- Net income below year-ago level as prior year revenue and net
income included $107 million in after-tax realized gains on assets
transferred as consideration in annuity reinsurance
transaction
- Core earnings well ahead of last year with contributions from
all business segments
- Property & Casualty reported combined ratio of 95% as
temporary reduction in auto loss frequency offset 22 points from
catastrophe losses
- Supplemental segment margins remain strong
- Financial position remains strong with book value ahead of
year-end 2019 level
- Raises full-year 2020 core earnings guidance to range of $2.80
to $3.00
- Guidance reflects strong first half results, with catastrophe
loss assumption adjusted for unusually high second-quarter
catastrophe losses
- Now includes estimated $8.3 million third-quarter pretax
subrogation recovery from 2018 wildfires
Horace Mann Educators Corporation (NYSE:HMN) today reported
financial results for the quarter ended June 30, 2020:
Horace Mann Consolidated
Financial Highlights
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, except per share
amounts)
2020
2019
% Change
2020
2019
% Change
Total revenues
$
314.9
$
454.1
-30.7
%
$
622.2
$
770.0
-19.2
%
Net income
30.5
93.8
-67.5
%
49.0
126.0
-61.1
%
Net investment gains (losses) after
tax
2.5
114.7
N.M.
(12.0
)
120.5
N.M.
Goodwill impairment
—
(28.0
)
N.M.
—
(28.0
)
N.M.
Core earnings*
28.0
7.1
294.4
%
61.0
33.5
82.1
%
Per diluted share:
Net income
0.73
2.24
-67.4
%
1.17
3.01
-61.1
%
Net investment gains (losses) after
tax
0.06
2.74
N.M.
(0.28
)
2.88
N.M.
Goodwill impairment
—
(0.67
)
N.M.
—
(0.67
)
N.M.
Core earnings per diluted share*
0.67
0.17
294.1
%
1.45
0.80
81.3
%
Book value per share
39.69
36.41
9.0
%
Book value per share excluding net
unrealized
investment gains on fixed maturity
securities*
32.93
31.48
4.6
%
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.
“The COVID-19 pandemic has changed how we live, work and learn,”
said President and CEO Marita Zuraitis. “In this very different
environment, Horace Mann is still guided by the same mission: To
help educators achieve lifelong financial success. Given the
immense challenges educators are facing during this time, we
believe they deserve to have someone looking out for them now more
than ever. I’m especially proud of the way our employees and agents
have taken this commitment to heart during these challenging
times.
“Despite these unusual times, Horace Mann continues to take care
of our educator customers while remaining focused on the path to
long-term growth in market share and achieving a double-digit
return on equity,” Zuraitis continued. “We continue to see the
benefits of our comprehensive transformational strategic plan. For
example, this quarter, our new Supplemental segment added $9.5
million to core earnings. Our Retirement segment continues to
benefit from our annuity reinsurance transaction, which
significantly mitigated interest rate risk.
“And through the second quarter, we continued measures to
support educators, including auto premium credits to reflect
driving levels that remained lower than normal. Further, and
despite the additional challenges presented by the pandemic, our
employees and agents moved quickly and compassionately to take care
of customers in the South and Midwest affected by multiple
tornadoes and severe storms that resulted in $34.7 million in
catastrophe losses.
“As the effects of COVID-19 continue to ripple through the
markets, work environments, and schools, we are seeing a short-term
impact on new sales and, therefore, the time frame to achieve some
longer-term objectives may be extended. But we know that,
especially in challenging times, educators appreciate the value of
protection and preparation, and we are uniquely well-positioned to
help them protect what they have today and prepare for a successful
tomorrow.
“Our full-year 2020 core EPS guidance range is now $2.80 to
$3.00, with core ROE expected to be about 9%. The revised guidance
takes into account the favorable results for the first half of the
year. In addition, we are increasing our full-year catastrophe loss
assumption and will record subrogation benefits in the third
quarter as a result of PG&E's successful emergence from
bankruptcy.” Zuraitis concluded. “For 75 years, Horace Mann has
been successful because we have stayed true to our mission of
serving educators. Guided by this mission and supported by our
strong financial position, we will continue to work toward our
long-term objectives and focus on supporting our educator
customers.”
As a result of the emergence of PG&E Corporation and Pacific
Gas and Electric Company (together, PG&E) from bankruptcy on
July 1, 2020, in the third quarter of 2020, Horace Mann expects to
recognize favorable prior year reserve development of approximately
$4.8 million, pretax and net of reinsurance, along with the return
of reinsurance reinstatement premiums of approximately $3.5
million, for a total of $8.3 million, related to the 2018 Camp Fire
in California. The Camp Fire generated gross losses of $150.0
million, and, net losses after reinsurance of $37.9 million pretax,
in 2018.
Property and Casualty Segment
Second-Quarter Combined Ratio at 95.4%
(All comparisons vs. same period in 2019,
unless noted otherwise)
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions)
2020
2019
Change
2020
2019
Change
Property and Casualty written
premiums*
$
156.1
$
174.3
-10.4
%
$
309.7
$
336.0
-7.8
%
Property and Casualty net income / core
earnings*
11.3
5.1
121.6
%
37.9
20.1
88.6
%
Property and Casualty combined ratio
95.4
%
103.8
%
-8.4
pts
92.0
%
99.7
%
-7.7
pts
Property and Casualty underlying loss
ratio*
47.6
%
65.6
%
-18.0
pts
53.0
%
64.4
%
-11.4
pts
Property and Casualty expense ratio
26.2
%
26.5
%
-0.3
pts
26.1
%
26.9
%
-0.8
pts
Property and Casualty catastrophe
costs
22.2
%
12.9
%
9.3
pts
13.5
%
9.6
%
3.9
pts
Property and Casualty underlying combined
ratio*
73.8
%
92.1
%
-18.3
pts
79.1
%
91.3
%
-12.2
pts
Auto combined ratio
80.3
%
100.4
%
-20.1
pts
86.3
%
99.2
%
-12.9
pts
Auto underlying loss ratio*
50.1
%
72.8
%
-22.7
pts
58.8
%
71.9
%
-13.1
pts
Property combined ratio
123.9
%
111.4
%
12.5
pts
103.3
%
101.0
%
2.3
pts
Property underlying loss ratio*
43.0
%
49.8
%
-6.8
pts
41.9
%
48.2
%
-6.3
pts
Property and Casualty written premiums declined in part because
premiums were reduced by $9.8 million for COVID-19 related credits
equal to 15% of two months of automobile premiums. In addition,
written premiums reflected lower new business and a lower level of
rate increases being implemented in 2020. Auto and property policy
retention rates for the quarter were 81.6% and 87.5%, respectively,
remaining in line with recent experience.
Segment core earnings rose substantially, primarily due to an
8.4 points improvement in the combined ratio driven by the
unusually low underlying loss ratios. The auto loss ratio reflected
lower frequency related to reduced driving activity due to COVID-19
as well as the ongoing benefit of profitability initiatives. The
property loss ratio reflected lower non-catastrophe-related weather
losses.
Offsetting the improved underlying loss ratio were $34.7 million
of catastrophe losses from 20 events that added 22 points to the
combined ratio. The largest losses were a multi-state, mid-April
wind and thunderstorm event in multiple states across the Midwest,
South and East Coast; and an early May wind and thunderstorm event
that traveled from Kansas to South Carolina.
The catastrophe losses in this year’s second quarter were about
70% of the company’s original full-year guidance. Historically,
Horace Mann’s second-quarter catastrophe losses have been
approximately 50% of full-year catastrophe losses. As a result, the
company’s guidance now assumes full-year 2020 catastrophe losses
between $60 and $70 million, or as much as 10 points on the
combined ratio.
Supplemental Segment Contributes $9.5 Million to
Second-Quarter Earnings
On July 1, 2019, Horace Mann acquired NTA Life Enterprises, LLC
(NTA), which became the company’s new Supplemental segment. As a
part of Horace Mann, it continues to provide supplemental insurance
products to the education market, building on nearly 50 years of
experience in the sector. The segment specializes in developing,
marketing and underwriting supplemental insurance products,
including cancer, heart, limited supplemental disability and
accident.
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions)
2020
2019
Change
2020
2019
Change
Supplemental sales*
$
0.7
N/A
N/A
$
4.4
N/A
N/A
Earned premiums
33.3
N/A
N/A
66.3
N/A
N/A
Supplemental net income / core
earnings*
9.5
N/A
N/A
20.0
N/A
N/A
Pretax profit margin (1)
31.9
%
N/A
N/A
34.0
%
N/A
N/A
N/A - The acquisition of NTA closed on July 1, 2019. (1)
Measured to total revenues.
Supplemental segment sales were $0.7 million for the quarter,
reflecting significantly lower sales volume due to school closings
in the spring because of COVID-19. Persistency remained steady at
89.3%.
The segment added $9.5 million to core earnings, with the pretax
profit margin moving closer to management’s longer-term
expectations. Second-quarter results reflected continued favorable
trends in the acquired business and some short-term benefit from
changes in policyholder behavior due to COVID-19. Segment expenses
include the non-cash impact of amortization of intangible assets
under purchase accounting that reduces quarterly core earnings by
$3.2 million pretax.
Retirement Segment Sees 2.6% Increase
in Annuity Contract Deposits
(All comparisons vs. same period in 2019,
unless noted otherwise)
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions)
2020
2019
Change
2020
2019
Change
Annuity contract deposits*
$
111.8
$
109.0
2.6
%
$
229.5
$
216.3
6.1
%
Annuity assets under management (1)
4,324.3
4,170.3
3.7
%
Total assets under administration (2)
7,952.8
7,801.5
1.9
%
Retirement net income (loss)
9.7
(25.0
)
N.M.
8.8
(12.8
)
N.M.
Retirement core earnings*
9.7
3.0
223.3
%
8.8
15.2
-42.1
%
Retirement core earnings excluding DAC
unlocking*
6.0
7.4
-18.9
%
8.3
18.0
-53.9
%
N.M. - Not meaningful. (1) Amount reported as of June 30, 2020
excludes $627.6 of assets under management held under modified
coinsurance reinsurance. (2) Includes Annuity AUM, Brokerage and
Advisory AUA, and Recordkeeping AUA.
Annuity contract deposits rose 2.6% over prior year, reflecting
the value educators continue to see in our Retirement savings
products. Total cash value persistency remained strong at 94.9% for
variable annuities and 94.2% for fixed annuities.
Reflecting the 2019 annuity reinsurance transaction, Horace Mann
currently has $4.3 billion in annuity assets under management,
including $2.1 billion of fixed annuities, $1.7 billion of variable
annuities and $0.5 billion of fixed indexed annuities. Assets under
administration, which includes advisory and recordkeeping assets
added through the acquisition of BCG in 2019, were down 3.9% from
year-end 2019, primarily due to market volatility.
The segment recorded net income of $9.7 million for the quarter,
benefiting from expense savings as well as favorable DAC unlocking
from the recovery of the equity markets in the period. In last
year’s second quarter, the segment recorded a net loss, largely due
to the impairment of $28.0 million of goodwill as a result of the
annuity reinsurance transaction, as well as unfavorable DAC
unlocking due to the accelerated amortization of the DAC asset
associated with the reinsured block.
Core earnings excluding DAC unlocking for the quarter were down
due to lower limited partnership earnings as a result of the equity
and credit market volatility in the first quarter.
Life Segment Has Steady Sales of
Recurring Premium Products
(All comparisons vs. same period in 2019,
unless noted otherwise)
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions)
2020
2019
Change
2020
2019
Change
Life sales*
$
3.6
$
5.0
-28.0
%
$
6.9
$
9.3
-25.8
%
Life mortality costs
9.2
7.5
22.7
%
19.3
18.0
7.2
%
Life net income / core earnings*
1.9
5.2
-63.5
%
2.5
8.5
-70.6
%
Sales of recurring premium Life products were relatively
consistent with last year’s second quarter, although lower single
premium product sales drove overall lower sales. Life core
earnings* largely reflected lower net investment income and
mortality costs in line with expectations; the company had
favorable mortality experience in the second quarter of 2019. Life
persistency of 95.8% was consistent with the prior year period.
Investment Portfolio Well-Positioned for Market Disruption
and Economic Downturn
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 related to
the company’s 2019 reinsurance of a block of approximately $2.9
billion of policy liabilities related to legacy individual
annuities written in 2002 or earlier that was effective April 1,
2019.
(All comparisons vs. same period in 2019, unless noted
otherwise)
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions)
2020
2019
Change
2020
2019
Change
Pretax net investment income - investment
portfolio
$
56.5
$
70.3
-19.6
%
$
115.1
$
163.1
-29.4
%
Pretax investment income - deposit asset
on reinsurance
23.9
23.2
3.0
%
47.6
23.2
105.2
%
Total pretax net investment income
80.4
93.5
-14.0
%
162.7
186.3
-12.7
%
Pretax net investment gains (losses)
3.2
146.3
N.M.
(15.3
)
153.7
N.M.
Pretax net unrealized investment gains
(losses) on fixed maturity securities
417.6
292.5
42.8
%
Investment yield, excluding limited
partnership interests, pretax - annualized
4.39
%
4.74
%
-0.35
pts
4.45
%
4.79
%
-0.34
pts
N.M. - Not meaningful.
Total net investment income declined 14.0% year-over-year. Net
investment income on the managed portfolio declined 19.6% because
of mark-to-market valuation adjustments on limited partnership and
commercial mortgage loan fund investments that report on a
one-quarter lag.
Second-quarter pretax net investment gains were $3.2 million,
including $0.5 million in other-than-temporary impairment charges.
The company’s fixed maturity securities portfolio is in a net
unrealized investment gain position of $417.6 million at June 30,
2020.
Book Value Excluding Unrealized Investment Gains Up 5% Year
Over Year
At June 30, 2020, shareholders’ equity was $1.64 billion, or
$39.69 per share. Excluding net unrealized investment gains on
fixed maturity securities, shareholders’ equity was $1.36 billion,
or $32.93 per share.* The year-over-year improvement in book value
excluding unrealized investment gains on fixed maturity securities
primarily reflected the realized gain on assets transferred in the
2019 annuity reinsurance transaction, as well as strong
earnings.
At June 30, 2020, total debt was $437.2 million, with $135.0
million outstanding on the company’s line of credit. The
debt-to-capital ratio* was 24.3%.
Quarterly Webcast
Horace Mann’s senior management will discuss the company’s
second quarter financial results with investors on August 7, 2020
at 9:00 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 March
31, 2020 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 of America
(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 June 30,
Six Months Ended June 30,
2020
2019
% Change
2020
2019
% Change
EARNINGS
SUMMARY
Net income
$
30.5
$
93.8
-67.5
%
$
49.0
$
126.0
-61.1
%
Net investment gains (losses), after
tax
2.5
114.7
N.M.
(12.0
)
120.5
N.M.
Other expense - goodwill impairment
—
(28.0
)
N.M.
—
(28.0
)
N.M.
Core earnings*
28.0
7.1
294.4
%
61.0
33.5
82.1
%
Per diluted share:
Net income
$
0.73
$
2.24
-67.4
%
$
1.17
$
3.01
-61.1
%
Net investment gains (losses), after
tax
$
0.06
$
2.74
N.M.
$
(0.28
)
$
2.88
N.M.
Other expense - goodwill impairment
$
—
$
(0.67
)
N.M.
$
—
$
(0.67
)
N.M.
Core earnings*
$
0.67
$
0.17
294.1
%
$
1.45
$
0.80
81.3
%
Weighted average number of shares and
equivalent shares (in millions) -
Diluted
42.0
41.9
0.2
%
42.0
41.9
0.2
%
RETURN ON
EQUITY
Net income return on equity - LTM (1)
6.9
%
8.6
%
6.9
%
8.6
%
Net income return on equity -
annualized
7.8
%
25.7
%
6.1
%
18.1
%
Core return on equity - LTM* (2)
9.0
%
2.9
%
9.0
%
2.9
%
Core return on equity - annualized*
8.3
%
2.3
%
9.0
%
5.4
%
FINANCIAL
POSITION
Per share: (3)
Book value
$
39.69
$
36.41
9.0
%
Effect of net unrealized investment gains
on fixed maturity securities (4)
$
6.76
$
4.93
37.1
%
Dividends paid
$
0.30
$
0.2875
4.3
%
$
0.60
$
0.575
4.3
%
Ending number of shares outstanding (in
millions) (3)
41.3
41.2
0.2
%
Total assets
$
12,571.7
$
11,779.4
6.7
%
Short-term debt
135.0
—
N.M.
Long-term debt
302.2
297.9
1.4
%
Total shareholders’ equity
1,639.8
1,499.7
9.3
%
ADDITIONAL
INFORMATION
Net investment gains (losses)
Before tax
$
3.2
$
146.3
N.M.
$
(15.3
)
$
153.7
N.M.
After tax
2.5
114.7
N.M.
(12.0
)
120.5
N.M.
Per share, diluted
$
0.06
$
2.74
N.M.
$
(0.28
)
$
2.88
N.M.
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 41,315,424
at June 30, 2020 and 41,185,721 at June 30, 2019.
(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 June 30,
Six Months Ended June 30,
2020
2019
% Change
2020
2019
% Change
STATEMENTS OF
OPERATIONS
Insurance premiums and contract charges
earned
$
225.4
$
208.1
8.3
%
$
461.7
$
417.9
10.5
%
Net investment income
80.4
93.5
-14.0
%
162.7
186.3
-12.7
%
Net investment gains (losses)
3.2
146.3
N.M.
(15.3
)
153.7
N.M.
Other income
5.9
6.2
-4.8
%
13.1
12.1
8.3
%
Total revenues
314.9
454.1
-30.7
%
622.2
770.0
-19.2
%
Benefits, claims and settlement
expenses
143.0
152.7
-6.4
%
281.7
292.1
-3.6
%
Interest credited
50.7
53.6
-5.4
%
102.2
106.5
-4.0
%
Operating expenses
55.7
57.3
-2.8
%
116.4
113.5
2.6
%
DAC unlocking and amortization expense
20.4
31.6
-35.4
%
50.4
56.6
-11.0
%
Intangible asset amortization expense
3.7
0.6
N.M.
7.4
1.1
N.M.
Interest expense
4.0
3.3
21.2
%
8.2
6.6
24.2
%
Other expense - goodwill impairment
—
28.0
N.M.
—
28.0
N.M.
Total benefits, losses and expenses
277.5
327.1
-15.2
%
566.3
604.4
-6.3
%
Income before income taxes
37.4
127.0
-70.6
%
55.9
165.6
-66.2
%
Income tax expense
6.9
33.2
-79.2
%
6.9
39.6
-82.6
%
Net income
$
30.5
$
93.8
-67.5
%
$
49.0
$
126.0
-61.1
%
PREMIUMS WRITTEN
AND CONTRACT DEPOSITS*
Property and Casualty
$
156.1
$
174.3
-10.4
%
$
309.7
$
336.0
-7.8
%
Supplemental
33.7
—
—
66.3
—
—
Annuity contract deposits
111.8
109.0
2.6
%
229.5
216.3
6.1
%
Life
27.6
28.4
-2.8
%
52.4
54.8
-4.4
%
Total
$
329.2
$
311.7
5.6
%
$
657.9
$
607.1
8.4
%
SEGMENT NET
INCOME (LOSS)
Property and Casualty
$
11.3
$
5.1
121.6
%
$
37.9
$
20.1
88.6
%
Supplemental
9.5
—
—
20.0
—
—
Retirement
9.7
(25.0
)
138.8
%
8.8
(12.8
)
168.8
%
Life
1.9
5.2
-63.5
%
2.5
8.5
-70.6
%
Corporate and Other (1)
(1.9
)
108.5
-101.8
%
(20.2
)
110.2
-118.3
%
Net income
$
30.5
$
93.8
-67.5
%
$
49.0
$
126.0
-61.1
%
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 June 30,
Six Months Ended June 30,
2020
2019
Change
2020
2019
Change
PROPERTY and
CASUALTY
Written premiums*
$
156.1
$
174.3
-10.4
%
$
309.7
$
336.0
-7.8
%
Premiums earned
156.2
171.3
-8.8
%
322.7
342.1
-5.7
%
Net investment income
6.3
12.7
-50.4
%
16.6
22.9
-27.5
%
Other income
0.8
0.8
—
%
1.6
1.2
33.3
%
Losses and loss adjustment expenses
(LAE)
108.2
132.4
-18.3
%
212.6
249.2
-14.7
%
Operating expenses (includes amortization
expense)
40.9
45.4
-9.9
%
84.1
91.9
-8.5
%
Interest expense
0.1
0.4
-75.0
%
0.3
0.7
-57.1
%
Income before income taxes
14.1
6.6
113.6
%
43.9
24.4
79.9
%
Net income / core earnings*
11.3
5.1
121.6
%
37.9
20.1
88.6
%
Net investment income, after tax
5.5
10.7
-48.6
%
14.2
19.4
-26.8
%
Catastrophe costs (1)
After tax
27.4
17.5
56.6
%
34.4
26.0
32.3
%
Before tax
34.7
22.1
57.0
%
43.5
32.9
32.2
%
Prior years’ reserves favorable
development, before tax
Automobile
—
1.0
-100.0
%
1.0
2.0
-50.0
%
Property and other
1.0
1.0
—
%
1.0
2.0
-50.0
%
Total
1.0
2.0
-50.0
%
2.0
4.0
-50.0
%
Operating statistics:
Loss and loss adjustment expense ratio
69.2
%
77.3
%
-8.1
pts
65.9
%
72.8
%
-6.9
pts
Expense ratio
26.2
%
26.5
%
-0.3
pts
26.1
%
26.9
%
-0.8
pts
Combined ratio
95.4
%
103.8
%
-8.4
pts
92.0
%
99.7
%
-7.7
pts
Effect on the combined ratio of:
Catastrophe costs (1)
22.2
%
12.9
%
9.3
pts
13.5
%
9.6
%
3.9
pts
Prior years’ (favorable) reserve
development
-0.6
%
-1.2
%
0.6
pts
-0.6
%
-1.2
%
0.6
pts
Combined ratio excluding the effects
of
catastrophe costs and prior years’
reserve
development (underlying combined
ratio)*
73.8
%
92.1
%
-18.3
pts
79.1
%
91.3
%
-12.2
pts
Risks in force (in thousands)
609
646
-5.7
%
Automobile (2)
418
448
-6.7
%
Property
191
198
-3.5
%
Policy renewal rate - 12 months
Automobile
81.6
%
81.3
%
0.3
pts
Property
87.5
%
87.7
%
-0.2
pts
N.M.-
Not meaningful.
(1)
Includes allocated loss adjustment
expenses and, when applicable, catastrophe reinsurance
reinstatement premiums.
(2)
Includes assumed risks in force of 4.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended June 30,
Six Months Ended June 30,
2020
2019
Change
2020
2019
Change
SUPPLEMENTAL
Premiums and contract charges earned
$
33.3
N/A
N/A
$
66.3
N/A
N/A
Net investment income
4.0
N/A
N/A
7.5
N/A
N/A
Other income
0.6
N/A
N/A
1.3
N/A
N/A
Benefits
8.7
N/A
N/A
19.4
N/A
N/A
Change in reserves
3.8
N/A
N/A
3.6
N/A
N/A
Operating expenses (includes DAC unlocking
and amortization expense)
10.1
N/A
N/A
20.2
N/A
N/A
Intangible asset amortization expense
3.2
N/A
N/A
6.4
N/A
N/A
Income before income taxes
12.1
N/A
N/A
25.5
N/A
N/A
Net income / core earnings*
9.5
N/A
N/A
20.0
N/A
N/A
Benefits ratio (1)
37.5
%
N/A
N/A
34.7
%
N/A
N/A
Operating expense ratio (2)
26.6
%
N/A
N/A
26.9
%
N/A
N/A
Pretax profit margin (3)
31.9
%
N/A
N/A
34.0
%
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 June 30,
Six Months Ended June 30,
2020
2019
Change
2020
2019
Change
RETIREMENT
Contract deposits*
$
111.8
$
109.0
2.6
%
$
229.5
$
216.3
6.1
%
Variable
52.3
54.1
-3.3
%
110.1
102.9
7.0
%
Fixed
59.5
54.9
8.4
%
119.4
113.4
5.3
%
Contract charges earned
6.7
6.9
-2.9
%
14.1
15.5
-9.0
%
Net investment income
31.2
39.5
-21.0
%
61.0
104.2
-41.5
%
Interest credited
14.5
18.0
-19.4
%
30.2
59.7
-49.4
%
Net interest margin
16.7
21.5
-22.3
%
30.8
44.5
-30.8
%
Investment income - deposit asset on
reinsurance
23.9
23.2
3.0
%
47.6
23.2
105.2
%
Interest credited - Reinsured block
24.9
24.3
2.5
%
49.5
24.3
103.7
%
Net interest margin - Reinsured block
(1.0
)
(1.1
)
9.1
%
(1.9
)
(1.1
)
-72.7
%
Other income
4.1
5.0
-18.0
%
9.4
10.1
-6.9
%
Mortality loss and other reserve
changes
(1.2
)
(1.2
)
—
%
(2.8
)
(1.8
)
-55.6
%
Operating expenses (includes DAC unlocking
and amortization expense)
13.6
27.3
-50.2
%
38.5
48.3
-20.3
%
Intangible asset amortization expense
0.5
0.6
-16.7
%
1.0
1.1
-9.1
%
Other expense - goodwill impairment
—
28.0
N.M.
—
28.0
N.M.
Income (loss) before income taxes
11.2
(24.8
)
N.M.
10.1
(10.2
)
N.M.
Net income (loss)
9.7
(25.0
)
N.M.
8.8
(12.8
)
N.M.
Core earnings
9.7
3.0
223.3
%
8.8
15.2
-42.1
%
Pretax income increase (decrease) due to
evaluation of:
Deferred policy acquisition costs
$
4.6
$
(5.6
)
N.M.
$
0.6
$
(3.6
)
N.M.
Guaranteed minimum death benefit
reserve
0.2
—
N.M.
(0.1
)
0.1
N.M.
Retirement contracts in force (in
thousands)
230
227
1.3
%
Annuity accumulated account value on
deposit /
Assets under management
4,324.3
$
4,170.3
3.7
%
Variable (1)
1,689.3
1,619.3
4.3
%
Fixed
2,635.0
2,551.0
3.3
%
Annuity accumulated value retention - 12
months
Variable accumulations
94.9
%
94.3
%
0.6
pts
Fixed accumulations
94.2
%
93.9
%
0.3
pts
LIFE
Premiums and contract deposits*
$
27.6
$
28.4
-2.8
%
$
52.4
$
54.8
-4.4
%
Premiums and contract charges earned
29.2
29.9
-2.3
%
58.6
60.3
-2.8
%
Net investment income
15.6
18.3
-14.8
%
31.2
36.4
-14.3
%
Other income
—
0.1
N.M.
—
0.2
N.M.
Death benefits/mortality cost/change in
reserves
21.1
19.1
10.5
%
43.3
41.1
5.4
%
Interest credited
11.3
11.3
—
%
22.5
22.5
—
%
Operating expenses (includes DAC unlocking
and amortization expense)
10.1
11.2
-9.8
%
21.0
22.6
-7.1
%
Income before income taxes
2.3
6.7
-65.7
%
3.0
10.7
-72.0
%
Net income / core earnings*
1.9
5.2
-63.5
%
2.5
8.5
-70.6
%
Pretax income increase (decrease) due to
evaluation of:
Deferred policy acquisition costs
$
0.2
$
0.1
N.M.
$
0.3
$
0.1
N.M.
Life policies in force (in thousands)
201
199
1.0
%
Life insurance in force
$
19,565
$
18,598
5.2
%
Lapse ratio - 12 months (Ordinary life
insurance)
4.2
%
4.5
%
-0.3
pts
N.M.-
Not meaningful.
(1)
Amount reported as of June 30, 2020
excludes $627.6 of assets under management held under modified
coinsurance reinsurance.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended June 30,
Six Months Ended June 30,
2020
2019
Change
2020
2019
% Change
CORPORATE AND
OTHER (1)
Components of income (loss) before
tax:
Net investment gains (losses)
$
3.2
$
146.3
N.M.
$
(15.3
)
$
153.7
N.M.
Interest expense
(3.9
)
(2.9
)
-34.5
%
(7.9
)
(5.9
)
-33.9
%
Other operating expenses, net investment
income and other income
(1.6
)
(4.9
)
67.3
%
(3.4
)
(7.1
)
52.1
%
Income (loss) before income taxes
(2.3
)
138.5
101.7
%
(26.6
)
140.7
118.9
%
Net income (loss)
(1.9
)
108.5
101.8
%
(20.2
)
110.2
118.3
%
INVESTMENTS
Retirement and Life
Fixed maturity securities, at fair
value
(amortized cost 2020, $4,251.5; 2019,
$4,388.8)
$
4,579.9
$
4,637.0
-1.2
%
Equity securities, at fair value
79.2
71.2
11.2
%
Short-term investments
157.6
196.8
-19.9
%
Policy loans
151.4
153.5
-1.4
%
Limited partnerships
257.9
273.0
-5.5
%
Other investments
37.1
31.3
18.5
%
Total Retirement and Life investments
5,263.1
5,362.8
-1.9
%
Property and Casualty
Fixed maturity securities, at fair
value
(amortized cost 2020, $808.0; 2019,
$853.0)
867.5
897.3
-3.3
%
Equity securities, at fair value
7.5
28.9
-74.0
%
Short-term investments
14.4
32.7
-56.0
%
Limited partnerships
115.0
78.5
46.5
%
Other investments
1.1
1.0
10.0
%
Total Property and Casualty
investments
1,005.5
1,038.4
-3.2
%
Supplemental
Fixed maturity securities, at fair
value
(amortized cost 2020, $544.9; 2019,
N/A)
574.6
N/A
N/A
Equity securities, at fair value
3.6
N/A
N/A
Short-term investments
11.7
N/A
N/A
Policy loans
0.8
N/A
N/A
Limited partnerships
19.3
N/A
N/A
Other investments
1.8
N/A
N/A
Total Supplemental investments
611.8
N/A
N/A
Corporate investments
0.4
18.4
-97.8
%
Total investments
$
6,880.8
$
6,419.6
7.2
%
Net investment income - investment
portfolio
Before tax
$
56.5
$
70.3
-19.6
%
$
115.1
$
163.1
-29.4
%
After tax
45.2
56.2
-19.6
%
92.0
130.2
-29.3
%
Investment income - deposit asset on
reinsurance
Before tax
$
23.9
23.2
N.M.
$
47.6
23.2
N.M.
After tax
18.9
18.3
N.M.
37.6
18.3
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/20200806005947/en/
Heather J. Wietzel Vice President, Investor Relations
217-788-5144 investorrelations@horacemann.com
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