Horace Mann(US:HMN)2022-08-05 22:34Financial Data and Key Metrics Changes - The company reported second-quarter core results near breakeven, with a minor upward revision to full-year core EPS guidance to a range of $2.15 to $2.35 [7][36] - The expected return on equity (ROE) for 2023 is projected to be in the high single digits, aiming for a sustainable double-digit ROE in the long term [8][36] - Core loss for the Property & Casualty (P&C) segment was $25.4 million, significantly impacted by catastrophe losses and inflation [37] Business Line Data and Key Metrics Changes - Core earnings for the Worksite segment increased by 14% year-over-year, with voluntary supplemental sales growing by 83% compared to the previous year [20] - Life and Retirement segment core earnings rose by 4.8%, with adjusted core earnings up 24.4% [43] - The P&C segment saw average written premiums increase by 1.6% for auto policies and 7.5% for property [37] Market Data and Key Metrics Changes - Catastrophe losses for the quarter were $45.7 million, contributing significantly to the combined ratio, which was well above the 10-year average [38] - The company anticipates average premiums for property to rise to the mid-teens over the next 12 to 18 months due to ongoing inflation and weather-related factors [15][111] Company Strategy and Development Direction - The company is focused on expanding market share and enhancing shareholder value through a multi-year PDI strategy, which includes product enhancement and infrastructure modernization [18] - The acquisition of Madison National Life has allowed the company to better serve educators with a broader range of products [18] - The company aims to leverage its dual division structure (retail and worksite) to respond effectively to the needs of educators and school districts [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that external events, including high catastrophe storm activity and inflation, have impacted financial performance but expressed confidence in long-term growth [7][17] - The company remains committed to its mission of serving educators and is optimistic about the upcoming school year, anticipating increased engagement with educators [30][88] Other Important Information - The company has returned capital to shareholders through dividend increases and share repurchases, with $24 million used to repurchase shares in the first seven months of the year [31][62] - The transition to new LDTI accounting guidance is expected to reduce shareholders' equity by $400 million to $500 million, but the company plans to provide adjusted equity figures excluding these impacts [54][55] Q&A Session Summary Question: Impact of inflation on catastrophe loss ratio - Management indicated that while inflation is a concern, their planning includes considerations for increased material costs, and they do not expect a significant increase in catastrophe losses for the second half of the year [66][67][70] Question: Adverse development in auto reserves - Management explained that the increase in auto reserves was due to inflationary pressures affecting claims from previous accident years, with a $12 million strengthening of auto BI reserves [78][79] Question: Marketing strategies for the upcoming school year - Management reported strong early back-to-school activity, with metrics indicating a return to pre-pandemic levels of engagement with educators [88][90] Question: Pricing program and rate increases - Management discussed anticipated rate increases in the high single to low double-digit range for auto premiums, with property premiums expected to rise to mid-teens levels over the next 12 to 18 months [108][111]