AM Best has commented that the Long-Term Issuer Credit Rating (Long-Term ICR) rating of “bbb-” of Kemper Corporation (Kemper) (Delaware) [NYSE:KMPR], and the Financial Strength Rating (FSR) of A- (Excellent) and Long-Term ICRs of “a-” of its property/casualty operating subsidiaries, referred to as Kemper Property & Casualty Group, are unchanged by the announcement that Kemper plans to acquire American Access Casualty Company (American Access) (Downers Grove, IL) for $370 million in an all-cash transaction. The outlook of Kemper’s Credit Ratings (ratings) is positive.
The acquisition is in line with Kemper’s strategy of seeking growth in niche markets. Based on the most recent 12-month results, the acquisition will increase Kemper’s specialty auto net premiums written by over 10%, and will expand its geographic footprint and presence in Hispanic communities.
Following the close of the transaction, expected in the first quarter of 2021, Kemper’s financial leverage and coverage metrics are expected to remain comfortably within AM Best’s guidelines for the ratings. The transaction will drive an increase in tangible leverage, but management anticipates earnings over the course of the first year after the acquisition to neutralize this effect. As a result, AM Best does not expect that the transaction will have any adverse rating impact, but will continue to discuss its progress with management and assess its effects on Kemper’s operations.
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