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Investments | 9 Months Ended
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Sep. 30, 2014
Investments Disclosures [Abstract] |
Investments | Note 2 - Investments The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at September 30, 2014 were:
|  | Amortized Cost |  | Gross Unrealized |  | Fair Value
(Dollars in Millions) |  | Gains |  | Losses |
U.S. Government and Government Agencies and Authorities |  | $ | 320.4 |  |  | $ | 28.5 |  |  | $ | (5.4 | ) |  | $ | 343.5 |
States and Political Subdivisions |  | 1,336.0 |  |  | 107.5 |  |  | (4.3 | ) |  | 1,439.2 |
Corporate Securities: |  |  |  |  |  |  |  |
Bonds and Notes |  | 2,589.4 |  |  | 268.0 |  |  | (18.4 | ) |  | 2,839.0 |
Redeemable Preferred Stocks |  | 6.2 |  |  | 1.2 |  |  | — |  |  | 7.4 |
Collateralized Loan Obligations |  | 62.5 |  |  | 0.4 |  |  | (0.4 | ) |  | 62.5 |
Other Mortgage- and Asset-backed |  | 4.0 |  |  | 1.6 |  |  | — |  |  | 5.6 |
Investments in Fixed Maturities |  | $ | 4,318.5 |  |  | $ | 407.2 |  |  | $ | (28.5 | ) |  | $ | 4,697.2 |
The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2013 were:
|  | Amortized Cost |  | Gross Unrealized |  | Fair Value
(Dollars in Millions) |  | Gains |  | Losses |
U.S. Government and Government Agencies and Authorities |  | $ | 351.1 |  |  | $ | 22.8 |  |  | $ | (11.7 | ) |  | $ | 362.2 |
States and Political Subdivisions |  | 1,327.4 |  |  | 53.8 |  |  | (20.2 | ) |  | 1,361.0 |
Corporate Securities: |  |  |  |  |  |  |  |
Bonds and Notes |  | 2,636.4 |  |  | 205.0 |  |  | (47.7 | ) |  | 2,793.7 |
Redeemable Preferred Stocks |  | 6.6 |  |  | 0.8 |  |  | — |  |  | 7.4 |
Collateralized Loan Obligations |  | 44.2 |  |  | 0.5 |  |  | — |  |  | 44.7 |
Other Mortgage- and Asset-backed |  | 4.8 |  |  | 1.3 |  |  | (0.1 | ) |  | 6.0 |
Investments in Fixed Maturities |  | $ | 4,370.5 |  |  | $ | 284.2 |  |  | $ | (79.7 | ) |  | $ | 4,575.0 |
Note 2 - Investments (continued) The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at September 30, 2014 by contractual maturity were:
(Dollars in Millions) |  | Amortized Cost |  | Fair Value
Due in One Year or Less |  | $ | 46.6 |  |  | $ | 47.9 |
Due after One Year to Five Years |  | 728.5 |  |  | 777.4 |
Due after Five Years to Ten Years |  | 1,329.0 |  |  | 1,378.5 |
Due after Ten Years |  | 2,009.5 |  |  | 2,277.1 |
Asset-backed Securities Not Due at a Single Maturity Date |  | 204.9 |  |  | 216.3 |
Investments in Fixed Maturities |  | $ | 4,318.5 |  |  | $ | 4,697.2 |
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 Asset-backed Securities Not Due at a Single Maturity Date at September 30, 2014 consisted of securities issued by the Government National Mortgage Association with a fair value of $138.3 million, securities issued by the Federal National Mortgage Association with a fair value of $9.6 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $0.3 million and securities of other non-governmental issuers with a fair value of $68.1 million. There were no unsettled sales of Investments in Fixed Maturities at September 30, 2014. Other Receivables included unsettled sales of Investments in Fixed Maturities of $2.5 million at December 31, 2013, all of which settled in the following month. Accrued Expenses and Other Liabilities included unsettled purchases of Investments in Fixed Maturities of $6.8 million at September 30, 2014, all of which settled in the following month. There were no unsettled purchases of Investments in Fixed Maturities at December 31, 2013. Other Receivables included unsettled sales of Investments in Equity Securities of $53.4 million at September 30, 2014, all of which settled in the following month. There were no unsettled sales of Investments in Equity Securities at December 31, 2013. Accrued Expenses and Other Liabilities included unsettled purchases of Investments in Equity Securities of $51.3 million at September 30, 2014, all of which settled in the following month. There were no unsettled purchases of Investments in Equity Securities at December 31, 2013. Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at September 30, 2014 were:
|  |  |  | Gross Unrealized |  |
(Dollars in Millions) |  | Cost |  | Gains |  | Losses |  | Fair Value
Preferred Stocks: |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | $ | 85.5 |  |  | $ | 4.9 |  |  | $ | (1.0 | ) |  | $ | 89.4 |
Other Industries |  | 20.2 |  |  | 5.6 |  |  | (0.1 | ) |  | 25.7 |
Common Stocks: |  |  |  |  |  |  |  |
Manufacturing |  | 84.8 |  |  | 25.9 |  |  | (1.1 | ) |  | 109.6 |
Other Industries |  | 67.3 |  |  | 22.6 |  |  | (0.7 | ) |  | 89.2 |
Other Equity Interests: |  |  |  |  |  |  |  |
Exchange Traded Funds |  | 125.2 |  |  | 5.2 |  |  | (0.6 | ) |  | 129.8 |
Limited Liability Companies and Limited Partnerships |  | 164.3 |  |  | 55.7 |  |  | (2.3 | ) |  | 217.7 |
Investments in Equity Securities |  | $ | 547.3 |  |  | $ | 119.9 |  |  | $ | (5.8 | ) |  | $ | 661.4 |
Note 2 - Investments (continued) Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2013 were:
|  |  |  | Gross Unrealized |  |
(Dollars in Millions) |  | Cost |  | Gains |  | Losses |  | Fair Value
Preferred Stocks: |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | $ | 85.4 |  |  | $ | 2.9 |  |  | $ | (2.5 | ) |  | $ | 85.8 |
Other Industries |  | 20.1 |  |  | 4.4 |  |  | (0.1 | ) |  | 24.4 |
Common Stocks: |  |  |  |  |  |  |  |
Manufacturing |  | 83.4 |  |  | 21.3 |  |  | (0.1 | ) |  | 104.6 |
Other Industries |  | 68.8 |  |  | 17.0 |  |  | (0.9 | ) |  | 84.9 |
Other Equity Interests: |  |  |  |  |  |  |  |
Exchange Traded Funds |  | 122.0 |  |  | 3.9 |  |  | (1.0 | ) |  | 124.9 |
Limited Liability Companies and Limited Partnerships |  | 150.3 |  |  | 25.2 |  |  | (1.6 | ) |  | 173.9 |
Investments in Equity Securities |  | $ | 530.0 |  |  | $ | 74.7 |  |  | $ | (6.2 | ) |  | $ | 598.5 |
An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at September 30, 2014 is presented below.
|  | Less Than 12 Months |  | 12 Months or Longer |  | Total
(Dollars in Millions) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
Fixed Maturities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and Government Agencies and Authorities |  | $ | 24.3 |  |  | $ | (1.4 | ) |  | $ | 65.3 |  |  | $ | (4.0 | ) |  | $ | 89.6 |  |  | $ | (5.4 | )
States and Political Subdivisions |  | 50.1 |  |  | (0.1 | ) |  | 154.8 |  |  | (4.2 | ) |  | 204.9 |  |  | (4.3 | )
Corporate Securities: |  |  |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | 250.8 |  |  | (2.8 | ) |  | 409.4 |  |  | (15.6 | ) |  | 660.2 |  |  | (18.4 | )
Collateralized Loan Obligations |  | 36.2 |  |  | (0.3 | ) |  | 2.2 |  |  | (0.1 | ) |  | 38.4 |  |  | (0.4 | )
Other Mortgage- and Asset-backed |  | — |  |  | — |  |  | 0.7 |  |  | — |  |  | 0.7 |  |  | — |
Total Fixed Maturities |  | 361.4 |  |  | (4.6 | ) |  | 632.4 |  |  | (23.9 | ) |  | 993.8 |  |  | (28.5 | )
Equity Securities: |  |  |  |  |  |  |  |  |  |  |  |
Preferred Stocks: |  |  |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | 5.0 |  |  | — |  |  | 12.1 |  |  | (1.0 | ) |  | 17.1 |  |  | (1.0 | )
Other Industries |  | 0.7 |  |  | (0.1 | ) |  | 0.7 |  |  | — |  |  | 1.4 |  |  | (0.1 | )
Common Stocks: |  |  |  |  |  |  |  |  |  |  |  |
Manufacturing |  | 30.8 |  |  | (1.1 | ) |  | 0.3 |  |  | — |  |  | 31.1 |  |  | (1.1 | )
Other Industries |  | 12.0 |  |  | (0.7 | ) |  | — |  |  | — |  |  | 12.0 |  |  | (0.7 | )
Other Equity Interests: |  |  |  |  |  |  |  |  |  |  |  |
Exchange Traded Funds |  | 51.2 |  |  | (0.2 | ) |  | 14.5 |  |  | (0.4 | ) |  | 65.7 |  |  | (0.6 | )
Limited Liability Companies and Limited Partnerships |  | 74.8 |  |  | (2.0 | ) |  | 2.4 |  |  | (0.3 | ) |  | 77.2 |  |  | (2.3 | )
Total Equity Securities |  | 174.5 |  |  | (4.1 | ) |  | 30.0 |  |  | (1.7 | ) |  | 204.5 |  |  | (5.8 | )
Total |  | $ | 535.9 |  |  | $ | (8.7 | ) |  | $ | 662.4 |  |  | $ | (25.6 | ) |  | $ | 1,198.3 |  |  | $ | (34.3 | )
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 Condensed Consolidated Statements of Income in the periods when such determinations are made. Note 2 - Investments (continued) Unrealized losses on fixed maturities, which the Company has determined to be temporary at September 30, 2014, were $28.5 million, of which $23.9 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were no unrealized losses at September 30, 2014 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” Included in the preceding table under the heading “12 Months or Longer” were unrealized losses of $0.3 million related to securities for which the Company has recognized credit losses in earnings. Investment-grade fixed maturity investments comprised $24.7 million and below-investment-grade fixed maturity investments comprised $3.8 million of the unrealized losses on investments in fixed maturities at September 30, 2014. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was less than 4% of the amortized cost basis of the investment. At September 30, 2014, 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 it recovered the amortized cost of such investments, which may be at maturity. Based on the Company’s evaluation at September 30, 2014 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 it recovered 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 September 30, 2014 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 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 September 30, 2014. Note 2 - Investments (continued) An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2013 is presented below.
|  | Less Than 12 Months |  | 12 Months or Longer |  | Total
(Dollars in Millions) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
Fixed Maturities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and Government Agencies and Authorities |  | $ | 95.8 |  |  | $ | (10.9 | ) |  | $ | 4.4 |  |  | $ | (0.8 | ) |  | $ | 100.2 |  |  | $ | (11.7 | )
States and Political Subdivisions |  | 222.9 |  |  | (20.1 | ) |  | 2.0 |  |  | (0.1 | ) |  | 224.9 |  |  | (20.2 | )
Corporate Securities: |  |  |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | 699.8 |  |  | (39.4 | ) |  | 103.2 |  |  | (8.3 | ) |  | 803.0 |  |  | (47.7 | )
Other Mortgage- and Asset-backed |  | 13.9 |  |  | (0.1 | ) |  | 1.1 |  |  | — |  |  | 15.0 |  |  | (0.1 | )
Total Fixed Maturities |  | 1,032.4 |  |  | (70.5 | ) |  | 110.7 |  |  | (9.2 | ) |  | 1,143.1 |  |  | (79.7 | )
Equity Securities: |  |  |  |  |  |  |  |  |  |  |  |
Preferred Stocks: |  |  |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | 22.5 |  |  | (2.5 | ) |  | 2.5 |  |  | — |  |  | 25.0 |  |  | (2.5 | )
Other Industries |  | 4.3 |  |  | (0.1 | ) |  | 0.7 |  |  | — |  |  | 5.0 |  |  | (0.1 | )
Common Stocks: |  |  |  |  |  |  |  |  |  |  |  |
Manufacturing |  | 5.0 |  |  | (0.1 | ) |  | 0.2 |  |  | — |  |  | 5.2 |  |  | (0.1 | )
Other Industries |  | 14.2 |  |  | (0.9 | ) |  | 0.5 |  |  | — |  |  | 14.7 |  |  | (0.9 | )
Other Equity Interests: |  |  |  |  |  |  |  |  |  |  |  |
Exchange Traded Funds |  | 67.6 |  |  | (1.0 | ) |  | — |  |  | — |  |  | 67.6 |  |  | (1.0 | )
Limited Liability Companies and Limited Partnerships |  | 53.1 |  |  | (0.9 | ) |  | 5.0 |  |  | (0.7 | ) |  | 58.1 |  |  | (1.6 | )
Total Equity Securities |  | 166.7 |  |  | (5.5 | ) |  | 8.9 |  |  | (0.7 | ) |  | 175.6 |  |  | (6.2 | )
Total |  | $ | 1,199.1 |  |  | $ | (76.0 | ) |  | $ | 119.6 |  |  | $ | (9.9 | ) |  | $ | 1,318.7 |  |  | $ | (85.9 | )
Unrealized losses on fixed maturities, which the Company has determined to be temporary at December 31, 2013, were $79.7 million, of which $9.2 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were no unrealized losses at December 31, 2013 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” Included in the preceding table under the heading “12 Months or Longer” there were unrealized losses of $0.3 million at December 31, 2013 related to securities for which the Company has recognized credit losses in earnings. Investment-grade fixed maturity investments comprised $74.2 million and below-investment-grade fixed maturity investments comprised $5.5 million of the unrealized losses on investments in fixed maturities at December 31, 2013. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was less than 5% of the amortized cost basis of the investment. At December 31, 2013, 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 it recovered the amortized cost of such investments, which may be at maturity. Based on the Company’s evaluation at December 31, 2013 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 it recovered 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 in preferred and common stocks at December 31, 2013 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 distressed debt, mezzanine debt and secondary transactions. By the nature of their underlying investments, the Company believes that its investments in limited liability companies and limited partnerships also exhibit debt-like characteristics which, among other factors, the Company also Note 2 - Investments (continued) considers when evaluating these investments for impairment. Based on the Company’s evaluations, it concluded that the declines in the fair values of the Company’s investments in equity securities in the preceding table were temporary at December 31, 2013. The following table sets forth the pre-tax amount of other-than-temporary-impairment (“OTTI”) credit losses, recognized in Retained Earnings for Investments in Fixed Maturities held by the Company as of the dates indicated, for which the portion of the OTTI loss related to factors other than credit has been recognized in Accumulated Other Comprehensive Income, and the corresponding changes in such amounts.
|  | Nine Months Ended |  | Three Months Ended
(Dollars in Millions) |  | Sep 30, 2014 |  | Sep 30, 2013 |  | Sep 30, 2014 |  | Sep 30, 2013
Balance at Beginning of Period |  | $ | 9.9 |  |  | $ | 4.6 |  |  | $ | 12.9 |  |  | $ | 4.4 |
Additions for Previously Unrecognized OTTI Credit Losses |  | 2.4 |  |  | 1.8 |  |  | — |  |  | 0.8 |
Increases to Previously Recognized OTTI Credit Losses |  | 0.6 |  |  | 1.3 |  |  | — |  |  | 1.3 |
Reductions for Change in Impairment Status: |  |  |  |  |  |  |  |
From Status of Credit Loss to Status of Intent-to-sell or Required-to-sell |  | (2.4 | ) |  | (3.2 | ) |  | (2.4 | ) |  | (2.1 | )
Reductions for Investments Sold During Period |  | — |  |  | (0.1 | ) |  | — |  |  | — |
Balance at End of Period |  | $ | 10.5 |  |  | $ | 4.4 |  |  | $ | 10.5 |  |  | $ | 4.4 |
Gross gains and losses on sales of investments in fixed maturities and equity securities for the nine and three months ended September 30, 2014 and 2013 were:
|  | Nine Months Ended |  | Three Months Ended
(Dollars in Millions) |  | Sep 30, 2014 |  | Sep 30, 2013 |  | Sep 30, 2014 |  | Sep 30, 2013
Fixed Maturities: |  |  |  |  |  |  |  |
Gains on Sales |  | $ | 5.0 |  |  | $ | 29.6 |  |  | $ | 0.2 |  |  | $ | 2.5 |
Equity Securities: |  |  |  |  |  |  |  |
Gains on Sales |  | 11.7 |  |  | 1.9 |  |  | 7.9 |  |  | 0.7 |
Losses on Sales |  | — |  |  | (0.3 | ) |  | — |  |  | (0.2 | )
For the nine months ended September 30, 2014, Kemper purchased and sold $52.9 million and $2.9 million, respectively, of investments in certain hedge funds. 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 Condensed Consolidated Statement 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. The fair value of such investments reported as Fair Value Option Investments in the Condensed Consolidated Balance Sheet was $50.6 million at September 30, 2014. The carrying values of the Company’s Other Investments at September 30, 2014 and December 31, 2013 were:
(Dollars in Millions) |  | Sep 30, 2014 |  | Dec 31, 2013
Loans to Policyholders at Unpaid Principal |  | $ | 280.8 |  |  | $ | 275.4 |
Real Estate at Depreciated Cost |  | 164.3 |  |  | 167.1 |
Trading Securities at Fair Value |  | 5.0 |  |  | 5.0 |
Other |  | 0.4 |  |  | 0.5 |
Total |  | $ | 450.5 |  |  | $ | 448.0 |

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- Definition The entire disclosure for investments, including all tables. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 6 -Section 10 -Paragraph (c) -Subparagraph (1) + Details
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