Horace Mann Reports Results for Fourth Quarter and Year
Tuesday February 1, 4:17 pm Eastern Time
Company Press Release
SPRINGFIELD, Ill.--(BUSINESS WIRE)--Feb. 1, 2000--Horace Mann Educators Corporation (NYSE:HMN - news) today reported operating income of $21.9 million, or 53 cents per share, for the fourth quarter ended December 31, 1999. Prior year operating income for the same period was $24.7 million, or 57 cents per share. For the year, operating income was $70.7 million, or $1.70 per share. Full year 1998 operating income was $78.9 million, or $1.80 per share. Results for the quarter and full year were lower than the prior year due principally to non-recurring tax benefits in 1998 of 5 cents per share for the fourth quarter and 15 cents per share for the full year. Per-share amounts are stated on a diluted basis. Operating income is net income before the after-tax impact of realized investment gains and losses and non-recurring charges.
``While we are not satisfied with the Company's performance this year, we are encouraged by recent trends. Our automobile loss ratio continues to be very good in a difficult competitive environment. Our premium rates have kept pace with loss costs. And, while our total agency force showed a 2 percent decrease for the year, the number of experienced agents increased 2 percent,' said Paul J. Kardos, Chairman of the Board of Directors of Horace Mann.
``Although total premiums written and contract deposits were essentially flat for the quarter and year, our property and casualty and life insurance segments both experienced modest premium growth. In addition, the life insurance and annuity segments recorded gains in operating income for the year,' Kardos said. Total voluntary auto and homeowners insurance written premium increased 2 percent in the fourth quarter and 3 percent for the year, resulting from growth in the average premium per policy for both automobile and homeowners and an increase in the number of homeowners policies in force. Average premium per automobile policy increased 1 percent for the quarter and year with automobile policies in force about the same as year-end 1998.
Property and casualty segment operating income was $13.8 million for the fourth quarter and $39.5 million for the year. Voluntary automobile average premium per policy has kept pace with loss cost developments. For the fourth quarter of 1999, the homeowners loss ratio before catastrophe losses was an excellent 55.2 percent, 22.5 percentage points lower than the first nine months of the year. The results for the quarter and full year also included continuation of favorable development of prior years reserves, although at a lower level than in 1998, and lower catastrophe losses in 1999. Horace Mann's property and casualty combined ratio was 93.5 percent for the fourth quarter of 1999 and 96.1 percent for the year, compared to 89.5 percent and 93.6 percent in the comparable year-earlier periods.
New annuity deposits decreased 5 percent and 8 percent for the fourth quarter and full year 1999, respectively, compared to the comparable 1998 periods. The decreases resulted primarily from a 21 percent decrease in new single premium deposits. In 1998, new tax legislation contributed to a high volume of single premium and rollover amounts to tax-qualified products. Over the last 12 months, the number of annuity contracts outstanding increased 4 percent. Fixed annuity cash value retention was 92 percent for 1999.
Annuity segment operating income was $8.6 million for the fourth quarter and $27.3 million for the year, significantly higher in both periods than in 1998. Income growth was driven by an increase of 8 percent in the net margin and lower expenses. The reduction in expenses resulted from the deferral of additional sales-related costs and in the fourth quarter a net decrease in the amortization of the value of acquired insurance in force and deferred acquisition costs to reflect recent experience and trends. Life insurance premiums increased 2 percent in the quarter and 3 percent for the year from the comparable 1998 periods. Life operating income was $3.0 million for the fourth quarter of 1999 and $14.6 million through 12 months. The increase in 1999 life operating income over 1998 reflected slightly lower mortality costs and lower expenses. The expense reductions were due to the net deferral of additional sales-related costs and a decrease in amortization of deferred acquisition costs to reflect current mortality estimates.
The Company's total operating expenses for the year continued to grow at a slower pace than premiums earned. However, fourth quarter operating expenses included additional funding of an employee health insurance trust.
Fourth quarter 1999 net income was $22.5 million, or 54 cents per share, 4 percent greater than the fourth quarter of 1998 on a per-share basis. Lower operating income for the current period was offset by after-tax realized investment gains in 1999, compared to investment losses in the fourth quarter a year ago.
For the full year, net income was $44.5 million, or $1.07 per share, compared to $85.3 million, or $1.95 per share, in 1998. Two non-recurring charges were recorded in the third quarter of 1999 that reduced 1999 net income: an additional federal income tax provision of $20.0 million, or 48 cents per share, representing the Company's maximum exposure for disputed prior years' taxes; and a net cost of $1.0 million (after insurance proceeds), or 2 cents per share, to settle certain litigation in Alabama related to life insurance policies. Net income for 1999 also reflected after-tax realized investment losses of $5.2 million, compared to investment gains of $6.4 million for 1998.
Return on equity based on operating income was 16 percent for all of 1999. Return on equity based on net income (including realized investment gains and losses and non-recurring charges) was 10 percent for 1999.
As previously announced, the Company's Board of Directors has suspended the share repurchase program. During the first six months of 1999, the Company repurchased 1,075,300 shares of its common stock at an average aggregate cost of $23.33 per share. No shares were repurchased during the third and fourth quarters. Total shares outstanding on December 31, 1999 and 1998 were 41,033,157 and 42,091,094, respectively, a 3 percent reduction. Book value per share was $9.86 at December 31, 1999, a decrease of 16 percent compared to a year earlier. The decrease is due entirely to the share repurchases, unrealized investment gains and losses and the non-recurring charges for prior years' taxes. Excluding these items, book value per share increased 11 percent over the 12-month period.
Founded in 1945 and headquartered in Springfield, Illinois, Horace Mann sells retirement annuities and automobile, homeowners and life insurance to the nation's educators through an exclusive sales force of more than 1,000 agents.
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.
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Contact:
Horace Mann Educators Corporation
J. Michael Henderson, 217/788-5708
Vice President & Treasurer
www.horacemann.com
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