Infinity Assurance Insurance Company — Moody's affirms Kemper's ratings (Baa3 senior), outlook to stable from positive – Yahoo Finance
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Rating Action:
Moody’s affirms Kemper’s ratings (Baa3 senior), outlook
to stable from positive
11 February 2022
New York, February 11, 2022 – Moody’s Investors Service (“Moody’s”) has affirmed the Baa3 senior
debt rating of Kemper Corporation (NYSE: KMPR, Kemper) as well as the A3 insurance financial
strength (IFS) ratings of its leading property and casualty (P&C) and life insurance subsidiaries.
Moody’s has changed the rating outlook on Kemper and its subsidiaries to stable from positive
based on the group’s weak operating performance in its nonstandard auto insurance business.
RATINGS RATIONALE
According to Moody’s, the ratings affirmation and stable outlook reflect Kemper’s diversified
revenues and earnings from its nonstandard personal auto insurance and life businesses, its
profitable home service insurance business, solid risk-adjusted subsidiary capitalization, and high-
quality fixed income portfolio. Credit challenges include the group’s limited scale relative to larger
competitors, weak profitability in its personal auto business given higher auto repair costs, higher
used vehicle prices and increasing miles driven as the economy reopens. Other challenges include
the group’s exposure to natural catastrophes in its homeowners business as well as low growth
opportunities in the home service life insurance business.
For 2021, Kemper reported a net loss of $120.5 million compared to net income of $409.9 million
in 2020, primarily driven by poor performance in its nonstandard auto insurance business. The
Specialty P&C segment, which primarily consists of nonstandard personal auto business, produced
progressively higher underlying combined ratios over the course of 2021, reaching 119.4% in the
fourth quarter. Kemper Specialty P&C’s results were driven by higher auto parts and labor repair
costs, by higher used vehicle prices, and by the reopening of the economy following a suspension
of rate increases during the pandemic. The company began filing for rate increases in Q3 2021 and
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expects to continue to raise rates in 2022 to help offset rising loss costs.
Moody’s expects Kemper’s earnings to improve gradually as it will take time for rate increases to be
approved by regulators, for policies to be renewed at higher rates, and for higher premium rates to
be earned over time. Kemper’s financial leverage remains moderate, with strong long-term earnings
coverage. The holding company maintains good liquidity with cash and investments of $233.9
million, $191.2 million of dividend capacity from insurance subsidiaries without regulatory approval,
and $400 million available under the company’s revolving credit facility as of year-end 2021.
Kemper’s senior debt is three notches below the financial strength of its lead P&C and life and health
insurance operations, consistent with Moody’s typical notching practices for US holding company
structures. Although the debt rating is supported by diversified earnings, Kemper’s revenue and
capital base is heavily weighted toward the P&C group, which represented almost 80% of combined
statutory surplus as of September 30, 2021.
Kemper P&C
The rating affirmation and stable outlook of Kemper P&C’s ratings reflect its leading market presence
in the nonstandard personal auto insurance market, solid risk adjusted capitalization and a high-
quality investment portfolio. The P&C operations have generated significant growth in nonstandard
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auto insurance both organically and through acquisitions with scale advantages including a low
expense base. In the past several years, Kemper P&C has focused on increasing its technological
resources to further enhance ratemaking, underwriting and claims management capabilities.
These strengths are mitigated by the group’s operating losses and elevated combined ratios
driven by higher loss cost trends. Other challenges include volatility from catastrophe losses in
its homeowners book. Kemper Specialty P&C generates 57% of its nonstandard auto business
in California, which leads to potential regulatory and legal risks. Moody’s expects the company’s
profitability to gradually improve as the company raises rates and takes additional underwriting
actions.
Kemper Life and Health
The rating affirmation and stable outlook of the group’s lead life and health insurance company,
United Insurance Co. of America (United, A3 IFS), is based upon the group’s strong presence and
consistent profitability in the home service insurance business and its well-established career agent
distribution force. These strengths are offset by the company’s modest market position, franchise,
and brand in the overall life insurance market as well as its limited growth opportunities in the
declining home service insurance business.
Moody’s believes the company’s implementation of new sales technology and improved agency
practices should result in sales growth and greater profitability. While pressure on the life and health
business remains from the coronavirus pandemic, including elevated mortality, recent company
actions are starting to lead to positive business developments.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Kemper Corporation
Factors that could lead to a rating upgrade for Kemper Corporation include: an upgrade of the
financial strength ratings of the P&C and/or Life and Health companies; strong P&C operating
performance with combined ratios in the mid-90s or lower; adjusted financial leverage below 25%
and interest coverage 6x or greater. Factors that could lead to a rating downgrade for Kemper
Corporation include: a downgrade of the financial strength ratings of the P&C and/or Life and Health
companies; sustained combined ratios greater than 105%; or, adjusted financial leverage above 35%
and interest coverage below 4x.
Kemper P&C
Factors that could lead to an upgrade of the P&C ratings include: strong operating performance
with combined ratios consistently in the mid-90s or lower; gross underwriting leverage below 3.5x;
adjusted financial leverage below 25% and interest coverage 6x or greater. Factors that could lead
to a downgrade of the P&C ratings include: sustained combined ratios greater than 105%; gross
underwriting leverage of 5x or higher; reduction in P&C capital by more than 10% over a rolling
twelve-month period; or, adjusted financial leverage above 35% and interest coverage below 4x.
Kemper Life and Health
Factors that could lead to an upgrade of United’s ratings include: positive revenue growth in the
home service business; profitable life earned premiums outside of home service growing above
10%; adjusted financial leverage below 25% and interest coverage 6x or greater. Factors that could
lead to a downgrade of United’s ratings include: NAIC company action level RBC ratio falling below
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275%; statutory return on capital falling below 8%; adjusted financial leverage above 35% and
interest coverage below 4x.
The following ratings have been affirmed:
Kemper Corporation – senior unsecured debt at Baa3, provisional senior unsecured debt shelf at
(P)Baa3, provisional subordinated debt shelf at (P)Ba1; provisional junior subordinated debt shelf at
(P)Ba1; provisional preferred shelf at (P)Ba2; provisional preferred shelf non-cumulative at (P)Ba2;
issuer rating at Baa3;
Infinity Property and Casualty Corporation – senior unsecured debt at Baa3;
Trinity Universal Insurance Company – insurance financial strength at A3;
Infinity Insurance Company – insurance financial strength at A3;
Infinity Auto Insurance Company – insurance financial strength at A3;
Infinity Assurance Insurance Company – insurance financial strength at A3;
Infinity Casualty Insurance Company – insurance financial strength at A3;
Infinity Indemnity Insurance Company – insurance financial strength at A3;
Infinity Preferred Insurance Company – insurance financial strength at A3;
Infinity Safeguard Insurance Company – insurance financial strength at A3;
Infinity Security Insurance Company – insurance financial strength at A3;
Infinity Select Insurance Company – insurance financial strength at A3;
Infinity Standard Insurance Company – insurance financial strength at A3;
United Insurance Co. of America – insurance financial strength at A3.
The rating outlook for these companies was changed to stable from positive.
The principal methodologies used in rating Kemper Corporation were Property and Casualty
Insurers Methodology published in September 2021 available at
https://www.moodys.com/
researchdocumentcontentpage.aspx?docid=PBC_1254163
and Life Insurers Methodology published
in September 2021 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBC_1254133.
The principal methodology used in rating Trinity Universal Insurance
Company, Infinity Property and Casualty Corporation, Infinity Insurance Company, Infinity Auto
Insurance Company, Infinity Assurance Insurance Company, Infinity Casualty Insurance Company,
Infinity Indemnity Insurance Company, Infinity Preferred Insurance Company, Infinity Safeguard
Insurance Company, Infinity Security Insurance Company, Infinity Select Insurance Company, and
Infinity Standard Insurance Company was Property and Casualty Insurers Methodology published
in September 2021 available at
https://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBC_1254163.
The principal methodology used in rating United Insurance Co. of
America was Life Insurers Methodology published in September 2021 and available at
https://
www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1254133.
Alternatively, please
see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
Kemper Corporation, based in Chicago, Illinois, is a publicly-traded, diversified company with
subsidiaries engaged in Property & Casualty Insurance and Life and Health Insurance. For 2021,
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Kemper reported total revenue of $5.8 billion and a net loss of $120.5 million. Shareholders’ equity
as of December 31, 2021 was about $4.0 billion.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see
the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure
form. Moody’s Rating Symbols and Definitions can be found at:
https://www.moodys.com/
researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement
provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or
note of the same series, category/class of debt, security or pursuant to a program for which the
ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices.
For ratings issued on a support provider, this announcement provides certain regulatory disclosures
in relation to the credit rating action on the support provider and in relation to each particular credit
rating action for securities that derive their credit ratings from the support provider’s credit rating.
For provisional ratings, this announcement provides certain regulatory disclosures in relation to the
provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent
to the final issuance of the debt, in each case where the transaction structure and terms have not
changed prior to the assignment of the definitive rating in a manner that would have affected the
rating. For further information please see the ratings tab on the issuer/entity page for the respective
issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies)
of this credit rating action, and whose ratings may change as a result of this credit rating action, the
associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach
exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated
entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no
amendment resulting from that disclosure.
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Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the
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our credit analysis can be found at
http://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s
affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No
1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the
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The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s
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Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK.
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Further information on the UK endorsement status and on the Moody’s office that issued the credit
rating is available on www.moodys.com.
The below contact information is provided for information purposes only. Please see the ratings tab
of the issuer page at www.moodys.com, for each of the ratings covered, Moody’s disclosures on the
lead rating analyst and the Moody’s legal entity that has issued the ratings.
The person who approved Kemper Corporation, Infinity Property and Casualty Corporation, Trinity
Universal Insurance Company, Infinity Insurance Company, Infinity Auto Insurance Company, Infinity
Assurance Insurance Company, Infinity Casualty Insurance Company, Infinity Indemnity Insurance
Company, Infinity Preferred Insurance Company, Infinity Safeguard Insurance Company, Infinity
Security Insurance Company, Infinity Select Insurance Company, and Infinity Standard Insurance
Company’s credit ratings is Sarah Hibler, Associate Managing Director, Financial Institutions Group,
JOURNALISTS: 1 212 553 0376 , Client Service: 1 212 553 1653 . The person who approved United
Insurance Co. of America credit ratings is Scott Robinson, CFA, Associate Managing Director,
Financial Institutions Group, JOURNALISTS: 1 212 553 0376 , Client Service: 1 212 553 1653 .
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the
Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory
disclosures for each credit rating.
Jasper Cooper, CFA
VP-Sr Credit Officer
Financial Institutions Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Sarah Hibler
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
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