• Core Earnings: Record fourth quarter core earnings of $1.62 per share, a 93% increase over prior year; full year 2024 core EPS of $3.18, more than double 2023 earnings.
• Core Return on Equity: 8.8%, a 4.5-point improvement over 2023.
• Combined Ratio: Full year property and casualty combined ratio of 98%, a 15-point improvement over prior year.
• Premiums and Contract Deposits: Increased 8% over prior year; PNC net premiums earned increased 14%.
• Net Investment Income: Increased due to strong core fixed income returns; commercial mortgage loan fund portfolio contributed $17 million in the second half.
• 2025 Guidance: Core earnings expected in the range of $3.60 to $3.90 per share; shareholder return on equity of at least 10%.
• Net Written Premiums: Property and casualty net written premiums of $779.3 million, a 13.9% increase over prior year.
• Catastrophe Losses: Estimated at $90 million for 2025, about 11% of net earned premium.
• Life and Retirement Core Earnings: $56.3 million, below prior year due to lower net interest margins.
• Supplemental and Group Benefits Core Earnings: $60.4 million, a 10% increase over prior year.
• Adjusted Book Value: $37.54 at year end 2024.
• Share Repurchase: 256,000 shares repurchased at a total cost of $8.5 million.

Release Date: February 06, 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 record fourth quarter core earnings of $1.62 per share, a 93% increase over the prior year.
• The company achieved a full year 2024 core EPS of $3.18, more than double the 2023 earnings.
• Property and casualty segment showed significant improvement with a full year combined ratio of 98%, a 15-point improvement over the prior year.
• Net investment income increased due to strong core fixed income returns, benefiting from the higher interest rate environment.
• The company is guiding 2025 core earnings within the range of $3.60 to $3.90 per share, with a shareholder return on equity of at least 10%.

Negative Points

• The company faced estimated direct policyholder losses from the California wildfires in the range of $5 million to $10 million.
• Full year 2024 catastrophe losses were $94.9 million, representing a 12.8-point impact on the combined ratio.
• Life and retirement segment core earnings were below the prior year, primarily due to lower net interest margins.
• The net interest spread on the fixed annuity business declined, reflecting lower commercial mortgage loan fund returns.
• The company recorded $18 million of reserves and $2 million of expenses pre-tax related to legacy commercial exposures.

Q & A Highlights

Q: Could you talk a little bit about what gives you confidence in the CML returns improving and the potential drag on the 2025 EPS guide based on those lower returns? A: Ryan Greenier, Executive Vice President and CFO, explained that they are at an inflection point with CMLs and confident about the portfolio's direction. The broad-based valuation adjustments that impacted returns in the first half of 2024 have largely abated. The economy remains strong, with values increasing for industrial properties and multi-family sectors. They have a 6.25% assumption for 2025, and while they expect improvement, they don't anticipate recovering all adjustments in 2025.

Q: Can you discuss the CAP losses of $90 million for 2025 and how much that changed from business growth versus CAP mitigation efforts? A: Ryan Greenier noted that CAP losses are slightly down from 2024, with exposure-adjusted numbers reflecting usual adjustments for changes in exposures and planned actions. Marita Zuraitis, CEO, added that they feel confident about their property underwriting and mitigation efforts, which are reflected in the 2025 numbers.

Q: How are you planning to execute growth across different lines of business? A: Marita Zuraitis highlighted that they are excited to share more details during their Investor Day in May. They have been focusing on demonstrating the earnings power of their multi-line model and are confident in their growth capabilities. Despite competitive dynamics, they believe they can continue to grow the business with the tools and capabilities they are building.

Q: With industry pricing approaching rate adequacy, does this change the strategic focus on reducing earnings volatility, particularly in property? A: Marita Zuraitis emphasized their long-standing focus on educators, which helps them navigate cycles and maintain strong retention. They do not focus on selling at the lowest price but understand competitive dynamics. Mark Desrochers, SVP, added that they offer a holistic product suite and manage volatility through thoughtful product offerings and partnerships.

Q: Any updates on changes to deductibles and roof schedules and their impact on the business? A: Mark Desrochers noted that they are seeing positive impacts from shifts in wind and hail deductibles and roof schedules, particularly in states with significant roof losses. They have also experienced lighter weather and improved claims processes, contributing to favorable reserve development.

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