Attached files
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| 8-K - FORM 8-K - KEMPER Corp | d8k.htm |
 1
Exhibit 99.1 |
 Donald G. Southwell: Chairman, President
& Chief Executive Officer
Dennis Vigneau: Senior Vice President &
Chief Financial Officer
Insurance Industry Conference
February 7, 2011
New York, NY |
 2
Housekeeping Statements
Safe Harbor Statement:
This presentation may contain or incorporate by reference information that includes
or is based on forward-looking statements within the meaning
of
Section
27A
of
the
Securities
Act
of
1933
and
Section
21E
of
the
Securities
Exchange
Act
of
1934.
Forward-looking
statements give expectations or forecasts of future events. These statements can
be indentified by the fact that they do not relate strictly
to
historical
or
current
facts.
They
use
words
such
as
“believe(s),”
“goal(s),”
“target(s),”
“estimate(s),”
“anticipate(s),”
“forecast(s),”
“project(s),”
“plan(s),”
“intend(s),”
“expect(s),”
“might,”
“may”
and other words and terms of similar meaning in
connection with a discussion of future operating financial performance or
financial condition. Forward-looking statements, in particular, include
statements relating to future actions, prospective services or products, future performance or results of current
and anticipated services or products, sales efforts, expenses, the outcome of
contingencies such as legal proceedings, trends in operations and financial
results. Any or all forward-looking statements may turn out to be wrong,
and, accordingly, readers are cautioned not to place undue reliance on such
statements, which speak only as of the date of this presentation. These statements are based on current expectations and
the
current
economic
environment.
They
involve
a
number
of
risks
and
uncertainties
that
are
difficult
to
predict.
These
statements
are not guarantees of future performance; actual results could differ materially
from those expressed or implied in the forward- looking statements.
Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and
uncertainties. No assurances can be given that the results contemplated in
any forward-looking statements will be achieved or will be achieved in
any particular timetable. The Company assumes no obligation to publicly correct or update any forward-looking
statements as a result of events or developments subsequent to the date of this
presentation. The reader is advised, however, to consult any further
disclosures Unitrin makes on related subjects in its filings with the SEC.
Kemper®:
Kemper®
is a registered service mark of Unitrin, Inc.
Presentation Note:
Unless
otherwise
noted,
numbers
presented
are
as
of
December
31,
2010
and
dollars
are
in
millions.
A reconciliation of a Non-GAAP Measure is provided at the end of this
presentation. |
 3
Unitrin Highlights
A diversified P&C and Life business with a National footprint
20
th
largest
personal
lines
writer
and
17
th
largest
auto
insurer
in
the
United
States
(1)
Strong regional presence providing basic protection product
Multi-channel distribution network
History of opportunistic acquisitions and successful integration
Conservative balance sheet with strong holding company liquidity
$8.4
billion
assets,
$2.1
billion
shareholders’
equity,
22.4%
basic
debt
to
capital
ratio
94% of fixed maturity investment portfolio rated investment grade
Experienced management team with long-term association with the Company
|
 4
Multi-line
insurance
holding
company
incorporated
in
1990
and
based
in
Chicago,
IL
(Ticker:
UTR)
Operating companies have been conducting business for more than 80 years
Independently managed businesses, leveraging key common platforms
Over 6 million policyholders served by 7,000 associates
Company Overview
Kemper
Unitrin
Specialty
(Non-Standard)
Unitrin Direct
Property & Casualty Insurance
$900 surplus
(est.)
Career Agency
Fireside Bank
(In Run-off)
Life & Health Insurance
$405 surplus
(est.)
Reserve
National
Earned Premiums
Policies in Force
$888
$475
$282
$514
$130
721K
342K
175K
5,000K
80K |
 $397
$137
$431
$162
$819
$299
Life 17%
Other 6%
Homeowners
13%
A&H 7%
Commercial
Auto 2%
$44
Earned Premiums
by Line of Business
Earned Premiums $2,289
Standard & Preferred
Personal Auto 36%
Non-Standard
Personal Auto 19%
Total
Auto
$1,250
55%
5
Total Revenues $2,743
Personal |
 History of Successful
Transactions
Multiple acquisitions
since spin-off
Launched Unitrin Direct
as a start-up
6
Disciplined capital management to
create shareholder value
Tax-free spin-off of Curtiss Wright
Structured tax efficient sale of Litton to
Northrop Grumman
Exited several non-core businesses (e.g.
Fireside, Pyramid Life and Unitrin
Business Insurance |
 Business Lines |
 8
Unitrin’s
Property & Casualty Insurance Group |
 Personal
Lines Insurance
Lines Insurance
Headquartered in Jacksonville, Florida
Personal auto (61% sales) & homeowners/other (39% sales)
2,600 independent agents in 38 states
Lead product is Package Plus
Net Written Premium:
$872 million
Top 4 Premium States: NY, CA, NC & TX
9 |
 Competitive
Advantages
Advantages
Strong brand name recognized by agents and target
market
Package policies specifically designed for target market
Proprietary pricing engine
Multi-variant capabilities
Leveraged across Unitrin
Automation and service built for agency convenience
Claims handling focused on high quality customer
service, supported by a shared services group
10 |
 Headquartered in Dallas, Texas
Non Standard Auto (NSA) -
Personal and Commercial
8,000 independent agents in 21 states
Target market includes insureds not eligible for Preferred
and/or Standard Auto market
Business model focused on automation and agent
convenience
Net Written Premium: $457 million
Top 2 Premium States: CA & TX
Non Standard Auto Insurance
11 |
 Competitive Advantages
Recognized carrier in the NSA market
for over 60 years
Strong regional presence expandable
to more states
Point of sale systems designed for
ease of placement
12
Proprietary pricing engine leveraged across Unitrin
Claims handling designed for the unique challenges of
NSA, supported by a shared claims organization |
 Headquartered in Chicago, Illinois
Built through several key acquisitions
Offer direct homeowners line
Business model calls for long term
growth through utilization of direct to
consumer channels
Direct to Consumer
13
Growth is deferred until profitability is achieved
In 2010 rolled out a new product; an easy-to-use website and
Launched
iMingle
TM
,
a
social
networking
insurance
platform |
 Experienced foothold in the direct marketplace
Complete on-line life cycle capabilities for ease of doing
business
Multi-channel direct distribution targeting standard &
preferred customers
Customizable product offering
Integrated customer experience
Flexible payment options
Leveraging claims and other back office infrastructure
Building Competitive
Advantages
14 |
 Life & Health Insurance Group
Career Agency Companies |
 16
Life and Health Insurance Business
3,800 associates and career agents
Targets modest income consumers
Basic protection for individuals and families
Leading product is ordinary life insurance,
including permanent and term insurance
No exposure to variable annuities
Operates in 25 states
Career Agency Companies
275 exclusive independent agents and 150
home office employees, targeting
underserved rural markets
Key products include limited benefit hospital
expense and surgical benefit plan, Medicare
Supplement and other supplemental A&H
insurance |
 17
Life and Health Insurance Business
Career
Agency
Competitive
Advantages
Leader in moderate to lower income
segment
Significant scale
Business not sensitive to market interest
rates or stock market volatility
Products
are
simple
–
high
persistency
with stable, predictable cash flows
Over 5 million policyholders
Life
Property
Total Earned Premiums = $644 million
Accident &
Health
Earned Premiums by Product
Predominately a career agency-driven business with modest amounts
of A&H business through Reserve National
25%
13%
62% |
 Reserves By Product Line
Career Agency Life
Whole Life
$2,666
Term Life
$225
A&H
$54 2%
Total $ 3,064
(Dollars in Millions)
Interest Sensitive Life
$119
18
87%
4%
7% |
 Financial Discussion |
 20
Financial Trends
Earned Premiums
Income from Continuing Operations
1
2
3
4
5
Stable earned premiums over the
past several years
Income from continuing operations
has rebounded from low in 2008
-
Portfolio losses
-
Catastrophe losses
Post 2008 Catastrophe exposure
significantly reduced in both P&C
and Career Agency businesses
2006
2007
2008
2009
2010
L&H
P&C
$2,291
$2,287
$2,377
$2,456
$2,289
Fireside
Core
Operations
2006
2007
2008
2009
2010
$268
$178
$(38)
$162
$184
$242
$217
$(16)
$167
$169 |
 21
P&C Insurance Financial Results
Earned Premiums
Underlying Combined Ratios*
$945
$926
$931
$932
$888
2006
2007
2008
2009
2010
Kemper
$444
$449
$494
$528
$475
2006
2007
2008
2009
2010
Unitrin Specialty
$226
$258
$291
$346
$282
2006
2007
2008
2009
2010
Unitrin Direct
2006
2007
2008
2009
2010
Kemper
93.7%
96.7%
96.7%
93.6%
96.9%
2006
2007
2008
2009
2010
Unitrin Specialty
97.9%
98.9%
100.3%
98.7%
99.8%
2006
2007
2008
2009
2010
Unitrin Direct
106.1%
111.9%
119.8%
111.9%
117.3%
Cats \
Loss Development:
2.4%
1.6%
(4.6%)
1.4%
(5.2%)
1.7%
3.3%
0.5%
0.7%
(1.4%)
(2.5%)
(2.3%)
0.0%
2.6%
1.8%
GAAP Combined Ratios:
91.3%
95.3%
101.3%
95.3%
98.8%
96.2%
96.5%
99.8%
98.2%
100.1%
108.6%
119.6%
119.8%
109.3%
110.1%
*Underlying
Combined Ratio is a Non-GAAP measure discussed at the end of
this presentation. |
 22
Life and Health Insurance Financial Results
$102
$97
$52
$112
$95
2006
2007
2008
2009
2010
$654
$651
$676
$661
$644
2006
2007
2008
2009
2010
Earned Premiums
Segment Net Income |
 23
Auto only subprime lender
Run-off plan commenced March 2009
All deposits mature by Q3 2012
No new deposits since March 2009
No deposit rollovers since October 2009
Strong
balance
sheet
–
Tier
One
Capital
37.3%
(2)
$250 million expected to be returned to Unitrin
Run-off Asset: Fireside Bank
Loans 30 or More Days Delinquent
$19
$103
91%
44%
3/31/2009
12/31/2010
Loans 30 or more days
delinquent
Loans 30 or more days delinquent
as % of reserves for loan losses
Net Automobile Loan Receivables Outstanding
$1,125
$381
3/31/2009
12/31/2010
Tier One Capital
(2)
16%
37%
3/31/2009
12/31/2010 |
 Investment Portfolio |
 25
Investment Portfolio Overview
Total return investment strategy with
an emphasis on yield
No direct exposure to:
Enhanced Money Market Funds
Commercial Paper Investments
Sovereign Governments
Securities Lending
Credit or Other Derivatives
Less than $10 million of exposure to
non-governmental RMBS, CMBS, and
CDO
Centralized investment function
Equities
$550
Real
Estate
$250
Other (3)
$245
LP
LLC
$328
Short
Term
$403
Fixed Maturities
$4,475
72%
6%
9%
5%
4%
4%
$6,251 million |
 26
Fixed Income Portfolio
States & Political
Subs
$1,793
U.S. Gov't &
Agencies
$537
Corporate
$2,049
40%
$4,475 million
Fixed maturity portfolio comprised primarily of high-grade municipal,
corporate and agency bonds
95% investment grade
40% of fixed maturity portfolio is debt related to states, municipal entities and
political subdivisions
No state represents more than 4% of total fixed maturity investments
46%
State
G.O.’s
Revenue
Bonds
Local
Government
G. O.’s
24%
Pre-Refunded
20%
10%
12%
48% |
 Technology
$12
Industrial
$158
Other
$37
Consumer,
Non-cyclical
$47
Energy
$33
Financial
$109
27
LP’s & LLC’s / Equities
Diversified
across
30+
Funds
Performed Well During Financial Crisis
Secondary
Funds
$68
Private Equity /
LBO Funds
$31
Other Funds
$8
Mezzanine /
Senior Debt
$74
Distressed Debt
$206
51%
18%
17%
8%
2%
$403 million
(4)
4%
Equity
Co-Investments
$16
40%
28%
8%
12%
9%
3%
LP & LLC’s
Equities
Fair
value
%
(2)
Intermec
138
$
2.2%
Barclays Bank
22
0.3%
Deutsche Bank
20
0.3%
HSBC Holdings
16
0.3%
Bank of America
16
0.3%
Total
211
$
3.4%
Top 5 Holdings
$396 million
(5) |
 Capital and Liquidity |
 Sound Balance Sheet
Strong liquidity at the holding company
Simple
capital
structure
–
no
converts
or
hybrids
Low debt to total capitalization ratio of 22
High quality investment portfolio
Highly rated reinsurance partners
Shareholders’
equity
of
$2.1B
/
$2.0B
ex.
AOCI
(6)
29 |
 30
Strong Liquidity Profile
Operating Company Dividend Capacity
$123
$147
$170
2009
2010
2011E
$1,757
$1,859
$1,956
$1,649
$1,918
$2,113
12/31/2008
12/31/2009
12/31/2010
Excl. AOCI
Incl. AOCI
Shareholders’
Equity Trend
(6)
Growing Statutory Earnings
and Dividend Capacity
Earnings Per Share:
2008
2009
2010
(6)
$(0.47)
$2.64
$2.98 |
 Investor Considerations
Personal lines soft market is less severe
Positioned well for changing consumer purchasing
preferences
Fireside Bank run-off on track to free-up $250 million of
capital
Quarterly dividend increased from $0.22 to $0.24 per
share
Announced $300 million share repurchase program
31
DELIVERING SHAREHOLDER VALUE |
 |
 Non-GAAP Measure
is a non-GAAP measure, which is computed as the difference between
the GAAP combined ratio, the effect of catastrophes (excluding development of prior year
catastrophes) on the combined ratio and the effect of prior year reserve development (including
development on prior year catastrophes) on the combined ratio. The most directly comparable
GAAP measure is the combined ratio. We believe the underlying combined ratio is useful to
investors and is used by management to reveal the trends in our Property and Casualty business
that may be obscured by catastrophe losses and prior year reserve development. These
catastrophe losses cause our loss trends to vary significantly between periods as a result of their
incidence of occurrence and magnitude, and can have a significant impact on the combined
ratio. Prior year reserve developments are caused by unexpected loss development on historical
reserves. We believe it is useful for investors to evaluate these components separately and in
the aggregate when reviewing our underwriting performance. The underlying combined ratio
should not be considered a substitute for the combined ratio and does not reflect the overall
underwriting profitability of our business.
As shown on the bottom of Slide 21, to reconcile the Underlying Combined Ratios to the GAAP
combined ratios: if the Cats \ Loss Development ratio is positive, subtract it from the Underlying
Combined Ratio; if the Cats \ Loss Development ratio is negative (in parentheses), add it to
the Underlying Combined Ratio.
Underlying Combined Ratio |
 Footnotes
(1)
Source: SNL Financial based on 2009 Direct Premium Written
(2)
Ratio of Tier 1 Capital to total average assets
(3)
Primarily loans to policyholders
(4)
Includes $75 million of LP & LLC’s accounted under the Fair Value Method
and reported as Equity Securities.
(5)
Excludes $75 million of LP & LLC’s accounted under the Fair Value Method
and reported
as
Equity
Securities
and
$79
million
of
exchange
traded
funds;
includes
$125 million of Preferred Stock
(6)
AOCI
represents
Accumulated
Other
Comprehensive
Income
reported
in
the
company’s 10K filings. |