Exhibit 99.1
[Horace Mann Educators Corporation logo]
Dwayne D. Hallman
Senior Vice President -
Finance
Horace Mann Educators
Corporation
(217) 788-5708
www.horacemann.com
HORACE MANN REPORTS RESULTS
FOR THIRD QUARTER
SPRINGFIELD, Ill., October 30, 2003 -- Horace Mann Educators Corporation
(NYSE:HMN) today reported net losses of $14.3 million (34 cents per share) and
$4.1 million (10 cents per share) for the three and nine months ended September
30, 2003, respectively, driven by adverse development and strengthening of
property and casualty reserves. These results compare to net income of $0.6
million (2 cents per share) and a net loss of $2.2 million (5 cents per share)
for the three and nine month periods ended September 30, 2002. Included in the
current year net losses were net realized gains on securities of $7.2 million
($4.7 million after tax, or 10 cents per share) and $4.7 million ($3.1 million
after tax, or 6 cents per share) for the third quarter and first nine months of
2003, compared to net realized losses of $13.2 million ($8.6 million after tax,
or 20 cents per share) and $51.9 million ($33.8 million after tax, or 81 cents
per share) for the comparable periods a year earlier. In 2002, net income also
included charges for restructuring, debt retirement and class action litigation
which totaled $3.4 million ($2.2 million after tax, or 6 cents per share) and
$7.3 million ($4.7 million after tax, or 12 cents per share) for the three and
nine months, respectively. All per-share amounts are stated on a diluted basis.
As previously announced, the company's earnings for the quarter ended September
30, 2003 were negatively affected by approximately 57 cents per share due to
adverse prior years' development and strengthening of property and casualty
claims reserves. Included in this amount was $30.1 million pretax of adverse
prior years' development, which primarily related to voluntary automobile
liability claims from the 2001 and 2002 accident years. The company also
strengthened current accident year reserves by approximately $8 million pretax
in the third quarter. Total property and casualty reserves were $308.0 million
as of September 30, 2003.
As disclosed in the Form 8-K issued on October 28, 2003 immediately following
the company's earnings pre-announcement conference call, the high level of
property and casualty paid and case reserve activity on
1
older bodily injury claims that was observed in the second quarter of 2003
continued in the third quarter -- across all prior accident years -- as the
company's new claims organization intensified their efforts to bring older
claims files up to date. Furthermore, the acceleration of claim disposition
rates extended into the current quarter, as the new organization also moved to
reduce the backlog of older claims and handle current claims on a timely basis.
These actions resulted in a continuation in the third quarter of the high level
of adverse reserve development experienced in the second quarter of 2003.
"As I mentioned earlier this week, we are obviously disappointed in the
persistent and accelerated levels of adverse prior years' development, which
have become more fully revealed as we have introduced new claims processes in
2003," said Louis G. Lower II, President and Chief Executive Officer. "We have
retained independent property and casualty actuarial and claims consultants from
Deloitte & Touche to conduct a review of our claims operations and reserving
processes. This will include a review of claim files and claim handling
processes and procedures (including case reserving and establishment of
supplemental and IBNR reserves) and will help us understand the continuing
adverse reserve development as well as give us perspective on future
expectations and reserving implications. Completion of this independent review
is targeted for January 2004. While further adjustments to our reserves may be
necessary based on this study, our September 30 held reserves of $308 million
have been established toward what we, and our independent advisors, believe to
be the high end of a reasonable range."
In the third quarter, the company revised its estimated annual effective income
tax rate for 2003 to approximately 3 percent compared to the prior estimate of
approximately 26 percent, reflecting the property and casualty net loss recorded
in the current period.
Net income comparisons to the prior year were adversely impacted by severe
weather experienced in the current period, as further described below. In
addition, net income continued to be negatively impacted by lower interest rates
and decreases in investment income related to investment credit issues
experienced in 2002. These negative prior year comparisons were partially offset
by the impact of property and casualty rate increases on earned premiums and the
company's restructuring of its Massachusetts automobile business.
"As previously announced, we are reducing our guidance for 2003 net income
before realized investment gains and losses to 30 cents to 40 cents per share
for the full year, primarily reflecting the adverse development and
strengthening of property and casualty reserves," said Lower.
Results of Operations
The company's core lines premiums written and contract deposits increased 12 and
8 percent compared to the third quarter and first nine months of 2002,
respectively, resulting from rate increases in the property and automobile lines
and notable growth in new annuity deposits in the third quarter.
2
"Sales for the current quarter increased 34 percent compared to the prior year,
with automobile new premiums up 9 percent and all other core lines growing at
double digit rates. Year to date total sales have increased 12 percent, two
thirds of which was from the increasing momentum in our independent distribution
of annuities," Lower said. "The combination of our independent and career agent
channels produced a significant 52 percent surge in annuity sales for the
quarter. Our career agency force increased 3 percent from a year ago to 899 with
positive gains in productivity for the quarter."
Property and Casualty
Written premiums for voluntary property and casualty insurance increased 7
percent in both the current quarter and the nine months. The growth was a result
of increases in average written premium per policy of approximately 5 percent
for automobile and 14 percent for homeowners compared to the first nine months
of 2002. Excluding Massachusetts, the number of automobile policies in force
increased slightly compared to a year earlier, while homeowners policies in
force decreased by 2 percent. In the current periods, involuntary automobile
premiums were negatively impacted by an adjustment to anticipated premiums from
state reinsurance facilities.
For the third quarter of 2003, the property and casualty segment recorded a net
loss of $22.1 million, compared to net income of $5.6 million for the same
period in 2002. Horace Mann's property and casualty statutory combined ratio was
124.8 percent for the third quarter of 2003, compared to 102.3 percent a year
earlier. For the nine months, the property and casualty segment net loss was
$20.0 million and the combined ratio was 111.5 percent, compared to net income
of $16.1 million and a combined ratio of 103.3 percent a year earlier. In 2002,
the combined ratio reflected the impact of restructuring charges which
represented 2.9 and 1.1 percentage points for the third quarter and nine months,
respectively, as well as class action litigation charges which represented 0.4
percentage points for the nine months. The property and casualty statutory
expense ratio of 22.7 percent for the first nine months of 2003 was 1 percentage
point lower than last year primarily as a result of the non-recurring charge
related to the restructure of the property and casualty claims operation which
was recorded in 2002.
The 2003 property and casualty results included adverse prior years' loss
reserve development, representing 23.0 percentage points of the combined ratio,
or $30.1 million pretax, in the third quarter and 11.1 percentage points, or
$44.3 million pretax, for the nine months. Development of prior years' reserves
decreased 2002 property and casualty pretax earnings $6.3 million and $7.2
million for the third quarter and first nine months, respectively. Compared to
last year, the higher level of weather-related catastrophe losses represented an
increase in the combined ratio of approximately 4 and 5 percentage points for
the quarter and nine months, respectively; non-catastrophe weather losses
further increased the ratio by approximately 1 percentage point for the nine
months.
3
Third quarter 2003 catastrophe losses of $5.7 million pretax were $4.0 million
greater than the same period last year, and somewhat higher than expected
levels. Claims from Hurricane Isabel, primarily in the homeowners line,
represented $4.0 million of the current quarter losses. Compared to the first
nine months of 2002, the increase in losses from weather-related catastrophes
decreased pretax income $13.2 million. Non-catastrophe weather-related losses
for the nine months were approximately $6.0 million pretax greater in 2003
compared to the prior year, although they were approximately $1.0 million lower
in the third quarter.
The voluntary automobile statutory loss ratio for the third quarter of 2003 was
107.3 percent, an increase of 34.5 percentage points compared to 72.8 percent
for the same period in 2002. The current period included 27.6 percentage points
due to adverse development of prior years' reserves, compared to a 4.2
percentage point impact in the prior year. For the first nine months of 2003,
the voluntary automobile statutory loss ratio was 88.5 percent and included 14.8
percentage points of adverse prior years' development.
The property statutory loss ratio of 87.7 percent for the first nine months of
2003 increased 3.9 percentage points from the same period in 2002. Higher
catastrophe losses in the current period accounted for a 10.2 percentage point
increase in the loss ratio compared to the prior year while non-catastrophe
weather losses increased the ratio by approximately 3 percentage points.
Annuity
New annuity deposits increased 26 percent in the current quarter. The nine month
growth of 12 percent primarily reflected a 42 percent increase in new single
premium and rollover deposits. New scheduled annuity deposits decreased 4
percent compared to the first nine months of 2002. At September 30, 2003,
retention of fixed and variable accumulated annuity deposits for the prior 12
months was 95 percent and 92 percent, compared to 94 percent and 93 percent,
respectively, a year earlier. The number of annuity contracts outstanding
increased 4 percent over that 12 month period.
New annuity sales by Horace Mann agents increased 13 percent and 5 percent in
the quarter and nine months, respectively, compared to the prior year. Total
annuity sales increased 52 percent for the quarter and 17 percent for the nine
months, including Horace Mann's independent agent distribution initiative.
Ongoing production from independent agents has shown steady sequential growth
for each month in 2003, with strong growth in the third quarter.
Annuity segment net income was $2.9 million for the third quarter of 2003, a
slight decrease compared to the same period in 2002, while nine month net income
was $8.7 million in the current year and $12.3 million a year earlier. Net
income in 2002 benefited from a reduction in federal income taxes, due to an
updated estimate of the 2002 tax rate. On a pretax basis, income increased $1.9
million compared to the third quarter of 2002 and decreased $3.7 million
compared to the first nine months. Current period earnings were adversely
impacted by
4
a reduction in the pretax net interest margin of $1.0 million for the quarter
and $5.5 million for the nine months, reflecting lower investment income due to
lower interest rates and investment credit issues in 2002. Valuation of annuity
segment deferred acquisition costs and value of acquired insurance in force at
September 30, 2003 resulted in decreases in pretax amortization of $0.2 million
for the current quarter and $0.1 million for the nine months. Similar valuations
a year earlier increased pretax amortization $1.8 million for the quarter and
$1.2 million for the nine months. A decrease in reserves for guaranteed minimum
death benefits (GMDB) increased pretax income by $0.1 million and $0.3 million
in the third quarter and nine months, respectively, compared to a decrease in
pretax income of $0.4 million and $0.7 million for the third quarter and nine
months in 2002. For the current quarter, fee income related to variable annuity
deposits increased $0.4 million compared to last year due primarily to favorable
equity market performance over the preceding six months. On a year-to-date
basis, fee income was slightly below the nine months ended September 30, 2002.
Life
Life segment insurance premiums and contract deposits for the quarter and nine
months were comparable to the same periods a year earlier. Life policies and
insurance in force decreased compared to a year ago; however insurance in force
was comparable to December 31, 2002.
Life segment net income of $2.1 million for the quarter and $9.6 million for the
nine months declined $2.3 million and $3.9 million compared to the respective
prior year periods, reflecting declines in investment income and an increase in
mortality costs. Valuation of life segment deferred acquisition costs at
September 30, 2003 resulted in an increase in pretax amortization of $0.2
million for the current quarter bringing the nine month impact to zero. A
similar valuation in 2002 resulted in reductions in pretax amortization of $0.3
million and $0.9 million for the quarter and nine months.
Realized Investment Gains and Losses
In 2003, pretax realized investment gains were $7.2 million and $4.7 million for
the quarter and nine months, respectively. In the current quarter, impairment of
one security in the amount of $1.2 million pretax was more than offset by gains
from portfolio transactions. Impairment charges totaled $9.3 million pretax for
the nine months ended September 30, 2003. In 2002, the company recorded
impairment charges, largely related to fixed income securities of companies in
the communications sector, which represented the primary component of the $13.2
million and $51.9 million pretax realized investment losses for the third
quarter and nine months, respectively.
Total shares outstanding on September 30, 2003 and 2002 were 42,721,940 and
40,853,319, respectively. The company has not repurchased shares of its common
stock since the third quarter of 2000.
5
Book value per share was $12.47 at September 30, 2003, an increase of 5 percent
compared to 12 months earlier, including the effects of unrealized investment
gains and losses. Excluding unrealized investment gains and losses, book value
per share decreased 2 percent compared to September 30, 2002. Return on equity
based on net income was 2 percent for the twelve months ended September 30,
2003.
Horace Mann -- the largest national multiline insurance company focusing on
educators' financial needs -- provides retirement annuities, life insurance,
property/casualty insurance, and other financial solutions. Founded by educators
for educators in 1945, the company is headquartered in Springfield, Ill. Horace
Mann is publicly traded on the New York Stock Exchange as HMN. 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
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as the result of new information, future events or
otherwise. Information concerning factors that could cause actual results to
differ materially from those in forward-looking statements is contained from
time to time in the company's public filings with the Securities and Exchange
Commission.
# # #
HORACE MANN EDUCATORS CORPORATION
Digest of Earnings and Highlights
(Dollars in Millions, Except Per Share Data)
Quarter Ended Nine Months Ended
September 30, September 30,
---------------------- ------------------------
2003 2002 % Change 2003 2002 % Change
---- ---- -------- ---- ---- --------
DIGEST OF EARNINGS
Net income (loss) ($14.3) $ 0.6 ($4.1) ($2.2)
Net income (loss) per share:
Basic ($0.34) $ 0.02 ($0.10) ($0.05)
Diluted ($0.34) $ 0.02 ($0.10) ($0.05)
Weighted average number of shares and equivalent shares:
Basic 42.7 40.8 42.7 40.8
Diluted 42.9 41.0 42.9 41.2
HIGHLIGHTS
Operations
Insurance premiums written
and contract deposits
Core lines $250.0 $224.1 11.6% $ 704.0 $ 653.8 7.7%
Total 251.4 232.7 8.0% 705.7 663.0 6.4%
Return on equity (A) 1.8% 0.6%
Property & Casualty statutory
combined ratio (B) 124.8% 102.3% 111.5% 103.3%
Property & Casualty statutory combined
ratio before catastrophes (B) 120.5% 101.0% 106.7% 101.7%
Experienced agents 498 512 -2.7%
Financed agents 401 357 12.3%
Total agents 899 869 3.5%
Additional Per Share Information
Dividends paid $0.105 $0.105 - $ 0.315 $ 0.315 -
Book value (C) $ 12.47 $ 11.93 4.5%
Financial Position
Total assets $5,295.9 $ 4,842.1 9.4%
Short-term debt - -
Long-term debt 144.7 187.7
Total shareholders' equity 532.8 487.3 9.3%
(A) Based on 12-month net income and average quarter-end shareholders'
equity.
(B) Consistent with management's evaluation of the property and casualty
operations, the combined ratio, which is the sum of the loss ratio and
the expense ratio, is computed based on financial information prepared
in accordance with statutory accounting principles and as reported to
state insurance departments. Expenses are divided by net written
premiums. Statutory expenses differ from GAAP expenses primarily with
regard to policy acquisition costs, which are not deferred and amortized
for statutory purposes, but rather recognized as incurred. The sum of
losses and loss adjustment expenses incurred is divided by net earned
premiums. Property and casualty statutory net written premiums and net
earned premiums differ from the comparable GAAP amounts primarily with
regard to the classification of certain service fees and escrowed
amounts.
(C) Before the market value adjustment for investments, book value per share
was $10.07 at September 30, 2003 and $10.25 at September 30, 2002.
Ending shares outstanding were 42,721,940 at September 30, 2003,
42,691,244 at December 31, 2002 and 40,853,319 at September 30, 2002.
-1-
HORACE MANN EDUCATORS CORPORATION
Statements of Operations and Income Reconciliations
(Dollars in Millions, Except Per Share Data)
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
2003 2002 % Change 2003 2002 % Change
---- ---- -------- ---- ---- --------
STATEMENTS OF OPERATIONS
Insurance premiums written
and contract deposits (A) $251.4 $232.7 8.0% $705.7 $663.0 6.4%
Insurance premiums and
contract charges earned (A) $158.3 $155.6 1.7% $478.0 $465.5 2.7%
Net investment income 45.4 47.6 -4.6% 138.5 147.6 -6.2%
Realized investment gains (losses) 7.2 (13.2) 4.7 (51.9)
Total revenues 210.9 190.0 11.0% 621.2 561.2 10.7%
Benefits, claims and settlement expenses 148.4 112.9 388.6 338.2
Interest credited 25.9 24.5 76.8 73.1
Policy acquisition expenses amortized 16.7 16.9 50.3 45.8
Operating expenses 32.6 32.3 0.9% 99.2 96.3 3.0%
Amortization of intangible assets 2.3 1.9 4.8 4.6
Interest expense 1.6 2.3 4.7 6.7
Restructuring charges (adjustments) (0.4) 4.2 (0.4) 4.2
Debt retirement costs (gains) - (0.8) - 1.5
Litigation charges - - - 1.6
Total benefits, losses and expenses 227.1 194.2 16.9% 624.0 572.0 9.1%
Income (loss) before income taxes (16.2) (4.2) (2.8) (10.8)
Income tax expense (benefit) (1.9) (4.8) 1.3 (8.6)
Net income (loss) ($14.3) $0.6 ($4.1) ($2.2)
(A) Effective December 31, 2001, Horace Mann ceased writing automobile insurance
policies in Massachusetts. See footnote (A) on page 3 for quantification.
-2-
HORACE MANN EDUCATORS CORPORATION
Supplemental GAAP Consolidated Data
(Dollars in Millions)
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
2003 2002 % Change 2003 2002 % Change
---- ---- -------- ---- ---- --------
Analysis of Premiums Written
and Contract Deposits
Automobile and property (voluntary) (A) $145.2 $135.8 6.9% $410.2 $382.1 7.4%
Annuity deposits 78.0 61.8 26.2% 212.3 190.2 11.6%
Life insurance 26.8 26.5 1.1% 81.5 81.5 -
Subtotal - core lines 250.0 224.1 11.6% 704.0 653.8 7.7%
Involuntary and other property & casualty (A) 1.4 8.6 1.7 9.2
Total (A) 251.4 232.7 8.0% 705.7 663.0 6.4%
Total, excluding Massachusetts automobile (A) 251.4 232.5 8.1% 705.7 661.6 6.7%
Analysis of Net Income (Loss)
Property & Casualty
Before catastrophes ($18.4) $ 6.7 ($7.6) $ 20.0
Catastrophe losses, after tax (3.7) (1.1) (12.4) (3.9)
Total Property & Casualty (22.1) 5.6 (20.0) 16.1
Annuity 2.9 3.1 -6.5% 8.7 12.3 -29.3%
Life 2.1 4.4 -52.3% 9.6 13.5 -28.9%
Corporate and other (B) 2.8 (12.5) (2.4) (44.1)
Net income (loss) (14.3) 0.6 (4.1) (2.2)
(A) Effective December 31, 2001, Horace Mann ceased
writing automobile insurance policies in
Massachusetts. This business represented the
following amounts for the periods indicated:
Premiums written
Voluntary automobile and core lines - - - -
Total - $ 0.2 - $ 1.4
Premiums earned
Voluntary automobile and core lines - 1.9 - 9.3
Total - 3.3 $ 0.2 14.3
Policies in force (in thousands)
Voluntary automobile - 6
(B) The Corporate and Other segment includes interest
expense on debt and the impact of realized
investment gains and losses and other reconciling
items to net income (loss). The Company does not
allocate the impact of corporate level
transactions to the insurance segments consistent
with management's evaluation of the results of
those segments. See detail for this segment on
page 5.
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HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview
(Dollars in Millions)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- ---------------------
2003 2002 % Change 2003 2002 % Change
---- ---- -------- ---- ---- --------
Property & Casualty
Premiums written (A) $146.6 $144.4 1.5% $411.9 $391.3 5.3%
Premiums earned (A) 130.3 130.2 0.1% 395.7 386.8 2.3%
Net investment income 7.9 8.0 -1.3% 23.9 26.4 -9.5%
Losses and loss adjustment expenses 135.5 101.2 353.0 305.7
Operating expenses (includes policy acquisition expenses
amortized) 30.7 30.7 93.3 87.9
Income (loss) before tax (28.0) 6.3 (26.7) 19.6
Net income (loss) (22.1) 5.6 (20.0) 16.1
Net investment income, after tax 6.6 6.3 4.8% 19.6 20.2 -3.0%
Catastrophe losses, after tax 3.7 1.1 12.4 3.9
Statutory operating statistics (B):
Loss and loss adjustment expense ratio 103.6% 77.7% 88.8% 79.6%
Expense ratio 21.2% 24.6% 22.7% 23.7%
Combined ratio 124.8% 102.3% 111.5% 103.3%
Expense ratio impact of restructuring charges (C) - 2.9% - 1.1%
Impact of litigation charges (D) - - - 0.4%
Combined ratio before catastrophes 120.5% 101.0% 106.7% 101.7%
Automobile and property detail:
Premiums written (voluntary) (A) $145.2 $135.8 6.9% $410.2 $382.1 7.4%
Automobile (A) 101.9 96.8 5.3% 298.2 281.3 6.0%
Property 43.3 39.0 11.0% 112.0 100.8 11.1%
Premiums earned, including Massachusetts (voluntary)(A) 134.8 126.5 6.6% 396.0 376.7 5.1%
Premiums earned, excluding Massachusetts (voluntary)(A) 134.8 124.6 8.2% 396.0 367.4 7.8%
Automobile, excluding Massachusetts (A) 98.6 92.0 7.2% 290.6 271.9 6.9%
Automobile, including Massachusetts (A) 98.6 93.9 5.0% 290.6 281.2 3.3%
Property 36.2 32.6 11.0% 105.4 95.5 10.4%
Policies in force (voluntary) (in thousands) (A) 852 863 -1.3%
Automobile, excluding Massachusetts (A) 574 573 0.2%
Automobile, including Massachusetts (A) 574 579 -0.9%
Property 278 284 -2.1%
Voluntary automobile statutory operating statistics (B):
Loss and loss adjustment expense ratio 107.3% 72.8% 88.5% 76.8%
Expense ratio 22.6% 26.7% 23.0% 24.3%
Combined ratio 129.9% 99.5% 111.5% 101.1%
Expense ratio impact of restructuring charges (C) - 3.4% - 1.2%
Impact of litigation charges (D) - - - 0.6%
Combined ratio before catastrophes 129.0% 99.1% 110.2% 100.4%
Total property statutory operating statistics (B):
Loss and loss adjustment expense ratio 83.1% 88.0% 87.7% 83.8%
Expense ratio 19.6% 22.5% 21.8% 21.9%
Combined ratio 102.7% 110.5% 109.5% 105.7%
Expense ratio impact of restructuring charges (C) - 2.4% - 0.9%
Combined ratio before catastrophes 89.3% 106.2% 94.8% 101.2%
Prior years' reserves favorable (adverse) development, pretax
Voluntary automobile (D) ($27.4) ($4.0) ($43.2) ($5.4)
Total property (1.6) (1.1) (0.5) (1.1)
Other property and casualty (1.1) (1.2) (0.6) (2.3)
Total (D) (30.1) (6.3) (44.3) (8.8)
(A) Effective December 31, 2001, Horace Mann ceased writing automobile
insurance policies in Massachusetts. See footnote (A) on page 3 for
quantification.
(B) Also see footnote (B) on page 1.
(C) Represents a $4.2 million pretax statutory accounting charge for claims
restructuring costs for the three and nine months ended September 30, 2002.
$3.3 million was charged to voluntary automobile, and $0.9 million was
charged to property.
(D) Includes a $1.6 million pretax statutory accounting charge for class action
litigation for the nine months ended September 30, 2002 which was recorded
in the second quarter of 2002.
-4-
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview
(Dollars in Millions)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- ---------------------
2003 2002 % Change 2003 2002 % Change
---- ---- -------- ---- ---- --------
Annuity
Contract deposits $78.0 $61.8 26.2% $ 212.3 $ 190.2 11.6%
Variable 25.3 25.7 -1.6% 79.0 87.8 -10.0%
Fixed 52.7 36.1 46.0% 133.3 102.4 30.2%
Contract charges earned 3.9 3.5 11.4% 10.6 10.9 -2.8%
Net investment income 26.0 26.4 -1.5% 78.1 81.2 -3.8%
Net interest margin (without realized gains) 8.1 9.1 24.9 30.4
Net margin (includes fees and contract charges earned) 12.5 13.0 -3.8% 36.9 42.8 -13.8%
Mortality gain (loss) and other reserve changes (0.2) (1.3) (0.7) (1.9)
Operating expenses
(includes policy acquisition expenses amortized) 6.2 7.9 19.8 21.1
Income before tax and amortization of intangible assets 6.1 3.8 60.5% 16.4 19.8 -17.2%
Amortization of intangible assets 1.9 1.5 3.6 3.3
Income before tax 4.2 2.3 12.8 16.5
Net income 2.9 3.1 -6.5% 8.7 12.3 -29.3%
Annuity contracts in force (in thousands) 150 144 4.2%
Accumulated value on deposit $2,647.1 $2,290.1 15.6%
Variable 1,031.9 817.8 26.2%
Fixed 1,615.2 1,472.3 9.7%
Annuity accumulated value retention - 12 months
Variable accumulations 92.4% 92.5%
Fixed accumulations 94.9% 94.1%
Life
Premiums and contract deposits $26.8 $26.5 1.1% $ 81.5 $ 81.5 -
Premiums and contract charges earned 24.1 21.9 10.0% 71.7 67.8 5.8%
Net investment income 11.9 13.4 -11.2% 37.4 40.6 -7.9%
Income before tax 3.2 6.7 14.8 20.9
Net income 2.1 4.4 -52.3% 9.6 13.5 -28.9%
Life policies in force (in thousands) 260 270 -3.7%
Life insurance in force (in millions) $ 13,212 $ 13,379 -1.2%
Lapse ratio - 12 months
(Ordinary life insurance) 8.1% 9.4%
Corporate and Other (A)
Components of loss before tax:
Realized investment gains (losses) $7.2 ($13.2) $ 4.7 ($51.9)
Restructuring (charges) adjustments 0.4 (4.2) 0.4 (4.2)
Debt retirement (costs) gains - 0.8 - (1.5)
Litigation charges - - - (1.6)
Interest expense (1.6) (2.3) (4.7) (6.7)
Other operating expenses (1.6) (0.6) (4.1) (1.9)
Gain (loss) before tax 4.4 (19.5) (3.7) (67.8)
Net gain (loss) 2.8 (12.5) (2.4) (44.1)
(A) The Corporate and Other segment includes interest expense on debt and the
impact of realized investment gains and losses and other reconciling
items to net income (loss). The Company does not allocate the impact of
corporate level transactions to the insurance segments consistent with
management's evaluation of the results of those segments.
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HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview
(Dollars in Millions)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- ---------------------
2003 2002 % Change 2003 2002 % Change
---- ---- -------- ---- ---- --------
Investments
Annuity and Life
Fixed maturities, at market
(amortized cost 2003, $2,419.7; 2002, $2,216.1) $2,554.8 $2,301.1
Mortgage loans and real estate 4.6 5.0
Short-term investments 56.0 87.3
Short-term investments, securities lending collateral 433.9 430.5
Policy loans and other 74.9 67.6
-------- --------
Total Annuity and Life investments 3,124.2 2,891.5 8.0%
Property & Casualty
Fixed maturities, at market
(amortized cost 2003, $584.4; 2002, $567.9) 615.3 594.4
Short-term investments 3.1 14.3
Short-term investments, securities lending collateral - 13.3
Other 2.5 0.4
-------- --------
Total Property & Casualty investments 620.9 622.4 -0.2%
Corporate investments 8.7 21.1
Total investments 3,753.8 3,535.0 6.2%
Net investment income
Before tax $45.4 $47.6 -4.6% $ 138.5 $147.6 -6.2%
After tax 31.0 32.1 -3.4% 94.1 99.0 -4.9%
Realized investment gains (losses) by
investment portfolio included in
Corporate & Other segment income
Property & Casualty $ 0.7 ($4.9) ($0.8) ($16.1)
Annuity 4.2 (4.6) 5.6 (21.8)
Life 2.3 (3.7) (0.1) (13.6)
Corporate and Other - - - (0.4)
Total, before tax 7.2 (13.2) 4.7 (51.9)
Total, after tax 4.7 (8.6) 3.1 (33.8)
Per share, diluted $0.10 ($0.20) $ 0.06 ($0.81)
Other Information
End of period goodwill asset $ 47.4 $ 47.4
End of period property and casualty net reserves as of:
September 30, 2003 $ 308.0
June 30, 2003 285.4
March 31, 2003 275.7
December 31, 2002 272.6
September 30, 2002 273.2
June 30, 2002 273.5
March 31, 2002 270.5
December 31, 2001 272.0
September 30, 2001 274.6
June 30, 2001 271.6
March 31, 2001 248.6
December 31, 2000 249.8
September 30, 2000 226.9
June 30, 2000 228.8
March 31, 2000 225.3
December 31, 1999 235.4
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