Horace Mann(US:HMN)2023-05-05 10:35Financial Data and Key Metrics Changes - The company reported first quarter core earnings of $0.23 per share, consistent with pre-announcement expectations, but impacted by outsized catastrophe losses [13][22] - Catastrophe losses contributed 14.7 points to the combined ratio, significantly higher than 4.8 points from the previous year's first quarter [23] - Total net investment income was $74.7 million, a 2.3% increase from the previous year, driven by higher contributions from floating rate investments [65] Business Line Data and Key Metrics Changes - Life product sales increased by 22% year-over-year, benefiting from worksite representatives during enrollment activities [7] - The Supplemental and Group Benefits segment is expected to contribute 25% of total earned premiums and contract deposits, with the highest quarterly sales since 2019 [15] - Property segment average written premiums rose by 9.8% year-over-year, with an underlying loss ratio improving to 50.2% [27] Market Data and Key Metrics Changes - The company expects nationwide premium increases of 17% to 20% in the Property segment due to rate increases and non-rate actions [8] - Auto average premiums increased by 8% year-over-year, with a target of 18% to 20% rate increases for 2023 [56][58] - The company anticipates a combined ratio for auto between 106% and 107% in 2023, improving to 97% to 98% in 2024 [57] Company Strategy and Development Direction - The company is focused on increasing educator household acquisition and expanding its share in the education market [4] - A commitment to corporate social responsibility is evident, with initiatives aimed at supporting educators and reducing carbon emissions [19][50] - The hiring of a new COO is aimed at supporting market share expansion in the retail division [52] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2023 outlook, expecting core EPS to be in the range of $2 to $2.30, with a long-term target of $4 EPS in 2024 [9][67] - The company is monitoring loss trends closely and is prepared to adjust pricing or underwriting plans as necessary [26][72] - Management highlighted the importance of maintaining strong relationships with customers and transparency regarding rate increases [49] Other Important Information - The company identified $160 million in public service loan forgiveness opportunities for educators, totaling over $600 million in the student loan solutions program [20] - The net unrealized investment loss position of fixed maturity securities decreased to $453.3 million at quarter end, reflecting stabilization in the interest rate environment [35] Q&A Session Summary Question: What actions are being taken to address issues in auto and home? - Management discussed controlling distribution and implementing non-rate actions to manage underwriting effectively [72][100] Question: How does the company view its market share in the broader educator market? - The company sees potential for growth beyond the K-12 public space, leveraging relationships with other community service sectors [78] Question: Can you elaborate on the lift in covered lives and cross-sold products? - Management confirmed strong momentum in sales and cross-selling opportunities, particularly in the employer-sponsored and worksite direct channels [85][86] Question: Why haven't planned auto rate increases changed despite peers' trends? - Management explained that their preferred driver base and proactive underwriting strategies differentiate them from peers [91][92] Question: What is the outlook for the Supplemental segment's benefit ratio? - Management anticipates a return to more normalized benefit ratios post-pandemic, with adjustments to guidance as necessary [128]