- 60% increase in net income per share;
24% increase in core earnings per share over prior year quarter,
benefiting from compounding progress on strategic initiatives
- 95.5% Property and Casualty combined
ratio reflected significant improvement in underlying auto and
property loss ratios
- Continued sales momentum in Retirement
and Life; annuity sales deposits up 9%
- Annualized ROE based on net income was
9.5% in first quarter vs. 5.6% in last year's quarter; annualized
core ROE* was 8.8% vs. 7.1%
Horace Mann Educators Corporation (NYSE:HMN) today reported
financial results for the quarter ended March 31, 2019:
Horace Mann Consolidated Financial Highlights
Three Months EndedMarch 31, ($ in millions, except
per share amounts) 2019 2018
Change Total revenues $ 313.2 $ 295.5 6.0% Net income
32.2 20.2 59.4% Net investment gains (losses) after tax 5.8
(1.3 ) N.M. Core earnings* 26.4 21.5 22.8% Per diluted share: Net
income 0.77 0.48 60.4% Net investment gains (losses) after tax 0.14
(0.03 ) N.M. Core earnings per diluted share* 0.63 0.51
23.5% Book value per share 34.60 34.35 0.7% Book value per share
excluding net unrealized investment gains on securities* 29.47
30.00 -1.8% N.M. - Not meaningful. * These measures are not based
on accounting principles generally accepted in the United States
(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.
“We had a strong start to 2019, with quarterly results that
reflected the progress we've made on strategic initiatives that
will drive our return to a long-term, sustainable double-digit
return on equity,” said President and CEO Marita Zuraitis. “In our
Property and Casualty business, the cumulative benefit of rate
increases and underwriting initiatives delivered a 4.6 point
improvement in the underlying auto loss ratio. Retirement and Life
sales remained solid, with educators responding to our suite of
solutions to meet their unique needs.
"In addition, our pending acquisition of National Teachers
Associates (NTA) will enhance our offerings for educators. NTA
specializes in developing, marketing and underwriting supplemental
insurance products, including cancer and heart," Zuraitis said.
"Our full-year guidance of $2.00 to $2.20 in core earnings per
share doesn't reflect any contribution from NTA, pending mid-year
completion of that transaction."
Property and Casualty Segment Shows
Profitability Improvement
(All comparisons vs. same period in 2018,
unless noted otherwise)
Three Months EndedMarch 31, ($ in
millions) 2019 2018 Change
Property and Casualty written premiums* $ 161.7 $ 159.4 1.4%
Property and Casualty net income / core earnings* 15.0 9.7 54.6%
Property and Casualty combined ratio 95.5 % 98.9 % -3.4 pts
Property and Casualty underlying loss ratio* 63.3 % 67.2 % -3.9 pts
Property and Casualty expense ratio 27.2 % 26.0 % 1.2 pts Property
and Casualty catastrophe costs 6.2 % 5.9 % 0.3 pts Property and
Casualty underlying combined ratio* 90.5 % 93.2 % -2.7 pts Auto
combined ratio 98.0 % 101.8 % -3.8 pts Auto underlying loss ratio*
70.9 % 75.5 % -4.6 pts Property combined ratio 90.5 % 93.3 % -2.8
pts Property underlying loss ratio* 46.5 % 49.6 % -3.1 pts
For the first quarter of 2019, the Property and Casualty
combined ratio improved 3.4 points to 95.5% on improved
underwriting results and modest favorable reserve development, with
net income and core earnings up 55%. Rate actions were the primary
factor in the 1.4% increase in written premiums, as well as in the
4.6 point improvement in the auto underlying loss ratio and the 3.1
point improvement in the property underlying loss ratio.
Auto and property policy retention rates for the current quarter
were 81.5% and 87.8%, respectively, which are consistent with full
year 2018 retention rates.
Retirement Segment Annuity Sales
Deposits up 9%
(All comparisons vs. same period in 2018,
unless noted otherwise)
Three Months EndedMarch 31, ($ in
millions) 2019 2018 Change
Annuity sales deposits* $ 107.3 $ 98.8 8.6% Annuity assets
under management 6,972.7 6,769.5 3.0% Total assets under
administration (1) 10,528.4 7,052.6 49.3% Retirement net income /
core earnings* 12.2 11.4 7.0% Retirement core earnings excluding
DAC unlocking* 10.6 11.6 -8.6%
(1) Includes Annuity AUM, Brokerage and
Advisory AUA, and Recordkeeping AUA
For the first quarter of 2019, annuity sales deposits* increased
9% on higher demand from educators for the retirement savings
solutions we offer. Annuity assets under management increased 3%
due to the continued sales momentum and favorable market
performance. Total cash value persistency remained strong at 94.3%
for variable annuities and 94.1% for fixed annuities.
Total assets under administration were $10.5 billion, up from a
year ago because of the inclusion of Benefit Consultants Group's
(BCG) advisory and recordkeeping assets effective January 2,
2019.
Both net income and core earnings* increased for the quarter,
largely due to favorable DAC unlocking. Core earnings excluding DAC
unlocking declined slightly for the quarter. The net interest
spread for the first quarter was 142 basis points on $4.7 billion
of fixed annuity assets under management, consistent with 2019
guidance.
Life Segment Sales Remain
Robust
(All comparisons vs. same period in 2018,
unless noted otherwise)
Three Months EndedMarch 31, ($ in
millions) 2019 2018 Change
Life sales* $ 4.3 $ 4.3 —% Life mortality costs 10.5 9.5
10.5% Life net income / core earnings* 3.3 3.8 -13.2%
Life sales* were consistent with the strong prior year quarter;
both ranked among the top 10 quarters for Life sales in the past 20
years. Demand remains healthy in the educator market for both
single and recurring premium products.
Life core earnings* were down 13% for the quarter largely due to
mortality costs, which rose in line with modeled actuarial
assumptions. Life persistency of 95.4% was slightly better than the
prior year period.
Net Investment Income Up Slightly from
PYQ
(All comparisons vs. same period in 2018,
unless noted otherwise)
Three Months EndedMarch 31, ($ in
millions) 2019 2018 Change
Total pretax net investment income $ 92.8 $ 91.9 1.0% Pretax
net investment gains (losses) 7.4 (1.7 ) N.M. Pretax net unrealized
investment gains (losses) on securities 310.5 261.1 18.9%
Total net investment income increased slightly on strong returns
on alternative investments and higher asset balances. As
anticipated, prepayment activity was below last year, and
investment yields continue to be impacted by the low interest rate
environment of recent years.
Net investment gains were $7.4 million (pretax), primarily due
to increases in the fair values of equity securities. Net
unrealized investment gains on securities increased from last year
due to a decline in interest rates, which has resulted in higher
fair values of fixed maturity securities.
Capital Position Supports Business Investments
At March 31, 2019, shareholders' equity was $1.4 billion, or
$34.60 per share. Excluding net unrealized investment gains on
securities, shareholders' equity was $1.2 billion, or $29.47 per
share. The improvement in book value since year-end reflected lower
interest rates and tighter credit spreads across most asset
classes.
On January 2, 2019, the company completed the purchase of BCG in
a $25 million transaction. The NTA transaction is expected to close
in mid-2019, pending regulatory approvals and other customary
closing conditions, for a purchase price of $405 million.
First-quarter expenses of $0.5 million, after tax, related to the
continued work on the pending NTA transaction, and was reported in
the Corporate and Other segment.
Quarterly Webcast
Horace Mann’s senior management will discuss the company’s first
quarter financial results with investors on May 1, 2019 at 9:30
a.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 providing America's educators
and school employees with insurance and retirement solutions.
Founded by Educators for Educators® in 1945, the company is
headquartered in Springfield, Illinois. For more information, visit
horacemann.com.
Safe Harbor Statement and Non-GAAP Measures
`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 period ended
December 31, 2018 and the company's past and future filings
and reports filed with the Securities and Exchange Commission (SEC)
for information concerning important factors that could cause
actual results to differ materially from those in forward-looking
statements. Information contained in this news release include
measures which are based on methodologies other than accounting
principles generally accepted in the United States (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 the
company’s SEC filings.
HORACE MANN EDUCATORS
CORPORATION
Financial Highlights (Unaudited)
($ in Millions, except per share data)
Three Months EndedMarch 31,
2019
2018
Change
EARNINGS
SUMMARY
Net income $ 32.2 $ 20.2 59.4 % Net investment gains (losses),
after tax 5.8 (1.3 ) N.M. Core earnings* 26.4 21.5 22.8 %
Per diluted share: Net income $ 0.77 $ 0.48 60.4 % Net investment
gains (losses), after tax $ 0.14 $ (0.03 ) N.M. Core earnings* $
0.63 $ 0.51 23.5 % Weighted average number of shares and
equivalent shares (in millions) -
Diluted
41.8 41.7 0.2 %
RETURN ON
EQUITY
Net income return on equity - LTM (1) 2.2 % 12.5 % Net income
return on equity - annualized 9.5 % 5.6 % Core return on equity -
LTM* (2) 2.7 % 6.7 % Core return on equity - annualized* 8.8 % 7.1
%
FINANCIAL
POSITION
Per share (3): Book value $ 34.60 $ 34.35 0.7 % Effect of net
unrealized investment gains on securities (4) $ 5.13 $ 4.35 17.9 %
Dividends paid $ 0.2875 $ 0.2850 0.9 % Ending number of shares
outstanding (in millions) (3) 41.2 40.9 0.7 % Total assets $
11,561.1 $ 11,068.5 4.5 % Long-term debt, current and noncurrent
297.8 297.5 0.1 % Total shareholders' equity 1,423.7 1,404.7 1.4 %
ADDITIONAL
INFORMATION
Net investment gains (losses) Before tax $ 7.4 $ (1.7 ) N.M. After
tax 5.8 (1.3 ) N.M. Per share, diluted $ 0.14 $ (0.03 ) N.M.
N.M.- Not meaningful.
(1)
Based on last twelve months net income and average quarter-end
shareholders' equity.
(2)
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.
(3)
Ending shares outstanding were 41,150,005 at March 31, 2019 and
40,888,534 at March 31, 2018.
(4)
Net of the related impact on deferred policy acquisition costs and
applicable deferred taxes.
HORACE MANN EDUCATORS
CORPORATION
Statements of Operations and Supplemental
Consolidated Data (Unaudited)
($ in Millions)
Three Months EndedMarch 31,
2019
2018
Change
STATEMENTS OF
OPERATIONS
Insurance premiums and contract charges earned $ 209.8 $ 203.0 3.3
% Net investment income 92.8 91.9 1.0 % Net investment gains
(losses) 7.4 (1.7 ) N.M. Other income 3.2 2.3 39.1 % Total revenues
313.2 295.5 6.0 % Benefits, claims and settlement expenses
139.4 143.6 -2.9 % Interest credited 52.9 50.0 5.8 % Policy
acquisition expenses amortized 25.0 26.7 -6.4 % Operating expenses
54.0 48.2 12.0 % Interest expense 3.3 3.2 3.1 % Total benefits,
losses and expenses 274.6 271.7 1.1 % Income before income
taxes 38.6 23.8 62.2 % Income tax expense 6.4 3.6 77.8 % Net income
$ 32.2 $ 20.2 59.4 %
PREMIUMS WRITTEN
AND CONTRACT DEPOSITS
Property and Casualty $ 161.7 $ 159.4 1.4 % Annuity deposits 107.3
98.8 8.6 % Life 26.4 25.8 2.3 % Total $ 295.4 $ 284.0 4.0 %
SEGMENT NET
INCOME (LOSS)
Property and Casualty $ 15.0 $ 9.7 54.6 % Retirement 12.2 11.4 7.0
% Life 3.3 3.8 -13.2 % Corporate and Other (1) 1.7 (4.7 ) N.M. Net
income $ 32.2 $ 20.2 59.4 %
N.M. - Not meaningful.
(1)
Corporate and 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 4.
HORACE MANN EDUCATORS
CORPORATION
Supplemental Business Segment Overview
(Unaudited)
($ in Millions)
Three Months EndedMarch 31,
2019
2018
Change
PROPERTY &
CASUALTY
Premiums written $ 161.7 $ 159.4 1.4 % Premiums earned 170.8 165.5
3.2 % Net investment income 10.2 9.5 7.4 % Other income 0.4 0.2
100.0 % Losses and loss adjustment expenses (LAE) 116.8 120.7 -3.2
% Operating expenses (includes policy
acquisition expenses amortized)
46.5 43.1 7.9 % Interest expense 0.3 0.2 50.0 % Income before tax
17.8 11.2 58.9 % Net income 15.0 9.7 54.6 % Net investment income,
after tax 8.7 7.8 11.5 % Catastrophe costs (1) After tax 8.5
7.7 10.4 % Before tax 10.8 9.8 10.2 % Prior years' reserves
favorable (adverse)
development, before tax
Automobile 1.0 — — % Property & other 1.0 0.3 N.M. Total 2.0
0.3 N.M. Operating statistics: Loss and loss adjustment
expense ratio 68.3 % 72.9 % -4.6 pts Expense ratio 27.2 % 26.0 %
1.2 pts Combined ratio 95.5 % 98.9 % -3.4 pts Effect on the
combined ratio of: Catastrophe costs (1) 6.2 % 5.9 % 0.3 pts Prior
years' (favorable) adverse reserve development -1.2 % -0.2 % -1.0
pts Combined ratio excluding the effects of
catastrophe costs and prior years'
reserve
development (underlying combined
ratio)*
90.5 % 93.2 % -2.7 pts Policies in force (in thousands) 654
679 -3.7 % Automobile (2) 454 475 -4.4 % Property 200 204 -2.0 %
Policy renewal rate - 12 months Automobile 81.5 % 82.9 %
-1.4 pts Property 87.8 % 87.9 % -0.1 pts N.M. - Not
meaningful.
(1)
Includes allocated loss adjustment expenses and, when applicable,
catastrophe reinsurance reinstatement premiums.
(2)
March 31, 2019 includes assumed policies in force of 4.
HORACE MANN EDUCATORS
CORPORATION
Supplemental Business Segment Overview
(Unaudited)
($ in Millions)
Three Months EndedMarch 31,
2019
2018
Change
RETIREMENT
Contract deposits $ 107.3 $ 98.8 8.6 % Variable 48.8 46.8 4.3 %
Fixed 58.5 52.0 12.5 % Contract charges earned 8.6 8.0 7.5 % Net
investment income 64.7 64.2 0.8 % Interest credited 41.7 38.7 7.8 %
Net interest margin (without net investment gains/losses) 23.0 25.5
-9.8 % Other income 2.4 1.8 33.3 % Mortality loss and other reserve
changes (0.6 ) (1.9 ) -68.4 % Operating expenses (includes policy
acquisition expenses amortized) 18.8 19.4 -3.1 % Income before tax
14.6 14.0 4.3 % Net income 12.2 11.4 7.0 % Pretax income increase
(decrease) due to evaluation of: Deferred policy acquisition costs
$ 2.0 $ (0.2 ) N.M. Guaranteed minimum death benefit reserve 0.1 —
— % Retirement contracts in force (in thousands) 226 223 1.3 %
Annuity accumulated account value on deposit /
Assets under management
$ 6,972.7 $ 6,769.5 3.0 % Variable 2,224.1 2,139.6 3.9 % Fixed
4,748.6 4,629.9 2.6 % Annuity accumulated value retention - 12
months Variable accumulations 94.3 % 94.6 % -0.3 pts Fixed
accumulations 94.1 % 94.4 % -0.3 pts
LIFE
Premiums and contract deposits $ 26.4 $ 25.8 2.3 % Premiums and
contract charges earned 30.4 29.5 3.1 % Net investment income 18.1
18.3 -1.1 % Other income 0.1 0.1 — % Death benefits/mortality
cost/change in reserves 22.0 21.0 4.8 % Interest credited 11.2 11.3
-0.9 % Operating expenses (includes policy acquisition expenses
amortized) 11.4 10.9 4.6 % Income before tax 4.0 4.7 -14.9 % Net
income 3.3 3.8 -13.2 % Pretax income increase (decrease) due to
evaluation of: Deferred policy acquisition costs $ — $ (0.1 ) N.M.
Life policies in force (in thousands) 198 197 0.5 % Life insurance
in force $ 18,409 $ 17,665 4.2 % Lapse ratio - 12 months (Ordinary
life insurance) 4.6 % 4.9 % -0.3 pts
CORPORATE AND
OTHER (1)
Components of income (loss) before tax: Net investment gains
(losses) $ 7.4 $ (1.7 ) N.M. Interest expense (3.0 ) (3.0 ) — %
Other operating expenses, net investment income and other income
(2.2 ) (1.4 ) 57.1 % Income (loss) before tax 2.2 (6.1 ) -136.1 %
Net income (loss) 1.7 (4.7 ) 136.2 % N.M.-Not meaningful.
(1)
The Corporate and 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
Supplemental Business Segment Overview
(Unaudited)
($ in Millions)
Three Months EndedMarch 31,
2019
2018
Change
INVESTMENTS
Retirement and Life Fixed maturity securities, at fair value
(amortized
cost 2019, $6,656.9; 2018, $6,551.1)
$ 6,940.1 $ 6,792.7 2.2 % Equity securities, at fair value 77.6
77.5 0.1 % Short-term investments 121.2 10.6 N.M. Policy loans
153.4 152.8 0.4 % Other investments 280.6 211.0 33.0
% Total Retirement and Life investments 7,572.9 7,244.6 4.5 %
Property & Casualty Fixed maturity securities, at fair
value (amortized
cost 2019, $830.5; 2018, $822.4)
857.9 842.0 1.9 % Equity securities, at fair value 27.9 53.5 -47.9
% Short-term investments 15.2 9.0 68.9 % Other investments 76.8
73.0 5.2 % Total Property & Casualty investments
977.8 977.5 — % Corporate investments 7.1 2.6 N.M.
Total investments 8,557.8 8,224.7 4.0 % Net investment
income Before tax $ 92.8 $ 91.9 1.0 % After tax 74.0 72.8 1.6 %
N.M.-Not meaningful.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190430006140/en/
Heather J. WietzelVice President, Investor
Relations217-788-5144investorrelations@horacemann.com
Horace Mann Educators (NYSE:HMN)
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