Kemper to Lay Off About 1,000, Hires Runoff Management Firm

Long Grove, Ill.-based Kemper Insurance Cos. will be laying off about 1,000 employees and pursuing options of how best to put into runoff the middle-market offerings for which negotiations fell through Wednesday, according to a Kemper spokeswoman.

Kemper had previously announced a letter of intent to sell these lines of business to an investment consortium comprised of Securitas Capital, LLC, Cypress Merchant Banking Partners II LP and Gilbert Global Partners LP, but negotiations were called off after a definitive agreement could not be reached.

“We’re still working on what the exact number [laid off] will be,” said Linda Kingman, a Kemper spokeswoman. “It might be right around 1,000. These discussions just got called off two days ago. That’s a ballpark number.”

All employees who are laid off will be given 60 days working notice. When the 60-day working period concludes, severance payments begin, according to Kingman. Kemper has about 7,000 employees, she added, and more than half work in the new Kemper Services portion, which offers claims management, loss control and engineering services. A formal announcement about the layoffs will not be made until a decision is final, Kingman said.

How exactly Kemper will proceed is unclear. Kemper is honoring quotes and renewals but not writing new business right now.

“There may be some sectors that are still writing new business, but for the bulk of our middle-market, small business insurance we’re not writing new business right now,” Kingman said.

“Our business executives will take a look at other options for that business,” Kingman said. “There will be some runoff for that business, and they’ll be determining what staffing they’ll need for that activity too. We’ve executed a number of similar operations … we have substantial runoff operation going here too.”

Kemper also announced today that it retained the services of Princeton Partnership LLC to “assist in the development and implementation of strategies related to the runoff of certain lines of business.”

Princeton’s role will be to consult “on a lot of review and consideration, objections to plan and strategy, class and E&O issues,” according to Tonya Williams, a spokeswoman for the firm. “It’s mostly strategy, that’s what I was told.”

Kingman said that policies already placed with Kemper will be transitioned in a “very orderly” manner, but cautioned, “We’re still going to have to figure out how to best transition that business over time.”

A call to Bruce Shulan, the Princeton managing partner who will be the lead consultant, was not immediately returned. Princeton specializes in reinsurance and insurance runoff issues.

It is still unclear what effect the called off negotiations will have on Kemper’s outstanding surplus notes offer, Kingman said.

Kemper is rated “B-” by Standard & Poor’s, “B (Fair)” by A.M. Best and “B3” by Moody’s Investor Services.