Horace Mann Educators Corporation of Springfield, Ill., a provider of a variety of insurance products to educators, reported operating income of $13.9 million, for the first quarter ended March 31, 2002, slightly higher than the $13.7 million in operating income recorded for the same period in 2001.
The company’s net income for first quarter 2002, however, dropped to $15.6 million, down from a net income of $16.7 million in first quarter 2001.
Operating income is defined by the company as net income before the after-tax impact of realized investment gains and losses and non-recurring items. There were no non-recurring items in either the first quarter of 2002 or 2001.
Compared to the first quarter of 2001, current period operating income benefited from mild weather, the growing impact of property and casualty rate increases on earned premiums, the positive impact of the company’s restructuring of its Massachusetts automobile business, and the discontinuance of goodwill amortization with the adoption of Statement of Financial Accounting Standards No. 142 on Jan. 1, 2002.
Offsetting the positive items were an increase in operating expenses due primarily to transition costs related to changes in the company’s retirement plans, which are expected to have a favorable long-term impact on employee benefit costs, and an unfavorable prior year comparison of catastrophe losses due to a release of fourth quarter 2000 catastrophe reserves in the first quarter of 2001.
Written premiums for voluntary property and casualty insurance increased 6 percent in the current quarter, excluding Massachusetts voluntary automobile written premiums of $5.5 million from the first quarter of 2001. Average premium per policy increased for both automobile and homeowners. The number of automobile policies in force increased, and homeowners’ policies were comparable to the prior year.
First quarter 2002 operating income for the property and casualty segment was $7.2 million, compared to $7.9 million for the same period last year. Earnings for the current quarter reflected favorable weather offset by the increase in the company’s employee retirement costs and the unfavorable prior year comparison of catastrophe losses. Development of prior years’ reserves had no net impact on earnings for the first quarters of 2002 and 2001. The primary factor which affected earnings in the first quarter of 2001 was a high level of non-catastrophe weather-related losses in the homeowners line of business.
The voluntary automobile loss ratio was 75.5 percent for the first quarter of 2002, comparable to 75.4 percent for the same period in 2001. The increase in average voluntary automobile premium in the current quarter kept pace with the increase in average current accident year loss costs.
The property loss ratio of 78.6 percent for the first quarter of 2002 improved 3.8 percentage points from the same period in 2001, reflecting favorable weather, loss containment initiatives and an increase in average premium per policy.
Horace Mann’s property and casualty combined ratio was 100.4 percent for the first quarter of 2002, compared to 99.1 percent a year earlier. The loss ratio for the segment was equal to the prior year; however, the expense ratio increased 1.3 percentage points primarily reflecting this segment’s portion of the growth in employee retirement costs. Incurred catastrophe losses were $0.2 million and ($1.4) million in the first quarter of 2002 and 2001, respectively.
Topics Profit Loss Property Property Casualty
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