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HORACE MANN EDUCATORS CORP /DE/ (HMN)·Q4 2024 Earnings Summary

Executive Summary

  • Record quarter: Core EPS $1.62, up 92.9% YoY; total revenues $409.0M (+1.5% YoY). GAAP diluted EPS was $0.92, down 3.2% YoY due to non-core legacy commercial exposures and investment marks .
  • 2025 guidance introduced: Core EPS $3.60–$3.90, double-digit ROE; total net investment income $470–$480M; assumed catastrophe losses $90M (~11% of net earned premium) .
  • P&C profitability restored: FY 2024 combined ratio 97.9% (improved 15 pts YoY); reinsurance costs down >10% for 2025 renewal; targeting mid-90s combined ratio in 2025 (auto mid-90s, property ≤90%) .
  • Stock reaction: Shares rose into and after results/call (Feb 5 close $38.83, +2.0%; Feb 6 close $40.82, +0.3%; Feb 7 close $41.16, +1.0%). Data from market-data skill fetch_prices.py (event window 2025-02-04 to 2025-02-07).

What Went Well and What Went Wrong

What Went Well

  • “Record fourth quarter core earnings of $1.62 per share, a 93% increase over prior year” as P&C profit restoration and strong segment performance converged .
  • FY P&C combined ratio improved to 97.9% (−15.4 pts YoY) with $29.5M prior-year reserve releases and lower non-cat weather losses; auto and property retention remained strong (85.3% and 89.6%) despite rate actions .
  • Growth engines: Auto, life, and individual supplemental delivered double-digit sales growth; Q4 individual supplemental sales set a record at $5.5M, +12.6% YoY for FY .

What Went Wrong

  • Non-core legacy commercial exposures: $18M reserves + $2M expenses pretax in Q4 for historical policies from as early as the 1960s, creating EPS drag (−$0.37 per share in Q4) .
  • Life & Retirement net interest spread compressed (172 bps vs. 218 bps in 2023) due to lower commercial mortgage loan (CML) fund returns, pressuring segment earnings; management expects improvement but remains conservative for 2025 .
  • Catastrophe environment remains a headwind: FY 2024 cat losses $94.9M (12.8 pts on combined ratio); 2025 assumption still $90M, weighted to Q2 seasonality .

Financial Results

MetricQ2 2024Q3 2024Q4 2024YoY (Q4)Seq (Q4 vs Q3)
Total Revenues ($M)$388.1 $412.1 $409.0 +1.5% −0.8% (calc)
GAAP Net Income ($M)$3.8 $34.3 $38.2 −3.3% +11.3% (calc)
GAAP Diluted EPS$0.09 $0.83 $0.92 −3.2% +10.8% (calc)
Core Earnings ($M)$8.4 $31.3 $67.6 +93.7% +115.9% (calc)
Core EPS$0.20 $0.76 $1.62 +92.9% +113.2% (calc)
Adjusted Core EPS$0.27 $0.83 $1.68 +84.6% +102.4% (calc)
P&C Combined Ratio111.5% 97.9% N/A*N/AN/A

Note: P&C combined ratio given for Q2 and Q3 in releases; Q4 ratio not separately disclosed.

Segment KPIs (FY 2024 and Q4 highlights):

SegmentKey KPIsFY 2024Q4 2024 Highlights
Property & CasualtyCombined Ratio97.9% (−15.4 pts YoY) Prior-year reserve releases $10.3M in Q4 property; favorable severity AY’23 & prior
AutoNet Written Premiums$490.7M (+11.8% YoY) Retention 85.3%; pricing targeted to mid-90s combined ratio
PropertyNet Written Premiums$288.6M (+17.7% YoY) Retention 89.6%; roof schedules & wind/hail deductibles driving lower severity
Life & RetirementCore Earnings$56.3M (below FY’23) Net interest spread 172 bps vs. 218 bps FY’23
Supplemental & GroupCore Earnings$60.4M (+10% YoY) Q4 reserve assumption review favorable; record individual supplemental Q4 sales $5.5M

Balance Sheet / Book Value (period-end):

MetricQ2 2024Q3 2024Q4 2024
Book Value/Share$29.60 $31.60 $31.51
Adjusted Book Value/Share$36.33 $36.89 $37.54
Tangible Book Value/Share$31.01 $31.62 $32.38
Core ROE (LTM)5.9% 6.7% 8.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core EPSFY 2024$2.40–$2.70 Actual: $3.18 Beat prior guidance (actual vs. guide)
Core EPSFY 2025N/A$3.60–$3.90 New
Shareholder ROEFY 2025N/ADouble-digit ROE New
Total Net Investment IncomeFY 2025N/A$470–$480M New
Managed Portfolio NIIFY 2025N/A$370–$380M New
CML / LP Returns (Reported vs. Forecast)FY 2024 vs FY 20253.42% / 4.65% (FY’24 reported) 6.25% / 7.25% (FY’25 forecast) Raised expectations
Catastrophe Losses AssumptionFY 2025N/A$90M (~11% of NEP), weighted to Q2 New
Reinsurance CostFY 2025N/ARisk-adjusted cost down >10% Favorable
Dividend2025$0.34/qtr (Dec 2024) $0.35/qtr (Mar 2025) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
P&C Profit RestorationRate/non-rate actions; Q2 combined ratio 111.5%, reserve releases; roof schedules in 6 wind-prone states Q3 combined ratio 97.9%; rate adequacy across country; favorable PYD FY combined ratio 97.9%; mid-90s target; reinsurance costs −>10% Improving, hitting targets
Catastrophe Load/SeasonalityQ2 cats $41M (~half of annual) Hurricane Helene $22.5M; Q3 cats +12 pts CR 2025 cat assumption $90M; CA wildfire est. $5–$10M in Q1 Normalizing to long-term averages
CML/InvestmentsMark-to-market pressure; cash yields ~7.5%; 2/3 of CMLs mature ≤18 months Early stabilization; Q3 CML NII $9.9M; annualized 6.4% return FY’24 CML/LP returns 3.42% / 4.65%; FY’25 forecast 6.25% / 7.25% Recovering, conservative outlook
Distribution/Technology (AI/CRM)Website/quoting upgrades; digital leads rising Strong agency productivity; worksite growth Catalyst CRM with AI (predictive analytics, doc integration, streamlined marketing) Scaling tech-enabled distribution
Supplemental & GroupUtilization below pre-COVID; trending toward 43% Q3 blended benefit ratio up 3.7 pts; demand strong Q4 reserve assumption review favorable; pretax margins remain above target; record Q4 individual sales Strong demand; margins normalize gradually
Regulatory/Legal——Legacy commercial liability reserves ($18M + $2M) One-time non-core item recognized

Management Commentary

  • “We delivered a record fourth quarter… showcasing the earnings power of all of our businesses… guiding 2025 core earnings $3.60 to $3.90 per share with a shareholder ROE of at least 10%.” — Marita Zuraitis, CEO .
  • “Full year core earnings for P&C were $49.1M, an $85M improvement… combined ratio 97.9% improved 15.4 points… We released $29.5M in prior year development in 2024.” — Ryan Greenier, CFO .
  • “Risk-adjusted reinsurance costs declined over 10% for 2025, reflecting our prudent exposure management.” — Ryan Greenier, CFO .
  • “Catalyst leverages advanced technology and AI… predictive analytics, digital documentation integration and streamlined marketing capabilities.” — Company press release on Catalyst .

Q&A Highlights

  • CML returns and 2025 drag: Management believes an inflection point has been reached; loaded ~6.25% for 2025 on ~$600M asset class, with cash returns in low-8% range, but not expecting full recovery in 2025 .
  • Catastrophe assumptions: 2025 cat pick $90M is exposure-adjusted and reflects mitigation efforts; number down slightly vs. ~95 in 2024 actuals .
  • Property roof schedules/deductibles: Material impact in core wind/hail states (75–80% of roof losses); lighter Q4 weather and tempered inflation aided severity; claims process improvements reduced non-weather water severity and reopen risk .
  • Auto frequency/pricing: Q4 frequency down ~1 pt YoY; planning for aggregate loss trends in low- to mid-single digits and will adjust pricing if lower frequency persists; growth driven by increasing “at-bats” rather than price cuts .
  • Guidance confidence and variance drivers: Strong confidence in $3.60–$3.90; principal unknown remains weather/cats; industry science improving, but variability remains .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable at time of query due to SPGI request limit. As a result, a beat/miss assessment vs. Wall Street consensus cannot be provided.
  • Given record core EPS ($1.62) and strong sequential improvement vs. Q3, the setup supports potential upward estimate revisions, particularly for 2025 core EPS within management’s $3.60–$3.90 range .

Key Takeaways for Investors

  • Earnings power re-rated: P&C restoration plus diversified segments produced a record Q4; 2025 setup targets mid-90s P&C combined ratio, double-digit ROE, and core EPS $3.60–$3.90 .
  • Investment tailwinds: Higher core fixed income yields and improving CML/LP return expectations underpin $470–$480M total NII guidance despite conservative posture .
  • Volatility mitigation: Reinsurance program reset with >10% risk-adjusted cost decline; structural underwriting changes (roof schedules, deductibles) reducing severity and cat volatility over time .
  • Growth execution: Strong agency productivity and AI-enabled Catalyst CRM should sustain auto, life, and supplemental momentum; record Q4 supplemental sales highlight demand .
  • Capital returns: Dividend increased to $0.35/share (17th consecutive annual increase); buybacks remain opportunistic with ~$26M authorization remaining .
  • Watch items: Legacy commercial exposures recognized; normalization of supplemental/group utilization; cat seasonality (Q2) and weather variability remain key swing factors .
  • Trading setup: Positive narrative shift to earnings growth and ROE expansion; price catalysts include Investor Day in May and continued validation of P&C mid-90s combined ratio trajectory .

Citations:

  • Q4 press release and detailed financial table
  • Q4 earnings call transcript (prepared remarks and Q&A) and duplicate transcript –
  • Q3 press release and call – –
  • Q2 press release and call – –
  • Catalyst CRM press release ; Dividend press releases

Estimates note: S&P Global consensus data was unavailable due to request limits at query time.