• Core Earnings: $31.3 million or $0.76 per diluted share, a 73% increase over prior year.
• Revenue Growth: Up 9% year-over-year.
• Auto Sales Increase: 24% increase in auto sales.
• Life Sales Increase: 14% increase in life sales.
• 403 B Deposits: Up 9% over prior year.
• Property and Casualty Combined Ratio: 97.9%, a 19-point improvement over prior year.
• Catastrophe Losses: $34 million, including $22.5 million from Hurricane Helene.
• Underlying Loss Ratio - Auto: 71.5%, an 8.2-point improvement over prior year.
• Underlying Loss Ratio - Property: 41.4%, a 20.4-point improvement over prior year.
• Net Written Premiums - Property and Casualty: $212 million, a 13% increase over prior year.
• Net Written Premiums - Auto: $129 million, a 9% increase over prior year.
• Net Written Premiums - Property: $83 million, an 18% increase over prior year.
• Policyholder Retention - Auto: 86.6%.
• Policyholder Retention - Property: 90.1%.
• Life and Retirement Core Earnings: $14.8 million.
• Supplemental and Group Benefits Core Earnings: $14.8 million, a 6% decrease.
• Total Net Investment Income: $113 million, down 5% year-over-year.
• Core Fixed Income New Money Yield: 5.48%.
• Commercial Mortgage Loan Fund Contribution: $9.9 million to net investment income in the quarter.
• Share Repurchase: 256,000 shares repurchased at a total cost of $8.5 million.
• Annualized Return on Equity: 8.4%, a 3.4-point improvement over prior year.

• Warning! GuruFocus has detected 5 Warning Signs with GIFI.

Release Date: November 05, 2024

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 73% increase in third-quarter core earnings per diluted share, reaching $0.76, aligning with mid-year guidance.
• Revenues increased by 9%, with double-digit sales growth in auto, life, and individual supplemental lines.
• The company achieved significant improvements in underlying loss ratios for both auto and property segments, with an 8.2 point and 20.4 point improvement, respectively.
• Horace Mann Educators Corp (NYSE:HMN) maintained strong policyholder retention rates in both auto (86.6%) and property (90.1%) segments despite significant rate actions.
• The company continues to expand its agency force and digital capabilities, resulting in a 50% increase in online quote activity.

Negative Points

• Hurricane Helene caused $22.5 million in damages, adding 12 points to the combined ratio, although the company remained profitable.
• The life and retirement segment saw a decrease in core earnings due to lower net interest margins.
• The supplemental and group benefits segment experienced a 6% decrease in core earnings due to a higher blended benefits ratio.
• Net investment income declined by 5% in the third quarter, with limited partnership portfolio income negatively impacted by some equity-related funds.
• The company faces challenges in maintaining growth in the employer-sponsored benefits segment due to variability in case sizes.

Q & A Highlights

Q: Can you explain the core loss ratio within personal auto, given the strong reserve releases and moderating loss trends? A: Marita Zuraitis, CEO, explained that the prior year development trends in injury lines from 2022 and prior were favorable, leading to reserve releases. Ryan Greenier, CFO, added that auto saw an $8 million reserve release due to lower than expected severity in claims. The company is on track with rate adequacy, although slightly behind larger competitors in the auto line.

Q: How do you expect the trend in variable annuities versus fixed and indexed annuities to play out over time? A: Ryan Greenier, CFO, noted that the mix of business in the 403 B and annuity space remains consistent, with a preference for lower-risk fixed and fixed index products among their educator demographic. Variable annuities are simple asset accumulation tools without living benefits, leading to consistent retention and asset accumulation.

Q: What growth opportunities do you see in the educator and adjacent markets as you approach rate adequacy? A: Marita Zuraitis, CEO, highlighted strong agent productivity, increased web traffic, and digital tools as drivers for growth. Mark Desrochers, SVP, added that despite competitive pressures, close rates remain strong, and investments in distribution and digital leads are expected to maintain and increase growth.

Q: Can you discuss the stabilization in commercial loan income and expectations for future marks? A: Ryan Greenier, CFO, mentioned early signs of stabilization in commercial mortgage loan income, with a 6.4% annualized quarterly return. While there is still some drag from unrealized losses, the company is optimistic about future stabilization but remains cautious about predicting exact outcomes.

Q: How are you approaching share repurchases given the current catastrophe results? A: Ryan Greenier, CFO, stated that the company is committed to growth, a compelling dividend, and opportunistic share buybacks. With a clear line of sight to sustainable double-digit ROEs in 2025, the company is comfortable using buybacks as a lever when market conditions are favorable.

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