HORACE MANN EDUCATORS CORP DE
For the period ended Dec 31, 2023. Filed Feb 27, 2024.
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FY2023 · Filed Feb 27, 2024
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Property & Casualty
2023 net loss reflected the following factors:
Increases in average written premium per policy
Higher net investment income on limited partnership portfolio
Higher catastrophe losses
No prior years' reserve development in the current year
Continued elevated underlying auto and property loss ratios* due to non-catastrophe weather
The following table provides certain financial information for Property & Casualty for the years indicated.
| ($ in millions, unless otherwise indicated) | Year Ended December 31, | 2023-2022 | |||
|---|---|---|---|---|---|
| 2023 · 2022 · Change % | |||||
| Financial Data: | |||||
| Net premiums written*: | |||||
| Auto | $439.1 | $394.0 | 11.4% | ||
| Property and other | 245.3 | 223.5 | 9.8% | ||
| Total net premiums written | 684.4 | 617.5 | 10.8% | ||
| Change in unearned net premiums | (38.8) | (9.3) | N.M. | ||
| Total net premiums earned | 645.6 | 608.2 | 6.1% | ||
| Incurred claims and claims expenses: | |||||
| Claims occurring in the current year | 557.0 | 512.3 | 8.7% | ||
| Prior years' reserve development(1) | — | 22.0 | N.M. | ||
| Total claims and claim expenses incurred | 557.0 | 534.3 | 4.2% | ||
| Operating expenses, including DAC amortization | 174.6 | 166.9 | 4.6% | ||
| Underwriting gain (loss) | (86.0) | (93.0) | 7.5% | ||
| Net investment income | 37.9 | 31.4 | 20.7% | ||
| Income (loss) before income taxes | (45.3) | (58.2) | 22.2% | ||
| Net income (loss) | (35.5) | (44.4) | 20.0% | ||
| Core earnings (loss)* | (35.5) | (44.4) | 20.0% | ||
| Operating Statistics: | |||||
| Auto | |||||
| Loss and loss adjustment expense ratio | 84.4% | 91.8% | -7.4 | pts | |
| Expense ratio | 27.3% | 27.2% | 0.1 | pts | |
| Combined ratio: | 111.7% | 119.0% | -7.3 | pts | |
| Prior years' reserve development(1) | —% | 7.2% | -7.2 | pts | |
| Catastrophe losses | 2.7% | 1.8% | 0.9 | pts | |
| Underlying combined ratio* | 109.0% | 110.0% | -1.0 | pts | |
| Property | |||||
| Loss and loss adjustment expense ratio | 89.5% | 80.7% | 8.8 | pts | |
| Expense ratio | 26.6% | 28.1% | -1.5 | pts | |
| Combined ratio: | 116.1% | 108.8% | 7.3 | pts | |
| Prior years' reserve development(1) | —% | -2.8% | 2.8 | pts | |
| Catastrophe losses | 37.3% | 33.4% | 3.9 | pts | |
| Underlying combined ratio* | 78.8% | 78.2% | 0.6 | pts | |
| Risks in force (in thousands) | |||||
| Auto(2) | 358 | 367 | -2.5% | ||
| Property | 168 | 171 | -1.8% | ||
| Total | 526 | 538 | -2.2% | ||
(1)(Favorable) unfavorable.
(2)Includes assumed risks in force of 4.
Catastrophe losses incurred were as follows:(1)
| ($ in millions) | Year Ended December 31, | |
|---|---|---|
| 2023 | 2022 | |
| Three months ended | ||
| March 31st | $22.4 | $7.3 |
| June 30th | 41.5 | 45.7 |
| September 30th | 28.7 | 14.6 |
| December 31st | 5.0 | 12.4 |
| Total for year | $97.6 | $80.0 |
(1)See Part I - Item 1 - Reporting Segments - Property & Casualty for further details regarding catastrophe losses for the past five years.
Including a profit of $8.8 million in the fourth quarter, the Property & Casualty segment’s net loss for the full year 2023 reflected elevated catastrophe and non-catastrophe weather activity for much of the year. Property & Casualty net premiums written were up 10.8% for the year and segment net investment income was up 20.7% for the year.
On a reported basis, the 7.3 point decrease in the auto combined ratio in 2023 was mainly attributable to a 1.1 point decrease in the auto underlying loss ratio* and an 7.2 point decrease in prior years' reserve development. Unfavorable prior years' auto reserve development of $28.0 millionwas reported in 2022, reflecting the impact on severity of overall inflation, including higher medical costs, increased usage of medical services and the current judicial environment.
The reported property combined ratio increased 7.3 points in 2023, partially driven by catastrophe and non-catastrophe weather activity. In addition, favorable prior years' reserve development of $6.0 million benefited the prior year reported property combined ratio by 2.8 points.
In 2023, total Property & Casualty net premiums written* increased $66.9 million as rate actions and inflation adjustments to coverage values for property more that offset declines in risks in force. Retention remains strong.
In 2023, auto net premiums written* increased $45.1 million, primarily due to rate actions partially offset by the continuing decline in auto risks in force. For 2023, average auto net premium written and average net premium earned increased 13.1% and 8.2%, respectively. Property and other net premiums written* increased $21.8 million due to increases in average net premium written and average net premium earned which increased 11.5% and 9.9% respectively, as rate actions and inflation adjustments to coverage values continue to take effect. The number of educator risks has been at or above 80% relative to overall risks in force over the past two years.
We continue to evaluate and implement actions to further mitigate our risk exposure. Such actions could include, but are not limited to, non-renewal of property risks, restricted agent geographic placement, limitations on agent new business sales, further tightening of underwriting standards and increased utilization of third-party vendor products.
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