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 FOURTH QUARTER AND YEAR
SPRINGFIELD, Ill., February 17, 2004 -- Horace Mann Educators Corporation
(NYSE:HMN) today reported net income of $23.1 million (54 cents per share) and
$19.0 million (44 cents per share) for the three and twelve months ended
December 31, 2003, respectively, including adverse development and strengthening
of prior years' property and casualty reserves as well as a significant level of
catastrophe losses. These results compare to net income of $13.5 million (33
cents per share) and $11.3 million (28 cents per share) for the same periods in
2002. Included in current year net income were net realized gains on securities
of $20.8 million ($13.5 million after tax, or 32 cents per share) and $25.5
million ($16.6 million after tax, or 38 cents per share) for the fourth quarter
and twelve months of 2003, compared to net realized gains of $2.5 million ($1.6
million after tax, or 4 cents per share) and net realized losses of $49.4
million ($32.2 million after tax, or 77 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 $0.8
million ($0.5 million after tax, or 1 cent per share) and $8.1 million ($5.2
million after tax, or 13 cents per share) for the three and twelve months,
respectively. All per-share amounts are stated on a diluted basis.
The company's earnings for the quarter ended December 31, 2003 were negatively
affected by $12.1 million pretax, approximately 18 cents per share, of adverse
development and strengthening of prior years' property and casualty claims
reserves, which primarily related to voluntary automobile liability claims.
Total property and casualty reserves were $320.9 million as of December 31,
2003.
The independent property and casualty actuarial and claims consultants from
Deloitte & Touche recently completed the previously announced review of the
company's claims operations and reserving processes. This included a review of
claims files and claim handling processes and procedures (including case
reserving) and the process for establishing supplemental and IBNR reserves.
In addition, Deloitte was engaged to perform the independent property and
casualty claims reserve study for December 31, 2003.
1
"The in-depth review conducted by Deloitte and the additional insights it has
provided regarding recent adverse property and casualty reserve development have
been incorporated into the establishment of year-end reserves," stated Louis G.
Lower II, President and Chief Executive Officer. "Reserve levels at December 31,
2003 are consistent with Deloitte's point estimates with the exception of
voluntary automobile liability reserves which were recorded toward the high end
of their range to improve our confidence in the property and casualty reserve
levels going into 2004."
As previously announced, the company's earnings for the quarter ended December
31, 2003 were also negatively affected by catastrophe losses. Total catastrophe
losses were 21 cents per share for the quarter, due primarily to the California
wildfires, compared to losses of 9 cents per share in the fourth quarter of
2002.
These negative prior year comparisons were partially offset by the impact of
property and casualty rate increases on earned premiums and favorable property
loss results excluding the impact of catastrophes.
"Our underlying 2003 results support a preliminary full year 2004 estimate of
net income before realized investment gains and losses of between $1.20 and
$1.30 per share," said Lower. "This projection anticipates improvement in the
property and casualty statutory combined ratio and stabilization of operating
results in the annuity and life segments."
Results of Operations
The company's core lines premiums written and contract deposits increased 9 and
8 percent compared to the fourth quarter and twelve months of 2002,
respectively, resulting from rate increases in the property and automobile lines
and notable growth in new annuity deposits in both the third and fourth
quarters.
Horace Mann's career agency force totaled 888 agents at December 31, 2003.
"While the number of agents declined compared to a year ago, average agent
productivity increased for both the fourth quarter and the year. We have
implemented additional programs to continue development of a high quality agency
force and improve retention of productive agents," Lower said. "Total sales
increased 25 percent and 15 percent for the quarter and full year, respectively,
compared to the prior year. While also benefitting from strong life and
homeowner insurance sales, this increase was primarily driven by growth in new
annuity deposits. The combination of our independent and career agent channels
produced growth of 34 percent in annuity sales for the quarter and 22 percent
for the year."
Property and Casualty
Written premiums for voluntary property and casualty insurance increased 6
percent and 7 percent in the current quarter and twelve months, respectively. On
an annual basis, the growth was a result of increases in average written premium
per policy of approximately 5 percent for automobile and 12 percent for
homeowners. The number of automobile policies in force decreased slightly
compared to a year earlier, and homeowners policies in force decreased by 2
percent. In
2
the current periods, involuntary automobile and involuntary property premiums
were negatively impacted by adjustments to anticipated premiums from state
reinsurance facilities.
For the fourth quarter of 2003, property and casualty segment net income was
$2.2 million, compared to $3.8 million for the same period in 2002. Horace
Mann's property and casualty statutory combined ratio was 111.5 percent for the
fourth quarter of 2003, compared to 104.8 percent a year earlier. For the year,
the property and casualty segment recorded a net loss of $17.8 million and the
combined ratio was 111.5 percent, compared to net income of $19.9 million and a
combined ratio of 103.6 percent a year earlier. In 2002, the combined ratio
reflected the impact of restructuring charges, which represented 0.8 percentage
points for the year, as well as class action litigation charges, which
represented 0.3 percentage points for the twelve months. The property and
casualty statutory expense ratio of 23.2 percent for the full year 2003 was 1
percentage point lower than a year earlier, primarily as a result of the
non-recurring charge related to the restructure of the property and casualty
claims operation recorded in 2002.
The 2003 property and casualty results included adverse prior years' loss
reserve development representing 8.8 percentage points of the combined ratio, or
$12.1 million pretax, in the fourth quarter and 10.5 percentage points, or $56.4
million pretax, for the full year. In 2002, development of prior years' reserves
decreased property and casualty pretax earnings $15.2 million and $24.0 million
for the fourth quarter and full year, respectively. Compared to the prior year,
the higher level of 2003 wildfire and weather-related catastrophe losses
represented an increase in the combined ratio of approximately 6 and 4
percentage points for the quarter and year, respectively.
Fourth quarter 2003 catastrophe losses of $14.0 million pretax were $8.1 million
greater than the same period a year earlier. Homeowner claims from the
California wildfires, net of anticipated reinsurance recoveries, represented
$12.0 million of the current quarter's losses. For the full year, catastrophe
losses in 2003 were $21.3 million greater than in 2002.
The voluntary automobile statutory loss ratio for the fourth quarter of 2003 was
93.0 percent, an increase of 15.4 percentage points compared to 77.6 percent for
the same period in 2002. The current period included 13.7 percentage points due
to adverse development of prior years' reserves, compared to a 10.7 percentage
point impact in the prior year. For full year 2003, the voluntary automobile
statutory loss ratio was 89.7 percent and included 14.5 percentage points of
adverse prior years' development, compared to a 2002 loss ratio of 77.0 percent
including 4.1 percentage points of adverse prior years' development.
The property statutory loss ratio of 82.6 percent for the full year increased
1.6 percentage points compared to 2002 in spite of a 13.1 percentage point
increase attributable to higher catastrophe losses in the current year. For full
year 2003, the property statutory combined
3
ratio excluding catastrophes of 84.5 percent improved 11.9 percentage points
compared to the prior year, due primarily to the favorable results in the
current quarter.
Annuity
New annuity deposits in the fourth quarter increased 18 percent over the prior
year. The full year growth of 13 percent primarily reflected a 46 percent
increase in new single premium and rollover deposits. New scheduled annuity
deposits decreased 4 percent compared to the full year 2002. During 2003, the
retention ratio for fixed and variable accumulated annuity deposits remained
strong -- in the mid-90s -- and the number of annuity contracts outstanding
increased 4 percent compared to December 31, 2002.
New annuity sales by Horace Mann agents increased 1 percent and 4 percent in the
quarter and year, respectively, compared to the same periods in 2002. Primarily
driven by Horace Mann"s independent agent distribution initiative, total annuity
sales increased 34 percent for the quarter and 22 percent for the full year.
Annuity production from independent agents has shown steady sequential growth
for each quarter in 2003, particularly in the last six months. "In 2004, we will
continue to leverage the independent agent channel as a key source for growth in
our annuity business, but with greater emphasis on variable deposits to improve
overall returns in this low interest rate environment," Lower commented.
Annuity segment net income was $5.7 million for the fourth quarter of 2003, an
increase of 21 percent compared to the same period in 2002, while full year net
income was $14.4 million in 2003 versus $17.0 million a year earlier. On a
pretax basis, fourth quarter 2003 income increased $0.3 million compared to 2002
while full year pretax income decreased $3.4 million versus prior year. Current
period earnings were adversely impacted by a reduction in the pretax net
interest margin of $0.7 million for the quarter and $6.2 million for the year,
reflecting spread compression due to lower investment income.
Valuation of annuity segment deferred acquisition costs and value of acquired
insurance in force at December 31, 2003 increased pretax income by $1.3 million
and $2.6 million for the current quarter and year, respectively, compared to
similar valuations a year earlier. Changes in reserves for guaranteed minimum
death benefits (GMDB) in 2003 increased pretax income by $0.2 million and $1.2
million in the fourth quarter and full year, respectively, compared to the
changes recorded for the same periods in 2002. For the current quarter and year,
fee income related to variable annuity deposits increased $0.7 million and $0.4
million, respectively, compared to 2002, due primarily to favorable equity
market performance.
Life
Life segment insurance premiums and contract deposits for the quarter and year
decreased slightly compared to the same periods in 2002. Life policies in force
declined while the amount of insurance in force increased during 2003.
4
Life segment net income of $3.8 million for the quarter and $13.4 million for
the year declined $1.6 million and $5.5 million compared to the respective
periods in 2002, primarily reflecting a decline in investment income and an
increase in mortality costs. Valuation of life segment deferred acquisition
costs at December 31, 2003 increased pretax income by $1.9 million and $1.0
million in the current quarter and year, respectively, compared to a similar
valuation in 2002.
Realized Investment Gains and Losses
In 2003, pretax realized investment gains were $20.8 million and $25.5 million
for the quarter and year, respectively. In the current quarter, impairment of
one security in the amount of $3.2 million pretax was more than offset by gains
from portfolio transactions. Gains realized in the quarter included $12.9
million pretax from sales of securities impaired in 2002. For the year ended
December 31, 2003, impairment charges totaled $12.5 million pretax. 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 $49.4 million pretax realized investment losses for the year.
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 Year Ended
December 31, December 31,
---------------- ----------------
2003 2002 % Change 2003 2002 % Change
------ ------ -------- ------ ------ --------
DIGEST OF EARNINGS
- ------------------
Net income $ 23.1 $ 13.5 71.1% $ 19.0 $ 11.3 68.1%
Net income per share:
Basic $ 0.54 $ 0.33 63.6% $ 0.44 $ 0.28 57.1%
Diluted $ 0.54 $ 0.33 63.6% $ 0.44 $ 0.28 57.1%
Weighted average number of shares and equivalent shares:
Basic 42.7 41.3 42.7 40.9
Diluted 42.9 41.5 42.9 41.2
HIGHLIGHTS
- ----------
Operations
- ----------
Insurance premiums written
and contract deposits
Core lines $254.2 $233.8 8.7% $958.2 $887.6 8.0%
Total 249.8 236.3 5.7% 955.5 899.3 6.2%
Return on equity (A) 3.5% 2.4%
Property & Casualty statutory
combined ratio (B) 111.5% 104.8% 111.5% 103.6%
Property & Casualty statutory combined
ratio before catastrophes (B) 101.3% 100.3% 105.3% 101.3%
Experienced agents 510 527 -3.2%
Financed agents 378 395 -4.3%
Total agents 888 922 -3.7%
Additional Per Share Information
- --------------------------------
Dividends paid $0.105 $0.105 - $ 0.42 $ 0.42 -
Book value (C) $12.42 $12.39 0.2%
Financial Position
- ------------------
Total assets $4,983.6 $4,512.3 10.4%
Short-term debt $ 25.0 -
Long-term debt 144.7 144.7
Total shareholders' equity 530.5 528.8 0.3%
(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 $10.51 at December 31, 2003 and $10.50 at December 31, 2002. Ending
shares outstanding were 42,721,940 at December 31, 2003 and 42,691,244 at
December 31, 2002.
-1-
HORACE MANN EDUCATORS CORPORATION
Statements of Operations
(Dollars in Millions, Except Per Share Data)
Quarter Ended Year Ended
December 31, December 31,
---------------- ----------------
2003 2002 % Change 2003 2002 % Change
------ ------ -------- ------ ------ --------
STATEMENTS OF OPERATIONS
- ------------------------
Insurance premiums written
and contract deposits (A) $249.8 $236.3 5.7% $955.5 $899.3 6.2%
Insurance premiums and
contract charges earned (A) $165.5 $159.7 3.6% $643.5 $625.2 2.9%
Net investment income 46.2 48.4 -4.5% 184.7 196.0 -5.8%
Realized investment gains (losses) 20.8 2.5 25.5 (49.4)
Total revenues 232.5 210.6 10.4% 853.7 771.8 10.6%
Benefits, claims and settlement expenses 130.4 112.7 519.0 450.9
Interest credited 26.2 25.3 103.0 98.4
Policy acquisition expenses amortized 14.0 15.5 64.3 61.3
Operating expenses 38.1 34.9 9.2% 137.3 131.2 4.6%
Amortization of intangible assets 0.2 1.1 5.0 5.7
Interest expense 1.6 1.8 6.3 8.5
Restructuring charges (adjustments) - - (0.4) 4.2
Debt retirement costs - 0.8 - 2.3
Litigation charges - - - 1.6
Total benefits, losses and expenses 210.5 192.1 9.6% 834.5 764.1 9.2%
Income before income taxes 22.0 18.5 18.9% 19.2 7.7 149.4%
Income tax expense (benefit) (1.1) 5.0 0.2 (3.6)
Net income $ 23.1 $ 13.5 71.1% $ 19.0 $ 11.3 68.1%
(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 Year Ended
December 31, December 31,
---------------- ----------------
2003 2002 % Change 2003 2002 % Change
------ ------ -------- ------ ------ --------
Analysis of Premiums Written
and Contract Deposits
- ----------------------------
Automobile and property (voluntary) (A) $139.0 $131.1 6.0% $549.2 $513.2 7.0%
Annuity deposits 84.3 71.3 18.2% 296.6 261.5 13.4%
Life 30.9 31.4 -1.6% 112.4 112.9 -0.4%
Subtotal - core lines 254.2 233.8 8.7% 958.2 887.6 8.0%
Involuntary and other property & casualty (A) (4.4) 2.5 (2.7) 11.7
Total (A) 249.8 236.3 5.7% 955.5 899.3 6.2%
Total, excluding Massachusetts automobile (A) 249.8 236.5 5.6% 955.5 898.1 6.4%
Analysis of Net Income
- ----------------------
Property & Casualty
Before catastrophes $ 11.4 $ 7.7 48.1% $ 3.8 $ 27.7 -86.3%
Catastrophe losses, after tax (9.2) (3.9) (21.6) (7.8)
Total Property & Casualty 2.2 3.8 -42.1% (17.8) 19.9
Annuity 5.7 4.7 21.3% 14.4 17.0 -15.3%
Life 3.8 5.4 -29.6% 13.4 18.9 -29.1%
Corporate and other (B) 11.4 (0.4) 9.0 (44.5)
Net income 23.1 13.5 71.1% 19.0 11.3 68.1%
(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) - $ 1.2
Premiums earned
Voluntary automobile and core lines - 0.6 - 9.9
Total - 1.3 $ 0.2 15.6
Policies in force (in thousands)
Voluntary automobile - -
(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. 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.
-3-
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
------------------- -------------------
2003 2002 % Change 2003 2002 % Change
------- ------ --------- -------- -------- ---------
Property & Casualty
- -------------------
Premiums written (A) $ 134.6 $ 133.6 0.7% $ 546.5 $524.9 4.1%
Premiums earned (A) 138.1 132.8 4.0% 533.8 519.6 2.7%
Net investment income 8.0 8.8 -9.1% 31.9 35.2 -9.4%
Losses and loss adjustment expenses 119.9 104.5 472.9 410.2
Operating expenses (includes policy
acquisition expenses amortized) 34.7 32.9 128.0 120.8
Income (loss) before tax (8.5) 4.2 (35.2) 23.8
Net income (loss) 2.2 3.8 -42.1% (17.8) 19.9
Net investment income, after tax 6.6 6.9 -4.3% 26.2 27.1 -3.3%
Catastrophe losses, after tax 9.2 3.9 21.6 7.8
Statutory operating statistics (B):
Loss and loss adjustment expense ratio 87.0% 78.3% 88.3% 79.2%
Expense ratio 24.5% 26.5% 23.2% 24.4%
Combined ratio 111.5% 104.8% 111.5% 103.6%
Expense ratio impact of restructuring charges (C) - - - 0.8%
Impact of litigation charges (D) - - - 0.3%
Combined ratio before catastrophes 101.3% 100.3% 105.3% 101.3%
Automobile and property detail:
Premiums written (voluntary) (A) $ 139.0 $ 131.1 6.0% $ 549.2 $513.2 7.0%
Automobile (A) 101.2 95.5 6.0% 399.4 376.8 6.0%
Property 37.8 35.6 6.2% 149.8 136.4 9.8%
Premiums earned, including Massachusetts (voluntary) (A) 138.8 127.6 8.8% 534.8 504.3 6.0%
Premiums earned, excluding Massachusetts (voluntary) (A) 138.8 127.0 9.3% 534.8 494.4 8.2%
Automobile, excluding Massachusetts (A) 100.7 93.4 7.8% 391.3 365.3 7.1%
Automobile, including Massachusetts (A) 100.7 94.0 7.1% 391.3 375.2 4.3%
Property 38.1 33.6 13.4% 143.5 129.1 11.2%
Policies in force (voluntary) (in thousands) (A) 850 857 -0.8%
Automobile, excluding Massachusetts (A) 571 573 -0.3%
Automobile, including Massachusetts (A) 571 573 -0.3%
Property 279 284 -1.8%
Voluntary automobile statutory operating statistics (B):
Loss and loss adjustment expense ratio 93.0% 77.6% 89.7% 77.0%
Expense ratio 23.5% 26.1% 23.1% 24.8%
Combined ratio 116.5% 103.7% 112.8% 101.8%
Expense ratio impact of restructuring charges (C) - - - 0.9%
Impact of litigation charges (D) - - - 0.4%
Combined ratio before catastrophes 116.1% 103.2% 111.7% 101.2%
Total property statutory operating statistics (B):
Loss and loss adjustment expense ratio 68.0% 73.5% 82.6% 81.0%
Expense ratio 24.9% 25.3% 22.5% 22.9%
Combined ratio 92.9% 98.8% 105.1% 103.9%
Expense ratio impact of restructuring charges (C) - - - 0.7%
Combined ratio before catastrophes 55.5% 83.6% 84.5% 96.4%
Prior years' reserves favorable (adverse)
development, pretax
Voluntary automobile (D) $ (13.8) $ (10.1) $ (57.0) $(15.5)
Total property (0.1) (3.1) (0.6) (4.2)
Other property and casualty 1.8 (2.0) 1.2 (4.3)
Total (D) (12.1) (15.2) (56.4) (24.0)
(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 year ended December 31, 2002 which was recorded
in the third quarter of 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 year ended December 31, 2002 which was recorded in the
second quarter of 2002.
-4-
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
------------------- ------------------
2003 2002 % Change 2003 2002 % Change
--------- ------- ---------- --------- -------- ---------
Annuity
- -------
Contract deposits $84.3 $71.3 18.2% $ 296.6 $ 261.5 13.4%
Variable 36.3 32.5 11.7% 115.3 120.3 -4.2%
Fixed 48.0 38.8 23.7% 181.3 141.2 28.4%
Contract charges earned 4.0 3.3 21.2% 14.6 14.2 2.8%
Net investment income 26.3 26.5 -0.8% 104.4 107.7 -3.1%
Net interest margin
(without realized gains) 8.2 8.9 33.1 39.3
Net margin (includes fees and
contract charges earned) 10.8 12.7 -15.0% 49.6 55.5 -10.6%
Mortality gain (loss) and other reserve changes (0.1) 1.1 (0.8) (0.8)
Operating expenses (includes policy
acquisition expenses amortized) 3.9 6.4 25.6 27.5
Income before tax and amortization of
intangible assets 6.8 7.4 -8.1% 23.2 27.2 -14.7%
Amortization of intangible assets (0.2) 0.7 3.4 4.0
Income before tax 7.0 6.7 19.8 23.2
Net income 5.7 4.7 21.3% 14.4 17.0 -15.3%
Pretax income increase (decrease) due to valuation of:
Deferred policy acquisition costs $ 1.4 $ 0.9 $ 2.4 $0.1
Value of acquired insurance in force 1.1 0.3 0.2 (0.1)
Guaranteed minimum death benefit reserve 0.4 0.2 0.7 (0.5)
Annuity contracts in force (in thousands) 153 147 4.1%
Accumulated value on deposit $2,769.8 $2,360.5 17.3%
Variable 1,119.2 854.5 31.0%
Fixed 1,650.6 1,506.0 9.6%
Annuity accumulated value retention - 12 months
Variable accumulations 92.8% 92.1%
Fixed accumulations 95.1% 94.0%
Life
- ----
Premiums and contract deposits $30.9 $31.4 -1.6% $ 112.4 $ 112.9 -0.4%
Premiums and contract charges earned 23.4 23.6 -0.8% 95.1 91.4 4.0%
Net investment income 12.2 13.3 -8.3% 49.6 53.9 -8.0%
Income before tax 6.0 8.3 20.8 29.2
Net income 3.8 5.4 -29.6% 13.4 18.9 -29.1%
Pretax income increase (decrease) due to valuation of:
Deferred policy acquisition costs $ 1.4 $(0.5) $ 1.4 $ 0.4
Life policies in force (in thousands) 259 264 -1.9%
Life insurance in force (in millions) $ 13,267 $ 13,197 0.5%
Lapse ratio - 12 months
(Ordinary life insurance) 7.7% 9.1%
Corporate and Other (A)
- -----------------------
Components of gain (loss) before tax:
Realized investment gains (losses) $20.8 $ 2.5 $ 25.5 $ (49.4)
Restructuring (charges) adjustments - - 0.4 (4.2)
Debt retirement costs - (0.8) - (2.3)
Litigation charges - - - (1.6)
Interest expense (1.6) (1.8) (6.3) (8.5)
Other operating expenses (1.7) (0.6) (5.8) (2.5)
Gain (loss) before tax 17.5 (0.7) 13.8 (68.5)
Net gain (loss) 11.4 (0.4) 9.0 (44.5)
(A) The Corporate and Other segment includes interest expense on debt and the
impact of realized investment gains and losses and other reconciling items
to net income. The Company does not allocate the impact of corporate level
transactions to the insurance segments consistent with management's
evaluation of the results of those segments.
-5-
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
------------------ --------------------
2003 2002 % Change 2003 2002 % Change
------- ------- -------- -------- ------- --------
Investments
- -----------
Annuity and Life
Fixed maturities, at market
(amortized cost 2003, $2,501.2; 2002, $2,291.4) $2,613.0 $2,397.3
Mortgage loans and real estate 4.6 4.9
Short-term investments 9.0 52.6
Short-term investments, securities lending collateral 22.1 1.3
Policy loans and other 74.0 69.1
-------- --------
Total Annuity and Life investments 2,722.7 2,525.2 7.8%
Property & Casualty
Fixed maturities, at market
(amortized cost 2003, $623.7; 2002, $567.6) 645.7 593.9
Short-term investments 9.8 5.0
Short-term investments, securities lending collateral - 2.6
Other 0.7 0.3
--------- --------
Total Property & Casualty investments 656.2 601.8 9.0%
Corporate investments 6.8 3.6
Total investments 3,385.7 3,130.6 8.1%
Net investment income
Before tax $46.2 $48.4 -4.5% $ 184.7 $ 196.0 -5.8%
After tax 31.4 32.7 -4.0% 125.5 131.7 -4.7%
Realized investment gains (losses) by
investment portfolio included in
Corporate & Other segment income
Property & Casualty $11.0 - $ 10.2 $ (16.1)
Annuity 11.2 ($3.1) 16.8 (24.9)
Life (1.5) 5.6 (1.6) (8.0)
Corporate and Other 0.1 - 0.1 (0.4)
Total, before tax 20.8 2.5 25.5 (49.4)
Total, after tax 13.5 1.6 16.6 (32.2)
Per share, diluted $0.32 $0.04 $ 0.38 $ (0.77)
Other Information
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End of period goodwill asset $ 47.4 $ 47.4
End of period property and casualty net reserves as of:
December 31, 2003 $ 320.9
September 30, 2003 308.0
June 30, 2003 285.4
March 31, 2003 275.7
December 31, 2002 272.6
December 31, 2001 272.0
December 31, 2000 249.8
December 31, 1999 235.4
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