SCHEDULE II

KEMPER CORPORATION

PARENT COMPANY BALANCE SHEETS

(Dollars in Millions)



	December 31,
	2012		2011
ASSETS
Investments in Subsidiaries	$	2,744.0	$	2,666.6
Fixed Maturities at Fair Value (Cost: 2011 – $13.1)	—		13.1
Equity Securities at Fair Value (Cost: 2012 – $4.9; 2011 – $5.0)	4.5		4.3
Short-term Investments	183.5		77.2
Cash	2.2		122.4
Other Receivables	7.2		5.7
Deferred Income Taxes	75.4		57.6
Other Assets	6.3		5.9
Total Assets	$	3,023.1	$	2,952.8
LIABILITIES AND SHAREHOLDERS’ EQUITY
Senior Notes Payable, 6.00% due 2017 (Fair Value: 2012 – $393.7; 2011 – $370.3)	$	357.3	$	356.8
Senior Notes Payable, 6.00% due 2015 (Fair Value: 2012 – $276.3; 2011 – $262.8 )	248.6		248.2
Liabilities for Income Taxes	77.6		85.3
Liabilities for Benefit Plans	172.8		140.5
Accrued Expenses and Other Liabilities	5.1		5.4
Total Liabilities	861.4		836.2
Shareholders’ Equity:
Common Stock	5.8		6.0
Additional Paid-in Capital	725.0		743.9
Retained Earnings	1,118.2		1,108.7
Accumulated Other Comprehensive Income	312.7		258.0
Total Shareholders’ Equity	2,161.7		2,116.6
Total Liabilities and Shareholders’ Equity	$	3,023.1	$	2,952.8

See Accompanying Report of Independent Registered Public Accounting Firm.

SCHII-1

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF INCOME

(Dollars in Millions)



	For The Years Ended December 31,
	2012			2011			2010
Net Investment Income	$	0.2		$	0.4		$	1.7
Net Realized Gains (Losses) on Sales of Investments	0.3			(0.2		)	0.5
Total Revenues	0.5			0.2			2.2
Interest Expense	39.5			39.4			34.1
Other Operating Expenses	13.6			10.3			4.3
Total Operating Expenses	53.1			49.7			38.4
Loss before Income Taxes and Equity in Net Income of Subsidiaries	(52.6		)	(49.5		)	(36.2		)
Income Tax Benefit	18.2			18.6			13.0
Loss before Equity in Net Income of Subsidiaries	(34.4		)	(30.9		)	(23.2		)
Equity in Net Income of Subsidiaries	137.8			105.4			201.1
Net Income	$	103.4		$	74.5		$	177.9

See Accompanying Report of Independent Registered Public Accounting Firm.

SCHII-2

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Millions)



	For The Years Ended December 31,
	2012			2011			2010
Net Income	$	103.4		$	74.5		$	177.9
Other Comprehensive Income (Loss):
Unrealized Holding Gains (Losses) Arising During the Year:
Securities Held by Subsidiaries	157.9			231.5			195.7
Securities Held by Parent	—			0.6			0.1
Reclassification Adjustment for Amounts Included in Net Income:
Securities Held by Subsidiaries	(61.2		)	(30.2		)	(18.8		)
Securities Held by Parent	—			(0.7		)	—
Unrealized Holding Gains	96.7			201.2			177.0
Unrecognized Postretirement Benefit Costs Arising During the Year	(29.4		)	(53.9		)	(27.9		)
Amortization of Unrecognized Postretirement Benefit Costs	16.2			8.7			1.2
Net Unrecognized Postretirement Benefit Costs	(13.2		)	(45.2		)	(26.7		)
Foreign Currency Translation Adjustments	1.6			0.4			(2.6		)
Reclassification Adjustment for Amounts Included in Net Income	—			—			2.1
Foreign Currency Translation Adjustments	1.6			0.4			(0.5		)
Equity in Other Comprehensive Income of Subsidiary	—			—			2.9
Other Comprehensive Income before Income Taxes	85.1			156.4			152.7
Income Tax Benefit (Expense):
Unrealized Holding Gains and Losses Arising During the Year:
Securities Held by Subsidiaries	(55.9		)	(82.3		)	(69.2		)
Securities Held by Parent	—			(0.2		)	—
Reclassification Adjustment for Amounts Included in Net Income:
Securities Held by Subsidiaries	21.5			10.7			6.6
Securities Held by Parent	—			0.2			—
Unrealized Holding Gains and Losses	(34.4		)	(71.6		)	(62.6		)
Unrecognized Postretirement Benefit Costs Arising During the Year	10.3			19.0			9.8
Amortization of Unrecognized Postretirement Benefit Costs	(5.7		)	(3.1		)	(0.5		)
Net Unrecognized Postretirement Benefit Costs	4.6			15.9			9.3
Foreign Currency Translation Adjustments	(0.6		)	(0.1		)	1.0
Reclassification Adjustment for Amounts Included in Net Income	—			—			(0.8		)
Foreign Currency Translation Adjustments	(0.6		)	(0.1		)	0.2
Equity in Other Comprehensive Income of Subsidiary	—			—			(1.0		)
Income Tax Expense	(30.4		)	(55.8		)	(54.1		)
Other Comprehensive Income	54.7			100.6			98.6
Total Comprehensive Income	$	158.1		$	175.1		$	276.5

See Accompanying Report of Independent Registered Public Accounting Firm.

SCHII-3

KEMPER CORPORATION

PARENT COMPANY STATEMENTS OF CASH FLOWS

(Dollars in Millions)



	For The Years Ended December 31,
	2012			2011			2010
Operating Activities:
Net Income	$	103.4		$	74.5		$	177.9
Adjustment Required to Reconcile Net Income to Net Cash Provided by Operations:
Equity in Net Income of Subsidiaries	(137.8		)	(105.4		)	(201.1		)
Cash Dividends from Subsidiaries	95.0			70.8			147.4
Cash Contribution to Defined Benefit Plan	—			(32.2		)	(15.0		)
Net Realized (Gains) Losses on Sales of Investments	(0.3		)	0.2			(0.5		)
Other, Net	8.5			35.5			(10.8		)
Net Cash Provided by Operating Activities	68.8			43.4			97.9
Investing Activities:
Capital Contributed to Subsidiaries	—			—			(110.0		)
Capital Distribution from Subsidiary	20.0			250.0			—
Maturity of Note Receivable from Subsidiary	—			—			20.0
Sales and Maturities of Fixed Maturities	13.1			—			—
Purchases of Fixed Maturities	—			—			(13.1		)
Purchases of Common Stocks from Subsidiary	—			(50.8		)	—
Change in Short-term Investments	(106.3		)	(35.4		)	10.5
Net Cash Provided (Used) by Investing Activities	(73.2		)	163.8			(92.6		)
Financing Activities:
Notes Payable Proceeds:
Senior Notes Payable Issued	—			—			247.8
Revolving Credit Agreement	—			95.0			140.0
Notes Payable Payments:
Senior Notes Payable Repaid	—			—			(200.0		)
Revolving Credit Agreement	—			(95.0		)	(140.0		)
Cash Dividends Paid	(56.9		)	(58.2		)	(54.6		)
Common Stock Repurchases	(60.7		)	(27.4		)	(34.4		)
Exercise of Stock Options	1.3			0.2			0.5
Excess Tax Benefits on Share Based Awards	0.5			0.2			0.2
Net Cash Used by Financing Activities	(115.8		)	(85.2		)	(40.5		)
Increase (Decrease) in Cash	(120.2		)	122.0			(35.2		)
Cash, Beginning of Year	122.4			0.4			35.6
Cash, End of Year	$	2.2		$	122.4		$	0.4

See Accompanying Report of Independent Registered Public Accounting Firm.

SCHII-4