Kemper Corp.

The stable outlook on Kemper reflects S&P Global Ratings' expectation that the group will maintain very strong capital adequacy according to our calculations and will continue to build upon its improved underwriting performance in P/C operations while maintaining stable earnings from its life business. We expect Kemper's financial leverage to remain between 20% and 25% with generally accepted accounting principles fixed-charge coverage above 10x. We may lower the ratings in the next 12 to 24 months if the company's underwriting performance deteriorates materially below our base-case assumptions or relative to peers', if capital deteriorates below our very strong adequacy levels for a sustained period, if financial leverage approaches 35%, or fixed-charge coverage drops below 4x. Further, we could take negative

...Kemper's improved P/C performance was strengthened by its integration of Infinity. Over the past few years, Kemper has been taking underwriting actions to improve its P/C operating performance. These improvements have been accelerated based on its integration of Infinity, which has historically been a strong performer in the nonstandard business. Kemper's reduced catastrophe exposure should reduce earnings volatility. Kemper's higher allocation to auto liability, as well as enhancements to its reinsurance program, have reduced the impact that losses stemming from catastrophes will have on P/C operating performance compared with what they've been historically. This, coupled with stable performance from Kemper's life operations, significantly reduces the volatility of earnings. Kemper has high geographical and product concentrations. Kemper's new P/C risk profile has led to large product risk in nonstandard auto, which faces long-term headwinds related to technological advances as well as...

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