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HORACE MANN EDUCATORS CORP /DE/ (HMN)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2 core EPS of $1.06 vs $0.27 y/y, driven by improved P&C profitability, lower catastrophe losses vs prior year, and stronger investment income; full-year core EPS guidance raised to $4.15–$4.45 from $3.85–$4.15 set after Q1’s methodology update .
  • P&C combined ratio improved to 97.0% (–15 pts y/y) as pricing, underwriting actions (roof schedules, higher deductibles), and lower cat losses vs prior periods took hold; prior-year reserve development also contributed .
  • Mixed vs Street: EPS beat (driven by below-average cats and stronger NII) but revenue was below consensus; outlook maintained conservative cat load ($90M) given hurricane seasonality, but guidance raised on 1H outperformance .
  • Capital return supports equity story: dividend maintained ($0.35/qtr), new $50M buyback authorized in May; $13M repurchased YTD through July, with ~$63M authorization remaining, per CFO .

What Went Well and What Went Wrong

  • What Went Well

    • “Record second-quarter core earnings reflect very strong business profitability and solid growth momentum,” aided by P&C cats “meaningfully below prior year and recent prior periods” .
    • P&C combined ratio 97.0% improved ~15 pts y/y; favorable prior-year development ($5.5M) and lower cat frequency/severity underpin results .
    • Investment income tailwinds: 14th consecutive quarter of new money yields > book yield; CFO cited 5.79% new money yield in core fixed maturity portfolio and improving commercial mortgage loan fund accounting yields .

  • What Went Wrong

    • Revenue growth (+6.1% y/y) strong but below Street consensus for Q2; headline growth tempered by investment gains/losses and non-core adjustments (including an $8.1M out-of-period LP-related NII correction recorded in non-core) .
    • Auto retention remains pressured (household retention “nearly 84%”) after ~40% cumulative rate over three years; PIF stabilization improving but not yet growing .
    • Group Benefits can be lumpy given small scale and long sales cycles; management flagged quarterly variability, though July sales were record and 2H pipeline looks solid .

Financial Results

Revenue, EPS, and margins across recent quarters:

MetricQ4 2024Q1 2025Q2 2025
Total Revenues ($MM)$409.0 $416.4 $411.7
GAAP Diluted EPS$0.92 $0.92 $0.71
Core EPS (non-GAAP)$1.62 $1.07 $1.06
P&C Combined RatioN/A89.4% 97.0%
Core ROE - LTM8.8% 10.6% 12.6%

Q2 2025 actuals vs Wall Street consensus:

MetricQ2 2025 ActualQ2 2025 Consensus*Surprise
EPS (Primary)$1.06 $0.60*Beat
Revenue ($MM)$411.7 $424.7*Miss

*Values retrieved from S&P Global.

Segment snapshot (Q2 2025):

SegmentCore Earnings ($MM)Notes
Property & Casualty$17 CR 97; +$25M y/y swing; prior-year dev $5.5M (Property $4M, Auto $1.5M); cats $30M below prior year and below historic avg
Life & Retirement$25 Double y/y; higher NII, lower mortality; persistency: Life 96%, Retirement ~92%
Individual Supplemental & Group Benefits$13 Indiv. Supplemental sales $6M (+43% y/y), benefit ratio 27.7%; Group benefits ratio 44.8%

Q2 2025 KPIs:

KPIQ2 2025
Auto Household Retention~84%
Property Policyholder Retention89%
Retirement Persistency~92%
Life Persistency96%
Individual Supplemental Sales$6M (+43% y/y)
Website Traffic+75% y/y

Non-GAAP Note: Q2 non-core includes an ($8.1M) out-of-period correction to NII related to private debt in LPs, excluded from core earnings .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core EPS (non-GAAP)FY 2025$3.85–$4.15 (updated definition in Q1) $4.15–$4.45 Raised
Catastrophe Loss AssumptionFY 2025~$90M ~$90M Maintained
Total NIIFY 2025$470–$480M $470–$480M Maintained
Managed Portfolio IncomeFY 2025$370–$380M $370–$380M Maintained
Interest Expense & Other Corp.FY 2025$35–$40M $35–$40M Maintained
DividendQuarterly$0.35/share $0.35/share Maintained
Share RepurchaseAuthorization—New $50M authorized (May) ; ~$63M remaining authorization per CFO Initiated/Active

Earnings Call Themes & Trends

TopicPrevious-2 (Q4 2024)Previous-1 (Q1 2025)Current (Q2 2025)Trend
P&C Profitability & CatsFull-year P&C CR 97.9%; 2025 core EPS outlook $3.60–$3.90 CR 89.4%; reiterated ~$90M cat load; pricing/underwriting restoration CR 97.0%; prior-year dev, lower cat freq/sev; keep ~$90M cat guide given 3Q volatility At/near targets; prudent cat stance
Investment Income/Yields—New money yield 5.51%; 13th straight > book; LPs ~10% New money yield 5.79%; improving CML accounting yields; continued tailwind Strengthening
Distribution/Technology—Launch of Catalyst CRM; omnichannel; website visitors +40% Catalyst gaining traction; website traffic +75% y/y Accelerating engagement
Supplemental/Group Growth—Indiv. supplemental sales +61% y/y; Group seasonality Record indiv. supplemental sales $6M (+43% y/y); Group variability but strong 2H pipeline Sustained growth, pipeline solid
Retention/PIF—Auto retention slightly down post-rate; Property 89% Auto nearly 84%; PIF stabilizing, expected to turn positive within “handful of quarters” Stabilizing → growth expected
Capital Returns & Guidance—Dividend raised in March; guidance updated for core definition Buybacks: 325k shares, $13M thru July; guidance raised to $4.15–$4.45 Increasing returns; higher guide

Management Commentary

  • “Record second-quarter core earnings reflect very strong business profitability and solid growth momentum… we are increasing our full-year 2025 core EPS guidance to $4.15 to $4.45.” — Marita Zuraitis, CEO .
  • “We continue to see the earnings power of our multiline business when operating at target profitability… trailing twelve month core ROE was 12.6%.” — Ryan Greenier, CFO .
  • “Property volatility actions… roof settlement schedules, higher deductibles, water claim management… are clearly working the way we had hoped.” — CEO on P&C underwriting .
  • “This is the fourteenth consecutive quarter that new money yields in the core portfolio have exceeded book yield.” — CEO .
  • “We have about $63 million remaining on our current share repurchase authorization.” — CFO .

Q&A Highlights

  • Catastrophe load philosophy: Maintain ~$90M full-year cat assumption despite favorable Q2, due to hurricane-season volatility (3 of last 5 years had $15M+ hurricanes) .
  • Underlying P&C: Management “feels really good” ex-PY dev and ex-cats; pricing/underwriting actions tracking ahead of plan .
  • Auto/home growth and retention: PIF stabilizing, expected to turn positive in coming quarters; points of distribution up, improved lead flow and agent productivity via Catalyst .
  • Supplemental/Group: Record individual supplemental sales driven by more sellers and higher productivity; Group is lumpy but July was record and 2H pipeline is strong .
  • Investment portfolio: New money yield 5.79%; improving CML accounting yields indicate recovery of prior unrealized “noise” through earnings .

Estimates Context

  • Q2 EPS beat and revenue miss: EPS $1.06 vs $0.60*; revenue $411.7MM vs $424.7MM* — EPS upside driven by favorable cat experience and stronger NII; revenue shortfall less indicative for insurers given mix and non-core items .
  • Recent trend: Q1 EPS $1.07 vs $0.94*; Q3 setup: consensus EPS $1.11* and revenue $430.9MM* as of latest data. Guidance raise suggests Street EPS likely revises upward for FY25.
  • Target price consensus ~$50.33* across recent quarters.

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Guidance raise with prudent cat stance: Despite conservative cat assumptions into hurricane season, HMN raised FY core EPS to $4.15–$4.45, implying confidence in underlying earnings power .
  • P&C profitability restoration is sticking: y/y combined ratio improvement and favorable PYD suggest pricing/underwriting changes and volatility mitigation are working .
  • Investment income is a tailwind: New money yields exceeding book for 14 straight quarters and stabilizing CML returns boost visibility on NII .
  • Distribution/tech execution: Catalyst and omnichannel are lifting lead volume and productivity; website traffic +75% y/y is a forward indicator for sales .
  • Supplemental/Group adds growth and earnings diversification: Record supplemental sales and improving Group pipeline support mid-single-digit top-line growth targets with attractive margins .
  • Capital returns: Dividend sustained ($0.35/qtr) and active buybacks ($13M YTD; ~$63M remaining authorization) provide support for TSR while investing for growth .
  • Near-term trading setup: EPS beat + guide raise are positive catalysts; investors should monitor 3Q cat activity and auto retention/PIF inflection to validate trajectory .