Horace Mann Clarifies Recent Bank Credit Facility Borrowing, Revises 2008 Earnings Guidance
October 09 2008 - 3:29PM
PR Newswire (US)
SPRINGFIELD, Ill., Oct. 9 /PRNewswire-FirstCall/ -- Horace Mann
Educators Corporation (NYSE:HMN) disclosed in a Form 8-K, filed
after the market closed on October 8, 2008, that it had drawn down
$75 million of its existing $125 million bank credit facility.
Based on a significant decline today in the price of the company's
stock and anecdotal market intelligence, the company's management
has concluded that the market may have misinterpreted the purpose
of this borrowing. "The $75 million was borrowed to contribute
capital to our insurance subsidiaries, if necessary, to maintain
capital and operating ratios at a level consistent with their
current financial strength ratings," said Louis G. Lower II,
President and Chief Executive Officer. "While we do not believe
that we will need to utilize the entire amount borrowed to maintain
the appropriate capital levels of these subsidiaries, we chose to
draw this amount in light of concerns regarding bank lending
capacity at the time the borrowing was made. At this level of
borrowing, Horace Mann's debt to capital ratio is expected to
remain within management's target range." "Horace Mann is not
facing a liquidity crisis either at the insurance subsidiary or
holding company levels," stated Lower. "The company does not
currently utilize hedging or credit default swap programs and
suspended its securities lending program effective August 2007,
with no outstanding balances as of September 30, 2008. The company
does not have any near-term refinancing needs; the bank credit
facility expires in December 2011 and the company's long-term debt
does not mature until 2015 and 2016." With regard to the current
financial markets crisis, the company estimates that approximately
$50 million pretax of investment losses and other-than- temporary
impairments will be recognized in the third quarter, based on
preliminary September 30, 2008 pricing. As previously disclosed,
approximately $33 million of this amount is due to impairment
write-downs of fixed maturity and preferred stock securities of
Lehman Brothers Holdings, Inc., the Federal National Mortgage
Association ("Fannie Mae"), the Federal Home Loan Mortgage
Corporation ("Freddie Mac"), and American International Group, Inc.
Horace Mann estimates its financial impact from catastrophe losses
during the three months ended September 30, 2008 will total $34
million to $38 million pretax. This estimate includes loss and loss
adjustment expenses of $11 million to $14 million each for
Hurricanes Gustav and Ike, including approximately $1 million in
assessments from the Texas Windstorm Insurance Association related
to Hurricane Ike; $5 million to $7 million related to other third
quarter catastrophe events; and approximately $4 million to $5
million of reserve development for catastrophe activity in the
second quarter of 2008. The company's pretax catastrophe costs were
$10.3 million for the three months ended September 30, 2007.
"Primarily as a result of the higher than expected level of
catastrophe losses in the third quarter, we are reducing our
full-year 2008 estimate of net income excluding net realized
investment gains and losses from $1.30 to $1.45 per share to
between $1.10 and $1.25 per share based on information available
today," continued Lower. "The excessive catastrophe costs incurred
during the first three quarters, coupled with the effects of the
financial markets crisis, have made 2008 a challenging year for the
insurance industry," continued Lower. "While the financial impact
of these challenges on Horace Mann will be material, we believe the
impact on our capital and surplus and underlying financial strength
is very manageable." Horace Mann plans to release third quarter
2008 financial results on Wednesday, October 29, 2008, followed by
a conference call at 10:00 a.m. EDT on Thursday, October 30, 2008,
to discuss the company's third quarter performance. Live and
archived broadcasts of that conference call will be posted on the
company's Web site. 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 period ended June
30, 2008 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.
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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