Kemper Group Ratings Infinity Property Casualty Corp. Ratings Put On CW Negative After Merger Announcement

Stocks and Financial Services Press Releases Wednesday February 14, 2018 09:46
NEW YORK--14 Feb--S&P Global Ratings

NEW YORK (S&P Global Ratings) Feb. 13, 2018--S&P Global Rating said today it Services affirmed its ratings on Kemper Group following the company's announcement that it had agreed to purchase Infinity Property & Casualty Corp. (Infinity) for about $1.4 billion in cash and stock. The outlook is stable. At the same time, we are placing all of our ratings on the Infinity on CreditWatch with negative implications.

Our rating actions follow the announcement that Kemper and Infinity have entered into a merger agreement under which Kemper will acquire Infinity for about $1.4 billion in cash and stock considerations. We expect the transaction to close in the second half of 2018 pending shareholder and regulatory approvals.

The stable outlook on Kemper reflects our expectation that the group will maintain very strong capital adequacy per our criteria and that it will continue to improve its underwriting performance with operating performance metrics in line with our base-case forecast: financial leverage remaining below 35% with generally accepted accounting principles (GAAP) fixed-charge coverage above 4x.

We may lower the ratings in the next 12 to 24 months if Kemper sees significant underwriting underperformance especially in newly acquired operations; capital falls and stays below very strong adequacy levels; leverage nears 35% with fixed-charge coverage dipping below 4x; or our view of management's ability to execute strategy or its enterprise risk management weakens.

Although unlikely in the next 24 months, we could raise the ratings if Kemper is able to consistently maintain extremely strong capital adequacy, or if it shows a proven track record of reduced volatility and improved profitability in its P/C operations.

CreditWatch
We will resolve the placement of our ratings on Infinity on CreditWatch Negative as developments warrant.

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