Kemper Corporation (Exact Name of Registrant As Specified in Its Charter)

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K Annual report pursuant to section 13 and 15(d)

Filing Date: 2017-02-13 | Period of Report: 2016-12-31 SEC Accession No. 0000860748-17-000017

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FILER KEMPER Corp Mailing Address Business Address ONE EAST WACKER DRIVE ONE EAST WACKER DRIVE CIK:860748| IRS No.: 954255452 | State of Incorp.:DE | Fiscal Year End: 1231 CHICAGO IL 60601 CHICAGO IL 60601 Type: 10-K | Act: 34 | File No.: 001-18298 | Film No.: 17600590 3126614600 SIC: 6331 Fire, marine & casualty insurance

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-18298 Kemper Corporation (Exact name of registrant as specified in its charter)

Delaware 95-4255452 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

One East Wacker Drive, Chicago, Illinois 60601 (Address of principal executive offices) (Zip Code) (312) 661-4600 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered Common Stock, $0.10 par value per share New York Stock Exchange 7.375% Subordinated Debentures due 2054 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller Reporting Company ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x As of June 30, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $1.6 billion based on the closing sale price as reported on the New York Stock Exchange. Solely for purposes of this calculation, all executive officers and directors of the registrant are considered affiliates. Registrant had 51,294,172 shares of common stock outstanding as of January 31, 2017. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 3, 2017 are incorporated by reference into Part III.

Caution Regarding Forward-Looking Statements 1

Part I

Item 1. Business 3 Item 1A. Risk Factors 13 Item 1B. Unresolved Staff Comments 19 Item 2. Properties 19 Item 3. Legal Proceedings 19 Item 4. Mine Safety Disclosures 19

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 20 Item 6. Selected Financial Data 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8. Financial Statements and Supplementary Data 64 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 129 Item 9A. Controls and Procedures 129 Item 9B. Other Information 130

Part III

Item 10. Directors, Executive Officers and Corporate Governance 131 Item 11. Executive Compensation 131 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 131 Item 13. Certain Relationships and Related Transactions, and Director Independence 132 Item 14. Principal Accounting Fees and Services 132

Part IV

Item 15. Exhibits, Financial Statement Schedules 133 Item 16. Form 10-K Summary 133

Power of Attorney 134 Signatures 134 Financial Statement Schedules: Schedule 1 - Investments Other than Investments in Related Parties SCH I-1 Schedule 2 - Parent Company Financial Statements SCH II-1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 3 - Supplementary Insurance Information SCH III-1 Schedule 4 - Reinsurance Schedule SCH IV-1 Exhibit Index E-1

This 2016 Annual Report on Form 10-K (the “2016 Annual Report”), including, but not limited to, the accompanying consolidated financial statements of Kemper Corporation (“Kemper” or the “Registrant”) and its subsidiaries (individually and collectively referred to herein as the “Company”) and the notes thereto appearing in Item 8 herein (the “Consolidated Financial Statements”), the Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Item 7 herein (the “MD&A”) and the other Exhibits and Financial Statement Schedules filed as a part hereof or incorporated by reference herein, 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. The reader can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “believe(s),” “goal(s),” “target(s),” “estimate(s),” “anticipate(s),” “forecast(s),” “project(s),” “plan(s),” “intend(s),” “expect(s),” “might,” “may,” “could” and other terms of similar meaning. Forward-looking statements, in particular, include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong, and, accordingly, Kemper cautions readers not to place undue reliance on such statements. Kemper bases these statements on current expectations and the current economic environment as of the date of this 2016 Annual Report. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance; actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties that may be important in determining the Company’s actual future results and financial condition.

In addition to the factors discussed below under Item 1A., “Risk Factors,” in this 2016 Annual Report, the reader should consider the following list of general factors that, among others, could cause the Company’s actual results and financial condition to differ materially from estimated results and financial condition:

Factors related to the legal and regulatory environment in which Kemper and its subsidiaries operate

• Outcomes of state initiatives that could result in significant changes to, or interpretations of, unclaimed property laws or significant changes in claims handling practices with respect to life insurance policies, including the requirement to proactively use death verification databases, particularly any that involve retroactive application of new requirements to existing life insurance policy contracts; • Adverse outcomes in litigation or other legal or regulatory proceedings involving Kemper or its subsidiaries or affiliates; • Governmental actions, including, but not limited to, implementation of new federal and state laws and regulations, and court decisions interpreting existing laws and regulations or policy provisions; • Uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications, dividends from insurance subsidiaries, acquisitions of businesses and other matters within the purview of state insurance regulators; Factors relating to insurance claims and related reserves in the Company’s insurance businesses

• The incidence, frequency and severity of catastrophes occurring in any particular reporting period or geographic area, including natural disasters, pandemics and terrorist attacks or other man-made events; • The number and severity of insurance claims (including those associated with catastrophe losses); • Changes in facts and circumstances affecting assumptions used in determining loss and loss adjustment expenses (“LAE”) reserves, including, but not limited to, the number and severity of insurance claims, changes in claims handling procedures and closure patterns and development patterns; • The impact of inflation on insurance claims, including, but not limited to, the effects on personal injury claims of increasing medical costs and the effects on property claims attributed to scarcity of resources available to rebuild damaged structures, including labor and materials and the amount of salvage value recovered for damaged property; • Developments related to insurance policy claims and coverage issues, including, but not limited to, interpretations or decisions by courts or regulators that may govern or influence losses incurred in connection with hurricanes and other catastrophes; • Orders, interpretations or other actions by regulators that impact the reporting, adjustment and payment of claims;

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document • Changes in the pricing or availability of reinsurance, or in the financial condition of reinsurers and amounts recoverable therefrom;

Factors related to the Company’s ability to compete

• Changes in the ratings by rating agencies of Kemper and/or its insurance company subsidiaries with regard to credit, financial strength, claims paying ability and other areas on which the Company is rated; • The level of success and costs incurred in realizing or maintaining economies of scale, implementing significant business initiatives, including those related to, but not limited to, expense and claims savings, consolidations, reorganizations and technology, and integrating acquired businesses; • Absolute and relative performance of the Company’s products and services, including, but not limited to, the level of success achieved in designing and introducing new insurance products; • The ability of the Company to maintain the availability of critical systems and manage technology initiatives cost-effectively to address insurance industry developments and regulatory requirements; • Heightened competition, including, with respect to pricing, entry of new competitors and alternate distribution channels, introduction of new technologies, emergence of telematics, refinements of existing products and development of new products by current or future competitors;

Factors relating to the business environment in which Kemper and its subsidiaries operate

• Changes in general economic conditions, including, but not limited to, performance of financial markets, interest rates, inflation, unemployment rates and fluctuating values of particular investments held by the Company; • Absolute and relative performance of investments held by the Company; • Changes in insurance industry trends and significant industry developments; • Changes in consumer trends and significant consumer or product developments; • Changes in capital requirements, including the calculations thereof, used by regulators and rating agencies; • Regulatory, accounting or tax changes that may affect the cost of, or demand for, the Company’s products or services or after- tax returns from the Company’s investments; • The impact of required participation in windpools and joint underwriting associations, residual market assessments and assessments for insurance industry insolvencies; • Changes in distribution channels, methods or costs resulting from changes in laws or regulations, lawsuits or market forces; • Increased costs and risks related to cybersecurity and information technology, including, but not limited to, identity theft, data breaches and system disruptions affecting services and actions taken to minimize the risks thereof; and

Other risks and uncertainties described from time to time in Kemper’s filings with the U.S. Securities and Exchange Commission (“SEC”).

Kemper cannot provide any assurances that the results contemplated in any forward-looking statements will be achieved or will be achieved in any particular timetable or that future events or developments will not cause such statements to be inaccurate. Kemper assumes no obligation to correct or update any forward-looking statements publicly for any changes in events or developments or in the Company’s expectations or results subsequent to the date of this 2016 Annual Report. Kemper advises the reader, however, to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.

Kemper is a diversified insurance holding company, with subsidiaries that provide automobile, homeowners, life, health, and other insurance products to individuals and businesses. Kemper’s annual reports on Form 10-K, quarterly reports on Form 10‑Q, current reports on Form 8-K and amendments thereto are accessible free of charge through Kemper’s website, kemper.com, and as soon as reasonably practicable after such materials are filed with, or furnished to, the SEC.

(a) GENERAL DEVELOPMENT OF BUSINESS

Registrant is a holding company incorporated under the laws of the State of Delaware in 1990, with equity securities traded on the New York Stock Exchange (the “NYSE”). On August 25, 2011, Registrant adopted its current name, Kemper Corporation, and changed its NYSE ticker symbol to KMPR. Prior to the name change, the Registrant was known as Unitrin, Inc. and traded on the NYSE under the ticker symbol UTR.

(b) BUSINESS SEGMENT FINANCIAL DATA

Financial information about Kemper’s business segments for the years ended December 31, 2016, 2015 and 2014 is contained in the following sections of this 2016 Annual Report and is incorporated herein by reference: (i) Note 18, “Business Segments,” to the Consolidated Financial Statements and (ii) MD&A.

The Company is engaged, through its subsidiaries, in the property and casualty insurance and life and health insurance businesses. The Company conducts its operations through two operating segments: Property & Casualty Insurance and Life & Health Insurance. The Company conducts its operations solely in the United States.

Kemper’s subsidiaries employ approximately 5,750 full-time associates supporting their operations, of which approximately 2,000 are employed in the Property & Casualty Insurance segment, approximately 3,250 are employed in the Life & Health Insurance segment and the remainder are employed in various corporate and other staff and shared functions.

General

The Property & Casualty Insurance segment provides automobile, homeowners, renters, fire, umbrella and other types of property and casualty insurance to individuals and commercial automobile insurance to businesses. Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property. Casualty insurance primarily covers liability for damage to property of, or injury to, a person or entity other than the insured. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation arising out of events covered by the policy.

The Property & Casualty Insurance segment distributes its products primarily through independent agents and brokers who are paid commissions for their services. In addition, the Life & Health Insurance segment’s career agents also sell contents coverage for personal property to its customers.

Earned premiums from automobile insurance accounted for 58%, 54% and 48% of the Company’s consolidated insurance premiums earned in 2016, 2015 and 2014, respectively. Revenues from automobile insurance accounted for 53%, 48% and 43% of Kemper’s consolidated revenues from continuing operations in 2016, 2015 and 2014, respectively. Automobile insurance products include personal automobile insurance, ranging from preferred to nonstandard risks, and commercial automobile insurance. Nonstandard personal automobile insurance policyholders tend to have difficulty obtaining standard or preferred risk insurance, usually because of their driving records, claims experience or premium payment history. Homeowners insurance accounted for 12%, 14% and 17% of the Company’s consolidated insurance premiums earned in 2016, 2015 and 2014, respectively. Homeowners insurance accounted for 12%, 13% and 15% of the Company’s consolidated revenues from continuing operations in 2016, 2015 and 2014, respectively.

The Property & Casualty Insurance segment is headquartered in Chicago, Illinois, and conducts business in more than 40 states and the District of Columbia. The segment’s insurance products are offered by approximately 18,000 independent insurance agents and brokers. As shown in the following table, five states provided 78% of the segment’s premium revenues in 2016.

Percentage of State Total Premiums California 51% Texas 11 New York 9 North Carolina 5 Oregon 2

Property and Casualty Loss and Loss Adjustment Expense Reserves

The Company’s reserves for losses and LAE for property and casualty insurance (“Property and Casualty Insurance Reserves”) are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid.

Property and Casualty Insurance Reserves by business segment at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Business Segments: Property & Casualty Insurance $ 884.1 $ 800.5 Life & Health Insurance 4.5 5.2 Total Business Segments 888.6 805.7 Discontinued Operations 38.6 51.0 Unallocated Reserves 4.2 6.1 Total Property and Casualty Insurance Reserves $ 931.4 $ 862.8

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ultimate net cost of claims may vary materially from the estimated amounts reserved. The reserving process is particularly imprecise for claims involving asbestos, environmental matters, construction defect and other emerging and/or long-tailed exposures that may not be discovered or reported until years after the insurance policy period has ended. Property and Casualty Insurance Reserves related to the Company’s Discontinued Operations are predominantly long-tailed exposures, of which $16.7 million was related to asbestos, environmental matters and construction defect exposures at December 31, 2016. See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” beginning on page 57 for a discussion of the Company’s reserving process and the factors considered by the Company’s actuaries in estimating the Company’s Property and Casualty Insurance Reserves.

The Company’s goal is to ensure that its total reserves for property and casualty insurance losses and LAE are adequate to cover all costs, while minimizing variation from the time reserves for losses and LAE are initially estimated until losses and LAE are fully developed. Changes in the Company’s estimates of these losses and LAE, also referred to as “development,” will occur over time and may be material. Favorable development is recognized and reported in the Consolidated Financial Statements when the Company decreases its previous estimate of ultimate losses and LAE and results in an increase in net income in the period recognized, whereas adverse development is recognized and reported in the Consolidated Financial Statements when the Company increases its previous estimate of ultimate losses and LAE and results in a decrease in net income.

Development of property and casualty insurance losses and LAE from prior accident years for each of the Company’s continuing business segments and discontinued operations in 2016, 2015 and 2014 was:

Favorable (Adverse) Development DOLLARS IN MILLIONS 2016 2015 2014 Continuing Operations: Property & Casualty Insurance $ 14.3 $ 12.9 $ 54.4 Life & Health Insurance 0.1 (1.4) (0.9) Total Favorable Development from Continuing Operations, Net 14.4 11.5 53.5 Discontinued Operations 6.3 8.6 3.6 Total Favorable Development, Net $ 20.7 $ 20.1 $ 57.1

See MD&A, “Loss and LAE Reserve Development,” “Property & Casualty Insurance,” and “Life & Health Insurance,” for the impact of development on the results reported by the Company’s business segments. Also see MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” beginning on page 57 for additional information about the Company’s reserving practices.

See Note 6, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for information about incurred and paid claims development for the 2012-2015 accident years as of December 31, 2016, net of reinsurance and indemnification, as well as cumulative claim frequency and the total of incurred but not reported (“IBNR”) liabilities, including expected development on reported claims included within the net incurred losses and allocated LAE amounts as of December 31, 2016. See Note 6, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for a tabular reconciliation of the three most recent annual periods setting forth the Company’s Property and Casualty Insurance Reserves as of the beginning of each year, incurred losses and LAE for insured events of the current year, changes in incurred losses and LAE for insured events of prior years, payments of losses and LAE for insured events of the current year, payments of losses and LAE for insured events of prior years and the Company’s Property and Casualty Insurance Reserves at the end of the year and additional information regarding the nature of adjustments to incurred losses and LAE for insured events of prior years.

Catastrophe Losses

Catastrophes and natural disasters are inherent risks of the property and casualty insurance business. These catastrophic events and natural disasters include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds and winter storms. Such events result in insured losses that are, and are expected to be, a material factor in the results of operations and financial position of Kemper’s property and casualty insurance companies. Further, because the level of insured losses that could occur in any one year cannot be accurately predicted, these losses contribute to material year-to-year fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more likely to occur at certain times within the year than others. This factor adds an element of seasonality to property and casualty insurance claims. The occurrence and severity of catastrophic events cannot be accurately predicted in any year. However, some geographic locations are more susceptible to these events than others. The Company has endeavored to manage its direct insurance exposures in certain regions that are prone to naturally occurring catastrophic events through a combination of geographic

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and reinsurance. The Company has adopted the industry-wide catastrophe classifications of storms and other events promulgated by Insurance Services Office, Inc. (“ISO”) to track and report losses related to catastrophes. ISO classifies a disaster as a catastrophe when the event causes $25 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. The discussions throughout this 2016 Annual Report utilize ISO’s definition of catastrophes.

The process of estimating and establishing reserves for catastrophe losses is inherently uncertain and the actual ultimate cost of a claim, net of reinsurance recoveries, may vary materially from the estimated amount reserved. See Item 1A., “Risk Factors,” under the caption “Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial condition” for a discussion of catastrophe risk. See Note 20, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for a discussion of the factors that influence the process of estimating and establishing reserves for catastrophes.

Reinsurance

The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and reinsurance. To limit its exposures to catastrophic events, the Company maintains a primary catastrophe reinsurance program for the Property & Casualty Insurance segment. Coverage for the primary catastrophe reinsurance program is provided in various layers and reinsurance contracts. The Property & Casualty Insurance segment and the Life & Health Insurance segment also purchase reinsurance from the Florida Hurricane Catastrophe Fund (the “FHCF”) for hurricane losses in Florida at retentions lower than those described below for the Company’s primary catastrophe reinsurance program. Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program for 2017 is provided by three three-year reinsurance contracts. The first reinsurance contract provides coverage over the three-year period of January 1, 2015 through December 31, 2017 (the “2015 Reinsurance Contract”). The 2015 Reinsurance Contract provides coverage in two layers, which together provide coverage for losses on individual catastrophes of $300 million in excess of $50 million.The percentage of coverage under the 2015 Reinsurance Contract in the first, second and third years is 95%, 63.3% and 31.7%, respectively. Under the 2015 Reinsurance Contract, the participation of each reinsurer decreases by one-third in the second year and another one-third in the third year. Accordingly, the 2015 Reinsurance Contract provides coverage for 31.7% of losses on individual catastrophes of $300 million in excess of $50 million in 2017. The second reinsurance contract provides coverage over the three-year period of January 1, 2016 through December 31, 2018 (the “2016 Reinsurance Contract”). The 2016 Reinsurance Contract provides coverage in two layers, which together provide coverage for losses on individual catastrophes of $300 million in excess of $50 million. Under the 2016 Reinsurance Contract, the percentage of coverage is 31.7% for each year in the three-year period, and participation of each reinsurer remains the same over the entire three-year period. Accordingly, the 2016 Reinsurance Contract provides coverage for 31.7% of losses on individual catastrophes of $300 million in excess of $50 million in 2017. The third reinsurance contract provides coverage over the three year period of January 1, 2017 through December 31, 2019 (the “2017 Reinsurance Contract”). The 2017 Reinsurance Contract provides coverage in two layers, which together provide coverage for losses on individual catastrophes of $200 million in excess of $50 million, a $100 million reduction in the coverage for losses on individual catastrophes in excess of $50 million provided under the 2015 Reinsurance Contract and 2016 Reinsurance Contract. Under the 2017 Reinsurance Contract, the percentage of coverage is 31.7% for each year in the three- year period, and participation of each reinsurer remains the same over the entire three-year period. Accordingly, the 2017 Reinsurance Contract provides coverage for 31.7% of losses on individual catastrophes of $200 million in excess of $50 million in 2017.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Coverage provided under the combined programs for 2017 (January 1, 2017 to December 31, 2017) is provided in various layers as summarized below.

Catastrophe Losses and LAE Combined Percentage DOLLARS IN MILLIONS In Excess of Up to of Coverage Retained $ — $ 50.0 —% 1st Layer of Coverage (Combination of 2017, 2016 and 2015 Reinsurance Contracts) 50.0 150.0 95.0 2nd Layer of Coverage (2017 Reinsurance Contract) 150.0 250.0 31.7 2nd Layer of Coverage (Combination of 2016 and 2015 Reinsurance Contracts) 150.0 350.0 63.4

The coverage presented in the preceding table differs from the coverage provided in 2016. See Note 20, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for information pertaining to the primary catastrophe reinsurance programs for the Property & Casualty Insurance segment for 2016. To maintain the same level and percentage of coverage in subsequent years as provided by the combined programs in 2017, the Property & Casualty Insurance segment will need to purchase additional reinsurance in the future for the portion of the coverage expiring in 2017, 2018 and 2019.

The estimated aggregate annual premium in 2017 for the combined programs presented in the preceding table is $12.1 million. In the event that the Company’s incurred catastrophe losses and LAE covered by its catastrophe reinsurance program exceed the retention for a particular layer, the combined programs require one reinstatement of such coverage. In such an instance, the Company is required to pay a reinstatement premium to the reinsurers to reinstate the full amount of reinsurance available under such layer. The reinstatement premium for the first layer of coverage is a percentage of the full original premium based on the ratio of the losses in excess of the Company’s retention to the reinsurers’ coverage limit. The reinstatement premium for the second layer of coverage is a percentage of half the original premium based on the ratio of the losses in excess of the Company’s retention to the reinsurers’ coverage limit.

In addition to the catastrophe loss exposures caused by natural events described above, Kemper’s property and casualty insurance companies are exposed to losses from catastrophic events that are not the result of acts of nature, such as acts of terrorism, the nature, occurrence and severity of which in any period cannot be accurately predicted. The companies have reinsurance coverage to address certain exposures to potential future terrorist attacks. The reinsurance coverage for certified events, as designated by the federal government, is from the Terrorist Risk Insurance Act and the coverage for non-certified events is available in the catastrophe reinsurance program for Kemper’s Property & Casualty Insurance segment. However, certain perils, such as biological, chemical, nuclear pollution or contamination, are excluded from the reinsurance coverage for non-certified events.

In addition to the catastrophe reinsurance programs described above, Kemper’s property and casualty insurance companies utilize other reinsurance arrangements to limit their maximum loss, provide greater diversification of risk and minimize exposures on larger risks.

Under the various reinsurance arrangements, Kemper’s property and casualty insurance companies are indemnified by reinsurers for certain losses incurred under insurance policies issued by the reinsurers. As indemnity reinsurance does not discharge an insurer from its direct obligations to policyholders on risks insured, Kemper’s property and casualty insurance companies remain directly liable. However, provided that the reinsurers meet their obligations, the net liability for Kemper’s property and casualty insurance companies is limited to the amount of risk that they retain. Kemper’s property and casualty insurance companies purchase their reinsurance only from reinsurers rated “A-” or better by A. M. Best Co., Inc. (“A.M. Best”), at the time of purchase. A.M. Best is an organization that specializes in rating insurance and reinsurance companies.

For further discussion of the reinsurance programs, see Note 20, “Catastrophe Reinsurance,” and Note 21, “Other Reinsurance,” to the Consolidated Financial Statements.

Pricing

Pricing levels for property and casualty insurance products are influenced by many factors, including the frequency and severity of claims, state regulation and legislation, competition, general business and economic conditions, including market rates of interest, inflation, expense levels, and judicial decisions. In addition, many state regulators require consideration of investment income when approving or setting rates, which could reduce underwriting margins. See MD&A under the caption “Property & Casualty Insurance.”

Based on the most recent annual data published by A.M. Best, as of the end of 2015, there were 1,205 property and casualty insurance groups in the United States. Kemper’s property and casualty group was among the top 9% of property and casualty insurance groups in the United States as measured by net written premiums, policyholders’ surplus and admitted assets in 2015. Among all personal lines automobile insurance writers, Kemper’s property and casualty group was the 27th largest writer as measured by net written premiums in 2015.

Rankings by admitted assets, net premiums written and capital and surplus were:

Ordinal Percentile Measurement Rank Rank Net Admitted Assets 101 91% Net Written Premiums 62 94 Capital and Surplus 102 91

In 2015, the U.S. property and casualty insurance industry’s estimated net premiums written were $525 billion, of which nearly 80% were accounted for by the top 50 groups of property and casualty insurance companies. Kemper’s property and casualty insurance companies wrote less than 1% of the industry’s 2015 premium volume.

The property and casualty insurance industry is highly competitive, particularly with respect to personal automobile insurance. Kemper’s property and casualty insurance companies compete on the basis of, among other measures, (i) using suitable pricing segmentation, (ii) maintaining underwriting discipline, (iii) settling claims timely and efficiently, (iv) offering products in selected markets or geographies, (v) utilizing technological innovations for the marketing and sale of insurance, (vi) controlling expenses, (vii) maintaining adequate ratings from A.M. Best and other ratings agencies and (viii) providing quality services to independent agents and policyholders. See Item 1A., “Risk Factors,” under the caption “The insurance industry is highly competitive, making it difficult to grow profitability and within expectations of investors.”

Life and Health Insurance Business

The Company’s Life & Health Insurance segment consists of Kemper’s wholly-owned subsidiaries, United Insurance Company of America (“United Insurance”), The Reliable Life Insurance Company (“Reliable”), Union National Life Insurance Company (“Union National Life”), Mutual Savings Life Insurance Company (“Mutual Savings Life”), United Casualty Insurance Company of America (“United Casualty”), Union National Fire Insurance Company (“Union National Fire”), Mutual Savings Fire Insurance Company (“Mutual Savings Fire”) and Reserve National Insurance Company (“Reserve National”). As discussed below, United Insurance, Reliable, Union National Life, Mutual Savings Life, United Casualty, Union National Fire and Mutual Savings Fire (the “Kemper Home Service Companies”) distribute their products through a network of employee, or “career” agents. Reserve National distributes its products through a network of independent agents and brokers. These career agents, independent agents and brokers are paid commissions for their services.

Earned premiums from life insurance accounted for 17%, 19% and 21% of the Company’s consolidated insurance premiums earned in 2016, 2015 and 2014, respectively. Revenues from life insurance accounted for 23%, 25% and 27% of the Company’s consolidated revenues from continuing operations in 2016, 2015 and 2014, respectively. As shown in the following table, five states provided 51% of the premium revenues in this segment in 2016.

Percentage of State Total Premiums Texas 21% Louisiana 12 Alabama 7 Mississippi 6 Florida 5

Kemper Home Service Companies

The Kemper Home Service Companies, based in St. Louis, Missouri, focus on providing individual life and supplemental accident and health insurance products to customers of modest incomes who desire basic protection for themselves and their

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document families. Their leading product is ordinary life insurance, including permanent and term insurance. Face amounts of these policies are lower than those of policies typically sold to higher income customers by other companies in the life insurance industry. Approximately 77% of the Life & Health Insurance segment’s premium revenues are generated by the Kemper Home Service Companies.

The Kemper Home Service Companies employ nearly 2,200 career agents to distribute insurance products in 25 states and the District of Columbia. These career agents are full-time employees who call on customers in their homes to sell insurance products, provide services related to policies in force and collect premiums, typically monthly. Premiums average about $21 per policy per month with an average face value of $5,400. Permanent and term policies are offered primarily on a non-participating, guaranteed-cost basis. These career agents also distribute and/or service certain property insurance products for the Kemper Home Service Companies.

Reserve National

Reserve National, based in Oklahoma City, Oklahoma, is licensed in 49 states throughout the United States and has traditionally specialized in the sale of Medicare Supplement insurance and limited health insurance coverages, such as fixed indemnity and accident- only plans, primarily to individuals in rural areas who often do not have access to a broad array of accident and health insurance products tailored to meet their individual and family needs. Reserve National’s traditional distribution channel consists of approximately 400 independent agents.

Reserve National began expanding its distribution channels during 2013 by launching two marketing channel initiatives —Kemper Senior Solutions and Kemper Benefits. Kemper Senior Solutions markets life insurance and home health care products focusing on the individual, senior-age demographic of the market place. Kemper Benefits sells voluntary products in the employer market place. Brokers and non-exclusive independent agents are utilized to market and distribute products in these new distribution channels. Reserve National currently has approximately 4,000 independent agents appointed in connection with these initiatives.

Reinsurance

Consistent with insurance industry practice, the Company’s life and health insurance companies utilize reinsurance arrangements to limit their maximum loss, provide greater diversification of risk and minimize exposures on larger risks in its life and health insurance businesses. As the face amounts of its issued policies are relatively small, the ceded risks and corresponding premiums are also relatively small, particularly when compared to other companies in the industry. The segment is also exposed to losses from catastrophes arising from insurance policies distributed by career agents of the Kemper Home Service Companies. Over the last several years, the Kemper Home Service Companies have been intentionally reducing their exposure to catastrophic events through the run-off of their dwelling insurance business. Accordingly, except for reinsurance provided by the FHCF for catastrophe losses in Florida, the Kemper Home Service Companies have not carried catastrophe reinsurance since 2012.

Lapse Ratio

The lapse ratio is a measure of a life insurer’s loss of in-force policies. For a given year, this ratio is commonly computed as the total face amount of individual life insurance policies lapsed, surrendered, expired and decreased during such year, less policies increased and revived during such year, divided by the total face amount of policies at the beginning of the year plus the face amount of policies issued and reinsurance assumed in the prior year. The Life & Health Insurance segment’s lapse ratio for individual life insurance was 6%, 6% and 7% in 2016, 2015 and 2014, respectively.

The customer base served by the Kemper Home Service Companies and competing life insurance companies tends to have a higher incidence of lapse than other demographic segments of the population. Thus, to maintain or increase the level of its business, the Kemper Home Service Companies must write a high volume of new policies.

Pricing

Premiums for life and health insurance products are based on assumptions with respect to mortality, morbidity, investment yields, expenses, and lapses and are also affected by state laws and regulations, as well as competition. Pricing assumptions are based on the experience of Kemper’s life and health insurance subsidiaries, as well as the industry in general, depending on the factor being considered. The actual profit or loss produced by a product will vary from the anticipated profit if the actual experience differs from the assumptions used in pricing the product.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Premiums for policies sold by the Kemper Home Service Companies are set at levels designed to cover the relatively high cost of “in- home” servicing of such policies. As a result, Kemper Home Service Companies’ premiums have a higher expense load than the life insurance industry average.

Premiums for Medicare supplement and other accident and health policies must take into account the rising costs of medical care. The annual rate of medical cost inflation has historically been higher than the general rate of inflation, necessitating frequent rate increases, most of which are subject to approval by state regulators.

Competition

Based on the most recent data published by A.M. Best, as of the end of 2015, there were 448 life and health insurance company groups in the United States. The Company’s Life & Health Insurance segment ranked in the top 22% of life and health insurance company groups, as measured by admitted assets, net premiums written and capital and surplus. Rankings by admitted assets, net premiums written and capital and surplus were:

Ordinal Percentile Measurement Rank Rank Net Admitted Assets 88 80% Net Written Premiums 96 78 Capital and Surplus 94 79

Kemper’s life and health insurance subsidiaries generally compete by using appropriate pricing, offering products to selected markets or geographies, controlling expenses, maintaining adequate ratings from A.M. Best and providing competitive services to agents and policyholders.

Investments

The quality, nature and amount of the various types of investments that can be made by insurance companies are regulated by state laws. Depending on the state, these laws permit investments in qualified assets, including, but not limited to, municipal, state and federal government obligations, corporate bonds, real estate, preferred and common stocks, investment partnerships, limited liability investment companies and limited partnerships. In addition, the quality, nature and amount of the various types of investments held by Kemper’s insurance subsidiaries affect the amount of asset risk calculated by regulators and rating agencies in determining required capital. See “Regulation” immediately following this subsection and Item 1A., “Risk Factors,” under the caption “The Company’s investment portfolio is exposed to a variety of risks that may negatively impact net investment income and cause realized and unrealized losses.”

The Company employs a total return investment strategy, with an emphasis on yield, while maintaining liquidity to meet both its short- and medium-term insurance obligations. See the discussions of the Company’s investments under the headings “Investment Results,” “Investment Quality and Concentrations,” “Investments in Limited Liability Companies and Limited Partnerships,” “Liquidity and Capital Resources” and “Critical Accounting Estimates,” in the MD&A, “Quantitative and Qualitative Disclosures about Market Risk,” in Item 7A and Note 4, “Investments,” Note 13, “Income from Investments,” and Note 22, “Fair Value Measurements,” to the Consolidated Financial Statements.

Regulation

Overview of State Regulation

Kemper’s insurance subsidiaries are subject to extensive regulation in the states in which they conduct business. Such regulation pertains to a variety of matters, including, but not limited to, policy forms, premium rate plans, licensing of agents, licenses to transact business, market conduct, trade practices, claims practices, transactions with affiliates, payment of dividends, investments and solvency. In addition, insurance regulatory authorities perform periodic examinations of an insurer’s financial condition, market conduct and other affairs.

Approval of Policy Rates and Forms

The majority of Kemper’s insurance operations are in states requiring prior approval by regulators before proposed policy or coverage forms and rates for property, casualty, or health insurance policies may be implemented and used. However, provided that the policy form has been previously approved, rates proposed for life insurance generally become effective immediately upon filing with a state, even though the same state may require prior rate approval for other types of insurance.

Insurance companies are required to report their financial condition and results of operation in accordance with statutory accounting principles prescribed or permitted by state insurance regulators in conjunction with the National Association of Insurance Commissioners (“NAIC”). State insurance regulators also prescribe the form and content of statutory financial statements, set minimum reserve and loss ratio requirements and establish standards for the types and amounts of investments. In addition, state regulators require minimum capital and surplus levels and incorporate risk-based capital (“RBC”) standards promulgated by the NAIC. These RBC standards are intended to assess the level of risk inherent in an insurance company’s business and consider items such as asset risk, credit risk, underwriting risk and other business risks relevant to its operations. In accordance with RBC formulas, a company’s RBC requirements are calculated and compared to its total adjusted capital to determine whether regulatory intervention is warranted. At December 31, 2016, the total adjusted capital of each of Kemper’s insurance subsidiaries exceeded the minimum levels required under applicable RBC rules.

Guaranty Funds and Risk Pools

Kemper’s insurance subsidiaries are required to pay assessments up to prescribed limits to fund policyholder losses or liabilities of insolvent insurance companies under the guaranty fund laws of most states in which they transact business. Kemper’s insurance subsidiaries are subject to certain fees imposed on health insurers by the federal Patient Protection and Affordable Care Act (“Affordable Care Act”), including the Health Insurance Providers Fee (subject to a moratorium on collection of the fee otherwise due in 2017 pursuant to the Consolidated Appropriations Act of 2016), but not the fees associated with the Reinsurance, Risk Adjustment and Risk Corridor programs, as Kemper’s insurance subsidiaries do not have any policies subject to those fees. Kemper’s insurance subsidiaries are also required to participate in various involuntary pools or assigned risk pools, principally involving windstorms and high risk drivers. In most states, the involuntary pool participation of Kemper’s insurance subsidiaries is set in proportion to their voluntary writings of related lines of business in such states. See Item 1A., “Risk Factors,” under the caption “Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial condition” for a discussion of the impact of required participation in windstorm pools and joint underwriting associations on the ability of the Company to manage its exposure to catastrophic events.

Dividends and Other Transactions with Affiliates

Kemper and its insurance subsidiaries are also subject to the insurance holding company laws of the states in which they are domiciled or commercially domiciled. Certain dividends and distributions by an insurance subsidiary are subject to prior approval by the insurance regulators of its state of domicile. See Item 1A., “Risk Factors,” under the caption “The ability of Kemper to service its debt, to pay dividends to its shareholders and/or make repurchases of its stock may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries.” Other significant transactions between an insurance subsidiary and its holding company or other affiliates may require approval by insurance regulators in the state of domicile of each participating insurance subsidiary.

Cybersecurity Regulation

Insurance regulators have been focusing increased attention on data security during financial exams, and new laws and regulations are pending that would impose new requirements and standards for protecting personally identifiable information of insurance company policyholders. For example, the New York Department of Financial Services has proposed a comprehensive cybersecurity regulation that is expected to become effective during 2017. In addition, the NAIC has adopted the Cybersecurity Bill of Rights, a set of directives aimed at protecting consumer data, and is working on a new model data security law that is expected to incorporate the directives and impose additional requirements on insurance companies to the extent ultimately adopted by applicable state legislation. The NAIC has also strengthened and enhanced the cybersecurity guidance included in its handbook for state insurance examiners. The Company anticipates a continuing focus on new regulatory and legislative proposals at the state and federal levels that further regulate practices regarding privacy and security of personal information.

Holding Company Regulation, Including Enterprise Risk Management and Governance

Nearly half of all states have adopted extensive modifications to their holding company laws. These modifications impose new reporting requirements on Kemper and substantially expand the oversight and examination powers of state insurance regulators to assess enterprise risks within the entire holding company system that may arise from operations of Kemper’s insurance and non-insurance subsidiaries. They also impose new reporting requirements on Kemper as the ultimate controlling person of its insurance company subsidiaries in respect of, among other things, affiliated transactions and divestiture of controlling interests in such insurance companies.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In addition, the Company is subject to new laws that require insurers to maintain an enterprise risk management (“ERM”) framework, perform regular assessments of the adequacy of the ERM framework and the company’s solvency and file an annual ERM assessment summary report. The Company is also required to submit an annual disclosure with its lead state regulator with information about board structure, policies, meeting frequency and oversight of critical risk areas and practices of Kemper and/or its insurance company subsidiaries.

Additional regulation has also resulted from other measures in recent years including, among other things, tort reform, the federal Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively the “Health Care Acts”), the Dodd- Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), consumer privacy and data security requirements, credit score regulation, producer compensation regulations, cybersecurity and financial services regulation initiatives.

Change in Control Requirements

State insurance laws also impose requirements that must be met prior to a change of control of an insurance company or insurance holding company based on the insurer’s state of domicile and, in some cases, additional states in which it is deemed commercially domiciled due to the substantial amount of business it conducts therein. These requirements may include the advance filing of specific information with the state insurance regulators, a public hearing on the matter, and the review and approval of the change of control by such regulators. The Company has insurance subsidiaries domiciled or deemed commercially domiciled in Alabama, California, Illinois, Louisiana, Missouri, New York, Oklahoma, Oregon, Texas and Wisconsin. In these states, except Alabama, “control” generally is presumed to exist through the direct or indirect ownership of 10% or more of the voting securities of an insurance company. Control is presumed to exist in Alabama with a 5% or more ownership interest in such securities. Any purchase of Kemper’s shares that would result in the purchaser owning Kemper’s voting securities in the foregoing percentages for the states indicated would be presumed to result in the acquisition of control of the Company’s insurance subsidiaries in those states. Therefore, acquisitions subject to the 10% threshold generally would require the prior approval of insurance regulators in each state in which the Company’s insurance subsidiaries are domiciled or deemed commercially domiciled, including those in Alabama, while acquisitions subject to the 5% threshold generally would require the prior approval of only Alabama regulators. Similarly, consistent with the Model Holding Company Act, several of the states in which the Company’s insurance subsidiaries are domiciled have enacted legislation that requires either the divesting and/or acquiring company to notify regulators of, and in some cases to receive regulatory approval for, a change in control.

Many state statutes also require pre-acquisition notification to state insurance regulators of a change of control of an insurance company licensed in the state if specific market concentration thresholds would be triggered by the acquisition. Such statutes authorize the issuance of a cease and desist order with respect to the insurance company if certain conditions, such as undue market concentration, would result from the acquisition. These regulatory requirements may deter, delay or prevent transactions effecting control of Kemper or its insurance subsidiaries, or the ownership of Kemper’s voting securities, including transactions that could be advantageous to Kemper’s shareholders.

Federal Government Regulation

Kemper’s health insurance subsidiaries are subject to additional regulation by the federal government. For example, the Health Care Acts, and the regulations promulgated thereunder, have established minimum loss ratios, rating restrictions, mandates for essential health benefit coverages, and restrictions or prohibitions on pre-existing condition exclusions and annual and lifetime policy limits for health insurance policies.

In addition, the Dodd-Frank Act, enacted in 2010, profoundly increases federal regulation of the financial services industry, of which the insurance industry is a part. Among other things, the Dodd-Frank Act formed a Federal Insurance Office (“FIO”) charged with monitoring the insurance industry and conducting a study on methods to modernize and improve the insurance regulatory system in the United States. FIO’s report, delivered to Congress in 2013, concluded that a hybrid approach to regulation, involving a combination of state and federal government action, could improve the U.S. insurance system by attaining uniformity, efficiency and consistency, particularly with respect to solvency and market conduct regulation. A hybrid approach was also recommended to address the perceived need for uniform supervision of insurance companies with national and global activities. FIO established the Federal Advisory Committee on Insurance (“FACI”) whose mission is to provide recommendations to FIO on issues it monitors for Congress. While the NAIC continues to promote the strengths of the U.S. state-based insurance regulatory system, both FIO/FACI and international standard setting authorities such as the International Association of Insurance Supervisors are actively seeking a role in shaping the future of the U.S. insurance regulatory framework. It is not yet known whether or how these organizations’ recommendations might result in changes to the current state-based system of insurance industry regulation or ultimately impact Kemper’s operations.

Kemper is exposed to numerous risk factors that could cause actual results to differ materially from recent results or anticipated future results. The following discussion details the significant risk factors that are specific to the Company. In addition to those described below, the Company’s business, financial condition and results of operations could be materially affected by other factors not presently known by, or considered material to, the Company. Readers are advised to consider all of these factors along with the other information included in this 2016 Annual Report, including the factors set forth under the caption “Caution Regarding Forward-Looking Statements” beginning on page 1, and to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.

Kemper’s insurance subsidiaries are subject to significant regulation, and the evolving legal and regulatory landscape in which they operate could result in increased operating costs, reduced profitability and limited growth.

Kemper’s insurance subsidiaries operate under an extensive insurance regulatory system. Current laws and regulations encompass a wide variety of matters, including policy forms, premium rates, licensing, market conduct, trade practices, claims practices, reserve and loss ratio requirements, investment standards, statutory capital and surplus requirements, restrictions on the payment of dividends, approvals of transactions involving a change in control of one or more insurance companies, restrictions on transactions among affiliates and consumer privacy. They also require the filing of annual and quarterly financial reports and holding company reports. Pre-approval requirements often restrict the companies from implementing premium rate changes for property, casualty and health insurance policies, introducing new, or making changes to existing, policy forms and many other actions. Insurance regulators conduct periodic examinations of Kemper’s insurance subsidiaries and can suspend or delay their operations or licenses, require corrective actions, and impose penalties or other remedies available for compliance failures. For a more detailed discussion of the regulations applicable to Kemper’s subsidiaries and related emerging developments, see “Regulation” in Item 1, beginning on page 10.

These laws and regulations, and their interpretation by the various regulators and courts, are undergoing continual revision and expansion. The legal and regulatory landscape within which Kemper’s insurance subsidiaries conduct their businesses is often unpredictable. As industry practices and regulatory, judicial, political, social and other conditions change, issues may emerge, whether intended or not. These emerging practices, conditions and issues could adversely affect Kemper’s insurance subsidiaries in a variety of ways, including, for example, by expansion of coverages beyond the underwriting intent, increasing the number or size of claims, accelerating the payment of claims or adding to operational costs. Industry practices that were once considered approved, compliant and reasonable may suddenly be deemed unacceptable by virtue of a court or regulatory ruling or changes in regulatory enforcement policies and practices. It is not possible for the Company to predict such shifts in legal or regulatory enforcement or to accurately estimate the impact they may have on the Company and its operations.

One area where the legal and regulatory landscape is experiencing significant change is in connection with the mandated use of death verification databases (a “DMF”) by life insurance companies in their policy administration and claims handling practices. In recent years, many states have adopted new laws requiring insurers to proactively use such databases, including the Social Security Administration’s Death Master File, to varying degrees in order to ascertain if an insured may be deceased. More than twenty states have adopted such laws, and Kemper cannot predict whether additional states will enact similar legislation or, if enacted, what form such legislation may take. These laws require the insurer to initiate the claims process even though the insureds’ beneficiaries have not submitted a claim, including proof of death, as required by regulator-approved policy forms and the insurer was otherwise unaware of the insured’s death. In a related development, many states have expanded the application of their unclaimed property laws, particularly as they relate to life insurance proceeds, and the treasurers or controllers of a large number of states have engaged audit firms to examine the practices of life insurance companies with respect to the reporting and remittance of such proceeds under unclaimed property laws. The push to alter historic practices that were previously considered lawful and appropriate relative to both claims handling and remittance of life insurance policy proceeds under unclaimed property laws has caused the Company to be involved in compliance audits, market conduct examinations and litigation. In the third quarter of 2016, the Company voluntarily began implementing a comprehensive process to compare life insurance records against a DMF and other databases to determine if any of its insured may be deceased. See Note 2, “Summary of Accounting Policies and Accounting Changes,” and Note 23, “Contingencies,” to the Consolidated Financial Statements for further details.

The financial services industry, including insurance companies and their holding company systems, remains under regulatory scrutiny. While it is not possible to predict how new laws or regulations or new interpretations of existing laws and regulations may impact the operations of Kemper’s insurance subsidiaries, several developments have the potential to significantly impact such operations. This includes increased regulatory focus on cybersecurity and state adoption of extensive modifications to state holding company laws that substantially expand the oversight and examination powers of state insurance regulators beyond licensed insurance companies to their non-insurance affiliates and their organizations as a whole, particularly with respect to

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document enterprise risk. In addition, the Health Care Acts have resulted in regulations affecting health insurers such as Reserve National, and potential changes to the state insurance regulatory system may result from the Dodd-Frank Act. See the discussion of these matters under “Regulation” in Item 1, beginning on page 10.

These new developments and significant changes in, or new interpretations of, existing laws and regulations could make it more expensive for Kemper’s insurance subsidiaries to conduct and grow their businesses.

Legal and regulatory proceedings are unpredictable and could produce one or more unexpected verdicts against the Company that could materially and adversely affect the Company’s financial results for any given period.

Kemper and its subsidiaries are from time to time involved in lawsuits, regulatory inquiries and other legal proceedings arising out of the ordinary course of their businesses. Some of these proceedings may involve matters particular to Kemper or one or more of its subsidiaries, while others may pertain to business practices in the industry in which Kemper and its subsidiaries operate. Some lawsuits may seek class action status that, if granted, could expose the Company to potentially significant liability by virtue of the size of the putative classes. These matters often raise difficult factual and legal issues and are subject to uncertainties and complexities. The outcomes of these matters are difficult to predict, and the amounts or ranges of potential loss at particular stages in the proceedings are in most cases difficult or impossible to ascertain. A further complication is that even where the possibility of an adverse outcome is deemed to be remote using traditional legal analysis, juries sometimes substitute their subjective views in place of facts and established legal principles. Given the unpredictability of the legal and regulatory landscape in which the Company operates, there can be no assurance that one or more of these matters will not produce a result that could materially and adversely affect the Company’s financial results for any given period.

For information about the Company’s pending legal proceedings, see Note 23, “Contingencies,” to the Consolidated Financial Statements.

Catastrophe losses could materially and adversely affect the Company’s results of operations, liquidity and/or financial condition.

Kemper’s property and casualty insurance subsidiaries are subject to claims arising out of catastrophes that may have a significant effect on their results of operations, liquidity and financial condition. Catastrophes can be caused by various events, including, but not limited to, hurricanes, tornadoes, windstorms, earthquakes, hailstorms, explosions, severe winter weather and wildfires and may include man- made events, such as terrorist attacks and hazardous material spills. The incidence, frequency and severity of catastrophes are inherently unpredictable and may be impacted by the uncertain effects of climate change. The extent of the Company’s losses from a catastrophe is a function of both the total amount of insured exposure in the geographic area affected by the event and the severity of the event. The Company could experience more than one severe catastrophic event in any given period.

Kemper’s life and health insurance subsidiaries are particularly exposed to risks of catastrophic mortality, such as pandemic or other events that result in large numbers of deaths. In addition, the occurrence of such an event in a concentrated geographic area could have a severe disruptive effect on the Company’s workforce and business operations. The likelihood and severity of such events cannot be predicted and are difficult to estimate.

The property and casualty insurance subsidiaries use catastrophe modeling tools developed by third parties to project their potential exposure to property damage resulting from catastrophic events under various scenarios. Such models are based on various assumptions and judgments which may turn out to be wrong. The actual impact of one or more catastrophic events could adversely and materially differ from these projections.

Changes in the availability and cost of catastrophe reinsurance and in the ability of reinsurers to meet their obligations could result in Kemper’s insurance subsidiaries retaining more risk and could adversely and materially affect the Company’s results of operations, financial condition and/or liquidity.

Kemper’s property and casualty insurance subsidiaries seek to reduce their exposure to catastrophe losses through the purchase of catastrophe reinsurance. Catastrophe reinsurance does not relieve such subsidiaries of their direct liability to their policyholders. As long as the reinsurers meet their obligations, the net liability for such subsidiaries is limited to the amount of risk that they retain. While such subsidiaries’ principal reinsurers are each rated “A-” or better by A.M. Best at the time reinsurance is purchased, the Company cannot be certain that reinsurers will pay the amounts due from them either now, in the future, or on a timely basis. A reinsurer’s insolvency or inability to make payments under the terms of its reinsurance agreement could materially and adversely affect the Company’s financial position, results of operations and liquidity.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In addition, market conditions beyond the Company’s control determine the availability of the reinsurance protection that Kemper’s property and casualty insurance subsidiaries may purchase. A decrease in the amount of reinsurance protection that such subsidiaries purchase generally should increase their risk of a more severe loss. However, if the amount of available reinsurance is reduced, such subsidiaries may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance on acceptable terms, which could adversely affect the ability of such subsidiaries to write future insurance policies or result in their retaining more risk with respect to such policies.

The extent to which Kemper’s insurance subsidiaries can manage their catastrophe exposure through underwriting strategies may be limited by law or regulatory action and could adversely and materially affect the Company’s results of operations, financial condition and/or liquidity.

Kemper’s property and casualty insurance subsidiaries also manage their exposure to catastrophe losses through underwriting strategies such as reducing exposures in, or withdrawing from, catastrophe-prone areas, establishing appropriate guidelines for insurable structures, and setting appropriate rates, deductibles, exclusions and policy limits. The extent to which such subsidiaries can manage their exposure through such strategies may be limited by law or regulatory action. For example, laws and regulations may limit the rate or timing at which insurers may non-renew insurance policies in catastrophe-prone areas or require insurers to participate in wind pools and joint underwriting associations. Generally, an insurer’s participation in such pools and associations are based on the insurer’s market share determined on a state-wide basis. Accordingly, even though Kemper’s property and casualty insurance subsidiaries may not incur a direct insured loss as a result of managing direct catastrophe exposures, they may incur indirect losses from required participation in pools and associations. Laws and regulations requiring prior approval of policy forms and premium rates may limit the ability of Kemper’s property and casualty insurance subsidiaries to increase rates or deductibles on a timely basis, which may result in additional losses or lower returns than otherwise would have occurred in an unregulated market. See the risk factor above under the title “Kemper’s insurance subsidiaries are subject to significant regulation, and the evolving legal and regulatory landscape in which they operate could result in increased operating costs, reduced profitability and limited growth.”

A downgrade in the ratings of Kemper or its insurance subsidiaries could materially and adversely affect the Company.

Third-party rating agencies assess the financial strength and rate the claims-paying ability of insurance companies based on criteria established by the rating agencies. Third-party ratings are important competitive factors in the insurance industry. Financial strength ratings are used to assess the financial strength and quality of insurers. Ratings agencies may downgrade the ratings of Kemper and/or its insurance subsidiaries or require Kemper to retain more capital in its insurance businesses to maintain existing ratings following developments that they deem negative. This can include factors directly related to the Company, such as an increase in the catastrophic risk retained by Kemper’s insurance subsidiaries, or developments in industry or general economic conditions. A downgrade by A.M. Best in the ratings of Kemper’s insurance subsidiaries, particularly those operating in the preferred and standard market or offering homeowners insurance, could result in a substantial loss of business if independent agents and brokers or policyholders of such subsidiaries move to other companies with higher claims-paying and financial strength ratings. Any substantial loss of business could materially and adversely affect the financial condition and results of operations of such subsidiaries. A downgrade in Kemper’s credit rating by Standard & Poor’s (“S&P”), Moody’s Investors Services (“Moody’s”) or Fitch Ratings (“Fitch”) may reduce Kemper’s ability to access the capital markets or may increase the cost to refinance existing debt.

The insurance industry is highly competitive, making it difficult to grow profitability and within expectations of investors.

The Company’s insurance businesses face significant competition, and their ability to compete is affected by a variety of issues relative to others in the industry, such as quality of management, product pricing, service quality, financial strength and name recognition. Competitive success is based on many factors, including, but not limited to, the following: • Competitiveness of prices charged for insurance policies; • Sophistication of pricing segmentation; • Design and introduction of insurance products to meet emerging consumer trends; • Selection and retention of agents and other business partners; • Compensation paid to agents; • Underwriting discipline; • Selectiveness of sales markets; • Effectiveness of marketing materials and name recognition; • Product and technological innovation; • Ability to settle claims timely and efficiently; • Ability to detect and prevent fraudulent insurance claims;

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document • Effectiveness of deployment and use of information technology across all aspects of operations; • Ability to control operating expenses; • Financial strength ratings; and • Quality of services provided to, and ease of doing business with, independent agents and brokers or policyholders.

The inability to compete effectively in any of the Company’s insurance businesses could materially reduce the Company’s customer base and revenues and could materially and adversely affect the future results and financial condition of the Company.

See “Competition” in Item 1 of Part I beginning on page 8 and page 10, for more information on the competitive rankings in the property and casualty insurance markets and the life and health insurance markets, respectively, in the United States.

Technology initiatives, particularly large, multi-year initiatives, to address business developments and regulatory requirements present significant economic and competitive challenges to the Company. Failure to complete and implement such initiatives in a timely manner could result in incurring internal use software development costs that may not be recoverable and the inability to meet emerging consumer and competitive needs which may result in the loss of business.

Data and analytics play an increasingly important role in the insurance industry. While technology developments can facilitate the use of data and analytics, streamline business processes and ultimately reduce the cost of operations, technology initiatives can present significant economic and organizational challenges to the Company and potential short-term cost and implementation risks. In addition, projections of expenses and implementation schedules could change materially and costs could escalate over time, while the ultimate utility of a technology initiative could deteriorate over time. For example, in 2015 and 2014, the Company wrote off costs that had been capitalized in connection with multi-year computer software development projects related to systems that had been intended to replace certain aging systems of the Company’s Property & Casualty Insurance segment. Accordingly, the Company is in the process of undertaking new multi-year projects to replace these aging systems, as well as certain aging systems in its Life & Health Insurance segment.

In addition, due to the highly-regulated nature of the financial services industry, the Company faces rising costs and competing time constraints in adapting technology to meet compliance requirements of new and proposed regulations. The costs to develop and implement systems to replace the Company’s aging systems and to comply with new regulatory requirements as needed over time are expected to be material. Due to the complexities involved and the results of the Company’s past attempts to replace its aging systems, there can be no assurances that new multi-year projects will be successful and that the costs incurred to develop and implement the replacement systems will be recoverable. Furthermore, failure to implement replacement systems in a timely manner could result in loss of business from the Company’s inability to design and introduce new insurance products to meet emerging consumer and competitive trends.

Failure to maintain the security of personal data may result in lost business, reputational harm, legal costs and regulatory penalties.

Kemper’s insurance subsidiaries obtain and store vast amounts of personal data that can present significant risks to the Company and its customers and employees. An increasing array of laws and regulations govern the use and storage of such data, including, for example, social security numbers, credit card data and protected health information. Despite the implementation of various security measures, the Company’s data systems, or those of its third party administrators and other business partners working on behalf of the Company, may be vulnerable to security breaches due to the increasing sophistication of cyber-attacks, viruses, malware, hackers and other external hazards, as well as equipment and system failures and inadvertent errors, negligence or intentional misconduct of employees and/or contractors. The Company also relies on the ability of its business partners to maintain secure systems and processes that comply with legal requirements and protect personal data. These increased risks and expanding regulatory requirements related to personal data privacy and security expose the Company to potential data loss and resulting damages, regulatory fines and other liabilities, reputational risk and significant increases in compliance and litigation costs. Although Kemper maintains cyber risk insurance, there is no guarantee that it will be sufficient to cover all of the costs of one or more data breach incidents that could occur.

In the event of non-compliance with the Payment Card Industry Data Security Standard, an information security framework for organizations that handle cardholder information for the major debit, credit, prepaid, e-purse, ATM and point-of-sale cards, such organizations could prevent Kemper’s insurance subsidiaries from collecting premium payments from customers by way of such cards and impose significant fines on Kemper’s insurance subsidiaries.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Failure to maintain the availability of critical systems may result in lost business, reputational harm, legal costs and regulatory penalties.

The Company’s business operations rely on the continuous availability of its computer systems, including computer systems used by third party administrators working on behalf of the Company. In addition to disruptions caused by cyber-attacks or other data breaches, such systems may be adversely affected by natural and man-made catastrophes. The failure of the Company, or its third party administrators or other business partners, to maintain business continuity in the wake of such events may prevent the timely completion of critical processes across its operations, including, for example, insurance policy administration, claims processing, billing, treasury and investment operations and payroll. These failures could result in significant loss of business, fines and litigation.

The Company’s investment portfolio is exposed to a variety of risks that may negatively impact net investment income and cause realized and unrealized losses.

The Company maintains a diversified investment portfolio that is exposed to significant financial and capital market risks, including interest rate (risk-free and spread), equity price, and liquidity, as well as risks from changes in tax laws and regulations and other risks from changes in general economic conditions.

The interest rate environment has a significant impact on the Company’s financial results and position. In recent years, rates have been at or near historic lows. A protracted low interest rate environment would continue to place pressure on net investment income, particularly related to fixed income securities, short-term investments and limited liability investment companies and limited partnerships accounted for under the equity method of accounting (“Equity Method Limited Liability Investments”) that invest in distressed and mezzanine debt of other companies. A decline in interest rates would generally increase the carrying value of the Company’s fixed income securities and its Equity Method Limited Liability Investments that exhibit debt-like characteristics, but it may adversely affect the Company’s investment income as it invests cash in new investments that may yield less than the portfolio’s average rate. In a declining interest rate environment, borrowers may seek to refinance their borrowings at lower rates and, accordingly, prepay or redeem securities the Company holds as investments more quickly than the Company initially expected. Such prepayment or redemption action may cause the Company to reinvest the redeemed proceeds in lower yielding investments. An increase in interest rates would generally reduce the carrying value of a substantial portion of the Company’s investment portfolio, particularly fixed income securities and Equity Method Limited Liability Investments.

The Company invests a portion of its investment portfolio in equity securities, which generally have more volatile returns than fixed income securities and may experience sustained periods of depressed values. There are multiple factors that could negatively impact the performance of the Company’s equity portfolio, including general economic conditions, industry or sector deterioration and issuer- specific concerns. A decline in equity values may result in a decrease in dividend income, realized losses upon sales of the securities, or other-than-temporary impairment charges on securities still held.

Interest rates and equity returns also have a significant impact on the Company’s pension and other postretirement employee benefit plans. In addition to the impact on carrying values and yields of the underlying assets of the funded plans, interest rates also impact the discounting of the projected and accumulated benefit obligations of the plans. A decrease in interest rates may have a negative impact on the funded status of the plans.

The nature and cash flow needs of the Company and the insurance industry in general present certain liquidity risks that may impact the return of the investment portfolio. If the Company were to experience several significant catastrophic events over a relatively short period of time, investments may have to be sold in advance of their maturity dates to fund payments to claimants, which could result in realized losses. Additionally, increases in illiquidity in the financial markets may increase uncertainty in the valuations of the Company’s investments. This increases the risk that the fair values reported in the Company’s consolidated financial statements may differ from the actual price that may be obtained in an orderly sales transaction.

The Company has also benefited from certain tax laws related to its investment portfolio, including dividends received deductions and tax-exempt municipal securities. Changes in tax laws may have a detrimental effect on the after-tax return of the Company’s investment portfolio. A reduction in income tax rates also could also reduce the demand for tax-preference securities and result in a decline in the value of the Company’s investment portfolio of such securities.

The Company’s entire investment portfolio is subject to broad risks inherent in the financial markets, including, but not limited to, inflation, regulatory changes, inactive capital markets, governmental and social stability, economic outlooks, unemployment and recession. Changes to these risks and how the market perceives them may impact the financial

Kemper and its insurance subsidiaries are subject to various capital adequacy measurements that are significantly impacted by various characteristics of their invested assets, including, but not limited to, asset type, class, duration and credit rating. The Company’s insurance subsidiaries are also subject to various limitations on the amounts at which they can invest in individual assets or certain asset classes in the aggregate. Asset risk is one factor used by insurance regulators and rating agencies to determine required capital for Kemper’s insurance subsidiaries. Accordingly, a deterioration in the quality of the investments held by Kemper’s insurance subsidiaries or an increase in the investment risk inherent in their investment portfolios could increase capital requirements. See the risk factor below under the title “The ability of Kemper to service its debt, to pay dividends to its shareholders and/or make repurchases of its stock may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries.” These factors may inhibit the Company from shifting its investment mix to produce higher returns. The Company is also subject to concentration of investment risk to the extent that the portfolio is heavily invested, at any particular time, in specific asset types, classes, industries, sectors or collateral types, among other defining features. Developments and the market’s perception thereof in any of these concentrations may exacerbate the negative effects on the Company’s investment portfolio compared to other companies.

The determination of the fair values of the Company’s investments and whether a decline in the fair value of an investment is other- than-temporary are based on management’s judgment and may prove to be materially different than the actual economic outcome.

The Company holds a significant amount of assets without readily available, active, quoted market prices or for which fair value cannot be measured from actively quoted prices. These assets are generally deemed to require a higher degree of judgment in measuring fair value. The assumptions used by management to measure fair values could turn out to be different than the actual amounts that may be realized in an orderly transaction with a willing market participant could be either lower or higher than the Company’s estimates of fair value.

The Company reviews its investment portfolio for factors that may indicate that a decline in the fair value of an investment is other- than-temporary. This evaluation is based on subjective factors, assumptions and estimates and may be materially different than the actual economic outcome, which may result in the Company recognizing additional losses in the future as new information emerges or recognizing losses currently that may never materialize in the future in an orderly transaction with a willing market participant.

Estimating losses and LAE for determining property and casualty insurance reserves, or determining premium rates, is inherently uncertain, and the Company’s results of operations may be materially impacted if the Company’s insurance reserves or premium rates are insufficient.

The Company establishes loss and LAE reserves to cover estimated liabilities, which remain unpaid as of the end of each accounting period, and to investigate and settle all claims incurred under the property and casualty insurance policies that it has issued. Loss and LAE reserves are established for claims that have been reported to the Company as of the end of the accounting period, as well as for claims that have occurred but have not yet been reported to the Company. The estimates of loss and LAE reserves are based on the Company’s assessment of the facts and circumstances known to it at the time, as well as estimates of the impact of future trends in the severity of claims, the frequency of claims and other factors.

The process of estimating property and casualty insurance reserves is complex and imprecise. The reserves established by the Company are inherently uncertain estimates and could prove to be inadequate to cover its ultimate losses and expenses for insured events that have occurred. The estimate of the ultimate cost of claims for insured events that have occurred must take into consideration many factors that are dependent on the outcome of future events associated with the reporting, investigation and settlement of claims. The impacts on the Company’s estimates of property and casualty insurance reserves from these factors are difficult to assess accurately. A change in any one or more of the factors is likely to result in a projected ultimate loss that is different than the previous projected ultimate loss and may have a material impact on the Company’s estimate of the projected ultimate loss. Increases in the estimates of ultimate losses and LAE will decrease earnings, while decreases in such estimates will increase earnings, as reported by the Company in the results of its operations for the periods in which the changes to the estimates are made by the Company. See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” beginning on page 57 for a discussion of the Company’s reserving process and the factors considered by the Company’s actuaries in estimating the Company’s Property and Casualty Insurance Reserves.

The Company’s actuaries also consider trends in the severity and frequency of claims and other factors when determining the premium rates to charge for its property and casualty insurance products. An unanticipated change in any one or more of these

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document factors or trends, as well as a change in competitive conditions, may also result in inadequate premium rates charged for insurance policies issued by Kemper’s property and casualty insurance subsidiaries in the future. Such pricing inadequacies could have a material impact on the Company’s operating results.

The ability of Kemper to service its debt, to pay dividends to its shareholders and/or make repurchases of its stock may be materially impacted by lack of timely and/or sufficient dividends received from its subsidiaries.

As a holding company, Kemper depends on the dividend income that it receives from its subsidiaries as the primary source of funds to pay interest and principal on its outstanding debt obligations, to pay dividends to its shareholders and to make repurchases of its stock. Kemper’s insurance subsidiaries are subject to significant regulatory restrictions under state insurance laws and regulations that limit their ability to declare and pay dividends. These laws and regulations impose minimum solvency and liquidity requirements on dividends between affiliated companies and require prior notice to, and may require approval from, state insurance regulators before dividends can be paid. In addition, third-party rating agencies monitor statutory capital and surplus levels for capital adequacy. Even though a dividend may be payable without regulatory approval, an insurance subsidiary may forgo paying a dividend to Kemper and retain the capital in its insurance subsidiaries to maintain or improve the ratings of Kemper’s insurance subsidiaries, or to offset increases in required capital from increases in premium volume or investment risk. The inability of one or more of Kemper’s insurance subsidiaries to pay sufficient dividends to Kemper may materially affect Kemper’s ability to pay its debt obligations on time, to pay dividends to its shareholders or make repurchases of its stock.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Owned Properties

Kemper’s subsidiaries together own and occupy seven buildings located in six states consisting of approximately 25,000 square feet in the aggregate. One of Kemper’s subsidiaries owns one building totaling approximately 2,000 square feet which was vacant at December 31, 2016. Kemper’s subsidiaries hold, solely for investment purposes, additional properties that are not occupied by Kemper or its subsidiaries.

Leased Facilities

The Company leases five floors, or approximately 67,000 square feet, in a 41-story office building in Chicago for its corporate headquarters and Property & Casualty Insurance segment’s headquarters. The lease expires in September 2023. Kemper’s Property & Casualty Insurance segment leases facilities with an aggregate square footage of approximately 462,000 at 14 locations in nine states. The latest expiration date of the existing leases is in June 2025. Kemper’s Life & Health Insurance segment leases facilities with aggregate square footage of approximately 472,000 at 127 locations in 28 states. The latest expiration date of the existing leases is in January 2025. Kemper’s corporate data processing operation leases facilities with aggregate square footage of approximately 36,000 square feet at two locations in two states. The latest expiration date of the existing leases is in December 2018.

The properties described above are in good condition. The properties utilized in the Company’s operations consist of facilities suitable for general office space, call centers and data processing operations.

Item 3. Legal Proceedings.

Proceedings

Information concerning pending legal proceedings is incorporated herein by reference to Note 23, “Contingencies,” to the Consolidated Financial Statements.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Kemper’s common stock is traded on the New York Stock Exchange (the “NYSE”) under the symbol of “KMPR.” Quarterly information pertaining to market prices of Kemper common stock in 2016 and 2015 is presented below.

Three Months Ended Year Ended Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, DOLLARS PER SHARE 2016 2016 2016 2016 2016 Common Stock Market Prices: High $ 36.73 $ 33.20 $ 39.52 $ 45.95 $ 45.95 Low 23.51 28.42 30.87 35.30 23.51 Close 29.57 30.98 39.32 44.30 44.30

Three Months Ended Year Ended Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, DOLLARS PER SHARE 2015 2015 2015 2015 2015 Common Stock Market Prices: High $ 40.13 $ 40.12 $ 40.28 $ 41.65 $ 41.65 Low 34.31 35.06 34.08 34.43 34.08 Close 38.96 38.55 35.37 37.25 37.25

Holders

As of January 19, 2017, the number of record holders of Kemper’s common stock was 3,658.

Quarterly information pertaining to payment of dividends on Kemper’s common stock is presented below.

Three Months Ended Year Ended Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, DOLLARS PER SHARE 2016 2016 2016 2016 2016 Cash Dividends Paid to Shareholders (per share) $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

Three Months Ended Year Ended Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, DOLLARS PER SHARE 2015 2015 2015 2015 2015 Cash Dividends Paid to Shareholders (per share) $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

Kemper’s insurance subsidiaries are subject to various state insurance laws that may restrict the ability of these insurance subsidiaries to pay dividends without prior regulatory approval. See MD&A, “Liquidity and Capital Resources” and Note 9, “Shareholders’ Equity,” to the Consolidated Financial Statements for information on Kemper’s ability and intent to pay dividends.

Issuer Purchases of Equity Securities Information pertaining to purchases of Kemper common stock for the three months ended December 31, 2016 follows.

Total Maximum Number of Shares Dollar Value of Shares Average Purchased as Part that May Yet Be Total Price of Publicly Purchased Under Number of Shares Paid per Announced Plans the Plans or Programs Period Purchased (1) Share or Programs (1) (Dollars in Millions) October 2016 — — — $ 243.7 November 2016 — — — $ 243.7 December 2016 42,444 $ 43.42 — $ 243.7 (1) On August 6, 2014, Kemper’s Board of Directors authorized the repurchase of up to 300 million of Kemper’s common stock. The repurchase program has no expiration date. See MD&A, “Liquidity and Capital Resources.”

The preceding table includes 42,444 shares withheld or surrendered to satisfy the exercise price and/or tax withholding obligations relating to the exercise of stock options under Kemper’s long-term equity-based compensation plans during the quarter ended December 31, 2016.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Kemper Common Stock Performance Graph The following graph assumes $100 invested on December 31, 2011 in (i) Kemper common stock, (ii) the S&P MidCap 400 Index and (iii) the S&P Supercomposite Insurance Index, in each case with dividends reinvested. Kemper is a constituent of each of these two indices. The comparisons in the graph below are based on historical data and are not intended to forecast the possible future performance of Kemper common stock.

Company / Index 2011 2012 2013 2014 2015 2016 Kemper Corporation $ 100.00 $ 104.32 $ 148.66 $ 134.83 $ 142.71 $ 174.63 S&P MidCap 400 Index 100.00 117.88 157.37 172.74 168.98 204.03 S&P Supercomposite Insurance Index 100.00 119.12 173.60 188.73 195.60 232.51

Selected financial information as of and for the years ended December 31, 2016, 2015, 2014, 2013 and 2012 is presented below.

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2016 2015 2014 2013 2012 FOR THE YEAR Earned Premiums $ 2,220.0 $ 2,009.6 $ 1,862.2 $ 2,025.8 $ 2,107.1 Net Investment Income 298.3 302.6 309.1 314.7 295.9 Other Income 3.2 3.7 1.4 0.8 0.8 Net Realized Gains on Sales of Investments 33.1 52.1 39.1 99.1 65.4 Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) (13.9) (6.9) Total Revenues $ 2,521.9 $ 2,340.8 $ 2,196.6 $ 2,426.5 $ 2,462.3 Income from Continuing Operations $ 12.7 $ 80.2 $ 112.6 $ 214.5 $ 91.8 Income from Discontinued Operations 4.1 5.5 1.9 3.2 11.6 Net Income $ 16.8 $ 85.7 $ 114.5 $ 217.7 $ 103.4 Per Unrestricted Share: Income from Continuing Operations $ 0.25 $ 1.55 $ 2.08 $ 3.75 $ 1.55 Income from Discontinued Operations 0.08 0.10 0.04 0.06 0.20 Net Income $ 0.33 $ 1.65 $ 2.12 $ 3.81 $ 1.75 Per Unrestricted Share Assuming Dilution: Income from Continuing Operations $ 0.25 $ 1.55 $ 2.08 $ 3.74 $ 1.54 Income from Discontinued Operations 0.08 0.10 0.04 0.06 0.20 Net Income $ 0.33 $ 1.65 $ 2.12 $ 3.80 $ 1.74 Dividends Paid to Shareholders Per Share $ 0.96 $ 0.96 $ 0.96 $ 0.96 $ 0.96 AT YEAR END Total Assets $ 8,210.5 $ 8,036.1 $ 7,833.4 $ 7,656.4 $ 8,009.1 Insurance Reserves $ 4,406.7 $ 4,203.8 $ 4,007.6 $ 4,061.0 $ 4,132.2 Unearned Premiums 618.7 613.1 536.9 598.9 650.9 Long-term Debt, Current and Non-current 751.6 750.6 752.1 606.9 611.4 All Other Liabilities 458.3 476.2 446.1 338.1 452.9 Total Liabilities 6,235.3 6,043.7 5,742.7 5,604.9 5,847.4 Shareholders’ Equity 1,975.2 1,992.4 2,090.7 2,051.5 2,161.7 Total Liabilities and Shareholders’ Equity $ 8,210.5 $ 8,036.1 $ 7,833.4 $ 7,656.4 $ 8,009.1 Book Value Per Share $ 38.52 $ 38.82 $ 39.88 $ 36.86 $ 36.98

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations

Summary of Results 25 Catastrophes 26 Loss and LAE Reserve Development 28 Non-GAAP Financial Measures 28 Property & Casualty Insurance 30 Life & Health Insurance 40 Investment Results 45 Investment Quality and Concentrations 48 Investments in Limited Liability Companies and Limited Partnerships 50 Write-offs of Long-lived Assets 51 Interest and Other Expenses 51 Income Taxes 51 Liquidity and Capital Resources 52 Off-Balance Sheet Arrangements 54 Contractual Obligations 55 Critical Accounting Estimates 55 Recently Issued Accounting Pronouncements 61

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Kemper Corporation and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations

SUMMARY OF RESULTS

Net Income was $16.8 million ($0.33 per unrestricted common share) for the year ended December 31, 2016, compared to $85.7 million ($1.65 per unrestricted common share) for the year ended December 31, 2015. Income from Continuing Operations was $12.7 million ($0.25 per unrestricted common share) in 2016, compared to $80.2 million ($1.55 per unrestricted common share) in 2015.

A reconciliation of Segment Net Operating Income to Consolidated Net Operating Income (a non-GAAP financial measure) and to Net Income for the years ended December 31, 2016, 2015 and 2014 is presented below.

Increase Increase (Decrease) (Decrease) in Income in Income from 2015 from 2014 DOLLARS IN MILLIONS 2016 2015 to 2016 2014 to 2015 Segment Net Operating Income (Loss): Property & Casualty Insurance $ (2.9) $ 26.7 $ (29.6) $ 24.9 $ 1.8 Life & Health Insurance 30.3 71.7 (41.4) 91.8 (20.1) Total Segment Net Operating Income 27.4 98.4 (71.0) 116.7 (18.3) Unallocated Net Operating Loss (15.0) (28.5) 13.5 (19.6) (8.9) Consolidated Net Operating Income 12.4 69.9 (57.5) 97.1 (27.2) Net Income (Loss) From: Net Realized Gains on Sales of Investments 21.5 33.9 (12.4) 25.4 8.5 Net Impairment Losses Recognized in Earnings (21.2) (17.7) (3.5) (9.9) (7.8) Loss from Early Extinguishment of Debt — (5.9) 5.9 — (5.9) Income from Continuing Operations 12.7 80.2 (67.5) 112.6 (32.4) Income from Discontinued Operations 4.1 5.5 (1.4) 1.9 3.6 Net Income $ 16.8 $ 85.7 $ (68.9) $ 114.5 $ (28.8)

Net Income

2016 Compared with 2015

The Company’s net income decreased by $68.9 million in 2016, compared to 2015. In the Property & Casualty Insurance segment, segment net operating results deteriorated by $29.6 million due primarily to higher incurred catastrophe losses and LAE (excluding reserve development) and higher underlying losses and LAE as a percentage of earned premiums, partially offset by lower insurance expenses as a percentage of earned premiums and the impact of the write-off of internal use software in 2015. See MD&A, “Property & Casualty Insurance,” beginning on page 30 for additional discussion of the segment’s results. See MD&A, “Write-offs of Long-lived Assets,” beginning on page 51 for additional information related to the internal use software write-off. In the Life & Health Insurance segment, segment net operating income decreased by $41.4 million due primarily to a $50.5 million after-tax charge to recognize the impact of using death verification databases in the Company’s operations, including to determine its IBNR liability for unpaid claims and claims adjustment expenses for life insurance products, partially offset by the impact of an adjustment recorded in 2015 to correct deferred premium reserves on certain limited pay life insurance policies and lower Insurance Expenses. See MD&A, “Life & Health Insurance,” beginning on page 40 for additional discussion of the segment’s results. The Company’s results were also significantly and negatively impacted in 2016, compared to 2015, by lower net realized gains on sales of investments and positively impacted in 2016,

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document compared to 2015, from a loss from early extinguishment of debt in 2015. See MD&A, “Investment Results,” beginning on page 45 and MD&A, “Liquidity and Capital Resources,” beginning on page 52 for additional discussion.

2015 Compared with 2014

The Company’s net income decreased by $28.8 million in 2015, compared to 2014. In the Property & Casualty Insurance segment, segment net operating income increased by $1.8 million due primarily to a lower amount of write-offs of internal use software, lower insurance expenses as a percentage of earned premiums and lower incurred catastrophe losses and LAE (excluding reserve development), partially offset by higher underlying losses and LAE as a percentage of earned premiums and a lower level of favorable loss and LAE reserve development. See MD&A, “Property & Casualty Insurance,” beginning on page 30 for additional discussion of the segment’s results. See MD&A, “Write-offs of Long-lived Assets,” beginning on page 51 for additional information related to the internal use software write-offs. In the Life & Health Insurance segment, segment

SUMMARY OF RESULTS (Continued) net operating income decreased by $20.1 million due primarily to a $13.9 million after-tax dividend in 2014 from an investment that had sold substantially all of its operations, an after-tax adjustment to earned premiums of $4.9 million recorded in the first quarter of 2015 to correct deferred premium reserves on certain limited pay life insurance policies, and higher policyholders’ benefits on life insurance. See MD&A, “Life & Health Insurance,” beginning on page 40 for additional discussion of the segment’s results. The Company’s results were also significantly and negatively impacted in 2015, compared to 2014, by higher net impairment losses recognized in earnings and a loss from early extinguishment of debt in 2015, partially offset by higher net realized gains on sales of investments. See MD&A, “Investment Results,” beginning on page 45 and MD&A, “Liquidity and Capital Resources,” beginning on page 52 for additional discussion.

Revenues

2016 Compared with 2015

Earned Premiums were $2,220.0 million in 2016, compared to $2,009.6 million in 2015, an increase of $210.4 million. Earned Premiums increased by $199.6 million and $10.8 million in the Property & Casualty Insurance segment and Life & Health Insurance segment, respectively. See MD&A, “Property & Casualty Insurance,” beginning on page 30 and MD&A, “Life & Health Insurance,” beginning on page 40 for discussion the changes in each segment’s earned premiums.

Net Investment Income decreased by $4.3 million in 2016 due primarily to lower investment returns from Alternative Investments, lower levels and lower returns on investments in equity securities excluding alternative investments, and higher level of investments in fixed income securities, partially offset by lower yields on fixed income securities. Net Investment Income from Alternative Investments which consist of Equity Method Limited Liability Investments, Fair Value Option Investments and other limited liability investments included in Equity Securities decreased by $9.2 million. Alternative investment income from Equity Method Limited Liability Investments and Fair Value Option Investments decreased by $11.5 million and $2.1 million, respectively, for the year ended December 31, 2016, compared to the same period in 2015, while alternative investment income from other limited liability investments included in Equity Securities increased by $4.4 million. See MD&A, “Investment Results,” under the sub-caption “Net Investment Income” beginning on page 45 for additional discussion.

Net Realized Gains on Sales of Investments were $33.1 million in 2016, compared to $52.1 million in 2015. See MD&A, “Investment Results,” under the sub-caption “Net Realized Gains on Sales of Investments” beginning on page 46 for additional discussion. Net Impairment Losses Recognized in Earnings for the years ended December 31, 2016 and 2015 were $32.7 million and $27.2 million, respectively. See MD&A, “Investment Results,” under the sub-caption “Net Impairment Losses Recognized in Earnings” beginning on page 47 for additional discussion. The Company cannot predict when or if similar investment gains or losses may occur in the future.

2015 Compared with 2014

Earned Premiums were $2,009.6 million in 2015, compared to $1,862.2 million in 2014, an increase of $147.4 million. Earned Premiums increased by $165.7 million in the Property & Casualty Insurance segment and decreased by $18.3 million. in the Life & Health Insurance segment. See MD&A, “Property & Casualty Insurance,” beginning on page 30 and MD&A, “Life & Health Insurance,” beginning on page 40 for discussion the changes in each segment’s earned premiums.

Net Investment Income decreased by $6.5 million in 2015, compared to 2014, due primarily to lower investment income from Alternative Investments, partially offset by higher investment income from investments in fixed income securities. Net Investment Income from Alternative Investments decreased by $12.2 million due primarily to a $21.8 million dividend in 2014 from an investment that had sold substantially all of its operations, partially offset by higher investment income from Equity Method Limited Liability Investments.See MD&A, “Investment Results,” under the sub-caption “Net Investment Income” beginning on page 45 for additional discussion.

Net Realized Gains on Sales of Investments were $52.1 million in 2015, compared to $39.1 million in 2014. See MD&A, “Investment Results,” under the sub-caption “Net Realized Gains on Sales of Investments” beginning on page 46 for additional discussion. Net Impairment Losses Recognized in Earnings were $27.2 million in 2015, compared to $15.2 million in 2014. See MD&A, “Investment Results,” under the sub-caption “Net Impairment Losses Recognized in Earnings” beginning on page 47 for additional discussion. The Company cannot predict when or if similar investment gains or losses may occur in the future.

CATASTROPHES Catastrophes and natural disasters are inherent risks of the property and casualty insurance business. These catastrophic events and natural disasters include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds and winter storms. Such events result in insured losses that are, and will continue to be, a material factor in the results of operations and financial position of the Company’s property and casualty insurance companies. Further, because the level of these insured losses occurring in any one year cannot be accurately predicted, these losses may contribute to material year-to-year fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more likely to occur at certain times within the year than others. This factor adds an element of seasonality to property and casualty insurance claims. The Company has adopted the industry- wide catastrophe classifications of storms and other events promulgated by ISO to track and report losses related to catastrophes. ISO classifies a disaster as a catastrophe when the event causes $25.0 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. The discussions that follow utilize ISO’s definition of catastrophes.

The number of catastrophic events and catastrophe losses and LAE (excluding loss and LAE reserve development) by range of loss and business segment for the years ended December 31, 2016, 2015 and 2014 are presented below.

Year Ended Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Number of Losses and Number of Losses and Number of Losses and DOLLARS IN MILLIONS Events LAE Events LAE Events LAE Range of Losses and LAE Per Event: Below $5 39 $ 37.6 37 $ 43.6 27 $ 31.1 $5 - $10 2 13.5 3 24.7 3 20.4 $10 - $15 — — — — 1 13.1 $15 - $20 — — — — — — $20 - $25 — — — — — — Greater Than $25 2 64.0 — — 1 33.9 Total 43 $ 115.1 40 $ 68.3 32 $ 98.5

Property & Casualty Insurance $ 109.6 $ 64.5 $ 96.5 Life & Health Insurance 5.5 3.8 2.0 Total Catastrophe Losses and LAE $ 115.1 $ 68.3 $ 98.5

2016 Compared with 2015

As shown in the preceding table, catastrophe losses and LAE increased for the year ended December 31, 2016, compared to 2015, due primarily to two significant catastrophe events in 2016 exceeding $25 million of losses (a hailstorm in Texas in March with losses and LAE of $36.0 million and another hailstorm in Texas in April with losses and LAE of $28.0 million), compared to no such events in 2015, partially offset by lower severity of events below $10 million of losses in 2016, compared to 2015.

2015 Compared with 2014

As shown in the preceding table, catastrophe losses and LAE decreased for the year ended December 31, 2015, compared to 2014, due primarily to two significant catastrophe events in 2014 (one event with losses and LAE of $33.9 million and another event with losses and LAE of $13.1 million), compared to no such events exceeding $10 million in 2015, partially offset by higher frequency of events below $5 million of losses in 2015, compared to 2014. The event in the preceding table with $33.9 million in catastrophe losses and LAE in 2014 was incurred in multiple states, particularly Montana. The event in the preceding table with $13.1 million in catastrophe losses and LAE in 2014 was primarily related to hail in Texas.

CATASTROPHES (Continued) Catastrophe Reinsurance

The Company primarily manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in such regions, modifications of, and/or limitations to coverages and deductibles for certain perils in such regions and a primary catastrophe reinsurance program for the Property & Casualty Insurance segment. Coverage for this segment’s primary catastrophe reinsurance program is provided in various layers. The Property & Casualty Insurance segment also purchases reinsurance from the FHCF for hurricane losses in Florida at retentions lower than its primary catastrophe reinsurance program. The Life & Health Insurance segment also purchases reinsurance from the FHCF for hurricane losses in Florida. Except for the coverage provided by the FHCF, the Life & Health Insurance segment has not carried any other catastrophe reinsurance since 2012, primarily due to actions taken by KHSC to reduce its exposures to catastrophes. See the “Reinsurance” subsections of the “Property and Casualty Insurance Business” and “Life and Health Insurance Business” sections of Item 1(c), “Description of Business,” and Note 20, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for additional information on the Company’s reinsurance programs. LOSS AND LAE RESERVE DEVELOPMENT

Increases (decreases) in the Company’s property and casualty loss and LAE reserves for the years ended December 31, 2016, 2015 and 2014 to recognize adverse (favorable) loss and LAE reserve development from prior accident years in continuing operations, hereinafter also referred to as “reserve development” in the discussion of segment results, are presented below.

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance: Non-catastrophe $ 4.9 $ (5.0) $ (38.6) Catastrophe (19.2) (7.9) (15.8) Total (14.3) (12.9) (54.4) Life & Health Insurance: Non-catastrophe — 1.3 (0.2) Catastrophe (0.1) 0.1 1.1 Total (0.1) 1.4 0.9 Increase (Decrease) in Total Loss and LAE Reserves Related to Prior Years: Non-catastrophe 4.9 (3.7) (38.8) Catastrophe (19.3) (7.8) (14.7) Decrease in Total Loss and LAE Reserves Related to Prior Years $ (14.4) $ (11.5) $ (53.5)

See MD&A, “Property & Casualty Insurance,” MD&A, “Life & Health Insurance,” and Note 6, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for additional information on the Company’s reserve development. See MD&A, “Critical Accounting Estimates,” of this 2016 Annual Report for additional information pertaining to the Company’s process of estimating property and casualty insurance reserves for losses and LAE, and the estimated variability thereof, development of property and casualty insurance losses and LAE, and a discussion of some of the variables that may impact them.

NON-GAAP FINANCIAL MEASURES

Pursuant to the rules and regulations of the SEC, the Company is required to file consolidated financial statements prepared in accordance with the accounting principles generally accepted in the United States (“GAAP”). The Company is permitted to include non- GAAP financial measures in its filings provided that they are defined along with an explanation of their usefulness to investors, are no more prominent than the comparable GAAP financial measures and are reconciled to such GAAP financial measures.

These non-GAAP financial measures should not be considered a substitute for the comparable GAAP financial measures, as they do not fully recognize the overall profitability of the Company’s businesses.

NON-GAAP FINANCIAL MEASURES (Continued)

Underlying Combined Ratio

The following discussions of segment results use the non-GAAP financial measures of (i) Underlying Losses and LAE and (ii) Underlying Combined Ratio. Underlying Losses and LAE (also referred to in the discussion as “Current Year Non-catastrophe Losses and LAE”) exclude the impact of catastrophe losses and loss and LAE reserve development from prior years from the Company’s Incurred Losses and LAE, which is the most directly comparable GAAP financial measure. The Underlying Combined Ratio 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 is computed by adding total incurred losses and LAE, including the impact of catastrophe losses and loss and LAE reserve development from prior years, with the Insurance Expense (including write-offs of long-lived assets) Ratio. The Company believes Underlying Losses and LAE and the Underlying Combined Ratio are useful to investors and are used by management to reveal the trends in the Company’s Property & Casualty Insurance business that may be obscured by catastrophe losses and prior year reserve development. These catastrophe losses may cause the Company’s 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 developments are caused by unexpected loss development on historical reserves. Because reserve development relates to the re-estimation of losses from earlier years, it has no bearing on the performance of the Company’s insurance products that were in force 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.

Consolidated Net Operating Income

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; 3) Loss from Early Extinguishment of Debt; and 4) 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. There were no applicable significant non-recurring items that the Company excluded from the calculation of Consolidated Net Operating Income for the years ended December 31, 2016, 2015 and 2014.

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. Loss from Early Extinguishment of Debt is driven by the Company’s financing and refinancing decisions and capital needs, as well as external economic developments such as debt market conditions, 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.

PROPERTY & CASUALTY INSURANCE

Selected financial information for the Property & Casualty Insurance segment is presented below.

DOLLARS IN MILLIONS 2016 2015 2014 Net Premiums Written $ 1,620.9 $ 1,406.2 $ 1,189.1 Earned Premiums $ 1,614.8 $ 1,415.2 $ 1,249.5 Net Investment Income 72.4 73.3 72.7 Other Income 0.5 0.6 0.5 Total Revenues 1,687.7 1,489.1 1,322.7 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE 1,223.9 1,034.6 845.2 Catastrophe Losses and LAE 109.6 64.5 96.5 Prior Years: Non-catastrophe Losses and LAE 4.9 (5.0) (38.6) Catastrophe Losses and LAE (19.2) (7.9) (15.8) Total Incurred Losses and LAE 1,319.2 1,086.2 887.3 Insurance Expenses, Excluding Write-offs of Long-lived Assets 385.7 368.1 353.7 Write-offs of Long-lived Assets — 11.1 54.6 Operating Profit (Loss) (17.2) 23.7 27.1 Income Tax Benefit (Expense) 14.3 3.0 (2.2) Segment Net Operating Income (Loss) $ (2.9) $ 26.7 $ 24.9

Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 75.8 % 73.2 % 67.7 % Current Year Catastrophe Losses and LAE Ratio 6.8 4.6 7.7 Prior Years Non-catastrophe Losses and LAE Ratio 0.3 (0.4) (3.1) Prior Years Catastrophe Losses and LAE Ratio (1.2) (0.6) (1.3) Total Incurred Loss and LAE Ratio 81.7 76.8 71.0 Insurance Expense Ratio, Excluding Write-offs of Long-lived Assets 23.9 26.0 28.3 Impact on Ratio from Write-offs of Long-lived Assets — 0.8 4.4 Combined Ratio 105.6 % 103.6 % 103.7 % Underlying Combined Ratio Current Year Non-catastrophe Losses and LAE Ratio 75.8 % 73.2 % 67.7 % Insurance Expense Ratio, Excluding Write-offs of Long-lived Assets 23.9 26.0 28.3 Impact on Ratio from Write-offs of Long-lived Assets — 0.8 4.4 Underlying Combined Ratio 99.7 % 100.0 % 100.4 % Non-GAAP Measure Reconciliation Underlying Combined Ratio 99.7 % 100.0 % 100.4 % Current Year Catastrophe Losses and LAE Ratio 6.8 4.6 7.7 Prior Years Non-catastrophe Losses and LAE Ratio 0.3 (0.4) (3.1) Prior Years Catastrophe Losses and LAE Ratio (1.2) (0.6) (1.3) Combined Ratio as Reported 105.6 % 103.6 % 103.7 %

PROPERTY & CASUALTY INSURANCE (Continued)

CATASTROPHE FREQUENCY AND SEVERITY

Dec 31, 2016 Dec 31, 2015 Number of Losses and Number of Losses and DOLLARS IN MILLIONS Events LAE Events LAE Range of Losses and LAE Per Event: Below $5 39 $ 33.0 37 $ 40.9 $5 - $10 2 13.2 3 23.6 $10 - $15 — — — — $15 - $20 — — — — $20 - $25 — — — — Greater Than $25 2 63.4 — — Total 43 $ 109.6 40 $ 64.5

INSURANCE RESERVES

Dec 31, Dec 31, DOLLARS IN MILLIONS 2016 2015 Insurance Reserves: Automobile $ 754.1 $ 656.3 Homeowners 88.9 98.9 Other 41.1 45.3 Insurance Reserves $ 884.1 $ 800.5 Insurance Reserves: Loss Reserves: Case $ 598.0 $ 537.1 Incurred But Not Reported 158.2 147.6 Total Loss Reserves 756.2 684.7 LAE Reserves 127.9 115.8 Insurance Reserves $ 884.1 $ 800.5

See MD&A, “Critical Accounting Estimates,” under the caption “Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses” beginning on page 57 for additional information pertaining to the Company’s process of estimating property and casualty insurance reserves for losses and LAE, development of property and casualty insurance losses and LAE from prior accident years, also referred to as “reserve development” in the discussion of segment results, estimated variability of property and casualty insurance reserves for losses and LAE, and a discussion of some of the variables that may impact development of property and casualty insurance losses and LAE and the estimated variability of property and casualty insurance reserves for losses and LAE.

Acquisition of Alliance United

As discussed in Note 3, “Acquisition of Business,” to the Consolidated Financial Statements, the Company completed its acquisition of Alliance United on April 30, 2015. Alliance United is a provider of nonstandard personal automobile insurance in California and has added significant scale to the Property & Casualty Insurance segment’s premium base. The results of Alliance United’s operations have been included in the Company’s consolidated results since the date of its acquisition, which can obscure certain comparisons of year- over-year results, particularly when analyzing overall segment results as well as the nonstandard personal automobile insurance line of business. To focus on the performance of the segment’s legacy business, certain comparisons exclude Alliance United’s impact on the segment’s results.

PROPERTY & CASUALTY INSURANCE (Continued)

Overall

2016 Compared with 2015

The Property & Casualty Insurance segment reported Segment Net Operating Loss of $2.9 million for the year ended December 31, 2016, compared to Segment Net Operating Income of $26.7 million in 2015. Segment net operating results deteriorated by $29.6 million due primarily to higher incurred catastrophe losses and LAE (excluding reserve development) and higher net operating losses from Alliance United, largely due to it being included in 2016 results for the full year. The deterioration was partially offset by lower underlying losses and LAE as a percentage of earned premiums in the legacy business and the write-off of internal-use software in 2015.

Earned Premiums in the Property & Casualty Insurance segment increased by $199.6 million in 2016, compared to 2015. Excluding the $235.9 million impact from Alliance United, earned premiums decreased by $36.3 million, as lower volume accounted for a decrease of $55.6 million, while higher average earned premium accounted for an increase of $19.3 million. Excluding Alliance United, the lower volume was driven primarily by preferred personal automobile insurance, homeowners insurance and nonstandard personal automobile insurance, which had volume decreases of $28.3 million, $11.9 million and $9.0 million, respectively. Excluding Alliance United, the increase in average earned premium was driven primarily by nonstandard personal automobile insurance, which had an increase of $15.3 million.

Net Investment Income in the Property & Casualty Insurance segment decreased by $0.9 million in 2016,, compared to 2015, due primarily to lower investment income from Alternative Investments and a lower level of non-alternative investments, partially offset by investment income from the investments acquired from the acquisition of, and the capital contributed to, Alliance United and higher yields on non-alternative investments. The Property & Casualty Insurance segment reported Net Investment Income from Alternative Investments of $20.2 million in 2016, compared to $25.3 million in 2015.

Underlying losses and LAE as a percentage of earned premiums were 75.8% in 2016, an increase of 2.6 percentage points, compared to 2015. Alliance United, which runs at a higher underlying losses and LAE ratio but lower insurance expense ratio, added 8.4 percentage points to the overall underlying losses and LAE ratio in 2016, compared to adding 4.8 percentage points in 2015. Excluding the impact of Alliance United, underlying losses and LAE as a percentage of earned premiums were 67.4% in 2016, compared to 68.4% in 2015, or a decrease of 1.0 percentage points, as all product lines improved with the exception of preferred personal automobile insurance, which deteriorated. Underlying incurred losses and LAE exclude the impact of catastrophes and loss and LAE reserve development. Catastrophe losses and LAE (excluding reserve development) were $109.6 million in 2016, compared to $64.5 million in 2015, which is an increase of $45.1 million due primarily to two separate hailstorms in Texas—one in March 2016 with estimated losses and LAE of $36.0 million and another in April 2016 with estimated losses and LAE of $27.4 million. The increase was partially offset by reduced severity of catastrophic events with losses and LAE (excluding reserve development) of less than $10 million in 2016, compared to 2015. Excluding the impact of Alliance United, favorable loss and LAE reserve development (including favorable catastrophe reserve development of $19.2 million in 2016 and $7.9 million in 2015) was $19.4 million in 2016, compared to $20.6 million in 2015.

Insurance expenses were $385.7 million, or 23.9% of earned premiums, in 2016. Excluding a write-off of a long-lived asset, insurance expenses were $368.1 million, or 26.0% of earned premiums, in 2015. The improvement in the ratio of 2.1 percentage points from 2015 to 2016 was due primarily to the inclusion of Alliance United, which runs at a lower insurance expense ratio, for a full year in 2016. Excluding the impact of the write-off and Alliance United, insurance expenses decreased by $12.7 million in 2016, compared to 2015, and decreased as a percentage of earned premiums from 28.8% in 2015 to 28.4% in 2016.

The Property & Casualty Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to tax-exempt investment income, dividends received deductions and estimated indemnification recoveries recognized in earnings pursuant to the Alliance United purchase agreement. Tax-exempt investment income and dividends received deductions were $23.7 million in 2016, compared to $22.6 million in 2015. Indemnification recoveries result in an adjustment to the tax purchase price and are excluded from the determination of taxable income and income tax expense. Estimated indemnification recoveries recognized in earnings were $0.7 million in 2016, all of which has been reported as a reduction of Insurance Expenses. Estimated indemnification recoveries recognized in earnings were $10.4 million in 2015, of which $5.9 million has been reported as a reduction of Incurred Losses and LAE and $4.5 million has been recorded as a reduction of Insurance Expenses.

PROPERTY & CASUALTY INSURANCE (Continued)

2015 Compared with 2014

The Property & Casualty Insurance segment reported Segment Net Operating Income of $26.7 million for the year ended December 31, 2015, compared to $24.9 million in 2014. Segment Net Operating Income improved by $1.8 million due primarily to the impact of write-offs of internal use software, lower insurance expenses as a percentage of earned premiums and lower incurred catastrophe losses and LAE (excluding reserve development), partially offset by higher underlying losses and LAE as a percentage of earned premiums and a lower level of favorable loss and LAE reserve development.

Earned Premiums in the Property & Casualty Insurance segment increased by $165.7 million. Excluding the $272.9 million impact from Alliance United, earned premiums decreased by $107.2 million, as lower volume accounted for a decrease of $127.4 million, while higher average earned premium accounted for an increase of $20.2 million. Excluding Alliance United, the lower volume was driven primarily by preferred personal automobile insurance, homeowners insurance and nonstandard personal automobile insurance, which had volume decreases of $80.2 million, $32.0 million and $8.8 million, respectively. Excluding Alliance United, the increase in average earned premium was driven primarily by nonstandard personal automobile insurance, homeowners insurance and preferred personal automobile insurance, which had increases of $8.2 million, $5.9 million and $4.2 million, respectively.

Net Investment Income in the Property & Casualty Insurance segment increased by $0.6 million for the year ended December 31, 2015, compared to the same period in 2014, due primarily to higher investment income from Alternative Investments, higher yields on fixed income securities and investment income from the investments acquired from the acquisition of and, the capital contributed to, Alliance United, partially offset by lower dividends on equity securities and lower levels of allocated investments resulting from a decline in the level of capital needed to support the legacy business. The Property & Casualty Insurance segment reported Net Investment Income from Alternative Investments of $25.3 million in 2015, compared to $ 22.2 million in 2014.

Underlying losses and LAE as a percentage of earned premiums were 73.2% in 2015, an increase of 5.5 percentage points, compared to 2014. Alliance United, which runs at a higher underlying losses and LAE ratio but lower insurance expense ratio, added 4.8 percentage points to the overall underlying losses and LAE ratio. Excluding the impact of Alliance United, underlying losses and LAE as a percentage of earned premiums were 68.4% in 2015, compared to 67.7% in 2014, or an increase of 0.7 percentage points, as nonstandard personal automobile insurance, homeowners insurance and commercial automobile insurance deteriorated, while preferred personal automobile insurance and other personal insurance improved. Underlying incurred losses and LAE exclude the impact of catastrophes and loss and LAE reserve development. Catastrophe losses and LAE (excluding reserve development) were $64.5 million in 2015, compared to $96.5 million in 2014, which is a decrease of $32.0 million due primarily to two catastrophe events in 2014 that exceeded $10.0 million of losses and LAE, compared to no such events in 2015, partially offset by an increase in the number of catastrophe events in 2015 with losses and LAE less than $5 million. Excluding the impact of Alliance United, favorable loss and LAE reserve development (including favorable catastrophe reserve development of $7.9 million in 2015 and $15.8 million in 2014) was $20.6 million in 2015, compared to $54.4 million in 2014.

Insurance expenses, including write-offs of long-lived assets, were $379.2 million in 2015, compared to $408.3 million in 2014, which is a decrease of $29.1 million due primarily to the impact of write-offs of internal use software, lower variable costs in line with a general decline in the size of the Company’s legacy business and cost-cutting measures implemented by the Company, partially offset by the inclusion of Alliance United. The write-off of internal use software was $11.1 million in 2015, compared to $54.6 million in 2014. See “Write-offs of Long-lived Assets” of the MD&A for further discussion. Excluding the software write-offs, insurance expenses were $368.1 million, or 26.0% of earned premiums, in 2015, compared to $353.7 million, or 28.3% of earned premiums, in 2014. The inclusion of Alliance United accounted for a reduction of 3.0 percentage points in the segment’s overall insurance expense ratio. Insurance expenses for Alliance United include a write-off of deferred policy acquisition costs of $9.0 million due to a premium deficiency and legal expenses of $5.2 million, net of indemnification, for a certain legal matter. See Note 3, “Acquisition of Business,” to the Consolidated Financial Statements. Excluding the impact of the software write-offs and Alliance United, insurance expenses decreased by $24.2 million in 2015, compared to 2014, but increased, as a percentage of earned premiums, from 28.3% in 2014 to 28.8% in 2015. The increase in the ratio was due primarily to the reduction in legacy earned premiums outpacing the reduction in fixed costs.

PROPERTY & CASUALTY INSURANCE (Continued) to the tax purchase price and are excluded from the determination of taxable income and income tax expense. Estimated indemnification recoveries recognized in earnings were $10.4 million in 2015, of which $5.9 million has been reported as a reduction of Incurred Losses and LAE and $4.5 million has been recorded as a reduction of Insurance Expenses.

Preferred Personal Automobile Insurance

Selected financial information for the preferred personal automobile insurance product line follows.

DOLLARS IN MILLIONS 2016 2015 2014 Net Premiums Written $ 426.1 $ 434.5 $ 486.2 Earned Premiums $ 424.6 $ 449.9 $ 525.9 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 308.0 $ 319.5 $ 377.4 Catastrophe Losses and LAE 11.6 3.0 8.9 Prior Years: Non-catastrophe Losses and LAE 4.9 (15.0) (31.5) Catastrophe Losses and LAE (0.3) (0.2) (0.3) Total Incurred Losses and LAE $ 324.2 $ 307.3 $ 354.5 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 72.6 % 70.9 % 71.8 % Current Year Catastrophe Losses and LAE Ratio 2.7 0.7 1.7 Prior Years Non-catastrophe Losses and LAE Ratio 1.2 (3.3) (6.0) Prior Years Catastrophe Losses and LAE Ratio (0.1) — (0.1) Total Incurred Loss and LAE Ratio 76.4 % 68.3 % 67.4 %

2016 Compared with 2015

Earned premiums in preferred personal automobile insurance decreased by $25.3 million in 2016, compared to 2015, as lower volume accounted for a decrease of $28.3 million, while higher average earned premium accounted for an increase of $3.0 million. The run-off of the direct-to-consumer business accounted for 60% of the decrease in earned premiums attributed to lower volume. Incurred losses and LAE were $324.2 million, or 76.4% of earned premiums, in 2016, compared to $307.3 million, or 68.3% of earned premiums, in 2015. Incurred losses and LAE as a percentage of earned premiums increased due to an unfavorable change in loss and LAE reserve development, higher incurred catastrophe losses and LAE (excluding reserve development) and higher underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of related earned premiums were 72.6% in 2016, compared to 70.9% in 2015, which was a deterioration of 1.7 percentage points due primarily to slightly higher severity of losses on most coverages. Catastrophe losses and LAE (excluding reserve development) were $11.6 million in 2016, compared to $3.0 million in 2015. This increase was driven primarily by the two aforementioned hailstorms in Texas in 2016. Loss and LAE reserve development was adverse by $4.6 million in 2016, compared to favorable development of $15.2 million in 2015.

2015 Compared with 2014

Earned premiums in preferred personal automobile insurance decreased by $76.0 million in 2015, compared to 2014, as lower volume accounted for a decrease of $80.2 million, while higher average earned premium accounted for an increase of $4.2 million. The run-off of the direct-to-consumer business accounted for approximately 30% of the decrease in earned premiums attributed to lower volume. Incurred losses and LAE were $307.3 million, or 68.3% of earned premiums, in 2015, compared to $354.5 million, or 67.4% of earned premiums, in 2014. Incurred losses and LAE as a percentage of earned premiums increased due to a lower level of favorable loss and LAE reserve development, partially offset by lower incurred catastrophe losses and LAE (excluding reserve development) and lower underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 70.9% in 2015, compared to 71.8% in 2014, which was an improvement of 0.9 percentage points due primarily to higher average earned premium and lower frequency of claims on bodily

PROPERTY & CASUALTY INSURANCE (Continued) injury, uninsured/underinsured motorists, property damage and comprehensive coverages, partially offset by higher severity of losses on most coverages. Catastrophe losses and LAE (excluding reserve development) were $3.0 million in 2015, compared to $8.9 million in 2014. Favorable loss and LAE reserve development was $15.2 million in 2015, compared to $31.8 million in 2014.

Nonstandard Personal Automobile Insurance

Selected financial information for the nonstandard personal automobile insurance product line for the years ended December 31, 2016, 2015 and 2014 is presented in the following table. The results for the year ended December 31, 2015 for Alliance United include only the last eight months of the period, which is the period since the date of acquisition.

2016 2015 2014 Alliance Alliance DOLLARS IN MILLIONS Legacy United Total Legacy United Total Legacy Net Premiums Written $ 317.7 $ 514.9 $ 832.6 $ 310.9 $ 285.1 $ 596.0 $ 302.8

Earned Premiums $ 311.2 $ 508.8 $ 820.0 $ 304.9 $ 272.9 $ 577.8 $ 305.5

Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 236.1 $ 478.2 $ 714.3 $ 247.6 $ 253.3 $ 500.9 $ 238.6 Catastrophe Losses and LAE 5.6 0.1 5.7 3.7 — 3.7 3.8 Prior Years: Non-catastrophe Losses and LAE 1.7 5.1 6.8 5.8 7.7 13.5 0.5 Catastrophe Losses and LAE (0.1) — (0.1) (0.1) — (0.1) (0.3) Total Incurred Losses and LAE $ 243.3 $ 483.4 $ 726.7 $ 257.0 $ 261.0 $ 518.0 $ 242.6

Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 75.9% 94.0% 87.1% 81.2% 92.8% 86.8% 78.1 % Current Year Catastrophe Losses and LAE Ratio 1.8 — 0.7 1.2 — 0.6 1.2 Prior Years Non-catastrophe Losses and LAE Ratio 0.5 1.0 0.8 1.9 2.8 2.3 0.2 Prior Years Catastrophe Losses and LAE Ratio — — — — — — (0.1) Total Incurred Loss and LAE Ratio 78.2% 95.0% 88.6% 84.3% 95.6% 89.7% 79.4 %

2016 Compared with 2015

Earned Premiums on nonstandard personal automobile insurance increased by $242.2 million in 2016, compared to 2015. Excluding the impact from Alliance United, Earned Premiums increased by $6.3 million as higher average earned premium accounted for an increase of $15.3 million, while lower volume accounted for a decrease of $9.0 million. Incurred losses and LAE were $726.7 million, or 88.6% of earned premiums, in 2016, compared to $518.0 million, or 89.7% of earned premiums, in 2015. Excluding Alliance United, incurred losses and LAE were $243.3 million, or 78.2% of related earned premiums, in 2016, compared to $257.0 million, or 84.3% of related earned premiums, in 2015. Excluding the impact of Alliance United, incurred losses and LAE as a percentage of earned premiums

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document decreased due to lower underlying losses and LAE as a percentage of earned premiums and a lower level of adverse loss and LAE reserve development, partially offset by higher incurred catastrophe losses and LAE (excluding reserve development). Excluding Alliance United, underlying losses and LAE as a percentage of related earned premiums were 75.9% in 2016, compared to 81.2% in 2015, which was an improvement of 5.3 percentage points due primarily to higher average earned premium, lower frequency of claims across all coverages on non-California policies and lower severity of property losses on California policies, partially offset by higher frequency of claims on most coverages on California policies and higher severity of bodily injury losses on non-California policies. Catastrophe losses

PROPERTY & CASUALTY INSURANCE (Continued) and LAE (excluding reserve development) were $5.7 million in 2016, compared to $3.7 million in 2015. Excluding Alliance United, adverse loss and LAE reserve development was $1.6 million in 2016, compared to $5.7 million in 2015.

For Alliance United, underlying losses and LAE as a percentage of related earned premiums were 94.0% in 2016, compared to 92.8% in 2015, which was a deterioration of 1.2 percentage points. Alliance United’s underlying loss and LAE ratio continues to be significantly higher than what had been reported by Alliance United prior to the acquisition date. Alliance United has experienced significantly higher frequency of claims on all coverages and, to a lesser extent, higher severity of losses on most coverages than the trend that Kemper had anticipated prior to the acquisition. Alliance United’s premium rates have become inadequate due in part to the significant adverse changes in underlying frequency and severity trends. The Company continues to analyze its experience against industry information as it becomes available and believes that Alliance United’s frequency trend may be worse than industry due in part to anti- selection resulting from inadequate rates and higher growth rates for new business, which tends to run at a higher underlying loss and LAE ratio than renewal business. In addition, Alliance United’s results for the year ended December 31, 2016 include adverse loss and LAE reserve development of $5.1 million. Since the acquisition, several events have resulted in the historical development factors becoming less reliable in predicting how losses will ultimately emerge. For 2016, the primary driver of adverse development was a decrease in the ratio of claims closed without payment, which has driven the Company’s selection of ultimate losses higher. In addition, payment development patterns, as well as claim severity patterns, may have been influenced by an inadequate level of claims adjusters, as staffing levels for Alliance United’s claims adjusters were not able to keep pace with Alliance United’s growth rate prior to and after the acquisition date and the recent spike in frequency. The Company has taken and continues to take various actions to address Alliance United’s performance, including increasing the staffing levels for claims adjusters, slowing growth rates for new business, various agency management actions and filing and implementing rate increases. The Company anticipates it will take several more pricing cycles to become rate adequate.

2015 Compared with 2014

Earned Premiums on nonstandard personal automobile insurance increased by $272.3 million in 2015, compared to 2014,. Excluding the impact from Alliance United, Earned Premiums decreased by $0.6 million as lower volume accounted for a decrease of $8.8 million, while higher average earned premium accounted for an increase of $8.2 million. Incurred losses and LAE were $518.0 million, or 89.7% of earned premiums, in 2015, compared to $242.6 million, or 79.4% of earned premiums, in 2014. Excluding Alliance United, incurred losses and LAE were $257.0 million, or 84.3% of related earned premiums, in 2015, compared to $242.6 million, or 79.4% of related earned premiums, in 2014. Excluding the impact of Alliance United, incurred losses and LAE as a percentage of earned premiums increased due to higher underlying losses and LAE as a percentage of earned premiums and a higher level of adverse loss and LAE reserve development. Excluding Alliance United, underlying losses and LAE as a percentage of related earned premiums were 81.2% in 2015, compared to 78.1% in 2014, which was a deterioration of 3.1 percentage points due primarily to higher frequency of claims across all coverages and higher severity of property damage losses, partially offset by higher average earned premium and lower severity of bodily injury losses. Catastrophe losses and LAE (excluding reserve development) were $3.7 million in 2015, compared to $3.8 million in 2014. Excluding Alliance United, adverse loss and LAE reserve development was $5.7 million in 2015, compared to $0.2 million in 2014.

PROPERTY & CASUALTY INSURANCE (Continued)

Homeowners Insurance

Selected financial information for the homeowners insurance product line follows.

DOLLARS IN MILLIONS 2016 2015 2014 Net Premiums Written $ 267.4 $ 276.0 $ 296.5 Earned Premiums $ 271.9 $ 286.3 $ 312.4 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 135.5 $ 145.1 $ 156.5 Catastrophe Losses and LAE 89.0 55.4 80.8 Prior Years: Non-catastrophe Losses and LAE (3.2) (3.3) (1.5) Catastrophe Losses and LAE (16.8) (7.5) (13.3) Total Incurred Losses and LAE $ 204.5 $ 189.7 $ 222.5 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 49.9 % 50.7 % 50.1 % Current Year Catastrophe Losses and LAE Ratio 32.7 19.4 25.9 Prior Years Non-catastrophe Losses and LAE Ratio (1.2) (1.2) (0.5) Prior Years Catastrophe Losses and LAE Ratio (6.2) (2.6) (4.3) Total Incurred Loss and LAE Ratio 75.2 % 66.3 % 71.2 %

2016 Compared with 2015

Earned premiums in homeowners insurance decreased by $14.4 million in 2016, compared to 2015, as lower volume accounted for a decrease of $11.9 million and lower average earned premium accounted for a decrease of $2.5 million. Incurred losses and LAE were $204.5 million, or 75.2% of earned premiums, in 2016, compared to $189.7 million, or 66.3% of earned premiums, in 2015. Incurred losses and LAE as a percentage of earned premiums increased due to higher incurred catastrophe losses and LAE (excluding reserve development), partially offset by a higher level of favorable loss and LAE reserve development and lower underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 49.9% in 2016, compared to 50.7% in 2015, which was an improvement of 0.8 percentage points due primarily to lower frequency of claims, partially offset by higher severity of losses. Catastrophe losses and LAE (excluding reserve development) were $89.0 million in 2016, compared to $55.4 million in 2015. This increase was driven primarily by the two aforementioned hailstorms in Texas in 2016. Favorable loss and LAE reserve development was $20.0 million in 2016, compared to $10.8 million in 2015.

2015 Compared with 2014

Earned premiums in homeowners insurance decreased by $26.1 million in 2015, compared to 2014, as lower volume accounted for a decrease of $32.0 million, while higher average earned premium accounted for an increase of $5.9 million. Incurred losses and LAE were $189.7 million, or 66.3% of earned premiums, in 2015, compared to $222.5 million, or 71.2% of earned premiums, in 2014. Incurred losses and LAE as a percentage of earned premiums decreased due to lower incurred catastrophe losses and LAE (excluding reserve development), partially offset by a lower level of favorable loss and LAE reserve development and higher underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 50.7% in 2015, compared to 50.1% in 2014, which was a deterioration of 0.6 percentage points due primarily to higher severity of losses, partially offset by lower frequency of claims and higher average earned premium. Catastrophe losses and LAE (excluding reserve development) were $55.4 million in 2015, compared to $80.8 million in 2014. Favorable loss and LAE reserve development was $10.8 million in 2015, compared to $14.8 million in 2014.

PROPERTY & CASUALTY INSURANCE (Continued)

Commercial Automobile Insurance

Selected financial information for the commercial automobile insurance product line follows.

DOLLARS IN MILLIONS 2016 2015 2014 Net Premiums Written $ 51.0 $ 54.1 $ 55.6 Earned Premiums $ 53.3 $ 54.5 $ 54.8 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 44.0 $ 45.7 $ 44.6 Catastrophe Losses and LAE 0.8 0.2 0.2 Prior Years: Non-catastrophe Losses and LAE 2.5 1.8 (2.6) Catastrophe Losses and LAE (0.1) — — Total Incurred Losses and LAE $ 47.2 $ 47.7 $ 42.2 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 82.6 % 83.8% 81.3 % Current Year Catastrophe Losses and LAE Ratio 1.5 0.4 0.4 Prior Years Non-catastrophe Losses and LAE Ratio 4.7 3.3 (4.7) Prior Years Catastrophe Losses and LAE Ratio (0.2) — — Total Incurred Loss and LAE Ratio 88.6 % 87.5% 77.0 %

2016 Compared with 2015

Earned premiums in commercial automobile insurance decreased by $1.2 million in 2016, compared to 2015, as lower volume accounted for a decrease of $3.8 million, while higher average earned premium accounted for an increase of $2.6 million. Incurred losses and LAE were $47.2 million, or 88.6% of earned premiums, in 2016, compared to $47.7 million, or 87.5% of earned premiums, in 2015. Incurred losses and LAE as a percentage of earned premiums increased due primarily to a higher level of adverse loss and LAE reserve development and higher incurred catastrophe losses and LAE (excluding reserve development), partially offset by lower underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 82.6% in 2016, compared to 83.8% in 2015, which was an improvement of 1.2 percentage points due primarily to higher average earned premium and lower severity of losses, partially offset by higher frequency of claims. Adverse loss and LAE reserve development was $2.4 million in 2016, compared to $1.8 million in 2015.

2015 Compared with 2014

Earned premiums in commercial automobile insurance decreased by $0.3 million in 2015, compared to 2014, due primarily to a slight decrease in volume, nearly offset by an increase in average earned premium. Incurred losses and LAE were $47.7 million, or 87.5% of earned premiums, in 2015, compared to $42.2 million, or 77.0% of earned premiums, in 2014. Incurred losses and LAE as a percentage of earned premiums increased due primarily to adverse loss and LAE reserve development in 2015, compared to favorable development in 2014, and higher underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 83.8% in 2015, compared to 81.3% in 2014, which was a deterioration of 2.5 percentage points due primarily to higher frequency of claims across all coverages, particularly bodily injury, partially offset by lower severity of losses across most coverages, particularly bodily injury and comprehensive. Adverse loss and LAE reserve development was $1.8 million in 2015, compared to favorable development of $2.6 million in 2014.

PROPERTY & CASUALTY INSURANCE (Continued)

Other Personal Insurance

Other personal insurance products include umbrella, dwelling fire, inland marine, earthquake, boat owners and other liability coverages. Selected financial information for other personal insurance product lines follows.

DOLLARS IN MILLIONS 2016 2015 2014 Net Premiums Written $ 43.8 $ 45.6 $ 48.0 Earned Premiums $ 45.0 $ 46.7 $ 50.9 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE $ 22.1 $ 23.4 $ 28.1 Catastrophe Losses and LAE 2.5 2.2 2.8 Prior Years: Non-catastrophe Losses and LAE (6.1) (2.0) (3.5) Catastrophe Losses and LAE (1.9) (0.1) (1.9) Total Incurred Losses and LAE $ 16.6 $ 23.5 $ 25.5 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 49.1 % 50.1 % 55.2 % Current Year Catastrophe Losses and LAE Ratio 5.6 4.7 5.5 Prior Years Non-catastrophe Losses and LAE Ratio (13.6) (4.3) (6.9) Prior Years Catastrophe Losses and LAE Ratio (4.2) (0.2) (3.7) Total Incurred Loss and LAE Ratio 36.9 % 50.3 % 50.1 %

2016 Compared with 2015

Earned premiums in other personal insurance decreased by $1.7 million in 2016, compared to 2015, as lower volume accounted for a decrease of $2.6 million, while higher average earned premium accounted for an increase of $0.9 million. Incurred losses and LAE were $16.6 million, or 36.9% of earned premiums, in 2016, compared to $23.5 million, or 50.3% of earned premiums, in 2015. Incurred losses and LAE as a percentage of earned premiums decreased due to a higher level of favorable loss and LAE reserve development and, to a lesser extent, lower underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 49.1% in 2016, compared to 50.1% in 2015, which was an improvement of 1.0 percentage points due primarily to lower frequency of non-umbrella claims and lower severity of losses on most coverages, partially offset by higher frequency of umbrella claims and lower average earned premium. Catastrophe losses and LAE (excluding reserve development) were $2.5 million in 2016, compared to $2.2 million in 2015. Favorable loss and LAE reserve development was $8.0 million in 2016, compared to $2.1 million in 2015.

2015 Compared with 2014

Earned premiums in other personal insurance decreased by $4.2 million in 2015, compared to 2014, as lower volume accounted for a decrease of $5.5 million, while higher average earned premium accounted for an increase of $1.3 million. Incurred losses and LAE were $23.5 million, or 50.3% of earned premiums, in 2015, compared to $25.5 million, or 50.1% of earned premiums, in 2014. Incurred losses and LAE as a percentage of earned premiums increased due to a lower level of favorable loss and LAE reserve development, partially offset by lower underlying losses and LAE as a percentage of earned premiums and lower catastrophe losses and LAE (excluding reserve development). Underlying losses and LAE as a percentage of earned premiums were 50.1% in 2015, compared to 55.2% in 2014, which was an improvement of 5.1 percentage points due primarily to lower frequency of umbrella claims, partially offset by higher severity of losses across all coverages. Catastrophe losses and LAE (excluding reserve development) were $2.2 million in 2015, compared to $2.8 million in 2014. Favorable loss and LAE reserve development was $2.1 million in 2015, compared to $5.4 million in 2014.

LIFE & HEALTH INSURANCE

Selected financial information for the Life & Health Insurance segment is presented below.

DOLLARS IN MILLIONS 2016 2015 2014 Earned Premiums: Life $ 381.6 $ 374.1 $ 387.6 Accident and Health 149.4 144.9 148.6 Property 74.2 75.4 76.5 Total Earned Premiums 605.2 594.4 612.7 Net Investment Income 213.2 214.2 218.7 Other Income 2.8 2.4 0.9 Total Revenues 821.2 811.0 832.3 Policyholders’ Benefits and Incurred Losses and LAE 461.6 381.3 374.4 Insurance Expenses 313.9 320.0 316.0 Operating Profit 45.7 109.7 141.9 Income Tax Expense (15.4) (38.0) (50.1) Segment Net Operating Income $ 30.3 $ 71.7 $ 91.8

INSURANCE RESERVES

Dec 31, Dec 31, DOLLARS IN MILLIONS 2016 2015 Insurance Reserves: Future Policyholder Benefits $ 3,311.5 $ 3,278.4 Incurred Losses and LAE Reserves: Life 141.9 41.2 Accident and Health 21.9 21.4 Property 4.5 5.2 Total Incurred Losses and LAE Reserves 168.3 67.8 Insurance Reserves $ 3,479.8 $ 3,346.2

Use of Death Verification Databases

In the third quarter of 2016, the Company’s Life & Health segment voluntarily began implementing a comprehensive process under which it will cross-reference its life insurance policies against the DMF and other death verification databases to identify potential situations where the beneficiaries may not have filed a claim following the death of an insured and initiate an outreach process to identify and contact beneficiaries and settle claims. Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses for the year ended December 31, 2016 include a pre-tax charge of $77.8 million to recognize the initial impact of using death verification databases in the Company’s operations, including to determine its IBNR liability for unpaid claims and claims adjustment expenses for life insurance products. See Note 2, “Summary of Accounting Policies and Accounting Changes.” to the Consolidated Financial Statements under the sub-caption “Insurance Reserves” for additional discussion.

2016 Compared with 2015

Earned Premiums in the Life & Health Insurance segment increased by $10.8 million for the year ended December 31, 2016, compared to 2015 due primarily to the impact of an adjustment of $7.6 million recorded in 2015 to correct deferred premium reserves on certain limited pay life insurance policies.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Net Investment Income decreased by $1.0 million in 2016, compared to 2015, due primarily to lower yields on investments in fixed income securities and lower levels of Alternative Investments, partially offset by higher levels of investments in non-alternative investments. The weighted-average book yield on the Company’s life and health insurance subsidiaries’ investments in fixed maturities was approximately 5.5% and 5.8% at December 31, 2016 and 2015, respectively. A protracted low interest rate environment, relative to the Life & Health Insurance segment’s fixed income portfolio, could adversely impact the

LIFE & HEALTH INSURANCE (Continued) weighted-average book yield on these subsidiaries’ investments in fixed maturities. For example, the weighted-average book yield on the subsidiaries’ investments in fixed maturities will decline if new money is invested at yields below the portfolio rate. Also, the weighted-average book yield on the subsidiaries’ investments in fixed maturities will decline, to the extent that investments maturing are not used for such purposes as paying claims and expenses, if the reinvested portion is at a yield that is lower than the book yield of the maturing investment. To help illustrate the potential impact, the subsidiaries’ investments in fixed maturities that are maturing over the next five years totaled $666.2 million at December 31, 2016. The weighted-average book yield on such investments was 7.6% at December 31, 2016. The reinvestment rate for the subsidiaries’ investments in fixed maturities was approximately 4.9% in 2016 with an average duration of 7.1 years at December 31, 2016.

Policyholders’ Benefits and Incurred Losses and LAE increased by $80.3 million in 2016, compared to 2015. Excluding the impact of using death verification databases described above, Policyholders’ Benefits and Incurred Losses and LAE increased by $2.5 million due primarily to higher policyholders’ benefits on life insurance, partially offset by lower incurred losses and LAE on property insurance and accident and health insurance. Insurance Expenses in the Life & Health Insurance segment decreased by $6.1 million due primarily to lower legal costs, partially offset by higher agent and field management compensation costs for KHSC and the impact of an adjustment made in 2015 to deferred policy acquisition costs for Reserve National. Segment Net Operating Income in the Life & Health Insurance segment was $30.3 million for the year ended December 31, 2016, compared to $71.7 million in 2015.

2015 Compared with 2014

Earned Premiums in the Life & Health Insurance segment decreased by $18.3 million for the year ended December 31, 2015, compared to the same period in 2014 due in part to the $7.6 million adjustment recorded in 2015 to correct deferred premium reserves on certain limited pay life insurance policies. Excluding the adjustment, earned premiums decreased by $10.7 million due primarily lower earned premiums on life insurance and accident and health insurance, and, to a lesser extent, property insurance.

Net Investment Income decreased by $4.5 million in 2015, compared to 2014, due primarily to lower investment income from Alternative Investments, partially offset by higher investment income from fixed income securities. Investment income from Alternative Investments in 2014 included dividend income of $21.4 million from one company that had sold substantially all of its operations.

Policyholders’ Benefits and Incurred Losses and LAE increased by $6.9 million in 2015, compared to 2014, due primarily to higher policyholders’ benefits on life insurance and higher incurred losses and LAE on property insurance. Insurance Expenses in the Life & Health Insurance segment increased by $4.0 million due primarily to higher legal costs and costs incurred in connection with a project to digitize historical records, partially offset by lower salary expenses from a lower level of field staff managers and district managers resulting from a consolidation of KHSC field operations substantially completed in the first quarter of 2015 and lower agent incentive conference expense. Segment Net Operating Income in the Life & Health Insurance segment was $71.7 million in 2015, compared to $91.8 million in 2014.

LIFE & HEALTH INSURANCE (Continued)

Life Insurance

Selected financial information for the life insurance product line follows.

DOLLARS IN MILLIONS 2016 2015 2014 Earned Premiums $ 381.6 $ 374.1 387.6 Net Investment Income 206.3 207.2 211.9 Other Income 2.3 1.9 0.8 Total Revenues 590.2 583.2 600.3 Policyholders’ Benefits and Incurred Losses and LAE 356.3 274.9 268.7 Insurance Expenses 211.3 221.7 214.6 Operating Profit 22.6 86.6 117.0 Income Tax Expense (7.5) (30.1) (41.4) Total Product Line Net Operating Income $ 15.1 $ 56.5 $ 75.6

2016 Compared with 2015

Earned premiums on life insurance increased by $7.5 million in 2016, compared to 2015, due primarily to an adjustment of $7.6 million recorded in the first quarter of 2015 to correct deferred premium reserves on certain limited pay life insurance policies. Excluding the adjustment, earned premiums on life insurance decreased by $0.1 million as a decrease of $3.4 million from life insurance products offered by KHSC was offset by an increase of $3.3 million from life insurance products offered by Reserve National. Policyholders’ benefits on life insurance were $356.3 million in 2016, compared to $274.9 million in 2015, an increase of $81.4 million. Excluding the impact of using death verification databases described above, Policyholders’ Benefits and Incurred Losses and LAE increased by $3.6 million. Insurance Expenses decreased by $10.4 million in 2016, compared to 2015, due primarily to lower legal costs, partially offset by higher agent and field management compensation costs for KHSC.

2015 Compared with 2014

Earned premiums on life insurance decreased by $13.5 million in 2015, compared to 2014, due in part to the $7.6 million adjustment recorded in 2015 to correct deferred premium reserves on certain limited pay life insurance policies. Excluding the adjustment, earned premiums on life insurance decreased by $5.9 million as a decrease of $8.9 million from life insurance products offered by KHSC was partially offset by an increase of $3.0 million from life insurance products offered by Reserve National due in part to the impact of the expansion of its distribution channels. Policyholders’ benefits on life insurance were $274.9 million in 2015, compared to $268.7 million in 2014, an increase of $6.2 million due primarily to higher death claims and a lower lapse ratio related to insurance policies issued by KHSC and higher volume of insurance from policies issued by Reserve National. Insurance Expenses increased by $7.1 million in 2015, compared to 2014, due primarily to higher legal costs and costs incurred in connection with a project to digitize historical records, partially offset by lower salary expenses from a lower level of field staff managers and district managers resulting from a consolidation of KHSC field operations substantially completed in the first quarter of 2015 and lower agent incentive conference expense.

LIFE & HEALTH INSURANCE (Continued)

Accident and Health Insurance

Selected financial information for the accident and health insurance product line follows.

DOLLARS IN MILLIONS 2016 2015 2014 Earned Premiums $ 149.4 $ 144.9 $ 148.6 Net Investment Income 5.4 5.5 5.2 Other Income 0.5 0.5 0.1 Total Revenues 155.3 150.9 153.9 Policyholders’ Benefits and Incurred Losses and LAE 80.3 80.8 81.1 Insurance Expenses 67.6 63.8 65.8 Operating Profit 7.4 6.3 7.0 Income Tax Expense (2.5) (2.2) (2.6) Total Product Line Net Operating Income $ 4.9 $ 4.1 $ 4.4

2016 Compared with 2015

Earned premiums on accident and health insurance increased by $4.5 million in 2016, compared to 2015, due primarily to higher volume. Incurred accident and health insurance losses were $80.3 million, or 53.7% of accident and health insurance earned premiums, in 2016, compared to $80.8 million, or 55.8% of accident and health insurance earned premiums, in 2015. Incurred accident and health insurance losses decreased as a percentage of earned premiums due primarily to lower average claim costs in other supplemental products and a lower level of hospitalization exposure, partially offset by higher frequency and higher average claim costs in Medicare Supplement. Insurance Expenses increased by $3.8 million in 2016, compared to 2015, due primarily to the impact of an adjustment made in 2015 to Reserve National’s deferred policy acquisition costs and the higher level of earned premiums.

2015 Compared with 2014

Earned premiums on accident and health insurance decreased by $3.7 million in 2015, compared to 2014, due primarily to lower volume resulting from the non-renewal and run-off of certain health insurance products largely due to the impact of the Health Care Acts, partially offset by higher volume of supplemental health insurance products and higher average earned premium. In particular, provisions, effective in 2014, prohibiting the renewal of certain policies issued by Reserve National after the issuance of the Health Care Acts and also establishing health insurance exchanges, and a provision that sets minimum loss ratios for certain health insurance policies have adversely impacted Reserve National’s business. Such affected health insurance products (the “HCA Affected Products”) accounted for $20.4 million, or 14%, of the segment’s accident and health insurance earned premiums in 2015 and $30.8 million, or 21%, of the segment’s accident and health insurance earned premiums in 2014. Incurred accident and health insurance losses were $80.8 million, or 55.8% of accident and health insurance earned premiums, in 2015, compared to $81.1 million, or 54.6% of accident and health insurance earned premiums, in 2014. Incurred accident and health insurance losses increased as a percentage of earned premiums due primarily to higher average claim costs, partially offset by the impact of a change in business mix resulting from the non-renewal and run-off of certain health insurance products with higher loss ratios and the issuance of supplemental insurance products with lower loss ratios. Insurance Expenses decreased by $2.0 million in 2015, compared to 2014, due in part to the impact of an adjustment made in 2015 to Reserve National’s deferred policy acquisition costs.

LIFE & HEALTH INSURANCE (Continued)

Property Insurance

Selected financial information for the property insurance product line follows.

DOLLARS IN MILLIONS 2016 2015 2014 Earned Premiums $ 74.2 $ 75.4 $ 76.5 Net Investment Income 1.5 1.5 1.6 Total Revenues 75.7 76.9 78.1 Incurred Losses and LAE related to: Current Year: Non-catastrophe Losses and LAE 19.6 20.4 21.7 Catastrophe Losses and LAE 5.5 3.8 2.0 Prior Years: Non-catastrophe Losses and LAE — 1.3 (0.2) Catastrophe Losses and LAE (0.1) 0.1 1.1 Total Incurred Losses and LAE 25.0 25.6 24.6 Insurance Expenses 35.0 34.5 35.6 Operating Profit 15.7 16.8 17.9 Income Tax Expense (5.4) (5.7) (6.1) Total Product Line Net Operating Income $ 10.3 $ 11.1 $ 11.8 Ratios Based On Earned Premiums Current Year Non-catastrophe Losses and LAE Ratio 26.4 % 27.2% 28.5 % Current Year Catastrophe Losses and LAE Ratio 7.4 5.0 2.6 Prior Years Non-catastrophe Losses and LAE Ratio — 1.7 (0.3) Prior Years Catastrophe Losses and LAE Ratio (0.1) 0.1 1.4 Total Incurred Loss and LAE Ratio 33.7 % 34.0% 32.2 %

2016 Compared with 2015

Earned premiums on property insurance decreased by $1.2 million in 2016, compared to 2015, due primarily to lower volume of insurance. Incurred losses and LAE on property insurance were $25.0 million, or 33.7% of property insurance earned premiums, in 2016, compared to $25.6 million, or 34.0% of property insurance earned premiums, in 2015. Underlying losses and LAE on property insurance were $19.6 million, or 26.4% of property insurance earned premiums, in 2016, compared to $20.4 million, or 27.1% of property insurance earned premiums, in 2015. Catastrophe losses and LAE (excluding development) were $5.5 million in 2016, compared to $3.8 million in 2015. Favorable loss and LAE reserve development was $0.1 million in 2016, compared to unfavorable loss and LAE reserve development of $1.4 million in 2015.

2015 Compared with 2014

Earned premiums on property insurance decreased by $1.1 million in 2015, compared to 2014, due primarily to lower volume of insurance, partially offset by higher premium rates in a few states. Incurred losses and LAE on property insurance were $25.6 million, or 34.0% of property insurance earned premiums, in 2015, compared to $24.6 million, or 32.2% of property insurance earned premiums, in 2014. Underlying losses and LAE on property insurance were $20.4 million, or 27.1% of property insurance earned premiums, in 2015, compared to $21.7 million, or 28.4% of property insurance earned premiums, in 2014. and decreased due primarily to lower frequency and severity of fire insurance losses, partially offset by higher severity of losses from storms that were not large enough to be classified as a catastrophe by ISO. Catastrophe losses and LAE (excluding development) were $3.8 million in 2015, compared to $2.0 million in 2014. Unfavorable loss and LAE reserve development was $1.4 million in 2015, compared to $0.9 million in 2014.

INVESTMENT RESULTS

Net Investment Income

Net Investment Income for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Investment Income (Loss): Interest and Dividends on Fixed Maturities $ 242.7 $ 236.2 $ 227.4 Dividends on Equity Securities Excluding Alternative Investments 11.8 14.8 19.2 Alternative Investments: Equity Method Limited Liability Investments 7.5 19.0 9.0 Fair Value Option Investments (1.9) 0.2 (0.7) Limited Liability Investments Included in Equity Securities 22.0 17.6 40.7 Total Alternative Investments 27.6 36.8 49.0 Short-term Investments 0.5 0.4 0.6 Loans to Policyholders 21.6 21.1 20.5 Real Estate 11.8 11.9 12.1 Other 0.3 — 0.1 Total Investment Income 316.3 321.2 328.9 Investment Expenses: Real Estate 11.0 11.3 11.3 Other Investment Expenses 7.0 7.3 8.5 Total Investment Expenses 18.0 18.6 19.8 Net Investment Income $ 298.3 $ 302.6 $ 309.1

2016 Compared with 2015

Net Investment Income decreased by $4.3 million for the year ended December 31, 2016, compared to 2015, due primarily to lower investment returns from Alternative Investments, lower levels and lower returns on investments in equity securities excluding alternative investments and lower yields on fixed income securities, partially offset by higher level of investments in fixed income securities.

2015 Compared with 2014

Net Investment Income decreased by $6.5 million for the year ended December 31, 2015, compared to 2014, due primarily to lower income from Alternative Investments and lower dividends on equity securities excluding Alternative Investments, partially offset by higher investment income from fixed income securities. Net investment income from Alternative Investments decreased by $12.2 million in 2015. Investment income from Alternative Investments in 2014 included dividend income of $21.8 million from one company that had sold substantially all of its operations. Investment income from Equity Method Limited Liability Investments, included in Alternative Investments, increased by $10.0 million in 2015 due primarily to higher returns on two distressed debt funds. Investment income from fixed income securities increased by $8.8 million due primarily to higher yields.

INVESTMENT RESULTS (Continued)

Total Comprehensive Investment Gains (Losses)

The components of Total Comprehensive Investment Gains (Losses) for the years ended December 31, 2016, 2015 and 2014 is presented below.

DOLLARS IN MILLIONS 2016 2015 2014 Recognized in Consolidated Statements of Income: Gains on Sales $ 38.0 $ 55.3 $ 40.1 Losses on Sales (5.1) (2.9) (2.5) Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) Gain on Sale of Subsidiary — — 1.6 Net Gains (Losses) on Trading Securities 0.2 (0.3) (0.1) Net Gain Recognized in Consolidated Statements of Income 0.4 24.9 23.9 Recognized in Other Comprehensive Income (Loss) (2.5) (178.7) 233.6 Total Comprehensive Investment Gains (Losses) $ (2.1) $ (153.8) $ 257.5

Net Realized Gains on Sales of Investments

The components of Net Realized Gains on Sales of Investments for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Fixed Maturities: Gains on Sales $ 17.0 $ 16.1 $ 7.0 Losses on Sales (4.6) (1.1) (0.2) Equity Securities: Gains on Sales 19.9 39.2 33.1 Losses on Sales (0.3) (1.6) (2.0) Real Estate: Gains on Sales 1.1 — — Losses on Sales — (0.2) (0.2) Other Investments: Gain on Sale of Subsidiary — — 1.6 Losses on Sales (0.2) — (0.1) Trading Securities Net Gains (Losses) 0.2 (0.3) (0.1) Net Realized Gains on Sales of Investments $ 33.1 $ 52.1 $ 39.1 Gross Gains on Sales $ 38.0 $ 55.3 $ 41.7 Gross Losses on Sales (5.1) (2.9) (2.5) Net Gains (Losses) on Trading Securities 0.2 (0.3) (0.1) Net Realized Gains on Sales of Investments $ 33.1 $ 52.1 $ 39.1

Equity Securities

Net Realized Gains on Sales of Equity Securities for the year ended December 31, 2016 includes a net realized gain of $8.1 million from a transaction in which the Company’s investment in the common stock of a company was acquired by another company for cash and shares of such acquiring company.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In 2015, the Company sold $149.9 million of equity securities due to portfolio allocation adjustments and tax planning initiatives. The Company recognized Gains on Sales of Equity Securities of $31.4 million and Losses on Sales of Equity Securities of $0.7 million resulting from such sales.

INVESTMENT RESULTS (Continued)

In 2014, the Company sold certain common stocks and other equity interests to reduce a concentration with an external investment manager and to accelerate utilization of net operating loss carryforwards. Net Realized Gains on Sales of Equity Securities for the year ended December 31, 2014 include net realized gains of $21.6 million from such sales.

Other sales activity in 2016, 2015 and 2014 was due to normal portfolio management.

Net Impairment Losses Recognized in Earnings

The Company regularly reviews its investment portfolio for factors that may indicate that a decline in the fair value of an investment is other-than-temporary. Losses arising from other-than-temporary declines in fair value are reported in the Consolidated Statements of Income in the period that the declines are determined to be other-than-temporary.

Information pertaining to Net Impairment Losses Recognized in Earnings reported in the Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014 is presented below.

2016 2015 2014 Number of Number of Number of Issuers/ Issuers/ Issuers/ DOLLARS IN MILLIONS Amount Properties Amount Properties Amount Properties Fixed Maturities $ (26.6) 12 $ (11.5) 9 $ (5.7) 21 Equity Securities (5.6) 14 (15.7) 25 (7.1) 22 Real Estate (0.5) 1 — — (2.4) 1 Net Impairment Losses Recognized in Earnings $ (32.7) $ (27.2) $ (15.2)

Fixed Maturities

Net Impairment Losses Recognized in the Consolidated Statements of Income for the year ended December 31, 2016 related to Investments in Fixed Maturities include losses of $23.9 million due to the Company’s intent to sell or requirement to sell bonds of 11 issuers and credit losses of $2.7 million from other-than-temporary declines in the fair values of investments in fixed maturities of one issuer.

Net Impairment Losses Recognized in the Consolidated Statements of Income for the year ended December 31, 2015 related to Investments in Fixed Maturities include losses of $4.3 million due to the Company’s intent to sell or requirement to sell bonds of four issuers and credit losses of $7.2 million from other-than-temporary declines in the fair values of investments in fixed maturities of six issuers.

Net Impairment Losses Recognized in the Consolidated Statements of Income for the year ended December 31, 2014 related to Investments in Fixed Maturities include losses of $0.4 million due to the Company’s intent to sell or requirement to sell bonds of 18 issuers and credit losses of $5.3 million from other-than-temporary declines in the fair values of investments in fixed maturities of three issuers.

Real Estate

Net Impairment Losses Recognized in the Consolidated Statements of Income for the year ended December 31, 2016 related to Investments in Real Estate includes a loss of $0.5 million due to the Company’s intent to sell one property.

In 2014, the Company determined that the book value of one property was not recoverable based on the Company’s estimate of the weighted-average, undiscounted cash flows from such property. Accordingly, the Company wrote down the property to its estimated fair value and recognized an impairment loss of $2.4 million in 2014.

INVESTMENT QUALITY AND CONCENTRATIONS

The Company’s fixed maturity investment portfolio is comprised primarily of high-grade municipal, corporate and agency bonds. At December 31, 2016, 90% of the Company’s fixed maturity investment portfolio was rated investment-grade, which is defined as a security having a rating of AAA, AA, A or BBB from S&P; a rating of Aaa, Aa, A or Baa from Moody’s; or a rating from the NAIC of 1 or 2.

The following table summarizes the credit quality of the fixed maturity investment portfolio at December 31, 2016 and 2015:

Dec 31, 2016 Dec 31, 2015 NAIC Fair Value Percentage Fair Value Percentage Rating S&P Equivalent Rating in Millions of Total in Millions of Total 1 AAA, AA, A $ 3,280.4 64.0% $ 3,222.5 66.4% 2 BBB 1,338.2 26.1 1,149.0 23.7 3-4 BB, B 321.6 6.3 222.4 4.6 5-6 CCC or Lower 184.7 3.6 258.4 5.3 Total Investments in Fixed Maturities $ 5,124.9 100.0% $ 4,852.3 100.0%

Gross unrealized losses on the Company’s investments in below-investment-grade fixed maturities were $12.7 million and $16.5 million at December 31, 2016 and 2015, respectively.

The following table summarizes the fair value of the Company’s investments in governmental fixed maturities at December 31, 2016 and 2015:

Dec 31, 2016 Dec 31, 2015 Percentage Percentage of Total of Total DOLLARS IN MILLIONS Fair Value Investments Fair Value Investments U.S. Government and Government Agencies and Authorities $ 336.3 5.1% $ 320.6 5.0% States and Political Subdivisions: States 655.3 9.9 673.5 10.5 Political Subdivisions 174.7 2.6 177.3 2.8 Revenue Bonds 884.9 13.4 771.8 12.0 Foreign Governments 3.4 0.1 — — Total Investments in Governmental Fixed Maturities $ 2,054.6 31.1% $ 1,943.2 30.3%

The following table summarizes the fair value of the Company’s investments in non-governmental fixed maturities by industry at December 31, 2016 and 2015:

Dec 31, 2016 Dec 31, 2015 Percentage Percentage of Total of Total DOLLARS IN MILLIONS Fair Value Investments Fair Value Investments Manufacturing $ 1,227.8 18.6% $ 1,160.4 18.0% Finance, Insurance and Real Estate 742.6 11.2 707.4 11.0 Services 391.6 5.9 374.4 5.8 Transportation, Communication and Utilities 364.1 5.5 334.4 5.2 Mining 157.2 2.4 139.7 2.2 Retail Trade 101.9 1.5 91.1 1.4 Wholesale Trade 69.2 1.0 80.6 1.3 Agriculture, Forestry and Fishing 14.4 0.2 20.6 0.3

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other 1.5 — 0.5 — Total Investments in Non-governmental Fixed Maturities $ 3,070.3 46.3% $ 2,909.1 45.2%

INVESTMENT QUALITY AND CONCENTRATIONS (Continued)

The following table summarizes the fair value of the Company’s investments in non-governmental fixed maturities by range of amount invested at December 31, 2016.

Number of Aggregate Fair DOLLARS IN MILLIONS Issuers Value Below $5 448 $ 883.2 $5 -$10 132 919.9 $10 - $20 66 886.2 $20 - $30 13 316.0 Greater Than $30 2 65.0 Total 661 $ 3,070.3

The Company’s short-term investments primarily consist of overnight repurchase agreements, overnight interest bearing accounts, certificates of deposits, U.S. Treasury securities with maturities of less than one year at the date of purchase and money market funds. At December 31, 2016, the Company had $67.6 million invested in overnight repurchase agreements primarily collateralized by securities issued by the U.S. government and government agencies and authorities, $79.1 million invested in overnight interest bearing accounts with one of the Company’s custodial banks, $60.0 million invested in certificates of deposits issued by a single bank, $46.1 million invested in U.S. Treasury securities with maturities of less than one year at the date of purchase and $20.9 million invested in money market funds which primarily invest in U.S. Treasury securities.

At the time of borrowing, the repurchase agreements generally require the borrower to provide collateral to the Company at least equal to the amount borrowed from the Company. The Company bears some investment risk in the event that a borrower defaults and the value of collateral falls below the amount borrowed.

The following table summarizes the fair value of the Company’s ten largest exposures, excluding investments in U.S. Government and Government Agencies and Authorities and Short-term Investments, at December 31, 2016.

Percentage Fair of Total DOLLARS IN MILLIONS Value Investments Fixed Maturities: States including their Political Subdivisions: Texas $ 101.5 1.5% Michigan 86.0 1.3 Ohio 82.6 1.3 Louisiana 81.7 1.2 Georgia 80.7 1.2 Colorado 65.5 1.0 Virgina 65.3 1.0 Florida 63.5 1.0 Wisconsin 57.2 0.9 Equity Securities—Other Equity Interests: Vanguard Total Stock Market ETF 73.4 1.1 Total $ 757.4 11.5%

INVESTMENTS IN LIMITED LIABILITY COMPANIES AND LIMITED PARTNERSHIPS

The Company owns investments in various limited liability investment companies and limited partnerships that primarily invest in distressed debt, mezzanine debt and secondary transactions. The Company’s investments in these limited liability investment companies and limited partnerships are reported either as Equity Method Limited Liability Investments, Other Equity Interests and included in Equity Securities, or Fair Value Option Investments depending on the accounting method used to report the investment. See Note 2, “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial Statements. Additional information pertaining to these investments at December 31, 2016 and 2015 is presented below.

Unfunded Commitment Reported Value in Millions Dec 31, Dec 31, Dec 31, Asset Class 2016 2016 2015 Reported as Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings: Distressed Debt $ — $ 65.4 $ 90.5 Mezzanine Debt 56.2 63.2 38.8 Secondary Transactions 19.6 27.3 38.5 Senior Debt 0.5 6.6 10.8 Growth Equity — 4.6 4.8 Leveraged Buyout — — 2.8 Other — 8.8 4.4 Total Equity Method Limited Liability Investments 76.3 175.9 190.6 Reported as Other Equity Interests at Fair Value: Mezzanine Debt 85.6 97.6 83.8 Senior Debt 33.5 36.4 37.9 Distressed Debt 4.6 18.8 18.9 Secondary Transactions 10.6 11.9 14.2 Leveraged Buyout 0.9 6.5 5.9 Other — 38.4 44.8 Total Reported as Other Equity Interests at Fair Value 135.2 209.6 205.5 Reported as Fair Value Option Investments: Hedge Fund — 111.4 164.5 Total Investments in Limited Liability Companies and Limited Partnerships $ 211.5 $ 496.9 $ 560.6

The Company expects that it will be required to fund its commitments over the next several years. The Company expects that the proceeds from distributions from these investments will be the primary source of funding of such commitments.

The Company does not directly participate, as either a lender or borrower of securities, in any securities lending program. The Company does not participate directly in credit default swaps. Except for a cash flow hedge entered into by the Company in 2016 in anticipation of a debt offering in 2017, the Company does not engage directly in hedging activities, including, but not limited to, activities involving interest rate swaps, forward foreign currency contracts, commodities contracts, exchange traded and over-the-counter options or warrants. The Company has limited exposure to such programs and activities by virtue of its investments in the limited liability investment companies and limited partnerships noted above. See Note 7 “Debt,” to the Consolidated Financial Statements for additional discussion of the cash flow hedge entered into by the Company in 2016 in anticipation of a debt offering in 2017.

WRITE-OFFS OF LONG-LIVED ASSETS

In June 2015, the Company decided to cease funding for and abandon a computer software development project for the Company’s Property & Casualty Insurance segment. Accordingly, the Company recorded a charge of $11.1 million before taxes to write off such software in 2015.

In September 2014, the Company determined that it was no longer probable that certain software for the Property & Casualty Insurance segment would be completed and/or fully implemented. Accordingly, the Company recorded a charge of $54.6 million before taxes to write off such software in 2014.

INTEREST AND OTHER EXPENSES

Interest and Other Expenses was $90.3 million, $107.6 million and $91.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. Interest expense was $44.4 million, $46.5 million and $46.9 million for the years ended December 31, 2016, 2015 and 2014, respectively. Other Corporate Expenses were $45.9 million, $61.1 million and $44.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. Other Corporate Expenses decreased by $15.2 million for the year ended December 31, 2016, compared to 2015, due primarily to lower pension expense from the effect of freezing benefit accruals under the Company’s defined benefit pension plans and lower amortization of accumulated unrecognized pension losses related to the Company’s defined benefit pension plans. See Note 16 “Pension Benefits” to the Consolidated Financial Statements. Other Corporate Expenses increased by $16.3 million for the year ended December 31, 2015, compared to 2014, due primarily to higher postretirement benefit costs and, to a lesser extent, higher compensation expense.

As discussed in Note 16, “Pension Benefits,” the Company had an Accumulated Actuarial Loss included in Accumulated Other Comprehensive Income (“AOCI”) of $152.2 million at December 31, 2015, which was being amortized over five years—the remaining average service life of participants at December 31, 2015. As a result of freezing benefit accruals under the Company’s defined benefit pension plan, the Accumulated Actuarial Loss of $144.7 million included in AOCI at December 31, 2016 is being amortized over 25 years—the remaining average estimated life expectancy of participants. Amortization of accumulated actuarial losses included as a component of pension expense is anticipated to decrease by $4.2 million in 2017, compared to 2016, due primarily to the change in amortization period resulting from the pension freeze.

In 2016, the Company changed its method for estimating the interest and service cost components of expense recognized for its pension and other postretirement employee benefit plans. As a result, the Company elected to use a full yield curve approach to estimate these components of benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. Historically, the interest and service cost components were estimated using a single weighted-average discount rate derived from the yield curve used to measure the projected benefit obligation or accumulated postretirement benefit obligation, as relevant, at the beginning of the period. The change provides a more precise measurement of interest and service costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. The Company has accounted for this change as a change in accounting estimate that is inseparable from a change in accounting principle and, accordingly, recognized the effect prospectively in 2016. The change in method for estimating the interest and service cost components decreased pension expense by $2.7 million in 2016, compared to 2015, but had no impact on the measurement of benefit obligations.

INCOME TAXES

The Company’s effective income tax rate from continuing operations differs from the Federal statutory income tax rate due primarily to the effects of tax-exempt investment income and dividends received deductions, interest related to unrecognized tax benefits, estimated indemnification recoveries recognized in earnings pursuant to the Alliance United purchase agreement and the net effects of state income taxes. Tax-exempt investment income and dividends received deductions were $28.0 million, $27.9 million and $25.6 million in 2016, 2015 and 2014, respectively. Estimated indemnification recoveries recognized in earnings result in an adjustment in the tax purchase price and are excluded from the determination of taxable income and income tax expense. Such recoveries were $0.7 million and $10.4 million for the years ended December 31, 2016 and December 31, 2015, respectively. Tax expense for the year ended December 31, 2015 includes an interest benefit on unrecognized tax benefits of $2.3 million from the settlement of certain tax years. State income tax expense, net of federal benefit, from continuing operations was $0.6 million, $0.6 million and $0.6 million in 2016, 2015 and 2014, respectively. See Note 15, “Income Taxes,” to the Consolidated Financial Statements for additional discussion of income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Debt

Kemper has a $225.0 million, unsecured, revolving credit agreement expiring June 2, 2020. The credit agreement provides for fixed and floating rate advances for periods up to six months at various interest rates. The credit agreement contains various financial covenants, including limits on total debt to total capitalization, consolidated net worth and minimum risk-based capital ratios for Kemper’s largest insurance subsidiaries, United Insurance and Trinity Universal Insurance Company (“Trinity”). Proceeds from advances under the credit agreement may be used for general corporate purposes, including repayment of existing indebtedness. Kemper did not borrow under its credit agreement during 2016, 2015 and 2014. There were no outstanding borrowings under the credit agreement at December 31, 2016, and accordingly, $225.0 million was available for future borrowings.

In February 2015, Kemper issued $250.0 million of its 4.35% senior notes due February 15, 2025. The net proceeds of the issuance were $247.3 million, net of discount and transaction costs, for an effective yield of 4.49%. The 2025 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time at Kemper’s option at specified redemption prices. Kemper used the net proceeds from the sale of the 2025 Senior Notes, together with available cash, to redeem in full the $250.0 million outstanding principal amount of its 6.00% Senior Notes due November 30, 2015. Kemper recognized a loss of $9.1 million before income taxes in the first quarter of 2015 from the early redemption of these senior notes.

The outstanding principal balance, net of unamortized issuance costs, of Kemper’s debt was $751.6 million at December 31, 2016, of which, $360 million is scheduled to mature on May 15, 2017 (the “2017 Debt”), $250 million is scheduled to mature on February 15, 2025 (the “2025 Debt”) and $150 million is scheduled to mature on February 27, 2054 (the “2054 Debt”). The 2017 Debt and 2025 Debt are currently redeemable at Kemper’s option at specified redemption prices. The 2054 Debt was issued in 2014 and is subordinated to the 2017 Debt and 2025 Debt. Kemper cannot redeem the 2054 Debt prior to February 27, 2019 unless certain tax or rating agency events have occurred. See Note 7, “Debt,” to the Consolidated Financial Statements for additional information regarding Kemper’s debt.

The Company’s present intention is to issue at least $250 million of 10 year senior notes to refinance its $360 million 6.00% Senior Notes maturing in the second quarter of 2017. For risk management purposes, during the fourth quarter of 2016, the Company entered into a derivative transaction to hedge the risk of changes in the debt cash flows attributable to changes in the benchmark U.S. Treasury during the period leading up to the probable debt issuance. See Note 7, “Debt,” to the Consolidated Financial Statements for additional information regarding such hedge.

Trinity and United Insurance are members of the Federal Home Loan Bank (“FHLB”) of Dallas and the FHLB of Chicago, respectively. As members, Trinity and United Insurance may obtain advances from the FHLB of Dallas and Chicago, respectively. Advances from the FHLB of Dallas and Chicago are subject to collateral requirements as specified in the respective agreements with Trinity and United Insurance. From time to time, Trinity and United Insurance obtain advances from the FHLB of Dallas and Chicago, respectively, for short-term liquidity needs. During 2016 and 2015, Trinity borrowed and repaid $10.0 million and $77.5 million, respectively under its agreement with the FHLB of Dallas. During 2015, United Insurance borrowed and repaid $21.0 million under its agreement with the FHLB of Chicago. There were no advances from the FHLB of Dallas or Chicago outstanding at either December 31, 2016 or December 31, 2015.

Subsidiary Dividends

Under various state insurance laws, Kemper’s insurance subsidiaries may pay dividends without obtaining prior regulatory approval based upon levels of statutory capital and surplus and/or net income, as defined by the applicable state law. Kemper’s direct insurance subsidiaries paid dividends of $104.5 million, $285.0 million and $217.5 million to Kemper in 2016, 2015 and 2014, respectively. In 2017, Kemper estimates that its direct insurance subsidiaries would be able to pay $133 million in dividends to Kemper without prior regulatory approval.

Acquisition of Alliance United Group

On April 30, 2015, Kemper completed its acquisition of Alliance United in a cash transaction for a total purchase price of $71.0 million, subject to certain post-closing indemnifications. After completing the transaction, Kemper contributed $75.0 million to support the book of business acquired. Kemper contributed $30 million of additional capital in the fourth quarter of 2015 due primarily to support Alliance United’s growing book of business and reductions in statutory capital resulting from the impacts of development of pre-

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document acquisition losses and LAE and non-admission of indemnification receivables. In 2016, Kemper contributed $55 million of additional capital to Alliance United.

LIQUIDITY AND CAPITAL RESOURCES (Continued)

Common Stock Repurchases and Dividends to Shareholders

On August 6, 2014, the Board of Directors approved the 2014 Repurchase Program under which Kemper is authorized to repurchase up to $300 million of its common stock and terminated Kemper’s remaining authorization under the 2011 Repurchase Program.

During 2016, Kemper repurchased approximately 0.1 million shares of its common stock at an aggregate cost of $3.8 million in open market transactions under the 2014 Repurchase Program. During 2015, Kemper repurchased approximately 1.2 million shares of its common stock at an aggregate cost of $43.5 million in open market transactions under the 2014 Repurchase Program. During 2014, Kemper repurchased approximately 3.2 million shares of its common stock at an aggregate cost of $115.5 million in open market transactions under the two repurchase programs. The Company had $243.7 million of remaining capacity under the 2014 Repurchase Program at December 31, 2016.

Kemper paid a quarterly dividend to shareholders of $0.24 per common share in each quarter of 2016. Dividends paid were $49.2 million for the year ended December 31, 2016.

Sources and Uses of Funds

Kemper directly held cash and investments totaling $298.7 million at December 31, 2016, compared to $341.2 million at December 31, 2015. Sources available for the repayment of indebtedness, repurchases of common stock, future shareholder dividend payments, additional capitalization of its direct insurance subsidiaries, and the payment of interest on Kemper’s senior notes and subordinated debentures include cash and investments directly held by Kemper, receipt of dividends from Kemper’s subsidiaries and borrowings under the credit agreement.

The primary sources of funds for Kemper’s insurance subsidiaries are premiums, investment income and proceeds from the sales and maturity of investments, advances from the FHLBs of Dallas and Chicago, and capital contributions from Kemper. The primary uses of funds are the payment of policyholder benefits under life insurance contracts, claims and claims-related expenses under property and casualty insurance contracts and accident and health insurance contracts, the payment of commissions and general expenses, the purchase of investments, repayments of advances from the FHLBs of Dallas and Chicago and payment of dividends to Kemper. Generally, there is a time lag between when premiums are collected and when policyholder benefits and insurance claims are paid. In the third quarter of 2016, the Company’s Life & Health segment voluntarily began implementing a comprehensive process under which it will cross-reference its life insurance policies against the DMF and other death verification databases to identify potential situations where the beneficiaries may not have filed a claim following the death of an insured and initiate an outreach process to identify and contact beneficiaries and settle claims. The Company expects to pay approximately $80 million in claims over the next several years to complete the initial outreach process. During periods of growth, insurance companies typically experience positive operating cash flows and are able to invest a portion of their operating cash flows to fund future policyholder benefits and claims. During periods in which premium revenues decline, insurance companies may experience negative cash flows from operations and may need to sell investments to fund payments to policyholders and claimants. In addition, if the Company’s property and casualty insurance subsidiaries experience several significant catastrophic events over a relatively short period of time, investments may have to be sold in advance of their maturity dates to fund payments, which could result in either investment gains or losses. Management believes that its property and casualty insurance subsidiaries maintain adequate levels of liquidity in the event that they were to experience several future catastrophic events over a relatively short period of time.

Net Cash Provided by Operating Activities increased by $25.5 million for the year ended December 31, 2016, compared to 2015. Net Cash Provided by Operating Activities increased by $81.4 million for the year ended December 31, 2015, compared to 2014.

Net Cash Used by Financing Activities was $48.4 million for the year ended December 31, 2016, compared to $100.8 million for the same period in 2015. Net proceeds from advances from FHLB provided $10.0 million for the year ended December 31, 2016. Kemper used $10.0 million of cash to repay the FHLB advances for the year ended December 31, 2016. Kemper used $357.3 million of cash to repay debt for the year ended December 31, 2015, of which $258.8 million was used to redeem the 2015 Senior Notes and $98.5 million to repay the FHLB advances. Net proceeds from the issuance of debt provided $345.8 million of cash for the year ended December 31, 2015, of which $247.3 million was related to the issuance of the 2025 Senior Notes and $98.5 million from FHLB advances. Kemper used $3.8 million of cash during 2016 to repurchase shares of its common stock, compared to $45.0 million in 2015, including $1.5 million of cash to settle repurchases made at the end of 2014. Kemper used $49.2 million of cash to pay dividends for the year ended December 31, 2016, compared to $49.7 million of cash

LIQUIDITY AND CAPITAL RESOURCES (Continued) used to pay dividends in the same period of 2015. The quarterly dividend rate was $0.24 per common share for each quarter of 2016 and 2015.

Net Cash Used by Financing Activities was $100.8 million for the year ended December 31, 2015, compared to $19.7 million for the same period in 2014. Kemper used $357.3 million of cash to repay debt for the year ended December 31, 2015, of which $258.8 million was used to redeem the 2015 Senior Notes and $98.5 million to repay the FHLB advances. Net proceeds from the issuance of debt provided $345.8 million of cash for the year ended December 31, 2015, of which $247.3 million was related to the issuance of the 2025 Senior Notes and $98.5 million from FHLB advances, compared to net proceeds of $144.0 million related to the issuance of the 2054 Subordinated Debentures in 2014. Kemper used $45.0 million of cash in 2015, including $1.5 million of cash to settle repurchases made at the end of 2014, to repurchase shares of its common stock, compared to using $114.0 million of cash to repurchase shares of its common stock in 2014. Kemper used $49.7 million of cash to pay dividends for the year ended December 31, 2015, compared to $51.8 million in 2014. The quarterly dividend rate was $0.24 per common share for each quarter of 2015 and 2014.

Cash available for investment activities in total is dependent on cash flow from Operating Activities and Financing Activities and the level of cash the Company elects to maintain. Net Cash Used by Investing Activities was $238.1 million for the year ended December 31, 2016, compared to $28.6 million in 2015. Net cash used by acquisitions of short-term investments was $18.0 million for the year ended December 31, 2016, compared to net cash provided by dispositions of short term investments of $104.9 million in 2015. Fixed Maturities investing activities used net cash of $318.0 million for the year ended December 31, 2016, compared to $53.5 million in 2015. Equity Securities investing activities provided net cash of $68.8 million for the year ended December 31, 2016, compared to $104.4 million in 2015. Equity Method Limited Liability Investments investing activities provided net cash of $6.4 million for the year ended December 31, 2016, compared to $0.5 million in 2015. Net cash provided by Fair Value Option Investments investing activities was $51.2 million for the year ended December 31, 2016, compared to net cash used of $111.0 million in 2015. Net cash used to acquire Alliance United was $57.6 million for the year ended December 31, 2015. Purchases of Corporate-owned Life Insurance were $7.5 million for both the year ended December 31, 2016 and the year ended December 31, 2015.

Net Cash Used by Investing Activities was $28.6 million for the year ended December 31, 2015, compared to $104.3 million in 2014. Net cash provided by dispositions of short-term investments was $104.9 million for the year ended December 31, 2015, compared to net cash of $63.9 million used by acquisitions of short-term investments in 2014. Fixed Maturities investing activities used net cash of $53.5 million for the year ended December 31, 2015, compared to providing net cash of $20.7 million in 2014. Equity Securities investing activities provided net cash of $104.4 million for the year ended December 31, 2015, compared to $10.1 million in 2014. Equity Method Limited Liability Investments investing activities provided net cash of $0.5 million for the year ended December 31, 2015, compared to $33.8 million in 2014. Fair Value Option Investments investing activities used net cash of $111.0 million for the year ended December 31, 2015, compared to $54.0 million in 2014. Net cash used to acquire Alliance United was $57.6 million for the year ended December 31, 2015 compared to net cash of $8.9 million provided by the disposition of a subsidiary in 2014. Purchases of Corporate-owned Life Insurance were $7.5 million for the year ended December 31, 2015, compared to $33.5 million in 2014.

OFF–BALANCE SHEET ARRANGEMENTS

The Company has no material obligations under guarantee contracts. The Company has no material retained or contingent interests in assets transferred to an unconsolidated entity. The Company has no material obligations, including contingent obligations, under contracts that would be accounted for as derivative instruments. The Company has no obligations, including contingent obligations, arising out of a variable interest in an unconsolidated entity held by, and material to, the Company, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with the Company. Accordingly, the Company has no material off–balance sheet arrangements.

CONTRACTUAL OBLIGATIONS

Estimated cash disbursements pertaining to the Company’s contractual obligations at December 31, 2016 are presented below.

Jan 1, 2017 Jan 1, 2018 Jan 1, 2020 to to to After DOLLARS IN MILLIONS Dec 31, 2017 Dec 31, 2019 Dec 31, 2021 Dec 31, 2021 Total Long Term Debt Obligations $ 360.0 $ — $ — $ 400.0 $ 760.0 Capital Lease Obligations 0.7 0.1 — — 0.8 Operating Lease Obligations 17.4 25.4 16.5 15.2 74.5 Purchase Obligations 26.7 15.7 0.5 — 42.9 Life and Health Insurance Policy Benefits 272.8 455.5 440.2 7,040.4 8,208.9 Property and Casualty Insurance Reserves 548.4 282.9 47.6 52.5 931.4 Other Contractual Obligations Reflected in Long Term Liabilities on the Consolidated Balance Sheet under GAAP 30.6 44.9 44.1 397.8 517.4 Total Contractual Obligations $ 1,256.6 $ 824.5 $ 548.9 $ 7,905.9 $ 10,535.9

Amounts included in Life and Health Insurance Policy Benefits within the contractual obligations table above represent the estimated cash payments to be made to policyholders and beneficiaries. Such cash outflows are based on the Company’s current assumptions for mortality, morbidity and policy lapse, but are undiscounted with respect to interest. Policies must remain in force for the policyholder or beneficiary to receive the benefit under the policy. Depending on the terms of a particular policy, future premiums from the policyholder may be required for the policy to remain in force. The Company estimates that future cash inflows would total $4.0 billion using the same assumptions used to estimate the cash outflows. The Company’s Life Insurance Reserves in the Company’s Consolidated Balance Sheets are generally based on the historical assumptions for mortality and policy lapse rates and are on a discounted basis. Accordingly, the sum of the amounts presented above for Life and Health Insurance Policy Benefits significantly exceeds the amount of Life and Health Insurance Reserves reported on the Company’s Consolidated Balance Sheet at December 31, 2016.

In addition to the purchase obligations included above, the Company had certain investment commitments totaling $214.7 million at December 31, 2016. The funding of such investment commitments is dependent on a number of factors, the timing of which is indeterminate. The contractual obligations reported above also exclude the Company’s liability of $5.1 million for unrecognized tax benefits. The Company cannot make a reasonably reliable estimate of the amount and period of related future payments, if any, for such liability. Other Contractual Obligations Reflected in Long Term Liabilities on the Consolidated Balance Sheet under GAAP primarily consist of interest obligations related to Long Term Debt Obligations.

CRITICAL ACCOUNTING ESTIMATES

Kemper’s subsidiaries conduct their businesses in two industries: property and casualty insurance and life and health insurance. Accordingly, the Company is subject to several industry-specific accounting principles under GAAP. The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The process of estimation is inherently uncertain. Accordingly, actual results could ultimately differ materially from the estimated amounts reported in a company’s financial statements. Different assumptions are likely to result in different estimates of reported amounts. The Company’s critical accounting policies most sensitive to estimates include the valuation of investments, the valuation of property and casualty insurance reserves for losses and LAE, the assessment of recoverability of goodwill and the valuation of pension benefit obligations.

Valuation of Investments

The reported value of the Company’s investments was $6,607.5 million at December 31, 2016, of which $5,723.3 million, or 87%, was reported at fair value, $175.9 million, or 3%, was reported under the equity method of accounting, $294.2 million, or 4%, was reported at unpaid principal balance and $414.1 million, or 6%, was reported at cost or depreciated cost. Investments, in general, are exposed to various risks, such as interest rate risk, credit risk and overall market volatility risk. Accordingly, it is reasonably possible that changes in the fair values of the Company’s investments reported at fair value will occur in the near term and such changes could materially

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document affect the amounts reported in the financial statements. Also, it is reasonably possible that changes in the carrying values of the Company’s Equity Method Limited Liability Investments will occur in the near term and such changes could materially affect the amounts reported in the financial statements because these issuers follow specialized industry accounting rules which require that they report all of their investments at fair value (See Item 1A., “Risk

CRITICAL ACCOUNTING ESTIMATES (Continued)

Factors” under the title “The Company’s investment portfolio is exposed to a variety of risks that may negatively impact net investment income and cause realized and unrealized losses”).

As more fully described under the heading, “Fair Value Measurements,” in Note 2, “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial Statements, the Company uses a hierarchical framework which prioritizes and ranks the market observability used in fair value measurements.

The fair value of the Company’s investments measured and reported at fair value was $5,723.3 million at December 31, 2016, of which $4,861.5 million, or 85%, were investments that were based on quoted market prices or significant value drivers that are observable, $581.7 million, or 10%, were investments where at least one significant value driver was unobservable and $280.1 million or 5% were investments for which fair value is measured using the net asset value per share practical expedient. Fair value measurements based on readily available, active, quoted market prices or for which fair value can be measured from actively quoted prices generally are deemed to have a higher degree of market price observability and a lesser degree of judgment, compared to fair value measurements based on significant unobservable inputs used in measuring fair value. The prices that the Company might realize from actual sales of investments are likely to vary from their respective estimated fair values at December 31, 2016 due to changing market conditions and limitations inherent in the estimation process.

The classification of a company’s investment in a financial instrument may affect its reported results. For investments classified as trading or for financial instruments for which a company has elected the fair value option method of accounting, a company is required to recognize changes in the fair values into income for the period reported. Accordingly, both the reported and fair values of the Company’s investments classified as trading were $5.3 million at December 31, 2016. Both the reported and fair values of the Company’s investments accounted for under the fair value option method of accounting were $111.4 million at December 31, 2016. For investments in fixed maturities classified as held to maturity, a company is required to carry the investment at amortized cost, with only amortization occurring during the period recognized into income. None of the Company’s investments in fixed maturities were classified as held to maturity at December 31, 2016. Changes in the fair value of investments in fixed maturities classified as available for sale, investments in equity securities classified as available for sale and an insurance entity’s investments in equity securities without readily determinable fair values are not recognized in income during the period, but rather are recognized as a separate component of AOCI until realized. All of the Company’s investments in fixed maturities were classified as available for sale at December 31, 2016. Except for investments accounted for under the equity method of accounting or classified as trading, all of the Company’s investments in equity securities at December 31, 2016 are reported at fair value with changes in fair value reported in AOCI until realized. The Company’s investments accounted for under the equity method of accounting consist of the Company’s investments in Equity Method Limited Liability Investments and are valued at cost plus cumulative undistributed comprehensive earnings or losses, and not at fair value.

Under GAAP, a company may elect to use the fair value option for some or all of its investments in financial instruments. Under the fair value option, a company is required to recognize changes in the fair values into income for the period reported. Had the Company elected the fair value option for all of its investments in financial instruments, the Company’s reported net income for the year ended December 31, 2016, would have decreased by $1.5 million.

The Company regularly reviews its investments for factors that may indicate that a decline in the fair value of an investment below its cost or amortized cost is other than temporary. Such reviews are inherently uncertain in that the value of the investment may not fully recover or may decline further in future periods. Some factors considered for fixed maturity and equity securities in evaluating whether or not a decline in fair value is other than temporary include, but are not limited to, the following:

Fixed Maturity Securities

• The financial condition, credit rating and prospects of the issuer; • The length of time and magnitude of the unrealized loss; • The ability of the issuer to make scheduled principal and interest payments; • The volatility of the investment; • Opinions of the Company’s external investment managers; • The Company’s intentions to sell or not to sell the investment; and • The Company’s determination of whether it will be required to sell the investment before a full recovery in value.

CRITICAL ACCOUNTING ESTIMATES (Continued)

Equity Securities

• The financial condition and prospects of the issuer; • The length of time and magnitude of the unrealized loss; The volatility of the investment; • Analyst recommendations and near term price targets; • Opinions of the Company’s external investment managers; • Market liquidity; • Debt-like characteristics of perpetual preferred stocks and issuer ratings; and • The Company’s intentions to sell or ability to hold the investments until recovery.

Changes in these factors from their December 31, 2016 evaluation date could result in the Company determining that a temporary decline in the fair value of an investment held and evaluated at December 31, 2016 is no longer temporary at a subsequent evaluation date. Such determination would result in an impairment loss recognized in earnings in the period such determination is made.

Property and Casualty Insurance Reserves for Losses and Loss Adjustment Expenses

The Company’s Property and Casualty Insurance Reserves are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid. The Company had $931.4 million and $862.8 million of gross loss and LAE reserves at December 31, 2016 and 2015, respectively.

Property and Casualty Insurance Reserves for the Company’s business segments at December 31, 2016 and 2015 were:

In estimating the Company’s Property and Casualty Insurance Reserves, the Company’s actuaries exercise professional judgment and must consider, and are influenced by, many variables that are difficult to quantify. Accordingly, the process of estimating and establishing the Company’s Property and Casualty Insurance Reserves is inherently uncertain, and the actual ultimate net cost of known and unknown claims may vary materially from the estimated amounts reserved. The reserving process is particularly imprecise for claims involving asbestos, environmental matters, construction defect and other emerging and/or long-tailed exposures which may not be discovered or reported until years after the insurance policy period has ended. Property and Casualty Insurance Reserves related to the Company’s discontinued operations are predominantly long-tailed exposures, $16.7 million of which was related to asbestos, environmental matters and construction defect exposures at December 31, 2016.

The Company’s actuaries generally estimate reserves at least quarterly for most product lines and/or coverage levels using accident quarters spanning 10 or more years, depending on the size of the product line and/or coverage level or emerging issues relating to them. The Company’s actuaries use a variety of generally accepted actuarial loss reserving estimation methodologies, including, but not limited to, the following:

• Incurred Loss Development Methodology; • Paid Loss Development Methodology; • Bornhuetter-Ferguson Incurred Loss Methodology; • Bornhuetter-Ferguson Paid Loss Methodology; and • Frequency and Severity Methodology.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company’s actuaries generally review the results of at least four of the estimation methodologies, two based on paid data and two based on incurred data, to initially estimate the ultimate losses and LAE for the current accident quarter and re-estimate the ultimate losses and LAE for previous accident quarters to determine if changes in the previous estimates of the ultimate

CRITICAL ACCOUNTING ESTIMATES (Continued) losses and LAE are indicated by the most recent data. In some cases, the methodologies produce a cluster of estimates with a tight band of indicated possible outcomes. In other cases, however, the methodologies produce conflicting results and wider bands of indicated possible outcomes, and the Company’s actuaries perform additional analyses before making their final selections. However, such bands do not necessarily constitute a range of outcomes, nor does the Company’s management or the Company’s actuaries calculate a range of outcomes.

The key assumption in these estimation methodologies is that patterns observed in prior periods are indicative of how losses and LAE are expected to develop in the future and that such historical data can be used to predict and estimate ultimate losses and LAE. However, changes in the Company’s business processes, by their very nature, are likely to affect the development patterns, which generally results in the historical development factors becoming less reliable over time in predicting how losses and LAE will ultimately develop. The ultimate impact of a single change in a business process is difficult to quantify and detect, and even more difficult if several changes to business processes occur over several years. Initially after a change is implemented, there are fewer data points, as compared to the historical data, for the Company’s actuaries to analyze. With fewer data points to analyze, the Company’s actuaries cannot be certain that observed differences from the historical data trends are a result of the change in business process or merely a random fluctuation in the data. As the Company’s actuaries observe more data points following the change in business process, the Company’s actuaries can gain more confidence in whether the change in business process is affecting the development pattern. The challenge for the Company’s actuaries is how much weight to place on the development patterns based on the older historical data and how much weight to place on the development patterns based on more recent data.

At a minimum, the Company’s actuaries analyze 45 product and/or coverage levels for over 40 separate current and prior accident quarters for both losses and LAE using many of the loss reserving estimation methodologies identified above as well as other generally accepted actuarial estimation methodologies. In all, there are more than 10,000 combinations of accident quarters, coverage levels, and generally accepted actuarial estimation methodologies used to estimate the Company’s unpaid losses and LAE. In some cases, the Company’s actuaries make adjustments to the loss reserving estimation methodologies identified above or use additional generally accepted actuarial estimation methodologies to estimate ultimate losses and LAE.

For each accident quarter, the point estimate selected by the Company’s actuaries is not necessarily one of the points produced by any particular one of the methodologies utilized, but often is another point selected by the Company’s actuaries, using their professional judgment, that takes into consideration each of the points produced by the several loss reserving estimation methodologies used. In some cases, for a particular product, the current accident quarter may not have enough paid claims data to rely upon, leading the Company’s actuaries to conclude that the incurred loss development methodology provides a better estimate than the paid loss development methodology. Therefore, the Company’s actuaries may give more weight to the incurred loss development methodology for that particular accident quarter. As an accident quarter ages for that same product, the actuary may gain more confidence in the paid loss development methodology and begin to give more weight to the paid loss development methodology. The Company’s actuaries’ quarterly selections are summed by product and/or coverage levels to create the actuarial indication of the ultimate losses. More often than not, the actuarial indication for a particular product line and accident quarter is most heavily weighted toward the incurred loss development methodology, particularly for short-tail lines such as personal automobile insurance. Historically, the incurred loss development methodology has been more reliable in predicting ultimate losses for short-tail lines, especially in the more recent accident quarters, compared with the paid loss development methodology. However, in some circumstances changes can occur which impact numerous variables, including, but not limited to, those variables identified below that are difficult to quantify and/or impact the predictive value of prior development patterns relied upon in the incurred loss development methodology and paid loss development methodology. In those circumstances, the Company’s actuaries must make adjustments to these loss reserving estimation methodologies or use additional generally accepted actuarial estimation methodologies. In those circumstances, the Company’s actuaries, using their professional judgment, may place more weight on the adjusted loss reserving estimation methodologies or other generally accepted actuarial estimation methodologies until the newer development patterns fully emerge and the Company’s actuaries can fully rely on the unadjusted loss reserving estimation methodologies. In the event of a wide variation among results generated by the different projection methodologies, the Company’s actuaries further analyze the data using additional techniques.

CRITICAL ACCOUNTING ESTIMATES (Continued)

In estimating reserves, the Company’s actuaries exercise professional judgment and must consider, and are influenced by, many variables that are difficult to quantify, such as:

• Changes in the level of minimum case reserves, and the automatic aging of those minimum case reserves; • Changes to claims practices, including, but not limited to, changes in the reporting and impact of large losses, timing of reported claims, changes in claims closing and re-opening patterns, adequacy of case reserves, implementation of new systems for handling claims, turnover of claims department staffs, timing and depth of the audit review of claims handling procedures; • Changes in underwriting practices; • Changes in the mix of business by state, class and policy limit within product line; • Growth in new lines of business; • Changes in the attachment points of the Company’s reinsurance programs; • Medical costs, including, but not limited to, the ability to assess the extent of injuries and the impact of inflation; • Repair costs, including, but not limited to, the impact of inflation and the availability of labor and materials; • Changes in the judicial environment, including, but not limited to, the interpretation of policy provisions, the impact of jury awards and changes in case law; and • Changes in state regulatory requirements.

A change in any one or more of the foregoing factors is likely to result in a projected ultimate net loss and LAE that is different from the previously estimated reserve and/or previous frequency and severity trends. Such changes in estimates may be material.

For example, the Company’s actuaries review frequency (number of claims per policy or exposure), severity (dollars of loss per claim) and average premium (dollars of premium per exposure). Actual frequency and severity experienced will vary depending on changes in mix by class of insured risk. Similarly, the actual frequency and rate of recovery from reinsurance will vary depending on changes in the attachment point for reinsurance. In particular, in periods of high growth or expansion into new markets, there may be additional uncertainty in estimating the ultimate losses and LAE. The contributing factors of this potential risk are changes in the Company’s mix by policy limit and mix of business by state or jurisdiction.

Actuaries use historical experience and trends as predictors of how losses and LAE will emerge over time. However, historical experience may not necessarily be indicative of how actual losses and LAE will emerge. Changes in case reserve adequacy, changes in minimum case reserves and changes in internal claims handling procedures could impact the timing and recognition of incurred claims and produce an estimate that is either too high or too low if not adjusted for by the actuary. For example, if, due to changes in claims handling procedures, actual claims are settled more rapidly than they were settled historically, the estimate produced by the paid loss development methodology would tend to be overstated if the actuary did not identify and adjust for the impact of the changes in claims handling procedures. Similarly, if, due to changes in claims handling procedures, actual claim reserves are set at levels higher than past experience, the estimate produced by the incurred loss development methodology would tend to be overstated if the actuary did not identify and adjust for the impact of the changes in claims handling procedures.

The final step in the quarterly loss and LAE reserving process involves a comprehensive review of the actuarial indications by the Company’s corporate actuary and corporate management who apply their collective judgment and determine the appropriate estimated level of reserves to record. Numerous factors are considered in this determination process, including, but not limited to, the assessed reliability of key loss trends and assumptions that may be significantly influencing the current actuarial indications, changes in claim handling practices or other changes that affect the timing of payment or development patterns, changes in the mix of business, the maturity of the accident year, pertinent trends observed over the recent past, the level of volatility within a particular line of business, the improvement or deterioration of actuarial indications in the current period as compared to prior periods, and the amount of reserves related to third party pools for which the Company does not have access to the underlying data and, accordingly, relies on calculations provided by such pools.

Estimated Variability of Property and Casualty Insurance Reserves

The Company’s goal is to ensure that its total reserves for property and casualty insurance losses and LAE are adequate to cover all costs, while sustaining minimal variation from the time reserves for losses and LAE are initially estimated until losses and LAE are fully developed. Changes in the Company’s estimates of these losses and LAE over time, also referred to as “development,” will occur and may be material. Favorable development is recognized and reported in the Consolidated Financial Statements when the Company decreases its previous estimate of ultimate losses and LAE and results in an increase

CRITICAL ACCOUNTING ESTIMATES (Continued) in net income in the period recognized, whereas adverse development is recognized and reported in the Consolidated Financial Statements when the Company increases its previous estimate of ultimate losses and LAE and results in a decrease in net income.

Development for the years ended December 31, 2016, 2015 and 2014, was:

Favorable (Adverse) Development DOLLARS IN MILLIONS 2016 2015 2014 Continuing Operations: Property & Casualty Insurance: Personal Automobile Insurance $ (11.3) $ 1.8 $ 31.6 Homeowners Insurance 20.0 10.8 14.8 Commercial Automobile Insurance (2.4) (1.8) 2.6 Other Personal Lines 8.0 2.1 5.4 Life & Health Insurance: Property 0.1 (1.4) (0.9) Total Favorable Development from Continuing Operations, Net 14.4 11.5 53.5 Discontinued Operations 6.3 8.6 3.6 Total Favorable Development, Net $ 20.7 $ 20.1 $ 57.1

See MD&A, “Loss and LAE Reserve Development,” “Property & Casualty Insurance,” and “Life & Health Insurance,” for further information on development reported in the Consolidated Financial Statements.

Although development will emerge in all of the Company’s product lines, development in the Company’s personal automobile insurance product line could have the most significant impact due to the relative size of its loss and LAE reserves. To further illustrate the sensitivity of the Company’s reserves for personal automobile insurance losses and LAE to changes in the cumulative development factors, for each quarterly evaluation point the Company’s actuaries calculated the variability of cumulative development factors observed in the incurred loss development methodology using one standard deviation. The Company believes that one standard deviation of variability is a reasonably likely scenario to measure variability for its loss and LAE reserves under the incurred development method for personal automobile insurance. Assuming that the Company’s personal automobile insurance loss and LAE reserves were based solely on the incurred loss development methodology and the variability in the cumulative development factors occurred within one standard deviation, the Company estimates that the Company’s personal automobile insurance loss and LAE reserves could have varied by $66.8 million in either direction at December 31, 2016 for all accident years combined under this scenario. In addition to the factors described above, other factors may also impact loss reserve development in future periods. These factors include governmental actions, including court decisions interpreting existing laws, regulations or policy provisions, developments related to insurance policy claims and coverage issues, adverse or favorable outcomes in pending claims litigation, the number and severity of insurance claims, the impact of inflation on insurance claims and the impact of required participation in windpools and joint underwriting associations and residual market assessments. Although the Company’s actuaries do not make specific numerical assumptions about these factors, changes in these factors from past patterns will impact historical loss development factors and, in turn, future loss reserve development. Significant favorable changes in one or more factors will lead to favorable future loss reserve development, which could result in the actual loss developing closer to, or even below, the lower end of the Company’s estimated reserve variability. Significant unfavorable changes in one or more factors will lead to unfavorable loss reserve development, which could result in the actual loss developing closer to, or even above, the higher end of the Company’s estimated reserve variability. Accordingly, due to these factors and the other factors enumerated throughout the MD&A and the inherent limitations of the loss reserving estimation methodologies, the estimated and illustrated reserve variability may not necessarily be indicative of the Company’s future reserve variability, which could ultimately be greater than the estimated and illustrated variability. In addition, as previously noted, development will emerge in all of the Company’s product lines over time. Accordingly, the Company’s future reserve variability could ultimately be greater than the illustrated variability. Additional information pertaining to the estimation of, and development of, the Company’s Property and Casualty Insurance Reserves is contained in Item 1 of Part I of this 2016 Annual Report under the heading “Property and Casualty Loss and Loss Adjustment Expense Reserves.”

CRITICAL ACCOUNTING ESTIMATES (Continued)

Goodwill Recoverability

While the Company believes that none of its reporting units with material Goodwill are at risk of failing step one of the goodwill impairment test, the process of determining whether or not an asset, such as Goodwill, is impaired or recoverable relies on projections of future cash flows, operating results and market conditions. Such projections are inherently uncertain and, accordingly, actual future cash flows may differ materially from projected cash flows. In evaluating the recoverability of Goodwill, the Company performs a discounted cash flow analysis for each of the Company’s reporting units carrying Goodwill. The discounted cash value may be different from the fair value that would result from an actual transaction between a willing buyer and a willing seller. Such analyses are particularly sensitive to changes in discount rates and investment rates. Changes to these rates might result in material changes in the valuation and determination of the recoverability of Goodwill. For example, an increase in the rate used to discount cash flows will decrease the discounted cash value. There is likely to be a similar, but not necessarily as large as, increase in the investment rate used to project the cash flows resulting from investment income earned on the Company’s investments. Accordingly, an increase in the investment rate would increase the discounted cash value.

Pension Benefit Obligations

The process of estimating the Company’s pension benefit obligations and pension benefit costs is inherently uncertain and the actual cost of benefits may vary materially from the estimates recorded. These liabilities are particularly volatile due to their long-term nature and are based on several assumptions. The main assumptions used in the valuation of the Company’s pension benefit obligations and pension costs are:

• Estimated mortality of the participants and beneficiaries eligible for benefits; • Estimated expected long-term rates of returns on investments; • Estimated compensation increases; • Estimated employee turnover; and • Estimated rate used to discount the expected benefit payment to a present value.

A change in any one or more of these assumptions is likely to result in a projected benefit obligation or pension cost that differs from the actuarial estimates at December 31, 2016. Such changes in estimates may be material. For example, a one–percentage point decrease in the Company’s estimated discount rate would increase the pension benefit obligation at December 31, 2016 by $87.5 million, while a one–percentage point increase in the rate would decrease the pension benefit obligation at December 31, 2016 by $69.8 million. A one–percentage point decrease in the Company’s estimated long-term rate of return on plan assets would increase the pension expense for the year ended December 31, 2016 by $5.2 million, while a one–percentage point increase in the rate would decrease pension expense by $5.2 million for the same period.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP recognized by the Financial Accounting Standards Board (“FASB”) that is applicable to the Company. The FASB issues Accounting Standards Updates (“ASUs”) to amend the authoritative literature in ASC.

The Company has adopted all recently issued accounting pronouncements with effective dates prior to January 1, 2017. See Note 2, “Summary of Accounting Policies and Accounting Changes” for discussion on adoption of these ASUs and impacts to the Company’s financial statements, which were not material. With the possible exceptions of ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, ASU 2016-02, Leases (Topic 842) and ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company does not expect the adoption of all other recently issued accounting pronouncements with effective dates after December 31, 2016 to have a material impact on the Company’s financial statements. All other recently issued accounting pronouncements with effective dates after December 31, 2016 are not expected to have a material impact on the Company.

Quantitative Information About Market Risk

The Company’s consolidated balance sheets include four types of financial instruments subject to the material market risk disclosures required by the SEC:

1. Investments in Fixed Maturities; 2. Investments in Equity Securities; 3. Fair Value Option Investments; and 4. Debt.

Investments in Fixed Maturities and Debt are subject to material interest rate risk. The Company’s Investments in Equity Securities include common and preferred stocks and, accordingly, are subject to material equity price risk and interest rate risk, respectively. The Company’s Fair Value Option Investments include hedge funds that are subject to material equity price risk.

For purposes of this disclosure, market risk sensitive financial instruments are divided into two categories: financial instruments acquired for trading purposes and financial instruments acquired for purposes other than trading. The Company’s market risk sensitive financial instruments are generally classified as held for purposes other than trading. The Company has no significant holdings of financial instruments acquired for trading purposes. The Company has no significant holdings of derivatives.

The Company measures its sensitivity to market risk by evaluating the change in its financial assets and liabilities relative to fluctuations in interest rates and equity prices. The evaluation is made using instantaneous changes in interest rates and equity prices on a static balance sheet to determine the effect such changes would have on the Company’s market value at risk and the resulting pre-tax effect on Shareholders’ Equity. The changes chosen represent the Company’s view of adverse changes which are reasonably possible over a one-year period. The selection of the changes chosen should not be construed as the Company’s prediction of future market events, but rather an illustration of the impact of such possible events.

For the interest rate sensitivity analysis presented below, the Company assumed an adverse and instantaneous increase of 100 basis points in the yield curve at both December 31, 2016 and 2015 for Investments in Fixed Maturities. Such 100 basis point increase in the yield curve may not necessarily result in a corresponding 100 basis point increase in the interest rate for all investments in fixed maturities. For example, a 100 basis point increase in the yield curve for risk-free, taxable investments in fixed maturities may not result in a 100 basis point increase for tax-exempt investments in fixed maturities. For Investments in Fixed Maturities, the Company also anticipated changes in cash flows due to changes in the likelihood that investments would be called or prepaid prior to their contractual maturity. All other variables were held constant. For preferred stock equity securities, the Company assumed an adverse and instantaneous increase of 100 basis points in market interest rates from their levels at both December 31, 2016 and 2015. All other variables were held constant. For Debt, the Company assumed an adverse and instantaneous decrease of 100 basis points in market interest rates from their levels at December 31, 2016 and 2015. All other variables were held constant. The Company measured equity price sensitivity assuming an adverse and instantaneous 30% decrease in the Standard and Poor’s Stock Index (the “S&P 500”) from its level at December 31, 2016 and 2015, with all other variables held constant. The Company’s investments in common stock equity securities were correlated with the S&P 500 using the portfolio’s weighted-average beta of 1.00 and 0.99 at December 31, 2016 and 2015, respectively. Beta measures a stock’s relative volatility in relation to the rest of the stock market, with the S&P 500 having a beta coefficient of 1.00. The common stock portfolio’s weighted-average beta was calculated using each security’s beta for the five-year periods ended December 31, 2016 and 2015, and weighted on the fair value of such securities at December 31, 2016 and 2015, respectively. For equity securities without observable market inputs, the Company assumed a beta of 1.00 at December 31, 2016 and 2015. The Company’s Fair Value Option Investments were correlated with the S&P 500 using such portfolio’s weighted-average beta of 0.08 and 0.14 at December 31, 2016 and 2015, respectively, which was calculated for each hedge fund in the portfolio and weighted on the respective fair value of each of the hedge funds.

The estimated adverse effects on the fair value of the Company’s financial instruments at December 31, 2016 using these assumptions were:

Pro Forma Increase (Decrease) Interest Equity Total DOLLARS IN MILLIONS Fair Value Rate Risk Price Risk Market Risk ASSETS Investments in Fixed Maturities $ 5,124.9 $ (313.4) $ — $ (313.4) Investments in Equity Securities 481.7 (5.4) (120.7) (126.1) Fair Value Option Investments 111.4 — (2.5) (2.5) LIABILITIES Debt $ 770.9 $ 24.5 $ — $ 24.5

The estimated adverse effects on the fair value of the Company’s financial instruments at December 31, 2015 using these assumptions were:

Pro Forma Increase (Decrease) Interest Equity Total DOLLARS IN MILLIONS Fair Value Rate Risk Price Risk Market Risk ASSETS Investments in Fixed Maturities $ 4,852.3 $ (307.6) $ — $ (307.6) Investments in Equity Securities 523.2 (7.2) (126.0) (133.2) Fair Value Option Investments 164.5 — (6.7) (6.7) LIABILITIES Debt $ 781.3 $ 33.0 $ — $ 33.0

The market risk sensitivity analysis assumes that the composition of the Company’s interest rate sensitive assets and liabilities, including, but not limited to, credit quality, and the equity price sensitive assets existing at the beginning of the period remains constant over the period being measured. It also assumes that a particular change in interest rates is uniform across the yield curve regardless of the time to maturity. Interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market interest rates. Also, any future correlation, either in the near term or the long term, between the Company’s common stock equity securities and fair value option portfolios and the S&P 500 may differ from the historical correlation as represented by the weighted-average historical beta of the common stock equity securities and fair value option portfolios. Accordingly, the market risk sensitivity analysis may not be indicative of, is not intended to provide, and does not provide, a precise forecast of the effect of changes of market rates on the Company’s income or shareholders’ equity. Further, the computations do not contemplate any actions the Company may undertake in response to changes in interest rates or equity prices.

To the extent that any adverse 100 basis point change occurs in increments over a period of time instead of instantaneously, the adverse impact on fair values would be partially mitigated because some of the underlying financial instruments would have matured. For example, proceeds from any maturing assets could be reinvested and any new liabilities would be incurred at the then current interest rates.

Qualitative Information About Market Risk Market risk is a broad term related to economic losses due to adverse changes in the fair value of a financial instrument and is inherent to all financial instruments. SEC disclosure rules focus on only one element of market risk—price risk. Price risk relates to changes in the level of prices due to changes in interest rates, equity prices, foreign exchange rates or other factors that relate to market volatility of the rate, index, or price underlying the financial instrument. The Company’s primary market risk exposures are to changes in interest rates and equity prices.

The Company manages its interest rate exposures with respect to Investments in Fixed Maturities by investing primarily in investment- grade securities of moderate effective duration.

Index to the Consolidated Financial Statements of Kemper Corporation and Subsidiaries

Consolidated Balance Sheets at December 31, 2016 and 2015 65

Consolidated Statements of Income for the Years Ended December 31, 2016, 2015 and 2014 66

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2016, 2015 and 2014 67

Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014 68

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2016, 2015 and 2014 69

Notes to the Consolidated Financial Statements

Note 1—Basis of Presentation and Significant Estimates 70

Note 2—Summary of Accounting Policies and Accounting Changes 70

Note 3—Acquisition of Business 76

Note 4—Investments 77

Note 5—Goodwill 82

Note 6—Property and Casualty Insurance Reserves 83

Note 7—Debt 91

Note 8—Leases 93

Note 9—Shareholders’ Equity 94

Note 10—Long-term Equity-based Compensation 94

Note 11—Income from Continuing Operations per Unrestricted Share 99

Note 12—Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income 101

Note 13—Income from Investments 103

Note 14—Insurance Expenses 104

Note 15—Income Taxes 105

Note 16—Pension Benefits 107

Note 17—Postretirement Benefits Other Than Pensions 112

Note 18—Business Segments 114

Note 19—Discontinued Operations 116

Note 20—Catastrophe Reinsurance 116

Note 21—Other Reinsurance 119

Note 22—Fair Value Measurements 120

Note 24—Related Parties 125

Note 25—Quarterly Financial Information (Unaudited) 126

Report of Independent Registered Public Accounting Firm 128

December 31, DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2016 2015 Assets: Investments: Fixed Maturities at Fair Value (Amortized Cost: 2016 - $4,846.8; 2015 - $4,560.7) $ 5,124.9 $ 4,852.3 Equity Securities at Fair Value (Cost: 2016 - $434.4; 2015 - $486.9) 481.7 523.2 Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings 175.9 190.6 Fair Value Option Investments 111.4 164.5 Short-term Investments at Cost which Approximates Fair Value 273.7 255.7 Other Investments 439.9 443.2 Total Investments 6,607.5 6,429.5 Cash 115.7 161.7 Receivables from Policyholders 336.5 332.4 Other Receivables 198.6 193.2 Deferred Policy Acquisition Costs 332.0 316.4 Goodwill 323.0 323.0 Current Income Tax Assets 15.5 9.5 Deferred Income Tax Assets 25.8 31.9 Other Assets 255.9 238.5 Total Assets $ 8,210.5 $ 8,036.1 Liabilities and Shareholders’ Equity: Insurance Reserves: Life and Health $ 3,475.3 $ 3,341.0 Property and Casualty 931.4 862.8 Total Insurance Reserves 4,406.7 4,203.8 Unearned Premiums 618.7 613.1 Liabilities for Unrecognized Tax Benefits 5.1 3.8 Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2016 - $770.9; 2015 - $781.3) 751.6 750.6 Accrued Expenses and Other Liabilities 453.2 472.4 Total Liabilities 6,235.3 6,043.7 Shareholders’ Equity: Common Stock, $0.10 Par Value Per Share, 100 Million Shares Authorized; 51,270,940 Shares Issued and Outstanding at December 31, 2016 and 51,326,751 Shares Issued and Outstanding at December 31, 2015 5.1 5.1 Paid-in Capital 660.3 654.0 Retained Earnings 1,172.8 1,209.0 Accumulated Other Comprehensive Income 137.0 124.3 Total Shareholders’ Equity 1,975.2 1,992.4 Total Liabilities and Shareholders’ Equity $ 8,210.5 $ 8,036.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

For The Years Ended December 31, DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2016 2015 2014 Revenues: Earned Premiums $ 2,220.0 $ 2,009.6 $ 1,862.2 Net Investment Income 298.3 302.6 309.1 Other Income 3.2 3.7 1.4 Net Realized Gains on Sales of Investments 33.1 52.1 39.1 Other-than-temporary Impairment Losses: Total Other-than-temporary Impairment Losses (33.0) (27.4) (15.2) Portion of Losses Recognized in Other Comprehensive Income 0.3 0.2 — Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) Total Revenues 2,521.9 2,340.8 2,196.6 Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses 1,780.8 1,467.6 1,261.7 Insurance Expenses 647.3 645.1 628.4 Write-off of Long-lived Assets — 11.1 54.6 Loss from Early Extinguishment of Debt — 9.1 — Interest and Other Expenses 90.3 107.6 91.7 Total Expenses 2,518.4 2,240.5 2,036.4 Income from Continuing Operations before Income Taxes 3.5 100.3 160.2 Income Tax Benefit (Expense) 9.2 (20.1) (47.6) Income from Continuing Operations 12.7 80.2 112.6 Income from Discontinued Operations 4.1 5.5 1.9 Net Income $ 16.8 $ 85.7 $ 114.5 Income from Continuing Operations Per Unrestricted Share: Basic $ 0.25 $ 1.55 $ 2.08 Diluted $ 0.25 $ 1.55 $ 2.08 Net Income Per Unrestricted Share: Basic $ 0.33 $ 1.65 $ 2.12 Diluted $ 0.33 $ 1.65 $ 2.12 Dividends Paid to Shareholders Per Share $ 0.96 $ 0.96 $ 0.96

The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Kemper Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Loss)

For The Years Ended December 31, DOLLARS IN MILLIONS 2016 2015 2014 Net Income $ 16.8 $ 85.7 $ 114.5

Other Comprehensive Income (Loss) Before Income Taxes: Unrealized Holding Gains (Losses) (2.2) (177.3) 234.6 Foreign Currency Translation Adjustments (0.3) (1.4) (1.0) Decrease (Increase) in Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Gain on Cash Flow Hedge 1.6 — — Other Comprehensive Income (Loss) Before Income Taxes 19.6 (152.6) 135.1 Other Comprehensive Income Tax Benefit (Expense) (6.9) 54.2 (47.7) Other Comprehensive Income (Loss) 12.7 (98.4) 87.4 Total Comprehensive Income (Loss) $ 29.5 $ (12.7) $ 201.9

The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

For The Years Ended December 31, DOLLARS IN MILLIONS 2016 2015 2014 Operating Activities: Net Income $ 16.8 $ 85.7 $ 114.5 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Increase in Deferred Policy Acquisition Costs (15.6) (13.1) (0.4) Amortization of Intangible Assets Acquired 5.9 15.4 7.2 Equity in Earnings of Equity Method Limited Liability Investments (7.5) (19.0) (9.0) Distribution of Accumulated Earnings of Equity Method Limited Liability Investments 15.7 8.6 21.7 Decrease (Increase) in Value of Fair Value Option Investments reported in Investment Income 1.9 (0.3) 0.7 Amortization of Investment Securities and Depreciation of Investment Real Estate 16.2 16.1 15.4 Net Realized Gains on Sales of Investments (33.1) (52.1) (39.1) Net Impairment Losses Recognized in Earnings 32.7 27.2 15.2 Loss from Early Extinguishment of Debt — 9.1 — Depreciation of Property and Equipment 13.6 13.5 16.0 Write-offs of Long-lived Assets — 11.1 54.6 Decrease (Increase) in Other Receivables (11.0) 49.6 46.2 Increase (Decrease) in Insurance Reserves 201.8 39.6 (54.7) Increase (Decrease) in Unearned Premiums 5.6 (9.4) (62.0) Change in Income Taxes (6.5) (21.8) 11.2 Increase (Decrease) in Accrued Expenses and Other Liabilities 3.3 22.6 (20.3) Other, Net 0.7 32.2 16.4 Net Cash Provided by Operating Activities 240.5 215.0 133.6 Investing Activities: Sales, Paydowns and Maturities of Fixed Maturities 532.3 627.8 573.7 Purchases of Fixed Maturities (850.3) (681.3) (553.0) Sales of Equity Securities 158.9 238.4 245.3 Purchases of Equity Securities (90.1) (134.0) (235.2) Acquisition and Improvements of Investment Real Estate (2.2) (1.8) (2.1) Sales of Investment Real Estate 7.5 7.7 0.9 Sales of and Return of Investment of Equity Method Limited Liability Investments 41.0 32.9 55.2 Acquisitions of Equity Method Limited Liability Investments (34.6) (32.4) (21.4) Sales of Fair Value Option Investments 72.2 — 6.9 Purchases of Fair Value Option Investments (21.0) (111.0) (60.9) Decrease (Increase) in Short-term Investments (18.0) 104.9 (63.9) Acquisition of Businesses, Net of Cash Acquired — (57.6) — Disposition of Business, Net of Cash Disposed — — 8.9 Increase in Other Investments (5.7) (3.2) (8.0) Purchase of Corporate-owned Life Insurance (7.5) (7.5) (33.5) Acquisition of Software (17.6) (8.9) (11.3) Other, Net (3.0) (2.6) (5.9) Net Cash Used by Investing Activities (238.1) (28.6) (104.3) Financing Activities:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Net Proceeds from Issuances of Debt 10.0 345.8 144.0 Repayments of Debt (10.0) (357.3) — Common Stock Repurchases (3.8) (45.0) (114.0) Dividends and Dividend Equivalents Paid (49.2) (49.7) (51.8) Cash Exercise of Stock Options 3.5 3.9 0.5 Other, Net 1.1 1.5 1.6 Net Cash Used by Financing Activities (48.4) (100.8) (19.7) Increase (Decrease) in Cash (46.0) 85.6 9.6 Cash, Beginning of Year 161.7 76.1 66.5 Cash, End of Year $ 115.7 $ 161.7 $ 76.1

The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

For The Years Ended December 31, 2016, 2015 and 2014 Accumulated Other Total DOLLARS AND SHARES IN MILLIONS, Number of Common Paid-in Retained Comprehensive Shareholders’ EXCEPT PER SHARE AMOUNTS Shares Stock Capital Earnings Income Equity BALANCE, DECEMBER 31, 2013 55.7 $ 5.6 $ 694.8 $ 1,215.8 $ 135.3 $ 2,051.5 Net Income — — — 114.5 — 114.5 Other Comprehensive Income (Note 12) — — — — 87.4 87.4 Cash Dividends to Shareholders ($0.96 per share) — — — (51.8) — (51.8) Repurchases of Common Stock (3.2) (0.4) (40.2) (74.9) — (115.5) Equity-based Compensation Cost (Note 10) — — 6.4 — — 6.4 Equity-based Awards, Net of Shares Exchanged (Note 10) (0.1) — (0.9) (0.9) — (1.8) BALANCE, DECEMBER 31, 2014 52.4 $ 5.2 $ 660.1 $ 1,202.7 $ 222.7 $ 2,090.7 Net Income — — — 85.7 — 85.7 Other Comprehensive Loss (Note 12) — — — — (98.4) (98.4) Cash Dividends and Dividend Equivalents to Shareholders ($0.96 per share) — — — (49.7) — (49.7) Repurchases of Common Stock (1.2) (0.1) (15.5) (27.9) — (43.5) Equity-based Compensation Cost (Note 10) — — 6.5 — — 6.5 Equity-based Awards, Net of Shares Exchanged (Note 10) 0.1 — 2.9 (1.8) — 1.1 BALANCE, DECEMBER 31, 2015 51.3 $ 5.1 $ 654.0 $ 1,209.0 $ 124.3 $ 1,992.4 Net Income — — — 16.8 — 16.8 Other Comprehensive Income (Note 12) — — — — 12.7 12.7 Cash Dividends and Dividend Equivalents to Shareholders ($0.96 per share) — — — (49.2) — (49.2) Repurchases of Common Stock (0.1) — (1.8) (2.0) — (3.8) Equity-based Compensation Cost (Note 10) — — 4.7 — — 4.7 Equity-based Awards, Net of Shares Exchanged (Note 10) 0.1 — 3.4 (1.8) — 1.6 BALANCE, DECEMBER 31, 2016 51.3 $ 5.1 $ 660.3 $ 1,172.8 $ 137.0 $ 1,975.2

The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Kemper Corporation and Subsidiaries Notes to the Consolidated Financial Statements

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ESTIMATES

The Consolidated Financial Statements included herein have been prepared on the basis of accounting principles generally accepted in the United States (“GAAP”) and include the accounts of Kemper Corporation (“Kemper”) and its subsidiaries (individually and collectively referred to herein as the “Company”). All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions.

The fair values of the Company’s Investments in Fixed Maturities, Investments in Equity Securities, Fair Value Option Investments, Short-term Investments, Trading Securities, derivative instrument included in Other Assets and Debt are estimated using a hierarchical framework which prioritizes and ranks market price observability. The carrying amounts reported in the Consolidated Balance Sheets approximate fair value for Cash, Short-term Investments and certain other assets and other liabilities because of their short-term nature. The actual value at which financial instruments could be sold or settled with a willing buyer or seller may differ from estimated fair values depending on a number of factors, including, but not limited to, current and future economic conditions, the quantity sold or settled, the presence of an active market and the availability of a willing buyer or seller.

The process of estimating and establishing reserves for losses and loss adjustment expenses ("LAE") for property and casualty insurance is inherently uncertain, and the actual ultimate net cost of known and unknown claims may vary materially from the estimated amounts reserved. The reserving process is particularly imprecise for claims involving long-tailed exposures, which may not be discovered or reported until years after the insurance policy period has ended. Management considers a variety of factors, including, but not limited to, past claims experience, current claim trends and relevant legal, economic and social conditions, in estimating reserves. A change in any one or more factors is likely to result in the ultimate net claim costs to differ from the estimated reserve. Changes in such estimates may be material and would be recognized in the Consolidated Financial Statements when such estimates change.

The process of determining whether an asset is impaired or recoverable relies on projections of future cash flows, operating results and market conditions. Projections are inherently uncertain, and, accordingly, actual future cash flows may differ materially from projected cash flows. As a result, the Company’s assessment of the impairment of long-lived assets is susceptible to the risk inherent in making such projections.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES

Investments

Investments in Fixed Maturities include bonds, notes and redeemable preferred stocks. Investments in Fixed Maturities are classified as available for sale and reported at fair value. Net Investment Income, including amortization of purchased premiums and accretion of market discounts, on Investments in Fixed Maturities is recognized as interest over the period that it is earned using the effective yield method.

Investments in Equity Securities include common and non-redeemable preferred stocks and other equity interests and are reported at fair value. Investments in common and non-redeemable preferred stocks with readily determinable fair values are classified as available for sale. Dividend income on investments in common and non-redeemable preferred stocks is recognized on the ex-dividend date. Other equity interests primarily consist of exchange traded funds and interests in limited liability companies and limited partnerships in which the Company’s interests are deemed minor. The Company’s share of distributed earnings from other equity interests is recognized as dividend income when received.

Unrealized appreciation or depreciation, net of applicable deferred income taxes, on fixed maturities and equity securities classified as available for sale is reported in Accumulated Other Comprehensive Income (“AOCI”) included in Shareholders’ Equity.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Fair Value Option Investments include investments in certain hedge funds, which the Company has elected the fair value option (“FVO”) to account for such investments. Under the FVO method of accounting, the Company reports changes in the fair value of such investments in Net Investment Income in the Consolidated Statements of Income. The hedge funds are designed to preserve liquidity, while providing higher returns than Kemper would otherwise expect to earn had it invested in other short-term investments.

Short-term Investments include certificates of deposits and other fixed maturities that mature within one year from the date of purchase, U.S. Treasury bills, money market mutual funds, overnight interest bearing accounts, and repurchase agreements. Short-term Investments are reported at cost, which approximates fair value.

Other Investments primarily include loans to policyholders and real estate. Loans to policyholders are carried at unpaid principal balance. Real estate is carried at cost, net of accumulated depreciation. Real estate is depreciated over the estimated useful life of the asset using the straight-line method of depreciation. Real estate is evaluated for impairment when events or circumstances indicate the carrying value may not be recoverable. An impairment loss on real estate is recognized when the carrying value exceeds the sum of undiscounted projected future cash flows as well as the fair value, or, in the case of a property classified as held for sale, when the carrying value exceeds the fair value, net of costs to sell.

Gains and losses on sales of investments are computed on the specific identification method and are reported in the Consolidated Statements of Income in the period in which the sales occur. The Company regularly reviews its investment portfolio for factors that may indicate that a decline in fair value of an investment is other than temporary. Losses are computed on the specific identification method and reported in the Consolidated Statements of Income in the period that the decline is determined to be other than temporary. The portion of an impairment of an investment in a fixed maturity attributed to a credit loss is reported in Net Impairment Losses Recognized in Earnings in the Consolidated Statements of Income, with the portion of the impairment that is not attributed to a credit loss reported in AOCI.

Fair Value Measurements

The Company uses a hierarchical framework which prioritizes and ranks the market observability of inputs used in fair value measurements. Market price observability is affected by a number of factors, including the type of asset or liability and the characteristics specific to the asset or liability being measured. Assets and liabilities with readily available, active, quoted market prices or for which fair value can be measured from actively quoted prices generally are deemed to have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The Company classifies the inputs used to measure fair value into one of three levels as follows:

• Level 1 — Quoted prices in an active market for identical assets or liabilities; • Level 2 — Observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and • Level 3 — Unobservable inputs for the asset or liability being measured.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level of input that is significant to the entire measurement. Such determination requires significant management judgment. However, in accordance with GAAP, the Company is not permitted to use management judgment to adjust quoted market prices in an active market.

Deferred Policy Acquisition Costs

Costs directly associated with the successful acquisition of business, principally commissions and certain premium taxes and policy issuance costs, are deferred. Costs deferred on property and casualty insurance contracts and short duration health insurance contracts are amortized over the period in which premiums are earned. Costs deferred on traditional life insurance products and other long- duration insurance contracts are primarily amortized over the anticipated premium-paying period of the related policies in proportion to the ratio of the annual premiums to the total premiums anticipated, which is estimated using the same assumptions used in calculating policy reserves.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Goodwill

The cost of an acquired entity over the fair value of net assets acquired is reported as Goodwill. Goodwill is not amortized, but rather is tested for recoverability annually or when certain triggering events require testing.

Insurance Reserves

Reserves for losses and LAE on property and casualty insurance coverage and health insurance coverage represent the estimated claim cost and loss adjustment expense necessary to cover the ultimate net cost of investigating and settling all losses incurred and unpaid at the end of any given accounting period. Such estimates are based on individual case estimates for reported claims and estimates for incurred but not reported (“IBNR”) losses, including expected development on reported claims. These estimates are adjusted in the aggregate for ultimate loss expectations based on historical experience patterns and current economic trends, with any change in the estimated ultimate liabilities being reported in the Consolidated Statements of Income in the period of change. Changes in such estimates may be material.

For traditional life insurance products, the reserves for future policy benefits are estimated on the net level premium method using assumptions as of the issue date for mortality, interest, policy lapses and expenses, including provisions for adverse mortality. These assumptions vary by such characteristics as plan, age at issue and policy duration. Mortality assumptions are based on the Company’s historical experience and industry standards. Interest rate assumptions principally range from 3% to 7%. Lapse rate assumptions are based on actual and industry experience. Insurance Reserves for life insurance products are comprised of reserves for future policy benefits plus an estimate of the Company’s liability for unpaid life insurance claims and claims adjustment expenses, which includes an estimate for IBNR life insurance claims. Prior to the third quarter of 2016, except when required by applicable law, the Company did not utilize the database of reported deaths maintained by the Social Security Administration or any other comparable database (a “Death Master File” or “DMF”) in its operations, including to determine its IBNR liability for life insurance products. Instead of using such a database, the Company calculated its IBNR liability for life insurance products using Company-specific historical information, which included analyzing average paid claims and the average lag between date of death and the date reported to the Company for claims for which proof of death had been provided. In the third quarter of 2016, the Company initiated a voluntary enhancement of its claims handling procedures for its life insurance policies. The Company is now utilizing a DMF to identify potential situations where the Company has yet to be notified of an insured’s death and, as appropriate, initiating an outreach process to identify and contact beneficiaries and settle claims. Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses for the year ended December 31, 2016 include a charge of $77.8 million to recognize the initial impact of using a DMF in the Company’s operations, including to determine its IBNR liability for unpaid claims and claims adjustment expenses for life insurance products.

Other Receivables

Other Receivables primarily include reinsurance recoverables and accrued investment income. Reinsurance Recoverables were $106.4 million and $108.3 million at December 31, 2016 and 2015, respectively. Accrued Investment Income was $70.8 million and $68.5 million at December 31, 2016 and 2015, respectively.

Other Assets

Other Assets primarily include property and equipment, internal use software, insurance licenses acquired in business combinations, the value of other intangible assets acquired, corporate-owned life insurance and prepaid expenses.

Property and equipment is depreciated over the useful lives of the assets, generally using the straight-line or double declining balance methods of depreciation depending on the asset involved.

Internal use software is amortized over the useful life of the asset using the straight-line method of amortization. Write-offs of Long- lived Assets for the year ended December 31, 2015 was a charge of $11.1 million to write off the costs of a computer software development project that was abandoned by the Company’s Property & Casualty Insurance segment. Write-offs of Long-lived Assets for the year ended December 31, 2014 was a charge of $54.6 million to write off certain software for the Company’s Property & Casualty Insurance segment after the Company determined that it was no longer probable that the software would be fully implemented.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Insurance licenses acquired in business combinations and other indefinite life intangibles are not amortized, but rather tested periodically for recoverability.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Corporate-owned life insurance is reported at cash surrender value with changes due to cost of insurance and investment experience reported in Other Income in the Consolidated Statements of Income.

The Company accounts for the present value of the future profits embedded in life insurance in force acquired (“Life VIF”) based on actuarial estimates of the present value of estimated net cash flows. Life VIF was $28.9 million and $32.5 million at December 31, 2016 and 2015, respectively. Life VIF is amortized using the effective interest method using interest rates consistent with the rates in the underlying insurance contracts. The Company estimates that it will record Life VIF amortization, net of interest, of $3.1 million in 2017, $2.8 million in 2018, $2.4 million in 2019, $2.0 million in 2020 and $1.8 million in 2021. The Company evaluates the Life VIF for recoverability annually.

The Company accounts for the present value of the future profits embedded in Property and Casualty Insurance Customer Relationships Acquired (“P&C Customer Relationships”) based on the present value of estimated future cash flows from the customer relationships acquired. P&C Customer Relationships was $9.0 million and $11.2 million at December 31, 2016 and 2015, respectively. P&C Customer Relationships is amortized using the effective interest method. P&C Customer Relationships is tested for recoverability using undiscounted projections of future cash flows and written down to estimated fair value if the carrying value exceeds the sum of such projections of undiscounted cash flows.

The Company accounts for the present value of the future profits embedded in Property and Casualty Insurance Broker Relationships Acquired (“P&C Broker Relationships”) based on the present value of estimated future cash flows from the broker relationships acquired. P&C Broker Relationships was $16.8 million and $18.1 million at December 31, 2016 and 2015, respectively. P&C Broker Relationships is amortized on a straight-line basis over 15 years. P&C Broker Relationships is tested for recoverability using undiscounted projections of future cash flows and written down to estimated fair value if the carrying value exceeds the sum of such projections of undiscounted cash flows.

Accrued Expenses and Other Liabilities

Accrued Expenses and Other Liabilities primarily include accrued salaries and commissions, pension benefits, postretirement medical benefits and accrued taxes, licenses and fees.

Recognition of Earned Premiums and Related Expenses

Property and casualty insurance and short duration health insurance premiums are deferred when written and recognized and earned ratably over the periods to which the premiums relate. Unearned Premiums represent the portion of the premiums written related to the unexpired portion of policies in force which has been deferred and is reported as a liability. The Company performs a premium deficiency analysis typically at a product line level, namely automobile insurance, homeowners insurance and other insurance, which is consistent with the manner in which the Company acquires and services policies and measures profitability. Anticipated investment income is excluded from such analysis. A premium deficiency is recognized when the sum of expected claim costs, claim adjustment expenses, unamortized deferred policy acquisition costs and maintenance costs exceeds the related unearned premiums by first reducing related deferred policy acquisition costs to an amount, but not below zero, at which the premium deficiency would not exist. If a premium deficiency remains after first reducing deferred policy acquisition costs, a premium deficiency reserve is established and reported as a liability in the Company’s financial statements. The Company’s deferred policy acquisition costs in the Consolidated Balance Sheets at December 31, 2016 and 2015 include reductions of $9.7 million and $9.0 million, respectively, due to premium deficiencies with respect to Alliance United’s personal automobile book of business.

Traditional life insurance premiums are recognized as revenue when due. Policyholders’ benefits are associated with related premiums to result in recognition of profits over the periods for which the benefits are provided using the net level premium method.

Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses include provisions for future policy benefits under life and certain accident and health insurance contracts and provisions for reported claims, estimates for IBNR claims and loss adjustment expenses. Benefit payments in excess of policy account balances are expensed.

Reinsurance

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In the normal course of business, Kemper’s insurance subsidiaries reinsure certain risks above certain retention levels with other insurance enterprises. These reinsurance agreements do not relieve Kemper’s insurance subsidiaries of their legal obligations to the policyholder. Amounts recoverable from reinsurers are included in Other Receivables.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Gains related to long-duration reinsurance contracts are deferred and amortized over the life of the underlying reinsured policies. Losses related to long-duration reinsurance contracts are recognized immediately. Any gain or loss associated with reinsurance agreements for which Kemper’s insurance subsidiaries have been legally relieved of their obligations to the policyholder is recognized in the period of relief.

Income Taxes

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance, if any, is maintained for the portion of deferred income tax assets that the Company does not expect to recover. Increases, if any, in the valuation allowance for deferred income tax assets are recognized as income tax expense. Decreases, if any, in the valuation allowance for deferred income tax assets are recognized as income tax benefit. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period in which the change is enacted.

The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in an income tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Change in Accounting and Adoption of New Accounting Standards

Effective January 1, 2016, the Company changed its method for estimating the interest and service cost components of expense recognized for its pension and other postretirement employee benefit plans. As a result, the Company elected to use a full yield curve approach to estimate these components of benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. Prior to 2016, the interest and service cost components were estimated using a single weighted-average discount rate derived from the yield curve used to measure the projected benefit obligation or accumulated postretirement benefit obligation, as relevant, at the beginning of the period. The change provides a more precise measurement of interest and service costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. The Company has accounted for this change as a change in accounting estimate that is inseparable from a change in accounting principle and, accordingly, recognized the effect prospectively in 2016. The change in method for estimating the interest and service cost components decreased pension expense for the year ended December 31, 2016 by approximately $2.7 million, but had no impact on the measurement of benefit obligations.

In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The amendments in ASU 2015-02 affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities while also eliminating the presumption that a general partner should consolidate a limited partnership. ASU 2015-02 may also affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. The Company's adoption and initial application as of January 1, 2016 resulted in no changes to the legal entities that the Company consolidates.

In May 2015, the FASB issued ASU 2015-07 Fair Value Measurement (Topic 820), Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The Company adopted ASU 2015-07 in the first quarter of 2016 and applied its provisions on a retrospective basis. Except for the change in disclosure requirements, adoption of ASU 2015-07 did not impact the Company’s financial statements. The presentation of certain prior year amounts and disclosures have been reclassified to conform to the presentation for the current year.

In May 2015, the FASB issued ASU 2015-09, Financial Services—Insurance (Topic 944): Disclosures about Short-Duration Contracts. ASU 2015-09 requires insurers to provide additional disclosures about short-duration insurance contracts, focusing

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) particularly on the liability for unpaid claims and claim adjustment expenses. Insurers are required to disclose tables showing incurred and paid claims development information by accident year for the number of years that claims typically remain outstanding, although not to exceed ten years, as well as a reconciliation of this information to the balance sheet. Additional disclosures are also required on the total of IBNR liabilities, including expected development on reported claims, reserving methodologies, quantitative information about claim frequency, qualitative description of the methodologies used for determining claim frequency and average annual percentage payout of incurred claims by age. ASU 2015-09 is effective for annual periods beginning after December 31, 2015 and interim periods within annual periods beginning after December 15, 2016. Except for the additional disclosure requirements, adoption of ASU 2015-09 did not impact the Company’s financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Most significantly, ASU 2016-01 requires companies to measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily- determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. ASU 2016-01 also simplifies the impairment assessment of equity investments without readily-determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.

ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company currently records its Investments in Equity Securities at fair value with net unrealized appreciation or depreciation reported in AOCI in Shareholders’ Equity. The Company’s Investments in Equity Securities include securities with readily-determinable fair values and securities without readily-determinable fair values. Until the Company adopts ASU 2016-01 and makes its elections for Investments in Equity Securities that do not have readily-determinable fair values, it cannot determine the impact of the adoption on its consolidated balance sheet. Subsequent to adoption, ASU 2016-01 is expected to cause increased volatility in the Company’s Consolidated Statements of Operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), by amending the Accounting Standards Codification (“ASC”) and creating a new topic on accounting for leases. ASU 2016-02 introduces a lessee model that requires most leases to be reported on the balance sheet of a lessee. ASU 2016-02 also aligns many of the underlying principles of the new lessor model with those in ASC Topic 606, Revenue from Contracts with Customers, the FASB’s new revenue recognition standard (e.g., those related to evaluating when profit can be recognized). Furthermore, ASU 2016-02 addresses other concerns related to the current leases model. For example, ASU 2016-02 eliminates the requirement in current GAAP for an entity to use bright-line tests in determining lease classification. ASU 2016-02 also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those years with early adoption permitted. The Company is currently evaluating the impact of this guidance on its financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718), which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods with early adoption permitted. The Company does not anticipate adoption to have a material impact on its financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that utilizes expected credit losses to provide for an allowance for credit losses for financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The income statement includes the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document losses that have taken place during the period. Credit losses on available-for-sale debt securities are measured in a manner similar to current GAAP, although the ASU requires that they be presented as an allowance rather than as a write-down. In situations where the estimate of credit loss on an available-for-sale

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued) debt security declines, entities will be able to record the reversal to income in the current period, which GAAP currently prohibits. ASU 2016-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods with early adoption permitted for fiscal years beginning after December 31, 2018 and interim periods within such year. The Company is currently evaluating the impact of this guidance on its financial statements.

The Company has adopted all recently issued accounting pronouncements with effective dates prior to January 1, 2017. There were no adoptions of such accounting pronouncements in 2016 that had a material impact on the Company’s Consolidated Financial Statements. With the possible exceptions of ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, ASU 2016-02, Leases (Topic 842) and ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company does not expect the adoption of all other recently issued accounting pronouncements with effective dates after December 31, 2016 to have a material impact on the Company’s financial statements.

NOTE 3. ACQUISITION OF BUSINESS

On April 30, 2015, Kemper acquired 100% of the outstanding common stock of Alliance United Group and its wholly-owned subsidiaries, Alliance United Insurance Company and Alliance United Insurance Services, (individually and collectively referred to herein as “Alliance United”) in a cash transaction for a total purchase price of $71.0 million, of which $17.5 million was placed in escrow to secure the sellers’ potential indemnification obligations under the purchase agreement. After completing the transaction, Kemper contributed $75.0 million to support the book of business acquired and commuted a quota share reinsurance agreement whereby Alliance United ceded a portion of its business to an unaffiliated reinsurer. The results of Alliance United are included in the Consolidated Financial Statements from the date of acquisition and are reported in the Company’s Property & Casualty Insurance segment. Alliance United is a provider of nonstandard personal automobile insurance in California. As a result of the acquisition, the Company increased its presence in the California nonstandard automobile insurance market by gaining access to additional brokers and gained expertise in serving the Hispanic market.

The Company has completed the allocation of the purchase price to the assets acquired and liabilities assumed. The final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed is presented below.

DOLLARS IN MILLIONS

Investments $ 187.0 Cash 13.4 Receivables from Policyholders 44.4 Other Receivables 52.8 Value of Intangible Assets Acquired (Reported in Other Assets) 32.6 Goodwill 11.2 Current Income Taxes 1.4 Other Assets 5.9 Property and Casualty Insurance Reserves (155.8) Unearned Premiums (85.6) Liabilities for Income Taxes (1.5) Accrued Expenses and Other Liabilities (34.8) Total Purchase Price $ 71.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document preceding table include an indemnification receivable of $5.4 million. Other Receivables in the Consolidated Balance Sheets at December 31, 2016 and 2015 include an indemnification receivable of $16.0 million and $15.9 million, respectively.

NOTE 3. ACQUISITION OF BUSINESS (Continued)

The carrying amount, net of accumulated amortization, of the intangible assets acquired by class at December 31, 2016, December 31, 2015 and the acquisition date are presented below.

Dec 31, Dec 31, At Acquisition DOLLARS IN MILLIONS 2016 2015 Date P&C Broker Relationships $ 16.8 $ 18.1 $ 18.9 Value of In Force Policies — 0.2 9.2 Other 2.5 3.7 4.5 Value of Intangible Assets Acquired $ 19.3 $ 22.0 $ 32.6

P&C Broker Relationships are being amortized over 15 years on a straight-line basis. Value of In Force Policies (“P&C VIF”) was amortized pro ratably as premiums were earned over the remaining terms of the underlying policies. Other intangible assets acquired are generally being amortized on a straight-line basis over 2 years to 5 years.

NOTE 4. INVESTMENTS

The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2016 were:

Gross Unrealized Amortized DOLLARS IN MILLIONS Cost Gains Losses Fair Value U.S. Government and Government Agencies and Authorities $ 321.2 $ 22.3 $ (7.2) $ 336.3 States and Political Subdivisions 1,640.6 88.4 (14.1) 1,714.9 Foreign Governments 3.5 — (0.1) 3.4 Corporate Securities: Bonds and Notes 2,758.9 209.9 (24.0) 2,944.8 Redeemable Preferred Stocks 0.5 0.1 — 0.6 Collateralized Loan Obligations 121.2 2.7 (1.1) 122.8 Other Mortgage- and Asset-backed 0.9 1.2 — 2.1 Investments in Fixed Maturities $ 4,846.8 $ 324.6 $ (46.5) $ 5,124.9

Included in the fair value of Other Mortgage- and Asset-backed investments at December 31, 2016 are $0.9 million of collateralized debt obligations and $1.2 million of non-governmental residential mortgage-backed securities.

The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2015 were:

Gross Unrealized Amortized DOLLARS IN MILLIONS Cost Gains Losses Fair Value U.S. Government and Government Agencies and Authorities $ 298.0 $ 26.2 $ (3.6) $ 320.6 States and Political Subdivisions 1,513.7 111.6 (2.7) 1,622.6 Corporate Securities: Bonds and Notes 2,651.5 202.0 (40.7) 2,812.8 Redeemable Preferred Stocks 3.7 0.1 — 3.8 Collateralized Loan Obligations 90.0 0.3 (3.0) 87.3 Other Mortgage- and Asset-backed 3.8 1.4 — 5.2 Investments in Fixed Maturities $ 4,560.7 $ 341.6 $ (50.0) $ 4,852.3

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Included in the fair value of Other Mortgage- and Asset-backed investments at December 31, 2015 are $3.8 million of collateralized debt obligations, $1.3 million of non-governmental residential mortgage-backed securities and $0.1 million of other asset-backed securities.

Accrued Expenses and Other Liabilities included unsettled purchases of Investments in Fixed Maturities of $0.1 million and $5.6 million at December 31, 2016 and 2015, respectively. Other Receivables included unsettled sales of Investments in Fixed

NOTE 4. INVESTMENTS (Continued)

Maturities of $2.7 million at December 31, 2016. There were no unsettled sales of Investments in Fixed Maturities at December 31, 2015.

The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2016 by contractual maturity were:

Amortized DOLLARS IN MILLIONS Cost Fair Value Due in One Year or Less $ 101.6 $ 102.8 Due after One Year to Five Years 836.7 867.0 Due after Five Years to Ten Years 1,608.6 1,652.4 Due after Ten Years 2,038.2 2,233.0 Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date 261.7 269.7 Investments in Fixed Maturities $ 4,846.8 $ 5,124.9

The expected maturities of the Company’s Investments in Fixed Maturities may differ from the contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments in Mortgage- and Asset- backed Securities Not Due at a Single Maturity Date at December 31, 2016 consisted of securities issued by the Government National Mortgage Association with a fair value of $126.2 million, securities issued by the Federal National Mortgage Association with a fair value of $13.9 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $4.8 million and securities of other non-governmental issuers with a fair value of $124.8 million.

Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2016 were:

Gross Unrealized DOLLARS IN MILLIONS Cost Gains Losses Fair Value Preferred Stocks: Finance, Insurance and Real Estate $ 58.1 $ 2.3 $ (0.8) $ 59.6 Other Industries 18.5 4.9 (0.5) 22.9 Common Stocks: Finance, Insurance and Real Estate 31.2 2.3 — 33.5 Other Industries 7.2 4.6 (0.1) 11.7 Other Equity Interests: Exchange Traded Funds 136.1 9.6 (1.3) 144.4 Limited Liability Companies and Limited Partnerships 183.3 29.2 (2.9) 209.6 Investments in Equity Securities $ 434.4 $ 52.9 $ (5.6) $ 481.7

NOTE 4. INVESTMENTS (Continued)

Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2015 were:

Gross Unrealized DOLLARS IN MILLIONS Cost Gains Losses Fair Value Preferred Stocks: Finance, Insurance and Real Estate $ 80.8 $ 4.9 $ (0.8) $ 84.9 Other Industries 17.1 2.7 (0.8) 19.0 Common Stocks: Manufacturing 0.7 1.0 — 1.7 Finance, Insurance and Real Estate 18.9 5.3 (1.0) 23.2 Other Industries 8.7 3.3 (0.2) 11.8 Other Equity Interests: Exchange Traded Funds 179.7 1.1 (3.7) 177.1 Limited Liability Companies and Limited Partnerships 181.0 25.0 (0.5) 205.5 Investments in Equity Securities $ 486.9 $ 43.3 $ (7.0) $ 523.2

Other Receivables included unsettled sales of Investments in Equity Securities of $0.2 million at December 31, 2016. There were no unsettled sales of Investments in Equity Securities at December 31, 2015. There were no unsettled purchases of Investments in Equity Securities at either December 31, 2016 or December 31, 2015.

An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2016 is presented below.

Less Than 12 Months 12 Months or Longer Total Fair Unrealized Fair Unrealized Fair Unrealized DOLLARS IN MILLIONS Value Losses Value Losses Value Losses Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 117.7 $ (7.2) $ 1.1 $ — $ 118.8 $ (7.2) States and Political Subdivisions 432.7 (14.1) 0.3 — 433.0 (14.1) Foreign Governments 2.1 (0.1) — — 2.1 (0.1) Corporate Securities: Bonds and Notes 663.3 (16.6) 107.3 (7.4) 770.6 (24.0) Collateralized Loan Obligations 19.9 (0.7) 21.4 (0.4) 41.3 (1.1) Total Fixed Maturities 1,235.7 (38.7) 130.1 (7.8) 1,365.8 (46.5) Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate 15.6 (0.5) 7.3 (0.3) 22.9 (0.8) Other Industries 5.3 (0.5) — — 5.3 (0.5) Common Stocks: Finance, Insurance and Real Estate 2.8 — — — 2.8 — Other Industries 0.6 (0.1) 0.5 — 1.1 (0.1) Other Equity Interests: Exchange Traded Funds — — 18.6 (1.3) 18.6 (1.3)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Limited Liability Companies and Limited Partnerships 13.9 (0.7) 33.8 (2.2) 47.7 (2.9) Total Equity Securities 38.2 (1.8) 60.2 (3.8) 98.4 (5.6) Total $ 1,273.9 $ (40.5) $ 190.3 $ (11.6) $ 1,464.2 $ (52.1)

NOTE 4. INVESTMENTS (Continued)

The Company regularly reviews its investment portfolio for factors that may indicate that a decline in fair value of an investment is other than temporary. The portions of the declines in the fair values of investments that are determined to be other than temporary are reported as losses in the Consolidated Statements of Income in the periods when such determinations are made.

Unrealized losses on fixed maturities, which the Company has determined to be temporary at December 31, 2016, were $46.5 million, of which $7.8 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were unrealized losses of $0.1 million at December 31, 2016 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” There were no unrealized losses at December 31, 2016 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “12 Months or Longer.” Investment-grade fixed maturity investments comprised $33.8 million and below-investment-grade fixed maturity investments comprised $12.7 million of the unrealized losses on investments in fixed maturities at December 31, 2016. For below- investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 5% of the amortized cost basis of the investment. At December 31, 2016, the Company did not have the intent to sell these investments and it was not more likely than not that the Company would be required to sell these investments before recovery of its amortized cost basis, which may be at maturity. Based on the Company’s evaluation at December 31, 2016 of the prospects of the issuers, including, but not limited to, the credit ratings of the issuers of the investments in the fixed maturities, and the Company’s intention to not sell and its determination that it would not be required to sell before recovery of the amortized cost of such investments, the Company concluded that the declines in the fair values of the Company’s investments in fixed maturities presented in the preceding table were temporary at the evaluation date.

For equity securities, the Company considers various factors when determining whether a decline in the fair value is other than temporary, including, but not limited to:

• The financial condition and prospects of the issuer; • The length of time and magnitude of the unrealized loss; • The volatility of the investment; • Analyst recommendations and near term price targets; • Opinions of the Company’s external investment managers; • Market liquidity; • Debt-like characteristics of perpetual preferred stocks and issuer ratings; and • The Company’s intentions to sell or ability to hold the investments until recovery.

With respect to Investments in Equity Securities, the Company concluded that the unrealized losses on its investments in preferred and common stocks at December 31, 2016 were temporary based on various factors, including the relative short length and magnitude of the losses and overall market volatility. The Company’s investments in other equity interests include investments in limited liability companies and limited partnerships that primarily invest in mezzanine debt, distressed debt, and secondary transactions. By the nature of their underlying investments, the Company believes that some of its investments in the limited liability companies and limited partnerships exhibit debt-like characteristics which, among other factors, the Company also considers when evaluating these investments for impairment. Based on evaluations of the factors in the preceding paragraph, the Company concluded that the declines in the fair values of the Company’s investments in equity securities presented in the preceding table were temporary at December 31, 2016.

NOTE 4. INVESTMENTS (Continued)

An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2015 is presented below.

Less Than 12 Months 12 Months or Longer Total Fair Unrealized Fair Unrealized Fair Unrealized DOLLARS IN MILLIONS Value Losses Value Losses Value Losses Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 56.6 $ (1.6) $ 24.1 $ (2.0) $ 80.7 $ (3.6) States and Political Subdivisions 131.0 (2.6) 0.9 (0.1) 131.9 (2.7) Corporate Securities: Bonds and Notes 783.8 (26.0) 133.6 (14.7) 917.4 (40.7) Redeemable Preferred Stocks — — — — — — Collateralized Loan Obligations 57.4 (2.9) 0.8 (0.1) 58.2 (3.0) Other Mortgage- and Asset-backed — — 0.3 — 0.3 — Total Fixed Maturities 1,028.8 (33.1) 159.7 (16.9) 1,188.5 (50.0) Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate 2.7 — 12.3 (0.8) 15.0 (0.8) Other Industries 7.3 (0.8) — — 7.3 (0.8) Common Stocks: Finance, Insurance and Real Estate 16.3 (1.0) — — 16.3 (1.0) Other Industries 2.8 (0.2) — — 2.8 (0.2) Other Equity Interests: Exchange Traded Funds 135.2 (3.7) — — 135.2 (3.7) Limited Liability Companies and Limited Partnerships 2.7 (0.5) — — 2.7 (0.5) Total Equity Securities 167.0 (6.2) 12.3 (0.8) 179.3 (7.0) Total $ 1,195.8 $ (39.3) $ 172.0 $ (17.7) $ 1,367.8 $ (57.0)

Unrealized losses on fixed maturities, which the Company determined to be temporary at December 31, 2015, were $50.0 million, of which $16.9 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were unrealized losses of $0.2 million at December 31, 2015 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” There were no unrealized losses at December 31, 2015 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “12 Months or Longer.” Investment-grade fixed maturity investments comprised $33.5 million and below-investment-grade fixed maturity investments comprised $16.5 million of the unrealized losses on investments in fixed maturities at December 31, 2015. For below- investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was less than 8% of the amortized cost basis of the investment. At December 31, 2015, the Company did not have the intent to sell these investments and it was not more likely than not that the Company would be required to sell these investments before recovery of its amortized cost basis, which may be at maturity. Based on the Company’s evaluation at December 31, 2015 of the prospects of the issuers, including, but not limited to, the credit ratings of the issuers of the investments in the fixed maturities, and the Company’s intention to not sell and its determination that it would not be required to sell before recovery of the amortized cost of such investments, the Company concluded that the declines in the fair values of the Company’s investments in fixed maturities presented in the preceding table were temporary at the evaluation date.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document With respect to Investments in Equity Securities, the Company concluded that the unrealized losses on its investments at December 31, 2015 were temporary based on various factors, including the relative short length and magnitude of the losses and overall market volatility, as well as, the debt-like characteristics of investments in certain other equity interests.

NOTE 4. INVESTMENTS (Continued)

The following table sets forth the pre-tax amount of Other Than Temporary Impairments (“OTTI”) credit losses, recognized in Retained Earnings for Investments in Fixed Maturities held by the Company as of December 31, 2016, 2015 and 2014, for which a portion of the OTTI loss related to factors other than credit has been recognized in AOCI, and the corresponding changes in such amounts.

DOLLARS IN MILLIONS 2016 2015 2014 Cumulative Balance of Pre-tax Credit Losses Recognized in Retained Earnings at Beginning of Year $ 5.1 $ 5.3 $ 9.9 Pre-tax Credit Losses on Fixed Maturities without Pre-tax Credit Losses Included in Cumulative Balance at Beginning of Year 2.7 0.2 2.4 Additional Pre-tax Credit Losses on Fixed Maturities with Pre-tax Credit Losses Included in Cumulative Balance at Beginning of Year — — 0.6 Reductions for Change in Impairment Status: From Status of Credit Loss to Status of Intent-to-sell or Required-to-sell (6.3) (0.4) (2.4) Reductions for Investments Sold During Year (0.1) — (5.2) Balance at End of Year $ 1.4 $ 5.1 $ 5.3 Equity Method Limited Liability Investments include investments in limited liability investment companies and limited partnerships in which the Company’s interests are not deemed minor and are accounted for under the equity method of accounting. The Company’s investments in Equity Method Limited Liability Investments are generally of a passive nature in that the Company does not take an active role in the management of the investment entity. In 2016 and 2015, aggregate investment income (losses) from Equity Method Limited Liability Investments exceeded 10% of the Company’s pretax consolidated net income. Accordingly, the Company is disclosing aggregated summarized financial data for its Equity Method Limited Liability Investments. Such aggregated summarized financial data does not represent the Company’s proportionate share of the Equity Method Limited Liability Investment assets or earnings. Aggregate total assets of the Equity Method Limited Liability Investments in which the Company invested totaled $2,618.1 million and $3,801.7 million as of December 31, 2016 and 2015, respectively. Aggregate total liabilities of the Equity Method Limited Liability Investments in which the Company invested totaled $828.0 million and $879.1 million as of December 31, 2016 and 2015, respectively. Aggregate net income of the Equity Method Limited Liability Investments in which the Company invested totaled $85.0 million, $159.6 million and $96.2 million for the years ended December 31, 2016, 2015 and 2014, respectively. The aggregate summarized financial data is based on the most recent and sufficiently-timely financial information available to the Company as of the respective reporting dates and periods. The Company’s maximum exposure to loss at December 31, 2016 is limited to the total carrying value of $175.9 million. In addition, the Company had outstanding commitments totaling approximately $76.3 million to fund Equity Method Limited Liability Investments at December 31, 2016.

The carrying values of the Company’s Other Investments at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Loans to Policyholders at Unpaid Principal $ 294.2 $ 288.4 Real Estate at Depreciated Cost 140.2 149.8 Trading Securities at Fair Value 5.3 4.7 Other 0.2 0.3 Total $ 439.9 $ 443.2

NOTE 5. GOODWILL

Goodwill balances by business segment at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Property & Casualty Insurance $ 103.6 $ 103.6 Life & Health Insurance 219.4 219.4 Total $ 323.0 $ 323.0

The Company tests goodwill for recoverability on an annual basis at the beginning of the first quarter and, if circumstances or events indicate that the fair value of a reporting unit may have declined below its carrying value, such tests are performed at intervening interim periods. The Company principally used projections of discounted future cash flows to estimate the fair values of the reporting units tested. For each reporting unit tested, the estimated fair value exceeded the carrying value of the reporting unit, and the Company concluded that the associated goodwill was recoverable at the aforementioned dates tested.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES

The Company’s Property and Casualty Insurance Reserves are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid. Such estimates are based on individual case estimates for reported claims and estimates for IBNR losses, including expected development on reported claims.

The determination of individual case reserves differs by line of business. For preferred personal automobile insurance, homeowners insurance and other personal insurance, case reserves are set by adjusters and are based on the adjusters’ estimates of the amount for which the claims will ultimately be paid. For non-standard personal automobile insurance and commercial automobile insurance, case reserves are set primarily using statistical reserves that are based on studies of historical average paid amounts by state, coverage and product. However, when such reserves exceed certain thresholds they are set manually by adjusters.

The Company’s actuaries generally estimate ultimate losses and LAE and, therefore, reserves at least quarterly for most product lines and/or coverage levels using accident quarters spanning 10 or more years, depending on the size of the product line and/or coverage level or emerging issues relating to them. The Company’s actuaries use a variety of generally accepted actuarial loss reserving estimation methodologies to estimate the ultimate losses and LAE for the current accident quarter and re-estimate the ultimate losses and LAE for previous accident quarters to determine if changes in the previous estimates of the ultimate losses and LAE are indicated by the most recent data.

The Company’s actuaries’ quarterly selections are summed by product and/or coverage levels to create the actuarial indication of the ultimate losses and LAE. Paid amounts are then subtracted from the ultimates to compute the reserves for property and casualty insurance losses and LAE. These results are reviewed by the Company’s corporate actuary and corporate management who apply their collective judgment and determine the appropriate estimated level of reserves to record. Numerous factors are considered in this determination process, including, but not limited to, the assessed reliability of key loss trends and assumptions that may be significantly influencing the current actuarial indications, changes in claim handling practices or other changes that affect the timing of payment or development patterns, changes in the mix of business, the maturity of the accident year, pertinent trends observed over the recent past, the level of volatility within a particular line of business, the improvement or deterioration of actuarial indications in the current period as compared to prior periods, and the amount of reserves related to third party pools for which the Company does not have access to the underlying data and, accordingly, relies on calculations provided by such pools.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company’s goal is to ensure that its total reserves for property and casualty insurance losses and LAE are adequate to cover all costs, while sustaining minimal variation from the time reserves for losses and LAE are initially estimated until losses and

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

LAE are fully developed. Changes in the Company’s estimates of these losses and LAE over time, also referred to as “development,” will occur and may be material.

The following tables contain information about incurred and paid claims development as of and for the year December 31, 2016, net of reinsurance and indemnification, as well as cumulative claim frequency and the total of IBNR liabilities, including expected development on reported claims included within the net incurred losses and allocated LAE amounts. The tables are grouped by major product line and, if relevant, coverage. The information about incurred and paid claims development for the years ended December 31, 2012 through 2015 is presented as supplementary information and is unaudited.

Preferred Personal Automobile Insurance—Liability

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Accident 2012 2013 2014 2015 Development on Number of Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Reported Claims Incurred Claims 2012 $ 305.0 $ 290.9 $ 284.4 $ 282.2 $ 282.1 $ 0.8 56,772 2013 265.4 251.1 250.1 251.6 — 51,126 2014 202.1 198.3 200.2 0.9 39,865 2015 168.3 171.8 6.3 32,484 2016 162.1 26.9 30,278 Total 1,067.8

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 117.8 $ 207.6 $ 245.5 $ 264.3 $ 272.9 2013 107.2 182.2 216.3 234.1 2014 85.8 143.3 168.8 2015 73.1 122.4 2016 61.2 Total 859.4 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance 10.9 Loss and Allocated LAE Reserves, Net of Reinsurance $ 219.3

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Preferred Personal Automobile Insurance—Physical Damage

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Accident 2012 2013 2014 2015 Development on Number of Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Reported Claims Incurred Claims 2012 $ 163.9 $ 163.9 $ 164.1 $ 164.2 $ 164.3 $ (0.1) 89,703 2013 139.7 138.5 138.5 138.4 (0.1) 78,779 2014 122.0 121.6 121.4 (0.1) 67,205 2015 101.2 100.7 (0.4) 53,419 2016 106.6 (4.2) 49,267 Total 631.4

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 160.5 $ 164.4 $ 164.2 $ 164.2 $ 164.3 2013 137.0 138.9 138.6 138.5 2014 121.0 121.8 121.5 2015 100.1 101.0 2016 105.2 Total 630.5 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance (0.1) Loss and Allocated LAE Reserves, Net of Reinsurance $ 0.8

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Non-standard Personal Automobile Insurance—Liability1

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance and Indemnification Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Accident 2012 2013 2014 2015 Development on Number of Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Reported Claims Incurred Claims 2012 $ 243.0 $ 242.1 $ 242.0 $ 243.0 $ 244.0 $ 0.2 63,019 2013 250.5 247.1 248.3 249.5 0.5 67,058 2014 255.0 262.9 267.1 5.4 76,846 2015 379.4 379.8 10.4 91,832 2016 435.7 72.2 108,062 Total 1,576.1

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 112.8 $ 202.6 $ 228.9 $ 238.9 $ 242.6 2013 117.8 208.2 233.8 244.2 2014 117.4 210.8 245.5 2015 167.7 304.7 2016 168.9 Total 1,205.9 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance and Indemnification 1.5 Loss and Allocated LAE Reserves, Net of Reinsurance and Indemnification $ 371.7

1 Table retrospectively includes Alliance United’s historical incurred and paid accident year claim information for all periods presented.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Non-standard Personal Automobile Insurance—Physical Damage1

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance and Indemnification Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Accident 2012 2013 2014 2015 Development on Number of Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Reported Claims Incurred Claims 2012 $ 96.4 $ 98.1 $ 98.4 $ 98.3 $ 98.2 $ — 35,840 2013 100.1 100.3 100.0 99.8 (0.1) 36,179 2014 105.8 104.7 104.3 (0.7) 38,042 2015 143.2 143.3 (1.6) 42,863 2016 177.9 (4.0) 52,039 Total 623.5

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 91.2 $ 98.3 $ 98.2 $ 98.2 $ 98.2 2013 93.4 100.2 99.9 99.7 2014 97.1 105.9 105.1 2015 130.0 143.8 2016 167.4 Total 614.2 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance and Indemnification — Loss and Allocated LAE Reserves, Net of Reinsurance and Indemnification $ 9.3

1 Table retrospectively includes Alliance United’s historical incurred and paid accident year claim information for all periods presented.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Homeowners Insurance

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Accident 2012 2013 2014 2015 Development on Number of Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Reported Claims Incurred Claims 2012 $ 250.2 $ 235.9 $ 231.0 $ 227.5 $ 226.7 $ 0.1 27,833 2013 180.8 172.8 169.4 167.5 (0.1) 21,976 2014 211.1 208.5 205.0 (0.1) 22,432 2015 178.9 164.9 (1.8) 17,432 2016 200.3 9.7 16,769 Total 964.4

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 165.9 $ 216.0 $ 222.3 $ 225.2 $ 225.8 2013 122.4 156.5 162.5 164.7 2014 149.2 194.4 200.1 2015 116.9 154.4 2016 141.2 Total 886.2 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance 3.5 Loss and Allocated LAE Reserves, Net of Reinsurance $ 81.7

The claim counts in the preceding tables are cumulative incurred claim counts as of December 31, 2016 and are equal to both (i) reported claims minus claims closed without payment as well as (ii) open claims plus claims closed with payment. As such, the difference between these claim counts and final claim counts once all claims have been identified and settled will tend to be higher in recent accident years, particularly the most recent accident year, due to claims closed without payment. Certain product lines, particularly the Company’s non-standard personal automobile insurance, tend to have a higher percentage of claims closed without payment.

The Company's claims are counted at the feature level. As such, each claimant and each coverage is counted separately. For example, if for one occurrence, the Company's policyholder is at fault for damage to his/her own vehicle, another party's vehicle and three injured parties, there may be five features—three for bodily injury liability, one for property damage liability and one for first-party collision coverage. There may also be another feature for first-party medical payments.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

The following table reconciles the net incurred and paid claims development tables presented above to the Company's liability for Property and Casualty Insurance Reserves included in the Consolidated Balance Sheet at December 31, 2016.

DOLLARS IN MILLIONS 2016 Property and Casualty Insurance Reserves, Net of Reinsurance and Indemnification: Preferred Personal Automobile Insurance—Liability $ 219.3 Preferred Personal Automobile Insurance—Physical Damage 0.8 Non-standard Personal Automobile Insurance—Liability 371.7 Non-standard Personal Automobile Insurance—Physical Damage 9.3 Homeowners Insurance 81.7 Other 124.7 Total 807.5 Reinsurance and Indemnification Recoverables on Unpaid Losses and Allocated LAE: Preferred Personal Automobile Insurance—Liability 28.3 Preferred Personal Automobile Insurance—Physical Damage — Non-standard Personal Automobile Insurance—Liability 10.6 Non-standard Personal Automobile Insurance—Physical Damage (0.6) Homeowners Insurance — Other 8.7 Total 47.0 Insurance Lines other than Short-duration — Unallocated LAE 76.9 Property and Casualty Insurance Reserves, Gross of Reinsurance and Indemnification $ 931.4

The following is supplementary information about average historical claims duration as of December 31, 2016.

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance and Indemnification (Unaudited) Years 1 2 3 4 5 Preferred Personal Automobile Insurance—Liability 41.5% 72.2% 85.8% 93.4% 96.7% Preferred Personal Automobile Insurance—Physical Damage 98.9% 100.3% 100.1% 100.0% 100.0% Non-standard Personal Automobile Insurance—Liability 44.1% 81.4% 93.1% 97.9% 99.4% Non-standard Personal Automobile Insurance—Physical Damage 92.9% 100.6% 100.3% 99.9% 100.0% Homeowners Insurance 72.1% 94.3% 97.6% 98.8% 99.6%

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Property and Casualty Insurance Reserve activity for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Beginning Property and Casualty Insurance Reserves: Gross of Reinsurance and Indemnification at Beginning of Year $ 862.8 $ 733.9 $ 843.5 Less Reinsurance Recoverables and Indemnification at Beginning of Year 52.0 54.9 63.4 Property and Casualty Insurance Reserves, Net of Reinsurance and Indemnification at Beginning of Year 810.8 679.0 780.1 Property and Casualty Insurance Reserves Acquired, Net of Reinsurance and Indemnification — 125.4 — Incurred Losses and LAE related to: Current Year: Continuing Operations 1,358.6 1,123.3 965.4 Prior Years: Continuing Operations (14.4) (11.5) (53.5) Discontinued Operations (6.3) (8.6) (3.6) Total Incurred Losses and LAE related to Prior Years (20.7) (20.1) (57.1) Total Incurred Losses and LAE 1,337.9 1,103.2 908.3 Paid Losses and LAE related to: Current Year: Continuing Operations 831.0 723.2 639.8 Prior Years: Continuing Operations 431.9 366.2 360.4 Discontinued Operations 4.6 7.4 9.2 Total Paid Losses and LAE related to Prior Years 436.5 373.6 369.6 Total Paid Losses and LAE 1,267.5 1,096.8 1,009.4 Property and Casualty Insurance Reserves, Net of Reinsurance and Indemnification at End of Year 881.2 810.8 679.0 Plus Reinsurance and Indemnification Recoverables at End of Year 50.2 52.0 54.9 Property and Casualty Insurance Reserves, Gross of Reinsurance and Indemnification at End of Year $ 931.4 $ 862.8 $ 733.9

Property and Casualty Insurance Reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends are likely to differ from these historical experience patterns and economic conditions. Loss experience and loss trends emerge over several years from the dates of loss inception. The Company monitors such emerging loss trends on a quarterly basis. Changes in such estimates are included in the Consolidated Statements of Income in the period of change.

In 2016, the Company reduced its property and casualty insurance reserves by $20.7 million to recognize favorable development of loss and LAE reserves from prior accident years. Personal lines insurance loss and LAE reserves developed favorably by $16.8 million, and commercial lines insurance loss and LAE reserves developed favorably by $3.9 million. Personal automobile insurance loss and LAE reserves developed adversely by $11.3 million due primarily to the emergence of loss patterns that were worse than expected for liability insurance for the 2015 and 2014 accident years and, to a lesser extent, the 2013 and 2012 accident years. Homeowners insurance loss and LAE reserves developed favorably by $20.0 million due primarily to $16.8 million of favorable development on catastrophes primarily for the 2015 accident year and, to a lesser extent, the 2014 accident year. Other personal lines loss and LAE reserves developed favorably by $8.1 million due primarily to the emergence of more favorable loss patterns than expected for the 2015,

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2014, 2013 and 2012 accident years. Commercial lines insurance loss and LAE reserves included adverse development of $2.4 million from continuing operations and favorable development of $6.3 million from discontinued operations.

In 2015, the Company reduced its property and casualty insurance reserves by $20.1 million to recognize favorable development of losses and LAE from prior accident years, including the impact of adverse development of $7.7 million, net of estimated indemnification recoveries, related to Alliance United for periods prior to the date of its acquisition. Personal lines

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued) insurance loss and LAE reserves developed favorably by $13.3 million and commercial lines insurance loss and LAE reserves developed favorably by $6.8 million. Personal automobile insurance loss and LAE reserves developed favorably by $1.8 million, net of the adverse development related to Alliance United, homeowners insurance loss and LAE reserves developed favorably by $10.8 million, and other personal lines loss and LAE reserves developed favorably by $0.7 million. Excluding the adverse development related to Alliance United for periods prior to the date of its acquisition, personal lines insurance losses and LAE reserves developed favorably by $21.0 million due primarily to the emergence of more favorable loss patterns than expected for the 2013, 2012 and 2011 accident years. Commercial lines insurance loss and LAE reserves included adverse development of $1.8 million from continuing operations and favorable development of $8.6 million from discontinued operations.

In 2014, the Company reduced its property and casualty insurance reserves by $57.1 million to recognize favorable development of losses and LAE from prior accident years. Personal lines insurance loss and LAE reserves developed favorably by $50.9 million and commercial lines insurance loss and LAE reserves developed favorably by $6.2 million. Personal automobile insurance loss and LAE reserves developed favorably by $31.6 million, homeowners insurance loss and LAE reserves developed favorably by $14.8 million, and other personal lines loss and LAE reserves developed favorably by $4.5 million. The personal lines insurance losses and LAE reserves developed favorably due primarily to the emergence of more favorable loss patterns than expected for the three most recent prior accident years. Commercial lines insurance loss and LAE reserves included favorable development of $2.6 million from continuing operations and $3.6 million from discontinued operations. Commercial lines insurance losses and LAE reserves developed favorably from continuing operations due primarily to the emergence of more favorable loss patterns than expected for the 2013, 2011 and 2010 accident years.

The Company cannot predict whether loss and LAE reserves will develop favorably or unfavorably from the amounts reported in the Consolidated Financial Statements. The Company believes that any such development will not have a material effect on the Company’s consolidated financial position, but could have a material effect on the Company’s consolidated financial results for a given period.

Reinsurance and indemnification recoverables on property and casualty insurance reserves were $50.2 million and $52.0 million at December 31, 2016 and 2015, respectively. These recoverables are concentrated with several reinsurers, the vast majority of which are highly rated by one or more of the principal investor and/or insurance company rating agencies. While most of these recoverables were unsecured at December 31, 2016 and 2015, the agreements with the reinsurers generally provide for some form of collateralization upon the occurrence of certain events.

NOTE 7. DEBT

The Company designates debt obligations as either short-term or long-term based on maturity date at issuance. Total amortized cost of Long-term Debt, Current and Non-current, outstanding at December 31, 2016 and 2015 was:

NOTE 7. DEBT (Continued)

Interest Expense, including facility fees, accretion of discount and amortization of issuance costs, for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Notes Payable under Revolving Credit Agreement $ 0.8 $ 0.8 $ 0.8 Federal Home Loan Bank of Dallas — — — Federal Home Loan Bank of Chicago — — — Senior Notes Payable: 6.00% Senior Notes due November 30, 2015 — 3.7 15.5 6.00% Senior Notes due May 15, 2017 22.3 22.2 22.2 4.35% Senior Notes due February 15, 2025 11.1 9.5 — 7.375% Subordinated Debentures due February 27, 2054 11.1 11.1 9.4 Interest Expense before Capitalization of Interest 45.3 47.3 47.9 Capitalization of Interest (0.9) (0.8) (1.0) Total Interest Expense $ 44.4 $ 46.5 $ 46.9

Interest Paid, including facility fees, for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Notes Payable under Revolving Credit Agreement $ 0.6 $ 1.4 $ 0.6 Federal Home Loan Bank of Dallas — — — Federal Home Loan Bank of Chicago — — — Senior Notes Payable: 6.00% Senior Notes due November 30, 2015 — 4.8 15.0 6.00% Senior Notes due May 15, 2017 21.6 21.6 21.6 4.35% Senior Notes due February 15, 2025 10.9 5.2 — 7.375% Subordinated Debentures due February 27, 2054 11.1 11.1 8.5 Total Interest Paid $ 44.2 $ 44.1 $ 45.7

Kemper has a $225.0 million, unsecured, revolving credit agreement expiring June 2, 2020. The credit agreement provides for fixed and floating rate advances for periods up to six months at various interest rates. The credit agreement contains various financial covenants, including limits on total debt to total capitalization, consolidated net worth and minimum risk-based capital ratios for Kemper’s largest insurance subsidiaries, Trinity and United Insurance. Proceeds from advances under the credit agreement may be used for general corporate purposes, including repayment of existing indebtedness. There were no outstanding borrowings under the credit agreement at either December 31, 2016 or December 31, 2015.

Trinity and United Insurance are members of the FHLB of Dallas and Chicago, respectively. During 2016 and 2015, Trinity borrowed and repaid $10.0 million and $77.5 million, respectively, under its agreement with the FHLB of Dallas. During 2015, United Insurance borrowed and repaid $21.0 million under its agreement with the FHLB of Chicago. There were no advances from the FHLB of Dallas or Chicago outstanding at either December 31, 2016 or December 31, 2015.

On February 24, 2015, Kemper issued $250.0 million of its 4.35% senior notes due February 15, 2025 (the “2025 Senior Notes”). The net proceeds of the issuance were $247.3 million, net of discount and transaction costs, for an effective yield of 4.49%. The 2025 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time at Kemper’s option at specified redemption prices. Kemper used the net proceeds from the sale of the 2025 Senior Notes, together with available cash, to redeem in full the $250.0 million outstanding principal amount of its 6.00% senior notes due November 30, 2015. Kemper recognized a loss of $9.1 million before income taxes in the first quarter of 2015 from the early redemption of these senior notes.

NOTE 7. DEBT (Continued)

On February 27, 2014, Kemper issued $150.0 million of its 7.375% subordinated debentures due February 27, 2054 (the “2054 Debentures”). The net proceeds of the issuance were $144.0 million, net of discount and transaction costs, for an effective yield of 7.69%. The subordinated debentures are unsecured and are subordinated and junior to the senior indebtedness of Kemper. Interest on the subordinated debentures is payable quarterly. As long as no event of default has occurred, Kemper may defer interest payments on the subordinated debentures for up to five consecutive years without giving rise to an event of default. During a deferral period, interest will continue to accrue at the stated interest rate compounded quarterly. Kemper is permitted to redeem some or all of the subordinated debentures on or after February 27, 2019, at a redemption price that is equal to their principal amount plus accrued and unpaid interest. Kemper is permitted to redeem the subordinated debentures in whole, but not in part, at any time prior to February 27, 2019, within 90 days of the occurrence of certain tax events or rating agency events, at specified redemption prices.

The Company anticipates issuing at least $250.0 million in 10-year senior notes in the second quarter of 2017 to replace its Senior Notes due May 15, 2017. For risk management purposes, during the fourth quarter of 2016, the Company entered into a derivative transaction to hedge the risk of changes in the debt cash flows attributable to changes in the benchmark U.S. Treasury interest rate during the period leading up to the probable debt issuance (“Treasury Lock”). The Treasury Lock was formally designated as a cash flow hedge at inception and qualified for hedge accounting treatment. As such, the effective portion of the gain or loss on the derivative instrument is reported as a component of Other Comprehensive Income and will be amortized into earnings in the same periods that the hedged items affect earnings. The amortization will be included in Interest and Other Expenses, which is the same line item associated with the forecasted transaction. The ineffective portion of the change in fair value of the derivative instrument, if any, is recognized immediately in earnings. The fair value of the Treasury Lock of $1.6 million at December 31, 2016 has been included in Other Assets in the Consolidated Balance Sheet. As the entire amount of the change in fair value during the year was deemed effective, all of the change has been included entirely in Other Comprehensive Income for the year ended December 31, 2016. As the hedged transaction has yet to occur, no amounts have been reclassified from Other Comprehensive Income into earnings. If debt is issued in the second quarter of 2017 and its terms are consistent with what has been anticipated, the Company expects to reclassify $0.1 million of net gains on derivative instruments from AOCI to earnings for the year ended December 31, 2017 as interest expense on the debt is recognized.

NOTE 8. LEASES The Company leases certain office space under non-cancelable operating leases, with initial terms typically ranging from one to ten years, along with options that permit renewals for additional periods. The Company also leases certain equipment under non-cancellable operating leases, with initial terms typically ranging from one to five years. Minimum rent is expensed on a straight-line basis over the term of the lease. Net rental expense for operating leases for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Minimum Rental Expense $ 21.2 $ 20.7 $ 21.5 Less Sublease Rental Income (1.6) (1.7) (1.3) Net Rental Expense $ 19.6 $ 19.0 $ 20.2

Future minimum lease payments under capital and operating leases at December 31, 2016 were:

Capital Operating DOLLARS IN MILLIONS Leases Leases 2017 $ 0.7 $ 17.4 2018 0.1 13.9 2019 — 11.5 2020 — 9.2 2021 — 7.3 2022 and Thereafter — 15.2 Total Future Payments $ 0.8 $ 74.5 Less Imputed Interest (0.1)

The total of minimum rentals to be received in the future under non-cancellable subleases was $2.1 million at December 31, 2016.

NOTE 9. SHAREHOLDERS’ EQUITY

Kemper is authorized to issue 20 million shares of $0.10 par value preferred stock and 100 million shares of $0.10 par value common stock. No preferred shares were issued or outstanding at December 31, 2016 and 2015. There were 51,270,940 shares and 51,326,751 shares of common stock outstanding at December 31, 2016 and 2015, respectively. Common stock outstanding included 16,000 shares and 80,848 shares at December 31, 2016 and 2015, respectively, that have been issued, subject to certain vesting and other requirements, in connection with the Company’s long-term equity compensation plans. See Note 10, “Long-Term Equity-based Compensation,” to the Consolidated Financial Statements for a discussion of the restrictions and vesting provisions.

Kemper repurchased and retired 0.1 million shares of its common stock in open market transactions at an aggregate cost of $3.8 million in 2016. Kemper repurchased and retired 1.2 million shares of its common stock in open market transactions at an aggregate cost of $43.5 million in 2015. Kemper repurchased and retired 3.2 million shares of its common stock in open market transactions at an aggregate cost of $115.5 million in 2014.

Various state insurance laws restrict the amount that an insurance subsidiary may pay in the form of dividends, loans or advances without the prior approval of regulatory authorities. Also, that portion of an insurance subsidiary’s net equity which results from differences between statutory insurance accounting practices and GAAP would not be available for cash dividends, loans or advances. Kemper’s insurance subsidiaries paid dividends of $104.5 million to Kemper in 2016. In 2017, Kemper’s insurance subsidiaries would be able to pay $133 million in dividends to Kemper without prior regulatory approval. Kemper’s insurance subsidiaries had net assets of $2.4 billion, determined in accordance with GAAP, that were restricted from payment to Kemper without prior regulatory approval at December 31, 2016.

Kemper’s insurance subsidiaries are required to file financial statements prepared on the basis of statutory insurance accounting practices, a comprehensive basis of accounting other than GAAP. Statutory capital and surplus for the Company’s life and health insurance subsidiaries was $403.7 million and $394.6 million at December 31, 2016 and 2015, respectively. Statutory net income for the Company’s life and health insurance subsidiaries was $29.7 million, $62.8 million and $100.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. Statutory capital and surplus for the Company’s property and casualty insurance subsidiaries was $928.9 million and $957.7 million at December 31, 2016 and 2015, respectively. Statutory net income for the Company’s property and casualty insurance subsidiaries was $1.4 million, $58.9 million and $85.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. Statutory capital and surplus and statutory net income exclude parent company operations.

Kemper’s insurance subsidiaries are also required to hold minimum levels of statutory capital and surplus to satisfy regulatory requirements. The minimum statutory capital and surplus, or company action level RBC, necessary to satisfy regulatory requirements for the Company’s life and health insurance subsidiaries collectively was $121.4 million at December 31, 2016. The minimum statutory capital and surplus necessary to satisfy regulatory requirements for the Company’s property and casualty insurance subsidiaries collectively was $334.1 million at December 31, 2016. Company action level RBC is the level at which a company is required to file a corrective action plan with its regulators and is equal to 200% of the authorized control level RBC.

In 2016, Kemper paid dividends of $49.2 million to its shareholders. Except for certain financial covenants under Kemper’s credit agreement or during any period in which Kemper elects to defer interest payments, there are no restrictions on Kemper’s ability to pay dividends to its shareholders. Certain financial covenants, namely minimum net worth and a maximum debt to total capitalization ratio, under Kemper’s credit agreement could limit the amount of dividends that Kemper may pay to shareholders at December 31, 2016. Kemper had the ability to pay without restrictions $269 million in dividends to its shareholders and still be in compliance with all financial covenants under its credit agreement at December 31, 2016.

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION

On May 4, 2011, Kemper’s shareholders approved the 2011 Omnibus Equity Plan (“Omnibus Plan”). The Omnibus Plan replaced the Company’s previous employee stock option plans, director stock option plan and restricted stock plan (collectively, the “Prior Plans”). Awards previously granted under the Prior Plans remain outstanding in accordance with their original terms. Beginning May 4, 2011, equity-based compensation awards may only be granted under the Omnibus Plan. A maximum number of 10,000,000 shares of Kemper common stock may be issued under the Omnibus Plan (the “Share Authorization”). As of December 31, 2016, there were 6,762,714 common shares available for future grants under the Omnibus Plan, of which 682,752 shares were reserved for future grants based on the achievement of performance goals under the terms of outstanding performance-based restricted stock unit (“RSU”) awards.

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

The design of the Omnibus Plan provides for fungible use of shares to determine the number of shares available for future grants, with a fungible conversion factor of three to one, such that the Share Authorization will be reduced at two different rates, depending on the type of award granted. Each share of Kemper common stock issuable upon the exercise of stock options or stock appreciation rights will reduce the number of shares available for future grant under the Share Authorization by one share, while each share of Kemper common stock issued pursuant to “full value awards” will reduce the number of shares available for future grant under the Share Authorization by three shares. “Full value awards” are awards, other than stock options or stock appreciation rights, that are settled by the issuance of shares of Kemper common stock and include restricted stock, RSUs and deferred stock units (“DSUs”), if settled with stock, and other stock-based awards.

Outstanding equity-based compensation awards at December 31, 2016 consisted of tandem stock option and stock appreciation rights (“Tandem Awards”), time-vested restricted stock, time-vested RSUs, performance-based RSUs and DSUs. Effective February 4, 2014, the Company began issuing time-based and performance-based RSUs. Recipients of restricted stock receive full dividend and voting rights on the same basis as all other outstanding shares of Kemper common stock. RSUs and DSUs give the recipient the right to receive one share of Kemper common stock for each RSU or DSU issued. Recipients of RSUs and DSUs receive full dividend equivalents on the same basis as all other outstanding shares of Kemper common stock, but do not receive voting rights until such shares are issued. Except as described below for equity-based compensation awards granted to each member of the Board of Directors who is not employed by the Company (“Non-employee Directors”), all outstanding awards are subject to forfeiture until certain restrictions have lapsed.

For equity-based compensation awards with a graded vesting schedule, the Company recognizes compensation expense on a straight- line basis over the requisite service period for each separately-vesting portion of the awards as if each award were, in substance, multiple awards. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. Equity-based compensation expense was $4.7 million, $6.5 million and $6.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Total unamortized compensation expense related to nonvested awards at December 31, 2016 was $8.1 million, which is expected to be recognized over a weighted-average period of 1.8 years.

The Compensation Committee of the Board of Directors, or the Board’s authorized designee, has sole discretion to determine the persons to whom awards under the Omnibus Plan are granted, and the material terms of the awards. For Tandem Awards, material terms include the number of shares covered by such awards and the exercise price, vesting and expiration dates of such awards. Tandem Awards are non-transferable. The exercise price of Tandem Awards is the fair value of Kemper’s common stock on the date of grant. Employee Tandem Awards, time-based restricted stock awards and time-based RSU awards generally vest, beginning six months after date of grant, in four equal annual installments over a period of three and one-half years, with the Tandem Awards expiring ten years from the date of grant. Employee performance-based restricted stock and RSU awards generally vest over a period of three years, subject to achievement of performance goals and other restrictions.

Under the Non-employee Director compensation programs in effect for 2016, each non-employee director receives an annual DSU award covering shares of Kemper common with an aggregate grant date fair value of $75,000 at the conclusion of each annual shareholder meeting. Under the Non-employee Director compensation programs in effect for 2015 and 2014, annual awards to each Non-employee Director included 500 DSUs and stock options, as described below. The DSUs granted to Non-employee Directors are fully vested on the date of grant. Conversion of the DSUs into shares of Kemper’s common stock is deferred until the date a director’s board service terminates.

In addition to the annual DSU awards under the Non-employee Director compensation programs in effect for 2015 and 2014, each Non- employee Director received an initial option award to purchase 4,000 shares of Kemper common stock immediately upon becoming a director, and in addition, received an annual option award to purchase 4,000 shares of common stock on the date of each annual meeting of Kemper’s shareholders. Grants of such option awards were fully vested and exercisable on the date of grant at an exercise price equal to the fair value of Kemper’s common stock on the date of grant and expire ten years from the date of grant.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document February 3, 2009. However, Restorative Options could still be granted, subject to certain limitations, in connection with the exercise of original options granted before February 3, 2009. Following the exercise in 2016 of original options previously granted prior to February 3, 2009 and the automatic grant of Restorative Options in

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued) connection with such exercise, there were no options outstanding at December 31, 2016 that were eligible to receive a grant of a Restorative Option. Restorative Options are subject to the same terms and conditions as the original options, including the expiration date, except that the exercise price is equal to the fair value of Kemper common stock on the date of grant of a Restorative Option and cannot be exercised until six months after the date of grant. The grant of a Restorative Option does not result in an increase in the total number of shares and options held by an employee, but changes the mix of the two.

The Company uses the Black-Scholes option pricing model to estimate the fair value of each Tandem Award on the date of grant. The expected terms of Tandem Awards are developed by considering the Company’s historical Tandem Award exercise experience, demographic profiles, historical share retention practices of employees and assumptions about their propensity for early exercise in the future. Expected volatility is estimated using weekly historical volatility. The Company believes that historical volatility is currently the best estimate of expected volatility. The dividend yield in 2016, 2015 and 2014 was calculated by taking the natural logarithm of the annualized yield divided by the Kemper common stock price on the date of grant. The risk-free interest rate was the yield on the grant date of U.S. Treasury zero coupon issues with a maturity comparable to the expected term of the option.

The assumptions used in the Black-Scholes pricing model for Tandem Awards granted during the years ended December 31, 2016, 2015 and 2014 are presented below.

2016 2015 2014 RANGE OF VALUATION ASSUMPTIONS Expected Volatility 25.85% - 42.19% 21.31% - 41.65% 25.76% - 44.43% Risk-free Interest Rate 0.77 - 2.01 1.08 - 1.96 1.07 - 2.14 Expected Dividend Yield 2.22 - 3.41 2.37 - 2.62 2.53 - 2.60 WEIGHTED-AVERAGE EXPECTED LIFE IN YEARS Employee Grants 1 - 6.5 4 - 7 4 - 7 Director Grants N/A 5.5 6

Tandem Award activity for the year ended December 31, 2016 is presented below.

Weighted- Weighted- average Aggregate Shares average Remaining Intrinsic Subject to Exercise Price Contractual Value Awards Per Share ($) Life (in Years) ($ In Millions) Outstanding at Beginning of the Year 1,428,157 $ 39.75 Granted 506,675 31.09 Exercised (251,522) 34.04 Forfeited or Expired (377,187) 43.72 Outstanding at December 31, 2016 1,306,123 36.35 6.5 $ 11.5 Vested and Expected to Vest at December 31, 2016 1,254,165 $ 36.49 6.4 $ 10.9 Exercisable at December 31, 2016 701,486 $ 38.32 4.8 $ 5.3

The weighted-average grant-date fair values of Tandem Awards granted during 2016, 2015 and 2014 were $5.17, $7.85 and $10.49, respectively. Total intrinsic value of Tandem Awards exercised was $2.0 million, $4.6 million and $0.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Cash received from exercises of Tandem Awards was $3.5 million, $3.9 million and $0.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. Total tax benefit realized for tax deductions from exercises of Tandem Awards was $0.7 million, $1.6 million and $0.1 million for the years ended December 31, 2016, 2015 and 2014, respectively.

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Information pertaining to Tandem Awards outstanding at December 31, 2016 is presented below.

Outstanding Exercisable Weighted- Weighted- average Weighted- Shares average Remaining Shares average Subject to Exercise Price Contractual Subject to Exercise Price Range of Exercise Prices ($) Awards Per Share ($) Life (in Years) Awards Per Share ($) 15.01 - 20.00 4,000 16.48 2.35 4,000 16.48 20.01 - 25.00 9,500 23.37 3.06 9,500 23.37 25.01 - 30.00 316,603 27.89 8.21 116,909 28.20 30.01 - 35.00 176,845 32.43 8.18 74,742 32.33 35.01 - 40.00 437,299 36.64 7.21 270,763 36.67 40.01 - 45.00 166,376 41.33 7.02 30,072 40.70 45.01 - 50.00 195,500 49.74 0.11 195,500 49.74 15.01 - 50.00 1,306,123 36.35 6.45 701,486 38.32

The grant-date fair values of time-based restricted stock and time-based RSU awards are determined using the closing price of Kemper common stock on the date of grant. Activity related to nonvested time-based restricted stock and nonvested time-based RSUs for the year ended December 31, 2016 is presented below.

Time-based Restricted Stock Awards Time-based RSU Awards Weighted- Weighted- average average Grant-date Grant-date Number of Fair Value Number of Fair Value Shares Per Share RSUs Per RSU Nonvested Balance at Beginning of the Year 29,448 $ 33.77 85,048 $ 36.84 Granted — — 118,622 31.48 Vested (12,098) 32.32 (26,006) 33.01 Forfeited (1,350) 35.75 (19,303) 36.03 Nonvested Balance at December 31, 2016 16,000 $ 34.69 158,361 $ 33.56

Prior to February 3, 2009, only awards of time-vested restricted stock had been granted. Beginning on February 3, 2009, in addition to time-vested restricted stock granted to certain employees and officers, the Company began making performance-based restricted awards to certain officers and employees. The initial number of shares or RSUs awarded to each participant of a performance-based award represents the shares that would vest, or, in the case of a RSU, that would vest and would be issued, if the performance level attained were to be at the “target” performance level. For performance above the target level, each participant would receive a grant of additional shares of stock up to a maximum of 100% of the initial number of shares or RSUs awarded to the participant. The final payout of these awards, and any forfeitures of shares for performance below the “target” performance level, will be determined based on the Company’s performance. If, at the end of the applicable performance period, the Company’s performance:

• exceeds the “target” performance level, additional shares of stock will be issued to the award recipient; • is below the “target” performance level, but at or above a “minimum” performance level, only a portion of the shares of performance-based restricted stock or RSUs originally issued to the award recipient will vest; or • is below a “minimum” performance level, none of the shares of performance-based restricted stock or RSUs originally issued to the award recipient will vest.

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Activity related to nonvested performance-based restricted stock and nonvested performance-based RSU awards for the year ended December 31, 2016 is presented below.

Performance-based Restricted Stock Awards Performance-based RSU Awards Weighted- Weighted- average average Grant-date Grant-date Number of Fair Value Number of Fair Value Shares Per Share RSUs Per RSU Nonvested Balance at Beginning of the Year 51,400 $ 42.12 128,100 $ 41.85 Granted — — 146,788 29.62 Forfeited (51,400) 42.12 (47,304) 39.04 Nonvested Balance at December 31, 2016 — $ — 227,584 $ 34.55

The number of additional shares that would be granted if the Company were to meet or exceed the maximum performance levels related to the outstanding performance-based awards for the 2016 and 2015 three-year performance periods was 137,615 common shares and 46,762 common shares, respectively, (as “full value awards,” the equivalent of 412,845 shares and 140,286 shares, respectively, under the Share Authorization) at December 31, 2016. For the 2014 three-year performance period, the Company’s performance level was below the minimum performance level, and all of the related 43,207 shares of performance-based RSUs were forfeited on February 4, 2017, the three-year anniversary of their grant date. For the 2013 three-year performance period, the Company’s performance level was below the minimum performance level, and all of the related 51,400 shares of performance-based restricted shares were forfeited on February 4, 2016, the three-year anniversary of their grant date.

The grant date fair values of the performance-based restricted stock and performance-based RSU awards with a market performance condition are determined using the Monte Carlo simulation method. The Monte Carlo simulation model produces a risk-neutral simulation of the daily returns on the common stock of Kemper and each of the other companies included in the peer group. Returns generated by the simulation depend on the risk-free interest rate used and the volatilities of, and the correlation between, these stocks. The model simulates stock prices and dividend payouts to the end of the three-year performance period. Total shareholder returns are generated for each of these stocks based on the simulated prices and dividend payouts. The total shareholder returns are then ranked, and Kemper’s simulated ranking is converted to a payout percentage based on the terms of the performance-based restricted stock and performance-based RSU awards. The payout percentage is applied to the simulated stock price at the end of the performance period, reinvested dividends are added back, and the total is discounted to the valuation date at the risk-free rate. This process is repeated approximately ten thousand times, and the grant date fair value is equal to the average of the results from these trials.

Performance-based awards outstanding on January 1, 2016 are measured using a market performance condition. Fair value for these awards was estimated using the Monte Carlo simulation method described above. For awards outstanding on January 1, 2016, the final payout of these awards, and any forfeitures of shares for performance below the “target” performance level, are determined based on Kemper’s total shareholder return, relative to a peer group comprised of all the companies in the S&P Supercomposite Insurance Index, over the respective three-year performance period ending on either December 31, 2017, 2016 or 2015, depending on the three-year performance period being measured. Compensation cost for these awards is recognized ratably over the requisite service period. In the event that the market performance condition is not satisfied, previously recognized compensation cost would not reverse, but it would reverse if the requisite service period is not met.

Half of the performance-based RSUs granted in 2016 are measured using a market performance condition. Fair value for these awards was estimated using the Monte Carlo simulation method described above. Final payout for these awards, and any forfeitures of shares for performance below the “target” performance level, will be based on Kemper’s total shareholder return, relative to a peer group comprised of all the companies in the S&P Supercomposite Insurance Index, over a three-year performance period ending on February 28, 2019. Compensation cost for these awards is recognized ratably over the requisite service period. In the event that the market performance condition is not satisfied, previously recognized compensation cost would not reverse, but it would reverse if the requisite service period is not met.

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Half of the performance-based RSUs granted in 2016 are measured solely using a Company-specific metric. Final payout for these awards, and any forfeitures of shares for performance below the “target” performance level, will be determined based on Kemper’s adjusted return on equity over a three-year performance period ending on December 31, 2018. Fair value for these awards was determined using the closing price of Kemper common stock on the date of grant. Accruals of compensation cost for these awards are estimated based on the probable outcome of the performance condition.

The total fair value of time-vested and performance-based restricted stock and RSUs that vested during the year ended December 31, 2016 was $1.3 million. The tax benefits for tax deductions realized from such shares was $0.5 million. The total fair value of the shares of time-vested and performance-based restricted stock that vested during the year ended December 31, 2015 was $1.4 million. The tax benefits for tax deductions realized from such shares was $0.5 million. The total fair value of the shares of time-vested and performance-based restricted stock that vested during the year ended December 31, 2014 and the 2011 Additional Shares was $3.6 million. The tax benefits for tax deductions realized from such shares was $1.2 million.

The grant-date fair values of DSU awards granted to Non-employee Directors are determined using the closing price of Kemper common stock on the date of grant. The total fair value of DSUs that vested during the years ended December 31, 2016, 2015 and 2014 was $0.5 million, $0.1 million and $0.2 million, respectively.

Activity related to DSU awards for the year ended December 31, 2016 is presented below.

Weighted- average Grant-date Number of Fair Value DSUs Per DSU Vested Balance at Beginning of the Year 7,000 $ 36.17 Granted and Vested 14,520 31.00 Vested Balance at December 31, 2016 21,520 $ 32.68

NOTE 11. INCOME FROM CONTINUING OPERATIONS PER UNRESTRICTED SHARE

The Company’s awards of restricted stock contain rights to receive non-forfeitable dividends and participate in the undistributed earnings with common shareholders. The Company’s awards of RSUs and DSUs contain rights to receive non-forfeitable dividend equivalents and participate in the undistributed earnings with common shareholders. Accordingly, the Company is required to apply the two-class method of computing basic and diluted earnings per share. A reconciliation of the numerator and denominator used in the calculation of Basic Income from Continuing Operations Per Unrestricted Share and Diluted Income from Continuing Operations Per Unrestricted Share for the years ended December 31, 2016, 2015 and 2014 is presented below.

2016 2015 2014 DOLLARS IN MILLIONS Income from Continuing Operations $ 12.7 $ 80.2 $ 112.6 Less Income (Loss) from Continuing Operations Attributed to Participating Awards (0.2) 0.4 0.5 Income from Continuing Operations Attributed to Unrestricted Shares 12.9 79.8 112.1 Dilutive Effect on Income of Equity-based Compensation Equivalent Shares — — — Diluted Income from Continuing Operations Attributed to Unrestricted Shares $ 12.9 $ 79.8 $ 112.1

SHARES IN THOUSANDS Weighted-average Unrestricted Shares Outstanding 51,156.1 51,606.9 53,762.5 Equity-based Compensation Equivalent Shares 58.6 76.6 105.4 Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution 51,214.7 51,683.5 53,867.9

PER UNRESTRICTED SHARE IN WHOLE DOLLARS Basic Income from Continuing Operations Per Unrestricted Share $ 0.25 $ 1.55 $ 2.08 Diluted Income from Continuing Operations Per Unrestricted Share $ 0.25 $ 1.55 $ 2.08

The number of shares of Kemper common stock that were excluded from the calculations of Equity-based Compensation Equivalent Shares and Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution for the years ended December 31, 2016, 2015 and 2014 because the exercise prices for the options exceeded the average market price is presented below.

SHARES IN THOUSANDS 2016 2015 2014 Equity-based Compensation Equivalent Shares 959.9 959.7 1,605.1 Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution 959.9 959.7 1,605.1

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NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of Other Comprehensive Income (Loss) Before Income Taxes for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Other Comprehensive Income (Loss) Before Income Taxes: Unrealized Holding Gains (Losses) Arising During the Year Before Reclassification Adjustment $ (2.4) $ (151.9) $ 259.7 Reclassification Adjustment for Amounts Included in Net Income 0.2 (25.4) (25.1) Unrealized Holding Gains (Losses) (2.2) (177.3) 234.6 Foreign Currency Translation Adjustments Arising During the Year Before Reclassification Adjustment (0.3) (1.4) (1.0) Reclassification Adjustment for Amounts Included in Net Income — — — Foreign Currency Translation Adjustments (0.3) (1.4) (1.0) Net Unrecognized Postretirement Benefit Costs Arising During the Year 14.2 3.0 (106.4) Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized 1.0 — — Amortization of Net Unrecognized Postretirement Benefit Costs 5.3 23.1 7.9 Total Reclassification Adjustments for Amounts Included in Net Income 6.3 23.1 7.9 Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Gains (Losses) on Cash Flow Hedge During the Year Before Reclassification Adjustment 1.6 — — Reclassification Adjustment for Amounts Included in Net Income — — — Gain on Cash Flow Hedge 1.6 — — Other Comprehensive Income (Loss) Before Income Taxes $ 19.6 $ (152.6) $ 135.1

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NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)

The components of Other Comprehensive Income Tax Benefit (Expense) for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Income Tax Benefit (Expense): Unrealized Holding Gains and Losses Arising During the Year Before Reclassification Adjustment $ 1.0 $ 53.9 $ (91.6) Reclassification Adjustment for Amounts Included in Net Income (0.1) 8.9 8.8 Unrealized Holding Gains and Losses 0.9 62.8 (82.8) Foreign Currency Translation Adjustments Arising During the Year Before Reclassification Adjustment 0.1 0.5 0.4 Reclassification Adjustment for Amounts Included in Net Income — — — Foreign Currency Translation Adjustment 0.1 0.5 0.4 Net Unrecognized Postretirement Benefit Costs Arising During the Year (5.0) (1.1) 37.5 Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized (0.4) — — Amortization of Net Unrecognized Postretirement Benefit Costs (1.9) (8.0) (2.8) Total Reclassification Adjustments for Amounts Included in Net Income (2.3) (8.0) (2.8) Net Unrecognized Postretirement Benefit Costs (7.3) (9.1) 34.7 Gain on Cash Flow Hedge During the Year Before Reclassification Adjustment (0.6) — — Reclassification Adjustment for Amounts Included in Net Income — — — Gain on Cash Flow Hedge (0.6) — — Other Comprehensive Income Tax Benefit (Expense) $ (6.9) $ 54.2 $ (47.7)

The components of AOCI at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Unrealized Gains on Investments, Net of Income Taxes: Available for Sale Fixed Maturities with Portion of OTTI Recognized in Earnings $ 0.1 $ 1.4 Other Net Unrealized Gains on Investments 211.7 211.7 Foreign Currency Translation Adjustments, Net of Income Taxes (0.9) (0.7) Net Unrecognized Postretirement Benefit Costs, Net of Income Taxes (74.9) (88.1) Gain on Cash Flow Hedge, Net of Income Taxes 1.0 — Accumulated Other Comprehensive Income $ 137.0 $ 124.3

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NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)

Components of AOCI were reclassified to the following lines of the Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014:

DOLLARS IN MILLIONS 2016 2015 2014 Reclassification of AOCI from Unrealized Gains and Losses on Available For Sale Securities to: Net Realized Gains on Sales of Investments $ 32.0 $ 52.6 $ 37.9 Net Impairment Losses Recognized in Earnings (32.2) (27.2) (12.8) Total Before Income Taxes (0.2) 25.4 25.1 Income Tax Expense 0.1 (8.9) (8.8) Reclassification from AOCI, Net of Income Taxes (0.1) 16.5 16.3 Reclassification of AOCI from Amortization of Net Unrecognized Postretirement Benefit Costs to: Interest and Other Expenses (6.3) (23.1) (7.9) Income Tax Benefit 2.3 8.0 2.8 Reclassification from AOCI, Net of Income Taxes (4.0) (15.1) (5.1) Total Reclassification from AOCI to Net Income $ (4.1) $ 1.4 $ 11.2

NOTE 13. INCOME FROM INVESTMENTS

Net Investment Income for the years ended December 31, 2016, 2015 and 2014 was:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Receivables includes accrued investment income of $70.8 million and $68.5 million at December 31, 2016 and 2015, respectively.

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NOTE 13. INCOME FROM INVESTMENTS (Continued)

The components of Net Realized Gains on Sales of Investments for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Fixed Maturities: Gains on Sales $ 17.0 $ 16.1 $ 7.0 Losses on Sales (4.6) (1.1) (0.2) Equity Securities: Gains on Sales 19.9 39.2 33.1 Losses on Sales (0.3) (1.6) (2.0) Real Estate: Gains on Sales 1.1 — — Losses on Sales — (0.2) (0.2) Other Investments: Gain on Sale of Subsidiary — — 1.6 Losses on Sales (0.2) — (0.1) Net Gains (Losses) on Trading Securities 0.2 (0.3) (0.1) Net Realized Gains on Sales of Investments $ 33.1 $ 52.1 $ 39.1 Gross Gains on Sales $ 38.0 $ 55.3 $ 41.7 Gross Losses on Sales (5.1) (2.9) (2.5) Net Gains (Losses) on Trading Securities 0.2 (0.3) (0.1) Net Realized Gains on Sales of Investments $ 33.1 $ 52.1 $ 39.1

The components of Net Impairment Losses Recognized in Earnings reported in the Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Fixed Maturities $ (26.6) $ (11.5) $ (5.7) Equity Securities (5.6) (15.7) (7.1) Real Estate (0.5) — (2.4) Net Impairment Losses Recognized in Earnings $ (32.7) $ (27.2) $ (15.2)

NOTE 14. INSURANCE EXPENSES

Insurance Expenses for the years ended December 31, 2016, 2015 and 2014 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Amortized 299.3 257.4 235.4 Net Policy Acquisition Costs Deferred (15.6) (13.2) (0.4) Life VIF, P&C VIF and P&C Customer Relationships Amortized 5.9 15.4 7.2 Insurance Expenses $ 647.3 $ 645.1 $ 628.4

Commissions for servicing policies are expensed as incurred, rather than deferred and amortized.

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NOTE 15. INCOME TAXES

The tax effects of temporary differences that give rise to significant portions of the Company’s Net Deferred Income Tax Assets and Deferred Income Tax Liabilities at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Deferred Income Tax Assets: Insurance Reserves $ 83.4 $ 83.0 Unearned Premium Reserves 42.1 41.7 Tax Capitalization of Policy Acquisition Costs 70.7 71.5 Payroll and Employee Benefit Accruals 60.5 72.0 Net Operating Loss Carryforwards 52.2 30.5 Other 13.2 15.7 Total Deferred Income Tax Assets 322.1 314.4 Deferred Income Tax Liabilities: Investments 113.0 109.8 Deferred Policy Acquisition Costs 116.2 110.7 Life VIF and P&C Customer Relationships 13.5 15.5 Goodwill and Other Intangible Assets Acquired 37.1 37.0 Depreciable Assets 12.5 7.3 Other 4.0 2.2 Total Deferred Income Tax Liabilities 296.3 282.5 Net Deferred Income Tax Assets $ 25.8 $ 31.9

The expiration of federal net operating loss (“NOL”) carryforwards and their related deferred income tax assets at December 31, 2016 is presented below by year of expiration.

NOL Carry- Deferred Tax DOLLARS IN MILLIONS forwards Asset Expiring in: 2020 $ 7.8 $ 2.7 2021 through 2025 30.5 10.7 2026 through 2030 29.9 10.5 2031 through 2036 81.0 28.3 Total All Years $ 149.2 $ 52.2

Except for the NOL carryforward scheduled to expire in 2031 through 2036, all of the NOL carryforwards were acquired in connection with business acquisitions made in prior years and are subject to annual usage limitations under the Internal Revenue Code. The Company expects to fully utilize these federal NOL carryforwards.

The Company has not provided for Federal income taxes on $14.7 million of Mutual Savings Life’s income earned prior to 1984 which is not subject to income taxes under certain circumstances. Federal income taxes of $5.1 million would be paid on such income if it is distributed to shareholders in the future or if it does not continue to meet certain limitations.

A reconciliation of the beginning and ending amount of Unrecognized Tax Benefits for the years ended December 31, 2016, 2015 and 2014 is presented below.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document DOLLARS IN MILLIONS 2016 2015 2014 Liabilities for Unrecognized Tax Benefits at Beginning of Year $ 3.8 $ 7.2 $ 6.8 Additions for Tax Positions of Current Period 1.5 0.2 0.1 Additions for Tax Positions of Prior Years — — 0.3 Reduction for Expiration of Federal Statute of Limitations (0.2) (3.6) — Liabilities for Unrecognized Tax Benefits at End of Year $ 5.1 $ 3.8 $ 7.2

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NOTE 15. INCOME TAXES (Continued)

The statute of limitations related to Kemper and its eligible subsidiaries’ consolidated Federal income tax returns is closed for all tax years up to and including 2012. The expiration of the statute of limitations related to the various state income tax returns that Kemper and its subsidiaries file varies by state.

Unrecognized Tax Benefits at December 31, 2016, 2015 and 2014 include $4.6 million, $3.3 million and $3.4 million, respectively, for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred income tax accounting, other than for interest and penalties, the disallowance of the shorter deductibility period would not affect the effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The liability for Unrecognized Tax Benefits included accrued interest of $0.5 million, $0.5 million and $3.8 million at December 31, 2016, 2015 and 2014, respectively. Net interest related to unrecognized tax benefits for the year ended December 31, 2016 was insignificant. Tax expense includes interest benefit of $3.3 million and interest expense of $0.4 million related to unrecognized tax benefits for the years ended December 31, 2015 and 2014, respectively.

The components of Income Tax Expense from Continuing Operations for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Current Income Tax Benefit (Expense) $ 8.2 $ (25.7) $ (41.7) Deferred Income Tax Benefit (Expense) 2.3 2.2 (5.5) (Increase) Decrease Unrecognized Tax Benefits (1.3) 3.4 (0.4) Income Tax Benefit (Expense) $ 9.2 $ (20.1) $ (47.6)

Income tax refunds received, net of income taxes paid, were $0.5 million in 2016. Net income taxes paid were $44.4 million and $37.2 million in 2015 and 2014, respectively.

A reconciliation of the Statutory Federal Income Tax Expense and Rate to the Company’s Effective Income Tax Expense and Rate from Continuing Operations for the years ended December 31, 2016, 2015 and 2014 is presented below.

2016 2015 2014 DOLLARS IN MILLIONS Amount Rate Amount Rate Amount Rate Statutory Federal Income Tax Expense $ (1.2) 35.0 % $ (35.1) 35.0 % $ (56.1) 35.0 % Tax-exempt Income and Dividends Received Deduction 9.8 (279.5) 9.8 (9.7) 9.0 (5.6) Unrecognized Tax Benefit (Expense) — — 2.1 (2.1) (0.3) — Indemnification Recoveries 0.2 (6.5) 3.7 (3.6) — — State Income Taxes (0.6) 16.9 (0.6) 0.5 (0.6) 0.4 Other, Net 1.0 (28.9) — — 0.4 (0.1) Effective Income Tax Benefit (Expense) from Continuing Operations $ 9.2 (263.0)% $ (20.1) 20.1 % $ (47.6) 29.7 %

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NOTE 15. INCOME TAXES (Continued)

Comprehensive Income Tax Benefit (Expense) included in the Consolidated Financial Statements for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Income Tax Expense: Continuing Operations $ 9.2 $ (20.1) $ (47.6) Discontinued Operations (2.2) (3.1) (1.1) Unrealized Depreciation (Appreciation) on Securities 0.9 62.8 (82.8) Foreign Currency Translation Adjustments on Investments 0.1 0.5 0.4 Tax Effects from Postretirement Benefit Plans (7.3) (9.1) 34.7 Tax Effects from Cash Flow Hedge (0.6) — — Tax Effects from Long-term Equity-based Compensation included in Paid-in Capital (1.1) (1.0) (1.0) Comprehensive Income Tax Benefit (Expense) $ (1.0) $ 30.0 $ (97.4)

NOTE 16. PENSION BENEFITS

The Company sponsors a qualified defined benefit pension plan (the “Pension Plan”). The Pension Plan covers approximately 9,200 participants and beneficiaries, of which 1,800 are active employees. The Pension Plan is closed to new employees hired after January 1, 2006. The Pension Plan is generally non-contributory, but participation requires or required some employees to contribute 3% of pay, as defined, per year. Benefits for participants who are or were required to contribute to the Pension Plan are based on compensation during plan participation and the number of years of participation. Benefits for the vast majority of participants who are not required to contribute to the Pension Plan are based on years of service and final average pay, as defined. The Company funds the Pension Plan in accordance with the requirements of ERISA.

On May 12, 2016, the Company amended the Pension Plan to freeze benefit accruals, effective June 30, 2016, for substantially all of the participants under the plan. Accordingly, plan assets and liabilities were re-measured, resulting in balances in accumulated unrecognized pension loss and unamortized prior service credit prior to the freeze of $191.2 million and $0.3 million, respectively. In recognizing the curtailment, the Company recorded income of $0.3 million before income taxes in the second quarter of 2016 to immediately recognize the remaining unamortized prior service credit in the Pension Plan. The curtailment reduced the accumulated unrecognized pension loss by $23.3 million. The remaining accumulated unrecognized pension loss of $167.9 million as of the re-measurement date is being amortized over approximately 25 years, the remaining average estimated life expectancy of participants. Prior to the amendment, the accumulated unrecognized pension loss was being amortized over approximately 5 years, the remaining average service life of active participants.

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NOTE 16. PENSION BENEFITS (Continued)

Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Pension Plan for the years ended December 31, 2016 and 2015 is presented below.

DOLLARS IN MILLIONS 2016 2015 Fair Value of Plan Assets at Beginning of Year $ 507.5 $ 543.0 Actual Return on Plan Assets 29.9 (10.6) Employer Contributions 9.0 — Benefits Paid (25.5) (24.9) Fair Value of Plan Assets at End of Year 520.9 507.5 Projected Benefit Obligation at Beginning of Year 597.8 634.0 Service Cost 4.8 10.5 Interest Cost 20.1 25.7 Benefits Paid (25.5) (24.9) Curtailment (23.3) — Actuarial Losses (Gains) 19.7 (47.5) Projected Benefit Obligation at End of Year 593.6 597.8 Funded Status—Plan Assets in Deficit of Projected Benefit Obligation $ (72.7) $ (90.3) Unamortized Amount Reported in AOCI at End of Year: Accumulated Actuarial Loss $ (144.7) $ (152.2) Prior Service Credit — 0.4 Unamortized Amount Reported in AOCI at End of Year $ (144.7) $ (151.8) Accumulated Benefit Obligation at End of Year $ 593.5 $ 573.9

The measurement dates of the assets and liabilities at end of year presented in the preceding table under the headings, “2016” and “2015” were December 31, 2016 and December 31, 2015, respectively.

The weighted-average discount rate and rate of increase in future compensation levels used to estimate the components of the Projected Benefit Obligation for the Pension Plan at December 31, 2016 and 2015 were:

2016 2015 Discount Rate 4.18% 4.47% Rate of Increase in Future Compensation Levels 2.56 3.15

Weighted-average asset allocations for the Pension Plan at December 31, 2016 and 2015 by asset category were:

ASSET CATEGORY 2016 2015 Cash and Short-term Investments 2% 4% Corporate Bonds and Notes 31 28 Common and Preferred Stocks 48 43 Exchange Traded Funds 1 9 Other Assets 18 16 Total 100% 100%

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document is adequate to provide for the payment of the benefit obligations of the Pension Plan. The assets of the Pension Plan may be invested in fixed income and equity investments or any other investment vehicle or financial instrument deemed appropriate. Fixed income investments may include cash and short-term instruments, U.S. Government securities, corporate bonds, mortgages and other fixed income investments. Equity investments may include various types of stock, such as large-cap, mid-cap and small-cap stocks, and may also include investments in investment companies, collective investment funds and Kemper common stock (subject to Section 407 and other requirements of ERISA). The Pension Plan has not invested in Kemper common stock.

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NOTE 16. PENSION BENEFITS (Continued)

The trust investment committee for the Pension Plan, along with its third party fiduciary advisor, periodically reviews the performance of the Pension Plan’s investments and asset allocation. Several external investment managers, one of which is Fayez Sarofim & Co. (see Note 24, “Related Parties,” to the Consolidated Financial Statements), manage the equity investments of the trust for the Pension Plan. Each manager is allowed to exercise investment discretion, subject to limitations, if any, established by the trust investment committee for the Pension Plan. All other investment decisions are made by the Company, subject to general guidelines as set by the trust investment committee for the Pension Plan.

The Company determines its Expected Long Term Rate of Return on Plan Assets based primarily on the Company’s expectations of future returns, with consideration to historical returns, for the Pension Plan’s investments, based on target allocations of the Pension Plan’s investments.

Fair value measurements for the Pension Plan’s assets at December 31, 2016 are summarized below.

Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Measured at Net DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 21.2 $ 8.6 $ — $ — $ 29.8 States and Political Subdivisions — 3.1 — — 3.1 Corporate Bonds and Notes — 126.4 — — 126.4 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 6.2 — — 6.2 Common Stocks: Manufacturing 77.5 16.0 — — 93.5 Other Industries 88.1 — — — 88.1 Other Equity Interests: Collective Investment Funds — — — 60.7 60.7 Exchange Traded Funds 6.0 — — — 6.0 Limited Liability Companies and Limited Partnerships — — — 93.5 93.5 Short-term Investments 11.8 — — — 11.8 Receivables and Other 1.4 — 0.4 — 1.8 Total $ 206.0 $ 160.3 $ 0.4 $ 154.2 $ 520.9

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NOTE 16. PENSION BENEFITS (Continued)

Fair value measurements for the Pension Plan’s assets at December 31, 2015 are summarized below.

Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Measured at Net DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 19.2 $ — $ — — $ 19.2 States and Political Subdivisions — 3.2 — — 3.2 Corporate Bonds and Notes — 122.2 — — 122.2 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 6.1 — — 6.1 Common Stocks: Manufacturing 77.9 16.2 — — 94.1 Other Industries 82.5 1.8 — — 84.3 Other Equity Interests: Collective Investment Funds — — — 31.1 31.1 Exchange Traded Funds 47.2 — — — 47.2 Limited Liability Companies and Limited Partnerships — — — 78.2 78.2 Short-term Investments 20.4 — — — 20.4 Receivables and Other 1.1 — 0.4 — 1.5 Total $ 248.3 $ 149.5 $ 0.4 $ 109.3 $ 507.5

Additional information pertaining to the changes in the fair value of the Pension Plan’s assets classified as Level 3 in the two preceding tables for the years ended December 31, 2016 and 2015 is presented below.

DOLLARS IN MILLIONS 2016 2015 Balance at Beginning of Year $ 0.4 $ 0.4 Return on Plan Assets Held — — Purchases, Sales and Settlements, Net — — Transfers out of Level 3 — — Balance at End of Year $ 0.4 $ 0.4

The components of Comprehensive Pension Expense (Income) for the Pension Plan for the years ended December 31, 2016, 2015 and 2014 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Expense (Income) Recognized in Consolidated Statements of Income (1.5) 25.6 8.3 Unrecognized Pension Loss (Gain) Arising During the Year (0.7) (1.9) 102.0 Prior Service Credit Arising During the Year — — (0.6) Amortization of Accumulated Unrecognized Pension Loss (6.3) (24.4) (9.7) Comprehensive Pension Expense (Income) $ (8.5) $ (0.7) $ 100.0

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NOTE 16. PENSION BENEFITS (Continued)

The actuarial loss included in AOCI at December 31, 2016 is being amortized over approximately 24 years, the remaining average estimated life expectancy of participants. The Company estimates that Pension Expense for the Pension Plan for the year ended December 31, 2017 will include expense of $2.5 million resulting from the amortization of the related accumulated actuarial loss included in AOCI at December 31, 2016.

Years Ended December 31, 5/13/16 to 12/31/ 16 1/1/16 to 5/12/16 2015 2014 Weighted-average Discount Rate 3.94% 4.47% 4.10% 4.90% Service Cost Discount Rate 4.22 4.78 — — Interest Cost Discount Rate 3.18 3.69 — — Rate of Increase in Future Compensation Levels 3.15 3.15 3.31 3.05 Expected Long Term Rate of Return on Plan Assets 6.25 6.25 6.75 7.00

On August 12, 2016, the Company made a voluntary cash contribution of $9.0 million to the Pension Plan. The Company did not contribute to the Pension Plan in 2015 or 2014. The Company does not expect that it will be required to contribute to the Pension Plan in 2017, but could make a voluntary contribution pursuant to the maximum funding limits under ERISA.

The following benefit payments (net of participant contributions), which consider expected future service of certain participants that remain eligible for a benefit accrual, as appropriate, are expected to be paid from the Pension Plan:

Years Ending December 31, DOLLARS IN MILLIONS 2017 2018 2019 2020 2021 2022-2026 Estimated Pension Benefit Payments $ 27.6 $ 28.8 $ 29.9 $ 30.9 $ 31.9 $ 170.0

The Company also sponsors a non-qualified supplemental defined benefit pension plan (the “Supplemental Plan”). As a result of the amendment to the Pension Plan, benefit accruals for all participants in the Supplemental Plan were also frozen effective June 30, 2016. Accordingly, plan liabilities for the Supplemental Plan were also re-measured in the second quarter of 2016, resulting in balances in accumulated unrecognized pension loss and unamortized prior service costs prior to the freeze of $1.6 million and $1.3 million, respectively. The Company recorded expense of $1.3 million in the second quarter of 2016 to immediately recognize the remaining net unamortized prior service costs in the Supplemental Plan. The curtailment reduced the Projected Benefit Obligation by $5.2 million at the re-measurement date. Accordingly, a curtailment gain of $3.6 million before tax was recorded to recognize the reduction in the Projected Benefit Obligation that exceeded the accumulated unrecognized pension loss prior to the freeze.

The unfunded liability related to the Supplemental Plan was $25.4 million and $30.4 million at December 31, 2016 and 2015, respectively. Pension income for the Supplemental Plan was $1.0 million for the year ended December 31, 2016, compared to pension expense of $2.1 million and $1.8 million for the years ended December 31, 2015, and 2014, respectively. An actuarial gain of $4.8 million before taxes, an actuarial gain of $1.5 million before taxes and an actuarial loss of $7.0 million before taxes are included in Other Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014, respectively.

The Company also sponsors several defined contribution benefit plans covering most of its employees. The Company made contributions to those plans of $8.4 million, $7.8 million and $7.3 million in 2016, 2015 and 2014, respectively.

NOTE 17. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company sponsors an other than pension postretirement employee benefit plan (“OPEB”) that provides medical, dental and/or life insurance benefits to approximately 500 retired and 225 active employees (the “OPEB Plan”). The Company has historically self- insured the benefits under the OPEB Plan. The medical plan generally provides for a limited number of years of medical insurance benefits at retirement based on the participant’s attained age at retirement and number of years of service until specified dates and generally has required participant contributions, with most contributions adjusted annually. On December 30, 2016, the Company amended the OPEB Plan and, effective December 31, 2016, will no longer offer coverage to post-65 Medicare-eligible retirees and Medicare-eligible spouses under the self-insured portion of its coverage. Rather, beginning on January 1, 2017, the OPEB Plan will offer access to a private, third-party Medicare exchange and will provide varying levels of a Company-determined subsidy via health reimbursement accounts to certain Medicare-eligible retirees and spouses in order to help fund a portion of the participants’ cost. Further, the amendment eliminates the requirement for such participants to contribute to the OPEB Plan. In conjunction with the amendment, the Company recorded a pre-tax reduction to its Accumulated Postretirement Benefit Obligation of $11.0 million through Other Comprehensive Income. This prior service credit will be amortized into income over the remaining average life of the OPEB Plan’s participants.

Changes in Fair Value of Plan Assets and Changes in Accumulated Postretirement Benefit Obligation for the years ended December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Fair Value of Plan Assets at Beginning of Year $ — $ — Employer Contributions 3.4 3.4 Plan Participants’ Contributions 1.0 1.2 Benefits Paid (4.4) (4.6) Fair Value of Plan Assets at End of Year — — Accumulated Postretirement Benefit Obligation at Beginning of Year 29.6 31.1 Service Cost 0.1 0.2 Interest Cost 0.8 1.0 Plan Participants’ Contributions 1.0 1.2 Benefits Paid (4.4) (4.6) Medicare Part D Subsidy Received 0.3 0.3 Plan Amendments (11.0) — Actuarial Loss (Gain) (1.3) 0.4 Accumulated Postretirement Benefit Obligation at End of Year 15.1 29.6 Funded Status—Accumulated Postretirement Benefit Obligation in Excess of Plan Assets $ (15.1) $ (29.6) Unamortized Actuarial Gain Reported in AOCI at End of Year $ 27.6 $ 16.8

The measurement dates of the assets and liabilities at end of year in the preceding table under the headings “2016” and “2015” were December 31, 2016 and December 31, 2015, respectively.

The weighted-average discount rate and rate of increase in future compensation levels used to develop the components of the Accumulated Postretirement Benefit Obligation at December 31, 2016 and 2015 were:

2016 2015 Discount Rate 3.60% 3.70% Rate of Increase in Future Compensation Levels 2.60 2.64

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, 2016 was 6.75% for 2017, gradually declining to 5.0% in the year 2024 and remaining at that level thereafter for medical benefits and 10.25% for 2017, gradually declining to 5.0% in the year 2024 and remaining at that level thereafter for prescription drug benefits. The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, 2015 was 7.0% for 2016, gradually declining to 5.0% in the year 2024 and remaining at that level thereafter for medical benefits and 11.0% for 2016, gradually declining to 5.0% in the year 2024 and remaining at that level thereafter for prescription drug benefits.

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NOTE 17. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)

A one-percentage point increase in the assumed health care cost trend rate for each year would have increased the Accumulated Postretirement Benefit Obligation at December 31, 2016 by $0.6 million and 2016 OPEB expense by an insignificant amount. A one- percentage point increase in the assumed health care cost trend rate for each year would have increased the Accumulated Postretirement Benefit Obligation at December 31, 2015 by $1.5 million and 2015 OPEB expense by $0.1 million.

The components of Comprehensive OPEB Expense (Income) for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Service Cost Earned During the Year $ 0.1 $ 0.2 $ 0.2 Interest Cost on Accumulated Postretirement Benefit Obligation 0.8 1.0 1.1 Amortization of Actuarial Gain (1.4) (1.4) (1.8) OPEB Income Recognized in Consolidated Statements of Income (0.5) (0.2) (0.5) Unrecognized OPEB Loss (Gain) Arising During the Year (1.3) 0.4 (2.0) Prior Service Credit Arising During the Year (11.0) — — Amortization of Accumulated Unrecognized OPEB Gain 1.4 1.4 1.8 Comprehensive OPEB Expense (Income) $ (11.4) $ 1.6 $ (0.7)

The Company estimates that OPEB Expense for the year ended December 31, 2017 will include income of $3.1 million resulting from the amortization of the related accumulated actuarial gain and prior service credit included in AOCI at December 31, 2016.

2016 2015 2014 Weighted-average Discount Rate 3.70% 3.40% 4.00% Service Cost Discount Rate 4.21 — — Interest Cost Discount Rate 2.90 — — Rate of Increase in Future Compensation Levels 2.64 2.68 2.10

The Company expects to contribute $1.8 million, net of the expected Medicare Part D subsidy, to its OPEB Plan to fund benefit payments in 2017.

The following benefit payments (net of participant contributions), which consider expected future service, as appropriate, are expected to be paid:

Years Ending December 31, DOLLARS IN MILLIONS 2017 2018 2019 2020 2021 2022-2026 Estimated Benefit Payments: Excluding Medicare Part D Subsidy $ 1.8 $ 1.8 $ 1.7 $ 1.6 $ 1.5 $ 5.9 Expected Medicare Part D Subsidy — — — — — — Net Estimated Benefit Payments $ 1.8 $ 1.8 $ 1.7 $ 1.6 $ 1.5 $ 5.9

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NOTE 18. BUSINESS SEGMENTS

The Property & Casualty Insurance segment’s principal products are personal automobile insurance, both preferred and nonstandard, homeowners insurance, other personal insurance and commercial automobile insurance. These products are distributed primarily through independent agents and brokers. The Life & Health Insurance segment’s principal products are individual life, accident, health and property insurance. These products are distributed by career agents employed by the Company and independent agents and brokers.

The Company’s earned premiums are derived in the United States. The accounting policies of the segments are the same as those described in Note 2, “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial Statements. Capital expenditures for long-lived assets by operating segment are immaterial.

It is the Company’s management practice to allocate certain corporate expenses, primarily compensation costs for corporate employees and related facility costs, included in Interest and Other Expenses in the Consolidated Statements of Income to its insurance operations. The amount of such allocated corporate expenses was $52.9 million, $43.4 million and $42.1 million for the years ended December 31, 2016, 2015 and 2014, respectively. The Company does not allocate Net Realized Gains on Sales of Investments, Net Impairment Losses Recognized in Earnings, interest expense on debt or postretirement benefit plans, and actuarial gains and losses on its postretirement benefit plans to its operating segments.

Segment Assets at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Property & Casualty Insurance $ 2,815.1 $ 2,749.0 Life & Health Insurance 4,888.7 4,733.9 Corporate and Other, Net 506.7 553.2 Total Assets $ 8,210.5 $ 8,036.1

Earned Premiums by product line for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Personal Automobile $ 1,244.6 $ 1,027.7 $ 831.4 Homeowners 271.9 286.3 312.4 Other Personal Property and Casualty Insurance 119.2 122.1 127.4 Commercial Automobile 53.3 54.5 54.8 Life 381.6 374.1 387.6 Accident and Health 149.4 144.9 148.6 Total Earned Premiums $ 2,220.0 $ 2,009.6 $ 1,862.2

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NOTE 18. BUSINESS SEGMENTS (Continued)

Segment Revenues, including a reconciliation to Total Revenues, for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Segment Revenues: Property & Casualty Insurance: Earned Premiums $ 1,614.8 $ 1,415.2 $ 1,249.5 Net Investment Income 72.4 73.3 72.7 Other Income 0.5 0.6 0.5 Total Property & Casualty Insurance 1,687.7 1,489.1 1,322.7 Life & Health Insurance: Earned Premiums 605.2 594.4 612.7 Net Investment Income 213.2 214.2 218.7 Other Income 2.8 2.4 0.9 Total Life & Health Insurance 821.2 811.0 832.3 Total Segment Revenues 2,508.9 2,300.1 2,155.0 Net Realized Gains on the Sales of Investments 33.1 52.1 39.1 Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) Other 12.6 15.8 17.7 Total Revenues $ 2,521.9 $ 2,340.8 $ 2,196.6

Segment Operating Profit, including a reconciliation to Income from Continuing Operations before Income Taxes, for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Segment Operating Profit (Loss): Property & Casualty Insurance $ (17.2) $ 23.7 $ 27.1 Life & Health Insurance 45.7 109.7 141.9 Total Segment Operating Profit 28.5 133.4 169.0 Corporate and Other Operating Loss (25.4) (48.9) (32.7) Total Operating Profit 3.1 84.5 136.3 Net Realized Gains on Sales of Investments 33.1 52.1 39.1 Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) Loss from Early Extinguishment of Debt — (9.1) — Income from Continuing Operations before Income Taxes $ 3.5 $ 100.3 $ 160.2

Segment Net Operating Income, including a reconciliation to Income from Continuing Operations, for the years ended December 31, 2016, 2015 and 2014 was:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Corporate and Other Net Operating Loss (15.0) (28.5) (19.6) Consolidated Net Operating Income 12.4 69.9 97.1 Net Income (Loss) From: Net Realized Gains on Sales of Investments 21.5 33.9 25.4 Net Impairment Losses Recognized in Earnings (21.2) (17.7) (9.9) Loss from Early Extinguishment of Debt — (5.9) — Income from Continuing Operations $ 12.7 $ 80.2 $ 112.6

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NOTE 18. BUSINESS SEGMENTS (Continued)

Amortization of Deferred Policy Acquisition Costs by Operating Segment for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance $ 252.1 $ 213.1 $ 187.5 Life & Health Insurance 47.2 44.3 47.9 Total Amortization $ 299.3 $ 257.4 $ 235.4

NOTE 19. DISCONTINUED OPERATIONS

The Company accounts for its former Unitrin Business Insurance operations as discontinued operations.

Summary financial information included in Income from Discontinued Operations for the years ended December 31, 2016, 2015 and 2014 is presented below.

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2016 2015 2014 Income from Discontinued Operations before Income Taxes: Change in Estimate of Retained Liabilities Arising from Discontinued Operations 6.3 8.6 3.0 Income Tax Expense (2.2) (3.1) (1.1) Income from Discontinued Operations $ 4.1 $ 5.5 $ 1.9

Income from Discontinued Operations Per Unrestricted Share: Basic $ 0.08 $ 0.10 $ 0.04 Diluted $ 0.08 $ 0.10 $ 0.04

In 2008, the Company sold its Unitrin Business Insurance operations. The Company retained Property and Casualty Insurance Reserves for unpaid insured losses that occurred prior to the date of the sale. Property and Casualty Insurance Reserves reported in the Company’s Consolidated Balance Sheets include $38.3 million and $50.3 million at December 31, 2016 and 2015, respectively, for the retained liabilities. In accordance with GAAP, changes in the Company’s estimate of such retained liabilities after the sale are reported as a separate component of the results of discontinued operations. See Note 6, “Property and Casualty Insurance Reserves,” to the Consolidated Financial Statements for information pertaining cash used by operating activities to pay losses and LAE related to discontinued operations.

NOTE 20. CATASTROPHE REINSURANCE

Catastrophes and natural disasters are inherent risks of the property and casualty insurance business. These catastrophic events and natural disasters include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds and winter storms. Such events result in insured losses that are, and will continue to be, a material factor in the results of operations and financial position of the Company’s property and casualty insurance companies. Further, because the level of these insured losses occurring in any one year cannot be accurately predicted, these losses may contribute to material year-to-year fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more likely to occur at certain times within the year than others. This factor adds an element of seasonality to property and casualty insurance claims. The Company has adopted the industry- wide catastrophe classifications of storms and other events promulgated by ISO to track and report losses related to catastrophes. ISO classifies a disaster as a catastrophe when the event causes $25.0 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. The discussions that follow utilize ISO’s definition of catastrophes.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in certain regions, and reinsurance. To limit its exposures to catastrophic events, the Company maintains various catastrophe reinsurance programs for its property and casualty insurance businesses.

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NOTE 20. CATASTROPHE REINSURANCE (Continued)

Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2016 to December 31, 2016 is provided in various layers as presented below.

Catastrophe Losses and LAE Percentage DOLLARS IN MILLIONS In Excess of Up to of Coverage Property & Casualty Insurance Segment: Retained $ — $ 50.0 —% 1st Layer of Coverage 50.0 150.0 95.0 2nd Layer of Coverage 150.0 350.0 95.0

Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2015 to December 31, 2015 is provided in various layers as presented below.

Catastrophe Losses and LAE Percentage DOLLARS IN MILLIONS In Excess of Up to of Coverage Retained $ — $ 50.0 —% 1st Layer of Coverage 50.0 150.0 95.0 2nd Layer of Coverage 150.0 350.0 95.0

Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2014 to December 31, 2014 is provided in various layers as presented below.

Catastrophe Losses and LAE Percentage DOLLARS IN MILLIONS In Excess of Up to of Coverage Property & Casualty Insurance Segment: Retained $ — $ 50.0 —% 1st Layer of Coverage 50.0 100.0 95.0 2nd Layer of Coverage 100.0 200.0 95.0 3rd Layer of Coverage 200.0 400.0 95.0

In the event that the Property & Casualty Insurance segment’s incurred catastrophe losses and LAE covered by any of its catastrophe reinsurance programs presented in the three preceding tables exceed the retention for that particular layer, each of the programs required one reinstatement of such coverage. In such an instance, the Property & Casualty Insurance segment is required to pay a reinstatement premium to the reinsurers to reinstate the full amount of reinsurance available under such layer.

The Property & Casualty Insurance segment’s catastrophe reinsurance in 2016, 2015 and 2014 also included reinsurance coverage from the Florida Hurricane Catastrophe Fund (the “FHCF”) for hurricane losses in Florida at retentions lower than those described above. The Life & Health Insurance segment also purchases reinsurance from the FHCF for hurricane losses in Florida. Except for the coverage provided by the FHCF, the Life & Health Insurance segment has not carried any other catastrophe reinsurance since 2012, primarily due to actions taken by the Life & Health Insurance segment to reduce its exposures to catastrophes.

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NOTE 20. CATASTROPHE REINSURANCE (Continued)

Reinsurance premiums for the Company’s primary catastrophe reinsurance programs and the FHCF Program reduced earned premiums for the years ended December 31, 2016, 2015 and 2014 by the following:

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance $ 11.9 $ 12.8 $ 17.6 Life & Health Insurance 0.1 0.1 0.1 Total Ceded Catastrophe Reinsurance Premiums $ 12.0 $ 12.9 $ 17.7

Catastrophe losses and LAE (including reserve development), net of reinsurance recoveries, for the years ended December 31, 2016, 2015 and 2014 by business segment are presented below.

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance $ 90.4 $ 56.6 $ 80.7 Life & Health Insurance 5.4 3.9 3.1 Total Catastrophe Losses and LAE $ 95.8 $ 60.5 $ 83.8

Total catastrophe loss and LAE reserves, net of reinsurance recoverables, developed favorably by $19.3 million, $7.8 million and $14.7 million in 2016, 2015 and 2014, respectively. The Property & Casualty Insurance segment reported favorable catastrophe reserve development of $19.2 million, $7.9 million and $15.8 million in 2016, 2015 and 2014, respectively. The Life & Health Insurance segment reported favorable catastrophe reserve development of $0.1 million in 2016, adverse catastrophe reserve development of $0.1 million in 2015 and adverse catastrophe reserve development of $1.1 million in 2014.

The process of estimating and establishing reserves for catastrophe losses is inherently uncertain and the actual ultimate cost of a claim, net of actual reinsurance recoveries, may vary materially from the estimated amount reserved. The Company’s estimates of direct catastrophe losses are generally based on inspections by claims adjusters and historical loss development experience for areas that have not been inspected or for claims that have not yet been reported. The Company’s estimates of direct catastrophe losses are based on the coverages provided by its insurance policies. The Company’s homeowners and dwelling insurance policies do not provide coverage for losses caused by floods, but generally provide coverage for physical damage caused by wind or wind-driven rain. Accordingly, the Company’s estimates of direct losses for homeowners and dwelling insurance do not include losses caused by flood. Depending on the policy, automobile insurance may provide coverage for losses caused by flood. Estimates of the number and severity of claims ultimately reported are influenced by many variables, including, but not limited to, repair or reconstruction costs and determination of cause of loss that are difficult to quantify and will influence the final amount of claim settlements. All these factors, coupled with the impact of the availability of labor and material on costs, require significant judgment in the reserve setting process. A change in any one or more of these factors is likely to result in an ultimate net claim cost different from the estimated reserve. The Company’s estimates of indirect losses from wind pools and joint underwriting associations are based on a variety of factors, including, but not limited to, actual or estimated assessments provided by or received from such entities, insurance industry estimates of losses, and estimates of the Company’s market share in the assessable states. Actual assessments may differ materially from these estimated amounts.

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NOTE 21. OTHER REINSURANCE

In addition to the reinsurance programs described in Note 20, “Catastrophe Reinsurance,” to the Consolidated Financial Statements, Kemper’s insurance subsidiaries utilize other reinsurance arrangements to limit their maximum loss, provide greater diversification of risk and to minimize exposures on larger risks. The ceding of insurance does not discharge the primary liability of the original insurer. Accordingly, insurance reserve liabilities are reported gross of any estimated recovery from reinsurers in the Consolidated Balance Sheets. Amounts recoverable from reinsurers are estimated in a manner consistent with the insurance reserve liability and are included in Other Receivables in the Consolidated Balance Sheets.

Earned Premiums ceded on long-duration and short-duration policies were $19.0 million, $20.6 million and $26.0 million for the years ended December 31, 2016, 2015 and 2014, respectively, of which $12.0 million, $12.9 million and $17.7 million, respectively, was related to catastrophe reinsurance. See Note 20, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for additional information regarding the Company’s catastrophe reinsurance programs. Certain insurance subsidiaries assume business from other insurance companies and involuntary pools. Earned Premiums assumed on long-duration and short-duration policies were $67.3 million, $60.0 million and $57.1 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Trinity and Capitol County Mutual Fire Insurance Company (“Capitol”) are parties to a quota share reinsurance agreement whereby Trinity assumes 100% of the business written by Capitol, subject to a cap, for ceded losses for dwelling coverage. Earned Premiums assumed by Trinity from Capitol were $21.3 million, $21.8 million and $21.9 million for the years ended December 31, 2016, 2015 and 2014, respectively. Capitol is a mutual insurance company and, accordingly, is owned by its policyholders. Trinity and Old Reliable Casualty Company (“ORCC”), a subsidiary of Capitol, are parties to a quota share reinsurance agreement whereby Trinity assumes 100% of the business written by ORCC, subject to a cap for ceded losses for dwelling coverage. Earned Premiums assumed by Trinity from ORCC were $6.2 million, $6.5 million and $6.7 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Five employees of the Company serve as directors of Capitol’s five member board of directors. Nine employees of the Company also serve as directors of ORCC’s nine member board of directors. Kemper’s subsidiary, United Insurance, provides claims and administrative services to Capitol and ORCC. In addition, agents appointed by Kemper’s subsidiary, The Reliable Life Insurance Company, and who are employed by United Insurance, are also appointed by Capitol and ORCC to sell property insurance products for the Company’s Life & Health Insurance segment. The Company also provides certain investment services to Capitol and ORCC.

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NOTE 22. FAIR VALUE MEASUREMENTS

The Company classifies its Investments in Fixed Maturities and Equity Securities as available for sale and reports these investments at fair value. The Company has elected the fair value option method of accounting for investments in certain hedge funds and, accordingly, reports these investments at fair value. The Company classifies certain investments in mutual funds included in Other Investments as trading securities and reports these investments at fair value. The Company has a derivative instrument that is classified as a cash flow hedge and reported in Other Assets at fair value at December 31, 2016. The Company has no material liabilities that are measured and reported at fair value.

The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2016 is summarized below.

Fair Value Measurements Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Measured at Net DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 119.5 $ 216.8 $ — — $ 336.3 States and Political Subdivisions — 1,711.1 3.8 — 1,714.9 Foreign Governments — 3.4 — — 3.4 Corporate Securities: Bonds and Notes — 2,541.6 403.2 — 2,944.8 Redeemable Preferred Stocks — — 0.6 — 0.6 Collateralized Loan Obligations — 19.3 103.5 — 122.8 Other Mortgage- and Asset-backed — 2.1 — — 2.1 Total Investments in Fixed Maturities 119.5 4,494.3 511.1 — 5,124.9 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 59.6 — — 59.6 Other Industries — 11.4 11.5 — 22.9 Common Stocks: Finance, Insurance and Real Estate 26.4 — 7.1 — 33.5 Other Industries 0.4 0.2 11.1 — 11.7 Other Equity Interests: Exchange Traded Funds 144.4 — — — 144.4 Limited Liability Companies and Limited Partnerships — — 40.9 168.7 209.6 Total Investments in Equity Securities 171.2 71.2 70.6 168.7 481.7 Fair Value Option Investments: Limited Liability Companies and Limited Partnerships Hedge Funds — — — 111.4 111.4 Other Investments: Trading Securities 5.3 — — — 5.3 Other Assets:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Derivative Instrument Classified as Cash Flow Hedge — 1.6 — — 1.6 Total $ 296.0 $ 4,567.1 $ 581.7 $ 280.1 $ 5,724.9

At December 31, 2016, the Company had unfunded commitments to invest an additional $135.2 million in certain limited liability investment companies and limited partnerships that will be included in Other Equity Interests when funded.

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NOTE 22. FAIR VALUE MEASUREMENTS (Continued)

The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2015 is summarized below.

Fair Value Measurements Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Measured at Net DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 124.9 $ 195.7 $ — $ — $ 320.6 States and Political Subdivisions — 1,622.6 — — 1,622.6 Corporate Securities: Bonds and Notes — 2,376.5 436.3 — 2,812.8 Redeemable Preferred Stocks — — 3.8 — 3.8 Collateralized Loan Obligations — — 87.3 — 87.3 Other Mortgage- and Asset-backed — 1.4 3.8 — 5.2 Total Investments in Fixed Maturities 124.9 4,196.2 531.2 — 4,852.3 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 79.8 5.1 — 84.9 Other Industries — 6.2 12.8 — 19.0 Common Stocks: Finance, Insurance and Real Estate 16.6 6.6 — — 23.2 Other Industries 0.6 0.8 12.1 — 13.5 Other Equity Interests: Exchange Traded Funds 177.1 — — — 177.1 Limited Liability Companies and Limited Partnerships — — 45.6 159.9 205.5 Total Investments in Equity Securities 194.3 93.4 75.6 159.9 523.2 Fair Value Option Investments: Limited Liability Companies and Limited Partnerships Hedge Funds — — — 164.5 164.5 Other Investments: Trading Securities 4.7 — — — 4.7 Total $ 323.9 $ 4,289.6 $ 606.8 324.4 $ 5,544.7

The Company’s investments in Fixed Maturities that are classified as Level 1 in the two preceding tables primarily consist of U.S. Treasury Bonds and Notes. The Company’s investments in Equity Securities that are classified as Level 1 in the two preceding tables consist either of investments in publicly-traded common stocks or exchange traded funds. The Company’s investments in Fixed Maturities that are classified as Level 2 in the two preceding tables primarily consist of investments in corporate bonds, obligations of states and political subdivisions, and bonds and mortgage-backed securities of U.S. government agencies. The Company’s investments in Equity Securities that are classified as Level 2 in the two preceding tables primarily consist of investments in preferred stocks. The Company uses a leading, nationally recognized provider of market data and analytics to price the vast majority of the Company’s Level

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2 measurements. The provider utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information. Because many fixed maturity securities do not trade on a daily basis, the provider’s evaluated pricing applications apply available information through processes such

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NOTE 22. FAIR VALUE MEASUREMENTS (Continued) as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing to prepare evaluations. In addition, the provider uses model processes to develop prepayment and interest rate scenarios. The pricing provider’s models and processes also take into account market convention. For each asset class, teams of its evaluators gather information from market sources and integrate relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models. The Company generally validates the measurements obtained from its primary pricing provider by comparing them with measurements obtained from one additional pricing provider that provides either prices from recent market transactions or quotes in inactive markets or evaluations based on its own proprietary models.

The Company investigates significant differences related to the values provided. On completion of its investigation, management exercises judgment to determine the price selected and whether adjustments, if any, to the price obtained from the Company’s primary pricing provider would warrant classification of the price as Level 3. In instances where a measurement cannot be obtained from either pricing provider, the Company generally will evaluate bid prices from one or more binding quotes obtained from market makers to value investments in inactive markets and classified by the Company as Level 2. The Company generally classifies securities when it receives non-binding quotes or indications as Level 3 securities unless the Company can validate the quote or indication against recent transactions in the market.

The Company’s Investments in Fixed Maturities that are classified as Level 3 in the two preceding tables primarily consist of privately placed securities not rated by a Nationally Recognized Statistical Rating Organization and are priced primarily using a market yield approach. A market yield approach uses a risk-free rate plus a credit spread depending on the underlying credit profile of the security. For floating rate securities, the risk-free rate used in the market yield is the contractual floating rate of the security. For each individual security, the Company or the Company’s third party appraiser gathers information from market sources, relevant credit information, perceived market movements and sector news and determines an appropriate market yield for each security. The market yield selected is then used to discount the estimated future cash flows of the security to determine the fair value. The Company separately evaluates market yields based upon asset class to assess the reasonableness of the recorded fair value. For non-investment-grade Investments in Fixed Maturities that are classified as Level 3, the two primary asset classes are senior debt and junior debt. Senior debt includes those securities that receive first priority in a liquidation and junior debt includes any fixed maturity security with other than first priority in a liquidation.

The table below presents quantitative information about the significant unobservable inputs utilized by the Company in determining fair values for fixed maturity investments in corporate securities classified as Level 3 at December 31, 2016.

Unobservable Total Range of Unobservable Weighted DOLLARS IN MILLIONS Input Fair Value Inputs Average Yield Investment-grade Market Yield $ 106.1 2.7% - 5.1% 3.8% Non-investment-grade: Senior Debt Market Yield 142.2 4.8 - 14.0 9.6 Junior Debt Market Yield 143.3 9.5 - 20.0 13.0 Collateralized Loan Obligations Market Yield 103.5 3.7 - 9.9 6.3 Other Various 16.0 Total Fixed Maturity Investments in Corporate Securities $ 511.1

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NOTE 22. FAIR VALUE MEASUREMENTS (Continued)

Unobservable Total Range of Unobservable Weighted DOLLARS IN MILLIONS Input Fair Value Inputs Average Yield Investment-grade Market Yield $ 98.7 2.6% - 6.9% 4.4% Non-investment-grade: Senior Debt Market Yield 114.2 5.9 - 15.3 10.4 Junior Debt Market Yield 216.3 8.2 - 26.2 13.6 Collateralized Loan Obligations Market Yield 87.3 3.1 - 10.8 6.1 Other Various 14.7 Total Fixed Maturity Investments in Corporate Securities $ 531.2

For an investment in a fixed maturity security, an increase in the yield used to determine the fair value of the security will decrease the fair value of the security. A decrease in the yield used to determine fair value will increase the fair value of the security, but the fair value increase is generally limited to par, unless callable at a premium, if the security is currently callable.

The Company’s other investments that are classified as Level 3 primarily consist of Limited Liability Companies and Limited Partnerships, but also certain Preferred Stocks and Common Stocks. The Company either uses valuations provided by third party fund managers, third party appraisers, or that are generated internally. These valuations typically employ various valuation techniques commonly used in the industry, including earnings multiples based on comparable public securities, industry-specific non-earnings based multiples, market yields based on comparable public securities and discounted cash flow models.

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the year ended December 31, 2016 is presented below.

Fixed Maturities Equity Securities Corporate States and Other Preferred Bonds Political Redeemable Collateralized Mortgage- and Other and Sub- Preferred Loan and Asset- Common Equity DOLLARS IN MILLIONS Notes divisions Stocks Obligations backed Stocks Interests Total Balance at Beginning of Year $ 436.3 $ — $ 3.8 $ 87.3 $ 3.8 $ 30.0 $ 45.6 $ 606.8 Total Gains (Losses): Included in Consolidated Statements of Income (23.0) (0.3) — — 0.4 (1.7) (1.6) (26.2) Included in Other Comprehensive Income 0.9 — — 4.3 (0.3) 3.4 (2.4) 5.9 Purchases 203.7 — — 29.1 — 7.9 3.9 244.6 Settlements (85.4) — (3.2) (5.0) (3.0) (5.2) — (101.8) Sales (114.5) — — (1.9) — (4.7) (4.6) (125.7) Transfers into Level 3 — 4.1 — — — — — 4.1 Transfers out of Level 3 (14.8) — — (10.3) (0.9) — — (26.0) Balance at End of Year $ 403.2 $ 3.8 $ 0.6 $ 103.5 $ — $ 29.7 $ 40.9 $ 581.7

The Company’s policy is to recognize transfers between levels as of the end of the reporting period. There were no transfers between Levels 1 and 2 or Levels 1 and 3 for the year ended December 31, 2016. All transfers into or out of Level 3 for the year ended December 31, 2016 were due to changes in the availability of market observable inputs.

NOTE 22. FAIR VALUE MEASUREMENTS (Continued)

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the year ended December 31, 2015 is presented below.

Fixed Maturities Equity Securities Other Preferred Corporate Redeemable Collateralized Mortgage- and Other Bonds and Preferred Loan and Asset- Common Equity DOLLARS IN MILLIONS Notes Stocks Obligations backed Stocks Interests Total Balance at Beginning of Year $ 360.6 $ 6.7 $ 64.4 $ 3.9 $ 38.8 $ 44.0 $ 518.4 Total Gains (Losses): Included in Consolidated Statement of Income (9.4) (1.6) 0.6 — (2.6) (5.2) (18.2) Included in Other Comprehensive Income (7.4) (0.7) (2.2) (0.1) 1.4 1.7 (7.3) Purchases 241.6 — 39.5 1.3 8.1 6.3 296.8 Settlements (65.5) (0.6) (7.5) (0.1) (0.7) (1.2) (75.6) Sales (73.6) — (7.5) (1.2) (5.0) — (87.3) Transfers into Level 3 — — — — — — — Transfers out of Level 3 (10.0) — — — (10.0) — (20.0) Balance at End of Year $ 436.3 $ 3.8 $ 87.3 $ 3.8 $ 30.0 $ 45.6 $ 606.8

The Company’s policy is to recognize transfers between levels as of the end of the reporting period. There were no transfers between Levels 1 and 2 or Levels 1 and 3 for the year ended December 31, 2015. The transfers out of Level 3 for the year ended December 31, 2015 were due to changes in the availability of market observable inputs.

The fair value of Debt is estimated using quoted prices for similar liabilities in markets that are not active. The inputs used in the valuation are considered Level 2 measurements. The fair value of Short-term Investments is estimated using inputs that are considered Level 1 or Level 2 measurements.

NOTE 23. CONTINGENCIES

In the ordinary course of its businesses, the Company is involved in legal proceedings, including lawsuits, regulatory examinations, audits and inquiries. Except with regard to the matters discussed below, based on currently available information, the Company does not believe that it is reasonably possible that any of its pending legal proceedings will have a material effect on the Company’s consolidated financial statements.

Over the last several years there have been an array of initiatives that seek, in various ways, to impose new duties on life insurance companies to proactively search for information related to the deaths of their insureds. These initiatives, which can include legislation, unclaimed property audits, market conduct examinations and related litigation, could have the effect of altering the terms of Kemper’s life insurance subsidiaries’ existing life insurance contracts by imposing requirements that did not exist and were not contemplated at the time those companies entered into such contracts.

In the third quarter of 2016, the Company voluntarily began implementing a comprehensive process to compare its life insurance records against one or more death verification databases to determine if any of its insureds may be deceased. See Note 2, “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial Statements for discussion of the estimated financial impact of such voluntary action recognized in the Company’s Consolidated Financial Statements. Any attempt to estimate the ultimate outcomes of the aforementioned initiatives entails uncertainties including, but not limited to (i) the scope and interpretation of DMF statutes, including the matching criteria and methodologies to be used in comparing policy records against a DMF, (ii) the universe of policies affected, (iii) the results of audits, examinations and other actions by regulators and (iv) related litigation.

NOTE 24. RELATED PARTIES

Mr. Christopher B. Sarofim, a director of Kemper, is Vice Chairman and a member of the board of directors of Fayez Sarofim & Co. (“FS&C”), a registered investment advisory firm. FS&C provided investment management services with respect to certain assets of Kemper’s subsidiary, Trinity, under an agreement between the parties. Trinity had $85.8 million in assets managed by FS&C at December 31, 2014. In 2014, Trinity began reducing the amount of assets managed by FS&C. Trinity completed the disposal of all the assets managed by FS&C in 2015. Investment Expenses incurred in connection with such agreement were $0.1 million and $0.3 million for the years ended December 31, 2015, and 2014, respectively.

The Company’s Pension Plan had $148.4 million, $137.2 million and $159.2 million in assets managed by FS&C at December 31, 2016, 2015 and 2014, respectively, under an agreement with FS&C whereby FS&C provides investment management services with respect to certain funds of the plan. Investment Expenses incurred in connection with such agreement were $0.8 million, $0.4 million and $0.4 million for the years ended December 31, 2016, 2015 and 2014, respectively.

With respect to the Company’s defined contribution plans, until November 4, 2014, one of the alternative investment choices afforded to participating employees was the Dreyfus Appreciation Fund, an open-end, diversified managed investment fund. FS&C provides investment management services to the Dreyfus Appreciation Fund as a sub-investment advisor. The Company did not compensate FS&C for services provided to the Dreyfus Appreciation Fund.

The Company believes that the transactions described above have been provided on terms no less favorable to the Company than could have been negotiated with non-affiliated third parties.

As described in Note 21, “Other Reinsurance,” to the Consolidated Financial Statements, the Company also has certain relationships with Capitol, a mutual insurance company which is owned by its policyholders, and its subsidiary, ORCC.

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NOTE 25. QUARTERLY FINANCIAL INFORMATION (Unaudited)

Three Months Ended (Unaudited) Year Ended Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2016 2016 2016 2016 2016 Revenues: Earned Premiums $ 546.0 $ 553.7 $ 558.9 $ 561.4 $ 2,220.0 Net Investment Income 67.0 73.7 77.7 79.9 298.3 Other Income 0.8 0.6 0.8 1.0 3.2 Net Realized Gains on Sales of Investments 6.8 5.6 11.6 9.1 33.1 Other-than-temporary Impairment Losses: Total Other-than-temporary Impairment Losses (9.6) (6.4) (8.3) (8.7) (33.0) Portion of Losses Recognized in Other Comprehensive Income 0.3 — — — 0.3 Net Impairment Losses Recognized in Earnings (9.3) (6.4) (8.3) (8.7) (32.7) Total Revenues 611.3 627.2 640.7 642.7 2,521.9 Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses 436.2 436.1 490.2 418.3 1,780.8 Insurance Expenses 159.3 167.8 161.7 158.5 647.3 Interest and Other Expenses 22.3 20.7 22.0 25.3 90.3 Total Expenses 617.8 624.6 673.9 602.1 2,518.4 Income (Loss) from Continuing Operations before Income Taxes (6.5) 2.6 (33.2) 40.6 3.5 Income Tax Benefit (Expense) 4.3 1.5 14.9 (11.5) 9.2 Income (Loss) from Continuing Operations (2.2) 4.1 (18.3) 29.1 12.7 Income (Loss) from Discontinued Operations 0.1 (0.1) 2.0 2.1 4.1 Net Income (Loss) $ (2.1) $ 4.0 $ (16.3) $ 31.2 $ 16.8 Income (Loss) from Continuing Operations Per Unrestricted Share: Basic $ (0.04) $ 0.08 $ (0.36) $ 0.56 $ 0.25 Diluted $ (0.04) $ 0.08 $ (0.36) $ 0.56 $ 0.25 Net Income (Loss) Per Unrestricted Share: Basic $ (0.04) $ 0.08 $ (0.32) $ 0.60 $ 0.33 Diluted $ (0.04) $ 0.08 $ (0.32) $ 0.60 $ 0.33 Dividends Paid to Shareholders Per Share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

The sum of quarterly per share amounts may not equal per share amounts for the year due to differences in weighted-average shares and/or equivalent shares outstanding for each of the periods presented.

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NOTE 25. QUARTERLY FINANCIAL INFORMATION (Unaudited) (Continued)

Three Months Ended (Unaudited) Year Ended Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2015 2015 2015 2015 2015 Revenues: Earned Premiums $ 431.3 $ 500.1 $ 536.7 $ 541.5 $ 2,009.6 Net Investment Income 70.6 76.7 75.9 79.4 302.6 Other Income 0.9 0.6 0.8 1.4 3.7 Net Realized Gains on Sales of Investments 3.4 34.0 5.3 9.4 52.1 Other-than-temporary Impairment Losses: Total Other-than-temporary Impairment Losses (7.0) (2.2) (3.3) (14.9) (27.4) Portion of Losses Recognized in Other Comprehensive Income — — — 0.2 0.2 Net Impairment Losses Recognized in Earnings (7.0) (2.2) (3.3) (14.7) (27.2) Total Revenues 499.2 609.2 615.4 617.0 2,340.8 Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses 297.7 375.1 378.8 416.0 1,467.6 Insurance Expenses 144.9 162.1 161.1 177.0 645.1 Write-off Long-lived Asset — 11.1 — — 11.1 Loss from Early Extinguishment of Debt 9.1 — — — 9.1 Interest and Other Expenses 29.7 26.6 25.7 25.6 107.6 Total Expenses 481.4 574.9 565.6 618.6 2,240.5 Income (Loss) from Continuing Operations before Income Taxes 17.8 34.3 49.8 (1.6) 100.3 Income Tax Benefit (Expense) (4.3) (6.9) (11.8) 2.9 (20.1) Income from Continuing Operations 13.5 27.4 38.0 1.3 80.2 Income (Loss) from Discontinued Operations — 2.3 (0.1) 3.3 5.5 Net Income $ 13.5 $ 29.7 $ 37.9 $ 4.6 $ 85.7 Income from Continuing Operations Per Unrestricted Share: Basic $ 0.26 $ 0.53 $ 0.73 $ 0.03 $ 1.55 Diluted $ 0.26 $ 0.53 $ 0.73 $ 0.03 $ 1.55 Net Income Per Unrestricted Share: Basic $ 0.26 $ 0.57 $ 0.73 $ 0.09 $ 1.65 Diluted $ 0.26 $ 0.57 $ 0.73 $ 0.09 $ 1.65 Dividends Paid to Shareholders Per Share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

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TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF KEMPER CORPORATION

We have audited the accompanying consolidated balance sheets of Kemper Corporation and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedules listed in the index at Item 15. We also have audited the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedules and an opinion on the Company’s internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kemper Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP Chicago, Illinois February 13, 2017

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Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not Applicable

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

The Company’s management, with participation of Kemper’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, Kemper’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by Kemper in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC’s rules and forms, and accumulated and communicated to the Company’s management, including Kemper’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management Report on Internal Control Over Financial Reporting

We, as management of the Company, are responsible for establishing and maintaining adequate internal control over financial reporting. Pursuant to the rules and regulations of the SEC, internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2016, based on the control criteria established in a report entitled Internal Control—Integrated Framework, issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that the Company’s internal control over financial reporting is effective as of December 31, 2016.

The independent registered public accounting firm of Deloitte & Touche LLP, as auditors of the consolidated financial statements of Kemper and its subsidiaries, has issued an attestation report on the effectiveness of management’s internal control over financial reporting based on criteria established in Internal Control—Integrated Framework, issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.

/S/ JOSEPH P. LACHER, JR. /S/ JAMES J. MCKINNEY Joseph P. Lacher, Jr. James J. McKinney President and Chief Executive Officer Senior Vice President and Chief Financial Officer

February 13, 2017

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Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

The attestation report of the independent registered public accounting firm, Deloitte & Touche LLP, on the Company’s internal control over financial reporting is included in Item 8 under the heading “Report of Independent Registered Public Accounting Firm,” and is incorporated herein by reference.

Item 9B. Other Information.

At its meeting on February 7, 2017, the Compensation Committee of the Board of Directors approved annual incentive compensation awards pursuant to Kemper’s Executive Performance Plan and the Company’s new incentive compensation program implemented in 2016. The Compensation Committee approved a cash incentive award under the new program for Mr. Roeske, one of the “named executive officers” in the Proxy Statement for Kemper’s 2016 Annual Meeting of Shareholders, who does not participate in the Executive Performance Plan. The amount of the award approved for Mr. Roeske for 2016 was not materially different from the amount of the award he had received for 2015 under the Company’s prior program.

The Compensation Committee also approved a change in practice with regard to the grant date for its annual equity-based compensation awards. Beginning with the 2017 annual awards, the grant date will be the date of the committee’s first quarter meeting at which such awards are approved, resuming the practice for such awards prior to 2016.

130

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item is incorporated herein by reference to the sections captioned “Election of Directors,” “Executive Officers,” “Ownership of Kemper Common Stock” and “Corporate Governance” in the Proxy Statement for Kemper’s 2017 Annual Meeting of Shareholders. Kemper plans to file such proxy statement within 120 days after December 31, 2016, the end of Kemper’s fiscal year.

Kemper’s code of ethics applicable to its chief executive officer, chief financial officer and principal accounting officer (“Code of Ethics for Senior Financial Executives”) is posted in the “Governance” section of Kemper’s website, kemper.com. Kemper also intends to disclose any future amendments to, and any waivers from (though none are anticipated), the Code of Ethics for Senior Financial Executives in the “Governance” section of its website.

Item 11. Executive Compensation.

The information required by this Item is incorporated herein by reference to the sections captioned “Executive Compensation,” “Executive Officer Compensation and Benefits,” “Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the Proxy Statement for Kemper’s 2017 Annual Meeting of Shareholders. The Compensation Committee Report to be included in such Proxy Statement shall be deemed to be furnished in this report and shall not be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act as a result of such furnishing in this Item 11.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is set forth in the table below and incorporated herein by reference to the section captioned “Ownership of Kemper Common Stock” in the Proxy Statement for Kemper’s 2017 Annual Meeting of Shareholders.

Equity Compensation Plan Information

Number of Securities Number of Securities Remaining Available to be Issued Upon Weighted-Average for Future Issuance Exercise of Exercise Price of Under Equity Outstanding Options, Outstanding Options, Compensation Plans Plan Category Warrants and Rights Warrants and Rights or Programs (1) Equity Compensation Plans Approved by Security Holders 1,306,123 $ 36.35 6,762,714 Equity Compensation Plans Not Approved by Security Holders — — — Total 1,306,123 $ 36.35 6,762,714

(1) Includes 682,752 shares reserved for future grants based on the achievement of performance goals under the terms of outstanding performance-based RSU awards.

Kemper’s Omnibus Plan permits various stock-based awards including, but not limited to, stock options, stock appreciation rights, DSUs, time-vested restricted stock and RSUs, and performance-based restricted stock and RSUs.

The design of the Omnibus Plan provides for fungible use of shares to determine the number of shares available for future grants, with a fungible conversion factor of three to one, such that the Share Authorization will be reduced at two different rates, depending on the type of award granted. Each share of Kemper common stock issuable upon the exercise of stock options or stock appreciation rights will reduce the number of shares available for future grant under the Share Authorization by one share, while each share of Kemper common stock issued pursuant to “full value awards” will reduce the number of shares available for future grant under the Share Authorization by three shares. “Full value awards” are awards, other than stock options or stock appreciation rights, that are settled by the issuance of shares of Kemper common stock and include restricted stock, RSUs, DSUs, if settled with stock, and other stock-based awards.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is incorporated herein by reference to the sections captioned “Related Person Transactions” and “Director Independence” in the Proxy Statement for Kemper’s 2017 Annual Meeting of Shareholders.

Item 14. Principal Accounting Fees and Services.

The information required by this Item is incorporated by reference to the section captioned “Independent Registered Public Accountant” in the Proxy Statement for Kemper’s 2017 Annual Meeting of Shareholders.

132

Item 15. Exhibits, Financial Statement Schedules.

(a) Documents filed as part of this Report 1. Financial Statements. The consolidated balance sheets of Kemper and subsidiaries as of December 31, 2016 and 2015, and the consolidated statements of income, comprehensive income (loss), cash flows and shareholders’ equity for the years ended December 31, 2016, 2015 and 2014, together with the notes thereto and the report of Deloitte & Touche LLP thereon appearing in Item 8 are included in this 2016 Annual Report. 2. Financial Statement Schedules. The following four financial statement schedules are included on the pages immediately following the signature pages hereof. Schedules not listed here have been omitted because they are not applicable or not material or the required information is included in the Consolidated Financial Statements. Schedule I Investments Other Than Investments in Related Parties Schedule II Parent Company Financial Statements Schedule III Supplementary Insurance Information Schedule IV Reinsurance Schedule The Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP, with regards to the Financial Statement Schedules listed above, is incorporated by reference to the Report of Independent Registered Public Accountant included in Item 8. 3. Exhibits. An Exhibit Index has been filed as part of this report on pages E-1 through E-5.

(b) Exhibits. Included in Item 15(a)3 above

Item 16. Form 10-K Summary

None

133

Each person whose signature appears below on the following page hereby appoints each of Joseph P. Lacher, Jr., President and Chief Executive Officer, James J. McKinney, Senior Vice President and Chief Financial Officer, and Richard Roeske, Vice President and Chief Accounting Officer, so long as such individual remains an executive officer of Kemper Corporation, his true and lawful attorney- in-fact with authority together or individually to execute in the name of each such signatory, and with authority to file with the SEC, any and all amendments to this 2016 Annual Report of Kemper Corporation, together with any and all exhibits thereto and other documents therewith, necessary or advisable to enable Kemper Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations, and requirements of the SEC in respect thereof, which amendments may make such other changes in the 2016 Annual Report as the aforesaid attorney-in-fact executing the same deems appropriate.

SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Kemper Corporation has duly caused this 2016 Annual Report on Form 10-K for the fiscal year ended December 31, 2016 to be signed on its behalf by the undersigned, thereunto duly authorized, on February 13, 2017.

KEMPER CORPORATION (Registrant)

By: /S/ JOSEPH P. LACHER, JR. Joseph P. Lacher, Jr. President, Chief Executive Officer and Director

134

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Kemper Corporation in the capacities indicated on February 13, 2017.

Signature Title /S/ ROBERT J. JOYCE Chairman of the Board and Director Robert J. Joyce

/S/ JOSEPH P. LACHER, JR. President, Chief Executive Officer and Director (principal Joseph P. Lacher, Jr. executive officer)

/S/ JAMES J. MCKINNEY Senior Vice President and Chief Financial Officer (principal James J. McKinney financial officer)

/S/ RICHARD ROESKE Vice President and Chief Accounting Officer (principal accounting Richard Roeske officer)

/S/ GEORGE N. COCHRAN Director George N. Cochran

/S/ KATHLEEN M. CRONIN Director Kathleen M. Cronin

/S/ DOUGLAS G. GEOGA Director Douglas G. Geoga

/S/ THOMAS M. GOLDSTEIN Director Thomas M. Goldstein

/S/ LACY M. JOHNSON Director Lacy M. Johnson

/S/ CHRISTOPHER B. SAROFIM Director Christopher B. Sarofim

/S/ DAVID P. STORCH Director David P. Storch

135

KEMPER CORPORATION AND SUBSIDIARIES INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES DECEMBER 31, 2016 (Dollars in Millions)

Amount Amortized Carried in Cost Fair Value Balance Sheet Fixed Maturities: Bonds and Notes: United States Government and Government Agencies and Authorities $ 321.2 $ 336.3 $ 336.3 States and Political Subdivisions 1,640.6 1,714.9 1,714.9 Foreign Governments 3.5 3.4 3.4 Corporate Securities: Other Bonds and Notes 2,758.9 2,944.8 2,944.8 Redeemable Preferred Stocks 0.5 0.6 0.6 Collateralized Loan Obligations 121.2 122.8 122.8 Other Mortgage- and Asset-backed 0.9 2.1 2.1 Total Investments in Fixed Maturities 4,846.8 5,124.9 5,124.9 Equity Securities: Preferred Stocks 76.6 82.5 82.5 Common Stocks 38.4 45.2 45.2 Other Equity Interests 319.4 354.0 354.0 Total Investments in Equity Securities 434.4 481.7 481.7 Fair Value Option Investments 111.4 111.4 111.4 Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings 175.9 XXX.X 175.9 Loans, Real Estate and Other Investments 439.9 XXX.X 439.9 Short-term Investments 273.7 XXX.X 273.7 Total Investments $ 6,282.1 $ 6,607.5

See Accompanying Report of Independent Registered Public Accounting Firm.

SCH I-1

KEMPER CORPORATION PARENT COMPANY BALANCE SHEETS (Dollars in Millions)

December 31, 2016 2015 ASSETS Investments in Subsidiaries $ 2,575.5 $ 2,586.6 Fixed Maturities at Fair Value (Amortized Cost: 2016 – $46.3; 2015 – $15.1) 46.3 15.1 Equity Securities at Fair Value (Cost: 2016 – $5.2; 2015 – $11.1) 5.3 10.9 Fair Value Option Investments 111.4 164.5 Short-term Investments 120.0 134.8 Cash 15.7 15.9 Other Receivables 3.4 5.7 Current Income Taxes 2.4 — Other Assets 7.5 6.1 Total Assets $ 2,887.5 $ 2,939.6 LIABILITIES AND SHAREHOLDERS’ EQUITY Senior Notes Payable, 6.00% due 2017 (Fair Value: 2016 – $365.3; 2015 – $374.0) $ 359.8 $ 359.1 Senior Notes Payable, 4.35% due 2025 (Fair Value: 2016 - $248.5; 2015 – $248.3) 247.7 247.4 Subordinated Debentures due 2054 (Fair Value: 2016 – $157.1; 2015 – $159.0) 144.1 144.1 Current Income Tax Liability — 11.3 Deferred Income Tax Liability 34.0 22.0 Liabilities for Benefit Plans 118.7 154.8 Accrued Expenses and Other Liabilities 8.0 8.5 Total Liabilities 912.3 947.2 Shareholders’ Equity: Common Stock 5.1 5.1 Additional Paid-in Capital 660.3 654.0 Retained Earnings 1,172.8 1,209.0 Accumulated Other Comprehensive Income 137.0 124.3 Total Shareholders’ Equity 1,975.2 1,992.4 Total Liabilities and Shareholders’ Equity $ 2,887.5 $ 2,939.6

See Accompanying Report of Independent Registered Public Accounting Firm.

SCH II-1

For The Years Ended December 31, 2016 2015 2014 Net Investment Income $ 2.0 $ 1.7 $ 0.9 Net Realized Gains (Losses) on Sales of Investments 0.1 (0.1) (0.2) Net Impairment Losses Recognized in Earnings — (1.6) (1.7) Total Revenues 2.1 — (1.0) Interest Expense 45.2 47.3 47.9 Loss from Early Extinguishment of Debt — 9.1 — Other Operating (Benefits) Expenses (6.1) 17.6 2.7 Total Operating Expenses 39.1 74.0 50.6 Loss before Income Taxes and Equity in Net Income of Subsidiaries (37.0) (74.0) (51.6) Income Tax Benefit 13.4 26.5 18.9 Loss before Equity in Net Income of Subsidiaries (23.6) (47.5) (32.7) Equity in Net Income of Subsidiaries 40.4 133.2 147.2 Net Income $ 16.8 $ 85.7 $ 114.5

See Accompanying Report of Independent Registered Public Accounting Firm.

SCH II-2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document KEMPER CORPORATION PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME (Dollars in Millions)

For The Years Ended December 31, 2016 2015 2014 Net Income $ 16.8 $ 85.7 $ 114.5 Other Comprehensive Income (Loss): Unrealized Holding Gains (Losses) Arising During the Year: Securities Held by Subsidiaries (2.6) (150.4) 261.7 Securities Held by Parent 0.2 (1.5) (2.0) Reclassification Adjustment for Amounts Included in Net Income: Securities Held by Subsidiaries 0.2 (26.9) (26.8) Securities Held by Parent — 1.5 1.7 Unrealized Holding Gains (Losses) (2.2) (177.3) 234.6 Unrecognized Postretirement Benefit Costs Arising During the Year 14.2 3.0 (106.4) Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized 1.0 — — Amortization of Unrecognized Postretirement Benefit Costs 5.3 23.1 7.9 Total Reclassification Adjustments for Amounts Included in Net Income 6.3 23.1 7.9 Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Foreign Currency Translation Adjustments on Investments Held by Subsidiaries (0.3) (1.4) (1.0) Gain on Cash Flow Hedge 1.6 — — Other Comprehensive Income (Loss) before Income Taxes 19.6 (152.6) 135.1 Income Tax Benefit (Expense): Unrealized Holding Gains and Losses Arising During the Year: Securities Held by Subsidiaries 1.1 53.4 (92.3) Securities Held by Parent (0.1) 0.5 0.7 Reclassification Adjustment for Amounts Included in Net Income: Securities Held by Subsidiaries (0.1) 9.4 9.4 Securities Held by Parent — (0.5) (0.6) Unrealized Holding Gains and Losses 0.9 62.8 (82.8) Unrecognized Postretirement Benefit Costs Arising During the Year (5.0) (1.1) 37.5 Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized (0.4) — — Amortization of Unrecognized Postretirement Benefit Costs (1.9) (8.0) (2.8) Total Reclassification Adjustments for Amounts Included in Net Income (2.3) (8.0) (2.8) Net Unrecognized Postretirement Benefit Costs (7.3) (9.1) 34.7 Foreign Currency Translation Adjustments on Investments Held by Subsidiaries 0.1 0.5 0.4 Gain on Cash Flow Hedge (0.6) — — Income Tax Benefit (Expense) (6.9) 54.2 (47.7) Other Comprehensive Income (Loss) 12.7 (98.4) 87.4 Total Comprehensive Income (Loss) $ 29.5 $ (12.7) $ 201.9

SCH II-3

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document KEMPER CORPORATION PARENT COMPANY STATEMENTS OF CASH FLOWS (Dollars in Millions)

For The Years Ended December 31, 2016 2015 2014 Operating Activities: Net Income $ 16.8 $ 85.7 $ 114.5 Adjustment Required to Reconcile Net Income to Net Cash Provided by Operations: Equity in Net Income of Subsidiaries (40.4) (133.2) (147.2) Cash Dividends from Subsidiaries 77.7 285.0 159.1 Cash Received for Benefit Plan from Subsidiary 1.4 — — Cash Contribution to Defined Benefit Plan (9.0) — — Net Realized (Gains) Losses on Sales of Investments (0.1) 0.1 0.2 Net Impairment Losses Recognized in Earnings — 1.6 1.7 Loss from Early Extinguishment of Debt — 9.1 — Other, Net (9.3) 41.6 10.5 Net Cash Provided by Operating Activities 37.1 289.9 138.8 Investing Activities: Capital Contributed to Subsidiary (52.9) (105.0) — Capital Distribution from Subsidiary — — 1.1 Sales, Paydowns and Maturities of Fixed Maturities 73.5 11.8 11.5 Purchases of Fixed Maturities (77.9) (14.8) — Sales of Equity Securities 3.5 9.4 15.1 Sales of Fair Value Option Investments 72.2 — 6.9 Purchases of Fair Value Option Investments (21.0) (111.0) (60.9) Acquisition of Business — (71.0) — Change in Short-term Investments 14.8 90.3 (94.3) Net Cash Provided (Used) by Investing Activities 12.2 (190.3) (120.6) Financing Activities: Net Proceeds from Issuance of Debt — 247.3 144.0 Repayments of Debt — (258.8) — Cash Dividends Paid (49.2) (49.7) (51.8) Common Stock Repurchases (3.8) (45.0) (114.0) Cash Exercise of Stock Options 3.5 3.9 0.5 Excess Tax Benefits on Share Based Awards — 0.7 0.2 Net Cash Used by Financing Activities (49.5) (101.6) (21.1) Decrease in Cash (0.2) (2.0) (2.9) Cash, Beginning of Year 15.9 17.9 20.8 Cash, End of Year $ 15.7 $ 15.9 $ 17.9

See Accompanying Report of Independent Registered Public Accounting Firm.

KEMPER CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INSURANCE INFORMATION (Dollars in Millions)

Year Ended December 31, At December 31 Insurance Claims Amortization and Of Deferred Deferred Net Policy- Policy Other Policy Earned Premiums Other Investment holders’ Acquisition Insurance Acquisition Insurance Unearned Premiums Written Income Income Benefits Costs Expenses Costs Reserves Premiums 2016 Property & Casualty Insurance $1,614.8 $1,620.9 $ 0.5 $ 72.4 $1,319.2 $ 252.1 $ 133.6 $ 82.1 $ 884.1 $ 592.0 Life & Health Insurance (1) 605.2 N/A 2.8 213.2 461.6 47.2 266.7 249.9 3,479.8 26.7 Other — N/A (0.1) 12.7 — — (52.3) — 42.8 — Total $2,220.0 N/A $ 3.2 $ 298.3 $1,780.8 $ 299.3 $ 348.0 $ 332.0 $4,406.7 $ 618.7 2015 Property & Casualty Insurance $1,415.2 $1,406.2 $ 0.6 $ 73.3 $1,086.2 $ 213.1 $ 155.0 $ 80.7 $ 800.5 $ 586.1 Life & Health Insurance (1) 594.4 N/A 2.4 214.2 381.3 44.3 275.7 235.7 3,346.2 27.0 Other — N/A 0.7 15.1 — — (42.9) — 57.1 — Total $2,009.6 N/A $ 3.7 $ 302.6 $1,467.5 $ 257.4 $ 387.8 $ 316.4 $4,203.8 $ 613.1 2014 Property & Casualty Insurance $1,249.5 $1,189.1 $ 0.5 $ 72.7 $ 887.3 $ 187.5 $ 166.2 Life & Health Insurance (1) 612.7 N/A 0.9 218.7 374.4 47.9 268.1 Other — N/A — 17.7 — — (41.3) Total $1,862.2 N/A $ 1.4 $ 309.1 $1,261.7 $ 235.4 $ 393.0

(1) The Company’s Life & Health Insurance employee-agents also market certain property and casualty insurance products under common management. Accordingly, the Company includes the results of these property and casualty insurance products in its Life & Health Insurance segment.

See Accompanying Report of Independent Registered Public Accounting Firm.

SCH III-1

KEMPER CORPORATION REINSURANCE SCHEDULE FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 (Dollars in Millions)

Percentage Ceded to Assumed of Amount Gross Other from Other Net Assumed to Amount Companies Companies Amount Net Year Ended December 31, 2016 Life Insurance in Force $ 20,889.0 $ 486.9 $ 195.0 $ 20,597.1 0.9% Premiums: Life Insurance $ 381.4 $ 1.4 $ 1.3 $ 381.3 0.3% Accident and Health Insurance 144.9 0.5 5.3 149.7 3.5% Property and Liability Insurance 1,645.4 17.1 60.7 1,689.0 3.6% Total Premiums $ 2,171.7 $ 19.0 $ 67.3 $ 2,220.0 3.0% Year Ended December 31, 2015 Life Insurance in Force $ 20,209.8 $ 514.2 $ 205.7 $ 19,901.3 1.0% Premiums: Life Insurance $ 374.1 $ 1.4 $ 1.4 $ 374.1 0.4% Accident and Health Insurance 139.8 0.5 5.6 144.9 3.9% Property and Liability Insurance 1,456.2 18.7 53.1 1,490.6 3.6% Total Premiums $ 1,970.1 $ 20.6 $ 60.1 $ 2,009.6 3.0% Year Ended December 31, 2014 Life Insurance in Force $ 20,565.9 $ 541.5 $ 217.8 $ 20,242.2 1.1% Premiums: Life Insurance $ 387.5 $ 1.5 $ 1.6 $ 387.6 0.4% Accident and Health Insurance 146.3 0.5 2.8 148.6 1.9% Property and Liability Insurance 1,297.3 24.0 52.7 1,326.0 4.0% Total Premiums $ 1,831.1 $ 26.0 $ 57.1 $ 1,862.2 3.1%

See Accompanying Report of Independent Registered Public Accounting Firm.

SCH IV-1

The following exhibits are either filed as a part hereof or are incorporated by reference. Exhibit numbers followed by an asterisk (*) indicate exhibits that are management contracts or compensatory plans or arrangements.

Incorporated by Reference Filed or Exhibit Furnished Number Exhibit Description Form File Number Exhibit Filing Date Herewith 3.1 Restated Certificate of Incorporation 8-K 001-18298 3.2 August 8, 2014 3.2 Amended and Restated Bylaws of Kemper 8-K 001-18298 3.3 August 8, 2014 Corporation 4.1 Indenture dated as of June 26, 2002, by and between 8-K 001-18298 4.1 May 14, 2012 Kemper and The Bank of New York Trust Company, N.A., as successor trustee to BNY Midwest Trust Company, as Trustee 4.2 Officers’ Certificate, including form of Senior Note 10-Q 001-18298 4.3 May 7, 2012 with respect to Kemper’s 6.00% Senior Notes due May 15, 2017 4.3 Indenture, dated as of February 27, 2014, by and 8-K 001-18298 4.1 February 27, 2014 between Kemper Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee 4.4 First Supplemental Indenture dated as of February 8-K 001-18298 4.2 February 27, 2014 27, 2014, to the Indenture dated as of February 27, 2014, by and between Kemper and The Bank of New York Mellon Trust Company, N.A., as Trustee (including the form of 7.375% Subordinated Debentures due 2054). 4.5 Second Supplemental Indenture, dated as of 8-K 001-18298 4.2 February 24, 2015 February 24, 2015, to the Indenture, dated as of February 27, 2014, between Kemper Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee (including the form of 4.350% Senior Notes due 2025) 4.6 Form of Certificate Representing Shares of Kemper 10-K 001-18298 4.6 February 12, 2016 Corporation Common Stock 10.1 Amended and Restated Credit Agreement, dated as 8-K 001-18298 10.1 June 8, 2015 of June 2, 2015, by and among Kemper, the lenders party thereto, JP Morgan Chase Bank, N.A., as administrative agent, swing line lender and issuing bank, and Wells Fargo Bank, National Association and Fifth Third Bank, as co-syndication agents 10.2 Advances and Security Agreement and Addendum 10-K 001-18298 10.2 February 14, 2014 to Advances and Security Agreement, effective as of December 31, 2013, between Trinity Universal Insurance Company and the Federal Home Loan Bank of Dallas 10.3 Advances, Collateral Pledge, and Security 8-K 001-18298 10.1 March 21, 2014 Agreement, dated as of March 18, 2014, between United Insurance Company of America and the Federal Home Loan Bank of Chicago 10.4* Kemper Pension Equalization Plan, as amended and 10-K 001-18298 10.3 February 14, 2014 restated effective August 25, 2011, as amended by Amendment No. 2 effective September 16, 2013

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 10.5* Kemper Supplemental Retirement Plan, as amended X and restated effective September 22, 2016

E-1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Incorporated by Reference Filed or Exhibit Furnished Number Exhibit Description Form File Number Exhibit Filing Date Herewith 10.6* Kemper Non-Qualified Deferred Compensation 10-Q 001-18298 10.3 May 5, 2016 Plan, as amended and restated effective March 16, 2016 10.7* Kemper Severance Plan, as amended and restated 10-Q 001-18298 10.18 November 2, 2011 effective August 25, 2011 10.8* Kemper 1995 Non-employee Director Stock Option 10-K 001-18298 10.2 February 4, 2009 Plan, as amended and restated effective February 3, 2009 10.9* Form of Stock Option Agreement under the Kemper 10-Q 001-18298 10.6 May 4, 2011 1995 Non-employee Director Stock Option Plan, as of February 1, 2006 10.10* Form of Stock Option Agreement under the Kemper 10-K 001-18298 10.7 February 4, 2009 1995 Non-employee Director Stock Option Plan, as of February 3, 2009 10.11* Kemper 1997 Stock Option Plan, as amended and 10-Q 001-18298 10.2 May 4, 2011 restated effective February 1, 2006 10.12* Form of Stock Option and SAR Agreement under 10-Q 001-18298 10.8 May 4, 2011 the Kemper 1997 Stock Option Plan, as of February 1, 2006 10.13* Kemper 2002 Stock Option Plan, as amended and 10-K 001-18298 10.4 February 4, 2009 restated effective February 3, 2009 10.14* Form of Stock Option and SAR Agreement under 10-Q 001-18298 10.9 May 4, 2011 the Kemper 2002 Stock Option Plan, as of February 1, 2006 10.15* Form of Stock Option Agreement (including stock 10-K 001-18298 10.9 February 3, 2011 appreciation rights) under the Kemper 2002 Stock Option Plan, as of February 1, 2011 10.16* Kemper 2011 Omnibus Equity Plan, as amended 10-Q 001-18298 10.1 October 31, 2013 and restated effective October 30, 2013 10.17* Kemper 2011 Omnibus Equity Plan, as amended X and restated effective February 8, 2017 10.18* Form of Stock Option and SAR Agreement for 10-K 001-18298 10.13 February 17, 2012 Non-employee Directors under the Kemper 2011 Omnibus Equity Plan, as of August 25, 2011 10.19* Form of Time-Vested Restricted Stock Award 10-K 001-18298 10.24 February 15, 2013 Agreement under the Kemper 2011 Omnibus Equity Plan, as of February 4, 2013 10.20* Form of Performance-Based Restricted Stock 10-K 001-18298 10.25 February 15, 2013 Award Agreement under the Kemper 2011 Omnibus Equity Plan, as of February 4, 2013 10.21* Form of Stock Option and SAR Agreement for 10-Q 001-18298 10.1 May 2, 2013 Non-employee Directors under the Kemper 2011 Omnibus Equity Plan, as of May 1, 2013 10.22* Form of Deferred Stock Unit Agreement for Non- 10-Q 001-18298 10.2 May 2, 2013 employee Directors under the Kemper 2011 Omnibus Equity Plan, as of May 1, 2013 10.23* Form of Stock Option and SAR Agreement - 10-K 001-18298 10.24 February 14, 2014 Installment-Vesting form under the Kemper 2011 Omnibus Equity Plan, as of February 4, 2014

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Incorporated by Reference Filed or Exhibit Furnished Number Exhibit Description Form File Number Exhibit Filing Date Herewith 10.24* Form of Stock Option and SAR Agreement - Cliff- 10-K 001-18298 10.25 February 14, 2014 Vesting Form under the Kemper 2011 Omnibus Equity Plan, as of February 4, 2014 10.25* Form of Time-Vested Restricted Stock Unit Award 10-K 001-18298 10.26 February 14, 2014 Agreement - Installment-Vesting Form under the Kemper 2011 Omnibus Equity Plan, as of February 4, 2014 10.26* Form of Time-Vested Restricted Stock Unit Award 10-K 001-18298 10.27 February 14, 2014 Agreement - Cliff- Vesting Form under the Kemper 2011 Omnibus Equity Plan, as of February 4, 2014 10.27* Form of Performance-Based Restricted Stock Unit 10-K 001-18298 10.28 February 14, 2014 Award Agreement under the Kemper 2011 Omnibus Equity Plan, as of February 4, 2014 10.28* Form of Performance-Based Restricted Stock Unit 10-Q 001-18298 10.1 May 5, 2016 Award Agreement under the Kemper 2011 Omnibus Equity Plan, as of February 26, 2016 10.29* Form of Performance-Based Restricted Stock Unit X Award Agreement (Relative TSR) under the Kemper 2011 Omnibus Equity Plan, as of February 7, 2017 10.30* Form of Performance-Based Restricted Stock Unit X Award Agreement (Adjusted ROE) under the Kemper 2011 Omnibus Equity Plan, as of February 7, 2017 10.31* Form of Stock Option and SAR Agreement - X Installment-Vesting form under the Kemper 2011 Omnibus Equity Plan, as of February 7, 2017 10.32* Form of Stock Option and SAR Agreement - Cliff- X Vesting Form under the Kemper 2011 Omnibus Equity Plan, as of February 7, 2017 10.33* Form of Time-Vested Restricted Stock Unit Award X Agreement - Installment-Vesting Form under the Kemper 2011 Omnibus Equity Plan, as of February 7, 2017 10.34* Form of Time-Vested Restricted Stock Unit Award X Agreement - Cliff- Vesting Form under the Kemper 2011 Omnibus Equity Plan, as of February 7, 2017 10.35* Kemper 2009 Performance Incentive Plan, as 10-Q 001-18298 10.2 October 31, 2013 amended and restated effective October 29, 2013 (for awards through February 3, 2014) 10.36* Form of Multi-Year Incentive Award Agreement 10-K 001-18298 10.21 February 15, 2013 under the Kemper 2009 Performance Incentive Plan, as of February 4, 2013 10.37* Kemper 2009 Performance Incentive Plan, as 10-K 001-18298 10.32 February 14, 2014 amended and restated effective February 4, 2014 10.38* Form of Annual Incentive Award Agreement under 10-K 001-18298 10.33 February 14, 2014 the Kemper 2009 Performance Incentive Plan, as of February 4, 2014

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 10.39* Form of Multi-Year Incentive Award Agreement 10-K 001-18298 10.34 February 14, 2014 under the Kemper 2009 Performance Incentive Plan, as of February 4, 2014

E-3

Joseph P. Lacher, Jr. (President and Chief Executive Officer) John M. Boschelli (Senior Vice President and Chief Investment Officer) Charles T. Brooks (Senior Vice President & Chief Information Officer) George "Chip" D. Dufala, Jr. (Senior Vice President and President, Property & Casualty Division) C. Thomas Evans, Jr. (Senior Vice President, Secretary & General Counsel) Mark A. Green (Senior Vice President and President, Life & Health Division) James J. McKinney (Senior Vice President and Chief Financial Officer) Christine F. Mullins (Senior Vice President, Chief Human Resources Officer) Richard Roeske (Vice President and Chief Accounting Officer) Each of the foregoing agreements is identical except that the multipliers for benefits related to bonus, severance, life insurance and health insurance are 150%, 3 years, 3 years and 36 months, respectively, for Mr. Lacher and 110%, 2 years, 2 years and 24 months, respectively, for the other officers. 10.43* Joseph P. Lacher, Jr. Offer Letter dated November 8-K 001-18298 10.1 November 20, 2015 19, 2015 10.44* Separation Agreement, dated as of March 2, 2016, 10-Q 001-18298 10.2 May 5, 2016 with Denise I. Lynch, former Vice President and Property & Casualty Group Executive of the Company 10.45* Letter with Frank J. Sodaro, former Chief Financial 10-Q 001-18298 10.1 November 3, 2016 Officer, dated October 7, 2016, with Separation Agreement included as Exhibit B and subsequently executed by the parties without material revision as of January 13, 2017 12 Ratios of Earnings to Fixed Charges X 21 Subsidiaries of Kemper Corporation X 23 Consent of Deloitte & Touche LLP X

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Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Incorporated by Reference Filed or Exhibit Furnished Number Exhibit Description Form File Number Exhibit Filing Date Herewith 31.1 Certification of Chief Executive Officer Pursuant to X SEC Rule 13a-14(a) 31.2 Certification of Chief Financial Officer Pursuant to X SEC Rule 13a-14(a) 32.1 Certification of Chief Executive Officer Pursuant to X 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K) 32.2 Certification of Chief Financial Officer Pursuant to X 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K) 101.1 XBRL Instance X 101.2 XBRL Taxonomy Extension Schema Document X 101.3 XBRL Taxonomy Extension Calculation Linkbase X Document 101.4 XBRL Taxonomy Extension Label Linkbase X Document 101.5 XBRL Taxonomy Extension Presentation Linkbase X Document 101.6 XBRL Taxonomy Extension Definition Linkbase X Document

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KEMPER CORPORATION SUPPLEMENTAL RETIREMENT PLAN

As Amended and Restated Effective September 22, 2016

Page ARTICLE I DEFINITIONS 1 ARTICLE II ELIGIBILITY 5 ARTICLE III SUPPLEMENTAL PLAN CONTRIBUTION 5 ARTICLE IV FUNDING 6 ARTICLE V INVESTMENT OF FUNDS, ACCOUNT MAINTENANCE AND VESTING 6 ARTICLE VI DISTRIBUTIONS 8 ARTICLE VII PAYMENTS UPON DEATH 9 ARTICLE VIII ADMINISTRATION OF THE PLAN 10 ARTICLE IX AMENDMENT OR TERMINATION 11 ARTICLE X GENERAL PROVISIONS 11

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Effective as of September 22, 2016, the Kemper Corporation Defined Contribution Retirement Plan (the “DC Retirement Plan”) is being merged with and into the Kemper Corporation 401(k) Savings Plan (the “Merger”), which is being renamed the Kemper Corporation 401(k) & Retirement Plan (the “Qualified Plan”). As a result of the Merger, effective as of September 22, 2016, the plan set forth herein is now known as the Kemper Corporation Supplemental Retirement Plan (the “Plan”) and the Plan is hereby amended and restated effective as of September 22, 2016 to reflect the Merger and update the Plan.

The Plan is maintained by the Company for the purpose of providing certain employees of the Company and its Affiliates with benefits in excess of the limitations imposed by Section 415 of the Internal Revenue Code on the retirement contributions, as defined in the Qualified Plan (“Retirement Contributions”), provided by the Qualified Plan. Also, only with respect to those Participants hereunder who are Top Hat Participants as defined in Section 1.24, the Plan provides benefits in excess of the limitations imposed by Section 401(a)(17) of the Internal Revenue Code on the Retirement Contributions provided by the Qualified Plan.

ARTICLE I

DEFINITIONS

1.1 General. For purposes of the Plan, the following terms, when capitalized, will have the following meanings. The masculine pronoun wherever used herein will include the feminine gender, the singular number will include the plural, and the plural will include the singular, unless the context clearly indicates a different meaning.

1.2 “Account” means the account maintained with respect to each Participant under the Plan, as described in Section 5.1.

1.3 “Administrative Committee” means the Administrative Committee of the Kemper Corporation 401(k) and Retirement Plan.

1.4 “Affiliated Company” or “Affiliate” means any corporation, trade or business entity which is a member of a controlled group of corporations, trades or businesses of which the Company is also a member, as provided in Code Sections 414(b) or (c).

1.5 “Beneficiary Designation Form” means either a written document or an electronic form on an Internet exchange system, the form of which the Company shall determine from time to time, on which a Participant shall have the right to designate a beneficiary.

1.6 “Board” means the Board of Directors of the Company.

1.7 “Change in Control Event” means the occurrence of any of the following events in subsections (a) through (d) below:

(a) any “Person” (defined below) is or becomes the “Beneficial Owner,” (defined below) directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its “Affiliate” (defined below)) representing 25% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of subsection (c) below; or

(b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on December 31, 2015, constituted the Board of Directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board of Directors or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds of the directors still in office who either were directors on December 31, 2015 or whose appointment, election or nomination for election was previously so approved or recommended; or

(c) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which results in the directors of the Company immediately prior to such merger or consolidation continuing to constitute at least a majority of the board of directors of the surviving entity or any parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliate) representing 25% or more of the combined voting power of the Company’s then outstanding securities; or

(d) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board of Directors immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or any parent thereof.

(e) As used in this definition of Change of Control Event:

(i) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”);

(ii) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act; and

(iii) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified in Sections 13(d)(3) and 14(d)(2) thereof, except that such term shall not include (1) the Company or any entity, more than 50% of the voting securities of which are Beneficially Owned by the Company, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (3) an underwriter temporarily holding securities pursuant to an offering of such securities, (4) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, (5) any individual, entity or group whose ownership of securities of the Company is reported on Schedule 13G pursuant to Rule 13d-1 promulgated under the Exchange Act (but only for so long as such ownership is so reported) or (6) Singleton Group LLC or any successor in interest to such entity.

1.8 “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder.

1.9 “Committee” means the Compensation Committee of the Board.

1.10 “Company” means Kemper Corporation, a Delaware corporation, or, to the extent provided in Section 10.10, any successor corporation or other entity resulting from a reorganization, merger or consolidation into or with the Company, or a transfer or sale of substantially all of the assets of the Company.

1.11 “Disabled” means that the Participant has a Disability as defined in the Qualified Plan.

1.12 “Employer” means the Company and its Affiliates.

1.13 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.

1.14 “Investment Preference Form” means either a written document or an electronic form on an Internet exchange system, the form of which the Company shall determine from time to time, on which a Participant shall communicate his or her investment preference.

1.15 “Participant” means an employee of the Company or of an Affiliated Company who at any time on or after January 1, 2008 is a participant under the Qualified Plan and to whom or with respect to whom a benefit is payable under the Plan. The term “Participant” shall include Top Hat Participants.

1.16 “Plan” means the Kemper Corporation Supplemental Retirement Plan.

1.17 “Plan Administrator” means the Committee.

1.18 “Plan Year” means any calendar year during which the Plan is in effect.

1.19 “Qualified Plan” means the Kemper Corporation 401(k) and Retirement Plan.

1.20 “Qualified Plan Contribution” means any Retirement Contributions made by the Employer on behalf of the Participant pursuant to Section 4.03 of the Qualified Plan.

1.21 “Regulations” means the regulations, as amended from time to time, which are issued under Code Section 409A.

1.22 “Separation from Service” means the Participant’s termination from employment from the Employer, subject to the following and other provisions of the Regulations:

(a) The employment relationship is treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual retains a right to reemployment with the Employer under an applicable statute or by contract. A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer. If the period of leave exceeds six months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such six-month period.

(b) In determining whether a Separation from Service has occurred, the following presumptions, which may be rebutted as provided in the Regulations, shall apply:

(i) A Participant is presumed to have separated from service where the level of bona fide services performed decreases to a level equal to 20% or less of the average level of services performed by the Participant during the immediately preceding 36-month period.

(ii) A Participant will be presumed not to have separated from service where the level of bona fide services performed continues at a level that is 50% or more of the average level of services performed by the Participant during the immediately preceding 36-month period.

No presumption applies to a decrease in the level of bona fide services performed to a level that is more than 20% but less than 50% of the average level of bona fide services performed during the immediately preceding 36-month period. If a Participant had not performed services for the Employer for 36 months, the full period that the Participant has performed services for the Employer shall be substituted for 36 months.

(c) For purposes of this Section, the term “Employer” has the meaning set forth in Section 1.12, provided that the following shall apply in determining whether a person is an Affiliate as defined in Section 1.4:

(i) In applying Code Sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations under Code Section 414(b), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears in Code Sections 1563(a)(1), (2) and (3); and

(ii) In applying Treas. Reg. Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code Section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Treas. Reg. Section 1.414(c)-2.

(d) In the event of the sale or other disposition of assets by the Company or an Affiliate (the “Seller”) to an unrelated service recipient (the “Buyer”), the Seller and the Buyer may specify whether a Separation from Service has occurred for a Participant who would otherwise experience a Separation from Service with the Seller, in accordance with the rules set forth in Section 1.409A-1(h)(4) of the Regulations.

1.23 “Supplemental Plan Contribution” means the contribution made to a Participant’s Account pursuant to the terms of the Plan.

1.24 “Top Hat Participant” means a Participant who qualifies for inclusion in a “select group of management or highly compensated employees” as provided in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA and who has been designated as a Top Hat Participant by the Board, as reflected in Board minutes or other official records of the Board.

1.25 “Trust” means a so-called “rabbi trust,” the assets of which shall remain, for all purposes, a part of the general unrestricted assets of the Company.

1.26 “Valuation Date” means each day that the New York Stock Exchange is open for business. The determination of the Valuation Date as of which changes in investment preferences under the Plan are effected shall be made in accordance with rules and procedures established by the Company.

ARTICLE II

ELIGIBILITY

An employee who is eligible to receive a Qualified Plan Contribution, the amount of which is reduced by reason of the application of the limitations on benefits imposed by application of Code Section 415 (or in the case of a Top Hat Participant, is reduced by the limitations on benefits imposed by application of Code Section 401(a)(17)), shall be eligible to receive a Supplemental Plan Contribution.

ARTICLE III

SUPPLEMENTAL PLAN CONTRIBUTION

The Supplemental Plan Contribution to be credited to a Participant’s Account for each Plan Year shall be an amount equal to the difference between (a) and (b) below:

(a) the amount of the Qualified Plan Contribution to which the Participant would have been entitled if such Qualified Plan Contribution were computed: (i) without giving effect to the limitations on benefits imposed by application of Code Section 415 (and in the

case of a Top Hat Participant, Code Section 401(a)(17)), and (ii) by modifying the compensation used to determine such Qualified Plan Contribution by including in compensation any amount which a Participant elected to have deducted from his or her compensation on a pre-tax basis and contributed to a nonqualified deferred compensation plan maintained by the Company or an Affiliate and excluding from compensation any benefits paid or payable to the Participant under such deferred compensation plan;

LESS

(b) the amount of the Qualified Plan Contribution that would have been credited to the Participant’s account under the Qualified Plan during the plan year of the Qualified Plan that is coincident with the applicable Plan Year if the Participant’s Compensation used to calculate such Qualified Plan Contribution were equal to the limit under Code Section 401(a)(17).

ARTICLE IV

FUNDING

4.1 Unsecured Obligation. Supplemental Plan Contributions and the hypothetical investment earnings/ losses thereon shall be reflected in book entries maintained by or on behalf of the Company, as set forth in Section 5.1. The existence of such book entries shall not create a trust of any kind, or a fiduciary relationship between the Company, any third party record keeper and the Participant, his or her designated beneficiary, or other beneficiaries provided for under the Plan. The bookkeeping entries represent an unsecured obligation of the Company to pay Supplemental Plan Contributions and the investment earnings/losses thereon to a Participant at a future date.

4.2 Discretionary Rabbi Trust. If the Company so determines, in its sole discretion, payments to a Participant or his or her designated beneficiary or any other beneficiary hereunder may be made from assets held in a Trust. No person shall have any interest in such assets by virtue of the Plan. The Company’s obligations hereunder shall be an unfunded and unsecured promise to pay money in the future. Any Participant having a right to receive payments pursuant to the provisions of the Plan shall have no greater rights than any unsecured general creditor of the Company in the event of the Company’s insolvency or bankruptcy, and no person shall have nor acquire any legal or equitable right, claim or interest in or to any property or assets of the Company. In no event shall the assets accumulated in the Trust be construed as creating a funded plan under the applicable provisions of ERISA, or under the Code, or under the provisions of any other applicable statute or regulation.

ARTICLE V

INVESTMENT OF FUNDS, ACCOUNT MAINTENANCE AND VESTING

5.1 Record Keeper. The Company shall appoint a Plan record keeper which shall establish and maintain an individual bookkeeping Account on behalf of each Participant for purposes of determining each Participant’s benefits under the Plan.

5.2 Account Adjustments.

(a) The Plan record keeper shall adjust each Participant’s Account for amounts representing:

(i) Supplemental Plan Contributions,

(ii) Hypothetical investment earnings/losses,

(iii) Expenses, and

(iv) Distributions paid to the Participant or beneficiaries.

(b) Upon becoming a Participant, each Participant, or in the absence of action by the Participant, the Trust Administrative Committee of Kemper Corporation 401(k) and Retirement Plan (the “Trust Administrative Committee”), shall specify the hypothetical measure(s) of investment performance from among the choices made available from time to time to Plan participants by the Trust Administrative Committee. The Participant’s bookkeeping account shall be deemed to be invested in the hypothetical investment selected by the Participant, or if none, in the default hypothetical investment preference selected by the Trust Administrative Committee. Investment preferences selected by the Participant are used only to determine the value of a Participant’s Account and in no event is the Company required to follow these investment preferences for actual plan investments. A Participant’s investment preference shall be communicated to the Company by completion and delivery to the Company of an Investment Preference Form in such form as the Company shall determine from time to time. Participants shall indicate their initial investment preferences by filing an Investment Preference Form with the Company prior to the date on which the first Supplemental Plan Contribution is credited to the Participant’s Account. Once elected, investment preferences shall be valid until revoked by filing a new Investment Preference Form. Participants shall have the opportunity to change their investment preferences with respect to the Account in accordance with such procedures as may be established by the Company.

(c) The Plan record keeper shall determine the value of all Accounts maintained under the terms of the Plan on each Valuation Date. The Plan record keeper shall provide each Participant with a statement of his or her individual bookkeeping Account reflecting adjustments to such Account during the period from the last statement date. Such statement shall be provided to Participants as soon as administratively feasible following the end of each calendar quarter.

5.3 Vesting. The Participant’s Account will vest upon the completion of three (3) years of vesting service, as defined in the Qualified Plan. If the Participant dies or becomes Disabled prior to his or her Separation from Service, the Participant’s Account shall become fully vested. The Participant shall forfeit any non-vested portion of his or her Account upon his or her Separation from Service.

5.4 Bookkeeping Accounts. The Accounts shall be hypothetical in nature and shall be maintained for bookkeeping purposes only, so that contributions can be credited to Participants and

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 10.5 so that investment returns on such contributions can be credited. Neither the Plan nor any of the Accounts shall hold any actual funds or assets.

ARTICLE VI

DISTRIBUTIONS 6.1 Form of Distribution. The Company shall distribute an amount equal to the vested balance of the Participant’s Account to the Participant (or, in the event of the death of the Participant, to his or her beneficiary) in the form of a single lump sum distribution or installments, as elected by the Participant. Installment payments shall be made over a term of years selected by the Participant, not to exceed 10 years in duration, and shall be paid in quarterly or annual installments, as elected by the Participant. The Participant shall make the above elections in accordance with procedures established by the Company and no later than 30 days following the date on which the Participant is initially eligible to participate in the Plan, at which time the elections shall become irrevocable. If a Participant fails to make an election within the required time period, the Participant’s benefit will be paid in the form of a single lump sum distribution.

6.2 Timing of Distribution. Subject to the provisions of Section 6.6 through Section 6.9:

(a) Upon a Participant’s Separation from Service, payment of the vested balance of the Participant’s Account shall be made, or commence, on the first day of the seventh month following the Participant’s Separation from Service; and

(b) Upon a Participant’s death, payment of the vested balance of a Participant’s Account shall be made, or commence, as soon as practicable after the Participant’s death, but no later than ninety (90) days after such death.

6.3 Payment Date. A payment shall be considered to have been made on the payment date specified in Section 6.2(a) if the payment is made no later than December 31 of the calendar year in which such payment date occurs (or the last day of the Participant’s taxable year in which such payment date occurs, if earlier).

6.4 Transitional Relief. Prior to January 1, 2009, a Participant may change the form of payment for his Account to the extent permitted by IRS Notice 2007-86 and administrative procedures adopted by the Company.

6.5 Acceleration Prohibited. Except as provided in Section 6.7 through Section 6.9, acceleration of the time of payment of any portion of the balance of a Participant’s Account is prohibited.

6.6 Payments in Violation of Federal Securities Laws. To the extent permitted by the Regulations, the Company may delay a benefit payment where the Company reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law. Such a benefit payment shall be made at the earliest date at which the Company reasonably anticipates that the making of the benefit payment will not cause such violation and, if the Participant had

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 10.5 elected installment payments, the first payment to the Participant shall include the payments that the Participant would have received had payments begun as of the date such payments were scheduled to begin.

6.7 Accelerated Payment for Domestic Relations Orders. To the extent necessary to fulfill a domestic relations order (as defined in Code Section 414(p)(1)(B)) and as permitted by the Regulations, the Company, in its sole discretion, may accelerate the time or schedule of a benefit payment under the Plan to an individual other than the Participant, or a benefit payment under the Plan may be made to an individual other than the Participant.

6.8 Accelerated Payment for Failure to Comply with Code Section 409A. To the extent permitted by the Regulations, at any time the Plan fails to meet the requirements of Code Section 409A and the Regulations, the Company may accelerate the time or schedule of a payment, or a payment under the Plan may be made; provided, however, that such payment shall not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A and the Regulations.

6.9 Small Benefits. If, upon the first day of the seventh month following a Participant’s Separation from Service (“Payment Date”), a Participant’s Account is less than or equal to the applicable dollar limit under Code Section 402(g)(1)(B) and results in the determination and liquidation of the entirety of the Participant’s interest under all agreements, methods, programs or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Section 1.409A-1(c)(2) of the Regulations, the Company may pay such Account to the Participant or his or her beneficiary in a single lump sum, in lieu of any further benefit payments hereunder, on the Payment Date.

ARTICLE VII

PAYMENTS UPON DEATH

7.1 Payment to Beneficiary. Any benefit which a deceased Participant is entitled to receive under the Plan shall be paid to such Participant’s beneficiary. Such death benefit shall be paid in accordance with the Participant’s election pursuant to Section 6.1 and at the time specified in Section 6.2.

7.2 Designation of Beneficiary. A Participant shall have the right to designate a beneficiary on the Beneficiary Designation Form and to amend or revoke such designation at any time in writing. Such designation, amendment or revocation shall be effective only when filed with the Company. Any beneficiary designation, amendment or revocation shall apply to the Participant’s entire Account.

If no Beneficiary Designation Form is filed with the Company, or if the Beneficiary Designation Form is held invalid, or if no beneficiary survives the Participant and benefits remain payable following the Participant’s death, the Company shall direct that payment of benefits be made to the person or persons in the first category in which there is a survivor. The categories of successor beneficiaries, in order, are (a) the Participant’s spouse and (b) the Participant’s estate.

ARTICLE VIII

ADMINISTRATION OF THE PLAN

8.1 Administration by the Company. The Committee, acting through the Company, shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof.

8.2 General Powers of Administration. The Committee shall have such powers and duties with respect to the administration of the Plan as are applicable to the Administrative Committee with respect to the Qualified Plan. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, treasurer, controller, counsel or other person employed or engaged by the Company with respect to the Plan.

8.3 Claims.

Any Participant or beneficiary who believes that there was an error in the calculation of his or her account balance or in the payment of benefits under the Plan shall file a claim with the Plan Administrator. The claim must be filed, signed and dated within 90 days of the date on which the claimant learned of the facts from which such claim arises. The claim must be sent by certified mail or presented in person to the Plan Administrator.

The Plan Administrator, acting through the Company, shall respond in writing to the claimant within a reasonable period of time but not later than 90 days after receipt of the claim unless special circumstances require an extension of time for processing. If such extension of time is required, the Plan Administrator, acting through the Company, shall furnish written notice of the extension to the claimant prior to the termination of the initial 90 day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator, acting through the Company, expects to render a final decision. In no event shall such extension exceed a period of 90 days from the end of the initial period.

8.4 Appeals.

Any claimant not satisfied with the Plan Administrator’s decision of a claim shall have the right to appeal to the Plan Administrator. The appeal must be signed and dated by the claimant and include a copy of the claim submitted to the Plan Administrator as well as a copy of the Plan Administrator’s decision. The appeal should explain why the claimant does not agree with the Plan Administrator’s decision. The appeal must be filed within 60 days of the receipt of the Plan Administrator’s decision. The appeal must be sent by certified mail or presented in person to the Plan Administrator.

The Plan Administrator shall promptly advise the claimant of its decision on the claimant’s appeal. Such decision shall be written in layman’s terms, shall include specific reasons for the decision and shall contain specific references to pertinent Plan provisions upon which the decision is based. The decision on appeal shall be made no later than 60 days after the Plan Administrator’s

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 10.5 receipt of the appeal, unless special circumstances require an extension of the time for processing. If such an extension of time is required, the Plan Administrator shall furnish written notice of the extension to the claimant prior to the termination of the 60 day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render a final decision. If an extension of time is required, a decision shall be rendered as soon as possible, but not later than 120 days following receipt of the appeal.

ARTICLE IX

AMENDMENT OR TERMINATION

9.1 Amendment or Termination. The Company intends the Plan to be permanent but reserves the right, subject to Section 9.2, to amend or terminate the Plan when, in the sole opinion of the Company, such amendment or termination is advisable. However, no amendment shall deprive a Participant or beneficiary of any of the benefits which he or she has accrued under the Plan or otherwise adversely affect the Participant’s Account with respect to amounts credited thereto prior to the date such amendment is made. The Administrative Committee shall have the authority, on behalf of the Company, to amend the Plan in any manner permitted by Article IX of the Plan as the Administrative Committee considers desirable, appropriate or necessary, provided that no such amendments, either individually or in the aggregate, have a material adverse financial impact on the Company and the Employers. The Board reserves the authority to make any other amendments to the Plan, including, but not limited to, amendments that the Administrative Committee deems desirable, appropriate or necessary which would have a material adverse financial impact on the Company and the Employers.

9.2 Effect of Amendment or Termination. No amendment or termination of the Plan shall, without the express written consent of the affected current or former Participant or beneficiary, reduce or alter any benefit entitlement of such Participant or beneficiary.

ARTICLE X

GENERAL PROVISIONS

10.1 General Conditions. Any benefit payable under the Qualified Plan shall be paid solely in accordance with the terms and conditions of the Qualified Plan and nothing in the Plan shall operate or be construed in any way to modify, amend or affect the terms and provisions of the Qualified Plan.

10.2 Taxes. The Company shall have the right to (a) require any Participant or beneficiary to pay the Company the amount of any taxes which the Company may be required to withhold with respect to any benefits earned under, or distributions from, the Plan or (b) deduct from all amounts paid the amount of any taxes which the Company may be required to withhold with respect to any such distributions.

10.3 Entire Agreement. The Plan document along with the Investment Preference Form, Beneficiary Designation Form and other administration forms required of Participants, and made

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 10.5 known to them by the Company, shall constitute the entire agreement or contract between the Company and the Participant regarding the Plan. No oral statement regarding the Plan may be relied upon by the Participant or any other person claiming through or under the Participant.

10.4 Construction. Any mention of “Articles,” “Sections” and subsections thereof, unless stated specifically to the contrary, refers to Articles, Sections or subsections in the Plan. Headings of Articles, Sections and subsections are for convenient reference. The headings are not part of the Plan and are not to be considered in its construction. All references to statutory sections shall include the section as amended from time to time.

10.5 Employment Rights. Neither the establishment of the Plan nor any modification thereof, nor the creation of any trust or account, nor the payment of any benefits, shall be construed as conferring upon a Participant the right to continue to be employed by the Company in his or her present capacity, or in any capacity. The Plan relates to the payment of deferred compensation as provided herein, and is not intended to be an employment contract.

10.6 Benefit Transfers. Neither the Participant nor his or her designated or other beneficiary under the Plan shall have any right to transfer, assign, anticipate, hypothecate or otherwise encumber all or any part of the amounts payable under the Plan, except as provided in Section 6.7. No such amounts shall be subject to seizure by any creditor of any such Participant or beneficiary, by a proceeding at law or in equity, nor shall any such amounts be transferable by operation of law in the event of bankruptcy, insolvency or death of the Participant, his or her designated beneficiary or any other beneficiary hereunder. Any attempted assignment or transfer in contravention of this provision shall be void.

10.7 Governing Law. Construction, validity and administration of the Plan shall be governed by applicable Federal law and the laws of the State of Illinois.

10.8 Inurement. The Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Participant, his or her successors, heirs, executors, administrators and beneficiaries.

10.9 Notices. Any notice (other than pursuant to enrollment materials) required or permitted to be given pursuant to the Plan shall be in writing, and shall be signed by the person giving the notice. If such notice is mailed, it shall be sent by United States first class mail, postage prepaid, addressed to such person’s last known address as shown on the records of the Company. The date of such mailing shall be deemed to be the date of notice, but the notice shall not be effective until actually received. The Company or the Participant may change the address to which notice is sent by giving notice of such change in the manner above.

10.10 Corporate Successor. The Plan shall not be automatically terminated by a Change in Control Event, but the Plan shall be continued after such Change in Control Event only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Section 9.2.

10.11 Unclaimed Benefit. Each Participant shall keep the Company informed of his or her current address and the current address of his or her beneficiary. The Company shall not be obligated to search for the whereabouts of any person. The Company is authorized to adopt procedures regarding unclaimed benefits that provide for the irrevocable forfeiture of a benefit if the Company is unable to locate the Participant, or if the Participant is deceased, his or her beneficiary. Such procedures shall be consistent with the Regulations and any other guidance issued by the Internal Revenue Service.

10.12 Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company nor any individual acting as an employee or agent of the Company shall be liable to any Participant, former Participant, beneficiary or any other person for any claim, loss, liability or expense incurred in connection with the Plan.

10.13 No Guaranty of Benefits. Nothing contained in the Plan shall constitute a guaranty by the Company or any other entity or person that the assets of the Company will be sufficient to pay any benefit hereunder.

10.14 409A Compliance. The Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Code Section 409A and the Regulations, and shall be interpreted and operated consistent with such intent. If any ambiguity exists in the terms of the Plan, it shall be interpreted to be consistent with this purpose.

IN WITNESS WHEREOF, a duly appointed member of the Administrative Committee has executed the Plan on this 22nd day of December, 2016.

KEMPER CORPORATION

By: /s/ John A. DiDomenico Its: Director, Benefits

KEMPER CORPORATION

2011 Omnibus Equity Plan

Amended and Restated as of February 8, 2017

Page Article 1 Establishment, Purpose, and Duration 1 1.1 Establishment 1 1.2 Purpose of the Plan 1 1.3 Duration of the Plan 1 Article 2 Definitions 1 2.1 “Affiliate” 1 2.2 “Annual Award Limit” or “Annual Award Limits” 1 2.3 “Award” 1 2.4 “Award Agreement” 2 2.5 “Beneficial Owner” or “Beneficial Ownership” 2 2.6 “Board” or “Board of Directors” 2 2.7 “Code” 2 2.8 “Committee” 2 2.9 “Company” 2 2.10 “Constructive or Actual Delivery” 2 2.11 “Covered Employee” 2 2.12 “Director” 2 2.13 “Disability or Disabled” 2 2.14 “Effective Date” 2 2.15 “Eligible Director” 3 2.16 “Employee” 3 2.17 “Employment 3 2.18 “Exchange Act” 3 2.19 “Exercise Price” 3 2.20 “Fair Market Value” or “FMV” 3 2.21 “Full Value Award” 3 2.22 “Insider” 3 2.23 “Incentive Stock Option” or “ISO” 3 2.24 “Leave of Absence” 3 2.25 “Non-Qualified Option” 3 2.26 “Option” 3 2.27 “Other Stock-Based Award” 4 2.28 “Participant” 4 2.29 “Performance-Based Compensation” 4 2.30 “Performance Measures” 4 2.31 “Performance Period” 4 2.32 “Performance Share” 4

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2.34 “Period of Restriction” 4 2.35 “Plan” 4 2.36 “Plan Year” 4 2.37 “Prior Plans” 4 2.38 “Representative” 4 2.39 “Restricted Stock” 5 2.40 “Restricted Stock Unit” 5 2.41 “Retirement” or “Retires” 5 2.42 “Section 162(m)” 5 2.43 “Section 409A” 5 2.44 “Share” 5 2.45 “Stock Appreciation Right” or “SAR” 5 2.46 “Substantial Cause” 5 2.47 “Third Party Service Provider” 6 Article 3 Administration 6 3.1 General 6 3.2 Authority of the Committee 6 3.3 Delegation 6 Article 4 Shares Subject to the Plan and Maximum Awards 7 4.1 Number of Shares Available for Awards 7 4.2 Share Counting 7 4.3 Annual Award Limits 8 4.4 Adjustments in Authorized Shares 8 Article 5 Eligibility 9 Article 6 Restricted Stock and Restricted Stock Units 9 6.1 Restricted Stock or Restricted Stock Unit Award Agreement 9 6.2 Other Restrictions 9 6.3 Certificate Retention or Legend 10 6.4 Voting Rights 10 6.5 Dividends and Dividend Equivalents 10 6.6 Section 83(b) Election 10 Article 7 Stock Appreciation Rights 11 7.1 Grant of Stock Appreciation Rights 11

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 7.2 SAR Award Agreement 11 Article 8 Stock Options 11 8.1 Grant of Stock Options 11 8.2 Stock Option and SAR Award Agreements 12 8.3 Exercise of Options and SARs 12 Article 9 Performance Shares and Performance Units 13 9.1 Grant of Performance Shares and Performance Units and Award Agreement 13

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9.2 Value of Performance Shares and Performance Units 13 9.3 Earning of Performance Shares and Performance Units 13 9.4 Form and Timing of Payment of Performance Shares and Performance Units 14 9.5 No Dividends Payable 14 Article 10 Other Stock-Based Awards 14 Article 11 Awards to Eligible Directors 14 11.1 Annual Award Grants 14 11.2 Other Forms of Awards to Eligible Directors 14 Article 12 Forfeiture and Termination of Employment or Service as a Director or Consultant 15 12.1 Terms Provided in Award Agreements 15 12.2 Termination of Services as an Employee 15 12.3 Termination of Services as a Director 17 12.4 Termination of Services as Third Party Service Provider 18 12.5 Forfeiture Provisions and Clawbacks 18 12.6 Leaves of Absence 18 Article 13 Transferability of Awards 18 13.1 Transferability 18 13.2 Domestic Relations Orders 18 Article 14 Performance Measures 19 14.1 Performance Measures 19 14.2 Evaluation of Performance 20 14.3 Adjustment of Performance-Based Compensation 20 14.4 Committee Discretion 20 Article 15 Arbitration 21 Article 16 Compliance with Section 409A 21 16.1 409A Compliance 21 16.2 Deferrals 21 Article 17 Rights of Participants 22 17.1 Employment; Services 22 17.2 Participation 22 17.3 Form of Stock; Rights as a Shareholder 22 Article 18 Change in Control 22 18.1 Definition of Change in Control 22

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 18.2 Other Definitions 23 18.3 Occurrence of a Change in Control 24 Article 19 Amendment, Modification, Suspension, and Termination 25 19.1 Amendment, Modification, Suspension, and Termination 25 19.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events 25

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19.3 Awards Previously Granted 26 Article 20 Withholding 26 20.1 Tax Withholding 26 20.2 Share Withholding 26 20.3 Option or SAR Withholding 26 Article 21 Successors 27 Article 22 General Provisions 27 22.1 Gender and Number 27 22.2 Severability 27 22.3 Requirements of Law 27 22.4 Delivery of Title 27 22.5 Inability to Obtain Authority 27 22.6 Investment Representations 28 22.7 Unfunded Plan 28 22.8 No Fractional Shares 28 22.9 Non-Exclusivity of the Plan 28 22.10 No Constraint on Corporate Action 28 22.11 Non-Uniform Treatment 28 22.12 Governing Law 29

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Article 1 Establishment, Purpose, and Duration

1.1 Establishment. Kemper Corporation, a Delaware corporation (the “Company”), established the 2011 Omnibus Equity Plan (the “Plan”), effective May 4, 2011 (the “Effective Date”). The Plan permits the grant of Awards to eligible Participants, as defined below.

1.2 Purpose of the Plan. The purpose of the Plan is to provide a means whereby employees and directors of the Company and its Affiliates and key advisors develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of the Plan is to provide a means through which the Company may attract able individuals to become employees and to provide a means whereby those individuals on whom the responsibilities for the successful administration and management of the Company depend can acquire and maintain ownership of the Company’s common stock, thereby strengthening their concern for the welfare of the Company.

1.3 Duration of the Plan. Unless sooner terminated as provided herein, the Plan shall terminate ten (10) years from the Effective Date. After the Plan is terminated, no Awards may be granted, but Awards previously granted shall remain outstanding in accordance with the applicable terms and conditions of the Plan and the respective Award Agreements.

Article 2 Definitions

Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.

2.1 “Affiliate” means any person or entity controlled directly or indirectly by the Company, whether by equity ownership, contract or otherwise and shall include direct or indirect subsidiaries of the Company and mutual companies the management of which is controlled by the Company and its subsidiaries.

2.2 “Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3.

2.3 “Award” means, individually or collectively, a grant under the Plan of Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Options, Performance Shares, Performance Units or Other Stock-Based Awards, in each case subject to the terms of the Plan.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2.4 “Award Agreement” means either one of the following, in such form as the Committee shall from time to time approve: (i) an agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award, or (ii) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of an Award. The Committee may provide for the use of non-paper Award Agreement(s) and acceptance and other actions related thereto that involve the use of electronic, internet, intranet or other non-paper means.

2.5 “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

2.6 “Board” or “Board of Directors” means the board of directors of the Company.

2.7 “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor statute.

2.8 “Committee” means the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer the Plan.

2.9 “Company” has the meaning set forth in Section 1.1.

2.10 “Constructive or Actual Delivery” means either of the following: (a) presentation to the Company of a recent brokerage account statement or other written evidence satisfactory to the Committee evidencing beneficial ownership by the Participant of Shares other than Shares held in 401(k), pension, individual retirement or similar accounts; or (b) physical delivery of certificates evidencing Shares, properly indorsed for transfer to the Company or with an appropriately executed stock power.

2.11 “Covered Employee” means any Employee who is or may become a “Covered Employee,” as defined in Section 162(m).

2.12 “Director” means a member of the Board of Directors.

2.13 “Disability or Disabled” when used with respect to a particular Participant, means a physical or mental condition that: (i) is of a type that would generally trigger benefits under the Company’s or an applicable Affiliate’s long-term disability plan (as in effect from time to time), whether or not such Participant is actually enrolled in such plan; or (ii) in the absence of any such plan, would cause such Participant to be unable to substantially perform his or her duties as an Employee, as determined in the sole discretion of the Committee. Notwithstanding the foregoing, if an Award of Restricted Stock Units becomes subject to the requirements of Article 15, the term “disabled” shall be defined as required under Section 409A.

2.14 “Effective Date” has the meaning set forth in Section 1.1.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2.15 “Eligible Director” means a Director who is not also an Employee (including any Director who has retired as an Employee).

2.16 “Employee” means any employee of the Company or any of its Affiliates.

2.17 “Employment” and related terms means the provision of services to the Company or its Affiliates as an Employee.

2.18 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

2.19 “Exercise Price” means the price at which the Shares underlying an Option or SAR may be purchased upon exercise of thereof.

2.20 “Fair Market Value” or “FMV” as used to refer to the price of a Share on a particular day, means the closing price for a Share for that day as subsequently reported by the New York Stock Exchange (or such other exchange on which the Shares are primarily traded), or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, in such other manner as the Committee in its sole discretion may deem appropriate to determine the fair market value of a Share).

2.21 “Full Value Award” means an Award that is not an Option or SAR and that consists of or is settled by the issuance of Shares.

2.22 “Insider” means an individual who is, on the relevant date, a Director, an executive officer of the Company, as determined by the Board for purposes of Section 16 of the Exchange Act, or a more than ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act.

2.23 “Incentive Stock Option” or “ISO” means an Option that satisfies the requirements of Code Section 422(b) and any regulations promulgated thereunder from time to time, or any successor provisions thereto.

2.24 “Leave of Absence” means an approved leave of absence from a Participant’s Employment (other than short-term disability) determined in accordance with the applicable policies of the Participant’s employer.

2.25 “Non-Qualified Option” means an Option that does not satisfy the requirements for an ISO.

2.26 “Option” means an option to purchase a designated number of Shares granted to a Participant pursuant to Article 8.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2.27 “Other Stock-Based Award” means an equity-based or equity-related Award of a type other than those described in Articles 6 – 9 of the Plan, and which is granted pursuant to Article 10.

2.28 “Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted.

2.29 “Performance-Based Compensation” means compensation under an Award that satisfies the requirements of Section 162(m) and the applicable regulations thereunder for certain performance-based compensation, if any, paid to Covered Employees.

2.30 “Performance Measures” means measures described in Article 14 on which performance goals are based and which are approved by the Company’s shareholders pursuant to the Plan in order to qualify Awards as Performance-Based Compensation.

2.31 “Performance Period” means the period of time during which performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.

2.32 “Performance Share” means an Award granted to a Participant pursuant to Article 9, denominated in Shares, the value of which at the time it is payable is determined based on actual results of the corresponding performance criteria.

2.33 “Performance Unit” means an Award granted to a Participant pursuant to Article 9, denominated in units, the value of which at the time it is payable is determined based on actual results of the corresponding performance criteria.

2.34 “Period of Restriction” means the period when Restricted Stock or Restricted Stock Units (or other types of Awards as may be applicable) are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals, or on the occurrence of other events as determined by the Committee, in its discretion), as provided in the Plan and/or the applicable Award Agreement.

2.35 “Plan” means the 2011 Omnibus Incentive Plan.

2.36 “Plan Year” means the calendar year.

2.37 “Prior Plans” means the Company’s 1995 Non-Employee Director Stock Option Plan, 1997 Stock Option Plan, 2002 Stock Option Plan and 2005 Restricted Stock and Restricted Stock Unit Plan, as amended through the Effective Date.

2.38 “Representative” means an executor, administrator, guardian, trustee or other representative of a Participant who has legal authority to exercise such Participant’s Options or

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Stock Appreciation Rights or rights under other types of Awards on behalf of such Participant or such Participant’s estate.

2.39 “Restricted Stock” means an Award granted to a Participant pursuant to Article 6, and includes (but is not limited to) performance-based Restricted Stock and time-vested Restricted Stock.

2.40 “Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 6, except that no Shares are actually awarded to the Participant on the date of grant.

2.41 “Retirement” or “Retires” means, for Employees: (a) for Awards granted prior to February 2013, the termination of Employment of a Participant who is eligible to either make an election to begin receiving early or regular retirement benefits under the Company’s defined benefit pension plan or to begin receiving tax penalty-free early distributions (other than a rollover to another retirement plan) from the Company’s defined contribution retirement plan; (b) for Awards granted beginning in February 2013 through January 2014, the termination of employment by a Participant who has attained age 65 and completed at least five years of service with the Company and/or one or more of its Affiliates; and (c) for Awards granted beginning in February 2014, the definition set forth in the applicable Award Agreement.

2.42 “Section 162(m)” means Section 162(m) of the Code, or any successor provision, and the regulations, rulings and other guidance issued thereunder.

2.43 “Section 409A” means Section 409A of the Code, or any successor provision, and the regulations, rulings and other guidance issued thereunder.

2.44 “Share” means a share of common stock of the Company.

2.45 “Stock Appreciation Right” or “SAR” means a right of the type described in Article 7 of the Plan.

2.46 “Substantial Cause” means the (a) commission of a criminal act against, an action in derogation of the interests of, or misconduct which results in a financial loss to, the Company or an Affiliate; (b) misconduct which obligates the Company to prepare an accounting restatement due to material noncompliance with applicable financial reporting requirements; (c) knowing disclosure of confidential information about the Company or an Affiliate in breach of the Company’s Essential Standards of Conduct or an applicable contractual or other obligation, or using such information for personal gain, including, without limitation, by trading in Company securities on the basis of material, non-public information; or (d) performance of any other action that the Committee, in its sole discretion, may deem to be sufficiently injurious to the interests or reputation of the Company or an Affiliate to constitute substantial cause for the termination of services by a Participant as an Employee, Director or Third Party Service Provider. Nothing in the Plan shall be

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document construed to imply that a Participant’s employment or other relationship with the Company or its Affiliates may only be terminated for Substantial Cause.

2.47 “Third Party Service Provider” means any consultant, agent, advisor, or independent contractor who provides services to the Company or an Affiliate pursuant to a written contract that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction, and (b) do not, directly or indirectly, promote or maintain a market for the Company’s securities.

Article 3 Administration

3.1 General. The Committee shall be responsible for administering the Plan, subject to this Article 3 and the other provisions of the Plan. The Committee may retain attorneys, consultants, accountants, or other advisors. The Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such advisors. The fees of any such advisors shall be paid by the Company. All actions taken and all interpretations and determinations made by the Committee shall be final and binding on the Participants, beneficiaries, the Company, and all other interested individuals.

3.2 Authority of the Committee. The Committee shall have full and, except as otherwise expressly provided in the Plan, exclusive, power and discretion: (a) to interpret the terms and the intent of the Plan and any Award Agreement or other agreement or document ancillary to or in connection with the Plan, and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Plan as the Committee may deem necessary or proper; (b) to select Award recipients; (c) to establish the terms and conditions of all Awards, including the terms and conditions to be set forth in Award Agreements; (d) to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company; and (e) subject to Article 19, to adopt modifications and amendments to the Plan or any Award Agreement, including without limitation, any that are necessary to comply with the laws of the jurisdictions in which the Company and/or its Affiliates operate or may operate.

3.3 Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company or its Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may retain such legal, financial or other advisors as they deem appropriate to assist them with respect to any responsibility the Committee or such individuals may have under the Plan. To the extent consistent with the Company’s bylaws and applicable law, the Board may, by resolution, authorize one or more officers of the Company or committees of the Board (in addition to the Committee) to do one or both of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards; and (b) determine the size of any such Awards and the terms and conditions of such Awards; provided,

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document however, (i) the Board shall not authorize any such officer to grant Awards to himself or herself, nor authorize any such officer or committee to grant Awards to any individual who is considered an Insider; (ii) the resolution providing such authorization must place a limit on the total number of Shares that may be covered by all such Awards; and (iii) such officer(s) or committee(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated.

Article 4 Shares Subject to the Plan and Maximum Awards

4.1 Number of Shares Available for Awards.

(a) Share Authorization. Subject to adjustment as provided in Section 4.4, the maximum number of Shares available for issuance to Participants under the Plan on or after the Effective Date (the “Share Authorization”) shall be ten million (10,000,000) Shares. The Shares available for issuance under the Plan may be authorized and unissued Shares or treasury Shares.

(b) Fungible Conversion Factor. Notwithstanding any other provision of the Plan, each Share granted to a Participant as part of a Full Value Award shall reduce the Share Authorization by three (3) Shares. Each Share granted to a Participant as part an Award that is not a Full Value Award shall reduce the Share Authorization by one (1) Share.

(c) Limit on Grants to Eligible Directors. The maximum aggregate number of Shares that may be granted under the Plan to Eligible Directors shall be limited to one million (1,000,000).

(d) Prior Plans. All awards granted pursuant to the Prior Plans and outstanding on the Effective Date shall remain subject to the terms of the applicable Prior Plans and award agreements issued thereunder, except that any Shares to be issued after the Effective Date pursuant to the terms of performance-based restricted stock awards granted under one of the Prior Plans in connection with above-target performance results shall be issued under this Plan. Beginning on the Effective Date, no additional awards shall be granted under any Prior Plan, except for restorative options automatically granted pursuant to the terms of any option awards outstanding under a Prior Plan.

4.2 Share Counting. Shares covered by an Award shall only be counted against the Share Authorization to the extent they are actually issued, provided that:

(a) Shares Available for Future Grant. Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise, without the issuance of such Shares (other than surrender of an Option at the time of exercise of a related Stock Appreciation Right), or are settled in cash in lieu of Shares, shall be available again for grant under the Plan, consistent with the fungible conversion factor methodology set forth in Section 4.1(b).

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Shares That Will Reduce Share Authorization. The Share Authorization will be reduced by the full number of Shares that: (i) are subject to the exercise or vesting of an Award, regardless of whether fewer Shares are actually issued because of Shares tendered to the Company (by either Constructive or Actual Delivery) or withheld by the Company to satisfy tax withholding requirements or to pay the exercise price with respect to such exercise or vesting; or (ii) may be issued in connection with an Award of a SAR, regardless of whether fewer Shares are actually issued upon exercise of such SAR.

4.3 Annual Award Limits. The following limits (“Annual Award Limits”) shall apply to grants of such Awards under the Plan, subject to any adjustments pursuant to Section 4.4 or 19.2, unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance- Based Compensation.

(a) Restricted Stock or Restricted Stock Units. The aggregate maximum number of Shares that may be subject to Awards of Restricted Stock or Restricted Stock Units granted in any one Plan Year to any one Participant shall be five hundred thousand (500,000).

(b) Options and SARs. The aggregate maximum number of Shares that may be subject to Awards of Options and SARs, including ISOs, granted in any one Plan Year to any one Participant shall be one million five hundred thousand (1,500,000).

(c) Performance Shares and Performance Units. The aggregate maximum number of Shares that may be subject to Awards of Performance Shares or Performance Units granted in any one Plan Year to any one Participant shall be five hundred thousand (500,000).

(d) Other Stock-Based Awards. The aggregate maximum number of Shares that may be subject to Other Stock-Based Awards granted in any one Plan Year to any one Participant shall be five hundred thousand (500,000).

(e) Awards to Eligible Directors. Notwithstanding the foregoing provisions of Sections 4.3 (a) – (d), the maximum number of Shares that may be granted in any one Plan Year to any Eligible Director shall be twenty thousand (20,000).

4.4 Adjustments in Authorized Shares. If the number of outstanding Shares is increased or decreased through a reorganization, recapitalization, reclassification, special cash dividend, stock dividend, stock split, reverse stock split or other similar transaction, an appropriate and proportionate adjustment shall be made in: (a) the number of Shares included in the Share Authorization in Section 4.1 (a) and the Share limitation in Section 4.1 (c), (b) the number of Shares that may be issued under outstanding Awards, and (c) the Award limits specified in Section 4.3. In the event that the Shares are changed into or exchanged for a different kind of shares or other securities of the Company through transactions of the type referenced above, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights under the Plan,

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document may substitute or adjust, as applicable, the number and kind of securities that may be issued under the Plan or under particular forms of Awards, the number and kind of securities subject to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards.

The Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under the Plan to reflect such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. No amendment, modification, suspension or termination may impact the distribution of any Award that is subject to Section 409A or is intended to qualify as Performance-Based Compensation under Section 162(m), except as permitted by such applicable Section.

Subject to the provisions of Article 19.1, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under the Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization on such terms and conditions as it may deem appropriate.

Article 5 Eligibility

All Employees and Eligible Directors shall be eligible for selection to receive Awards. In addition, any key person selected by the Committee in its sole discretion who provides bona fide services to the Company or an Affiliate as a Third Party Service Provider shall be eligible for selection to receive Awards.

Article 6 Restricted Stock and Restricted Stock Units

6.1 Restricted Stock or Restricted Stock Unit Award Agreement. Each Award of Restricted Stock and/or Restricted Stock Units shall be evidenced by an Award Agreement that specifies the material terms of the Award, including, without limitation, the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, vesting terms (which can include, without limitation, time-vested or performance-based terms) and such other provisions as the Committee shall determine in its discretion.

6.2 Other Restrictions. The Committee may impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, time-based restrictions, and/or restrictions under applicable laws, rules and regulations or under the requirements of any stock exchange or market upon which such Shares are listed or traded, holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, or time-based restrictions on vesting following the attainment of the performance goals.

Except as otherwise provided in this Article 6, and subject in all cases to the requirements of applicable laws, rules and regulations, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.

6.3 Certificate Retention or Legend. To the extent that a certificate is issued to evidence Shares of Restricted Stock, the Committee may determine in its sole discretion that such certificate shall: (a) be retained by the Company until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse; and/or (b) bear a legend such as the following or as otherwise determined by the Committee in its discretion:

The sale or transfer of Shares represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Kemper Corporation 2011 Omnibus Incentive Plan, and in the associated Award Agreement. A copy of such Plan and Award Agreement may be obtained from Kemper Corporation.

6.4 Voting Rights. Issued and outstanding Shares of Restricted Stock shall at all times possess the same voting rights as all other issued and outstanding Shares. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.

6.5 Dividends and Dividend Equivalents. Except as the Committee determines otherwise with respect to a particular Award and as set forth in the applicable Award Agreement, issued and outstanding Shares of Restricted Stock shall be entitled to dividends if, as and when declared by the Board with respect to the Company’s Shares on the same basis and on the same payment dates as all other issued and outstanding Shares. The Committee may, in its discretion, grant dividend equivalents with respect to any Restricted Stock Units. The terms and conditions of such dividend equivalents, including the rate per Unit, timing of payment and other requirements, shall be established by the Committee in its discretion, subject to the requirements of Article 16 of the Plan.

6.6 Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned on the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.

7.1 Grant of Stock Appreciation Rights. The Committee may grant an Award of Stock Appreciation Rights in connection with an Option Award (“Tandem SAR”) or independently of any Option Award (“Freestanding SAR”).

7.2 SAR Award Agreement. Each SAR Award shall be evidenced by an Award Agreement that specifies the material terms of the Award, including, without limitation, exercise terms consistent with Section 8.2 below and the following provisions, and such other provisions as the Committee shall determine in its discretion:

(a) A SAR shall be exercised in accordance with the provisions of this Article 7 and Section 8.3.

(b) A Tandem SAR shall be exercisable to the extent, and only to the extent, the associated Option is exercisable and shall be exercisable only for such period as the Committee may determine. Upon exercise of a Tandem SAR, the Participant shall be required to surrender to the Company unexercised the Option to which it relates, or any portion thereof (subject to Section 8.3(c));

(d) Upon exercise of a SAR, the Participant shall receive that number of Shares (rounded down to the nearest whole number) having an aggregate value equal to the excess of the Fair Market Value of one Share over the Exercise Price per Share specified in the applicable Award Agreement, multiplied by the number of Shares subject to the SAR, or portion thereof, which is exercised. However, the Committee may elect to settle, or the Award Agreement may permit the Participant to elect to receive (subject to approval by the Committee), any part or all of the Company’s obligation arising out of the exercise of the SAR by the payment of cash equal to the aggregate Fair Market Value of that part or all of the Shares it would otherwise be obligated to deliver.

Article 8 Stock Options

8.1 Grant of Stock Options. The Committee may grant Option Awards and determine whether an Option will be an ISO or a Non-Qualified Option, whether to couple a SAR with an Option, the number of Shares to be subject to each Option, the Exercise Price, the number of installments, if any, in which each Option may vest, the expiration date of each Option and all other terms and conditions of each Option. ISO Awards may be granted only to Participants who are Employees.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 8.2 Stock Option and SAR Award Agreements. Each Option Award and SAR Award granted pursuant to the Plan shall be evidenced by an Award Agreement that specifies the material terms of the Award, including, without limitation, terms consistent with the following provisions, and such other provisions as the Committee shall determine in its discretion:

(a) Duration. Each Option and SAR and all rights associated therewith, shall expire on such date as the Committee may determine, but in no event later than the ten-year anniversary of the grant date, subject to a limited extension if so provided in the Award Agreement in the event that the expiration date of an Award held by a Participant falls within a trading “blackout” period imposed by the Company and applicable to the Participant, or earlier termination as provided in the Plan.

(b) Exercise Price. The Exercise Price for each Share that is the subject of an Option or SAR shall be determined by the Committee and shall not be less than the Fair Market Value of a Share on the date of grant, subject to adjustment pursuant to Section 19.2.

(c) Vesting. Each Option and SAR granted under the Plan shall vest and be exercisable in such installments, if any, during the period prior to its expiration date as the Committee shall determine, and, unless otherwise specified in an Award Agreement, no Option or SAR shall be exercisable for at least six months after grant except in the case of the death or Disability of the Participant.

(d) No Repricing. Except as otherwise permitted as an adjustment pursuant to Section 19.2 or as approved by the Company’s shareholders, the exercise price of an Option or SAR outstanding under the Plan may not be reduced, whether through amendment, exchange, cancellation and re-grant, repurchase or other method.

8.3 Exercise of Options and SARs.

(a) Notice by Participant. Each Participant (or such Participant’s Representative) who desires to exercise an Option or SAR shall give advance written notice of such exercise to the Company in such form as may be prescribed from time to time by the Committee or the management of the Company.

(b) Payment for Exercises of Options. Before shares will be issued in connection with an exercise, the Exercise Price of an Option shall be paid in full by: (i) check payable to the order of the Company; (ii) Constructive or Actual Delivery of Shares, subject to any terms and conditions that may be imposed the Committee in its discretion; (iii) electronic transfer of funds to an account of the Company; (iv) by other means acceptable to the Committee; or (v) any combination of the foregoing. Shares used by Constructive or Actual Delivery to satisfy the Exercise Price of an Option shall be valued at their Fair Market Value on the date of exercise.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) Partial Exercises. No Option or SAR may be exercised for a fraction of a share and no partial exercise of any Option or SAR Right may be made for less than 50 shares unless the total number of Shares remaining under the Award Agreement is less than 50 at the time of exercise.

(d) Exercise by Participant’s Spouse. Unless otherwise provided in an Award Agreement, an Option or SAR shall be exercisable during the Participant’s lifetime only by the Participant (or, in the case of the incapacity of the Participant, by the Participant’s Representative) regardless of any community property interest therein of the spouse of the Participant, or such spouse’s successors in interest. If the spouse of the Participant shall have acquired a community property interest in such Option or SAR, the Participant, or the Participant’s Representative, may exercise the Option or SAR on behalf of the spouse of the Participant or such spouse’s successors in interest.

(e) Special Provisions for Incentive Stock Options. In addition to the limitation applicable to ISOs in Section 4.3 (b), to the extent that the aggregate Fair Market Value (determined as of the grant date) of Shares underlying an ISO granted to a Participant under this Plan (and any other option plans of the Company) that become exercisable for the first time by the Participant during any Plan Year exceeds $100,000 (or, if different, the maximum limitation in effect at the time of grant under Code Section 422, or any successor provision), the portion of such ISO in excess of $100,000 (or, if different, such maximum limitation) will be treated as Non-Qualified Options. The portion of any ISO not exercised within three months after termination of Employment will be treated as a Non-Qualified Option.

Article 9 Performance Shares and Performance Units

9.1 Grant of Performance Shares and Performance Units and Award Agreement. Each Award of Performance Shares or Performance Units shall be evidenced by an Award Agreement that specifies the material terms of the Award, including, without limitation, any performance criteria, vesting provisions and expiration date, and such other provisions as the Committee shall determine in its discretion.

9.2 Value of Performance Shares and Performance Units. Each Performance Share shall have an initial value based on one Share on the date of grant. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. The Committee shall set performance criteria in its discretion that, depending on the actual performance results, will determine the number and/or value of the Performance Shares and Performance Units that will be paid out to the Participant.

9.3 Earning of Performance Shares and Performance Units. After the applicable Performance Period has ended, the holder of Performance Shares or Performance Units shall be

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document entitled to receive a payout on the value and number of Performance Shares or Performance Units earned by the Participant over the Performance Period, if such payout is due as determined based on the actual results of the corresponding performance criteria.

9.4 Form and Timing of Payment of Performance Shares and Performance Units. Payment of earned Performance Shares and Performance Units shall be made as determined by the Committee as set forth in the applicable Award Agreements. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Shares and Performance Units in the form of Shares or in cash (or a combination thereof) equal to their value, if any, at the end of the applicable Performance Period or as soon as practicable thereafter. Shares may be granted subject to any restrictions deemed appropriate by the Committee, as set forth in the applicable Award Agreements.

9.5 No Dividends Payable. Awards of Performance Shares or Performance Units shall not be entitled to dividends with respect to the Company’s Shares, but, in the discretion of the Committee, may be entitled to dividend equivalents earned and payable to the extent, and at the time, of any payout of such Award.

Article 10 Other Stock-Based Awards

The Committee may grant Other Stock-Based Awards (which may include unrestricted Shares) in such amounts and subject to such terms and conditions as the Committee determines appropriate, and may include, without limitation, Awards that upon grant are fully vested and non-forfeitable. Such Other Stock-Based Awards may entail the issue or transfer of actual Shares or payment in cash or otherwise of amounts based on the value of Shares. Each Other Stock-Based Award shall be evidenced by an Award Agreement that specifies the material terms and conditions of the Award, including, without limitation, any restrictions or vesting provisions and whether such Award is entitled to dividends or dividend equivalents, and such other provisions as the Committee shall determine in its discretion.

Article 11 Awards to Eligible Directors

11.1 Annual Award Grants. An Award shall be granted to each Eligible Director automatically on the date of each Annual Meeting of the Company’s Shareholders, following such meeting (“Annual Award Grant”), in such form, amount, and subject to such terms as shall be determined from time to time by the Board of Directors in its sole discretion, after considering any recommendation by the Committee, subject to the limitations of Section 4.3(e).

11.2 Other Forms of Awards to Eligible Directors. In addition to Annual Award Grants, Eligible Directors may be entitled to receive other forms of Awards under the Plan, in such forms and amounts, and subject to such terms, as shall be determined from time to time by the Board of

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Directors in its sole discretion, after considering any recommendation by the Committee. In no event shall an Incentive Stock Option be granted to an Eligible Director.

Article 12 Forfeiture and Termination of Employment or Service as a Director or Consultant.

12.1 Terms Provided in Award Agreements. Except as determined otherwise by the Committee in connection with particular Awards and set forth in the applicable Award Agreements, the provisions of Sections 12.2, 12.3, and 12.4 shall apply to outstanding Awards held by a Participant at the time of termination of the Participant’s Employment (or termination of the Participant’s employer’s affiliation with the Company, as described in Section 12.4 below), or the termination or a Participant’s service as a Director or Third Party Service Provider, respectively.

12.2 Termination of Services as an Employee.

(a) Options and SARs. The vesting, forfeiture and other terms of payout for Awards of Options and SARs that apply in the event that a Participant ceases to be an Employee of the Company or any of its Affiliates shall be determined as set forth in the applicable Award Agreement for Awards granted beginning in February 2013, and as follows for Awards granted prior to February 2013:

(i) Death or Disability. If a Participant dies or becomes Disabled while employed by the Company or any of its Affiliates, then all Awards granted to such Participant that were outstanding but not vested on such date shall immediately vest and remain outstanding and exercisable until the earlier of their original expiration date or one year from the date of death or the date the Participant first became Disabled, and all Awards that are not exercised within such period shall be forfeited to the Company.

(ii) Retirement.

(A) If a Participant Retires but continues to provide services to the Company or any of its Affiliates as a director or as a Third Party Service Provider, then all Awards held by such Participant shall continue in full force and effect in accordance with their terms or until the Participant ceases to provide such services. If such services cease as a result of death or Disability, then Section 12.2(a)(i) above shall apply. If such services cease for any other reason, then Section 12.2(a)(ii)(B) below shall apply as if the Participant were Retiring on the date of such cessation of services.

(B) If a Participant Retires but does not continue to provide services as provided in subsection (ii)(A) above, then such Participant may exercise all vested Awards until the earlier of one year from the date of Retirement or the original expiration date of such Awards and all vested Awards that are not exercised within such period shall be forfeited to

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Company, and all Awards that were not vested on the date of Retirement shall be forfeited to the Company.

(iii) Sale or Divestiture of Employer. If the Company sells or divests its controlling interest in any Affiliate which employs a Participant, or if its control of such Affiliate otherwise ceases, then all unvested Awards held by such Participant on the date of such sale, divestiture, cessation of control or termination shall be forfeited to the Company, and the Participants shall have until the earlier of 90 days from such date (or one year in the case of a Participant who is eligible for Retirement on such date), or the original expiration date of such Awards, in which to exercise Awards that were vested on such date, and all vested Awards that are not exercised within such period shall be forfeited to the Company.

(A) If the termination of Employment was not for Substantial Cause, then all Awards held by such Participant that were not vested on the date of termination shall immediately be forfeited to the Company, and the Participant shall have until the earlier of 90 days from the date of termination or the original expiration date of such Awards in which to exercise Awards that were vested on such date, and all such Awards that are not exercised within such period shall be forfeited to the Company.

(B) If the termination of Employment was for Substantial Cause, then all of the Participant’s outstanding Awards then held by such Participant shall be forfeited to the Company (including vested Options and SARs) on the date of such termination, notwithstanding any otherwise applicable vesting or performance conditions related to any such Awards.

(b) Time-Vested Restricted Stock. The vesting, forfeiture and other terms of payout for Awards of Time-Vested Restricted Stock that apply in the event that a Participant ceases to be an Employee of the Company or any of its Affiliates shall be determined as set forth in the applicable Award Agreement for Awards granted beginning in February 2013, and as follows for Awards granted prior to February 2013:

(i) Death or Disability. If a Participant dies or becomes Disabled while employed by the Company or any of its Affiliates, then all restrictions on such Participant’s outstanding Awards shall lapse and such Awards shall vest on the date of such death or Disability.

(ii) Retirement.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (A) If a Participant Retires but continues to provide services to the Company or any of its Affiliates as a director or as a Third Party Service Provider, then all Awards held by such Participant shall continue in full force and effect in accordance with their terms or until the Participant ceases to provide such services. If such services cease as a result of death or Disability, then subsection (i) above shall apply. If such services cease for any other reason, all of Participant’s Awards that are then unvested shall be forfeited to the Company on the date of such cessation of services.

(B) If a Participant Retires but does not continue to provide services as provided in subsection (ii)(A) above, then all unvested Awards then held by such Participant shall be forfeited to the Company on the date of Retirement.

(iv) Other Termination of Employment. If a Participant ceases to be an Employee of the Company or any of its Affiliates under circumstances other than those set forth in the foregoing subsections (i) – (iii), all of the unvested Awards such Participant then holds shall be forfeited to the Company on the date of such cessation of Employment.

(c) Performance-Based Restricted Stock, Performance Shares, Performance Units or Other Stock-Based Awards. If a Participant ceases to be an Employee of the Company or any of its Affiliates under any circumstance, the vesting, forfeiture and other terms of payout of any outstanding Award of a type other than those covered by Sections 12.2(a) or (b) above shall be determined as set forth in the applicable Award Agreement.

12.3 Termination of Services as a Director.

(a) Options and SARs. The vesting, forfeiture and other terms of payout for Awards of Options and SARs that apply in the event that a Director’s services cease shall be determined as set forth in the applicable Award Agreement for Awards granted beginning in February 2013, and as follows for Awards granted prior to February 2013: All rights of a Director under an outstanding Award, to the extent it has not been exercised, shall terminate 90 days after the date of the termination of his or her services as a Director for any reason other than: (i) the death of the Director; (ii) cessation of services as a Director because the individual, although nominated by the Board of Directors, is not elected by the shareholders to the Board of Directors; or (iii) cessation of services as a Director because of total and permanent disability as defined in Section 22(e)(3) of the Code (collectively, “Termination Events”). If a Director’s services as such cease because of a

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Termination Event, his or her unvested Options and SARs shall vest immediately. All vested Options and SARs shall expire one year after the date of a Termination Event.

(b) Other Types of Awards. If a Director’s services as such cease under any circumstance, the vesting, forfeiture and other terms of payout of any outstanding Award other than Options and SARs shall be determined as set forth in the applicable Award Agreement.

12.4 Termination of Services as Third Party Service Provider. Except as provided otherwise in Sections 12.2 or 12.3, if applicable, the vesting, forfeiture and other terms of payout of any outstanding Award to a Participant whose agreement to provide services as a Third Party Service Provider ceases under any circumstance shall be determined as set forth in the applicable Award Agreement.

12.5 Forfeiture Provisions and Clawbacks. The Committee may, as required by applicable laws, rules and regulations or otherwise in its discretion, approve forfeiture and/or “clawback” provisions in connection with particular Awards or Participants that specify that the Participant’s rights, payments, and benefits with respect to an Award may be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, despite and notwithstanding any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Employment for Substantial Cause, misconduct resulting in an accounting restatement due to material noncompliance with financial reporting requirements, violation of material Company or Affiliate policies, breach of non-competition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is determined by the Committee to be detrimental to the business or reputation of the Company and/or its Affiliates.

12.6 Leaves of Absence. The extent to which a Leave of Absence taken by an Employee Participant will affect an outstanding Award held by such Participant shall be determined in accordance with the terms of the Award Agreement and any applicable policies of the Participant’s employer.

Article 13 Transferability of Awards

13.1 Transferability. Unless otherwise provided in an Award Agreement, Awards shall not be transferable either voluntarily or by operation of law other than by will or the laws of descent and distribution; no Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation hereof shall be null and void.

13.2 Domestic Relations Orders. Without limiting the generality of Section 13.1, no domestic relations order purporting to authorize a transfer of an Award or any interest in an Award or to grant the power to exercise an Option or SAR to any person other than a Participant (or his or her Representative) shall be recognized as valid or enforceable.

14.1 Performance Measures. Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Article 14, the performance goals or metrics upon which the payment or vesting of an Award of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units (and any other Awards subject to performance results) to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:

(a) Measures of profitability, including, but not limited to, net income, operating earnings, and earnings before or after any one or more of the following: taxes, interest, depreciation, amortization and other noncash charges;

(b) Measures of revenue, including, but not limited to, earned premiums, written premiums, investment income, investment gains, and any other revenue measures reported by the Company in its financial statements;

(c) Measures of return, including, but not limited to, return on assets, capital, invested capital, equity, earned premiums, written premiums, revenues, and returns and yields with respect to investment portfolio performance;

(d) Cash flow including, but not limited to, operating cash flow, free cash flow, and cash flow return on equity;

(e) Measures related to insurance policy retention, operating efficiencies, and productivity;

(f) The Company’s share price, including, but not limited to, share appreciation measures and measures of total shareholder return;

(g) Measures based on cost or expense targets;

(h) Market share;

(i) Customer satisfaction;

(j) Bad debt experience;

(k) Economic value added or EVA® [net operating profit after tax] less [cost of equity capital];

(l) Insurance underwriting income, combined ratios, loss ratios or expense ratios; and

In the sole discretion of the Committee, any of the foregoing Performance Measure(s) may: (i) be determined on a consolidated basis or with regard to any business unit or Affiliate or any combination thereof, (ii) be computed in accordance with accounting principles generally accepted in the United States, insurance statutory accounting principles or international accounting principles, or otherwise without regard to any such principles, (iii) be calculated on an absolute, relative or per-share basis, and (iv) in the case of a relative Performance Measure, be compared to (A) internal benchmarks, plans, projections or prior-years’ results, or (B) the performance of a group of comparator companies or any published or specially created index (including any equity market index), in each case as selected by the Committee. The Committee shall also have the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 14.

14.2 Evaluation of Performance. In evaluating performance in connection with an Award, the Committee may include or exclude any of the following events that occur during a Performance Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) nonrecurring items as described in FASB Accounting Standards Codification™ 225-20 – Income Statement – Unusual or Infrequently Occurring Items (or a successor pronouncement) and/or in the Company’s periodic reports filed with the Securities and Exchange Commission for periods within the applicable year; (f) acquisitions, divestitures, or business unit run-offs or closures; and any other circumstances deemed relevant by the Committee. To the extent such inclusions or exclusions affect Awards to Covered Employees that are intended to qualify as Performance-Based Compensation, they shall be prescribed in a form that meets the requirements of Section 162(m) for deductibility.

14.3 Adjustment of Performance-Based Compensation. Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward so as to enrich the Award. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines.

14.4 Committee Discretion. In the event that applicable tax, securities laws and regulations and/or stock exchange rules change so as to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Section 162(m) and base vesting on Performance Measures other than those set forth in Section 14.1.

The Committee may, as a condition to granting an Award, require that a Participant agree in writing to submit all disputes or claims arising out of or relating to any such Award to binding arbitration in accordance with such terms as the Committee shall prescribe.

Article 16 Compliance with Section 409A

16.1 409A Compliance.

(a) Any Award that is granted under the Plan shall be designed and administered so that the Award is either exempt from the application of, or compliant with, the requirements of Section 409A.

(b) To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A, the Award Agreement shall include such terms and conditions as the Committee determines, in its discretion, are necessary or advisable to avoid the imposition on the Participant of an additional tax under Section 409A. Notwithstanding any other provision of the Plan or any Award Agreement (unless the Award Agreement provides otherwise with specific reference to this Section): (i) an Award shall not be granted, deferred, accelerated, extended, paid out, settled, substituted, adjusted or modified under the Plan in a manner that would result in the imposition of an additional tax under Section 409A on a Participant; and (ii) if an Award Agreement provides for the deferral of compensation within the meaning of Section 409A, no distribution or payment of any amount shall be made before a date that is six (6) months following the date of such participant’s separation from service (as defined in Section 409A) or, if earlier, the date of the participant’s death.

(c) Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A, the Company does not warrant that any Award under the Plan will qualify for favorable tax treatment under Section 409A or any other provision of federal, state, local, or non-United States law. Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers shall be liable to any Participant (or any other individual claiming a benefit through the Participant) for any tax, interest or penalties the Participant may owe as a result of the grant, holding, vesting, exercise or payment of any Award under the Plan.

16.2 Deferrals. Subject to the requirements of Section 16.1 of the Plan, the Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the lapse or waiver of restrictions with respect to any Award of a type that may be subject to the deferral provisions of Section 409A. If any such deferral election is required or permitted, the Committee shall, prior to

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document requiring or permitting such deferral election, establish written rules and procedures for such payment deferrals that are intended to comply with the requirements of Section 409A including, without limitation, the time when a deferral election can or must be made, the period of the deferral, and the events that would result in payment of the deferred amount.

Article 17 Rights of Participants

17.1 Employment; Services. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company and/or any of its Affiliates to terminate the Employment of, or provisions of services by, any Participant at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his or her Employment or services for any specified period of time. Neither an Award nor any benefits arising under the Plan shall constitute an employment contract with the Company and/or its Affiliates and, accordingly, subject to Article 19, the Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Board without giving rise to any liability on the part of the Company and/or its Affiliates.

17.2 Participation. No individual shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive a future Award.

17.3 Form of Stock; Rights as a Shareholder.

(a) Subject to the provisions of applicable laws, rules and regulations and stock exchange requirements, Shares granted pursuant to Awards hereunder shall be issued in book entry or similar non- certificated form, or, at the request of a Participant following the completion of any applicable Period of Restriction, in the form of a stock certificate or by “DWAC” or similar electronic transfer to a brokerage or other account of the Participant.

(b) No Participant shall have any of the rights or privileges of a shareholder with respect to Shares covered by any Award until Shares shall have been issued and delivered: (a) to the Participant in the form of certificates (or held by the Company pursuant to Section 6.4); (b) to a brokerage or other account for the benefit of the Participant either in certificate form or via “DWAC” or similar electronic means; or (c) to a book entry or direct registration account in the name of the Participant, including a book entry account at the Company’s transfer agent.

Article 18 Change in Control

18.1 Definition of Change in Control. A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

(a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document securities acquired directly from the Company or any of its Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below; or

(b) the following individuals cease for any reason to constitute a majority of the number of Directors then serving: individuals who, on the Effective Date, constitute the Board of Directors and any new Director (other than a Director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board of Directors or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; or

(c) there is consummated a merger or consolidation of the Company or any Affiliate with any other corporation, other than (i) a merger or consolidation which results in the Directors immediately prior to such merger or consolidation continuing to constitute at least a majority of the Board of Directors of the surviving entity or any parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization or reincorporation of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or any of its Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities; or

18.2 Other Definitions. As used in this definition of Change in Control:

(a) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

(b) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified in Sections 13(d)(3) and 14(d)(2) thereof, except that such term shall not include (1) the Company or any entity, more than 50% of the voting securities of which are Beneficially Owned by the Company, (2) a trustee or other fiduciary holding securities under an employee benefit

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document plan of the Company or any of its Affiliates, (3) an underwriter temporarily holding securities pursuant to an offering of such securities, (4) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, (5) any individual, entity or group whose ownership of securities of the Company is reported on Schedule 13G pursuant to Rule 13d-1 promulgated under the Exchange Act (but only for so long as such ownership is so reported) or (6) Singleton Group LLC or any successor in interest to such entity.

(c) “Good Reason” shall mean any action taken by the Participant’s employer which results in a material negative change to the Participant in the Employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services. A termination by the Participant shall not constitute termination for Good Reason unless the Participant shall first have delivered to the employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than 90 days after the occurrence of such event), and there shall have passed a reasonable time (not less than 30 days) within which the employer may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Participant.

18.3 Occurrence of a Change in Control. Upon the Occurrence of a Change in Control:

(a) In the event of a Change in Control as defined in Section 18.1 (a) or (b), except as prohibited by applicable laws, rules, regulations or stock exchange requirements, or as determined otherwise by the Committee in connection with particular Awards and set forth in the applicable Award Agreements, if the Employment of a Participant is terminated by the Company or an Affiliate without Substantial Cause or by the Participant for Good Reason within the twenty-four (24) month period following such Change in Control:

(i) any and all Options and SARs granted under the Plan shall vest and be immediately exercisable and shall remain exercisable for the remainder of their term;

(ii) any Period of Restriction and other restrictions imposed on time-vested Restricted Stock or Restricted Stock Units or Other Stock-Based Awards not subject to specified performance criteria shall lapse and such Awards shall immediately vest and be paid out or distributed without further restriction; and

(iii) the payout opportunities attainable under all outstanding performance-based Restricted Stock, Performance Shares or Performance Units or Other Stock-Based Awards subject to specified performance criteria, including Awards intended to qualify for deductibility under Section 162(m) of the Code, shall be deemed to have been fully earned based on the greater of (A) targeted performance, or (B) actual performance

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document being attained for a truncated Performance Period that ends on the date of the Change in Control.

(b) In the event of a Change in Control as defined in Section 18.1 (c) or (d), the Plan shall terminate; provided, however, that notwithstanding the foregoing, the Board shall provide in writing in connection with such transaction for any one or more of the following alternatives (separately or in combinations): (i) all restrictions on outstanding Awards shall immediately lapse; (ii) for the assumption by the successor corporation of the Awards theretofore granted or the substitution by such corporation for such Awards theretofore granted of new Awards covering the stock of the successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (iii) for the continuance of the Plan by such successor corporation in which event the Plan and the Awards therefore granted shall continue in the manner and under the terms so provided; or (iv) for the payment in cash or stock in lieu of and in complete satisfaction of such Awards.

(c) Notwithstanding the foregoing provisions of Sections 18.3 (a) and (b) or any other Section of the Plan, the Committee may, in its sole discretion, determine different provisions for vesting and payout that shall apply in the event of a Change in Control in connection with particular Awards, provided that such provisions are consistent with Article 16 and applicable laws, rules, regulations and stock exchange requirements and are set forth in the applicable Award Agreements.

Article 19 Amendment, Modification, Suspension, and Termination

19.1 Amendment, Modification, Suspension, and Termination. Subject to Sections 16.1 and 19.3, the Board may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan in whole or in part; provided, however, that, no material amendment of the Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule. Furthermore, no amendment, modification, suspension or termination may impact the distribution of any Award that is subject to Section 409A or is intended to qualify as Performance-Based Compensation under Section 162(m), except as permitted by such applicable Section.

19.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company (or any of its Affiliates) or the financial statements of the Company (or any of its Affiliates) or of changes in applicable laws, rules, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. No amendment, modification, suspension or termination may impact the distribution of any Award that is subject to Section 409A or is intended to qualify as Performance-Based Compensation under Section 162(m), except as permitted by such applicable Section.

19.3 Awards Previously Granted. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.

Article 20 Withholding

20.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the amount of any taxes that the Company may be required to withhold with respect to any taxable event arising from such Participant’s Awards.

20.2 Share Withholding. For Participants who are Employees, unless a different form of remittance is agreed to in writing by the Company pursuant to Section 20.1, upon the lapse of restrictions on a Participant’s Restricted Stock and Restricted Stock Units, or any other taxable event arising as a result of an Award granted hereunder, the Company shall withhold Shares having a Fair Market Value not in excess of the amount of the tax withholding requirements with respect to any such taxable event based on the maximum statutory withholding rates for the Participant for federal, state and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction.

20.3 Option or SAR Withholding. Upon the exercise of a Non-Qualified Option or a SAR, the Company shall have the right to: (i) require such Participant (or such Participant’s Representative) to pay the Company the amount of any taxes which the Company may be required to withhold with respect to such exercise, or (ii) deduct from all amounts paid in cash with respect to the exercise of a SAR the amount of any taxes which the Company may be required to withhold with respect to such cash amounts. Subject to the limitation set forth in the next sentence, a Participant or such Participant’s Representative may elect to satisfy all or any portion of the tax withholding obligations arising from the exercise of an Option or SAR either by: (i) any of the methods described in Section 8.3(b); or (ii) directing the Company to withhold Shares that would otherwise be issued pursuant to such exercise. No Participant or Participant’s Representative shall have the right to utilize Constructive or Actual Delivery of Shares or have Shares withheld, in either case, to the extent that, the Fair Market Value of such Shares delivered or withheld on the date of exercise exceeds the amount required to be delivered or withheld to meet tax withholding requirements, based on the maximum statutory withholding rates for the Participant for federal, state and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction.

All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

Article 22 General Provisions

22.1 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

22.2 Severability. In the event that any provision of the Plan shall for any reason be held illegal, invalid or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law, rule or regulation deemed applicable by the Committee, such provision shall be construed or deemed amended to the minimum extent necessary to conform to such applicable law, rule or regulation or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.

22.3 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

22.4 Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:

(a) Obtaining any approvals from governmental agencies or national securities exchanges that the Company determines are necessary or advisable; and

(b) Completion of any registration or other qualification of the Shares under any applicable securities, “Blue Sky” or other laws that the Company determines to be necessary or advisable.

22.5 Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 22.6 Investment Representations. The Committee may require any individual receiving Shares pursuant to an Award under the Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.

22.7 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any person acquires a right to receive payments from the Company, its Affiliates under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or an Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general assets of the Company or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan.

22.8 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.

22.9 Non-Exclusivity of the Plan. The adoption of the Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.

22.10 No Constraint on Corporate Action. Nothing in the Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.

22.11 Non-Uniform Treatment. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among Participants or individuals who are eligible to receive Awards (whether or not such individuals are similarly situated). Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements, as to Participants under the Plan and the terms and conditions applicable to Awards made under the Plan.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 22.12 Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Delaware and Illinois, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.

Kemper Corporation 2011 Omnibus Equity Plan

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT

(Relative TSR)

This PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”) is made as of this ______day of ______, ____ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (“Company”), and «name» (“Award Holder”) for an Award of an aggregate of «shares» («shares») restricted stock units (the “RSUs”), each representing the right to receive one share of the Company’s common stock (“Common Stock”) on the terms and conditions set forth in this Agreement.

SIGNATURES

As of the date set forth above, the parties have accepted the terms of this Agreement by signing this Agreement by an electronic signature, and each party agrees that such signature shall not be denied legal effect, validity or enforceability solely because it was submitted or executed electronically.

KEMPER CORPORATION AWARD HOLDER

By: «CEO Signature and Title» By: «name»

RECITALS

A. The Board of Directors of the Company has adopted the Kemper Corporation 2011 Omnibus Equity Plan (“Plan”), including all amendments to date, to be administered by the Compensation Committee of the Company’s Board of Directors or any subcommittee thereof or other committee designated by the Board to administer the Plan (“Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.

B. The Plan authorizes the Committee to grant to selected employees, directors and Third Party Service Providers of the Company or any Affiliate of the Company awards of various types, including restricted stock units providing the right to receive shares of Common Stock under specified terms and conditions.

C. Pursuant to the Plan, the Committee has determined that it is in the best interest of the Company and its shareholders to grant the Award Holder an Award of restricted stock units under the terms and conditions specified in this Agreement as an inducement to remain in the service of the Company and an incentive for increased effort during such service.

NOW, THEREFORE, the parties hereto agree as follows:

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1. Grant. The Company grants the RSUs to the Award Holder, subject to the terms and conditions set forth in this Agreement. Except as otherwise set forth herein, the RSUs shall not entitle the Award Holder to any rights of a shareholder of Common Stock.

2. Vesting and Forfeiture.

(a) Restricted Period. The RSUs shall be subject to the vesting terms of Exhibit A. The RSUs shall be restricted during a period (“Restricted Period”) that begins on the Grant Date and expires on the date(s) that they vest in accordance with Exhibit A (“Vesting Date”), provided that the RSUs have not been forfeited pursuant to Section E of such applicable Exhibit and:

(i) the Award Holder is in Service (as hereafter defined) on the Vesting Date; or

(ii) the Award Holder is Retirement Eligible (as hereafter defined) prior to the date the Award Holder terminates Service and the Award Holder has not, at any time prior to or on the Vesting Date, become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole discretion.

The RSUs will vest on the Vesting Date only to the extent provided in and in accordance with the provisions of the applicable Exhibit.

(b) Certain Definitions.

(i) “Service” means that the Award Holder is employed by, or a Third Party Service Provider or member of the board of directors of, the Company or an Affiliate.

(ii) “Retirement Eligible” means that the Award Holder has either attained age 60 and completed 10 years of Service as an Employee or attained age 65 and completed 5 years of Service as an Employee.

3. Conversion of RSUs; Issuance of Common Stock. Except as otherwise provided in Section 8, the Company shall cause one share of Common Stock to be issued, within the time period provided below, for each RSU that is vesting upon the applicable Vesting Date.

Any issuance of Common Stock shall be subject to applicable tax withholding obligations as described in Section 6 and shall be in book-entry form, registered in the Award Holder’s name (or in the name of the Award Holder’s Representative, as the case may be), in payment of whole RSUs. Except as otherwise provided in Section 8, in no event shall the date that Common Stock is issued to the Award Holder (“Settlement Date”) occur later than the first to occur of (a) March 15th following the calendar year in which the Award Holder’s RSUs are no longer subject to a substantial risk of forfeiture, as such term is defined for purposes of Section 409A, or (b) ninety (90) days following the applicable Vesting Date.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 4. Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to the Common Stock during the Restricted Period, the Award Holder shall be entitled to receive a cash payment equal to the total cash dividend the Award Holder would have received had the RSUs been actual shares of Common Stock, subject to applicable tax withholding obligations as described in Section 6. The cash payment shall be made on the date that the dividends are payable to holders of Common Stock (“Dividend Payment Date”). The rules of Treas. Reg. § 1.409A-3(d) shall be applied in determining whether a cash payment is made on the Dividend Payment Date.

5. Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the Grant Date or Vesting Date, as applicable, or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, in such other manner as the Committee in its sole discretion may deem appropriate to reflect the fair market value thereof).

6. Withholding of Taxes. The Award Holder acknowledges that the vesting of the RSUs will result in the Award Holder being subject to payroll taxes upon the Vesting Date (to the extent that payroll taxes have not previously become due) and that the conversion of the RSUs to Common Stock will result in the Award Holder being subject to income taxes upon the Settlement Date. The Company will deduct from the shares of Common Stock that are otherwise due to be delivered to the Award Holder a number of whole shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory withholding rates for the Award Holder for federal, state and local tax purposes (including the Award Holder’s share of payroll or similar taxes) in the applicable jurisdiction, and the Award Holder shall remit to the Company in cash any and all applicable withholding taxes that exceed the amount available to the Company using whole shares.

The Company shall withhold from any dividend equivalents paid during the Restricted Period an amount not in excess of the tax withholding requirements based on the maximum statutory withholding rates for the Award Holder for federal, state and local tax purposes (including the Award Holder’s share of payroll or similar taxes) in the applicable jurisdiction.

7. Section 409A. The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Award Agreement shall be interpreted and administered in accordance with such intent. In no event shall the Company and/or its Affiliates be liable for any tax, interest or penalties that may be imposed on the Award Holder (or the Award Holder’s estate) under Section 409A.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to assure that such full compliance on the part of the Company is made. By signing this Agreement, the Award Holder represents and warrants that none of the shares to be acquired in settlement of the RSUs will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Securities Act of 1933 as amended (“Act”), and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Award Holder hereby agrees to indemnify the Company in the event of any violation by the Award Holder of such Act, rules, regulations or laws. The Company will use its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 3; provided that if the Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates that such settlement will not cause a violation of applicable law, all in accordance with Treas. Reg. § 1.409A-2(b)(7)(ii).

9. No Assignment or Other Transfer. During the Restricted Period, neither this Agreement, the RSU nor any rights and privileges granted hereby may be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise, except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be assigned or otherwise transferred during the Restricted Period to the spouse or former spouse of the Award Holder pursuant to any divorce proceedings, settlement or judgment. Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Agreement, the RSUs or any other rights or privileges granted hereby contrary to the provisions hereof shall be null and void and of no force or effect.

10. Certain Adjustments. The provisions of Sections 4.4 and 19.2 of the Plan relating to certain adjustments in the case of stock splits, reorganizations, equity restructurings and similar matters described therein are hereby incorporated in and made a part of this Agreement. Any such adjustments shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan on any such adjustment.

11. Participation by Award Holder in Other Company Plans. Nothing herein contained shall affect the right of the Award Holder to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare benefit plan or program of the Company or of any Affiliate of the Company, subject in each case, to the terms and conditions of any such plan or program.

12. Not an Employment or Service Contract. Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, expressed or implied, to employ or contract for the services of the Award Holder, to restrict the right of the Company or any of its Affiliates to discharge the Award Holder or cease contracting for the Award Holder’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Award Holder and the Company or any of its Affiliates.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 13. Agreement Subject to the Plan. The RSUs hereby granted are subject to, and the Company and the Award Holder agree to be bound by, all of the terms and conditions of the Plan, as the same may be amended from time to time hereafter in accordance with the terms thereof, but no such amendment shall adversely affect the Award Holder’s rights under this Agreement without his or her prior written consent. To the extent that the terms or conditions of this Agreement conflict with the terms or conditions of the Plan, the Plan shall govern.

14. Arbitration. Notwithstanding the terms of any other agreement in effect between the parties, all disputes related to this Agreement or any RSUs granted hereunder shall be submitted to final and binding arbitration with the American Arbitration Association (“AAA”) pursuant to the AAA Employment Arbitration Rules and Mediation Procedures (“AAA Rules”) as amended from time to time. A copy of the AAA Rules is available to the Award Holder upon written request to the Company’s Director of Human Resources at One East Wacker Drive, Chicago, Illinois 60601 (or such other address as the Company may specify from time to time), or may be obtained online at: www.adr.org.

To initiate arbitration, either party must file a Demand for Arbitration (“Demand”) in the manner described in the AAA Rules. After a Demand has been filed and served, either party may request that the dispute initially be mediated pursuant to the AAA Rules, in which event such dispute shall be mediated. If mediation does not fully resolve the dispute or if neither party requests mediation, then the matter will be subject to arbitration before a single arbitrator who shall have the power to award any types of legal or equitable relief (other than punitive damages) available in a court of competent jurisdiction, including, but not limited to, attorneys’ fees and costs, and all defenses that would be applicable in a court of competent jurisdiction shall be available. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including reimbursement of filing fees) and the fees of the arbitrator will be paid by the Company. The parties agree that no class action proceedings (or joinder or consolidation with claims of any other person) may be brought in connection with this Agreement without the written consent of both parties.

15. Governing Law. This Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles, and the Federal Arbitration Act.

16. Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the RSUs granted hereby and may not be amended except in a writing signed by both the Company and the Award Holder. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document required by applicable law, rule or regulation of the Securities and Exchange Commission, or rule or listing requirement of the New York Stock Exchange as in effect from time to time (collectively with the Company Policy, “Applicable Requirements”) in connection with an accounting restatement or under such other circumstances as specified in the Applicable Requirements. Any action taken under this provision shall be made pursuant to the Company’s determination, which shall be final, binding and conclusive.

ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:

18. Stock Holding Period. The Award Holder agrees to hold the shares of Common Stock acquired upon the vesting of the RSUs for a minimum of twelve months following their Vesting Date. This holding period shall not apply to shares of Common Stock withheld by the Company to settle tax liabilities related to vesting, and as otherwise may be provided under the Company’s Stock Ownership Policy.

As of 2-7-17

Vesting Schedule Based on Relative TSR

A. Definition of Terms:

“Additional Shares” means any shares of Common Stock to be issued to the Award Holder on the Vesting Date in the event that the Company’s Relative TSR Percentile Rank exceeds the Target Performance Level.

“Award Agreement” means the Performance-Based Restricted Stock Unit Award Agreement to which this Exhibit is a part, pursuant to which an award of performance-based RSUs has been granted.

“Company’s Relative TSR Percentile Rank” means the Company’s TSR Percentile Rank relative to the companies in the Peer Group as certified by the Committee for the Performance Period.

“Disability” means that the Award Holder either: (A) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and, with respect to an Award Holder who is an Employee, is receiving income replacement benefits for a period of not less than three months under an accident and health plan (e.g., a long term disability plan) covering Employees of the Company or Affiliate that employs the Award Holder; or (B) has been determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.

“Grant Date” is defined in the first paragraph of the Award Agreement.

“Peer Group” means the peer group approved by the Committee which shall be the companies that comprised the S&P Supercomposite Insurance Index at the beginning of the Performance Period (other than the Company), adjusted as of the end of the Performance Period to remove any such companies which are no longer included in the S&P Supercomposite Insurance Index as of the last day of the Performance Period.

“Performance Period” means the three-year period starting on February 1 of the calendar year in which the Grant Date occurs (“Start Date”) and ending on the calendar day immediately preceding the three-year anniversary of the Start Date.

“Separation from Service” has the meaning ascribed to such term in IRC Section 409A.

“Target Performance Level” means the Company’s Relative TSR Percentile Rank at the 50th percentile.

“Target Shares” means fifty percent (50%) of the total number of shares of performance-based RSUs granted on the Grant Date, as specified in the first paragraph of the Award Agreement.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document “TSR” means Total Shareholder Return as determined by the Committee for the Performance Period.

“TSR Percentile Rank” means the percentile performance of the Company and each of the companies in the Peer Group based on the TSR for such company as determined by the Committee for the Performance Period.

“Vesting Date” means the date that the Committee certifies the Company’s Relative TSR Percentile Rank, except as otherwise provided in Section E below.

B. Determination of Vesting Date Events:

As soon as practicable following the end of the Performance Period, the Committee will determine the Company’s Relative TSR Percentile Rank in accordance with the methodology described in the next section below. The Company’s Relative TSR Percentile Rank will determine the number of Target Shares that will vest or be forfeited on the Vesting Date, and the number of Additional Shares, if any, that will be issued to the Award Holder on the Vesting Date, as described below under “Vesting Determination.”

C. TSR Percentile Rank Calculation Methodology:

The Company’s Relative TSR Percentile Rank will be calculated in a two-step process. First, the TSR will be calculated for the Company and each company in the Peer Group. Then, the TSR Percentile Rank for the Company and each of the companies in the Peer Group will be determined. The TSR and the TSR Percentile Rank will be determined by the Committee in accordance with the formula and methods approved by the Committee, as described below.

Formula for Calculating TSR

For purposes of this Exhibit, the TSR for the Company and each of the companies comprising the Peer Group will be calculated as follows:

Ending Stock Price – Beginning Stock Price + Dividends Reinvested on all Ex-Dividend Dates Beginning Stock Price

Share Price Averaging Period The beginning and ending stock prices in the above formula for TSR will be calculated using a trailing average approach (i.e., average of the closing stock prices for 20 consecutive trading days prior to the beginning and end of the Performance Period).

Reinvestment of Dividends and Other Adjustments The above TSR formula assumes that dividends are paid and reinvested into additional shares of common stock on their ex-dividend dates. TSR will be adjusted for stock dividends, stock splits, spin-offs and other corporate changes having a similar effect.

As of 2-7-17

The percentile performance for determining the TSR Percentile Rank will be measured using the Microsoft Excel function PERCENTRANK.

D. Vesting Determination:

Except as otherwise provided in Section E, the RSUs held by the Award Holder will vest, to the extent earned for the Performance Period, on the Vesting Date only if the Award Holder has not had a Separation from Service prior to such date. Once the Company’s Relative TSR Percentile Rank is determined by the Committee, the Company will confirm the number of Target Shares that will vest or be forfeited on the Vesting Date, and the number of Additional Shares, if any, that will be issued to the Award Holder on the Vesting Date consistent with the following provisions:

• If the Company’s Relative TSR Percentile Rank is at the Target Performance Level, 100% of the Target Shares will vest on the Vesting Date. If the Company’s Relative TSR Percentile Rank is above the Target Performance Level, Additional Shares will also be issued to the Award Holder on the Vesting Date. If the Company’s Relative TSR Percentile Rank is less than the Target Performance Level, some or all of the Target Shares will be forfeited.

• The number of the Target Shares that will vest on the Vesting Date, and the number of any Additional Shares that will be issued to the Award Holder on the Vesting Date, will be determined in accordance with the table set forth below. Any Target Shares that do not vest in accordance with the table will be forfeited on the Vesting Date.

If the Company’s Relative TSR Percentile Rank for the Performance Period falls between the percentile levels specified in the first column of the table, the number of Shares that will vest or be granted or forfeited on the Vesting Date shall equal the number corresponding to the percentage interpolated on a straight-line basis.

Total RSUs to Vest (and/or Shares to be Granted) Company’s Relative TSR on Vesting Date as Percentage of Target Shares Percentile Rank

90th or Higher 200% 75th 150% 50th 100% 25th 50% Below 25th 0%

E. Determination of Vesting in Case of Certain Terminations and Other Events:

Notwithstanding any contrary provisions of the Plan:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (1) Retirement Eligible. (a) Except as otherwise provided in (1)(b) or another subsection of this Section E, if the Award Holder is Retirement Eligible, all RSUs held by the Award Holder will vest on the last day of the Performance Period, to the extent earned for the Performance Period, in an amount equal to the number of Target Shares that would vest in accordance with the provisions of Sections A – D above, if any, multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Award Holder was actively in Service, and the denominator of which is the total number of months in the Performance Period. A partial month worked shall be counted as a full month if the Award Holder was actively working for fifteen (15) days or more in that month. All RSUs that do not vest in accordance with this provision shall be forfeited.

(b) If, on or prior to the last day of the Performance Period, the Award Holder is Retirement Eligible and either (i) becomes an employee of a competitor of the Company or any of its Affiliates or otherwise engages in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole discretion, or (ii) the Award Holder’s Service is terminated for Substantial Cause, then any of the RSUs that are restricted on the date of such employment, activity or termination shall be forfeited to the Company.

(2) Termination on Death or Disability. The Vesting Date shall be the date of the Award Holder’s death or Disability if the Award Holder dies or becomes Disabled prior to the three-year anniversary of the Grant Date: (i) while in Service; or (ii) after terminating Service if the Award Holder (A) was Retirement Eligible on the date of such termination of Service for a reason other than Substantial Cause, and (B) had not, at any time prior to the date of the Award Holder’s death or Disability, become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole discretion. On such Vesting Date: (a) the Performance Period shall be deemed to have been completed; (b) a number of RSUs shall vest in an amount equal to the number of Target Shares multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Award Holder was actively in Service, and the denominator of which is the total number of months in the original Performance Period (a partial month worked shall be counted as a full month if the Award Holder was actively in Service for fifteen (15) days or more in that month); (c) no Additional Shares shall be issued to the Award Holder; and (d) all RSUs that do not vest in accordance with this provision shall be forfeited.

(3) Termination on Divestiture. In the event that, prior to the three-year anniversary of the Grant Date, the Award Holder is no longer employed by the Company or an Affiliate upon and as result of the divestiture by the Company of its controlling interest in the Award Holder’s Employer, or other cessation of the Company’s control of such Employer, the Performance Period and vesting determination set forth in Sections A – D above shall be deemed revised as follows, provided that the Award Holder does not otherwise continue in Service with the Company or another Affiliate:

• The Performance Period shall be deemed revised to end on the effective date of such divestiture or cessation of control (“Vesting Date”);

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document • The Company’s Relative TSR Percentile Rank will be determined for such truncated Performance Period by the Committee in accordance with the methodology set forth above.

• The Target Shares will vest or be forfeited on the Vesting Date in accordance with the table set forth below, but no Additional Shares will be issued to the Award Holder; and

• If the Company’s Relative TSR Percentile Rank for the truncated Performance Period falls between the percentile levels specified in the first column of the table set forth below, the number of Target Shares that will vest on the Vesting Date shall equal the number corresponding to the percentage interpolated on a straight-line basis from the percentages specified in the second column of the table.

Company’s Relative TSR Total RSUs to Vest on Vesting Date as Percentage of Percentile Rank Target Shares

50th or Higher 100% 25th 50% Below 25th 0%

(4) Other Termination of Service. If the Award Holder ceases to be in Service prior to the Vesting Date (including, without limitation, by reason of a divestiture or cessation of control of an Affiliate), and is not Retirement Eligible, under circumstances other than those set forth in the foregoing subsections (1) – (3) of this Section E, all unvested RSUs held by the Award Holder shall be forfeited to the Company on the date of such cessation of Service, and no Additional Shares shall be issued to the Award Holder.

(5) Leave of Absence. In the event that the Award Holder is on an approved Leave of Absence (other than a short-term disability leave) at the end of the Performance Period or takes such a leave of absence at any time during the Performance Period, then the RSUs will vest, forfeit or be granted, as applicable, to the extent earned for the Performance Period, in an amount equal to the number of Target Shares that would vest and the number of Additional Shares that would be issued in accordance with the provisions of Sections A – D above, if any, multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Award Holder was an active Employee not on such leave of absence and the denominator of which is the total number of months in the Performance Period.

(6) Change of Control. This Award may be subject to termination or early vesting in connection with a Change in Control in accordance with the provisions of Section 18.3 of the Plan.

F. Interpretations Related to Calculations and Determinations Related to Performance:

(1) Interpretations. The Company shall have the reasonable discretion to interpret or construe ambiguous, unclear or implied terms applicable to this Award Agreement, and to make any findings of fact necessary to make a calculation or determination hereunder.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (2) Disagreements. A decision made in good faith by the Company shall govern and be binding in the event of any dispute regarding a method of calculation of performance or a determination of vesting or forfeiture in connection with this Award.

(3) Method of Calculating Final Number of Vested or Forfeited Target Shares.

The following methods shall apply in determining the number of Target Shares that will vest or be forfeited on the Vesting Date pursuant to Section D above. As a general rule, the determination for performance that falls between Percentile Rank points in the table in Section D above would be interpolated on a straight-line basis, as stated in Section D.

Specifically, the formula to be used to calculate the final number of Target Shares that will vest or be forfeited is as follows:

• For TSR performance between the 25th & 50th Percentile Ranks, the number of Target Shares that will vest as a % of the total number of Target Shares equals: 50% + [(Actual Percentile Rank - 25)/50]%

• For TSR performance between the 50th & 75th Percentile Ranks, the number of Target Shares that will vest as a % of the total number of Target Shares equals: 100% + [(Actual Percentile Rank - 50)/50]%

• For TSR performance between the 75th & 90th Percentile Ranks, the number of Target Shares that will vest as a % of the total number of Target Shares equals: 150% + [(Actual Percentile Rank - 75)/30]%

Note that since the interval between the 75th & 90th Percentile Rank is shorter (15 percentiles) compared to the other quadrants (25 percentiles), the vesting result for this particular quadrant would be higher compared to the other quadrants.

(4) Rounding Conventions.

• Regarding rounding of TSRs, percentages for each company in the Peer Group shall be computed to two decimal points, i.e., XX.XX%)

• Regarding TSR Percentile Rank, the percentile rankings for each company in the Peer Group shall be rounded to the nearest percentage (e.g., 85% rather than 85.4166666%) before calculating the linearly interpolated payout, and the final payout percentage shall be rounded to the nearest percentage (e.g., 183% rather than 183.333333%).

• Target Shares that will vest and any Additional Shares that will result from the application of the methods and formula set forth in the foregoing subsection F(3) and Section D above shall only be paid out in whole shares. Any fractional shares that would otherwise result from such application shall be rounded down to the nearest whole number of shares.

As of 2-7-17

Kemper Corporation 2011 Omnibus Equity Plan

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT

(Adjusted ROE)

SIGNATURES

KEMPER CORPORATION AWARD HOLDER

By: «CEO Signature and Title» By: «name»

RECITALS

NOW, THEREFORE, the parties hereto agree as follows:

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2. Vesting and Forfeiture.

(i) the Award Holder is in Service (as hereafter defined) on the Vesting Date; or

The RSUs will vest on the Vesting Date only to the extent provided in and in accordance with the provisions of the applicable Exhibit.

(b) Certain Definitions.

(i) “Service” means that the Award Holder is employed by, or a Third Party Service Provider or member of the board of directors of, the Company or an Affiliate.

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ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:

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Vesting Schedule Based on Operational Metric

A. Definition of Terms:

“Additional Shares” means any shares of Common Stock to be issued to the Award Holder on the Vesting Date in the event that the Company’s Operational Performance Results exceed the Target Performance Level.

“Award Agreement” means the Performance-Based Restricted Stock Unit Award Agreement to which this Exhibit is a part, pursuant to which an award of performance-based RSUs has been granted.

“Grant Date” is defined in the first paragraph of the Award Agreement.

“Operational Performance Results” means the Company’s Adjusted Return on Equity as defined in Section C below and certified by the Committee for the Performance Period.

“Performance Period” means the three-year period ending on the December 31 immediately preceding the three- year anniversary of the Grant Date.

“Separation from Service” has the meaning ascribed to such term in Section 409A.

“Target Shares” means fifty percent of the total number of shares of performance-based RSUs granted on the Grant Date, as specified in the first paragraph of the Award Agreement.

“Vesting Date” means the date that the Committee certifies the Operational Performance Results, except as otherwise provided in Section E below.

B. Determination of Vesting Date Events:

As soon as practicable following the end of the Performance Period, the Committee will determine the Company’s Operational Performance Results in accordance with the methodology described in the next section below. The Company’s Operational Performance Results will determine the number of Target Shares that will vest or be forfeited on the Vesting Date, and the number of Additional

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Shares, if any, that will be issued to the Award Holder on the Vesting Date, as described below under “Vesting Determination.”

C. Operational Performance Calculation Methodology:

The following table shows the Maximum, Target and Threshold Performance Levels for the Company’s Operational Performance Results:

Total RSUs to Vest (and/or Shares to be Level of Achievement Operational Performance Granted) on Vesting Date as Percentage of for Performance Period Results Target Shares

Maximum 200%

Target 100%

Threshold 50%

Below Threshold 0%

At the conclusion of the Performance Period, the Committee will determine the Company’s Operational Performance Results in accordance with the formula and methods described below, including consideration of whether the Company’s Ratio of Debt to Total Capitalization at the end of the Performance Period exceeds 35%.

Formula for Calculating Operational Performance Results

For purposes of this Exhibit, the Operational Performance Results for the Company will be calculated as follows:

Adjusted Return on Equity shall be computed by dividing the sum of Adjusted Net Income for each of the three years in the Performance Period by the sum of the Adjusted Average Shareholders’ Equity for each of the three years.

Adjusted Net Income is defined as Net Income as reported in the Company’s financial statements for the respective year, adjusted to take into account the after-tax impacts of the following items, to the extent the Committee deems them not indicative of the Company’s core operating performance:

(i) adjust the amount of Actual CAT Losses and LAE to equal Expected CAT Losses;

(ii) adjust Net Realized Gains on Sales of Investments and Net Impairment Losses Recognized in Earnings to equal Expected Net Realized Gains on Sales of Investments and Expected Net Impairment Losses Recognized in Earnings;

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Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii) significant unusual judgments or settlements in connection with the Company’s legal contingencies or benefit plans; and

(iv) additional significant unusual or nonrecurring items as permitted by the Plan. Adjusted Average Shareholders’ Equity is defined as the simple average of Total Shareholders’ Equity as reported in the Company’s financial statements for the beginning and end of year for each year in the Performance Period, adjusted to take into account the after-tax impacts of the following items, to the extent the Committee deems them not indicative of the Company’s core operating performance:

(i) Unrealized Gains and Losses on Fixed Maturity Securities from Adjusted Shareholders Equity;

(ii) the modifications made in calculating Adjusted Net Income; and

(iii) additional significant unusual or nonrecurring items as permitted by the Plan.

Actual CAT Losses and LAE means the actual Catastrophe Losses and associated Loss Adjustment Expenses, including catastrophe reserve development, as reported in the Management Reports.

Expected CAT Losses, Expected Net Realized Gains on Sales of Investments, and Expected Net Impairment Losses Recognized in Earnings means the amounts specified in the Management Reports as “Planned” or “Expected” for the 2016 Annual Performance Period for, respectively, (A) Catastrophe Losses and associated Loss Adjustment Expenses, including catastrophe reserve development, (B) Net Realized Gains on Sales of Investments, and (C) Net Impairment Losses Recognized in Earnings.

Management Reports means the Hyperion reports, or their reporting equivalent, prepared by the Company for the relevant Plan Year or other time period.

Unrealized Gains and Losses on Fixed Maturity Securities means the Unrealized Gains and Losses on Fixed Maturity Securities as reported in the Management Reports.

D. Vesting Determination:

Once the Company’s Operational Performance Results are determined by the Committee, the Company will confirm the number of Target Shares that will vest or be forfeited on the Vesting Date, and the number of Additional Shares, if any, that will be issued to the Award Holder on the Vesting Date consistent with the following provisions:

As of 2-7-17-

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document • If the Company’s Operational Performance Results are at or above the Target Performance Level, 100% of the Target Shares will vest on the Vesting Date. If the Company’s Operational Performance Results are above the Target Performance Level, Additional Shares will also be issued to the Award Holder on the Vesting Date. If the Company’s Operational Performance Results are less than the Target Performance Level, some or all of the Target Shares will be forfeited.

• The number of the Target Shares that will vest on the Vesting Date, and the number of any Additional Shares that will be issued to the Award Holder on the Vesting Date, will be determined in accordance with the table set forth in Section C above. Any Target Shares that do not vest in accordance with the table will be forfeited on the Vesting Date.

E. Determination of Vesting in Case of Certain Terminations and Other Events:

Notwithstanding any contrary provisions of the Plan:

(1) Retirement Eligible. (a) Except as otherwise provided in (1)(b) or another subsection of this Section E, if the Award Holder is Retirement Eligible, all RSUs held by the Award Holder will vest on the last day of the Performance Period, to the extent earned for the Performance Period, in an amount equal to the number of Target Shares that would vest in accordance with the provisions of Sections A – D above, if any, multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Award Holder was actively in Service, and the denominator of which is the total number of months in the Performance Period. A partial month worked shall be counted as a full month if the Award Holder was actively working for fifteen (15) days or more in that month. All RSUs that do not vest in accordance with this provision shall be forfeited.

As of 2-7-17-

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document partial month worked shall be counted as a full month if the Award Holder was actively in Service for fifteen (15) days or more in that month); (c) no Additional Shares shall be issued to the Award Holder; and (d) all RSUs that do not vest in accordance with this provision shall be forfeited.

• The Performance Period shall be deemed revised to end on the effective date of such divestiture or cessation of control (“Vesting Date”);

• The Company’s Operational Performance Results will be determined for such truncated Performance Period by the Committee in accordance with the methodology set forth above.

• The Target Shares will vest or be forfeited on the Vesting Date in accordance with the table set forth below, but no Additional Shares will be issued to the Award Holder; and

• If the Company’s Operational Performance Results for the truncated Performance Period fall between the percentile levels specified in the first column of the table set forth below, the number of Target Shares that will vest on the Vesting Date shall equal the number corresponding to the percentage interpolated on a straight-line basis from the percentages specified in the second column of the table.

Company’s Operational Total RSUs to Vest on Vesting Date as Percentage of Performance Results Target Shares

Target 100% Threshold 50% Below Threshold 0%

As of 2-7-17-

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document or be granted, as applicable, to the extent earned for the Performance Period, in an amount equal to the number of Target Shares that would vest and the number of Additional Shares that would be issued in accordance with the provisions of Sections A – D above, if any, multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Award Holder was an active Employee not on such leave of absence and the denominator of which is the total number of months in the Performance Period.

(6) Change of Control. This Award may be subject to termination or early vesting in connection with a Change in Control in accordance with the provisions of Section 18.3 of the Plan.

F. Interpretations Related to Calculations and Determinations Related to Performance:

(2) Disagreements. A decision made in good faith by the Company shall govern and be binding in the event of any dispute regarding a method of calculation of performance or a determination of vesting or forfeiture in connection with this Award.

(3) Method of Calculating Final Number of Vested or Forfeited Target Shares.

The number of Target Shares that will vest or be forfeited on the Vesting Date pursuant to Section D above for performance that falls between the percentage points specified in the second column of the table in Section C above shall be interpolated on a straight-line basis.

(4) Rounding Conventions.

• Regarding rounding of results, percentages shall be computed to one decimal point, i.e., XX.X%)

• Target Shares that will vest and any Additional Shares that will result from the application of the methods in the foregoing subsection F(3) and Section D above shall only be paid out in whole shares. Any fractional shares that would otherwise result from such application shall be rounded down to the nearest whole number of shares.

As of 2-7-17-

Kemper Corporation 2011 Omnibus Equity Plan

NON-QUALIFIED STOCK OPTION AND SAR AGREEMENT

(Installment-Vesting Form)

This NON-QUALIFIED STOCK OPTION AND SAR AGREEMENT (“Agreement”) is made as of this ______day of ______, 2___ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (the “Company”), and «name» (the “Award Holder”), for an award consisting of the right and option (the “Option”) to purchase on the terms and conditions hereinafter set forth, all or any part (subject to the limitations of Section 3) of an aggregate of «shares» («number») shares of the Common Stock of the Company (“Common Stock”) at the purchase price of $______per share.

SIGNATURES

KEMPER CORPORATION AWARD HOLDER

By: «CEO Signature and Title» «name»

RECITALS

A. The Board of Directors of the Company has adopted the Kemper Corporation 2011 Omnibus Equity Plan (the “Plan”), including all amendments to date, to be administered by the Compensation Committee of the Company’s Board of Directors or any subcommittee thereof, or any other committee designated by the Board to administer the Plan (the “Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.

B. The Plan authorizes the Committee to grant to selected employees, directors and Third Party Service Providers of the Company or any Affiliate of the Company awards of various types, including of options to purchase shares of Common Stock of the Company and tandem stock appreciation rights (“SAR(s)”).

C. Pursuant to the Plan, the Committee has determined that it is in the best interest of the Company and its shareholders to grant a non-qualified stock option (and tandem SAR) to the Award Holder, and has approved the execution of this Non-Qualified Stock Option and SAR Agreement between the Company and the Award Holder.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document D. Neither the option nor the SAR granted hereby is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.

NOW, THEREFORE, the parties hereto agree as follows:

1. Grant.

(a) The Company grants the Option to the Award Holder, which Option will be exercisable from time to time in accordance with the provisions of this Agreement during a period expiring on the tenth anniversary of the Grant Date or such later date as may result from the application of Section 6 (such anniversary or later date is referred to as the “Expiration Date”). The Option is also subject to early termination pursuant to Section 3(f) and Section 5.

(b) The Option is coupled with a SAR that is exercisable to the extent, and only to the extent, that the Option is exercisable under the vesting provisions of Section 2. The term of the SAR shall expire on the Expiration Date and shall be subject to early termination pursuant to Section 3(f) and Section 5. The SAR shall entitle the Award Holder to surrender the Option (or any portion thereof, subject to Section 3(a)) to the Company unexercised and receive in exchange for the surrender of the Option (or the surrendered portion thereof) that number of shares of the Company’s common stock having an aggregate value equal to: (A) the excess of the fair market value of one share of such stock (as determined in accordance with Section 4) over the purchase price per share specified on page one above (or, if applicable, such price as adjusted pursuant to Section 9 hereof), multiplied by (B) the number of such shares subject to the Option (or portion thereof) which is so surrendered.

2. Vesting.

(a) The Award Holder may not purchase any shares by exercise of this Option or the SAR until the date on which they are exercisable (the “Vesting Date(s)”). Subject to early vesting or forfeiture pursuant to Section 5, the shares subject to this Option and SAR shall become exercisable in four (4), equal annual installments, the first of which shall vest on the six-month anniversary of the Grant Date (the “Initial Vesting Date”), and the remainder of which shall vest on the first, second and third anniversaries of the Initial Vesting Date, respectively, provided that: (i) the Award Holder is in Service (as hereafter defined) on the Vesting Date; or (ii) the Award Holder is Retirement Eligible (as hereafter defined) prior to the date the Award Holder terminates Service and the Award Holder has not, at any time prior to or on the Vesting Date, become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole discretion.

(b) Certain Definitions.

(i) “Service” means that the Award Holder is employed by, or a Third Party Service Provider or member of the board of directors of, the Company or an Affiliate.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Subject to early vesting or forfeiture under Section 5 or the terms of the Plan and no later than the Expiration Date, the Award Holder may purchase all or any part (subject to the limitations of Section 3) of the shares subject to this Option which are currently exercisable, or such lesser number of shares as may be available through the exercise of the SAR. The total number of shares subject to the Option and the number of shares subject to the Option which are currently exercisable by the Award Holder each shall be reduced by the number of shares previously acquired by the Award Holder pursuant to this Agreement.

3. Manner of Exercise.

(a) Each exercise of this Option shall be by means of a written notice of exercise delivered to the Company by the Award Holder or his or her Representative. Such notice shall identify the Options being exercised. When applicable, the notice shall also specify the number of shares of Common Stock that the Award Holder plans to deliver in payment of all or part of the exercise price. Before shares will be issued, the full purchase price of the shares subject to the Options being exercised shall be paid to the Company using the following methods, individually or in combination: (i) by check payable to the order of the Company in an amount equal to the purchase price, (ii) by Constructive or Actual Delivery of shares of Common Stock with a fair market value as of the close of business on the date of exercise equal to or greater than the purchase price, (iii) by electronic transfer of funds to an account of the Company, or (iv) by other means acceptable to the Committee. This Option may not be exercised for a fraction of a share and no partial exercise of this Option may be for less than fifty (50) shares unless the total number of shares covered by this Option is less than 50 on the date of exercise or unless this Option is scheduled to expire within six months of the date of exercise.

(b) Each exercise of the SAR shall be by means of a written notice of exercise delivered to the Company, specifying whether the Award Holder is surrendering all or a portion of the Option and, if only a portion of the Option is being surrendered, how many shares are included in such portion (to the extent determinable by the Award Holder). Upon satisfaction of the Award Holder’s obligation to pay the Company the amount of all taxes that the Company is required to withhold in connection with such exercise as specified in Section 3(e) below, the Company shall issue to the Award Holder a number of shares of the Company’s common stock computed in accordance with Section 1(b) and the Option and the SAR (or the surrendered portions thereof) shall be deemed extinguished. The SAR may only be settled in shares of the Company’s common stock and not by payment of cash to the Award Holder. Any fractional share that would otherwise result from an exercise of the SAR shall be rounded down to the nearest whole share.

(c) The date of exercise shall be: (i) in the case of a broker-assisted cashless exercise, the earlier of (A) the trade date of the related sale of stock or (B) the date that the Company receives the purchase price; (ii) in the case of a SAR, or an Option exercise in which the Award Holder elects to pay some or all of the exercise price and/ or any related withholding taxes by Constructive or Actual Delivery of shares of Common Stock (or, in the case of such taxes, by directing the Company to withhold shares that would otherwise be issued upon exercise of such Option), the date that the Company receives written notice of such exercise; or (iii) in all other cases, the date that the Company receives the purchase price.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) This Option and SAR may be exercised only by the Award Holder or his or her Representative, and not otherwise, regardless of any community property interest therein of the spouse of the Award Holder, or such spouse’s successors in interest. If the spouse of the Award Holder shall have acquired a community property interest in this Option and the SAR, the Award Holder, or the Award Holder’s Representative, may exercise the Option and the SAR on behalf of the spouse of the Award Holder or such spouse’s successors in interest.

(e) Upon the exercise of this Option or SAR, the Company shall require the Award Holder or the Award Holder’s Representative to pay the Company the amount of any taxes which the Company may be required to withhold with respect to such exercise. Subject to the limitations set forth in the next two sentences, the Award Holder or his/her Representative may elect to satisfy all or any portion of such tax withholding obligations either by: (i) any of the methods described in Sections 3(a)(i) through 3(a)(iv) above, or (ii) directing the Company to withhold shares that would otherwise have been issued pursuant to the exercise of this Option or SAR. Neither the Award Holder nor his/her Representative shall have the right to use Constructive or Actual Delivery of shares of Common Stock or to have shares withheld, in either case, to the extent that the Fair Market Value of such shares delivered or withheld on the date of exercise exceeds the amount required to be delivered or withheld to meet tax withholding requirements, based on the maximum statutory withholding rates for the Award Holder for federal, state and local tax purposes (including the Award Holder’s share of payroll or similar taxes) in the applicable jurisdiction. In the case of an exercise of the SAR, the Company retains the right to require the Award Holder to pay any and all withholding taxes arising out of such exercise solely in cash.

(f) In the event the Option (or any portion thereof) is exercised, then the SAR (or the corresponding portion) shall terminate. In the event that the SAR (or any portion thereof) is exercised, then the Option (or the corresponding portion) shall likewise terminate.

4. Fair Market Value of Common Stock. The fair market value of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock, as reported by the New York Stock Exchange (or such other exchange on which the Shares of Common Stock are primarily traded) for the Grant Date or date of exercise, as applicable, or if such date is not a business day, for the business day immediately preceding such date (or, if for any reason no such price is available, in such other manner as the Committee may deem appropriate to reflect the then fair market value thereof).

5. Termination of Service. The Option may be subject to early vesting or forfeiture in accordance with the following provisions:

(a) Death or Disability.

(i) The Vesting Date shall be the date of the Award Holder’s death or Disability if the Award Holder dies or becomes Disabled: (A) while in Service; or (B) after terminating Service if the Award Holder (1) was Retirement Eligible on the date of such termination of Service, and (2) had not, at any time prior to the date of the Award Holder’s death or Disability, become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document discretion. On such Vesting Date, any portion of this Option and SAR granted hereunder that is outstanding but not vested shall immediately vest and, along with any previously-vested portion that is then outstanding, remain outstanding and exercisable until the earlier of the Expiration Date or one year from the Vesting Date, and any portion not exercised within such period shall be forfeited to the Company.

(ii) “Disabled” or “Disability” means that the Award Holder either:

(A) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months and, with respect to an Award Holder who is an Employee, is receiving income replacement benefits for a period of not less than three months under an accident and health plan (e.g. a long term disability plan) covering Employees of the Company or Affiliate that employs the Award Holder; or

(B) has been determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.

(b) Divestiture of Employer. If the Company divests its controlling interest in an Affiliate, or if its control of such Affiliate otherwise ceases, and the Award Holder is in Service to such Affiliate and is not in Service to the Company or another Affiliate, then any unvested portion of this Option and SAR held by the Award Holder on the date of such divestiture or cessation of control shall be forfeited to the Company if the Award Holder is not Retirement Eligible on such date. The Award Holder shall have until the earlier of 90 days from such date or the Expiration Date, in which to exercise any portion that is vested on such date, and any portion that is not exercised within such period shall be forfeited to the Company.

If the Award Holder is Retirement Eligible on the date of such divestiture or cessation of control, this Option and SAR shall continue to vest in accordance with Section 2(a) and the Award Holder shall have until the Expiration Date to exercise any portion of the Option that becomes vested; provided, however, that if the Award Holder dies or becomes Disabled prior to the Expiration Date, Section 5(a) shall apply.

(c) Other Termination of Service. If the Award Holder ceases to be in Service under circumstances other than those set forth in the foregoing subsections (a) or (b), then:

(i) If the termination of Service is not for Substantial Cause and the Award Holder is not Retirement Eligible, then any portion of this Option and SAR held by the Award Holder that was not vested on the date of termination shall immediately be forfeited to the Company, and the Award Holder shall have until the earlier of 90 days from the date of termination or the Expiration Date in which to exercise any portion that was vested on such date, and any portion not exercised within such period shall be forfeited to the Company.

(ii) If the termination of Service is not for Substantial Cause and the Award Holder is Retirement Eligible, the Award Holder shall continue to vest in this Option and SAR in

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document accordance with Section 2(a) and shall have until the Expiration Date to exercise any portion of the Option that becomes vested, unless (A) the Award Holder becomes an employee of a competitor of the Company or any of its Affiliates or otherwise engages in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole discretion, in which case any portion of this Option and SAR that was not vested on the date that such employment or activity began shall be forfeited to the Company on such date, or (B) the Award Holder dies or becomes Disabled prior to the Expiration Date, in which case Section 5(a) shall apply.

(iii) If the termination of Service is for Substantial Cause, regardless of whether the Award Holder is Retirement Eligible, then any portion of this Option and SAR that remains outstanding on the date of termination (whether vested or unvested) shall be forfeited to the Company, notwithstanding any otherwise applicable term of this Agreement that provided for vesting or non-forfeitability, including (but not limited to) Section 2(a).

6. Extension of Expiration in Certain Cases. From time to time, the Company may declare “blackout” periods during which the Award Holder may be prohibited from engaging in certain transactions in Company securities. In the event that the scheduled Expiration Date of this Option and SAR shall fall within a blackout period that has been declared by the Company and that applies to the Award Holder, then the Expiration Date shall automatically, and without further notice to Award Holder, be extended until such time as fifteen (15) consecutive business days have elapsed after the scheduled Expiration Date without interruption by any blackout period that applied to the Award Holder.

7. Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules. No shares issuable upon the exercise of this Option or SAR shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange or such other exchange(s) or markets on which shares of the same class are then listed and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to assure that such full compliance on the part of the Company is made.

8. No Assignment. This Option and SAR and all rights and privileges granted hereby (including the right of exercise) shall not be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise, except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be assigned or otherwise transferred to the spouse or former spouse of the Award Holder pursuant to any divorce proceedings, settlement or judgment. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or SAR or any other rights or privileges granted hereby contrary to the provisions hereof, this Option and SAR and all other rights and privileges contained herein shall immediately become null and void and of no further force or effect.

As of 2-7-17

(a) The provisions of Sections 4.4 and 19.2 of the Plan relating to certain adjustments in the case of stock splits, reorganizations, equity restructurings and similar matters described therein are hereby incorporated in and made a part of this Agreement. Any such adjustments shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan on any such adjustment.

(b) This award may be subject to termination or early vesting in connection with a Change in Control in accordance with the provisions of Section 18.3 of the Plan.

10. Participation by Award Holder in Other Company Plans. Nothing herein contained shall affect the right of the Award Holder to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare benefit plan or program of the Company or of any Affiliate of the Company, subject in each case, to the terms and conditions of any such plan or program.

11. No Rights as a Stockholder Until Issuance of Shares. Neither the Award Holder nor his/her Representative shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercise of this Option or SAR unless and until such shares shall have been issued and delivered to: (i) Award Holder in the form of certificates, (ii) a brokerage or other account for the benefit of Award Holder either in certificate form or via “DWAC” or similar electronic means, or (iii) a book entry or direct registration account in the name of Award Holder.

12. Not an Employment or Service Contract. Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, expressed or implied, to employ the Award Holder or contract for the Award Holder’s services, to restrict the right of the Company or any of its Affiliates to discharge Award Holder or cease contracting for Award Holder’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Award Holder and the Company or any of its Affiliates.

13. Agreement Subject to the Plan. This Option and SAR hereby granted are subject to, and the Company and the Award Holder agree to be bound by, all of the terms and conditions of the Plan, as the same may be amended from time to time hereafter in accordance with the terms thereof, but no such amendment shall adversely affect the Award Holder’s rights under this Agreement without the prior written consent of the Award Holder. To the extent that the terms or conditions of this Agreement conflict with the terms or conditions of the Plan, the Plan shall govern.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Company’s Director of Human Resources at One East Wacker Drive, Chicago, Illinois 60601 (or such other address as the Company may specify from time to time), or may be obtained online at: www.adr.org.

16. Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the Option and SAR granted hereby and may not be amended except in a writing signed by both the Company and the Award Holder or his/her Representative. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.

17. Forfeiture and Clawback of Award. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement and as a condition to the receipt of this Award, the rights, payments and benefits with respect to this Award are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent required in accordance with Company policy as in effect from time to time (“Company Policy”), and/or as otherwise required by applicable law, rule or regulation of the Securities and Exchange Commission, or rule or listing requirement of the New York Stock Exchange as in effect from time to time (collectively with the Company Policy, “Applicable Requirements”) in connection with an accounting restatement or under such other circumstances as specified in the Applicable Requirements. Any action taken under this provision shall be made pursuant to the Company’s determination, which shall be final, binding and conclusive.

ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:

18. Stock Holding Period. The Award Holder agrees to hold all shares of Common Stock acquired upon the exercise of Options granted hereunder for a minimum of twelve months

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document following the date of such exercise. This holding period shall not apply to shares sold or tendered by the Award Holder and/or withheld by the Company to pay the Option exercise price and/or to settle tax liabilities related to the Option exercise, and as otherwise may be provided under the Company’s Stock Ownership Policy.

As of 2-7-17

Kemper Corporation 2011 Omnibus Equity Plan

NON-QUALIFIED STOCK OPTION AND SAR AGREEMENT

(Cliff-Vesting Form)

SIGNATURES

KEMPER CORPORATION AWARD HOLDER

By: «CEO Signature and Title» «name»

RECITALS

B. The Plan authorizes the Committee to grant to selected employees, directors and Third Party Service Providers of the Company or any Affiliate of the Company awards of various types, including of options to purchase shares of Common Stock of the Company and tandem stock appreciation rights (“SAR(s)”).

As of 2-7-17

NOW, THEREFORE, the parties hereto agree as follows:

1. Grant.

(a) The Company grants the Option to the Award Holder, which will Option be exercisable from time to time in accordance with the provisions of this Agreement during a period expiring on the tenth anniversary of the Grant Date or such later date as may result from the application of Section 6 (such anniversary or later date is referred to as the “Expiration Date”). The Option is also subject to early termination pursuant to Section 3(f) and Section 5.

2. Vesting. The Award Holder may not purchase any shares by exercise of this Option or the SAR until the date on which they are exercisable (the “Vesting Date”). Subject to Section 5, the shares subject to this Option and SAR shall become exercisable on the [______] anniversary of the Grant Date.

Subject to early vesting or forfeiture pursuant to Section 5 or the terms of the Plan and no later than the Expiration Date, the Award Holder may purchase all or any part (subject to the limitations of Section 3) of the shares subject to this Option which are currently exercisable, or such lesser number of shares as may be available through the exercise of the SAR. The total number of shares subject to the Option and the number of shares subject to the Option which are currently exercisable by the Award Holder each shall be reduced by the number of shares previously acquired by the Award Holder pursuant to this Agreement.

3. Manner of Exercise.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document or in combination: (i) by check payable to the order of the Company in an amount equal to the purchase price, (ii) by Constructive or Actual Delivery of shares of Common Stock with a fair market value as of the close of business on the date of exercise equal to or greater than the purchase price, (iii) by electronic transfer of funds to an account of the Company, or (iv) by other means acceptable to the Committee. This Option may not be exercised for a fraction of a share and no partial exercise of this Option may be for less than fifty (50) shares unless the total number of shares covered by this Option is less than 50 on the date of exercise or unless this Option is scheduled to expire within six months of the date of exercise.

(c) The date of exercise shall be: (i) in the case of a broker-assisted cashless exercise, the earlier of (A) the trade date of the related sale of stock or (B) the date that the Company receives the purchase price; (ii) in the case of a SAR, or an Option exercise in which the Award Holder elects to pay some or all of the exercise price and/or any related withholding taxes by Constructive or Actual Delivery of shares of Common Stock (or, in the case of such taxes, by directing the Company to withhold shares that would otherwise be issued upon exercise of such Option), the date that the Company receives written notice of such exercise; or (iii) in all other cases, the date that the Company receives the purchase price.

(d) This Option and SAR may be exercised only by the Award Holder or his or her Representative, and not otherwise, regardless of any community property interest therein of the spouse of the Award Holder, or such spouse’s successors in interest. If the spouse of the Award Holder shall have acquired a community property interest in this Option and the SAR, the Award Holder, or the Award Holder’s Representative, may exercise the Option and the SAR on behalf of the spouse of the Award Holder or such spouse’s successors in interest.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of shares of Common Stock or to have shares withheld, in either case, to the extent that the Fair Market Value of such shares delivered or withheld on the date of exercise exceeds the amount required to be delivered or withheld to meet tax withholding requirements, based on the maximum statutory withholding rates for the Award Holder for federal, state and local tax purposes (including the Award Holder’s share of payroll or similar taxes) in the applicable jurisdiction. In the case of an exercise of the SAR, the Company retains the right to require the Award Holder to pay any and all withholding taxes arising out of such exercise solely in cash.

5. Termination of Service. The Option may be subject to early vesting or forfeiture in accordance with the following provisions:

(a) Death or Disability.

(i) If the Award Holder dies or becomes Disabled while in Service, then any portion of this Option and SAR granted hereunder that is outstanding but not vested on the date of the Award Holder’s death or Disability shall immediately vest on such date and, along with any previously-vested portion that is then outstanding, remain outstanding and exercisable until the earlier of the Expiration Date or one year from the date of death or the date the Award Holder first became Disabled, and any portion not exercised within such period shall be forfeited to the Company.

(ii) “Disabled” or “Disability” means that the Award Holder either:

(B) has been determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.

(b) Retirement.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (i) If the Award Holder Retires but continues to provide Services, then any outstanding portion of this Option and SAR shall continue to vest and remain outstanding in accordance with this Agreement until he or she ceases to provide Services. If such Services cease as a result of death or Disability, then subsection (a) above shall apply. If such Services cease for any other reason, then subsection (b)(ii) below shall apply as if the Award Holder were Retiring on the date of such cessation of Services.

(ii) If the Award Holder Retires but does not continue to provide Services as provided in subsection (b)(i) above, then such Award Holder may exercise any vested and outstanding portion of this Option and SAR until the earlier of one year from the date of Retirement or the Expiration Date and any portion that is not exercised within such period shall be forfeited to the Company, and any portion that is not vested on the date of Retirement shall be forfeited to the Company.

(iii) For the purposes of this Agreement, “Retires” or “Retirement” shall mean the termination of the Award Holder’s employment on or after either attaining age 60 and completing ten years of Service as an Employee, or attaining age 65 and completing five years of Service as an Employee, and “Service” means that the Award Holder is employed by, or a Third Party Service Provider or member of the board of directors of, the Company or an Affiliate.

(c) Divestiture of Employer. If the Company divests its controlling interest in an Affiliate, or if its control of such Affiliate otherwise ceases, and the Award Holder is in Service to such Affiliate and is not in Service to the Company or another Affiliate, then any unvested portion of this Option and SAR held by the Award Holder on the date of such divestiture or cessation of control shall be forfeited to the Company, and the Award Holder shall have until the earlier of 90 days from such date or the Expiration Date, in which to exercise any portion that is vested on such date, and any portion that is not exercised within such period shall be forfeited to the Company.

(d) Other Termination of Employment. If the Award Holder ceases to be in Service under circumstances other than those set forth in the foregoing subsections (a) – (c), then:

(i) If the termination of Service is not for Substantial Cause, then any portion of this Option and SAR held by the Award Holder that is not vested on the date of termination shall immediately be forfeited to the Company, and the Award Holder shall have until the earlier of 90 days from the date of termination or the Expiration Date in which to exercise any portion that is vested on such date, and any portion not exercised within such period shall be forfeited to the Company.

(ii) If the termination of Service is for Substantial Cause, then any portion of this Option and SAR that remains outstanding on the date of termination (whether vested or unvested) shall be forfeited to the Company, notwithstanding any otherwise applicable term of this Agreement.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Option and SAR shall fall within a blackout period that has been declared by the Company and that applies to the Award Holder, then the Expiration Date shall automatically, and without further notice to Award Holder, be extended until such time as fifteen (15) consecutive business days have elapsed after the scheduled Expiration Date without interruption by any blackout period that applied to the Award Holder.

9. Certain Adjustments; Change in Control.

(b) This award may be subject to termination or early vesting in connection with a Change in Control in accordance with the provisions of Section 18.3 of the Plan.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 11. No Rights as a Stockholder Until Issuance of Shares. Neither the Award Holder nor his/her Representative shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercise of this Option or SAR unless and until such shares shall have been issued and delivered to: (i) Award Holder in the form of certificates, (ii) a brokerage or other account for the benefit of Award Holder either in certificate form or via “DWAC” or similar electronic means, or (iii) a book entry or direct registration account in the name of Award Holder.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 15. Governing Law. This Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles, and the Federal Arbitration Act.

ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:

18. Stock Holding Period. The Award Holder agrees to hold all shares of Common Stock acquired upon the exercise of Options granted hereunder for a minimum of twelve months following the date of such exercise. This holding period shall not apply to shares sold or tendered by the Award Holder and/or withheld by the Company to pay the Option exercise price and/or to settle tax liabilities related to the Option exercise, and as otherwise may be provided under the Company’s Stock Ownership Policy.

As of 2-7-17

Kemper Corporation 2011 Omnibus Equity Plan

TIME-VESTED RESTRICTED STOCK UNIT AWARD AGREEMENT

(Installment-Vesting Form)

This TIME-VESTED RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”) is made as of this ______day of ______, ____ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (the “Company”), and «name» (the “Award Holder”) for an Award of an aggregate of «shares» («shares») restricted stock units (the “RSUs”), each representing the right to receive one share of the Company’s common stock (“Common Stock”) on the terms and conditions set forth in this Agreement.

SIGNATURES

KEMPER CORPORATION AWARD HOLDER By: «CEO Signature and Title» By: «name»

RECITALS

C. Pursuant to the Plan, the Committee has determined that it is in the best interest of the Company and its shareholders to grant the Award Holder an Award of restricted stock units

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document under the terms and conditions specified in this Agreement as an inducement to remain in the service of the Company and an incentive for increased effort during such service.

NOW, THEREFORE, the parties hereto agree as follows:

1. Grant. The Company grants the RSUs to the Award Holder, subject to the terms and conditions set forth in this Agreement. Except as otherwise set forth herein, the RSUs shall not entitle the Award Holder to any rights of a shareholder of Common Stock.

2. Vesting and Forfeiture.

(a) Restricted Period. The RSUs shall be restricted during a period (the “Restricted Period”) beginning on the Grant Date and expiring on the date(s) that they vest in accordance with the next sentence (the “Vesting Date(s)”), provided that the RSUs have not vested early or been forfeited pursuant to Section 2(c) below and: (i) the Award Holder is in Service (as hereafter defined) on the Vesting Date; or (ii) the Award Holder is Retirement Eligible (as hereafter defined) prior to the date the Award Holder terminates Service and the Award Holder has not, at any time prior to or on the Vesting Date, become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole discretion. The Vesting Dates are, for the first of four equal installments of the RSUs, the six-month anniversary of the Grant Date (the “Initial Vesting Date”), and for each of the remaining three installments, respectively, the first, second and third anniversaries of the Initial Vesting Date.

(b) Certain Definitions.

(i) “Service” means that the Award Holder is employed by, or a Third Party Service Provider or member of the board of directors of, the Company or an Affiliate.

(iii) “Disability” means that the Award Holder either:

(B) has been determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) Termination of Service. During the Restricted Period, the RSUs may be subject to early vesting or forfeiture in accordance with the following provisions:

(i) Death or Disability. Notwithstanding the foregoing, the Vesting Date shall be the date of the Award Holder’s death or Disability if the Award Holder dies or becomes Disabled: (a) while in Service; or (b) after terminating Service if the Award Holder (1) was Retirement Eligible on the date of such termination of Service, and (2) had not, at any time prior to the date of the Award Holder’s death or Disability, become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Company in its sole discretion. On such Vesting Date, any of the RSUs that were outstanding but not vested shall immediately vest.

(ii) Divestiture of Employer. If the Company divests its controlling interest in an Affiliate, or if its control of such Affiliate otherwise ceases, and the Award Holder is in Service to such Affiliate and is not in Service to the Company or another Affiliate, then all unvested RSUs shall be forfeited to the Company on the date of such divestiture or cessation of control, except if the Award Holder is Retirement Eligible on such date, in which case the Award Holder may continue to vest in accordance with Section 2(a).

(iii) Other Termination of Service. If the Award Holder ceases to be in Service prior to becoming Retirement Eligible under circumstances other than those set forth in the foregoing subsections (i) or (ii), or if the Award Holder’s Service is terminated for Substantial Cause prior to or after becoming Retirement Eligible, all unvested RSUs held by the Award Holder shall be forfeited to the Company on the date of such cessation of Service or termination, notwithstanding any otherwise applicable term of this Agreement that provided for vesting or non-forfeitability, including (but not limited to) Section 2(a).

Any issuance of Common Stock shall be subject to applicable tax withholding obligations as described in Section 6 and shall be in book-entry form, registered in the Award Holder’s name (or in the name of the Award Holder’s Representative, as the case may be), in payment of whole RSUs. Except as otherwise provided in Section 8, in no event shall the date that Common Stock is issued to the Award Holder (“Settlement Date”) occur later than the first to occur of (a) March 15th following the calendar year in which the Vesting Date occurred, or (b) ninety (90) days following the applicable Vesting Date.

4. Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to the Common Stock during the Restricted Period, the Award Holder shall be entitled to receive a cash payment equal to the total cash dividend the Award Holder would have received had the RSUs been actual shares of Common Stock, subject to applicable tax withholding obligations as described in Section 6. The cash payment shall be made on the date that the dividends are payable to holders of Common Stock (the “Dividend Payment Date”). The rules of Treas. Reg. § 1.409A-3(d) shall be applied in determining whether a cash payment is made on the Dividend Payment Date.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5. Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the Grant Date or Vesting Date, as applicable, or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, in such other manner as the Committee in its sole discretion may deem appropriate to reflect the fair market value thereof).

6. Withholding of Taxes. The Award Holder acknowledges that the vesting of the RSUs will result in the Award Holder being subject to payroll taxes upon the Vesting Date (to the extent that payroll taxes have not previously become due) and that the conversion of the RSUs to Common Stock will result in the Award Holder being subject to income taxes upon the Settlement Date. Upon a required withholding date, the Company will deduct from the shares of Common Stock that are otherwise due to be delivered to the Award Holder a number of whole shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory withholding rates for the Award Holder for federal, state and local tax purposes (including the Award Holder’s share of payroll or similar taxes) in the applicable jurisdiction, and the Award Holder shall remit to the Company in cash any and all applicable withholding taxes that exceed the amount available to the Company using whole shares.

The Award Holder further acknowledges that the Award Holder will be subject to payroll taxes upon becoming Retirement Eligible prior to termination of the Award Holder’s Service and agrees that the Company or its Affiliate shall withhold such payroll taxes from any other compensation paid by the Company or its Affiliate to the Award Holder.

7. Code Section 409A. The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Award Agreement shall be interpreted and administered in accordance with such intent. In no event shall the Company and/or its Affiliates be liable for any tax, interest or penalties that may be imposed on the Award Holder (or the Award Holder’s estate) under Code Section 409A.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document warrants that none of the shares to be acquired in settlement of the RSUs will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Securities Act of 1933, as amended (the “Act”), and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Award Holder hereby agrees to indemnify the Company in the event of any violation by the Award Holder of such Act, rules, regulations or laws. The Company will use its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 3; provided that if the Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates that such settlement will not cause a violation of applicable law, all in accordance with Treas. Reg. § 1.409A-2(b)(7)(ii).

10. Certain Adjustments; Change in Control.

(b) The RSUs may be subject to termination or early vesting in connection with a Change in Control in accordance with the provisions of Section 18.3 of the Plan.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document agreement or contract for services which may exist between the Award Holder and the Company or any of its Affiliates.

13. Agreement Subject to the Plan. The RSUs hereby granted are subject to, and the Company and the Award Holder agree to be bound by, all of the terms and conditions of the Plan, as the same may be amended from time to time hereafter in accordance with the terms thereof, but no such amendment shall adversely affect the Award Holder’s rights under this Agreement without his or her prior written consent. To the extent that the terms or conditions of this Agreement conflict with the terms or conditions of the Plan, the Plan shall govern.

17. Forfeiture and Clawback of Award. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement and as a condition to the receipt of

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document this Award, the rights, payments and benefits with respect to this Award are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent required in accordance with Company policy as in effect from time to time (“Company Policy”), and/or as otherwise required by applicable law, rule or regulation of the Securities and Exchange Commission, or rule or listing requirement of the New York Stock Exchange as in effect from time to time (collectively with the Company Policy, “Applicable Requirements”) in connection with an accounting restatement or under such other circumstances as specified in the Applicable Requirements. Any action taken under this provision shall be made pursuant to the Company’s determination, which shall be final, binding and conclusive.

Additional Provisions Applicable to Executive Officers Only:

As of 2-7-17

Kemper Corporation 2011 Omnibus Equity Plan

TIME-VESTED RESTRICTED STOCK UNIT AWARD AGREEMENT

(Cliff-Vesting Form)

SIGNATURES

KEMPER CORPORATION AWARD HOLDER

By: «CEO Signature and Title» By: «name»

RECITALS

C. Pursuant to the Plan, the Committee has determined that it is in the best interest of the Company and its shareholders to grant the Award Holder an Award of restricted stock units

As of 2-7-17

NOW, THEREFORE, the parties hereto agree as follows:

2. Vesting and Forfeiture.

(a) Restricted Period. The RSUs shall be restricted during a period (the “Restricted Period”) beginning on the Grant Date and expiring on the date that they vest in accordance with the next sentence (the “Vesting Date”), provided that the RSUs have not vested early or been forfeited pursuant to Section 2(c) below. The Vesting Date is the [______] anniversary of the Grant Date.

(b) Certain Definitions.

(i) “Service” means that the Award Holder is employed by, or a Third Party Service Provider or member of the board of directors of, the Company or an Affiliate.

(ii) “Retires” or “Retirement” shall mean the termination of the Award Holder’s employment on or after either attaining age 60 and completing ten years of Service as an Employee, or attaining age 65 and completing five years of Service as an Employee.

(iii) “Disability” means that the Award Holder either:

(B) has been determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.

(c) Termination of Service. During the Restricted Period, the RSUs may be subject to early vesting or forfeiture in accordance with the following provisions:

(i) Death or Disability. Notwithstanding the foregoing, the Vesting Date shall be the date of the Award Holder’s death or Disability if the Award Holder dies or becomes Disabled while in Service.

As of 2-7-17

(A) If the Award Holder Retires but continues to provide Services, then any portion of the RSUs that is unvested on the date of Retirement shall continue to vest in accordance with this Agreement until the Award Holder ceases to provide Services. If such Services cease as a result of death or Disability, then subsection (i) above shall apply. If such Services cease for any reason other than death or Disability, all unvested RSUs shall be forfeited to the Company on the date of such cessation of Services.

(B) If the Award Holder Retires but does not continue to provide Services as provided in subsection (ii)(A) above, then all unvested RSUs shall be forfeited to the Company on the date of Retirement.

(iii) Other Termination of Service. If the Award Holder ceases to be in Service under circumstances other than those set forth in the foregoing subsections (i) and (ii), then all unvested RSUs shall be forfeited to the Company on the date of such cessation of Service, notwithstanding any otherwise applicable term of this Agreement.

Any issuance of Common Stock shall be subject to applicable tax withholding obligations as described in Section 6 and shall be in book-entry form, registered in the Award Holder’s name (or in the name of the Award Holder’s Representative, as the case may be), in payment of whole RSUs. Except as otherwise provided in Section 8, in no event shall the date that Common Stock is issued to the Award Holder (“Settlement Date”) occur later than the first to occur of (a) March 15th following the calendar year in which the Vesting Date occurred, or (b) ninety (90) days following the applicable Vesting Date.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document such other exchange on which the shares of Common Stock are primarily traded) for the Grant Date or Vesting Date, as applicable, or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, in such other manner as the Committee in its sole discretion may deem appropriate to reflect the fair market value thereof).

6. Withholding of Taxes. The Award Holder acknowledges that the vesting of the RSUs will result in the Award Holder being subject to payroll taxes upon the Vesting Date (to the extent that payroll taxes have not previously become due) and that the conversion of the RSUs to Common Stock will result in the Award Holder being subject to income taxes upon the Settlement Date. Upon a required withholding date, the Company will deduct from the shares of Common Stock that are otherwise due to be delivered to the Award Holder a number of whole shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory withholding rates for the Award Holder for federal, state and local tax purposes (including the Award Holder’s share of payroll or similar taxes) in the applicable jurisdiction, and the Award Holder shall remit to the Company in cash any and all applicable withholding taxes that exceed the amount available to the Company using whole shares.

7. Code Section 409A.The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Award Agreement shall be interpreted and administered in accordance with such intent. In no event shall the Company and/or its Affiliates be liable for any tax, interest or penalties that may be imposed on the Award Holder (or the Award Holder’s estate) under Code Section 409A.

8. Shares to be Issued in Compliance with Federal Securities Laws and Other Rules. No shares of Common Stock issuable in settlement of the RSUs shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange (or such other exchange(s) or market(s) on which shares of the same class are then listed) and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to assure that such full compliance on the part of the Company is made. By signing this Agreement, the Award Holder represents and warrants that none of the shares to be acquired in settlement of the RSUs will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Securities Act of 1933, as amended (the “Act”), and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Award Holder hereby agrees to indemnify the Company in the event of any violation by the Award Holder of such Act, rules, regulations or laws. The Company will use its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 3; provided that if the Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document that such settlement will not cause a violation of applicable law, all in accordance with Treas. Reg. § 1.409A-2(b)(7)(ii).

10. Certain Adjustments; Change in Control.

(b) The RSUs may be subject to termination or early vesting in connection with a Change in Control in accordance with the provisions of Section 18.3 of the Plan.

As of 2-7-17

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 14. Arbitration. Notwithstanding the terms of any other agreement in effect between the parties, all disputes related to this Agreement or any RSUs granted hereunder shall be submitted to final and binding arbitration with the American Arbitration Association (“AAA”) pursuant to the AAA Employment Arbitration Rules and Mediation Procedures (“AAA Rules”) as amended from time to time. A copy of the AAA Rules is available to the Award Holder upon written request to the Company’s Director of Human Resources at One East Wacker Drive, Chicago, Illinois 60601 (or such other address as the Company may specify from time to time), or may be obtained online at: www.adr.org.

As of 2-7-17

DATE

Dear ______:

Kemper Corporation (“Company”) considers you to be a valued employee of the “Employer” (as defined below). In recognition of the value of your continued services to the Employer, the Company’s shareholders and other relevant constituencies, the Company proposes the following agreement (“Agreement”) to provide you with certain severance payments and benefits if your employment terminates in connection with a “Change in Control” (as defined below) under specified circumstances.

ARTICLE I

DEFINITIONS

1.1 Definitions

Whenever used in this Agreement, the following capitalized terms shall have the meanings set forth in this Section, certain other capitalized terms being defined elsewhere in this Agreement:

(a) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

(b) “Annual Bonus” shall mean the higher of (i) the amount paid to you as your annual bonus for the prior calendar year, or, if greater, the calendar year prior to the Change in Control, or (ii) { ALTERNATIVES: [110] [150] } % of your annual base salary as in effect immediately prior to your Qualifying Termination, without regard to any decrease in such salary which would give rise to Good Reason.

(c) “Annualized Compensation” shall mean your rate of annual base salary as in effect immediately prior to your Qualifying Termination, without regard to any decrease in such salary which would give rise to Good Reason plus an amount equal to your “Annual Bonus.”

(d) “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 promulgated under the Exchange Act.

(e) “Board of Directors” shall mean the Board of Directors of the Company, or any successor thereto.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (f) A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or any of its Subsidiaries or Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (A) of paragraph (iii) below; or

(ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board of Directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board of Directors or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

(iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which results in the directors of the Company immediately prior to such merger or consolidation continuing to constitute at least a majority of the board of directors of the Company, the surviving entity or any parent thereof or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or any of its Subsidiaries or Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities; or

(iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board of Directors immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or any parent thereof.

(h) “Company” shall mean Kemper Corporation, a Delaware corporation, and any successor as provided in Article IV.

(i) “Confidential Information” shall mean any and all confidential information, including without limitation any negotiations or agreements between the Company or its Affiliates and third parties, business and marketing plans and related materials, training materials, financial information, plans, executive summaries, capitalization tables, budgets, and unpublished financial statements; costs, prices, and licenses; employee, customer, supplier, shareholder, partner or investor lists and/or data, products, technology, know-how, business processes and business data, inventions, designs, patents, trademarks, copyrights, trade secrets and business models; notes, sketches, flow charts, formulas, blueprints, and elements thereof; databases, compilations, and other intellectual property, whether written or otherwise, shall be deemed “Confidential Information. Some or all of the Confidential Information may also be entitled to protection as a “trade secret” under applicable state or federal law.

(j) “Disability” shall mean a physical or mental condition entitling you to benefits under the applicable long-term disability plan of the Company or any of its Subsidiaries or Affiliates, or if no such plan exists, causing you to be unable to substantially perform your duties with the Employer for at least 6 months in any 12-month period.

(k) “Employer” shall mean the Company or any Subsidiary or Affiliate of the Company by which you are employed.

(l) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(n) “Good Reason” shall mean the occurrence after any Change in Control, or prior to a Change in Control under the circumstances described in clause (ii) of the first sentence of the final paragraph of Section 2.1 hereof (treating all references to a “Change in Control” in paragraphs (i) through (iii) below as references to a “Potential Change in Control”), of any one or more of the following events without your express written consent:

(i) a reduction in your base salary as in effect immediately prior to the Change in Control, or a material reduction in the compensation and benefit plans, arrangements, policies and procedures, taken as a whole, provided to you from those, taken as a whole, provided to you immediately prior to the Change in Control;

(ii) a material reduction in your job authority and responsibility as in effect immediately prior to the Change in Control;

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii) the Employer requires you to change the location of your job or office, so that you will be based at a location more than thirty miles from the location of your job or office immediately prior to the Change in Control;

(iv) a successor company fails or refuses to assume the Company’s obligations under this Agreement, as required by Article IV hereof; or

(v) any purported termination of your employment which is not effected pursuant to the terms of Section 7.5 hereof.

Notwithstanding any of the foregoing to the contrary, a termination by you shall not constitute termination for Good Reason unless you shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than ninety (90) days after the occurrence of such event), and the Employer failed to take appropriate corrective action with regard to such occurrence claimed to constitute Good Reason for your resignation within thirty (30) days following your notification of such occurrence.

(o) “Just Cause” shall mean, with respect to a termination of your employment with the Employer, (i) your engagement in egregious misconduct involving serious moral turpitude to the extent that, in the reasonable judgment of the Company, your credibility and reputation no longer conform to the standard of the Company’s executives, (ii) your egregious violation of a material provision of the Company’s Code of Business Conduct and Ethics, or (iii) your conviction or entry of a plea of guilty or “nolo contenere” for the commission of a felony.

(p) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries or Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries or Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, (v) any individual, entity or group whose ownership of securities of the Company is reported on Schedule 13G pursuant to Rule 13d-1 promulgated under the Exchange Act (but only for so long as such ownership is so reported) or (vi) Singleton Group LLC or any successor in interest to such entity.

(q) A “Potential Change in Control” shall be deemed to occur in the event that (a) the Company enters into an agreement, the consummation of which would result in a Change in Control, (b) the Company or any Person publicly announces an intention to take or to consider taking action which, if consummated, would constitute a Change in Control, (c) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document directly from the Company or any of its Subsidiaries or Affiliates) or (d) the Board of Directors adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(r) “Qualifying Termination” shall mean a termination of employment pursuant to Section 2.1 entitling you to a Severance Payment pursuant to the terms of this Agreement.

(s) “Separation from Service” shall mean a separation from service as defined in Code section 409A and the applicable regulations thereunder, without giving effect to any elective provisions that may be available under such definition except that in determining whether there is a separation from service with the employer, the employer shall be determined as follows:

(i) In applying Code section 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations under Code section 414(b), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears in Code section 1563(a)(1), (2) and (3); and

(ii) In applying Treas. Reg. section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Treas. Reg. section 1.414(c)-2.

(t) “Severance Payment” shall mean the payment described in Section 2.2.

(u) “Subsidiary” shall mean any entity at least 50% of the voting securities of which are Beneficially Owned by the Company.

ARTICLE II

SEVERANCE PAYMENTS

2.1 Right to Severance Payment

You shall be entitled to receive a Severance Payment from the Company in the amount provided in Section 2.2 if the following circumstances apply:

(a) (i) there has been a Change in Control, (ii) you are an active employee at the time of the Change in Control, and (iii) within two years from and including the date of the Change in Control, your employment is terminated by the Employer for any reason (other than Just Cause or your death or Disability), or you terminate your employment for Good Reason;

(b) you execute a separate release agreement, in substantially the form attached as Exhibit 1 hereto (“Release Agreement”), subject to applicable law in effect at the time of execution, in accordance with the terms and timing set forth therein; and

(i) Non-Disclosure Obligation: In order to facilitate your exposure and access to Confidential Information for purposes of carrying out your job duties on behalf of the Company and the Employer, you agree to treat and hold the Confidential Information in the strictest confidence. You further agree that, without the Company’s prior written consent, or as required by law, you will not provide copies of or otherwise disclose the Confidential Information to any person including, but not limited to, the media, any corporation, partnership, group, individual or other entity, except as required to carry out your job duties on behalf of the Company and the Employer. You further agree not to exploit or make use, directly or indirectly, of such Confidential Information without the express written consent of the Company, except to carry out your job duties on behalf of the Company and the Employer. You understand that this obligation survives beyond the termination of your employment.

(ii) No Rights To Confidential Information: It is understood and agreed that the disclosure of the Confidential Information by the Company and the Employer shall not grant you any express, implied or other license or rights to the Confidential Information, patents or trade secrets of the Company or any of its Affiliates, whether or not patentable, nor shall it constitute or be deemed to create a partnership, joint venture or other undertaking. Further, you agree not to remove or otherwise alter any of the trademarks or service marks, serial numbers, logos, copyrights, notices or other proprietary notices or indicia, if any, fixed or attached to Confidential Information or any part thereof. You shall not reverse-engineer, decompile, attempt to derive independently, or disassemble any and all Confidential Information and technology disclosed during your employment and shall not remove, overprint or deface any notice of confidentiality, copyright, trademark, logo, legend or other notices of ownership or confidentiality from any originals or copies of Confidential Information.

(iii) Return of Confidential Information: Upon the request of the Company at any time, you will cease using and return to the Company (or, to the extent agreed to in writing by the Company, delete) the Confidential Information and all copies, summaries and extracts thereof (including without limitation any notes, memoranda, notebooks, drawings, records, reports, files, documented source and object codes and other documents and all copies or reproductions of such materials) in your possession or under your control, whether prepared by you or others.

(iv) Proprietary Rights and Assignment Agreement: You hereby confirm that: (i) you do not have any proprietary rights, including, without limitation, copyright or other right, relating to any idea, product or any other development of the Company or its Affiliates, and that all such respective rights belong exclusively to the Company and its Affiliates, and (ii) that all rights, title and interest in and to development and/or products, including, but not limited to, trade secrets,

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Confidential Information, know-how, patents and other rights in connection therewith developed by you or obtained by you from, for or on behalf of the Company or its Affiliates, or with the contribution of your efforts and created during the term of your relationship with the Company and its Affiliates, are hereby assigned to the Company, and shall be the sole and exclusive property of the Company and/or its applicable Affiliates. You shall execute all documents necessary to assign any patents to the Company and otherwise transfer such proprietary rights to the Company.

(v) Non-Disparagement: You agree not to make statements to clients, policyholders, suppliers or other business partners of the parties released pursuant to the Release Agreement (“Released Parties”) or to other members of the public that are in any way disparaging or negative towards the Released Parties or their products and services.

(iv) Injunctive Relief: Finally, you acknowledge that money damages would not be a sufficient remedy for any breach of the terms of Sections 2.1(b) or (c) and that the Company and its applicable Affiliates shall be entitled to injunctive relief, specific performance and/or any other appropriate equitable remedy, in addition to any other available legal remedies for any such breach, enforceable in a court of law.

(d) Nothing in this Agreement (including but not limited to the contemplated release of claims, promise not to sue, acknowledgements, confidentiality, cooperation, non-disparagement, and return of property provisions in Section 2.1 of this Agreement and/or in Exhibit 1 and ): (i) limits or affects your right to challenge the validity of this Release under the Age Discrimination in Employment Act or the Older Workers Benefit Protection Act of 1990; (ii) prevents you from filing a charge or complaint with, providing documents or other information to, or participating in an investigation or proceeding conducted by, the Equal Employment Opportunity Commission, the National Labor Relations Board, the Securities and Exchange Commission, or any other federal, state or local government agency; (iii) prevents you from exercising your rights under Section 7 of the National Labor Relations Act to engage in protected, concerted activity with other employees; or (iv) limits or affects any right you may have to receive a payment from a government agency (and not the Company) for information provided to such agency.

(e) Notwithstanding your confidentiality and non-disclosure obligations under this Agreement or otherwise, as provided in the Federal Defend Trade Secret Act, you shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or to your attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In addition, if prior to a Change in Control (i) your employment is terminated by the Employer for any reason (other than Just Cause or your death or Disability) or (ii) you terminate your employment following the occurrence of any event that would give rise to Good Reason, and you reasonably demonstrate that such termination or event giving rise to Good Reason, as the case may be, (a) occurred at the request of a Person who has indicated an intention or taken steps reasonably calculated to effect a Change in Control or (b) otherwise occurred in connection with, or in anticipation of, a Change in Control (whether or not a Change in Control actually occurs), then for all purposes of this Agreement the termination of your employment shall be deemed to have occurred immediately following a Change in Control. There shall be an irrebuttable presumption that (i) if your employment is terminated by the Employer for any reason (other than Just Cause or your death or Disability) within ninety (90) calendar days prior to the date of a Change in Control, or (ii) if you terminate your employment following the occurrence of an event that would give rise to Good Reason, which occurs within ninety (90) calendar days prior to the date of a Change in Control, your termination shall be deemed to be a Qualifying Termination. For purposes of subclause (a)(ii) above, to the extent permitted by Section 409A of the Code, you will still be considered to be an active employee if you are on sick leave, military leave or any other leave of absence approved by the Employer.

2.2 Amount of Severance Payment

(a) If you become entitled to a Severance Payment under this Agreement, the Company shall pay to you a lump sum payment equal to { ALTERNATIVES: [two (2)] [three (3)] } times one year’s Annualized Compensation, plus an amount equal to your Annual Bonus, divided by 12, and multiplied by the number of whole months during the relevant bonus year in which you were employed for at least one day.

(b) In the event that you become entitled to a Severance Payment under this Agreement, such Severance Payment shall be in lieu of payments and benefits under any other severance plan or arrangement, including, without limitation, the Kemper Corporation Employee General Severance Pay Plan.

2.3 Limitation on Payments

(a) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by you (including any payment or benefit received in connection with a Change in Control or the termination of your employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the payments and benefits under Sections 2.2 and 2.6 of this Agreement, being hereinafter referred to as “Total Payments”) would be subject (in whole or part), to the excise tax imposed under Section 4999 of the Code (“Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the cash severance payments shall first be reduced, and the noncash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which you would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced by the Employer in its reasonable discretion in the following order: (A) reduction of any cash payment, excluding any cash payment with respect to the acceleration of equity awards, that is otherwise payable to you that is exempt from Section 409A of the Code, (B) reduction of any other payments or benefits otherwise payable to you on a pro-rata basis or such other manner that complies with Section 409A of the Code and (C) reduction of any payment with respect to the acceleration of equity awards that is otherwise payable to you that is exempt from Section 409A of the Code.

(b) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which you shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Employer, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

2.4 No Duty of Mitigation

The Company acknowledges that it would be very difficult and generally impracticable to determine your ability to, or extent to which you may, mitigate any damages or injuries you may incur by reason of the Change in Control. The Company has taken this into account in entering into this Agreement and, accordingly, the Company acknowledges and agrees that you shall have no duty to mitigate any such damages and that you shall be entitled to receive your entire Severance Payment regardless of any income which you may receive from other sources following your termination after any Change in Control.

2.5 Time of Severance Payment

The Severance Payment to which you are entitled shall be paid to you, in cash and in full,

{ ALTERNATIVES:

[on or as soon as practicable following the first day of the seventh month following your Separation from Service,]

FOR EXECUTIVES FIRST RECEIVING SEVERANCE AGREEMENTS AFTER JULY 1, 2016 (“GROUP B”):

[within the sixty-day period following your Separation from Service,] } provided that the Release Agreement has been executed and returned to the Employer and any applicable revocation period has expired. If you should die before all amounts payable to you have been paid, such unpaid amounts shall be paid to your beneficiary under this Agreement or, if you have not designated such a beneficiary in writing to the Company, to the personal representative(s) of your estate as soon as possible following your death (and without regard to the timing set out in the first sentence of this Section 2.5).

2.6 Life and Health Insurance Coverage

If you are entitled to receive a Severance Payment under Section 2.1, the Company shall also provide you with the following additional benefits:

(a) Life insurance coverage for you and your dependents, for a period of { ALTERNATIVES: [two (2)] [three (3)] } years following your termination of employment, having a face amount at least equal to the greater of (i) the amount in effect for you (in your case) and/or your dependents (in the case of your dependents) immediately prior to the Change in Control, or (ii) the amount in effect for you (in your case) and/or your dependents (in the case of your dependents) immediately prior to the Date of Termination, such coverage to be provided under the same plan or plans under which you (in your case) or your dependents (in the case of your dependents) were covered immediately prior to the Change in Control (or Date of Termination, as applicable) or substantially similar plan(s) established by the Company or any of its Subsidiaries or Affiliates thereafter, and at no greater cost (“Active Employee Cost”) to you (in your case) or your dependents (in the case of your dependents) than was imposed pursuant to the plan(s) under which you (in your case) and/or your dependents (in the case of your dependents) were covered immediately prior to the Change in Control (or Date of Termination, as applicable), provided, however, that until the first day of the seventh month following your Separation from Service, you shall pay the entire cost of such coverage and shall be reimbursed by the Company for the difference between such payments and the Active Employee Cost on or as soon as possible following the first day of the seventh month following your Separation from Service. { ADDITIONAL WORDING ONLY FOR GROUP B: [Notwithstanding the foregoing, the requirement to pay the cost of life insurance, followed by reimbursement by the Company on the first day of the seventh month following your Separation from Service, shall only be applicable to the extent the Company determines that the provision of a taxable benefit under this Section 2.6(a) during the first six months following your Separation from Service is not exempt from

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Code Section 409A by reason of the application of the short-term deferral exemption and/or the separation pay plan exemption, found in Treasury Regulation Section 1.409A-1(b)(4) and -1(b)(9)(iii), respectively.] }

(b) You have the right to continue your health insurance coverage (including any dental coverage) for you and your dependents under the same plan or plans under which you were covered immediately prior to your termination of employment, upon your payment of the

applicable premium (as defined by Code section 4980B(f)(4)) for such coverage (such continuation of health insurance coverage is referred to herein as “COBRA Coverage”). The Company shall pay you, in accordance with the timing specified in Section 2.5, as an addition to the lump sum payment called for under Section 2.2, an amount equal to the excess of (A) the amount payable as a monthly premium for COBRA Coverage (assuming you were to elect COBRA Coverage) over (B) the monthly amount paid by an active employee for the same coverage (both determined as of the date of your termination of employment), multiplied by { ALTERNATIVES: [twenty-four (24)] [thirty-six (36)] }. This payment represents generally the amount of the Company’s subsidy of employee group health for you while employed (as a component of your total, regular compensation), but the payment is an additional, taxable separation pay benefit, and is not linked to or conditioned on your election of COBRA continuation coverage.

2.7 Outplacement Services

If you are entitled to receive a Severance Payment under Section 2.1, the Company shall also provide you with a full range of outplacement services provided for up to fifty-two (52) weeks by a reputable organization chosen by the Company. These outplacement services will be paid for by the Company.

2.8 Withholding of Taxes

The Company or your Employer may withhold from any amounts payable under this Agreement all federal, state, city or other taxes required by applicable law to be withheld.

2.9 No Setoff

The Company’s obligation to make Severance Payments to you pursuant to this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, but not limited to, any setoff, counterclaim, recoupment, defense or other right which the Company or any of its Subsidiaries or Affiliates may have against you or others.

2.10 Benefits Under Other Plans

The benefits that you may be entitled to receive pursuant to Sections 2.6 and 2.7 of this Agreement are not intended to be duplicative of any similar benefits to which you may be entitled from the Company or any of its Subsidiaries or Affiliates under any other severance plan, agreement, policy or program maintained by the Company or any of its Subsidiaries or Affiliates. Accordingly, the benefits to which you are entitled under Sections 2.6 and 2.7 shall be reduced to take account of

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document any other similar benefits to which you are entitled from the Company or any of its Subsidiaries or Affiliates.

ARTICLE III

OTHER RIGHTS AND BENEFITS NOT AFFECTED

3.1 Other Benefits

This Agreement does not provide a pension for you nor shall any payment hereunder be characterized as deferred compensation. Except as set forth in Sections 2.2(b) and 2.10, neither the provisions of this Agreement nor the Severance Payment and other amounts and benefits provided for hereunder shall reduce any amounts otherwise payable, or in any way diminish your rights as an employee, whether existing now or hereafter, under any benefit, incentive, retirement, equity-based award, stock purchase plan or any employment agreement or other plan or arrangement not related to severance. Any such other amounts or benefits payable shall be included, as necessary, for making any of the calculations required under Section 2.3.

3.2 Employment Status

This Agreement does not constitute a contract of employment or impose on you any obligation to remain in the employ of the Employer, nor does it impose on the Company or any of its Subsidiaries or Affiliates any obligation to retain you in your present or any other position, or to change the status of your employment as an employee at will. Nothing in this Agreement shall in any way require the Company or any of its Subsidiaries or Affiliates to provide you with any severance benefits prior to a Change in Control (except that the foregoing shall not modify the second and third sentences of Section 2.1), nor shall this Agreement ever be construed in any way as establishing any policies or requirements of the Company or any of its Subsidiaries or Affiliates for the termination of your employment or the payment of severance benefits to you if your employment terminates prior to a Change in Control, nor shall anything in this Agreement in any way affect the right of the Company or any of its Subsidiaries or Affiliates in its absolute discretion to change prior to a Change in Control one or more benefit plans, including but not limited to pension plans, dental plans, health care plans, savings plans, bonus plans, vacation pay plans, disability plans, and the like.

ARTICLE IV

SUCCESSOR TO COMPANY

The Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company’s obligations under this Agreement, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. In such event, the term “Company,” as used in this Agreement, shall mean the Company as herein before defined and any successor or

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of this Agreement.

ARTICLE V

LEGAL FEES AND EXPENSES

The Company shall pay as they become due { ADDITIONAL WORDING ONLY FOR GROUP A: [, but no sooner than the first day of the seventh month following your Separation from Service,] } all legal fees, costs of arbitration and other expenses incurred in good faith by you as a result of the Company’s refusal or failure to make the Severance Payment and/or other amounts and benefits to which you become entitled under this Agreement, as a result of the Company’s contesting the validity, enforceability or interpretation of this Agreement or of your right to benefits hereunder. A determination as to whether or not you have acted in good faith shall be determined by the arbitrator based on the facts and circumstances presented in the arbitration.

ARTICLE VI

ARBITRATION

In lieu of litigation, any dispute or controversy arising under or in connection with this Agreement not otherwise resolved through the claims procedure set forth in Section 7.12 shall be settled by arbitration, consistent with the arbitration agreement currently in effect by separate agreement with you and the Employer, as that may be modified from time to time. In the event such arbitration agreement is determined to be inapplicable or unenforceable hereunder or if no such arbitration agreement is then in effect, you agree to arbitrate any dispute related to this Agreement, that this Agreement provides sufficient consideration for that obligation, and that the following terms and conditions shall apply to any such arbitration hereunder: The arbitration shall be conducted before a panel of three arbitrators sitting in a location selected by you within fifty (50) miles from the location of your job with the Employer immediately prior to the Change in Control (determined without regard to any relocation thereof which would give rise to Good Reason), in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. All expenses of such arbitration, including the fees and expenses of your counsel, shall be borne, and paid as incurred, by the Company, { ADDITIONAL WORDING ONLY FOR GROUP A: [but not earlier than the first day of the seventh month following your Separation from Service,] } provided that the Company shall only be required to pay your fees and expenses if they are incurred in good faith. You shall be conclusively presumed to have acted in good faith unless and until the arbitrator makes a final determination to the contrary. Notwithstanding any provision of this Agreement to the contrary, you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. Nothing in this Article VI limits the Company’s rights to enforce the terms and conditions of the covenant obligations set forth in Section 2.1 (b) and (c) in a court of law.

MISCELLANEOUS

7.1 Applicable Law

To the extent not preempted by the laws of the United States and in the interest of interpreting this Agreement in a uniform manner with other similar agreements being entered into by the Company with other of its and its Subsidiaries’ and Affiliates’ employees regardless of the jurisdiction in which you are employed or any other factor, the laws of the State of Illinois shall be the controlling law in all matters relating to this Agreement, regardless of the choice-of-law rules of the State of Illinois or any other jurisdiction.

7.2 Construction

No term or provision of this Agreement shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provision of this Agreement and any present or future statute, law, ordinance, or regulation contrary to which the parties have no legal right to contract, the latter shall prevail, but in such event the affected provision of this Agreement shall be curtailed and limited only to the extent necessary to bring such provision within the requirements of the law.

7.3 Severability

If a provision of this Agreement shall be held illegal or invalid, the illegality or invalidity shall not affect the remaining parts of this Agreement and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.

7.4 Headings

The Section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, or extend or interpret the scope of this Agreement or of any particular Section.

7.5 Termination Procedures

(a) Notice of Termination. After a Change in Control and during the Term, any purported termination of your employment (other than by reason of death) shall be communicated by a written Notice of Termination from the Employer to you or by you to the Employer in accordance with Section 7.10 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. Further, a Notice of Termination for Just Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the board of directors of the Employer at a meeting of such board of directors which was called and held for the purpose of considering such termination (after

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document reasonable notice to you and an opportunity for you, together with your counsel, to be heard before such board of directors) finding that, in the good faith opinion of such board of directors, you were guilty of conduct set forth in clause (i) or (ii) of the definition of Just Cause herein, and specifying the particulars thereof in detail.

(b) Date of Termination. “Date of Termination,” with respect to any purported termination of your employment after a Change in Control and during the Term, shall mean (i) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (ii) if your employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Just Cause) and, in the case of a termination by you, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

7.6 Assignability

Neither this Agreement nor any right or interest therein shall be assignable or transferable (whether by pledge, grant of a security interest, or otherwise) by you, your beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns, and you and shall be enforceable by them and your legal personal representatives.

7.7 Entire Agreement

This Agreement constitutes the entire agreement between the Company and you regarding the subject matter hereof and supersedes all prior agreements, if any, understandings and arrangements, written or oral, between the Company and you with respect to the subject matter hereof.

7.8 Term

The term of this Agreement (“Term”) shall commence on the date set forth on page one and shall continue in effect through December 31 of this year; provided, however, that commencing on each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or you shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control occurred. If you become entitled to Severance Payments hereunder, this Agreement shall continue and be effective until you (or the person(s) specified in Section 2.5) shall have received in full all Severance Payments and other benefits to which you are entitled under this Agreement, at which time this Agreement shall terminate for all purposes.

No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and the Company. No waiver by the Company or you at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or any prior or subsequent time. No agreement or representations, written or oral, express or implied, with respect to the subject matter hereof, have been made by either party which are not expressly set forth in this Agreement.

7.10 Notices

For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given upon delivery when personally delivered or sent by a recognized overnight courier service in writing, addressed to the respective addresses last given by each party to the other, provided that all notices to the Company or the Employer shall be directed to the attention of the Board of Directors with a copy to the General Counsel of the Company. No objection to the method of delivery may be made if the written notice or other communication is actually received.

7.11 Administration

The Company has entered into agreements similar to this Agreement herein with other employees of the Company and its Subsidiaries and Affiliates. These agreements, taken together, constitute a welfare benefit plan within the meaning of Section 3(1) of ERISA. The Administrator of such plan, within the meaning of Section 3(16) of ERISA, and the Named Fiduciary thereof, within the meaning of Section 402 of ERISA, is the Company.

7.12 Claims

If you believe you are entitled to a benefit under this Agreement, you may make a claim for such benefit by filing with the Company a written statement setting forth the amount and type of payment so claimed. The statement shall also set forth the facts supporting the claim. The claim may be filed by mailing or delivering it to the Secretary of the Company. Within ninety (90) calendar days after receipt of such a claim, the Company shall notify you in writing of its action on such claim and if such claim is not allowed in full, shall state the following in a manner calculated to be understood by you:

(a) The specific reason or reasons for the denial;

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Specific reference to pertinent provisions of this Agreement on which the denial is based;

(c) A description of any additional material or information necessary for you to be entitled to the benefits that have been denied and an explanation of why such material or information is necessary; and

(d) An explanation of this Agreement’s claim review procedure.

If you disagree with the action taken by the Company, you or your duly authorized representative may apply to the Company for a review of such action. Such application shall be made within sixty (60) calendar days after receipt by you of the notice of the Company’s action on your claim. The application for review shall be filed in the same manner as the claim for benefits. In connection with such review, you may inspect any documents or records pertinent to the matter and may submit issues and comments in writing to the Company. A decision by the Company shall be communicated to you within sixty (60) calendar days after receipt of the application (unless special circumstances require an extension of time, but in no event more than one hundred and twenty (120) days after such receipt). The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by you, and specific references to the pertinent provisions of this Agreement on which the decision is based.

7.13 Individual Severance Agreement

This Agreement constitutes an individual severance agreement for purposes of the Company’s Severance Plan (“Severance Plan”). Accordingly, you will not be eligible to receive any severance payments or other benefits under the Severance Plan if you are entitled to benefits under this Agreement.

{ ALTERNATIVES:

FOR GROUP A:

[7.14 409A Compliance

(a) This Agreement shall be interpreted and administered in a manner so that all amounts and/or benefits payable or provided hereunder shall be paid or provided in a manner that is compliant with Code section 409A, including, specifically, the requirement to delay certain payments to you during the first six months following your Separation from Service, and to pay all amounts at a fixed time or on a fixed or permissible schedule in relationship to the date of your Separation from Service.

(b) Notwithstanding anything in this Agreement to the contrary, to the extent that the requirements of Code section 409A apply to any amount or benefit that would otherwise be payable or distributable hereunder by reason of your termination of employment, such amount or benefit will not be payable or distributable to you by reason of such circumstance

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document unless the circumstances giving rise to such termination of employment constitute a Separation from Service.

(c) Notwithstanding anything in this Agreement to the contrary, if any amount or benefit is nonqualified deferred compensation for purposes of Code section 409A that would otherwise be payable or distributable under this Agreement by reason of your Separation from Service, then, subject to any permissible acceleration of payment by the Company under Treas. Reg. section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):

(i) If the payment or distribution is payable in a lump sum, your right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of your death or the first day of the seventh month following your Separation from Service; and

(ii) If the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following your Separation from Service will be accumulated and your right to receive payment or distribution of such accumulated amount will be delayed until the earlier of your death or the first day of the seventh month following your Separation from Service, whereupon the accumulated amount will be paid or distributed to you on such date and the normal payment or distribution schedule for any remaining payments or distributions will resume.

(d) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits that are not exempt from Code section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any of your taxable years shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any of your other taxable years, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code section 105(b) solely because such arrangement provides for a limit on the amount of expenses that may be reimbursed over some or all of the period the arrangement is in effect, and (iii) such payments shall be made on or before the last day of your taxable year following the taxable year in which the expenses was incurred.]

FOR GROUP B:

[7.14 409A Exemption

(a) All cash payments and all taxable benefits provided for under this Agreement are intended to be exempt from Code Section 409A by reason of the short-term deferral exemption and/or the separation pay plan exemption, found in Treasury Regulation Section 1.409A-1(b)(4) and -1(b)(9)(iii), respectively, and shall be interpreted and administered to the maximum extent permissible so as to comply in all regards with the aforementioned exemptions.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) In the event any portion of the cash payments and/or taxable benefits provided for under this Agreement are determined to be outside the scope of the regulatory exemptions referred to in the preceding paragraph, such payments and benefits shall be paid or provided following the time or schedule measured by reference to your Separation from Service, and shall not be paid or provided during the first six months following your Separation from Service (with payments otherwise payable during such period to be paid on the first day of the seventh month following your Separation from Service).] }

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document If this Agreement is acceptable to you, please sign the enclosed copy of this Agreement in the space provided below and return it to me.

Sincerely,

______[TYPED NAME] { ALTERNATIVES: [President and Chief Executive Officer] [Chairman of the Board] }

ACCEPTED AND AGREED TO:

By: ______[TYPED NAME]

GENERAL RELEASE AGREEMENT

This General Release Agreement (“Release Agreement”) is made between [NAME] (“Employee”) and [EMPLOYER NAME AT TIME OF SIGNATURE], for itself and on behalf of all of its affiliates (collectively, “Employer”), on the date last written below.

BACKGROUND

Employee is party to a letter agreement providing for severance and other benefits in connection with a change in control of Kemper Corporation, dated [DATE] (“Severance Agreement”), which provides that certain benefits will be provided subject to certain terms and conditions, including the execution of this General Release Agreement.

TERMS AND CONDITIONS

In consideration of their mutual promises and undertakings described in the Severance Agreement (incorporated herein by reference) and those described below, Employee and Employer agree as follows:

1. Employment Responsibilities End. Employee’s employment by Employer {ALTERNATIVES: [shall end] [ended]} at the close of business on [DATE] (“Termination Date”). Employee no longer will be authorized to transact business or incur any expenses, obligations and liabilities on behalf of the Employer after the Termination Date. Employee agrees not to seek reinstatement, future employment, or other working relationship with the Employer or any of its affiliates. Employee acknowledges and represents: (a) Employee has reported to the Employer any and all work-related injuries incurred during employment; (b) the Employer properly provided any leave of absence because of Employee’s or a family member’s health condition and Employee has not been subjected to any improper treatment, conduct or actions due to a request for or taking such leave; and (c) Employee had the opportunity to provide the Employer with written notice of any and all concerns regarding suspected ethical and compliance issues or violations on the part of the Employer or any Released Party (as defined below), and to report to the Employer any complaints, claims, or actions filed against the Employer or any Released Party, subject to the provisions of the second and third paragraphs of Section 4 below.

Employee further agrees that Employee has been paid all wages, benefits, and other compensation owed to Employee by Employer through the Termination Date, subject to the obligation of Employer for the payment of salary at Employee’s current base rate through the Termination Date and all paid time off (PTO), if any, that will be accrued but unpaid on the Termination Date. Any such accrued and unpaid PTO will be paid to Employee no later than the next regularly scheduled payday after the Termination Date. Employee agrees that Employee is not entitled to any additional or future compensation or benefits other than compensation and benefits provided under the Severance Agreement and/or compensation and benefits, if any, arising under the retirement, welfare benefits, bonus and equity compensation plans of Kemper Corporation to which Employee may be entitled by virtue of Employee’s employment with Employer, subject in

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document all cases to the terms and conditions of the plans and agreements governing such compensation and benefits. Without limitation to the above, Employee acknowledges and agrees that Employee is not entitled to any severance pay pursuant to the Kemper Corporation Employee General Severance Pay Plan.

2. Unemployment Claims. Employer expressly agrees that the release language in Section 4 below shall not prevent Employee from applying for unemployment benefits to which Employee may be entitled under applicable law.

3. Confidentiality and Return of Property.

(a) Employee acknowledges that the covenant obligations in paragraph 2.1 (b) and (c) of the Severance Agreement survive his or her discharge and remain in full force and effect.

(b) Employee agrees to return to Employer all Employer credit cards, identification cards, access cards and keys to Employer’s properties or facilities that Employee may have in her possession. Employee shall return any and all Employer confidential files and all Employer confidential and proprietary information that Employee may have in his or her possession. Employee shall also return any and all of Employer’s property, including but not limited to, computer equipment, peripherals, printers, and company vehicles.

4. Consideration to Employer - Release of Claims and Agreement Not to Sue. Except as stated below, Employee hereby forever releases, discharges and holds harmless Employer and its respective parent company, subsidiaries, affiliates, predecessors, successors and assigns, and their officers, directors, shareholders, principals, employees, insurers, and agents (“the Released Parties”) from any claim or cause of action whatsoever which Employee either has or may have against Employer resulting from or arising out of or related to Employee’s employment by Employer, or the termination of that employment, including any claims or causes of action Employee has or may have pursuant to the Age Discrimination in Employment Act (“ADEA”); the Older Workers Benefit Protection Act of 1990 (“OWBPA”); Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991; the Americans with Disabilities Act; the Rehabilitation Act of 1973; the Family and Medical Leave Act of 1993; the Illinois Human Rights Act; the Employer Retirement Income Security Act of 1974; and any other law or regulation of any local, state or federal jurisdiction.

This release does not apply to any claims or rights that may arise after the date that Employee signs this Release Agreement, or relate to the consideration for this Release Agreement, vested rights under the Employer’s employee benefit plans as applicable on the date Employee signs this Release Agreement, or any claims that the controlling law clearly states may not be released by private agreement. Furthermore, this release does not waive any rights Employee might have to indemnification as a corporate officer pursuant to Kemper Corporation’s certificate of incorporation and bylaws, applicable benefit plan documents, or by applicable statutory or common law.

Nothing in this Release Agreement (including but not limited to the release of claims, promise not to sue, Employee acknowledgements, confidentiality, cooperation, non-disparagement, and return of property provisions): (a) limits or affects Employee’s right to challenge the validity of this release under the ADEA or the OWBPA; (b) prevents Employee from filing a charge or

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document complaint with, providing documents or other information to, or participating in an investigation or proceeding conducted by, the Equal Employment Opportunity Commission, the National Labor Relations Board, the Securities and Exchange Commission or any other federal, state or local government agency; or (c) prevents Employee from exercising his or her rights under Section 7 of the National Labor Relations Act to engage in protected, concerted activity with other employees, although by signing this Release Agreement Employee is waiving his or her right to recover any individual relief (including any backpay, frontpay, reinstatement or other legal or equitable relief) in any charge, complaint, or lawsuit or other proceeding brought by or on behalf of Employee, except for any right Employee may have to receive a payment from a government agency (and not the Employer) for information provided to such agency, or other waiver prohibited by applicable law.

Other than an arbitration action for breach of this Release Agreement, Employee expressly acknowledges that if Employee files any claim or lawsuit in a court or arbitration proceeding regarding any matter described in this Release Agreement, Employer may be entitled to recover from Employee some or all money paid under this Release Agreement, and if Employer prevails, Employee agrees to pay attorneys’ fees and costs incurred in defending against such action, to the extent permitted by law.

Notwithstanding Employee’s confidentiality and non-disclosure obligations under this Release Agreement or otherwise, as provided in the Federal Defend Trade Secret Act, Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or to Employee’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public.

5. No Admission of Liability. Nothing in this Release Agreement shall be construed to be an admission of liability by Employer and its respective parent company, subsidiaries, affiliates, predecessors, successors and assigns, and their officers, directors, shareholders, principals, employees, insurers, and agents for any alleged violation of any of Employee’s statutory rights or any common law duty imposed upon Employer.

6. Adequate Consideration. Employee agrees that the consideration provided for in the Severance Agreement is above and beyond any amounts already owed to Employee and is adequate consideration for all promises and releases contained in this Release Agreement.

7. Non-waiver. The waiver by either party of a breach of any provision of this Release Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of the same or any other provision of this Release Agreement.

8. Notices. Any notices required or permitted to be given under this Release Agreement shall be deemed to have been duly given upon delivery when personally delivered or sent by a recognized overnight courier service in writing to Employee’s residence as last shown on Employer’s

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document employment records, in the case of Employee, or to [EMPLOYER NAME AND CONTACT TITLE AND ADDRESS AT TIME OF SIGNATURE], in the case of Employer.

9. Successors and Assigns. Except as otherwise provided in specific provisions above, this Release Agreement shall be binding upon and inure to the benefit of Employee, Employee’s spouse, Employee’s heirs, executors, administrators, designated beneficiaries and upon anyone claiming under Employee or Employee’s spouse, and shall be binding upon and inure to the benefit of Employer and its successors and assigns. Employee warrants and represents that, except as provided herein, no right, claim, cause of action or demand, or any part thereof, which Employee may have arising out of or in any way related to Employee’s employment with Employer, has been or will be assigned, granted or transferred in any way to any other person, entity, firm or corporation, in any manner, including by subrogation or by operation of marital property rights.

10. Severability. If a court or other body of competent jurisdiction should determine that any term or provision of this Release Agreement is invalid or unenforceable, such term or provision shall be reformed rather than voided, if possible, in accordance with the purposes stated in this Release Agreement and with applicable law, and all other terms and provisions of this Release Agreement shall be deemed valid and enforceable to the extent possible.

11. Oral Agreements; Applicable Law. The parties acknowledge that there are no oral agreements or understandings that conflict with, modify, supplement or supersede the terms and conditions of this Release Agreement. This Release Agreement shall be construed under the laws of the State of Illinois applicable to contracts entered into and to be performed in the State of Illinois.

12. Representations and Warranties. By signing below, the Employee represents and warrants that Employee has been advised in writing to consult with an attorney before signing this Release Agreement, and Employee has had the opportunity to do so if desired. Employee acknowledges that this Release Agreement has been delivered to Employee on [DATE] and understands that Employee has up to twenty-one (21) days following such date to sign and return this Release Agreement to Employer. Employee agrees that any changes made to this Release Agreement do not restart the running of the 21-day period.

The Employee further acknowledges and understands that some portions of the payments and/or benefits described in the Severance Agreement and this Release Agreement, are the consideration to the Employee for waiving rights under the ADEA referenced in Section 4 and for Employee’s obligations described in Section 3.

Finally, Employee understands that Employee has the right within seven (7) days of the signing of this Release Agreement to revoke Employee’s waiver of rights to claim damages under the ADEA. If Employee does revoke that waiver within the seven (7) day period, the Release Agreement shall be null and void.

Any such revocation must be in writing and in delivered to Employer in compliance with the notice provisions of Section 8 no later than the seventh day after execution of this Release Agreement.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 13. Employee Cooperation and Assistance. Employee agrees to cooperate fully with Employer in the defense or prosecution of any lawsuits, arbitrations, or any other types of proceedings, and in the preparation of any response to any examination or investigation by any government entity or agency, and with respect to any other claims or matters (all such lawsuits, arbitrations, proceedings, examinations, investigation, claims and matters being collectively referred to as “Proceedings”), arising out of or in any way related to the policies, practices, or conduct of Employer and its affiliates during the time Employee was employed by Employer, and shall testify fully and truthfully in connection therewith. In addition, Employee agrees that, upon reasonable notice, Employee will participate in such informal interviews by counsel for Employer as may be reasonably necessary to ascertain Employee’s knowledge concerning the facts relating to any such Proceedings, and to cooperate with such counsel in providing testimony whether through deposition or affidavit in any such Proceeding.

Employee agrees to immediately notify Employer if he or she is served with legal process to compel her to disclose any information related to either his or her employment with Employer or information regarding one or more of its affiliates, unless prohibited by law. Employee further agrees to immediately notify Employer if he or she is contacted regarding any legal claim or legal matter related to her employment with Employer, unless prohibited by applicable law.

Caution: This Release Agreement includes a release of certain specified rights. Employer hereby advises Employee to read it and to consult with an attorney prior to signing it.

TO EVIDENCE THEIR AGREEMENT, the parties have executed this document as of the date last written below.

[EMPLOYEE NAME] [EMPLOYER NAME AT TIME OF EXECUTION]

By: [OFFICER NAME]

Dated: Dated:

Seven Day Right to Revocation

Acknowledgment Form

I, [EMPLOYEE NAME], hereby acknowledge that [EMPLOYER NAME AT TIME OF EXECUTION] tendered a General Release Agreement offer which I voluntarily agreed to accept on______, 20___ a date at least seven days prior to today’s date.

I certify that seven calendar days have elapsed since my voluntary acceptance of this above-referenced offer (i.e. seven days have elapsed since the above date), and that I have voluntarily chosen not to revoke my acceptance of the above-referenced General Release Agreement.

Signed this ___ day of ______, 20__

Employee Signature

KEMPER CORPORATION AND SUBSIDIARIES COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES (Dollars in Millions)

Years Ended December 31, 2016 2015 2014 2013 2012 Income from Continuing Operations before Income Taxes $ 3.5 $ 100.3 $ 160.2 $ 314.4 $ 122.4 Less Equity in Earnings of Equity Method Limited Liability Investments (7.5) (19.0) (9.0) (26.4) (9.3) Plus Distribution of Accumulated Earnings in Equity Method Limited Liability Investments 15.7 8.6 21.7 15.4 15.4 Plus Fixed Charges 50.2 52.3 52.9 44.3 45.1 Less Capitalized Interest (0.9) (0.8) (1.0) (0.9) (1.8) Total Earnings $ 61.0 $ 141.4 $ 224.8 $ 346.8 $ 171.8 Interest $ 47.8 $ 50.0 $ 50.3 $ 41.7 $ 41.4 Rental Factor 1.5 1.5 1.6 1.7 1.9 Capitalized Interest 0.9 0.8 1.0 0.9 1.8 Total Fixed Charges $ 50.2 $ 52.3 $ 52.9 $ 44.3 $ 45.1 Ratio of Earnings to Fixed Charges (a) 1.2 x 2.7 x 4.2 x 7.8 x 3.8 x

(a) The ratios of earnings to fixed charges have been computed on a consolidated basis by dividing (a) Income from Continuing Operations before Income Taxes less Equity in Earnings of Equity Method Limited Liability Investments, plus Distribution of Accumulated Earnings of Equity Method Limited Liability Investments, plus fixed charges, and less capitalized interest, by (b) fixed charges. Fixed charges consist of interest on debt and a factor for interest included in rent expense. Income from Continuing Operations before Income Taxes has the meaning as set forth in the Consolidated Statements of Income included in our Annual Report on Form 10-K for the year ended December 31, 2016. Equity in Earnings of Equity Method Limited Liability Investments and Distribution of Accumulated Earnings of Equity Method Limited Liability Investments have the meanings as set forth in the Consolidated Statements of Cash Flows included in our Annual Report on Form 10-K for the year ended December 31, 2016.

Subsidiaries of Kemper Corporation, with their states of incorporation in parentheses, are as follows:

1. Alliance United Group, LLC (California) 2. Alliance United Insurance Company (California) 3. Alliance United Insurance Services, LLC (California) 4. Alpha Property & Casualty Insurance Company (Wisconsin) 5. Capitol County Mutual Fire Insurance Company (Texas)* 6. Charter Indemnity Company (Texas) 7. Direct Response Corporation (Delaware) 8. Family Security Funerals Company (Texas) 9. Financial Indemnity Company (Illinois) 10. KAHG LLC (Illinois) 11. Kemper Corporate Services, Inc. (Illinois) 12. Kemper Direct General Agency, Inc. (Texas) 13. Kemper Financial Indemnity Company (Illinois) 14. Kemper General Agency, Inc. (Texas) 15. Kemper Independence Insurance Company (Illinois) 16. Merastar Industries LLC (Delaware) 17. Merastar Insurance Company (Illinois) 18. Mutual Savings Fire Insurance Company (Alabama) 19. Mutual Savings Life Insurance Company (Alabama) 20. NCM Management Corporation (Delaware) 21. Old Reliable Casualty Company (Missouri)* 22. The Reliable Life Insurance Company (Missouri) 23. Reserve National Insurance Company (Oklahoma) 24. Response Insurance Company (Illinois) 25. Response Worldwide Direct Auto Insurance Company (Illinois) 26. Response Worldwide Insurance Company (Illinois) 27. Security One Agency LLC (Illinois) 28. Trinity Universal Insurance Company (Texas) 29. Union National Fire Insurance Company (Louisiana) 30. Union National Life Insurance Company (Louisiana) 31. United Casualty Insurance Company of America (Illinois) 32. United Insurance Company of America (Illinois) 33. Unitrin Advantage Insurance Company (New York) 34. Unitrin Auto and Home Insurance Company (New York) 35. Unitrin County Mutual Insurance Company (Texas)* 36. Unitrin Direct Insurance Company (Illinois) 37. Unitrin Direct Property & Casualty Company (Illinois) 38. Unitrin Preferred Insurance Company (New York) 39. Unitrin Safeguard Insurance Company (Wisconsin) 40. Valley Property & Casualty Insurance Company (Oregon) 41. Warner Insurance Company (Illinois)

* May be deemed to be an affiliate pursuant to Rule 1-02 of SEC Regulation S-X.

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 33-58300, 333-4530, 333-86935, 333-76076, 333-87898 and 333-173877 on Form S-8 and Nos. 333-127215, 333-142722 and 333-194032 on Form S-3 of our report, dated February 13, 2017, relating to the consolidated financial statements and the financial statement schedules of Kemper Corporation and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2016.

/s/ Deloitte & Touche LLP Chicago, Illinois February 13, 2017

CERTIFICATIONS

I, Joseph P. Lacher, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Kemper Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 13, 2017

/S/ JOSEPH P. LACHER, JR. Joseph P. Lacher, Jr. President and Chief Executive Officer

CERTIFICATIONS

I, James J. McKinney, certify that:

1. I have reviewed this annual report on Form 10-K of Kemper Corporation;

Date: February 13, 2017

/S/ JAMES J. MCKINNEY James J. McKinney Senior Vice President and Chief Financial Officer

Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Kemper Corporation (the “Company”) for the year ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Joseph P. Lacher, Jr., as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ JOSEPH P. LACHER, JR. Name: Joseph P. Lacher, Jr. Title: President and Chief Executive Officer Date: February 13, 2017

Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Kemper Corporation (the “Company”) for the year ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), James J. McKinney, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ JAMES J. MCKINNEY Name: James J. McKinney Title: Senior Vice President and Chief Financial Officer Date: February 13, 2017

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Document and Entity 12 Months Ended Information Document and Entity Information - USD ($) Dec. 31, 2016 Jan. 31, 2017Jun. 30, 2016 $ in Billions Document and Entity Information [Abstract] Entity Registrant Name KEMPER Corporation Trading Symbol KMPR Entity Central Index Key 0000860748 Current Fiscal Year End Date --12-31 Entity Filer Category Large Accelerated Filer Document Type 10-K Document Period End Date Dec. 31, 2016 Document Fiscal Year Focus 2016 Document Fiscal Period Focus FY Amendment Flag false Entity Common Stock, Shares Outstanding 51,294,172 Entity Well-known Seasoned Issuer Yes Entity Voluntary Filers No Entity Current Reporting Status Yes Entity Public Float $ 1.6

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Consolidated Balance Sheets Dec. Dec. - USD ($) 31, 31, $ in Millions 2016 2015 Assets: Fixed Maturities at Fair Value (Amortized Cost: 2016 - $4,846.8; 2015 - $4,560.7) $ $ 5,124.94,852.3 Equity Securities at Fair Value (Cost: 2016 - $434.4; 2015 - $486.9) 481.7 523.2 Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings 175.9 190.6 Fair Value Option Investments 111.4 164.5 Short-term Investments at Cost which Approximates Fair Value 273.7 255.7 Other Investments 439.9 443.2 Total Investments 6,607.56,429.5 Cash 115.7 161.7 Receivables from Policyholders 336.5 332.4 Other Receivables 198.6 193.2 Deferred Policy Acquisition Costs 332.0 316.4 Goodwill 323.0 323.0 Current Income Tax Assets 15.5 9.5 Other Assets 25.8 31.9 Other Assets 255.9 238.5 Total Assets 8,210.58,036.1 Liabilities and Shareholders’ Equity: Life and Health 3,475.33,341.0 Property and Casualty 931.4 862.8 Total Insurance Reserves 4,406.74,203.8 Unearned Premiums 618.7 613.1 Liabilities for Unrecognized Tax Benefits 5.1 3.8 Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2016 - $770.9; 2015 - 751.6 750.6 $781.3) Accrued Expenses and Other Liabilities 453.2 472.4 Total Liabilities 6,235.36,043.7 Shareholders’ Equity: Common Stock, $0.10 Par Value Per Share, 100 Million Shares Authorized; 51,270,940 Shares Issued and Outstanding at December 31, 2016 and 51,326,751 Shares Issued and Outstanding at 5.1 5.1 December 31, 2015 Paid-in Capital 660.3 654.0 Retained Earnings 1,172.81,209.0 Accumulated Other Comprehensive Income 137.0 124.3 Stockholders' Equity Attributable to Parent 1,975.21,992.4 Total Liabilities and Shareholders’ Equity $ $ 8,210.58,036.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Consolidated Balance Sheets Consolidated Balance Sheets Dec. 31, 2016Dec. 31, 2015 (Parenthetical) - USD ($) $ in Millions Amortized Cost of Fixed Maturity Securities $ 4,846.8 $ 4,560.7 Equity Securities at Cost 434.4 486.9 Fair Value of Notes Payable $ 770.9 $ 781.3 Common Stock, Par Value $ 0.1 $ 0.1 Common Stock, Shares Authorized 100,000,000 100,000,000 Common Stock, Shares Issued 51,270,940 51,326,751 Common Stock, Shares Outstanding 51,270,940 51,326,751

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Consolidated Statements of 12 Months Ended Income - USD ($) Dec. 31, Dec. 31, Dec. 31, $ in Millions 2016 2015 2014 Revenues: Earned Premiums $ 2,220.0 $ 2,009.6 $ 1,862.2 Net Investment Income 298.3 302.6 309.1 Other Income 3.2 3.7 1.4 Net Realized Gains on Sales of Investments 33.1 52.1 39.1 Other-than-temporary Impairment Losses: Total Other-than-temporary Impairment Losses (33.0) (27.4) (15.2) Portion of Losses Recognized in Other Comprehensive Income 0.3 0.2 0.0 Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) Total Revenues 2,521.9 2,340.8 2,196.6 Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjustment 1,780.8 1,467.6 1,261.7 Expenses Insurance Expenses 647.3 645.1 628.4 Write-off of Long-lived Assets 0.0 11.1 54.6 Loss from Early Extinguishment of Debt 0.0 9.1 0.0 Interest and Other Expenses 90.3 107.6 91.7 Total Expenses 2,518.4 2,240.5 2,036.4 Income from Continuing Operations before Income Taxes 3.5 100.3 160.2 Income Tax Benefit (Expense) 9.2 (20.1) (47.6) Income (Loss) from Continuing Operations 12.7 80.2 112.6 Discontinued Operations: Income from Discontinued Operations 4.1 5.5 1.9 Net Income $ 16.8 $ 85.7 $ 114.5 Income from Continuing Operations Per Unrestricted Share: Income from Continuing Operations Per Unrestricted Share - Basic (usd $ 0.25 $ 1.55 $ 2.08 pre share) Income from Continuing Operations Per Unrestricted Share - Diluted (usd 0.25 1.55 2.08 per share) Net Income Per Unrestricted Share: Net Income Per Unrestricted Share - Basic ( usd per share) 0.33 1.65 2.12 Net Income Per Unrestricted Share - Diluted (usd pre share) 0.33 1.65 2.12 Dividends Paid to Shareholders Per Share (usd per share) $ 0.96 $ 0.96 $ 0.96

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Consolidated Statements of 3 Months Ended 12 Months Ended Comprehensive Income Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. (Loss) - USD ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ in Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Consolidated Statements of Comprehensive Income [Abstract] Net Income $ $ $ 31.2 $ 4.0 $ (2.1) $ 4.6 $ 37.9 $ 29.7 $ 13.5 $ 16.8 $ 85.7 (16.3) 114.5 Unrealized Holding Gains (2.2) (177.3)234.6 (Losses) Foreign Currency Translation (0.3) (1.4) (1.0) Adjustments Decrease (Increase) in Net Unrecognized Postretirement 20.5 26.1 (98.5) Benefit Costs Gain on Cash Flow Hedge 1.6 0.0 0.0 Other Comprehensive Income 19.6 (152.6)135.1 (Loss) Before Income Taxes Other Comprehensive Income (6.9) 54.2 (47.7) Tax Benefit (Expense) Other Comprehensive Income 12.7 (98.4) 87.4 (Loss) Total Comprehensive Income $ $ $ 29.5 (Loss) (12.7) 201.9

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Consolidated Statements of 12 Months Ended Cash Flows - USD ($) Dec. 31, Dec. 31, Dec. 31, $ in Millions 2016 2015 2014 Operating Activities: Net Income $ 16.8 $ 85.7 $ 114.5 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Increase in Deferred Policy Acquisition Costs (15.6) (13.1) (0.4) Amortization of Intangible Assets Acquired 5.9 15.4 7.2 Equity in Earnings of Equity Method Limited Liability Investments (7.5) (19.0) (9.0) Distribution of Accumulated Earnings of Equity Method Limited Liability 15.7 8.6 21.7 Investments Decrease (Increase) in Value of Fair Value Option Investments reported in 1.9 (0.3) 0.7 Investment Income Amortization of Investment Securities and Depreciation of Investment Real 16.2 16.1 15.4 Estate Net Realized Gains on Sales of Investments (33.1) (52.1) (39.1) Net Impairment Losses Recognized in Earnings 32.7 27.2 15.2 Loss from Early Extinguishment of Debt 0.0 9.1 0.0 Depreciation of Property and Equipment 13.6 13.5 16.0 Write-off of Long-lived Assets 0.0 11.1 54.6 Decrease (Increase) in Other Receivables (11.0) 49.6 46.2 Increase (Decrease) in Insurance Reserves 201.8 39.6 (54.7) Increase (Decrease) in Unearned Premiums 5.6 (9.4) (62.0) Change in Income Taxes (6.5) (21.8) 11.2 Increase (Decrease) in Accrued Expenses and Other Liabilities 3.3 22.6 (20.3) Other, Net 0.7 32.2 16.4 Net Cash Provided by Operating Activities 240.5 215.0 133.6 Investing Activities: Sales, Paydowns and Maturities of Fixed Maturities 532.3 627.8 573.7 Purchases of Fixed Maturities (850.3) (681.3) (553.0) Sales of Equity Securities 158.9 238.4 245.3 Purchases of Equity Securities (90.1) (134.0) (235.2) Acquisition and Improvements of Investment Real Estate (2.2) (1.8) (2.1) Sales of Investment Real Estate 7.5 7.7 0.9 Sales of and Return of Investment of Equity Method Limited Liability 41.0 32.9 55.2 Investments Acquisitions of Equity Method Limited Liability Investments (34.6) (32.4) (21.4) Sales of Fair Value Option Investments 72.2 0.0 6.9 Purchases of Fair Value Option Investments (21.0) (111.0) (60.9) Decrease (Increase) in Short-term Investments (18.0) 104.9 (63.9) Acquisition of Businesses, Net of Cash Acquired 0.0 (57.6) 0.0 Disposition of Business, Net of Cash Disposed 0.0 0.0 8.9 Increase in Other Investments (5.7) (3.2) (8.0)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Purchase of Corporate-owned Life Insurance (7.5) (7.5) (33.5) Acquisition of Software (17.6) (8.9) (11.3) Other, Net (3.0) (2.6) (5.9) Net Cash Used by Investing Activities (238.1) (28.6) (104.3) Financing Activities: Net Proceeds from Issuances of Debt 10.0 345.8 144.0 Repayments of Debt (10.0) (357.3) 0.0 Common Stock Repurchases (3.8) (45.0) (114.0) Dividends and Dividend Equivalents Paid (49.2) (49.7) (51.8) Cash Exercise of Stock Options 3.5 3.9 0.5 Other, Net 1.1 1.5 1.6 Net Cash Used by Financing Activities (48.4) (100.8) (19.7) Increase (Decrease) in Cash (46.0) 85.6 9.6 Cash, Beginning of Year 161.7 76.1 66.5 Cash, End of Year $ 115.7 $ 161.7 $ 76.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Consolidated Statements of Shareholders’ Equity - USD Common Paid-in Retained Accumulated Other ($) Total Stock Capital Earnings Comprehensive Income shares in Millions, $ in [Member] [Member] [Member] [Member] Millions Beginning balance at Dec. 31, $ $ 5.6 $ 694.8 $ 1,215.8 $ 135.3 2013 2,051.5 Beginning Balance, shares at 55.7 Dec. 31, 2013 Increase (Decrease) in Stockholders' Equity [Roll Forward] Net Income 114.5 114.5 Other Comprehensive Income 87.4 87.4 (Loss), Net of Tax Cash Dividends to (51.8) (51.8) Shareholders Repurchases of Common Stock $ $ (0.4) (40.2) (74.9) (115.5) Repurchases of Common (3.2) (3.2) Stock, shares Equity-based Compensation $ 6.4 6.4 Cost Equity-based Awards, Net of (1.8) (0.9) (0.9) Shares Exchanged Equity-based Awards, Net of (0.1) Shares Exchanged, shares Ending Balance, shares at Dec. 52.4 31, 2014 Ending balance at Dec. 31, 2,090.7$ 5.2 660.1 1,202.7 222.7 2014 Increase (Decrease) in Stockholders' Equity [Roll Forward] Net Income 85.7 85.7 Other Comprehensive Income (98.4) (98.4) (Loss), Net of Tax Cash Dividends to (49.7) (49.7) Shareholders Repurchases of Common Stock $ $ (0.1) (15.5) (27.9) (43.5) Repurchases of Common (1.2) (1.2) Stock, shares Equity-based Compensation $ 6.5 6.5 Cost

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Equity-based Awards, Net of 1.1 2.9 (1.8) Shares Exchanged Equity-based Awards, Net of 0.1 Shares Exchanged, shares Ending Balance, shares at Dec. 51.3 31, 2015 Ending balance at Dec. 31, 1,992.4$ 5.1 654.0 1,209.0 124.3 2015 Increase (Decrease) in Stockholders' Equity [Roll Forward] Net Income 16.8 16.8 Other Comprehensive Income 12.7 12.7 (Loss), Net of Tax Cash Dividends to (49.2) (49.2) Shareholders Repurchases of Common Stock $ (3.8) $ 0.0 (1.8) (2.0) Repurchases of Common (0.1) (0.1) Stock, shares Equity-based Compensation $ 4.7 4.7 Cost Equity-based Awards, Net of 1.6 3.4 (1.8) Shares Exchanged Equity-based Awards, Net of 0.1 Shares Exchanged, shares Ending Balance, shares at Dec. 51.3 31, 2016 Ending balance at Dec. 31, $ $ 5.1 $ 660.3 $ 1,172.8 $ 137.0 2016 1,975.2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Basis of Presentation And 12 Months Ended Significant Estimates Dec. 31, 2016 Organization, Consolidation and Presentation of Financial Statements [Abstract] Basis of Presentation and NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ESTIMATES Significant Estimates The Consolidated Financial Statements included herein have been prepared on the basis of accounting principles generally accepted in the United States (“GAAP”) and include the accounts of Kemper Corporation (“Kemper”) and its subsidiaries (individually and collectively referred to herein as the “Company”). All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Summary Of Accounting 12 Months Ended Policies And Accounting Dec. 31, 2016 Changes Accounting Policies [Abstract] Summary Of Accounting NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES Policies And Accounting Investments Changes Investments in Fixed Maturities include bonds, notes and redeemable preferred stocks. Investments in Fixed Maturities are classified as available for sale and reported at fair value. Net Investment Income, including amortization of purchased premiums and accretion of market discounts, on Investments in Fixed Maturities is recognized as interest over the period that it is earned using the effective yield method.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Gains and losses on sales of investments are computed on the specific identification method and are reported in the Consolidated Statements of Income in the period in which the sales occur. The

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Company regularly reviews its investment portfolio for factors that may indicate that a decline in fair value of an investment is other than temporary. Losses are computed on the specific identification method and reported in the Consolidated Statements of Income in the period that the decline is determined to be other than temporary. The portion of an impairment of an investment in a fixed maturity attributed to a credit loss is reported in Net Impairment Losses Recognized in Earnings in the Consolidated Statements of Income, with the portion of the impairment that is not attributed to a credit loss reported in AOCI.

Fair Value Measurements

Deferred Policy Acquisition Costs

Costs directly associated with the successful acquisition of business, principally commissions and certain premium taxes and policy issuance costs, are deferred. Costs deferred on property and casualty insurance contracts and short duration health insurance contracts are amortized over the period in which premiums are earned. Costs deferred on traditional life insurance products and other long-duration insurance contracts are primarily amortized over the anticipated premium- paying period of the related policies in proportion to the ratio of the annual premiums to the total premiums anticipated, which is estimated using the same assumptions used in calculating policy reserves.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Goodwill

Insurance Reserves

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document given accounting period. Such estimates are based on individual case estimates for reported claims and estimates for incurred but not reported (“IBNR”) losses, including expected development on reported claims. These estimates are adjusted in the aggregate for ultimate loss expectations based on historical experience patterns and current economic trends, with any change in the estimated ultimate liabilities being reported in the Consolidated Statements of Income in the period of change. Changes in such estimates may be material.

Other Receivables

Other Assets

Property and equipment is depreciated over the useful lives of the assets, generally using the straight-line or double declining balance methods of depreciation depending on the asset involved.

Internal use software is amortized over the useful life of the asset using the straight-line method of amortization. Write-offs of Long-lived Assets for the year ended December 31, 2015 was a charge of $11.1 million to write off the costs of a computer software development project that was abandoned by the Company’s Property & Casualty Insurance segment. Write-offs of Long- lived Assets for the year ended December 31, 2014 was a charge of $54.6 million to write off certain software for the Company’s Property & Casualty Insurance segment after the Company determined that it was no longer probable that the software would be fully implemented.

Insurance licenses acquired in business combinations and other indefinite life intangibles are not amortized, but rather tested periodically for recoverability.

Corporate-owned life insurance is reported at cash surrender value with changes due to cost of insurance and investment experience reported in Other Income in the Consolidated Statements of Income.

Accrued Expenses and Other Liabilities

Accrued Expenses and Other Liabilities primarily include accrued salaries and commissions, pension benefits, postretirement medical benefits and accrued taxes, licenses and fees.

Recognition of Earned Premiums and Related Expenses

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Traditional life insurance premiums are recognized as revenue when due. Policyholders’ benefits are associated with related premiums to result in recognition of profits over the periods for which the benefits are provided using the net level premium method.

Reinsurance

In the normal course of business, Kemper’s insurance subsidiaries reinsure certain risks above certain retention levels with other insurance enterprises. These reinsurance agreements do not relieve Kemper’s insurance subsidiaries of their legal obligations to the policyholder. Amounts recoverable from reinsurers are included in Other Receivables.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Income Taxes

Change in Accounting and Adoption of New Accounting Standards

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The amendments in ASU 2015-02 affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities while also eliminating the presumption that a general partner should consolidate a limited partnership. ASU 2015-02 may also affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. The Company's adoption and initial application as of January 1, 2016 resulted in no changes to the legal entities that the Company consolidates.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company currently records its Investments in Equity Securities at fair value with net unrealized appreciation or depreciation reported in AOCI in Shareholders’ Equity. The Company’s Investments in Equity Securities include securities with readily-determinable fair values and securities without readily-determinable fair values. Until the Company adopts ASU 2016-01 and makes its elections for Investments in Equity Securities that do not have readily-determinable fair values, it cannot determine the impact of the adoption on its consolidated balance sheet. Subsequent to adoption, ASU 2016-01 is expected to cause increased volatility in the Company’s Consolidated Statements of Operations.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company has adopted all recently issued accounting pronouncements with effective dates prior to January 1, 2017. There were no adoptions of such accounting pronouncements in 2016 that had a material impact on the Company’s Consolidated Financial Statements. With the possible exceptions of ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, ASU 2016-02, Leases (Topic 842) and ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company does not expect the adoption of all other recently issued accounting pronouncements with effective dates after December 31, 2016 to have a material impact on the Company’s financial statements.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Acquisition of Business Dec. 31, 2016 Business Combinations [Abstract] Acquisition of Business NOTE 3. ACQUISITION OF BUSINESS On April 30, 2015, Kemper acquired 100% of the outstanding common stock of Alliance United Group and its wholly-owned subsidiaries, Alliance United Insurance Company and Alliance United Insurance Services, (individually and collectively referred to herein as “Alliance United”) in a cash transaction for a total purchase price of $71.0 million, of which $17.5 million was placed in escrow to secure the sellers’ potential indemnification obligations under the purchase agreement. After completing the transaction, Kemper contributed $75.0 million to support the book of business acquired and commuted a quota share reinsurance agreement whereby Alliance United ceded a portion of its business to an unaffiliated reinsurer. The results of Alliance United are included in the Consolidated Financial Statements from the date of acquisition and are reported in the Company’s Property & Casualty Insurance segment. Alliance United is a provider of nonstandard personal automobile insurance in California. As a result of the acquisition, the Company increased its presence in the California nonstandard automobile insurance market by gaining access to additional brokers and gained expertise in serving the Hispanic market.

DOLLARS IN MILLIONS

Under the purchase agreement, the Company is indemnified up to $12.5 million on an after-tax basis for, among other things, breaches of customary representations and warranties, loss and LAE reserve development and pre-closing income taxes. In addition, the Company is indemnified up to $5.0 million on an after-tax basis, for certain employment related matters. Other Receivables in the preceding table include an indemnification receivable of $5.4 million. Other Receivables in the Consolidated Balance Sheets at December 31, 2016 and 2015 include an indemnification receivable of $16.0 million and $15.9 million, respectively.

NOTE 3. ACQUISITION OF BUSINESS (Continued)

The carrying amount, net of accumulated amortization, of the intangible assets acquired by class at December 31, 2016, December 31, 2015 and the acquisition date are presented below.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document At Dec 31, Dec 31, Acquisition DOLLARS IN MILLIONS 2016 2015 Date P&C Broker Relationships $ 16.8 $ 18.1 $ 18.9 Value of In Force Policies — 0.2 9.2 Other 2.5 3.7 4.5 Value of Intangible Assets Acquired $ 19.3 $ 22.0 $ 32.6

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Investments Dec. 31, 2016 Investments, Debt and Equity Securities [Abstract] Investments NOTE 4. INVESTMENTS The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2016 were:

The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2015 were:

Included in the fair value of Other Mortgage- and Asset-backed investments at December 31, 2015 are $3.8 million of collateralized debt obligations, $1.3 million of non-governmental residential mortgage-backed securities and $0.1 million of other asset-backed securities.

NOTE 4. INVESTMENTS (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Maturities of $2.7 million at December 31, 2016. There were no unsettled sales of Investments in Fixed Maturities at December 31, 2015.

The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2016 by contractual maturity were:

The expected maturities of the Company’s Investments in Fixed Maturities may differ from the contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments in Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date at December 31, 2016 consisted of securities issued by the Government National Mortgage Association with a fair value of $126.2 million, securities issued by the Federal National Mortgage Association with a fair value of $13.9 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $4.8 million and securities of other non-governmental issuers with a fair value of $124.8 million.

Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2016 were:

NOTE 4. INVESTMENTS (Continued)

Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2015 were:

Gross Unrealized DOLLARS IN MILLIONS Cost Gains Losses Fair Value Preferred Stocks: Finance, Insurance and Real Estate $ 80.8 $ 4.9 $ (0.8) $ 84.9 Other Industries 17.1 2.7 (0.8) 19.0 Common Stocks:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Manufacturing 0.7 1.0 — 1.7 Finance, Insurance and Real Estate 18.9 5.3 (1.0) 23.2 Other Industries 8.7 3.3 (0.2) 11.8 Other Equity Interests: Exchange Traded Funds 179.7 1.1 (3.7) 177.1 Limited Liability Companies and Limited Partnerships 181.0 25.0 (0.5) 205.5 Investments in Equity Securities $ 486.9 $ 43.3 $ (7.0) $ 523.2

An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2016 is presented below.

Unrealized losses on fixed maturities, which the Company has determined to be temporary at December 31, 2016, were $46.5 million, of which $7.8 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were unrealized losses of $0.1 million at December 31, 2016 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” There were no unrealized losses at December 31, 2016 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “12 Months or Longer.” Investment-grade fixed maturity investments comprised $33.8 million and below- investment-grade fixed maturity investments comprised $12.7 million of the unrealized losses on investments in fixed maturities at December 31, 2016. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 5% of the amortized cost basis of the investment. At December 31, 2016, the Company did not have the intent to sell these investments and it was not more likely than not that the Company would be required to sell these investments before recovery of its amortized cost basis, which may be at maturity. Based on the Company’s evaluation at December 31, 2016 of the prospects of the issuers, including, but not limited to, the credit ratings of the issuers of the investments in the fixed maturities, and the Company’s intention to not sell and its determination that it would not be required to sell before recovery of the amortized cost of such investments, the Company concluded that the declines in the fair values of the Company’s investments in fixed maturities presented in the preceding table were temporary at the evaluation date.

For equity securities, the Company considers various factors when determining whether a decline in the fair value is other than temporary, including, but not limited to:

NOTE 4. INVESTMENTS (Continued)

An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2015 is presented below.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Less Than 12 Months 12 Months or Longer Total Fair Unrealized Fair Unrealized Fair Unrealized DOLLARS IN MILLIONS Value Losses Value Losses Value Losses Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 56.6 $ (1.6) $ 24.1 $ (2.0) $ 80.7 $ (3.6) States and Political Subdivisions 131.0 (2.6) 0.9 (0.1) 131.9 (2.7) Corporate Securities: Bonds and Notes 783.8 (26.0) 133.6 (14.7) 917.4 (40.7) Redeemable Preferred Stocks — — — — — — Collateralized Loan Obligations 57.4 (2.9) 0.8 (0.1) 58.2 (3.0) Other Mortgage- and Asset-backed — — 0.3 — 0.3 — Total Fixed Maturities 1,028.8 (33.1) 159.7 (16.9) 1,188.5 (50.0) Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate 2.7 — 12.3 (0.8) 15.0 (0.8) Other Industries 7.3 (0.8) — — 7.3 (0.8) Common Stocks: Finance, Insurance and Real Estate 16.3 (1.0) — — 16.3 (1.0) Other Industries 2.8 (0.2) — — 2.8 (0.2) Other Equity Interests: Exchange Traded Funds 135.2 (3.7) — — 135.2 (3.7) Limited Liability Companies and Limited Partnerships 2.7 (0.5) — — 2.7 (0.5) Total Equity Securities 167.0 (6.2) 12.3 (0.8) 179.3 (7.0) Total $1,195.8 $ (39.3) $172.0 $ (17.7) $1,367.8 $ (57.0)

Unrealized losses on fixed maturities, which the Company determined to be temporary at December 31, 2015, were $50.0 million, of which $16.9 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were unrealized losses of $0.2 million at December 31, 2015 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” There were no unrealized losses at December 31, 2015 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “12 Months or Longer.” Investment-grade fixed maturity investments comprised $33.5 million and below- investment-grade fixed maturity investments comprised $16.5 million of the unrealized losses on investments in fixed maturities at December 31, 2015. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was less than 8% of the amortized cost basis of the investment. At December 31, 2015, the Company did not have the intent to sell these investments and it was not more likely than not that the Company would be required to sell these investments before recovery of its amortized cost basis, which

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document may be at maturity. Based on the Company’s evaluation at December 31, 2015 of the prospects of the issuers, including, but not limited to, the credit ratings of the issuers of the investments in the fixed maturities, and the Company’s intention to not sell and its determination that it would not be required to sell before recovery of the amortized cost of such investments, the Company concluded that the declines in the fair values of the Company’s investments in fixed maturities presented in the preceding table were temporary at the evaluation date.

With respect to Investments in Equity Securities, the Company concluded that the unrealized losses on its investments at December 31, 2015 were temporary based on various factors, including the relative short length and magnitude of the losses and overall market volatility, as well as, the debt-like characteristics of investments in certain other equity interests.

NOTE 4. INVESTMENTS (Continued)

Equity Method Limited Liability Investments include investments in limited liability investment companies and limited partnerships in which the Company’s interests are not deemed minor and are accounted for under the equity method of accounting. The Company’s investments in Equity Method Limited Liability Investments are generally of a passive nature in that the Company does not take an active role in the management of the investment entity. In 2016 and 2015, aggregate investment income (losses) from Equity Method Limited Liability Investments exceeded 10% of the Company’s pretax consolidated net income. Accordingly, the Company is disclosing aggregated summarized financial data for its Equity Method Limited Liability Investments. Such aggregated summarized financial data does not represent the Company’s proportionate share of the Equity Method Limited Liability Investment assets or earnings. Aggregate total assets of the Equity Method Limited Liability Investments in which the Company invested totaled $2,618.1 million and $3,801.7 million as of December 31, 2016 and 2015, respectively. Aggregate total liabilities of the Equity Method Limited Liability Investments in which the Company invested totaled $828.0 million and $879.1 million as of December 31, 2016 and 2015, respectively. Aggregate net income of the Equity Method Limited Liability Investments in which the Company invested totaled $85.0 million, $159.6 million and $96.2 million for the years ended December 31, 2016, 2015 and 2014, respectively. The aggregate summarized financial data is based on the most recent and sufficiently-timely financial information available to the Company as of the respective reporting dates and periods. The Company’s maximum exposure to loss at December 31, 2016 is limited to the total carrying value of $175.9 million. In addition, the Company had outstanding commitments totaling approximately $76.3 million to fund Equity Method Limited Liability Investments at December 31, 2016.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The carrying values of the Company’s Other Investments at December 31, 2016 and 2015 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Goodwill Dec. 31, 2016 Goodwill and Intangible Assets Disclosure [Abstract] Goodwill NOTE 5. GOODWILL Goodwill balances by business segment at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Property & Casualty Insurance $ 103.6 $ 103.6 Life & Health Insurance 219.4 219.4 Total $ 323.0 $ 323.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property and Casualty 12 Months Ended Insurance Reserves Dec. 31, 2016 Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] Property and Casualty NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES Insurance Reserves The Company’s Property and Casualty Insurance Reserves are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid. Such estimates are based on individual case estimates for reported claims and estimates for IBNR losses, including expected development on reported claims.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

LAE are fully developed. Changes in the Company’s estimates of these losses and LAE over time, also referred to as “development,” will occur and may be material.

Preferred Personal Automobile Insurance—Liability

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance Total of For the Years Ended December 31, IBNR Liabilities Plus Expected Cumulative Development Number of Accident 2012 2013 2014 2015 on Reported Incurred Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Claims Claims 2012 $ 305.0 $ 290.9 $ 284.4 $ 282.2 $ 282.1 $ 0.8 56,772 2013 265.4 251.1 250.1 251.6 — 51,126 2014 202.1 198.3 200.2 0.9 39,865 2015 168.3 171.8 6.3 32,484 2016 162.1 26.9 30,278 Total 1,067.8

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Preferred Personal Automobile Insurance—Physical Damage

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Incurred Losses and Allocated LAE, Net of Reinsurance Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Development Number of Accident 2012 2013 2014 2015 on Reported Incurred Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Claims Claims 2012 $ 163.9 $ 163.9 $ 164.1 $ 164.2 $ 164.3 $ (0.1) 89,703 2013 139.7 138.5 138.5 138.4 (0.1) 78,779 2014 122.0 121.6 121.4 (0.1) 67,205 2015 101.2 100.7 (0.4) 53,419 2016 106.6 (4.2) 49,267 Total 631.4

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 160.5 $ 164.4 $ 164.2 $ 164.2 $ 164.3 2013 137.0 138.9 138.6 138.5 2014 121.0 121.8 121.5 2015 100.1 101.0 2016 105.2 Total 630.5 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance (0.1) Loss and Allocated LAE Reserves, Net of Reinsurance $ 0.8

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Non-standard Personal Automobile Insurance—Liability1

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance and Total of Indemnification IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Development Number of Accident 2012 2013 2014 2015 on Reported Incurred Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Claims Claims 2012 $ 243.0 $ 242.1 $ 242.0 $ 243.0 $ 244.0 $ 0.2 63,019 2013 250.5 247.1 248.3 249.5 0.5 67,058 2014 255.0 262.9 267.1 5.4 76,846 2015 379.4 379.8 10.4 91,832 2016 435.7 72.2 108,062 Total 1,576.1

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification For the Years Ended December 31,

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 112.8 $ 202.6 $ 228.9 $ 238.9 $ 242.6 2013 117.8 208.2 233.8 244.2 2014 117.4 210.8 245.5 2015 167.7 304.7 2016 168.9 Total 1,205.9 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance and Indemnification 1.5 Loss and Allocated LAE Reserves, Net of Reinsurance and Indemnification $ 371.7

1 Table retrospectively includes Alliance United’s historical incurred and paid accident year claim information for all periods presented.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Non-standard Personal Automobile Insurance—Physical Damage1

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance and Total of IBNR Indemnification Liabilities For the Years Ended December 31, Plus Expected Cumulative Development Number of Accident 2012 2013 2014 2015 on Reported Incurred Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Claims Claims 2012 $ 96.4 $ 98.1 $ 98.4 $ 98.3 $ 98.2 $ — 35,840 2013 100.1 100.3 100.0 99.8 (0.1) 36,179 2014 105.8 104.7 104.3 (0.7) 38,042 2015 143.2 143.3 (1.6) 42,863 2016 177.9 (4.0) 52,039 Total 623.5

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 91.2 $ 98.3 $ 98.2 $ 98.2 $ 98.2 2013 93.4 100.2 99.9 99.7 2014 97.1 105.9 105.1 2015 130.0 143.8 2016 167.4 Total 614.2 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance and Indemnification —

1 Table retrospectively includes Alliance United’s historical incurred and paid accident year claim information for all periods presented.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Homeowners Insurance

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Development Number of Accident 2012 2013 2014 2015 on Reported Incurred Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Claims Claims 2012 $ 250.2 $ 235.9 $ 231.0 $ 227.5 $ 226.7 $ 0.1 27,833 2013 180.8 172.8 169.4 167.5 (0.1) 21,976 2014 211.1 208.5 205.0 (0.1) 22,432 2015 178.9 164.9 (1.8) 17,432 2016 200.3 9.7 16,769 Total 964.4

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 165.9 $ 216.0 $ 222.3 $ 225.2 $ 225.8 2013 122.4 156.5 162.5 164.7 2014 149.2 194.4 200.1 2015 116.9 154.4 2016 141.2 Total 886.2 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance 3.5 Loss and Allocated LAE Reserves, Net of Reinsurance $ 81.7

The Company's claims are counted at the feature level. As such, each claimant and each coverage is counted separately. For example, if for one occurrence, the Company's policyholder is at fault

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document for damage to his/her own vehicle, another party's vehicle and three injured parties, there may be five features—three for bodily injury liability, one for property damage liability and one for first- party collision coverage. There may also be another feature for first-party medical payments.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

The following is supplementary information about average historical claims duration as of December 31, 2016.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property and Casualty Insurance Reserve activity for the years ended December 31, 2016, 2015 and 2014 was:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document million of favorable development on catastrophes primarily for the 2015 accident year and, to a lesser extent, the 2014 accident year. Other personal lines loss and LAE reserves developed favorably by $8.1 million due primarily to the emergence of more favorable loss patterns than expected for the 2015, 2014, 2013 and 2012 accident years. Commercial lines insurance loss and LAE reserves included adverse development of $2.4 million from continuing operations and favorable development of $6.3 million from discontinued operations.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Debt Dec. 31, 2016 Debt Disclosure [Abstract] Debt NOTE 7. DEBT The Company designates debt obligations as either short-term or long-term based on maturity date at issuance. Total amortized cost of Long-term Debt, Current and Non-current, outstanding at December 31, 2016 and 2015 was:

NOTE 7. DEBT (Continued)

Interest Expense, including facility fees, accretion of discount and amortization of issuance costs, for the years ended December 31, 2016, 2015 and 2014 was:

Interest Paid, including facility fees, for the years ended December 31, 2016, 2015 and 2014 was:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Kemper has a $225.0 million, unsecured, revolving credit agreement expiring June 2, 2020. The credit agreement provides for fixed and floating rate advances for periods up to six months at various interest rates. The credit agreement contains various financial covenants, including limits on total debt to total capitalization, consolidated net worth and minimum risk-based capital ratios for Kemper’s largest insurance subsidiaries, Trinity and United Insurance. Proceeds from advances under the credit agreement may be used for general corporate purposes, including repayment of existing indebtedness. There were no outstanding borrowings under the credit agreement at either December 31, 2016 or December 31, 2015.

NOTE 7. DEBT (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document quarter of 2017 and its terms are consistent with what has been anticipated, the Company expects to reclassify $0.1 million of net gains on derivative instruments from AOCI to earnings for the year ended December 31, 2017 as interest expense on the debt is recognized.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Leases Dec. 31, 2016 Leases [Abstract] Leases NOTE 8. LEASES The Company leases certain office space under non-cancelable operating leases, with initial terms typically ranging from one to ten years, along with options that permit renewals for additional periods. The Company also leases certain equipment under non-cancellable operating leases, with initial terms typically ranging from one to five years. Minimum rent is expensed on a straight-line basis over the term of the lease. Net rental expense for operating leases for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Minimum Rental Expense $ 21.2 $ 20.7 $ 21.5 Less Sublease Rental Income (1.6) (1.7) (1.3) Net Rental Expense $ 19.6 $ 19.0 $ 20.2

Future minimum lease payments under capital and operating leases at December 31, 2016 were:

The total of minimum rentals to be received in the future under non-cancellable subleases was $2.1 million at December 31, 2016.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Shareholders' Equity Dec. 31, 2016 Equity [Abstract] Stockholders' Equity NOTE 9. SHAREHOLDERS’ EQUITY Kemper is authorized to issue 20 million shares of $0.10 par value preferred stock and 100 million shares of $0.10 par value common stock. No preferred shares were issued or outstanding at December 31, 2016 and 2015. There were 51,270,940 shares and 51,326,751 shares of common stock outstanding at December 31, 2016 and 2015, respectively. Common stock outstanding included 16,000 shares and 80,848 shares at December 31, 2016 and 2015, respectively, that have been issued, subject to certain vesting and other requirements, in connection with the Company’s long-term equity compensation plans. See Note 10, “Long-Term Equity-based Compensation,” to the Consolidated Financial Statements for a discussion of the restrictions and vesting provisions.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document total capitalization ratio, under Kemper’s credit agreement could limit the amount of dividends that Kemper may pay to shareholders at December 31, 2016. Kemper had the ability to pay without restrictions $269 million in dividends to its shareholders and still be in compliance with all financial covenants under its credit agreement at December 31, 2016.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Long-term Equity-based 12 Months Ended Compensation Dec. 31, 2016 Disclosure of Compensation Related Costs, Share-based Payments [Abstract] Long-Term Equity-Based NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION Compensation On May 4, 2011, Kemper’s shareholders approved the 2011 Omnibus Equity Plan (“Omnibus Plan”). The Omnibus Plan replaced the Company’s previous employee stock option plans, director stock option plan and restricted stock plan (collectively, the “Prior Plans”). Awards previously granted under the Prior Plans remain outstanding in accordance with their original terms. Beginning May 4, 2011, equity-based compensation awards may only be granted under the Omnibus Plan. A maximum number of 10,000,000 shares of Kemper common stock may be issued under the Omnibus Plan (the “Share Authorization”). As of December 31, 2016, there were 6,762,714 common shares available for future grants under the Omnibus Plan, of which 682,752 shares were reserved for future grants based on the achievement of performance goals under the terms of outstanding performance-based restricted stock unit (“RSU”) awards.

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Outstanding equity-based compensation awards at December 31, 2016 consisted of tandem stock option and stock appreciation rights (“Tandem Awards”), time-vested restricted stock, time- vested RSUs, performance-based RSUs and DSUs. Effective February 4, 2014, the Company began issuing time-based and performance-based RSUs. Recipients of restricted stock receive full dividend and voting rights on the same basis as all other outstanding shares of Kemper common stock. RSUs and DSUs give the recipient the right to receive one share of Kemper common stock for each RSU or DSU issued. Recipients of RSUs and DSUs receive full dividend equivalents on the same basis as all other outstanding shares of Kemper common stock, but do not receive voting rights until such shares are issued. Except as described below for equity-based compensation awards granted to each member of the Board of Directors who is not employed by the Company (“Non-employee Directors”), all outstanding awards are subject to forfeiture until certain restrictions have lapsed.

For equity-based compensation awards with a graded vesting schedule, the Company recognizes compensation expense on a straight-line basis over the requisite service period for each separately-vesting portion of the awards as if each award were, in substance, multiple awards. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. Equity-based compensation expense was $4.7 million, $6.5 million and $6.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Total unamortized compensation expense related to nonvested awards at December 31, 2016 was $8.1 million, which is expected to be recognized over a weighted-average period of 1.8 years.

The Compensation Committee of the Board of Directors, or the Board’s authorized designee, has sole discretion to determine the persons to whom awards under the Omnibus Plan are granted,

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and the material terms of the awards. For Tandem Awards, material terms include the number of shares covered by such awards and the exercise price, vesting and expiration dates of such awards. Tandem Awards are non-transferable. The exercise price of Tandem Awards is the fair value of Kemper’s common stock on the date of grant. Employee Tandem Awards, time-based restricted stock awards and time-based RSU awards generally vest, beginning six months after date of grant, in four equal annual installments over a period of three and one-half years, with the Tandem Awards expiring ten years from the date of grant. Employee performance-based restricted stock and RSU awards generally vest over a period of three years, subject to achievement of performance goals and other restrictions.

In addition to the annual DSU awards under the Non-employee Director compensation programs in effect for 2015 and 2014, each Non-employee Director received an initial option award to purchase 4,000 shares of Kemper common stock immediately upon becoming a director, and in addition, received an annual option award to purchase 4,000 shares of common stock on the date of each annual meeting of Kemper’s shareholders. Grants of such option awards were fully vested and exercisable on the date of grant at an exercise price equal to the fair value of Kemper’s common stock on the date of grant and expire ten years from the date of grant.

Prior to approval of the Omnibus Plan, the Company’s previous stock option plans included provisions, subject to certain limitations, to automatically grant restorative, or reload stock options (“Restorative Options”), to replace shares of previously owned Kemper common stock that an exercising option holder surrenders, either actually or constructively, to satisfy the exercise price and/or tax withholding obligations relating to the exercise. The restorative feature was eliminated prospectively for original option awards granted on or after February 3, 2009. However, Restorative Options could still be granted, subject to certain limitations, in connection with the exercise of original options granted before February 3, 2009. Following the exercise in 2016 of original options previously granted prior to February 3, 2009 and the automatic grant of Restorative Options in

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The assumptions used in the Black-Scholes pricing model for Tandem Awards granted during the years ended December 31, 2016, 2015 and 2014 are presented below.

Tandem Award activity for the year ended December 31, 2016 is presented below.

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Information pertaining to Tandem Awards outstanding at December 31, 2016 is presented below.

Outstanding Exercisable Weighted- Weighted- average Weighted- Shares average Remaining Shares average Range of Exercise Prices Subject to Exercise Price Contractual Subject to Exercise Price ($) Awards Per Share ($) Life (in Years) Awards Per Share ($) 15.01 - 20.00 4,000 16.48 2.35 4,000 16.48 20.01 - 25.00 9,500 23.37 3.06 9,500 23.37 25.01 - 30.00 316,603 27.89 8.21 116,909 28.20 30.01 - 35.00 176,845 32.43 8.18 74,742 32.33 35.01 - 40.00 437,299 36.64 7.21 270,763 36.67

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 40.01 - 45.00 166,376 41.33 7.02 30,072 40.70 45.01 - 50.00 195,500 49.74 0.11 195,500 49.74 15.01 - 50.00 1,306,123 36.35 6.45 701,486 38.32

Time-based Restricted Time-based RSU Stock Awards Awards Weighted- Weighted- average average Grant- Grant- date date Number Fair Value Number Fair Value of Shares Per Share of RSUs Per RSU Nonvested Balance at Beginning of the Year 29,448 $ 33.77 85,048 $ 36.84 Granted — — 118,622 31.48 Vested (12,098) 32.32 (26,006) 33.01 Forfeited (1,350) 35.75 (19,303) 36.03 Nonvested Balance at December 31, 2016 16,000 $ 34.69 158,361 $ 33.56

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Activity related to nonvested performance-based restricted stock and nonvested performance- based RSU awards for the year ended December 31, 2016 is presented below.

Performance-based Restricted Stock Performance-based Awards RSU Awards Weighted- Weighted- average average Grant- Grant- date date Number Fair Value Number Fair Value of Shares Per Share of RSUs Per RSU

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Nonvested Balance at Beginning of the Year 51,400 $ 42.12 128,100 $ 41.85 Granted — — 146,788 29.62 Forfeited (51,400) 42.12 (47,304) 39.04 Nonvested Balance at December 31, 2016 — $ — 227,584 $ 34.55

NOTE 10. LONG-TERM EQUITY-BASED COMPENSATION (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Half of the performance-based RSUs granted in 2016 are measured solely using a Company- specific metric. Final payout for these awards, and any forfeitures of shares for performance below the “target” performance level, will be determined based on Kemper’s adjusted return on equity over a three-year performance period ending on December 31, 2018. Fair value for these awards was determined using the closing price of Kemper common stock on the date of grant. Accruals of compensation cost for these awards are estimated based on the probable outcome of the performance condition.

Activity related to DSU awards for the year ended December 31, 2016 is presented below.

Weighted- average Grant-date Number Fair Value of DSUs Per DSU Vested Balance at Beginning of the Year 7,000 $ 36.17 Granted and Vested 14,520 31.00 Vested Balance at December 31, 2016 21,520 $ 32.68

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income From Continuing 12 Months Ended Operations Per Unrestricted Dec. 31, 2016 Share Earnings Per Share [Abstract] Income from Continuing NOTE 11. INCOME FROM CONTINUING OPERATIONS PER UNRESTRICTED Operations Per Unrestricted SHARE Share The Company’s awards of restricted stock contain rights to receive non-forfeitable dividends and participate in the undistributed earnings with common shareholders. The Company’s awards of RSUs and DSUs contain rights to receive non-forfeitable dividend equivalents and participate in the undistributed earnings with common shareholders. Accordingly, the Company is required to apply the two-class method of computing basic and diluted earnings per share. A reconciliation of the numerator and denominator used in the calculation of Basic Income from Continuing Operations Per Unrestricted Share and Diluted Income from Continuing Operations Per Unrestricted Share for the years ended December 31, 2016, 2015 and 2014 is presented below.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Comprehensive 12 Months Ended Income (Loss) And Accumulated Other Dec. 31, 2016 Comprehensive Income Equity [Abstract] Other Comprehensive Income (Loss) and NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS) AND Accumulated Other Comprehensive Income ACCUMULATED OTHER COMPREHENSIVE INCOME The components of Other Comprehensive Income (Loss) Before Income Taxes for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Other Comprehensive Income (Loss) Before Income Taxes: Unrealized Holding Gains (Losses) Arising During the Year Before Reclassification Adjustment $ (2.4) $(151.9) $ 259.7 Reclassification Adjustment for Amounts Included in Net Income 0.2 (25.4) (25.1) Unrealized Holding Gains (Losses) (2.2) (177.3) 234.6 Foreign Currency Translation Adjustments Arising During the Year Before Reclassification Adjustment (0.3) (1.4) (1.0) Reclassification Adjustment for Amounts Included in Net Income — — — Foreign Currency Translation Adjustments (0.3) (1.4) (1.0) Net Unrecognized Postretirement Benefit Costs Arising During the Year 14.2 3.0 (106.4) Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized 1.0 — — Amortization of Net Unrecognized Postretirement Benefit Costs 5.3 23.1 7.9 Total Reclassification Adjustments for Amounts Included in Net Income 6.3 23.1 7.9 Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Gains (Losses) on Cash Flow Hedge During the Year Before Reclassification Adjustment 1.6 — — Reclassification Adjustment for Amounts Included in Net Income — — — Gain on Cash Flow Hedge 1.6 — — Other Comprehensive Income (Loss) Before Income Taxes $ 19.6 $(152.6) $ 135.1

NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)

The components of Other Comprehensive Income Tax Benefit (Expense) for the years ended December 31, 2016, 2015 and 2014 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document DOLLARS IN MILLIONS 2016 2015 2014 Income Tax Benefit (Expense): Unrealized Holding Gains and Losses Arising During the Year Before Reclassification Adjustment $ 1.0 $ 53.9 $(91.6) Reclassification Adjustment for Amounts Included in Net Income (0.1) 8.9 8.8 Unrealized Holding Gains and Losses 0.9 62.8 (82.8) Foreign Currency Translation Adjustments Arising During the Year Before Reclassification Adjustment 0.1 0.5 0.4 Reclassification Adjustment for Amounts Included in Net Income — — — Foreign Currency Translation Adjustment 0.1 0.5 0.4 Net Unrecognized Postretirement Benefit Costs Arising During the Year (5.0) (1.1) 37.5 Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized (0.4) — — Amortization of Net Unrecognized Postretirement Benefit Costs (1.9) (8.0) (2.8) Total Reclassification Adjustments for Amounts Included in Net Income (2.3) (8.0) (2.8) Net Unrecognized Postretirement Benefit Costs (7.3) (9.1) 34.7 Gain on Cash Flow Hedge During the Year Before Reclassification Adjustment (0.6) — — Reclassification Adjustment for Amounts Included in Net Income — — — Gain on Cash Flow Hedge (0.6) — — Other Comprehensive Income Tax Benefit (Expense) $ (6.9) $ 54.2 $(47.7)

The components of AOCI at December 31, 2016 and 2015 were:

NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Components of AOCI were reclassified to the following lines of the Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Income From Investments Dec. 31, 2016 Investment Income, Net [Abstract] Income From Investments NOTE 13. INCOME FROM INVESTMENTS Net Investment Income for the years ended December 31, 2016, 2015 and 2014 was:

Other Receivables includes accrued investment income of $70.8 million and $68.5 million at December 31, 2016 and 2015, respectively.

NOTE 13. INCOME FROM INVESTMENTS (Continued)

The components of Net Realized Gains on Sales of Investments for the years ended December 31, 2016, 2015 and 2014 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Losses on Sales — (0.2) (0.2) Other Investments: Gain on Sale of Subsidiary — — 1.6 Losses on Sales (0.2) — (0.1) Net Gains (Losses) on Trading Securities 0.2 (0.3) (0.1) Net Realized Gains on Sales of Investments $ 33.1 $ 52.1 $ 39.1 Gross Gains on Sales $ 38.0 $ 55.3 $ 41.7 Gross Losses on Sales (5.1) (2.9) (2.5) Net Gains (Losses) on Trading Securities 0.2 (0.3) (0.1) Net Realized Gains on Sales of Investments $ 33.1 $ 52.1 $ 39.1

The components of Net Impairment Losses Recognized in Earnings reported in the Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Insurance Expenses Dec. 31, 2016 Insurance Expenses [Abstract] Insurance Expenses NOTE 14. INSURANCE EXPENSES Insurance Expenses for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Commissions $ 399.2 $ 357.6 $ 324.6 General Expenses 209.0 241.1 258.1 Taxes, Licenses and Fees 48.8 44.2 38.9 Total Costs Incurred 657.0 642.9 621.6 Policy Acquisition Costs: Deferred (314.9) (270.6) (235.8) Amortized 299.3 257.4 235.4 Net Policy Acquisition Costs Deferred (15.6) (13.2) (0.4) Life VIF, P&C VIF and P&C Customer Relationships Amortized 5.9 15.4 7.2 Insurance Expenses $ 647.3 $ 645.1 $ 628.4

Commissions for servicing policies are expensed as incurred, rather than deferred and amortized.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Income Taxes Dec. 31, 2016 Income Tax Disclosure [Abstract] Income Taxes NOTE 15. INCOME TAXES The tax effects of temporary differences that give rise to significant portions of the Company’s Net Deferred Income Tax Assets and Deferred Income Tax Liabilities at December 31, 2016 and 2015 were:

The expiration of federal net operating loss (“NOL”) carryforwards and their related deferred income tax assets at December 31, 2016 is presented below by year of expiration.

NOL Carry- Deferred DOLLARS IN MILLIONS forwards Tax Asset Expiring in: 2020 $ 7.8 $ 2.7 2021 through 2025 30.5 10.7 2026 through 2030 29.9 10.5 2031 through 2036 81.0 28.3 Total All Years $ 149.2 $ 52.2

The Company has not provided for Federal income taxes on $14.7 million of Mutual Savings Life’s income earned prior to 1984 which is not subject to income taxes under certain

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document circumstances. Federal income taxes of $5.1 million would be paid on such income if it is distributed to shareholders in the future or if it does not continue to meet certain limitations.

A reconciliation of the beginning and ending amount of Unrecognized Tax Benefits for the years ended December 31, 2016, 2015 and 2014 is presented below.

DOLLARS IN MILLIONS 2016 2015 2014 Liabilities for Unrecognized Tax Benefits at Beginning of Year $ 3.8 $ 7.2 $ 6.8 Additions for Tax Positions of Current Period 1.5 0.2 0.1 Additions for Tax Positions of Prior Years — — 0.3 Reduction for Expiration of Federal Statute of Limitations (0.2) (3.6) — Liabilities for Unrecognized Tax Benefits at End of Year $ 5.1 $ 3.8 $ 7.2

NOTE 15. INCOME TAXES (Continued)

The components of Income Tax Expense from Continuing Operations for the years ended December 31, 2016, 2015 and 2014 were:

Income tax refunds received, net of income taxes paid, were $0.5 million in 2016. Net income taxes paid were $44.4 million and $37.2 million in 2015 and 2014, respectively.

2016 2015 2014 DOLLARS IN MILLIONS Amount Rate Amount Rate Amount Rate Statutory Federal Income Tax Expense $ (1.2) 35.0 % $ (35.1) 35.0 % $ (56.1) 35.0 %

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Tax-exempt Income and Dividends Received Deduction 9.8 (279.5) 9.8 (9.7) 9.0 (5.6) Unrecognized Tax Benefit (Expense) — — 2.1 (2.1) (0.3) — Indemnification Recoveries 0.2 (6.5) 3.7 (3.6) — — State Income Taxes (0.6) 16.9 (0.6) 0.5 (0.6) 0.4 Other, Net 1.0 (28.9) — — 0.4 (0.1) Effective Income Tax Benefit (Expense) from Continuing Operations $ 9.2 (263.0)% $ (20.1) 20.1 % $ (47.6) 29.7 %

NOTE 15. INCOME TAXES (Continued)

Comprehensive Income Tax Benefit (Expense) included in the Consolidated Financial Statements for the years ended December 31, 2016, 2015 and 2014 was:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Pension Benefits Dec. 31, 2016 Compensation and Retirement Disclosure [Abstract] Pension Benefits NOTE 16. PENSION BENEFITS The Company sponsors a qualified defined benefit pension plan (the “Pension Plan”). The Pension Plan covers approximately 9,200 participants and beneficiaries, of which 1,800 are active employees. The Pension Plan is closed to new employees hired after January 1, 2006. The Pension Plan is generally non-contributory, but participation requires or required some employees to contribute 3% of pay, as defined, per year. Benefits for participants who are or were required to contribute to the Pension Plan are based on compensation during plan participation and the number of years of participation. Benefits for the vast majority of participants who are not required to contribute to the Pension Plan are based on years of service and final average pay, as defined. The Company funds the Pension Plan in accordance with the requirements of ERISA.

NOTE 16. PENSION BENEFITS (Continued)

Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Pension Plan for the years ended December 31, 2016 and 2015 is presented below.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Unamortized Amount Reported in AOCI at End of Year $(144.7) $(151.8) Accumulated Benefit Obligation at End of Year $ 593.5 $ 573.9

2016 2015 Discount Rate 4.18% 4.47% Rate of Increase in Future Compensation Levels 2.56 3.15

Weighted-average asset allocations for the Pension Plan at December 31, 2016 and 2015 by asset category were:

ASSET CATEGORY 2016 2015 Cash and Short-term Investments 2% 4% Corporate Bonds and Notes 31 28 Common and Preferred Stocks 48 43 Exchange Traded Funds 1 9 Other Assets 18 16 Total 100% 100%

The investment objective of the Pension Plan is to produce current income and long-term capital growth through a combination of equity and fixed income investments which, together with appropriate employer contributions and any required employee contributions, is adequate to provide for the payment of the benefit obligations of the Pension Plan. The assets of the Pension Plan may be invested in fixed income and equity investments or any other investment vehicle or financial instrument deemed appropriate. Fixed income investments may include cash and short- term instruments, U.S. Government securities, corporate bonds, mortgages and other fixed income investments. Equity investments may include various types of stock, such as large-cap, mid-cap and small-cap stocks, and may also include investments in investment companies, collective investment funds and Kemper common stock (subject to Section 407 and other requirements of ERISA). The Pension Plan has not invested in Kemper common stock.

NOTE 16. PENSION BENEFITS (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair value measurements for the Pension Plan’s assets at December 31, 2016 are summarized below.

Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Measured Assets Inputs Inputs at Net DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 21.2 $ 8.6 $ — $ — $ 29.8 States and Political Subdivisions — 3.1 — — 3.1 Corporate Bonds and Notes — 126.4 — — 126.4 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 6.2 — — 6.2 Common Stocks: Manufacturing 77.5 16.0 — — 93.5 Other Industries 88.1 — — — 88.1 Other Equity Interests: Collective Investment Funds — — — 60.7 60.7 Exchange Traded Funds 6.0 — — — 6.0 Limited Liability Companies and Limited Partnerships — — — 93.5 93.5 Short-term Investments 11.8 — — — 11.8 Receivables and Other 1.4 — 0.4 — 1.8 Total $ 206.0 $ 160.3 $ 0.4 $ 154.2 $ 520.9

NOTE 16. PENSION BENEFITS (Continued)

Fair value measurements for the Pension Plan’s assets at December 31, 2015 are summarized below.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document States and Political Subdivisions — 3.2 — — 3.2 Corporate Bonds and Notes — 122.2 — — 122.2 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 6.1 — — 6.1 Common Stocks: Manufacturing 77.9 16.2 — — 94.1 Other Industries 82.5 1.8 — — 84.3 Other Equity Interests: Collective Investment Funds — — — 31.1 31.1 Exchange Traded Funds 47.2 — — — 47.2 Limited Liability Companies and Limited Partnerships — — — 78.2 78.2 Short-term Investments 20.4 — — — 20.4 Receivables and Other 1.1 — 0.4 — 1.5 Total $ 248.3 $ 149.5 $ 0.4 $ 109.3 $ 507.5

The components of Comprehensive Pension Expense (Income) for the Pension Plan for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Service Cost Earned During the Year $ 4.8 $ 10.5 $ 8.7 Interest Cost on Projected Benefit Obligation 20.1 25.7 24.8 Expected Return on Plan Assets (32.7) (35.0) (34.9) Amortization of Actuarial Loss 6.6 24.4 9.7 Curtailment Gain (0.3) — — Pension Expense (Income) Recognized in Consolidated Statements of Income (1.5) 25.6 8.3 Unrecognized Pension Loss (Gain) Arising During the Year (0.7) (1.9) 102.0 Prior Service Credit Arising During the Year — — (0.6)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Amortization of Accumulated Unrecognized Pension Loss (6.3) (24.4) (9.7) Comprehensive Pension Expense (Income) $ (8.5) $ (0.7) $ 100.0

NOTE 16. PENSION BENEFITS (Continued)

Years Ended December 31, 5/13/16 to 1/1/16 to 12/31/16 5/12/16 2015 2014 Weighted-average Discount Rate 3.94% 4.47% 4.10% 4.90% Service Cost Discount Rate 4.22 4.78 — — Interest Cost Discount Rate 3.18 3.69 — — Rate of Increase in Future Compensation Levels 3.15 3.15 3.31 3.05 Expected Long Term Rate of Return on Plan Assets 6.25 6.25 6.75 7.00

Years Ending December 31, DOLLARS IN MILLIONS 2017 2018 2019 2020 2021 2022-2026 Estimated Pension Benefit Payments $ 27.6 $ 28.8 $ 29.9 $ 30.9 $ 31.9 $ 170.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document unamortized prior service costs in the Supplemental Plan. The curtailment reduced the Projected Benefit Obligation by $5.2 million at the re-measurement date. Accordingly, a curtailment gain of $3.6 million before tax was recorded to recognize the reduction in the Projected Benefit Obligation that exceeded the accumulated unrecognized pension loss prior to the freeze.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Postretirement Benefits 12 Months Ended Other Than Pensions Dec. 31, 2016 Other Postretirement Benefit Plan, Defined Benefit [Member] Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] Postemployment Benefits NOTE 17. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Other Than Pensions The Company sponsors an other than pension postretirement employee benefit plan (“OPEB”) that provides medical, dental and/or life insurance benefits to approximately 500 retired and 225 active employees (the “OPEB Plan”). The Company has historically self-insured the benefits under the OPEB Plan. The medical plan generally provides for a limited number of years of medical insurance benefits at retirement based on the participant’s attained age at retirement and number of years of service until specified dates and generally has required participant contributions, with most contributions adjusted annually. On December 30, 2016, the Company amended the OPEB Plan and, effective December 31, 2016, will no longer offer coverage to post-65 Medicare-eligible retirees and Medicare-eligible spouses under the self-insured portion of its coverage. Rather, beginning on January 1, 2017, the OPEB Plan will offer access to a private, third-party Medicare exchange and will provide varying levels of a Company-determined subsidy via health reimbursement accounts to certain Medicare-eligible retirees and spouses in order to help fund a portion of the participants’ cost. Further, the amendment eliminates the requirement for such participants to contribute to the OPEB Plan. In conjunction with the amendment, the Company recorded a pre-tax reduction to its Accumulated Postretirement Benefit Obligation of $11.0 million through Other Comprehensive Income. This prior service credit will be amortized into income over the remaining average life of the OPEB Plan’s participants.

Changes in Fair Value of Plan Assets and Changes in Accumulated Postretirement Benefit Obligation for the years ended December 31, 2016 and 2015 were:

The measurement dates of the assets and liabilities at end of year in the preceding table under the headings “2016” and “2015” were December 31, 2016 and December 31, 2015, respectively.

2016 2015 Discount Rate 3.60% 3.70% Rate of Increase in Future Compensation Levels 2.60 2.64

The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, 2016 was 6.75% for 2017, gradually declining to 5.0% in the year 2024 and remaining at that level thereafter for medical benefits and 10.25% for 2017, gradually declining to 5.0% in the year 2024 and remaining at that level thereafter for prescription drug benefits. The assumed health care cost trend rate used in measuring the Accumulated Postretirement Benefit Obligation at December 31, 2015 was 7.0% for 2016, gradually declining to 5.0% in the year 2024 and remaining at that level thereafter for medical benefits and 11.0% for 2016, gradually declining to 5.0% in the year 2024 and remaining at that level thereafter for prescription drug benefits.

NOTE 17. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued)

A one-percentage point increase in the assumed health care cost trend rate for each year would have increased the Accumulated Postretirement Benefit Obligation at December 31, 2016 by $0.6 million and 2016 OPEB expense by an insignificant amount. A one-percentage point increase in the assumed health care cost trend rate for each year would have increased the Accumulated Postretirement Benefit Obligation at December 31, 2015 by $1.5 million and 2015 OPEB expense by $0.1 million.

The components of Comprehensive OPEB Expense (Income) for the years ended December 31, 2016, 2015 and 2014 were:

Effective January 1, 2016, the Company changed its method for estimating the interest and service cost components of expense recognized for its pension and other postretirement employee

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document benefit plans. As a result, the Company elected to use a full yield curve approach to estimate these components of benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. See Note 2, “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial Statements for further discussion of the change. The weighted-average discount rate and rate of increase in future compensation levels used to develop OPEB Expense for the years ended December 31, 2016, 2015 and 2014 were:

The Company expects to contribute $1.8 million, net of the expected Medicare Part D subsidy, to its OPEB Plan to fund benefit payments in 2017.

The following benefit payments (net of participant contributions), which consider expected future service, as appropriate, are expected to be paid:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Business Segments Dec. 31, 2016 Segment Reporting [Abstract] Business Segments NOTE 18. BUSINESS SEGMENTS The Company is engaged, through its subsidiaries, in the property and casualty insurance and life and health insurance businesses. The Company conducts its operations through two operating segments: Property & Casualty Insurance and Life & Health Insurance.

Segment Assets at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Property & Casualty Insurance $2,815.1 $2,749.0 Life & Health Insurance 4,888.7 4,733.9 Corporate and Other, Net 506.7 553.2 Total Assets $8,210.5 $8,036.1

Earned Premiums by product line for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Personal Automobile $1,244.6 $1,027.7 $ 831.4 Homeowners 271.9 286.3 312.4 Other Personal Property and Casualty Insurance 119.2 122.1 127.4 Commercial Automobile 53.3 54.5 54.8 Life 381.6 374.1 387.6 Accident and Health 149.4 144.9 148.6 Total Earned Premiums $2,220.0 $2,009.6 $1,862.2

NOTE 18. BUSINESS SEGMENTS (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Segment Revenues, including a reconciliation to Total Revenues, for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Segment Revenues: Property & Casualty Insurance: Earned Premiums $1,614.8 $1,415.2 $1,249.5 Net Investment Income 72.4 73.3 72.7 Other Income 0.5 0.6 0.5 Total Property & Casualty Insurance 1,687.7 1,489.1 1,322.7 Life & Health Insurance: Earned Premiums 605.2 594.4 612.7 Net Investment Income 213.2 214.2 218.7 Other Income 2.8 2.4 0.9 Total Life & Health Insurance 821.2 811.0 832.3 Total Segment Revenues 2,508.9 2,300.1 2,155.0 Net Realized Gains on the Sales of Investments 33.1 52.1 39.1 Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) Other 12.6 15.8 17.7 Total Revenues $2,521.9 $2,340.8 $2,196.6

Segment Operating Profit, including a reconciliation to Income from Continuing Operations before Income Taxes, for the years ended December 31, 2016, 2015 and 2014 was:

Segment Net Operating Income, including a reconciliation to Income from Continuing Operations, for the years ended December 31, 2016, 2015 and 2014 was:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Net Realized Gains on Sales of Investments 21.5 33.9 25.4 Net Impairment Losses Recognized in Earnings (21.2) (17.7) (9.9) Loss from Early Extinguishment of Debt — (5.9) — Income from Continuing Operations $ 12.7 $ 80.2 $ 112.6

NOTE 18. BUSINESS SEGMENTS (Continued)

Amortization of Deferred Policy Acquisition Costs by Operating Segment for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance $ 252.1 $ 213.1 $ 187.5 Life & Health Insurance 47.2 44.3 47.9 Total Amortization $ 299.3 $ 257.4 $ 235.4

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Discontinued Operations Dec. 31, 2016 Discontinued Operations and Disposal Groups [Abstract] Discontinued Operations NOTE 19. DISCONTINUED OPERATIONS The Company accounts for its former Unitrin Business Insurance operations as discontinued operations.

Summary financial information included in Income from Discontinued Operations for the years ended December 31, 2016, 2015 and 2014 is presented below.

Income from Discontinued Operations Per Unrestricted Share: Basic $ 0.08 $ 0.10 $ 0.04 Diluted $ 0.08 $ 0.10 $ 0.04

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Catastrophe Reinsurance Dec. 31, 2016 Reinsurance Disclosures [Abstract] Catastrophe Reinsurance NOTE 20. CATASTROPHE REINSURANCE Catastrophes and natural disasters are inherent risks of the property and casualty insurance business. These catastrophic events and natural disasters include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds and winter storms. Such events result in insured losses that are, and will continue to be, a material factor in the results of operations and financial position of the Company’s property and casualty insurance companies. Further, because the level of these insured losses occurring in any one year cannot be accurately predicted, these losses may contribute to material year-to-year fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more likely to occur at certain times within the year than others. This factor adds an element of seasonality to property and casualty insurance claims. The Company has adopted the industry-wide catastrophe classifications of storms and other events promulgated by ISO to track and report losses related to catastrophes. ISO classifies a disaster as a catastrophe when the event causes $25.0 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. The discussions that follow utilize ISO’s definition of catastrophes.

The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in certain regions, and reinsurance. To limit its exposures to catastrophic events, the Company maintains various catastrophe reinsurance programs for its property and casualty insurance businesses.

NOTE 20. CATASTROPHE REINSURANCE (Continued)

Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2016 to December 31, 2016 is provided in various layers as presented below.

Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2015 to December 31, 2015 is provided in various layers as presented below.

Catastrophe Losses and LAE Percentage DOLLARS IN MILLIONS In Excess of Up to of Coverage Retained $ — $ 50.0 —% 1st Layer of Coverage 50.0 150.0 95.0 2nd Layer of Coverage 150.0 350.0 95.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2014 to December 31, 2014 is provided in various layers as presented below.

NOTE 20. CATASTROPHE REINSURANCE (Continued)

Reinsurance premiums for the Company’s primary catastrophe reinsurance programs and the FHCF Program reduced earned premiums for the years ended December 31, 2016, 2015 and 2014 by the following:

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance $ 11.9 $ 12.8 $ 17.6 Life & Health Insurance 0.1 0.1 0.1 Total Ceded Catastrophe Reinsurance Premiums $ 12.0 $ 12.9 $ 17.7

Catastrophe losses and LAE (including reserve development), net of reinsurance recoveries, for the years ended December 31, 2016, 2015 and 2014 by business segment are presented below.

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance $ 90.4 $ 56.6 $ 80.7 Life & Health Insurance 5.4 3.9 3.1 Total Catastrophe Losses and LAE $ 95.8 $ 60.5 $ 83.8

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document adverse catastrophe reserve development of $0.1 million in 2015 and adverse catastrophe reserve development of $1.1 million in 2014.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Other Reinsurance Dec. 31, 2016 Reinsurance Disclosures [Abstract] Other Reinsurance NOTE 21. OTHER REINSURANCE In addition to the reinsurance programs described in Note 20, “Catastrophe Reinsurance,” to the Consolidated Financial Statements, Kemper’s insurance subsidiaries utilize other reinsurance arrangements to limit their maximum loss, provide greater diversification of risk and to minimize exposures on larger risks. The ceding of insurance does not discharge the primary liability of the original insurer. Accordingly, insurance reserve liabilities are reported gross of any estimated recovery from reinsurers in the Consolidated Balance Sheets. Amounts recoverable from reinsurers are estimated in a manner consistent with the insurance reserve liability and are included in Other Receivables in the Consolidated Balance Sheets.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Fair Value Measurements Dec. 31, 2016 Fair Value Disclosures [Abstract] Fair Value Measurements NOTE 22. FAIR VALUE MEASUREMENTS The Company classifies its Investments in Fixed Maturities and Equity Securities as available for sale and reports these investments at fair value. The Company has elected the fair value option method of accounting for investments in certain hedge funds and, accordingly, reports these investments at fair value. The Company classifies certain investments in mutual funds included in Other Investments as trading securities and reports these investments at fair value. The Company has a derivative instrument that is classified as a cash flow hedge and reported in Other Assets at fair value at December 31, 2016. The Company has no material liabilities that are measured and reported at fair value.

The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2016 is summarized below.

Fair Value Measurements Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Measured at DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Net Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 119.5 $ 216.8 $ — — $ 336.3 States and Political Subdivisions — 1,711.1 3.8 — 1,714.9 Foreign Governments — 3.4 — — 3.4 Corporate Securities: Bonds and Notes — 2,541.6 403.2 — 2,944.8 Redeemable Preferred Stocks — — 0.6 — 0.6 Collateralized Loan Obligations — 19.3 103.5 — 122.8 Other Mortgage- and Asset-backed — 2.1 — — 2.1 Total Investments in Fixed Maturities 119.5 4,494.3 511.1 — 5,124.9 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 59.6 — — 59.6 Other Industries — 11.4 11.5 — 22.9 Common Stocks: Finance, Insurance and Real Estate 26.4 — 7.1 — 33.5 Other Industries 0.4 0.2 11.1 — 11.7 Other Equity Interests: Exchange Traded Funds 144.4 — — — 144.4 Limited Liability Companies and Limited Partnerships — — 40.9 168.7 209.6 Total Investments in Equity Securities 171.2 71.2 70.6 168.7 481.7 Fair Value Option Investments:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Limited Liability Companies and Limited Partnerships Hedge Funds — — — 111.4 111.4 Other Investments: Trading Securities 5.3 — — — 5.3 Other Assets: Derivative Instrument Classified as Cash Flow Hedge — 1.6 — — 1.6 Total $ 296.0 $ 4,567.1 $ 581.7 $ 280.1 $ 5,724.9

NOTE 22. FAIR VALUE MEASUREMENTS (Continued)

The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2015 is summarized below.

Fair Value Measurements Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Measured at DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Net Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 124.9 $ 195.7 $ — $ — $ 320.6 States and Political Subdivisions — 1,622.6 — — 1,622.6 Corporate Securities: Bonds and Notes — 2,376.5 436.3 — 2,812.8 Redeemable Preferred Stocks — — 3.8 — 3.8 Collateralized Loan Obligations — — 87.3 — 87.3 Other Mortgage- and Asset-backed — 1.4 3.8 — 5.2 Total Investments in Fixed Maturities 124.9 4,196.2 531.2 — 4,852.3 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 79.8 5.1 — 84.9 Other Industries — 6.2 12.8 — 19.0 Common Stocks: Finance, Insurance and Real Estate 16.6 6.6 — — 23.2 Other Industries 0.6 0.8 12.1 — 13.5 Other Equity Interests: Exchange Traded Funds 177.1 — — — 177.1 Limited Liability Companies and Limited Partnerships — — 45.6 159.9 205.5 Total Investments in Equity Securities 194.3 93.4 75.6 159.9 523.2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value Option Investments: Limited Liability Companies and Limited Partnerships Hedge Funds — — — 164.5 164.5 Other Investments: Trading Securities 4.7 — — — 4.7 Total $ 323.9 $ 4,289.6 $ 606.8 324.4 $ 5,544.7

Weighted Unobservable Total Range of Unobservable Average DOLLARS IN MILLIONS Input Fair Value Inputs Yield

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Market Investment-grade Yield $ 106.1 2.7% - 5.1% 3.8% Non-investment-grade: Market Senior Debt Yield 142.2 4.8 - 14.0 9.6 Market Junior Debt Yield 143.3 9.5 - 20.0 13.0 Market Collateralized Loan Obligations Yield 103.5 3.7 - 9.9 6.3 Other Various 16.0 Total Fixed Maturity Investments in Corporate Securities $ 511.1

NOTE 22. FAIR VALUE MEASUREMENTS (Continued)

Weighted Unobservable Total Range of Unobservable Average DOLLARS IN MILLIONS Input Fair Value Inputs Yield Market Investment-grade Yield $ 98.7 2.6% - 6.9% 4.4% Non-investment-grade: Market Senior Debt Yield 114.2 5.9 - 15.3 10.4 Market Junior Debt Yield 216.3 8.2 - 26.2 13.6 Market Collateralized Loan Obligations Yield 87.3 3.1 - 10.8 6.1 Other Various 14.7 Total Fixed Maturity Investments in Corporate Securities $ 531.2

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the year ended December 31, 2016 is presented below.

Fixed Maturities Equity Securities States Corporate and Other Preferred Bonds Political Redeemable Collateralized Mortgage- and Other DOLLARS IN and Sub- Preferred Loan and Asset- Common Equity MILLIONS Notes divisions Stocks Obligations backed Stocks Interests Total Balance at Beginning of Year $ 436.3 $ — $ 3.8 $ 87.3 $ 3.8 $ 30.0 $ 45.6 $606.8

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total Gains (Losses): Included in Consolidated Statements of Income (23.0) (0.3) — — 0.4 (1.7) (1.6) (26.2) Included in Other Comprehensive Income 0.9 — — 4.3 (0.3) 3.4 (2.4) 5.9 Purchases 203.7 — — 29.1 — 7.9 3.9 244.6 Settlements (85.4) — (3.2) (5.0) (3.0) (5.2) — (101.8) Sales (114.5) — — (1.9) — (4.7) (4.6) (125.7) Transfers into Level 3 — 4.1 — — — — — 4.1 Transfers out of Level 3 (14.8) — — (10.3) (0.9) — — (26.0) Balance at End of Year $ 403.2 $ 3.8 $ 0.6 $ 103.5 $ — $ 29.7 $ 40.9 $581.7

NOTE 22. FAIR VALUE MEASUREMENTS (Continued)

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the year ended December 31, 2015 is presented below.

The Company’s policy is to recognize transfers between levels as of the end of the reporting period. There were no transfers between Levels 1 and 2 or Levels 1 and 3 for the year ended December 31, 2015. The transfers out of Level 3 for the year ended December 31, 2015 were due to changes in the availability of market observable inputs.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Contingencies Dec. 31, 2016 Commitments and Contingencies Disclosure [Abstract] Contingencies NOTE 23. CONTINGENCIES In the ordinary course of its businesses, the Company is involved in legal proceedings, including lawsuits, regulatory examinations, audits and inquiries. Except with regard to the matters discussed below, based on currently available information, the Company does not believe that it is reasonably possible that any of its pending legal proceedings will have a material effect on the Company’s consolidated financial statements.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Related Parties Dec. 31, 2016 Related Party Transactions [Abstract] Related Parties NOTE 24. RELATED PARTIES Mr. Christopher B. Sarofim, a director of Kemper, is Vice Chairman and a member of the board of directors of Fayez Sarofim & Co. (“FS&C”), a registered investment advisory firm. FS&C provided investment management services with respect to certain assets of Kemper’s subsidiary, Trinity, under an agreement between the parties. Trinity had $85.8 million in assets managed by FS&C at December 31, 2014. In 2014, Trinity began reducing the amount of assets managed by FS&C. Trinity completed the disposal of all the assets managed by FS&C in 2015. Investment Expenses incurred in connection with such agreement were $0.1 million and $0.3 million for the years ended December 31, 2015, and 2014, respectively.

The Company believes that the transactions described above have been provided on terms no less favorable to the Company than could have been negotiated with non-affiliated third parties.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Quarterly Financial 12 Months Ended Information Dec. 31, 2016 Quarterly Financial Data [Abstract] Quarterly Financial NOTE 25. QUARTERLY FINANCIAL INFORMATION (Unaudited)

Information Year Three Months Ended (Unaudited) Ended DOLLARS IN MILLIONS, EXCEPT PER SHARE Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, AMOUNTS 2016 2016 2016 2016 2016 Revenues: Earned Premiums $ 546.0 $ 553.7 $ 558.9 $ 561.4 $2,220.0 Net Investment Income 67.0 73.7 77.7 79.9 298.3 Other Income 0.8 0.6 0.8 1.0 3.2 Net Realized Gains on Sales of Investments 6.8 5.6 11.6 9.1 33.1 Other-than-temporary Impairment Losses: Total Other-than-temporary Impairment Losses (9.6) (6.4) (8.3) (8.7) (33.0) Portion of Losses Recognized in Other Comprehensive Income 0.3 — — — 0.3 Net Impairment Losses Recognized in Earnings (9.3) (6.4) (8.3) (8.7) (32.7) Total Revenues 611.3 627.2 640.7 642.7 2,521.9 Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses 436.2 436.1 490.2 418.3 1,780.8 Insurance Expenses 159.3 167.8 161.7 158.5 647.3 Interest and Other Expenses 22.3 20.7 22.0 25.3 90.3 Total Expenses 617.8 624.6 673.9 602.1 2,518.4 Income (Loss) from Continuing Operations before Income Taxes (6.5) 2.6 (33.2) 40.6 3.5 Income Tax Benefit (Expense) 4.3 1.5 14.9 (11.5) 9.2 Income (Loss) from Continuing Operations (2.2) 4.1 (18.3) 29.1 12.7 Income (Loss) from Discontinued Operations 0.1 (0.1) 2.0 2.1 4.1 Net Income (Loss) $ (2.1) $ 4.0 $ (16.3) $ 31.2 $ 16.8 Income (Loss) from Continuing Operations Per Unrestricted Share: Basic $ (0.04) $ 0.08 $ (0.36) $ 0.56 $ 0.25 Diluted $ (0.04) $ 0.08 $ (0.36) $ 0.56 $ 0.25 Net Income (Loss) Per Unrestricted Share: Basic $ (0.04) $ 0.08 $ (0.32) $ 0.60 $ 0.33 Diluted $ (0.04) $ 0.08 $ (0.32) $ 0.60 $ 0.33 Dividends Paid to Shareholders Per Share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The sum of quarterly per share amounts may not equal per share amounts for the year due to differences in weighted- average shares and/or equivalent shares outstanding for each of the periods presented.

NOTE 25. QUARTERLY FINANCIAL INFORMATION (Unaudited) (Continued)

Year Three Months Ended (Unaudited) Ended DOLLARS IN MILLIONS, EXCEPT PER SHARE Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, AMOUNTS 2015 2015 2015 2015 2015 Revenues: Earned Premiums $ 431.3 $ 500.1 $ 536.7 $ 541.5 $2,009.6 Net Investment Income 70.6 76.7 75.9 79.4 302.6 Other Income 0.9 0.6 0.8 1.4 3.7 Net Realized Gains on Sales of Investments 3.4 34.0 5.3 9.4 52.1 Other-than-temporary Impairment Losses: Total Other-than-temporary Impairment Losses (7.0) (2.2) (3.3) (14.9) (27.4) Portion of Losses Recognized in Other Comprehensive Income — — — 0.2 0.2 Net Impairment Losses Recognized in Earnings (7.0) (2.2) (3.3) (14.7) (27.2) Total Revenues 499.2 609.2 615.4 617.0 2,340.8 Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses 297.7 375.1 378.8 416.0 1,467.6 Insurance Expenses 144.9 162.1 161.1 177.0 645.1 Write-off Long-lived Asset — 11.1 — — 11.1 Loss from Early Extinguishment of Debt 9.1 — — — 9.1 Interest and Other Expenses 29.7 26.6 25.7 25.6 107.6 Total Expenses 481.4 574.9 565.6 618.6 2,240.5 Income (Loss) from Continuing Operations before Income Taxes 17.8 34.3 49.8 (1.6) 100.3 Income Tax Benefit (Expense) (4.3) (6.9) (11.8) 2.9 (20.1) Income from Continuing Operations 13.5 27.4 38.0 1.3 80.2 Income (Loss) from Discontinued Operations — 2.3 (0.1) 3.3 5.5 Net Income $ 13.5 $ 29.7 $ 37.9 $ 4.6 $ 85.7 Income from Continuing Operations Per Unrestricted Share: Basic $ 0.26 $ 0.53 $ 0.73 $ 0.03 $ 1.55 Diluted $ 0.26 $ 0.53 $ 0.73 $ 0.03 $ 1.55 Net Income Per Unrestricted Share: Basic $ 0.26 $ 0.57 $ 0.73 $ 0.09 $ 1.65 Diluted $ 0.26 $ 0.57 $ 0.73 $ 0.09 $ 1.65 Dividends Paid to Shareholders Per Share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 1 - Investments 12 Months Ended Other Than Investments in Dec. 31, 2016 Related Parties Summary of Investments, Other than Investments in Related Parties [Abstract] Schedule of Investments Other than Investments SCHEDULE I in Related Parties KEMPER CORPORATION AND SUBSIDIARIES INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES DECEMBER 31, 2016 (Dollars in Millions)

Amount Amortized Carried in Cost Fair Value Balance Sheet Fixed Maturities: Bonds and Notes: United States Government and Government Agencies and Authorities $ 321.2 $ 336.3 $ 336.3 States and Political Subdivisions 1,640.6 1,714.9 1,714.9 Foreign Governments 3.5 3.4 3.4 Corporate Securities: Other Bonds and Notes 2,758.9 2,944.8 2,944.8 Redeemable Preferred Stocks 0.5 0.6 0.6 Collateralized Loan Obligations 121.2 122.8 122.8 Other Mortgage- and Asset- backed 0.9 2.1 2.1 Total Investments in Fixed Maturities 4,846.8 5,124.9 5,124.9 Equity Securities: Preferred Stocks 76.6 82.5 82.5 Common Stocks 38.4 45.2 45.2 Other Equity Interests 319.4 354.0 354.0 Total Investments in Equity Securities 434.4 481.7 481.7 Fair Value Option Investments 111.4 111.4 111.4 Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings 175.9 XXX.X 175.9 Loans, Real Estate and Other Investments 439.9 XXX.X 439.9 Short-term Investments 273.7 XXX.X 273.7 Total Investments $ 6,282.1 $ 6,607.5

See Accompanying Report of Independent Registered Public Accounting Firm.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 2 - Parent 12 Months Ended Company Financial Dec. 31, 2016 Statements Parent Company Financial Statements [Abstract] Parent Company Financial Statements SCHEDULE II KEMPER CORPORATION PARENT COMPANY BALANCE SHEETS (Dollars in Millions)

December 31, 2016 2015 ASSETS Investments in Subsidiaries $2,575.5 $2,586.6 Fixed Maturities at Fair Value (Amortized Cost: 2016 – $46.3; 2015 – $15.1) 46.3 15.1 Equity Securities at Fair Value (Cost: 2016 – $5.2; 2015 – $11.1) 5.3 10.9 Fair Value Option Investments 111.4 164.5 Short-term Investments 120.0 134.8 Cash 15.7 15.9 Other Receivables 3.4 5.7 Current Income Taxes 2.4 — Other Assets 7.5 6.1 Total Assets $2,887.5 $2,939.6 LIABILITIES AND SHAREHOLDERS’ EQUITY Senior Notes Payable, 6.00% due 2017 (Fair Value: 2016 – $365.3; 2015 – $374.0) $ 359.8 $ 359.1 Senior Notes Payable, 4.35% due 2025 (Fair Value: 2016 - $248.5; 2015 – $248.3) 247.7 247.4 Subordinated Debentures due 2054 (Fair Value: 2016 – $157.1; 2015 – $159.0) 144.1 144.1 Current Income Tax Liability — 11.3 Deferred Income Tax Liability 34.0 22.0 Liabilities for Benefit Plans 118.7 154.8 Accrued Expenses and Other Liabilities 8.0 8.5 Total Liabilities 912.3 947.2 Shareholders’ Equity: Common Stock 5.1 5.1 Additional Paid-in Capital 660.3 654.0 Retained Earnings 1,172.8 1,209.0 Accumulated Other Comprehensive Income 137.0 124.3 Total Shareholders’ Equity 1,975.2 1,992.4 Total Liabilities and Shareholders’ Equity $2,887.5 $2,939.6

See Accompanying Report of Independent Registered Public Accounting Firm.

KEMPER CORPORATION PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME (Dollars in Millions)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized 1.0 — — Amortization of Unrecognized Postretirement Benefit Costs 5.3 23.1 7.9 Total Reclassification Adjustments for Amounts Included in Net Income 6.3 23.1 7.9 Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Foreign Currency Translation Adjustments on Investments Held by Subsidiaries (0.3) (1.4) (1.0) Gain on Cash Flow Hedge 1.6 — — Other Comprehensive Income (Loss) before Income Taxes 19.6 (152.6) 135.1 Income Tax Benefit (Expense): Unrealized Holding Gains and Losses Arising During the Year: Securities Held by Subsidiaries 1.1 53.4 (92.3) Securities Held by Parent (0.1) 0.5 0.7 Reclassification Adjustment for Amounts Included in Net Income: Securities Held by Subsidiaries (0.1) 9.4 9.4 Securities Held by Parent — (0.5) (0.6) Unrealized Holding Gains and Losses 0.9 62.8 (82.8) Unrecognized Postretirement Benefit Costs Arising During the Year (5.0) (1.1) 37.5 Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized (0.4) — — Amortization of Unrecognized Postretirement Benefit Costs (1.9) (8.0) (2.8) Total Reclassification Adjustments for Amounts Included in Net Income (2.3) (8.0) (2.8) Net Unrecognized Postretirement Benefit Costs (7.3) (9.1) 34.7 Foreign Currency Translation Adjustments on Investments Held by Subsidiaries 0.1 0.5 0.4 Gain on Cash Flow Hedge (0.6) — — Income Tax Benefit (Expense) (6.9) 54.2 (47.7) Other Comprehensive Income (Loss) 12.7 (98.4) 87.4 Total Comprehensive Income (Loss) $ 29.5 $ (12.7) $ 201.9

See Accompanying Report of Independent Registered Public Accounting Firm.

KEMPER CORPORATION PARENT COMPANY STATEMENTS OF CASH FLOWS (Dollars in Millions)

For The Years Ended December 31,

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2016 2015 2014 Operating Activities: Net Income $ 16.8 $ 85.7 $ 114.5 Adjustment Required to Reconcile Net Income to Net Cash Provided by Operations: Equity in Net Income of Subsidiaries (40.4) (133.2) (147.2) Cash Dividends from Subsidiaries 77.7 285.0 159.1 Cash Received for Benefit Plan from Subsidiary 1.4 — — Cash Contribution to Defined Benefit Plan (9.0) — — Net Realized (Gains) Losses on Sales of Investments (0.1) 0.1 0.2 Net Impairment Losses Recognized in Earnings — 1.6 1.7 Loss from Early Extinguishment of Debt — 9.1 — Other, Net (9.3) 41.6 10.5 Net Cash Provided by Operating Activities 37.1 289.9 138.8 Investing Activities: Capital Contributed to Subsidiary (52.9) (105.0) — Capital Distribution from Subsidiary — — 1.1 Sales, Paydowns and Maturities of Fixed Maturities 73.5 11.8 11.5 Purchases of Fixed Maturities (77.9) (14.8) — Sales of Equity Securities 3.5 9.4 15.1 Sales of Fair Value Option Investments 72.2 — 6.9 Purchases of Fair Value Option Investments (21.0) (111.0) (60.9) Acquisition of Business — (71.0) — Change in Short-term Investments 14.8 90.3 (94.3) Net Cash Provided (Used) by Investing Activities 12.2 (190.3) (120.6) Financing Activities: Net Proceeds from Issuance of Debt — 247.3 144.0 Repayments of Debt — (258.8) — Cash Dividends Paid (49.2) (49.7) (51.8) Common Stock Repurchases (3.8) (45.0) (114.0) Cash Exercise of Stock Options 3.5 3.9 0.5 Excess Tax Benefits on Share Based Awards — 0.7 0.2 Net Cash Used by Financing Activities (49.5) (101.6) (21.1) Decrease in Cash (0.2) (2.0) (2.9) Cash, Beginning of Year 15.9 17.9 20.8 Cash, End of Year $ 15.7 $ 15.9 $ 17.9

See Accompanying Report of Independent Registered Public Accounting Firm.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 3 - Supplementary 12 Months Ended Insurance Information Dec. 31, 2016 Supplementary Insurance Information [Abstract] Supplementary Insurance KEMPER CORPORATION AND SUBSIDIARIES Information SUPPLEMENTARY INSURANCE INFORMATION (Dollars in Millions)

See Accompanying Report of Independent Registered Public Accounting Firm.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 4 - Reinsurance 12 Months Ended Schedule Dec. 31, 2016 Supplemental Schedule of Reinsurance Premiums for Insurance Companies [Abstract] Reinsurance Schedule SCHEDULE IV KEMPER CORPORATION REINSURANCE SCHEDULE FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 (Dollars in Millions)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total Premiums $ 1,970.1 $ 20.6 $ 60.1 $ 2,009.6 3.0% Year Ended December 31, 2014 Life Insurance in Force $20,565.9 $ 541.5 $ 217.8 $20,242.2 1.1% Premiums: Life Insurance $ 387.5 $ 1.5 $ 1.6 $ 387.6 0.4% Accident and Health Insurance 146.3 0.5 2.8 148.6 1.9% Property and Liability Insurance 1,297.3 24.0 52.7 1,326.0 4.0% Total Premiums $ 1,831.1 $ 26.0 $ 57.1 $ 1,862.2 3.1%

See Accompanying Report of Independent Registered Public Accounting Firm.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Summary Of Accounting 12 Months Ended Policies And Accounting Dec. 31, 2016 Changes (Policies) Accounting Policies [Abstract] Investments Investments Investments in Fixed Maturities include bonds, notes and redeemable preferred stocks. Investments in Fixed Maturities are classified as available for sale and reported at fair value. Net Investment Income, including amortization of purchased premiums and accretion of market discounts, on Investments in Fixed Maturities is recognized as interest over the period that it is earned using the effective yield method.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document identification method and reported in the Consolidated Statements of Income in the period that the decline is determined to be other than temporary. The portion of an impairment of an investment in a fixed maturity attributed to a credit loss is reported in Net Impairment Losses Recognized in Earnings in the Consolidated Statements of Income, with the portion of the impairment that is not attributed to a credit loss reported in AOCI.

Fair Value Measurements Fair Value Measurements The Company uses a hierarchical framework which prioritizes and ranks the market observability of inputs used in fair value measurements. Market price observability is affected by a number of factors, including the type of asset or liability and the characteristics specific to the asset or liability being measured. Assets and liabilities with readily available, active, quoted market prices or for which fair value can be measured from actively quoted prices generally are deemed to have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The Company classifies the inputs used to measure fair value into one of three levels as follows:

Deferred Policy Acquisition Deferred Policy Acquisition Costs Costs Costs directly associated with the successful acquisition of business, principally commissions and certain premium taxes and policy issuance costs, are deferred. Costs deferred on property and casualty insurance contracts and short duration health insurance contracts are amortized over the period in which premiums are earned. Costs deferred on traditional life insurance products and other long-duration insurance contracts are primarily amortized over the anticipated premium- paying period of the related policies in proportion to the ratio of the annual premiums to the total premiums anticipated, which is estimated using the same assumptions used in calculating policy reserves.

Goodwill Goodwill The cost of an acquired entity over the fair value of net assets acquired is reported as Goodwill. Goodwill is not amortized, but rather is tested for recoverability annually or when certain triggering events require testing.

Insurance Reserves Insurance Reserves Reserves for losses and LAE on property and casualty insurance coverage and health insurance coverage represent the estimated claim cost and loss adjustment expense necessary to cover the ultimate net cost of investigating and settling all losses incurred and unpaid at the end of any given accounting period. Such estimates are based on individual case estimates for reported claims and estimates for incurred but not reported (“IBNR”) losses, including expected

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document development on reported claims. These estimates are adjusted in the aggregate for ultimate loss expectations based on historical experience patterns and current economic trends, with any change in the estimated ultimate liabilities being reported in the Consolidated Statements of Income in the period of change. Changes in such estimates may be material.

Other Receivables Other Receivables Other Receivables primarily include reinsurance recoverables and accrued investment income. Reinsurance Recoverables were $106.4 million and $108.3 million at December 31, 2016 and 2015, respectively. Accrued Investment Income was $70.8 million and $68.5 million at December 31, 2016 and 2015, respectively.

Other Assets Other Assets Other Assets primarily include property and equipment, internal use software, insurance licenses acquired in business combinations, the value of other intangible assets acquired, corporate-owned life insurance and prepaid expenses.

Property and equipment is depreciated over the useful lives of the assets, generally using the straight-line or double declining balance methods of depreciation depending on the asset involved.

Internal use software is amortized over the useful life of the asset using the straight-line method of amortization. Write-offs of Long-lived Assets for the year ended December 31, 2015 was a charge of $11.1 million to write off the costs of a computer software development project that was abandoned by the Company’s Property & Casualty Insurance segment. Write-offs of Long- lived Assets for the year ended December 31, 2014 was a charge of $54.6 million to write off certain software for the Company’s Property & Casualty Insurance segment after the Company determined that it was no longer probable that the software would be fully implemented.

Insurance licenses acquired in business combinations and other indefinite life intangibles are not amortized, but rather tested periodically for recoverability.

Corporate-owned life insurance is reported at cash surrender value with changes due to cost of insurance and investment experience reported in Other Income in the Consolidated Statements of Income.

Accrued Expenses and Other Accrued Expenses and Other Liabilities Liabilities Accrued Expenses and Other Liabilities primarily include accrued salaries and commissions, pension benefits, postretirement medical benefits and accrued taxes, licenses and fees.

Recognition of Earned Recognition of Earned Premiums and Related Expenses Premiums and Related Property and casualty insurance and short duration health insurance premiums are deferred when Expenses written and recognized and earned ratably over the periods to which the premiums relate. Unearned Premiums represent the portion of the premiums written related to the unexpired portion of policies in force which has been deferred and is reported as a liability. The Company performs a premium deficiency analysis typically at a product line level, namely automobile insurance, homeowners insurance and other insurance, which is consistent with the manner in which the Company acquires and services policies and measures profitability. Anticipated investment income is excluded from such analysis. A premium deficiency is recognized when the sum of expected claim costs, claim adjustment expenses, unamortized deferred policy acquisition costs and maintenance costs exceeds the related unearned premiums by first reducing related deferred policy acquisition costs to an amount, but not below zero, at which the premium deficiency would not exist. If a premium deficiency remains after first reducing deferred policy acquisition costs, a premium deficiency reserve is established and reported as a liability in the Company’s financial statements. The Company’s deferred policy acquisition costs in the Consolidated Balance Sheets at December 31, 2016 and 2015 include reductions of $9.7 million and $9.0 million, respectively, due to premium deficiencies with respect to Alliance United’s personal automobile book of business.

Reinsurance Reinsurance In the normal course of business, Kemper’s insurance subsidiaries reinsure certain risks above certain retention levels with other insurance enterprises. These reinsurance agreements do not relieve Kemper’s insurance subsidiaries of their legal obligations to the policyholder. Amounts recoverable from reinsurers are included in Other Receivables.

NOTE 2. SUMMARY OF ACCOUNTING POLICIES AND ACCOUNTING CHANGES (Continued)

Income Taxes Income Taxes Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance, if any, is maintained for the portion of deferred income tax assets that the Company does not expect to recover. Increases, if any, in the valuation allowance for deferred income tax assets are recognized as income tax expense. Decreases, if any, in the valuation allowance for deferred income tax assets are recognized as income tax benefit. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period in which the change is enacted.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Acquisition of Business 12 Months Ended (Tables) Dec. 31, 2016 Business Combinations [Abstract] Schedule of Intangible Assets Acquired by Class [Table Text Block] At DOLLARS IN Dec 31, Dec 31, Acquisition MILLIONS 2016 2015 Date P&C Broker Relationships $ 16.8 $ 18.1 $ 18.9 Value of In Force Policies — 0.2 9.2 Other 2.5 3.7 4.5 Value of Intangible Assets Acquired $ 19.3 $ 22.0 $ 32.6

Schedule of Recognized Identified Assets Acquired and Liabilities DOLLARS IN MILLIONS Assumed [Table Text Block] Investments $ 187.0 Cash 13.4 Receivables from Policyholders 44.4 Other Receivables 52.8 Value of Intangible Assets Acquired (Reported in Other Assets) 32.6 Goodwill 11.2 Current Income Taxes 1.4 Other Assets 5.9 Property and Casualty Insurance Reserves (155.8) Unearned Premiums (85.6) Liabilities for Income Taxes (1.5) Accrued Expenses and Other Liabilities (34.8) Total Purchase Price $ 71.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Investments (Tables) Dec. 31, 2016 Schedule of Available-for- sale Securities [Line Items] Schedule of Unrealized Loss An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity on Investments Securities at December 31, 2015 is presented below.

Less Than 12 Months 12 Months or Longer Total Fair Unrealized Fair Unrealized Fair Unrealized DOLLARS IN MILLIONS Value Losses Value Losses Value Losses Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 56.6 $ (1.6) $ 24.1 $ (2.0) $ 80.7 $ (3.6) States and Political Subdivisions 131.0 (2.6) 0.9 (0.1) 131.9 (2.7) Corporate Securities: Bonds and Notes 783.8 (26.0) 133.6 (14.7) 917.4 (40.7) Redeemable Preferred Stocks — — — — — — Collateralized Loan Obligations 57.4 (2.9) 0.8 (0.1) 58.2 (3.0) Other Mortgage- and Asset-backed — — 0.3 — 0.3 — Total Fixed Maturities 1,028.8 (33.1) 159.7 (16.9) 1,188.5 (50.0) Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate 2.7 — 12.3 (0.8) 15.0 (0.8) Other Industries 7.3 (0.8) — — 7.3 (0.8) Common Stocks: Finance, Insurance and Real Estate 16.3 (1.0) — — 16.3 (1.0) Other Industries 2.8 (0.2) — — 2.8 (0.2) Other Equity Interests: Exchange Traded Funds 135.2 (3.7) — — 135.2 (3.7) Limited Liability Companies and Limited Partnerships 2.7 (0.5) — — 2.7 (0.5) Total Equity Securities 167.0 (6.2) 12.3 (0.8) 179.3 (7.0) Total $1,195.8 $ (39.3) $172.0 $ (17.7) $1,367.8 $ (57.0)

An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2016 is presented below.

Less Than 12 Months 12 Months or Longer Total Fair Unrealized Fair Unrealized Fair Unrealized DOLLARS IN MILLIONS Value Losses Value Losses Value Losses

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 117.7 $ (7.2) $ 1.1 $ — $ 118.8 $ (7.2) States and Political Subdivisions 432.7 (14.1) 0.3 — 433.0 (14.1) Foreign Governments 2.1 (0.1) — — 2.1 (0.1) Corporate Securities: Bonds and Notes 663.3 (16.6) 107.3 (7.4) 770.6 (24.0) Collateralized Loan Obligations 19.9 (0.7) 21.4 (0.4) 41.3 (1.1) Total Fixed Maturities 1,235.7 (38.7) 130.1 (7.8) 1,365.8 (46.5) Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate 15.6 (0.5) 7.3 (0.3) 22.9 (0.8) Other Industries 5.3 (0.5) — — 5.3 (0.5) Common Stocks: Finance, Insurance and Real Estate 2.8 — — — 2.8 — Other Industries 0.6 (0.1) 0.5 — 1.1 (0.1) Other Equity Interests: Exchange Traded Funds — — 18.6 (1.3) 18.6 (1.3) Limited Liability Companies and Limited Partnerships 13.9 (0.7) 33.8 (2.2) 47.7 (2.9) Total Equity Securities 38.2 (1.8) 60.2 (3.8) 98.4 (5.6) Total $1,273.9 $ (40.5) $190.3 $ (11.6) $1,464.2 $ (52.1)

Other than Temporary The following table sets forth the pre-tax amount of Other Than Temporary Impairments Impairment, Credit Losses (“OTTI”) credit losses, recognized in Retained Earnings for Investments in Fixed Maturities held by the Company as of December 31, 2016, 2015 and 2014, for which a portion of the OTTI loss Recognized in Earnings related to factors other than credit has been recognized in AOCI, and the corresponding changes in such amounts.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The components of Net Impairment Losses Recognized in Earnings reported in the Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014 were:

Schedule of Other Investments The carrying values of the Company’s Other Investments at December 31, 2016 and 2015 were:

Investments in Fixed Maturities [Member] Schedule of Available-for- sale Securities [Line Items] Schedule of Available-for-sale The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at Securities Reconciliation December 31, 2016 were:

The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2015 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Mortgage- and Asset-backed 3.8 1.4 — 5.2 Investments in Fixed Maturities $4,560.7 $ 341.6 $ (50.0) $4,852.3

Investments Classified by The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at Contractual Maturity Date December 31, 2016 by contractual maturity were: Amortized DOLLARS IN MILLIONS Cost Fair Value Due in One Year or Less $ 101.6 $ 102.8 Due after One Year to Five Years 836.7 867.0 Due after Five Years to Ten Years 1,608.6 1,652.4 Due after Ten Years 2,038.2 2,233.0 Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date 261.7 269.7 Investments in Fixed Maturities $4,846.8 $5,124.9

Investments in Equity Securities [Member] Schedule of Available-for- sale Securities [Line Items] Schedule of Available-for-sale Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities Reconciliation Securities at December 31, 2016 were:

NOTE 4. INVESTMENTS (Continued)

Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2015 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Industries 8.7 3.3 (0.2) 11.8 Other Equity Interests: Exchange Traded Funds 179.7 1.1 (3.7) 177.1 Limited Liability Companies and Limited Partnerships 181.0 25.0 (0.5) 205.5 Investments in Equity Securities $ 486.9 $ 43.3 $ (7.0) $ 523.2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Goodwill (Tables) Dec. 31, 2016 Goodwill and Intangible Assets Disclosure [Abstract] Schedule of Goodwill Goodwill balances by business segment at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Property & Casualty Insurance $103.6 $103.6 Life & Health Insurance 219.4 219.4 Total $323.0 $323.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property and Casualty 12 Months Ended Insurance Reserves (Tables) Dec. 31, 2016 Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] Short-duration Insurance The following tables contain information about incurred and paid claims development as of and Contracts, Claims for the year December 31, 2016, net of reinsurance and indemnification, as well as cumulative claim frequency and the total of IBNR liabilities, including expected development on reported Development [Table Text claims included within the net incurred losses and allocated LAE amounts. The tables are Block] grouped by major product line and, if relevant, coverage. The information about incurred and paid claims development for the years ended December 31, 2012 through 2015 is presented as supplementary information and is unaudited.

Preferred Personal Automobile Insurance—Liability

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Preferred Personal Automobile Insurance—Physical Damage

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Development Number of Accident 2012 2013 2014 2015 on Reported Incurred Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Claims Claims 2012 $ 163.9 $ 163.9 $ 164.1 $ 164.2 $ 164.3 $ (0.1) 89,703 2013 139.7 138.5 138.5 138.4 (0.1) 78,779 2014 122.0 121.6 121.4 (0.1) 67,205 2015 101.2 100.7 (0.4) 53,419 2016 106.6 (4.2) 49,267 Total 631.4

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 160.5 $ 164.4 $ 164.2 $ 164.2 $ 164.3 2013 137.0 138.9 138.6 138.5 2014 121.0 121.8 121.5 2015 100.1 101.0 2016 105.2 Total 630.5 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance (0.1) Loss and Allocated LAE Reserves, Net of Reinsurance $ 0.8

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Non-standard Personal Automobile Insurance—Liability1

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification For the Years Ended December 31,

1 Table retrospectively includes Alliance United’s historical incurred and paid accident year claim information for all periods presented.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Non-standard Personal Automobile Insurance—Physical Damage1

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance and Indemnification For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 91.2 $ 98.3 $ 98.2 $ 98.2 $ 98.2 2013 93.4 100.2 99.9 99.7 2014 97.1 105.9 105.1 2015 130.0 143.8 2016 167.4 Total 614.2 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance and Indemnification —

1 Table retrospectively includes Alliance United’s historical incurred and paid accident year claim information for all periods presented.

NOTE 6. PROPERTY AND CASUALTY INSURANCE RESERVES (Continued)

Homeowners Insurance

DOLLARS IN MILLIONS, EXCEPT CUMULATIVE INCURRED CLAIMS As of December 31, 2016 Incurred Losses and Allocated LAE, Net of Reinsurance Total of IBNR For the Years Ended December 31, Liabilities Plus Expected Cumulative Development Number of Accident 2012 2013 2014 2015 on Reported Incurred Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 Claims Claims 2012 $ 250.2 $ 235.9 $ 231.0 $ 227.5 $ 226.7 $ 0.1 27,833 2013 180.8 172.8 169.4 167.5 (0.1) 21,976 2014 211.1 208.5 205.0 (0.1) 22,432 2015 178.9 164.9 (1.8) 17,432 2016 200.3 9.7 16,769 Total 964.4

Cumulative Paid Losses and Allocated LAE, Net of Reinsurance For the Years Ended December 31, Accident 2012 2013 2014 2015 Year (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2016 2012 $ 165.9 $ 216.0 $ 222.3 $ 225.2 $ 225.8 2013 122.4 156.5 162.5 164.7 2014 149.2 194.4 200.1 2015 116.9 154.4 2016 141.2 Total 886.2 Outstanding Loss and Allocated LAE Reserves on Accident Years before 2012, Net of Reinsurance 3.5 Loss and Allocated LAE Reserves, Net of Reinsurance $ 81.7

Liability for Unpaid Claims Property and Casualty Insurance Reserve activity for the years ended December 31, 2016, 2015 Adjustment Expense by and 2014 was:

Expense Type DOLLARS IN MILLIONS 2016 2015 2014 Beginning Property and Casualty Insurance Reserves: Gross of Reinsurance and Indemnification at Beginning of Year $ 862.8 $ 733.9 $ 843.5 Less Reinsurance Recoverables and Indemnification at Beginning of Year 52.0 54.9 63.4 Property and Casualty Insurance Reserves, Net of Reinsurance and Indemnification at Beginning of Year 810.8 679.0 780.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property and Casualty Insurance Reserves Acquired, Net of Reinsurance and Indemnification — 125.4 — Incurred Losses and LAE related to: Current Year: Continuing Operations 1,358.6 1,123.3 965.4 Prior Years: Continuing Operations (14.4) (11.5) (53.5) Discontinued Operations (6.3) (8.6) (3.6) Total Incurred Losses and LAE related to Prior Years (20.7) (20.1) (57.1) Total Incurred Losses and LAE 1,337.9 1,103.2 908.3 Paid Losses and LAE related to: Current Year: Continuing Operations 831.0 723.2 639.8 Prior Years: Continuing Operations 431.9 366.2 360.4 Discontinued Operations 4.6 7.4 9.2 Total Paid Losses and LAE related to Prior Years 436.5 373.6 369.6 Total Paid Losses and LAE 1,267.5 1,096.8 1,009.4 Property and Casualty Insurance Reserves, Net of Reinsurance and Indemnification at End of Year 881.2 810.8 679.0 Plus Reinsurance and Indemnification Recoverables at End of Year 50.2 52.0 54.9 Property and Casualty Insurance Reserves, Gross of Reinsurance and Indemnification at End of Year $ 931.4 $ 862.8 $ 733.9

Short-duration Insurance The following table reconciles the net incurred and paid claims development tables presented Contracts, Reconciliation of above to the Company's liability for Property and Casualty Insurance Reserves included in the Consolidated Balance Sheet at December 31, 2016. Claims Development to Liability [Table Text Block] DOLLARS IN MILLIONS 2016 Property and Casualty Insurance Reserves, Net of Reinsurance and Indemnification: Preferred Personal Automobile Insurance—Liability $ 219.3 Preferred Personal Automobile Insurance—Physical Damage 0.8 Non-standard Personal Automobile Insurance—Liability 371.7 Non-standard Personal Automobile Insurance—Physical Damage 9.3 Homeowners Insurance 81.7 Other 124.7 Total 807.5 Reinsurance and Indemnification Recoverables on Unpaid Losses and Allocated LAE: Preferred Personal Automobile Insurance—Liability 28.3 Preferred Personal Automobile Insurance—Physical Damage — Non-standard Personal Automobile Insurance—Liability 10.6 Non-standard Personal Automobile Insurance—Physical Damage (0.6) Homeowners Insurance — Other 8.7 Total 47.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Insurance Lines other than Short-duration — Unallocated LAE 76.9 Property and Casualty Insurance Reserves, Gross of Reinsurance and Indemnification $ 931.4

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Debt (Tables) Dec. 31, 2016 Debt Disclosure [Abstract] Schedule of Long-term Debt Total amortized cost of Long-term Debt, Current and Non-current, outstanding at December 31, Instruments 2016 and 2015 was:

DOLLARS IN MILLIONS 2016 2015 Senior Notes: 6.00% Senior Notes due May 15, 2017 $ 359.8 $ 359.1 4.35% Senior Notes due February 15, 2025 247.7 247.4 7.375% Subordinated Debentures due February 27, 2054 144.1 144.1 Total Long-term Debt, Current and Non-current, Outstanding $ 751.6 $ 750.6 Schedule of Interest Expense Interest Expense, including facility fees, accretion of discount and amortization of issuance costs, for the years ended December 31, 2016, 2015 and 2014 was:

Schedule of Interest Paid Interest Paid, including facility fees, for the years ended December 31, 2016, 2015 and 2014 was:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Leases (Tables) Dec. 31, 2016 Leases [Abstract] Schedule of Rent Expense Net rental expense for operating leases for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Minimum Rental Expense $21.2 $20.7 $21.5 Less Sublease Rental Income (1.6) (1.7) (1.3) Net Rental Expense $19.6 $19.0 $20.2

Schedule of Future Minimum Lease Payments for Future minimum lease payments under capital and operating leases Capital and Operating Leases at December 31, 2016 were: Capital Operating DOLLARS IN MILLIONS Leases Leases 2017 $ 0.7 $ 17.4 2018 0.1 13.9 2019 — 11.5 2020 — 9.2 2021 — 7.3 2022 and Thereafter — 15.2 Total Future Payments $ 0.8 $ 74.5 Less Imputed Interest (0.1) Present Value of Minimum Capital Lease Payments $ 0.7

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Long-term Equity-based 12 Months Ended Compensation (Tables) Dec. 31, 2016 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Schedule of Share-based Payment Award, The assumptions used in the Black-Scholes pricing model for Tandem Awards Stock Options, Valuation Assumptions granted during the years ended December 31, 2016, 2015 and 2014 are presented below.

2016 2015 2014 RANGE OF VALUATION ASSUMPTIONS Expected Volatility 25.85% - 42.19% 21.31% - 41.65% 25.76% - 44.43% Risk-free Interest Rate 0.77 - 2.01 1.08 - 1.96 1.07 - 2.14 Expected Dividend Yield 2.22 - 3.41 2.37 - 2.62 2.53 - 2.60 WEIGHTED- AVERAGE EXPECTED LIFE IN YEARS Employee Grants 1 - 6.5 4 - 7 4 - 7 Director Grants N/A 5.5 6

Disclosure of Share-based Compensation activity for the year ended December 31, 2016 is presented below.

Arrangements by Share-based Payment Weighted- Award Weighted- average Aggregate Shares average Remaining Intrinsic Subject to Exercise Price Contractual Value Awards Per Share ($) Life (in Years) ($ In Millions) Outstanding at Beginning of the Year 1,428,157 $ 39.75 Granted 506,675 31.09 Exercised (251,522) 34.04 Forfeited or Expired (377,187) 43.72 Outstanding at December 31, 2016 1,306,123 36.35 6.5 $ 11.5 Vested and Expected to Vest at December 31, 2016 1,254,165 $ 36.49 6.4 $ 10.9 Exercisable at December 31, 2016 701,486 $ 38.32 4.8 $ 5.3

Schedule of Options Outstanding Information pertaining to Tandem Awards outstanding at December 31, 2016 is presented below.

Outstanding Exercisable Weighted- Weighted- Shares Weighted- Range of Shares average average Subject average Exercise Prices Subject to Exercise Price Remaining to Exercise Price ($) Awards Per Share ($) Contractual Awards Per Share ($)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Life (in Years) 15.01 - 20.00 4,000 16.48 2.35 4,000 16.48 20.01 - 25.00 9,500 23.37 3.06 9,500 23.37 25.01 - 30.00 316,603 27.89 8.21 116,909 28.20 30.01 - 35.00 176,845 32.43 8.18 74,742 32.33 35.01 - 40.00 437,299 36.64 7.21 270,763 36.67 40.01 - 45.00 166,376 41.33 7.02 30,072 40.70 45.01 - 50.00 195,500 49.74 0.11 195,500 49.74 15.01 - 50.00 1,306,123 36.35 6.45 701,486 38.32

Schedule of Share-based Compensation, Activity related to DSU awards for the year ended December 31, 2016 is Nonemployee Director Deferred Stock Unit presented below. Award Plan, Activity [Table Text Block] Weighted- average Grant- date Number Fair Value of DSUs Per DSU Vested Balance at Beginning of the Year 7,000 $ 36.17 Granted and Vested 14,520 31.00 Vested Balance at December 31, 2016 21,520 $ 32.68

Time Vested Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Schedule of Share-based Compensation, Activity related to nonvested time-based restricted stock and nonvested time- Restricted Stock and Restricted Stock Units based RSUs for the year ended December 31, 2016 is presented below. Activity Time-based Restricted Time-based RSU Stock Awards Awards Weighted- Weighted- average average Grant- Grant- date date Number Fair Value Number Fair Value of Shares Per Share of RSUs Per RSU Nonvested Balance at Beginning of the Year 29,448 $ 33.77 85,048 $ 36.84 Granted — — 118,622 31.48 Vested (12,098) 32.32 (26,006) 33.01 Forfeited (1,350) 35.75 (19,303) 36.03 Nonvested Balance at December 31, 2016 16,000 $ 34.69 158,361 $ 33.56

Performance Based Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule of Share-based Compensation, Activity related to nonvested performance-based restricted stock and nonvested Restricted Stock and Restricted Stock Units performance-based RSU awards for the year ended December 31, 2016 is presented below. Activity Performance-based Restricted Stock Performance-based Awards RSU Awards Weighted- Weighted- average average Grant- Grant- date date Number Fair Value Number Fair Value of Shares Per Share of RSUs Per RSU Nonvested Balance at Beginning of the Year 51,400 $ 42.12 128,100 $ 41.85 Granted — — 146,788 29.62 Forfeited (51,400) 42.12 (47,304) 39.04 Nonvested Balance at December 31, 2016 — $ — 227,584 $ 34.55

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income From Continuing 12 Months Ended Operations Per Unrestricted Dec. 31, 2016 Share (Tables) Earnings Per Share [Abstract] Schedule of Calculation of A reconciliation of the numerator and denominator used in the calculation of Basic Income Numerator and Denominator in from Continuing Operations Per Unrestricted Share and Diluted Income from Continuing Operations Per Unrestricted Share for the years ended December 31, 2016, 2015 and 2014 is Earnings Per Share presented below.

Schedule of Antidilutive Securities Excluded from SHARES IN THOUSANDS 2016 2015 2014 Computation of Earnings Per Equity-based Compensation Equivalent Shares 959.9 959.7 1,605.1 Share [Table Text Block] Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution 959.9 959.7 1,605.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Comprehensive 12 Months Ended Income (Loss) And Accumulated Other Dec. 31, 2016 Comprehensive Income (Tables) Equity [Abstract] Schedule of Comprehensive Income The components of Other Comprehensive Income (Loss) Before Income Taxes for the (Loss) years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Other Comprehensive Income (Loss) Before Income Taxes: Unrealized Holding Gains (Losses) Arising During the Year Before Reclassification Adjustment $ (2.4) $(151.9) $ 259.7 Reclassification Adjustment for Amounts Included in Net Income 0.2 (25.4) (25.1) Unrealized Holding Gains (Losses) (2.2) (177.3) 234.6 Foreign Currency Translation Adjustments Arising During the Year Before Reclassification Adjustment (0.3) (1.4) (1.0) Reclassification Adjustment for Amounts Included in Net Income — — — Foreign Currency Translation Adjustments (0.3) (1.4) (1.0) Net Unrecognized Postretirement Benefit Costs Arising During the Year 14.2 3.0 (106.4) Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized 1.0 — — Amortization of Net Unrecognized Postretirement Benefit Costs 5.3 23.1 7.9 Total Reclassification Adjustments for Amounts Included in Net Income 6.3 23.1 7.9 Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Gains (Losses) on Cash Flow Hedge During the Year Before Reclassification Adjustment 1.6 — — Reclassification Adjustment for Amounts Included in Net Income — — — Gain on Cash Flow Hedge 1.6 — — Other Comprehensive Income (Loss) Before Income Taxes $ 19.6 $(152.6) $ 135.1

NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)

The components of Other Comprehensive Income Tax Benefit (Expense) for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Tax Benefit (Expense): Unrealized Holding Gains and Losses Arising During the Year Before Reclassification Adjustment $ 1.0 $ 53.9 $ (91.6) Reclassification Adjustment for Amounts Included in Net Income (0.1) 8.9 8.8 Unrealized Holding Gains and Losses 0.9 62.8 (82.8) Foreign Currency Translation Adjustments Arising During the Year Before Reclassification Adjustment 0.1 0.5 0.4 Reclassification Adjustment for Amounts Included in Net Income — — — Foreign Currency Translation Adjustment 0.1 0.5 0.4 Net Unrecognized Postretirement Benefit Costs Arising During the Year (5.0) (1.1) 37.5 Reclassification Adjustments for Amounts Included in Net Income: Curtailment Cost Recognized (0.4) — — Amortization of Net Unrecognized Postretirement Benefit Costs (1.9) (8.0) (2.8) Total Reclassification Adjustments for Amounts Included in Net Income (2.3) (8.0) (2.8) Net Unrecognized Postretirement Benefit Costs (7.3) (9.1) 34.7 Gain on Cash Flow Hedge During the Year Before Reclassification Adjustment (0.6) — — Reclassification Adjustment for Amounts Included in Net Income — — — Gain on Cash Flow Hedge (0.6) — — Other Comprehensive Income Tax Benefit (Expense) $ (6.9) $ 54.2 $ (47.7)

Schedule of Accumulated Other The components of AOCI at December 31, 2016 and 2015 were: Comprehensive Income (Loss) DOLLARS IN MILLIONS 2016 2015 Unrealized Gains on Investments, Net of Income Taxes: Available for Sale Fixed Maturities with Portion of OTTI Recognized in Earnings $ 0.1 $ 1.4 Other Net Unrealized Gains on Investments 211.7 211.7 Foreign Currency Translation Adjustments, Net of Income Taxes (0.9) (0.7) Net Unrecognized Postretirement Benefit Costs, Net of Income Taxes (74.9) (88.1) Gain on Cash Flow Hedge, Net of Income Taxes 1.0 — Accumulated Other Comprehensive Income $137.0 $124.3

Reclassification out of Accumulated Other Comprehensive Income DOLLARS IN MILLIONS 2016 2015 2014 Reclassification of AOCI from Unrealized Gains and Losses on Available For Sale Securities to: Net Realized Gains on Sales of Investments $ 32.0 $ 52.6 $ 37.9 Net Impairment Losses Recognized in Earnings (32.2) (27.2) (12.8) Total Before Income Taxes (0.2) 25.4 25.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Tax Expense 0.1 (8.9) (8.8) Reclassification from AOCI, Net of Income Taxes (0.1) 16.5 16.3 Reclassification of AOCI from Amortization of Net Unrecognized Postretirement Benefit Costs to: Interest and Other Expenses (6.3) (23.1) (7.9) Income Tax Benefit 2.3 8.0 2.8 Reclassification from AOCI, Net of Income Taxes (4.0) (15.1) (5.1) Total Reclassification from AOCI to Net Income $ (4.1) $ 1.4 $ 11.2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income From Investments 12 Months Ended (Tables) Dec. 31, 2016 Investment Income, Net [Abstract] Investment Income Net Investment Income for the years ended December 31, 2016, 2015 and 2014 was:

Realized Gain (Loss) on The components of Net Realized Gains on Sales of Investments for the years ended Investments December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Fixed Maturities: Gains on Sales $ 17.0 $ 16.1 $ 7.0 Losses on Sales (4.6) (1.1) (0.2) Equity Securities: Gains on Sales 19.9 39.2 33.1 Losses on Sales (0.3) (1.6) (2.0) Real Estate: Gains on Sales 1.1 — — Losses on Sales — (0.2) (0.2) Other Investments: Gain on Sale of Subsidiary — — 1.6 Losses on Sales (0.2) — (0.1) Net Gains (Losses) on Trading Securities 0.2 (0.3) (0.1) Net Realized Gains on Sales of Investments $ 33.1 $ 52.1 $ 39.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Gross Gains on Sales $ 38.0 $ 55.3 $ 41.7 Gross Losses on Sales (5.1) (2.9) (2.5) Net Gains (Losses) on Trading Securities 0.2 (0.3) (0.1) Net Realized Gains on Sales of Investments $ 33.1 $ 52.1 $ 39.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Insurance Expenses (Tables) Dec. 31, 2016 Insurance Expenses [Abstract] Schedule of Insurance Expenses Insurance Expenses for the years ended December 31, 2016, 2015 and 2014 were:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Income Taxes (Tables) Dec. 31, 2016 Income Tax Disclosure [Abstract] Schedule of Deferred Tax The tax effects of temporary differences that give rise to significant portions of the Company’s Assets and Liabilities Net Deferred Income Tax Assets and Deferred Income Tax Liabilities at December 31, 2016 and 2015 were:

Summary of Operating Loss The expiration of federal net operating loss (“NOL”) carryforwards and their related deferred Carryforwards income tax assets at December 31, 2016 is presented below by year of expiration. NOL Carry- Deferred DOLLARS IN MILLIONS forwards Tax Asset Expiring in: 2020 $ 7.8 $ 2.7 2021 through 2025 30.5 10.7 2026 through 2030 29.9 10.5 2031 through 2036 81.0 28.3 Total All Years $ 149.2 $ 52.2

Reconciliation Of A reconciliation of the beginning and ending amount of Unrecognized Tax Benefits for the years Unrecognized Tax Benefits ended December 31, 2016, 2015 and 2014 is presented below.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule of Components of The components of Income Tax Expense from Continuing Operations for the years ended Income Tax Expense (Benefit) December 31, 2016, 2015 and 2014 were:

Schedule of Effective Income A reconciliation of the Statutory Federal Income Tax Expense and Rate to the Company’s Tax Rate Reconciliation Effective Income Tax Expense and Rate from Continuing Operations for the years ended December 31, 2016, 2015 and 2014 is presented below.

Comprehensive Income Tax Comprehensive Income Tax Benefit (Expense) included in the Consolidated Financial Statements Benefit and Expenses for the years ended December 31, 2016, 2015 and 2014 was:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits (Tables) - 12 Months Ended Pension Plans, Defined Dec. 31, 2016 Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Schedule of Changes in Fair Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Value of Plan Assets Pension Plan for the years ended December 31, 2016 and 2015 is presented below.

DOLLARS IN MILLIONS 2016 2015 Fair Value of Plan Assets at Beginning of Year $ 507.5 $ 543.0 Actual Return on Plan Assets 29.9 (10.6) Employer Contributions 9.0 — Benefits Paid (25.5) (24.9) Fair Value of Plan Assets at End of Year 520.9 507.5 Projected Benefit Obligation at Beginning of Year 597.8 634.0 Service Cost 4.8 10.5 Interest Cost 20.1 25.7 Benefits Paid (25.5) (24.9) Curtailment (23.3) — Actuarial Losses (Gains) 19.7 (47.5) Projected Benefit Obligation at End of Year 593.6 597.8 Funded Status—Plan Assets in Deficit of Projected Benefit Obligation $ (72.7) $ (90.3) Unamortized Amount Reported in AOCI at End of Year: Accumulated Actuarial Loss $(144.7) $(152.2) Prior Service Credit — 0.4 Unamortized Amount Reported in AOCI at End of Year $(144.7) $(151.8) Accumulated Benefit Obligation at End of Year $ 593.5 $ 573.9

Schedule of Assumptions Used The weighted-average discount rate and rate of increase in future compensation levels used to estimate the components of the Projected Benefit Obligation for the Pension Plan at December 31, 2016 and 2015 were:

2016 2015 Discount Rate 4.18% 4.47% Rate of Increase in Future Compensation Levels 2.56 3.15

used to develop the components of Pension Expense for the Pension Plan for the periods presented below were:

Schedule of Allocation of Plan Weighted-average asset allocations for the Pension Plan at December 31, 2016 and 2015 by Assets asset category were:

ASSET CATEGORY 2016 2015 Cash and Short-term Investments 2% 4% Corporate Bonds and Notes 31 28 Common and Preferred Stocks 48 43 Exchange Traded Funds 1 9 Other Assets 18 16 Total 100% 100%

Fair Value, Measurement Fair value measurements for the Pension Plan’s assets at December 31, 2015 are summarized Inputs, Disclosure below. Quoted Prices Significant in Active Markets Other Significant Measured for Identical Observable Unobservable at Net Assets Inputs Inputs Asset DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 19.2 $ — $ — — $ 19.2 States and Political Subdivisions — 3.2 — — 3.2 Corporate Bonds and Notes — 122.2 — — 122.2 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 6.1 — — 6.1 Common Stocks: Manufacturing 77.9 16.2 — — 94.1 Other Industries 82.5 1.8 — — 84.3 Other Equity Interests: Collective Investment Funds — — — 31.1 31.1 Exchange Traded Funds 47.2 — — — 47.2 Limited Liability Companies and Limited Partnerships — — — 78.2 78.2 Short-term Investments 20.4 — — — 20.4 Receivables and Other 1.1 — 0.4 — 1.5 Total $ 248.3 $ 149.5 $ 0.4 $ 109.3 $ 507.5

Quoted Prices Significant in Active Markets Other Significant Measured for Identical Observable Unobservable at Net Assets Inputs Inputs Asset DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 21.2 $ 8.6 $ — $ — $ 29.8 States and Political Subdivisions — 3.1 — — 3.1 Corporate Bonds and Notes — 126.4 — — 126.4 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 6.2 — — 6.2 Common Stocks: Manufacturing 77.5 16.0 — — 93.5 Other Industries 88.1 — — — 88.1 Other Equity Interests: Collective Investment Funds — — — 60.7 60.7 Exchange Traded Funds 6.0 — — — 6.0 Limited Liability Companies and Limited Partnerships — — — 93.5 93.5 Short-term Investments 11.8 — — — 11.8 Receivables and Other 1.4 — 0.4 — 1.8 Total $ 206.0 $ 160.3 $ 0.4 $ 154.2 $ 520.9

Schedule of Defined Benefit The components of Comprehensive Pension Expense (Income) for the Pension Plan for the Plan Amounts Recognized in years ended December 31, 2016, 2015 and 2014 were:

Other Comprehensive Income DOLLARS IN MILLIONS 2016 2015 2014 (Loss) Service Cost Earned During the Year $ 4.8 $ 10.5 $ 8.7 Interest Cost on Projected Benefit Obligation 20.1 25.7 24.8 Expected Return on Plan Assets (32.7) (35.0) (34.9) Amortization of Actuarial Loss 6.6 24.4 9.7 Curtailment Gain (0.3) — — Pension Expense (Income) Recognized in Consolidated Statements of Income (1.5) 25.6 8.3 Unrecognized Pension Loss (Gain) Arising During the Year (0.7) (1.9) 102.0 Prior Service Credit Arising During the Year — — (0.6) Amortization of Accumulated Unrecognized Pension Loss (6.3) (24.4) (9.7) Comprehensive Pension Expense (Income) $ (8.5) $ (0.7) $ 100.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule of Expected Benefit The following benefit payments (net of participant contributions), which consider expected Payments future service of certain participants that remain eligible for a benefit accrual, as appropriate, are expected to be paid from the Pension Plan:

Years Ending December 31, DOLLARS IN MILLIONS 2017 2018 2019 2020 2021 2022-2026 Estimated Pension Benefit Payments $ 27.6 $ 28.8 $ 29.9 $ 30.9 $ 31.9 $ 170.0

Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Schedule of Changes in Fair Value of Plan Assets

Schedule of Assumptions Used The weighted-average discount rate and rate of increase in future compensation levels used to develop OPEB Expense for the years ended December 31, 2016, 2015 and 2014 were:

2016 2015 Discount Rate 3.60% 3.70% Rate of Increase in Future Compensation Levels 2.60 2.64

Schedule of Comprehensive The components of Comprehensive OPEB Expense (Income) for the years ended Other Postretirement Employee December 31, 2016, 2015 and 2014 were: Benefit Expense

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document DOLLARS IN MILLIONS 2016 2015 2014 Service Cost Earned During the Year $ 0.1 $ 0.2 $ 0.2 Interest Cost on Accumulated Postretirement Benefit Obligation 0.8 1.0 1.1 Amortization of Actuarial Gain (1.4) (1.4) (1.8) OPEB Income Recognized in Consolidated Statements of Income (0.5) (0.2) (0.5) Unrecognized OPEB Loss (Gain) Arising During the Year (1.3) 0.4 (2.0) Prior Service Credit Arising During the Year (11.0) — — Amortization of Accumulated Unrecognized OPEB Gain 1.4 1.4 1.8 Comprehensive OPEB Expense (Income) $ (11.4) $ 1.6 $ (0.7)

Schedule of Expected Benefit The following benefit payments (net of participant contributions), which consider expected Payments future service, as appropriate, are expected to be paid: Years Ending December 31, DOLLARS IN MILLIONS 2017 2018 2019 2020 2021 2022-2026 Estimated Benefit Payments: Excluding Medicare Part D Subsidy $ 1.8 $ 1.8 $ 1.7 $ 1.6 $ 1.5 $ 5.9 Expected Medicare Part D Subsidy — — — — — — Net Estimated Benefit Payments $ 1.8 $ 1.8 $ 1.7 $ 1.6 $ 1.5 $ 5.9

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Business Segments (Tables) Dec. 31, 2016 Segment Reporting [Abstract] Segment Assets Segment Assets at December 31, 2016 and 2015 were:

DOLLARS IN MILLIONS 2016 2015 Property & Casualty Insurance $2,815.1 $2,749.0 Life & Health Insurance 4,888.7 4,733.9 Corporate and Other, Net 506.7 553.2 Total Assets $8,210.5 $8,036.1

Earned Premiums by Product Earned Premiums by product line for the years ended December 31, 2016, 2015 and 2014 were: Line DOLLARS IN MILLIONS 2016 2015 2014 Personal Automobile $1,244.6 $1,027.7 $ 831.4 Homeowners 271.9 286.3 312.4 Other Personal Property and Casualty Insurance 119.2 122.1 127.4 Commercial Automobile 53.3 54.5 54.8 Life 381.6 374.1 387.6 Accident and Health 149.4 144.9 148.6 Total Earned Premiums $2,220.0 $2,009.6 $1,862.2

Segment Revenues Segment Revenues, including a reconciliation to Total Revenues, for the years ended December 31, 2016, 2015 and 2014 were:

DOLLARS IN MILLIONS 2016 2015 2014 Segment Revenues: Property & Casualty Insurance: Earned Premiums $1,614.8 $1,415.2 $1,249.5 Net Investment Income 72.4 73.3 72.7 Other Income 0.5 0.6 0.5 Total Property & Casualty Insurance 1,687.7 1,489.1 1,322.7 Life & Health Insurance: Earned Premiums 605.2 594.4 612.7 Net Investment Income 213.2 214.2 218.7 Other Income 2.8 2.4 0.9 Total Life & Health Insurance 821.2 811.0 832.3 Total Segment Revenues 2,508.9 2,300.1 2,155.0 Net Realized Gains on the Sales of Investments 33.1 52.1 39.1 Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) Other 12.6 15.8 17.7 Total Revenues $2,521.9 $2,340.8 $2,196.6

Segment Operating Profit Segment Operating Profit, including a reconciliation to Income from Continuing Operations before Income Taxes, for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Segment Operating Profit (Loss):

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property & Casualty Insurance $ (17.2) $ 23.7 $ 27.1 Life & Health Insurance 45.7 109.7 141.9 Total Segment Operating Profit 28.5 133.4 169.0 Corporate and Other Operating Loss (25.4) (48.9) (32.7) Total Operating Profit 3.1 84.5 136.3 Net Realized Gains on Sales of Investments 33.1 52.1 39.1 Net Impairment Losses Recognized in Earnings (32.7) (27.2) (15.2) Loss from Early Extinguishment of Debt — (9.1) — Income from Continuing Operations before Income Taxes $ 3.5 $ 100.3 $ 160.2

Segment Net Income (Loss) Segment Net Operating Income, including a reconciliation to Income from Continuing Operations, for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Segment Net Operating Income (Loss): Property & Casualty Insurance $ (2.9) $ 26.7 $ 24.9 Life & Health Insurance 30.3 71.7 91.8 Total Segment Net Operating Income 27.4 98.4 116.7 Corporate and Other Net Operating Loss (15.0) (28.5) (19.6) Consolidated Net Operating Income 12.4 69.9 97.1 Net Income (Loss) From: Net Realized Gains on Sales of Investments 21.5 33.9 25.4 Net Impairment Losses Recognized in Earnings (21.2) (17.7) (9.9) Loss from Early Extinguishment of Debt — (5.9) — Income from Continuing Operations $ 12.7 $ 80.2 $ 112.6

Segment Amortization of Deferred Policy Acquisition NOTE 18. BUSINESS SEGMENTS (Continued) Costs Amortization of Deferred Policy Acquisition Costs by Operating Segment for the years ended December 31, 2016, 2015 and 2014 was:

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance $ 252.1 $ 213.1 $ 187.5 Life & Health Insurance 47.2 44.3 47.9 Total Amortization $ 299.3 $ 257.4 $ 235.4

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Discontinued Operations 12 Months Ended (Tables) Dec. 31, 2016 Discontinued Operations and Disposal Groups [Abstract] Schedule of Disposal Groups, Including Discontinued Summary financial information included in Income from Operations, Income Statement, Balance Sheet and Discontinued Operations for the years ended December 31, 2016, 2015 and 2014 is presented below. Additional Disclosures DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2016 2015 2014 Income from Discontinued Operations before Income Taxes: Change in Estimate of Retained Liabilities Arising from Discontinued Operations 6.3 8.6 3.0 Income Tax Expense (2.2) (3.1) (1.1) Income from Discontinued Operations $ 4.1 $ 5.5 $ 1.9

Income from Discontinued Operations Per Unrestricted Share: Basic $0.08 $0.10 $0.04 Diluted $0.08 $0.10 $0.04

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Catastrophe Reinsurance 12 Months Ended (Tables) Dec. 31, 2016 Reinsurance Disclosures [Abstract] Reinsurance Retention Policy Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2015 to December 31, 2015 is provided in various layers as presented below.

Catastrophe Losses and LAE Percentage DOLLARS IN MILLIONS In Excess of Up to of Coverage Retained $ — $ 50.0 —% 1st Layer of Coverage 50.0 150.0 95.0 2nd Layer of Coverage 150.0 350.0 95.0

Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2016 to December 31, 2016 is provided in various layers as presented below.

Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2014 to December 31, 2014 is provided in various layers as presented below.

Catastrophe Reinsurance Reinsurance premiums for the Company’s primary catastrophe reinsurance programs and the Premiums FHCF Program reduced earned premiums for the years ended December 31, 2016, 2015 and 2014 by the following:

DOLLARS IN MILLIONS 2016 2015 2014 Property & Casualty Insurance $ 11.9 $ 12.8 $ 17.6 Life & Health Insurance 0.1 0.1 0.1 Total Ceded Catastrophe Reinsurance Premiums $ 12.0 $ 12.9 $ 17.7

Catastrophe Losses and LAE, Catastrophe losses and LAE (including reserve development), net of reinsurance recoveries, for Net Reinsurance Recoveries the years ended December 31, 2016, 2015 and 2014 by business segment are presented below.

DOLLARS IN MILLIONS 2016 2015 2014

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property & Casualty Insurance $ 90.4 $ 56.6 $ 80.7 Life & Health Insurance 5.4 3.9 3.1 Total Catastrophe Losses and LAE $ 95.8 $ 60.5 $ 83.8

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value Measurements 12 Months Ended (Tables) Dec. 31, 2016 Fair Value Disclosures [Abstract] Fair Value, Assets and The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, Liabilities Measured on 2016 is summarized below.

Recurring and Nonrecurring Fair Value Measurements Basis Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Measured at DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Net Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 119.5 $ 216.8 $ — — $ 336.3 States and Political Subdivisions — 1,711.1 3.8 — 1,714.9 Foreign Governments — 3.4 — — 3.4 Corporate Securities: Bonds and Notes — 2,541.6 403.2 — 2,944.8 Redeemable Preferred Stocks — — 0.6 — 0.6 Collateralized Loan Obligations — 19.3 103.5 — 122.8 Other Mortgage- and Asset-backed — 2.1 — — 2.1 Total Investments in Fixed Maturities 119.5 4,494.3 511.1 — 5,124.9 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 59.6 — — 59.6 Other Industries — 11.4 11.5 — 22.9 Common Stocks: Finance, Insurance and Real Estate 26.4 — 7.1 — 33.5 Other Industries 0.4 0.2 11.1 — 11.7 Other Equity Interests: Exchange Traded Funds 144.4 — — — 144.4 Limited Liability Companies and Limited Partnerships — — 40.9 168.7 209.6 Total Investments in Equity Securities 171.2 71.2 70.6 168.7 481.7 Fair Value Option Investments: Limited Liability Companies and Limited Partnerships Hedge Funds — — — 111.4 111.4 Other Investments: Trading Securities 5.3 — — — 5.3 Other Assets: Derivative Instrument Classified as Cash Flow Hedge — 1.6 — — 1.6

NOTE 22. FAIR VALUE MEASUREMENTS (Continued)

The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2015 is summarized below.

Fair Value Measurements Quoted Prices Significant in Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Measured at DOLLARS IN MILLIONS (Level 1) (Level 2) (Level 3) Net Asset Value Fair Value Fixed Maturities: U.S. Government and Government Agencies and Authorities $ 124.9 $ 195.7 $ — $ — $ 320.6 States and Political Subdivisions — 1,622.6 — — 1,622.6 Corporate Securities: Bonds and Notes — 2,376.5 436.3 — 2,812.8 Redeemable Preferred Stocks — — 3.8 — 3.8 Collateralized Loan Obligations — — 87.3 — 87.3 Other Mortgage- and Asset-backed — 1.4 3.8 — 5.2 Total Investments in Fixed Maturities 124.9 4,196.2 531.2 — 4,852.3 Equity Securities: Preferred Stocks: Finance, Insurance and Real Estate — 79.8 5.1 — 84.9 Other Industries — 6.2 12.8 — 19.0 Common Stocks: Finance, Insurance and Real Estate 16.6 6.6 — — 23.2 Other Industries 0.6 0.8 12.1 — 13.5 Other Equity Interests: Exchange Traded Funds 177.1 — — — 177.1 Limited Liability Companies and Limited Partnerships — — 45.6 159.9 205.5 Total Investments in Equity Securities 194.3 93.4 75.6 159.9 523.2 Fair Value Option Investments: Limited Liability Companies and Limited Partnerships Hedge Funds — — — 164.5 164.5 Other Investments: Trading Securities 4.7 — — — 4.7 Total $ 323.9 $ 4,289.6 $ 606.8 324.4 $ 5,544.7

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value Inputs, Assets, The table below presents quantitative information about the significant unobservable inputs utilized by the Quantitative Information Company in determining fair values for fixed maturity investments in corporate securities classified as Level 3 at December 31, 2016.

Weighted Unobservable Total Range of Unobservable Average DOLLARS IN MILLIONS Input Fair Value Inputs Yield Market Investment-grade Yield $ 106.1 2.7% - 5.1% 3.8% Non-investment-grade: Market Senior Debt Yield 142.2 4.8 - 14.0 9.6 Market Junior Debt Yield 143.3 9.5 - 20.0 13.0 Market Collateralized Loan Obligations Yield 103.5 3.7 - 9.9 6.3 Other Various 16.0 Total Fixed Maturity Investments in Corporate Securities $ 511.1

NOTE 22. FAIR VALUE MEASUREMENTS (Continued)

Fair Value, Assets Measured Information by security type pertaining to the changes in the fair value of the Company’s investments classified on Recurring Basis, as Level 3 for the year ended December 31, 2016 is presented below.

Unobservable Input Fixed Maturities Equity Securities Reconciliation States Corporate and Other Preferred Bonds Political Redeemable Collateralized Mortgage- and Other DOLLARS IN and Sub- Preferred Loan and Asset- Common Equity MILLIONS Notes divisions Stocks Obligations backed Stocks Interests Total Balance at Beginning of Year $ 436.3 $ — $ 3.8 $ 87.3 $ 3.8 $ 30.0 $ 45.6 $606.8 Total Gains (Losses): Included in Consolidated Statements of Income (23.0) (0.3) — — 0.4 (1.7) (1.6) (26.2)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Included in Other Comprehensive Income 0.9 — — 4.3 (0.3) 3.4 (2.4) 5.9 Purchases 203.7 — — 29.1 — 7.9 3.9 244.6 Settlements (85.4) — (3.2) (5.0) (3.0) (5.2) — (101.8) Sales (114.5) — — (1.9) — (4.7) (4.6) (125.7) Transfers into Level 3 — 4.1 — — — — — 4.1 Transfers out of Level 3 (14.8) — — (10.3) (0.9) — — (26.0) Balance at End of Year $ 403.2 $ 3.8 $ 0.6 $ 103.5 $ — $ 29.7 $ 40.9 $581.7

Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the year ended December 31, 2015 is presented below.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Quarterly Financial 12 Months Ended Information (Tables) Dec. 31, 2016 Quarterly Financial Data [Abstract] Schedule of Quarterly Year Financial Information Three Months Ended (Unaudited) Ended DOLLARS IN MILLIONS, EXCEPT PER SHARE Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, AMOUNTS 2016 2016 2016 2016 2016 Revenues: Earned Premiums $ 546.0 $ 553.7 $ 558.9 $ 561.4 $2,220.0 Net Investment Income 67.0 73.7 77.7 79.9 298.3 Other Income 0.8 0.6 0.8 1.0 3.2 Net Realized Gains on Sales of Investments 6.8 5.6 11.6 9.1 33.1 Other-than-temporary Impairment Losses: Total Other-than-temporary Impairment Losses (9.6) (6.4) (8.3) (8.7) (33.0) Portion of Losses Recognized in Other Comprehensive Income 0.3 — — — 0.3 Net Impairment Losses Recognized in Earnings (9.3) (6.4) (8.3) (8.7) (32.7) Total Revenues 611.3 627.2 640.7 642.7 2,521.9 Expenses: Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses 436.2 436.1 490.2 418.3 1,780.8 Insurance Expenses 159.3 167.8 161.7 158.5 647.3 Interest and Other Expenses 22.3 20.7 22.0 25.3 90.3 Total Expenses 617.8 624.6 673.9 602.1 2,518.4 Income (Loss) from Continuing Operations before Income Taxes (6.5) 2.6 (33.2) 40.6 3.5 Income Tax Benefit (Expense) 4.3 1.5 14.9 (11.5) 9.2 Income (Loss) from Continuing Operations (2.2) 4.1 (18.3) 29.1 12.7 Income (Loss) from Discontinued Operations 0.1 (0.1) 2.0 2.1 4.1 Net Income (Loss) $ (2.1) $ 4.0 $ (16.3) $ 31.2 $ 16.8 Income (Loss) from Continuing Operations Per Unrestricted Share: Basic $ (0.04) $ 0.08 $ (0.36) $ 0.56 $ 0.25 Diluted $ (0.04) $ 0.08 $ (0.36) $ 0.56 $ 0.25 Net Income (Loss) Per Unrestricted Share: Basic $ (0.04) $ 0.08 $ (0.32) $ 0.60 $ 0.33 Diluted $ (0.04) $ 0.08 $ (0.32) $ 0.60 $ 0.33 Dividends Paid to Shareholders Per Share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

NOTE 25. QUARTERLY FINANCIAL INFORMATION (Unaudited) (Continued)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Summary Of Accounting 3 Months Ended 12 Months Ended Policies And Accounting Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Changes (Details) - USD ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ in Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Accounting Policy Disclosures [Line Items] Reinsurance Recoverables, Including $ $ $ 106.4$ 108.3 Reinsurance Premium Paid 106.4 108.3 Accrued Investment Income Receivable 70.8 68.5 70.8 68.5 Deferred Policy Acquisition Costs 332.0 316.4 332.0 316.4 Write-off of long-lived asset $ 0.0 $ 0.0 $ 0.0 0.0 11.1 $ 54.6 11.1 Expected Amortization Expense of Ending Present Value of Future Insurance Profits, Net of Interest Accrued [Abstract] Policyholders’ Benefits and Incurred $ $ $ $ $ $ $ 418.3 416.0 1,780.81,467.6 Losses and Loss Adjustment Expenses 490.2436.1436.2 378.8375.1297.7 1,261.7 Life Insurance Product Line [Member] Accounting Policy Disclosures [Line Items] Present value of the future profits 28.9 32.5 28.9 32.5 embedded in life insurance in force Expected Amortization Expense of Ending Present Value of Future Insurance Profits, Net of Interest Accrued [Abstract] 2017 3.1 2018 2.8 2019 2.4 2020 2.0 2021 1.8 Property and Casualty Insurance [Member] Accounting Policy Disclosures [Line Items] Present value of the future profits 9.0 11.2 9.0 11.2 embedded in life insurance in force Broker Relationships [Member] Accounting Policy Disclosures [Line Items] Assets acquired $ 16.8 18.1 $ 16.8 18.1 Useful life of intangibles acquired (in 15 years) years Minimum [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Accounting Policy Disclosures [Line Items] Useful life of intangibles acquired (in 2 years years) Minimum [Member] | Traditional Life [Member] Accounting Policy Disclosures [Line Items] Liability for Future Policy Benefits, 3.00% 3.00% Interest Rate Maximum [Member] Accounting Policy Disclosures [Line Items] Useful life of intangibles acquired (in 5 years years) Maximum [Member] | Traditional Life [Member] Accounting Policy Disclosures [Line Items] Liability for Future Policy Benefits, 7.00% 7.00% Interest Rate Change in Accounting Method Accounted for as Change in Estimate [Member] Accounting Policy Disclosures [Line Items] Pension Expense $ (2.7) Change in Accounting Estimate, Use of Death Master File in Reserving Process [Member] Expected Amortization Expense of Ending Present Value of Future Insurance Profits, Net of Interest Accrued [Abstract] Policyholders’ Benefits and Incurred 77.8 Losses and Loss Adjustment Expenses Premium Deficiency [Member] Accounting Policy Disclosures [Line Items] Deferred Policy Acquisition Costs $ $ $ (9.7) $ (9.0) (9.7) (9.0)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Acquisition of Business May 07, Apr. 30, Dec. 31, (Details) - USD ($) 2015 2015 2015 $ in Millions Business Combinations [Abstract] Business Acquisition, Percentage of Voting Interests Acquired 100.00% Payments to Acquire Businesses, Gross $ 71.0 Business Combination, Cash Held in Escrow, Indemnification $ 17.5 Obligation Capital Contributed to Subsidiary $ 75.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Acquisition of Business Assets Acquired and Dec. 31, Dec. 31, Apr. 30, Liabilities Assumed (Details) 2016 2015 2015 - USD ($) $ in Millions Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and $ 71.0 Liabilities Assumed, Net Business Combination, Indemnification Assets, Amount as of Acquisition 5.4 Date Business Combination, Indemnification Asset $ 16.0 $ 15.9 Investments [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and 187.0 Liabilities Assumed, Assets Cash [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and 13.4 Liabilities Assumed, Assets Premiums Receivable [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and 44.4 Liabilities Assumed, Assets Receivables Other Than Premium Receivables [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and 52.8 Liabilities Assumed, Assets Finite-Lived Intangible Assets [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and $ 19.3 $ 22.0 32.6 Liabilities Assumed, Assets Goodwill [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and 11.2 Liabilities Assumed, Assets Current Income Tax Asset [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and 1.4 Liabilities Assumed, Assets Other Assets Acquired [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and 5.9 Liabilities Assumed, Assets Property and Casualty Insurance Reserves [Member] Business Acquisition [Line Items]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Business Combination, Recognized Identifiable Assets Acquired and (155.8) Liabilities Assumed, Liabilities Unearned Premiums [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and (85.6) Liabilities Assumed, Liabilities Liabilities for Income Taxes [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and (1.5) Liabilities Assumed, Liabilities Other Liabilities [Member] Business Acquisition [Line Items] Business Combination, Recognized Identifiable Assets Acquired and (34.8) Liabilities Assumed, Liabilities General Indemnification [Member] Business Acquisition [Line Items] Business Combination, Indemnification Assets, Range of Outcomes, Value, 12.5 High Employee Related Matters [Member] Business Acquisition [Line Items] Business Combination, Indemnification Assets, Range of Outcomes, Value, $ 5.0 High

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Acquisition of Business 12 Months Intangible Assets Acquired Ended (Details) - USD ($) Dec. 31, Apr. 30, Dec. 31, 2016 $ in Millions 2015 2015 Broker Relationships [Member] Schedule of Intangible Assets Acquired by Class [Line Items] Business Combination, Recognized Identifiable Assets Acquired and $ 16.8 $ 18.1 $ 18.9 Liabilities Assumed, Assets Useful life of intangibles acquired (in years) 15 years Intangible Assets Arising from Insurance Contracts Acquired in Business Combination [Member] Schedule of Intangible Assets Acquired by Class [Line Items] Business Combination, Recognized Identifiable Assets Acquired and $ 0.0 0.2 9.2 Liabilities Assumed, Assets Other Intangible Assets [Member] Schedule of Intangible Assets Acquired by Class [Line Items] Business Combination, Recognized Identifiable Assets Acquired and 2.5 3.7 4.5 Liabilities Assumed, Assets Finite-Lived Intangible Assets [Member] Schedule of Intangible Assets Acquired by Class [Line Items] Business Combination, Recognized Identifiable Assets Acquired and $ 19.3 $ 22.0 $ 32.6 Liabilities Assumed, Assets Minimum [Member] Schedule of Intangible Assets Acquired by Class [Line Items] Useful life of intangibles acquired (in years) 2 years Maximum [Member] Schedule of Intangible Assets Acquired by Class [Line Items] Useful life of intangibles acquired (in years) 5 years

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investments - Amortized Cost and Estimated Fair Dec. 31, 2016 Dec. 31, 2015 Value of investments (Details) - USD ($) Schedule of Available-for-sale Securities [Line Items] Amortized Cost $ $ 4,846,800,0004,560,700,000 Gross Unrealized Gains 324,600,000 341,600,000 Gross Unrealized Losses (46,500,000) (50,000,000) Fair Value 5,124,900,0004,852,300,000 Accrued Expenses and Other Liabilities 453,200,000 472,400,000 Other Receivables 198,600,000 193,200,000 Available-for-sale-Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Securities that have had Recognized Credit Losses in Earnings, 0 0 Aggregate Losses Equity Securities [Member] Schedule of Available-for-sale Securities [Line Items] Accrued Expenses and Other Liabilities 0 0 Other Receivables 200,000 0 Investments in Fixed Maturities [Member] Schedule of Available-for-sale Securities [Line Items] Accrued Expenses and Other Liabilities 100,000 5,600,000 Other Receivables 2,700,000 0 US Government and Government Agencies and Authorities [Member] Schedule of Available-for-sale Securities [Line Items] Amortized Cost 321,200,000 298,000,000 Gross Unrealized Gains 22,300,000 26,200,000 Gross Unrealized Losses (7,200,000) (3,600,000) Fair Value 336,300,000 320,600,000 States and Political Subdivisions [Member] Schedule of Available-for-sale Securities [Line Items] Amortized Cost 1,640,600,0001,513,700,000 Gross Unrealized Gains 88,400,000 111,600,000 Gross Unrealized Losses (14,100,000) (2,700,000) Fair Value 1,714,900,0001,622,600,000 Foreign Government Debt Securities [Member] Schedule of Available-for-sale Securities [Line Items] Amortized Cost 3,500,000 Gross Unrealized Gains 0 Gross Unrealized Losses (100,000) Fair Value 3,400,000 Corporate Bonds and Notes [Member] Schedule of Available-for-sale Securities [Line Items] Amortized Cost 2,758,900,0002,651,500,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Gross Unrealized Gains 209,900,000 202,000,000 Gross Unrealized Losses (24,000,000) (40,700,000) Fair Value 2,944,800,0002,812,800,000 Redeemable Preferred Stocks [Member] Schedule of Available-for-sale Securities [Line Items] Amortized Cost 500,000 3,700,000 Gross Unrealized Gains 100,000 100,000 Gross Unrealized Losses 0 0 Fair Value 600,000 3,800,000 Collateralized Loan Obligations [Member] Schedule of Available-for-sale Securities [Line Items] Amortized Cost 121,200,000 90,000,000 Gross Unrealized Gains 2,700,000 300,000 Gross Unrealized Losses (1,100,000) (3,000,000) Fair Value 122,800,000 87,300,000 Other Mortgage and Asset-backed Securities [Member] Schedule of Available-for-sale Securities [Line Items] Amortized Cost 900,000 3,800,000 Gross Unrealized Gains 1,200,000 1,400,000 Gross Unrealized Losses 0 0 Fair Value 2,100,000 5,200,000 Collateralized Debt Obligations [Member] Schedule of Available-for-sale Securities [Line Items] Fair Value 900,000 3,800,000 Non-governmental Residential Mortgage-backed Securities [Member] Schedule of Available-for-sale Securities [Line Items] Fair Value $ 1,200,000 1,300,000 Other Asset Backed Securities [Member] Schedule of Available-for-sale Securities [Line Items] Fair Value $ 100,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investments - Schedule of Contractual Maturity Dec. 31, Dec. 31, (Details) - USD ($) 2016 2015 $ in Millions Schedule of Available-for-sale Securities [Line Items] Due in One Year or Less, Amortized Cost $ 101.6 Due in One Year or Less, Fair Value 102.8 Due after One Year to Five Years, Amortized Cost 836.7 Due after One Year to Five Years, Fair Value 867.0 Due after Five Years to Ten Years, Amortized Cost 1,608.6 Due after Five Years to Ten Years, Fair Value 1,652.4 Due after Ten Years, Amortized Cost 2,038.2 Due after Ten Years, Fair Value 2,233.0 Asset-backed Securities Not Due at a Single Maturity Date, Amortized Cost 261.7 Asset-backed Securities Not Due at a Single Maturity Date, Fair Value 269.7 Amortized Cost 4,846.8 $ 4,560.7 Investments in Fixed Maturities, Fair Value 5,124.9 $ 4,852.3 Government National Mortgage Association Certificates and Obligations (GNMA) [Member] Schedule of Available-for-sale Securities [Line Items] Asset-backed Securities Not Due at a Single Maturity Date, Fair Value 126.2 Federal National Mortgage Association Certificates and Obligations (FNMA) [Member] Schedule of Available-for-sale Securities [Line Items] Asset-backed Securities Not Due at a Single Maturity Date, Fair Value 13.9 Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] Schedule of Available-for-sale Securities [Line Items] Asset-backed Securities Not Due at a Single Maturity Date, Fair Value 4.8 Other Non-Governmental Issuers [Member] Schedule of Available-for-sale Securities [Line Items] Asset-backed Securities Not Due at a Single Maturity Date, Fair Value $ 124.8

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investments - Unrealized Gains and Gross Unrealized Losses in Investment in Dec. 31, Dec. 31, Equity Securities (Details) - 2016 2015 USD ($) $ in Millions Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost $ 434.4 $ 486.9 Gross Unrealized Gains 52.9 43.3 Gross Unrealized Losses (5.6) (7.0) Equity Securities at Fair Value 481.7 523.2 Exchange Traded Funds [Member] Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost 136.1 179.7 Gross Unrealized Gains 9.6 1.1 Gross Unrealized Losses (1.3) (3.7) Equity Securities at Fair Value 144.4 177.1 Limited Liability Companies and Limited Partnerships [Member] Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost 183.3 181.0 Gross Unrealized Gains 29.2 25.0 Gross Unrealized Losses (2.9) (0.5) Equity Securities at Fair Value 209.6 205.5 Finance, Insurance and Real Estate [Member] | Preferred Stock [Member] Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost 58.1 80.8 Gross Unrealized Gains 2.3 4.9 Gross Unrealized Losses (0.8) (0.8) Equity Securities at Fair Value 59.6 84.9 Finance, Insurance and Real Estate [Member] | Common Stock [Member] Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost 31.2 18.9 Gross Unrealized Gains 2.3 5.3 Gross Unrealized Losses 0.0 (1.0) Equity Securities at Fair Value 33.5 23.2 All Industries Other than Finance, Insurance and Real Estate [Member] | Preferred Stock [Member] Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost 18.5 17.1 Gross Unrealized Gains 4.9 2.7 Gross Unrealized Losses (0.5) (0.8) Equity Securities at Fair Value 22.9 19.0 All Industries Other than Finance, Insurance and Real Estate [Member] | Common Stock [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost 7.2 Gross Unrealized Gains 4.6 Gross Unrealized Losses (0.1) Equity Securities at Fair Value $ 11.7 Manufacturing [Member] | Common Stock [Member] Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost 0.7 Gross Unrealized Gains 1.0 Gross Unrealized Losses 0.0 Equity Securities at Fair Value 1.7 All Industries Other than Manufacturing and Finance, Insurance and Real Estate [Member] | Common Stock [Member] Schedule of Available-for-sale Securities [Line Items] Equity Securities at Cost 8.7 Gross Unrealized Gains 3.3 Gross Unrealized Losses (0.2) Equity Securities at Fair Value $ 11.8

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investments - Aging of Unrealized Losses on Investments in Fixed Dec. 31, 2016 Dec. 31, 2015 Maturities and Equity Securities (Details) - USD ($) Schedule of Available-for-sale Securities [Line Items] Unsettled purchases or sales of Investments in fixed maturities $ 453,200,000$ 472,400,000 Other receivables 198,600,000 193,200,000 Fair Value Less Than 12 Months 1,273,900,0001,195,800,000 12 Months or Longer 190,300,000 172,000,000 Total 1,464,200,0001,367,800,000 Unrealized Losses Less Than 12 Months (40,500,000) (39,300,000) 12 Months or Longer (11,600,000) (17,700,000) Total (52,100,000) (57,000,000) Unrealized losses related to securities for which the Company has recognized credit 100,000 200,000 losses in earnings Available-for-sale-Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Securities that have had Recognized Credit Losses in Earnings, 0 0 Aggregate Losses US Government and Government Agencies and Authorities [Member] Fair Value Less Than 12 Months 117,700,000 56,600,000 12 Months or Longer 1,100,000 24,100,000 Total 118,800,000 80,700,000 Unrealized Losses Less Than 12 Months (7,200,000) (1,600,000) 12 Months or Longer 0 (2,000,000) Total (7,200,000) (3,600,000) States and Political Subdivisions [Member] Fair Value Less Than 12 Months 432,700,000 131,000,000 12 Months or Longer 300,000 900,000 Total 433,000,000 131,900,000 Unrealized Losses Less Than 12 Months (14,100,000) (2,600,000) 12 Months or Longer 0 (100,000) Total (14,100,000) (2,700,000) Foreign Government Debt Securities [Member] Fair Value Less Than 12 Months 2,100,000 12 Months or Longer 0 Total 2,100,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Unrealized Losses Less Than 12 Months (100,000) 12 Months or Longer 0 Total (100,000) Corporate Bonds and Notes [Member] Fair Value Less Than 12 Months 663,300,000 783,800,000 12 Months or Longer 107,300,000 133,600,000 Total 770,600,000 917,400,000 Unrealized Losses Less Than 12 Months (16,600,000) (26,000,000) 12 Months or Longer (7,400,000) (14,700,000) Total (24,000,000) (40,700,000) Redeemable Preferred Stocks [Member] Fair Value Less Than 12 Months 0 12 Months or Longer 0 Total 0 Unrealized Losses Less Than 12 Months 0 12 Months or Longer 0 Total 0 Collateralized Loan Obligations [Member] Fair Value Less Than 12 Months 19,900,000 57,400,000 12 Months or Longer 21,400,000 800,000 Total 41,300,000 58,200,000 Unrealized Losses Less Than 12 Months (700,000) (2,900,000) 12 Months or Longer (400,000) (100,000) Total (1,100,000) (3,000,000) Other Mortgage and Asset-backed Securities [Member] Fair Value Less Than 12 Months 0 12 Months or Longer 300,000 Total 300,000 Unrealized Losses Less Than 12 Months 0 12 Months or Longer 0 Total 0 Investments in Fixed Maturities [Member] Schedule of Available-for-sale Securities [Line Items] Unsettled purchases or sales of Investments in fixed maturities 100,000 5,600,000 Other receivables 2,700,000 0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value Less Than 12 Months 1,235,700,0001,028,800,000 12 Months or Longer 130,100,000 159,700,000 Total 1,365,800,0001,188,500,000 Unrealized Losses Less Than 12 Months (38,700,000) (33,100,000) 12 Months or Longer (7,800,000) (16,900,000) Total (46,500,000) (50,000,000) Investments in Fixed Maturities [Member] | External Credit Rating, Investment Grade [Member] Unrealized Losses Total (33,800,000) (33,500,000) Investments in Fixed Maturities [Member] | External Credit Rating, Non Investment Grade [Member] Unrealized Losses Total $ $ (12,700,000) (16,500,000) Percentage of unrealized loss position to amortized cost basis of available for sale 5.00% 8.00% security average Preferred Stock [Member] | Finance, Insurance and Real Estate [Member] Fair Value Less Than 12 Months $ 15,600,000 $ 2,700,000 12 Months or Longer 7,300,000 12,300,000 Total 22,900,000 15,000,000 Unrealized Losses Less Than 12 Months (500,000) 0 12 Months or Longer (300,000) (800,000) Total (800,000) (800,000) Preferred Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] Fair Value Less Than 12 Months 5,300,000 7,300,000 12 Months or Longer 0 0 Total 5,300,000 7,300,000 Unrealized Losses Less Than 12 Months (500,000) (800,000) 12 Months or Longer 0 0 Total (500,000) (800,000) Common Stock [Member] | Finance, Insurance and Real Estate [Member] Fair Value Less Than 12 Months 2,800,000 16,300,000 12 Months or Longer 0 0 Total 2,800,000 16,300,000 Unrealized Losses Less Than 12 Months 0 (1,000,000)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months or Longer 0 0 Total 0 (1,000,000) Common Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] Fair Value Less Than 12 Months 600,000 2,800,000 12 Months or Longer 500,000 0 Total 1,100,000 2,800,000 Unrealized Losses Less Than 12 Months (100,000) (200,000) 12 Months or Longer 0 0 Total (100,000) (200,000) Exchange Traded Funds [Member] Fair Value Less Than 12 Months 0 135,200,000 12 Months or Longer 18,600,000 0 Total 18,600,000 135,200,000 Unrealized Losses Less Than 12 Months 0 (3,700,000) 12 Months or Longer (1,300,000) 0 Total (1,300,000) (3,700,000) Limited Liability Companies and Limited Partnerships [Member] Fair Value Less Than 12 Months 13,900,000 2,700,000 12 Months or Longer 33,800,000 0 Total 47,700,000 2,700,000 Unrealized Losses Less Than 12 Months (700,000) (500,000) 12 Months or Longer (2,200,000) 0 Total (2,900,000) (500,000) Equity Securities [Member] Schedule of Available-for-sale Securities [Line Items] Unsettled purchases or sales of Investments in fixed maturities 0 0 Other receivables 200,000 0 Fair Value Less Than 12 Months 38,200,000 167,000,000 12 Months or Longer 60,200,000 12,300,000 Total 98,400,000 179,300,000 Unrealized Losses Less Than 12 Months (1,800,000) (6,200,000) 12 Months or Longer (3,800,000) (800,000) Total $ (5,600,000) $ (7,000,000)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investments - OTTI losses 12 Months Ended Recognized in Accumulated Other Comprehensive Income (Details) - Fixed Dec. 31, Dec. 31, Dec. 31, Maturities [Member] - USD 2016 2015 2014 ($) $ in Millions Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] Balance at Beginning of Year $ 5.1 $ 5.3 $ 9.9 Additions for Previously Unrecognized OTTI Credit Losses 2.7 0.2 2.4 Increases to Previously Recognized OTTI Credit Losses 0.0 0.0 0.6 Reduction due to Intent to Sell Investments (6.3) (0.4) (2.4) Reductions for Investments Sold During Period (0.1) 0.0 (5.2) Balance at End of Year $ 1.4 $ 5.1 $ 5.3

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investments - Equity Method 12 Months Ended LLCs (Details) - USD ($) Dec. 31, Dec. 31, Dec. 31, $ in Millions 2016 2015 2014 Investments, Debt and Equity Securities [Abstract] Equity Method Investment, Summarized Financial Information, Assets $ 2,618.1 $ 3,801.7 Equity Method Investment, Summarized Financial Information, Liabilities 828.0 879.1 Equity Method Investment, Summarized Financial Information, Net Income 85.0 159.6 $ 96.2 (Loss) Equity method limited liability investments at cost plus cumulative 175.9 $ 190.6 undistributed earnings Outstanding commitments to fund equity method limited liability $ 76.3 investments

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investments - Other Investments Carrying Values Dec. 31, 2016Dec. 31, 2015 (Details) - USD ($) $ in Millions Investments, Debt and Equity Securities [Abstract] Loans to Policyholders at Unpaid Principal $ 294.2 $ 288.4 Real Estate at Depreciated Cost 140.2 149.8 Trading Securities at Fair Value 5.3 4.7 Other 0.2 0.3 Total Investments $ 439.9 $ 443.2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Goodwill (Details) - USD ($) Dec. 31, 2016Dec. 31, 2015 $ in Millions Goodwill [Roll Forward] Goodwill $ 323.0 $ 323.0 Property and Casualty Insurance [Member] Goodwill [Roll Forward] Goodwill 103.6 103.6 Life and Health Insurance [Member] Goodwill [Roll Forward] Goodwill $ 219.4 $ 219.4

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property and Casualty 12 Months Ended Insurance Reserves (Details) Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2014 - USD ($) 2016 2015 2014 Beginning Property and Casualty Insurance Reserves: [Abstract] Gross of Reinsurance and Indemnification at Beginning $ 862,800,000$ 733,900,000$ 843,500,000 of Year Less Reinsurance Recoverables and 108,300,000 Indemnification at Beginning of Year Property and Casualty Insurance Reserves, Net of Reinsurance and 810,800,000 679,000,000 780,100,000 Indemnification at Beginning of Year Property and Casualty Insurance Reserves Acquired, $ $ 0 $ 0 Net of Reinsurance and 125,400,000 Indemnification Incurred Losses and LAE related to: Prior Years - Incurred Losses (20,700,000) (20,100,000) (57,100,000) and LAE Total Incurred Losses and 1,337,900,0001,103,200,000908,300,000 LAE Paid Losses and LAE related to: Prior Years - Paid Losses and 436,500,000 373,600,000 369,600,000 LAE Total Paid Losses and LAE 1,267,500,0001,096,800,0001,009,400,000 Property and Casualty Insurance Reserves, Net of $ $ $ 810,800,000 679,000,000 780,100,000 Reinsurance and 881,200,000810,800,000679,000,000 Indemnification at End of Year Plus Reinsurance and Indemnification Recoverables 106,400,000 108,300,000 at End of Year Property and Casualty Insurance Reserves, Gross of 931,400,000 862,800,000 733,900,000 Reinsurance at End of Year Continuing Operations [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Incurred Losses and LAE related to: Current Year - Incurred Losses 1,358,600,0001,123,300,000965,400,000 and LAE Prior Years - Incurred Losses (14,400,000) (11,500,000) (53,500,000) and LAE Paid Losses and LAE related to: Current Year - Paid Losses and 831,000,000 723,200,000 639,800,000 LAE Prior Years - Paid Losses and 431,900,000 366,200,000 360,400,000 LAE Discontinued Operations [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses (6,300,000) (8,600,000) (3,600,000) and LAE Paid Losses and LAE related to: Prior Years - Paid Losses and 4,600,000 7,400,000 9,200,000 LAE Alliance United [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses 7,700,000 and LAE Catastrophe [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses (19,300,000) (7,800,000) (14,700,000) and LAE Total Incurred Losses and 95,800,000 60,500,000 83,800,000 LAE Property and Casualty Insurance [Member] Beginning Property and Casualty Insurance Reserves: [Abstract] Less Reinsurance Recoverables and 52,000,000 54,900,000 63,400,000 Indemnification at Beginning of Year Paid Losses and LAE related to:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Plus Reinsurance and Indemnification Recoverables 50,200,000 52,000,000 54,900,000 at End of Year Property and Casualty, Personal Insurance Product Line [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses (16,800,000) (13,300,000) (50,900,000) and LAE Property and Casualty, Commercial Insurance Product Line [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses (3,900,000) (6,800,000) (6,200,000) and LAE Property and Casualty, Commercial Insurance Product Line [Member] | Continuing Operations [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses 2,400,000 1,800,000 (2,600,000) and LAE Property and Casualty, Commercial Insurance Product Line [Member] | Discontinued Operations [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses (6,300,000) (8,600,000) (3,600,000) and LAE Personal Automobile [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses 11,300,000 (1,800,000) (31,600,000) and LAE Homeowners [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses (20,000,000) (10,800,000) (14,800,000) and LAE Homeowners [Member] | Catastrophe [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Incurred Losses and LAE related to: Prior Years - Incurred Losses (16,800,000) and LAE Other Personal Lines [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses $ (8,100,000) (700,000) $ (4,500,000) and LAE Property and Casualty, Personal Insurance Product Line, Excluding Alliance United [Member] Incurred Losses and LAE related to: Prior Years - Incurred Losses $ and LAE (21,000,000)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property and Casualty Dec. Dec. Dec. Dec. Dec. Insurance Reserves Short- 31, 31, 31, 31, 31, duration Insurance 2016 2015 2014 2013 2012 Contracts, Claims USD USD USD USD USD Development (Details) ($) ($) ($) ($) ($) $ in Millions claim Claims Development [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and $ 807.5 Allocated Claim Adjustment Expense, Net Preferred Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and 10.9 Allocated Claim Adjustment Expense, Net, Not Separately Presented Short-duration Insurance Contracts, Liability for Unpaid Claims and 219.3 Allocated Claim Adjustment Expense, Net Preferred Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and (0.1) Allocated Claim Adjustment Expense, Net, Not Separately Presented Short-duration Insurance Contracts, Liability for Unpaid Claims and 0.8 Allocated Claim Adjustment Expense, Net Non-standard Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and 0.0 Allocated Claim Adjustment Expense, Net, Not Separately Presented Short-duration Insurance Contracts, Liability for Unpaid Claims and 9.3 Allocated Claim Adjustment Expense, Net Non-standard Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and 1.5 Allocated Claim Adjustment Expense, Net, Not Separately Presented Short-duration Insurance Contracts, Liability for Unpaid Claims and 371.7 Allocated Claim Adjustment Expense, Net Homeowners [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and 3.5 Allocated Claim Adjustment Expense, Net, Not Separately Presented Short-duration Insurance Contracts, Liability for Unpaid Claims and 81.7 Allocated Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2012 [Member] | Preferred Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim $ $ $ $ 282.1 Adjustment Expense, Net 282.2 284.4 290.9 305.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (0.8) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 56,772 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 272.9 264.3 245.5 207.6 117.8 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2012 [Member] | Preferred Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 164.3 164.2 164.1 163.9 163.9 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 0.1 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 89,703 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 164.3 164.2 164.2 164.4 160.5 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2012 [Member] | Non- standard Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 98.2 98.3 98.4 98.1 96.4 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 0.0 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 35,840 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 98.2 98.2 98.2 98.3 91.2 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2012 [Member] | Non- standard Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 244.0 243.0 242.0 242.1 243.0 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (0.2) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 63,019 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 242.6 238.9 228.9 202.6 112.8 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2012 [Member] | Homeowners [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 226.7 227.5 231.0 235.9 250.2 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 0.1 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 27,833 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ $ 225.8 225.2 222.3 216.0 Claim Adjustment Expense, Net 165.9

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Short-duration Insurance Contracts, Accident Year 2013 [Member] | Preferred Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 251.6 250.1 251.1 265.4 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 0.0 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 51,126 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 234.1 216.3 182.2 107.2 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2013 [Member] | Preferred Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 138.4 138.5 138.5 139.7 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 0.1 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 78,779 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 138.5 138.6 138.9 137.0 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2013 [Member] | Non- standard Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 99.8 100.0 100.3 100.1 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (0.1) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 36,179 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 99.7 99.9 100.2 93.4 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2013 [Member] | Non- standard Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 249.5 248.3 247.1 250.5 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (0.5) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 67,058 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 244.2 233.8 208.2 117.8 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2013 [Member] | Homeowners [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 167.5 169.4 172.8 180.8 Adjustment Expense, Net

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (0.1) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 21,976 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ $ 164.7 162.5 156.5 Claim Adjustment Expense, Net 122.4 Short-duration Insurance Contracts, Accident Year 2014 [Member] | Preferred Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 200.2 198.3 202.1 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (0.9) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 39,865 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 168.8 143.3 85.8 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2014 [Member] | Preferred Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 121.4 121.6 122.0 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 0.1 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 67,205 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 121.5 121.8 121.0 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2014 [Member] | Non- standard Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 104.3 104.7 105.8 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (0.7) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 38,042 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 105.1 105.9 97.1 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2014 [Member] | Non- standard Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 267.1 262.9 255.0 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (5.4) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 76,846 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 245.5 210.8 117.4 Claim Adjustment Expense, Net

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Short-duration Insurance Contracts, Accident Year 2014 [Member] | Homeowners [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 205.0 208.5 211.1 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (0.1) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 22,432 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ $ 200.1 194.4 Claim Adjustment Expense, Net 149.2 Short-duration Insurance Contracts, Accident Year 2015 [Member] | Preferred Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 171.8 168.3 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (6.3) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 32,484 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 122.4 73.1 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2015 [Member] | Preferred Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 100.7 101.2 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 0.4 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 53,419 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 101.0 100.1 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2015 [Member] | Non- standard Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 143.3 143.2 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (1.6) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 42,863 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 143.8 130.0 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2015 [Member] | Non- standard Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 379.8 379.4 Adjustment Expense, Net

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (10.4) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 91,832 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 304.7 167.7 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2015 [Member] | Homeowners [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 164.9 178.9 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (1.8) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 17,432 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ $ 154.4 Claim Adjustment Expense, Net 116.9 Short-duration Insurance Contracts, Accident Year 2016 [Member] | Preferred Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 162.1 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (26.9) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 30,278 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 61.2 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2016 [Member] | Preferred Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 106.6 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 4.2 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 49,267 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 105.2 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2016 [Member] | Non- standard Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 177.9 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (4.0) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 52,039 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 167.4 Claim Adjustment Expense, Net

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Short-duration Insurance Contracts, Accident Year 2016 [Member] | Non- standard Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 435.7 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ (72.2) Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 108,062 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 168.9 Claim Adjustment Expense, Net Short-duration Insurance Contracts, Accident Year 2016 [Member] | Homeowners [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 200.3 Adjustment Expense, Net Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) $ 9.7 Claims Liability, Net Short-duration Insurance Contracts, Number of Reported Claims | claim 16,769 Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 141.2 Claim Adjustment Expense, Net Short-Duration Insurance Contracts, Accident Years 2012 through 2016 [Member] | Preferred Personal Automobile Liability Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 1,067.8 Adjustment Expense, Net Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated 859.4 Claim Adjustment Expense, Net Short-Duration Insurance Contracts, Accident Years 2012 through 2016 [Member] | Preferred Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 631.4 Adjustment Expense, Net Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated 630.5 Claim Adjustment Expense, Net Short-Duration Insurance Contracts, Accident Years 2012 through 2016 [Member] | Non-standard Personal Automobile Physical Damage Insurance [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 623.5 Adjustment Expense, Net Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated 614.2 Claim Adjustment Expense, Net Short-Duration Insurance Contracts, Accident Years 2012 through 2016 [Member] | Non-standard Personal Automobile Liability Insurance [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 1,576.1 Adjustment Expense, Net Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated 1,205.9 Claim Adjustment Expense, Net Short-Duration Insurance Contracts, Accident Years 2012 through 2016 [Member] | Homeowners [Member] Claims Development [Line Items] Short-duration Insurance Contracts, Incurred Claims and Allocated Claim 964.4 Adjustment Expense, Net Short-duration Insurance Contracts, Cumulative Paid Claims and Allocated $ 886.2 Claim Adjustment Expense, Net

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property and Casualty Insurance Reserves Short- duration Insurance Dec. 31, Contracts, Reconciliation of 2016 Claims Development to USD ($) Liability (Details) $ in Millions Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and Allocated Claim Adjustment $ 807.5 Expense, Net Reinsurance Recoverable for Unpaid Claims and Claims Adjustments 47.0 Liability for Claims and Claims Adjustment Expense 931.4 Short-duration Insurance Contracts, Liability for Unpaid Claims and Claims Adjustment Expense, 76.9 Accumulated Unallocated Claim Adjustment Expense Preferred Personal Automobile Liability Insurance [Member] Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and Allocated Claim Adjustment 219.3 Expense, Net Reinsurance Recoverable for Unpaid Claims and Claims Adjustments 28.3 Preferred Personal Automobile Physical Damage Insurance [Member] Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and Allocated Claim Adjustment 0.8 Expense, Net Reinsurance Recoverable for Unpaid Claims and Claims Adjustments 0.0 Non-standard Personal Automobile Liability Insurance [Member] Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and Allocated Claim Adjustment 371.7 Expense, Net Reinsurance Recoverable for Unpaid Claims and Claims Adjustments 10.6 Non-standard Personal Automobile Physical Damage Insurance [Member] Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and Allocated Claim Adjustment 9.3 Expense, Net Reinsurance Recoverable for Unpaid Claims and Claims Adjustments (0.6) Homeowners [Member] Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and Allocated Claim Adjustment 81.7 Expense, Net Reinsurance Recoverable for Unpaid Claims and Claims Adjustments 0.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Short-duration Insurance Product Line [Member] Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] Short-duration Insurance Contracts, Liability for Unpaid Claims and Allocated Claim Adjustment 124.7 Expense, Net Reinsurance Recoverable for Unpaid Claims and Claims Adjustments 8.7 Other Long-duration Insurance Product Line [Member] Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items] Liability for Claims and Claims Adjustment Expense $ 0.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property and Casualty Insurance Reserves Dec. 31, 2016 Historical Claims Duration (Details) Preferred Personal Automobile Liability Insurance [Member] Short-duration Insurance Contracts, Historical Claims Duration [Line Items] Short-duration Insurance Contracts, Historical Claims Duration, Year One 41.50% Short-duration Insurance Contracts, Historical Claims Duration, Year Two 72.20% Short-duration Insurance Contracts, Historical Claims Duration, Year Three 85.80% Short-duration Insurance Contracts, Historical Claims Duration, Year Four 93.40% Short-duration Insurance Contracts, Historical Claims Duration, Year Five 96.70% Preferred Personal Automobile Physical Damage Insurance [Member] Short-duration Insurance Contracts, Historical Claims Duration [Line Items] Short-duration Insurance Contracts, Historical Claims Duration, Year One 98.90% Short-duration Insurance Contracts, Historical Claims Duration, Year Two 100.30% Short-duration Insurance Contracts, Historical Claims Duration, Year Three 100.10% Short-duration Insurance Contracts, Historical Claims Duration, Year Four 100.00% Short-duration Insurance Contracts, Historical Claims Duration, Year Five 100.00% Non-standard Personal Automobile Liability Insurance [Member] Short-duration Insurance Contracts, Historical Claims Duration [Line Items] Short-duration Insurance Contracts, Historical Claims Duration, Year One 44.10% Short-duration Insurance Contracts, Historical Claims Duration, Year Two 81.40% Short-duration Insurance Contracts, Historical Claims Duration, Year Three 93.10% Short-duration Insurance Contracts, Historical Claims Duration, Year Four 97.90% Short-duration Insurance Contracts, Historical Claims Duration, Year Five 99.40% Non-standard Personal Automobile Physical Damage Insurance [Member] Short-duration Insurance Contracts, Historical Claims Duration [Line Items] Short-duration Insurance Contracts, Historical Claims Duration, Year One 92.90% Short-duration Insurance Contracts, Historical Claims Duration, Year Two 100.60% Short-duration Insurance Contracts, Historical Claims Duration, Year Three 100.30% Short-duration Insurance Contracts, Historical Claims Duration, Year Four 99.90% Short-duration Insurance Contracts, Historical Claims Duration, Year Five 100.00% Homeowners [Member] Short-duration Insurance Contracts, Historical Claims Duration [Line Items] Short-duration Insurance Contracts, Historical Claims Duration, Year One 72.10% Short-duration Insurance Contracts, Historical Claims Duration, Year Two 94.30% Short-duration Insurance Contracts, Historical Claims Duration, Year Three 97.60% Short-duration Insurance Contracts, Historical Claims Duration, Year Four 98.80% Short-duration Insurance Contracts, Historical Claims Duration, Year Five 99.60%

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Debt - Debt Outstanding Dec. 31, Dec. 31, (Details) - USD ($) 2016 2015 $ in Millions Debt Instrument [Line Items] Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2016 - $ 751.6 $ 750.6 $770.9; 2015 - $781.3) Senior Notes [Member] | Senior Notes, 6% Due May 15, 2017 [Member] Debt Instrument [Line Items] Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2016 - 359.8 359.1 $770.9; 2015 - $781.3) Senior Notes [Member] | Senior Notes, 4.35 Percent Due February 15, 2025 [Member] Debt Instrument [Line Items] Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2016 - 247.7 247.4 $770.9; 2015 - $781.3) Subordinated Debt [Member] | Subordinated Debenture, 7.375 Percent Due 2054 [Member] Debt Instrument [Line Items] Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2016 - $ 144.1 $ 144.1 $770.9; 2015 - $781.3)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Debt - Interest Expense on 12 Months Ended Debt (Details) - USD ($) Dec. 31, Dec. 31, Dec. 31, $ in Millions 2016 2015 2014 Debt Instrument [Line Items] Interest Costs Incurred $ 45.3 $ 47.3 $ 47.9 Capitalization of Interest (0.9) (0.8) (1.0) Total Interest Expense 44.4 46.5 46.9 Senior Notes [Member] | Senior Notes, 6% Due November 30, 2015 [Member] Debt Instrument [Line Items] Interest Costs Incurred 0.0 3.7 15.5 Senior Notes [Member] | Senior Notes, 6% Due May 15, 2017 [Member] Debt Instrument [Line Items] Interest Costs Incurred 22.3 22.2 22.2 Senior Notes [Member] | Senior Notes, 4.35 Percent Due February 15, 2025 [Member] Debt Instrument [Line Items] Interest Costs Incurred 11.1 9.5 0.0 Subordinated Debt [Member] | Subordinated Debenture, 7.375 Percent Due 2054 [Member] Debt Instrument [Line Items] Interest Costs Incurred 11.1 11.1 9.4 Revolving Credit Facility [Member] Debt Instrument [Line Items] Interest Costs Incurred 0.8 0.8 0.8 Federal Home Loan Bank of Chicago [Member] Debt Instrument [Line Items] Interest Costs Incurred 0.0 0.0 0.0 Federal Home Loan Bank of Dallas [Member] Debt Instrument [Line Items] Interest Costs Incurred $ 0.0 $ 0.0 $ 0.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Debt - Interest Paid on Debt 12 Months Ended (Details) - USD ($) Dec. 31, Dec. 31, Dec. 31, $ in Millions 2016 2015 2014 Debt Instrument [Line Items] Interest Paid $ 44.2 $ 44.1 $ 45.7 Senior Notes [Member] | Senior Notes, 6% Due November 30, 2015 [Member] Debt Instrument [Line Items] Interest Paid 0.0 4.8 15.0 Senior Notes [Member] | Senior Notes, 6% Due May 15, 2017 [Member] Debt Instrument [Line Items] Interest Paid 21.6 21.6 21.6 Senior Notes [Member] | Senior Notes, 4.35 Percent Due February 15, 2025 [Member] Debt Instrument [Line Items] Interest Paid 10.9 5.2 0.0 Subordinated Debt [Member] | Subordinated Debenture, 7.375 Percent Due 2054 [Member] Debt Instrument [Line Items] Interest Paid 11.1 11.1 8.5 Revolving Credit Facility [Member] Debt Instrument [Line Items] Interest Paid 0.6 1.4 0.6 Federal Home Loan Bank of Chicago [Member] Debt Instrument [Line Items] Interest Paid 0.0 0.0 0.0 Federal Home Loan Bank of Dallas [Member] Debt Instrument [Line Items] Interest Paid $ 0.0 $ 0.0 $ 0.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3 Months Ended 12 Months Ended Dec. Sep. Jun. Debt (Details) - USD ($) Feb. 27, Mar. 31, Dec. 31, Dec. 31, Dec. 31, Feb. 24, 2015 31, 30, 30, 2014 2015 2016 2015 2014 201520152015 Debt Instrument [Line Items] Proceeds from Issuances of $ $ $ Debt 10,000,000 345,800,000144,000,000 Repayments of Debt 10,000,000 357,300,0000 Gains (Losses) on $ $ 0 $ 0 $ 0 0 (9,100,000) $ 0 Extinguishment of Debt (9,100,000) Cash Flow Hedges Derivative 1,600,000 Instruments at Fair Value, Net Cash Flow Hedge Gain (Loss) to be Reclassified within 100,000 Twelve Months Notes Payable under Revolving Credit Agreement Debt Instrument [Line Items] Line of credit, outstanding 0 0 0 Subordinated Debt [Member] | Subordinated Debenture, 7.375 Percent Due 2054 [Member] Debt Instrument [Line Items] Debt instrument, face amount $ 150,000,000 Stated interest rate, percentage 7.375% Issuance costs $ 144,000,000 Interest rate, effective 7.69% percentage Senior Notes [Member] Debt Instrument [Line Items] Anticipated 2017 Debt $ Issuance, Face Amount 250,000,000 Anticipated 2017 Debt 10 years Issuance, Term Senior Notes [Member] | Senior Notes, 4.35 Percent Due February 15, 2025 [Member] Debt Instrument [Line Items] Debt instrument, face amount $ 250,000,000.0 Stated interest rate, percentage 4.35% Issuance costs $ 247,300,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Interest rate, effective 4.49% percentage Senior Notes [Member] | Senior Notes, 6% Due November 30, 2015 [Member] Debt Instrument [Line Items] Debt instrument, face amount $ 250,000,000 Stated interest rate, percentage 6.00% Revolving Credit Facility [Member] Debt Instrument [Line Items] Line of credit facility, length 4 years of agreement Line of credit facility, $ maximum borrowing capacity 225,000,000 Federal Home Loan Bank of Chicago [Member] Debt Instrument [Line Items] Proceeds from Issuances of 21,000,000 Debt Repayments of Debt 21,000,000 Federal Home Loan Bank, Advances, Branch of FHLB 0 0 0 Bank, Amount of Advances Federal Home Loan Bank of Dallas [Member] Debt Instrument [Line Items] Proceeds from Issuances of 10,000,000 77,500,000 Debt Repayments of Debt 10,000,000 77,500,000 Federal Home Loan Bank, Advances, Branch of FHLB $ 0 $ 0 $ 0 Bank, Amount of Advances

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Leases (Details) - USD ($) Dec. 31, Dec. 31, Dec. 31, $ in Millions 2016 2015 2014 Operating Leases, Rent Expense, Net [Abstract] Minimum Rental Expense $ 21.2 $ 20.7 $ 21.5 Less: Sublease Rental Income (1.6) (1.7) (1.3) Net Rental Expense 19.6 $ 19.0 $ 20.2 Future Minimum Lease Payments, Capital and Operating Leases Capital Leases, Future Minimum Payments Due, 2017 0.7 Capital Leases, Future Minimum Payments Due, 2018 0.1 Capital Leases, Future Minimum Payments Due, 2019 0.0 Capital Leases, Future Minimum Payments Due, 2020 0.0 Capital Leases, Future Minimum Payments Due, 2021 0.0 Capital Leases, Future Minimum Payments Due, 2022 and Thereafter 0.0 Capital Leases, Total Future Payments 0.8 Less: Imputed Interest (0.1) Present Value of Minimum Capital Lease Payments 0.7 Operating Leases, Future Minimum Payments Due, 2017 17.4 Operating Leases, Future Minimum Payments Due, 2018 13.9 Operating Leases, Future Minimum Payments Due, 2019 11.5 Operating Leases, Future Minimum Payments Due, 2020 9.2 Operating Leases, Future Minimum Payments Due, 2021 7.3 Operating Leases, Future Minimum Payments Due, 2022 and Thereafter 15.2 Operating Leases, Total Future Payments 74.5 Total of minimum rentals to be received in the future under non-cancelable $ 2.1 subleases Office Space [Member] | Minimum [Member] Operating Leased Assets [Line Items] Operating Lease, Term 1 year Office Space [Member] | Maximum [Member] Operating Leased Assets [Line Items] Operating Lease, Term 10 years Equipment [Member] | Minimum [Member] Operating Leased Assets [Line Items] Operating Lease, Term 1 year Equipment [Member] | Maximum [Member] Operating Leased Assets [Line Items] Operating Lease, Term 5 years

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Shareholders' Equity 12 Months Ended (Details) - USD ($) Dec. 31, Dec. 31, Dec. 31, $ / shares in Units, $ in 2016 2015 2014 Millions Schedule of Capitalization, Equity [Line Items] Preferred Stock, shares authorized 20,000,000 Par value of preferred stock (per share) $ 0.1 Common stock, shares authorized 100,000,000100,000,000 Par value of common stock (per share) $ 0.1 $ 0.1 Preferred stock, shares issued 0 0 Preferred stock, shares outstanding 0 0 Common stock, shares outstanding 51,270,940 51,326,751 Stock Repurchased and retired during period, Shares (100,000) (1,200,000) (3,200,000) Repurchases of common stock $ (3.8) $ (43.5) $ (115.5) Company Action Level RBC, as Percentage of Authorized Control Level 200.00% RBC Dividends paid $ 49.2 49.7 51.8 Amount available for dividend payment 269.0 Kemper's Insurance Subsidiaries [Member] Schedule of Capitalization, Equity [Line Items] Cash dividends paid by Kemper's Insurance Subsidiaries to Kemper 104.5 Amount available for dividend payments 133.0 Amount of restricted net assets for consolidated and unconsolidated 2,400.0 subsidiaries Life and Health [Member] Schedule of Capitalization, Equity [Line Items] Statutory capital and surplus for the Company’s life and health insurance 403.7 394.6 subsidiaries Statutory net income for the Company’s life and health insurance 29.7 62.8 100.7 subsidiaries Statutory capital and surplus required 121.4 Property and Casualty Insurance [Member] Schedule of Capitalization, Equity [Line Items] Statutory capital and surplus for the Company’s life and health insurance 928.9 957.7 subsidiaries Statutory net income for the Company’s life and health insurance 1.4 $ 58.9 $ 85.7 subsidiaries Statutory capital and surplus required $ 334.1 Restricted Stock [Member] Schedule of Capitalization, Equity [Line Items] Common stock, shares outstanding 16,000 80,848

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Long-term Equity-based Feb. Compensation (Details) - Dec. 31, Dec. 31, Dec. 31, 04, USD ($) 2016 2015 2014 2017 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Share-based Compensation Arrangement by Share-based Payment $ $ $ 400,000 Award, Options, Exercises in Period, Intrinsic Value 2,000,000 4,600,000 Shares authorized 10,000,000 Shares available for grant 6,762,714 Share-based compensation expense $ $ $ 4,700,000 6,500,0006,400,000 Total compensation cost not yet recognized $ 8,100,000 Total compensation cost not yet recognized, period for recognition 1 year 9 months Annual Awards of Deferred Stock Units to be Issued to each Non- $ 75,000 Employee Director, Aggregate Fair Value Initial grant for non-employee director, shares 4,000 4,000 Automatic annual grant, non-employee directors, options 4,000 4,000 Automatic annual grant, non-employee directors, options, expiration 10 years 10 years date Annual Awards of Deferred Stock Units to be Issued to each Non- 500 500 Employee Director Performance Based Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Reduction in share authorization if maximum performance level is met 682,752 or exceeded (shares) Share-based Compensation Arrangement by Share-based Payment 51,400 Award, Equity Instruments Other than Options, Forfeited in Period Performance Based Restricted Stock Units [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Share-based Compensation Arrangement by Share-based Payment 47,304 Award, Equity Instruments Other than Options, Forfeited in Period Performance Period, 2016 to 2018 [Member] | Performance Based Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Number of Additional Shares To Be Granted If Maximum Perfornance 137,615 Level Is Met or Exceeded Performance Period, 2014 to 2016 [Member] | Performance Based Restricted Stock [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Reduction in share authorization if maximum performance level is met 140,286 or exceeded (shares) Subsequent Event [Member] | Performance Period, 2014 to 2016 [Member] | Performance Based Restricted Stock Units [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Share-based Compensation Arrangement by Share-based Payment 43,207 Award, Equity Instruments Other than Options, Forfeited in Period

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Long-term Equity-based 12 Months Ended Compensation - Black- Scholes Pricing Model For Dec. 31, Dec. 31, Dec. 31, Options (Details) - Stock 2016 2015 2014 Options [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Expected Volatility Rate, Minimum 25.85% 21.31% 25.76% Expected Volatility Rate, Maximum 42.19% 41.65% 44.43% Risk Free Interest Rate, Minimum 0.77% 1.08% 1.07% Risk Free Interest Rate, Maximum 2.01% 1.96% 2.14% Minimum [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Expected Dividend Yield Rate 2.22% 2.37% 2.53% Maximum [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Expected Dividend Yield Rate 3.41% 2.62% 2.60% Employee [Member] | Minimum [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Share-based Compensation Arrangement by Share-based Payment Award, Fair 1 year 4 years 4 years Value Assumptions, Expected Term Employee [Member] | Maximum [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Share-based Compensation Arrangement by Share-based Payment Award, Fair 6 years 6 7 years 7 years Value Assumptions, Expected Term months Director [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Share-based Compensation Arrangement by Share-based Payment Award, Fair 5 years 6 0 years 6 years Value Assumptions, Expected Term months

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Long-term Equity-based 12 Months Ended Compensation - Option and SAR Activity (Details) - USD Dec. 31, Dec. 31, ($) Dec. 31, 2016 2015 2014 $ / shares in Units, $ in Millions Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] Shares Subject to Options at Beginning of Year 1,428,157 Weighted Average Exercise Price Per Share at Beginning of Year $ 39.75 Grants in Period 506,675 Grants in Period, Weighted Average Exercise Price $ 31.09 Exercises in Period 251,522 Exercises in Period, Weighted Average Exercise Price $ 34.04 Forfeitures and Expirations in Period (377,187) Forfeitures and Expirations in Period, Weighted Average Exercise Price $ 43.72 Shares Subject to Options at End of Year 1,306,123 1,428,157 Weighted Average Exercise Price Per Share at End of Year $ 36.35 $ 39.75 Outstanding at End of Year, Weighted Average Remaining Contractual Term 6 years 6 months Outstanding at End of Year, Intrinsic Value $ 11.5 Vested and Expected to Vest, Outstanding at End of Year 1,254,165 Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price $ 36.49 Vested and Expected to Vest, Outstanding, Weighted Average Remaining 6 years 4 Contractual Term months 26 days Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value $ 10.9 Vested and Expected to Vest, Exercisable at End of Year 701,486 Vested and Expected to Vest, Exercisable at End of Year, Weighted Average $ 38.32 Exercise Price Vested and Expected to Vest, Exercisable at End of Year, Weighted Average 4 years 9 Remaining Contractual Term months 17 days Vested and Expected to Vest, Exercisable at End of Year, Aggregate Intrinsic $ 5.3 Value Weighted-average grant-date fair values (per share) $ 5.17 $ 7.85 $ 10.49 Cash received from exercises of Tandem Awards $ 3.5 $ 3.9 $ 0.5 Total tax benefit realized for tax deductions from exercise of Tandem $ 0.7 $ 1.6 $ 0.1 Awards

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Long-term Equity-based 12 Months Ended Compensation - Schedule of Dec. 31, Outstanding Options Dec. 31, 2016 2015 (Details) - $ / shares Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Shares Subject to Awards 1,306,123 1,428,157 Weighted- average Exercise Price Per Share ($) $ 36.35 $ 39.75 Weighted- average Remaining Contractual Life (in Years) 6 years 6 months Range of Exercise Prices $15.01 - $20.00 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Range of Exercise Prices, Lower Range Limit $ 15.01 Range of Exercise Prices, Upper Range Limit $ 20.00 Shares Subject to Awards 4,000 Weighted- average Exercise Price Per Share ($) $ 16.48 Weighted- average Remaining Contractual Life (in Years) 2 years 4 months 5 days Shares Subject to Awards 4,000 Weighted- average Exercise Price Per Share ($) $ 16.48 Range of Exercise Prices $20.01 - $25.00 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Range of Exercise Prices, Lower Range Limit 20.01 Range of Exercise Prices, Upper Range Limit $ 25.00 Shares Subject to Awards 9,500 Weighted- average Exercise Price Per Share ($) $ 23.37 Weighted- average Remaining Contractual Life (in Years) 3 years 21 days Shares Subject to Awards 9,500 Weighted- average Exercise Price Per Share ($) $ 23.37 Range of Exercise Prices $25.01 - $30.00 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Range of Exercise Prices, Lower Range Limit 25.01 Range of Exercise Prices, Upper Range Limit $ 30.00 Shares Subject to Awards 316,603 Weighted- average Exercise Price Per Share ($) $ 27.89 Weighted- average Remaining Contractual Life (in Years) 8 years 2 months 14 days Shares Subject to Awards 116,909 Weighted- average Exercise Price Per Share ($) $ 28.20 Range of Exercise Prices $30.01 - $35.00 Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Range of Exercise Prices, Lower Range Limit 30.01 Range of Exercise Prices, Upper Range Limit $ 35.00 Shares Subject to Awards 176,845 Weighted- average Exercise Price Per Share ($) $ 32.43 Weighted- average Remaining Contractual Life (in Years) 8 years 2 months 4 days Shares Subject to Awards 74,742 Weighted- average Exercise Price Per Share ($) $ 32.33 Range of Exercise Prices $35.01 - $40.00 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Range of Exercise Prices, Lower Range Limit 35.01 Range of Exercise Prices, Upper Range Limit $ 40.00 Shares Subject to Awards 437,299 Weighted- average Exercise Price Per Share ($) $ 36.64 Weighted- average Remaining Contractual Life (in Years) 7 years 2 months 14 days Shares Subject to Awards 270,763 Weighted- average Exercise Price Per Share ($) $ 36.67 Range of Exercise Prices $40.01 - $45.00 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Range of Exercise Prices, Lower Range Limit 40.01 Range of Exercise Prices, Upper Range Limit $ 45.00 Shares Subject to Awards 166,376 Weighted- average Exercise Price Per Share ($) $ 41.33 Weighted- average Remaining Contractual Life (in Years) 7 years 6 days Shares Subject to Awards 30,072 Weighted- average Exercise Price Per Share ($) $ 40.70 Range of Exercise Prices $45.01 - $50.00 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Range of Exercise Prices, Lower Range Limit 45.01 Range of Exercise Prices, Upper Range Limit $ 50.00 Shares Subject to Awards 195,500 Weighted- average Exercise Price Per Share ($) $ 49.74 Weighted- average Remaining Contractual Life (in Years) 1 month 8 days Shares Subject to Awards 195,500 Weighted- average Exercise Price Per Share ($) $ 49.74 Range of Exercise Prices $15.01 - $50.00 Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Range of Exercise Prices, Lower Range Limit 15.01 Range of Exercise Prices, Upper Range Limit $ 50 Shares Subject to Awards 1,306,123

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Weighted- average Exercise Price Per Share ($) $ 36.35 Weighted- average Remaining Contractual Life (in Years) 6 years 5 months 11 days Shares Subject to Awards 701,486 Weighted- average Exercise Price Per Share ($) $ 38.32

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Long-term Equity-based 12 Months Ended Compensation - Activity Related to Nonvested Feb. Dec. Restricted Stock (Details) - Feb. 04, Dec. 31, Dec. 31, 04, 31, USD ($) 2017 2016 2015 2016 2014 $ / shares in Units, $ in Millions Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Total fair value of DSUs that vested during the years $ 0.5 $ 0.1 $ 0.2 Annual Awards of Deferred Stock Units to be Issued to each Non- 500 500 Employee Director Initial grant for non-employee director, shares 4,000 4,000 Automatic annual grant, non-employee directors, options 4,000 4,000 Automatic annual grant, non-employee directors, options, expiration 10 10 years date years Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Vested in Period, Total Fair Value 1.3 $ 1.4 $ 3.6 Income tax benefit from share-based compensation $ 0.5 $ 0.5 $ 1.2 Time Vested Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Nonvested Balance at Beginning of Year, Restricted Shares 29,448 Nonvested at Beginning of Year, Weighted Average Grant Date Fair $ 33.77 Value (per share) Grants in Period 0 Grants in Period, Weighted Average Grant Date Fair Value (per share) $ 0.00 Vested in Period (12,098) Vested in Period, Weighted Average Grant Date Fair Value (per share) $ 32.32 Forfeited in Period (1,350) Forfeited in Period, Weighted Average Grant Date Fair Value (per $ 35.75 share) Nonvested Balance at End of Year, Restricted Shares 16,000 29,448 Nonvested at End of Year, Weighted Average Grant Date Fair Value $ 34.69 $ 33.77 (per share) Performance Based Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Performance period 3 years Nonvested Balance at Beginning of Year, Restricted Shares 51,400 Nonvested at Beginning of Year, Weighted Average Grant Date Fair $ 42.12 Value (per share) Grants in Period 0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Grants in Period, Weighted Average Grant Date Fair Value (per share) $ 0.00 Forfeited in Period (51,400) Forfeited in Period, Weighted Average Grant Date Fair Value (per $ 42.12 share) Nonvested Balance at End of Year, Restricted Shares 0 51,400 Nonvested at End of Year, Weighted Average Grant Date Fair Value $ 0.00 $ 42.12 (per share) Reduction in share authorization if maximum performance level is 682,752 met or exceeded (shares) Time Vested Restricted Stock Units [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Nonvested Balance at Beginning of Year, Restricted Shares 85,048 Nonvested at Beginning of Year, Weighted Average Grant Date Fair $ 36.84 Value (per share) Grants in Period 118,622 Grants in Period, Weighted Average Grant Date Fair Value (per share) $ 31.48 Vested in Period (26,006) Vested in Period, Weighted Average Grant Date Fair Value (per share) $ 33.01 Forfeited in Period (19,303) Forfeited in Period, Weighted Average Grant Date Fair Value (per $ 36.03 share) Nonvested Balance at End of Year, Restricted Shares 158,361 85,048 Nonvested at End of Year, Weighted Average Grant Date Fair Value $ 33.56 $ 36.84 (per share) Performance Based Restricted Stock Units [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Nonvested Balance at Beginning of Year, Restricted Shares 128,100 Nonvested at Beginning of Year, Weighted Average Grant Date Fair $ 41.85 Value (per share) Grants in Period 146,788 Grants in Period, Weighted Average Grant Date Fair Value (per share) $ 29.62 Forfeited in Period (47,304) Forfeited in Period, Weighted Average Grant Date Fair Value (per $ 39.04 share) Nonvested Balance at End of Year, Restricted Shares 227,584 128,100 Nonvested at End of Year, Weighted Average Grant Date Fair Value $ 34.55 $ 41.85 (per share) Performance Period, 2015 to 2017 [Member] | Performance Based Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Number of Additional Shares To Be Granted If Maximum 46,762 Perfornance Level Is Met or Exceeded

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Reduction in share authorization if maximum performance level is 412,845 met or exceeded (shares) Performance Period, 2014 to 2016 [Member] | Performance Based Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Reduction in share authorization if maximum performance level is 140,286 met or exceeded (shares) Performance Period, 2013 to 2015 [Member] | Performance Based Restricted Stock [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Stock Issued During Period, Shares, Share-based Compensation, 51,400 Forfeited Subsequent Event [Member] | Performance Period, 2014 to 2016 [Member] | Performance Based Restricted Stock Units [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Forfeited in Period (43,207) Director [Member] | Stock Options [Member] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Share-based Compensation Arrangement by Share-based Payment 5 years 6 0 years 6 years Award, Fair Value Assumptions, Expected Term months

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Long-term Equity-based 12 Months Ended Compensation -Schedule of Share-based Compensation, Nonemployee Director Dec. 31, Dec. 31, Dec. 31, Deferred Stock Unit Award 2016 2015 2014 Plan (Details) - USD ($) $ / shares in Units, $ in Millions Schedule of Share-based Compensation, Nonemployee Director Deferred Stock Unit Award Plan [Abstract] Total fair value of DSUs that vested during the years $ 0.5 $ 0.1 $ 0.2 Deferred Stock Units, Outstanding, Number, Period Start (in shares) 7,000 Deferred Stock Units, Granted and Vested in Period (in shares) 14,520 Deferred Stock Units, Outstanding, Number, Period End (in shares) 21,520 7,000 Deferred Stock Units, Outstanding, Weighted Average Exercise Price, Period $ 36.17 Start (per share) Deferred Stock Units, Granted and Vested in Period, Weighted Average Exercise 31.00 Price (per share) Deferred Stock Units, Outstanding, Weighted Average Exercise Price, Period End $ 32.68 $ 36.17 (per share)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income From Continuing 3 Months Ended 12 Months Ended Operations Per Unrestricted Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Share (Details) - USD ($) Dec. 31, Dec. 31, Dec. 31, 31, 30, 30, 31, 31, 30, 30, 31, $ / shares in Units, $ in 2016 2015 2014 2016 2016 2016 2016 201520152015 2015 Millions Schedule of Basic and Diluted Earnings Per Share [Line Items] Income (Loss) from Continuing $ $ $ $ $ $ $ 4.1 $ 1.3 $ 12.7 $ 80.2 $ 112.6 Operations 29.1 (18.3) (2.2) 38.0 27.4 13.5 Dilutive Effect on Income of Equity-based Compensation 0.0 0.0 0.0 Equivalent Shares Diluted Income from Continuing Operations Attributed to $ 12.9 $ 79.8 $ 112.1 Unrestricted Shares Weighted-Average Unrestricted 51,156,10051,606,90053,762,500 Shares Outstanding (in shares) Equity-based Compensation 58,600 76,600 105,400 Equivalent Shares (in shares) Weighted-average Unrestricted Shares and Equivalent Shares 51,214,70051,683,50053,867,900 Outstanding Assuming Dilution ( in shares) Basic Income from Continuing $ $ $ $ $ $ $ $ Operations Per Unrestricted $ 0.25 $ 1.55 $ 2.08 0.56 (0.36)0.08 (0.04)0.03 0.73 0.53 0.26 Share (per share) Diluted Income from Continuing $ $ $ $ $ $ $ $ Operations Per Unrestricted $ 0.25 $ 1.55 $ 2.08 0.56 (0.36)0.08 (0.04)0.03 0.73 0.53 0.26 Share (per share) Common Stock [Member] Schedule of Basic and Diluted Earnings Per Share [Line Items] Income (Loss) from Continuing $ 12.9 $ 79.8 $ 112.1 Operations Participating Awards [Member] Schedule of Basic and Diluted Earnings Per Share [Line Items] Income (Loss) from Continuing $ (0.2) $ 0.4 $ 0.5 Operations

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income From Continuing 12 Months Ended Operations Per Unrestricted Dec. 31, Dec. 31, Dec. 31, Share - Antidilutive 2016 2015 2014 Securities (Details) - shares Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] Antidilutive Options Excluded from Computation of Earnings Per Share, 959,900 959,700 1,605,100 Amount (in shares) Stock Options [Member] Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] Antidilutive Options Excluded from Computation of Earnings Per Share, 959,900 959,700 1,605,100 Amount (in shares)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Comprehensive 12 Months Ended Income (Loss) And Accumulated Other Dec. 31, Dec. 31, Dec. 31, Comprehensive Income 2016 2015 2014 (Details) - USD ($) $ in Millions Other Comprehensive Income (Loss) Before Income Taxes: Unrealized Holding Gains (Losses) Arising During the Period Before Reclassification $ $ (2.4) $ 259.7 Adjustment (151.9) Reclassification Adjustment for Amounts Included in Net Income 0.2 (25.4) (25.1) Unrealized Holding Gains (Losses) (2.2) (177.3) 234.6 Foreign Currency Translation Adjustments Arising During the Period Before (0.3) (1.4) (1.0) Reclassification Adjustment Reclassification Adjustment for Amounts Included in Net Income 0.0 0.0 0.0 Foreign Currency Translation Adjustments (0.3) (1.4) (1.0) Unrecognized Postretirement Benefit Costs Arising During the Year 14.2 3.0 (106.4) Other Comprehensive Income (Loss), Finalization of Pension and Other 1.0 0.0 0.0 Postretirement Benefit Plan Valuation, before Tax Amortization of Net Unrecognized Postretirement Benefit Costs 5.3 23.1 7.9 Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI, 6.3 23.1 7.9 Pension and Other Postretirement Benefit Plans, before Tax Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising 1.6 0.0 0.0 During Period, before Tax Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on 0.0 0.0 0.0 Derivatives, Net of Tax Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, before Tax 1.6 0.0 0.0 Other Comprehensive Income (Loss) Before Income Taxes 19.6 (152.6) 135.1 Income Tax Benefit (Expense): Unrealized Holding Gains and Losses Arising During the Year Before 1.0 53.9 (91.6) Reclassification Adjustment Reclassification Adjustment for Amounts Included in Net Income (0.1) 8.9 8.8 Unrealized Holding Gains and Losses 0.9 62.8 (82.8) Foreign Currency Translation Adjustments Arising During the Period Before 0.1 0.5 0.4 Reclassification Adjustment Reclassification Adjustment for Amounts Included in Net Income 0.0 0.0 0.0 Foreign Currency Translation Adjustment 0.1 0.5 0.4 Unrecognized Postretirement Benefit Costs Arising During the Year (5.0) (1.1) 37.5 Curtailment Cost Recognized (0.4) 0.0 0.0 Amortization of Unrecognized Postretirement Benefit Costs (1.9) (8.0) (2.8) Total Reclassification Adjustments for Amounts Included in Net Income (2.3) (8.0) (2.8) Net Unrecognized Postretirement Benefit Costs (7.3) (9.1) 34.7 Gain on Cash Flow Hedge During the Year Before Reclassification Adjustment (0.6) 0.0 0.0 Reclassification Adjustment for Amounts Included in Net Income 0.0 0.0 0.0 Gain on Cash Flow Hedge (0.6) 0.0 0.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document - Accumulated Other Comprehensive Income Dec. 31, 2016Dec. 31, 2015 (Details) - USD ($) $ in Millions Unrealized Gains on Investments, Net of Income Taxes: Available for Sale Fixed Maturities with Portion of OTTI Recognized in Earnings $ 0.1 $ 1.4 Other Net Unrealized Gains on Investments 211.7 211.7 Foreign Currency Translation Adjustments, Net of Income Taxes (0.9) (0.7) Net Unrecognized Postretirement Benefit Costs, Net of Income Taxes (74.9) (88.1) Gain on Cash Flow Hedge, Net of Income Taxes 1.0 0.0 Accumulated Other Comprehensive Income $ 137.0 $ 124.3

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Comprehensive 3 Months Ended 12 Months Ended Income (Loss) And Accumulated Other Comprehensive Income Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Reclassification from AOCI 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, to Consolidated Statements 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 of Income (Details) - USD ($) $ in Millions Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] Net Realized Gains (Losses) on Sales of $ $ $ $ $ 9.1 $ 5.6 $ 6.8 $ 9.4 $ 5.3 $ 3.4 $ 52.1 Investments 11.6 34.0 33.1 39.1 Net Impairment Losses Recognized in (8.7) (8.3) (6.4) (9.3) (14.7)(3.3) (2.2) (7.0) (32.7)(27.2) (15.2) Earnings Interest and Other Expenses (25.3)(22.0)(20.7)(22.3)(25.6)(25.7)(26.6)(29.7)(90.3)(107.6)(91.7) Income Tax Benefit (Expense) (11.5) 14.9 1.5 4.3 2.9 (11.8) (6.9) (4.3) 9.2 (20.1) (47.6) Net Income $ $ $ $ $ $ $ 4.0 $ 4.6 16.8 85.7 114.5 31.2 (16.3) (2.1) 37.9 29.7 13.5 Reclassification out of Accumulated Other Comprehensive Income [Member] Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] Net Income (4.1) 1.4 11.2 Accumulated Net Unrealized Investment Gain (Loss) [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member] Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] Net Realized Gains (Losses) on Sales of 32.0 52.6 37.9 Investments Net Impairment Losses Recognized in (32.2)(27.2) (12.8) Earnings Total Before Income Taxes (0.2) 25.4 25.1 Income Tax Benefit (Expense) 0.1 (8.9) (8.8) Net Income (0.1) 16.5 16.3 Accumulated Defined Benefit Plans Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member] Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Interest and Other Expenses (6.3) (23.1) (7.9) Income Tax Benefit (Expense) 2.3 8.0 2.8 Net Income $ $ $ (4.0) (15.1) (5.1)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income From Investments - 3 Months Ended 12 Months Ended Net Investment Income Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. (Details) - USD ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ in Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Investment Income: Equity Method Limited Liability $ 7.5 $ 19.0 $ 9.0 Investments Fair Value Option Investments (1.9) 0.2 (0.7) Investment Income, Limited Liability Investments Included in 22.0 17.6 40.7 Equity Securities Investment Income, Alternative 27.6 36.8 49.0 Investments Real Estate 11.8 11.9 12.1 Total Investment Income 316.3 321.2 328.9 Investment Expenses: Other Investment Expenses 18.0 18.6 19.8 Net Investment Income $ 79.9 $ 77.7 $ 73.7 $ 67.0 $ 79.4 $ 75.9 $ 76.7 $ 70.6 298.3 302.6 309.1 Accrued Investment Income $ 70.8 $ 68.5 70.8 68.5 Receivable Real Estate Investment [Member] Investment Expenses: Other Investment Expenses 11.0 11.3 11.3 Other Investment [Member] Investment Expenses: Other Investment Expenses 7.0 7.3 8.5 Fixed Maturities [Member] Investment Income: Interest and Dividends on Fixed 242.7 236.2 227.4 Maturities Equity Securities [Member] Investment Income: Interest and Dividends on Fixed 11.8 14.8 19.2 Maturities Short-term Investments [Member] Investment Income: Interest and Dividends on Fixed 0.5 0.4 0.6 Maturities Policy Loans [Member] Investment Income: Interest and Dividends on Fixed 21.6 21.1 20.5 Maturities Other Investment [Member] Investment Income:

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income From Investments - 3 Months Ended 12 Months Ended Net Realized Gains on Sales Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. of Investments (Details) - 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, USD ($) 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 $ in Millions Net Investment Income [Line Items] Realized Investment Gains $ 38.0 $ 55.3 $ 41.7 Realized Investment Losses (5.1) (2.9) (2.5) Gain on Sale of Subsidiary 0.0 0.0 1.6 Net Gains (Losses) on Trading 0.2 (0.3) (0.1) Securities Net Realized Gains (Losses) $ 9.1 $ 11.6 $ 5.6 $ 6.8 $ 9.4 $ 5.3 $ 34.0 $ 3.4 33.1 52.1 39.1 on Sales of Investments Fixed Maturities [Member] Net Investment Income [Line Items] Gains on Sales 17.0 16.1 7.0 Losses on Sales (4.6) (1.1) (0.2) Equity Securities [Member] Net Investment Income [Line Items] Gains on Sales 19.9 39.2 33.1 Losses on Sales (0.3) (1.6) (2.0) Real Estate Investment [Member] Net Investment Income [Line Items] Realized Investment Gains 1.1 0.0 0.0 Realized Investment Losses 0.0 (0.2) (0.2) Other Investment [Member] Net Investment Income [Line Items] Realized Investment Losses $ (0.2) $ 0.0 $ (0.1)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3 Months Ended 12 Months Ended Insurance Expenses (Details) Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. - USD ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ in Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Insurance Expenses [Abstract] Commissions $ $ $ 399.2 357.6 324.6 General Expenses 209.0 241.1 258.1 Taxes, Licenses and Fees 48.8 44.2 38.9 Total Costs Incurred 657.0 642.9 621.6 Policy Acquisition Costs: Deferred (314.9)(270.6)(235.8) Amortized 299.3 257.4 235.4 Net Policy Acquisition Costs (15.6) (13.2) (0.4) Deferred Life VIF, P&C VIF and P&C Customer Relationships 5.9 15.4 7.2 Amortized Insurance Expenses $ $ $ $ $ $ $ $ $ $ $ 158.5 161.7 167.8 159.3 177.0 161.1 162.1 144.9 647.3 645.1 628.4

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Taxes - Narrative 12 Months Ended (Details) - USD ($) Dec. 31, Dec. 31, Dec. 31, $ in Millions 2016 2015 2014 Income Taxes Paid, Net $ 0.5 $ (44.4) $ (37.2) Interest on income taxes expense $ (3.3) $ 0.4 Mutual Savings Life [Member] Mutual Savings Life’s income 14.7 Amount of tax the company will have to pay if the Mutual Savings Life's income is $ 5.1 distributes to shareholders in the future

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Taxes - Schedule of Liabilities for Income Tax Dec. 31, 2016Dec. 31, 2015Dec. 31, 2014Dec. 31, 2013 (Details) - USD ($) $ in Millions Income Tax Disclosure [Abstract] Liabilities for Unrecognized Tax Benefits $ 5.1 $ 3.8 $ 7.2 $ 6.8

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Taxes - Schedule of Temporary Differences That Give Rise to Net Deferred Income Tax Assets Dec. 31, 2016Dec. 31, 2015 (Liabilities) (Details) - USD ($) $ in Millions Deferred Income Tax Assets: Insurance Reserves $ 83.4 $ 83.0 Unearned Premium Reserves 42.1 41.7 Tax Capitalization of Policy Acquisition Costs 70.7 71.5 Payroll and Employee Benefit Accruals 60.5 72.0 Net Operating Loss Carryforward 52.2 30.5 Other 13.2 15.7 Total Deferred Income Tax Assets 322.1 314.4 Deferred Income Tax Liabilities: Investments 113.0 109.8 Deferred Policy Acquisition Costs 116.2 110.7 Life VIF and P&C Customer Relationships 13.5 15.5 Goodwill and Other Intangible Assets Acquired 37.1 37.0 Depreciable Assets 12.5 7.3 Other 4.0 2.2 Total Deferred Income Tax Liabilities 296.3 282.5 Net Deferred Income Tax Liabilities $ 25.8 $ 31.9

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Taxes - Summary of Federal Net Operating Loss Carryforwards and Related Dec. 31, 2016Dec. 31, 2015 Deferred Income Tax Assets (Details) - USD ($) $ in Millions Income Tax Contingency [Line Items] Deferred Tax Asset $ 52.2 $ 30.5 Internal Revenue Service (IRS) [Member] Income Tax Contingency [Line Items] NOL Carry-forwards 149.2 Deferred Tax Asset 52.2 Internal Revenue Service (IRS) [Member] | 2020 [Member] Income Tax Contingency [Line Items] NOL Carry-forwards 7.8 Deferred Tax Asset 2.7 Internal Revenue Service (IRS) [Member] | 2021 through 2025 [Member] Income Tax Contingency [Line Items] NOL Carry-forwards 30.5 Deferred Tax Asset 10.7 Internal Revenue Service (IRS) [Member] | 2026 through 2030 [Member] Income Tax Contingency [Line Items] NOL Carry-forwards 29.9 Deferred Tax Asset 10.5 Internal Revenue Service (IRS) [Member] | 2031 through 2032 [Member] Income Tax Contingency [Line Items] NOL Carry-forwards 81.0 Deferred Tax Asset $ 28.3

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Taxes - 12 Months Ended Reconciliation of Unrecognized Tax Benefits Dec. 31, Dec. 31, Dec. 31, (Details) - USD ($) 2016 2015 2014 $ in Millions Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] Balance at Beginning of Year $ 3.8 $ 7.2 $ 6.8 Additions for Tax Positions of Current Period 1.5 0.2 0.1 Additions for Tax Positions of Prior Years 0.0 0.0 0.3 Reduction for Expiration of Federal Statute of Limitations (0.2) (3.6) 0.0 Balance at End of Year 5.1 3.8 7.2 Unrecognized tax benefit 4.6 3.3 3.4 Accrued interest included in unrecognized tax benefits $ 0.5 0.5 3.8 Interest on income taxes expense $ 3.3 $ (0.4)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Taxes - Income Tax 3 Months Ended 12 Months Ended Benefit (Expense) from Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Continuing Operations 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, (Details) - USD ($) 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 $ in Millions Income Tax Disclosure [Abstract] Current Income Tax Expense $ $ $ 8.2 (25.7) (41.7) Deferred Income Tax Benefit 2.3 2.2 (5.5) (Expense) (Increase) Decrease (1.3) 3.4 (0.4) Unrecognized Tax Benefits Income Tax Expense $ $ $ $ $ 14.9 $ 1.5 $ 4.3 $ 2.9 $ (6.9) $ (4.3) $ 9.2 (11.5) (11.8) (20.1) (47.6)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Taxes - Statutory 3 Months Ended 12 Months Ended Federal Income Tax Expense, Effective Income Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. 31, Tax Expense, Rates (Details) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 2016 - USD ($) 2016 2016 2016 2016 2015 2015 2015 2015 2015 2014 $ in Millions Income Tax Disclosure [Abstract] Statutory Federal Income Tax $ (1.2) $ (35.1) $ (56.1) Expense Statutory Federal Income Tax 35.00% 35.00% 35.00% Expense, Rate, percentage Tax-exempt Income and Dividends $ 9.8 $ 9.8 $ 9.0 Received Deduction Tax-exempt Income and Dividends Received Deduction, Rate, (279.50%)(9.70%)(5.60%) percentage Effective Income Tax Rate Reconciliation, Unrecognized Tax $ 0.0 $ 2.1 $ (0.3) Benefit (Expense), Amount Effective Income Tax Rate Reconciliation, Unrecognized Tax (0.00%) (2.10%)(0.00%) Benefit (Expense), Percent Effective Income Tax Rate Reconciliation, Indemnification $ 0.2 $ 3.7 $ 0.0 Recoveries, Amount Effective Income Tax Rate Reconciliation, Indemnification (6.50%) (3.60%)(0.00%) Recoveries, Percent State Income Taxes $ (0.6) $ (0.6) $ (0.6) State Income Taxes, Percentage 16.90% 0.50% 0.40% Other, Net $ 1.0 $ 0.0 $ 0.4 Other, Net, Rate, percentage (28.90%) 0.00% (0.10%) Income Tax Expense $ $ $ $ $ $ 1.5 $ 4.3 $ 2.9 $ 9.2 $ (20.1) $ (47.6) (11.5)14.9 (11.8)(6.9) (4.3) Effective Income Tax Expense, (263.00%)20.10% 29.70% Rate, percentage

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income Taxes - 3 Months Ended 12 Months Ended Comprehensive Income Tax Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Benefit and Expense 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, (Details) - USD ($) 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 $ in Millions Operating Loss Carryforwards [Line Items] Income Tax Expense $ $ $ $ $ $ 11.5 $ 11.8 $ 6.9 $ 4.3 $ 20.1 $ 47.6 (14.9) (1.5) (4.3) (2.9) (9.2) Unrealized Depreciation 0.9 62.8 (82.8) (Appreciation) on Securities Foreign Currency Translation 0.1 0.5 0.4 Adjustments on Investments Tax Effects from Postretirement (7.3) (9.1) 34.7 Benefit Plans Other Comprehensive Income (Loss), (0.6) 0.0 0.0 Derivatives Qualifying as Hedges, Tax Tax Effects from Long-term Equity- based Compensation included in Paid- (1.1) (1.0) (1.0) in Capital Comprehensive Income Tax Benefit 1.0 (30.0) 97.4 (Expense) Discontinued Operations [Member] Operating Loss Carryforwards [Line Items] Income Tax Expense 2.2 3.1 1.1 Continuing Operations [Member] Operating Loss Carryforwards [Line Items] Income Tax Expense $ $ 20.1 $ 47.6 (9.2)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Aug. May Dec. Dec. Dec. 31, Pension Benefits (Details) 12, 12, 31, 31, 2016 $ in Millions 2016 2016 2015 2014 USD ($) USD USD USD USD employees ($) ($) ($) ($) Defined Benefit Plan Disclosure [Line Items] Unrecognized Postretirement Benefit Costs Arising During the Year $ $ 14.2 $ 3.0 (106.4) Defined Contribution Plan, Cost Recognized $ 8.4 7.8 7.3 Pension Plans, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Pension Plan, Number of Participants and 9,200 Beneficiaries | employees Defined Benefit Pension Plans Active Employees | employees 1,800 Percentage of Compensation, Defined Benefit Plan Employee 3.00% Contribution Employer Contributions $ 9.0 0.0 Defined Benefit Plan, Funded Status of Plan (72.7) (90.3) Pension Expense Recognized (1.5) 25.6 8.3 Unrecognized Postretirement Benefit Costs Arising During the Year 0.7 1.9 (102.0) Pension and Other Postretirement Benefit Plans, Accumulated Other $ 144.7 152.2 Comprehensive Income (Loss), Net Gains (Losses), before Tax Amortization Period, Accumulated Unrecognized Pension Gain/Loss 24 years Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive Income (Loss), Net Prior Service Cost (Credit), before $ 0.0 0.4 Tax Defined Benefit Plan, Effect of Plan Amendment on Net Periodic $ 0.3 Benefit Cost Defined Benefit Plan, Effect of Curtailment on Accumulated 23.3 Unrecognized Pension Loss Defined Benefit Plan, Recognized Net Gain (Loss) Due to Curtailments 0.3 0.0 0.0 Supplemental Employee Retirement Plan [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Funded Status of Plan 25.4 30.4 Pension Expense Recognized (1.0) 2.1 1.8 Unrecognized Postretirement Benefit Costs Arising During the Year 4.8 $ 1.5 $ (7.0) Defined Benefit Plan, Effect of Plan Amendment on Net Periodic 1.3 Benefit Cost Defined Benefit Plan, Effect of Curtailments on Projected Benefit (5.2) Obligation Defined Benefit Plan, Recognized Net Gain (Loss) Due to Curtailments $ 3.6 Post-Freeze [Member] | Pension Plans, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension and Other Postretirement Benefit Plans, Accumulated Other $ Comprehensive Income (Loss), Net Gains (Losses), before Tax 167.9 Amortization Period, Accumulated Unrecognized Pension Gain/Loss 25 years Pre-Freeze [Member] | Pension Plans, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Pension and Other Postretirement Benefit Plans, Accumulated Other $ Comprehensive Income (Loss), Net Gains (Losses), before Tax 191.2 Amortization Period, Accumulated Unrecognized Pension Gain/Loss 5 years Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive Income (Loss), Net Prior Service Cost (Credit), before $ 0.3 Tax Pre-Freeze [Member] | Supplemental Employee Retirement Plan [Member] Defined Benefit Plan Disclosure [Line Items] Pension and Other Postretirement Benefit Plans, Accumulated Other 1.6 Comprehensive Income (Loss), Net Gains (Losses), before Tax Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive Income (Loss), Net Prior Service Cost (Credit), before $ 1.3 Tax Cash [Member] Defined Benefit Plan Disclosure [Line Items] Employer Contributions $ 9.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits - Changes 12 Months Ended in Fair Value of Plan Assets and Changes in Accumulated Benefit Dec. 31, Dec. 31, Dec. 31, Obligations (Details) - 2016 2015 2014 Pension Plans, Defined Benefit [Member] - USD ($) $ in Millions Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] Fair Value of Plan Assets at Beginning of Year $ 507.5 $ 543.0 Actual Return on Plan Assets 29.9 (10.6) Employer Contributions 9.0 0.0 Benefits Paid (25.5) (24.9) Fair Value of Plan Assets at End of Year 520.9 507.5 $ 543.0 Defined Benefit Plan, Change in Benefit Obligation [Roll Forward] Benefit Obligations at Beginning of Year 597.8 634.0 Service Cost 4.8 10.5 8.7 Interest Cost 20.1 25.7 24.8 Benefits Paid (25.5) (24.9) Curtailment (23.3) 0.0 Actuarial Losses (Gains) (19.7) 47.5 Projected Benefit Obligation at End of Year 593.6 597.8 $ 634.0 Funded Status—Plan Assets in Deficit of Projected Benefit Obligation (72.7) (90.3) Amount Recognized in Accumulated Other Comprehensive Income: Accumulated Actuarial Loss (144.7) (152.2) Prior Service Credit 0.0 0.4 Unamortized Amount Reported in AOCI at End of Year (144.7) (151.8) Accumulated Benefit Obligation at End of Year $ 593.5 $ 573.9

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits - Actuarial Assumptions for Project Dec. 31, Dec. 31, Benefit Obligations (Details) 2016 2015 - Pension Plans, Defined Benefit [Member] Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] Discount Rate 4.18% 4.47% Rate of Increase in Future Compensation Levels 2.56% 3.15%

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits - Weighted Average Asset Allocation for Pension Plans (Details) - Dec. 31, 2016Dec. 31, 2015 Pension Plans, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Weighted-average asset allocations 100.00% 100.00% Cash and Short-term Investments [Member] Defined Benefit Plan Disclosure [Line Items] Weighted-average asset allocations 2.00% 4.00% Corporate Bonds and Notes [Member] Defined Benefit Plan Disclosure [Line Items] Weighted-average asset allocations 31.00% 28.00% Common and Preferred Stocks [Member] Defined Benefit Plan Disclosure [Line Items] Weighted-average asset allocations 48.00% 43.00% Exchange Traded Funds [Member] Defined Benefit Plan Disclosure [Line Items] Weighted-average asset allocations 1.00% 9.00% Other Assets [Member] Defined Benefit Plan Disclosure [Line Items] Weighted-average asset allocations 18.00% 16.00%

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits - Fair Value Plan Assets Measurements (Details) - Pension Plans, Dec. 31, Dec. 31, Dec. 31, Defined Benefit [Member] - 2016 2015 2014 USD ($) $ in Millions Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets $ 520.9 $ 507.5 $ 543.0 Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 206.0 248.3 Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 160.3 149.5 Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.4 0.4 $ 0.4 US Government and Government Agencies and Authorities [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 29.8 19.2 US Government and Government Agencies and Authorities [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 21.2 19.2 US Government and Government Agencies and Authorities [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 8.6 0.0 US Government and Government Agencies and Authorities [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 States and Political Subdivisions [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 3.1 3.2 States and Political Subdivisions [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 States and Political Subdivisions [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 3.1 3.2 States and Political Subdivisions [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Corporate Bonds and Notes [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 126.4 122.2 Corporate Bonds and Notes [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Corporate Bonds and Notes [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 126.4 122.2 Corporate Bonds and Notes [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Preferred Stocks Finance, Insurance and Real Estate [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 6.2 6.1 Preferred Stocks Finance, Insurance and Real Estate [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Preferred Stocks Finance, Insurance and Real Estate [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 6.2 6.1 Preferred Stocks Finance, Insurance and Real Estate [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Common Stocks Manufacturing [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 93.5 94.1 Common Stocks Manufacturing [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 77.5 77.9 Common Stocks Manufacturing [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 16.0 16.2 Common Stocks Manufacturing [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Common Stock Other Industries [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 88.1 84.3 Common Stock Other Industries [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Defined Benefit Plan, Fair Value of Plan Assets 88.1 82.5 Common Stock Other Industries [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 1.8 Common Stock Other Industries [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Equity Funds [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 60.7 31.1 Equity Funds [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Equity Funds [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Equity Funds [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Exchange Traded Funds [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 6.0 47.2 Exchange Traded Funds [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 6.0 47.2 Exchange Traded Funds [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Exchange Traded Funds [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Limited Liability Companies and Limited Partnerships [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 93.5 78.2 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Inputs, Level 3 [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Short-term Investments [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 11.8 20.4 Short-term Investments [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 11.8 20.4 Short-term Investments [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Short-term Investments [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Receivables and Other [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 1.8 1.5 Receivables and Other [Member] | Fair Value, Inputs, Level 1 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 1.4 1.1 Receivables and Other [Member] | Fair Value, Inputs, Level 2 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Receivables and Other [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.4 0.4 Fair Value, Inputs, Net Asset Value [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 154.2 109.3 Fair Value, Inputs, Net Asset Value [Member] | US Government and Government Agencies and Authorities [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Fair Value, Inputs, Net Asset Value [Member] | States and Political Subdivisions [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Fair Value, Inputs, Net Asset Value [Member] | Corporate Bonds and Notes [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Fair Value, Inputs, Net Asset Value [Member] | Preferred Stocks Finance, Insurance and Real Estate [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value, Inputs, Net Asset Value [Member] | Common Stocks Manufacturing [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Fair Value, Inputs, Net Asset Value [Member] | Common Stock Other Industries [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Fair Value, Inputs, Net Asset Value [Member] | Equity Funds [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 60.7 31.1 Fair Value, Inputs, Net Asset Value [Member] | Exchange Traded Funds [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Fair Value, Inputs, Net Asset Value [Member] | Limited Liability Companies and Limited Partnerships [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 93.5 78.2 Fair Value, Inputs, Net Asset Value [Member] | Short-term Investments [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets 0.0 0.0 Fair Value, Inputs, Net Asset Value [Member] | Receivables and Other [Member] Defined Benefit Plan Disclosure [Line Items] Defined Benefit Plan, Fair Value of Plan Assets $ 0.0 $ 0.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits - Changes 12 Months Ended in Fair Value of Pension Plans Level 3 (Details) - Pension Plans, Defined Dec. 31, 2016Dec. 31, 2015 Benefit [Member] - USD ($) $ in Millions Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] Fair Value of Plan Assets at Beginning of Year $ 507.5 $ 543.0 Fair Value of Plan Assets at End of Year 520.9 507.5 Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] Fair Value of Plan Assets at Beginning of Year 0.4 0.4 Return on Plan Assets Held 0.0 0.0 Purchases, Sales and Settlements, Net 0.0 0.0 Transfers out of Level 3 0.0 0.0 Fair Value of Plan Assets at End of Year 0.4 0.4 Receivables and Other [Member] Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] Fair Value of Plan Assets at Beginning of Year 1.5 Fair Value of Plan Assets at End of Year 1.8 1.5 Receivables and Other [Member] | Fair Value, Inputs, Level 3 [Member] Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] Fair Value of Plan Assets at Beginning of Year 0.4 Fair Value of Plan Assets at End of Year $ 0.4 $ 0.4

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits - 12 Months Ended Components Of Comprehensive Pension Dec. 31, Dec. 31, Dec. 31, Expense (Details) - USD ($) 2016 2015 2014 $ in Millions Defined Benefit Plan Disclosure [Line Items] Unrecognized Pension Loss (Gain) Arising During the Year $ (14.2) $ (3.0) $ 106.4 Amortization of Accumulated Unrecognized Pension Loss (5.3) (23.1) (7.9) Pension Plans, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Service Cost Earned During the Year 4.8 10.5 8.7 Interest Cost on Projected Benefit Obligation 20.1 25.7 24.8 Expected Return on Plan Assets (32.7) (35.0) (34.9) Amortization of Actuarial Loss 6.6 24.4 9.7 Curtailment Gain (0.3) 0.0 0.0 Pension Expense (Income) Recognized in Consolidated Statements of (1.5) 25.6 8.3 Income Unrecognized Pension Loss (Gain) Arising During the Year (0.7) (1.9) 102.0 Prior Service Credit Arising During the Year 0.0 0.0 (0.6) Amortization of Accumulated Unrecognized Pension Loss (6.3) (24.4) (9.7) Comprehensive Pension Expense (Income) (8.5) $ (0.7) $ 100.0 Amounts that will be amortized from AOCI in next Fiscal Year $ 2.5

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits - Actuarial 4 Months 8 Months 12 Months Ended Assumptions Pension Ended Ended Expense (Details) - Pension Dec. 31, Dec. 31, Plans, Defined Benefit May 12, 2016 Dec. 31, 2016 2015 2014 [Member] Defined Benefit Plan Disclosure [Line Items] Discount Rate 4.10% 4.90% Weighted-average Discount Rate 0.00% 0.00% Interest Cost Discount Rate 0.00% 0.00% Rate of Increase in Future Compensation Levels 3.31% 3.05% Expected Long Term Rate of Return on Plan 6.75% 7.00% Assets Post-Freeze [Member] Defined Benefit Plan Disclosure [Line Items] Discount Rate 3.94% Weighted-average Discount Rate 4.22% Interest Cost Discount Rate 3.18% Rate of Increase in Future Compensation Levels 3.15% Expected Long Term Rate of Return on Plan 6.25% Assets Pre-Freeze [Member] Defined Benefit Plan Disclosure [Line Items] Discount Rate 4.47% Weighted-average Discount Rate 4.78% Interest Cost Discount Rate 3.69% Rate of Increase in Future Compensation Levels 3.15% Expected Long Term Rate of Return on Plan 6.25% Assets

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits - Pension Benefit Payments (Details) - Dec. 31, 2016 Pension Plans, Defined USD ($) Benefit [Member] $ in Millions Defined Benefit Plan Disclosure [Line Items] Expected Future Benefit Payments In 2017 $ 27.6 Expected Future Benefit Payments in 2018 28.8 Expected Future Benefit Payments in 2019 29.9 Expected Future Benefit Payments in 2020 30.9 Expected Future Benefit Payments in 2021 31.9 Expected Future Benefit Payments in 2022-2026 $ 170.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pension Benefits Schedule of May 12, Supplemental Employee 2016 Retirement Plan (Details) USD ($) $ in Millions Pre-Freeze [Member] | Supplemental Employee Retirement Plan [Member] Defined Benefit Plan Disclosure [Line Items] Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive Income (Loss), $ 1.6 Net Gains (Losses), before Tax

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3 Months Ended 12 Months Ended Postretirement Benefits Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. 31, Other Than Pensions 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 2016 (Details) 2016 2016 2016 2016 2015 2015 2015 2015 2015 2014 USD ($) $ in Millions USD USD USD USD USD USD USD USD USD USD employees ($) ($) ($) ($) ($) ($) ($) ($) ($) ($) Defined Benefit Plan Disclosure [Line Items] Income (Loss) from Continuing $ $ $ $ $ $ $ $ $ 2.6 $ 3.5 $ 100.3 Operations before Income Taxes 40.6 (33.2) (6.5) (1.6) 49.8 34.3 17.8 160.2 Other Postretirement Benefit Plan, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Number of retired employees 500 covered | employees Number of active employees covered 225 | employees Plan Amendments $ (11.0) 0.0 Effect of one percentage point increase on accumulated 0.6 1.5 postretirement benefit obligation Effect of one percentage point increase on service and interest cost $ 0.1 components Amounts that will be amortized from 3.1 AOCI in next Fiscal Year Estimated future employer $ 1.8 contributions in next fiscal year Medical Benefits [Member] Defined Benefit Plan Disclosure [Line Items] Health care cost trend rate assumed 6.75% 7.00% for next fiscal year Health care cost trend rate assumed 5.00% 5.00% for future years Prescription Drug Benefits [Member] Defined Benefit Plan Disclosure [Line Items] Health care cost trend rate assumed 10.25% 11.00% for next fiscal year Health care cost trend rate assumed 5.00% 5.00% for future years

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Postretirement Benefits 12 Months Ended Other Than Pensions - Changes in Fair Value of Plan Assets and Changes in Accumulated Benefit Dec. 31, Dec. 31, Dec. 31, Obligations (Details) - Other 2016 2015 2014 Postretirement Benefit Plan, Defined Benefit [Member] - USD ($) $ in Millions Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] Fair Value of Plan Assets at Beginning of Year $ 0.0 $ 0.0 Employer Contributions 3.4 3.4 Plan Participants' Contributions 1.0 1.2 Benefits Paid (4.4) (4.6) Fair Value of Plan Assets at End of Year 0.0 0.0 $ 0.0 Defined Benefit Plan, Change in Benefit Obligation [Roll Forward] Benefit Obligations at Beginning of Year 29.6 31.1 Service Cost 0.1 0.2 0.2 Interest Cost 0.8 1.0 1.1 Plan Participants' Contributions 1.0 1.2 Benefits Paid (4.4) (4.6) Medicare Part D Subsidy Received 0.3 0.3 Plan Amendments (11.0) 0.0 Actuarial Losses (Gains) (1.3) 0.4 Projected Benefit Obligation at End of Year 15.1 29.6 $ 31.1 Defined Benefit Plan, Funded Status of Plan (15.1) (29.6) Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive $ (27.6) $ (16.8) Income (Loss), Net Gains (Losses), before Tax

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Postretirement Benefits Other Than Pensions - Actuarial Assumptions of OPEB Accumulated Benefit Dec. 31, 2016Dec. 31, 2015 Obligation (Details) - Other Postretirement Benefit Plan, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Discount Rate 3.60% 3.70% Rate of Increase in Future Compensation Levels 2.60% 2.64%

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Postretirement Benefits 12 Months Ended Other Than Pensions - Components Of Comprehensive OPEB Dec. 31, Dec. 31, Dec. 31, (Income) Expense (Details) - 2016 2015 2014 USD ($) $ in Millions Defined Benefit Plan Disclosure [Line Items] Unrecognized Postretirement Benefit Costs Arising During the Year $ (14.2) $ (3.0) $ 106.4 Amortization of Accumulated Unrecognized Pension Loss (5.3) (23.1) (7.9) Other Postretirement Benefit Plan, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Service Cost Earned During the Year 0.1 0.2 0.2 Interest Cost on Accumulated Postretirement Benefit Obligation 0.8 1.0 1.1 Amortization of Actuarial Loss (1.4) (1.4) (1.8) Pension Expense (Income) Recognized in Consolidated Statements of (0.5) (0.2) (0.5) Income Unrecognized Postretirement Benefit Costs Arising During the Year (1.3) 0.4 (2.0) Prior Service Credit Arising During the Year (11.0) 0.0 0.0 Amortization of Accumulated Unrecognized Pension Loss 1.4 1.4 1.8 Comprehensive OPEB Expense $ (11.4) $ 1.6 $ (0.7)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Postretirement Benefits 12 Months Ended Other Than Pensions - Actuarial Assumptions of OPEB Expense (Details) - Dec. 31, 2016Dec. 31, 2015Dec. 31, 2014 Other Postretirement Benefit Plan, Defined Benefit [Member] Defined Benefit Plan Disclosure [Line Items] Discount Rate 3.70% 3.40% 4.00% Weighted-average Discount Rate 4.21% 0.00% 0.00% Interest Cost Discount Rate 2.90% 0.00% 0.00% Rate of Increase in Future Compensation Levels 2.64% 2.68% 2.10%

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Postretirement Benefits Other Than Pensions - Benefit Payments Net, Modernization Act Subsidy Dec. 31, 2016 (Details) - Other USD ($) Postretirement Benefit Plan, Defined Benefit [Member] $ in Millions Defined Benefit Plan Disclosure [Line Items] Excluding Medicare Part D Subsidy Year One $ 1.8 Expected Medicare Part D Subsidy, Year One 0.0 Net OPEB Benefits Year One 1.8 Excluding Medicare Part D Subsidy, Year Two 1.8 Expected Medicare Part D Subsidy, Year Two 0.0 Net OPEB Benefits Year Two 1.8 Excluding Medicare Part D Subsidy, Year Three 1.7 Expected Medicare Part D Subsidy, Year Three 0.0 Net OPEB Benefits Year Three 1.7 Excluding Medicare Part D Subsidy, Year Four 1.6 Expected Medicare Part D Subsidy, Year Four 0.0 Net OPEB Benefits Year Four 1.6 Excluding Medicare Part D Subsidy, Year Five 1.5 Expected Medicare Part D Subsidy, Year Five 0.0 Net OPEB Benefits Year Five 1.5 Excluding Medicare Part D Subsidy Fiscal Years Thereafter 5.9 Expected Medicare Part D Subsidy, Five Fiscal Years Thereafter 0.0 Net OPEB Benefits Five Fiscal Years Thereafter $ 5.9

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Business Segments (Details) Dec. 31, 2016 Dec. 31, 2015Dec. 31, 2014 $ in Millions USD ($) USD ($) USD ($) segment Segment Reporting [Abstract] Number of Operating Segments | segment 2 Allocated Interest and Other Expenses | $ $ 52.9 $ 43.4 $ 42.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Business Segments - Segment Assets (Details) - USD ($) Dec. 31, 2016Dec. 31, 2015 $ in Millions Segment Reporting Information [Line Items] Total Assets $ 8,210.5 $ 8,036.1 Property and Casualty Insurance [Member] Segment Reporting Information [Line Items] Total Assets 2,815.1 2,749.0 Life and Health Insurance [Member] Segment Reporting Information [Line Items] Total Assets 4,888.7 4,733.9 Corporate and Other, Net [Member] Segment Reporting Information [Line Items] Total Assets $ 506.7 $ 553.2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Business Segments - Earned 3 Months Ended 12 Months Ended Premiums by Product Line Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. (Details) - USD ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ in Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Entity-Wide Information, Revenue from External Customer [Line Items] Premiums Earned, Net, Life $ 381.6$ 374.1$ 387.6 Premiums Earned, Net, Accident 149.4 144.9 148.6 and Health Earned Premiums $ $ $ $ $ $ $ $ 2,220.02,009.61,862.2 561.4 558.9 553.7 546.0 541.5 536.7 500.1 431.3 Personal Automobile [Member] Entity-Wide Information, Revenue from External Customer [Line Items] Premiums Earned, Net, Property 1,244.61,027.7831.4 and Casualty Homeowners [Member] Entity-Wide Information, Revenue from External Customer [Line Items] Premiums Earned, Net, Property 271.9 286.3 312.4 and Casualty Other Personal Lines [Member] Entity-Wide Information, Revenue from External Customer [Line Items] Premiums Earned, Net, Property 119.2 122.1 127.4 and Casualty Commercial Automobile [Member] Entity-Wide Information, Revenue from External Customer [Line Items] Premiums Earned, Net, Property $ 53.3 $ 54.5 $ 54.8 and Casualty

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3 Months Ended 12 Months Ended Business Segments - Segment Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Revenues (Details) - USD ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ in Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Segment Reporting Information [Line Items] Earned Premiums $ $ $ $ $ $ $ $ $ $ $ 561.4 558.9 553.7 546.0 541.5 536.7 500.1 431.3 2,220.02,009.61,862.2 Net Investment Income 79.9 77.7 73.7 67.0 79.4 75.9 76.7 70.6 298.3 302.6 309.1 Other Income 1.0 0.8 0.6 0.8 1.4 0.8 0.6 0.9 3.2 3.7 1.4 Total Revenues 642.7 640.7 627.2 611.3 617.0 615.4 609.2 499.2 2,521.92,340.82,196.6 Net Realized Gains on Sales of 9.1 11.6 5.6 6.8 9.4 5.3 34.0 3.4 33.1 52.1 39.1 Investments Net Impairment Losses $ $ $ $ $ $ $ (9.3) $ (7.0) (32.7) (27.2) (15.2) Recognized in Earnings (8.7) (8.3) (6.4) (14.7) (3.3) (2.2) Operating Segments [Member] Segment Reporting Information [Line Items] Total Revenues 2,508.92,300.12,155.0 Operating Segments [Member] | Property and Casualty Insurance [Member] Segment Reporting Information [Line Items] Earned Premiums 1,614.81,415.21,249.5 Net Investment Income 72.4 73.3 72.7 Other Income 0.5 0.6 0.5 Total Revenues 1,687.71,489.11,322.7 Operating Segments [Member] | Life and Health Insurance [Member] Segment Reporting Information [Line Items] Earned Premiums 605.2 594.4 612.7 Net Investment Income 213.2 214.2 218.7 Other Income 2.8 2.4 0.9 Total Revenues 821.2 811.0 832.3 Segment Reconciling Items [Member] Segment Reporting Information [Line Items] Other Income 12.6 15.8 17.7 Net Realized Gains on Sales of 33.1 52.1 39.1 Investments

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Business Segments - Segment 3 Months Ended 12 Months Ended Operating Profit (Details) - Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. USD ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ in Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Segment Reporting Information [Line Items] Operating Income (Loss) $ $ 3.1 $ 84.5 136.3 Net Realized Gains on Sales of $ 9.1 $ 11.6 $ 5.6 $ 6.8 $ 9.4 $ 5.3 $ 34.0 $ 3.4 33.1 52.1 39.1 Investments Net Impairment Losses Recognized (8.7) (8.3) (6.4) (9.3) (14.7) (3.3) (2.2) (7.0) (32.7) (27.2) (15.2) in Earnings Loss from Early Extinguishment of 0.0 0.0 0.0 9.1 0.0 9.1 0.0 Debt Income (Loss) from Continuing $ $ 40.6 $ 2.6 $ (6.5) $ (1.6)$ 49.8 $ 34.3 $ 17.8 3.5 100.3 160.2 Operations before Income Taxes (33.2) Operating Segments [Member] Segment Reporting Information [Line Items] Operating Income (Loss) 28.5 133.4 169.0 Operating Segments [Member] | Property and Casualty Insurance [Member] Segment Reporting Information [Line Items] Operating Income (Loss) (17.2) 23.7 27.1 Operating Segments [Member] | Life and Health Insurance [Member] Segment Reporting Information [Line Items] Operating Income (Loss) 45.7 109.7 141.9 Corporate, Non-Segment [Member] Segment Reporting Information [Line Items] Operating Income (Loss) (25.4) (48.9) (32.7) Segment Reconciling Items [Member] Segment Reporting Information [Line Items] Net Realized Gains on Sales of 33.1 52.1 39.1 Investments Net Impairment Losses Recognized (32.7) (27.2) (15.2) in Earnings

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Business Segments - Segment 3 Months Ended 12 Months Ended Net Income (Details) - USD Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ in Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Segment Reporting Information [Line Items] Income (Loss) from Continuing $ $ $ 29.1 $ 4.1 $ (2.2) $ 1.3 $ 38.0 $ 27.4 $ 13.5 $ 12.7 $ 80.2 Operations (18.3) 112.6 Net Operating Income 12.4 69.9 97.1 Income (Loss) from Continuing 12.7 80.2 112.6 Operations Operating Segments [Member] Segment Reporting Information [Line Items] Net Operating Income 27.4 98.4 116.7 Operating Segments [Member] | Property and Casualty Insurance [Member] Segment Reporting Information [Line Items] Income (Loss) from Continuing (2.9) 26.7 Operations Net Operating Income 24.9 Operating Segments [Member] | Life and Health Insurance [Member] Segment Reporting Information [Line Items] Income (Loss) from Continuing 30.3 71.7 Operations Net Operating Income 91.8 Corporate, Non-Segment [Member] Segment Reporting Information [Line Items] Net Operating Income (15.0) (28.5) (19.6) Segment Reconciling Items [Member] Segment Reporting Information [Line Items] Net Realized Gains on Sales of 21.5 33.9 25.4 Investments Net Impairment Losses Recognized (21.2) (17.7) (9.9) in Earnings Loss from Early Extinguishment of $ 0.0 $ (5.9)$ 0.0 Debt

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Business Segments - 12 Months Ended Amortization of Deferred Policy Acquisitions Costs By Dec. 31, 2016Dec. 31, 2015Dec. 31, 2014 Segment (Details) - USD ($) $ in Millions Segment Reporting Information [Line Items] Amortization of Deferred Policy Acquisition Costs $ 299.3 $ 257.4 $ 235.4 Operating Segments [Member] Segment Reporting Information [Line Items] Amortization of Deferred Policy Acquisition Costs 299.3 257.4 235.4 Property and Casualty Insurance [Member] Segment Reporting Information [Line Items] Amortization of Deferred Policy Acquisition Costs 252.1 213.1 187.5 Life and Health Insurance [Member] Segment Reporting Information [Line Items] Amortization of Deferred Policy Acquisition Costs $ 47.2 $ 44.3 $ 47.9

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Discontinued Operations 3 Months Ended Ended (Details) - USD ($) Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Dec. $ / shares in Units, $ in 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, 31, Millions 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 2013 Discontinued Operation, Income (Loss) from Discontinued Operation Disclosures [Abstract] Income Tax Expense $ $ $ (2.2) (3.1) (1.1) Income from Discontinued Operations $ $ $ 2.1 $ 2.0 $ 0.1 $ 3.3 $ 2.3 $ 0.0 $ 4.1 $ 5.5 $ 1.9 (0.1) (0.1) Income from Discontinued Operations Per Unrestricted Share: Basic (in dollars per share) $ $ $ 0.08 0.10 0.04 Diluted (in dollars per share) $ $ $ 0.08 0.10 0.04 Property and Casualty $ $ $ $ 931.4 862.8 931.4 862.8 733.9 843.5 Unitrin Business Insurance [Member] Discontinued Operation, Income (Loss) from Discontinued Operation Disclosures [Abstract] Results of Operations 6.3 8.6 $ 3.0 Income from Discontinued Operations Per Unrestricted Share: Property and Casualty $ $ $ $ 38.3 50.3 38.3 50.3

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Catastrophe Reinsurance 12 Months Ended (Details) Dec. 31, 2016 $ in Millions USD ($) Reinsurance Disclosures [Abstract] Catastrophic Events Classification $ 25.0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Catastrophe Reinsurance - 12 Months Ended Coverage for Catastrophe Reinsurance (Details) - Property and Casualty Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2014 Insurance [Member] - USD ($) Retained [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Reinsured Risk, Percentage 0.00% 0.00% 0.00% First Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Percentage 95.00% 95.00% 95.00% Second Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Percentage 95.00% 95.00% 95.00% Third Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Percentage 95.00% Minimum [Member] | Retained [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Amount Retained $ 0 $ 0 $ 0 Minimum [Member] | First Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Amount Reinsured 50,000,000 50,000,000 50,000,000 Minimum [Member] | Second Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Amount Reinsured 150,000,000 150,000,000 100,000,000 Minimum [Member] | Third Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Amount Reinsured 200,000,000 Maximum [Member] | Retained [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Amount Retained 50,000,000 50,000,000 50,000,000 Maximum [Member] | First Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Amount Reinsured 150,000,000 150,000,000 100,000,000 Maximum [Member] | Second Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Amount Reinsured $ 350,000,000$ 350,000,000200,000,000 Maximum [Member] | Third Layer of Coverage [Member] Liability for Catastrophe Claims [Line Items] Reinsurance Retention Policy, Excess Retention, Amount Reinsured $ 400,000,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Catastrophe Reinsurance - 12 Months Ended Catastrophe Reinsurance Dec. 31, Dec. 31, Dec. 31, Premiums (Details) - USD ($) 2016 2015 2014 $ in Millions Liability for Catastrophe Claims [Line Items] Ceded Catastrophe Reinsurance Premiums $ 19.0 $ 20.6 $ 26.0 Catastrophe Reinsurance [Member] Liability for Catastrophe Claims [Line Items] Ceded Catastrophe Reinsurance Premiums 12.0 12.9 17.7 Property and Casualty Insurance [Member] | Catastrophe Reinsurance [Member] Liability for Catastrophe Claims [Line Items] Ceded Catastrophe Reinsurance Premiums 11.9 12.8 17.6 Life and Health Insurance [Member] | Catastrophe Reinsurance [Member] Liability for Catastrophe Claims [Line Items] Ceded Catastrophe Reinsurance Premiums $ 0.1 $ 0.1 $ 0.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Catastrophe Reinsurance - 12 Months Ended Catastrophe Losses and LAE Dec. 31, Dec. 31, Dec. 31, (Details) - USD ($) 2016 2015 2014 $ in Millions Liability for Catastrophe Claims [Line Items] Catastrophe Losses and LAE $ 1,337.9 $ 1,103.2 $ 908.3 Catastrophe Loss and LAE Reserves, (Unfavorable) Favorable (20.7) (20.1) (57.1) Development Catastrophe [Member] Liability for Catastrophe Claims [Line Items] Catastrophe Losses and LAE 95.8 60.5 83.8 Catastrophe Loss and LAE Reserves, (Unfavorable) Favorable (19.3) (7.8) (14.7) Development Catastrophe [Member] | Property and Casualty Insurance [Member] Liability for Catastrophe Claims [Line Items] Catastrophe Losses and LAE 90.4 56.6 80.7 Catastrophe Loss and LAE Reserves, (Unfavorable) Favorable (19.2) (7.9) (15.8) Development Catastrophe [Member] | Life and Health Insurance [Member] Liability for Catastrophe Claims [Line Items] Catastrophe Losses and LAE 5.4 3.9 3.1 Catastrophe Loss and LAE Reserves, (Unfavorable) Favorable $ (0.1) $ 0.1 $ 1.1 Development

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Reinsurance Ceded 12 Months Ended Insurance (Details) - USD ($) Dec. 31, 2016Dec. 31, 2015Dec. 31, 2014 $ in Millions Effects of Reinsurance [Line Items] Ceded to Other Companies $ 19.0 $ 20.6 $ 26.0 Catastrophe Reinsurance [Member] Effects of Reinsurance [Line Items] Ceded to Other Companies $ 12.0 $ 12.9 $ 17.7

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12 Months Ended Other Reinsurance Assumed Dec. 31, 2016 Insurance (Details) USD ($) Dec. 31, 2015Dec. 31, 2014 $ in Millions employees USD ($) USD ($) director Assumed Insurance [Line Items] Assumed Premiums Earned $ 67.3 $ 60.1 $ 57.1 Capitol [Member] Assumed Insurance [Line Items] Number of Company Employee Board Members | employees 5 Number of Board of Director Members | director 5 ORCC [Member] Assumed Insurance [Line Items] Number of Company Employee Board Members | employees 9 Number of Board of Director Members | director 9 Capitol [Member] Assumed Insurance [Line Items] Assumed Premiums Earned $ 21.3 21.8 21.9 Capitol [Member] | Trinity [Member] Assumed Insurance [Line Items] Earned Premiums Assumed, Percentage 100.00% ORCC [Member] Assumed Insurance [Line Items] Assumed Premiums Earned $ 6.2 6.5 6.7 ORCC [Member] | Trinity [Member] Assumed Insurance [Line Items] Earned Premiums Assumed, Percentage 100.00% Non-Catastrophe Reinsurance [Member] Assumed Insurance [Line Items] Assumed Premiums Earned $ 67.3 $ 60.0 $ 57.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value Measurements - Valuation of Assets Dec. 31, 2016 Dec. 31, 2015 Measured at Fair Value (Details) - USD ($) Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Fair Value Option Investments $ 111,400,000 $ 164,500,000 Trading Securities at Fair Value 5,300,000 4,700,000 Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Trading Securities at Fair Value 5,300,000 4,700,000 Cash Flow Hedge Derivative Instrument Assets at Fair Value 1,600,000 Assets, Fair Value Disclosure 5,724,900,000 Investments, Fair Value Disclosure 5,544,700,000 Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Trading Securities at Fair Value 5,300,000 4,700,000 Cash Flow Hedge Derivative Instrument Assets at Fair Value 0 Assets, Fair Value Disclosure 296,000,000 Investments, Fair Value Disclosure 323,900,000 Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Trading Securities at Fair Value 0 0 Cash Flow Hedge Derivative Instrument Assets at Fair Value 1,600,000 Assets, Fair Value Disclosure 4,567,100,000 Investments, Fair Value Disclosure 4,289,600,000 Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Trading Securities at Fair Value 0 0 Cash Flow Hedge Derivative Instrument Assets at Fair Value 0 Assets, Fair Value Disclosure 581,700,000 Investments, Fair Value Disclosure 606,800,000 Investments in Fixed Maturities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 5,124,900,0004,852,300,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investments in Fixed Maturities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 119,500,000 124,900,000 Investments in Fixed Maturities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 4,494,300,0004,196,200,000 Investments in Fixed Maturities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 511,100,000 531,200,000 US Government and Government Agencies and Authorities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 336,300,000 320,600,000 US Government and Government Agencies and Authorities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 119,500,000 124,900,000 US Government and Government Agencies and Authorities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 216,800,000 195,700,000 US Government and Government Agencies and Authorities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 States and Political Subdivisions [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 1,714,900,0001,622,600,000 States and Political Subdivisions [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document States and Political Subdivisions [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 1,711,100,000 1,622,600,000 States and Political Subdivisions [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 3,800,000 0 Foreign Government Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 3,400,000 Foreign Government Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0.0 Foreign Government Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 3,400,000 Foreign Government Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0.0 Corporate Bonds and Notes [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 2,944,800,0002,812,800,000 Corporate Bonds and Notes [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Corporate Bonds and Notes [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 2,541,600,0002,376,500,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Corporate Bonds and Notes [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 403,200,000 436,300,000 Redeemable Preferred Stocks [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 600,000 3,800,000 Redeemable Preferred Stocks [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Redeemable Preferred Stocks [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Redeemable Preferred Stocks [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 600,000 3,800,000 Collateralized Loan Obligations [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 122,800,000 87,300,000 Collateralized Loan Obligations [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Collateralized Loan Obligations [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 19,300,000 0 Collateralized Loan Obligations [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 103,500,000 87,300,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other Mortgage and Asset-backed Securities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 2,100,000 5,200,000 Other Mortgage and Asset-backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Other Mortgage and Asset-backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 2,100,000 1,400,000 Other Mortgage and Asset-backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 3,800,000 Equity Securities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 481,700,000 523,200,000 Equity Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 171,200,000 194,300,000 Equity Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 71,200,000 93,400,000 Equity Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 70,600,000 75,600,000 Preferred Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 59,600,000 84,900,000 Preferred Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Preferred Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 59,600,000 79,800,000 Preferred Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 5,100,000 Preferred Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 22,900,000 19,000,000 Preferred Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Preferred Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 11,400,000 6,200,000 Preferred Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 11,500,000 12,800,000 Common Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 33,500,000 23,200,000 Common Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 26,400,000 16,600,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Common Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 6,600,000 Common Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 7,100,000 0 Common Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 11,700,000 13,500,000 Common Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 400,000 600,000 Common Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 200,000 800,000 Common Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 11,100,000 12,100,000 Exchange Traded Funds [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 144,400,000 177,100,000 Exchange Traded Funds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 144,400,000 177,100,000 Exchange Traded Funds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Exchange Traded Funds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Unfunded commitments 135,200,000 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 209,600,000 205,500,000 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 40,900,000 45,600,000 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Fair Value Option Investments 111,400,000 164,500,000 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Fair Value Option Investments 0 0 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Fair Value Option Investments 0 0 Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Fair Value Option Investments 0 0 Fair Value, Inputs, Net Asset Value [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Trading Securities at Fair Value 0 0 Cash Flow Hedge Derivative Instrument Assets at Fair Value 0 Assets, Fair Value Disclosure 280,100,000 Investments, Fair Value Disclosure 324,400,000 Fair Value, Inputs, Net Asset Value [Member] | Investments in Fixed Maturities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | US Government and Government Agencies and Authorities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | States and Political Subdivisions [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Foreign Government Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 Fair Value, Inputs, Net Asset Value [Member] | Corporate Bonds and Notes [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Redeemable Preferred Stocks [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Collateralized Loan Obligations [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Other Mortgage and Asset-backed Securities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Equity Securities [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 168,700,000 159,900,000 Fair Value, Inputs, Net Asset Value [Member] | Preferred Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Preferred Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Common Stock [Member] | Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Common Stock [Member] | All Industries Other than Finance, Insurance and Real Estate [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0 Fair Value, Inputs, Net Asset Value [Member] | Exchange Traded Funds [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 0 0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value, Inputs, Net Asset Value [Member] | Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Available-for-sale Securities 168,700,000 159,900,000 Fair Value, Inputs, Net Asset Value [Member] | Limited Liability Companies and Limited Partnerships [Member] | Fair Value, Measurements, Recurring [Member] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Fair Value Option Investments $ 111,400,000 $ 164,500,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value Measurements - 12 Months Ended Quantitative Information about Significant Unobservable Inputs (Details) - Market Approach Dec. 31, Dec. 31, Valuation Technique 2016 2015 [Member] - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Millions Collateralized Loan Obligations [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Assets, Fair Value Disclosure $ 103.5 $ 87.3 Collateralized Loan Obligations [Member] | Minimum [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 3.70% 3.10% Collateralized Loan Obligations [Member] | Maximum [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 9.90% 10.80% Collateralized Loan Obligations [Member] | Weighted Average [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 6.30% 6.10% Other Debt Obligations [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Assets, Fair Value Disclosure $ 16.0 $ 14.7 Investments in Fixed Maturities [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Assets, Fair Value Disclosure 511.1 531.2 External Credit Rating, Investment Grade [Member] | Private Placement [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Assets, Fair Value Disclosure $ 106.1 $ 98.7 External Credit Rating, Investment Grade [Member] | Private Placement [Member] | Minimum [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 2.70% 2.60% External Credit Rating, Investment Grade [Member] | Private Placement [Member] | Maximum [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 5.10% 6.90% External Credit Rating, Investment Grade [Member] | Private Placement [Member] | Weighted Average [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 3.80% 4.40% External Credit Rating, Non Investment Grade [Member] | Senior Debt Obligations [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value Inputs, Assets, Quantitative Information [Line Items] Assets, Fair Value Disclosure $ 142.2 $ 114.2 External Credit Rating, Non Investment Grade [Member] | Senior Debt Obligations [Member] | Minimum [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 4.80% 5.90% External Credit Rating, Non Investment Grade [Member] | Senior Debt Obligations [Member] | Maximum [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 14.00% 15.30% External Credit Rating, Non Investment Grade [Member] | Senior Debt Obligations [Member] | Weighted Average [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 9.60% 10.40% External Credit Rating, Non Investment Grade [Member] | Junior Subordinated Debt [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Assets, Fair Value Disclosure $ 143.3 $ 216.3 External Credit Rating, Non Investment Grade [Member] | Junior Subordinated Debt [Member] | Minimum [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 9.50% 8.20% External Credit Rating, Non Investment Grade [Member] | Junior Subordinated Debt [Member] | Maximum [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 20.00% 26.20% External Credit Rating, Non Investment Grade [Member] | Junior Subordinated Debt [Member] | Weighted Average [Member] Fair Value Inputs, Assets, Quantitative Information [Line Items] Fair Value Inputs, Discount Rate 13.00% 13.60%

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Fair Value Measurements - 12 Months Ended Level 3 Inputs Reconciliation Dec. 31, Dec. 31, 2016 (Details) - USD ($) 2015 Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] Fair Value, Level 1 to level 3 Transfers, Amount $ 0 $ 0 Fair Value, Level 3 to level 1 Transfers, Amount 0 0 Fair Value, Level 1 to Level 2 Activity Transfers, Amount 0 0 Fair Value, Level 2 to Level 1 Activity Transfers, Amount 0 0 Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance at Beginning of Year 606,800,000 518,400,000 Included in Consolidated Statement of Income (26,200,000) (18,200,000) Included in Other Comprehensive Income 5,900,000 (7,300,000) Purchases 244,600,000 296,800,000 Settlements (101,800,000)(75,600,000) Sales (125,700,000)(87,300,000) Transfers Into Level 3 4,100,000 0 Transfers out of Level 3 (26,000,000) (20,000,000) Balance at End of Year 581,700,000 606,800,000 Corporate Bonds and Notes [Member] Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance at Beginning of Year 436,300,000 360,600,000 Included in Consolidated Statement of Income (23,000,000) (9,400,000) Included in Other Comprehensive Income 900,000 (7,400,000) Purchases 203,700,000 241,600,000 Settlements (85,400,000) (65,500,000) Sales (114,500,000) (73,600,000) Transfers Into Level 3 0 0 Transfers out of Level 3 (14,800,000) (10,000,000) Balance at End of Year 403,200,000 436,300,000 States and Political Subdivisions [Member] Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance at Beginning of Year 0 Included in Consolidated Statement of Income (300,000) Included in Other Comprehensive Income 0 Purchases 0 Settlements 0 Sales 0 Transfers Into Level 3 4,100,000 Transfers out of Level 3 0 Balance at End of Year 3,800,000 0

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Redeemable Preferred Stocks [Member] Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance at Beginning of Year 3,800,000 6,700,000 Included in Consolidated Statement of Income 0 (1,600,000) Included in Other Comprehensive Income 0 (700,000) Purchases 0 0 Settlements (3,200,000) (600,000) Sales 0 0 Transfers Into Level 3 0 0 Transfers out of Level 3 0 0 Balance at End of Year 600,000 3,800,000 Collateralized Loan Obligations [Member] Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance at Beginning of Year 87,300,000 64,400,000 Included in Consolidated Statement of Income 0 600,000 Included in Other Comprehensive Income 4,300,000 (2,200,000) Purchases 29,100,000 39,500,000 Settlements (5,000,000) (7,500,000) Sales (1,900,000) (7,500,000) Transfers Into Level 3 0 0 Transfers out of Level 3 (10,300,000) 0 Balance at End of Year 103,500,000 87,300,000 Other Mortgage and Asset-backed Securities [Member] Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance at Beginning of Year 3,800,000 3,900,000 Included in Consolidated Statement of Income 400,000 0 Included in Other Comprehensive Income (300,000) (100,000) Purchases 0 1,300,000 Settlements (3,000,000) (100,000) Sales 0 (1,200,000) Transfers Into Level 3 0 0 Transfers out of Level 3 (900,000) 0 Balance at End of Year 0 3,800,000 Preferred and Common Stock [Member] Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance at Beginning of Year 30,000,000 38,800,000 Included in Consolidated Statement of Income (1,700,000) (2,600,000) Included in Other Comprehensive Income 3,400,000 1,400,000 Purchases 7,900,000 8,100,000 Settlements (5,200,000) (700,000) Sales (4,700,000) (5,000,000)

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Transfers Into Level 3 0 0 Transfers out of Level 3 0 (10,000,000) Balance at End of Year 29,700,000 30,000,000 Other Equity Interests [Member] Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance at Beginning of Year 45,600,000 44,000,000 Included in Consolidated Statement of Income (1,600,000) (5,200,000) Included in Other Comprehensive Income (2,400,000) 1,700,000 Purchases 3,900,000 6,300,000 Settlements 0 (1,200,000) Sales (4,600,000) 0 Transfers Into Level 3 0 0 Transfers out of Level 3 0 0 Balance at End of Year $ $ 40,900,000 45,600,000

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Related Parties (Details) - 12 Months Ended FS&C [Member] - USD ($) Dec. 31, Dec. 31, Dec. 31, $ in Millions 2016 2015 2014 Trinity [Member] Related Party Transaction [Line Items] Related Party Transaction, Amounts of Assets Managed by Investment Advisory $ 85.8 Firm under Director's Management Related Party Transaction, Expenses from Transactions with Related Party $ 0.1 0.3 Pension Plans, Defined Benefit [Member] | Investment Management Services for Defined Benefit Plan [Member] Related Party Transaction [Line Items] Related Party Transaction, Expenses from Transactions with Related Party $ 0.8 0.4 0.4 Assets under Management, Carrying Amount $ 148.4 $ 137.2 $ 159.2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Quarterly Financial 3 Months Ended 12 Months Ended Information (Details) - USD Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. ($) 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, $ / shares in Units, $ in 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 Millions Revenues [Abstract] Earned Premiums $ $ $ $ $ $ $ $ $ $ $ 561.4 558.9 553.7 546.0 541.5 536.7 500.1 431.3 2,220.02,009.61,862.2 Net Investment Income 79.9 77.7 73.7 67.0 79.4 75.9 76.7 70.6 298.3 302.6 309.1 Other Income 1.0 0.8 0.6 0.8 1.4 0.8 0.6 0.9 3.2 3.7 1.4 Net Realized Gains on Sales of 9.1 11.6 5.6 6.8 9.4 5.3 34.0 3.4 33.1 52.1 39.1 Investments Other-than-temporary Impairment Losses: Total Other-than-temporary (8.7) (8.3) (6.4) (9.6) (14.9) (3.3) (2.2) (7.0) (33.0) (27.4) (15.2) Impairment Losses Portion of Losses Recognized in 0.0 0.0 0.0 (0.3) 0.2 0.0 0.0 0.0 0.3 0.2 Other Comprehensive Income Net Impairment Losses Recognized (8.7) (8.3) (6.4) (9.3) (14.7) (3.3) (2.2) (7.0) (32.7) (27.2) (15.2) in Earnings Total Revenues 642.7 640.7 627.2 611.3 617.0 615.4 609.2 499.2 2,521.92,340.82,196.6 Expenses [Abstract] Policyholders’ Benefits and Incurred Losses and Loss Adjustment 418.3 490.2 436.1 436.2 416.0 378.8 375.1 297.7 1,780.81,467.61,261.7 Expenses Insurance Expenses 158.5 161.7 167.8 159.3 177.0 161.1 162.1 144.9 647.3 645.1 628.4 Write-off of Long-lived Assets 0.0 0.0 11.1 0.0 0.0 11.1 54.6 Loss from Early Extinguishment of 0.0 0.0 0.0 9.1 0.0 9.1 0.0 Debt Interest and Other Expenses 25.3 22.0 20.7 22.3 25.6 25.7 26.6 29.7 90.3 107.6 91.7 Total Expenses 602.1 673.9 624.6 617.8 618.6 565.6 574.9 481.4 2,518.42,240.52,036.4 Income (Loss) from Continuing 40.6 (33.2) 2.6 (6.5) (1.6) 49.8 34.3 17.8 3.5 100.3 160.2 Operations before Income Taxes Income Tax Benefit (Expense) (11.5) 14.9 1.5 4.3 2.9 (11.8) (6.9) (4.3) 9.2 (20.1) (47.6) Income (Loss) from Continuing 29.1 (18.3) 4.1 (2.2) 1.3 38.0 27.4 13.5 12.7 80.2 112.6 Operations Income from Discontinued 2.1 2.0 (0.1) 0.1 3.3 (0.1) 2.3 0.0 4.1 5.5 1.9 Operations Net Income $ $ $ $ $ $ 4.0 $ 4.6 $ 13.5 $ 16.8 $ 85.7 $ 114.5 31.2 (16.3) (2.1) 37.9 29.7 Income (Loss) from Continuing Operations Per Unrestricted Share [Abstract]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Income from Continuing Operations $ $ $ $ $ $ $ Per Unrestricted Share - Basic (usd $ 0.26 $ 0.25 $ 1.55 $ 2.08 0.56 (0.36) 0.08 (0.04) 0.03 0.73 0.53 pre share) Income from Continuing Operations Per Unrestricted Share - Diluted (usd 0.56 (0.36) 0.08 (0.04) 0.03 0.73 0.53 0.26 0.25 1.55 2.08 per share) Net Income (Loss) Per Unrestricted Share [Abstract] Net Income Per Unrestricted Share - 0.60 (0.32) 0.08 (0.04) 0.09 0.73 0.57 0.26 0.33 1.65 2.12 Basic ( usd per share) Net Income Per Unrestricted Share - 0.60 (0.32) 0.08 (0.04) 0.09 0.73 0.57 0.26 0.33 1.65 2.12 Diluted (usd pre share) Dividends Paid to Shareholders Per $ $ $ $ $ $ $ 0.24 $ 0.24 $ 0.96 $ 0.96 $ 0.96 Share (usd per share) 0.24 0.24 0.24 0.24 0.24 0.24

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 1 - Investments Dec. 31, Other Than Investments in 2016 Related Parties (Details) USD ($) $ in Millions Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost $ 6,282.1 Amount Carried in Balance Sheet 6,607.5 Fixed Maturities [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 4,846.8 Fair Value 5,124.9 Amount Carried in Balance Sheet 5,124.9 US Government and Government Agencies and Authorities [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 321.2 Fair Value 336.3 Amount Carried in Balance Sheet 336.3 States and Political Subdivisions [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 1,640.6 Fair Value 1,714.9 Amount Carried in Balance Sheet 1,714.9 Foreign Government Debt [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 3.5 Fair Value 3.4 Amount Carried in Balance Sheet 3.4 Other Corporate Bonds and Notes [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 2,758.9 Fair Value 2,944.8 Amount Carried in Balance Sheet 2,944.8 Redeemable Preferred Stocks [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 0.5 Fair Value 0.6 Amount Carried in Balance Sheet 0.6

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Collateralized Loan Obligations [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 121.2 Fair Value 122.8 Amount Carried in Balance Sheet 122.8 Other Mortgage and Asset-backed Securities [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 0.9 Fair Value 2.1 Amount Carried in Balance Sheet 2.1 Equity Securities, Investment Summary [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 434.4 Fair Value 481.7 Amount Carried in Balance Sheet 481.7 Preferred Stock [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 76.6 Fair Value 82.5 Amount Carried in Balance Sheet 82.5 Common Stock [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 38.4 Fair Value 45.2 Amount Carried in Balance Sheet 45.2 Other Equity Interests [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 319.4 Fair Value 354.0 Amount Carried in Balance Sheet 354.0 Fair Value Option Investments [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 111.4 Fair Value 111.4 Amount Carried in Balance Sheet 111.4 Equity Method Investments [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Amortized Cost 175.9 Amount Carried in Balance Sheet 175.9 Loans, Real Estate and Other Investments [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 439.9 Amount Carried in Balance Sheet 439.9 Short-term Investments [Member] Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items] Amortized Cost 273.7 Amount Carried in Balance Sheet $ 273.7

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 2 - Parent Company Financial Dec. 31, Dec. 31, Dec. 31, Dec. 31, Statements - Balance Sheets 2016 2015 2014 2013 (Details) - USD ($) $ in Millions ASSETS Investments in Subsidiaries $ 175.9 $ 190.6 Fixed Maturities at Fair Value (Amortized Cost: 2016 – $46.3; 2015 5,124.9 4,852.3 – $15.1) Fair Value Option Investments 111.4 164.5 Short-term Investments 273.7 255.7 Cash 115.7 161.7 $ 76.1 $ 66.5 Other Receivables 198.6 193.2 Current Income Tax Assets 15.5 9.5 Other Assets 255.9 238.5 Total Assets 8,210.5 8,036.1 LIABILITIES AND SHAREHOLDERS’ EQUITY Accrued Expenses and Other Liabilities 453.2 472.4 Total Liabilities 6,235.3 6,043.7 Shareholders’ Equity: Additional Paid-in Capital 660.3 654.0 Retained Earnings 1,172.8 1,209.0 Accumulated Other Comprehensive Income 137.0 124.3 Stockholders' Equity Attributable to Parent 1,975.2 1,992.4 2,090.7 2,051.5 Total Liabilities and Shareholders’ Equity 8,210.5 8,036.1 Parent Company [Member] ASSETS Investments in Subsidiaries 2,575.5 2,586.6 Fixed Maturities at Fair Value (Amortized Cost: 2016 – $46.3; 2015 46.3 15.1 – $15.1) Equity Securities at Fair Value (Cost: 2016 – $5.2; 2015 – $11.1) 5.3 10.9 Fair Value Option Investments 111.4 164.5 Short-term Investments 120.0 134.8 Cash 15.7 15.9 $ 17.9 $ 20.8 Other Receivables 3.4 5.7 Current Income Tax Assets 2.4 0.0 Other Assets 7.5 6.1 Total Assets 2,887.5 2,939.6 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Income Tax Liability 0.0 11.3 Deferred Income Tax Assets, Net 34.0 22.0 Liabilities for Benefit Plans 118.7 154.8 Accrued Expenses and Other Liabilities 8.0 8.5 Total Liabilities 912.3 947.2

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Shareholders’ Equity: Common Stock 5.1 5.1 Additional Paid-in Capital 660.3 654.0 Retained Earnings 1,172.8 1,209.0 Accumulated Other Comprehensive Income 137.0 124.3 Stockholders' Equity Attributable to Parent 1,975.2 1,992.4 Total Liabilities and Shareholders’ Equity 2,887.5 2,939.6 Parent Company [Member] | Senior Notes, 6% Due May 15, 2017 [Member] LIABILITIES AND SHAREHOLDERS’ EQUITY Notes Payable 359.8 359.1 Parent Company [Member] | Senior Notes, 4.35 Percent Due February 15, 2025 [Member] LIABILITIES AND SHAREHOLDERS’ EQUITY Notes Payable 247.7 247.4 Parent Company [Member] | Subordinated Debenture, 7.375 Percent Due 2054 [Member] LIABILITIES AND SHAREHOLDERS’ EQUITY Notes Payable $ 144.1 $ 144.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 2 - Parent Company Financial Statements - Balance Sheets Dec. 31, Dec. 31, Feb. 24, Feb. 27, (Non-printing) (Details) - 2016 2015 2015 2014 USD ($) $ in Millions Amortized Cost of Fixed Maturity Securities $ $ 4,846.8 4,560.7 Senior Notes [Member] | Senior Notes Payable, 6.00% due 2015 [Member] Senior Notes Payable, Interest Rate 6.00% Senior Notes [Member] | Senior Notes, 4.35 Percent Due February 15, 2025 [Member] Senior Notes Payable, Interest Rate 4.35% Subordinated Debt [Member] | Subordinated Debenture, 7.375 Percent Due 2054 [Member] Senior Notes Payable, Interest Rate 7.375% Parent Company [Member] Amortized Cost of Fixed Maturity Securities 46.3 15.1 Equity Securities at Cost 5.2 11.1 Parent Company [Member] | Senior Notes [Member] | Senior Notes Payable, 6.00% due 2017 [Member] Fair Value of Notes Payable $ 365.3 $ 374.0 Senior Notes Payable, Interest Rate 6.00% 6.00% Parent Company [Member] | Senior Notes [Member] | Senior Notes Payable, 6.00% due 2015 [Member] Fair Value of Notes Payable $ 0.0 Senior Notes Payable, Interest Rate 0.00% Parent Company [Member] | Senior Notes [Member] | Senior Notes, 4.35 Percent Due February 15, 2025 [Member] Fair Value of Notes Payable $ 248.5 $ 248.3 Senior Notes Payable, Interest Rate 4.35% 4.35% Parent Company [Member] | Subordinated Debt [Member] | Subordinated Debenture, 7.375 Percent Due 2054 [Member] Fair Value of Notes Payable $ 157.1 $ 159.0 Senior Notes Payable, Interest Rate 7.375% 7.375%

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 2 - Parent 3 Months Ended 12 Months Ended Company Financial Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Statements - Statements of 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, Income (Details) - USD ($) 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 $ in Millions Condensed Financial Statements, Captions [Line Items] Gain on Cash Flow Hedge $ 0.6 $ 0.0 $ 0.0 Net Investment Income $ 79.9 $ 77.7 $ 73.7 $ 67.0 $ 79.4 $ 75.9 $ 76.7 $ 70.6 298.3 302.6 309.1 Net Realized Gains (Losses) on 9.1 11.6 5.6 6.8 9.4 5.3 34.0 3.4 33.1 52.1 39.1 Sales of Investments Net Impairment Losses (8.7) (8.3) (6.4) (9.3) (14.7) (3.3) (2.2) (7.0) (32.7) (27.2) (15.2) Recognized in Earnings Total Revenues 642.7 640.7 627.2 611.3 617.0 615.4 609.2 499.2 2,521.92,340.82,196.6 Loss from Early Extinguishment 0.0 0.0 0.0 9.1 0.0 9.1 0.0 of Debt Total Expenses 602.1 673.9 624.6 617.8 618.6 565.6 574.9 481.4 2,518.42,240.52,036.4 Income Tax Benefit (11.5) 14.9 1.5 4.3 2.9 (11.8) (6.9) (4.3) 9.2 (20.1) (47.6) Net Income $ $ 31.2 $ 4.0 $ (2.1) $ 4.6 $ 37.9 $ 29.7 $ 13.5 16.8 85.7 114.5 (16.3) Parent Company [Member] Condensed Financial Statements, Captions [Line Items] Gain on Cash Flow Hedge 0.6 0.0 0.0 Net Investment Income 2.0 1.7 0.9 Net Realized Gains (Losses) on 0.1 (0.1) (0.2) Sales of Investments Net Impairment Losses 0.0 (1.6) (1.7) Recognized in Earnings Total Revenues 2.1 0.0 (1.0) Interest Expense 45.2 47.3 47.9 Loss from Early Extinguishment 0.0 9.1 0.0 of Debt Other Operating (Benefits) (6.1) 17.6 2.7 Expenses Total Expenses 39.1 74.0 50.6 Loss before Income Taxes and Equity in Net Income of (37.0) (74.0) (51.6) Subsidiaries Income Tax Benefit 13.4 26.5 18.9 Loss before Equity in Net (23.6) (47.5) (32.7) Income of Subsidiaries

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Equity in Net Income of 40.4 133.2 147.2 Subsidiaries Net Income $ 16.8 $ 85.7 $ 114.5

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 2 - Parent 3 Months Ended 12 Months Ended Company Financial Statements - Statements of Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Comprehensive Income 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, (Details) - USD ($) 2016 2016 2016 2016 201520152015 2015 2016 2015 2014 $ in Millions Condensed Financial Statements, Captions [Line Items] Net Income $ $ $ $ $ $ $ $ $ 4.0 $ 4.6 $ 85.7 31.2 (16.3) (2.1) 37.9 29.7 13.5 16.8 114.5 Unrealized Holding Gains (Losses) Arising During the Year: Securities Held by Parent (2.4) (151.9)259.7 Reclassification Adjustment for Amounts Included in Net Income: Securities Held by Parent 0.2 (25.4) (25.1) Unrealized Holding Gains (Losses) (2.2) (177.3)234.6 Unrecognized Postretirement Benefit Costs 14.2 3.0 (106.4) Arising During the Year Other Comprehensive Income (Loss), Finalization of Pension and Other Postretirement 1.0 0.0 0.0 Benefit Plan Valuation, before Tax Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI, 6.3 23.1 7.9 Pension and Other Postretirement Benefit Plans, before Tax Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Foreign Currency Translation Adjustments (0.3) (1.4) (1.0) Reclassification Adjustment for Amounts 0.0 0.0 0.0 Included in Net Income Foreign Currency Translation Adjustments (0.3) (1.4) (1.0) Gain on Cash Flow Hedge 1.6 0.0 0.0 Other Comprehensive Income (Loss) Before 19.6 (152.6)135.1 Income Taxes Income Tax Benefit (Expense): Securities Held by Parent 1.0 53.9 (91.6) Securities Held by Parent (0.1) 8.9 8.8 Unrealized Holding Gains and Losses 0.9 62.8 (82.8) Unrecognized Postretirement Benefit Costs (5.0) (1.1) 37.5 Arising During the Year Curtailment Cost Recognized (0.4) 0.0 0.0 Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI, 2.3 8.0 2.8 Pension and Other Postretirement Benefit Plans, Tax

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Net Unrecognized Postretirement Benefit Costs (7.3) (9.1) 34.7 Foreign Currency Translation Adjustments 0.1 0.5 0.4 Reclassification Adjustment for Amounts 0.0 0.0 0.0 Included in Net Income Foreign Currency Translation Adjustment 0.1 0.5 0.4 Gain on Cash Flow Hedge 0.6 0.0 0.0 Other Comprehensive Income Tax Benefit (6.9) 54.2 (47.7) (Expense) Other Comprehensive Income (Loss), Net of 12.7 (98.4) 87.4 Tax Total Comprehensive Income (Loss) 29.5 (12.7) 201.9 Parent Company [Member] Condensed Financial Statements, Captions [Line Items] Net Income 16.8 85.7 114.5 Unrealized Holding Gains (Losses) Arising During the Year: Securities Held by Subsidiaries (2.6) (150.4)261.7 Securities Held by Parent 0.2 (1.5) (2.0) Reclassification Adjustment for Amounts Included in Net Income: Securities Held by Subsidiaries 0.2 (26.9) (26.8) Securities Held by Parent 0.0 1.5 1.7 Unrealized Holding Gains (Losses) (2.2) (177.3)234.6 Unrecognized Postretirement Benefit Costs 14.2 3.0 (106.4) Arising During the Year Other Comprehensive Income (Loss), Finalization of Pension and Other Postretirement 1.0 0.0 0.0 Benefit Plan Valuation, before Tax Amortization of Unrecognized Postretirement 5.3 23.1 7.9 Benefit Costs Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI, 6.3 23.1 7.9 Pension and Other Postretirement Benefit Plans, before Tax Net Unrecognized Postretirement Benefit Costs 20.5 26.1 (98.5) Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation (0.3) (1.4) (1.0) Adjustment, Held by Subsidiaries, before Tax Gain on Cash Flow Hedge 1.6 0.0 0.0 Other Comprehensive Income (Loss) Before 19.6 (152.6)135.1 Income Taxes Income Tax Benefit (Expense): Securities Held by Subsidiaries 1.1 53.4 (92.3) Securities Held by Parent (0.1) 0.5 0.7 Securities Held by Subsidiaries (0.1) 9.4 9.4

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Securities Held by Parent 0.0 (0.5) (0.6) Unrealized Holding Gains and Losses 0.9 62.8 (82.8) Unrecognized Postretirement Benefit Costs (5.0) (1.1) 37.5 Arising During the Year Curtailment Cost Recognized (0.4) 0.0 0.0 Amortization of Unrecognized Postretirement (1.9) (8.0) (2.8) Benefit Costs Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI, 2.3 8.0 2.8 Pension and Other Postretirement Benefit Plans, Tax Net Unrecognized Postretirement Benefit Costs (7.3) (9.1) 34.7 Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation 0.1 0.5 0.4 Adjustment, Held by Subsidiaries, Tax Gain on Cash Flow Hedge 0.6 0.0 0.0 Other Comprehensive Income Tax Benefit (6.9) 54.2 (47.7) (Expense) Other Comprehensive Income (Loss), Net of 12.7 (98.4) 87.4 Tax Total Comprehensive Income (Loss) $ $ $ 29.5 (12.7) 201.9

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 2 - Parent 3 Months Ended 12 Months Ended Company Financial Statements - Statements of May Dec. Sep. Jun. Mar. Dec. Sep. Jun. Mar. Dec. Dec. Dec. Cash Flows (Details) - USD 07, 31, 30, 30, 31, 31, 30, 30, 31, 31, 31, 31, ($) 2015 2016 2016 2016 2016 2015 2015 2015 2015 2016 2015 2014 $ in Millions Operating Activities: Net Income $ $ $ $ $ $ $ $ 4.0 $ 4.6 $ 16.8 $ 85.7 31.2 (16.3) (2.1) 37.9 29.7 13.5 114.5 Adjustment Required to Reconcile Net Income to Net Cash Provided by Operations: Net Realized (Gains) Losses on (9.1) (11.6) (5.6) (6.8) (9.4) (5.3) (34.0)(3.4) (33.1) (52.1) (39.1) Sales of Investments Net Impairment Losses Recognized 8.7 $ 8.3 $ 6.4 9.3 14.7 3.3 2.2 7.0 32.7 27.2 15.2 in Earnings Loss from Early Extinguishment of 0.0 $ 0.0 $ 0.0 9.1 0.0 9.1 0.0 Debt Other, Net 0.7 32.2 16.4 Net Cash Provided by Operating 240.5 215.0 133.6 Activities Investing Activities: Capital Contributed to Subsidiary $ 75.0 Sales, Paydowns and Maturities of 532.3 627.8 573.7 Fixed Maturities Sales of Equity Securities 158.9 238.4 245.3 Sales of Fair Value Option 72.2 0.0 6.9 Investments Purchases of Fair Value Option (21.0) (111.0) (60.9) Investments Payments to Acquire Businesses, 0.0 (57.6) 0.0 Net of Cash Acquired Change in Short-term Investments (18.0) 104.9 (63.9) Net Cash Used by Investing (238.1)(28.6) (104.3) Activities Notes Payable Proceeds: Cash Dividends Paid (49.2) (49.7) (51.8) Common Stock Repurchases (3.8) (45.0) (114.0) Cash Exercise of Stock Options 3.5 3.9 0.5 Net Cash Used by Financing (48.4) (100.8)(19.7) Activities Decrease in Cash (46.0) 85.6 9.6 Cash, Beginning of Year 161.7 76.1 161.7 76.1 66.5 Cash, End of Year 115.7 161.7 115.7 161.7 76.1

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Purchases of Fixed Maturities 850.3 681.3 553.0 Parent Company [Member] Operating Activities: Net Income 16.8 85.7 114.5 Adjustment Required to Reconcile Net Income to Net Cash Provided by Operations: Equity in Net Income of (40.4) (133.2)(147.2) Subsidiaries Cash Dividends from Subsidiaries 77.7 285.0 159.1 Cash Received for Benefit Plan 1.4 0.0 0.0 from Subsidiary Cash Contribution to Defined (9.0) 0.0 0.0 Benefit Plan Net Realized (Gains) Losses on (0.1) 0.1 0.2 Sales of Investments Net Impairment Losses Recognized 0.0 1.6 1.7 in Earnings Loss from Early Extinguishment of 0.0 9.1 0.0 Debt Other, Net (9.3) 41.6 10.5 Net Cash Provided by Operating 37.1 289.9 138.8 Activities Investing Activities: Capital Contributed to Subsidiary 52.9 105.0 0.0 Capital Distribution from 0.0 0.0 1.1 Subsidiary Sales, Paydowns and Maturities of 73.5 11.8 11.5 Fixed Maturities Sales of Equity Securities 3.5 9.4 15.1 Sales of Fair Value Option 72.2 0.0 6.9 Investments Purchases of Fair Value Option (21.0) (111.0) (60.9) Investments Payments to Acquire Businesses, 0.0 (71.0) 0.0 Net of Cash Acquired Change in Short-term Investments 14.8 90.3 (94.3) Net Cash Used by Investing 12.2 (190.3)(120.6) Activities Notes Payable Proceeds: Net Proceeds from Issuance of 0.0 247.3 144.0 Subordinated Debentures Cash Dividends Paid (49.2) (49.7) (51.8) Common Stock Repurchases (3.8) (45.0) (114.0) Cash Exercise of Stock Options 3.5 3.9 0.5

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Excess Tax Benefits on Share 0.0 0.7 0.2 Based Awards Net Cash Used by Financing (49.5) (101.6)(21.1) Activities Decrease in Cash (0.2) (2.0) (2.9) Cash, Beginning of Year $ $ 15.9 17.9 20.8 15.9 17.9 Cash, End of Year $ $ 15.7 15.9 17.9 15.7 15.9 Purchases of Fixed Maturities 77.9 14.8 0.0 Notes Payable Payments: Repayments of Debt $ $ 0.0 $ 0.0 258.8

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Schedule 3 - Supplementary 12 Months Ended Insurance Information Dec. 31, Dec. 31, Dec. 31, (Details) - USD ($) 2016 2015 2014 $ in Millions Supplementary Insurance Information, by Segment [Line Items] Premiums $ 2,220.0 $ 2,009.6 $ 1,862.2 Other Income 3.2 3.7 1.4 Net Investment Income 298.3 302.6 309.1 Insurance Claims and Policyholders' Benefits 1,780.8 1,467.5 1,261.7 Amortization of Deferred Policy Acquisition Costs 299.3 257.4 235.4 Other Insurance Expenses 348.0 387.8 393.0 Deferred Policy Acquisition Costs 332.0 316.4 Insurance Reserves 4,406.7 4,203.8 Unearned Premiums 618.7 613.1 Property and Casualty Insurance [Member] Supplementary Insurance Information, by Segment [Line Items] Premiums 1,614.8 1,415.2 1,249.5 Premiums Written 1,620.9 1,406.2 1,189.1 Other Income 0.5 0.6 0.5 Net Investment Income 72.4 73.3 72.7 Insurance Claims and Policyholders' Benefits 1,319.2 1,086.2 887.3 Amortization of Deferred Policy Acquisition Costs 252.1 213.1 187.5 Other Insurance Expenses 133.6 155.0 166.2 Deferred Policy Acquisition Costs 82.1 80.7 Insurance Reserves 884.1 800.5 Unearned Premiums 592.0 586.1 Life and Health Insurance [Member] Supplementary Insurance Information, by Segment [Line Items] Premiums [1] 605.2 594.4 612.7 Other Income [1] 2.8 2.4 0.9 Net Investment Income [1] 213.2 214.2 218.7 Insurance Claims and Policyholders' Benefits [1] 461.6 381.3 374.4 Amortization of Deferred Policy Acquisition Costs [1] 47.2 44.3 47.9 Other Insurance Expenses [1] 266.7 275.7 268.1 Deferred Policy Acquisition Costs [1] 249.9 235.7 Insurance Reserves [1] 3,479.8 3,346.2 Unearned Premiums [1] 26.7 27.0 Other Segments [Member]

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Supplementary Insurance Information, by Segment [Line Items] Premiums 0.0 0.0 0.0 Other Income (0.1) 0.7 0.0 Net Investment Income 12.7 15.1 17.7 Insurance Claims and Policyholders' Benefits 0.0 0.0 0.0 Amortization of Deferred Policy Acquisition Costs 0.0 0.0 0.0 Other Insurance Expenses (52.3) (42.9) $ (41.3) Deferred Policy Acquisition Costs 0.0 0.0 Insurance Reserves 42.8 57.1 Unearned Premiums $ 0.0 $ 0.0 [1]The Company’s Life & Health Insurance employee-agents also market certain property and casualty insurance products under common management. Accordingly, the Company includes the results of these property and casualty insurance products in its Life & Health Insurance segment.

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3 Months Ended 12 Months Ended Schedule 4 - Reinsurance Sep. Jun. Mar. Sep. Jun. Mar. Schedule (Details) - USD ($) Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 30, 30, 31, 30, 30, 31, $ in Millions 2016 2015 2016 2015 2014 2016 2016 2016 2015 2015 2015 Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] Direct Premiums, Life $ $ $ $ $ Insurance in Force 20,889.0 20,209.8 20,889.020,209.820,565.9 Direct Premiums Earned 2,171.7 1,970.1 1,831.1 Ceded Premiums, Life 486.9 514.2 486.9 514.2 541.5 Insurance in Force Ceded to Other Companies 19.0 20.6 26.0 Assumed Premiums, Life 195.0 205.7 195.0 205.7 217.8 Insurance in Force Assumed Premiums Earned 67.3 60.1 57.1 Premiums, Net, Life Insurance 20,597.1 19,901.3 20,597.119,901.320,242.2 in Force Net Amount $ $ $ $ $ $ $ $ $ $ 561.4 $ 541.5 558.9553.7546.0 536.7500.1431.32,220.0 2,009.6 1,862.2 Life Insurance in Force Premiums, Percentage Assumed 0.90% 1.00% 0.90% 1.00% 1.10% to Net Premiums, Percentage Assumed 3.00% 3.00% 3.10% to Net Life Insurance Product Line [Member] Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] Direct Premiums Earned $ 381.4 $ 374.1 $ 387.5 Ceded to Other Companies 1.4 1.4 1.5 Assumed Premiums Earned 1.3 1.4 1.6 Net Amount $ 381.3 $ 374.1 $ 387.6 Premiums, Percentage Assumed 0.30% 0.40% 0.40% to Net Accident and Health Insurance [Member] Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] Direct Premiums Earned $ 144.9 $ 139.8 $ 146.3 Ceded to Other Companies 0.5 0.5 0.5 Assumed Premiums Earned 5.3 5.6 2.8 Net Amount $ 149.7 $ 144.9 $ 148.6

Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Premiums, Percentage Assumed 3.50% 3.90% 1.90% to Net Property, Liability and Casualty Insurance [Member] Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] Direct Premiums Earned $ $ $ 1,645.4 1,456.2 1,297.3 Ceded to Other Companies 17.1 18.7 24.0 Assumed Premiums Earned 60.7 53.1 52.7 Net Amount $ $ $ 1,689.0 1,490.6 1,326.0 Premiums, Percentage Assumed 3.60% 3.60% 4.00% to Net