KMPR 2014 09.30.14 8-K Release and Supplement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 6, 2014

Kemper Corporation

(Exact name of registrant as specified in its charter)

Commission File Number: 001-18298




DE		95-4255452
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

One East Wacker Drive, Chicago, IL 60601

(Address of principal executive offices, including zip code)

312-661-4600

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2.below):



¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2. – Financial Information



Item 2.02.	Results of Operations and Financial Condition.

On November 6, 2014, the Registrant issued a press release announcing its financial results for the third quarter of 2014 and the availability of the Registrant’s third quarter investor supplement on the Registrant’s web site. The press release and the investor supplement are furnished as Exhibits 99.1 and 99.2 to this report. The information contained in the press release and the investor supplement are furnished and not filed pursuant to instruction B.2 of Form 8-K.

Section 9. – Financial Statements and Exhibits.



Item 9.01.	Financial Statements and Exhibits.

(d) Exhibits

99.1 Registrant’s press release dated November 6, 2014.

99.2 Third Quarter 2014 Investor Supplement of Kemper Corporation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




		Kemper Corporation

Date:	November 6, 2014	/S/ FRANK J. SODARO
		Frank J. Sodaro
		Senior Vice President and Chief Financial Officer

Exhibit Index



99.1			Registrant’s press release dated November 6, 2014.
99.2			Third Quarter 2014 Investor Supplement of Kemper Corporation.

KMPR 2014 09.30.14 EX 99.1 Release

Exhibit 99.1



		Kemper Corporation One East Wacker Drive Chicago, IL 60601 kemper.com



	Press Release

November 6, 2014

Kemper Corporation Reports Third Quarter 2014 Earnings


◦	Delivered Net Income of $40 million excluding $35 million after-tax software write-off; Net income was $5 million including write-off


◦	Improved the Property & Casualty Insurance segment’s underlying loss and LAE ratio 3.5 percentage points


◦	Returned $43 million to shareholders through share repurchases and dividends in the quarter; $146 million in the first nine months of 2014


◦	Reported book value per share of $39.96, up 8 percent from year-end 2013 and book value per share excluding net unrealized gains on fixed maturities of $35.31, up 2 percent

CHICAGO - (Business Wire) - Kemper Corporation (NYSE: KMPR) reported today net income of $4.7 million, or $0.09 per diluted share, for the third quarter of 2014, compared to $70.1 million, or $1.23 per diluted share, for the third quarter of 2013. Consolidated net operating income¹ was $2.1 million, or $0.04 per diluted share, for the third quarter of 2014, compared to $38.9 million, or $0.69 per diluted share, for the third quarter of 2013. Net operating income per diluted share decreased primarily from the write-off of software and lower net investment income, partially offset by improved underlying loss results in the Property & Casualty Insurance segment.



	Three Months Ended						Nine Months Ended
(Dollars in Millions, Except Per Share Amounts) (Unaudited)	Sep 30, 2014			Sep 30, 2013			Sep 30, 2014			Sep 30, 2013
Consolidated Net Operating Income ¹	$	2.1		$	38.9		$	43.2		$	112.9
Income from Continuing Operations	4.8			68.6			49.3			159.7
Net Income	4.7			70.1			49.1			162.5

Impact of Catastrophe Losses and Related Loss Adjustment Expense (LAE) on Net Income	$	(9.2	)	$	(6.7	)	$	(60.9	)	$	(31.5	)

Diluted Net Income Per Share From:
Consolidated Net Operating Income ¹	$	0.04		$	0.69		$	0.79		$	1.95
Continuing Operations	0.09			1.21			0.90			2.76
Net Income	0.09			1.23			0.90			2.81

Impact of Catastrophe Losses and Related LAE on Net Income Per Share	$	(0.17	)	$	(0.12	)	$	(1.12	)	$	(0.55	)

“Kemper’s third quarter results included a $35 million after-tax software write-off in the Property & Casualty segment that overshadowed improvements in many areas,” commented Donald G. Southwell, Kemper’s Chairman, President and Chief Executive Officer. “In the Property & Casualty segment, these improvements included a lower underlying loss ratio and increased agent engagement on the new business front.

“Our Life & Health segment fundamentals continued to be stable, although profits were lower as a result of the volatility in our alternative investments portfolio.

“Once again, we returned capital to shareholders with $13 million in dividends and $30 million in share repurchases in the quarter,” said Southwell.

¹ Consolidated net operating income is an after-tax, non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for additional information.

Capital

During the third quarter of 2014, Kemper repurchased more than 800,000 shares of its common stock at a total cost of $29.9 million, or $36.51 per share, and paid dividends of $12.6 million. During the first nine months of 2014, Kemper repurchased nearly 3.0 million shares of its common stock at a cost of $106.5 million and paid dividends of $39.2 million.

Kemper ended the quarter with a book value per share excluding net unrealized gains on fixed maturities of $35.31, up 2 percent from $34.49 at the end of 2013. Book value per share was $39.96, up 8 percent from $36.86 at the end of 2013, largely from the impact of lower yields on the fixed maturities portfolio.

Revenues

Total revenues were $539.8 million for the third quarter of 2014, compared to $635.7 million in 2013. Revenues decreased primarily from $41.1 million lower net realized gains, a $39.0 million decrease in earned premiums in the Property & Casualty Insurance segment and $10.1 million lower net investment income.

Net realized gains in the third quarter of 2013 included a realized gain of $43.6 million on the sale of the Company’s corporate headquarters.

The Property & Casualty Insurance segment continued to feel the impact of lower new and renewal business due to the profit improvement actions taken over the past couple of years. Consistent with growth and profitability objectives, the company implemented additional actions to increase new business sales. However, the company anticipates it will take several quarters to see the impact of these actions.

Net investment income was $72.3 million in the third quarter of 2014, compared to $82.4 million in 2013. Net investment income from equity method and fair value option investments was $5.2 million for the third quarter of 2014, compared to $7.7 million in 2013. Excluding equity method and fair value option investments, net investment income decreased $7.6 million as lower yields more than offset a higher level of investments. The investment portfolio in total generated a pre-tax equivalent annualized book yield of 5.1 percent for the third quarter of 2014.

Segment Results

In the first quarter of 2014, Kemper realigned its property and casualty insurance businesses. As a result of the realignment, the company is now reporting the property and casualty businesses in a single segment named the Property & Casualty Insurance segment. Kemper has reclassified certain prior-year amounts in its segment results to conform to the current presentation.

Unless otherwise noted, (i) the segment results discussed below are presented on an after-tax basis, (ii) prior-year development includes both catastrophe and non-catastrophe losses, (iii) catastrophe losses exclude the impact of prior-year development and (iv) underlying loss ratio includes loss and loss adjustment expenses.



	Three Months Ended						Nine Months Ended
(Dollars in Millions) (Unaudited)	Sep 30, 2014			Sep 30, 2013			Sep 30, 2014			Sep 30, 2013
Segment Net Operating Income (Loss):
Property & Casualty Insurance	$	(13.6	)	$	23.4		$	(0.4	)	$	71.5
Life & Health Insurance	20.3			22.9			58.3			64.4
Total Segment Net Operating Income	6.7			46.3			57.9			135.9
Corporate and Other Net Operating Loss	(4.6		)	(7.4		)	(14.7		)	(23.0		)
Consolidated Net Operating Income	2.1			38.9			43.2			112.9
Net Income (Loss) From:
Net Realized Gains on Sales of Investments	5.2			31.9			11.8			50.9
Net Impairment Losses Recognized in Earnings	(2.5		)	(2.2		)	(5.7		)	(4.1		)
Income from Continuing Operations	$	4.8		$	68.6		$	49.3		$	159.7

The Property & Casualty Insurance segment reported a net operating loss of $13.6 million in the third quarter of 2014, compared to net operating income of $23.4 million in 2013. Results decreased primarily from a $35.5 million software write-off and higher insurance expenses as a percentage of earned premiums, partially offset by improved underlying loss and LAE results. Results also included catastrophe losses of $9.2 million in the third quarter of 2014, compared to $6.7 million in the prior year. The insurance expense ratio increased to 45.7 percent in the third quarter of 2014, compared to 27.0 percent in 2013, driven by the software write-off. Excluding the write-off, the insurance expense ratio increased 1.1 percentage points to 28.1 percent, driven by the lower premium base. The underlying loss and LAE ratio for the third quarter of 2014 improved 3.5 percentage points to 66.8 percent, primarily from higher average earned premium rates in personal auto and homeowners.

The Life & Health Insurance segment reported net operating income of $20.3 million for the third quarter of 2014, compared to $22.9 million in 2013. Results decreased largely from lower net investment income and lower earned premiums, partially offset by lower expenses. Insurance expenses decreased primarily from lower home service agent commissions and lower legal fees, partially offset by start-up expenses to expand distribution channels at Reserve National.

Corporate and Other net operating loss improved $2.8 million over the third quarter of 2013, driven by lower employee retirement benefits and higher unallocated net investment income, partially offset by higher interest expense.

Unaudited condensed consolidated statements of income for the three and nine months ended September 30, 2014 and 2013 are presented below:



	Three Months Ended						Nine Months Ended
(Dollars in Millions, Except Per Share Amounts)	Sep 30, 2014			Sep 30, 2013			Sep 30, 2014			Sep 30, 2013
Revenues:
Earned Premiums	$	462.8		$	507.5		$	1,410.7		$	1,530.2
Net Investment Income	72.3			82.4			216.0			237.8
Other Income	0.5			0.1			0.8			0.5
Net Realized Gains on Sales of Investments	8.0			49.1			18.1			78.3
Other-than-temporary Impairment Losses:
Total Other-than-temporary Impairment Losses	(3.8		)	(3.5		)	(8.7		)	(8.2		)
Portion of Losses Recognized in Other Comprehensive Income	—			0.1			—			1.9
Net Impairment Losses Recognized in Earnings	(3.8		)	(3.4		)	(8.7		)	(6.3		)
Total Revenues	539.8			635.7			1,636.9			1,840.5
Expenses:
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses	300.5			338.3			975.9			1,041.7
Insurance Expenses	158.6			170.1			472.0			491.5
Write-off of Long-lived Asset	54.6			—			54.6			—
Interest and Other Expenses	22.1			25.3			67.3			74.3
Total Expenses	535.8			533.7			1,569.8			1,607.5
Income from Continuing Operations before Income Taxes	4.0			102.0			67.1			233.0
Income Tax Benefit (Expense)	0.8			(33.4		)	(17.8		)	(73.3		)
Income from Continuing Operations	4.8			68.6			49.3			159.7
Income (Loss) from Discontinued Operations	(0.1		)	1.5			(0.2		)	2.8
Net Income	$	4.7		$	70.1		$	49.1		$	162.5

Income from Continuing Operations Per Unrestricted Share:
Basic	$	0.09		$	1.21		$	0.90		$	2.77
Diluted	$	0.09		$	1.21		$	0.90		$	2.76

Net Income Per Unrestricted Share:
Basic	$	0.09		$	1.24		$	0.90		$	2.82
Diluted	$	0.09		$	1.23		$	0.90		$	2.81

Weighted-average Outstanding (Shares in Thousands):
Unrestricted Shares - Basic	52,605.3			56,365.8			54,245.7			57,374.4
Unrestricted Shares and Equivalent Shares - Diluted	52,699.9			56,501.5			54,356.2			57,493.2

Dividends Paid to Shareholders Per Share	$	0.24		$	0.24		$	0.72		$	0.72

Unaudited business segment revenues for the three and nine months ended September 30, 2014 and 2013 are presented below:



	Three Months Ended						Nine Months Ended
(Dollars in Millions)	Sep 30, 2014			Sep 30, 2013			Sep 30, 2014			Sep 30, 2013
REVENUES
Property & Casualty Insurance:
Earned Premiums:
Personal Automobile	$	205.1		$	239.1		$	633.4		$	729.4
Homeowners	77.9			82.3			236.6			244.8
Other Personal	12.6			13.8			38.7			41.8
Total Personal	295.6			335.2			908.7			1,016.0
Commercial Automobile	14.1			13.5			40.8			38.7
Total Earned Premiums	309.7			348.7			949.5			1,054.7
Net Investment Income	18.5			21.3			55.6			67.9
Other Income	0.1			0.1			0.4			0.4
Total Property & Casualty Insurance	328.3			370.1			1,005.5			1,123.0
Life & Health Insurance:
Earned Premiums:
Life	96.8			98.4			291.6			294.9
Accident and Health	37.1			40.7			112.1			121.2
Property	19.2			19.7			57.5			59.4
Total Earned Premiums	153.1			158.8			461.2			475.5
Net Investment Income	49.2			56.5			147.4			159.3
Other Income	0.4			—			0.4			0.1
Total Life & Health Insurance	202.7			215.3			609.0			634.9
Total Segment Revenues	531.0			585.4			1,614.5			1,757.9
Net Realized Gains on Sales of Investments	8.0			49.1			18.1			78.3
Net Impairment Losses Recognized in Earnings	(3.8		)	(3.4		)	(8.7		)	(6.3		)
Other	4.6			4.6			13.0			10.6
Total Revenues	$	539.8		$	635.7		$	1,636.9		$	1,840.5

KEMPER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Millions)

	Sep 30, 2014		Dec 31, 2013
Assets:	(Unaudited)
Investments:
Fixed Maturities at Fair Value	$	4,697.2	$	4,575.0
Equity Securities at Fair Value	661.4		598.5
Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings	222.8		245.1
Fair Value Option Investments	50.6		—
Short-term Investments at Cost which Approximates Fair Value	316.2		284.7
Other Investments	450.5		448.0
Total Investments	6,398.7		6,151.3
Cash	93.1		66.5
Receivables from Policyholders	314.4		331.6
Other Receivables	247.5		193.1
Deferred Policy Acquisition Costs	306.7		302.9
Goodwill	311.8		311.8
Current and Deferred Income Tax Assets	4.3		31.8
Other Assets	228.8		267.4
Total Assets	$	7,905.3	$	7,656.4
Liabilities and Shareholders’ Equity:
Insurance Reserves:
Life and Health	$	3,260.8	$	3,217.5
Property and Casualty	780.9		843.5
Total Insurance Reserves	4,041.7		4,061.0
Unearned Premiums	568.2		598.9
Liabilities for Income Taxes	48.7		8.3
Debt at Amortized Cost	751.9		606.9
Accrued Expenses and Other Liabilities	390.3		329.8
Total Liabilities	5,800.8		5,604.9
Shareholders’ Equity:
Common Stock	5.3		5.6
Paid-in Capital	662.2		694.8
Retained Earnings	1,155.6		1,215.8
Accumulated Other Comprehensive Income	281.4		135.3
Total Shareholders’ Equity	2,104.5		2,051.5
Total Liabilities and Shareholders’ Equity	$	7,905.3	$	7,656.4

Unaudited selected financial information for the Property & Casualty Insurance segment follows:



	Three Months Ended						Nine Months Ended
(Dollars in Millions)	Sep 30, 2014			Sep 30, 2013			Sep 30, 2014			Sep 30, 2013

Results of Operations
Net Premiums Written	$	307.0		$	345.0		$	920.0		$	1,039.3

Total Earned Premiums	$	309.7		$	348.7		$	949.5		$	1,054.7
Net Investment Income	18.5			21.3			55.6			67.9
Other Income	0.1			0.1			0.4			0.4
Total Revenues	328.3			370.1			1,005.5			1,123.0
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	206.8			245.1			646.6			742.5
Catastrophe Losses and LAE	14.2			10.4			92.1			45.0
Prior Years:
Non-catastrophe Losses and LAE	(3.3		)	(10.2		)	(30.5		)	(34.4		)
Catastrophe Losses and LAE	(7.2		)	(1.7		)	(15.0		)	(8.4		)
Total Incurred Losses and LAE	210.5			243.6			693.2			744.7
Insurance Expenses, Excluding Write-off of Long-lived Asset	87.1			94.3			266.6			280.3
Write-off of Long-lived Asset	54.6			—			54.6			—
Operating Profit (Loss)	(23.9		)	32.2			(8.9		)	98.0
Income Tax Benefit (Expense)	10.3			(8.8		)	8.5			(26.5		)
Segment Net Operating Income (Loss)	$	(13.6	)	$	23.4		$	(0.4	)	$	71.5

Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	66.8		%	70.3		%	68.1		%	70.4		%
Current Year Catastrophe Losses and LAE Ratio	4.6			3.0			9.7			4.3
Prior Years Non-catastrophe Losses and LAE Ratio	(1.1		)	(2.9		)	(3.2		)	(3.3		)
Prior Years Catastrophe Losses and LAE Ratio	(2.3		)	(0.5		)	(1.6		)	(0.8		)
Total Incurred Loss and LAE Ratio	68.0			69.9			73.0			70.6
Insurance Expense Ratio, Excluding Write-off of Long-lived Asset	28.1			27.0			28.1			26.6
Impact on Ratio from Write-off of Long-lived Asset	17.6			—			5.8			—
Combined Ratio	113.7		%	96.9		%	106.9		%	97.2		%

Underlying Combined Ratio
Current Year Non-catastrophe Losses and LAE Ratio	66.8		%	70.3		%	68.1		%	70.4		%
Insurance Expense Ratio, Excluding Write-off of Long-lived Asset	28.1			27.0			28.1			26.6
Impact on Ratio from Write-off of Long-lived Asset	17.6			—			5.8			—
Underlying Combined Ratio	112.5		%	97.3		%	102.0		%	97.0		%

Non-GAAP Measure Reconciliation
Underlying Combined Ratio	112.5		%	97.3		%	102.0		%	97.0		%
Current Year Catastrophe Losses and LAE Ratio	4.6			3.0			9.7			4.3
Prior Years Non-catastrophe Losses and LAE Ratio	(1.1		)	(2.9		)	(3.2		)	(3.3		)
Prior Years Catastrophe Losses and LAE Ratio	(2.3		)	(0.5		)	(1.6		)	(0.8		)
Combined Ratio as Reported	113.7		%	96.9		%	106.9		%	97.2		%

Unaudited selected financial information for the Life & Health Insurance segment follows:



	Three Months Ended						Nine Months Ended
(Dollars in Millions)	Sep 30, 2014			Sep 30, 2013			Sep 30, 2014			Sep 30, 2013

Results of Operations

Earned Premiums:
Life	$	96.8		$	98.4		$	291.6		$	294.9
Accident and Health	37.1			40.7			112.1			121.2
Property	19.2			19.7			57.5			59.4
Total Earned Premiums	153.1			158.8			461.2			475.5
Net Investment Income	49.2			56.5			147.4			159.3
Other Income	0.4			—			0.4			0.1
Total Revenues	202.7			215.3			609.0			634.9
Policyholders’ Benefits and Incurred Losses and LAE	89.9			94.6			282.7			296.9
Insurance Expenses	81.4			85.5			235.6			239.7
Operating Profit	31.4			35.2			90.7			98.3
Income Tax Expense	(11.1		)	(12.3		)	(32.4		)	(33.9		)
Segment Net Operating Income	$	20.3		$	22.9		$	58.3		$	64.4

Use of Non-GAAP Financial Measures

Consolidated Net Operating Income

Consolidated Net Operating Income is an after-tax, non-GAAP financial measure computed by excluding from income from continuing operations the after-tax impact of 1) net realized gains on sales of investments, 2) net impairment losses recognized in earnings related to investments and 3) 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.

Kemper believes that Consolidated Net Operating Income 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 on sales of investments and net impairment losses recognized in earnings related to investments included in Kemper’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 Kemper’s business or economic trends.

A reconciliation of Consolidated Net Operating Income to Income from Continuing Operations for the three and nine months ended September 30, 2014 and 2013 is presented below:



	Three Months Ended						Nine Months Ended
(Dollars in Millions) (Unaudited)	Sep 30, 2014			Sep 30, 2013			Sep 30, 2014			Sep 30, 2013
Consolidated Net Operating Income	$	2.1		$	38.9		$	43.2		$	112.9
Net Income (Loss) From:
Net Realized Gains on Sales of Investments	5.2			31.9			11.8			50.9
Net Impairment Losses Recognized in Earnings	(2.5		)	(2.2		)	(5.7		)	(4.1		)
Income from Continuing Operations	$	4.8		$	68.6		$	49.3		$	159.7

Diluted Consolidated Net Operating Income Per Unrestricted Share

Diluted Consolidated Net Operating Income Per Unrestricted Share is a non-GAAP financial measure computed by dividing Consolidated Net Operating Income attributed to unrestricted shares by the weighted-average unrestricted shares and equivalent shares outstanding. The most directly comparable GAAP financial measure is Income from Continuing Operations Per Unrestricted Share-Diluted.

A reconciliation of Diluted Consolidated Net Operating Income Per Unrestricted Share to Diluted Income from Continuing Operations Per Unrestricted Share for the three and nine months ended September 30, 2014 and 2013 is presented below:



	Three Months Ended						Nine Months Ended
(Unaudited)	Sep 30, 2014			Sep 30, 2013			Sep 30, 2014			Sep 30, 2013
Diluted Consolidated Net Operating Income Per Unrestricted Share	$	0.04		$	0.69		$	0.79		$	1.95
Net Income (Loss) Per Unrestricted Share From:
Net Realized Gains on Sales of Investments	0.10			0.56			0.21			0.88
Net Impairment Losses Recognized in Earnings	(0.05		)	(0.04		)	(0.10		)	(0.07		)
Diluted Income from Continuing Operations Per Unrestricted Share	$	0.09		$	1.21		$	0.90		$	2.76

Book Value Per Share Excluding Net Unrealized Gains on Fixed Maturities

Book Value Per Share Excluding Net 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 after-tax impact of net unrealized gains on fixed income securities by total Common Shares Issued and Outstanding. Book Value Per Share is the most directly comparable GAAP financial measure. Kemper uses the trend in book value per share, excluding the after-tax impact of net unrealized gains 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. Kemper 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. Kemper believes it enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers.

A reconciliation of the numerator used in the computation of Book Value Per Share Excluding Net Unrealized Gains on Fixed Maturities and Book Value Per Share at September 30, 2014 and December 31, 2013 is presented below:



(Dollars in Millions) (Unaudited)	Sep 30, 2014		Dec 31, 2013
Shareholders’ Equity Excluding Net Unrealized Gains on Fixed Maturities	$	1,859.6	$	1,919.3
Net Unrealized Gains on Fixed Maturities	244.9		132.2
Shareholders’ Equity	$	2,104.5	$	2,051.5

Underlying Combined Ratio

Underlying Combined Ratio is a non-GAAP financial measure, which is computed by adding the current year non-catastrophe losses and LAE ratio with the insurance expense (including write-offs of long-lived assets) ratio. The most directly comparable GAAP financial measure is the combined ratio, which uses total incurred losses and LAE, including the impact of catastrophe losses, and loss and LAE reserve development. Kemper believes the underlying combined ratio is useful to investors and is used by management to reveal the trends in Kemper’s property and casualty insurance businesses that may be obscured by catastrophe losses and prior-year reserve development. These catastrophe losses may 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 incurred losses and LAE and the combined ratio. Prior-year reserve development is 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 the company’s insurance products in the current period. Kemper believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing its 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.

Conference Call

Kemper will discuss its third quarter 2014 results in a conference call on Friday, November 7, at 11 a.m. Eastern Time. Kemper’s conference call will be accessible via the internet and by telephone. The phone number for Kemper’s conference call is 866.393.1565. To listen via webcast, register online at the investor section of kemper.com at least 15 minutes prior to the webcast to download and install any necessary software.

A replay of the call will be available through November 21, 2014 at 855.859.2056 using conference ID number 18629795.

More detailed financial information can be found in Kemper’s Investor Financial Supplement for the third quarter of 2014, which is available at the investor section of kemper.com.

About Kemper

Kemper is a diversified insurance holding company with subsidiaries that provide an array of products to the individual and small business markets:


•	Auto insurance


•	Homeowners insurance


•	Renters insurance


•	Life insurance


•	Health insurance

Kemper markets to its customers through a network of independent agents, brokers and career agents.

Additional information about Kemper, including its filings on Forms 10-K, 10-Q and 8-K and its investor supplement, is available by visiting kemper.com.

Caution Regarding Forward-Looking Statements

This press release may contain or incorporate by reference information that includes or is based on forward-looking statements within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events, and can be identified by the fact that they relate to future actions, performance or results rather than strictly to historical or current facts.

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 press release. Forward-looking statements involve a number of risks and uncertainties that are difficult to predict, and are not guarantees of future performance. Among the general factors that could cause actual results and financial condition to differ materially from estimated results and financial condition are those listed in periodic reports filed by Kemper with the Securities and Exchange Commission (the “SEC”). No assurances can be given that the results and financial condition contemplated in any forward-looking statements will be achieved or will be achieved in any particular timetable. Kemper 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 press release. The reader is advised, however, to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.

Source: Kemper Corporation



Contact
Investors: Diana Hickert-Hill	312.661.4930 or investor.relations@kemper.com

KEYWORD: ILLINOIS

INDUSTRY KEYWORD: INSURANCE EARNINGS

KMPR 2014 09.30.14 EX 99.2 Supplement

Exhibit 99.2

Investor Supplement

Third Quarter 2014

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 27.

Kemper Corporation

Investor Supplement

Third Quarter 2014

Table of Contents




	Page
Consolidated Financial Highlights	3
Consolidated Statements of Income	4
Consolidated Balance Sheets	5
Consolidated Statements of Cash Flows	6 - 7
Capital Metrics	8
Debt Outstanding and Ratings	9
Segment Summary Results:
Revenues	10
Operating Profit	11
Net Operating Income	11
Earned Premiums by Product	12
Net Investment Income by Segment	12
Catastrophe Frequency and Severity	13
Property & Casualty Insurance Segment - Results of Operations and Selected Financial Information	14-15
Property & Casualty Insurance Segment - Premiums and Losses and LAE by Product:
Personal Automobile Insurance	16
Commercial Automobile Insurance	17
Total Automobile Insurance	18
Homeowners Insurance	19
Other Personal Lines	20
Life & Health Insurance Segment - Results of Operations and Selected Financial Information	21
Investment Performance	22
Invested Assets	23
Investment Concentration	24
Municipal Bond Securities	25
Investments in Limited Liability Companies and Limited Partnerships	26
Definitions of Non-GAAP Financial Measures	27-28

Page 2

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

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014		Sep 30, 2013
For Period Ended
Earned Premiums	$	462.8		$	470.3		$	477.6		$	495.6		$	507.5		$	512.8		$	509.9		$	1,410.7	$	1,530.2
Net Investment Income	72.3			72.6			71.1			76.9			82.4			74.6			80.8			216.0		237.8
Net Investment Gains (Losses) and Other Income	4.7			(0.4		)	5.9			13.5			45.8			1.5			25.2			10.2		72.5
Total Revenues	$	539.8		$	542.5		$	554.6		$	586.0		$	635.7		$	588.9		$	615.9		$	1,636.9	$	1,840.5

Consolidated Net Operating Income ¹	$	2.1		$	9.6		$	31.5		$	46.3		$	38.9		$	31.7		$	42.3		$	43.2	$	112.9
Income from Continuing Operations	$	4.8		$	9.3		$	35.2		$	54.8		$	68.6		$	32.5		$	58.6		$	49.3	$	159.7
Net Income	$	4.7		$	9.3		$	35.1		$	55.2		$	70.1		$	34.0		$	58.4		$	49.1	$	162.5

Per Unrestricted Common Share Amounts:
Basic:
Consolidated Net Operating Income ¹	$	0.04		$	0.18		$	0.56		$	0.83		$	0.69		$	0.55		$	0.72		$	0.79	$	1.96
Income from Continuing Operations	$	0.09		$	0.17		$	0.63		$	0.98		$	1.21		$	0.56		$	1.00		$	0.90	$	2.77
Net Income	$	0.09		$	0.17		$	0.63		$	0.99		$	1.24		$	0.59		$	1.00		$	0.90	$	2.82
Diluted:
Consolidated Net Operating Income ¹	$	0.04		$	0.18		$	0.56		$	0.83		$	0.69		$	0.55		$	0.72		$	0.79	$	1.95
Income from Continuing Operations	$	0.09		$	0.17		$	0.63		$	0.98		$	1.21		$	0.56		$	1.00		$	0.90	$	2.76
Net Income	$	0.09		$	0.17		$	0.63		$	0.99		$	1.23		$	0.59		$	1.00		$	0.90	$	2.81

Dividends Paid to Shareholders Per Share	$	0.24		$	0.24		$	0.24		$	0.24		$	0.24		$	0.24		$	0.24		$	0.72	$	0.72

At Period End
Total Assets	$	7,905.3		$	7,969.8		$	7,944.2		$	7,656.4		$	7,745.9		$	7,820.8		$	8,056.2
Insurance Reserves	$	4,041.7		$	4,064.2		$	4,067.3		$	4,061.0		$	4,086.1		$	4,108.6		$	4,117.1
Debt	$	751.9		$	751.7		$	751.4		$	606.9		$	606.7		$	611.9		$	611.6
Shareholders’ Equity	$	2,104.5		$	2,138.6		$	2,144.7		$	2,051.5		$	2,009.1		$	2,005.0		$	2,172.4
Shareholders’ Equity Excluding Goodwill	$	1,792.7		$	1,826.8		$	1,832.9		$	1,739.7		$	1,697.3		$	1,693.2		$	1,860.6
Common Shares Issued and Outstanding (In Millions)	52.666			53.497			55.408			55.653			56.025			57.061			58.322
Book Value Per Share²	$	39.96		$	39.98		$	38.71		$	36.86		$	35.86		$	35.14		$	37.25
Book Value Per Share Excluding Goodwill^1,2	$	34.04		$	34.15		$	33.08		$	31.26		$	30.30		$	29.67		$	31.90
Book Value Per Share Excluding Net Unrealized Gains on Fixed Maturities^1,2	$	35.31		$	35.32		$	35.13		$	34.49		$	32.93		$	31.91		$	31.55
Debt to Total Capitalization²	26.3		%	26.0		%	25.9		%	22.8		%	23.2		%	23.4		%	22.0		%
Rolling 12 Months Return on 5-point AverageShareholders Equity^2,3	5.0		%	8.2		%	9.4		%	10.5		%	7.8		%	7.0		%	5.5		%

¹ Non-GAAP Measure. See page 27 for definition.
²See Capital Metrics on page 8 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 Income (Dollars in Millions, Except Per Share Amounts) (Unaudited)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Revenues:
Earned Premiums	$	462.8		$	470.3		$	477.6		$	495.6		$	507.5		$	512.8		$	509.9		$	1,410.7		$	1,530.2
Net Investment Income	72.3			72.6			71.1			76.9			82.4			74.6			80.8			216.0			237.8
Other Income	0.5			0.2			0.1			0.3			0.1			0.2			0.2			0.8			0.5
Net Realized Gains on Sales of Investments	8.0			3.5			6.6			20.8			49.1			2.3			26.9			18.1			78.3
Other-than-temporary Impairment Losses:
Total Other-than-temporary Impairment Losses	(3.8		)	(4.1		)	(0.8		)	(7.6		)	(3.5		)	(2.3		)	(2.4		)	(8.7		)	(8.2		)
Portion of Losses Recognized in Other Comprehensive Income	—			—			—			—			0.1			1.3			0.5			—			1.9
Net Impairment Losses Recognized in Earnings	(3.8		)	(4.1		)	(0.8		)	(7.6		)	(3.4		)	(1.0		)	(1.9		)	(8.7		)	(6.3		)
Total Revenues	539.8			542.5			554.6			586.0			635.7			588.9			615.9			1,636.9			1,840.5
Expenses:
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses	300.5			347.5			327.9			315.5			338.3			354.2			349.2			975.9			1,041.7
Insurance Expenses	158.6			161.3			152.1			162.9			170.1			163.1			158.3			472.0			491.5
Write-off of Long-lived Asset	54.6			—			—			—			—			—			—			54.6			—
Interest and Other Expenses	22.1			22.5			22.7			26.2			25.3			25.2			23.8			67.3			74.3
Total Expenses	535.8			531.3			502.7			504.6			533.7			542.5			531.3			1,569.8			1,607.5
Income from Continuing Operations before Income Taxes	4.0			11.2			51.9			81.4			102.0			46.4			84.6			67.1			233.0
Income Tax Benefit (Expense)	0.8			(1.9		)	(16.7		)	(26.6		)	(33.4		)	(13.9		)	(26.0		)	(17.8		)	(73.3		)
Income from Continuing Operations	4.8			9.3			35.2			54.8			68.6			32.5			58.6			49.3			159.7
Discontinued Operations:
Income (Loss) from Discontinued Operations before Income Taxes	(0.2		)	—			(0.2		)	0.6			2.2			2.5			(0.4		)	(0.4		)	4.3
Income Tax Benefit (Expense)	0.1			—			0.1			(0.2		)	(0.7		)	(1.0		)	0.2			0.2			(1.5		)
Income (Loss) from Discontinued Operations	(0.1		)	—			(0.1		)	0.4			1.5			1.5			(0.2		)	(0.2		)	2.8
Net Income	$	4.7		$	9.3		$	35.1		$	55.2		$	70.1		$	34.0		$	58.4		$	49.1		$	162.5
Income from Continuing Operations Per Unrestricted Share:
Basic	$	0.09		$	0.17		$	0.63		$	0.98		$	1.21		$	0.56		$	1.00		$	0.90		$	2.77
Diluted	$	0.09		$	0.17		$	0.63		$	0.98		$	1.21		$	0.56		$	1.00		$	0.90		$	2.76
Net Income Per Unrestricted Share:
Basic	$	0.09		$	0.17		$	0.63		$	0.99		$	1.24		$	0.59		$	1.00		$	0.90		$	2.82
Diluted	$	0.09		$	0.17		$	0.63		$	0.99		$	1.23		$	0.59		$	1.00		$	0.90		$	2.81
Dividends Paid to Shareholders Per Share	$	0.24		$	0.24		$	0.24		$	0.24		$	0.24		$	0.24		$	0.24		$	0.72		$	0.72
Weighted Average Unrestricted Common Shares Outstanding (in Millions)	52.605			54.667			55.313			55.412			56.366			57.519			58.131			54.246			57.374

Page 4

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

	Sep 30, 2014		Jun 30, 2014		Mar 31, 2014		Dec 31, 2013		Sep 30, 2013		Jun 30, 2013		Mar 31, 2013
Assets:
Investments:
Fixed Maturities at Fair Value	$	4,697.2	$	4,680.0	$	4,619.5	$	4,575.0	$	4,645.0	$	4,701.1	$	4,856.5
Equity Securities at Fair Value	661.4		646.2		648.3		598.5		567.4		545.0		554.1
Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings	222.8		227.1		239.0		245.1		231.4		241.7		248.1
Fair Value Option Investments	50.6		40.3		—		—		—		—		—
Short-term Investments at Cost	316.2		480.1		506.9		284.7		286.8		239.3		362.8
Other Investments	450.5		448.3		448.2		448.0		446.2		496.0		494.8
Total Investments	6,398.7		6,522.0		6,461.9		6,151.3		6,176.8		6,223.1		6,516.3
Cash	93.1		61.8		65.0		66.5		76.1		69.5		97.5
Receivable from Policyholders	314.4		313.5		319.5		331.6		354.2		357.5		363.2
Other Receivables	247.5		190.5		225.5		193.1		203.9		206.2		202.7
Deferred Policy Acquisition Costs	306.7		304.8		301.8		302.9		308.5		308.4		304.5
Goodwill	311.8		311.8		311.8		311.8		311.8		311.8		311.8
Current and Deferred Income Tax Assets	4.3		10.1		—		31.8		61.6		85.7		—
Other Assets	228.8		255.3		258.7		267.4		253.0		258.6		260.2
Total Assets	$	7,905.3	$	7,969.8	$	7,944.2	$	7,656.4	$	7,745.9	$	7,820.8	$	8,056.2
Liabilities and Shareholders’ Equity:
Insurance Reserves:
Life and Health	$	3,260.8	$	3,249.0	$	3,237.7	$	3,217.5	$	3,201.5	$	3,189.6	$	3,174.8
Property and Casualty	780.9		815.2		829.6		843.5		884.6		919.0		942.3
Total Insurance Reserves	4,041.7		4,064.2		4,067.3		4,061.0		4,086.1		4,108.6		4,117.1
Unearned Premiums	568.2		571.8		582.5		598.9		635.3		640.3		646.8
Liabilities for Income Taxes	48.7		53.4		30.6		8.3		6.6		6.5		25.8
Debt at Amortized Cost	751.9		751.7		751.4		606.9		606.7		611.9		611.6
Accrued Expenses and Other Liabilities	390.3		390.1		367.7		329.8		402.1		448.5		482.5
Total Liabilities	5,800.8		5,831.2		5,799.5		5,604.9		5,736.8		5,815.8		5,883.8
Shareholders’ Equity:
Common Stock	5.3		5.3		5.5		5.6		5.6		5.7		5.8
Paid-in Capital	662.2		671.3		693.5		694.8		698.0		709.1		722.5
Retained Earnings	1,155.6		1,183.4		1,231.5		1,215.8		1,184.4		1,151.7		1,158.0
Accumulated Other Comprehensive Income	281.4		278.6		214.2		135.3		121.1		138.5		286.1
Total Shareholders’ Equity	2,104.5		2,138.6		2,144.7		2,051.5		2,009.1		2,005.0		2,172.4
Total Liabilities and Shareholders’ Equity	$	7,905.3	$	7,969.8	$	7,944.2	$	7,656.4	$	7,745.9	$	7,820.8	$	8,056.2

Page 5

Kemper Corporation Consolidated Statements of Cash Flows (Dollars in Millions) (Unaudited)

	Nine Months Ended						Year Ended
	Sep 30, 2014			Sep 30, 2013			Dec 31, 2013
Operating Activities:
Net Income	$	49.1		$	162.5		$	217.7
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:
Decrease (Increase) in Deferred Policy Acquisition Costs	(3.8		)	(5.1		)	0.5
Amortization of Life Insurance in Force Acquired and Customer Relationships Acquired	5.4			6.3			8.3
Equity in Earnings of Equity Method Limited Liability Investments	(9.7		)	(19.9		)	(26.4		)
Distribution of Accumulated Earnings of Equity Method Limited Liability Investments	14.4			15.1			15.4
Appreciation on Fair Value Option Investments	(0.6		)	—			—
Amortization of Investment Securities and Depreciation of Investment Real Estate	11.3			12.4			16.2
Net Realized Gains on Sales of Investments	(18.1		)	(78.3		)	(99.1		)
Net Impairment Losses Recognized in Earnings	8.7			6.3			13.9
Depreciation of Property and Equipment	13.0			12.7			17.4
Write-off of Long-lived Asset	54.6			—			—
Decrease in Receivables	21.0			13.5			43.5
Decrease in Insurance Reserves	(20.1		)	(47.3		)	(72.5		)
Decrease in Unearned Premiums	(30.7		)	(15.6		)	(52.0		)
Change in Income Taxes	(12.9		)	34.3			57.9
Increase (Decrease) in Accrued Expenses and Other Liabilities	0.1			(36.2		)	(54.8		)
Other, Net	17.7			32.2			36.1
Net Cash Provided by Operating Activities (Carryforward to page 7)	99.4			92.9			122.1

Page 6

Kemper Corporation Consolidated Statements of Cash Flows (Dollars in Millions) (Unaudited)

	Nine Months Ended						Year Ended
	Sep 30, 2014			Sep 30, 2013			Dec 31, 2013
Net Cash Provided by Operating Activities (Carryforward from page 6)	99.4			92.9			122.1
Investing Activities:
Sales, Paydowns and Maturities of Fixed Maturities	454.1			578.5			664.4
Purchases of Fixed Maturities	(404.3		)	(667.4		)	(744.5		)
Sales of Equity Securities	84.4			107.3			182.1
Purchases of Equity Securities	(95.1		)	(136.0		)	(213.4		)
Sales of and Return of Investment of Equity Method Limited Liability Investments	37.4			26.5			31.3
Acquisitions of Equity Method Limited Liability Investments	(19.8		)	(8.3		)	(20.5		)
Sales of Fair Value Option Investments	2.9			—			—
Purchases of Fair Value Option Investments	(52.9		)	—			—
Decrease (Increase) in Short-term Investments	(34.1		)	39.7			41.8
Acquisition and Improvements of Investment Real Estate	(1.9		)	(4.9		)	(5.4		)
Sales of Investment Real Estate	0.9			102.5			102.7
Increase in Other Investments	(5.4		)	(6.5		)	(9.1		)
Purchase of Corporate-owned Life Insurance	(33.5		)	—			—
Acquisition of Software	(8.5		)	(12.5		)	(15.2		)
Disposition of Business, Net of Cash Disposed	8.9			3.8			3.8
Other, Net	(5.4		)	(8.5		)	(13.2		)
Net Cash Provided (Used) by Investing Activities	(72.3		)	14.2			4.8
Financing Activities:
Net Proceeds from Issuance of Subordinated Debentures	144.2			—			—
Repayments of Debt	—			(5.5		)	(5.5		)
Common Stock Repurchases	(106.5		)	(82.9		)	(100.4		)
Dividends and Dividend Equivalents Paid	(39.2		)	(41.5		)	(54.9		)
Cash Exercise of Stock Options	—			0.6			1.7
Other, Net	1.0			2.0			2.4
Net Cash Used by Financing Activities	(0.5		)	(127.3		)	(156.7		)
Increase (Decrease) in Cash	26.6			(20.2		)	(29.8		)
Cash, Beginning of Year	66.5			96.3			96.3
Cash, End of Period	$	93.1		$	76.1		$	66.5

Page 7

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

	Three Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013
Book Value Per Share
Numerator
Shareholders’ Equity	$	2,104.5		$	2,138.6		$	2,144.7		$	2,051.5		$	2,009.1		$	2,005.0		$	2,172.4
Less: Goodwill	(311.8		)	(311.8		)	(311.8		)	(311.8		)	(311.8		)	(311.8		)	(311.8		)
Shareholders’ Equity Excluding Goodwill	$	1,792.7		$	1,826.8		$	1,832.9		$	1,739.7		$	1,697.3		$	1,693.2		$	1,860.6
Shareholders’ Equity	$	2,104.5		$	2,138.6		$	2,144.7		$	2,051.5		$	2,009.1		$	2,005.0		$	2,172.4
Less: Net Unrealized Gains on Fixed Maturities	(244.9		)	(249.0		)	(198.3		)	(132.2		)	(164.0		)	(184.2		)	(332.4		)
Shareholders’ Equity Excluding Net Unrealized Gains on Fixed Maturities	$	1,859.6		$	1,889.6		$	1,946.4		$	1,919.3		$	1,845.1		$	1,820.8		$	1,840.0
Denominator
Common Shares Issued and Outstanding	52.666			53.497			55.408			55.653			56.025			57.061			58.322
Book Value Per Share	$	39.96		$	39.98		$	38.71		$	36.86		$	35.86		$	35.14		$	37.25
Book Value Per Share Excluding Goodwill	$	34.04		$	34.15		$	33.08		$	31.26		$	30.30		$	29.67		$	31.90
Book Value Per Share Excluding Unrealized on Fixed Maturities	$	35.31		$	35.32		$	35.13		$	34.49		$	32.93		$	31.91		$	31.55

Return on Shareholders’ Equity
Numerator
Rolling 12 Months Net Income	$	104.3		$	169.7		$	194.4		$	217.7		$	164.4		$	149.9		$	118.2
Denominator (5-point Average)
5-point Average Shareholders’ Equity	$	2,089.7		$	2,069.8		$	2,076.5		$	2,079.9		$	2,110.5		$	2,138.5		$	2,163.8
Rolling 12 Months Return on Average Shareholders Equity (5-point Average)	5.0		%	8.2		%	9.4		%	10.5		%	7.8		%	7.0		%	5.5		%

Debt and Total Capitalization
Debt	$	751.9		$	751.7		$	751.4		$	606.9		$	606.7		$	611.9		$	611.6
Shareholders’ Equity	2,104.5			2,138.6			2,144.7			2,051.5			2,009.1			2,005.0			2,172.4
Total Capitalization	$	2,856.4		$	2,890.3		$	2,896.1		$	2,658.4		$	2,615.8		$	2,616.9		$	2,784.0
Ratio of Debt to Shareholders’ Equity	35.7		%	35.1		%	35.0		%	29.6		%	30.2		%	30.5		%	28.2		%
Ratio of Debt to Total Capitalization	26.3		%	26.0		%	25.9		%	22.8		%	23.2		%	23.4		%	22.0		%

Parent Company Liquidity
Kemper Holding Company Cash and Investments	$	302.4		$	302.7		$	255.9		$	156.7		$	152.6		$	124.3		$	187.4
Borrowings Available Under Credit Agreement	225.0			225.0			225.0			225.0			325.0			325.0			325.0
Parent Company Liquidity	$	527.4		$	527.7		$	480.9		$	381.7		$	477.6		$	449.3		$	512.4

Capital Returned to Shareholders
Common Stock Repurchased	$	29.9		$	68.3		$	8.3		$	15.2		$	36.3		$	42.4		$	6.5
Cash Dividends Paid	12.6			13.3			13.3			13.4			13.6			13.9			14.0
Total Capital Returned to Shareholders	$	42.5		$	81.6		$	21.6		$	28.6		$	49.9		$	56.3		$	20.5

Page 8

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

	Sep 30, 2014		Jun 30, 2014		Mar 31, 2014		Dec 31, 2013		Sep 30, 2013		Jun 30, 2013		Mar 31, 2013
Notes Payable under Revolving Credit Agreements	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Senior Notes at Amortized Cost:
6.00% Senior Notes due November 30, 2015	249.4		249.3		249.2		249.0		248.9		248.8		248.7
6.00% Senior Notes due May 15, 2017	358.3		358.2		358.0		357.9		357.8		357.6		357.4
7.375% Subordinated Debentures due February 27, 2054 at Amortized Cost	144.2		144.2		144.2		—		—		—		—
Mortgage Note Payable at Amortized Cost	—		—		—		—		—		5.5		5.5
Debt Outstanding	$	751.9	$	751.7	$	751.4	$	606.9	$	606.7	$	611.9	$	611.6

	A.M. Best		Moody’s		S&P		Fitch
As of Date of Financial Supplement
Kemper Debt Ratings:
Senior Notes Payable	bbb-		Baa3		BBB-		BBB-
Subordinated Debentures	bb+		Ba1		BB		BB
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 9

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

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Revenues:
Property & Casualty Insurance:
Earned Premiums:
Personal Automobile	$	205.1		$	212.0		$	216.3		$	229.7		$	239.1		$	244.6		$	245.7		$	633.4		$	729.4
Homeowners	77.9			79.0			79.7			81.4			82.3			82.1			80.4			236.6			244.8
Other Personal	12.6			12.9			13.2			13.5			13.8			14.1			13.9			38.7			41.8
Total Personal	295.6			303.9			309.2			324.6			335.2			340.8			340.0			908.7			1,016.0
Commercial Automobile	14.1			13.6			13.1			13.6			13.5			13.1			12.1			40.8			38.7
Total Earned Premiums	309.7			317.5			322.3			338.2			348.7			353.9			352.1			949.5			1,054.7
Net Investment Income	18.5			19.5			17.6			23.0			21.3			21.5			25.1			55.6			67.9
Other Income	0.1			0.2			0.1			0.1			0.1			0.1			0.2			0.4			0.4
Total Property & Casualty Insurance	328.3			337.2			340.0			361.3			370.1			375.5			377.4			1,005.5			1,123.0
Life & Health Insurance:
Earned Premiums:
Life	96.8			97.2			97.6			97.8			98.4			98.6			97.9			291.6			294.9
Accident and Health	37.1			36.2			38.8			40.2			40.7			40.3			40.2			112.1			121.2
Property	19.2			19.4			18.9			19.4			19.7			20.0			19.7			57.5			59.4
Total Earned Premiums	153.1			152.8			155.3			157.4			158.8			158.9			157.8			461.2			475.5
Net Investment Income	49.2			48.0			50.2			50.6			56.5			49.8			53.0			147.4			159.3
Other Income	0.4			—			—			0.1			—			0.1			—			0.4			0.1
Total Life & Health Insurance	202.7			200.8			205.5			208.1			215.3			208.8			210.8			609.0			634.9
Total Segment Revenues	531.0			538.0			545.5			569.4			585.4			584.3			588.2			1,614.5			1,757.9
Net Realized Gains on Sales of Investments	8.0			3.5			6.6			20.8			49.1			2.3			26.9			18.1			78.3
Net Impairment Losses Recognized in Earnings	(3.8		)	(4.1		)	(0.8		)	(7.6		)	(3.4		)	(1.0		)	(1.9		)	(8.7		)	(6.3		)
Other	4.6			5.1			3.3			3.4			4.6			3.3			2.7			13.0			10.6
Total Revenues	$	539.8		$	542.5		$	554.6		$	586.0		$	635.7		$	588.9		$	615.9		$	1,636.9		$	1,840.5

Page 10

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

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Segment Operating Profit (Loss):
Property & Casualty Insurance	$	(23.9	)	$	(4.3	)	$	19.3		$	41.6		$	32.2		$	25.6		$	40.2		$	(8.9	)	$	98.0
Life & Health Insurance	31.4			24.7			34.6			38.6			35.2			31.2			31.9			90.7			98.3
Total Segment Operating Profit	7.5			20.4			53.9			80.2			67.4			56.8			72.1			81.8			196.3
Corporate and Other Operating Loss	(7.7		)	(8.6		)	(7.8		)	(12.0		)	(11.1		)	(11.7		)	(12.5		)	(24.1		)	(35.3		)
Total Operating Profit (Loss)	(0.2		)	11.8			46.1			68.2			56.3			45.1			59.6			57.7			161.0
Net Realized Gains on Sales of Investments	8.0			3.5			6.6			20.8			49.1			2.3			26.9			18.1			78.3
Net Impairment Losses Recognized in Earnings	(3.8		)	(4.1		)	(0.8		)	(7.6		)	(3.4		)	(1.0		)	(1.9		)	(8.7		)	(6.3		)
Income from Continuing Operations before Income Taxes	$	4.0		$	11.2		$	51.9		$	81.4		$	102.0		$	46.4		$	84.6		$	67.1		$	233.0
Segment Net Operating Income (Loss):
Property & Casualty Insurance	$	(13.6	)	$	(1.2	)	$	14.4		$	29.1		$	23.4		$	19.1		$	29.0		$	(0.4	)	$	71.5
Life & Health Insurance	20.3			15.9			22.1			24.9			22.9			20.3			21.2			58.3			64.4
Total Segment Net Operating Income	6.7			14.7			36.5			54.0			46.3			39.4			50.2			57.9			135.9
Corporate and Other Net Operating Loss	(4.6		)	(5.1		)	(5.0		)	(7.7		)	(7.4		)	(7.7		)	(7.9		)	(14.7		)	(23.0		)
Consolidated Operating Income	2.1			9.6			31.5			46.3			38.9			31.7			42.3			43.2			112.9
Net Income (Loss) From:
Net Realized Gains on Sales of Investments	5.2			2.4			4.2			13.5			31.9			1.5			17.5			11.8			50.9
Net Impairment Losses Recognized in Earnings	(2.5		)	(2.7		)	(0.5		)	(5.0		)	(2.2		)	(0.7		)	(1.2		)	(5.7		)	(4.1		)
Income from Continuing Operations	$	4.8		$	9.3		$	35.2		$	54.8		$	68.6		$	32.5		$	58.6		$	49.3		$	159.7

Page 11

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

	Three Months Ended															Nine Months Ended
	Sep 30, 2014		Jun 30, 2014			Mar 31, 2014		Dec 31, 2013		Sep 30, 2013		Jun 30, 2013		Mar 31, 2013		Sep 30, 2014			Sep 30, 2013
Earned Premiums by Product:
Personal Automobile	$	205.1	$	212.0		$	216.3	$	229.7	$	239.1	$	244.6	$	245.7	$	633.4		$	729.4
Homeowners	77.9		79.0			79.7		81.4		82.3		82.1		80.4		236.6			244.8
Other Personal Property and Casualty Insurance	31.8		32.3			32.1		32.9		33.5		34.1		33.6		96.2			101.2
Commercial Automobile	14.1		13.6			13.1		13.6		13.5		13.1		12.1		40.8			38.7
Life	96.8		97.2			97.6		97.8		98.4		98.6		97.9		291.6			294.9
Accident and Health	37.1		36.2			38.8		40.2		40.7		40.3		40.2		112.1			121.2
Total Earned Premiums	$	462.8	$	470.3		$	477.6	$	495.6	$	507.5	$	512.8	$	509.9	$	1,410.7		$	1,530.2
Net Investment Income by Segment:
Property & Casualty Insurance:
Equity Method Limited Liability Investments	$	4.3	$	2.1		$	2.5	$	5.0	$	3.4	$	2.3	$	5.8	$	8.9		$	11.5
All Other Net Investment Income	14.2		17.4			15.1		18.0		17.9		19.2		19.3		46.7			56.4
Net Investment Income	18.5		19.5			17.6		23.0		21.3		21.5		25.1		55.6			67.9
Life & Health Insurance:
Equity Method Limited Liability Investments	0.1		(1.1		)	0.7		1.2		3.8		1.1		2.3		(0.3		)	7.2
All Other Net Investment Income	49.1		49.1			49.5		49.4		52.7		48.7		50.7		147.7			152.1
Net Investment Income	49.2		48.0			50.2		50.6		56.5		49.8		53.0		147.4			159.3
Total Segment Net Investment Income	67.7		67.5			67.8		73.6		77.8		71.3		78.1		203.0			227.2
Unallocated Net Investment Income:
Equity Method Limited Liability Investments	0.5		0.3			0.3		0.3		0.5		0.2		0.5		1.1			1.2
All Other Net Investment Income	4.1		4.8			3.0		3.0		4.1		3.1		2.2		11.9			9.4
Unallocated Net Investment Income	4.6		5.1			3.3		3.3		4.6		3.3		2.7		13.0			10.6
Net Investment Income	$	72.3	$	72.6		$	71.1	$	76.9	$	82.4	$	74.6	$	80.8	$	216.0		$	237.8

Page 12

Kemper Corporation Catastrophe Frequency and Severity (Dollars in Millions) (Unaudited)

	Nine Months Ended Sep 30, 2014
	Property & Casualty Insurance Segment			Life & Health Insurance Segment			Consolidated
	Number of Events	Losses and LAE		Number of Events	Losses and LAE		Number of Events	Losses and LAE
Range of Losses and LAE Per Event:
Below $5	21	$	26.0	15	$	1.6	21	$	26.7
$5 - $10	3	19.9		—	—		3	20.4
$10 - $15	1	12.7		—	—		1	13.0
$15 - $20	—	—		—	—		—	—
$20 - $25	—	—		—	—		—	—
Greater Than $25	1	33.5		—	—		1	33.6
Total	26	$	92.1	15	$	1.6	26	$	93.7

	Nine Months Ended Sep 30, 2013
	Property & Casualty Insurance Segment			Life & Health Insurance Segment			Consolidated
	Number of Events	Losses and LAE		Number of Events	Losses and LAE		Number of Events	Losses and LAE
Range of Losses and LAE Per Event:
Below $5	25	$	45.0	17	$	3.4	24	$	41.9
$5 - $10	—	—		—	—		1	6.5
$10 - $15	—	—		—	—		—	—
$15 - $20	—	—		—	—		—	—
$20 - $25	—	—		—	—		—	—
Greater Than $25	—	—		—	—		—	—
Total	25	$	45.0	17	$	3.4	25	$	48.4

Page 13

Kemper Corporation Property & Casualty Insurance Segment - Results of Operations and Selected Financial Information (Dollars in Millions) (Unaudited)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Results of Operations
Net Premiums Written	$	307.0		$	308.7		$	304.3		$	302.9		$	345.0		$	348.9		$	345.4		$	920.0		$	1,039.3

Earned Premiums	309.7			317.5			322.3			338.2			348.7			353.9			352.1			949.5			1,054.7
Net Investment Income	18.5			19.5			17.6			23.0			21.3			21.5			25.1			55.6			67.9
Other Income	0.1			0.2			0.1			0.1			0.1			0.1			0.2			0.4			0.4
Total Revenues	328.3			337.2			340.0			361.3			370.1			375.5			377.4			1,005.5			1,123.0
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	206.8			209.4			230.4			237.7			245.1			246.3			251.1			646.6			742.5
Catastrophe Losses and LAE	14.2			61.9			16.0			2.1			10.4			25.9			8.7			92.1			45.0
Prior Years:
Non-catastrophe Losses and LAE	(3.3		)	(14.5		)	(12.7		)	(11.1		)	(10.2		)	(12.2		)	(12.0		)	(30.5		)	(34.4		)
Catastrophe Losses and LAE	(7.2		)	(5.1		)	(2.7		)	(4.1		)	(1.7		)	(5.2		)	(1.5		)	(15.0		)	(8.4		)
Total Incurred Losses and LAE	210.5			251.7			231.0			224.6			243.6			254.8			246.3			693.2			744.7
Insurance Expenses, Excluding Write-off of Long-lived Assets	87.1			89.8			89.7			95.1			94.3			95.1			90.9			266.6			280.3
Write-off of Long-lived Asset	54.6			—			—			—			—			—			—			54.6			—
Operating Profit (Loss)	(23.9		)	(4.3		)	19.3			41.6			32.2			25.6			40.2			(8.9		)	98.0
Income Tax Benefit (Expense)	10.3			3.1			(4.9		)	(12.5		)	(8.8		)	(6.5		)	(11.2		)	8.5			(26.5		)
Segment Net Operating Income (Loss)	$	(13.6	)	$	(1.2	)	$	14.4		$	29.1		$	23.4		$	19.1		$	29.0		$	(0.4	)	$	71.5
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	66.8		%	66.0		%	71.4		%	70.3		%	70.3		%	69.6		%	71.3		%	68.1		%	70.4		%
Current Year Catastrophe Losses and LAE Ratio	4.6			19.5			5.0			0.6			3.0			7.3			2.5			9.7			4.3
Prior Years Non-catastrophe Losses and LAE Ratio	(1.1		)	(4.6		)	(3.9		)	(3.3		)	(2.9		)	(3.4		)	(3.4		)	(3.2		)	(3.3		)
Prior Years Catastrophe Losses and LAE Ratio	(2.3		)	(1.6		)	(0.8		)	(1.2		)	(0.5		)	(1.5		)	(0.4		)	(1.6		)	(0.8		)
Total Incurred Loss and LAE Ratio	68.0			79.3			71.7			66.4			69.9			72.0			70.0			73.0			70.6
Insurance Expense Ratio, Excluding Write-off of Long-lived Asset	28.1			28.3			27.8			28.1			27.0			26.9			25.8			28.1			26.6
Impact on Ratio from Write-off of Long-lived Asset	17.6			—			—			—			—			—			—			5.8			—
Combined Ratio	113.7		%	107.6		%	99.5		%	94.5		%	96.9		%	98.9		%	95.8		%	106.9		%	97.2		%
Underlying Combined Ratio ¹
Current Year Non-catastrophe Losses and LAE Ratio	66.8		%	66.0		%	71.4		%	70.3		%	70.3		%	69.6		%	71.3		%	68.1		%	70.4		%
Insurance Expense Ratio, Excluding write-off of Long-lived Asset	28.1			28.3			27.8			28.1			27.0			26.9			25.8			28.1			26.6
Impact on Ratio from Write-off of Long-lived Asset	17.6			—			—			—			—		%	—			—			5.8			—
Underlying Combined Ratio	112.5		%	94.3		%	99.2		%	98.4		%	97.3		%	96.5		%	97.1		%	102.0		%	97.0		%
Non-GAAP Measure Reconciliation
Underlying Combined Ratio	112.5		%	94.3		%	99.2		%	98.4		%	97.3		%	96.5		%	97.1		%	102.0		%	97.0		%
Current Year Catastrophe Losses and LAE Ratio	4.6			19.5			5.0			0.6			3.0			7.3			2.5			9.7			4.3
Prior Years Non-catastrophe Losses and LAE Ratio	(1.1		)	(4.6		)	(3.9		)	(3.3		)	(2.9		)	(3.4		)	(3.4		)	(3.2		)	(3.3		)
Prior Years Catastrophe Losses and LAE Ratio	(2.3		)	(1.6		)	(0.8		)	(1.2		)	(0.5		)	(1.5		)	(0.4		)	(1.6		)	(0.8		)
Combined Ratio as Reported	113.7		%	107.6		%	99.5		%	94.5		%	96.9		%	98.9		%	95.8		%	106.9		%	97.2		%


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 Property & Casualty Insurance Segment - Results of Operations and Selected Financial Information (continued) (Dollars in Millions) (Unaudited)

	Sep 30, 2014		Jun 30, 2014		Mar 31, 2014		Dec 31, 2013		Sep 30, 2013		Jun 30, 2013		Mar 31, 2013
Insurance Reserves:
Automobile	$	524.2	$	545.4	$	568.9	$	595.1	$	614.9	$	638.4	$	649.3
Homeowners	118.8		128.3		114.4		99.9		118.2		122.6		122.4
Other Personal	47.5		47.2		47.9		47.6		47.1		46.9		50.3
Insurance Reserves	$	690.5	$	720.9	$	731.2	$	742.6	$	780.2	$	807.9	$	822.0
Insurance Reserves:
Loss Reserves:
Case	$	447.6	$	460.8	$	468.1	$	471.2	$	491.8	$	509.0	$	514.7
Incurred but Not Reported	148.9		162.5		164.2		169.0		180.5		184.6		190.2
Total Loss Reserves	596.5		623.3		632.3		640.2		672.3		693.6		704.9
LAE Reserves	94.0		97.6		98.9		102.4		107.9		114.3		117.1
Insurance Reserves	$	690.5	$	720.9	$	731.2	$	742.6	$	780.2	$	807.9	$	822.0

Page 15

Kemper Corporation Property & Casualty Insurance Segment Personal Automobile Insurance - Premiums and Losses and LAE (Dollars in Millions) (Unaudited)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Premiums
Net Premiums Written	$	202.1		$	200.1		$	207.7		$	204.2		$	232.9		$	233.0		$	244.1		$	609.9		$	710.0

Earned Premiums	$	205.1		$	212.0		$	216.3		$	229.7		$	239.1		$	244.6		$	245.7		$	633.4		$	729.4

Losses and LAE
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	$	149.8		$	153.1		$	163.1		$	189.5		$	181.3		$	184.0		$	186.9		$	466.0		$	552.2
Catastrophe Losses and LAE	1.6			9.8			0.9			0.1			0.8			4.2			2.5			12.3			7.5
Prior Years:
Non-catastrophe Losses and LAE	(3.1		)	(11.9		)	(11.3		)	(7.6		)	(6.9		)	(8.5		)	(6.9		)	(26.3		)	(22.3		)
Catastrophe Losses and LAE	(0.3		)	(0.1		)	(0.2		)	0.1			(0.1		)	(0.3		)	0.1			(0.6		)	(0.3		)
Total Incurred Losses and LAE	$	148.0		$	150.9		$	152.5		$	182.1		$	175.1		$	179.4		$	182.6		$	451.4		$	537.1

Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	73.0		%	72.2		%	75.4		%	82.6		%	75.8		%	75.2		%	76.1		%	73.7		%	75.7		%
Current Year Catastrophe Losses and LAE Ratio	0.8			4.6			0.4			—			0.3			1.7			1.0			1.9			1.0
Prior Years Non-catastrophe Losses and LAE Ratio	(1.5		)	(5.6		)	(5.2		)	(3.3		)	(2.9		)	(3.5		)	(2.8		)	(4.2		)	(3.1		)
Prior Years Catastrophe Losses and LAE Ratio	(0.1		)	—			(0.1		)	—			—			(0.1		)	—			(0.1		)	—
Total Incurred Loss and LAE Ratio	72.2		%	71.2		%	70.5		%	79.3		%	73.2		%	73.3		%	74.3		%	71.3		%	73.6		%

Page 16

Kemper Corporation Property & Casualty Insurance Segment Commercial Automobile Insurance - Premiums and Losses and LAE (Dollars in Millions) (Unaudited)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Premiums
Net Premiums Written	$	13.7		$	15.3		$	14.3		$	12.3		$	12.7		$	14.4		$	14.3		$	43.3		$	41.4

Earned Premiums	$	14.1		$	13.6		$	13.1		$	13.6		$	13.5		$	13.1		$	12.1		$	40.8		$	38.7

Losses and LAE
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	$	11.5		$	11.6		$	11.1		$	10.6		$	10.9		$	12.8		$	9.4		$	34.2		$	33.1
Catastrophe Losses and LAE	0.1			0.1			—			(0.1		)	0.1			0.1			—			0.2			0.2
Prior Years:
Non-catastrophe Losses and LAE	(0.6		)	0.4			(0.5		)	(1.0		)	(2.0		)	(0.7		)	0.7			(0.7		)	(2.0		)
Catastrophe Losses and LAE	—			—			—			—			—			—			—			—			—
Total Incurred Losses and LAE	$	11.0		$	12.1		$	10.6		$	9.5		$	9.0		$	12.2		$	10.1		$	33.7		$	31.3

Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	81.6		%	85.4		%	84.7		%	78.0		%	80.8		%	97.6		%	77.7		%	83.8		%	85.6		%
Current Year Catastrophe Losses and LAE Ratio	0.7			0.7			—			(0.7		)	0.7			0.8			—			0.5			0.5
Prior Years Non-catastrophe Losses and LAE Ratio	(4.3		)	2.9			(3.8		)	(7.4		)	(14.8		)	(5.3		)	5.8			(1.7		)	(5.2		)
Prior Years Catastrophe Losses and LAE Ratio	—			—			—			—			—			—			—			—			—
Total Incurred Loss and LAE Ratio	78.0		%	89.0		%	80.9		%	69.9		%	66.7		%	93.1		%	83.5		%	82.6		%	80.9		%

Page 17

Kemper Corporation Property & Casualty Insurance Segment Total Automobile Insurance - Premiums and Losses and LAE (Dollars in Millions) (Unaudited)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Premiums
Net Premiums Written	$	215.8		$	215.4		$	222.0		$	216.5		$	245.6		$	247.4		$	258.4		$	653.2		$	751.4

Earned Premiums	$	219.2		$	225.6		$	229.4		$	243.3		$	252.6		$	257.7		$	257.8		$	674.2		$	768.1

Losses and LAE
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	$	161.3		$	164.7		$	174.2		$	200.1		$	192.2		$	196.8		$	196.3		$	500.2		$	585.3
Catastrophe Losses and LAE	1.7			9.9			0.9			—			0.9			4.3			2.5			12.5			7.7
Prior Years:
Non-catastrophe Losses and LAE	(3.7		)	(11.5		)	(11.8		)	(8.6		)	(8.9		)	(9.2		)	(6.2		)	(27.0		)	(24.3		)
Catastrophe Losses and LAE	(0.3		)	(0.1		)	(0.2		)	0.1			(0.1		)	(0.3		)	0.1			(0.6		)	(0.3		)
Total Incurred Losses and LAE	$	159.0		$	163.0		$	163.1		$	191.6		$	184.1		$	191.6		$	192.7		$	485.1		$	568.4

Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	73.5		%	73.0		%	75.9		%	82.3		%	76.0		%	76.4		%	76.1		%	74.2		%	76.2		%
Current Year Catastrophe Losses and LAE Ratio	0.8			4.4			0.4			—			0.4			1.7			1.0			1.9			1.0
Prior Years Non-catastrophe Losses and LAE Ratio	(1.7		)	(5.1		)	(5.1		)	(3.5		)	(3.5		)	(3.6		)	(2.4		)	(4.0		)	(3.2		)
Prior Years Catastrophe Losses and LAE Ratio	(0.1		)	—			(0.1		)	—			—			(0.1		)	—			(0.1		)	—
Total Incurred Loss and LAE Ratio	72.5		%	72.3		%	71.1		%	78.8		%	72.9		%	74.4		%	74.7		%	72.0		%	74.0		%

Page 18

Kemper Corporation Property & Casualty Insurance Segment Homeowners Insurance - Premiums and Losses and LAE (Dollars in Millions) (Unaudited)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Premiums
Net Premiums Written	$	78.6		$	80.5		$	70.9		$	74.2		$	85.4		$	87.0		$	74.3		$	230.0		$	246.7

Earned Premiums	$	77.9		$	79.0		$	79.7		$	81.4		$	82.3		$	82.1		$	80.4		$	236.6		$	244.8

Losses and LAE
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	$	38.1		$	37.9		$	49.1		$	30.9		$	47.6		$	43.1		$	48.8		$	125.1		$	139.5
Catastrophe Losses and LAE	12.3			50.4			14.3			2.2			8.8			21.2			6.0			77.0			36.0
Prior Years:
Non-catastrophe Losses and LAE	1.5			(1.6		)	(0.7		)	(3.0		)	(0.3		)	(1.0		)	(4.6		)	(0.8		)	(5.9		)
Catastrophe Losses and LAE	(6.0		)	(4.4		)	(2.1		)	(3.8		)	(1.6		)	(4.2		)	(1.6		)	(12.5		)	(7.4		)
Total Incurred Losses and LAE	$	45.9		$	82.3		$	60.6		$	26.3		$	54.5		$	59.1		$	48.6		$	188.8		$	162.2

Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	48.9		%	48.0		%	61.6		%	38.0		%	57.8		%	52.5		%	60.6		%	52.9		%	57.0		%
Current Year Catastrophe Losses and LAE Ratio	15.8			63.8			17.9			2.7			10.7			25.8			7.5			32.5			14.7
Prior Years Non-catastrophe Losses and LAE Ratio	1.9			(2.0		)	(0.9		)	(3.7		)	(0.4		)	(1.2		)	(5.7		)	(0.3		)	(2.4		)
Prior Years Catastrophe Losses and LAE Ratio	(7.7		)	(5.6		)	(2.6		)	(4.7		)	(1.9		)	(5.1		)	(2.0		)	(5.3		)	(3.0		)
Total Incurred Loss and LAE Ratio	58.9		%	104.2		%	76.0		%	32.3		%	66.2		%	72.0		%	60.4		%	79.8		%	66.3		%

Page 19

Kemper Corporation Property & Casualty Insurance Segment Other Personal Lines - Premiums and Losses and LAE (Dollars in Millions) (Unaudited)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Premiums
Net Premiums Written	$	12.6		$	12.8		$	11.4		$	12.2		$	14.0		$	14.5		$	12.7		$	36.8		$	41.2

Earned Premiums	$	12.6		$	12.9		$	13.2		$	13.5		$	13.8		$	14.1		$	13.9		$	38.7		$	41.8

Losses and LAE
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE	$	7.4		$	6.8		$	7.1		$	6.7		$	5.3		$	6.4		$	6.0		$	21.3		$	17.7
Catastrophe Losses and LAE	0.2			1.6			0.8			(0.1		)	0.7			0.4			0.2			2.6			1.3
Prior Years:
Non-catastrophe Losses and LAE	(1.1		)	(1.4		)	(0.2		)	0.5			(1.0		)	(2.0		)	(1.2		)	(2.7		)	(4.2		)
Catastrophe Losses and LAE	(0.9		)	(0.6		)	(0.4		)	(0.4		)	—			(0.7		)	—			(1.9		)	(0.7		)
Total Incurred Losses and LAE	$	5.6		$	6.4		$	7.3		$	6.7		$	5.0		$	4.1		$	5.0		$	19.3		$	14.1

Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio	58.6		%	52.8		%	53.7		%	49.6		%	38.3		%	45.5		%	43.2		%	55.1		%	42.3		%
Current Year Catastrophe Losses and LAE Ratio	1.6			12.4			6.1			(0.7		)	5.1			2.8			1.4			6.7			3.1
Prior Years Non-catastrophe Losses and LAE Ratio	(8.7		)	(10.9		)	(1.5		)	3.7			(7.2		)	(14.2		)	(8.6		)	(7.0		)	(10.0		)
Prior Years Catastrophe Losses and LAE Ratio	(7.1		)	(4.7		)	(3.0		)	(3.0		)	—			(5.0		)	—			(4.9		)	(1.7		)
Total Incurred Loss and LAE Ratio	44.4		%	49.6		%	55.3		%	49.6		%	36.2		%	29.1		%	36.0		%	49.9		%	33.7		%

Page 20

Kemper Corporation Life & Health Insurance Segment - Results of Operations and Selected Financial Information (Dollars in Millions) (Unaudited)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Results of Operations
Earned Premiums:
Life	$	96.8		$	97.2		$	97.6		$	97.8		$	98.4		$	98.6		$	97.9		$	291.6		$	294.9
Accident and Health	37.1			36.2			38.8			40.2			40.7			40.3			40.2			112.1			121.2
Property	19.2			19.4			18.9			19.4			19.7			20.0			19.7			57.5			59.4
Total Earned Premiums	153.1			152.8			155.3			157.4			158.8			158.9			157.8			461.2			475.5
Net Investment Income	49.2			48.0			50.2			50.6			56.5			49.8			53.0			147.4			159.3
Other Income	0.4			—			—			0.1			—			0.1			—			0.4			0.1
Total Revenues	202.7			200.8			205.5			208.1			215.3			208.8			210.8			609.0			634.9
Policyholders’ Benefits and Incurred Losses and LAE	89.9			95.8			97.0			91.0			94.6			99.4			102.9			282.7			296.9
Insurance Expenses	81.4			80.3			73.9			78.5			85.5			78.2			76.0			235.6			239.7
Operating Profit	31.4			24.7			34.6			38.6			35.2			31.2			31.9			90.7			98.3
Income Tax Expense	(11.1		)	(8.8		)	(12.5		)	(13.7		)	(12.3		)	(10.9		)	(10.7		)	(32.4		)	(33.9		)
Segment Net Operating Income	$	20.3		$	15.9		$	22.1		$	24.9		$	22.9		$	20.3		$	21.2		$	58.3		$	64.4



	Sep 30, 2014		Jun 30, 2014		Mar 31, 2014		Dec 31, 2013		Sep 30, 2013		Jun 30, 2013		Mar 31, 2013
Insurance Reserves:
Future Policyholder Benefits	$	3,202.5	$	3,189.5	$	3,173.8	$	3,157.7	$	3,146.7	$	3,133.3	$	3,119.4
Incurred Losses and LAE Reserves:
Life	38.7		39.4		42.6		37.6		33.1		34.3		35.0
Accident and Health	19.6		20.1		21.3		22.2		21.7		22.0		20.4
Property	4.3		5.3		5.6		5.3		4.7		5.7		8.0
Total Incurred Losses and LAE Reserves	62.6		64.8		69.5		65.1		59.5		62.0		63.4
Insurance Reserves	$	3,265.1	$	3,254.3	$	3,243.3	$	3,222.8	$	3,206.2	$	3,195.3	$	3,182.8

Page 21

Kemper Corporation Details of Investment Performance (Dollars in Millions)

	Three Months Ended																					Nine Months Ended
	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Net Investment Income
Interest and Dividends on Fixed Maturities	$	56.1		$	56.9		$	57.0		$	58.3		$	59.5		$	58.6		$	59.1		$	170.0		$	177.2
Dividends on Equity Securities	7.7			10.8			7.3			8.9			11.3			9.0			8.8			25.8			29.1
Equity Method Limited Liability Investments	4.9			1.3			3.5			6.5			7.7			3.6			8.6			9.7			19.9
Fair Value Option Investments	0.3			0.3			—			—			—			—			—			0.6			—
Short-term Investments	0.1			0.2			0.2			0.1			—			—			—			0.5			—
Real Estate	3.1			2.9			3.2			3.1			3.7			6.6			7.4			9.2			17.7
Loans to Policyholders	5.2			5.0			5.1			5.1			5.0			4.8			4.9			15.3			14.7
Total Investment Income	77.4			77.4			76.3			82.0			87.2			82.6			88.8			231.1			258.6
Investment Expenses:
Real Estate	3.1			2.7			2.8			3.0			3.0			6.0			6.3			8.6			15.3
Other Investment Expenses	2.0			2.1			2.4			2.1			1.8			2.0			1.7			6.5			5.5
Total Investment Expenses	5.1			4.8			5.2			5.1			4.8			8.0			8.0			15.1			20.8
Net Investment Income	$	72.3		$	72.6		$	71.1		$	76.9		$	82.4		$	74.6		$	80.8		$	216.0		$	237.8
Net Realized Gains on Sales of Investments
Fixed Maturities:
Gains on Sales	$	0.2		$	0.4		$	4.4		$	1.3		$	2.5		$	1.4		$	25.7		$	5.0		$	29.6
Losses on Sales	—			—			—			(0.4		)	—			—			—			—			—
Equity Securities:
Gains on Sales	7.9			3.0			0.8			19.9			0.7			0.8			0.4			11.7			1.9
Losses on Sales	—			—			—			(0.2		)	(0.2		)	—			(0.1		)	—			(0.3		)
Equity Method Limited Liability Investments:
Gains on Sales	—			—			—			—			2.3			0.2			—			—			2.5
Real Estate:
Gains on Sales	—			—			—			—			43.6			—			0.6			—			44.2
Losses on Sales	—			—			(0.2		)	—			—			—			—			(0.2		)	—
Other Investments:
Gain on Sale of Subsidiary	—			—			1.6			—			—			—			—			1.6			—
Gains on Sales	—			—			—			—			—			—			0.1			—			0.1
Losses on Sales	—			(0.1		)	—			—			—			(0.1		)	—			(0.1		)	(0.1		)
Trading Securities Net Gains	(0.1		)	0.2			—			0.2			0.2			—			0.2			0.1			0.4
Net Realized Gains on Sales of Investments	$	8.0		$	3.5		$	6.6		$	20.8		$	49.1		$	2.3		$	26.9		$	18.1		$	78.3
Net Impairment Losses Recognized in Earnings
Fixed Maturities	$	(2.2	)	$	(3.1	)	$	(0.3	)	$	(5.9	)	$	(2.2	)	$	(0.5	)	$	(1.7	)	$	(5.6	)	$	(4.4	)
Equity Securities	(1.6		)	(1.0		)	(0.5		)	(1.7		)	(1.2		)	(0.5		)	(0.2		)	(3.1		)	(1.9		)
Net Impairment Losses Recognized in Earnings	$	(3.8	)	$	(4.1	)	$	(0.8	)	$	(7.6	)	$	(3.4	)	$	(1.0	)	$	(1.9	)	$	(8.7	)	$	(6.3	)

Page 22

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

	Sep 30, 2014				Dec 31, 2013				Dec 31, 2012
	Carrying Value		Percent of Total¹		Carrying Value		Percent of Total¹		Carrying Value		Percent of Total¹
Fixed Maturities Reported at Fair Value:
U.S. Government and Government Agencies and Authorities	$	343.5	5.4	%	$	362.2	5.9	%	$	428.9	6.6	%
States and Political Subdivisions	1,439.2		22.5		1,361.0		22.1		1,401.4		21.7
Corporate Securities:
Bonds and Notes	2,839.0		44.4		2,793.7		45.4		2,993.4		46.3
Redeemable Preferred Stocks	7.4		0.1		7.4		0.1		32.6		0.5
Collaterized Loan Obligations	62.5		1.0		44.7		0.7		—		—
Other Mortgage- and Asset-backed	5.6		0.1		6.0		0.1		3.9		0.1
Subtotal Fixed Maturities Reported at Fair Value	4,697.2		73.4		4,575.0		74.3		4,860.2		75.2
Equity Securities Reported at Fair Value:
Preferred Stocks	115.1		1.8		110.2		1.8		100.5		1.6
Common Stocks	198.8		3.1		189.5		3.1		154.2		2.4
Other Equity Interests:
Exchange Traded Funds	129.8		2.0		124.9		2.0		125.9		1.9
Limited Liability Companies and Limited Partnerships	217.7		3.4		173.9		2.8		141.3		2.2
Subtotal Equity Securities Reported at Fair Value	661.4		10.3		598.5		9.7		521.9		8.1
Equity Method Limited Liability Investments	222.8		3.5		245.1		4.0		253.0		3.9
Fair Value Option Investments	50.6		0.8		—		—		—		—
Short-term Investments at Cost which Approximates Fair Value	316.2		4.9		284.7		4.6		327.5		5.1
Other Investments:
Loans to Policyholders at Unpaid Principal	280.8		4.4		275.4		4.5		266.3		4.1
Real Estate at Depreciated Cost	164.3		2.6		167.1		2.7		226.2		3.5
Trading Securities at Fair Value	5.0		0.1		5.0		0.1		4.5		0.1
Other	0.4		—		0.5		—		0.5		—
Subtotal Other Investments	450.5		7.1		448.0		7.3		497.5		7.7
Total Investments	$	6,398.7	100.0	%	$	6,151.3	100.0	%	$	6,460.1	100.0	%
S&P Equivalent Rating for Fixed Maturities
AAA, AA, A	$	3,199.9	68.1	%	$	3,128.1	68.4	%	$	3,319.1	68.3	%
BBB	1,160.6		24.7		1,119.9		24.5		1,199.0		24.7
BB, B	163.6		3.5		144.6		3.1		158.9		3.2
CCC or Lower	173.1		3.7		182.4		4.0		183.2		3.8
Total Investments in Fixed Maturities	$	4,697.2	100.0	%	$	4,575.0	100.0	%	$	4,860.2	100.0	%
Duration (in Years)
Total Investments in Fixed Maturities	6.9				6.8				7.1

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

Page 23

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

	Sep 30, 2014				Dec 31, 2013				Dec 31, 2012
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	$	1,216.0	19.0	%	$	1,196.9	19.5	%	$	1,371.1	21.2	%
Finance, Insurance and Real Estate	785.6		12.3		767.9		12.5		780.8		12.1
Transportation, Communication and Utilities	313.7		4.9		306.7		5.0		289.2		4.5
Services	289.8		4.5		277.5		4.5		298.6		4.6
Mining	142.9		2.2		143.1		2.3		143.4		2.2
Retail Trade	79.3		1.2		75.6		1.2		66.5		1.0
Wholesale Trade	67.1		1.0		60.7		1.0		57.8		0.9
Agriculture, Forestry and Fishing	15.5		0.2		18.8		0.3		19.2		0.3
Other	4.6		0.1		4.6		0.1		3.3		0.1
Total Fair Value of Non-governmental Fixed Maturities	$	2,914.5	45.4	%	$	2,851.8	46.4	%	$	3,029.9	46.9	%



	Sep 30, 2014
Ten Largest Investment Exposures ¹	Fair Value		Percent of Total Investments
Fixed Maturities:
States and Political Subdivisions:
Texas	$	94.5	1.5	%
Ohio	78.6		1.2
Michigan	64.4		1.0
Florida	63.2		1.0
Georgia	63.0		1.0
Wisconsin	59.4		0.9
Colorado	58.6		0.9
Washington	56.6		0.9
Louisiana	56.5		0.9
Equity Method Limited Liability Investments:
Tennenbaum Opportunities Fund V, LLC	69.3		1.1
Total	$	664.1	10.4	%


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 obligations held in Trust at September 30, 2014.

Page 24

Kemper Corporation Municipal Bonds (excluding Pre-refunded Bonds) (Unaudited)

	Sep 30, 2014
	State General Obligation		Political Subdivision General Obligation		Revenue		Total Fair Value		Percent of Total Muni Bond¹		Percent of Total Investments¹
Texas	$	30.8	$	18.4	$	45.3	$	94.5	6.9	%	1.5	%
Ohio	40.5		4.7		33.4		78.6		5.7		1.2
Michigan	36.8		—		27.6		64.4		4.7		1.0
Florida	52.2		—		11.0		63.2		4.6		1.0
Georgia	49.1		6.7		7.2		63.0		4.6		1.0
Wisconsin	51.2		6.8		1.4		59.4		4.3		0.9
Colorado	—		15.7		42.9		58.6		4.3		0.9
Washington	27.7		0.3		28.6		56.6		4.1		0.9
Louisiana	33.2		0.2		23.1		56.5		4.1		0.9
Arkansas	52.6		—		—		52.6		3.8		0.8
New York	6.2		—		37.5		43.7		3.2		0.7
North Carolina	17.7		2.0		22.9		42.6		3.1		0.7
Utah	28.8		—		10.6		39.4		2.9		0.6
Minnesota	27.0		4.3		3.5		34.8		2.5		0.5
Oregon	30.1		—		1.1		31.2		2.3		0.5
Virginia	—		19.0		11.3		30.3		2.2		0.5
Nevada	22.6		7.2		—		29.8		2.2		0.5
Connecticut	24.4		—		5.4		29.8		2.2		0.5
Indiana	—		—		28.3		28.3		2.1		0.4
Mississippi	24.5		—		3.1		27.6		2.0		0.4
Delaware	17.6		—		9.3		26.9		2.0		0.4
Massachusetts	—		—		26.0		26.0		1.9		0.4
New Jersey	—		5.3		20.4		25.7		1.9		0.4
South Carolina	20.2		3.2		—		23.4		1.7		0.4
Maryland	—		18.1		3.6		21.7		1.6		0.3
Tennessee	4.5		7.4		9.4		21.3		1.6		0.3
Missouri	—		—		18.9		18.9		1.4		0.3
Iowa	—		—		17.3		17.3		1.3		0.3
Kentucky	—		1.1		15.2		16.3		1.2		0.3
Rhode Island	10.6		—		5.1		15.7		1.1		0.2
Pennsylvania	11.5		2.5		1.3		15.3		1.1		0.2
Illinois	—		5.8		9.2		15.0		1.1		0.2
Hawaii	14.9		—		—		14.9		1.1		0.2
Idaho	—		7.6		5.4		13.0		0.9		0.2
District of Columbia	—		—		11.9		11.9		0.9		0.2
Nebraska	—		6.6		5.3		11.9		0.9		0.2
Alabama	6.2		—		5.6		11.8		0.9		0.2
California	0.4		—		10.8		11.2		0.8		0.2
Oklahoma	—		—		10.7		10.7		0.8		0.2
All Other States	22.4		—		35.9		58.3		4.2		0.9
Total ⁽¹⁾	$	663.7	$	142.9	$	565.5	$	1,372.1	100.0	%	21.4	%

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

Page 25

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

	Unfunded Commitment		Reported Value
Asset Class	Sep 30, 2014		Sep 30, 2014		Dec 31, 2013
Reported as Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings:
Distressed Debt	$	—	$	105.4	$	126.1
Secondary Transactions	17.7		54.5		54.0
Mezzanine Debt	16.3		46.6		46.0
Growth Equity	—		5.3		7.8
Senior Debt	5.0		5.0		7.5
Leveraged Buyout	0.1		4.2		3.7
Other	—		1.8		—
Total Equity Method Limited Liability Investments	39.1		222.8		245.1
Reported as Other Equity Interests at Fair Value:
Mezzanine Debt	68.1		68.3		63.8
Senior Debt	20.4		20.4		15.0
Distressed Debt	3.2		17.9		14.4
Secondary Transactions	13.0		15.7		13.7
Hedge Fund	—		12.3		12.5
Leveraged Buyout	2.7		7.8		9.9
Real Estate	—		6.9		6.3
Other	1.5		68.4		38.3
Total Reported as Other Equity Interests at Fair Value	108.9		217.7		173.9
Reported as Fair Value Option Investments:
Hedge Fund	—		50.6		—
Total Investments in Limited Liability Companies and Limited Partnerships	$	148.0	$	491.1	$	419.0

Page 26

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 Net 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 after-tax impact of net unrealized gains 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 after-tax impact of net unrealized gains 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 by total Common Shares Issued and Outstanding. 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.

Consolidated Net Operating Income is an after-tax, non-GAAP financial measure and is computed by excluding from Income from Continuing Operations the after-tax impact of 1) Net Realized Gains on Sales of Investments, 2) Net Impairment Losses Recognized in Earnings related to investments and 3) 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 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 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 to Income from Continuing Operations is presented below:



	Three Months Ended																					Nine Months Ended
Dollars in Millions (Unaudited)	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Consolidated Net Operating Income	$	2.1		$	9.6		$	31.5		$	46.3		$	38.9		$	31.7		$	42.3		$	43.2		$	112.9
Net Income (Loss) From:
Net Realized Gains on Sales of Investments	5.2			2.4			4.2			13.5			31.9			1.5			17.5			11.8			50.9
Net Impairment Losses Recognized in Earnings	(2.5		)	(2.7		)	(0.5		)	(5.0		)	(2.2		)	(0.7		)	(1.2		)	(5.7		)	(4.1		)
Income from Continuing Operations	$	4.8		$	9.3		$	35.2		$	54.8		$	68.6		$	32.5		$	58.6		$	49.3		$	159.7

Page 27

Consolidated Net Operating Income 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 from Continuing Operations Per Unrestricted Share‐basic.

A reconciliation of Consolidated Net Operating Income Per Unrestricted Share-basic to Income from Continuing Operations Per Unrestricted Share-basic is presented below:



	Three Months Ended																					Nine Months Ended
(Unaudited)	Sep 30, 2014			Jun 30, 2014			Mar 31, 2014			Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Sep 30, 2014			Sep 30, 2013
Consolidated Net Operating Income Per Unrestricted Share	$	0.04		$	0.18		$	0.56		$	0.83		$	0.69		$	0.55		$	0.72		$	0.79		$	1.96
Net Income (Loss) Per Unrestricted Share From:
Net Realized Gains on Sales of Investments	0.10			0.04			0.08			0.24			0.56			0.02			0.30			0.21			0.88
Net Impairment Losses Recognized in Earnings	(0.05		)	(0.05		)	(0.01		)	(0.09		)	(0.04		)	(0.01		)	(0.02		)	(0.10		)	(0.07		)
Income from Continuing Operations Per Unrestricted Share	$	0.09		$	0.17		$	0.63		$	0.98		$	1.21		$	0.56		$	1.00		$	0.90		$	2.77

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 Insurance Expense (including write-offs of long-lived assets) Ratio. The most directly comparable GAAP financial measure is the combined ratio, which uses total incurred losses and LAE, including the impact of catastrophe losses and loss and LAE reserve development. 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 28