Horace Mann Reports Results for First Quarter
May 05 2004 - 4:27PM
PR Newswire (US)
Horace Mann Reports Results for First Quarter SPRINGFIELD, Ill.,
May 5 /PRNewswire-FirstCall/ -- Horace Mann Educators Corporation
today reported net income of $21.7 million (51 cents per share) for
the three months ended March 31, 2004, compared to net income of
$8.1 million (19 cents per share) for the same period in 2003.
Included in current quarter net income were net realized gains on
securities of $5.3 million ($3.4 million after tax, or 8 cents per
share), compared to net realized losses of $4.7 million ($3.1
million after tax, or 7 cents per share) for the same period a year
earlier. All per-share amounts are stated on a diluted basis.
"Horace Mann had a strong first quarter," said Louis G. Lower II,
President and Chief Executive Officer. "We are particularly
encouraged by the improvement in the earnings of our property and
casualty segment, which was driven by favorable non-catastrophe
frequency trends for automobile and property claims and a
relatively low level of catastrophe losses, along with no adverse
development of prior years' reserves." "Similar to much of the
industry, Horace Mann benefited in the quarter from favorable
weather and underlying frequency trends. However, our property and
casualty combined ratio improvement was also the result of
aggressive underwriting and pricing actions taken over the last
several quarters, continued improvements in claims processes and
procedures, and the positive effect of cost containment initiatives
on both claims and underwriting expenses," Lower added. Net income
for the property and casualty segment improved $6.5 million
compared to a year earlier due primarily to the factors cited
above. Net income for the annuity segment increased $1.6 million
compared to the first quarter of 2003, driven by growth in contract
fees and favorable adjustments from the March 31, 2004 valuations
of the value of acquired insurance in force, deferred policy
acquisition costs and guaranteed minimum death benefit reserves
compared to unfavorable adjustments from similar valuations a year
earlier. Life segment net income decreased $0.7 million compared to
the first quarter of 2003 due primarily to a decline in group
insurance earnings, lower investment income and valuation of
deferred policy acquisition costs. The company's premiums written
and contract deposits increased 11 percent compared to the prior
year, reflecting significant growth in new annuity deposits and
rate increases in the property and automobile lines. While life
segment insurance premiums and contract deposits decreased slightly
compared to the first quarter of 2003, total life annualized new
sales, including partner products, increased 16 percent. New
annuity deposits in the first quarter increased 31 percent over the
prior year due to growth in new single premium and rollover
deposits. In addition, the 12-month retention ratio for fixed and
variable accumulated annuity deposits improved to approximately 95
and 93 percent, respectively. Total new annuity sales increased 77
percent compared to the first quarter of 2003, including growth of
35 percent in new sales by Horace Mann agents. Annuity production
from independent agents was comparable to the fourth quarter of
2003 and seven times the level produced in the first quarter of
2003. "We plan to continue leveraging the independent agent channel
as a key source for growth in our annuity business, but with
greater emphasis on variable deposits to improve overall returns in
today's low interest rate environment," Lower commented. Horace
Mann's career agency force totaled 830 agents at March 31, 2004.
"While the total number of agents declined compared to a year ago,
the number of experienced agents held steady, average agent
productivity increased more than 20 percent compared to the first
quarter of 2003, and annualized new sales by the career agency
force increased 17 percent," Lower said. Horace Mann -- the largest
national multiline insurance company focusing on educators'
financial needs -- provides retirement annuities, life insurance,
property/casualty insurance, and other financial solutions. Founded
by educators for educators in 1945, the company is headquartered in
Springfield, Ill. Horace Mann is publicly traded on the New York
Stock Exchange as HMN. 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 undertakes no obligation to publicly update or revise any
forward-looking statements, whether as the result of new
information, future events or otherwise. Information concerning
factors that could cause actual results to differ materially from
those in forward-looking statements is contained from time to time
in the company's public filings with the Securities and Exchange
Commission. HORACE MANN EDUCATORS CORPORATION Digest of Earnings
and Highlights (Dollars in Millions, Except Per Share Data) Three
Months Ended March 31, 2004 2003 % Change DIGEST OF EARNINGS Net
income $21.7 $8.1 167.9% Net income per share: Basic $0.51 $0.19
168.4% Diluted $0.51 $0.19 168.4% Weighted average number of shares
and equivalent shares: Basic 42.7 42.7 Diluted 42.9 42.9 HIGHLIGHTS
Operations Insurance premiums written and contract deposits $244.8
$219.6 11.5% Return on equity (A) 5.9% 0.8% Property & Casualty
GAAP combined ratio 93.5% 99.5% Property & Casualty GAAP
combined ratio before catastrophes 92.6% 97.9% Experienced agents
496 497 -0.2% Financed agents 334 387 -13.7% Total agents 830 884
-6.1% Additional Per Share Information Dividends paid $0.105 $0.105
- Book value (B) $13.50 $12.73 6.0% Financial Position Total assets
$5,519.0 $4,907.8 12.5% Short-term debt 25.0 - Long-term debt 144.7
144.7 Total shareholders' equity 576.5 543.5 6.1% (A) Based on
12-month net income and average quarter-end shareholders' equity.
(B) Before the market value adjustment for investments, book value
per share was $10.91 at March 31, 2004 and $10.59 at March 31,
2003. Ending shares outstanding were 42,722,701 at March 31, 2004,
42,721,940 at December 31, 2003 and 42,701,528 at March 31, 2003. -
1 - HORACE MANN EDUCATORS CORPORATION Statements of Operations and
Supplemental GAAP Consolidated Data (Dollars in Millions) Three
Months Ended March 31, 2004 2003 % Change STATEMENTS OF OPERATIONS
Insurance premiums written and contract deposits $244.8 $219.6
11.5% Insurance premiums and contract charges earned $167.6 $158.3
5.9% Net investment income 48.6 47.5 2.3% Realized investment gains
(losses) 5.3 (4.7) Total revenues 221.5 201.1 10.1% Benefits,
claims and settlement expenses 111.5 110.9 Interest credited 26.4
25.4 Policy acquisition expenses amortized 16.4 17.1 Operating
expenses 33.6 33.6 - Amortization of intangible assets 1.3 1.6
Interest expense 1.7 1.6 Total benefits, losses and expenses 190.9
190.2 0.4% Income before income taxes 30.6 10.9 180.7% Income tax
expense 8.9 2.8 Net income $21.7 $8.1 167.9% ANALYSIS OF PREMIUMS
WRITTEN AND CONTRACT DEPOSITS Property & Casualty Automobile
and property (voluntary) $134.0 $128.5 4.3% Involuntary and other
property & casualty 0.7 0.1 Total Property & Casualty 134.7
128.6 4.7% Annuity deposits 84.2 64.3 30.9% Life 25.9 26.7 -3.0%
Total $244.8 $219.6 11.5% ANALYSIS OF NET INCOME Property &
Casualty Before catastrophes $13.9 $8.0 73.8% Catastrophe losses,
after tax (0.8) (1.4) Total Property & Casualty 13.1 6.6 98.5%
Annuity 3.9 2.3 69.6% Life 3.1 3.8 -18.4% Corporate and other (A)
1.6 (4.6) Net income 21.7 8.1 167.9% (A) The Corporate and Other
segment includes interest expense on debt and the impact of
realized investment gains and losses and other reconciling items to
net income. The Company does not allocate the impact of corporate
level transactions to the insurance segments consistent with
management's evaluation of the results of those segments. See
detail for this segment on page 4. - 2 - HORACE MANN EDUCATORS
CORPORATION Supplemental Business Segment Overview (Dollars in
Millions) Three Months Ended March 31, 2004 2003 % Change PROPERTY
& CASUALTY Premiums written $134.7 $128.6 4.7% Premiums earned
139.6 131.6 6.1% Net investment income 8.8 8.2 7.3% Losses and loss
adjustment expenses 99.6 99.3 Operating expenses (includes policy
acquisition expenses amortized) 31.3 31.8 -1.6% Income before tax
17.5 8.7 Net income 13.1 6.6 98.5% Net investment income, after tax
7.3 6.6 10.6% Catastrophe losses, after tax 0.8 1.4 GAAP operating
statistics: Loss and loss adjustment expense ratio 71.3% 75.5%
Expense ratio 22.2% 24.0% Combined ratio 93.5% 99.5% Combined ratio
before catastrophes 92.6% 97.9% Automobile and property detail:
Premiums written (voluntary) $134.0 $128.5 4.3% Automobile 102.3
98.6 3.8% Property 31.7 29.9 6.0% Premiums earned (voluntary)
$137.5 $129.4 6.3% Automobile 100.2 95.2 5.3% Property 37.3 34.2
9.1% Policies in force (voluntary) (in thousands) 843 852 -1.1%
Automobile 565 571 -1.1% Property 278 281 -1.1% Voluntary
automobile GAAP operating statistics: Loss and loss adjustment
expense ratio 73.4% 76.3% Expense ratio 22.0% 23.3% Combined ratio
95.4% 99.6% Combined ratio before catastrophes 95.3% 99.4% Total
property GAAP operating statistics: Loss and loss adjustment
expense ratio 60.0% 74.1% Expense ratio 22.4% 26.0% Combined ratio
82.4% 100.1% Combined ratio before catastrophes 79.4% 94.4% Prior
years' reserves favorable (adverse) development, pretax Voluntary
automobile $- $(5.6) Total property - 0.4 Other property and
casualty - 0.9 Total - (4.3) - 3 - HORACE MANN EDUCATORS
CORPORATION Supplemental Business Segment Overview (Dollars in
Millions) Three Months Ended March 31, 2004 2003 % Change ANNUITY
Contract deposits $84.2 $64.3 30.9% Variable 31.2 24.2 28.9% Fixed
53.0 40.1 32.2% Contract charges earned 4.2 3.2 31.3% Net
investment income 27.4 26.5 3.4% Net interest margin (without
realized gains) 9.1 8.8 3.4% Net margin (includes fees and contract
charges earned) 13.8 12.4 11.3% Mortality gain (loss) and other
reserve changes (0.1) (0.5) Operating expenses (includes policy
acquisition expenses amortized) 7.0 7.4 -5.4% Income before tax and
amortization of intangible assets 6.7 4.5 48.9% Amortization of
intangible assets 0.9 1.2 Income before tax 5.8 3.3 Net income 3.9
2.3 69.6% Pretax income increase (decrease) due to valuation of:
Deferred policy acquisition costs $0.4 $(0.7) Value of acquired
insurance in force - (0.3) Guaranteed minimum death benefit reserve
0.1 (0.2) Annuity contracts in force (in thousands) 154 148 4.1%
Accumulated value on deposit $2,831.5 $2,399.4 18.0% Variable
1,137.5 859.3 32.4% Fixed 1,694.0 1,540.1 10.0% Annuity accumulated
value retention - 12 months Variable accumulations 92.9% 91.9%
Fixed accumulations 95.2% 94.2% LIFE Premiums and contract deposits
$25.9 $26.7 -3.0% Premiums and contract charges earned 23.8 23.5
1.3% Net investment income 12.7 13.0 -2.3% Income before tax 4.8
5.9 Net income 3.1 3.8 -18.4% Pretax income increase (decrease) due
to valuation of: Deferred policy acquisition costs $(0.1) $0.2 Life
policies in force (in thousands) 256 267 -4.1% Life insurance in
force (in millions) $13,272 $13,259 0.1% Lapse ratio - 12 months
(Ordinary life insurance) 7.2% 9.1% CORPORATE AND OTHER (A)
Components of gain (loss) before tax: Realized investment gains
(losses) $5.3 $(4.7) Interest expense (1.7) (1.6) Other operating
expenses (1.1) (0.7) Gain (loss) before tax 2.5 (7.0) Net gain
(loss) 1.6 (4.6) (A) The Corporate and Other segment includes
interest expense on debt and the impact of realized investment
gains and losses and other reconciling items to net income. The
Company does not allocate the impact of corporate level
transactions to the insurance segments consistent with management's
evaluation of the results of those segments. - 4 - HORACE MANN
EDUCATORS CORPORATION Supplemental Business Segment Overview
(Dollars in Millions) Three Months Ended March 31, 2004 2003 %
Change INVESTMENTS Annuity and Life Fixed maturities, at market
(amortized cost 2004, $2,522.6; 2003, $2,352.0) $2,682.1 $2,475.0
Short-term investments 59.4 31.9 Short-term investments, securities
lending collateral 385.9 370.1 Policy loans and other 79.8 74.7
Total Annuity and Life investments 3,207.2 2,951.7 8.7% Property
& Casualty Fixed maturities, at market (amortized cost 2004,
$634.5; 2003, $570.4) 656.8 597.5 Short-term investments 41.1 11.4
Short-term investments, securities lending collateral 0.9 4.4 Other
0.7 0.7 Total Property & Casualty investments 699.5 614.0 13.9%
Corporate investments 0.6 0.8 Total investments 3,907.3 3,566.5
9.6% Net investment income Before tax $48.6 $47.5 2.3% After tax
33.2 32.2 3.1% Realized investment gains (losses) by investment
portfolio included in Corporate and Other segment income Property
& Casualty $2.3 $(1.3) Annuity 2.1 (0.4) Life 0.9 (3.0)
Corporate and Other - - Total, before tax 5.3 (4.7) Total, after
tax 3.4 (3.1) Per share, diluted $0.08 $(0.07) OTHER INFORMATION
End of period goodwill asset $47.4 $47.4 Property and casualty net
reserves as of: March 31, 2004 $326.9 December 31, 2003 320.9
September 30, 2003 308.0 June 30, 2003 285.4 March 31, 2003 275.7
December 31, 2002 272.6 December 31, 2001 272.0 December 31, 2000
249.8 December 31, 1999 235.4 - 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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