SPRINGFIELD, Ill., July 30 /PRNewswire-FirstCall/ -- Horace Mann
Educators Corporation (NYSE:HMN) today reported net income of $4.5
million (11 cents per share) and $18.8 million (45 cents per share)
for the three and six months ended June 30, 2008, respectively,
compared to net income of $23.1 million (52 cents per share) and
$46.4 million ($1.04 per share) for the same periods in 2007.
Included in net income were net realized losses on securities of
$8.1 million ($5.1 million after tax, or 12 cents per share) and
$10.5 million ($6.7 million after tax, or 16 cents per share) for
the three and six months ended June 30, 2008, respectively. In the
prior year, the second quarter earnings reflected net realized
investment losses of $0.9 million ($0.6 million after tax, or 1
cent per share) and the six months reflected net realized
investment gains of $2.6 million ($1.7 million after tax, or 4
cents per share). All per-share amounts are stated on a diluted
basis. "As previously announced, industry-wide catastrophe losses
had an adverse impact on our second quarter net income of
approximately 28 cents per share as compared to the same period
last year. In addition, Horace Mann's second quarter results also
reflected the continued impact of a challenging financial market
environment and the adverse effect of a slowing economy on both
home and auto sales," said Louis G. Lower II, President and Chief
Executive Officer. "That said, our underlying fundamentals of
profitability remain solid. For the current accident year and
excluding catastrophes, our voluntary auto combined ratio increased
somewhat but was within our expectations, and the increase in our
property combined ratio on the same basis was driven primarily by
non-catastrophe weather-related losses. Meanwhile, for the quarter
and year to date -- excluding the impact of the valuation of
deferred policy acquisition costs -- both annuity and life segment
earnings exceeded prior year." "Due to the significant level of
catastrophe costs experienced this quarter, along with the adverse
financial market performance in the first six months of the year,
we are decreasing our full year 2008 estimate of net income before
realized investment gains and losses to between $1.30 and $1.45 per
share," Lower stated. "This projection reflects an average level of
property and casualty catastrophe losses and relatively flat
financial market performance in the second half of the year. The
revised estimate also anticipates 5 cents per share of expenses
related to the recent decision to consolidate the company's
property and casualty field claims offices." In the second quarter
of 2008, the company completed its $25 million share repurchase
authorization announced in April 2008. During the three months
ended June 30, 2008, the company repurchased a total of 1,561,849
shares of its common stock at an aggregate cost of $24.8 million,
or an average cost of $15.93 per share. Total shares outstanding on
June 30, 2008 and 2007 were 39,061,788 and 43,275,184,
respectively. Segment Earnings Net income for the property and
casualty segment of $1.9 million for the quarter decreased $16.0
million compared to the same period in 2007, including the $11.3
million increase in after tax catastrophe costs. Pretax catastrophe
costs in the current quarter were $22.4 million compared to $4.9
million incurred in the second quarter of 2007. The second quarter
2008 property and casualty combined ratio was 106.7 percent,
including 16.6 percentage points due to catastrophe costs, compared
to 89.1 percent, including 3.7 percentage points due to catastrophe
costs, in the prior year period. Favorable prior years' reserve
development totaling $2.4 million was recorded in the current
quarter, which represented 1.8 percentage points on the combined
ratio, compared to $5.6 million, or 4.2 percentage points on the
combined ratio, recorded in the second quarter of 2007. Annuity
segment net income of $5.1 million for the quarter was equal to the
second quarter of 2007. Compared to the prior year and similar to
the first three months of 2008, current period improvements in the
interest margin were offset by the adverse impact of the financial
markets on both the valuation of deferred policy acquisition costs
and the level of contract charges earned. Life segment net income
of $5.2 million for the current quarter increased $1.6 million
compared to the same period a year earlier, reflecting growth in
investment income and lower mortality costs. Segment Revenues The
company's total premiums written and contract deposits declined 2
percent compared to both the second quarter and first half of 2007,
largely due to expected decreases in single premium annuity deposit
receipts in 2008. Property and casualty premiums written increased
2 percent compared to prior year, reflecting lower catastrophe
reinsurance premiums and an increase in average property and auto
premiums per policy. Annuity new contract deposits decreased 9
percent compared to the three and six months ended June 30, 2007.
Scheduled, flexible-premium annuity deposit receipts decreased
slightly compared to the prior year, while rollover deposits
declined approximately 20 percent. Life segment insurance premiums
and contract deposits were comparable to the prior year. Sales and
Distribution Total new auto sales units were 5 percent and 8
percent lower in the three and six months ended June 30, 2008,
respectively, than in the prior year periods. "Second quarter true
new auto sales volume, while not where we wanted it to be, improved
sequentially reflecting productivity gains in the current period,"
said Lower. Annuity new business decreased 12 percent and 14
percent for the three and six months ended June 30, 2008, compared
to the same periods a year earlier, primarily due to the expected
decline in single premium rollover deposits. "IRS transition
regulations for the 403(b) annuity marketplace have reduced new
rollover deposits industry-wide," said Lower. The company's career
agents produced a 4 percent increase in new flexible- premium
annuity business, offset by a decline in this business from
independent agents. The number of career agents declined 12 percent
to 721 agents at June 30, 2008 compared to 12 months earlier. "As
anticipated, our decline in agent count primarily reflects the loss
of lower-producing agents and a reduction in new agent hires as we
transition our hiring standards to target only those individuals we
believe will be successful in the new Agency Business Model," Lower
noted. Including 322 licensed producers who work for the agents,
Horace Mann's total points of distribution increased to 1,043, a
growth of 3 percent over prior year. "We continue to be very
pleased with the progress we are making in transitioning to our new
Agency Business Model. While it's still early in the migration
process, the approximately 200 agents who have completed Horace
Mann's agency business school have continued to outperform our
other agents in all key productivity measures, with double-digit
increases in true new auto units, new flexible annuity premiums and
total first year earned commissions in the second quarter, compared
to prior year," said Lower. "Agency business school graduate
productivity, continued increases in policyholder retention and a
consistent growth trend in educator policies in force have helped
offset the decline in agent count and the adverse competitive and
economic environments, resulting in positive property and casualty
written premium growth and only a slight decline in property and
casualty policies in force." Realized Investment Gains and Losses
In 2008, pretax net realized investment losses were $8.1 million
for the second quarter, including $11.2 million of impairment
write-downs and $0.3 million of realized impairment losses on
securities that were disposed of during the quarter. The impairment
write-downs were primarily related to two collateralized debt
obligation securities and five equity securities, including four
financial industry preferred stock issues. "While we realized
additional investment losses this quarter, our conservative
investment portfolio continues to serve us well in the current
financial market environment," said Lower. Horace Mann -- the
largest national multiline insurance company focusing on educators'
financial needs -- provides auto and homeowners insurance,
retirement annuities, life insurance and other financial solutions.
Founded by educators for educators in 1945, the company is
headquartered in Springfield, Ill. For more information, visit
http://www.horacemann.com/. Statements included in this news
release that are not historical in nature are forward-looking
within the meaning of the Private Securities Litigation Reform Act
of 1995 and are subject to certain risks and uncertainties. Horace
Mann is not under any obligation to (and expressly disclaims any
such obligation to) update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. Please refer to the company's Quarterly Report on
Form 10-Q for the period ended March 31, 2008 and the company's
past and future filings and reports filed with the Securities and
Exchange Commission for information concerning the important
factors that could cause actual results to differ materially from
those in forward-looking statements. HORACE MANN EDUCATORS
CORPORATION Digest of Earnings and Highlights (Unaudited) (Dollars
in Millions, Except Per Share Data) Quarter Ended Six Months Ended
June 30, June 30, 2008 2007 % Change 2008 2007 % Change DIGEST OF
EARNINGS Net income $4.5 $23.1 -80.5% $18.8 $46.4 -59.5% Net income
per share: Basic $0.11 $0.54 -79.6% $0.46 $1.08 -57.4% Diluted (A)
$0.11 $0.52 -78.8% $0.45 $1.04 -56.7% Weighted average number of
shares and equivalent shares (in millions) (B): Basic 40.1 43.2
-7.2% 40.6 43.2 -6.0% Diluted (A) 41.2 44.9 -8.2% 41.7 45.1 -7.5%
HIGHLIGHTS Operations Insurance premiums written and contract
deposits $245.0 $250.8 -2.3% $469.6 $481.1 -2.4% Return on equity
(C) 8.5% 15.0% N.M. Property & Casualty GAAP combined ratio
106.7% 89.1% N.M. 100.2% 89.3% N.M. Effect of catastrophe costs on
the Property & Casualty combined ratio 16.6% 3.7% N.M. 10.4%
2.7% N.M. Experienced agents 549 577 -4.9% Financed agents 172 244
-29.5% Total agents 721 821 -12.2% Licensed producers 322 187 72.2%
Total points of distribution (D) 1,043 1,008 3.5% Additional Per
Share Information Dividends paid $0.105 $0.105 0.0% $0.21 $0.21
0.0% Book value (E) $15.13 $15.08 0.3% Financial Position Total
assets $6,053.0 $6,476.5 -6.5% Short-term debt - - 0.0% Long-term
debt 199.5 199.5 0.0% Total shareholders' equity 591.1 652.5 -9.4%
N.M. - Not meaningful. (A) Effective December 31, 2004, the Company
adopted EITF Consensus 04-8, "The Effect of Contingently
Convertible Instruments on Diluted Earnings per Share". Diluted per
share information for all periods is presented on a basis
consistent with this consensus. On May 14, 2007, the Company
redeemed all remaining Senior Convertible Notes. For the three and
six months ended June 30, 2007, the Senior Convertible Notes
represented 0.6 million and 0.9 million equivalent shares and had
after tax interest expense of $0.1 million and $0.3 million,
respectively. (B) In November and December 2007, the Company
repurchased 1,111,600 shares of its common stock at an aggregate
cost of $20.7 million, or an average cost of $18.66 per share.
During the three months ended March 31, 2008, the Company
repurchased 1,636,376 shares of its common stock at an aggregate
cost of $29.5 million, or an average cost of $18.01 per share.
During the three months ended June 30, 2008, the Company
repurchased 1,561,849 shares of its common stock at an aggregate
cost of $24.8 million, or an average cost of $15.93 per share. (C)
Based on trailing 12-month net income and average quarter-end
shareholders' equity. (D) Includes licensed producers working in
exclusive agents' offices and excludes independent agents. (E) Book
value per share excluding the fair value adjustment for investments
was $16.71 at June 30, 2008 and $15.88 at June 30, 2007. Ending
shares outstanding were 39,061,788 at June 30, 2008 and 43,275,184
at June 30, 2007. - 1 - HORACE MANN EDUCATORS CORPORATION
Statements of Operations and Supplemental GAAP Consolidated Data
(Unaudited) (Dollars in Millions) Quarter Ended Six Months Ended
June 30, June 30, 2008 2007 % Change 2008 2007 % Change STATEMENTS
OF OPERATIONS Insurance premiums and contract charges earned $163.8
$163.5 0.2% $326.3 $324.7 0.5% Net investment income 57.8 55.4 4.3%
114.4 110.3 3.7% Net realized investment gains (losses) (8.1) (0.9)
N.M. (10.5) 2.6 N.M. Other income 2.7 3.5 -22.9% 5.3 6.1 -13.1%
Total revenues 216.2 221.5 -2.4% 435.5 443.7 -1.8% Benefits, claims
and settlement expenses 122.1 100.0 22.1% 229.0 198.4 15.4%
Interest credited 32.6 31.6 3.2% 64.7 62.8 3.0% Policy acquisition
expenses amortized 18.8 18.2 3.3% 39.8 37.3 6.7% Operating expenses
33.3 34.2 -2.6% 68.1 69.3 -1.7% Amortization of intangible assets
1.6 1.3 23.1% 2.8 2.8 0.0% Interest expense 3.4 3.5 -2.9% 6.8 7.2
-5.6% Total benefits, losses and expenses 211.8 188.8 12.2% 411.2
377.8 8.8% Income before income taxes 4.4 32.7 -86.5% 24.3 65.9
-63.1% Income tax expense (benefit) (0.1) 9.6 N.M. 5.5 19.5 -71.8%
Net income $4.5 $23.1 -80.5% $18.8 $46.4 -59.5% ANALYSIS OF
PREMIUMS WRITTEN AND CONTRACT DEPOSITS Property & Casualty
Automobile and property (voluntary) $137.7 $134.9 2.1% $264.3
$259.4 1.9% Involuntary and other property & casualty 0.8 0.9
-11.1% 1.0 1.7 -41.2% Total Property & Casualty 138.5 135.8
2.0% 265.3 261.1 1.6% Annuity deposits 80.8 89.0 -9.2% 154.7 170.5
-9.3% Life 25.7 26.0 -1.2% 49.6 49.5 0.2% Total $245.0 $250.8 -2.3%
$469.6 $481.1 -2.4% ANALYSIS OF SEGMENT NET INCOME (LOSS) Property
& Casualty $1.9 $17.9 -89.4% $14.9 $34.7 -57.1% Annuity 5.1 5.1
0.0% 8.1 8.5 -4.7% Life 5.2 3.6 44.4% 7.8 7.2 8.3% Corporate and
other (A) (7.7) (3.5) 120.0% (12.0) (4.0) 200.0% Net income 4.5
23.1 -80.5% 18.8 46.4 -59.5% Catastrophe costs, after tax, included
above (B) (14.5) (3.2) 353.1% (18.0) (4.8) 275.0% N.M. - Not
meaningful. (A) The Corporate and Other segment includes interest
expense on debt and the impact of realized investment gains and
losses and other corporate level items. The Company does not
allocate the impact of corporate level transactions to the
insurance segments consistent with how management evaluates the
results of those segments. See detail for this segment on page 4.
(B) Includes allocated loss adjustment expenses and catastrophe
reinsurance reinstatement premiums. See also page 3. - 2 - HORACE
MANN EDUCATORS CORPORATION Supplemental Business Segment Overview
(Unaudited) (Dollars in Millions) Quarter Ended Six Months Ended
June 30, June 30, 2008 2007 % Change 2008 2007 % Change PROPERTY
& CASUALTY Premiums written $138.5 $135.8 2.0% $265.3 $261.1
1.6% Premiums earned 134.5 133.6 0.7% 267.5 265.8 0.6% Net
investment income 9.1 9.3 -2.2% 18.3 18.5 -1.1% Other income 0.5
1.2 -58.3% 1.1 1.7 -35.3% Losses and loss adjustment expenses (LAE)
111.0 86.9 27.7% 202.7 172.9 17.2% Operating expenses (includes
policy acquisition expenses amortized) 32.5 32.2 0.9% 65.2 64.6
0.9% Income before tax 0.6 25.0 -97.6% 19.0 48.5 -60.8% Net income
1.9 17.9 -89.4% 14.9 34.7 -57.1% Net investment income, after tax
7.6 7.6 0.0% 15.3 15.2 0.7% Catastrophe costs, after tax (A) 14.5
3.2 353.1% 18.0 4.8 275.0% Catastrophe losses and LAE, before tax
22.4 4.9 357.1% 27.8 7.4 275.7% Reinsurance reinstatement premiums,
before tax - - 0.0% - - 0.0% Operating statistics: Loss and loss
adjustment expense ratio 82.5% 65.0% N.M. 75.8% 65.0% N.M. Expense
ratio 24.2% 24.1% N.M. 24.4% 24.3% N.M. Combined ratio 106.7% 89.1%
N.M. 100.2% 89.3% N.M. Effect of catastrophe costs on the combined
ratio 16.6% 3.7% N.M. 10.4% 2.7% N.M. Automobile and property
detail: Premiums written (voluntary) (B) $137.7 $134.9 2.1% $264.3
$259.4 1.9% Automobile 90.3 89.9 0.4% 182.1 181.5 0.3% Property
47.4 45.0 5.3% 82.2 77.9 5.5% Premiums earned (voluntary) (B) 134.1
131.0 2.4% 267.4 260.7 2.6% Automobile 91.1 91.0 0.1% 182.0 182.1
-0.1% Property 43.0 40.0 7.5% 85.4 78.6 8.7% Policies in force
(voluntary) (in thousands) 799 801 -0.2% Automobile 535 536 -0.2%
Property 264 265 -0.4% Policy renewal rate (voluntary) Automobile
(6 months) 91.3% 91.0% N.M. Property (12 months) 88.8% 87.8% N.M.
Voluntary automobile operating statistics: Loss and loss adjustment
expense ratio 71.7% 69.9% N.M. 71.4% 69.3% N.M. Expense ratio 24.3%
24.0% N.M. 24.3% 24.4% N.M. Combined ratio 96.0% 93.9% N.M. 95.7%
93.7% N.M. Effect of catastrophe costs on the combined ratio 2.5%
0.7% N.M. 1.4% 0.4% N.M. Total property operating statistics: Loss
and loss adjustment expense ratio 106.2% 51.0% N.M. 86.2% 52.2%
N.M. Expense ratio 23.9% 25.1% N.M. 24.4% 25.0% N.M. Combined ratio
130.1% 76.1% N.M. 110.6% 77.2% N.M. Effect of catastrophe costs on
the combined ratio 47.5% 11.0% N.M. 29.8% 8.6% N.M. Prior years'
reserves favorable (adverse) development, pretax Voluntary
automobile $2.2 $1.4 57.1% $3.5 $4.4 -20.5% Total property 0.2 4.2
-95.2% 0.6 6.7 -91.0% Other property and casualty - - N.M. 1.0 -
N.M. Total 2.4 5.6 -57.1% 5.1 11.1 -54.1% N.M. - Not meaningful.
(A) Includes allocated loss adjustment expenses and catastrophe
reinsurance reinstatement premiums. (B) Amounts are net of
additional ceded premiums to reinstate the Company's property and
casualty catastrophe reinsurance coverage, if any, as quantified
above. - 3 - HORACE MANN EDUCATORS CORPORATION Supplemental
Business Segment Overview (Unaudited) (Dollars in Millions) Quarter
Ended Six Months Ended June 30, June 30, 2008 2007 % Change 2008
2007 % Change ANNUITY Contract deposits $80.8 $89.0 -9.2% $154.7
$170.5 -9.3% Variable 35.3 38.9 -9.3% 70.9 75.4 -6.0% Fixed 45.5
50.1 -9.2% 83.8 95.1 -11.9% Contract charges earned 4.9 5.5 -10.9%
9.6 10.9 -11.9% Net investment income 34.0 32.0 6.2% 67.1 63.5 5.7%
Net interest margin (without realized investment gains and losses)
10.9 9.7 12.4% 21.4 19.2 11.5% Other income 1.4 1.3 7.7% 2.7 2.5
8.0% Mortality loss and other reserve changes 0.4 (0.3) N.M. (0.1)
(0.6) -83.3% Operating expenses (includes policy acquisition
expenses amortized) 8.7 8.0 8.7% 20.2 17.7 14.1% Amortization of
intangible assets 1.3 0.9 44.4% 2.2 2.1 4.8% Income before tax 7.6
7.3 4.1% 11.2 12.2 -8.2% Net income 5.1 5.1 0.0% 8.1 8.5 -4.7%
Pretax income increase (decrease) due to valuation of: Deferred
policy acquisition costs $0.2 $0.5 -60.0% $(2.1) $- N.M. Value of
acquired insurance in force (0.3) 0.1 N.M. (0.2) (0.1) 100.0%
Guaranteed minimum death benefit reserve - (0.2) -100.0% (0.1)
(0.1) 0.0% Annuity contracts in force (in thousands) 168 165 1.8%
Accumulated value on deposit $3,600.6 $3,723.7 -3.3% Variable
1,382.7 1,602.8 -13.7% Fixed 2,217.9 2,120.9 4.6% Annuity
accumulated value retention - 12 months Variable accumulations
91.8% 91.2% N.M. Fixed accumulations 92.4% 92.4% N.M. LIFE Premiums
and contract deposits $25.7 $26.0 -1.2% $49.6 $49.5 0.2% Premiums
and contract charges earned 24.4 24.4 0.0% 49.2 48.0 2.5% Net
investment income 14.9 14.2 4.9% 29.5 28.1 5.0% Income before tax
7.9 5.7 38.6% 12.3 11.2 9.8% Net income 5.2 3.6 44.4% 7.8 7.2 8.3%
Pretax income increase (decrease) due to valuation of: Deferred
policy acquisition costs $(0.1) $0.1 N.M. $(0.1) $0.1 N.M. Life
policies in force (in thousands) 225 230 -2.2% Life insurance in
force $13,647 $13,470 1.3% Lapse ratio - 12 months (Ordinary life
insurance) 5.6% 5.9% N.M. CORPORATE AND OTHER (A) Components of
loss before tax: Net realized investment gains (losses) $(8.1)
$(0.9) N.M. $(10.5) $2.6 N.M. Interest expense (3.4) (3.5) -2.9%
(6.8) (7.2) -5.6% Other operating expenses, net investment income
and other income (0.2) (0.9) -77.8% (0.9) (1.4) -35.7% Loss before
tax (11.7) (5.3) 120.8% (18.2) (6.0) 203.3% Net loss (7.7) (3.5)
120.0% (12.0) (4.0) 200.0% N.M. - Not meaningful. (A) The Corporate
and Other segment includes interest expense on debt and the impact
of realized investment gains and losses and other corporate level
items. The Company does not allocate the impact of corporate level
transactions to the insurance segments consistent with how
management evaluates the results of those segments. - 4 - HORACE
MANN EDUCATORS CORPORATION Supplemental Business Segment Overview
(Unaudited) (Dollars in Millions) Quarter Ended Six Months Ended
June 30, June 30, 2008 2007 % Change 2008 2007 % Change INVESTMENTS
Annuity and Life Fixed maturities, at fair value (amortized cost
2008, $3,223.7; 2007, $3,125.9) $3,137.5 $3,075.2 2.0% Equity
securities, at fair value (cost 2008, $52.9; 2007, $13.5) 47.7 13.5
253.3% Short-term investments 52.4 47.1 11.3% Short-term
investments, securities lending collateral 63.1 350.1 -82.0% Policy
loans and other 104.3 98.7 5.7% Total Annuity and Life investments
3,405.0 3,584.6 -5.0% Property & Casualty Fixed maturities, at
fair value (amortized cost 2008, $682.9; 2007, $753.5) 671.3 745.4
-9.9% Equity securities, at fair value (cost 2008, $39.9; 2007,
$8.5) 37.0 8.7 325.3% Short-term investments 26.1 20.8 25.5%
Short-term investments, securities lending collateral - - 0.0%
Total Property & Casualty investments 734.4 774.9 -5.2%
Corporate investments 4.1 4.3 -4.7% Total investments 4,143.5
4,363.8 -5.0% Net investment income Before tax $57.8 $55.4 4.3%
$114.4 $110.3 3.7% After tax 39.3 37.6 4.5% 77.8 74.9 3.9% Net
realized investment gains (losses) by investment portfolio included
in Corporate and Other segment gain (loss) Property & Casualty
$(1.5) $0.1 N.M. $(1.7) $0.4 N.M. Annuity (7.7) 0.2 N.M. (11.1) 3.4
N.M. Life 1.1 (1.2) N.M. 2.3 (1.2) N.M. Corporate and Other - -
0.0% - - 0.0% Total, before tax (8.1) (0.9) N.M. (10.5) 2.6 N.M.
Total, after tax (5.1) (0.6) N.M. (6.7) 1.7 N.M. Per share, diluted
$(0.12) $(0.01) N.M. $(0.16) $0.04 N.M. N.M. - Not meaningful. - 5
- DATASOURCE: Horace Mann Educators Corporation CONTACT: Dwayne D.
Hallman, Senior Vice President - Finance of Horace Mann Educators
Corporation, +1-217-788-5708 Web site: http://www.horacemann.com/
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