KEMPER Corp - FORM 8-K - EX-99.2 - FIRST QUARTER 2012 INVESTOR SUPPLEMENT

Attached files

file	filename
8-K - FORM 8-K - KEMPER Corp	kmpr20120331128-kreleasean.htm
EX-99.1 - REGISTRANT'S PRESS RELEASE DATED MAY 7, 2012 - KEMPER Corp	kmpr2012033112ex991release.htm

Exhibit 99.2

Investor Supplement

First Quarter 2012

The financial statements and financial exhibits included herein are unaudited. These financial statements and exhibits should be read in conjunction with the Company’s periodic reports on Form 10-K, Form 10-Q and Form 8-K. The results of operations for interim periods should not be considered indicative of results to be expected for the full year.

Non-GAAP Financial Measures

This document contains non-GAAP financial measures to analyze the Company’s operating performance for the periods presented. Because the Company’s calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company’s non-GAAP financial measures to those of other companies. For detailed disclosures on non-GAAP financial measures please refer to the “Definitions of Non-GAAP Financial Measures” on Page 24.

Kemper Corporation

Investor Supplement

First Quarter 2012

Table of Contents




	Page
Consolidated Financial Highlights	3
Consolidated Statements of Operations	4
Consolidated Balance Sheets	5
Capital Metrics	6
Debt Outstanding and Ratings	7
Segment Revenues	8
Segment Operating Results	9 - 10
Combined Property and Casualty Operations	11
Kemper Preferred Segment	12 - 13
Kemper Specialty Segment	14 - 15
Kemper Direct Segment	16 - 17
Life and Health Insurance Segment	18
Investment Performance	19
Invested Assets	20
Investment Concentration	21
Municipal Bond Securities	22
Investments in Limited Liability Investment Companies and Limited Partnerships	23
Definitions of Non-GAAP Financial Measures	24 - 25

Page 2

Kemper Corporation Consolidated Financial Highlights (Dollars in Millions, Except Per Share Amounts) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
For Period Ended
Earned Premiums	$	529.2		$	536.5		$	543.0		$	548.1		$	546.0
Net Investment Income	77.4			75.3			58.6			82.9			81.2
Net Investment Gains (Losses) and Other Income	4.6			1.5			(8.8		)	16.7			14.0
Total Revenues	$	611.2		$	613.3		$	592.8		$	647.7		$	641.2

Consolidated Net Operating Income (Loss)¹	$	33.4		$	24.1		$	7.1		$	(20.2	)	$	36.1
Income (Loss) from Continuing Operations	$	36.3		$	25.0		$	1.1		$	(9.4	)	$	45.0
Net Income (Loss)	$	43.6		$	24.3		$	2.0		$	(3.3	)	$	51.5

Per Unrestricted Common Share Amounts:
Basic:
Consolidated Net Operating Income (Loss)¹	$	0.56		$	0.40		$	0.12		$	(0.33	)	$	0.59
Income (Loss) from Continuing Operations	$	0.61		$	0.41		$	0.01		$	(0.16	)	$	0.74
Net Income (Loss)	$	0.73		$	0.40		$	0.03		$	(0.06	)	$	0.85
Diluted:
Consolidated Net Operating Income (Loss)¹	$	0.55		$	0.40		$	0.12		$	(0.33	)	$	0.59
Income (Loss) from Continuing Operations	$	0.60		$	0.41		$	0.01		$	(0.16	)	$	0.73
Net Income (Loss)	$	0.72		$	0.40		$	0.03		$	(0.06	)	$	0.84

Dividends Paid to Shareholders Per Share	$	0.24		$	0.24		$	0.24		$	0.24		$	0.24

At Period End
Total Assets	$	7,970.4		$	7,934.7		$	8,047.8		$	8,068.4		$	8,137.0
Insurance Reserves	$	4,119.2		$	4,131.8		$	4,158.1		$	4,186.8		$	4,169.4
Notes Payable	$	610.8		$	610.6		$	675.4		$	610.2		$	610.0
Shareholders’ Equity	$	2,131.8		$	2,116.6		$	2,121.6		$	2,040.4		$	2,023.5
Shareholders’ Equity Excluding Goodwill	$	1,820.0		$	1,804.8		$	1,809.8		$	1,728.6		$	1,711.7
Common Shares Issued and Outstanding (In Millions)	59.723			60.249			60.456			60.460			60.453
Book Value Per Share²	$	35.69		$	35.13		$	35.09		$	33.75		$	33.47
Book Value Per Share Excluding Goodwill^1,2	$	30.47		$	29.96		$	29.94		$	28.59		$	28.31
Book Value Per Share Excluding Unrealized on Fixed Maturities^1,2	$	30.40		$	29.70		$	29.80		$	30.62		$	31.01
Debt to Total Capitalization²	22.3		%	22.4		%	24.1		%	23.0		%	23.2		%
Rolling 12 Months Return on 5-point AverageShareholders Equity^2,3	3.2		%	3.6		%	5.3		%	7.0		%	9.1		%

¹ Non-GAAP Measure. See Page 24 for definition.
²See Capital Metrics for detail calculations.
³ Rolling 12 Months Return on 5-point Average Shareholders Equity is calculated by taking the last 12 months of Net Income (Loss) divided by the 5-point average Shareholders’ Equity. The 5-point Average Shareholders’ Equity is calculated by using a 5-point quarter average of Shareholders’ Equity for the 12 month period.

Page 3

Kemper Corporation Consolidated Statements of Operations (Dollars in Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Revenues:
Earned Premiums	$	529.2		$	536.5		$	543.0		$	548.1		$	546.0
Net Investment Income	77.4			75.3			58.6			82.9			81.2
Other Income	0.2			0.2			0.4			0.2			0.2
Net Realized Gains (Losses) on Sales of Investments	4.9			5.9			(4.2		)	17.8			14.2
Other-than-temporary Impairment Losses:
Total Other-than-temporary Impairment Losses	(0.5		)	(4.7		)	(5.0		)	(1.3		)	(0.4		)
Portion of Losses Recognized in Other Comprehensive (Income) Loss	—			0.1			—			—			—
Net Impairment Losses Recognized in Earnings	(0.5		)	(4.6		)	(5.0		)	(1.3		)	(0.4		)
Total Revenues	611.2			613.3			592.8			647.7			641.2
Expenses:
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses	376.6			376.7			399.6			477.1			392.3
Insurance Expenses	162.4			170.1			176.8			170.6			166.1
Write-off of Intangibles Acquired	—			13.5			—			—			—
Interest and Other Expenses	21.8			21.9			21.4			20.9			19.7
Total Expenses	560.8			582.2			597.8			668.6			578.1
Income (Loss) from Continuing Operations before Income Taxes	50.4			31.1			(5.0		)	(20.9		)	63.1
Income Tax Benefit (Expense)	(14.1		)	(6.1		)	6.1			11.5			(18.1		)
Income (Loss) from Continuing Operations	36.3			25.0			1.1			(9.4		)	45.0
Discontinued Operations:
Income from Discontinued Operations before Income Taxes	12.3			0.2			0.6			9.3			9.4
Income Tax Benefit (Expense)	(5.0		)	(0.9		)	0.3			(3.2		)	(2.9		)
Income (Loss) from Discontinued Operations	7.3			(0.7		)	0.9			6.1			6.5
Net Income (Loss)	$	43.6		$	24.3		$	2.0		$	(3.3	)	$	51.5
Income (Loss) from Continuing Operations Per Unrestricted Share:
Basic	$	0.61		$	0.41		$	0.01		$	(0.16	)	$	0.74
Diluted	$	0.60		$	0.41		$	0.01		$	(0.16	)	$	0.73
Net Income (Loss) Per Unrestricted Share:
Basic	$	0.73		$	0.40		$	0.03		$	(0.06	)	$	0.85
Diluted	$	0.72		$	0.40		$	0.03		$	(0.06	)	$	0.84
Dividends Paid to Shareholders Per Share	$	0.24		$	0.24		$	0.24		$	0.24		$	0.24
Weighted Average Unrestricted Common Shares Outstanding	59.866			60.113			60.141			60.119			60.678

Page 4

Kemper Corporation Consolidated Balance Sheets (Dollars in Millions) (Unaudited)

	Mar 31, 2012		Dec 31, 2011		Sep 30, 2011		Jun 30, 2011		Mar 31, 2011
Assets:
Investments:
Fixed Maturities at Fair Value	$	4,787.7	$	4,773.4	$	4,782.4	$	4,573.2	$	4,491.9
Equity Securities at Fair Value	429.6		397.3		360.8		503.0		511.7
Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings	311.7		306.3		305.0		325.3		326.0
Short-term Investments at Cost	364.2		247.4		120.9		274.5		415.8
Other Investments	499.0		498.3		495.2		497.2		496.0
Total Investments	6,392.2		6,222.7		6,064.3		6,173.2		6,241.4
Cash	128.7		251.2		471.0		123.8		77.5
Receivable from Policyholders	378.4		379.2		390.4		381.7		387.6
Other Receivables	210.5		218.7		214.0		442.8		510.4
Deferred Policy Acquisition Costs	297.9		294.0		296.5		294.4		289.8
Goodwill	311.8		311.8		311.8		311.8		311.8
Current and Deferred Income Tax Assets	—		6.4		38.7		76.1		53.2
Other Assets	250.9		250.7		261.1		264.6		265.3
Total Assets	$	7,970.4	$	7,934.7	$	8,047.8	$	8,068.4	$	8,137.0
Liabilities and Shareholders’ Equity:
Insurance Reserves:
Life and Health	$	3,117.8	$	3,102.7	$	3,094.5	$	3,085.6	$	3,073.6
Property and Casualty	1,001.4		1,029.1		1,063.6		1,101.2		1,095.8
Total Insurance Reserves	4,119.2		4,131.8		4,158.1		4,186.8		4,169.4
Certificates of Deposits at Cost	—		—		—		—		172.7
Unearned Premiums	668.3		666.2		687.1		675.6		680.4
Liabilities for Income Taxes	18.2		6.2		14.9		7.4		8.6
Notes Payable at Amortized Cost	610.8		610.6		675.4		610.2		610.0
Accrued Expenses and Other Liabilities	422.1		403.3		390.7		548.0		472.4
Total Liabilities	5,838.6		5,818.1		5,926.2		6,028.0		6,113.5
Shareholders’ Equity:
Common Stock	6.0		6.0		6.1		6.0		6.0
Paid-in Capital	737.5		743.9		745.4		744.2		743.3
Retained Earnings	1,126.2		1,108.7		1,102.0		1,114.7		1,132.6
Accumulated Other Comprehensive Income	262.1		258.0		268.1		175.5		141.6
Total Shareholders’ Equity	2,131.8		2,116.6		2,121.6		2,040.4		2,023.5
Total Liabilities and Shareholders’ Equity	$	7,970.4	$	7,934.7	$	8,047.8	$	8,068.4	$	8,137.0

Page 5

Kemper Corporation Capital Metrics (Dollars and Shares in Millions, Except Per Share Amounts) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Book Value Per Share
Numerator
Shareholders’ Equity	$	2,131.8		$	2,116.6		$	2,121.6		$	2,040.4		$	2,023.5
Less: Goodwill	(311.8		)	(311.8		)	(311.8		)	(311.8		)	(311.8		)
Shareholders’ Equity Excluding Goodwill	$	1,820.0		$	1,804.8		$	1,809.8		$	1,728.6		$	1,711.7
Shareholders’ Equity	$	2,131.8		$	2,116.6		$	2,121.6		$	2,040.4		$	2,023.5
Less: Unrealized Gains and Losses on Fixed Maturities	(316.3		)	(327.4		)	(319.8		)	(189.4		)	(149.0		)
Shareholders’ Equity Excluding Unrealized on Fixed Maturities	$	1,815.5		$	1,789.2		$	1,801.8		$	1,851.0		$	1,874.5
Denominator
Common Shares Issued and Outstanding	59.723			60.249			60.456			60.460			60.453
Book Value Per Share	$	35.69		$	35.13		$	35.09		$	33.75		$	33.47
Book Value Per Share Excluding Goodwill	$	30.47		$	29.96		$	29.94		$	28.59		$	28.31
Book Value Per Share Excluding Unrealized on Fixed Maturities	$	30.40		$	29.70		$	29.80		$	30.62		$	31.01

Return on Shareholders’ Equity
Numerator
Rolling 12 Months Net Income	$	66.6		$	74.5		$	110.2		$	142.5		$	182.1
Denominator (5-point Average)
5-point Average Shareholders’ Equity	$	2,086.8		$	2,065.0		$	2,064.3		$	2,036.4		$	2,006.9
Rolling 12 Months Return on Average Shareholders Equity (5-point Average)	3.2		%	3.6		%	5.3		%	7.0		%	9.1		%

Debt and Total Capitalization
Debt	$	610.8		$	610.6		$	675.4		$	610.2		$	610.0
Shareholders’ Equity	2,131.8			2,116.6			2,121.6			2,040.4			2,023.5
Total Capitalization	$	2,742.6		$	2,727.2		$	2,797.0		$	2,650.6		$	2,633.5
Ratio of Debt to Shareholders’ Equity	28.7		%	28.8		%	31.8		%	29.9		%	30.1		%
Ratio of Debt to Total Capitalization	22.3		%	22.4		%	24.1		%	23.0		%	23.2		%

Parent Company Liquidity
Kemper Holding Company Cash and Investments	$	188.9		$	217.0		$	37.6		$	47.6		$	84.2
Borrowings Available Under Credit Agreement	325.0			245.0			180.0			245.0			245.0
Parent Company Liquidity	$	513.9		$	462.0		$	217.6		$	292.6		$	329.2

Capital Returned to Shareholders
Common Stock Repurchased	$	19.2		$	5.7		$	—		$	—		$	21.7
Cash Dividends Paid	14.5			14.5			14.5			14.5			14.7
Total Capital Returned to Shareholders	$	33.7		$	20.2		$	14.5		$	14.5		$	36.4

Page 6

Kemper Corporation Debt Outstanding and Ratings (Dollars in Millions) (Unaudited)

	Mar 31, 2012		Dec 31, 2011		Sep 30, 2011		Jun 30, 2011		Mar 31, 2011
Notes Payable under Revolving Credit Agreements	$	—	$	—	$	65.0	$	—	$	—
Senior Notes at Amortized Cost:
6.00% Senior Notes due May 15, 2017	356.9		356.8		356.7		356.5		356.4
6.00% Senior Notes due November 30, 2015	248.3		248.2		248.1		248.0		247.9
Mortgage Note Payable at Amortized Cost	5.6		5.6		5.6		5.7		5.7
Notes Payable at Amortized Cost	$	610.8	$	610.6	$	675.4	$	610.2	$	610.0

	A.M. Best		Moody’s		S&P		Fitch
As of Date of Financial Supplement
Kemper Debt Ratings:
Senior Notes Payable	bbb-		Baa3		BBB-		BBB-
Insurance Company Financial Strength Ratings:
Trinity Universal Insurance Company	A-		A3		A-		A-
United Insurance Company of America	A-		A3		A		A-
Reserve National Insurance Company	A-		NR		NR		NR

NR - Not Rated

Page 7

Kemper Corporation Segment Revenues (Dollars In Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Revenues:
Kemper Preferred:
Earned Premiums	$	215.0		$	217.0		$	216.5		$	214.4		$	211.9
Net Investment Income	10.9			11.0			8.2			15.4			14.2
Other Income	0.1			0.1			0.1			—			0.1
Total Kemper Preferred	226.0			228.1			224.8			229.8			226.2
Kemper Specialty:
Earned Premiums	106.8			108.5			111.0			113.3			112.4
Net Investment Income	5.2			5.3			3.7			7.2			6.6
Other Income	—			0.1			0.2			0.1			0.1
Total Kemper Specialty	112.0			113.9			114.9			120.6			119.1
Kemper Direct:
Earned Premiums	47.0			50.9			54.4			57.5			59.9
Net Investment Income	3.6			3.8			2.8			5.5			5.3
Other Income	—			—			0.1			—			—
Total Kemper Direct	50.6			54.7			57.3			63.0			65.2
Life and Health Insurance:
Earned Premiums	160.4			160.1			161.1			162.9			161.8
Net Investment Income	55.7			53.2			42.5			52.1			52.7
Other Income	0.1			—			—			0.1			—
Total Life and Health Insurance	216.2			213.3			203.6			215.1			214.5
Total Segment Revenues	604.8			610.0			600.6			628.5			625.0
Net Realized Gains (Losses) on Sales of Investments	4.9			5.9			(4.2		)	17.8			14.2
Net Impairment Losses Recognized in Earnings	(0.5		)	(4.6		)	(5.0		)	(1.3		)	(0.4		)
Other	2.0			2.0			1.4			2.7			2.4
Total Revenues	$	611.2		$	613.3		$	592.8		$	647.7		$	641.2

Page 8

Kemper Corporation Segment Operating Results (Dollars in Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Segment Operating Profit (Loss):
Kemper Preferred	$	13.1		$	15.9		$	(16.1	)	$	(54.5	)	$	14.1
Kemper Specialty	4.9			5.3			7.1			6.4			5.4
Kemper Direct	(3.0		)	(27.6		)	(3.8		)	(8.3		)	(7.5		)
Life and Health	43.0			47.7			29.9			28.2			46.5
Total Segment Operating Profit (Loss)	58.0			41.3			17.1			(28.2		)	58.5
Corporate and Other Operating Loss	(12.0		)	(11.5		)	(12.9		)	(9.2		)	(9.2		)
Total Operating Profit (Loss)	46.0			29.8			4.2			(37.4		)	49.3
Net Realized Gains (Losses) on Sales of Investments	4.9			5.9			(4.2		)	17.8			14.2
Net Impairment Losses Recognized in Earnings	(0.5		)	(4.6		)	(5.0		)	(1.3		)	(0.4		)
Income (Loss) from Continuing Operations before Income Taxes	$	50.4		$	31.1		$	(5.0	)	$	(20.9	)	$	63.1
Segment Net Operating Income (Loss):
Kemper Preferred	$	10.4		$	12.7		$	(8.3	)	$	(33.3	)	$	11.3
Kemper Specialty	4.1			4.4			5.7			5.3			4.4
Kemper Direct	(1.3		)	(17.1		)	(1.7		)	(4.8		)	(3.9		)
Life and Health	27.8			31.2			19.7			18.0			30.0
Total Segment Net Operating Income (Loss)	41.0			31.2			15.4			(14.8		)	41.8
Corporate and Other Net Operating Loss	(7.6		)	(7.1		)	(8.3		)	(5.4		)	(5.7		)
Consolidated Operating Income (Loss)	33.4			24.1			7.1			(20.2		)	36.1
Unallocated Net Income (Loss) From:
Net Realized Gains (Losses) on Sales of Investments	3.2			3.9			(2.7		)	11.5			9.2
Net Impairment Losses Recognized in Earnings	(0.3		)	(3.0		)	(3.3		)	(0.7		)	(0.3		)
Income (Loss) from Continuing Operations	$	36.3		$	25.0		$	1.1		$	(9.4	)	$	45.0

Page 9

Kemper Corporation Segment Operating Results (Dollars in Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012		Dec 31, 2011		Sep 30, 2011			Jun 30, 2011		Mar 31, 2011
Earned Premiums by Product:
Life	$	98.5	$	98.0	$	98.0		$	99.7	$	99.4
Accident and Health	41.5		41.7		41.9			41.5		41.2
Property and Casualty:
Personal Lines:
Automobile	267.7		274.7		281.4			286.2		287.1
Homeowners	77.1		77.7		76.6			75.7		74.1
Other Personal	34.2		34.2		35.0			35.1		34.4
Total Personal Lines	379.0		386.6		393.0			397.0		395.6
Commercial Automobile	10.2		10.2		10.1			9.9		9.8
Total Earned Premiums	$	529.2	$	536.5	$	543.0		$	548.1	$	546.0
Net Investment Income by Segment:
Kemper Preferred:
Equity Method Limited Liability Companies	$	1.4	$	0.8	$	(2.1	)	$	5.4	$	3.9
All Other Net Investment Income	9.5		10.2		10.3			10.0		10.3
Net Investment Income	10.9		11.0		8.2			15.4		14.2
Kemper Specialty:
Equity Method Limited Liability Companies	0.6		0.4		(1.0		)	2.5		1.8
All Other Net Investment Income	4.6		4.9		4.7			4.7		4.8
Net Investment Income	5.2		5.3		3.7			7.2		6.6
Kemper Direct:
Equity Method Limited Liability Companies	0.5		0.3		(0.8		)	2.0		1.4
All Other Net Investment Income	3.1		3.5		3.6			3.5		3.9
Net Investment Income	3.6		3.8		2.8			5.5		5.3
Life and Health Insurance:
Equity Method Limited Liability Companies	3.9		0.8		(9.3		)	—		2.2
All Other Net Investment Income	51.8		52.4		51.8			52.1		50.5
Net Investment Income	55.7		53.2		42.5			52.1		52.7
Total Segment Net Investment Income	75.4		73.3		57.2			80.2		78.8
Unallocated Net Investment Income:
Equity Method Limited Liability Companies	0.3		0.1		(0.5		)	1.0		0.7
All Other Net Investment Income	1.7		1.9		1.9			1.7		1.7
Unallocated Net Investment Income	2.0		2.0		1.4			2.7		2.4
Net Investment Income	$	77.4	$	75.3	$	58.6		$	82.9	$	81.2

Page 10

Kemper Corporation Combined Property and Casualty Operations¹ (Dollars in Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Results of Operations
Net Premiums Written	$	368.6		$	356.7		$	394.6		$	381.1		$	383.6
Earned Premiums:
Personal:
Automobile	$	267.7		$	274.7		$	281.4		$	286.2		$	287.1
Homeowners	77.1			77.7			76.6			75.7			74.1
Other Personal	13.8			13.8			13.8			13.4			13.2
Total Personal	358.6			366.2			371.8			375.3			374.4
Commercial Automobile	10.2			10.2			10.1			9.9			9.8
Total Earned Premiums	368.8			376.4			381.9			385.2			384.2
Net Investment Income	19.7			20.1			14.7			28.1			26.1
Other Income	0.1			0.2			0.4			0.1			0.2
Total Revenues	388.6			396.7			397.0			413.4			410.5
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	271.0			285.4			280.6			281.2			290.6
Catastrophe Losses and LAE	10.7			7.0			43.8			94.7			9.2
Prior Years:
Non-catastrophe Losses and LAE	(5.5		)	(2.6		)	(16.4		)	(5.4		)	(3.1		)
Catastrophe Losses and LAE	(0.2		)	(1.6		)	(1.5		)	(1.9		)	0.1
Total Incurred Losses and LAE	276.0			288.2			306.5			368.6			296.8
Insurance Expenses	97.6			101.4			103.3			101.2			101.7
Write-off of Other Intangible Assets Acquired	—			13.5			—			—			—
Operating Profit (Loss)	15.0			(6.4		)	(12.8		)	(56.4		)	12.0
Income Tax Benefit (Expense)	(1.8		)	6.4			8.5			23.6			(0.2		)
Segment Net Operating Income (Loss)	$	13.2		$	—		$	(4.3	)	$	(32.8	)	$	11.8
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	73.5		%	75.8		%	73.5		%	73.0		%	75.7		%
Current Year Catastrophe Losses and LAE Ratio	2.9			1.9			11.5			24.6			2.4
Prior Years Non-catastrophe Losses and LAE Ratio	(1.5		)	(0.7		)	(4.3		)	(1.4		)	(0.8		)
Prior Years Catastrophe Losses and LAE Ratio	(0.1		)	(0.4		)	(0.4		)	(0.5		)	—
Total Incurred Loss and LAE Ratio	74.8			76.6			80.3			95.7			77.3
Incurred Expense Ratio	26.5			30.5			27.0			26.3			26.5
Combined Ratio	101.3		%	107.1		%	107.3		%	122.0		%	103.8		%
Underlying Combined Ratio ²
Current Year Non-catastrophe Losses and LAE Ratio	73.5		%	75.8		%	73.5		%	73.0		%	75.7		%
Incurred Expense Ratio	26.5			30.5			27.0			26.3			26.5
Underlying Combined Ratio	100.0		%	106.3		%	100.5		%	99.3		%	102.2		%
Non-GAAP Measure Reconciliation
Underlying Combined Ratio	100.0		%	106.3		%	100.5		%	99.3		%	102.2		%
Current Year Catastrophe Losses and LAE Ratio	2.9			1.9			11.5			24.6			2.4
Prior Years Non-catastrophe Losses and LAE Ratio	(1.5		)	(0.7		)	(4.3		)	(1.4		)	(0.8		)
Prior Years Catastrophe Losses and LAE Ratio	(0.1		)	(0.4		)	(0.4		)	(0.5		)	—
Combined Ratio as Reported	101.3		%	107.1		%	107.3		%	122.0		%	103.8		%

¹Includes the results of operations of the Kemper Preferred, Kemper Specialty and Kemper Direct segments.
²Underlying Combined Ratio is a non-GAAP measure, which is computed as the difference between three operating ratios: the combined ratio, the effect of catastrophes (excluding development of prior year catastrophes) on the combined ratio and the effect of prior year reserve development at the reporting date (including development on prior year catastrophes) on the combined ratio.

Page 11

Kemper Corporation Kemper Preferred (Dollars in Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Results of Operations
Net Premiums Written	$	207.0		$	211.2		$	233.3		$	224.7		$	199.6
Earned Premiums:
Automobile	$	126.6		$	127.9		$	128.5		$	127.6		$	126.9
Homeowners	74.7			75.3			74.3			73.4			71.9
Other Personal	13.7			13.8			13.7			13.4			13.1
Total Earned Premiums	215.0			217.0			216.5			214.4			211.9
Net Investment Income	10.9			11.0			8.2			15.4			14.2
Other Income	0.1			0.1			0.1			—			0.1
Total Revenues	226.0			228.1			224.8			229.8			226.2
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	145.0			148.8			148.9			141.4			145.5
Catastrophe Losses and LAE	8.5			6.4			40.9			87.9			9.0
Prior Years:
Non-catastrophe Losses and LAE	(0.6		)	(2.0		)	(7.9		)	(2.6		)	(1.1		)
Catastrophe Losses and LAE	(0.3		)	(1.7		)	(1.5		)	(2.0		)	(0.3		)
Total Incurred Losses and LAE	152.6			151.5			180.4			224.7			153.1
Insurance Expenses	60.3			60.7			60.5			59.6			59.0
Operating Profit (Loss)	13.1			15.9			(16.1		)	(54.5		)	14.1
Income Tax Benefit (Expense)	(2.7		)	(3.2		)	7.8			21.2			(2.8		)
Segment Net Operating Income (Loss)	$	10.4		$	12.7		$	(8.3	)	$	(33.3	)	$	11.3
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	67.4		%	68.6		%	68.7		%	65.9		%	68.7		%
Current Year Catastrophe Losses and LAE Ratio	4.0			2.9			18.9			41.0			4.2
Prior Years Non-catastrophe Losses and LAE Ratio	(0.3		)	(0.9		)	(3.6		)	(1.2		)	(0.5		)
Prior Years Catastrophe Losses and LAE Ratio	(0.1		)	(0.8		)	(0.7		)	(0.9		)	(0.1		)
Total Incurred Loss and LAE Ratio	71.0			69.8			83.3			104.8			72.3
Incurred Expense Ratio	28.0			28.0			27.9			27.8			27.8
Combined Ratio	99.0		%	97.8		%	111.2		%	132.6		%	100.1		%
Underlying Combined Ratio ¹
Current Year Non-catastrophe Losses and LAE Ratio	67.4		%	68.6		%	68.7		%	65.9		%	68.7		%
Incurred Expense Ratio	28.0			28.0			27.9			27.8			27.8
Underlying Combined Ratio	95.4		%	96.6		%	96.6		%	93.7		%	96.5		%
Non-GAAP Measure Reconciliation
Underlying Combined Ratio	95.4		%	96.6		%	96.6		%	93.7		%	96.5		%
Current Year Catastrophe Losses and LAE Ratio	4.0			2.9			18.9			41.0			4.2
Prior Years Non-catastrophe Losses and LAE Ratio	(0.3		)	(0.9		)	(3.6		)	(1.2		)	(0.5		)
Prior Years Catastrophe Losses and LAE Ratio	(0.1		)	(0.8		)	(0.7		)	(0.9		)	(0.1		)
Combined Ratio as Reported	99.0		%	97.8		%	111.2		%	132.6		%	100.1		%

¹ Underlying Combined Ratio is a non-GAAP measure, which is computed as the difference between three operating ratios: the combined ratio, the effect of catastrophes (excluding development of prior year catastrophes) on the combined ratio and the effect of prior year reserve development at the reporting date (including development on prior year catastrophes) on the combined ratio.

Page 12

Kemper Corporation Kemper Preferred Insurance Reserves (Dollars in Millions) (Unaudited)

	Mar 31, 2012		Dec 31, 2011		Sep 30, 2011		Jun 30, 2011		Mar 31, 2011
Insurance Reserves:
Automobile	$	273.2	$	274.7	$	268.5	$	275.0	$	277.3
Homeowners	106.6		106.2		127.5		131.2		101.0
Other Personal	36.0		35.3		37.2		38.4		37.6
Insurance Reserves	$	415.8	$	416.2	$	433.2	$	444.6	$	415.9
Insurance Reserves:
Loss Reserves:
Case	$	260.3	$	259.0	$	268.6	$	271.3	$	263.6
Incurred but Not Reported	92.7		92.9		97.5		103.7		82.6
Total Loss Reserves	353.0		351.9		366.1		375.0		346.2
LAE Reserves	62.8		64.3		67.1		69.6		69.7
Insurance Reserves	$	415.8	$	416.2	$	433.2	$	444.6	$	415.9

Page 13

Kemper Corporation Kemper Specialty (Dollars in Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Results of Operations
Net Premiums Written	$	117.7		$	100.0		$	109.3		$	105.8		$	123.1
Earned Premiums:
Personal Automobile	$	96.6		$	98.3		$	100.9		$	103.4		$	102.6
Commercial Automobile	10.2			10.2			10.1			9.9			9.8
Total Earned Premiums	106.8			108.5			111.0			113.3			112.4
Net Investment Income	5.2			5.3			3.7			7.2			6.6
Other Income	—			0.1			0.2			0.1			0.1
Total Revenues	112.0			113.9			114.9			120.6			119.1
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	86.2			87.5			86.8			91.3			92.8
Catastrophe Losses and LAE	0.1			0.1			0.7			2.9			0.1
Prior Years:
Non-catastrophe Losses and LAE	(1.0		)	(2.5		)	(3.2		)	(1.9		)	(1.9		)
Catastrophe Losses and LAE	0.1			—			—			—			0.1
Total Incurred Losses and LAE	85.4			85.1			84.3			92.3			91.1
Insurance Expenses	21.7			23.5			23.5			21.9			22.6
Operating Profit	4.9			5.3			7.1			6.4			5.4
Income Tax Expense	(0.8		)	(0.9		)	(1.4		)	(1.1		)	(1.0		)
Segment Net Operating Income	$	4.1		$	4.4		$	5.7		$	5.3		$	4.4
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	80.7		%	80.6		%	78.2		%	80.6		%	82.5		%
Current Year Catastrophe Losses and LAE Ratio	0.1			0.1			0.6			2.6			0.1
Prior Years Non-catastrophe Losses and LAE Ratio	(0.9		)	(2.3		)	(2.9		)	(1.7		)	(1.7		)
Prior Years Catastrophe Losses and LAE Ratio	0.1			—			—			—			0.1
Total Incurred Loss and LAE Ratio	80.0			78.4			75.9			81.5			81.0
Incurred Expense Ratio	20.3			21.7			21.2			19.3			20.1
Combined Ratio	100.3		%	100.1		%	97.1		%	100.8		%	101.1		%
Underlying Combined Ratio ¹
Current Year Non-catastrophe Losses and LAE Ratio	80.7		%	80.6		%	78.2		%	80.6		%	82.5		%
Incurred Expense Ratio	20.3			21.7			21.2			19.3			20.1
Underlying Combined Ratio	101.0		%	102.3		%	99.4		%	99.9		%	102.6		%
Non-GAAP Measure Reconciliation
Underlying Combined Ratio	101.0		%	102.3		%	99.4		%	99.9		%	102.6		%
Current Year Catastrophe Losses and LAE Ratio	0.1			0.1			0.6			2.6			0.1
Prior Years Non-catastrophe Losses and LAE Ratio	(0.9		)	(2.3		)	(2.9		)	(1.7		)	(1.7		)
Prior Years Catastrophe Losses and LAE Ratio	0.1			—			—			—			0.1
Combined Ratio as Reported	100.3		%	100.1		%	97.1		%	100.8		%	101.1		%

¹Underlying Combined Ratio is a non-GAAP measure, which is computed as the difference between three operating ratios: the combined ratio, the effect of catastrophes (excluding development of prior year catastrophes) on the combined ratio and the effect of prior year reserve development at the reporting date (including development on prior year catastrophes) on the combined ratio.

Page 14

Kemper Corporation Kemper Specialty Insurance Reserves (Dollars in Millions) (Unaudited)

	Mar 31, 2012		Dec 31, 2011		Sep 30, 2011		Jun 30, 2011		Mar 31, 2011
Insurance Reserves:
Personal Automobile	$	165.2	$	166.6	$	169.6	$	176.1	$	179.7
Commercial Automobile	46.7		51.5		54.4		55.6		58.7
Other	7.6		7.8		7.9		8.1		8.3
Insurance Reserves	$	219.5	$	225.9	$	231.9	$	239.8	$	246.7
Insurance Reserves:
Loss Reserves:
Case	$	131.0	$	135.1	$	137.9	$	143.6	$	147.3
Incurred but Not Reported	47.2		47.7		48.9		60.8		63.1
Total Loss Reserves	178.2		182.8		186.8		204.4		210.4
LAE Reserves	41.3		43.1		45.1		35.4		36.3
Insurance Reserves	$	219.5	$	225.9	$	231.9	$	239.8	$	246.7

Page 15

Kemper Corporation Kemper Direct (Dollars in Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Results of Operations
Net premiums written	$	43.9		$	45.5		$	52.0		$	50.6		$	60.9
Earned Premiums:
Automobile	$	44.5		$	48.5		$	52.0		$	55.2		$	57.6
Homeowners	2.4			2.4			2.3			2.3			2.2
Other Personal	0.1			—			0.1			—			0.1
Total Earned Premiums	47.0			50.9			54.4			57.5			59.9
Net Investment Income	3.6			3.8			2.8			5.5			5.3
Other Income	—			—			0.1			—			—
Total Revenues	50.6			54.7			57.3			63.0			65.2
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	39.8			49.1			44.9			48.5			52.3
Catastrophe Losses and LAE	2.1			0.5			2.2			3.9			0.1
Prior Years:
Non-catastrophe Losses and LAE	(3.9		)	1.9			(5.3		)	(0.9		)	(0.1		)
Catastrophe Losses and LAE	—			0.1			—			0.1			0.3
Total Incurred Losses and LAE	38.0			51.6			41.8			51.6			52.6
Insurance Expenses	15.6			17.2			19.3			19.7			20.1
Write-off of Other Intangible Assets Acquired	—			13.5			—			—			—
Operating Loss	(3.0		)	(27.6		)	(3.8		)	(8.3		)	(7.5		)
Income Tax Benefit	1.7			10.5			2.1			3.5			3.6
Segment Net Operating Loss	$	(1.3	)	$	(17.1	)	$	(1.7	)	$	(4.8	)	$	(3.9	)
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	84.7		%	96.5		%	82.5		%	84.3		%	87.3		%
Current Year Catastrophe Losses and LAE Ratio	4.5			1.0			4.0			6.8			0.2
Prior Years Non-catastrophe Losses and LAE Ratio	(8.3		)	3.7			(9.7		)	(1.6		)	(0.2		)
Prior Years Catastrophe Losses and LAE Ratio	—			0.2			—			0.2			0.5
Total Incurred Loss and LAE Ratio	80.9			101.4			76.8			89.7			87.8
Incurred Expense Ratio	33.2			60.3			35.5			34.3			33.6
Combined Ratio	114.1		%	161.7		%	112.3		%	124.0		%	121.4		%
Underlying Combined Ratio ¹
Current Year Non-catastrophe Losses and LAE Ratio	84.7		%	96.5		%	82.5		%	84.3		%	87.3		%
Incurred Expense Ratio	33.2			60.3			35.5			34.3			33.6
Underlying Combined Ratio	117.9		%	156.8		%	118.0		%	118.6		%	120.9		%
Non-GAAP Measure Reconciliation
Underlying Combined Ratio	117.9		%	156.8		%	118.0		%	118.6		%	120.9		%
Current Year Catastrophe Losses and LAE Ratio	4.5			1.0			4.0			6.8			0.2
Prior Years Non-catastrophe Losses and LAE Ratio	(8.3		)	3.7			(9.7		)	(1.6		)	(0.2		)
Prior Years Catastrophe Losses and LAE Ratio	—			0.2			—			0.2			0.5
Combined Ratio as Reported	114.1		%	161.7		%	112.3		%	124.0		%	121.4		%

¹Underlying Combined Ratio is a non-GAAP measure, which is computed as the difference between three operating ratios: the combined ratio, the effect of catastrophes (excluding development of prior year catastrophes) on the combined ratio and the effect of prior year reserve development at the reporting date (including development on prior year catastrophes) on the combined ratio.

Page 16

Kemper Corporation Kemper Direct Insurance Reserves (Dollars in Millions) (Unaudited)

	Mar 31, 2012		Dec 31, 2011		Sep 30, 2011		Jun 30, 2011		Mar 31, 2011
Insurance Reserves:
Automobile	$	208.1	$	216.5	$	213.3	$	223.0	$	230.5
Homeowners	5.1		4.8		5.1		5.8		5.4
Other Personal	2.7		2.6		2.7		2.7		2.5
Insurance Reserves	$	215.9	$	223.9	$	221.1	$	231.5	$	238.4
Insurance Reserves:
Loss Reserves:
Case	$	137.0	$	140.9	$	147.2	$	146.4	$	150.8
Incurred but Not Reported	51.5		54.0		44.5		53.5		54.9
Total Loss Reserves	188.5		194.9		191.7		199.9		205.7
LAE Reserves	27.4		29.0		29.4		31.6		32.7
Insurance Reserves	$	215.9	$	223.9	$	221.1	$	231.5	$	238.4

Page 17

Kemper Corporation Life and Health Insurance (Dollars in Millions) (Unaudited)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Results of Operations
Earned Premiums:
Life	$	98.5		$	98.0		$	98.0		$	99.7		$	99.4
Accident and Health	41.5			41.7			41.9			41.5			41.2
Property	20.4			20.4			21.2			21.7			21.2
Total Earned Premiums	160.4			160.1			161.1			162.9			161.8
Net Investment Income	55.7			53.2			42.5			52.1			52.7
Other Income	0.1			—			—			0.1			—
Total Revenues	216.2			213.3			203.6			215.1			214.5
Policyholders’ Benefits and Incurred Losses and LAE	100.6			88.5			93.0			108.6			95.5
Insurance Expenses	72.6			77.1			80.7			78.3			72.5
Operating Profit	43.0			47.7			29.9			28.2			46.5
Income Tax Expense	(15.2		)	(16.5		)	(10.2		)	(10.2		)	(16.5		)
Segment Net Operating Income	$	27.8		$	31.2		$	19.7		$	18.0		$	30.0



	Mar 31, 2012		Dec 31, 2011		Sep 30, 2011		Jun 30, 2011		Mar 31, 2011
Insurance Reserves:
Future Policyholder Benefits	$	3,062.7	$	3,046.8	$	3,039.8	$	3,029.2	$	3,014.7
Incurred Losses and LAE Reserves:
Life	32.7		33.8		32.9		34.3		36.0
Accident and Health	22.4		22.1		21.7		22.1		22.9
Property	8.0		8.3		12.0		18.1		16.9
Total Incurred Losses and LAE Reserves	63.1		64.2		66.6		74.5		75.8
Insurance Reserves	$	3,125.8	$	3,111.0	$	3,106.4	$	3,103.7	$	3,090.5

Page 18

Kemper Corporation Details of Investment Performance (Dollars and Shares in Millions, Except Per Share Amounts)

	Three Months Ended
	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Net Investment Income
Interest and Dividends on Fixed Maturities	$	62.2		$	62.8		$	61.8		$	62.0		$	60.0
Dividends on Equity Securities	5.2			6.0			6.0			6.1			7.1
Short-term Investments	—			—			—			—			0.1
Loans to Policyholders	4.7			4.6			4.4			4.3			4.4
Real Estate	6.4			6.6			6.7			6.3			6.4
Equity Method Limited Liability Investments	6.7			2.4			(13.7		)	10.9			10.0
Other	—			0.2			—			0.1			—
Total Investment Income	85.2			82.6			65.2			89.7			88.0
Investment Expenses:
Real Estate	6.3			6.9			6.2			6.4			6.4
Other Investment Expenses	1.5			0.4			0.4			0.4			0.4
Total Investment Expenses	7.8			7.3			6.6			6.8			6.8
Net Investment Income	$	77.4		$	75.3		$	58.6		$	82.9		$	81.2
Net Realized Gains on Sales of Investments
Fixed Maturities:
Gains on Sales	$	0.4		$	1.3		$	7.1		$	3.0		$	2.8
Losses on Sales	—			—			—			(0.1		)	—
Equity Securities:
Gains on Sales	4.1			4.8			2.8			15.2			11.2
Losses on Sales	—			—			(13.4		)	(0.1		)	—
Real Estate:
Gains on Sales	—			—			—			—			0.1
Other Investments:
Losses on Sales	—			(0.1		)	—			—			—
Trading Securities Net Gains (Losses)	0.4			(0.1		)	(0.7		)	(0.2		)	0.1
Net Realized Gains (Losses) on Sales of Investments	$	4.9		$	5.9		$	(4.2	)	$	17.8		$	14.2
Net Impairment Losses Recognized in Earnings
Fixed Maturities	$	—		$	(2.2	)	$	—		$	—		$	—
Equity Securities	(0.5		)	(0.1		)	(0.1		)	(1.3		)	(0.4		)
Real Estate	—			(2.3		)	(4.9		)	—			—
Net Impairment Losses Recognized in Earnings	$	(0.5	)	$	(4.6	)	$	(5.0	)	$	(1.3	)	$	(0.4	)

Page 19

Kemper Corporation Details of Invested Assets (Dollars in Millions) (Unaudited)

	Mar 31, 2012				Dec 31, 2011				Dec 31, 2010
	Carrying Value		Percent of Total Investments¹		Carrying Value		Percent of Total Investments¹		Carrying Value		Percent of Total Investments¹
Fixed Maturities Reported at Fair Value:
U.S. Government and Government Agencies and Authorities	$	474.4	7.4	%	$	491.7	7.9	%	$	536.9	8.6	%
States and Political Subdivisions	1,825.4		28.6		1,852.6		29.8		1,792.8		28.7
Corporate Securities:
Bonds and Notes	2,401.5		37.6		2,342.3		37.6		2,049.0		32.8
Redeemable Preferred Stocks	81.4		1.3		81.7		1.3		88.3		1.4
Mortgage and Asset-backed	5.0		0.1		5.1		0.1		8.3		0.1
Total Fixed Maturities Reported at Fair Value	4,787.7		74.9		4,773.4		76.7		4,475.3		71.6
Equity Securities Reported at Fair Value:
Preferred Stocks	118.6		1.9		107.2		1.7		125.1		2.0
Common Stocks:
Intermec	—		—		—		—		137.5		2.2
Other Equities	136.8		2.1		130.4		2.1		133.4		2.1
Other Equity Interests:
Exchange Traded Funds	67.7		1.1		66.6		1.1		79.2		1.3
Limited Liability Companies and Limited Partnerships	106.5		1.7		93.1		1.5		75.2		1.2
Total Equity Securities Reported at Fair Value	429.6		6.7		397.3		6.4		550.4		8.8
Equity Method Limited Liability Investments	311.7		4.9		306.3		4.9		328.0		5.2
Short-term Investments at Cost which Approximates Fair Value	364.2		5.7		247.4		4.0		402.9		6.4
Other Investments:
Loans to Policyholders at Unpaid Principal	255.6		4.0		253.9		4.1		238.4		3.8
Real Estate at Depreciated Cost	238.2		3.7		239.4		3.8		249.9		4.0
Trading Securities at Fair Value	4.6		0.1		4.4		0.1		5.1		0.1
Other	0.6		—		0.6		—		0.8		—
Total Other Investments	499.0		7.8		498.3		8.0		494.2		7.9
Total Investments	$	6,392.2	100.0	%	$	6,222.7	100.0	%	$	6,250.8	100.0	%
S&P Equivalent Rating for Fixed Maturities
AAA, AA, A	$	3,582.2	74.8	%	$	3,591.8	75.2	%	$	3,493.7	78.1	%
BBB	861.5		18.0		839.4		17.6		733.1		16.4
BB	103.4		2.2		108.6		2.3		105.3		2.4
B	88.3		1.8		89.1		1.9		52.3		1.2
CCC	145.4		3.0		127.8		2.7		76.6		1.7
In or Near Default	6.9		0.1		16.7		0.3		14.3		0.3
Total Investments in Fixed Maturities	$	4,787.7	100.0	%	$	4,773.4	100.0	%	$	4,475.3	100.0	%
Duration (in Years)
Total Investments in Fixed Maturities	7.3				7.4				7.2

¹ Sum of percentages for individual lines does not equal subtotals and grand total due to rounding.

Page 20

Kemper Corporation Investment Concentration (Dollars in Millions) (Unaudited)

	Mar 31, 2012				Dec 31, 2011				Dec 31, 2010
Fair Value of Non-governmental Fixed Maturities by Industry	Amount		Percent of Total Investments		Amount		Percent of Total Investments		Amount		Percent of Total Investments
Manufacturing	$	1,149.1	18.0	%	$	1,153.1	18.5	%	$	1,023.6	16.4	%
Finance, Insurance and Real Estate	645.4		10.1		590.4		9.5		566.4		9.1
Transportation, Communication and Utilities	244.0		3.8		252.2		4.1		229.7		3.7
Services	245.4		3.8		233.8		3.8		186.3		3.0
Mining	92.1		1.4		89.6		1.4		52.0		0.8
Retail Trade	41.2		0.6		50.1		0.8		33.5		0.5
Wholesale Trade	49.4		0.8		41.5		0.7		36.5		0.6
Agriculture, Forestry and Fishing	17.8		0.3		17.8		0.3		17.0		0.3
Other	3.5		0.1		0.6		—		0.6		—
Total Fair Value of Non-governmental Fixed Maturities	$	2,487.9	38.9	%	$	2,429.1	39.1	%	$	2,145.6	34.4	%



	Mar 31, 2012
Ten Largest Investment Exposures ¹	Fair Value		Percent of Total Investments
Fixed Maturities:
States and Political Subdivisions:
Texas	$	105.1	1.6	%
Washington	87.4		1.4
Louisiana	76.8		1.2
Georgia	75.5		1.2
New York	65.3		1.0
Colorado	60.7		0.9
Equity Securities:
iShares® iBoxx $ Investment Grade Corporate Bond Fund	67.6		1.1
Equity Method Limited Liability Investments:
Tennenbaum Opportunities Fund V, LLC	77.5		1.2
Special Value Opportunity Fund, LLC	71.2		1.1
Goldman Sachs Vintage Fund IV, L.P.	61.7		1.0
Total	$	748.8	11.7	%


¹	Excluding Investments in U.S. Government and Government Agencies and Authorities and Obligations of States and Political Subdivisions Pre-refunded with U.S. Government and Government Agencies Held in Trust at March 31, 2012.

Page 21

Kemper Corporation Municipal Bond Securities excluding Pre-refunded with U.S. Government Held in Trust (Dollars in Millions) (Unaudited)

	Mar 31, 2012
	State General Obligation		Political Subdivision General Obligation		Revenue		Total Fair Value		Percent of Total Muni Bond¹		Percent of Total Investments¹
Texas	$	66.3	$	15.5	$	23.3	$	105.1	7.0	%	1.6	%
Washington	59.6		4.5		23.3		87.4		5.8		1.4
Louisiana	40.1		10.0		26.7		76.8		5.1		1.2
Georgia	50.4		13.3		11.8		75.5		5.0		1.2
New York	22.5		—		42.8		65.3		4.3		0.8
Colorado	—		19.8		40.9		60.7		4.0		0.8
Ohio	28.2		—		22.8		51.0		3.4		1.0
Wisconsin	50.4		—		—		50.4		3.3		0.8
Connecticut	43.9		—		5.5		49.4		3.3		0.9
Pennsylvania	39.4		5.3		1.7		46.4		3.1		0.7
Florida	45.7		—		0.1		45.8		3.0		0.7
Massachusetts	21.5		—		22.7		44.2		2.9		0.7
Illinois	38.3		1.0		3.8		43.1		2.9		0.7
Oregon	41.6		—		0.6		42.2		2.8		0.6
North Carolina	15.3		5.1		19.3		39.7		2.6		0.6
Maryland	34.0		1.9		3.6		39.5		2.6		0.5
Hawaii	35.2		0.5		—		35.7		2.4		0.2
South Carolina	25.7		5.0		—		30.7		2.0		0.7
Virginia	2.4		19.8		7.0		29.2		1.9		0.5
Arkansas	29.1		—		—		29.1		1.9		0.5
Mississippi	24.5		—		4.3		28.8		1.9		0.2
New Jersey	6.1		2.0		19.3		27.4		1.8		0.4
Indiana	—		—		27.1		27.1		1.8		0.4
Utah	11.9		3.5		10.8		26.2		1.7		0.6
California	12.9		1.1		11.2		25.2		1.7		0.4
Missouri	3.1		—		21.4		24.5		1.6		0.5
Nevada	23.2		1.2		—		24.4		1.6		0.4
Iowa	—		—		23.2		23.2		1.5		0.3
Minnesota	13.2		8.4		—		21.6		1.4		0.4
Delaware	14.7		—		6.1		20.8		1.4		0.4
Tennessee	4.5		12.5		3.3		20.3		1.3		0.3
Rhode Island	19.3		—		—		19.3		1.3		0.4
West Virginia	19.2		—		—		19.2		1.3		0.3
Alaska	16.0		—		2.7		18.7		1.2		0.3
Nebraska	—		12.6		5.1		17.7		1.2		0.3
Kentucky	—		0.6		15.0		15.6		1.0		0.3
Arizona	—		8.6		5.8		14.4		1.0		0.3
Michigan	—		—		12.7		12.7		0.8		0.2
All Other States	7.8		21.1		41.3		70.2		4.7		1.1
Total ⁽¹⁾	$	866.0	$	173.3	$	465.2	$	1,504.5	100.0	%	23.5	%

¹ Sum of percentages for individual lines does not equal total due to rounding.

Page 22

Kemper Corporation Investments in Limited Liability Investment Companies and Limited Partnerships (Dollars in Millions) (Unaudited)

		Unfunded Commitment		Reported Value				Stated Fund
	Asset Class	Mar 31, 2012		Mar 31, 2012		Dec 31, 2011		End Date
Reported as Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings:
Tennenbaum Opportunities Fund V, LLC	Distressed Debt	$	—	$	77.5	$	75.6	10/10/16
Special Value Opportunity Fund, LLC	Distressed Debt	—		71.2		67.8		07/13/14
Goldman Sachs Vintage Fund IV, L.P.	Secondary Transactions	20.0		61.7		64.2		12/31/16
Special Value Continuation Fund, LLC	Distressed Debt	—		22.7		22.4		06/30/16
BNY-Alcentra Mezzanine Partners III, L.P.	Mezzanine Debt	18.1		25.9		22.7		2021-2022
NY Life Investment Management Mezzanine Partners II, LP	Mezzanine Debt	4.0		13.4		13.5		07/31/16
BNY Mezzanine Partners L.P.	Mezzanine Debt	1.3		12.8		12.9		04/17/16
Ziegler Meditech Equity Partners, LP	Growth Equity	1.8		9.9		13.3		01/31/16
Other Funds		9.5		16.6		13.9		Various
Total Equity Method Limited Liability Investments		54.7		311.7		306.3
Reported as Other Equity Interests and Reported at Fair Value:
Highbridge Principal Strategies Fund L.P.	Mezzanine Debt	3.1		22.4		20.8		01/23/18
Goldman Sachs Vintage Fund V, L.P.	Secondary Transactions	7.8		13.5		13.9		12/31/18
Goldman Sachs Mezzanine Partners V, L.P.	Mezzanine Debt	15.3		8.6		8.2		12/31/21
Other		68.0		62.0		50.2		Various
Total Reported as Other Equity Interests and Reported at Fair Value		94.2		106.5		93.1
Total		$	148.9	$	418.2	$	399.4

Page 23

Kemper Corporation

Definitions of Non-GAAP Financial Measures

The Company believes that investors’ understanding of Kemper’s performance is enhanced by the disclosure of the following non-GAAP financial measures. The methods for calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Book Value Per Share Excluding Unrealized Gains on Fixed Maturities, is a ratio that uses a non-GAAP financial measure. It is calculated by dividing shareholders’ equity after excluding the impact of unrealized net capital gains and losses on fixed income securities by total Common Shares Issued and Outstanding. Book value per share is the most directly comparable GAAP financial measure. The Company uses the trend in book value per share, excluding the impact of unrealized net capital gains and losses on fixed income securities in conjunction with book value per share to identify and analyze the change in net worth attributable to management efforts between periods. The Company believes the non-GAAP financial measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily capital market conditions, the magnitude and timing of which are generally not influenced by management. The Company believes it enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers.

Book Value Per Share Excluding Goodwill, is a ratio that uses a non-GAAP financial measure. It is calculated by dividing shareholders’ equity after excluding the recorded Goodwill asset. Book value per share is the most directly comparable GAAP financial measure. Book Value Per Share, Excluding Goodwill, also referred to as Tangible Book Value Per Share, is a common measure used by analysts and investors to compare similar companies.

Combined Property and Casualty Operations is a non-GAAP financial measure, which is comprised of the Kemper Preferred, Kemper Specialty and Kemper Direct segments.

Consolidated Net Operating Income (Loss) is an after-tax, non-GAAP financial measure and is computed by excluding from Income (Loss) from Continuing Operations the after-tax impact of 1) Net Realized Gains (Losses) on Sales of Investments, 2) Net Impairment Losses Recognized in Earnings related to investments and 3) other significant non-recurring or infrequent items that may not be indicative of ongoing operations. Significant non-recurring items are excluded when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, and (b) there has been no similar charge or gain within the prior two years. The most directly comparable GAAP financial measure is income from continuing operations.

The Company believes that Consolidated Net Operating Income (Loss) provides investors with a valuable measure of its ongoing performance because it reveals underlying operational performance trends that otherwise might be less apparent if the items were not excluded. Net Realized Gains (Losses) on Sales of Investments and Net Impairment Losses Recognized in Earnings related to investments included in the Company’s results may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions that impact the values of the company’s investments, the timing of which is unrelated to the insurance underwriting process. Significant non-recurring items are excluded because, by their nature, they are not indicative of the Company’s business or economic trends.

A reconciliation of Consolidated Net Operating Income (Loss) to Income (Loss) from Continuing Operations is presented below:



	Three Months Ended
Dollars in Millions (Unaudited)	Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Consolidated Net Operating Income (Loss)	$	33.4		$	24.1		$	7.1		$	(20.2	)	$	36.1
Net Income (Loss) From:
Net Realized Gains on Sales of Investments	3.2			3.9			(2.7		)	11.5			9.2
Net Impairment Losses Recognized in Earnings	(0.3		)	(3.0		)	(3.3		)	(0.7		)	(0.3		)
Income (Loss) from Continuing Operations	$	36.3		$	25.0		$	1.1		$	(9.4	)	$	45.0

Page 24

Consolidated Net Operating Income (Loss) Per Unrestricted Share is a non-GAAP financial measure. It is computed by dividing Consolidated Net Operating Income by the weighted average unrestricted shares outstanding. The most directly comparable GAAP financial measure is Income (Loss) from Continuing Operations Per Unrestricted share‐basic.

A reconciliation of Consolidated Net Operating Income (Loss) Per Unrestricted Share to Income (Loss) from Continuing Operations Per Unrestricted Share is presented below:



	Three Months Ended
Dollars in Millions (Unaudited)	Mar 31, 2012		Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011
Consolidated Net Operating Income (Loss) Per Unrestricted Share	$	0.56	$	0.40		$	0.12		$	(0.33	)	$	0.59
Net Income (Loss) Per Unrestricted Share From:
Net Realized Gains (Losses) on Sales of Investments	0.05		0.06			(0.05		)	0.19			0.15
Net Impairment Losses Recognized in Earnings	—		(0.05		)	(0.06		)	(0.02		)	—
Income (Loss) from Continuing Operations Per Unrestricted Share	$	0.61	$	0.41		$	0.01		$	(0.16	)	$	0.74

Underlying Combined Ratio is a non-GAAP financial measure. It is computed by adding the Current Year Non-catastrophe Losses and LAE Ratio with the Incurred Expense Ratio. The most directly comparable GAAP financial measure is the combined ratio. The Company believes the underlying combined ratio is useful to investors and is used by management to reveal the trends in the Company’s Property and Casualty insurance businesses that may be obscured by catastrophe losses and prior year reserve development. These catastrophe losses cause 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. Because reserve development relates to the re-estimation of losses from earlier periods, it has no bearing on the performance of our insurance products in the current period. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company’s 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.

Page 25

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