Kemper Corporation 2020 Annual Report Kemper at a Glance Kemper Corporation (NYSE: KMPR) is one of the nation’s leading specialized insurers. With over $14 billion in assets, Kemper is improving the world of insurance by providing affordable and easy-to-use personalized solutions to individuals, families and businesses through its Auto, Personal Insurance, Life and Health brands. Kemper serves over 6.2 million policies, is represented by more than 30,000 agents and brokers, and has over 9,500 associates dedicated to meeting the ever- changing needs of its customers. Financial Highlights Earned Premiums Earnings Per Diluted Share Book Value Per Share Dollars in Millions Dollars Per Share Dollars Per Share Net Income BVPS Adj. Net Operating Income1 Adj. BVPS1 $7.96 $4,672 $4,472 $69.74 $6.57 $6.27 $6.14 $59.59 $3,384 $47.10 $4.37 $41.65 $36.36 $3.22 $28.22 2018 2019 2020 2018 2019 2020 2018 2019 2020 1 Adjusted Consolidated Net Operating Income 1 Book value per share excluding net unrealized gains on fixed maturities and goodwill Return on Average Cash Flow From Shareholders’ Equity Operating Activities Percentage Dollars in Millions ROAE 24.7% Adj. ROAE1 $539.2 $534.3 $448.0 16.3% 14.8% 11.4% 9.8% 7.7% 2018 2019 2020 2018 2019 2020 1 Rolling 12 months return on book value per share excluding net unrealized gains on fixed maturities and goodwill A Message from Joe Lacher President and Chief Executive Officer Kemper Corporation To Our Shareholders, This past year has been unpredictable and challenging by almost any measure. Nevertheless, through this environment, Kemper was given the opportunity to demonstrate the resiliency of our franchise. We met this challenge by leveraging our strong business model and financial position to meet the needs of our associates, customers, agents, suppliers and shareholders. In our letter last year, as the world was beginning to have opportunities to stand out—a unique skillset or sense the threat of the pandemic, we couldn’t predict capability, an unmet customer need, weak or unfocused that the impact and timeline would be as vast and far- competition. If we excel at meeting customer needs, reaching as it has been. We did, however, feel confident this will produce market share gains at appropriate and the crisis could be overcome through collaboration and attractive returns. focused dedication. Now, in March 2021, through much pain and hardship experienced by so many, we can see Our business is only as good as the sum of its parts. an end in sight. That said, our continued collaboration For a business to be part of our portfolio, it either needs and dedication to see us through to the end of this crisis to improve the portfolio or needs to be improved by remain just as important and necessary. being part of the portfolio. Taken together, the portfolio provides enhanced capital efficiency, reduced costs, At Kemper, our job is to empower specialty and better returns, and the ability to achieve enhanced underserved consumer markets. This is accomplished organic growth, all at lower risk to stakeholders than can by being responsible corporate citizens who consistently be achieved if the businesses were separate. The key deliver on our mission—providing affordable and easy- metrics we use to track success remain organic growth, to-use personalized financial protection to individuals, earnings generation, growth in tangible book value per families and businesses. Our secret sauce is, quite simply, share, return on tangible capital, and cash generation. to meet the needs of customers better than anyone else. We believe our model and business performance will consistently outperform the competition in these key We are able to achieve this differentiation through a metrics over time. portfolio of specialty businesses centered on where we Kemper Corporation 2020 Annual Report | 1 2020 Results In both volatile and non-volatile times, our business Every day, we focus on making investments and enhancing should produce better results than the competition capabilities in order to bolster our systematic, sustainable with less inherent risk. Amid a global pandemic, our net competitive advantages. In 2020, we had some unique income was down over the prior year but was still very events that helped to strengthen the organization: strong. When we look at the key metrics of how we build shareholder value, we’re pleased with our performance. • Announced the acquisition of American Access Casualty Company, accelerating the expansion of our Specialty Auto franchise. At Kemper, our job is to empower • Repurchased approximately $110 million of Kemper specialty and underserved stock, roughly equal to the shares issued in consumer markets. conjunction with the redemption in 2019 of hybrid notes, but at an 18% discount. During the year, we delivered adjusted operating earnings • Took advantage of market conditions to issue $400 of $439 million, or $6.57 per diluted share, compared million of 2.4% senior notes due in 2030. with $418 million or $6.27 per diluted share in 2019. Net income was $410 million, or $6.14 per diluted share, • De-risked a significant portion of pension liability by compared to $531 million or $7.96 per diluted share in transferring that exposure to a third party. 2019. Our results drove a 15% increase in tangible book These actions, along with enhancements made across value per share excluding unrealized gains, a 16% return our businesses, delivered growing operating earnings on tangible equity excluding unrealized gains, and $448 and stable cash flow in both favorable as well as difficult million of cash generated from operations. Particularly economic times. In addition, our actions were recognized in light of the challenging environment, these metrics by rating agencies with positive actions taken by S&P, demonstrate our ability to leverage a strong balance Fitch and AM Best over the past 12 months. Overall, sheet to produce exceptional results. Kemper produced a very solid year. 2 | Kemper Corporation 2020 Annual Report Business Performance Our Specialty Auto business produced excellent results and a decrease in lapse rates. This highlights the great in 2020. We had pandemic-related frequency benefits value our customers place in these products and the and used those benefits to our customers’ advantage in customer experience we deliver. a number of ways—premium credits, relaxing payment grace periods, and being particularly attentive to the We continue to be pleased with our competitive strength service needs of customers during a challenging time. in the Life and Health business and the value it adds For the year, adjusted for the premium credits we to the overall portfolio—it works exceptionally well provided, earned premiums increased 10%. Our in combination with our Specialty Auto business. The cost advantage, focus on underserved customers, portfolio diversification benefit of our business model and increasing product sophistication are the key was very evident in 2020, when we saw the frequency components to being successful in the market we serve. benefits in the P&C auto businesses offset the frequency challenges in Life and Health, and continued to produce We continue to be confident about the growth strong earnings and cash flows in spite of the volatile year. prospects of this business, which is enhanced by the announced acquisition of American Access Casualty Company in a $370 million cash transaction. This In each of our specialties, we seek acquisition, which is expected to close in early 2021, accelerates the expansion of our Specialty Auto business to build systematic, sustainable through increased scale in new and under-penetrated competitive advantages. geographies. It enhances our customer reach in the area of low-limit policies and expands our agency network. We continue to work toward improving results in our Our Life and Health segment continues to perform Preferred Insurance segment. Profit improvement well. We saw pandemic-related mortality increases in actions through underwriting, pricing and exposure line with domestic trends. Despite what is comparable management are expected to bring us closer to desired to a 1-in-100-year catastrophe event as well as a results. Actions to strengthen this business will likely two-month pause on sales, the business generated persist for a couple of years. positive operating earnings, new business growth, Kemper Corporation 2020 Annual Report | 3 Our Communities and Social Responsibility Kemper’s philanthropic initiatives are focused on supporting causes, organizations and initiatives that make a meaningful difference in the lives of our customers, employees and the communities where we live and work. Our support is provided through donations of time and resources to underserved communities primarily in the areas of education, health and community development. Particularly in light of the challenging environment, our 2020 metrics demonstrate our ability to leverage a strong balance sheet to produce exceptional results. In addition, due to the pandemic, providing relief to communities that have critical needs is part of our responsibility. In 2020, we prioritized donations to organizations focused on critical issues including food insecurity, supporting front-line medical personnel, and supporting those facing disproportionate impact from the pandemic. These organizations are doing extraordinary things to help our communities deal with this crisis, and we are proud to support them. We believe that our stakeholders benefit from companies that create enduring, sustainable value for the communities where we live and work. We have a longstanding commitment in addressing the environmental, social and governance aspects of our organization, and are focused on advancing existing and new initiatives in these areas to have a profound impact. I encourage you to read more about our efforts directed towards our communities and ESG on the following pages. 4 | Kemper Corporation 2020 Annual Report The Long Term As I’ve discussed many times, we are focused on creating We remain positive about the outlook for our Life and long-term shareholder value at Kemper.