UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: April 24, 2017
HORACE MANN EDUCATORS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-10890 | 37-0911756 |
| (State of incorporation) | (Commission File Number) | (I.R.S. Employer |
| Identification No.) |
1 Horace Mann Plaza, Springfield, Illinois 62715-0001
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: 217-789-2500
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Forward-looking Information
Statements included in the accompanying press release that state Horace Mann Educators Corporation’s (the “Company”) or its management’s intentions, hopes, beliefs, expectations or predictions of future events or the Company’s future financial performance are forward-looking statements and involve known and unknown risks, uncertainties and other factors. The Company 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. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 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.
| Item 2.02: | Results of Operations and Financial Condition |
On April 24, 2017, the Company issued a press release reporting its financial results for the three month period ended March 31, 2017. A copy of the press release is attached as Exhibit 99.2 and is incorporated by reference herein.
The Company’s Investor Financial Supplement has been posted on the investors page of its website, investors.horacemann.com, and the Investor Presentation is anticipated to be posted there on April 25, 2017.
| Item 9.01: | Financial Statements and Exhibits |
| (d) | Exhibits. |
| 99.1 | Glossary of Selected Terms |
| 99.2 | Press release dated April 24, 2017 reporting financial results for the three month period ended March 31, 2017. |
| -1- |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HORACE MANN EDUCATORS CORPORATION | |||
| By: | /s/ Bret A. Conklin | ||
| Name: | Bret A. Conklin | ||
| Title: | Executive Vice President & | ||
| Chief Financial Officer | |||
Date: April 24, 2017
| -2- |
Exhibit 99.1
Glossary of Selected Terms
The following measures are used by the Company’s management to evaluate performance against historical results and establish targets on a consolidated basis. Several of such measures are components of net income or the balance sheet but, in some cases, may not be considered measures based on accounting principles generally accepted in the United States (i.e., “non-GAAP” measures) under applicable SEC rules because they are not displayed as separate line items in the Consolidated Statement of Operations or Consolidated Balance Sheet, and in some cases, there is inclusion or exclusion of certain items not ordinarily included or excluded in a measure that is based on accounting principles generally accepted in the United States (i.e., “GAAP” measure). In the opinion of the Company’s management, a discussion of these measures is meaningful to provide investors with an understanding of the significant factors that comprise the Company’s periodic results of operations and financial condition.
Book value per share excluding the fair value adjustment for investments - The result of dividing total shareholders’ equity excluding after tax net unrealized investment gains and losses on fixed maturities and equity securities, including the related effect on certain deferred policy acquisition costs and value of acquired insurance in force, by ending shares outstanding. Book value per share is the most directly comparable GAAP measure. Management believes it is useful to consider the trend in book value per share excluding net unrealized investment gains and losses in conjunction with book value per share to identify and analyze the change in net worth. Management also believes the non-GAAP measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily financial market conditions, the magnitude and timing of which are generally not influenced by the Company’s underlying insurance operations.
Catastrophe costs - The sum of catastrophe losses and property and casualty catastrophe reinsurance reinstatement premiums.
Catastrophe losses - In categorizing property and casualty claims as being from a catastrophe, the Company utilizes the designations of the Property Claim Services, a subsidiary of Insurance Services Office, Inc., and additionally beginning in 2007, includes losses from all such events that meet the definition of covered loss in the Company’s primary catastrophe excess of loss reinsurance contract, and reports claims and claim expense amounts net of reinsurance recoverables. A catastrophe is a severe loss resulting from natural and man-made events within a particular territory, including risks such as hurricane, fire, earthquake, windstorm, explosion, terrorism and other similar events, that causes $25 million or more in insured property and casualty losses for the industry and affects a significant number of property and casualty insurers and policyholders. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or amount of loss in advance. Their effects are not included in earnings or claim and claim expense reserves prior to occurrence. In the opinion of the Company’s management, a discussion of the impact of catastrophes is meaningful for investors to understand the variability in periodic earnings.
| 1 |
Exclusive Distributor - A licensed representative of Horace Mann. Horace Mann utilizes multiple points of distribution, including, but not limited to, direct sales, employee agents and exclusive agents.
Independent Agents - Non-exclusive distributor contractors who are under contract with the Company to market the Company’s annuity products but who are not restricted to writing only the Company’s products and products authorized by the Company.
Insurance premiums written and contract deposits - Premiums written represent (1) the amount charged for policies issued during a fiscal period for property and casualty business, such amounts may be earned and included in financial results over future fiscal periods, and (2) the amount charged for policies in force during a fiscal period for traditional life and group life business. Amounts are reported net of reinsurance, unless otherwise specified. Contract deposits include amounts received from customers on deposit-type contracts, such as investment contracts (annuities) and life products with account values, including deposit amounts and any related contract or policy fees. Management utilizes this non-GAAP measure, which is based on statutory accounting principles, in analyzing and evaluating the business growth of its operating segments. Insurance premiums and contract charges earned is the most directly comparable GAAP measure.
Net Reserves - Property and casualty unpaid claim and claim expense reserves net of anticipated reinsurance recoverables.
Operating income or Net income before net realized investment gains and losses - Net income adjusted to exclude after tax net realized investment gains and losses. Net income is the most directly comparable GAAP measure. Management believes the measure provides investors with a valuable measure of the Company’s ongoing performance because it reveals trends in the business that may be obscured by the effect of net realized investment gains and losses. Net realized investment gains and losses may vary significantly between periods and are generally driven by business decisions and external economic developments that are unrelated to the insurance underwriting process. Operating income is used by management along with other components of net income to assess their performance and adjusted measures of operating income and operating income per diluted share are used in incentive compensation programs. Management believes that a projection of net income including after tax net realized investment gains and losses is not appropriate on a forward-looking basis because it is not possible to provide a valid forecast of net realized investment gains and losses, which can vary substantially from one period to another and may have a significant impact on net income.
Prior Years’ Reserve Development - A measure which the Company reports for its Property and Casualty segment which identifies the increase or decrease in net incurred claim and claim expense reserves at successive valuation dates for claims which occurred in previous calendar years. In the opinion of the Company’s management, a discussion of prior years’ reserve development is useful to investors as it allows them to assess the impact on current period earnings of incurred claims experience from the current calendar year and previous calendar years.
| 2 |
Property and casualty operating statistics - Operating measures utilized by the Company and the insurance industry regarding the relative profitability of property and casualty underwriting results.
| · | Loss Ratio or Loss and Loss Adjustment Expense Ratio - The ratio of (1) the sum of net incurred losses and loss adjustment expenses to (2) net earned premiums. |
| · | Expense Ratio - The ratio of (1) the sum of operating expenses and the amortization of policy acquisition costs to (2) net earned premiums. |
| · | Combined Ratio - The sum of the Loss Ratio and the Expense Ratio. A Combined Ratio less than 100% generally indicates profitable underwriting prior to the consideration of net investment income. |
| · | Combined Ratio Excluding Catastrophes and Prior Years’ Reserve Development or Underlying Combined Ratio - The sum of the Loss Ratio and the Expense Ratio adjusted to remove the effect of catastrophe costs and prior years’ reserve development. The Combined Ratio is the most directly comparable GAAP measure. Management believes this ratio provides a valuable measure of the Company’s underlying underwriting performance that may be obscured by the effects of catastrophe costs and prior years’ reserve development, the amounts of which may be significant and may vary significantly between periods. |
Return on equity - The ratio of (1) trailing 12 month net income to (2) the average of ending shareholders’ equity for the current quarter end and the preceding four quarter ends.
Sales or Annualized New Sales - Sales represent the amount of new business sold during the period and exclude renewal of policies sold in previous periods. Sales are measured by the Company as premiums and deposits to be collected over the 12 months following the sale of a new policy for annuity, life, automobile and homeowners business, as well as increases in contributions to annuity and certain life business, and this time period may extend into the following calendar year. In addition, the Company may disclose new policy count (units) information for automobile and homeowners business. Sales data pertains to Horace Mann products and excludes authorized products sold by exclusive agents, employee agents, and their licensed staff which are underwritten by third-party vendors. Sales should not be viewed as a substitute for any measure determined in accordance with GAAP, including "sales" as it relates to non-insurance companies, and the Company’s definition of sales might differ from that used by other companies. The Company utilizes sales information as a performance measure that indicates the productivity of its agency force. Sales are also a leading indicator of future revenue trends.
| 3 |
Exhibit 99.2
[Horace Mann Educators Corporation logo]
Contact information:
Ryan Greenier, Vice President, Investor Relations
217-788-5738
HORACE MANN REPORTS FIRST QUARTER 2017
NET INCOME PER SHARE AND OPERATING EPS OF $0.37
| · | Property and Casualty net income results significantly impacted by $0.27 cents of elevated catastrophe losses, as well as adverse non-catastrophe weather-related losses |
| · | Solid operating results in Retirement and Life segments |
| · | Retirement assets under management increased 9% from a year ago |
| · | Sales increased across all business segments; double-digit growth in Life sales continues |
SPRINGFIELD, Ill., April 24, 2017 — Horace Mann Educators Corporation (NYSE:HMN) today reported financial results for the three months ended March 31, 2017:
| Horace Mann Financial Highlights | |||
|
Three months ended March 31, | |||
| ($ in millions, except per share amounts) | 2017 | 2016 | Change |
| Total revenues | $287.3 | $271.3 | 5.9% |
| Net income | 15.3 | 25.2 | -39.3% |
| Net realized investment gains (losses) after tax | (0.1) | (0.4) | |
| Operating income* | 15.4 | 25.6 | -39.8% |
| Per diluted share: | |||
| Net income | 0.37 | 0.61 | -39.3% |
| Net realized investment gains (losses) after tax | (0.00) | (0.01) | |
| Operating income* | 0.37 | 0.62 | -40.3% |
| Book value per share | 32.60 | 33.11 | -1.5% |
| Book value per share excluding | |||
| the fair value adjustment for investments* | 27.71 | 27.05 | 2.4% |
| Property and Casualty segment net income | 2.7 | 13.8 | -80.4% |
| Property and Casualty combined ratio | 105.5% | 93.8% | 11.7 pts |
| Property and Casualty underlying combined ratio* | 95.3% | 86.8% | 8.5 pts |
| Retirement segment net income | $ 11.5 | $ 10.6 | 8.5% |
| Life segment net income | 3.9 | 3.9 | N.M. |
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 supplemental numerical pages of this document. 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 SEC.
| 1 |
“Horace Mann’s first quarter operating income was significantly impacted by adverse weather; catastrophe losses were $17.2 million, the highest level ever recorded during the first quarter, and non-catastrophe weather losses also impacted underlying auto and property results. On a positive note, we are seeing signs of improvement in the underlying auto loss ratio when you exclude weather-related impacts. Sales in all business lines were strong, with 9% growth in Property and Casualty, 4% growth in Retirement and continued double-digit growth in Life,” said Horace Mann’s President and Chief Executive Officer Marita Zuraitis.
Property and Casualty Segment
For the quarter, Property and Casualty net income of $2.7 million was $11.1 million lower compared to the prior year period. The total Property and Casualty combined ratio was 105.5%, reflecting a record level of catastrophe losses in the quarter, as well as elevated non-catastrophe weather-related losses. Catastrophe losses of $17.2 million pretax were $4.5 million higher than the first quarter of 2016, representing 2.5 points of the combined ratio increase. Prior years’ reserves continue to develop favorably; however, the favorable development in the current quarter was $1.0 million pretax lower than the amount a year ago, representing 0.7 points of the combined ratio increase.
On an underlying basis, the auto loss ratio of 76.7% was in line with the prior period result on a developed basis, and was in line with full year 2016 results despite the elevated level of weather losses in the first quarter of 2017. The Company remains confident that it is on the right track for 1 point of underlying auto combined ratio improvement for full year 2017. For property, the increase in the underlying loss ratio from 35.9% for the first quarter of 2016 to 46.9% for the first quarter of 2017 was largely related to the impact of higher non-catastrophe weather-related losses.
Compared to the first quarter of 2016, the Property and Casualty expense ratio of 28.3% increased 1.0 point from a year ago reflecting additional costs related to the Company’s continued infrastructure investments.
Total Property and Casualty written premiums of $152.9 million for the three months ended March 31, 2017 increased 4% compared to the prior year period. The growth was driven primarily by increases in average premium per policy for both auto and property.
Total Property and Casualty sales increased 9% compared to the first quarter of 2016. Auto sales increased 9% while property sales increased 5% compared to the prior year period. Policy retention continues to be strong with auto and property policy retention rates for the current quarter at 83% and 88%, respectively.
The Company adopted a new accounting rule for employee share-based payment accounting in the first quarter of 2017 that required all income tax effects of awards to be recognized in the income statement when the awards vest or are settled rather than through additional paid-in capital in the equity section of the balance sheet. As a result, Property and Casualty recognized an income tax benefit of $1.6 million in its provision for federal income taxes.
| 2 |
Retirement Segment
For the first quarter of 2017, Retirement segment net income of $11.5 million increased $0.9 million or 9% compared to the prior year period which is primarily due to a $3.4 million pretax increase in net interest margin offset by a $2.6 million pretax increase in operating expenses including costs related to the Company’s continued infrastructure and strategic investments.
The annualized net interest spread on fixed annuity assets was 183 basis points for the first quarters of 2017 and 2016, which reflects the continued low interest rate environment. Total Retirement assets under management of $6.6 billion increased 9% compared to March 31, 2016, and total cash value persistency remained strong at approximately 95%.
For the three months ended March 31, 2017, annuity deposits of $117.3 million increased 4%, or $4.7 million, compared to the prior year period and was attributable to $2.2 million of single premium and $2.5 million of recurring deposits received in 2017.
Life Segment
Life segment net income was $3.9 million for the first quarter of 2017 and comparable to a year ago.
In the current quarter, Life segment insurance premiums and contract deposits of $26.5 million increased 11%, or $2.6 million, compared to the prior year period. Life sales of $4.7 million increased $1.7 million, or 57%, compared to the prior year period, primarily due to an increase in single premium sales. Life persistency of 96% was comparable to 12 months earlier.
Investment Results
Total net investment income increased 7% compared to the three months ended March 31, 2016. In addition to reflecting higher asset balances in the Retirement segment, investment results also reflected an increase in investment prepayment activity and favorable returns on alternative investments, partially offset by the impact of the current low interest rate environment. Pretax net realized investment losses were $0.2 million for the three months ended March 31, 2017, including $2.8 million of other than temporary impairment charges recorded on certain equity and fixed maturity securities.
Horace Mann’s net unrealized investment gains on fixed maturity and equity securities were $351.3 million at March 31, 2017, compared to net unrealized investment gains of $312.2 million at December 31, 2016 and $432.9 million at March 31, 2016.
| 3 |
Webcast Conference Call
Horace Mann’s senior management will discuss the company’s fourth quarter financial results with investors and analysts on April 25, 2017 at 10:00 a.m. Eastern Time. The conference call will be webcast live on the Internet at investors.horacemann.com and archived later in the day for replay.
Horace Mann — the largest financial services company focusing on educators' financial needs — provides auto, homeowners and life insurance, retirement products and other financial solutions. Founded by Educators for Educators® in 1945, the company is headquartered in Springfield, Ill. For more information, visit 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, 2016 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. The information contained in this press release includes financial measures which are based on methodologies other than United States generally accepted accounting principles (“GAAP”). Reconciliations of non-GAAP measures to the closest GAAP measures are contained in the supplemental numerical pages of this release 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.
# # #
| 4 |
HORACE MANN EDUCATORS CORPORATION
Financial Highlights (Unaudited)
(Dollars in Millions, Except Per Share Data)
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2017 | 2016 | % Change | ||||||||||
| EARNINGS SUMMARY | ||||||||||||
| Net income | $ | 15.3 | $ | 25.2 | -39.3 | % | ||||||
| Net realized investment gains (losses), after tax (see below) | (0.1 | ) | (0.4 | ) | -75.0 | % | ||||||
| Operating income (A) | 15.4 | 25.6 | -39.8 | % | ||||||||
| Per diluted share: | ||||||||||||
| Net income | $ | 0.37 | $ | 0.61 | -39.3 | % | ||||||
| Net realized investment gains (losses), after tax (see below) | $ | - | $ | (0.01 | ) | -100.0 | % | |||||
| Operating income (A) | $ | 0.37 | $ | 0.62 | -40.3 | % | ||||||
| Weighted average number of shares and equivalent shares (in millions) - Diluted | 41.3 | 41.5 | -0.5 | % | ||||||||
| RETURN ON EQUITY | ||||||||||||
| Net income return on equity (B) | 5.4 | % | 6.4 | % | N.M. | |||||||
| Operating income return on equity excluding the fair value adjustment for investments (A) (C) | 6.5 | % | 7.4 | % | N.M. | |||||||
| FINANCIAL POSITION | ||||||||||||
| Per share (D): | ||||||||||||
| Book value | $ | 32.60 | $ | 33.11 | -1.5 | % | ||||||
| Effect of the fair value adjustment for investments (E) | $ | 4.89 | $ | 6.06 | -19.3 | % | ||||||
| Book value excluding the fair value adjustment for investments (A) | $ | 27.71 | $ | 27.05 | 2.4 | % | ||||||
| Dividends paid | $ | 0.275 | $ | 0.265 | 3.8 | % | ||||||
| Ending number of shares outstanding (in millions) (D) | 40.5 | 40.4 | 0.2 | % | ||||||||
| Total assets | $ | 10,779.5 | $ | 10,231.4 | 5.4 | % | ||||||
| Long-term debt, current and noncurrent | 247.3 | 247.0 | 0.1 | % | ||||||||
| Total shareholders' equity | 1,321.8 | 1,336.0 | -1.1 | % | ||||||||
| ADDITIONAL INFORMATION | ||||||||||||
| Net realized investment gains (losses) | ||||||||||||
| Before tax | $ | (0.2 | ) | $ | (0.2 | ) | N.M. | |||||
| After tax | (0.1 | ) | (0.4 | ) | -75.0 | % | ||||||
| Per share, diluted | $ | - | $ | (0.01 | ) | -100.0 | % | |||||
| N.M. | - Not meaningful. |
| (A) | These measures are not based on accounting principles generally accepted in the United States ("non-GAAP"). 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 SEC. |
| (B) | Based on trailing 12-month net income and average quarter-end shareholders' equity. |
| (C) | Based on trailing 12-month operating income 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 the applicable deferred taxes. |
| (D) | Ending shares outstanding were 40,542,116 at March 31, 2017 and 40,350,937 at March 31, 2016. |
| (E) | Net of the related impact on deferred policy acquisition costs and the applicable deferred taxes. |
| -1- |
HORACE MANN EDUCATORS CORPORATION
Statements of Operations and Supplemental Consolidated Data (Unaudited)
(Dollars in Millions)
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2017 | 2016 | % Change | ||||||||||
| STATEMENTS OF OPERATIONS | ||||||||||||
| Insurance premiums and contract charges earned | $ | 195.7 | $ | 185.5 | 5.5 | % | ||||||
| Net investment income | $ | 90.7 | $ | 84.7 | 7.1 | % | ||||||
| Net realized investment gains (losses) | $ | (0.2 | ) | $ | (0.2 | ) | N.M. | |||||
| Other income | $ | 1.1 | $ | 1.3 | -15.4 | % | ||||||
| Total revenues | 287.3 | 271.3 | 5.9 | % | ||||||||
| Benefits, claims and settlement expenses | 144.1 | 119.5 | 20.6 | % | ||||||||
| Interest credited | 48.8 | 46.7 | 4.5 | % | ||||||||
| Policy acquisition expenses amortized | 24.9 | 24.1 | 3.3 | % | ||||||||
| Operating expenses | 48.7 | 42.8 | 13.8 | % | ||||||||
| Interest expense | 3.0 | 2.9 | 3.4 | % | ||||||||
| Total benefits, losses and expenses | 269.5 | 236.0 | 14.2 | % | ||||||||
| Income before income taxes | 17.8 | 35.3 | -49.6 | % | ||||||||
| Income tax expense | 2.5 | 10.1 | -75.2 | % | ||||||||
| Net income | $ | 15.3 | $ | 25.2 | -39.3 | % | ||||||
| PREMIUMS WRITTEN AND CONTRACT DEPOSITS | ||||||||||||
| Property & Casualty | $ | 152.9 | $ | 146.7 | 4.2 | % | ||||||
| Retirement deposits | 117.3 | 112.6 | 4.2 | % | ||||||||
| Life | 26.5 | 23.9 | 10.9 | % | ||||||||
| Total | $ | 296.7 | $ | 283.2 | 4.8 | % | ||||||
| SEGMENT NET INCOME (LOSS) | ||||||||||||
| Property & Casualty | $ | 2.7 | $ | 13.8 | -80.4 | % | ||||||
| Retirement | 11.5 | 10.6 | 8.5 | % | ||||||||
| Life | 3.9 | 3.9 | N.M. | |||||||||
| Corporate and other (A) | (2.8 | ) | (3.1 | ) | -9.7 | % | ||||||
| Net income | $ | 15.3 | $ | 25.2 | -39.3 | % | ||||||
| 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. |
| -2- |
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2017 | 2016 | % Change | ||||||||||
| PROPERTY & CASUALTY | ||||||||||||
| Premiums written | $ | 152.9 | $ | 146.7 | 4.2 | % | ||||||
| Premiums earned | 158.3 | 152.1 | 4.1 | % | ||||||||
| Net investment income | 9.2 | 8.8 | 4.5 | % | ||||||||
| Other income (loss) | - | 0.4 | N.M. | |||||||||
| Losses and loss adjustment expenses (LAE) | 122.2 | 101.2 | 20.8 | % | ||||||||
| Operating expenses (includes policy acquisition expenses amortized) | 44.7 | 41.6 | 7.5 | % | ||||||||
| Income before tax | 0.6 | 18.5 | -96.8 | % | ||||||||
| Net income | 2.7 | 13.8 | -80.4 | % | ||||||||
| Net investment income, after tax | 7.4 | 7.2 | 2.8 | % | ||||||||
| Catastrophe costs (A) | ||||||||||||
| After tax | 11.1 | 8.3 | 33.7 | % | ||||||||
| Before tax | 17.2 | 12.7 | 35.4 | % | ||||||||
| Prior years' reserves favorable (adverse) development, before tax | ||||||||||||
| Automobile | - | - | N.M. | |||||||||
| Property | 1.0 | 2.0 | -50.0 | % | ||||||||
| Other liability | - | - | N.M. | |||||||||
| Total | 1.0 | 2.0 | -50.0 | % | ||||||||
| Operating statistics: | ||||||||||||
| Loss and loss adjustment expense ratio | 77.2 | % | 66.5 | % | N.M. | |||||||
| Expense ratio | 28.3 | % | 27.3 | % | N.M. | |||||||
| Combined ratio | 105.5 | % | 93.8 | % | N.M. | |||||||
| Effect on the combined ratio of: | ||||||||||||
| Catastrophe costs (A) | 10.8 | % | 8.3 | % | N.M. | |||||||
| Prior years' reserve development | -0.6 | % | -1.3 | % | N.M. | |||||||
Combined ratio excluding the effects of catastrophe costs and prior years' reserve development ("underlying combined ratio") (B) | 95.3 | % | 86.8 | % | N.M. | |||||||
| Policies in force (voluntary) (in thousands) | 703 | 710 | -1.0 | % | ||||||||
| Automobile | 484 | 487 | -0.6 | % | ||||||||
| Property | 219 | 223 | -1.8 | % | ||||||||
| Policy renewal rate (voluntary) - 12 months | ||||||||||||
| Automobile | 83.0 | % | 84.5 | % | N.M. | |||||||
| Property | 87.5 | % | 88.4 | % | N.M. | |||||||
| N.M. | - Not meaningful. |
| (A) | Includes allocated loss adjustment expenses and, when applicable, catastrophe reinsurance reinstatement premiums. For the periods presented, there were no reinsurance reinstatement premiums. |
| (B) | This measure is not based on accounting principles generally accepted in the United States ("non-GAAP"). |
See footnote (A) on page 1 of these supplemental numerical pages.
| -3- |
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2017 | 2016 | % Change | ||||||||||
| RETIREMENT | ||||||||||||
| Contract deposits | $ | 117.3 | $ | 112.6 | 4.2 | % | ||||||
| Variable | 45.4 | 37.9 | 19.8 | % | ||||||||
| Fixed | 71.9 | 74.7 | -3.7 | % | ||||||||
| Contract charges earned | 6.6 | 6.1 | 8.2 | % | ||||||||
| Net investment income | 63.4 | 58.1 | 9.1 | % | ||||||||
| Interest credited | 37.5 | 35.6 | 5.3 | % | ||||||||
| Net interest margin (without realized investment gains/losses) | 25.9 | 22.5 | 15.1 | % | ||||||||
| Other income | 0.9 | 0.8 | 12.5 | % | ||||||||
| Mortality loss and other reserve changes | (1.1 | ) | (0.9 | ) | 22.2 | % | ||||||
| Operating expenses (includes policy acquisition expenses amortized) | 16.1 | 13.5 | 19.3 | % | ||||||||
| Income before tax | 16.2 | 15.0 | 8.0 | % | ||||||||
| Net income | 11.5 | 10.6 | 8.5 | % | ||||||||
| Pretax income increase (decrease) due to evaluation of: | ||||||||||||
| Deferred policy acquisition costs | $ | (0.3 | ) | $ | (0.2 | ) | 50.0 | % | ||||
| Guaranteed minimum death benefit reserve | - | - | N.M. | |||||||||
| Retirement contracts in force (in thousands) | 220 | 212 | 3.8 | % | ||||||||
| Accumulated account value on deposit / Assets under management | $ | 6,565.4 | $ | 6,024.2 | 9.0 | % | ||||||
| Variable | 2,011.5 | 1,767.9 | 13.8 | % | ||||||||
| Fixed | 4,553.9 | 4,256.3 | 7.0 | % | ||||||||
| Retirement accumulated value retention - 12 months | ||||||||||||
| Variable accumulations | 94.7 | % | 94.5 | % | N.M. | |||||||
| Fixed accumulations | 94.4 | % | 94.9 | % | N.M. | |||||||
| LIFE | ||||||||||||
| Premiums and contract deposits | $ | 26.5 | $ | 23.9 | 10.9 | % | ||||||
| Premiums and contract charges earned | 30.8 | 27.3 | 12.8 | % | ||||||||
| Net investment income | 18.3 | 18.0 | 1.7 | % | ||||||||
| Other income | 0.1 | 0.1 | 0.0 | % | ||||||||
| Death benefits/mortality cost/change in reserves | 20.8 | 17.4 | 19.5 | % | ||||||||
| Interest credited | 11.2 | 11.1 | 0.9 | % | ||||||||
| Operating expenses (includes policy acquisition expenses amortized) | 11.8 | 10.9 | 8.3 | % | ||||||||
| Income before tax | 5.4 | 6.0 | -10.0 | % | ||||||||
| Net income | 3.9 | 3.9 | 0.0 | % | ||||||||
| Pretax income increase (decrease) due to evaluation of: | ||||||||||||
| Deferred policy acquisition costs | $ | 0.1 | $ | 0.1 | N.M. | |||||||
| Life policies in force (in thousands) | 198 | 201 | -1.5 | % | ||||||||
| Life insurance in force | $ | 17,164 | $ | 16,651 | 3.1 | % | ||||||
| Lapse ratio - 12 months (Ordinary life insurance) | 4.5 | % | 4.2 | % | N.M. | |||||||
| CORPORATE AND OTHER (A) | ||||||||||||
| Components of income (loss) before tax: | ||||||||||||
| Net realized investment gains (losses) | $ | (0.2 | ) | $ | (0.2 | ) | N.M. | |||||
| Interest expense | (3.0 | ) | (2.9 | ) | 3.4 | % | ||||||
| Other operating expenses, net investment income and other income | (1.2 | ) | (1.1 | ) | 9.1 | % | ||||||
| Loss before tax | (4.4 | ) | (4.2 | ) | 4.8 | % | ||||||
| Net loss | (2.8 | ) | (3.1 | ) | -9.7 | % | ||||||
| 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, | ||||||||||||
| 2017 | 2016 | % Change | ||||||||||
| INVESTMENTS | ||||||||||||
| Retirement and Life | ||||||||||||
| Fixed maturities, at fair value (amortized cost 2017, $6,421.1; 2016, $6,022.9) | $ | 6,732.3 | $ | 6,407.0 | 5.1 | % | ||||||
| Equity securities, at fair value (cost 2017, $80.3; 2016, $35.3) | 80.0 | 35.0 | 128.6 | % | ||||||||
| Short-term investments | 61.9 | 197.0 | -68.6 | % | ||||||||
| Policy loans | 151.5 | 148.6 | 2.0 | % | ||||||||
| Other investments | 174.7 | 98.8 | 76.8 | % | ||||||||
| Total Retirement and Life investments | 7,200.4 | 6,886.4 | 4.6 | % | ||||||||
| Property & Casualty | ||||||||||||
| Fixed maturities, at fair value (amortized cost 2017, $752.1; 2016, $768.4) | 778.4 | 809.5 | -3.8 | % | ||||||||
| Equity securities, at fair value (cost 2017, $62.9; 2016, $61.0) | 77.0 | 69.0 | 11.6 | % | ||||||||
| Short-term investments | 3.4 | 7.0 | -51.4 | % | ||||||||
| Other investments | 49.2 | 40.4 | 21.8 | % | ||||||||
| Total Property & Casualty investments | 908.0 | 925.9 | -1.9 | % | ||||||||
| Corporate investments | 15.8 | 12.3 | 28.5 | % | ||||||||
| Total investments | 8,124.2 | 7,824.6 | 3.8 | % | ||||||||
| Net investment income | ||||||||||||
| Before tax | $ | 90.7 | $ | 84.7 | 7.1 | % | ||||||
| After tax | 60.4 | 56.5 | 6.9 | % | ||||||||
| -5- |