Horace Mann(HMN)2023-02-28 20:19Financial Performance - The company reported 612.6 million in direct premiums for the Property & Casualty segment for the year ended December 31, 2022[54]. - Direct premiums and contract deposits totaled 599.2 million, reflecting the company's strong performance in retirement products and life insurance[86]. - The employer-sponsored line of business generated 179.9 million in dividends from its insurance subsidiaries[117]. Customer Base and Market Presence - The company serves approximately 1 million households, with about 80% of its customer base being educators[23]. - The top five states by direct insurance premiums were California (12.2%), Texas (8.2%), North Carolina (7.9%), Minnesota (6.0%), and South Carolina (4.8%)[50]. - The top five states for worksite direct business accounted for significant portions of total direct insurance premiums: California (28.7%), Texas (13.7%), Florida (6.3%), North Carolina (5.7%), and Louisiana (5.4%)[98]. - The top five states by direct premiums and contract deposits in 2022 were Pennsylvania (9.2%), North Carolina (6.1%), Minnesota (5.5%), Indiana (5.3%), and California (5.3%)[84]. Product Offerings - The Worksite Division focuses on providing employee benefits, including life insurance and supplemental products, to educators through their school district employers[33]. - The average face amount of individual life insurance policies issued in 2022 was approximately 123,000[75]. - In 2022, 47.2% of net annuity contract deposits were for 403(b) tax-qualified annuities[73]. - At year-end 2022, 55.5% of accumulated annuity value on deposit was 403(b) tax-qualified[73]. Risk Management and Reinsurance - The company retains approximately 72.6% of gross and assumed group disability and specialty health benefits in 2022, demonstrating effective risk management[103]. - The catastrophe excess of loss reinsurance contract for 2022 provided 95% coverage for catastrophe losses above a 175.0 million per occurrence[62]. - The life catastrophe reinsurance program covers risks up to 1 million reinsured in 2022[90]. - The company maintains a life insurance risk retention limit of 100,000 to 3.1 billion block of in-force fixed and variable annuity business, with approximately 50% of fixed annuity balances being reinsured[88]. Investment Strategy - The investment strategy focuses on generating income to support product liabilities, primarily through investment-grade fixed maturity securities[109]. - As of December 31, 2022, the total investment portfolio amounted to 5,003.7 million in fixed maturity securities[113]. - The fixed maturity securities portfolio is composed of 92.0% investment grade and 8.0% non-investment grade securities, with an average credit quality of A+[115]. - The average option-adjusted duration of the fixed maturity securities portfolio is 6.4 years[115]. - The total fair value of publicly traded securities is $4,812.9 million, with 73.1% of the total investment portfolio[113]. Regulatory and Economic Environment - The insurance industry is subject to extensive regulation, which may restrict investment types and rates charged for property and casualty products, affecting profitability[205]. - Changes in insurance regulations could adversely affect the financial condition and operational results of the insurance subsidiaries[206]. - The NAIC's risk-based capital system assesses minimum capital adequacy, and changes in statutory surplus requirements could negatively impact the insurance subsidiaries' business volume and profitability[207]. - Legislative efforts to expand regulations regarding property and casualty insurance may continue, potentially affecting the financial condition of the insurance subsidiaries[208]. - The potential reversal of corporate tax cuts could increase the federal corporate income tax rate from 21%, significantly impacting financial results[204]. Climate and Environmental Risks - The company recognizes the importance of managing climate risks and aims for carbon neutrality[127]. - Increased frequency and severity of weather events have led to higher insurance claims and costs, impacting future financial results[129]. - The company emphasizes the need to model and price climate change risks into insurance products and services[130]. - The company faces increased losses from catastrophes due to population growth in high-risk areas and changing climate conditions[131]. - Climate change poses risks that could lead to increased weather-related catastrophes, affecting overall losses and reinsurance costs, particularly in coastal areas[183]. Operational Risks - The company faces operational risks from large-scale pandemics, terrorism, and military actions, which could disrupt commerce and negatively impact financial performance[180]. - Data security breaches could result in loss of sensitive information and operational disruptions, adversely impacting the company's reputation and business[185]. - The company relies on various vendors for critical services, and the loss of key vendor relationships could lead to operational difficulties and financial losses[188]. - Attracting and retaining top talent is crucial, with increased competition for qualified employees in specialized areas such as technology and analytics[189]. Competitive Landscape - The personal lines insurance and retirement markets are highly competitive, with numerous competitors targeting the educator marketplace[171]. - The Retirement business faces increased competition due to changes in IRS regulations, making the 403(b) market more attractive to larger companies[174]. - The company's ability to access educators is critical for increasing new business in the educator market, particularly for 403(b) retirement products, and any significant decrease in access could adversely affect sales across all business lines[178]. - Relationships with education-related associations are vital for the company's marketing strategy, enhancing brand presence and access to educators[179].