Horace Mann Reports Record First Quarter Operating Income
SPRINGFIELD, Ill.--(BUSINESS WIRE)--May 3, 1999--Horace Mann Educators Corporation (NYSE:HMN - news) today reported record first quarter operating income of $19.1 million, or 45 cents per share, compared to $18.4 million, or 41 cents per share, a year ago -- an increase of 10 percent on a per-share basis.
Per-share amounts are stated on a diluted basis and reflect the impact of share repurchases in 1997, 1998 and the first quarter of 1999. Operating income is net income before the after tax impact of realized investment gains and losses.
Premiums written and contract deposits for Horace Mann's core lines increased slightly in the first quarter, with growth in the property and casualty and life segments mostly offset by a decline in the annuity segment.
''We are pleased that Horace Mann achieved record first quarter operating income and a strong property and casualty combined ratio but are not satisfied with the growth of our business in the first quarter of 1999,'' said Paul J. Kardos, chairman of the board of directors, president and chief executive officer of Horace Mann. ''We expect better premium growth performance for Horace Mann. We continue to expand our exclusive agent force -- agent growth, and particularly growth in the number of experienced agents, has historically been a key indicator of our prospects for growth. Since our total agent force grew 6 percent in the 12 months from March 31, 1998 to March 31, 1999 and our experienced agent force grew 7 percent over the same period, we are optimistic that such expansion of the agency force will lead to better premium growth numbers later in the year.''
Kardos added, ''Under our 'best use of capital' philosophy, we continue to make investments in recruiting and retaining agents, developing new products, improving customer service, expanding our marketing efforts and upgrading technology. Beyond this, we invest our capital in ways that provide the greatest value for shareholders, currently the repurchase of Horace Mann shares. The results for the last 12 months represent an excellent 16 percent return on equity.''
Voluntary automobile and homeowners insurance written premium increased 3 percent in the first quarter, reflecting growth in average premium per policy and the number of both automobile and homeowners policies. Operating income for this segment decreased $2.1 million in the quarter, due to a non-recurring tax benefit of $1.3 million recognized in the first quarter of 1998 and January 1999 winter storms. While non-catastrophe weather-related losses increased compared to the same period last year, Horace Mann's catastrophe losses for the first quarter declined 38 percent from a year earlier.
Horace Mann's property and casualty combined ratio was 95.2 percent for the first quarter of 1999, up from 94.1 percent in the first quarter of 1998. Kardos noted that, ''Historically, Horace Mann's combined ratio has ranked among the best for property-casualty insurers, outperforming the personal lines segment of the industry by an average of 9 percentage points annually during the last 10 years.''
Annuity deposits decreased 6 percent in the first quarter compared to a high volume of single premium deposits achieved in the first quarter last year. Annuity contributions received through payroll deduction increased 1 percent for the quarter. Overall annuity cash value retention improved 1.6 percentage points to 93 percent, and over the last 12 months the number of annuity contracts grew 8 percent.
Annuity segment operating income increased 11 percent in the first quarter. The growth in income was driven by an 8 percent growth in total margin and a 2 percent growth in variable annuity funds on deposit. Total annuity segment expenses were unchanged compared to the same quarter last year after the deferral of additional sales-related costs.
The company began deferring additional sales-related costs in 1999 for all new life and annuity contracts to be more consistent with common industry accounting practices. Additional life segment net deferrals were $0.6 million after tax and additional annuity segment net deferrals were $0.4 million after tax for the quarter. Future quarterly results are expected to include similar amounts of additional net deferrals.
Life insurance premiums increased 2 percent in the quarter from the comparable period in 1998. Life operating income for the first quarter of 1999 was $4.9 million, compared to $2.7 million for the first quarter of 1998. The increase in life operating earnings included the net deferral of additional sales-related costs. In addition, life segment earnings reflected a decrease in amortization of deferred acquisition costs to reflect current mortality estimates and positive experience on a small closed block of individual A&H business. Excluding these items, life segment earnings increased 11 percent over the same quarter last year.
Excluding a non-cash charge for amortization of intangible assets, operating income per share was 48 cents for the current quarter, an increase of 9 percent compared to last year.
First quarter net income was $17.1 million, or 40 cents per share, lower than the $22.5 million, or 50 cents per share, recorded in the first quarter of 1998. The decline was attributable to after tax realized investment losses of $2.0 million in the current period compared to realized investment gains of $4.1 million in the first quarter of last year. The current quarter realized investment loss resulted primarily from the sale of two fixed income securities.
During the first quarter of 1999, the company repurchased 589,700 shares of Horace Mann stock, increasing the total number of shares repurchased since early 1997 to 6,597,100, or 14 percent of the shares outstanding on December 31, 1996. Including shares repurchased in 1995, the company has repurchased 31 percent of the shares outstanding on December 31, 1994. The share repurchase program has been financed through cash generated from operations, which has contributed to the reduction of investment income and earnings while having a net positive impact on earnings per share. Total shares outstanding on March 31, 1999 and 1998 were 41,506,444 and 44,044,744, respectively, a 6 percent reduction.
Book value per share was $11.40 at March 31, 1999, a decrease of 1 percent compared to a year earlier. Excluding unrealized investment gains, book value per share increased 3 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 nearly 1,100 agents. |
