AM Best Revises Outlooks to Negative for Kemper Corporation, Its Affiliates and Subsidiaries
February 02 2022 - 7:13PM
Business Wire
AM Best has revised the outlooks to negative from stable
and affirmed the Financial Strength Rating (FSR) of A (Excellent)
and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a”
(Excellent) of the property/casualty subsidiaries and affiliated
insurance companies of Kemper Corporation (Kemper Corp.) [NYSE:
KMPR], collectively referred to as Kemper Property &
Casualty Group (Kemper P&C). AM Best also has revised the
outlooks to negative from stable and affirmed the FSR of A
(Excellent) and the Long-Term ICRs of “a” (Excellent) of Kemper
Corp.’s life/health subsidiaries, collectively referred to as
Kemper Life & Health Group (Kemper L&H) (Chicago, IL).
Concurrently, AM Best has revised the outlooks to negative from
stable and affirmed the Long-Term ICR and the Long-Term Issue
Credit Ratings (Long-Term IR) of “bbb” (Good) and indicative
Long-Term IRs of Kemper Corp., the ultimate parent, headquartered
in Chicago, IL. AM Best also has revised the outlooks to negative
from stable and affirmed the Long-Term ICR and Long-Term IR of
“bbb” (Good) of Infinity Property and Casualty Corporation
(Infinity) (headquartered in Birmingham, AL). See below for a
detailed listing of all companies and ratings.
The ratings of Kemper P&C reflect its balance sheet
strength, which AM Best categorizes very strong, as well as its
adequate operating performance, neutral business profile and
appropriate enterprise risk management (ERM). The ratings of Kemper
L&H reflect its balance sheet strength, which AM Best assesses
as strongest, as well as its adequate operating performance,
neutral business profile and appropriate ERM.
With respect to the parent company, AM Best notes that Kemper
Corp. continues to benefit from a financial leverage profile that
remains within AM Best’s guidelines for the current rating levels,
as well as a favorable holding company liquidity profile.
Additional financial flexibility through access to debt and equity
capital markets, despite reduced dividend capacity from the
subsidiary operations as a result of operating losses and lower
statutory capitalization at year-end 2021, is another positive
rating factor.
The negative rating outlooks for Kemper P&C—the lead
rating unit of the group—and for Kemper Corp., as well as
for Infinity, whose debt is guaranteed by Kemper Corp. and matures
in September 2022, primarily consider the significant earnings
deterioration of Kemper P&C and for Kemper Corp. overall in
2021. This earnings deterioration resulted in reduced capital
levels at the operating companies and holding company, and the
likelihood of continued earnings weakness and the potential for
further capital erosion in 2022 remains a concern for AM Best.
Underlying the significant deterioration in underwriting
performance was a sharp rise in claims severity in the automobile
line of business, which accounts for approximately 95% of Kemper
P&C’s premium volume, largely reflecting significant supply
chain issues, labor shortages and inflationary pressures. The
automobile line of business also experienced higher claim costs, as
well as a higher claim frequency, particularly in the latter half
of 2021. Kemper L&H reported positive net income of $28.2
million in 2021, which was significantly down from $60.0 million in
2020, primarily reflecting higher pandemic-related life insurance
mortality.
The negative outlooks for Kemper Corp. follows that of Kemper
P&C, the lead rating unit.
The negative outlooks for Kemper L&H primarily reflects that
operation’s significantly smaller scale within the organization,
and AM Best’s view that its credit profile is therefore a function
of its intrinsic strength and that of its P&C insurance
affiliate and holding company.
A return to strengthened profitability and improved capital
strength for Kemper P&C and Kemper Corp. could lead to an
outlook revision back to stable; conversely, sustained earnings
weakness or capital erosion at Kemper P&C and Kemper Corp.
could lead to rating downgrades.
The FSR of A (Excellent) and the Long-Term ICRs of “a”
(Excellent) have been affirmed with the outlooks revised to
negative from stable for the members of the Kemper Property &
Casualty Group:
- Trinity Universal Insurance Company
- Alpha Property & Casualty Insurance Company
- Capitol County Mutual Fire Insurance Company
- Charter Indemnity Company
- Financial Indemnity Company
- Infinity Insurance Company
- Infinity Assurance Insurance Company
- Infinity Auto 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
- Infinity Standard Insurance Company
- Infinity County Mutual Insurance Company
- Kemper Independence Insurance Company
- Merastar Insurance Company
- Mutual Savings Fire Insurance Company
- Kemper Financial Indemnity Company
- Old Reliable Casualty Company
- Response Insurance Company
- Response Worldwide Direct Auto Insurance Company
- Response Worldwide Insurance Company
- Union National Fire Insurance Company
- United Casualty Insurance Company of America
- Unitrin Advantage Insurance Company
- Unitrin Auto and Home Insurance Company
- Unitrin County Mutual Insurance Company
- Unitrin Direct Insurance Company
- Unitrin Direct Property & Casualty Company
- Unitrin Preferred Insurance Company
- Unitrin Safeguard Insurance Company
- Valley Property & Casualty Insurance Company
- Warner Insurance Company
The FSR of A (Excellent) and the Long-Term ICRs of “a”
(Excellent) have been affirmed with the outlooks revised to
negative from stable for the members of Kemper Life & Health
Group:
- United Insurance Company of America
- Mutual Savings Life Insurance Company
- The Reliable Life Insurance Company
- Union National Life Insurance Company
- Reserve National Insurance Company
The following Long-Term IR has been affirmed, with the outlooks
revised to negative from stable:
Kemper Corporation— -- “bbb” (Good) on $450 million 4.35% senior
unsecured notes, due 2025 -- “bbb” (Good) on $400 million 2.4%
senior unsecured notes, due 2030
The following indicative Long-Term IRs have been affirmed with
the outlooks revised to negative from stable for the shelf
registration:
Kemper Corporation— -- “bbb” (Good) on senior unsecured debt --
“bbb-” (Good) on subordinated debt -- “bb+” (Fair) on preferred
stock
The following Long-Term IR has been affirmed, with the outlook
revised to negative from stable:
Infinity Property and Casualty Corporation— -- “bbb” (Good) on
$275 million 5% senior unsecured notes, due September 2022
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Guide to Best's
Credit Ratings. For information on the proper use of Best’s Credit
Ratings, Best’s Preliminary Credit Assessments and AM Best press
releases, please view Guide to Proper Use of Best’s Ratings &
Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2022 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20220202006031/en/
Alan Murray Senior Financial Analyst +1 908 439 2200,
ext. 5327 alan.murray@ambest.com Michael J. Lagomarsino,
CFA, FRM Senior Director +1 908 439 2200, ext.
5810 michael.lagomarsino@ambest.com Christopher Sharkey
Manager, Public Relations +1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com Jim Peavy Director,
Communications +1 908 439 2200, ext. 5644 james.peavy@ambest.com
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