Horace Mann(HMN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Horace Mann reported record 2025 full-year core earnings per share of $4.71, a 39% increase over the prior year, with a shareholder return on equity of 12.4% [4][15] - Total revenues increased by 7% year-over-year, with net premiums and contract deposits earned also up more than 7% [4][15] - Core earnings for 2025 were $196 million, reflecting strong underlying profitability across the business [15][19] Business Line Data and Key Metrics Changes - In Property and Casualty (P&C), core earnings were $112 million, more than double the prior year, with a reported combined ratio of 89.7, improving over 8 points year-over-year [19] - Auto net written premiums increased to $502 million, with a combined ratio of 96.5, improving nearly 2 points [19] - Life and retirement segment saw core earnings increase by 13% to $61 million, with net premiums written and contract deposits growing to $612 million, up 7% year-over-year [21] - Individual supplemental sales increased nearly 40% year-over-year, while group benefits recorded a 33% increase [6][22] Market Data and Key Metrics Changes - Unaided brand awareness reached 35% in 2025, up from less than 10% a year ago, indicating significant growth in market recognition [7] - New business customer interactions increased by 37% in the fourth quarter, reflecting improved marketing effectiveness [8] Company Strategy and Development Direction - The company aims for a 10% average compound annual growth rate in core EPS and a sustainable 12%-13% shareholder return on equity over the next three years [11][26] - Investments in marketing, infrastructure improvements, and product expansion are prioritized to support sustained profitable growth [12][14] - The introduction of the Horace Mann Club aims to enhance engagement with educators and provide financial wellness tools [9] Management's Comments on Operating Environment and Future Outlook - Management noted that 2025 benefited from unusually light severe weather activity, with pre-tax catastrophe losses of $62 million contributing positively to core earnings [5] - The company expects a normalized core earnings per share guidance range of $4.20-$4.50 for 2026, reflecting a nearly 10% increase [11][17] - Management expressed confidence in achieving long-term financial targets despite potential macroeconomic uncertainties [26] Other Important Information - The company repurchased $21 million of shares in 2025, the highest annual level since 2022, with an additional $50 million authorization in May [14][25] - The early retirement offering was taken up by about 8% of eligible employees, aimed at aligning the workforce with future needs [56][59] Q&A Session Summary Question: Distribution initiatives and policy count growth outlook - Management indicated strong sales momentum driven by distribution efforts, with brand awareness and website traffic significantly increasing [30][31] Question: EPS outlook for 2026 and growth acceleration - Management confirmed expectations for a 10% annual earnings per share growth rate, with anticipated accelerating top-line growth due to investments made [33][34] Question: Catastrophe loss assumptions and reinsurance program - Management clarified that the catastrophe loss guidance for 2026 is based on a consistent approach, not influenced by one year's results [36][37] Question: Early retirement offering participation - Approximately 8% of eligible employees participated in the early retirement offering, aimed at workforce planning [56][59] Question: Investment in supplemental and group segment - Management expressed satisfaction with progress in individual supplemental and group benefits, with strong sales and distribution efforts [70][72]