- Net income per share declined 28.0% from 2019, largely due to
realized investment gains in 2019 related to annuity reinsurance
transaction, with net return on equity at 8.1%
- Core earnings per share rose 54.5% to record $3.40 with core
ROE at 10.5%
- Continued progress that reflects unwavering commitment to
education market and multi-year emphasis on products, distribution
and infrastructure; full-year contribution of new Supplemental
segment
- Property and Casualty and Supplemental segment results
reflected pandemic-related changes in policyholder behavior, as
well as Camp Fire subrogation recovery
- Partial offsets included higher catastrophe losses, lower net
investment income, auto premium relief and increased Life segment
benefit costs compared to 2019
- Fourth-quarter net income per share rose 44.9% to $1.13 with
core earnings up 50.7%
- Book value per share up 13.7% and book value excluding net
unrealized gains up 6.0% since year end 2019
- 2021 core earnings expected to be in the range of $3.00 to
$3.20, with ROE in the range of 9% to 9.5%
- Anticipate further underlying progress toward long-term
objective of double-digit ROE
- Auto and Supplemental policyholder behavior expected to
gradually return to near historical levels by year-end 2021
- Catastrophe losses would reduce Property and Casualty combined
ratio by approximately 9.5 points
- Growing contribution of alternative portfolio boosting net
investment income, particularly for Retirement and Life
segments
Horace Mann Educators Corporation (NYSE:HMN) today reported
financial results for the year ended December 31, 2020:
Horace Mann Consolidated
Financial Highlights
Three Months Ended
December 31,
Twelve Months Ended
December 31,
($ in millions, except per share
amounts)
2020
2019
% Change
2020
2019
% Change
Total revenues
$
352.3
$
333.6
5.6
%
$
1,310.4
$
1,439.0
-8.9
%
Net income
47.8
33.0
44.8
%
133.3
184.4
-27.7
%
Net investment gains (losses) after
tax
8.4
1.3
N.M.
(1.7
)
120.2
N.M.
Other expense - goodwill and intangible
asset impairments, after tax
(8.1
)
—
N.M.
(8.1
)
(28.0
)
N.M.
Core earnings*
47.5
31.7
49.8
%
143.1
92.2
55.2
%
Per diluted share:
Net income
1.13
0.78
44.9
%
3.17
4.40
-28.0
%
Net investment gains (losses) after
tax
0.19
0.03
N.M.
(0.04
)
2.87
N.M.
Other expense - goodwill and intangible
asset impairments, after tax
(0.19
)
—
N.M.
(0.19
)
(0.67
)
N.M.
Core earnings per diluted share*
1.13
0.75
50.7
%
3.40
2.20
54.5
%
Book value per share
43.22
38.01
13.7
%
Book value per share excluding net
unrealized investment gains on fixed maturity securities*
34.38
32.42
6.0
%
N.M. - Not meaningful.
* These measures are not based on
accounting principles generally accepted in the United States of
America (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.
“Never has there been a clearer example of how vital educators
are to our communities than 2020,” said Horace Mann President and
CEO Marita Zuraitis. “We are deeply appreciative of the work
educators are doing to educate and advocate for students while
facing an overwhelming array of new challenges. At Horace Mann,
helping educators address challenges is part of who we are, and we
completed a number of initiatives this year to optimize our efforts
for serving customers better in a remote environment. The events of
2020 serve as reinforcement of the importance of our mission for
the past 75 years - to help deserving educators achieve lifelong
financial success.
“Our 2020 results reflected the pandemic’s effect on
policyholder behavior, such as changing driving patterns, that
resulted in lower Auto loss frequency,” Zuraitis said. “But
underneath those unusual trends, we are benefiting from a stronger
foundation — the result of our long-term strategic plan to improve
our ability to serve educators by enhancing our product offerings,
strengthening our distribution and modernizing our infrastructure,
including the 2019 addition of our Supplemental segment and annuity
reinsurance transaction to mitigate interest rate risk. While 2020
results clearly illustrate the strength of our profitability
initiatives, the impact of a largely remote educator workforce in a
pre-vaccine environment is temporarily slowing our top-line growth.
More importantly, we are well positioned for post-vaccine growth
due to the strategic work we completed in 2020, including full
integration of Supplemental agents to allow them to reach more
educators with more solutions.
“In 2021, we expect core EPS will be in the range of $3.00 to
$3.20 as we make further progress toward our long-term objectives,”
Zuraitis concluded. “Our outlook anticipates policyholder behavior
gradually returning to historical patterns by the end of 2021, and
a Property and Casualty catastrophe loss load almost two points
higher than our previous year’s initial estimate. We expect all
segments, particularly Retirement and Life, to benefit from the
growing contribution to net investment income of our alternative
investment portfolio. Our 2021 ROE target of 9% to 9.5% keeps us on
the path to a sustainable, long-term double-digit ROE from our
strategic actions. As expected, those actions contributed about one
full point of the ROE improvement we saw in 2020.”
Property and Casualty Segment 2020 Combined Ratio at 92.7%
Despite Higher Catastrophe Losses
(All comparisons vs. same period in 2019, unless noted
otherwise)
Our Property and Casualty insurance segment primarily markets
private passenger automobile insurance and residential home
insurance. We offer standard automobile coverages, including
liability, collision and comprehensive. Property coverage includes
both homeowners and renters policies. For both automobile and
property coverage, we offer educators a discounted rate and the
Educator Advantage® package of features. The Property and Casualty
segment represented 53% of 2020 total revenues and contributed
$76.5 million to core earnings.
Three Months Ended December
31,
Twelve Months Ended
December 31,
($ in millions)
2020
2019
Change
2020
2019
Change
Property and Casualty written
premiums*
$
153.0
$
164.6
-7.0
%
$
635.5
$
683.1
-7.0
%
Property and Casualty net income / core
earnings*
22.8
20.0
14.0
%
76.5
54.3
40.9
%
Property and Casualty combined ratio
90.2
%
90.3
%
-0.1
pts
92.7
%
96.5
%
-3.8
pts
Property and Casualty underlying loss
ratio*
58.7
%
60.3
%
-1.6
pts
54.9
%
63.1
%
-8.2
pts
Property and Casualty expense ratio
28.3
%
27.4
%
0.9
pts
26.4
%
26.9
%
-0.5
pts
Property and Casualty catastrophe
losses
3.8
%
2.6
%
1.2
pts
13.0
%
7.6
%
5.4
pts
Property and Casualty underlying combined
ratio*
87.0
%
87.7
%
-0.7
pts
81.3
%
90.0
%
-8.7
pts
Auto combined ratio
96.2
%
99.7
%
-3.5
pts
88.0
%
97.6
%
-9.6
pts
Auto underlying loss ratio*
67.4
%
71.9
%
-4.5
pts
60.4
%
70.6
%
-10.2
pts
Property combined ratio
79.0
%
71.5
%
7.5
pts
102.0
%
94.2
%
7.8
pts
Property underlying loss ratio*
42.1
%
37.1
%
5.0
pts
44.3
%
47.2
%
-2.9
pts
Full-year 2020 Property and Casualty written premiums declined
due to lower new business and pandemic-related premium credits in
the second quarter, which more than offset the return of the
reinstatement premiums related to the PG&E subrogation recovery
in the third quarter. The Auto policy retention rate of 81.2% and
Property retention rate of 86.8% were in line with recent
experience.
Overall, segment core earnings for the year rose 40.9% due to
the 3.8 point improvement in the combined ratio, despite a 5.4
point increase in the catastrophe loss ratio, and higher net
investment income, driven by favorable limited partnership returns
in the second half of the year.
The underlying combined ratio improved by 8.7 points over 2019,
largely due to the unusually low underlying Auto loss ratio. The
underlying auto loss ratio improved 10.2 points, reflecting lower
frequency related to changing driving patterns due to COVID-19, as
well as the ongoing benefit of profitability initiatives. The
underlying property loss ratio improved 2.9 points, primarily due
to the return of the reinsurance reinstatement premium in the
second quarter.
In the fourth quarter, the company incurred $6.1 million of
catastrophe losses from 13 events that added 3.8 points to the
combined ratio. Catastrophe losses for the year totaled $84.4
million, adding 13.0 points to the combined ratio. The company’s
full-year 2021 guidance reflects a catastrophe loss assumption of
approximately 9.5 points on the combined ratio.
Supplemental Segment Contributed $43.1 million to 2020
Earnings
(All comparisons vs. same period in 2019, unless noted
otherwise)
Our Supplemental insurance segment specializes in marketing
supplemental insurance products, including cancer, heart, hospital,
supplemental disability and accident for the education market. The
segment was formed when Horace Mann acquired NTA Life Enterprises,
LLC (NTA) in July 2019 and continues to build on NTA’s nearly 50
years of experience in the sector. The Supplemental segment
represented 12% of 2020 total revenues and contributed $43.1
million to core earnings.
Three Months Ended December
31,
Twelve Months Ended
December 31,
($ in millions)
2020
2019
Change
2020
2019 (1)
Change (1)
Supplemental sales*
$
1.4
$
4.6
-69.6
%
$
7.2
$
8.2
N/A
Earned premiums
31.9
32.9
-3.0
%
130.7
65.8
N/A
Supplemental net income / core
earnings*
12.5
11.1
12.6
%
43.1
18.0
N/A
Pretax profit margin (2)
41.5
%
37.9
%
3.6
pts
36.4
%
30.8
%
N/A
(1)
The acquisition of NTA closed on July 1,
2019.
(2)
Measured to total revenues.
Supplemental segment sales were $1.4 million in the fourth
quarter, in line with the third quarter, reflecting the modest
rebound that began mid-year, but continuing to reflect lower sales
volume due to limited school access because of COVID-19.
Persistency was up slightly at 90.5%.
Strong core earnings reflected continued favorable business
trends as well as some short-term benefit from changes in
policyholder behavior due to COVID-19. Segment expenses include the
non-cash impact of amortization of intangible assets under purchase
accounting that reduced full-year core earnings by $12.6 million
pretax. The pretax profit margin remains above management’s
longer-term expectations because of the pandemic-related changes in
policyholder behavior.
Retirement Segment Sees 4.5% Increase in Annuity Contract
Deposits over 2019
(All comparisons vs. same period in 2019, unless noted
otherwise)
Our Retirement segment primarily markets 403(b) tax-qualified
fixed, fixed index and variable annuities; the Horace Mann
Retirement Advantage® open architecture platform for 403(b)(7) and
other defined contribution plans; and other retirement products to
educators. Horace Mann is one of the largest participants in the
K-12 educator portion of the 403(b) tax-qualified annuity market,
measured by 403(b) net written premium on a statutory accounting
basis. The Retirement segment represented 21% of 2020 total
revenues and contributed $28.2 million to core earnings.
Three Months Ended December
31,
Twelve Months Ended
December 31,
($ in millions)
2020
2019
Change
2020
2019
Change
Annuity contract deposits*
$
116.7
$
117.9
-1.0
%
$
483.4
$
462.5
4.5
%
Annuity assets under management (1)
4,841.8
4,379.6
10.6
%
Total assets under administration (2)
8,684.0
8,270.6
5.0
%
Retirement net income (loss)
3.5
2.1
66.7
%
20.1
(4.8
)
N.M.
Retirement core earnings*
11.6
2.1
N.M.
28.2
23.2
21.6
%
Retirement core earnings excluding DAC
unlocking*
11.2
2.1
N.M.
26.8
26.0
3.1
%
N.M. - Not meaningful.
(1)
Amount reported as of December 31, 2020
excludes $752.1 of assets under management held under modified
coinsurance reinsurance.
(2)
Includes Annuity AUM, Brokerage and
Advisory AUA, and Recordkeeping AUA.
For the year, annuity contract deposits rose 4.5% over 2019.
Educators continue to find value in our Retirement savings
products, including our competitively priced annuity products.
Total cash value persistency remained strong at 95.0% for variable
annuities and 94.7% for fixed annuities.
Horace Mann currently has $4.8 billion in annuity assets under
management, including $2.2 billion of fixed annuities, $2.1 billion
of variable annuities and $0.5 billion of fixed indexed annuities.
Assets under administration, which includes advisory and
recordkeeping assets added through the acquisition of Benefit
Consultants Group (BCG) in 2019, were up 5.0% from year-end
2019.
The net interest spread on the retained annuity business was 212
points for the year, continuing to improve because of the benefits
of the 2019 annuity reinsurance transaction. Lower net interest
margin due to the reduced size of the managed portfolio was more
than offset by expense savings, resulting in 3.1% growth in core
earnings excluding DAC unlocking for the year.
In the fourth quarter of 2020, Retirement segment net income
reflected the after-tax impairment of $8.1 million of goodwill and
intangible assets associated with BCG, which had been acquired in
2019, due to anticipated softer BCG wealth management sales outside
of the education markets. Operational benefits from the BCG
transaction remain on track. In 2019, management impaired $28.0
million of goodwill that had been associated with the reinsured
legacy annuity block.
Life Segment 2020 Sales of Recurring Premium Products
Stable
(All comparisons vs. same period in 2019, unless noted
otherwise)
Our Life insurance segment primarily markets traditional term
and whole life insurance products to educators. The Life segment
represented 14% of 2020 total revenues and contributed $10.4
million to core earnings.
Three Months Ended December
31,
Twelve Months Ended
December 31,
($ in millions)
2020
2019
Change
2020
2019
Change
Life sales*
$
3.1
$
4.2
-26.2
%
$
12.7
$
17.9
-29.1
%
Life mortality costs
10.5
7.1
47.9
%
38.8
33.5
15.8
%
Life net income / core earnings*
3.6
4.0
-10.0
%
10.4
17.6
-40.9
%
Life sales were down for the year on stable new sales of
recurring term and whole life policies, and lower new sales of more
complex products such as single premium and Indexed Universal Life
policies. Life core earnings* reflected 2020 mortality costs in
line with expectations compared with favorable mortality experience
in 2019. Full-year persistency for life products of 95.8% improved
from the prior year period.
Investment Portfolio Achieved Better-Than-Anticipated Fourth
Quarter Results Due To Continued Rebound in Alternatives
Portfolio
(All comparisons vs. same period in 2019, unless noted
otherwise)
Our investment strategy is primarily focused on generating
income to support product liabilities, and balances principal
protection and risk. Total net investment income includes net
investment income on the investment portfolio managed by Horace
Mann as well as accreted investment income on the deposit asset on
reinsurance related to the company’s 2019 reinsurance of a block of
approximately $2.9 billion of policy liabilities related to legacy
individual annuities written in 2002 or earlier that was effective
April 1, 2019.
Three Months Ended December
31,
Twelve Months Ended
December 31,
($ in millions)
2020
2019
Change
2020
2019
Change
Pretax net investment income - investment
portfolio
$
76.0
$
62.0
22.6
%
$
260.3
$
294.3
-11.6
%
Pretax investment income - deposit asset
on reinsurance
25.2
23.8
5.9
%
97.3
70.8
37.4
%
Total pretax net investment income
101.2
85.8
17.9
%
357.6
365.1
-2.1
%
Pretax net investment gains (losses)
10.5
1.7
N.M.
(2.3
)
153.3
N.M.
Pretax net unrealized investment gains on
fixed maturity securities
556.7
334.7
66.3
%
Investment yield, excluding limited
partnership interests, pretax - annualized
4.25
%
4.36
%
-0.11
pts
4.33
%
4.64
%
-0.31
pts
N.M. - Not meaningful.
Total net investment income was down slightly year-over-year.
Net investment income on the managed portfolio rose 22.6% in the
fourth quarter as favorable returns on limited partnership
investments continued to offset slightly lower yields on fixed
maturity investments. Net investment income on the managed
portfolio was down for the full year due to market weakness early
in 2020, which primarily impacted limited partnership returns.
Full-year pretax net investment losses were $2.3 million,
including $5.3 million in other-than-temporary impairment charges.
The company’s fixed maturity securities portfolio is in a net
unrealized investment gain position of $556.7 million at December
31, 2020.
Book Value Excluding Net Unrealized Investment Gains Up 6%
Year Over Year
At December 31, 2020, shareholders’ equity was $1.79 billion, or
$43.22 per share. Excluding net unrealized investment gains on
fixed maturity securities, shareholders’ equity was $1.42 billion,
or $34.38 per share.* The year-over-year improvement in book value
excluding unrealized investment gains on fixed maturity securities
primarily reflected the realized gain on assets transferred in the
2019 annuity reinsurance transaction, as well as strong
earnings.
At December 31, 2020, total debt was $437.3 million, with $135.0
million outstanding on the company’s line of credit. The ratio of
debt-to-capital excluding net unrealized investment gains* was
23.5%.
Quarterly Webcast
Horace Mann’s senior management will discuss the company’s
fourth-quarter and full-year financial results with investors on
February 3, 2021 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 Quarterly Report on Form 10-Q for the period ended
September 30, 2020 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 of America
(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 Ended December
31,
Twelve Months Ended December
31,
2020
2019
% Change
2020
2019
% Change
EARNINGS
SUMMARY
Net income
$
47.8
$
33.0
44.8
%
$
133.3
$
184.4
-27.7
%
Net investment gains (losses), after
tax
8.4
1.3
N.M.
(1.7
)
120.2
N.M.
Other expense - goodwill and intangible
asset
impairments, after tax
(8.1
)
—
N.M.
(8.1
)
(28.0
)
N.M.
Core earnings*
47.5
31.7
49.8
%
143.1
92.2
55.2
%
Per diluted share:
Net income
$
1.13
$
0.78
44.9
%
$
3.17
$
4.40
-28.0
%
Net investment gains (losses), after
tax
$
0.19
$
0.03
N.M.
$
(0.04
)
$
2.87
N.M.
Other expense - goodwill and intangible
asset
impairments, after tax
$
(0.19
)
$
—
N.M.
$
(0.19
)
$
(0.67
)
N.M.
Core earnings*
$
1.13
$
0.75
50.7
%
$
3.40
$
2.20
54.5
%
Weighted average number of shares and
equivalent shares (in millions) -
Diluted
42.2
42.1
0.2
%
42.0
41.9
0.2
%
RETURN ON
EQUITY
Net income return on equity - LTM (1)
8.1
%
12.5
%
8.1
%
12.5
%
Net income return on equity -
annualized
10.9
%
8.4
%
Core return on equity - LTM* (2)
10.5
%
7.3
%
10.5
%
7.3
%
Core return on equity - annualized*
13.5
%
9.6
%
FINANCIAL
POSITION
Per share: (3)
Book value
$
43.22
$
38.01
13.7
%
Effect of net unrealized investment gains
on fixed
maturity securities (4)
$
8.84
$
5.59
58.1
%
Dividends paid
$
0.30
$
0.2875
4.3
%
$
1.20
$
1.15
4.3
%
Ending number of shares outstanding (in
millions) (3)
41.4
41.2
0.5
%
Total assets
$
13,471.8
$
12,478.7
8.0
%
Short-term debt
135.0
135.0
—
%
Long-term debt
302.3
298.0
1.4
%
Total shareholders’ equity
1,790.1
1,567.3
14.2
%
ADDITIONAL
INFORMATION
Net investment gains (losses)
Before tax
$
10.5
$
1.7
N.M.
$
(2.3
)
$
153.3
N.M.
After tax
8.4
1.3
N.M.
(1.7
)
120.2
N.M.
Per share, diluted
$
0.19
$
0.03
N.M.
$
(0.04
)
$
2.87
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 41,414,218
at December 31, 2020 and 41,238,324 at December 31, 2019.
(4)
Net of the related impact on deferred
policy acquisition costs and applicable deferred taxes.
HORACE MANN EDUCATORS
CORPORATION
Statements of Operations and
Consolidated Data (Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
% Change
2020
2019
% Change
STATEMENTS OF
OPERATIONS
Insurance premiums and contract charges
earned
$
233.7
$
240.4
-2.8
%
$
930.7
$
898.0
3.6
%
Net investment income
101.2
85.8
17.9
%
357.6
365.1
-2.1
%
Net investment gains (losses)
10.5
1.7
N.M.
(2.3
)
153.3
N.M.
Other income
6.9
5.7
21.1
%
24.4
22.6
8.0
%
Total revenues
352.3
333.6
5.6
%
1,310.4
1,439.0
-8.9
%
Benefits, claims and settlement
expenses
135.8
138.8
-2.2
%
568.9
585.1
-2.8
%
Interest credited
51.3
52.7
-2.7
%
204.6
212.8
-3.9
%
Operating expenses
64.7
67.2
-3.7
%
237.8
243.1
-2.2
%
DAC unlocking and amortization expense
24.9
26.3
-5.3
%
99.9
109.2
-8.5
%
Intangible asset amortization expense
3.5
3.9
-10.3
%
14.4
8.8
63.6
%
Interest expense
3.5
4.4
-20.5
%
15.2
15.6
-2.6
%
Other expense - goodwill and intangible
asset
impairments
10.0
—
N.M.
10.0
28.0
N.M.
Total benefits, losses and expenses
293.7
293.3
0.1
%
1,150.8
1,202.6
-4.3
%
Income before income taxes
58.6
40.3
45.4
%
159.6
236.4
-32.5
%
Income tax expense
10.8
7.3
47.9
%
26.3
52.0
-49.4
%
Net income
$
47.8
$
33.0
44.8
%
$
133.3
$
184.4
-27.7
%
PREMIUMS WRITTEN
AND CONTRACT DEPOSITS*
Property and Casualty
$
153.0
$
164.6
-7.0
%
$
635.5
$
683.1
-7.0
%
Supplemental (1)
32.0
33.0
-3.0
%
130.3
65.7
N/A
Annuity contract deposits
116.7
117.9
-1.0
%
483.4
462.5
4.5
%
Life
30.8
30.7
0.3
%
110.1
113.2
-2.7
%
Total
$
332.5
$
346.2
-4.0
%
$
1,359.3
$
1,324.5
2.6
%
SEGMENT NET
INCOME (LOSS)
Property and Casualty
$
22.8
$
20.0
14.0
%
$
76.5
$
54.3
40.9
%
Supplemental (1)
12.5
11.1
12.6
%
43.1
18.0
N/A
Retirement
3.5
2.1
66.7
%
20.1
(4.8
)
N.M.
Life
3.6
4.0
-10.0
%
10.4
17.6
-40.9
%
Corporate and Other (2)
5.4
(4.2
)
N.M.
(16.8
)
99.3
-116.9
%
Net income
$
47.8
$
33.0
44.8
%
$
133.3
$
184.4
-27.7
%
N.M. - Not meaningful.
(1)
Acquired on July 1, 2019. Twelve month
comparison is not applicable.
(2)
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 13.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
Change
2020
2019
Change
PROPERTY and
CASUALTY
Written premiums*
$
153.0
$
164.6
-7.0
%
$
635.5
$
683.1
-7.0
%
Premiums earned
161.4
170.9
-5.6
%
650.1
683.5
-4.9
%
Net investment income
12.3
8.1
51.9
%
42.6
41.7
2.2
%
Other income
0.2
0.3
-33.3
%
2.3
2.0
15.0
%
Losses and loss adjustment expenses
(LAE)
100.0
107.4
-6.9
%
431.0
475.6
-9.4
%
Operating expenses (includes amortization
expense)
45.7
46.7
-2.1
%
171.7
183.6
-6.5
%
Interest expense
—
0.3
N.M.
0.4
1.3
-69.2
%
Income before income taxes
28.2
24.9
13.3
%
91.9
66.7
37.8
%
Net income / core earnings*
22.8
20.0
14.0
%
76.5
54.3
40.9
%
Net investment income, after tax
10.2
7.0
45.7
%
35.7
35.4
0.8
%
Catastrophe losses
After tax
4.8
3.5
37.1
%
66.7
41.1
62.3
%
Before tax
6.1
4.4
38.6
%
84.4
52.0
62.3
%
Prior years’ reserves favorable
development, before tax
Automobile
—
—
N.M.
2.0
5.5
-63.6
%
Property and other
1.0
—
N.M.
8.2
2.0
N.M.
Total
1.0
—
N.M.
10.2
7.5
36.0
%
Operating statistics:
Loss and loss adjustment expense ratio
61.9
%
62.9
%
-1.0
pts
66.3
%
69.6
%
-3.3
pts
Expense ratio
28.3
%
27.4
%
0.9
pts
26.4
%
26.9
%
-0.5
pts
Combined ratio
90.2
%
90.3
%
-0.1
pts
92.7
%
96.5
%
-3.8
pts
Effect on the combined ratio of:
Catastrophe losses
3.8
%
2.6
%
1.2
pts
13.0
%
7.6
%
5.4
pts
Prior years’ (favorable) reserve
development
-0.6
%
—
%
-0.6
pts
-1.6
%
-1.1
%
-0.5
pts
Combined ratio excluding the effects
of
catastrophe losses and prior years’
reserve
development (underlying combined
ratio)*
87.0
%
87.7
%
-0.7
pts
81.3
%
90.0
%
-8.7
pts
Risks in force (in thousands)
583
627
-7.0
%
Automobile (1)
399
433
-7.9
%
Property
184
194
-5.2
%
Policy renewal rate - 12 months
Automobile
81.2
%
81.1
%
0.1
pts
Property
86.8
%
87.1
%
-0.3
pts
N.M. - Not meaningful.
(1)
Includes assumed risks in force of 4.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
Change
2020
2019 (1)
Change (1)
SUPPLEMENTAL
Premiums and contract charges earned
$
31.9
$
32.9
-3.0
%
$
130.7
$
65.8
N/A
Net investment income
6.0
3.8
57.9
%
17.8
7.5
N/A
Other income
0.7
0.8
-12.5
%
2.7
1.4
N/A
Benefits
9.6
10.6
-9.4
%
38.2
21.7
N/A
Change in reserves
(0.2)
(0.6)
66.7
%
4.7
3.0
N/A
Interest credited
—
—
—
%
0.2
—
N/A
Operating expenses (includes DAC unlocking
and
amortization expense)
10.1
9.9
2.0
%
40.4
20.4
N/A
Intangible asset amortization expense
3.1
3.4
-8.8
%
12.6
6.6
N/A
Income before income taxes
16.0
14.2
12.7
%
55.1
23.0
N/A
Net income / core earnings*
12.5
11.1
12.6
%
43.1
18.0
N/A
Benefits ratio (2)
29.5
%
30.4
%
-0.9
pts
32.8
%
37.5
%
N/A
Operating expense ratio (3)
26.2
%
26.4
%
-0.2
pts
26.7
%
27.3
%
N/A
Pretax profit margin (4)
41.5
%
37.9
%
3.6
pts
36.4
%
30.8
%
N/A
Premium persistency (rolling 12
months)
90.5
%
89.3
%
1.2
pts
90.5
%
89.3
%
N/A
N.M. - Not meaningful.
(1)
The acquisition of NTA closed on July 1,
2019.
(2)
Ratio of benefits plus change in reserves
to earned premium.
(3)
Ratio of operating expenses to total
revenues.
(4)
Ratio of income before taxes to total
revenues.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
Change
2020
2019
Change
RETIREMENT
Contract deposits*
$
116.7
$
117.9
-1.0
%
$
483.4
$
462.5
4.5
%
Variable
57.6
59.8
-3.7
%
226.2
217.3
4.1
%
Fixed
59.1
58.1
1.7
%
257.2
245.2
4.9
%
Contract charges earned
8.2
7.0
17.1
%
29.7
29.1
2.1
%
Net investment income
37.9
33.5
13.1
%
132.5
174.7
-24.2
%
Interest credited
14.2
16.4
-13.4
%
58.6
93.6
-37.4
%
Net interest margin
23.7
17.1
38.6
%
73.9
81.1
-8.9
%
Investment income - deposit asset on
reinsurance
25.2
23.8
5.9
%
97.3
70.8
37.4
%
Interest credited - Reinsured block
25.9
25.0
3.6
%
100.9
74.2
36.0
%
Net interest margin - Reinsured block
(0.7
)
(1.2
)
41.7
%
(3.6
)
(3.4
)
-5.9
%
Other income
4.2
4.0
5.0
%
16.3
17.4
-6.3
%
Mortality loss and other reserve
changes
(1.2
)
(2.6
)
53.8
%
(5.3
)
(5.3
)
—
%
Operating expenses (includes DAC unlocking
and
amortization expense)
20.6
22.4
-8.0
%
77.0
90.5
-14.9
%
Intangible asset amortization expense
0.4
0.5
-20.0
%
1.8
2.2
-18.2
%
Other expense - goodwill and intangible
asset
impairments
10.0
—
N.M.
10.0
28.0
-64.3
%
Income (loss) before income taxes
3.2
1.4
N.M.
22.2
(1.8
)
N.M.
Net income (loss)
3.5
2.1
66.7
%
20.1
(4.8
)
N.M.
Core earnings
11.6
2.1
N.M.
28.2
23.2
21.6
%
Pretax income increase (decrease) due to
evaluation of:
Deferred policy acquisition costs
$
0.5
$
0.1
N.M.
$
1.8
$
(3.5
)
N.M.
Guaranteed minimum death benefit
reserve
0.1
—
N.M.
0.1
0.1
—
%
Retirement contracts in force (in
thousands)
230
229
0.4
%
Annuity accumulated account value on
deposit /
Assets under management
$
4,841.8
$
4,379.6
10.6
%
Variable (1)
2,139.3
1,782.7
20.0
%
Fixed
2,702.5
2,596.9
4.1
%
Annuity accumulated value retention - 12
months
Variable accumulations
95.0
%
94.7
%
0.3
pts
Fixed accumulations
94.7
%
94.0
%
0.7
pts
LIFE
Premiums and contract deposits*
$
30.8
$
30.7
0.3
%
$
110.1
$
113.2
-2.7
%
Premiums and contract charges earned
32.2
29.6
8.8
%
120.2
119.6
0.5
%
Net investment income
20.4
17.2
18.6
%
69.8
72.0
-3.1
%
Other income
0.1
0.2
-50.0
%
0.2
0.4
-50.0
%
Death benefits/mortality cost/change in
reserves
25.2
18.8
34.0
%
89.7
79.5
12.8
%
Interest credited
11.2
11.3
-0.9
%
44.9
45.0
-0.2
%
Operating expenses (includes DAC unlocking
and
amortization expense)
11.6
12.2
-4.9
%
42.7
45.7
-6.6
%
Income before income taxes
4.7
4.7
—
%
12.9
21.8
-40.8
%
Net income / core earnings*
3.6
4.0
-10.0
%
10.4
17.6
-40.9
%
Pretax income increase (decrease) due to
evaluation of:
Deferred policy acquisition costs
$
(0.2
)
$
0.2
N.M.
$
0.3
$
0.3
—
%
Life policies in force (in thousands)
202
201
0.5
%
Life insurance in force
$
19,821
$
19,180
3.3
%
Lapse ratio - 12 months (Ordinary life
insurance)
4.2
%
4.6
%
-0.4
pts
N.M. - Not meaningful.
(1)
Amount reported as of December 31, 2020
excludes $752.1 of assets under management held under modified
coinsurance reinsurance.
HORACE MANN EDUCATORS
CORPORATION
Business Segment Overview
(Unaudited)
($ in Millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
Change
2020
2019
% Change
CORPORATE AND
OTHER (1)
Components of income (loss) before
tax:
Net investment gains (losses)
$
10.5
$
1.7
N.M.
$
(2.3
)
$
153.3
N.M.
Interest expense
(3.5
)
(4.1
)
14.6
%
(14.8
)
(14.3
)
-3.5
%
Other operating expenses, net investment
income and
other income
(0.5
)
(2.5
)
80.0
%
(5.4
)
(12.3
)
56.1
%
Income (loss) before income taxes
6.5
(4.9
)
N.M.
(22.5
)
126.7
N.M.
Net income (loss)
5.4
(4.2
)
N.M.
(16.8
)
99.3
N.M.
INVESTMENTS
Retirement and Life
Fixed maturity securities, at fair
value
(amortized cost 2020, $4,458.1; 2019,
$4,151.1)
$
4,896.6
$
4,427.0
10.6
%
Equity securities, at fair value
82.9
79.4
4.4
%
Short-term investments
125.8
113.6
10.7
%
Policy loans
149.3
152.7
-2.2
%
Limited partnership interests
276.6
253.1
9.3
%
Other investments
51.5
34.8
48.0
%
Total Retirement and Life investments
5,582.7
5,060.6
10.3
%
Property and Casualty
Fixed maturity securities, at fair
value
(amortized cost 2020, $789.5; 2019,
$846.8)
867.2
899.5
-3.6
%
Equity securities, at fair value
31.7
21.1
50.2
%
Short-term investments
6.8
0.2
N.M.
Limited partnership interests
136.1
114.5
18.9
%
Other investments
1.1
1.0
10.0
%
Total Property and Casualty
investments
1,042.9
1,036.3
0.6
%
Supplemental
Fixed maturity securities, at fair
value
(amortized cost 2020, $541.0; 2019,
$459.1)
581.5
465.2
25.0
%
Equity securities, at fair value
6.0
1.4
N.M.
Short-term investments
6.4
57.5
-88.9
%
Policy loans
0.8
0.8
—
%
Limited partnership interests
36.3
16.0
126.9
%
Other investments
1.8
—
N.M.
Total Supplemental investments
632.8
540.9
17.0
%
Corporate investments
Equity securities, at fair value
1.0
—
N.M.
Short-term investments
2.8
1.4
100.0
%
Total Corporate investments
3.8
1.4
N.M.
Total investments
$
7,262.2
$
6,639.2
9.4
%
Net investment income - investment
portfolio
Before tax
$
76.0
$
62.0
22.6
%
$
260.3
$
294.3
-11.6
%
After tax
60.6
49.5
22.4
%
207.7
235.0
-11.6
%
Investment income - deposit asset on
reinsurance
Before tax
$
25.2
23.8
5.9
%
$
97.3
70.8
37.4
%
After tax
19.9
18.8
5.9
%
76.9
55.9
37.6
%
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210202006106/en/
Heather J. Wietzel, Vice President, Investor Relations
217-788-5144 | investorrelations@horacemann.com
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