OREANDA-NEWS. Fitch Ratings expects to assign a 'BBB-' rating to Kemper Corporation's (NYSE: KMPR) proposed \$250 million issuance of senior unsecured notes maturing in 2025. The new notes' rating is equivalent to the ratings on KMPR's existing senior debt.


Kemper is expected to use the net proceeds of the issuance to retire its existing senior notes due on Nov. 30, 2015. Pro-forma year-end 2014 financial leverage (excluding unrealized investment gains/losses on fixed income securities) is expected to temporarily increase to approximately 35.7% from 29.4% at Dec. 31, 2014. Once the existing notes are repaid, pro-forma leverage is expected to return to approximately 29.4%. This remains consistent with Fitch's upper guideline of 30% for the current rating category.

Kemper's fixed-charge coverage was modest at 3.3x at year-end 2014 down from year-end 2013 of 6.2x. Debt-servicing capacity is further supported by dividend capacity from its insurance subsidiaries and holding company cash and short term investments of \$330 million as of Dec. 31, 2014.

On January 22, 2015, Fitch affirmed all of its ratings for KMPR and KMPR's subsidiaries with a Stable Outlook.


Factors that could lead to a downgrade include:
--Statutory fixed charge coverage below 3.5x;
--A combined ratio above 106% for a sustained period;
--Deterioration in capitalization with a p/c Prism capital model score below 'adequate' (based on year-end 2013 data Kemper's Prism score was 'Strong');
--RBC ratio for the p/c and life insurance entities below 200% and 250%, respectively;
--Financial leverage ratio that exceeds 30%.

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