Horace Mann Says Property Line Remains a ‘Challenge’

The property insurance market remains the top challenge for Horace Mann Educators Corp., as the line is hurt by weather-related losses and mounting sinkhole claims in Florida, according to the company's recently promoted president and chief executive officer.

"We recorded nearly $16 million in property cat losses in the third quarter, substantially greater than prior year," said Peter H. Heckman during a conference call to discuss the company's third-quarter results. "In addition, the impact of non-cat weather accounted for nearly eight points of the quarter's property combined ratio variance to prior year."

In the third quarter, the company's combined ratio increased to 106.8 from 104.1 in the year-earlier period. Net income was $20.1 million, up 4.1% from $19.3 million a year ago. Revenue rose 3.5% to $250 million from $241.6 million.

Heckman called it one of the worst quarters for property profitability in several years. The company continues to address the situation through rate increases, and its nonrenewal program in Florida remains ahead of schedule, Heckman said, adding that the property line should return to "acceptable levels" in the latter part of next year. The company is shedding some 9,600 policies in Florida.

Sinkhole losses have been an ongoing concern for property insurers in Florida (BestWire, Oct. 11, 2010).

Horace Mann said its margins in automobile insurance are improving, as it pursues a "fairly aggressive" approach to rate increases in the auto line.

The company said its annuity and life segment continues to perform well, with the company experiencing a record quarter in annuity sales.

Horace Mann lowered its full-year earnings outlook, excluding investment gains and losses, citing weather and sinkhole losses, a write-off for software-development costs and expenses to pay CEO retirement benefits.

Earlier this month, the company named Heckman as its president and CEO, after former president and CEO Louis Lower was jailed after pleading guilty to drunken driving. Lower is eligible for retirement benefits including a cash bonus and stock-based award of about $3.7 million (BestWire, Oct. 7, 2010).

Horace Mann Educators markets and underwrites life insurance and tax-qualified retirement annuities, as well as private-passenger autoe and homeowners insurance to educators and other employees of public schools and their families. Educators comprise approximately 80% of its book of business, according to BestLink, which provides online access to A.M. Best Co.'sGlobal Insurance & Banking Database.

In afternoon trading on Oct. 29, shares of Horace Mann (NYSE: HMN) were selling at $19.02, up 3.82% from the previous close.

The Horace Mann Insurance Group currently has a Best's Financial Strength Rating of A- (Excellent).

(By Diana Rosenberg, senior associate editor, BestWeek)