Good afternoon, ladies and gentlemen, welcome to Kemper's first quarter 2018 earnings conference call. My name is Cole, I will be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, instructions will follow at that time. As a reminder, the conference is being recorded for replay purposes. I would now like to introduce you to your host for today's conference, Mr. Michael Marinaccio, Kemper's Vice President of Corporate Development and Investor Relations. Mr. Marinaccio, you may begin.
Thank you, Cole, good afternoon, everyone, welcome to Kemper's discussion of our first quarter 2018 results. This afternoon you'll hear from Joe Lacher, Kemper's President and Chief Executive Officer, Jim McKinney, Kemper's Senior Vice President and Chief Financial Officer, Duane Sanders, Kemper's Property and Casualty Division President. We will make a few opening remarks to provide context around our first quarter results, then we will open up the call for a questions and answer session. During the interactive portion of the call, our presenters will be joined by John Boschelli, Kemper's Senior Vice President and Chief Investment Officer, Mark Green, Kemper's Life and Health Division President. Before the markets opened this morning, we issued our earnings release and published our first quarter earnings presentation and financial supplement. In addition, we filed our 10-Q with the SEC.
You can find these documents on the investors section of our website, kemper.com. Our discussion today may contain forward-looking statements. Our actual results may differ materially from these statements. For information on potential risks associated with relying on forward-looking statements, please refer to our 2017 Form 10-K, as well as our first quarter 2018 earnings release. This afternoon's discussion includes non-GAAP financial measures that we believe are meaningful to investors. In our financial supplement presentation and earnings release, we have defined and reconciled non-GAAP financial measures to GAAP where required in accordance with SEC rules. Finally, all comparative references will be to the first quarter of 2017, unless otherwise stated. Now I'll turn the call over to Joe.
Thank you, Mike. Good afternoon, everyone, thank you for joining us on the call today. Before walking through our quarterly results, I want to take this opportunity to provide an overview of Kemper for the benefit of Infinity stakeholders who may be on the line with us for the first time, to remind those of you that have been with us previously of the transformation that has taken place over the last couple of years. As you can see on page four, Kemper is a national multi-line insurer providing specialty auto, preferred home and auto, basic life, accident and health products. We distribute our products through a combination of 2,200 career agents and over 20,000 independent agents, our insurance subsidiaries have been issuing policies for more than a century.
Over the last two years, we've defined our strategy, made progress on its execution, and reinvigorated a storied brand. Our success to date is evidenced by the quality of leadership we've attracted and the significant turnaround in our non-standard auto business. The pending Infinity acquisition will further solidify our leading position and commitment to that sector. I'll provide more information on the strategic benefits of the combination shortly. Turning to page five, our long-term perspective continues to remain focused on building Kemper's overall value, and our strategy was formulated with that in mind. We'll continue to leverage our competitive advantages while building core capabilities in order to maximize the value we deliver to all of our stakeholders. In 2016, we described a broad array of strategic initiatives to unlock the embedded value within Kemper. At that time, the company was in a turnaround position.
We've made great strides in advancing these initiatives and appropriately have shifted our focus from turnaround mode to building a growing franchise that delivers value, strong value for all our stakeholders. As you'll see on page six, we took the next step in our journey with our announced acquisition of Infinity. We remain extremely excited about this highly strategic transaction, both within our specialty auto business and more broadly at Kemper as a whole. With the strong growth and earnings momentum in both businesses, we believe this is the right time for the combination of our two companies. This quarter, our non-standard auto earned premium increased 23%, while the underlying combined ratio improved to 93.2%. This resulted in a net operating profit of $21 million.
The acquisition of Infinity should accelerate our progress towards becoming the premier specialty auto franchise, one that consistently delivers exceptional value for customers and at the same time, strong financial results. Within specialty auto, we are creating a focused and scaled player in a traditionally niche market. Given our complementary footprints, this transaction will allow Kemper to reach a broader customer base and will strengthen our relationships with agencies. From a Kemper corporate perspective, a larger specialty auto business further enhances our overall brand and customer value proposition. Additionally, we expect to benefit from the financial flexibility and capital generation provided from increased and more diversified earning sources across our business lines. We're currently in the process of seeking regulatory and shareholder approval and anticipate the transaction will close in the third quarter of 2018. Let's turn to page seven and look at some of our first quarter's highlights.
Overall, we had a strong quarter reporting a net income of $53.8 million, leading to significant increases in earnings per share and adjusted consolidated net operating earnings per share. Earned premiums increased 8% in the quarter to $610 million. In the P&C segment, strong top-line growth was driven primarily by policy growth and higher average premium rates in the non-standard auto business, which posted an 18% increase in policies in force and a 23% increase in earned premiums. In addition to strong growth, the P&C segment's underlying performance has significantly improved. The underlying combined ratio improved 2.7 percentage points in the quarter, largely driven by the non-standard auto business, which improved by 4.7 points and contributed a greater percentage of premium to the segment. Our life and health segment continues to provide a stable source of earnings, with strong and predictable cash flows.
Net operating income increased $2 million in the quarter. Our core investment portfolio continues to be a strength, delivering a consistent and predictable revenue stream. In this quarter, we reported net investment income of $79 million. Our balance sheet and capital levels remain strong. We have approximately $570 million of parent company liquidity, consisting of over $180 million of cash and investments at the holding company, plus borrowings available under the revolving credit agreement and from our subsidiaries. We have over $225 million of excess capital in our operating companies, and our debt to capital ratio improved to a very manageable 22.3%. Given all the positive progress we've made, Kemper continues to attract quality leadership. During the first quarter, Duane Sanders joined the organization as our President of the P&C division. Duane's a proven leader with more than 30 years of P&C experience in numerous executive roles.
He's an excellent addition to our leadership team who enhances the depth of our capabilities and will accelerate the value we're able to provide to all of our stakeholders. Additionally, Robert Otis recently joined Kemper to lead our preferred home and auto business. Robert's also a proven leader with approximately 30 years of P&C experience in numerous executive roles and will add significant value in moving this business toward achieving long-term profitable growth. With that, I'll hand the call over to James to discuss our consolidated financial results in more detail.
Thank you, Joe. Good afternoon. I'll start on page eight and review our consolidated first quarter results, then briefly touch on our life and health results. Overall, we had a strong quarter. Net income was $54 million, or $1.02 per share. This is up from a loss of $300,000, or $0.01 per share in the first quarter of 2017. Adjusted consolidated net operating income was $58 million, or $1.10 per share for the quarter, compared to a loss of $4 million or $0.08 per share. Earned premiums increased over 8% from last year, or $46 million in the quarter to $610 million. Our investment portfolio continued to provide us with consistent returns with a pretax equivalent annualized book yield of 5%, delivering $79 million of net investment income in the quarter.
Book value per share, excluding unrealized gains on fixed maturities, ended the quarter at $36.35, up 4% from $34.81 last year. On the bottom of the slide, you'll note that we profitably grew our P&C policies in force while improving both the underlying loss ratio and the expense ratio. Turning to page nine. We isolated the key sources of volatility in our earnings. In the highlighted section at the bottom of the page, you can see the underlying operating performance for the quarter. Quarter-over-quarter, we improved underlying performance 47%, or $0.33 per share, as we continue to execute our strategy. Overall, we're pleased that our underlying operating performance remains strong. We recognize that there are and should be sources of volatility in our earnings. As such, we seek to optimally manage the risk-reward trade-off on each of these items.
As mentioned on our last call, we secured an aggregate catastrophe reinsurance treaty that helps mitigate the impact of high frequency, low severity catastrophes in a capital efficient manner for shareholders. Recall in our 2016 strategic update, we made a commitment to improving our normalized run rate earnings by 90% or $90 million on an after-tax basis by year-end 2018. Based on the results from the most recent three quarters, we're excited to have exceeded that commitment ahead of schedule. Our Life & Health Division's results are on page 10 of the presentation. On the top half of the page, you can see the stable revenue trend continued. Earned premiums increased $2 million to $155 million, while net operating income improved to $24 million. This is despite increases in mortality and morbidity in the first half of the quarter that corresponded with the severe flu season.
This division continues to be a stable source of earnings with strong and predictable cash flows. I'll now turn the call over to Duane to discuss the results of our P&C division.
Thank you, Jim, and good afternoon, everyone. I'm excited to be here today as a new member of the Kemper team. I'll begin with a discussion of non-standard auto on page 11 of our presentation. For the past two years, advanced with the implementation of our strategic plan, we have seen significant improvement across our entire non-standard auto business. Earned premiums increased to $266 million for the quarter, up $50 million or 23% over the first quarter of 2017, and up $69 million or 35% over the first quarter of 2016. The top-line growth was fueled by higher volume and premium rate increases. Policies in force increased 18%. More importantly, the growth was achieved profitably as reflected by the improved underlying combined ratio.
Non-standard auto underlying combined ratio improved nearly five percentage points over the first quarter of 2017 and 12 percentage points over the first quarter of 2016, as the business benefited from rate increases as well as underwriting and claims actions. We currently have a leading non-standard auto franchise with over $1.2 billion of annualized net written premiums, and we're focused on continuing to grow it profitably. With the combination of Infinity, we expect the specialty auto division to contribute significant value to our shareholders. Moving on to page 12. Our preferred auto business continues to show improvement. While the business is still pressured, we're seeing improved profitability working its way through the book as we benefit from rate increases and improvements in underwriting and claims practices. Turning your attention to homeowners, the underlying combined ratio was 88%, about six percentage points higher than last year.
About half this increase was due to our purchase of an aggregate catastrophe treaty to reduce the impact of high frequency, low severity events and manage loss volatility. The remainder was largely due to an increase in severity. The team continues to focus on underwriting and claims practices to bring this business to an appropriate level of profitability. I'll now turn it back to Jim.
Thank you, Duane. Turning to investments on page 13. This area continues to be a strength for Kemper. Our portfolio is diversified, highly rated, and has performed well over time. On the bottom left of the page, we've broken out the portfolio by investment type and provided the fixed maturity ratings. The portfolio is conservative in nature, with more than 75% comprised of fixed maturities, and of those, 90% are investment grade. Looking at the chart on the upper left, you can see our performance over the past five quarters. This quarter, we delivered $79 million in net investment income. The core portfolio produced slightly lower net investment income as the higher investment base was offset by an average lower rate. The alternative investment portfolio generated investment income of $11 million. Overall, in the first quarter, the portfolio delivered an attractive pretax equivalent annualized book yield of 5%.
Turning to page 14, we highlight our strong capital and liquidity position. At the end of the first quarter, we had a debt to total capitalization ratio of 22.3%, which provides us with ample financial flexibility. We expect the debt to total capitalization ratio to increase into the high 20s upon the close of the Infinity acquisition and to revert to current levels within a year post-close. I think this is a good place to pause and highlight some items in interest and other expenses. The largest driver of the increase in interest and other is diligence and integration costs of $6.2 million. A significant portion of the remaining difference is an increase in our pension expense. Historically, the company has had a funded status around 80%. Today, we're about 92% funded.
This has led us to an enhanced glide path that has reduced risk associated with our go-forward funding obligations and earnings volatility while marginally increasing ongoing pension expense. In the chart in the upper left-hand corner, you can see our parent company liquidity. While our holding company liquidity slightly decreased, we have ample liquidity. At quarter end, we had $184 million in cash and investments and $385 million in borrowings available from our revolver and insurance subs. Looking at the chart in the upper right, you can see our insurance subs remain well capitalized. Finally, looking to the bottom left of the page, you can see our business continues to generate substantial operating cash flow. With that, I'll turn the call back to Joe for some closing comments.
Thanks, Jim. Hey, to wrap up, the strong results in this quarter demonstrate the significant progress we've made on Kemper's transformation and the effective execution of our strategy to date. As Jim mentioned earlier, in the five years prior to this management team's arrival, the company had been generating, on average, about $100 million of after-tax normalized net income. In our 2016 strategic update, we described initiatives to unlock the embedded value within Kemper. We committed to improve that average by 90% or $90 million after tax by the end of 2018. Based on the most recent three quarters, we're excited about delivering on this commitment ahead of schedule. That said, we're not satisfied. While we've dramatically improved our performance, we've not achieved our full potential.
We recognize we still have work to do to further enhance the value we provide our stakeholders, we remain excited about our continued efforts to unlock this value and are confident that the foundation we've built to date enables us to achieve that potential. Now we'll turn the call back to the operator to take your questions.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Matthew Carletti from JMP Securities. Please go ahead.
All right. Thanks. Good afternoon. Just had a few questions, wanted to jump into homeowners first. Duane, I think you mentioned that about half of the six-point uptick in the loss ratios related to the aggregate reinsurance contract. Was there a top-line impact there? Was that part of the drag on premiums and you're talking about points more of a as it comes out in the equation, or did it just go straight into expenses?
We're going to tag team this one, Matt. The ceded reinsurance comes right off the top line from the net written premium perspective.
Perfect.
Right.
That is the three points just the math of the denominator shrinking and the expenses staying relatively level?
Correct.
Okay.
When we reference that three points, it's just the premium coming out of the denominator.
Perfect. Just want to make sure I was understanding that correctly. Kind of staying on homeowners, of kind of the rest of the three points. Cats were light. Was non-cat weather part of the difference year-over-year on that? Because there was some stuff that went on in the country. I know some places you weren't particularly exposed to, but was non-cat weather any of the remaining increase there, or was that really not a factor?
Really not much of a factor. There's a few things in there. We got obviously a little bit of just demand surge, a little bit of impact on the claim process, then just normal volatility.
Okay. Then last piece-
You know, Matt, I'm going to-
Yeah, go ahead.
jump in. I'm going to add a thought on that. I don't have anything to add on the answer to it, but maybe it's worth a point. We've got a modest-sized book, and periodically people do market share estimates. We've told you guys a couple of times that we've had hailstorms in Dallas or something, and we got sort of an outsized piece of that. Market share wasn't a good measurement. This is a quarter where we're the beneficiary of that, where some other folks were popped bigger and we didn't get that. It goes both ways, and maybe this is just a reminder when it's good news that sometimes we get that on that side, too.
All right. Fair enough. Lastly, if you just had any color around, I know the net development there was virtually nothing, but there was a handful of points from non-CAT that was offset by CAT. Anything in particular driving that non-CAT development in the quarter?
Yeah, Matt, thanks. This is Jim. High level, in previous quarters, we had a specific amount that was kind of targeted as it related to CAT. Some of the demand surge that Dwayne had mentioned earlier and some of the increase in severity, we had modeled that coming through from a standpoint as it related to our CATs. What we're seeing is it's kind of bled over and is actually more coming up into our normalized results. What you've seen is really just a shift in the geography and kind of a net result of the total numbers that you're looking at. It's really placement versus it is anything that actually really deviated from our expectations. The net is the same, it's just geography.
That makes sense. That's helpful. Last one, just shift to high level and switch to non-standard auto. Results continue to be good. You already had strong growth and it's accelerated nicely. Can you just expand a little bit on what you're seeing in the market there, what's continuing to drive really strong growth? If anything, and have you seen any change in the market yet? There's some that think that the tax changes might show up in personal lines before they show up anywhere else. If you just update us on that'd be great. Thanks.
Matt, I think what we're seeing is a consistent strength inside our non-standard auto business. We've got a strong profitability and competitive prices. The value we're delivering is working well. To some degree in this marketplace, you've got to have competitive prices. That drives a lot of it. We're seeing a continuation of that trend. We were the beneficiary in the quarter of Access Insurance Company in California, was put into liquidation, and they had to non-renew their policies and move those to other carriers. We got about $10 million to $12 million of written premium in the first quarter's numbers from that item, so it was a little bit of the growth there. I think what you're seeing is a strong position in the market, and as customers are out shopping, we're well-positioned to take advantage of that.
Clearly the Access opportunity won't be there for 12 months. For the back end of the first quarter and the early part of the second quarter, it's one we're excited about.
Okay, great. Thank you for the answers, and congrats on a really nice start to the year.
Thank you.
The next question comes from Paul Newsome from Sandler O'Neill. Please go ahead.
Good morning. I wanted to ask a couple of big picture questions about sort of the strategy for the personal lines business outside of the non-standard, what you think given the environment, if you have any updates.
Paul, you're cutting out a little bit. I heard you start to say you wanted to ask some high-level questions on strategy, we lost the back half.
Let me see if I can. I'd like to ask about sort of the strategy for the preferred auto business as well as the life business, and if you have any updated thoughts on what you'd like to do with those businesses.
Yeah, great question. The focus of the company is to find appropriate niches where we either target some market that's not being adequately served, a place where we have some unique skill or underwriting capability, or we're finding competitors in the marketplace targeting that space enough, where we think we can do something unique in that. Our life business clearly matches that from the perspective that it's dealing with very low-income consumers. There aren't a lot of folks targeting that customer segment. We're serving an unmet need there, we do it very well. Our focus there is continuing to drive the strength of profitability we have in that business, making the appropriate investments and adjustments into our tactics that will enable us to grow that business. Sometimes when you say make appropriate investments, that scares people that there's huge dollars associated with that.
That's not, in fact, the case here. They're modest dollar items, it's an improvement in execution capability that will allow us to continue to grow that business. We've talked about before that a big benefit of our life business is how it fits in with the rest of the portfolio. It enables us to have the investments department we have because we have a broader pool of invested assets, which lets us drive a stronger set of returns than we'd be able to drive if we were a P&C-only company. We get a capital diversification benefit because of the different earning streams, which is a plus. There's a series of benefits that come through that. I think it's very much a positive force for us, fits importantly in the rest of the strategies in the organization.
Its free cash flow covers all of our interest and dividends payments. It lets us Work in our P&C different business in a different way. What we've got to do to make that work better is just old-fashioned sales management. On the preferred auto and home side of the house, that's a case where we recognize there's a lot of folks playing in that space. What we've got to do is have a capability that's different, otherwise, we're in a crowded space. Job one is to fix the profitability inside of that business, to where we have the right and option to do something else. Beyond that, we're going to focus on our packaged product and improving the strength of our property capability, because we think that there is, to some degree, an unmet market with less focused competition in that space.
Job one is improving that profitability inside of that business, that's where we're focused first. We have seen the ability with the appropriate focus to profitably grow that segment of the market.
Do you think the preferred business could be, in this environment, as profitable as the non-standard auto business?
I'm not 100% sure how to answer the question, Paul, in this environment.
Just giving you an out.
Yeah. Do I think that we can get an appropriate return on that business in total? I do. I think that that's a possibility. I don't think you're going to see us try to be a preferred monoline auto player that's trying to be dominant in that space, because I think that we're not positioned to be a dominant player there. Our strength is going to come from leading with the homeowners and building a strength there and working around our package policy. Because I think there's shelf space in an agent's office, there's mind share in a consumer's mind for somebody who works in that environment. Our issues have been, in some cases, self-inflicted ones that we've talked about in the past. The systems changes we've put in place, and that are being rolled out now, help us position the business better.
The claim changes we put in help us position that better. There's a variety of things that will enable us to be more successful there. They just take longer to get to them.
Good stuff. Well, congratulations on the quarter. Thanks for the call.
Thanks.
The next question comes from Bob Glasspiegel from Janney Montgomery Scott. Please go ahead.
Good afternoon, everyone. Are you winning or losing more business from Access to Infinity? Have you been tracking that?
We're not in a position that we can comment on Infinity's results at this point, in terms of what they are. We're aware that both of us are strong players in the marketplace, and have been successful at writing some of that business. I'm not sure how head-to-head we would've done at an individual consumer level. I know we've both been successful in the aggregate, because we're both strong players in that marketplace and have generated sales as a result.
Well, I think if you lose, you hope you lose to them, right? You'll be picking it up down the road. How's the transition going? You said third quarter closing. Is there anything you're learning as you're going along?
We're excited. We got an early termination to the Hart-Scott-Rodino filing. The SEC approved our ability to make the S4 active in fairly brisk order. That was effective Friday, so we're pleased with that. What we have outstanding is the shareholder vote, which we expect to occur on June 1st, and then the appropriate state-based regulatory approvals, which are operating in their ordinary course. We've seen nothing from those approval and vote perspectives that have been anything at this point other than positive, and the balance will operate under their normal course. As we thought about the integration efforts as we work together as a team, I think we're particularly enthused about that. The teams are working well together. Our hypotheses on the cultures being strong fits, and working well together are moving appropriately.
We had, what I would describe as a list of things that we thought were strong positive opportunities or things that were going to be challenges. I would tell you, as we've worked our way through those, we've found more positive surprises than negative ones, and are as optimistic or more about how these things will come together at this point. It's obviously still early, we're definitely feeling good about where we are.
Great. Are you talking $3 million-$5 million on mortality swing and early flu or could it be more than that?
Yeah, no, the change was about $3 million.
Okay. One last question. Insurance Insider was saying Gerber Life was hiring Goldman, or Nestlé was hiring Goldman to look at Gerber Life. It sounds like that would be right in your strike zone, but potentially a little big. Is that the type of a direct market life company that might interest you at the right price?
Bob, we've both been doing this long enough to know that we'll never comment on an M&A opportunity from anybody else.
Thank you. Thought I'd give it a try.
Good shot.
The next question comes from Gary Ransom from Dowling & Partners. Please go ahead.
Yes, good afternoon. I wanted to ask about loss cost trends. One of your peers, more standard than non-standard, had some issues in bodily injury in California, more legal representation and things just going against them. I don't know if you've seen anything like that. I just wanted to ask if you had.
We're sort of scrambling through all our loss cost trends and trying to isolate to California. We've seen more severity pressure than frequency pressure, when you think about the components of loss cost trend, but not so significant that we would've been swinging around to point somebody to a commentary that we thought it was particularly troubling. It would be what I would describe in the sort of the ordinary course, trend that would be in line with what we've been doing from a pricing perspective. Nothing out of sorts, and nothing that I would point to be a particular item like certain representation trends in a particular state.
Right. Okay. What about-
I'm trying to be helpful, I'm not particularly sure exactly what that commentary was.
Well, it was Mercury's commentary, I-
Okay.
I'll leave it at that.
Having not reviewed their results at a detail level, we're not seeing anything huge.
Yeah. Okay. Maybe you could just tell us what you are seeing broadly, not particularly in any state, if you're seeing any kind of frequency trends that have been a little more favorable as other auto writers have commented on.
Yeah, that was, again, to my point, the frequency's less troubling than it had been. When you think about loss trend, it's a combination of frequency and severity. We're seeing more upward pressure on severity than we are on frequency. I wouldn't say that our frequency is declining at this point, but it's increasing at a very modest pace.
Right. Okay. Just one more, this may be more of a strategic question too, but in thinking about where you end up after Infinity closes and gets integrated, I really can't think of anyone else that's even remotely the same size in the Hispanic market that you would be. You would essentially dominate it. Is that a fair characterization, at least until some competitor tries to go after it?
Being a large player there, I'd love to say makes dominant, but we're not dominant. I think there's a lot of people in the marketplace playing around in it. It's a competitive marketplace. I think we have a significant scale, and I think we're going to be particularly strong in that space. I think we're going to have a focus on serving the Hispanic market with a stronger set of capabilities of Spanish-speaking claim reps and Spanish-speaking service representatives. I think we're going to be attuned and focused on that marketplace more so, but there's plenty of people who serve that marketplace now with less effective capabilities.
Right.
Hopefully that got it.
Yes. Fine. Thank you very much.
Once again, if you have a question, please press star then one. Our next question comes from Caitlin Young from William Blair. Please go ahead.
Hi, good afternoon. I wanted to circle back to the standard auto lines, and when we think about the improvement in the first quarter and how much of that should maintain momentum into the balance of the year. You talk about continued improvement through underwriting and rate. What is the largest driver for improvement going forward, and how should we think about the first quarter trend in and of itself and how much of that should push forward, I guess?
Yeah, no, thanks. Good question. I would tell you that generally speaking, kind of the underlying results that we saw in our auto business in the first quarter are sustainable for the most part throughout the year with modeling in some elements of seasonality. So there'll be a little bit of improvement or a little bit of volatility that I would expect. We'll take some steps back to take two steps back to go three steps forward, I'm sure, at various places. All in all, I would expect something from where we're at with modest to slight improvement through the remaining year, adjusted for seasonality.
Great. Thank you. Then can you give us an update on what level of rates are being pushed through the standard and non-standard sides each?
Yeah. We don't typically, Caitlin, provide specific rate actions and specific rate numbers on those. As a general rule, I would tell you they're in the mid-single-digit range.
Got it. Thanks.
That, of course, varies by state, and sometimes we have multiple products in a state.
Sure. Then on the merger, excuse me, the acquisition, fast-forwarding six months, how do you think about funding the non-equity piece in terms of expected liquidity at that point in time or kind of the makeup between that and debt?
I'm sorry, I just want to make sure that I understand the question, and so I'm going to answer it based on what I think I heard, and if I miss it, just I'll come back to it and let me know where I've missed. High level, I would expect the non-equity component to be funded through a composition of cash on hand that we have, as well as a $250 million bank loan that we'll be putting in place between now and close, which will essentially account for the non-cash or non-equity portion of the transaction. This is in line with what we put out in our presentation last quarter when we announced the deal and as well as what's in the S4.
Okay, great. Thank you. What do you expect your share count to be post-acquisition?
It's about, I want to say about 63.5, somewhere in there, plus or minus 250,000-500,000 shares minorly in there. I say that just because there's a lot of stuff that moves around, obviously marginally with stock comp and other things between now and then.
Yep. All right. Thank you very much. That's all I had.
This concludes our question and answer session. I would now like to turn the conference back over to Mr. Joe Lacher for any closing remarks.
Thank you, operator. Thanks to everybody for your time today and your interest in Kemper. We look forward to updating you again next quarter, and have a great day.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.