Transcript: Horace Mann Educators Q2 2026 Earnings Conference Call

Horace Mann Educators (NYSE: HMN ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. This content is powered APIs. 8%.

90 per share, citing strong operating performance and confidence in its long-term strategy. Property and casualty combined ratio improved by seven points, and total revenues increased by 8%, driven by strong growth in Individual Supplemental and Group Benefits. Strategic initiatives include enhancing product offerings, expanding distribution capabilities, and strengthening relationships with educators and school districts. Management highlighted successful investments in recruiting and training agents, leading to expanded distribution and increased life sales.

Acquisitions announced in July are expected to be accretive to earnings per share starting in 2027, contributing to return on equity accretion. Net investment income guidance was adjusted due to lower expected returns on certain alternative strategies amid a high-interest-rate environment. The company continues to maintain a strong balance sheet and return capital to shareholders through dividends and share repurchases. Full Transcript OPERATOR Good day and welcome to the Horace Mann Educators second quarter 2026 investor call.

All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.

To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Rachael Luber, Vice President, Investor Relations. Please go ahead.

Rachael Luber, Vice President Investor Relations & Corporate FP&A Thank you. Welcome to Horace Mann's discussion of our second quarter 2026 results. Yesterday we issued our earnings release, Investor Supplement and investor presentation. Copies are available on the Investors page of our website.

Our speakers today are Marita Zuraitis, President and Chief Executive Officer, and Ryan E Greenier, Executive Vice President and Chief Financial Officer. Before turning it over to Marita, I want to note that our presentation today includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The company cautions investors that any forward-looking statements include risks and uncertainties and are not guarantees of future performance. These forward-looking statements are based on management's current expectations and we assume no obligation to update them.

Actual results may differ materially due to a variety of factors which are described in our news release and SEC filings. In our prepared remarks we used some non-GAAP measures. Reconciliations of these measures to the most comparable GAAP measures are available in our Investor Supplement. I'll now turn the call over to Marita.

Marita Zuraitis, President and Chief Executive Officer Thanks, Rachael, and good morning, everyone. 17 per share, an increase of more than 10% over prior year. 8%. These results reflect continued strong operating performance across our diversified business and demonstrate the progress we're making against the long-term strategy we outlined at Investor Day.

Our diversified business model continues to prove its value across a variety of economic and industry conditions. The investments we've made to strengthen our portfolio, improve execution and expand our distribution capabilities are translating into consistent operating performance and keep us on track to deliver our three-year financial objectives. 90 per share.

This morning I'll discuss the operating momentum we're seeing across the business, the progress we're making to strengthen relationships with educators, school districts and other employers, and why we remain confident in our long-term strategy to continue delivering sustainable, profitable growth and long-term shareholder value. Turning to operating performance, the strength of our second quarter results reflects disciplined execution across the business. Property and casualty continued to perform well during the quarter.

The property and casualty combined ratio improved seven points from the prior year period, reflecting the rate and non-rate actions we've taken over the past several years together with generally favorable weather conditions and lower catastrophe losses. At the same time, Life and Retirement and Individual Supplemental and Group Benefits continued to generate attractive returns and further diversify our earnings profile. Those results are supported by continued growth across the enterprise, reflecting the investments we've made to strengthen both our product offerings and our distribution capabilities. Total revenues increased 8% over the prior year.

Quarter sales were particularly strong in Individual Supplemental and Group Benefits, up 44%, and in Life, up 20%. The momentum we're seeing reflects the deliberate investments we've made in two areas. First, we continue to enhance our portfolio with products and solutions that address evolving customer and employer needs, and second, we're making it easier for customers to access those solutions by investing in our distribution capabilities, technology and agent development. In Individual Supplemental, our newest generation of cancer coverage continues to generate strong sales as it addresses the evolving protection needs of our customers.

In Group Benefits, the paid family and medical leave enhancement we introduced alongside our short-term disability offering earlier this year continues to support strong employer demand and continues to be an important driver of new business. We're also seeing the benefits of our investments in distribution. Through continued investments in recruiting, training and coaching, we've strengthened our agency force and are helping new agents become successful more quickly. Those investments are expanding our distribution capacity, supporting profitable growth and contributing to the continued momentum we're seeing in life sales.

The benefits of these investments extend across our business. In Property and Casualty, we continue to pursue profitable growth by focusing on markets and customer segments where we believe we can earn attractive long-term returns. We're encouraged by the momentum we're seeing as we continue to grow customer relationships while maintaining the disciplined approach that supports our long-term strategy. Our approach to the auto market reflects the broader philosophy that extends across Horace Mann.

We measure success by the strength and longevity of our customer relationships, not simply by quarterly sales or individual policy growth. Our relationships continue to be one of our greatest competitive advantages. Auto household retention remains steady near 84% during the quarter, while customer retention across our other businesses remains near or above 90%. Those results reflect the trust our customers place in Horace Mann and the value they see in the solutions we provide.

Our relationships are built on a deep understanding of the educator community and a commitment to helping educators succeed both in and outside of the classroom. We continue to invest in resources and solutions that strengthen our connections with educators while creating long-term value for our shareholders. We're continuing to expand how we connect with educators. Online quoting activity increased nearly 10% over prior year and we continue to grow our points of distribution, creating more opportunities to introduce educators to Horace Mann and the solutions we provide throughout their careers.

We're also expanding our reach through partnerships that allow us to meet educators where they are. Through our partnership with Crayola and the Disney Institute, thousands of educators have now completed professional development programs sponsored by Horace Mann. More recently, we announced a new relationship with the Women's Professional Baseball League to create unique experiences for educators, support women's sports, and celebrate the league's inaugural season. We're also proud to have established the first Horace Mann Educator Excellence Award Endowment in partnership with the Smithsonian Institution.

This permanent endowment recognizes and celebrates outstanding educators while reinforcing Horace Mann's long-standing commitment to the profession we have served for more than 80 years. Our support of educators extends well beyond insurance products. During Teacher Appreciation Month in May, we celebrated educators nationwide through a variety of recognition and community initiatives. As students return to the classroom this fall, our annual Back to School campaign will once again provide educators with resources, classroom support and opportunities to engage with Horace Mann both locally through our agents and nationally through our partnerships and digital channels.

The result is a business model built on trusted solutions rather than transactions. Today, more than one third of educators nationwide recognize the Horace Mann brand. That growing awareness strengthens customer acquisition, reinforces long-term relationships, and positions us to continue serving more customers with more solutions over time. Before I turn the call over to Ryan, I want to briefly reiterate one point.

Today's guidance increase is entirely the result of the strong operating performance and disciplined execution we've discussed this morning. The progress we've discussed today reinforces our confidence in the strategy we outlined at our Investor Day. We remain focused on delivering our long-term financial objectives of a 10% compound annual growth rate in core earnings per share and a sustainable shareholder return on equity of 12% to 13%. Our recently announced acquisitions further strengthen that strategy, expanding our ability to serve more customers and reinforcing our confidence in achieving those long-term financial objectives.

Our strategy is delivering results today while positioning Horace Mann for continued success tomorrow. We're serving more educators and employers, solving more customer needs over time, and building stronger, long-lasting customer relationships. Together, those advantages position us to continue delivering sustained, profitable growth and long-term value to our shareholders. Thank you.

And with that, I'll turn the call over to Ryan. Ryan E Greenier, Chief Financial Officer Thanks, Marita. We've had a strong first half of 2026. 90 per share.

In updating our outlook for the balance of the year, we've also revised several key assumptions that underpin our guidance. Compared to our prior outlook, we've reduced our full-year catastrophe loss assumption, lowered our net investment income expectations, and increased our individual supplemental and group benefits blended benefit ratio assumption to reflect the continued strong growth momentum we're seeing across that segment.

Our updated guidance assumes approximately $75 million of catastrophe losses for the full year, total net investment income in the range of 465 to 475 million, with managed portfolio income of 365 to 375 million, an individual supplemental and group benefits blended benefit ratio of approximately 42%, and interest expense and other corporate items of 35 to 40 million. As always, our guidance reflects what we believe is a balanced view of the trends that we are seeing across the business and our expectations for the remainder of the year. I'll provide additional context across each of those assumptions as I discuss our segment results.

Before turning to the quarterly results, I'd like to briefly address the acquisitions we announced in July. The transactions are progressing as planned, our expectations remain unchanged, and we have no additional updates to share at this time. The transactions are not reflected in our updated 2026 guidance as we do not expect a meaningful impact to earnings this year given our expectations for closing dates. During our announcement call, we referenced a six- to seven-year tangible book value payback period.

That metric reflects the standalone economics of the acquired businesses under the standard tangible book value dilution methodology. Importantly, the ongoing earnings generation of the combined company is expected to replenish the reduction in book value associated with the transactions within approximately one year following closing. This clarification does not change the economics of the transaction. Beginning in 2027, we continue to expect the transactions to be immediately accretive to earnings per share and contribute approximately 100 basis points of return on equity accretion.

Now let me turn to the quarterly results and the key drivers of our performance. In property and casualty, core earnings increased 56% year over year to 26 million. 6, reflecting favorable weather, lower catastrophe losses, favorable prior-year reserve development, and the continued benefits of disciplined underwriting actions. Favorable prior-year reserve development totaled 7 million, including $5 million in property and 2 million in auto, primarily reflecting lower-than-expected claim severity.

Underlying loss trends were generally favorable during the quarter. In auto, frequency trends were favorable, reflecting both the rate and non-rate actions we've taken over the past years as well as broader trends affecting the personal auto industry. We continue to closely monitor the underlying drivers of those trends, including business mix, geographic exposure, weather patterns, and driving behavior, and our outlook for the remainder of the year reflects what we believe is a balanced view of those underlying trends.

As we've discussed in our updated guidance assumptions, we've reduced our full-year catastrophe loss expectation from approximately 90 million to 75 million based on our first-half experience. At the same time, our outlook for P&C for the remainder of the year continues to reflect a balanced view of underlying loss trends and the normal variability, including seasonality, that we expect over the course of the year. From a premium standpoint, net written premiums were essentially flat at 212 million. Property premiums increased 6%, reflecting higher average premiums.

With continued positive sales trends in auto, our approach to growth remains disciplined. We continue to prioritize profitable growth over volume, focusing on markets where we see attractive long-term opportunities while maintaining our underwriting standards. Overall, the quarter reflects the continued progress we've made in strengthening the profitability and quality of our P&C portfolio. Those improvements are the result of actions we've taken over the past several years and continue to support our confidence in the long-term earnings potential of the business.

Turning to life and retirement, core earnings were 17 million. Life sales increased 20% over the prior-year quarter, reflecting the continued success of the investments we've made in agent recruiting and productivity. Persistency remains strong at approximately 96%. In retirement, contract deposits were modestly lower year over year, primarily reflecting product mix and market conditions, while fee income and strong persistency continue to support stable earnings.

We continue to view the underlying fundamentals of the life and retirement business as strong, and the segment remains well positioned to support our long-term growth objectives. Turning to individual supplemental and group benefits, the momentum we've seen over the past several quarters continued. This segment generated another excellent quarter with continued demand across both individual supplemental and group benefits while continuing to produce consistently strong returns. Individual supplemental continued to perform well during the quarter.

Sales increased 5%, reflecting continued demand for our enhanced cancer product, while persistency remains strong at approximately 89%. Group benefits also delivered another strong sales quarter driven by continued employer demand for our paid family and medical leave enhancement introduced earlier this year. As I mentioned earlier, we've increased our full-year blended benefit ratio expectation to approximately 42%. That change reflects the continued strong growth of the segment and the increasing contribution of paid family and medical leave to our overall business mix.

As with many newer insurance products, we expect a period of elevated utilization as newly covered employees begin accessing benefits available to them. That first-year experience has been contemplated in our pricing and long-term return expectations from the outset.