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Section 1: 8-K (8-K)

Document
false0000850141 0000850141 2019-11-06 2019-11-06





UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report: November 6, 2019

HORACE MANN EDUCATORS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
1-10890
37-0911756
(State of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)


1 Horace Mann Plaza, Springfield, Illinois 62715‑0001
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: 217789‑2500

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange
on which registered
Common Stock, $0.001 par value
 
HMN
 
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐








Forward-looking Information

Statements included in the accompanying news release that state Horace Mann Educators Corporation’s (the “Company”) or its management’s intentions, hopes, beliefs, expectations or predictions of future events or the Company’s future financial performance are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to known and unknown risks, uncertainties and other factors. The Company 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. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Please refer to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 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.

 
Item 2.02:
Results of Operations and Financial Condition

 On November 6, 2019, the Company issued a news release reporting its financial results for the three and nine month periods ended September 30, 2019. A copy of the news release is attached as Exhibit 99.2 and is incorporated herein by reference.

 The Company’s Investor Supplement has been posted on the investors page of its website, investors.horacemann.com, and the Investor Presentation is anticipated to be posted there by November 7, 2019.

 
Item 9.01:
Financial Statements and Exhibits

(d)Exhibits.
    
Exhibit 99.1    Glossary of Selected Terms.

Exhibit 99.2    News release dated November 6, 2019 reporting financial results for the three and nine month periods ended September 30, 2019.


-1



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
HORACE MANN EDUCATORS CORPORATION
 
 
 
By:
/s/ Kimberly A. Johnson
 
 
Name:
Kimberly A. Johnson
 
 
Title:
Vice President & Controller
 
 
 
(Principal Accounting Officer)
 
Date: November 6, 2019
 


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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Exhibit 99.1


Glossary of Selected Terms
 
The following measures are used by the Company’s management to evaluate performance against historical results and establish targets on a consolidated basis. A number of these measures are components of net income or the balance sheet but, in some cases, are not based on accounting principles generally accepted in the U.S. (non-GAAP) under applicable SEC rules because they are not displayed as separate line items in the Consolidated Statements of Operations or Consolidated Balance Sheets or are not required to be disclosed in the Notes to the Consolidated Financial Statements or, in some cases, there is inclusion or exclusion of certain items not ordinarily included or excluded in accordance with accounting principles generally accepted in the U.S. (GAAP).  In the opinion of the Company’s management, a discussion of these measures is meaningful to provide investors with an understanding of the significant factors that comprise the Company’s periodic results of operations and financial condition.
 
Book value per share excluding the fair value adjustment for investments - The result of dividing total shareholders’ equity excluding after tax net unrealized investment gains and losses on securities, including the related effect on certain deferred policy acquisition costs, by ending shares outstanding. Book value per share is the most directly comparable GAAP measure. Management believes it is useful to consider the trend in book value per share excluding net unrealized investment gains and losses on securities in conjunction with book value per share to identify and analyze the change in net worth. Management also believes the non-GAAP measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and are generally driven by economic developments, primarily financial market conditions, the magnitude and timing of which are generally not influenced by the Company’s underlying insurance operations.

Catastrophe costs - The sum of catastrophe losses, net of reinsurance and before income tax benefits that includes allocated loss adjustment expenses and reinsurance reinstatement premiums; excluding unallocated loss adjustment expenses.
 
Catastrophe losses - In categorizing property and casualty claims as being from a catastrophe, the Company utilizes the designations of the Property Claim Services, a subsidiary of Insurance Services Office, Inc., and additionally beginning in 2007, includes losses from all such events that meet the definition of covered loss in the Company’s primary catastrophe excess of loss reinsurance contract, and reports claims and claim expense amounts net of reinsurance recoverables. A catastrophe is a severe loss resulting from natural and man-made events within a particular territory, including risks such as hurricane, fire, earthquake, windstorm, explosion, terrorism and other similar events, that causes $25 million or more in insured property and casualty losses for the industry and affects a significant number of property and casualty insurers and policyholders. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or amount of loss in advance. Their effects are not included in earnings or claim and claim expense reserves prior to occurrence. In the opinion of the Company’s management, a discussion of the impact of catastrophes is meaningful for investors to understand the variability in periodic earnings.

Core earnings (loss) - Consolidated net income (loss) excluding the after-tax impact of net investment gains (losses), discontinued operations, goodwill impairment charges, the effect of a change in tax laws and tax rates at enactment date, and cumulative effect of changes in accounting principles when applicable. Net income is the most comparable GAAP measure.


1



Pretax core earnings (loss) - Pretax net income (loss) excluding pretax impact of net investment gains (losses), discontinued operations, goodwill impairment charges and cumulative effect of changes in accounting principles when applicable. Income before income taxes is the most comparable GAAP measure.
Segment core earnings - Determined in the same manner as core earnings on a consolidated basis. Management uses segment core earnings to analyze each segment's performance and as a tool in making business decisions. Financial statement users also consider core earnings when analyzing the results and trends of insurance companies.

Core earnings (loss) per share - Core earnings on a per common share basis. Earnings per share is the most comparable GAAP measure.

Exclusive distributor - A licensed representative of Horace Mann. Horace Mann utilizes multiple points of distribution, including, but not limited to, direct sales, employee agents and exclusive agents.

Insurance premiums written and contract deposits - Premiums written represent (1) the amount charged for policies issued during a fiscal period for property and casualty business, such amounts may be earned and included in financial results over future fiscal periods, and (2) the amount charged for policies in force during a fiscal period for traditional life and group life business. Amounts are reported net of reinsurance, unless otherwise specified. Contract deposits include amounts received from customers on deposit-type contracts, such as investment contracts (annuities) and life products with account values, including deposit amounts and any related contract or policy fees. Management utilizes this non-GAAP measure, which is based on statutory accounting principles, in analyzing and evaluating the business growth of its operating segments. Insurance premiums and contract charges earned is the most directly comparable GAAP measure.

Net income return on equity - LTM: The ratio of (1) trailing 12 month net income to (2) the average of ending shareholders’ equity for the current quarter end and the preceding four quarter ends - referred to as 5 quarter average shareholder's equity.
Core return on equity - LTM: The ratio of (1) trailing 12 month core earnings to (2) 5 quarter average shareholders’ equity excluding net unrealized investment gains and losses on securities and the effect of a change in tax laws and tax rates at enactment date. Net income return on equity - LTM is the most comparable GAAP measure.
Net income return on equity - Annualized: The ratio of (1) annualized net income to (2) the 2 quarter average shareholders' equity (but the year-end measures are still based on a 5 quarter average).
Core return on equity - Annualized: The ratio of (1) annualized core earnings to (2) the 2 quarter average shareholders’ equity excluding net unrealized investment gains and losses on securities and the effect of a change in tax laws and tax rates at enactment date (but the year-end measures are still based on a 5 quarter average). Net income return on equity - Annualized is the most comparable GAAP measure.
Net reserves - Property and casualty unpaid claim and claim expense reserves net of anticipated reinsurance recoverables.


2



Prior years’ reserve development - A measure which the Company reports for its Property and Casualty segment which identifies the increase or decrease in net incurred claim and claim expense reserves at successive valuation dates for claims which occurred in previous calendar years. In the opinion of the Company’s management, a discussion of prior years’ loss reserve development is useful to investors as it allows them to assess the impact on current period earnings of incurred claims experience from the current calendar year and previous calendar years.

Property and casualty operating statistics - Operating measures utilized by the Company and the insurance industry regarding the relative profitability of property and casualty underwriting results.

Loss ratio - The ratio of (1) the sum of net incurred losses and loss adjustment expenses to (2) net earned premiums.
Underlying loss ratio - The sum of the Loss Ratio adjusted to remove the effect of catastrophe costs and prior years' reserve development. The Loss Ratio is the most directly comparable GAAP measure. Management believes this ratio provides a valuable measure of the Company's underlying underwriting performance that may be obscured by the effects of catastrophe costs and prior years' reserve development, the amounts of which may be significant and may vary significantly between periods.
Expense ratio - The ratio of (1) the sum of operating expenses and the amortization of policy acquisition costs to (2) net earned premiums.
Combined ratio - The sum of the Loss Ratio and the Expense Ratio.  A Combined Ratio less than 100% generally indicates profitable underwriting prior to the consideration of net investment income.
Underlying combined ratio or combined ratio excluding catastrophe costs and prior years’ reserve development - The sum of the Loss Ratio and the Expense Ratio adjusted to remove the effect of catastrophe costs and prior years’ reserve development.  The Combined Ratio is the most directly comparable GAAP measure.  Management believes this ratio provides a valuable measure of the Company’s underlying underwriting performance that may be obscured by the effects of catastrophe costs and prior years’ reserve development, the amounts of which may be significant and may vary significantly between periods.

Sales - Sales are measured by the Company as premiums and deposits to be collected over the 12 months following the sale of a new policy for automobile, homeowners, supplemental business and life business, as well as increases in contributions to certain life business. In addition, the Company may disclose new policy count (units) information for automobile and homeowners business. Sales data pertains to Horace Mann products and excludes authorized products sold by Exclusive Distributors that are underwritten by third-party vendors. The Retirement segment’s annuity contract deposits are measured by the Company based on total recurring deposits as well as single deposits/rollovers. Sales should not be viewed as a substitute for any GAAP measure, including "sales" as it relates to non-insurance companies, and the Company’s definition of sales, sales deposits or new annualized sales might differ from that used by other companies. The Company utilizes sales information as a performance measure that indicates the productivity of its agency force. Sales are also a leading indicator of future revenue trends.



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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit

Exhibit 99.2

400863489_hmnlogoa08.jpg
 
News release for immediate release
Contact information:
Heather J. Wietzel
Vice President, Investor Relations
217-788-5144
[email protected]

HORACE MANN REPORTS THIRD-QUARTER 2019 NET INCOME OF $0.60 PER SHARE
AND CORE EARNINGS* OF $0.64 PER SHARE

Net income per share more than doubled over prior year while core earnings per share* improved 156.0%
New Supplemental segment added $6.9 million to net income, diversifying sales and earnings while expanding solutions available for educators
Property and Casualty combined ratio of 96.2% reflected improved auto profitability and lower catastrophe losses
Retirement results on track and reflected more favorable interest spread following annuity reinsurance transaction
Annualized quarterly core ROE* at 8.3%, moving closer to double-digit ROE target
Tightens range of full-year 2019 core EPS guidance to $2.05 to $2.15 to reflect:
Flat full-year underlying property loss ratio
Fourth-quarter severance charges for previously announced expense reduction initiatives

SPRINGFIELD, Ill., November 6, 2019 — Horace Mann Educators Corporation (NYSE:HMN) today reported financial results for the quarter ended September 30, 2019:
Horace Mann Consolidated Financial Highlights
 
 
Three Months Ended September 30,
 
Nine Months Ended
September 30,
($ in millions, except per share amounts)
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
334.4

 
$
311.4

 
7.4
 %
 
$
1,099.1

 
$
913.1

 
20.4
%
Net income
 
25.4

 
12.5

 
103.2
 %
 
151.4

 
38.6

 
N.M.

  Net investment gains (losses) after tax
 
(1.6
)
 
2.2

 
-172.7
 %
 
118.9

 
1.5

 
N.M.

  Goodwill impairment
 

 

 
N.M.

 
(28.0
)
 

 
N.M.

Core earnings*
 
27.0

 
10.3

 
162.1
 %
 
60.5

 
37.1

 
63.1
%
Per diluted share:
 
 
 
 
 
 
 
 
 
 
 
 
  Net income
 
0.60

 
0.30

 
100.0
 %
 
3.61

 
0.93

 
N.M.

    Net investment gains (losses) after tax
 
(0.04
)
 
0.05

 
-180.0
 %
 
2.84

 
0.04

 
N.M.

    Goodwill impairment
 

 

 
N.M.

 
(0.67
)
 

 
N.M.

Core earnings per diluted share*
 
0.64

 
0.25

 
156.0
 %
 
1.44

 
0.89

 
61.8
%
Book value per share
 
 
 
 
 
 
 
38.30

 
31.78

 
20.5
%
Book value per share excluding net unrealized
investment gains on fixed maturity securities*
 
 

 
 

 
 
 
31.84

 
29.93

 
6.4
%

N.M. - Not meaningful.
* These measures are not based on accounting principles generally accepted in the United States (non-GAAP). They are reconciled to the most directly comparable GAAP measures in the Appendix to the Investor Supplement. An explanation of these measures is contained in the Glossary of Selected Terms included as an exhibit in the Company’s reports filed with the Securities and Exchange Commission.

The Horace Mann Companies 1 Horace Mann Plaza Springfield, Illinois 62715-0001
217-789-2500 www.horacemann.com


“The positive third-quarter results reinforce that Horace Mann is better equipped than ever before to meet the financial needs of educators. Our transformative efforts, and multi-year initiatives focused on improving our products, distribution and infrastructure, have resulted in a larger, more diverse company with a strong long-term outlook,” said President and CEO Marita Zuraitis. “This is the first quarter that National Teachers Associates (NTA) is included in our results as the Supplemental segment, contributing $0.16 per share to earnings. Concurrently, we have significantly reduced our interest-spread risk in our Retirement segment following the annuity reinsurance transaction earlier in the year.

“As we announced several weeks ago, we have streamlined our organizational structure to accelerate profitable growth and strengthen our solutions orientation. We are also making significant progress on expense synergies and efficiency projects that are expected to reduce our annual operating expense run-rate in 2020 and beyond by at least $15 million,” Zuraitis noted, “Fourth quarter core EPS will reflect approximately $0.07 per share for severance charges resulting from previously announced expense reduction initiatives.

“As a result, we are tightening the range of our full-year guidance, and now expect 2019 core EPS between $2.05 to $2.15 per share. Illustrating the benefits of our sales and earnings diversification, quarterly annualized core ROE was above 8% in the third quarter.

“We are on a clear path to a 10% ROE over the next two years, reflecting two points of contribution from the new Supplemental segment plus at least another point from the lower operating expense run-rate.” Zuraitis continued. “At the same time, we are leveraging our leadership position in the education space to increase our market share, further accelerating long-term shareholder value creation.”

Property and Casualty Segment Sees 4.7 Point Improvement in Underlying Auto Loss Ratio; Catastrophe Costs Below 2018 Level
(All comparisons vs. same period in 2018, unless noted otherwise)
 
 
Three Months Ended September 30,
 
Nine Months Ended
September 30,
($ in millions)
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and Casualty written premiums*
 
$
182.5

 
$
182.7

 
-0.1
%
 
$
518.5

 
$
515.1

 
0.7
%
Property and Casualty net income / core earnings*
 
14.2

 
(3.2
)
 
N.M.

 
34.3

 
(4.4
)
 
N.M.

  Property and Casualty combined ratio
 
96.2
%
 
110.1
%
 
-13.9
  pts
 
98.5
%
 
108.0
%
 
-9.5
  pts
  Property and Casualty underlying loss ratio*
 
63.3
%
 
63.9
%
 
-0.6
  pts
 
64.0
%
 
67.7
%
 
-3.7
  pts
  Property and Casualty expense ratio
 
26.4
%
 
27.1
%
 
-0.7
  pts
 
26.7
%
 
26.7
%
 

  Property and Casualty catastrophe costs
 
8.6
%
 
19.1
%
 
-10.5
  pts
 
9.3
%
 
13.7
%
 
-4.4
  pts
  Property and Casualty underlying combined ratio*
 
89.7
%
 
91.0
%
 
-1.3
  pts
 
90.7
%
 
94.4
%
 
-3.7
  pts
  Auto combined ratio
 
92.4
%
 
99.5
%
 
-7.1
  pts
 
97.0
%
 
103.4
%
 
-6.4
  pts
  Auto underlying loss ratio*
 
66.7
%
 
71.4
%
 
-4.7
  pts
 
70.2
%
 
75.1
%
 
-4.9
  pts
  Property combined ratio
 
104.3
%
 
133.3
%
 
-29.0
  pts
 
102.0
%
 
117.9
%
 
-15.9
  pts
  Property underlying loss ratio*
 
55.6
%
 
48.0
%
 
+7.6
  pts
 
50.6
%
 
51.5
%
 
-0.9
  pts
N.M. - Not meaningful.
For the third quarter of 2019, the Property and Casualty segment was solidly profitable, with a combined ratio of 96.2% driving core earnings of $14.2 million, compared to a loss in the prior year. Underwriting and rate actions contributed to a 4.7 point improvement in the underlying auto loss ratio. The underlying property loss ratio reflected an increase in non-catastrophe fire loss severity with no increase in frequency.

2


The underlying property loss ratio is now expected to be flat for full-year 2019 compared to 2018. Property and Casualty written premiums were flat.
Pretax catastrophe losses of $14.7 million were attributable to 17 weather events, the most costly of which were wind and hail events in the Midwest and Plains states. Pretax catastrophe losses through the first nine months were $47.6 million. The company estimate of full-year 2019 catastrophe losses has narrowed to $50 to $55 million, or about 7.5 points on the combined ratio, more heavily weighting more recent years in forecasting to reflect the impact of sustained elevated catastrophe loss trends.
Auto and property policy retention rates for the current quarter were 80.9% and 87.3%, respectively.
 
Supplemental Segment Contributes $6.9 Million in New Earnings

On July 1, 2019, Horace Mann acquired NTA. As a part of Horace Mann, NTA will continue to provide supplemental insurance products to the education market, building on nearly 50 years of experience in the sector. NTA specializes in developing, marketing and underwriting supplemental insurance products, including cancer, heart, limited supplemental disability and accident.
 
 
Three Months Ended September 30,
 
Nine Months Ended
September 30,
($ in millions)
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental sales*
 
$
3.6

 
N/A
 
N/A
 
$
3.6

 
N/A
 
N/A
Earned premiums
 
32.9

 
N/A
 
N/A
 
32.9

 
N/A
 
N/A
Supplemental net income / core earnings*
 
6.9

 
N/A
 
N/A
 
6.9

 
N/A
 
N/A
Pretax profit margin (1)
 
23.7
%
 
N/A
 
N/A
 
23.7
%
 
N/A
 
N/A
N/A - The acquisition of NTA closed on July 1, 2019.
(1) Measured to total revenues

Supplemental segment sales for the third quarter were $3.6 million with steady sales in all product categories. The segment contributed $6.9 million to core earnings in its initial quarter with Horace Mann, in line with management's expectations for $12 million to $14 million in earnings in the second half of this year.

The pretax profit margin for the third quarter was 23.7%, reflecting this business' focus on efficient operations and product mix. Supplemental segment expenses reflected the non-cash impact of amortization of intangible assets under purchasing accounting that reduced core earnings by $3.2 million (pretax). Supplemental persistency was 88.9% for the quarter.

Retirement Segment Annualized Net Interest Margin Remained Strong at 224 Basis Points

Effective April 1, 2019, Horace Mann reinsured a block of approximately $2.9 billion of policy liabilities related to legacy individual annuities written in 2002 or earlier. The annuity reinsurance transaction is accounted for under the deposit method. Under the deposit method of accounting, the consideration paid by Horace Mann is reported as a deposit asset on reinsurance that is adjusted consistent with the reinsurance agreement terms, along with recognizing accreted investment income. Accreted investment income is calculated based on the ultimate anticipated cash flows from the annuity reinsurance transaction.


3


As a result of the transaction, in the second quarter management impaired $28.0 million of goodwill that had been associated with the Retirement segment.

(All comparisons vs. same period in 2018, unless noted otherwise)
 
 
Three Months Ended September 30,
 
Nine Months Ended
September 30,
($ in millions)
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Annuity contract deposits*
 
$
128.3

 
$
127.0

 
1.0
 %
 
$
344.6

 
$
326.0

 
5.7
 %
Annuity assets under management (1)
 
 
 
 
 


 
4,215.9

 
6,997.7

 
-39.8
 %
Total assets under administration (2)
 
 
 
 
 
 
 
7,897.7

 
7,331.3

 
7.7
 %
Retirement net income (loss)
 
5.9

 
12.1

 
-51.2
 %
 
(6.9
)
 
37.6

 
-118.4
 %
Retirement core earnings*
 
5.9

 
12.1

 
-51.2
 %
 
21.1

 
37.6

 
-43.9
 %
Retirement core earnings excluding
DAC unlocking*
 
5.9

 
11.9

 
-50.4
 %
 
23.9

 
37.7

 
-36.6
 %
N.M. - Not meaningful.
(1) Amount reported as of September 30, 2019 excludes $673.1 of assets under management held under modified coinsurance reinsurance.
(2) Includes Annuity AUM, Brokerage and Advisory AUA, and Recordkeeping AUA

Reflecting the annuity reinsurance transaction, Horace Mann currently has $4.2 billion in assets under management, including $2.1 billion of fixed annuities, $1.6 billion of variable annuities and $0.5 billion of fixed indexed annuities. Assets under administration were up from a year ago due to the inclusion of Benefit Consultants Group's (BCG) advisory and recordkeeping assets effective January 2, 2019.
 
The annuity reinsurance transaction was the primary driver in the year-over-year decline in Retirement core earnings. Core earnings excluding DAC unlocking were $5.9 million, consistent with management's expectation of full year Retirement segment earnings excluding DAC unlocking of $25 million to $27 million. Core earnings excluding DAC unlocking were below the second quarter of 2019 due to the sequential decline in segment invested assets and net investment income following the redeployment of capital in the acquisition of NTA.

The average crediting rate on the retained traditional fixed annuities is 2.5%. The annualized net interest spread was 224 basis points, compared to 233 basis points in the second quarter. In the first quarter, prior to the annuity reinsurance transaction, the averaging crediting rate was 3.6% and the spread was 142 basis points.

Annuity sales deposits* were up slightly in the third quarter, reflecting positive momentum in retirement initiatives and in engaging new households. Total cash value persistency remained strong at 94.7% for variable annuities and 93.9% for fixed annuities.
   









4


Life Segment Sales of Recurring Premium Products Remains Strong
(All comparisons vs. same period in 2018, unless noted otherwise)
 
 
Three Months Ended September 30,
 
Nine Months Ended
September 30,
($ in millions)
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Life sales*
 
$
4.4

 
$
5.3

 
-17.0
 %
 
$
13.7

 
$
15.1

 
-9.3
 %
Life mortality costs
 
8.4

 
8.7

 
-3.4
 %
 
26.4

 
25.9

 
1.9
 %
Life net income / core earnings*
 
5.1

 
5.3

 
-3.8
 %
 
13.6

 
15.0

 
-9.3
 %
  
Demand remains healthy in the education market for life products. Recurring premium product sales were up 13.0%. Lower single premium product sales led to the decline in total Life sales* when compared with last year's strong third quarter.

Life core earnings* were down $0.2 million for the quarter due to lower net investment income. Life persistency of 95.5% was slightly better than the prior year period.

Investment Results Impacted by Annuity Reinsurance Transaction

Total net investment income includes net investment income on the investment portfolio managed by Horace Mann as well as accreted investment income on the deposit asset on reinsurance.

(All comparisons vs. same period in 2018, unless noted otherwise)
 
 
Three Months Ended September 30,
 
Nine Months Ended
September 30,
($ in millions)
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net investment income - Investment portfolio
 
$
69.2

 
$
99.1

 
-30.2
%
 
$
232.3

 
$
288.1

 
-19.4
%
Pretax investment income - Deposit asset on
reinsurance
 
23.8

 

 
N.M.

 
47.0

 

 
N.M.

     Total pretax net investment income
 
93.0

 
99.1

 
-6.2
%
 
279.3

 
288.1

 
-3.1
%
Pretax net investment gains (losses)
 
(2.1
)
 
2.9

 
N.M.

 
151.6

 
1.9

 
N.M.

Pretax net unrealized investment gains (losses)
on fixed maturity securities
 
 
 
 
 


 
386.1

 
109.6

 
N.M.

Annualized pretax investment portfolio yield
 
4.81
%
 
5.31
%
 
-0.5
  pts
 
4.97
%
 
5.19
%
 
-0.22
  pts
N.M. - Not meaningful.

Total net investment income declined 6.2% compared with last year's third quarter. Net investment income on the managed portfolio declined sequentially by $1.1 million because returns on alternative investments remained strong but were lower than the second quarter. Pretax investment portfolio yield for the third quarter was below the second quarter yield of 5.14%. Accreted investment income for the deposit asset on reinsurance was $0.6 million higher compared with the second quarter.

Year-to-date net investment gains included $135.3 million, or $106.9 million after tax, related to the second-quarter gain on assets transferred in the annuity reinsurance transaction. Net unrealized investment gains on fixed maturity securities increased significantly from last year due to the decline in interest rates, which has resulted in higher fair values of fixed maturity securities.



5


Capital Position Supports Business Initiatives
  
At September 30, 2019, shareholders' equity was $1.58 billion, or $38.30 per share. Excluding net unrealized investment gains on fixed maturity securities, shareholders' equity was $1.31 billion, or $31.84 per share*. The year-over-year improvement in book value excluding unrealized investment gains on fixed maturity securities primarily reflected the realized gain on assets transferred in the annuity reinsurance transaction.

At September 30, 2019, total debt was $433 million with $135 million outstanding on the company's line of credit. The debt-to-capital ratio was 24.8%.

Quarterly Webcast
 
Horace Mann’s senior management will discuss the company’s third quarter financial results with investors on November 7, 2019 at 11:00 a.m. Eastern Time. The conference call will be webcast live at investors.horacemann.com and archived later in the day for replay.
 
About Horace Mann
 
Horace Mann Educators Corporation (NYSE: HMN) is the largest financial services company focused on providing America's educators and school employees with insurance and retirement solutions. Founded by Educators for Educators® in 1945, the company is headquartered in Springfield, Illinois. For more information, visit horacemann.com.
 
Safe Harbor Statement and Non-GAAP Measures
 
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 June 30, 2019 and the company's past and future filings and reports filed with the Securities and Exchange Commission (SEC) for information concerning important factors that could cause actual results to differ materially from those in forward-looking statements. Information contained in this news release include measures which are based on methodologies other than accounting principles generally accepted in the United States (GAAP). Reconciliations of non-GAAP measures to the closest GAAP measures are contained in the Appendix to the Investor Supplement and additional descriptions of the non-GAAP measures are contained in the Glossary of Selected Terms included as an exhibit to the company’s SEC filings.
# # #

6




HORACE MANN EDUCATORS CORPORATION
Financial Highlights (Unaudited)
($ in Millions, except per share data)

 
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
EARNINGS SUMMARY
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
25.4

 
$
12.5

 
103.2
 %
 
$
151.4

 
$
38.6

 
N.M.

Net investment gains (losses), after tax
 
(1.6
)
 
2.2

 
-172.7
 %
 
118.9

 
1.5

 
N.M.

    Goodwill impairment
 

 

 
N.M.

 
(28.0
)
 

 
N.M.

Core earnings*
 
27.0

 
10.3

 
162.1
 %
 
60.5

 
37.1

 
63.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Per diluted share:
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
0.60

 
$
0.30

 
100.0
 %
 
$
3.61

 
$
0.93

 
N.M.

Net investment gains (losses), after tax
 
$
(0.04
)
 
$
0.05

 
-180.0
 %
 
$
2.84

 
$
0.04

 
N.M.

    Goodwill impairment
 
$

 
$

 
N.M.

 
$
(0.67
)
 
$

 
N.M.

Core earnings*
 
$
0.64

 
$
0.25

 
156.0
 %
 
$
1.44

 
$
0.89

 
61.8
%
Weighted average number of shares and
equivalent shares (in millions) - Diluted
 
42.0

 
41.9

 
0.2
 %
 
41.9

 
41.7

 
0.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
RETURN ON EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Net income return on equity - LTM (1)
 
9.2
%
 
11.8
%
 
 
 
9.2
%
 
11.8
%
 
 
Net income return on equity - annualized
 
6.6
%
 
3.8
%
 
 
 
14.1
%
 
3.7
%
 
 
Core return on equity - LTM* (2)
 
4.1
%
 
5.3
%
 
 
 
4.1
%
 
5.3
%
 
 
Core return on equity - annualized*
 
8.3
%
 
3.4
%
 
 
 
6.4
%
 
4.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL POSITION
 
 
 
 
 
 
 
 
 
 
 
 
Per share (3):
 
 
 
 
 
 
 
 
 
 
 
 
Book value
 
 
 
 
 
 
 
$
38.30

 
$
31.78

 
20.5
%
Effect of net unrealized investment gains on fixed maturity securities (4)
 
 
 
 
 
 
 
$
6.46

 
$
1.85

 
N.M.

Dividends paid
 
$
0.2875

 
$
0.2850

 
0.9
 %
 
$
0.8625

 
$
0.8550

 
0.9
%
Ending number of shares outstanding (in millions) (3)
 
 
 
 
 
 
 
41.2

 
41.0

 
0.5
%
Total assets
 
 
 
 
 
 
 
$
12,332.5

 
$
11,280.8

 
9.3
%
Short-term debt
 
 
 
 
 
 
 
135.0

 

 
N.M.

Long-term debt
 
 
 
 
 
 
 
298.0

 
297.7

 
0.1
%
Total shareholders' equity
 
 
 
 
 
 
 
1,578.6

 
1,304.3

 
21.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
ADDITIONAL INFORMATION
 
 

 
 

 
 

 
 
 
 
 
 
Net investment gains (losses)
 
 

 
 

 
 

 
 
 
 
 
 
Before tax
 
$
(2.1
)
 
$
2.9

 
N.M.

 
$
151.6

 
$
1.9

 
N.M.

After tax
 
(1.6
)
 
2.2

 
N.M.

 
118.9

 
1.5

 
N.M.

Per share, diluted
 
$
(0.04
)
 
$
0.05

 
N.M.

 
$
2.84

 
$
0.04

 
N.M.

 
N.M.-
Not meaningful.
(1) 
Based on last twelve months net income and average quarter-end shareholders' equity.
(2) 
Based on last twelve months core earnings and average quarter-end shareholders' equity which has been adjusted to exclude the fair value adjustment for investments, net of the related impact on deferred policy acquisition costs and applicable deferred taxes.
(3) 
Ending shares outstanding were 41,213,085 at September 30, 2019 and 41,040,746 at September 30, 2018.
(4) 
Net of the related impact on deferred policy acquisition costs and applicable deferred taxes.

7




HORACE MANN EDUCATORS CORPORATION
Statements of Operations and Consolidated Data (Unaudited)
($ in Millions)
 

 
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
STATEMENTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
 
 
 
Insurance premiums and contract charges earned
 
$
239.7

 
$
206.8

 
15.9
 %
 
$
657.6

 
$
615.4

 
6.9
%
Net investment income
 
93.0

 
99.1

 
-6.2
 %
 
279.3

 
288.1

 
-3.1
 %
Net investment gains (losses)
 
(2.1
)
 
2.9

 
N.M.

 
151.6

 
1.9

 
N.M.

Other income
 
3.8

 
2.6

 
46.2
 %
 
10.6

 
7.7

 
37.7
 %
Total revenues
 
334.4

 
311.4

 
7.4
 %
 
1,099.1

 
913.1

 
20.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefits, claims and settlement expenses
 
154.2

 
161.8

 
-4.7
 %
 
446.3

 
473.7

 
-5.8
 %
Interest credited
 
53.6

 
52.1

 
2.9
 %
 
160.1

 
153.2

 
4.5
 %
Operating expenses
 
61.4

 
51.0

 
20.4
 %
 
169.6

 
149.4

 
13.5
 %
DAC unlocking and amortization expense
 
26.3

 
26.2

 
0.4
 %
 
82.9

 
79.4

 
4.4
 %
Intangible asset amortization expense
 
3.8

 

 
N.M.

 
4.9

 

 
N.M.

Interest expense
 
4.6

 
3.2

 
43.8
 %
 
11.2

 
9.7

 
15.5
 %
Other expense - goodwill impairment
 

 

 
N.M.

 
28.0

 

 
N.M.

Total benefits, losses and expenses
 
303.9

 
294.3

 
3.3
 %
 
903.0

 
865.4

 
4.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
30.5

 
17.1

 
78.4
 %
 
196.1

 
47.7

 
N.M.

Income tax expense
 
5.1

 
4.6

 
10.9
 %
 
44.7

 
9.1

 
N.M.

Net income
 
$
25.4

 
$
12.5

 
103.2
 %
 
$
151.4

 
$
38.6

 
N.M.

 
 
 
 
 
 
 
 
 
 
 
 
 
PREMIUMS WRITTEN AND CONTRACT DEPOSITS*
 
 
 
 
 
 
 
 
 
 
Property and Casualty
 
$
182.5

 
$
182.7

 
-0.1
 %
 
$
518.5

 
$
515.1

 
0.7
 %
Supplemental
 
32.7

 
N/A

 
N/A

 
32.7

 
N/A

 
N/A

Annuity contract deposits
 
128.3

 
127.0

 
1.0
 %
 
344.6

 
326.0

 
5.7
 %
Life
 
27.7

 
28.4

 
-2.5
 %
 
82.5

 
82.7

 
-0.2
 %
Total
 
$
371.2

 
$
338.1

 
9.8
 %
 
$
978.3

 
$
923.8

 
5.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
SEGMENT NET INCOME (LOSS)
 
 
 
 
 
 
 
 
 
 
 
 
Property and Casualty
 
$
14.2

 
$
(3.2
)
 
N.M.

 
$
34.3

 
$
(4.4
)
 
N.M.

Supplemental
 
6.9

 
N/A

 
N/A

 
6.9

 
N/A

 
N/A

Retirement
 
5.9

 
12.1

 
51.2
 %
 
(6.9
)
 
37.6

 
-118.4
 %
Life
 
5.1

 
5.3

 
3.8
 %
 
13.6

 
15.0

 
-9.3
 %
Corporate and Other (1)
 
(6.7
)
 
(1.7
)
 
N.M.

 
103.5

 
(9.6
)
 
N.M.

Net income
 
$
25.4

 
$
12.5

 
103.2
 %
 
$
151.4

 
$
38.6

 
N.M.

 
N.M.-
Not meaningful.
(1) 
Corporate and Other includes interest expense on debt and the impact of net 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 5.

8



HORACE MANN EDUCATORS CORPORATION
Business Segment Overview (Unaudited)
($ in Millions)


 
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
PROPERTY and CASUALTY
 
 
 
 
 
 
 
 
 
 
 
 
Premiums written*
 
$
182.5

 
$
182.7

 
-0.1
%
 
$
518.5

 
$
515.1

 
0.7
%
Premiums earned
 
170.5

 
168.6

 
1.1
%
 
512.6

 
501.4

 
2.2
%
Net investment income
 
10.7

 
12.4

 
-13.7
%
 
33.6

 
32.2

 
4.3
%
Other income
 
0.5

 
0.4

 
25.0
%
 
1.7

 
1.4

 
21.4
%
Losses and loss adjustment expenses (LAE)
 
119.0

 
140.0

 
-15.0
%
 
368.2

 
407.7

 
-9.7
%
Operating expenses (includes amortization expense)
 
45.0

 
45.8

 
-1.7
%
 
136.9

 
133.7

 
2.4
%
Interest expense
 
0.3

 
0.3

 
%
 
1.0

 
0.8

 
25.0
%
Income (loss) before tax
 
17.4

 
(4.7
)
 
N.M.

 
41.8

 
(7.2
)
 
N.M.

Net income (loss) / core earnings*
 
14.2

 
(3.2
)
 
N.M.

 
34.3

 
(4.4
)
 
N.M.

Net investment income, after tax
 
9.0

 
10.5

 
-14.3
%
 
28.4

 
27.6

 
2.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Catastrophe costs (1)
 
 

 
 

 
 

 
 
 
 
 
 
After tax
 
11.6

 
25.4

 
-54.3
%
 
37.6

 
54.3

 
-30.8
%
Before tax
 
14.7

 
32.2

 
-54.3
%
 
47.6

 
68.8

 
-30.8
%
Prior years' reserves favorable (adverse)
development, before tax
 
 

 
 

 
 

 
 
 
 
 
 
Automobile
 
3.5

 

 
N.M.

 
5.5

 

 
N.M.

Property and other
 

 

 
N.M.

 
2.0

 
0.3

 
N.M.

Total
 
3.5

 

 
N.M.

 
7.5

 
0.3

 
N.M.

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating statistics:
 
 

 
 

 
 

 
 
 
 
 
 
Loss and loss adjustment expense ratio
 
69.8
 %
 
83.0
%
 
-13.2
  pts
 
71.8
 %
 
81.3
 %
 
-9.5
  pts
Expense ratio
 
26.4
 %
 
27.1
%
 
-0.7
  pts
 
26.7
 %
 
26.7
 %
 

Combined ratio
 
96.2
 %
 
110.1
%
 
-13.9
  pts
 
98.5
 %
 
108.0
 %
 
-9.5
  pts
Effect on the combined ratio of:
 
 

 
 

 
 

 
 
 
 
 
 
Catastrophe costs (1)
 
8.6
 %
 
19.1
%
 
-10.5
  pts
 
9.3
 %
 
13.7
 %
 
-4.4
  pts
Prior years' (favorable) adverse reserve development
 
-2.1
 %
 
%
 
-2.1
  pts
 
-1.5
 %
 
-0.1
 %
 
-1.4
  pts
Combined ratio excluding the effects of
catastrophe costs and prior years' reserve
development (underlying combined ratio)*
 
89.7
 %
 
91.0
%
 
-1.3
  pts
 
90.7
 %
 
94.4
 %
 
-3.7
  pts
 
 
 
 
 
 
 
 
 
 
 
 
 
Policies in force (in thousands)
 
 
 
 
 
 
 
637

 
668

 
-4.6
%
Automobile (2)
 
 
 
 
 
 
 
441

 
466

 
-5.4
%
Property
 
 
 
 
 
 
 
196

 
202

 
-3.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Policy renewal rate - 12 months
 
 

 
 

 
 

 
 
 
 
 
 
Automobile
 
 
 
 
 
 
 
80.9
 %
 
82.5
 %
 
-1.6
  pts
Property
 
 
 
 
 
 
 
87.3
 %
 
87.9
 %
 
-0.6
  pts
 
N.M.-
Not meaningful.
(1) 
Includes allocated loss adjustment expenses and, when applicable, catastrophe reinsurance reinstatement premiums.
(2) 
September 30, 2019 includes assumed policies in force of 4.




9



HORACE MANN EDUCATORS CORPORATION
Business Segment Overview (Unaudited)
($ in Millions)
 
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
SUPPLEMENTAL
 
 
 
 
 
 
 
 
 
 
 
 
Premiums and contract charges earned
 
$
32.9

 
N/A
 
N/A
 
$
32.9

 
N/A
 
N/A
Net investment income
 
3.7

 
N/A
 
N/A
 
3.7

 
N/A
 
N/A
Other income
 
0.6

 
N/A
 
N/A
 
0.6

 
N/A
 
N/A
Benefits
 
11.1

 
N/A
 
N/A
 
11.1

 
N/A
 
N/A
Change in reserves
 
3.6

 
N/A
 
N/A
 
3.6

 
N/A
 
N/A
Operating expenses (includes DAC unlocking and amortization expense)
 
10.5

 
N/A
 
N/A
 
10.5

 
N/A
 
N/A
Intangible asset amortization expense
 
3.2

 
N/A
 
N/A
 
3.2

 
N/A
 
N/A
Income before tax
 
8.8

 
N/A
 
N/A
 
8.8

 
N/A
 
N/A
Net income / core earnings*
 
6.9

 
N/A
 
N/A
 
6.9

 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefits ratio (1)
 
44.7
%
 
N/A
 
N/A
 
44.7
%
 
N/A
 
N/A
Operating expense ratio (2)
 
28.2
%
 
N/A
 
N/A
 
28.2
%
 
N/A
 
N/A
Pretax profit margin (3)
 
23.7
%
 
N/A
 
N/A
 
23.7
%
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
 
Premium persistency
 
88.9
%
 
N/A
 
N/A
 
88.9
%
 
N/A
 
N/A

 
N/A - The acquisition of NTA closed on July 1, 2019.
(1) 
Ratio of benefits plus change in reserves to earned premium.
(2) 
Ratio of operating expenses to total revenues.
(3) 
Ratio of income before taxes to total revenues.


10



HORACE MANN EDUCATORS CORPORATION
Business Segment Overview (Unaudited)
($ in Millions)
 
 
Three Months Ended
September 30,
 
 
 
Nine Months Ended
September 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
RETIREMENT
 
 
 
 
 
 
 
 
 
 
 
 
Contract deposits*
 
$
128.3

 
$
127.0

 
1.0
%
 
$
344.6

 
$
326.0

 
5.7
%
Variable
 
54.6

 
53.8

 
1.5
%
 
157.5

 
151.3

 
4.1
%
Fixed
 
73.7

 
73.2

 
0.7
%
 
187.1

 
174.7

 
7.1
%
Contract charges earned
 
6.6

 
8.0

 
-17.5
%
 
22.1

 
23.9

 
-7.5
%
Net investment income
 
37.0

 
67.7

 
-45.3
%
 
141.2

 
199.7

 
-29.3
%
Interest credited
 
17.5

 
40.8

 
-57.1
%
 
77.2

 
119.4

 
-35.3
%
     Net interest margin
 
19.5

 
26.9

 
-27.5
%
 
64.0

 
80.3

 
-20.3
%
Investment income - Deposit asset on reinsurance
 
23.8

 

 
N.M.

 
47.0

 

 
N.M.

Interest credited - Reinsured block
 
24.9

 

 
N.M.

 
49.2

 

 
N.M.

     Net interest margin - Reinsured block
 
(1.1
)
 

 
N.M.

 
(2.2
)
 

 
N.M.

Other income
 
2.3

 
1.8

 
27.8
%
 
7.1

 
5.3

 
34.0
%
Mortality loss and other reserve changes
 
(0.9
)
 
(1.5
)
 
40.0
%
 
(2.7
)
 
(4.8
)
 
43.8
%
Operating expenses (includes DAC unlocking and amortization expense)
 
18.8

 
18.4

 
2.2
%
 
61.8

 
56.7

 
9.0
%
Intangible asset amortization expense
 
0.6

 

 
N.M.

 
1.7

 

 
N.M.

Other expense - goodwill impairment
 

 

 
N.M.

 
28.0

 

 
N.M.

Income (loss) before tax
 
7.0

 
16.8

 
-58.3
%
 
(3.2
)
 
48.0

 
-106.7
%
Net income (loss)
 
5.9

 
12.1

 
-51.2
%
 
(6.9
)
 
37.6

 
-118.4
%
Core earnings*
 
5.9

 
12.1

 
-51.2
%
 
21.1

 
37.6

 
-43.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax income increase (decrease) due to evaluation of:
 
 

 
 

 
 

 
 
 
 
 
 
Deferred policy acquisition costs
 
$

 
$
0.3

 
-100.0
%
 
$
(3.6
)
 
$
(0.1
)
 
N.M.

Guaranteed minimum death benefit reserve
 

 

 
%
 
0.1

 

 
N.M.

Retirement contracts in force (in thousands)
 
 
 
 
 
 
 
227

 
224

 
1.3
%
Annuity accumulated account value on deposit /
Assets under management
 
 
 
 
 
 
 
4,215.9

 
$
6,997.7

 
-39.8
%
Variable (1)
 
 
 
 
 
 
 
1,635.0

 
2,292.5

 
-28.7
%
Fixed
 
 
 
 
 
 
 
2,580.9

 
4,705.2

 
-45.1
%
Annuity accumulated value retention - 12 months
 
 
 
 
 
 
 
 
 
 
 
 
Variable accumulations
 
 
 
 
 
 
 
94.7
%
 
94.5
%
 
0.2
  pts
Fixed accumulations
 
 
 
 
 
 
 
93.9
%
 
94.2
%
 
-0.3
  pts
 
 
 
 
 
 
 
 
 
 
 
 
 
LIFE
 
 

 
 

 
 

 
 
 
 
 
 
Premiums and contract deposits*
 
$
27.7

 
$
28.4

 
-2.5
%
 
$
82.5

 
$
82.7

 
-0.2
%
Premiums and contract charges earned
 
29.7

 
30.2

 
-1.7
%
 
90.0

 
90.1

 
-0.1
%
Net investment income
 
18.4

 
19.1

 
-3.7
%
 
54.8

 
56.6

 
-3.2
%
Other income
 

 
0.1

 
-100.0
%
 
0.2

 
0.2

 
%
Death benefits/mortality cost/change in reserves
 
19.6

 
20.3

 
-3.4
%
 
60.7

 
61.2

 
-0.8
%
Interest credited
 
11.2

 
11.3

 
-0.9
%
 
33.7

 
33.8

 
-0.3
%
Operating expenses (includes DAC unlocking and amortization expense)
 
10.9

 
10.8

 
0.9
%
 
33.5

 
32.9

 
1.8
%
Income before tax
 
6.4

 
7.0

 
-8.6
%
 
17.1

 
19.0

 
-10.0
%
Net income / core earnings*
 
5.1

 
5.3

 
-3.8
%
 
13.6

 
15.0

 
-9.3
%
Pretax income increase (decrease) due to evaluation of:
 
 

 
 

 
 

 
 
 
 
 
 
Deferred policy acquisition costs
 
$

 
$
(0.1
)
 
-100.0
 %
 
$
0.1

 
$
(0.2
)
 
N.M.

Life policies in force (in thousands)
 
 
 
 
 
 
 
202

 
198

 
2.0
%
Life insurance in force
 
 
 
 
 
 
 
$
18,937

 
$
18,054

 
4.9
%
Lapse ratio - 12 months (Ordinary life insurance)