Horace Mann Educators Corporation (HMN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance, with improvements in combined ratios, increased net written premiums, and strong persistency rates. The Q&A section reinforces positive momentum with strong EPS growth targets, successful distribution initiatives, and strategic partnerships. Despite some unclear responses, the overall sentiment is positive, supported by raised EPS guidance and strategic partnerships. Considering the company's market cap, the stock price is likely to experience a positive movement in the 2% to 8% range over the next two weeks.
Key Financial Performance
Core earnings per share $4.71, a 39% increase year-over-year. This increase was attributed to strong underlying business performance, growth momentum, and unusually light severe weather activity.
Shareholder return on equity 12.4%, reflecting continued strong underlying profitability across the business.
Total revenues Up 7% year-over-year, driven by a 7% increase in net premiums and contract deposits earned.
Individual supplemental sales Increased nearly 40% year-over-year, driven by strong demand, improved distribution reach, and deeper customer engagement.
Group Benefits sales Increased 33% year-over-year, supported by expanding distribution.
Pretax catastrophe losses $62 million, contributing approximately $28 million or about $0.55 per share to core earnings relative to original assumptions.
Property and Casualty underlying combined ratio 84.3%, a 5-point improvement year-over-year, reflecting rate and non-rate actions to reduce segment earnings volatility.
Auto combined ratio 96.5%, improved nearly 2 points year-over-year, aligning with mid-90s profitability targets.
Life sales Up 21% year-over-year in the fourth quarter, attributed to improved marketing campaigns, higher agent productivity, and stronger engagement with educators.
Retirement deposits Increased 4% in the quarter and 7% for the full year, reflecting top-line momentum.
Supplemental and Group Benefits core earnings contribution 25%, highlighting its role in diversifying earnings and reducing volatility.
Supplemental benefit ratio 37%, moving toward long-term expectations.
Net written premiums for Property and Casualty Increased 7% to $830 million, driven by higher average premium.
Reported combined ratio for Property and Casualty 89.7%, improved more than 8 points year-over-year, reflecting strong underlying results, lower catastrophe losses, and favorable prior year development.
Net written premiums for Auto $502 million, with a combined ratio improvement of nearly 2 points to 96.5%.
Net written premiums for Property $328 million, a 14% increase, reflecting rate actions and solid sales momentum.
Life persistency Remained strong at 96%.
Retirement persistency Rose to 92%.
Individual supplemental net written premiums Increased 4% to $126 million, with a benefit ratio of 26.8% reflecting favorable policyholder utilization trends.
Group Benefits net written premiums Increased 6% to $142 million, with a benefit ratio of 45.8% moving closer to long-term expectations.
Total net investment income on managed portfolio Increased more than 6% year-over-year, driven by strong limited partnership returns and improved commercial mortgage loan fund results.
Core fixed income performance Full year new money yields of 5.51%.
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Operating Highlights
Horace Mann Club: Introduced a new platform for educators to access financial wellness tools, classroom resources, and perks.
Supplemental and Group Benefits: Delivered record sales in 2025, with individual supplemental sales up 40% and group benefits sales up 33%.
Brand Awareness: Unaided brand awareness increased to 35% in 2025, up from less than 10% a year ago, supported by partnerships with Crayola and Get Your Teach On.
Distribution Expansion: Increased points of distribution by 15% across all channels, with website traffic and online quotes doubling.
Expense Optimization: Achieved $10 million in annualized savings through initiatives like automation, straight-through processing, and workforce planning.
Reinsurance Renewal: Completed 2026 reinsurance renewal with a 15% reduction in rate online, maintaining disciplined risk management.
Marketing Investments: Accelerated investments in marketing and strategic partnerships to strengthen brand awareness and support growth.
Capital Allocation: Deployed $21 million for share repurchases in 2025, with an additional $50 million authorization for future repurchases.
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Risk or Challenges
Catastrophe Losses: 2025 benefited from unusually light severe weather activity, with pretax catastrophe losses of $62 million, contributing approximately $28 million to core earnings. However, the company does not expect similarly low levels of catastrophe losses in 2026 or subsequent years, which could adversely impact financial performance.
Commercial Mortgage Loan Fund Performance: One fund, Sound Mark Partners, is in runoff and expected to continue underperforming, which will modestly pressure reported commercial mortgage loan fund yields. This impact is idiosyncratic but already reflected in planning assumptions.
Expense Optimization Challenges: The company is targeting a 100 to 150 basis point reduction in the expense ratio, but most of the improvement is expected in the later years of the 3-year plan. This delay could impact short-term financial performance.
Reinsurance Costs and Coverage: While the company achieved a nearly 15% reduction in reinsurance rate online, it increased the size of its property catastrophe tower. This could lead to higher costs if catastrophe events exceed expectations.
Early Retirement Offering Costs: The early retirement offering, part of workforce planning, will result in noncore expenses in 2025. While expected to generate savings in the long term, these costs could impact short-term financials.
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Guidance & Outlook
2026 Core Earnings Per Share Guidance: Expected to be in the range of $4.20 to $4.50, representing a nearly 10% increase consistent with the 3-year financial goals outlined at Investor Day.
2026 Financial Goals: Includes delivering a 10% average compound annual growth rate in core EPS and a sustainable 12% to 13% shareholder return on equity.
Expense Ratio Improvement: Targeted 100 to 150 basis point reduction in the expense ratio, with most improvement expected in the later years of the 3-year plan (2027 and 2028).
Capital Allocation: Continued disciplined approach to capital allocation, balancing reinvestment in the business with returning capital to shareholders. $49 million remains on the current share repurchase authorization.
Catastrophe Losses Assumption for 2026: Full year assumption of approximately $90 million, reflecting a blend of industry standard catastrophe model losses and historical experience.
Net Investment Income for 2026: Expected to be in the range of $485 million to $495 million, with managed portfolio income between $385 million to $395 million.
Reinsurance Renewal for 2026: Completed with a nearly 15% reduction in rate online, allowing for increased property catastrophe tower coverage to $240 million while maintaining a $35 million attachment point.
Expense Optimization Initiatives: Expected to generate more than $10 million of annualized savings, with meaningful ongoing run rate savings impacting 2027.
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Shareholder Return Plan
Share Repurchase in 2025: In 2025, the company deployed $21 million of capital to share repurchases, marking the highest annual level since 2022. The Board also authorized an additional $50 million for share repurchases in May 2025, emphasizing the company's commitment to using share repurchases as a lever for shareholder value creation.
Share Repurchase in 2026: Through January 30, 2026, the company repurchased approximately 140,000 shares at a total cost of $6 million, with an average price of $43.36. The company has about $49 million remaining on its current share repurchase authorization.
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Key Q&A
Q:Can you provide an update on the distribution initiatives and the shift to a specialist model, as well as the outlook for policy count growth in the P&C business?
A:Marita Zuraitis stated that 2025 is expected to be the strongest year for distribution efforts, with brand awareness up over 35%, website traffic significantly increased, and quoting more than doubled. Agency force is up over 15%, and all three growth levers outlined at Investor Day are ahead of expectations, driving strong production momentum.
Q:What is the outlook for EPS growth in 2026 and beyond, and are there any offsets to consider?
A:Ryan Greenier confirmed a 10% annual EPS growth rate target, with accelerating top-line growth expected over the next three years. Expense savings are being reinvested to drive growth, with more impact expected in 2027. Savings from expense initiatives will also contribute to growth.
Q:Does the catastrophe loss assumption in the guidance reflect improvements in the reinsurance program or changes in terms and conditions?
A:Marita Zuraitis and Ryan Greenier explained that the $90 million catastrophe loss guidance reflects a consistent year-over-year approach, industry modeling, and historical loss experience. Prior year development is excluded from planning assumptions, and reserve releases are expected to normalize as loss trends stabilize.
Q:What drove the shift in K-12 households from inaccessible to accessible, as shown in the slides?
A:Marita Zuraitis attributed the shift to multidimensional efforts, including increased brand awareness, strategic partnerships, and investments in marketing and distribution. Educator household count increased by 100,000, with strong sales momentum across all business lines.
Q:What is the long-term target for net interest spread in the retirement business?
A:Ryan Greenier stated that the target for the fixed annuity block is a 200 basis point spread. While 2025 underperformed due to commercial mortgage loan issues, overall profitability remains in line with ROE targets.
Q:How many employees took the early retirement offering, and what was its purpose?
A:Marita Zuraitis noted that 8% of employees were eligible, and the program allowed for workforce planning acceleration. The participation rate was satisfactory, enabling reinvestment in future skills and expense savings to improve the expense ratio.
Q:What is the run rate level of free cash flow conversion of operating earnings?
A:Ryan Greenier reported an 80% free cash flow conversion in 2025, exceeding targets. For 2026, the target is over 75%, supported by capital-efficient businesses and strong cash flow conversion.
Q:How does Horace Mann see sales and margins playing out in the supplemental and group benefits segments?
A:Marita Zuraitis highlighted strong momentum, with individual supplemental sales up 40% and group benefits up 33%. Investments in product development, distribution, and infrastructure are driving success. Ryan Greenier added that the blended benefit ratio target is 39%, with individual supplemental running lower and group higher.
Q:Does softening reinsurance pricing factor into the 2026 margin outlook?
A:Ryan Greenier explained that favorable reinsurance rates allowed for additional coverage at the top of the tower, with total spend remaining flat. This decision is incorporated into the 2026 outlook.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific number of employees who took the early retirement offering, only stating that the participation rate was satisfactory. Additionally, while discussing catastrophe loss assumptions, the response included generalities about modeling and historical trends without providing specific details on the impact of reinsurance program improvements or terms and conditions changes.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Benefits record
Group Benefits
Retirement
action
assumption
baseline
benefit
brand awareness
capital
catastrophe loss
classroom
club
customer
deposit
distribution channel
educator market
engagement
goal balance
highlight
investment
line momentum
line profitability
marketing
partnership brand
program
progress
record core
resource
retention auto
sale result
segment
shareholder return
strength
target
value
HMN Transcript
Horace Mann Educators Corporation (HMN) Q4 2025 Earnings Call Transcript
Positive2-4
The earnings call highlights strong financial performance, with improvements in combined ratios, increased net written premiums, and strong persistency rates. The Q&A section reinforces positive momentum with strong EPS growth targets, successful distribution initiatives, and strategic partnerships. Despite some unclear responses, the overall sentiment is positive, supported by raised EPS guidance and strategic partnerships. Considering the company's market cap, the stock price is likely to experience a positive movement in the 2% to 8% range over the next two weeks.
Horace Mann Educators Corporation (HMN) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call presents a generally positive outlook. Financial performance is strong with increased EPS guidance, robust sales growth in life, retirement, and group benefits, and improved property combined ratio. The Q&A section reveals strategic investments and growth plans, although some uncertainty exists in catastrophe mitigation. Overall, the company's strategic investments and strong sales momentum suggest a positive sentiment, likely to result in a stock price increase of 2% to 8% over the next two weeks, considering the market cap.
Horace Mann Educators Corporation (HMN) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings call highlights strong financial performance, with improvements in profitability, reduced catastrophe losses, and increased premiums across segments. The Q&A session suggests optimism in policy growth and sustained sales momentum. Despite some uncertainty in catastrophe load guidance, the overall sentiment remains positive. The market cap indicates a small-cap stock, likely to react positively to these strong earnings and optimistic guidance, predicting a stock price increase of 2% to 8% over the next two weeks.
Horace Mann Educators Corporation (NYSE:HMN) Q4 2024 Earnings Call Transcript
Positive2-7
The earnings call reflects strong financial performance, with record core earnings and a significant EPS increase. The company is confident in its future profitability and growth plans, despite some regulatory challenges and policyholder losses. The share repurchase program is a positive catalyst. Q&A responses show management's optimism and confidence in achieving guidance targets. While there are risks, overall sentiment is positive, suggesting a stock price increase in the short term.
HMN Report
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