XML 23 R9.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Basis of Presentation | 9 Months Ended
--- | ---
Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis of Presentation | The accompanying unaudited consolidated financial statements of Horace Mann Educators Corporation (“HMEC”; and together with its subsidiaries, the “Company” or “Horace Mann”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”), specifically Regulation S-X and the instructions to Form 10-Q. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP, but are not required for interim reporting purposes, have been omitted. The Company believes that these consolidated financial statements contain all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the Company’s consolidated financial position as of September 30, 2017, the consolidated results of operations and comprehensive income for the three and nine month periods ended September 30, 2017 and 2016, and the consolidated changes in shareholders’ equity and cash flows for the nine month periods ended September 30, 2017 and 2016. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The subsidiaries of HMEC market and underwrite personal lines of property and casualty (primarily personal lines of automobile and homeowners) insurance, retirement annuities (primarily tax-qualified products) and life insurance, primarily to K-12 teachers, administrators and other employees of public schools and their families. HMEC’s principal operating subsidiaries are Horace Mann Life Insurance Company, Horace Mann Insurance Company, Teachers Insurance Company, Horace Mann Property & Casualty Insurance Company and Horace Mann Lloyds. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three and nine month periods ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year. The Company reclassified the presentation of certain prior period information to conform to the 2017 presentation. See “Adopted Accounting Standards”. Investment Contract and Life Policy Reserves This table summarizes the Company’s investment contract and life policy reserves.
($ in thousands) |  | September 30, 2017 |  | December 31, 2016
Investment contract reserves |  | $ | 4,428,989 |  |  | $ | 4,360,456 |
Life policy reserves |  | 1,111,056 |  |  | 1,087,513 |
Total |  | $ | 5,540,045 |  |  | $ | 5,447,969 |
Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) represents the accumulated change in shareholders’ equity from transactions and other events and circumstances from non-shareholder sources. For the Company, accumulated other comprehensive income (loss) includes the after tax change in net unrealized investment gains and losses on fixed maturity and equity securities and the after tax change in net funded status of benefit plans for the period as shown in the Consolidated Statement of Changes in Shareholders’ Equity. The following tables reconcile these components.
($ in thousands) |  | Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities (1)(2) |  | Benefit Plans (1) |  | Total (1)
Beginning balance, July 1, 2017 |  | $ | 243,510 |  |  | $ | (11,817 | ) |  | $ | 231,693 |
Other comprehensive income (loss) before reclassifications |  | 9,786 |  |  | — |  |  | 9,786 |
Amounts reclassified from accumulated other comprehensive income (loss) |  | 2,422 |  |  | — |  |  | 2,422 |
Net current period other comprehensive income |  | 12,208 |  |  | — |  |  | 12,208 |
Ending balance, September 30, 2017 |  | $ | 255,718 |  |  | $ | (11,817 | ) |  | $ | 243,901 |
Beginning balance, January 1, 2017 |  | $ | 175,738 |  |  | $ | (11,817 | ) |  | $ | 163,921 |
Other comprehensive income (loss) before reclassifications |  | 78,419 |  |  | — |  |  | 78,419 |
Amounts reclassified from accumulated other comprehensive income (loss) |  | 1,561 |  |  | — |  |  | 1,561 |
Net current period other comprehensive income |  | 79,980 |  |  | — |  |  | 79,980 |
Ending balance, September 30, 2017 |  | $ | 255,718 |  |  | $ | (11,817 | ) |  | $ | 243,901 |
(1) | All amounts are net of tax.
(2) | The pretax amounts reclassified from accumulated other comprehensive income (loss), $(3,726) thousand and $(2,401) thousand, are included in net realized investment gains and losses and the related income tax expense, $(1,304) thousand and $(840) thousand, are included in income tax expense in the Consolidated Statements of Operations for the three and nine month periods ended September 30, 2017, respectively.
($ in thousands) |  | Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities (1)(2) |  | Benefit Plans (1) |  | Total (1)
Beginning balance, July 1, 2016 |  | $ | 329,653 |  |  | $ | (11,794 | ) |  | $ | 317,859 |
Other comprehensive income (loss) before reclassifications |  | 9,912 |  |  | — |  |  | 9,912 |
Amounts reclassified from accumulated other comprehensive income (loss) |  | (2,274 | ) |  | — |  |  | (2,274 | )
Net current period other comprehensive income |  | 7,638 |  |  | — |  |  | 7,638 |
Ending balance, September 30, 2016 |  | $ | 337,291 |  |  | $ | (11,794 | ) |  | $ | 325,497 |
Beginning balance, January 1, 2016 |  | $ | 175,167 |  |  | $ | (11,794 | ) |  | $ | 163,373 |
Other comprehensive income (loss) before reclassifications |  | 167,692 |  |  | — |  |  | 167,692 |
Amounts reclassified from accumulated other comprehensive income (loss) |  | (5,568 | ) |  | — |  |  | (5,568 | )
Net current period other comprehensive income |  | 162,124 |  |  | — |  |  | 162,124 |
Ending balance, September 30, 2016 |  | $ | 337,291 |  |  | $ | (11,794 | ) |  | $ | 325,497 |
(1) | All amounts are net of tax.
(2) | The pretax amounts reclassified from accumulated other comprehensive income (loss), $3,499 thousand and $8,566 thousand, are included in net realized investment gains and losses and the related income tax expense, $1,225 thousand and $2,998 thousand, are included in income tax expense in the Consolidated Statements of Operations for the three and nine month periods ended September 30, 2016, respectively.
Comparative information for elements that are not required to be reclassified in their entirety to net income in the same reporting period is located in “Note 2 -- Investments -- Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities”. Adopted Accounting Standards Employee Share-based Payment Accounting Effective January 1, 2017, the Company adopted new accounting guidance for employee share-based payments which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The recognition and classification of the excess tax benefit provisions were applied prospectively in the results of operations. This adoption resulted in additional excess tax benefits of $2,864 thousand which reduced the current provision for income taxes in the results of operations. The statutory tax withholding classification, which are cash payments made to taxing authorities for withheld taxes funded through tendered shares, were applied retrospectively and the Company reclassified the statutory tax withholding requirements in the statement of cash flows from Other in operating activities to Withholding tax payments on RSUs tendered in financing activities. This statutory withholding reclassification resulted in $2,745 thousand and $3,321 thousand being included in financing activities for the nine month periods ended September 30, 2017 and 2016, respectively. There were no cumulative effect adjustments upon adoption of the new accounting guidance. Pending Accounting Standards Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance to provide a single comprehensive model in accounting for revenue arising from contracts with customers. The guidance applies to all contracts with customers; however, insurance contracts are specifically excluded from this updated guidance. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted only for annual reporting periods beginning after December 15, 2016. The Company plans to adopt the guidance as of January 1, 2018. Insurance contract revenue continues to fall under the scope of ASC 944, Financial Services - Insurance, and ASC 605, Revenue Recognition. The Company performed an evaluation of the non-insurance contract revenue that would be subject to ASC 606, Revenue from Contracts with Customers, and concluded that there is not a material impact to the consolidated financial statements upon adoption on January 1, 2018. Recognition and Measurement of Financial Assets and Liabilities In January 2016, the FASB issued accounting guidance to improve certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. Among other things, the guidance revises the accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The Company’s results of operations will be impacted as changes in fair value of equity securities will be reported in net income instead of reported in other comprehensive income. The effective date of the guidance is for interim and annual reporting periods beginning after December 15, 2017. The guidance has not yet been adopted. Had the Company adopted the guidance on September 30, 2017, $15,718 thousand of after-tax unrealized gains on equity securities would have been reclassified from accumulated other comprehensive income to retained earnings. The actual amount reclassified upon adoption will vary depending on the future changes in fair value of the Company's equity portfolio. Statement of Cash Flows -- Classification In August 2016, the FASB issued guidance to reduce diversity in practice in the statement of cash flows between operating, investing and financing activities related to the classification of cash receipts and cash payments for eight specific issues. The FASB acknowledged that current GAAP either is unclear or does not include specific guidance on these eight cash flow classification issues: (1) debt prepayment or extinguishment costs; (2) settlement of zero-coupon bonds (pertains to issuers); (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims (pertains to claimants); (5) proceeds from the settlement of corporate-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions (pertains to transferors) and (8) separately identifiable cash flows and application of the predominance principle. For public business entities, the guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years, using a retrospective approach. The guidance allows prospective adoption for individual issues if it is impracticable to apply the amendments retrospectively for those issues. Early application is permitted. Management believes the adoption of this accounting guidance will not have a material effect on the classifications in the Company’s consolidated statement of cash flows. The adoption of this accounting guidance will not have any effect on the results of operations or financial position of the Company. Accounting for Leases In February 2016, the FASB issued accounting and disclosure guidance to improve financial reporting and comparability among organizations about leasing transactions. Under the new guidance, for leases with lease terms of more than 12 months, a lessee will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by those leases. Consistent with current accounting guidance, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or an operating lease. However, while current guidance requires only capital leases to be recognized on the balance sheet, the new guidance will require both operating and capital leases to be recognized on the balance sheet. In transition to the new guidance, companies are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those years. Early application is permitted. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued guidance to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments, including reinsurance receivables, held by companies. The new guidance replaces the incurred loss impairment methodology and requires an organization to measure and recognize all current expected credit losses (“CECL”) for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Companies will need to utilize forward-looking information to better inform their credit loss estimates. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Credit losses related to available for sale debt securities -- which represent over 90% of Horace Mann’s total investment portfolio -- will be recorded through an allowance for credit losses with this allowance having a limit equal to the amount by which fair value is below amortized cost. The guidance also requires enhanced qualitative and quantitative disclosures to provide additional information about the amounts recorded in the financial statements. For public business entities that are SEC filers, the guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, using a modified-retrospective approach. Early application is permitted for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company. Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill for reporting units with zero or negative carrying amounts. Public business entities should adopt the guidance prospectively for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early application is permitted. Management believes the adoption of this accounting guidance will not have a material effect on how it tests goodwill for impairment.

X
- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration