Horace Mann Reports 21% Increase in Operating EPS, Continued New Business Sales Momentum for First Quarter

SPRINGFIELD, Ill., April 25, 2012 /PRNewswire/ -- Horace Mann Educators Corporation (NYSE: HMN) today reported financial results for the first three months of 2012:

Horace Mann Financial Highlights

Three months ended

March 31,

($ in millions, except per share amounts)


2011 (A)


Total revenues




Net income




Net income per diluted share




Operating income*




Operating income per diluted share*




Book value per share




Book value per share excluding

the fair value adjustment for investments*




Property and Casualty segment net income




    Property and Casualty combined ratio




    Property and Casualty underlying combined ratio*



2.4 pts

Annuity segment net income

$ 11.6

$ 8.4


Life segment net income




* These measures are not based on accounting principles generally accepted in the United States ("non-GAAP"). They are reconciled to the most directly comparable GAAP measures in the supplemental numerical pages of this document. An explanation of these measures is contained in the Glossary of Selected Terms included as an exhibit in the company's reports filed with the SEC.

(A) Effective January 1, 2012, the company adopted new accounting guidance for deferred policy acquisition costs with the effects applied retrospectively. The adoption of this accounting guidance did not have a material effect on the company's results of operations, but did decrease shareholders' equity $31.6 million, or 2.9%, after tax at January 1, 2012.

"Operating income was 64 cents per share for the first quarter, an 11 cent -- or 21% -- increase compared to prior year, reflecting improved earnings across all of our operating segments. With solid earnings over the last 12 months and a higher level of unrealized investment gains, book value per share of $27.37 as of March 31, 2012 increased 26% compared to a year ago," said Peter H. Heckman, President and Chief Executive Officer. "In addition, we are pleased with the sales momentum that carried over into the first quarter of 2012 and resulted in strong new business growth in each of our product lines -- auto, property, annuity and life."

Property and Casualty Segment

The property and casualty segment recorded net income of $13.2 million for the quarter, a 6% increase compared to the same period in 2011. The total property and casualty combined ratio of 95.0% was equal to the first quarter of 2011. Pretax catastrophe costs in the current quarter of $5.9 million decreased $2.1 million compared to a year ago. Favorable prior years' reserve development totaling $4.0 million was recorded in the first quarter, compared to $2.7 million recorded in the first quarter of 2011. The underlying property and casualty combined ratio of 93.6% increased 2.4 percentage points compared to the prior year quarter, as favorable current accident year property results excluding catastrophes were more than offset by an increase in the underlying auto combined ratio. Florida sinkhole losses incurred in the current quarter were zero compared to $4.7 million, excluding claim settlement expenses, recorded in the first quarter of 2011.

Total property and casualty premiums written decreased 1% compared to the first quarter of 2011, with increases in average property and auto premiums per policy offset by a reduced level of policies in force.

For the current quarter, true new auto sales units -- units associated with new Horace Mann auto policyholders -- increased 42% compared to the prior year, reflecting the continued positive impact of state-specific pricing, underwriting and marketing initiatives implemented during the last several months of 2011. Total new auto units, tempered by a modest increase in additional vehicles added to existing policies, increased 21% compared to a year ago. In addition, property new sales units increased 13% compared to the first quarter of 2011.

Annuity Segment

Annuity segment net income of $11.6 million for the three months ended March 31, 2012, increased $3.2 million compared to the same period in 2011. The interest margin earned on fixed annuity assets increased 17% compared to the first quarter of 2011, with net interest spreads reaching 2.11% for the current period, improving 9 basis points compared to the first quarter of 2011. Largely driven by improved financial markets performance, the evaluation of deferred policy acquisition costs in the quarter had a $2.6 million pretax positive impact on annuity segment earnings compared to a positive $0.9 million positive impact in the prior year. Charges and fees earned in the quarter, primarily on variable annuity contracts, increased 6% compared to prior year. Total accumulated account values increased 7% compared to March 31, 2011. Total cash value persistency of 94.5% improved approximately 1 percentage point compared to a year earlier.

Annuity deposits received decreased slightly compared to the first quarter of 2011, reflecting a 2% increase in single deposit and rollover receipts, offset by scheduled, flexible premium annuity deposit receipts that decreased 3% compared to a year ago.

Total annuity sales increased 9% compared to last year's first quarter, building on the positive, record-level new business results produced in 2011.

Life Segment

Life segment net income of $5.2 million for the first quarter increased $1.0 million compared to the same period in 2011, primarily due to lower mortality costs in the current period. Life persistency remained strong at 95%.

Life segment insurance premiums and contract deposits increased 1% compared to the first quarter of the prior year.

Total new life sales in the quarter increased by double-digits compared to the prior year, including growth of 24% in sales of Horace Mann-manufactured products -- consistent with the company's strategic intent to significantly increase its underwritten, mortality-based business.

Investment Results

Total net investment income increased 7% in the first quarter of 2012 compared to the prior year. Pretax net realized investment gains were $0.4 million in the current period and included no impairment write-downs on securities.

Horace Mann's net unrealized investment gains on fixed maturity and equity securities of $462.1 million at March 31, 2012 increased compared to the $441.1 million net unrealized gain at December 31, 2011. Net unrealized gains were $180.0 million at March 31, 2011.

Capital Management

During the first three months of 2012, the company repurchased 200,120 shares of its common stock at an aggregate cost of $3.3 million, or an average price per share of $16.65, under its $50 million share repurchase program. As of March 31, 2012, the program had a remaining authorization of $44.6 million. There were 39,773,363 shares outstanding on March 31, 2012.

Webcast Conference Call

Horace Mann's senior management will discuss the company's first quarter performance with investors and analysts on April 26, 2012 at 10:00 a.m. Eastern Time. The conference call will be webcast live on the Internet at www.horacemann.com and archived later in the day for replay, which will be available for one month.

Horace Mann -- the largest national multiline insurance company focusing on educators' financial needs -- provides auto and homeowners insurance, retirement annuities, life insurance and other financial solutions. Founded by Educators for Educators® in 1945, the company is headquartered in Springfield, Ill. For more information, visit www.horacemann.com.