October 20, 2004

The Pension Benefit Guaranty Corporation (PBGC), the federal corporation responsible for guaranteeing payment of pension benefits, notified Kemper on Tuesday, October 19, 2004 that it will move to take control of the company’s pension plan effective Thursday, October 21, 2004. Kemper will not contest the PBGC’s action. The benefits under Kemper’s pension plan are insured through the PBGC; the benefit levels for the majority of plan participants will not be affected by this development and payments to retirees will continue uninterrupted. Future retirees will receive their pension from the PBGC when they are eligible to retire.

The PBGC guarantees the payment of benefits if the assets in a pension plan are insufficient to pay all benefits. The maximum guaranteed benefit that the PBGC will pay is adjusted yearly. For 2004, the maximum payment is $3,699 a month, or $44,386 per year, payable at age 65. The guarantee is lower for those under age 65 who are receiving benefits and those who have a joint and survivor election. The amount is higher for those over age 65.

Kemper has met its minimum funding obligations to the pension plan to date, including a payment on Friday, October 15th.

Hewitt will continue to administer Kemper’s pension plan for the next few months while the PBGC reviews the plan’s records and prepares to assume administrative responsibility. Payments will continue without interruption. Once the PBGC has completed its review of the plan and recalculated individual benefit levels in accordance with the maximum benefits payable, it will adjust monthly benefit payments as appropriate. It will reduce future payments if it has overpaid any individuals during the review period. Reductions in the event of overpayments between current benefit levels and the PBGC recalculation will not exceed 10 percent of the monthly recalculated payment.

The PBGC will publish a notice about its takeover of the Kemper pension plan in the Thursday, October 21 editions of USA Today and the Chicago Tribune. Within the next few weeks, it will send a written notice to all plan participants and will provide additional information as it becomes available. The PBGC has informed Kemper that PBGC representatives will meet with active employees and retirees covered by the Kemper pension plan in the spring to further explain the federal pension program and answer questions. In the meantime, a Q&A is attached. Information is also available on the PBGC’s website at www.pbgc.gov or by calling 1-800-400-7242 between 8 a.m. and 5 p.m. eastern time, Monday through Friday.

The PBGC was created by Congress in 1974 to, among other things, provide timely and uninterrupted payment of pension benefits. It currently pays monthly retirement benefits to more than 450,000 retirees in over 3,200 pension plans. The PBGC is responsible for the current and future pensions of about 934,000 people.