Horace Mann(HMN) - 2023 Q3 - Quarterly Report

Financial Performance - Total revenues for Q3 2023 increased by 10.5% to $378.7 million compared to $342.6 million in Q3 2022[168] - Net income for Q3 2023 decreased by 42.6% to $11.7 million, down from $20.4 million in Q3 2022[171] - Net premiums and contract charges earned rose by 3.3% to $266.0 million for Q3 2023, compared to $257.4 million in Q3 2022[171] - Net investment income increased by 21.8% to $118.9 million for Q3 2023, up from $97.6 million in Q3 2022[171] - Benefits, claims, and settlement expenses increased by 19.2% to $199.2 million for Q3 2023, compared to $167.1 million in Q3 2022[171] - Interest credited rose by 17.6% to $52.7 million for Q3 2023, compared to $44.8 million in Q3 2022[171] - Operating expenses remained relatively stable, increasing by only 0.1% to $75.7 million for Q3 2023[171] Investment Performance - The annualized investment yield, excluding limited partnership interests, was 4.8% for Q3 2023, up from 4.3% in Q3 2022[173] - Net investment income from the managed investment portfolio rose by 29.5% to $91.8 million for the three months ended September 30, 2023, compared to $70.9 million in the same period of 2022[234] - Total net investment income increased by 21.8% to $118.9 million for the three months ended September 30, 2023, compared to $97.6 million in the same period of 2022[234] Segment Performance - Net income for the Property & Casualty segment is now anticipated to be a loss between $32 million and $37 million, primarily due to third-quarter weather losses[193] - Anticipated net income for the Life & Retirement segment in 2023 is projected to be in the range of $63 million to $65 million, with a targeted spread of 220 to 230 basis points[195] - Net income for the Supplemental & Group Benefits segment is now expected to be between $52 million and $55 million, reflecting strong performance in the third quarter[197] - Life & Retirement segment net income for Q3 2023 was $20.9 million, reflecting an 18.1% increase compared to $17.7 million in Q3 2022[217] - Supplemental & Group Benefits segment net income was $15.8 million for the quarter, reflecting a 23.7% decrease from $20.7 million in 2022[228] Premiums and Sales - Property & Casualty segment net premiums written increased by 13.2% to $188.4 million in Q3 2023, compared to $166.4 million in Q3 2022[210] - Average written premiums for auto policies rose by 15.9% in Q3 2023, up from 11.4% in Q2 2023[212] - Average written premiums for property policies increased by 11.3% in Q3 2023, driven by rate increases and inflation adjustments[213] - Sales of worksite direct supplemental products increased by 59.1% to $3.5 million, while sales of employer-sponsored products rose by 109.1% to $4.6 million[230] Expenses and Liabilities - Interest expense increased by $2.2 million and $7.6 million for the three and nine months ended September 30, 2023, primarily due to rising floating interest rates on the Revolving Credit Facility[183] - Corporate interest expense is now expected to be between $29 million and $30 million for the full year[197] - The benefits ratio for the Supplemental & Group Benefits segment increased to 32.3% for the quarter, up from 25.1% in the prior year[228] Cash Flow and Capital - For the nine months ended September 30, 2023, net cash provided by operating activities was $199.2 million, a 72.0% increase from $115.8 million in the prior year[247] - Net cash used in investing activities decreased to $85.6 million from $295.9 million in the prior year, reflecting a significant reduction in investment outflows[249] - Net cash used in financing activities increased by $204.5 million compared to the prior year, primarily due to increased cash outflows from benefits and withdrawals[253] - As of September 30, 2023, total capital was $1,597.4 million, with long-term debt amounting to $546.1 million, representing 34.2% of total capital[261] Shareholder Information - Total dividends paid to shareholders for the nine months ended September 30, 2023, was $40.4 million, with quarterly dividends of $0.33 per share approved in March, May, and September[264] - The company repurchased 196,934 shares of common stock at an average price of $32.85, with $34.9 million remaining authorized for future repurchases[265] Risk Management - Significant market value risk exists due to potential decreases in the value of invested assets, influenced by changes in yields and liquidity[278] - Interest rate changes may lead to losses or reduced income levels based on the difference between earned interest rates and credited interest rates on liabilities[280] - The company manages market value risk by aligning projected cash inflows of assets with projected cash outflows of liabilities[281] - Investment risk from variable annuity deposits is borne by contractholders, not the company[281] Ratings and Outlook - All insurance financial strength ratings for the Property & Casualty and Life insurance subsidiaries are rated 'A' (stable) by A.M. Best as of October 31, 2023[276] - HMEC's parent company is rated 'bbb' (stable) by A.M. Best and 'BBB' (stable) by S&P[276] - HMEC's Property & Casualty group has a negative outlook from Fitch and Moody's, rated 'A' and 'A2' respectively[276]