Q1 2023 Horace Mann Educators Corporation Earnings Call
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And welcome to you.
First quarter 2023 investor call.
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I would now like to turn the conference over to Heather Wentzville, Vice President of Investor Relations. Please go ahead. Thank you and good morning, everyone. Welcome to Horace Mann's discussion of our first quarter results yesterday, we issued our earnings release Investor supplement and Investor presentation.
These are available on the Investor page of our website.
Where it is you're right as president and Chief Executive Officer, and Bret Conklin Executive Vice President and Chief Financial Officer gives us some of the remarks on today's call with us for Q&A, we have Matt Sharpe Mark dress shirts, like working Brock and dry in green here.
Before turning it over to Amrita I want to note that our presentation. Today includes forward looking statements as defined in the private Securities Litigation Reform Act of 1995 to.
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 and we assume no obligation to update them actual results may differ materially due to a variety of factors, which are described in our 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'll turn the call over to Maria.
Thanks, Heather and Hello, everyone last night, we reported first quarter core earnings up 23 cents per share in line with our pre announcement as we noted then outsized catastrophe losses affected our quarter's bottom line consistent with the experience of others in the industry.
The first quarter results also confirm that we remain on pace toward our business objectives for the year. In particular, we are very pleased with our top line sales momentum across all segments as well as what that growth momentum means for our progress towards increasing educator household acquisition.
<unk> and gaining a larger share of the education market.
Brett will talk about the details later in the call, but at a high level. We continue to expect core EPS in the range of $2 to $2 30 for the full year with lower first quarter P&C net investment income being offset by higher than expected supplemental and group benefits.
First quarter earnings.
Today I want to talk about the progress we are seeing as a result of the transformational actions we've taken over the past few years, our diversified business model provides more stable earnings and revenues in a quarter like this one but more importantly, it broadens the solutions and value we can provide.
<unk> to educators and school districts.
In the year since we integrated the Worksite Division. Our team has made substantial progress building a solid foundation for growth by serving educators through their school district employers. This provides value not only to the educators, who receive more coverage, but also to <unk>.
Cool districts that can provide more robust benefit packages to attract and retain staff while the sales pipeline in this business is longer than in the retail division, we're seeing positive outcomes.
This year, we expect the supplemental and group benefits segment to contribute 25% of our total earned premiums and contract deposits.
This segment's worksite direct line of business saw the highest quarterly sales since 2019.
In the employer sponsored line, we are seeing success building relationships and winning business with new districts and associations.
This business continues to grow and participation rates within those areas are on the high end of our expectations. We continue to receive good feedback from our school district customers about our enrollment services, including an option for one on one enrollment support.
In the retail division, we're seeing momentum within the priorities that underlie our strategy to serve a larger share of the education market.
Across the country School access is improving our agency force continues to grow what are the key programs to which we attribute this growth is an agency mentor model, where a new agent works in an established office before opening their own.
Which sets Horace Mann apart is that our exclusive agents have distinct territories. So theres cooperation among our agency force that's beneficial for everyone.
Our established agents share best practices and resources with our newer agents. In fact, we recently returned from one of our first retail agent leadership trips since the pandemic began it was a great opportunity to discuss the business in person and we're seeing a lot of optimism in the agency force.
Looking towards the future.
With that said back to the retail results.
Sales of life products increased 22% over prior year in part benefiting from sales by Worksite Representatives during enrollment activities. We also have been focusing additional retail agent training and support around our indexed universal life and cash value term products as.
Caters may be more interested in these options in a higher interest rate environment. In addition retirement results remained solid.
Property and casualty net written premiums were up 7%, primarily due to the impact of rate and non rate underwriting actions taking effect. We are on track to meet our profitability goals in this business, including our target of 18% to 20% cumulative points of rate in <unk>.
So nationwide by the end of 'twenty two 'twenty three.
Of note over the weekend, we received notice that California has approved a 6.9% auto rate increase for the smaller of our underwriting companies in the state. We are confident that we have demonstrated our rate need and expect to see approval in the coming weeks for the other which represents about 80% of our.
Premiums in this state we expect our actions will lead to an auto combined ratio between 97 and 98% in 'twenty 'twenty four.
In property, we expect rate increases and non rate actions to contribute to nationwide premium increases of 17% to 20% over the course of the year if loss trends exceed our current expectations for property or auto we will adjust our pricing or underwriting plans as needed.
For the quarter auto average premiums increased 8% over last year and average property premiums increased almost 10%. So far our retention is holding we believe there are three reasons for this.
First property and casualty carriers are implementing similar rate increases to address the impact of high inflation.
All aspects of settling claims, including labor materials litigation and medical care costs more than they did a year ago.
Second we provide more value to educators than just an insurance policy. Many of our P&C customers have retirement plans with us or a student loan solutions account or they know their local agent as a trusted school partner, our diversified business create stronger customer retention are.
Auto retention is more than 10 points stronger with customers, who have four lines of business with us than with mono line customers.
Finally, we're working to help our agents understand the rate environment. So they can answer policyholder questions proactively.
We respect our customers and we care about our customers, we want to be transparent about what's happening in our business because we want to maintain those relationships. When it makes sense, we retain the business, but we can place customers with trusted third party carriers when that is more appropriate.
To sum up we're confident in our 'twenty to 'twenty three outlook and are excited about the growth we're seeing across the business.
After addressing the profitability of the property and casualty business over the course of the year, we expect to be near our long term targets in 'twenty 'twenty four we believe this along with growth across our businesses will contribute to a 'twenty 'twenty four core E. P S nearing $4 and a double digit return on equity.
Before I turn the call over to Brett I want to talk about our commitment to corporate social responsibility. We recently released our 2022 reporting that details how we address the issues that are important to our stakeholders, while ensuring we run our business ethically mint.
Minimize our environmental impact and support our educators employees and communities.
To touch on a few of the highlights in 'twenty 'twenty. Two we successfully reached our objective of cutting our scope, one and scope two carbon emissions in half and plan to further reduce our carbon footprint going forward, we increased our corporate transparency by providing new disclosures and business ethics.
<unk> data security and privacy and responsible product offerings.
We identified $160 million in public service alone forget the best opportunities for educators, bringing the total for Horace Mann's student loan solutions program to more than 600 million and forgiveness opportunities identified.
And we completed hundreds of financial wellness workshops in schools across the country, providing free sessions for educators on topics like state teacher retirement systems classroom crowdfunding and financial literacy.
The need for these financial resources for educators is clear more than a third of educators say finding a trustworthy financial adviser is an obstacle to their financial security. Many don't think they can afford one by providing complementary financial education inconvenient formats.
We're helping more educators become financially secure which leads to more educators staying in the profession. They love.
These commitments to educators and other stakeholders are not separate from our business as a mission centric organization. It's part of who we are a good example of this is the activities. We've undertaken this week, which is teacher appreciation week.
Our agents are hosting events for teachers.
Employees are calling our customers to thank them for all that they do and this week, we will be honoring top educators, both locally and nationally.
While we are more than happy to share an appreciation events. This week, we make it a point to thank educators all year long for their important role in helping prepare our children for the future.
Before I wrap up as you may have seen we announced the hiring of Steve Mckenna.
As our Chief operating Officer, Steve. Most recently served as president of personal lines and earlier President of distribution life in financial services for farmers insurance before that he was at Liberty mutual group for more than 25 years. His initial focus will be supporting <unk>.
Share expansion in the retail division he.
He is starting next week and we will introduce him on our second quarter call. Thank you and with that I'll turn the call over to Brett.
Thanks, everyone for joining our call today.
As Marita described 2023 has started very well for Horace Mann. Despite the early arrival of some spring storms.
I want to turn to the details of the segment performance and how we adjusted segment guidance to reflect first quarter results. Even as we continue to expect full year core EPS in the $2 to $2 30 range.
So let's start with P&C.
Catastrophe losses were $22 4 million for the quarter in line with our pre announcement and the primary reason for the segments quarterly loss. In addition segment net investment income was below the prior year largely due to the negative return on the limited partnership portfolio in the first quarter.
Sure.
Cat losses for the quarter contributed 14 points seven points to the combined ratio versus four eight points from last year's first quarter. The twenty-three cat events in the period included two severe storms very late in March that combined to contribute more than a quarter of the cat losses in Q1.
Over the past 10 years second quarter events have typically resulted in almost half or full year cat losses, and first half events have resulted in almost 60% of the total.
With April cats coming in below our historic average, we think timing is definitely a factor in the above average first quarter cat losses.
We're continuing to use our cat loss assumption that equals about 10 points on the full year combined ratio in our 2023 guidance.
As we said at year end 10 points is our 10 year average and also aligns with our calculation based on historical frequency and a modest increase in severities due to inflation, partially offset by a modest decrease in exposures.
Turning to the underwriting results total written premiums rose six 8% this quarter compared to the fourth quarter's 4.7% increase as we begin to see the benefits of the rate actions that have been implemented to date.
Retention remained very strong rising for both auto and property with strong auto sales coming largely from states, where we're most confident in the outlook for pricing.
I'll address the auto and property books in a moment, but we will certainly see the growth rate and total written premiums accelerate further over 2023 in 'twenty 'twenty four with earned premium growth path.
Turning to auto the year over year increase in average written premiums was eight 1% in the first quarter up from 4.8% in the fourth quarter rate actions averaged almost 10% countrywide over the past five quarters.
As anticipated first quarter underlying loss cost continued to be impacted by higher severity due to the inflation of the past year.
We expect frequency to stabilize near 2022 levels for the full year, but it rose in the quarter over a year ago impacted by the severe weather.
However, we did see frequency returned to expected levels in April .
And as Marita noted if loss trends exceed our current expectations in auto or property, we will adjust our pricing or underwriting plans as needed.
The auto rate plan for 2020, three is targeting rate increases of 18% to 20%.
Achieving that rate plan only requires a single round of approvals in California, one of which we received over the weekend as Marita noted.
Bolstered by non rate actions. This should lead to an auto combined ratio between 106 in 107 in 2023 and near our target level of 97 to 98 in 2024.
Turning to property the year over year increase in average written premiums was nine 8% in the first quarter.
Rate increases countrywide since the beginning of 2022 had been bolstered by inflation adjustments to coverage values.
The first quarter property underlying loss ratio improved to 52% with fire losses lower than a year ago.
Our 2023 rate plan for property as another 12% to 15% over the course of the year on top of another year of inflation guard increases to keep coverage values updated.
These will combine for an impact of 17% to 20% in 2023 which should result in an underwriting profit in 2023 and getting us back to our targeted 92 to 93 combined ratio in 2024.
Taking into account the various factors, but recognizing the lower net investment income in the first quarter P&C 'twenty twenty-three segment core earnings are expected to be between breakeven and $5 million, reflecting a combined ratio in the range of 104 to 105, including 10 points from cat.
Losses in 2024, we should be near or longer term combined ratio target for the segment of 95 to 96.
Results for both our life and retirement and supplemental and group benefits segments reflect our adoption of L. D. T. I as of the first of the year with an implementation date of one 121 as we've said the standard did not change long term earnings underlying economics or cash flow.
Furthermore, it has no impact on statutory accounting.
However, it did require cash flow assumptions underlying policy reserves to be reviewed and those reserves to be revalued using current discount rates.
You'll see the L. D T impact in three areas and reported results and in the recast results for the past two years.
First it made the liability for future policyholder benefits more variable largely due to changes in discount rate assumptions.
Second it added a new benefit liability called market risk benefits or M arby's, which adds volatility to the benefit expense and retirement business and third is eliminated the shadow DAC equity adjustment.
So let's look at these segments.
Turning to life and retirement the segment performed largely as expected with adjusted core earnings of 14 million with net investment income up four 4%, reflecting a higher contribution from floating rate investments, including commercial mortgage loan funds.
The net interest spread on our fixed annuity business was 206 bps in the first quarter.
Interest on FH L. B funding agreements, which is included in interest credited rose more rapidly than investment income due to the timing of rate resets for the full year. We continue to expect the spread on our fixed annuity business to be in the range of 220 to 230 bps.
For the segment total benefit expenses declined life mortality experience improved over a year ago that offset a modestly higher unfavorable MRV adjustment for the retirement business.
For the retirement business.
Never nobody contract deposits were 109 million for the first quarter.
Cash value persistency was 93, 1%.
Outside of our core for all three of the accounts, we may be seeing a bit of an impact from the external headwinds are you seeing the retirement savings sector, including inflationary pressures on consumers. We had another good quarter for retirement advantage. The fee based mutual fund platform that we believe creates long term opportunity.
For this business segment.
Life annualized sales rose 22, 2% year over year with persistency remaining strong.
We continue to look for life sales as a way to initiate and solidify educator relationships and we are very pleased with the progress.
We continue to expect life and retirement core earnings will be between 67 and $70 million for the year.
Now, let me turn to the supplemental and group benefits segment, where we are beginning to reap the rewards of the investments we have made and will continue to make in diversifying into this higher growth less capital intensive business.
For the segment first quarter core earnings were $14 million as the benefit ratio remains very favorable.
First quarter premiums and contract charges earned were $66 million about evenly split between the Worksite direct employer sponsored businesses. We expect this segment will represent about 25% of total premiums and contract charges earned for the year.
Segment sales of $8 $2 million for the year reflected sales levels in our Worksite direct business. The supplemental products acquired in the N T. A transaction in 2019 approaching pre pandemic levels.
They also include strong sales of employer sponsored products is we gained traction with our distribution partners together, gaining more access to districts and schools.
We generally expect the first quarter to be a good sales quarter for employer sponsored products, but also expect it to be the highest quarter for the employer sponsored products benefit ratio is benefit utilization for these products typically is highest early in the calendar year in our market.
With benefit utilization and therefore, the benefit ratio lower than anticipated in the quarter, we expect seasonality will be less pronounced this year.
We now expect the benefit ratio in the third and fourth quarters will be higher than originally anticipated, but expect a full year benefit ratio to be below our long term target for this business of 50%.
The benefit ratio for the Worksite direct business remained slow as utilization remains below pre pandemic levels. Although the ratio is slowly moving closer to our long term target.
As expected the expense ratio rose from a year ago as we invest in the infrastructure for this business.
Looking into 2023, we now expect core earnings to be between 45, and 49 million taking into account the strong first quarter results.
Total net investment income was $74 7 million, 2.3% above last year's first quarter as a higher contribution from floating rate investments, including commercial mortgage loan funds more than offset lower L. P returns.
Pre tax investment yield on the portfolio, excluding limited partnership interest rose to $4, seven 2% with new money yields continuing to exceed portfolio yields in the core fixed maturity securities portfolio.
A plus rated core portfolio is primarily invested in investment grade corporates municipal and highly liquid agency and agency MBS securities positioning us well for a recessionary environment later in 2023.
The net unrealized investment loss position of the fixed maturity securities portfolio decreased to $453 3 million pretax at quarter end compared to $571 9 million at year end 2022, primarily due to moderate stabilization of the interest rate environment.
<unk> during first quarter 2023.
Realized investment losses were well below last year and continued to reflect portfolio repositioning activities to improve book yield as well as the declines in the fair value of equity Securities.
Full year net investment income from the managed portfolio is now expected to be between 325 and $335 million. We are clearly benefiting from the higher interest rate environment in our core portfolio and we're monitoring our commercial mortgage loan exposure closely.
And the portfolio, we are underweight office and remain committed to our high quality portfolio. So we would take action quickly if appropriate.
Due to first quarter results, we now assume full year limited partnership returns will be below their 10 year average our guidance for total 2023 net investment income reflects approximately $26 million quarterly from the deposit asset on reinsurance.
In closing despite the cat losses, the first quarter clearly demonstrated the progress we are making to leverage the stronger and more diverse organization that Horace Mann has become.
We remain confident that the growth we anticipate over the next several years will lead to an increasing share of the educator market, putting us back on the trajectory to sustainable double digit ROE is as.
As we return to our longer term profitability targets in the P&C segment. We continue to expect 2023 core EPS will be in the range of two to $2 30.
In 2024, we believe or we will be at 10% with core EPS approaching $4.
Our life and retirement and supplemental group benefits segments are a stable source of earnings and capital, which clearly mitigates the volatility of P&C when.
When we have returned to our targeted profitability across the segments. We know that Horace Mann is capable of generating approximately $50 million in excess capital above what we pay and shareholder dividends.
Our priority for excess capital will remain on growth. However, we are committed to using available excess capital for steady shareholder dividend increases the board raised the dividend by three 1% in March and opportunistic share repurchases.
We purchased approximately 157000 shares at a total cost of $5 3 million since the beginning of the year.
At the same time, we are committed to maintaining our financial leverage and capital ratios at levels appropriate for our current financial strength ratings.
We expect our progress toward our objectives will accelerate over the coming quarters as we remain focused on providing strong returns to shareholders. Thank you and with that I'll turn it back to Heather.
Thank you operator, we're ready for questions.
Thank you we will now begin the question and one quick one.
Awesome.
You ask a question you may call probably number one on your telephone keypad.
Yeah.
Please go ahead with your hands before car Ts.
Your question please.
Cool.
This time, we will pause momentarily to assemble all wellcare.
Our first question comes from Matt <unk> can go ahead.
Good morning.
Good morning, Matt.
You guys gave a lot of great color on the rate actions you're taking in.
There are some really good slide.
In the deck on that and kind of how that will flow through.
My question is could you talk a little bit about what non rate actions you might be taking to kind of address the issues in auto and home to the extent you are taking any of that are noteworthy.
Yeah, Matt It's a great question and I'll turn it over to Mark Durocher in a minute, but one of the things I would say upfront is I think this is clearly a place where our distribution helps us remember we have captive distribution and right now our distribution runs about 80% educators our ability.
To say to our agents now is the time, where you should proactively focused on educators and right now they're not soliciting a lot of non educator business. It's a time when we can talk about our non rate actions to our agents and quite frankly for those agents, who follow the script, which.
The majority of them do well.
We're good to go for those that don't we can restrict their writings, we can you know.
Talk to them about what they can and can't do so I think the control issue over the distribution and that's very different than independent distribution and how you would control non rate underwriting actions. There is something that is very helpful to us as we navigate this kind of environment that combined with our <unk>.
Third party strategy, where we have good third party strategies that we can lever as well and good partners now we're not naive we know that we're all in this same soup here everybody is pushing rate everybody's tightening on.
The underwriting on their book appropriately in this type of environment. So our third parties have some of those same constraints as well and we would probably leverage those third parties more in a softer environment, but they're still there and we still use them just not to the same extent that you would see in a <unk>.
<unk> are different but I'll turn it over to Mark and he can talk specifically about some of those non rate underwriting actions that have been underway for quite some time.
Sure I'm worried at that in addition to what what Marita mentioned around using our distribution plan to help us manage the business. We're writing there are several things we have in play.
First there is there's a lot of work that's been done around well this account verification and mileage verification a lot of states mileage as a big rating factor and we've got a pretty aggressive program to go back and re validate that mileage and while that's not necessarily a rate increase it is.
Premium levels increase as we make adjustments to.
Either the discounts or the mileage factors that are being used.
Also from a renewal underwriting standpoint, our underwriters you're taking.
On a more aggressive view of folks with.
Poor driving experience accident experience and we've increased our non renewal rate a little bit above what we might normally do in our marketplace and lastly visit several claims initiatives that we've been working on to try to who are the.
Again, the outcome of claims most notably trying to drive more.
Appraisals, two or more preferred methods, whether it would be.
Internal adjusters or to our preferred direct repair shops.
Yeah, Mark that was very clearly said and you know you Didnt ask this Matt, but despite our clear laser focus on P&C rate and profitability, we're really firing on all cylinders I'm I'm very excited about our long term strategic plan to diversify our earnings stream.
To focus on total household acquisition and maybe theyre not all starting by driving through the garage, we have other levers to start that.
Educator household acquisition with the company and I think that our you know our plan is working and it's working out pretty pretty close to as we had expected. Despite the fact that we're laser focused on P&C rate and profitability.
That's very helpful and you read me right to my My second question, which was the households question you.
As you know the past several years you've gotten.
All the pieces of the puzzle.
You know together and I see in the slides.
About 1 million households, and it sounds like you view the market as being about seven and a half million dollars or so in total.
As you look out long term now that you have kind of the product board filled and as you think about kind of the the presence of the size or the right fit for Horace Mann in that market.
How should we think about.
Where we're Horace Mann could end up in that broader $7 5 million total and I'm not asking you to put a timeframe on it just kind of you know.
What what's kind of your fair share as you view it now with what you have.
Yeah, Matt I think that's absolutely the right question and how we think about it as well going to the conversation that we just had one of the first things I think about and I'll ask Mike to talk about life insurance in a minute because I think it is a perfect example is our ability for our agents to pivot a little bit I mean, we take a tour.
Total account approach to educators house acquisition, when we get them, we're really good at cross sell and when we have the cross sell you see it in our retention numbers. So starting that household acquisition, whether it's with auto or something else is important and Mike has been driving.
An awful lot in the life space about potentially starting with life potentially.
Pushing on the retirement side of the house and you're seeing good solid results in retirement, you're seeing big increases in the life space and even a little cross sell them.
On the supplemental and group benefit side with life. So I think that ability for our captive distribution to pivot is a key lever for us that maybe others don't have them. The other thing is that seven and a half million I rounded to eight.
And Heather It gives me a hard time at least in the K through 12 public space I don't think about it as 8 million. When you think about the Worksite division. The strong relationship that we have with firefighters. The building relationship we have with others, who serve the community I think about that number broader then RK.
12, public educator space and as we build out this division will focus you're going to see that begin to push on the Worksite side and then the question for us is going to be.
What participants within that Worksite.
Business have similar attributes to educators and we can push on the retail side and I really think about that as a big future growth lever for Horace Mann, but Mike do you want to talk a little bit about the success, we're seeing in life and some of the pivot you've seen sure no I appreciate it.
Just starting off a 22% up in the Q1 over last year, we've really hit the ground running coming off a strong finish in 'twenty. Two just another piece that Maria mentioned around cross sell and an integration with you know our acquisitions you know 15% of that is coming from our Worksite Division.
And so that that says a lot about.
You know the opportunity of expanding life distribution, you know I got to give a lot of credit to our team Christian who is really focused on the fundamentals. The life insurance is under sold or undervalued by some of our educators and it's our job to get out there and expressed the need that they have and so that's what we're doing that's what.
We're focusing on it's the protection that needs to be in place and so a lot of emphasis on life, making sure. They get the right protection in place and working with our partners to expand that opportunity.
And Matt If your next question was why am I other than hard work and focus which I do think our strategic plan really drives us here a lot of this has to do with access post pandemic combined with lessons learned during the pandemic our agents are much better.
Prepared for household acquisition than they were pre pandemic and we're seeing that come through look at recruiting on the agency side the speed to productivity. The mentoring programs that I mentioned in the script, you think about our head of sales and distribution Heather Cobre she'd you.
Find us a few months before the pandemic hit this is the first year, where she is actually physical with her distribution. This is the first time that we're able to hold.
Meetings in large groups with our agents and really see the benefit of the strong team that she's built.
And what this company looks like when we're firing on all cylinders I think about the supplemental and group benefits space and the teacher shortage that we see and that you read about and see them on the TV. Almost every night, it's a great retention tool for districts to build out robust benefit plans and really.
Provide financial support and seminars and and and state retirement conferences that we build so we're invited in because those schools desperately want to keep the teachers, they have and want us help educating the new replacements that they have to hire to fill the seats. So we.
Feel good about our relationships with the districts and they're only growing with this two divisional structure that we've built.
Great. Thank you very much for the answers really helpful.
Our next question comes from John Barnidge with Piper Jaffray. Please go ahead.
Thank you very much and good morning.
My question is around the meaningful lift in covered lives and employer sponsored.
All right.
I know there was a first quarter waiting to this given kind of open enrollment and stuff like that but can you talk about the ability to capture that lift in covered lives.
Cross sold products, how quickly that can get addressed thank you.
Yeah, John It's a great question and I think I started to answer it but I'll leave some of the specifics to Matt Who's on the line and who runs that Worksite Division map.
Sure Let me let me start by.
Just kind of reminding everybody how we go to market, we go to market in three distinct ways.
The first piece is the employer paid side of the house, which was the acquisition we made at the Madison National that closed January last year.
Our Worksite direct channel, which is the former M T a channel.
That's also the channel that also sells the horsemeat and byproduct that Mike referred to a minute or two ago and then we have the employer sponsored side of the house, which is our voluntary group product that's actually a joint venture between the two sales channels and that's how we bring that product to market and we cross sell within our distribution team.
Yes.
So when you think about when you think about how the how those teams interface interact.
That's where that's where we get to how we think about the.
The covered lives or the number of participants in a number of.
Folks that we have to see every year in order for us to be able to.
Obtained the sales plans that we have and you can see in the first quarter and are in the.
The way that the sales came through in the first quarter, we've been gaining momentum all the way through last year and into this year you started to see that momentum play through so we hit on both on both divisions. Both the employer sponsored side of the house and on the Worksite direct side of the house.
We.
Doubled sales between the same time period of the prior year. So we have really strong momentum and that momentum continues and it is in line with our expectations that we outlined last year.
On the employer sponsored side you know our business is a little bit lumpy, that's just kind of how it works.
Had some key wins in the quarter and we continue to to to build that momentum as the year ago. Thanks to our key distribution partners.
And there are continued and expanded support and we expect that momentum to continue along with the voluntary product adoption on the individual side very proud and thankful of the team. The sales results reflect our continued confidence and significant progress to build back to the pre pandemic levels.
Significantly.
Policy Count is growing for the first time since the onset of Covid, because that's a huge momentum shift for us so as we add employers as we add eligible.
And the opportunities for us to make our case, we're having great success.
Yeah, Matt that's that's right on plus when you think about the amount of folks that we're adding and the building of the sales team and the investment that you're making in this business it's intentional.
And we're seeing it come through the numbers so thanks, Matt.
Okay.
Thank you for that my follow up question.
You can't help but notice the iron and the C O all roll market share expansion in the retail channel called out and then you talk about firefighters.
We kind of talk about immediate Adjacencies, how do you size that $707 5 million going higher.
And what what are some of these adjacencies, but besides firefighters potentially.
Yeah. Good good question I mean, the hiring of Steve in the C O overall make.
Make no mistake when you look at that resume we're talking about an accomplished leader here with some pretty significant technical expertise. When you think about the background P&C life financial services distribution, it's kind of ideally suited.
To who we are at Horace Mann we.
We have a solid long term strategy, we've got the right priorities in place. We're excited about the future and I think Steve is the guy to help us accelerate our momentum. It is more about the strategies that we have in place and not new strategies, it's more about hands on deck because of the opportunities that we see in front of us.
Because of that strategy. So when I think about this I, obviously think that although his short term focus is retail and the priorities that we have in retail and building out complementary distribution and our third party strategies and some of the things beyond how.
How we had historically done business in P&C, but I also think it's about working with Matt.
And doubling down on the cross sell opportunities between Worksite and retail you mentioned firefighters. That's a really good example of future growth as we Peel back the onion, but there are other pockets of folks who are similar to educators in wage.
In dedication and financial needs that we certainly can tap into and we see some of that in the benefits space. It will be hard work to determine what and if across that we can leverage into the retail space and I think Steve will be front and center in a lot of that work.
With Matt we obviously have opinions of what those buckets are we are obviously have opinions on how high we could what the numbers look like there and we'll we'll talk about those as we build them into part of the long term strategy and they're not just in.
You know in the design phase if you will.
Yeah.
Thank you very much.
Yes.
Our next question comes from Derek can keeps telling me Oh. Please go ahead.
Thank you I just got them at the personal auto I think it was a little surprised to see that the plan to auto rate increases have been changed since last quarter, just given what's going on with other peers. Our severity trends can you just talk about what would you see and maybe why you're different from peers.
Your preferred driver base or whatever else, you think might might be explaining the differences.
Yeah. Good question some of that has to do with our assumptions on our picks obviously, but I can turn it over to mark for a little more of the detail.
Yeah, I mean, I think when we look at the frequency and severity trends for the quarter with the exception of frequency in the month of March which.
It was elevated a bit from our assumptions.
And over last year, and we attribute much of that to the severe weather we saw.
Over the latter part of the quarter, but when we step back and we look at overall frequency and severity would that one exception everythings very much in line with what our assumptions were coming into the year.
We have assumptions that overall loss costs would remain above.
The long term average, but would that rate of increase in loss costs would start to temper from what we saw throughout the year in 2022, and so far everything is is pretty consistent with those expectations, obviously with the one exception of March which again.
Seems like an anomalous event due to some of the weather and in fact, our early read of April .
<unk> T is right back on.
Level with what our expectations were so.
So we'll continue to watch that and if anything changes, we'll adjust our rate plan as necessary, but right now we're not seeing anything that.
Gives us any strong indication that we need to veer off our current plan.
Yeah. Thanks, Mark Thats really helpful. Mark mentioned, the more normalized frequency in April that's one of the benefits we have at this point in the call. We know with April quote unquote in the bank what it looks like in frequency certainly mitigated in April we also saw that.
From a cat perspective, we did get some questions regarding why didn't you think about <unk>.
Annualized cats, and changing that number as many in the industry did well we had the benefit of seeing our April results.
Whether those storms occurred on March 27th or 28 or occurred on April 2nd or third it really is that spring storm activity that we count on if you will in our second quarter plan and what we saw in March is our actual cats were less than what we would put in the plan.
For an April number.
So we'll wait until after the second quarter to take a look at that full year cat number but for US. It really is about spring storms not whether they occur on the last day of March or the first day of April .
Okay. That's really detailed and helpful. My second question is on supplemental supplemental excuse me you had really good earnings there and you raised the full year guidance as a result of that.
I think you've previously talked about a benefit ratio of kind of moving towards 43%, which is the long longer term average, but do you see an enduring changes post pandemic that that you might find sticky and maybe allow you to see a lower benefit ratio going forward.
Let me start this is Brett.
Obviously in that space, We did guide at yearend two of higher benefits ratio and I think Matt has mentioned.
In prior calls that the first quarter I think we even had it in our talking points.
For the color commentary that traditionally the first quarter certainly for the employer sponsored is typically higher we finished as we said better or a lower benefits ratio I would say similar to marita. His comments on cats, it's one quarter. So we don't want to get overly.
Excited about that remaining at that lower level for the year as you acknowledged we did increase our guidance $5 million in that segment, but both the worksite direct and employer sponsored components of that segment are certainly performing at lower.
Fits ratios as we would expect we've been saying this for the past couple of years, we would anticipate the further we get out of the pandemic those ratios will revert to a more normalized ratio if you will.
So here again, we will look at those ratios at the end of the second quarter and see if we need to adjust the guidance, but certainly.
We took a $5 million of credit and increased our earnings in that segment.
Got it thank you very much sure.
Right.
This concludes our question and answer his question I would like to turn the conference back over to her.
Any closing remarks.
Thank you and we appreciate everyone, making time on a busy earnings day available through the remainder of the week. If there is any additional follow up questions. We do have plans to be meeting with investors over the next couple of months feel free to reach out, but we do hope to connect with everyone in and tuck again. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.