Kemper Corp. was granted an A.M. Best upgrade of its financial strength rating, based on a strong balance sheet and solid operating performance over time.

The property/casualty insurer and its subsidiaries/affiliated insurance companies saw their Financial Strength Rating upgrated to A (Excellent) from A- (Excellent). As well, Kemper’s Long-Term Issuer Credit Ratings improved to “a” from “a-“. Collectively, Kemper’s various parts are referred to as Kemper Property & Casualty Group.

Kemper P&C’s ratings reflect its balance sheet strength, which A.M. Best categorizes strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The rating upgrades reflect that Kemper P&C has consistently maintained risk-adjusted capitalization measuring at the strongest level in recent years, even while paying significant shareholder dividends. In addition, the group’s loss reserves have generally developed favorably over time.

A.M. Best said the group has demonstrated an ability to generate organic surplus growth through investment earnings and fee and service revenue, which was enhanced in recent years by profitable underwriting performance.

However, the ratings agency said Kemper P&C’s balance sheet strength is moderated by the payment of shareholder dividends, which have contributed to a decline in policyholders’ surplus over the past five years. The group’s invested assets produce above-average returns, but have a higher risk profile than peers, with above-average allocations to below-investment grade bonds and to limited partnerships and similar instruments. Nevertheless, these risks are well-managed, and are supported by the current capital levels.

Kemper P&C’s operating performance has benefitted in recent years from improved underwriting performance, said AM Best, noting that the group’s overall return metrics compare favorably with peers. The group has also taken actions to diversify its business profile and enhance the scope of its ERM.

The stable rating outlooks reflect A.M. Best’s expectation that the rated insurance operations’ balance sheet strength will remain at the strongest assessment level, underpinned by the strongest level of risk-adjusted capitalization. They further reflect the expectation that the operating insurance companies will maintain their consistent operating earnings, supported by their current business profile.

Additionly, A.M. Best revised the outlooks to stable from positive for the members of the Kemper Property/Casualty Group.

Source: A.M. Best

*A version of this story ran previously in our sister publication Insurance Journal.