SPRINGFIELD, Ill., Oct. 29 /PRNewswire-FirstCall/ -- Horace Mann
Educators Corporation (NYSE:HMN) today reported net losses of $30.8
million (79 cents per share) and $12.0 million (30 cents per share)
for the three and nine months ended September 30, 2008,
respectively, compared to net income of $18.4 million (41 cents per
share) and $64.8 million ($1.45 per share) for the same periods in
2007. Included in these amounts were net realized losses on
securities of $45.2 million ($37.5 million after tax, or 96 cents
per share) and $55.7 million ($44.2 million after tax, or $1.10 per
share) for the three and nine months ended September 30, 2008,
respectively. In 2007, the third quarter earnings reflected net
realized investment losses of $0.5 million ($0.3 million after tax,
or 1 cent per share) and the nine months reflected net realized
investment gains of $2.1 million ($1.4 million after tax, or 3
cents per share). All per-share amounts are stated on a diluted
basis. "As previously announced, the continuing challenges of the
financial markets had an adverse impact on Horace Mann's third
quarter results, as the company recorded losses and impairment
write-downs of $45 million pretax, primarily related to our
holdings of Lehman Brothers, Fannie Mae, Freddie Mac and AIG. In
addition, and also consistent with previous disclosures,
industry-wide catastrophe losses reduced current quarter earnings
by approximately 60 cents per share, due in large part to the
effect of Hurricanes Gustav and Ike, as compared to an adverse
impact of approximately 15 cents per share for the third quarter of
2007," said Louis G. Lower II, President and Chief Executive
Officer. "In spite of the significant level of catastrophe losses,
net income before realized investment gains and losses was 17 cents
per share in the quarter and our underlying profit fundamentals
remain solid. For the current accident year and excluding
catastrophes, our property and casualty combined ratio improved
sequentially in the third quarter and was below prior year for both
the quarter and year to date. In addition, excluding the impact of
the valuation of deferred policy acquisition costs and change in
the guaranteed minimum death benefit reserve, year-to-date combined
annuity and life segment earnings were comparable to a very strong
prior year result. Meanwhile, compared to last year's third
quarter, average productivity of the approximately 200 agents who
have completed our Agency Business School training increased over
10 percent in our lead auto and annuity lines in spite of the
difficult competitive and economic environment." "As previously
indicated, our estimate of full-year 2008 net income before
realized investment gains and losses is between $1.10 and $1.25 per
share," Lower said. "This projection assumes an average amount of
property and casualty catastrophe losses in the fourth quarter and
a relatively flat performance in the financial markets from
September 30 levels." Segment Earnings The property and casualty
segment recorded a net loss of $1.3 million for the quarter,
resulting in a decrease of $11.7 million compared to the segment's
net income for the same period in 2007, including a $16.9 million
increase in after tax catastrophe costs. Pretax catastrophe costs
in the current quarter were $36.2 million compared to $10.3 million
incurred in the third quarter of 2007. Hurricane Gustav, at
approximately $13 million pretax, and Hurricane Ike, at
approximately $12 million pretax, represented the most significant
third quarter catastrophe events for the company, with
approximately $5 million pretax of adverse reserve development for
catastrophe activity in the second quarter of 2008 also recorded in
the current period. The third quarter 2008 property and casualty
combined ratio was 109.7 percent, including 26.9 percentage points
due to catastrophe costs, compared to 96.7 percent, including 7.7
percentage points due to catastrophe costs, in the prior year
period. Favorable prior years' reserve development totaling $6.3
million was recorded in the current quarter, which represented 4.7
percentage points on the combined ratio, compared to $3.7 million,
or 2.8 percentage points on the combined ratio, recorded in the
third quarter of 2007. Annuity segment net income of $6.3 million
for the quarter increased $1.1 million compared to the third
quarter of 2007. Compared to the prior year and similar to the
first six months of 2008, current period improvements in the
interest margin were offset by the adverse impact of the financial
markets on the level of contract charges earned. For the third
quarter of 2008, the valuation of annuity deferred policy
acquisition costs had a net positive impact on earnings, with the
favorable impact related to the investment losses recognized in the
quarter more than offsetting the adverse impact of the financial
markets on variable deposit fund performance. "Third quarter
annuity net fund flows were positive and have increased
sequentially over the last two quarters, while cash value
persistency of 93 percent has increased steadily throughout the
year," noted Lower. Life segment net income of $4.4 million for the
current quarter decreased $1.1 million compared to the same period
a year earlier, as growth in earned premium and investment income
was more than offset by higher mortality costs. Life persistency
remained in excess of 94 percent. Segment Revenues The company's
total premiums written and contract deposits declined 1 percent and
2 percent compared to the third quarter and first nine months of
2007, respectively, largely due to expected decreases in single
premium annuity deposit receipts in 2008. Property and casualty
premiums written increased 1 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 5 percent and 8 percent compared to the
three and nine months ended September 30, 2007, respectively.
Scheduled, flexible-premium annuity deposit receipts decreased
moderately compared to the prior year, while rollover deposits
declined 4 percent and 16 percent compared to the third quarter and
first nine months of 2007, respectively. Life segment insurance
premiums and contract deposits were comparable to the prior year.
Sales and Distribution For the three and nine months ended
September 30, 2008, total new auto sales units were 2 percent and 6
percent lower in the current periods than in the prior year,
respectively. "Third quarter true new auto sales volume improved
sequentially, reflecting continued productivity gains in the
current period," said Lower. Similarly, Horace Mann agent flexible
premium annuity sales were up 9 percent in the quarter and 6
percent year to date versus prior year, offset by lower independent
agent sales and an expected decline in single premium rollover
deposits. "IRS transition regulations for the 403(b) annuity
marketplace continue to reduce new rollover deposits
industry-wide," said Lower. The number of career agents declined 13
percent to 690 agents at September 30, 2008 compared to 12 months
earlier. "As expected, our decline in agent count primarily
reflects the loss of lower-producing agents and a reduction in new
agent hires as we continue to transition our hiring standards to
target only those individuals we believe will be successful in the
new Agency Business Model," Lower said. Including 360 licensed
producers who work for the agents, Horace Mann's total points of
distribution increased to 1,050, a growth of 2 percent over prior
year. "In spite of the decline in agent count, a difficult
competitive and economic environment, and our continuing actions to
reduce risk exposure in hurricane-prone areas, we have recorded
positive property and casualty written premium growth and only a
slight decline in property and casualty policies in force this
year. Growth in Agency Business School graduate productivity,
policyholder retention, and educator policies in force -- the
primary focal points of our strategic initiatives -- have
contributed significantly to these results." Investment Gains and
Losses In 2008, pretax net realized investment losses were $45.2
million for the third quarter, including $33.4 million of
impairment write-downs and $14.2 million of realized impairment
losses on securities that were disposed of during the quarter. Of
the investment losses, $29 million ($24 million of write-downs and
$5 million on disposals) were on fixed maturity and preferred stock
securities of Lehman Brothers Holdings, Inc., the Federal National
Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage
Corporation ("Freddie Mac"), and American International Group, Inc.
The remaining $9 million of impairment write-downs included $2
million related to securities that the Company no longer intends to
hold until the value fully recovers. An $11.5 million deferred tax
allowance was established at September 30, 2008, based on an
assessment that gross realized and unrealized investment gains were
insufficient to offset gross unrealized investment losses.
Approximately $8.2 million of the allowance related to losses
realized during the quarter on Lehman Brothers, Fannie Mae and
Freddie Mac, which are considered to be permanently impaired, and
was recorded as a reduction to the company's tax benefit on
realized investment losses. "While the investment losses we
realized in the quarter were not insignificant, they are very
manageable in terms of our ability to maintain acceptable insurance
subsidiary capital and operating ratios, particularly in light of
the flexibility afforded us by our existing bank credit facility,"
said Lower. As previously disclosed, on October 2, 2008 the company
drew down $75 million of its $125 million bank credit facility,
which currently remains at the holding company level. Net
unrealized investment losses on fixed maturity and equity
securities increased from $4.8 million at December 31, 2007, to
$105.9 million at June 30, 2008, and totaled $271.1 million at
September 30, 2008. This dramatic and relatively recent increase in
the unrealized position reflects the extreme and unprecedented
widening of corporate bond spreads. "Our considered judgment is
that our unrealized balance almost exclusively reflects a
remarkably disruptive credit market in a crisis mode where
liquidity has been severely impaired, with spreads and prices
disconnected from rational valuation across all asset classes,"
said Lower. "Given our insignificant exposure to sub-prime, Alt-A
and other lower-quality securities, coupled with the credit
enhancement of the government's TARP program being available to
many of our financial institution holdings, we remain comfortable
with the underlying credit quality of our portfolio." 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 June 30, 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 Nine Months Ended
September 30, September 30, 2008 2007 % Change 2008 2007 % Change
DIGEST OF EARNINGS Net income (loss) $(30.8) $18.4 N.M. $(12.0)
$64.8 N.M. Net income (loss) per share: Basic $(0.79) $0.42 N.M.
$(0.30) $1.50 N.M. Diluted (A) $(0.79) $0.41 N.M. $(0.30) $1.45
N.M. Weighted average number of shares and equivalent shares (in
millions) (B): Basic 39.1 43.3 -9.7% 40.1 43.2 -7.2% Diluted (A)
39.1 44.3 -11.7% 40.1 44.8 -10.5% HIGHLIGHTS Operations Insurance
premiums written and contract deposits $251.4 $254.4 -1.2% $721.0
$735.5 -2.0% Return on equity(C) 1.0% 14.2% N.M. Property &
Casualty GAAP combined ratio 109.7% 96.7% N.M. 103.3% 91.8% N.M.
Effect of catastrophe costs on the Property & Casualty combined
ratio 26.9% 7.7% N.M. 15.9% 4.4% N.M. Experienced agents 529 576
-8.2% Financed agents 161 221 -27.1% Total agents 690 797 -13.4%
Licensed producers 360 228 57.9% Total points of distribution (D)
1,050 1,025 2.4% Additional Per Share Information Dividends paid
$0.105 $0.105 - $0.315 $0.315 - Book value (E) $11.82 $15.73 -24.9%
Financial Position Total assets $5,798.4 $6,295.3 -7.9% Short-term
debt - - - Long-term debt 199.5 199.5 - Total shareholders' equity
461.8 680.9 -32.2% 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
nine months ended September 30, 2007, the Senior Convertible Notes
represented 0.6 million equivalent shares and had after tax
interest expense of $0.3 million. (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 (loss) 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 $15.82 at September 30, 2008 and
$16.21 at September 30, 2007. Ending shares outstanding were
39,061,788 at September 30, 2008 and 43,294,959 at September 30,
2007. - 1 - HORACE MANN EDUCATORS CORPORATION Statements of
Operations and Supplemental GAAP Consolidated Data (Unaudited)
(Dollars in Millions) Quarter Ended Nine Months Ended September 30,
September 30, 2008 2007 % Change 2008 2007 % Change STATEMENTS OF
OPERATIONS Insurance premiums and contract charges earned $163.4
$163.3 0.1% $489.7 $488.0 0.3% Net investment income 57.8 56.0 3.2%
172.2 166.3 3.5% Net realized investment gains (losses) (45.2)
(0.5) N.M. (55.7) 2.1 N.M. Other income 2.2 2.9 -24.1% 7.5 9.0
-16.7% Total revenues 178.2 221.7 -19.6% 613.7 665.4 -7.8%
Benefits, claims and settlement expenses 131.2 108.6 20.8% 360.2
307.0 17.3% Interest credited 33.2 32.2 3.1% 97.9 95.0 3.1% Policy
acquisition expenses amortized 16.2 18.4 -12.0% 56.0 55.7 0.5%
Operating expenses 30.6 31.9 -4.1% 98.7 101.2 -2.5% Amortization of
intangible assets 1.3 1.2 8.3% 4.1 4.0 2.5% Interest expense 3.4
3.4 - 10.2 10.6 -3.8% Total benefits, losses and expenses 215.9
195.7 10.3% 627.1 573.5 9.3% Income (loss) before income taxes
(37.7) 26.0 N.M. (13.4) 91.9 N.M. Income tax expense (benefit)
(6.9) 7.6 N.M. (1.4) 27.1 N.M. Net income (loss) $(30.8) $18.4 N.M.
$(12.0) $64.8 N.M. ANALYSIS OF PREMIUMS WRITTEN AND CONTRACT
DEPOSITS Property & Casualty Automobile and property
(voluntary) $143.1 $141.7 1.0% $407.4 $401.1 1.6% Involuntary and
other property & casualty 0.4 0.3 33.3% 1.4 2.0 -30.0% Total
Property & Casualty 143.5 142.0 1.1% 408.8 403.1 1.4% Annuity
deposits 83.1 87.8 -5.4% 237.8 258.3 -7.9% Life 24.8 24.6 0.8% 74.4
74.1 0.4% Total $251.4 $254.4 -1.2% $721.0 $735.5 -2.0% ANALYSIS OF
SEGMENT NET INCOME (LOSS) Property & Casualty $(1.3) $10.4 N.M.
$13.6 $45.1 -69.8% Annuity 6.3 5.2 21.2% 14.4 13.7 5.1% Life 4.4
5.5 -20.0% 12.2 12.7 -3.9% Corporate and other(A) (40.2) (2.7) N.M.
(52.2) (6.7) N.M. Net income (loss) (30.8) 18.4 N.M. (12.0) 64.8
N.M. Catastrophe costs, after tax, included above (B) (23.6) (6.7)
252.2% (41.6) (11.5) 261.7% 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 Nine Months Ended September 30, September
30, 2008 2007 % Change 2008 2007 % Change PROPERTY & CASUALTY
Premiums written $143.5 $142.0 1.1% $408.8 $403.1 1.4% Premiums
earned 134.5 133.4 0.8% 402.0 399.2 0.7% Net investment income 8.7
9.3 -6.5% 27.0 27.8 -2.9% Other income - 0.3 -100.0% 1.1 2.0 -45.0%
Losses and loss adjustment expenses (LAE) 117.5 97.4 20.6% 320.2
270.3 18.5% Operating expenses (includes policy acquisition
expenses amortized) 30.1 31.5 -4.4% 95.3 96.1 -0.8% Income (loss)
before tax (4.4) 14.1 N.M. 14.6 62.6 -76.7% Net income (loss) (1.3)
10.4 N.M. 13.6 45.1 -69.8% Net investment income, after tax 7.3 7.8
-6.4% 22.6 23.0 -1.7% Catastrophe costs, after tax (A) 23.6 6.7
252.2% 41.6 11.5 261.7% Catastrophe losses and LAE, before tax 36.2
10.3 251.5% 64.0 17.7 261.6% Reinsurance reinstatement premiums,
before tax - - - - - - Operating statistics: Loss and loss
adjustment expense ratio 87.3% 73.0% N.M. 79.6% 67.7% N.M. Expense
ratio 22.4% 23.7% N.M. 23.7% 24.1% N.M. Combined ratio 109.7% 96.7%
N.M. 103.3% 91.8% N.M. Effect of catastrophe costs on the combined
ratio 26.9% 7.7% N.M. 15.9% 4.4% N.M. Automobile and property
detail: Premiums written (voluntary)(B) $143.1 $141.7 1.0% $407.4
$401.1 1.6% Automobile 93.1 93.1 - 275.2 274.6 0.2% Property 50.0
48.6 2.9% 132.2 126.5 4.5% Premiums earned (voluntary)(B) 134.3
131.9 1.8% 401.7 392.6 2.3% Automobile 91.6 91.2 0.4% 273.6 273.3
0.1% Property 42.7 40.7 4.9% 128.1 119.3 7.4% Policies in force
(voluntary) (in thousands) 798 801 -0.4% Automobile 535 535 -
Property 263 266 -1.1% Policy renewal rate (voluntary) Automobile
(6 months) 91.5% 91.4% N.M. Property (12 months) 88.7% 88.2% N.M.
Voluntary automobile operating statistics: Loss and loss adjustment
expense ratio 62.1% 69.9% N.M. 68.3% 69.5% N.M. Expense ratio 22.1%
23.8% N.M. 23.5% 24.2% N.M. Combined ratio 84.2% 93.7% N.M. 91.8%
93.7% N.M. Effect of catastrophe costs on the combined ratio 2.0%
0.7% N.M. 1.6% 0.5% N.M. Total property operating statistics: Loss
and loss adjustment expense ratio 143.8% 78.9% N.M. 105.4% 61.2%
N.M. Expense ratio 23.2% 23.9% N.M. 24.0% 24.6% N.M. Combined ratio
167.0% 102.8% N.M. 129.4% 85.8% N.M. Effect of catastrophe costs on
the combined ratio 82.1% 24.2% N.M. 47.3% 13.8% N.M. Prior years'
reserves favorable (adverse) development, pretax Voluntary
automobile $6.2 $2.8 121.4% $9.7 $7.2 34.7% Total property (0.5)
0.9 N.M. 0.1 7.6 -98.7% Other property and casualty 0.6 - N.M. 1.6
- N.M. Total 6.3 3.7 70.3% 11.4 14.8 -23.0% 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 Nine Months Ended September 30, September 30, 2008 2007 %
Change 2008 2007 % Change ANNUITY Contract deposits $83.1 $87.8
-5.4% $237.8 $258.3 -7.9% Variable 31.7 35.8 -11.5% 102.6 111.2
-7.7% Fixed 51.4 52.0 -1.2% 135.2 147.1 -8.1% Contract charges
earned 4.2 5.5 -23.6% 13.8 16.4 -15.9% Net investment income 34.4
32.6 5.5% 101.5 96.1 5.6% Net interest margin (without realized
investment gains and losses) 10.8 9.7 11.3% 32.2 28.9 11.4% Other
income 1.4 1.7 -17.6% 4.1 4.2 -2.4% Mortality loss and other
reserve changes (0.3) (0.3) - (0.4) (0.9) -55.6% Operating expenses
(includes policy acquisition expenses amortized) 6.0 7.9 -24.1%
26.2 25.6 2.3% Amortization of intangible assets 0.9 0.9 - 3.1 3.0
3.3% Income before tax 9.2 7.8 17.9% 20.4 20.0 2.0% Net income 6.3
5.2 21.2% 14.4 13.7 5.1% Pretax income increase (decrease) due to
valuation of: Deferred policy acquisition costs $2.2 $0.2 N.M. $0.1
$0.2 N.M. Value of acquired insurance in force 0.2 - N.M. -
(0.1)-100.0% Guaranteed minimum death benefit reserve (0.2) - N.M.
(0.3) (0.1) 200.0% Annuity contracts in force (in thousands) 168
164 2.4% Accumulated value on deposit $3,539.0 $3,750.7 -5.6%
Variable 1,266.1 1,610.3 -21.4% Fixed 2,272.9 2,140.4 6.2% Annuity
accumulated value retention - 12 months Variable accumulations
92.7% 90.8% N.M. Fixed accumulations 93.3% 91.9% N.M. LIFE Premiums
and contract deposits $ 24.8 $ 24.6 0.8% $74.4 $74.1 0.4% Premiums
and contract charges earned 24.7 24.4 1.2% 73.9 72.4 2.1% Net
investment income 15.0 14.3 4.9% 44.5 42.4 5.0% Income before tax
6.9 8.4 -17.9% 19.2 19.6 -2.0% Net income 4.4 5.5 -20.0% 12.2 12.7
-3.9% Pretax income increase (decrease) due to valuation of:
Deferred policy acquisition costs $0.2 $(0.1) N.M. $0.1 $ - N.M.
Life policies in force (in thousands) 222 227 -2.2% Life insurance
in force $13,619 $13,499 0.9% Lapse ratio - 12 months (Ordinary
life insurance) 5.5% 5.6% N.M. CORPORATE AND OTHER (A) Components
of loss before tax: Net realized investment gains (losses) $(45.2)
$(0.5) N.M. $(55.7) $2.1 N.M. Interest expense (3.4) (3.4) - (10.2)
(10.6) -3.8% Other operating expenses, net investment income and
other income (0.8) (0.4) 100.0% (1.7) (1.8) -5.6% Loss before tax
(49.4) (4.3) N.M. (67.6) (10.3) N.M. Net loss (40.2) (2.7) N.M.
(52.2) (6.7) N.M. 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 Nine Months Ended
September 30, September 30, 2008 2007 % Change 2008 2007 % Change
INVESTMENTS Annuity and Life Fixed maturities, at fair value
(amortized cost 2008, $3,170.2; 2007, $3,111.3) $2,956.3 $3,077.4
-3.9% Equity securities, at fair value (cost 2008, $50.9; 2007,
$49.1) 36.6 47.2 -22.5% Short-term investments 113.6 60.8 86.8%
Short-term investments, securities lending collateral - 77.6
-100.0% Policy loans and other 106.9 101.0 5.8% Total Annuity and
Life investments 3,213.4 3,364.0 -4.5% Property & Casualty
Fixed maturities, at fair value (amortized cost 2008, $659.3; 2007,
$758.7) 622.1 758.8 -18.0% Equity securities, at fair value (cost
2008, $30.7; 2007, $32.4) 25.0 32.5 -23.1% Short-term investments
54.2 6.3 N.M. Short-term investments, securities lending collateral
- - - Total Property & Casualty investments 701.3 797.6 -12.1%
Corporate investments 0.9 6.7 -86.6% Total investments 3,915.6
4,168.3 -6.1% Net investment income Before tax $57.8 $56.0 3.2%
$172.2 $166.3 3.5% After tax 39.2 38.1 2.9% 117.0 113.0 3.5% Net
realized investment gains (losses) by investment portfolio included
in Corporate and Other segment gain (loss) Property & Casualty
$(11.9) $(0.6) N.M. $(13.6) $(0.2) N.M. Annuity (30.7) 0.1 N.M.
(41.8) 3.5 N.M. Life (2.6) - N.M. (0.3) (1.2) N.M. Corporate and
Other - - N.M. - - N.M. Total, before tax (45.2) (0.5) N.M. (55.7)
2.1 N.M. Total, after tax (37.5) (0.3) N.M. (44.2) 1.4 N.M. Per
share, diluted $(0.96) $(0.01) N.M. $(1.10) $0.03 N.M. N.M. - Not
meaningful. - 5 - HORACE MANN EDUCATORS CORPORATION Supplemental
Business Segment Overview (Unaudited) (Dollars in Millions) June
December September 30, 30, 31, 2008 2008 2007 Net Net Net Unreal-
Unreal- Unrealized ized ized Fair Gain Gain Gain Value (Loss)
(Loss) (Loss) FIXED MATURITY & EQUITY SECURITY INVESTMENTS
Fixed income securities U.S. government and federally sponsored
agency bonds $165.7 $0.2 $0.8 $2.3 Municipal bonds 477.9 (22.8)
(5.1) 6.0 Corporate bonds Financial institutions 183.6 (31.6)
(13.5) (3.0) Other 1,259.5 (113.5) (34.1) 11.0 High yield 162.9
(17.2) (9.5) (4.6) Foreign government bonds 14.9 0.5 0.9 1.5
Mortgage-backed securities Prime agency 874.3 (0.6) (2.3) 1.9 Prime
other 16.3 (0.1) (1.6) 0.5 Sub-prime, Alt-A 7.5 (0.7) (0.6) (0.1)
Commercial mortgage-backed securities 258.5 (47.1) (23.9) (5.4)
Asset-backed securities Sub-prime, Alt-A 4.4 (0.3) (0.1) -
Collateralized debt obligations, collateralized loan obligations
14.9 (1.2) (2.5) (3.8) Other 96.1 (3.8) (1.1) 0.4 Preferred stocks
Financial institutions 67.1 (25.1) (9.4) (7.6) Other 33.8 (8.1)
(4.2) (3.4) Total fixed income securities 3,637.4 (271.4) (106.2)
(4.3) Common stocks 2.6 0.3 0.3 (0.5) Derivatives - - - - Total
fixed maturity and equity security investments $3,640.0 $(271.1)
$(105.9) $(4.8) September 30, 2008 Fair Net Unrealized Value Gain
(Loss) BANKING AND FINANCE EXPOSURE Wells Fargo & Company /
Wachovia Corporation $20.4 $(1.8) Bank of America Corporation /
Merrill Lynch & Co., Inc. 19.5 (4.9) JPMorgan Chase & Co.
18.8 (6.2) The Goldman Sachs Group, Inc. 18.3 (4.4) General
Electric Company / GE Capital 18.0 (3.3) Citigroup Inc. 12.1 (2.5)
American Express Company 12.0 (1.5) Morgan Stanley 11.0 (5.4)
Barclays PLC 10.7 (3.3) National Australia Bank Limited 9.6 (0.8)
UBS AG 9.5 (2.8) HSBC North America Holdings Inc. 8.8 (2.4) The
Royal Bank of Scotland plc 6.9 (2.4) All other, 45 issuers 75.1
(15.0) Total $250.7 $(56.7) - 6 - 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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