HORACE MANN EDUCATORS CORP /DE/ Q3 FY2024 earnings call

• Thanked claims team for handling Hurricane Helene, estimating $22.5 million in damages for policyholders in Carolinas and Georgia. Highlighted progress in P&C underlying loss ratios due to rate and non-rate actions. Auto underlying loss ratio 71.5%, 8.2-point improvement; Property underlying loss ratio 41.4%, 20.4-point improvement. - Emphasized multiline approach enabling educators and others to achieve lifelong financial success. - Third quarter back-to-school season: Auto sales up 24%, Life sales up 14%, 403(b) deposits up 9%. - Increased digital leads with 50% increase in quotes started online after website and quoting functionality upgrades. - Worksite division: Individual Supplemental Line sales up 20%, surpassing pre-pandemic levels; strong relationship with International Association of Firefighters accounts for over 20% of new Individual Supplemental sales. - Corporate net investment income in line with midyear guidance, with early signs of stabilization in commercial mortgage fund portfolio.

Property-Casualty

• Net written premiums were $212 million, up 13% over prior year. Reported combined ratio was 97.9%, a 19-point improvement over prior year. Underlying loss ratio was 60.7%, improving 12.6 points over prior year. Auto: net written premiums $129 million, up 9% over prior year, combined ratio 92.8%, improving 16 points. Property: net written premiums $83 million, up 18% over prior year, underlying combined ratio 66.9%, improving 20 points.

Life & Retirement

• Contributed $14.8 million to core earnings, down from prior year, primarily due to lower net interest margins. Net written premiums and contract deposits were $156 million, slightly up over prior year. Retirement deposits in core 403(b) products increased 9%, persistency 91.5%. Annualized Life sales increased 14%.

Supplemental & Group Benefits

• Contributed $14.8 million to core earnings, down 6% due to a 3.7-point increase in the blended benefits ratio. Premiums and contract charges earned were $63 million, slightly down from prior year. Total segment sales $7.5 million, down from strong prior year, but Individual Supplemental sales up 20%.

• Full year core EPS expected in range of $2.40 to $2.70. - P&C segment expects full year core earnings of $36 million to $39 million. - Life & Retirement segment expects full year core earnings of $50 million to $56 million. - Supplemental & Group Benefits segment expects full year core earnings of $49 million to $52 million. - Expect to reach inflection point in Auto policy growth by latter part of 2025. Target profitability levels expected in 2025 with mid-single-digit rate increases to keep pace with loss trends.

• Catastrophe events can impact combined ratio, e.g., Hurricane Helene added 12 points to the combined ratio. - Market factors can affect investment income, such as mark-to-market valuation adjustments in commercial mortgage fund portfolio. - Competition could heat up, potentially affecting growth in segments like Auto.

Q: Dean Criscitiello asked about core loss ratio within Personal Auto and initial loss picks going forward.

A: Marita Zuraitis and Ryan Greenier responded that there was prior year development in Auto, with an $8 million prior year reserve release from injury liability from accident year 2022 and earlier, where paid severity is emerging lower than expected. Also discussed Auto rate adequacy and customer retention.

Q: John Barnidge inquired about growth opportunity in segments as approaching rate adequacy.

A: Ryan Greenier, Mark Desrochers, and Steve Mcanena responded, talking about Auto growth with more agents, increased productivity, and digital lead activity; and for Supplemental & Group Benefits, discussing Individual Supplemental Line growth and Employer sponsored benefits fundamentals.

Q: Wilma Burdis asked about share purchases going into 4Q and details on favorable prior year developments (PYDs).

A: Ryan Greenier said share buyback is opportunistic with a multiyear view and optimism for share price growth. Marita Zuraitis stated that there is a consistent reserve process, with clear favorable development in injury lines seen in the third quarter.