Delaware
|
37-0911756
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
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
|
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New York Stock Exchange
|
Large accelerated filer
|
☑
|
|
Accelerated filer
|
☐
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Non-accelerated filer
|
☐
|
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Smaller reporting company
|
☐
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|
|
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Emerging growth company
|
☐
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1A.
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Item 2.
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Item 5.
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Item 6.
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/s/ KPMG LLP
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KPMG LLP
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Chicago, Illinois
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August 7, 2020
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Horace Mann Educators Corporation
|
1
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Quarterly Report on Form 10-Q
|
|
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June 30, 2020
|
|
December 31, 2019
|
||||
|
|
(Unaudited)
|
|
|
||||
ASSETS
|
||||||||
Investments
|
|
|
|
|
||||
Fixed maturity securities, available for sale, at fair value
(amortized cost 2020, $5,604,405; 2019, $5,456,980)
|
|
$
|
6,021,983
|
|
|
$
|
5,791,676
|
|
Equity securities at fair value
|
|
90,338
|
|
|
101,864
|
|
||
Limited partnership interests
|
|
392,192
|
|
|
383,717
|
|
||
Short-term and other investments
|
|
376,297
|
|
|
361,976
|
|
||
Total investments
|
|
6,880,810
|
|
|
6,639,233
|
|
||
Cash
|
|
82,390
|
|
|
25,508
|
|
||
Deferred policy acquisition costs
|
|
257,129
|
|
|
276,668
|
|
||
Deposit asset on reinsurance
|
|
2,373,267
|
|
|
2,346,166
|
|
||
Intangible assets, net
|
|
169,845
|
|
|
177,217
|
|
||
Goodwill
|
|
49,079
|
|
|
49,079
|
|
||
Other assets
|
|
442,284
|
|
|
474,364
|
|
||
Separate Account (variable annuity) assets
|
|
2,316,900
|
|
|
2,490,469
|
|
||
Total assets
|
|
$
|
12,571,704
|
|
|
$
|
12,478,704
|
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Policy liabilities
|
|
|
|
|
||||
Investment contract and policy reserves
|
|
$
|
6,320,577
|
|
|
$
|
6,234,452
|
|
Unpaid claims and claim expenses
|
|
444,558
|
|
|
442,854
|
|
||
Unearned premiums
|
|
266,406
|
|
|
279,163
|
|
||
Total policy liabilities
|
|
7,031,541
|
|
|
6,956,469
|
|
||
Other policyholder funds
|
|
741,859
|
|
|
647,283
|
|
||
Other liabilities
|
|
404,421
|
|
|
384,173
|
|
||
Short-term debt
|
|
135,000
|
|
|
135,000
|
|
||
Long-term debt
|
|
302,172
|
|
|
298,025
|
|
||
Separate Account (variable annuity) liabilities
|
|
2,316,900
|
|
|
2,490,469
|
|
||
Total liabilities
|
|
10,931,893
|
|
|
10,911,419
|
|
||
Preferred stock, $0.001 par value, authorized
1,000,000 shares; none issued
|
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value, authorized 75,000,000 shares;
issued, 2020, 66,218,003; 2019, 66,088,808
|
|
66
|
|
|
66
|
|
||
Additional paid-in capital
|
|
483,754
|
|
|
480,962
|
|
||
Retained earnings
|
|
1,375,737
|
|
|
1,352,539
|
|
||
Accumulated other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|||
Net unrealized investment gains on fixed maturity securities
|
|
279,129
|
|
|
230,448
|
|
||
Net funded status of benefit plans
|
|
(10,767
|
)
|
|
(10,767
|
)
|
||
Treasury stock, at cost, 2020, 24,902,579 shares;
2019, 24,850,484 shares
|
|
(488,108
|
)
|
|
(485,963
|
)
|
||
Total shareholders’ equity
|
|
1,639,811
|
|
|
1,567,285
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
12,571,704
|
|
|
$
|
12,478,704
|
|
Horace Mann Educators Corporation
|
2
|
Quarterly Report on Form 10-Q
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
||||||
Insurance premiums and contract charges earned
|
|
$
|
225,431
|
|
|
$
|
208,096
|
|
|
$
|
461,696
|
|
|
$
|
417,881
|
|
Net investment income
|
|
80,410
|
|
|
93,458
|
|
|
162,685
|
|
|
186,258
|
|
||||
Net investment gains (losses)
|
|
3,162
|
|
|
146,333
|
|
|
(15,302
|
)
|
|
153,750
|
|
||||
Other income
|
|
5,926
|
|
|
6,223
|
|
|
13,095
|
|
|
12,097
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total revenues
|
|
314,929
|
|
|
454,110
|
|
|
622,174
|
|
|
769,986
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Benefits, losses and expenses
|
|
|
|
|
|
|
|
|
||||||||
Benefits, claims and settlement expenses
|
|
143,010
|
|
|
152,692
|
|
|
281,670
|
|
|
292,076
|
|
||||
Interest credited
|
|
50,674
|
|
|
53,594
|
|
|
102,219
|
|
|
106,516
|
|
||||
Operating expenses
|
|
55,775
|
|
|
57,343
|
|
|
116,437
|
|
|
113,518
|
|
||||
DAC unlocking and amortization expense
|
|
20,426
|
|
|
31,648
|
|
|
50,401
|
|
|
56,621
|
|
||||
Intangible asset amortization expense
|
|
3,686
|
|
|
541
|
|
|
7,372
|
|
|
1,082
|
|
||||
Interest expense
|
|
3,941
|
|
|
3,312
|
|
|
8,169
|
|
|
6,615
|
|
||||
Other expense - goodwill impairment
|
|
—
|
|
|
28,025
|
|
|
—
|
|
|
28,025
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total benefits, losses and expenses
|
|
277,512
|
|
|
327,155
|
|
|
566,268
|
|
|
604,453
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Income before income taxes
|
|
37,417
|
|
|
126,955
|
|
|
55,906
|
|
|
165,533
|
|
||||
Income tax expense
|
|
6,839
|
|
|
33,133
|
|
|
6,856
|
|
|
39,545
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
30,578
|
|
|
$
|
93,822
|
|
|
$
|
49,050
|
|
|
$
|
125,988
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
0.73
|
|
|
$
|
2.25
|
|
|
$
|
1.17
|
|
|
$
|
3.02
|
|
Diluted
|
|
$
|
0.73
|
|
|
$
|
2.24
|
|
|
$
|
1.17
|
|
|
$
|
3.01
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of shares and equivalent shares
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
41,879
|
|
|
41,762
|
|
|
41,856
|
|
|
41,685
|
|
||||
Diluted
|
|
41,996
|
|
|
41,921
|
|
|
42,008
|
|
|
41,851
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net investment gains (losses)
|
|
|
|
|
|
|
|
|
||||||||
Total other-than-temporary impairment losses
on securities
|
|
$
|
(523
|
)
|
|
$
|
(34
|
)
|
|
$
|
(4,215
|
)
|
|
$
|
(271
|
)
|
Portion of losses recognized in other
comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net other-than-temporary impairment losses
on securities recognized in earnings
|
|
(523
|
)
|
|
(34
|
)
|
|
(4,215
|
)
|
|
(271
|
)
|
||||
Sales and other, net
|
|
352
|
|
|
142,067
|
|
|
4,909
|
|
|
146,905
|
|
||||
Change in fair value - equity securities
|
|
6,600
|
|
|
3,441
|
|
|
(7,886
|
)
|
|
6,948
|
|
||||
Change in fair value and gains (losses) realized
on settlements - derivatives
|
|
(3,267
|
)
|
|
859
|
|
|
(8,110
|
)
|
|
168
|
|
||||
Total
|
|
$
|
3,162
|
|
|
$
|
146,333
|
|
|
$
|
(15,302
|
)
|
|
$
|
153,750
|
|
Horace Mann Educators Corporation
|
3
|
Quarterly Report on Form 10-Q
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
30,578
|
|
|
$
|
93,822
|
|
|
$
|
49,050
|
|
|
$
|
125,988
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in net unrealized investment gains
(losses) on fixed maturity securities
|
|
142,450
|
|
|
(7,762
|
)
|
|
48,681
|
|
|
106,136
|
|
||||
Change in net funded status of benefit plans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other comprehensive income (loss)
|
|
142,450
|
|
|
(7,762
|
)
|
|
48,681
|
|
|
106,136
|
|
||||
Total
|
|
$
|
173,028
|
|
|
$
|
86,060
|
|
|
$
|
97,731
|
|
|
$
|
232,124
|
|
Horace Mann Educators Corporation
|
4
|
Quarterly Report on Form 10-Q
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Common stock, $0.001 par value
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
|
$
|
66
|
|
|
$
|
66
|
|
|
$
|
66
|
|
|
$
|
66
|
|
Options exercised
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Conversion of common stock units
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Conversion of restricted stock units
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Ending balance
|
|
66
|
|
|
66
|
|
|
66
|
|
|
66
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Additional paid-in capital
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
|
481,917
|
|
|
474,336
|
|
|
480,962
|
|
|
475,109
|
|
||||
Options exercised and conversion of common stock
units and restricted stock units
|
|
447
|
|
|
344
|
|
|
268
|
|
|
(1,761
|
)
|
||||
Share-based compensation expense
|
|
1,390
|
|
|
1,673
|
|
|
2,524
|
|
|
3,005
|
|
||||
Ending balance
|
|
483,754
|
|
|
476,353
|
|
|
483,754
|
|
|
476,353
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Retained earnings
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
|
1,357,833
|
|
|
1,236,621
|
|
|
1,352,539
|
|
|
1,216,582
|
|
||||
Net income
|
|
30,578
|
|
|
93,822
|
|
|
49,050
|
|
|
125,988
|
|
||||
Dividends, 2020, $0.30, $0.60 per share;
2019, $0.2875, $0.5750 per share
|
|
(12,674
|
)
|
|
(12,114
|
)
|
|
(25,343
|
)
|
|
(24,241
|
)
|
||||
Cumulative effect of change in accounting principle
|
|
—
|
|
|
—
|
|
|
(509
|
)
|
|
—
|
|
||||
Ending balance
|
|
1,375,737
|
|
|
1,318,329
|
|
|
1,375,737
|
|
|
1,318,329
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Accumulated other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
|
125,912
|
|
|
198,654
|
|
|
219,681
|
|
|
84,756
|
|
||||
Change in net unrealized investment gains (losses)
on fixed maturity securities
|
|
142,450
|
|
|
(7,762
|
)
|
|
48,681
|
|
|
106,136
|
|
||||
Change in net funded status of benefit plans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Ending balance
|
|
268,362
|
|
|
190,892
|
|
|
268,362
|
|
|
190,892
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Treasury stock, at cost
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
|
(488,108
|
)
|
|
(485,963
|
)
|
|
(485,963
|
)
|
|
(485,963
|
)
|
||||
Acquisition of shares
|
|
—
|
|
|
—
|
|
|
(2,145
|
)
|
|
—
|
|
||||
Ending balance
|
|
(488,108
|
)
|
|
(485,963
|
)
|
|
(488,108
|
)
|
|
(485,963
|
)
|
||||
Shareholders' equity at end of period
|
|
$
|
1,639,811
|
|
|
$
|
1,499,677
|
|
|
$
|
1,639,811
|
|
|
$
|
1,499,677
|
|
Horace Mann Educators Corporation
|
5
|
Quarterly Report on Form 10-Q
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2020
|
|
2019
|
||||
Cash flows - operating activities
|
|
|
|
|
||||
Net income
|
|
$
|
49,050
|
|
|
$
|
125,988
|
|
Adjustments to reconcile net income to net cash provided
by operating activities
|
|
|
|
|
||||
Net investment (gains) losses
|
|
15,302
|
|
|
(153,750
|
)
|
||
Amortization of premiums and accretion of discounts on
fixed maturity securities, net
|
|
2,837
|
|
|
(348
|
)
|
||
Depreciation and intangible asset amortization
|
|
11,655
|
|
|
4,433
|
|
||
Share-based compensation expense
|
|
2,786
|
|
|
3,451
|
|
||
Other expense - goodwill impairment
|
|
—
|
|
|
28,025
|
|
||
Changes in:
|
|
|
|
|
||||
Accrued investment income
|
|
(568
|
)
|
|
20,277
|
|
||
Insurance liabilities
|
|
38,416
|
|
|
(51,018
|
)
|
||
Premium receivables
|
|
2,063
|
|
|
3,541
|
|
||
Deferred policy acquisitions
|
|
1,507
|
|
|
3,766
|
|
||
Reinsurance recoverables
|
|
(2,860
|
)
|
|
20,718
|
|
||
Income tax liabilities
|
|
7,215
|
|
|
39,466
|
|
||
Other operating assets and liabilities
|
|
16,683
|
|
|
61,029
|
|
||
Other
|
|
21,503
|
|
|
(7,742
|
)
|
||
Net cash provided by operating activities
|
|
165,589
|
|
|
97,836
|
|
||
Cash flows - investing activities
|
|
|
|
|
|
|
||
Fixed maturity securities
|
|
|
|
|
|
|
||
Purchases
|
|
(818,151
|
)
|
|
(644,104
|
)
|
||
Sales
|
|
294,162
|
|
|
501,739
|
|
||
Maturities, paydowns, calls and redemptions
|
|
372,412
|
|
|
342,998
|
|
||
Equity securities
|
|
|
|
|
||||
Purchases
|
|
(11,752
|
)
|
|
(5,282
|
)
|
||
Sales and repayments
|
|
12,059
|
|
|
17,122
|
|
||
Limited partnership interests
|
|
|
|
|
||||
Purchases
|
|
(30,310
|
)
|
|
(29,357
|
)
|
||
Sales
|
|
5,666
|
|
|
15,029
|
|
||
Change in short-term and other investments, net
|
|
(19,058
|
)
|
|
(156,748
|
)
|
||
Acquisition of business, net of cash acquired
|
|
—
|
|
|
(18,198
|
)
|
||
Net cash provided by (used in) investing activities
|
|
(194,972
|
)
|
|
23,199
|
|
||
Cash flows - financing activities
|
|
|
|
|
|
|
||
Dividends paid to shareholders
|
|
(24,777
|
)
|
|
(23,630
|
)
|
||
FHLB borrowings
|
|
4,000
|
|
|
—
|
|
||
Acquisition of treasury stock
|
|
(2,145
|
)
|
|
—
|
|
||
Proceeds from exercise of stock options
|
|
899
|
|
|
722
|
|
||
Withholding tax payments on RSUs tendered
|
|
(1,517
|
)
|
|
(3,366
|
)
|
||
Annuity contracts: variable, fixed and FHLB funding agreements
|
|
|
|
|
|
|
||
Deposits
|
|
325,019
|
|
|
266,310
|
|
||
Benefits, withdrawals and net transfers to
Separate Account (variable annuity) assets
|
|
(196,972
|
)
|
|
(214,243
|
)
|
||
Life policy accounts
|
|
|
|
|
|
|||
Deposits
|
|
4,580
|
|
|
4,638
|
|
||
Withdrawals and surrenders
|
|
(2,126
|
)
|
|
(1,733
|
)
|
||
Change in deposit asset on reinsurance
|
|
(19,894
|
)
|
|
(134,682
|
)
|
||
Change in book overdrafts
|
|
(802
|
)
|
|
(19,341
|
)
|
||
Net cash provided by (used in) financing activities
|
|
86,265
|
|
|
(125,325
|
)
|
||
Net increase (decrease) in cash
|
|
56,882
|
|
|
(4,290
|
)
|
||
Cash at beginning of period
|
|
25,508
|
|
|
11,906
|
|
||
Cash at end of period
|
|
$
|
82,390
|
|
|
$
|
7,616
|
|
Horace Mann Educators Corporation
|
6
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
7
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
8
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
9
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Fixed maturity securities
|
|
$
|
58,861
|
|
|
$
|
83,561
|
|
|
$
|
118,307
|
|
|
$
|
167,877
|
|
Equity securities
|
|
1,182
|
|
|
1,392
|
|
|
2,390
|
|
|
2,590
|
|
||||
Limited partnership interests
|
|
(3,485
|
)
|
|
9,449
|
|
|
(6,184
|
)
|
|
15,900
|
|
||||
Short-term and other investments
|
|
2,784
|
|
|
(21,451
|
)
|
|
5,641
|
|
|
(18,063
|
)
|
||||
Investment expenses
|
|
(2,886
|
)
|
|
(2,688
|
)
|
|
(5,111
|
)
|
|
(5,241
|
)
|
||||
Net investment income - investment portfolio
|
|
56,456
|
|
|
70,263
|
|
|
115,043
|
|
|
163,063
|
|
||||
Investment income - deposit asset on reinsurance
|
|
23,954
|
|
|
23,195
|
|
|
47,642
|
|
|
23,195
|
|
||||
Total net investment income
|
|
$
|
80,410
|
|
|
$
|
93,458
|
|
|
$
|
162,685
|
|
|
$
|
186,258
|
|
($ in thousands)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Fixed maturity securities
|
|
$
|
(642
|
)
|
|
$
|
141,548
|
|
|
$
|
460
|
|
|
$
|
141,749
|
|
Equity securities
|
|
7,071
|
|
|
3,926
|
|
|
(7,652
|
)
|
|
11,833
|
|
||||
Short-term investments and other
|
|
(3,267
|
)
|
|
859
|
|
|
(8,110
|
)
|
|
168
|
|
||||
Net investment gains (losses)
|
|
$
|
3,162
|
|
|
$
|
146,333
|
|
|
$
|
(15,302
|
)
|
|
$
|
153,750
|
|
($ in thousands)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Credit impairment write-downs
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Change in intent write-downs
|
|
(523
|
)
|
|
(34
|
)
|
|
(4,215
|
)
|
|
(271
|
)
|
||||
Net other-than-temporary impairment losses
on securities recognized in earnings
|
|
(523
|
)
|
|
(34
|
)
|
|
(4,215
|
)
|
|
(271
|
)
|
||||
Sales and other, net
|
|
352
|
|
|
142,067
|
|
|
4,909
|
|
|
146,905
|
|
||||
Change in fair value - equity securities
|
|
6,600
|
|
|
3,441
|
|
|
(7,886
|
)
|
|
6,948
|
|
||||
Change in fair value and gains (losses) realized
on settlements - derivatives
|
|
(3,267
|
)
|
|
859
|
|
|
(8,110
|
)
|
|
168
|
|
||||
Net investment gains (losses)
|
|
$
|
3,162
|
|
|
$
|
146,333
|
|
|
$
|
(15,302
|
)
|
|
$
|
153,750
|
|
Horace Mann Educators Corporation
|
10
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
||||||||
June 30, 2020
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
||||||||
U.S. Government and federally
sponsored agency obligations: (1)
|
|
|
|
|
|
|
|
|
||||||||
Mortgage-backed securities
|
|
$
|
635,342
|
|
|
$
|
83,843
|
|
|
$
|
211
|
|
|
$
|
718,974
|
|
Other, including U.S. Treasury securities
|
|
333,428
|
|
|
41,453
|
|
|
—
|
|
|
374,881
|
|
||||
Municipal bonds
|
|
1,633,297
|
|
|
174,211
|
|
|
1,958
|
|
|
1,805,550
|
|
||||
Foreign government bonds
|
|
39,643
|
|
|
3,907
|
|
|
—
|
|
|
43,550
|
|
||||
Corporate bonds
|
|
1,705,963
|
|
|
169,498
|
|
|
13,021
|
|
|
1,862,440
|
|
||||
Other asset-backed securities
|
|
1,256,732
|
|
|
16,978
|
|
|
57,122
|
|
|
1,216,588
|
|
||||
Totals
|
|
$
|
5,604,405
|
|
|
$
|
489,890
|
|
|
$
|
72,312
|
|
|
$
|
6,021,983
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
||||||||
U.S. Government and federally
sponsored agency obligations: (1)
|
|
|
|
|
|
|
|
|
||||||||
Mortgage-backed securities
|
|
$
|
684,543
|
|
|
$
|
41,263
|
|
|
$
|
1,487
|
|
|
$
|
724,319
|
|
Other, including U.S. Treasury securities
|
|
436,665
|
|
|
22,824
|
|
|
621
|
|
|
458,868
|
|
||||
Municipal bonds
|
|
1,545,787
|
|
|
141,996
|
|
|
1,580
|
|
|
1,686,203
|
|
||||
Foreign government bonds
|
|
42,801
|
|
|
2,569
|
|
|
—
|
|
|
45,370
|
|
||||
Corporate bonds
|
|
1,464,444
|
|
|
118,775
|
|
|
1,795
|
|
|
1,581,424
|
|
||||
Other asset-backed securities
|
|
1,282,740
|
|
|
20,883
|
|
|
8,131
|
|
|
1,295,492
|
|
||||
Totals
|
|
$
|
5,456,980
|
|
|
$
|
348,310
|
|
|
$
|
13,614
|
|
|
$
|
5,791,676
|
|
(1)
|
Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $392.6 million and $405.1 million; Federal Home Loan Mortgage Corporation (FHLMC) of $312.9 million and $283.1 million; and Government National Mortgage Association (GNMA) of $145.6 million and $147.4 million as of June 30, 2020 and December 31, 2019, respectively.
|
Horace Mann Educators Corporation
|
11
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
12 Months or Less
|
|
More than 12 Months
|
|
Total
|
||||||||||||||||||
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
||||||||||||
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government and federally
sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
$
|
8,344
|
|
|
$
|
130
|
|
|
$
|
933
|
|
|
$
|
81
|
|
|
$
|
9,277
|
|
|
$
|
211
|
|
Other
|
|
37
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
—
|
|
||||||
Municipal bonds
|
|
81,279
|
|
|
1,958
|
|
|
—
|
|
|
—
|
|
|
81,279
|
|
|
1,958
|
|
||||||
Foreign government bonds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Corporate bonds
|
|
209,868
|
|
|
12,127
|
|
|
6,060
|
|
|
894
|
|
|
215,928
|
|
|
13,021
|
|
||||||
Other asset-backed securities
|
|
448,358
|
|
|
38,339
|
|
|
387,453
|
|
|
18,783
|
|
|
835,811
|
|
|
57,122
|
|
||||||
Total
|
|
$
|
747,886
|
|
|
$
|
52,554
|
|
|
$
|
394,446
|
|
|
$
|
19,758
|
|
|
$
|
1,142,332
|
|
|
$
|
72,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Number of positions with a
gross unrealized loss
|
|
594
|
|
|
|
|
109
|
|
|
|
|
703
|
|
|
|
|||||||||
Fair value as a percentage of total fixed maturity securities at fair value
|
|
12.4
|
%
|
|
|
|
6.6
|
%
|
|
|
|
19.0
|
%
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government and federally
sponsored agency obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
$
|
72,422
|
|
|
$
|
1,282
|
|
|
$
|
2,620
|
|
|
$
|
205
|
|
|
$
|
75,042
|
|
|
$
|
1,487
|
|
Other
|
|
38,341
|
|
|
619
|
|
|
1,527
|
|
|
2
|
|
|
39,868
|
|
|
621
|
|
||||||
Municipal bonds
|
|
91,195
|
|
|
977
|
|
|
9,160
|
|
|
603
|
|
|
100,355
|
|
|
1,580
|
|
||||||
Foreign government bonds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Corporate bonds
|
|
58,198
|
|
|
886
|
|
|
16,622
|
|
|
909
|
|
|
74,820
|
|
|
1,795
|
|
||||||
Other asset-backed securities
|
|
218,710
|
|
|
1,970
|
|
|
442,791
|
|
|
6,161
|
|
|
661,501
|
|
|
8,131
|
|
||||||
Total
|
|
$
|
478,866
|
|
|
$
|
5,734
|
|
|
$
|
472,720
|
|
|
$
|
7,880
|
|
|
$
|
951,586
|
|
|
$
|
13,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Number of positions with a
gross unrealized loss
|
|
330
|
|
|
|
|
137
|
|
|
|
|
467
|
|
|
|
|||||||||
Fair value as a percentage of total fixed maturity securities at fair value
|
|
8.3
|
%
|
|
|
|
8.2
|
%
|
|
|
|
16.5
|
%
|
|
|
Horace Mann Educators Corporation
|
12
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Six Months Ended
June 30, |
||||||
|
|
2020
|
|
2019
|
||||
Cumulative credit loss (1)
|
|
|
|
|
||||
Beginning of period
|
|
$
|
1,529
|
|
|
$
|
1,529
|
|
New credit losses
|
|
184
|
|
|
—
|
|
||
Increases to previously recognized credit losses
|
|
—
|
|
|
—
|
|
||
Losses related to securities sold or paid down during the period
|
|
(103
|
)
|
|
—
|
|
||
|
|
$
|
1,610
|
|
|
$
|
1,529
|
|
(1)
|
The cumulative credit loss amounts exclude OTTI losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before an anticipated recovery of value.
|
($ in thousands)
|
|
Percent of Total Fair Value
|
|
June 30, 2020
|
||||||||||
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||
Estimated expected maturity:
|
|
|
|
|
|
|
|
|
||||||
Due in 1 year or less
|
|
4.0
|
%
|
|
3.6
|
%
|
|
$
|
240,942
|
|
|
$
|
240,701
|
|
Due after 1 year through 5 years
|
|
27.9
|
%
|
|
27.4
|
%
|
|
1,680,037
|
|
|
1,650,193
|
|
||
Due after 5 years through 10 years
|
|
30.1
|
%
|
|
29.6
|
%
|
|
1,814,204
|
|
|
1,680,118
|
|
||
Due after 10 years through 20 years
|
|
24.7
|
%
|
|
26.1
|
%
|
|
1,487,294
|
|
|
1,314,841
|
|
||
Due after 20 years
|
|
13.3
|
%
|
|
13.3
|
%
|
|
799,506
|
|
|
718,552
|
|
||
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
6,021,983
|
|
|
$
|
5,604,405
|
|
|
|
|
|
|
|
|
|
|
||||||
Average option-adjusted duration, in years
|
|
6.2
|
|
|
6.0
|
|
|
|
|
|
Horace Mann Educators Corporation
|
13
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019 (1)
|
|
2020
|
|
2019 (1)
|
||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
||||||||
Proceeds received
|
|
$
|
196,004
|
|
|
$
|
442,015
|
|
|
$
|
294,162
|
|
|
$
|
501,739
|
|
Gross gains realized
|
|
5,506
|
|
|
147,774
|
|
|
10,285
|
|
|
148,316
|
|
||||
Gross losses realized
|
|
(5,625
|
)
|
|
(5,976
|
)
|
|
(5,893
|
)
|
|
(6,081
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
|
|
|
|
|
|
|
|
||||||||
Proceeds received
|
|
$
|
10,602
|
|
|
$
|
1,633
|
|
|
$
|
12,059
|
|
|
$
|
17,122
|
|
Gross gains realized
|
|
1,721
|
|
|
389
|
|
|
2,040
|
|
|
5,134
|
|
||||
Gross losses realized
|
|
(1,249
|
)
|
|
(166
|
)
|
|
(1,805
|
)
|
|
(510
|
)
|
(1)
|
Gross gains realized presented above include a $135.3 million realized investment gain associated with a transfer of investments to a reinsurer as consideration paid during the second quarter of 2019 in connection with the reinsurance of a $2.9 billion block of in force fixed and variable annuity business. See Note 5 for further information.
|
($ in thousands)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net unrealized investment gains (losses)
on fixed maturity securities, net of tax
|
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
|
$
|
149,876
|
|
|
$
|
245,319
|
|
|
$
|
264,410
|
|
|
$
|
111,712
|
|
Change in net unrealized investment gains
(losses) on fixed maturity securities
|
|
174,932
|
|
|
100,693
|
|
|
71,159
|
|
|
240,705
|
|
||||
Reclassification of net investment (gains) losses
on securities to net income
|
|
5,079
|
|
|
(114,925
|
)
|
|
(5,682
|
)
|
|
(121,330
|
)
|
||||
End of period
|
|
$
|
329,887
|
|
|
$
|
231,087
|
|
|
$
|
329,887
|
|
|
$
|
231,087
|
|
Horace Mann Educators Corporation
|
14
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
|
|
Gross
Amounts
Offset in the
Consolidated
Balance
Sheets
|
|
Net Amounts
of Assets/
Liabilities
Presented
in the
Consolidated
Balance
Sheets
|
|
Gross Amounts Not Offset
in the Consolidated
Balance Sheets
|
|
|
||||||||||||||
|
|
Gross
Amounts
|
|
|
|
Financial
Instruments
|
|
Cash
Collateral
Received
|
|
Net
Amount
|
||||||||||||||
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asset derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Free-standing derivatives
|
|
$
|
7,276
|
|
|
$
|
—
|
|
|
$
|
7,276
|
|
|
$
|
4,340
|
|
|
$
|
2,600
|
|
|
$
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asset derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Free-standing derivatives
|
|
13,239
|
|
|
—
|
|
|
13,239
|
|
|
7,687
|
|
|
6,640
|
|
|
(1,088
|
)
|
Horace Mann Educators Corporation
|
15
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
|
|
Fair Value Measurements at
|
||||||||||||||||
|
|
Carrying
|
|
Fair
|
|
Reporting Date Using
|
||||||||||||||
|
|
Amount
|
|
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and federally
sponsored agency obligations:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-backed securities
|
|
$
|
718,974
|
|
|
$
|
718,974
|
|
|
$
|
—
|
|
|
$
|
694,513
|
|
|
$
|
24,461
|
|
Other, including U.S. Treasury securities
|
|
374,881
|
|
|
374,881
|
|
|
18,520
|
|
|
356,361
|
|
|
—
|
|
|||||
Municipal bonds
|
|
1,805,550
|
|
|
1,805,550
|
|
|
—
|
|
|
1,732,379
|
|
|
73,171
|
|
|||||
Foreign government bonds
|
|
43,550
|
|
|
43,550
|
|
|
—
|
|
|
43,550
|
|
|
—
|
|
|||||
Corporate bonds
|
|
1,862,440
|
|
|
1,862,440
|
|
|
12,773
|
|
|
1,723,375
|
|
|
126,292
|
|
|||||
Other asset-backed securities
|
|
1,216,588
|
|
|
1,216,588
|
|
|
—
|
|
|
1,040,903
|
|
|
175,685
|
|
|||||
Total fixed maturity securities
|
|
6,021,983
|
|
|
6,021,983
|
|
|
31,293
|
|
|
5,591,081
|
|
|
399,609
|
|
|||||
Equity securities
|
|
90,338
|
|
|
90,338
|
|
|
35,269
|
|
|
54,954
|
|
|
115
|
|
|||||
Short-term investments
|
|
182,670
|
|
|
182,670
|
|
|
179,651
|
|
|
3,019
|
|
|
—
|
|
|||||
Other investments
|
|
23,604
|
|
|
23,604
|
|
|
—
|
|
|
23,604
|
|
|
—
|
|
|||||
Totals
|
|
$
|
6,318,595
|
|
|
$
|
6,318,595
|
|
|
$
|
246,213
|
|
|
$
|
5,672,658
|
|
|
$
|
399,724
|
|
Separate Account (variable annuity) assets (1)
|
|
$
|
2,316,900
|
|
|
$
|
2,316,900
|
|
|
$
|
2,316,900
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contract and policy reserves,
embedded derivatives
|
|
$
|
1,113
|
|
|
$
|
1,113
|
|
|
$
|
—
|
|
|
$
|
1,113
|
|
|
$
|
—
|
|
Other policyholder funds, embedded derivatives
|
|
$
|
93,619
|
|
|
$
|
93,619
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
93,619
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and federally
sponsored agency obligations:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-backed securities
|
|
$
|
724,319
|
|
|
$
|
724,319
|
|
|
$
|
—
|
|
|
$
|
711,004
|
|
|
$
|
13,315
|
|
Other, including U.S. Treasury securities
|
|
458,868
|
|
|
458,868
|
|
|
17,699
|
|
|
441,169
|
|
|
—
|
|
|||||
Municipal bonds
|
|
1,686,203
|
|
|
1,686,203
|
|
|
—
|
|
|
1,641,912
|
|
|
44,291
|
|
|||||
Foreign government bonds
|
|
45,370
|
|
|
45,370
|
|
|
—
|
|
|
45,370
|
|
|
—
|
|
|||||
Corporate bonds
|
|
1,581,424
|
|
|
1,581,424
|
|
|
14,470
|
|
|
1,463,002
|
|
|
103,952
|
|
|||||
Other asset-backed securities
|
|
1,295,492
|
|
|
1,295,492
|
|
|
—
|
|
|
1,161,979
|
|
|
133,513
|
|
|||||
Total fixed maturity securities
|
|
5,791,676
|
|
|
5,791,676
|
|
|
32,169
|
|
|
5,464,436
|
|
|
295,071
|
|
|||||
Equity securities
|
|
101,864
|
|
|
101,864
|
|
|
49,834
|
|
|
51,923
|
|
|
107
|
|
|||||
Short-term investments
|
|
172,667
|
|
|
172,667
|
|
|
172,667
|
|
|
—
|
|
|
—
|
|
|||||
Other investments
|
|
25,997
|
|
|
25,997
|
|
|
—
|
|
|
25,997
|
|
|
—
|
|
|||||
Totals
|
|
$
|
6,092,204
|
|
|
$
|
6,092,204
|
|
|
$
|
254,670
|
|
|
$
|
5,542,356
|
|
|
$
|
295,178
|
|
Separate Account (variable annuity) assets (1)
|
|
$
|
2,490,469
|
|
|
$
|
2,490,469
|
|
|
$
|
2,490,469
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contract and policy reserves,
embedded derivatives
|
|
$
|
1,314
|
|
|
$
|
1,314
|
|
|
$
|
—
|
|
|
$
|
1,314
|
|
|
$
|
—
|
|
Other policyholder funds, embedded derivatives
|
|
$
|
93,733
|
|
|
$
|
93,733
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
93,733
|
|
Horace Mann Educators Corporation
|
16
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Financial Assets
|
|
Financial
Liabilities(1)
|
||||||||||||||||||||||||
|
|
Municipal
Bonds
|
|
Corporate
Bonds
|
|
Other
Mortgage-
Backed
Securities(2)
|
|
Total
Fixed
Maturity
Securities
|
|
Equity
Securities
|
|
Total
|
|
|
||||||||||||||
Beginning balance, April 1, 2020
|
|
$
|
104,892
|
|
|
$
|
111,693
|
|
|
$
|
140,527
|
|
|
$
|
357,112
|
|
|
$
|
83
|
|
|
$
|
357,195
|
|
|
$
|
87,506
|
|
Transfers into Level 3 (3)
|
|
10,726
|
|
|
13,970
|
|
|
64,239
|
|
|
88,935
|
|
|
—
|
|
|
88,935
|
|
|
—
|
|
|||||||
Transfers out of Level 3 (3)
|
|
(45,917
|
)
|
|
(4,166
|
)
|
|
(3,438
|
)
|
|
(53,521
|
)
|
|
—
|
|
|
(53,521
|
)
|
|
—
|
|
|||||||
Total gains or losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net investment gains (losses)
included in net income related
to financial assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
32
|
|
|
—
|
|
|||||||
Net realized (gains) losses
included in net income related
to financial liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,966
|
|
|||||||
Net unrealized investment gains
(losses) included in OCI
|
|
3,838
|
|
|
5,308
|
|
|
3,261
|
|
|
12,407
|
|
|
—
|
|
|
12,407
|
|
|
—
|
|
|||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,513
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Paydowns, maturities and distributions
|
|
(368
|
)
|
|
(513
|
)
|
|
(4,443
|
)
|
|
(5,324
|
)
|
|
—
|
|
|
(5,324
|
)
|
|
(2,366
|
)
|
|||||||
Ending balance, June 30, 2020
|
|
$
|
73,171
|
|
|
$
|
126,292
|
|
|
$
|
200,146
|
|
|
$
|
399,609
|
|
|
$
|
115
|
|
|
$
|
399,724
|
|
|
$
|
93,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Beginning balance, January 1, 2020
|
|
$
|
44,291
|
|
|
$
|
103,952
|
|
|
$
|
146,828
|
|
|
$
|
295,071
|
|
|
$
|
107
|
|
|
$
|
295,178
|
|
|
$
|
93,733
|
|
Transfers into Level 3 (3)
|
|
74,477
|
|
|
32,803
|
|
|
86,714
|
|
|
193,994
|
|
|
—
|
|
|
193,994
|
|
|
—
|
|
|||||||
Transfers out of Level 3 (3)
|
|
(45,917
|
)
|
|
(14,188
|
)
|
|
(6,385
|
)
|
|
(66,490
|
)
|
|
—
|
|
|
(66,490
|
)
|
|
—
|
|
|||||||
Total gains or losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net investment gains (losses)
included in net income related
to financial assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
|
—
|
|
|||||||
Net realized (gains) losses
included in net income related
to financial liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
924
|
|
|||||||
Net unrealized investment gains
(losses) included in OCI
|
|
812
|
|
|
(173
|
)
|
|
(21,101
|
)
|
|
(20,462
|
)
|
|
—
|
|
|
(20,462
|
)
|
|
—
|
|
|||||||
Purchases
|
|
—
|
|
|
6,875
|
|
|
1,890
|
|
|
8,765
|
|
|
—
|
|
|
8,765
|
|
|
—
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,867
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Paydowns, maturities and distributions
|
|
(492
|
)
|
|
(2,977
|
)
|
|
(7,800
|
)
|
|
(11,269
|
)
|
|
—
|
|
|
(11,269
|
)
|
|
(4,905
|
)
|
|||||||
Ending balance, June 30, 2020
|
|
$
|
73,171
|
|
|
$
|
126,292
|
|
|
$
|
200,146
|
|
|
$
|
399,609
|
|
|
$
|
115
|
|
|
$
|
399,724
|
|
|
$
|
93,619
|
|
(1)
|
Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.
|
(2)
|
Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other mortgage-backed securities.
|
(3)
|
Transfers into and out of Level 3 during the three and six months ended June 30, 2020 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.
|
Horace Mann Educators Corporation
|
17
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Financial Assets
|
|
Financial
Liabilities(1) |
||||||||||||||||||||||||
|
|
Municipal
Bonds |
|
Corporate
Bonds |
|
Other
Mortgage-
Backed Securities (2) |
|
Total
Fixed Maturity Securities |
|
Equity
Securities |
|
Total
|
|
|
||||||||||||||
Beginning balance, April 1, 2019
|
|
$
|
47,756
|
|
|
$
|
82,482
|
|
|
$
|
135,790
|
|
|
$
|
266,028
|
|
|
$
|
5
|
|
|
$
|
266,033
|
|
|
$
|
84,629
|
|
Transfers into Level 3 (3)
|
|
—
|
|
|
2,808
|
|
|
—
|
|
|
2,808
|
|
|
64
|
|
|
2,872
|
|
|
—
|
|
|||||||
Transfers out of Level 3 (3)
|
|
—
|
|
|
(4,876
|
)
|
|
—
|
|
|
(4,876
|
)
|
|
—
|
|
|
(4,876
|
)
|
|
—
|
|
|||||||
Total gains or losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net investment gains (losses)
included in net income related
to financial assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Net realized (gains) losses
included in net income related
to financial liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
371
|
|
|||||||
Net unrealized investment gains
(losses) included in OCI
|
|
(537
|
)
|
|
1,961
|
|
|
2,807
|
|
|
4,231
|
|
|
—
|
|
|
4,231
|
|
|
—
|
|
|||||||
Purchases
|
|
—
|
|
|
1,566
|
|
|
—
|
|
|
1,566
|
|
|
—
|
|
|
1,566
|
|
|
—
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,431
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
(607
|
)
|
|
(607
|
)
|
|
—
|
|
|
(607
|
)
|
|
—
|
|
|||||||
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Paydowns, maturities and distributions
|
|
(235
|
)
|
|
(4,719
|
)
|
|
(9,552
|
)
|
|
(14,506
|
)
|
|
—
|
|
|
(14,506
|
)
|
|
(1,470
|
)
|
|||||||
Ending balance, June 30, 2019
|
|
$
|
46,984
|
|
|
$
|
79,222
|
|
|
$
|
128,438
|
|
|
$
|
254,644
|
|
|
$
|
69
|
|
|
$
|
254,713
|
|
|
$
|
85,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Beginning balance, January 1, 2019
|
|
$
|
47,531
|
|
|
$
|
80,742
|
|
|
$
|
120,211
|
|
|
$
|
248,484
|
|
|
$
|
5
|
|
|
$
|
248,489
|
|
|
$
|
78,700
|
|
Transfers into Level 3 (3)
|
|
—
|
|
|
5,882
|
|
|
21,934
|
|
|
27,816
|
|
|
64
|
|
|
27,880
|
|
|
—
|
|
|||||||
Transfers out of Level 3 (3)
|
|
—
|
|
|
(4,876
|
)
|
|
—
|
|
|
(4,876
|
)
|
|
—
|
|
|
(4,876
|
)
|
|
—
|
|
|||||||
Total gains or losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net investment gains (losses)
included in net income related
to financial assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Net realized (gains) losses
included in net income related
to financial liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,705
|
|
|||||||
Net unrealized investment gains
(losses) included in OCI
|
|
(193
|
)
|
|
4,510
|
|
|
2,655
|
|
|
6,972
|
|
|
—
|
|
|
6,972
|
|
|
—
|
|
|||||||
Purchases
|
|
—
|
|
|
1,566
|
|
|
—
|
|
|
1,566
|
|
|
—
|
|
|
1,566
|
|
|
—
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,449
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
(607
|
)
|
|
(607
|
)
|
|
—
|
|
|
(607
|
)
|
|
—
|
|
|||||||
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Paydowns, maturities and distributions
|
|
(354
|
)
|
|
(8,602
|
)
|
|
(15,755
|
)
|
|
(24,711
|
)
|
|
—
|
|
|
(24,711
|
)
|
|
(2,893
|
)
|
|||||||
Ending balance, June 30, 2019
|
|
$
|
46,984
|
|
|
$
|
79,222
|
|
|
$
|
128,438
|
|
|
$
|
254,644
|
|
|
$
|
69
|
|
|
$
|
254,713
|
|
|
$
|
85,961
|
|
(1)
|
Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.
|
(2)
|
Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other mortgage-backed securities.
|
(3)
|
Transfers into and out of Level 3 during the three and six months ended June 30, 2019 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.
|
Horace Mann Educators Corporation
|
18
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
||||||||||
Financial
Assets
|
|
Fair Value at
June 30, 2020
|
|
Valuation Technique(s)
|
|
Unobservable Inputs
|
|
Range
(Weighted Average)
and Single Point Best Estimate (1)
|
||
Municipal bonds
|
|
$
|
73,171
|
|
|
discounted cash flow
|
|
I spread (2)
|
|
578 bps
|
Corporate bonds
|
|
126,292
|
|
|
discounted cash flow
|
|
N spread (3)
|
|
762 bps
|
|
|
|
|
|
discounted cash flow
|
|
T spread (4)
|
|
378 bps
|
||
|
|
|
|
discounted cash flow
|
|
I spread (2)
|
|
495 bps
|
||
|
|
|
|
market comparable
|
|
EV / TTM EBITDA (x) (5)
|
|
5.11x
|
||
Other asset-backed securities
|
|
175,685
|
|
|
discounted cash flow
|
|
constant prepayment rate
|
|
20.0%
|
|
|
|
|
|
vendor price
|
|
haircut
|
|
3.0%
|
||
|
|
|
|
market comparable
|
|
EV / TTM EBITDA (x) (5)
|
|
5.11x
|
||
|
|
|
|
discounted cash flow
|
|
N spread (3)
|
|
732 bps
|
||
|
|
|
|
discounted cash flow
|
|
PDI interest margin (6)
|
|
7.13%
|
||
|
|
|
|
discounted cash flow
|
|
SBL interest margin (7)
|
|
4.50%
|
||
Government mortgage-backed securities
|
|
24,461
|
|
|
vendor price
|
|
haircut
|
|
3.0%
|
|
|
|
|
|
discounted cash flow
|
|
N spread (3)
|
|
109 bps
|
||
|
|
|
|
discounted cash flow
|
|
constant prepayment yield
|
|
100 bps
|
||
|
|
|
|
discounted cash flow
|
|
constant default rate
|
|
0
|
||
Equity securities
|
|
115
|
|
|
Black Scholes
|
|
equity value
|
|
low - $43.27; high - $44.53
|
($ in thousands)
|
||||||||||
Financial
Liabilities
|
|
Fair Value at
June 30, 2020
|
|
Valuation Technique(s)
|
|
Unobservable Inputs
|
|
Range
(Weighted Average)
and Single Point Best Estimate (1)
|
||
Derivatives
embedded in
fixed indexed annuity products
|
|
$
|
93,619
|
|
|
discounted cash flow
|
|
lapse rate
|
|
5.25%
|
|
|
|
|
|
|
mortality multiplier (8)
|
|
61.00%
|
||
|
|
|
|
|
|
option budget
|
|
1.00% - 2.50%
|
||
|
|
|
|
|
|
non-performance adjustment (9)
|
|
5.00%
|
(1)
|
When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.
|
(2)
|
"I spread" is the interpolated weighted average life point on the "on the run" (OTR) point of the curve.
|
(3)
|
"N spread" is the interpolated weighted average life point on the swap curve.
|
(4)
|
"T spread" is a specific point on the OTR curve.
|
(5)
|
This represents the enterprise value (EV) for trailing twelve months (TTM) of EBITDA plus multiplier.
|
(6)
|
"PDI" stands for private debt investment.
|
(7)
|
"SBL" stands for broadly syndicated loans.
|
(8)
|
Mortality multiplier is applied to the Annuity 2000 table.
|
(9)
|
Determined as a percentage of a risk-free rate.
|
Horace Mann Educators Corporation
|
19
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
|
|
Fair Value Measurements at
|
||||||||||||||||
|
|
Carrying
|
|
Fair
|
|
Reporting Date Using
|
||||||||||||||
|
|
Amount
|
|
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other investments
|
|
$
|
168,541
|
|
|
$
|
172,364
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
172,364
|
|
Deposit asset on reinsurance
|
|
2,373,267
|
|
|
2,846,176
|
|
|
—
|
|
|
—
|
|
|
2,846,176
|
|
|||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contract and policy reserves,
fixed annuity contracts
|
|
4,742,272
|
|
|
4,651,533
|
|
|
—
|
|
|
—
|
|
|
4,651,533
|
|
|||||
Investment contract and policy reserves,
account values on life contracts
|
|
95,885
|
|
|
100,673
|
|
|
—
|
|
|
—
|
|
|
100,673
|
|
|||||
Other policyholder funds
|
|
648,240
|
|
|
648,240
|
|
|
—
|
|
|
590,693
|
|
|
57,547
|
|
|||||
Short-term debt
|
|
135,000
|
|
|
135,000
|
|
|
—
|
|
|
—
|
|
|
135,000
|
|
|||||
Long-term debt
|
|
302,172
|
|
|
332,385
|
|
|
—
|
|
|
332,385
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other investments
|
|
$
|
163,312
|
|
|
$
|
167,185
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
167,185
|
|
Deposit asset on reinsurance
|
|
2,346,166
|
|
|
2,634,012
|
|
|
—
|
|
|
—
|
|
|
2,634,012
|
|
|||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contract and policy reserves,
fixed annuity contracts
|
|
4,675,774
|
|
|
4,609,880
|
|
|
—
|
|
|
—
|
|
|
4,609,880
|
|
|||||
Investment contract and policy reserves,
account values on life contracts |
|
93,465
|
|
|
98,332
|
|
|
—
|
|
|
—
|
|
|
98,332
|
|
|||||
Other policyholder funds
|
|
553,550
|
|
|
553,550
|
|
|
—
|
|
|
495,812
|
|
|
57,738
|
|
|||||
Short-term debt
|
|
135,000
|
|
|
135,000
|
|
|
—
|
|
|
—
|
|
|
135,000
|
|
|||||
Long-term debt
|
|
298,025
|
|
|
322,678
|
|
|
—
|
|
|
322,678
|
|
|
—
|
|
Horace Mann Educators Corporation
|
20
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
Assets
|
|
|
|
|
||||
Derivatives, included in Short-term and other investments
|
|
$
|
7,276
|
|
|
$
|
13,239
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
FIA - embedded derivatives, included in Other policyholder funds
|
|
93,619
|
|
|
93,733
|
|
||
IUL - embedded derivatives, included in
Investment contract and policy reserves
|
|
1,113
|
|
|
1,314
|
|
($ in thousands)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Change in fair value of derivatives: (1)
|
|
|
|
|
|
|
|
|
||||||||
Net investment gains (losses)
|
|
$
|
3,210
|
|
|
$
|
1,375
|
|
|
$
|
(7,790
|
)
|
|
$
|
5,429
|
|
|
|
|
|
|
|
|
|
|
||||||||
Change in fair value of embedded derivatives:
|
|
|
|
|
|
|
|
|
||||||||
Net investment gains (losses)
|
|
(6,477
|
)
|
|
(516
|
)
|
|
(320
|
)
|
|
(5,261
|
)
|
(1)
|
Includes gains or losses recognized at the expiration of the option term or early termination and the changes in fair value for open options.
|
Horace Mann Educators Corporation
|
21
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||||||||
|
|
Credit Rating
|
|
Notional
|
|
Fair
|
|
Notional
|
|
Fair
|
||||||||||
Counterparty
|
|
S&P
|
|
Moody's
|
|
Amount
|
|
Value
|
|
Amount
|
|
Value
|
||||||||
Bank of America, N.A.
|
|
A+
|
|
Aa2
|
|
$
|
185,100
|
|
|
$
|
5,090
|
|
|
$
|
174,900
|
|
|
$
|
8,523
|
|
Barclays Bank PLC
|
|
A
|
|
A1
|
|
108,500
|
|
|
1,747
|
|
|
115,300
|
|
|
3,347
|
|
||||
Citigroup Inc.
|
|
BBB+
|
|
A3
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Credit Suisse International
|
|
A+
|
|
A1
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Societe Generale
|
|
A
|
|
A1
|
|
18,400
|
|
|
439
|
|
|
27,800
|
|
|
1,369
|
|
||||
Total
|
|
|
|
|
|
$
|
312,000
|
|
|
$
|
7,276
|
|
|
$
|
318,000
|
|
|
$
|
13,239
|
|
Horace Mann Educators Corporation
|
22
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
June 30, 2020
|
||
Property and Casualty
|
|
$
|
9,460
|
|
Supplemental
|
|
19,621
|
|
|
Retirement
|
|
10,087
|
|
|
Life
|
|
9,911
|
|
|
Total
|
|
$
|
49,079
|
|
($ in thousands)
|
|
Weighted Average
|
|
|
||
|
|
Useful Life (in Years)
|
|
|
||
At inception:
|
|
|
|
|
||
Value of business acquired
|
|
30
|
|
$
|
94,419
|
|
Value of distribution acquired
|
|
17
|
|
53,996
|
|
|
Value of agency relationships
|
|
14
|
|
16,981
|
|
|
Value of customer relationships
|
|
10
|
|
9,080
|
|
|
Total
|
|
23
|
|
174,476
|
|
|
Accumulated amortization:
|
|
|
|
|
||
Value of business acquired
|
|
|
|
(7,393
|
)
|
|
Value of distribution acquired
|
|
|
|
(3,527
|
)
|
|
Value of agency relationships
|
|
|
|
(2,774
|
)
|
|
Value of customer relationships
|
|
|
|
(2,468
|
)
|
|
Total
|
|
|
|
(16,162
|
)
|
|
Net intangible assets subject to amortization:
|
|
|
|
$
|
158,314
|
|
Horace Mann Educators Corporation
|
23
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
|
||
Year Ending December 31,
|
|
|
||
2020 (excluding the six months ended June 30, 2020)
|
|
$
|
7,116
|
|
2021
|
|
13,411
|
|
|
2022
|
|
12,433
|
|
|
2023
|
|
11,577
|
|
|
2024
|
|
10,805
|
|
|
Thereafter
|
|
102,972
|
|
|
Total
|
|
$
|
158,314
|
|
Horace Mann Educators Corporation
|
24
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Property and Casualty
|
|
|
|
|
|
|
|
|
|
|
||||||
Beginning gross reserves (1)
|
|
$
|
382,248
|
|
|
$
|
359,701
|
|
|
$
|
386,976
|
|
|
$
|
367,180
|
|
Less: reinsurance recoverables
|
|
119,045
|
|
|
78,328
|
|
|
120,506
|
|
|
89,725
|
|
||||
Net reserves, beginning of period (2)
|
|
263,203
|
|
|
281,373
|
|
|
266,470
|
|
|
277,455
|
|
||||
Incurred claims and claim expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||
Claims occurring in the current period
|
|
109,167
|
|
|
134,411
|
|
|
214,621
|
|
|
253,178
|
|
||||
Decrease in estimated reserves for claims occurring
in prior periods (3)
|
|
(1,000
|
)
|
|
(2,000
|
)
|
|
(2,000
|
)
|
|
(4,000
|
)
|
||||
Total claims and claim expenses incurred (4)
|
|
108,167
|
|
|
132,411
|
|
|
212,621
|
|
|
249,178
|
|
||||
Claims and claim expense payments
for claims occurring during:
|
|
|
|
|
|
|
|
|
|
|
||||||
Current period
|
|
61,420
|
|
|
83,755
|
|
|
104,883
|
|
|
129,469
|
|
||||
Prior periods
|
|
37,542
|
|
|
39,512
|
|
|
101,800
|
|
|
106,647
|
|
||||
Total claims and claim expense payments
|
|
98,962
|
|
|
123,267
|
|
|
206,683
|
|
|
236,116
|
|
||||
Net reserves, end of period (2)
|
|
272,408
|
|
|
290,517
|
|
|
272,408
|
|
|
290,517
|
|
||||
Plus: reinsurance recoverables
|
|
116,083
|
|
|
77,345
|
|
|
116,083
|
|
|
77,345
|
|
||||
Ending gross reserves (1)
|
|
$
|
388,491
|
|
|
$
|
367,862
|
|
|
$
|
388,491
|
|
|
$
|
367,862
|
|
(1)
|
Unpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for Supplemental, Life and Retirement of $56.1 million and $30.5 million as of June 30, 2020 and 2019, respectively, in addition to Property and Casualty reserves.
|
(2)
|
Reserves net of anticipated reinsurance recoverables.
|
(3)
|
Shows the amounts by which the Company decreased its reserves in each of the periods indicated for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs.
|
(4)
|
Benefits, claims and settlement expenses as reported in the Consolidated Statements of Operations also include amounts for Supplemental, Life and Retirement of $34.8 million and $69.1 million for the three and six months ended June 30, 2020, respectively, in addition to Property and Casualty amounts. Benefits, claims and settlement expenses for Life and Retirement were $20.3 million and $42.9 million for the three and six months ended June 30, 2019, respectively.
|
Horace Mann Educators Corporation
|
25
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Gross
Amount
|
|
Ceded to
Other
Companies (1)
|
|
Assumed
from Other
Companies
|
|
Net
Amount
|
||||||||
Three months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Premiums written and contract deposits (2)
|
|
$
|
332,379
|
|
|
$
|
6,379
|
|
|
$
|
3,169
|
|
|
$
|
329,169
|
|
Premiums and contract charges earned
|
|
230,635
|
|
|
8,307
|
|
|
3,103
|
|
|
225,431
|
|
||||
Benefits, claims and settlement expenses
|
|
143,285
|
|
|
2,407
|
|
|
2,132
|
|
|
143,010
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Three months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Premiums written and contract deposits (2)
|
|
$
|
314,897
|
|
|
$
|
6,028
|
|
|
$
|
2,822
|
|
|
$
|
311,691
|
|
Premiums and contract charges earned
|
|
213,415
|
|
|
8,155
|
|
|
2,836
|
|
|
208,096
|
|
||||
Benefits, claims and settlement expenses
|
|
153,436
|
|
|
2,797
|
|
|
2,053
|
|
|
152,692
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Six months ended June 30, 2020
|
|
|
|
|
|
|
|
|
||||||||
Premiums written and contract deposits (2)
|
|
$
|
666,110
|
|
|
$
|
12,689
|
|
|
$
|
4,506
|
|
|
$
|
657,927
|
|
Premiums and contract charges earned
|
|
473,805
|
|
|
16,684
|
|
|
4,575
|
|
|
461,696
|
|
||||
Benefits, claims and settlement expenses
|
|
282,817
|
|
|
4,391
|
|
|
3,244
|
|
|
281,670
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
||||||||
Premiums written and contract deposits (2)
|
|
$
|
613,990
|
|
|
$
|
11,876
|
|
|
$
|
4,971
|
|
|
$
|
607,085
|
|
Premiums and contract charges earned
|
|
426,671
|
|
|
13,977
|
|
|
5,187
|
|
|
417,881
|
|
||||
Benefits, claims and settlement expenses
|
|
295,488
|
|
|
7,089
|
|
|
3,677
|
|
|
292,076
|
|
(1)
|
Excludes the annuity reinsurance transaction accounted for using the deposit method that is discussed in Note 5.
|
(2)
|
This measure is not based on accounting principles generally accepted in the United States of America (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as an exhibit in the Company's reports filed with the SEC.
|
Horace Mann Educators Corporation
|
26
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Insurance premiums and contract charges earned
|
|
|
|
|
|
|
|
|
||||||||
Property and Casualty
|
|
$
|
156,212
|
|
|
$
|
171,303
|
|
|
$
|
322,686
|
|
|
$
|
342,143
|
|
Supplemental
|
|
33,302
|
|
|
N/A
|
|
|
66,292
|
|
|
N/A
|
|
||||
Retirement
|
|
6,717
|
|
|
6,931
|
|
|
14,097
|
|
|
15,509
|
|
||||
Life
|
|
29,200
|
|
|
29,862
|
|
|
58,621
|
|
|
60,229
|
|
||||
Total
|
|
$
|
225,431
|
|
|
$
|
208,096
|
|
|
$
|
461,696
|
|
|
$
|
417,881
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
|
|
|
|
|
|
|
|
||||||||
Property and Casualty
|
|
$
|
6,325
|
|
|
$
|
12,643
|
|
|
$
|
16,618
|
|
|
$
|
22,861
|
|
Supplemental
|
|
4,035
|
|
|
N/A
|
|
|
7,555
|
|
|
N/A
|
|
||||
Retirement
|
|
55,044
|
|
|
62,684
|
|
|
108,569
|
|
|
127,423
|
|
||||
Life
|
|
15,630
|
|
|
18,324
|
|
|
31,188
|
|
|
36,376
|
|
||||
Corporate and Other
|
|
(58
|
)
|
|
(14
|
)
|
|
(112
|
)
|
|
(37
|
)
|
||||
Intersegment eliminations
|
|
(566
|
)
|
|
(179
|
)
|
|
(1,133
|
)
|
|
(365
|
)
|
||||
Total
|
|
$
|
80,410
|
|
|
$
|
93,458
|
|
|
$
|
162,685
|
|
|
$
|
186,258
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
|
|
|
|
|
|
|
||||||||
Property and Casualty
|
|
$
|
11,289
|
|
|
$
|
5,101
|
|
|
$
|
37,859
|
|
|
$
|
20,153
|
|
Supplemental
|
|
9,479
|
|
|
N/A
|
|
|
20,016
|
|
|
N/A
|
|
||||
Retirement
|
|
9,733
|
|
|
(25,045
|
)
|
|
8,786
|
|
|
(12,894
|
)
|
||||
Life
|
|
1,922
|
|
|
5,239
|
|
|
2,563
|
|
|
8,516
|
|
||||
Corporate and Other
|
|
(1,845
|
)
|
|
108,527
|
|
|
(20,174
|
)
|
|
110,213
|
|
||||
Total
|
|
$
|
30,578
|
|
|
$
|
93,822
|
|
|
$
|
49,050
|
|
|
$
|
125,988
|
|
($ in thousands)
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
Assets
|
|
|
|
|
||||
Property and Casualty
|
|
$
|
1,283,328
|
|
|
$
|
1,327,099
|
|
Supplemental
|
|
810,122
|
|
|
747,602
|
|
||
Retirement
|
|
8,317,079
|
|
|
8,330,127
|
|
||
Life
|
|
2,048,910
|
|
|
1,964,993
|
|
||
Corporate and Other
|
|
168,108
|
|
|
172,955
|
|
||
Intersegment eliminations
|
|
(55,843
|
)
|
|
(64,072
|
)
|
||
Total
|
|
$
|
12,571,704
|
|
|
$
|
12,478,704
|
|
Horace Mann Educators Corporation
|
27
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
Net Unrealized Investment
Gains (Losses)
on
Securities (1)(2)
|
|
Net Funded Status of
Benefit Plans (1)
|
|
Total (1)
|
||||||
Beginning balance, April 1, 2020
|
|
$
|
136,679
|
|
|
$
|
(10,767
|
)
|
|
$
|
125,912
|
|
Other comprehensive income (loss) before reclassifications
|
|
147,529
|
|
|
—
|
|
|
147,529
|
|
|||
Amounts reclassified from AOCI
|
|
(5,079
|
)
|
|
—
|
|
|
(5,079
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
142,450
|
|
|
—
|
|
|
142,450
|
|
|||
Ending balance, June 30, 2020
|
|
$
|
279,129
|
|
|
$
|
(10,767
|
)
|
|
$
|
268,362
|
|
|
|
|
|
|
|
|
||||||
Beginning balance, January 1, 2020
|
|
$
|
230,448
|
|
|
$
|
(10,767
|
)
|
|
$
|
219,681
|
|
Other comprehensive income (loss) before reclassifications
|
|
42,999
|
|
|
—
|
|
|
42,999
|
|
|||
Amounts reclassified from AOCI
|
|
5,682
|
|
|
—
|
|
|
5,682
|
|
|||
Net current period other comprehensive income (loss)
|
|
48,681
|
|
|
—
|
|
|
48,681
|
|
|||
Ending balance, June 30, 2020
|
|
$
|
279,129
|
|
|
$
|
(10,767
|
)
|
|
$
|
268,362
|
|
(1)
|
All amounts are net of tax.
|
(2)
|
The pretax amounts reclassified from AOCI, $6.4 million and $(7.2) million, are included in Net investment gains (losses) and the related income tax expenses, $1.4 million and $(1.5) million, are included in income tax expense in the Consolidated Statements of Operations for the three and six month periods ended June 30, 2020, respectively.
|
($ in thousands)
|
|
Net Unrealized Investment
Gains (Losses) on
Securities (1)(2)
|
|
Net Funded Status of
Benefit Plans (1) |
|
Total (1)
|
||||||
Beginning balance, April 1, 2019
|
|
$
|
210,839
|
|
|
$
|
(12,185
|
)
|
|
$
|
198,654
|
|
Other comprehensive income (loss) before reclassifications
|
|
107,163
|
|
|
—
|
|
|
107,163
|
|
|||
Amounts reclassified from AOCI
|
|
(114,925
|
)
|
|
—
|
|
|
(114,925
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
(7,762
|
)
|
|
—
|
|
|
(7,762
|
)
|
|||
Ending balance, June 30, 2019
|
|
$
|
203,077
|
|
|
$
|
(12,185
|
)
|
|
$
|
190,892
|
|
|
|
|
|
|
|
|
||||||
Beginning balance, January 1, 2019
|
|
$
|
96,941
|
|
|
$
|
(12,185
|
)
|
|
$
|
84,756
|
|
Other comprehensive income (loss) before reclassifications
|
|
227,466
|
|
|
—
|
|
|
227,466
|
|
|||
Amounts reclassified from AOCI
|
|
(121,330
|
)
|
|
—
|
|
|
(121,330
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
106,136
|
|
|
—
|
|
|
106,136
|
|
|||
Ending balance, June 30, 2019
|
|
$
|
203,077
|
|
|
$
|
(12,185
|
)
|
|
$
|
190,892
|
|
(2)
|
The pretax amounts reclassified from AOCI, $145.5 million and $153.6 million, are included in Net investment gains (losses) and the related income tax expenses, $30.5 million and $32.3 million, are included in Income tax expense in the Consolidated Statements of Operations for the three and six month periods ended June 30, 2019, respectively.
|
Horace Mann Educators Corporation
|
28
|
Quarterly Report on Form 10-Q
|
($ in thousands)
|
|
June 30,
|
|
December 31,
|
||||
|
|
2020
|
|
2019
|
||||
Cash
|
|
$
|
81,709
|
|
|
$
|
25,206
|
|
Restricted cash
|
|
681
|
|
|
302
|
|
||
Total cash and restricted cash shown in the Consolidated Balance Sheets and Consolidated Statements of Cash Flows
|
|
$
|
82,390
|
|
|
$
|
25,508
|
|
($ in thousands)
|
|
Six Months Ended
June 30, |
||||||
|
|
2020
|
|
2019
|
||||
Cash paid (recovered) during the six months for:
|
|
|
|
|
||||
Interest
|
|
$
|
8,247
|
|
|
$
|
6,440
|
|
Income taxes
|
|
(617
|
)
|
|
78
|
|
Horace Mann Educators Corporation
|
29
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
30
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
Three Months Ended
June 30, |
|
2020-2019
|
|
Six Months Ended
June 30, |
|
2020-2019
|
||||||||||||||
|
|
2020
|
|
2019
|
|
Change %
|
|
2020
|
|
2019
|
|
Change %
|
||||||||||
Total revenues
|
|
$
|
314.9
|
|
|
$
|
454.1
|
|
|
-30.7
|
%
|
|
$
|
622.2
|
|
|
$
|
770.0
|
|
|
-19.2
|
%
|
Net income
|
|
30.5
|
|
|
93.8
|
|
|
-67.5
|
%
|
|
49.0
|
|
|
126.0
|
|
|
-61.1
|
%
|
||||
Per diluted share:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income
|
|
0.73
|
|
|
2.24
|
|
|
-67.4
|
%
|
|
1.17
|
|
|
3.01
|
|
|
-61.1
|
%
|
||||
Net investment gains (losses), after tax
|
|
0.06
|
|
|
2.74
|
|
|
N.M.
|
|
|
(0.28
|
)
|
|
2.88
|
|
|
N.M.
|
|
||||
Book value per share
|
|
|
|
|
|
|
|
$
|
39.69
|
|
|
$
|
36.41
|
|
|
9.0
|
%
|
|||||
Net income return on equity - last
twelve months
|
|
|
|
|
|
|
|
6.9
|
%
|
|
8.6
|
%
|
|
|
|
|||||||
Net income return on equity - annualized
|
|
|
|
|
|
|
|
6.1
|
%
|
|
18.1
|
%
|
|
|
|
Horace Mann Educators Corporation
|
31
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
Three Months Ended
June 30, |
|
2020-2019
|
|
Six Months Ended
June 30, |
|
2020-2019
|
||||||||||||||
|
|
2020
|
|
2019
|
|
Change %
|
|
2020
|
|
2019
|
|
Change %
|
||||||||||
Insurance premiums and
contract charges earned
|
|
$
|
225.4
|
|
|
$
|
208.1
|
|
|
8.3
|
%
|
|
$
|
461.7
|
|
|
$
|
417.9
|
|
|
10.5
|
%
|
Net investment income
|
|
80.4
|
|
|
93.5
|
|
|
-14.0
|
%
|
|
162.7
|
|
|
186.3
|
|
|
-12.7
|
%
|
||||
Net investment gains (losses)
|
|
3.2
|
|
|
146.3
|
|
|
N.M.
|
|
|
(15.3
|
)
|
|
153.7
|
|
|
N.M.
|
|
||||
Other income
|
|
5.9
|
|
|
6.2
|
|
|
-4.8
|
%
|
|
13.1
|
|
|
12.1
|
|
|
8.3
|
%
|
||||
Total revenues
|
|
314.9
|
|
|
454.1
|
|
|
-30.7
|
%
|
|
622.2
|
|
|
770.0
|
|
|
-19.2
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Benefits, claims and settlement expenses
|
|
143.0
|
|
|
152.7
|
|
|
-6.4
|
%
|
|
281.7
|
|
|
292.1
|
|
|
-3.6
|
%
|
||||
Interest credited
|
|
50.7
|
|
|
53.6
|
|
|
-5.4
|
%
|
|
102.2
|
|
|
106.5
|
|
|
-4.0
|
%
|
||||
Operating expenses
|
|
55.7
|
|
|
57.3
|
|
|
-2.8
|
%
|
|
116.4
|
|
|
113.5
|
|
|
2.6
|
%
|
||||
DAC unlocking and amortization expense
|
|
20.4
|
|
|
31.6
|
|
|
-35.4
|
%
|
|
50.4
|
|
|
56.6
|
|
|
-11.0
|
%
|
||||
Intangible asset amortization expense
|
|
3.7
|
|
|
0.6
|
|
|
N.M.
|
|
|
7.4
|
|
|
1.1
|
|
|
N.M.
|
|
||||
Interest expense
|
|
4.0
|
|
|
3.3
|
|
|
21.2
|
%
|
|
8.2
|
|
|
6.6
|
|
|
24.2
|
%
|
||||
Other expense - goodwill impairment
|
|
—
|
|
|
28.0
|
|
|
N.M.
|
|
|
—
|
|
|
28.0
|
|
|
N.M.
|
|
||||
Total benefits, losses and expenses
|
|
277.5
|
|
|
327.1
|
|
|
-15.2
|
%
|
|
566.3
|
|
|
604.4
|
|
|
-6.3
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before income taxes
|
|
37.4
|
|
|
127.0
|
|
|
-70.6
|
%
|
|
55.9
|
|
|
165.6
|
|
|
-66.2
|
%
|
||||
Income tax expense
|
|
6.9
|
|
|
33.2
|
|
|
-79.2
|
%
|
|
6.9
|
|
|
39.6
|
|
|
-82.6
|
%
|
||||
Net income
|
|
$
|
30.5
|
|
|
$
|
93.8
|
|
|
-67.5
|
%
|
|
$
|
49.0
|
|
|
$
|
126.0
|
|
|
-61.1
|
%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Investment yield, excluding limited partnership interests,
pretax - annualized*
|
|
4.4%
|
|
4.7%
|
|
4.4%
|
|
4.8%
|
Investment yield, excluding limited partnership interests,
after tax - annualized*
|
|
3.5%
|
|
3.8%
|
|
3.6%
|
|
3.8%
|
Horace Mann Educators Corporation
|
32
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net other-than-temporary impairment losses
on securities recognized in earnings |
|
$
|
(0.5
|
)
|
|
$
|
—
|
|
|
$
|
(4.2
|
)
|
|
$
|
(0.3
|
)
|
Sales and other, net
|
|
0.4
|
|
|
142.1
|
|
|
4.9
|
|
|
146.9
|
|
||||
Change in fair value - equity securities
|
|
6.6
|
|
|
3.4
|
|
|
(7.9
|
)
|
|
6.9
|
|
||||
Change in fair value and gains (losses) realized
on settlements - derivatives |
|
(3.3
|
)
|
|
0.8
|
|
|
(8.1
|
)
|
|
0.2
|
|
||||
Net investment gains (losses)
|
|
$
|
3.2
|
|
|
$
|
146.3
|
|
|
$
|
(15.3
|
)
|
|
$
|
153.7
|
|
Horace Mann Educators Corporation
|
33
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
34
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
35
|
Quarterly Report on Form 10-Q
|
•
|
Valuation of hard-to-value fixed maturity securities, including evaluation of other-than-temporary impairments
|
•
|
Evaluation of goodwill and intangible assets for impairment
|
•
|
Valuation of life and annuity deferred policy acquisition costs
|
•
|
Valuation of liabilities for property and casualty unpaid claims and claim expenses
|
•
|
Valuation of investment contract and policy reserves
|
•
|
Valuation of assets acquired and liabilities assumed under purchase accounting
|
•
|
Property and Casualty
|
•
|
Supplemental
|
•
|
Retirement
|
•
|
Life
|
•
|
Corporate and Other
|
Horace Mann Educators Corporation
|
36
|
Quarterly Report on Form 10-Q
|
•
|
Written premiums* reduced by $9.8 million of COVID-19 related premium credits
|
•
|
18.0 points and 11.4 points of reduction in the Property and Casualty underlying loss ratio*, respectively
|
•
|
Catastrophe losses increased by 9.3 points and 3.9 points, respectively
|
•
|
A one-time tax benefit of $2.8 million in the first quarter of 2020 as a result of the CARES Act
|
Horace Mann Educators Corporation
|
37
|
Quarterly Report on Form 10-Q
|
($ in millions, unless otherwise indicated)
|
|
Three Months Ended
June 30, |
|
2020-2019
|
|
Six Months Ended
June 30, |
|
2020-2019
|
||||||||||||||
|
|
2020
|
|
2019
|
|
Change %
|
|
2020
|
|
2019
|
|
Change %
|
||||||||||
Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Written premiums*:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Automobile
|
|
$
|
96.7
|
|
|
$
|
114.6
|
|
|
-15.6
|
%
|
|
$
|
206.1
|
|
|
$
|
231.4
|
|
|
-10.9
|
%
|
Property and other
|
|
59.4
|
|
|
59.7
|
|
|
-0.5
|
%
|
|
103.6
|
|
|
104.6
|
|
|
-1.0
|
%
|
||||
Total premiums written
|
|
156.1
|
|
|
174.3
|
|
|
-10.4
|
%
|
|
309.7
|
|
|
336.0
|
|
|
-7.8
|
%
|
||||
Change in unearned insurance premiums
|
|
0.1
|
|
|
(3.0
|
)
|
|
103.3
|
%
|
|
13.0
|
|
|
6.1
|
|
|
113.1
|
%
|
||||
Total insurance premiums earned
|
|
156.2
|
|
|
171.3
|
|
|
-8.8
|
%
|
|
322.7
|
|
|
342.1
|
|
|
-5.7
|
%
|
||||
Incurred claims and claims expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Claims occurring in the current year
|
|
109.2
|
|
|
134.4
|
|
|
-18.8
|
%
|
|
214.6
|
|
|
253.2
|
|
|
-15.2
|
%
|
||||
Prior years' reserve development
|
|
1.0
|
|
|
2.0
|
|
|
-50.0
|
%
|
|
2.0
|
|
|
4.0
|
|
|
-50.0
|
%
|
||||
Total claims and claim expenses incurred
|
|
108.2
|
|
|
132.4
|
|
|
-18.3
|
%
|
|
212.6
|
|
|
249.2
|
|
|
-14.7
|
%
|
||||
Operating expenses, including DAC amortization
|
|
40.9
|
|
|
45.4
|
|
|
-9.9
|
%
|
|
84.1
|
|
|
91.9
|
|
|
-8.5
|
%
|
||||
Underwriting gain (loss)
|
|
7.1
|
|
|
(6.5
|
)
|
|
209.2
|
%
|
|
26.0
|
|
|
1.0
|
|
|
N.M.
|
|
||||
Net investment income
|
|
6.3
|
|
|
12.7
|
|
|
-50.4
|
%
|
|
16.6
|
|
|
22.9
|
|
|
-27.5
|
%
|
||||
Income before income taxes
|
|
14.1
|
|
|
6.6
|
|
|
113.6
|
%
|
|
43.9
|
|
|
24.4
|
|
|
79.9
|
%
|
||||
Net income/core earnings*
|
|
11.3
|
|
|
5.1
|
|
|
121.6
|
%
|
|
37.9
|
|
|
20.1
|
|
|
88.6
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Automobile
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expense ratio
|
|
53.2
|
%
|
|
73.8
|
%
|
|
-20.6
|
pts
|
|
59.8
|
%
|
|
72.3
|
%
|
|
-12.5
|
pts
|
||||
Expense ratio
|
|
27.1
|
%
|
|
26.6
|
%
|
|
0.5
|
pts
|
|
26.5
|
%
|
|
26.9
|
%
|
|
-0.4
|
pts
|
||||
Combined ratio:
|
|
80.3
|
%
|
|
100.4
|
%
|
|
-20.1
|
pts
|
|
86.3
|
%
|
|
99.2
|
%
|
|
-12.9
|
pts
|
||||
Prior years' reserve development
|
|
—
|
%
|
|
-0.9
|
%
|
|
0.9
|
pts
|
|
-0.5
|
%
|
|
-0.9
|
%
|
|
0.4
|
pts
|
||||
Catastrophes
|
|
3.1
|
%
|
|
1.9
|
%
|
|
1.2
|
pts
|
|
1.5
|
%
|
|
1.3
|
%
|
|
0.2
|
pts
|
||||
Underlying combined ratio*
|
|
77.2
|
%
|
|
99.4
|
%
|
|
-22.2
|
pts
|
|
85.3
|
%
|
|
98.8
|
%
|
|
-13.5
|
pts
|
||||
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expense ratio
|
|
99.1
|
%
|
|
84.8
|
%
|
|
14.3
|
pts
|
|
77.8
|
%
|
|
73.9
|
%
|
|
3.9
|
pts
|
||||
Expense ratio
|
|
24.8
|
%
|
|
26.6
|
%
|
|
-1.8
|
pts
|
|
25.5
|
%
|
|
27.1
|
%
|
|
-1.6
|
pts
|
||||
Combined ratio:
|
|
123.9
|
%
|
|
111.4
|
%
|
|
12.5
|
pts
|
|
103.3
|
%
|
|
101.0
|
%
|
|
2.3
|
pts
|
||||
Prior years' reserve development
|
|
-1.8
|
%
|
|
-1.8
|
%
|
|
—
|
|
|
-0.9
|
%
|
|
-1.9
|
%
|
|
1.0
|
pts
|
||||
Catastrophes
|
|
57.9
|
%
|
|
36.8
|
%
|
|
21.1
|
pts
|
|
36.8
|
%
|
|
27.6
|
%
|
|
9.2
|
pts
|
||||
Underlying combined ratio*
|
|
67.8
|
%
|
|
76.4
|
%
|
|
-8.6
|
pts
|
|
67.4
|
%
|
|
75.3
|
%
|
|
-7.9
|
pts
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Risks in force (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Automobile (1)
|
|
|
|
|
|
|
|
418
|
|
|
448
|
|
|
-6.7
|
%
|
|||||||
Property
|
|
|
|
|
|
|
|
191
|
|
|
198
|
|
|
-3.5
|
%
|
|||||||
Total
|
|
|
|
|
|
|
|
609
|
|
|
646
|
|
|
-5.7
|
%
|
Horace Mann Educators Corporation
|
38
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
39
|
Quarterly Report on Form 10-Q
|
($ in millions, unless otherwise indicated)
|
|
Three Months Ended
June 30, |
|
2020-2019
|
|
Six Months Ended
June 30, |
|
2020-2019
|
||||||||
|
|
2020
|
|
2019
|
|
Change %
|
|
2020
|
|
2019
|
|
Change %
|
||||
Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Insurance premiums and contract deposits*
|
|
$
|
33.7
|
|
|
N/A
|
|
N/A
|
|
$
|
66.3
|
|
|
N/A
|
|
N/A
|
Insurance premiums and contract charges earned
|
|
33.3
|
|
|
N/A
|
|
N/A
|
|
66.3
|
|
|
N/A
|
|
N/A
|
||
Net investment income
|
|
4.0
|
|
|
N/A
|
|
N/A
|
|
7.5
|
|
|
N/A
|
|
N/A
|
||
Benefits and settlement expenses
|
|
12.5
|
|
|
N/A
|
|
N/A
|
|
23.0
|
|
|
N/A
|
|
N/A
|
||
Operating expenses (includes DAC unlocking and amortization expense)
|
|
10.1
|
|
|
N/A
|
|
N/A
|
|
20.2
|
|
|
N/A
|
|
N/A
|
||
Intangible asset amortization expense
|
|
3.2
|
|
|
N/A
|
|
N/A
|
|
6.4
|
|
|
N/A
|
|
N/A
|
||
Income before income taxes
|
|
12.1
|
|
|
N/A
|
|
N/A
|
|
25.5
|
|
|
N/A
|
|
N/A
|
||
Net income / core earnings*
|
|
9.5
|
|
|
N/A
|
|
N/A
|
|
20.0
|
|
|
N/A
|
|
N/A
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental insurance in force (thousands)
|
|
|
|
|
|
|
|
298
|
|
|
N/A
|
|
N/A
|
|||
Benefits ratio (1)
|
|
37.5
|
%
|
|
N/A
|
|
N/A
|
|
34.7
|
%
|
|
N/A
|
|
N/A
|
||
Operating expense ratio (2)
|
|
26.6
|
%
|
|
N/A
|
|
N/A
|
|
26.9
|
%
|
|
N/A
|
|
N/A
|
||
Pretax profit margin (2)
|
|
31.9
|
%
|
|
N/A
|
|
N/A
|
|
34.0
|
%
|
|
N/A
|
|
N/A
|
||
Persistency
|
|
|
|
|
|
|
|
89.3
|
%
|
|
N/A
|
|
N/A
|
Horace Mann Educators Corporation
|
40
|
Quarterly Report on Form 10-Q
|
•
|
prior period results include a $28.0 million pretax goodwill impairment charge related to the annuity reinsurance transaction in the second quarter of 2019
|
•
|
$5.6 million pretax of unfavorable DAC unlocking in the prior year quarter primarily due to accelerated amortization of the DAC asset associated with the reinsured annuity block, compared to $4.6 million of favorable DAC unlocking in the current year quarter due to equity market recovery
|
•
|
lower levels of net investment income in 2020, reflecting lower invested asset levels resulting from the prior year annuity reinsurance transaction and use of capital to purchase NTA as well as lower returns on limited partnership interests
|
Horace Mann Educators Corporation
|
41
|
Quarterly Report on Form 10-Q
|
($ in millions, unless otherwise indicated)
|
|
Three Months Ended
June 30, |
|
2020-2019
|
|
Six Months Ended
June 30, |
|
2020-2019
|
||||||||||||||
|
|
2020
|
|
2019
|
|
Change %
|
|
2020
|
|
2019
|
|
Change %
|
||||||||||
Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Contract charges earned
|
|
$
|
6.7
|
|
|
$
|
6.9
|
|
|
-2.9
|
%
|
|
$
|
14.1
|
|
|
$
|
15.5
|
|
|
-9.0
|
%
|
Net investment income
|
|
55.1
|
|
|
62.7
|
|
|
-12.1
|
%
|
|
108.6
|
|
|
127.4
|
|
|
-14.8
|
%
|
||||
Interest credited
|
|
39.4
|
|
|
42.3
|
|
|
-6.9
|
%
|
|
79.7
|
|
|
84.0
|
|
|
-5.1
|
%
|
||||
Net interest margin without net investment gains (losses)
|
|
16.7
|
|
|
21.5
|
|
|
-22.3
|
%
|
|
30.8
|
|
|
44.5
|
|
|
-30.8
|
%
|
||||
Net interest margin - reinsured block
|
|
(1.0
|
)
|
|
(1.1
|
)
|
|
9.1
|
%
|
|
(1.9
|
)
|
|
(1.1
|
)
|
|
-72.7
|
%
|
||||
Mortality loss and other reserve charges
|
|
1.2
|
|
|
1.2
|
|
|
—
|
%
|
|
2.8
|
|
|
1.8
|
|
|
55.6
|
%
|
||||
Operating expenses
|
|
13.9
|
|
|
17.4
|
|
|
-20.1
|
%
|
|
30.1
|
|
|
35.5
|
|
|
-15.2
|
%
|
||||
DAC and intangible asset amortization expense, excluding DAC unlocking
|
|
4.8
|
|
|
4.9
|
|
|
-2.0
|
%
|
|
10.0
|
|
|
10.3
|
|
|
-2.9
|
%
|
||||
DAC unlocking
|
|
(4.6
|
)
|
|
5.6
|
|
|
-182.1
|
%
|
|
(0.6
|
)
|
|
3.6
|
|
|
-116.7
|
%
|
||||
Income (loss) before income taxes
|
|
11.2
|
|
|
(24.8
|
)
|
|
N.M.
|
|
|
10.1
|
|
|
(10.2
|
)
|
|
N.M.
|
|
||||
Net income (loss)
|
|
9.7
|
|
|
(25.0
|
)
|
|
N.M.
|
|
|
8.8
|
|
|
(12.8
|
)
|
|
N.M.
|
|
||||
Core earnings
|
|
9.7
|
|
|
3.0
|
|
|
223.3
|
%
|
|
8.8
|
|
|
15.2
|
|
|
-42.1
|
%
|
||||
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Annuity contract deposits*
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Variable
|
|
$
|
52.3
|
|
|
$
|
54.1
|
|
|
-3.3
|
%
|
|
$
|
110.1
|
|
|
$
|
102.9
|
|
|
7.0
|
%
|
Fixed
|
|
59.5
|
|
|
54.9
|
|
|
8.4
|
%
|
|
119.4
|
|
|
113.4
|
|
|
5.3
|
%
|
||||
Total
|
|
111.8
|
|
|
109.0
|
|
|
2.6
|
%
|
|
229.5
|
|
|
216.3
|
|
|
6.1
|
%
|
||||
Single
|
|
55.9
|
|
|
55.8
|
|
|
0.2
|
%
|
|
118.1
|
|
|
111.7
|
|
|
5.7
|
%
|
||||
Recurring
|
|
55.9
|
|
|
53.2
|
|
|
5.1
|
%
|
|
111.4
|
|
|
104.6
|
|
|
6.5
|
%
|
||||
Total
|
|
111.8
|
|
|
109.0
|
|
|
2.6
|
%
|
|
229.5
|
|
|
216.3
|
|
|
6.1
|
%
|
||||
Assets under administration (AUA)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Annuity assets under management (1)
|
|
|
|
|
|
|
|
|
4,324.3
|
|
|
4,170.3
|
|
|
3.7
|
%
|
||||||
Broker and advisory assets under administration
|
|
|
|
|
|
|
|
|
2,168.0
|
|
|
2,236.1
|
|
|
-3.0
|
%
|
||||||
Recordkeeping assets under administration
|
|
|
|
|
|
|
|
|
1,460.5
|
|
|
1,395.1
|
|
|
4.7
|
%
|
||||||
Total
|
|
|
|
|
|
|
|
|
|
|
7,952.8
|
|
|
7,801.5
|
|
|
1.9
|
%
|
||||
Persistency
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Variable annuities
|
|
|
|
|
|
|
|
|
94.9
|
%
|
|
94.3
|
%
|
|
0.6
|
pts
|
||||||
Fixed annuities
|
|
|
|
|
|
|
|
|
94.2
|
%
|
|
93.9
|
%
|
|
0.3
|
pts
|
||||||
Total
|
|
|
|
|
|
|
|
|
94.5
|
%
|
|
94.0
|
%
|
|
0.5
|
pts
|
||||||
Annuity contracts in force (thousands)
|
|
|
|
|
|
|
|
|
230
|
|
|
227
|
|
|
1.3
|
%
|
||||||
Fixed spread - YTD annualized (basis points)
|
|
|
|
|
|
|
|
|
168
|
|
|
175
|
|
|
-7bps
|
|
(1)
|
Amounts reported as of June 30, 2020 and June 30, 2019 exclude $627.6 million and $691.6 million, respectively, of assets under management held under modified coinsurance reinsurance
|
Horace Mann Educators Corporation
|
42
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
June 30, 2020
|
|||||||||||||||
|
|
|
|
|
|
Deferred Annuities at
|
|||||||||||
|
|
Total Deferred Annuities
|
|
Minimum Guaranteed Rate
|
|||||||||||||
|
|
Percent
of Total
|
|
Accumulated
Value (AV)
|
|
Percent of
Total Deferred
Annuities AV
|
|
Percent
of Total
|
|
Accumulated
Value
|
|||||||
Minimum guaranteed interest rates:
|
|
|
|
|
|
|
|
|
|
|
|||||||
Less than 2%
|
|
53.7
|
%
|
|
$
|
1,299.3
|
|
|
49.4
|
%
|
|
37.5
|
%
|
|
$
|
642.1
|
|
Equal to 2% but less than 3%
|
|
11.8
|
%
|
|
286.2
|
|
|
83.4
|
%
|
|
13.9
|
%
|
|
238.8
|
|
||
Equal to 3% but less than 4%
|
|
25.3
|
%
|
|
612.8
|
|
|
99.9
|
%
|
|
35.7
|
%
|
|
612.4
|
|
||
Equal to 4% but less than 5%
|
|
7.1
|
%
|
|
170.5
|
|
|
100.0
|
%
|
|
9.9
|
%
|
|
170.5
|
|
||
5% or higher
|
|
2.1
|
%
|
|
50.5
|
|
|
100.0
|
%
|
|
3.0
|
%
|
|
50.5
|
|
||
Total
|
|
100.0
|
%
|
|
$
|
2,419.3
|
|
|
70.9
|
%
|
|
100.0
|
%
|
|
$
|
1,714.3
|
|
Horace Mann Educators Corporation
|
43
|
Quarterly Report on Form 10-Q
|
($ in millions, unless otherwise indicated)
|
|
Three Months Ended
June 30, |
|
2020-2019
|
|
Six Months Ended
June 30, |
|
2020-2019
|
||||||||||||||
|
|
2020
|
|
2019
|
|
Change %
|
|
2020
|
|
2019
|
|
Change %
|
||||||||||
Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Insurance premiums and contract deposits*
|
|
$
|
27.6
|
|
|
$
|
28.4
|
|
|
-2.8
|
%
|
|
$
|
52.4
|
|
|
$
|
54.8
|
|
|
-4.4
|
%
|
Insurance premiums and contract charges earned
|
|
29.2
|
|
|
29.9
|
|
|
-2.3
|
%
|
|
58.6
|
|
|
60.3
|
|
|
-2.8
|
%
|
||||
Net investment income
|
|
15.6
|
|
|
18.3
|
|
|
-14.8
|
%
|
|
31.2
|
|
|
36.4
|
|
|
-14.3
|
%
|
||||
Benefits and settlement expenses
|
|
21.1
|
|
|
19.1
|
|
|
10.5
|
%
|
|
43.3
|
|
|
41.1
|
|
|
5.4
|
%
|
||||
Interest credited
|
|
11.3
|
|
|
11.3
|
|
|
—
|
%
|
|
22.5
|
|
|
22.5
|
|
|
—
|
%
|
||||
Operating expenses
|
|
8.3
|
|
|
9.2
|
|
|
-9.8
|
%
|
|
17.4
|
|
|
18.6
|
|
|
-6.5
|
%
|
||||
DAC amortization expense, excluding unlocking
|
|
2.0
|
|
|
2.1
|
|
|
-4.8
|
%
|
|
3.9
|
|
|
4.1
|
|
|
-4.9
|
%
|
||||
DAC unlocking
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
N.M.
|
|
|
(0.3
|
)
|
|
(0.1
|
)
|
|
N.M.
|
|
||||
Income before income taxes
|
|
2.3
|
|
|
6.7
|
|
|
-65.7
|
%
|
|
3.0
|
|
|
10.7
|
|
|
-72.0
|
%
|
||||
Net income / core earnings*
|
|
1.9
|
|
|
5.2
|
|
|
-63.5
|
%
|
|
2.5
|
|
|
8.5
|
|
|
-70.6
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Life insurance in force
|
|
|
|
|
|
|
|
$
|
19,565
|
|
|
$
|
18,598
|
|
|
5.2
|
%
|
|||||
Number of policies in force (thousands)
|
|
|
|
|
|
|
|
201
|
|
|
199
|
|
|
1.0
|
%
|
|||||||
Average face amount in force (in dollars)
|
|
|
|
|
|
|
|
$
|
97,306
|
|
|
$
|
93,506
|
|
|
4.1
|
%
|
|||||
Lapse ratio (ordinary life insurance in force)
|
|
|
|
|
|
|
|
4.2
|
%
|
|
4.5
|
%
|
|
-0.3
|
pts
|
|||||||
Mortality costs
|
|
|
|
|
|
|
|
$
|
19.3
|
|
|
$
|
18.0
|
|
|
7.2
|
%
|
Horace Mann Educators Corporation
|
44
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
Three Months Ended
June 30, |
|
2020-2019
|
|
Six Months Ended
June 30, |
|
2020-2019
|
||||||||||||||
|
|
2020
|
|
2019
|
|
Change %
|
|
2020
|
|
2019
|
|
Change %
|
||||||||||
Interest expense
|
|
$
|
3.9
|
|
|
$
|
2.9
|
|
|
34.5
|
%
|
|
$
|
7.9
|
|
|
$
|
5.9
|
|
|
33.9
|
%
|
Net investment gains (losses) pretax
|
|
3.2
|
|
|
146.3
|
|
|
N.M.
|
|
|
(15.3
|
)
|
|
153.7
|
|
|
N.M.
|
|
||||
Tax on net investment gains (losses)
|
|
0.7
|
|
|
31.6
|
|
|
N.M.
|
|
|
(3.3
|
)
|
|
33.2
|
|
|
N.M.
|
|
||||
Net investment gains (losses) after tax
|
|
2.5
|
|
|
114.7
|
|
|
N.M.
|
|
|
(12.0
|
)
|
|
120.5
|
|
|
N.M.
|
|
||||
Net income (loss)
|
|
(1.9
|
)
|
|
108.5
|
|
|
-101.8
|
%
|
|
(20.2
|
)
|
|
110.2
|
|
|
-118.3
|
%
|
||||
Core earnings (loss)*
|
|
(4.4
|
)
|
|
(6.2
|
)
|
|
29.0
|
%
|
|
(8.2
|
)
|
|
(10.3
|
)
|
|
20.4
|
%
|
($ in millions)
|
|
Three Months Ended
June 30, |
|
2020-2019
|
|
Six Months Ended
June 30, |
|
2020-2019
|
||||||||||||||
|
|
2020
|
|
2019
|
|
Change %
|
|
2020
|
|
2019
|
|
Change %
|
||||||||||
Net investment income - Investment portfolio
|
|
$
|
56.5
|
|
|
$
|
70.3
|
|
|
-19.6
|
%
|
|
$
|
115.1
|
|
|
$
|
163.1
|
|
|
-29.4
|
%
|
Investment income - Deposit asset on reinsurance
|
|
23.9
|
|
|
23.2
|
|
|
3.0
|
%
|
|
47.6
|
|
|
23.2
|
|
|
105.2
|
%
|
||||
Total net investment income
|
|
80.4
|
|
|
93.5
|
|
|
-14.0
|
%
|
|
162.7
|
|
|
186.3
|
|
|
-12.7
|
%
|
||||
Pretax net investment gains (losses)
|
|
3.2
|
|
|
146.3
|
|
|
N.M.
|
|
|
(15.3
|
)
|
|
153.7
|
|
|
N.M.
|
|
||||
Pretax net unrealized investment gains on fixed maturity securities
|
|
|
|
|
|
|
|
417.6
|
|
|
292.5
|
|
|
42.8
|
%
|
Horace Mann Educators Corporation
|
45
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
June 30, 2020
|
|||||||||||||
|
|
Number of
Issuers
|
|
Fair
Value
|
|
Amortized
Cost or Cost
|
|
Pretax Net
Unrealized
Gain (Loss)
|
|||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|||||||
Corporate bonds
|
|
|
|
|
|
|
|
|
|||||||
Banking & Finance
|
|
134
|
|
|
$
|
476.8
|
|
|
$
|
436.0
|
|
|
$
|
40.8
|
|
Insurance
|
|
49
|
|
|
193.9
|
|
|
174.1
|
|
|
19.8
|
|
|||
HealthCare,Pharmacy
|
|
69
|
|
|
132.0
|
|
|
119.2
|
|
|
12.8
|
|
|||
Energy (1)
|
|
68
|
|
|
127.2
|
|
|
114.4
|
|
|
12.8
|
|
|||
Real Estate
|
|
34
|
|
|
120.0
|
|
|
113.0
|
|
|
7.0
|
|
|||
Transportation
|
|
38
|
|
|
94.5
|
|
|
92.0
|
|
|
2.5
|
|
|||
Technology
|
|
37
|
|
|
87.8
|
|
|
81.5
|
|
|
6.3
|
|
|||
Utilities
|
|
55
|
|
|
85.5
|
|
|
74.6
|
|
|
10.9
|
|
|||
Food and Beverage
|
|
31
|
|
|
76.6
|
|
|
66.7
|
|
|
9.9
|
|
|||
Broadcasting & Media
|
|
25
|
|
|
61.1
|
|
|
52.3
|
|
|
8.8
|
|
|||
All other corporates (2)
|
|
306
|
|
|
407.0
|
|
|
382.2
|
|
|
24.8
|
|
|||
Total corporate bonds
|
|
846
|
|
|
1,862.4
|
|
|
1,706.0
|
|
|
156.4
|
|
|||
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|||||||
U.S. Government and federally sponsored agencies
|
|
270
|
|
|
503.1
|
|
|
448.7
|
|
|
54.4
|
|
|||
Commercial (3)
|
|
125
|
|
|
348.7
|
|
|
319.6
|
|
|
29.1
|
|
|||
Other
|
|
42
|
|
|
63.4
|
|
|
63.7
|
|
|
(0.3
|
)
|
|||
Municipal bonds (4)
|
|
597
|
|
|
1,805.6
|
|
|
1,633.3
|
|
|
172.3
|
|
|||
Government bonds
|
|
|
|
|
|
|
|
|
|||||||
U.S.
|
|
34
|
|
|
374.9
|
|
|
333.4
|
|
|
41.5
|
|
|||
Foreign
|
|
7
|
|
|
43.6
|
|
|
39.7
|
|
|
3.9
|
|
|||
Collateralized loan obligations (5)
|
|
136
|
|
|
633.3
|
|
|
655.4
|
|
|
(22.1
|
)
|
|||
Asset-backed securities
|
|
106
|
|
|
387.0
|
|
|
404.6
|
|
|
(17.6
|
)
|
|||
Total fixed maturity securities
|
|
2,163
|
|
|
$
|
6,022.0
|
|
|
$
|
5,604.4
|
|
|
$
|
417.6
|
|
|
|
|
|
|
|
|
|
|
|||||||
Equity securities
|
|
|
|
|
|
|
|
|
|||||||
Non-redeemable preferred stocks
|
|
16
|
|
|
$
|
62.8
|
|
|
|
|
|
||||
Common stocks
|
|
95
|
|
|
6.5
|
|
|
|
|
|
|||||
Closed-end fund
|
|
1
|
|
|
21.0
|
|
|
|
|
|
|||||
Total equity securities
|
|
112
|
|
|
$
|
90.3
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||||
Total
|
|
2,275
|
|
|
$
|
6,112.3
|
|
|
|
|
|
(1)
|
At June 30, 2020, the fair value amount included $8.6 million which were non-investment grade.
|
(2)
|
The All other corporates category contains 19 additional industry sectors. Telecom, Retail, Consumer Products, Metal & Mining and Misc. represented $222.4 million of fair value at June 30, 2020, with the remaining 14 sectors each representing less than $32.2 million.
|
(3)
|
At June 30, 2020, 100% were investment grade, with an overall credit rating of AA+, and the positions were well diversified by property type, geography and sponsor.
|
(4)
|
Holdings are geographically diversified, 52.5% are tax-exempt and 76.8% are revenue bonds tied to essential services, such as mass transit, water and sewer. The overall credit quality of the municipal bond portfolio was AA- at June 30, 2020.
|
(5)
|
Based on fair value, 95.8% of the collateralized loan obligation securities were rated investment grade by Standard and Poor's Global Inc. (S&P), Moody's Investors Service, Inc. (Moody's) and/or Fitch Ratings, Inc. (Fitch) at June 30, 2020.
|
Horace Mann Educators Corporation
|
46
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
June 30, 2020
|
|||||||||||||||
|
|
Number of Issuers
|
|
Fair Value
|
|
Amortized
Cost or
Cost
|
|
Pretax Net Unrealized
Investment
Gains (Losses)
|
|
Credit
Quality
|
|||||||
Fixed maturity securities (1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Travel and leisure
|
|
48
|
|
|
$
|
107.3
|
|
|
$
|
106.4
|
|
|
$
|
0.9
|
|
|
BBB+
|
Energy-related
|
|
83
|
|
|
150.6
|
|
|
135.3
|
|
|
15.3
|
|
|
BBB+
|
|||
Retail
|
|
22
|
|
|
66.5
|
|
|
62.8
|
|
|
3.7
|
|
|
A-
|
|||
Aircraft
|
|
55
|
|
|
145.7
|
|
|
175.2
|
|
|
(29.5
|
)
|
|
A-
|
|||
Total fixed maturity securities
|
|
208
|
|
|
$
|
470.1
|
|
|
$
|
479.7
|
|
|
$
|
(9.6
|
)
|
|
BBB+
|
(1)
|
Below investment grade securities included in this population account for $55.7 million of amortized cost, $52.8 million of fair value, and $2.9 million of net unrealized investment losses. There are 90 issuers with an average rating of BB-. The majority of these securities are concentrated in the energy sector.
|
Horace Mann Educators Corporation
|
47
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
Percent of Portfolio
|
|
|
|
|
||||||||
|
|
Fair Value
|
|
June 30, 2020
|
||||||||||
|
|
December 31, 2019
|
|
June 30, 2020
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
||||||
AAA
|
|
11.5
|
%
|
|
11.6
|
%
|
|
$
|
698.5
|
|
|
$
|
685.2
|
|
AA (2)
|
|
42.7
|
|
|
41.0
|
|
|
2,468.4
|
|
|
2,232.1
|
|
||
A
|
|
23.3
|
|
|
20.5
|
|
|
1,235.7
|
|
|
1,148.0
|
|
||
BBB
|
|
18.9
|
|
|
19.7
|
|
|
1,188.7
|
|
|
1,112.1
|
|
||
BB
|
|
1.7
|
|
|
2.1
|
|
|
123.8
|
|
|
124.5
|
|
||
B
|
|
0.4
|
|
|
0.9
|
|
|
54.1
|
|
|
55.4
|
|
||
CCC or lower
|
|
—
|
|
|
0.1
|
|
|
3.0
|
|
|
3.6
|
|
||
Not rated (3)
|
|
1.5
|
|
|
4.1
|
|
|
249.8
|
|
|
243.5
|
|
||
Total fixed maturity securities
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
6,022.0
|
|
|
$
|
5,604.4
|
|
Equity securities
|
|
|
|
|
|
|
|
|
||||||
AAA
|
|
—
|
%
|
|
—
|
%
|
|
$
|
—
|
|
|
|
||
AA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||
A
|
|
—
|
|
|
0.6
|
|
|
0.5
|
|
|
|
|||
BBB
|
|
59.3
|
|
|
68.1
|
|
|
61.5
|
|
|
|
|||
BB
|
|
—
|
|
|
0.9
|
|
|
0.8
|
|
|
|
|||
B
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||
CCC or lower
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||
Not rated
|
|
40.7
|
|
|
30.4
|
|
|
27.5
|
|
|
|
|||
Total equity securities
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
90.3
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
|
|
|
|
$
|
6,112.3
|
|
|
|
(1)
|
Ratings are as assigned primarily by S&P when available, with remaining ratings as assigned on an equivalent basis by Moody's or Fitch. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings.
|
(2)
|
At June 30, 2020, the AA rated fair value amount included $374.9 million of U.S. Government and federally sponsored agency securities and $706.0 million of mortgage-backed and asset-backed securities issued by U.S. Government and federally sponsored agencies.
|
(3)
|
This category primarily represents private placement and municipal securities not rated by either S&P, Moody's or Fitch.
|
Horace Mann Educators Corporation
|
48
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
Six Months Ended
June 30, |
|
2020-2019
|
|||||||
|
|
2020
|
|
2019
|
|
Change %
|
|||||
Net cash provided by operating activities
|
|
$
|
165.6
|
|
|
$
|
97.8
|
|
|
69.3
|
%
|
Net cash provided by (used in) investing activities
|
|
(195.0
|
)
|
|
23.2
|
|
|
N.M.
|
|
||
Net cash provided by (used in) financing activities
|
|
86.3
|
|
|
(125.3
|
)
|
|
168.9
|
%
|
||
Net increase (decrease) in cash
|
|
56.9
|
|
|
(4.3
|
)
|
|
N.M.
|
|
||
Cash at beginning of period
|
|
25.5
|
|
|
11.9
|
|
|
114.3
|
%
|
||
Cash at end of period
|
|
$
|
82.4
|
|
|
$
|
7.6
|
|
|
N.M.
|
|
Horace Mann Educators Corporation
|
49
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
50
|
Quarterly Report on Form 10-Q
|
($ in millions)
|
|
Effective
Interest
Rates
|
|
Final
Maturity
|
|
|
|
|
||||
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||
Short-term debt
|
|
|
|
|
|
|
|
|
||||
Bank Credit Facility
|
|
Variable
|
|
2024
|
|
$
|
135.0
|
|
|
$
|
135.0
|
|
Long-term debt (1)
|
|
|
|
|
|
|
|
|
||||
4.50% Senior Notes, Aggregate principal
amount of $250,000 less unaccrued discount of $395 and $426 and unamortized debt issuance costs of $1,433 and $1,549 |
|
4.50%
|
|
2025
|
|
248.2
|
|
|
248.0
|
|
||
Federal Home Loan Bank borrowing
|
|
0.52%
|
|
2022
|
|
54.0
|
|
|
50.0
|
|
||
Total
|
|
|
|
|
|
$
|
437.2
|
|
|
$
|
433.0
|
|
Horace Mann Educators Corporation
|
51
|
Quarterly Report on Form 10-Q
|
|
|
Insurance Financial
|
|
|
|
Affirmed/
|
||||
|
|
Strength Ratings (Outlook)
|
|
Debt Ratings (Outlook)
|
|
Reviewed
|
||||
A.M. Best
|
|
|
|
|
|
|
|
|
|
7/2/2020
|
HMEC (parent company)
|
|
N.A.
|
|
|
|
bbb
|
|
(stable)
|
|
|
HMEC's Life
|
|
A
|
|
(stable)
|
|
N.A.
|
|
|
|
|
HMEC's Property and Casualty subsidiaries
|
|
A
|
|
(stable)
|
|
N.A.
|
|
|
|
|
HMEC's Supplemental subsidiaries
|
|
A-
|
|
(stable)
|
|
N.A.
|
|
|
|
|
Fitch
|
|
A
|
|
(stable)
|
|
BBB
|
|
(stable)
|
|
6/2/2020
|
Moody's
|
|
A2
|
|
(stable)
|
|
Baa2
|
|
(stable)
|
|
7/2/2019
|
S&P
|
|
A
|
|
(stable)
|
|
BBB
|
|
(stable)
|
|
2/19/2020
|
Horace Mann Educators Corporation
|
52
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
53
|
Quarterly Report on Form 10-Q
|
•
|
employees contracting COVID-19;
|
•
|
reductions in our operating effectiveness as our employees work from home;
|
•
|
sustained lack of access to schools and teachers that could materially impact our sales and premium volumes;
|
•
|
public school systems facing budget constraints due to the economic impacts of the pandemic that could result in educator layoffs;
|
•
|
unprecedented volatility in financial markets that could materially affect our investment portfolio valuations and returns as well as our ability to generate targeted spreads on the indexed products;
|
•
|
regulatory mandates and/or legislative changes, including premium grace periods and premium credits;
|
•
|
changes in frequency and/or severity of claims;
|
•
|
increased credit risk;
|
•
|
business disruption for insurance agents who market and sell our insurance products; and
|
•
|
business disruptions to third parties at which we outsource certain business functions to or on which we rely for technology.
|
Horace Mann Educators Corporation
|
54
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
55
|
Quarterly Report on Form 10-Q
|
10.2*
|
|
|
|
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|
10.2(a)*
|
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|
|
|
10.2(b)*
|
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|
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|
|
10.2(c)*
|
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|
|
|
10.2(d)*
|
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|
10.2(e)*
|
|
|
|
|
|
10.3*
|
|
|
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|
|
10.3(a)*
|
|
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|
|
|
10.3(b)*
|
|
|
|
|
|
10.3(c)*
|
|
|
|
|
|
10.3(d)*
|
|
|
|
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|
10.3(e)*
|
|
|
|
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|
10.3(f)*
|
|
|
|
|
|
Horace Mann Educators Corporation
|
56
|
Quarterly Report on Form 10-Q
|
10.3(g)*
|
|
|
|
|
|
10.4*
|
|
|
|
|
|
10.5*
|
|
|
|
|
|
10.6*
|
|
|
|
|
|
10.7*
|
|
|
|
|
|
10.8*
|
|
|
|
|
|
10.9*
|
|
|
|
|
|
10.10*
|
|
|
|
|
|
10.10(a)*
|
|
|
|
|
|
10.11*
|
|
|
|
|
|
10.11(a)*
|
|
|
|
|
|
10.11(b)*
|
|
|
|
|
|
10.12
|
|
|
|
|
|
10.13
|
|
|
|
|
|
10.14
|
|
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|
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|
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|
||
|
Horace Mann Educators Corporation
|
57
|
Quarterly Report on Form 10-Q
|
Horace Mann Educators Corporation
|
58
|
Quarterly Report on Form 10-Q
|
|
|
|
HORACE MANN EDUCATORS CORPORATION
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
August 7, 2020
|
|
/s/ Marita Zuraitis
|
|
|
|
|
|
|
|
Marita Zuraitis
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
August 7, 2020
|
|
/s/ Bret A. Conklin
|
|
|
|
|
|
|
|
Bret A. Conklin
|
|
|
|
Executive Vice President and
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
August 7, 2020
|
|
/s/ Kimberly A. Johnson
|
|
|
|
|
|
|
|
Kimberly A. Johnson
|
|
|
|
Senior Vice President, Controller and
|
|
|
|
Principal Accounting Officer
|
Horace Mann Educators Corporation
|
59
|
Quarterly Report on Form 10-Q
|
Compensation Element
|
Non-Employee Director Compensation (1)(2)
|
|
Board Chairman Annual Retainer
|
$125,000
|
|
Board Member Annual Retainer
(other than Board Chairman) |
$70,000
|
|
Audit Committee Chair Retainer
|
$25,000
|
|
All Other Committee Chair Retainers
|
$15,000
|
|
Technology Liaison
|
$10,000
|
|
Share-based Compensation
|
Fair value on the date of the respective awards is used to determine the number of Restricted Stock Units ("RSUs") awarded.
An annual award of $110,000 in RSUs following the Annual Shareholder Meeting. $110,000 in RSUs if joining the Board within six months after the prior Annual Shareholder Meeting, $55,000 in RSUs if joining more than six months after the prior Annual Shareholder Meeting but before the next Annual Shareholder Meeting.
All awards have a 1-year vesting period.
|
|
Basic Group Term Life Insurance
|
Premium for $10,000 face amount
|
|
Business Travel Accident Insurance
|
Premium for $100,000 coverage
|
(1)
|
Annual retainer fees are paid following the Annual Shareholder Meeting each year. The annual retainer fees are prorated to the extent that a non-employee Director joins the Board after the Annual Shareholder Meeting.
|
(2)
|
Non-employee Directors may elect to defer cash compensation into RSUs.
|
Named Executive Officer
|
Annualized Salary
|
Marita Zuraitis
President and Chief Executive Officer
|
$975,000
|
Bret A. Conklin
Executive Vice President and Chief Financial Officer
|
$450,000
|
Matthew P. Sharpe
Executive Vice President, Distribution & Business Strategy
|
$450,000
|
William J. Caldwell
Executive Vice President, Property & Casualty and Life & Retirement (1)
|
$450,000
|
Wade A. Rugenstein
Executive Vice President, Supplemental & Operations
|
$450,000
|
Note: The effective date of entry shall be subject to Section 4.2(a)
|
||
|
|
|
NAME OR TITLE
|
|
EFFECTIVE DATE OF
|
|
|
PARTICIPATION*
|
|
|
|
TIER I PARTICIPANTS
|
||
President and CEO
|
|
May 16, 2013
|
|
|
|
TIER II PARTICIPANTS
|
||
EVP and CFO
|
|
May 23, 2017
|
EVP, Distribution & Business Strategy
|
|
February 15, 2012
|
EVP, Property & Casualty and Life & Retirement (1)
|
|
July 1, 2015
|
EVP, Supplemental & Operations
|
|
August 15, 2019
|
|
|
|
TIER III PARTICIPANTS
|
||
|
|
|
*Subject to acceptance within 30 days of effective date of participation.
|
NAME OR TITLE
|
|
EFFECTIVE DATE OF
|
|
|
PARTICIPATION*
|
|
|
|
TIER I PARTICIPANTS
|
||
President and CEO
|
|
May 16, 2013
|
|
|
|
TIER II PARTICIPANTS
|
||
EVP and CFO
|
|
May 23, 2017
|
EVP, Distribution & Business Strategy
|
|
February 15, 2012
|
EVP, Property & Casualty and Life & Retirement (1)
|
|
July 1, 2015
|
EVP, Supplemental & Operations
|
|
August 15, 2019
|
|
|
|
TIER III PARTICIPANTS
|
||
|
|
|
*Subject to acceptance within 30 days of effective date of participation.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Basic:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
30,578
|
|
|
$
|
93,822
|
|
|
$
|
49,050
|
|
|
$
|
125,988
|
|
Weighted average number of common
shares during the period (in thousands)
|
|
41,879
|
|
|
41,762
|
|
|
41,856
|
|
|
41,685
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income per share – basic
|
|
$
|
0.73
|
|
|
$
|
2.25
|
|
|
$
|
1.17
|
|
|
$
|
3.02
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Diluted:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
30,578
|
|
|
$
|
93,822
|
|
|
$
|
49,050
|
|
|
$
|
125,988
|
|
Weighted average number of common
shares during the period
|
|
41,879
|
|
|
41,762
|
|
|
41,856
|
|
|
41,685
|
|
||||
Weighted average number of common equivalent
shares to reflect the dilutive effect of common
stock equivalent securities:
|
|
|
|
|
|
|
|
|
||||||||
Stock options
|
|
31
|
|
|
61
|
|
|
52
|
|
|
64
|
|
||||
Common stock units related to deferred
compensation for employees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Restricted common stock units related
to incentive compensation
|
|
86
|
|
|
98
|
|
|
100
|
|
|
102
|
|
||||
Total common and common equivalent shares
adjusted to calculate diluted earnings per share
|
|
41,996
|
|
|
41,921
|
|
|
42,008
|
|
|
41,851
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income per share – diluted
|
|
$
|
0.73
|
|
|
$
|
2.24
|
|
|
$
|
1.17
|
|
|
$
|
3.01
|
|
/s/ KPMG LLP
|
|
KPMG LLP
|
|
|
|
Chicago, Illinois
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Marita Zuraitis
|
|
|
Marita Zuraitis, Chief Executive Officer
|
|
|
Horace Mann Educators Corporation
|
|
|
|
|
|
Date:
|
August 7, 2020
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Bret A. Conklin
|
|
|
Bret A. Conklin, Chief Financial Officer
|
|
|
Horace Mann Educators Corporation
|
|
|
|
|
|
Date:
|
August 7, 2020
|
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Marita Zuraitis
|
|
|
Marita Zuraitis
|
|
|
Chief Executive Officer
|
|
|
|
|
|
Date:
|
August 7, 2020
|
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Bret A. Conklin
|
|
|
Bret A. Conklin
|
|
|
Chief Financial Officer
|
|
|
|
|
|
Date:
|
August 7, 2020
|
|
•
|
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 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.
|
•
|
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.
|