SPRINGFIELD, Ill., April 30 /PRNewswire-FirstCall/ -- Horace Mann
Educators Corporation (NYSE:HMN) today reported net income of $14.3
million (34 cents per share) for the three months ended March 31,
2008, compared to $23.3 million (52 cents per share) for the same
period in 2007. Included in net income were net realized losses on
securities of $2.4 million ($1.6 million after tax, or 4 cents per
share) for the three months ended March 31, 2008, and net realized
investment gains of $3.5 million ($2.3 million after tax, or 5
cents per share) for the first quarter of 2007. All per-share
amounts are stated on a diluted basis. "Horace Mann's first quarter
results reflected the strong headwinds felt throughout the
industry, including a relatively high level of catastrophe losses,
the continued impact of a challenging financial market environment,
and the adverse effect of a slowing economy on both home and auto
sales," said Louis G. Lower II, President and Chief Executive
Officer. "In terms of baseline earnings, our property and casualty
segment's current quarter combined ratio excluding catastrophes and
prior years' reserve development of approximately 91 percent was
slightly better than the prior year, while annuity segment earnings
excluding the impact of the valuation of deferred policy
acquisition costs also exceeded last year's first quarter. The
decline in life segment earnings was a result of adverse mortality
experience compared to prior year." In the first quarter of 2008,
the company completed its $50 million share repurchase
authorization announced in September 2007 and its Board of
Directors authorized an additional $25 million share repurchase
program. During the three months ended March 31, 2008, the company
repurchased a total of 1,636,376 shares of its common stock at an
aggregate cost of $29.5 million, or an average cost of $18.01 per
share. As of March 31, 2008, $24.8 million remained authorized for
future share repurchases. Total shares outstanding on March 31,
2008 and 2007 were 40,623,637 and 43,143,356, respectively. Segment
Earnings Net income for the property and casualty segment of $13.0
million for the quarter decreased $3.8 million compared to the same
period in 2007. The first quarter 2008 property and casualty
combined ratio was 93.5 percent, including 4.1 percentage points
due to catastrophe costs, compared to 89.5 percent, including 1.8
percentage points due to catastrophe costs, in the prior year
period. Pretax catastrophe costs in the current quarter were $5.4
million compared to $2.5 million incurred in the first quarter of
2007. Favorable prior years' reserve development totaling $2.7
million was recorded in the current quarter, which represented 2.0
percentage points on the combined ratio, compared to $5.5 million,
or 4.2 percentage points on the combined ratio, recorded in the
first quarter of 2007. Annuity segment net income of $3.0 million
for the quarter decreased $0.4 million compared to the first
quarter of 2007. Compared to the prior year, current period
improvements in the interest margin were more than offset by the
adverse impact of the financial market on the valuation of deferred
policy acquisition costs and the level of contract charges earned.
Life segment net income of $2.6 million for the current quarter
decreased $1.0 million compared to the same period a year earlier,
reflecting higher mortality costs which more than offset growth in
investment income. Segment Revenues The company's total premiums
written and contract deposits declined 2 percent compared to the
first quarter of 2007, largely due to decreases in annuity rollover
deposit receipts in 2008. Property and casualty premiums written
increased 1 percent compared to prior year, reflecting lower
catastrophe reinsurance premiums and an increase in average
property premium per policy. Annuity new contract deposits
decreased 9 percent compared to the three months ended March 31,
2007. Scheduled, flexible-premium annuity deposit receipts were
comparable to the first quarter of 2007, while rollover deposits
declined. For the three months, variable annuity deposits decreased
2 percent and deposits to fixed accounts decreased 15 percent
compared to the same period in 2007. Life segment insurance
premiums and contract deposits increased 2 percent compared to the
three months ended March 31, 2007. Sales and Distribution Total new
auto sales units were 12 percent lower in the first quarter than
the prior year, while the number of career agents declined 9
percent to 758 agents at March 31, 2008 compared to 12 months
earlier. The company's total points of distribution, including 284
licensed producers, increased 5 percent compared to March 31, 2007.
"In spite of a difficult economic and competitive environment, we
continue to be very positive about the progress we are making in
transitioning to our new Agency Business Model. While it's still
very early in the migration process, the approximately 200 agents
who have completed Horace Mann's agency business school have
outperformed our other agents in the key productivity measures,"
said Lower. "As anticipated, our decline in agent count reflects
the loss of generally lower-producing agents and a reduction in new
agent hires as we transition our hiring standards to target only
those individuals we believe will be successful in the new Agency
Business Model," Lower noted. Annuity new business decreased 16
percent for the three months ended March 31, 2008, compared to the
same period a year earlier, due to a decline in rollover deposits.
"While IRS transition regulations for the 403(b) annuity
marketplace reduced new rollover deposits, we are pleased to see
new business growth in our core scheduled deposit business," said
Lower. Realized Investment Gains and Losses In 2008, pretax net
realized investment losses were $2.4 million for the first quarter,
including $2.7 million of impairment write downs and $3.9 million
of realized impairment losses on securities that were disposed of
during the quarter. "While we realized a modest level of investment
losses in the quarter, our conservative investment portfolio
continues to serve us well in the current financial market
environment," said Lower. 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 Annual Report on Form 10-K for the year ended December
31, 2007 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
(Unaudited) (Dollars in Millions, Except Per Share Data) Three
Months Ended March 31, 2008 2007 % Change DIGEST OF EARNINGS Net
income $14.3 $23.3 -38.6% Net income per share: Basic $0.35 $0.54
-35.2% Diluted (A) $0.34 $0.52 -34.6% Weighted average number of
shares and equivalent shares (in millions) (B): Basic 41.1 43.1
-4.6% Diluted (A) 42.1 45.4 -7.3% HIGHLIGHTS Operations Insurance
premiums written and contract deposits $224.6 $230.3 -2.5% Return
on equity (C) 11.0% 16.2% N.M. Property & Casualty GAAP
combined ratio 93.5% 89.5% N.M. Effect of catastrophe costs on the
Property & Casualty combined ratio 4.1% 1.8% N.M. Experienced
agents 557 582 -4.3% Financed agents 201 248 -19.0% Total agents
758 830 -8.7% Licensed producers 284 158 79.7% Total points of
distribution (D) 1,042 988 5.5% Additional Per Share Information
Dividends paid $0.105 $0.105 0.0% Book value (E) $15.82 $15.70 0.8%
Financial Position Total assets $6,080.3 $6,470.7 -6.0% Short-term
debt - - 0.0% Long-term debt 199.5 232.0 -14.0% Total shareholders'
equity 642.7 677.4 -5.1% N.M. -- Not meaningful. (A) Effective
December 31, 2004, the Company adopted EITF Consensus 04-8, "The
Effect of Contingently Convertible Instruments on Diluted Earnings
per Share". Diluted per share information for all periods is
presented on a basis consistent with this consensus. On May 14,
2007, the Company redeemed all remaining Senior Convertible Notes.
For the three months ended March 31, 2007, the Senior Convertible
Notes represented 1.2 million equivalent shares and had after tax
interest expense of $0.2 million. (B) In November and December
2007, the Company repurchased 1,111,600 shares of its common stock
at an aggregate cost of $20.7 million, or an average cost of $18.66
per share. During the three months ended March 31, 2008, the
Company repurchased 1,636,376 shares of its common stock at an
aggregate cost of $29.5 million, or an average cost of $18.01 per
share. (C) Based on trailing 12-month net income and average
quarter-end shareholders' equity. (D) Includes licensed producers
working in exclusive agents' offices and excludes independent
agents. (E) Book value per share excluding the fair value
adjustment for investments was $16.66 at March 31, 2008 and $15.43
at March 31, 2007. Ending shares outstanding were 40,623,637 at
March 31, 2008 and 43,143,356 at March 31, 2007. - 1 - HORACE MANN
EDUCATORS CORPORATION Statements of Operations and Supplemental
GAAP Consolidated Data (Unaudited) (Dollars in Millions) Three
Months Ended March 31, 2008 2007 % Change STATEMENTS OF OPERATIONS
Insurance premiums and contract charges earned $162.5 $161.2 0.8%
Net investment income 56.6 54.9 3.1% Net realized investment gains
(losses) (2.4) 3.5 N.M. Other income 2.6 2.6 0.0% Total revenues
219.3 222.2 -1.3% Benefits, claims and settlement expenses 106.9
98.4 8.6% Interest credited 32.1 31.2 2.9% Policy acquisition
expenses amortized 21.0 19.1 9.9% Operating expenses 34.8 35.1
-0.9% Amortization of intangible assets 1.2 1.5 -20.0% Interest
expense 3.4 3.7 -8.1% Total benefits, losses and expenses 199.4
189.0 5.5% Income before income taxes 19.9 33.2 -40.1% Income tax
expense 5.6 9.9 -43.4% Net income $14.3 $23.3 -38.6% ANALYSIS OF
PREMIUMS WRITTEN AND CONTRACT DEPOSITS Property & Casualty
Automobile and property (voluntary) $126.6 $124.5 1.7% Involuntary
and other property & casualty 0.2 0.8 -75.0% Total Property
& Casualty 126.8 125.3 1.2% Annuity deposits 73.9 81.5 -9.3%
Life 23.9 23.5 1.7% Total $224.6 $230.3 -2.5% ANALYSIS OF SEGMENT
NET INCOME (LOSS) Property & Casualty $13.0 $16.8 -22.6%
Annuity 3.0 3.4 -11.8% Life 2.6 3.6 -27.8% Corporate and other (A)
(4.3) (0.5) N.M. Net income 14.3 23.3 -38.6% Catastrophe costs,
after tax, included above (B) (3.5) (1.6) 118.8% N.M. -- Not
meaningful. (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 how management evaluates the
results of those segments. See detail for this segment on page 4.
(B) Includes allocated loss adjustment expenses and catastrophe
reinsurance reinstatement premiums. See also page 3. - 2 - HORACE
MANN EDUCATORS CORPORATION Supplemental Business Segment Overview
(Unaudited) (Dollars in Millions) Three Months Ended March 31, 2008
2007 % Change PROPERTY & CASUALTY Premiums written $126.8
$125.3 1.2% Premiums earned 133.0 132.2 0.6% Net investment income
9.2 9.2 0.0% Other income 0.6 0.5 20.0% Losses and loss adjustment
expenses (LAE) 91.7 86.0 6.6% Operating expenses (includes policy
acquisition expenses amortized) 32.7 32.4 0.9% Income before tax
18.4 23.5 -21.7% Net income 13.0 16.8 -22.6% Net investment income,
after tax 7.7 7.6 1.3% Catastrophe costs, after tax (A) 3.5 1.6
118.8% Catastrophe losses and LAE, before tax 5.4 2.5 116.0%
Reinsurance reinstatement premiums, before tax - - 0.0% Operating
statistics: Loss and loss adjustment expense ratio 69.0% 65.0% N.M.
Expense ratio 24.5% 24.5% N.M. Combined ratio 93.5% 89.5% N.M.
Effect of catastrophe costs on the combined ratio 4.1% 1.8% N.M.
Automobile and property detail: Premiums written (voluntary) (B)
$126.6 $124.5 1.7% Automobile 91.8 91.6 0.2% Property 34.8 32.9
5.8% Premiums earned (voluntary) (B) 133.3 129.7 2.8% Automobile
90.9 91.1 -0.2% Property 42.4 38.6 9.8% Policies in force
(voluntary) (in thousands) 799 800 -0.1% Automobile 534 534 0.0%
Property 265 266 -0.4% Policy renewal rate (voluntary) Automobile
(6 months) 90.8% 90.3% N.M. Property (12 months) 88.6% 87.3% N.M.
Voluntary automobile operating statistics: Loss and loss adjustment
expense ratio 71.2% 68.8% N.M. Expense ratio 24.3% 24.8% N.M.
Combined ratio 95.5% 93.6% N.M. Effect of catastrophe costs on the
combined ratio 0.4% 0.2% N.M. Total property operating statistics:
Loss and loss adjustment expense ratio 66.0% 53.4% N.M. Expense
ratio 24.9% 24.9% N.M. Combined ratio 90.9% 78.3% N.M. Effect of
catastrophe costs on the combined ratio 12.1% 6.0% N.M. Prior
years' reserves favorable (adverse) development, pretax Voluntary
automobile $1.3 $3.0 -56.7% Total property 0.4 2.5 -84.0% Other
property and casualty 1.0 - N.M. Total 2.7 5.5 -50.9% N.M. -- Not
meaningful. (A) Includes allocated loss adjustment expenses and
catastrophe reinsurance reinstatement premiums. (B) Amounts are net
of additional ceded premiums to reinstate the Company's property
and casualty catastrophe reinsurance coverage, if any, as
quantified above. - 3 - HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited) (Dollars in
Millions) Three Months Ended March 31, 2008 2007 % Change ANNUITY
Contract deposits $73.9 $81.5 -9.3% Variable 35.6 36.5 -2.5% Fixed
38.3 45.0 -14.9% Contract charges earned 4.7 5.4 -13.0% Net
investment income 33.1 31.5 5.1% Net interest margin (without
realized investment gains and losses) 10.5 9.5 10.5% Other income
1.3 1.2 8.3% Mortality loss and other reserve changes (0.5) (0.3)
66.7% Operating expenses (includes policy acquisition expenses
amortized) 11.5 9.7 18.6% Amortization of intangible assets 0.9 1.2
-25.0% Income before tax 3.6 4.9 -26.5% Net income 3.0 3.4 -11.8%
Pretax income increase (decrease) due to valuation of: Deferred
policy acquisition costs $(2.3) $(0.5) 360.0% Value of acquired
insurance in force 0.1 (0.2) N.M. Guaranteed minimum death benefit
reserve (0.1) 0.1 N.M. Annuity contracts in force (in thousands)
168 165 1.8% Accumulated value on deposit $3,572.3 $3,618.0 -1.3%
Variable 1,392.8 1,517.9 -8.2% Fixed 2,179.5 2,100.1 3.8% Annuity
accumulated value retention - 12 months Variable accumulations
91.3% 91.5% N.M. Fixed accumulations 91.9% 93.1% N.M. LIFE Premiums
and contract deposits $23.9 $23.5 1.7% Premiums and contract
charges earned 24.8 23.6 5.1% Net investment income 14.6 13.9 5.0%
Income before tax 4.4 5.5 -20.0% Net income 2.6 3.6 -27.8% Pretax
income increase (decrease) due to valuation of: Deferred policy
acquisition costs $- $- 0.0% Life policies in force (in thousands)
226 231 -2.2% Life insurance in force $13,597 $13,435 1.2% Lapse
ratio - 12 months (Ordinary life insurance) 5.7% 5.8% N.M.
CORPORATE AND OTHER (A) Components of loss before tax: Net realized
investment gains (losses) $(2.4) $3.5 N.M. Interest expense (3.4)
(3.7) -8.1% Other operating expenses, net investment income and
other income (0.7) (0.5) 40.0% Loss before tax (6.5) (0.7) N.M. Net
loss (4.3) (0.5) N.M. N.M. -- Not meaningful. (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 how
management evaluates the results of those segments. - 4 - HORACE
MANN EDUCATORS CORPORATION Supplemental Business Segment Overview
(Unaudited) (Dollars in Millions) Three Months Ended March 31, 2008
2007 % Change INVESTMENTS Annuity and Life Fixed maturities, at
fair value (amortized cost 2008, $3,103.8; 2007, $3,136.8) $3,060.5
$3,149.5 -2.8% Equity securities, at fair value (cost 2008, $52.4;
2007, $13.5) 46.0 13.7 235.8% Short-term investments 120.3 20.5
486.8% Short-term investments, securities lending collateral 70.5
351.7 -80.0% Policy loans and other 103.4 96.9 6.7% Total Annuity
and Life investments 3,400.7 3,632.3 -6.4% Property & Casualty
Fixed maturities, at fair value (amortized cost 2008, $710.1; 2007,
$747.3) 705.7 753.4 -6.3% Equity securities, at fair value (cost
2008, $41.8; 2007, $8.5) 38.2 9.1 319.8% Short-term investments
11.5 14.7 -21.8% Short-term investments, securities lending
collateral - - 0.0% Total Property & Casualty investments 755.4
777.2 -2.8% Corporate investments 0.1 37.7 -99.7% Total investments
4,156.2 4,447.2 -6.5% Net investment income Before tax $56.6 $54.9
3.1% After tax 38.5 37.3 3.2% Net realized investment gains
(losses) by investment portfolio included in Corporate and Other
segment gain (loss) Property & Casualty $(0.2) $0.3 N.M.
Annuity (3.4) 3.2 N.M. Life 1.2 - N.M. Corporate and Other - - N.M.
Total, before tax (2.4) 3.5 N.M. Total, after tax (1.6) 2.3 N.M.
Per share, diluted $(0.04) $0.05 N.M. N.M. -- Not meaningful. - 5 -
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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