SPRINGFIELD, Ill., Feb. 8 /PRNewswire-FirstCall/ -- Horace Mann
Educators Corporation (NYSE:HMN) today reported net income of $16.1
million (35 cents per share) and $77.3 million ($1.67 per share),
respectively, for the three and twelve months ended December 31,
2005, compared to $28.3 million (61 cents per share) and $56.3
million ($1.25 per share) for the same periods in 2004. Included in
net income were net realized gains on securities of $0.7 million
($0.4 million after tax, or 1 cent per share) and $9.8 million
($6.4 million after tax, or 13 cents per share) for the three and
twelve months ended December 31, 2005, respectively, compared to
net realized gains of $2.9 million ($1.9 million after tax, or 4
cents per share) and $12.2 million ($7.9 million after tax, or 17
cents per share) for the three and twelve months ended December 31,
2004, respectively. All per-share amounts are stated on a diluted
basis. "As previously announced, Horace Mann's fourth quarter 2005
earnings reflected a significant level of catastrophe costs for the
company -- $13.2 million after tax, or 28 cents per share, for the
quarter. Looking beyond the catastrophe costs, property and
casualty non-catastrophe loss ratios continued to be favorable in
the fourth quarter, although somewhat higher than prior year due to
the severe winter weather that impacted several key states in the
first half of December," said Louis G. Lower II, President and
Chief Executive Officer. "Our underlying auto and homeowners
results continued to benefit from tightened underwriting standards
and pricing actions taken in recent years, ongoing improvements in
claims processes, cost containment initiatives, and generally low
non-catastrophe claim frequencies. Property and casualty earnings
for the quarter also benefited by $3.4 million after tax from
continued favorable development of prior years' claim reserves,"
Lower added. For full year 2005, the company's federal income tax
expense reflected a reduction of $9.1 million from the closing of
six prior tax years. Federal income tax expense for the third
quarter was reduced by $6.4 million as a result of closing tax
years 1998 through 2001 with favorable resolution of the contingent
tax liabilities related to those four years. In the second quarter
of 2005, resolution of tax years 1996 and 1997 reduced federal
income tax expense by $2.7 million, and interest on the tax refund
amounts of $1.4 million was received and recorded as pretax income.
"Our underlying 2005 results support a preliminary estimate of full
year 2006 net income before realized investment gains and losses of
between $1.65 and $1.80 per share," said Lower. "This projection
anticipates favorable underlying property and casualty underwriting
results -- with a combined ratio in the low 90s -- and also
reflects additional costs of approximately 16 cents per share
associated with an enhanced catastrophe reinsurance program. The
2006 reinsurance program includes increased coverage for a single
event to a maximum of $110 million as well as a new aggregate
excess of loss treaty with a $20 million limit on losses in excess
of $20 million." Segment Earnings Net income for the property and
casualty segment decreased $9.5 million for the quarter and
increased $17.4 million for the year compared to the 2004 periods.
The $20.3 million pretax of catastrophe costs incurred in the
fourth quarter of 2005 was attributed primarily to an estimated $15
million of losses and loss adjustment expenses related to Hurricane
Wilma, a $1 million increase in the estimated net losses from
Hurricane Rita and a $1.3 million assessment from Louisiana related
to Hurricane Katrina. In the fourth quarter of 2004, catastrophe
costs of $12.3 million pretax were due primarily to a re-estimate
of expected net losses and reinsurance reinstatement premiums
related to Hurricanes Charley, Frances, Ivan and Jeanne. In
addition to catastrophes, earnings for the fourth quarter of 2005
were also negatively effected by severe winter weather in early
December, primarily impacting the auto line. The reserve studies as
of December 31, 2005 and 2004 identified favorable development of
prior years' reserves of $5.3 million in the current quarter and
adverse development of $3.8 million in the fourth quarter of 2004.
These year-end studies also resulted in recognition of favorable
property and casualty claim and claim expense reserve development
for the first three quarters of each year totaling $5 million in
2005 and $13 million in 2004. Annuity segment net income of $3.2
million for the fourth quarter was $0.3 million less than in the
prior year. The current period reflected decreased amortization of
deferred policy acquisition costs and value of acquired insurance
in force, while the fourth quarter of 2004 included a favorable
accrual adjustment to federal income tax expense. For the year
ended December 31, 2005, annuity segment net income increased $2.5
million primarily as a result of the contingent income tax
liability reductions recorded in the second and third quarters of
2005. Annuity segment earnings for the current periods also
reflected declines in the interest margin. For the quarter, life
segment net income decreased slightly compared to prior year. For
full year 2005, life segment net income decreased $1.4 million
primarily as a result of an increase in the effective income tax
rate recorded in the third quarter. Segment Revenues The company's
premiums written and contract deposits increased slightly compared
to the fourth quarter of 2004 and decreased 3 percent compared to
full year 2004 with the effect of property and casualty reinsurance
reinstatement premiums representing one-half percentage point of
the annual decline. For property and casualty, full year premiums
written declined, as increases in average auto and homeowners
premium per policy -- which were moderated to some extent by the
improvement in quality in the books of business -- were more than
offset by the decline in policies in force and the higher level of
reinsurance reinstatement premiums. In the third and fourth
quarters, the growth in new scheduled annuity deposits exceeded the
reduction in single premium and rollover deposit receipts. However,
the full year decrease in annuity new contract deposits compared to
2004 was due primarily to a reduction in single premium and
rollover deposits, partially offset by growth in new scheduled
annuity deposit receipts. Full year deposits to fixed accounts
decreased 7 percent, reflecting the current interest rate
environment, while variable annuity deposits increased 4 percent
compared to the prior year. Life segment insurance premiums and
contract deposits decreased 3 percent compared to full year 2004,
reflecting the shift in sales mix toward partner products. Sales
and Distribution Compared to record levels of annuity sales in the
prior year, total new annuity sales decreased 4 percent in 2005.
This decline was narrowed during the third and fourth quarters as
the level of annuity new business from independent agents increased
following a transition period to implement the company's desired
shift in mix of business from this channel. Improved auto and
property sales in the fourth quarter of 2005 -- driven by gains in
average agent productivity for these products -- pushed these lines
to full year growth over 2004. Total career agent sales for the
year decreased compared to 2004 reflecting a modest decline in
average overall productivity per agent. Horace Mann's career agency
force totaled 855 agents at December 31, 2005. "The total number of
agents increased sequentially in each of the four quarters of 2005
and was up 7 percent for the full year. The number of experienced
agents -- a key component of the total agency force -- increased
more than 10 percent during 2005 and showed growth in each of the
last seven quarters," Lower said. "We anticipate continued,
although more modest, growth in our agency force in 2006." Horace
Mann -- the largest national multiline insurance company focusing
on educators' financial needs -- provides auto and homeowners
insurance, retirement annuities, life insurance and other financial
solutions. Founded by educators for educators in 1945, the company
is headquartered in Springfield, Ill. For more information, visit
http://www.horacemann.com/ . 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 quarter ended September 30, 2005 and the
company's past and future filings and reports filed with the
Securities and Exchange Commission for information concerning the
important factors that could cause actual results to differ
materially from those in forward-looking statements. HORACE MANN
EDUCATORS CORPORATION Digest of Earnings and Highlights (Dollars in
Millions, Except Per Share Data) Quarter Ended Year Ended December
31, December 31, % % 2005 2004 Change 2005 2004 Change DIGEST OF
EARNINGS Net income $16.1 $28.3 -43.1% $77.3 $56.3 37.3% Net income
per share: Basic $0.37 $0.66 -43.9% $1.80 $1.32 36.4% Diluted
(A)(B) $0.35 $0.61 -42.6% $1.67 $1.25 33.6% Weighted average number
of shares and equivalent shares: Basic 43.0 42.8 42.9 42.8 Diluted
(A)(B) 48.0 47.5 47.9 47.3 HIGHLIGHTS Operations Insurance premiums
written and contract deposits (C)(D) $242.7 $242.0 0.3% $972.6
$998.4 -2.6% Return on equity (E) 13.2% 10.3% Property &
Casualty GAAP combined ratio 96.9% 88.2% 95.6% 100.5% Effect of
catastrophe costs on the Property & Casualty combined ratio
14.5% 8.4% 12.3% 13.4% Experienced agents 600 539 11.3% Financed
agents 255 261 -2.3% Total agents 855 800 6.9% Additional Per Share
Information Dividends paid $0.105 $0.105 - $0.42 $0.42 - Book value
(F) $13.51 $13.45 0.4% Financial Position Total assets $5,835.9
$5,371.9 8.6% Short-term debt - 25.0 Long-term debt 190.9 144.7
Total shareholders' equity 580.6 576.2 0.8% (A) Effective December
31, 2004, the Company adopted EITF Consensus 04-8, "The Effect of
Contingently Convertible Instruments on Diluted Earnings per
Share". The Company's Senior Convertible Notes represent 4.3
million equivalent shares and have annual interest expense of $2.7
million after tax. Diluted per share information for all periods is
presented on a basis consistent with this consensus. (B) As
prescribed by U.S. generally accepted accounting principles, the
quarter earnings per share amounts were computed discretely and the
antidilutive effects of potential common shares outstanding were
excluded from weighted average shares and equivalent shares -
diluted for the third quarter of 2005 and 2004. Accordingly, the
sum of the per share amounts for the four quarters does not equal
the year-to- date per share amount. (C) As a result of catastrophes
in the third quarter of both 2005 and 2004, the Company incurred
additional ceded premiums, to reinstate its property and casualty
reinsurance coverage, of $0.5 million and $1.0 million for the
three months and $9.9 million and $5.0 million for the years ended
December 31, 2005 and 2004, respectively. Excluding these
reinstatement premiums from both years, the percentage changes were
0.1% and -2.1% for the three and twelve months ended December 31,
2005, respectively. (D) Reflecting resolution of the challenge to
automobile rates in North Carolina, in the fourth quarter of 2004
the Company returned to policyholders $4.0 million of previously
escrowed premiums, resulting in a reduction to written premiums.
Excluding the escrow payment and the reinstatement premiums
described in note (C), the written premium growth rates were -1.5%
and -2.5% for the three and twelve months ended December 31, 2005,
respectively. (E) Based on trailing 12-month net income and average
quarter-end shareholders' equity. (F) Before the fair value
adjustment for investments, book value per share was $12.85 at
December 31, 2005 and $11.45 at December 31, 2004. Ending shares
outstanding were 42,972,028 at December 31, 2005 and 42,846,643 at
December 31, 2004. - 1 - HORACE MANN EDUCATORS CORPORATION
Statements of Operations and Supplemental GAAP Consolidated Data
(Dollars in Millions) Quarter Ended Year Ended December 31,
December 31, % % 2005 2004 Change 2005 2004 Change STATEMENTS OF
OPERATIONS Insurance premiums written and contract deposits (A)
$242.7 $242.0 0.3% $972.6 $998.4 -2.6% Insurance premiums and
contract charges earned (A) $170.0 $172.9 -1.7% $664.9 $674.7 -1.5%
Net investment income 49.7 47.9 3.8% 194.6 191.4 1.7% Realized
investment gains 0.7 2.9 9.8 12.2 Total revenues 220.4 223.7 -1.5%
869.3 878.3 -1.0% Benefits, claims and settlement expenses 114.1
106.5 442.7 484.4 Interest credited 29.8 28.1 115.9 108.7 Policy
acquisition expenses amortized 17.1 18.2 71.5 70.0 Operating
expenses 35.4 34.3 3.2% 131.2 132.7 -1.1% Amortization of
intangible assets 0.8 2.2 5.1 6.0 Interest expense (B) 2.3 1.7 8.9
6.8 Total benefits, losses and expenses 199.5 191.0 4.5% 775.3
808.6 -4.1% Income before income taxes 20.9 32.7 -36.1% 94.0 69.7
34.9% Income tax expense (C) 4.8 4.4 16.7 13.4 Net income $16.1
$28.3 -43.1% $77.3 $56.3 37.3% ANALYSIS OF PREMIUMS WRITTEN AND
CONTRACT DEPOSITS (A) Property & Casualty Automobile and
property (voluntary) $131.7 $132.1 -0.3% $535.2 $552.5 -3.1%
Involuntary and other property & casualty 2.0 0.8 11.7 9.8
Total Property & Casualty 133.7 132.9 0.6% 546.9 562.3 -2.7%
Annuity deposits 79.9 78.6 1.7% 320.1 327.0 -2.1% Life 29.1 30.5
-4.6% 105.6 109.1 -3.2% Total $242.7 $242.0 0.3% $972.6 $998.4
-2.6% ANALYSIS OF SEGMENT NET INCOME (LOSS) Property & Casualty
$11.1 $20.6 -46.1% $45.0 $27.6 63.0% Annuity 3.2 3.5 -8.6% 15.1
12.6 19.8% Life 3.3 3.7 -10.8% 13.4 14.8 -9.5% Corporate and other
(D) (1.5) 0.5 3.8 1.3 Net income 16.1 28.3 -43.1% 77.3 56.3 37.3%
Catastrophe costs, after tax, included above (E) (13.2) (8.0)
(45.0) (49.1) (A) See additional information on page 1 regarding
the effects of property and casualty catastrophe reinsurance
reinstatement premiums and escrowed North Carolina automobile
premiums. (B) The year ended December 31, 2005 includes costs of
$0.5 million as a result of retiring the 6 5/8% Senior Notes due
2006. (C) The year ended December 31, 2005 reflects reductions of
$9.1 million as a result of closing tax years 1998 through 2001 in
the third quarter and tax years 1996 and 1997 in the second quarter
with favorable resolution of the contingent tax liabilities. The
Company also received interest on income tax refunds of $1.4
million pretax in the second quarter reflected as a reduction to
year-to-date Operating Expenses above. (D) The Corporate and Other
segment includes interest expense on debt and the impact of
realized 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 management's
evaluation of the results of those segments. See detail for this
segment on page 4. (E) Net of anticipated recoveries from the
Company's underlying catastrophe reinsurance program and, in 2004,
from the Florida Hurricane Catastrophe Fund. Includes allocated
loss adjustment expenses and catastrophe reinsurance reinstatement
premiums. - 2 - HORACE MANN EDUCATORS CORPORATION Supplemental
Business Segment Overview (Dollars in Millions) Quarter Ended Year
Ended December 31, December 31, % % 2005 2004 Change 2005 2004
Change PROPERTY & CASUALTY Premiums written (A)(B) $133.7
$132.9 0.6% $546.9 $562.3 -2.7% Premiums earned (A) 139.7 143.8
-2.9% 549.6 561.3 -2.1% Net investment income 8.5 8.3 2.4% 33.2
33.8 -1.8% Losses and loss adjustment expenses (LAE) 101.8 95.2
398.0 439.3 Operating expenses (includes policy acquisition
expenses amortized) 33.1 32.8 0.9% 126.8 126.3 0.4% Income before
tax 13.3 24.1 -44.8% 58.0 29.5 96.6% Net income 11.1 20.6 -46.1%
45.0 27.6 63.0% Net investment income, after tax 7.2 7.0 2.9% 28.2
28.6 -1.4% Catastrophe costs, after tax (C) 13.2 8.0 45.0 49.1
Catastrophe losses and LAE, before tax (D) 19.8 11.3 59.3 70.5
Reinsurance reinstatement premiums, before tax 0.5 1.0 9.9 5.0
Operating statistics: Loss and loss adjustment expense ratio 72.9%
66.2% 72.4% 78.3% Expense ratio 24.0% 22.0% 23.2% 22.2% Combined
ratio 96.9% 88.2% 95.6% 100.5% Effect of catastrophe costs on the
combined ratio 14.5% 8.4% 12.3% 13.4% Automobile and property
detail: Premiums written (voluntary) (A)(B) $131.7 $132.1 -0.3%
$535.2 $552.5 -3.1% Automobile (B) 92.5 93.5 -1.1% 381.1 398.2
-4.3% Property 39.2 38.6 1.6% 154.1 154.3 -0.1% Premiums earned
(voluntary) (A) 135.3 140.3 -3.6% 538.8 552.0 -2.4% Automobile 94.8
101.5 -6.6% 386.0 404.2 -4.5% Property 40.5 38.8 4.4% 152.8 147.8
3.4% Policies in force (voluntary) (in thousands) 797 818 -2.6%
Automobile 531 545 -2.6% Property 266 273 -2.6% Voluntary
automobile operating statistics: Loss and loss adjustment expense
ratio 70.7% 64.7% 68.2% 70.6% Expense ratio 24.5% 21.8% 23.4% 22.0%
Combined ratio 95.2% 86.5% 91.6% 92.6% Effect of catastrophe costs
on the combined ratio 1.1% 0.2% 1.5% 1.0% Total property operating
statistics: Loss and loss adjustment expense ratio 75.4% 67.4%
80.5% 96.9% Expense ratio 23.6% 22.3% 23.3% 22.6% Combined ratio
99.0% 89.7% 103.8% 119.5% Effect of catastrophe costs on the
combined ratio 45.7% 29.1% 39.3% 47.7% Prior years' reserves
favorable (adverse) development, pretax Voluntary automobile $3.5
$(3.8) $8.8 $(3.8) Total property 1.8 - 4.3 - Other property and
casualty - - - - Total 5.3 (3.8) 13.1 (3.8) (A) Amounts are net of
additional ceded premiums to reinstate the Company's property and
casualty catastrophe reinsurance coverage as quantified above. (B)
After return of escrowed North Carolina automobile premiums of $4.0
million for the three and twelve months ended December 31, 2004.
(C) Net of anticipated recoveries from the Company's underlying
catastrophe reinsurance program and, in 2004, from the Florida
Hurricane Catastrophe Fund. Includes allocated loss adjustment
expenses and catastrophe reinsurance reinstatement premiums. (D)
Amounts for the three and twelve months ended December 31, 2005
include the Company's $1.3 million assessment from the Louisiana
Citizens Fair and Coastal Plans. In addition, the amount for the
twelve months ended December 31, 2005 includes the Company's $1.8
million assessment from the Florida Citizens Property Insurance
Corporation. The Company intends to assess its Louisiana and
Florida property policyholders, respectively, to recoup these
amounts. - 3 - HORACE MANN EDUCATORS CORPORATION Supplemental
Business Segment Overview (Dollars in Millions) Quarter Ended Year
Ended December 31, December 31, % % 2005 2004 Change 2005 2004
Change ANNUITY Contract deposits $79.9 $78.6 1.7% $320.1 $327.0
-2.1% Variable 39.5 36.9 7.0% 137.8 132.0 4.4% Fixed 40.4 41.7
-3.1% 182.3 195.0 -6.5% Contract charges earned 4.6 4.3 7.0% 17.9
16.7 7.2% Net investment income 28.9 27.7 4.3% 112.9 109.4 3.2% Net
interest margin (without realized gains) 7.8 8.0 -2.5% 31.4 33.7
-6.8% Mortality gain (loss) and other reserve changes (0.4) 0.2
(0.8) (1.2) Operating expenses (includes policy acquisition
expenses amortized) 7.0 7.7 -9.1% 28.5 28.4 0.4% Income before tax
and amortization of intangible assets 5.0 4.8 4.2% 20.0 20.8 -3.8%
Amortization of intangible assets 0.5 1.9 3.7 4.5 Income before tax
4.5 2.9 55.2% 16.3 16.3 - Net income 3.2 3.5 -8.6% 15.1 12.6 19.8%
Pretax income increase (decrease) due to valuation of: Deferred
policy acquisition costs $0.2 $(0.8) $(1.8) $(1.2) Value of
acquired insurance in force 0.5 (0.9) 0.2 (0.9) Guaranteed minimum
death benefit reserve (0.2) - (0.6) - Annuity contracts in force
(in thousands) 162 159 1.9% Accumulated value on deposit $3,295.4
$3,081.0 7.0% Variable 1,333.7 1,254.8 6.3% Fixed 1,961.7 1,826.2
7.4% Annuity accumulated value retention - 12 months Variable
accumulations 91.5% 92.9% Fixed accumulations 94.5% 95.5% LIFE
Premiums and contract deposits $29.1 $30.5 -4.6% $105.6 $109.1
-3.2% Premiums and contract charges earned 25.7 24.8 3.6% 97.4 96.7
0.7% Net investment income 12.5 12.3 1.6% 49.3 49.5 -0.4% Income
before tax 5.3 4.8 10.4% 22.3 22.0 1.4% Net income 3.3 3.7 -10.8%
13.4 14.8 -9.5% Pretax income increase (decrease) due to valuation
of: Deferred policy acquisition costs $0.1 $- $0.7 $(0.4) Life
policies in force (in thousands) 237 252 -6.0% Life insurance in
force (in millions) $13,142 $13,223 -0.6% Lapse ratio - 12 months
(Ordinary life insurance) 6.5% 7.2% CORPORATE AND OTHER (A)
Components of gain (loss) before tax: Realized investment gains
$0.7 $2.9 $9.8 $12.2 Interest expense (2.3) (1.7) (8.9) (6.8) Other
operating expenses (0.6) (0.3) (3.5) (3.5) Income (loss) before tax
(2.2) 0.9 (2.6) 1.9 Net income (loss) (1.5) 0.5 3.8 1.3 (A) The
Corporate and Other segment includes interest expense on debt and
the impact of realized 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 management's evaluation of the results of those segments. - 4
- HORACE MANN EDUCATORS CORPORATION Supplemental Business Segment
Overview (Dollars in Millions) Quarter Ended Year Ended December
31, December 31, % % 2005 2004 Change 2005 2004 Change INVESTMENTS
Annuity and Life Fixed maturities, at market (amortized cost 2005,
$2,923.5; 2004, $2,694.1) $2,967.2 $2,820.4 Short-term investments
7.1 17.3 Short-term investments, securities lending collateral
184.7 0.1 Policy loans and other 88.7 83.1 Total Annuity and Life
investments 3,247.7 2,920.9 11.2% Property & Casualty Fixed
maturities, at market (amortized cost 2005, $734.5; 2004, $705.1)
738.3 720.8 Short-term investments 1.4 14.7 Short-term investments,
securities lending collateral 8.3 - Other 0.6 0.6 Total Property
& Casualty investments 748.6 736.1 1.7% Corporate investments
0.2 0.2 Total investments 3,996.5 3,657.2 9.3% Net investment
income Before tax $49.7 $47.9 3.8% $194.6 $191.4 1.7% After tax
34.0 32.8 3.7% 133.1 131.1 1.5% Realized investment gains (losses)
by investment portfolio included in Corporate and Other segment
income Property & Casualty $(0.4) $1.7 $1.9 $6.6 Annuity - -
7.9 3.7 Life 1.1 1.4 - 2.1 Corporate and Other - (0.2) - (0.2)
Total, before tax 0.7 2.9 9.8 12.2 Total, after tax 0.4 1.9 6.4 7.9
Per share, diluted $0.01 $0.04 $0.13 $0.17 OTHER INFORMATION End of
period goodwill asset $47.4 $47.4 End of period property and
casualty net reserves (A): December 31, 2005 $311.1 September 30,
2005 334.3 June 30, 2005 314.8 March 31, 2005 313.2 December 31,
2004 309.3 December 31, 2003 283.7 December 31, 2002 231.0 December
31, 2001 241.6 December 31, 2000 223.0 December 31, 1999 206.8 (A)
Unpaid claim and claim expense reserves net of anticipated
reinsurance recoverables and reduced for checks issued and
outstanding. - 5 - First Call Analyst: FCMN Contact:
ruffatk1@mail.horacemann.com DATASOURCE: Horace Mann Educators
Corporation CONTACT: Dwayne D. Hallman, Senior Vice President -
Finance, of Horace Mann Educators Corporation, +1-217-788-5708 Web
site: http://www.horacemann.com/
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