SPRINGFIELD, Ill., Oct. 31 /PRNewswire-FirstCall/ -- Horace Mann
Educators Corporation (NYSE:HMN) today reported net income of $18.4
million (41 cents per share) and $64.8 million ($1.45 per share)
for the three and nine months ended September 30, 2007,
respectively, compared to net income of $19.4 million (43 cents per
share) and $70.1 million ($1.55 per share) for the same periods in
2006. Included in net income was a net realized loss on securities
of $0.5 million ($0.3 million after tax, or 1 cent per share) for
the third quarter of 2007 and net realized gains of $2.1 million
($1.4 million after tax, or 3 cents per share) for the nine months
ended September 30, 2007. In 2006, net realized investment gains
were $0.8 million ($0.5 million after tax, or 1 cent per share) and
$5.3 million ($3.4 million after tax, or 8 cents per share) for the
respective three and nine month periods. All per-share amounts are
stated on a diluted basis. "Horace Mann continues to produce strong
results in 2007. The third quarter represented another solid
earnings period for the company, consistent with prior year and our
expectations," said Louis G. Lower II, President and Chief
Executive Officer. "In our property and casualty segment, the
current quarter and nine months' combined ratios excluding
catastrophes and prior years' reserve development of approximately
91 percent exceeded prior year and were somewhat above our
expectations, primarily due to an increase in property claims
frequency. In spite of the benign hurricane season, catastrophe
losses in the quarter were greater than prior year and somewhat
higher than normal primarily as a result of storms in the Midwest.
Favorable prior years' reserve development continued in the third
quarter, although at a reduced level compared to last year. Annuity
segment earnings exceeded our expectations in the quarter and
continued well ahead of prior year, driven by increased investment
spreads and contract charges. Life segment earnings were also
strong, reflecting growth in investment income and favorable
mortality experience." "Our growth initiatives demonstrated
continued progress as well," continued Lower. "While total new auto
unit sales were down in the third quarter compared to prior year,
virtually all of the decrease was a by-product of our property
catastrophe risk mitigation efforts in Florida. Through nine
months, total new auto sales units increased 2 percent, including a
3 percent growth in units sold to new auto policyholders." "In
terms of our year-end earnings outlook, at this time we are unable
to fully assess the fourth quarter effect of the Southern
California wildfires. However, based on the current preliminary
information available, we do not anticipate that these fires will
have a significant impact on our current estimate of full year 2007
net income before realized investment gains and losses of between
$1.80 and $1.95 per share," said Lower. Segment Earnings Net income
for the property and casualty segment of $10.4 million for the
quarter decreased $4.1 million compared to the same period in 2006,
with year-to-date income down $8.2 million. The current year
property and casualty combined ratios were 96.7 percent and 91.8
percent for the third quarter and nine months, respectively,
compared to 91.2 percent and 88.3 percent in the prior year
periods. Pretax catastrophe costs in the current quarter were $10.3
million compared to $7.2 million incurred in the third quarter of
2006. Favorable prior years' reserve development totaling $3.7
million was recorded in the current quarter, down from the $5.1
million recorded in the third quarter of last year. Annuity segment
net income of $5.2 million for the quarter increased $1.8 million
compared to the third quarter of 2006, contributing to a
year-to-date increase of $3.8 million. In addition to double-digit
growth in the interest margin and contract charges earned, there
was a small positive effect from valuations of deferred policy
acquisition costs and value of acquired insurance in force in the
current period. Life segment net income of $5.5 million for this
year's third quarter and $12.7 million for the nine months each
increased approximately $1.5 million compared to a year earlier,
reflecting growth in investment income and lower mortality costs.
Segment Revenues The company's total premiums written and contract
deposits increased 1 percent for the quarter and 2 percent for the
nine months compared to the prior year. As previously disclosed, in
August 2007 the National Education Association ("NEA") educator
excess professional liability insurance policy expired. As the
primary component of involuntary and other property and casualty
premiums, this policy represented approximately $8.6 million of
premiums written in the prior year third quarter and nine months.
Current quarter and year-to-date property and casualty premiums
written reflected slight increases due to growth in average
property premium per policy and growth in policies in force,
however these were more than offset by a decrease in average auto
premium per policy, higher catastrophe reinsurance premiums and the
impact of the NEA educator excess professional liability insurance
policy expiration. Annuity new contract deposits increased 10
percent and 7 percent compared to the three and nine months ended
September 30, 2006, respectively, due to growth in scheduled
annuity deposit receipts. For the nine months, deposits to fixed
accounts increased 6 percent, and variable annuity deposits
increased 9 percent. Life segment insurance premiums and contract
deposits decreased 2 percent and 1 percent compared to the three
and nine months ended September 30, 2006, respectively. Sales and
Distribution Total new auto sales units increased 2 percent
compared to the first nine months of 2006. Annuity new business
decreased 8 percent for the nine months compared to a year earlier.
In 2006, annuity sales benefitted from increased opportunities for
rollover deposits in six states that had initiated programs
allowing educators to privatize a portion of their state retirement
funds. The current period also reflected a decline in fixed indexed
annuity partner product sales. "While the decline in current year
annuity sales is disappointing, we had a smaller decline in the
third quarter and are pleased with the growth in total annuity
revenues and accumulated account values. We are also pleased to see
the year-to-date sales growth in our auto line, although the rate
of growth was somewhat lower than our expectations primarily due to
the reduced sales volume in Florida. Positive results from
initiatives such as the property and casualty Educator Segmentation
(Pricing) Model and our Product Management Organization are driving
year-to-date improvements in average auto productivity per agent
while also supporting Horace Mann's transition to our new Agency
Business Model," said Lower. Horace Mann's career agency force
totaled 797 agents at September 30, 2007, a 4 percent decline
compared to 12 months earlier. "As we continue transitioning to our
new Agency Business Model, we expect the agent count to continue to
decline somewhat over the intermediate term, while our total points
of distribution increase as a result of the growing number of
licensed producers supporting agents who adopt the new model,"
Lower noted. 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, 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) Quarter
Ended Nine Months Ended September 30, September 30, 2007 2006 %
Change 2007 2006 % Change DIGEST OF EARNINGS Net income $18.4 $19.4
-5.2% $64.8 $70.1 -7.6% Net income per share: Basic $0.42 $0.45
-6.7% $1.50 $1.63 -8.0% Diluted (A) $0.41 $0.43 -4.7% $1.45 $1.55
-6.5% Weighted average number of shares and equivalent shares:
Basic 43.3 43.0 43.2 43.0 Diluted (A) 44.3 45.0 44.8 46.0
HIGHLIGHTS Operations Insurance premiums written and contract
deposits $254.4 $252.3 0.8% $735.5 $723.9 1.6% Return on equity (B)
14.2% 15.0% Property & Casualty GAAP combined ratio 96.7% 91.2%
91.8% 88.3% Effect of catastrophe costs on the Property &
Casualty combined ratio 7.7% 5.4% 4.4% 4.8% Experienced agents 576
589 -2.2% Financed agents 221 244 -9.4% Total agents 797 833 -4.3%
Additional Per Share Information Dividends paid $0.105 $0.105 -
$0.315 $0.315 - Book value (C) $15.73 $14.33 9.8% Financial
Position Total assets $6,295.3 $6,277.5 0.3% Short-term debt - -
Long-term debt 199.5 232.0 Total shareholders' equity 680.9 616.4
10.5% (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.
Prior to the repurchases in 2006, the Company's Senior Convertible
Notes represented 4.3 million equivalent shares and had annual
interest expense of $2.7 million after tax. On May 14, 2007, the
Company redeemed all remaining Senior Convertible Notes. For the
nine months ended September 30, 2007, the Senior Convertible Notes
represented 0.6 million equivalent shares and had after tax
interest expense of $0.3 million. (B) Based on trailing 12-month
net income and average quarter-end shareholders' equity. (C) Before
the fair value adjustment for investments, book value per share was
$16.21 at September 30, 2007 and $14.17 at September 30, 2006.
Ending shares outstanding were 43,294,959 at September 30, 2007 and
43,026,839 at September 30, 2006. HORACE MANN EDUCATORS CORPORATION
Statements of Operations and Supplemental GAAP Consolidated Data
(Unaudited) (Dollars in Millions) Quarter Ended Nine Months Ended
September 30, September 30, 2007 2006 % Change 2007 2006 % Change
STATEMENTS OF OPERATIONS Insurance premiums written and contract
deposits $254.4 $252.3 0.8% $735.5 $723.9 1.6% Insurance premiums
and contract charges earned $163.3 $162.7 0.4% $488.0 $487.3 0.1%
Net investment income 56.0 53.1 5.5% 166.3 154.8 7.4% Net realized
investment gains (losses) (0.5) 0.8 2.1 5.3 Total revenues 218.8
216.6 1.0% 656.4 647.4 1.4% Benefits, claims and settlement
expenses 108.6 102.2 307.0 292.9 Interest credited 32.2 31.0 95.0
91.1 Policy acquisition expenses amortized 18.4 18.1 55.7 54.7
Operating expenses 29.0 32.8 -11.6% 92.2 95.3 -3.3% Amortization of
intangible assets 1.2 1.3 4.0 4.2 Interest expense (A) 3.4 3.6 10.6
9.4 Total benefits, losses and expenses 192.8 189.0 2.0% 564.5
547.6 3.1% Income before income taxes 26.0 27.6 -5.8% 91.9 99.8
-7.9% Income tax expense 7.6 8.2 27.1 29.7 Net income $18.4 $19.4
-5.2% $64.8 $70.1 -7.6% ANALYSIS OF PREMIUMS WRITTEN AND CONTRACT
DEPOSITS Property & Casualty Automobile and property
(voluntary) $141.7 $138.4 2.4% $401.1 $396.7 1.1% Involuntary and
other property & casualty 0.3 9.2 2.0 11.0 Total Property &
Casualty 142.0 147.6 -3.8% 403.1 407.7 -1.1% Annuity deposits 87.8
79.7 10.2% 258.3 241.1 7.1% Life 24.6 25.0 -1.6% 74.1 75.1 -1.3%
Total $254.4 $252.3 0.8% $735.5 $723.9 1.6% ANALYSIS OF SEGMENT NET
INCOME (LOSS) Property & Casualty $10.4 $14.5 -28.3% $45.1
$53.3 -15.4% Annuity 5.2 3.4 52.9% 13.7 9.9 38.4% Life 5.5 4.0
37.5% 12.7 11.0 15.5% Corporate and other (B) (2.7) (2.5) (6.7)
(4.1) Net income 18.4 19.4 -5.2% 64.8 70.1 -7.6% Catastrophe costs,
after tax, included above (C) (6.7) (4.7) (11.5) (12.5) (A) The
three and nine months ended September 30, 2006 included gains of
$0.1 million and $0.2 million, respectively, as a result of
repurchasing a portion of the 1.425% Senior Convertible Notes due
2032. (B) 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. (C) Includes
allocated loss adjustment expenses and catastrophe reinsurance
reinstatement premiums. HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited) (Dollars in
Millions) Quarter Ended Nine Months Ended September 30, September
30, 2007 2006 % Change 2007 2006 % Change PROPERTY & CASUALTY
Premiums written $142.0 $147.6 -3.8% $403.1 $407.7 -1.1% Premiums
earned 133.4 133.6 -0.1% 399.2 400.8 -0.4% Net investment income
9.3 8.9 4.5% 27.8 25.8 7.8% Losses and loss adjustment expenses
(LAE) 97.4 89.9 270.3 257.6 Operating expenses (includes policy
acquisition expenses amortized) 31.2 31.9 -2.2% 94.1 94.2 -0.1%
Income before tax 14.1 20.7 -31.9% 62.6 74.8 -16.3% Net income 10.4
14.5 -28.3% 45.1 53.3 -15.4% Net investment income, after tax 7.8
7.3 6.8% 23.0 21.6 6.5% Catastrophe costs, after tax (A) 6.7 4.7
11.5 12.5 Catastrophe losses and LAE, before tax (B)(C) 10.3 7.2
17.7 18.6 Reinsurance reinstatement premiums, before tax - - - 0.6
Operating statistics: Loss and loss adjustment expense ratio 73.0%
67.3% 67.7% 64.3% Expense ratio 23.7% 23.9% 24.1% 24.0% Combined
ratio 96.7% 91.2% 91.8% 88.3% Effect of catastrophe costs on the
combined ratio 7.7% 5.4% 4.4% 4.8% Automobile and property detail:
Premiums written (voluntary) (D) $141.7 $138.4 2.4% $401.1 $396.7
1.1% Automobile 93.1 93.0 0.1% 274.6 277.4 -1.0% Property 48.6 45.4
7.0% 126.5 119.3 6.0% Premiums earned (voluntary) (D) 131.9 131.2
0.5% 392.6 393.0 -0.1% Automobile 91.2 91.9 -0.8% 273.3 276.8 -1.3%
Property 40.7 39.3 3.6% 119.3 116.2 2.7% Policies in force
(voluntary) (in thousands) 801 796 0.6% Automobile 535 531 0.8%
Property 266 265 0.4% Policy renewal rate (voluntary) Automobile (6
months) 91.4% 91.1% Property (12 months) 88.2% 87.8% Voluntary
automobile operating statistics: Loss and loss adjustment expense
ratio 69.9% 69.8% 69.5% 64.5% Expense ratio 23.8% 24.5% 24.2% 24.3%
Combined ratio 93.7% 94.3% 93.7% 88.8% Effect of catastrophe costs
on the combined ratio (C) 0.7% 1.8% 0.5% 0.8% Total property
operating statistics: Loss and loss adjustment expense ratio 78.9%
58.3% 61.2% 61.4% Expense ratio 23.9% 23.8% 24.6% 24.1% Combined
ratio 102.8% 82.1% 85.8% 85.5% Effect of catastrophe costs on the
combined ratio (C) 24.2% 14.1% 13.8% 14.7% Prior years' reserves
favorable (adverse) development, pretax Voluntary automobile (C)
$2.8 $3.8 $7.2 $17.3 Total property (C) 0.9 1.3 7.6 (0.1) Other
property and casualty - - - - Total (C) 3.7 5.1 14.8 17.2 (A)
Includes allocated loss adjustment expenses and catastrophe
reinsurance reinstatement premiums. (B) The three and nine months
ended September 30, 2007 reflect reductions of $0.2 million and
$0.3 million, respectively, due to net recoupment from
policyholders of assessments previously paid by the Company to the
Florida Citizens Property Insurance Corporation ("Florida
Citizens") and the Louisiana Citizens Fair and Coastal Plans
("Louisiana Citizens"). The three and nine months ended September
30, 2006 reflected reductions of $0.8 million and $2.0 million,
respectively, due to recoupment from policyholders of assessments
previously paid by the Company to Florida Citizens and Louisiana
Citizens. (C) The nine months ended September 30, 2006 included
development of prior years' reserves for catastrophe losses and LAE
in captions related to catastrophe costs as well as captions
related to prior years' reserve development as follows: total
property and casualty, unfavorable development of $1.4 million;
voluntary automobile, favorable development of $1.5 million; and
total property, unfavorable development of $2.9 million. (D)
Amounts are net of additional ceded premiums to reinstate the
Company's property and casualty catastrophe reinsurance coverage as
quantified above. HORACE MANN EDUCATORS CORPORATION Supplemental
Business Segment Overview (Unaudited) (Dollars in Millions) Quarter
Ended Nine Months Ended September 30, September 30, 2007 2006 %
Change 2007 2006 % Change ANNUITY Contract deposits $87.8 $79.7
10.2% $258.3 $241.1 7.1% Variable 35.8 30.0 19.3% 111.2 102.2 8.8%
Fixed 52.0 49.7 4.6% 147.1 138.9 5.9% Contract charges earned 5.5
5.0 10.0% 16.4 14.6 12.3% Net investment income 32.6 30.4 7.2% 96.1
89.1 7.9% Net interest margin (without realized gains) 9.7 8.5
14.1% 28.9 24.9 16.1% Mortality loss and other reserve changes
(0.3) (0.6) (0.9) (0.7) Operating expenses (includes policy
acquisition expenses amortized) 6.2 7.4 -16.2% 21.4 21.7 -1.4%
Amortization of intangible assets 0.9 0.9 3.0 3.1 Income before tax
7.8 4.6 69.6% 20.0 14.0 42.9% Net income 5.2 3.4 52.9% 13.7 9.9
38.4% Pretax income increase (decrease) due to valuation of:
Deferred policy acquisition costs $0.2 $- $0.2 $(0.2) Value of
acquired insurance in force - - (0.1) (0.1) Guaranteed minimum
death benefit reserve - (0.1) (0.1) - Annuity contracts in force
(in thousands) 164 163 0.6% Accumulated value on deposit $3,750.7
$3,470.1 8.1% Variable 1,610.3 1,414.0 13.9% Fixed 2,140.4 2,056.1
4.1% Annuity accumulated value retention - 12 months Variable
accumulations 90.8% 91.2% Fixed accumulations 91.9% 93.8% LIFE
Premiums and contract deposits $24.6 $25.0 -1.6% $74.1 $75.1 -1.3%
Premiums and contract charges earned 24.4 24.1 1.2% 72.4 71.9 0.7%
Net investment income 14.3 13.6 5.1% 42.4 39.7 6.8% Income before
tax 8.4 6.0 40.0% 19.6 17.0 15.3% Net income 5.5 4.0 37.5% 12.7
11.0 15.5% Pretax income increase due to valuation of: Deferred
policy acquisition costs $(0.1) $(0.1) $- $0.1 Life policies in
force (in thousands) 227 232 -2.2% Life insurance in force $13,499
$13,235 2.0% Lapse ratio - 12 months (Ordinary life insurance) 5.6%
6.0% CORPORATE AND OTHER (A) Components of loss before tax: Net
realized investment gains (losses) $(0.5) $0.8 $2.1 $5.3 Interest
expense (3.4) (3.6) (10.6) (9.4) Other operating expenses and net
investment income (0.4) (0.9) (1.8) (1.9) Loss before tax (4.3)
(3.7) (10.3) (6.0) Net loss (2.7) (2.5) (6.7) (4.1) (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. HORACE
MANN EDUCATORS CORPORATION Supplemental Business Segment Overview
(Unaudited) (Dollars in Millions) Quarter Ended Nine Months Ended
September 30, September 30, 2007 2006 % Change 2007 2006 % Change
INVESTMENTS Annuity and Life Fixed maturities, at fair value
(amortized cost 2007, $3,111.3; 2006, $3,043.7) $3,077.4 $3,049.7
Short-term investments 60.8 15.5 Short-term investments, securities
lending collateral 77.6 378.1 Policy loans and other 148.2 94.3
Total Annuity and Life investments 3,364.0 3,537.6 -4.9% Property
& Casualty Fixed maturities, at fair value (amortized cost
2007, $758.7; 2006, $751.3) 758.8 756.7 Short-term investments 6.3
9.6 Short-term investments, securities lending collateral - 13.4
Other 32.5 2.8 Total Property & Casualty investments 797.6
782.5 1.9% Corporate investments 6.7 37.0 Total investments 4,168.3
4,357.1 -4.3% Net investment income Before tax $56.0 $53.1 5.5%
$166.3 $154.8 7.4% After tax 38.1 36.2 5.2% 113.0 105.5 7.1% Net
realized investment gains (losses) by investment portfolio included
in Corporate and Other segment loss Property & Casualty $(0.6)
$(0.3) $(0.2) $(0.1) Annuity 0.1 0.5 3.5 2.9 Life - 0.6 (1.2) 2.5
Corporate and Other - - - - Total, before tax (0.5) 0.8 2.1 5.3
Total, after tax (0.3) 0.5 1.4 3.4 Per share, diluted $(0.01) $0.01
$0.03 $0.08 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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