Horace Mann Reports Second Quarter 2016 Net Income per

SPRINGFIELD, IL --(Marketwired - July 27, 2016) -

• Catastrophe losses impacted second quarter income by $0.43 per diluted share
• Auto sales increased 10% for the quarter
• Life sales continue to grow at a double digit pace
• Book value per share excluding the fair value adjustment for investments of $27.10, up 3% compared to a year ago

Horace Mann Educators Corporation ( NYSE : HMN ) today reported financial results for the three and six months ended June 30, 2016:

^{* These measures are not based on accounting principles generally accepted in the United States ("non-GAAP"). They are reconciled to the most directly comparable GAAP measures in the supplemental numerical pages of this document. An explanation of these measures is contained in the Glossary of Selected Terms included as an exhibit in the company's reports filed with the SEC. N.M. - Not meaningful.}

"Horace Mann's second quarter operating income was $0.25 per diluted share. Property and casualty results in the quarter were impacted by increases in catastrophe losses, as well as elevated auto loss frequencies, somewhat offset by continued strong underlying property results. Auto policies in force continue to exceed the prior year as a result of strong sales and retention. Annuity results reflected the continued impact of the low interest rate environment, partially offset by higher investment income including an increase in investment prepayments. Annuity sales remain solid but were lower than a year ago, primarily reflecting a decrease in single premium and rollover deposits. Life segment net income reflected lower mortality costs in the current quarter, and sales were strong and again benefited from our new Indexed Universal Life product," said Horace Mann's President and CEO Marita Zuraitis.

"Reflecting results through the first six months, which included the impact of a higher than anticipated level of weather-related catastrophe and non-catastrophe losses in our property and casualty segment, we are revising our estimate of full-year 2016 operating income to between $1.80 and $2.00 per share," stated Zuraitis. "Catastrophe losses for the last six months of 2016 are estimated to be similar to our historical averages."

Property and Casualty Segment

For the second quarter of 2016, property and casualty recorded a net loss of $4.5 million compared to net income of $3.3 million for the same period in the prior year. The total property and casualty combined ratio of 111.6% increased 7.9 points compared to a year earlier. Catastrophe losses of $27.3 million pretax were $6.0 million higher than the second quarter of 2015, representing 3.2 points of the combined ratio increase. Prior years' reserves continue to develop favorably; however, the favorable development in the current quarter was $1.6 million pretax lower than the amount a year ago, representing 1.2 points of the combined ratio increase. On an underlying basis, the auto loss ratio of 80.4% increased 6.6 points compared to a year earlier, primarily as a result of higher loss frequency. The current quarter auto loss ratio also included approximately 4 points due to unfavorable development of first quarter 2016 losses. For property, the underlying loss ratio was 41.9% for the current quarter, which was 4.5 points lower than the prior year, primarily reflecting the impacts of initiatives to improve profitability, as well as lower reinsurance costs. The total property and casualty expense ratio increased modestly compared to the second quarter of 2015, as anticipated.

For the first half of 2016, property and casualty net income of $9.3 million decreased $11.6 million compared to the prior year. The current period total property and casualty combined ratio of 102.8% increased 5.8 points compared to a year ago, including an underlying loss ratio that increased 1.0 point compared to the prior year and a slightly higher expense ratio. Catastrophe losses were $8.2 million higher than the first half of 2015; favorable prior years' reserve development was $3.6 million less than the prior year amount. On an underlying basis, the six month auto loss ratio of 75.8% increased 4.0 points compared to a year earlier. For property, the underlying loss ratio was 38.9% for the current year, 5.4 points lower than the first half of 2015 for reasons similar to the second quarter comparison above.

Compared to the first half of 2015, the property and casualty expense ratio of 27.3% increased 1.2 points, primarily due to a reduction in incentive compensation accruals recorded in the first quarter of 2015. The majority of that 2015 cost reduction benefited the property and casualty segment, increasing that segment's net income by approximately $2 million and decreasing the combined ratio by approximately 1 percentage point for the six months ended June 30, 2015.

Total property and casualty written premiums of $159.8 million and $306.5 million for the three and six months ended June 30, 2016, respectively, each increased 5% compared to the prior year. The growth was driven primarily by increases in average premium per policy for both auto and property, accompanied by an increase in auto policies in force and reductions in catastrophe reinsurance costs.

Total property and casualty sales increased 8% and 10% compared to the three and six months ended June 30, 2015, respectively. Auto sales increased approximately 10% compared to the prior year periods, while property sales increased 2% for the current quarter and 5% for the six months. Policy retention continues to be strong with auto and property policy retention rates for the current period at 84% and 88%, respectively.

Annuity Segment

For the second quarter of 2016, annuity segment net income of $13.0 million increased $1.2 million compared to the prior year period. For the first half of 2016, annuity segment net income decreased $0.7 million, partially due to a $3.1 million pretax increase in operating expenses including costs related to the company's continued modernization of technology and infrastructure. In the current year, both periods reflected an increase in the net interest margin. And, in the current year, the impact of unlocking deferred policy acquisition costs decreased pretax income by $0.4 million and $0.7 million compared to the three and six months ended June 30, 2015, respectively.

The six month 2016 annualized net interest spread on fixed annuity assets was 185 basis points. This measure declined 5 basis points from a year ago, which reflected the continued low interest rate environment. Total annuity assets under management of $6.1 billion increased 3% compared to June 30, 2015, and total cash value persistency remained strong at approximately 95%.

For the three and six months ended June 30, 2016, annuity deposits of $124.7 million and $237.3 million decreased 11% and 16%, respectively, compared to the prior year periods. In 2015, changes in the company's employee retirement savings plans resulted in non-recurring deposits received in the first half of 2015. Excluding that item, the remaining current period decrease was primarily due to a decrease in the amount of other single premium and rollover deposits received in 2016.

Horace Mann's total annuity sales decreased 11% and 13% compared to the three and six months ended June 30, 2015, respectively, reflecting reductions in single premium and rollover deposits, primarily related to the company's employee retirement savings plans, as well as a modest decrease in recurring deposit business for the six months.

Life Segment

Life segment net income of $4.6 million and $8.5 million for the current three and six months, respectively, increased $1.0 million and $1.5 million compared to the respective periods in 2015, primarily attributable to a decrease in mortality losses in 2016, compared to the prior year periods.

In 2016, life segment insurance premiums and contract deposits of $27.3 million for the current quarter and $51.2 million for the six months increased 5% and 4% compared to the respective periods in 2015. Life sales of $4.1 million increased $1.2 million compared to the second quarter of 2015, including an increase of $0.8 million for single premium sales, which included the company's new Indexed Universal Life product. Similarly, the year to date sales of $7.1 million increased $2.3 million with $1.7 million of the increase attributable to single premium sales. Life persistency of 96% was comparable to 12 months earlier.

Investment Results

Total net investment income increased 8% and 5% compared to the three and six months ended June 30, 2015, respectively. While asset balances in the annuity segment continued to grow, overall investment results reflected the impact of the current low interest rate environment, partially offset by an increase in investment prepayments in the current period. Pretax net realized investment gains were $3.1 million and $2.9 million for the three and six months ended June 30, 2016, respectively. In the second quarter of 2016, $3.5 million of impairment charges were recorded primarily on equity securities and energy sector fixed maturity securities.

Horace Mann's net unrealized investment gains on fixed maturity and equity securities were $584.1 million at June 30, 2016, compared to net unrealized gains of $432.9 million at March 31, 2016 and $309.8 million at December 31, 2015. Net unrealized gains were $397.3 million at June 30, 2015.

Capital Management

During the second quarter of 2016, the company repurchased 227,133 shares of its common stock at an aggregate cost of $7.1 million, under its share repurchase program. As of June 30, 2016, the company had a remaining authorization of $29.5 million.

Webcast Conference Call

Horace Mann's senior management will discuss the company's second quarter financial results with investors and analysts on July 28, 2016 at 9:00 a.m. Eastern Time. The conference call will be webcast live on the Internet at investors.horacemann.com and archived later in the day for replay.

Horace Mann -- the largest national multiline insurance company focusing on educators' financial needs -- provides auto, homeowners and life insurance, retirement products and other financial solutions. Founded by Educators for Educators ^® in 1945, the company is headquartered in Springfield, Ill. For more information, visit www.horacemann.com .

Statements included in this news release that are not historical in nature are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties. Horace Mann is not under any obligation to (and expressly disclaims any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to the company's Quarterly Report on Form 10-Q for the period ended March 31, 2016 and the company's past and future filings and reports filed with the Securities and Exchange Commission for information concerning the important factors that could cause actual results to differ materially from those in forward-looking statements. The information contained in this press release includes financial measures which are based on methodologies other than United States generally accepted accounting principles ("GAAP"). Reconciliations of non-GAAP measures to the closest GAAP measures are contained in the supplemental numerical pages of this release and additional descriptions of the non-GAAP measures are contained in the Glossary of Selected Terms included as an exhibit to the company's SEC filings.

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