- Household acquisition momentum strengthened with healthy
customer retention in back-to-school season
- $19 million in earnings from Supplemental & Group Benefits
segment, which includes employer-sponsored benefit products for
K-12 school districts added in Madison National Life acquisition
- Earnings diversification benefit of worksite business offset by
ongoing effect of financial market volatility and continuing impact
of inflation on Property & Casualty segment results
- Catastrophe losses contributed 9.6% to the combined ratio, in
line with guidance and the company’s 10-year average for the
third-quarter
- 2022 full-year core EPS guidance revised to $1.70 to $2.00,
reflecting third-quarter results and expectations for continued
headwinds from inflation and financial market volatility
- Trajectory toward sustainable double-digit ROEs expected to
resume in 2023 as share of education market grows; full-year 2023
core return on equity targeted for high-single digits
Horace Mann Educators Corporation (NYSE:HMN) today reported
financial results for the three months ended September 30,
2022:
($ in millions, except per share
amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
% Change
2022
2021
% Change
Total revenues
$
343.0
$
329.6
4.1
%
$
1,036.1
$
998.7
3.7
%
Net income
13.9
16.3
-14.7
%
15.9
102.3
-84.5
%
Net investment losses, after tax
(10.1
)
(5.1
)
N.M.
(34.5
)
(8.3
)
N.M.
Core earnings*
24.0
21.4
12.1
%
50.4
110.6
-54.4
%
Adjusted core earnings*
27.5
23.4
17.5
%
65.4
116.9
-44.1
%
Per diluted share:
Net income
0.33
0.39
-15.4
%
0.38
2.43
-84.4
%
Net investment losses, after tax
(0.24
)
(0.11
)
N.M.
(0.82
)
(0.19
)
N.M.
Core earnings per diluted share*
0.57
0.50
14.0
%
1.20
2.62
-54.2
%
Adjusted core earnings per diluted
share*
0.66
0.55
20.0
%
1.56
2.77
-43.7
%
Book value per share
26.32
43.30
-39.2
%
Adjusted book value per share*
36.02
35.90
0.3
%
Tangible book value per share*
29.96
31.28
-4.2
%
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.
“This year’s back-to-school season brought more agents back into
schools to share Horace Mann solutions, meet with teachers, and
provide financial wellness education, letting Horace Mann showcase
our commitment to educators’ financial success,” said Horace Mann
President and CEO Marita Zuraitis. “We’re pleased with this return
to a more normal operating environment, even as Horace Mann’s
results — along with those of the entire insurance industry — have
been impacted by inflation and financial market volatility.
“Better access was key to the improved momentum we saw
throughout the quarter,” Zuraitis added. “Agents are reporting
strong interest from educators in our financial workshops on topics
like Student Loan Solutions and financial wellness. These events
often lead to new household relationships that support our sales
growth. In addition, we are seeing progress in a variety of ways
across the business; for example, voluntary supplemental sales rose
10%, auto sales were also up, largely in states where we are
confident in the outlook for pricing, and application counts for
individual life policies during back to school have been above last
year.
“The 14% year-over-year increase in core EPS also illustrated
the importance of the addition of employer-sponsored benefits to
complement the value we bring to educators through local, trusted
advisors with insurance and financial services solutions,” noted
Zuraitis. “Our new Supplemental & Group Benefits segment has
delivered $44 million in core earnings in the first nine months of
2022, including $19 million in the third quarter, helping to offset
external events affecting our Property & Casualty and Life
& Retirement segments.
“In line with the broader industry, the Property & Casualty
segment underlying loss ratios reflected inflationary pressures,”
Zuraitis said. “As the impact of inflation continues to unfold, our
rate plans for auto and property have become more aggressive, both
in size and timing, and will continue to evolve as circumstances
warrant. In addition to rate action implemented in the first nine
months of 2022, we now expect to increase auto rates by 15% to 16%
over the next five quarters. We believe this plan - bolstered by
non-rate underwriting actions - will result in a seasonally
adjusted auto combined ratio under 100 by the fourth quarter of
2023. Further, we expect to increase property rates by 8% to 9%
over the next five quarters, on top of increases of 7% to 8% due to
higher coverage values. The combination should result in an overall
average property premium increase in 2023 in the mid-teens.
“Finally, financial market volatility continues to be a headwind
across the entire insurance sector. While each of our segments is
benefiting from rising new money yields in our core investment
portfolio, this has been offset by returns below our historical
average for our limited partnership fund portfolio. In addition,
the Life & Retirement segment continues to experience lower
charges and fees on variable annuities and asset-based accounts, as
well as market-performance related DAC unlocking.
“We now expect full-year 2022 core EPS between $1.70 and $2.00,
a wider-than-typical range due to the variability of the current
environment,” Zuraitis said. “While it is disappointing that
external factors are slowing our progress, we remain as committed
as ever to supporting the education market. We remain confident
that this dedication, coupled with successful execution of our
strategic initiatives, will result in a larger share of the
education market over the coming years. As we look to 2023, we
expect return on equity to reach the high-single digits as we
resume our trajectory toward sustainable double-digit ROEs.
Further, our capital generating capacity remains strong, and we
remain committed to driving shareholder value. Deploying capital
for growth is a key priority. In addition, we provide an attractive
shareholder return through our cash dividends and the opportunistic
share repurchase program.”
Operating Segment Results
Beginning with first quarter 2022, Horace Mann is reporting
financial results in three operating segments: (1) Property &
Casualty, (2) Life & Retirement, and (3) Supplemental &
Group Benefits. The retail business, consisting of the Property
& Casualty and Life & Retirement segments, provides
insurance and financial services to individual educators through
agency and direct channels. The Supplemental & Group Benefits
segment provides voluntary and employer-sponsored benefits through
school district employers. These worksite offerings help school
districts attract and retain staff. This segment includes the
results of Madison National Life Insurance Company, Inc. (Madison
National) that was acquired effective January 1, 2022.
Property & Casualty segment results reflect impact of
inflation (All comparisons vs. same period in 2021, unless
noted otherwise)
The Property & Casualty insurance segment primarily markets
private passenger auto insurance and residential home insurance.
Horace Mann offers standard auto coverages, including liability,
collision and comprehensive. Property coverage includes both
homeowners and renters policies. For both auto and property
coverage, Horace Mann offers educators a discounted rate and the
Educator Advantage® package of features. The Property &
Casualty segment represented 46% of total revenues for the first
nine months of 2022.
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
Change
2022
2021
Change
Property & Casualty net premiums
written*
$
166.4
$
163.8
1.6
%
$
464.0
$
461.2
0.6
%
Property & Casualty net income (loss)
/ core earnings (loss)*
(2.5
)
(4.7
)
46.8
%
(19.4
)
42.5
-145.6
%
Property & Casualty combined ratio
107.5
%
112.0
%
-4.5 pts
110.9
%
99.1
%
11.8 pts
Property & Casualty underlying loss
ratio*
69.3
%
61.4
%
7.9 pts
67.3
%
60.0
%
7.3 pts
Property & Casualty expense ratio
27.3
%
27.5
%
-0.2 pts
26.8
%
26.2
%
0.6 pts
Property & Casualty catastrophe
losses
9.6
%
25.1
%
-15.5 pts
15.0
%
14.5
%
0.5 pts
Property & Casualty underlying
combined ratio*
96.6
%
88.9
%
7.7 pts
94.1
%
86.2
%
7.9 pts
Auto combined ratio
110.8
%
99.2
%
11.6 pts
110.6
%
92.1
%
18.5 pts
Auto underlying loss ratio*
78.4
%
70.6
%
7.8 pts
77.0
%
65.7
%
11.3 pts
Property combined ratio
101.9
%
136.1
%
-34.2 pts
111.6
%
112.4
%
-0.8 pts
Property underlying loss ratio*
53.3
%
43.5
%
9.8 pts
50.1
%
49.0
%
1.1 pts
The Property & Casualty segment core loss improved over the
prior year. The benefit of substantially lower catastrophe losses
was partially offset by the impact of inflation and other factors
on loss costs, which resulted in a lower segment combined ratio. In
addition, segment net investment income was $8.0 million,
reflecting the effect of equity market declines on private equity
limited partnership fund returns, compared to $11.3 million in last
year’s third quarter, when outsized returns in the limited
partnership fund portfolio benefited this segment.
The property underlying loss ratio was 53.3% due to higher
non-catastrophe water and fire losses. Catastrophe losses were
$14.6 million, a significant portion of which was attributable to
property damage from wind, thunderstorms and hail in the Midwest
and the South. Hurricane Ian losses represented $3.3 million of the
total catastrophe losses for the period, including less than $1.0
million in auto losses across all states and $2.5 million in
property losses in North and South Carolina. The level of
third-quarter catastrophe losses was below the company’s 10-year
historical average of $17.2 million.
The auto underlying loss ratio increased 1.5 points sequentially
and 7.8 points over last year, due to the ongoing impact of
inflation and other loss cost factors that began impacting the
insurance sector earlier this year. In addition, auto frequency
moved closer to pre-pandemic levels. However, the company continues
to implement rate and other underwriting actions that address these
trends. Auto prior-accident year reserves were strengthened by $2.0
million due to impact of higher medical costs and social inflation
on bodily injury cases, largely from accident-year 2021.
As expected, Property & Casualty net premiums written were
slightly above last year’s third quarter. The year-over-year
increase in property average net premiums improved sequentially to
9.2% from 7.5% in the second quarter as rate increases and
inflation adjustments to coverage values take effect. The company
expects the overall impact on average premiums of planned rate
changes and inflation adjustments will rise to the mid teens in
2023. Rate increases will reflect changes in the level of weather
activity.
Reflecting rate actions taken throughout 2022, the increase in
average written premiums for auto policies improved sequentially to
4.4% from 1.6% in the second quarter. Reflecting rate actions in
the first nine months of 2023 and the current plan for rate
increases through year-end 2023, the rate plan anticipates auto
rates rising a minimum of 15% to 16% over the next five quarters
supplemented by non-rate underwriting actions.
Life & Retirement segment core earnings of $12.7
million (All comparisons vs. same period in 2021, unless noted
otherwise)
The Life & Retirement segment markets 403(b) tax-qualified
fixed, fixed indexed and variable annuities; the Horace Mann
Retirement Advantage® open architecture platform for 403(b)(7) and
other defined contribution plans; and other retirement products to
educators as well as traditional term and whole life insurance
products. Horace Mann is one of the largest participants in the
K-12 educator portion of the 403(b) tax-qualified annuity market,
measured by 403(b) net premiums written on a statutory accounting
basis. The Life & Retirement segment represented 36% of total
revenues for the first nine months of 2022.
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
Change
2022
2021
Change
Life & Retirement net income / core
earnings*
$
12.7
$
19.1
-33.5
%
$
41.8
$
47.0
-11.1
%
Life & Retirement adjusted core
earnings*
13.1
18.8
-30.3
%
47.5
46.3
2.6
%
Life annualized sales*
2.2
2.0
10.0
%
6.2
6.4
-3.1
%
Life mortality costs
11.1
10.3
7.8
%
31.5
33.4
-5.7
%
Net annuity contract deposits*
108.1
121.4
-11.0
%
324.3
344.6
-5.9
%
Annuity assets under management(1)
4,731.6
5,246.9
-9.8
%
Total assets under administration(2)
7,914.5
9,352.7
-15.4
%
(1)
Amount reported as of September 30, 2022
excludes $600.8 million of assets under management held under
modified coinsurance reinsurance.
(2)
Includes Annuity AUM, Brokerage and
Advisory AUA, and Recordkeeping AUA.
Life & Retirement segment core earnings were down 33.5%, due
to a decline in the net interest margin. In addition, charges and
fees on variable annuities and asset-based accounts were lower due
to market volatility. Higher mortality was offset by lower
operating expenses. Adjusted core earnings, which excludes DAC
unlocking, were down 30.3%.
For the Retirement business, net annuity contract deposits
increased 3.7% sequentially to $108.1 million. Educators continue
to begin their relationship with Horace Mann through 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
94.0%. The net interest spread was 193 basis points.
Horace Mann currently has $4.7 billion in annuity assets under
management, including $2.2 billion of fixed annuities, $2.0 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 down from a year
ago as equity market performance affects assets under
management.
Supplemental & Group Benefits segment core earnings of
$19.2 million (All comparisons vs. same period in 2021, unless
noted otherwise)
The Supplemental & Group Benefits segment markets
employer-sponsored group worksite solutions for districts and other
public employers, as well as voluntary products typically
distributed through the worksite channel. The worksite business
provides group term life, disability and specialty health insurance
along with voluntary supplemental products including cancer, heart,
hospital, supplemental disability and accident coverages. The
Supplemental & Group Benefits segment represented 22% of total
revenues for the first nine months of 2022.
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
Change
2022
2021
Change
Supplemental & Group Benefits net
income /
core earnings*
19.2
11.5
67.0
%
$
43.6
$
34.8
25.3
%
Supplemental & Group Benefits
adjusted
core earnings*
22.3
13.8
61.6
%
52.9
41.8
26.6
%
Pretax profit margin(1)
33.8
%
37.0
%
-3.2 pts
24.6
%
37.9
%
-13.3 pts
Net premiums earned
$
68.3
$
31.7
115.5
%
$
207.3
$
96.4
115.0
%
Voluntary products sales*
2.2
2.0
10.0
%
5.8
4.2
38.1
%
Employer-sponsored products sales*
2.2
—
N.M.
5.8
—
N.M.
Voluntary products benefits ratio
31.4
%
33.9
%
-2.5 pts
31.7
%
31.8
%
-0.1 pts
Employer-sponsored products benefits
ratio
25.0
%
—
N.M.
44.8
%
—
N.M.
(1) Measured to total revenues.
Supplemental & Group Benefits segment core earnings were up
67.0% with adjusted core earnings up 61.6%, largely due to seasonal
fluctuations in benefits and settlement expenses. Adjusted core
earnings exclude the non-cash impact of amortization of intangible
assets under purchase accounting that reduced core earnings by $4.0
million pretax vs. $2.9 million in the third quarter of 2021.
Segment net investment income rose 20.8%, largely due to the
addition of the Madison National portfolio in 2022.
The pre-tax profit margin reflected the addition of the newly
acquired employer-sponsored products. Year-to-date benefit ratios
for the voluntary and employer-sponsored products lines are near
longer-term targets, despite expected quarterly fluctuations due to
seasonality and other factors.
Total sales for the segment were $4.4 million. Sales of
voluntary products were $2.2 million, a 10.0% increase over prior
year, with persistency remaining very strong at 91.3%. Sales of
employer-sponsored products added another $2.2 million.
Consolidated Results
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. The Corporate segment reduced total revenues by $43.4
million for the first nine months of 2022.
Net investment income of $98 million (All comparisons vs.
same period in 2021, unless noted otherwise)
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
Change
2022
2021
Change
Pretax net investment income - investment
portfolio
$
70.9
$
78.1
-9.2
%
$
223.3
$
233.3
-4.3
%
Pretax investment income - deposit asset
on
reinsurance
26.7
25.6
4.3
%
77.4
75.1
3.1
%
Total pretax net investment income
97.6
103.7
-5.9
%
300.7
308.4
-2.5
%
Pretax net investment losses
(12.8
)
(6.5
)
N.M
(43.8
)
(10.6
)
N.M.
Pretax net unrealized investment gains
(losses) on fixed maturity securities
(632.0
)
466.4
N.M.
Investment yield, excluding limited
partnership interests, pretax - annualized
4.26
%
4.34
%
-0.08 pts
4.28
%
4.25
%
0.03 pts
N.M. - Not meaningful.
Total net investment income was down $6.1 million with net
investment income on the managed portfolio down $7.2 million. The
decline was almost entirely due to returns below our historical
average in the limited partnership funds portfolio. New money
yields continue to exceed portfolio yields in the core fixed
maturity securities portfolio.
The fixed maturity securities portfolio was in a net unrealized
investment loss position of $632 million pretax at September 30,
2022, primarily due to the rising interest rate environment.
Realized investment losses were largely due to portfolio
repositioning activities to improve book yield as well as declines
in the fair value of equity securities and impairments.
Adjusted book value per share* flat year over year
At September 30, 2022, shareholders’ equity was $1.08 billion,
or $26.32 per share, as higher interest rates resulted in net
unrealized investment losses on fixed maturity securities.
Excluding the unrealized losses, shareholders’ equity was $1.47
billion, or $36.02 per share*. During the third quarter, Horace
Mann repurchased 295,445 shares of common stock at an average price
of $33.87, with year-to-date repurchases totaling 670,816 shares.
As of September 30, 2022, $41.3 million remained authorized for
future repurchases under the share repurchase program authorized in
2022.
At September 30, 2022, total debt was $497.9 million, with
$249.0 million outstanding on the company’s line of credit.
Interest expense on the line of credit was $1.6 million in the
third quarter compared to $0.4 million last year. The ratio of
debt-to-capital excluding net unrealized investment gains/losses*
was 25.3% at September 30, 2022, which aligns with levels
appropriate for the company’s current financial strength
ratings.
Segment outlook for 2022
Horace Mann’s expectation for 2022 core EPS is now $1.70 to
$2.00, reflecting third-quarter results and expectations for
continued headwinds from inflation and stock market volatility.
Total net investment income from the managed portfolio for 2022 is
now expected to be between $295 million and $305 million. Fourth
quarter commercial mortgage loan fund balances are expected to be
lower than anticipated due to slower capital call activity and
limited partnership fund returns are expected to be below
historical averages.
Revised guidance for each segment reflects the following:
- Property & Casualty segment 2022 core loss now expected to
be $13 million to $19 million, reflecting nine-month results and
updated fourth-quarter outlook: Fourth-quarter results are expected
to reflect the continued impact of inflation, normal seasonality in
auto loss patterns and catastrophe losses in line with the
company’s 10-year average of approximately $5 million for this
period.
- Life & Retirement segment 2022 core earnings still expected
to be in the range of $56 million to $59 million, reflecting
nine-month results: The company continues to expect the full-year
net investment spread will be below the 2021 level of 290 due to
the revised outlook for net investment income.
- Supplemental & Group Benefits segment 2022 core earnings
now expected to be $55 million to $58 million, reflecting
nine-month results: The company continues to expect full-year 2022
benefit ratios will be in line with its longer-term targets of
approximately 35% for voluntary products and approximately 50% for
employer-sponsored products.
Quarterly webcast
Horace Mann’s senior management will discuss the company’s
third-quarter financial results with investors on Nov. 4, 2022 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 helping America’s educators
and others who serve the community achieve lifelong financial
success. The company offers individual and group insurance and
financial solutions tailored to the needs of the educational
community. Founded by Educators for Educators® in 1945, Horace Mann
is headquartered in Springfield, Illinois. For more information,
visit horacemann.com.
Safe Harbor Statement and Non-GAAP Measures
Certain statements included in this news release, including
those regarding our earnings outlook, expected catastrophe losses,
our investment strategies, our plans to implement additional rate
actions, our plans relating to share repurchases and dividends, our
efforts to enhance customer experience and expand our products and
solutions to more educators, our strategies to create sustainable
long-term growth and double-digit ROEs, our strategy to achieve a
larger share of the education market, and other business
strategies, constitute forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995. Forward-looking statements are made based on management’s
current expectations and beliefs concerning future developments and
their potential effects upon Horace Mann and its subsidiaries.
Horace Mann cautions investors that such statements are subject to
risks and uncertainties, many of which are difficult to predict and
generally beyond Horace Mann’s control, that could cause actual
results to differ materially from those expressed in, or implied or
projected by, the forward-looking statements included in this
document. Certain important factors that could cause actual results
to differ, possibly materially, from expectations or estimates
reflected in such forward-looking statements can be found in the
“Risk Factors” and “Forward-Looking Information” sections included
in Horace Mann’s Annual Reports on Form 10-K and Quarterly Reports
on Form 10-Q filed with the Securities and Exchange Commission
(SEC). The forward-looking statements herein are subject to the
risk, among others, that we will be unable to execute our strategy
because of market or competitive conditions or other factors.
Horace Mann does not undertake to update any particular
forward-looking statement included in this document if we later
become aware that such statement is not likely to be achieved.
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 Horace
Mann’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,
2022
2021
% Change
2022
2021
% Change
Earnings Summary
Net income
$
13.9
$
16.3
-14.7
%
$
15.9
$
102.3
-84.5
%
Net investment losses, after tax
(10.1
)
(5.1
)
N.M.
(34.5
)
(8.3
)
N.M.
Core earnings*
24.0
21.4
12.1
%
50.4
110.6
-54.4
%
Adjusted core earnings*
27.5
23.4
17.5
%
65.4
116.9
-44.1
%
Per diluted share:
Net income
$
0.33
$
0.39
-15.4
%
$
0.38
$
2.43
-84.4
%
Net investment losses, after tax
(0.24
)
(0.11
)
N.M.
(0.82
)
(0.19
)
N.M.
Core earnings*
0.57
0.50
14.0
%
1.20
2.62
-54.2
%
Adjusted core earnings*
0.66
0.55
20.0
%
1.56
2.77
-43.7
%
Weighted average number of shares and
equivalent shares (in millions) -
Diluted
41.6
42.2
-1.4
%
41.9
42.2
-0.7
%
Return on Equity
Net income return on equity - LTM(1)
3.8
%
8.5
%
3.8
%
8.5
%
Net income return on equity -
annualized
4.8
%
3.6
%
1.5
%
7.6
%
Core return on equity - LTM*(2)
6.1
%
10.9
%
6.1
%
10.9
%
Core return on equity - annualized*
6.5
%
5.8
%
4.5
%
10.1
%
Adjusted core return on equity -
LTM*(3)
7.3
%
11.5
%
7.3
%
11.5
%
Adjusted core return on equity -
annualized*
7.5
%
6.3
%
5.8
%
10.7
%
Financial Position
Per share:(4)
Book value
$
26.32
$
43.30
-39.2
%
Effect of net unrealized investment gains
(losses) on fixed maturity securities(5)
$
(9.70
)
$
7.40
N.M.
Dividends paid
$
0.32
$
0.31
3.2
%
$
0.96
$
0.93
3.2
%
Ending number of shares outstanding (in
millions)(4)
40.9
41.5
-1.4
%
Total assets
$
13,314.1
$
14,266.0
-6.7
%
Short-term debt
249.0
135.0
84.4
%
Long-term debt
248.9
253.6
-1.9
%
Total shareholders’ equity
1,076.6
1,796.4
-40.1
%
Additional Information
Net investment losses
Before tax
$
(12.8
)
$
(6.5
)
N.M.
$
(43.8
)
$
(10.6
)
N.M.
After tax
(10.1
)
(5.1
)
N.M.
(34.5
)
(8.3
)
N.M.
Per share, diluted
$
(0.24
)
$
(0.11
)
N.M.
$
(0.82
)
$
(0.19
)
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)
Based on last twelve months adjusted 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.
(4)
Ending shares outstanding were 40,898,170
at September 30, 2022 and 41,487,287 at September 30, 2021.
(5)
Net of the related impact on deferred
policy acquisition costs and applicable deferred taxes.
HORACE MANN EDUCATORS
CORPORATION
Consolidated Statements of
Operations and Data (Unaudited)
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
% Change
2022
2021
% Change
Consolidated Statements of
Operations
Net premiums and contract charges
earned
$
257.8
$
225.4
14.4
%
$
769.5
$
678.8
13.4
%
Net investment income
97.6
103.7
-5.9
%
300.7
308.4
-2.5
%
Net investment losses
(12.8
)
(6.5
)
N.M.
(43.8
)
(10.6
)
N.M.
Other income
0.4
7.0
-94.3
%
9.7
22.1
-56.1
%
Total revenues
343.0
329.6
4.1
%
1,036.1
998.7
3.7
%
Benefits, claims and settlement
expenses
173.6
164.8
5.3
%
558.2
446.2
25.1
%
Interest credited
45.9
51.9
-11.6
%
129.1
153.7
-16.0
%
Operating expenses
75.6
64.3
17.6
%
229.7
182.8
25.7
%
DAC unlocking and amortization expense
23.3
22.9
1.7
%
76.7
70.5
8.8
%
Intangible asset amortization expense
4.2
3.3
27.3
%
12.6
9.8
28.6
%
Interest expense
5.3
3.4
55.9
%
13.5
10.4
29.8
%
Total benefits, losses and expenses
327.9
310.6
5.6
%
1,019.8
873.4
16.8
%
Income before income taxes
15.1
19.0
-20.5
%
16.3
125.3
-87.0
%
Income tax expense
1.2
2.7
-55.6
%
0.4
23.0
-98.3
%
Net income
$
13.9
$
16.3
-14.7
%
$
15.9
$
102.3
-84.5
%
Net Premiums Written and Contract
Deposits*
Property & Casualty
$
166.4
$
163.8
1.6
%
$
464.0
$
461.2
0.6
%
Life & Retirement
138.0
150.8
-8.5
%
408.0
427.4
-4.5
%
Supplemental & Group Benefits
68.3
31.6
116.1
%
206.8
96.2
115.0
%
Total
$
372.7
$
346.2
7.7
%
$
1,078.8
$
984.8
9.5
%
Segment Net Income (Loss)
Property & Casualty
$
(2.5
)
$
(4.7
)
-46.8
%
$
(19.4
)
$
42.5
-145.6
%
Life & Retirement
12.7
19.1
-33.5
%
41.8
47.0
-11.1
%
Supplemental & Group Benefits
19.2
11.5
67.0
%
43.6
34.8
25.3
%
Corporate & Other(1)
(15.5
)
(9.6
)
-61.5
%
(50.1
)
(22.0
)
-127.7
%
Consolidated net income
$
13.9
$
16.3
-14.7
%
$
15.9
$
102.3
-84.5
%
N.M. - Not meaningful. (1)
Corporate & 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 13.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
Change
2022
2021
Change
Property & Casualty
Net premiums written*
$
166.4
$
163.8
1.6
%
$
464.0
$
461.2
0.6
%
Net premiums earned
152.4
153.3
-0.6
%
452.5
464.1
-2.5
%
Net investment income
8.0
11.3
-29.2
%
22.9
43.8
-47.7
%
Other income
0.7
0.7
—
%
2.7
4.0
-32.5
%
Losses and loss adjustment expenses
(LAE)
122.3
129.5
-5.6
%
380.8
338.2
12.6
%
Operating expenses (includes amortization
expense)
41.6
42.1
-1.2
%
121.1
121.5
-0.3
%
Interest expense
—
—
N.M.
—
0.1
-100.0
%
Income (loss) before income taxes
(2.8
)
(6.3
)
55.6
%
(23.8
)
52.1
-145.7
%
Net income (loss)
(2.5
)
(4.7
)
46.8
%
(19.4
)
42.5
-145.6
%
Core earnings (loss)*
(2.5
)
(4.7
)
46.8
%
(19.4
)
42.5
-145.6
%
Net investment income, after tax
6.8
9.4
-27.7
%
19.4
36.1
-46.3
%
Catastrophe losses
After tax
11.5
30.5
-62.3
%
53.4
53.0
0.8
%
Before tax
14.6
38.6
-62.2
%
67.6
67.1
0.7
%
Prior years’ reserve development, before
tax(1)
Auto
2.0
(2.0
)
N.M.
14.0
(5.0
)
N.M.
Property and other
—
(1.0
)
N.M.
(6.0
)
(2.2
)
N.M.
Total
2.0
(3.0
)
N.M.
8.0
(7.2
)
N.M.
Operating statistics:
Loss and loss adjustment expense ratio
80.2
%
84.5
%
-4.3 pts
84.1
%
72.9
%
11.2 pts
Expense ratio
27.3
%
27.5
%
-0.2 pts
26.8
%
26.2
%
0.6 pts
Combined ratio
107.5
%
112.0
%
-4.5 pts
110.9
%
99.1
%
11.8 pts
Effect on the combined ratio of:
Catastrophe losses
9.6
%
25.1
%
-15.5 pts
15.0
%
14.5
%
0.5 pts
Prior years’ reserve development(1)
1.3
%
-2.0
%
3.3 pts
1.8
%
-1.6
%
3.4 pts
Combined ratio excluding the effects of
catastrophe losses and prior years’ reserve development (underlying
combined ratio)*
96.6
%
88.9
%
7.7 pts
94.1
%
86.2
%
7.9 pts
Risks in force (in thousands)
540
559
-3.4
%
Auto(2)
368
381
-3.4
%
Property
172
178
-3.4
%
Household Retention - LTM
Auto(3)
86.9
%
85.1
%
1.8 pts
Property(3)
89.5
%
88.1
%
1.4 pts
N.M. - Not meaningful. (1)
(Favorable) unfavorable.
(2)
Includes assumed risks in force of 4.
(3)
Retention is based on retained households.
History has been restated to reflect this change.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
Change
2022
2021
Change
Life & Retirement
Net premiums written and contract
deposits*
$
138.0
$
150.8
-8.5
%
$
408.0
$
427.4
-4.5
%
Net premiums and contract charges
earned
37.1
40.4
-8.2
%
109.7
118.3
-7.3
%
Net investment income
81.4
85.8
-5.1
%
254.0
247.4
2.7
%
Other income
4.1
5.1
-19.6
%
13.4
14.9
-10.1
%
Death benefits / mortality cost(1)
11.1
10.3
7.8
%
31.5
33.4
-5.7
%
Interest credited
45.5
51.8
-12.2
%
128.4
153.4
-16.3
%
Change in reserves
21.6
14.5
49.0
%
65.8
44.0
49.5
%
Operating expenses
24.2
25.7
-5.8
%
74.8
74.0
1.1
%
DAC amortization expense, excluding
unlocking
6.7
6.6
1.5
%
21.3
20.1
6.0
%
DAC unlocking
0.2
(0.8
)
N.M
6.4
(1.8
)
N.M.
Intangible asset amortization expense
0.2
0.4
-50.0
%
0.8
1.0
-20.0
%
Income before income taxes
13.1
22.8
-42.5
%
48.1
56.5
-14.9
%
Income tax expense
0.4
3.7
-89.2
%
6.3
9.5
-33.7
%
Net income
12.7
19.1
-33.5
%
41.8
47.0
-11.1
%
Core earnings*
12.7
19.1
-33.5
%
41.8
47.0
-11.1
%
Adjusted core earnings*
13.1
18.8
-30.3
%
47.5
46.3
2.6
%
Life policies in force (in thousands)
162
163
-0.6
%
Life insurance in force
$
19,815
$
19,384
2.2
%
Lapse ratio - 12 months(1)
4.0
%
3.8
%
0.2 pts
Annuity contracts in force (in
thousands)
227
229
-0.9
%
Retirement Advantage® contracts in force
(in thousands)
16
14
14.3
%
Total Persistency - LTM
94.0
%
94.7
%
-0.7 pts
N.M. - Not meaningful. (1)
Ordinary life insurance.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
Change
2022
2021
Change
Supplemental & Group
Benefits
Net premiums and contract charges
earned
$
68.3
$
31.7
115.5
%
$
207.3
$
96.4
115.0
%
Net investment income
8.7
7.2
20.8
%
25.4
19.0
33.7
%
Other income
(5.2
)
0.6
N.M.
(8.4
)
1.9
N.M.
Benefits, settlement expenses and change
in reserves
18.6
10.5
77.1
%
80.1
30.7
160.9
%
Interest credited
0.4
0.1
N.M.
0.7
0.2
N.M.
Operating expenses (includes DAC
unlocking
and amortization expense)
24.5
11.4
114.9
%
76.5
33.1
131.1
%
Intangible asset amortization expense
4.0
2.9
37.9
%
11.8
8.8
34.1
%
Income before income taxes
24.3
14.6
66.4
%
55.2
44.5
24.0
%
Net income
19.2
11.5
67.0
%
43.6
34.8
25.3
%
Core earnings*
19.2
11.5
67.0
%
43.6
34.8
25.3
%
Adjusted core earnings*
22.3
13.8
61.6
%
52.9
41.8
26.6
%
Benefits ratio(1)
27.8
%
33.4
%
-5.6 pts
39.0
%
32.1
%
6.9 pts
Operating expense ratio(2)
34.1
%
28.9
%
5.2 pts
34.1
%
28.2
%
5.9 pts
Pretax profit margin(3)
33.8
%
37.0
%
-3.2 pts
24.6
%
37.9
%
-13.3 pts
Voluntary products benefits ratio
31.4
%
33.9
%
-2.5 pts
31.7
%
31.8
%
-0.1 pts
Voluntary premium persistency (rolling 12
months)
91.3
%
92.2
%
-0.9 pts
91.3
%
92.2
%
-0.9 pts
Employer-sponsored products benefits
ratio
25.0
%
—
%
N.M.
44.8
%
—
%
N.M.
N.M. - Not meaningful. (1)
Ratio of benefits to net premiums
earned.
(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,
2022
2021
% Change
2022
2021
% Change
Corporate & Other(1)
Components of loss before tax:
Net investment losses
$
(12.8
)
$
(6.5
)
N.M.
$
(43.8
)
$
(10.6
)
N.M.
Interest expense
(5.3
)
(3.4
)
-55.9
%
(13.5
)
(10.3
)
-31.1
%
Other operating expenses, net investment
income and other income
(1.4
)
(2.2
)
36.4
%
(5.9
)
(6.9
)
14.5
%
Loss before income taxes
(19.5
)
(12.1
)
-61.2
%
(63.2
)
(27.8
)
-127.3
%
Net loss
(15.5
)
(9.6
)
-61.5
%
(50.1
)
(22.0
)
-127.7
%
Core loss*
(5.4
)
(4.5
)
-20.0
%
(15.6
)
(13.7
)
-13.9
%
Investments
Life & Retirement
Fixed maturity securities, at fair value
(amortized cost, net 2022, $4,542.0; 2021, $4,746.7)
$
4,052.8
$
5,120.3
-20.8
%
Equity securities, at fair value
90.1
112.2
-19.7
%
Short-term investments
19.7
32.6
-39.6
%
Policy loans
139.0
143.1
-2.9
%
Limited partnership interests
708.6
404.5
75.2
%
Other investments
54.7
51.2
6.8
%
Total Life & Retirement
investments
5,064.9
5,863.9
-13.6
%
Property & Casualty
Fixed maturity securities, at fair value
(amortized
cost, net 2022, $590.4; 2021, $704.6)
540.7
768.9
-29.7
%
Equity securities, at fair value
15.7
30.6
-48.7
%
Short-term investments
5.3
13.5
-60.7
%
Limited partnership interests
192.2
171.2
12.3
%
Other investments
1.0
1.1
-9.1
%
Total Property & Casualty
investments
754.9
985.3
-23.4
%
Supplemental & Group Benefits
Fixed maturity securities, at fair value
(amortized
cost, net 2022, $771.7; 2021, $594.3)
678.6
622.8
9.0
%
Equity securities, at fair value
7.0
8.5
-17.6
%
Short-term investments
22.6
5.7
N.M.
Policy loans
0.8
0.8
—
%
Limited partnership interests
96.7
39.7
143.6
%
Other investments
7.6
3.2
137.5
%
Total Supplemental & Group Benefits
investments
813.3
680.7
19.5
%
Corporate & Other
Equity securities, at fair value
1.0
1.0
—
%
Short-term investments
3.9
0.4
N.M.
Total Corporate & Other
investments
4.9
1.4
N.M.
Total investments
$
6,638.0
$
7,531.3
-11.9
%
Net investment income - investment
portfolio
Before tax
$
70.9
$
78.1
-9.2
%
$
223.3
$
233.3
-4.3
%
After tax
56.5
62.2
-9.2
%
177.7
185.8
-4.4
%
Investment income - deposit asset on
reinsurance
Before tax
$
26.7
25.6
4.3
%
$
77.4
75.1
3.1
%
After tax
21.0
20.2
4.0
%
61.1
59.3
3.0
%
N.M. - Not meaningful. (1)
The Corporate & 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/20221103006121/en/
Heather J. Wietzel, Vice President, Investor Relations
217-788-5144 | investorrelations@horacemann.com
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