Horace Mann Educators Corporation Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Key Takeaways: Second quarter core earnings per share were $1.06, nearly threefold increase over prior year. Net premiums and contract charges earned were up 8% with total revenues up 6%. Increased full-year 2025 core EPS guidance to a range of $4.15 to $4.45. Core return on equity for the quarter was 11.3%, trailing 12-month core return on equity was 12.6%.
• Strategic Goals: Focus on 10% average compound annual growth rate in core EPS and sustained 12% to 13% core return on equity by 2028.
• Operational Highlights: Strong business profitability and growth momentum. Strategic partnerships like with Crayola and Lakeshore Learning. Website traffic in second quarter increased 75% over prior year. Auto sales up 10% year-to-date. Individual Supplemental achieved record-breaking quarter with second quarter sales up 43% over prior year.

Segment Performance

• Property and Casualty: Core earnings were $17 million, a $25 million improvement from the prior year's segment loss. The combined ratio was 97%, a nearly 15-point improvement over prior year. Net written premiums: auto was $127 million (up 4% over prior year) and property was $84 million (up 10% over prior year). Pretax catastrophe losses were $30 million, $11 million below prior year and below historic averages due to lower claim frequency and severity.
• Life and Retirement: Core earnings were $25 million, a twofold improvement compared to the prior year, primarily driven by higher net investment income and lower mortality costs. Net written premiums and contract deposits were $142 million (up 6% over prior year).
• Individual Supplemental and Group Benefits: The segment contributed $13 million to core earnings. Individual supplemental net written premiums were $31 million (up 4% over prior year) with second quarter sales of $6 million, a 43% increase over prior year. Group benefits net written premiums were $35 million (up 3% over prior year), with July being a record sales month for group.

Guidance

• Increased full-year 2025 core EPS guidance to a range of $4.15 to $4.45.
• Total net investment income expected in the range of $470 million to $480 million with managed portfolio income of $370 million to $380 million and interest expense and other corporate items of $35 million to $40 million.
• Catastrophe loss guidance based on 5-year historical average at $90 million for full year.

Risks

• Catastrophe losses are unpredictable and can vary from historical averages.
• Increased competition in the monoline auto space.
• Variable quarterly sales in Group Benefits due to longer sales cycle.

Q: Mike Zaremski with BMO asked about P&C segment cat load guidance and potential changes.

A: Marita Zuraitis and Ryan Greenier responded that cat guidance is based on 5-year historical average of $90M full year, as weather events are unpredictable.

Q: Mike Zaremski followed up on P&C growth and retention.

A: Marita Zuraitis and Steve McAnena stated that PIF is stabilizing with increased leads, growing points of distribution, and increased productivity from tools like Catalyst.

Q: John Barnidge with Piper Sandler asked about Group Benefits business.

A: Steve McAnena and Marita Zuraitis discussed seasonality, volumes, and RFP activity, noting individual supplemental sales growth and Group Benefits having a longer sales cycle but positive outlook.

Q: Mike Zarinky with BMO asked about investment portfolio.

A: Ryan Greenier mentioned the core fixed maturity portfolio had a new money yield of 5.79% for the quarter, exceeding book yield, and commercial mortgage loan funds showing improvement.