EX-99.2 16 dex992.htm UPDATED NUMERICAL EXHIBITS TO THE COMPANY'S EARNINGS RELEASE Updated Numerical Exhibits to the Company's Earnings Release

Exhibit 99.2

 

Updated Numerical Exhibits to the Company’s Earnings Release for the Year Ended December 31, 2004

 

HORACE MANN EDUCATORS CORPORATION

Digest of Earnings and Highlights

(Dollars in Millions, Except Per Share Data)

 

     Quarter Ended
December 31,
          

Year Ended

December 31,

        
     2004
     2003
     % Change
     2004
     2003
     % Change
  

DIGEST OF EARNINGS

                                             

Net income

    $ 28.3     $ 23.1           $ 56.3     $ 19.0        

Net income per share:

                                             

Basic

    $ 0.66     $ 0.54           $ 1.32     $ 0.44        

Diluted (A)

    $ 0.61     $ 0.50           $ 1.25     $ 0.44        

Weighted average number of shares and equivalent shares:

                                             

Basic

      42.8       42.7             42.8       42.7        

Diluted (A)

      47.5       47.2             47.3       42.9        

HIGHLIGHTS

                                             

Operations

                                             

Insurance premiums written and contract deposits (B)(C)

    $ 242.0     $ 249.8     -3.1 %   $ 998.4     $ 955.5     4.5 %

Return on equity (D)

                            10.3 %     3.5 %      

Property & Casualty GAAP combined ratio

      88.2 %     111.3 %           100.5 %     112.3 %      

Property & Casualty combined ratio before catastrophes

      79.8 %     101.1 %           87.1 %     106.1 %      

Experienced agents

                            539       510     5.7 %

Financed agents

                            261       378     -31.0 %

Total agents

                            800       888     -9.9 %

Additional Per Share Information

                                             

Dividends paid

    $ 0.105     $ 0.105     —       $ 0.42     $ 0.42     —    

Book value (E)

                          $ 13.45     $ 12.42     8.3 %

Financial Position

                                             

Total assets

                          $ 5,371.9     $ 4,953.2     8.5 %

Short-term debt

                            25.0       25.0        

Long-term debt

                            144.7       144.7        

Total shareholders’ equity

                            576.2       530.5     8.6 %

 

(A) Effective December 31, 2004, the Company adopted EITF Consensus 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share”. The Company’s Senior Convertible Notes represent 4.3 million equivalent shares and have annual interest expense of $2.7 million after tax. Diluted per share information for all periods is presented on a basis consistent with this consensus. This new accounting reduced the fourth quarter net income per share amounts by $0.04 for both 2004 and 2003 and the full year 2004 amount by $0.06 while having no impact on full year 2003 net income per share due to an anti-dilutive effect.

 

(B) As a result of catastrophes in the third quarter of 2004, the Company incurred $1.0 million and $5.0 million of additional ceded written and earned premiums in the three and twelve months ended December 31, 2004, respectively, to reinstate its property and casualty catastrophe reinsurance coverage. Excluding these reinstatement premiums, the written premium growth rates were -2.7% and 5.0% for the three and twelve months ended December 31, 2004, respectively.

 

(C) Reflecting resolution of the challenge to automobile rates in North Carolina, in the fourth quarter of 2004 the Company returned to policyholders $4.0 million of previously escrowed premiums, resulting in a reduction to written premiums. Excluding the escrow payment and the reinstatement premiums described in note (B), the written premium growth rates were -1.1% and 5.4% for the three and twelve months ended December 31, 2004, respectively.

 

(D) Based on trailing 12-month net income and average quarter-end shareholders’ equity.

 

(E) Before the market value adjustment for investments, book value per share was $11.45 at December 31, 2004 and $10.51 at December 31, 2003. Ending shares outstanding were 42,846,643 at December 31, 2004 and 42,721,940 at December 31, 2003.

 

- 1 -

 

HORACE MANN EDUCATORS CORPORATION

Statements of Operations and Supplemental GAAP Consolidated Data

(Dollars in Millions)

 

     Quarter Ended
December 31,
           Year Ended
December 31,
        
     2004
     2003
     %
Change
     2004
     2003
     %
Change
  

STATEMENTS OF OPERATIONS

                                             

Insurance premiums written and contract deposits (A)

    $ 242.0     $ 249.8     -3.1 %   $ 998.4     $ 955.5     4.5 %

Insurance premiums and contract charges earned (A)

    $ 172.9     $ 165.5     4.5 %   $ 674.7     $ 643.5     4.8 %

Net investment income

      47.9       46.2     3.7 %     191.4       184.7     3.6 %

Realized investment gains

      2.9       20.8             12.2       25.5        

Total revenues

      223.7       232.5     -3.8 %     878.3       853.7     2.9 %

Benefits, claims and settlement expenses

      106.5       130.4             484.4       519.0        

Interest credited

      28.1       26.2             108.7       103.0        

Policy acquisition expenses amortized

      18.2       14.0             70.0       64.3        

Operating expenses

      34.3       38.1     -10.0 %     132.7       137.3     -3.4 %

Amortization of intangible assets

      2.2       0.2             6.0       5.0        

Interest expense

      1.7       1.6             6.8       6.3        

Restructuring charge adjustment

      —         —               —         (0.4 )      

Total benefits, losses and expenses

      191.0       210.5     -9.3 %     808.6       834.5     -3.1 %

Income before income taxes

      32.7       22.0     48.6 %     69.7       19.2     263.0 %

Income tax expense (benefit)

      4.4       (1.1 )           13.4       0.2        

Net income

    $ 28.3     $ 23.1     22.5 %   $ 56.3     $ 19.0     196.3 %

ANALYSIS OF PREMIUMS WRITTEN AND CONTRACT DEPOSITS (A)

                                             

Property & Casualty

                                             

Automobile and property (voluntary)

    $ 132.1     $ 139.0     -5.0 %   $ 552.5     $ 549.2     0.6 %

Involuntary and other property & casualty

      0.8       (4.4 )           9.8       (2.7 )      

Total Property & Casualty

      132.9       134.6     -1.3 %     562.3       546.5     2.9 %

Annuity deposits

      78.6       84.3     -6.8 %     327.0       296.6     10.2 %

Life

      30.5       30.9     -1.3 %     109.1       112.4     -2.9 %

Total

    $ 242.0     $ 249.8     -3.1 %   $ 998.4     $ 955.5     4.5 %

ANALYSIS OF SEGMENT NET INCOME

                                             

Property & Casualty

                                             

Before catastrophes

    $ 28.6     $ 11.4     150.9 %   $ 76.7     $ 3.8        

Catastrophe costs, after tax (B)

      (8.0 )     (9.2 )           (49.1 )     (21.6 )      

Total Property & Casualty

      20.6       2.2             27.6       (17.8 )      

Annuity

      3.5       5.7     -38.6 %     12.6       14.4     -12.5 %

Life

      3.7       3.8     -2.6 %     14.8       13.4     10.4 %

Corporate and other (C)

      0.5       11.4             1.3       9.0        

Net income

      28.3       23.1     22.5 %     56.3       19.0     196.3 %

 

(A) See additional information on pages 1 and 3 regarding the effects of property and casualty catastrophe reinsurance reinstatement premiums and escrowed North Carolina automobile premiums.

 

(B) Net of anticipated recoveries from the Florida Hurricane Catastrophe Fund and the Company’s underlying catastrophe reinsurance program. Includes allocated loss adjustment expenses and catastrophe reinsurance reinstatement premiums.

 

(C) The Corporate and Other segment includes interest expense on debt and the impact of realized investment gains and losses and other reconciling items to net income. The Company does not allocate the impact of corporate level transactions to the insurance segments consistent with management's evaluation of the results of those segments. See detail for this segment on page 4.

 

- 2 -

 

HORACE MANN EDUCATORS CORPORATION

Supplemental Business Segment Overview

(Dollars in Millions)

 

     Quarter Ended
December 31,
           Year Ended
December 31,
        
     2004
     2003
     % Change
     2004
     2003
     % Change
  

PROPERTY & CASUALTY

                                             

Premiums written (A)(B)

    $ 132.9     $ 134.6     -1.3 %   $ 562.3     $ 546.5     2.9 %

Premiums earned (A)

      143.8       138.1     4.1 %     561.3       533.8     5.2 %

Net investment income

      8.3       8.0     3.7 %     33.8       31.9     6.0 %

Losses and loss adjustment expenses (LAE)

      95.2       119.9             439.3       472.9        

Operating expenses (includes policy acquisition expenses amortized)

      32.8       34.7     -5.5 %     126.3       128.0     -1.3 %

Income (loss) before tax

      24.1       (8.5 )           29.5       (35.2 )      

Net income (loss)

      20.6       2.2             27.6       (17.8 )      

Net investment income, after tax

      7.0       6.6     6.1 %     28.6       26.2     9.2 %

Catastrophe costs, after tax (C)

      8.0       9.2             49.1       21.6        

Catastrophe losses and LAE, before tax

      11.3       14.0             70.5       33.2        

Reinsurance reinstatement premiums, before tax

      1.0       —               5.0       —          

Operating statistics:

                                             

Loss and loss adjustment expense ratio

      66.2 %     86.9 %           78.3 %     88.6 %      

Expense ratio

      22.0 %     24.4 %           22.2 %     23.7 %      

Combined ratio

      88.2 %     111.3 %           100.5 %     112.3 %      

Combined ratio before catastrophes

      79.8 %     101.1 %           87.1 %     106.1 %      

Automobile and property detail:

                                             

Premiums written (voluntary), before reinstatement premiums and return of escrowed North Carolina automobile premiums

    $ 137.1     $ 139.0     -1.4 %   $ 561.5     $ 549.2     2.2 %

Premiums written (voluntary), before reinstatement premiums

      133.1       139.0     -4.2 %     557.5       549.2     1.5 %

Premiums written (voluntary), after reinstatement premiums

      132.1       139.0     -5.0 %     552.5       549.2     0.6 %

Automobile (B)

      93.5       101.2     -7.6 %     398.2       399.4     -0.3 %

Property (A)

      38.6       37.8     2.1 %     154.3       149.8     3.0 %

Premiums earned (voluntary), before reinstatement premiums

    $ 141.3     $ 138.8     1.8 %   $ 557.0     $ 534.8     4.2 %

Premiums earned (voluntary), after reinstatement premiums

      140.3       138.8     1.1 %     552.0       534.8     3.2 %

Automobile

      101.5       100.7     0.8 %     404.2       391.3     3.3 %

Property (A)

      38.8       38.1     1.8 %     147.8       143.5     3.0 %

Policies in force (voluntary) (in thousands)

                            818       850     -3.8 %

Automobile

                            545       571     -4.6 %

Property

                            273       279     -2.2 %

Voluntary automobile operating statistics:

                                             

Loss and loss adjustment expense ratio

      64.7 %     92.8 %           70.6 %     90.0 %      

Expense ratio

      21.8 %     23.6 %           22.0 %     22.9 %      

Combined ratio

      86.5 %     116.4 %           92.6 %     112.9 %      

Combined ratio before catastrophes

      86.3 %     116.0 %           91.6 %     111.8 %      

Total property operating statistics:

                                             

Loss and loss adjustment expense ratio

      67.4 %     68.0 %           96.9 %     82.5 %      

Expense ratio

      22.3 %     25.1 %           22.6 %     24.9 %      

Combined ratio

      89.7 %     93.1 %           119.5 %     107.4 %      

Combined ratio before catastrophes

      60.6 %     55.6 %           71.8 %     86.9 %      

Prior years’ reserves favorable (adverse) development, pretax

                                             

Voluntary automobile

    $ (3.8 )   $ (13.8 )         $ (3.8 )   $ (57.0 )      

Total property

      —         (0.1 )           —         (0.6 )      

Other property and casualty

      —         1.8             —         1.2        

Total

      (3.8 )     (12.1 )           (3.8 )     (56.4 )      

 

(A) After catastrophe reinsurance reinstatement premiums of $1.0 million and $5.0 million for the three and twelve months ended December 31, 2004, respectively.

 

(B) After return of escrowed North Carolina automobile premiums of $4.0 million for the three and twelve months ended December 31, 2004.

 

(C) Net of anticipated recoveries from the Florida Hurricane Catastrophe Fund and the Company’s underlying catastrophe reinsurance program. Includes allocated loss adjustment expenses and catastrophe reinsurance reinstatement premiums.

 

- 3 -

 

HORACE MANN EDUCATORS CORPORATION

Supplemental Business Segment Overview

(Dollars in Millions)

 

     Quarter Ended
December 31,
          

Year Ended

December 31,

        
     2004
     2003
     % Change
     2004
     2003
     % Change
  

ANNUITY

                                             

Contract deposits

    $ 78.6     $ 84.3     -6.8 %   $ 327.0     $ 296.6     10.2 %

Variable

      36.9       36.3     1.7 %     132.0       115.3     14.5 %

Fixed

      41.7       48.0     -13.1 %     195.0       181.3     7.6 %

Contract charges earned

      4.3       4.0     7.5 %     16.7       14.6     14.4 %

Net investment income

      27.7       26.3     5.3 %     109.4       104.4     4.8 %

Net interest margin (without realized gains)

      8.0       8.2     -2.4 %     33.7       33.1     1.8 %

Net margin (includes fees and contract charges earned)

      12.8       12.7     0.8 %     52.5       49.6     5.8 %

Mortality gain (loss) and other reserve changes

      0.2       (0.1 )           (1.2 )     (0.8 )      

Operating expenses (includes policy acquisition expenses amortized)

      8.2       5.8     41.4 %     30.5       25.6     19.1 %

Income before tax and amortization of intangible assets

      4.8       6.8     -29.4 %     20.8       23.2     -10.3 %

Amortization of intangible assets

      1.9       (0.2 )           4.5       3.4        

Income before tax

      2.9       7.0             16.3       19.8        

Net income

      3.5       5.7     -38.6 %     12.6       14.4     -12.5 %

Pretax income increase (decrease) due to valuation of:

                                             

Deferred policy acquisition costs

    $ (0.8 )   $ 1.4           $ (1.2 )   $ 2.4        

Value of acquired insurance in force

      (0.9 )     1.1             (0.9 )     0.2        

Guaranteed minimum death benefit reserve

      —         0.4             —         0.7        

Annuity contracts in force (in thousands)

                            159       153     3.9 %

Accumulated value on deposit

                          $ 3,081.0     $ 2,769.8     11.2 %

Variable

                            1,254.8       1,119.2     12.1 %

Fixed

                            1,826.2       1,650.6     10.6 %

Annuity accumulated value retention - 12 months

                                             

Variable accumulations

                            92.9 %     92.8 %      

Fixed accumulations

                            95.5 %     95.1 %      

LIFE

                                             

Premiums and contract deposits

    $ 30.5     $ 30.9     -1.3 %   $ 109.1     $ 112.4     -2.9 %

Premiums and contract charges earned

      24.8       23.4     6.0 %     96.7       95.1     1.7 %

Net investment income

      12.3       12.2     0.8 %     49.5       49.6     -0.2 %

Income before tax

      4.8       6.0             22.0       20.8        

Net income

      3.7       3.8     -2.6 %     14.8       13.4     10.4 %

Pretax income increase (decrease) due to valuation of:

                                             

Deferred policy acquisition costs

    $ —       $ 1.4           $ (0.4 )   $ 1.4        

Life policies in force (in thousands)

                            252       258     -2.3 %

Life insurance in force (in millions)

                          $ 13,223     $ 13,263     -0.3 %

Lapse ratio - 12 months (Ordinary life insurance)

                            7.2 %     7.7 %      

CORPORATE AND OTHER (A)

                                             

Components of gain (loss) before tax:

                                             

Realized investment gains

    $ 2.9     $ 20.8           $ 12.2     $ 25.5        

Interest expense

      (1.7 )     (1.6 )           (6.8 )     (6.3 )      

Restructuring charge adjustment

      —         —               —         0.4        

Other operating expenses

      (0.3 )     (1.7 )           (3.5 )     (5.8 )      

Income (loss) before tax

      0.9       17.5             1.9       13.8        

Net income (loss)

      0.5       11.4             1.3       9.0        

 

(A) The Corporate and Other segment includes interest expense on debt and the impact of realized investment gains and losses and other reconciling items to net income. The Company does not allocate the impact of corporate level transactions to the insurance segments consistent with management's evaluation of the results of those segments.

 

- 4 -

 

HORACE MANN EDUCATORS CORPORATION

Supplemental Business Segment Overview

(Dollars in Millions)

 

     Quarter Ended
December 31,
          

Year Ended

December 31,

        
     2004
     2003
     % Change
     2004
     2003
     % Change
  

INVESTMENTS

                                             

Annuity and Life

                                             

Fixed maturities, at market (amortized cost 2004, $2,694.1; 2003, $2,501.2)

                          $ 2,820.4     $ 2,613.0        

Short-term investments

                            17.3       9.0        

Short-term investments, securities lending collateral

                            0.1       22.1        

Policy loans and other

                            83.1       78.6        
                          
 
     

Total Annuity and Life investments

                            2,920.9       2,722.7     7.3 %

Property & Casualty

                                             

Fixed maturities, at market (amortized cost 2004, $705.1; 2003, $623.7)

                            720.8       645.7        

Short-term investments

                            14.7       9.8        

Short-term investments, securities lending collateral

                            —         —          

Other

                            0.6       0.7        
                          
 
     

Total Property & Casualty investments

                            736.1       656.2     12.2 %

Corporate investments

                            0.2       6.8        

Total investments

                            3,657.2       3,385.7     8.0 %

Net investment income

                                             

Before tax

    $ 47.9     $ 46.2     3.7 %   $ 191.4     $ 184.7     3.6 %

After tax

      32.8       31.4     4.5 %     131.1       125.5     4.5 %

Realized investment gains (losses) by investment portfolio included in Corporate and Other segment income

                                             

Property & Casualty

    $ 1.7     $ 11.0           $ 6.6     $ 10.2        

Annuity

      —         11.2             3.7       16.8        

Life

      1.4       (1.5 )           2.1       (1.6 )      

Corporate and Other

      (0.2 )     0.1             (0.2 )     0.1        

Total, before tax

      2.9       20.8             12.2       25.5        

Total, after tax

      1.9       13.5             7.9       16.6        

Per share, diluted

    $ 0.04     $ 0.28           $ 0.17     $ 0.38        

OTHER INFORMATION

                                             

End of period goodwill asset

                          $ 47.4     $ 47.4        

End of period property and casualty Net Reserves (A):

                                             

December 31, 2004

                          $ 362.4                

September 30, 2004

                            398.9                

June 30, 2004

                            332.9                

March 31, 2004

                            326.9                

December 31, 2003

                            320.9                

December 31, 2002

                            272.6                

December 31, 2001

                            272.0                

December 31, 2000

                            249.8                

December 31, 1999

                            235.4                

 

(A) Unpaid claim and claim expense reserves net of anticipated reinsurance recoverables and before reduction for checks issued and outstanding (“Net Reserves”).

 

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