Q4 2024 Horace Mann Educators Corp Earnings Call
Good day and welcome to the Horace Mann educators fourth quarter, 'twenty 'twenty four investor call.
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Speaker Change: I would now like to turn the conference a little brothers the wall Vice President of Investor Relations. Please go ahead, Sir. Thank you welcome to Horace Mann's discussion of our fourth quarter and full year 2024 results yet.
Speaker Change: Yesterday, we issued our earnings release, and Investor supplement and Investor presentation copies.
Speaker Change: Copies are available on the investors page of our website morita.
Speaker Change: Marita has it right as president and Chief Executive Officer, and Ryan Grinning ear Executive Vice President and Chief Financial Officer will give the formal remarks on today's call.
Speaker Change: With us for Q&A, we have Steve Mcnamara and Mark Durocher before.
Speaker Change: Before turning it over to Marita I want to note that our presentation. Today includes forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
The company cautions investors that any forward looking statements include risks and uncertainties and are not guarantees of future performance.
Speaker Change: These forward looking statements are based on management's current expectations and we assume no obligation to update them.
Speaker Change: Actual results may differ materially due to a variety of factors, which are described in our news release and SEC filings.
Speaker Change: In our prepared remarks, we use some non-GAAP measures.
Speaker Change: Reconciliations of these measures to the most comparable GAAP measures are available in our investor supplement.
Marita: I'll now turn the call over to Marita <unk>.
Marita: Thanks, Brendan and good morning, everyone.
Speaker Change: First man deliberate a record fourth quarter with very strong results that showcase the earnings power of all of our businesses.
Speaker Change: Before we dive further into the details I want to comment on the recent wildfires in southern California, our thoughts are with those affected by these devastating events. Our claims team is working with our affected policyholders to provide quick and compassionate assistance.
Speaker Change: Delivering on our promise of distinctive service.
Speaker Change: As a partner to the fire fighting community. We deeply appreciate the heroic efforts of the first responders serving their communities.
Speaker Change: Ryan will provide more details later in the call, but our current estimate of direct policyholder losses is in a conservative range of $5 million to $10 million.
Speaker Change: Turning to this quarter's results yesterday, Horace Mann reported record fourth quarter core earnings of $1.62 per share and 93% increase over prior year.
Speaker Change: Full year 'twenty 'twenty, four core EPS of $3.18 more than double our 2023 earnings and core return on equity of eight 8%.
Speaker Change: In 'twenty 'twenty four we did exactly what we set out to do restore P&C profitability, while positioning Horace Mann for sustained profitable household growth.
Speaker Change: Specifically from a bottom line perspective in property and casualty re reported a full year combined ratio of 98% a 15 point improvement over prior year.
Speaker Change: We are clearly seeing the benefit of the significant rate increases implemented over the last three years. In addition roof rating schedules have been implemented and are most wind and hail prone states with the new terms and conditions taking effect at renewal.
Speaker Change: These include required minimum wind and hail deductibles.
Speaker Change: From a topline perspective premiums and contract deposits increased 8% over prior year P&C net premiums earned increased 14%.
Speaker Change: In addition, we grew sales by double digit percentages in auto individuals' supplemental and lifelines by investing in our agency force and lead generation capabilities.
Speaker Change: Net investment income increased over prior year due to the strong core fixed income returns a benefit of the continued higher interest rate environment well underperforming in the first half of the year. The commercial mortgage loan fund portfolio contributed $17 million in the second half exceeding our mid year estimate.
Speaker Change: $10 million to $12 million.
Speaker Change: These results clearly illustrate the significant efforts taken to restore P&C profitability as well as the strength of our multiline business model through various business cycles.
Speaker Change: This strong foundation enables us to now concentrate our focus on driving sustained profitable growth and continued increase in shareholder value.
Speaker Change: We are guiding 2025 core earnings within the range of $3 60 to $3 90 per share with a shareholder return on equity of at least 10%.
Speaker Change: With more sustained profitable growth, we have the opportunity to drive return on equity even further into the double digit range.
Speaker Change: Our strategy to accomplish this is twofold maintain business profitability, while strategically investing in driving profitable growth.
Speaker Change: Let me start by talking about target profitability by segment.
Speaker Change: In property and casualty our focus is to reach a mid ninety's combined ratio, while mitigating earnings volatility in the property line for.
Speaker Change: For both auto and property, we will continue to take rate as needed to keep pace with anticipated loss trends likely in the mid single digits for 2025 on a blended basis.
Speaker Change: We continue to leverage industry, leading tools to better model severe weather risk to better manage property exposure.
Speaker Change: In life and retirement, we expect the steady earnings contribution from this segment to continue bolstered by that very strong investment yields we have achieved in our core fixed income portfolio.
Speaker Change: The 20th twenty-five outlook for our commercial mortgage loan funds and limited partnerships portfolios remains conservative but represents an improvement over 2024.
Speaker Change: In supplemental and group benefits, our pretax profit margin remains above our profitability targets due to lower policyholder utilization. Our expectation is that utilization will continue to trend back towards more typical levels with time and as we continue to grow this business.
Speaker Change: Our initiatives to improve Horace Mann's products distribution and infrastructure continually evolve to better meet the needs of our market.
Speaker Change: With profit restoration complete our product focus will turn to operational efficiencies and product enhancements. Later this year, we will introduce our next generation cancer product and our individual supplemental line, which will build upon that flagship product and include new benefits that reflect the advancements in <unk>.
Speaker Change: Cancer treatments. In addition, we continue to make investments to modernize our P&C pricing processes to reduce cycle time and give our business the flexibility to respond even faster to changes in trends.
Speaker Change: To further our distribution effectiveness, we are continuing to invest in our agency force and successful lead generation strategies recently, we rolled out our state of the art customer relationship management platform catalyst to our exclusive agency force and internal teams.
Speaker Change: This tool Leverages advanced technology, and AI to drastically simplify workflows and enhance customer interactions with features like predictive analytic latex digital documentation immigration and streamline marketing capabilities. This investment equips agents with more sophisticated.
Speaker Change: Holes to focus on building customer relationships and their agencies in 2025 and beyond.
Speaker Change: Our agency force remains strong in 'twenty 'twenty four we grew our points of distribution and across the board. Our agents are more productive over the past year agency production is up 10% and average age and income is up 20%. Many of US spent last week with agents at our annual sales conference and morale is strong.
Speaker Change: On the infrastructure front, we continue to make investments in technology to enhance the operational effectiveness of our business for example, and the individual supplemental line. We are nearing completion of straight through processing capabilities, which will automate and accelerate many elements of the sales cycle.
Speaker Change: To close our 'twenty 'twenty four performance was very strong and illustrated what our multiline niche market business model can achieve with solid profitability across the enterprise.
Speaker Change: By executing on our strategic and scalable growth strategy, we will achieve our 2025 goals of a larger share of the market record core earnings and a sustainable double digit shareholder return on equity.
Ryan Grinning: I'll now turn the call over to Ryan.
Ryan Grinning: Thanks, Marita today, I will add some color to the fourth quarter and full year results as well as discuss our 2025 guidance.
Ryan Grinning: At the corporate level full year 2024 core earnings of $132 million or $3.18 per diluted share was more than double the prior year result core return on equity of eight 8% was a 4.5 point improvement over 2023.
Ryan Grinning: Record fourth quarter core EPS of $1.62 a.
Ryan Grinning: 93% increase over the prior year reflected both the profitability restoration, we completed in the property casualty segment as well as each segment performing at or above our expectations.
Ryan Grinning: For 2025, we are streamlining our corporate guidance to focus on a more holistic view of the earnings power of the total enterprise along with the long term profitability targets for the individual businesses.
Ryan Grinning: You can see the guidance details in our investor presentation on page 12.
Ryan Grinning: As Marita mentioned, we expect our core EPS in the range of $3 60 to $3.90.
Ryan Grinning: A double digit return on equity.
Ryan Grinning: Guidance includes total net investment income in the range of $470 million to $480 million.
Ryan Grinning: In our managed portfolio, we expect net investment income between $370 million to $380 million, which reflects the continued benefit of the higher interest rate environment as well as conservative expectations for commercial mortgage loan and limited partnership returns that are an improvement over 'twenty 'twenty four but room.
Ryan Grinning: Main below historic averages.
Ryan Grinning: Full year 'twenty 'twenty four reported commercial mortgage loan in the limited partnership returns were 3.42% and $4 six 5% compared to full year 'twenty twenty-five forecasted returns.
Speaker Change: <unk>, 6.25% and 7.25%.
Speaker Change: We are assuming catastrophe losses of 90 million or about 11% of the net earned premium for the full year.
Speaker Change: This estimate is in line with our five year historical average on an exposure weighted basis and reflects the expected benefits of the underwriting actions, we've taken to reduce earnings volatility and property.
Speaker Change: As a reminder, our catastrophe losses tend to be weighted to the second quarter, which typically represents about half of our annual cat losses.
Speaker Change: The California wildfires will be a first quarter 2025 event.
Speaker Change: As Marita mentioned, our caressed admit of direct policyholder losses is is in the range of $5 million to $10 million as we are underrepresented in the L. A area relative to our statewide market share.
Speaker Change: Turning to 2024 results by segment.
Speaker Change: In property casualty, we clearly see the success of our multi year profitability restoration strategy of rate and non rate underwriting actions reflected in the results.
Speaker Change: Full year core earnings for the segment were $49 1 million and 85 million dollar improvement over the prior year.
Speaker Change: Annual net written premiums of $779 3 million increased 13, 9% over prior year, primarily on higher average written premiums.
Speaker Change: The reported combined ratio of 97, 9% improved 15.4 points over prior year, primarily reflecting improved underlying results as well as favorable prior year development.
Speaker Change: Slightly lower catastrophe losses.
Speaker Change: We released $29.5 million in prior year development in 2020 for.
Auto releases were $15 2 million.
Speaker Change: Property was 14.3 of which $10 three was in the fourth quarter.
Speaker Change: It was related to favorable severity from accident years twenty-three in Pryor.
Speaker Change: For the full year, the majority of releases where in shorter tail coverages like auto property damage and property, where we're seeing the benefit of lower severities and improved claims processes.
Speaker Change: Full year catastrophe losses were $94 9 million compared to 97.6 a year ago.
Speaker Change: This represents a 12 eight point impact on the combined ratio.
Speaker Change: More than 25% of the full year catastrophe losses were related to hurricane Helene.
The P&C underlying loss ratio of 61.9% improved 9.3 points over the prior year, reflecting both higher average premium and lower non catastrophe weather losses.
Speaker Change: Full year segment sales were strong at $100 9 million or 29% increase over the prior year.
Speaker Change: In auto net written premiums of $497 million increased 11, 8% over the prior year.
Speaker Change: The combined ratio of 98 point for improved 13.3 points, primarily due to higher average premiums.
Speaker Change: Despite substantial rate increases policyholder retention declined only one percentage point to 85, 3%.
Speaker Change: In property net written premiums were $288 6 million or 17, 7% increase over prior year.
Speaker Change: The combined ratio of 96 point for improved 19, seven points, reflecting improved underwriting results large largely due to favorable weather and favorable prior year development.
Speaker Change: Household retention remained steady at 89, 6%.
Murray: As Murray dimensions, our profitability target for the P&C segment is the combined ratio in the mid Ninety's, which we expect to achieve in 'twenty five as rate and non rate underwriting actions fully earn in across the book.
Murray: If you break the combined ratio down by product line, where underwriting auto to the mid nineties and property to 90% or below.
Murray: Yeah.
Murray: Also in the Investor presentation Appendix, we provide details on our 2025 reinsurance program that renewed in January.
Murray: We were very pleased with the renewal process this year and risk adjusted reinsurance cost declined over 10% for 2025, reflecting our prudent approach to exposure management.
Murray: In life and retirement core earnings of $56 3 million were below prior year, primarily due to lower net interest margins.
Murray: The net interest spread on our fixed annuity business declined to 172 basis points compared to 218 in 2023.
Murray: This reflected lower commercial mortgage loan fund returns.
Murray: Our longer term target for net interest spread on our fixed annuity business remains in the range of 220 to 230 basis points.
Murray: Net written premiums and contract deposits of $573 9 million or a slight increase over the prior year and in the retirement business deposits in our core 403, B products remained strong and persistency was steady at 91, 4%.
Murray: In the life business annualized life sales increased 11, 8% over prior year and persistency improve slightly ending the year above 96%.
Murray: Moving to supplemental and group benefits.
Murray: This segment contributed 64 million to core earnings a 10% increase over prior year Q.
Murray: Q4 benefits and changes in reserves reflects a favorable impact from the annual reserve assumption review, primarily related to favorable morbidity in our group long term disability book.
Murray: As a result, the combined benefits ratio remains below our long term expectation. We continue to expect the benefit ratio to tick up with more normal utilization trends and as we continue to grow this business.
Murray: In individual supplemental net written premiums and contract deposits of $121 3 million, where a slight increase over prior year.
Murray: The pretax profit margin of 35, 7% was down a percentage point from prior year, but remains above our profitability target.
Murray: We continue to see very strong customer demand for these products and had record sales of $5 5 million in the fourth quarter.
Murray: Full year sales of $17 million or a 12, 6% increase over prior year and persistency remains strong at 95%.
Murray: In group benefits net written premiums and contract deposits of $133 2 million were slightly below prior year. The pretax profit margin of 17, 4% was very strong in covered lives grew to 838000 with strong persistency.
Murray: I also want to comment on a one time item. We have noted in our materials as noncore legacy commercial exposures.
As noted in our 10-K last year, we were named as a defendant in a litigation and presented with claims related to legacy commercial policies.
Murray: These commercial policies were issued as early as the 19 sixties.
Murray: Our previous ownership structure in business lines, which we no longer operate.
Murray: In the fourth quarter, we recorded $18 million of reserves in $2 million of expenses pretax related to these matters.
Murray: We believe the reserve selected is prudent conservative inappropriate to cover a wide range of possible outcomes.
Murray: Turning to investments full year net investment income on the managed portfolio of $357 6 million was slightly above prior year.
Murray: Let me break the results down into our three distinct portfolios.
Murray: Our core fixed maturities portfolio, which represents about 80% of our total investments.
Murray: Income of $287 million was up six 6% over prior year, our core fixed income new money yield in the fourth quarter was 5.38%, which exceeded the portfolio book yield by over 100 basis points.
Murray: In commercial mortgage loan funds income of $21 5 million was below prior year due to unfavorable valuation adjustments on the portfolio. During the first half of the year as required by equity method of accounting.
Murray: We believe we have reached the inflection point with significantly improved returns in the second half of the year.
Murray: For perspective commercial mortgage loan investment income in the first half of the year was about $4 million compared to $17 million in the second half.
Murray: In limited partnerships income of $23 3 million was the seven 9% increase over the prior year with strong results from private credit infrastructure related funds private and private equity, partially offset by lower returns in real estate equity.
Murray: At year end 2024, adjusted book value was $37 54.
Murray: Adjusted book value better shows the intrinsic value of our business by adjusting for both unrealized investment losses.
Murray: And net reserve re measurements attributable to discount rates.
Murray: We use adjusted book value when we talk about our core return on equity.
The ratio of debt to capital on a similarly adjusted basis was 26, 3% at year end, an appropriate level for our current financial strength ratings.
Murray: We remain committed to driving shareholder value creation through an annual dividend with a compelling yield and we will continue to opportunistically buy back shares when market conditions are favorable.
Murray: For the full year 'twenty four we repurchased 256000 shares at a total cost of $8 $5 million at an average price of $33.31.
Murray: We have about $26 million remaining on our current share repurchase authorization.
Murray: As we have stated before our first priority and the most accretive use of excess capital is to fund profitable growth.
Murray: In 2025, we are well positioned to strategically deploy funds on marketing technologies and tactics in a thoughtful way, while maintaining our disciplined approach to expense management.
Murray: In closing 2024 core earnings were among the highest in the company's history, including a record fourth quarter result.
Murray: We expect 2025 to be even better.
Murray: By capitalizing on the profitability improvements made to the business and fully leveraging our growth strategies and market knowledge, we will meet our long term goal of a sustainable double digit shareholder return on equity in 2025.
Murray: We are proud of our progress and excited for this next chapter for Horace Mann.
Murray: Before we turn to Q&A I want to mention that Horace Mann is planning to host an investor day in May at the New York Stock Exchange.
Murray: We will present, a deep dive into our strategic initiatives to drive sustained profitable growth with more detail on our go forward plans at the corporate level and by individual business lines will be providing more information on that soon.
Murray: Thank you operator, and now we're ready for questions.
Murray: Thank you we will now begin the question and answer session.
Murray: Ask a question you May press Star then one on your telephone keypad.
Murray: If you're using a speaker phone please pickup your handset before pressing the keys.
Murray: Your question. Please press Star then two.
Murray: Once again Thats Star then one if you have a question.
Speaker Change: And today's first question comes from Roma Burgers with Raymond James. Please go ahead.
Speaker Change: Hey, good morning could you talk a little bit about what gives you confidence in that email returns D N a whole returns improving.
Speaker Change: And then could you help us think about maybe quantifying the potential drag on the 2025.
Speaker Change: 2025 Guide EPS guide based on both of them over time. Thanks.
Speaker Change: Good morning, Wilma, it's it's Ryan.
Speaker Change: You know on CML, so as I said in prepared remarks, we do think we are at an inflection point and we're confident about the direction that that portfolio is going for us as well as the broader sector.
Speaker Change: You're always going to have property specific idiosyncratic risk. It's just the nature of the asset class, but overall, what we're seeing is we're seeing broad based valuation adjustments that impacted our returns in the first half of 'twenty four largely abate you know the economy remained strong values are actually going up for <unk>.
Speaker Change: Industrial properties and in many areas many geographies the multifamily story is quite good.
Speaker Change: So you know.
Speaker Change: We loaded 625 assumption and 25. This is about a 600 billion dollar asset class for us and.
Speaker Change: And if you think about it our cash returns that we disclosed in the Investor Investor presentation. For you are you know in the low eights at this point. So you can put 200 basis points on that but remember we're not out of the woods, yet so I feel pretty confident we're moving in the right direction and it's going to be a better year, but I still don't think will recover.
Speaker Change: You know all of that adjustment in 'twenty five.
Speaker Change: Hey, Thank you just one cats and then hopefully I can sneak in.
Speaker Change: Another question really quick but sharp.
Speaker Change: What's the 90 million for 25 versus just kind of aviation 24, I understand that the California, wildfires and there seems pretty manageable, but maybe just talk about.
Speaker Change: How much that changed from business growth versus some of the cat mitigation efforts you put in place.
Speaker Change: So the cat losses are actually down a little bit they were closer to 95 in 24, well months. So our pick on a dollar basis, it's a little lower than actual performance, but I don't know if.
Speaker Change: And you have to remember those numbers our exposure adjusted and they wouldn't keep they include the usual math that we would do every year. When we think about five and 10 year averages I don't know if you have anything to add to that mark.
Speaker Change: No I think you've got it exactly right.
Speaker Change: Generally.
Speaker Change: Look at our five and 10 year averages make adjustments for changes in exposures and planned actions that we have.
Speaker Change: Around any aggregation mitigation that we're doing as well as the impact of the booth schedule in that it that all plays and so I think what you are seeing is that number come down.
Speaker Change: Even as the overall exposure and maybe it's not.
Speaker Change: Rooftop count, but the exposures going up just because of the replacement costs are rising each year.
Speaker Change: Yeah.
Speaker Change: Yeah, and we feel very confident about the property underwriting and mitigation efforts, we have underway, whether it's underwriting whether it's coverage whether it's.
Speaker Change: Pricing, whether it's the models that we are bringing to bear in a pretty modern way we feel good about those efforts and we think they are reflected in the numbers that we've put forward for 2025 and feel even more confident our past 2025.
Speaker Change: Okay. Thank you.
Speaker Change: And then could you.
Speaker Change: If you ever can you maybe just give us some updates on how you're thinking about grow just more specifically on how you plan to execute on growing the different lines of business. Thank you.
Speaker Change: Yeah, you know one of the things Brian in his script mentioned, our Investor day in May and we're quite excited to be able to unpack with a little more specificity. The growth plans that we have for the business and obviously it was really important for us to show them.
Speaker Change: On the street the earnings power of.
Speaker Change: Our company and I believe this quarter is clearly showing that I'm building a multi line model a well diversified earnings stream, we knew that we needed to work hard like the rest of the industry on TNC profit restoration. So that you could see the true earnings.
Speaker Change: Our of the company and I believe this quarter demonstrates that.
Speaker Change: So for us, it's really exciting to be able to sit down with you in may and show you. All the work we've been doing behind the scenes and really laying out the capabilities required to drive that growth agenda strong growth numbers in 'twenty 'twenty four strong growth numbers.
Speaker Change: In the quarter.
Speaker Change: We are not.
Speaker Change: You know not paying attention to the competitive landscape we understand it.
Speaker Change: And we still feel very strongly that we can continue to.
Speaker Change: To grow this business the tools the capabilities. We're building are for the long haul, but we're really excited about showing you. How we think about that growth agenda in 2025 and certainly beyond.
Speaker Change: Thank you and our next question today comes from John Barnidge with Piper Sandler. Please go ahead.
John Barnidge: Good morning, Thanks for the opportunity.
John Barnidge: My question, the first one with industry pricing kind of approaching rate adequacy personal lines.
John Barnidge: Does this put more options on the table, particularly on the property side, where results are left less differentiated versus auto where they're the educator base is more of a differentiator with the strategic focus of the organization really being on reducing earnings volatility.
Speaker Change: Yeah, I mean, John what one of the things that's interesting for us as we have been.
Speaker Change: Ensuring educators for 80 years.
Speaker Change: Through every cycle the amount of data we have on these educators our intimate understanding of this group of folks you know really helps us navigate through cycles continue to grow our strong retention in this business I think speaks for itself and at the end of the day, if we don't.
Speaker Change: Ah educator, a reason not to beat with us they probably would prefer to be with the educator company and that's been our strategy all along it's never been about providing the lowest price our strategy isn't to sell on price and yet we understand the competitive dynamics of the marketplace and we know that it Matt.
Speaker Change: So I'm I'm really not sure how to give you anything else other than the fact that we've been doing it for a long time, we've navigated many cycles quite well I think the last one was quite different it was different for us it was different for the industry and we feel like we are back to a more historic level of profitability in that business.
Speaker Change: And feel strong that we all learned a lot through this and we may be conservative, but we feel really good about our dynamics going for it I don't know if you have anything to add to that mark.
Mark Durocher: Yeah, I think you said it well Marie that but I do think obviously for us and our educator clients looking at that the bundling of products is important to us and <unk>.
Mark Durocher: Property goes along with auto, but we want to be thoughtful about it from a property perspective, clearly that's a place to differentiate but we also have to be cognizant of.
Mark Durocher: The volatility in the aggregation issues. So for US. It is about you know offerings at total product suite, but at the same time filling in with what we might need with other third party partners.
Speaker Change: Where we can't do it because either we don't have the product or.
Mark Durocher: We don't feel great about our pricing or we have you know.
Mark Durocher: Potential concerns with how our aggregation may be filling up and we want to manage that volatility. So I think it is a holistic approach and I think it does help us differentiate a little bit from.
Mark Durocher: Maybe folks that are focused primarily on the commodity auto product.
Mark Durocher: And John I'll, just add this is Ryan we're targeting a 90 combined ratio were lower for that line and we feel that does provide an appropriate return for the business.
Mark Durocher: Thank you for those answers my follow up question any updates on changes to deductibles and roof schedules and impact you're starting to see on the business there can't help but notice the meaningful prior year reserve development the last couple of quarters.
Mark Durocher: Yeah, I mean, I love that question, John because we're actually seeing that hard work come through do you want to take that Mark.
Mark Durocher: Sure No I think we are both in what Youre seeing with prior year Reserve development, but also if you look at the fourth quarter.
Mark Durocher: I think it was a really good quarter I think there were a number of factors I'd say, we are seeing the impact of.
Mark Durocher: With shifts in you.
Mark Durocher: You know when deductible would be hail deductibles as well as the impact of the Blue schedule. The reschedule is is not yet countrywide, but it's in the most meaningful states in terms of.
Mark Durocher: We're talking 75% to 80% of our move losses come in those states and we're certainly seeing that impact as well as.
Mark Durocher: We certainly experienced lighter.
Mark Durocher: Lighter weather.
Mark Durocher: Everyone in the fourth quarter, we've also seen to some extent.
Mark Durocher: Some tempering of the inflationary impact so claims are settling.
Mark Durocher: At a lower rate than we might have expected coming into the year and lastly, I'd highlight some of the work that our claims team has done to get on top of.
Mark Durocher: Claim severity, especially in.
Mark Durocher: And notably and non weather water, which makes up a pretty.
Mark Durocher: Pretty good sized chunk of our ex cat losses, and we've put a lot of effort.
Mark Durocher: Into water mitigation, and we're seeing that pay off not only in our current quarter results, but I think that's also part of what we're seeing with what's driving prior year development that.
Mark Durocher: Our ability to get on top of those claims sat alone not see the same kind of reopen activity on them has helped.
Mark Durocher: Give us some confidence that you know.
Mark Durocher: Our reserve position.
Mark Durocher: Probably somewhat conservative and now that it's become clear.
Mark Durocher: We release those reserves.
Mark Durocher: Yeah.
Mark Durocher: Okay.
Mark Durocher: Thank you.
Speaker Change: Thank you and our next question today comes from Meyer Shields with VW. Please go ahead.
Meyer Shields: Great. Thanks, So too I guess frequency related questions. The first one is in supplemental.
Meyer Shields: The fact that theres less utilization than you'd model won't have any impact on demand.
Speaker Change: So mayor you know I think you bring up an important point or a good question around the utilization because we got a couple of questions on some of the supplemental reserve arms I should say benefit ratios.
Speaker Change: We report them in the supplement they reflect in the fourth quarter, Our annual reserve review for supplemental in group business.
Speaker Change: And I will say that the reserve releases very similar to P&C. They are reflecting the improved underlying business trends that we're seeing in the business.
Speaker Change: So if I step back and if I look at the pretty sizeable $9 8 million dollar reserve release.
Speaker Change: Release, and supplemental group and combine that with what we saw on P&C. That's about 35 cents on a net basis, you know of of reserve releases in the fourth quarter. So in the supplemental group business primarily in group, we are seeing more favorable morbidity experience. They don't if you step back.
Speaker Change: <unk>, we purchased M and L. A little over two years ago, and we took a pretty conservative and cautious approach.
Speaker Change: So the reserving methodology that type of business was new to us and so over the past two years, we've seen utilization trends be favorable to our pick but you've also seen that ridge macro trends be pretty favorable compared to historic averages.
Speaker Change: You know longer term I think you will see a normalization may not go all the way back, but we're targeting a high forty's benefit ratio for group and a low thirties for individuals supplemental and as you can see the demand remains really strong sales are good.
Speaker Change: I don't know well as Ryan said in the.
Speaker Change: The script.
Speaker Change: You know we had record sales in the fourth quarter and $5 5 million in the fourth quarter was strong for US 12.6 over prior year for the full year lift persistency in that 90 to 95 ish range. So I would say the demand remains strong it's a smaller business for us but.
Speaker Change: We are very optimistic about not only continued growth in the individual line, but another way to bring new educators and others, who serve that community to Horace Mann and starting their relationship with an individual supplemental. So we feel we feel good about individuals' supplemental demand its small but its.
Speaker Change: Good entre for folks into Horace Mann.
Speaker Change: No that's perfect that pulls it together very helpful and.
Speaker Change: And I think you've touched on this before but we keep on hearing about lower auto frequency maybe.
Speaker Change: Located with big rate increases where people are worried about getting canceled the profile small claim and I'm, hoping for a little bit more color on what you're seeing and how your pricing is set to be temporary.
Mark Durocher: Do you want to comment on that Mark.
Yes sure Marie.
Speaker Change: Thanks, Matt.
Mark Durocher: I don't know if I'm.
Mark Durocher: Seeing.
Mark Durocher: That phenomenon of less smaller claims because people are worried about pricing we have certainly seen.
Mark Durocher: Lower frequency.
Mark Durocher: Frequency in the fourth quarter was down about one point.
Mark Durocher: Over where it was in the fourth quarter of 2023.
Mark Durocher: However.
Mark Durocher: Some of that.
I would suspect is related to the aforementioned kind of that I'd mentioned on property with the lighter weather in the quarter.
Mark Durocher: That's certainly playing an impact so are our thought process on pricing on the auto side right. Now is we are expecting the aggregate loss trends frequency and severity blended together.
Mark Durocher: You know move down more towards the low to mid single digits.
Mark Durocher: Closer to the to the long term average and that's how we are.
Mark Durocher:
Mark Durocher: Planning our pricing at this point, we will watch it very closely and if it emerges and these frequency trends.
Mark Durocher: A link or at a lower level than we may adjust that pricing level down a little bit, but well like we always do we'll wait and see how that plays out.
Mark Durocher: Then necessarily be overreacting and.
Mark Durocher: Trying to drive market share just through.
Mark Durocher: This decreases our our focus on driving growth is going to all be about how do we get more at bats, while maintaining what we think is a fair and competitive price.
Mark Durocher: Yeah.
Mark Durocher: Okay perfect. Thank you so much.
Speaker Change: Thank you next question comes from Microlending well this is Sam.
Speaker Change: Please go ahead.
Speaker Change: Hey, Thanks, good morning.
Speaker Change: Good morning, you get you guys, it's been a bit of time, we've talked about kind of.
Speaker Change: The ability restoration in P&C and.
Speaker Change: It feels like a much better spot today than the past couple of years, you know Ryan you talked a bit about kind of commercial real estate and feel a little better there.
Speaker Change: If we zoom out and we think about kind of the guidance of $3 60 to $3 90, EPS for 25 can you talk a bit about kind of your your.
Speaker Change: Your confidence level in getting to that number versus 'twenty, four and 'twenty, three which felt like there was a lot more variability in both the industry and kind of what's going on at Horace Mann.
Speaker Change: And then kind of along alongside that as we think about kind of that that range of 30 or so yeah, what what's the bigger driver biggest driver ovarian is there a particular item maybe cats in P&C I don't know that might.
Speaker Change: It might be the kind of the largest unknown or the largest driver of where we end up.
Speaker Change: Hey, you know, Matt I think you when you asked your questions usually embed the answer in there and I think you did it again.
Speaker Change: You know I I think that we are very confident in our guidance for 2025 and.
Speaker Change: You know that we are conservative in our planning and in our assumptions and that remains I am very excited to get a lot of the variability behind us P&C restoration profit restoration in P&C was a big not for the whole industry.
Speaker Change: Three and certainly for us as well and with that you know catch up after COVID-19 all the various moving parts, we feel really good about where we are on in that business and you know again, it's a sum of our parts for us with profit restoration.
Speaker Change: In P&C and more predictability in that line added to the life and retirement ballast that is always there you can go back for as long as we've been doing life and retirement as a company look at the earnings power of that company and it is not cyclical or as cyclical as what you saw.
Speaker Change: See in the industry trends and PNC. So we feel very confident in our ability to estimate and predict that earnings stream from our life and retirement perspective, you saw a little impact from an investment income perspective, and that is beginning to work its way through as Ryan has said.
Speaker Change: As well and then you look at the strong earnings power of individuals' supplemental and group supplemental business, especially the way we do it in our targeted areas of focus and that is a good earnings producer very predictable for us. So I don't see a lot of very.
Speaker Change: The ability.
Speaker Change: <unk> in our earnings projections as we look at 2025 I would say, we're very confident in that range. You mentioned cats and you know the science is better we all know that predicting hurricanes has been something that the industry has gotten better at over time.
Speaker Change: I feel the industry is getting better with new tools in predicting convective storm activity. So andriy, one feels a little bit better about their cast cat estimates, but make no mistake about it if you didn't notice that December was pretty benign from a weather perspective.
Speaker Change: And a big part of many companies outperformance in P&C was a unprecedented relatively benign weather month in the month of December that tends to have you know a fair amount of ice and snow and other things that drive.
Speaker Change: At least underlying.
Speaker Change: Performance in the month, so weather and cats do remain something that the only thing you know when you put a number out there is it's going to be wrong, but I feel pretty good about that science getting better and better over time long answer to a short question, but I'd say, we feel we feel confident.
Speaker Change: In that range.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you and this concludes today's question and answer session.
Speaker Change: The conference back over to Brendan the wall for any closing remarks.
Speaker Change: Thank you I want to also mention that we will be attending a conference in March. Please let us know if you'd like to meet thanks and have a great day.
Speaker Change: Thank you Sir This concludes today's conference call.
Speaker Change: Thank you all for attending today's presentation.
Speaker Change: You may now disconnect your lines and have a wonderful day.
Speaker Change: Okay.
Speaker Change: [music].