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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________________
FORM 10-Q
______________________________________________________
☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended 6/30/2023
OR
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from              to             
Commission file number 001-18298
______________________________________________________
 Kemper Corporation
(Exact name of registrant as specified in its charter)
______________________________________________________
DE95-4255452
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
200 E. Randolph Street
Suite 3300
ChicagoIL60601
(Address of principal executive offices)(Zip Code)
(312) 661-4600
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.10 per shareKMPRNYSE
5.875% Fixed-Rate Reset Junior Subordinated Debentures due 2062KMPBNYSE
______________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x      No ¨ 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “ accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐
Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐  No  x
64,056,329 shares of common stock, $0.10 par value, were outstanding as of August 3, 2023.


KEMPER CORPORATION
INDEX
  Page
PART I.
Item 1.
 
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 5
Item 6.


Caution Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including, but not limited to, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), Risk Factors and the accompanying unaudited Condensed Consolidated Financial Statements (including the notes thereto) of Kemper Corporation (“Kemper”) and its subsidiaries (individually and collectively referred to herein as the “Company”) may contain or incorporate by reference information that includes or is based on forward-looking statements within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements give expectations or forecasts of future events. The reader can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “believe(s),” “goal(s),” “target(s),” “estimate(s),” “anticipate(s),” “forecast(s),” “project(s),” “plan(s),” “intend(s),” “expect(s),” “might,” “may,” “could” and other terms of similar meaning. Forward-looking statements, in particular, include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.
Any or all forward-looking statements may turn out to be wrong, and, accordingly, Kemper cautions readers not to place undue reliance on such statements. Kemper bases these statements on current expectations and the current economic environment as of the date of this Quarterly Report on Form 10-Q. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance, and actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties that may be important in determining the Company’s actual future results and financial condition.
In addition to those factors discussed under Item 1A., “Risk Factors,” of Part I of Kemper’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”), for the year ended December 31, 2022 (the “2022 Annual Report”), the reader should consider the following list of general factors that, among others, could cause the Company’s actual results and financial condition to differ materially from estimated results and financial condition.
Factors related to the legal and regulatory environment in which Kemper and its subsidiaries operate
•Evolving policies, practices and interpretations by regulators and courts that increase operating costs and potential liabilities, particularly any that involve retroactive application of new requirements, including, but not limited to, initiatives related to unclaimed property laws or claims handling practices with respect to life insurance policies and the proactive use of death verification databases, and developments related to the novel coronavirus COVID-19 (“COVID-19”);
•Adverse outcomes in litigation or other legal or regulatory proceedings involving Kemper or its subsidiaries or affiliates or related to business practices in the insurance industry;
•Governmental actions, including, but not limited to, implementation of new laws and regulations, and court decisions interpreting existing and future laws and regulations or policy provisions;
•Uncertainties related to regulatory approval of insurance rates, policy forms, insurance products, license applications, dividends from insurance subsidiaries, acquisitions of businesses or strategic initiatives and other matters within the purview of insurance regulators;
•Increased costs and initiatives required to address new legal and regulatory requirements; liabilities, costs and other impacts arising from developments related to cybersecurity, privacy and data governance, including, without limitation, cyber incidents that have occurred or could occur;

Factors relating to insurance claims and related reserves in the Company’s insurance businesses

•The incidence, frequency and severity of catastrophes occurring in any particular reporting period or geographic area, including natural disasters, pandemics (including COVID-19) and terrorist attacks or other man-made events;
•The frequency and severity of insurance claims (including those associated with catastrophe losses and pandemics);
•The interest rate environment, including proposed rate changes by the U.S. Federal Reserve, which may cause material fluctuations in our life policyholder benefit reserves;
•Changes in facts and circumstances affecting assumptions used in determining loss and loss adjustment expenses (“LAE”) reserves, including, but not limited to, the frequency and severity of insurance claims, changes in claims
1

handling procedures and closure patterns, development patterns and the impacts of COVID-19 and associated governmental responses, and technological and other environmental conditions;
•The impact of inflation on insurance claims, including, but not limited to, the effects on material costs and personal injury claims of increasing medical costs and the severity of claims resulting from a catastrophe;
•The effects on property claims attributed to supply chain disruption and scarcity of resources available to rebuild damaged structures, including labor and materials and the amount of salvage value recovered for damaged property;
•The rising costs of insurance claims from increased and more targeted litigation, higher jury awards, broader definitions of liability, and other effects of societal trends referred to as social inflation;
•Developments related to insurance policy claims and coverage issues, including, but not limited to, interpretations, pronouncements or decisions by courts or regulators that may govern or influence losses incurred in connection with hurricanes and other catastrophes, including COVID-19;
•Orders, interpretations or other actions by regulators that impact the reporting, adjustment and payment of claims;
•Changes in the pricing or availability of reinsurance, or in the financial condition of reinsurers and amounts recoverable therefrom;
Factors related to the Company’s ability to compete
•Changes in the ratings of Kemper and/or its insurance company subsidiaries by rating agencies with regard to credit, financial strength, claims paying ability and other areas on which the Company is rated;
•The level of success and costs incurred in realizing or maintaining economies of scale, integrating acquired businesses and implementing significant business initiatives and the timing of the occurrence or completion of such events, including, but not limited to, those related to expense and claims savings, consolidations, reorganizations and technology;
•Absolute and relative performance of the Company’s products and services, including, but not limited to, the level of success achieved in designing and introducing new insurance products and services;
•Difficulties with technology, data and network security (including as a result of cyber attacks that have occurred or could occur), outsourcing relationships or cloud-based technology that could negatively impact the Company’s ability to conduct business, a heightened risk when substantial numbers of employees shift to work from home arrangements, such as the arrangements implemented for a vast majority of the Company’s employees and some business partners during the COVID-19 pandemic;
•The ability of the Company to maintain the availability and required performance of critical systems and manage technology initiatives cost-effectively to address insurance industry developments and regulatory requirements;
•Heightened competition, including, with respect to pricing, consolidations of existing competitors or entry of new competitors and alternate distribution channels, introduction of new technologies, use and enhancements of telematics, refinements of existing products and development of new products by current or future competitors;
•Expected benefits and synergies from mergers, acquisitions, divestitures and/or strategic initiatives that may not be realized to the extent anticipated, within expected time frames or at all, due to a number of factors including, but not limited to, the loss of key agents/brokers, customers or employees, increased costs, fees, expenses and related charges and delays caused by unanticipated developments or factors outside of the Company’s control;
•The successful formulation and execution of the Company’s plan with regard to corporate strategy and significant operational changes;
•Increase in competition as a result of new competitors to the property and casualty insurance industry or existence of competitors that receive substantial infusion of capital or access to third-party capital;
Factors relating to the business environment in which Kemper and its subsidiaries operate

•Changes in general economic conditions, including those related to, without limitation, performance of financial markets, interest rates, inflation, unemployment rates, significant global catastrophes such as the COVID-19 outbreak and subsequent global pandemic, and fluctuating values of particular investments held by the Company;
•Absolute and relative performance of investments held by the Company;
•Changes in insurance industry trends and significant industry developments;
•Changes in consumer trends, including changes in number of miles driven by automobile insurance policyholders, and significant consumer or product developments;
•Changes in capital requirements, including the calculations thereof, used by regulators and rating agencies;
2

•Regulatory, accounting or tax changes that may affect the Company’s earnings, the cost of, or demand for, the Company’s products or services or after-tax returns from the Company’s investments;
•The impact of required participation in state windpools and joint underwriting associations, residual market assessments and assessments for insurance industry insolvencies, including the impact of COVID-19;
•Changes in distribution channels, methods or costs resulting from changes in laws or regulations, legal proceedings or market forces;
•Increasing competition and higher costs for executive talent and employees with necessary skills and industry experience;
•Increased costs and risks related to cybersecurity that could materially affect the Company’s operations including, but not limited to, data breaches, cyber attacks, virus or malware attacks, or other infiltrations or incidents affecting system integrity, availability and performance, and actions taken to minimize and remediate the risks of such events that have occurred or could occur;
Other risks and uncertainties described from time to time in Kemper’s filings with the U.S. Securities and Exchange Commission (the “SEC”)
Kemper cannot provide any assurances that the results and outcomes contemplated in any forward-looking statements will be achieved or will be achieved in any particular timetable or that future events or developments will not cause such statements to be inaccurate, including impacts related to COVID-19. Kemper assumes no obligation to correct or update any forward-looking statements publicly for any changes in events or developments or in the Company’s expectations or results subsequent to the date of this Quarterly Report on Form 10-Q. Kemper advises the reader, however, to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.

3

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KEMPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Dollars in millions, except per share amounts)
(Unaudited)
Six Months EndedThree Months Ended
 Jun 30,
2023
Jun 30, 20221
Jun 30, 2023
Jun 30, 20221
Revenues:
Earned Premiums (Changes in Deferred Profit Liability for the Six and Three Months Ended: 2023 - $35.7 and $16.5; 2022 - $37.7 and $17.4)
$2,347.8 $2,657.6 $1,166.9 $1,337.6 
Net Investment Income208.1 218.5 106.3 118.5 
Change in Value of Alternative Energy Partnership Investments1.5 (21.6)0.8 (4.9)
Other Income2.9 3.3 1.7 0.9 
Income (Loss) from Change in Fair Value of Equity and Convertible Securities4.1 (68.7)2.4 (40.5)
Net Realized Investment (Losses) Gains(8.0)12.5 (14.4)11.0 
Impairment Gains (Losses)1.2 (13.8)(0.9)(4.9)
Total Revenues2,557.6 2,787.8 1,262.8 1,417.7 
Expenses:
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses (Changes in Liability for Future Policyholder Benefits for the Six and Three Months Ended: 2023 - $2.5 and $0.6; 2022 - $20.3 and $1.7)
2,036.7 2,274.3 984.7 1,151.1 
Insurance Expenses535.4 612.5 266.1 307.7 
Loss from Early Extinguishment of Debt— 3.7 — — 
Interest and Other Expenses155.7 107.6 78.3 53.5 
Goodwill Impairment49.6 — 49.6 — 
Total Expenses2,777.4 2,998.1 1,378.7 1,512.3 
Loss before Income Taxes(219.8)(210.3)(115.9)(94.6)
Income Tax Benefit42.6 51.8 18.8 22.4 
Net Loss$(177.2)$(158.5)$(97.1)$(72.2)
Net Loss Per Unrestricted Share:
Basic$(2.77)$(2.49)$(1.52)$(1.13)
Diluted$(2.77)$(2.49)$(1.52)$(1.13)
1As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been recasted to reflect application of the new guidance. See Note 1 to the Condensed Consolidated Financial Statements for additional information.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.
4

KEMPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Dollars in millions)
(Unaudited)
Six Months EndedThree Months Ended
Jun 30,
2023
Jun 30, 20221
Jun 30,
2023
Jun 30, 20221
Net Loss$(177.2)$(158.5)$(97.1)$(72.2)
Other Comprehensive Income (Loss) Before Income Taxes
Changes in Net Unrealized Holding Gains (Losses) on Investment Securities with:
No Credit Losses Recognized in Condensed Consolidated Statements of Loss104.0 (1,231.7)(83.2)(587.1)
Credit Losses Recognized in Condensed Consolidated Statements of Loss(0.1)(0.5)(0.1)6.9 
Change in Net Unrecognized Postretirement Benefit Costs(1.1)(0.1)(0.6)— 
(Loss) Gain on Cash Flow Hedges(0.1)5.9 (0.1)(0.2)
Change in Discount Rate on Future Life Policyholder Benefits(59.2)1,090.0 50.6 527.7 
Other Comprehensive Income (Loss) Before Income Taxes43.5 (136.4)(33.4)(52.7)
Other Comprehensive Income Tax (Expense) Benefit(9.4)28.6 7.3 11.1 
Other Comprehensive Income (Loss), Net of Taxes34.1 (107.8)(26.1)(41.6)
Total Comprehensive Loss$(143.1)$(266.3)$(123.2)$(113.8)
1As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been recasted to reflect application of the new guidance. See Note 1 to the Condensed Consolidated Financial Statements for additional information.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.
5

KEMPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
(Unaudited)
Jun 30,
2023
Dec 31, 20221
Assets:
Investments:
Fixed Maturities at Fair Value (Amortized Cost: 2023 - $7,761.7; 2022 - $7,811.8
   Allowance for Credit Losses: 2023 - $7.1; 2022 - $9.6)
$6,943.8 $6,894.8 
Equity Securities at Fair Value (Cost: 2023 - $232.4; 2022 - $247.6)
247.0 243.2 
Equity Method Limited Liability Investments225.1 217.0 
Alternative Energy Partnership Investments16.8 16.3 
Short-term Investments at Cost which Approximates Fair Value406.3 278.4 
Company-Owned Life Insurance
500.5 586.5 
Loans to Policyholders
281.6 283.4 
Other Investments275.6 269.9 
Total Investments8,896.7 8,789.5 
Cash73.6 212.4 
Receivables from Policyholders (Allowance for Credit Losses: 2023 - $12.0; 2022 - $13.1)
1,246.3 1,286.6 
Other Receivables262.0 262.6 
Deferred Policy Acquisition Costs646.2 635.6 
Goodwill1,250.7 1,300.3 
Current Income Tax Assets9.0 167.6 
Deferred Income Tax Assets208.0 129.0 
Other Assets503.8 530.0 
Total Assets$13,096.3 $13,313.6 
Liabilities and Shareholders’ Equity:
Insurance Reserves:
Life and Health$3,363.8 $3,276.2 
Property and Casualty2,680.1 2,756.9 
Total Insurance Reserves6,043.9 6,033.1 
Unearned Premiums1,665.2 1,704.4 
Policyholder Obligations700.2 701.3 
Accrued Expenses and Other Liabilities786.7 817.3 
Long-term Debt, Current and Non-current, at Amortized Cost (Fair Value: 2023 - $1,183.5; 2022 - $1,195.1)
1,388.1 1,386.9 
Total Liabilities10,584.1 10,643.0 
Shareholders’ Equity:
Common Stock, $0.10 Par Value, 100,000,000 Shares Authorized; 64,054,430 Shares Issued and Outstanding at June 30, 2023 and 63,912,762 Shares Issued and Outstanding at December 31, 2022
6.4 6.4 
Paid-in Capital1,837.6 1,812.7 
Retained Earnings1,149.0 1,366.4 
Accumulated Other Comprehensive Loss(480.8)(514.9)
Total Shareholders’ Equity2,512.2 2,670.6 
Total Liabilities and Shareholders’ Equity$13,096.3 $13,313.6 
1As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been recasted to reflect application of the new guidance. See Note 1 to the Condensed Consolidated Financial Statements for additional information.
The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.
6

KEMPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
 Six Months Ended
 Jun 30,
2023
Jun 30, 20221
Cash Flows from Operating Activities:
Net Loss$(177.2)$(158.5)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities
Net Realized Investment Losses (Gains)8.0 (12.5)
Impairment (Gains) Losses(1.2)13.8 
Depreciation and Amortization of Property, Equipment and Software26.2 26.5 
Amortization of Intangibles Assets Acquired7.9 11.2 
Loss from Early Extinguishment of Debt— 3.7 
Change in Accumulated Undistributed Earnings of Equity Method Limited Liability Investments(1.3)(18.3)
(Income) Loss from Change in Value of Alternative Energy Partnership Investments(1.5)21.6 
(Increase) Decrease in Value of Equity and Convertible Securities(4.1)68.7 
Goodwill Impairment49.6 — 
Changes in:
Receivables from Policyholders40.3 43.6 
Reinsurance Recoverables11.6 0.3 
Deferred Policy Acquisition Costs(10.6)(2.1)
Insurance Reserves(47.7)(1.8)
Unearned Premiums(39.2)(44.3)
Income Taxes72.6 (46.2)
Other Assets and Liabilities0.7 4.3 
Net Cash Used in Operating Activities(65.9)(90.0)
Cash Flows from Investing Activities:
Proceeds from Sales, Calls and Maturities of Fixed Maturities353.0 564.9 
Proceeds from the Sales or Paydowns of Investments:
Equity Securities32.5 403.7 
Mortgage Loans42.5 46.6 
Other Investments5.1 36.9 
Purchases of Investments:
Fixed Maturities(334.8)(1,025.9)
Equity Securities(26.2)(39.1)
Real Estate Investments(0.3)(2.9)
Company-Owned Life Insurance— (100.0)
Mortgage Loans(44.1)(45.0)
Other Investments(11.6)(4.9)
Net (Purchases) Sales of Short-term Investments(126.9)54.0 
Acquisition of Software and Long-lived Assets(25.4)(23.7)
Settlement Proceeds from Company-Owned Life Insurance102.2 — 
Other(1.1)2.9 
Net Cash Used in Investing Activities(35.1)(132.5)
1As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been recasted to reflect application of the new guidance. See Note 1 to the Condensed Consolidated Financial Statements for additional information.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.









7

KEMPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in millions)
(Unaudited)
Six Months Ended
Jun 30,
2023
Jun 30, 20221
Net Cash Used in Investing Activities (Carryforward from page 7)
(35.1)(132.5)
Cash Flows from Financing Activities:
Repayment of Long-term Debt— (280.0)
Proceeds from Issuance of 3.800% Senior Notes due February 23, 2032
— 396.3 
Issuance Fees on 3.800% Senior Notes due February 23, 2032
— (1.2)
Proceeds from Issuance of 5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062
— 145.6 
Issuance Fees on 5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062
— (0.9)
Proceeds from Policyholder Contract Obligations114.5 289.6 
Repayment of Policyholder Contract Obligations(115.8)(89.3)
Proceeds from Shares Issued under Employee Stock Purchase Plan2.2 2.5 
Dividends Paid(39.6)(40.0)
Other0.9 0.3 
Net Cash (Used in) Provided by Financing Activities(37.8)422.9 
Net (decrease) increase in cash(138.8)200.4 
Cash, Beginning of Year212.4 148.2 
Cash, End of Period$73.6 $348.6 
1As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been recasted to reflect application of the new guidance. See Note 1 to the Condensed Consolidated Financial Statements for additional information.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.








8

KEMPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except per share amounts)
(Unaudited)
Six Months Ended June 30, 2023
Number of
Shares		Common
Stock		Paid-in
Capital		Retained
Earnings		Accumulated Other Comprehensive (Loss) IncomeTotal
Shareholders’
Equity
Balance, December 31, 20221
63.9 $6.4 $1,812.7 $1,366.4 $(514.9)$2,670.6 
Net Loss— — — (177.2)— (177.2)
Other Comprehensive Income, Net of Taxes (Note 13)
— — — — 34.1 34.1 
Cash Dividends and Dividend Equivalents to Shareholders ($0.62 per share)
— — — (39.6)— (39.6)
Shares Issued Under Employee Stock Purchase Plan (Note 14)
— — 2.2 — — 2.2 
Equity-based Compensation Cost— — 22.7 — — 22.7 
Equity-based Awards, Net of Shares Exchanged0.1 — — (0.6)— (0.6)
Balance, June 30, 2023
64.0 $6.4 $1,837.6 $1,149.0 $(480.8)$2,512.2 
Six Months Ended June 30, 20221
Number of
Shares		Common
Stock		Paid-in
Capital		Retained
Earnings		Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
Balance, December 31, 2021
63.7 $6.4 $1,790.7 $1,734.2 $(401.6)$3,129.7 
Net Loss— — — (158.5)— (158.5)
Other Comprehensive Loss, Net of Taxes (Note 13)
— — — — (107.8)(107.8)
Cash Dividends and Dividend Equivalents to Shareholders ($0.62 per share)
— — — (40.2)— (40.2)
Shares Issued Under Employee Stock Purchase Plan (Note 14)
— — 2.5 — — 2.5 
Equity-based Compensation Cost— — 20.2 — — 20.2 
Equity-based Awards, Net of Shares Exchanged0.1 — (0.9)(0.9)— (1.8)
Balance, June 30, 2022
63.8 $6.4 $1,812.5 $1,534.6 $(509.4)$2,844.1 
1As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been recasted to reflect application of the new guidance. See Note 1 to the Condensed Consolidated Financial Statements for additional information.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.







9

KEMPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (continued)
(In millions, except per share amounts)
(Unaudited)
Three Months Ended June 30, 2023
Number of
Shares		Common
Stock		Paid-in
Capital		Retained
Earnings		Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
Balance, March 31, 2023
64.0 $6.4 $1,828.9 $1,266.3 $(454.7)$2,646.9 
Net Loss— — — (97.1)— (97.1)
Other Comprehensive Loss, Net of Taxes (Note 13)
— — — — (26.1)(26.1)
Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)
— — — (20.2)— (20.2)
Shares Issued Under Employee Stock Purchase Plan (Note 14)
— — 1.2 — — 1.2 
Equity-based Compensation Cost— — 7.1 — — 7.1 
Equity-based Awards, Net of Shares Exchanged— — 0.4 — — 0.4 
Balance, June 30, 2023
64.0 $6.4 $1,837.6 $1,149.0 $(480.8)$2,512.2 
Three Months Ended June 30, 20221
Number of
Shares		Common
Stock		Paid-in
Capital		Retained
Earnings		Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
Balance, March 31, 2022
63.8 $6.4 $1,803.1 $1,627.5 $(467.8)$2,969.2 
Net Loss— — — (72.2)— (72.2)
Other Comprehensive Loss, Net of Taxes (Note 13)
— — — — (41.6)(41.6)
Cash Dividends and Dividend Equivalents to Shareholders ($0.31 per share)
— — — (20.6)— (20.6)
Shares Issued Under Employee Stock Purchase Plan (Note 14)
— — 1.2 — — 1.2 
Equity-based Compensation Cost— — 8.3 — — 8.3 
Equity-based Awards, Net of Shares Exchanged— — (0.1)(0.1)— (0.2)
Balance, June 30, 2022
63.8 $6.4 $1,812.5 $1,534.6 $(509.4)$2,844.1 
1As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been recasted to reflect application of the new guidance. See Note 1 to the Condensed Consolidated Financial Statements for additional information.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.
10

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - Basis of Presentation and Accounting Policies
The unaudited Condensed Consolidated Financial Statements include the accounts of Kemper Corporation (“Kemper”) and its subsidiaries which include property and casualty subsidiaries, life subsidiaries, and a health subsidiary through the date of its sale of December 1, 2022 (collectively referred to herein as the “Company”).
The unaudited Condensed Consolidated Financial Statements included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) on a basis consistent with reporting interim financial information pursuant to the rules and regulations for Form 10-Q and Article 10 of Regulation S-X of the SEC and include the accounts of Kemper Corporation and its subsidiaries. All intercompany accounts and transactions have been eliminated.
Certain financial information that is included in the annual financial statements, including certain financial statement footnote disclosures, prepared in accordance with GAAP is not required by the rules and regulations of the SEC for interim financial reporting and has been condensed or omitted. In the opinion of the Company’s management, the Condensed Consolidated Financial Statements include all adjustments necessary to fairly present the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements requires significant management estimates. Due to this factor and other factors, such as the seasonal nature of some portions of the insurance business, annualizing the results of operations for the six months ended June 30, 2023 would not necessarily be indicative of the results expected for the full fiscal year. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements and related notes included in Kemper’s Annual Report for the year ended December 31, 2022, except for Note 7 “Liability for Future Policyholder Benefits”, Note 8 “Deferred Policy Acquisition Costs”, Note 13 ”Other Comprehensive Loss and Accumulated Other Comprehensive Loss” and Note 16 “Policyholder Obligations”, which were impacted due to the implementation of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2018-12 Financial Services-Insurance (Topic 944): Targeted Improvements to Accounting for Long-Duration Contracts.
Adoption of New Accounting Guidance
The Company has adopted all recently issued accounting pronouncements with effective dates prior to June 30, 2023. Other than discussed below, there were no adoptions of accounting pronouncements during the six months ended June 30, 2023 that had a material impact on the Company’s Condensed Consolidated Financial Statements.
Guidance Adopted in 2023
The Company adopted ASU 2018-12 for the liability for future policyholder benefits and deferred acquisition costs on a modified retrospective basis as of January 1, 2023, such that those balances were adjusted to conform to ASU 2018-12 on January 1, 2021.
The new standard requires cash flow assumptions used to measure the liability for future policyholder benefits for nonparticipating traditional and limited pay long-duration contracts be reviewed at least annually, and if there is a change, updated with the recognition and remeasurement recorded in net income. It also requires the discount rate used in measuring the liability to be an upper-medium grade fixed-income instrument yield, which is to be updated at each reporting period, and recognized in other comprehensive income. ASU 2018-12 simplifies the amortization of deferred acquisition costs to a constant level basis over the expected term of the contract, requires all market risk benefits to be measured at fair value, and enhances certain presentation and disclosure requirements, as discussed in Note 7 and Note 8.
As a result of the adoption of ASU 2018-12, beginning retained earnings was reduced by $25.1 million and Accumulated Other Comprehensive Income (“AOCI”) reduced by $1,030.3 million as of January 1, 2021.
The table below presents the transition adjustment for the adoption of ASU 2018-12:
Pre-Adoption Balance 12/31/2020Adjustments to AOCIAdjustments to Retained EarningsPost- Adoption Balance 1/1/2021
Retained Earnings $2,071.2 — (25.1)$2,046.1 
AOCI$680.5 (1,030.3)— $(349.8)

11

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 1 - Basis of Presentation and Accounting Policies (Continued)
For the liability for future policyholder benefits, the net transition adjustment is related to the difference in the historical discount rates used pre-transition and the discount rate at December 31, 2020. At transition, there were no adjustments related to premium deficiencies, as the balance is only applicable to Kemper’s universal life contracts which are stated at account value.
The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Loss for the six months ended June 30, 2022 were as follows:
Prior to AdoptionEffect of AdoptionPost- Adoption Balance
Earned Premiums $2,692.3 (34.7)$2,657.6 
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses$2,323.7 (49.4)$2,274.3 
Insurance Expenses$611.7 0.8 $612.5 
Income Tax Benefit$54.7 (2.9)$51.8 
Net Loss$(169.5)11.0 $(158.5)
Net Loss Per Unrestricted Share:
Basic$(2.66)$0.17 $(2.49)
Diluted$(2.66)$0.17 $(2.49)
The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Loss for the three months ended June 30, 2022 were as follows:
Prior to AdoptionEffect of AdoptionPost- Adoption Balance
Earned Premiums $1,353.7 (16.1)$1,337.6 
Policyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses$1,170.3 (19.2)$1,151.1 
Insurance Expenses$307.7 — $307.7 
Income Tax Benefit$23.0 (0.6)$22.4 
Net Loss$(74.7)2.5 $(72.2)
Net Loss Per Unrestricted Share:
Basic$(1.17)$0.04 $(1.13)
Diluted$(1.17)$0.04 $(1.13)

The effects of adoption of ASU 2018-12 on the Condensed Consolidated Balance Sheet as of December 31, 2022 were as follows:
Prior to AdoptionEffect of AdoptionPost- Adoption Balance
Deferred Policy Acquisition Costs$625.6 10.0 $635.6 
Deferred Income Tax Assets$189.4 (60.4)$129.0 
Total Assets$13,364.0 (50.4)$13,313.6 
Life and Health Insurance Reserves$3,554.0 (277.8)$3,276.2 
Total Liabilities$10,920.8 (277.8)$10,643.0 
Retained Earnings$1,380.1 (13.7)$1,366.4 
Accumulated Other Comprehensive Loss$(756.0)241.1 $(514.9)
Total Shareholders’ Equity$2,443.2 227.4 $2,670.6 


12

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 1 - Basis of Presentation and Accounting Policies (Continued)
The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Comprehensive Loss for the six months ended June 30, 2022 were as follows:
Prior to AdoptionEffect of AdoptionPost- Adoption Balance
Change in Discount Rate on Future Life Policyholder Benefits$— 1,090.0 $1,090.0 
Other Comprehensive Loss Before Income Taxes$(1,226.4)1,090.0 $(136.4)
Other Comprehensive Income Tax Benefit$257.5 (228.9)$28.6 
Other Comprehensive Loss, Net of Taxes$(968.9)861.1 $(107.8)
Total Comprehensive Loss$(1,138.4)872.1 $(266.3)

The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Comprehensive Loss for the three months ended June 30, 2022 were as follows:
Prior to AdoptionEffect of AdoptionPost- Adoption Balance
Change in Discount Rate on Future Life Policyholder Benefits$— 527.7 $527.7 
Other Comprehensive Loss Before Income Taxes$(580.4)527.7 $(52.7)
Other Comprehensive Income Tax Benefit$121.9 (110.8)$11.1 
Other Comprehensive Loss, Net of Taxes$(458.5)416.9 $(41.6)
Total Comprehensive Loss$(533.2)419.4 $(113.8)

The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2022 were as follows:
Prior to AdoptionEffect of AdoptionPost- Adoption Balance
Cash Flows from Operating Activities:
Net Loss$(169.5)11.0 $(158.5)
Change in Deferred Policy Acquisition Costs$(2.9)0.8 $(2.1)
Change in Insurance Reserves$12.9 (14.7)$(1.8)
Change in Income Taxes$(49.1)2.9 $(46.2)
Net Cash Used in Operating Activities$(90.0)— $(90.0)
Guidance Not Yet Adopted

In March 2023, the FASB issued ASU 2023-02 Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, which expands the use of the proportional amortization method of accounting to equity investments in other tax credit structures that meet certain criteria. The proportional amortization method results in the tax credit investment being amortized in proportion to the allocation of tax credits and other tax benefits in each period, and a net presentation within the income tax line item. ASU 2023-02 is effective for annual periods beginning after December 15, 2023 and interim periods within those annual periods. The Company is currently evaluating the impact of this guidance on its financial statements.

Significant Accounting Policies Related to ASU 2018-12
The below outlines those significant accounting policies related to ASU 2018-12 that were effective January 1, 2023.
Liability for Future Policyholder Benefits
A liability for future policyholder benefits, which is the present value of estimated future policyholder benefits to be paid to or on behalf of policyholders and certain related expenses, less the present value of estimated future net premiums to be collected from policyholders, is accrued as premium revenue is recognized. The liability is estimated using current assumptions that

13

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 1 - Basis of Presentation and Accounting Policies (Continued)

include discount rate, mortality, lapses and expenses. These current assumptions are based on judgments that consider the Company’s historical experience, industry data, and other factors.

The liability is adjusted for differences between actual and expected experience. The Company reviews and updates its estimate of cash flows expected over the lifetime of a group of contracts using actual historical experience quarterly and current future cash flow assumptions at least annually to calculate its revised net premium ratio. The revised net premium ratios are then used to calculate an updated liability for future policyholder benefits for the current reporting period, discounted at the original contract issuance discount rate. The Company has elected to use expense assumptions that are locked in at contract inception and are not subsequently reviewed or updated. Resulting changes in the liability due to differences in actual versus expected experience, changes in current cash flow assumptions, and prefunding and payout of benefits compared to the carrying amount of the liability as of that same date are recorded as a separate component of benefit expense in the Condensed Consolidated Statements of Loss.

The current discount rate assumption is an equivalent spot rate curve of annually compounded rates at monthly increments that is derived based on A-credit rated fixed-income instruments reflecting the duration characteristics of the liability. The Company utilizes published corporate yield curves from Bloomberg’s BVAL Investment Grade Corporate Sector curve. The current
discount rate assumption is updated quarterly and used to remeasure the liability at the reporting date, with the resulting change reflected in Other Comprehensive Income (Loss). For liability cash flows that are projected beyond the maximum observable point on the yield curve, the yield grades to an ultimate forward rate.
Deferred Profit Liability

For limited-payment products, gross premiums received in excess of net premiums are deferred at initial recognition as a deferred profit liability (“DPL”). Gross premiums are measured using assumptions consistent with those used in the measurement of the liability for future policyholder benefits, including discount rate, mortality, lapses, and expenses.
The DPL is amortized and recognized as premium revenue in proportion to insurance in force for nonparticipating limited-payment contracts. Interest is accreted on the balance of the DPL using the discount rate determined at contract issuance. The Company reviews and updates its estimates of cash flows for the DPL at the same time as the estimates of cash flows for the liability for future policyholder benefits. When cash flows are updated, the updated estimates are used to recalculate the DPL at contract issuance. The recalculated DPL as of the beginning of the current reporting period is compared to the carrying amount of the DPL as of the beginning of the current reporting period, and any difference is recognized as either an increase or decrease to Earned Premiums.
Deferred Policy Acquisition Costs
Deferred costs are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. These deferred costs are amortized on a constant level basis for grouped contracts over the expected term of the related contracts to approximate straight-line amortization. The expected term of the contract used for amortization is determined using mortality and termination assumptions that are based on the Company’s experience, industry data, and other factors and are consistent with those used for the liability for future policyholder benefits. If those projected assumptions change in future periods, they will be reflected in the straight-line amortization horizon at that time. Unexpected terminations, due to higher mortality and termination experience than expected, are recognized in the current period as a reduction of the capitalized balances. Amortization of deferred policy acquisition costs is included in Insurance Expenses in the Condensed Consolidated Statements of Loss.

Note 2 - Net Loss Per Unrestricted Share
The Company’s awards of deferred stock units granted to Kemper’s non-employee directors prior to 2019 contain rights to receive non-forfeitable dividend equivalents and participate in the undistributed earnings with common shareholders. Accordingly, the Company is required to apply the two-class method of computing basic and diluted earnings per share.



14

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 2 - Net Loss Per Unrestricted Share (Continued)
A reconciliation of the numerator and denominator used in the calculation of Basic Net Loss Per Unrestricted Share and Diluted Net Loss Per Unrestricted Share for the six and three months ended June 30, 2023 and 2022 is presented below.
 Six Months EndedThree Months Ended
(Dollars in Millions, except per share amounts)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Net Loss$(177.2)$(158.5)$(97.1)$(72.2)
Less: Net Loss Attributed to Participating Awards— — — — 
Net Loss Attributed to Unrestricted Shares(177.2)(158.5)(97.1)(72.2)
Dilutive Effect on Income of Equity-based Compensation Equivalent Shares
— — — — 
Diluted Net Loss Attributed to Unrestricted Shares$(177.2)$(158.5)$(97.1)$(72.2)
(Number of Shares in Thousands)  
Weighted-average Unrestricted Shares Outstanding
63,977.7 63,779.9 64,008.5 63,815.6 
Equity-based Compensation Equivalent Shares
— — — — 
Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution
63,977.7 63,779.9 64,008.5 63,815.6 
(Per Unrestricted Share in Whole Dollars)  
Basic Net Loss Per Unrestricted Share
$(2.77)$(2.49)$(1.52)$(1.13)
Diluted Net Loss Per Unrestricted Share
$(2.77)$(2.49)$(1.52)$(1.13)
Note 3 - Goodwill
During the second quarter of 2023, the Company identified impairment indicators impacting the fair value of the Preferred Property & Casualty Insurance reportable segment in connection with ongoing evaluation of strategic alternatives for the Preferred Insurance business. As a result, the fair value of the reportable segment was determined using a combination of available market information, market comparisons and a discounted cash flow valuation method based on the present value of future earnings. The fair value calculated in the second quarter of 2023 was lower than the carrying value of the reportable segment, resulting in a pre-tax impairment charge of $49.6 million and an after-tax impairment charge of $45.5 million related to the reportable segment. A substantial portion of the goodwill that was impaired was not tax deductible. The goodwill impairment charge is reported separately in the Condensed Consolidated Income Statements for the six and three months ended June 30, 2023, with a corresponding reduction to goodwill in the Condensed Consolidated Balance Sheet as of June 30, 2023.

Note 4 - Dispositions
Disposition of Reserve National Insurance Company
In July 2022, the Company entered into a definitive agreement to sell Reserve National Insurance Company and its wholly-owned subsidiaries (collectively, “Reserve National”) to Medical Mutual of Ohio, for approximately $90.0 million in total consideration. The sale closed on December 1, 2022 and a loss of $1.6 million, net of income tax, was recorded for the year ended December 31, 2022. Subsequent adjustments to this purchase price could occur pursuant to the definitive agreement but
are not expected to be material. The Company reported Reserve National’s results of operations in the Life & Health Insurance segment through December 1, 2022.

Note 5 - Business Segments
The Company is engaged, through its subsidiaries, in the property and casualty insurance and life insurance businesses. The Company conducts its operations through three operating segments: Specialty Property & Casualty Insurance, Preferred Property & Casualty Insurance, and Life & Health Insurance.
The Specialty Property & Casualty Insurance segment’s principal products are specialty automobile insurance and commercial automobile insurance. The Preferred Property & Casualty Insurance segment’s principal products are preferred automobile insurance, homeowners insurance and other personal insurance. These products are distributed primarily through independent agents and brokers. The Life & Health Insurance segment’s principal products are individual life, accident, supplemental health and property insurance. These products are distributed by career agents employed by the Company.
15

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 5 - Business Segments (Continued)
Earned Premiums by product line for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Specialty Property & Casualty Insurance:
Personal Automobile$1,554.5 $1,807.5 $766.6 $905.8 
Commercial Automobile322.0 257.8 165.7 137.9 
Preferred Property & Casualty Insurance:
Preferred Automobile153.9 190.0 75.7 94.0 
Homeowners102.2 99.0 50.0 47.7 
Other Personal Lines13.7 16.5 6.7 8.2 
Life & Health Insurance:
Life167.0 169.5 84.8 86.8 
Accident and Health11.7 90.9 5.8 45.1 
Property22.8 26.4 11.6 12.1 
Total Earned Premiums$2,347.8 $2,657.6 $1,166.9 $1,337.6 
16

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 5 - Business Segments (Continued)
Segment Revenues, including a reconciliation to Total Revenues, for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Segment Revenues:
Specialty Property & Casualty Insurance:
Earned Premiums$1,876.5 $2,065.3 $932.3 $1,043.7 
Net Investment Income83.0 68.9 44.5 34.0 
Change in Value of Alternative Energy Partnership Investments0.8 (10.9)0.4 (2.5)
Other Income1.6 2.7 0.7 1.0 
Total Specialty Property & Casualty Insurance1,961.9 2,126.0 977.9 1,076.2 
Preferred Property & Casualty Insurance:
Earned Premiums269.8 305.5 132.4 149.9 
Net Investment Income23.6 24.4 13.1 11.9 
Change in Value of Alternative Energy Partnership Investments0.3 (5.0)0.2 (1.1)
Total Preferred Property & Casualty Insurance293.7 324.9 145.7 160.7 
Life & Health Insurance:
Earned Premiums201.5 286.8 102.2 144.0 
Net Investment Income96.9 111.3 47.1 61.9 
Change in Value of Alternative Energy Partnership Investments0.4 (5.7)0.2 (1.3)
Other (Loss) Income(0.3)(0.8)0.1 (0.8)
Total Life & Health Insurance298.5 391.6 149.6 203.8 
Total Segment Revenues2,554.1 2,842.5 1,273.2 1,440.7 
Income (Loss) from Change in Fair Value of Equity and Convertible Securities4.1 (68.7)2.4 (40.5)
Net Realized Investment (Losses) Gains(8.0)12.5 (14.4)11.0 
Net Impairment Gains (Losses) Recognized in Earnings1.2 (13.8)(0.9)(4.9)
Other6.2 15.3 2.5 11.4 
Total Revenues$2,557.6 $2,787.8 $1,262.8 $1,417.7 
17

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 5 - Business Segments (Continued)
Segment Operating (Loss) Income, including a reconciliation to Loss before Income Taxes, for the six and three months ended June 30, 2023 and 2022 was:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Segment Operating (Loss) Income:
Specialty Property & Casualty Insurance$(89.7)$(111.2)$(15.0)$(51.0)
Preferred Property & Casualty Insurance(15.9)(31.1)(3.7)(21.6)
Life & Health Insurance24.9 35.9 10.1 23.9 
Total Segment Operating Loss(80.7)(106.4)(8.6)(48.7)
Corporate and Other Operating Loss From:
Other(28.2)(15.6)(15.3)(1.6)
Corporate and Other Operating Loss(28.2)(15.6)(15.3)(1.6)
Adjusted Consolidated Operating Loss(108.9)(122.0)(23.9)(50.3)
Income (Loss) from Change in Fair Value of Equity and Convertible Securities4.1 (68.7)2.4 (40.5)
Net Realized Investment (Losses) Gains(8.0)12.5 (14.4)11.0 
Impairment Gains (Losses)1.2 (13.8)(0.9)(4.9)
Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs(58.6)(14.6)(29.5)(9.9)
Loss from Early Extinguishment of Debt— (3.7)— — 
Goodwill Impairment Charge(49.6)— (49.6)— 
Loss before Income Taxes$(219.8)$(210.3)$(115.9)$(94.6)















18

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 5 - Business Segments (Continued)
Segment Net Operating Loss, including a reconciliation to Net Loss, for the six and three months ended June 30, 2023 and 2022 was:
 Six Months EndedThree Months Ended
(Dollars in Millions and Net of Income Taxes)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Segment Net Operating (Loss) Income:
Specialty Property & Casualty Insurance$(69.2)$(83.6)$(10.8)$(38.9)
Preferred Property & Casualty Insurance(12.2)(22.9)(2.7)(16.8)
Life & Health Insurance22.1 31.8 8.9 20.2 
Total Segment Net Operating Loss(59.3)(74.7)(4.6)(35.5)
Corporate and Other Net Operating Loss From:
Other(22.8)(14.1)(12.3)(1.7)
Total Corporate and Other Net Operating Loss(22.8)(14.1)(12.3)(1.7)
Adjusted Consolidated Net Operating Loss(82.1)(88.8)(16.9)(37.2)
Net Income (Loss) From:
Change in Fair Value of Equity and Convertible Securities3.2 (54.3)1.9 (32.0)
Net Realized Investment (Losses) Gains(7.4)9.9 (12.5)8.7 
Impairment Gains (Losses)0.9 (10.9)(0.8)(3.9)
Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs(46.3)(11.5)(23.3)(7.8)
Loss from Early Extinguishment of Debt— (2.9)— — 
Goodwill Impairment Charge(45.5)— (45.5)— 
Net Loss$(177.2)$(158.5)$(97.1)$(72.2)
Note 6 - Property and Casualty Insurance Reserves
Property and casualty insurance reserve activity for the six months ended June 30, 2023 and 2022 was:
 Six Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022
Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year$2,756.9 $2,772.7 
Less Reinsurance Recoverables at Beginning of Year39.6 41.9 
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year2,717.3 2,730.8 
Incurred Losses and Loss Adjustment Expenses (“ LAE”) Related to:
Current Year1,837.5 2,116.5 
Prior Years67.9 (15.6)
Total Incurred Losses and LAE1,905.4 2,100.9 
Paid Losses and LAE Related to:
Current Year864.1 1,032.9 
Prior Years1,107.5 1,080.2 
Total Paid Losses and LAE1,971.6 2,113.1 
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Period2,651.1 2,718.6 
Plus Reinsurance Recoverables at End of Period29.0 39.8 
Property and Casualty Insurance Reserves - Gross of Reinsurance at End of Period$2,680.1 $2,758.4 
19

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 6 - Property and Casualty Insurance Reserves (Continued)
Property and casualty insurance reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends are likely to 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 in the period of change.
For the six months ended June 30, 2023, the Company increased its property and casualty insurance reserves by $67.9 million to recognize adverse development of loss and LAE reserves from prior accident years. Specialty personal automobile insurance loss and LAE reserves developed adversely by $40.0 million due primarily to higher than expected emergence in loss patterns related to third and fourth accident quarters of 2022 within the bodily injury and physical damage coverages. Commercial automobile insurance loss and LAE reserves developed adversely by $15.2 million due to higher than expected emergence in loss patterns related to 2021 and 2022 bodily injury coverages. Preferred personal automobile insurance loss and LAE reserves developed adversely by $7.8 million due to higher than expected emergence in loss patterns related to the third and fourth accident quarters of 2022 within the bodily injury and physical damage coverages. Homeowners loss and LAE reserves developed adversely by $4.0 million. Other lines loss and LAE reserves developed adversely by $0.9 million.

For the six months ended June 30, 2022, the Company decreased its property and casualty insurance reserves by $15.6 million to recognize favorable development of loss and LAE reserves from prior accident years. Specialty personal automobile insurance loss and LAE reserves developed favorably by $25.0 million due primarily to the emergence of more favorable loss patterns than expected for liability and physical damage insurance. Commercial automobile insurance loss and LAE reserves developed adversely by $7.4 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Preferred personal automobile insurance loss and LAE reserves developed adversely by $1.6 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Homeowners loss and LAE reserves developed favorably by $5.3 million due primarily to the emergence of more favorable loss patterns than expected. Other lines loss and LAE reserves developed adversely by $5.8 million due primarily to the emergence of more adverse loss patterns than expected for prior accident years.

The Company cannot predict whether loss and LAE reserves will develop favorably or adversely from the amounts reported in the Company’s Condensed Consolidated Financial Statements. The Company believes that any such development will not have a material effect on the Company’s Condensed Consolidated Shareholders’ Equity, but could have a material effect on the Company’s consolidated financial results for a given period.
Receivables from Policyholders - Allowance for Expected Credit Losses
The following table presents receivables from policyholders, net of the allowance for expected credit losses including a roll forward of changes in the allowance for expected credit losses for the six months ended June 30, 2023.
(Dollars in Millions)Receivables from Policyholders, Net of Allowance for Expected Credit LossesAllowance for Expected Credit Losses
Balance at Beginning of Year$1,286.6 $13.1 
Provision for Expected Credit Losses21.5 
Write-offs of Uncollectible Receivables from Policyholders(22.6)
Balance at End of Period$1,246.3 $12.0 

20

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 6 - Property and Casualty Insurance Reserves (Continued)
The following table presents receivables from policyholders, net of the allowance for expected credit losses including a roll forward of changes in the allowance for expected credit losses for the six months ended June 30, 2022.
(Dollars in Millions)Receivables from Policyholders, Net of Allowance for Expected Credit LossesAllowance for Expected Credit Losses
Balance at Beginning of Year$1,418.7 $13.6 
Provision for Expected Credit Losses26.7 
Write-offs of Uncollectible Receivables from Policyholders(27.6)
Balance at End of Period$1,375.1 $12.7 
21

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 7 - Liability for Future Policyholder Benefits

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 six and three months ended June 30, 2023 and June 30, 2022:
Six Months EndedThree Months Ended
Jun 30, 2023Jun 30, 2022Jun 30, 2023Jun 30, 2022
Present Value of Expected Net PremiumsBalance, Beginning of Period$688.6 $669.0 $722.4 $661.0 
Beginning Balance at Original Discount Rate$728.9 $599.8 $744.5 $637.9 
        Effect of Changes in Cash Flow Assumptions— — — — 
        Effect of Actual Variances from Expected Experience(12.3)13.5 (13.0)1.0 
Adjusted Beginning of Period Balance716.6 613.3 731.5 638.9 
         Issuances61.9 79.4 30.1 37.8 
         Interest Accrual14.5 10.4 7.5 5.3 
         Net Premiums Collected(47.9)(42.8)(24.0)(21.7)
Ending Balance at Original Discount Rate745.1 660.3 745.1 660.3 
         Effect of Changes in Discount Rate Assumptions(33.4)(13.9)(33.4)(13.9)
Balance, End of Period$711.7 $646.4 $711.7 $646.4 
Present Value of Expected Future Policyholder BenefitsBalance, Beginning of Period$3,561.0 $4,933.1 $3,699.5 $4,348.7 
Beginning Balance at Original Discount Rate$3,906.2 $3,788.1 $3,916.9 $3,812.2 
        Effect of Changes in Cash Flow Assumptions— — — — 
        Effect of Actual Variances From Expected Experience(13.2)15.3 (13.5)2.6 
Adjusted Beginning of Period Balance3,893.0 3,803.4 3,903.4 3,814.8 
         Issuances 61.9 79.5 30.1 37.9 
         Interest Accrual85.2 81.4 42.8 40.6 
         Benefit Payments(125.0)(136.7)(61.2)(65.7)
Ending Balance at Original Discount Rate3,915.1 3,827.6 3,915.1 3,827.6 
         Effect of Changes in Discount Rate Assumptions(279.2)(28.2)(279.2)(28.2)
Balance, End of Period$3,635.9 $3,799.4 $3,635.9 $3,799.4 
Net Liability for Future Policyholder Benefits$2,924.2 $3,153.0 $2,924.2 $3,153.0 
Less: Reinsurance Recoverable— — — — 
Net Liability for Future Policyholder Benefits, After Reinsurance Recoverable$2,924.2 $3,153.0 $2,924.2 $3,153.0 

The weighted-average liability duration of the liability for future policyholder benefits as calculated under current rates is as follows:
Jun 30, 2023Jun 30, 2022
Weighted-Average Liability Duration of the Liability for Future Policyholder Benefits (Years)15.015.6







22

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 7 - Liability for Future Policyholder Benefits (Continued)

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:
Jun 30, 2023Jun 30, 2022
Net Liability for Future Policyholder Benefits2,924.2 3,153.0 
Deferred Profit Liability288.8 230.9 
Other1
150.8 201.3 
Total Life and Health Insurance Reserves$3,363.8 $3,585.2 
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, were as follows:
Jun 30, 2023Jun 30, 2022
Expected Future Benefit Payments, undiscounted$10,170.1 $9,573.5 
Expected Future Gross Premiums, undiscounted$4,436.6 $3,820.0 
Expected Future Gross Premiums, discounted$2,860.4 $2,740.2 
    
The amount of revenue and interest recognized in the Condensed Consolidated Statements of Loss is as follows:

Six Months EndedThree Months Ended
Jun 30, 2023Jun 30, 2022Jun 30, 2023Jun 30, 2022
Gross Premiums or Assessments $202.3 $196.4 $98.5 $95.0 
Interest Expense $70.7 $71.1 $35.3 $35.5 

The weighted-average interest rate is as follows:
Jun 30, 2023Jun 30, 2022
Interest Accretion Rate4.54 %4.60 %
Current Discount Rate5.17 %4.70 %
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 reviewed all significant assumptions and did not make any changes to mortality and lapse assumptions. Market data that underlies current discount rates was updated from March 31, 2023.

Note 8 - Deferred Policy Acquisition Costs

The following table presents the balances and changes in Deferred Policy Acquisition Costs for the Property and Casualty and Life and Health and business for the six months ended June 30, 2023 and 2022:

Jun 30, 2023Jun 30, 2022
Property and CasualtyLife and HealthTotalProperty and CasualtyLife and HealthTotal
Balance, Beginning of Year$231.1 $404.5 $635.6 $268.7 $419.3 $688.0 
 Capitalizations294.6 27.7 322.3 330.0 33.0 363.0 
 Amortization Expense (295.7)(9.7)(305.4)(343.8)(14.7)(358.5)
 Experience Adjustment— (6.3)(6.3)— (2.4)(2.4)
Balance, End of Period$230.0 $416.2 $646.2 $254.9 $435.2 $690.1 

23

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 8 - Deferred Policy Acquisition Costs (Continued)

Costs directly associated with the successful acquisition of business, principally commissions and certain premium taxes and policy issuance costs, are deferred. Costs deferred on property and casualty insurance contracts are amortized over the period in which premiums are earned. Costs deferred on traditional life insurance products and other long-duration insurance contracts are amortized on a constant level basis over the expected life of the contracts in accordance with the assumptions used to estimate the liability for future policyholder benefits for nonparticipating traditional and limited-payment contracts. The underlying assumptions for deferred policy acquisition costs and the liability for future policyholder benefits were updated concurrently.

In the second quarter of 2023, the Company did not make any changes to future assumptions.

Note 9 - Investments
Fixed Maturities
The amortized cost and fair values of the Company’s Investments in Fixed Maturities at June 30, 2023 were:
 Amortized
Cost		Gross UnrealizedAllowance for Expected Credit LossesFair Value
(Dollars in Millions)GainsLosses
U.S. Government and Government Agencies and Authorities$627.8 $1.4 $(83.7)$— $545.5 
States and Political Subdivisions1,646.8 21.9 (207.3)(0.4)1,461.0 
Foreign Governments4.8 — (0.8)— 4.0 
Corporate Securities:
Bonds and Notes4,083.2 22.5 (465.6)(6.7)3,633.4 
Redeemable Preferred Stocks9.0 — (1.1)— 7.9 
Collateralized Loan Obligations1,032.7 0.4 (45.9)— 987.2 
Other Mortgage- and Asset-backed357.4 0.2 (52.8)— 304.8 
Investments in Fixed Maturities$7,761.7 $46.4 $(857.2)$(7.1)$6,943.8 
The amortized cost and fair values of the Company’s Investments in Fixed Maturities at December 31, 2022 were:
 Amortized
Cost		Gross UnrealizedAllowance for Expected Credit LossesFair Value
(Dollars in Millions)GainsLosses
U.S. Government and Government Agencies and Authorities$612.5 $1.3 $(85.8)$— $528.0 
States and Political Subdivisions1,797.6 10.3 (238.3)(0.7)1,568.9 
Foreign Governments5.0 — (0.9)— 4.1 
Corporate Securities:
Bonds and Notes4,030.3 17.7 (499.7)(8.9)3,539.4 
Redeemable Preferred Stocks9.0 — (1.0)— 8.0 
Collateralized Loan Obligations1,014.7 — (60.8)— 953.9 
Other Mortgage- and Asset-backed342.7 0.1 (50.3)— 292.5 
Investments in Fixed Maturities$7,811.8 $29.4 $(936.8)$(9.6)$6,894.8 
Other Receivables included $12.5 million and $5.8 million of unsettled sales of Investments in Fixed Maturities at June 30, 2023 and December 31, 2022, respectively. Accrued Expenses and Other Liabilities included unsettled purchases of Investments in Fixed Maturities of $2.7 million and $25.9 million at June 30, 2023 and December 31, 2022, respectively.
24

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 9 - Investments (Continued)
The amortized cost and fair values of the Company’s Investments in Fixed Maturities at June 30, 2023 by contractual maturity were:
(Dollars in Millions)Amortized CostFair Value
Due in One Year or Less$196.0 $187.3 
Due after One Year to Five Years918.7 879.2 
Due after Five Years to Ten Years1,111.6 960.4 
Due after Ten Years3,664.7 3,217.4 
Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date1,870.7 1,699.5 
Investments in Fixed Maturities $7,761.7 $6,943.8 
The expected maturities of the Company’s Investments in Fixed Maturities may differ from the contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
Investments in Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date at June 30, 2023 consisted of securities issued by the Government National Mortgage Association with a fair value of $248.1 million, securities issued by the Federal National Mortgage Association with a fair value of $94.1 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $65.4 million, and securities issued by other non-governmental issuers with a fair value of $1,291.9 million.
An aging of unrealized losses on the Company’s Investments in Fixed Maturities at June 30, 2023 is presented below.
 Less Than 12 Months12 Months or LongerTotal
(Dollars in Millions)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Fixed Maturities:
U.S. Government and Government Agencies and Authorities$127.6 $(5.0)$365.3 $(78.7)$492.9 $(83.7)
States and Political Subdivisions235.1 (8.6)843.1 (198.7)1,078.2 (207.3)
Foreign Governments0.9 — 2.2 (0.8)3.1 (0.8)
Corporate Securities:
Bonds and Notes1,163.4 (59.3)2,045.4 (406.3)3,208.8 (465.6)
Redeemable Preferred Stocks— — 7.6 (1.1)7.6 (1.1)
Collateralized Loan Obligations47.4 (0.6)884.1 (45.3)931.5 (45.9)
Other Mortgage- and Asset-backed22.7 (0.3)277.9 (52.5)300.6 (52.8)
Total Fixed Maturities$1,597.1 $(73.8)$4,425.6 $(783.4)$6,022.7 $(857.2)
Investment-grade fixed maturity investments comprised $827.1 million and below-investment-grade Fixed Maturity Investments comprised $30.1 million of the unrealized losses on investments in fixed maturities at June 30, 2023. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 9.5% of the amortized cost basis of the investment.
25

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 9 - Investments (Continued)
An aging of unrealized losses on the Company’s Investments in Fixed Maturities at December 31, 2022 is presented below.
 Less Than 12 Months12 Months or LongerTotal
(Dollars in Millions)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Fixed Maturities:
U.S. Government and Government Agencies and Authorities$337.3 $(49.3)$126.5 $(36.5)$463.8 $(85.8)
States and Political Subdivisions854.7 (140.6)276.8 (97.7)1,131.5 (238.3)
Foreign Governments0.1 — 2.6 (0.9)2.7 (0.9)
Corporate Securities:
Bonds and Notes2,730.6 (373.9)424.4 (125.8)3,155.0 (499.7)
Redeemable Preferred Stocks7.7 (1.0)— — 7.7 (1.0)
Collateralized Loan Obligations568.2 (34.2)373.9 (26.6)942.1 (60.8)
Other Mortgage- and Asset-backed205.4 (28.9)79.5 (21.4)284.9 (50.3)
Total Fixed Maturities$4,704.0 $(627.9)$1,283.7 $(308.9)$5,987.7 $(936.8)
Investment-grade fixed maturity investments comprised $904.0 million and below-investment-grade Fixed Maturity Investments comprised $32.8 million of the unrealized losses on Investments in Fixed Maturities at December 31, 2022. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 11% of the amortized cost basis of the investment.

Fixed Maturities - Expected Credit Losses

The following table sets forth the change in allowance for credit losses on fixed maturities available-for-sale by major security type for six months ended June 30, 2023.
 States and Political SubdivisionsCorporate Bonds and NotesTotal
(Dollars in Millions)
Beginning of the Year$0.7 $8.9 $9.6 
Additions for Securities for which No Previous Expected Credit Losses were
   Recognized		— 0.7 0.7 
Reduction Due to Sales— (1.9)(1.9)
Net Decrease in Allowance on Securities for which Expected Credit Losses were Previously Recognized— (1.0)(1.0)
Write-offs Charged Against Allowance(0.3)— (0.3)
End of the Period$0.4 $6.7 $7.1 
26

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 9 - Investments (Continued)
The following table sets forth the change in allowance for credit losses on fixed maturities available-for-sale by major security type for the six months ended June 30, 2022.
 Corporate Bonds and NotesTotal
(Dollars in Millions)
Beginning of the Year$7.5 $7.5 
Additions for Securities for which No Previous Expected Credit Losses were
   Recognized		3.8 3.8 
Net Increase in Allowance on Securities for which Expected Credit Losses were Previously Recognized5.8 5.8 
Write-offs Charged Against Allowance(3.5)(3.5)
End of the Period$13.6 $13.6 
Equity Securities at Fair Value
Investments in Equity Securities at Fair Value were $247.0 million and $243.2 million at June 30, 2023 and December 31, 2022, respectively. Net unrealized gains arising during the six months ended June 30, 2023 and recognized in earnings, related to such investments still held as of June 30, 2023, were $9.8 million.
There were no unsettled purchases of Investments in Equity Securities at Fair Value at June 30, 2023 or December 31, 2022. There were $31.3 million and $0.0 million in unsettled sales of Investments in Equity Securities at Fair Value at June 30, 2023 and December 31, 2022, respectively.
Equity Method Limited Liability Investments
Equity Method Limited Liability Investments include investments in limited liability investment companies and limited partnerships in which the Company’s interests are not deemed minor and are accounted for under the equity method of accounting. The Company’s investments in Equity Method Limited Liability Investments are generally of a passive nature in that the Company does not take an active role in the management of the investment entity.
The Company’s maximum exposure to loss at June 30, 2023 is limited to the total carrying value of $225.1 million. In addition, the Company had outstanding commitments totaling approximately $90.5 million to fund Equity Method Limited Liability Investments at June 30, 2023. At June 30, 2023, 2.0% of Equity Method Limited Liability Investments were reported without a reporting lag. Of the total carrying value, 5.3% was reported with a one month lag and the remainder was reported with more than a one-month lag.

There were no unsettled purchases of Equity Method Limited Liability Investments at June 30, 2023 or December 31, 2022. There were $0.8 million and $35.2 million unsettled sales of Equity Method Limited Liability Investments at June 30, 2023 and December 31, 2022, respectively. Unsettled sales of Equity Method Limited Liability Investments are carried within Other Receivables on the Condensed Consolidated Balance Sheets.

Alternative Energy Partnership Investments

Alternative Energy Partnership Investments include partnerships formed to invest in newly installed residential solar leases and power purchase agreements. As a result of this investment, the Company has the right to certain investment tax credits and tax depreciation benefits, and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers for a fixed period of time. The Hypothetical Liquidation Book Value (“HLBV”) equity method of accounting is used for the Company’s investments in Alternative Energy Partnership Investments.

The Company’s maximum exposure to loss at June 30, 2023 is limited to the total carrying value of $16.8 million. The Company had no outstanding commitments to fund Alternative Energy Partnership Investments as of June 30, 2023. Alternative Energy Partnership Investments are reported on a three-month lag.
27

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 9 - Investments (Continued)
Loans to Policyholders
Loans to Policyholders represents funds loaned to policyholders up to the cash surrender value of the associated insurance policies and are carried at the unpaid principal balances due to the Company from the policyholders. Interest income on policy loans is recognized in Net Investment Income at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policies.
The carrying values of the Company’s Loans to Policyholders at Unpaid Principal investment at June 30, 2023 and December 31, 2022 were $281.6 million and $283.4 million, respectively.

Other Investments
The carrying values of the Company’s Other Investments at June 30, 2023 and December 31, 2022 were:
(Dollars in Millions)Jun 30,
2023		Dec 31,
2022
Equity Securities at Modified Cost
$34.7 $38.4 
Convertible Securities at Fair Value
46.2 43.3 
Real Estate at Depreciated Cost96.0 93.6 
Mortgage Loans92.6 91.1 
Other6.1 3.5 
Total$275.6 $269.9 
The Company performs a qualitative impairment analysis of its Other Investments on a quarterly basis consisting of various factors such as earnings performance, current market conditions, changes in credit ratings, changes in the regulatory environment and other factors. If the qualitative analysis identifies the presence of impairment indicators, the Company estimates the fair value of the investment. If the estimated fair value is below the carrying value, the Company records an impairment in the Condensed Consolidated Statements of Loss to reduce the carrying value to the estimated fair value. When the Company identifies observable transactions of the same or similar securities to those held by the Company, the Company increases or decreases the carrying value to the observable transaction price. The Company did not recognize any changes in carrying value due to observable transactions for the six months ended June 30, 2023. The Company did not recognize any impairment on Equity Securities at Modified Cost for six months ended June 30, 2023 as a result of the Company’s impairment analysis. The Company recognized no cumulative increases or decreases in the carrying value due to observable transactions and $9.6 million of cumulative impairments on Equity Securities at Modified Cost held as of June 30, 2023.
28

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 9 - Investments (Continued)
Net Investment Income
Net Investment Income for the six and three months ended June 30, 2023 and 2022 was:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Investment Income:
Interest on Fixed Income Securities$173.3 $141.5 $87.1 $72.8 
Dividends on Equity Securities Excluding Alternative Investments2.2 3.2 1.2 1.7 
Alternative Investments:
Equity Method Limited Liability Investments3.9 28.6 2.8 15.3 
Limited Liability Investments Included in Equity Securities8.9 26.1 6.3 18.5 
Total Alternative Investments12.8 54.7 9.1 33.8 
Short-term Investments5.9 0.3 3.6 0.2 
Loans to Policyholders10.5 10.8 5.1 5.3 
Real Estate4.3 4.5 1.9 2.3 
Company-Owned Life Insurance16.2 18.1 7.4 9.8 
Other8.3 3.4 5.3 1.7 
Total Investment Income 233.5 236.5 120.7 127.6 
Investment Expenses:
Real Estate4.3 3.5 2.2 1.0 
Other Investment Expenses21.1 14.5 12.2 8.1 
Total Investment Expenses25.4 18.0 14.4 9.1 
Net Investment Income$208.1 $218.5 $106.3 $118.5 
Gross gains and losses on sales of investments in fixed maturities for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Fixed Maturities:
Gains on Sales$1.5 $13.8 $0.4 $13.4 
Losses on Sales(9.3)(3.6)(6.0)(2.8)
(Losses) Gains on Hedging Activity(0.3)0.3 (8.7)0.3 
Note 10 - Derivatives

The Company’s earnings, cash flows, and financial position are subject to fluctuations due to changes in prevailing interest rates. From time to time, the Company uses derivative financial instruments to reduce fluctuations of earnings related to interest rate exposure.

The Company entered into derivative agreements with maturity dates throughout 2023. Derivative instruments are carried at fair value on the Condensed Consolidated Balance Sheets. Derivative instruments in a gain position are presented within Other Investments and those in a loss position are included in Accrued Expenses and Other Liabilities. Changes in the fair values of derivatives are recorded on the Condensed Consolidated Statements of Loss within Net Realized Investment Gains or Accumulated Other Comprehensive Loss along with the corresponding change in the designated hedge assets. As of June 30, 2023, no derivatives qualified for hedge accounting, therefore, amounts previously held in Accumulated Other Comprehensive Loss have been recognized through the Condensed Consolidated Statements of Loss.

29

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 10 - Derivatives (Continued)

Interest Rate Risk

The Company’s debt securities valuations utilize the Treasury designated benchmark rate, exposing the Company to variability due to changes in interest rates.

Interest Swap Lock

The Company entered into an interest swap lock agreement in the third quarter of 2022 classified as cash flow hedges to manage exposure to changes in future purchase prices of fixed maturity securities attributable to changes in the benchmark (Treasury) interest rate. The Company assesses the effectiveness of cash flow hedges using the hypothetical derivative method. Based on the results of the assessment, the hedge was determined to be effective. The interest swap lock agreement was closed out in the first quarter of 2023.

Ultra-Long Treasury Futures

During 2023, the Company entered into two transactions of exchange-traded ultra-long Treasury futures (“Treasury Futures”) in order to manage exposure to upcoming changes in the benchmark (Treasury) interest rate of forecasted transactions. These derivatives expire quarterly. The open treasury futures do not qualify for hedge accounting. The results are shown in the Primary Risks Managed by Derivatives section below.

Reverse Treasury Lock

During 2022, the Company entered into a Reverse Treasury Lock agreement to manage reinvestment risk on future purchases of fixed maturity securities. The Reverse Treasury Lock agreement did not qualify for hedge accounting and matured in the first quarter of 2023. The results are shown in the Primary Risks Managed by Derivatives section below.

Primary Risks Managed by Derivatives
The following table presents the derivative instruments, primary underlying risk exposure, gross notional amount, and fair value of the Company’s derivatives:
June 30, 2023December 31, 2022
(Dollars in Millions)Fair ValueFair Value
Derivative InstrumentPrimary Underlying Risk ExposureGross Notional AmountAssetsLiabilitiesGross Notional AmountAssetsLiabilities
Derivatives Designated as Hedging Instruments:
Interest Swap LockInterest Rate Risk$— $— $— $5.0 $— $0.4 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Treasury FuturesInterest Rate Risk$201.5 $3.2 $— $— $— $— 
Reverse Treasury LockInterest Rate Risk$— $— $— $100.0 $1.7 $— 

Note 11 - Fair Value Measurements
The Company classifies its Investments in Fixed Maturities as available-for-sale and reports these investments at fair value. The Company reports equity investments with readily determinable fair values as Equity Securities at Fair Value. Certain investments that are measured at fair value using the net asset value practical expedient are not required to be classified using the fair value hierarchy, but are presented in the following two tables to permit reconciliation of the fair value hierarchy to the amounts presented in the Condensed Consolidated Balance Sheets.
30

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Fair Value Measurements (Continued)
The valuation of assets and liabilities measured at fair value in Company’s Condensed Consolidated Balance Sheets at June 30, 2023 is summarized below.
 Fair Value Measurements 
(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 ValueTotal Fair Value
Assets:
Fixed Maturities:
U.S. Government and Government Agencies and Authorities$120.0 $425.5 $— $— $545.5 
States and Political Subdivisions— 1,461.0 — — 1,461.0 
Foreign Governments— 4.0 — — 4.0 
Corporate Securities:
Bonds and Notes— 3,446.0 187.4 — 3,633.4 
Redeemable Preferred Stock— 1.2 6.7 — 7.9 
Collateralized Loan Obligations— 987.2 — — 987.2 
Other Mortgage and Asset-backed— 299.6 5.2 — 304.8 
Total Investments in Fixed Maturities 120.0 6,624.5 199.3 — 6,943.8 
Equity Securities at Fair Value:
Preferred Stocks:
Finance, Insurance and Real Estate— 30.0 — — 30.0 
Other Industries— 9.5 1.8 — 11.3 
Common Stocks:
Finance, Insurance and Real Estate0.6 — — — 0.6 
Other Industries0.4 — 0.4 — 0.8 
Other Equity Interests:
Exchange Traded Funds7.3 — — — 7.3 
Limited Liability Companies and Limited Partnerships— — — 197.0 197.0 
Total Investments in Equity Securities at Fair Value8.3 39.5 2.2 197.0 247.0 
Other Investments:
Convertible Securities at Fair Value— 46.2 — — 46.2 
Other Assets:
Derivative Instrument Not Designated as Hedges— 3.2 — — 3.2 
Total Assets$128.3 $6,713.4 $201.5 $197.0 $7,240.2 
At June 30, 2023, the Company had unfunded commitments to invest an additional $110.7 million in certain limited liability investment companies and limited partnerships that will be included in Other Equity Interests if funded.
31

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Fair Value Measurements (Continued)
The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheets at December 31, 2022 is summarized below.
 Fair Value Measurements 
(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 Total Fair Value
Assets:
Fixed Maturities:
U.S. Government and Government Agencies and Authorities$103.6 $424.4 $— $— $528.0 
States and Political Subdivisions— 1,568.9 — — 1,568.9 
Foreign Governments— 4.1 — — 4.1 
Corporate Securities:
Bonds and Notes— 3,323.4 216.0 — 3,539.4 
Redeemable Preferred Stocks— 1.2 6.8 — 8.0 
Collateralized Loan Obligations— 953.9 — — 953.9 
Other Mortgage and Asset-backed— 287.4 5.1 — 292.5 
Total Investments in Fixed Maturities103.6 6,563.3 227.9 — 6,894.8 
Equity Securities at Fair Value:
Preferred Stocks:
Finance, Insurance and Real Estate— 29.0 — — 29.0 
Other Industries— 9.2 1.6 — 10.8 
Common Stocks:
Finance, Insurance and Real Estate0.9 — — — 0.9 
Other Industries0.3 0.4 0.5 — 1.2 
Other Equity Interests:
Exchange Traded Funds12.2 — — — 12.2 
Limited Liability Companies and Limited Partnerships— — — 189.1 189.1 
Total Investments in Equity Securities at Fair Value13.4 38.6 2.1 189.1 243.2 
Other Investments:
Convertible Securities at Fair Value— 43.3 — — 43.3 
Other Assets:
Derivative Instruments Not Designated as Hedges— 1.7 — — 1.7 
Total Assets$117.0 $6,646.9 $230.0 $189.1 $7,183.0 
Liabilities:
Accrued Expenses and Other Liabilities:
Derivative Instruments Designated as Fair Value Hedges$— $(0.4)$— $— $(0.4)
Total Liabilities$— $(0.4)$— $— $(0.4)

32

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Fair Value Measurements (Continued)
The Company’s investments in Fixed Maturities that are classified as Level 1 primarily consist of U.S. Treasury Bonds and Notes. The Company’s investments in Equity Securities at Fair Value that are classified as Level 1 consist of either investments in publicly-traded common stocks or exchange traded funds. The Company’s investments in Fixed Maturities that are classified as Level 2 primarily consist of investments in corporate bonds, obligations of states and political subdivisions, collateralized loan obligations, and mortgage-backed securities of U.S. government agencies. The Company’s investments in Equity Securities at Fair Value that are classified as Level 2 primarily consist of investments in preferred stocks. The Company’s Derivative Instruments Designated as Fair Value Hedges that are classified as Level 2 primarily consist of hedges against the Company’s available for sale debt securities portfolio. The Company uses a leading, nationally recognized provider of market data and analytics to price the vast majority of the Company’s Level 2 measurements. The provider utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information. Because many fixed maturity securities do not trade on a daily basis, the provider’s evaluated pricing applications apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. In addition, the provider uses model processes to develop prepayment and interest rate scenarios. The pricing provider’s models and processes also take into account market convention. For each asset class, teams of its evaluators gather information from market sources and integrate relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models. The Company generally validates the measurements obtained from its primary pricing provider by comparing them with measurements obtained from one additional pricing provider that provides either prices from recent market transactions, quotes in inactive markets or evaluations based on its own proprietary models.
The Company investigates significant differences related to the values provided. On completion of its investigation, management exercises judgment to determine the price selected and whether adjustments, if any, to the price obtained from the Company’s primary pricing provider would warrant classification of the price as Level 3. In instances where a measurement cannot be obtained from either pricing provider, the Company generally will evaluate bid prices from one or more binding quotes obtained from market makers to value investments in inactive markets and classified by the Company as Level 2. The Company generally classifies securities when it receives non-binding quotes or indications as Level 3 securities unless the Company can validate the quote or indication against recent transactions in the market.
The table below presents quantitative information about the significant unobservable inputs utilized by the Company in determining fair values for fixed maturity investments classified as Level 3 at June 30, 2023.
(Dollars in Millions)Unobservable InputTotal Fair ValueRange of Unobservable InputsWeighted-average Yield
Investment-gradeMarket Yield$57.4 4.2 %-14.3 %10.0 %
Non-investment-grade:
Senior DebtMarket Yield47.8 6.3 -39.9 15.3 
Junior DebtMarket Yield33.2 6.3 -22.5 19.4 
OtherVarious60.9 
Total Level 3 Fixed Maturity Investments$199.3 
The table below presents quantitative information about the significant unobservable inputs utilized by the Company in determining fair values for fixed maturity investments classified as Level 3 at December 31, 2022.
(Dollars in Millions)Unobservable InputTotal Fair ValueRange of Unobservable InputsWeighted-average Yield
Investment-gradeMarket Yield$56.5 4.6 %-14.5 %9.2 %
Non-investment-grade:
Senior DebtMarket Yield72.9 4.6 -36.7 10.9 
Junior DebtMarket Yield42.1 8.8 -22.5 15.1 
OtherVarious56.4 
Total Level 3 Fixed Maturity Investments$227.9 
33

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Fair Value Measurements (Continued)
For an investment in a fixed maturity security, an increase in the yield used to determine the fair value of the security will decrease the fair value of the security. A decrease in the yield used to determine fair value will increase the fair value of the security, but for callable securities the fair value increase is generally limited to par, unless security is currently callable at a premium.
Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the six months ended June 30, 2023 is presented below.
 Fixed MaturitiesEquity Securities
(Dollars in Millions)Corporate
Bonds
and Notes		Redeemable
Preferred
Stocks		Other Mortgage-
and Asset-
backed		Preferred
and 
Common
Stocks		Total
Balance at Beginning of Year$216.0 $6.8 $5.1 $2.1 $230.0 
Total Gains (Losses):
Included in Condensed Consolidated Statements of Loss0.5 — — (1.4)(0.9)
Included in Other Comprehensive Income
2.4 (0.1)0.1 — 2.4 
Purchases37.9 — — 1.1 39.0 
Settlements— — — — — 
Sales(69.3)— — — (69.3)
Transfers into Level 3— — — 0.4 0.4 
Transfers out of Level 3(0.1)— — — (0.1)
Balance at End of Period$187.4 $6.7 $5.2 $2.2 $201.5 
The transfers into and out of Level 3 were due primarily to changes in the availability of market observable inputs.
Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the three months ended June 30, 2023 is presented below.
 Fixed MaturitiesEquity Securities
(Dollars in Millions)Corporate
Bonds
and Notes		Redeemable
Preferred
Stocks		Other Mortgage-
and Asset-
backed		Preferred
and 
Common
Stocks		Total
Balance at Beginning of Period$196.1 $6.8 $5.3 $2.0 $210.2 
Total Gains (Losses):
Included in Condensed Consolidated Statements of Loss0.1 — — (0.9)(0.8)
Included in Other Comprehensive Loss
0.9 (0.1)(0.1)— 0.7 
Purchases18.5 — — 1.1 19.6 
Settlements— — — — — 
Sales(28.1)— — — (28.1)
Transfers into Level 3— — — — — 
Transfers out of Level 3(0.1)— — — (0.1)
Balance at End of Period$187.4 $6.7 $5.2 $2.2 $201.5 
The transfers into and out of Level 3 were due to changes in the availability of market observable inputs.


34

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Fair Value Measurements (Continued)
Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the six months ended June 30, 2022 is presented below.
 Fixed MaturitiesEquity Securities
(Dollars in Millions)Corporate
Bonds
and Notes		Redeemable
Preferred
Stocks		Other Mortgage-
and Asset-
backed		Preferred
and 
Common
Stocks		Total
Balance at Beginning of Year$236.8 $6.1 $7.0 $1.5 $251.4 
Total (Losses) Gains:
Included in Condensed Consolidated Statements of Loss(5.9)— — — (5.9)
Included in Other Comprehensive Loss
(9.4)(1.2)(1.4)0.2 (11.8)
Purchases21.6 2.0 — — 23.6 
Settlements— — — — — 
Sales(65.6)— — — (65.6)
Transfers into Level 35.3 — — — 5.3 
Transfers out of Level 3(5.7)— — — (5.7)
Balance at End of Period$177.1 $6.9 $5.6 $1.7 $191.3 
The transfers into and out of Level 3 were due to changes in the availability of market observable inputs.
Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the three months ended June 30, 2022 is presented below.
 Fixed MaturitiesEquity Securities
(Dollars in Millions)Corporate
Bonds
and Notes		Redeemable
Preferred
Stocks		Other Mortgage-
and Asset-
backed		Preferred
and 
Common
Stocks		Total
Balance at Beginning of Period$205.6 $5.6 $6.2 $1.5 $218.9 
Total (Losses) Gains:
Included in Condensed Consolidated Statements of Loss(0.2)— — — (0.2)
Included in Other Comprehensive Loss
(7.7)(0.7)(0.6)0.2 (8.8)
Purchases7.9 2.0 — — 9.9 
Settlements— — — — — 
Sales(22.8)— — — (22.8)
Transfers into Level 3— — — — — 
Transfers out of Level 3(5.7)— — — (5.7)
Balance at End of Period$177.1 $6.9 $5.6 $1.7 $191.3 
35

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Fair Value Measurements (Continued)
The table below shows investments reported at fair value using NAV and their unfunded commitments by asset class as of June 30, 2023 and December 31, 2022.
June 30, 2023December 31, 2022
Asset ClassFair Value Using NAVUnfunded CommitmentsFair Value Using NAVUnfunded Commitments
Reported as Equity Method Limited Liability Investments at Cost Plus Cumulative Undistributed Earnings:
Mezzanine Debt$125.6 $47.0 $114.3 $51.6 
Senior Debt21.8 41.1 21.6 42.0 
Distressed Debt8.1 — 9.4 — 
Secondary Transactions8.5 1.7 9.3 1.7 
Hedge Fund0.1 — 0.5 — 
Leveraged Buyout9.7 0.7 8.9 0.6 
Growth Equity1.2 — 1.2 — 
Real Estate41.5 — 43.3 — 
Other8.6 — 8.5 — 
Total Equity Method Limited Liability Investments225.1 90.5 217.0 95.9 
Alternative Energy Partnership Investments16.8 — 16.3 — 
Reported as Other Equity Interests at Fair Value:
Mezzanine Debt115.8 66.2 106.0 56.0 
Senior Debt22.4 13.4 21.9 6.0 
Distressed Debt12.5 13.3 12.5 13.0 
Secondary Transactions2.8 3.1 3.5 4.2 
Hedge Funds14.9 — 18.1 — 
Leveraged Buyout22.5 7.8 21.6 9.0 
Growth Equity6.0 6.7 5.4 7.9 
Real Estate0.1 0.2 — — 
Other— — 0.1 0.2 
Total Reported as Other Equity Interests at Fair Value197.0 110.7 189.1 96.3 
Reported as Equity Securities at Modified Cost:
Other6.0 — 8.3 — 
Total Reported as Equity Securities at Modified Cost6.0 — 8.3 — 
Total Investments in Limited Liability Companies and Limited Partnerships$444.9 $201.2 $430.7 $192.2 
At June 30, 2023, the Company had unfunded commitments to invest an additional $201.2 million in certain limited liability investment companies and limited partnerships that will be included in Other Equity Interests and Equity Method Limited Liability Investments if funded.




36

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Fair Value Measurements (Continued)
The fund investments included above (excluding Hedge Funds) are not redeemable, because distributions from the funds will be received when underlying investments of the funds are liquidated. The funds are generally expected to have approximately 10 year lives at their inception, but these lives may be extended at the fund manager’s discretion, typically in one or two-year increments.
The hedge fund investments included above, which are carried at fair value, are generally redeemable subject to the redemption notices period. The majority of the hedge fund investments are redeemable monthly or quarterly.
The following table includes information related to the Company’s investments in certain private equity funds or hedge funds that calculate a net asset value per share:
Asset ClassInvestment Category Includes
Mezzanine DebtFunds with investments in junior or subordinated debt and potentially minority equity securities issued by private companies.
Senior DebtFunds with investments in senior or first lien debt and potentially minority equity securities typically issued by private companies.
Distressed DebtFunds with debt or minority equity investments that are made opportunistically in companies that are in or near default or under financial strain with potential to have an active role in restructuring company.
Secondary TransactionsFunds that focus on purchasing third party fund interests from investors seeking liquidity within their own portfolio.
Hedge FundFunds that focus primarily on investing in public securities with strategy of generating uncorrelated returns to the public markets.
Leveraged BuyoutFunds with control equity investments in more mature, positive cash flowing, private companies that are typically purchased with the use of financial leverage.
Growth EquityFunds that invest in early or venture stage companies with high growth potential with view towards generating realizations through sale or initial public offering (“IPO”) of company.
Real EstateFunds with investments in multi-family housing properties.
OtherConsists of direct investments of preferred equity or minority common equity investments into private companies structured as limited partnerships or limited liability companies.
Presented below are the carrying values and fair value estimates of financial instruments not carried at fair value.
 June 30, 2023December 31, 2022
(Dollars in Millions)Carrying ValueFair ValueCarrying ValueFair Value
Financial Assets:
Loans to Policyholders $281.6 $281.6 $283.4 $283.4 
Short-term Investments406.3 406.3 278.4 278.4 
Mortgage Loans92.6 92.6 91.1 91.1 
Company-Owned Life Insurance500.5 500.5 586.5 586.5 
Equity Securities at Modified Cost34.7 34.7 38.4 38.4 
Financial Liabilities:
Long-term Debt$1,388.1 $1,183.5 $1,386.9 $1,195.1 
Policyholder Obligations601.0 601.0 601.0 601.0 
37

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 11 - Fair Value Measurements (Continued)
Loans to policyholders are carried at unpaid principal balance which approximates fair value and are categorized as Level 3 within the fair value hierarchy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of payments, the Company believes the carrying value of policy loans approximates fair value. The fair value measurement of Short-term Investments is estimated using inputs that are considered either Level 1 or Level 2 measurements. The Mortgage Loans fair value measurement is considered equal to amortized cost given the short-term nature of the investments. The fair value measurement of Equity Securities at Modified Cost is estimated using inputs that are considered Level 3 measurements. The cash surrender value of Company-Owned Life Insurance approximates fair value and is considered to be a Level 2 investment. The fair value of Long-term Debt is estimated using quoted prices for similar liabilities in markets that are not active. The inputs used in the valuation are considered Level 2 measurements. Policyholder Obligations presented in the preceding table consist of advances from the Federal Home Loan Bank (“FHLB”) of Chicago, and the inputs used in the valuation are considered Level 2 measurements.
Note 12 - Variable Interest Entities
The Company invests in an Alternative Energy Partnership formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits. This entity was formed to invest in newly installed residential solar leases and power purchase agreements. As a result of this investment, the Company has the right to certain investment tax credits and tax depreciation benefits, and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers.
The Company’s interest in the Alternative Energy Partnership Investment is considered an investment in a variable interest entity (“VIE”). To determine whether the investment should be consolidated in the Consolidated Financial Statements, the Company evaluates whether it is the primary beneficiary of the VIE. The primary beneficiary is the party that has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company has determined that it is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact the economic performance of the entity and therefore is not required to consolidate the VIE. The project sponsor governs the entity and the Company only has consent rights that have been deemed protective in nature and does not participate in key economic decisions of the entity.
The investment is accounted for using the equity method of accounting and included in Alternative Energy Partnership Investments in the Condensed Consolidated Balance Sheets. The Company uses the HLBV equity method to account for earnings and losses. This method provides an earnings allocation that appropriately reflects the substantive economics of the investment. Earnings and losses on the investment are reported in Change in Value of Alternative Energy Partnership Investments and investment tax credits are recognized in Income Tax Benefit on the Condensed Consolidated Statements of Loss.
The following table presents information regarding activity in the Company’s Alternative Energy Partnership Investments for the six and three months ended June 30, 2023 and 2022.
Six Months EndedThree Months Ended
(Dollars in millions)Jun 30, 2023Jun 30, 2022Jun 30, 2023Jun 30, 2022
Fundings$— $— $— $— 
Cash Distribution from Investment1.0 0.9 0.5 0.5 
Income (Loss) on Investments in Alternative Energy Partnership1.5 (21.6)0.8 (4.9)
Income Tax (Recaptures) Credits Recognized(0.1)3.9 — — 
Tax (Expense) Benefit Recognized from Alternative Energy Partnership(0.3)4.2 (0.1)1.1 

38

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 12 - Variable Interest Entities (Continued)
The following table represents the carrying value of the associated assets and liabilities and the associated maximum loss exposure of the Alternative Energy Partnership Investments as of June 30, 2023 and December 31, 2022.
(Dollars in millions)Jun 30, 2023Dec 31, 2022
Cash$2.9 $3.0 
Equipment, Net of Depreciation257.8 261.7 
Other Assets6.3 5.1 
Total Unconsolidated Assets267.0 269.7 
Maximum Loss Exposure16.8 16.3 
The Company’s maximum loss exposure in the event that all of the assets in the Alternative Energy Partnership are deemed worthless is $16.8 million and $16.3 million, which is the carrying value of the investment at June 30, 2023 and December 31, 2022, respectively.
Note 13 - Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The tables below display the changes in Accumulated Other Comprehensive Loss by component for the six months ended June 30, 2023 and 2022.
(Dollars in Millions)
Net Unrealized Losses on Other Investments
Net Unrealized Losses on Investments with an Allowance for Credit Losses
Net Unrecognized Postretirement Benefit CostsGain on Cash Flow HedgeChange in Discount Rate on Future Life Policyholder BenefitsTotal
Balance as of January 1, 2023$(719.4)$(2.2)$(37.2)$2.8 $241.1 (514.9)
Other Comprehensive Income (Loss) Before Reclassifications75.4 1.4 — — (46.7)30.1 
Amounts Reclassified from Accumulated Other Comprehensive Loss Net of Tax (Expense) Benefit of $(1.8), $0.4, $0.3, $0.0, $0.0 and $(1.1)
6.4 (1.5)(0.8)(0.1)— 4.0 
Other Comprehensive Income (Loss) Net of Tax (Expense) Benefit of $(20.4), $(0.4), $0.0, $0.0, $12.5, and $(8.3)
81.8 (0.1)(0.8)(0.1)(46.7)34.1 
Balance as of June 30, 2023$(637.6)$(2.3)$(38.0)$2.7 $194.4 $(480.8)
(Dollars in Millions)
Net Unrealized Gains (Losses) on Other Investments
Net Unrealized Losses on Investments with an Allowance for Credit Losses
Net Unrecognized Postretirement Benefit Costs(Loss) Gain on Cash Flow HedgeChange in Discount Rate on Future Life Policyholder BenefitsTotal
Balance as of January 1, 2022$505.8 $(3.7)$(52.1)$(1.9)$(849.7)$(401.6)
Other Comprehensive (Loss) Income Before Reclassifications(972.0)(0.4)— 4.7 861.1 (106.6)
Amounts Reclassified from Accumulated Other Comprehensive Loss Net of Tax Benefit of $0.2, $0.0, $0.0, $0.0, $0.0 and $0.2
(1.1)— (0.1)— — (1.2)
Other Comprehensive (Loss) Income Net of Tax Benefit (Expense) of $258.6, $0.1, $0.0, $(1.2), $(228.9), and $28.6
(973.1)(0.4)(0.1)4.7 861.1 (107.8)
Balance as of June 30, 2022$(467.3)$(4.1)$(52.2)$2.8 $11.4 $(509.4)
39

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 13 - Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss (Continued)
The tables below display the changes in Accumulated Other Comprehensive Loss by component for the three months ended June 30, 2023 and 2022.
(Dollars in Millions)
Net Unrealized Losses on Other Investments
Net Unrealized Losses on Investments with an Allowance for Credit Losses
Net Unrecognized Postretirement Benefit CostsGain on Cash Flow HedgeChange in Discount Rate on Future Life Policyholder BenefitsTotal
Balance as of March 31, 2023$(572.0)$(2.2)$(37.6)$2.7 $154.4 $(454.7)
Other Comprehensive (Loss) Income Before Reclassifications(72.1)— — — 40.0 (32.1)
Amounts Reclassified from Accumulated Other Comprehensive Loss Net of Tax (Expense) Benefit of $(1.8), $0.0, $0.4, $(0.1), $0.0 and $(1.5)
6.5 (0.1)(0.4)— — 6.0 
Other Comprehensive (Loss) Income Net of Tax Benefit (Expense) of $19.4, $0.0, $0.0, $0.0, $(10.6), and $8.8
(65.6)(0.1)(0.4)— 40.0 (26.1)
Balance as of June 30, 2023$(637.6)$(2.3)$(38.0)$2.7 $194.4 $(480.8)
(Dollars in Millions)
Net Unrealized Losses on Other Investments
Net Unrealized Losses on Investments with an Allowance for Credit Losses
Net Unrecognized Postretirement Benefit CostsGain on Cash Flow HedgeChange in Discount Rate on Future Life Policyholder BenefitsTotal
Balance as of March 31, 2022$(3.5)$(9.5)$(52.1)$2.8 $(405.5)$(467.8)
Other Comprehensive (Loss) Income Before Reclassifications(456.9)5.4 — — 416.9 (34.6)
Amounts Reclassified from Accumulated Other Comprehensive Loss Net of Tax Benefit of $1.7, $0.0,$0.0, $0.0, $0.0, and $1.7
(6.9)— (0.1)— — (7.0)
Other Comprehensive (Loss) Income Net of Tax Benefit (Expense) of $123.4, $(1.5), $0.0, $0.0 $(110.8) and $11.1
(463.8)5.4 (0.1)— 416.9 (41.6)
Balance as of June 30, 2022$(467.3)$(4.1)$(52.2)$2.8 $11.4 $(509.4)
Amounts reclassified from Accumulated Other Comprehensive Loss shown above are reported in Net Loss as follows:
Components of AOCI
Consolidated Statements of Loss Line Item Affected by Reclassifications
Net Unrealized Gains (Losses) on Other Investments and Net Unrealized Gains (Losses) on Investments with an Allowance for Credit Losses
Net Realized Investment (Losses) Gains and Impairment Gains (Losses)
Net Unrecognized Postretirement Benefit CostsPolicyholders’ Benefits and Incurred Losses and Loss Adjustment Expenses, Insurance Expenses, and Interest and Other Expenses
(Loss) Gain on Cash Flow Hedges
Interest and Other Expenses
Change in Discount Rate on Future Life Policyholder BenefitsNot Applicable
40

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 14 - Shareholders’ Equity
Common Stock Repurchases
On May 6, 2020, Kemper’s Board of Directors authorized the repurchase of up to an additional $200.0 million of Kemper’s common stock, in addition to $133.3 million remaining under the August 6, 2014 authorization, bringing the remaining share repurchase authorization to approximately $333.3 million. As of June 30, 2023, the remaining share repurchase authorization was $171.6 million under the repurchase program.
During the six and three months ended June 30, 2023 and 2022, Kemper did not repurchase any shares of its common stock.
Employee Stock Purchase Plan
During the six months ended June 30, 2023 and 2022, the Company issued 44,000 and 48,000 shares under the Kemper Employee Stock Purchase Plan (“ESPP”), respectively, at an average discounted price of $43.28 and $44.15 per share. Compensation costs charged against income were $0.3 million and $0.4 million for the six months ended June 30, 2023 and 2022, respectively.
During the three months ended June 30, 2023 and 2022, the Company issued 26,000 and 26,000 shares under the ESPP at a discounted price of $41.02 and $40.72 per share, respectively. Compensation costs charged against income were $0.2 million for the three months ended June 30, 2023 and 2022, respectively.
Note 15 - Pension Benefits and Postretirement Benefits Other Than Pensions
The Company sponsors a qualified defined benefit pension plan (the “Pension Plan”) that 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 (“ERISA”).
The components of Pension Expense for the Pension Plan for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Interest Cost on Projected Benefit Obligation$6.9 $4.3 $3.5 $2.1 
Expected Return on Plan Assets(6.5)(3.7)(3.2)(1.8)
Amortization of Prior Service Cost0.3 0.3 0.1 0.1 
Amortization of Net Actuarial Loss— 0.9 — 0.5 
Total Pension Expense$0.7 $1.8 $0.4 $0.9 
The Company sponsors two other than pension postretirement benefit (“OPEB”) plans (together the “OPEB Plans”) that together provide medical, dental and/or life insurance benefits to approximately 400 retired and 500 active employees.
41

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 15 - Pension Benefits and Postretirement Benefits Other Than Pensions (Continued)
The components of OPEB Benefit for the OPEB Plans for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Service Cost$0.1 $0.1 $0.1 $— 
Interest Cost on Accumulated Postretirement Benefit Obligation0.2 0.1 0.1 0.1 
Amortization of Prior Service Credit(0.7)(0.7)(0.4)(0.4)
Amortization of Net Gain(0.9)(0.8)(0.5)(0.4)
Total OPEB Benefit$(1.3)$(1.3)$(0.7)$(0.7)
The non-service cost components of the Pension Plan and OPEB Plans are presented within the Interest and Other Expenses line item in the Condensed Consolidated Statements of Loss.
Note 16 - Policyholder Obligations
Policyholder Obligations at June 30, 2023 and December 31, 2022 were as follows:
(Dollars in Millions)Jun 30,
2023		Dec 31,
2022
FHLB Funding Agreements$601.0 $601.0 
Universal Life-type Policyholder Account Balances99.2 100.3 
Total$700.2 $701.3 
FHLB Funding Agreements
Kemper’s subsidiary, United Insurance Company of America (“United Insurance”) has entered into funding agreements with the FHLB of Chicago in exchange for cash, which it uses for spread lending purposes. During the six months ended June 30, 2023, United Insurance received advances of $114.2 million from the FHLB of Chicago and made repayments of $114.2 million under the spread lending program.
When a funding agreement is issued, United Insurance is then required to post collateral in the form of eligible securities including mortgage-backed, government, and agency debt instruments for each of the advances that are entered. The fair value of the collateral pledged must be maintained at certain specified levels above the borrowed amount, which can vary depending on the assets pledged. If the fair value of the collateral declines below these specified levels of the amount borrowed, United Insurance would be required to pledge additional collateral or repay outstanding borrowings. Upon any event of default by United Insurance, the FHLB’s recovery on the collateral is limited to the amount of United Insurance’s liability under the funding agreements to the FHLB of Chicago.
United Insurance’s liability under the funding agreements with the FHLB of Chicago, the amount of collateral pledged under such agreements and FHLB of Chicago common stock owned by United Insurance at June 30, 2023 and December 31, 2022 is presented below.
(Dollars in Millions)Jun 30,
2023		Dec 31,
2022
Liability under Funding Agreements$601.0 $601.0 
Fair Value of Collateral Pledged756.5 744.6 
FHLB of Chicago Common Stock Owned at Cost17.5 17.5 
42

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 16 - Policyholder Obligations (Continued)
Universal Life-type Policyholder Account Balances
The Company’s weighted-average crediting rate for Universal Life-type Policyholder Account Balances was 5.1% as of June 30, 2023 and 2022. Guaranteed minimum benefit amounts in excess of the current account balances for these contracts were $302.8 million and $311.4 million as of June 30, 2023 and December 31, 2022, respectively. The cash surrender value of the Company’s policyholder obligations for these contracts were $98.0 million and $100.0 million as of June 30, 2023 and December 31, 2022, respectively.
Note 17 - Debt
Amended and Extended Credit Agreement and Term Loan Facility
On March 15, 2022, the Company entered into an amended and extended credit agreement. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to $600.0 million and extended the maturity date to March 15, 2027. Furthermore, the amended and extended credit agreement provides for an accordion feature whereby the Company can increase the revolving credit borrowing capacity by an additional $200.0 million for a total maximum capacity of $800.0 million.
Financial covenants within the agreement limit the Company from accessing the maximum capacity. The amount available as of June 30, 2023 was $460.0 million. There were no outstanding borrowings under the credit agreement at either June 30, 2023 or December 31, 2022.
Long-term Debt
The Company designates debt obligations as either short-term or long-term based on maturity date at issuance, or in the case of the 2022 Senior Notes, based on the date of assumption.
Total amortized cost of Long-term Debt outstanding at June 30, 2023 and December 31, 2022 was:
(Dollars in Millions)Jun 30,
2023		Dec 31,
2022
Senior Notes:
    4.350% Senior Notes due February 15, 2025
$449.5 $449.3 
    2.400% Senior Notes due September 30, 2030
396.8 396.6 
    3.800% Senior Notes due February 23, 2032
395.7 395.5 
5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062
146.1 145.5 
Total Long-term Debt Outstanding$1,388.1 $1,386.9 
4.350% Senior Notes Due 2025
Kemper has $450.0 million aggregate principal of 4.350% senior notes due February 15, 2025 (the “2025 Senior Notes”). Kemper initially issued $250.0 million of the notes in February of 2015 and issued an additional $200.0 million of the notes in June of 2017. The additional notes are fungible with the initial notes issued in 2015, and together are treated as part of a single series for all purposes under the indenture governing the 2025 Senior Notes. The 2025 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time at Kemper’s option at specified redemption prices.
2.400% Senior Notes Due 2030
Kemper has $400.0 million aggregate principal of 2.400% senior notes due September 30, 2030 (the “2030 Senior Notes”). The net proceeds of issuance were $395.8 million, net of discount and transaction costs for an effective yield of 2.52%. The 2030 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time, at Kemper’s option, at specified redemption prices.
43

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 17 - Debt (Continued)
3.800% Senior Notes Due 2032
On February 15, 2022, Kemper offered and sold $400.0 million aggregate principal of 3.800% senior notes due February 23, 2032 (the “2032 Senior Notes”). The net proceeds of issuance were $395.1 million, net of discount and transaction costs for an effective yield of 3.950%. The 2032 Senior Notes are unsecured and may be redeemed in whole at any time or in part from time to time, at Kemper’s option, at specified redemption prices.
In anticipation of the issuance of the 2032 Senior Notes and for risk management purposes, the Company entered into a derivative transaction to hedge the risk of changes in the debt cash flows attributable to changes in the benchmark U.S. Treasury interest rate during the period leading up to the debt issuance (“Treasury Lock”). The effective portion of the gain on the derivative instrument upon discontinuance was $5.9 million before taxes, and is reported as a component of Accumulated Other Comprehensive Income (Loss). Beginning with the issuance of the 2032 Senior Notes described in the preceding paragraph, such gain is being amortized into earnings and reported in Interest and Other Expenses in the same periods that the hedged items affect earnings. Amortization, reported in Interest and Other Expenses, was $0.3 million for the six months ended June 30, 2023. The Company expects to reclassify $0.5 million of net gain on derivative instruments from AOCI to earnings for the twelve months ended June 30, 2024 as interest expense on the debt is recognized.
5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062
On March 10, 2022, Kemper issued $150.0 million aggregate principal amount of 5.875% Fixed-Rate Reset Junior Subordinated Debentures due March 15, 2062 (the “2062 Junior Debentures”). The net proceeds from issuance were $144.7 million, net of discount and transaction costs. The 2062 Junior Debentures will bear interest from and including the date of original issue to, but excluding, March 15, 2027 (the “First Reset Date”) at the fixed rate of 5.875% per annum. The interest
rate on the First Reset Date, and subsequent Reset Dates, will be equal to the Five-Year Treasury Rate as of the most recent Reset Date plus 4.140% to be reset on each Reset Date. Interest is due quarterly in arrears beginning on June 15, 2022. The Company has the option to defer interest payments for one or more optional deferral periods of up to five consecutive years,
provided that no optional deferral period shall extend beyond March 15, 2062, or any earlier accelerated maturity date arising from an event of default or any earlier redemption of the 2062 Junior Debentures.
The 2062 Junior Debentures are unsecured and may be redeemed in whole or in part on the First Reset Date or any time thereafter, at a redemption price equal to the principal amount of the debentures being redeemed plus any accrued and unpaid interest.

Short-term Debt
Kemper’s subsidiaries, United Insurance, Trinity Universal Insurance Company (“Trinity”) and American Access Casualty Company (“AAC”), are members of the FHLBs of Chicago, Dallas and Chicago respectively. Alliance United Insurance Company (“Alliance”) was a member of the FHLB of San Francisco until it surrendered all California licenses on January 30, 2023 and ceased to exist as an insurance company. As a requirement of membership in the FHLBs, United Insurance, Trinity, and AAC maintain a certain level of investment in FHLB stock. The Company periodically uses short-term FHLB borrowings for a combination of cash management and risk management purposes, in addition to long-term FHLB borrowings for spread lending purposes. There were no short-term debt advances from the FHLBs of Chicago or Dallas outstanding at June 30, 2023 or December 31, 2022. For information on United Insurance’s funding agreement with the FHLB of Chicago in connection with the spread lending program, see Note 16, “Policyholder Obligations,” to the Condensed Consolidated Financial Statements.

Interest Expense and Interest Paid
Interest Expense, including facility fees, accretion of discount, amortization of premium and amortization of issuance costs, was $28.1 million and $14.0 million for the six and three months ended June 30, 2023, respectively. Interest paid, including facility fees, was $27.3 million and $2.5 million for the six and three months ended June 30, 2023, respectively. Interest Expense, including facility fees, accretion of discount and amortization of issuance costs, was $26.7 million and $14.0 million for the six and three months ended June 30, 2022, respectively. Interest paid, including facility fees, was $24.4 million and $2.4 million for the six and three months ended June 30, 2022, respectively.
44

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 18 - Leases
The Company leases certain office space under non-cancelable operating leases, with initial terms typically ranging from one to fifteen years, along with options that permit renewals for additional periods. The Company also leases certain equipment under non-cancelable operating leases, with initial terms typically ranging from one to five years. Minimum rent is expensed on a straight-line basis over the term of the lease.
The following table presents operating lease right-of-use assets and lease liabilities.
(Dollars in Millions)Jun 30,
2023		Dec 31,
2022
Operating Lease Right-of-Use Assets$37.5 $45.1 
Operating Lease Liabilities61.8 72.6 
Lease expenses are primarily included in Insurance Expenses in the Condensed Consolidated Statements of Loss. Additional information regarding the Company’s lease cost is presented below.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Lease Cost:
Operating Lease Cost$7.9 $11.4 $3.8 $5.8 
Variable Lease Cost2.2 0.1 2.1 — 
Short-Term Lease Cost1
0.8 2.2 0.8 1.0 
Total Lease Expense$10.9 $13.7 $6.7 $6.8 
Less: Sub-Lease Income— 0.1 — — 
Total Lease Cost$10.9 $13.6 $6.7 $6.8 
1 Leases with an initial term of twelve months or less are not recorded on the Condensed Consolidated Balance Sheets.
Other Information on Operating Leases
Supplemental cash flow information related to the Company’s operating leases for the six months ended June 30, 2023 and 2022 is as follows:
 Six Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022
Operating Cash Flows from Operating Lease (Fixed Payments)$13.4 $12.7 
Operating Cash Flows from Operating Lease (Liability Reduction)12.2 11.3 
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities2.4 6.6 
As of June 30, 2023, the Company does not have any finance leases.
Significant judgments and assumptions for determining lease asset and liability at June 30, 2023 and 2022 are presented below.
Six Months Ended
Jun 30,
2023		Jun 30,
2022
Weighted-average Remaining Lease Term - Finance LeasesN/A0.6 years
Weighted-average Remaining Lease Term - Operating Leases5.6 years5.7 years
Weighted-average Discount Rate - Finance LeasesN/A0.6 %
Weighted-average Discount Rate - Operating Leases3.7 %3.4 %
Most of the Company’s leases do not provide an implicit rate. Accordingly, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of its lease payments.
45

KEMPER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 18 - Leases (Continued)
Future minimum lease payments under operating leases at June 30, 2023 are presented below. There are no significant future minimum lease payments under finance leases.
(Dollars in Millions)Jun 30, 2023
Remainder of 2023
$12.1 
202418.5 
202513.3 
20266.7 
20274.6 
2028 and Thereafter18.4 
Total Future Payments$73.6 
Less Imputed Interest11.8 
Present Value of Minimum Lease Payments$61.8 
Note 19 - Income Taxes
The statute of limitations related to Kemper and its eligible subsidiaries’ consolidated Federal income tax returns is closed for all tax years up to and including 2011 as well as 2018. As a result of the Company filing amended federal income tax returns, tax years 2012 and 2013 are under limited examination with respect to carry-back adjustments associated with the amended returns. The statute of limitations related to tax years 2014, 2015, 2016 and 2017 has been extended to December 31, 2023. Tax years 2019, 2020 and 2021 are subject to a statute of three years from the extended due dates of October 15, 2020, 2021, and 2022, respectively.

The expiration of the statute of limitations related to the various state income tax returns that Kemper and its subsidiaries file varies by state.

There were no Unrecognized Tax Benefits at June 30, 2023 or December 31, 2022. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in Income Tax Benefit.

For the six months ended June 30, 2023 and 2022, federal income tax refunds received, net of income taxes paid, were $114.6 million and $0.3 million, respectively.

For the six months ended June 30, 2023, state income taxes paid, net of refunds received, were $0.1 million. For the six months ended June 30, 2022, state income taxes paid, net of refunds received, were negligible. There were no foreign income taxes paid or refunds received for the six months ended June 30, 2023 and June 30, 2022, respectively.

Note 20 - Commitments and Contingencies
In the ordinary course of its businesses, the Company is involved in legal proceedings including lawsuits, arbitration, regulatory examinations, audits and inquiries. Based on currently available information, the Company does not believe that it is reasonably possible that any of its pending legal proceedings will have a material effect on the Company’s Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements.
Note 21 - Subsequent Events
The Company is in the process of terminating its defined benefit pension plan, which is expected to be completed during the third quarter of 2023. The termination will fully relieve the Company of all obligations related to the defined benefit pension plan. Accordingly, the Company estimates that net income for the third quarter of 2023 will include an after-tax settlement charge to net income (loss) ranging from $50 million to $70 million to primarily recognize the remaining unamortized net unrecognized postretirement benefit costs related to the settled obligations, with a corresponding offset to AOCI.
46

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Summary of Results
As discussed in Note 1, “Basis of Presentation and Accounting Policies”, to the Condensed Consolidated Financial Statements effective January 1, 2023, the Company adopted Accounting Standards Update No. 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts and related amendments” (“LDTI”) under the modified retrospective method. Prior period amounts in the financial statements have been adjusted to reflect application of the new guidance. Related financial data shown in Management's Discussion and Analysis of Financial Condition and Results of Operations also have been adjusted.

Net Loss was $177.2 million ($(2.77) per unrestricted common share) for the six months ended June 30, 2023, compared to Net Loss of $158.5 million ($(2.49) per unrestricted common share) for the same period in 2022.

Net Loss was $97.1 million ($(1.52) per unrestricted common share) for the three months ended June 30, 2023, compared to Net Loss of $72.2 million ($(1.13) per unrestricted common share) for the same period in 2022.

A reconciliation of Net Loss to Adjusted Consolidated Net Operating Loss (a non-GAAP financial measure) for the six and three months ended June 30, 2023 and 2022 is presented below.
 Six Months EndedThree Months Ended
(Dollars in Millions and Net of Income Taxes)Jun 30,
2023		Jun 30,
2022		ChangeJun 30,
2023		Jun 30,
2022		Change
Net Loss$(177.2)$(158.5)$(18.7)$(97.1)$(72.2)$(24.9)
Less:
Income (Loss) from Change in Fair Value of Equity and Convertible Securities3.2 (54.3)57.5 1.9 (32.0)33.9 
Net Realized Investment (Losses) Gains(7.4)9.9 (17.3)(12.5)8.7 (21.2)
Impairment Gains (Losses)0.9 (10.9)11.8 (0.8)(3.9)3.1 
Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs(46.3)(11.5)(34.8)(23.3)(7.8)(15.5)
Debt Extinguishment, Pension, and Other Charges— (2.9)2.9 — — — 
Goodwill Impairment Charge(45.5)— (45.5)(45.5)— (45.5)
Adjusted Consolidated Net Operating Loss$(82.1)$(88.8)$6.7 $(16.9)$(37.2)$20.3 
Components of Adjusted Consolidated Net Operating Loss:
Segment Net Operating (Loss) Income:
Specialty Property & Casualty Insurance$(69.2)$(83.6)$14.4 $(10.8)$(38.9)$28.1 
Preferred Property & Casualty Insurance(12.2)(22.9)10.7 (2.7)(16.8)14.1 
Life & Health Insurance22.1 31.8 (9.7)8.9 20.2 (11.3)
Segment Net Operating Loss(59.3)(74.7)15.4 (4.6)(35.5)30.9 
Corporate and Other Net Operating Loss From:
Other(22.8)(14.1)(8.7)(12.3)(1.7)(10.6)
Corporate and Other Net Operating Loss(22.8)(14.1)(8.7)(12.3)(1.7)(10.6)
Adjusted Consolidated Net Operating Loss$(82.1)$(88.8)$6.7 $(16.9)$(37.2)$20.3 
Net Loss
Net Loss increased by $18.7 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to the $45.5 million after-tax charge from the impairment of the goodwill asset related to the Preferred Property & Casualty Insurance segment, increased Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs, partially offset by favorable changes in the Change in Fair Value of Equity and Convertible Securities from six months ended June 30, 2022. Adjusted Consolidated Net Operating Loss decreased by $6.7 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to a reduction in Segment Insurance Net Operating Losses in the Specialty and Preferred Property & Casualty Segments, partially offset by lower net income in the Life and Health Insurance Segment and higher net losses from Corporate and Other.
47

Summary of Results (Continued)

Net Loss increased by $24.9 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to the Goodwill Impairment Charge, as described above, Net Realized Losses on Investments, increased Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs, partially offset by favorable changes in the Change in Fair Value of Equity and Convertible Securities and a reduction in Adjusted Consolidated Net Operating Loss. Adjusted Consolidated Net Operating Loss decreased by $20.3 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to a reduction in Segment Insurance Net Operating Losses in the Specialty and Preferred Property & Casualty Segments, partially offset by lower net income in the Life and Health Insurance Segment and higher net losses from Corporate and Other.

See “Specialty Property & Casualty Insurance,” “Preferred Property & Casualty Insurance” and “Life & Health Insurance,” for discussion of each respective segment’s results. Corporate and Other Net Operating Loss increased for the six and three months ended June 30, 2023 compared to the same periods in 2022, due primarily to a decrease in Net Investment Income.

Revenues
Earned Premiums were $2,347.8 million for the six months ended June 30, 2023, compared to $2,657.6 million for the same period in 2022, a decrease of $309.8 million. Earned Premiums in the Specialty Property & Casualty Insurance segment decreased by $188.8 million for the six months ended June 30, 2023, compared to the same period in 2022. Earned Premiums in the Preferred Property & Casualty Insurance segments decreased by $35.7 million for the six months ended June 30, 2023, compared to the same period in 2022. Earned premiums in the Life & Health Insurance segments decreased by $85.3 million for the six months ended June 30, 2023, compared to the same period in 2022. See “Specialty Property & Casualty Insurance”, “Preferred Property & Casualty Insurance,” and “ Life & Health Insurance” for discussion of the changes in each segment’s earned premiums.
Earned Premiums were $1,166.9 million for the three months ended June 30, 2023, compared to $1,337.6 million for the same period in 2022, a decrease of $170.7 million. Earned Premiums in the Specialty Property & Casualty Insurance segment decreased by $111.4 million for the three months ended June 30, 2023, compared to the same period in 2022. Earned Premiums in the Preferred Property & Casualty Insurance segments decreased by $17.5 million for the three months ended June 30, 2023, compared to the same period in 2022. Earned premiums in the Life & Health Insurance segments decreased by $41.8 million for the three months ended June 30, 2023, compared to the same period in 2022. See “Specialty Property & Casualty Insurance”, “Preferred Property & Casualty Insurance,” and “ Life & Health Insurance” for discussion of the changes in each segment’s earned premiums.
Net Investment Income decreased by $10.4 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to lower returns on Equity Method Limited Liability Investments and Equity Securities offset by higher rate earned on Fixed Income Securities.
Net Investment Income decreased by $12.2 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to lower returns on Equity Securities and Equity Method Limited Liability Investments offset by higher rate earned on Fixed Income Securities.
Gain from the Change in Value of Alternative Energy Partnership Investments was $1.5 million for the six months ended June 30, 2023, compared to loss of $21.6 million for the same period 2022. Tax expense related to the Alternative Energy Partnership Investments were $0.4 million compared to tax benefit of $8.1 million for the six months ended June 30, 2023 and 2022, respectively. This resulted in net income of $1.1 million and net loss of $13.5 million attributable to Alternative Energy Partnership Investments for the six months ended June 30, 2023 and 2022, respectively.
Gain from the Change in Value of Alternative Energy Partnership Investments was $0.8 million for the three months ended June 30, 2023, compared to loss of $4.9 million for the same period 2022. Tax expense related to the Alternative Energy Partnership Investments were $0.1 million, compared to tax benefit of $1.1 million for the three months ended June 30, 2023 and 2022, respectively. This resulted in net income of $0.7 million and a net loss of $3.8 million attributable to Alternative Energy Partnership Investments for the three months ended June 30, 2023 and 2022, respectively.
Other Income was $2.9 million for the six months ended June 30, 2023, compared to Other Income of $3.3 million for the same period in 2022.
Other Income was $1.7 million for the three months ended June 30, 2023, compared to Other Income of $0.9 million for the same period in 2022.
48

Summary of Results (Continued)
Net Realized Investment Losses were $8.0 million for the six months ended June 30, 2023, compared to Net Realized Investment Gains of $12.5 million for the same period in 2022.
Net Realized Investment Losses were $14.4 million for the three months ended June 30, 2023, compared to Net Realized Investment Gains of $11.0 million for the same period in 2022.
Impairment Gains were $1.2 million for the six months ended June 30, 2023, compared to Impairment Losses of $13.8 million for the same period in 2022.
Impairment Losses were $0.9 million for the three months ended June 30, 2023, compared to Impairment Losses of $4.9 million for the same period in 2022.
See “Investment Results,” under the sub-captions “Net Realized (Losses) Gains on Sales of Investment” and “Impairment Gains (Losses)” for additional discussion. The Company cannot predict if or when similar investment gains or losses may occur in the future.
The Company is in the process of terminating its defined benefit pension plan which is expected to be completed during the third quarter of 2023. The termination will fully relieve the Company of all obligations related to the defined benefit pension
plan. Accordingly, the Company estimates that net income for the third quarter of 2023 will include an after-tax settlement
charge to net income (loss) that will be excluded from adjusted consolidated net operating income (loss) ranging from $50
million to $70 million to primarily recognize the remaining unamortized net unrecognized postretirement benefit costs related
to the settled obligations, with a corresponding offset to AOCI.

Non-GAAP Financial Measures
Underlying Losses and LAE and Underlying Combined Ratio
The following discussion of segment results uses the non-GAAP financial measures of (i) Underlying Losses and LAE and (ii) Underlying Combined Ratio. Underlying Losses and LAE (also referred to in the discussion as “Current Year Non-catastrophe Losses and LAE”) exclude the impact of catastrophe losses and loss and LAE reserve development from prior years from the Company’s Incurred Losses and LAE, which is the most directly comparable GAAP financial measure.
The Underlying Combined Ratio is computed by adding the Current Year Non-catastrophe Losses and LAE Ratio with the Insurance Expense Ratio. The most directly comparable GAAP financial measure is the Combined Ratio, which is computed by adding Total Incurred Losses and LAE Ratio, including the impact of catastrophe losses and loss and LAE reserve development from prior years, with the Insurance Expense Ratio.
The Company believes Underlying Losses and LAE and the Underlying Combined Ratio are useful to investors and uses these financial measures to reveal the trends in the Company’s Property & Casualty Insurance segment that may be obscured by catastrophe losses and prior-year reserve development. These catastrophe losses may cause the Company’s loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude and can have a significant impact on incurred losses and LAE and the Combined Ratio. Prior-year reserve developments are caused by unexpected loss development on historical reserves. Because reserve development relates to the re-estimation of losses from earlier periods, it has no bearing on the performance of the Company’s insurance products in the current period. The Company believes it is useful for investors to evaluate these components separately and in the aggregate when reviewing the Company’s underwriting performance.
Adjusted Consolidated Net Operating Loss
Adjusted Consolidated Net Operating Loss is an after-tax, non-GAAP financial measure and is computed by excluding from Net Loss the after-tax impact of
(i) Income (Loss) from Change in Fair Value of Equity and Convertible Securities;
(ii) Net Realized Investment (Losses) Gains;
(iii) Impairment Gains (Losses);
(iv) Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs;
(v) Debt Extinguishment, Pension and Other Charges;
49

Non-GAAP Financial Measures (Continued)
(vi) Goodwill Impairment Charges; and
(vii) Significant non-recurring or infrequent items that may not be indicative of ongoing operations
Significant non-recurring items are excluded when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, and (b) there has been no similar charge or gain within the prior two years. The most directly comparable GAAP financial measure is Net Loss. There were no applicable significant non-recurring items that the Company excluded from the calculation of Adjusted Consolidated Net Operating Loss for the six and three months ended June 30, 2023 or 2022.
The Company believes that Adjusted Consolidated Net Operating Loss provides investors with a valuable measure of its ongoing performance because it reveals underlying operational performance trends that otherwise might be less apparent if the items were not excluded. Income (Loss) from Change in Fair Value of Equity and Convertible Securities, Net Realized Investment (Losses) Gains and Impairment Gains (Losses) related to investments included in the Company’s results may vary significantly between periods and are generally driven by business decisions and external economic developments such as capital market conditions that impact the values of the Company’s investments, the timing of which is unrelated to the insurance underwriting process. Acquisition and Disposition Related Transaction Costs, Integration Costs, and Restructuring and Other Costs may vary significantly between periods and are generally driven by the timing of acquisitions and business decisions which are unrelated to the insurance underwriting process. Debt Extinguishment, Pension and Other Charges relate to (i) loss from early extinguishment of debt, which is driven by the Company’s financing and refinancing decisions and capital needs, as well as external economic developments such as debt market conditions, the timing of which is unrelated to the insurance underwriting process; (ii) settlement of pension plan obligations which are business decisions made by the Company, the timing of which is unrelated to the underwriting process; and (iii) other charges that are non-standard, not part of the ordinary course of business, and unrelated to the insurance underwriting process. Goodwill impairment charges are excluded because they are infrequent and non-recurring charges. Significant non-recurring items are excluded because, by their nature, they are not indicative of the Company’s business or economic trends.

The preceding non-GAAP financial measures should not be considered a substitute for the comparable GAAP financial measures, as they do not fully recognize the overall profitability of the Company’s businesses.
50

Specialty Property & Casualty Insurance
Selected financial information for the Specialty Property & Casualty Insurance segment follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Net Premiums Written$1,852.7 $2,043.6 $830.6 $1,019.9 
Earned Premiums$1,876.5 $2,065.3 $932.3 $1,043.7 
Net Investment Income83.0 68.9 44.5 34.0 
Change in Value of Alternative Energy Partnership Investments0.8 (10.9)0.4 (2.5)
Other Income1.6 2.7 0.7 1.0 
Total Revenues1,961.9 2,126.0 977.9 1,076.2 
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE1,589.3 1,841.9 763.9 930.2 
Catastrophe Losses and LAE25.8 8.3 17.4 6.2 
Prior Years:
Non-catastrophe Losses and LAE56.6 (18.2)25.0 (14.4)
Catastrophe Losses and LAE(1.4)0.5 (0.9)(0.2)
Total Incurred Losses and LAE1,670.3 1,832.5 805.4 921.8 
Insurance Expenses381.3 404.7 187.5 205.4 
Operating Loss(89.7)(111.2)(15.0)(51.0)
Income Tax Benefit20.5 27.6 4.2 12.1 
Segment Net Operating Loss$(69.2)$(83.6)$(10.8)$(38.9)
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio84.7 %89.2 %81.9 %89.1 %
Current Year Catastrophe Losses and LAE Ratio1.4 0.4 1.9 0.6 
Prior Years Non-catastrophe Losses and LAE Ratio3.0 (0.9)2.7 (1.4)
Prior Years Catastrophe Losses and LAE Ratio(0.1)— (0.1)— 
Total Incurred Loss and LAE Ratio89.0 88.7 86.4 88.3 
Insurance Expense Ratio20.3 19.6 20.1 19.7 
Combined Ratio109.3 %108.3 %106.5 %108.0 %
Underlying Combined Ratio
Current Year Non-catastrophe Losses and LAE Ratio84.7 %89.2 %81.9 %89.1 %
Insurance Expense Ratio20.3 19.6 20.1 19.7 
Underlying Combined Ratio105.0 %108.8 %102.0 %108.8 %
Non-GAAP Measure Reconciliation
Combined Ratio109.3 %108.3 %106.5 %108.0 %
Less:
Current Year Catastrophe Losses and LAE Ratio1.4 0.4 1.9 0.6 
Prior Years Non-catastrophe Losses and LAE Ratio3.0 (0.9)2.7 (1.4)
Prior Years Catastrophe Losses and LAE Ratio(0.1)— (0.1)— 
Underlying Combined Ratio105.0 %108.8 %102.0 %108.8 %
    
51

Specialty Property & Casualty Insurance (Continued)
Insurance Reserves
(Dollars in Millions)Jun 30,
2023		Dec 31,
2022
Insurance Reserves:
Personal Automobile$1,741.4 $1,875.8 
Commercial Automobile530.8 445.3 
Insurance Reserves$2,272.2 $2,321.1 
Insurance Reserves:
Loss and Allocated LAE Reserves:
Case and Allocated LAE$1,061.7 $1,099.9 
Incurred But Not Reported1,036.7 1,041.2 
Total Loss and LAE Reserves2,098.4 2,141.1 
Unallocated LAE Reserves173.8 180.0 
Insurance Reserves$2,272.2 $2,321.1 
See “Critical Accounting Estimates,” of the 2022 Annual Report for additional information pertaining to the Company’s process of estimating property and casualty insurance reserves for losses and LAE, development of property and casualty insurance losses and LAE from prior accident years, also referred to as “reserve development” in the discussion of segment results, estimated variability of property and casualty insurance reserves for losses and LAE, and a discussion of some of the variables that may impact development of property and casualty insurance losses and LAE and the estimated variability of property and casualty insurance reserves for losses and LAE.
Overall
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
The Specialty Property & Casualty Insurance segment reported a Segment Net Operating Loss of $69.2 million for the six months ended June 30, 2023, compared to Segment Net Operating Loss of $83.6 million for the same period in 2022. Segment Net Operating Loss improved by $14.4 million mostly driven by a $31.4 million improvement from personal automobile insurance due primarily to higher average earned premiums per exposure resulting from rate increases and lower underlying claim frequency that were partially offset by unfavorable prior year loss and LAE development. The improvement in segment net operating loss was offset by a $17.0 million decrease in net income from our commercial automobile insurance business due primarily to an increase in the underlying loss ratio from higher claim frequency partially offset by higher average earned premium per exposure.

Earned Premiums in the Specialty Property & Casualty Insurance segment decreased by $188.8 million for the six months ended June 30, 2023, compared to the same period in 2022, due to a decrease in new business resulting from targeted underwriting actions to improve profitability, partially offset by higher average earned premium per exposure from rate increases.

Net Investment Income in the Specialty Property & Casualty Insurance segment increased by $14.1 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to higher rates on Fixed Income Securities offset by lower returns on Equity Method Limited Liability Investments and Equity Securities.

Income related to Changes in Value of Alternative Energy Partnership Investments was $0.8 million for the six months ended June 30, 2023, compared to loss of $10.9 million for the same period in 2022. Tax expenses related to the Alternative Energy Partnership Investments were $0.2 million for the six months ended June 30, 2023, compared to benefits of $4.1 million for the six months ended June 30, 2022. This resulted in net income of $0.6 million and net loss of $6.8 million attributable to Alternative Energy Partnership Investments for the six months ended June 30, 2023 and 2022, respectively.

Underlying losses and LAE as a percentage of earned premiums were 84.7% for the six months ended June 30, 2023, an improvement of 4.5 percentage points, compared to the same period in 2022, driven by higher average earned premium per exposure resulting from rate increases offset mostly by higher claims frequency from commercial automobile insurance. Underlying losses and LAE exclude the impact of catastrophes and loss and LAE reserve development. Adverse loss and LAE
52

Specialty Property & Casualty Insurance (Continued)
reserve development (including catastrophe reserve development) was $55.2 million for the six months ended June 30, 2023, compared to favorable development of $17.7 million for the same period in 2022. Catastrophe losses and LAE (excluding reserve development) were $25.8 million for the six months ended June 30, 2023 compared to $8.3 million for the same period in 2022, a deterioration of $17.5 million.
Insurance Expenses were $381.3 million, or 20.3% of earned premiums, for the six months ended June 30, 2023, an increase of 0.7 percent compared to the same period in 2022.
The Specialty Property & Casualty Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investments in Company-Owned Life Insurance, tax-exempt investment income and dividends received deductions.
Three Months Ended June 30, 2023 Compared to the Same Period in 2022
The Specialty Property & Casualty Insurance segment reported a Segment Net Operating Loss of $10.8 million for the three months ended June 30, 2023, compared to a Segment Net Operating Loss of $38.9 million for the same period in 2022. Segment Net Operating Loss improved by $28.1 million mostly driven by a $30.7 million improvement from personal automobile insurance due primarily to higher average earned premiums per exposure resulting from rate increases and lower underlying claim frequency that were partially offset by unfavorable prior year loss and LAE development and elevated catastrophe losses and LAE.

Earned Premiums in the Specialty Property & Casualty Insurance segment decreased by $111.4 million for the three months ended June 30, 2023, compared to the same period in 2022, due to a decrease in new business resulting from targeted underwriting actions to improve profitability, partially offset by higher average earned premium per exposure from rate increases.

Net Investment Income in the Specialty Property & Casualty Insurance segment increased by $10.5 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to higher rates on Fixed Income Securities offset by lower returns on Equity Securities.
Underlying losses and LAE as a percentage of earned premiums were 81.9% for the three months ended June 30, 2023, an improvement of 7.2 percentage points, compared to the same period in 2022, driven by personal automobile insurance due primarily to higher average earned premiums per exposure resulting from rate increases that were offset by unfavorable prior year loss and LAE development. Underlying losses and LAE exclude the impact of catastrophes and loss and LAE reserve development. Adverse loss and LAE reserve development (including catastrophe reserve development) was $24.1 million for the three months ended June 30, 2023, compared to favorable development of $14.6 million for the same period in 2022. Catastrophe losses and LAE (excluding reserve development) were $17.4 million for the three months ended June 30, 2023, compared to $6.2 million for the same period in 2022, an increase of $11.2 million.
Insurance Expenses were $187.5 million, or 20.1% of earned premiums, for the three months ended June 30, 2023, an increase of 0.4 percentage points compared to the same period in 2022.

The Specialty Property & Casualty Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investments in Company-Owned Life Insurance, tax-exempt investment income and dividends received deductions.
53

Specialty Property & Casualty Insurance (Continued)
Specialty Personal Automobile Insurance
Selected financial information for the personal automobile insurance product line follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Net Premiums Written$1,529.8 $1,737.1 $687.4 $852.3 
Earned Premiums$1,554.5 $1,807.5 $766.6 $905.8 
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE$1,336.3 $1,656.3 $638.7 $828.6 
Catastrophe Losses and LAE22.7 7.8 15.0 5.8 
Prior Years:
Non-catastrophe Losses and LAE41.4 (25.5)18.0 (16.5)
Catastrophe Losses and LAE(1.4)0.5 (0.9)(0.2)
Total Incurred Losses and LAE$1,399.0 $1,639.1 $670.8 $817.7 
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio85.9 %91.7 %83.3 %91.5 %
Current Year Catastrophe Losses and LAE Ratio1.5 0.4 2.0 0.6 
Prior Years Non-catastrophe Losses and LAE Ratio2.7 (1.4)2.3 (1.8)
Prior Years Catastrophe Losses and LAE Ratio(0.1)— (0.1)— 
Total Incurred Loss and LAE Ratio90.0 %90.7 %87.5 %90.3 %
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from personal automobile insurance decreased by $253.0 million for the six months ended June 30, 2023, compared to the same period in 2022, due to a decrease in new business driven by targeted underwriting actions to improve profitability, partially offset by higher average earned premium per exposure resulting from rate increases. Incurred losses and LAE were $1,399.0 million, or 90.0% of earned premiums for the six months ended June 30, 2023, compared to $1,639.1 million, or 90.7% of earned premiums, for the same period in 2022. Incurred losses and LAE as a percentage of earned premiums decreased due to improvement in underlying losses and LAE as a percentage of earned premium driven by higher average earned premiums per exposure and underwriting actions that drove a lower frequency of claims, partially offset by adverse loss and LAE development. Underlying losses and LAE as a percentage of related earned premiums were 85.9% for the six months ended June 30, 2023, compared to 91.7% for the same period in 2022, an improvement of 5.8 points. Adverse loss and LAE reserve development was $40.0 million for the six months ended June 30, 2023, compared to favorable development of $25.0 million for the same period in 2022. Catastrophe losses and LAE (excluding reserve development) were $22.7 million for the six months ended June 30, 2023, primarily driven by multiple California weather events in the first quarter of 2023 and numerous rain and hail events in the second quarter of 2023, compared to $7.8 million for the same period in 2022.

Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from personal automobile insurance decreased by $139.2 million for the three months ended June 30, 2023, compared to the same period in 2022, due to a decrease in new business driven by targeted underwriting actions to improve profitability, partially offset by higher average earned premium per exposure resulting from rate increases. Incurred losses and LAE were $670.8 million, or 87.5% of earned premiums for the three months ended June 30, 2023, compared to $817.7 million, or 90.3% of earned premiums, for the same period in 2022. Incurred losses and LAE as a percentage of earned premiums decreased due primarily to improvement in underlying losses and LAE as a percentage of earned premium, partially offset by increases in catastrophe losses and LAE and prior year reserve development. Underlying losses and LAE as a percentage of related earned premiums were 83.3% for the three months ended June 30, 2023, compared to 91.5% for the same period in 2022, an improvement of 8.2 points driven by higher average earned premiums per exposure and underwriting actions drove a lower frequency of claims. Adverse loss and LAE reserve development was $17.1 million for the three months ended June 30, 2023, compared to favorable development of $16.7 million for the same period in 2022. Catastrophe losses and LAE (excluding reserve development) were $15.0 million for the three months ended June 30, 2023, driven by multiple rain and hail events, compared to $5.8 million for the same period in 2022.

54

Specialty Property & Casualty Insurance (Continued)
Commercial Automobile Insurance
Selected financial information for the commercial automobile insurance product line follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Net Premiums Written$322.9 $306.5 $143.2 $167.6 
Earned Premiums$322.0 $257.8 $165.7 $137.9 
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE$253.0 $185.6 $125.2 $101.6 
Catastrophe Losses and LAE3.1 0.5 2.4 0.4 
Prior Years:
Non-catastrophe Losses and LAE15.2 7.3 7.0 2.1 
Catastrophe Losses and LAE— — — — 
Total Incurred Losses and LAE$271.3 $193.4 $134.6 $104.1 
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio78.6 %72.0 %75.6 %73.7 %
Current Year Catastrophe Losses and LAE Ratio1.0 0.2 1.4 0.3 
Prior Years Non-catastrophe Losses and LAE Ratio4.7 2.8 4.2 1.5 
Prior Years Catastrophe Losses and LAE Ratio— — — — 
Total Incurred Loss and LAE Ratio84.3 %75.0 %81.2 %75.5 %
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from commercial automobile insurance increased by $64.2 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to higher volume and higher average earned premium per exposure. Incurred losses and LAE were $271.3 million, or 84.3% of earned premiums in 2023, compared to $193.4 million, or 75.0% of earned premiums in 2022. Incurred losses and LAE as a percentage of earned premiums increased due primarily to a deterioration in underlying losses and LAE as a percentage of earned premiums, as well as higher levels of adverse loss and LAE reserve development. Underlying losses and LAE as a percentage of earned premiums were 78.6% for the six months ended June 30, 2023, compared to 72.0% during the same time period in 2022, a deterioration of 6.6 percentage points due primarily to a higher frequency of bodily injury claims and higher severity trends from rising inflation and supply chain constraints. Adverse loss and LAE reserve development was $15.2 million for the six months ended June 30, 2023, compared to adverse development of $7.3 million for the same period in 2022.
Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from commercial automobile insurance increased by $27.8 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to higher volume and higher average earned premium per exposure. Incurred losses and LAE were $134.6 million, or 81.2% of earned premiums in 2023, compared to $104.1 million, or 75.5% of earned premiums in 2022. Incurred losses and LAE as a percentage of earned premiums increased due primarily to higher underlying losses and LAE as a percentage of earned premiums, as well as higher levels of adverse loss and LAE reserve development. Underlying losses and LAE as a percentage of earned premiums were 75.6% in the three months ended June 30, 2023, compared to 73.7% during the same time period in 2022, a deterioration of 1.9 percentage points due primarily to a higher frequency of bodily injury claims and higher severity trends from rising inflation and supply chain constraints. Adverse loss and LAE reserve development was $7.0 million for the three months ended June 30, 2023, compared to adverse development of $2.1 million for the same period in 2022.
55

Preferred Property & Casualty Insurance
Selected financial information for the Preferred Property & Casualty Insurance segment follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Net Premiums Written$254.2 $278.7 $130.2 $141.3 
Earned Premiums$269.8 $305.5 $132.4 $149.9 
Net Investment Income23.6 24.4 13.1 11.9 
Changes in Value of Alternative Energy Partnership Investments0.3 (5.0)0.2 (1.1)
Total Revenues293.7 324.9 145.7 160.7 
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE178.3 222.7 87.9 110.5 
Catastrophe Losses and LAE38.2 34.9 21.2 23.5 
Prior Years:
Non-catastrophe Losses and LAE14.2 3.9 7.3 1.8 
Catastrophe Losses and LAE(2.7)(4.0)(5.6)(0.8)
Total Incurred Losses and LAE228.0 257.5 110.8 135.0 
Insurance Expenses81.6 98.5 38.6 47.3 
Operating Loss(15.9)(31.1)(3.7)(21.6)
Income Tax Benefit3.7 8.2 1.0 4.8 
Segment Net Operating Loss$(12.2)$(22.9)$(2.7)$(16.8)
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio66.0 %72.9 %66.4 %73.7 %
Current Year Catastrophe Losses and LAE Ratio14.2 11.4 16.0 15.7 
Prior Years Non-catastrophe Losses and LAE Ratio5.3 1.3 5.5 1.2 
Prior Years Catastrophe Losses and LAE Ratio(1.0)(1.3)(4.2)(0.5)
Total Incurred Loss and LAE Ratio84.5 84.3 83.7 90.1 
Insurance Expense Ratio30.2 32.2 29.2 31.6 
Combined Ratio114.7 %116.5 %112.9 %121.7 %
Underlying Combined Ratio
Current Year Non-catastrophe Losses and LAE Ratio66.0 %72.9 %66.4 %73.7 %
Insurance Expense Ratio30.2 32.2 29.2 31.6 
Underlying Combined Ratio96.2 %105.1 %95.6 %105.3 %
Non-GAAP Measure Reconciliation
Combined Ratio 114.7 %116.5 %112.9 %121.7 %
Less:
Current Year Catastrophe Losses and LAE Ratio14.2 11.4 16.0 15.7 
Prior Years Non-catastrophe Losses and LAE Ratio5.3 1.3 5.5 1.2 
Prior Years Catastrophe Losses and LAE Ratio(1.0)(1.3)(4.2)(0.5)
Underlying Combined Ratio96.2 %105.1 %95.6 %105.3 %
56

Preferred Property & Casualty Insurance (Continued)
Catastrophe Frequency and Severity
Six Months Ended
Jun 30, 2023Jun 30, 2022
(Dollars in Millions)Number of EventsLosses and LAENumber of EventsLosses and LAE
Range of Losses and LAE Per Event:
Below $541 $38.2 33 $34.9 
$5 - $10— — — — 
$10 - $15— — — — 
$15 - $20— — — — 
$20 - $25— — — — 
Greater Than $25— — — — 
Total41 $38.2 33 $34.9 
Insurance Reserves
(Dollars in Millions)Jun 30,
2023		Dec 31,
2022
Insurance Reserves:
Personal Automobile$276.8 $298.4 
Homeowners87.8 91.8 
Other 27.2 28.9 
Insurance Reserves$391.8 $419.1 
Insurance Reserves:
Loss and Allocated LAE Reserves:
Case and Allocated LAE$248.9 $251.6 
Incurred But Not Reported115.4 139.0 
Total Loss and LAE Reserves364.3 390.6 
Unallocated LAE Reserves27.5 28.5 
Insurance Reserves$391.8 $419.1 
See “Critical Accounting Estimates,” in the 2022 Annual Report for additional information pertaining to the Company’s process of estimating property and casualty insurance reserves for losses and LAE, development of property and casualty insurance losses and LAE from prior accident years, also referred to as “reserve development” in the discussion of segment results, estimated variability of property and casualty insurance reserves for losses and LAE, and a discussion of some of the variables that may impact development of property and casualty insurance losses and LAE and the estimated variability of property and casualty insurance reserves for losses and LAE.
Overall
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
The Preferred Property & Casualty Insurance segment reported a Segment Net Operating Loss of $12.2 million for the six months ended June 30, 2023, compared to a Segment Net Operating Loss of $22.9 million for the same period in 2022. Segment Net Operating Loss improved by $10.7 million primarily driven by $4.4 million and $3.2 million improvements in Preferred Personal Automobile Insurance and Homeowners Insurance, respectively, as a result of rate increases and other targeted underwriting actions to improve profitability and a $3.0 million improvement from Other Personal Insurance.

Earned Premiums in the Preferred Property & Casualty Insurance segment decreased by $35.7 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to lower Personal Automobile Insurance volumes as a result of ongoing profit improvement actions.
57

Preferred Property & Casualty Insurance (Continued)
Net Investment Income in the Preferred Property & Casualty Insurance segment decreased by $0.8 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to lower returns on Equity Method Limited Liability Investments and Equity Securities offset by higher rates in Fixed Income Securities.

Income related to Changes in Value of Alternative Energy Partnership Investments was $0.3 million for the six months ended June 30, 2023, compared to loss of $5.0 million for the same period in 2022. Tax expenses related to the Alternative Energy Partnership Investments were $0.1 million and tax benefits of $1.9 million for the six months ended June 30, 2023 and 2022, respectively. This resulted in a net income of $0.2 million and net loss of $3.1 million attributable to Alternative Energy Partnership Investments for the six months ended June 30, 2023 and 2022, respectively.

Underlying losses and LAE as a percentage of earned premiums were 66.0% and 72.9% for the six months ended June 30, 2023 and 2022, respectively. Underlying losses and LAE as a percentage of earned premiums decreased as a result of higher average earned premiums per exposure resulting from rate increases and lower frequency of auto claims. Catastrophe losses and LAE (excluding reserve development) were $38.2 million, in 2023, compared to $34.9 million in 2022, an increase of $3.3 million. Catastrophe losses and LAE (excluding reserve development) increased due primarily to higher frequency of catastrophic events in 2023 compared to 2022. Adverse loss and LAE reserve development (including catastrophe reserve development) was $11.5 million for the six months ended 2023, compared to favorable development of $0.1 million for the same period in 2022.

Insurance expenses were $81.6 million, or 30.2% of earned premiums in 2023, an improvement of 2.0% percentage points compared to 2022.

The Preferred Property & Casualty Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investments in Company-Owned Life Insurance, tax-exempt investment income, and dividends received deductions.
Three Months Ended June 30, 2023 Compared to the Same Period in 2022
The Preferred Property & Casualty Insurance segment reported a Segment Net Operating Loss of $2.7 million for the three months ended June 30, 2023, compared to a Segment Net Operating Loss of $16.8 million for the same period in 2022. Segment Net Operating Loss improved by $14.1 million mostly driven by a $10.1 million improvement from homeowners insurance due primarily to rate increases and other targeted underwriting actions to improve profitability and a $3.2 million improvement in Other Personal Insurance.

Earned Premiums in the Preferred Property & Casualty Insurance segment decreased by $17.5 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to lower personal automobile insurance volumes as a result of ongoing profit improvement actions.
Net Investment Income in the Preferred Property & Casualty Insurance segment increased by $1.2 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to higher rates on Fixed Income Securities offset by lower returns on Equity Securities.

Underlying losses and LAE as a percentage of earned premiums were 66.4% and 73.7% for the three months ended June 30, 2023 and 2022, respectively. Underlying losses and LAE as a percentage of earned premiums decreased as a result of higher average earned premiums per exposure resulting from rate increases and lower frequency of auto claims. Catastrophe losses and LAE (excluding reserve development) were $21.2 million in 2023, primarily driven by Florida and Texas weather events, compared to $23.5 million in 2022. Adverse loss and LAE reserve development (including catastrophe reserve development) was $1.7 million in 2023, compared to adverse development of $1.0 million for the same period in 2022.

Insurance expenses were $38.6 million, or 29.2% of earned premiums in 2023, an improvement of 2.4 percentage points compared to 2022.
The Preferred Property & Casualty Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investments in Company-Owned Life Insurance, tax-exempt investment income and dividends received deductions.
58

Preferred Property & Casualty Insurance (Continued)
Preferred Personal Automobile Insurance
Selected financial information for the personal automobile insurance product line follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Net Premiums Written$145.1 $168.8 $73.3 $84.6 
Earned Premiums$153.9 $190.0 $75.7 $94.0 
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE$124.3 $158.3 $61.6 $77.8 
Catastrophe Losses and LAE2.8 2.1 1.6 1.6 
Prior Years:
Non-catastrophe Losses and LAE8.4 1.5 5.5 — 
Catastrophe Losses and LAE(0.6)0.1 (1.1)— 
Total Incurred Losses and LAE$134.9 $162.0 $67.6 $79.4 
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio80.8 %83.3 %81.4 %82.8 %
Current Year Catastrophe Losses and LAE Ratio1.8 1.1 2.1 1.7 
Prior Years Non-catastrophe Losses and LAE Ratio5.5 0.8 7.3 — 
Prior Years Catastrophe Losses and LAE Ratio(0.4)0.1 (1.5)— 
Total Incurred Loss and LAE Ratio87.7 %85.3 %89.3 %84.5 %
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums on personal automobile insurance decreased by $36.1 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to lower volume as a result of ongoing profit improvement actions. Incurred losses and LAE were $134.9 million, or 87.7% of earned premiums, for the six months ended June 30, 2023, compared to $162.0 million, or 85.3% of earned premiums, for the same period in 2022. Incurred losses and LAE as a percentage of earned premiums increased due primarily to unfavorable development on prior year losses and LAE, partially offset by lower underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 80.8% for the six months ended June 30, 2023, compared to 83.3% for the same period in 2022, an improvement of 2.5 percentage points. Adverse loss and LAE reserve development (including catastrophe loss reserve development) was $7.8 million for the six months ended June 30, 2023, compared to adverse development of $1.6 million for the same period in 2022. Catastrophe losses and LAE (excluding reserve development) were $2.8 million for the six months ended June 30, 2023, compared to $2.1 million in for the same period in 2022.

Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums on preferred personal automobile insurance decreased by $18.3 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to lower volume as a result of ongoing profit improvement actions. Incurred losses and LAE were $67.6 million, or 89.3% of earned premiums, for the three months ended June 30, 2023, compared to $79.4 million, or 84.5% of earned premiums, for the same period in 2022. Incurred losses and LAE as a percentage of earned premiums decreased due primarily to unfavorable development on prior year losses and LAE, partially offset by lower underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 81.4% for the three months ended June 30, 2023, compared to 82.8% for the same period in 2022, an improvement of 1.4 percentage points. Adverse loss and LAE reserve development (including catastrophe loss reserve development) was $4.4 million for the three months ended June 30, 2023, compared to no development for the same period in 2022. Catastrophe losses and LAE (excluding reserve development) were $1.6 million for the three months ended June 30, 2023 and June 30, 2022, respectively.
59

Preferred Property & Casualty Insurance (Continued)
Homeowners Insurance
Selected financial information for the homeowners insurance product line follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Net Premiums Written$97.0 $94.7 $50.8 $49.2 
Earned Premiums$102.2 $99.0 $50.0 $47.7 
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE$46.9 $56.1 $23.0 $28.6 
Catastrophe Losses and LAE34.3 32.1 19.4 21.3 
Prior Years:
Non-catastrophe Losses and LAE4.9 (1.7)1.8 (0.1)
Catastrophe Losses and LAE(0.9)(3.6)(3.3)(0.8)
Total Incurred Losses and LAE$85.2 $82.9 $40.9 $49.0 
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio45.9 %56.6 %46.0 %59.9 %
Current Year Catastrophe Losses and LAE Ratio33.6 32.4 38.8 44.7 
Prior Years Non-catastrophe Losses and LAE Ratio4.8 (1.7)3.6 (0.2)
Prior Years Catastrophe Losses and LAE Ratio(0.9)(3.6)(6.6)(1.7)
Total Incurred Loss and LAE Ratio83.4 %83.7 %81.8 %102.7 %
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums in homeowners insurance increased by $3.2 million for the six months ended June 30, 2023, compared to the same period in 2022, driven by higher average earned premium per exposure resulting from rate increases and non-renewal of the catastrophe aggregate reinsurance treaty. Incurred losses and LAE were $85.2 million, or 83.4% of earned premiums, for the six months ended June 30, 2023, compared to $82.9 million, or 83.7% of earned premiums, for the same period in 2022. Incurred losses and LAE as a percentage of earned premiums decreased due primarily to lower underlying losses and LAE as a percentage of earned premiums, partially offset by higher incurred catastrophe losses (excluding loss reserve development), and unfavorable development on prior year losses and LAE. Underlying losses and LAE as a percentage of earned premiums were 45.9% for the six months ended June 30, 2023, compared to 56.6% for the same period in 2022, an improvement of 10.7 percentage points. Catastrophe losses and LAE (excluding reserve development) were $34.3 million for the six months ended June 30, 2023, compared to $32.1 million for the same period in 2022. Adverse loss and LAE reserve development (including catastrophe loss reserve development) was $4.0 million for the six months ended June 30, 2023, compared to favorable development of $5.3 million for the same period in 2022.

Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums in homeowners insurance increased by $2.3 million for the three months ended June 30, 2023, compared to the same period in 2022 driven by higher average earned premium per exposure resulting from rate increases and non-renewal of the catastrophe aggregate reinsurance treaty. Incurred losses and LAE were $40.9 million, or 81.8% of earned premiums, for the three months ended June 30, 2023, compared to $49.0 million, or 102.7% of earned premiums, for the same period in 2022. Incurred losses and LAE as a percentage of earned premiums decreased due to lower underlying losses and LAE as a percentage of earned premiums, lower incurred catastrophe losses (excluding loss reserve development), and favorable development on prior year catastrophe losses and LAE, offset by unfavorable underlying loss and LAE development. Underlying losses and LAE as a percentage of earned premiums were 46.0% for the three months ended June 30, 2023, compared to 59.9% for the same period in 2022, a decrease of 13.9 percentage points. Catastrophe losses and LAE (excluding reserve development) were $19.4 million for the three months ended June 30, 2023, compared to $21.3 million for the same period in 2022. Favorable loss and LAE reserve development (including catastrophe loss reserve development) was $1.5 million for the three months ended June 30, 2023, compared to favorable development of $0.9 million for the same period in 2022.
60

Preferred Property & Casualty Insurance (Continued)
Other Personal Insurance
Other personal insurance products include umbrella, dwelling fire, inland marine, earthquake, boat owners and other liability coverages. Selected financial information for other personal insurance product lines follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Net Premiums Written$12.1 $15.2 $6.1 $7.5 
Earned Premiums$13.7 $16.5 $6.7 $8.2 
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE$7.1 $8.3 $3.3 $4.1 
Catastrophe Losses and LAE1.1 0.7 0.2 0.6 
Prior Years:
Non-catastrophe Losses and LAE0.9 4.1 — 1.9 
Catastrophe Losses and LAE(1.2)(0.5)(1.2)— 
Total Incurred Losses and LAE$7.9 $12.6 $2.3 $6.6 
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio51.9 %50.4 %49.2 %50.0 %
Current Year Catastrophe Losses and LAE Ratio8.0 4.2 3.0 7.3 
Prior Years Non-catastrophe Losses and LAE Ratio6.6 24.8 — 23.2 
Prior Years Catastrophe Losses and LAE Ratio(8.8)(3.0)(17.9)— 
Total Incurred Loss and LAE Ratio57.7 %76.4 %34.3 %80.5 %
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums in other personal insurance decreased by $2.8 million for the six months ended June 30, 2023, compared to the same period in 2022. Incurred losses and LAE was $7.9 million, or 57.7% of earned premiums for the six months ended June 30, 2023, compared to $12.6 million, or 76.4% of earned premiums, for the same period in 2022. Underlying losses and LAE as a percentage of earned premiums were 51.9% for the six months ended June 30, 2023, compared to 50.4% for the same period in 2022, a deterioration of 1.5 percentage points. Catastrophe losses and LAE (excluding loss reserve development) was $1.1 million for the six months ended June 30, 2023, compared to $0.7 million for the same period in 2022. Favorable loss and LAE reserve development (including catastrophe losses development) for the six months ended June 30, 2023 was $0.3 million, compared to adverse development of $3.6 million for the same period in 2022.
Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums in other personal insurance decreased by $1.5 million for the three months ended June 30, 2023, compared to the same period in 2022. Incurred losses and LAE were $2.3 million, or 34.3% of earned premiums, for the three months ended June 30, 2023, compared to $6.6 million, or 80.5% of earned premiums, for the same period in 2022. Underlying losses and LAE as a percentage of earned premiums were 49.2% for the three months ended June 30, 2023, compared to 50.0% for the same period in 2022, an improvement of 0.8 percentage points. Catastrophe losses and LAE (excluding loss reserve development) was $0.2 million for the three months ended June 30, 2023, compared to $0.6 million for the same period in 2022. Favorable loss and LAE reserve development (including catastrophe losses development) for the three months ended June 30, 2023 was $1.2 million, compared to adverse development of $1.9 million for the same period in 2022.

61

Life & Health Insurance
Selected financial information for the Life & Health Insurance segment follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Earned Premiums$201.5 $286.8 $102.2 $144.0 
Net Investment Income96.9 111.3 47.1 61.9 
Changes in Value of Alternative Energy Partnership Investments0.4 (5.7)0.2 (1.3)
Other (Loss) Income(0.3)(0.8)0.1 (0.8)
Total Revenues298.5 391.6 149.6 203.8 
Policyholders’ Benefits and Incurred Losses and LAE138.2 184.2 68.3 94.3 
Insurance Expenses135.4 171.5 71.2 85.6 
Operating Income24.9 35.9 10.1 23.9 
Income Tax Expense(2.8)(4.1)(1.2)(3.7)
Segment Net Operating Income$22.1 $31.8 $8.9 $20.2 
INSURANCE RESERVES
(Dollars in Millions)Jun 30, 2023Dec 31,
2022
Insurance Reserves:
Future Policyholder Benefits$3,315.2 $3,218.5 
Incurred Losses and LAE Reserves:
Life44.2 53.3 
Accident and Health4.4 4.3 
Property2.6 2.3 
Total Incurred Losses and LAE Reserves51.2 59.9 
Insurance Reserves$3,366.4 $3,278.4 
See Note 2 “Summary of Accounting Policies and Accounting Changes,” to the Consolidated Financial Statements under the sub-caption “Insurance Reserves” for additional discussion in the 2022 Annual Report.
Overall
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Segment Net Operating Income in the Life & Health Insurance segment was $22.1 million for the six months ended June 30, 2023, compared to Segment Net Operating Income of $31.8 million for the same period in 2022.

Earned Premiums in the Life & Health Insurance segment decreased by $85.3 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022 and lower volume on property insurance products.

Net Investment Income decreased by $14.4 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to lower returns from Equity Method Limited Liability Investments, partially offset by higher rate earned on Fixed Income Securities.

Income related to Changes in Value of Alternative Energy Partnership Investments was $0.4 million for the six months ended June 30, 2023, compared to loss of $5.7 million for the same period in 2022. Tax expense related to the Alternative Energy Partnership Investments were $0.1 million and tax benefits of $2.1 million for the six months ended June 30, 2023 and 2022,     respectively. This resulted in net income of $0.3 million and net loss of $3.6 million attributable to Alternative Energy Partnership Investments for the six months ended June 30, 2023 and 2022, respectively.
62

Life & Health Insurance (Continued)
Policyholders’ Benefits and Incurred Losses and LAE decreased by $46.0 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022 and lower current year property non-catastrophe losses and LAE.
Insurance Expenses in the Life & Health Insurance segment decreased by $36.1 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022 and a reduction in expenses due to lower volume of property insurance products.

The Life & Health Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investments in Company-Owned Life Insurance, tax-exempt investment income and dividends received deductions.
Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Segment Net Operating Income in the Life & Health Insurance segment was $8.9 million for the three months ended June 30, 2023, compared to Segment Net Operating Income of $20.2 million for the same period in 2022.
Earned Premiums in the Life & Health Insurance segment decreased by $41.8 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022 and lower volume on life and property insurance products.
Net Investment Income decreased by $14.8 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to lower returns from Equity Method Limited Liability Investments, partially offset by higher rate earned on Fixed Income Securities and Equity Securities.
Income related to Changes in Value of Alternative Energy Partnership Investments was $0.2 million for the three months ended June 30, 2023, compared to loss of $1.3 million for the same period in 2022. There were no tax expenses related to the Alternative Energy Partnership Investments for the three months ended June 30, 2023, compared to tax benefits of $0.3 million for the same period in 2022. This resulted in net income of $0.2 million and net loss of $1.0 million attributable to Alternative Energy Partnership Investments for the three months ended June 30, 2023 and 2022, respectively.
Policyholders’ Benefits and Incurred Losses and LAE decreased by $26.0 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022, changes in mortality experience and lower current year property non-catastrophe losses and LAE.

Insurance Expenses in the Life & Health Insurance segment decreased by $14.4 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022 and a reduction in expenses due to lower volume of property insurance products.

The Life & Health Insurance segment’s effective income tax rate differs from the federal statutory income tax rate due primarily to investments in Company-Owned Life Insurance, tax-exempt investment income and dividends received deductions.
63

Life & Health Insurance (Continued)
Life Insurance
Selected financial information for the life insurance product line follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Earned Premiums$167.0 $169.5 $84.8 $86.8 
Net Investment Income96.1 108.0 46.6 60.1 
Changes in Value of Alternative Energy Partnership Investments0.4 (5.3)0.2 (1.3)
Other (Loss) Income(0.5)(1.1)— (1.1)
Total Revenues263.0 271.1 131.6 144.5 
Policyholders’ Benefits and Incurred Losses and LAE124.1 125.3 60.0 64.9 
Insurance Expenses118.4 117.1 62.3 58.9 
Operating Income20.5 28.7 9.3 20.7 
Income Tax Expense(1.9)(2.7)(1.0)(3.0)
Total Product Line Net Operating Income$18.6 $26.0 $8.3 $17.7 
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from life insurance decreased by $2.5 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to lower volume of life insurance products, partially offset by increased average premium rate. Policyholders’ Benefits and Incurred Losses and LAE on life insurance were $124.1 million for the six months ended June 30, 2023, compared to $125.3 million for the same period in 2022, a decrease of $1.2 million due primarily to changes in mortality experience.
Insurance Expenses increased by $1.3 million for the six months ended June 30, 2023, compared to the same period in 2022.

Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from life insurance decreased by $2.0 million for the three months ended June 30, 2023, compared to the same period in 2022 due primarily to lower volume of life insurance products, partially offset by increased average premium rate. Policyholders’ Benefits and Incurred Losses and LAE on life insurance were $60.0 million for the three months ended June 30, 2023, compared to $64.9 million for the same period 2022, a decrease of $4.9 million due primarily to improved mortality experience.
Insurance Expenses increased by $3.4 million for the three months ended June 30, 2023, compared to the same period in 2022.

64

Life & Health Insurance (Continued)
Accident and Health Insurance
Selected financial information for the accident and health insurance product line follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Earned Premiums$11.7 $90.9 $5.8 $45.1 
Net Investment Income— 1.7 — 1.0 
Changes in Value of Alternative Energy Partnership Investments— (0.1)— — 
Other Income0.2 0.3 0.1 0.3 
Total Revenues11.9 92.8 5.9 46.4 
Policyholders’ Benefits and Incurred Losses and LAE7.1 48.0 5.1 24.5 
Insurance Expenses5.1 40.9 3.1 20.1 
Operating (Loss) Income(0.3)3.9 (2.3)1.8 
Income Tax Benefit (Expense)0.1 (0.8)0.5 (0.4)
Total Product Line Net Operating (Loss) Income$(0.2)$3.1 $(1.8)$1.4 
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from accident and health insurance decreased by $79.2 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022. Policyholders’ Benefits and Incurred Losses and LAE on accident and health insurance were $7.1 million for the six months ended June 30, 2023, compared to $48.0 million for the same period in 2022, with the decrease due primarily to the disposition of Reserve National in December 2022.
Insurance Expenses decreased by $35.8 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022.

Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from accident and health insurance decreased by $39.3 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022. Policyholders’ Benefit and Incurred Losses and LAE on accident and health insurance were $5.1 million for the three months ended June 30, 2023, compared to $24.5 million for the same period in 2022, with the decrease due primarily to the disposition of Reserve National in December 2022.
Insurance Expenses decreased by $17.0 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to the disposition of Reserve National in December 2022.
65

Life & Health Insurance (Continued)
Property Insurance
Selected financial information for the property insurance product line follows.
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Earned Premiums$22.8 $26.4 $11.6 $12.1 
Net Investment Income0.8 1.6 0.5 0.8 
Changes in Value of Alternative Energy Partnership Investments— (0.3)— — 
Total Revenues23.6 27.7 12.1 12.9 
Incurred Losses and LAE related to:
Current Year:
Non-catastrophe Losses and LAE4.4 7.7 2.2 3.6 
Catastrophe Losses and LAE1.4 1.0 0.8 0.6 
Prior Years:
Non-catastrophe Losses and LAE1.0 1.1 0.2 0.5 
Catastrophe Losses and LAE0.2 1.1 — 0.2 
Total Incurred Losses and LAE7.0 10.9 3.2 4.9 
Insurance Expenses11.9 13.5 5.8 6.6 
Operating Income4.7 3.3 3.1 1.4 
Income Tax Expense(1.0)(0.6)(0.7)(0.3)
Total Product Line Net Operating Income$3.7 $2.7 $2.4 $1.1 
Ratios Based On Earned Premiums
Current Year Non-catastrophe Losses and LAE Ratio19.3 %29.1 %19.0 %29.7 %
Current Year Catastrophe Losses and LAE Ratio6.1 3.8 6.9 5.0 
Prior Years Non-catastrophe Losses and LAE Ratio4.4 4.2 1.7 4.1 
Prior Years Catastrophe Losses and LAE Ratio0.9 4.2 — 1.7 
Total Incurred Loss and LAE Ratio30.7 %41.3 %27.6 %40.5 %
Six Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from property insurance decreased by $3.6 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to lower volume of property insurance products. Incurred losses and LAE on property insurance were $7.0 million, or 30.7% of earned premiums, for the six months ended June 30, 2023, compared to $10.9 million, or 41.3% of earned premiums for the same period in 2022. Underlying losses and LAE were $4.4 million, or 19.3% of earned premiums for the six months ended June 30, 2023, compared to $7.7 million, or 29.1% of earned premiums for the same period in 2022, a decrease of 9.8 percentage points due primarily to lower claim frequency and severity. Catastrophe losses and LAE (excluding loss reserve development) were $1.4 million for the six months ended June 30, 2023, compared to $1.0 million for the same period in 2022. Catastrophe losses and LAE increased $0.4 million due primarily to higher frequency of catastrophe claims. Adverse loss and LAE reserve development was $1.2 million for the six months ended June 30, 2023, compared to adverse development of $2.2 million in the same period in 2022.
Insurance expenses decreased $1.6 million for the six months ended June 30, 2023, compared to the same period in 2022 due primarily to lower volume of property insurance products.

Three Months Ended June 30, 2023 Compared to the Same Period in 2022
Earned Premiums from property insurance decreased by $0.5 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to lower volume of property insurance products. Incurred losses and LAE on property insurance were $3.2 million, or 27.6% of earned premiums, for the three months ended June 30, 2023, compared to $4.9 million, or 40.5% of earned premiums for the same period in 2022. Underlying losses and LAE were $2.2 million, or 19.0% of
66

Life & Health Insurance (Continued)
earned premiums for the three months ended June 30, 2023, compared to $3.6 million, or 29.7% of earned premiums for the same period in 2022, a decrease of 10.7 percentage points due primarily to lower claim frequency and severity. Catastrophe losses and LAE (excluding loss reserve development) were $0.8 million for the three months ended June 30, 2023, compared to $0.6 million for the same period in 2022. Catastrophe losses and LAE increased by $0.2 million due primarily to higher frequency of catastrophe claims. Adverse loss and LAE reserve development was $0.2 million for the three months ended June 30, 2023, compared to adverse development of $0.7 million for the same period in 2022.

Insurance expenses decreased $0.8 million for the three months ended June 30, 2023, compared to the same period in 2022 due primarily to lower volume of property insurance products.

Investment Results
Net Investment Income
Net Investment Income for the six and three months ended June 30, 2023 and 2022 was:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Investment Income:
Interest on Fixed Income Securities$173.3 $141.5 $87.1 $72.8 
Dividends on Equity Securities Excluding Alternative Investments2.2 3.2 1.2 1.7 
Alternative Investments:
Equity Method Limited Liability Investments3.9 28.6 2.8 15.3 
Limited Liability Investments Included in Equity Securities8.9 26.1 6.3 18.5 
Total Alternative Investments12.8 54.7 9.1 33.8 
Short-term Investments5.9 0.3 3.6 0.2 
Loans to Policyholders10.5 10.8 5.1 5.3 
Real Estate4.3 4.5 1.9 2.3 
Company-Owned Life Insurance
16.2 18.1 7.4 9.8 
Other8.3 3.4 5.3 1.7 
Total Investment Income233.5 236.5 120.7 127.6 
Investment Expenses:
Real Estate4.3 3.5 2.2 1.0 
Other Investment Expenses21.1 14.5 12.2 8.1 
Total Investment Expenses25.4 18.0 14.4 9.1 
Net Investment Income$208.1 $218.5 $106.3 $118.5 
Net Investment Income was $208.1 million and $218.5 million for the six months ended June 30, 2023 and 2022, respectively. Net Investment Income decreased by $10.4 million in 2023 due primarily to lower returns on Equity Method Limited Liability Investments and Equity Securities offset by higher rate earned on Fixed Income Securities.
Net Investment Income was $106.3 million and $118.5 million for the three months ended June 30, 2023 and 2022, respectively. Net Investment Income decreased by $12.2 million in 2023 due primarily to lower returns on Equity Securities and Equity Method Limited Liability Investments offset by higher rate earned on Fixed Income Securities.
Income and distributions on Alternative Investments can fluctuate significantly between periods as they are influenced by operating performance of the underlying investments, changes in market or economic conditions or the timing of asset sales.
67

Investment Results (Continued)
Total Comprehensive Investment Gains (Losses)
The components of Total Comprehensive Investment Gains (Losses) for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Recognized in Condensed Consolidated Statements of Loss:
Income (Loss) from Change in Fair Value of Equity and Convertible Securities$4.1 $(68.7)$2.4 $(40.5)
Gains on Sales1.8 15.9 0.5 13.5 
Losses on Sales(9.5)(3.7)(6.2)(2.8)
(Losses) Gains on Hedging Activity(0.3)0.3 (8.7)0.3 
Impairment Gains (Losses)1.2 (13.8)(0.9)(4.9)
Net Losses Recognized in Condensed Consolidated Statements of Loss(2.7)(70.0)(12.9)(34.4)
Recognized in Other Comprehensive Income (Loss)103.9 (1,232.2)(75.9)(580.3)
Total Comprehensive Investment Gains (Losses)$101.2 $(1,302.2)$(88.8)$(614.7)
Total Comprehensive Investment Gains were $101.2 million for the six months ended June 30, 2023, compared to Total Comprehensive Investment Losses of $1,302.2 million for the six months ended June 30, 2022. The increase of $1,403.4 million was primarily due to a decrease in the Company’s unrealized loss position on the fixed income bond portfolio.
Total Comprehensive Investment Losses were $88.8 million and $614.7 million for the three months ended June 30, 2023 and 2022. The decrease of $525.9 million was primarily due to a decrease in the Company’s unrealized loss position on the fixed income bond portfolio.
Income (Loss) from Change in Fair Value of Equity and Convertible Securities
The components of Income (Loss) from Change in Fair Value of Equity and Convertible Securities for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Preferred Stocks$0.3 $(5.9)$0.2 $(3.5)
Common Stocks(0.2)(1.3)0.3 (1.7)
Other Equity Interests:
Exchange Traded Funds0.4 (45.5)0.3 (14.6)
Limited Liability Companies and Limited Partnerships2.6 (12.2)0.9 (16.7)
Total Other Equity Interests3.0 (57.7)1.2 (31.3)
Income (Loss) from Change in Fair Value of Equity Securities3.1 (64.9)1.7 (36.5)
Income (Loss) from Change in Fair Value of Convertible Securities1.0 (3.8)0.7 (4.0)
Income (Loss) from Change in Fair Value of Equity and Convertible Securities$4.1 $(68.7)$2.4 $(40.5)
68

Investment Results (Continued)
Net Realized (Losses) Gains on Sales of Investment
The components of Net Realized Investment (Losses) Gains for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Fixed Maturities:
Gains on Sales$1.5 $13.8 $0.4 $13.4 
Losses on Sales(9.3)(3.6)(6.0)(2.8)
(Losses) Gains on Hedging Activity(0.3)0.3 (8.7)0.3 
Equity Securities:
Gains on Sales0.1 2.1 0.1 0.1 
Losses on Sales(0.1)(0.1)(0.1)— 
Other:
Gains on Sales0.2 — — — 
Losses on Sales(0.1)— (0.1)— 
Net Realized Investment (Losses) Gains$(8.0)$12.5 $(14.4)$11.0 
Gross Gains on Sales$1.8 $15.9 $0.5 $13.5 
Gross Losses on Sales(9.5)(3.7)(6.2)(2.8)
(Losses) Gains on Hedging Activity(0.3)0.3 (8.7)0.3 
Net Realized Investment (Losses) Gains$(8.0)$12.5 $(14.4)$11.0 
Impairment Gains (Losses)
The Company regularly reviews its investment portfolio to determine whether a decline in the fair value of an investment has occurred from credit or other, non-credit related factors. If the decline in fair value is due to credit factors and the Company does not expect to receive cash flows sufficient to support the entire amortized cost basis, the credit loss is reported in the Condensed Consolidated Statements of Loss in the period that the declines are evaluated. Conversely, an increase in the fair value or disposal of an investment with a previously established credit allowance will result in the recognition of impairment gain reported in the Condensed Consolidated Statements of Loss in the period.
The components of Impairment Gains (Losses) in the Condensed Consolidated Statements of Loss for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
Jun 30, 2023Jun 30, 2022Jun 30, 2023Jun 30, 2022
(Dollars in Millions)AmountNumber of IssuersAmountNumber of IssuersAmountNumber of IssuersAmountNumber of Issuers
Fixed Maturities$2.1 18 $(13.8)17 $— 12 $(4.9)12 
Securities Receivable(0.8)1 — — (0.8)1 — — 
Mortgage Loans(0.1)2 — — (0.1)2 — — 
Impairment Gains (Losses)$1.2 $(13.8)$(0.9)$(4.9)

Investment Quality and Concentrations
The Company’s fixed maturity investment portfolio is comprised primarily of high-grade corporate, municipal and agency bonds. At June 30, 2023, 95.9% of the Company’s fixed maturity investment portfolio was rated investment-grade, which the Company defines as a security issued by a high quality obligor with at least a relatively stable credit profile and where it is highly likely that all contractual payments of principal and interest will timely occur and carry a rating from the National Association of Insurance Commissioners (“NAIC”) of 1 or 2. Securities with a rating of 1 or 2 from the NAIC typically are rated by one of more Nationally Recognized Statistical Rating Organizations and either have a rating of AAA, AA, A or BBB
69

Investment Quality and Concentrations (Continued)
from Standard & Poor’s (“S&P”); a rating of Aaa, Aa, A or Baa from Moody’s Investors Service (“Moody’s”); or a rating of AAA, AA, A or BBB from Fitch Ratings.
The following table summarizes the credit quality of the Company’s fixed maturity investment portfolio at June 30, 2023 and December 31, 2022:
(Dollars in Millions)Jun 30, 2023Dec 31, 2022
NAIC
Rating		RatingFair ValuePercentageFair ValuePercentage
1AAA, AA, A$5,008.0 72.1 %$4,896.4 71.0 %
2BBB1,653.2 23.8 1,687.4 24.5 
3-4BB, B214.7 3.1 239.7 3.5 
5-6CCC or Lower67.9 1.0 71.3 1.0 
Total Investments in Fixed Maturities$6,943.8 100.0 %$6,894.8 100.0 %
Gross unrealized losses on the Company’s investments in below-investment-grade fixed maturities were $30.1 million and $32.8 million at June 30, 2023 and December 31, 2022, respectively.
The following table summarizes the fair value of the Company’s investments in governmental fixed maturities at June 30, 2023 and December 31, 2022:
Jun 30, 2023Dec 31, 2022
(Dollars in Millions)Fair ValuePercentage
of Total
Investments		Fair ValuePercentage
of Total
Investments
U.S. Government and Government Agencies and Authorities$545.5 6.1 %$528.0 6.0 %
States and Political Subdivisions:
Revenue Bonds1,259.8 14.2 1,324.3 15.1 
States122.1 1.4 143.8 1.6 
Political Subdivisions79.1 0.9 100.8 1.1 
Foreign Governments4.0 — 4.1 — 
Total Investments in Governmental Fixed Maturities$2,010.5 22.6 %$2,101.0 23.8 %
The following table summarizes the fair value of the Company’s investments in non-governmental fixed maturities by industry at June 30, 2023 and December 31, 2022.
Jun 30, 2023Dec 31, 2022
(Dollars in Millions)Fair ValuePercentage
of Total
Investments		Fair ValuePercentage
of Total
Investments
Finance, Insurance and Real Estate$2,083.8 23.4 %$2,007.5 22.8 %
Manufacturing1,080.1 12.1 1,085.9 12.4 
Transportation, Communication and Utilities776.6 8.7 733.7 8.3 
Services637.9 7.2 602.4 6.9 
Mining171.8 1.9 173.3 2.0 
Retail Trade150.1 1.7 165.1 1.9 
Construction9.1 0.1 11.7 0.1 
Other23.9 0.3 14.2 0.2 
Total Investments in Non-governmental Fixed Maturities$4,933.3 55.4 %$4,793.8 54.6 %
70

Investment Quality and Concentrations (Continued)
The following table summarizes the fair value of the Company’s investments in non-governmental fixed maturities by range of amount invested at June 30, 2023.
(Dollars in Millions)Number of IssuesAggregate Fair Value
Below $5700 $1,479.6 
$5 -$10187 1,404.6 
$10 - $20107 1,445.5 
$20 - $3019 456.8 
Greater Than $304 146.8 
Total1,017 $4,933.3 
The Company’s short-term investments primarily consist of money market funds and short term bonds. At June 30, 2023, the Company had $305.2 million invested in money market funds which primarily invest in U.S. Treasury securities and $100.7 million invested in U.S. treasury bills and short-term bonds.
The following table summarizes the fair value of the Company’s ten largest investment exposures in a single issuer, excluding investments in U.S. Government and Government Agencies and Authorities and Short-term Investments, at June 30, 2023:
(Dollars in Millions)Fair
Value		Percentage
of Total
Investments
Fixed Maturities:
States including their Political Subdivisions:
California$132.9 1.5 %
Texas130.8 1.5 
Michigan85.4 1.0 
New York78.2 0.9 
Georgia73.1 0.8 
Louisiana64.6 0.7 
Pennsylvania59.2 0.7 
Florida56.2 0.6 
Colorado49.8 0.5 
Missouri43.8 0.5 
Total$774.0 8.7 %
71

Investments in Limited Liability Companies and Limited Partnerships
The Company owns investments in various limited liability investment companies and limited partnerships that primarily invest in mezzanine debt, distressed debt, real estate and senior debt. The Company’s investments in these limited liability investment companies and limited partnerships are reported either as Equity Method Limited Liability Investments, Other Equity Interests and included in Equity Securities at Fair Value, or Equity Securities at Modified Cost depending on the accounting method used to report the investment. Additional information pertaining to these investments at June 30, 2023 and December 31, 2022 is presented below.
 Unfunded
Commitment		Reported Value
(Dollars in Millions)Jun 30,
2023		Jun 30,
2023		Dec 31,
2022
Reported as Equity Method Limited Liability Investments:
Mezzanine Debt$47.0 $125.6 $114.3 
Senior Debt41.1 21.8 21.6 
Distressed Debt— 8.1 9.4 
Secondary Transactions1.7 8.5 9.3 
Leveraged Buyout0.7 9.7 8.9 
Growth Equity— 1.2 1.2 
Real Estate— 41.5 43.3 
Hedge Fund— 0.1 0.5 
Other— 8.6 8.5 
Total Equity Method Limited Liability Investments90.5 225.1 217.0 
Alternative Energy Partnership Investments— 16.8 16.3 
Reported as Other Equity Interests at Fair Value:
Mezzanine Debt66.2 115.8 106.0 
Senior Debt13.4 22.4 21.9 
Distressed Debt13.3 12.5 12.5 
Secondary Transactions3.1 2.8 3.5 
Hedge Funds— 14.9 18.1 
Leveraged Buyout7.8 22.5 21.6 
Growth Equity6.7 6.0 5.4 
Real Estate0.2 0.1 — 
Other— — 0.1 
Total Reported as Other Equity Interests at Fair Value110.7 197.0 189.1 
Reported as Equity Securities at Modified Cost:
Other— 6.0 8.3 
Total Reported as Equity Securities at Modified Cost— 6.0 8.3 
Total Investments in Limited Liability Companies and Limited Partnerships$201.2 $444.9 $430.7 
The Company expects that it will be required to fund its commitments over the next several years. The Company expects that the proceeds from distributions from these investments will be the primary source of funding of such commitments.

72

Insurance, Interest, and Other Expenses
Expenses for the six and three months ended June 30, 2023 and 2022 were:
 Six Months EndedThree Months Ended
(Dollars in Millions)Jun 30,
2023		Jun 30,
2022		Jun 30,
2023		Jun 30,
2022
Insurance Expenses:
Commissions$332.2 $382.8 $165.3 $190.9 
General Expenses168.7 178.5 74.5 91.4 
Taxes, Licenses and Fees44.1 50.6 20.5 25.2 
Total Costs Incurred545.0 611.9 260.3 307.5 
Net Policy Acquisition Costs (Deferred) Amortized(10.6)(2.2)5.3 (0.5)
Amortization of Value of Business Acquired (“VOBA”)1.0 2.8 0.5 0.7 
Insurance Expenses535.4 612.5 266.1 307.7 
Loss from Early Extinguishment of Debt— 3.7 — — 
Interest and Other Expenses:
Interest Expense28.1 26.7 14.0 14.0 
Other Expenses:
Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs58.6 14.6 29.5 9.9 
Other69.0 66.3 34.8 29.6 
Other Expenses127.6 80.9 64.3 39.5 
Interest and Other Expenses155.7 107.6 78.3 53.5 
Goodwill Impairment49.6 — 49.6 — 
Total Expenses$740.7 $723.8 $394.0 $361.2 
Insurance Expenses
Insurance Expenses were $535.4 million for the six months ended June 30, 2023, compared to $612.5 million for the same period in 2022. Insurance Expenses decreased by $77.1 million in 2023 due primarily to lower expenses from less business being written.
Insurance Expenses were $266.1 million for the three months ended June 30, 2023, compared to $307.7 million for the same period in 2022. Insurance Expenses decreased by $41.6 million in 2023 due primarily to lower expenses from less business being written.
Loss from Early Extinguishment of Debt
Loss from Early Extinguishment of Debt decreased by $3.7 million for the six months ended June 30, 2023, compared to the same period in 2022 due to the redemption of the 2022 Senior Notes.
Interest and Other Expenses
Interest expense increased by $1.4 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to the addition of the 2032 Senior Notes and the 2062 Junior Debentures.
Other expenses increased by $46.7 million for the six months ended June 30, 2023, compared to the same period in 2022, due primarily to increases in Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs.
Other expenses increased by $24.8 million for the three months ended June 30, 2023, compared to the same period in 2022, due primarily to increases in Acquisition and Disposition Related Transaction, Integration, Restructuring and Other Costs.
Goodwill Impairment
Goodwill Impairments increased $49.6 million for the six and three months ended June 30, 2023 and 2022 due to the impairment of goodwill related to the Preferred Property & Casualty Insurance segment. See Note 3 “Goodwill,” to the Condensed Consolidated Financial Statements for more information.
73

Income Taxes
The federal corporate statutory income tax rate was 21% for the six months ended June 30, 2023 and June 30, 2022. The Company’s effective income tax rate differs from the federal corporate income tax rate due primarily to (1) the effects of tax-exempt investment income, (2) nontaxable income associated with the change in cash surrender value on Company-Owned Life Insurance, (3) Alternative Energy Partnership Investment and general business tax credits, (4) a permanent difference between the amount of long-term equity-based compensation expense recognized under GAAP and the amount deductible in the computation of Federal taxable income (5) a permanent difference associated with nondeductible executive compensation, and (6) an impairment of non-tax deductible goodwill.
The Inflation Reduction Act (H.R. 5376 or the "Law") was signed into law on August 16, 2022, and became generally effective on January 1, 2023. Included in the provisions of the Law are various changes to the tax code, including the establishment of a Corporate Alternative Minimum tax. The Company has evaluated the provisions of the Law and does not expect a material impact. The Company will continue to monitor guidance as it is released by the Internal Revenue Service and United States Treasury.
Tax-exempt investment income and dividends received deductions collectively were $13.2 million for the six months ended June 30, 2023, compared to $12.3 million for the same period in 2022. Tax-exempt investment income and dividends received deductions collectively were $5.5 million for the three months ended June 30, 2023, compared to $6.0 million for the same period in 2022.
The nontaxable increase in cash surrender value on Company-Owned Life Insurance was $16.2 million for the six months ended June 30, 2023, compared to $18.1 million for the same period in 2022. The nontaxable increase in cash surrender value on Company-Owned Life Insurance was $7.3 million for the three months ended June 30, 2023, compared to $9.8 million for the same period in 2022.
The Company recaptured investment tax credits of $0.1 million for the six months ended June 30, 2023, compared to realized investment tax credits of $3.5 million for the same period in 2022. The Company did not realize or recapture investment tax credits for the three months ended June 30, 2023 or for the same period in 2022.
The amount of expense recognized for long-term equity-based compensation expense under GAAP was $0.5 million higher than the amount that would be deductible under the IRC for the six months ended June 30, 2023, compared to $5.1 million higher for the same period in 2022. The amount of expense recognized for long-term equity-based compensation expense under GAAP was $0.5 million higher than the amount that would be deductible under the IRC for the three months ended June 30, 2023, compared to $1.5 million higher for the same period in 2022.
The amount of nondeductible executive compensation was $7.2 million for the six months ended June 30, 2023, compared to $6.2 million for the same period in 2022. The amount of nondeductible executive compensation was $2.3 million for the three months ended June 30, 2023, compared to $3.1 million for the same period in 2022.
The total impairment of non-tax deductible goodwill was $30.0 million for the six and three months ended June 30, 2023. No impairment of non-tax deductible goodwill was recorded in the six and three months ended June 30, 2022.

Recently Issued Accounting Pronouncements
The Company has adopted all recently issued accounting pronouncements with effective dates prior to June 30, 2023.
In August 2018, the FASB issued ASU 2018-12. The Company’s adoption of LDTI was effective January 1, 2023 under the modified retrospective transition method. See Note 1, “Basis of Presentation and Accounting Policies,” to the Condensed Consolidated Financial Statements for more information.
Other than discussed above, there were no adoptions of such accounting pronouncements during the six months ended June 30, 2023 that had a material impact on the Company’s Condensed Consolidated Financial Statements.

74

Liquidity and Capital Resources
Amended and Extended Credit Agreement
On March 15, 2022, the Company entered into an amended and extended credit agreement. The amended and extended credit agreement increased the borrowing capacity of the existing unsecured credit agreement to $600.0 million and extended the maturity date to March 15, 2027. Furthermore, the amended and extended credit agreement provides for an accordion feature whereby the Company can increase the revolving credit borrowing capacity by and additional $200.0 million for a total of maximum capacity of $800.0 million. Financial covenants within the agreement limit the Company from accessing the maximum capacity. The amount available as of June 30, 2023 was $460.0 million. There were no outstanding borrowings under the credit agreement at either June 30, 2023 or December 31, 2022.

Long-term Debt
The Company designates debt obligations as either short-term or long-term based on maturity date at issuance, or in the case of the 2022 Senior Notes, based on the date of assumption. Total amortized cost of Long-term Debt outstanding at June 30, 2023 and December 31, 2022 was:
(Dollars in Millions)Jun 30,
2023		Dec 31,
2022
Senior Notes:
4.350% Senior Notes due February 15, 2025
$449.5 $449.3 
2.400% Senior Notes due September 30, 2030
396.8 396.6 
3.800% Senior Notes due February 23, 2032
395.7 395.5 
5.875% Fixed-Rate Reset Junior Subordinated Debentures Due 2062
146.1 145.5 
Total Long-term Debt Outstanding$1,388.1 $1,386.9 
See Note 17, “Debt,” to the Consolidated Financial Statements for more information regarding the Company’s long-term debt.
Federal Home Loan Bank Agreements
Kemper’s subsidiaries, United Insurance Company of America (“United Insurance”), Trinity Universal Insurance Company (“Trinity”), and American Access Casualty Company (“AAC”) are members of the Federal Home Loan Banks (“FHLBs”) of Chicago, Dallas and Chicago respectively. Alliance United Insurance Company (“Alliance”) was a member of the FHLB of San Francisco until it surrendered all California licenses on January 30, 2023 and ceased to exist as an insurance company. American Access Casualty Company became a member of the FHLB of Chicago in May 2022. United Insurance and Trinity became members of the FHLBs of Chicago and Dallas, respectively, in 2013. Under their memberships, United Insurance, Trinity and AAC may borrow through the advance program of their respective FHLB. As a requirement of membership in the FHLB, United Insurance, Trinity and AAC must maintain certain levels of investment in FHLB common stock and additional amounts based on the level of outstanding borrowings. The Company’s investments in FHLB common stock are reported at cost and included in Other Investments.  The carrying value of FHLB of Chicago common stock was $17.5 million at June 30, 2023 and December 31, 2022, respectively. The carrying value of FHLB of Dallas common stock was $3.5 million and $3.4 million at June 30, 2023 and December 31, 2022, respectively. The carrying value of FHLB of San Francisco common stock was $1.4 million at December 31, 2022. The Company periodically uses short-term FHLB borrowings for a combination of cash management and risk management purposes, in addition to long-term FHLB borrowings for spread lending purposes.
During the first six months of 2023, United Insurance received advances of $114.2 million from the FHLB of Chicago and made repayments of $114.2 million. United Insurance had outstanding advances from the FHLB of Chicago totaling $601.0 million at June 30, 2023. These advances were made in connection with the Company’s spread lending program. The proceeds related to these advances were used to purchase fixed maturity securities to earn incremental net investment income.
With respect to these advances, United Insurance held pledged securities in a custodial account with the FHLB of Chicago with a fair value of $756.5 million at June 30, 2023. The fair value of the collateral pledged must be maintained at certain specified levels above the borrowed amount, which can vary depending on the assets pledged. If the fair value of the collateral declines below these specified levels of the amount borrowed, United Insurance would be required to pledge additional collateral or repay outstanding borrowings. See Note 16, “Policyholder Obligations,” to the Condensed Consolidated Financial Statements for additional information about the United Insurance advances and related funding agreements.

75

Liquidity and Capital Resources (Continued)
Common Stock Repurchases
On May 6, 2020, Kemper’s Board of Directors authorized the repurchase of up to an additional $200.0 million of Kemper’s common stock, in addition to $133.3 million remaining under the August 6, 2014 authorization, bringing the remaining share repurchase authorization to approximately $333.3 million. As of June 30, 2023 the remaining share repurchase authorization under the repurchase program was $171.6 million. The amount and timing of any future share repurchases under the authorization will depend on a variety of factors, including market conditions, the Company’s financial condition, results of operations, available liquidity, particular circumstances and other considerations.
During the six and three months ended June 30, 2023 and 2022, Kemper did not repurchase any shares of its common stock.
Dividends to Shareholders
Kemper paid a quarterly dividend to shareholders of $0.31 per common share in the second quarter of 2023. Dividends and dividend equivalents paid were $39.6 million for the six months ended June 30, 2023.
Subsidiary Dividends
Various insurance laws restrict the ability of Kemper’s insurance subsidiaries to pay dividends without regulatory approval. Such insurance laws generally restrict the amount of dividends paid in an annual period to the greater of statutory net income from the previous year or 10% of statutory capital and surplus. Kemper’s insurance subsidiaries collectively paid $103.0 million in dividends to Kemper during the first six months of 2023. Kemper estimates that its direct insurance subsidiaries would be able to pay approximately $77.9 million in additional dividends to Kemper during the remainder of 2023 without prior regulatory approval.
Sources and Uses of Funds
Kemper and its direct non-insurance subsidiaries directly held cash and investments totaling $220.3 million at June 30, 2023, compared to $417.6 million at December 31, 2022.
The primary sources of funds available for repayment of Kemper’s indebtedness, repurchases of common stock, future shareholder dividend payments, and the payment of interest on Kemper’s senior notes and term loan, include cash and investments directly held by Kemper, receipt of dividends from Kemper’s insurance subsidiaries and borrowings under the credit agreement and from subsidiaries.
The primary sources of funds for Kemper’s insurance subsidiaries are premiums, investment income, proceeds from the sales, and maturity of investments, advances from the FHLBs of Chicago and Dallas, and capital contributions from Kemper. The primary uses of funds are the payment of policyholder benefits under life insurance contracts, claims under property and casualty insurance contracts and accident and health insurance contracts, the payment of commissions and general expenses, the purchase of investments and repayments of advances from the FHLBs of Chicago and Dallas.
Generally, there is a time lag between when premiums are collected and when policyholder benefits and insurance claims are paid. During periods of growth, property and casualty insurance companies typically experience positive operating cash flows and are able to invest a portion of their operating cash flows to fund future policyholder benefits and claims. During periods in which premium revenues decline, insurance companies may experience negative cash flows from operations and may need to sell investments to fund payments to policyholders and claimants. In addition, if the Company’s property and casualty insurance subsidiaries experience several significant catastrophic events over a relatively short period of time, investments may be sold to fund payments, which could result in investment gains or losses. Management believes that its property and casualty insurance subsidiaries maintain adequate levels of liquidity in the event that they were to experience several future catastrophic events over a relatively short period of time.




76

Liquidity and Capital Resources (Continued)
Information about the Company’s cash flows for six months ended June 30, 2023 and 2022 is presented below.
DOLLARS IN MILLIONSJune 30, 2023June 30, 2022
Net Cash Used in Operating Activities$(65.9)$(90.0)
Net Cash Used in Investing Activities(35.1)(132.5)
Net Cash (Used in) Provided by Financing Activities(37.8)422.9 
Cash available for investment activities in total is dependent on cash flow from Operating Activities and Financing Activities and the level of cash the Company elects to maintain.
Net Cash Used in Operating Activities
Net cash used in Operating Activities was $65.9 million for the six months ended June 30, 2023, compared to $90.0 million for the same period in 2022. The decrease in cash used in Operating Activities was primarily due to a $124.7 million federal income tax refund that was received in first quarter 2023, partially offset by timing of paid losses on claims within the P&C business.

Net Cash Used in Investing Activities
Net cash used in Investing Activities for the six months ended June 30, 2023 was $35.1 million, compared to $132.5 million for the same period in 2022. The decrease in cash used in Investing Activities was primarily driven by the ongoing management of our investment portfolio that was impacted by a decrease in new business written from our Property and Casualty operations.

Net Cash (Used in) Provided by Financing Activities

Net cash used in Financing Activities for the six months ended June 30, 2023 was $37.8 million, compared to cash provided of $422.9 million for the same period in 2022, a decrease of $460.7 million. This was primarily due to a decrease in debt raising activities in 2023.

Critical Accounting Estimates
Kemper’s subsidiaries conduct their operations in two industries: property and casualty insurance and life and health insurance. Accordingly, the Company is subject to several industry-specific accounting principles under GAAP. The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The process of estimation is inherently uncertain. Accordingly, actual results could ultimately differ materially from the estimated amounts reported in a company’s financial statements. Different assumptions are likely to result in different estimates of reported amounts.
The Company’s critical accounting policies most sensitive to estimates include the valuation of investments, the valuation of reserves for property and casualty insurance incurred losses and LAE, the valuation of liability for future policyholder benefits, the assessment of recoverability of goodwill, the valuation of pension benefit obligations, and the recoverability of deferred tax assets. The Company’s critical accounting policies are described in the MD&A included in the 2022 Annual Report. There have been no material changes to the information disclosed in the 2022 Annual Report with respect to these critical accounting estimates and the Company’s significant accounting policies, other than the addition of significant accounting policies related to the adoption of ASU 2018-12 included in Note 1, “Basis of Presentation and Accounting Policies” to the Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the Company’s disclosures about market risk in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk of Part II of the 2022 Annual Report. Accordingly, no disclosures about market risk have been made in Item 3 of this Form 10-Q.


77

Item 4. Controls and Procedures
(a)    Evaluation of disclosure controls and procedures.

The Company’s management, with the participation of Kemper’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on such evaluation, Kemper’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by Kemper in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC’s rules and forms, and accumulated and communicated to the Company’s management, including Kemper’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)    Changes in internal control over financial reporting.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION
Items not listed here have been omitted because they are inapplicable or the answer is negative.
Item 1. Legal Proceedings
Information concerning pending legal proceedings is incorporated herein by reference to Note 20, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements in Part I of this Form 10-Q.
Item 1A. Risk Factors
For a discussion of the Company’s significant risk factors, see Item 1A. of Part I of the 2022 Annual Report. Readers are also advised to consider other factors not presently known by, or considered material to, the Company that could materially affect the Company’s business, financial condition and results of operations, along with other information disclosed in the 2022 Annual Report and this Quarterly Report on Form 10-Q, including the factors set forth under the caption “Caution Regarding Forward-Looking Statements” beginning on page 1 of the 2022 Annual Report and on page 1 of this Quarterly Report on Form 10-Q, and to consult any further disclosures Kemper makes on related subjects in its filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 
On May 6, 2020, Kemper’s Board of Directors authorized the repurchase of up to an additional $200.0 million of Kemper common stock, in addition to the $133.3 million remaining under the August 6, 2014 authorization, bringing the remaining share repurchase authorization to approximately $333.3 million. As of December 31, 2022, the remaining share repurchase authorization was $171.6 million under the repurchase program. During the quarter ended June 30, 2023, Kemper did not repurchase any shares. As of June 30, 2023, the remaining share repurchase authorization was $171.6 million under the repurchase program.
All purchases were made in the open market in accordance with applicable federal securities laws, including Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Securities Trading Plans of Executive Officers and Directors
The Company’s Insider Trading Policy permits executive officers and directors to enter into trading plans designed to comply with Rule 10b5-1 under the Exchange Act. During the three months ended June 30, 2023, none of the Company’s executive officers or directors adopted, modified or terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
78

Item 6. Exhibits
The Exhibit Index that follows has been filed as part of this report. Exhibit numbers correspond to the numbering system in Item 601 of Regulation S-K.
Exhibit Index
The following exhibits are either filed as a part hereof or are incorporated by reference. Exhibit numbers followed by an asterisk (*) indicate exhibits that are management contracts or compensatory plans or arrangements.
Incorporated by Reference
Exhibit NumberExhibit DescriptionFormFile NumberExhibitFiling DateFiled or Furnished Herewith
10.1*X
10.2*X
10.3*X
10.4*X
10.5*X
10.6*X
10.7*X
31.1X
31.2X
32.1X
32.2X
101.1XBRL Instance DocumentX
101.2XBRL Taxonomy Extension Schema DocumentX
101.3XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.4XBRL Taxonomy Extension Label Linkbase DocumentX
101.5XBRL Taxonomy Extension Presentation Linkbase DocumentX
101.6XBRL Taxonomy Extension Definition Linkbase DocumentX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)X
79

Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Kemper Corporation
Date:August 7, 2023/s/    JOSEPH P. LACHER, JR.
Joseph P. Lacher, Jr.
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)
Date:August 7, 2023/s/    JAMES J. MCKINNEY
James J. McKinney
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date:August 7, 2023/s/    JAMES A. ALEXANDER
James A. Alexander
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
80

Kemper Corporation 2023 Omnibus Plan
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK UNIT AWARD AGREEMENT
This NON-EMPLOYEE DIRECTOR RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”) is made as of this ______ day of _________________, 20__ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (“Company”), and «name» (“Participant”) for an Award of restricted stock units (“RSUs”), each representing the right to receive one share of the Company’s common stock (“Common Stock”) on the terms and conditions set forth in this Agreement.
SIGNATURES
As of the date set forth above, the parties have accepted the terms of this Agreement by signing this Agreement by an electronic signature, and each party agrees that such signature shall not be denied legal effect, validity or enforceability solely because it was submitted or executed electronically.
KEMPER CORPORATION              PARTICIPANT
By: ____________________________________        _____________________________
«CEO or Chairman of the Board Signature and Title»    «Name»
RECITALS
A.The Board of Directors of the Company (“Board”) has adopted the Kemper Corporation 2023 Omnibus Plan (“Plan”), including all amendments to date, to be administered by the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer the Plan (“Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.
B.The Plan provides, among other things, for grants of awards to non-employee Directors of the Company, of the type, in the amounts and subject to such terms as shall be determined from time to time by the Board after considering any recommendation by the Committee.
C.The Committee has adopted rules and procedures for the deferral of non-employee Director RSU Awards that permit a non-employee Director to defer the date on which an RSU granted to a non-employee Director is converted into Common Stock (“Deferral Rules and Procedures”).
NOW, THEREFORE, the parties hereto agree as follows:
1.Grant. The Company grants an aggregate of «shares» («shares») RSUs, which represent the Company’s unfunded and unsecured promise to issue shares of Common Stock, to the Participant, subject to the terms and conditions set forth in this Agreement. The RSUs shall not entitle the Participant to any rights of a shareholder of Common Stock and the Participant has no rights with respect to the Award other than rights as a general creditor of the Company.
2.Governing Plan. This Award is granted pursuant to the Plan, which is incorporated herein for all purposes. The Participant agrees to be bound by the terms and
As of 5-2-23


conditions of the Plan, which controls in case of any conflict with this Agreement, except as otherwise provided for in the Plan. No amendment of the Plan shall adversely affect this Award in any material way without the written consent of the Participant.
3.Restrictions on Transfer. The RSUs shall be restricted during a period (“Restriction Period”) beginning on the Grant Date and expiring on the Settlement Date (as defined in Section 6 below). During the Restriction Period, neither this Agreement, the RSUs nor any rights and privileges granted hereby may be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise (any such disposition being referred to herein as a “Transfer”), except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be Transferred during the Restriction Period to the spouse or former spouse of the Participant pursuant to any divorce proceedings, settlement or judgment, unless approved by the Committee. Any attempt to Transfer this Agreement, the RSUs or any other rights or privileges granted hereby contrary to the provisions hereof shall be null and void and of no force or effect, and the Company shall not recognize or give effect to any such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such RSUs.
4.Vesting and Forfeiture.
(a)Vesting. To the extent not previously forfeited, the RSUs shall fully vest on the earliest to occur of the following (“Vesting Date”), except as otherwise provided herein:
(i)the first anniversary of the Grant Date, if the Participant continues in Service through such anniversary date;
(ii)the date of the Participant’s death, if the Participant dies while in Service;
(iii)the date of the Participant’s Disability, if the Participant becomes Disabled while in Service;
(iv)the date of a Change of Control after which the Director ceases to serve as a Director or as a member of the board of directors of any successor to the Company, unless such cessation is due to the Director’s voluntary resignation;
(v)the expiration of the annual term of the Participant if the Participant elects not to stand for re-election as a Director; or
(vi)any date upon which vesting is accelerated by the Committee in its discretion in accordance with the terms of the Plan.
Notwithstanding the foregoing, if the Participant makes a deferral election in accordance with the Company’s Deferral Rules and Procedures on or after the first day of the calendar year in which the RSU is awarded (as permitted by Section 409A with respect to certain forfeitable rights), such Participant may be vested only upon a date or event described in Section 4(a)(i) through (iv) and if such event is a Change of Control, only if such Change of Control is a change in control event described in Treas. Reg. §1.409A-3(i)(5).
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(b)Termination of Service. On the date of the Participant’s cessation of Service, all unvested RSUs that do not vest upon such cessation of Service in accordance with this Agreement shall be forfeited to the Company.
(c)Certain Definitions.
(i)“Service” means the period during which the Participant is a Director.
(ii)“Disabled” or “Disability” means that the Participant either:
(A)is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or
(B)is determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.
5.Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to the Common Stock during the Restriction Period, the Participant shall be eligible to receive a cash payment equal to the total cash dividend the Participant would have received had the RSUs been actual shares of Common Stock (“Dividend Equivalents”), provided that the Participant vests in the RSUs. Any such cash payment shall be made on the Vesting Date. After the Vesting Date and prior to the settlement date, as defined in Section 6 (the “Settlement Date”), the Participant shall be entitled to receive payment of Dividend Equivalents on the date that the dividends are payable to holders of the Company’s Common Stock.
6.Conversion of RSUs; Issuance of Common Stock. Except as otherwise provided in Section 9, the Company shall cause one share of Common Stock to be issued for each vested RSU on the Settlement Date, as defined below:
(a)For a Participant who does not elect to defer the Settlement Date pursuant to the Deferral Rules and Procedures, the Settlement Date shall be the Vesting Date or any date after the Vesting Date which is no later than the first to occur of (a) March 15th following the calendar year in which the Vesting Date occurred, or (b) 90 days following the Vesting Date; and
(b)For a Participant who elects to defer the Settlement Date pursuant to the Deferral Rules and Procedures, the Settlement Date shall be such date as the Participant elected, in accordance with such procedures, to have the RSUs converted to shares of Common Stock, except that in the event the Vesting Date is accelerated due to the Participant’s death, Disability or pursuant to a Change of Control, the Settlement Date shall be the date described in Section 6(a) if the Participant’s deferral election was permitted pursuant to Treas. Reg. §1.409A-2(a)(5) (relating to initial deferral elections with respect to certain forfeitable rights) and was not otherwise permissible under Treas. Reg. §1.409A-2.
Any issuance of Common Stock shall be in book-entry form, registered in the Participant’s name (or in the name of the Participant’s Representative, as the case may be), in payment of whole RSUs. Any fractional shares of Common Stock that would otherwise be issued to the Participant shall instead be paid in the form of cash.
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7.Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the applicable date or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, the Fair Market Value shall be determined by the Company in its sole discretion in accordance with the Plan).
8.Section 409A. The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Agreement shall be interpreted and administered in accordance with such intent. In no event shall the Company and/or its Affiliates be liable for any tax, interest or penalties that may be imposed on the Participant (or the Participant’s estate) under Section 409A.
9.Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules. No shares issuable upon the vesting of the RSUs shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (“Act”) (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange (or such other exchange(s) or market(s) on which shares of the same class are then listed) and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to ensure that such full compliance on the part of the Company is made. By signing this Agreement, the Participant represents and warrants that none of the shares to be acquired in settlement of the RSUs will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Act, and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Participant hereby agrees to indemnify the Company in the event of any violation by the Participant of such Act, rules, regulations or laws. The Company will use its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 6; provided that if the Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates that such settlement will not cause a violation of applicable law, all in accordance with Treas. Reg. §1.409A-2(b)(7)(ii).
10.Certain Adjustments. If, during the term of this Agreement, there shall be any equity restructurings (within the meaning of FASB Accounting Standards Codification® Topic 718) that causes the per share value of a share of Common Stock to change, such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a large, nonrecurring cash dividend, and similar matters, the Committee shall make or cause to be made an equitable adjustment to the number and kind of RSUs subject to the Award. If, during the term of this Agreement, there shall be any other changes in corporate capitalization, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the RSUs in a manner consistent with Sections 4.3 and 21.2 of the Plan. The Committee’s determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional RSUs shall be issued under the Plan on any such adjustment.
11.Participation by Participant in Other Company Plans. Nothing herein contained shall affect the right of the Participant to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare
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benefit plan or program of the Company or of any Affiliate of the Company in which non-employee Directors are otherwise eligible to participate.
12.No Right to Continue as a Director. Nothing herein contained shall be construed as an agreement by the Company, expressed or implied, that the Participant has a right to continue as a Director for any period of time or at any particular rate of compensation.
13.Death of the Participant. In the event of the Participant’s death prior to the Settlement Date, delivery of shares of Common Stock pursuant to Section 6 shall be made to the duly appointed and qualified executor or other personal representative of the Participant, to be distributed in accordance with the Participant’s will or applicable intestacy law.
14.Arbitration. In lieu of litigation by way of court or jury trial, any dispute or controversy arising hereunder shall be settled by arbitration pursuant to the terms of this paragraph.  The parties agree that this Agreement provides sufficient consideration for that obligation and the mutual promises to arbitrate also constitutes consideration for this agreement to arbitrate.  The following terms and conditions shall apply to such arbitration hereunder. The arbitration shall be conducted before a single arbitrator in accordance with the Employment Arbitration Rules of the American Arbitration Association (“AAA Rules”) then in effect, and shall be governed by the Federal Arbitration Act. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including filing fees) and the fees of the arbitrator will be paid by the Company. The Participant and the Company waive the right for any dispute to be brought, heard, decided, or arbitrated as a class and/or collective action (or joinder or consolidation with claims of any other person), and the parties agree that, regardless of anything else in this arbitration provision or the AAA Rules, the interpretation, applicability, enforceability or formation of the class action waiver in this provision may only be determined by a court and not an arbitrator.  Regardless of anything else in this Agreement, this arbitration provision may not be modified or terminated absent a writing signed by the Participant and the Company stating an intent to modify or terminate the arbitration provision. 
15.Governing Law. Except as otherwise provided in Section 14, this Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles.
16.Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the RSUs granted hereby and may not be amended except in a writing signed by both the Company and the Participant or his or her Representative. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.


5

Kemper Corporation 2023 Omnibus Plan
NON-QUALIFIED STOCK OPTION AND SAR AWARD AGREEMENT
(Cliff-Vesting Form)
This NON-QUALIFIED STOCK OPTION AND SAR AWARD AGREEMENT (“Agreement”) is made as of this ______ day of __________________, 20__ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (“Company”), and «name» (“Participant”), for an award consisting of the right and option (“Option”) to purchase, on the terms and conditions hereinafter set forth, shares of the Company’s common stock (“Common Stock”), along with a tandem stock appreciation right (“SAR”).
SIGNATURES
As of the date set forth above, the parties have accepted the terms of this Agreement by signing this Agreement by an electronic signature, and each party agrees that such signature shall not be denied legal effect, validity or enforceability solely because it was submitted or executed electronically.
KEMPER CORPORATION                PARTICIPANT
By: __________________________________    ____________________________________
«CEO Signature and Title»    «name»
RECITALS
A.The Board of Directors of the Company (“Board”) has adopted the Kemper Corporation 2023 Omnibus Plan (“Plan”), including all amendments to date, to be administered by the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer the Plan (“Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.
B.The Plan authorizes the Committee to grant to selected Employees, Directors and Third Party Service Providers awards of various types, including Options to purchase shares of Common Stock and tandem SARs.
C.Pursuant to the Plan, the Committee has determined that it is in the best interests of the Company and its shareholders to grant a non-qualified Option (and tandem SAR) to the Participant under the terms and conditions specified in this Agreement as an inducement to remain in the service of the Company and as an incentive for increased effort during such service.
D.Neither the Option nor the SAR granted hereby is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, the parties hereto agree as follows:
1.Grant.
(a)The Company grants the Option to purchase all or any part of an aggregate of «shares» («number») shares of Common Stock at the Exercise Price (as


defined below) to the Participant, which will be exercisable in accordance with the provisions of this Agreement; provided that the Option may not be exercised with respect to a fraction of a share.
(b)The Option is coupled with a SAR that is exercisable to the extent, and only to the extent, that the Option is vested as described in Section 6. The SAR shall entitle the Participant to surrender the Option (or any portion thereof, subject to Section 8(a)) to the Company unexercised and receive in exchange therefor that number of shares of Common Stock having an aggregate value equal to: (A) the excess of the Fair Market Value (as defined below) of one share of Common Stock over the Exercise Price, multiplied by (B) the number of such shares of Common Stock subject to the Option (or portion thereof) which is so surrendered.
2.Exercise Price. The per share price of Common Stock issuable upon exercise of the Option or SAR shall be $ ____ (“Exercise Price”), which shall not be less than 100% of the Fair Market Value of a share of Common Stock on the Grant Date. The Exercise Price may be adjusted in accordance with Section 13.
3.Governing Plan. The Option is granted pursuant to the Plan, which is incorporated herein for all purposes. The Participant agrees to be bound by the terms and conditions of the Plan, which controls in case of any conflict with this Agreement, except as otherwise provided for in the Plan. No amendment of the Plan shall adversely affect this Option in any material way without the written consent of the Participant.
4.Restrictions on Transfer. The Option and SAR and all rights and privileges granted hereby (including the right of exercise) shall not be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise, except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be assigned or otherwise transferred to the spouse or former spouse of the Participant pursuant to any divorce proceedings, settlement or judgment, unless approved by the Committee. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the Option or the SAR or any other rights or privileges granted hereby contrary to the provisions hereof, the Option and SAR and all other rights and privileges contained herein shall immediately become null and void and of no further force or effect.
5.Term. Except as provided in Section 11, neither the Option nor the SAR shall be exercisable after the Company’s close of business on the last business day that occurs coincident with or prior to the earliest of (“Expiration Date”):
(a)the 10th anniversary of the Grant Date;
(b)the first anniversary of the Participant’s death;
(c)the first anniversary of the Participant’s termination of Service due to the Participant’s Disability;
(d)if the Participant was not Retirement Eligible (as defined below) on the date of the Participant’s termination of Service (other than as described in (b) or (c) above), the date that is three (3) months following the Participant’s termination of Service for any reason other than Cause;
(e)if the Participant was Retirement Eligible on the date of the Participant’s termination of Service (other than as described in (b) or (c) above), the earlier of (A) the 10th anniversary of the Grant Date or (B) the date on which the Participant became an
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employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Committee in its sole discretion; or
(f)any date of the Participant’s termination of Service for Cause.
6.Vesting and Exercise.
(a)Vesting. The Option and/or the SAR may only be exercised to the extent they are vested. To the extent not previously forfeited, the Option and SAR shall fully vest on the earliest to occur of the following (“Vesting Date”):
(i)the _________ anniversary of the Grant Date, if the Participant continues in Service through such date;
(ii)the date of the Participant’s death, if the Participant dies while in Service;
(iii)the date of the Participant’s Disability, if the Participant becomes Disabled while in Service; or
(iv)the date upon which vesting is accelerated in accordance with Section 13(b), or otherwise by the Committee in its discretion in accordance with the terms of the Plan. 
(b)Certain Definitions.
(i)“Cause” means any of the following: (1) the Participant’s theft or falsification of any Company or Affiliate documents, records or property; (2) the Participant’s improper use or disclosure of the Company’s or an Affiliate’s confidential or proprietary information in breach of the Company’s Essential Standards of Conduct or an applicable contractual or other obligation, or using such information for personal gain including, without limitation, by trading in Company securities on the basis of material, non-public information; (3) fraud, misappropriation of or intentional material damage to the property or business of the Company or an Affiliate or other action by the Participant which has a material detrimental effect on the Company’s or an Affiliate’s reputation or business as determined by the Committee; (4) the Participant’s material failure or inability to perform any reasonable assigned and lawful duties after written notice from the Company or Affiliate of such failure or inability, and such failure or inability is not cured by the Participant within ten (10) business days; (5) the Participant’s conviction (including any plea of guilty or nolo contendere) of any felony or any criminal violation involving fraud, embezzlement, misappropriation, dishonesty, the misuse or misappropriation of money or other property or any other crime which has or would reasonably be expected to have an adverse effect on the business or reputation of the Company or an Affiliate or (6) a material breach by the Participant of the policies and procedures of the Company or an Affiliate, including, but not limited to, any breach of the Company’s Essential Standards of Conduct and the requirements of Section 18 below.
(ii)“Disabled” or “Disability” means that the Participant either:
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(A)is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and, with respect to a Participant who is an Employee, is receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan (e.g., a long term disability plan) covering Employees of the Company or Affiliate that employs the Participant ; or
(B)is determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.
(iii)“Employer” means the Company or Affiliate by whom the Participant is employed, or to whom the Participant provides services.
(iv)“Good Reason” means any action taken by the Employer which results in a material negative change to the Participant in the employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services. A termination by the Participant shall not constitute termination for Good Reason unless the Participant shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than ninety (90) days after the occurrence of such event), and there shall have passed a reasonable time (not less than thirty (30) days) within which the Employer may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Participant and the Participant terminates within ninety (90) days following the expiration of the cure period.
(v)“Retirement Eligible” means that the Participant has either attained age 55 and completed ten (10) years of Service as an Employee or attained age 60 and completed five (5) years of Service as an Employee.
(vi)“Service” means the period during which the Participant is an Employee, Director or Third Party Service Provider; provided, however, that the Participant will not be deemed to be in Service after the Company divests its control in the Affiliate for whom the Participant is exclusively in Service, or if the Company’s control of such Affiliate otherwise ceases.
7.Termination of Service. On the date of the Participant’s cessation of Service, any unvested portion of the Option and SAR held by the Participant that does not vest upon such cessation of Service in accordance with this Agreement shall be forfeited to the Company. If the Participant’s Service is terminated, or is deemed to be terminated, for Cause, any outstanding portions of the Option and SAR held by the Participant (vested or unvested) shall be forfeited to the Company on the date of such termination of Service. For purposes of the preceding sentence, a Participant’s Service shall be deemed terminated for Cause if the Participant resigns or is terminated and the Committee determines in good faith, either before, at the time of, or after such termination, that one or more of the events or actions described in the definition of Cause in Section 6(b) existed as of the time of such termination.
8.Manner of Exercise.
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(a)During the period beginning on the Vesting Date and ending on the Expiration Date, the Participant may purchase all or any part of the shares of Common Stock subject to the Option or may receive such lesser number of shares as may be available through the exercise of the SAR. In the event the Option (or any portion thereof) is exercised, then the SAR (or the corresponding portion) shall terminate. In the event that the SAR (or any portion thereof) is exercised, then the Option (or the corresponding portion) shall likewise terminate. Consequently, the total number of shares subject to the Option shall be reduced by the number of shares for which the Option or the SAR has previously been exercised. Likewise, the total number of shares subject to the SAR shall be reduced by the number of shares for which the SAR or the Option has previously been exercised.
(b)Each exercise of the Option shall be initiated by the Participant or his or her Representative by means of a notice of exercise delivered to the Company through the internet portal (“Portal”) provided by or on behalf of the Company or, if such Portal is not available for such exercise, in the form of a written document or electronic mail (“Notice”). The Notice shall identify the number of shares for which the Option is being exercised. Before shares of Common Stock will be issued and subject to the requirements of Section 9 below, the aggregate Exercise Price for the shares for which the Option is being exercised shall be paid to the Company in a manner permitted under the Plan.
(c)Each exercise of the SAR shall be initiated by the Participant or his or her Representative by delivery of a Notice as described above in Section 8(b). The Notice shall identify the number of shares for which the SAR is being exercised. Upon satisfaction of the Participant’s obligation to pay the Company the amount of all taxes that the Company is required to withhold in connection with such exercise as specified in Section 9 below, the Company shall issue to the Participant a number of shares of the Company’s common stock determined in accordance with Section 1(b). The SAR may only be settled by delivery of shares of Common Stock and not by payment of cash to the Participant. Any fractional share that would otherwise result from an exercise of the SAR shall be rounded down to the nearest whole share.
(d)The date of exercise shall be: (i) in the case of an Option exercise, the date that the Company receives the Notice if received within regular market hours on a day that the New York Stock Exchange is open for business (“Trading Day”), and otherwise on the next Trading Day; provided, however, that if the Notice is provided by means of a “Good Till Cancelled Order” involving a “Same Day Sale” or “Sell to Cover” transaction (“Order”), then the date of exercise shall instead be the date that the Order is executed; (ii) in the case of a SAR exercise not conducted through the Portal, the date specified in the Notice or, if not specified, the date that the Company receives the Notice; or (iii) in the case of a SAR exercise conducted through the Portal, the date that the Company receives the Notice if received within regular market hours on a Trading Day, and otherwise on the next Trading Day.
(e)The Option and SAR may be exercised only by the Participant or his or her Representative, and not otherwise, regardless of any community property interest therein of the spouse of the Participant, or such spouse’s successors in interest. If the spouse of the Participant shall have acquired a community property interest in the Option or the SAR, the Participant, or the Participant’s Representative, may exercise the Option and/or the SAR on behalf of the spouse of the Participant or such spouse’s successors in interest.
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9.Withholding of Taxes. Upon the exercise of the Option or the SAR, the Participant or the Participant’s Representative shall pay to the Company the amount of any taxes which the Company is required to withhold with respect to such exercise. Subject to the limitations set forth in the next two sentences, the Company shall withhold shares of Common Stock that would otherwise have been issued pursuant to the exercise of the Option or the SAR to satisfy the tax withholding obligations, unless and except to the extent that the Participant or his or her Representative elects to satisfy all or any portion of such tax withholding obligations by cash payment to the Company. Neither the Participant nor his or her Representative shall have the right to have shares of Common Stock withheld, in either case, to the extent that the Fair Market Value of such shares delivered or withheld on the date of exercise exceeds the amount required to be delivered or withheld to meet tax withholding requirements, based on the maximum statutory withholding rates for the Participant for federal, state and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction. In the case of an exercise of the SAR, the Committee retains the right to require the Participant or his or her Representative to pay any and all withholding taxes arising out of such exercise solely in cash.
10.Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock, as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the Grant Date or date of exercise, as applicable, or if such date is not a business day, for the business day immediately preceding such date (or, if for any reason no such price is available, the Fair Market Value shall be determined by the Company in its sole discretion in accordance with the Plan).
11.Extension of Expiration Date in Certain Cases. From time to time, the Company may declare “blackout” periods during which the Participant may be prohibited from engaging in certain transactions in Company securities. In the event that the scheduled Expiration Date of the Option and SAR shall fall within a blackout period that has been declared by the Company and that applies to the Participant, then the Expiration Date shall automatically, and without further notice to the Participant, be extended until such time as fifteen (15) consecutive business days have elapsed after the scheduled Expiration Date without interruption by any blackout period that applied to the Participant, provided that the Expiration Date shall not be extended beyond the original ten-year term unless otherwise permitted by Section 409A of the Code.
12.Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules. No shares issuable upon the exercise of the Option or the SAR shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (“Act”) (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange (or such other exchange(s) or market(s) on which shares of the same class are then listed) and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to ensure that such full compliance on the part of the Company is made. By signing this Agreement, the Participant represents and warrants that none of the shares to be acquired upon exercise of the Option or the SAR will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Act, and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Participant hereby agrees to indemnify the Company in the event of any violation by the Participant of such Act, rules, regulations or laws.
13.Certain Adjustments; Change in Control.
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(a)If, during the term of this Agreement, there shall be any equity restructurings (within the meaning of FASB Accounting Standards Codification® Topic 718) that causes the per share value of a share of Common Stock to change, such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a large, nonrecurring cash dividend, and similar matters, the Committee shall make or cause to be made an equitable adjustment to the number and kind of shares subject to and/or the Exercise Price (if applicable) of the Award. If, during the term of this Agreement, there shall be any other changes in corporate capitalization, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the Option in a manner consistent with Sections 4.3 and 21.2 of the Plan. The Committee’s determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan on any such adjustment.
(b)In the event of a Change in Control as defined in Section 20.1 of the Plan, except as prohibited by applicable laws, rules, regulations or stock exchange requirements, if the Service of a Participant is terminated within the two (2)-year period following such Change in Control by the Company or an Affiliate for reasons other than Cause or by the Participant for Good Reason, the Option and SAR shall vest and be immediately exercisable and shall remain exercisable until the 10th anniversary of the Grant Date.
14.Participation by Participant in Other Company Plans. Nothing herein contained shall affect the right of the Participant to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare benefit plan or program of the Company or of any Affiliate of the Company, subject in each case, to the terms and conditions of any such plan or program.
15.No Rights as a Shareholder Until Issuance of Shares. Neither the Participant nor his or her Representative shall be entitled to any of the rights or privileges of a shareholder of the Company in respect of any shares of Common Stock issuable upon any exercise of the Option or the SAR unless and until such shares shall have been issued and delivered to: (i) the Participant in the form of certificates, (ii) a brokerage or other account for the benefit of the Participant either in certificate form or via “DWAC” or similar electronic means, or (iii) a book entry or direct registration account in the name of the Participant.
16.Not an Employment or Service Contract. Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, expressed or implied, to employ or contract for the services of the Participant, to restrict the right of the Company or any of its Affiliates to discharge the Participant or cease contracting for the Participant’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Participant and the Company or any of its Affiliates.
17.Death of the Participant. In the event of the death of the Participant while any portion of the Option and/or the SAR are outstanding, the Option and/or the SAR may be exercised prior to the Expiration Date by the duly appointed and qualified executor or other personal representative of the Participant, and the shares of Common Stock received upon such exercise shall be made to such executor or representative to be distributed in accordance with the Participant’s will or applicable intestacy law.
18.Confidentiality, Non-Solicitation and Non-Disparagement. The Participant agrees that the Award to the Participant under the terms and conditions specified in this
7


Agreement is conditioned upon the Participant’s compliance with the following confidentiality, non-solicitation and non-disparagement terms and conditions.
(a)Definitions. As used in this Section, the following terms have the meanings set forth below:
(i)“Confidential Information” means any and all confidential information, including without limitation any negotiations or agreements between the Company or its Affiliates and third parties, business and marketing plans and related materials, training materials, financial information, plans, executive summaries, capitalization tables, budgets, unpublished financial statements, costs, prices, licenses, employee, customer, supplier, shareholder, partner or investor lists and/or data, products, technology, know-how, business processes, business data, inventions, designs, patents, trademarks, copyrights, trade secrets, business models, notes, sketches, flow charts, formulas, blueprints and elements thereof, databases, compilations, and other intellectual property, whether written or otherwise. Some or all of the Confidential Information may also be entitled to protection as a “trade secret” under applicable state or federal law. Confidential Information does not include information that the Participant can prove was properly known to the Participant from sources permitted to disseminate the information prior to the Participant’s employment by, or provision of services to, the Employer, or that has become publicly known and made generally available through no wrongful act of the Participant.
(ii)“Customer” means any customer of the Company or an Affiliate with which/whom the Participant had material communications, for which/whom the Participant performed any services, to which/whom the Participant sold any products, or about which/whom the Participant learned or had access to any Confidential Information, in each case during the twelve (12)-month period immediately preceding the Participant’s termination of employment from, or provision of services to, the Employer (whether by Participant or by the Employer and whether for any or no reason).
(iii)“Enhanced Restricted Period” means the twenty-four (24)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or by the Employer and whether for any or no reason).
(iv)“Restricted Employee” means any person who was employed by the Company or an Affiliate and had Material Contact pursuant to the Participant’s duties at any point during the period of twelve (12) months immediately preceding the Participant’s last day of employment with the Employer. For purposes of this Section, “Material Contact” means interaction between the Participant and another employee of the Employer or an Affiliate: (A) with whom the Participant actually dealt or interacted; or (B) whose employment or dealings with the Employer or services for the Employer were directly or indirectly handled, coordinated, managed, or supervised by the Participant.
(v)“Restricted Period” means the twelve (12)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or by the Employer and whether for any or no reason).
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(b)Confidential Information.
(i)Protection of Confidential Information. At all times during the Participant’s employment with, or provision of services to, the Employer, and at all times thereafter, the Participant agrees to: (A) hold the Confidential Information in strictest confidence, and not to directly or indirectly copy, distribute, disclose, divert, or disseminate, in whole or in part, any of such Confidential Information to any person, firm, corporation, association or other entity except (x) to authorized agents of the Employer who have a need to know such Confidential Information for the purpose for which it is disclosed, or (y) to other persons for the benefit of the Employer, in the course and scope of the Participant’s employment with or service to the Employer; and (B) refrain from directly or indirectly using the Confidential Information other than as necessary and as authorized in the course and scope of the Participant’s employment with, or provision of services to, the Employer. In the event the Participant receives a subpoena or other validly issued administrative or judicial order demanding production or disclosure of Confidential Information, the Participant shall promptly notify the Employer and provide a copy of such subpoena or order and tender to the Employer the defense of any such demand. The Participant may, if necessary, disclose Confidential Information in judicial proceedings relating to the enforcement of the Participant’s rights or obligations under this Agreement; provided, however, that the Participant must first enter into an agreed protective order with the Employer protecting the confidentiality of the Confidential Information.
(ii)Notwithstanding the Participant’s confidentiality and non-disclosure obligations under this Agreement or otherwise, as provided in the Federal Defend Trade Secret Act, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public. The Participant understands and acknowledges that nothing in this Agreement prohibits the Participant from confidentially or otherwise communicating with or reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice or the Securities and Exchange Commission, or making other disclosures or statements that are protected under the whistleblower, collective bargaining, anti-discrimination and/or anti-retaliation provisions of federal or state law or regulation. The Participant understands that the Participant does not need prior authorization of the Employer to make any such reports or disclosures, and that the Participant is not required to notify the Employer that the Participant has made such reports or disclosures.
(c)Non-Solicitation.
(i)Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one
9


another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly, seek to recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i). Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(i) shall be replaced with those set forth in Appendix I of this Agreement.
(ii)Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in their and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue, or terminate Customer’s or Key Business Partner’s patronage and/or business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate. In addition to the
10


foregoing restrictions, the Participant agrees that, during the Participant’s employment with the Employer and during the Enhanced Restricted Period, the Participant shall not be personally involved in the negotiation, competition for, solicitation or execution of any individual book roll over(s) or other book of business transfer arrangements involving the transfer of business away from the Company or an Affiliate. Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(ii) shall be replaced with those set forth in Appendix I of this Agreement.
(d)Notification to New Employers. During the Restricted Period, the Participant shall notify any subsequent employer of the Participant’s obligations under this Section prior to commencing employment. In addition, during the Restricted Period, the Participant shall provide the Employer and his/her prior manager at the Employer fourteen (14) days’ advance written notice prior to becoming employed by, or retained to represent or provide services to, any person or entity or engaging in any business of any type or form, with such notice including the identity of the prospective employer or business, the specific division (if applicable) for which the Participant will be performing services, the title or position to be assumed by the Participant, the physical location of the position to be assumed by the Participant, and the responsibilities of the position to be assumed by the Participant. The Participant hereby authorizes the Company and/or any of its Affiliates, at their discretion, to contact the Participant’s prospective or subsequent employers and inform them of this Section or any other policy or employment agreement between the Participant and the Company and/or its Affiliates that may be in effect at the termination of the Participant’s employment with the Employer.
(e)Non-Disparagement. During the term of Participant’s employment and for the two (2)-year period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason), the Participant shall not make or intentionally cause or direct others to make any written or oral statement that disparages or otherwise are slanderous, libelous, or defamatory towards the Company or its Affiliates, or their respective business relations. Without in any way limiting the scope or effect of the preceding sentence, the Participant specifically agrees, represents and warrants that the Participant shall not directly or indirectly disparage the Company’s and/or its Affiliates’: (i) officers, management, business practices, policies, procedures and/or operations, (ii) employees or other personnel, employment or other personnel-related decisions, staffing, and/or hiring or termination decisions, practices or other personnel-related activities or occurrences, and/or any other employment-related decisions, actions or practices by or relating to the Company or the Affiliates, or (iii) any other policies, procedures or matters concerning or relating to the Company, including but not limited to the Company’s business, operations, employees, management, Customers, suppliers, activities, products, services or any other matter relating to the Company or its Affiliates; provided that this non-disparagement provision shall not prohibit any statement, reporting or other action this is permitted by subsection (b)(ii) of this Section. Moreover, unless permitted by applicable law, and subject to subsection (b)(ii) of this Section, the Participant shall not encourage or aid any person or entity in the pursuit of any cause of action, lawsuit or any other claim or dispute of any kind against the Company and/or its Affiliates.
(f)Consideration/Reasonableness of Restrictions.
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(i)Consideration. The Participant agrees and acknowledges that the Participant has received valuable and adequate consideration in exchange for the restrictions in this Section, including but not limited to the Award to the Participant under the terms and conditions specified in this Agreement, offer of employment or continued employment with the Employer, training and continued training, access to the Confidential Information, and access to the Customers and Key Business Partners.
(ii)Reasonableness of Restrictions. The Participant understands and acknowledges the importance of the relationships which the Company and its Affiliates have with their Employees, Customers and Key Business Partners, as well as how significant the maintenance of the Confidential Information is to the business and success of the Company and its Affiliates, and acknowledges the steps the Company and its Affiliates have taken, are taking and will continue to take to develop, preserve and protect these relationships and the Confidential Information. Accordingly, the Participant agrees that the scope and duration of the restrictions and limitations described in this Section are reasonable and necessary to protect the legitimate business interests of the Company and its Affiliates, and the Participant agrees and acknowledges that all restrictions and limitations relating to the period following the end of the Participant’s employment or service with the Employer will apply regardless of the reason the Participant’s employment or service ends. The Participant agrees and acknowledges that the enforcement of this Section will not in any way preclude the Participant from becoming gainfully employed or engaged as a contractor in such manner and to such extent as to provide the Participant with an adequate standard of living.
(iii)Participant’s Notice to Consult An Attorney. The Company hereby advises the Participant to consult with an attorney (chosen by the Participant and at the Participant’s cost) prior to signing this Agreement, including with respect to the non-solicitation provisions and other restrictive covenants contained in this Section. The Participant hereby acknowledges receipt of this notice by the Company.
(iv)Review Period. The Participant has at least fourteen (14) calendar days to review this Agreement before agreeing to its terms (although the Participant may elect to voluntarily sign it before the end of this review period).
(v)Tolling. Notwithstanding anything herein to the contrary, if the Participant breaches any of the non-solicitation restrictions in Section 18(c), then the Restricted Period (or the Enhanced Restricted Period, if applicable) shall be tolled (retroactive to the date such breach commenced) until such breach or violation has been duly cured.
(vi)Modification. If any provision or term in this Section is declared invalid or unenforceable by a court of competent jurisdiction, the invalid and unenforceable portion shall be reformed to the maximum time, activity-related restrictions and/or limitations permitted by applicable law, so as to be valid and enforceable. If any such provision cannot be made valid and enforceable, it shall be severed from this Agreement without affecting the remainder of this Agreement.
(vii)Breach/Remedies. Notwithstanding anything to the contrary in this Agreement, the Participant agrees and acknowledges that the breach of this
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Section would cause substantial loss to the goodwill of the Company and/or its Affiliates, and cause irreparable harm for which there is no adequate remedy at law. Further, because the Participant’s employment with the Employer is personal and unique, because damages alone would not be an adequate remedy and because of the Participant’s access to the Confidential Information, the Company and/or its Affiliates shall have the right to enforce this Section, including any of its provisions, by injunction, specific performance, or other equitable relief, without having to post bond or prove actual damages, and without prejudice to any other rights and remedies that the Company and/or its Affiliates may have for a breach of this Section, including, without limitation, money damages. The Participant agrees and acknowledges that notwithstanding the arbitration provisions in this Agreement, the Company may elect to file and pursue claims which arise from or relate to the Participant’s actual or threatened breaches of this Section in state or federal court of competent jurisdiction. The Participant shall be liable to pay all costs, including reasonable attorneys’ and experts’ fees and expenses, that the Company and/or its Affiliates may incur in enforcing or defending this Section, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the Company and/or its Affiliates where the Company and/or its Affiliates succeed in enforcing any provision of this Section.
(viii)Forfeiture and Repayment Provisions. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement, the Participant agrees that during the Restricted Period (or the Enhanced Restricted Period, if/as applicable), if the Participant breaches any of the terms or conditions in this Section, then in addition to all rights and remedies available to the Company and/or its Affiliates at law and in equity, the Participant shall immediately forfeit any portion of the Award that has not otherwise been previously forfeited under the applicable terms of this Agreement and that has not yet been paid, exercised, settled, or vested. The Company and/or its Affiliates may also require repayment from the Participant of any and all of the compensatory value of the Award that the Participant received during the Restricted Period (or the Enhanced Restricted Period, as applicable), including without limitation the gross amount of any Common Stock distribution or cash payment made to the Participant upon the vesting, distribution, exercise, or settlement of the Award and/or any consideration in excess of such gross amounts received by the Participant upon the sale or transfer of the Common Stock acquired through vesting, distribution, exercise or settlement of the Award. The Participant shall promptly pay the full amount due upon demand by the Company and/or its Affiliates in the form of cash or shares of Common Stock at current Fair Market Value.
(ix)Waiver. The waiver of any breach of the terms of this Section shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver by the Company or any of its Affiliates of the breach of any term contained in a similar agreement between the Company and/or any of its Affiliates and any other employee or participant, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a waiver of the breach of any term of this Section. No waiver of any provision of this Section shall be valid unless in writing and signed by an authorized representative of the Company or one or more of its Affiliates.
(x)Interpretation. Any reference to “Section” or “subsection” in this Section 18 shall refer to this Section 18 or respective subsection.
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19.Arbitration. In lieu of litigation by way of court or jury trial, any dispute or controversy arising hereunder shall be settled by arbitration, in accordance with the arbitration agreement currently in effect by separate agreement between the Participant and the Company or any of its Affiliates and which is incorporated herein by reference. In the event that such arbitration agreement is determined to be inapplicable or unenforceable or if no such arbitration agreement is then in effect, the parties mutually agree to arbitrate any dispute arising out of or related to this Agreement pursuant to the terms of this paragraph. The parties agree that this Agreement provides sufficient consideration for that obligation and the mutual promises to arbitrate also constitutes consideration for this agreement to arbitrate. The following terms and conditions shall apply to such arbitration hereunder. The arbitration shall be conducted before a single arbitrator in accordance with the Employment Arbitration Rules of the American Arbitration Association (“AAA Rules”) then in effect, and shall be governed by the Federal Arbitration Act. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including filing fees) and the fees of the arbitrator will be paid by the Company. The Participant and the Company waive the right for any dispute to be brought, heard, decided, or arbitrated as a class and/or collective action (or joinder or consolidation with claims of any other person), and the parties agree that, regardless of anything else in this arbitration provision or the AAA Rules, the interpretation, applicability, enforceability or formation of the class action waiver in this provision may only be determined by a court and not an arbitrator. Regardless of anything else in this Agreement, this arbitration provision may not be modified or terminated absent a writing signed by the Participant and the Company stating an intent to modify or terminate the arbitration provision.
20.Governing Law. Except as otherwise provided in the foregoing Section or an Appendix to this Agreement, this Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles.
21.Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the Option and SAR granted hereby and may not be amended except in a writing signed by both the Company and the Participant or his or her Representative. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.
22.Forfeiture and Clawback of Option. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement and as a condition to the receipt of this Option, the rights, payments and benefits with respect to this Option, SAR and any shares acquired pursuant to the exercise of this Option and/or SAR are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent permitted by Section 15.3 of the Plan, pursuant to any clawback or recoupment policy in effect as of the Grant Date or any clawback or recoupment policy that the Company may adopt from time to time to comply with applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing rules, and regulations (“Forfeiture and Clawback Policy”). Any determination made and action taken under the Forfeiture and Clawback Policy shall be final, binding and conclusive.
ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:
23.Stock Holding Period. The Participant agrees to hold all shares of Common Stock acquired upon the exercise of the Option and/or the SAR granted hereunder for a minimum of 12 months following the date of such exercise. This holding period shall not apply to shares
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sold or tendered by the Participant and/or withheld by the Company to pay the aggregate Exercise Price and/or to settle tax liabilities related to the exercise, and as otherwise may be provided under the Company’s Stock Ownership Policy.



15


Appendix I (Employees Whose Primary Residences are Located in California)
If the Participant’s primary residence is located in the State of California:
1.    Sections 18(c)(i) and (c)(ii) of the foregoing Agreement shall be replaced with the following:
18(c)(i) Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees to the extent that the Participant uses or misuses Confidential Information (as the term is defined in this Section) to so solicit and/or interfere. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, use or rely in any manner on any Confidential Information to directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i).
18(c)(ii) Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in its and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue or terminate Customer’s patronage and/or
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business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate.
    2.    Any claims relating to Section 18 of the Agreement shall be governed by and interpreted in accordance with the laws of the State of California.
    


17

Kemper Corporation 2023 Omnibus Plan
NON-QUALIFIED STOCK OPTION AND SAR AWARD AGREEMENT
(Installment Vesting Form)
This NON-QUALIFIED STOCK OPTION AND SAR AWARD AGREEMENT (“Agreement”) is made as of this ______ day of _________________, 20__ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (“Company”), and «name» (“Participant”), for an award consisting of the right and option (“Option”) to purchase, on the terms and conditions hereinafter set forth, shares of the Company’s common stock (“Common Stock”), along with a tandem stock appreciation right (“SAR”).
SIGNATURES
As of the date set forth above, the parties have accepted the terms of this Agreement by signing this Agreement by an electronic signature, and each party agrees that such signature shall not be denied legal effect, validity or enforceability solely because it was submitted or executed electronically.
KEMPER CORPORATION                PARTICIPANT
By: _________________________________    ____________________________________
«CEO Signature and Title»    «name»
RECITALS
A.The Board of Directors of the Company (“Board”) has adopted the Kemper Corporation 2023 Omnibus Plan (“Plan”), including all amendments to date, to be administered by the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer the Plan (“Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.
B.The Plan authorizes the Committee to grant to selected Employees, Directors and Third Party Service Providers awards of various types, including Options to purchase shares of Common Stock and tandem SARs.
C.Pursuant to the Plan, the Committee has determined that it is in the best interests of the Company and its shareholders to grant a non-qualified Option (and tandem SAR) to the Participant under the terms and conditions specified in this Agreement as an inducement to remain in the service of the Company and as an incentive for increased effort during such service.
D.Neither the Option nor the SAR granted hereby is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
NOW, THEREFORE, the parties hereto agree as follows:
1.Grant.


(a)The Company grants the Option to purchase all or any part of an aggregate of «shares» shares of Common Stock at the Exercise Price (as defined below) to the Participant, which will be exercisable in accordance with the provisions of this Agreement; provided that the Option may not be exercised with respect to a fraction of a share.
(b)The Option is coupled with a SAR that is exercisable to the extent, and only to the extent, that the Option is vested as described in Section 6. The SAR shall entitle the Participant to surrender the Option (or any portion thereof, subject to Section 8(a)) to the Company unexercised and receive in exchange therefor that number of shares of Common Stock having an aggregate value equal to: (A) the excess of the Fair Market Value (as defined below) of one share of Common Stock over the Exercise Price, multiplied by (B) the number of such shares of Common Stock subject to the Option (or portion thereof) which is so surrendered.
2.Exercise Price. The per share price of Common Stock issuable upon exercise of the Option or SAR shall be $ ____ (“Exercise Price”), which shall not be less than 100% of the Fair Market Value of a share of Common Stock on the Grant Date. The Exercise Price may be adjusted in accordance with Section 13.
3.Governing Plan. The Option is granted pursuant to the Plan, which is incorporated herein for all purposes. The Participant agrees to be bound by the terms and conditions of the Plan, which controls in case of any conflict with this Agreement, except as otherwise provided for in the Plan. No amendment of the Plan shall adversely affect this Option in any material way without the written consent of the Participant.
4.Restrictions on Transfer. The Option and SAR and all rights and privileges granted hereby (including the right of exercise) shall not be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise, except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be assigned or otherwise transferred to the spouse or former spouse of the Participant pursuant to any divorce proceedings, settlement or judgment, unless approved by the Committee. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the Option or the SAR or any other rights or privileges granted hereby contrary to the provisions hereof, the Option and SAR and all other rights and privileges contained herein shall immediately become null and void and of no further force or effect.
5.Term. Except as provided in Section 11, neither the Option nor the SAR shall be exercisable after the Company’s close of business on the last business day that occurs coincident with or prior to the earliest of (“Expiration Date”):
(a)the 10th anniversary of the Grant Date;
(b)the first anniversary of the Participant’s death;
(c)the first anniversary of the Participant’s termination of Service due to the Participant’s Disability;
(d)if the Participant was not Retirement Eligible (as defined below) on the date of the Participant’s termination of Service (other than as described in (b) or (c) above), the date that is three (3) months following the Participant’s termination of Service for any reason other than Cause;
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(e)if the Participant was Retirement Eligible on the date of the Participant’s termination of Service (other than as described in (b) or (c) above), the earlier of (A) the 10th anniversary of the Grant Date or (B) the date on which the Participant became an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Committee in its sole discretion; or
(f)any date of the Participant’s termination of Service for Cause.
6.Vesting and Exercise.
(a)Vesting. The Option and/or the SAR may only be exercised to the extent they are vested. To the extent not previously forfeited, and except as provided in Section 6(b) below, the Option and SAR shall vest in accordance with the following schedule if the Participant continues in Service through the applicable date (each date of vesting, a “Vesting Date”):
in three (3) equal, annual installments, beginning on the first anniversary of the Grant Date.
Notwithstanding the foregoing and except as provided in Section 6(b) or 6(c) below, if the Participant is Retirement Eligible (as defined below) as of the date the Participant’s Service is terminated for any reason other than Cause, the unvested portions of the Option and SAR shall continue to vest in accordance with the schedule set forth above until the Expiration Date, provided that the Committee in its sole discretion determines that the Participant has not at any time prior to the applicable Vesting Date become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates.
(b)Acceleration of Vesting. Notwithstanding the terms of Section 6(a) above, to the extent not previously vested or forfeited, the shares covered by the Option and SAR shall fully vest on the earliest to occur of the following (the date of which shall also be designated as a Vesting Date) prior to the Expiration Date:
(i)the date of the Participant’s death or Disability, if the Participant dies or becomes Disabled while in Service;
(ii)if the Participant was Retirement Eligible as of the date the Participant’s Service was terminated, then the Option and SAR shall fully vest as the date of the Participant’s death or Disability following the Participant’s termination of Service for any reason other than Cause, provided that the Committee in its sole discretion determines that the Participant did not at any time prior to the date of death or Disability become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates; or
(iii)the date upon which vesting is accelerated in accordance with Section 13(b), or otherwise by the Committee in its discretion in accordance with the terms of the Plan.
(c)Certain Definitions.
(i)“Cause” means any of the following: (1) the Participant’s theft or falsification of any Company or Affiliate documents, records or property; (2) the
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Participant’s improper use or disclosure of the Company’s or an Affiliate’s confidential or proprietary information in breach of the Company’s Essential Standards of Conduct or an applicable contractual or other obligation, or using such information for personal gain including, without limitation, by trading in Company securities on the basis of material, non-public information; (3) fraud, misappropriation of or intentional material damage to the property or business of the Company or an Affiliate or other action by the Participant which has a material detrimental effect on the Company’s or an Affiliate’s reputation or business as determined by the Committee; (4) the Participant’s material failure or inability to perform any reasonable assigned and lawful duties after written notice from the Company or Affiliate of such failure or inability, and such failure or inability is not cured by the Participant within ten (10) business days; (5) the Participant’s conviction (including any plea of guilty or nolo contendere) of any felony or any criminal violation involving fraud, embezzlement, misappropriation, dishonesty, the misuse or misappropriation of money or other property or any other crime which has or would reasonably be expected to have an adverse effect on the business or reputation of the Company or an Affiliate or (6) a material breach by the Participant of the policies and procedures of the Company or an Affiliate, including, but not limited to, any breach of the Company’s Essential Standards of Conduct and the requirements of Section 18 below.
(ii)“Disabled” or “Disability” means that the Participant either:
(A)is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and, with respect to a Participant who is an Employee, is receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan (e.g., a long term disability plan) covering Employees of the Company or Affiliate that employs the Participant ; or
(B)is determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.
(iii)“Employer” means the Company or Affiliate by whom the Participant is employed, or to whom the Participant provides services.
(iv)“Good Reason” means any action taken by the Employer which results in a material negative change to the Participant in the employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services. A termination by the Participant shall not constitute termination for Good Reason unless the Participant shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than ninety (90) days after the occurrence of such event), and there shall have passed a reasonable time (not less than thirty (30) days) within which the Employer may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Participant and the Participant terminates within ninety (90) days following the expiration of the cure period.
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(v)“Retirement Eligible” means that the Participant has either attained age 55 and completed ten (10) years of Service as an Employee or attained age 60 and completed five (5) years of Service as an Employee.
(vi)“Service” means the period during which the Participant is an Employee, Director or Third Party Service Provider; provided, however, that the Participant will not be deemed to be in Service after the Company divests its control in the Affiliate for whom the Participant is exclusively in Service, or if the Company’s control of such Affiliate otherwise ceases.
7.Termination of Service. On the date of the Participant’s cessation of Service, any unvested portion of the Option and SAR held by the Participant that does not vest upon such cessation of Service in accordance with this Agreement shall be forfeited to the Company if the Participant is not Retirement Eligible on such date. If the Participant’s Service is terminated, or is deemed to be terminated, for Cause prior to or after becoming Retirement Eligible, any outstanding portions of the Option and SAR held by the Participant (vested or unvested) shall be forfeited to the Company on the date of such termination of Service. For purposes of the preceding sentence, a Participant’s Service shall be deemed terminated for Cause if the Participant resigns or is terminated and the Committee determines in good faith, either before, at the time of, or after such termination, that one or more of the events or actions described in the definition of Cause in Section 6(b) existed as of the time of such termination.
8.Manner of Exercise.
(a)During the period beginning on the applicable Vesting Date and ending on the Expiration Date, the Participant may purchase all or any part of the shares of Common Stock subject to the vested portion of the Option or may receive such lesser number of shares as may be available through the exercise of the SAR. In the event the Option (or any portion thereof) is exercised, then the SAR (or the corresponding portion) shall terminate. In the event that the SAR (or any portion thereof) is exercised, then the Option (or the corresponding portion) shall likewise terminate. Consequently, the total number of shares subject to the Option shall be reduced by the number of shares for which the Option or the SAR has previously been exercised. Likewise, the total number of shares subject to the SAR shall be reduced by the number of shares for which the SAR or the Option has previously been exercised.
(b)Each exercise of the Option shall be initiated by the Participant or his or her Representative by means of a notice of exercise delivered to the Company through the internet portal (“Portal”) provided by or on behalf of the Company or, if such Portal is not available for such exercise, in the form of a written document or electronic mail (“Notice”). The Notice shall identify the number of shares for which the Option is being exercised. Before shares of Common Stock will be issued and subject to the requirements of Section 9 below, the aggregate Exercise Price for the shares for which the Option is being exercised shall be paid to the Company in a manner permitted under the Plan.
(c)Each exercise of the SAR shall be initiated by the Participant or his or her Representative by delivery of a Notice as described above in Section 8(b). The Notice shall identify the number of shares for which the SAR is being exercised. Upon satisfaction of the Participant’s obligation to pay the Company the amount of all taxes that the Company is required to withhold in connection with such exercise as specified in Section 9 below, the Company shall issue to the Participant a number of shares of the Company’s common stock determined in accordance with Section 1(b). The SAR may only be settled by delivery of shares of Common Stock and not by payment of cash to
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the Participant. Any fractional share that would otherwise result from an exercise of the SAR shall be rounded down to the nearest whole share.
(d)The date of exercise shall be: (i) in the case of an Option exercise, the date that the Company receives the Notice if received within regular market hours on a day that the New York Stock Exchange is open for business (“Trading Day”), and otherwise on the next Trading Day; provided, however, that if the Notice is provided by means of a “Good Till Cancelled Order” involving a “Same Day Sale” or “Sell to Cover” transaction (“Order”), then the date of exercise shall instead be the date that the Order is executed; (ii) in the case of a SAR exercise not conducted through the Portal, the date specified in the Notice or, if not specified, the date that the Company receives the Notice; or (iii) in the case of a SAR exercise conducted through the Portal, the date that the Company receives the Notice if received within regular market hours on a Trading Day, and otherwise on the next Trading Day.
(e)The Option and SAR may be exercised only by the Participant or his or her Representative, and not otherwise, regardless of any community property interest therein of the spouse of the Participant, or such spouse’s successors in interest. If the spouse of the Participant shall have acquired a community property interest in the Option or the SAR, the Participant, or the Participant’s Representative, may exercise the Option and/or the SAR on behalf of the spouse of the Participant or such spouse’s successors in interest.
9.Withholding of Taxes. Upon the exercise of the Option or the SAR, the Participant or the Participant’s Representative shall pay to the Company the amount of any taxes which the Company is required to withhold with respect to such exercise. Subject to the limitations set forth in the next two sentences, the Company shall withhold shares of Common Stock that would otherwise have been issued pursuant to the exercise of the Option or the SAR to satisfy the tax withholding obligations, unless and except to the extent that the Participant or his or her Representative elects to satisfy all or any portion of such tax withholding obligations by cash payment to the Company. Neither the Participant nor his or her Representative shall have the right to have shares of Common Stock withheld, in either case, to the extent that the Fair Market Value of such shares delivered or withheld on the date of exercise exceeds the amount required to be delivered or withheld to meet tax withholding requirements, based on the maximum statutory withholding rates for the Participant for federal, state and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction. In the case of an exercise of the SAR, the Committee retains the right to require the Participant or his or her Representative to pay any and all withholding taxes arising out of such exercise solely in cash.
10.Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock, as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the Grant Date or date of exercise, as applicable, or if such date is not a business day, for the business day immediately preceding such date (or, if for any reason no such price is available, the Fair Market Value shall be determined by the Company in its sole discretion in accordance with the Plan).
11.Extension of Expiration Date in Certain Cases. From time to time, the Company may declare “blackout” periods during which the Participant may be prohibited from engaging in certain transactions in Company securities. In the event that the scheduled Expiration Date of the Option and SAR shall fall within a blackout period that has been declared by the Company and that applies to the Participant, then the Expiration Date shall automatically, and
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without further notice to the Participant, be extended until such time as fifteen (15) consecutive business days have elapsed after the scheduled Expiration Date without interruption by any blackout period that applied to the Participant, provided that the Expiration Date shall not be extended beyond the original ten-year term unless otherwise permitted by Section 409A of the Code.
12.Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules. No shares issuable upon the exercise of the Option or the SAR shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (“Act”) (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange (or such other exchange(s) or market(s) on which shares of the same class are then listed) and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to ensure that such full compliance on the part of the Company is made. By signing this Agreement, the Participant represents and warrants that none of the shares to be acquired upon exercise of the Option or the SAR will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Act, and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Participant hereby agrees to indemnify the Company in the event of any violation by the Participant of such Act, rules, regulations or laws.
13.Certain Adjustments; Change in Control.
(a)If, during the term of this Agreement, there shall be any equity restructurings (within the meaning of FASB Accounting Standards Codification® Topic 718) that causes the per share value of a share of Common Stock to change, such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a large, nonrecurring cash dividend, and similar matters, the Committee shall make or cause to be made an equitable adjustment to the number and kind of shares subject to and/or the Exercise Price (if applicable) of the Award. If, during the term of this Agreement, there shall be any other changes in corporate capitalization, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the Option in a manner consistent with Sections 4.3 and 21.2 of the Plan. The Committee’s determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan on any such adjustment.
(b)In the event of a Change in Control as defined in Section 20.1 of the Plan, except as prohibited by applicable laws, rules, regulations or stock exchange requirements, if the Service of a Participant is terminated within the two (2)-year period following such Change in Control by the Company or an Affiliate for reasons other than Cause or by the Participant for Good Reason, the Option and SAR shall vest and be immediately exercisable and shall remain exercisable until the 10th anniversary of the Grant Date.
14.Participation by Participant in Other Company Plans. Nothing herein contained shall affect the right of the Participant to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare benefit plan or program of the Company or of any Affiliate of the Company, subject in each case, to the terms and conditions of any such plan or program.
15.No Rights as a Shareholder Until Issuance of Shares. Neither the Participant nor his or her Representative shall be entitled to any of the rights or privileges of a shareholder of
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the Company in respect of any shares of Common Stock issuable upon any exercise of the Option or the SAR unless and until such shares shall have been issued and delivered to: (i) the Participant in the form of certificates, (ii) a brokerage or other account for the benefit of the Participant either in certificate form or via “DWAC” or similar electronic means, or (iii) a book entry or direct registration account in the name of the Participant.
16.Not an Employment or Service Contract. Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, expressed or implied, to employ or contract for the services of the Participant, to restrict the right of the Company or any of its Affiliates to discharge the Participant or cease contracting for the Participant’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Participant and the Company or any of its Affiliates.
17.Death of the Participant. In the event of the death of the Participant while any portion of the Option and/or the SAR are outstanding, the Option and/or the SAR may be exercised prior to the Expiration Date by the duly appointed and qualified executor or other personal representative of the Participant, and the shares of Common Stock received upon such exercise shall be made to such executor or representative to be distributed in accordance with the Participant’s will or applicable intestacy law.
18.Confidentiality, Non-Solicitation and Non-Disparagement. The Participant agrees that the Award to the Participant under the terms and conditions specified in this Agreement is conditioned upon the Participant’s compliance with the following confidentiality, non-solicitation and non-disparagement terms and conditions.
(a)Definitions. As used in this Section, the following terms have the meanings set forth below:
(i)“Confidential Information” means any and all confidential information, including without limitation any negotiations or agreements between the Company or its Affiliates and third parties, business and marketing plans and related materials, training materials, financial information, plans, executive summaries, capitalization tables, budgets, unpublished financial statements, costs, prices, licenses, employee, customer, supplier, shareholder, partner or investor lists and/or data, products, technology, know-how, business processes, business data, inventions, designs, patents, trademarks, copyrights, trade secrets, business models, notes, sketches, flow charts, formulas, blueprints and elements thereof, databases, compilations, and other intellectual property, whether written or otherwise. Some or all of the Confidential Information may also be entitled to protection as a “trade secret” under applicable state or federal law. Confidential Information does not include information that the Participant can prove was properly known to the Participant from sources permitted to disseminate the information prior to the Participant’s employment by, or provision of services to, the Employer, or that has become publicly known and made generally available through no wrongful act of the Participant.
(ii)“Customer” means any customer of the Company or an Affiliate with which/whom the Participant had material communications, for which/whom the Participant performed any services, to which/whom the Participant sold any products, or about which/whom the Participant learned or had access to any Confidential Information, in each case during the twelve (12)-month period immediately preceding the Participant’s termination of employment
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from, or provision of services to, the Employer (whether by Participant or the Employer and whether for any or no reason).
(iii)“Enhanced Restricted Period” means the twenty-four (24)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).).
(iv)“Restricted Employee” means any person who was employed by the Company or an Affiliate and had Material Contact pursuant to the Participant’s duties at any point during the period of twelve (12) months immediately preceding the Participant’s last day of employment with the Employer. For purposes of this Section, “Material Contact” means interaction between the Participant and another employee of the Employer or an Affiliate: (A) with whom the Participant actually dealt or interacted; or (B) whose employment or dealings with the Employer or services for the Employer were directly or indirectly handled, coordinated, managed, or supervised by the Participant.
(v)“Restricted Period” means the twelve (12)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).
(b)Confidential Information.
(i)Protection of Confidential Information. At all times during the Participant’s employment with, or provision of services to, the Employer, and at all times thereafter, the Participant agrees to: (A) hold the Confidential Information in strictest confidence, and not to directly or indirectly copy, distribute, disclose, divert, or disseminate, in whole or in part, any of such Confidential Information to any person, firm, corporation, association or other entity except (x) to authorized agents of the Employer who have a need to know such Confidential Information for the purpose for which it is disclosed, or (y) to other persons for the benefit of the Employer, in the course and scope of the Participant’s employment with or service to the Employer; and (B) refrain from directly or indirectly using the Confidential Information other than as necessary and as authorized in the course and scope of the Participant’s employment with, or provision of services to, the Employer. In the event the Participant receives a subpoena or other validly issued administrative or judicial order demanding production or disclosure of Confidential Information, the Participant shall promptly notify the Employer and provide a copy of such subpoena or order and tender to the Employer the defense of any such demand. The Participant may, if necessary, disclose Confidential Information in judicial proceedings relating to the enforcement of the Participant’s rights or obligations under this Agreement; provided, however, that the Participant must first enter into an agreed protective order with the Employer protecting the confidentiality of the Confidential Information.
(ii)Notwithstanding the Participant’s confidentiality and non-disclosure obligations under this Agreement or otherwise, as provided in the Federal Defend Trade Secret Act, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (A) in confidence to a federal, state, or local
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government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public. The Participant understands and acknowledges that nothing in this Agreement prohibits the Participant from confidentially or otherwise communicating with or reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice or the Securities and Exchange Commission, or making other disclosures or statements that are protected under the whistleblower, collective bargaining, anti-discrimination and/or anti-retaliation provisions of federal or state law or regulation. The Participant understands that the Participant does not need prior authorization of the Employer to make any such reports or disclosures, and that the Participant is not required to notify the Employer that the Participant has made such reports or disclosures.
(c)Non-Solicitation.
(i)Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly, seek to recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i). Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(i) shall be replaced with those set forth in Appendix I of this Agreement.
(ii)Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and
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is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in their and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue, or terminate Customer’s or Key Business Partner’s patronage and/or business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate. In addition to the foregoing restrictions, the Participant agrees that, during the Participant’s employment with the Employer and during the Enhanced Restricted Period, the Participant shall not be personally involved in the negotiation, competition for, solicitation or execution of any individual book roll over(s) or other book of business transfer arrangements involving the transfer of business away from the Company or an Affiliate. Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(ii) shall be replaced with those set forth in Appendix I of this Agreement.
(d)Notification to New Employers. During the Restricted Period, the Participant shall notify any subsequent employer of the Participant’s obligations under this Section prior to commencing employment. In addition, during the Restricted Period, the Participant shall provide the Employer and his/her prior manager at the Employer fourteen (14) days’ advance written notice prior to becoming employed by, or retained to represent or provide services to, any person or entity or engaging in any business of any type or form, with such notice including the identity of the prospective employer or business, the specific division (if applicable) for which the Participant will be performing services, the title or position to be assumed by the Participant, the physical location of the position to be assumed by the Participant, and the responsibilities of the position to be assumed by the Participant. The Participant hereby authorizes the Company and/or any of its Affiliates, at their discretion, to contact the Participant’s prospective or subsequent employers and inform them of this Section or any other policy or employment agreement between the Participant and the Company and/or its Affiliates that may be in effect at the termination of the Participant’s employment with the Employer.
(e)Non-Disparagement. During the term of Participant’s employment and for the two (2)-year period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer
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and whether for any or no reason), the Participant shall not make or intentionally cause or direct others to make any written or oral statement that disparages, or otherwise are slanderous, libelous, or defamatory towards, the Company or its Affiliates, or their respective business relations. Without in any way limiting the scope or effect of the preceding sentence, the Participant specifically agrees, represents and warrants that the Participant shall not directly or indirectly disparage the Company’s and/or its Affiliates’: (i) officers, management, business practices, policies, procedures and/or operations, (ii) employees or other personnel, employment or other personnel-related decisions, staffing, and/or hiring or termination decisions, practices or other personnel-related activities or occurrences, and/or any other employment-related decisions, actions or practices by or relating to the Company or the Affiliates, or (iii) any other policies, procedures or matters concerning or relating to the Company, including but not limited to the Company’s business, operations, employees, management, Customers, suppliers, activities, products, services or any other matter relating to the Company or its Affiliates; provided that this non-disparagement provision shall not prohibit any statement, reporting or other action this is permitted by subsection (b)(ii) of this Section. Moreover, unless permitted by applicable law, and subject to subsection (b)(ii) of this Section, the Participant shall not encourage or aid any person or entity in the pursuit of any cause of action, lawsuit or any other claim or dispute of any kind against the Company and/or its Affiliates.
(f)Consideration/Reasonableness of Restrictions.
(i)Consideration. The Participant agrees and acknowledges that the Participant has received valuable and adequate consideration in exchange for the restrictions in this Section, including but not limited to the Award to the Participant under the terms and conditions specified in this Agreement, offer of employment or continued employment with the Employer, training and continued training, access to the Confidential Information, and access to the Customers and Key Business Partners.
(ii)Reasonableness of Restrictions. The Participant understands and acknowledges the importance of the relationships which the Company and its Affiliates have with their Employees, Customers and Key Business Partners, as well as how significant the maintenance of the Confidential Information is to the business and success of the Company and its Affiliates, and acknowledges the steps the Company and its Affiliates have taken, are taking and will continue to take to develop, preserve and protect these relationships and the Confidential Information. Accordingly, the Participant agrees that the scope and duration of the restrictions and limitations described in this Section are reasonable and necessary to protect the legitimate business interests of the Company and its Affiliates, and the Participant agrees and acknowledges that all restrictions and limitations relating to the period following the end of the Participant’s employment or service with the Employer will apply regardless of the reason the Participant’s employment or service ends. The Participant agrees and acknowledges that the enforcement of this Section will not in any way preclude the Participant from becoming gainfully employed or engaged as a contractor in such manner and to such extent as to provide the Participant with an adequate standard of living.
(iii)Participant’s Notice to Consult An Attorney. The Company hereby advises the Participant to consult with an attorney (chosen by the Participant and at the Participant’s cost) prior to signing this Agreement, including with respect to the non-solicitation provisions and other restrictive covenants
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contained in this Section. The Participant hereby acknowledges receipt of this notice by the Company.
(iv)Review Period. The Participant has at least fourteen (14) calendar days to review this Agreement before agreeing to its terms (although the Participant may elect to voluntarily sign it before the end of this review period).
(v)Tolling. Notwithstanding anything herein to the contrary, if the Participant breaches any of the non-solicitation restrictions in Section 18(c), then the Restricted Period (or the Enhanced Restricted Period, if applicable) shall be tolled (retroactive to the date such breach commenced) until such breach or violation has been duly cured.
(vi)Modification. If any provision or term in this Section is declared invalid or unenforceable by a court of competent jurisdiction, the invalid and unenforceable portion shall be reformed to the maximum time, activity-related restrictions and/or limitations permitted by applicable law, so as to be valid and enforceable. If any such provision cannot be made valid and enforceable, it shall be severed from this Agreement without affecting the remainder of this Agreement.
(vii)Breach/Remedies. Notwithstanding anything to the contrary in this Agreement, the Participant agrees and acknowledges that the breach of this Section would cause substantial loss to the goodwill of the Company and/or its Affiliates, and cause irreparable harm for which there is no adequate remedy at law. Further, because the Participant’s employment with the Employer is personal and unique, because damages alone would not be an adequate remedy and because of the Participant’s access to the Confidential Information, the Company and/or its Affiliates shall have the right to enforce this Section, including any of its provisions, by injunction, specific performance, or other equitable relief, without having to post bond or prove actual damages, and without prejudice to any other rights and remedies that the Company and/or its Affiliates may have for a breach of this Section, including, without limitation, money damages. The Participant agrees and acknowledges that notwithstanding the arbitration provisions in this Agreement, the Company may elect to file and pursue claims which arise from or relate to the Participant’s actual or threatened breaches of this Section in state or federal court of competent jurisdiction. The Participant shall be liable to pay all costs, including reasonable attorneys’ and experts’ fees and expenses, that the Company and/or its Affiliates may incur in enforcing or defending this Section, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the Company and/or its Affiliates where the Company and/or its Affiliates succeed in enforcing any provision of this Section.
(viii)Forfeiture and Repayment Provisions. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement, the Participant agrees that during the Restricted Period (or the Enhanced Restricted Period, if/as applicable), if the Participant breaches any of the terms or conditions in this Section, then in addition to all rights and remedies available to the Company and/or its Affiliates at law and in equity, the Participant shall immediately forfeit any portion of the Award that has not otherwise been previously forfeited under the applicable terms of this Agreement and that has not yet been paid, exercised, settled, or vested. The Company and/or its Affiliates may also require repayment from the Participant
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of any and all of the compensatory value of the Award that the Participant received during the Restricted Period (or the Enhanced Restricted Period, as applicable), including without limitation the gross amount of any Common Stock distribution or cash payment made to the Participant upon the vesting, distribution, exercise, or settlement of the Award and/or any consideration in excess of such gross amounts received by the Participant upon the sale or transfer of the Common Stock acquired through vesting, distribution, exercise or settlement of the Award. The Participant shall promptly pay the full amount due upon demand by the Company and/or its Affiliates in the form of cash or shares of Common Stock at current Fair Market Value.
(ix)Waiver. The waiver of any breach of the terms of this Section shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver by the Company or any of its Affiliates of the breach of any term contained in a similar agreement between the Company and/or any of its Affiliates and any other employee or participant, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a waiver of the breach of any term of this Section. No waiver of any provision of this Section shall be valid unless in writing and signed by an authorized representative of the Company or one or more of its Affiliates.
(x)Interpretation. Any reference to “Section” or “subsection” in this Section 18 shall refer to this Section 18 or respective subsection.
19.Arbitration. In lieu of litigation by way of court or jury trial, any dispute or controversy arising hereunder shall be settled by arbitration, in accordance with the arbitration agreement currently in effect by separate agreement between the Participant and the Company or any of its Affiliates and which is incorporated herein by reference. In the event that such arbitration agreement is determined to be inapplicable or unenforceable or if no such arbitration agreement is then in effect, the parties mutually agree to arbitrate any dispute arising out of or related to this Agreement pursuant to the terms of this paragraph.  The parties agree that this Agreement provides sufficient consideration for that obligation and the mutual promises to arbitrate also constitutes consideration for this agreement to arbitrate.  The following terms and conditions shall apply to such arbitration hereunder. The arbitration shall be conducted before a single arbitrator in accordance with the Employment Arbitration Rules of the American Arbitration Association (“AAA Rules”) then in effect, and shall be governed by the Federal Arbitration Act. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including filing fees) and the fees of the arbitrator will be paid by the Company. The Participant and the Company waive the right for any dispute to be brought, heard, decided, or arbitrated as a class and/or collective action (or joinder or consolidation with claims of any other person), and the parties agree that, regardless of anything else in this arbitration provision or the AAA Rules, the interpretation, applicability, enforceability or formation of the class action waiver in this provision may only be determined by a court and not an arbitrator.  Regardless of anything else in this Agreement, this arbitration provision may not be modified or terminated absent a writing signed by the Participant and the Company stating an intent to modify or terminate the arbitration provision.
20.Governing Law. Except as otherwise provided in the foregoing Section or an Appendix to this Agreement, this Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles.
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21.Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the Option and SAR granted hereby and may not be amended except in a writing signed by both the Company and the Participant or his or her Representative. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.
22.Forfeiture and Clawback of Option. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement and as a condition to the receipt of this Option, the rights, payments and benefits with respect to this Option, SAR and any shares acquired pursuant to the exercise of this Option and/or SAR are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent permitted by Section 15.3 of the Plan, pursuant to any clawback or recoupment policy in effect as of the Grant Date or any clawback or recoupment policy that the Company may adopt from time to time to comply with applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing rules, and regulations (“Forfeiture and Clawback Policy”). Any determination made and action taken under the Forfeiture and Clawback Policy shall be final, binding and conclusive.
ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:
23.Stock Holding Period. The Participant agrees to hold all shares of Common Stock acquired upon the exercise of the Option and/or the SAR granted hereunder for a minimum of 12 months following the date of such exercise. This holding period shall not apply to shares sold or tendered by the Participant and/or withheld by the Company to pay the aggregate Exercise Price and/or to settle tax liabilities related to the exercise, and as otherwise may be provided under the Company’s Stock Ownership Policy.

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Appendix I (Employees Whose Primary Residences are Located in California)
If the Participant’s primary residence is located in the State of California:
1.    Sections 18(c)(i) and (c)(ii) of the foregoing Agreement shall be replaced with the following:
18(c)(i) Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees to the extent that the Participant uses or misuses Confidential Information (as the term is defined in this Section) to so solicit and/or interfere. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, use or rely in any manner on any Confidential Information to directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i).
18(c)(ii) Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in its and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue or terminate Customer’s patronage and/or
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business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate.
    2.    Any claims relating to Section 18 of the Agreement shall be governed by and interpreted in accordance with the laws of the State of California.
    



17

Kemper Corporation 2023 Omnibus Plan
RESTRICTED STOCK UNIT AWARD AGREEMENT
(Cliff-Vesting Form)
This RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”) is made as of this ______ day of _________________, 20__ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (“Company”), and «name» (“Participant”) for an Award of restricted stock units (“RSUs”), each representing the right to receive one share of the Company’s common stock (“Common Stock”) on the terms and conditions set forth in this Agreement.
SIGNATURES
As of the date set forth above, the parties have accepted the terms of this Agreement by signing this Agreement by an electronic signature, and each party agrees that such signature shall not be denied legal effect, validity or enforceability solely because it was submitted or executed electronically.
KEMPER CORPORATION                 PARTICIPANT
By: ____________________________________    ____________________________________
«CEO Signature and Title»    «name»
RECITALS
A.The Board of Directors of the Company (“Board”) has adopted the Kemper Corporation 2023 Omnibus Plan (“Plan”), including all amendments to date, to be administered by the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer the Plan (“Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.
B.The Plan authorizes the Committee to grant to selected Employees, Directors and Third Party Service Providers awards of various types, including restricted stock units providing the right to receive shares of Common Stock under specified terms and conditions.
C.Pursuant to the Plan, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Award of RSUs to the Participant under the terms and conditions specified in this Agreement as an inducement to remain in the service of the Company and an incentive for increased effort during such service.
NOW, THEREFORE, the parties hereto agree as follows:
1.Grant. The Company grants an aggregate of «shares» («shares») RSUs, which represent the Company’s unfunded and unsecured promise to issue shares of Common Stock, to the Participant, subject to the terms and conditions set forth in this Agreement. The RSUs shall not entitle the Participant to any rights of a shareholder of Common Stock and the Participant has no rights with respect to the Award other than rights as a general creditor of the Company.
2.Governing Plan. This Award is granted pursuant to the Plan, which is incorporated herein for all purposes. The Participant agrees to be bound by the terms and conditions of the Plan, which controls in case of any conflict with this Agreement, except as


otherwise provided for in the Plan. No amendment of the Plan shall adversely affect this Award in any material way without the written consent of the Participant.
3.Restrictions on Transfer. The RSUs shall be restricted during a period (“Restriction Period”) beginning on the Grant Date and expiring on the Settlement Date (as defined in Section 6 below). During the Restriction Period, neither this Agreement, the RSUs nor any rights and privileges granted hereby may be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise (any such disposition being referred to herein as a “Transfer”), except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be Transferred during the Restriction Period to the spouse or former spouse of the Participant pursuant to any divorce proceedings, settlement or judgment, unless approved by the Committee. Any attempt to Transfer this Agreement, the RSUs or any other rights or privileges granted hereby contrary to the provisions hereof shall be null and void and of no force or effect, and the Company shall not recognize or give effect to any such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such RSUs.
4.Vesting and Forfeiture.
(a)Vesting. To the extent not previously forfeited, the RSUs shall fully vest on the earliest to occur of the following (“Vesting Date”):
(i)the _________ anniversary of the Grant Date, if the Participant continues in Service through such date;
(ii)the date of the Participant’s death, if the Participant dies while in Service;
(iii)the date of the Participant’s Disability, if the Participant becomes Disabled while in Service; or
(iv)the date upon which vesting is accelerated in accordance with Section 11(b) or otherwise by the Committee in its discretion in accordance with the terms of the Plan. 
(b)Termination of Service. On the date of the Participant’s cessation of Service, all unvested RSUs that do not vest upon such cessation of Service in accordance with this Agreement shall be forfeited to the Company. If the Participant’s Service is terminated, or is deemed to be terminated, for Cause, any outstanding portion of the RSUs held by the Participant (vested or unvested) shall be forfeited to the Company on the date of such termination of Service. For purposes of the preceding sentence, a Participant’s Service shall be deemed terminated for Cause if the Participant resigns or is terminated and the Committee determines in good faith, either before, at the time of, or after such termination, that one or more of the events or actions described in the definition of Cause below existed as of the time of such termination.
(c)Certain Definitions.
(i)“Cause” means any of the following: (1) the Participant’s theft or falsification of any Company or Affiliate documents, records or property; (2) the Participant’s improper use or disclosure of the Company’s or an Affiliate’s confidential or proprietary information in breach of the Company’s Essential Standards of Conduct or an applicable contractual or other obligation, or using such information for personal gain including, without limitation, by trading in Company securities on the basis of material, non-public information; (3) fraud,
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misappropriation of or intentional material damage to the property or business of the Company or an Affiliate or other action by the Participant which has a material detrimental effect on the Company’s or an Affiliate’s reputation or business as determined by the Committee; (4) the Participant’s material failure or inability to perform any reasonable assigned and lawful duties after written notice from the Company or Affiliate of such failure or inability, and such failure or inability is not cured by the Participant within ten (10) business days; (5) the Participant’s conviction (including any plea of guilty or nolo contendere) of any felony or any criminal violation involving fraud, embezzlement, misappropriation, dishonesty, the misuse or misappropriation of money or other property or any other crime which has or would reasonably be expected to have an adverse effect on the business or reputation of the Company or an Affiliate or (6) a material breach by the Participant of the policies and procedures of the Company or an Affiliate, including, but not limited to, any breach of the Company’s Essential Standards of Conduct and the requirements of Section 15 below.
(ii)“Disabled” or “Disability” means that the Participant either:
(A)is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and, with respect to a Participant who is an Employee, is receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan (e.g., a long term disability plan) covering Employees of the Company or Affiliate that employs the Participant; or
(B)is determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.
(iii)“Employer” means the Company or Affiliate by whom the Participant is employed, or to whom the Participant provides services.
(iv)“Good Reason” means any action taken by the Employer which results in a material negative change to the Participant in the employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services. A termination by the Participant shall not constitute termination for Good Reason unless the Participant shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than ninety (90) days after the occurrence of such event), and there shall have passed a reasonable time (not less than thirty (30) days) within which the Employer may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Participant and the Participant terminates within ninety (90) days following the expiration of the cure period.
(v)“Service” means the period during which the Participant is an Employee, Director or Third Party Service Provider; provided, however, that the Participant will not be deemed to be in Service after the Company divests its control in the Affiliate for whom the Participant is exclusively in Service, or if the Company’s control of such Affiliate otherwise ceases.
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5.Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to the Common Stock during the Restriction Period, the Participant shall be eligible to receive a cash payment equal to the total cash dividend the Participant would have received had the RSUs been actual shares of Common Stock, provided that the Participant vests in the RSUs. Any such cash payment shall be made on the Settlement Date (as defined below) and it shall be subject to applicable tax withholding obligations as described in Section 8.
6.Conversion of RSUs; Issuance of Common Stock. Except as otherwise provided in Section 10, the Company shall cause one share of Common Stock to be issued, within the time period provided below, for each RSU that is vesting on the Vesting Date.
Any issuance of Common Stock shall be subject to applicable tax withholding obligations as described in Section 8 and shall be in book-entry form, registered in the Participant’s name (or in the name of the Participant’s Representative, as the case may be), in payment of whole RSUs. Any fractional shares of Common Stock that would otherwise be issued to the Participant shall instead be paid in the form of cash. Except as otherwise provided in Section 10, in no event shall the date on which Common Stock is issued to the Participant (in each case, a “Settlement Date”) occur later than the first to occur of (a) March 15th following the calendar year in which the applicable Vesting Date occurred, or (b) 90 days following the applicable Vesting Date.

7.Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the applicable date or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, the Fair Market Value shall be determined by the Company in its sole discretion in accordance with the Plan).
8.Withholding of Taxes. The Participant acknowledges that the vesting of the RSUs will result in the Participant being subject to payroll taxes upon the Vesting Date (if the Participant is an Employee or was an Employee on the Grant Date), except as otherwise determined by the Company and permitted by regulations issued under Section 3121(v)(2) of the Code, and that the issuance of Common Stock pursuant to Section 6 will result in the Participant being subject to income taxes upon the Settlement Date. Upon a required withholding date, the Company will deduct from the shares of Common Stock that are otherwise due to be delivered to the Participant shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory withholding rates for the Participant for federal, state and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction, and the Participant shall remit to the Company in cash any and all applicable withholding taxes that exceed the amount available to the Company using shares with respect to which the Settlement Date has occurred.
9.Section 409A. The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Award Agreement shall be interpreted and administered in accordance with such intent. In no event shall the Company and/or its Affiliates be liable for any tax, interest or penalties that may be imposed on the Participant (or the Participant’s estate) under Section 409A. For purposes of Section 409A, each settlement hereunder shall be considered a separate payment. Notwithstanding the foregoing, if the RSUs are considered “deferred compensation” within the meaning of Section 409A and the Participant is a “specified employee” for purposes of Section 409A, no distribution or payment of any amount that is due upon a “separation from service” (as defined in Section 409A without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participant’s “separation from service” (as defined in Section 409A without regard to alternative definitions
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thereunder) or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses.
10.Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules. No shares issuable upon the vesting of the RSUs shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (“Act”) (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange (or such other exchange(s) or market(s) on which shares of the same class are then listed) and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to ensure that such full compliance on the part of the Company is made. By signing this Agreement, the Participant represents and warrants that none of the shares to be acquired in settlement of the RSUs will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Act, and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Participant hereby agrees to indemnify the Company in the event of any violation by the Participant of such Act, rules, regulations or laws. The Company will use its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 6; provided that if the Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates that such settlement will not cause a violation of applicable law, all in accordance with Treas. Reg. § 1.409A-2(b)(7)(ii).
11.Certain Adjustments; Change in Control.
(a)If, during the term of this Agreement, there shall be any equity restructurings (within the meaning of FASB Accounting Standards Codification® Topic 718) that causes the per share value of a share of Common Stock to change, such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a large, nonrecurring cash dividend, and similar matters, the Committee shall make or cause to be made an equitable adjustment to the number and kind of RSUs subject to the Award. If, during the term of this Agreement, there shall be any other changes in corporate capitalization, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the RSUs in a manner consistent with Sections 4.3 and 21.2 of the Plan. The Committee’s determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional RSUs shall be issued under the Plan on any such adjustment.
(b)In the event of a Change in Control as defined in Section 20.1 of the Plan, except as prohibited by applicable laws, rules, regulations or stock exchange requirements, if the Service of a Participant is terminated within the two (2)-year period following such Change in Control by the Company or an Affiliate for reasons other than Cause or by the Participant for Good Reason, any Restriction Period shall lapse and the RSUs shall immediately vest and be paid out or distributed without further restriction. 
12.Participation by Participant in Other Company Plans. Nothing herein contained shall affect the right of the Participant to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare benefit plan or program of the Company or of any Affiliate of the Company, subject in each case, to the terms and conditions of any such plan or program.
13.Not an Employment or Service Contract. Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, expressed or implied, to
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employ or contract for the services of the Participant, to restrict the right of the Company or any of its Affiliates to discharge the Participant or cease contracting for the Participant’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Participant and the Company or any of its Affiliates.
14.Death of the Participant. In the event of the Participant’s death prior to the Settlement Date, delivery of shares of Common Stock pursuant to Section 6 shall be made to the duly appointed and qualified executor or other personal representative of the Participant, to be distributed in accordance with the Participant’s will or applicable intestacy law.
15.Confidentiality, Non-Solicitation and Non-Disparagement. The Participant agrees that the Award to the Participant under the terms and conditions specified in this Agreement is conditioned upon the Participant’s compliance with the following confidentiality, non-solicitation and non-disparagement terms and conditions.
(a)Definitions. As used in this Section, the following terms have the meanings set forth below:
(i)“Confidential Information” means any and all confidential information, including without limitation any negotiations or agreements between the Company or its Affiliates and third parties, business and marketing plans and related materials, training materials, financial information, plans, executive summaries, capitalization tables, budgets, unpublished financial statements, costs, prices, licenses, employee, customer, supplier, shareholder, partner or investor lists and/or data, products, technology, know-how, business processes, business data, inventions, designs, patents, trademarks, copyrights, trade secrets, business models, notes, sketches, flow charts, formulas, blueprints and elements thereof, databases, compilations, and other intellectual property, whether written or otherwise. Some or all of the Confidential Information may also be entitled to protection as a “trade secret” under applicable state or federal law. Confidential Information does not include information that the Participant can prove was properly known to the Participant from sources permitted to disseminate the information prior to the Participant’s employment by, or provision of services to, the Employer, or that has become publicly known and made generally available through no wrongful act of the Participant.
(ii)“Customer” means any customer of the Company or an Affiliate with which/whom the Participant had material communications, for which/whom the Participant performed any services, to which/whom the Participant sold any products, or about which/whom the Participant learned or had access to any Confidential Information, in each case during the twelve (12)-month period immediately preceding the Participant’s termination of employment from, or provision of services to, the Employer (whether by Participant or the Employer and whether for any or no reason).
(iii)“Enhanced Restricted Period” means the twenty-four (24)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).
(iv)“Restricted Employee” means any person who was employed by the Company or an Affiliate and had Material Contact pursuant to the Participant’s duties at any point during the period of twelve (12) months immediately preceding the Participant’s last day of employment with the
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Employer. For purposes of this Section, “Material Contact” means interaction between the Participant and another employee of the Employer or an Affiliate: (A) with whom the Participant actually dealt or interacted; or (B) whose employment or dealings with the Employer or services for the Employer were directly or indirectly handled, coordinated, managed, or supervised by the Participant.
(v)“Restricted Period” means the twelve (12)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).
(b)Confidential Information.
(i)Protection of Confidential Information. At all times during the Participant’s employment with, or provision of services to, the Employer, and at all times thereafter, the Participant agrees to: (A) hold the Confidential Information in strictest confidence, and not to directly or indirectly copy, distribute, disclose, divert, or disseminate, in whole or in part, any of such Confidential Information to any person, firm, corporation, association or other entity except (x) to authorized agents of the Employer who have a need to know such Confidential Information for the purpose for which it is disclosed, or (y) to other persons for the benefit of the Employer, in the course and scope of the Participant’s employment with or service to the Employer; and (B) refrain from directly or indirectly using the Confidential Information other than as necessary and as authorized in the course and scope of the Participant’s employment with, or provision of services to, the Employer. In the event the Participant receives a subpoena or other validly issued administrative or judicial order demanding production or disclosure of Confidential Information, the Participant shall promptly notify the Employer and provide a copy of such subpoena or order and tender to the Employer the defense of any such demand. The Participant may, if necessary, disclose Confidential Information in judicial proceedings relating to the enforcement of the Participant’s rights or obligations under this Agreement; provided, however, that the Participant must first enter into an agreed protective order with the Employer protecting the confidentiality of the Confidential Information.
(ii)Notwithstanding the Participant’s confidentiality and non-disclosure obligations under this Agreement or otherwise, as provided in the Federal Defend Trade Secret Act, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public. The Participant understands and acknowledges that nothing in this Agreement prohibits the Participant from confidentially or otherwise communicating with or reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice or the Securities and Exchange Commission, or making other disclosures or statements that are protected under the whistleblower, collective bargaining, anti-discrimination and/or anti-retaliation provisions of federal or state law or regulation. The Participant understands that the
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Participant does not need prior authorization of the Employer to make any such reports or disclosures, and that the Participant is not required to notify the Employer that the Participant has made such reports or disclosures.
(c)Non-Solicitation.
(i)Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly, seek to recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i). Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(i) shall be replaced with those set forth in Appendix I of this Agreement.
(ii)Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in their and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or
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an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue, or terminate Customer’s or Key Business Partner’s patronage and/or business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate. In addition to the foregoing restrictions, the Participant agrees that, during the Participant’s employment with the Employer and during the Enhanced Restricted Period, the Participant shall not be personally involved in the negotiation, competition for, solicitation or execution of any individual book roll over(s) or other book of business transfer arrangements involving the transfer of business away from the Company or an Affiliate. Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(ii) shall be replaced with those set forth in Appendix I of this Agreement.
(d)Notification to New Employers. During the Restricted Period, the Participant shall notify any subsequent employer of the Participant’s obligations under this Section prior to commencing employment. In addition, during the Restricted Period, the Participant shall provide the Employer and his/her prior manager at the Employer fourteen (14) days’ advance written notice prior to becoming employed by, or retained to represent or provide services to, any person or entity or engaging in any business of any type or form, with such notice including the identity of the prospective employer or business, the specific division (if applicable) for which the Participant will be performing services, the title or position to be assumed by the Participant, the physical location of the position to be assumed by the Participant, and the responsibilities of the position to be assumed by the Participant. The Participant hereby authorizes the Company and/or any of its Affiliates, at their discretion, to contact the Participant’s prospective or subsequent employers and inform them of this Section or any other policy or employment agreement between the Participant and the Company and/or its Affiliates that may be in effect at the termination of the Participant’s employment with the Employer.
(e)Non-Disparagement. During the term of Participant’s employment and for the two (2)-year period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason), the Participant shall not make or intentionally cause or direct others to make any written or oral statement that disparages or otherwise are slanderous, libelous, or defamatory towards the Company or its Affiliates, or their respective business relations. Without in any way limiting the scope or effect of the preceding sentence, the Participant specifically agrees, represents and warrants that the Participant shall not directly or indirectly disparage the Company’s and/or its Affiliates’: (i) officers, management, business practices, policies, procedures and/or operations, (ii) employees or other personnel, employment or other personnel-related decisions, staffing, and/or hiring or termination decisions, practices or other personnel-related activities or occurrences, and/or any other employment-related decisions, actions or practices by or relating to the Company or the Affiliates, or (iii) any other policies, procedures or matters concerning or relating to the Company, including but not limited to the Company’s business, operations, employees, management, Customers, suppliers, activities, products, services or any other matter relating to the Company or its Affiliates; provided that this non-disparagement provision shall not prohibit any
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statement, reporting or other action this is permitted by subsection (b)(ii) of this Section. Moreover, unless permitted by applicable law, and subject to subsection (b)(ii) of this Section, the Participant shall not encourage or aid any person or entity in the pursuit of any cause of action, lawsuit or any other claim or dispute of any kind against the Company and/or its Affiliates.
(f)Consideration/Reasonableness of Restrictions.
(i)Consideration. The Participant agrees and acknowledges that the Participant has received valuable and adequate consideration in exchange for the restrictions in this Section, including but not limited to the Award to the Participant under the terms and conditions specified in this Agreement, offer of employment or continued employment with the Employer, training and continued training, access to the Confidential Information, and access to the Customers and Key Business Partners.
(ii)Reasonableness of Restrictions. The Participant understands and acknowledges the importance of the relationships which the Company and its Affiliates have with their Employees, Customers and Key Business Partners, as well as how significant the maintenance of the Confidential Information is to the business and success of the Company and its Affiliates, and acknowledges the steps the Company and its Affiliates have taken, are taking and will continue to take to develop, preserve and protect these relationships and the Confidential Information. Accordingly, the Participant agrees that the scope and duration of the restrictions and limitations described in this Section are reasonable and necessary to protect the legitimate business interests of the Company and its Affiliates, and the Participant agrees and acknowledges that all restrictions and limitations relating to the period following the end of the Participant’s employment or service with the Employer will apply regardless of the reason the Participant’s employment or service ends. The Participant agrees and acknowledges that the enforcement of this Section will not in any way preclude the Participant from becoming gainfully employed or engaged as a contractor in such manner and to such extent as to provide the Participant with an adequate standard of living.
(iii)Participant’s Notice to Consult An Attorney. The Company hereby advises the Participant to consult with an attorney (chosen by the Participant and at the Participant’s cost) prior to signing this Agreement, including with respect to the non-solicitation provisions and other restrictive covenants contained in this Section. The Participant hereby acknowledges receipt of this notice by the Company.
(iv)Review Period. The Participant has at least fourteen (14) calendar days to review this Agreement before agreeing to its terms (although the Participant may elect to voluntarily sign it before the end of this review period).
(v)Tolling. Notwithstanding anything herein to the contrary, if the Participant breaches any of the non-solicitation restrictions in Section 15(c), then the Restricted Period (or the Enhanced Restricted Period, if applicable) shall be tolled (retroactive to the date such breach commenced) until such breach or violation has been duly cured.
(vi)Modification. If any provision or term in this Section is declared invalid or unenforceable by a court of competent jurisdiction, the invalid and unenforceable portion shall be reformed to the maximum time, activity-related
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restrictions and/or limitations permitted by applicable law, so as to be valid and enforceable. If any such provision cannot be made valid and enforceable, it shall be severed from this Agreement without affecting the remainder of this Agreement.
(vii)Breach/Remedies. Notwithstanding anything to the contrary in this Agreement, the Participant agrees and acknowledges that the breach of this Section would cause substantial loss to the goodwill of the Company and/or its Affiliates, and cause irreparable harm for which there is no adequate remedy at law. Further, because the Participant’s employment with the Employer is personal and unique, because damages alone would not be an adequate remedy and because of the Participant’s access to the Confidential Information, the Company and/or its Affiliates shall have the right to enforce this Section, including any of its provisions, by injunction, specific performance, or other equitable relief, without having to post bond or prove actual damages, and without prejudice to any other rights and remedies that the Company and/or its Affiliates may have for a breach of this Section, including, without limitation, money damages. The Participant agrees and acknowledges that notwithstanding the arbitration provisions in this Agreement, the Company may elect to file and pursue claims which arise from or relate to the Participant’s actual or threatened breaches of this Section in state or federal court of competent jurisdiction. The Participant shall be liable to pay all costs, including reasonable attorneys’ and experts’ fees and expenses, that the Company and/or its Affiliates may incur in enforcing or defending this Section, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the Company and/or its Affiliates where the Company and/or its Affiliates succeed in enforcing any provision of this Section.
(viii)Forfeiture and Repayment Provisions. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement, the Participant agrees that during the Restricted Period (or the Enhanced Restricted Period, if/as applicable), if the Participant breaches any of the terms or conditions in this Section, then in addition to all rights and remedies available to the Company and/or its Affiliates at law and in equity, the Participant shall immediately forfeit any portion of the Award that has not otherwise been previously forfeited under the applicable terms of this Agreement and that has not yet been paid, exercised, settled, or vested. The Company and/or its Affiliates may also require repayment from the Participant of any and all of the compensatory value of the Award that the Participant received during the Restricted Period (or the Enhanced Restricted Period, as applicable), including without limitation the gross amount of any Common Stock distribution or cash payment made to the Participant upon the vesting, distribution, exercise, or settlement of the Award and/or any consideration in excess of such gross amounts received by the Participant upon the sale or transfer of the Common Stock acquired through vesting, distribution, exercise or settlement of the Award. The Participant shall promptly pay the full amount due upon demand by the Company and/or its Affiliates in the form of cash or shares of Common Stock at current Fair Market Value.
(ix)Waiver. The waiver of any breach of the terms of this Section shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver by the Company or any of its Affiliates of the breach of any term contained in a similar agreement between the Company and/or any of its Affiliates and any other employee or participant, whether by conduct or otherwise, in any one or more instances, shall be deemed
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to be, or construed as, a waiver of the breach of any term of this Section. No waiver of any provision of this Section shall be valid unless in writing and signed by an authorized representative of the Company or one or more of its Affiliates.
(x)Interpretation. Any reference to “Section” or “subsection” in this Section 15 shall refer to this Section 15 or respective subsection.
16.Arbitration. In lieu of litigation by way of court or jury trial, any dispute or controversy arising hereunder shall be settled by arbitration, in accordance with the arbitration agreement currently in effect by separate agreement between the Participant and the Company or any of its Affiliates and which is incorporated herein by reference. In the event that such arbitration agreement is determined to be inapplicable or unenforceable or if no such arbitration agreement is then in effect, the parties mutually agree to arbitrate any dispute arising out of or related to this Agreement pursuant to the terms of this paragraph.  The parties agree that this Agreement provides sufficient consideration for that obligation and the mutual promises to arbitrate also constitutes consideration for this agreement to arbitrate.  The following terms and conditions shall apply to such arbitration hereunder. The arbitration shall be conducted before a single arbitrator in accordance with the Employment Arbitration Rules of the American Arbitration Association (“AAA Rules”) then in effect, and shall be governed by the Federal Arbitration Act. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including filing fees) and the fees of the arbitrator will be paid by the Company. The Participant and the Company waive the right for any dispute to be brought, heard, decided, or arbitrated as a class and/or collective action (or joinder or consolidation with claims of any other person), and the parties agree that, regardless of anything else in this arbitration provision or the AAA Rules, the interpretation, applicability, enforceability or formation of the class action waiver in this provision may only be determined by a court and not an arbitrator.  Regardless of anything else in this Agreement, this arbitration provision may not be modified or terminated absent a writing signed by the Participant and the Company stating an intent to modify or terminate the arbitration provision. 
17.Governing Law. Except as otherwise provided in the foregoing Section or an Appendix to this Agreement, this Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles.
18.Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the RSUs granted hereby and may not be amended except in a writing signed by both the Company and the Participant or his or her Representative. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.
19.Forfeiture and Clawback of Award. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement and as a condition to the receipt of this Award, the rights, payments and benefits with respect to this Award and any shares acquired pursuant to the vesting of this Award are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent permitted by Section 15.3 of the Plan, pursuant to any clawback or recoupment policy in effect as of the Grant Date or any clawback or recoupment policy that the Company may adopt from time to time to comply with applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing rules, and regulations (“Forfeiture and Clawback Policy”). Any determination made and action taken under the Forfeiture and Clawback Policy shall be final, binding and conclusive.
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ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:
20.Stock Holding Period. The Participant agrees to hold the shares of Common Stock acquired upon the conversion of the RSUs for a minimum of 12 months following their Settlement Date. This holding period shall not apply to shares of Common Stock withheld by the Company to settle tax liabilities related to vesting and/or settlement, and as otherwise may be provided under the Company’s Stock Ownership Policy.

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Appendix I (Employees Whose Primary Residences are Located in California)
If the Participant’s primary residence is located in the State of California:
1.    Sections 15(c)(i) and (c)(ii) of the foregoing Agreement shall be replaced with the following:
15(c)(i) Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees to the extent that the Participant uses or misuses Confidential Information (as the term is defined in this Section) to so solicit and/or interfere. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, use or rely in any manner on any Confidential Information to directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i).
15(c)(ii) Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in its and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue or terminate Customer’s patronage and/or business relationship with the Company or an Affiliate; or (B) inviting, assisting,
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encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate.
    2.    Any claims relating to Section 15 of the Agreement shall be governed by and interpreted in accordance with the laws of the State of California.
    

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Kemper Corporation 2023 Omnibus Plan
RESTRICTED STOCK UNIT AWARD AGREEMENT
(Installment-Vesting Form)
This RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”) is made as of this ______ day of _______________, 20__ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (“Company”), and «name» (“Participant”) for an Award of restricted stock units (“RSUs”), each representing the right to receive one share of the Company’s common stock (“Common Stock”) on the terms and conditions set forth in this Agreement.
SIGNATURES
As of the date set forth above, the parties have accepted the terms of this Agreement by signing this Agreement by an electronic signature, and each party agrees that such signature shall not be denied legal effect, validity or enforceability solely because it was submitted or executed electronically.
KEMPER CORPORATION                 PARTICIPANT

By: ________________________________    ____________________________________
«CEO Signature and Title»    «name»
RECITALS
A.The Board of Directors of the Company (“Board”) has adopted the Kemper Corporation 2023 Omnibus Plan (“Plan”), including all amendments to date, to be administered by the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer the Plan (“Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.
B.The Plan authorizes the Committee to grant to selected Employees, Directors and Third Party Service Providers awards of various types, including restricted stock units providing the right to receive shares of Common Stock under specified terms and conditions.
C.Pursuant to the Plan, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Award of RSUs to the Participant under the terms and conditions specified in this Agreement as an inducement to remain in the service of the Company and an incentive for increased effort during such service.
NOW, THEREFORE, the parties hereto agree as follows:
1.Grant. The Company grants an aggregate of «shares» RSUs, which represent the Company’s unfunded and unsecured promise to issue shares of Common Stock, to the Participant, subject to the terms and conditions set forth in this Agreement. The RSUs shall not entitle the Participant to any rights of a shareholder of Common Stock and the Participant has no rights with respect to the Award other than rights as a general creditor of the Company.
2.Governing Plan. This Award is granted pursuant to the Plan, which is incorporated herein for all purposes. The Participant agrees to be bound by the terms and conditions of the Plan, which controls in case of any conflict with this Agreement, except as


otherwise provided for in the Plan.     No amendment of the Plan shall adversely affect this Award in any material way without the written consent of the Participant.
3.Restrictions on Transfer. The RSUs shall be restricted during a period (“Restriction Period”) beginning on the Grant Date and expiring on the applicable Settlement Date (as defined in Section 6 below). During the Restriction Period, neither this Agreement, the RSUs nor any rights and privileges granted hereby may be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise (any such disposition being referred to herein as a “Transfer”), except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be Transferred during the Restriction Period to the spouse or former spouse of the Participant pursuant to any divorce proceedings, settlement or judgment, unless approved by the Committee. Any attempt to Transfer this Agreement, the RSUs or any other rights or privileges granted hereby contrary to the provisions hereof shall be null and void and of no force or effect, and the Company shall not recognize or give effect to any such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such RSUs.
4.Vesting and Forfeiture.
(a)Vesting. To the extent not previously forfeited, and except as provided in Section 4(b) below, the RSUs shall vest in accordance with the following schedule if the Participant continues in Service through the applicable date (each date of vesting, a “Vesting Date”):
in three (3) equal, annual installments, beginning on the first anniversary of the Grant Date.
Notwithstanding the foregoing and except as provided in Section 4(b) or 4(c) below, if the Participant is Retirement Eligible (as defined below) prior to the date the Participant’s Service is terminated for any reason other than Cause, any unvested RSUs shall continue to vest in accordance with the schedule set forth above, provided that the Committee does not determine, in its sole discretion, that the Participant has failed to comply with the restrictive covenants set forth in Section 15 and executes and does not revoke a release of claims in the form provided by the Company.
(b)Acceleration of Vesting. Notwithstanding the terms of Section 4(a) above, to the extent not previously vested or forfeited, the RSUs shall fully vest on the earliest to occur of the following (the date of which shall also be designated as a Vesting Date):
(i)the date of the Participant’s death or Disability, if the Participant dies or becomes Disabled while in Service;
(ii)the date of the Participant’s death or Disability following the Participant’s termination of Service for any reason other than Cause, if the Participant was Retirement Eligible prior to the date the Participant’s Service is terminated, provided that the Committee does not determine, in its sole discretion, that the Participant has failed to comply with the restrictive covenants set forth in Section 15 prior to the date of death or Disability; or
(iii)the date upon which vesting is accelerated in accordance with Section 11(b) or otherwise by the Committee in its discretion in accordance with the terms of the Plan.
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(c)Termination of Service. On the date of the Participant’s cessation of Service, any unvested portion of the RSUs held by the Participant that does not vest upon such cessation of Service in accordance with this Agreement shall be forfeited to the Company if the Participant is not Retirement Eligible on such date. If the Participant’s Service is terminated, or is deemed to be terminated, for Cause prior to or after becoming Retirement Eligible, any outstanding portion of the RSUs held by the Participant (vested or unvested) shall be forfeited to the Company on the date of such termination of Service. For purposes of the preceding sentence, a Participant’s Service shall be deemed terminated for Cause if the Participant resigns or is terminated and the Committee determines in good faith, either before, at the time of, or after such termination, that one or more of the events or actions described in the definition of Cause below existed as of the time of such termination.
(d)Certain Definitions.
(i)“Cause” means any of the following: (1) the Participant’s theft or falsification of any Company or Affiliate documents, records or property; (2) the Participant’s improper use or disclosure of the Company’s or an Affiliate’s confidential or proprietary information in breach of the Company’s Essential Standards of Conduct or an applicable contractual or other obligation, or using such information for personal gain including, without limitation, by trading in Company securities on the basis of material, non-public information; (3) fraud, misappropriation of or intentional material damage to the property or business of the Company or an Affiliate or other action by the Participant which has a material detrimental effect on the Company’s or an Affiliate’s reputation or business as determined by the Committee; (4) the Participant’s material failure or inability to perform any reasonable assigned and lawful duties after written notice from the Company or Affiliate of such failure or inability, and such failure or inability is not cured by the Participant within ten (10) business days; (5) the Participant’s conviction (including any plea of guilty or nolo contendere) of any felony or any criminal violation involving fraud, embezzlement, misappropriation, dishonesty, the misuse or misappropriation of money or other property or any other crime which has or would reasonably be expected to have an adverse effect on the business or reputation of the Company or an Affiliate or (6) a material breach by the Participant of the policies and procedures of the Company or an Affiliate, including, but not limited to, any breach of the Company’s Essential Standards of Conduct and the requirements of Section 15 below.
(ii)“Disabled” or “Disability” means that the Participant either:
(A)is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and, with respect to a Participant who is an Employee, is receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan (e.g., a long term disability plan) covering Employees of the Company or Affiliate that employs the Participant; or
(B)is determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.
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(iii)“Employer” means the Company or Affiliate by whom the Participant is employed, or to whom the Participant provides services.
(iv)“Good Reason” means any action taken by the Employer which results in a material negative change to the Participant in the employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services. A termination by the Participant shall not constitute termination for Good Reason unless the Participant shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than ninety (90) days after the occurrence of such event), and there shall have passed a reasonable time (not less than thirty (30) days) within which the Employer may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Participant and the Participant terminates within ninety (90) days following the expiration of the cure period.
(v)“Retirement Eligible” means that the Participant has either attained age 55 and completed ten (10) years of Service as an Employee or attained age 60 and completed five (5) years of Service as an Employee.
(vi)“Service” means the period during which the Participant is an Employee, Director or a Third Party Service Provider; provided, however, that the Participant will not be deemed to be in Service after the Company divests its control in the Affiliate for whom the Participant is exclusively in Service, or if the Company’s control of such Affiliate otherwise ceases.
5.Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to the Common Stock during the Restriction Period, the Participant shall be eligible to receive a cash payment equal to the total cash dividend the Participant would have received had the RSUs been actual shares of Common Stock, provided that the Participant vests in the RSUs for which the cash payment (or portion thereof) relates. Any such cash payment(s) shall be made on the Settlement Date(s) (as defined below) of the applicable RSUs, and they shall be subject to applicable tax withholding obligations as described in Section 8.
6.Conversion of RSUs; Issuance of Common Stock. Except as otherwise provided in Section 10, the Company shall cause one share of Common Stock to be issued, within the time period provided below, for each RSU that is vesting on the applicable Vesting Date.
Any issuance of Common Stock shall be subject to applicable tax withholding obligations as described in Section 8 and shall be in book-entry form, registered in the Participant’s name (or in the name of the Participant’s Representative, as the case may be), in payment of whole RSUs. Any fractional shares of Common Stock that would otherwise be issued to the Participant shall instead be paid in the form of cash. Except as otherwise provided in Section 10, in no event shall the date on which Common Stock is issued to the Participant (in each case, a “Settlement Date”) occur later than the first to occur of (a) March 15th following the calendar year in which the applicable Vesting Date occurred, or (b) 90 days following the applicable Vesting Date.
7.Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded)
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for the applicable date, or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, the Fair Market Value shall be determined by the Company in its sole discretion in accordance with the Plan).
8.Withholding of Taxes. The Participant acknowledges that the vesting of the RSUs will result in the Participant being subject to payroll taxes upon the Vesting Date (if the Participant is an Employee or was an Employee on the Grant Date), except as otherwise determined by the Company and permitted by regulations issued under Section 3121(v)(2) of the Code, and that the issuance of Common Stock pursuant to Section 6 will result in the Participant being subject to income taxes upon the applicable Settlement Date. Upon a required withholding date, the Company will deduct from the shares of Common Stock that are otherwise due to be delivered to the Participant shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory withholding rates for the Participant for federal, state and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction, and the Participant shall remit to the Company in cash any and all applicable withholding taxes that exceed the amount available to the Company using shares with respect to which the Settlement Date has occurred.
The Participant further acknowledges that the Participant will be subject to payroll taxes upon becoming Retirement Eligible prior to termination of the Participant’s Service and agrees that the Company or its Affiliate shall withhold such payroll taxes from any other compensation paid by the Company or its Affiliate to the Participant.
9.Section 409A. The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Award Agreement shall be interpreted and administered in accordance with such intent. In no event shall the Company and/or its Affiliates be liable for any tax, interest or penalties that may be imposed on the Participant (or the Participant’s estate) under Section 409A. For purposes of Section 409A, each settlement hereunder shall be considered a separate payment. Notwithstanding the foregoing, if the RSUs are considered “deferred compensation” within the meaning of Section 409A and the Participant is a “specified employee” for purposes of Section 409A, no distribution or payment of any amount that is due upon a “separation from service” (as defined in Section 409A without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participant’s “separation from service” (as defined in Section 409A without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses.
10.Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules. No shares issuable upon the vesting of the RSUs shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (“Act”) (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange (or such other exchange(s) or market(s) on which shares of the same class are then listed) and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to ensure that such full compliance on the part of the Company is made. By signing this Agreement, the Participant represents and warrants that none of the shares to be acquired in settlement of the RSUs will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Act, and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Participant hereby agrees to indemnify the Company in the event of any violation by the Participant of such Act, rules, regulations or laws. The Company will use
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its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 6; provided that if the Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates that such settlement will not cause a violation of applicable law, all in accordance with Treas. Reg. § 1.409A-2(b)(7)(ii).
11.Certain Adjustments; Change in Control.
(a)If, during the term of this Agreement, there shall be any equity restructurings (within the meaning of FASB Accounting Standards Codification® Topic 718) that causes the per share value of a share of Common Stock to change, such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a large, nonrecurring cash dividend, and similar matters, the Committee shall make or cause to be made an equitable adjustment to the number and kind of RSUs subject to the Award. If, during the term of this Agreement, there shall be any other changes in corporate capitalization, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the RSUs in a manner consistent with Sections 4.3 and 21.2 of the Plan. The Committee’s determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional RSUs shall be issued under the Plan on any such adjustment.
(b)In the event of a Change in Control as defined in Section 20.1 of the Plan, except as prohibited by applicable laws, rules, regulations or stock exchange requirements, if the Service of a Participant is terminated within the two (2)-year period following such Change in Control by the Company or an Affiliate for reasons other than Cause or by the Participant for Good Reason, any Restriction Period shall lapse and the RSUs shall immediately vest and be paid out or distributed without further restriction; provided, however, if the Change in Control is not a “change in control event” within the meaning of Section 409A of the Code and the Participant would satisfy the definition of Retirement Eligible prior to the last Vesting Date, then to the extent required by Section 409A, the RSUs shall vest and shall be settled in accordance with the vesting schedule set forth in Section 4(a), subject to accelerated settlement as provided for in Section 4(b) to the extent permitted by Section 409A of the Code.
12.Participation by Participant in Other Company Plans. Nothing herein contained shall affect the right of the Participant to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare benefit plan or program of the Company or of any Affiliate of the Company, subject in each case, to the terms and conditions of any such plan or program.
13.Not an Employment or Service Contract. Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, expressed or implied, to employ or contract for the services of the Participant, to restrict the right of the Company or any of its Affiliates to discharge the Participant or cease contracting for the Participant’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Participant and the Company or any of its Affiliates.
14.Death of the Participant. In the event of the Participant’s death prior to the Settlement Date, delivery of shares of Common Stock pursuant to Section 6 shall be made to the duly appointed and qualified executor or other personal representative of the Participant, to be distributed in accordance with the Participant’s will or applicable intestacy law.
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15.Confidentiality, Non-Solicitation and Non-Disparagement. The Participant agrees that the Award to the Participant under the terms and conditions specified in this Agreement is conditioned upon the Participant’s compliance with the following confidentiality, non-solicitation and non-disparagement terms and conditions.
(a)Definitions. As used in this Section, the following terms have the meanings set forth below:
(i)“Confidential Information” means any and all confidential information, including without limitation any negotiations or agreements between the Company or its Affiliates and third parties, business and marketing plans and related materials, training materials, financial information, plans, executive summaries, capitalization tables, budgets, unpublished financial statements, costs, prices, licenses, employee, customer, supplier, shareholder, partner or investor lists and/or data, products, technology, know-how, business processes, business data, inventions, designs, patents, trademarks, copyrights, trade secrets, business models, notes, sketches, flow charts, formulas, blueprints and elements thereof, databases, compilations, and other intellectual property, whether written or otherwise. Some or all of the Confidential Information may also be entitled to protection as a “trade secret” under applicable state or federal law. Confidential Information does not include information that the Participant can prove was properly known to the Participant from sources permitted to disseminate the information prior to the Participant’s employment by, or provision of services to, the Employer, or that has become publicly known and made generally available through no wrongful act of the Participant.
(ii)“Customer” means any customer of the Company or an Affiliate with which/whom the Participant had material communications for which/whom the Participant performed any services, to which/whom the Participant sold any products, or about which/whom the Participant learned or had access to any Confidential Information, in each case during the twelve (12)-month period immediately preceding the Participant’s termination of employment from, or provision of services to, the Employer (whether by Participant or the Employer and whether for any or no reason).
(iii)“Enhanced Restricted Period” means the twenty-four (24)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).
(iv)“Restricted Employee” means any person who was employed by the Company or an Affiliate and had Material Contact pursuant to the Participant’s duties at any point during the period of twelve (12) months immediately preceding the Participant’s last day of employment with the Employer. For purposes of this Section, “Material Contact” means interaction between the Participant and another employee of the Employer or an Affiliate: (A) with whom the Participant actually dealt or interacted; or (B) whose employment or dealings with the Employer or services for the Employer were directly or indirectly handled, coordinated, managed, or supervised by the Participant.
(v)“Restricted Period” means the twelve (12)-month period commencing on the day following the last day of the Participant’s employment
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with the Employer (whether by Participant or the Employer and whether for any or no reason).
(b)Confidential Information.
(i)Protection of Confidential Information. At all times during the Participant’s employment with, or provision of services to, the Employer, and at all times thereafter, the Participant agrees to: (A) hold the Confidential Information in strictest confidence, and not to directly or indirectly copy, distribute, disclose, divert, or disseminate, in whole or in part, any of such Confidential Information to any person, firm, corporation, association or other entity except (x) to authorized agents of the Employer who have a need to know such Confidential Information for the purpose for which it is disclosed, or (y) to other persons for the benefit of the Employer, in the course and scope of the Participant’s employment with or service to the Employer; and (B) refrain from directly or indirectly using the Confidential Information other than as necessary and as authorized in the course and scope of the Participant’s employment with, or provision of services to, the Employer. In the event the Participant receives a subpoena or other validly issued administrative or judicial order demanding production or disclosure of Confidential Information, the Participant shall promptly notify the Employer and provide a copy of such subpoena or order and tender to the Employer the defense of any such demand. The Participant may, if necessary, disclose Confidential Information in judicial proceedings relating to the enforcement of the Participant’s rights or obligations under this Agreement; provided, however, that the Participant must first enter into an agreed protective order with the Employer protecting the confidentiality of the Confidential Information.
(ii)Notwithstanding the Participant’s confidentiality and non-disclosure obligations under this Agreement or otherwise, as provided in the Federal Defend Trade Secret Act, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public. The Participant understands and acknowledges that nothing in this Agreement prohibits the Participant from confidentially or otherwise communicating with or reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice or the Securities and Exchange Commission, or making other disclosures or statements that are protected under the whistleblower, collective bargaining, anti-discrimination and/or anti-retaliation provisions of federal or state law or regulation. The Participant understands that the Participant does not need prior authorization of the Employer to make any such reports or disclosures, and that the Participant is not required to notify the Employer that the Participant has made such reports or disclosures.
(c)Non-Solicitation.
(i)Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and
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the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly, seek to recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i). Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(i) shall be replaced with those set forth in Appendix I of this Agreement.
(ii)Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in their and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue, or terminate Customer’s or Key Business Partner’s patronage and/or business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an
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Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate. In addition to the foregoing restrictions, the Participant agrees that, during the Participant’s employment with the Employer and during the Enhanced Restricted Period, the Participant shall not be personally involved in the negotiation, competition for, solicitation or execution of any individual book roll over(s) or other book of business transfer arrangements involving the transfer of business away from the Company or an Affiliate. Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(ii) shall be replaced with those set forth in Appendix I of this Agreement.
(d)Notification to New Employers. During the Restricted Period, the Participant shall notify any subsequent employer of the Participant’s obligations under this Section prior to commencing employment. In addition, during the Restricted Period, the Participant shall provide the Employer and his/her prior manager at the Employer fourteen (14) days’ advance written notice prior to becoming employed by, or retained to represent or provide services to, any person or entity or engaging in any business of any type or form, with such notice including the identity of the prospective employer or business, the specific division (if applicable) for which the Participant will be performing services, the title or position to be assumed by the Participant, the physical location of the position to be assumed by the Participant, and the responsibilities of the position to be assumed by the Participant. The Participant hereby authorizes the Company and/or any of its Affiliates, at their discretion, to contact the Participant’s prospective or subsequent employers and inform them of this Section or any other policy or employment agreement between the Participant and the Company and/or its Affiliates that may be in effect at the termination of the Participant’s employment with the Employer.
(e)Non-Disparagement. During the term of Participant’s employment and for the two (2)-year period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason), the Participant shall not make or intentionally cause or direct others to make any written or oral statement that disparages or otherwise are slanderous, libelous, or defamatory towards the Company or its Affiliates, or their respective business relations. Without in any way limiting the scope or effect of the preceding sentence, the Participant specifically agrees, represents and warrants that the Participant shall not directly or indirectly disparage the Company’s and/or its Affiliates’: (i) officers, management, business practices, policies, procedures and/or operations, (ii) employees or other personnel, employment or other personnel-related decisions, staffing, and/or hiring or termination decisions, practices or other personnel-related activities or occurrences, and/or any other employment-related decisions, actions or practices by or relating to the Company or the Affiliates, or (iii) any other policies, procedures or matters concerning or relating to the Company, including but not limited to the Company’s business, operations, employees, management, Customers, suppliers, activities, products, services or any other matter relating to the Company or its Affiliates; provided that this non-disparagement provision shall not prohibit any statement, reporting or other action this is permitted by subsection (b)(ii) of this Section. Moreover, unless permitted by applicable law, and subject to subsection (b)(ii) of this Section, the Participant shall not encourage or aid any person or entity in the pursuit of any cause of action, lawsuit or any other claim or dispute of any kind against the Company and/or its Affiliates.
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(f)Consideration/Reasonableness of Restrictions.
(i)Consideration. The Participant agrees and acknowledges that the Participant has received valuable and adequate consideration in exchange for the restrictions in this Section, including but not limited to the Award to the Participant under the terms and conditions specified in this Agreement, offer of employment or continued employment with the Employer, training and continued training, access to the Confidential Information, and access to the Customers and Key Business Partners.
(ii)Reasonableness of Restrictions. The Participant understands and acknowledges the importance of the relationships which the Company and its Affiliates have with their Employees, Customers and Key Business Partners, as well as how significant the maintenance of the Confidential Information is to the business and success of the Company and its Affiliates, and acknowledges the steps the Company and its Affiliates have taken, are taking and will continue to take to develop, preserve and protect these relationships and the Confidential Information. Accordingly, the Participant agrees that the scope and duration of the restrictions and limitations described in this Section are reasonable and necessary to protect the legitimate business interests of the Company and its Affiliates, and the Participant agrees and acknowledges that all restrictions and limitations relating to the period following the end of the Participant’s employment or service with the Employer will apply regardless of the reason the Participant’s employment or service ends. The Participant agrees and acknowledges that the enforcement of this Section will not in any way preclude the Participant from becoming gainfully employed or engaged as a contractor in such manner and to such extent as to provide the Participant with an adequate standard of living.
(iii)Participant’s Notice to Consult An Attorney. The Company hereby advises the Participant to consult with an attorney (chosen by the Participant and at the Participant’s cost) prior to signing this Agreement, including with respect to the non-solicitation provisions and other restrictive covenants contained in this Section. The Participant hereby acknowledges receipt of this notice by the Company.
(iv)Review Period. The Participant has at least fourteen (14) calendar days to review this Agreement before agreeing to its terms (although the Participant may elect to voluntarily sign it before the end of this review period).
(v)Tolling. Notwithstanding anything herein to the contrary, if the Participant breaches any of the non-solicitation restrictions in Section 15(c), then the Restricted Period (or the Enhanced Restricted Period, if applicable) shall be tolled (retroactive to the date such breach commenced) until such breach or violation has been duly cured.
(vi)Modification. If any provision or term in this Section is declared invalid or unenforceable by a court of competent jurisdiction, the invalid and unenforceable portion shall be reformed to the maximum time, activity-related restrictions and/or limitations permitted by applicable law, so as to be valid and enforceable. If any such provision cannot be made valid and enforceable, it shall be severed from this Agreement without affecting the remainder of this Agreement.
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(vii)Breach/Remedies. Notwithstanding anything to the contrary in this Agreement, the Participant agrees and acknowledges that the breach of this Section would cause substantial loss to the goodwill of the Company and/or its Affiliates, and cause irreparable harm for which there is no adequate remedy at law. Further, because the Participant’s employment with the Employer is personal and unique, because damages alone would not be an adequate remedy and because of the Participant’s access to the Confidential Information, the Company and/or its Affiliates shall have the right to enforce this Section, including any of its provisions, by injunction, specific performance, or other equitable relief, without having to post bond or prove actual damages, and without prejudice to any other rights and remedies that the Company and/or its Affiliates may have for a breach of this Section, including, without limitation, money damages. The Participant agrees and acknowledges that notwithstanding the arbitration provisions in this Agreement, the Company may elect to file and pursue claims which arise from or relate to the Participant’s actual or threatened breaches of this Section in state or federal court of competent jurisdiction. The Participant shall be liable to pay all costs, including reasonable attorneys’ and experts’ fees and expenses, that the Company and/or its Affiliates may incur in enforcing or defending this Section, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the Company and/or its Affiliates where the Company and/or its Affiliates succeed in enforcing any provision of this Section.
(viii)Forfeiture and Repayment Provisions. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement, the Participant agrees that during the Restricted Period (or the Enhanced Restricted Period, if/as applicable), if the Participant breaches any of the terms or conditions in this Section, then in addition to all rights and remedies available to the Company and/or its Affiliates at law and in equity, the Participant shall immediately forfeit any portion of the Award that has not otherwise been previously forfeited under the applicable terms of this Agreement and that has not yet been paid, exercised, settled, or vested. The Company and/or its Affiliates may also require repayment from the Participant of any and all of the compensatory value of the Award that the Participant received during the Restricted Period (or the Enhanced Restricted Period, as applicable), including without limitation the gross amount of any Common Stock distribution or cash payment made to the Participant upon the vesting, distribution, exercise, or settlement of the Award and/or any consideration in excess of such gross amounts received by the Participant upon the sale or transfer of the Common Stock acquired through vesting, distribution, exercise or settlement of the Award. The Participant shall promptly pay the full amount due upon demand by the Company and/or its Affiliates, in the form of cash or shares of Common Stock at current Fair Market Value.
(ix)Waiver. The waiver of any breach of the terms of this Section shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver by the Company or any of its Affiliates of the breach of any term contained in a similar agreement between the Company and/or any of its Affiliates and any other employee or participant, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a waiver of the breach of any term of this Section. No waiver of any provision of this Section shall be valid unless in writing and signed by an authorized representative of the Company or one or more of its Affiliates.
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(x)Interpretation. Any reference to “Section” or “subsection” in this Section 15 shall refer to this Section 15 or respective subsection.
16.Arbitration. In lieu of litigation by way of court or jury trial, any dispute or controversy arising hereunder shall be settled by arbitration, in accordance with the arbitration agreement currently in effect by separate agreement between the Participant and the Company or any of its Affiliates and which is incorporated herein by reference. In the event that such arbitration agreement is determined to be inapplicable or unenforceable or if no such arbitration agreement is then in effect, the parties mutually agree to arbitrate any dispute arising out of or related to this Agreement pursuant to the terms of this paragraph.  The parties agree that this Agreement provides sufficient consideration for that obligation and the mutual promises to arbitrate also constitutes consideration for this agreement to arbitrate.  The following terms and conditions shall apply to such arbitration hereunder. The arbitration shall be conducted before a single arbitrator in accordance with the Employment Arbitration Rules of the American Arbitration Association (“AAA Rules”) then in effect, and shall be governed by the Federal Arbitration Act. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including filing fees) and the fees of the arbitrator will be paid by the Company. The Participant and the Company waive the right for any dispute to be brought, heard, decided, or arbitrated as a class and/or collective action (or joinder or consolidation with claims of any other person), and the parties agree that, regardless of anything else in this arbitration provision or the AAA Rules, the interpretation, applicability, enforceability or formation of the class action waiver in this provision may only be determined by a court and not an arbitrator.  Regardless of anything else in this Agreement, this arbitration provision may not be modified or terminated absent a writing signed by the Participant and the Company stating an intent to modify or terminate the arbitration provision.
17.Governing Law. Except as otherwise provided in the foregoing Section or an Appendix to this Agreement, this Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles.
18.Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the RSUs granted hereby and may not be amended except in a writing signed by both the Company and the Participant or his or her Representative. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.
19.Forfeiture and Clawback of Award. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement and as a condition to the receipt of this Award, the rights, payments and benefits with respect to this Award and any shares acquired pursuant to the vesting of this Award are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent permitted by Section 15.3 of the Plan, pursuant to any clawback or recoupment policy in effect as of the Grant Date or any clawback or recoupment policy that the Company may adopt from time to time to comply with applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing rules, and regulations (“Forfeiture and Clawback Policy”). Any determination made and action taken under the Forfeiture and Clawback Policy shall be final, binding and conclusive.
ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:
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20.Stock Holding Period. The Participant agrees to hold the shares of Common Stock acquired upon the conversion of the RSUs for a minimum of 12 months following the applicable Settlement Date. This holding period shall not apply to shares of Common Stock withheld by the Company to settle tax liabilities related to vesting and/or settlement, and as otherwise may be provided under the Company’s Stock Ownership Policy.

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Appendix I (Employees Whose Primary Residences are Located in California)
If the Participant’s primary residence is located in the State of California:
1.    Sections 15(c)(i) and (c)(ii) of the foregoing Agreement shall be replaced with the following:
15(c)(i) Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees to the extent that the Participant uses or misuses Confidential Information (as the term is defined in this Section) to so solicit and/or interfere. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, use or rely in any manner on any Confidential Information to directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i).
15(c)(ii) Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in its and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue or terminate Customer’s patronage and/or
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business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate.
    2.    Any claims relating to Section 15 of the Agreement shall be governed by and interpreted in accordance with the laws of the State of California.
    


16

Kemper Corporation 2023 Omnibus Plan
PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT
(Adjusted ROE)
This PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”) is made as of this ______ day of __________________, 20__ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (“Company”), and «name» (“Participant”) for an Award of performance-based restricted stock units (“PSUs”), each representing the right to receive one share of the Company’s common stock (“Common Stock”) on the terms and conditions set forth in this Agreement.
SIGNATURES
As of the date set forth above, the parties have accepted the terms of this Agreement by signing this Agreement by an electronic signature, and each party agrees that such signature shall not be denied legal effect, validity or enforceability solely because it was submitted or executed electronically.
KEMPER CORPORATION                 PARTICIPANT
By: __________________________________    ____________________________________
«CEO Signature and Title»    «name»
RECITALS
A.The Board of Directors of the Company (“Board”) has adopted the Kemper Corporation 2023 Omnibus Plan (“Plan”), including all amendments to date, to be administered by the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer the Plan (“Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.
B.The Plan authorizes the Committee to grant to selected Employees, Directors and Third Party Service Providers awards of various types, including PSUs providing the right to receive shares of Common Stock under specified terms and conditions.
C.Pursuant to the Plan, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Award of PSUs to the Participant under the terms and conditions specified in this Agreement as an inducement to remain in the service of the Company and an incentive for increased effort during such service.
NOW, THEREFORE, the parties hereto agree as follows:
1.Grant. The Company grants a target award of «shares» PSUs, which represent the Company’s unfunded and unsecured promise to issue shares of Common Stock under certain circumstances to the Participant, subject to the terms and conditions set forth in this Agreement. The PSUs shall not entitle the Participant to any rights of a shareholder of Common Stock and the Participant has no rights with respect to the Award other than rights as a general creditor of the Company.
2.Governing Plan. This Award is granted pursuant to the Plan, which is incorporated herein for all purposes. The Participant agrees to be bound by the terms and



conditions of the Plan, which controls in case of any conflict with this Agreement, except as otherwise provided for in the Plan. No amendment of the Plan shall adversely affect this Award in any material way without the written consent of the Participant.
3.Restrictions on Transfer. The PSUs shall be restricted during a period (“Restriction Period”) beginning on the Grant Date and expiring on the Settlement Date (as defined in Section 6 below). During the Restriction Period, neither this Agreement, the PSUs nor any rights and privileges granted hereby may be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise (any such disposition being referred to herein as a “Transfer”), except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be Transferred during the Restriction Period to the spouse or former spouse of the Participant pursuant to any divorce proceedings, settlement or judgment, unless approved by the Committee. Any attempt to Transfer this Agreement, the PSUs or any other rights or privileges granted hereby contrary to the provisions hereof shall be null and void and of no force or effect, and the Company shall not recognize or give effect to any such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such PSUs.
4.Vesting and Forfeiture. The PSUs shall be subject to the terms concerning vesting and forfeiture set forth on Exhibit A to this Agreement and Section 11(b).
5.Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to the Common Stock during the Restriction Period, the Participant shall be eligible to receive a cash payment equal to the total cash dividend the Participant would have received had the PSUs and any “Additional Shares” granted to Participant pursuant to Exhibit A been actual shares of Common Stock held by the Participant during the Restriction Period, provided and to the extent that that the Participant vests in the PSUs and any such Additional Shares. Any such cash payment shall be made on the Settlement Date (as defined below) and it shall be subject to applicable withholding obligations as described in Section 8.
6.Conversion of PSUs; Issuance of Common Stock. Except as otherwise provided in Section 10, the Company shall cause one share of Common Stock to be issued, within the time period provided below, for each PSU that is vesting and each Additional Share that is being issued on the applicable Vesting Date in accordance with Exhibit A.
Any issuance of Common Stock shall be subject to applicable tax withholding obligations as described in Section 8 and shall be in book-entry form, registered in the Participant’s name (or in the name of the Participant’s Representative, as the case may be). Except as otherwise provided in Section 10, in no event shall the date that Common Stock is issued to the Participant (“Settlement Date”) occur later than March 15th following the calendar year in which the Performance Period occurs (or, if earlier, a termination of Service in accordance with Section 11(a) or a qualifying termination of Service in accordance with the Exhibit).
7.Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the applicable date, or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, in such other manner as the Committee in its sole discretion may deem appropriate to reflect the fair market value thereof).
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8.Withholding of Taxes. The Participant acknowledges that the vesting of the PSUs will result in the Participant being subject to payroll taxes upon the Vesting Date (if the Participant is an Employee or was an Employee on the Grant Date), except as otherwise determined by the Company and permitted by regulations issued under Section 3121(v)(2) of the Code, and that the issuance of Common Stock pursuant to Section 6 will result in the Participant being subject to income taxes upon the Settlement Date. Upon a required withholding date, the Company will deduct from the shares of Common Stock that are otherwise due to be delivered to the Participant shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory withholding rates for the Participant for federal, state and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction, and the Participant shall remit to the Company in cash any and all applicable withholding taxes that exceed the amount available to the Company using shares with respect to which the Settlement Date has occurred.
9.Section 409A. The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Award Agreement shall be interpreted and administered in accordance with such intent. In no event shall the Company and/or its Affiliates be liable for any tax, interest or penalties that may be imposed on the Participant (or the Participant’s estate) under Section 409A. Notwithstanding the foregoing, if the PSUs are considered “deferred compensation” within the meaning of Section 409A and the Participant is a “specified employee” for purposes of Section 409A, no distribution or payment of any amount that is due upon a “separation from service” (as defined in Section 409A without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participant’s “separation from service” (as defined in Section 409A without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses.
10.Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules. No shares issuable upon the vesting of the PSUs shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (“Act”) (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange (or such other exchange(s) or market(s) on which shares of the same class are then listed) and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to ensure that such full compliance on the part of the Company is made. By signing this Agreement, the Participant represents and warrants that none of the shares to be acquired in settlement of the PSUs will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Act, and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Participant hereby agrees to indemnify the Company in the event of any violation by the Participant of such Act, rules, regulations or laws. The Company will use its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 6; provided that if the Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates that such settlement will not cause a violation of applicable law, all in accordance with Treas. Reg. § 1.409A-2(b)(7)(ii).
11.Certain Adjustments; Change in Control.
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(a)If, during the term of this Agreement, there shall be any equity restructurings (within the meaning of FASB Accounting Standards Codification® Topic 718) that causes the per share value of Shares to change, such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a large, nonrecurring cash dividend, and similar matters, the Committee shall make or cause to be made an equitable adjustment to the number and kind of PSUs subject to the Award and, if applicable, the performance goals. If, during the term of this Agreement, there shall be any other changes in corporate capitalization, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the PSUs in a manner consistent with Sections 4.3 and 21.2 of the Plan. The Committee’s determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of PSUs shall be issued under the Plan on any such adjustment. This Award may be subject to early vesting or termination in connection with a Change in Control in accordance with the provisions of Section 20.3 of the Plan.
(b)In the event of a Change in Control as defined in Section 20.1 of the Plan, except as prohibited by applicable laws, rules, regulations or stock exchange requirements, if the Service of a Participant is terminated within the two (2)-year period following such Change in Control by the Company or an Affiliate for reasons other than Cause or by the Participant for Good Reason, the payout opportunities attainable under all outstanding PSUs shall be deemed to have been fully earned based on the greater of (i) targeted performance, or (ii) actual performance being attained for a truncated Performance Period (as defined in Exhibit A) that ends on the date of the Change in Control.
(c)Definitions
(i)“Cause” means any of the following: (1) the Participant’s theft or falsification of any Company or Affiliate documents, records or property; (2) the Participant’s improper use or disclosure of the Company’s or an Affiliate’s confidential or proprietary information in breach of the Company’s Essential Standards of Conduct or an applicable contractual or other obligation, or using such information for personal gain including, without limitation, by trading in Company securities on the basis of material, non-public information; (3) fraud, misappropriation of or intentional material damage to the property or business of the Company or an Affiliate or other action by the Participant which has a material detrimental effect on the Company’s or an Affiliate’s reputation or business as determined by the Committee; (4) the Participant’s material failure or inability to perform any reasonable assigned and lawful duties after written notice from the Company or Affiliate of such failure or inability, and such failure or inability is not cured by the Participant within ten (10) business days; (5) the Participant’s conviction (including any plea of guilty or nolo contendere) of any felony or any criminal violation involving fraud, embezzlement, misappropriation, dishonesty, the misuse or misappropriation of money or other property or any other crime which has or would reasonably be expected to have an adverse effect on the business or reputation of the Company or an Affiliate or (6) a material breach by the Participant of the policies and procedures of the Company or an Affiliate, including, but not limited to, any breach of the Company’s Essential Standards of Conduct and the requirements of Section 15.
(ii)“Employer” means the Company or Affiliate by which/whom the Participant is employed, or to which/whom the Participant provides services.
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(iii)“Good Reason” means any action taken by the Employer which results in a material negative change to the Participant in the employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services. A termination by the Participant shall not constitute termination for Good Reason unless the Participant shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than ninety (90) days after the occurrence of such event), and there shall have passed a reasonable time (not less than thirty (30) days) within which the Employer may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Participant and the Participant terminates within ninety (90) days following the expiration of the cure period.
12.Participation by Participant in Other Company Plans. Nothing herein contained shall affect the right of the Participant to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare benefit plan or program of the Company or of any Affiliate of the Company, subject in each case, to the terms and conditions of any such plan or program.
13.Not an Employment or Service Contract. Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, expressed or implied, to employ or contract for the services of the Participant, to restrict the right of the Company or any of its Affiliates to discharge the Participant or cease contracting for the Participant’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Participant and the Company or any of its Affiliates.
14.Death of the Participant. In the event of the Participant’s death prior to the Settlement Date, delivery of shares of Common Stock pursuant to Section 6 shall be made to the duly appointed and qualified executor or other personal representative of the Participant, to be distributed in accordance with the Participant’s will or applicable intestacy law.
15.Confidentiality, Non-Solicitation and Non-Disparagement. The Participant agrees that the Award to the Participant under the terms and conditions specified in this Agreement is conditioned upon the Participant’s compliance with the following confidentiality, non-solicitation and non-disparagement terms and conditions.
(a)Definitions. As used in this Section, the following terms have the meanings set forth below:
(i)“Confidential Information” means any and all confidential information, including without limitation any negotiations or agreements between the Company or its Affiliates and third parties, business and marketing plans and related materials, training materials, financial information, plans, executive summaries, capitalization tables, budgets, unpublished financial statements, costs, prices, licenses, employee, customer, supplier, shareholder, partner or investor lists and/or data, products, technology, know-how, business processes, business data, inventions, designs, patents, trademarks, copyrights, trade secrets, business models, notes, sketches, flow charts, formulas, blueprints and elements thereof, databases, compilations, and other intellectual property, whether written or otherwise. Some or all of the Confidential Information may also be entitled to protection as a “trade secret” under applicable state or
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federal law. Confidential Information does not include information that the Participant can prove was properly known to the Participant from sources permitted to disseminate the information prior to the Participant’s employment by, or provision of services to, the Employer, or that has become publicly known and made generally available through no wrongful act of the Participant.
(ii)“Customer” means any customer of the Company or an Affiliate with which/whom the Participant had material communications, for which/whom the Participant performed any services, to which/whom the Participant sold any products, or about which/whom the Participant learned or had access to any Confidential Information, in each case during the twelve (12)-month period immediately preceding the Participant’s termination of employment from, or provision of services to, the Employer (whether by Participant or the Employer and whether for any or no reason).
(iii)“Enhanced Restricted Period” means the twenty-four (24)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).
(iv)“Restricted Employee” means any person who was employed by the Company or an Affiliate and had Material Contact pursuant to the Participant’s duties at any point during the period of twelve (12) months immediately preceding the Participant’s last day of employment with the Employer. For purposes of this Section, “Material Contact” means interaction between the Participant and another employee of the Employer or an Affiliate: (A) with whom the Participant actually dealt or interacted; or (B) whose employment or dealings with the Employer or services for the Employer were directly or indirectly handled, coordinated, managed, or supervised by the Participant.
(v)“Restricted Period” means the twelve (12)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).
(b)Confidential Information.
(i)Protection of Confidential Information. At all times during the Participant’s employment with, or provision of services to, the Employer, and at all times thereafter, the Participant agrees to: (A) hold the Confidential Information in strictest confidence, and not to directly or indirectly copy, distribute, disclose, divert, or disseminate, in whole or in part, any of such Confidential Information to any person, firm, corporation, association or other entity except (x) to authorized agents of the Employer who have a need to know such Confidential Information for the purpose for which it is disclosed, or (y) to other persons for the benefit of the Employer, in the course and scope of the Participant’s employment with or service to the Employer; and (B) refrain from directly or indirectly using the Confidential Information other than as necessary and as authorized in the course and scope of the Participant’s employment with, or provision of services to, the Employer. In the event the Participant receives a subpoena or other validly issued administrative or judicial order demanding production or disclosure of Confidential Information, the Participant shall promptly notify the Employer and provide a copy of such subpoena or order and
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tender to the Employer the defense of any such demand. The Participant may, if necessary, disclose Confidential Information in judicial proceedings relating to the enforcement of the Participant’s rights or obligations under this Agreement; provided, however, that the Participant must first enter into an agreed protective order with the Employer protecting the confidentiality of the Confidential Information.
(ii)Notwithstanding the Participant’s confidentiality and non-disclosure obligations under this Agreement or otherwise, as provided in the Federal Defend Trade Secret Act, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public. The Participant understands and acknowledges that nothing in this Agreement prohibits the Participant from confidentially or otherwise communicating with or reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice or the Securities and Exchange Commission, or making other disclosures or statements that are protected under the whistleblower, collective bargaining, anti-discrimination and/or anti-retaliation provisions of federal or state law or regulation. The Participant understands that the Participant does not need prior authorization of the Employer to make any such reports or disclosures, and that the Participant is not required to notify the Employer that the Participant has made such reports or disclosures.
(c)Non-Solicitation.
(i)Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly, seek to recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or
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engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i). Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(i) shall be replaced with those set forth in Appendix I of this Agreement.
(ii)Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in their and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue, or terminate Customer’s or Key Business Partner’s patronage and/or business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate. In addition to the foregoing restrictions, the Participant agrees that, during the Participant’s employment with the Employer and during the Enhanced Restricted Period, the Participant shall not be personally involved in the negotiation, competition for, solicitation or execution of any individual book roll over(s) or other book of business transfer arrangements involving the transfer of business away from the Company or an Affiliate. Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(ii) shall be replaced with those set forth in Appendix I of this Agreement.
(d)Notification to New Employers. During the Restricted Period, the Participant shall notify any subsequent employer of the Participant’s obligations under this Section prior to commencing employment. In addition, during the Restricted Period, the Participant shall provide the Employer and his/her prior manager at the Employer fourteen (14) days’ advance written notice prior to becoming employed by, or retained to represent or provide services to, any person or entity or engaging in any business of any type or form, with such notice including the identity of the prospective employer or business, the specific division (if applicable) for which the Participant will be
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performing services, the title or position to be assumed by the Participant, the physical location of the position to be assumed by the Participant, and the responsibilities of the position to be assumed by the Participant. The Participant hereby authorizes the Company and/or any of its Affiliates, at their discretion, to contact the Participant’s prospective or subsequent employers and inform them of this Section or any other policy or employment agreement between the Participant and the Company and/or its Affiliates that may be in effect at the termination of the Participant’s employment with the Employer.
(e)Non-Disparagement. During the term of Participant’s employment and for the two (2)-year period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason), the Participant shall not make or intentionally cause or direct others to make any written or oral statement that disparages or otherwise are slanderous, libelous, or defamatory towards the Company or its Affiliates, or their respective business relations. Without in any way limiting the scope or effect of the preceding sentence, the Participant specifically agrees, represents and warrants that the Participant shall not directly or indirectly disparage the Company’s and/or its Affiliates’: (i) officers, management, business practices, policies, procedures and/or operations, (ii) employees or other personnel, employment or other personnel-related decisions, staffing, and/or hiring or termination decisions, practices or other personnel-related activities or occurrences, and/or any other employment-related decisions, actions or practices by or relating to the Company or the Affiliates, or (iii) any other policies, procedures or matters concerning or relating to the Company, including but not limited to the Company’s business, operations, employees, management, Customers, suppliers, activities, products, services or any other matter relating to the Company or its Affiliates; provided that this non-disparagement provision shall not prohibit any statement, reporting or other action this is permitted by subsection (b)(ii) of this Section. Moreover, unless permitted by applicable law, and subject to subsection (b)(ii) of this Section, the Participant shall not encourage or aid any person or entity in the pursuit of any cause of action, lawsuit or any other claim or dispute of any kind against the Company and/or its Affiliates.
(f)Consideration/Reasonableness of Restrictions.
(i)Consideration. The Participant agrees and acknowledges that the Participant has received valuable and adequate consideration in exchange for the restrictions in this Section, including but not limited to the Award to the Participant under the terms and conditions specified in this Agreement, offer of employment or continued employment with the Employer, training and continued training, access to the Confidential Information, and access to the Customers and Key Business Partners.
(ii)Reasonableness of Restrictions. The Participant understands and acknowledges the importance of the relationships which the Company and its Affiliates have with their Employees, Customers and Key Business Partners, as well as how significant the maintenance of the Confidential Information is to the business and success of the Company and its Affiliates, and acknowledges the steps the Company and its Affiliates have taken, are taking and will continue to take to develop, preserve and protect these relationships and the Confidential Information. Accordingly, the Participant agrees that the scope and duration of the restrictions and limitations described in this Section are reasonable and necessary to protect the legitimate business interests of the Company and its Affiliates, and the Participant agrees and acknowledges that all restrictions and
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limitations relating to the period following the end of the Participant’s employment or service with the Employer will apply regardless of the reason the Participant’s employment or service ends. The Participant agrees and acknowledges that the enforcement of this Section will not in any way preclude the Participant from becoming gainfully employed or engaged as a contractor in such manner and to such extent as to provide the Participant with an adequate standard of living.
(iii)Participant’s Notice to Consult An Attorney. The Company hereby advises the Participant to consult with an attorney (chosen by the Participant and at the Participant’s cost) prior to signing this Agreement, including with respect to the non-solicitation provisions and other restrictive covenants contained in this Section. The Participant hereby acknowledges receipt of this notice by the Company.
(iv)Review Period. The Participant has at least fourteen (14) calendar days to review this Agreement before agreeing to its terms (although the Participant may elect to voluntarily sign it before the end of this review period).
(v)Tolling. Notwithstanding anything herein to the contrary, if the Participant breaches any of the non-solicitation restrictions in Section 15(c), then the Restricted Period (or the Enhanced Restricted Period, if applicable) shall be tolled (retroactive to the date such breach commenced) until such breach or violation has been duly cured.
(vi)Modification. If any provision or term in this Section is declared invalid or unenforceable by a court of competent jurisdiction, the invalid and unenforceable portion shall be reformed to the maximum time, activity-related restrictions and/or limitations permitted by applicable law, so as to be valid and enforceable. If any such provision cannot be made valid and enforceable, it shall be severed from this Agreement without affecting the remainder of this Agreement.
(vii)Breach/Remedies. Notwithstanding anything to the contrary in this Agreement, the Participant agrees and acknowledges that the breach of this Section would cause substantial loss to the goodwill of the Company and/or its Affiliates, and cause irreparable harm for which there is no adequate remedy at law. Further, because the Participant’s employment with the Employer is personal and unique, because damages alone would not be an adequate remedy and because of the Participant’s access to the Confidential Information, the Company and/or its Affiliates shall have the right to enforce this Section, including any of its provisions, by injunction, specific performance, or other equitable relief, without having to post bond or prove actual damages, and without prejudice to any other rights and remedies that the Company and/or its Affiliates may have for a breach of this Section, including, without limitation, money damages. The Participant agrees and acknowledges that notwithstanding the arbitration provisions in this Agreement, the Company may elect to file and pursue claims which arise from or relate to the Participant’s actual or threatened breaches of this Section in state or federal court of competent jurisdiction. The Participant shall be liable to pay all costs, including reasonable attorneys’ and experts’ fees and expenses, that the Company and/or its Affiliates may incur in enforcing or defending this Section, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the
10



Company and/or its Affiliates where the Company and/or its Affiliates succeed in enforcing any provision of this Section.
(viii)Forfeiture and Repayment Provisions. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement, the Participant agrees that during the Restricted Period (or the Enhanced Restricted Period, if/as applicable), if the Participant breaches any of the terms or conditions in this Section, then in addition to all rights and remedies available to the Company and/or its Affiliates at law and in equity, the Participant shall immediately forfeit any portion of the Award that has not otherwise been previously forfeited under the applicable terms of this Agreement and that has not yet been paid, exercised, settled, or vested. The Company and/or its Affiliates may also require repayment from the Participant of any and all of the compensatory value of the Award that the Participant received during the Restricted Period (or the Enhanced Restricted Period, as applicable), including without limitation the gross amount of any Common Stock distribution or cash payment made to the Participant upon the vesting, distribution, exercise, or settlement of the Award and/or any consideration in excess of such gross amounts received by the Participant upon the sale or transfer of the Common Stock acquired through vesting, distribution, exercise or settlement of the Award. The Participant shall promptly pay the full amount due upon demand by the Company and/or its Affiliates, in the form of cash or shares of Common Stock at current Fair Market Value.
(ix)Waiver. The waiver of any breach of the terms of this Section shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver by the Company or any of its Affiliates of the breach of any term contained in a similar agreement between the Company and/or any of its Affiliates and any other employee or participant, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a waiver of the breach of any term of this Section. No waiver of any provision of this Section shall be valid unless in writing and signed by an authorized representative of the Company or one or more of its Affiliates.
(x)Interpretation. Any reference to “Section” or “subsection” in this Section 15 shall refer to this Section 15 or respective subsection.
16.Arbitration. In lieu of litigation by way of court or jury trial, any dispute or controversy arising hereunder shall be settled by arbitration, in accordance with the arbitration agreement currently in effect by separate agreement between the Participant and the Company or any of its Affiliates and which is incorporated herein by reference. In the event that such arbitration agreement is determined to be inapplicable or unenforceable or if no such arbitration agreement is then in effect, the parties mutually agree to arbitrate any dispute arising out of or related to this Agreement pursuant to the terms of this paragraph.  The parties agree that this Agreement provides sufficient consideration for that obligation and the mutual promises to arbitrate also constitutes consideration for this agreement to arbitrate.  The following terms and conditions shall apply to such arbitration hereunder. The arbitration shall be conducted before a single arbitrator in accordance with the Employment Arbitration Rules of the American Arbitration Association (“AAA Rules”) then in effect, and shall be governed by the Federal Arbitration Act. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including filing fees) and the fees of the arbitrator will be paid by the Company. The Participant and the Company waive the right for any dispute to be
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brought, heard, decided, or arbitrated as a class and/or collective action (or joinder or consolidation with claims of any other person), and the parties agree that, regardless of anything else in this arbitration provision or the AAA Rules, the interpretation, applicability, enforceability or formation of the class action waiver in this provision may only be determined by a court and not an arbitrator.  Regardless of anything else in this Agreement, this arbitration provision may not be modified or terminated absent a writing signed by the Participant and the Company stating an intent to modify or terminate the arbitration provision.
17.Governing Law. Except as otherwise provided in the foregoing Section or an Appendix to this Agreement, this Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles.
18.Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the PSUs granted hereby and may not be amended except in a writing signed by both the Company and the Participant or his or her Representative. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.
19.Forfeiture and Clawback of Award. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement and as a condition to the receipt of this Award, the rights, payments and benefits with respect to this Award and any shares acquired pursuant to the vesting of this Award are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent permitted by Section 15.3 of the Plan, pursuant to any clawback or recoupment policy in effect as of the Grant Date or any clawback or recoupment policy that the Company may adopt from time to time to comply with applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing rules, and regulations (“Forfeiture and Clawback Policy”). Any determination made and action taken under the Forfeiture and Clawback Policy shall be final, binding and conclusive.
ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:
20.Stock Holding Period. The Participant agrees to hold the shares of Common Stock acquired upon the conversion of the PSUs for a minimum of 12 months following their Settlement Date. This holding period shall not apply to shares of Common Stock withheld by the Company to settle tax liabilities related to vesting and/or settlement, and as otherwise may be provided under the Company’s Stock Ownership Policy.
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EXHIBIT A
Vesting Schedule Based on Operational Metric
A.Definition of Terms:
“Additional Shares” means any shares of Common Stock to be issued to the Participant on the Vesting Date in the event that the Company’s Operational Performance Results exceed the Target Performance Level.
“Award Agreement” means the Performance-Based Restricted Stock Unit Award Agreement to which this Exhibit is a part, pursuant to which an award of PSUs has been granted.
“Cause” is defined in Section 11(c) of the Award Agreement.
“Disability” means that the Participant either: (A) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months and, with respect to a Participant who is an Employee, is receiving income replacement benefits for a period of not less than three months under an accident and health plan (e.g., a long term disability plan) covering Employees of the Company or Affiliate that employs the Participant; or (B) is determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.
“Grant Date” is defined in the first paragraph of the Award Agreement.
“Operational Performance Results” means the Company’s Adjusted Return on Equity as defined in Section C below and certified by the Committee for the Performance Period.
“Performance Period” means the three-year period starting on January 1 of the calendar year in which the Grant Date occurs (“Start Date”) and ending on the December 31 immediately preceding the three-year anniversary of the Start Date.
“Retirement Eligible” means that the Participant has either attained age 55 and completed 10 years of Service as an Employee or attained age 60 and completed five years of Service as an Employee.
“Separation from Service” has the meaning ascribed to such term in Section 409A.
“Service” means the period during which the Participant is an Employee, Director or a Third Party Service Provider; provided, however, that the Participant will not be deemed to be in service after the Company divests its control in the Affiliate for which the Participant is exclusively in Service, or if the Company’s control of such Affiliate otherwise ceases.
“Target Units” means one hundred percent (100%) of the total number of PSUs granted on the Grant Date, as specified in Section 1 of the Award Agreement.
“Vesting Date” means the date that the Committee certifies the Operational Performance Results, except as otherwise provided in Section E below.
B.Determination of Vesting Date Events:
As soon as practicable following the end of the Performance Period (but in any event no later than sixty (60) days following the end of the Performance Period), the Committee will
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determine the Company’s Operational Performance Results in accordance with the methodology described in the next section below. The Company’s Operational Performance Results will determine the number of Target Units that will vest or be forfeited on the Vesting Date, and the number of Additional Shares, if any, that will be issued to the Participant on the Vesting Date, as described below under “Vesting Determination.”
C.Operational Performance Calculation Methodology:
The following table shows the Maximum, Target and Threshold Performance Levels for the Company’s Operational Performance Results:
Level of Achievement for Performance PeriodOperational Performance Results
Total PSUs to Vest (and/or Additional Shares to be Granted) on Vesting Date as Percentage of Target Units
Maximum
10.0%
200%
Target
8.5%
100%
Threshold
7.0%
50%
Below Threshold
Under 7.0%
0%
At the conclusion of the Performance Period, the Committee will determine the Company’s Operational Performance Results in accordance with the formula and methods described below. For performance that falls between the percentage points specified in the second column of the above table, the total PSUs to vest and/or Additional Shares to be granted shall be interpolated on a straight-line basis.
Formula for Calculating Operational Performance Results
For purposes of this Exhibit, the Operational Performance Results for the Company will be calculated as follows:
Adjusted Return on Equity shall be computed by dividing the sum of Adjusted Net Income for each of the three years in the Performance Period by the sum of the Adjusted Average Shareholders’ Equity for each of the three years.
Adjusted Net Income is defined as Net Income as reported in the Company’s financial statements for the respective year, adjusted to take into account the after-tax impacts of the following items, to the extent the Committee deems them not indicative of the Company’s core operating performance:
(i)    adjust the amount of Actual CAT Losses and LAE to equal Expected CAT Losses;
(ii)    adjust Net Realized Gains on Sales of Investments and Net Impairment Losses Recognized in Earnings to equal Expected Net Realized Gains on Sales of Investments and Expected Net Impairment Losses Recognized in Earnings;
(iii)    significant unusual judgments or settlements in connection with the Company’s legal contingencies or benefit plans; and
(iv)    additional significant unusual or nonrecurring items as permitted by the Plan.
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Adjusted Average Shareholders’ Equity is defined as the simple average of Total Shareholders’ Equity as reported in the Company’s financial statements for the beginning and end of year for each year in the Performance Period, adjusted to take into account the after-tax impacts of the following items, to the extent the Committee deems them not indicative of the Company’s core operating performance:
(i)    Unrealized Gains and Losses on Fixed Maturity Securities from Adjusted Shareholders Equity;
(ii)    the modifications made in calculating Adjusted Net Income; and
(iii)    additional significant unusual or nonrecurring items as permitted by the Plan.
Actual CAT Losses and LAE means the actual Catastrophe Losses and associated Loss Adjustment Expenses, including catastrophe reserve development, as reported in the Management Reports.
Expected CAT Losses, Expected Net Realized Gains on Sales of Investments, and Expected Net Impairment Losses Recognized in Earnings means the amounts specified in the Management Reports as “Planned” or “Expected” for, respectively, (A) Catastrophe Losses and associated Loss Adjustment Expenses, including catastrophe reserve development, (B) Net Realized Gains on Sales of Investments, and (C) Net Impairment Losses Recognized in Earnings.
Management Reports means the Hyperion reports, or their reporting equivalent, prepared by the Company for the relevant Plan Year or other time period.
Unrealized Gains and Losses on Fixed Maturity Securities means the Unrealized Gains and Losses on Fixed Maturity Securities as reported in the Management Reports.
D.Vesting Determination:
Except as otherwise provided in Section E, the PSUs held by the Participant will vest, to the extent earned for the Performance Period, and Additional Shares, if any, will be issued to the Participant, on the Vesting Date only if the Participant has not had a Separation from Service prior to such date.
Once the Company’s Operational Performance Results are determined by the Committee, the Company will confirm the number of Target Units that will vest or be forfeited on the Vesting Date, and the number of Additional Shares, if any, that will be issued to the Participant on the Vesting Date consistent with the following provisions:
•If the Company’s Operational Performance Results are at or above the Target Performance Level, 100% of the Target Units will vest on the Vesting Date. If the Company’s Operational Performance Results are above the Target Performance Level, Additional Shares will also be issued to the Participant on the Vesting Date. If the Company’s Operational Performance Results are less than the Target Performance Level, some or all of the Target Units will be forfeited.
•The number of the Target Units that will vest on the Vesting Date, and the number of any Additional Shares that will be issued to the Participant on the Vesting Date, will be determined in accordance with the table set forth in Section C above. Any Target Units that do not vest in accordance with the table will be forfeited on the Vesting Date.
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E.Determination of Vesting in Case of Certain Terminations and Other Events:
Notwithstanding any contrary provisions of the Plan:
(1)    Retirement Eligible. (a) Except as otherwise provided in Section (1)(b) or in another subsection of this Section E, if the Participant is Retirement Eligible, any PSUs that will vest and Additional Shares that will be issued on the Vesting Date will be based on the extent earned for the Performance Period as determined in accordance with the provisions of Sections A – D above, and then reduced pro-rata by multiplying any such PSUs and Additional Shares by a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was actively in Service, and the denominator of which is the total number of months in the Performance Period. A partial month worked shall be counted as a full month if the Participant was actively working for 15 or more days in that month. All PSUs that do not vest in accordance with this provision shall be forfeited.
(b) If, on or prior to the last day of the Performance Period, the Participant is Retirement Eligible and either (i) becomes an employee of a competitor of the Company or any of its Affiliates or otherwise engages in any activity that is competitive with the Company or any of its Affiliates, as determined by the Committee in its sole discretion, or (ii) the Participant’s Service is terminated, or is deemed to be terminated, for Cause, then any of the PSUs that are restricted on the date of such employment, activity or termination shall be forfeited to the Company. For purposes of the preceding sentence, a Participant’s Service shall be deemed terminated for Cause if the Participant resigns or is terminated and the Committee determines in good faith, either before, at the time of, or after such termination, that one or more of the events or actions described in the definition of Cause in Section 11(c) of the Award Agreement existed as of the time of such termination.
(2)    Termination on Death or Disability. The Vesting Date shall be the date of the Participant’s death or Disability if the Participant dies or becomes Disabled prior to the three-year anniversary of the Grant Date: (i) while in Service; or (ii) after terminating Service if the Participant (A) was Retirement Eligible on the date of such termination of Service for a reason other than Cause, and (B) had not, at any time prior to the date of the Participant’s death or Disability, become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Committee in its sole discretion. On such Vesting Date: (a) the Performance Period shall be deemed to have been completed; (b) a number of PSUs shall vest in an amount equal to the number of Target Units multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was actively in Service, and the denominator of which is the total number of months in the original Performance Period (a partial month worked shall be counted as a full month if the Participant was actively in Service for 15 or more days in that month); (c) no Additional Shares shall be issued to the Participant; and (d) all PSUs that do not vest in accordance with this provision shall be forfeited.
(3)    Termination on Divestiture. Except as otherwise provided below or in another subsection of this Section E, in the event that, prior to the three-year anniversary of the Grant Date, the Participant is no longer employed by the Company or an Affiliate as a result of the Company’s divestiture of the business for which the Participant primarily performed services or its controlling interest in the Affiliate for which the Participant was exclusively in Service, or other cessation of the Company’s control of such Affiliate, the following terms shall apply. Any PSUs that will vest and Additional Shares that will be issued on the Vesting Date will be based on the extent earned for the Performance Period as determined in accordance with the provisions of Sections A – D above, and then reduced pro-rata by multiplying the number of any such PSUs and Additional Shares by a fraction, the numerator of which is the number of full
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months in the Performance Period during which the Participant was actively in Service, and the denominator of which is the total number of months in the Performance Period. A partial month worked shall be counted as a full month if the Participant was actively working for 15 or more days in that month. All PSUs that do not vest in accordance with this provision shall be forfeited.
(4)    Other Termination of Service. If the Participant ceases to be in Service prior to the Vesting Date (including, without limitation, by reason of a divestiture or cessation of control of an Affiliate), and is not Retirement Eligible or subject to a divestiture, under circumstances other than those set forth in the foregoing subsections (1) – (3) of this Section E or Section 11(b) of the Award Agreement, all unvested PSUs held by the Participant shall be forfeited to the Company on the date of such cessation of Service, and no Additional Shares shall be issued to the Participant.
(5)    Leave of Absence. In the event that the Participant is on an approved Leave of Absence (other than a short-term disability or Family and Medical Leave Act leave) at the end of the Performance Period or takes such a Leave of Absence at any time during the Performance Period, then the PSUs will vest, forfeit or be granted, as applicable, to the extent earned for the Performance Period, in an amount equal to the number of Target Units that would vest and the number of Additional Shares that would be issued in accordance with the provisions of Sections A – D above, if any, multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was an active Employee not on such Leave of Absence and the denominator of which is the total number of months in the Performance Period.
F.Interpretations Related to Calculations and Determinations Related to Performance:
(1)    Interpretations. The Committee shall have the reasonable discretion to interpret or construe ambiguous, unclear or implied terms applicable to this Agreement, and to make any findings of fact necessary to make a calculation or determination hereunder.
(2)    Disagreements. A decision made in good faith by the Committee or the Company shall govern and be binding in the event of any dispute regarding a method of calculation of performance or a determination of vesting or forfeiture in connection with this Award.
(3)    Method of Calculating Final Number of Vested or Forfeited PSUs. The number of PSUs that will vest or be forfeited and any Additional Shares that will be issued on the Vesting Date pursuant to Section D above for performance that falls between the percentage points specified in the second column of the table in Section C above shall be interpolated on a straight-line basis.
(4)    Rounding Conventions.
•Regarding rounding of results, percentages shall be computed to one decimal point (i.e., XX.X%).
•Target Units that will vest and any Additional Shares that will be issued from the application of the methods in the foregoing subsection F(3) and Section D above shall only be paid out in whole shares of Common Stock. Any fractional shares that would otherwise result from such application shall be rounded down to the nearest whole number of shares.
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18



Appendix I (Employees Whose Primary Residences are Located in California)
If the Participant’s primary residence is located in the State of California:
1.    Sections 15(c)(i) and (c)(ii) of the foregoing Agreement shall be replaced with the following:
15(c)(i) Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees to the extent that the Participant uses or misuses Confidential Information (as the term is defined in this Section) to so solicit and/or interfere. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, use or rely in any manner on any Confidential Information to directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i).
15(c)(ii) Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in its and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue or terminate Customer’s patronage and/or
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business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate.
    2.    Any claims relating to Section 15 of the Agreement shall be governed by and interpreted in accordance with the laws of the State of California.
    

20

Kemper Corporation 2023 Omnibus Plan
PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT
(Relative TSR)
This PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”) is made as of this ______ day of ________________, 20__ (“Grant Date”) between KEMPER CORPORATION, a Delaware corporation (“Company”), and «name» (“Participant”) for an Award of performance-based restricted stock units (“PSUs”), each representing the right to receive one share of the Company’s common stock (“Common Stock”) on the terms and conditions set forth in this Agreement.
SIGNATURES
As of the date set forth above, the parties have accepted the terms of this Agreement by signing this Agreement by an electronic signature, and each party agrees that such signature shall not be denied legal effect, validity or enforceability solely because it was submitted or executed electronically.
KEMPER CORPORATION                 PARTICIPANT
By: ___________________________________    ____________________________________
«CEO Signature and Title»    «name»
RECITALS
1.The Board of Directors of the Company (“Board”) has adopted the Kemper Corporation 2023 Omnibus Plan (“Plan”), including all amendments to date, to be administered by the Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer the Plan (“Committee”). Capitalized terms that are not defined herein shall be defined in accordance with the Plan.
2.The Plan authorizes the Committee to grant to selected Employees, Directors and Third Party Service Providers awards of various types, including PSUs providing the right to receive shares of Common Stock under specified terms and conditions.
3.Pursuant to the Plan, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Award of PSUs to the Participant under the terms and conditions specified in this Agreement as an inducement to remain in the service of the Company and an incentive for increased effort during such service.
NOW, THEREFORE, the parties hereto agree as follows:
a.Grant. The Company grants a target award of «shares» PSUs, which represent the Company’s unfunded and unsecured promise to issue shares of Common Stock under certain circumstances to the Participant, subject to the terms and conditions set forth in this Agreement. The PSUs shall not entitle the Participant to any rights of a shareholder of Common Stock and the Participant has no rights with respect to the Award other than rights as a general creditor of the Company.
b.Governing Plan. This Award is granted pursuant to the Plan, which is incorporated herein for all purposes. The Participant agrees to be bound by the terms and


conditions of the Plan, which controls in case of any conflict with this Agreement, except as otherwise provided for in the Plan. No amendment of the Plan shall adversely affect this Award in any material way without the written consent of the Participant.    
c.Restrictions on Transfer. The PSUs shall be restricted during a period (“Restriction Period”) beginning on the Grant Date and expiring on the Settlement Date (as defined in Section 6 below). During the Restriction Period, neither this Agreement, the PSUs nor any rights and privileges granted hereby may be transferred, assigned, pledged or hypothecated in any way, whether by operation of the law or otherwise (any such disposition being referred to herein as a “Transfer”), except by will or the laws of descent and distribution. Without limiting the generality of the preceding sentence, no rights or privileges granted hereby may be Transferred during the Restriction Period to the spouse or former spouse of the Participant pursuant to any divorce proceedings, settlement or judgment, unless approved by the Committee. Any attempt to Transfer this Agreement, the PSUs or any other rights or privileges granted hereby contrary to the provisions hereof shall be null and void and of no force or effect, and the Company shall not recognize or give effect to any such Transfer on its books and records or recognize the person to whom such purported Transfer has been made as the legal or beneficial holder of such PSUs.
d.Vesting and Forfeiture. The PSUs shall be subject to the terms concerning vesting and forfeiture set forth on Exhibit A to this Agreement and Section 11(b).
e.Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to the Common Stock during the Restriction Period, the Participant shall be eligible to receive a cash payment equal to the total cash dividend the Participant would have received had the PSUs and any “Additional Shares” granted to Participant pursuant to Exhibit A been actual shares of Common Stock held by the Participant during the Restriction Period, provided and to the extent that that the Participant vests in the PSUs and any such Additional Shares. Any such cash payment shall be made on the Settlement Date (as defined below) and it shall be subject to applicable withholding obligations as described in Section 8.
f.Conversion of PSUs; Issuance of Common Stock. Except as otherwise provided in Section 10, the Company shall cause one share of Common Stock to be issued, within the time period provided below, for each PSU that is vesting and each Additional Share that is being issued on the applicable Vesting Date in accordance with Exhibit A.
Any issuance of Common Stock shall be subject to applicable tax withholding obligations as described in Section 8 and shall be in book-entry form, registered in the Participant’s name (or in the name of the Participant’s Representative, as the case may be). Except as otherwise provided in Section 10, in no event shall the date that Common Stock is issued to the Participant (“Settlement Date”) occur later than March 15th following the calendar year in which the Performance Period occurs (or, if earlier, a termination of Service in accordance with Section 11(a) or a qualifying termination of Service in accordance with the Exhibit).
g.Fair Market Value of Common Stock. The fair market value (“Fair Market Value”) of a share of Common Stock shall be determined for purposes of this Agreement by reference to the closing price of a share of Common Stock as reported by the New York Stock Exchange (or such other exchange on which the shares of Common Stock are primarily traded) for the applicable date, or if no prices are reported for that day, the last preceding day on which such prices are reported (or, if for any reason no such price is available, in such other manner as the Committee in its sole discretion may deem appropriate to reflect the fair market value thereof).
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h.Withholding of Taxes. The Participant acknowledges that the vesting of the PSUs will result in the Participant being subject to payroll taxes upon the Vesting Date (if the Participant is an Employee or was an Employee on the Grant Date), except as otherwise determined by the Company and permitted by regulations issued under Section 3121(v)(2) of the Code, and that the issuance of Common Stock pursuant to Section 6 will result in the Participant being subject to income taxes upon the Settlement Date. Upon a required withholding date, the Company will deduct from the shares of Common Stock that are otherwise due to be delivered to the Participant shares of Common Stock having a Fair Market Value not in excess of the tax withholding requirements based on the maximum statutory withholding rates for the Participant for federal, state and local tax purposes (including the Participant’s share of payroll or similar taxes) in the applicable jurisdiction, and the Participant shall remit to the Company in cash any and all applicable withholding taxes that exceed the amount available to the Company using shares with respect to which the Settlement Date has occurred.
i.Section 409A. The Company intends that the Award hereunder shall either be exempt from the application of, or compliant with, the requirements of Section 409A and this Award Agreement shall be interpreted and administered in accordance with such intent. In no event shall the Company and/or its Affiliates be liable for any tax, interest or penalties that may be imposed on the Participant (or the Participant’s estate) under Section 409A. Notwithstanding the foregoing, if the PSUs are considered “deferred compensation” within the meaning of Section 409A and the Participant is a “specified employee” for purposes of Section 409A, no distribution or payment of any amount that is due upon a “separation from service” (as defined in Section 409A without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participant’s “separation from service” (as defined in Section 409A without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses.
j.Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules. No shares issuable upon the vesting of the PSUs shall be issued and delivered unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (“Act”) (whether by registration or satisfaction of exemption conditions), all applicable listing requirements of the New York Stock Exchange (or such other exchange(s) or market(s) on which shares of the same class are then listed) and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company shall use its best efforts and take all necessary or appropriate actions to ensure that such full compliance on the part of the Company is made. By signing this Agreement, the Participant represents and warrants that none of the shares to be acquired in settlement of the PSUs will be acquired with a view towards any sale, transfer or distribution of said shares in violation of the Act, and the rules and regulations promulgated thereunder, or any applicable “blue sky” laws, and that the Participant hereby agrees to indemnify the Company in the event of any violation by the Participant of such Act, rules, regulations or laws. The Company will use its best efforts to complete all actions necessary for such compliance so that settlement can occur within the period specified in Section 6; provided that if the Company reasonably anticipates that settlement within such period will cause a violation of applicable law, settlement may be delayed provided that settlement occurs at the earliest date at which the Company reasonably anticipates that such settlement will not cause a violation of applicable law, all in accordance with Treas. Reg. § 1.409A-2(b)(7)(ii).
k.Certain Adjustments; Change in Control.
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(i)If, during the term of this Agreement, there shall be any equity restructurings (within the meaning of FASB Accounting Standards Codification® Topic 718) that causes the per share value of Shares to change, such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a large, nonrecurring cash dividend, and similar matters, the Committee shall make or cause to be made an equitable adjustment to the number and kind of PSUs subject to the Award and, if applicable, the performance goals. If, during the term of this Agreement, there shall be any other changes in corporate capitalization, the Committee shall make or cause to be made an appropriate and equitable substitution, adjustment or treatment with respect to the PSUs in a manner consistent with Sections 4.3 and 21.2 of the Plan. The Committee’s determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of PSUs shall be issued under the Plan on any such adjustment. This Award may be subject to early vesting or termination in connection with a Change in Control in accordance with the provisions of Section 20.3 of the Plan.
(ii)In the event of a Change in Control as defined in Section 20.1 of the Plan, except as prohibited by applicable laws, rules, regulations or stock exchange requirements, if the Service of a Participant is terminated within the two (2)-year period following such Change in Control by the Company or an Affiliate for reasons other than Cause or by the Participant for Good Reason, the payout opportunities attainable under all outstanding PSUs shall be deemed to have been fully earned based on the greater of (i) targeted performance, or (ii) actual performance being attained for a truncated Performance Period (as defined in Exhibit A) that ends on the date of the Change in Control.
(iii)Definitions
(1)“Cause” means any of the following: (1) the Participant’s theft or falsification of any Company or Affiliate documents, records or property; (2) the Participant’s improper use or disclosure of the Company’s or an Affiliate’s confidential or proprietary information in breach of the Company’s Essential Standards of Conduct or an applicable contractual or other obligation, or using such information for personal gain including, without limitation, by trading in Company securities on the basis of material, non-public information; (3) fraud, misappropriation of or intentional material damage to the property or business of the Company or an Affiliate or other action by the Participant which has a material detrimental effect on the Company’s or an Affiliate’s reputation or business as determined by the Committee; (4) the Participant’s material failure or inability to perform any reasonable assigned and lawful duties after written notice from the Company or Affiliate of such failure or inability, and such failure or inability is not cured by the Participant within ten (10) business days; (5) the Participant’s conviction (including any plea of guilty or nolo contendere) of any felony or any criminal violation involving fraud, embezzlement, misappropriation, dishonesty, the misuse or misappropriation of money or other property or any other crime which has or would reasonably be expected to have an adverse effect on the business or reputation of the Company or an Affiliate or (6) a material breach by the Participant of the policies and procedures of the Company or an Affiliate, including, but not limited to, any breach of the Company’s Essential Standards of Conduct and the requirements of Section 15.
(2)“Employer” means the Company or Affiliate by which/whom the Participant is employed, or to which/whom the Participant provides services.
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(3)“Good Reason” means any action taken by the Employer which results in a material negative change to the Participant in the employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services. A termination by the Participant shall not constitute termination for Good Reason unless the Participant shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than ninety (90) days after the occurrence of such event), and there shall have passed a reasonable time (not less than thirty (30) days) within which the Employer may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Participant and the Participant terminates within ninety (90) days following the expiration of the cure period.
l.Participation by Participant in Other Company Plans. Nothing herein contained shall affect the right of the Participant to participate in and receive benefits under and in accordance with the then current provisions of any retirement plan or employee welfare benefit plan or program of the Company or of any Affiliate of the Company, subject in each case, to the terms and conditions of any such plan or program.
m.Not an Employment or Service Contract. Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, expressed or implied, to employ or contract for the services of the Participant, to restrict the right of the Company or any of its Affiliates to discharge the Participant or cease contracting for the Participant’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Participant and the Company or any of its Affiliates.
n.Death of the Participant. In the event of the Participant’s death prior to the Settlement Date, delivery of shares of Common Stock pursuant to Section 6 shall be made to the duly appointed and qualified executor or other personal representative of the Participant, to be distributed in accordance with the Participant’s will or applicable intestacy law.
o.Confidentiality, Non-Solicitation and Non-Disparagement. The Participant agrees that the Award to the Participant under the terms and conditions specified in this Agreement is conditioned upon the Participant’s compliance with the following confidentiality, non-solicitation and non-disparagement terms and conditions.
(i)Definitions. As used in this Section, the following terms have the meanings set forth below:
(1)“Confidential Information” means any and all confidential information, including without limitation any negotiations or agreements between the Company or its Affiliates and third parties, business and marketing plans and related materials, training materials, financial information, plans, executive summaries, capitalization tables, budgets, unpublished financial statements, costs, prices, licenses, employee, customer, supplier, shareholder, partner or investor lists and/or data, products, technology, know-how, business processes, business data, inventions, designs, patents, trademarks, copyrights, trade secrets, business models, notes, sketches, flow charts, formulas, blueprints and elements thereof, databases, compilations, and other intellectual property, whether written or otherwise. Some or all of the Confidential Information may also be entitled to protection as a “trade secret” under applicable state or
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federal law. Confidential Information does not include information that the Participant can prove was properly known to the Participant from sources permitted to disseminate the information prior to the Participant’s employment by, or provision of services to, the Employer, or that has become publicly known and made generally available through no wrongful act of the Participant.
(2)“Customer” means any customer of the Company or an Affiliate with which/whom the Participant had material communications for which/whom the Participant performed any services, to which/whom the Participant sold any products, or about which/whom the Participant learned or had access to any Confidential Information, in each case during the twelve (12)-month period immediately preceding the Participant’s termination of employment from, or provision of services to, the Employer (whether by Participant or the Employer and whether for any or no reason).
(3)“Enhanced Restricted Period” means the twenty-four (24)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).
(4)“Restricted Employee” means any person who was employed by the Company or an Affiliate and had Material Contact pursuant to the Participant’s duties at any point during the period of twelve (12) months immediately preceding the Participant’s last day of employment with the Employer. For purposes of this Section, “Material Contact” means interaction between the Participant and another employee of the Employer or an Affiliate: (A) with whom the Participant actually dealt or interacted; or (B) whose employment or dealings with the Employer or services for the Employer were directly or indirectly handled, coordinated, managed, or supervised by the Participant.
(5)“Restricted Period” means the twelve (12)-month period commencing on the day following the last day of the Participant’s employment with the Employer (whether by Participant or the Employer and whether for any or no reason).
(ii)Confidential Information.
(1)Protection of Confidential Information. At all times during the Participant’s employment with, or provision of services to, the Employer, and at all times thereafter, the Participant agrees to: (A) hold the Confidential Information in strictest confidence, and not to directly or indirectly copy, distribute, disclose, divert, or disseminate, in whole or in part, any of such Confidential Information to any person, firm, corporation, association or other entity except (x) to authorized agents of the Employer who have a need to know such Confidential Information for the purpose for which it is disclosed, or (y) to other persons for the benefit of the Employer, in the course and scope of the Participant’s employment with or service to the Employer; and (B) refrain from directly or indirectly using the Confidential Information other than as necessary and as authorized in the course and scope of the Participant’s employment with, or provision of services to, the Employer. In the event the Participant receives a subpoena or other validly issued administrative or judicial order demanding production or disclosure of Confidential Information, the Participant shall promptly notify the Employer and provide a copy of such subpoena or order and
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tender to the Employer the defense of any such demand. The Participant may, if necessary, disclose Confidential Information in judicial proceedings relating to the enforcement of the Participant’s rights or obligations under this Agreement; provided, however, that the Participant must first enter into an agreed protective order with the Employer protecting the confidentiality of the Confidential Information.
(2)Notwithstanding the Participant’s confidentiality and non-disclosure obligations under this Agreement or otherwise, as provided in the Federal Defend Trade Secret Act, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or to the Participant’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public. The Participant understands and acknowledges that nothing in this Agreement prohibits the Participant from confidentially or otherwise communicating with or reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice or the Securities and Exchange Commission, or making other disclosures or statements that are protected under the whistleblower, collective bargaining, anti-discrimination and/or anti-retaliation provisions of federal or state law or regulation. The Participant understands that the Participant does not need prior authorization of the Employer to make any such reports or disclosures, and that the Participant is not required to notify the Employer that the Participant has made such reports or disclosures.
(iii)Non-Solicitation.
(1)Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly, seek to recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or
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engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i). Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(i) shall be replaced with those set forth in Appendix I of this Agreement.
(2)Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in their and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not, directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue, or terminate Customer’s or Key Business Partner’s patronage and/or business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate. In addition to the foregoing restrictions, the Participant agrees that, during the Participant’s employment with the Employer and during the Enhanced Restricted Period, the Participant shall not be personally involved in the negotiation, competition for, solicitation or execution of any individual book roll over(s) or other book of business transfer arrangements involving the transfer of business away from the Company or an Affiliate. Notwithstanding the foregoing, if the Participant’s primary residence is located in the State of California, the restrictions set forth in this subsection (c)(ii) shall be replaced with those set forth in Appendix I of this Agreement.
(iv)Notification to New Employers. During the Restricted Period, the Participant shall notify any subsequent employer of the Participant’s obligations under this Section prior to commencing employment. In addition, during the Restricted Period, the Participant shall provide the Employer and his/her prior manager at the Employer fourteen (14) days’ advance written notice prior to becoming employed by, or retained to represent or provide services to, any person or entity or engaging in any business of any type or form, with such notice including the identity of the prospective employer or business, the specific division (if applicable) for which the Participant will be performing
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services, the title or position to be assumed by the Participant, the physical location of the position to be assumed by the Participant, and the responsibilities of the position to be assumed by the Participant. The Participant hereby authorizes the Company and/or any of its Affiliates, at their discretion, to contact the Participant’s prospective or subsequent employers and inform them of this Section or any other policy or employment agreement between the Participant and the Company and/or its Affiliates that may be in effect at the termination of the Participant’s employment with the Employer.
(v)Non-Disparagement. During the term of Participant’s employment and for the two (2)-year period commencing on the day following the last day of the Participant’s employment with the Employer (whether by the Participant or the Employer and whether for any or no reason), the Participant shall not make or intentionally cause or direct others to make any written or oral statement that disparages or otherwise are slanderous, libelous, or defamatory towards on the Company or its Affiliates, or their respective business relations. Without in any way limiting the scope or effect of the preceding sentence, the Participant specifically agrees, represents and warrants that the Participant shall not directly or indirectly disparage the Company’s and/or its Affiliates’: (i) officers, management, business practices, policies, procedures and/or operations, (ii) employees or other personnel, employment or other personnel-related decisions, staffing, and/or hiring or termination decisions, practices or other personnel-related activities or occurrences, and/or any other employment-related decisions, actions or practices by or relating to the Company or the Affiliates, or (iii) any other policies, procedures or matters concerning or relating to the Company, including but not limited to the Company’s business, operations, employees, management, Customers, suppliers, activities, products, services or any other matter relating to the Company or its Affiliates; provided that this non-disparagement provision shall not prohibit any statement, reporting or other action this is permitted by subsection (b)(ii) of this Section. Moreover, unless permitted by applicable law, and subject to subsection (b)(ii) of this Section, the Participant shall not encourage or aid any person or entity in the pursuit of any cause of action, lawsuit or any other claim or dispute of any kind against the Company and/or its Affiliates.
(vi)Consideration/Reasonableness of Restrictions.
(1)Consideration. The Participant agrees and acknowledges that the Participant has received valuable and adequate consideration in exchange for the restrictions in this Section, including but not limited to the Award to the Participant under the terms and conditions specified in this Agreement, offer of employment or continued employment with the Employer, training and continued training, access to the Confidential Information, and access to the Customers and Key Business Partners.
(2)Reasonableness of Restrictions. The Participant understands and acknowledges the importance of the relationships which the Company and its Affiliates have with their Employees, Customers and Key Business Partners, as well as how significant the maintenance of the Confidential Information is to the business and success of the Company and its Affiliates, and acknowledges the steps the Company and its Affiliates have taken, are taking and will continue to take to develop, preserve and protect these relationships and the Confidential Information. Accordingly, the Participant agrees that the scope and duration of the restrictions and limitations described in this Section are reasonable and necessary to protect the legitimate business interests of the Company and its Affiliates, and the Participant agrees and acknowledges that all restrictions and
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limitations relating to the period following the end of the Participant’s employment or service with the Employer will apply regardless of the reason the Participant’s employment or service ends. The Participant agrees and acknowledges that the enforcement of this Section will not in any way preclude the Participant from becoming gainfully employed or engaged as a contractor in such manner and to such extent as to provide the Participant with an adequate standard of living.
(3)Participant’s Notice to Consult An Attorney. The Company hereby advises the Participant to consult with an attorney (chosen by the Participant and at the Participant’s cost) prior to signing this Agreement, including with respect to the non-solicitation provisions and other restrictive covenants contained in this Section. The Participant hereby acknowledges receipt of this notice by the Company.
(4)Review Period. The Participant has at least fourteen (14) calendar days to review this Agreement before agreeing to its terms (although the Participant may elect to voluntarily sign it before the end of this review period).
(5)Tolling. Notwithstanding anything herein to the contrary, if the Participant breaches any of the non-solicitation restrictions in Section 15(c), then the Restricted Period (or the Enhanced Restricted Period, if applicable) shall be tolled (retroactive to the date such breach commenced) until such breach or violation has been duly cured.
(6)Modification. If any provision or term in this Section is declared invalid or unenforceable by a court of competent jurisdiction, the invalid and unenforceable portion shall be reformed to the maximum time, activity-related restrictions and/or limitations permitted by applicable law, so as to be valid and enforceable. If any such provision cannot be made valid and enforceable, it shall be severed from this Agreement without affecting the remainder of this Agreement.
(7)Breach/Remedies. Notwithstanding anything to the contrary in this Agreement, the Participant agrees and acknowledges that the breach of this Section would cause substantial loss to the goodwill of the Company and/or its Affiliates, and cause irreparable harm for which there is no adequate remedy at law. Further, because the Participant’s employment with the Employer is personal and unique, because damages alone would not be an adequate remedy and because of the Participant’s access to the Confidential Information, the Company and/or its Affiliates shall have the right to enforce this Section, including any of its provisions, by injunction, specific performance, or other equitable relief, without having to post bond or prove actual damages, and without prejudice to any other rights and remedies that the Company and/or its Affiliates may have for a breach of this Section, including, without limitation, money damages. The Participant agrees and acknowledges that notwithstanding the arbitration provisions in this Agreement, the Company may elect to file and pursue claims which arise from or relate to the Participant’s actual or threatened breaches of this Section in state or federal court of competent jurisdiction. The Participant shall be liable to pay all costs, including reasonable attorneys’ and experts’ fees and expenses, that the Company and/or its Affiliates may incur in enforcing or defending this Section, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the
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Company and/or its Affiliates where the Company and/or its Affiliates succeed in enforcing any provision of this Section.
(8)Forfeiture and Repayment Provisions. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement, the Participant agrees that during the Restricted Period (or the Enhanced Restricted Period, if/as applicable), if the Participant breaches any of the terms or conditions in this Section, then in addition to all rights and remedies available to the Company and/or its Affiliates at law and in equity, the Participant shall immediately forfeit any portion of the Award that has not otherwise been previously forfeited under the applicable terms of this Agreement and that has not yet been paid, exercised, settled, or vested. The Company and/or its Affiliates may also require repayment from the Participant of any and all of the compensatory value of the Award that the Participant received during the Restricted Period (or the Enhanced Restricted Period, as applicable), including without limitation the gross amount of any Common Stock distribution or cash payment made to the Participant upon the vesting, distribution, exercise, or settlement of the Award and/or any consideration in excess of such gross amounts received by the Participant upon the sale or transfer of the Common Stock acquired through vesting, distribution, exercise or settlement of the Award. The Participant shall promptly pay the full amount due upon demand by the Company and/or its Affiliates, in the form of cash or shares of Common Stock at current Fair Market Value.
(9)Waiver. The waiver of any breach of the terms of this Section shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver by the Company or any of its Affiliates of the breach of any term contained in a similar agreement between the Company and/or any of its Affiliates and any other employee or participant, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a waiver of the breach of any term of this Section. No waiver of any provision of this Section shall be valid unless in writing and signed by an authorized representative of the Company or one or more of its Affiliates.
(10)Interpretation. Any reference to “Section” or “subsection” in this Section 15 shall refer to this Section 15 or respective subsection.
p.Arbitration. In lieu of litigation by way of court or jury trial, any dispute or controversy arising hereunder shall be settled by arbitration, in accordance with the arbitration agreement currently in effect by separate agreement between the Participant and the Company or any of its Affiliates and which is incorporated herein by reference. In the event that such arbitration agreement is determined to be inapplicable or unenforceable or if no such arbitration agreement is then in effect, the parties mutually agree to arbitrate any dispute arising out of or related to this Agreement pursuant to the terms of this paragraph.  The parties agree that this Agreement provides sufficient consideration for that obligation and the mutual promises to arbitrate also constitutes consideration for this agreement to arbitrate.  The following terms and conditions shall apply to such arbitration hereunder. The arbitration shall be conducted before a single arbitrator in accordance with the Employment Arbitration Rules of the American Arbitration Association (“AAA Rules”) then in effect, and shall be governed by the Federal Arbitration Act. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. Unless provided otherwise in the arbitrator’s award, each party will pay its own attorneys’ fees and costs. To the extent required by law or the AAA Rules, all administrative costs of arbitration (including filing fees) and the fees of the arbitrator will be paid by the Company. The Participant and the Company waive the right for any dispute to be
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brought, heard, decided, or arbitrated as a class and/or collective action (or joinder or consolidation with claims of any other person), and the parties agree that, regardless of anything else in this arbitration provision or the AAA Rules, the interpretation, applicability, enforceability or formation of the class action waiver in this provision may only be determined by a court and not an arbitrator.  Regardless of anything else in this Agreement, this arbitration provision may not be modified or terminated absent a writing signed by the Participant and the Company stating an intent to modify or terminate the arbitration provision.
q.Governing Law. Except as otherwise provided in the foregoing Section or an Appendix to this Agreement, this Agreement and any disputes hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without application of its conflicts of laws principles.
r.Miscellaneous. This Agreement, together with the Plan, is the entire agreement of the parties with respect to the PSUs granted hereby and may not be amended except in a writing signed by both the Company and the Participant or his or her Representative. If any provision of this Agreement is deemed invalid, it shall be modified to the extent possible and minimally necessary to be enforceable, and, in any event, the remainder of this Agreement will be in full force and effect.
s.Forfeiture and Clawback of Award. Notwithstanding the terms regarding vesting and forfeiture or any other provision set forth in this Agreement and as a condition to the receipt of this Award, the rights, payments and benefits with respect to this Award and any shares acquired pursuant to the vesting of this Award are subject to reduction, cancellation, forfeiture, or recoupment by the Company if and to the extent permitted by Section 15.3 of the Plan, pursuant to any clawback or recoupment policy in effect as of the Grant Date or any clawback or recoupment policy that the Company may adopt from time to time to comply with applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing rules, and regulations (“Forfeiture and Clawback Policy”). Any determination made and action taken under the Forfeiture and Clawback Policy shall be final, binding and conclusive.
ADDITIONAL PROVISIONS APPLICABLE ONLY TO EXECUTIVE OFFICERS OF THE COMPANY:
t.Stock Holding Period. The Participant agrees to hold the shares of Common Stock acquired upon the conversion of the PSUs for a minimum of 12 months following their Settlement Date. This holding period shall not apply to shares of Common Stock withheld by the Company to settle tax liabilities related to vesting and/or settlement, and as otherwise may be provided under the Company’s Stock Ownership Policy.
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EXHIBIT A
Vesting Schedule Based on Relative TSR
1.Definition of Terms:
“Additional Shares” means any shares of Common Stock to be issued to the Participant on the Vesting Date in the event that the Company’s Relative TSR Percentile Rank exceeds the Target Performance Level.
“Award Agreement” means the Performance-Based Restricted Stock Unit Award Agreement to which this Exhibit is a part, pursuant to which an award of PSUs has been granted.
“Cause” is defined in Section 11(c) of the Award Agreement.
“Company’s Relative TSR Percentile Rank” means the Company’s TSR Percentile Rank relative to the companies in the Peer Group as certified by the Committee for the Performance Period.
“Disability” means that the Participant either: (A) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months and, with respect to a Participant who is an Employee, is receiving income replacement benefits for a period of not less than three months under an accident and health plan (e.g., a long term disability plan) covering Employees of the Company or Affiliate that employs the Participant; or (B) is determined to be totally disabled by the Social Security Administration or Railroad Retirement Board.
“Grant Date” is defined in the first paragraph of the Award Agreement.
“Peer Group” means the peer group approved by the Committee which shall be the companies that comprised the S&P Supercomposite Insurance Index at the beginning of the Performance Period (other than the Company), adjusted as of the end of the Performance Period to remove any such companies which are no longer included in the S&P Supercomposite Insurance Index as of the last day of the Performance Period.
“Performance Period” means the three-year period starting on February 1 of the calendar year in which the Grant Date occurs (“Start Date”) and ending on the calendar day immediately preceding the three-year anniversary of the Start Date.
“Retirement Eligible” means that the Participant has either attained age 55 and completed 10 years of Service as an Employee or attained age 60 and completed five years of Service as an Employee.
“Separation from Service” has the meaning ascribed to such term in Section 409A.
“Service” means the period during which the Participant is an Employee, Director or a Third Party Service Provider; provided, however, that the Participant will not be deemed to be in service after the Company divests its control in the Affiliate for which the Participant is exclusively in Service, or if the Company’s control of such Affiliate otherwise ceases.
“Target Performance Level” means the Company’s Relative TSR Percentile Rank at the 50th percentile.
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“Target Units” means one hundred percent (100%) of the total number of PSUs granted on the Grant Date, as specified in Section 1 of the Award Agreement.
“TSR” means Total Shareholder Return as determined by the Committee for the Performance Period.
“TSR Percentile Rank” means the percentile performance of the Company and each of the companies in the Peer Group based on the TSR for such company as determined by the Committee for the Performance Period.
“Vesting Date” means the date that the Committee certifies the Company’s Relative TSR Percentile Rank, except as otherwise provided in Section E below.
2.Determination of Vesting Date Events:
As soon as practicable following the end of the Performance Period (but in any event no later than sixty (60) days following the end of the Performance Period), the Committee will determine the Company’s Relative TSR Percentile Rank in accordance with the methodology described in the next section below. The Company’s Relative TSR Percentile Rank will determine the number of Target Units that will vest or be forfeited on the Vesting Date, and the number of Additional Shares, if any, that will be issued to the Participant on the Vesting Date, as described below under “Vesting Determination.”
3.TSR Percentile Rank Calculation Methodology:
The Company’s Relative TSR Percentile Rank will be calculated in a two-step process. First, the TSR will be calculated for the Company and each company in the Peer Group. Then, the TSR Percentile Rank for the Company and each of the companies in the Peer Group will be determined. The TSR and the TSR Percentile Rank will be determined by the Committee in accordance with the formula and methods approved by the Committee, as described below.
Formula for Calculating TSR
For purposes of this Exhibit, the TSR for the Company and each of the companies comprising the Peer Group will be calculated as follows:
Ending Stock Price – Beginning Stock Price + Dividends Reinvested on all Ex-Dividend Dates
Beginning Stock Price
Share Price Averaging Period
The beginning and ending stock prices in the above formula for TSR will be calculated using a trailing average approach (i.e., average of the closing stock prices for 20 consecutive trading days prior to the beginning and end of the Performance Period).
Reinvestment of Dividends and Other Adjustments
The above TSR formula assumes that dividends are paid and reinvested into additional shares of Common Stock on their ex-dividend dates. TSR will be adjusted for stock dividends, stock splits, spin-offs and other corporate changes having a similar effect.
Calculation of TSR Percentile Rank
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The percentile performance for determining the TSR Percentile Rank will be measured using the Microsoft Excel function PERCENTRANK.
4.Vesting Determination:
Except as otherwise provided in Section E, the PSUs held by the Participant will vest, to the extent earned for the Performance Period, and Additional Shares, if any, will be issued to the Participant, on the Vesting Date only if the Participant has not had a Separation from Service prior to such date. Once the Company’s Relative TSR Percentile Rank is determined by the Committee, the Company will confirm the number of Target Units that will vest or be forfeited on the Vesting Date, and the number of Additional Shares, if any, that will be issued to the Participant on the Vesting Date consistent with the following provisions:
•If the Company’s Relative TSR Percentile Rank is at the Target Performance Level, 100% of the Target Units will vest on the Vesting Date. If the Company’s Relative TSR Percentile Rank is above the Target Performance Level, Additional Shares will also be issued to the Participant on the Vesting Date. If the Company’s Relative TSR Percentile Rank is less than the Target Performance Level, some or all of the Target Units will be forfeited.
•The number of the Target Units that will vest on the Vesting Date, and the number of any Additional Shares that will be issued to the Participant on the Vesting Date, will be determined in accordance with the table set forth below. Any Target Units that do not vest in accordance with the table will be forfeited on the Vesting Date.
If the Company’s Relative TSR Percentile Rank for the Performance Period falls between the percentile levels specified in the first column of the table, the number of PSUs that will vest or Additional Shares that will be granted or forfeited on the Vesting Date shall equal the number corresponding to the percentage interpolated on a straight-line basis.


Company’s Relative TSR Percentile RankTotal PSUs to Vest (and/or Additional Shares to be Granted) on Vesting Date as Percentage of Target Units
90th or Higher
200%
75th
150%
50th
100%
25th
50%
Below 25th
0%
5.Determination of Vesting in Case of Certain Terminations and Other Events:
Notwithstanding any contrary provisions of the Plan:
(1)    Retirement Eligible. (a) Except as otherwise provided in Section (1)(b) or in another subsection of this Section E, if the Participant is Retirement Eligible, any PSUs that will vest and Additional Shares that will be issued on the Vesting Date will be based on the extent earned for the Performance Period as determined in accordance with the provisions of Sections A – D above, and then reduced pro-rata by multiplying any such PSUs and Additional Shares by a fraction, the numerator of which is the number of full months in the Performance Period
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during which the Participant was actively in Service, and the denominator of which is the total number of months in the Performance Period. A partial month worked shall be counted as a full month if the Participant was actively working for 15 or more days in that month. All PSUs that do not vest in accordance with this provision shall be forfeited.
(b) If, on or prior to the last day of the Performance Period, the Participant is Retirement Eligible and either (i) becomes an employee of a competitor of the Company or any of its Affiliates or otherwise engages in any activity that is competitive with the Company or any of its Affiliates, as determined by the Committee in its sole discretion, or (ii) the Participant’s Service is terminated, or is deemed to be terminated, for Cause, then any of the PSUs that are restricted on the date of such employment, activity or termination shall be forfeited to the Company. For purposes of the preceding sentence, a Participant’s Service shall be deemed terminated for Cause if the Participant resigns or is terminated and the Committee determines in good faith, either before, at the time of, or after such termination, that one or more of the events or actions described in the definition of Cause in Section 11(c) of the Award Agreement existed as of the time of such termination.
(2)    Termination on Death or Disability. The Vesting Date shall be the date of the Participant’s death or Disability if the Participant dies or becomes Disabled prior to the three-year anniversary of the Grant Date: (i) while in Service; or (ii) after terminating Service if the Participant (A) was Retirement Eligible on the date of such termination of Service for a reason other than Cause, and (B) had not, at any time prior to the date of the Participant’s death or Disability, become an employee of a competitor of the Company or any of its Affiliates or otherwise engaged in any activity that is competitive with the Company or any of its Affiliates, as determined by the Committee in its sole discretion. On such Vesting Date: (a) the Performance Period shall be deemed to have been completed; (b) a number of PSUs shall vest in an amount equal to the number of Target Units multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was actively in Service, and the denominator of which is the total number of months in the original Performance Period (a partial month worked shall be counted as a full month if the Participant was actively in Service for 15 or more days in that month); (c) no Additional Shares shall be issued to the Participant; and (d) all PSUs that do not vest in accordance with this provision shall be forfeited.
(3)    Termination on Divestiture. Except as otherwise provided below or in another subsection of this Section E, in the event that, prior to the three-year anniversary of the Grant Date, the Participant is no longer employed by the Company or an Affiliate as a result of the Company’s divestiture of the business for which the Participant primarily performed services or its controlling interest in the Affiliate for which the Participant was exclusively in Service, or other cessation of the Company’s control of such Affiliate, the following terms shall apply. Any PSUs that will vest and Additional Shares that will be issued on the Vesting Date will be based on the extent earned for the Performance Period as determined in accordance with the provisions of Sections A – D above, and then reduced pro-rata by multiplying the number of any such PSUs and Additional Shares by a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was actively in Service, and the denominator of which is the total number of months in the Performance Period. A partial month worked shall be counted as a full month if the Participant was actively working for 15 or more days in that month. All PSUs that do not vest in accordance with this provision shall be forfeited.
(4)    Other Termination of Service. If the Participant ceases to be in Service prior to the Vesting Date (including, without limitation, by reason of a divestiture or cessation of control of an Affiliate), and is not Retirement Eligible or subject to a divestiture, under circumstances other than those set forth in the foregoing subsections (1) – (3) of this Section E or Section 11(b)
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of the Award Agreement, all unvested PSUs held by the Participant shall be forfeited to the Company on the date of such cessation of Service, and no Additional Shares shall be issued to the Participant.
(5)    Leave of Absence. In the event that the Participant is on an approved Leave of Absence (other than a short-term disability or Family and Medical Leave Act leave) at the end of the Performance Period or takes such a Leave of Absence at any time during the Performance Period, then the PSUs will vest, forfeit or be granted, as applicable, to the extent earned for the Performance Period, in an amount equal to the number of Target Units that would vest and the number of Additional Shares that would be issued in accordance with the provisions of Sections A – D above, if any, multiplied by a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was an active Employee not on such Leave of Absence and the denominator of which is the total number of months in the Performance Period.
6.Interpretations Related to Calculations and Determinations Related to Performance:
(1)    Interpretations. The Committee shall have the reasonable discretion to interpret or construe ambiguous, unclear or implied terms applicable to this Agreement, and to make any findings of fact necessary to make a calculation or determination hereunder.
(2)    Disagreements. A decision made in good faith by the Committee or the Company shall govern and be binding in the event of any dispute regarding a method of calculation of performance or a determination of vesting or forfeiture in connection with this Award.
(3)    Method of Calculating Final Number of Vested or Forfeited PSUs.
The following methods shall apply in determining the number of PSUs that will vest or be forfeited and any Additional Shares that will be issued on the Vesting Date pursuant to Section D above. As a general rule, the determination for performance that falls between Percentile Rank points in the table in Section D above would be interpolated on a straight-line basis, as stated in Section D.
Specifically, the formula to be used to calculate the final number of PSUs that will vest or be forfeited and any Additional Shares that will be issued is as follows:
•For TSR performance between the 25th & 50th Percentile Ranks, the number of PSUs that will vest as a % of the total number of PSUs equals: 50% + [(Actual Percentile Rank - 25)/50%]%
•For TSR performance between the 50th & 75th Percentile Ranks, the number of PSUs that will vest and Additional Shares that will be issued as a % of the total number of PSUs equals: 100% + [(Actual Percentile Rank - 50)/50%]%
•For TSR performance between the 75th & 90th Percentile Ranks, the number of PSUs that will vest and Additional Shares that will be issued as a % of the total number of PSUs equals: 150% + [(Actual Percentile Rank - 75)/30%]%
Note that since the interval between the 75th & 90th Percentile Rank is shorter (15 percentiles) compared to the other quadrants (25 percentiles), the vesting result for this particular quadrant would be higher compared to the other quadrants.
(4)    Rounding Conventions.
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•Regarding rounding of TSRs, percentages for each company in the Peer Group shall be computed to two decimal points (i.e., XX.XX%).
•Regarding TSR Percentile Rank, the percentile rankings for each company in the Peer Group shall be rounded to the nearest percentage (e.g., 85% rather than 85.4166666%) before calculating the linearly interpolated payout, and the final payout percentage shall be rounded to the nearest percentage (e.g., 183% rather than 183.333333%).
•Target Units that will vest and any Additional Shares that will be issued from the application of the methods and formula set forth in the foregoing subsection F(3) and Section D above shall only be paid out in whole shares of Common Stock. Any fractional shares that would otherwise result from such application shall be rounded down to the nearest whole number of shares.

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Appendix I (Employees Whose Primary Residences are Located in California)
If the Participant’s primary residence is located in the State of California:
1.    Sections 15(c)(i) and (c)(ii) of the foregoing Agreement shall be replaced with the following:
15(c)(i) Non-Solicitation of Employees. The Participant agrees and acknowledges that the Company and its Affiliates sustain their operations and the goodwill of the Customers and other business relations through its employees. The Company and its Affiliates have made significant investment in their employees and their ability to establish and maintain relationships with one another and with their Customers, agents, brokers, vendors, suppliers, consultants, partners and/or other business relations in order to further the Company’s and its Affiliates’ legitimate business interests and operations and to cultivate goodwill. The Participant further agrees and acknowledges that the Company’s and its Affiliates’ loss of their employees could adversely affect the Company’s and its Affiliates’ operations and jeopardize the goodwill that has been established through these employees, and that the Company and its Affiliates therefore have a legitimate interest in preventing the solicitation of its employees and/or the interference with the relationships between the Company and its Affiliates and their employees to the extent that the Participant uses or misuses Confidential Information (as the term is defined in this Section) to so solicit and/or interfere. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly recruit or solicit, attempt to influence or assist, participate in or promote the solicitation of, or otherwise attempt to interfere with or adversely affect the employment of any Restricted Employees. Without limiting the foregoing restriction, during the Restricted Period, the Participant shall not, on behalf of the Participant or any other person or entity, use or rely in any manner on any Confidential Information to directly or indirectly hire, employ or engage any Restricted Employee in any capacity that interferes with such Restricted Employee’s employment with or engagement by the Company and its Affiliates and shall not engage in the aforesaid conduct through a third party for the purpose of colluding to avoid the restrictions of this subsection(c)(i).
15(c)(ii) Non-Solicitation of Business. The Participant agrees and acknowledges that by virtue of the Participant’s employment with, or service to, the Employer, the Participant has developed or will develop relationships with and/or had or will have access to Confidential Information about Customers and agents, brokers and similar key business partners (“Key Business Partners”) and is, therefore, capable of significantly and adversely impacting existing relationships that the Company or an Affiliate has with them. The Participant further agrees and acknowledges that the Company and/or its Affiliates have invested in its and the Participant’s relationship with Customers and Key Business Partners and the goodwill that has been developed with them; therefore, the Company and/or its Affiliates have a legitimate business interest in protecting these relationships against solicitation and/or interference by the Participant for a reasonable period of time after the Participant’s employment with, or provision of services to, the Employer ends. Accordingly, during the Participant’s employment with the Employer and during the Restricted Period, the Participant shall not use or rely in any manner on any Confidential Information to directly or indirectly initiate, contact or engage in any contact or communication, of any kind whatsoever, that has the purpose or effect of: (A) inviting, assisting, encouraging or requesting any Customer or Key Business Partner to (1) transfer the Participant’s business from the Company or an Affiliate to the Participant, the Participant’s subsequent employer or any other third party, or (2) otherwise diminish, divert, discontinue or terminate Customer’s patronage and/or
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business relationship with the Company or an Affiliate; or (B) inviting, assisting, encouraging or requesting any Customer to purchase any products or services from the Participant, the Participant’s subsequent employer or any other third party that are or may be competitive with the products or services of the Company or an Affiliate, or use any products or services of the Participant, the Participant’s subsequent employer or of any other third party that are or may be competitive with the products or services of the Company or an Affiliate.
    2.    Any claims relating to Section 15 of the Agreement shall be governed by and interpreted in accordance with the laws of the State of California.
    

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Exhibit 31.1
CERTIFICATIONS
I, Joseph P. Lacher, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kemper Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 

Date: August 7, 2023
/s/    JOSEPH P. LACHER, JR.
Joseph P. Lacher, Jr.
Chairman of the Board, President and Chief Executive Officer

Exhibit 31.2
CERTIFICATIONS
I, James J. McKinney, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kemper Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 

Date: August 7, 2023
/s/    JAMES J. MCKINNEY
James J. McKinney
Executive Vice President and Chief Financial Officer


Exhibit 32.1
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Kemper Corporation (the “Company”) for the quarterly period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Joseph P. Lacher, Jr., as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/    JOSEPH P. LACHER, JR.
Name: Joseph P. Lacher, Jr.
Title: Chairman of the Board, President and Chief Executive Officer
Date: August 7, 2023

Exhibit 32.2
Certification of CFO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Kemper Corporation (the “Company”) for the quarterly period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), James J. McKinney, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/    JAMES J. MCKINNEY
Name: James J. McKinney
Title: Executive Vice President and Chief Financial Officer
Date: August 7, 2023