Kemper’s Poor Ratings Affirmed by Best, Then Withdrawn at Management’s Request

A.M. Best Co. has affirmed the financial strength rating of “D” (poor) of Kemper Insurance Cos., which is comprised of Long Grove, Ill.-based Lumbermens Mutual Casualty Co. and five reinsured affiliated companies.

Additionally, A.M. Best has affirmed the debt ratings of “c” on a combined $700 million of surplus notes issued by Lumbermens. Best has also affirmed the issuer credit rating of “c” of Lumbermens. All ratings have a negative outlook. Subsequently, Lumbermens and its five reinsured affiliated companies’ rating will be withdrawn and assigned a rating of NR-4 at the management’s request that each member be removed from A.M. Best’s interactive rating process.

The rating affirmation reflects Kemper’s poor risk-adjusted capitalization evident by Lumbermens’ NAIC risk-based capital, which is at the “mandatory control level” and the increased risk of insolvency. Since July 2003, Lumbermens and most of its affiliates have been subject to corrective orders by the Illinois Division of Insurance. Lumbermens is operating under a run-off plan filed with the Division of Insurance in 2004.