Sales.................................................................................................................. Other Investments: — — — Gains on Sales ................................................................................................................... Net Realized Investment (Losses) Gains ............................................................................... $ 0.2 (18.6) $ — — — — 4.3 Gross Gains on Sales ............................................................................................................. $ Gross Losses on Sales............................................................................................................ (Losses) Gains on Hedging Activity...................................................................................... Net Realized Investment (Losses) Gains ............................................................................... $ $ 6.7 (13.4) (11.9) (18.6) $ 41.3 (38.7) 1.7 4.3 $ $ $ 63.4 (2.1) — 4.1 (0.7) 0.4 0.1 (0.4) — 64.8 68.0 (3.2) — 64.8 The components of Impairment Losses reported in the Consolidated Statements of Loss for the years ended December 31, 2023, 2022 and 2021 were: II DOLLARS IN MILLIONS Fixed Maturities ..................................................................................................................... $ Equity Securities at Modified Cost ........................................................................................ Real Estate ............................................................................................................................. Other ..................................................................................................................................... Net Impairment Losses Recognized in Earnings1.................................................................. $ I Includes losses from intent-to-sell securities of $(2.0) million, $(23.8) million and $(6.6) million for the years ended December 31, 2023, 2022 and 2021, respectively. (25.8) $ — — — (25.8) $ (0.1) $ (0.5) — (0.5) (1.1) $ 2022 2023 (6.4) (4.2) (0.4) — (11.0) 2021 NOTE 12. DERIVATIVES The Company’s earnings, cash flows, and financial position are subju ect to fluctuations due to changes in prevailing interest rates. The Company entered into derivative agreements with maturity dates throughout 2023. Derivative instruments are carried at fair value on the Consolidated Balance Sheets. Derivative instruments in a gain position are presented within Other Investments and those in a loss position are included in Accruer d Expenses and Other Liabilities. Changes in the fair values of derivatives are recorded on the Consolidated Statements of Loss within Net Realized Investment Gains or Accumulated Other Comprehensive Loss along with the corresponding change in the designated hedge assets. As of December 31, 2023, no derivatives qualifieff d for hedge accounting, thereforff e, amounts previously held in Accumulated Other Comprehensive Loss have been recognized through the Consolidated Statements of Loss. 115 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 12. DERIVATIVES (Continued) Interest Rate Riskii The Company’s debt securities valuations utilize the Treasury designated benchmark rate, exposing the Company to variability due to changes in interest rates. Interest Swap Lock The Company entered into an interest swap lock agreement in the third quarter of 2022 classified as cash flow hedges to manage exposure to changes in future purchase prices of fixed maturity securities attributable to changes in the benchmark (Treasury)r interest rate. The Company assesses the effeff ctiveness of cash flow hedges using the hypothetical derivative method. Based on the results of the assessment, the hedge was determined to be effeff ctive. The interest swap lock agreement was closed out in the first quarter of 2023. Ultrll a-Lo- ng Treasury Futures During 2023, the Company entered into two transactions of exchange-traded ultra-long Treasuryr order to manage exposure to upcoming changes in the benchmark (Treasury)r derivatives expire quarterly. The Treasuryrr Futures renewed in the third quarter of 2023. The open treasuryr qualifyff for hedge accounting. The positions are shown in the Treasuryr Futures section below. interest rate of forecasted transactions. These futures do not futures (“Treasury Futures”) in Reverserr Treasury Lock During 2022, the Company entered into a Reverse Treasury Lock agreement to manage reinvestment risk on future purchases of fixed maturity securities. The Reverse Treasury Lock agreement did not qualifyff quarter of 2023. The positions are shown in the Reverse Treasury Lock section below. for hedge accounting and matured in the first Primary Riskii skk Managea d by Derivatives The following tabla e presents the derivative instruments, primaryr underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives: (Dollars in Millions) Dec 31, 2023 Dec 31, 2022 Estimated Fair Value Estimated Fair Value Derivative Instrument Primary Underlying Risk Exposure Gross Notional Amount Assets Liabilities Gross Notional Amount Assets Liabilities Derivatives Designated as Hedging Instruments: Interest Swap Lock Interest Rate Risk $ — $ — $ — $ 5.0 $ — $ 0.4 Derivatives Not Designated or Not Qualifyiff ng as Hedging Instruments: Interest Rate Risk Treasuryr Futures Interest Rate Risk Reverse Treasuryr Lock $ — $ 149.7 $ $ 14.7 $ — $ — $ — $ — $ $ 100.0 — $ $ 1.7 — — Effeff ctstt of Derivatives on the Stattt emtt ents of Income and Comprehensive (Loss) Income Cash Flowll Hedges The below tabla e reflects the amounts of Losses deferred into AOCI and subsu equently reclassified into Net Loss through Net Realized Investment Gains for derivatives qualifyiff ng as cash flow hedges for the years ended December 31, 2023 and 2022: Year Ended (Dollars in Millions) Amount of Losses Deferred in AOCI Amount of Losses Reclassified into Income Net Comprehensive Loss from Cash Flow Hedges Dec 31, 2023 $ Dec 31, 2022 — $ — — $ (0.4) — (0.4) $ 116 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 12. DERIVATIVES (Continued) Fair Value Hedges The below tabla e reflects the effeff cts of changes in the designated hedged asset’s impacts on AOCI and Net Realized Investment Gains as well as the derivative instruments designated as fair value hedges impact on Net Realized Investment Gains for the years ended December 31, 2023 and 2022: Year Ended (Dollars in Millions) Increase in Derivative Instruments Designated as Fair Value Hedges Decrease in Fair Value of Hedged Assets Reclassified from AOCI Net Gain from Hedging Activity NOTE 13. FAIR VALUE MEASUREMENTS Dec 31, 2023 $ Dec 31, 2022 1.1 (1.1) — — $ — — $ $ Fair value is defined as the price that would be received to sell an asset or paid to transferff between market participants at the measurement date. The Company is responsible for the determination of fair value of financial assets and liabia lities, including the suppor 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 observabla e inputs and minimizes the use of unobservabla e 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. ting assumptions and methodologies, and uses independent third-party a liabia lity in an orderly transaction u The Company classifies its Investments in Fixed Maturities as availabla e-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 tabla es to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheets. 117 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 13. FAIR VALUE MEASUREMENTS (Continued) The valuation of assets and liabia lities measured at fair value in the Company’s Consolidated Balance Sheets at December 31, 2023 is summarized below. The Company has no material liabilities that are measured and reported at fair value. Fair Value Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significff ant Other Observable Inputs (Level 2) Significff ant Unobservable Inputs (Level 3) Measured at Net Asset Value Total Fair Value DOLLARS IN MILLIONS Assets: II Fixed Maturities: U.S. Government and Government Agencies and Authorities................ $ States and Political Subdiu visions.... Foreign Governments ..................... Corporate Securities: Bonds and Notes ....................... Redeemabla e Preferff red Stock......... Collateralized Loan Obligations ... Other Mortgage and Asset- backed ....................................... Total Investments in Fixed Maturities.. Equity Securities at Fair Value: red Stocks: Preferff 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 ......................................... Other Investments: Derivative Instruments Not Designated as Hedges................ Total Assets ............................................ $ 98.8 — — — — — — 98.8 — — 0.6 0.2 7.7 — 8.5 $ $ 412.7 1,401.8 3.8 — $ 0.1 — — $ — — 511.5 1,401.9 3.8 3,513.7 1.2 949.8 310.6 6,593.6 15.6 7.5 — — — — 23.1 177.1 7.1 — 5.2 189.5 — 2.4 — 0.4 — — 2.8 — — — — — — — — — — 191.4 191.4 3,690.8 8.3 949.8 315.8 6,881.9 15.6 9.9 0.6 0.6 7.7 191.4 225.8 — 107.3 $ 14.7 6,631.4 $ — 192.3 $ — 191.4 $ 14.7 7,122.4 At December 31, 2023, the Company had unfunde liabia lity investment companies and limited partnerships that will be included in Other Equity Interests if funded. d commitments to invest an additional $110.4 million in certain limited ff 118 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 13. FAIR VALUE MEASUREMENTS (Continued) The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheets at December 31, 2022 is summarized below. Fair Value Measurements Quoted Prices in Active Markets for Identical Assets (Level 1) Significff ant Other Observable Inputs (Level 2) Significff ant Unobservable Inputs (Level 3) Measured at Net Asset Value Total Fair Value DOLLARS IN MILLIONS Assets: II Fixed Maturities: U.S. Government and Government Agencies and Authorities.................................... $ States and Political Subdiu visions.. Foreign Governments................... Corporate Securities: Bonds and Notes ..................... Redeemable Preferff red Stocks...... Collateralized Loan Obligations... Other Mortgage and Asset- backed ..................................... Total Investments in Fixed Maturities Equity Securities at Fair Value: Preferff red 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 ........................................ Other Investments: Convertible Securities at Fair Value. Other Assets: Derivative Instruments Not Designated as Hedges...................... Total Assets............................................ $ Liabilities: Accruerr d Expenses and Other Liabilities: Derivative Instruments Designated as Cash Flow Hedges ..................... $ Total Liabilities ...................................... $ 103.6 $ 424.4 $ — $ — $ 528.0 — — — — — — 103.6 — — 0.9 0.3 12.2 — 13.4 — 1,568.9 4.1 3,323.4 1.2 953.9 287.4 6,563.3 29.0 9.2 — 0.4 — — 38.6 43.3 — — 216.0 6.8 — 5.1 227.9 — 1.6 — 0.5 — — 2.1 — — — — — — — — — — — — — 189.1 189.1 1,568.9 4.1 3,539.4 8.0 953.9 292.5 6,894.8 29.0 10.8 0.9 1.2 12.2 189.1 243.2 — 43.3 — 117.0 $ 1.7 6,646.9 $ — 230.0 $ — 189.1 $ 1.7 7,183.0 — $ — $ (0.4) $ (0.4) $ — $ — $ — $ — $ (0.4) (0.4) 119 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 13. FAIR VALUE MEASUREMENTS (Continued) u The Company’s investments in Fixed Maturities that are classified as Level 1 primarily consist of U.S. Treasury Bonds and Notes. The Company’s investments in Equity Securities at Fair Value that are classified as Level 1 consist of either investments in publicly-traded common stocks or exchange traded funds. The Company’s investments in Fixed Maturities that are classified as Level 2 primarily consist of investments in corporate bonds, obligations of states and political subdi loan obligations, and mortgage-backed securities of U.S. government agencies. The Company’s investments in Equity Securities at Fair Value that are classified as Level 2 primarily consist of investments in preferff Derivative Instruments Designated as Fair Value Hedges that are classified as Level 2 primarily consist of hedges against the io. The Company uses a leading, nationally recognized provider of market Company’s availabla e for sale debt securities portfolff data and analytics to price the vast majoa rity of the Company’s Level 2 measurements. The provider utilizes evaluated pricing models that vary by asset class and incorporate availabla e trade, bid and other market information. Because many fixed maturity securities do not trade on a daily basis, the provider’s evaluated pricing applications apply availabla e information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. In addition, the provider uses model processes to develop prepayment and interest rate scenarios. The pricing provider’s models and processes also take into account market convention. For each asset class, teams of its evaluators gather information from market sources and integrate relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models. The Company generally validates the measurements obtained from its primaryr pricing provider by comparing them with measurements obtained from one additional pricing provider that provides either prices from recent market transactions, quotes in inactive markets or evaluations based on its own proprietary models. red stocks. The Company’s visions, collateralized The Company investigates significant differences related to the values provided. On completion of its investigation, management exercises judgment to determine the price selected and whether adjud stments, if any, to the price obtained from the Company’s primary pricing provider would warrant classification of the price as Level 3. In instances where a measurement cannot be obtained from either pricing provider, the Company generally will evaluate bid prices from one or more binding quotes obtained from market makers to value investments in inactive markets and classified by the Company as Level 2. The Company generally classifies securities when it receives non-binding quotes or indications as Level 3 securities unless the Company can validate the quote or indication against recent transactions in the market. The tabla e below presents quantitative information about the significant unobservabla e inputs utilized by the Company in determining fair values for fixed maturt ity investments classified as Level 3 at December 31, 2023. DOLLARS IN MILLIONS II Unobservable Input Total Fair Value Range of Unobservable Inputs Weighted- average Yield Investment-grade .......................................................................... Market Yield Non-investment-grade: Senior Debt ............................................................................... Market Yield Junior Debt ............................................................................... Market Yield Other.............................................................................................. Various Total Level 3 Fixed Maturity Investments ................................. $ $ 60.0 4.2 % - 15.8 % 8.7 % 9.2 11.8 - - 36.7 22.5 13.5 13.8 32.6 32.5 64.4 189.5 The tabla e below presents quantitative information about the significant unobservabla e inputs utilized by the Company in determining fair values for fixed maturt ity investments classified as Level 3 at December 31, 2022. DOLLARS IN MILLIONS II Unobservable Input Total Fair Value Range of Unobservable Inputs Weighted- average Yield Investment-grade .......................................................................... Market Yield Non-investment-grade: Senior Debt ............................................................................... Market Yield Junior Debt ............................................................................... Market Yield Other.............................................................................................. Various Total Level 3 Fixed Maturity Investments ............................ $ 120 $ 56.5 4.6 % - 14.5 % 9.2 % 4.6 8.8 - - 36.7 22.5 10.9 15.1 72.9 42.1 56.4 227.9 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 13. FAIR VALUE MEASUREMENTS (Continued) For an investment in a fixed maturt 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 callabla e securities the fair value increase is generally limited to par, unless security is currently callabla e at a premium. ity security, an increase in the yield used to determine the fair value of the security will 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, 2023 is presented below. DOLLARS IN MILLIONS II Fixed Maturities Corporate Bonds and Notes States and Political Sub- divisions Redeemable Preferred ff Stocks Other Mortgage- and Asset- backed Equity Securities Preferred ff and Common Stocks Total Balance at Beginning of Year........................................ $ 216.0 $ — $ 6.8 $ 5.1 $ 2.1 $ 230.0 Total (Losses) Gains: Included in Consolidated Statements of Loss ........... Included in Other Comprehensive Income................ Purchases ....................................................................... Settlements..................................................................... (0.7) 6.4 50.4 — Sales ............................................................................... (102.6) Transferff s into Level 3 .................................................... Transferff s out of Level 3................................................. 7.7 (0.1) — — 0.1 — — — — — 0.3 — — — — — — 0.1 — — — — — Balance at End of Year .................................................. $ 177.1 $ 0.1 $ 7.1 $ 5.2 $ (0.8) — 1.1 — — 0.4 — 2.8 (1.5) 6.8 51.6 — (102.6) 8.1 (0.1) $ 192.3 The transferff s into and out of Level 3 were due primarily to changes in the availabia lity of market observabla e inputs. 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, 2022 is presented below. II DOLLARS IN MILLIONS Balance at Beginning of Year...................................... $ 236.8 Total (Losses) Gains: Corporate Bonds and Notes Fixed Maturities Redeemable Preferred ff Stocks Collateralized Loan Obligations Equity Securities Preferred ff and Common Stocks Other Mortgage- and Asset- backed $ 6.1 $ — $ 7.0 $ 1.5 Total $ 251.4 Included in Consolidated Statements of Loss............ (12.7) (19.2) Included in Other Comprehensive Income................ 107.8 Purchases ..................................................................... — Settlements................................................................... (114.1) Sales............................................................................. 23.1 Transferff s into Level 3.................................................. Transferff s out of Level 3............................................... (5.7) Balance at End of Year ................................................ $ 216.0 $ — (1.3) 2.0 — — — — 6.8 $ — — — — — — — — $ — (1.9) — — — — — 5.1 $ — (0.2) 2.7 — (1.9) — — 2.1 (12.7) (22.6) 112.5 — (116.0) 23.1 (5.7) $ 230.0 The transferff s into and out of Level 3 were due to changes in the availabia lity of market observabla e inputs. 121 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 13. FAIR VALUE MEASUREMENTS (Continued) The tabla e below shows investments reported at fair value using NAV and their unfunde December 31, 2023 and 2022, respectively. ff d commitments by asset class as of Dollars in Millions Reported as Equity Method Limited Liability Investments: Asset Class December 31, 2023 December 31, 2022 Fair Value Using NAV Unfunded Commitments Fair Value Using NAV Unfunded Commitments Mezzanine Debt ................................................................................ $ Real Estate......................................................................................... Senior Debt ....................................................................................... Leveraged Buyout ............................................................................. Secondary Transactions .................................................................... Distressed Debt ................................................................................. Growth Equity................................................................................... Hedge Fund ....................................................................................... Other ................................................................................................. Total Equity Method Limited Liability Investments............................. 125.4 $ 41.9 19.0 8.6 7.9 7.9 1.2 0.1 9.7 221.7 Reported as Other Equity Interests at Fair Value: Mezzanine Debt ................................................................................ Senior Debt ....................................................................................... Leveraged Buyout ............................................................................. Distressed Debt ................................................................................. Growth Equity................................................................................... Secondary Transactions .................................................................... Hedge Funds ..................................................................................... Real Estate......................................................................................... 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 .......................... Total Investments in Limited Liability Companies and Limited Partnerships ........................................................................................... $ 124.0 24.8 19.0 12.4 6.4 2.8 1.9 0.1 — 191.4 4.8 4.8 43.1 — 39.9 0.6 1.7 — — — — 85.3 67.0 10.6 10.0 13.0 6.5 3.1 — 0.2 — 110.4 — — $ 114.3 $ 43.3 21.6 8.9 9.3 9.4 1.2 0.5 8.5 217.0 106.0 21.9 21.6 12.5 5.4 3.5 18.1 — 0.1 189.1 8.3 8.3 51.6 — 42.0 0.6 1.7 — — — — 95.9 56.0 6.0 9.0 13.0 7.9 4.2 — — 0.2 96.3 — — 417.9 $ 195.7 $ 414.4 $ 192.2 At December 31, 2023, the Company had unfunde d commitments to invest an additional $195.7 million in certain limited liabia lity investment companies and limited partnerships that will be included in Other Equity Interests and Equity Method Limited Liability Investments if funded. ff The fund investments included above (excluding Hedge Funds) are not redeemable, because distributions from the funds will be received when underlying investments of the funds are liquidated. The funds are generally expected to have approximately 10 year lives at their inception, but these lives may be extended at the fund manager’s discretion, typically in one or two-year increments. The hedge fund investments included above, which are carried at fair value, are generally redeemable subju ect to the redemption notices period. The majoa rity of the hedge fund investments are redeemable monthly or quarterly. 122 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 13. FAIR VALUE MEASUREMENTS (Continued) The following tabla e includes information related to the Company’s investments in certain private equity funds or hedge funds that calculate a net asset value per share: Asset Class Mezzanine Debt Senior Debt Distressed Debt Secondary Transactions Hedge Fund Leveraged Buyout Growth Equity Real Estate Other Investment Category Includes ing company. dinated debt and potentially minority equity securities Funds with investments in junior or suboru issued by private companies. Funds with investments in senior or first lien debt and potentially minority equity securities typically issued by private companies. Funds with debt or minority equity investments that are made opportunistically in companies that are in or near default or under financial strain with potential to have an active role in restructurt Funds that focus on purchasing third party fund interests from investors seeking liquidity within their own portfolff Funds that focus primarily on investing in public securities with strategy of generating uncorrelated returns to the public markets. Funds with control equity investments in more mature, positive cash flowing, private companies that are typically purchased with the use of financial leverage. Funds that invest in early or venturt e stage companies with high growth potential with view towards generating realizations through sale or initial public offeff ring (“IPO”) of company. Funds with investments in multi-family housing properties. Consists of direct investments of preferff private companies structurt ed as limited partnerships or limited liability companies. red equity or minority common equity investments into io. 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, 2023 December 31, 2022 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 ....................................................... $ 281.2 520.9 99.8 513.5 32.6 $ 281.2 520.9 99.8 513.5 32.6 $ 283.4 278.4 91.1 586.5 38.4 283.4 278.4 91.1 586.5 38.4 Financial Liabilities: Long-term Debt..................................................................................... $ 1,389.2 557.4 Policyholder Obligations ...................................................................... $ 1,213.4 557.4 $ 1,386.9 601.0 $ 1,195.1 601.0 Loans to policyholders are carried at unpaid principal balance which approximates fair value and are categorized as Level 3 within the fair value hierarchy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accruerr d interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictabla e timing of payments, the Company believes the carrying value of policy loans approximates fair value. 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 cash surrender value of Company-Owned Life Insurance approximates fair value and is considered to be a Level 2 investment. 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 tabla e consist of advances from the Federal Home Loan Bank (“FHLB”) of Chicago, and the inputs used in the valuation are considered Level 2 measurements. 123 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 14. GOODWILL AND INTANGIBLE ASSETS Goodwill balances by business segment at December 31, 2023 and 2022 were: DOLLARS IN MILLIONS II 2023 2022 Specialty Property & Casualty Insurance .................................................................................................. $ 1,043.0 $ 1,043.0 Life Insurance ............................................................................................................................................ Non-Core Operations................................................................................................................................. 207.7 — 207.7 49.6 Total........................................................................................................................................................... $ 1,250.7 $ 1,300.3 The Company tests goodwill for recoverabia lity 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 carryirr ng value. The Company performed a qualitative goodwill impairment assessment for all reporting units with goodwill as of October 1, 2023. The qualitative assessment takes into consideration changes in macroeconomic conditions, industryrr 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 October 1, 2022. Based on its qualitative assessment, the Company concluded that the associated goodwill was recoverabla e for each reporting unit. During the second quarter of 2023, the Company identifieff d impairment indicators impacting the fair value of the Preferff Property & Casualty Insurance business in connection with ongoing evaluation of strategic alternatives for the Preferff red Insurance business. As a result, the business’s fair value was determined using a combination of availabla e market information, market comparisons and a discounted cash flow valuation method based on the present value of future earnings. The fair value calculated in the second quarter of 2023 was lower than the carrying value of the business, resulting in a pre-tax impairment charge of $49.6 million and an afteff r-tax impairment charge of $45.5 million. A subsu tantial portion of the goodwill that was impaired was not tax deductible. The goodwill impairment charge is reported separately in the Consolidated Statements of Loss for the year ended December 31, 2023, with a corresponding reduction to goodwill in the Consolidated Balance Sheet as of December 31, 2023. red In 2022, Kemper completed the sale of Reserve National to Medical Mutual of Ohio. As a result of the sale, goodwill attributed to Reserve National was separately tested for recoverabia lity and the Company incurred goodwill impairment of $11.4 million. The remaining $0.3 million of goodwill attributable to Reserve National was derecognized at the time of the sale. See Note 4, “Dispositions”, for more information. The gross carrying amount and accumulated amortization of definite and indefinite life intangible assets at December 31, 2023 and 2022 were: (Dollars in Millions) Definite Life Intangible Assets: Value of Business Acquired ............ $ 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 2023 2022 Gross Carrying Amount Accumulated Amortization Net Amount Gross Carrying Amount Accumulated Amortization Net Amount $ 237.5 43.8 81.6 — 388.0 750.9 5.2 44.2 49.4 $ 223.7 42.1 38.2 — 178.0 482.0 — — — $ 13.8 1.7 43.4 — 210.0 268.9 5.2 44.2 49.4 $ 237.5 43.8 81.6 1.8 352.1 716.8 5.2 44.5 49.7 $ 222.1 41.1 31.0 1.7 153.9 449.8 — — — 15.4 2.7 50.6 0.1 198.2 267.0 5.2 44.5 49.7 Total Intangible Assets......................... $ 800.3 $ 482.0 $ 318.3 $ 766.5 $ 449.8 $ 316.7 124 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 14. GOODWILL AND INTANGIBLE ASSETS (Continued) 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 lifeff amortized over the estimated profitff emergence period or estimated usefulff not amortized, but rather tested annually for impairment. In 2023, 2022 and 2021, the Company recognized amortization expense on definite life intangible assets of $48.6 million, $53.7 million and $87.0 million, respectively. intangible assets are life of the asset. Indefinite life intangible assets are The amount of amortization expense expected to be recorded in the next five years for definite lifeff follows: intangible assets is as DOLLARS IN MILLIONS II Definite Life Intangible Assets: 2024 2025 2026 2027 2028 Value of Business Acquired ........................... $ Customer Relationships.................................. Agent Relationships........................................ Internal-Use Software..................................... Total $ 1.6 0.4 5.5 33.3 40.8 $ $ 1.6 0.4 4.9 27.4 34.3 $ $ 1.5 0.3 4.9 23.4 30.1 $ $ 1.5 0.2 4.9 17.9 24.5 $ $ 1.4 0.2 4.9 15.3 21.8 NOTE 15. VARIABLE INTEREST ENTITIES u t or is structurt ed such that equity investors lack the ability to make significant decisions relating to the entity's A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subor financial suppor operations through voting rights or do not subsu tantively participate in the gains and losses of the entity. The Company consolidates VIEs in which the Company is deemed the primary beneficiary.r The primaryrr beneficiaryrr (1) the power to direct the activities of the VIE that most significantly affeff ct that entity's economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. is the entity that has both dinated u Recipri ocal Exchange The Company has formed a management company that acts as attorney-in-fact (“AIF”) for Kemper Reciprocal (the “Reciprocal Exchange” or “Exchange”), an Illinois-domiciled reciprocal insurance exchange. The Exchange principally writes specialty personal automobile policies sold to subsu cribers of the Exchange. The establa ishment of Kemper Reciprocal was completed in the third quarter of 2023. The Company consolidates the Exchange since (1) the AIF manages the business operations of the Exchange and thereforff e has the power to direct the activities that most significantly impact the economic performance of the Exchange and (2) the Company has provided capia tal to the Exchange and would absorb any expected losses that could potentially be significff ant to the Exchange. The Exchange’s anticipated economic performance is the product of its underwriting and investment results. The AIF receives a management fee for the services provided to the Reciprocal Exchange. The management fee revenues are based upon all premiums written or assumed by the Exchange. The AIF determines the management fee rate to be paid by the Exchange. This rate cannot exceed 30% of the Exchange’s gross written and assumed premiums. The assets of the Reciprocal Exchange can be used only to settle the obligations of the Reciprocal Exchange for which creditors and other beneficial owners have no recourse to the Company. The Company has no obligation related to any underwriting and/ or investment losses experienced by the Exchange. As of December 31, 2023, the Company had contributed $4.0 million of surplus to the Reciprocal Exchange. The effeff cts of the transactions between the Company and the Reciprocal Exchange are eliminated in consolidation to derive consolidated Net Loss. However, the management fee income earned by the AIF is reported in Net Loss attributable to Kemper Corporation and is included in the basic and diluted earnings per share. Noncontrolling interest is the portion of equity (net assets) not attributable, directly or indirectly, to a parent. Since the Company has no ownership interest in Kemper Reciprocal, the difference between the carryirr ng value of the Exchange’s assets and liabilities represents noncontrolling interest and any income or loss generated by the net assets of the Exchange is presented as income or loss attributable to noncontrolling interest. 125 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 15. VARIABLE INTEREST ENTITIES (Continued) Alternative Energyr Partnett rship The Company invests in an Alternative Energy Partnership formed to provide sustainabla e 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 VIE. The Company has determined that it is not the primaryr beneficiaryr as it does not have the power to direct the activities that most significantly impact the economic performance of the entity and thereforff e 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 subsu tantive 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 Benefit on the Consolidated Statements of Loss. The following tabla e presents information regarding activity in the Company’s Alternative Energy Partnership Investments for the years ended December 31, 2023, 2022 and 2021. (Dollars in millions) Fundings ...................................................................................................................... $ Cash distribution from Investment .............................................................................. Income (Loss) on Investments in Alternative Energy Partnership Income Tax Credits Recognized Tax (Expense) Benefit Recognized from Alternative Energy Partnership — $ 2.0 2.9 0.2 (0.7) Dec 31, 2021 80.0 0.5 (61.2) 73.9 5.1 — $ 3.3 (19.9) 4.3 3.7 Year Ended Dec 31, 2022 Dec 31, 2023 The following tabla e represents the carrying value of the associated assets and liabia lities and the associated maximum loss exposure of the Alternative Energy Partnership Investments as of December 31, 2023 and December 31, 2022. (Dollars in millions) Cash .................................................................................................................................................... $ Equipment, Net of Depreciation ......................................................................................................... Other Assets........................................................................................................................................ Total Unconsolidated Assets .............................................................................................................. Maximum Loss Exposure ................................................................................................................... Dec 31, 2023 Dec 31, 2022 3.0 261.7 5.1 269.7 16.3 2.7 $ 2 7.5 266.4 17.3 The Company’s maximum loss exposure in the event that all of the assets in the Alternative Energy Partnership are deemed worthless is $17.3 million and $16.3 million, which is the carrying value of the investment at December 31, 2023 and December 31, 2022, respectively. 126 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 16. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS The tabla es below display the changes in Accumulated Other Comprehensive Loss by component for the years ended December 31, 2023, 2022 and 2021: (Dollars in Millions) Net Unrealized Losses on Other Investments Net Unrealized Losses on Investments with an Allowance for Credit Losses Net Unrecognized Postretirement Benefit Costs Gain on Cash Flow Hedge on Cash Flow Hedges Change in Discount Rate on Future Life Policyholder Benefits Total Balance as of January 1, 2021 $ 730.6 $ (2.1) $ (45.7) $ (2.3) $ (1,030.3) $ (349.8) Other Comprehensive (Loss) Income Before Reclassifications Amounts Reclassified from Accumulated Other Comprehensive Income Net of Tax Benefit (Expense) of $11.3, $—, $—, $(0.1). $—, and $11.2 Other Comprehensive Income (Loss) Net of Tax Benefit (Expense) of $59.7, $0.4, $2.4, $(0.1), $(47.9), and $14.5 (182.0) (1.6) (6.5) — 180.6 (9.5) (42.8) — 0.1 0.4 — (42.3) (224.8) (1.6) (6.4) 0.4 180.6 (51.8) Balance as of December 31, 2021 $ 505.8 $ (3.7) $ (52.1) $ (1.9) $ (849.7) $ (401.6) Balance as of December 31, 2022 $ (719.4) $ (2.2) $ (37.2) $ Other Comprehensive (Loss) Income Before Reclassifications Amounts Reclassified from Accumulated Other Comprehensive Loss Net of Tax Benefit of $2.7, $0.1, $0.1, $—, $—, and $2.9 Other Comprehensive (Loss) Income Net of Tax Benefit (Expense) of $325.9, $(0.4), $(4.0), $(1.2), $(289.9) and $30.4 Other Comprehensive Income (Loss) Before Reclassifications Amounts Reclassified from Accumulated Other Comprehensive Loss Net of Tax (Expense) Benefit of $(0.9), $—, $(13.8), $(0.1), $—, and $(14.8) Other Comprehensive Income (Loss) Before Reclassifications Net of Tax (Expense) Benefit of $(50.3), $0.2, $(12.5), $(0.1), $21.2, and $(41.5) (1,215.1) 2.0 15.2 4.7 1,090.8 (102.4) (10.1) (0.5) (0.3) (1,225.2) 1.5 14.9 185.0 (0.3) (6.0) — 4.7 2.8 — — (10.9) 1,090.8 (113.3) $ 241.1 $ (514.9) (80.5) 98.2 3.5 — 52.7 (0.3) — 55.9 188.5 (0.3) 46.7 (0.3) (80.5) 154.1 Balance as of December 31, 2023 $ (530.9) $ (2.5) $ 9.5 $ 2.5 $ 160.6 $ (360.8) 127 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 16. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS (Continued) Amounts reclassified from Accumulated Other Comprehensive Loss shown above are reported in Net 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 (Loss) Gain on Cash Flow Hedges Consolidated Statements of Loss Line Item Affeff cted by Reclassifications Net Realized Investment (Losses) Gains and Impairment Losses Policyholders’ Benefits and Incurred Losses and Loss Adjud stment Expenses, Insurance Expenses, and Interest and Other Expenses Interest and Other Expenses Change in Discount Rate on Future Life Policyholder Benefits Not Applicable NOTE 17. SHAREHOLDERS’ EQUITY Common Stock Issuance Kemper is authorized to issue 20 million shares of $0.10 par value preferff common stock. No preferff and 63,912,762 shares of common stock outstanding at December 31, 2023 and 2022, respectively. red shares were issued or outstanding at December 31, 2023 and 2022. There were 64,111,555 shares red stock and 100 million shares of $0.10 par value Common Stock Repur e chases 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 August 6, 2014 authorization, bringing the remaining share repurchase authorization to approximately $333.3 million. As of December 31, 2023, the remaining share repurchase authorization was $171.6 million under the repurchase program. During the years ended 2023 and 2022, Kemper did not repurchase any of its common stock. During the year ended 2021 Kemper repurchased and retired approximately 2,085,000 shares of its common stock under its share repurchase authorization for an aggregate cost of $161.7 million and an average cost per share of $77.58. 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. Emplm oyee Stock Purchase Plan During the years ended December 31, 2023, 2022, and 2021, the Company issued 89,000, 102,000, and 79,000 shares under the Kemper Employee Stock Purchase Plan (“ESPP”), respectively, at an average discounted price of $40.79, $40.83, and $58.08 per share. Compensation costs charged against income were $0.6 million, $0.7 million, and $0.8 million for the years ended December 31, 2023, 2022, and 2021, respectively. Dividends In 2023, Kemper issued dividends and dividend equivalents of $80.1 million, of which $80.1 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 capia talization ratio, under Kemper’s credit agreement could limit the amount of dividends that Kemper may pay to shareholders at December 31, 2023. Kemper had the ability to pay without restrictions of $0.5 billion in dividends to its shareholders and still be in compliance with all financial covenants under its credit agreement at December 31, 2023. NOTE 18. STATUTORY FINANCIAL INFORMATION AND DIVIDEND LIMITATIONS Kemper’s US based insurance subsu idiaries are required to file financial statements in conforff mity with accounting practices prescribed or permitted by the insurance department of the applicable state of domicile. Prescribed statutt oryrr accounting practices include a variety of publications of the NAIC, as well as state laws, regulations and general administrative rules. All states require domiciled insurance companies to prepare statutt ory-r basis financial statements in conforff mity with the NAIC 128 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 18. STATUTORY FINANCIAL INFORMATION AND DIVIDEND LIMITATIONS (Continued) Accounting practices and Procedurd es Manual, subju ect to any deviations prescribed or permitted by the applicable insurance commissioner or director. Statutt oryrr accounting practices differ from GAAP primarily since they require charging policy acquisition costs to expense as incurred, establa ishing life insurance reserves based on different actuat rial assumptions, and valuing certain investments and establa ishing deferred taxes on a different basis. The estimated combined statutt oryr net loss, excluding intercompany dividends and surplus note interest, and estimated combined capital and surplus of the Company’s US based insurance subsu idiaries is as follows: II DOLLARS IN MILLIONS Property and casualty companies ..................................................................................... $ Life and health companies................................................................................................ Total statutt oryrr net loss ................................................................................................ $ Year Ended December 31, 2023 (150.4) $ (136.0) (286.4) $ 2022 (226.7) $ 174.4 (52.3) $ 2021 (206.9) (12.4) (219.3) II DOLLARS IN MILLIONS Property and casualty companies........................................................................................................... $ 1,587.8 Life and health companies ..................................................................................................................... 113.7 Total statutt oryrr capital and surplus .................................................................................................... $ 1,701.5 2023 2022 $ 1,582.7 265.2 $ 1,847.9 Kemper’s offsff hore subsu idiary, Kemper Bermuda Ltd., is required to file with its insurance regulator financial statements prepared in accordance with US GAAP and presented in conforff mity with the financial reporting provisions of the Insurance Act of 1978, amendments thereto and the Insurance Account Rules 2016 with respect to Condensed Consolidated General Purpose Financial Statements (the “Legislation”). Kemper’s insurance subsu idiaries are also required to hold minimum levels of statutt oryrr capia tal and surplus to satisfy regulatoryr requirements. The minimum statutt oryr capia tal and surplus for US subsu idiaries, or company action level risk-based capital (“RBC”), necessary to satisfyff requirements for the Company’s US based lifeff and health insurance subsu idiaries collectively was estimated to be approximately $36.4 million and $50.0 million at December 31, 2023 and 2022, respectively. requirements for the Company’s property The estimated minimum statutt oryr capia tal and surplus necessary to satisfy regulatoryr and casualty insurance subsu idiaries collectively was approximately $574.3 million and $665.7 million at December 31, 2023 and 2022, respectively. Company action level RBC is the level at which a US based insurance company is required to file a corrective action plan with its regulators and is equal to 200% of the authorized control level RBC. regulatoryrr Capia tal and surplus requirements of Kemper Bermuda Ltd. are regulated by the Bermuda Monetary Authority (“BMA”) and differ from those applicable to the US subsu idiaries. On July 1, 2022, Kemper entered into an indefinite agreement with its subsu idiary, Kemper Bermuda Ltd., that provides financial guarantees of up to $300.0 million in contributed capia tal to maintain a minimum target capital ratio of 150% Enhance Capia tal Requirement, as described in Bermuda’s Insurance Act 1978. As of December 31, 2023 and 2022, Kemper had cumulatively contributed $40.0 million and $5.0 million under this agreement. At December 31, 2023, all insurance subsu idiaries individually are expected to exceed the minimum required statutt oryr capital and surplus requirements. Various insurance laws restrict the amount that an insurance subsu idiary may pay in the form of dividends, loans or advances without the prior approval of regulatory authorities. Such insurance laws applicable to the Company’s US based subsu idiaries generally restrict the amount of dividends paid in an annual period to the greater of statutt oryr net income from the previous year or 10% of statutt ory capia tal and surplus. Also, that portion of a US based insurance subsu idiary’s net equity which results from insurance accounting practices and GAAP would not be availabla e for cash dividends, loans or differences between statutt oryr advances. Kemper’s insurance subsu idiaries paid dividends of $640.9 million, $311.7 million and $347.0 million to Kemper in 2023, 2022 and 2021, respectively. In 2024, Kemper’s US based insurance subsu idiaries capaa city to pay dividends to Kemper without prior regulatoryr approval is estimated to be zero as of the filing date. Kemper’s insurance subsu idiaries had net assets of approximately $3.5 billion and $3.6 billion, determined in accordance with GAAP, that were restricted from payment to Kemper without prior regulatoryr approval at December 31, 2023 and 2022, respectively. 129 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 19. PENSION BENEFITS ls were frozen for subsu tantially all of the participants under the Pension Plan. The Pension Plan was The Company previously sponsored a qualifieff d defined benefit pension plan (the “Pension Plan”) that covered approximately 3,100 participants and beneficiaries. Effeff ctive January 1, 2006, the Pension Plan was closed to new hires and, effeff ctive June 30, 2016, benefit accruar terminated effeff ctive November 30, 2023. The Pension Plan was generally non-contributory,rr but participation required some employees to contribute 3% of pay, as defined, per year. Benefits for participants who were required to contribute to the Pension Plan were based on compensation during plan participation and the number of years of participation. Benefits for the vast majoa rity 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 funded the Pension Plan in accordance with the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). In the third quarter of 2023, the Company's Pension Plan made lump-sum payments to certain vested plan participants that were not currently receiving benefit payments and elected to receive lump-sum payments and purchased annuities on behalf of the remaining plan participants. For plan participants who elected lump-sum payments during the election window, payments of $90.0 million were distributed. Group annuity contracts were purchased from Banner Life Insurance Company for $205.7 million for the remaining plan participants for whom Banner irrevocably assumed the pension obligations. These r- transactions resulted in a full settlement of the Pension Plan and a $70.2 million noncash settlement charge ($55.5 million afteff tax) for the unamortized net unrecognized postretirement benefit costs related to the settled obligations recorded in Interest and Other Expenses on the Consolidated Statements of Loss. The Pension Plan continues to have approximately $16.4 million of net assets remaining in the trusr r the settlement and was included within Other Assets in the accompanying consolidated balance sheet as of December 31, 2023. t afteff Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Pension Plan for the years ended December 31, 2023 and 2022 is presented below. II DOLLARS IN MILLIONS Fair Value of Plan Assets at Beginning of Year........................................................................................ $ Actual Return on Plan Assets.................................................................................................................... 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.................................................................................................................................... Actuarial Gains.......................................................................................................................................... Projected Benefit Obligation at End of Year............................................................................................. Funded Statust —Plan Assets in Excess of Projected Benefit Obligation .................................................. $ Unamortized Amount Reported in AOCI at End of Year ......................................................................... $ Accumulated Benefit Obligation at End of Year ...................................................................................... $ $ 2023 315.8 7.1 (100.9) (205.7) 16.3 292.2 8.4 (100.9) (205.7) 6.0 — 16.3 $ — $ — $ 2022 391.7 (65.1) (13.7) 2.9 315.8 378.8 8.7 (13.7) 2.9 (84.5) 292.2 23.6 (63.1) 289.3 The measurement dates of the assets and liabia lities at end of year presented in the preceding tabla e under the headings, “2023” and “2022” were December 31, 2023 and December 31, 2022, respectively. 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, 2022 were: Discount Rate ................................................................................................................................................................ Rate of Increase in Future Compensation Levels.......................................................................................................... 2022 5.05 % — 130 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 19. PENSION BENEFITS (Continued) Asset allocations for the Pension Plan at December 31, 2023 and 2022 by asset categoryr were: ASSESS T CATEGTT ORY Corporate Bonds and Notes ....................................................................................................................... Bond Exchange Traded Funds ................................................................................................................... Cash and Short-term Investments .............................................................................................................. Other Assets ............................................................................................................................................... Total ........................................................................................................................................................... 2023 2022 — % — 100 — 100 % 27 % 35 37 1 100 % The investment objective of the Pension Plan was 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, was adequate to provide for the payment of the benefit obligations of the Pension Plan. The assets of the Pension Plan could have been 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,a mid-cap and small-cap stocks, and may also include investments in investment companies, collective investment funds and Kemper common stock (subjeb ct to Section 407 and other requirements of ERISA). The Pension Plan did not invest in Kemper common stock. t investment committee for the Pension Plan, along with its third party fiduciary advisor, periodically reviewed the The trusr performance of the Pension Plan’s investments and asset allocation. Several external investment managers managed the equity investments of the trusr limitations, if any, establa ished by the trusr made by the Company, subju ect to general guidelines as set by the trusrr t for the Pension Plan. Each manager was allowed to exercise investment discretion, subju ect to t investment committee for the Pension Plan. All other investment decisions were t investment committee for the Pension Plan. The Company determined 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. 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 categoryr of the Company. These methodologies and inputs are disclosed in Note 13, “Fair Value Measurements,” to the Consolidated Financial Statements. Fair value measurements for the Pension Plan’s assets at December 31, 2023 are summarized below. Quoted Prices in Active Markets for Identical Assets (Level 1) Significff ant Other Observable Inputs (Level 2) Significff ant Unobservable Inputs (Level 3) Measured at Net Asset Value Fair Value DOLLARS IN MILLIONS II Equity Securities: Other Equity Interests: Limited Liability Companies and Limited Partnerships .................... Short-term Investments.............................. Total........................................................... $ — 16.2 16.2 $ — — — $ — — — $ 0.1 — 0.1 $ 0.1 16.2 16.3 131 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 19. PENSION BENEFITS (Continued) Fair value measurements for the Pension Plan’s assets at December 31, 2022 are summarized below. DOLLARS IN MILLIONS Fixed Maturities: II Quoted Prices in Active Markets for Identical Assets (Level 1) Significff ant Other Observable Inputs (Level 2) Significff ant Unobservable Inputs (Level 3) Measured at Net Asset Value Fair Value U.S. Government and Government Agencies and Authorities................... $ States and Political Subdiu visions........... Foreign Governments............................ Corporate Bonds and Notes................... Equity Securities: Other Equity Interests: Bond Exchange Traded Funds......... Limited Liability Companies and Limited Partnerships .................... Short-term Investments.............................. Receivabla es and Other ............................... Total........................................................... $ 40.1 $ — $ — $ — $ — — — 111.1 — 116.1 0.8 0.1 0.4 45.4 — — — — — — — — — — — — — — — 1.8 — — 268.1 $ 45.9 $ — $ 1.8 $ 40.1 0.1 0.4 45.4 111.1 1.8 116.1 0.8 315.8 The components of Comprehensive Pension (Income) Expense for the Pension Plan for the years ended December 31, 2023, 2022 and 2021 were: II DOLLARS IN MILLIONS Service Cost Earned During the Year..................................................................................... $ Interest Cost on Projected Benefit Obligation........................................................................ Expected Return on Plan Assets............................................................................................. Amortization of Prior Service Cost ........................................................................................ Amortization of Actuarial Loss .............................................................................................. Settlement Expense ................................................................................................................ Pension Expense Recognized in Consolidated Statements of (Loss) Income........................ Unrecognized Pension Loss Arising During the Year............................................................ Prior Service Cost Arising During the Year........................................................................... Amortization of Prior Service Cost ........................................................................................ Amortization of Accumulated Unrecognized Pension Loss................................................... Comprehensive Pension (Income) Expense .......................................................................... $ 2023 2022 2021 — $ 8.4 (7.9) 0.4 — 70.2 71.1 — — — — 71.1 $ — $ 8.7 (7.4) 0.7 1.8 — 3.8 (12.0) — (0.7) (1.8) (10.7) $ — 7.2 (9.5) — 2.9 — 0.6 (6.0) 18.3 — (2.9) 10.0 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, 2023, 2022 and 2021 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 .................................................. The Company did not contribute to the Pension Plan in 2021, 2022 or 2023. 2023 2022 2021 5.05 % N/A 4.92 N/A 3.79 2.89 % N/A 2.35 3.40 2.08 2.56 % 2.41 1.90 3.40 2.70 132 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 19. PENSION BENEFITS (Continued) emental defined benefit pension plan (the “Su lPlan )”). Benefifit lls for d liabia lity related to the emental Plan was $21.8 million and $22.0 million at December 31, 2023 and 2022, respectively. Pension expense for the emental Plan was $1.0 million, $0.8 million, and $0.7 million for the years ended December 31, 2023, 2022 and 2021, The Company also sponsors a non-qualifieff d supplu accruar lalll partr icipants in the Supplu Supplu u Suppl respectively. There was an actuarial loss of $0.7 million before taxes in 2023, and actuat million before taxes included in Other Comprehensive (Loss) Income for the years ended December 31, 2022 and 2021, respectively. emental Plan were frozen effeff ctive June 30, 2016. The unfunde rial gains of $4.8 million and $1.3 lpplu ff ementall The Company also sponsors several defined contribution benefit plans covering most of its employees. The Company made contributions to those plans of $27.5 million, $30.6 million and $28.9 million in 2023, 2022 and 2021, respectively. NOTE 20. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Kemper and Infinity Property and Casualty Corporation (“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-iff nsured 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 adjud sted annually. On December 30, 2016, Kemper amended the Kemper OPEB Plan and, effeff ctive December 31, 2016, no longer offeff portion of its coverage. Rather, beginning on January 1, 2017, the Kemper OPEB Plan offeff Medicare exchange and provides varying levels of a Company-determined subsu idy 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. rs coverage to post-65 Medicare-eligible retirees and Medicare-eligible spouses under the self-iff nsured rs access to a private, third-party 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 (Loss) Income. This prior service credit is being amortized into income over the remaining average lifeff 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, 2023 and 2022 were: II 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 ........................................................................................................................................... Accumulated Postretirement Benefit Obligation at End of Year .............................................................. Funded Statust —Ac— cumulated Postretirement Benefit Obligation in Excess of Plans’ Assets................. $ 2023 2022 — $ 1.0 0.3 (1.3) — 8.1 0.1 0.4 0.3 (1.3) (0.1) 7.5 (7.5) $ — 1.0 0.3 (1.3) — 11.2 0.2 0.2 0.3 (1.3) (2.5) 8.1 (8.1) Unamortized Actuarial Gain Reported in AOCI at End of Year............................................................... $ 13.9 $ 16.9 The measurement dates of the assets and liabia lities at end of year in the preceding tabla e under the headings “2023” and “2022” were December 31, 2023 and December 31, 2022, respectively. 133 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 20. 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, 2023 and 2022 were: Discount Rate ............................................................................................................................................ Rate of Increase in Future Compensation Levels...................................................................................... 2023 4.92 % 2.20 2022 5.08 % 2.20 The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, 2023 was 6.7% for 2024, graduad lly declining to 4.7% in the year 2029 and remaining at that level thereafter for medical benefits and 8.0% for 2024, graduad lly declining to 4.8% in the year 2030 and remaining at that level thereafter for prescription benefits. The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at drugr December 31, 2022 was 6.0% for 2023, graduad lly declining to 4.8% in the year 2029 and remaining at that level thereafteff r for medical benefits and 6.7% for 2023, graduad lly declining to 4.8% in the year 2030 and remaining at that level thereafteff r for prescription drugr benefits. The components of Comprehensive OPEB (Income) Expense for the years ended December 31, 2023, 2022 and 2021 were: II 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 Loss........................................... Unrecognized OPEB Gain Arising During the Year ............................................................. Amortization of Prior Service Credit..................................................................................... Amortization of Accumulated Unrecognized OPEB Gain .................................................... Comprehensive OPEB Expense (Income) ............................................................................. $ 2023 2022 2021 0.1 0.4 (1.3) (1.8) (2.6) (0.1) 1.3 1.8 0.4 $ $ $ 0.2 0.2 (1.3) (1.8) (2.7) (2.5) 1.3 1.8 (2.1) $ 0.3 0.1 (1.3) (1.7) (2.6) (1.8) 1.3 1.7 (1.4) The Company estimates that OPEB Expense for the year ended December 31, 2024 will include income of $2.8 million resulting from the amortization of the related accumulated actuat December 31, 2023. rial gain and prior service credit included in AOCI at The weighted-average discount rate and rate of increase in future compensation levels used to develop OPEB Expense for the years ended December 31, 2023, 2022 and 2021 were: Weighted-average Discount Rate .......................................................................................... Service Cost Discount Rate ................................................................................................... Interest Cost Discount Rate ................................................................................................... Effeff ctive Rate for Interest on Service Cost............................................................................ Rate of Increase in Future Compensation Levels .................................................................. 2023 5.11 % 5.12 5.03 5.04 2.20 2022 2.56 % 2.79 1.97 2.54 2.20 2021 1.99 % 2.06 1.19 — 2.20 The Company expects to contribute $0.9 million, net of the expected Medicare Part D subsu idy, to its OPEB Plan to fund benefit payments in 2024. 134 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 20. 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: II 2024 2025 2026 2027 2028 2029-2032 Years Ending December 31, Excluding Medicare Part D Subsu idy ...................... $ Expected Medicare Part D Subsu idy ........................ Net Estimated Benefit Payments................................. $ 0.9 — 0.9 $ $ 0.9 — 0.9 $ $ 0.9 — 0.9 $ $ 0.8 — 0.8 $ $ 0.7 — 0.7 $ $ 3.0 — 3.0 NOTE 21. LONG-TERM EQUITY-BASED COMPENSATION On May 3, 2023 (“2023 Omnibus Plan Effeff ctive Date”), Kemper’s shareholders approved the 2023 Omnibus Equity Plan (“2023 Omnibus Plan”). The number of shares of Kemper common stock availabla e for issuance under the 2023 Omnibus Plan is (i) 1,850,000 shares less (ii) one (1) share for everyr one (1) share granted afteff r the 2023 Omnibus Plan Effeff ctive Date, no new awards are Omnibus Plan Effeff ctive Date (the “Share Authorization”). Afteff granted under the 2020 Omnibus Equity Plan (“2020 Omnibus Plan”) that had been approved by Kemper’s Shareholders on May 6, 2020, but awards previously granted under the 2020 Omnibus Plan remain outstanding in accordance with their original terms. As of December 31, 2023, there were 1,995,442 common shares availabla e for future grants. An additional 581,307 shares are reserved for future grants based on the performance results under the terms of outstanding performance share units (“PSUs”). ry 28, 2023 and prior to the 2023 r Februar Outstanding equity-based compensation awards as of December 31, 2023 consisted of time-based Restricted Stock Units that typically vest over three years (“RSU”), stock option and stock appreciation rights (“Tandem Awards”), PSUs and Deferred Stock Units (“DSUs”) that were previously granted under the 2011 Omnibus Equity Plan. 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 2023 Omnibus Plan and the 2020 Omnibus Plan, recipients of RSUs and PSUs receive dividend equivalents on the same basis as all other outstanding shares of Kemper common stock only if,ff to the extent, and at the time that they vest and on subsu equent dividend payment dates afteff r they vest until the awards are settled, and do not receive voting rights until such shares are issued. For awards subju ect to a performance condition, the Company recognizes compensation expense based upon the probabla e outcome of the performance condition. 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 subsu tance, multiple awards. Compensation expense is recognized only for those awards expected to vest, with forfeiturt es estimated at the date of grant based on the Company’s historical experience and future expectations. Equity-based compensation expense was $29.0 million, $17.7 million and $28.0 million for the years ended December 31, 2023, 2022 and 2021, respectively. Total unamortized compensation expense related to unvested awards at December 31, 2023 was $18.9 million, which is expected to be recognized over the next three years ending December 31, 2024, 2025 and 2026. 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 2023 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-transferff able. 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, subju ect to performance results and other restrictions. Under the Non-employee Director compensation program in effeff ct for 2023, each Non-employee Director elected at the 2023 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 135 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 21. LONG-TERM EQUITY-BASED COMPENSATION (Continued) 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,ff to the extent, and at the time that they vest and on subsu equent dividend payment dates afteff awards are settled. Each Non-employee Director elected at the 2022 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 2021 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 effeff ct for the applicable year. r they vest until the 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 profileff s, 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 over the estimated life of each tranche of the award. The Company believes that historical volatility is currently the best estimate of expected volatility. The dividend yield in 2023, 2022 and 2021 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, 2023, 2022 and 2021 are presented below. 2023 2022 2021 II TIONS ASSUSS MPUU OF VALUATIONII RANGENN Expected Volatility..................................................... Risk-free Interest Rate................................................ Expected Dividend Yield ........................................... EE IN YEARS WEIGEE HTGG EDTT Employee Grants ........................................................ -AVERAGEGG EXPECT LIFEII EDTT PP 35.12 3.47 1.55 -% - - 39.27 % 33.20 % - 37.67 % 33.67 0.26 - 4.74 1.18 - 2.39 4.33 2.25 1.20 1.59 -% - - 38.04 % 1.33 1.78 -4 6 4 - 6 -4 6 Tandem Award activity for the year ended December 31, 2023 is presented below. Outstanding at Beginning of the Year........................................ Granted....................................................................................... Exercised .................................................................................... Forfeited or Expired ................................................................... Outstanding at December 31, 2023............................................ Vested and Expected to Vest at December 31, 2023 ................. Exercisabla e at December 31, 2023............................................. Shares Subject to Awards 2,325,576 239,026 (50,297) (140,986) 2,373,319 2,320,371 1,801,418 Weighted- average Exercise Price Per Share ($) 59.10 $ 58.19 37.57 62.41 59.27 59.31 59.92 $ $ $ Weighted- average Remaining Contractual Life (in Years) Aggregate Intrinsic Value ($ In Millions) 5.39 $ 5.32 $ 4.45 $ 5.4 5.4 5.4 The weighted-average grant-date fair values of Tandem Awards granted during 2023, 2022 and 2021 were $18.85, $14.67 and $19.29, respectively. Total intrinsic value of Tandem Awards exercised was $0.6 million, $0.3 million and $1.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. Cash received from exercises of Tandem Awards was $1.9 million, $0.6 million and $3.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. Total tax benefit realized for tax deductions from exercises of Tandem Awards was $0.1 million, $0.1 million and $0.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. 136 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 21. LONG-TERM EQUITY-BASED COMPENSATION (Continued) Information pertaining to Tandem Awards outstanding at December 31, 2023 is presented below. Range of Exercise Prices ($) $ 20.01 30.01 40.01 50.01 60.01 70.01 80.01 20.01 - - - - - - - - 30.00 40.00 50.00 60.00 70.00 80.00 90.00 90.00 Shares Subject to Awards 104,562 80,219 333,156 941,827 311,236 575,358 26,961 2,373,319 Outstanding Weighted- average Exercise Price Per Share ($) Weighted- average Remaining Contractual Life (in Years) $ 27.71 33.97 42.64 56.23 69.22 76.61 83.39 59.27 2.17 1.75 2.93 6.72 6.42 5.13 5.81 5.39 Exercisable Shares Subject to Awards 104,562 80,219 323,069 463,930 229,511 574,467 25,660 1,801,418 Weighted- average Exercise Price Per Share ($) $ 27.71 33.97 42.48 57.31 69.04 76.61 83.51 59.92 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, 2023 is presented below. Time-based Restricted Stock Unit Awards Number of Restricted Stock Units Weighted- average Grant-date Fair Value Per Unit Nonvested Balance at Beginning of the Year ........................................................................................ Granted................................................................................................................................................... Vested..................................................................................................................................................... Forfeited ................................................................................................................................................. $ 478,254 254,991 (96,855) (68,074) Nonvested Balance at December 31, 2023 ............................................................................................ 568,316 $ 53.78 56.79 54.91 55.20 54.77 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 tures of PSUs for performance below the “target” awarded to the participant. The final payout of these awards, and any forfeiff performance level, will be determined based on the Company’s performance. If,ff at the end of the applicable performance period, the Company’s performance: • • • exceeds the “target” performance level, all of the PSUs will vest and additional shares of stock will be issued to the award recipient; is below the “target” performance level, but at or above a “minimum” performance level, only a portion of the PSUs originally issued to the award recipient will vest; or is below a “minimum” performance level, none of the PSUs originally issued to the award recipient will vest. 137 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 21. LONG-TERM EQUITY-BASED COMPENSATION (Continued) Activity related to nonvested PSU awards for the year ended December 31, 2023 is presented below. PSU Awards Weighted- average Grant-date Fair Value Per PSU Number of PSUs Nonvested Balance at Beginning of the Year........................................................................................ 610,574 $ Granted................................................................................................................................................... 211,236 Vested .................................................................................................................................................... (480) Forfeited................................................................................................................................................. Nonvested Balance at December 31, 2023 ............................................................................................ (240,023) 581,307 $ 68.78 66.59 77.37 78.85 63.82 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 2023, 2022 and 2021 three-year performance periods was 189,283 common shares, 200,520 common shares and 191,504 common shares, respectively, (as “fulff shares, 601,560 shares, and 574,512 shares, respectively, under the Share Authorization) at December 31, 2023. l value awards,” the equivalent of 567,849 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,ff 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 2023, sixty-seven percent of the PSU awards granted to employees in 2022 and sixty-seven percent of the PSU awards granted to employees in 2021 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 Supeu rcomposite Insurance Index, over a three-year performance period. The three-year performance periods for the 2023, 2022 and 2021 awards end on January 31, 2025, Januaryrr 31, 2024 and January 31, 2023, respectively. Compensation cost for these awards is recognized ratabla y 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. Thirty-three percent of the PSU awards granted to employees in 2023, thirty-three percent of the PSU awards granted to employees in 2022 and thirty-three percent of the PSU awards granted to employees in 2021 are measured solely using a Company-specific metric. Final payout for these awards, and any forfeiff tures of shares for performance below the “target” performance level, will be determined based on Kemper’s adjud sted return on equity over a three-year performance period. The three-year performance periods for the 2023, 2022 and 2021 awards end on December 31, 2025, December 31, 2024 and December 31, 2023, respectively. Fair value for these awards was determined using the closing price of Kemper common stock on the date of grant. Accruar performance condition. ls of compensation cost for these awards are estimated based on the probabla e outcome of the The total fair value of RSUs and PSUs that vested during the year ended December 31, 2023 was $5.2 million. The tax benefits for tax deductions realized from such awards was $1.1 million. The total fair value of RSUs and PSUs that vested during the year ended December 31, 2022 was $7.5 million. The tax benefits for tax deductions realized from such awards was $1.6 million. 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. 138 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 21. LONG-TERM EQUITY-BASED COMPENSATION (Continued) The grant-date fair values of DSU awards issued under the 2011 Omnibus Plan 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, 2023, 2022 and 2021. Activity related to DSU awards for the year ended December 31, 2023 is presented below. Vested Balance at Beginning of the Year ............................................................................................ Reduction for Shares Issued on Conversion......................................................................................... Vested Balance at December 31, 2023................................................................................................. NOTE 22. POLICYHOLDER OBLIGATIONS Policyholder Obligations at December 31, 2023 and 2022 were as follows: Weighted- average Grant-date Fair Value Per DSU Number of DSUs 36,600 (8,220) 28,380 $ $ 45.25 42.43 46.07 DOLLARS IN MILLIONS II FHLB Funding Agreements ......................................................................................................... $ Universal Life-type Policyholder Account Balances ................................................................... Total ............................................................................................................................................. $ December 31, 2023 2022 557.4 98.3 655.7 $ $ 601.0 100.3 701.3 Kemper’s subsu idiary, United Insurance Company of America (“United Insurance”) has entered into funding agreements with the FHLB of Chicago in exchange for cash, which it uses for spread lending purpos es. United Insurance received advances of $122.5 million from the FHLB of Chicago and made repayments of $166.1 million under the spread lending program in 2023. United Insurance received advances of $334.8 million and made repayments of $135.7 million from the FHLB of Chicago in 2022 under the spread lending program. rr 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 specifieff d levels of the amount borrowed, United Insurance would be required to pledge additional collateral or repay outstanding borrowings. Upon any event of default by United Insurance, the FHLB’s recovery on the collateral is limited to the amount of United Insurance’s liability under the funding agreements to the FHLB of Chicago. United Insurance’s liability under the funding agreements with the FHLB of Chicago, the amount of collateral pledged under such agreements and FHLB of Chicago common stock owned by United Insurance at December 31, 2023 and 2022 is presented below. DOLLARS IN MILLIONS II 2023 2022 Liability under Funding Agreements......................................................................................................... $ 557.4 $ 601.0 Fair Value of Collateral Pledged ............................................................................................................... FHLB of Chicago Common Stock Owned at Cost.................................................................................... 629.3 16.6 744.6 17.5 Universarr l Lifei -typtt e Policyhc oldell r Account Balances The Company’s weighted-average crediting rate for Universal Life-type Policyholder Account Balances was 5.1% as of December 31, 2023 and 2022. Guaranteed minimum benefit amounts in excess of the current account balances for these contracts were $294.1 million and $311.4 million as of December 31, 2023 and 2022, respectively. The cash surrender value of 139 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 22. POLICYHOLDER OBLIGATIONS (Continued) the Company’s policyholder obligations for these contracts were $98.2 million and $100.0 million as of December 31, 2023 and 2022, respectively. NOTE 23. DEBT Amended and Extendeddd Credit Agreg ement and Term Loan Facility On March 15, 2022, the Company entered into an amended and extended credit agreement. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to $600.0 million and extended the maturity date to March 15, 2027. Furthermore, the amended and extended credit agreement provides for an accordion featurt e whereby the Company can increase the revolving credit borrowing capaa maximum capacity of $800.0 million. city by an additional $200.0 million for a total Financial covenants within the agreement limit the Company from accessing the maximum capacity. The amount availabla e as of December 31, 2023 was $393.0 million. There were no outstanding borrowings under the credit agreement at either December 31, 2023 or December 31, 2022. The Company incurred $2.2 million of debt issuance costs in relation to the amended agreement. As of December 31, 2023 there were $1.7 million of remaining unamortized costs under the credit agreement, which will be amortized under the remaining term of the credit agreement. Long-term Debt Total amortized cost of Long-term Debt outstanding at December 31, 2023 and 2022 was: (Dollars in Millions) Senior Notes:............................................................................................................................................ 4.350% Senior Notes due Februar 2.400% Senior Notes due September 30, 2030................................................................................... ry 15, 2025...................................................................................... $ 3.800% Senior Notes due Februar 5.875% Fixed-Rate Reset Junior Suboru ry 23, 2032...................................................................................... dinated Debenturt es due 2062..................................................... Dec 31, 2023 Dec 31, 2022 $ 449.6 397.0 396.0 146.6 449.3 396.6 395.5 145.5 Total Long-term Debt Outstanding .......................................................................................................... $ 1,389.2 $ 1,386.9 4.350% Senior Notes Due 2025 Kemper has $450.0 million aggregate principal of 4.350% senior notes due Februarr Kemper initially issued $250.0 million of the notes in Februarr ry 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 purpos es under the indenturt e 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. ry 15, 2025 (the “2025 Senior Notes”). r 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 effeff ctive yield of 2.52%. The 2030 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time, at Kemper’s option, at specified redemption prices. 3.800% Senior Notes Due 2032 ry 15, 2022, Kemper offeff On Februar 2032 (the “2032 Senior Notes”). The net proceeds of issuance were $395.1 million, net of discount and transaction costs for an effeff ctive yield of 3.950%. The 2032 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time, at Kemper’s option, at specifieff d redemption prices. red and sold $400.0 million aggregate principal of 3.800% senior notes due Februarr ry 23, 140 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 23. DEBT (Continued) In anticipation of the issuance of the 2032 Senior Notes and for risk management purpos es, the Company entered into a derivative transaction to hedge the risk of changes in the debt cash flows attributable to changes in the benchmark U.S. Treasuryr interest rate during the period leading up to the debt issuance (“Treasuryr Lock”). The effeff ctive portion of the gain on the derivative instrument upon discontinuance was $5.9 million before taxes, and is reported as a component of Accumulated Other Comprehensive (Loss) Income. Beginning with the issuance of the 2032 Senior Notes described in the preceding paragraph, such gain is being amortized into earnings and reported in Interest and Other Expenses in the same periods that the hedged items affeff ct earnings. Amortization, reported in Interest and Other Expenses, was $0.6 million for the year ended December 31, 2023. The Company expects to reclassify $0.5 million of net gain on derivative instruments from AOCI to earnings for the twelve months ended December 31, 2024 as interest expense on the debt is recognized. r 5.875% Fixedii -Rdd ate Reset Junior Subordinated Debentures Due 2062 dinated Debenturt es due March 15, 2062 (the “2062 Junior Debenturt es”). The net proceeds from issuance were On March 10, 2022, Kemper issued $150.0 million aggregate principal amount of 5.875% Fixed-Rate Reset Junior Suboru $144.7 million, net of discount and transaction costs. The 2062 Junior Debenturt es will bear interest from and including the date of original issue to, but excluding, March 15, 2027 (the “First Reset Date”) at the fixed rate of 5.875% per annum. The interest rate on the First Reset Date, and subsu equent Reset Dates, will be equal to the Five-Year Treasuryr Rate as of the most recent Reset Date plus 4.140% to be reset on each Reset Date. Interest is due quarterly in arrears beginning on June 15, 2022. The Company has the option to defer interest payments for one or more optional deferral periods of up to five consecutive years, provided that no optional deferral period shall extend beyond March 15, 2062, or any earlier accelerated maturity date arising from an event of default or any earlier redemption of the 2062 Junior Debenturt es. The 2062 Junior Debenturt es are unsecured and may be redeemed in whole or in part on the First Reset Date or any time thereafteff interest. r, at a redemption price equal to the principal amount of the debenturt es being redeemed plus any accruer d and unpaid Short-term Debt Kemper’s subsu idiaries, United Insurance, Trinity Universal Insurance Company (“Trinity”) and American Access Casualty Company (“AAC”), are members of the FHLBs of Chicago, Dallas and Chicago, respectively. Alliance United Insurance Company (“Alliance”) was a member of the FHLB of San Francisco until it surrendered all Califorff nia licenses on January 30, 2023, and ceased to exist as an insurance company. As a requirement of membership in the FHLBs, United Insurance, Trinity, and AAC maintain a certain level of investment in FHLB stock. The Company periodically uses short-term FHLB borrowings for cash management and risk management purpor program. The Company received advances and made repayments of $0.0 million, $81.0 million and $85.0 million for the years ended December 31, 2023, 2022 and 2021, respectively, for cash and risk management purpos es. There were no short-term debt advances from the FHLBs of Chicago or Dallas outstanding at December 31, 2023 or December 31, 2022. For information on United Insurance’s funding agreement with the FHLB of Chicago in connection with the spread lending program, see Note 22, “Policyholder Obligations,” to the Consolidated Financial Statements. ses, in addition to long-term FHLB borrowings for the spread lending rr Interest Expex nse and Interest Paid Interest Expense, including facility fees, accretion of discount, amortization of premium and amortization of issuance costs, was $56.1 million, $54.7 million and $43.6 million for the years ended December 31, 2023, 2022 and 2021 respectively. Interest paid, including facility fees, was $54.5 million, $51.5 million and $43.9 million for the years ended December 31, 2023, 2022 and 2021 respectively. NOTE 24. LEASES The Company leases certain offiff ce 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 vehicles and 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. 141 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 24. LEASES (Continued) The following tabla e presents operating lease right-of-use assets and lease liabia lities. (Dollars in Millions) Operating Lease Right-of-Use Assets............................................................................................ $ Operating Lease Liabilities ............................................................................................................ Dec 31, 2023 38.4 62.3 $ Dec 31, 2022 45.1 72.6 Lease expenses are primarily included in insurance expenses in the Consolidated Statements of Loss. Additional information regarding the Company’s operating leases for the year ended December 31, 2023 and 2022 is presented below. (Dollars in Millions) Lease Cost: Operating Lease Cost .................................................................................................................. Variable Lease Cost..................................................................................................................... Short-Term Lease Cost1 .............................................................................................................. Total Lease Expense ...................................................................................................................... $ Less: Short-Term Lease Cost......................................................................................................... Total Lease Cost............................................................................................................................. $ 1 Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets. 2023 2022 15.7 3.2 0.3 19.2 — $ 19.2 $ 21.3 0.3 3.8 25.4 0.1 25.3 The Company incurred expenses of $18.0 million for the year ended December 31, 2023, associated with lease impairments and other related costs. The Company had no expenses during the year ended December 31, 2022 and 2021 associated with lease impairments and other related costs. Othett r Infon rmation on Operating Leases Significant judgments and assumptions for determining lease asset and liabia lity at December 31, 2023 and 2022 are presented below. Weighted-average Remaining Lease Term - Operating Leases..................................................... Weighted-average Discount Rate - Operating Leases ................................................................... 2023 5.5 years 4.3 % 2022 5.6 years 3.6 % Most of the Company’s leases do not provide an implicit rate. Accordingly, the Company uses its incremental borrowing rate based on the information availabla e at the commencement date to determine its lease payments’ present value. Future minimum lease payments under operating leases at December 31, 2023 are presented below. (Dollars in Millions) 2024 ........................................................................................................................................................... $ 2025 ........................................................................................................................................................... 2026 ........................................................................................................................................................... 2027 ........................................................................................................................................................... 2028 ........................................................................................................................................................... 2029 and Thereafteff r................................................................................................................................... Total Future Payments............................................................................................................................... $ Less: Discount ........................................................................................................................................... Present Value of Minimum Lease Payments............................................................................................. $ As of December 31, 2023, the Company did not have any finance leases. 20.4 15.5 9.4 7.2 4.4 15.2 72.1 9.8 62.3 142 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 25. 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. Specificff 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-r wide catastrophe classifications of storms and other events promulgated by the Insurance Services Offiff ce (“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 affeff cts a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry.r The discussions that follow utilize ISO’s definition of catastrophes. types of catastrophic events are more The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversificff ation, 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 2023, the property business written through the Life 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 individuad l catastrophes provided under the excess of loss reinsurance contracts effeff ctive January 1, 2023 to December 31, 2023 is provided in various layers as presented below. II 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 0 295.0 Up to 50.0 150.0 250.0 295.0 325.0 Percentage of Coverage — % 95.0 95.0 95.0 95.0 Coverage on individuad l catastrophes provided under the excess of loss reinsurance contracts effeff ctive January 1, 2022 to December 31, 2022 is provided in various layers as presented below. II 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 0 325.0 Up to 50.0 150.0 250.0 325.0 350.0 Percentage of Coverage — % 95.0 95.0 95.0 95.0 Coverage on individuad l catastrophes provided under the excess of loss reinsurance contracts effeff ctive January 1, 2021 to December 31, 2021 is provided in various layers as presented below. II 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 0 Up to 50.0 150.0 250.0 275.0 Percentage of Coverage — % 95.0 95.0 95.0 143 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 25. CATASTROPHE REINSURANCE (Continued) In the event that the incurred catastrophe losses and LAE covered by the catastrophe reinsurance programs presented in the three preceding tabla es exceed the retention for that particular layer, each of the programs allow 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 reinsurance availabla e under such layer. The aggregate property catastrophe reinsurance contract was discontinued in 2023. Coverage provided under the 2022 aggregate property catastrophe reinsurance contract is summarized below. Aggregate Catastrophe Losses and LAE II DOLLARS IN MILLIONS Retained .................................................................................................................................................. $ Coverage ................................................................................................................................................. In Excess of — $ 65.0 Up to 65.0 115.0 Coverage provided under the 2021 aggregate property catastrophe reinsurance contract is summarized below. Aggregate Catastrophe Losses and LAE II DOLLARS IN MILLIONS Retained .................................................................................................................................................. $ Coverage ................................................................................................................................................. In Excess of — $ 60.0 Up to 60.0 110.0 The catastrophe reinsurance in 2023, 2022 and 2021 for the property and casualty insurance companies also included reinsurance coverage from the Florida Hurricane Catastrophe Fund (“FHCF”) for hurricane losses in Florida at retentions lower than those described above. The Life 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, 2023, 2022 and 2021 by the following: II DOLLARS IN MILLIONS Specialty Property & Casualty Insurance .............................................................................. Life Insurance ........................................................................................................................ Non-Core Operations ............................................................................................................. Total Ceded Catastrophe Reinsurance Premiums.................................................................. $ 2023 2022 2021 6.1 0.7 9.5 16.3 $ $ 8.9 0.6 22.5 32.0 $ $ 7.0 1.3 22.0 30.3 The Company did not pay any reinstatement premiums in 2023, 2022, or 2021. Catastrophe losses and LAE (including reserve development), net of reinsurance recoveries, for the years ended December 31, 2023, 2022 and 2021 by business segment are presented below. II DOLLARS IN MILLIONS Specialty Property & Casualty Insurance .............................................................................. Life Insurance ........................................................................................................................ Non-Core Operations ............................................................................................................. Total Catastrophe Losses and LAE........................................................................................ $ 2023 2022 2021 32.2 3.0 52.4 87.6 $ $ 23.6 3.3 48.3 75.2 $ $ 16.0 12.9 73.5 102.4 The Company had no material recoveries under its catastrophe reinsurance treaties for the years ended December 31, 2023 and 2022. Total prior year catastrophe loss and LAE reserves, net of reinsurance recoverabla es, developed favorably by $9.1 million in 2023, favorably by $4.1 million in 2022 and favorably by $5.4 million in 2021. The Specialty Property & Casualty Insurance segment reported favorable catastrophe reserve development of $2.3 million, adverse development of $0.6 million, and adverse development of $0.3 million in 2023, 2022 and 2021, respectively. The Life Insurance segment reported adverse catastrophe 144 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 25. CATASTROPHE REINSURANCE (Continued) reserve development of $0.8 million, adverse development of $1.5 million and favorable development of $0.1 million in 2023, 2022 and 2021, respectively. The Non-Core Operations reported favorable catastrophe reserve development of $7.6 million, favorable development of $6.2 million and favorable development of $5.6 million in 2023, 2022 and 2021, respectively. The process of estimating and establa ishing 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 adjud sters 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 reconstrucr quantifyff and will influence the final amount of claim settlements. All these factors, coupled with the impact of the availabia lity of labor and material on costs, require significant judgment in the reserve setting process. A change in any one or more of these a 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 industryr estimates of losses, and estimates of the Company’s market share in the assessabla e states. Actual assessments may differ materially from these estimated amounts. tion costs and determination of cause of loss that are difficult to NOTE 26. OTHER REINSURANCE In addition to the reinsurance programs described in Note 25, “Catastrophe Reinsurance,” to the Consolidated Financial Statements, Kemper’s insurance subsu idiaries utilize other reinsurance arrangements to limit their maximum loss, provide greater diversificff ation of risk and to minimize exposures on larger risks. The ceding of insurance does not discharge the primaryr liabia lity of the original insurer. Accordingly, insurance reserve liabilities are reported gross of any estimated recovery from reinsurers in the Consolidated Balance Sheets. Amounts recoverabla e from reinsurers are estimated in a manner consistent with the insurance reserve liability and are included in Other Receivables in the Consolidated Balance Sheets. Reinsurance Recoverabla es were $86.5 million and $99.6 million at December 31, 2023 and 2022, respectively, of which $34.1 million and $47.3 million was related to short-duration policies, respectively, and $52.4 million and $52.3 million related to long-duration policies, respectively. Earned Premiums ceded on long-duration and short-duration policies were $32.7 million, $42.7 million and $36.1 million for the years ended December 31, 2023, 2022 and 2021, respectively, of which $16.3 million, $32.0 million and $30.3 million, respectively, was related to catastrophe reinsurance. See Note 25, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for additional information regarding the Company’s catastrophe reinsurance programs. Certain insurance subsu idiaries assume business from other insurance companies and involuntaryr pools. Earned Premiums assumed on long- duration and short-duration policies were $42.9 million, $41.4 million and $56.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. Trinity and Capia tol County Mutual Fire Insurance Company (“Capia tol”) are parties to a quota share reinsurance agreement for ceded losses for dwelling coverage. whereby Trinity assumes 100% of the business written by Capia tol, subju ect to a cap,a Earned Premiums assumed by Trinity from Capia tol were $10.4 million, $11.9 million and $17.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. Capia tol is a mutual insurance company and, accordingly, is owned by its policyholders. Trinity and Old Reliabla e Casualty Company (“ORCC”), a subsu idiary of Capia tol, are parties to a quota share reinsurance agreement whereby Trinity assumes 100% of the business written by ORCC, subju ect to a cap, for ceded losses for dwelling coverage. Earned Premiums assumed by Trinity from ORCC were $2.7 million, $3.2 million and $4.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. Five employees of the Company serve as directors of Capia tol’s five member board of directors. Nine employees of the Company also serve as directors of ORCC’s nine member board of directors. Kemper’s subsu idiary, United Insurance, provides claims and administrative services to Capia tol and ORCC. In addition, agents appointed by Kemper’s subsu idiary, The Reliabla e Life Insurance Company, and who are employed by United Insurance, are also appointed by Capia tol and ORCC to sell property insurance products for the Company’s Life Insurance segment. The Company also provides certain investment services to Capia tol and ORCC. 145 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 27. INCOME TAXES The tax effeff cts of temporaryrr differff ences that give rise to significant portions of the Company’s Net Deferred Income Tax Assets and Deferred Income Tax Liabilities at December 31, 2023 and 2022 were: LARS IN MILLIONS II Deferred Income Tax Assets: Unearned Premium Reserves ................................................................................................................ $ Tax Capia talization of Policy Acquisition Costs .................................................................................... Payroll and Employee Benefit Accruar ls................................................................................................ Investments............................................................................................................................................ Net Operating Loss and Credit Carryforwards...................................................................................... Other ...................................................................................................................................................... Subtu otal.................................................................................................................................................... Valuation Allowance ............................................................................................................................... Total Deferred Income Tax Assets ............................................................................................................ Deferred Income Tax Liabilities: Insurance Reserves ................................................................................................................................ 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 Assets ............................................................................................................... $ 2023 2022 54.0 46.3 34.8 103.4 114.6 32.2 385.3 (27.4) 357.9 12.7 124.3 3.2 32.6 19.3 6.0 198.1 159.8 $ $ 70.8 45.9 32.8 152.2 49.7 22.6 374.0 — 374.0 24.9 133.3 3.7 36.9 35.7 10.5 245.0 129.0 Due to jurisdictional differences in which the Company operates, the consolidated net deferred tax asset of $159.8 million is reported on the Consolidated Balance Sheets as a total deferred tax asset of $210.4 million and a deferred tax liability of $50.6 million. The evaluation of the recoverabia lity of the deferred tax asset and the need for a valuation allowance is based on the weight of all availabla e positive and negative evidence. For the year ended December 31, 2023, a valuation of $27.4 million was recorded against those deferred tax assets that were determined not to be more likely than not to be realized based on Management’s assessment, an increase of $27.4 million from the year ended December 31, 2022 when no valuation allowance was recorded. The expiration of federal net operating loss (“NOL”) and tax credit carryforwards and their related deferred income tax assets at December 31, 2023 is presented below by year of expiration. DOLLARS IN MILLIONS Expiring in: II NOL Carry- forwards Deferred Tax Asset 2027....................................................................................................................................................... $ 2028....................................................................................................................................................... 2040....................................................................................................................................................... 2041....................................................................................................................................................... 2042....................................................................................................................................................... 2043....................................................................................................................................................... No Expiration ........................................................................................................................................ $ 0.8 4.4 1.4 4.5 6.0 140.4 343.3 0.2 0.9 1.4 4.5 6.0 29.5 72.1 Total All Years .......................................................................................................................................... $ 500.8 $ 114.6 146 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 27. INCOME TAXES (Continued) The carryforwards relate to general business and investment tax credits and federal NOL carryfr orff wards which the Company expects to fully utilize prior to expiration. There were no Unrecognized Tax Benefits at December 31, 2023, 2022 or 2021. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in Income Tax Benefit (Expense). There were no liabilities for accruerr d interest and penalties as of December 31, 2023, 2022 or 2021. The statutt e of limitations related to Kemper and its eligible subsu idiaries’ consolidated Federal income tax returns is closed for all tax years up to and including 2011 as well as 2018 and 2019. 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 adjud stments associated with the amended returns. The statutt e of limitations related to tax years 2015, 2016, 2017 and 2018 has been extended to June 30, 2024. Tax years 2020, 2021 and 2022 are subju ect to a statutt e of three years from the extended due dates of October 15, 2021, 2022 and 2023, respectively. The expiration of the statutt e of limitations related to the various state income tax returns that Kemper and its subsu idiaries file varies by state. The components of Income Tax Benefit from Operations for the years ended December 31, 2023, 2022 and 2021 were: II DOLLARS IN MILLIONS Current Income Tax Benefit (Expense) ................................................................................. $ Deferred Income Tax Benefit ................................................................................................ Income Tax Benefit................................................................................................................ $ 2023 2022 4.0 70.8 74.8 $ $ (6.2) $ 90.6 84.4 $ 2021 122.7 2.9 125.6 Federal income tax refunds received, net of income taxes paid, were $107.7 million in 2023. Federal income taxes paid, net of income tax refunds received, were $1.1 million, and $34.7 million in 2022 and 2021, respectively. State income taxes paid, net of income tax refunds received, were $1.0 million in 2023. State income tax refunds received, net of income taxes paid, were $0.4 million in 2022. State income taxes paid, net of income tax refunds received, were $3.3 million in 2021. No foreign income taxes were paid or refunded in 2023, 2022, or 2021. A reconciliation of the Statutt oryr Federal Income Tax Benefit and Rate to the Company’s Effeff ctive Income Tax Benefit and Rate from Operations for the years ended December 31, 2023, 2022 and 2021 is presented below. LARS IN MILLIONS II Amount Rate Amount Rate Amount Rate 2023 2022 2021 Statutt oryrr Federal Income Tax Benefit ........................ $ Tax-exempt Income and Dividends Received Deduction ................................................................ Untaxed Earnings on Company-Owned Life Insurance ..................................................................... Tax credits................................................................... Stock-Based Compensation ........................................ Nondeductible Executive Compensation .................... Goodwill impairment .................................................. Expense on Transactions............................................. Effeff ct of foreign operations ........................................ Change in valuation allowance ................................... Other, Net.................................................................... Effeff ctive Income Tax Benefit ..................................... $ 72.8 21.0 % $ 77.9 21.0 % $ 52.3 21.0 % 4.8 1.4 5.3 1.3 4.6 1.9 1.8 0.9 (0.1) (0.5) (1.8) — 7.9 (7.9) (1.1) 21.6 % $ 8.0 6.5 (1.3) (1.5) — (11.5) — — 1.0 84.4 2.1 1.7 (0.3) (0.4) — (3.0) — — 0.3 22.7 % $ 5.4 66.1 0.3 (2.7) — — — — (0.4) 125.6 2.2 27.0 0.1 (1.1) — — — — (0.2) 50.9 % 6.1 3.1 (0.3) (1.8) (6.3) — 27.4 (27.4) (3.6) 74.8 147 Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements NOTE 27. INCOME TAXES (Continued) Comprehensive Income Tax Benefit included in the Consolidated Financial Statements for the years ended December 31, 2023, 2022 and 2021 was: II DOLLARS IN MILLIONS Income Tax Benefit (Expense): Operations .............................................................................................................................. $ Unrealized (Appreciation) Depreciation on Securities .......................................................... Tax Effeff cts from Postretirement Benefit Plans ..................................................................... Tax Effeff cts on changes in Discount Rate for Life Reserves.................................................. Tax Effeff cts from Cash Flow Hedge....................................................................................... Comprehensive Income Tax Benefit ..................................................................................... $ 2023 2022 2021 74.8 (50.3) (12.4) 21.2 — 33.3 $ $ 84.4 325.5 (4.0) (289.9) (1.2) 114.8 $ $ 125.6 60.7 1.8 (47.9) (0.1) 140.1 NOTE 28. COMMITMENTS AND CONTINGENCIES tration, regulatoryr In the ordinary course of its businesses, the Company is involved in legal proceedings including lawsuits, arbir examinations, audits and inquiries. Based on currently availabla e information, the Company does not believe that it is reasonabla y possible that any of its pending legal proceedings will have a material effeff ct on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements. NOTE 29. RELATED PARTIES As described in Note 26, “Other Reinsurance,” to the Consolidated Financial Statements, the Company has certain relationships with Capia tol, a mutual insurance company that is owned by its policyholders. 148 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 subsu idiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of loss, comprehensive loss, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023 and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "finff ancial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria establa ished in Internal Controt l — Integre ated Frameworkrr (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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conforff mity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effeff ctive internal control over financial reporting as of December 31, 2023, based on criteria establa ished in Internal Controt COSO. l — Integre ated Frameworkrr (2013) issued by Change in Accounting Principle As discussed in Note 2 to the financial statements, the Company changed its method of accounting, measurement, and disclosure of long duration contracts effeff ctive January 1, 2023, using the modified retrospective method applied as of the transition date of January 1, 2021, dued Imprm ovements to the Accounting for Long Duration Contrat ctstt . to adoption of ASU 2018-12, Financial Services - Insurance (TopiTT c 944): Targeted Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effeff ctive internal control over financial reporting, and for its assessment of the effeff ctiveness 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 Publu ic 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 reasonabla e assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effeff ctive internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedurd es to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedurd es to respond to those risks. Such procedurd es 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 effeff ctiveness of internal control based on the assessed risk. Our audits also included performing such other procedurd es as we considered necessary in the circumstances. We believe that our audits provide a reasonabla e 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 reasonabla e assurance regarding the reliabia lity of financial reporting and the preparation of financial statements for external purpos es in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedurd es that (1) pertain to the maintenance of records that, in reasonabla e detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonabla e 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 r 149 Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued) company; and (3) provide reasonabla e assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effeff ct on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effeff ctiveness to future periods are subju ect to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedurd es 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, subju ective, 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. Propertytt and casualtyll insurance reserves – Refee r to Notes 2 and 6 to the consolidll atdd edtt finaii ncial stattt emtt ents Critical Audit Matter Descripti ion The estimation of property and casualty insurance reserves for losses and loss adjud stment 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 actuat rial estimation techniques that are dependent on assumptions and expectations about future events, many of which are difficult to quantify.ff The estimation process, particularly for claims with longer-tailed exposures that may not be discovered or reported immediately, is an inherently subju ective 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 effoff involvement of our actuarial specialists. rt, including the How the Critical Audit Matter Was Addrdd essed in the Audit Our audit procedurd es related to property and casualty insurance reserves included the following, among others: • We tested the effeff ctiveness 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 actuat the inputs to the actuarial estimates were accurate and complete. rial analyses to test that • 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. Fixeii d Maturitieii s at Fair Value – Refee r to Notes 2, 10, and 13 to the consolidll atdd edtt finaii ncial stattt emtt ents Critical Audit Matter Descripti ion Investments in fixed maturity securities classified as availabla e-for-sale are reported at fair value in the financial statements. Fixed maturity securities without readily determinable market values are valued using significant unobservabla e inputs, such as credit profileff , credit spread and resulting market yield, which involve considerable judgment by management. 150 Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued) Given management uses significant unobservabla e inputs to estimate the fair value of fixed maturity securities without readily determinable market values, performing audit procedurd es to evaluate these inputs required a high degree of auditor judgment and an increased extent of effoff rt, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addrdd essed in the Audit Our audit procedurd es related to the unobservabla e 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 effeff ctiveness 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 subsu equent transactions, taking into account changes in market conditions. • We evaluated the reasonabla eness of the models, methodologies, and unobservabla e inputs used by management to estimate fair value. • With the assistance of our fair value specialists, we compared management’s unobservabla e 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 ry 7, 2024 Februar We have served as the Company’s auditor since 2002. 151 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 Offiff cer and Chief Financial Offiff cer, has evaluated the effeff ctiveness of the Company’s disclosure controls and procedurd es (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 Offiff cer and Chief Financial Offiff cer have concluded that, as of the end of such period, the Company’s disclosure controls and procedurd es are effeff ctive in ensuring that information required to be disclosed by Kemper in reports that it files or submu 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 Offiff cer and Chief Financial Offiff cer, as appropriate to allow timely decisions regarding required disclosure. its under the Exchange Act is recorded, 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, 2023 that have materially affeff cted, or are reasonabla y likely to materially affeff ct, 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 establa ishing 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 supeu rvision of,ff a company’s principal executive and principal financial offiff cers, or persons performing similar functions, and effeff cted by the company’s board of directors, management and other personnel, to provide reasonabla e assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpos with generally accepted accounting principles and includes those policies and procedurd es that: es in accordance r • • • 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 reasonabla e 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 reasonabla e assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effeff ct on the financial statements. Management has evaluated the effeff ctiveness of its internal control over financial reporting as of December 31, 2023, based on the control criteria establa ished in a report entitled Internal Contrott Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that the Company’s internal control over financial reporting is effeff ctive as of December 31, 2023. issued in 2013 by the Committee of l—In— tegre ated Framework,rr The independent registered public accounting firm of Deloitte & Touche LLP, as auditors of the consolidated financial statements of Kemper and its subsu idiaries, has issued an attestation report on the effeff ctiveness of management’s internal control over financial reporting based on criteria establa ished in Internal Controt Committee of Sponsoring Organizations of the Treadway Commission. l—In— tegre ated Framework,rr issued in 2013 by the JOSEPH P. LACHER, JR. /s/ Joseph P. Lacher, Jr. Chairman of the Board, President and Chief Executive Offiff cer Kemper Corporation Februar ry 7, 2024 EY T. CAMDEN RR /s/ BRADL Bradley T. Camden Senior Vice President and Interim Chief Financial Offiff cer Kemper Corporation 152 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 Publu ic Accounting Firm,” and is incorporated herein by reference. Item 9B. Other Information. None. 153 Item 10. Directors, Executive Offiff cers and Corporate Governance. PART III The information required by this Item is incorporated herein by reference to the sections captioned “Director Biographies,” rate Governance” in the Proxy Statement for “Executive Offiff cers,” “Beneficff Kemper’s 2024 Annual Meeting of Shareholders. Kemper plans to file such proxy statement within 120 days afteff r December 31, 2023, the end of Kemper’s fiscal year. ial Ownership of Common Stock” and “Corporr Kemper’s code of ethics applicable to its chief executive offiff cer, chief financial offiff cer and principal accounting offiff cer (“Code of Ethics for Senior Financial Executives”) is posted in the “Governance” section of Kemper’s investor relations website, investors.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 Compensation,” “Director Compensation,” “HR & Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the Proxy Statement for Kemper’s 2024 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 tabla e below and incorporated herein by reference to the section captioned “Ownership of Kemper Common Stock” in the Proxy Statement for Kemper’s 2024 Annual Meeting of Shareholders. Equity Compensation Plan Information 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 Programs1 2,373,319 $ 59.27 1,995,442 — 1,995,442 Plan Category Equity Compensation Plans Approved by Security Holders Equity Compensation Plans Not Approved by Security Holders — 59.27 1 Includes 581,307 shares reserved for future grants based on performance results under the terms of outstanding PSU awards. — 2,373,319 Total $ Kemper’s 2023 Omnibus Plan permits various stock-based awards including, but not limited to, stock options, stock appreciation rights, RSUs, and PSUs. 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 2024 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 Publu ic Accountant” in the Proxy Statement for Kemper’s 2024 Annual Meeting of Shareholders. 154 Item 15. Exhibits, Financial Statement Schedules. (a)a Documentstt t filed as part of this Repor e PART IV 1. Financial Statements. The consolidated balance sheets of Kemper and subsu idiaries as of December 31, 2023 and 2022, and the consolidated statements of loss, comprehensive loss, cash flows and shareholders’ equity for the years ended December 31, 2023, 2022 and 2021, together with the notes thereto and the report of Deloitte & Touche LLP thereon appearing in Item 8 are included in this 2023 Annual Report. 2. Financial Statement Schedules. The following four financial statement schedules are included on the pages immediately following the signature pages hereof.ff 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 Supplu ementary Insurance Information Schedule IV Reinsurance Schedule The Report of Independent Registered Publu ic Accounting Firm, Deloitte & Touche LLP, with regards to the Financial Statement Schedules listed above, is incorporated by reference to the Report of Independent Registered Publu ic Accountant included in Item 8. 3. Exhibits. An Exhibit Index has been filed as part of this report on pages 156 through 159. (b) Eb xhEE ibits. Included in Item 15(a)(( 3 above (c) Fc inFF ancial Statement Schedules. Included in Item 15(a)(( 2 above Item 16. Form 10-K Summary None. 155 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 3.2 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 10.1 10.2 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) 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 (Including the form of 2.400% Senior Notes due 2030) Second Supplemental Indenture, dated as of February 23, 2022, by and between the Company and U.S. Bank Trust Company, National Association (Including the form of 3.800% Senior Notes due 2032) Third Supplemental Indenture, dated as of March 10, 2022, by and between the Company and U.S. Bank Trust Company, National Association (Including the form of 5.875% Fixed-Rate Reset Junior Subordinated Debentures due 2062) Form of Certificate Representing Shares of Kemper Corporation Common Stock Description of Securities Registered Under Section 12 of the Exchange Act Third Amended and Restated Credit Agreement, dated as of March 15, 2022, by and among the Company, as the borrower, the lenders and issuing banks from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent 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 Incorporated by Reference Form File Number 001-18298 K 8-K 001-18298 Exhibit Filing Date 3.2 August 8, 2014 3.1 December 6, 2022 8-K 001-18298 4.1 Februar ry 27, 2014 Filed or Furnished Herewith 8-K 001-18298 4.2 Februar ry 24, 2015 8-K 001-18298 8-K 001-18298 4.1 September 29, 2020 4.2 September 29, 2020 8-K 001-18298 4.2 Februar ry 23, 2022 8-K 001-18298 4.2 March 10, 2022 10-K 001-18298 4.7 Februar ry 20, 2019 X 8-K 001-18298 10.1 March 17, 2022 10.2 Februar ry 14, 2014 10-K 001-18298 156 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* 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 Advances, Collateral Pledge, and Security Agreement, dated as of May 10, 2022, between American Access Casualty Company and the Federal Home Loan Bank of Chicago 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 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 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 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 individual Indemnification Agreements between Kemper and its directors and executive officers 10.16* 2020 Omnibus Plan 10.17* Form of Non-Employee Director Restricted Stock Unit Award Agreement as of May 5, 2020 under the 2020 Omnibus Equity Plan 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 May 11, 2022 10-K 001-18298 10.3 Februar ry 14, 2014 10-K 001-18298 10.5 Februar ry 13, 2017 10-K 001-18298 10.17 Februar ry 13, 2017 10-Q 001-18298 10.1 May 2, 2013 10-Q 001-18298 10.2 May 2, 2013 K 001-18298 10.24 Februar ry 14, 2014 K 001-18298 10.31 Februar ry 13, 2017 10-K 001-18298 10.39 Februar ry 13, 2018 10-Q 001-18298 10.2 July 30, 2018 8-K 001-18298 10.1 Februar ry 11, 2020 001-18298 Appendix B March 25, 2020 10.1 May 11, 2020 001-18298 Schedule 14A 8-K 157 Exhibit Number 10.18* 10.19* 10.20* 10.21* 10.22* 10.23* 10.24* 10.25* 10.26* 10.27* 10.28* 10.29* Exhibit Description 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 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 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 Offiff cer and 110%, 2 years, 2 years and 24 months, respectively, for the other offiff cers. 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 10.30* 2023 Omnibus Plan 10.31* Form of Non-Employee Director Restricted Stock Unit Award Agreement as of May 2, 2023 under the 2023 Omnibus Plan Incorporated by Reference Form 8-K File Number 001-18298 Exhibit Filing Date 10.2 May 11, 2020 Filed or Furnished Herewith K 001-18298 10.3 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 Februar ry 13, 2017 X X X X X 001-18298 Appendix A 001-18298 March 22, 2023 10.1 August 7, 2023 Schedule 14A 10-Q 158 Exhibit Number 10.32* 10.33* 10.34* 10.35* 10.36* 10.37* 18.1 21 23 24 31.1 31.2 32.1 32.2 97.1 101.1 101.2 101.3 101.4 101.5 101.6 Exhibit Description Form of Non-Qualified Stock Option and SAR Award Agreement (Cliff-Vesting) as of May 2, 2023 under the 2023 Omnibus Plan Form of Non-Qualified Stock Option and SAR Award Agreement (Installment-Vesting) as of May 2, 2023 under the 2023 Omnibus Plan Form of Restricted Stock Unit Award Agreement (Cliff-Vesting) as of May 2, 2023 under the 2023 Omnibus Plan Form of Restricted Stock Unit Award Agreement (Installment-Vesting) as of May 2, 2023 under the 2023 Omnibus Plan Form of Performance Share Unit Award Agreement (Adjusted ROE) as of May 2, 2023 under the 2023 Omnibus Plan Form of Performance Share Unit Award Agreement (Relative TSR) as of May 2, 2023 under the 2023 Omnibus Plan Preferability letter from Deloitte & Touche LLP regarding change in accounting principle 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) Kemper Corporation Policy on Recoupment of Incentive Compensation XBRL Instance XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Labea Document XBRL Taxonomy Extension Presentation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document l Linkbase Incorporated by Reference Form File Number Exhibit Filing Date Filed or Furnished Herewith 10.2 August 7, 2023 10.3 August 7, 2023 10.4 August 7, 2023 10.5 August 7, 2023 10.6 August 7, 2023 10.7 August 7, 2023 X X X X X X X X X X X X X X X 159 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 Offiff cer, Bradley T. Camden, Senior Vice President and Interim Chief Financial Offiff cer, and James A. Alexander, Senior Vice President and Chief Accounting Offiff cer, so long as such individual remains an executive offiff cer of Kemper Corporation, his or her truer each such signatory, and with authority to file with the SEC, any and all amendments to this 2023 Annual Report of Kemper Corporation, together with any and all exhibits thereto and other documents therewith, necessary or advisabla e 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 2023 Annual Report as the aforff esaid attorney-in-fact executing the same deems appropriate. attorney-in-fact with authority together or individually to execute in the name of and lawfulff SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Kemper Corporation has duly caused this 2023 Annual Report on Form 10-K for the fiscal year ended December 31, 2023 to be signed on its behalf by the undersigned, thereunto duly authorized, on Februar ry 7, 2024. KEMPER CORPORATRR ION (Registrant) By: JOSEPH P. LACHER, JR. /s/ Joseph P. Lacher, Jr. Chairman of the Board, President and Chief Executive Offiff cer 160 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 capaa cities indicated on Februar ry 7, 2024. Signature JOSEPH P. LACHER, JR. /s/ Joseph P. Lacher, Jr. /s/ BRADLEY T. CAMDEN Bradley T. Camden /s/ JAMES A. ALEXANDER James A. Alexander /s/ TERESA A. CANIAA DA Teresa A. Canida /s/ GEORGE N. COCHRANAA George N. Cochran /s/ KATHLEEN M. CRONIN Kathleen M. Cronin JASON N. GOREVIC /s/ Jason N. Gorevic /s/ LACY M. JOHNSON Lacy M. Johnson /s/ GERALD LADERMAN Gerald Laderman /s/ ALBERTO PARACCHINI Alberto J. Paracchini /s/ STUART B. PARKER Stuart B. Parker /s/ CHRISTOPHER B. SAROFIM Christopher B. Sarofim /s/ SUSANAA D. WHITING Susan D. Whiting Title Chairman of the Board, President and Chief Executive Offiff cer (Principal Executive Offiff cer) Senior Vice President and Interim Chief Financial Offiff cer (Principal Financial Offiff cer) Senior Vice President and Chief Accounting Offiff cer (Principal Accounting Offiff cer) Director Director Director Director Director Director Director Director Director Director 161 KEMPER CORPORATRR ION AND SUBSIDIARIES INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES DECEMBER 31, 2023 (Dollars in Millions) SCHEDULE I Amortized Cost Fair Value Amount Carried in Balance Sheet 594.1 1,575.9 4.4 $ 511.5 1,401.9 3.8 $ 511.5 1,401.9 3.8 3,690.8 8.3 949.8 315.8 6,881.9 25.5 1.2 199.1 225.8 XXX.X XXX.X XXX.X XXX.X XXX.X XXX.X $ 3,690.8 8.3 949.8 315.8 6,881.9 25.5 1.2 199.1 225.8 221.7 17.3 520.9 513.5 281.2 241.9 8,904.2 Fixed Maturities: Bonds and Notes: United States Government and Government Agencies and Authorities.............. $ States and Political Subdiu visions ......................................................................... Foreign Governments........................................................................................... Corporate Securities: Other Bonds and Notes.................................................................................... Redeemable Preferff red Stocks.......................................................................... Collateralized Loan Obligations...................................................................... Other Mortgage- and Asset-backed................................................................. Total Investments in Fixed Maturities ........................................................................... Equity Securities at Fair Value: Preferff red Stocks ........................................................................................................ Common Stocks ........................................................................................................ Other Equity Interests................................................................................................ Total Investments in Equity Securities .......................................................................... 4,046.8 9.0 973.6 362.0 7,565.8 25.5 1.2 199.1 225.8 Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings...................................................................................................................... 221.7 Alternative Energy Partnership Investments ................................................................. 17.3 Short-term Investments.................................................................................................. 520.9 Company-Owned Life Insurance................................................................................... 513.5 Loans to Policyholders................................................................................................... 281.2 Other Investments .......................................................................................................... 241.9 Total Investments........................................................................................................... $ 9,588.1 See Accompanying Report of Independent Registered Publu ic Accounting Firm. 1 KEMPER CORPORATRR ION PARENT COMPANY BALANCAA E SHEETS (Dollars in Millions) SCHEDULE II December 31, 2023 20221 ASSETS Investments in Subsu idiaries ....................................................................................................................... $ 3,594.1 Fixed Maturities at Fair Value (Amortized Cost: 2023 – $177.4; 2022 - $122.5) .................................... 174.3 Equity Securities at Fair Value (Cost: 2023 - $11.6; 2022 - $39.3) .......................................................... 9.9 Short-term Investments.............................................................................................................................. 180.2 Other Investments...................................................................................................................................... 18.8 Cash ........................................................................................................................................................... 1.5 Other Receivabla es...................................................................................................................................... 38.5 Current Income Taxes................................................................................................................................ 33.9 Right-of-Use Assets................................................................................................................................... 7.7 Other Assets............................................................................................................................................... 32.5 Total Assets ............................................................................................................................................... $ 4,091.4 LIABILITIES AND SHAREHOLDERS’ EQUITY Senior Notes Payabla e, 4.350% due 2025 (Fair Value: 2023 – $440.8; 2022 – $438.5)............................ $ Senior Notes Payabla e, 2.400% due 2030 (Fair Value: 2023 – $313.6; 2022 – $310.3)............................ Senior Notes Payabla e, 3.800% due 2032 (Fair Value: 2023 - $338.4; 2022 - $336.2) ............................. Fixed-Rate Reset Junior Suboru 2022 - $110.1)............................................................................................................................................ Current Income Tax Liability .................................................................................................................... Deferred Income Tax Liability .................................................................................................................. Liabilities for Benefit Plans ....................................................................................................................... Right-of-Use Liabilities ............................................................................................................................. Accruerr d Expenses and Other Liabilities.................................................................................................... Total Liabilities.......................................................................................................................................... Shareholders’ Equity: 146.6 — 119.5 28.1 23.3 26.3 1,586.4 dinated Debenturt es, 5.875% due 2062 (Fair Value: 2023 - $120.6; 449.6 397.0 396.0 $ 3,849.0 120.0 24.1 67.7 — 66.3 5.6 12.0 12.2 35.6 $ 4,192.5 $ 449.3 396.6 395.5 145.5 — 49.1 35.4 24.4 26.1 1,521.9 Common Stock...................................................................................................................................... Additional Paid-in Capia tal..................................................................................................................... Retained Earnings ................................................................................................................................. Accumulated Other Comprehensive Loss............................................................................................. Total Shareholders’ Equity attributable to Kemper Corporation............................................................... Noncontrolling Interest ......................................................................................................................... Total Shareholders’ Equity ........................................................................................................................ 2,505.0 Total Liabilities and Shareholders’ Equity ................................................................................................ $ 4,091.4 6.4 1,845.3 1,014.3 (360.8) 2,505.2 6.4 1,812.7 1,366.4 (514.9) 2,670.6 — 2,670.6 $ 4,192.5 (0.2) $ 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes See Accompanying Report of Independent Registered Publu ic Accounting Firm. 2 KEMPER CORPORATRR ION PARENT COMPANY STATEMENTS OF LOSS (Dollars in Millions) For the Year Ended December 31, 20211 20221 2023 $ $ Net Investment Income .......................................................................................................... $ 3.4 (Loss) Income from Change in Fair Value of Equity Securities ........................................... 10.0 Net Realized Investment (Losses) Gains ............................................................................... 10.6 Impairment Losses — Other Income ......................................................................................................................... — Total Revenues....................................................................................................................... 24.0 Interest Expense ..................................................................................................................... 32.0 Pension Settlement Expense .................................................................................................. — Other Operating Expenses ..................................................................................................... 5.9 Total Operating Expenses ...................................................................................................... 37.9 Loss before Income Taxes and Equity in Net Loss of Subsu idiaries ...................................... (13.9) Income Tax Benefit (Expense) .............................................................................................. (0.6) Loss before Equity in Net Loss of Subsu idiaries..................................................................... (14.5) Equity in Net Loss of Subsu idiaries......................................................................................... (109.2) Net Loss ................................................................................................................................. (123.7) Less: Net Loss attributable to Noncontrolling Interest .......................................................... — Net Loss attributable to Kemper Corporation........................................................................ $ (272.1) $ (286.6) $ (123.7) 8.6 (1.5) (11.9) (0.4) — (5.2) 56.7 70.2 6.1 133.0 (138.2) 28.4 (109.8) (162.5) (272.3) (0.2) 16.6 (14.8) 3.0 (0.2) 1.1 5.7 52.6 — 6.6 59.2 (53.5) 14.0 (39.5) (247.1) (286.6) — 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes See Accompanying Report of Independent Registered Publu ic Accounting Firm. 3 KEMPER CORPORATRR ION PARENT COMPANY STATEMENTS OF COMPREHENSIVE LOSS (Dollars in Millions) Net Loss ................................................................................................................................................. Other Comprehensive Income: $ Changes in Net Unrealized (Losses) Gains on Investment Securities: Having No Credit Losses Recognized in Consolidated Statements of Loss: For the Year Ended December 31, 20211 20221 2023 (272.3) $ (286.6) $ (123.7) Securities Held by Subsu idiaries .................................................................................................. Securities Held by Parent............................................................................................................ 235.0 (0.6) (1,535.7) (2.6) (230.4) — 1.9 (2.0) Having Credit Losses Recognized in Consolidated Statements of Loss: Securities Held by Subsu idiaries Reclassification Adjud stment for Amounts Included in Net Loss: Securities Held by Subsu idiaries .................................................................................................. Securities Held by Parent............................................................................................................ Unrecognized Postretirement Benefit Costs Arising During the Year: Subsu idiaries................................................................................................................................. Parent .......................................................................................................................................... Reclassification Adjud stment for Postretirement Benefit Costs Arising During the Year: Subsu idiaries................................................................................................................................. Parent .......................................................................................................................................... Gains on Cash Flow Hedge............................................................................................................... Change in Discount Rate on Future Life Policyholder Benefits....................................................... Other Comprehensive Income (Loss) Before Income Taxes................................................................. Income Tax (Expense) Benefit: Changes in Net Unrealized (Losses) Gains on Investment Securities: Having No Credit Losses Recognized in Consolidated Statements of Loss: (0.5) 4.5 (0.1) 0.1 (7.4) (0.3) 66.8 (0.2) (101.7) 195.6 (12.8) — 1.1 18.2 — (0.4) 5.9 1,380.7 (143.7) Securities Held by Subsu idiaries .................................................................................................. Securities Held by Parent............................................................................................................ (49.5) 0.1 322.7 0.5 Having Credit Losses Recognized in Consolidated Statements of Loss: Securities Held by Subsu idiaries .................................................................................................. 0.2 (0.4) Reclassification Adjud stment for Amounts Included in Net Loss: Securities Held by Subsu idiaries .................................................................................................. Securities Held by Parent............................................................................................................ Unrecognized Postretirement Benefit Costs Arising During the Year: Subsu idiaries................................................................................................................................. Parent .......................................................................................................................................... Reclassification Adjud stments for Amounts Included in Net Loss: Subsu idiaries................................................................................................................................. Parent .......................................................................................................................................... Changes in Gain on Cash Flow Hedges............................................................................................ Change in Discount Rate on Future Life Policyholder Benefits ...................................................... Income Tax (Expense) Benefit .............................................................................................................. Other Comprehensive Income (Loss) .................................................................................................... Total Comprehensive Loss .................................................................................................................... (1.0) 0.1 — 1.3 0.2 (14.0) (0.1) 21.2 (41.5) 154.1 (118.2) 2.7 — (0.2) (3.9) — 0.1 (1.2) (289.9) 30.4 (113.3) (399.9) Less: Total Comprehensive Loss attributable to Noncontrolling Interest ............................................. Total Comprehensive Loss attributable to Kemper Corporation........................................................... (0.2) (118.0) $ — (399.9) $ $ (43.5) (10.6) 0.6 (9.5) — 0.1 0.5 228.5 (66.3) 48.4 — 0.4 9.1 2.2 (0.1) 2.5 — — (0.1) (47.9) 14.5 (51.8) (175.5) — (175.5) 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes See Accompanying Report of Independent Registered Publu ic Accounting Firm. 4 KEMPER CORPORATRR ION PARENT COMPANY STATEMENTS OF CASH FLOWS (Dollars in Millions) Operating Activities: Net Loss............................................................................................................................. $ (272.3) $ (286.6) $ (123.7) Adjud stment Required to Reconcile Net (Loss) Income to Net Cash (Used in) Provided by Operations: r the Year Ended December 31, 20211 20221 2023 Equity in Net Loss (Income) of Subsu idiaries ............................................................... Cash Dividends from Subsu idiaries............................................................................... Net Realized Investment Losses (Gains) ..................................................................... Settlement Costs Related to Defined Benefit Pension Plan......................................... Impairment Losses ....................................................................................................... Income (Loss) from Change in Fair Value of Equity and Convertible Securities ....... Other, Net..................................................................................................................... Net Cash Provided by (Used in) Operating Activities........................................................... Investing Activities: Capia tal Contributed to Subsu idiaries................................................................................... Proceeds from Sales, Calls and Maturities of Fixed Maturities ........................................ Proceeds from the Sales or Paydowns of Investments: ..................................................... Equity Securities ............................................................................................................. Purchases of Investments: ................................................................................................. Fixed Maturities .............................................................................................................. Equity Securities ............................................................................................................. Net Purchases of Short-term Investments ......................................................................... Acquisition of Business..................................................................................................... Other.................................................................................................................................. Net Cash (Used in) Provided by Investing Activities............................................................ Financing Activities: Notes Payabla e Proceeds: Proceeds from Issuance of 3.800% Senior Notes due Februar ry 23, 2032 Issuance Fees from Issuance of 3.800% Senior Notes due Februarr Proceeds from Issuance of 5.875% Fixed-Rate Reset Junior Subor Debenturt es due 2062 Issuance Fees from Issuance of 5.875% Fixed-Rate Reset Junior Suboru Debenturt es due 2062 Proceeds from Issuance of 2.400% Senior Notes due September 30, 2030 Issuance Fees from Issuance of 2.400% Senior Notes due September 30, 2030 ry 23, 2032 dinated dinated u Repayments of Long-term Debt ........................................................................................ Proceeds from Shares Issued under Employee Stock Purchase Plan ................................ Common Stock Repurchases............................................................................................. Dividends and Dividend Equivalents Paid ........................................................................ Other.................................................................................................................................. Net Cash (Used in) Provided by Financing Activities........................................................... Net (decrease) increase in cash .............................................................................................. Cash, Beginning of Year........................................................................................................ Cash, End of Year .................................................................................................................. $ 162.5 320.8 11.9 70.2 0.4 1.5 (30.6) 264.4 247.1 25.3 (3.0) — 0.2 14.8 (48.9) (51.1) (181.5) 50.8 (537.8) 0.1 109.2 170.3 (10.6) — — (10.0) (35.3) 99.9 (36.5) 181.3 14.8 71.9 28.5 — (2.1) (112.2) — (23.2) (253.4) (40.3) (5.6) 138.9 — (3.1) (375.9) — — — — — — — 4.3 — (79.6) (0.5) (75.8) (64.8) 66.3 1.5 $ 396.3 (1.2) 145.6 (0.9) — — — 4.9 — (79.7) 0.6 465.6 38.6 27.7 66.3 $ — (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 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes See Accompanying Report of Independent Registered Publu ic Accounting Firm. 5 KEMPER CORPORATRR ION FINANCIAL INFORMATION OF KEMPER CORPORATRR ION 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 subsu idiaries are accounted for using the equity method of accounting. Equity in Net Loss of Subsu idiaries of these subsu idiaries is presented on the Statements of Operations as Equity in Net Loss of Subsu idiaries. NOTE 2. GUARANTEES ry 23, 2022, Kemper issued a notice of redemption for the entire $275.0 million aggregate principal outstanding of On Februar the 2022 Senior Notes at a redemption price equal to 100% of their principal, plus accruer d and unpaid interest on the redemption date. On March 25, 2022, Kemper completed the redemption, and the 2022 Senior Notes were repaid in full. The Company recognized a Loss from Early Extinguishment of Debt of $3.7 million in the first quarter of 2022 which is reflected in the Consolidated Statements of Loss. The Company used the proceeds received from Kemper’s 2032 Senior Notes offeff “3.800% Senior Notes Due 2032” in the Debt disclosure, Note 23 for additional information regarding the debt issuance. ring to repay the 2022 Senior Notes. See On July 1, 2022, Kemper executed an indefinite agreement with its subsu idiary, Kemper Bermuda Ltd, which requires Kemper to contribute up to $300.0 million in contributed capia tal to maintain its minimum Enhanced Capia tal Requirement (“ECR”) as required by the Bermuda Monetary Authority as a Class C insurer. As of December 31, 2023 and 2022, Kemper had contributed $40.0 million and $5.0 million, respectively, under this agreement. NOTE 3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Kemper received $385.6 million and $300.1 million in non-cash dividends from subsu idiaries in 2023 and 2022, respectively. Kemper made non-cash capia tal contributions of $336.5 million and $156.3 million to subsu idiaries in 2023 and 2022, respectively. NOTE 4. LEASES Kemper leases certain offiff ce space for its current and former corporate headquarters under non-cancelable operating leases. The following tabla e presents operating lease Right-of-Uff se (“ROU”) assets and lease liabia lities at December 31, 2023 and 2022. II DOLLARS IN MILLIONS Operating Lease Right-of-Use Assets.................................................................................. $ Operating Lease Liabilities.................................................................................................. 2023 2022 $ 7.7 23.3 12.2 24.4 emental cash flow information related to Kemper’s operating leases for the year-ended December 31, 2023 and Supplu December 31, 2022 respectively are presented follows. II DOLLARS IN MILLIONS Operating Cash Flows from Operating Leases (Fixed Payments)....................................... $ Operating Cash Flows from Operating Leases (Liabia lity Reduction) ................................. Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities.............. 2023 2022 $ 5.8 4.8 — 2.4 1.4 — 6 KEMPER CORPORATRR ION FINANCIAL INFORMATION OF KEMPER CORPORATRR ION NOTES TO FINANCIAL INFORMATION (Dollars in Millions) NOTE 4. LEASES (Continued) Significant judgments and assumptions for determining lease asset and liabia lity as December 31, 2023 and December 31, 2022 respectively are presented below. DOLLARS IN MILLIONS Weighted-average Remaining Lease Term - Operating Leases .......................................... II Weighted-average Discount Rate - Operating Leases ......................................................... 2023 2022 10.0 years 11.0 years 4.1 % 4.0 % Kemper’s leases do not provide an implicit rate. Accordingly, Kemper uses its incremental borrowing rate based on the information availabla e at the commencement date in determining the present value of its lease payments. Future minimum operating lease payments at December 31, 2023 were: LARS IN MILLIONS II 2024 ........................................................................................................................................................... $ 2025 ........................................................................................................................................................... 2026 ........................................................................................................................................................... 2027 ........................................................................................................................................................... 2028 ........................................................................................................................................................... 2028 and Thereafteff r .................................................................................................................................. Total Future Payments............................................................................................................................... $ Less Discount ............................................................................................................................................ Present Value of Minimum Lease Payments............................................................................................. $ Operating Leases 2.9 2.6 2.6 2.7 2.8 14.8 28.4 5.1 23.3 NOTE 5. DEBT 4.350% Senior Notes Due 2025 Kemper has $450.0 million aggregate principal of 4.350% senior notes due Februarr Kemper initially issued $250.0 million of the notes in Februarr ry 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 es under the indenturt e governing the 2025 Senior Notes. The 2025 Senior Notes are unsecured and may be series for all purpos redeemed in whole at any time or in part from time to time at Kemper’s option at specified redemption prices. ry 15, 2025 (the “2025 Senior Notes”). r 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 effeff ctive yield of 2.52%. The 2030 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time, at Kemper’s option, at specified redemption prices. 3.800% Senior Notes Due 2032 ry 15, 2022, Kemper offeff On Februar 2032 (the “2032 Senior Notes”). The net proceeds of issuance were $395.1 million, net of discount and transaction costs for an effeff ctive yield of 3.950%. The 2032 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time, at Kemper’s option, at specifieff d redemption prices. red and sold $400.0 million aggregate principal of 3.800% senior notes due Februarr ry 23, In anticipation of the issuance of the 2032 Senior Notes and for risk management purpos es, the Company entered into a derivative transaction to hedge the risk of changes in the debt cash flows attributable to changes in the benchmark U.S. r 7 KEMPER CORPORATRR ION FINANCIAL INFORMATION OF KEMPER CORPORATRR ION NOTES TO FINANCIAL INFORMATION (Dollars in Millions) NOTE 5. DEBT (Continued) Treasuryr interest rate during the period leading up to the debt issuance (“Treasuryr Lock”). The effeff ctive portion of the gain on the derivative instrument upon discontinuance was $5.9 million before taxes, and is reported as a component of Accumulated Other Comprehensive Loss. Beginning with the issuance of the 2032 Senior Notes described in the preceding paragraph, such gain is being amortized into earnings and reported in Interest and Other Expenses in the same periods that the hedged items affeff ct earnings. Amortization, reported in Interest and Other Expenses, was $0.6 million for the year ended December 31, 2023. The Company expects to reclassify $0.5 million of net gain on derivative instruments from AOCI to earnings for the twelve months ended December 31, 2024 as interest expense on the debt is recognized. 5.875% Fixedii -Rdd ate Reset Junior Subordinated Debentures Due 2062 dinated Debenturt es due March 15, 2062 (the “2062 Junior Debenturt es”). The net proceeds from issuance were On March 10, 2022, Kemper issued $150.0 million aggregate principal amount of 5.875% Fixed-Rate Reset Junior Suboru $144.7 million, net of discount and transaction costs. The 2062 Junior Debenturt es will bear interest from and including the date of original issue to, but excluding, March 15, 2027 (the “First Reset Date”) at the fixed rate of 5.875% per annum. The interest rate on the First Reset Date, and subsu equent Reset Dates, will be equal to the Five-Year Treasuryr Rate as of the most recent Reset Date plus 4.140% to be reset on each Reset Date. Interest is due quarterly in arrears beginning on June 15, 2022. The Company has the option to defer interest payments for one or more optional deferral periods of up to five consecutive years, provided that no optional deferral period shall extend beyond March 15, 2062, or any earlier accelerated maturity date arising from an event of default or any earlier redemption of the 2062 Junior Debenturt es. 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e e y o l p m m e e c n a r u s n I e f i i L s ’ y n a p m o C e h T 1 . t n e m g e e s e c n a r u s n I e f i i L s t i n i s t c u d o r p e c n a r u s n i y t l a u s a c . m r i F g n i t n u o c c A c i l b u u P d e r e t s i g e R t n e d n e p e d n I f o t r o p e R g n i y n a p m o c c A e e S 1 KEMPER CORPORATRR ION REINSURANCAA E 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, 2023 Life Insurance in Force......................................................... $ 19,750.8 Premiums: Life Insurance................................................................... $ Accident and Health Insurance ........................................ Property and Liability Insurance ...................................... 322.0 34.7 4,175.7 Total Premiums..................................................................... $ 4,532.4 Year Ended December 31, 2022 Life Insurance in Force1........................................................ $ 19,885.1 Premiums: Life Insurance1 ................................................................. $ Accident and Health Insurance ........................................ Property and Liability Insurance ...................................... 355.8 167.9 4,706.1 Total Premiums..................................................................... $ 5,229.8 Year Ended December 31, 2021 Life Insurance in Force1........................................................ $ 20,287.7 Premiums: Life Insurance1 ................................................................. $ Accident and Health Insurance ........................................ Property and Liability Insurance ...................................... 327.4 185.8 4,667.4 Total Premiums..................................................................... $ 5,180.6 $ $ $ $ $ $ $ $ $ 339.4 3.3 11.6 17.8 32.7 354.8 3.6 1.1 38.0 42.7 372.3 0.9 0.3 34.9 36.1 $ $ $ $ $ $ $ $ $ 129.9 $ 19,541.3 0.7 % 0.5 — 29.2 29.7 $ 319.2 23.1 4,187.1 $ 4,529.4 0.2 % — 0.7 0.7 % 137.1 $ 19,667.4 0.7 % 0.6 1.4 24.3 26.3 $ 352.8 168.2 4,692.4 $ 5,213.4 0.2 % 0.8 0.5 0.5 % 144.5 $ 20,059.9 0.7 % 0.7 4.4 29.6 34.7 $ 327.2 189.9 4,662.1 $ 5,179.2 0.2 % 2.3 0.6 0.7 % 11 AsA of Januaryr 1, 2023, the Company adopted ASU 2018-12 using the modifiei period amountstt additional infon rmation. in the financial statements have been recast to reflee ctive method applied as of the transition date of Januaryr 1, 2021. Prior ct application of the new guidance. See Note 2 to the Consolidatdd ed Financial Statements for d retrospes See Accompanying Report of Independent Registered Publu ic Accounting Firm. 1 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] Kemper Corporation Board of Directors Joseph P. Lacher, Jr. Chairman of the Board, President and Chief Executive Officer Kemper Corporation Stuart B. Parker Lead Director, Kemper Corporation Retired President and Chief Executive Officer USAA Teresa A. Canida Principal and Portfolio Manager Ceeto Capital Group, LLC George N. Cochran Retired Chairman Global Financial Institutions Group Macquarie Capital Jason N. Gorevic Chief Executive Officer Teladoc Health, Inc. Lacy M. Johnson Partner Taft Stettinius & Hollister LLP Gerald Laderman Executive Vice President, Finance United Airlines Suzet M. McKinney Principal and Director, Life Sciences Sterling Bay Alberto J. Paracchini President, Byline Bancorp, Inc. and President and CEO, Byline Bank Christopher B. Sarofim 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 Duckson 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 Matthew A. Hunton Executive Vice President President, Kemper Auto Bradley T. Camden Exectutive Vice President Chief Financial Officer Christopher W. Flint Executive Vice President President, Kemper Life Duane A. Sanders Executive Vice President Chief Claims Officer, P&C 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 2024 Annual Meeting Wednesday, May 1, 2024 8:30a.m. CT 200 East Randolph Street 70th Floor Chicago, IL 60601 Investor Relations Kemper Corporation 200 East Randolph Street Suite 3300 Chicago, IL 60601 312.661.4930 investors@kemper.com 200 East Randolph Street, Suite 3300 Chicago, IL 60601 312.661.4600 Kemper.com

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