OREANDA-NEWS. September 01, 2015. Fitch Ratings has affirmed Kemper Corporation's (Kemper) holding company ratings, including the senior debt rating at 'BBB-'. Fitch has also affirmed the Insurer Financial Strength (IFS) ratings of Kemper's operating subsidiaries at 'A-'. The Rating Outlook is Stable. A full list of ratings follows at the end of this press release.

KEY RATING DRIVERS

Kemper's ratings reflect modest earnings, solid balance sheet strength, and sufficient debt servicing capability. The ratings also consider the company's more volatile earnings profile caused by natural catastrophe exposures.

Kemper's life/health segment (United Insurance Co. of America and its subsidiaries') ratings reflect its continued strong earnings, solid capitalization, and effective niche in the home service market, albeit a slow growth market. The group has been a steady source of capital for Kemper, with dividend capacity to support parent objectives. Fitch views United's ratings as limited by its small size and scale relative to larger, national peers.

Kemper reported total operating earnings of \\$28.5 million for the first six-months of 2015, down from \\$41.1 in the prior year period. Weaker results include a \\$11.1 million write-off related to software that was being developed for internal use, along with a lower level of favorable reserve development in the first half of the year. Results benefited from a decline in catastrophe losses to approximately \\$46 million, down from \\$78 million in the prior period.

On April 30, 2015, Kemper closed on its acquisition of the Alliance United Group, a writer of non-standard auto insurance in California. Kemper experienced premium declines from existing lines in both standard and non-standard lines in the first half of 2015, while Alliance United added approximately \\$62 million in net premiums earned to Kemper's first-half 2015 results.

Capitalization at the property/casualty operating company level scored 'Strong' on Fitch's proprietary capital model, Prism, which is considered consistent with Kemper's 'A-' Insurer Financial Strength rating. Other measures of capital strength also suggest Kemper is strongly capitalized. NAIC risk-based capital ratios for Trinity Universal Insurance Co. was 329% of the company action level at year-end 2014. RBC for United Insurance Co. of America was 401% at year-end 2014.

Net premiums written-to-surplus for Kemper's property/casualty operations remains acceptable for its line of business at approximately 1.4x. Kemper's financial leverage ratio remains in line with median guidelines for the current rating category at 29.5% as of June 30, 2015.

The life/health segment statutory operating results remain very strong, as return on assets (ROA) and return on capital (ROC) were 4.8% and 26.0% at year-end 2014 respectively. The group reported a moderate decline in operating profit for the six months ended 2015 to \\$47 million, down from \\$59 million in the prior year. The decline in profitability was primarily due to worse mortality experience along with increased legal expenses.

RATING SENSITIVITIES

Factors that could lead to an upgrade of Trinity Universal Insurance Co. include:
--Maintaining a Prism score of 'strong';
--Sustained underwriting profit;
--GAAP fixed charge coverage at or above 7x.

Factors that could lead to a downgrade of Trinity Universal Insurance Co. include:
--Statutory fixed charge coverage below 3.5x;
--A combined ratio above 106% for a sustained period;
--Deterioration in capitalization with a p/c Prism capital model score below 'adequate'.
--RBC ratio for the p/c entities below 200%;
--Financial leverage ratio that exceeds 30%.

Factors that could lead to an upgrade for the United Insurance Co. and its subsidiaries include:
--Sustained strong profitability with positive movement in Trinity Universal Insurance Co. ratings.

Factors that could lead to a downgrade for the United Insurance Co. and its subsidiaries include:
--A decline in the RBC ratio below 300% of the company action level;
--A sustained decline in profitability resulting in a return on capital below 5%.

FULL LIST OF RATING ACTIONS

Fitch has affirmed the following ratings with a Stable Outlook:

Kemper:
--IDR at 'BBB';
--\\$610 million senior notes at 'BBB-';
--\\$225 million credit facility at 'BBB-'.
--\\$150 million subordinated notes at 'BB'.

Trinity Universal Insurance Co.
United Insurance Co. of America
Union National Life Insurance Co.
Reliable Life Insurance Co.
--Insurer Financial Strength rating at 'A-'.