[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 37-0911756 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | X | Accelerated filer | |||
Non-accelerated filer | Smaller reporting company | ||||
Emerging growth company | |||||
PART I - FINANCIAL INFORMATION | Page | |
Item 1. | Financial Statements | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1A. | ||
Item 2. | ||
Item 5. | ||
Item 6. | ||
/s/ KPMG LLP | |
KPMG LLP | |
Chicago, Illinois | |
May 9, 2018 | |
March 31, 2018 | December 31, 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Investments | ||||||||
Fixed maturity securities, available for sale, at fair value (amortized cost 2018, $7,373,552; 2017, $7,302,950) | $ | $ | ||||||
Equity securities, at fair value (cost 2017, $116,320) | ||||||||
Short-term and other investments | ||||||||
Total investments | ||||||||
Cash | ||||||||
Deferred policy acquisition costs | ||||||||
Goodwill | ||||||||
Other assets | ||||||||
Separate Account (variable annuity) assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Policy liabilities | ||||||||
Investment contract and life policy reserves | $ | $ | ||||||
Unpaid claims and claim expenses | ||||||||
Unearned premiums | ||||||||
Total policy liabilities | ||||||||
Other policyholder funds | ||||||||
Other liabilities | ||||||||
Long-term debt | ||||||||
Separate Account (variable annuity) liabilities | ||||||||
Total liabilities | ||||||||
Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued | ||||||||
Common stock, $0.001 par value, authorized 75,000,000 shares; issued, 2018, 65,610,067; 2017, 65,439,245 | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive income (loss), net of taxes: | ||||||||
Net unrealized investment gains on securities | ||||||||
Net funded status of benefit plans | ( | ) | ( | ) | ||||
Treasury stock, at cost, 2018, 24,721,533 shares; 2017, 24,721,372 shares | ( | ) | ( | ) | ||||
Total shareholders’ equity | ||||||||
Total liabilities and shareholders’ equity | $ | $ | ||||||
Three Months Ended March 31, | |||||||||
2018 | 2017 | ||||||||
Revenues | |||||||||
Insurance premiums and contract charges earned | $ | $ | |||||||
Net investment income | |||||||||
Net investment losses | ( | ) | ( | ) | |||||
Other income | |||||||||
Total revenues | |||||||||
Benefits, losses and expenses | |||||||||
Benefits, claims and settlement expenses | |||||||||
Interest credited | |||||||||
DAC amortization expense | |||||||||
Operating expenses | |||||||||
Interest expense | |||||||||
Total benefits, losses and expenses | |||||||||
Income before income taxes | |||||||||
Income tax expense | |||||||||
Net income | $ | $ | |||||||
Net income per share | |||||||||
Basic | $ | $ | |||||||
Diluted | $ | $ | |||||||
Weighted average number of shares and equivalent shares | |||||||||
Basic | |||||||||
Diluted | |||||||||
Net investment losses | |||||||||
Total other-than-temporary impairment losses on securities | $ | ( | ) | $ | ( | ) | |||
Portion of losses recognized in other comprehensive income | |||||||||
Net other-than-temporary impairment losses on securities recognized in earnings | ( | ) | ( | ) | |||||
Sales and other | |||||||||
Change in fair value - equity securities | ( | ) | |||||||
Change in fair value and gains (losses) realized on settlements - derivative instruments | |||||||||
Total | $ | ( | ) | $ | ( | ) | |||
Three Months Ended March 31, | |||||||||
2018 | 2017 | ||||||||
Comprehensive income | |||||||||
Net income | $ | $ | |||||||
Other comprehensive income, net of tax: | |||||||||
Change in net unrealized investment gains (losses) on securities | ( | ) | |||||||
Change in net funded status of benefit plans | |||||||||
Cumulative effect of change in accounting principle | ( | ) | |||||||
Other comprehensive income (loss) | ( | ) | |||||||
Total | $ | ( | ) | $ | |||||
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Common stock, $0.001 par value | ||||||||
Beginning balance | $ | $ | ||||||
Options exercised, 2018, 56,614 shares; 2017, 33,764 shares | ||||||||
Conversion of common stock units, 2018, 11,804 shares; 2017, 15,981 shares | ||||||||
Conversion of restricted stock units, 2018, 105,116 shares; 2017, 247,620 shares | ||||||||
Ending balance | ||||||||
Additional paid-in capital | ||||||||
Beginning balance | ||||||||
Options exercised and conversion of common stock units and restricted stock units | ( | ) | ( | ) | ||||
Share-based compensation expense | ||||||||
Ending balance | ||||||||
Retained earnings | ||||||||
Beginning balance | ||||||||
Net income | ||||||||
Dividends, 2018, $0.285 per share; 2017, $0.275 per share | ( | ) | ( | ) | ||||
Cumulative effect of change in accounting principle | ||||||||
Ending balance | ||||||||
Accumulated other comprehensive income, net of tax | ||||||||
Beginning balance | ||||||||
Change in net unrealized investment gains (losses) on securities | ( | ) | ||||||
Change in net funded status of benefit plans | ||||||||
Cumulative effect of change in accounting principle | ( | ) | ||||||
Ending balance | ||||||||
Treasury stock, at cost | ||||||||
Beginning balance, 2018, 24,721,372 shares; 2017, 24,672,932 shares | ( | ) | ( | ) | ||||
Acquisition of shares, 2018, 161 shares; 2017, 0 shares | ( | ) | ||||||
Ending balance, 2018, 24,721,533 shares; 2017, 24,672,932 shares | ( | ) | ( | ) | ||||
Shareholders’ equity at end of period | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Cash flows - operating activities | ||||||||
Premiums collected | $ | $ | ||||||
Policyholder benefits paid | ( | ) | ( | ) | ||||
Policy acquisition and other operating expenses paid | ( | ) | ( | ) | ||||
Income taxes paid | ||||||||
Investment income collected | ||||||||
Interest expense paid | ( | ) | ( | ) | ||||
Other | ||||||||
Net cash provided by operating activities | ||||||||
Cash flows - investing activities | ||||||||
Fixed maturity securities | ||||||||
Purchases | ( | ) | ( | ) | ||||
Sales | ||||||||
Maturities, paydowns, calls and redemptions | ||||||||
Equity securities | ||||||||
Purchases | ( | ) | ( | ) | ||||
Sales and repayments | ||||||||
Purchase of other invested assets | ( | ) | ( | ) | ||||
Net cash provided by (used in) short-term and other investments | ( | ) | ||||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows - financing activities | ||||||||
Dividends paid to shareholders | ( | ) | ( | ) | ||||
Acquisition of treasury stock | ( | ) | ||||||
Proceeds from exercise of stock options | ||||||||
Withholding tax payments on RSUs tendered | ( | ) | ( | ) | ||||
Annuity contracts: variable, fixed and FHLB funding agreements | ||||||||
Deposits | ||||||||
Benefits, withdrawals and net transfers to Separate Account (variable annuity) assets | ( | ) | ( | ) | ||||
Life policy accounts | ||||||||
Deposits | ||||||||
Withdrawals and surrenders | ( | ) | ( | ) | ||||
Change in bank overdrafts | ( | ) | ||||||
Net cash (used in) provided by financing activities | ( | ) | ||||||
Net increase (decrease) in cash | ( | ) | ||||||
Cash at beginning of period | ||||||||
Cash at end of period | $ | $ | ||||||
($ in thousands) | March 31, 2018 | December 31, 2017 | ||||||
Investment contract reserves | $ | $ | ||||||
Life policy reserves | ||||||||
Total | $ | $ | ||||||
($ in thousands) | Net Unrealized Investment Gains and Losses on Securities (1)(2) | Defined Benefit Plans (1) | Total (1) | |||||||||
Beginning balance, January 1, 2018 | $ | $ | ( | ) | $ | |||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ||||||||||||
Cumulative effect of change in accounting principle (3) | ( | ) | ( | ) | ||||||||
Net current period other comprehensive income (loss) | ( | ) | ( | ) | ||||||||
Ending balance, March 31, 2018 | $ | $ | ( | ) | $ | |||||||
Beginning balance, January 1, 2017 | $ | $ | ( | ) | $ | |||||||
Other comprehensive income (loss) before reclassifications | ||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ||||||||||||
Net current period other comprehensive income (loss) | ||||||||||||
Ending balance, March 31, 2017 | $ | $ | ( | ) | $ | |||||||
(1) | All amounts are net of tax. |
(2) | The pretax amounts reclassified from accumulated other comprehensive income (loss), $( |
(3) |
($ in thousands) | Amortized Cost/Cost | Unrealized Investment Gains | Unrealized Investment Losses | Fair Value | OTTI in AOCI (2) | |||||||||||||||
March 31, 2018 (1) | ||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||
U.S. Government and federally sponsored agency obligations (3): | ||||||||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | |||||||||||||||
Other, including U.S. Treasury securities | ||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||
Foreign government bonds | ||||||||||||||||||||
Corporate bonds | ||||||||||||||||||||
Other mortgage-backed securities | ||||||||||||||||||||
Totals | $ | $ | $ | $ | $ | |||||||||||||||
December 31, 2017 | ||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||
U.S. Government and federally sponsored agency obligations (3): | ||||||||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | |||||||||||||||
Other, including U.S. Treasury securities | ||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||
Foreign government bonds | ||||||||||||||||||||
Corporate bonds | ||||||||||||||||||||
Other mortgage-backed securities | ||||||||||||||||||||
Totals | $ | $ | $ | $ | $ | |||||||||||||||
Equity securities (4) | $ | $ | $ | $ | $ | |||||||||||||||
(1) | Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, available for sale equity securities were reclassified to equity securities at fair value and are excluded from the table above as of March 31, 2018. |
(2) | Related to securities for which an unrealized loss was bifurcated to distinguish the credit-related portion and the portion driven by other market factors. Represents the amount of OTTI losses in AOCI which was not included in earnings; amounts also include net unrealized investment gains and losses on such impaired securities relating to changes in the fair value of those securities subsequent to the impairment measurement date. |
(3) | Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $ |
(4) | Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds. |
($ in thousands) | 12 Months or Less | More than 12 Months | Total | |||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
March 31, 2018 (1) | ||||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||||
U.S. Government and federally sponsored agency obligations: | ||||||||||||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Other | ||||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||||
Foreign government bonds | ||||||||||||||||||||||||
Corporate bonds | ||||||||||||||||||||||||
Other mortgage-backed securities | ||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Number of positions with a gross unrealized loss | ||||||||||||||||||||||||
Fair value as a percentage of total fixed maturity securities fair value | % | % | % | |||||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||||
U.S. Government and federally sponsored agency obligations: | ||||||||||||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Other | ||||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||||
Foreign government bonds | ||||||||||||||||||||||||
Corporate bonds | ||||||||||||||||||||||||
Other mortgage-backed securities | ||||||||||||||||||||||||
Total fixed maturity securities | ||||||||||||||||||||||||
Equity securities (2) | ||||||||||||||||||||||||
Combined totals | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Number of positions with a gross unrealized loss | ||||||||||||||||||||||||
Fair value as a percentage of total fixed maturity and equity securities fair value | % | % | % | |||||||||||||||||||||
(1) | Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, available for sale equity securities were reclassified to equity securities at fair value and are excluded from the table above as of March 31, 2018. |
(2) | Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds. |
($ in thousands) | Three Months Ended March 31, | |||||||
2018 | 2017 | |||||||
Cumulative credit loss (1) | ||||||||
Beginning of period | $ | $ | ||||||
New credit losses | ||||||||
Increases to previously recognized credit losses | ||||||||
Gains (losses) related to securities sold or paid down during the period | ( | ) | ||||||
End of period | $ | $ | ||||||
(1) |
($ in thousands) | Percent of Total Fair Value | March 31, 2018 | ||||||||||||
March 31, 2018 | December 31, 2017 | Fair Value | Amortized Cost | |||||||||||
Estimated expected maturity: | ||||||||||||||
Due in 1 year or less | % | % | $ | $ | ||||||||||
Due after 1 year through 5 years | ||||||||||||||
Due after 5 years through 10 years | ||||||||||||||
Due after 10 years through 20 years | ||||||||||||||
Due after 20 years | ||||||||||||||
Total | % | % | $ | $ | ||||||||||
Average option-adjusted duration, in years | ||||||||||||||
($ in thousands) | Three Months Ended March 31, | |||||||
2018 | 2017 | |||||||
Fixed maturity securities | ||||||||
Proceeds received | $ | $ | ||||||
Gross gains realized | ||||||||
Gross losses realized | ( | ) | ( | ) | ||||
Equity securities | ||||||||
Proceeds received | $ | $ | ||||||
Gross gains realized | ||||||||
Gross losses realized | ( | ) | ( | ) | ||||
($ in thousands) | Three Months Ended March 31, | ||||||||
2018 | 2017 | ||||||||
Impairment write-downs | $ | $ | ( | ) | |||||
Change in intent write-downs | ( | ) | ( | ) | |||||
Net other-than-temporary impairment losses recognized in earnings | ( | ) | — | ( | ) | ||||
Sales and other | |||||||||
Change in fair value - equity securities (1) | ( | ) | |||||||
Change in fair value and gains (losses) realized on settlements - derivative instruments | |||||||||
Net investment gains (losses) | $ | ( | ) | — | $ | ( | ) | ||
(1) |
($ in thousands) | Three Months Ended March 31, | ||||||||
2018 | 2017 | ||||||||
Net unrealized investment gains and losses on securities, net of tax | |||||||||
Beginning of period | $ | $ | |||||||
Change in net unrealized investment gains and losses | ( | ) | |||||||
Reclassification of net investments (gains) losses to net income | |||||||||
Reclassification of unrealized gains on equity securities, net of tax, to Retained earnings (1) | ( | ) | |||||||
End of period | $ | $ | |||||||
(1) |
($ in thousands) | Gross Amounts Offset in the | Net Amounts of Assets/ Liabilities Presented in the | Gross Amounts Not Offset in the Consolidated Balance Sheets | |||||||||||||||||||||
Gross Amounts | Consolidated Balance Sheets | Consolidated Balance Sheets | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||||||||
March 31, 2018 | ||||||||||||||||||||||||
Asset derivatives: | ||||||||||||||||||||||||
Free-standing derivatives | $ | $ | $ | $ | $ | $ | ( | ) | ||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||||
Asset derivatives: | ||||||||||||||||||||||||
Free-standing derivatives | $ | $ | $ | $ | $ | $ | ( | ) | ||||||||||||||||
($ in thousands) | Fair Value Measurements at | |||||||||||||||||||||
Carrying | Fair | Reporting Date Using | ||||||||||||||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
March 31, 2018 | ||||||||||||||||||||||
Financial Assets | ||||||||||||||||||||||
Investments | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
U.S. Government and federally sponsored agency obligations: | ||||||||||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | |||||||||||||||||
Other, including U.S. Treasury securities | ||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||
Foreign government bonds | ||||||||||||||||||||||
Corporate bonds | ||||||||||||||||||||||
Other mortgage-backed securities | ||||||||||||||||||||||
Total fixed maturity securities | ||||||||||||||||||||||
Equity securities | — | — | ||||||||||||||||||||
Short-term investments | ||||||||||||||||||||||
Other investments | ||||||||||||||||||||||
Totals | $ | $ | $ | $ | $ | |||||||||||||||||
Financial Liabilities | ||||||||||||||||||||||
Investment contract and life policy reserves, embedded derivatives | $ | $ | $ | $ | $ | |||||||||||||||||
Other policyholder funds, embedded derivatives | ||||||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||
Financial Assets | ||||||||||||||||||||||
Investments | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
U.S. Government and federally sponsored agency obligations: | ||||||||||||||||||||||
Mortgage-backed securities | $ | $ | $ | $ | $ | |||||||||||||||||
Other, including U.S. Treasury securities | ||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||
Foreign government bonds | ||||||||||||||||||||||
Corporate bonds | ||||||||||||||||||||||
Other mortgage-backed securities | ||||||||||||||||||||||
Total fixed maturity securities | ||||||||||||||||||||||
Equity securities | ||||||||||||||||||||||
Short-term investments | ||||||||||||||||||||||
Other investments | ||||||||||||||||||||||
Totals | $ | $ | $ | $ | $ | |||||||||||||||||
Financial Liabilities | ||||||||||||||||||||||
Investment contract and life policy reserves, embedded derivatives | $ | $ | $ | $ | $ | |||||||||||||||||
Other policyholder funds, embedded derivatives | ||||||||||||||||||||||
($ in thousands) | Financial Assets | Financial Liabilities(1) | ||||||||||||||||||||||||||||||
Municipal Bonds | Corporate Bonds | Other Mortgage- Backed Securities (2) | Total Fixed Maturity Securities | Equity Securities | Short-term Investments | Total | ||||||||||||||||||||||||||
Beginning balance, January 1, 2018 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Transfers into Level 3 (3) | ||||||||||||||||||||||||||||||||
Transfers out of Level 3 (3) | ||||||||||||||||||||||||||||||||
Total gains or losses | ||||||||||||||||||||||||||||||||
Net investment gains (losses) included in net income related to financial assets | — | |||||||||||||||||||||||||||||||
Net (gains) losses included in net income related to financial liabilities | — | — | — | — | — | — | ( | ) | ||||||||||||||||||||||||
Net unrealized investment gains (losses) included in OCI | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Purchases | ||||||||||||||||||||||||||||||||
Issuances | ||||||||||||||||||||||||||||||||
Sales | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Settlements | ||||||||||||||||||||||||||||||||
Paydowns, maturities and distributions | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Ending balance, March 31, 2018 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Beginning balance, January 1, 2017 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Transfers into Level 3 (3) | ||||||||||||||||||||||||||||||||
Transfers out of Level 3 (3) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Total gains or losses | ||||||||||||||||||||||||||||||||
Net investment gains (losses) included in net income related to financial assets | — | |||||||||||||||||||||||||||||||
Net (gains) losses included in net income related to financial liabilities | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Net unrealized investment gains (losses) included in OCI | ( | ) | ||||||||||||||||||||||||||||||
Purchases | ||||||||||||||||||||||||||||||||
Issuances | ||||||||||||||||||||||||||||||||
Sales | ||||||||||||||||||||||||||||||||
Settlements | ||||||||||||||||||||||||||||||||
Paydowns, maturities and distributions | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Ending balance, March 31, 2017 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) | Represents embedded derivatives, all related to the Company’s FIA products, reported in Other policyholder funds in the Company’s Consolidated Balance Sheets. |
(2) | Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other mortgage-backed securities. |
(3) |
($ in thousands) | Fair Value Measurements at | |||||||||||||||||||
Carrying | Fair | Reporting Date Using | ||||||||||||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
March 31, 2018 | ||||||||||||||||||||
Financial Assets | ||||||||||||||||||||
Investments | ||||||||||||||||||||
Other investments | $ | $ | $ | $ | $ | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Investment contract and life policy reserves, fixed annuity contracts | ||||||||||||||||||||
Investment contract and life policy reserves, account values on life contracts | ||||||||||||||||||||
Other policyholder funds | ||||||||||||||||||||
Long-term debt | ||||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||
Financial Assets | ||||||||||||||||||||
Investments | ||||||||||||||||||||
Other investments | $ | $ | $ | $ | $ | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Investment contract and life policy reserves, fixed annuity contracts | ||||||||||||||||||||
Investment contract and life policy reserves, account values on life contracts | ||||||||||||||||||||
Other policyholder funds | ||||||||||||||||||||
Long-term debt | ||||||||||||||||||||
($ in thousands) | March 31, 2018 | December 31, 2017 | ||||||
Assets | ||||||||
Derivative instruments, included in Short-term and other investments | $ | $ | ||||||
Liabilities | ||||||||
FIA - embedded derivatives, included in Other policyholder funds | $ | $ | ||||||
IUL - embedded derivatives, included in Investment contract and life policy reserves | ||||||||
($ in thousands) | Three Months Ended March 31, | ||||||||
2018 | 2017 | ||||||||
Change in fair value of derivatives (1): | |||||||||
Revenues | |||||||||
Net investment gains (losses) | $ | ( | ) | $ | |||||
Change in fair value of embedded derivatives: | |||||||||
Revenues | |||||||||
Net investment gains (losses) | $ | $ | ( | ) | |||||
(1) |
($ in thousands) | March 31, 2018 | December 31, 2017 | ||||||||||||||||||
Credit Rating | Notional | Fair | Notional | Fair | ||||||||||||||||
Counterparty | S&P | Moody's | Amount | Value | Amount | Value | ||||||||||||||
Bank of America, N.A. | A+ | Aa3 | $ | $ | $ | $ | ||||||||||||||
Barclays Bank PLC | A | A2 | ||||||||||||||||||
Citigroup Inc. | BBB+ | |||||||||||||||||||
Credit Suisse International | A | A1 | ||||||||||||||||||
Societe Generale | A | |||||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||||||
($ in thousands) | Three Months Ended March 31, | ||||||||
2018 | 2017 | ||||||||
Property and Casualty | |||||||||
Beginning gross reserves (1) | $ | $ | |||||||
Less: reinsurance recoverables | |||||||||
Net reserves, beginning of period (2) | |||||||||
Incurred claims and claim expenses: | |||||||||
Claims occurring in the current period | |||||||||
Decrease in estimated reserves for claims occurring in prior periods (3) | ( | ) | ( | ) | |||||
Total claims and claim expenses incurred (4) | |||||||||
Claims and claim expense payments for claims occurring during: | |||||||||
Current period | |||||||||
Prior periods | |||||||||
Total claims and claim expense payments | |||||||||
Net reserves, end of period (2) | |||||||||
Plus: reinsurance recoverables | |||||||||
Ending gross reserves (1) | $ | $ | |||||||
(1) | Unpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for Life and Retirement of $ |
(2) | Reserves net of anticipated reinsurance recoverables. |
(3) | Shows the amounts by which the Company decreased its reserves in each of the periods indicated for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs. |
(4) | Benefits, claims and settlement expenses as reported in the Consolidated Statements of Operations also include amounts for Life and Retirement of $ |
($ in thousands) | March 31, 2018 | December 31, 2017 | ||||||
Short-term debt: | ||||||||
Bank Credit Facility, expires July 30, 2019 | $ | $ | ||||||
Long-term debt: | ||||||||
4.50% Senior Notes, due December 1, 2025. Aggregate principal amount of $250,000 thousand less unaccrued discount of $532 thousand and $547 thousand (4.5% imputed rate) and unamortized debt issuance costs of $1,932 thousand and $1,984 thousand | ||||||||
Federal Home Loan Bank borrowing | ||||||||
Total | $ | $ | ||||||
($ in thousands) | Gross Amount | Ceded to Other Companies | Assumed from Other Companies | Net Amount | ||||||||||||
Three months ended March 31, 2018 | ||||||||||||||||
Premiums written and contract deposits (1) | $ | $ | $ | $ | ||||||||||||
Premiums and contract charges earned | ||||||||||||||||
Benefits, claims and settlement expenses | ||||||||||||||||
Three months ended March 31, 2017 | ||||||||||||||||
Premiums written and contract deposits (1) | $ | $ | $ | $ | ||||||||||||
Premiums and contract charges earned | ||||||||||||||||
Benefits, claims and settlement expenses | ||||||||||||||||
(1) |
($ in thousands) | Three Months Ended March 31, | ||||||||
2018 | 2017 | ||||||||
Insurance premiums and contract charges earned | |||||||||
Property and Casualty | $ | $ | |||||||
Retirement | |||||||||
Life | |||||||||
Total | $ | $ | |||||||
Net investment income | |||||||||
Property and Casualty | $ | $ | |||||||
Retirement | |||||||||
Life | |||||||||
Corporate and Other | |||||||||
Intersegment eliminations | ( | ) | ( | ) | |||||
Total | $ | $ | |||||||
Net income (loss) | |||||||||
Property and Casualty | $ | $ | |||||||
Retirement | |||||||||
Life | |||||||||
Corporate and Other | ( | ) | ( | ) | |||||
Total | $ | $ | |||||||
($ in thousands) | March 31, 2018 | December 31, 2017 | ||||||
Assets | ||||||||
Property and Casualty | $ | $ | ||||||
Retirement | ||||||||
Life | ||||||||
Corporate and Other | ||||||||
Intersegment eliminations | ( | ) | ( | ) | ||||
Total | $ | $ | ||||||
($ in millions) | Three Months Ended March 31, | Change From Prior Year | |||||||||||||
2018 | 2017 | Percent | Amount | ||||||||||||
Insurance premiums written and contract deposits (includes annuity and life contract deposits) | |||||||||||||||
Property and Casualty | $ | 159.4 | $ | 152.9 | 4.3 | % | $ | 6.5 | |||||||
Retirement (annuity) | 98.8 | 117.3 | -15.8 | % | (18.5 | ) | |||||||||
Life | 25.8 | 26.5 | -2.6 | % | (0.7 | ) | |||||||||
Total | $ | 284.0 | $ | 296.7 | -4.3 | % | $ | (12.7 | ) | ||||||
Insurance premiums and contract charges earned (excludes annuity and life contract deposits) | |||||||||||||||
Property and Casualty | $ | 165.5 | $ | 158.3 | 4.5 | % | $ | 7.2 | |||||||
Retirement (annuity) | 8.0 | 6.6 | 21.2 | % | 1.4 | ||||||||||
Life | 29.5 | 30.8 | -4.2 | % | (1.3 | ) | |||||||||
Total | $ | 203.0 | $ | 195.7 | 3.7 | % | $ | 7.3 | |||||||
March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||
Property and Casualty | ||||||
Automobile | 474,478 | 478,951 | 483,683 | |||
Property and other liability | 215,809 | 216,306 | 219,017 | |||
Total | 690,287 | 695,257 | 702,700 | |||
Retirement | 223,472 | 223,287 | 220,284 | |||
Life | 197,885 | 197,889 | 197,900 | |||
($ in millions) | March 31, 2018 | ||||||||||||||
Number of Issuers | Fair Value | Amortized Cost | Pretax Net Unrealized Investment Gain (Loss) | ||||||||||||
Fixed maturity securities | |||||||||||||||
Corporate bonds | |||||||||||||||
Banking & Finance | 117 | $ | 653.6 | $ | 634.3 | $ | 19.3 | ||||||||
Insurance | 56 | 267.2 | 248.2 | 19.0 | |||||||||||
Energy (1) | 58 | 203.8 | 195.7 | 8.1 | |||||||||||
Real Estate | 44 | 188.6 | 184.3 | 4.3 | |||||||||||
Technology | 34 | 172.5 | 170.4 | 2.1 | |||||||||||
HealthCare, Pharmacy | 49 | 160.6 | 155.5 | 5.1 | |||||||||||
Utilities | 40 | 132.4 | 117.4 | 15.0 | |||||||||||
Transportation | 36 | 130.6 | 127.0 | 3.6 | |||||||||||
Telecommunications | 19 | 81.7 | 76.4 | 5.3 | |||||||||||
Natural Gas | 16 | 73.6 | 71.3 | 2.3 | |||||||||||
All other corporates (2) | 185 | 416.8 | 403.2 | 13.6 | |||||||||||
Total corporate bonds | 654 | 2,481.4 | 2,383.7 | 97.7 | |||||||||||
Mortgage-backed securities | |||||||||||||||
U.S. Government and federally sponsored agencies | 236 | 431.4 | 416.0 | 15.4 | |||||||||||
Commercial (3) | 141 | 612.7 | 621.5 | (8.8 | ) | ||||||||||
Other | 29 | 84.5 | 84.4 | 0.1 | |||||||||||
Municipal bonds (4) | 403 | 1,861.3 | 1,721.0 | 140.3 | |||||||||||
Government bonds | |||||||||||||||
U.S. | 41 | 762.0 | 760.4 | 1.6 | |||||||||||
Foreign | 16 | 99.0 | 94.8 | 4.2 | |||||||||||
Collateralized loan obligations (5) | 125 | 646.0 | 644.1 | 1.9 | |||||||||||
Asset-backed securities | 111 | 656.4 | 647.7 | 8.7 | |||||||||||
Total fixed maturity securities | 1,756 | $ | 7,634.7 | $ | 7,373.6 | $ | 261.1 | ||||||||
Equity securities | |||||||||||||||
Non-redeemable preferred stocks | 12 | $ | 59.2 | ||||||||||||
Common stocks | 93 | 52.4 | |||||||||||||
Closed-end fund | 1 | 19.4 | |||||||||||||
Total equity securities | 106 | $ | 131.0 | ||||||||||||
Total | 1,862 | $ | 7,765.7 | ||||||||||||
(1) | At March 31, 2018, the fair value amount included $13.6 million which were non-investment grade. |
(2) | The All other corporates category contains 19 additional industry sectors. Gaming, broadcasting and media, food and beverage, metal and mining and retail represented $269.3 million of fair value at March 31, 2018, with the remaining 14 classification each representing less than $28.6 million. |
(3) | At March 31, 2018, 100% were investment grade, with an overall credit rating of AA, and the positions were well diversified by property type, geography and sponsor. |
(4) | Holdings are geographically diversified, 39.3% are tax-exempt and 77.8% are revenue bonds tied to essential services, such as mass transit, water and sewer. The overall credit quality of the municipal bond portfolio was AA- at March 31, 2018. |
(5) | Based on fair value, 97.1% of the collateralized debt obligation securities were rated investment grade by Standard and Poor’s Corporation (S&P), Moody’s Investors Service, Inc. (Moody’s) and/or Fitch Ratings (Fitch) at March 31, 2018. |
($ in millions) | Percent of Portfolio | |||||||||||||
Fair Value | March 31, 2018 | |||||||||||||
December 31, 2017 | March 31, 2018 | Fair Value | Amortized Cost | |||||||||||
Fixed maturity securities | ||||||||||||||
AAA | 7.4 | % | 7.8 | % | $ | 592.5 | $ | 583.2 | ||||||
AA (2) | 40.4 | 41.0 | 3,132.8 | 3,043.5 | ||||||||||
A | 23.8 | 23.4 | 1,784.5 | 1,695.8 | ||||||||||
BBB | 24.8 | 24.3 | 1,858.3 | 1,792.3 | ||||||||||
BB | 2.2 | 2.2 | 170.7 | 169.6 | ||||||||||
B | 0.6 | 0.5 | 41.1 | 40.9 | ||||||||||
CCC or lower | 0.1 | 0.1 | 1.1 | 1.1 | ||||||||||
Not rated (3) | 0.7 | 0.7 | 53.7 | 47.2 | ||||||||||
Total fixed maturity securities | 100.0 | % | 100.0 | % | $ | 7,634.7 | $ | 7,373.6 | ||||||
Equity securities | ||||||||||||||
AAA | — | — | — | |||||||||||
AA | — | — | — | |||||||||||
A | — | — | — | |||||||||||
BBB | 45.4 | % | 45.2 | % | $ | 59.2 | ||||||||
BB | — | — | — | |||||||||||
B | — | — | — | |||||||||||
CCC or lower | — | — | — | |||||||||||
Not rated | 54.6 | 54.8 | 71.8 | |||||||||||
Total equity securities | 100.0 | % | 100.0 | % | $ | 131.0 | ||||||||
Total | $ | 7,765.7 | ||||||||||||
(1) | Ratings are as assigned primarily by S&P when available, with remaining ratings as assigned on an equivalent basis by Moody’s or Fitch. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings. |
(2) | At March 31, 2018, the AA rated fair value amount included $762.0 million of U.S. Government and federally sponsored agency securities and $619.7 million of mortgage- and asset-backed securities issued by U.S. Government and federally sponsored agencies. |
(3) | This category primarily represents private placement and municipal securities not rated by either S&P, Moody’s or Fitch. |
($ in millions) | Three Months Ended March 31, | Change From Prior Year | |||||||||||||
2018 | 2017 | Percent | Amount | ||||||||||||
Property and Casualty | $ | 120.7 | $ | 122.2 | -1.2 | % | $ | (1.5 | ) | ||||||
Retirement | 1.9 | 1.1 | 72.7 | % | 0.8 | ||||||||||
Life | 21.0 | 20.8 | 1.0 | % | 0.2 | ||||||||||
Total | $ | 143.6 | $ | 144.1 | -0.3 | % | $ | (0.5 | ) | ||||||
Property and Casualty catastrophe losses, included above | $ | 9.8 | $ | 17.2 | -43.0 | % | $ | (7.4 | ) | ||||||
($ in millions) | Three Months Ended March 31, | |||||||
2018 | 2017 | |||||||
Incurred claims and claim expenses: | ||||||||
Claims occurring in the current year | $ | 121.0 | $ | 123.2 | ||||
Decrease in estimated reserves for claims occurring in prior years | (0.3 | ) | (1.0 | ) | ||||
Total claims and claim expenses incurred | $ | 120.7 | $ | 122.2 | ||||
Property and Casualty loss ratio: | ||||||||
Total | 72.9 | % | 77.2 | % | ||||
Effect of catastrophe losses, included above | 5.9 | % | 10.8 | % | ||||
Effect of prior years’ reserve development, included above | -0.2 | % | -0.6 | % | ||||
($ in millions) | Three Months Ended March 31, | Change From Prior Year | |||||||||||||
2018 | 2017 | Percent | Amount | ||||||||||||
Retirement (annuity) | $ | 38.7 | $ | 37.5 | 3.2 | % | $ | 1.2 | |||||||
Life | 11.3 | 11.2 | 0.9 | % | 0.1 | ||||||||||
Total | $ | 50.0 | $ | 48.7 | 2.7 | % | $ | 1.3 | |||||||
($ in millions) | March 31, 2018 | ||||||||||||||||
Deferred Annuities at | |||||||||||||||||
Total Deferred Annuities | Minimum Guaranteed Rate | ||||||||||||||||
Percent of Total | Accumulated Value (AV) | Percent of Total Deferred Annuities AV | Percent of Total | Accumulated Value | |||||||||||||
Minimum guaranteed interest rates: | |||||||||||||||||
Less than 2% | 25.3 | % | $ | 1,114.2 | 56.8 | % | 16.4 | % | $ | 632.7 | |||||||
Equal to 2% but less than 3% | 7.0 | 306.0 | 83.0 | % | 6.5 | 253.9 | |||||||||||
Equal to 3% but less than 4% | 14.0 | 614.3 | 99.9 | % | 15.9 | 613.8 | |||||||||||
Equal to 4% but less than 5% | 52.5 | 2,311.1 | 100.0 | % | 59.8 | 2,311.2 | |||||||||||
5% or higher | 1.2 | 53.5 | 100.0 | % | 1.4 | 53.5 | |||||||||||
Total | 100.0 | % | $ | 4,399.1 | 87.9 | % | 100.0 | % | $ | 3,865.1 | |||||||
($ in millions) | Three Months Ended March 31, | Change From Prior Year | |||||||||||||
2018 | 2017 | Percent | Amount | ||||||||||||
Analysis of net income (loss) by segment: | |||||||||||||||
Property and Casualty | $ | 9.7 | $ | 2.7 | 259.3 | % | $ | 7.0 | |||||||
Retirement | 11.4 | 11.5 | -0.9 | % | (0.1 | ) | |||||||||
Life | 3.8 | 3.9 | -2.6 | % | (0.1 | ) | |||||||||
Corporate and Other (1) | (4.7 | ) | (2.8 | ) | -67.9 | % | (1.9 | ) | |||||||
Net income | $ | 20.2 | $ | 15.3 | 32.0 | % | $ | 4.9 | |||||||
Effect of catastrophe losses, after tax, included above | $ | (7.7 | ) | $ | (11.1 | ) | -30.6 | % | $ | 3.4 | |||||
Effect of net investment gains (losses), after tax, included above | $ | (1.3 | ) | $ | (0.1 | ) | N.M. | $ | (1.2 | ) | |||||
Diluted: | |||||||||||||||
Net income per share | $ | 0.48 | $ | 0.37 | 29.7 | % | $ | 0.11 | |||||||
Weighted average number of common and common equivalent shares (in millions) | 41.7 | 41.3 | 1.0 | % | 0.4 | ||||||||||
Property and casualty combined ratio: | |||||||||||||||
Total | 98.9 | % | 105.5 | % | - | -6.6 pts | |||||||||
Effect of catastrophe losses, included above | 5.9 | % | 10.8 | % | - | -4.9 pts | |||||||||
Effect of prior years’ reserve development,included above | -0.2 | % | -0.6 | % | - | 0.4 pts | |||||||||
(1) | Corporate and Other includes interest expense on corporate debt, net investment gains and losses, corporate debt retirement costs, certain public company expenses and other corporate-level items. The Company does not allocate the impact of corporate-level transactions to the operating segments, consistent with the basis for management’s evaluation of the results of those segments. |
Insurance Financial | ||||||||
Strength Ratings (Outlook) | Debt Ratings (Outlook) | |||||||
As of April 30, 2018 | ||||||||
S&P | A | (stable) | BBB | (stable) | ||||
Moody’s | ||||||||
Horace Mann Life Insurance Company | A3 | (positive) | N.A. | |||||
HMEC’s Property and Casualty subsidiaries | A3 | (positive) | N.A. | |||||
HMEC | N.A. | Baa3 | (positive) | |||||
A.M. Best | A | (stable) | bbb | (stable) | ||||
Fitch | A | (stable) | BBB | (stable) | ||||
• | It could inhibit our ability to sell and service IRAs, resulting in a change and/or a reduction of the types of products we offer for IRAs, and impact our relationship with current clients. |
• | It could require changes in the way that we compensate our agents, thereby impacting our agents' business model. |
• | It could require changes in our distribution model for financial services products and could result in a decrease in the number of our agents. |
• | It could increase our costs of doing IRA business and increase our litigation and regulatory risks. |
• | It could increase the cost and complexity of regulatory compliance for our Retirement segment's products. |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under The Plans or Programs | |||||||
January 1 - 31 | — | — | — | $27.8 million | |||||||
February 1 - 28 | 161 | $37.50 | 161 | $27.8 million | |||||||
March 1 - 31 | — | — | — | $27.8 million | |||||||
Total | 161 | $37.50 | 161 | $27.8 million | |||||||
Exhibit | ||
No. | Description | |
(3) Articles of incorporation and bylaws: | ||
3.1 | ||
3.2 | ||
(4) Instruments defining the rights of security holders, including indentures: | ||
4.1 | ||
4.1(a) | ||
4.2 | ||
(10) Material contracts: | ||
10.1 | ||
10.1(a) | ||
10.1(b) | ||
10.2* | ||
10.2(a)* | ||
10.2(b)* | ||
10.2(c)* | ||
10.2(d)* | ||
10.2(e)* | ||
10.3* | ||
10.3(a)* | ||
10.3(b)* | ||
10.3(c)* | ||
10.3(d)* | ||
10.3(e)* | ||
10.3(f)* | ||
10.3(g)* | ||
10.4* | ||
10.5* | ||
10.6* | ||
10.7* | ||
10.8* | ||
10.9* | ||
10.9(a)* | ||
10.10* | ||
10.10(a)* | ||
10.11* | ||
10.11(a)* | ||
10.11(b)* | ||
(31) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002: | ||
31.1 | ||
31.2 | ||
(32) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002: | ||
32.1 | ||
32.2 | ||
(99) Additional exhibits: | ||
99.1 | ||
(101) Interactive Data File: | ||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
HORACE MANN EDUCATORS CORPORATION | |||
(Registrant) | |||
Date | May 9, 2018 | /s/ Marita Zuraitis | |
Marita Zuraitis | |||
President and Chief Executive Officer | |||
Date | May 9, 2018 | /s/ Bret A. Conklin | |
Bret A. Conklin | |||
Executive Vice President and | |||
Chief Financial Officer | |||
Date | May 9, 2018 | /s/ Kimberly A. Johnson | |
Kimberly A. Johnson | |||
Vice President, Controller and | |||
Principal Accounting Officer | |||
Compensation Element | Non-Employee Director Compensation (1)(2) | |
Board Chairman Annual Retainer | $115,000 | |
Board Member Annual Retainer (other than Board Chairman) | $60,000 | |
Committee Chairman Annual Retainer | $25,000 Audit Committee $15,000 Compensation Committee $15,000 Customer Experience & Technology Committee $15,000 Investment & Finance Committee $12,000 Nominating & Governance Committee | |
Committee Member Annual Retainer (other than Committee Chairman) | $10,000 Audit Committee $ 7,500 all other Committees (3) | |
Share-based Compensation | Fair value on the date of the respective awards is used to determine the number of Restricted Stock Units (“RSUs”) awarded. An annual award of $95,000 in RSUs following the Annual Shareholder Meeting. $95,000 in RSUs if joining the Board within 6 months after the prior Annual Shareholder Meeting, $47,500 in RSUs if joining more than 6 months after the prior Annual Shareholder Meeting but before the next Annual Shareholder Meeting. All awards have a 1 year vesting period. | |
Basic Group Term Life Insurance | Premium for $10,000 face amount | |
Business Travel Accident Insurance | Premium for $100,000 coverage | |
(1) | Annual retainer fees are paid following the Annual Shareholder Meeting each year. The annual retainer fees are prorated to the extent that a non-employee Director joins the Board after the Annual Shareholder Meeting. |
(2) | Non-employee Directors may elect to defer cash compensation into RSUs. |
(3) | All other Committees except for the Executive Committee which is not paid an Annual Retainer. |
Named Executive Officer | Annualized Salary |
Marita Zuraitis President and Chief Executive Officer | $900,000 |
Bret A. Conklin Executive Vice President and Chief Financial Officer | $350,000 |
Matthew P. Sharpe Executive Vice President, Strategy & Business Development | $425,000 |
William J. Caldwell Executive Vice President, Property & Casualty | $385,000 |
Donald M. Carley Senior Vice President, General Counsel, Corporate Secretary, and Chief Compliance Officer | $320,000 |
Note: The effective date of entry shall be subject to Section 4.2(a) | ||
NAME OR TITLE | EFFECTIVE DATE OF | |
PARTICIPATION* | ||
TIER I PARTICIPANTS | ||
President and CEO | May 16, 2013 | |
TIER II PARTICIPANTS | ||
EVP and CFO | May 23, 2017 | |
EVP, Strategy & Business Development | February 15, 2012 | |
EVP, Property & Casualty | July 1, 2015 | |
TIER III PARTICIPANTS | ||
SVP, General Counsel, Corporate Secretary | ||
and Chief Compliance Officer | January 30, 2016 | |
*Subject to acceptance within 30 days of effective date of participation. | ||
NAME OR TITLE | EFFECTIVE DATE OF | |
PARTICIPATION* | ||
TIER I PARTICIPANTS | ||
President and CEO | May 16, 2013 | |
TIER II PARTICIPANTS | ||
EVP and CFO | May 23, 2017 | |
EVP, Strategy & Business Development | February 15, 2012 | |
EVP, Property & Casualty | July 1, 2015 | |
TIER III PARTICIPANTS | ||
SVP, General Counsel, Corporate Secretary | January 30, 2016 | |
and Chief Compliance Officer | ||
*Subject to acceptance within 30 days of effective date of participation. | ||
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Basic: | ||||||||
Net income | $ | 20,155 | $ | 15,318 | ||||
Weighted average number of common shares during the period (in thousands) | 41,497 | 41,135 | ||||||
Net income per share – basic | $ | 0.49 | $ | 0.37 | ||||
Diluted: | ||||||||
Net income | $ | 20,155 | $ | 15,318 | ||||
Weighted average number of common shares during the period | 41,497 | 41,135 | ||||||
Weighted average number of common equivalent shares to reflect the dilutive effect of common stock equivalent securities: | ||||||||
Stock options | 115 | 195 | ||||||
Common stock units related to deferred compensation for employees | 25 | 29 | ||||||
Restricted common stock units related to incentive compensation | 16 | (17 | ) | |||||
Total common and common equivalent shares adjusted to calculate diluted earnings per share | 41,653 | 41,342 | ||||||
Net income per share – diluted | $ | 0.48 | $ | 0.37 | ||||
/s/ KPMG LLP | |
KPMG LLP | |
Chicago, Illinois | |
May 9, 2018 | |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Marita Zuraitis | ||
Marita Zuraitis, Chief Executive Officer | ||
Horace Mann Educators Corporation | ||
Date: | May 9, 2018 | |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Bret A. Conklin | ||
Bret A. Conklin, Chief Financial Officer | ||
Horace Mann Educators Corporation | ||
Date: | May 9, 2018 | |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Marita Zuraitis | ||
Marita Zuraitis | ||
Chief Executive Officer | ||
Date: | May 9, 2018 | |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Bret A. Conklin | ||
Bret A. Conklin | ||
Chief Financial Officer | ||
Date: | May 9, 2018 | |
• | Pretax core earnings - Pretax net income (loss) excluding pretax impact of net investment gains (losses), discontinued operations, and cumulative effect of changes in accounting principles when applicable. Net income is the most comparable GAAP measure. |
• | Segment core earnings - Determined in the same manner as core earnings on a consolidated basis. Management uses segment core earnings to analyze each segment's performance and as a tool in making business decisions. Financial statement users also consider core earnings when analyzing the results and trends of insurance companies. |
• | Net income return on equity excluding net unrealized investment gains and losses on securities and the effect of a change in tax laws and tax rates at enactment date - The ratio of (1) trailing 12 month net income excluding the effect of a change in tax laws and tax rates at enactment date to (2) 5 quarter average shareholders' equity excluding net unrealized investment gains and losses on securities and the effect of a change in tax laws and tax rates at enactment date. Net income return on equity is the most comparable GAAP measure. |
• | Core return on equity - The ratio of (1) trailing 12 month core earnings to (2) 5 quarter average shareholders' equity excluding the effect of a change in tax laws and tax rates at enactment date. Net income return on equity is the most comparable GAAP measure. |
• | Core return on equity excluding net unrealized investment gains and losses on securities - The ratio of (1) trailing 12 month core earnings to (2) 5 quarter average shareholders’ equity excluding net unrealized investment gains and losses on securities and the effect of a change in tax laws and tax rates at enactment date. Net income return on equity is the most comparable GAAP measure. |
• | 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. |
• | Underlying loss ratio - The sum of the Loss Ratio adjusted to remove the effect of catastrophe costs and prior years' reserve development. The Loss 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. |
• | 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. |
• | Underlying combined ratio or combined ratio excluding catastrophe costs and prior years’ reserve development - 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. |
Document And Entity Information - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Apr. 30, 2018 |
|
| Document And Entity Information [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Mar. 31, 2018 | |
| Document Fiscal Year Focus | 2018 | |
| Document Fiscal Period Focus | Q1 | |
| Entity Registrant Name | HORACE MANN EDUCATORS CORP /DE/ | |
| Entity Central Index Key | 0000850141 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Trading Symbol | HMN | |
| Entity Common Stock, Shares Outstanding | 40,893,687 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Fixed maturities, available for sale, amortized cost (in usd) | $ 7,373,552 | $ 7,302,950 |
| Equity securities, available for sale, cost (in usd) | $ 116,320 | |
| Preferred stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 75,000,000 | 75,000,000 |
| Common stock, shares issued | 65,610,067 | 65,439,245 |
| Treasury stock (in shares) | 24,721,533 | 24,721,372 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Comprehensive income | ||
| Net income | $ 20,155 | $ 15,318 |
| Other comprehensive income, net of tax: | ||
| Change in net unrealized investment gains (losses) on securities | (107,096) | 22,533 |
| Change in net funded status of benefit plans | 0 | 0 |
| Cumulative effect of change in accounting principle | (15,041) | 0 |
| Other comprehensive income (loss) | (122,137) | 22,533 |
| Total | $ (101,982) | $ 37,851 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - $ / shares |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
| Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 | ||
| Treasury stock (in shares) | 24,721,533 | 24,721,372 | ||
| Common stock | ||||
| Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 | ||
| Options exercised (in shares) | 56,614 | 33,764 | ||
| Conversion of common stock units (in shares) | 11,804 | 15,981 | ||
| Conversion of restricted stock units (in shares) | 105,116 | 247,620 | ||
| Retained earnings | ||||
| Cash dividends (in usd per share) | $ 0.285 | $ 0.275 | ||
| Treasury stock, at cost | ||||
| Treasury stock (in shares) | 24,721,533 | 24,672,932 | 24,721,372 | 24,672,932 |
| Treasury stock, acquisitions (in shares) | 161 | 0 | ||
Basis of Presentation |
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | The accompanying unaudited consolidated financial statements of Horace Mann Educators Corporation (HMEC; and together with its subsidiaries, the Company or Horace Mann) have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) and with the rules and regulations of the Securities and Exchange Commission (SEC), specifically Regulation S-X and the instructions to Form 10-Q. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP, but are not required for interim reporting purposes, have been omitted. The Company believes that these consolidated financial statements contain all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the Company’s consolidated financial position as of March 31, 2018, the consolidated results of operations, comprehensive income, changes in shareholders’ equity and cash flows for the three month periods ended March 31, 2018 and 2017. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The subsidiaries of HMEC market and underwrite personal lines of property and casualty insurance products (primarily personal lines of automobile and property insurance), retirement products (primarily tax-qualified annuities) and life insurance, primarily to K-12 teachers, administrators and other employees of public schools and their families. HMEC’s principal operating subsidiaries are Horace Mann Life Insurance Company, Horace Mann Insurance Company, Teachers Insurance Company, Horace Mann Property & Casualty Insurance Company and Horace Mann Lloyds. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The results of operations for the three month period ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year. Investment Contract and Life Policy Reserves This table summarizes the Company’s investment contract and life policy reserves.
Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) (AOCI) represents the accumulated change in shareholders’ equity from transactions and other events and circumstances from non-shareholder sources. For the Company, AOCI includes the after tax change in net unrealized investment gains and losses on securities and the after tax change in net funded status of defined benefit plans for the periods as shown in the Consolidated Statement of Changes in Shareholders’ Equity. The following tables reconcile these components.
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Comparative information for elements that are not required to be reclassified in their entirety to net income in the same reporting period is located in Note 2 -- Investments -- Net Unrealized Investment Gains and Losses on Securities. Adopted Accounting Standards Revenue Recognition In May 2014, the FASB issued accounting guidance to provide a single comprehensive model in accounting for revenue arising from contracts with customers. The guidance applies to all contracts with customers; however, certain insurance contracts are specifically excluded from this updated guidance. The Company adopted the guidance on January 1, 2018, using the modified retrospective transition method. The guidance did not have an impact on the Company’s consolidated financial position, results of operations, cash flows, or disclosures. Recognition and Measurement of Financial Assets and Liabilities In January 2016, the FASB issued accounting guidance to improve certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. Among other things, the guidance revises the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The Company adopted the guidance on January 1, 2018 using the modified retrospective approach that resulted in reclassifying $15,041 thousand of after tax unrealized gains on equity securities from AOCI to Retained earnings. The Company's Consolidated Statements of Operations were impacted as changes in fair value of equity securities are now being reported in Net investment gains and losses instead of reported in other comprehensive income (loss) (OCI). Statement of Cash Flows -- Classification In August 2016, the FASB issued guidance to reduce diversity in practice in the statement of cash flows between operating, investing and financing activities related to the classification of cash receipts and cash payments for eight specific issues. The FASB acknowledged that current GAAP either is unclear or does not include specific guidance on these eight cash flow classification issues: (1) debt prepayment or extinguishment costs; (2) settlement of zero-coupon bonds (pertains to issuers); (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims (pertains to claimants); (5) proceeds from the settlement of corporate-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions (pertains to transferors) and (8) separately identifiable cash flows and application of the predominance principle. The Company adopted the guidance on January 1, 2018 using a retrospective approach which had no impact to the prior year amounts reported in the Consolidated Statement of Cash Flows. Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income On February 14, 2018, the FASB issued accounting guidance that permits recognition of a reclassification adjustment between AOCI and Retained earnings for stranded tax amounts related to the reduced corporate tax rate enacted under the Tax Act. As permitted under its provisions, the Company early adopted the accounting guidance effective for the quarterly period that ended December 31, 2017 and elected to reclassify the stranded tax amounts. The impact from early adoption resulted in an increase to AOCI and a reduction to Retained earnings of approximately $47,900 thousand; representing the stranded deferred tax liabilities of $50,034 thousand and $(2,134) thousand for Net unrealized investment gains and losses on securities and Defined benefit plans, respectively. Pending Accounting Standards Accounting for Leases In February 2016, the FASB issued accounting and disclosure guidance to improve financial reporting and comparability among organizations about leasing transactions. Under the new guidance, for leases with lease terms of more than 12 months, a lessee will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by those leases. Consistent with current accounting guidance, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or an operating lease. However, while current guidance requires only capital leases to be recognized on the balance sheet, the new guidance will require both operating and capital leases to be recognized on the balance sheet. In transition to the new guidance, companies are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those years. Early application is permitted. While the Company is in the process of evaluating the impact of the guidance, it does not expect the guidance to have a material impact on its consolidated financial statements, except for recognizing lease assets and lease liabilities for its operating leases. The Company's lease obligations under various non-cancellable operating lease agreements amounted to approximately $9,093 thousand at March 31, 2018. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued guidance to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments, including reinsurance receivables, held by companies. The new guidance replaces the incurred loss impairment methodology and requires an organization to measure and recognize all current expected credit losses (CECL) for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Companies will need to utilize forward-looking information to better inform their credit loss estimates. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Any credit losses related to available for sale debt securities will be recorded through an allowance for credit losses with this allowance having a limit equal to the amount by which fair value is below amortized cost. The guidance also requires enhanced qualitative and quantitative disclosures to provide additional information about the amounts recorded in the financial statements. For public business entities that are SEC filers, the guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, using a modified-retrospective approach. Early application is permitted for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company. Simplifying the Test for Goodwill Impairment |
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| Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments | The Company’s investment portfolio includes free-standing derivative financial instruments (currently over the counter index call option contracts) to economically hedge risk associated with its fixed indexed annuity (FIA) and indexed universal life (IUL) products’ contingent liabilities. The Company’s FIA and IUL products include embedded derivative features that are discussed in Note 1 -- Summary of Significant Accounting Policies -- Investment Contract and Life Policy Reserves -- Reserves for Fixed Indexed Annuities and Indexed Universal Life Policies of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The Company’s investment portfolio included no other free-standing derivative financial instruments (futures, forwards, swaps, option contracts or other financial instruments with similar characteristics), and there were no other embedded derivative features related to the Company’s investment or insurance products during the three month periods ended March 31, 2018 and 2017. Fixed Maturity Securities The Company’s investment portfolio is comprised primarily of fixed maturity securities. The amortized cost, net unrealized investment gains and losses, fair values and other-than-temporary impairment (OTTI) included in AOCI of all fixed maturity securities in the portfolio were as follows:
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The following table presents the fair value and gross unrealized losses of securities in an unrealized loss position at March 31, 2018 and December 31, 2017, respectively. The Company views the decrease in value of all of the securities with unrealized losses at March 31, 2018 -- which was driven largely by changes in interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition -- as temporary. For fixed maturity securities, management does not have the intent to sell the securities and it is not more likely than not the Company will be required to sell the securities before the anticipated recovery of the amortized cost bases, and management expects to recover the entire amortized cost bases of the fixed maturity securities. Therefore, no impairment of fixed maturity securities was recorded at March 31, 2018.
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Fixed maturity securities with an investment grade rating represented 95.3% of the gross unrealized losses as of March 31, 2018. With respect to fixed maturity securities involving securitized financial assets, the underlying collateral cash flows were stress tested to determine there was no adverse change in the present value of cash flows below the amortized cost basis. Credit Losses The following table summarizes the cumulative amounts related to the Company’s credit loss component of OTTI losses on fixed maturity securities held as of March 31, 2018 and 2017 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of OTTI losses were recognized in OCI:
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Maturities/Sales of Fixed Maturity Securities The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers’ utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
Sales of Fixed Maturity and Equity Securities Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were:
Net Investment Gains (Losses) The following table reconciles the net investment gains and losses (pretax) by transaction type:
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Net Unrealized Investment Gains and Losses on Securities The following table reconciles the net unrealized investment gains and losses, net of tax, included in AOCI, before the impact of deferred policy acquisition costs (DAC):
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Offsetting of Assets and Liabilities The Company’s derivative instruments (call options) are subject to enforceable master netting arrangements. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event minimum thresholds have been reached. The following table presents the instruments that were subject to a master netting arrangement for the Company.
Deposits |
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Fair Value of Financial Instruments |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Instruments | The Company is required under GAAP to disclose estimated fair values for certain financial and nonfinancial assets and liabilities. Fair values of the Company’s insurance contracts other than annuity contracts are not required to be disclosed. However, the estimated fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk through the matching of investment maturities with amounts due under insurance contracts. Information regarding the three-level hierarchy presented below and the valuation methodologies utilized by the Company to estimate fair values at a point in time is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, specifically in Note 3 -- Fair Value of Financial Instruments. Financial Instruments Measured and Carried at Fair Value The following table presents the Company’s fair value hierarchy for those assets and liabilities measured and carried at fair value on a recurring basis. At March 31, 2018, Level 3 invested assets comprised 3.0% of the Company’s total investment portfolio at fair value.
During the three month period ended March 31, 2018, there were no transfers between Level 1 and Level 2. During the three month period ended March 31, 2017, an equity security was transferred into Level 1 from Level 2 as a result of increased liquidity in the market and a sustained increase in the market activity for this asset. The following table presents reconciliations for the periods indicated for all Level 3 assets and liabilities measured at fair value on a recurring basis.
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At March 31, 2018, the Company realized a gain of $3 thousand on one Level 3 security. At March 31, 2017, there were no net investment gains or losses included in earnings that were attributable to changes in the fair value of Level 3 assets still held. For the three month periods ended March 31, 2018 and 2017, a net investment gain of $2,222 thousand and a net investment loss of $2,308 thousand, respectively, were included in earnings that were attributable to the changes in the fair value of Level 3 liabilities (embedded derivatives) still held. The valuation techniques and significant unobservable inputs used in the fair value measurement for financial assets and liabilities classified as Level 3 are subject to the control processes as described in Note 3 -- Fair Value of Financial Instruments -- Investments in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Generally, valuation techniques for fixed maturity securities include spread pricing, matrix pricing and discounted cash flow methodologies; include inputs such as quoted prices for identical or similar securities that are less liquid; and are based on lower levels of trading activity than securities classified as Level 2. The valuation techniques and significant unobservable inputs used in the fair value measurement for equity securities classified as Level 3 use similar valuation techniques and significant unobservable inputs as those used for fixed maturity securities. The sensitivity of the estimated fair values to changes in the significant unobservable inputs for fixed maturity and equity securities included in Level 3 generally relate to interest rate spreads, illiquidity premiums and default rates. Significant spread widening in isolation will adversely impact the overall valuation, while significant spread tightening will lead to substantial valuation increases. Significant increases (decreases) in illiquidity premiums in isolation will result in substantially lower (higher) valuations. Significant increases (decreases) in expected default rates in isolation will result in substantially lower (higher) valuations. Financial Instruments Not Carried at Fair Value; Disclosure Required The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. The following table presents the carrying value, fair value and fair value hierarchy of these financial assets and financial liabilities.
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Derivative Instruments |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments | The Company offers FIA products, which are deferred fixed annuities that guarantee the return of principal to the contractholder and credit interest based on a percentage of the gain in a specified market index. The Company also offers IUL products which credit interest based on a percentage of the gain in a specified market index. When deposits are received for FIA and IUL contracts, a portion is used to purchase derivatives consisting of call options on the applicable market indices to fund the index credits due to FIA and IUL policyholders. For the Company, substantially all of such call options are one-year options purchased to match the funding requirements of the underlying contracts. The call options are carried at fair value with changes in fair value included in Net investment gains and losses, a component of Revenues, in the Consolidated Statements of Operations. The change in fair value of derivatives includes the gains or losses recognized at the expiration of the option term or early termination and the changes in fair value for open positions. Call options are not purchased to fund the index liabilities which may arise after the next deposit anniversary date. On the respective anniversary dates of the indexed deposits, the index used to compute the annual index credit is reset and new one-year call options are purchased to fund the next annual index credit. The cost of these purchases is managed through the terms of the FIA and IUL contracts, which permit changes to index return caps, participation rates and/or asset fees, subject to guaranteed minimums on each contract’s anniversary date. By adjusting the index return caps, participation rates or asset fees, crediting rates generally can be managed except in cases where the contractual features would prevent further modifications. The future annual index credits on FIA contracts are treated as a "series of embedded derivatives" over the expected life of the applicable contract with a corresponding reserve recorded. For the IUL, the embedded derivative represents a single year liability for the index return. The Company carries all derivative instruments at fair value in the Consolidated Balance Sheets. The Company elected to not use hedge accounting for derivative transactions related to the FIA and IUL products. As a result, the Company recognizes the purchased call options and the embedded derivatives related to the provision of a contingent return at fair value, with changes in the fair value of the derivatives recognized immediately as Net investment gains (losses) in the Consolidated Statements of Operations. The fair values of derivative instruments, including derivative instruments embedded in FIA and IUL contracts, are presented in the Consolidated Balance Sheets as follows:
In general, the change in the fair value of the embedded derivatives related to FIA contracts will not correspond to the change in fair value of the purchased call options because the purchased call options are one-year options while the options valued in the embedded derivatives represent the rights of the policyholder to receive index credits over the entire period the FIA contracts are expected to be in force, which typically exceeds 10 years. The changes in fair value of derivatives included in the Consolidated Statements of Operations were as follows:
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The Company’s strategy attempts to mitigate potential risk of loss under these agreements through a regular monitoring process, which evaluates the program’s effectiveness. The Company is exposed to risk of loss in the event of nonperformance by the counterparties and, accordingly, option contracts are purchased from multiple counterparties, which are evaluated for creditworthiness prior to purchase of the contracts. All of these options have been purchased from nationally recognized financial institutions with a Standard and Poor’s Financial Services LLC (S&P) and/or Moody's Investors Service (Moody's) long-term credit rating of "BBB+" or higher at the time of purchase and the maximum credit exposure to any single counterparty is subject to concentration limits. The Company also obtains credit support agreements that allow it to request the counterparty to provide collateral when the fair value of the exposure to the counterparty exceeds specified amounts. The notional amount and fair value of call options by counterparty and each counterparty’s long-term credit ratings were as follows:
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Property and Casualty Unpaid Claims and Claim Expenses |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Insurance Loss Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Casualty Unpaid Claims and Claim Expenses | The following table is a summary reconciliation of the beginning and ending Property and Casualty unpaid claims and claim expense reserves for the periods indicated. The table presents reserves on both gross and net (after reinsurance) bases. The total net Property and Casualty insurance claims and claim expense incurred amounts are reflected in the Consolidated Statements of Operations. The end of the period gross reserve (before reinsurance) balances and the reinsurance recoverable balances are reflected on a gross basis in the Consolidated Balance Sheets.
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Debt |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | Indebtedness outstanding was as follows:
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Reinsurance |
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| Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reinsurance | The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and claim settlement expenses, including estimated amounts for unsettled claims, claims incurred but not yet reported and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:
________________ (1) This measure is not based on accounting principles generally accepted in the U.S. (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as an exhibit in the Company's reports filed with the SEC.
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Commitments |
3 Months Ended |
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Mar. 31, 2018 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments | Investment Commitments |
Segment Information |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Information | The Company conducts and manages its business through four segments. The three operating segments, representing the major lines of insurance business, are: Property and Casualty, primarily personal lines automobile and property insurance products; Retirement, primarily tax-qualified fixed and variable annuities; and Life, life insurance. The Company does not allocate the impact of corporate-level transactions to these operating segments, consistent with the basis for management’s evaluation of the results of those segments, but classifies those items in the fourth segment, Corporate and Other. In addition to ongoing transactions such as corporate debt service, net investment gains and losses and certain public company expenses, such items also have included corporate debt retirement costs, when applicable. Summarized financial information for these segments is as follows:
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Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2018 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | On December 22, 2017, comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Act) was enacted by the U.S. government. The Tax Act is generally effective January 1, 2018, and among other changes, reduced the federal corporate income tax rate from 35% to 21%, eliminated the corporate Alternative Minimum Tax, modified numerous insurance-specific provisions, and further limited deductions for executive compensation. The Tax Act reduced the Company’s effective tax rate by 9.5% for the period ended March 31, 2018. The Company recorded provisional amounts in its December 31, 2017 and March 31, 2018 Consolidated Financial Statements related to partnership investments and discounted loss reserves. Reasonable estimates of the tax impacts of these provisional items were reflected in the Company’s results of operations; however, as of March 31, 2018, the Company has not yet completed its accounting for these provisional items. For partnership investments, the Company is waiting to receive schedules K-1, and for discounted loss reserves, the Company is waiting on guidance from the U.S. Treasury. Adjustments to the provisional amounts will impact the Company’s consolidated results of operations and must be reflected no later than in the Company’s December 31, 2018 Consolidated Financial Statements. |
Basis of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2018 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation | The accompanying unaudited consolidated financial statements of Horace Mann Educators Corporation (HMEC; and together with its subsidiaries, the Company or Horace Mann) have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) and with the rules and regulations of the Securities and Exchange Commission (SEC), specifically Regulation S-X and the instructions to Form 10-Q. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP, but are not required for interim reporting purposes, have been omitted. The Company believes that these consolidated financial statements contain all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the Company’s consolidated financial position as of March 31, 2018, the consolidated results of operations, comprehensive income, changes in shareholders’ equity and cash flows for the three month periods ended March 31, 2018 and 2017. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The subsidiaries of HMEC market and underwrite personal lines of property and casualty insurance products (primarily personal lines of automobile and property insurance), retirement products (primarily tax-qualified annuities) and life insurance, primarily to K-12 teachers, administrators and other employees of public schools and their families. HMEC’s principal operating subsidiaries are Horace Mann Life Insurance Company, Horace Mann Insurance Company, Teachers Insurance Company, Horace Mann Property & Casualty Insurance Company and Horace Mann Lloyds. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The results of operations for the three month period ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year. |
| Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) |
| Adopted and Pending Accounting Standards | Adopted Accounting Standards Revenue Recognition In May 2014, the FASB issued accounting guidance to provide a single comprehensive model in accounting for revenue arising from contracts with customers. The guidance applies to all contracts with customers; however, certain insurance contracts are specifically excluded from this updated guidance. The Company adopted the guidance on January 1, 2018, using the modified retrospective transition method. The guidance did not have an impact on the Company’s consolidated financial position, results of operations, cash flows, or disclosures. Recognition and Measurement of Financial Assets and Liabilities In January 2016, the FASB issued accounting guidance to improve certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. Among other things, the guidance revises the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The Company adopted the guidance on January 1, 2018 using the modified retrospective approach that resulted in reclassifying $15,041 thousand of after tax unrealized gains on equity securities from AOCI to Retained earnings. The Company's Consolidated Statements of Operations were impacted as changes in fair value of equity securities are now being reported in Net investment gains and losses instead of reported in other comprehensive income (loss) (OCI). Statement of Cash Flows -- Classification In August 2016, the FASB issued guidance to reduce diversity in practice in the statement of cash flows between operating, investing and financing activities related to the classification of cash receipts and cash payments for eight specific issues. The FASB acknowledged that current GAAP either is unclear or does not include specific guidance on these eight cash flow classification issues: (1) debt prepayment or extinguishment costs; (2) settlement of zero-coupon bonds (pertains to issuers); (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims (pertains to claimants); (5) proceeds from the settlement of corporate-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions (pertains to transferors) and (8) separately identifiable cash flows and application of the predominance principle. The Company adopted the guidance on January 1, 2018 using a retrospective approach which had no impact to the prior year amounts reported in the Consolidated Statement of Cash Flows. Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income On February 14, 2018, the FASB issued accounting guidance that permits recognition of a reclassification adjustment between AOCI and Retained earnings for stranded tax amounts related to the reduced corporate tax rate enacted under the Tax Act. As permitted under its provisions, the Company early adopted the accounting guidance effective for the quarterly period that ended December 31, 2017 and elected to reclassify the stranded tax amounts. The impact from early adoption resulted in an increase to AOCI and a reduction to Retained earnings of approximately $47,900 thousand; representing the stranded deferred tax liabilities of $50,034 thousand and $(2,134) thousand for Net unrealized investment gains and losses on securities and Defined benefit plans, respectively. Pending Accounting Standards Accounting for Leases In February 2016, the FASB issued accounting and disclosure guidance to improve financial reporting and comparability among organizations about leasing transactions. Under the new guidance, for leases with lease terms of more than 12 months, a lessee will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by those leases. Consistent with current accounting guidance, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or an operating lease. However, while current guidance requires only capital leases to be recognized on the balance sheet, the new guidance will require both operating and capital leases to be recognized on the balance sheet. In transition to the new guidance, companies are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those years. Early application is permitted. While the Company is in the process of evaluating the impact of the guidance, it does not expect the guidance to have a material impact on its consolidated financial statements, except for recognizing lease assets and lease liabilities for its operating leases. The Company's lease obligations under various non-cancellable operating lease agreements amounted to approximately $9,093 thousand at March 31, 2018. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued guidance to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments, including reinsurance receivables, held by companies. The new guidance replaces the incurred loss impairment methodology and requires an organization to measure and recognize all current expected credit losses (CECL) for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Companies will need to utilize forward-looking information to better inform their credit loss estimates. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Any credit losses related to available for sale debt securities will be recorded through an allowance for credit losses with this allowance having a limit equal to the amount by which fair value is below amortized cost. The guidance also requires enhanced qualitative and quantitative disclosures to provide additional information about the amounts recorded in the financial statements. For public business entities that are SEC filers, the guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, using a modified-retrospective approach. Early application is permitted for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company. Simplifying the Test for Goodwill Impairment |
Basis of Presentation (Tables) |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment Contract And Life Policy Reserves | This table summarizes the Company’s investment contract and life policy reserves.
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| Accumulated Other Comprehensive Income (Loss) | The following tables reconcile these components.
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(3) The Company adopted guidance on January 1, 2018 that resulted in reclassifying $15,041 thousand of after tax unrealized gains on equity securities from AOCI to Retained earnings.
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Investments (Tables) |
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| Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gains and losses on fixed maturities and equity securities | The amortized cost, net unrealized investment gains and losses, fair values and other-than-temporary impairment (OTTI) included in AOCI of all fixed maturity securities in the portfolio were as follows:
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| Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position | The following table presents the fair value and gross unrealized losses of securities in an unrealized loss position at March 31, 2018 and December 31, 2017, respectively. The Company views the decrease in value of all of the securities with unrealized losses at March 31, 2018 -- which was driven largely by changes in interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition -- as temporary. For fixed maturity securities, management does not have the intent to sell the securities and it is not more likely than not the Company will be required to sell the securities before the anticipated recovery of the amortized cost bases, and management expects to recover the entire amortized cost bases of the fixed maturity securities. Therefore, no impairment of fixed maturity securities was recorded at March 31, 2018.
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| Summary of cumulative credit losses | The following table summarizes the cumulative amounts related to the Company’s credit loss component of OTTI losses on fixed maturity securities held as of March 31, 2018 and 2017 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of OTTI losses were recognized in OCI:
________________ (1) The cumulative credit loss amounts exclude OTTI losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis.
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| Distribution of the Company's fixed maturity portfolio by estimated expected maturity | The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers’ utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
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| Proceeds received from sales of fixed maturities and equity securities | Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were:
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| Net Realized Investment Gains (Losses) | The following table reconciles the net investment gains and losses (pretax) by transaction type:
________________ (1) Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, equity securities are reported at fair value with change in fair value recognized in Net investment gains (losses) and are no longer included in impairment write-downs or change in intent write-downs.
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| Reconciliation of net unrealized investment gains (losses) on fixed maturity securities and equity securities | The following table reconciles the net unrealized investment gains and losses, net of tax, included in AOCI, before the impact of deferred policy acquisition costs (DAC):
________________ (1) Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, available for sale equity securities were reclassified to equity securities at fair value and the related unrealized gains were reclassified from AOCI to Retained earnings.
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| Offsetting assets and liability | The following table presents the instruments that were subject to a master netting arrangement for the Company.
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Fair Value of Financial Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Company's fair value hierarchy measured at recurring basis | The following table presents the Company’s fair value hierarchy for those assets and liabilities measured and carried at fair value on a recurring basis. At March 31, 2018, Level 3 invested assets comprised 3.0% of the Company’s total investment portfolio at fair value.
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| Table for reconciliations for all Level 3 assets measured at fair value on a recurring basis | The following table presents reconciliations for the periods indicated for all Level 3 assets and liabilities measured at fair value on a recurring basis.
________________
(3) Transfers into and out of Level 3 during the three month periods ended March 31, 2018 and 2017 were attributable to changes in the availability of observable market information for individual fixed maturity securities and short-term investments. The Company’s policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.
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| Summary of fair value assets and liabilities measured on nonrecurring basis | The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. The following table presents the carrying value, fair value and fair value hierarchy of these financial assets and financial liabilities.
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Derivative Instruments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The fair values of derivative instruments, including derivative instruments embedded in FIA and IUL contracts, are presented in the Consolidated Balance Sheets as follows:
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| Derivative Instruments, Gain (Loss) | The changes in fair value of derivatives included in the Consolidated Statements of Operations were as follows:
________________ (1) Includes the gains or losses recognized at the expiration of the option term or early termination and the changes in fair value for open options.
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| Financing Receivable Credit Quality Indicators | The notional amount and fair value of call options by counterparty and each counterparty’s long-term credit ratings were as follows:
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Property and Casualty Unpaid Claims and Claim Expenses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Insurance Loss Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of property and casualty unpaid claims and claim expenses | The end of the period gross reserve (before reinsurance) balances and the reinsurance recoverable balances are reflected on a gross basis in the Consolidated Balance Sheets.
________________
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Indebtedness outstanding | Indebtedness outstanding was as follows:
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Reinsurance (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effects of reinsurance on premiums and benefits | The effects of reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:
________________ (1) This measure is not based on accounting principles generally accepted in the U.S. (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as an exhibit in the Company's reports filed with the SEC.
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Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summarized financial information for these segments | Summarized financial information for these segments is as follows:
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Basis of Presentation - Investment Contract and Life Policy Reserves (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Investment contract reserves | $ 4,471,733 | $ 4,452,972 |
| Life policy reserves | 1,126,945 | 1,120,763 |
| Total | $ 5,598,678 | $ 5,573,735 |
Basis of Presentation - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
| Basis of Presentation [Line Items] | |||
| Cumulative effect of change in accounting principle (3) | $ (15,041) | $ 0 | |
| Future lease commitments | $ 9,093 | ||
| Retained earnings | |||
| Basis of Presentation [Line Items] | |||
| Cumulative effect of change in accounting principle (3) | 15,041 | 0 | |
| Accumulated other comprehensive income, net of tax | |||
| Basis of Presentation [Line Items] | |||
| Cumulative effect of change in accounting principle (3) | (15,041) | $ 0 | |
| Stranded Tax Amounts Reclassified | 47,900 | ||
| Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities | |||
| Basis of Presentation [Line Items] | |||
| Cumulative effect of change in accounting principle (3) | (15,041) | ||
| Stranded Tax Amounts Reclassified | 50,034 | ||
| Benefit Plans | |||
| Basis of Presentation [Line Items] | |||
| Cumulative effect of change in accounting principle (3) | 0 | ||
| Stranded Tax Amounts Reclassified | $ (2,134) | ||
Investments - Rollforward of OTTI Losses (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Cumulative credit loss | ||
| Beginning of period | $ 3,825 | $ 13,703 |
| New credit losses | 0 | 0 |
| Increases to previously recognized credit losses | 0 | 726 |
| Gains (losses) related to securities sold or paid down during the period | 0 | (2) |
| End of period | $ 3,825 | $ 14,427 |
Investments - Summary of Proceeds and Gains (Losses) Realized on Securities (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Proceeds received from sales of fixed maturities and equity securities | ||
| Proceeds received, Fixed maturity securities | $ 89,894 | $ 110,872 |
| Proceeds received, Equity securities | 2,048 | 5,489 |
| Fixed maturity securities | ||
| Proceeds received from sales of fixed maturities and equity securities | ||
| Gross gains realized | 1,670 | 2,489 |
| Gross losses realized | (53) | (881) |
| Equity securities | ||
| Proceeds received from sales of fixed maturities and equity securities | ||
| Gross gains realized | 616 | 1,048 |
| Gross losses realized | $ (34) | $ (192) |
Investments - Reconciliation of Net Unrealized Investment Gains (Losses) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
| Beginning balance | $ 1,501,573 | |
| Cumulative effect of change in accounting principle | (15,041) | $ 0 |
| Ending balance | 1,404,679 | 1,321,818 |
| Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities | ||
| AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
| Beginning balance | 300,177 | 175,738 |
| Cumulative effect of change in accounting principle | (15,041) | |
| Ending balance | 178,040 | 198,271 |
| Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities | Fixed maturity securities | ||
| AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
| Beginning balance | 286,176 | 202,941 |
| Change in net unrealized investment gains and losses | (67,285) | 25,193 |
| Reclassification of net investments (gains) losses to net income | 2,443 | 203 |
| Ending balance | $ 206,293 | $ 228,337 |
Investments - Offsetting of Assets and Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Asset derivatives: | ||
| Net Amounts of Assets/Liabilities Presented in the Consolidated Balance Sheets | $ 12,630 | $ 15,550 |
| Free-standing derivatives | ||
| Asset derivatives: | ||
| Gross Amounts | 12,630 | 15,550 |
| Gross Amounts Offset in the Consolidated Balance Sheets | 0 | 0 |
| Net Amounts of Assets/Liabilities Presented in the Consolidated Balance Sheets | 12,630 | 15,550 |
| Gross Amounts Not Offset in the Consolidated Balance Sheets, Financial Instruments | 0 | 0 |
| Gross Amounts Not Offset in the Consolidated Balance Sheets, Cash Collateral Received | 13,174 | 15,584 |
| Net Amount | $ (544) | $ (34) |
Investments - Narrative (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Investment Holdings [Line Items] | ||
| Investment Grade Rate | 95.30% | |
| Fair value of issued securities | $ 7,634,682 | $ 7,724,075 |
| Federal Home Loan Bank Funding Agreements | 625,000 | 625,000 |
| Federal Home Loans Bank Of Chicago | ||
| Investment Holdings [Line Items] | ||
| Fair value of issued securities | 686,387 | 686,790 |
| Governmental Agencies as Required by Law in Various States | ||
| Investment Holdings [Line Items] | ||
| Fair value of issued securities | $ 17,848 | $ 17,985 |
Investments - Net Realized Gain (Losses) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Investments, Debt and Equity Securities [Abstract] | ||
| Impairment write-downs | $ 0 | $ (1,777) |
| Change in intent write-downs | (110) | (1,020) |
| Net other-than-temporary impairment losses recognized in earnings | (110) | (2,797) |
| Sales and other | 2,203 | 2,484 |
| Change in fair value - equity securities (1) | (5,186) | 0 |
| Change in fair value and gains (losses) realized on settlements - derivative instruments | 1,439 | 71 |
| Net investment losses | $ (1,654) | $ (242) |
Fair Value of Financial Instruments - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Fair Value of Financial Instruments (Textual) [Abstract] | ||
| Net realized investment gains (losses) included in net income related to financial assets | $ 3 | $ 0 |
| Level 3 | ||
| Fair Value of Financial Instruments (Textual) [Abstract] | ||
| Percentage of invested assets in total investment portfolio Level 3 recurring | 3.00% | |
| Net realized investment losses | $ (2,222) | $ (2,308) |
Derivative Instruments - Fair Value of Derivatives in Consolidated Balance Sheets (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Assets | ||
| Derivative instruments, included in Short-term and other investments | $ 12,630 | $ 15,550 |
| Short-term and other investments | ||
| Assets | ||
| Derivative instruments, included in Short-term and other investments | 12,630 | 15,550 |
| Other policyholder funds | ||
| Liabilities | ||
| FIA - embedded derivatives, included in Other policyholder funds | 78,486 | 80,733 |
| Investment contract and life policy reserves | ||
| Liabilities | ||
| IUL - embedded derivatives, included in Investment contract and life policy reserves | $ 518 | $ 594 |
Derivative Instruments - Fair Value of Derivatives Included in Consolidated Statements of Operations (Details) - Revenues - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Change in fair value of derivatives: | ||
| Net investment gains (losses) | $ (849) | $ 2,437 |
| Change in fair value of embedded derivatives: | ||
| Net investment gains (losses) | $ 2,288 | $ (2,366) |
Derivative Instruments - Notional and Fair Value Amounts of Derivative Instruments (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Derivative [Line Items] | ||
| Notional Amount | $ 255,900 | $ 246,800 |
| Fair Value | 12,630 | 15,550 |
| Bank of America, N.A. | ||
| Derivative [Line Items] | ||
| Notional Amount | 93,800 | 85,100 |
| Fair Value | 6,017 | 6,320 |
| Barclays Bank PLC | ||
| Derivative [Line Items] | ||
| Notional Amount | 48,600 | 48,900 |
| Fair Value | 902 | 1,828 |
| Citigroup Inc. | ||
| Derivative [Line Items] | ||
| Notional Amount | 0 | 0 |
| Fair Value | 0 | 0 |
| Credit Suisse International | ||
| Derivative [Line Items] | ||
| Notional Amount | 21,100 | 21,100 |
| Fair Value | 1,469 | 1,444 |
| Societe Generale | ||
| Derivative [Line Items] | ||
| Notional Amount | 92,400 | 91,700 |
| Fair Value | $ 4,242 | $ 5,958 |
Derivative Instruments - Narrative (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
| Derivatives, Fair Value [Line Items] | ||
| Expected contract term | 10 years | |
| Maximum exposure | $ 250,000 | |
| Other liabilities | ||
| Derivatives, Fair Value [Line Items] | ||
| Fair value of collateral | $ 13,174,000 | $ 15,584,000 |
Property and Casualty Unpaid Claims and Claim Expenses - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Insurance Loss Reserves [Abstract] | ||
| Favorable development of total reserves for property and casualty claims occurring in prior years | $ 300 | $ 1,000 |
Debt - Summary of Indebtedness (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Short-term debt: | ||
| Bank Credit Facility, expires July 30, 2019 | $ 0 | $ 0 |
| Long-term debt: | ||
| Long-term debt | 297,536,000 | 297,469,000 |
| Debt and Capital Lease Obligations | 297,536,000 | 297,469,000 |
| Senior Notes 4.50% [Member] | ||
| Long-term debt: | ||
| Long-term debt | 247,536,000 | 247,469,000 |
| Unamortized discount | $ 532,000 | 547,000 |
| Stated rate | 4.50% | |
| Face amount | $ 250,000,000 | |
| Unamortized debt issuance costs | 1,932,000 | 1,984,000 |
| Federal Home Loan Bank Advances [Member] | ||
| Long-term debt: | ||
| Long-term debt | $ 50,000,000 | $ 50,000,000 |
Debt - Narrative (Details) |
Mar. 31, 2018 |
|---|---|
| Senior Notes 4.50% [Member] | |
| Debt Instrument [Line Items] | |
| Stated rate | 4.50% |
Commitments - Narrative (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Unfunded commitments to purchase investments | $ 170,102 | $ 106,381 |
Income Taxes - Narrative (Details) |
3 Months Ended |
|---|---|
Mar. 31, 2018 | |
| Income Tax Disclosure [Abstract] | |
| TCJA effect on tax rate | 9.50% |
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