Horace Mann Educators Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Record Performance: 2025 saw record core earnings per share of $4.71 and ROE of 12.4%. Total revenues up 7%, with Individual supplemental sales up nearly 40% and Group Benefits up 33%.
• Segment Performance: Property and Casualty combined ratio 84.3% (5-point improvement); Life and Retirement had top line momentum with record life sales; Supplemental and Group Benefits delivered record sales.
• Marketing and Distribution: Unaided brand awareness reached 35% in 2025; website traffic and online originated quotes doubled; partnerships with Crayola and Get Your Teach On expanded reach; 15% increase in distribution points.
• Community Initiatives: Launched Horace Mann Club for educators; donated $5 million to the Horace Mann Educators Foundation in Q4 2025.

Segment Performance

• Property and Casualty: Core earnings were $112 million. Net written premiums were $830 million, with the reported combined ratio at 89.7%, an 8-point improvement year-over-year. Auto net written premiums were $502 million, combined ratio 96.5% (in line with mid-90s profitability target). Property net written premiums were $328 million, combined ratio 78.3% due to lower catastrophe losses.
• Life and Retirement: Core earnings increased 13% to $61 million. Net premiums written and contract deposits grew to $612 million, up 7% year-over-year. Life mortality experience was favorable, and retirement net annuity contract deposits increased nearly 7%.
• Supplemental and Group Benefits: Contributed $59 million of core earnings. Net written premiums rose to $267 million. Individual supplemental net written premiums increased 4% to $126 million (benefit ratio 26.8%), and Group Benefits net written premiums increased 6% to $142 million (benefit ratio 45.8%).

Guidance

• 2026 core earnings per share guidance range: $4.20 to $4.50 (nearly 10% increase from normalized 2025).
• Target 10% average compound annual growth rate in core EPS and 12%-13% shareholder return on equity.
• Aim for 100-150 basis point reduction in expense ratio, with most improvement expected in later years of the 3-year plan.
• 2025 share repurchases totaled $21 million, with $50 million authorization in May 2025 for continued repurchases.

Risks

• Unusual low catastrophe losses in 2025 may not repeat, affecting future earnings.
• Inflation and social inflation could impact auto liability coverages, though insulated.
• Reinsurance modeling and prior year reserve development uncertainties may affect guidance.

Question and Answer

• Q: Francis Matten on distribution initiatives and EPS outlook A: Marita Zuraitis discussed strong distribution momentum with 15% increase in agency force, website traffic up, and partnerships boosting brand awareness. Ryan Greenier mentioned 10% annual EPS growth target is on track, with expense savings reinvested to drive growth.
• Q: Matthew Carletti on K-12 households A: Marita Zuraitis attributed 100,000 household increase to marketing, distribution efforts, partnerships, and product relevance to educators.
• Q: John Barnidge on early retirement and share repurchase A: Marita Zuraitis said ~8% of eligible employees took early retirement, allowing workforce alignment. Ryan Greenier noted 2025 exceeded free cash flow targets, with share repurchases as an attractive capital allocation lever.
• Q: Wilma Jackson Burdis on sub and group segment investment A: Marita Zuraitis highlighted strong momentum in individual supplemental and group benefits, with earnings diversification. Ryan Greenier discussed benefit ratio trends, noting individual supplemental moving toward long-term averages and group closer to expectations.