Horace Mann Educators Corporation

Good morning, and welcome to the Horseman Educators Third Quarter 2023 Investor Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Heather Wetzel, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Horace Mann's discussion of our third quarter results. Yesterday, we issued our earnings release, investor supplement, and investor presentation. Copies are available on the investor's page of our website. Marita Zoraitis, President and Chief Executive Officer, and Brett Conklin, Executive Vice President and Chief Financial Officer, will give the formal remarks on today's call. With us for the Q&A, we have Matt Sharp, Mark Derochers, Mike Weckenbrock, Ryan Greenyear, and Steve McInerney. 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 used some non-GAAP measures. Reconciliations 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, Heather, and hello, everyone. Last night, we reported third quarter core earnings of $0.44 per diluted share, Again, highlighting the strength of Horace Mann's diversified business model. Net written premiums rose 9% with strong product sales across all three segments. Our supplemental and group benefits and life and retirement segments delivered strong earnings. In property and casualty, we are making progress on our plan to return the segment to profitability despite the continued impact of severe convective storm activity across the country. All segments benefited from the 22% increase in net investment income to a record $119 million. Brett will talk about the details of our outlook later in the call, but at a high level, we continue to expect a full-year core EPS of $1.20 to $1.45. We are successfully executing on our plans to drive profitable growth and capture a larger share of the education market. This progress was clear in both divisions during the third quarter's back to school season. We remain confident in our ability to achieve a return on equity near 10% in 2024. In the supplemental and group benefits division, we are seeing outsized growth as we invest strategically in new capabilities and strengthen distribution partnerships. The benefit of these activities will be seen even more over the coming years. In our employer sponsored line, where we sell to employers instead of individuals, we expect strong first and third quarter sales in this business line because of benefit year timing. This third quarter was in line with that expectation, with sales doubling over last year. School districts in particular use these offerings to provide a more robust benefits package to retain and attract staff. This fall, we were able to fully take advantage of new enrollment technology to make our group enrollment process more efficient and easier to navigate for educators. In addition, the Worksite Direct business, where we are selling directly to individuals, has returned to its pre-pandemic run rate with trailing 12-month sales at their highest level since we acquired NTA Life in 2019. In addition to our core educator niche, we have built on NTA's long history with others who serve the community to further grow this business. In the two years since we began a partnership with the International Association of Firefighters, business from their local affiliates has grown to nearly 25% of new sales. In the retail division, we are realizing the benefits of being fully back in terms of school access. in combination with the efficiencies of video interactions. For example, our agents can again offer in-person financial wellness workshops in the lead up to the new school year and reestablish relationships with individual educators. This was key to the 16% increase in retirement sales quarter over quarter. I was able to see this for myself when I spoke to more than a thousand educators at a back to school event in Rapid City, South Dakota in August. Besides helping those educators understand retirement options in their state, Horace Mann showed its support with contributions to classroom projects through DonorsChoose. We're excited to be leveraging improved school access, including placing agents in open territories. We are also gaining traction with a program to embed new agents in established offices. so they can better learn the business while supporting sales growth. Now turning to property and casualty and our strategy to return this business to profitability. In auto, we have reached the inflection point on the path to our targeted combined ratio as earned premium growth moved ahead of lost cost growth late in the third quarter and the combined ratio improved sequentially. Since the beginning of 2022, we have implemented an average of 19% increases in rate nationwide to address inflation and the return towards pre-pandemic frequency levels. In 2024, we are currently planning for an average of 12% to 13% in additional rate increases nationwide, but that plan will be continuously reevaluated to ensure we continue to address emerging loss cost trends. Our rate actions, along with non-rate underwriting actions, are keeping us on track to targeted profitability. As I have noted before, the property environment is challenging. Our plan to address the increased loss costs associated with the more severe and frequent weather events is multifaceted. As we said last quarter, our strategy includes additional filed rate, product changes, and enhanced modeling. In addition to rate, we also use inflation guard to make adjustments to coverage values to more accurately reflect current replacement costs. These actions have brought the impact on renewal premium to a range of 17 to 20%. As we noted last quarter, we expect to have a similar impact on renewal premiums in 2024. We continuously reevaluate the environment to ensure we are reacting quickly to changes in lost cost trends. In addition, we are implementing product changes, particularly in areas with higher frequency of adverse weather. This includes higher deductibles as well as terms and conditions changes like an updated age of roost settlement process. We are also integrating new sophisticated modeling tools to provide more localized insight into the impact of severe convective storms. This will assist us in making portfolio optimization decisions through rate, and underwriting actions. We continue to expect to deliver our long-term property combined ratio target of 92% to 93% by 2025. Let me take a step back to revisit how a healthy P&C business fits into our long-term strategy. As a multi-line provider for a niche market, our goal is to have forest man customers for life, offering the solutions to meet their needs throughout their life stages. We believe this creates enduring value for Horace Mann and for our customers. While we return the auto book to rate adequacy across the country, we are maintaining sales momentum to attract and cross-sell more educator households. Even with the rate impact on our property and casualty policyholders over the past year, we are seeing remarkably stable retention. One reason for this is that all carriers are addressing the current lost cost trends and But another is the value we provide to our educator customers in terms of both relevant benefits, ease of doing business, and the partnership of a local trusted agent. In fact, in the new year, we are enhancing our Educator Advantage program for auto and home customers, adding features and increasing the limits on coverages that are unique to teachers' needs, such as theft of property at school sponsored events. We are making solid progress towards our long-term objectives. Our diversified business delivers operational consistency, a solid balance sheet, and a compelling dividend. We are executing on our strategy to address the performance of the property and casualty segment. Our retirement and life business is solid, a steady contributor that helps us distinguish horseman with educators. And our supplemental and group benefits segment is exceeding our expectations in terms of both top and bottom line. Taken together, our business offers complete solutions to help school districts attract and retain quality staff and to help educators protect what they have today and prepare for a successful tomorrow. At the same time, we remain committed to keeping the education community at the center of everything we do. Just this week, we announced the five national winners of the Horace Mann Awards for Teaching Excellence in conjunction with the NEA Foundation. These educators are dedicating their lives to helping our nation's children succeed, and they serve as a reminder as to why we do what we do, taking care of those who serve our communities every day. In a year like 2023, the value of our multi-line approach is clear. We are meeting the needs of all of our stakeholders, helping our customers recover from loss, supporting our employees and agents, and creating value for our shareholders. The strength of our value proposition combined with the earnings potential of our business gives us the confidence that we can approach a 10% return on equity in 2024. Thank you, and with that, I'll turn the call over to Brett.