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 also expect the company to remain the market leader in non-standard auto in its core states (Calif., Texas, and Fla.). We could lower the ratings over the next 12-24 months if Kemper's capital adequacy falls below 'AA' per our risk-based capital model, earnings and underwriting deteriorate to substantially less than our base-case assumptions, or earnings become less diversified. We could also lower the ratings if the company's leading market position in non-standard auto erodes or fixed-interest coverage comes in consistently below 4x. While we do not expect to raise the ratings in the next 12-24 months, we could

...We assume low single-digit returns on life and health sales, attributed to improved sales and customer retention. We also lowered our expectations on Kemper's P/C business operating margins, reflecting the impact of higher cost inflation coupled with increased frequency and severity. We believe the company prioritizing a return to target margins will lead to gradual improvement in operating results following marginal performance in 2021. The company's pricing action, while controlling growth, should help alleviate certain challenges amid inflationary pressure. We believe Kemper Home Services Corp., Kemper's life and health segment, will generate low single-digit returns from its small but profitable niche home services market. We believe Kemper's conservative capital structure and prudent catastrophe management strategy should provide adequate capital headroom to absorb insured losses related to weather and non-weather activities. However, the company's significant reliance on non-standard...

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