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HORACE MANN EDUCATORS CORP /DE/ (HMN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 core EPS was $1.07, up 73% y/y, a record first quarter; EPS beat S&P Global consensus by ~$0.13, while revenue of $416.4M was slightly below the ~$420.2M consensus, driven by a sharply improved P&C combined ratio of 89.4% and stronger investment income . Estimates from S&P Global marked with an asterisk below.
  • Management raised full‑year 2025 core EPS guidance to $3.85–$4.15 (from $3.60–$3.90), reflecting a refined core-definition and confidence in profit restoration, sustained P&C underwriting improvement, and capital generation .
  • P&C strength was the key driver: lower non‑weather property frequency, favorable prior‑year reserve development, and cumulative rate actions (including CA auto +14.5% in mid‑April; CA property ~20% effective July 1) improved margins; cats were modestly above prior year, with CA wildfires impact of $3.7M (incl. $1M Fair Plan assessment) .
  • Capital return remained supportive: 3% dividend increase to $0.35 (17th consecutive annual raise), $7M repurchased YTD through May 2 (179k shares, $40.12 avg), $19M authorization remaining, and a new $50M repurchase authorization announced May 13 .

What Went Well and What Went Wrong

  • What Went Well

    • P&C profitability: reported combined ratio of 89.4%, an ~11 point y/y improvement, reflecting 2024 profitability restoration, lower property loss frequency, and favorable reserve development; “first-quarter results reflect the earnings power of our business” (CEO) .
    • Investment income tailwinds: total NII $116M (+10% y/y); managed portfolio NII $92M (+15% y/y); annualized pretax portfolio yield 5.09% and new-money yields 5.51%, 13th straight quarter above book yield .
    • Distribution and sales momentum: individual supplemental sales +61%, auto sales +8%, annuity net deposits +6%; omnichannel and agent productivity gains (Catalyst CRM launch showing early success) .

  • What Went Wrong

    • Life & Retirement earnings down y/y on higher mortality (within actuarial expectations), tempering segment contribution despite solid deposit/persistency metrics .
    • Slight revenue shortfall vs consensus as P&C cat losses ($16.4M) ran slightly above prior year (ex‑CA wildfires, cats were below prior year and historical averages) .
    • Group Benefits benefits ratio seasonality (53.3%) returned after abnormally favorable Q1’24; small book size can drive quarterly volatility, a watch item for estimate stability .

Financial Results

Headline Quarterly Trend (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($M)$412.1 $409.0 $416.4
Net Income ($M)$34.3 $38.2 $38.2
Diluted EPS (GAAP)$0.83 $0.92 $0.92
Core Earnings ($M, non‑GAAP)$31.3 $67.6 $44.7
Core EPS (non‑GAAP)$0.76 $1.62 $1.07
P&C Combined Ratio (%)97.9 97.9 (FY context) 89.4

Q1 2025 Actual vs Prior Year and S&P Global Consensus

MetricQ1 2024Q1 2025 ActualS&P Global ConsensusSurprise
Total Revenues ($M)$386.0 $416.4 $420.2*-$3.8M vs est.
Core EPS (non‑GAAP)$0.62 $1.07 $0.94*+$0.13 vs est.
Diluted EPS (GAAP)$0.64 $0.92 N/AN/A
P&C Combined Ratio (%)~100.9 (implied +11 pts) 89.4 N/AN/A

Values with an asterisk (*) are retrieved from S&P Global.

Segment Performance – Q1 2025

SegmentCore Earnings ($M)Net Written Premiums/DepositsKey Profitability MetricsNotable Trends
Property & Casualty$27 NWP $185M (+8% y/y) Combined ratio 89.4%; Auto CR 95%; Property CR 79.9% Favorable PYD ($5.3M total: $3M property, $2.3M auto), lower non‑weather frequency; CA auto +14.5% (mid‑Apr), CA property ~20% (7/1)
Life & Retirement$8 Premiums & deposits $140M (+7% y/y) N/AHigher mortality (within range); annuity net deposits +6%; persistency 91.6%; life annualized sales +4%; life persistency ~96%
Supplemental & Group Benefits$14 NWP $67.6M (+5% y/y) Indiv. Supplemental benefits ratio 28.4%; Group benefits ratio 53.3% Indiv. Supplemental sales $5M (+61% y/y); persistency 90%; Group covered lives modestly up; seasonality normalized vs abnormally favorable Q1’24

KPIs – Q1 2025

KPIQ1 2025
Total Net Investment Income$116M (+10% y/y)
Managed Portfolio NII$92M (+15% y/y)
Portfolio Yield (annualized pretax)5.09%
Core New Money Yield5.51%
P&C Catastrophe Losses$16.4M; CA wildfires ~$3.7M (incl. $1M Fair Plan)
P&C Sales$25M (+9% y/y)
Auto Sales+8% y/y
Individual Supplemental Sales$5M (+61% y/y)
Annuity Net Contract Deposits+6% y/y

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core EPS (non‑GAAP)FY 2025$3.60–$3.90 (as of 2/5/25) $3.85–$4.15 (revised definition; same business outlook) Raised; methodology refined
Catastrophe Losses AssumptionFY 2025N/A~$90M (in line with 5‑yr avg) Newly reiterated/explicit
Total Net Investment IncomeFY 2025N/A$470–$480M; managed portfolio $370–$380M Newly provided detail
Interest Expense & Other CorporateFY 2025N/A$35–$40M Newly provided detail
DividendOngoingPrior rate implied; 16th raise$0.35/qtr; 17th consecutive annual raise (3% increase) Increased
Share Repurchase2025+~$19M remaining as of 5/2 New $50M authorization (5/13) Expanded capacity
Rate Actions (California)2025N/AAuto +14.5% (effective mid‑Apr); Property ~20% (effective 7/1) Positive pricing momentum

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
P&C Profit RestorationQ3: CR 97.9% with improvement; 2025 double‑digit ROE goal reiterated . Q4: FY P&C CR 97.9%, profit restoration positioning for growth; 2025 core EPS $3.60–$3.90 .Reported CR 89.4% on lower non‑weather losses and favorable PYD; pricing and claims initiatives continuing .Improving faster than plan
Catastrophe OutlookQ3: 18 pts cats in quarter; maintaining 2024 guidance . Q4: 2025 outlook framed but no explicit cat figure in release .FY25 cat assumption ~$90M; Q2 historically ~50% of annual cat load; CA wildfires ~$3.7M in Q1 .Seasonally vigilant but controlled
Distribution/Tech (Catalyst)Noted distribution focus; growth initiatives (press) .Omnichannel gains, +40% web traffic; Catalyst CRM launched; early adoption improving agent productivity .Strengthening go‑to‑market
Capital ReturnDividends/steady balance sheet; 2025 ROE target . Q4: record core EPS; dividend framework intact .3% dividend raise to $0.35; $7M repurchased YTD; new $50M authorization .More flexibility
Life & RetirementQ3: Solid sales; diversified model . Q4: strong quarter; FY setup for 2025 .Earnings below y/y on higher mortality (within range); deposits +6%; high persistency .Mixed: stable growth, mortality headwind
Pricing/Regulatory (CA)Ongoing rate actions referenced .CA auto +14.5% (Apr), property ~20% (Jul) approved; seeing marginal auto new business impact from cumulative increases .Pricing power intact

Management Commentary

  • “First-quarter results reflect the earnings power of our business, particularly in the Property & Casualty line… profitability restoration… lower property loss costs and favorable prior years’ reserve development.” — Marita Zuraitis, CEO .
  • “We revised our core earnings definition… to better reflect the true operating earnings of our business… updated core EPS range of $3.85 to $4.15.” — Ryan Greenier, CFO .
  • “We are seeing the benefit of our roof settlement schedule and specific initiatives in claims to control costs of non‑weather perils.” — CEO .
  • “Auto rate increase of 14.5% [CA] went into effect in mid‑April… property increase of just under 20% will go into effect July 1.” — CFO .
  • “Year‑to‑date through May 2, we returned $7 million to shareholders in share repurchases… we have about $19 million remaining….” — CFO ; plus new $50M authorization (5/13) .

Q&A Highlights

  • Cat seasonality and outlook: April cats “in line with expectations”; FY25 cat assumption maintained at ~$90M; historically ~50% of cats occur in Q2; CA wildfires ~$3.7M (incl. $1M Fair Plan) in Q1 .
  • Supplemental/Group utilization and reserving: Q1’24 comparison was abnormally favorable; Q1’25 seasonality returned, with January slightly elevated but Feb/Mar normal; no change to reserve assumptions; public sector tends to perform well in downturns .
  • Distribution momentum: 61% y/y increase in individual supplemental sales driven by stronger benefit specialist activity and easier comp; on a 12‑month rolling basis, ~12% new business growth expected to persist .

Estimates Context

  • Q1 2025 Results vs S&P Global Consensus: Core EPS $1.07 vs $0.94* (beat); Revenue $416.4M vs $420.2M* (slight miss). EPS beat reflects better‑than‑expected P&C underwriting (lower ex‑cat frequency, favorable PYD) and strong investment income, partially offset by slightly higher cats y/y and Life & Retirement mortality .
    Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • P&C margin recovery is tracking ahead of plan; Q1 combined ratio of 89.4% and favorable development underscore underwriting momentum; additional pricing in CA supports 2H trajectory .
  • Raised FY25 core EPS range to $3.85–$4.15 (methodology refined), signaling management confidence in sustainable earnings power and double‑digit ROE .
  • Investment income tailwinds should persist as new‑money yields (5.51%) continue to exceed the portfolio yield; duration ~7 years points to gradual lift through 2025–2026 .
  • Life & Retirement mortality is a near‑term headwind but within expectations; persistency and core 403(b) deposits remain constructive .
  • Supplemental & Group demand is healthy; watch quarterly variability given small book size and normalizing seasonality .
  • Capital return is a support: 3% dividend raise to $0.35, ongoing buybacks, and a fresh $50M authorization add flexibility to return excess capital while funding growth .
  • Near‑term stock drivers: underwriting quality and catastrophe experience into Q2 (seasonally heaviest), execution of rate actions (CA), and Investor Day follow‑through on growth/ROE roadmap .

Endnotes

  • All non‑GAAP metrics (e.g., core earnings/EPS, adjusted book) are defined by the company; see Glossary of Selected Terms and reconciliations referenced in filings .
  • Values marked with an asterisk (*) are retrieved from S&P Global.