- Net loss of $13 million, or $0.31 per share, for the
quarter
- Diversified business delivered core earnings* of $1 million, or
$0.03 per share, despite continued elevated catastrophe losses
- Educator household acquisition momentum continues with sales
growth in both Retail and Worksite Divisions
- Strong core earnings contributions from Supplemental &
Group Benefits and Life & Retirement segments illustrate
benefits of business diversification
- Catastrophe losses of $41.5 million, pretax, reduced
second-quarter Property & Casualty segment earnings
- Underlying P&C segment performance reflected rate actions
being implemented to address inflationary pressure in auto and
property businesses
- Full-year 2023 core EPS expected to be between $1.20-$1.45, in
line with pre-announcement
- 2024 core ROE still expected to be near 10% despite weather
headwinds
- Committed to average annual core EPS growth of 10% in 2025 and
beyond
Horace Mann Educators Corporation (NYSE:HMN) today reported
financial results for the three months ended June 30, 2023:
($ in millions, except per share
amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
% Change
2023
2022
% Change
Total revenues
$
356.4
$
345.9
3.0
%
$
710.3
$
692.6
2.6
%
Net income (loss)
(12.8
)
(4.2
)
N.M.
(6.2
)
16.1
-138.5
%
Net investment losses, after tax
(13.7
)
(12.2
)
N.M.
(16.8
)
(24.4
)
N.M.
Core earnings*
0.9
8.0
-88.8
%
10.6
40.5
-73.8
%
Adjusted core earnings*
3.8
11.3
-66.4
%
16.4
47.1
-65.2
%
Per diluted share:
Net income (loss)
(0.31
)
(0.10
)
N.M.
(0.15
)
0.38
-139.5
%
Net investment losses, after tax
(0.34
)
(0.29
)
N.M.
(0.41
)
(0.58
)
N.M.
Core earnings per diluted share*
0.03
0.19
-84.2
%
0.26
0.96
-72.9
%
Adjusted core earnings per diluted
share*
0.10
0.27
-63.0
%
0.40
1.12
-64.3
%
Book value per share
26.96
29.06
-7.2
%
Adjusted book value per share*
35.55
36.80
-3.4
%
Tangible book value per share*
29.87
30.69
-2.7
%
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.
“Continued outsized catastrophe losses are increasingly part of
a larger national discussion in many forums affecting the insurance
industry,” said Horace Mann President & CEO Marita Zuraitis.
”While we are contributing to this dialogue, we remain clearly
focused on helping all educators protect what they have today and
prepare for a successful tomorrow. This quarter we helped
policyholders recover when severe weather, particularly in the
Midwest and Texas, disrupted their lives. We continued to grow our
Worksite business, which can help school district employers provide
more comprehensive benefits to their employees.
“We are building on the revenue and earnings diversification
efforts we’ve made over the past five years to drive market share
growth,” Zuraitis continued. “This quarter, sales were up 59%, or
$1.3 million, in our Worksite Division. Our sales of worksite
direct products over the first half of the year were double last
year. In our Retail Division, educators continued to respond
favorably to the solutions offered by our Life & Retirement
business, with annuity contract deposits up 8%.
“Despite higher catastrophe losses in the Property &
Casualty segment, underlying results continue to reflect the rate
and non-rate underwriting actions we have been implementing to
address loss trends,” Zuraitis said. “In total, Property &
Casualty net written premiums were up 8% for the second quarter,
with earned premiums up 5%. Retention remained steady, and we’re
seeing household growth largely in states where we have the
greatest confidence in the pricing outlook. We will continue to
address the increased weather activity and inflation through
additional filed rate, product changes and enhanced modeling. This
includes our filed 20% California auto rate increase as well as a
25% California property rate increase that we filed in June. The
state represents about 12% of our P&C customer base.
“In Auto, our rate actions since the beginning of 2022 will
generate a cumulative impact of as much as 25% by the end of this
year. Auto should generate an underwriting profit during 2024 on
our path to our long-term combined ratio target of 97% to 98%,”
Zuraitis said. “In Property, we continue to expect average renewal
premiums for property to increase by 17% to 20% this year and we
now expect a similar impact next year. We expect to achieve our
long-term property combined ratio target of 92% to 93% by 2025.
“Our confidence in our long-term strategy to expand our share of
the education market remains unchanged as we diversify our earnings
profile,” Zuraitis said. “We also remain committed to achieving a
sustainable double-digit core return on equity and 10% core EPS
growth over the long term. Our 2023 core EPS is expected to be in
the range of $1.20 to $1.45 with strong contributions from our
Worksite and Life & Retirement business offsetting the impact
of weather on Property & Casualty segment results. The benefits
of our P&C rate actions will continue to accelerate over the
course of 2024 and our diversified business should enable us to
deliver core return on equity near the 10% level, which is now the
equivalent of about $3.50 in core EPS.”
Segment outlook for 2023
2023 core EPS expected to be between $1.20 to $1.45 (or core
earnings of $50 million to $60 million, after tax), in line with
pre-announcement:
- Property & Casualty segment core earnings guidance updated
to a loss between $27 million and $32 million largely due to
weather losses. We now assume a full-year catastrophe loss
contribution of $95 million to $100 million, or about 15.5 points
to the combined ratio. The longer-term combined ratio target for
the segment remains 95-96%.
- Life & Retirement segment core earnings guidance updated to
$63 million to $65 million to reflect the lower-than-anticipated
fixed annuity spread in the first-half. The longer-term targeted
range for the spread remains 220 to 230 basis points.
- Supplemental & Group Benefits segment core earnings
guidance updated to $47 million to $50 million to reflect strong
first-half performance. The longer-term target for the blended
segment benefit ratio remains 43%.
Full-year net investment income expected to be between $429
million and $439 million.
Reporting Segment Results
Horace Mann reports financial results in three reporting
segments: (1) Property & Casualty, (2) Life & Retirement,
and (3) Supplemental & Group Benefits. The retail business,
consisting of the Property & Casualty and Life & Retirement
segments, provides insurance and financial services to individual
educators through agency and direct channels. The Supplemental
& Group Benefits segment provides worksite direct and
employer-sponsored benefits through school district employers.
These worksite offerings help school districts attract and retain
staff.
Horace Mann adopted the Financial Accounting Standards Board’s
Accounting Standard Update 2018-12 Financial Services - Insurance:
Targeted Improvements to the Accounting for Long-Duration Contracts
as of January 1, 2023, with a January 1, 2021 transition date. The
company’s 2022 results have been recast to reflect the ASU and are
reflected in this release on that basis.
Property & Casualty segment results reflected outsized
catastrophe losses (All comparisons vs. same period in 2022,
unless noted otherwise)
The Property & Casualty segment primarily markets private
passenger auto insurance and residential home insurance. Horace
Mann offers standard auto coverages, including liability, collision
and comprehensive. Property coverage includes both homeowners and
renters policies. For both auto and property coverage, Horace Mann
offers educators a discounted rate and the Educator Advantage®
package of features. The Property & Casualty segment
represented 47% of total revenues for the year ended 2022.
($ in millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
Change
2023
2022
Change
Property & Casualty net premiums
written*
$
170.9
$
158.0
8.2
%
$
320.0
$
297.6
7.5
%
Property & Casualty net income (loss)
/ core earnings (loss)*
(21.4
)
(25.4
)
N.M.
(33.0
)
(16.9
)
N.M.
Property & Casualty combined ratio
124.0
%
126.9
%
-2.9 pts
118.4
%
112.6
%
5.8 pts
Property & Casualty underlying loss
ratio*
70.3
%
65.7
%
4.6 pts
70.0
%
66.4
%
3.6 pts
Property & Casualty expense ratio
27.4
%
26.7
%
0.7 pts
27.8
%
26.5
%
1.3 pts
Property & Casualty catastrophe
losses
26.3
%
30.5
%
-4.2 pts
20.6
%
17.7
%
2.9 pts
Property & Casualty underlying
combined ratio*
97.7
%
92.4
%
5.3 pts
97.8
%
92.9
%
4.9 pts
Auto combined ratio
114.6
%
119.3
%
-4.7 pts
112.8
%
110.6
%
2.2 pts
Auto underlying loss ratio*
81.6
%
76.9
%
4.7 pts
81.2
%
76.2
%
5.0 pts
Property combined ratio
141.0
%
141.0
%
— pts
128.5
%
116.6
%
11.9 pts
Property underlying loss ratio*
49.8
%
44.7
%
5.1 pts
50.0
%
48.5
%
1.5 pts
The Property & Casualty segment core loss for the second
quarter was in line with the company’s preliminary announcement,
reflecting the impact of outsized weather activity across the
country, which was also a primary factor in continued elevated auto
loss frequency. Property & Casualty net premiums written were
up 8.2% with average written premiums rising for both property and
auto. Segment net investment income for the quarter was 37.7% above
the prior year, as returns on the limited partnership portfolio
normalized from last year.
The second-quarter combined ratio improved 2.9 points over last
year, reflecting the slightly lower level of catastrophe losses
this year as well as no change in prior-accident year reserves
compared with strengthening in last year’s second quarter.
Catastrophe losses for the quarter were $41.5 million, pretax,
contributing 26.3 points to the combined ratio. In total, there
were 19 events designated as catastrophes by Property Claims
Services (PCS) in the year’s second quarter, including multiple
severe convective storms across the Midwest and Texas in June. In
the second quarter of 2022, catastrophe losses were $45.7 million,
pretax, contributing 30.5 points to the combined ratio, from 23 PCS
events.
The year-over-year increase in average written premiums for auto
policies also improved again in the second quarter to 11.4%,
compared with 8.1% in the first quarter and 4.8% in the fourth
quarter. The increase reflects auto rate increases of almost 15%
nationwide since the beginning of 2022. The second-quarter auto
underlying loss ratio was 81.2%, largely reflecting the loss cost
factors being addressed through rate and non-rate underwriting
actions.
The year-over-year increase in average written premiums for
property policies was 11.4% in the second quarter, as rate
increases taken over the past six quarters and inflation
adjustments to coverage values take effect. The second-quarter
property underlying loss ratio was 49.8%, essentially unchanged
from first-quarter 2023.
Life & Retirement segment net income of $17 million
(All comparisons vs. same period in 2022, unless noted
otherwise)
The Life & Retirement segment markets 403(b) tax-qualified
fixed, fixed indexed and variable annuities; the Horace Mann
Retirement Advantage® open architecture platform for 403(b)(7) and
other defined contribution plans; and other retirement products to
educators as well as traditional term and whole life insurance
products. Horace Mann is one of the largest participants in the
K-12 educator portion of the 403(b) tax-qualified annuity market,
measured by 403(b) net premiums written on a statutory accounting
basis. The Life & Retirement segment represented 36% of total
revenues for the year ended 2022.
($ in millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
Change
2023
2022
Change
Life & Retirement net income / core
earnings*
$
17.4
$
23.8
-26.9
%
$
31.4
$
39.4
-20.3
%
Life & Retirement adjusted core
earnings*
17.5
24.0
-27.1
%
31.5
39.8
-20.9
%
Life annualized sales*
2.2
2.2
—
%
4.4
4.0
10.0
%
Life mortality costs
17.6
14.7
19.7
%
37.1
36.1
2.8
%
Net annuity contract deposits*
112.8
104.2
8.3
%
222.0
216.2
2.7
%
Annuity assets under management(1)
5,033.9
4,841.9
4.0
%
Total assets under administration(2)
8,587.4
8,210.7
4.6
%
(1)
Amount reported as of June 30, 2023
excludes $691.0 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 $17.4 million
for the quarter. Lower net investment income from the segment’s
limited partnerships fund portfolio contributed to the decline in
the annualized net interest spread in our fixed annuity business to
203 for the second quarter compared to 303 last year. The net
contribution from FHLB funding agreements remained stable year over
year although net investment income reflected higher earnings from
the floating rate investments backing the program and interest
credited similarly reflected offsetting higher interest
expense.
For the segment, total benefit expenses declined as favorable
market risk benefit adjustments for Retirement more than offset a
marginal increase in Life mortality experience.
For the Retirement business, net annuity contract deposits were
up 8.3% to $112.8 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 was 92.2%, slightly below recent levels due to
higher activity in the non-qualified account portfolio. Life
annualized sales were $2.2 million for the quarter.
Horace Mann currently has $5.0 billion in annuity assets under
management, including $2.1 billion of fixed annuities, $2.4 billion
of variable annuities and $0.5 billion of fixed indexed annuities.
Assets under administration, which includes Horace Mann Retirement
Advantage® and other advisory and recordkeeping assets, were down
from a year ago as equity market performance affected assets under
management. Life insurance in force rose to $20.3 billion at June
30, 2023.
Supplemental & Group Benefits segment net income of $11.8
million (All comparisons vs. same period in 2022, unless noted
otherwise)
The Supplemental & Group Benefits segment markets
employer-sponsored group solutions for districts and other public
employers, as well as worksite direct products typically
distributed through the employer channel. The worksite business
provides group term life, disability and specialty health insurance
along with supplemental products including cancer, heart, hospital,
supplemental disability and accident coverages. The Supplemental
& Group Benefits segment represented 21% of total revenues for
the year ended 2022.
($ in millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
Change
2023
2022
Change
Supplemental & Group Benefits net
income / core earnings*
$
11.8
$
15.0
-21.3
%
$
25.8
$
28.2
-8.5
%
Supplemental & Group Benefits adjusted
core earnings*
14.7
18.2
-19.2
%
31.6
34.4
-8.1
%
Pretax profit margin(1)
20.5
%
25.6
%
-5.1 pts
22.7
%
23.4
%
-0.7 pts
Net premiums earned
$
65.9
$
69.2
-4.8
%
$
131.7
$
139.0
-5.3
%
Worksite direct products sales*
3.5
2.2
59.1
%
7.2
3.6
100.0
%
Employer-sponsored products sales*
0.9
1.3
-30.8
%
5.4
3.6
50.0
%
Worksite direct products benefit ratio
30.1
%
27.2
%
2.9 pts
26.1
%
24.7
%
1.4 pts
Employer-sponsored products benefit
ratio
50.0
%
42.6
%
7.4 pts
46.3
%
54.3
%
-8.0 pts
(1)
Measured to total revenues.
Supplemental & Group Benefits segment core earnings were
$11.8 million for the quarter. The benefit ratio for the worksite
direct product line for the quarter continues to move toward the
longer-term target with utilization remaining well below historical
levels. The benefit ratio for the employer-sponsored product lines
for the quarter increased from last year’s relatively low results
for this period, and remains in line with expectations.
The non-cash impact of amortization of intangible assets under
purchase accounting reduced second quarter 2023 core earnings by
$3.7 million pretax vs. $3.9 million in 2022. Segment net
investment income of $9.1 million for the quarter was slightly
below the prior year due to lower returns in the limited
partnership portfolio.
Total sales for the segment were $4.4 million. Sales of worksite
direct supplemental products were up 59.1% to $3.5 million, with
persistency remaining strong at 90.5%. Sales of employer-sponsored
products were $0.9 million, reflecting normal seasonality.
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 & Other segment reduced total
revenues by $56.1 million for the year ended 2022 largely due to
net investment losses.
Net investment income of $109 million (All comparisons
vs. same period in 2022, unless noted otherwise)
($ in millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
Change
2023
2022
Change
Pretax net investment income - investment
portfolio
$
82.5
$
79.4
3.9
%
$
157.2
$
152.4
3.1
%
Pretax investment income - deposit asset
on reinsurance
26.0
25.8
0.8
%
51.7
50.7
2.0
%
Total pretax net investment income
108.5
105.2
3.1
%
208.9
203.1
2.9
%
Pretax net investment losses
(17.4
)
(15.5
)
N.M
(21.3
)
(31.0
)
N.M.
Pretax net unrealized investment gains
(losses) on fixed maturity securities
(500.8
)
(358.5
)
N.M.
Investment yield, excluding limited
partnership interests, pretax - annualized
4.52
%
4.35
%
0.17 pts
4.62
%
4.35
%
0.27 pts
N.M. - Not meaningful.
Total net investment income rose 3.1% and net investment income
on the managed portfolio increased 3.9%, reflecting a higher
contribution from floating rate investments. Investment yield on
the portfolio excluding limited partnership interests was 4.52%,
with new money yields continuing to exceed portfolio yields in the
core fixed maturity securities portfolio. Commercial mortgage loan
funds are also benefiting from the higher interest rate environment
following valuation adjustments taken last year, offsetting limited
partnerships portfolio returns below last year’s second
quarter.
The fixed maturity securities portfolio was in a net unrealized
investment loss position of $500.8 million pretax at June 30, 2023,
primarily due to the elevated interest rate environment. Net
investment losses were slightly above the prior year due to yield
enhancing actions taken in the portfolio during the second
quarter.
Adjusted book value per share* of $35.55 at quarter
end
At June 30, 2023, shareholders’ equity was $1.10 billion, or
$26.96 per share, as continued higher interest rates resulted in
net unrealized investment losses on fixed maturity securities.
Excluding the unrealized losses and effect of net reserve
remeasurements attributable to discount rates*, shareholders’
equity was $1.45 billion, or $35.55 per share*. During the second
quarter, Horace Mann repurchased 35,394 shares at an average price
of $32.47. As of June 30, 2023, $35.8 million remained authorized
for future repurchases under the share repurchase program. In July
2023, the company repurchased 25,965 shares at an average price of
$28.81.
At June 30, 2023, total debt was $498.1 million, with $249.0
million outstanding on the company’s revolving credit facility.
Interest expense was $6.9 million for the second quarter of 2023
compared to $4.3 million for the second quarter of 2022 due to
higher interest expense on the revolving credit facility. The ratio
of debt-to-capital excluding net unrealized investment gains/losses
and effect of net reserve remeasurements attributable to discount
rates* was 25.5% at June 30, 2023, which aligns with levels
appropriate for the company’s current financial strength
ratings.
Quarterly webcast
Horace Mann’s senior management will discuss the company’s
second-quarter financial results with investors on August 2, 2023
at 12:30 p.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
June 30,
Six Months Ended
June 30,
2023
2022
% Change
2023
2022
% Change
Earnings Summary
Net income (loss)
$
(12.8
)
$
(4.2
)
N.M.
$
(6.2
)
$
16.1
-138.5
%
Net investment losses, after tax
(13.7
)
(12.2
)
N.M.
(16.8
)
(24.4
)
N.M.
Core earnings*
0.9
8.0
-88.8
%
10.6
40.5
-73.8
%
Adjusted core earnings*
3.8
11.3
-66.4
%
16.4
47.1
-65.2
%
Per diluted share:(1)
Net income (loss)
$
(0.31
)
$
(0.10
)
N.M.
$
(0.15
)
$
0.38
-139.5
%
Net investment losses, after tax
(0.34
)
(0.29
)
N.M.
(0.41
)
(0.58
)
N.M.
Core earnings*
0.03
0.19
-84.2
%
0.26
0.96
-72.9
%
Adjusted core earnings (loss)*
0.10
0.27
-63.0
%
0.40
1.12
-64.3
%
Weighted average number of shares and
equivalent shares (in millions) - Diluted
41.4
41.8
-1.0
%
41.4
42.0
-1.4
%
Return on Equity
Net income return on equity - LTM(2)
(0.2
)%
5.9
%
(0.2
)%
5.9
%
Net income return on equity -
annualized
(4.6
)%
(1.3
)%
(1.1
)%
2.4
%
Core return on equity - LTM*(3)
2.6
%
7.4
%
2.6
%
7.4
%
Core return on equity - annualized*
0.2
%
2.1
%
1.4
%
5.3
%
Adjusted core return on equity -
LTM*(4)
3.4
%
8.2
%
3.4
%
8.2
%
Adjusted core return on equity -
annualized*
1.0
%
3.0
%
2.2
%
6.2
%
Financial Position
Per share:(5)
Book value
$
26.96
$
29.06
-7.2
%
Effect of net unrealized investment gains
(losses) on fixed maturity securities
$
(9.64
)
$
(6.84
)
N.M.
Per share impact of net reserve
remeasurements attributable to discount rates*
$
1.05
$
(0.90
)
N.M.
Adjusted book value*
$
35.55
$
36.80
-3.4
%
Dividends paid
$
0.33
$
0.32
3.1
%
$
0.66
$
0.64
3.1
%
Ending number of shares outstanding (in
millions)(5)
40.9
41.2
-0.7
%
Total assets
$
13,671.9
$
13,661.3
0.1
%
Short-term debt
249.0
249.0
—
%
Long-term debt
249.1
248.8
0.1
%
Total shareholders’ equity
1,101.9
1,197.2
-8.0
%
N.M. - Not meaningful.
(1)
Calculated using basic shares when in a
net loss or core loss position.
(2)
Based on last twelve months net income and
average quarter-end shareholders’ equity.
(3)
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.
(4)
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.
(5)
Ending shares outstanding were 40,867,358
at June 30, 2023 and 41,189,337 at June 30, 2022.
HORACE MANN EDUCATORS
CORPORATION Consolidated Statements of Operations and Data
(Unaudited)
($ in millions, except per share
data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
Change
2023
2022
Change
Consolidated Statements of
Operations
Net premiums and contract charges
earned
$
260.7
$
255.4
2.1
%
$
516.6
$
511.2
1.1
%
Net investment income
108.5
105.2
3.1
%
208.9
203.1
2.9
%
Net investment losses
(17.4
)
(15.5
)
N.M.
(21.3
)
(31.0
)
N.M.
Other income
4.6
0.8
N.M.
6.1
9.3
-34.4
%
Total revenues
356.4
345.9
3.0
%
710.3
692.6
2.6
%
Benefits, claims and settlement
expenses
205.2
203.4
0.9
%
388.4
378.6
2.6
%
Interest credited
50.7
41.4
N.M.
99.4
81.1
22.6
%
Operating expenses
80.1
77.1
3.9
%
159.9
153.8
4.0
%
DAC amortization expense
25.4
21.5
18.1
%
49.1
43.5
12.9
%
Intangible asset amortization expense
3.7
4.2
-11.9
%
7.4
8.4
-11.9
%
Interest expense
6.9
4.3
60.5
%
13.6
8.2
65.9
%
Total benefits, losses and expenses
372.0
351.9
5.7
%
717.8
673.6
6.6
%
Income (loss) before income taxes
(15.6
)
(6.0
)
N.M.
(7.5
)
19.0
-139.5
%
Income tax expense (benefit)
(2.8
)
(1.8
)
N.M.
(1.3
)
2.9
-144.8
%
Net income (loss)
$
(12.8
)
$
(4.2
)
N.M.
$
(6.2
)
$
16.1
-138.5
%
Net Premiums Written and Contract
Deposits*
Property & Casualty
$
170.9
$
158.0
8.2
%
$
320.0
$
297.6
7.5
%
Life & Retirement
141.9
133.6
6.2
%
278.0
270.0
3.0
%
Supplemental & Group Benefits
65.2
68.3
-4.5
%
132.4
138.5
-4.4
%
Total
$
378.0
$
359.9
5.0
%
$
730.4
$
706.1
3.4
%
Segment Net Income (Loss)
Property & Casualty
$
(21.4
)
$
(25.4
)
N.M.
$
(33.0
)
$
(16.9
)
N.M.
Life & Retirement
17.4
23.8
-26.9
%
31.4
39.4
-20.3
%
Supplemental & Group Benefits
11.8
15.0
-21.3
%
25.8
28.2
-8.5
%
Corporate & Other(1)
(20.6
)
(17.6
)
-17.0
%
(30.4
)
(34.6
)
12.1
%
Consolidated net income (loss)
$
(12.8
)
$
(4.2
)
N.M.
$
(6.2
)
$
16.1
-138.5
%
Net investment losses
Before tax
$
(17.4
)
$
(15.5
)
N.M.
$
(21.3
)
$
(31.0
)
N.M.
After tax
(13.7
)
(12.2
)
N.M.
(16.8
)
(24.4
)
N.M.
Per share, diluted
$
(0.34
)
$
(0.29
)
N.M.
$
(0.41
)
$
(0.58
)
N.M.
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 12.
HORACE MANN EDUCATORS
CORPORATION Business Segment Overview (Unaudited)
($ in millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
% Change
2023
2022
% Change
Property & Casualty
Net premiums written*
$
170.9
$
158.0
8.2
%
$
320.0
$
297.6
7.5
%
Net premiums earned
157.4
149.9
5.0
%
309.8
300.1
3.2
%
Net investment income
10.6
7.7
37.7
%
14.6
14.9
-2.0
%
Other income
0.8
1.2
-33.3
%
1.5
2.0
-25.0
%
Losses and loss adjustment expenses
(LAE)
152.0
150.2
1.2
%
280.8
258.5
8.6
%
Operating expenses (includes amortization
expense)
43.1
40.1
7.5
%
86.0
79.5
8.2
%
Income (loss) before income taxes
(26.3
)
(31.5
)
-16.5
%
(40.9
)
(21.0
)
94.8
%
Net income (loss) / core earnings
(loss)*
(21.4
)
(25.4
)
-15.7
%
(33.0
)
(16.9
)
95.3
%
Net investment income, after tax
8.7
6.5
33.8
%
12.2
12.6
-3.2
%
Catastrophe losses
After tax
32.8
36.2
-9.4
%
50.5
41.9
20.5
%
Before tax
41.5
45.7
-9.2
%
63.9
53.0
20.6
%
Prior years’ reserve development, before
tax(1)
Auto
—
12.0
N.M.
—
12.0
N.M.
Property and other
—
(6.0
)
N.M.
—
(6.0
)
N.M.
Total
—
6.0
N.M.
—
6.0
N.M.
Operating statistics:
Loss and loss adjustment expense ratio
96.6
%
100.2
%
-3.6 pts
90.6
%
86.1
%
4.5 pts
Expense ratio
27.4
%
26.7
%
0.7 pts
27.8
%
26.5
%
1.3 pts
Combined ratio
124.0
%
126.9
%
-2.9 pts
118.4
%
112.6
%
5.8 pts
Effect on the combined ratio of:
Catastrophe losses
26.3
%
30.5
%
-4.2 pts
20.6
%
17.7
%
2.9 pts
Prior years’ reserve development(1)
—
%
4.0
%
-4.0 pts
—
%
2.0
%
-2.0 pts
Combined ratio excluding the effects
of
catastrophe losses and prior years’
reserve
development (underlying combined
ratio)*
97.7
%
92.4
%
5.3 pts
97.8
%
92.9
%
4.9 pts
Risks in force (in thousands)
531
545
-2.6
%
Auto(2)
362
371
-2.4
%
Property
169
174
-2.9
%
Household Retention - LTM
Auto(3)
86.8
%
86.8
%
— pts
Property(3)
90.1
%
89.5
%
0.6 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
June 30,
Six Months Ended
June 30,
2023
2022
Change
2023
2022
Change
Life & Retirement
Net premiums written and contract
deposits*
$
141.9
$
133.6
6.2
%
$
278.0
$
270.0
3.0
%
Net premiums and contract charges
earned
37.4
36.3
3.0
%
75.1
72.1
4.2
%
Net investment income
89.3
88.4
1.0
%
177.2
172.6
2.7
%
Other income
4.5
4.4
2.3
%
8.4
9.3
-9.7
%
Death benefits / mortality cost(1)
17.6
14.7
19.7
%
37.1
36.1
2.8
%
Interest credited
49.8
41.2
20.9
%
97.7
80.8
20.9
%
Change in reserves
9.6
13.9
-30.9
%
23.4
26.9
-13.0
%
Operating expenses
24.8
24.8
—
%
49.0
50.5
-3.0
%
DAC amortization expense
7.6
5.4
40.7
%
14.4
11.1
29.7
%
Intangible asset amortization expense
—
0.3
-100.0
%
0.1
0.6
-83.3
%
Income before income taxes
21.8
28.8
-24.3
%
39.0
48.0
-18.8
%
Income tax expense
4.4
5.0
-12.0
%
7.6
8.6
-11.6
%
Net income / core earnings*
17.4
23.8
-26.9
%
31.4
39.4
-20.3
%
Adjusted core earnings*
17.5
24.0
-27.1
%
31.5
39.8
-20.9
%
Life policies in force (in thousands)
162
162
—
%
Life insurance in force
$
20,265
$
19,714
2.8
%
Lapse ratio - 12 months(1)
4.1
%
3.8
%
0.3 pts
Annuity contracts in force (in
thousands)
225
228
-1.3
%
Horace Mann Retirement Advantage®
contracts in force (in thousands)
18
16
12.5
%
Total Persistency - LTM
92.2
%
94.1
%
-1.9 pts
N.M. - Not meaningful.
(1)
Ordinary life insurance.
HORACE MANN EDUCATORS
CORPORATION Business Segment Overview (Unaudited)
($ in millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
Change
2023
2022
Change
Supplemental & Group
Benefits
Net premiums and contract charges
earned
$
65.9
$
69.2
-4.8
%
$
131.7
$
139.0
-5.3
%
Net investment income
9.1
9.6
-5.2
%
18.2
16.7
9.0
%
Other income
(1.4
)
(4.8
)
-70.8
%
(5.1
)
(3.2
)
59.4
%
Benefits, settlement expenses and change
in reserves
26.0
24.6
5.7
%
47.1
57.1
-17.5
%
Interest credited
0.9
0.2
N.M.
1.7
0.3
N.M.
Operating expenses (includes DAC
amortization expense)
28.0
26.3
6.5
%
55.9
51.6
8.3
%
Intangible asset amortization expense
3.7
3.9
-5.1
%
7.3
7.8
-6.4
%
Income before income taxes
15.0
19.0
-21.1
%
32.8
35.7
-8.1
%
Net income / core earnings*
11.8
15.0
-21.3
%
25.8
28.2
-8.5
%
Adjusted core earnings*
14.7
18.2
-19.2
%
31.6
34.4
-8.1
%
Benefit ratio(1)
40.9
%
35.8
%
5.1 pts
37.1
%
41.3
%
-4.2 pts
Operating expense ratio(2)
38.0
%
35.6
%
2.4 pts
38.6
%
33.8
%
4.8 pts
Pretax profit margin(3)
20.5
%
25.6
%
-5.1 pts
22.7
%
23.4
%
-0.7 pts
Worksite Direct products benefit ratio
30.1
%
27.2
%
2.9 pts
26.1
%
24.7
%
1.4 pts
Worksite Direct premium persistency
(rolling 12 months)
90.5
%
92.0
%
-1.5 pts
90.5
%
92.0
%
-1.5 pts
Employer-sponsored products benefit
ratio
50.0
%
42.6
%
7.4 pts
46.3
%
54.3
%
-8.0 pts
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.
($ in millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
Change
2023
2022
Change
Corporate & Other(1)
Components of loss before tax:
Net investment losses
$
(17.4
)
$
(15.5
)
N.M.
$
(21.3
)
$
(31.0
)
N.M.
Interest expense
(6.9
)
(4.3
)
-60.5
%
(13.6
)
(8.2
)
-65.9
%
Other operating expenses, net investment
income and other income
(1.8
)
(2.5
)
28.0
%
(3.5
)
(4.5
)
22.2
%
Loss before income taxes
(26.1
)
(22.3
)
-17.0
%
(38.4
)
(43.7
)
12.1
%
Net loss
(20.6
)
(17.6
)
-17.0
%
(30.4
)
(34.6
)
12.1
%
Core loss*
(6.9
)
(5.4
)
-27.8
%
(13.6
)
(10.2
)
-33.3
%
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.
HORACE MANN EDUCATORS
CORPORATION Business Segment Overview (Unaudited)
($ in millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
% Change
2023
2022
% Change
Investments
Life & Retirement
Fixed maturity securities, at fair value
(amortized
cost, net 2023, $4,378.7; 2022,
$4,666.2)
$
3,985.9
$
4,389.3
-9.2
%
Equity securities, at fair value
62.3
91.0
-31.5
%
Short-term investments
32.3
38.1
-15.2
%
Policy loans
139.9
139.9
—
%
Limited partnership interests
773.1
587.7
31.5
%
Other investments
74.4
56.1
32.6
%
Total Life & Retirement
investments
5,067.9
5,302.1
-4.4
%
Property & Casualty
Fixed maturity securities, at fair value
(amortized
cost, net 2023, $609.3; 2022, $612.5)
576.0
587.7
-2.0
%
Equity securities, at fair value
16.7
18.0
-7.2
%
Short-term investments
3.7
0.8
N.M.
Limited partnership interests
191.7
184.5
3.9
%
Other investments
1.0
1.1
-9.1
%
Total Property & Casualty
investments
789.1
792.1
-0.4
%
Supplemental & Group Benefits
Fixed maturity securities, at fair value
(amortized
cost, net 2023, $724.5; 2022, $767.8)
649.8
711.0
-8.6
%
Equity securities, at fair value
5.8
7.3
-20.5
%
Short-term investments
34.2
47.2
-27.5
%
Policy loans
0.8
0.9
-11.1
%
Limited partnership interests
109.0
56.2
94.0
%
Other investments
8.0
7.5
6.7
%
Total Supplemental & Group Benefits
investments
807.6
830.1
-2.7
%
Corporate & Other
Fixed maturity securities, at fair value
(amortized
cost, net 2023, $0.2; 2022, $0.0)
0.2
—
N.M.
Equity securities, at fair value
1.0
1.0
—
%
Short-term investments
3.8
11.1
N.M.
Total Corporate & Other
investments
5.0
12.1
-58.7
%
Total investments
$
6,669.6
$
6,936.4
-3.8
%
Net investment income - investment
portfolio
Before tax
$
82.5
$
79.4
3.9
%
$
157.2
$
152.4
3.1
%
After tax
65.5
63.1
3.8
%
124.8
121.2
3.0
%
Investment income - deposit asset on
reinsurance
Before tax
$
26.0
25.8
0.8
%
$
51.7
50.7
2.0
%
After tax
20.5
20.4
0.5
%
40.8
40.1
1.7
%
N.M. - Not meaningful.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230801676450/en/
Heather J. Wietzel, Vice President, Investor Relations
217-788-5144 | investorrelations@horacemann.com
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