HMN

LLM Evaluations

Transcript Summary

Horace Mann Educators Corporation reported record Q1 2026 core EPS of $1.28, a 20% year-over-year increase, with a core ROE of 12.7%. The Property and Casualty segment delivered a strong 83.3% combined ratio, driven by disciplined underwriting and lower catastrophe losses. A standout performance in the Supplemental and Group Benefits segment saw group sales triple to $11 million, fueled by new paid family medical leave offerings. Life sales increased 17%, and the Retirement segment provided stable earnings as a core ballast for the company. Brand awareness among the target educator market rose to 35% following successful partnerships with Disney and Crayola. Management maintained their 2026 core EPS guidance of $4.20 to $4.50, expressing confidence in their 10% EPS growth target. Capital management remains a priority, with the company increasing its dividend for the 18th consecutive year and repurchasing $18 million in shares during the quarter. Despite regulatory headwinds in California's auto market and slight pressure on annuity spreads from commercial mortgage loans, the company's diversified model continues to drive profitable growth and strong educator household acquisition.

5-year share-count history (top 10 holders by peak, incl. exited) + price

Revenue Segments

Filing Risk Scores

Horace Mann Educators: Liquidity Constraints and Reinsurance Concentration Masked by Favorable Reserve Development

Full Earnings Call Transcript — Q1 • 2026-05-07

Operator: Good morning, and welcome to the Horace Mann Educators Corporation First Quarter 2026 Results Conference Call. Participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Rachael Luber. Thank you, and over to you.
Rachael Luber: Thank you. Welcome to Horace Mann Educators Corporation’s discussion of our first 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 Greenier, Executive Vice President and Chief Financial Officer. Before turning it over to Marita Zuraitis, 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; 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 use some non-GAAP measures. Reconciliations of these measures to the most comparable GAAP measures are available in our investor supplement. Now I will turn the call over to Marita Zuraitis.
Marita Zuraitis: Thanks, Rachael Luber, and good morning, everyone. Yesterday Horace Mann Educators Corporation reported record first quarter core earnings per share of $1.28, 20% above the record level of the first quarter earnings we reported last year. Insurance and fee-based revenue increased 6% year over year, reflecting growth across our businesses. Life sales were up 17%, individual supplemental increased 11%, and group benefits delivered a record quarter with sales more than tripling year over year. Core shareholder return on equity for the trailing twelve months was 12.7%. These results highlight the strength of our multiline business model and our ability to deliver consistent, profitable growth across a range of economic and industry conditions. We are maintaining our 2026 core EPS guidance of $4.20 to $4.50 and remain confident in achieving our three-year strategic goal of a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% shareholder return on equity. Today, I will discuss the highlights of the quarter and provide an update on our growth progress. Let us start with segment results. Property and Casualty profitability remained strong. The combined ratio of 83.3%, a five-point improvement over the prior year, reflects lower catastrophe costs and improved underlying performance. P&C written premiums increased 5%, and auto and property policyholder retention remained stable and consistently high relative to industry benchmarks. Segment sales reflect our disciplined focus on profitable growth in a competitive auto market. We are prioritizing growth in markets where we see the strongest returns. Excluding California, which remains a more complex and highly regulated market for the industry, auto sales increased at a high single-digit rate. Countrywide, property sales increased 11%. In Life and Retirement, core earnings increased 16% year over year, benefiting from lower mortality costs. Life sales increased 17%, and persistency across both life and retirement remains strong. The Individual Supplemental and Group Benefits segment continued to deliver strong growth this quarter. We continue to invest where we see meaningful long-term opportunity. Our approach is to build internally where we can deliver a differentiated, best-in-class experience and to partner with leading third parties where it enhances our capabilities and speed to market. In individual supplemental, we are investing in our distribution and product portfolio to support growth. Our enhanced cancer product continues to be a key driver of growth, with sales doubling year over year and building on record performance last year. Across all products, individual supplemental sales increased 11% year over year. This high-margin, high-persistency business also supports strong cross-sell opportunities. Life is a natural adjacency for benefits specialists selling individual supplemental products, and today, approximately 10% of our life sales are consistently generated through that channel. In Group Benefits, we are leveraging partnerships to expand our capabilities, including the recent implementation of a third-party technology platform that supports a fully integrated, end-to-end leave management experience for employers and educators. This investment underpins our paid family medical leave enhancement to our short-term disability offering introduced earlier this year in Minnesota. We will evaluate opportunities to expand these capabilities into additional markets over time as adoption continues to grow. Thirteen states have enacted paid leave mandates, with more proposals currently under consideration. Employers offering paid leave benefits report higher retention, a key priority for school administrators. Consistent with this, our research shows that one quarter of educators would be more likely to stay in their role with improved healthcare and protection benefits. Against this backdrop, Group Benefits sales more than tripled year over year to $11 million. While results can vary from quarter to quarter given the size and timing of our business, our first quarter sales nearly matched our total Group Benefits sales for all of 2025, highlighting the momentum we are building. Our corporate expense ratio is up slightly over the prior year but down sequentially. We manage our expenses closely and continue to expect a 25 basis point reduction over the course of 2026. Turning to how we are expanding our relationships across the educator market, we are reaching more educators than ever before and continuing to build meaningful relationships across our target market. As we have noted, unaided brand awareness among educators has increased to 35%, reflecting the impact of our investments over the past several years. We are building both awareness and affinity through partnerships with well-known, trusted national brands and educational institutions. In January, we sponsored Crayola Creativity Week, reaching more than 1 million educators through classroom and professional development activities. We are also excited about our new partnership with Disney. We recently launched a continuing education program, A Heart for Service and Education, developed in collaboration with Disney and delivered through the Disney Institute, with multiple sessions scheduled throughout the year. Each session brings together educators from across the country to participate in immersive, service-focused development experiences. We are seeing strong early engagement with the Horace Mann Educators Corporation Club, our centralized platform providing financial wellness tools, classroom resources, and educator benefits. Since launching earlier this year, thousands of educators across the country have already enrolled. We are also in the midst of Teacher Appreciation Month, where we continue to connect with educators through our Beyond Greet campaign. Last year, we engaged 55 thousand new educators during this event and expect another strong outcome this year. In addition, we have expanded our digital reach through targeted audio campaigns on platforms like Spotify and Apple Music, meeting educators where they are. Over the past year, we have grown our points of distribution by eight and continue to enhance the effectiveness of our marketing efforts as we scale these initiatives. Before I turn the call over to Ryan Greenier, I want to underscore our commitment to disciplined capital management and long-term shareholder value. In March, our Board of Directors approved a 3% increase to our quarterly shareholder dividend, marking the eighteenth consecutive year of dividend growth. In the quarter, we returned $33 million of capital to shareholders, including $18 million of share repurchases, a significant increase relative to recent periods. As we have said before, our highest priority remains investing in profitable growth, and we remain confident in our ability to continue creating long-term value for our shareholders. In closing, our strong start to the year reflects solid underlying performance and continued momentum across the business. We are investing where we see the most attractive returns and where it strengthens our ability to deliver a best-in-class experience for our customers, while maintaining expense discipline and executing against our strategy. We remain confident in achieving our three-year strategic goals of a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% shareholder return on equity. Thank you. And now I will turn the call over to Ryan Greenier. Thanks, Marita Zuraitis. I will focus on a few key takeaways from the quarter and provide some additional context on what is driving the results.
Ryan Greenier: This was a very strong start to the year. We delivered record first quarter core earnings of $53 million, or $1.28 per share, up 20% year over year, with solid underlying performance across the business, continued margin improvement in P&C, and continued growth in our higher-return segments. Core shareholder return on equity for the trailing twelve months was 12.7%. Overall, results are tracking in line with our expectations for the year, and we are not making any changes to our outlook. Turning to results by segment. In Property and Casualty, core earnings were $39 million, up 46% year over year. The reported combined ratio of 83.3 points improved five points year over year, reflecting lower catastrophe costs and improved underlying results. The $5 million in prior-year development included $2 million in property and $3 million in auto, primarily driven by lower-than-expected claim severity, with claims settling below prior reserve expectations. From a premium standpoint, net written premiums increased 5% to $194 million, primarily reflecting higher average premium. In property, premiums were up 14%, while auto premiums were essentially flat, reflecting a shift in mix toward targeted growth markets. That is consistent with the approach Marita Zuraitis outlined: prioritizing profitability and focusing growth in markets where we see the strongest returns. Auto profitability improved, with the combined ratio at 89.2%, reflecting strong underlying performance, and retention remained strong. Property also performed well, with a combined ratio of 74.3%, supported by lower catastrophe costs. While catastrophe losses and prior-year development were favorable in the quarter, we also saw improvement in underlying margins. We continue to incorporate current loss trends into our pricing and underwriting and feel well positioned given the actions we have taken over the past several quarters. In Life and Retirement, results were stable and improving. Core earnings increased 16% to $9 million, primarily driven by favorable mortality. Life sales were up 17%, with persistency remaining strong near 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. In Supplemental and Group Benefits, the story is about growth and continued investment. The segment contributed $12.6 million of core earnings, and net written premiums rose to nearly $71 million. Individual supplemental delivered another strong quarter. Our enhanced cancer product introduced last year continues to be a key driver of growth, with sales up 11% year over year. The benefit ratio of 30.5% reflects favorable policyholder utilization trends, and persistency remains above 90%. In Group Benefits, results reflect the investments we have made, including the introduction of paid family medical leave in January within our short-term disability offering in Minnesota. Premiums increased 4% to $38 million, and the benefit ratio of 51.9% moved closer to our longer-term expectations. Sales more than tripled year over year to $11 million, although results can vary quarter to quarter given the size and timing of the business. Total net investment income on the managed portfolio was relatively stable year over year. Core fixed income performance remains consistent, with some offset from the commercial mortgage loan fund and runoff that we have discussed previously, as well as limited partnership returns that were slightly below our full-year expectation. Limited partnership returns can vary quarter to quarter, and we remain confident in our full-year outlook. We continue to make progress on expense optimization, with early benefits beginning to emerge. As expected, the majority of our targeted improvement will come in later years as scale builds, but we remain on track for approximately 25 basis points of improvement in 2026. Our balance sheet remains strong, and capital generation continues to support both strategic growth initiatives and consistent shareholder returns. In the first quarter, we repurchased approximately 420 thousand shares at a total cost of $18 million, representing a meaningful increase in activity relative to recent periods, and we also returned $15 million to shareholders through dividends. We continue to prioritize investing in profitable growth while returning excess capital to shareholders. Tangible book value per share increased 9% year over year, reflecting solid earnings and disciplined capital management. Stepping back, the quarter reflects strong underlying performance, improved profitability in Property and Casualty, and continued growth momentum across our businesses. Importantly, the drivers of performance this quarter—margin improvement in P&C, stable and improving results in Life and Retirement, and growth in higher-return businesses like individual supplemental and group benefits—are all consistent with the framework we laid out at Investor Day, supported by continued progress in customer engagement and brand awareness. We continue to execute against our strategy with a focus on disciplined underwriting, profitable growth, and thoughtful capital allocation. We remain confident in our ability to deliver our three-year financial targets, including a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% return on equity. Thank you. Operator, we are ready for questions.
Operator: Thank you. We will now begin the question and answer session. We have the first question on the line of Jack Maarten from BMO Capital Markets. Please go ahead.
Jack Maarten: Hey, good morning. My first one is on the group business. I wonder if you could unpack further what is driving the strong sales growth, and I am curious over time how significant of a contributor you think the new paid family medical leave offering can be within that business.
Marita Zuraitis: Yes, thanks for the question. When we think about our supplemental growth—both individual supplemental, quite frankly, and group—it really has been a very strategic product enhancement strategy. You heard in the script that we built out our cancer product. Not only is it the new paid family leave connection to our short-term disability offering, but we also have about a 30% increase in the number of benefit specialists out there and the work that we are doing on the supplemental side. For paid family leave, I think it is just a really good example of thinking about our customer segment and what our customer segment needs. Bundling it with short-term disability was the right answer for us. As you pointed out, it has been a meaningful contributor to the sales in the quarter. But our group business is still relatively small, so we are focused on building a sustainable pipeline. It is not necessarily going to be linear; this is going to be quarter over quarter for us as we think about growth. And we thought about PFML as both defense and offense. There are about 13 states out there that have included this in their mandate. We know our educators are looking for increased benefits. We see improvement in retention when we build out these products. So defensively, in a state like Minnesota, adding that to our short-term disability offering allowed us to keep the good groups—the good schools—that we have in Minnesota. But also on the offense side, it allowed us an edge for new customer engagement, and that is how we will think about it as we think about the remaining states out there in our footprint. It may be a really good way for us to think about how we enter some new geographies as well. So it is a good example of how we think about our customer segment—building what they need. And when you build it, they will come, and that clearly is what occurred this quarter.
Ryan Greenier: And the only thing I would add is when I think about our ROE trajectory, growth in these capital-light, higher-margin products is a key component of our strategy to drive higher ROE in the future.
Jack Maarten: That is helpful, thank you. And maybe just one on the Life and Retirement business, which has thrown off healthy and stable margins over time. I am wondering about the top-line growth outlook there. It is a little bit softer this quarter. I know part of that might be lower CML and LP returns, but any trends that you are seeing on the premium and contract deposit growth in that business that we should be thinking about?
Marita Zuraitis: Yes. Ryan Greenier can cover some of the numbers, but what I would say in Life and Retirement is we are seeing a 17% increase in life sales. That is healthy. We are seeing more of our traditional agents in the game. That is also healthy. Ten percent of our life sales now, on a relatively consistent basis, is coming from benefit specialists who, at the beginning of this integration—when we brought on NTA and then later MNL—were predominantly in that individual supplemental space. Now they are selling Horace Mann Educators Corporation life products, and it is amounting to about 10% of our sales there. So it is working very well. And on the retirement side, we always talk about that as our ballast, and I would say retirement continues to be a very consistent, steady contributor to earnings.
Ryan Greenier: Yes. And if you isolate for just sales, sales were up 7% in the first quarter for retirement. We are attracting a few thousand new customers in the first quarter, opening new retirement accounts with us. So like Marita Zuraitis said, it is an important product and an important entry point for many educators to begin their relationship with us. On the bottom line, you correctly pointed out the commercial mortgage loan allocation. As a reminder, our commercial mortgage loan funds are nearly entirely held within Life and Retirement, and Retirement has a larger allocation to them. So when there is some pressure there, you are going to see that in the fixed annuity spread number, and you can see that this quarter. But overall, the business is solid, it is steady, and it is an important earnings diversification tool for us.
Jack Maarten: Thank you. And then if I could just sneak one more in on auto insurance. I think you referenced some challenges in California offset by strong sales growth in other states. Could you elaborate on what you are seeing in California and your outlook for growth there?
Marita Zuraitis: Yes, thanks for asking. When we think about auto, obviously we think about all the states that we are in. But California specifically—when you take California out of our growth numbers, like we said in the script—we are seeing high single-digit growth in auto, which in this competitive environment for us, I think, is quite strong. But California is highly regulated; it is complex, and we took an intentional, conservative approach in the state. We remain active in the state. We have been working very closely with the department, and, as we have talked about before, we have reached target profitability in all of our states except California, and California is dangerously close, if you will, to targeted profitability. We feel very confident that we will get there. But as you can imagine, when you think thoughtfully about where you place agents, where you make marketing investments, and the things you do intentionally to drive auto new business, California would not necessarily be the state in which we were making those investments. So it takes a while to ramp them back up, and we will continue to take a conservative and appropriately cautious approach to California. But we feel really good about the momentum that we are seeing in auto in this environment outside of California. California was intentional. It is a state that you need to be thoughtful and conservative in, feel good about the work with the department, and feel like we are getting close to California being like the rest of the states, where we are wide open and ready to push.
Operator: Thank you. Thank you. We have the next question from the line of Wilma Burdis from Raymond James. Please go ahead.
Wilma Jackson Burdis: Good morning. Could you talk a little bit more about how much of the good combined ratio in P&C comes from favorable claims experience and some of the variability there in the quarter, and how much is just more diligent underwriting that is going to stick around a little bit longer, especially given some others seem to be leaning aggressively in pricing? Thanks.
Ryan Greenier: Good morning, Wilma Jackson Burdis. Thanks for the question. The combined ratio improved 5.4 points this quarter and was 83.3%. Both auto and property contributed to that improvement. Stepping back, about half of that improvement was weather-related. We did not experience as severe weather activity in the first quarter, which benefited both property catastrophe and our non-catastrophe property results. But the other half reflects the disciplined rate and non-rate actions that we have deliberately taken to restore profitability and get the book back to our targets. We are seeing the benefits of the actions we have taken—whether it is terms and conditions, implementations of roof schedules, increases in deductibles, improved claims handling—that is all coming through our results. We believe that is durable and sustainable, and we are pleased with profitability in our P&C book.
Marita Zuraitis: Yes, and I would add—thanks, Ryan Greenier, that was a good layout there. On the latter half of your question, as others are powering up for growth or lower pricing, it is important to talk about how we think about this. It is a competitive market out there; shopping activity is clearly up. When others talk about powering up for growth—and we have said this before—we really do not think about it that way. We are powering up, but we are powering up the value that we are bringing to our customers. Customer engagement is up, brand recognition is up. When I think about auto—and that seems to be the basis of your question—we talk about insulated but not immune. We are not immune to the environment, but we are insulated somewhat by our strategy. Growth is not one line or one state; we think about it more broadly than that. It is about us expanding the relationships that we have with educators and increasing that educator household count. We are seeing strong results there. We mentioned that excluding California, being up mid single digits in this environment actually feels very good. We are excited about bringing more of these things to California as well. More importantly, stepping back: with Group Benefits tripling, Individual Supplemental up 11%, Life up 17%, property countrywide up 11%, and the stable ballast from Retirement, the momentum is good. So we really do not think about ramping up or ramping down; we think about increasing educator households, and that is exactly what we are doing. When you add that to the customer retention that we are seeing and how healthy it is—low to mid-90s in Life and Retirement, and Supplemental near 90% for property, a decent 84% in auto—those are pretty strong numbers, and that adds up to momentum. Our story is a little bit different from a monoline auto writer or some of the P&C-only writers you cover, but it is playing out consistently with what we laid out, and against our internal plans, we are right where we wanted to be this quarter and feel strong about the result.
Wilma Jackson Burdis: Thank you. I think you touched on this a little bit, but can you talk more about the strategy of reinvesting back into your teachers via programs and donations, and how that fits into your overall capital plans? There is a lot of pressure on classroom budgets, and it seems like you have leaned into some of these programs and donations given the good core results.
Marita Zuraitis: Thank you for the question. It is at the heart and the core of what we have always done as a company, and I am excited about how modernized that has become and the work that we have done over the past few years—new marketing leadership, building out that team. We have done all the things necessary to make sure educators know who we are, and we are pleased with the increase in brand identity and the increase in the number of educators who are engaging with us, maybe not even customers yet. When you think about good old-fashioned top-of-the-funnel marketing, for the first time in our eighty-year history, we are doing that and doing it well. We are engaging with more customers. We are partnering with like-minded companies. Our Crayola creativity assessment that we are doing—bringing creativity assessments to the classroom—engaging educators in continuing education that is fun, not just the required continuing education in their profession, is resonating. We are meeting them where they are and bringing meaningful value to those educators, with the idea that if you are an educator, you should be with the educator company. We have many ways to start that relationship, but it starts with them knowing who we are, engaging with us, and bringing them a solutions orientation, not just product, so that when they have a product decision, they are going to place that product with the educator company unless we give them a reason not to. Our agent NPS scores and our customer surveys—all the indications—are up. We feel good that when you do really good top-of-the-funnel marketing and engage with these educators, the current momentum is good and the momentum to come is good. None of that changes that we are in a competitive auto environment—we get it. But we have lots of ways to engage with these educators other than auto, and we feel good that when we do engage in auto—other than intentional plans in California that are working as well—we get our fair share. We do not win business solely on price, so we do not lose business solely on price. Our proactive retention efforts are helping on the retention side, and we feel really good about where we are.
Wilma Jackson Burdis: It makes a lot of sense. I know you touched on this a little earlier, but what are you seeing in the overall annuity spread environment, and do you think it will stabilize over the coming year?
Ryan Greenier: Thanks for your question, Wilma Jackson Burdis. This quarter is not indicative of what we would expect for our fixed annuity spread. It was 1.34% in the quarter, and we are targeting a number higher than that. For us, the core fixed income portfolio—which is the workhorse of the portfolio—is performing quite well. The core book yield is up 23 basis points year over year. Our new money yields were 5.38% for the core investment-grade fixed income portfolio. I have been impressed with the investment team’s ability to continue to find attractive investments without taking excessive risk. We are going to stick to our knitting, look for slightly better LP returns that were modestly below our expectations—they came in at 7% versus the 8% we would expect—and we will watch commercial mortgage loans carefully. I would not expect the 1.34% to repeat; I would expect it to improve from here.
Wilma Jackson Burdis: Okay. Thank you.
Operator: Thank you. We have the next question from the line of Matt Galetti from JMP Securities. Please go ahead.
Matt Galetti: Marita, I might ask you to follow on part of your last answer, specifically around auto and the environment we are in. Can you talk about how you are using the agency to help manage the environment? We can see the PIF numbers in the supplement and understand those are just on Horace Mann Educators Corporation paper. Has the agency been more active? Have you been placing more business with partners as the environment changes? Can you help us understand how you use it as a tool?
Marita Zuraitis: Yes, thanks for that, Matt. The Horace Mann Educators Corporation General Agency was started with the idea that if we had an educator customer or someone who served the community and they needed coverage that we either did not have an appetite for—think nonstandard—or a higher-valued home, and if we did not have the pricing sophistication and had no intention of building that, why send them down the road to an independent agent who, if that agent is good, is going to say, “When was the last time someone looked at your life insurance needs? Can I sell you something else?” So it was a very defensive strategy, and it has worked quite well. We are not seeing a large ramp-up in HMGA sales because of the competitive environment. Our close ratios have remained relatively consistent during this time. It is working as intended. We have said before we are a large agent of Progressive and have a good relationship with Progressive. They have a broad appetite and go well beyond our educators and others who serve the community, so they are there for us. We have other very strong partners. We have not seen a big change in the use of HMGA. It works very well for us and allows us to keep that educator household. If circumstances change and that customer is no longer nonstandard, we can pull that auto customer back. We have seen “win backs,” where we are bringing some of those customers back to the Horace Mann Educators Corporation portfolio when it makes sense and when they match our appetite. We look at that book often to do just that. I would say it is pretty consistent, as intended, and working as a good strategic lever for customer retention, which is what it was set up to be.
Matt Galetti: Great. Thank you for the color. Appreciate it.
Operator: Thank you. That was the last question. This concludes our question and answer session. I would now like to turn the conference back over to Rachael Luber for any closing remarks.
Rachael Luber: We appreciate everyone joining us on the call today, and we look forward to speaking with you. Thank you. Have a great day.
Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.