Illinois-based Horace Mann Educators Corporation estimates its financial impact from Hurricanes Katrina and Rita will total approximately $29 million to $33 million pretax, net of anticipated reinsurance recoveries.
Hurricane Katrina, with estimated gross losses of $65 million to $75 million, represents the largest portion of this cost at approximately $21 million to $23 million pretax, net of anticipated reinsurance. Pretax losses from Hurricane Rita, which occurred in late September, are estimated to be approximately $8 million to $10 million. In addition to these two events, the company estimates third quarter losses of approximately $10 million to $12 million pretax from other catastrophic storms.
These amounts represent the estimated net losses both from claims reported to the company and from future expected claims from policyholders with hurricane damage, as well as estimated reinsurance reinstatement costs following Katrina. These estimates are based upon information received through Oct. 11, 2005 on claims that have been settled, on-site evaluations by loss adjusters and loss estimates from catastrophe modeling.
Due to the magnitude and complexity of Katrina, including limited access to certain portions of the affected areas, the preliminary nature of the information used to prepare the estimate and an uncertain legal and regulatory environment, there can be no assurance that the ultimate costs associated with this and other catastrophic events will not exceed the company’s current estimates. These estimates will be refined as necessary, as additional information becomes available.
Also impacting Horace Mann’s third quarter financial results is the elimination of contingent tax liability amounts related to tax years 1998 through 2001, which were deemed closed as of Sept. 15, 2005. As a result, the company will record a decrease in federal income tax expense of approximately $6.4 million in the third quarter of 2005.
“In addition to the income tax benefit, Horace Mann’s favorable noncatastrophe property and casualty underwriting results in 2005 have continued into the third quarter, and preliminary analysis also indicates continued favorable development of property and casualty claim reserves for prior years,” said Louis Lower II, president and chief executive officer.
“Nonetheless, in light of the significant level of catastrophe losses experienced this quarter, we are reducing our estimated 2005 full year net income before realized investment gains and losses to between $1.70 and $1.80 per share, compared to our previous guidance of $1.80 to $1.90 per share,” Lower stated.
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