Horace Mann(US:HMN)2026-02-04 18:02Financial Data and Key Metrics Changes - The company 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), the underlying combined ratio improved to 84.3%, a 5-point improvement year-over-year, with sales increasing by 6% [5][19] - Auto reported a combined ratio of 96.5%, improving nearly 2 points over the prior year, with policyholder retention stable at 84% [6][19] - Life and Retirement saw record life sales in Q4, up 21% year-over-year, with retirement deposits increasing by 4% [6][21] - Individual Supplemental sales increased nearly 40% year-over-year, while Group Benefits recorded a 33% increase [4][7] Market Data and Key Metrics Changes - The company expanded its distribution organization significantly, increasing points of distribution by 15% across all channels [8] - Unaided brand awareness reached 35% in 2025, up from less than 10% a year ago, indicating strong market recognition [7][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 [11][12] - The introduction of the Horace Mann Club aims to provide educators with financial wellness tools and resources, enhancing community engagement [9] Management 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][10] - The company does not expect a similarly low level of catastrophe losses in 2026 or subsequent years, indicating a cautious outlook [10][18] - Management expressed confidence in achieving long-term financial targets while navigating a competitive environment [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 for share repurchases [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 that 2025 was the strongest year for distribution, with significant sales momentum and increased brand awareness [30][31] Question: EPS outlook for 2026 and growth acceleration - Management confirmed expectations for a 10% annual EPS growth rate and anticipated accelerating top-line growth due to investments made [32][34] Question: Catastrophe loss assumptions in guidance - Management clarified that the $90 million catastrophe loss assumption for 2026 is based on a consistent year-over-year approach, not influenced by prior year developments [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: Free cash flow conversion targets - The company achieved about 80% free cash flow conversion in 2025 and targets over 75% for 2026, supported by capital-efficient business growth [63][64] 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]