Kemper Receives Go-Ahead to Proceed with
FOR IMMEDIATE RELEASE
LONG GROVE, Ill. – The Illinois Department
of Insurance has given the Kemper Insurance Companies permission
to proceed with the run-off plan submitted on March 19, 2004. Details
of the plan are confidential, pursuant to the state’s risk-based
capital statute. The three-year plan is designed to help Kemper
meet its goal of resolving, to the maximum extent possible, all
valid policyholder claims.
The plan contains financial models that project positive surplus
and liquidity through 2006, the last year addressed in the plan,
assuming there is no further material adverse reserve development.
Successfully achieving this objective will be very challenging.
At this time, Kemper has little premium revenue (about $90 million
estimated for 2004 and virtually none thereafter) and the investment
income that is being generated is offset by expenses. If Kemper
does not successfully implement its plan, current financial trends
would render the company unable to meet its current policyholder
obligations in the first few months of 2005.
It is through initiatives such as a policy buyback effort, under
which the company “buys back” certain commercial lines
policies in order to reduce its future loss exposure, and aggressive
expense control measures that the company intends to successfully
implement the plan. The run-off plan Kemper filed with the state
projects that the company will create approximately $200 million
in surplus through various initiatives and further reduce already
substantially downsized expenses by another $30 million. If successful,
Kemper is projected to have a nominal amount of surplus and liquidity
remaining as of December 31, 2006. In view of the risks and uncertainties
involved in implementing the plan, including the need to achieve
significant policy buybacks, commutation of reinsurance agreements,
and further agreements with regulators, no assurance can be given
that the plan will be successfully implemented. The Illinois Department
of Insurance will continue to closely monitor Kemper’s progress
in achieving the objectives of the run-off plan.