S&P downgrades Kemper

S&P said its long-term issuer credit rating on Kemper Corp. to BBB- from BBB and removed its ratings from CreditWatch, where it had placed them with negative implications on Nov. 8. The outlook is stable.

“The rating actions reflect our updated view of Kemper's concentrated product offering and limited geographic footprint that have materially weakened its operating earnings amid high inflation affecting the personal auto market. As of year-end 2022, nonstandard auto remains substantial at 66% of Kemper's $5.3 billion total earned premium. The rising personal auto claim frequency in 2021 coincided with a sharp and sustained rise in severity stemming from chip shortages, rising used-car prices, labor shortages, and greater attorney involvement.

“Private auto insurers across the industry have struggled to increase rates to keep pace with the inflationary pressures, where Kemper's key state focus has been more acutely affected. However, the impact on Kemper has been outsized because of the company's concentration in nonstandard auto,” S&P said in a press release.

The stable outlook reflects the view that Kemper's restructuring to a reciprocal exchange will have little effect on its credit fundamentals, especially in the near to medium term, the agency said.

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