Horace Mann(US:HMN)2025-02-06 19:24Financial Data and Key Metrics Changes - The company reported record fourth-quarter core earnings of $1.62 per share, a 93% increase over the prior year [9] - Full-year 2024 core EPS was $3.18, more than doubling 2023 earnings, with a core return on equity of 8.8% [9][23] - The full-year combined ratio for property and casualty (P&C) was 98%, a 15-point improvement over the prior year [9] Business Line Data and Key Metrics Changes - P&C net premiums earned increased by 14%, with premiums and contract deposits rising by 8% over the prior year [10][11] - Full-year core earnings for the P&C segment were $49.1 million, an $85 million improvement over the prior year [28] - In the life and retirement segment, core earnings were $56.3 million, down from the prior year due to lower net interest margins [35] Market Data and Key Metrics Changes - The company experienced a 29% increase in annual segment sales, reaching $100.9 million [32] - Net written premiums in auto increased by 11.8% to $490.7 million, while property net written premiums rose by 17.7% to $288.6 million [32][33] - The company reported a pre-tax profit margin of 35.7% in individual supplemental, down one percentage point from the prior year but still above profitability targets [39] Company Strategy and Development Direction - The company aims to achieve a mid-90s combined ratio in P&C while mitigating earnings volatility [14] - Strategic investments will focus on driving profitable growth while maintaining business profitability [13] - The company plans to introduce a next-generation cancer product in the individual supplemental line later this year [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2025 core earnings guidance of $3.60 to $3.90 per share, with a return on equity of at least 10% [13][25] - The company anticipates catastrophe losses of $90 million for 2025, reflecting expected benefits from underwriting actions [26] - Management highlighted the importance of improved weather risk modeling and operational efficiencies in driving future growth [15][20] Other Important Information - The company recorded $18 million in reserves related to non-core legacy commercial exposures [42] - Adjusted book value at year-end 2024 was $37.54, reflecting intrinsic value adjustments [45] - The company plans to host an Investor Day in May to discuss strategic initiatives in detail [50] Q&A Session Summary Question: Confidence in CML returns improving - Management expressed confidence in the direction of the commercial mortgage loan (CML) portfolio, citing improved economic conditions and valuation adjustments [54] Question: Catastrophe losses and business growth impact - Management noted that catastrophe losses are expected to be lower due to effective mitigation efforts and adjustments based on historical averages [57][60] Question: Updates on growth execution across business lines - Management indicated excitement about presenting detailed growth plans at the upcoming Investor Day, emphasizing strong growth numbers in 2024 [64][67] Question: Industry pricing and property side options - Management highlighted the company's long-standing relationship with educators and the importance of product bundling while managing volatility [70][75] Question: Changes to deductibles and roof schedules - Management confirmed positive impacts from changes in deductibles and roof schedules, contributing to improved reserve development [78][81] Question: Impact of lower utilization in supplemental business - Management noted favorable morbidity experience and strong demand for supplemental products, with record sales in the fourth quarter [88][90] Question: Lower auto frequency and pricing strategy - Management acknowledged lower frequency of claims but emphasized a cautious approach to pricing, focusing on maintaining competitive rates [94][95] Question: Confidence in 2025 EPS guidance - Management expressed strong confidence in the 2025 EPS guidance, citing reduced variability in earnings projections due to successful profit restoration efforts [100][102]