SPRINGFIELD, Ill., April 29 /PRNewswire-FirstCall/ -- Horace Mann
Educators Corporation (NYSE:HMN) today reported net income of $13.4
million (33 cents per share) for the three months ended March 31,
2009, compared to $14.3 million (34 cents per share) for the same
period in 2008. Included in net income were net realized losses on
securities of $0.8 million ($0.6 million after tax, or 2 cents per
share) for the three months ended March 31, 2009. In the first
quarter of 2008, net income included net realized investment losses
of $2.4 million ($1.6 million after tax, or 4 cents per share). All
per-share amounts are stated on a diluted basis. "Against the
backdrop of continued volatility and uncertainty in the financial
markets, Horace Mann's underlying profit fundamentals remained
strong, producing net income before realized investment gains and
losses of 35 cents per share for the quarter, which included
transition costs, totaling approximately 8 cents per share, related
to our property and casualty claims office consolidation and
distribution strategy initiatives," said Louis G. Lower II,
President and Chief Executive Officer. "For the current accident
year and excluding catastrophes, our property and casualty combined
ratio of approximately 94 percent for the quarter was about two and
a half percentage points higher than the prior year period,
reflecting a combined 3.3 percentage point increase in the loss
adjustment and underwriting expense ratios related to the claims
and distribution initiatives. In addition, excluding the impacts of
the valuation of deferred policy acquisition costs and change in
the guaranteed minimum death benefit reserve, combined annuity and
life segment pretax earnings increased slightly compared to prior
year results," continued Lower. "Meanwhile, compared to first
quarter 2008, average agent productivity continued to improve in
our lead auto and annuity lines, in spite of the difficult
competitive and economic environments." Segment Earnings The
property and casualty segment recorded net income of $12.4 million
for the quarter, a decrease of $0.6 million compared to the same
period in 2008, including $4.4 million of pretax charges related to
the claims office consolidation and distribution initiatives.
Pretax catastrophe costs in the current quarter were $4.5 million
compared to $5.4 million incurred in the first quarter of 2008. The
first quarter 2009 property and casualty combined ratio was 94.6
percent, including 3.3 percentage points due to catastrophe costs,
compared to 93.5 percent, including 4.1 percentage points due to
catastrophe costs, in the prior year period. Favorable prior years'
reserve development totaling $3.4 million was recorded in the first
quarter, which represented 2.5 percentage points on the combined
ratio, compared to $2.7 million, or 2.0 percentage points on the
combined ratio, recorded in the first quarter of 2008. Annuity
segment net income was $1.2 million for the three months ended
March 31, 2009, reflecting a decrease of $1.8 million compared to
the same period in 2008. For the current period, financial market
performance over the past 12 months adversely affected the level of
charges and fees earned on variable contract deposits compared to
the prior year. In the first quarter, the negative market
performance also had an adverse impact on both the valuation of
annuity deferred policy acquisition costs and the level of
guaranteed minimum death benefit reserves. The interest margin
earned on fixed annuity assets was slightly higher in the current
quarter compared to a year earlier. "While financial market
performance once again negatively impacted our variable annuity
earnings, our fixed annuity business, which represents over 70
percent of our annuity account values, continued to perform
consistently with our expectations," noted Lower. "Further, total
annuity net fund flows were positive in the quarter, as they were
throughout 2008, and total cash value persistency of nearly 94
percent increased about 2 percentage points compared to a year
earlier." Life segment net income of $3.4 million for the first
quarter increased $0.8 million compared to the same period in 2008,
reflecting growth in investment income and a decrease in mortality
costs. Life persistency remained in excess of 94 percent. Segment
Revenues The company's total premiums written and contract deposits
declined a modest 1 percent compared to the first quarter of 2008,
primarily reflecting decreases in annuity deposit receipts in the
current period. Total property and casualty premiums written
increased 2 percent compared to the first three months of 2008,
primarily reflecting increases in average property and auto
premiums per policy. Annuity new contract deposits received
decreased 7 percent compared to the three months ended March 31,
2008. Scheduled, flexible-premium annuity deposit receipts
decreased 15 percent compared to the prior year, while rollover
deposits increased 12 percent compared to the first quarter of
2008. Life segment insurance premiums and contract deposits
decreased slightly compared to the prior year. Sales and
Distribution For the three months ended March 31, 2009, total new
auto sales units were 5 percent lower in the current period than in
the prior year. "In spite of the adverse prior year comparison in
total units, average agent true new auto productivity increased in
the current period," said Lower. Flexible premium annuity sales
increased nearly 100 percent in the quarter compared to the prior
year. Coupled with growth of 30 percent in single premium rollover
deposits, including both Horace Mann and partner company products,
total annuity sales increased 50 percent compared to the first
three months of 2008. "Horace Mann has approved annuity payroll
reduction capabilities in approximately one-third of the 15,500
public school districts in the United States and maintained that
position through the 2008 transition to new IRS 403(b) regulations.
This access will continue to benefit the Company's marketing
opportunities," said Lower. While the 675 Horace Mann agents at
March 31, 2009 reflected an 11 percent decrease compared to a year
earlier, the number of agents increased in the current quarter,
reversing a two-year period of decline during the early stages of
the company's transition to its Agency Business Model. Including
412 licensed producers who work for the agents, Horace Mann's total
points of distribution increased to 1,087, a growth of 4 percent
over a year earlier. "We are encouraged by the increase in the
number of agents in the first quarter. Based on current trends, we
anticipate surpassing prior year's agent count by the end of the
third quarter. That expectation, coupled with the positive impact
on agent productivity of our new agency business model and the
recent enhancements made to our field sales management structure,
bodes well for Horace Mann's future growth prospects," said Lower.
Investment Gains and Losses In the first quarter of 2009, pretax
net realized investment losses were $0.8 million, which were
comprised of $13.4 million of impairment write-downs, primarily
below investment grade perpetual preferred stocks; $1.6 million of
realized impairment losses on securities that were disposed of
during the quarter, primarily high-yield investments; and $2.4
million of impairments on securities that the company no longer
intends to hold until the value fully recovers, primarily
high-yield bonds. These amounts were largely offset by $16.6
million of realized gains on security sales. Net unrealized
investment losses on fixed maturity and equity securities continued
to be under pressure in the first quarter, and Horace Mann's March
31, 2009 balance of $359.6 million increased compared to the $327.2
million level recorded at the end of 2008. "With credit spreads for
some asset classes widening further during the first quarter, on
top of unprecedented December 31 levels, it remains our considered
judgment that our unrealized balance continues in large part to
reflect 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 structured securities, coupled with the
credit enhancement of the existing TARP program and the ongoing
commitments of the United States and European governments to
support most of our financial institution holdings, and the overall
quality and performance of our CMBS holdings, we remain comfortable
with the underlying credit quality of our investment 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 Annual
Report on Form 10-K for the year ended December 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) Three Months Ended
March 31, --------- 2009 2008 % Change ---- ---- -------- DIGEST OF
EARNINGS ------------------ Net income $13.4 $14.3 -6.3% Net income
per share: Basic $0.34 $0.35 -2.9% Diluted $0.33 $0.34 -2.9%
Weighted average number of shares and equivalent shares (in
millions) (A): Basic 39.2 41.1 -4.6% Diluted 40.4 42.1 -4.0%
HIGHLIGHTS ---------- Operations ---------- Insurance premiums
written and contract deposits $221.3 $224.6 -1.5% Return on equity
(B) 1.9% 11.0% N.M. Property & Casualty GAAP combined ratio
94.6% 93.5% N.M. Effect of catastrophe costs on the Property &
Casualty combined ratio 3.3% 4.1% N.M. Dedicated agents (C) 675 758
-10.9% Licensed producers (D) 412 284 45.1% Total points of
distribution 1,087 1,042 4.3% Additional Per Share Information
-------------------------------- Dividends paid $0.0525 $0.105
-50.0% Book value (E) $11.35 $15.82 -28.3% Financial Position
------------------ Total assets $5,526.4 $6,080.3 -9.1% Short-term
debt 38.0 - N.M. Long-term debt 199.6 199.5 0.1% Total
shareholders' equity 444.7 642.7 -30.8% N.M. - Not meaningful. (A)
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. (B)
Based on trailing 12-month net income and average quarter-end
shareholders' equity. (C) Agents under contract with the Company to
market only the Company's products and limited additional
third-party vendor products authorized by the Company. (D) Includes
licensed producers working in dedicated agents' offices and
excludes independent agents. (E) Book value per share excluding the
fair value adjustment for investments was $16.43 at March 31, 2009
and $16.66 at March 31, 2008. Ending shares outstanding were
39,169,009 at March 31, 2009 and 40,623,637 at March 31, 2008. -1-
HORACE MANN EDUCATORS CORPORATION Statements of Operations and
Supplemental GAAP Consolidated Data (Unaudited) (Dollars in
Millions) Three Months Ended March 31, --------- 2009 2008 % Change
---- ---- -------- STATEMENTS OF OPERATIONS
------------------------ Insurance premiums and contract charges
earned $162.5 $162.5 - Net investment income 57.9 56.6 2.3% Net
realized investment losses (0.8) (2.4) N.M. Other income 2.9 2.6
11.5% Total revenues 222.5 219.3 1.5% Benefits, claims and
settlement expenses 107.8 106.9 0.8% Interest credited 33.7 32.1
5.0% Policy acquisition expenses amortized 23.0 21.0 9.5% Operating
expenses 35.7 34.8 2.6% Amortization of intangible assets 0.2 1.2
-83.3% Interest expense 3.5 3.4 2.9% Total benefits, losses and
expenses 203.9 199.4 2.3% Income before income taxes 18.6 19.9
-6.5% Income tax expense 5.2 5.6 -7.1% Net income $13.4 $14.3 -6.3%
ANALYSIS OF PREMIUMS WRITTEN AND CONTRACT DEPOSITS
------------------------------------ Property & Casualty
Automobile and property (voluntary) $128.2 $126.6 1.3% Involuntary
and other property & casualty 0.9 0.2 350.0% Total Property
& Casualty 129.1 126.8 1.8% Annuity deposits 68.7 73.9 -7.0%
Life 23.5 23.9 -1.7% Total $221.3 $224.6 -1.5% ANALYSIS OF SEGMENT
NET INCOME (LOSS) ------------------------------------- Property
& Casualty $12.4 $13.0 -4.6% Annuity 1.2 3.0 -60.0% Life 3.4
2.6 30.8% Corporate and other (A) (3.6) (4.3) -16.3% Net income
13.4 14.3 -6.3% Catastrophe costs, after tax, included above (B)
(2.9) (3.5) -17.1% 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) Three
Months Ended March 31, --------- 2009 2008 % Change ---- ----
-------- PROPERTY & CASUALTY ------------------- Premiums
written $129.1 $126.8 1.8% Premiums earned 135.0 133.0 1.5% Net
investment income 8.3 9.2 -9.8% Other income 1.4 0.6 133.3% Losses
and loss adjustment expenses (LAE) 93.6 91.7 2.1% Operating
expenses (includes policy acquisition expenses amortized) 34.2 32.7
4.6% Income before tax 16.9 18.4 -8.2% Net income 12.4 13.0 -4.6%
Net investment income, after tax 7.0 7.7 -9.1% Catastrophe costs,
after tax (A) 2.9 3.5 -17.1% Catastrophe losses and LAE, before tax
4.5 5.4 -16.7% Reinsurance reinstatement premiums, before tax - - -
Operating statistics: Loss and loss adjustment expense ratio 69.3%
69.0% N.M. Expense ratio 25.3% 24.5% N.M. Combined ratio 94.6%
93.5% N.M. Effect on the combined ratio of: Catastrophe costs 3.3%
4.1% N.M. Claims office consolidation costs (all in LAE) 2.3% -
N.M. Automobile and property detail: Premiums written (voluntary)
(B) $128.2 $126.6 1.3% Automobile 92.9 91.8 1.2% Property 35.3 34.8
1.4% Premiums earned (voluntary) (B) 134.4 133.3 0.8% Automobile
91.7 90.9 0.9% Property 42.7 42.4 0.7% Policies in force
(voluntary) (in thousands) 795 799 -0.5% Automobile 532 534 -0.4%
Property 263 265 -0.8% Policy renewal rate (voluntary) Automobile
(6 months) 91.1% 90.8% N.M. Property (12 months) 88.8% 88.6% N.M.
Voluntary automobile operating statistics: Loss and loss adjustment
expense ratio 70.6% 71.2% N.M. Expense ratio 25.8% 24.3% N.M.
Combined ratio 96.4% 95.5% N.M. Effect on the combined ratio of:
Catastrophe costs 0.5% 0.4% N.M. Claims office consolidation costs
(all in LAE) 2.7% - N.M. Total property operating statistics: Loss
and loss adjustment expense ratio 66.8% 66.0% N.M. Expense ratio
24.2% 24.9% N.M. Combined ratio 91.0% 90.9% N.M. Effect on the
combined ratio of: Catastrophe costs 9.5% 12.1% N.M. Claims office
consolidation costs (all in LAE) 1.5% - N.M. Prior years' reserves
favorable (adverse) development, pretax Voluntary automobile $2.5
$1.3 92.3% Total property 0.4 0.4 - Other property and casualty 0.5
1.0 -50.0% Total 3.4 2.7 25.9% 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) Three Months Ended March
31, --------- 2009 2008 % Change ---- ---- -------- ANNUITY -------
Contract deposits $68.7 $73.9 -7.0% Variable 26.2 35.6 -26.4% Fixed
42.5 38.3 11.0% Contract charges earned 3.2 4.7 -31.9% Net
investment income 34.8 33.1 5.1% Net interest margin (without
realized investment gains and losses) 10.8 10.5 2.9% Other income
0.8 1.3 -38.5% Mortality loss and other reserve changes (0.6) (0.5)
20.0% Operating expenses (includes policy acquisition expenses
amortized) 12.5 11.5 8.7% Amortization of intangible assets - 0.9
-100.0% Income before tax 1.7 3.6 -52.8% Net income 1.2 3.0 -60.0%
Pretax income increase (decrease) due to valuation of: Deferred
policy acquisition costs $(3.0) $(2.3) 30.4% Value of acquired
insurance in force - 0.1 -100.0% Guaranteed minimum death benefit
reserve (0.5) (0.1) 400.0% Annuity contracts in force (in
thousands) 175 168 4.2% Accumulated value on deposit $3,221.8
$3,572.3 -9.8% Variable 884.3 1,392.8 -36.5% Fixed 2,337.5 2,179.5
7.2% Annuity accumulated value retention - 12 months Variable
accumulations 93.1% 91.3% N.M. Fixed accumulations 93.9% 91.9% N.M.
LIFE ---- Premiums and contract deposits $23.5 $23.9 -1.7% Premiums
and contract charges earned 24.3 24.8 -2.0% Net investment income
15.0 14.6 2.7% Income before tax 5.4 4.4 22.7% Net income 3.4 2.6
30.8% Pretax income increase (decrease) due to valuation of:
Deferred policy acquisition costs $(0.1) $- N.M. Life policies in
force (in thousands) 220 226 -2.7% Life insurance in force $13,651
$13,597 0.4% Lapse ratio - 12 months (Ordinary life insurance) 5.5%
5.7% N.M. CORPORATE AND OTHER (A) -----------------------
Components of loss before tax: Net realized investment losses
$(0.8) $(2.4) N.M. Interest expense (3.5) (3.4) 2.9% Other
operating expenses, net investment income and other income (1.1)
(0.7) 57.1% Loss before tax (5.4) (6.5) N.M. Net loss (3.6) (4.3)
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) Three Months Ended March 31,
--------- 2009 2008 % Change ---- ---- -------- INVESTMENTS
----------- Annuity and Life Fixed maturities, at fair value
(amortized cost 2009, $3,025.0; 2008, $3,103.8) $2,713.9 $3,060.5
-11.3% Equity securities, at fair value (cost 2009, $50.8; 2008,
$52.4) 31.4 46.0 -31.7% Short-term investments 300.7 120.3 150.0%
Short-term investments, securities lending collateral - 70.5
-100.0% Policy loans and other 110.1 103.4 6.5% ----- ----- Total
Annuity and Life investments 3,156.1 3,400.7 -7.2% Property &
Casualty Fixed maturities, at fair value (amortized cost 2009,
$681.6; 2008, $710.1) 658.5 705.7 -6.7% Equity securities, at fair
value (cost 2009, $21.9; 2008, $41.8) 15.9 38.2 -58.4% Short-term
investments 43.8 11.5 280.9% Short-term investments, securities
lending collateral - - - --- --- Total Property & Casualty
investments 718.2 755.4 -4.9% Corporate investments 23.6 0.1 N.M.
Total investments 3,897.9 4,156.2 -6.2% Net investment income
Before tax $57.9 $56.6 2.3% After tax 39.1 38.5 1.6% Net realized
investment gains (losses) by investment portfolio included in
Corporate and Other segment income (loss) Property & Casualty
$(8.2) $(0.2) N.M. Annuity 4.1 (3.4) N.M. Life 3.3 1.2 175.0%
Corporate and Other - - - --- --- Total, before tax (0.8) (2.4)
-66.7% Total, after tax (0.6) (1.6) -62.5% Per share, diluted
$(0.02) $(0.04) -50.0% N.M. - Not meaningful. -5- HORACE MANN
EDUCATORS CORPORATION Supplemental Business Segment Overview
(Unaudited) (Dollars in Millions) December 31, June 30, December
31, March 31, 2009 2008 2008 2007 --------------- ----------
--------- ----------- Net Net Unrealized Net Unrealized Net Fair
Gain Unrealized Gain Unrealized Value (Loss) Gain (Loss) (Loss)
Gain (Loss) ------ --------- ---------- --------- ----------- FIXED
MATURITY & EQUITY SECURITY INVESTMENTS Fixed income securities
U.S. government and federally sponsored agency bonds $122.9 $3.4
$4.9 $0.8 $2.3 Municipal bonds 617.2 (3.7) (14.1) (5.1) 6.0
Corporate bonds Financial institutions 188.0 (35.3) (19.9) (13.5)
(3.0) Other 1,373.2 (140.0) (122.6) (34.1) 11.0 High yield 132.9
(28.0) (38.0) (9.5) (4.6) Foreign government bonds 8.0 (0.1) 0.5
0.9 1.5 Mortgage-backed securities Prime agency 512.3 21.2 20.5
(2.3) 1.9 Prime other 15.9 (0.2) (0.6) (1.6) 0.5 Sub-prime, Alt-A
6.6 (0.9) (0.7) (0.6) (0.1) Commercial mortgage-backed securities
238.5 (115.8) (108.6) (23.9) (5.4) Asset-backed securities
Sub-prime, Alt-A 3.3 (0.1) 0.1 (0.1) - Collateralized debt
obligations, collateralized loan obligations 15.1 (4.7) (0.4) (2.5)
(3.8) Other 105.7 (8.3) (8.5) (1.1) 0.4 Preferred stocks Financial
institutions 49.0 (34.2) (29.8) (9.4) (7.6) Other 29.9 (12.5)
(10.0) (4.2) (3.4) ---- ----- ----- ---- ---- Total fixed income
securities 3,418.5 (359.3) (327.2) (106.2) (4.3) Common stocks 1.2
(0.3) - 0.3 (0.5) Derivatives - - - - - ---- ----- ----- ---- ----
Total fixed maturity and equity security investments $3,419.7
$(359.6) $(327.2) $(105.9) $(4.8) ======== ======= ======= =======
===== -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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