Horace Mann(US:HMN)2022-02-25 20:27Financial Performance - Premiums and contract charges earned for the year ended December 31, 2021, were $889.6 million, with premiums written and contract deposits totaling $1.3 billion[24]. - Net income for the year ended December 31, 2021, was $142.8 million, and total assets reached $14.4 billion[24]. - Direct premiums earned in 2021 amounted to $622.1 million for Property & Casualty and $625.1 million for life insurance, before reinsurance[98]. - The top five states by direct premiums and contract deposits in 2021 were California (10.2%), Texas (7.5%), North Carolina (7.0%), Minnesota (5.4%), and Pennsylvania (5.1%)[97]. Market Opportunities - The company serves approximately 1 million households, with about 80% of customers being educators, indicating a significant market opportunity[29]. - The acquisition of Madison National on January 1, 2022, enhances the company's offerings in employer-paid and voluntary benefits for educators[20]. - The company aims to address educator recruitment and retention challenges by offering a full suite of benefits, as educators generally earn less than their private-sector counterparts[33]. Infrastructure and Technology - The company has implemented a multi-year effort to upgrade its infrastructure, including the Guidewire platform, which has been launched in seven states, covering nearly 40% of total Property & Casualty premiums written[41]. - The company completed several transactions since July 2019, including acquiring NTA and Madison National, and reinsuring a $2.9 billion block of legacy annuity business[31]. Insurance Products and Services - The company offers fixed indexed annuity products linked to the S&P 500 Index and the Dow Jones Industrial Average[80]. - The company has entered the supplemental market since July 2019, acquiring NTA to offer supplemental insurance products[71]. - The company offers a combination product called Life Select, which allows for flexible coverage tailored to customers' needs[92]. Risk Management - The company maintains catastrophe excess of loss reinsurance coverage, providing 95% coverage for losses above a $25.0 million retention per occurrence, up to $175.0 million[62]. - The company reinsured each loss above a retention of $1.0 million up to $5.0 million for property coverages in 2021[67]. - The company recognizes climate change as a growing concern and is actively managing climate risks that affect its stakeholders[123]. - The Enterprise Risk Management (ERM) Committee oversees risk assessments and mitigation strategies, ensuring alignment with corporate objectives[131]. Investment Strategy - The investment strategy focuses on generating income to support product liabilities, primarily through investment-grade fixed maturity securities[104]. - Total investments as of December 31, 2021, amounted to $7,449.5 million, with a carrying value of $5,793.0 million and an amortized cost of $7,015.6 million[108]. - The investment portfolio consisted of 80% publicly traded securities, totaling $5,960.6 million, with 71.6% classified as investment grade[108]. Regulatory Environment - The insurance industry is highly regulated, and changes in regulations could affect the company's ability to operate profitably and obtain necessary regulatory approvals[202]. - Regulatory changes, including potential increases in corporate tax rates, could significantly impact the company's financial results and growth prospects[200]. - The Dodd-Frank Act has introduced significant regulatory changes that may increase compliance costs and affect the products and services offered by the company[212]. Operational Risks - The company faces operational risks from large-scale pandemics, terrorism, and military actions, which could adversely affect sales, liquidity, and operating results[178]. - The COVID-19 pandemic has caused significant economic damage, impacting the company's ability to conduct business and affecting financial condition and results of operations[179]. - The company has experienced increased competition in hiring and retaining employees, which is critical for maintaining optimal staffing levels and fostering an inclusive culture[187]. Catastrophe and Climate Risks - Catastrophe losses for 2021 totaled $78.2 million, with significant events including Hurricane Ida causing $24.0 million in losses[57]. - Increased frequency and severity of weather events have led to higher insurance claims and costs, impacting the company's financial results[125]. - Climate change poses risks that may adversely affect the company's financial position, results of operations, and cash flows due to increased frequency of weather-related catastrophes[181]. Financial Stability - The company maintains loss reserves for estimated ultimate liability for losses and loss adjustment expenses, which may prove inadequate, potentially affecting financial condition and cash distribution[151]. - A sustained period of low interest rates could negatively affect net interest margins from fixed annuity and life insurance products, with historically low yields on new investments[156]. - The company’s insurance subsidiaries maintained statutory capital and surplus above required levels as of December 31, 2021[115].