- Net income per share more than doubled over prior year while
core earnings per share* improved 156.0%
- New Supplemental segment added $6.9 million to net income,
diversifying sales and earnings while expanding solutions available
for educators
- Property and Casualty combined ratio of 96.2% reflected
improved auto profitability and lower catastrophe losses
- Retirement results on track and reflected more favorable
interest spread following annuity reinsurance transaction
- Annualized quarterly core ROE* at 8.3%, moving closer to
double-digit ROE target
- Tightens range of full-year 2019 core EPS guidance to $2.05 to
$2.15 to reflect:
- Flat full-year underlying property loss ratio
- Fourth-quarter severance charges for previously announced
expense reduction initiatives
Horace Mann Educators Corporation (NYSE:HMN) today reported
financial results for the quarter ended September 30, 2019:
Horace Mann Consolidated
Financial Highlights
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, except per share
amounts)
2019
2018
Change
2019
2018
Change
Total revenues
$
334.4
$
311.4
7.4
%
$
1,099.1
$
913.1
20.4
%
Net income
25.4
12.5
103.2
%
151.4
38.6
N.M.
Net investment gains (losses) after
tax
(1.6
)
2.2
-172.7
%
118.9
1.5
N.M.
Goodwill impairment
—
—
N.M.
(28.0
)
—
N.M.
Core earnings*
27.0
10.3
162.1
%
60.5
37.1
63.1
%
Per diluted share:
Net income
0.60
0.30
100.0
%
3.61
0.93
N.M.
Net investment gains (losses) after
tax
(0.04
)
0.05
-180.0
%
2.84
0.04
N.M.
Goodwill impairment
—
—
N.M.
(0.67
)
—
N.M.
Core earnings per diluted share*
0.64
0.25
156.0
%
1.44
0.89
61.8
%
Book value per share
38.30
31.78
20.5
%
Book value per share excluding net
unrealized
investment gains on fixed maturity
securities*
31.84
29.93
6.4
%
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 positive third-quarter results reinforce that Horace Mann
is better equipped than ever before to meet the financial needs of
educators. Our transformative efforts, and multi-year initiatives
focused on improving our products, distribution and infrastructure,
have resulted in a larger, more diverse company with a strong
long-term outlook,” said President and CEO Marita Zuraitis. “This
is the first quarter that National Teachers Associates (NTA) is
included in our results as the Supplemental segment, contributing
$0.16 per share to earnings. Concurrently, we have significantly
reduced our interest-spread risk in our Retirement segment
following the annuity reinsurance transaction earlier in the
year.
“As we announced several weeks ago, we have streamlined our
organizational structure to accelerate profitable growth and
strengthen our solutions orientation. We are also making
significant progress on expense synergies and efficiency projects
that are expected to reduce our annual operating expense run-rate
in 2020 and beyond by at least $15 million,” Zuraitis noted,
“Fourth quarter core EPS will reflect approximately $0.07 per share
for severance charges resulting from previously announced expense
reduction initiatives.
“As a result, we are tightening the range of our full-year
guidance, and now expect 2019 core EPS between $2.05 to $2.15 per
share. Illustrating the benefits of our sales and earnings
diversification, quarterly annualized core ROE was above 8% in the
third quarter.
“We are on a clear path to a 10% ROE over the next two years,
reflecting two points of contribution from the new Supplemental
segment plus at least another point from the lower operating
expense run-rate.” Zuraitis continued. “At the same time, we are
leveraging our leadership position in the education space to
increase our market share, further accelerating long-term
shareholder value creation.”
Property and Casualty Segment Sees 4.7 Point Improvement in
Underlying Auto Loss Ratio; Catastrophe Costs Below 2018
Level
(All comparisons vs. same period in 2018, unless noted
otherwise)
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2019
2018
Change
2019
2018
Change
Property and Casualty written
premiums*
$
182.5
$
182.7
-0.1
%
$
518.5
$
515.1
0.7
%
Property and Casualty net income / core
earnings*
14.2
(3.2
)
N.M.
34.3
(4.4
)
N.M.
Property and Casualty combined ratio
96.2
%
110.1
%
-13.9
pts
98.5
%
108.0
%
-9.5
pts
Property and Casualty underlying loss
ratio*
63.3
%
63.9
%
-0.6
pts
64.0
%
67.7
%
-3.7
pts
Property and Casualty expense ratio
26.4
%
27.1
%
-0.7
pts
26.7
%
26.7
%
—
pts
Property and Casualty catastrophe
costs
8.6
%
19.1
%
-10.5
pts
9.3
%
13.7
%
-4.4
pts
Property and Casualty underlying combined
ratio*
89.7
%
91.0
%
-1.3
pts
90.7
%
94.4
%
-3.7
pts
Auto combined ratio
92.4
%
99.5
%
-7.1
pts
97.0
%
103.4
%
-6.4
pts
Auto underlying loss ratio*
66.7
%
71.4
%
-4.7
pts
70.2
%
75.1
%
-4.9
pts
Property combined ratio
104.3
%
133.3
%
-29.0
pts
102.0
%
117.9
%
-15.9
pts
Property underlying loss ratio*
55.6
%
48.0
%
+7.6
pts
50.6
%
51.5
%
-0.9
pts
N.M. - Not meaningful.
For the third quarter of 2019, the Property and Casualty segment
was solidly profitable, with a combined ratio of 96.2% driving core
earnings of $14.2 million, compared to a loss in the prior year.
Underwriting and rate actions contributed to a 4.7 point
improvement in the underlying auto loss ratio. The underlying
property loss ratio reflected an increase in non-catastrophe fire
loss severity with no increase in frequency. The underlying
property loss ratio is now expected to be flat for full-year 2019
compared to 2018. Property and Casualty written premiums were
flat.
Pretax catastrophe losses of $14.7 million were attributable to
17 weather events, the most costly of which were wind and hail
events in the Midwest and Plains states. Pretax catastrophe losses
through the first nine months were $47.6 million. The company
estimate of full-year 2019 catastrophe losses has narrowed to $50
to $55 million, or about 7.5 points on the combined ratio, more
heavily weighting more recent years in forecasting to reflect the
impact of sustained elevated catastrophe loss trends.
Auto and property policy retention rates for the current quarter
were 80.9% and 87.3%, respectively.
Supplemental Segment Contributes $6.9 Million in New
Earnings
On July 1, 2019, Horace Mann acquired NTA. As a part of Horace
Mann, NTA will continue to provide supplemental insurance products
to the education market, building on nearly 50 years of experience
in the sector. NTA specializes in developing, marketing and
underwriting supplemental insurance products, including cancer,
heart, limited supplemental disability and accident.
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2019
2018
Change
2019
2018
Change
Supplemental sales*
$
3.6
N/A
N/A
$
3.6
N/A
N/A
Earned premiums
32.9
N/A
N/A
32.9
N/A
N/A
Supplemental net income / core
earnings*
6.9
N/A
N/A
6.9
N/A
N/A
Pretax profit margin (1)
23.7
%
N/A
N/A
23.7
%
N/A
N/A
N/A - The acquisition of NTA closed on
July 1, 2019.
(1) Measured to total revenues
Supplemental segment sales for the third quarter were $3.6
million with steady sales in all product categories. The segment
contributed $6.9 million to core earnings in its initial quarter
with Horace Mann, in line with management's expectations for $12
million to $14 million in earnings in the second half of this
year.
The pretax profit margin for the third quarter was 23.7%,
reflecting this business' focus on efficient operations and product
mix. Supplemental segment expenses reflected the non-cash impact of
amortization of intangible assets under purchasing accounting that
reduced core earnings by $3.2 million (pretax). Supplemental
persistency was 88.9% for the quarter.
Retirement Segment Annualized Net Interest Margin Remained
Strong at 224 Basis Points
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 $28.0 million of goodwill that had been associated with
the Retirement segment.
(All comparisons vs. same period in 2018, unless noted
otherwise)
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2019
2018
Change
2019
2018
Change
Annuity contract deposits*
$
128.3
$
127.0
1.0
%
$
344.6
$
326.0
5.7
%
Annuity assets under management (1)
4,215.9
6,997.7
-39.8
%
Total assets under administration (2)
7,897.7
7,331.3
7.7
%
Retirement net income (loss)
5.9
12.1
-51.2
%
(6.9
)
37.6
-118.4
%
Retirement core earnings*
5.9
12.1
-51.2
%
21.1
37.6
-43.9
%
Retirement core earnings excluding
DAC unlocking*
5.9
11.9
-50.4
%
23.9
37.7
-36.6
%
N.M. - Not meaningful.
(1) Amount reported as of September 30,
2019 excludes $673.1 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 $4.2 billion in assets under management, including
$2.1 billion of fixed annuities, $1.6 billion of variable annuities
and $0.5 billion of fixed indexed annuities. Assets under
administration were up from a year ago due to the inclusion of
Benefit Consultants Group's (BCG) advisory and recordkeeping assets
effective January 2, 2019.
The annuity reinsurance transaction was the primary driver in
the year-over-year decline in Retirement core earnings. Core
earnings excluding DAC unlocking were $5.9 million, consistent with
management's expectation of full year Retirement segment earnings
excluding DAC unlocking of $25 million to $27 million. Core
earnings excluding DAC unlocking were below the second quarter of
2019 due to the sequential decline in segment invested assets and
net investment income following the redeployment of capital in the
acquisition of NTA.
The average crediting rate on the retained traditional fixed
annuities is 2.5%. The annualized net interest spread was 224 basis
points, compared to 233 basis points in the second quarter. In the
first quarter, prior to the annuity reinsurance transaction, the
averaging crediting rate was 3.6% and the spread was 142 basis
points.
Annuity sales deposits* were up slightly in the third quarter,
reflecting positive momentum in retirement initiatives and in
engaging new households. Total cash value persistency remained
strong at 94.7% for variable annuities and 93.9% for fixed
annuities.
Life Segment Sales of Recurring Premium Products Remains
Strong
(All comparisons vs. same period in 2018, unless noted
otherwise)
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2019
2018
Change
2019
2018
Change
Life sales*
$
4.4
$
5.3
-17.0
%
$
13.7
$
15.1
-9.3
%
Life mortality costs
8.4
8.7
-3.4
%
26.4
25.9
1.9
%
Life net income / core earnings*
5.1
5.3
-3.8
%
13.6
15.0
-9.3
%
Demand remains healthy in the education market for life
products. Recurring premium product sales were up 13.0%. Lower
single premium product sales led to the decline in total Life
sales* when compared with last year's strong third quarter.
Life core earnings* were down $0.2 million for the quarter due
to lower net investment income. Life persistency of 95.5% was
slightly better than the prior year period.
Investment Results Impacted by Annuity Reinsurance
Transaction
Total net investment income includes net investment income on
the investment portfolio managed by Horace Mann as well as accreted
investment income on the deposit asset on reinsurance.
(All comparisons vs. same period in 2018, unless noted
otherwise)
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2019
2018
Change
2019
2018
Change
Pretax net investment income - Investment
portfolio
$
69.2
$
99.1
-30.2
%
$
232.3
$
288.1
-19.4
%
Pretax investment income - Deposit asset
on
reinsurance
23.8
—
N.M.
47.0
—
N.M.
Total pretax net investment income
93.0
99.1
-6.2
%
279.3
288.1
-3.1
%
Pretax net investment gains (losses)
(2.1
)
2.9
N.M.
151.6
1.9
N.M.
Pretax net unrealized investment gains
(losses)
on fixed maturity securities
386.1
109.6
N.M.
Annualized pretax investment portfolio
yield
4.81
%
5.31
%
-0.5
pts
4.97
%
5.19
%
-0.22
pts
N.M. - Not meaningful.
Total net investment income declined 6.2% compared with last
year's third quarter. Net investment income on the managed
portfolio declined sequentially by $1.1 million because returns on
alternative investments remained strong but were lower than the
second quarter. Pretax investment portfolio yield for the third
quarter was below the second quarter yield of 5.14%. Accreted
investment income for the deposit asset on reinsurance was $0.6
million higher compared with the second quarter.
Year-to-date 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.
Capital Position Supports Business Initiatives
At September 30, 2019, shareholders' equity was $1.58 billion,
or $38.30 per share. Excluding net unrealized investment gains on
fixed maturity securities, shareholders' equity was $1.31 billion,
or $31.84 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
annuity reinsurance transaction.
At September 30, 2019, total debt was $433 million with $135
million outstanding on the company's line of credit. The
debt-to-capital ratio was 24.8%.
Quarterly Webcast
Horace Mann’s senior management will discuss the company’s third
quarter financial results with investors on November 7, 2019 at
11:00 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 June
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 September
30,
Nine Months Ended September
30,
2019
2018
Change
2019
2018
Change
EARNINGS
SUMMARY
Net income
$
25.4
$
12.5
103.2
%
$
151.4
$
38.6
N.M.
Net investment gains (losses), after
tax
(1.6
)
2.2
-172.7
%
118.9
1.5
N.M.
Goodwill impairment
—
—
N.M.
(28.0
)
—
N.M.
Core earnings*
27.0
10.3
162.1
%
60.5
37.1
63.1
%
Per diluted share:
Net income
$
0.60
$
0.30
100.0
%
$
3.61
$
0.93
N.M.
Net investment gains (losses), after
tax
$
(0.04
)
$
0.05
-180.0
%
$
2.84
$
0.04
N.M.
Goodwill impairment
$
—
$
—
N.M.
$
(0.67
)
$
—
N.M.
Core earnings*
$
0.64
$
0.25
156.0
%
$
1.44
$
0.89
61.8
%
Weighted average number of shares and
equivalent shares (in millions) -
Diluted
42.0
41.9
0.2
%
41.9
41.7
0.5
%
RETURN ON
EQUITY
Net income return on equity - LTM (1)
9.2
%
11.8
%
9.2
%
11.8
%
Net income return on equity -
annualized
6.6
%
3.8
%
14.1
%
3.7
%
Core return on equity - LTM* (2)
4.1
%
5.3
%
4.1
%
5.3
%
Core return on equity - annualized*
8.3
%
3.4
%
6.4
%
4.1
%
FINANCIAL
POSITION
Per share (3):
Book value
$
38.30
$
31.78
20.5
%
Effect of net unrealized investment gains
on fixed maturity securities (4)
$
6.46
$
1.85
N.M.
Dividends paid
$
0.2875
$
0.2850
0.9
%
$
0.8625
$
0.8550
0.9
%
Ending number of shares outstanding (in
millions) (3)
41.2
41.0
0.5
%
Total assets
$
12,332.5
$
11,280.8
9.3
%
Short-term debt
135.0
—
N.M.
Long-term debt
298.0
297.7
0.1
%
Total shareholders' equity
1,578.6
1,304.3
21.0
%
ADDITIONAL
INFORMATION
Net investment gains (losses)
Before tax
$
(2.1
)
$
2.9
N.M.
$
151.6
$
1.9
N.M.
After tax
(1.6
)
2.2
N.M.
118.9
1.5
N.M.
Per share, diluted
$
(0.04
)
$
0.05
N.M.
$
2.84
$
0.04
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
41,213,085 at September 30, 2019 and 41,040,746 at September 30,
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 September
30,
Nine Months Ended September
30,
2019
2018
Change
2019
2018
Change
STATEMENTS OF
OPERATIONS
Insurance premiums and contract charges
earned
$
239.7
$
206.8
15.9
%
$
657.6
$
615.4
6.9
%
Net investment income
93.0
99.1
-6.2
%
279.3
288.1
-3.1
%
Net investment gains (losses)
(2.1
)
2.9
N.M.
151.6
1.9
N.M.
Other income
3.8
2.6
46.2
%
10.6
7.7
37.7
%
Total revenues
334.4
311.4
7.4
%
1,099.1
913.1
20.4
%
Benefits, claims and settlement
expenses
154.2
161.8
-4.7
%
446.3
473.7
-5.8
%
Interest credited
53.6
52.1
2.9
%
160.1
153.2
4.5
%
Operating expenses
61.4
51.0
20.4
%
169.6
149.4
13.5
%
DAC unlocking and amortization expense
26.3
26.2
0.4
%
82.9
79.4
4.4
%
Intangible asset amortization expense
3.8
—
N.M.
4.9
—
N.M.
Interest expense
4.6
3.2
43.8
%
11.2
9.7
15.5
%
Other expense - goodwill impairment
—
—
N.M.
28.0
—
N.M.
Total benefits, losses and expenses
303.9
294.3
3.3
%
903.0
865.4
4.3
%
Income before income taxes
30.5
17.1
78.4
%
196.1
47.7
N.M.
Income tax expense
5.1
4.6
10.9
%
44.7
9.1
N.M.
Net income
$
25.4
$
12.5
103.2
%
$
151.4
$
38.6
N.M.
PREMIUMS WRITTEN
AND CONTRACT DEPOSITS*
Property and Casualty
$
182.5
$
182.7
-0.1
%
$
518.5
$
515.1
0.7
%
Supplemental
32.7
N/A
N/A
32.7
N/A
N/A
Annuity contract deposits
128.3
127.0
1.0
%
344.6
326.0
5.7
%
Life
27.7
28.4
-2.5
%
82.5
82.7
-0.2
%
Total
$
371.2
$
338.1
9.8
%
$
978.3
$
923.8
5.9
%
SEGMENT NET
INCOME (LOSS)
Property and Casualty
$
14.2
$
(3.2
)
N.M.
$
34.3
$
(4.4
)
N.M.
Supplemental
6.9
N/A
N/A
6.9
N/A
N/A
Retirement
5.9
12.1
51.2
%
(6.9
)
37.6
-118.4
%
Life
5.1
5.3
3.8
%
13.6
15.0
-9.3
%
Corporate and Other (1)
(6.7
)
(1.7
)
N.M.
103.5
(9.6
)
N.M.
Net income
$
25.4
$
12.5
103.2
%
$
151.4
$
38.6
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 5.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
Change
2019
2018
Change
PROPERTY and
CASUALTY
Premiums written*
$
182.5
$
182.7
-0.1
%
$
518.5
$
515.1
0.7
%
Premiums earned
170.5
168.6
1.1
%
512.6
501.4
2.2
%
Net investment income
10.7
12.4
-13.7
%
33.6
32.2
4.3
%
Other income
0.5
0.4
25.0
%
1.7
1.4
21.4
%
Losses and loss adjustment expenses
(LAE)
119.0
140.0
-15.0
%
368.2
407.7
-9.7
%
Operating expenses (includes amortization
expense)
45.0
45.8
-1.7
%
136.9
133.7
2.4
%
Interest expense
0.3
0.3
—
%
1.0
0.8
25.0
%
Income (loss) before tax
17.4
(4.7
)
N.M.
41.8
(7.2
)
N.M.
Net income (loss) / core earnings*
14.2
(3.2
)
N.M.
34.3
(4.4
)
N.M.
Net investment income, after tax
9.0
10.5
-14.3
%
28.4
27.6
2.9
%
Catastrophe costs (1)
After tax
11.6
25.4
-54.3
%
37.6
54.3
-30.8
%
Before tax
14.7
32.2
-54.3
%
47.6
68.8
-30.8
%
Prior years' reserves favorable
(adverse)
development, before tax
Automobile
3.5
—
N.M.
5.5
—
N.M.
Property and other
—
—
N.M.
2.0
0.3
N.M.
Total
3.5
—
N.M.
7.5
0.3
N.M.
Operating statistics:
Loss and loss adjustment expense ratio
69.8
%
83.0
%
-13.2
pts
71.8
%
81.3
%
-9.5
pts
Expense ratio
26.4
%
27.1
%
-0.7
pts
26.7
%
26.7
%
—
pts
Combined ratio
96.2
%
110.1
%
-13.9
pts
98.5
%
108.0
%
-9.5
pts
Effect on the combined ratio of:
Catastrophe costs (1)
8.6
%
19.1
%
-10.5
pts
9.3
%
13.7
%
-4.4
pts
Prior years' (favorable) adverse reserve
development
-2.1
%
—
%
-2.1
pts
-1.5
%
-0.1
%
-1.4
pts
Combined ratio excluding the effects
of
catastrophe costs and prior years'
reserve
development (underlying combined
ratio)*
89.7
%
91.0
%
-1.3
pts
90.7
%
94.4
%
-3.7
pts
Policies in force (in thousands)
637
668
-4.6
%
Automobile (2)
441
466
-5.4
%
Property
196
202
-3.0
%
Policy renewal rate - 12 months
Automobile
80.9
%
82.5
%
-1.6
pts
Property
87.3
%
87.9
%
-0.6
pts
N.M.-
Not meaningful.
(1)
Includes allocated loss adjustment
expenses and, when applicable, catastrophe reinsurance
reinstatement premiums.
(2)
September 30, 2019 includes assumed
policies in force of 4.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
Change
2019
2018
Change
SUPPLEMENTAL
Premiums and contract charges earned
$
32.9
N/A
N/A
$
32.9
N/A
N/A
Net investment income
3.7
N/A
N/A
3.7
N/A
N/A
Other income
0.6
N/A
N/A
0.6
N/A
N/A
Benefits
11.1
N/A
N/A
11.1
N/A
N/A
Change in reserves
3.6
N/A
N/A
3.6
N/A
N/A
Operating expenses (includes DAC unlocking
and amortization expense)
10.5
N/A
N/A
10.5
N/A
N/A
Intangible asset amortization expense
3.2
N/A
N/A
3.2
N/A
N/A
Income before tax
8.8
N/A
N/A
8.8
N/A
N/A
Net income / core earnings*
6.9
N/A
N/A
6.9
N/A
N/A
Benefits ratio (1)
44.7
%
N/A
N/A
44.7
%
N/A
N/A
Operating expense ratio (2)
28.2
%
N/A
N/A
28.2
%
N/A
N/A
Pretax profit margin (3)
23.7
%
N/A
N/A
23.7
%
N/A
N/A
Premium persistency
88.9
%
N/A
N/A
88.9
%
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 September
30,
Nine Months Ended September
30,
2019
2018
Change
2019
2018
Change
RETIREMENT
Contract deposits*
$
128.3
$
127.0
1.0
%
$
344.6
$
326.0
5.7
%
Variable
54.6
53.8
1.5
%
157.5
151.3
4.1
%
Fixed
73.7
73.2
0.7
%
187.1
174.7
7.1
%
Contract charges earned
6.6
8.0
-17.5
%
22.1
23.9
-7.5
%
Net investment income
37.0
67.7
-45.3
%
141.2
199.7
-29.3
%
Interest credited
17.5
40.8
-57.1
%
77.2
119.4
-35.3
%
Net interest margin
19.5
26.9
-27.5
%
64.0
80.3
-20.3
%
Investment income - Deposit asset on
reinsurance
23.8
—
N.M.
47.0
—
N.M.
Interest credited - Reinsured block
24.9
—
N.M.
49.2
—
N.M.
Net interest margin - Reinsured block
(1.1
)
—
N.M.
(2.2
)
—
N.M.
Other income
2.3
1.8
27.8
%
7.1
5.3
34.0
%
Mortality loss and other reserve
changes
(0.9
)
(1.5
)
40.0
%
(2.7
)
(4.8
)
43.8
%
Operating expenses (includes DAC unlocking
and amortization expense)
18.8
18.4
2.2
%
61.8
56.7
9.0
%
Intangible asset amortization expense
0.6
—
N.M.
1.7
—
N.M.
Other expense - goodwill impairment
—
—
N.M.
28.0
—
N.M.
Income (loss) before tax
7.0
16.8
-58.3
%
(3.2
)
48.0
-106.7
%
Net income (loss)
5.9
12.1
-51.2
%
(6.9
)
37.6
-118.4
%
Core earnings*
5.9
12.1
-51.2
%
21.1
37.6
-43.9
%
Pretax income increase (decrease) due to
evaluation of:
Deferred policy acquisition costs
$
—
$
0.3
-100.0
%
$
(3.6
)
$
(0.1
)
N.M.
Guaranteed minimum death benefit
reserve
—
—
—
%
0.1
—
N.M.
Retirement contracts in force (in
thousands)
227
224
1.3
%
Annuity accumulated account value on
deposit /
Assets under management
4,215.9
$
6,997.7
-39.8
%
Variable (1)
1,635.0
2,292.5
-28.7
%
Fixed
2,580.9
4,705.2
-45.1
%
Annuity accumulated value retention - 12
months
Variable accumulations
94.7
%
94.5
%
0.2
pts
Fixed accumulations
93.9
%
94.2
%
-0.3
pts
LIFE
Premiums and contract deposits*
$
27.7
$
28.4
-2.5
%
$
82.5
$
82.7
-0.2
%
Premiums and contract charges earned
29.7
30.2
-1.7
%
90.0
90.1
-0.1
%
Net investment income
18.4
19.1
-3.7
%
54.8
56.6
-3.2
%
Other income
—
0.1
-100.0
%
0.2
0.2
—
%
Death benefits/mortality cost/change in
reserves
19.6
20.3
-3.4
%
60.7
61.2
-0.8
%
Interest credited
11.2
11.3
-0.9
%
33.7
33.8
-0.3
%
Operating expenses (includes DAC unlocking
and amortization expense)
10.9
10.8
0.9
%
33.5
32.9
1.8
%
Income before tax
6.4
7.0
-8.6
%
17.1
19.0
-10.0
%
Net income / core earnings*
5.1
5.3
-3.8
%
13.6
15.0
-9.3
%
Pretax income increase (decrease) due to
evaluation of:
Deferred policy acquisition costs
$
—
$
(0.1
)
-100.0
%
$
0.1
$
(0.2
)
N.M.
Life policies in force (in thousands)
202
198
2.0
%
Life insurance in force
$
18,937
$
18,054
4.9
%
Lapse ratio - 12 months (Ordinary life
insurance)
4.5
%
4.8
%
-0.3
pts
N.M.-
Not meaningful.
(1)
Amount reported as of September
30, 2019 excludes $673.1 of assets under management held under
modified coinsurance reinsurance.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
Change
2019
2018
Change
CORPORATE AND
OTHER (1)
Components of income (loss) before
tax:
Net investment gains (losses)
$
(2.1
)
$
2.9
N.M.
$
151.6
$
1.9
N.M.
Interest expense
(4.3
)
(2.9
)
-48.3
%
(10.2
)
(8.9
)
-14.6
%
Other operating expenses, net investment
income and other income
(2.7
)
(2.0
)
-35.0
%
(9.8
)
(5.1
)
-92.2
%
Income (loss) before tax
(9.1
)
(2.0
)
N.M.
131.6
(12.1
)
N.M.
Net income (loss)
(6.7
)
(1.7
)
N.M.
103.5
(9.6
)
N.M.
INVESTMENTS
Retirement and Life
Fixed maturity securities, at fair
value
(amortized cost 2019, $4,113.4; 2018,
$6,579.1)
$
4,432.7
$
6,680.5
-33.6
%
Equity securities, at fair value
76.2
76.7
-0.7
%
Short-term investments
180.7
49.7
263.6
%
Policy loans
153.1
153.6
-0.3
%
Limited partnerships
281.1
245.2
14.6
%
Other investments
35.0
23.5
48.9
%
Total Retirement and Life investments
5,158.8
7,229.2
-28.6
%
Property and Casualty
Fixed maturity securities, at fair
value
(amortized cost 2019, $879.1; 2018,
$840.4)
934.6
848.6
10.1
%
Equity securities, at fair value
29.3
56.5
-48.1
%
Short-term investments
10.0
13.4
-25.4
%
Limited partnerships
65.7
81.8
-19.7
%
Other investments
1.0
1.0
—
%
Total Property and Casualty
investments
1,040.6
1,001.3
3.9
%
Supplemental
Fixed maturity securities, at fair
value
(amortized cost 2019, $461.0)
472.2
N/A
N/A
Equity securities, at fair value
—
N/A
N/A
Short-term investments
46.7
N/A
N/A
Policy loans
0.8
N/A
N/A
Limited partnerships
7.8
N/A
N/A
Other investments
5.7
N/A
N/A
Total Supplemental investments
533.2
N/A
N/A
Corporate investments
0.4
11.5
-96.5
%
Total investments
6,733.0
8,242.0
-18.3
%
Net investment income - Investment
portfolio
Before tax
$
69.2
$
99.1
-30.2
%
$
232.3
$
288.1
-19.4
%
After tax
55.3
79.0
-30.0
%
185.5
229.7
-19.2
%
Investment income - Deposit asset on
reinsurance
Before tax
23.8
—
N.M.
47.0
—
N.M.
After tax
18.8
—
N.M.
37.1
—
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/20191106005986/en/
Contact information: Heather J. Wietzel Vice President,
Investor Relations 217-788-5144
investorrelations@horacemann.com
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