Securities and Exchange Commission
Washington, D. C. 20549-1004
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 6, 1995
KEMPER FINANCIAL COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-15253 36-3451068
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or
organization)
One Kemper Drive 60049
Long Grove, Illinois (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (708) 320-4700
Item 5. Other Events
A. LEGAL PROCEEDINGS
On June 6, 1995, Kemper Corporation ("Kemper") and William R. Buecking, a
former officer of a Kemper subsidiary that is also a subsidiary of Kemper
Financial Companies, Inc. (the "Company"), consented to the issuance of
an order by the Securities and Exchange Commission (the "Commission")
without admitting or denying the findings therein. This administrative
proceeding (In the matter of Kemper Corporation and William R. Buecking,
Securities Exchange Act Release No. 35814) resolved the previously
disclosed Commission investigation into certain of Kemper's real estate-
related accounting practices and related disclosures. Kemper fully
cooperated throughout the investigation. The order alleged that in 1990
and 1991, (i) Kemper violated Sections 13(a) and 13(b)(2)(B) of the
Securities Exchange Act of 1934 and Rules 13a-1, 13a-13 and 12b-20
promulgated thereunder in connection with Kemper's filing with the
Commission of periodic reports for the first, second and third quarters
of 1990, the year ended December 31, 1990, and the first and second
quarters of 1991, and (ii) Mr. Buecking, as the person with direct
responsibility for Kemper's real estate portfolio, caused certain of
Kemper's violations. The order also ordered Kemper and Mr. Buecking to
cease and desist from committing or causing any violations and future
violations of said statutory and regulatory provisions.
B. SALE OF STATE STREET COMMON STOCK
On June 21, 1995, Kemper Financial Services, Inc. ("KFS") sold the
2,986,111 shares of common stock of State Street Boston Corporation
("State Street") which KFS received from State Street on January 31, 1995
in exchange for KFS's 50 percent interest in Investors Fiduciary Trust
Company. The Company expects to record an after-tax gain of
approximately $4.3 million in the second quarter of 1995 from the sale of
the State Street common stock.
C. ORANGE COUNTY UPDATE
On July 11, 1995, Kemper announced that the five non-government taxable
money market funds managed by KFS which collectively hold $198 million of
Orange County notes consented to extend the maturity date of such notes
to June 30, 1996. The bank letter of credit arrangements with respect to
the Orange County notes were also extended to the new maturity date. The
Company expects to take an additional charge in the second quarter of
1995 to reflect recent declines in the estimated market value of the
Orange County notes. A copy of Kemper's July 11, 1995 press release is
filed herewith as Exhibit No. 20.1 and is incorporated herein by
reference. A copy of Amendment No. 2, dated as of July 7, 1995, to the
Letter of Credit Agreement, dated as of January 26, 1995, is filed
herewith as Exhibit No. 10.1 and is incorporated herein by reference. A
copy of the Amended Restated Note Proceeds Transfer Agreement dated as of
July 7, 1995 is filed herewith as Exhibit No. 10.2 and is incorporated
herein by reference.
D. REAL ESTATE ASSET SALES
In compliance with the Agreement and Plan of Merger among Zurich
Insurance Company, Insurance Partners, L.P., Insurance Partners Offshore
(Bermuda), L.P., ZIP Acquisition Corp. and Kemper dated as of May 15,
1995 (the "Merger Agreement," a copy of which was filed as Exhibit No.
2.1 to the Company's Form 8-K filed May 23, 1995), Kemper has been using
diligent efforts to enter into agreements to sell, and to cause its
subsidiaries (including the Company and its subsidiaries) to enter into
agreements to sell, various real estate assets, including certain
mortgage and other loans, real estate owned and equity interests in real
estate. Pursuant to Section 4.6(a) of the Merger Agreement, Kemper has
the right to require that any binding sale agreement with a third party
include a condition that Kemper (and therefore the Company) shall not be
obligated to consummate such real estate asset sale unless either the
Merger (as defined in the Merger Agreement) is consummated or the
Preliminary Closing Conditions (as defined in the Merger Agreement) are
satisfied or waived.
Since May 15, 1995, however, with respect to certain selected real estate
assets, the Company has entered into sale agreements without requiring
the above-described condition, or the Company has otherwise determined
that it is willing to enter into such sales contracts. A major
consequence of the Company's unconditional intent to sell such assets
under current real estate market conditions is the Company's recording of
additions to its provisions for real estate-related losses (reserves and
write-downs) to mark the subject assets down to the estimated or actual
sales contract prices (less estimated sales expenses). Such prices in
several instances differed significantly from the Company's carrying
values as determined pursuant to Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan."
Primarily due to these differences, the Company presently expects that
additions to reserves and write-downs in the second quarter of 1995 will
result in after-tax, real estate-related, realized investment losses of
approximately $35 million.
Although Kemper and the Company would not have intended to sell all of
such real estate assets at such prices in the absence of the Merger
Agreement, the Company determined that it would proceed with the sales
with respect to selected assets without the above-described condition in
order to facilitate their sales. Such action was in accordance with the
strategy and desires of the other parties to the Merger Agreement. Such
action, therefore, is intended to facilitate the Merger and will not
result in any adverse effect on the Merger.
If the Company determines to enter into other real estate sales contracts
without including therein the above-described condition, then further
additions to the Company's provisions for real-estate related losses may
be necessary.
Item 7. Financial Statements and Exhibits
(b) Exhibits.
Exhibit No.
10.1 Amendment No. 2, dated as of July 7, 1995, to the Letter of
Credit Agreement, dated as of January 26, 1995, among Kemper
Asset Holdings, Inc., the banks party thereto and The Bank of New
York as administrative agent and issuing bank.*
10.2 Amended Restated Note Proceeds Transfer Agreement dated as of
July 7, 1995 among Kemper Asset Holdings, Inc., certain
Massachusetts business trusts and Kemper Corporation as
guarantor.*
20.1 Press release of Kemper Corporation dated July 11, 1995.*
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*Incorporated herein by reference to the identically numbered exhibits to
Kemper Corporation's Form 8-K dated May 17, 1995 which was filed July 14,
1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEMPER FINANCIAL COMPANIES, INC.
By: JOHN H. FITZPATRICK
-------------------
John H. Fitzpatrick
Executive Vice President
and Chief Financial Officer
July 17, 1995
