Horace Mann Reports Results for Fourth Quarter
SPRINGFIELD, Ill., Feb. 8 /PRNewswire-FirstCall/ -- Horace Mann Educators Corporation (NYSE: HMN) today reported net income of $22.2 million (54 cents per share) and $73.5 million ($1.81 per share) for the three and twelve months ended December 31, 2009, respectively, compared to net income of $22.9 million (58 cents per share) and $10.9 million (27 cents per share) for the same periods in 2008. Included in net income were net realized gains on securities of $4.6 million ($3.2 million after tax, or 7 cents per share) and $26.3 million ($17.2 million after tax, or 42 cents per share) for the three and twelve months ended December 31, 2009, respectively. In the same periods in 2008, net income included net realized investment losses of $8.2 million (which after reflecting the reduction of the deferred tax allowance established at September 30, 2008 resulted in a gain of $2.7 million after tax, or 7 cents per share) and $63.9 million ($41.5 million after tax, or $1.02 per share), respectively. All per-share amounts are stated on a diluted basis.
"With the further stabilization of the financial markets in the fourth quarter, our confidence in the quality of our investment portfolio continues to be validated. We finished the year in a net unrealized gain position, as we did at the end of the third quarter, with reported book value per share increasing 60 percent over the twelve months to $18.36. Meanwhile, key balance sheet ratios, as well as risk based capital, remain more than adequate to support our ratings," said Louis G. Lower, President and Chief Executive Officer. "Horace Mann's financial stability, combined with our established position in the educator market, contributed to another quarter of solid growth in annuity sales, which increased 10 percent compared to a year earlier, with the fourth quarter's positive annuity net fund flows lifting the full year result to near-record levels. While the reduced number of new car sales in 2009 put pressure on applications for true new auto units, a 4 percent increase in true new units in the fourth quarter helped to close the gap to prior year, and we finished the full year only 2 percent below 2008. Looking to 2010, we expect additional improvement, as our growth in total points of distribution and recent growth in agent count build on the momentum we've established to transform our distribution system to a new, more powerful model."
"Net income before realized investment gains and losses was 47 cents per share for the fourth quarter compared to 51 cents a year ago. Within those results, the current period included a 6 cent per share charge related to the North Carolina Coastal Property Insurance Pool and the fourth quarter of 2008 benefited from a 10 cent per share non-recurring decrease in federal income tax," continued Lower. "For property and casualty, catastrophe losses were minimal in the quarter. The current accident year combined ratio excluding catastrophes was approximately 97 percent in the current quarter, which was nearly 7 percentage points higher than 2008, primarily reflecting an increase in auto loss frequency, a higher level of property sinkhole losses and a lower level of favorable current accident year reserve development. Meanwhile, combined annuity and life segment pretax earnings increased significantly in the fourth quarter compared to prior year, primarily due to the positive impact of financial market performance as well as a notable improvement in the interest margin."
"Looking forward to 2010, we estimate full-year net income before realized investment gains and losses of between $1.65 and $1.85 per share," Lower said. "This projection anticipates: for property and casualty, a moderation in recent auto frequency trends and a continuing high level of property sinkhole losses in Florida; for annuity, continued strong increases in fixed annuity spreads and an 8 to 10 percent increase in the S&P 500 Index; and for life, continued growth in investment income and more normal mortality levels."
Segment Earnings
The property and casualty segment recorded net income of $10.2 million for the quarter, a decrease of $4.3 million compared to the same period in 2008. Pretax catastrophe costs in the current quarter were $1.2 million compared to $9.9 million incurred in the fourth quarter of 2008, which included approximately $7 million of adverse development of reserves for hurricane losses occurring in the third quarter. The fourth quarter 2009 property and casualty combined ratio was 95.6 percent, including 0.9 percentage point due to catastrophe costs, compared to 92.9 percent, including 7.2 percentage points due to catastrophe costs, in the prior year period. Favorable prior years' reserve development totaling $3.4 million was recorded in the fourth quarter, which represented 2.4 percentage points on the combined ratio, compared to $6.7 million, or 4.8 percentage points on the combined ratio, recorded in the fourth quarter of 2008. Additionally, the fourth quarter 2009 combined ratio excluding catastrophes was reduced by 1.4 percentage points due to favorable development of current accident year reserves, compared to a benefit of 3.2 percentage points recorded in the fourth quarter of 2008 due to similar favorable development. In the current quarter, property and casualty pretax income was reduced by $3.8 million as a result of writing off the company's equity interest in the accumulated surplus of the North Carolina Coastal Property Insurance Pool (the "Pool"). This write-off, recorded in Other Income (Expense), is the result of recent legislation that changed the ownership status of the Pool and also capped future assessments that may be levied against insurers.
Annuity segment net income was $6.4 million for the three months ended December 31, 2009, reflecting an increase of $3.5 million compared to the same period in 2008. Annuity segment net income for the fourth quarter and full year 2008 benefited from a non-recurring reduction of $2.6 million in federal income tax expense as a result of the IRS completing its examination of the 2002, 2004, 2005 and 2006 tax years. In the current quarter, the positive financial market performance had a favorable impact on both the valuation of annuity deferred policy acquisition costs and the level of guaranteed minimum death benefit reserves, and favorably affected the level of charges and fees earned on variable contract deposits in the quarter compared to prior year. In addition, the interest margin earned on fixed annuity assets increased significantly compared to a year earlier, with net interest spreads reaching 1.69 percent for the year, up 15 basis points over 2008. Total annuity net fund flows continued to be positive in the current period, as they were throughout 2008 and 2009, and total cash value persistency of 94 percent increased about 1 percentage point compared to a year earlier.
Life segment net income of $5.5 million for the fourth quarter increased $1.3 million compared to the same period in 2008, primarily due to growth in investment income. Life persistency remained in excess of 94 percent.
Segment Revenues
At $1.0 billion for the full year, the company's total premiums written and contract deposits increased 3 percent and 5 percent compared to the three and twelve months ended December 31, 2008, respectively, primarily reflecting increases in annuity deposit receipts.
Total property and casualty premiums written were comparable to the fourth quarter of 2008 and increased 1 percent for the full year, primarily reflecting increases in average property and auto premiums per policy.
Annuity deposits received increased 11 percent and 12 percent compared to the three and twelve months ended December 31, 2008, respectively. Life segment insurance premiums and contract deposits decreased 2 percent compared to the prior year periods.
Sales and Distribution
For the three months ended December 31, 2009, total new auto sales units increased slightly compared to the prior year, while the full year reflected a 4 percent decrease compared to 2008. "In spite of a decline in total auto sales units, average agent true new auto productivity increased in 2009," said Lower. Annuity sales were up 10 percent in the fourth quarter, following a 50 percent increase in the first half of 2009, and a 23 percent increase in the third quarter, for a combined full-year growth of 31 percent compared to 2008. While flexible premium sales increased 22 percent during the year, single premium and rollover deposits increased 34 percent and were the primary drivers of growth in 2009. For the quarter and full year, total new life production decreased 6 percent and less than 1 percent compared to the prior year, reflecting a decline in sales of third-party vendor products which more than offset the growth in sales of Horace Mann's life products. Driven by the mid-year introduction of a new educator-focused portfolio of Horace Mann term and whole life products, sales of Horace Mann's life products increased 27 percent and 4 percent compared to the three and 12 months ended December 31, 2008.
At December 31, 2009, Horace Mann's 715 agents represented an increase of 7 percent compared to a year earlier, with the number of agents growing steadily throughout the year. Including 571 licensed producers who work for the agents, Horace Mann's total points of distribution increased to 1,286, a growth of 21 percent over year-end 2008. "We are encouraged by the increase in the number of agents in 2009. This agent growth, coupled with the positive impact that our new Agency Business Model is having on productivity and the recent enhancements made to our field sales management structure, bodes well for Horace Mann's future growth prospects," said Lower. Of the 715 agents at year-end, 249, or 35 percent, were Exclusive Agents, comprised of 130 former employee agents and 119 new appointments. The company's Exclusive Agent program was launched on January 1, 2009.
Investment Gains and Losses
In the fourth quarter of 2009, pretax net realized investment gains were $4.6 million, which included a $0.2 million credit-related impairment write-down and $2.3 million of realized impairment losses on securities that were disposed of during the quarter. The impairment amounts were more than offset by $5.7 million of realized gains on other security disposals and $1.4 million of litigation proceeds on debt securities.
Horace Mann's net unrealized investment gains on fixed maturity and equity securities of $36.1 million at December 31, 2009 continued to reflect improvement compared to the net unrealized loss of $327.2 million recorded at December 31, 2008. "Credit spreads narrowed across virtually all asset classes in 2009, with our investment grade corporate bond portfolio experiencing the most significant improvement in fair value. Some of the more highly stressed asset classes also showed improvement, including our financial institution bond and preferred stock holdings, as well as our CMBS and high yield bond portfolios," said Lower. "In light of the widespread improvement in the credit markets, coupled with our insignificant exposure to sub-prime, Alt-A, other lower-quality structured securities and commercial mortgage whole loans, we remain very comfortable with the underlying credit quality of our investment portfolio and have a high level of confidence that any future investment losses relating to the current economic environment will be very manageable."
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.
Statements included in this news release that are not historical in nature are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties. Horace Mann is not under any obligation to (and expressly disclaims any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to the company's Quarterly Report on Form 10-Q for the period ended September 30, 2009 and the company's past and future filings and reports filed with the Securities and Exchange Commission for information concerning the important factors that could cause actual results to differ materially from those in forward-looking statements.
HORACE MANN EDUCATORS CORPORATION
Digest of Earnings and Highlights (Unaudited)
(Dollars in Millions, Except Per Share Data)
Quarter Ended Year Ended
December 31, December 31,
2009 2008 % Change 2009 2008 % Change
DIGEST OF EARNINGS
Net income $22.2 $22.9 -3.1% $73.5 $10.9 N.M.
Net income
per share:
Basic $0.57 $0.59 -3.4% $1.88 $0.27 N.M.
Diluted $0.54 $0.58 -6.9% $1.81 $0.27 N.M.
Weighted average
number of shares
and equivalent
shares
(in millions) (A):
Basic 39.2 39.1 0.3% 39.2 39.8 -1.5%
Diluted 40.6 39.8 2.0% 40.5 40.6 -0.2%
HIGHLIGHTS
Operations
Insurance premiums
written and
contract
deposits $246.0 $239.1 2.9% $1,003.7 $960.1 4.5%
Return on
equity (B) 12.7% 1.9% N.M.
Property &
Casualty GAAP
combined ratio 95.6% 92.9% N.M. 99.5% 100.7% N.M.
Effect of
catastrophe
costs on the
Property &
Casualty
combined ratio 0.9% 7.2% N.M. 6.1% 13.7% N.M.
Dedicated
agents (C) 715 670 6.7%
Licensed
producers (D) 571 394 44.9%
Total points
of
distribution 1,286 1,064 20.9%
Additional Per
Share Information
Dividends paid $0.08 $0.0525 52.4% $0.2375 $0.3675 -35.4%
Book value (E) $18.36 $11.49 59.8%
Financial Position
Total assets $6,343.1 $5,507.7 15.2%
Short-term debt 38.0 38.0 -
Long-term debt 199.6 199.5 0.1%
Total
shareholders'
equity 719.5 448.8 60.3%
N.M. - Not meaningful.
(A) During the three months ended March 31, 2008, the Company repurchased
1,636,376 shares of its common stock at an aggregate cost of
$29.5 million, or an average cost of $18.01 per share. During the
three months ended June 30, 2008, the Company repurchased 1,561,849
shares of its common stock at an aggregate cost of $24.8 million, or
an average cost of $15.93 per share.
(B) Based on trailing 12-month net income and average quarter-end
shareholders' equity.
(C) Agents under contract with the Company to market only the Company's
products and limited additional third-party vendor products
authorized by the Company.
(D) Includes licensed producers working in dedicated agents' offices and
excludes independent agents.
(E) Book value per share excluding the fair value adjustment for
investments was $17.79 at December 31, 2009 and $16.15 at December
31, 2008.
Ending shares outstanding were 39,184,721 at December 31, 2009 and
39,061,788 at December 31, 2008.
- 1 -
HORACE MANN EDUCATORS CORPORATION
Statements of Operations and Supplemental GAAP Consolidated Data
(Unaudited)
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
2009 2008 % Change 2009 2008 % Change
STATEMENTS OF
OPERATIONS
Insurance
premiums and
contract
charges
earned $167.8 $168.8 -0.6% $659.6 $658.5 0.2%
Net investment
income 65.4 58.1 12.6% 246.8 230.3 7.2%
Net realized
investment
gains (losses) 4.6 (8.2) N.M. 26.3 (63.9) N.M.
Other income
(expense) (A) (1.9) 2.4 N.M. 4.7 9.9 -52.5%
Total
revenues 235.9 221.1 6.7% 937.4 834.8 12.3%
Benefits,
claims and
settlement
expenses 110.1 111.3 -1.1% 458.7 471.5 -2.7%
Interest
credited 35.9 33.9 5.9% 139.4 131.8 5.8%
Policy
acquisition
expenses
amortized 20.2 23.1 -12.6% 80.4 79.1 1.6%
Operating
expenses 35.6 33.7 5.6% 141.2 132.4 6.6%
Amortization
of intangible
assets - 1.2 -100.0% 0.2 5.3 -96.2%
Interest
expense 3.5 4.3 -18.6% 14.0 14.5 -3.4%
Total benefits,
losses and
expenses 205.3 207.5 -1.1% 833.9 834.6 -0.1%
Income before
income taxes 30.6 13.6 125.0% 103.5 0.2 N.M.
Income tax
expense
(benefit) 8.4 (9.3) N.M. 30.0 (10.7) N.M.
Net income $22.2 $22.9 -3.1% $73.5 $10.9 N.M.
ANALYSIS OF
PREMIUMS WRITTEN
AND CONTRACT
DEPOSITS
Property &
Casualty
Automobile
and property
(voluntary) $136.0 $134.8 0.9% $550.2 $542.2 1.5%
Involuntary
and other
property &
casualty 0.8 2.3 -65.2% 3.3 3.7 -10.8%
Total
Property &
Casualty 136.8 137.1 -0.2% 553.5 545.9 1.4%
Annuity deposits 81.7 73.9 10.6% 349.8 311.7 12.2%
Life 27.5 28.1 -2.1% 100.4 102.5 -2.0%
Total $246.0 $ 239.1 2.9% $1,003.7 $960.1 4.5%
ANALYSIS OF
SEGMENT NET
INCOME (LOSS)
Property &
Casualty $10.2 $14.5 -29.7% $30.0 $28.1 6.8%
Annuity 6.4 2.9 120.7% 21.2 17.3 22.5%
Life 5.5 4.2 31.0% 18.4 16.4 12.2%
Corporate and
other (B) 0.1 1.3 -92.3% 3.9 (50.9) N.M.
Net income 22.2 22.9 -3.1% 73.5 10.9 N.M.
Catastrophe
costs, after
tax, included
above (C) (0.8) (6.5) -87.7% (21.5) (48.1) -55.3%
N.M. - Not meaningful.
(A) The three and twelve months ended December 31, 2009 include a charge
of $3.8 million to write off the company's equity interest in the
accumulated surplus of the North Carolina Coastal Property Insurance
Pool as a result of recent legislation in that state.
(B) The Corporate and Other segment includes interest expense on debt and
the impact of realized investment gains and losses and other
corporate level items.
The Company does not allocate the impact of corporate level
transactions to the insurance segments consistent with how management
evaluates the results of those segments. See detail for this segment
on page 4.
(C) Includes allocated loss adjustment expenses and catastrophe
reinsurance reinstatement premiums. See also page 3.
- 2 -
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
2009 2008 % Change 2009 2008 % Change
PROPERTY & CASUALTY
Premiums
written $136.8 $137.1 -0.2% $ 553.5 $ 545.9 1.4%
Premiums
earned 138.9 139.1 -0.1% 547.3 541.1 1.1%
Net investment
income 8.8 8.7 1.1% 34.4 35.7 -3.6%
Other income
(expense) (A) (3.6) 0.4 N.M. (1.3) 1.5 N.M.
Losses and
loss adjustment
expenses (LAE) 97.9 95.9 2.1% 407.1 416.1 -2.2%
Operating
expenses
(includes policy
acquisition
expenses
amortized) 34.8 33.2 4.8% 137.6 128.5 7.1%
Income
before tax 11.4 19.1 -40.3% 35.7 33.7 5.9%
Net income 10.2 14.5 -29.7% 30.0 28.1 6.8%
Net investment
income,
after tax 7.7 7.2 6.9% 29.5 29.8 -1.0%
Catastrophe
costs, after
tax (B) 0.8 6.5 -87.7% 21.5 48.1 -55.3%
Catastrophe
losses and LAE,
before tax 1.2 9.9 -87.9% 33.1 73.9 -55.2%
Reinsurance
reinstatement
premiums,
before tax - - - - - -
Operating
statistics:
Loss and loss
adjustment
expense ratio 70.5% 69.0% N.M. 74.4% 76.9% N.M.
Expense ratio 25.1% 23.9% N.M. 25.1% 23.8% N.M.
Combined ratio 95.6% 92.9% N.M. 99.5% 100.7% N.M.
Effect on
the
combined
ratio of:
Catastrophe
costs 0.9% 7.2% N.M. 6.1% 13.7% N.M.
Claims
office
consolidation
costs
(all in
LAE) 0.1% 3.0% N.M. 0.7% 0.8% N.M.
Automobile and
property detail:
Premiums
written
(voluntary)(C) $136.0 $134.8 0.9% $ 550.2 $ 542.2 1.5%
Automobile 93.2 92.6 0.6% 372.5 367.8 1.3%
Property 42.8 42.2 1.4% 177.7 174.4 1.9%
Premiums
earned
(voluntary)(C) 137.3 136.1 0.9% 544.1 537.8 1.2%
Automobile 93.0 91.9 1.2% 369.8 365.5 1.2%
Property 44.3 44.2 0.2% 174.3 172.3 1.2%
Policies in
force
(voluntary)
(in thousands) 790 798 -1.0%
Automobile 528 535 -1.3%
Property 262 263 -0.4%
Policy renewal
rate (voluntary)
Automobile
(6 months) 91.3% 91.1% N.M.
Property
(12 months) 88.8% 88.6% N.M.
Voluntary
automobile
operating
statistics:
Loss and
loss
adjustment
expense
ratio 76.6% 67.0% N.M. 72.4% 68.0% N.M.
Expense ratio 24.4% 23.4% N.M. 25.1% 23.5% N.M.
Combined
ratio 101.0% 90.4% N.M. 97.5% 91.5% N.M.
Effect on
the
combined
ratio of:
Catastrophe
costs 0.2% 0.0% N.M. 0.8% 1.2% N.M.
Claims
office
consolidation
costs
(all in
LAE) 0.1% 3.5% N.M. 0.8% 0.9% N.M.
Total
property
operating
statistics:
Loss and
loss
adjustment
expense
ratio 57.6% 74.7% N.M. 78.6% 97.2% N.M.
Expense
ratio 25.8% 24.8% N.M. 24.9% 24.2% N.M.
Combined
ratio 83.4% 99.5% N.M. 103.5% 121.4% N.M.
Effect on
the combined
ratio of:
Catastrophe
costs 2.4% 21.6% N.M. 17.6% 40.4% N.M.
Claims office
consolidation
costs (all
in LAE) 0.1% 1.9% N.M. 0.4% 0.6% N.M.
Prior years'
reserves
favorable
(adverse)
development,
pretax
Voluntary
automobile $2.5 $ 6.3 -60.3% $ 9.2 $ 16.0 -42.5%
Total property 0.9 (0.6) N.M. 1.8 (0.5) N.M.
Other property
and casualty - 1.0 -100.0% 0.7 2.6 -73.1%
Total 3.4 6.7 -49.3% 11.7 18.1 -35.4%
N.M. - Not meaningful.
(A) The three and twelve months ended December 31, 2009 include a charge
of $3.8 million to write off the company's equity interest in the
accumulated surplus of the North Carolina Coastal Property Insurance
Pool as a result of recent legislation in that state.
(B) Includes allocated loss adjustment expenses and catastrophe
reinsurance reinstatement premiums.
(C) Amounts are net of additional ceded premiums to reinstate the
Company's property and casualty catastrophe reinsurance coverage, if
any, as quantified above.
- 3 -
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
2009 2008 % Change 2009 2008 % Change
ANNUITY
Contract
deposits $81.7 $73.9 10.6% $ 349.8 $ 311.7 12.2%
Variable 29.7 31.8 -6.6% 112.2 134.4 -16.5%
Fixed 52.0 42.1 23.5% 237.6 177.3 34.0%
Contract
charges
earned 4.3 3.9 10.3% 14.5 17.7 -18.1%
Net investment
income 40.1 34.7 15.6% 149.7 136.2 9.9%
Net interest
margin
(without
realized
investment gains
and losses) 14.2 10.5 35.2% 49.7 42.7 16.4%
Other income 0.9 0.8 12.5% 3.1 4.9 -36.7%
Mortality loss
and other
reserve
changes (0.2) (1.3) -84.6% 0.5 (1.7) N.M.
Operating expenses
(includes policy
acquisition
expenses
amortized) 8.8 12.8 -31.3% 35.5 39.0 -9.0%
Amortization of
intangible
assets - 0.9 -100.0% - 4.0 -100.0%
Income before
tax 10.4 0.2 N.M. 32.3 20.6 56.8%
Net income 6.4 2.9 120.7% 21.2 17.3 22.5%
Pretax income
increase
(decrease) due
to valuation of:
Deferred policy
acquisition
costs $0.5 $(4.1) N.M. $ 1.3 $ (4.0) N.M.
Value of
acquired insurance
in force - - - - - -
Guaranteed
minimum death
benefit reserve 0.1 (1.0) N.M. 0.8 (1.3) N.M.
Annuity contracts
in force
(in thousands) 178 171 4.1%
Accumulated value
on deposit $3,713.6 $3,262.3 13.8%
Variable 1,226.4 965.2 27.1%
Fixed 2,487.2 2,297.1 8.3%
Annuity
accumulated
value
retention -
12 months
Variable
accumulations 93.4% 93.2% N.M.
Fixed
accumulations 94.4% 93.5% N.M.
LIFE
Premiums and
contract
deposits $27.5 $28.1 -2.1% $ 100.4 $ 102.5 -2.0%
Premiums and
contract
charges
earned 24.6 25.8 -4.7% 97.8 99.7 -1.9%
Net investment
income 16.8 14.8 13.5% 63.8 59.3 7.6%
Income before
tax 8.7 6.4 35.9% 28.9 25.6 12.9%
Net income 5.5 4.2 31.0% 18.4 16.4 12.2%
Pretax income
increase (decrease)
due to valuation of:
Deferred policy
acquisition
costs $(0.7) $(0.3) 133.3% $ (0.9) $ (0.2) 350.0%
Life policies
in force
(in thousands) 213 221 -3.6%
Life insurance
in force $13,761 $13,672 0.7%
Lapse ratio -
12 months
(Ordinary life
insurance) 5.4% 5.4% N.M.
CORPORATE AND OTHER (A)
Components of
income (loss)
before tax:
Net realized
investment gains
(losses) $4.6 $(8.2) N.M. $ 26.3 $ (63.9) N.M.
Interest
expense (3.5) (4.3) -18.6% (14.0) (14.5) -3.4%
Other operating
expenses, net
investment
income
and other
income (1.0) 0.4 N.M. (5.7) (1.3) N.M.
Income (loss)
before tax 0.1 (12.1) N.M. 6.6 (79.7) N.M.
Net income
(loss) 0.1 1.3 -92.3% 3.9 (50.9) N.M.
N.M. - Not meaningful.
(A) The Corporate and Other segment includes interest expense on debt and
the impact of realized investment gains and losses and other corporate
level items.
The Company does not allocate the impact of corporate level
transactions to the insurance segments consistent with how management
evaluates the results of those segments.
- 4 -
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
2009 2008 % Change 2009 2008 % Change
INVESTMENTS
Annuity and Life
Fixed maturities,
at fair value
(amortized
cost 2009,
$3,341.1;
2008, $3,145.4) $3,358.9 $2,876.7 16.8%
Equity securities,
at fair value
(cost 2009,
$43.2; 2008,
$55.6) 40.6 38.3 6.0%
Short-term
investments 252.6 154.1 63.9%
Short-term
investments,
securities
lending collateral - - -
Policy loans
and other 116.0 109.2 6.2%
Total Annuity
and Life
investments 3,768.1 3,178.3 18.6%
Property & Casualty
Fixed maturities,
at fair
value (amortized
cost 2009,
$720.9; 2008,
$642.5) 741.0 608.6 21.8%
Equity securities,
at fair value
(cost 2009,
$18.3; 2008,
$30.6) 19.1 23.3 -18.0%
Short-term
investments 25.4 66.0 -61.5%
Short-term
investments,
securities
lending
collateral - - -
Total Property
& Casualty
investments 785.5 697.9 12.6%
Corporate
investments 21.0 25.6 -18.0%
Total
investments 4,574.6 3,901.8 17.2%
Net investment
income
Before tax $65.4 $58.1 12.6% $ 246.8 $ 230.3 7.2%
After tax 44.4 39.3 13.0% 167.5 156.3 7.2%
Net realized
investment
gains (losses)
by investment
portfolio
included in
Corporate and
Other segment
income (loss)
Property &
Casualty $- $(2.8) -100.0% $ (2.5) $ (16.4) -84.8%
Annuity 5.7 (5.3) N.M. 22.0 (47.1) N.M.
Life (1.1) (0.1) N.M. 6.8 (0.4) N.M.
Corporate
and Other - - - - - -
Total,
before tax 4.6 (8.2) N.M. 26.3 (63.9) N.M.
Total,
after tax 3.2 2.7 18.5% 17.2 (41.5) N.M.
Per share,
diluted $0.07 $0.07 - $ 0.42 $ (1.02) N.M.
N.M. - Not meaningful.
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HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
September June March December
30, 30, 31, 31,
December 31, 2009 2009 2009 2009 2008
Net Net Net Net Net
Unreal- Unreal- Unreal- Unreal- Unreal-
ized ized ized ized ized
Fair Gain Gain Gain Gain Gain
Value (Loss) (Loss) (Loss) (Loss) (Loss)
FIXED MATURITY
& EQUITY
SECURITY INVESTMENTS
Fixed income securities
U.S. government
and federally
sponsored
agency bonds $347.2 $(13.8) $2.0 $(2.5) $3.4 $4.9
Municipal
bonds 913.9 22.8 56.1 6.3 (3.7) (14.1)
Corporate
bonds
Financial
institutions 240.0 8.1 6.9 (11.0) (35.3) (19.9)
Other 1,359.0 73.0 84.6 (14.3) (140.1) (122.6)
High
yield 183.1 (5.9) (11.8) (26.4) (28.0) (38.0)
Foreign
government bonds 41.9 2.0 3.0 0.7 (0.1) 0.5
Mortgage-backed
securities
Prime agency 455.1 18.3 23.9 18.5 21.2 20.5
Prime other 16.1 0.4 0.5 (0.8) (0.2) (0.6)
Sub-prime,
Alt-A 0.5 (0.1) (0.4) (0.8) (0.9) (0.7)
Commercial
mortgage-backed
securities 267.4 (67.5) (71.7) (106.6) (115.8) (108.6)
Asset-backed
securities
Sub-prime,
Alt-A 0.5 - (0.5) (0.3) (0.1) 0.1
Collateralized
debt
obligations,
collateralized
loan
obligations 14.3 (4.1) (3.3) (4.0) (4.7) (0.4)
Other 204.4 8.2 4.5 (4.8) (8.3) (8.5)
Preferred stocks
Financial
institutions 75.5 (6.4) (9.5) (19.7) (34.2) (29.8)
Other 39.0 0.3 (0.7) (6.1) (12.5) (10.0)
Total fixed
income
securities 4,157.9 35.3 83.6 (171.8) (359.3) (327.2)
Common stocks 1.7 0.8 0.5 0.5 (0.3) -
Derivatives - - - - - -
Total fixed
maturity and
equity
security
investments $4,159.6 $36.1 $84.1 $(171.3) $(359.6) $(327.2)
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SOURCE Horace Mann Educators Corporation
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