Horace Mann: 2005 Catastrophe Losses at All-time High

Catastrophe losses for 2005 are at an all-time record high for the industry and represent the second-highest annual level experienced by Horace Mann, according to the company’s President and Chief Executive Officer, Louis G. Lower II. Lower added that “customers can be assured that we are continuing to make every effort to ensure timely and equitable claim settlements.”

Horace Mann Educators Corporation, headquartered Springfield, Illinois, announced late today that its estimates for the fourth quarter 2005 financial impact from Hurricanes Rita and Wilma will total approximately $13 million to $16 million pretax, net of anticipated reinsurance recoveries. The total impact of catastrophe losses and loss adjustment expenses for this quarter is estimated to be approximately $16 million to $21 million pretax.

Because of new information regarding claims from Hurricane Rita, which occurred in late September, and due primarily to a re-estimation of the average cost per claim, estimated gross losses have increased to between $20 million and $22 million, compared to the company’s earlier estimate of $10 million. Net of anticipated reinsurance, current estimated losses and related expenses for Hurricane Rita are approximately $11 million, compared to $10 million pretax recorded in net income for the nine months ending on September 30, 2005.

The company’s estimated gross losses from Hurricane Wilma, which struck Florida in late October as a Category 3 hurricane, are $12 million to $15 million. The company said that reinsurance recoveries are not available to offset this level of estimated losses from Wilma because a portion of the company’s catastrophe reinsurance coverage has been fully utilized for Hurricanes Katrina and Rita. The company’s estimated losses for Hurricane Katrina remain unchanged.

In addition to Hurricane Wilma and additional losses estimated for Hurricane Rita, the company estimates other fourth quarter catastrophe costs to be approximately $3 million to $5 million pretax, and those total include severe storms and tornadoes that hit the Midwest and a $1.4 million assessment from the Louisiana Citizens FAIR Plan related primarily to Hurricane Katrina.

These catastrophe amounts represent the estimated net losses both from claims reported to the company and from future expected claims from policyholders with hurricane damage. There can be no assurance that the ultimate costs associated with this and other catastrophic events will not exceed the company’s current estimates. Estimates will be refined as necessary, as additional information becomes available.

“Horace Mann’s favorable non-catastrophe property and casualty underwriting results in 2005 are continuing into the fourth quarter,” said Lower. “However, as a result of the greater than expected level of catastrophe losses to be recorded in the quarter, we are reducing our estimated 2005 full year net income before realized investment gains and losses to between $1.50 and $1.60 per share, compared to our previous guidance of $1.70 to $1.80 per share.”