Kemper Corp.

The stable outlook reflects our opinion that Kemper will maintain stable earnings and capital adequacy in line with our base-case assumptions. We don't expect any near-term material change in Kemper's overall risk profile resulting from an acquisition or otherwise. We could lower the ratings over the next 12-24 months if Kemper's capital adequacy falls below the 'AA' per our risk-based capital, earnings and underwriting deteriorate to substantially less than our base-case assumptions, or earnings become less diversified. We could also lower the ratings if its leading market position in non-standard auto erode or fixed-interest coverage comes in consistently below 4x. While we do not expect to make any upgrades in the next 12-24 months, we could raise the ratings if

...We expect Kemper to generate stable operating margins on the P/C business and low single-digit return on assets on life and health sales. We believe Kemper Corp., together with the American Access Casualty acquisition, will increase focus on the urban Hispanic market, supporting the leading position of its non-standard auto in core states (CA, TX, and FL). Kemper Home Services Corporation, Kemper's life and health segment, continues to generate low single-digit return on assets from its small but profitable niche home services market. Kemper's catastrophe management strategy should dampen insured losses related to weather-related activities. However, the company's significant reliance on non-standard auto and its business largely written in three states (CA, TX, and FL) could leave the company vulnerable to idiosyncratic disruption inherent to product and geographical concentrations....

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