SPRINGFIELD, Ill.–(BUSINESS WIRE)–Horace Mann Educators Corporation (NYSE: HMN) today announced that it incurred second-quarter catastrophe losses well above the company’s 10-year historical average. In addition, the significant declines in the equity market during the quarter resulted in an unfavorable release from the DAC.
“The confluence of external events that have a temporary impact on our financial performance does not detract from our unwavering commitment to the education market and the achievement of our long-term financial objectives,” said President and CEO of the management, Marita Zuraitis. “However, largely based on the level of catastrophe-related losses and the effects of declining equity markets, we are updating our full-year 2022 basic earnings per share guidance range to 2.10 $ to $2.30, including a second-quarter loss per share of about 10 cents to 20 cents.
“Horace Mann continues to build on its leadership position in the education market, with top-tier sales growth continuing to support our long-term goals,” Zuraitis continued. “Our fringe and group benefits segment is ramping up, with voluntary product sales in the second quarter nearly $1 million above the prior year level. The recently acquired Madison National continues to meet our expectations and we remain very optimistic about the long-term growth potential of the employer-sponsored and voluntary offerings sold on the job site. In addition, auto sales remain at the highest levels since the start of the pandemic.
“At the same time, we are supporting our policyholders in the Midwest and Plains states that were impacted by the multiple severe thunderstorms, winds and concentrated hailstorms in May,” Zuraitis said. “Due to the level of storm activity, we now expect our catastrophe losses for the second quarter to be approximately $44-47 million before tax.
“As we noted on our first quarter call, consistent with the broader industry, we have begun to see an increase in near-term auto and property loss costs due to inflation,” Zuraitis commented. “Inflation is also affecting the settlement of claims from recent accident years which remain open due to systemic delays related to the pandemic. In the second quarter results, we expect to recognize the effect of these inflationary trends by adding approximately $6 million, pre-tax, to property and casualty insurance reserves. We also continue to implement pricing changes and other underwriting changes that respond to these inflationary trends.
Total managed portfolio net investment income for 2022 is expected to be at the lower end of the indicative range of $310-320 million. This largely reflects net investment income on the core portfolio at the lower level of expectations due to lower portfolio balances resulting from high catastrophe losses. This will be somewhat offset by annual returns close to historical averages in the commercial mortgage fund portfolio. Due to the stock market decline, limited partnership fund returns are now expected to be below historical averages for the second half of the year.
Reflecting catastrophe losses and inflationary trends, P&C full-year core earnings are now expected to be between $10 million and $14 million, compared to guidance of $44 million to $48 million provided when the company announced year-end results. The revised full-year 2022 guidance also reflects the company’s assumption that catastrophe losses in the second half will contribute between $20 million and $22 million, before tax, unchanged from the previous guidance. and in line with the 10-year average of the second half. catastrophic losses.
Largely due to the effect of lower equity markets, Life and Retirement segment full-year core earnings are now expected to be between $56 million and $59 million, versus guidance of $74 million to $77 million. of dollars provided when the company announced year-end results. The change in guidance for life insurance and pensions reflects approximately $6 million (after tax) of market performance-related DAC release in the first half of 2022. Equity market declines are also driving lower expenses and fees on asset-backed accounts.
“Now, more than ever, Horace Mann remains committed to helping our nation’s educators protect what they have today and prepare for a prosperous future,” Zuraitis concluded. “We expect to resume our trajectory towards a sustainable double-digit return on equity in 2023. Our capital generation capability remains strong. We used $14 million to buy back a total of 375,371 shares in the first six months of 2022, and the board authorized a new $50 million share buyback plan at the end of May.
Second quarter financial results to be announced August 4
Horace Mann expects to release its second quarter 2022 results on Thursday, August 4 at 6:30 p.m. EST. At that time, the Quarterly Press Release, Investor Supplement and Investor Presentation will be available on the Company’s website at investor.horacemann.com.
Management will host a conference call to discuss the financial results on Friday, August 5 at 11 a.m. Eastern Time. Investors can access the webcast of the call through the Events page of the company’s Investors site or by dialing 844-735-3325. For webcasting, please log on to the site several minutes in advance to register and download any required audio software. The on-demand replay will be available later today.
About Horace Mann
Horace Mann Educators Corporation is the largest financial services company dedicated to helping American educators and other community service people achieve financial success throughout their lives. The company offers individual and group insurance and financial solutions adapted to the needs of the educational community. Founded by educators for educators® in 1945, the company was headquartered in Springfield, Illinois. For more information, visit horacemann.com.