Pension Benefits

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Pension Benefits

PENSION BENEFITS

Kemper sponsors a qualified defined benefit pension plan (the “Pension Plan”). The Pension Plan covers approximately 3,100 participants and beneficiaries. Effective January 1, 2006, the Pension Plan was closed to new hires and, effective June 30, 2016, benefit accruals were frozen for substantially all of the participants under the Pension Plan. The Pension Plan is generally non-contributory, but participation requires or required some employees to contribute 3% of pay, as defined, per year. Benefits for participants who are or were required to contribute to the Pension Plan are based on compensation during plan participation and the number of years of participation. Benefits for the vast majority of participants who are not required to contribute to the Pension Plan are based on years of service and final average pay, as defined. The Company funds the Pension Plan in accordance with the requirements of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA”).

Changes in Fair Value of Plan Assets and Changes in Projected Benefit Obligation for the Pension Plan for the years ended December 31, 2022 and 2021 is presented below.

DOLLARS IN MILLIONS	2022		2021
Fair Value of Plan Assets at Beginning of Year	$	391.7	$	405.4
Actual Return on Plan Assets	(65.1)		(0.7)
Benefits Paid	(13.7)		(13.0)
Settlement Benefits	2.9		—
Fair Value of Plan Assets at End of Year	315.8		391.7
Projected Benefit Obligation at Beginning of Year	378.8		382.3
Interest Cost	8.7		7.2
Benefits Paid	(13.7)		(13.0)
Settlement Benefits	2.9		—
Plan Amendments	—		18.3
Actuarial Gains	(84.5)		(16.0)
Projected Benefit Obligation at End of Year	292.2		378.8
Funded Status—Plan Assets in Excess of Projected Benefit Obligation	$	23.6	$	12.9
Unamortized Amount Reported in AOCI at End of Year	$	(63.1)	$	(77.6)
Accumulated Benefit Obligation at End of Year	$	289.3	$	378.8

NOTE 17. PENSION BENEFITS (Continued)

The measurement dates of the assets and liabilities at end of year presented in the preceding table under the headings, “2022” and “2021” were December 31, 2022 and December 31, 2021, respectively.

In 2021, the Plan was amended to update the actuarial equivalence used to determine both the early retirement factors and the optional form factors as of December 31, 2021. The result of this amendment was an increase to the Projected Benefit Obligation of $18.3 million, which was recognized in Prior Service Cost for the year ended December 31, 2021. No such amendments took place for the year ended December 31, 2022.

The weighted-average discount rate and rate of increase in future compensation levels used to estimate the components of the Projected Benefit Obligation for the Pension Plan at December 31, 2022 and 2021 were:

	2022		2021
Discount Rate	5.05	%	2.89	%
Rate of Increase in Future Compensation Levels	—		—

Asset allocations for the Pension Plan at December 31, 2022 and 2021 by asset category were:

ASSET CATEGORY	2022		2021
Corporate Bonds and Notes	27	%	30	%
Bond Exchange Traded Funds	35		32
Cash and Short-term Investments	37		36
Other Assets	1		2
Total	100	%	100	%

The investment objective of the Pension Plan is to produce current income and long-term capital growth through a combination of equity and fixed income investments which, together with appropriate employer contributions and any required employee contributions, is adequate to provide for the payment of the benefit obligations of the Pension Plan. The assets of the Pension Plan may be invested in fixed income and equity investments or any other investment vehicle or financial instrument deemed appropriate. Fixed income investments may include cash and short-term instruments, U.S. Government securities, corporate bonds, mortgages and other fixed income investments. Equity investments may include various types of stock, such as large-cap, mid-cap and small-cap stocks, and may also include investments in investment companies, collective investment funds and Kemper common stock (subject to Section 407 and other requirements of ERISA). The Pension Plan has not invested in Kemper common stock.

The trust investment committee for the Pension Plan, along with its third party fiduciary advisor, periodically reviews the performance of the Pension Plan’s investments and asset allocation. Several external investment managers manage the equity investments of the trust for the Pension Plan. Each manager is allowed to exercise investment discretion, subject to limitations, if any, established by the trust investment committee for the Pension Plan. All other investment decisions are made by the Company, subject to general guidelines as set by the trust investment committee for the Pension Plan.

The Company determines its Expected Long Term Rate of Return on Plan Assets based primarily on the Company’s expectations of future returns, with consideration to historical returns, for the Pension Plan’s investments, based on target allocations of the Pension Plan’s investments.

NOTE 17. PENSION BENEFITS (Continued)

The fair values of pension plan assets are estimated using the same methodologies and inputs as those used to determine the fair values for the respective asset category of the Company. These methodologies and inputs are disclosed in Note 12, “Fair Value Measurements,” to the Consolidated Financial Statements. Fair value measurements for the Pension Plan’s assets at December 31, 2022 are summarized below.

DOLLARS IN MILLIONS	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at Net Asset Value		Fair Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	40.1	$	—	$	—	$	—	$	40.1
States and Political Subdivisions	—		0.1		—		—		0.1
Foreign Governments	—		0.4		—		—		0.4
Corporate Bonds and Notes	—		45.4		—		—		45.4
Equity Securities:
Other Equity Interests:
Bond Exchange Traded Funds	111.1		—		—		—		111.1
Limited Liability Companies and Limited Partnerships	—		—		—		1.8		1.8
Short-term Investments	116.1		—		—		—		116.1
Receivables and Other	0.8		—		—		—		0.8
Total	$	268.1	$	45.9	$	—	$	1.8	$	315.8

Fair value measurements for the Pension Plan’s assets at December 31, 2021 are summarized below.

DOLLARS IN MILLIONS	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at Net Asset Value		Fair Value
Fixed Maturities:
U.S. Government and Government Agencies and Authorities	$	54.6	$	—	$	—	$	—	$	54.6
States and Political Subdivisions	—		0.1		—		—		0.1
Foreign Governments	—		0.6		—		—		0.6
Corporate Bonds and Notes	—		62.3		—		—		62.3
Equity Securities:
Other Equity Interests:
Bond Exchange Traded Funds	125.0		—		—		—		125.0
Limited Liability Companies and Limited Partnerships	—		—		—		8.4		8.4
Short-term Investments	140.2		—		—		—		140.2
Receivables and Other	0.5		—		—		—		0.5
Total	$	320.3	$	63.0	$	—	$	8.4	$	391.7

NOTE 17. PENSION BENEFITS (Continued)

The components of Comprehensive Pension (Income) Expense for the Pension Plan for the years ended December 31, 2022, 2021 and 2020 were:

DOLLARS IN MILLIONS	2022		2021		2020
Service Cost Earned During the Year	$	—	$	—	$	—
Interest Cost on Projected Benefit Obligation	8.7		7.2		16.5
Expected Return on Plan Assets	(7.4)		(9.5)		(27.6)
Amortization of Prior Service Cost	0.7		—		—
Amortization of Actuarial Loss	1.8		2.9		5.6
Settlement Expense	—		—		64.1
Pension Expense Recognized in Consolidated Statements of (Loss) Income	3.8		0.6		58.6
Unrecognized Pension Loss Arising During the Year	(12.0)		(6.0)		(7.8)
Prior Service Cost Arising During the Year	—		18.3		—
Amortization of Prior Service Cost	(0.7)		—		—
Amortization of Accumulated Unrecognized Pension Loss	(1.8)		(2.9)		(69.8)
Comprehensive Pension (Income) Expense	$	(10.7)	$	10.0	$	(19.0)

The actuarial loss included in AOCI at December 31, 2022 is being amortized over approximately 26 years, the remaining average estimated life expectancy of participants. The Company estimates that Pension Expense for the Pension Plan for the year ended December 31, 2023 will include $1.4 million resulting from the amortization of the related accumulated actuarial loss included in AOCI at December 31, 2022.

Settlements

In the fourth quarter of 2020, the Company’s defined benefit pension plan purchased annuities on behalf of certain plan participants currently receiving benefits and offered to make lump-sum payments to certain inactive, vested plan participants that are not currently receiving benefit payments and elected to receive lump-sum payments. Group annuity contracts were purchased from Banner Life Insurance Company (“Banner”) for $202.5 million for a portion of plan participants for whom Banner irrevocably assumed the pension obligations. For plan participants who elected lump-sum payments during the election window, a payment of $117.1 million was distributed. These transactions resulted in a partial settlement of the defined pension plan and a $50.6 million noncash settlement charge to net income for the unamortized net unrecognized postretirement benefit costs related to the settled obligations.

The weighted-average discount rate, service cost discount rate, interest cost discount rate, rate of increase in future compensation levels and expected long-term rate of return on plan assets used to develop the components of Pension Expense for the Pension Plan for the years ended December 31, 2022, 2021 and 2020 were:

	2022		2021		2020
Weighted-average Discount Rate	2.89	%	2.56	%	2.56	%
Service Cost Discount Rate	N/A		2.41		2.42
Interest Cost Discount Rate	2.35		1.90		1.89
Rate of Increase in Future Compensation Levels	3.40		3.40		3.40
Expected Long Term Rate of Return on Plan Assets	2.08		2.70		4.90

The Company did not contribute to the Pension Plan in 2020, 2021 or 2022. The Company does not expect that it will be required to contribute to the Pension Plan in 2023, but could make a voluntary contribution pursuant to the maximum funding limits under ERISA.

NOTE 17. PENSION BENEFITS (Continued)

The following benefit payments (net of participant contributions), which consider expected future service of certain participants that remain eligible for a benefit accrual, as appropriate, are expected to be paid from the Pension Plan:

DOLLARS IN MILLIONS	Years Ending December 31,
	2023		2024		2025		2026		2027		2028-2032
Estimated Pension Benefit Payments	$	18.0	$	17.2	$	18.0	$	18.7	$	19.2	$	99.1

The Company also sponsors a non-qualified supplemental defined benefit pension plan (the “Supplemental Plan”). Benefit accruals for all participants in the Supplemental Plan were frozen effective June 30, 2016. The unfunded liability related to the Supplemental Plan was $22.0 million and $28.0 million at December 31, 2022 and 2021, respectively. Pension expense for the Supplemental Plan was $0.8 million, $0.7 million, and $0.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. An actuarial gain of $4.8 million before taxes, an actuarial gain of $1.3 million before taxes and an actuarial loss of $2.7 million before taxes are included in Other Comprehensive (Loss) Income for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company also sponsors several defined contribution benefit plans covering most of its employees. The Company made contributions to those plans of $30.6 million, $28.9 million and $26.1 million in 2022, 2021 and 2020, respectively.