Horace Mann Educators (HMN) 8 Aug 242024 Q2 Earnings call transcript

Good morning and welcome to the Horace Mann Second Quarter of 2024 Results Conference Call. [Operator Instructions] Also, please be aware that today's call is being recorded. I would now like to turn the call over to Brendan Dawal, Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to Horace Mann's discussion of our second quarter results. earnings investor our presentation. and issued we release, supplement XX-Q, investor Yesterday, Executive Chief are page formal Executive and Conklin, Investors on remarks Officer President our Bret Copies the President on on today's available give Officer, Financial will website. Marita call. Zuraitis, and Vice the and Chief McAnena, us With Steve Q&A, Mark and have we Greenier for Desrochers. Sharpe, Matt Ryan

XXXX. materially defined in and a are the Before these most remarks, Reconciliations are expectations, and no The current to risks Reform today includes measures factors, presentation which note measures that turning our news of Litigation that our investors we it over turn cautions guarantees forward-looking management's due and measures. the over we to Securities statements investor supplement. I'll filings. In company update obligation to future in use may as assume to any Marita, our described Act variety of include statements Marita. now to call and Private I These on them. are our performance. release of are SEC want Actual to non-GAAP statements of the prepared available in GAAP some differ forward-looking based forward-looking comparable results not uncertainties

pre-announcement. deposits we and revenues Thanks, significant premiums per our X%. core diluted in were Brendan, improvement and net reported share, up up with contract over everyone. and Total good earnings morning, with Yesterday, line a quarter X% second of $X.XX earned prior year

strategy profit in XXXX in Our XXXX. profitability remains track underwriting Casualty an and Property on & profitability to restoration target reach

in XX%. up These of confidence achieving & worksite both in Benefits results underscore equity our shareholder sales Casualty XXXX. objective were Our and XX%. agency force growth Group profitable our double-digit sales on up were & is return divisions. Property our a in Supplemental driving retail

of roughly mark-to-market The our adjustments Supplemental details, in mortgage portfolio investments in & portfolios. noted and Retirement is and fund in we specific give to portfolio. loan total our pre-announcement, well call. XXXX, the more CML valuation accounting our related we recorded later of within X% as the first our Benefits the half Life some Group commercial will & as is As held Bret requirements

of the investment rate to pre-tax the performance. take well our investment averages. provide that is book back want results. loan our interest in despite half environment. performing the to X% At In revised money high first a in year-over-year the The of end the income second core portfolio managed more meaningfully step the on rates total of loan net new perspective net higher expect income over core we XXXX, rose funds on portfolio year, to and total portfolio commercial than the basis portfolio some mortgage XXX year exceeded commercial below for points. Even I funds prior with by our First, strength on the very maturity investment historical outlook the full returns for yield rose the quarter, investment managed mortgage were X.XX% fixed yield on XXXX,

income, to importantly, pressure of returns Casualty, agency the remains we business, factors XXXX. our begin the and commercial cash force real commercial of more the Property we in my progress strength make our In expect portfolio a have about an I impacting loan on investment providing valuation to employer investment the customers. sector productive towards fully value want profit we the seeing to remarks at focus our in in results X.X%. Today, do objective a and which from recover. are impacted on market valuation impacted are the this & educator as reported While engaged tailwind continue underwriting mortgage to underlying estate income and see not strong marks Most we has to these portfolio,

Our reported over seasonality, quarter prior combined XX points second of which year. expected improved reflects XXX.X%, ratio

a net year damage points favorable XXXX. which quarter combined reserve ratio XX.X%, physical The the prior-year auto release, from primarily accident in recorded also $X.X for prior-year We related million development, the severity from development. to includes was claims lower-than-expected X.X favorable auto

continue in damage XXXX. trends see moderating target We profitability to ability and physical reach to confident feel our in

plans, and continue We our and auto necessary. successfully respond to monitor implement to rate property and as trends will

to rate reach remainder. We majority of in and the of line our the in vast are rate adequacy at book have adequacy sight

In to additional trends rate react filings necessary. loss continue addition, with to we as state-level

compared The As from we've quarter in load. record our PCS-declared year primarily of noted before, convective These lower stemmed to in but in losses X-and to catastrophes XX-year full catastrophe country. quarter half averages, storm catastrophes from second losses with severe about XX the million comprises $XX historically in trend XXXX, second quarter activity the industry line above slightly second historical our experience. were continue across

in renewal wind-prone We our roof implemented most schedules, have are X effective which new states. at of policy rating

the close this potential appeared look to favorable at Our $X savings. with impact cost estimated in million first quarter

successful As in a the XX-month X segment have remains impact positively all educators of protect this to property reminder, through for value on be program about today educators cornerstone core they and to proposition what applicable value a loss respond prepare offerings. Life proposition & policies. In our tomorrow. full to we we expect a ratio of and to continue Retirement, for points the product see our our when This earned

have scale employers These providing healthy of core Horace to and cross-sell to sales resources pipeline. Against are retirement functionality, and and year-to-date our to new complementary plans working leads wellness website, introduced tested digital educators agents. able products financial are and mutual XXX(b) to our programs. planning XXXX. the how are have We're into and Retirement increased Advantage fund of the a realizing X% with this a and product deposits in We backdrop, most year our up to online number improvements in successful to the improved to customers. approaches back bring of platform. Mann are us XXX(b) the we're internal teams marketing XXX(b) half plans and our partner now enable number to including quality many educators, upgraded quoting We

together, Taken is from in were XX% agency result second up an Auto Life engaged up growth the were XX%. sales the sales strong sales quarter. retail all plan.

levels. prior XXXX, remain close The is from coming policies. In with consistent ratios the XX% increased writing over agency year. writing Our premium historic growth higher of income and more policies first agencies half more average

our Our plans. slightly retail distribution ahead is strong of recruiting and

the well enhancements is is We agents are our milestones productivity up realized long-term the XX%. pre-pandemic our remain over are XX% sales more update force. Worksite a direct NTA's number which worksite our trending continue to to speaks our level levels, to a force. Similar increase and to recent X% on Benefits retail, even in product offerings recent and we basis. In of towards set new has below results agents our Notably, have meet but XXX,XXX, sponsored customer levels. and to productivity reach target faster, product are key continues agency quality covered of to utilization lives sequential prior division needs. of our business, to employer sales the responding pre-pandemic seeing surpassed agency increases Customers year.

sales longer sales be we've has quarter-to-quarter As a XX business can this up months cycle lumpy. noted before, to and

our expand more broker partnerships are leverage continue on We to to distribution and existing partners. focused adding

an Horace Bret, want beyond. is ROE Mann the education share of a to and and over to sustainable double-digit XXXX call positioned the how our well turn in I reiterate goals to reach of expanded market I Before

Our diversified business earnings. model strong steady provides

have the consistently past to more years, we report income XXXX sight to With CML have over to all consolidated industry we've most lower been a value. been a first basis put P&C of earnings our adjustments. To and profitability due This able Retirement the current business. while of we the is investment the it income, segments are of in anticipate broader mark-to-market simply, target earnings of the clear half few lower eventual pressure valuation profitably view net basis. in And recovery growing XXXX, company facing we & the in of on of the line across Life

back when to value believe believe has of the conditions case shareholder to we favorable, we market are buy that shares the been further levers recently. and One is create

cost XXX,XXX a we've XXXX, bought total million. in $X.X far So back of shares at

touch activities in the been want summer. we've schools bookend doing addition, on the to some of In to I

month who thanked entertainers year school completed appreciation teacher we teachers events and the Before entire activities, an of directly. including ended, celebrities exclusive with virtual

Our with follow-up website the doubled over traffic thousands of year to hear to of wanted beginning were the Horace and Mann. able who more about educators we

there this school As our our be alongside back month, to them. will right head agents educators

be Our is personally. quarter aim to set for both the for help and third professionally educators success,

anyone and to else. Thanks. We we're increase the the we of here call help how succeed are with better them to than education educators, Bret. know I'll to ability share that, in over confident our market turn because And precisely our for

Marita. Thanks,

$X.XX earnings share, ago. year core million per $X.XX a increase $X.X were quarter from Second a or diluted significant

Our P&C We're return profitability in across target on and also profitability growth remains XXXX. seeing segments. track reach an underwriting strong the profit restoration in strategy to momentum XXXX

average. X now our A+. was primarily catastrophes As income in over as weighted $X from core portfolios investments the which and investment and performance assets to securities. high-quality portfolio, X-year performing yield core agency credit core portfolios, our EPS and to segments. benefited more new These on end corporates, rate interest full each I'll $X.XX first The At fixed funds our expectations. a that of of our as agency our have municipals our of environment we and well are speak detail a Within remarks money of X.XX%. have X.XX% of above our then yield concentrated average the invested Today, due higher my the mortgage is above start in of portfolio the our to were the exposure billion quarter, pre-announcement, well with second clearly rating weighted the are on XX% MBS above expect year in investment-grade we half pre-tax income noted $X.XX, of lower-than-anticipated commercial loan

valuations lag remains by many We, we're We fund booking and loan for origination used quarterly the have structures based quarter the and refinance to of at see markets, of across off less. If estate Essentially, loan par, a geographies, a current which property and access hold and strong of $XXX mature have method investment income. accounting the rates about broader or these Most which and not transaction. million of have estate exposure valuation loan to direct years like pay importantly, types in real versus estate X.X%. The X% interest are the as generally group a our or be Marita potentially loans cash of majority or in mark-to-market level these X within at We portfolio peers. X real these tailwind portfolio, by commercial strategy assets market been our funds. types, life performing commercial mortgage of expect managers therefore, is marks impacted of of Most to in equity on can mentioned, provide in factors industry would that total well. these loans have of borrowers on have that maturities returns funds property both we impacted diverse our multifamily industrial, real funds. this adjustments about follow underlying

we which loan means of office overall These senior funds. increase compared assumed less income We closely, slightly located investment guidance. mortgage in It the What higher commercial construction and exposure. portfolio. well our investment total XXXX that primarily continue for is are original Class exposure to A than monitor well investments this amenitized, net X% newer in XXXX to concentrated high the is is than single-digit represents generally

funds As of the a the in valuation half returns. a funds. on of in to The X early on negative tailwind across of million a the lower increase from the XXXX, market $X notable have the quarter from report of an so based year. investment in first of commercial is net future. factors $XX for potential we we the due see I into level CMLs expect million net million we income QX income the to half investments adjustments mentioned, investment This valuations loan previously are some Right insight $XX now, mortgage lag, and second

expect result, we a to averages historical remain full year basis. As on CML income below a

We XXXX. improvement expect further in

reserve added premiums reported XX months. million past to written XX from year, ratio on to release Turning to points to year including Casualty, favorable million, ago. ratio over year $XXX over The prior accident over claims $X.X reserve The XXXX. Catastrophe of improved increases compared nearly implemented primarily related development. auto the damage points segment a to business the XX% primarily almost of points the year losses $XX X.X is XX combined net reported performance. Property physical million of combined points XX & XXX.X prior premium rose

year that of before second our have half cat for accounts about We full load. typically quarter mentioned

losses levels the quarter The activity. In points above Second year. over convective which prior net with This industry, were of improved primarily of XX% consistent prior historic XX-year broader year, actions. $XXX severe storm of and written X-year premiums our over averages. is ratio auto, XX.X% million combined experienced record XX on rate increased

loss at year, averages. a cost severity trends XX%. million, combined substantial The net quarterly over unfavorable in Despite XX.X% of below increase $XX XX% saw to premiums, policyholder losses were elevated ratio the our remains premiums year. higher Frequency our were that retention Policyholder quarter. strong a terms cat In at retention historical prior favorable written prior reflected remains but compared flat trends, on basis, we property, despite but year-to-date. strong rate increases. In was

Looking to half million to to adjust we P&C million ahead year, slightly full cat guidance primarily costs. on $XX the first for narrowed our to $XX range higher earnings results,

We segment a profit to XXXX. in expect continue to underwriting reach

Turning the by to to Retirement X% loan higher XX% In deposits $XX funds credited. our business, Core increased on products due platform, commercial accounts retirement of Advantage Life in mutual year prior income surpassed our fee-based core & XXX(b) and million on mortgage lower-than-anticipated $XX,XXX. were Retirement. below interest and year-to-date fund our have earnings

year. products Marita prior to Annualized value costs at important As over retirement point market. were and a proposition, year XX%. our education of the comparable mentioned, sales for the Horace to increased strong persistency quarter Mann's XX% remains the entry prior life an are about cornerstone Mortality

outlook, investment lower income segment earnings of to commercial funds. year range & to have full to down mortgage million expected to related the adjusted For we million Life Retirement loan a the $XX due net $XX

investment were the by in were and million a benefits slightly down ratio & lower from year, segment, benefits target worksite, above worksite income the was on Supplemental XX% of toward XX% trending charges basis. line. were blended Sales Benefits mostly sequential prior earned on utilization. the Group below Premiums $XX year $XX million, to net of Turning our prior prior of year. The contract policyholder earnings direct higher XX% on XX% but up and strength of

volume. Our up were employer-sponsored our well, quarter group second broader sales light benefits the like as industry, but has sales generally

to to of Supplemental of lower range Benefits year, & to segment is the first in full $XX mostly adjusted we which million, have our benefits utilization due For earnings the Group the up an $XX million half year.

to originally While the we we continue to pace than expect utilization will slower levels, pre-pandemic anticipated. return is

of and As we the targeted in half creation. dividends about annually. value in our is At the of segments, capable capital across to Horace back year, excess the million pay what we continue above shareholder shareholder move profitability generating we interest $XX Mann expense long-term into prioritize

growth. Our first profitable remains priority on funding

we have we Second, XX are shareholder increasing dividend committed annual as past years. for to the the

we X, Year-to-date, Third, a August $X.X of through shares million. cost repurchased back conditions shares buy market when we have XXX,XXX favorable. at are opportunistically approximately

million current on sheet, repurchase across share target line strong Mann clear solid our $XX growth balance profitability Horace has to authorization. In about of remaining closing, momentum. and a sight segments, our have We a

we With we're questions. well return equity XXXX. expand a pieces in market these Thank positioned share in and our for you. Operator, XX% place, are shareholder to ready achieve on

come Instructions] will KBW. with from our Shields question [Operator And Meyer first

question by accident guess have the we because increase on pace trends, increase through, the add think rate bit I opposed frequency based probably severity what little expected a more the hoping was that when ask year to to auto you on the rate wanted had. rate improve at, could was decelerating of issue seems in talk or going I you it little than I that. what's look earned it's be guess, could I hoping I loss underlying a would I ratio to detail to Bret's earned I and comments, a of there.

look accident bit at that the take XXXX. quarter When a Mark. frequency question. to frequency, was elevated in compared Sure, is Meyer. I'll we the This auto

little I this of later primarily across was much that bit a the it's year. spring to country fact think attributable the break

would second leaked of normally some as first quarter. So what accident in quarter the into frequency the come

niche. But by of year a have at And are if in exacerbated think half our little first down. I frequency we look much accident the the educator that's year-over-year. severity, bit if coverages we that the flat you at look metal is fact aggregate, definitely coming pretty the

year, see single of to I we much somewhat trends think expected. in mid-to pretty auto But where half on continue and the the dead of to social we the kind the loss is [ over bodily in XXXX, UM what high first side digits, which they were costs function a inflation. in of about aggregate, continued for ], the X% injury on

Okay. the the -- see delta the filed abate? helpful. we rate on That's between on very liability as side, guess that changing damage question or physical the follow-up and a trends physical I the that. guess, Is filed damage the side I is metal on increases side

think about more see likely next profitability type mean, changes, board, year most primarily more of coverages. material we as we rate closely get and yet. now, I inflationary I the differences our kind get are rate it of with of you'll all across feel But up, think underlying match Meyer, across will, There been differences, you to some it trajectory the think, much coverage into but strong and but inflation. as I right I has our not

pipes, year's yes. Certainly, into as the data this gets worked

Meyer. ahead, Go

way the portfolio? back ask to estate of duration is timeline of par, the mark-to-market the A the real maybe accreting to guess, I right

Sure, is Ryan. Meyer. This

of We little and some of investor mortgage X/X a the see you about the months. asking presentation mature the slides you're this think going recovery unrealized. timeline And more we can of detail commercial next quarter. will see think about put on It's XX over that the our loan portfolio the to we're that CML I on XX when portfolio XX. on in

perform between equity unrealized we net of reminder, reflects loan accounting, statistics them. And clearly, adjustment for real-time, the X that loan investment on a of XXX those that lag to continue slide put many the quarter that's fund a net and significant to you yield mortgage the out limited with The in as a method single see in yield that delta valuation income. majority, well. can you, cash of the investment adjustments. cash there's every So we've taken them, that vast portfolio, income And

So them we good that of with months, in. that there's next the X/X play will maturing over XX tailwind feel a there

Our estimate conservative. for half is second

And confident so I think you're or going we more to feel about XXXX later. of in the trajectory. see that But

Okay. for apologize I And my phone.

problem. No

our will Burdis question And with next Wilma come James. Raymond from

talk the you guys Could about you just me? -- hear can

Yes.

just expectation that of are the you cuts CML maybe interest talk the talk factored the the for Could into And valuation? assumption? rates baked that into about that's current portfolio rate just about trajectory

is Thanks This for question. Wilma. again the Ryan. Sure,

primarily close rate. is that mortgage supporting the XX% Over of the has portfolio, commercial rate inverse helped to loans, the floating puts Our floating loan XX% But on underlying underlying And the yields. it are of loans, portfolio rates properties is the on the exposure. valuation, the cash loans. certainly that cap of pressure

moderating the likely properties. numbers debt will relief on cap a move help into we tailwind for the rate As a market. environment, as underlying the real service It well as what coverage be provide estate some be will support that commercial for will rates interest

that. counting not on we're necessarily So

We of lot over properties. mature, back come the in next is confidence portfolio this unrealized have next XX a they months. the Meyer, as marks to the said X/X matures to of the lot which as -- just underlying expect we I the fundamentals of a of over And

And drove that you what could year second the continuing could developments? then favorable see And talk something about we that the into the of half Okay. is prior year?

relates Bret. This Sure, it is reserves. P&C start me to just usual, And let Wilma. as by out the as

your auto with P&C on that beginning as the the pattern, emerging actuarial we take obviously, to it our my aggregate very I remarks claims it trends withholding point, that of quarter, would a comfortable think the also was conservative specifically relates second development we And to in think in the upper the our very half we prepared remain to PYD add levels. reserve reserving, range. our in I encouraged recorded by in most stance physical damage that we're the reserves know favorable see. were the at I coverage. we that And auto

about me over So we're the turn it let the talk specifically of kind with to can that that, who about Mark -- trends more seeing.

that it set. precipitously as collision damage, mean, the those I -- And them Absolutely. claims out short-tailed thought on lines. from property are is what essentially at all when essentially the are we're the has we which closing, of and came where Yes. auto development dropped reserves finding time were severity was

trends that were time, high still more what's really and mid-to trends. And driving low end So settling as we're very in that tail the are single-digit single they're now out, digits dealing severity that at that's prior we of year development. seeing with the

right on So a of that we're very have level we numbers. confidence these high

we Yes. favorable, to I going second in to guarantee year. say and I the we where it this as described, trends sit to would won't, here I continue that we're we're that. But we the half will would trends can't development. But currently can't not surprise what's the Mark have if just would seeing. feel we be And or this, at me just that But of good happen do about and say if very

year maybe in. and and talk quarter. as little bit talk came in But more normalize. just operations higher about share 'XX if Cat were you Could even the a just one that maybe I what could could about repurchases? And sneak second see the P&C half of bit we in They a line. the in

to let we one repurchase Ryan, is piece details. Yes. share want Ryan through it? very just management But go capital a thoughtful of as the you say, I'll always strategy. take

Sure. Thanks for the question, Wilma.

capital of to and returning on of interest production top about XXXX, line As compelling a the to sight target we million dividend. into a expense pretty excess and in have $XX that clear translates of that's profitability

to that of got X% we've profitable over one, Our priorities number annually past and We've management are, capital yield, bit two, growth. over Number the XX dividend to that dividend. a the fund increased support right years. now

buybacks continue in Like to target price $X.X we approach will we to have back line shares and clearly clear we I of We undervalued. million to excess profitability. been basis, And has Our confident capital our production yesterday, said, year-to-date feel an sight average capabilities. at opportunistic be. a on through historically are of And a bought feel $XX.XX.

So pretty opportunistic approach to what undervalued we stock feel is price. an

Instructions] conclude over for no question-and-answer Dawal [Operator with closing to And like further conference this the Brendan I'd our session. questions, will turn to back any remarks.

if to like Please and reach questions today. day. Thank are additional for any We'd joining our thank have you. there you call great a out

conference presentation. now Thank for today's has concluded. you attending The

lines. disconnect now may your You