Property and Casualty Insurance Reserves

9 Months Ended

Sep. 30, 2025

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Property and Casualty Insurance Reserves

Property and Casualty Insurance Reserve activity for the nine months ended September 30, 2025 and 2024 was:


	Nine Months Ended
(Dollars in Millions)	Sep 30, 2025		Sep 30, 2024
Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year	$	2,611.9	$	2,680.5
Less: Reinsurance Recoverables at Beginning of Year	24.3		27.8
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year	2,587.6		2,652.7
Incurred Losses and LAE related to:
Current Year	2,242.2		2,053.0
Prior Years	66.2		27.4
Total Incurred Losses and LAE	2,308.4		2,080.4
Paid Losses and LAE related to:
Current Year	945.0		945.0
Prior Years	1,167.7		1,227.6
Total Paid Losses and LAE	2,112.7		2,172.6
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Period	2,783.3		2,560.5
Plus: Reinsurance Recoverables at End of Period	22.7		26.4
Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Period	$	2,806.0	$	2,586.9

Property and Casualty Insurance Reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends may 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 Condensed Consolidated Statements of (Loss) Income in the period of change. Additionally, the Company reviews if any premium revisions are appropriate as a result of any incurred losses and loss adjustment expenses (“LAE”) related to prior years recorded in the current period. For the nine months ended September 30, 2025 and 2024, no additional premiums or return premiums were recorded.

For the nine months ended September 30, 2025, the net adverse prior year development of $66.2 million included $67.5 million of adverse development on prior accident years attributable to evolving loss patterns and higher defense costs associated with attorney-represented bodily injury coverages in the Commercial Automobile product line.

For the nine months ended September 30, 2024, the net adverse prior year development of $27.4 million included $22.1 million of adverse development within Non-Core Operations due primarily to higher than expected loss emergence related to homeowners, umbrella, and bodily injury coverages. In addition, the Company experienced adverse development of $5.1 million within the Specialty Personal Automobile product line, primarily driven by higher than expected settlements for extra-contractual demands related to prior year claims.

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

Liability for Future Policyholder Benefits

The Company’s Life Insurance Reserves are reported using the Company’s estimate of its liability for future policyholder benefits. The liability for future policyholder benefits is grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. Significant assumption inputs to the calculation of the liability for future

Note 5 - Liability for Future Policyholder Benefits (Continued)

policyholder benefits include mortality, lapses, and discount rates (both accretion and current). The liability is adjusted for differences between actual and expected experience.

The following tables summarize balances and changes in the present value of expected net premiums, present value of expected future policyholder benefits and net liability for future policyholder benefits as of and for the three and nine months ended September 30, 2025 and 2024:


		Three Months Ended				Nine Months Ended
(Dollars in Millions)		Sep 30, 2025		Sep 30, 2024		Sep 30, 2025		Sep 30, 2024
Present Value of Expected Net Premiums	Balance, Beginning of Period	$	683.1	$	692.6	$	646.1	$	675.4

	Beginning Balance at Original Discount Rate	$	705.6	$	733.2	$	681.0	$	694.7
	Effect of Changes in Cash Flow Assumptions	—		—		—		—
	Effect of Actual Variances from Expected Experience	1.1		(1.4)		17.8		4.3
	Adjusted Beginning of Period Balance	706.7		731.8		698.8		699.0
	Issuances	21.2		29.4		61.9		92.9
	Interest Accrual	7.6		8.0		22.4		23.5
	Net Premiums Collected	(24.2)		(24.0)		(71.8)		(70.2)
	Ending Balance at Original Discount Rate	711.3		745.2		711.3		745.2
	Effect of Changes in Discount Rate Assumptions	(14.4)		(12.0)		(14.4)		(12.0)
	Balance, End of Period	$	696.9	$	733.2	$	696.9	$	733.2
Present Value of Expected Future Policyholder Benefits	Balance, Beginning of Period	$	3,343.4	$	3,380.1	$	3,295.9	$	3,613.2

	Beginning Balance at Original Discount Rate	$	3,834.3	$	3,874.5	$	3,812.1	$	3,835.9
	Effect of Changes in Cash Flow Assumptions	—		—		—		—
	Effect of Actual Variances From Expected Experience	(0.7)		(2.6)		16.0		1.6
	Adjusted Beginning of Period Balance	3,833.6		3,871.9		3,828.1		3,837.5
	Issuances	21.3		29.5		62.4		92.9
	Interest Accrual	42.1		43.0		126.1		128.2
	Benefit Payments	(55.0)		(57.6)		(174.6)		(171.8)
	Ending Balance at Original Discount Rate	3,842.0		3,886.8		3,842.0		3,886.8
	Effect of Changes in Discount Rate Assumptions	(414.3)		(256.1)		(414.3)		(256.1)
	Balance, End of Period	$	3,427.7	$	3,630.7	$	3,427.7	$	3,630.7
	Net Liability for Future Policyholder Benefits, pre-flooring	$	2,730.8	$	2,897.5	$	2,730.8	$	2,897.5
	Cumulative impact of flooring the future Policyholder Benefits Reserve	—		—		—		—
	Net Liability for Future Policyholder Benefits, post-flooring	2,730.8		2,897.5		2,730.8		2,897.5
	Less: Reinsurance Recoverable	—		—		—		—
	Net Liability for Future Policyholder Benefits, After Reinsurance Recoverable	$	2,730.8	$	2,897.5	$	2,730.8	$	2,897.5

Note 5 - Liability for Future Policyholder Benefits (Continued)

The weighted-average liability duration of the liability for future policyholder benefits as calculated under current rates is as follows:


	Sep 30, 2025	Sep 30, 2024
Weighted-Average Liability Duration of the Liability for Future Policyholder Benefits (Years)	14.0	14.8

The reconciliation of the net liability for future policyholder benefits to Life and Health Insurance Reserves in the Condensed Consolidated Balance Sheets is as follows:


(Dollars in Millions)	Sep 30, 2025		Sep 30, 2024



Net Liability for Future Policyholder Benefits, post-flooring	$	2,730.8	$	2,897.5
Deferred Profit Liability	460.4		390.6
Other1	126.4		137.7
Total Life and Health Insurance Reserves	$	3,317.6	$	3,425.8
1Other primarily consists of Accident and Health and Universal Life reserves

The amounts of expected undiscounted future benefit payments, expected undiscounted future gross premiums and expected discounted future gross premiums, are as follows:


(Dollars in Millions)	Sep 30, 2025		Sep 30, 2024
Expected Future Benefit Payments, undiscounted	$	10,167.1	$	10,274.0
Expected Future Gross Premiums, undiscounted	$	4,010.9	$	4,159.0
Expected Future Gross Premiums, discounted	$	2,718.2	$	2,853.8

The amount of revenue and interest recognized on life insurance products in the Condensed Consolidated Statements of (Loss) Income is as follows:


	Three Months Ended				Nine Months Ended
(Dollars in Millions)	Sep 30, 2025		Sep 30, 2024		Sep 30, 2025		Sep 30, 2024
Gross Premiums or Assessments	$	99.2	$	99.8	$	299.7	$	300.3
Interest Expense	$	34.6	$	35.0	$	103.7	$	104.7

The weighted-average interest rate is as follows:


	Sep 30, 2025		Sep 30, 2024
Interest Accretion Rate	4.53	%	4.54	%
Current Discount Rate	5.57	%	5.17	%

Significant assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapses, and discount rates (both accretion and current). The Company did not make any changes to mortality and lapse assumptions during the nine months ended September 30, 2025 and 2024. Market data that underlies current discount rates was updated as of September 30, 2025.

Note 5 - Liability for Future Policyholder Benefits (Continued)

The balances of and changes in Deferred Profit Liability as of and for the periods indicated are as follows:


	Nine Months Ended
(Dollars in Millions)	Sep 30, 2025		Sep 30, 2024
Balance, Beginning of Year	$	412.1	$	337.8
Profits Deferred	118.4		121.1
Interest Accrual	14.9		12.5
Amortization	(86.6)		(82.0)
Effect of Actual Variances from Expected Experience and Other Changes	1.6		1.2
Balance, End of Period	$	460.4	$	390.6

KEMPER Corp 10-Q