Core EPS: $1.07 per share, a 73% increase over the prior year. Core Earnings: $45 million, reflecting a 73% increase over the prior year. Return on Equity: 10.6%, a 4.9% improvement over the prior year. Net Investment Income: $116 million, a 10% increase over the prior year. Property and Casualty Combined Ratio: 89.4%, a 10.5-point improvement over the prior year. Net Written Premiums: $185 million, an 8% increase over the prior year. Auto Sales: Up 8%. Individual Supplemental Sales: Up 61%. Annuity Net Contract Deposits: Up 6%. Share Repurchases: $7 million returned to shareholders year-to-date through May 2nd. Dividend Increase: 3% increase in annual dividend, marking the 17th consecutive year of increases.

Warning! GuruFocus has detected 6 Warning Sign with HMN.

Release Date: May 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Horace Mann Educators Corp (NYSE:HMN) reported a record first quarter core EPS of $1.07, a 73% increase over the prior year. The property and casualty segment showed strong performance with a combined ratio of 89.4%, a 10.5% improvement over the prior year. Total net investment income increased by 10% over the prior year, driven by higher limited partnership returns and strong fixed income portfolio performance. First quarter sales were robust, with individual supplemental sales up 61%, auto sales up 8%, and annuity net contract deposits up 6%. The company increased its annual dividend by 3%, marking the 17th consecutive year of dividend increases, and continued its share repurchase program.

Negative Points

Earnings in the life and retirement segment were below the prior year, primarily due to higher mortality rates. The company experienced a marginal impact on auto new business due to cumulative rate increases in California. Catastrophe losses were slightly above the prior year, with significant impact from California wildfires. Household retention in the auto segment decreased slightly to 84%, in line with expectations. The commercial mortgage loan funds underperformed in the life and retirement segment, affecting earnings.

Q & A Highlights

Q: Could you talk a little bit about the run rate earnings power of the life and the supplemental group benefit segments? Was 2025 a good level? A: Ryan Greenier, Executive Vice President and Chief Financial Officer, explained that the life and retirement business is considered a "ballast" for the company, with occasional mortality fluctuations within actuarial expectations. He noted that a specific commercial mortgage loan fund underperformed this quarter, but normalizing returns to a mid-single-digit level provides a good run rate for contributions. For supplemental and group benefits, the benefit ratio was close to expectations, and a longer-term average gives a good sense of the business's performance.

Story Continues

Q: Could you talk about the catastrophe activity in 2025 year-to-date and how we should account for seasonality going into the second quarter? A: Steve McAnenna, Vice President and Chief Operating Officer, stated that the major event for Q1 was the California wildfires, with an ultimate loss of $37 million. April's catastrophe losses were in line with expectations. Ryan Greenier added that historically, the second quarter is the heaviest for catastrophe costs, with about 50% of the annual load typically occurring then. The annual guidance for catastrophe losses is $90 million.

Q: Curious about the individual supplemental distribution in the quarter. Were there any new school districts added that drove that growth? A: Steve McAnenna noted that the 61% growth in individual supplemental sales was due to strong performance from benefit specialists and not the addition of new school districts. The comparison to Q1 2024, which was a light sales quarter, makes the year-over-year growth appear larger. On a 12-month rolling basis, new business growth is around 12%, which is expected to continue.

Q: Have you begun to reserve for potential macro deterioration that could lead to increased utilization in supplemental group benefits? A: Steve McAnenna mentioned that 2024 was abnormally favorable, making 2025 appear as an increase, but it is within expectations. Utilization was slightly elevated in January but normalized in February and March. Ryan Greenier added that quarterly reserve changes are related to claim counts and frequency, with no current trends causing concern. The public sector historically performs well in recessionary environments.

Q: How are you managing the impact of California wildfires and other catastrophe losses? A: Merita Zuraitis, President and Chief Executive Officer, highlighted that this is the first year to see the full effect of roof schedules and other measures to mitigate property volatility. The company feels confident in managing catastrophe losses and maintaining profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments