Unitrin Buys Kemper's Personal Lines

By Daniel Hays

NU Online News Service, April 12, 11:56 a.m.EST?Unitrin, Inc. in Chicago said last night itssubsidiary, Trinity Universal Insurance Company, will acquireKemper Insurance Companies' personal lines business for $45 millionplus a percentage of future premiums written.

Long Grove, Ill.-based Kemper's personal lines net writtenpremiums were approximately $700 million in 2001.

Fred Sklow a director with Standard & Poor's in New York,which put Kemper's "single-A" financial strength ratings onCreditWatch last month, reacted favorably to the move. In puttingthe firm on watch, S&P had cited concerns about statutorycapital deterioration, reserve adequacy for asbestos andenvironmental claims and challenges with restructuringoperations.

Mr. Sklow called the sale "a positive move for Kemper. "This isan area they don't want to be in," he said.

He estimated that provisions in the purchase arrangementconcerning the renewal business could mean another $20 million forKemper.

The Kemper's Individual and Family Group business unit involvedin the sale specializes in the sale of personal automobile andhomeowners' insurance through independent agents.

Unitrin said in addition to the $45 million the price wouldinclude 1 percent of premiums written over a three-year periodbeginning Jan. 1, 2003.

Trinity will purchase the assets of the IFG unit but allpre-closing liabilities of IFG, including policy reserves andunearned premium reserves, will remain with Kemper.

Unitrin said it will also acquire the stock of Kemper's directdistribution personal lines subsidiaries, which sell personalautomobile insurance to consumers over the Internet.

Kemper, Unitrin said, will be eligible for performance bonusesif the business meets certain loss ratio criteria over the samethree years. The ratio figure was not disclosed.

Mr. Sklow said how the business does would be a key factor inhow the agreement plays out for Kemper.

Kemper will have liability for policies issued prior to theclosing. Trinity will be entitled to premiums written forsubstantially all policies issued or renewed after the closing andwill be liable for their losses and expenses.

In addition, Trinity will administer on behalf of Kemper allpolicies issued prior to the closing.

The transaction, Unitrin said, is expected to close thissummer.

Richard C. Vie, Unitrin's chairman and chief executive officersaid the acquisition will give his company, "greater reach and sizein an industry where economies of scale are increasinglyimportant.''

In addition, Donald G. Southwell, Unitrin president and chiefoperating officer, said, "We value the management team, employees,technology and agent relationships of Kemper's personal linesoperation and believe it has excellent prospects for future growthand profitability.''

Unitrin "is serious about growing its personal lines presenceand will allow us to proceed with our technology-centered businessstrategy that our agents have strongly endorsed," commented Dale S.Hammond, President of the IFG unit.

Unitrin's subsidiaries are engaged in property-casualtyinsurance, life and health insurance and consumer finance. Unitrinsaid it has in excess of $7 billion in assets, nearly 7,700employees and had consolidated revenues in 2001 of more than $2.5billion.

Last year Unitrin wrote $570 million in property-casualtymulti-lines and $347 million in specialty lines.