- Net income and core earnings per share below prior year as
strong business performance offset by catastrophe losses and auto
loss costs approaching pre-pandemic levels plus inclusion of Camp
Fire subrogation recovery in third-quarter 2020
- Niche education market focus and multi-year emphasis on
products, distribution and infrastructure setting stage for
education market share growth
- Supplemental and Retirement quarterly sales highest since onset
of pandemic; Life sales above prior year
- Net investment income rose $10 million or 11% on strong returns
from alternatives portfolio
- Book value per share up 4% and book value excluding net
unrealized gains* up 7% from a year ago
- Management anticipates fourth-quarter EPS in range of 65 cents
to 80 cents, with full-year 2021 ROE close to 10%
- Acquisition of Madison National on track to close in early
2022, adding new suite of employer-sponsored benefit products and
new independent benefit broker distribution to K-12 school
districts
- Expecting 2022 EPS accretion from transaction to be at least 15
cents to 20 cents with approximately 50 basis point contribution to
ROE
- Growing market share supports progress toward long-term
objective of sustainable double-digit ROE
Horace Mann Educators Corporation (NYSE:HMN) today reported
financial results for the three months ended September 30,
2021:
($ in millions, except per share
amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
% Change
2021
2020
% Change
Total revenues
$
329.6
$
337.1
-2.2
%
$
998.7
$
958.1
4.2
%
Net income
16.3
36.5
-55.3
%
102.3
85.5
19.6
%
Net investment (losses) gains after
tax
(5.1
)
1.9
N.M.
(8.3
)
(10.1
)
N.M.
Core earnings*
21.4
34.6
-38.2
%
110.6
95.6
15.7
%
Per diluted share:
Net income
0.39
0.87
-55.2
%
2.43
2.03
19.7
%
Net investment (losses) gains after
tax
(0.11
)
0.05
N.M.
(0.19
)
(0.24
)
N.M.
Core earnings per diluted share*
0.50
0.82
-39.0
%
2.62
2.27
15.4
%
Book value per share
43.30
41.45
4.5
%
Book value per share excluding net
unrealized
investment gains on fixed maturity
securities*
35.90
33.52
7.1
%
N.M. - Not meaningful.
* These measures are not based on accounting principles
generally accepted in the United States of America (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.
“While all our business areas are showing some encouraging signs
of momentum, the pace continues to vary by segment and geography
compared to the pre-pandemic environment. Our Retirement line
continued the strong performance it has delivered since the
pandemic began, with its highest sales quarter in several years,”
said Horace Mann President and CEO Marita Zuraitis. “In addition,
as educators returned to a ‘more normal’ school year, we have seen
more opportunities to interact with them, introduce ourselves to
new clients and engage in enrollment activities. This led to our
highest sales quarter since the pandemic began for the Supplemental
segment. Overall, it is clear that educators continue to find our
financial solutions relevant for their needs. We also are seeing
solid agent recruiting, typically a ‘leading indicator’ of future
sales growth.
“Further, net investment income continued to outperform
expectations in the third quarter, due to the strength of our
alternatives investment strategy,” Zuraitis continued. “The strong
operating performance and net investment income increase were
partially offset by the impact on our policyholders from Hurricane
Ida and other catastrophe events, with $38.6 million in pretax
catastrophe losses for the quarter, in line with our previous
announcement. For the fourth quarter, we expect core EPS of $0.65
to $0.80 per diluted share with our full-year 2021 return on equity
approaching 10%, a positive step toward our long-term sustainable
double-digit ROE target.
“Our acquisition of Madison National Life remains on track for
an early 2022 close, solidifying our approach of reaching educators
wherever they get their protection and financial services
solutions. In addition to providing individual products through
local, trusted advisors, we will be able to reach substantially
more educators through employer-sponsored group worksite solutions
that also assist districts with attracting and retaining staff,”
Zuraitis said. “In its first year with Horace Mann, we expect
Madison National to be accretive to EPS and ROE, and for the
combined company to generate more than $50 million in excess
capital each year. Over the past few years, we have developed a
strong track record of prudent capital allocation that maximizes
value for shareholders by prioritizing growth, as well as continued
stock repurchases and maintaining our track record of annual
increases in our cash dividend.”
Property and Casualty segment loss due to catastrophe losses,
auto loss costs returning to pre-pandemic levels (All
comparisons vs. same period in 2020, unless noted otherwise)
The Property and Casualty insurance segment primarily markets
private passenger automobile insurance and residential home
insurance. Horace Mann offers standard automobile coverages,
including liability, collision and comprehensive. Property coverage
includes both homeowners and renters policies. For both automobile
and property coverage, Horace Mann offers educators a discounted
rate and the Educator Advantage® package of features. The Property
and Casualty segment represented 53% of 2020 total revenues and
contributed $76.5 million to 2020 core earnings.
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Property and Casualty premiums
written*
$
163.8
$
172.8
-5.2
%
$
461.2
$
482.5
-4.4
%
Property and Casualty net income / core
earnings*
(4.7
)
15.8
-129.7
%
42.5
53.7
-20.9
%
Property and Casualty combined ratio
112.0
%
96.5
%
15.5
pts
99.1
%
93.5
%
5.6
pts
Property and Casualty underlying loss
ratio*
61.4
%
54.7
%
6.7
pts
60.0
%
53.6
%
6.4
pts
Property and Casualty expense ratio
27.5
%
25.2
%
2.3
pts
26.2
%
25.8
%
0.4
pts
Property and Casualty catastrophe
losses
25.1
%
20.9
%
4.2
pts
14.5
%
16.0
%
-1.5
pts
Property and Casualty underlying combined
ratio*
88.9
%
79.9
%
9.0
pts
86.2
%
79.4
%
6.8
pts
Auto combined ratio
99.2
%
83.3
%
15.9
pts
92.1
%
85.3
%
6.8
pts
Auto underlying loss ratio*
70.6
%
56.8
%
13.8
pts
65.7
%
58.1
%
7.6
pts
Property combined ratio
136.1
%
121.7
%
14.4
pts
112.4
%
109.6
%
2.8
pts
Property underlying loss ratio*
43.5
%
50.8
%
-7.3
pts
49.0
%
44.9
%
4.1
pts
The Property and Casualty segment core loss was due to
catastrophe loss costs and auto loss costs continuing to move
closer to pre-pandemic levels. Policyholder catastrophe losses were
$38.6 million, which added 25.1 points to the combined ratio,
compared to $34.8 million or 20.9 points in last year’s third
quarter. The largest event was Hurricane Ida, with $23.7 million in
policyholder losses. The auto underlying loss ratio was 70.6%,
compared to prior year auto underlying loss ratio of 56.8%, as
driving patterns returned to a more normal level and severity
continues to rise. In addition, last year’s third quarter benefited
from the $8.7 million Camp Fire subrogation recovery, reported as
$5.2 million in favorable prior year reserve development and $3.5
million in return of reinsurance reinstatement premiums.
Property and Casualty premiums written of $163.8 million were
below last year’s third quarter with new business volume remaining
below historical levels due to the impact of the pandemic on sales,
as well as the impact of the Camp Fire subrogation recovery in
third-quarter 2020. Auto average premiums were down slightly,
driven in part by changes in miles driven during the pandemic.
Property average premiums rose slightly as adjustments to coverage
values continue to take effect. Rate increases are expected to play
a greater role in the coming quarters.
Supplemental segment sees highest sales quarter since
beginning of pandemic (All comparisons vs. same period in 2020,
unless noted otherwise)
The Supplemental insurance segment specializes in marketing
supplemental insurance products, including cancer, heart, hospital,
supplemental disability and accident for the education market. The
segment represented 12% of 2020 total revenues and contributed
$43.1 million to 2020 core earnings.
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Sales*
$
2.0
$
1.4
42.9
%
$
4.2
$
5.8
-27.6
%
Premiums earned
31.0
32.5
-4.6
%
94.3
98.8
-4.6
%
Supplemental net income / core
earnings*
11.4
10.6
7.5
%
34.8
30.6
13.7
%
Pretax profit margin(1)
37.6
%
36.3
%
1.3 pts
38.8
%
34.7
%
4.1 pts
(1) Measured to total revenues.
Supplemental segment sales were $2.0 million in the third
quarter, a 42.9% increase over prior year and the highest quarter
since the start of the pandemic. Persistency remained very strong
at 92.2%.
Strong core earnings reflected higher net investment income as
well as favorable business trends including some continued benefit
from changes in policyholder behavior due to the pandemic. Segment
expenses include the non-cash impact of amortization of intangible
assets under purchase accounting that reduced core earnings by $2.9
million pretax. The pretax profit margin remains above management’s
longer-term expectations because of the pandemic-related changes in
policyholder behavior.
Retirement segment benefits from strong net investment
spread (All comparisons vs. same period in 2020, unless noted
otherwise)
The Retirement segment primarily markets 403(b) tax-qualified
fixed, fixed index and variable annuities; the Horace Mann
Retirement Advantage® open architecture platform for 403(b)(7) and
other defined contribution plans; and other retirement products to
educators. Horace Mann is one of the largest participants in the
K-12 educator portion of the 403(b) tax-qualified annuity market,
measured by 403(b) net written premium on a statutory accounting
basis. The Retirement segment represented 21% of 2020 total
revenues and contributed $28.2 million to 2020 core earnings.
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Net annuity contract deposits*
$
121.4
$
118.7
2.3
%
$
344.6
$
326.1
5.7
%
Annuity assets under management(1)
5,246.9
4,508.7
16.4
%
Total assets under administration(2)
9,352.7
8,032.6
16.4
%
Retirement net income / core earnings*
14.1
7.8
80.8
%
36.2
16.6
118.1
%
Retirement core earnings excluding DAC
unlocking*
13.5
7.3
84.9
%
34.8
15.6
123.1
%
(1) Amount reported as of September 30,
2021 excludes $820.2 million of assets under management held under
modified coinsurance reinsurance.
(2) Includes Annuity AUM, Brokerage and
Advisory AUA, and Recordkeeping AUA.
Net annuity contract deposits rose 2.3% over last year’s third
quarter. Horace Mann’s relationship with educators often begins
with 403(b) retirement savings products, including the company’s
attractive annuity products, which provide encouraging cross-sell
opportunities. Total cash value persistency remained strong at
94.7% for both variable and fixed annuities.
Horace Mann currently has $5.2 billion in annuity assets under
management, including $2.2 billion of fixed annuities, $2.5 billion
of variable annuities and $0.5 billion of fixed indexed annuities.
Assets under administration, which includes Retirement Advantage
and other advisory and recordkeeping assets, was up 16.4% from a
year ago, as assets under management continued to rise due to
strong equity market performance over the past 12 months.
The net interest spread was 297 points, reflecting the strong
returns from the alternatives portfolio. Core earnings excluding
DAC unlocking was up 84.9%, primarily due to the strong net
interest margin.
Life segment third-quarter core earnings increase on higher
net investment income (All comparisons vs. same period in 2020,
unless noted otherwise)
The Life insurance segment primarily markets traditional term
and whole life insurance products to educators. The Life segment
represented 14% of 2020 total revenues and contributed $10.4
million to 2020 core earnings.
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Total sales*
$
3.5
$
2.7
29.6
%
$
10.8
$
9.6
12.5
%
Annualized sales*
2.0
2.0
—
%
6.4
6.4
—
%
Life mortality costs
10.3
9.0
14.4
%
33.4
28.3
18.0
%
Life net income / core earnings*
5.1
4.3
18.6
%
10.8
6.8
58.8
%
Life annualized sales were unchanged from last year on strong
new sales of recurring premium policies and an increase in sales of
single premium policies. Life core earnings for the quarter rose
18.6%, reflecting strong net investment income growth and mortality
costs slightly above expectations. Full-year persistency for life
products of 96.2% remains in line with prior periods.
Investment portfolio sees strong returns from alternatives
portfolio (All comparisons vs. same period in 2020, unless
noted otherwise)
Horace Mann’s investment strategy is primarily focused on
generating income to support product liabilities, and balances
principal protection and risk. 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 reinsurance of policy
liabilities related to legacy individual annuities written in 2002
or earlier.
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Pretax net investment income - investment
portfolio
$
78.1
$
69.2
12.9
%
$
233.3
$
184.3
26.6
%
Pretax investment income - deposit asset
on
reinsurance
25.6
24.5
4.5
%
75.1
72.1
4.2
%
Total pretax net investment income
103.7
93.7
10.7
%
308.4
256.4
20.3
%
Pretax net investment (losses) gains
(6.5)
2.5
N.M.
(10.6)
(12.8)
N.M.
Pretax net unrealized investment gains on
fixed
maturity securities
466.4
496.2
-6.0
%
Investment yield, excluding limited
partnership
interests, pretax - annualized
4.36
%
4.18
%
0.18 pts
4.29
%
4.36
%
-0.07 pts
N.M. - Not meaningful.
Total net investment income was up 10.7% or $10.0 million. Net
investment income on the managed portfolio rose 12.9%, reflecting
strong returns in the alternatives portfolio in the third quarter,
largely due to private equity and venture capital limited
partnership investments. The company’s fixed maturity securities
portfolio is in a net unrealized investment gain position of $466.4
million at September 30, 2021.
Book value excluding net unrealized investment gains up 7%
year over year
At September 30, 2021, shareholders’ equity was $1.80 billion,
or $43.30 per share. Excluding net unrealized investment gains on
fixed maturity securities, shareholders’ equity was $1.49 billion,
or $35.90 per share.* At September 30, 2021, total debt was $388.6
million, with $135.0 million outstanding on the company’s line of
credit. The ratio of debt-to-capital excluding net unrealized
investment gains* was 20.7%.
As of September 30, 2021, $18.9 million remained authorized for
future share repurchases under the share repurchase program.
Segment guidance
The company’s current guidance for fourth quarter 2021 core EPS
is 65 cents to 80 cents. Segment guidance includes fourth-quarter
net investment income estimated to total approximately $95 million
to $100 million.
- Property and Casualty segment fourth-quarter 2021 core earnings
expected to be in the range of $10 million to $13 million.
Underlying auto loss ratio expected to be above third quarter with
frequency at or near pre-pandemic levels and higher severity.
- Supplemental segment fourth-quarter 2021 core earnings expected
to be in the range of $10 million to $11 million.
- Life segment fourth-quarter 2021 core earnings expected to be
in the range of $3 million to $4 million.
- Retirement segment fourth-quarter 2021 core earnings expected
to be in the range of $10 million to $11 million.
Quarterly webcast
Horace Mann’s senior management will discuss the company’s
third-quarter financial results with investors on Nov. 4, 2021 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 quarterly period
ended June 30, 2021 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
September 30,
Nine Months Ended
September 30,
2021
2020
% Change
2021
2020
% Change
Earnings Summary
Net income
$
16.3
$
36.5
-55.3
%
$
102.3
$
85.5
19.6
%
Net investment (losses) gains, after
tax
(5.1
)
1.9
N.M.
(8.3
)
(10.1
)
N.M.
Core earnings*
21.4
34.6
-38.2
%
110.6
95.6
15.7
%
Per diluted share:
Net income
$
0.39
$
0.87
-55.2
%
$
2.43
$
2.03
19.7
%
Net investment (losses) gains, after
tax
(0.11
)
0.05
N.M.
(0.19
)
(0.24
)
N.M.
Core earnings*
0.50
0.82
-39.0
%
2.62
2.27
15.4
%
Weighted average number of shares and
equivalent shares (in millions) -
Diluted
42.2
42.1
0.2
%
42.2
42.0
0.5
%
Return on Equity
Net income return on equity - LTM(1)
8.5
%
7.4
%
8.5
%
7.4
%
Net income return on equity -
annualized
3.6
%
8.7
%
7.6
%
6.9
%
Core return on equity - LTM*(2)
10.9
%
9.4
%
10.9
%
9.4
%
Core return on equity - annualized*
5.8
%
10.1
%
10.1
%
9.4
%
Financial Position
Per share:(3)
Book value
$
43.30
$
41.45
4.5
%
Effect of net unrealized investment gains
on
fixed maturity securities(4)
$
7.40
$
7.93
-6.7
%
Dividends paid
$
0.31
$
0.30
3.3
%
$
0.93
$
0.90
3.3
%
Ending number of shares outstanding (in
millions)(3)
41.5
41.4
0.2
%
Total assets
$
14,266.0
$
13,003.4
9.7
%
Short-term debt
135.0
135.0
—
%
Long-term debt
253.6
302.2
-16.1
%
Total shareholders’ equity
1,796.4
1,715.7
4.7
%
Additional Information
Net investment (losses) gains
Before tax
$
(6.5
)
$
2.5
N.M.
$
(10.6
)
$
(12.8
)
N.M.
After tax
(5.1
)
1.9
N.M.
(8.3
)
(10.1
)
N.M.
Per share, diluted
$
(0.11
)
$
0.05
N.M.
$
(0.19
)
$
(0.24
)
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
41,487,287 at September 30, 2021 and 41,396,322 at September 30,
2020.
(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,
2021
2020
% Change
2021
2020
% Change
Statements of Operations
Premiums and contract charges earned
$
225.4
$
235.3
-4.2
%
$
678.8
$
697.0
-2.6
%
Net investment income
103.7
93.7
10.7
%
308.4
256.4
20.3
%
Net investment (losses) gains
(6.5
)
2.5
N.M.
(10.6
)
(12.8
)
N.M.
Other income
7.0
5.6
25.0
%
22.1
17.5
26.3
%
Total revenues
329.6
337.1
-2.2
%
998.7
958.1
4.2
%
Benefits, claims and settlement
expenses
164.8
151.4
8.9
%
446.2
433.1
3.0
%
Interest credited
51.9
51.1
1.6
%
153.7
153.3
0.3
%
Operating expenses
64.3
57.9
11.1
%
182.8
173.1
5.6
%
DAC unlocking and amortization expense
22.9
24.6
-6.9
%
70.5
75.0
-6.0
%
Intangible asset amortization expense
3.3
3.5
-5.7
%
9.8
10.9
-10.1
%
Interest expense
3.4
3.5
-2.9
%
10.4
11.7
-11.1
%
Total benefits, losses and expenses
310.6
292.0
6.4
%
873.4
857.1
1.9
%
Income before income taxes
19.0
45.1
-57.9
%
125.3
101.0
24.1
%
Income tax expense
2.7
8.6
-68.6
%
23.0
15.5
48.4
%
Net income
$
16.3
$
36.5
-55.3
%
$
102.3
$
85.5
19.6
%
Premiums Written and Contract
Deposits*
Property and Casualty
$
163.8
$
172.8
-5.2
%
$
461.2
$
482.5
-4.4
%
Supplemental
30.9
32.0
-3.4
%
94.2
98.3
-4.2
%
Net annuity contract deposits
121.4
118.7
2.3
%
344.6
326.1
5.7
%
Life
30.1
26.9
11.9
%
84.8
79.3
6.9
%
Total
$
346.2
$
350.4
-1.2
%
$
984.8
$
986.2
-0.1
%
Segment Net Income (Loss)
Property and Casualty
$
(4.7
)
$
15.8
-129.7
%
$
42.5
$
53.7
-20.9
%
Supplemental
11.4
10.6
7.5
%
34.8
30.6
13.7
%
Retirement
14.1
7.8
80.8
%
36.2
16.6
118.1
%
Life
5.1
4.3
18.6
%
10.8
6.8
58.8
%
Corporate and Other(1)
(9.6
)
(2.0
)
N.M.
(22.0
)
(22.2
)
0.9
%
Net income
$
16.3
$
36.5
-55.3
%
$
102.3
$
85.5
19.6
%
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
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Property and Casualty
Premiums written*
$
163.8
$
172.8
-5.2
%
$
461.2
$
482.5
-4.4
%
Premiums earned
153.3
166.0
-7.7
%
464.1
488.7
-5.0
%
Net investment income
11.3
13.7
-17.5
%
43.8
30.3
44.6
%
Other income
0.7
0.5
40.0
%
4.0
2.1
90.5
%
Losses and loss adjustment expenses
(LAE)
129.5
118.4
9.4
%
338.2
331.0
2.2
%
Operating expenses (includes amortization
expense)
42.1
41.9
0.5
%
121.5
126.0
-3.6
%
Interest expense
—
0.1
-100.0
%
0.1
0.4
-75.0
%
Income (loss) before income taxes
(6.3
)
19.8
-131.8
%
52.1
63.7
-18.2
%
Net income (loss) / core earnings
(loss)*
(4.7
)
15.8
-129.7
%
42.5
53.7
-20.9
%
Net investment income, after tax
9.4
11.3
-16.8
%
36.1
25.5
41.6
%
Catastrophe losses
After tax
30.5
27.5
10.9
%
53.0
61.9
-14.4
%
Before tax
38.6
34.8
10.9
%
67.1
78.3
-14.3
%
Prior years’ reserve development, before
tax(1)
Automobile
(2.0
)
(1.0
)
100.0
%
(5.0
)
(2.0
)
150.0
%
Property and other
(1.0
)
(6.2
)
-83.9
%
(2.2
)
(7.2
)
-69.4
%
Total
(3.0
)
(7.2
)
-58.3
%
(7.2
)
(9.2
)
-21.7
%
Operating statistics:
Loss and loss adjustment expense ratio
84.5
%
71.3
%
13.2
pts
72.9
%
67.7
%
5.2
pts
Expense ratio
27.5
%
25.2
%
2.3
pts
26.2
%
25.8
%
0.4
pts
Combined ratio
112.0
%
96.5
%
15.5
pts
99.1
%
93.5
%
5.6
pts
Effect on the combined ratio of:
Catastrophe losses
25.1
%
20.9
%
4.2
pts
14.5
%
16.0
%
-1.5
pts
Prior years’ reserve development(1)
-2.0
%
-4.3
%
2.3
pts
-1.6
%
-1.9
%
0.3
pts
Combined ratio excluding the effects
of
catastrophe losses and prior years’
reserve
development (underlying combined
ratio)*
88.9
%
79.9
%
9.0
pts
86.2
%
79.4
%
6.8
pts
Risks in force (in thousands)
559
593
-5.7
%
Automobile(2)
381
406
-6.2
%
Property
178
187
-4.8
%
Policy renewal rate - 12 months
Automobile(3)
83.3
%
80.9
%
2.4
pts
Property(3)
88.0
%
86.7
%
1.3
pts
N.M. - Not meaningful.
(1)
(Favorable) unfavorable.
(2)
Includes assumed risks in force of 4.
(3)
For the nine months ended September 30,
2021, retention data is an estimate due to system conversion.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
Change
2021
2020
Change
Supplemental
Premiums and contract charges earned
$
31.0
$
32.5
-4.6
%
$
94.3
$
98.8
-4.6
%
Net investment income
7.1
4.3
65.1
%
18.7
11.8
58.5
%
Other income
0.5
0.7
-28.6
%
1.8
2.0
-10.0
%
Benefits
8.7
9.2
-5.4
%
27.0
28.6
-5.6
%
Change in reserves
1.7
1.3
30.8
%
3.0
4.9
-38.8
%
Interest credited
0.1
0.2
-50.0
%
0.2
0.2
—
%
Operating expenses (includes DAC unlocking
and
amortization expense)
10.7
10.1
5.9
%
31.3
30.3
3.3
%
Intangible asset amortization expense
2.9
3.1
-6.5
%
8.8
9.5
-7.4
%
Income before income taxes
14.5
13.6
6.6
%
44.5
39.1
13.8
%
Net income / core earnings*
11.4
10.6
7.5
%
34.8
30.6
13.7
%
Benefits ratio(1)
33.5
%
32.3
%
1.2
pts
31.8
%
33.9
%
-2.1
pts
Operating expense ratio(2)
27.7
%
26.9
%
0.8
pts
27.3
%
26.9
%
0.4
pts
Pretax profit margin(3)
37.6
%
36.3
%
1.3
pts
38.8
%
34.7
%
4.1
pts
Premium persistency (rolling 12
months)
92.2
%
90.1
%
2.1
pts
92.2
%
90.1
%
2.1
pts
N.M. - Not meaningful.
(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,
2021
2020
Change
2021
2020
Change
Retirement
Net annuity contract deposits
$
121.4
$
118.7
2.3
%
$
344.6
$
326.1
5.7
%
Variable
71.0
58.5
21.4
%
200.2
168.6
18.7
%
Fixed
50.4
60.2
-16.3
%
144.4
157.5
-8.3
%
Contract charges earned
9.9
7.4
33.8
%
27.7
21.5
28.8
%
Net investment income
39.2
33.6
16.7
%
112.1
94.6
18.5
%
Interest credited
14.2
14.2
—
%
42.1
44.4
-5.2
%
Net interest margin
25.0
19.4
28.9
%
70.0
50.2
39.4
%
Investment income - deposit asset on
reinsurance
25.6
24.5
4.5
%
75.1
72.1
4.2
%
Interest credited - Reinsured block
26.5
25.5
3.9
%
77.9
75.0
3.9
%
Net interest margin - Reinsured block
(0.9
)
(1.0
)
10.0
%
(2.8
)
(2.9
)
3.4
%
Other income
5.1
3.9
30.8
%
14.7
12.1
21.5
%
Mortality loss and other reserve
changes
(0.9
)
(1.3
)
30.8
%
(3.6
)
(4.1
)
12.2
%
Operating expenses (includes DAC unlocking
and
amortization expense)
21.0
19.1
9.9
%
61.6
56.4
9.2
%
Intangible asset amortization expense
0.4
0.4
—
%
1.0
1.4
-28.6
%
Income before income taxes
16.8
8.9
88.8
%
43.4
19.0
128.4
%
Net income / core earnings*
14.1
7.8
80.8
%
36.2
16.6
118.1
%
Pretax income increase (decrease) due
to
evaluation of:
Deferred policy acquisition costs
$
0.8
$
0.7
14.3
%
$
1.8
$
1.3
38.5
%
Guaranteed minimum death benefit
reserve
—
0.1
-100.0
%
—
—
N.M.
Annuity contracts in force (thousands)
229
230
-0.4
%
Retirement Advantage® contracts in force
(thousands)
14
12
16.7
%
Annuity accumulated account value on
deposit /
Assets under management
$
5,246.9
$
4,508.7
16.4
%
Variable(1)
2,506.7
1,828.4
37.1
%
Fixed
2,740.2
2,680.3
2.2
%
Annuity accumulated value retention - 12
months
Variable accumulations
94.7
%
94.8
%
-0.1
pts
Fixed accumulations
94.7
%
94.5
%
0.2
pts
Life
Premiums written and contract
deposits*
$
30.1
$
26.9
11.9
%
$
84.8
$
79.3
6.9
%
Premiums and contract charges earned
31.2
29.4
6.1
%
92.7
88.0
5.3
%
Net investment income
21.1
18.2
15.9
%
60.5
49.4
22.5
%
Other income
0.1
0.1
—
%
0.3
0.1
N.M.
Death benefits/mortality cost/change in
reserves
24.0
21.2
13.2
%
74.4
64.5
15.3
%
Interest credited
11.1
11.2
-0.9
%
33.5
33.7
-0.6
%
Operating expenses (includes DAC unlocking
and
amortization expense)
11.2
10.1
10.9
%
32.5
31.1
4.5
%
Income before income taxes
6.1
5.2
17.3
%
13.1
8.2
59.8
%
Net income / core earnings*
5.1
4.3
18.6
%
10.8
6.8
58.8
%
Pretax income increase (decrease) due
to
evaluation of:
Deferred policy acquisition costs
$
—
$
0.2
-100.0
%
$
—
$
0.5
-100.0
%
Life policies in force (in thousands)
199
201
-1.0
%
Life insurance in force
$
20,271
$
19,681
3.0
%
Lapse ratio - 12 months (Ordinary life
insurance)
3.8
%
4.3
%
-0.5
pts
N.M. - Not meaningful.
(1)
Amount reported as of September 30, 2021
excludes $820.2 million of assets under management held under
modified coinsurance reinsurance.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
% Change
2021
2020
% Change
Corporate and Other(1)
Components of loss before tax:
Net investment (losses) gains
$
(6.5
)
$
2.5
N.M.
$
(10.6
)
$
(12.8
)
N.M.
Interest expense
(3.4
)
(3.4
)
—
%
(10.3
)
(11.3
)
8.8
%
Other operating expenses, net investment
income
and other income
(2.2
)
(1.5
)
-46.7
%
(6.9
)
(4.9
)
-40.8
%
Loss before income taxes
(12.1
)
(2.4
)
N.M.
(27.8
)
(29.0
)
4.1
%
Net loss
(9.6
)
(2.0
)
N.M.
(22.0
)
(22.2
)
0.9
%
Investments
Retirement and Life
Fixed maturity securities, at fair value
(amortized
cost, net 2021, $4,746,7; 2020,
$4,326.6)
$
5,120.3
$
4,719.0
8.5
%
Equity securities, at fair value
112.2
68.9
62.8
%
Short-term investments
32.6
219.1
-85.1
%
Policy loans
143.1
150.6
-5.0
%
Limited partnership interests
404.5
263.8
53.3
%
Other investments
51.2
44.4
15.3
%
Total Retirement and Life investments
5,863.9
5,465.8
7.3
%
Property and Casualty
Fixed maturity securities, at fair value
(amortized
cost, net 2021, $704.6; 2020, $804.1)
768.9
873.1
-11.9
%
Equity securities, at fair value
30.6
29.1
5.2
%
Short-term investments
13.5
21.1
-36.0
%
Limited partnership interests
171.2
118.6
44.4
%
Other investments
1.1
1.1
—
%
Total Property and Casualty
investments
985.3
1,043.0
-5.5
%
Supplemental
Fixed maturity securities, at fair value
(amortized
cost, net 2021, $594.3; 2020, $541.6)
622.8
576.5
8.0
%
Equity securities, at fair value
8.5
4.3
97.7
%
Short-term investments
5.7
13.8
-58.7
%
Policy loans
0.8
0.8
—
%
Limited partnership interests
39.7
35.8
10.9
%
Other investments
3.2
1.8
77.8
%
Total Supplemental investments
680.7
633.0
7.5
%
Corporate and Other
Equity securities, at fair value
1.0
—
N.M.
Short-term investments
0.4
0.3
33.3
%
Total Corporate and Other investments
1.4
0.3
N.M.
Total investments
$
7,531.3
$
7,142.1
5.4
%
Net investment income - investment
portfolio
Before tax
$
78.1
$
69.2
12.9
%
$
233.3
$
184.3
26.6
%
After tax
62.2
55.1
12.9
%
185.8
147.1
26.3
%
Investment income - deposit asset on
reinsurance
Before tax
$
25.6
24.5
4.5
%
$
75.1
72.1
4.2
%
After tax
20.2
19.4
4.1
%
59.3
57.0
4.0
%
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/20211103006118/en/
Heather J. Wietzel, Vice President, Investor Relations
217-788-5144 | investorrelations@horacemann.com
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