(The following statement was released by the rating agency)
CHICAGO, April 05 (Fitch) Fitch Ratings has affirmed Kemper
(Kemper) holding company ratings, including the senior debt
rating at 'BBB-'.
Fitch has also affirmed the Insurer Financial Strength (IFS)
ratings of Kemper's
operating subsidiaries at 'A-'. The Rating Outlook is Stable. A
full list of
ratings follows at the end of this press release.
KEY RATING DRIVERS
Kemper's property/casualty (P/C) ratings reflect deterioration
underwriting results, volatile earnings profile caused by
exposures and weakened debt servicing capability. The ratings
also consider the
company's strong capitalization and business profile as a
midsize personal lines
writer with a competitive position consistent with the company's
Kemper's life/health segment (United Insurance Co. of America
subsidiaries) ratings reflect continued stable underlying
capitalization, and effective niche in the home service market,
slow-growth market. The group has been a steady source of
capital for Kemper,
with dividend capacity to support parent objectives. Fitch views
ratings as limited by its modest business profile relative to
Kemper Corporation reported a GAAP 2016 calendar-year combined
ratio of 105.6%,
up from 103.6% in 2015. Results deteriorated largely as the
result of higher
incurred catastrophe losses and higher net operating losses at
Group. Kemper reported catastrophe losses of $110 million (6.8%
premium) in 2016, primarily related to two hailstorm events in
Texas, up from
$65 million (4.6% of earned premium) in the prior year.
Capitalization at the P/C operating company level scored
'Strong' on Fitch's
proprietary capital model, Prism, based on year-end 2015 data.
Other measures of
capital strength also suggest Kemper is strongly capitalized.
The NAIC RBC ratio
for Kemper's lead P/C subsidiary, Trinity Universal Insurance
Company, was 322%
of the company action level at year-end 2016. RBC for Kemper's
insurance company, United Insurance Co. of America, was 391% at
Financial leverage at Dec. 31, 2016 was 29.5% and remains within
guidelines for the current rating category.
Kemper's GAAP fixed-charge coverage ratio dropped to 1.1x in
2016 from 2.6x for
full-year 2015, as earnings included a $77.8 million pre-tax
after-tax) charge to recognize the impact of using death
The life/health segment reported a sizeable decline in net
operating income to
$30 million in 2016, down from $72 million in 2015, largely as a
result of the
charge to recognize the impact of using death verification
follows a decline from $92 million in 2014. As a result,
statutory return on
assets fell to 0.9% in 2016 compared to 2.6% in 2015, while
return on capital
declined to 7.5% in 2016 from 14.8% in 2015.
During 2017, Kemper's operating subsidiaries are permitted to
$133 million in dividends to the parent without prior regulatory
would cover Kemper's interest expense by approximately 3x.
Factors that could lead to an upgrade of Trinity Universal
Insurance Co. and
Kemper's holding company ratings include:
--Sustained underwriting profit;
--GAAP fixed charge coverage at or above 7x.
--Maintaining a Prism score of at least 'strong'.
Factors that could lead to a downgrade of Trinity Universal
Insurance Co. and
Kemper's holding company ratings include:
--GAAP fixed charge coverage below 3x;
--A combined ratio above 106% for a sustained period;
--Deterioration in capitalization with a P/C Prism capital model
--RBC for the P/C entities below 200%;
--Financial leverage ratio that exceeds 30%.
Factors that could lead to an upgrade for the United Insurance
Co. and its
--Sustained improvement profitability as measured by return on
adjusted capital above 15%.
Factors that could lead to a downgrade for the United Insurance
Co. and its
--A decline in RBC below 300% of the company action level;
--A sustained decline in profitability resulting in a return on
FULL LIST OF RATING ACTIONS
Fitch has affirmed the following ratings with a Stable Outlook:
--Issuer Default Rating at 'BBB';
--$359 million senior notes 6% due 2017 at 'BBB-';
--$248 million senior notes 4.35% due 2025 at 'BBB-';
--$225 million credit facility at 'BBB-';
--$144 million subordinated notes due 2054 at 'BB'.
Trinity Universal Insurance Co.
United Insurance Co. of America
Union National Life Insurance Co.
Reliable Life Insurance Co.
--IFS rating at 'A-'.
Primary Analyst (Property/Casualty Insurance)
Christopher A. Grimes, CFA
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
Primary Analyst (Life Insurance)
Donald F. Thorpe
Martha M. Butler, CFA
Jeffrey A. Mohrenweiser, FSA, CFA
Media Relations: Hannah James, New York, Tel: + 1 646 582 4947,
Additional information is available on www.fitchratings.com
Insurance Rating Methodology (pub. 15 Sep 2016)
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