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October 8, 2004
Dear Kemper retirees and employees on leave of absence, I’d like to take this opportunity to provide you with an update about Kemper’s situation, including our 2005 benefit plan. We are making progress in implementing our run-off plan to date. We remain solvent, and continue to appreciate the support we are receiving from the Illinois Division of Insurance. While our combined statutory surplus dipped to $28.9 million as of June 30, 2004, we are having success in implementing surplus-enhancing initiatives, such as policy buybacks and novations. Total assets for Kemper stood at $4.4 billion on June 30, compared to $5.3 billion at the end of 2003. Total liabilities dropped to $4.4 billion six months into the year from $5.1 billion on December 31, 2003. More detailed information about Kemper’s financials can be found at www.kemperinsurance.com and at www.kemperretirees.com. We are pleased to be able to continue to provide access to health benefit plans for retirees, employees and those on leave of absence. We are moving from self-insured to insured health insurance products. This provides protection for your health care benefits by ensuring that the plan will continue even if Kemper were to be put into a judicial proceeding such as rehabilitation or liquidation. Unfortunately, Kemper is unable to provide any company contribution toward the cost of retiree medical coverage in 2005. By the end of 2004, we will have spent $2.7 million for retiree health benefits. As a company in run off we regretfully can no longer afford to provide a subsidy for retiree health benefits. Benefits for retirees age 65 and older For retirees age 65 and older, Kemper is offering a Medicare supplemental plan issued through ‘A+’ rated Monumental Life Insurance Company, which is an AEGON company. We are happy to offer this as a guaranteed issue, which means you will not be subject to proof of good health. The plan includes a prescription drug card which provides coverage for retail and mail order prescriptions. The average monthly premium for the Medicare supplemental plan is $257 per person, but may vary depending on your geographic location. Marsh@WorkSolutions is our third party administrator for this benefit. Retirees in this age group who are currently utilizing Kemper retiree health insurance benefits will be automatically enrolled in this program. Marsh will send further information during the last week in October, and their customer service representatives will be available to answer questions as of November 1. We are also eliminating retiree voluntary accidental death and dismemberment coverage. MetLife, our current carrier, declined to renew this program in light of the previous decision to eliminate basic life coverage.
Kemper is offering two options for employees between 55 and 64, as well as those on leave of absence. A group supplemental hospital indemnity insurance program is available, which includes access to multiple PPO networks. Coverage is guaranteed; individuals are not subject to underwriting.* The estimated cost per person for this program is approximately $500 per month and includes a prescription drug card for retail and mail order prescriptions. Retirees in this age group who are currently utilizing Kemper retiree health insurance benefits will be automatically enrolled in this program. Marsh will send further information during the last week in October, and their customer service representatives will be available to answer questions as of November 1. In addition, we are offering the Marsh Health Insurance Mart for those who need or want additional coverage. The Mart provides access to PPOs, HMOs and traditional indemnity plans. These are individual plans as no group coverage is available. A health savings account is available in conjunction with high-deductible plans. Costs will vary depending on the type of plan you choose, and all applicants are subject to proof of good health and acceptance by the underwriting company. As outlined above, we are eliminating retiree voluntary accidental death and dismemberment coverage for all retirees and employees on leave of absence. MetLife has also declined to continue offering group term life insurance for employees on an unpaid leave of absence greater than one year. However, those who are affected may choose to continue their optional, spouse or child coverage by converting to an individual policy. More information will be sent soon to those affected by this change. I realize that the increased cost of your health benefits for 2005 is tough news. However, our human resources team worked very hard to ensure that you have access to health insurance and provided the best possible options given our current situation. You will be hearing from the health insurance companies we have selected with additional details about their offerings. In the meantime, if you have questions please contact Melissa Mykleby at 847/320-3329 or Debi Bierwirth at 847/320-4102. We will continue to keep you informed about major developments at Kemper. Sincerely,
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