Good morning, ladies and gentlemen, and welcome to Kemper’s Fourth Quarter 2012 Earnings Conference Call. My name is Shawn and I will be your coordinator today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded for replay purposes. I would now like to introduce your host for today’s conference, Ms. Diana Hickert-Hill, Vice President, Investor Relations and Corporate Identity. Ms. Hickert-Hill, you may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us. After the market’s close yesterday, we issued our earnings release and filed it along with our financial supplement. You can find these documents on the Investors section of our website, kemper.com. This morning you will hear from three of our business executives, starting with Don Southwell, Kemper’s Chairman, President and Chief Executive Officer, followed by Denise Lynch, Kemper’s Property and Casualty Group Executive; and finally, Dennis Vigneau, Kemper’s Senior Vice President and Chief Financial Officer. We will make a few opening remarks to provide context around our fourth quarter results. We will then open up the call for a question-and-answer session. During this interactive portion of the call, our three presenters will be joined by John Boschelli, Kemper’s Vice President and Chief Investment Officer; and Ed Konar, Kemper’s Life & Health Group Executive. Please note that our discussion today may contain forward-looking statements. Our actual results may differ materially from these statements. Please refer to the risk factors and cautionary disclosures on potential risks associated with relying on forward-looking statements included in our periodic filings with the SEC as well as in our earnings release. We plan to file our 2012 Form 10-K with the SEC on or about Friday, February 15, 2013. This morning’s discussion also includes non-GAAP financial measures that we believe may be meaningful to investors. In our supplement and our earnings release, non-GAAP financial measures have been reconciled to GAAP, where required in accordance with SEC rules. Now, I will turn the call over to Don Southwell.

Thank you, Diana, and good morning, everyone. As we look back over the fourth quarter in the past year, we see significant progress on many fronts, but challenges on others. Overall, I would characterize the year as mixed. Year-over-year, we did see improvement in earnings. However, in the fourth quarter, earnings were lower, primarily from Superstorm Sandy. We took several actions to improve profitability, including accelerating our rate increases and tightening underwriting and while a continued low interest rate environment persists, we delivered stable earnings in the Life and Health segment. In the year-end, we wrapped up our strategic evaluation of the Direct segment. Let me take a moment to comment on our performance in Superstorm Sandy. This storm affected many of our policyholders. It is at times like these when our agents and our claims teams show the value of Kemper fulfilling our promises and helping our customers restore their lives. I’m proud of the professional and caring support our team provides to our policyholders. As you heard in the introductions, I’ve asked Denise Lynch to provide an update on our Property and Casualty businesses. While Denise continues to lead the Kemper Preferred business, we promoted her in the fourth quarter to be the Group Executive for all of our Property and Casualty businesses. I’m delighted to have Denise as a key member of Kemper’s senior leadership team. Today, I’ll focus my remarks on two topics: our view of overall performance and a few thoughts on capital. We produced $2 million in net income during the fourth quarter and $103 million for the year. While Superstorm Sandy was clearly a significant event pressuring our results in the quarter, we did make good progress on our strategy to implement rate increases and further tightened underwriting. These activities remained important as…

Thank you, Don. Fourth quarter overall Property and Casualty results deteriorated when compared to the same period last year as well as sequentially. The largest single driver was Superstorm Sandy, which is estimated to be approximately $32 million in after-tax losses and loss adjusting expenses for our Property and Casualty businesses. In addition to this significant storm, the adverse loss trend continued to affect the auto line. For the full year, the combined ratio improved about 2 points and the underlying combined ratio was down about 1 point from prior year at 101%, which was a modest improvement and remains an area of our continued focus. While we are seeing progress, much work remains to be done. We continued to file rate increases and average premium is rising. We are well into implementing underwriting changes, including increased deductibles in 25 states and selectively reducing hurricane and earthquake home owner exposures. I will walk through each of our P&C businesses starting with Kemper Direct. We stopped the direct marketing spend early in the third quarter and initiated additional expense reductions consistent with a change in strategy. We’ve reduced staff levels in line with top line projections. Going forward, we will continue to reduce expenses consistent with premium projections and will eliminate infrastructure costs by consolidating programs and systems platforms. We will continue to grow the affinity, worksite and renters business, which is separate from the direct-to-consumer business. Profitability improved in the Kemper Direct segments for the second half of 2012 with two consecutive quarters of positive net operating income. The combined ratio and underlying combined ratio both improved in the quarter and on a year-to-date basis. We continue to focus on improving the bottom line results by first, taking great actions in line with full indications as well as taking other…

Thanks, Denise, and good morning, everyone. This morning, I’ll share further insights in the following areas: Kemper’s fourth quarter and full year 2012 performance, key actions that are underway to improve underwriting results, and lastly, I’ll highlight a few areas that remain challenging as we begin 2013. Let me begin with Kemper’s financial performance for 2012. Reported revenues were $597 million for the quarter and $2.5 billion for the full year. Earned premiums were $521 million in the quarter, a 3% decline from Q4 2011. On a full year basis, earned premiums were $2.1 billion. These results reflect the actions taken in a Direct business to improve profitability and were in line with our expectations. Consolidated net investment income across the portfolio was $73 million in the fourth quarter, down roughly 3% versus last year. For the full year, net investment income totaled $296 million, flat overall with the prior year. Equity method investments earned $2 million and $9 million for the quarter and full year respectively and both amounts were essentially flat with their comparable periods of 2011. At the end of the year, the equity method investment portfolio was $253 million, down $53 million year-over-year. We continued to appreciate the lifetime earnings potential and diversification benefits of this asset class. Though as investments have matured over the past year, we’ve reinvested the cash flows and other investment options, such as fair value funds that offer a more balanced mix of current period income and capital appreciation. Total invested assets grew about 4% in 2012 to $6.5 billion. And for the full year, the pre-tax equivalent book yield on average invested assets was 5.5%, down just 10 basis points year-over-year. Finally, net realized investment gains in the fourth quarter were $3 million. For the full year, realized gains were…

Thank you, Dennis. Thank you, Denise. As you just heard, we’re making progress in key areas and have plans in place to continue improvements and address our challenges. At this time, I’ll turn the call back over to the operator, so we may take your questions. Operator?

Thank you. (Operator Instructions) Our first question comes from Paul Newsome with Sandler O’Neill. Please go ahead with your question. Paul Newsome – Sandler O’Neill: Good morning and thank you for the call. I want to ask about how the – sort of the mechanics of the timing of returning capital from the Direct business, exactly how would that work?

Well, Paul, I’m going to ask Dennis to answer that question, but the basic answer is as the business runs up, the capital needed to support it frees up.

Hey, Paul. Good morning. We’d expect that capital based on our current run-off projections to – a majority of that would come out over the next two to three years and that’s comprised of, as you can imagine, a few different pieces. There’s what you’d expect in terms of allocated, required capital surplus for the book of business that’s there that aligned down. And then, in addition to that, there are other intangible assets, licenses, et cetera that also have value and as those – the book runs off those companies, we would expect to monetize those that we don’t intend to use going forward. Paul Newsome – Sandler O’Neill: So, you’d have to sell the piece that you – that those intangibles you’re talking about selling them to...

Yes, those are the legal entity shells and licenses that, to the extent we don’t use them, in the ongoing businesses elsewhere, we would monetize those. That’s right. And we’ve done that in the past on a number of occasions. Paul Newsome – Sandler O’Neill: No question. But so, is it kind of the business runs off, as we look at it as premium and then the following year, we’re able to dividend the cash out. Is that kind of how it works?

When you think about the capital that’s behind the business, it’s in the ballpark of $160 million at this point. That’s our internal allocated capital. And everything else that’s not allocated to support the business just automatically is freed up and available either for redeployment behind the other P&C business lines or to the extent we want to take a dividend out of the P&C businesses and bring it up to the holding company, we could choose to do that. Paul Newsome – Sandler O’Neill: Okay, great. Thank you very much.

You bet.

Our next question comes from Ray Iardella with Macquarie. Please go ahead with your question. Ray Iardella – Macquarie: Thanks and good morning, everyone. Maybe just going to sort of sticking on the capital question and you kind of talked about the three priorities, but I guess sort of just breaking them down a little bit further, organic growth, I’m just kind of wondering, I mean what type of return do you think you can get on that? And it just feels to me just given more valuation is maybe the better return would be to increase your share repurchases, any thoughts on that?

Sure, Ray, organic growth is always on our list because that’s profitable organic growth is the best use of capital. As we look into 2013, we’re not anticipating that we’ll be in growth mode. In fact, we may well continue to be in shrinkage mode with the run-off of Direct and with the intense emphasis on margin improvement. So while it’s our first priority that doesn’t mean we anticipate we’re going to deploy capital there this year. So, we certainly do have capital available to return to shareholders and our dividend is important to our shareholders and is competitive and we want to certainly maintain that and be opportunistic on our capital return through this year buyback. Ray Iardella – Macquarie: Okay, that’s helpful. And I guess going back to the Direct business, I mean how should we think about premiums going to 2013. I mean so is it – there’s just going to be zero going through written and then whatever earned gets earned out and then you guys are just paid stuck, paying the losses as they pay out over time? Is that sort of the right way to think about that?

Of course, I’m going to ask Denise to elaborate.

Okay. I’ll add a little bit more information to that. We have discontinued our marketing efforts to solicit new business. Having said that, new business will continue to come in to us and we’ll accept that where it is appropriate. So, there will be some new business coming in although just a small percent of what we’ve seen historically. And we will continue to renew business as appropriate. But over time, this book of business will continue in its run-off, the direct to consumer business that is. Ray Iardella – Macquarie: Okay. Thank you. That’s very helpful. And then maybe just talking about the Specialty business and I think there were some severity trends that drove the action, your hire, I mean. Is there anything in particular you guys are noticing in that book of business? And then, I guess, is the way to combat it sort of just continued push of rate or is there anything else you guys can do?

Denise, you want to take that one too?

Yes, I’ll be happy to take that one. Our Kemper severity – our Kemper Specialty book of business, you’re right, we’re watching those loss trends pretty carefully. Over time, we’ve experienced about a 3% to 4% loss trend. In the last year, we saw increased frequency and increased severity in that book of business. And I’m talking specifically about the private passenger book because that is majority of our book. Where we’re seeing the increased frequencies on the comp and collision and where we’re seeing the severity trend is on the BI and also on the comprehensive coverage. We’re addressing it aggressively. We’re addressing it with rate. As we said before, we’ve filed rate essentials of about 10% last year. And we’ll continue to file additional rate in the coming year. But in addition to rate, we’re addressing it with continued underwriting efforts and improving our segmentation and the pricing of the product. So, there’s a lot of ways we’re going at it with rate, with underwriting and improving our product. Ray Iardella – Macquarie: Okay. Thank you very much.

(Operator Instructions) Our next question comes from Steven Schwartz of Raymond James. Please go ahead with your question. Steve Schwartz – Raymond James: Thank you. Good morning, everybody. Talking about Preferred, there was adverse development there. I was wondering if we could possibly talk about what lines, what years and maybe what geographies led to that for the quarter?

I will take that one also then. For Preferred, we did see adverse development on our auto line of business. It was primarily in 2011 and it was primarily on the liability coverages is where we saw that. We are addressing again that book of business also with rate and also with underwriting in pricing, product improvements. Steve Schwartz – Raymond James: Denise, was this in the – was this widespread or was this concentrated in the three states we’ve been talking about for the other lines?

No. That development was spread – or said differently, it wasn’t heavily concentrated in any particular geography. That was spread. Steve Schwartz – Raymond James: Okay. And then going back to Direct, the programs that you are going to keep, the affinity group, the worksite, how much in premium is that?

We’re looking at about $30 million in premium for our affinity and worksite business. It’s been good business for us. It’s a good product. It’s distributed through primarily agents and brokers and we intend to keep that and to grow it. Steve Schwartz – Raymond James: Okay. And then, Dennis, of the $90 million, $95 million that you talked about dividending up to the holding company, how much of that would come from the life cos?

At this point, the majority of it will come from the life. We may, as we move through the year, shift a little bit of that over to the P&C business. We’ll see how weather performs. I’d say, if we take any from P&C, it’d be in the second half of this year. Steve Schwartz – Raymond James: Okay. And then the life cos dividend, is that – first off, is that greater or less than, and is that restricted to statutory operating or net income?

The life co dividend is based on earnings. Steve Schwartz – Raymond James: Oh, based on the net, so realized losses go through that. Okay. And then do you have an estimate for that for 2012?

Yes, it’s been pretty stable. It’s in the roughly $90 million on a statutory basis. Steve Schwartz – Raymond James: Okay, so you’ve just taken all of it. Okay. Thank you. That’s what I had.

Yes, thanks.

I’m not showing any other questions in the queue. I’d like to turn it back over to Diana Hickert-Hill for closing comments.

Thank you, operator. If anybody has any final questions or comments, they can contact me directly and we’d be happy to address them. This concludes our call.

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the conference. You may now disconnect. Good day.