- Fourth-quarter 2019 net income of $0.78 per share and core
earnings* of $0.75 per share
- Full-year 2019 net income at $4.40 per share and core
earnings* up three-fold to $2.20 per share
- Net income up significantly more than core earnings due to
second-quarter 2019 after-tax realized investment gains; core
earnings exceeded management guidance
- Strong operating results reflected anticipated improvement in
underlying profitability of Property and Casualty segment and
catastrophe losses well below prior year; improved margins in
Retirement segment; and contribution of new Supplemental
segment
- Book value per share up 21%; book value per share excluding
unrealized gains rose 11%
- Expects full-year 2020 core EPS* to increase approximately
20% and core ROE* above 8% as company continues integration of
Supplemental business
Horace Mann Educators Corporation (NYSE:HMN) today reported
financial results for the quarter and full-year ended December 31,
2019:
Horace Mann Consolidated
Financial Highlights
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions, except per share
amounts)
2019
2018
$ Change
2019
2018
$ Change
Total revenues
$
331.4
$
278.5
$
52.9
$
1,430.5
$
1,191.6
$
238.9
Net income
33.0
(20.3
)
53.3
184.4
18.3
166.1
Net investment gains (losses) after
tax
1.3
(11.6
)
12.9
120.2
(10.1
)
130.3
Goodwill impairment
—
—
—
(28.0
)
—
(28.0
)
Core earnings*
31.7
(8.7
)
40.4
92.2
28.4
63.8
Per diluted share:
Net income
0.78
(0.49
)
1.27
4.40
0.44
3.96
Net investment gains (losses) after
tax
0.03
(0.28
)
0.31
2.87
(0.24
)
3.11
Goodwill impairment
—
—
—
(0.67
)
—
(0.67
)
Core earnings per diluted share*
0.75
(0.21
)
0.96
2.20
0.68
1.52
Book value per share
38.01
31.50
6.51
Book value per share excluding net
unrealized
investment gains on fixed maturity
securities*
32.42
29.13
3.29
N.M. - Not meaningful. * These measures are not based on
accounting principles generally accepted in the United States
(non-GAAP). They are reconciled to the most directly comparable
GAAP measures in the Appendix to the Investor Supplement. An
explanation of these measures is contained in the Glossary of
Selected Terms included as an exhibit in the Company’s reports
filed with the Securities and Exchange Commission.
“I’m very proud of the Horace Mann team and the results we
achieved in 2019,” said President and CEO Marita Zuraitis. “As we
celebrate the company’s 75th anniversary in 2020, we are
successfully implementing our strategic initiatives and have set
the stage to further our corporate vision. We look forward to
leveraging our market leadership position to serve the financial
needs of even more educators. Deepening our market penetration will
lead to accelerated shareholder value creation and achievement of
our long-term objective of a double-digit return on equity.”
Summarizing the highlights of 2019’s performance, Zuraitis said,
“The year marked the culmination of a multi-year effort to
substantially improve profitability in our Property and Casualty
segment. For the year, the segment’s combined ratio of 96.5% was
the best full-year result since 2015, and we surpassed our goal for
improvement in our auto underlying loss ratio. The transaction that
reinsured a block of legacy annuity business greatly reduced the
Retirement segment’s exposure to declining interest rates and freed
up capital used to acquire the higher-margin Supplemental business
in July. The new Supplemental segment allows us to provide an
expanded suite of in-demand solutions for our educator customers,
while at the same time diversifying our sales and earnings results
to reduce volatility. The Supplemental segment added 43 cents to
2019’s core EPS.”
“In 2020, we expect to build on 2019’s successes with about 20%
growth in core EPS to the range of $2.55 to $2.75, despite the
challenging interest rate environment and presuming Property and
Casualty catastrophe losses are at a similar level to 2019. Our
2020 results will reflect a full-year contribution from the
Supplemental segment and a lower cost structure due to synergies
and our expense reduction efforts,” Zuraitis continued. “Core ROE
should be above 8% for the full year, which reflects continued
progress toward our double-digit objective.”
Fourth-quarter 2019 results included $4.1 million, or $0.08 per
share, for severance charges resulting from previously announced
expense reduction initiatives. These expense synergies and
efficiency projects are expected to reduce the annual operating
expense run-rate in 2020 and beyond by at least $15 million.
Property and Casualty Segment Full-Year Combined Ratio at
96.5%; Underlying Auto Loss Ratio Improved 4.0 Points; Catastrophe
Losses Far Below 2018 Level (All comparisons vs. same period in
2018, unless noted otherwise)
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions)
2019
2018
Change
2019
2018
Change
Property and Casualty written
premiums*
$
164.6
$
166.4
-1.1
%
$
683.1
$
681.5
0.2
%
Property and Casualty net income / core
earnings*
20.0
(9.9
)
N.M.
54.3
(14.3
)
N.M.
Property and Casualty combined ratio
90.3
%
113.3
%
-23.0
pts
96.5
%
109.3
%
-12.8
pts
Property and Casualty underlying loss
ratio*
60.3
%
59.3
%
1.0
pts
63.1
%
65.5
%
-2.4
pts
Property and Casualty expense ratio
27.4
%
28.1
%
-0.7
pts
26.9
%
27.0
%
-0.1
pts
Property and Casualty catastrophe
costs
2.6
%
27.0
%
-24.4
pts
7.6
%
17.1
%
-9.5
pts
Property and Casualty underlying combined
ratio*
87.7
%
86.3
%
+1.4
pts
90.0
%
92.2
%
-2.2
pts
Auto combined ratio
99.7
%
102.2
%
-2.5
pts
97.6
%
103.1
%
-5.5
pts
Auto underlying loss ratio*
71.9
%
72.8
%
-0.9
pts
70.6
%
74.6
%
-4.0
pts
Property combined ratio
71.5
%
139.8
%
-68.3
pts
94.2
%
123.1
%
-28.9
pts
Property underlying loss ratio*
37.1
%
30.7
%
+6.4
pts
47.2
%
46.2
%
+1.0
pts
N.M. - Not meaningful.
For full year 2019, Property and Casualty written premiums were
comparable to 2018, while the combined ratio improved 12.8 points.
This reflected catastrophe costs that were 9.5 points lower than
prior year as well as profitability improvements from underwriting
and rate actions.
Catastrophe costs added 7.6 points to the full-year combined
ratio, in line with the updated estimate management provided after
nine months. Fourth-quarter catastrophe losses were $4.4 million. A
wind and thunderstorm event in Texas in October was the largest of
13 events in the quarter.
The full-year auto combined ratio was 97.6%, improved 5.5 points
over last year and the best result since 2010, largely due to
profitability initiatives. The full-year property combined ratio
was 94.2% due to the significantly lower catastrophe losses.
Auto and property policy retention rates for 2019 were 81.1% and
87.1%, respectively, in line with 2018’s levels.
Supplemental Segment Contributes $18.0 Million to 2019 Core
Earnings
On July 1, 2019, Horace Mann acquired National Teachers
Associates (NTA). As a part of Horace Mann, NTA continues to
provide supplemental insurance products to the education market,
building on nearly 50 years of experience in the sector. NTA
specializes in developing, marketing and underwriting supplemental
insurance products, including cancer, heart, limited supplemental
disability and accident.
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions)
2019
2018
Change
2019
2018
Change
Supplemental sales*
$
4.6
N/A
N/A
$
8.2
N/A
N/A
Earned premiums
32.9
N/A
N/A
65.8
N/A
N/A
Supplemental net income / core
earnings*
11.1
N/A
N/A
18.0
N/A
N/A
Pretax profit margin (1)
37.9
%
N/A
N/A
30.8
%
N/A
N/A
N/A - The acquisition of NTA closed on July 1, 2019. (1)
Measured to total revenues.
Supplemental segment sales were $8.2 million for the third and
fourth quarters of 2019, reflecting steady sales in all product
categories with persistency at 89.3%.
The segment added $18.0 million to core earnings in the second
half of 2019, exceeding management’s guidance of $12 million to $14
million, reflecting favorable reserve changes. The segment’s pretax
profit margin for the second half of the year was 30.8%. Segment
expenses include the non-cash impact of amortization of intangible
assets under purchase accounting that reduces quarterly core
earnings by $6.6 million (pretax).
Retirement Segment Annualized Net Interest Margin Strong
Following Reinsurance Transaction
Effective April 1, 2019, Horace Mann reinsured a block of
approximately $2.9 billion of policy liabilities related to legacy
individual annuities written in 2002 or earlier. The annuity
reinsurance transaction is accounted for under the deposit method.
Under the deposit method of accounting, the consideration paid by
Horace Mann is reported as a deposit asset on reinsurance that is
adjusted consistent with the reinsurance agreement terms, along
with recognizing accreted investment income. Accreted investment
income is calculated based on the ultimate anticipated cash flows
from the annuity reinsurance transaction.
As a result of the transaction, in the second quarter management
impaired $28.0 million of goodwill that had been associated with
the Retirement segment.
(All comparisons vs. same period in 2018, unless noted
otherwise)
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions)
2019
2018
Change
2019
2018
Change
Annuity contract deposits*
$
117.9
$
113.1
4.2
%
$
462.5
$
439.1
5.3
%
Annuity assets under management (1)
4,379.6
6,713.3
-34.8
%
Total assets under administration (2)
8,270.6
7,043.6
17.4
%
Retirement net income (loss)
2.1
4.1
-48.8
%
(4.8
)
41.7
-111.5
%
Retirement core earnings*
2.1
4.1
-48.8
%
23.2
41.7
-44.4
%
Retirement core earnings excluding
DAC unlocking*
2.1
7.1
-70.4
%
26.0
44.8
-42.0
%
N.M. - Not meaningful. (1) Amount reported as of December 31,
2019 excludes $707.8 of assets under management held under modified
coinsurance reinsurance. (2) Includes Annuity AUM, Brokerage and
Advisory AUA, and Recordkeeping AUA.
Reflecting the annuity reinsurance transaction, Horace Mann
currently has $4.4 billion in assets under management, including
$2.1 billion of fixed annuities, $1.8 billion of variable annuities
and $0.5 billion of fixed indexed annuities. Assets under
administration were up 17.4% from year-end 2018 due to the
inclusion of Benefit Consultants Group’s (BCG) advisory and
recordkeeping assets effective January 2, 2019.
Annuity contract deposits continued to grow, increasing 5.3%
over prior year, reflecting positive momentum in retirement
initiatives and in engaging new households. Total cash value
persistency remained strong at 94.7% for variable annuities and
94.0% for fixed annuities.
The annuity reinsurance transaction and redeployment of capital
for the acquisition of NTA were the primary drivers in the decline
in Retirement earnings for the quarter and full year, with results
in line with management’s expectations. Due to the goodwill
impairment, Retirement reported a net loss for the year. Core
earnings excluding DAC unlocking for the year were $26.0 million,
in line with management’s guidance. Fourth-quarter core earnings
excluding DAC unlocking were down sequentially due to higher
expenses, as well as lower alternative investment income and
prepayments compared to the strong third-quarter.
After the annuity reinsurance transaction, the average crediting
rate on traditional fixed annuities is now 2.5% vs. 3.6%
previously. The 194 basis point net interest spread for full-year
2019 includes the 142 basis point net interest spread for the first
quarter, which was prior to the transaction.
Demand for Life Segment Products Remains Strong
(All comparisons vs. same period in 2018, unless noted
otherwise)
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions)
2019
2018
Change
2019
2018
Change
Life sales*
$
4.2
$
6.1
-31.1
%
$
17.9
$
21.2
-15.6
%
Life mortality costs
7.1
9.2
-22.8
%
33.5
35.1
-4.6
%
Life net income / core earnings*
4.0
3.8
5.3
%
17.6
18.8
-6.4
%
Demand remains healthy in the education market for life
products. The number of policies issued increased 2% over prior
year although life sales were lower than the very strong prior year
results primarily because of lower single premium product sales and
the introduction of product with pricing based on the updated
mortality table.
In line with management’s guidance, Life core earnings* were
down slightly for the year due to higher expenses and lower net
investment income, partially offset by lower mortality costs. Life
persistency of 95.4% was unchanged from the prior year period.
Investment Results Impacted by Annuity Reinsurance
Transaction
Total net investment income includes net investment income on
the investment portfolio managed by Horace Mann as well as accreted
investment income on the deposit asset on reinsurance.
(All comparisons vs. same period in 2018, unless noted
otherwise)
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions)
2019
2018
Change
2019
2018
Change
Pretax net investment income - investment
portfolio
$
62.0
$
88.4
-29.9
%
$
294.3
$
376.5
-21.8
%
Pretax investment income - deposit asset
on reinsurance
23.8
—
N.M.
70.8
—
N.M.
Total pretax net investment income
85.8
88.4
-2.9
%
365.1
376.5
-3.0
%
Pretax net investment gains (losses)
1.7
(14.4
)
N.M.
153.3
(12.5
)
N.M.
Pretax net unrealized investment gains
(losses)
on fixed maturity securities
334.7
141.4
136.7
%
Annualized pretax investment portfolio
yield
4.28
%
4.74
%
-0.46
pts
4.44
%
5.12
%
-0.68
pts
N.M. - Not meaningful.
Total net investment income declined 3.0% year-over-year. Net
investment income on the managed portfolio declined sequentially by
$7.2 million, largely due to lower returns on alternative
investments compared to the strong third-quarter level. Accreted
investment income for the deposit asset on reinsurance was
comparable to the third quarter.
Full-year net investment gains included $135.3 million, or
$106.9 million after tax, related to the second-quarter gain on
assets transferred in the annuity reinsurance transaction. Net
unrealized investment gains on fixed maturity securities increased
significantly from last year due to the decline in interest rates,
which has resulted in higher fair values of fixed maturity
securities.
Strong Results Contribute to 11% Growth in Book Value
Excluding Unrealized Investment Gains
At year-end 2019, shareholders’ equity was $1.57 billion, or
$38.01 per share. Excluding net unrealized investment gains on
fixed maturity securities, shareholders’ equity was $1.34 billion,
or $32.42 per share*. The improvement in book value excluding
unrealized investment gains on fixed maturity securities since
year-end 2018 primarily reflected the realized gain on assets
transferred in the annuity reinsurance transaction as well as
strong earnings.
At December 31, 2019, total debt was $433 million with $135
million outstanding on the company’s line of credit. The
debt-to-capital ratio was 24.5%.
Quarterly Webcast
Horace Mann’s senior management will discuss the company’s
fourth quarter financial results with investors on February 6, 2020
at 8:00 a.m. Eastern Time. The conference call will be webcast live
at investors.horacemann.com and
archived later in the day for replay.
About Horace Mann
Horace Mann Educators Corporation (NYSE: HMN) is the largest
financial services company focused on providing America’s educators
and school employees with insurance and retirement solutions.
Founded by Educators for Educators® in 1945, the company is
headquartered in Springfield, Illinois. For more information, visit
horacemann.com.
Safe Harbor Statement and Non-GAAP Measures
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
September 30, 2019 and the company’s past and future filings and
reports filed with the Securities and Exchange Commission (SEC) for
information concerning important factors that could cause actual
results to differ materially from those in forward-looking
statements. Information contained in this news release include
measures which are based on methodologies other than accounting
principles generally accepted in the United States (GAAP).
Reconciliations of non-GAAP measures to the closest GAAP measures
are contained in the Appendix to the Investor Supplement and
additional descriptions of the non-GAAP measures are contained in
the Glossary of Selected Terms included as an exhibit to the
company’s SEC filings.
HORACE MANN EDUCATORS
CORPORATION
Financial Highlights
(Unaudited)
($ in Millions, except per share
data)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
$
Change
2019
2018
$
Change
EARNINGS
SUMMARY
Net income
$
33.0
$
(20.3
)
$
53.3
$
184.4
$
18.3
$
166.1
Net investment gains (losses), after
tax
1.3
(11.6
)
12.9
120.2
(10.1
)
130.3
Goodwill impairment
—
—
—
(28.0
)
—
(28.0
)
Core earnings*
31.7
(8.7
)
40.4
92.2
28.4
63.8
Per diluted share:
Net income
$
0.78
$
(0.49
)
1.27
$
4.40
$
0.44
3.96
Net investment gains (losses), after
tax
$
0.03
$
(0.28
)
0.31
$
2.87
$
(0.24
)
3.11
Goodwill impairment
$
—
$
—
—
$
(0.67
)
$
—
(0.67
)
Core earnings*
$
0.75
$
(0.21
)
0.96
$
2.20
$
0.68
1.52
Weighted average number of shares and
equivalent shares (in millions) -
Diluted
42.1
41.9
0.20
41.9
41.9
—
RETURN ON
EQUITY
Net income return on equity - LTM (1)
12.5
%
1.3
%
12.5
%
1.3
%
Net income return on equity -
annualized
8.4
%
(6.3
)%
Core return on equity - LTM* (2)
7.3
%
2.3
%
7.3
%
2.3
%
Core return on equity - annualized*
9.6
%
(2.9
)%
FINANCIAL
POSITION
Per share (3):
Book value
$
38.01
$
31.50
6.51
Effect of net unrealized investment gains
on fixed maturity securities (4)
$
5.59
$
2.37
3.22
Dividends paid
$
0.2875
$
0.2850
0.0025
$
1.15
$
1.14
0.01
Ending number of shares outstanding (in
millions) (3)
41.2
41.0
0.2
Total assets
$
12,478.7
$
11,031.9
1,446.8
Short-term debt
135.0
—
135.0
Long-term debt
298.0
297.7
0.3
Total shareholders’ equity
1,567.3
1,290.6
276.7
ADDITIONAL
INFORMATION
Net investment gains (losses)
Before tax
$
1.7
$
(14.4
)
16.1
$
153.3
$
(12.5
)
165.8
After tax
1.3
(11.6
)
12.9
120.2
(10.1
)
130.3
Per share, diluted
$
0.03
$
(0.28
)
0.31
$
2.87
$
(0.24
)
3.11
N.M.-
Not meaningful.
(1)
Based on last twelve months net income and
average quarter-end shareholders’ equity.
(2)
Based on last twelve months core earnings
and average quarter-end shareholders’ equity which has been
adjusted to exclude the fair value adjustment for investments, net
of the related impact on deferred policy acquisition costs and
applicable deferred taxes.
(3)
Ending shares outstanding were 41,238,324
at December 31, 2019 and 40,969,885 at December 31, 2018.
(4)
Net of the related impact on deferred
policy acquisition costs and applicable deferred taxes.
HORACE MANN EDUCATORS
CORPORATION
Statements of Operations and
Consolidated Data (Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
Change
2019
2018
Change
STATEMENTS OF
OPERATIONS
Insurance premiums and contract charges
earned
$
240.4
$
201.9
19.1
%
$
898.0
$
817.3
9.9
%
Net investment income
85.8
88.4
-2.9
%
365.1
376.5
-3.0
%
Net investment gains (losses)
1.7
(14.4
)
111.8
%
153.3
(12.5
)
N.M.
Other income
3.5
2.6
34.6
%
14.1
10.3
36.9
%
Total revenues
331.4
278.5
19.0
%
1,430.5
1,191.6
20.0
%
Benefits, claims and settlement
expenses
138.8
163.9
-15.3
%
585.1
637.6
-8.2
%
Interest credited
52.7
53.0
-0.6
%
212.8
206.2
3.2
%
Operating expenses
65.0
56.0
16.1
%
234.6
205.4
14.2
%
DAC unlocking and amortization expense
26.3
30.5
-13.8
%
109.2
109.9
-0.6
%
Intangible asset amortization expense
3.9
—
N.M.
8.8
—
N.M.
Interest expense
4.4
3.3
33.3
%
15.6
13.0
20.0
%
Other expense - goodwill impairment
—
—
—
28.0
—
N.M.
Total benefits, losses and expenses
291.1
306.7
-5.1
%
1,194.1
1,172.1
1.9
%
Income before income taxes
40.3
(28.2
)
N.M.
236.4
19.5
N.M.
Income tax expense (benefit)
7.3
(7.9
)
N.M.
52.0
1.2
N.M.
Net income
$
33.0
$
(20.3
)
N.M.
$
184.4
$
18.3
N.M.
PREMIUMS WRITTEN
AND CONTRACT DEPOSITS*
Property and Casualty
$
164.6
$
166.4
-1.1
%
$
683.1
$
681.5
0.2
%
Supplemental
33.0
—
—
65.7
—
—
Annuity contract deposits
117.9
113.1
4.2
%
462.5
439.1
5.3
%
Life
30.7
31.7
-3.2
%
113.2
114.4
-1.0
%
Total
$
346.2
$
311.2
11.2
%
$
1,324.5
$
1,235.0
7.2
%
SEGMENT NET
INCOME (LOSS)
Property and Casualty
$
20.0
$
(9.9
)
N.M.
$
54.3
$
(14.3
)
N.M.
Supplemental
11.1
—
—
18.0
—
—
Retirement
2.1
4.1
-48.8
%
(4.8
)
41.7
-111.5
%
Life
4.0
3.8
5.3
%
17.6
18.8
-6.4
%
Corporate and Other (1)
(4.2
)
(18.3
)
77.0
%
99.3
(27.9
)
N.M.
Net income (loss)
$
33.0
$
(20.3
)
N.M.
$
184.4
$
18.3
N.M.
N.M.-
Not meaningful.
(1)
Corporate and Other includes interest
expense on debt and the impact of net 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 12.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
Change
2019
2018
Change
PROPERTY and
CASUALTY
Premiums written*
$
164.6
$
166.4
-1.1
%
$
683.1
$
681.5
0.2
%
Premiums earned
170.9
164.3
4.0
%
683.5
665.7
2.7
%
Net investment income
8.1
7.9
2.5
%
41.7
40.1
4.0
%
Other income
0.3
0.5
-40.0
%
2.0
1.9
5.3
%
Losses and loss adjustment expenses
(LAE)
107.4
140.0
-23.3
%
475.6
547.7
-13.2
%
Operating expenses (includes amortization
expense)
46.7
46.1
1.3
%
183.6
179.8
2.1
%
Interest expense
0.3
0.3
—
%
1.3
1.1
18.2
%
Income (loss) before tax
24.9
(13.7
)
N.M.
66.7
(20.9
)
N.M.
Net income (loss) / core earnings*
20.0
(9.9
)
N.M.
54.3
(14.3
)
N.M.
Net investment income, after tax
7.0
6.9
1.4
%
35.4
34.5
2.6
%
Catastrophe costs (1)
After tax
3.5
35.8
-90.2
%
41.1
90.1
-54.4
%
Before tax
4.4
45.3
-90.3
%
52.0
114.1
-54.4
%
Prior years’ reserves favorable
(adverse)
development, before tax
Automobile
—
—
—
5.5
—
N.M.
Property and other
—
—
—
2.0
0.3
N.M.
Total
—
—
—
7.5
0.3
N.M.
Operating statistics:
Loss and loss adjustment expense ratio
62.9
%
85.2
%
-22.3
pts
69.6
%
82.3
%
-12.7
pts
Expense ratio
27.4
%
28.1
%
-0.7
pts
26.9
%
27.0
%
-0.1
pts
Combined ratio
90.3
%
113.3
%
-23.0
pts
96.5
%
109.3
%
-12.8
pts
Effect on the combined ratio of:
Catastrophe costs (1)
2.6
%
27.0
%
-24.4
pts
7.6
%
17.1
%
-9.5
pts
Prior years’ (favorable) adverse reserve
development
—
%
—
%
—
pts
-1.1
%
—
%
-1.1
pts
Combined ratio excluding the effects
of
catastrophe costs and prior years’
reserve
development (underlying combined
ratio)*
87.7
%
86.3
%
1.4
pts
90.0
%
92.2
%
-2.2
pts
Policies in force (in thousands)
627
664
-5.6
%
Automobile (2)
433
463
-6.5
%
Property
194
201
-3.5
%
Policy renewal rate - 12 months
Automobile
81.1
%
81.9
%
-0.8
pts
Property
87.1
%
88.0
%
-0.9
pts
N.M.-
Not meaningful.
(1)
Includes allocated loss adjustment
expenses and, when applicable, catastrophe reinsurance
reinstatement premiums.
(2)
December 31, 2019 includes assumed
policies in force of 4.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
Change
2019
2018
Change
SUPPLEMENTAL
Premiums and contract charges earned
$
32.9
N/A
N/A
$
65.8
N/A
N/A
Net investment income
3.8
N/A
N/A
7.5
N/A
N/A
Other income
0.8
N/A
N/A
1.4
N/A
N/A
Benefits
10.6
N/A
N/A
21.7
N/A
N/A
Change in reserves
(0.6
)
N/A
N/A
3.0
N/A
N/A
Operating expenses (includes DAC unlocking
and amortization expense)
9.9
N/A
N/A
20.4
N/A
N/A
Intangible asset amortization expense
3.4
N/A
N/A
6.6
N/A
N/A
Income before tax
14.2
N/A
N/A
23.0
N/A
N/A
Net income / core earnings*
11.1
N/A
N/A
18.0
N/A
N/A
Benefits ratio (1)
30.4
%
N/A
N/A
37.5
%
N/A
N/A
Operating expense ratio (2)
26.4
%
N/A
N/A
27.3
%
N/A
N/A
Pretax profit margin (3)
37.9
%
N/A
N/A
30.8
%
N/A
N/A
Premium persistency (rolling 12
months)
89.3
%
N/A
N/A
89.3
%
N/A
N/A
N/A
- The acquisition of NTA closed on July 1,
2019.
(1)
Ratio of benefits plus change in
reserves to earned premium.
(2)
Ratio of operating expenses to
total revenues.
(3)
Ratio of income before taxes to
total revenues.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
Change
2019
2018
Change
RETIREMENT
Contract deposits*
$
117.9
$
113.1
4.2
%
$
462.5
$
439.1
5.3
%
Variable
59.8
54.5
9.7
%
217.3
205.8
5.6
%
Fixed
58.1
58.6
-0.9
%
245.2
233.3
5.1
%
Contract charges earned
7.0
7.3
-4.1
%
29.1
31.2
-6.7
%
Net investment income
33.5
62.9
-46.7
%
174.7
262.6
-33.5
%
Interest credited
16.4
41.7
-60.7
%
93.6
161.1
-41.9
%
Net interest margin
17.1
21.2
-19.3
%
81.1
101.5
-20.1
%
Investment income - deposit asset on
reinsurance
23.8
—
N.M.
70.8
—
N.M.
Interest credited - Reinsured block
25.0
—
N.M.
74.2
—
N.M.
Net interest margin - Reinsured block
(1.2
)
—
N.M.
(3.4
)
—
N.M.
Other income
1.8
1.7
5.9
%
8.9
7.0
27.1
%
Mortality loss and other reserve
changes
(2.6
)
(2.8
)
7.1
%
(5.3
)
(7.6
)
30.3
%
Operating expenses (includes DAC unlocking
and amortization expense)
20.2
23.7
-14.8
%
82.0
80.4
2.0
%
Intangible asset amortization expense
0.5
—
N.M.
2.2
—
N.M.
Other expense - goodwill impairment
—
—
—
28.0
—
N.M.
Income (loss) before tax
1.4
3.7
-62.2
%
(1.8
)
51.7
-103.5
%
Net income (loss)
2.1
4.1
-48.8
%
(4.8
)
41.7
-111.5
%
Core earnings*
2.1
4.1
-48.8
%
23.2
41.7
-44.4
%
Pretax income increase (decrease) due to
evaluation of:
Deferred policy acquisition costs
$
0.1
$
(3.8
)
-102.6
%
$
(3.5
)
$
(3.9
)
-10.3
%
Guaranteed minimum death benefit
reserve
—
(0.1
)
-100.0
%
0.1
(0.1
)
N.M.
Retirement contracts in force (in
thousands)
229
226
1.3
%
Annuity accumulated account value on
deposit /
Assets under management
4,379.6
$
6,713.3
-34.8
%
Variable (1)
1,782.7
2,001.1
-10.9
%
Fixed
2,596.9
4,712.2
-44.9
%
Annuity accumulated value retention - 12
months
Variable accumulations
94.7
%
94.4
%
0.3
pts
Fixed accumulations
94.0
%
94.0
%
—
pts
LIFE
Premiums and contract deposits*
$
30.7
$
31.7
-3.2
%
$
113.2
$
114.4
-1.0
%
Premiums and contract charges earned
29.6
30.3
-2.3
%
119.6
120.4
-0.7
%
Net investment income
17.2
17.8
-3.4
%
72.0
74.4
-3.2
%
Other income
0.2
0.1
100.0
%
0.4
0.3
33.3
%
Death benefits/mortality cost/change in
reserves
18.8
21.1
-10.9
%
79.5
82.3
-3.4
%
Interest credited
11.3
11.3
—
%
45.0
45.1
-0.2
%
Operating expenses (includes DAC unlocking
and amortization expense)
12.2
11.1
9.9
%
45.7
44.0
3.9
%
Income before tax
4.7
4.7
—
%
21.8
23.7
-8.0
%
Net income / core earnings*
4.0
3.8
5.3
%
17.6
18.8
-6.4
%
Pretax income increase (decrease) due to
evaluation of:
Deferred policy acquisition costs
$
0.2
$
(0.1
)
N.M.
$
0.3
$
(0.3
)
N.M.
Life policies in force (in thousands)
201
199
1.0
%
Life insurance in force
$
19,180
$
18,278
4.9
%
Lapse ratio - 12 months (Ordinary life
insurance)
4.6
%
4.6
%
—
pts
N.M.-
Not meaningful.
(1)
Amount reported as of December 31, 2019
excludes $707.8 of assets under management held under modified
coinsurance reinsurance.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
Change
2019
2018
Change
CORPORATE AND
OTHER (1)
Components of income (loss) before
tax:
Net investment gains (losses)
$
1.7
$
(14.4
)
111.8
%
$
153.3
$
(12.5
)
N.M.
Interest expense
(4.1
)
(3.0
)
-36.7
%
(14.3
)
(11.9
)
-20.2
%
Other operating expenses, net investment
income and other income
(2.5
)
(5.5
)
54.5
%
(12.3
)
(10.6
)
-16.0
%
Income (loss) before tax
(4.9
)
(22.9
)
78.6
%
126.7
(35.0
)
N.M.
Net income (loss)
(4.2
)
(18.3
)
77.0
%
99.3
(27.9
)
N.M.
INVESTMENTS
Retirement and Life
Fixed maturity securities, at fair
value
(amortized cost 2019, $4,151.1; 2018,
$6,569.3)
$
4,427.0
$
6,703.7
-34.0
%
Equity securities, at fair value
79.4
73.4
8.2
%
Short-term investments
113.6
97.9
16.0
%
Policy loans
152.7
154.0
-0.8
%
Limited partnerships
253.1
247.6
2.2
%
Other investments
34.8
17.9
94.4
%
Total Retirement and Life investments
5,060.6
7,294.5
-30.6
%
Property and Casualty
Fixed maturity securities, at fair
value
(amortized cost 2019, $846.8; 2018,
$804.6)
899.5
811.6
10.8
%
Equity securities, at fair value
21.1
38.4
-45.1
%
Short-term investments
0.2
19.0
-98.9
%
Limited partnerships
114.5
80.8
41.7
%
Other investments
1.0
1.0
—
%
Total Property and Casualty
investments
1,036.3
950.8
9.0
%
Supplemental
Fixed maturity securities, at fair
value
(amortized cost 2019, $459.1)
465.2
N/A
N/A
Equity securities, at fair value
1.4
N/A
N/A
Short-term investments
57.5
N/A
N/A
Policy loans
0.8
N/A
N/A
Limited partnerships
16.0
N/A
N/A
Other investments
—
N/A
N/A
Total Supplemental investments
540.9
N/A
N/A
Corporate investments
1.4
5.4
-74.1
%
Total investments
6,639.2
8,250.7
-19.5
%
Net investment income - investment
portfolio
Before tax
$
62.0
$
88.4
-29.9
%
$
294.3
$
376.5
-21.8
%
After tax
49.5
70.6
-29.9
%
235.0
300.3
-21.7
%
Investment income - deposit asset on
reinsurance
Before tax
23.8
—
N.M.
70.8
—
N.M.
After tax
18.8
—
N.M.
55.9
—
N.M.
N.M.-
Not meaningful.
(1)
The Corporate and Other segment includes
interest expense on debt and the impact of 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200205005819/en/
Heather J. Wietzel Vice President, Investor Relations
217-788-5144 investorrelations@horacemann.com
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