Horace Mann announces preliminary results for second-quarter and full-year 2024 guidance revision

Rhea-AI Summary

Horace Mann Educators (NYSE:HMN) has revised its full-year 2024 core EPS guidance to $2.40-$2.70, with Q2 core EPS expected at $0.18-$0.20. The revision is primarily due to lower-than-expected net investment income from valuation adjustments in commercial mortgage loan funds. Despite this, the company reports strong sales growth across multiple business lines, with P&C sales increasing over 30%.

The company narrowed its P&C segment earnings guidance to $36-$39 million, with Q2 catastrophe losses estimated at $40-$42 million pretax. The Supplemental & Group Benefits segment's full-year earnings estimate was increased to $49-$52 million due to lower-than-expected benefits utilization. Horace Mann remains confident in achieving a 10% return on equity by 2025 through its P&C restoration strategy and profitable growth initiatives.

Positive

• Double-digit sales growth in auto, property, life, worksite direct, and employer-sponsored business lines
• P&C sales increased by over 30%, providing strong momentum for back-to-school season
• $5-$6 million net Property & Casualty reserve release expected, mostly from 2023 auto claims
• Increased full-year earnings estimate for Supplemental & Group Benefits segment to $49-$52 million
• New money yields in core portfolio exceeding book yield by 163 basis points

Negative

• Revised full-year 2024 core EPS guidance down to $2.40-$2.70 from previous estimates
• Lower-than-expected net investment income, primarily from commercial mortgage loan fund portfolio adjustments
• Q2 catastrophe losses expected to be $40-$42 million pretax, or 23 points on the combined ratio
• Life & Retirement segment Q2 earnings expected to be comparable to Q1, with full-year earnings revised to $50-$56 million

Insights

Financial Analyst

Horace Mann's preliminary Q2 results and revised 2024 guidance offer a mixed picture for investors. The company's core EPS guidance reduction to $2.40 to $2.70 for 2024 is primarily due to lower-than-expected net investment income, specifically from valuation adjustments in their commercial mortgage loan fund portfolio. This highlights the potential volatility in investment income, which is a important component for insurance companies.

On the positive side, the company reports double-digit sales growth across multiple business lines, with Property & Casualty sales increasing by over 30%. This growth momentum, especially entering the back-to-school season, is encouraging for future revenue prospects. The higher interest rate environment is also benefiting their $7 billion investment portfolio, with new money yields exceeding book yield by 163 basis points.

However, investors should note the following concerns:

• Q2 catastrophe losses are expected to be between $40 million to $42 million, or approximately 23 points on the combined ratio.
• Life & Retirement segment earnings are projected to be lower than initially expected, ranging from $50 million to $56 million for the full year.
• Property & Casualty segment earnings guidance was narrowed to $36 million to $39 million.

The company's confidence in reaching a 10% return on equity by 2025 is noteworthy, but investors should closely monitor the execution of their multi-year Property & Casualty restoration strategy and the performance of their investment portfolio in the coming quarters.

Insurance Industry Expert

Horace Mann's preliminary results reveal both challenges and opportunities in the current insurance landscape. The Property & Casualty (P&C) segment shows promising signs with over 30% sales growth, indicating effective market penetration strategies and possibly competitive pricing. This growth is particularly significant given the challenging environment many P&C insurers are facing due to inflationary pressures and increased claims severity.

The expected net P&C reserve release of $5 million to $6 million in favorable prior year development, primarily from auto liability and physical damage claims, suggests prudent reserving practices. This could indicate improving underwriting performance, which is important for long-term profitability in the P&C sector.

However, the catastrophe losses of $40 million to $42 million for Q2 are significant, representing about half of the company's full-year catastrophe load. This underscores the ongoing challenge of managing climate-related risks in the property insurance business.

The Life & Retirement segment faces headwinds due to valuation adjustments in commercial mortgage loan funds. While cash returns remain stable at around 7.5%, the mark-to-market adjustments highlight the sensitivity of this segment to market fluctuations. This volatility in investment income could be a concern for investors, especially if it persists in future quarters.

The increased earnings estimate for the Supplemental & Group Benefits segment due to lower-than-expected benefits utilization is a positive development. This could indicate effective risk management or potentially a temporary trend that may normalize as healthcare utilization patterns evolve post-pandemic.

P&C profitability restoration and sales growth momentum underscore continued confidence in reaching a 10% return on equity in 2025

SPRINGFIELD, Ill.--(BUSINESS WIRE)-- Horace Mann Educators Corporation (NYSE:HMN) today announced it expects full-year 2024 core EPS in the range of $2.40 to $2.70, including second-quarter core EPS in the range of $0.18 to $0.20. The second-quarter results and full-year guidance revision is largely due to lower-than-expected net investment income, primarily from valuation adjustments in the company’s commercial mortgage loan fund portfolio.

“We continue to make progress toward our objective of a double-digit return on equity in 2025 through executing on our multi-year Property & Casualty restoration strategy and driving profitable growth across the business,” said Horace Mann President and CEO Marita Zuraitis. “In the second quarter, we saw double-digit sales growth in our auto, property, life, worksite direct and employer-sponsored business lines. Notably, P&C sales increased more than 30%, which provides strong momentum entering the back-to-school season.

“Our $7 billion investment portfolio continues to benefit from a higher interest rate environment, with new money yields in the core portfolio exceeding book yield by 163 basis points at the end of the second quarter,” Zuraitis continued. “In the first half of 2024, we recorded lower-than-expected income in the Life & Retirement segment due to mark-to-market valuation adjustments on several commercial mortgage loan funds. These valuation adjustments occur on a one-quarter lag and have not impacted cash returns, which are performing in line with expectations with cash yields of about 7.5%. However, as a result, we expect second-quarter Life & Retirement segment earnings comparable to first quarter, and full-year earnings in the range of $50 to $56 million.”

Property & Casualty segment earnings guidance was narrowed slightly to a range of $36 million to $39 million. Second-quarter catastrophe losses are expected to be between $40 million to $42 million, pretax, or approximately 23 points on the combined ratio. Second-quarter catastrophe losses typically account for about half of the company’s full-year catastrophe load.

The company expects a net Property & Casualty reserve release of $5 million to $6 million of favorable prior year development, the majority of which is related to auto liability and physical damage claims from accident year 2023.

In addition, as a result of continued lower-than-expected benefits utilization realized in the second quarter, the company has increased its full-year estimate for earnings in the Supplemental & Group Benefits segment to the range of $49 million to $52 million.

Second-quarter 2024 financial results to be announced on August 7

Horace Mann plans to release its second-quarter 2024 results on Wednesday, August 7, after the market closes. Management will host a conference call to discuss the financial results on Thursday, August 8 at 9:00 a.m. Eastern Time. Investors can access the call webcast via the Events page of the company’s investor site or by dialing 844-735-3325. For the webcast, please log on to the site several minutes in advance to register and download any required audio software. On-demand replay will be available later that day.

Safe Harbor Statement and Non-GAAP Measures

Certain statements included in this news release, including those regarding our earnings outlook, expected catastrophe losses, our investment strategies, our plans to implement additional rate actions, our plans relating to share repurchases and dividends, our efforts to enhance customer experience and expand our products and solutions to more educators, our strategies to create sustainable long-term growth and double-digit ROEs, our strategy to achieve a larger share of the education market, and other business strategies, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Horace Mann and its subsidiaries. Horace Mann cautions investors that such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond Horace Mann’s control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking statements included in this document. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in the “Risk Factors” and “Forward-Looking Information” sections included in Horace Mann’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC). The forward-looking statements herein are subject to the risk, among others, that we will be unable to execute our strategy because of market or competitive conditions or other factors. Horace Mann does not undertake to update any particular forward-looking statement included in this document if we later become aware that such statement is not likely to be achieved.

Information contained in this news release include measures which are based on methodologies other than accounting principles generally accepted in the United States of America (GAAP). Reconciliations of non-GAAP measures to the closest GAAP measures are contained in the Appendix to the Investor Supplement and additional descriptions of the non-GAAP measures are contained in the Glossary of Selected Terms included as an exhibit to Horace Mann’s SEC filings.

About Horace Mann

Horace Mann Educators Corporation is the largest multiline financial services company focused on helping America’s educators and others who serve the community achieve lifelong financial success. The company offers individual and group insurance and financial solutions tailored to the needs of the educator community. Founded by Educators for Educators^® in 1945, the company is headquartered in Springfield, Illinois. For more information, visit horacemann.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240725551786/en/

Brendan Dawal, Vice President, Investor Relations

217-670-8766 | investorrelations@horacemann.com

Source: Horace Mann Educators Corporation

FAQ

What is Horace Mann's revised full-year 2024 core EPS guidance?

Horace Mann (NYSE:HMN) has revised its full-year 2024 core EPS guidance to a range of $2.40 to $2.70.

What caused Horace Mann (HMN) to revise its 2024 guidance?

The revision is primarily due to lower-than-expected net investment income, mainly from valuation adjustments in the company's commercial mortgage loan fund portfolio.

How much did Horace Mann's (HMN) P&C sales increase in Q2 2024?

Horace Mann reported that its Property & Casualty sales increased by more than 30% in the second quarter of 2024.

What are Horace Mann's (HMN) expected catastrophe losses for Q2 2024?

Horace Mann expects second-quarter 2024 catastrophe losses to be between $40 million to $42 million pretax, or approximately 23 points on the combined ratio.

When will Horace Mann (HMN) release its Q2 2024 financial results?

Horace Mann plans to release its second-quarter 2024 financial results on Wednesday, August 7, 2024, after the market closes.