Horace Mann Educators Corporation 2026 Q2 Earnings Call

Please go ahead. Thank you.

Welcome to Horace Mann's discussion of our second quarter 2026 results. Yesterday, we issued our earnings release, investor supplement, and investor presentation. Copies are available on the Investors page of our website. Our speakers today are Marita Zuraitis, President and Chief Executive Officer, and Ryan Greenier, Executive Vice President and Chief Financial Officer. 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. 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 news release and SEC filings. In our prepared remarks, we use some non-GAAP measures.

Reconciliation of these measures to the most comparable GAAP measures are available in our investor supplement. I'll now turn the call over to Marita.

Thanks, Rachael. Good morning, everyone. Yesterday, Horace Mann reported another strong quarter with record second quarter core earnings of $1.17 per share, an increase of more than 10% over prior year. Core shareholder return on equity for the trailing 12 months was 12.8%. These results reflect continued strong operating performance across our diversified business and demonstrates the progress we're making against the long-term strategy we outlined at Investor Day. Our diversified business model continues to prove its value across a variety of economic and industry conditions. The investments we've made to strengthen our portfolio, improve execution, and expand our distribution capabilities are translating into consistent operating performance and keep us on track to deliver our three-year financial objectives.

As a result of our strong first half operating performance and our confidence in the outlook for the remainder of the year, we are increasing our full year 2026 core earnings guidance to a range of $4.60-$4.90 per share. This morning, I'll discuss the operating momentum we're seeing across the business, the progress we're making to strengthen relationships with educators, school districts, and other employers, and why we remain confident in our long-term strategy to continue delivering sustainable, profitable growth and long-term shareholder value. Turning to operating performance, the strength of our second quarter results reflects disciplined execution across the business. Property and casualty continued to perform well during the quarter. The property and casualty combined ratio improved seven points from the prior year period, reflecting the rate and non-rate actions we've taken over the past several years, together with generally favorable weather conditions and lower catastrophe losses.

At the same time, life and retirement and individual supplemental and group benefits continued to generate attractive returns and further diversify our earnings profile. Those results are supported by continued growth across the enterprise, reflecting the investments we've made to strengthen both our product offerings and our distribution capabilities. Total revenues increased 8% over the prior year quarter. Sales were particularly strong in individual supplemental and group benefits, up 44%, and in life, up 20%. The momentum we're seeing reflects the deliberate investments we've made in two areas. First, we continue to enhance our portfolio with products and solutions that address evolving customer and employer needs. Second, we're making it easier for customers to access those solutions by investing in our distribution capabilities, technology, and agent development.

In individual supplemental, our newest generation of cancer coverage continues to generate strong sales as it addresses the evolving protection needs of our customers. In group benefits, the paid family and medical leave enhancement we introduced alongside our short-term disability offering earlier this year continues to support strong employer demand and continues to be an important driver of new business. We're also seeing the benefits of our investments in distribution. Through continued investments in recruiting, training, and coaching, we've strengthened our agency force and are helping new agents become successful more quickly. Those investments are expanding our distribution capacity, supporting profitable growth, and contributing to the continued momentum we're seeing in life sales. The benefits of these investments extend across our business. In property and casualty, we continue to pursue profitable growth by focusing on markets and customer segments where we believe we can earn attractive long-term returns.

We're encouraged by the momentum we're seeing as we continue to grow customer relationships while maintaining the disciplined approach that supports our long-term strategy. Our approach to the auto market reflects the broader philosophy that extends across Horace Mann. We measure success by the strength and longevity of our customer relationships, not simply by quarterly sales or individual policy growth. Our relationships continue to be one of our greatest competitive advantages. Auto household retention remains steady, near 84% during the quarter, while customer retention across our other businesses remains near or above 90%. Those results reflect the trust our customers place in Horace Mann and value they see in the solutions we provide. Our relationships are built on a deep understanding of the educator community and a commitment to helping educators succeed both in and outside of the classroom.

We continue to invest in resources and solutions that strengthen our connections with educators while creating long-term value for our shareholders. We're continuing to expand how we connect with educators. Online quoting activity increased nearly 10% over prior year, and we continue to grow our points of distribution, creating more opportunities to introduce educators to Horace Mann and the solutions we provide throughout their careers. We're also expanding our reach through partnerships that allow us to meet educators where they are. Through our partnership with Crayola and the Disney Institute, thousands of educators have now completed professional development programs sponsored by Horace Mann. More recently, we announced a new relationship with the Women's Pro Baseball League to create unique experiences for educators, support women's sports, and celebrate the league's inaugural season.

We're also proud to have established the first Horace Mann Educator Excellence Award endowment in partnership with the Smithsonian Institution. This permanent endowment recognizes and celebrates outstanding educators while reinforcing Horace Mann's longstanding commitment to the profession we have served for more than 80 years. Our support of educators extends well beyond insurance products. During Teacher Appreciation Month in May, we celebrated educators nationwide through a variety of recognition and community initiatives. As students return to the classroom this fall, our annual Back to School campaign will once again provide educators with resources, classroom support, and opportunities to engage with Horace Mann, both locally through our agents and nationally through our partnerships and digital channels. The result is a business model built on trusted solutions rather than transactions. Today, more than one-third of educators nationwide recognize the Horace Mann brand.

That growing awareness strengthens customer acquisition, reinforces long-term relationships, and positions us to continue serving more customers with more solutions over time. Before I turn the call over to Ryan, I want to briefly reiterate one point. Today's guidance increase is entirely the result of the strong operating performance and disciplined execution we've discussed this morning. The progress we've discussed today reinforces our confidence in the strategy we outlined at our Investor Day. We remain focused on delivering our long-term financial objectives of a 10% compound annual growth rate in core earnings per share and a sustainable shareholder return on equity of 12%-13%. Our recently announced acquisitions further strengthen that strategy, expanding our ability to serve more customers and reinforcing our confidence in achieving those long-term financial objectives. Our strategy is delivering results today while positioning Horace Mann for continued success tomorrow.

We're serving more educators and employers, solving more customer needs over time, and building stronger, long-lasting customer relationships. Together, those advantages position us to continue delivering sustained profitable growth and long-term value to our shareholders. Thank you. With that, I'll turn the call over to Ryan.

Thanks, Marita. We've had a strong first half of 2026. The results we delivered, along with our outlook for the remainder of the year, support increasing our full-year earnings guidance to a range of $4.60-$4.90 per share. In updating our outlook for the balance of the year, we've also revised several key assumptions that underpin our guidance. Compared to our prior outlook, we've reduced our full-year catastrophe loss assumption, lowered our net investment income expectations, and increased our individual supplemental and group benefits blended benefit ratio assumption to reflect the continued strong growth momentum we're seeing across that segment.