Horace Mann Educators Corporation Stock

Good day and welcome to the Horace Mann Educators Second Quarter 2026 Investor Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Rachael Luber, Vice President, Investor Relations. 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, and 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 3-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 to $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 & Casualty continued to perform well during the quarter. The Property & Casualty combined ratio improved 7 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 & Retirement and Individual Supplemental & 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 & Group Benefits up 44% and in Life up 20%. The momentum we're seeing reflects the deliberate investments we've made in 2 areas. First, we continue to enhance our portfolio with products and solutions that address evolving customer and employer needs. And 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 & 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 remained 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 Professional 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 recognize and celebrates outstanding educators while reinforcing Horace Mann's long-standing 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 1/3 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% to 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. And 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 to $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 & Group Benefits blended benefit ratio assumption to reflect the continued strong growth momentum we're seeing across that segment.

Our updated guidance assumes approximately $75 million of catastrophe losses for the full year, total net investment income in the range of $465 million to $475 million with managed portfolio income of $365 million to $375 million; an Individual Supplemental & Group Benefits blended benefit ratio of approximately 42%; an interest expense and other corporate items of $35 million to $40 million. As always, our guidance reflects what we believe is a balanced view of the trends that we are seeing across the business and our expectations for the remainder of the year. I'll provide additional context across each of those assumptions as I discuss our segment results.

Before turning to the quarterly results, I'd like to briefly address the acquisitions we announced in July. The transactions are progressing as planned, our expectations remain unchanged and we have no additional updates to share at this time. The transactions are not reflected in our updated 2026 guidance as we do not expect a meaningful impact to earnings this year given our expectations for closing dates. During our announcement call, we referenced a 6- to 7-year tangible book value payback period. That metric reflects the stand-alone economics of the acquired businesses under the standard tangible book value dilution methodology.

Importantly, the ongoing earnings generation of the combined company is expected to replenish the reduction in book value associated with the transactions within approximately 1 year following closing. This clarification does not change the economics of the transaction. Beginning in 2027, we continue to expect the transactions to be immediately accretive to earnings per share and contribute approximately 100 basis points of return on equity accretion. Now let me turn to the quarterly results and the key drivers of our performance.

In Property & Casualty, core earnings increased 56% year-over-year to $26 million. The reported combined ratio improved 7 points to 89.6% reflecting favorable weather, lower catastrophe losses, favorable prior year reserve development and the continued benefits of disciplined underwriting actions. Favorable prior year reserve development totaled $7 million, including $5 million in property and $2 million in auto, primarily reflecting lower-than-expected claim severity. Underlying loss trends were generally favorable during the quarter.

In auto, frequency trends were favorable reflecting both the rate and non-rate actions we've taken over the past several years as well as broader trends affecting the personal auto industry. We continue to closely monitor the underlying drivers of those trends, including business mix, geographic exposure, weather patterns and driving behavior. And our outlook for the remainder of the year reflects what we believe is a balanced view of those underlying trends. As we've discussed in our updated guidance assumptions, we've reduced our full year catastrophe loss expectation from approximately $90 million to $75 million based on our first half experience.

At the same time, our outlook for P&C for the remainder of the year continues to reflect a balanced view of underlying loss trends and the normal variability, including seasonality, that we expect over the course of the year. From a premium standpoint, net written premiums were essentially flat at $212 million. Property premiums increased 6% reflecting higher average premiums with continued positive sales trends. In auto, our approach to growth remains disciplined.

We continue to prioritize profitable growth over volume focusing on markets where we see attractive long-term opportunities while maintaining our underwriting standards. Overall, the quarter reflects the continued progress we've made in strengthening the profitability and quality of our P&C portfolio. Those improvements are the result of actions we've taken over the past several years and continue to support our confidence in the long-term earnings potential of the business.

Turning to Life & Retirement. Core earnings were $17 million. Life sales increased 20% over the prior year quarter reflecting the continued success of the investments we've made in agent recruiting and productivity. Persistency remained strong at approximately 96%. In Retirement, contract deposits were modestly lower year-over-year primarily reflecting product mix and market conditions while fee income and strong persistency continued to support stable earnings. We continue to view the underlying fundamentals of the Life & Retirement business as strong and the segment remains well positioned to support our long-term growth objectives.

Turning to Individual Supplemental & Group Benefits. The momentum we've seen over the past several quarters continued. This segment generated another excellent quarter with continued demand across both Individual Supplemental and Group Benefits while continuing to produce consistently strong returns. Individual Supplemental continued to perform well during the quarter. Sales increased 5% reflecting continued demand for our enhanced cancer product while persistency remained strong at approximately 89%.

Group Benefits also delivered another strong sales quarter driven by continued employer demand for our paid family and medical leave enhancement introduced earlier this year. As I mentioned earlier, we've increased our full year blended benefit ratio expectation to approximately 42%. That change reflects the continued strong growth of the segment and the increasing contribution of paid family and medical leave to our overall business mix. As with many newer insurance products, we expect a period of elevated utilization as newly covered employees begin accessing benefits available to them.

That first year experience has been contemplated in our pricing and long-term return expectations from the outset. We also expect seasonality to become more pronounced as paid family and medical leave becomes a larger portion of the group business. Because a significant portion of our covered population consists of educators, utilization is naturally lower during the summer months when many educators are not actively working.

Consistent with that expectation, claims activity in July has tracked in line with what we anticipated and supports our confidence in the updated full year benefit ratio assumption. Importantly, nothing we've seen changes our expectations for the long-term profitability of the segment. A blended benefit ratio around 42% remains a very attractive level of profitability for this business. As the business continues to grow, including the addition of the group business we announced in July, we expect business mix to continue to evolve while maintaining attractive long-term returns.

Turning to investments. Total net investment income increased modestly over the prior year quarter. Within our managed portfolio, higher core fixed income and limited partnership income more than offset lower income from our commercial mortgage loan portfolio. As we discussed in our updated guidance assumptions, we've lowered our full year net investment income outlook to reflect the mixed impact of today's market environment across our investment portfolio.

While elevated interest rates continue to benefit reinvestment yields in our core fixed income portfolio, they also continue to pressure earnings from certain investment strategies. Our updated outlook reflects those conditions for the remainder of the year. Nothing has changed about our disciplined investment philosophy or the overall quality of the portfolio. We continue to maintain a high quality, well-diversified portfolio that is positioned to support stable earnings and attractive long-term returns.

Turning to capital. Our approach remains disciplined and unchanged. We continue to maintain a strong balance sheet, return excess capital to shareholders and invest in opportunities that support long-term profitable growth. During the quarter, we returned $15 million to shareholders through our dividend and we continue to have approximately $37 million available under our current share repurchase authorization. We will continue to opportunistically buy back shares when market conditions are compelling. That disciplined approach continues to create value for shareholders.

Tangible book value per share increased 10% year-over-year reflecting continued earnings generation and prudent capital management. Stepping back, today's updated guidance reflects the first half experience we've discussed across each of our businesses while maintaining what we believe is a balanced view of the assumptions underlying the remainder of the year. That updated outlook keeps us on track to achieve the long-term financial objectives we established at Investor Day, a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% shareholder return on equity.

Thank you. Operator, we are ready for questions.

[Operator Instructions] Our first question today will come from Wilma Burdis with Raymond James.

Can you talk about the pricing structure of Horace Mann's paid family medical leave business and how often there are opportunities to reprice?

Wilma, this is Ryan. The paid family medical leave business, when I think about the economic profile of that compared to the rest of our group offerings, the benefit ratio is higher, but that's offset by a meaningfully lower expense ratio. So net-net, the geography, if you will, of the profitability by line is a little bit different than the short-term, long-term disability in term life offerings. We do have an opportunity to reprice that annually. And I will say that the heavier utilization in the first half of the year was in line with our expectations and pricing assumptions.

Yes. And I think it's also important to point out, as Ryan said in his scripted remarks, that July coming in a little bit lower certainly is also in line with our expectations. So this is performing the way we had expected it to perform and in line with how we built our pricing and underwriting assumptions. I think it's also important to point out that this is not a stand-alone coverage. It's sold as part of our short-term disability product and that's an important thing to point out where you're combining the economics of those pieces.

And there's nothing dissimilar here than what you're hearing from others in this business as we all respond to the mandatory PFML offerings of states like Minnesota and others to come. So I think we've done a really good job thinking about this, combining it with a very solid profitable long-term approach here of a high-margin business and we feel good about where we are with this portion of that short-term disability offering.

Okay. And then can you talk about what increased the fixed annuity spread in the quarter? How the outlook is shaping up there? And then I guess on the other side of this question, what drove the factors of the decrease in the NII guidance? Is there any specific asset classes that you can give us a little bit more color on there?

Sure. Wilma, I'll start and Marita can add any additional color. The biggest driver of variability in the fixed annuity spread number is limited partnership earnings as well as commercial mortgage loan earnings. And the rebound this quarter, we had a particularly strong limited partnership quarter in our Life & Retirement segment. We had a number of venture capital investments that had very strong returns and we saw that come through. So the variability, if you will, in the fixed annuity, the improvement, a large portion of it was related to limited partnerships.

But stepping back and thinking about net investment income in the portfolio more broadly. The change to guidance was primarily due to expectations for certain alternative strategies that are more sensitive to a higher for longer interest rate environment. You've heard from other life carriers, we're seeing lower but positive returns on some strategies for us; private equity, infrastructure debt, real estate-related strategies; and for those we've incorporated lower, but positive anticipated returns for the remainder of the year.

But if you look at the portfolio in total, the interest rate environment that we're in today is quite constructive. Our new money yields for the core fixed income portfolio were 5.85% for the quarter. That's more than 100 basis points above the portfolio yield for that slice of our total portfolio and that's the workhorse. That's the bulk of our assets. This is the 18th quarter in a row where we've seen new money yields exceeding what's in the portfolio. So I'm optimistic for continued growth in net investment income as I look forward. But we wanted to calibrate our expectations within the guidance assumptions a little more closely for you.

Yes, I think you said that well. I don't have much to add other than the fact that it's a good NII story and this is the way the math works out for the remainder of the year. So as we looked at our guidance in total, we wanted to factor those thoughts into that.

And if I can squeeze one more in. Congrats on the deal with Medical Mutual of Ohio. Just to kind of I guess take it to a higher level, we calculated I think something along the lines of high single-digit EPS accretion there. Does that seem like it's in the ballpark? Is there anything we're missing plus or minuses? And maybe just kind of talk about how you see that playing out with EPS over the coming quarters?

Sure, Wilma. When I think about what that transaction does for us on an annual run rate basis, I think something in the neighborhood of $0.40 to $0.50 overall and that's really 2027 go forward. The timing of the closes of the transactions. The first one, the employer services business, that's with the EAP business. It's a recurring fee type business, quite attractive from an ROE and earnings perspective. But that closes in the fourth quarter. So we'll pick up 1 quarter of earnings, but we need to pay for the full amount of the transaction, that's $115 million at close. So the foregone investment income, interest expense; that offsets the earnings for that one quarter in 2026. So I think you're thinking about it in the right way and I hope that more granular specific guidance gives you a sense of how we've modeled it.

Yes. And although you asked about the math, I'd be remiss not to again reiterate the fact that this broadens our solutions platform especially when we think about that EAP business. When we survey educators, we learn that their #1 concern both for the individual educator as well as the school districts that employ them, that mental health and the stress created by the world around us is their #1 concern and this helps us bring that solution to school districts and the individual educators we serve as well as the broader employer population. It scales our distribution and brings us more points of distribution outlets and it expands our customer reach and brings us customers that aren't yet Horace Mann customers. So first and foremost, we're excited about the strategic lift. But as Ryan says, I think the economics speak for themselves.

[Operator Instructions] Our next question will come from Mike Zaremski with BMO.

Nice quarter. On just capital, should we be just turning off the buybacks in the meantime? I'm assuming there was a period you couldn't buy back with the M&A taking place this past quarter. But should we be turning that off in order to kind of pro forma provide leverage cushion for when you do spend money or is there any just kind of more direct guidance you want to give on that?

Yes. Thanks for the question. I'll start and then I can turn it over to Ryan on the specifics of what you're asking. But I think it's important to point out that our first priority remains maintaining a strong balance sheet and financial flexibility. And as we continue to advance our profitable growth strategy, those things are important and I think you saw with the recently announced acquisitions, the ability to do that. So that is our primary objective.

Yes. And Mike, when I think about buyback, it's a really important lever for us to return capital to shareholders. Our businesses produce, they're quite efficient from a free cash flow perspective and we have a 75% target free cash flow conversion. And the acquisitions we did or will close on as well as the growth in the more capital-efficient businesses like Individual Supplemental & Group, that will meaningfully enhance and grow that free cash flow conversion over time. And so what that does for us is it puts us in a good position, a position where we need to think about ways to return capital to shareholders.

So I wouldn't think of buyback as being an on or off switch. I think of it as being opportunistic. So we'll weigh it against other uses for the capital internally as well as market conditions. So we've got $37 million left on our authorization. You saw us be quite active in the first quarter with buyback. So we'll have to see what the market looks like.

And with strong performance, obviously increased flexibility for all of the components of our capital management strategy.

Okay. I think even though you're not giving a specific guidance, that's fairly clear. Okay. Maybe switching gears to Property & Casualty. Clearly excellent results continue on a profitability standpoint. I know there's still more work to do on organic policy growth. But I think you called out weather being a benefit. So obviously not going to run rate that. But the core loss ratio and especially PYD continues to be healthy. Any changes in loss trend views on either home auto or both? It seems like for the industry, trend appears to be better than expected. Any color there?

Yes. Ryan can give you loss trends specifics, but I'm going to sound a little bit like a broken record here. You mentioned organic growth in there. I don't necessarily look at organic growth as soft and more work to be done. I'm going to sound like a broken record, but our strategy is not a monoline auto strategy. When I look at our household growth and our household growth strategy that we laid out in Investor Day, we are growing households. In our script, we talked about a 10% increase in online quoting. We talked about increase in agents and our points of distribution.

And sometimes the new households that we bring in start with auto, but sometimes they start with 403(b) or they start with an individual supplemental policy. But specifically to auto, auto remains a meaningful part of our acquisition strategy. There's no doubt about that. And we are growing new business in targeted places where we can achieve our targeted combined ratio and where we see the ability to do that well. Our ex-California auto continues to grow. Our auto retention efforts are helping us keep existing business in a highly competitive market.

So I feel like our strategy is working and we're seeing solid steady retention across all of our product lines. I think it's important to note that the auto rate of decline continues to improve quarter-over-quarter, but we're not going to chase auto growth and sacrifice our disciplined approach to strong and steady earnings. And I feel like when you see these numbers and you digest these numbers quarter-over-quarter, you're going to understand what we're doing.

And then lastly to that, when you think about HMGA and our Horace Mann General Agency, remember that when we don't feel we can produce that new business auto policy at a long-term profit, we can take a fee and place it with a third-party carrier and not manufacture that auto. But when it makes sense for us to do that, we certainly can put that on our paper. And I think the strategy is working when you see these kinds of results.

Yes. And I'll take the loss trend component of your question. I mean the first half for auto was particularly favorable. Favorable weather as well as other factors we believe is driving the low single-digit frequency trends that we're seeing. In addition to that, we're seeing favorable severity on physical damage coverages. Our liability loss trend is in the mid-single digit. And so when I put it all together, our rate plan for 2026 of a mid-single-digit rate plan is on track to maintain the profitability on a go-forward basis. It's stable. It's in line with our targets. And when I think about second half of the year, we haven't seen weather so favorable like we did in the first half. So I would expect comp losses to normalize and we wouldn't expect and didn't plan for the favorable weather trend to continue.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Rachael Luber for any closing remarks.

Thank you for joining us today. We appreciate your continued interest in Horace Mann and look forward to updating you on our progress next quarter. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Good day, and welcome to the Horace Mann Educators Special Investor Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Rachael Luber, Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining us. Welcome to Horace Mann's investor conference call to discuss our announced acquisition of 3 complementary businesses from Medical Mutual of Ohio. Yesterday, we issued a press release and investor presentation outlining the transactions. 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. Reconciliations of these measures to the most comparable GAAP measures are available in our SEC filings.

I'll now turn the call over to Marita.

Thanks, Rachael, and good morning, everyone. As we continue to profitably grow Horace Mann, our approach is straightforward. We invest where we see the strongest long-term opportunities to create value. We build internally where we can create a differentiated best-in-class experience, and we partner externally when it expands our capabilities and accelerates execution. Today, we're announcing agreements to acquire 3 complementary businesses from Medical Mutual of Ohio, Employee Services, Reserve National and the Group Life and Disability business of MedMutual Life. Together, these transactions strengthen our Employer Solutions platform, expand our distribution capabilities and meaningfully increase our customer relationships.

They also accelerate progress towards our long-term financial objectives through immediate accretion to core earnings per share and shareholder return on equity. People sometimes ask whether we have an M&A strategy. The answer is no. We have a growth strategy. Our focus is on building a stronger company by serving more customers, providing more solutions and creating long-term value for shareholders. When we identify opportunities that accelerate that strategy and meet our financial return expectations, we'll pursue them. The strongest long-term customer relationships are built on solving meaningful customer needs. That principle has guided Horace Mann for more than 80 years, and it's exactly what makes today's announcement a natural extension of our strategy.

Before I go further, I'd like to welcome the employees and leadership teams from Employee Services, Reserve National and MedMutual Life, who may be joining us on today's call. Each of these organizations has built capabilities, customer relationships and expertise that we deeply respect. We're excited about what we can accomplish together, and we look forward to welcoming you to Horace Mann as we begin this next chapter. These transactions build on the foundation that has defined Horace Mann for more than 80 years. We remain an educator-centric company. We remain mission-driven. We remain focused on delivering solutions that help our customers protect what they have today and achieve long-term financial security.

And we partner with school districts and other employers to provide comprehensive benefits that help recruit, retain and support educators and other employees. None of that changes with these transactions. In fact, it strengthens our ability to deliver on that mission. It accelerates our ability to serve more customers with a broader set of solutions and broader distribution capabilities. As we discussed at Investor Day, our long-term growth strategy is built on 3 objectives: First, deepen relationships with the educator households we already serve; second, reach educator households where we do not yet have a meaningful presence; and third, thoughtfully expand into adjacent customer segments with similar financial profiles and protection needs of our educator-centric foundation.

These transactions advance those objectives while remaining true to who we are as a company. The strategic rationale is straightforward. We're strengthening our employer value proposition. We're expanding our distribution capabilities, and we're meaningfully increasing our customer relationships. Let me touch briefly on each. One of the strongest themes we've heard from school administrators and employer groups over the past several years is the increasing importance of providing comprehensive benefits to help recruit, retain and support employees.

That need continues to grow as employers respond to workforce shortages and increasing expectations around employee well-being. Our own educator research reinforces that trend. Mental health support consistently ranks among the areas educators say would make the greatest difference in improving their workplace experience. These transactions allow us to respond directly to those needs. By adding a differentiated employee assistance platform focused on mental health, wellness and workplace support, we become a more valuable long-term partner to employers and the employees they serve.

This is much more than adding another product. It strengthens our employer value proposition and positions Horace Mann to better serve school districts and other employers through a broader, more integrated benefit solution. The second strategic benefit is expanding our distribution capabilities. One of Horace Mann's long-standing competitive advantages is our distribution model. Our exclusive agency force is an important pillar of our value proposition. Our agents build trusted relationships with educators and their families and deliver meaningful solutions.

At the same time, we recognize that customers increasingly want the flexibility to engage with us when, where and how they choose. It's why we've been intentionally evolving towards a broader omnichannel distribution strategy, expanding our reach through complementary distribution capabilities while preserving the trusted relationships that define Horace Mann. These transactions meaningfully accelerate that strategy. They add more than 1,000 producing agents and brokers and strengthens our ability to serve customers across digital, agent and broker channels. The result is a stronger distribution platform that enables us to reach more educators, deliver more solutions and continue building long-term relationships.

The third strategic benefit is expanding customer relationships. We've spent a great deal of time over the past year discussing the importance of looking beyond individual products and policy counts and instead focusing on the households we serve and the long-term value of customer relationships. These transactions meaningfully accelerate that evolution. They add more than 1 million covered lives, more than 7,000 employer relationships and expands our reach into complementary customer segments whose protection needs and financial characteristics align well with our educator-centric foundation.

Those additional relationships create more opportunities to deepen engagement, introduce additional solutions over time and support sustainable long-term growth. Ultimately, that's why these transactions are such a strong strategic fit. It isn't about acquiring 3 businesses. It's about strengthening our Employer Solutions platform, expanding our distribution capabilities and creating more customer relationships that support the next phase of Horace Mann's growth. We've demonstrated through acquisitions like National Teachers Associates and Madison National that when we identify businesses that complement our strategy, we integrate them thoughtfully and create meaningful value for customers and shareholders.

These transactions build on that track record while advancing the long-term growth objectives we outlined at Investor Day. Ryan will walk through the transaction structure and financial details in a moment, but I want to leave you with one additional thought. Our approach to capital allocation is consistent. Our top priority is investing in opportunities that strengthen our business and create long-term profitable growth. Every investment we make is held to that standard, and these transactions reflect that same disciplined approach. Thank you.

I'll now turn the call over to Ryan.

Thanks, Marita. As you've heard, these transactions are a strong strategic fit that strengthens our Employer Solutions platform, expands our distribution capabilities and meaningfully increases customer relationships. I'll spend the next few minutes discussing why we also view it as a compelling financial transaction and a disciplined use of capital that accelerates long-term shareholder value creation and meaningfully improves shareholder return on equity. Our capital allocation framework has remained consistent.

The foundation is a strong balance sheet that supports the financial flexibility to invest through market cycles, pursue attractive growth opportunities and consistently return capital to shareholders. We don't view investing in growth and maintaining financial strength as competing priorities. The right growth investments strengthen both the earnings profile and the balance sheet over time.

That's exactly why we view this transaction as such an attractive use of capital. Under the terms of the agreement, Horace Mann will acquire 3 complementary businesses from Medical Mutual of Ohio in 2 separate transactions for a net purchase price of approximately $240 million. At approximately 10x estimated full year 2026 net income of the businesses acquired, the transactions represent an attractive valuation supported by the quality of earnings profiles, recurring revenue characteristics and long-term growth opportunities of the acquired businesses.

The valuation represents a disciplined use of capital that aligns with our long-term return objective. Importantly, our return expectations are based on the existing earnings power of these businesses and do not depend on realizing significant integration synergies to support the economics of the transaction. From a financial perspective, the transaction is expected to contribute approximately $20 million to $25 million of net core earnings and approximately 100 basis points of return on equity during the first 12 months following closing.

It is immediately accretive to core earnings per share and shareholder return on equity. Near-term tangible book value dilution reflects purchase accounting associated with goodwill and other intangible assets. We expect to finance the transaction with approximately $100 million to $150 million of revolving credit borrowings with the balance funded from excess capital. At closing, debt to total capitalization, excluding AOCI, is expected to remain below 30% within a level we believe is appropriate given the strength of our balance sheet, capital generation and current financial strength ratings.

Importantly, the transaction does not change our capital deployment strategy. We expect to continue investing in profitable growth while supporting our shareholder dividend and executing opportunistic share repurchases as excess capital is generated. Beyond the immediate earnings contribution, these transactions also accelerate progress against the long-term financial objectives we outlined at Investor Day. First, they support our growth initiatives by increasing the contribution from capital-efficient and low volatility earnings.

Greater contributions from individual supplemental and group benefits, along with recurring fee-based employee assistance program earnings, strengthen earnings diversification in our consolidated capital profile. Second, they advance our expense optimization objectives through greater scale. As we discussed at Investor Day, scale is an important driver of long-term operating leverage. These transactions expand our individual supplemental and group benefits platforms, allowing us to accelerate technology investments already underway, spread infrastructure costs across a larger premium base and continue improving operating efficiency over time. Finally, they enhance our capital optimization strategy.

From a regulatory capital perspective, additional mortality and morbidity diversification creates meaningful covariance benefits across our non-P&C businesses. Those covariance benefits more than offset the incremental capital required to support the group life and disability reinsurance transaction, creating additional flexibility to optimize our non-P&C capital levels over time. The transactions also strengthened free cash flow conversion through a greater mix of capital-efficient insurance earnings and recurring fee-based revenue, providing additional financial flexibility to reinvest in profitable growth while continuing to return capital to shareholders.

As I mentioned, our financial expectations are based on the existing earnings power of these businesses, and we did not incorporate significant operating synergies into our base case assumptions. Over time, we expect additional opportunities to leverage scale, optimize investment income and further improve operating efficiency. We view those opportunities as upside, not requirements to achieve the returns we've outlined today. That allows us to focus first on supporting employees and customers, maintaining business momentum and executing a thoughtful integration.

Stepping back, this transaction reflects the disciplined capital allocation framework that has guided Horace Mann for many years. It strengthens the long-term growth profile of the business, improves the quality of our earnings, enhances capital efficiency and accelerates progress towards the financial objectives we outlined at Investor Day. Just as importantly, it does so while preserving the financial flexibility to continue investing in profitable growth and consistently returning capital to shareholders.

And with that, operator, we're ready for questions.

[Operator Instructions] The first question comes from Wilma Burdis with Raymond James.

Congrats on the deal. Could you discuss any potential revenue synergies from the deal? Do you think the new 1,000 agents will be able to leverage existing Horace Mann's products and resources and vice versa? Maybe you could give us a little bit more color there. And then I just want to make sure that I heard you correctly that it sounds like the current assumptions do not bake in many, if at all, expense synergies.

Yes. Thanks, Wilma, and thanks for the congratulations. I can start and then Ryan can jump in on, as we said, the limited synergies that we've built into this and the upside we see, especially, as you said, from an expense perspective. From an agency perspective standpoint, I think it's important to break this down a little bit and talk about the component parts.

The employee services portion of this is very clearly connected to our educator-centric value proposition. Whether you're looking at it from an individual customer perspective, we hear and like we said in the script and we've talked about before, we hear from our educators that mental health and the pressure and stress that they have on the job as educators is a really big issue for them, #1 on many of our surveys.

And from an employer perspective, we hear that it is one of the main things that they worry about from attracting and retaining educators. So this capability is something that we have been looking to build a solution that we've been looking to bring. So very excited about what the employee services team brings to our value proposition, both to the individual customer as well as the school district and other employers that they serve.

So when I think about that, selling that -- those brokers that are out talking about this capability and selling it now on behalf of Horace Mann certainly expands our reach. We've been building omnichannel distribution capabilities, and all 3 of these help build that out. When you think about Reserve National and the individual supplemental business, a combination of exclusive agents like what we brought on from NTA as well as independent brokers, those are more distribution folks out there talking about who we are, what we do.

Obviously, it complements our individual supplemental business and really by putting those 2 individual supplemental businesses together under one umbrella, it certainly builds scale in a business that we've been building. And from a MedMutual Life perspective, adding scale to our group business and allowing, like you said, to get the expense synergies of that scale, obviously, very important to us as well.

So when we think about it, it has really doubled the customer relationships that we now have, clearly, expanded the distribution by probably close to 1,000 distribution sources out there. So I think you've really hit on it with your question that distribution is certainly a very big part of what we've done here. Ryan, do you want to talk a little bit about expense synergies?

Sure. Before I go there, Wilma, I'll just point out a fact that we've shared with you and others before. The individual supplemental channel that we currently have, 10% to 15% of our individual life new business flow is coming from that channel. And when I think about the distribution strategy of Reserve National, very similar exclusive agent model, complemented by broker, but I would expect to see over time, similar success for the individual life products sold through that channel.

Flipping to expense synergies, I think you and others appreciate that we're fairly -- we are transparent with our assumptions. We tend to be conservative. And this transaction reflects the $20 million to $25 million of net core earnings and 100 basis points of ROE accretion. That reflects bolting these transactions on. There's a limited amount of integration synergies that we would expect to get quickly. For example, with NTA and MNL, those acquisitions, we shifted the investment portfolio pretty quickly to our target model.

We would expect to do the same thing here. But beyond that, additional opportunity of accelerated growth, expense -- operational expense synergies and potential other opportunities to take advantage of our capital and scale like reinsurance recapture, for example, aren't contemplated in a meaningful way in our numbers. So we're pretty confident in the upside here, and we're excited about what we did.

Could you talk a little bit more about the transaction financing costs and how that factors into the $20 million to $25 million of annual earnings guide. I think we estimated around $8 million of after-tax interest cost and lost NII. We just want to know if that's factored into the $20 million to $25 million.

It is, Wilma. When I think about that, we tagged the $100 million to $150 million as potentially coming from debt or excess capital. As we continue to build a more capital-efficient platform, get better diversification, we talked about how that gives us more flexibility over time. So I think you should see us prioritize excess capital deployment first, which has a foregone net investment income component, as you correctly pointed out, as well as using the revolver to round it out. The terms of our revolver are SOFR plus [ 115 ]. That's about [ 488 ], [ 490 ] today. So I think you're thinking about it the right way.

And we feel really good about our profitability fundamentals, how we performed clearly in the first quarter for several quarters now, very strong prints from a profitability perspective. As that flows through the year, we've got until, obviously, the fourth quarter close on the Employer Services business, the first quarter close on the other businesses, it really gives us time to see that profitability picture flow through and then make the decision as to how much of this is financed versus how much of it is covered by capital on hand. So I think Ryan said that well, and we have time to see that play through, which is why it's that range of $100 million to $150 million from a financing perspective.

If I can sneak one more in. Just maybe talk a little bit about what was, I guess, most attractive to you about this deal? Was it sort of expanding into a more stable area? Was it the products, the distribution? I guess it's kind of all of it, but what would you look for in a similar deal down the road?

Yes. And similar deal down the road that you snuck in there at the end, we've said it over and over again, and we said it in the script, we don't have an M&A strategy. We have a profitable growth strategy. And in Investor Day, we laid out the 3 levers that we intended to pursue in our strategy of profitable growth, and we are pursuing all 3 of those levers. What I'm most excited about is the combination of these transactions accelerate all 3 of those levers. It increases penetration of educator households we currently have access to.

So we're bringing [ EAP ] capabilities to those households. It helps us gain access to educator households where we don't have an exclusive agent today or we don't have a footprint. So when you think about the Employer Services business, 70% of that business is straight down the middle of educators or others who serve the community. So these are customers that are clearly right in our core value proposition. And it expands our market to adjacent households where we believe our brand and our products and our services and our solutions resonate with those customers, like-minded individuals who need and want what we do as an organization. We said we would be very thoughtful as we thought about adjacent markets.

And when I think about the combination of these 2 strong individual supplemental business, it gives us the scale to build that out. We've learned a ton in the firefighter segment, for example, and that growth lever has been very successful for us. This is a complementary set of products and customers that are coming together with no channel conflict.

So that, to me, is also straight down the middle of bringing scale in a complementary way from a product perspective and expanding the distribution in a business that has been successful, that is highly profitable, we want to scale and we want to continue to grow. So that feels really good. And then when you think about what we're building in an employer value proposition, the MedMutual Life business does provide scale, does allow us to spread overhead and fixed costs -- and I think these are businesses that we know and do well.

We've been doing group life for a very long period of time even before the MNL acquisition, and we certainly have been building that group business with some good strong partners since the acquisition. So I feel like this is a 1, 2, 3 check the box of everything that we laid out at Investor Day with no channel conflict and complementary products and distribution.

The next question comes from Michael Zaremski with BMO Capital Markets.

Congrats. It's Dan on for Mike. Maybe first, just a quick one for Ryan. I know you called out some near-term tangible book value dilution. Could you just quantify that so investors get a better sense of the pro forma book value upon close?

Sure. Dan, thanks for the question. As I said in the script, one of our top priorities is to generate long-term shareholder value through growing tangible book value while also regularly returning capital through dividends and opportunistic share buyback, and that has not changed. I get your question about tangible book value dilution. Given the nature of these businesses, we would anticipate a meaningful amount of goodwill, especially from the fee-based [ EAP ] Employer Services business. And there will be some [ VOBA ] and [ VODA ] from the statutory acquisition of Reserve National.

We haven't finalized purchase accounting. But what I can tell you is approximately a year after close, we would expect tangible book value dilution of 10% to 12%. This reflects our conservative base case assumptions that I laid out. So we endeavor to do better than that and to grow earnings at a faster clip than what we've laid out in the base case, but we wanted to give you a marker, if you will, of what that looks like. The payback period using those conservative assumptions is 6 to 7 years, which given the mix of businesses here, recurring fee revenue, capital-light, high margin, we felt was an appropriate payback period at our conservative base case assumptions.

Great. And then maybe just switching gears just to the sale process at a high level, just curious if there are maybe multiple bidders for these assets and possibly just was the seller distressed or maybe just not the ideal operator to maximize profits like Horace Mann is?

Yes. What I would say is the best way to describe this is these businesses were not core to their strategy, and these businesses are businesses that we are in and are core to our strategy. So I would say it was a really good marriage for like-minded folks to come together and say, these are businesses that aren't core to us and are core to you, maybe we should have a conversation as to how we go forward and execute something like this, and that's pretty clear how it came up and how we got it done.

There is a follow-up question from Wilma Burdis with Raymond James.

On has follow-up could you go into a little bit more detail on the 100 basis points of ROE uplift? Can you just talk through how that, I guess, benefits from the covariance benefits if it does? And then how much of it is just that this is a higher ROE business versus your existing business?

Sure, Wilma. I think you hit on a number of the levers. What was attractive about these is they are higher-margin businesses. They're capital-efficient businesses. And so just tacking them on creates an ROE benefit given the profile, particularly with the recurring fee-based revenue of the Employer Services EAP platform. Secondly, we talked at Investor Day, we're in a unique position of being able to grow mortality and morbidity-based earnings in a pretty capital-efficient way.

And a lot of that stems from the large legacy fixed annuity spread liabilities that we have. And so finding a way to accelerate that and give us a better, more diversified platform means we can move our RBC targets down closer to peer medians as a result of the transaction. So really, it's a number of factors, Wilma, that get you there as well as the most obvious, we're going to deploy excess capital to go ahead and close on these deals. So I think you're thinking about it the right way, but it really is a combination of all 3 levers.

Thanks for your question and Yes. And then just -- yes, on the reinsurance transaction, what made you guys decide to do that as reinsurance rather than purchasing the legal entity as you did with the other 2?

Yes. The key reason there is that MedMutual Life will continue to offer some products that are not core to what we do, for example, [ MedSupp ], was not a part of this transaction, and it was the most efficient way to execute the transaction for them to be able to keep what they wanted to continue to keep and us not taking on businesses that aren't core to who we are. We're not in the medical insurance space and don't want to get in the medical insurance space. So this was the cleanest way for us to take on what we wanted to take on that was strategic to us and advanced the value proposition that we've laid out from the very beginning and allowed them to keep the businesses that are core to what they do and do well.

And then just one more. You talked a lot about the mental health benefit type product. I guess, like can you just talk about how that would be rolled out? And then I guess, along similar lines, is there a lot of -- what is the geography of this deal look like on the distribution side? Is there a lot of overlap? Is it geographically concentrated? Maybe just give a little bit of color there.

Sure. From Wilma, the geography -- so it really -- it cuts across the 3 businesses. So when I think about them, let me take them one at a time. The Employer Services business has a national platform. It does have some regional concentration in the Northeast and the Pennsylvania and New York, for example. Reserve National Insurance is headquartered in Oklahoma City, but they have a national footprint as well. So they are executing across the U.S. deep ties, if you will, in the Midwest, given where their headquarters is.

And on the MedMutual Life side of it, from a geographic perspective, it's quite complementary to a lot of the group life and disability offerings or customers that we already have. Our group platform today is concentrated in the Upper Midwest. A lot of MedMutual Life's customer base is in Ohio and some surrounding states around that. So we believe from a geographic perspective, these round us out and provide a nice compelling national footprint, if you will, when you take all 3 of them and kind of lay them across. Hopefully, that answers your question.

Yes. And because there's no channel conflict with product or distribution, I think these sit really nicely with each other.

This concludes our question-and-answer session. I would like to turn the conference back over to Rachael Luber for any closing remarks.

Thank you for joining us this morning. If you do have any follow-up questions, please reach out to Investor Relations, and we'd be happy to schedule meetings after our second quarter earnings release. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Horace Mann Educators' First Quarter 2026 Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Rachael Luber, Vice President of Investor Relations. Thank you, and over to you.

Thank you. Welcome to Horace Mann's discussion of our first 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. 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, Rachael, and good morning, everyone. Yesterday, Horace Mann reported record first quarter core earnings per share of $1.28, 20% above the record level of the first quarter earnings we reported last year.

Insurance and fee-based revenue increased 6% year-over-year, reflecting growth across our businesses. Life sales were up 17%, individual supplemental increased 11%, and group benefits delivered a record quarter with sales more than tripling year-over-year.

Core shareholder return on equity for the trailing 12 months was 12.7%. These results highlight the strength of our multiline business model and our ability to deliver consistent profitable growth across a range of economic and industry conditions.

We are maintaining our 2026 core EPS guidance of $4.20 to $4.50 and remain confident in achieving our 3-year strategic goal of a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% shareholder return on equity.

Today, I will discuss the highlights of the quarter and provide an update on our growth progress. Let's start with segment results.

Property and Casualty profitability remains strong. The combined ratio of 83.3%, a 5-point improvement over the prior year reflects lower catastrophe costs and improved underlying performance. P&C written premiums increased 5% and auto and property policyholder retention remained stable and consistently high relative to industry benchmarks.

Segment sales reflect our disciplined focus on profitable growth in a competitive auto market. We are prioritizing growth in markets where we see the strongest returns. Excluding California, which remains a more complex and highly regulated market for the industry, auto sales increased at a high single-digit rate. Countrywide, property sales increased 11%.

In life and retirement, core earnings increased 16% year-over-year, benefiting from lower mortality costs. Life sales increased 17% and persistency across both life and retirement remains strong. The individual supplemental and group benefits segment continued to deliver strong growth this quarter.

We continue to invest where we see meaningful long-term opportunity. Our approach is to build internally where we can deliver a differentiated best-in-class experience and to partner with leading third parties where it enhances our capabilities and speed to market.

In individual supplemental, we are investing in our distribution and product portfolio to support growth. Our enhanced cancer product continues to be a key driver of growth with sales doubling year-over-year and building on record performance last year. Across all products, individual supplemental sales increased 11% year-over-year. This high-margin, high persistency business also supports strong cross-sell opportunities.

Life is a natural adjacency for benefit specialists selling individual supplemental products. And today, approximately 10% of our life sales are consistently generated through that channel.

In group benefits, we are leveraging partnerships to expand our capabilities, including the recent implementation of a third-party technology platform that supports a fully integrated end-to-end leave management experience for employers and educators.

This investment underpins our paid family medical leave enhancement to our short-term disability offering introduced earlier this year in Minnesota.

We will evaluate opportunities to expand these capabilities into additional markets over time as adoption continues to grow. 13 states have enacted paid leave mandates with more proposals currently under consideration.

Employers offering paid leave benefits report higher retention, a key priority for school administrators. Consistent with this, our research shows that 1/4 of educators would be more likely to stay in their role with improved healthcare and protection benefits. Against this backdrop, group benefit sales more than tripled year-over-year, to $11 million.

While results can vary from quarter-to-quarter given the size and timing of our business, our first quarter sales nearly matched our total group benefit sales for all of 2025, highlighting the momentum we are building.

Our corporate expense ratio is up slightly over the prior year, but down sequentially. We manage our expenses closely and continue to expect a 25 basis point reduction over the course of 2026.

Turning to how we are expanding our relationships across the educator market. We are reaching more educators than ever before and continuing to build meaningful relationships across our target market.

As we have noted, unaided brand awareness among educators has increased to 35%, reflecting the impact of our investments over the past several years. We are building both awareness and affinity through partnerships with well-known trusted national brands and educational institutions.

In January, we sponsored Crayola Creativity Week, reaching more than 1 million educators through classroom and professional development activities.

We are also excited about our new partnership with Disney. We recently launched a continuing education program, a Heart for Service in Education, developed in collaboration with Disney and delivered through the Disney Institute with multiple sessions scheduled throughout the year. Each session brings together educators from across the country to participate in immersive service-focused development experiences.

We are seeing strong early engagement with the Horace Mann Club, our centralized platform providing financial wellness tools, classroom resources and educator benefits. Since launching earlier this year, thousands of educators across the country have already enrolled.

We are also in the midst of teacher appreciation month, where we continue to connect with educators through our Beyond Grateful campaign. Last year, we engaged 55,000 new educators during this event and expect another strong outcome this year.

In addition, we have expanded our digital reach through targeted audio campaigns on platforms like Spotify and Apple Music, meeting educators where they are. Over the past year, we have grown our points of distribution by 8% and continue to enhance the effectiveness of our marketing efforts as we scale these initiatives.

Before I turn the call over to Ryan, I want to underscore our commitment to disciplined capital management and long-term shareholder value. In March, our Board of Directors approved a 3% increase to our quarterly shareholder dividend, marking the 18th consecutive year of dividend growth.

In the quarter, we returned $33 million of capital to shareholders, including $18 million of share repurchases, a significant increase relative to recent periods.

As we've said before, our highest priority remains investing in profitable growth, and we remain confident in our ability to continue creating long-term value for our shareholders.

In closing, our strong start to the year reflects solid underlying performance and continued momentum across the business. We are investing where we see the most attractive returns and where it strengthens our ability to deliver a best-in-class experience for our customers, while maintaining expense discipline and executing against our strategy.

We remain confident in achieving our 3-year strategic goals of a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% shareholder return on equity.

Thank you. And now I'll turn the call over to Ryan.

Thanks, Marita. I'll focus on a few key takeaways from the quarter and provide some additional context on what's driving the results.

This was a very strong start to the year. We delivered record first quarter core earnings of $53 million or $1.28 per share, up 20% year-over-year with solid underlying performance across the business, continued margin improvement in P&C and continued growth in our higher return segments.

Core shareholder return on equity for the trailing 12 months was 12.7%. Overall, results are tracking in line with our expectations for the year, and we are not making any changes to our outlook.

Turning to results by segment. In Property and Casualty, core earnings were $39 million, up 46% year-over-year. The reported combined ratio of 83.3 points, improved 5 points year-over-year, reflecting lower catastrophe costs and improved underlying results. The $5 million in prior year development included $2 million in property and $3 million in auto, primarily driven by lower-than-expected claim severity, with claims settling below prior reserve expectations.

From a premium standpoint, net written premiums increased 5% to $194 million, primarily reflecting higher average premium. In Property, premiums were up 14%, while auto premiums were essentially flat, reflecting a shift in mix towards targeted growth markets. That's consistent with the approach Marita outlined, prioritizing profitability and focusing growth in markets where we see the strongest returns.

Auto profitability improved with the combined ratio at 89.2, reflecting strong underlying performance and retention remained strong. Property also performed well with a combined ratio of 74.3, supported by lower catastrophe costs.

While catastrophe losses and prior year development were favorable in the quarter, we also saw improvement in underlying margins. We continue to incorporate current loss trends into our pricing and underwriting, and feel well positioned given the actions we've taken over the past several quarters.

In Life & Retirement, results were stable and improving. Core earnings increased 16% to $9 million, primarily driven by favorable mortality. Life sales were up 17% with persistency remaining strong near 96%. In retirement, contract deposits were modestly lower year-over-year, primarily reflecting product mix and market conditions, while fee income and strong persistency continue to support stable earnings.

In Supplemental and Group Benefits, the story is about growth and continued investment. The segment contributed $12.6 million of core earnings and net written premiums rose to nearly $71 million.

Individual Supplemental delivered another strong quarter. Our enhanced cancer product introduced last year continues to be a key driver of growth, with sales up 11% year-over-year. The benefit ratio of 30.5 reflects favorable policyholder utilization trends and persistency remains above 90%.

In Group Benefits, results reflect the investments we've made, including the introduction of paid family medical leave in January, within our short-term disability offering in Minnesota. Premiums increased 4% to $38 million and the benefit ratio of 51.9% moved closer to our longer-term expectations.

Sales more than tripled year-over-year to $11 million, although results can vary quarter-to-quarter given the size and timing of the business.

Total net investment income on the managed portfolio was relatively stable year-over-year. Core fixed income performance remains consistent with some offset from the commercial mortgage loan fund and runoff that we've discussed previously, as well as limited partnership returns that were slightly below our full year expectation.

Limited partnership returns can vary quarter-to-quarter, and we remain confident in our full year outlook. We continue to make progress on expense optimization, with early benefits beginning to emerge. As expected, the majority of our targeted improvement will come in later years as scale builds, but we remain on track for approximately 25 basis points of improvement in 2026.

Our balance sheet remains strong, and capital generation continues to support both strategic growth initiatives and consistent shareholder returns.

In the first quarter, we repurchased approximately 420,000 shares at a total cost of $18 million, representing a meaningful increase in activity relative to recent periods.

We also returned $15 million to shareholders through dividends. We continue to prioritize investing in profitable growth while returning excess capital to shareholders.

Tangible book value per share increased 9% year-over-year, reflecting solid earnings and disciplined capital management. Stepping back, the quarter reflects strong underlying performance, improved profitability in property and casualty and continued growth momentum across our businesses.

Importantly, the drivers of performance this quarter, margin improvement in P&C, stable and improving results in life and retirement, and growth in higher return businesses, like Individual Supplemental and Group Benefits are all consistent with the framework we laid out at Investor Day, supported by continued progress in customer engagement and brand awareness.

We continue to execute against our strategy with a focus on disciplined underwriting, profitable growth and thoughtful capital allocation. We remain confident in our ability to deliver our 3-year financial targets, including a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% return on equity. Thank you.

Operator, we are ready for questions.

[Operator Instructions] We have the first question from the line of Jack Matten from BMO Capital Markets.

My first one is on the group business. I'm wondering if you could unpack further what's driving the strong sales growth. And I'm curious, over time, how significant of a contributor do you think the new paid family medical leave offering can be within that business?

Yes. Thanks for the question. When we think about our supplemental growth, both individual supplemental, quite frankly, and group, it really has been a very strategic product enhancement strategy. You heard in the script that we built our cancer product within individual supplemental and updated that offering, and we're seeing nice traction there.

And then on the group side, not only is it the new paid family leave connection to our short-term disability offering, but we also have about a 30% increase in the amount of benefit specialists out there and the work that we're doing on the supplemental side.

For paid family leave, I think it's just a really good example of thinking about our customer segment and what our customer segment needs. Bundling it with short-term disability was the right answer for us.

As you pointed out, it's been a meaningful contributor to the sales in the quarter. But our group business is still relatively small. So we're focused on building a sustainable pipeline. It's not necessarily going to be linear. This is going to be quarter-over-quarter for us as we think about growth.

And we thought about PMFL as both defense and offense. There are about 13 states out there that have included this in their mandate, if you will. We know our educators are looking for increased benefits. We see improvement in retention when we build out these products.

So defensively, in a state like Minnesota, adding that to our short-term disability offering allowed us to keep the good groups, the good schools that we have in Minnesota. But also on the offense side, it allowed us an edge for new customer engagement. And that's how we'll think about it as we think about the remaining states out there in our footprint and maybe a really good way for us to think about how we enter some new geographies as well.

So it's a good example of how we think about our customer segment building what they need. And when you build it, they will come, I guess, and that clearly is what occurred this quarter.

And Jack, this is Ryan. The only thing I would add is when I think about our ROE trajectory, growth in these capital-light, higher-margin products are a key component of our strategy to drive higher ROE in the future.

That's helpful. And maybe just one on the Life & Retirement business, which has thrown off healthy and stable margins over time. Just wondering about the top line growth outlook there. I think it's a little bit this quarter. I know part of that might be lower CML and LP returns. But any trends that you're seeing on the premium and contract deposit growth in that business that we should be thinking about?

Yes. Ryan can cover some of the numbers. But what I would say in Life & Retirement, we are seeing a 17% increase in Life sales. That's healthy. We're seeing more of our traditional agents in the game. That's also healthy. 10% of our Life sales now on a relatively consistent basis is coming from benefit specialists who, at the beginning of this integration when we brought on NTA and then later MNL, were predominantly in that individual supplemental space. Now, they are selling Horace Mann Life products, and it's amounting to about 10% of our sales there. So it's working very well.

And on the Retirement side, we always talk about that as our ballast. And I would say Retirement continues to be a very consistent, steady contributor to earnings.

Yes. And look, if you isolate for just sales, sales were up 7% in the first quarter for Retirement. We're attracting a few thousand new customers in the first quarter, opening new Retirement accounts with us. So like Marita said, it's an important product and an important entry point for many educators to begin their relationship with us.

On the bottom line, you correctly pointed out the commercial mortgage loan allocation. So as a reminder, our commercial mortgage loan funds are nearly entirely held within Life & Retirement, and Retirement has a larger allocation to them. So when there's some pressure there, you're going to see that in the fixed annuity spread number, and you can see that this quarter. But overall, the business is solid. It's steady, and it's an important earnings diversification tool for us.

And then if I could just sneak one more in on auto insurance. I think you referenced some challenges in California, offset by strong sales growth in other states. Just wondering, if you could elaborate on what you're seeing in California and your color for growth there.

Yes. Thanks for asking. It is -- when we think about auto, obviously, we think about all the states that we're in. But California specifically, when you take California out of our growth numbers, like we said in the script, we are seeing high single-digit growth in auto, which in this competitive environment for us, I think, is quite strong.

But California is highly regulated. It's complex. And we took an intentional conservative approach in the state. We remain active in the state. We've been working very closely with the department. And as we've talked about before, we have reached target profitability in all of our states except California, and California is dangerously close, if you will, to targeted profitability, and we feel very confident that we'll get there.

But as you can imagine, when you think thoughtfully about where you place agents, when you think thoughtfully about where you make marketing investments, when you think thoughtfully about the things you do intentionally to drive auto new business, California wouldn't necessarily be the state in which we were making those investments.

So it takes a while to ramp them back up. And we will continue to take a conservative and appropriately cautious approach to California. But we feel really good about the momentum that we're seeing in auto in this environment outside of California.

And like I said, California was intentional. I think it is a state that you need to be thoughtful and conservative and feel good about the work with the department and feel like we're getting close to California being like the rest of the states where we're wide open and ready to push.

We have the next question from the line of Wilma Burdis from Raymond James.

Can you talk a little bit more about how much of the good combined ratio in P&C comes from favorable claims experience and some of the variability there in the quarter? And how much is just, I guess, just more diligent underwriting you're going to stick around a little bit longer, especially given some others seem to be leaning in aggressively on pricing?

Wilma, thanks for the question. The combined ratio improved 5.4 points this quarter and was an 83.3 and both auto and property contributed to that improvement. Stepping back, about half of that improvement was weather related. We didn't experience as severe of weather activity in the first quarter, which benefited both property catastrophe and our non-catastrophe property results. But the other half reflects the disciplined rate and non-rate actions that we've deliberately taken to restore profitability and to get the book back to our targets.

We're seeing the benefits of the actions we've taken, whether it's terms and conditions, implementations of roof schedules, increases in deductibles, improved claims handling, that's all coming through our results. And we believe that's durable, that's sustainable, and we're pleased with the profitability in our P&C book.

Yes. And I'd add -- thanks, Ryan. That was a good layout there. I want to add on to the latter half of that as you were ending your question and you say, as others are powering up for growth or lower pricing.

I think it's important to talk about really how we think about this. I mean, clearly, it's a competitive market out there. Shopping activity is clearly up. And when others talk about powering up for growth, and we've said this before, we really don't think about it that way. We're powering up, but we're powering up the value that we're bringing to our customers. Customer engagement is up, brand recognition is up.

And when I think about auto, and that seems to be the basis of your question, we talk about insulated but not immune. We're not immune to the competitive environment that's out there, but we are insulated somewhat by our strategy. And growth is not one line or one state. We think about it much more broadly than that.

I mean, it is about us expanding the relationships that we have with educators and increasing that educator household count. And we're seeing strong results there. I mean, we talked in the script that, and we just mentioned that ex California being up mid-single digits in auto in this environment, we actually feel very good about that. We're excited about being able to bring more of these things to California as well.

But more importantly, when we step back with group benefits tripling, Individual Supplemental up 11%, Life up 17%, Property countrywide up 11%, the stable ballast we're getting from Retirement, the momentum is good. So we really don't think about ramping up or ramping down. We think about increasing educator households, and that's exactly what we're doing.

And when you add that to the customer retention that we're seeing and how healthy it is, low to mid-90s in Life and Retirement and Supplemental, near 90% for property, a decent 84% in auto, that -- those are pretty strong numbers. And I would say that does add up to momentum, but maybe it's our way, not necessarily the way a monoline auto writer would do it or some of the P&C-only writers that you cover.

Our story is a little bit different, but it is playing out consistently with what we laid out and against our internal plans, we're right where we wanted to be this quarter and feel strong about the result.

And I think you touched on this a little bit, but can you talk more about the strategy of, I'm going to call it, reinvesting back into your teachers via programs and donations, and how that fits into your overall capital plans? I definitely realize the importance of this. There's a lot of pressure on classroom budgets. And it seems like you guys have leaned into some of these programs and donations given the great quarter results.

Yes. Thank you for the question. It's at the heart and the core of what we've always done as a company, but I feel really excited about how modernized that has become. And the work that we have done over the past few years, new marketing leadership, building out that team, we've done all the things necessary to make sure educators know who we are and pleased with the increase in brand identity, increased the number of educators who are engaging with us, maybe not even customers yet.

But when you think about good old-fashioned top-of-the-funnel marketing, I would say for the first time in our 80-year history, we're doing that and we're doing it well. We're engaging with more customers. We're partnering with like-minded companies.

Our Crayola creativity assessment that we're doing, bringing creativity assessments to the classroom, engaging educators and continuing education that's fun and not just maybe some of the boring continuing education that's required, right, in their profession.

They're really enjoying the engagement with us. We're meeting them where they are, and we're bringing meaningful value to those educators with the idea of, if you're an educator, you should be with the educator company. And we have many ways to start that relationship with the educator. But it starts with them knowing who we are, engaging with us and bringing them a solutions orientation, not just product. So that when they have a product decision, they're going to place that product with an educator -- with the educator company unless we give them a reason not to.

And our agent NPS scores, our customer surveys, all the indications are up. And we feel good that -- when you do really good top-of-the-funnel marketing and you're engaging with these educators, we feel good about the current momentum, and we feel good about the momentum to come. None of that changes that with -- we're in a competitive auto environment, we get it. But we have lots of ways to engage with these educators other than auto.

And we feel good that when we do engage in auto, other than intentional plans in California that are working as well, when we engage in auto, we get our fair share. We don't win business solely on price, and we don't lose business solely on price. Our proactive retention efforts are helping on the retention side, and we feel really good about where we are.

Makes a lot of sense. I know you touched on this a little bit earlier, but can you talk about what you're seeing in the overall annuity spread environment? And do you think it will stabilize over the coming year?

Thanks for your question, Wilma. Yes, this quarter I don't think is indicative of what we would expect for our fixed annuity spread. It was a 134% in the quarter, and we're obviously targeting a number higher than that.

For us, the core fixed income portfolio, which is the workhorse of the portfolio is performing quite well. This is -- the core book yield, I should say, is up 23 basis points year-over-year. Our new money yields were 5.38, and that's for the core investment-grade fixed income portfolio.

So I have been impressed with the investment team's ability to continue to find attractive investments without taking excessive risk. So I think we're going to stick to our knitting. We're going to look for slightly better LP returns. They were modestly below our expectations. They came in at 7% versus the 8% we would expect. And we'll watch commercial mortgage loans carefully. But I don't think there's anything -- I guess, I would say, I wouldn't expect the 134% to repeat, Wilma, I'd expect it to improve from here.

We have the next question from the line of Matt Carletti from JMP Securities.

Marita, I might ask you to follow on kind of part of your last answer specifically around auto and kind of the environment we're in. Can you talk a little bit about how you guys are using the agency to kind of help manage the environment? I mean, we can see kind of the PIF numbers in the supplement and understand that those are just kind of on Horace Mann paper sort of numbers. Has the agency been more active? Have you been placing kind of more business with partners as the environment changes? Can you just help us understand how you use it as a tool?

Yes. Thanks for that, Matt. I mean, the Horace Mann General Agency was started with the idea that, if we had an educator customer or someone who served the community and they needed coverage that we either didn't have an appetite for, think nonstandard or higher-valued home, the idea is that, if we didn't have the pricing sophistication and had no intention of building that, why send them down the road to an independent agent who, if that independent agent is good, is going to say, when was the last time someone looked at your life insurance needs, can I sell you something else.

So it was a very defensive strategy, if you will, and it's worked quite well. We are not seeing a large ramp-up in HMGA sales because of the competitive environment. Our close ratios have remained relatively consistent during this time. So it is working as it is intended.

We've said before, we're a large agent of Progressive and have a good relationship with Progressive. They have a broad appetite and go well beyond our educators and others who serve the community. So they're there for us. We have other very strong partners. And we have not seen a big change in the use of HMGA. It's good. It works very well for us and allows us to keep that educator household.

And maybe if those circumstances change and that customer is no longer nonstandard, we can pull that auto customer back. We've seen win back, if you will, where we're bringing some of those customers back to the Horace Mann portfolio, when it makes sense, when they match our appetite. And we do look at that book often to do just that. But I would say, pretty consistent as intended and working as a good strategic lever for customer retention, which is what it was set up to be.

Thank you. That was the last question. This concludes our question-and-answer session. I would now like to turn the conference back over to Rachel Luber for any closing remarks.

We appreciate everyone joining us on the call today, and we look forward to speaking with you. Thank you. Have a great day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Horace Mann Educators Fourth Quarter and Full Year 2025 Investors Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rachael Luber, Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to Horace Mann's discussion of our fourth quarter and full year 2025 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. 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, Rachael and hello, everyone. Yesterday, Horace Mann reported record 2025 full year core earnings per share of $4.71 and shareholder return on equity of 12.4%. These are the highest earnings. Horace Mann has ever reported and a powerful confirmation of the strength of our business strategy and execution. All segments are in line with or exceeding our profitability targets and top line momentum continues across the board. Total revenues were up 7% over prior year with net premiums and contract deposits earned up more than 7%.

Individual supplemental sales increased nearly 40% over prior year, while Group Benefits recorded a 33% increase. I'm proud of all of our Horace Mann's team members for their contributions in exceeding our 2025 goals. We delivered record core earnings while providing our deserving educator customers with distinctive service. Today, I want to review the highlights of our 2025 performance as well as add some detail to our financial targets for the next 3 years. We delivered record earnings in 2025 on the strength of solid underlying business performance and continued growth momentum. Results also reflected unusually light severe weather activity with pretax catastrophe losses of $62 million, contributing approximately $28 million or about $0.55 per share to core earnings relative to our original assumptions.

Let me walk through performance by segment. In Property and Casualty, the underlying combined ratio was 84.3%, a 5-point improvement year-over-year reflecting rate and non-rate actions we've taken to reduce segment earnings volatility. P&C sales increased 6% year-over-year policyholder retention in both auto and property remains stable and continues to compare favorably with industry peers. In auto, the reported combined ratio of 96.5% and improved nearly 2 points over prior year. Given we are in line with our mid-90s profitability target with solid retention, we are well positioned to navigate a competitive auto environment in 2026.

In Life and Retirement, top line momentum continued with record life sales in the fourth quarter, up 21% over prior year. These results build on the success we saw last quarter and reflect the continued improvement in our marketing campaigns, growing brand awareness, higher agent productivity and stronger engagement with educators. Retirement deposits increased 4% in the quarter and for the full year, net written premiums and contract deposits for the segment rose 7%. Supplemental and Group Benefits delivered record sales results in 2025, this high-margin, capital-efficient business generated 25% of core earnings, playing an important role in diversifying our earnings and reducing volatility.

Overall, this segment's benefit ratio of 37% continues to move toward our long-term expectation. Individual supplemental delivered record results with sales up nearly 40% year-over-year, reflecting strong demand, improved distribution reach and deeper customer engagement. Group Benefits also posted record sales up 33% over the prior year, supported by expanding distribution. Over the past year, we have meaningfully expanded our distribution organization and strengthen our marketing capabilities to support sustained profitable growth.

A few highlights. Through disciplined increases in marketing investment, and thoughtful execution of strategic partnerships, we have significantly strengthened Horace Mann's brand awareness in our target market. Unaided brand awareness reached 35% in 2025, up from less than 10% a year ago. We are increasing recognition within the educator market through partnerships with trusted brands like Crayola. Recently, we partnered with Get Your Teach On, an organization that provides top professional development for teachers and school leaders. Through this partnership, we will reach a highly engaged audience of more than 800,000 educators through e-mail, social, live events and other channels.

We continue to optimize our marketing programs to be more efficient and effective. New business customer interactions are up 37% in the fourth quarter, and we are realizing productivity gains from our spend. We continue to enhance our distribution channels to ensure educators can research, shop and purchase with us when, where and how they choose. We increased points of distribution by 15% across all channels. Upgrades to our website and an improved digital customer experience led to website traffic and online originated quotes more than doubling over the course of the year. We have also expanded our commitment to supporting the educational community.

This week, we introduced the Horace Mann Club, a new platform that lets educators access financial wellness tools, classroom resources and educator-specific perks in 1 place. The club creates a strong foundation for delivering resources, services and programs that reward, celebrate and give back to educators.

We will continue to expand the club over time, ensuring it meets the changing needs of educators and provides unique benefits to support them in and out of the classroom. In the fourth quarter, we donated $5 million to the Horace Mann Educators Foundation. Created in 2020, this charitable organization provides funding to support students and educators success. This includes grants to fund food and security programs, essential classroom supplies and educator professional development.

Looking ahead to provide a clearer baseline to evaluate Horace Mann's strategic progress, we have included a normalized 2025 core earnings per share exhibit in our investor presentation. This excludes the earnings benefit from catastrophe losses that came in below our original guidance assumptions as well as other items not included in management guidance. This normalized view aligns with how management internally evaluates performance and represents the appropriate baseline to compare our 2026 guidance. While 2025 catastrophe losses were unusually favorable, driven by fewer catastrophe events and lower overall activity, we do not expect a similarly low level in 2026 or subsequent years. Against that normalized 2025 baseline, our 2026 core earnings per share guidance range of $4.20 to $4.50 represents progress consistent with the financial goals outlined at Investor Day.

As a reminder, those goals include delivering a 10% average compound annual growth rate in core EPS and a sustainable 12% to 13% shareholder return on equity. To achieve these goals, we will continuously evaluate and balance growth initiatives and expense optimization. In times of outperformance, such as the record year we had in 2025, we may choose to accelerate investments in growth initiatives. Last year, we accelerated investments in marketing, infrastructure improvements for distribution force and product and distribution expansion in supplemental and Group Benefits. We will continue to thoughtfully invest in initiatives that expand our capabilities and support long-term growth.

And we are confident that these actions, combined with ongoing operational efficiencies position us to achieve our targeted 100 to 150 basis point reduction in the expense ratio. While more of that improvement is expected to be realized towards the back half of our 3-year plan, we have a clear line of sight to the actions and execution required to deliver on that goal. Our balance sheet remains strong and well positioned to support strategic growth and shareholder returns. We continue to take a disciplined approach to capital allocation, balancing reinvestment in the business with returning capital to shareholders. In 2025, we deployed $21 million of capital to share repurchases, the highest annual level since 2022, and the Board's additional $50 million authorization in May underscores our commitment to using share repurchases as a meaningful lever for shareholder value creation.

In closing, 2025 was a record year that underscores the strength of Horace Mann's value proposition for the educator market. By maintaining business profitability, delivering sustained profitable growth optimizing our enterprise spend and strategically investing in growth enablers, we will achieve our 3-year goals. We are operating from a position of strength. We have a strong competitive advantage and we have the confidence that we will deliver sustained market-leading growth and accelerate shareholder value creation. Thank you.

And now I'll turn the call over to Ryan.

Thanks, Marita. I'll walk through how we think about normalized 2025 earnings, outline our 2026 outlook in key assumptions and then review full year 2025 performance by segment. 2025 was a record year for Horace Mann with core earnings of $196 million or $4.71 per share, an increase of 39% over the prior year. Trailing 12-month core return on equity increased to 12.4%, reflecting continued strong underlying profitability across the business. Total net premiums and contract charges earned increased 7% and with total revenues also up 7% year-over-year.

As Marita discussed, 2025 benefited from a few favorable items that are not assumed in our planning framework, when we normalize for catastrophe losses that were more than one standard deviation below historic averages in 2025 as well as favorable prior year reserve development, opportunistic share repurchases and incremental strategic spend. normalized core earnings per share were approximately $3.95. This is in line with our original 2025 guidance range of $3.85 to $4.15 and represents the appropriate baseline to compare 2026. Importantly, even on a normalized basis, our businesses delivered strong underlying profitability with all segments in line or exceeding profitability targets and top line momentum continued across the board.

Against that normalized baseline, we expect 2026 core earnings per share to be in the range of $4.20 to $4.50 and a nearly 10% increase consistent with the 3-year financial goals we outlined at Investor Day. Guidance includes total net investment income in the range of $485 million to $495 million. In our managed portfolio, we expect net investment income between $385 million to $395 million, which reflects the continued benefit of higher new money yields in our core fixed income portfolio. Commercial mortgage loan fund returns of 6.5% and limited partnership returns of 8%.

Looking specifically at commercial mortgage loan funds, one fund, Sound Mark Partners is in runoff. And as I've mentioned before, we expect continued underperformance from this one fund, which will modestly pressure reported commercial mortgage loan fund yields. This impact is idiosyncratic, well understood and already reflected in our planning assumptions.

Turning to catastrophe losses. Our full year assumption of approximately $90 million reflects our established planning framework which uses a blend of industry standard catastrophe model losses and our own historic experience. Our approach to setting guidance has not changed and continues to provide a consistent basis for managing variability across cycles.

Now I'll turn to full year 2025 results by segment. In Property and Casualty, core earnings were $112 million, more than double the prior year. Net written premiums increased 7% to $830 million, driven by higher average premium. The reported combined ratio of 89.7% improved more than 8 points year-over-year, reflecting strong underlying results, lower catastrophe losses and favorable prior year development. The $19 million in favorable prior year development was driven primarily by lower-than-expected claim severity and continued improvements in claims handling across shorter tail property and auto coverages.

As we've stated, prior year reserve development is not assumed in our guidance, and we continue to approach reserving with a prudent long-term view. Auto net written premiums increased to $502 million, the combined ratio improved nearly 2 points to 96.5% in line with our mid-90s profitability target. Household retention remains near 84% and continues to rank in the top quartile relative to industry benchmarks. Property net written premiums increased 14% to $328 million, reflecting rate actions and solid sales momentum. The combined ratio of 78.3% improved significantly primarily due to lower catastrophe losses, while retention remained strong, above 88%. We completed our 2026 reinsurance renewal in January with very favorable results, including a nearly 15% reduction in rate online, we use that improvement to increase the size of our property catastrophe tower. Purchasing $240 million of coverage while maintaining a $35 million attachment point consistent with the prior year.

We purchased additional coverage to maintain our disciplined approach to risk and capital management which includes the recent update to air catastrophe models. Coverage at the top of the tower was attractively priced, and it was a prudent risk management decision. Importantly, even including the additional coverage, our total annual reinsurance spend remains flat year-over-year. In Life and Retirement, core earnings increased 13% to $61 million and net premiums written and contract deposits grew to $612 million, up 7% year-over-year. In the Life business, mortality experience for the year was modestly favorable relative to expectations. Life persistency remained strong, near 96%. In the retirement business, net annuity contract deposits increased by nearly 7% and persistency rose to 92%.

Moving to supplemental Group Benefits. The segment contributed $59 million of core earnings and net written premiums rose to $267 million. Individual supplemental net written premiums increased 4% to $126 million. The benefit ratio of 26.8% reflects favorable policyholder utilization trends. Persistency remained steady over 89%. Group Benefits net written premiums increased 6% to $142 million. The benefits ratio of 45.8% moved closer to our longer-term expectations. Total net investment income on the managed portfolio increased more than 6% year-over-year, primarily driven by strong limited partnership returns and improved commercial mortgage loan fund results. Core fixed income performance remained strong with a full year new money yields of 5.51%.

Sales performance was strong across the business with record results in both individual supplemental and group benefits. Individual supplemental sales increased 39% to $24 million and Group Benefits delivered record sales of more than $12 million, up 33% year-over-year. As Marita mentioned, 2025 was a year in which we deliberately reinvested to position Horace Mann for sustained profitable growth. At the same time, we took several targeted actions to optimize our cost structure and improve long-term efficiency. These included the termination of a legacy pension plan, the continued rollout of straight-through processing and automation initiatives and early productivity gains from technology investments. While some of these actions resulted in onetime costs in 2025, they are expected to generate meaningful ongoing run rate savings as we move forward.

In addition, late in 2025, we introduced an early retirement offering as part of a broader proactive workforce planning effort. As we continue to invest in new technologies, automation and advanced capabilities, this program allows us to thoughtfully align our workforce with the skills and roles needed to support our long-term business strategy. The early retirement offering provides flexibility for eligible employees who may already be considering retirement or another life transition while allowing the company to manage workforce planning in a proactive and respectful way. Expenses associated with the early retirement offering will be treated as noncore and excluded from core earnings. This program is expected to generate run rate expense savings that will more meaningfully impact 2027.

Stepping back, the combination of all of these expense optimization initiatives have resulted in more than $10 million of annualized savings, which we can both reinvest in the business and use to improve our expense ratio over time. Consistent with our Investor Day commentary, we expect the majority of our targeted 100 to 150 basis point expense ratio improvement to be realized in the later years of our 3-year plan as scale builds and these actions fully earn in. Roughly, that means a 25 basis point improvement in 2026. An additional 25 to 50 basis point improvement in 2027 and another 50 to 75 basis point improvement in 2028.

Our balance sheet remains strong. and capital generation continues to support both strategic growth initiatives and consistent shareholder returns. In 2025, we repurchased nearly 0.5 million shares at a total cost of $21 million at an average price of $41.83. In 2026, we continue to buy back shares. And through January 30, we have repurchased approximately 140,000 shares at a total cost of $6 million at an average price of $43.36. We have about $49 million remaining on our current share repurchase authorization. Tangible book value per share increased more than 9% year-over-year, reflecting strong underlying earnings, disciplined capital management and the value of our diversified business model.

In closing, our record 2025 results reflect the strength and stability of Horace Mann's earnings profile. We are entering 2026 from a position of strength with a clear growth strategy and strong momentum. We are confident in our ability to achieve our long-term financial targets, a 10% average compound annual growth rate in core earnings per share and a sustainable 12% to 13% core return on equity all while delivering sustained market-leading growth and accelerating shareholder value creation. Thank you.

Operator, we are ready for questions.

[Operator Instructions] First question comes from Jack Matten with BMO Capital Markets.

Question just on the distribution initiatives and the shift to more of a specialist model that you discussed in detail in the Investor Day last year. Just any perspective that you can share on how those initiatives are going so far, including the implementation? And then regarding the outlook for policy count growth, especially in the P&C business. I'm wondering if you think that trend line will start to improve more meaningfully as we head into 2026.

Yes. Thanks for the question. From a distribution perspective, I think 2025 will probably go down as our strongest year. We have strong sales momentum across all the businesses, and that is really coming from the distribution efforts that I think we laid out pretty clearly at Investor Day. From a distribution perspective, our brand awareness up over 35%. Our website traffic up significantly with the increase in digital experience that we provided to our customers. Our quoting from that website traffic is more than double what it was last year. Significant partnership with companies like Crayola and other similar-minded companies in the educator space.

Just a real concentrated effort, we are at record numbers in our agency force, up over 15% where we were last year across the board. Our traditional EAs selling our traditional products and then benefit specialists in the supplemental and group benefits space up record numbers as well. So more people selling the product, better support from a marketing and distribution perspective. And on all 3 of those growth levers that we outlined at Investor Day, we are really, I'd say, probably ahead of where we expected to be at this point, and you're seeing it come through in strong production momentum that we have across the board.

That's helpful. And maybe one just on the moving pieces regarding the EPS outlook for '26, which I know it implies double-digit growth on a normalized basis. And it sounds like you might expect that to then maybe accelerate into 2027 and beyond if you see CML returns closer to your long-term trend. And then you also mentioned some of the expense actions that you're taking to have more of an impact on 2027. I guess given those is it fair to expect kind of an accelerating growth trend over time, or are there other offsets that we should be thinking about? .

Jack, this is Ryan. Thank you for the question. Directionally, you're thinking about it the right way. When we laid out our financial targets at Investor Day, we said we would achieve a 10% annual earnings per share growth rate. And on a normalized basis, we're on track to do that this year. With that, we also said that we would expect accelerating top line growth as the investments we're making to generate increased sales and revenue growth come to fruition. And that revenue growth, we would expect to pick up over that 3-year period. And finally, we were -- I was pretty specific because we get a fair amount of questions around the timing of the expense initiatives earning in. And right now, we are using a lot of that savings to invest back in the business. We were very intentional about accelerating certain initiatives in 2025 to drive growth in all of our channels, and you're seeing signs of success there. And those savings I outlined for you kind of how to think about that in '27.

Great. If I could squeeze one more in, just on the catastrophe loss assumption in your guide, I think it implies to get a lower ratio as a percent of premiums than your prior expectation. Is that mostly reflecting the improvements to the reinsurance program that you've talked about? Or is there a meaningful kind of benefit from the kind of the terms and conditions changes that you've implemented in the property business as well? .

Yes. I think it's before I turn it over to Ryan for a little more of the detailed color there. I think it's important for us to just reflect a little bit on the 2026 guidance that I think we were pretty clear in our scripted comments, but it was very important for us to normalize 2025 earnings, especially as you pointed out, the unusual level of low cap as well as prior year development, which management does not include in its guidance and why we wanted to add a new exhibit to our investor presentation to make that very clear. And on a normalized basis, it is a 10% increase over a pretty strong number that we had even last year. So I'll turn it over to Ryan to see if there's anything more specific to your question .

Sure. Let me dive into both of those, Jack. On the cat, our approach to setting a cat target, it's kind of like predicting the weather literally. You're probably going to be wrong. But you -- we take a consistent year-over-year approach. We look at industry modeling. We look at our current footprint from a property perspective. We look at our historical loss experience. But we don't assume or under or outperformance based on 1 year's individual results. So said another way, we are expecting kind of a consistent approach with the $90 million of cat guide for next year. .

On prior year development, I just wanted to comment and be crystal clear, we do not include any prior year development favorable or adverse in our planning assumptions. We have a prudent quarterly approach. We call it like we see it. And while we understand that from a reserve perspective, the industry and us coming out of COVID had very unusual loss patterns to react to. And you saw the industry as a whole, increased reserves and over the last couple of years, you've seen us and the broader industry release. These large swings in reserves will normalize as we go back to a more normal loss trend, which is what we're seeing, we're confident that the reserve this outsized prior year reserve releases will begin to temper. I will say, when I look at the macro backdrop, there's a fair amount of uncertainty in terms of inflation trends, impact potentially from tariff and like other auto insurers, we do see the impact of social inflation in our numbers.

We're insulated but not immune. Think about our policyholders, not super high limits compared to commercial auto or high net worth type of books. But we do see that impact. So we're being very prudent, particularly on the liability coverages. And I'll highlight that the majority of our release in '25 was related to shorter tail or physical damage type of coverages. So I hope that helps. The last thing I would say is if you look at where the Street is sitting from a consensus estimate for prior year development, if you back that out, you are right within the midpoint of our guidance range for this year.

The next question comes from Matt Carletti with Citizens.

Marita, a question for you. I'm looking at your slides, Slide 13. It's where you kind of dice up the 8 million or so K-12 households into kind of where you are today, those you can currently access for those who don't have access to. And if I'm looking at kind of last quarter, right, there was a pretty big shift, almost 1 million households that kind of went from, you don't access to you currently access, kind of change that bucket. Can you talk a little bit about kind of what drove that? .

Yes. Thanks for the question, Matt. It's really been multidimensional and across the board. We started last year, as you pointed out and the slide pointed out at about 1 million or so predominantly educator households and ended the year close to 1.1 million households. That's 100,000 household increase, if you will. And that's kind of how we think of the world. We're not a monoline auto provider. We're a niche marketer to a homogeneous set of customers. We understand the market dynamics of the auto line, and we posted our best P&C combined ratio at a very long time.

For us, a lot of folks ask the auto-specific question. We do expect our risks in force to turn positive in the second half of this year. A little bit longer due to the competitive dynamics. Many of those auto customers we keep, we just placed them through the Horace Mann General Agency if we're not willing to go to the auto price that may be another competitor would set. So in 2025, we had strong sales momentum across the board in all businesses. We increased individual supplemental by 40%, Group by 33%. Life was, what, 8% and 21% in the fourth quarter. P&C was up 6% with auto being 5.5% of that. And that auto growth didn't come from customers where we reduced the auto rate to buy the business, if you will. Retirement deposits were up 7%. These are all new customers that have at least one product with Horace Mann that we can eventually cross-sell.

So for us, it's really about the investments that we're making in marketing and distribution, which I've already talked about that have driven some of the numbers that I just answered and are included in the script. So we feel really, really good about the momentum. The strategic partnerships that we're pushing, the amount of brand awareness that we've gotten by joining forces with companies like Crayola. The foundation donation that we've put out there to help with professional development for educators, classroom supplies and other things have really helped that reputational brand awareness and the fact that 1 in 3 educators on an unaided basis know who we are and are beginning to engage with us is pretty powerful.

The 3 levers that we outlined at Investor Day that are on that slide are the levers that our strategic priorities and the initiatives that support them are aligned to. We're getting better in the game that we're playing today, and you see that in the amount of agents that we have selling the product, the productivity of those agents, how quickly they get up to speed in that first layer in that second layer, entering new school districts where we've never been before by warming up that territory and using the things I talked about, so that when we put an agent in place, they know who Horace Mann is as opposed to that agent spending the first year building that brand awareness independently. It's really quite powerful. There may be sets of educators that are already engaging with Horace Mann electronically that now that agent can begin to wrap their coverages and build that relationship with Horace Mann around.

And then that third lever, we haven't really talked a lot about but the work that we're doing with homeschoolers and seeing home school employees, not big numbers yet, but really like the early signs there. The work that we're doing with alumni and these are universities that are spitting out educators and have large colleges of education. Those numbers, they're not in the tens of thousands yet. But they're in the thousands and really good start of momentum in that area. All that is driving that increase in educator household count that's driving this kind of momentum across the board. And I appreciate the question because I think that's what it's all about. And I feel really good about the strong momentum that we're seeing.

Maybe a question for Ryan just a numbers question. I could be wrong here, but I kind of recall when thinking about retirement, kind of a long-term target of like net interest spread of kind of 220 to 230 basis points. Is that still the case? Or I guess, said another way, what is the long-term target for kind of net interest spread in retirement? .

Matt, yes, that's a good question. The target you're referring to is one that we've historically put out there, and it's for our fixed annuity block. So the fixed annuity block is the preponderance of our retirement assets. And we do target a 200 basis point spread on that block. What I will say is we are -- we were running behind that in 2025. A lot of that was driven by the commercial mortgage loan underperformance. The majority of our commercial mortgage loan investments are in the retirement block.

In addition to that, when I think about limited partnerships, we had a very strong year, we had over 9% return on our LP strategies. The strategies that outperformed were private equity, in particular, and that is skewed more towards the P&C business. So P&C benefited from a very strong LP type of return. Longer term, we continue to target that 200 basis point for fixed. The overall profitability of the retirement business, we do have variable annuity as well as some fee-based retirement advantage products as well. And so those -- when I look totality of the product mix, we're comfortable in our at target profitability overall for that mix of business. And when I say target profitability, that's implying that we have returns in line or above our ROE targets.

The next question comes from John Barnidge with Piper Sandler.

My question is focused on the first one on the early retirement offering to align the workforce how many -- as a percent of the employee base, how many employees took that opportunity.

Yes. John, I think it's important first to mention the fact that it was only about 8% of our employees that would have been eligible for early retirement in the first place. We used a combination of tenure and age. So these were employees that would have naturally been considering retirement in the foreseeable future. So I think it's important to start with the purpose. The purpose of this was really to allow us to accelerate some workforce planning.

As you know, when you think about the future, where we're going, what we've built. I think what we've laid out very strategically as far as our potential and you're seeing that in the momentum, the skills required the future ability of the place is going to require us to hire some of those more future skills, if you will, as we look forward. And this offering allowed us to accelerate some of the retirement plans of our more tenured individuals. We got a pretty nice participation rate. We're very pleased with the numbers that we're seeing from this, and we feel like the right people chose to opt in to that ERO program. I don't know if you have anything to add to that, Ryan.

No, I think Marita summed it up well, John. And as a reminder, any costs associated with it because it was onetime nonrecurring will be in non-core so below the line.

And we're also excited by the fact that when we look at this, the result was twofold. We will be able to reinvest some of that spend in skills necessary for the next leg of the journey, if you will, but we'll also be able to use some of the savings to drop to the bottom line. We made a very clear commitment to improve that expense ratio. I think Ryan laid it out very specifically and clearly in the script and this, along with other, I think, very thoughtful strategic plans like the retirement of our legacy pension program and other larger things that we have underway help us meet the commitment that we laid out at Investor Day. And obviously, we knew about these plans when we laid that out, and some of the savings will drop right to the bottom line.

My second question seems like share repurchase, is there another lever to be opportunistic, not embedded in guidance. How should we be thinking about a run rate level of free cash flow conversion of operating earnings targeted in your Investor Day goals .

John, that's a great question. Thank you for that. For 2025, we achieved -- we exceeded our free cash flow targets. We came in about 80% on a free cash flow conversion perspective for 2025, we're targeting north of 75% for that. And if you think about the mix of businesses that we have and with the acceleration in sales for our more capital-efficient businesses, individual supplemental and group. That bodes very well for continued strong free cash flow conversion. And then if I sit back and think about uses of capital, you saw we've been quite active in the share buyback front. We've put $6 million of work in the month of January alone. And we do believe that is an attractive lever for us to continue to pull as we move through 2026, especially at current multiples given our confidence in our growth outlook. .

Our next question comes from Wilma Burdis with Raymond James.

Could you talk about the investment in sub and Group segment and how Horace Mann see sales and margins playing out, especially after the favorable benefits year with respect to the 39% blended benefit ratio guidance. Does the benefit ratio continue to rise -- sorry, after a favorable year. I was asking if the benefit ratio has continued to rise. Yes, you got it.

Thanks for that. I can start on the investment and growth side, and then I'll turn it over to Ryan to talk about the benefit ratio. I mean I got to tell you, we are very pleased with the progress that we're making in both individual supplemental and group benefits and the momentum is excellent. It is a smaller business for us, as you know. But excellent earnings diversification just as we had planned and a really good source of new educator households for eventual cross-sell like I said when I was addressing Matt's question. With individual supplemental sales up 40%, a record number of agents selling group momentum up 33%. On the group side, it is smaller for us. It is newer. It is lumpy. That's the nature of the longer sales cycle. And it is an even smaller business than the individual supplemental side for us, but it's building.

And I think that the way to think about it is the way we thought about Horace Mann all along, go back to that PDI strategy. It's about building the product, making sure the products are relevant, including what we've done by adding the paid family medical leave portion to the product in states like Minnesota, it's -- we have all the products we need, both on the individual side and the group side and we evolve those products to make sure it's relevant to our market niche. And I feel good about the product development work we did and the fact that we built products that fit our niche, which are part of the -- why we feel strongly about these segments.

From a distribution side, the amount of benefit specialists that are facing off with these products in the schools, the amount of districts that we're touching, those numbers are all going in the right direction, and we feel really good about our distribution efforts. I'd also say that the corporate branding, marketing, distribution work that we're doing also benefits this space as well. educators know who we are when we enter these schools, and that's very helpful in this space as well.

And then lastly, on the infrastructure side, we are modernizing this space and improving the infrastructure and how we face off with these schools. Very early thought. We have now the ability to do straight-through processing on individual supplemental. We haven't done a lot yet. It's, like I said, in very small numbers. but we are starting to significantly modernize this space as well. So I think we took a very strategic approach to building the products that are relevant in our space, improving and expanding our distribution and improving our infrastructure. And I think that's why you see the early signs of success in this business. And as I said, the earnings diversification that we planned with these acquisitions. I don't know if you want to add anything to the benefits ratio .

Sure. I'll take the nuts and bolts, the numbers, Wilma. So on a blended basis, we target a benefit ratio for both businesses at about 39%. And individual supplemental runs lower than that and group runs higher than that. Both segments, if you look at the full year benefit ratio for 2025, the benefit ratio on the individual supplemental was in the high 20s. That's better than what we would expect on a long-term average that reflected favorable morbidity experience throughout the year. On the group side, we were in the mid-40s. Again, a little bit of favorability, but closer to what we would expect there.

One thing I will comment on as I think about the longer-term target, on the individual supplemental product, in particular, utilization in early policy years typically is higher. And so if you think about that, during a period of high sales, which we're clearly seeing, you're going to see a little bit of an uptick, and we've factored that into the pullback towards the historic experience. We did see a decline in utilization post COVID that is beginning to normalize. So that kind of combo of more typical utilization combined with a return or an acceleration, I should say, of sales is going to move the individual supplemental product closer to those longer-term averages? I hope that's helpful.

That was very helpful. Second question, does softening of reinsurance pricing factor into the '26 margin outlook? And if so, give us some color there.

Sure. So Wilma, this is Ryan again. So in my script, I talked about some of the decisions that we made from a risk management perspective around the reinsurance tower. We did use the favorable reinsurance rate environment to add additional coverage at the top of our tower. There were some modeling updates from one of the P&C model tools. And as a result of that, we looked at that. We looked at the mix of all tools and decided it was prudent to increase the top of the tower. So our total spend was flat. So from a guidance perspective, we're spending dollar for dollar the same amount as last year. So it's incorporated, obviously, in our outlook. But we used some of that savings to buy a fair amount of cover at the top end. .

This concludes our question-and-answer session. I would like to turn the conference back over to Rachael Luber for any closing remarks. Please go ahead.

Thanks for joining us on the call today. If you have any follow-up questions or would like to schedule a meeting, please reach out. We will be at AIFA in March, and we'll be happy to look at schedules to find time. So thanks again. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Horace Mann Educators Third Quarter 2025 Investor Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Rachael Luber, Vice President of Investor Relations. Please go ahead.

Thank you. Welcome to Horace Mann's discussion of our third quarter 2025 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. 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, Rachael, and good morning, everyone. Yesterday, Horace Mann reported record third quarter core EPS of $1.36, a 64% increase over the prior year. Trailing 12-month core return on equity has increased to 13.8%. These results clearly demonstrate the earnings power of our diversified business. On a year-to-date basis, we are now well ahead of our 2025 financial goals and on track for record core earnings, which generates strong shareholder return.

Both top and bottom line results were strong. Total revenues for the quarter were up 6% over prior year with net premiums and contract charges earned up over 7%. We delivered oversized growth in the Supplemental and Group Benefits segment with individual supplemental sales up 40% and record sales in Group Benefits. In fact, sales are outpacing the prior year across all business lines.

Given strong year-to-date outperformance, reflecting both underlying business performance, as well as continued lower catastrophe losses, we are raising our full year core EPS guidance to a range of $4.50 to $4.70. Ryan will provide more details on the full assumptions later in the call.

Today, I want to focus on the significant progress we are making towards our enterprise strategic priorities that position Horace Mann for sustained profitable growth over the long term. Most importantly, business profitability across all segments is in line with or above target levels, giving us the opportunity to accelerate investments in future growth.

In Property and Casualty, the total combined ratio year-to-date is 91.4%, with an auto combined ratio of 96.4%, in line with our mid-90s target. And in Property, we continue to deliver exceptional results with a combined ratio of 83.1%, well below our target of 90% or below. Property profitability is strong, reflecting both rate and non-rate actions we've taken to reduce earnings volatility, and to a larger degree, much lighter severe weather activity this year. For comparison, pretax catastrophe losses year-to-date are $56 million. Last year at this point, pretax catastrophe losses were $91 million.

In the Life and Retirement segment, we continue to see steady earnings growth, driven by strong net investment income and effective spread management. Our core fixed income portfolio continues to benefit from strong new money yields. Year-to-date, the core new money yield is exceeding book yield by more than 100 basis points.

In Supplemental and Group Benefits, policyholder utilization continues to trend below historic levels. Our long-term target for this business is a 39% blended benefits ratio. Year-to-date, we are running around 37%, a strong position that enables us to invest confidently for growth. With each business segment performing in line with or above target, we're investing strategically to increase our share of the education market and drive future growth.

Lead generation continues to scale rapidly with website visits up 120% year-over-year and online originated quotes nearly doubling. Our back-to-school celebration engaged tens of thousands of educators with more than half of those participants new to Horace Mann, an encouraging demonstration of increasing brand awareness. We're seeing record recruiting success as we continue to grow points of distribution, adding exclusive agents, licensed producers and benefit specialists as we expand local coverage and educator engagement.

Through strategic partnerships, we are furthering our ability to reach more educators. A couple of examples. New partnerships with Teach for America and Grand Canyon University will provide us access to hundreds of thousands of educators to provide tailored solutions, including financial education resources and personalized support, teaching scholarships, student loan awareness programs and community outreach. For example, with Teach for America, we recently launched educator financial wellness sessions as part of their Career Acceleration Series. We're excited to see the impact of these partnerships, along with our upcoming sponsorship of Crayola Creativity Week in January as we continue expanding our engagement with educators nationwide.

We continue to build on our integrated omnichannel approach to customer acquisition and service, allowing educators to engage with us when, where and how they choose. These efforts are driving tangible results. Life and Retirement sales were exceptionally strong in the third quarter, fueled by the success of our back-to-school campaign. Life sales increased 16% and Retirement deposits grew 9%, both impressive results in what is already a seasonally high quarter, highlighting the impact of our growth investments and brand momentum.

In addition, we are accelerating growth in our Supplemental and Group Benefits segment, a high-margin, capital-efficient business that diversifies our earnings and reduces volatility. Individual supplemental sales rose 40% for the quarter and 47% year-to-date, reflecting expanded distribution and deeper customer engagement, driven by product enhancements that resonate with our core educator market. Over the past year, we have grown our network of benefit specialists, who help educators understand and optimize their workplace benefits by nearly 30%. And we introduced our newest generation of cancer coverage, including new and enhanced benefits that best protect customers from the unexpected costs of cancer treatment. Group Benefits sales nearly doubled in the quarter and are up close to 20% year-to-date, reflecting encouraging growth in our network of like-minded broker partners.

As we invest in growth, we remain disciplined in optimizing enterprise spend. Our approach emphasizes efficiency, innovation, modernization and continuous improvement across the organization. As part of these efforts, we're leveraging GenAI to identify and test multiple use cases that enhance productivity and effectiveness. For example, in partnership with our customer care team, we identified call summary notes as a low value-add task where GenAI could enhance efficiency without sacrificing quality. By automating the process, which consumes 20% to 30% of a representative's day, we will be able to significantly reduce administrative burden. In our test, AI-generated call notes matched the accuracy and quality of human authored notes, quantifying clear time savings and productivity gains. As customer care historically has higher turnover than other departments, we expect to be able to realize expense savings organically through employee attrition. We continue to expand our framework for identifying, piloting and deploying GenAI projects across the company to create further expense synergies and savings.

We're striking a balance between investing for future growth and maintaining expense discipline. We expect expense levels to be elevated in the near term as we build scale and execute on key initiatives that position us for long-term efficiency and sustained profitable growth.

Before I turn the call over to Ryan, I want to highlight how our strong results are driving shareholder value creation. Over the past 15 years, our Board of Directors has authorized $200 million in share repurchases, including a $50 million share repurchase authorization in May. Through October, we have returned $20 million of capital to shareholders through share repurchases and $43 million through dividends. These actions reflect our disciplined capital management approach that balances profitable reinvestment in our business with consistent shareholder returns. This framework positions us to continue to maximize total shareholder return, while maintaining flexibility to fund strategic growth, the most accretive use of capital over the long term.

To close, third quarter results were incredibly strong. All segments are operating in line with or above target profitability, and our multiline business model continues to deliver consistent high-quality earnings. On a year-to-date basis, we are clearly exceeding our 2025 objectives, and we are confident in our ability to achieve our long-term financial targets, a 10% average compound annual growth rate in core EPS, and a sustained 12% to 13% core return on equity by 2028.

Horace Mann is operating from a position of strength, and our competitive advantages position us exceptionally well for sustained success. We are confident that we will continue to meet and exceed our strategic objectives, deliver sustained market-leading growth and accelerate shareholder value creation.

Thank you. And now, I'll turn the call over to Ryan.

Thanks, Marita. Our record third quarter results reflect continued lower catastrophe costs, strong underlying performance and encouraging growth momentum across the business. Given our strong year-to-date performance, we are accelerating strategic investments to build on this momentum and position Horace Mann for sustained profitable growth. We are increasing our full year 2025 core earnings per share guidance to a range of $4.50 to $4.70, which includes the following assumptions: roughly $65 million catastrophe losses assumed for the full year and total net investment income in the range of $473 million to $477 million, with managed portfolio income of $373 million to $377 million.

Reflecting our ongoing commitment to educators, we expect to make a significant donation in the range of $3 million to $7 million to the Horace Mann Educators Foundation in the fourth quarter. Thanks to our strong year-to-date business outperformance and by thoughtfully leveraging tax provisions under the Big Bill legislation, we're able to amplify our impact, aligning our financial strength with our mission to support educators and their students.

Turning to the results. Core earnings of $57 million or $1.36 per share increased 64% over the prior year. Trailing 12-month core return on equity was 13.8% and tangible book value per share increased more than 9%, reflecting continued strong underlying profitability across the business.

Total net premiums and contract charges earned were up 7% with total revenues up 6%. In the Property Casualty segment, core earnings were $32 million, tripling year-over-year. Net written premiums of $232 million increased 9% over the prior year, primarily reflecting higher average earned premium. The P&C reported combined ratio of 87.8% improved 10.1 points over prior year, reflecting much lower catastrophe costs, continued strong underlying results and favorable prior year development. The $3 million in prior year development was primarily driven by favorable property severity.

Pretax catastrophe losses of $10 million were 71% below the prior year due to lower claim frequency and severity, as well as lack of hurricane activity. In auto, net written premiums of $132 million increased slightly over the prior year. The underlying combined ratio of 94.9% improved 3 points, primarily due to higher average premiums. Household retention decreased from the prior period to 84%, but remained largely stable quarter-over-quarter. Retention remains in line with expectations, given the current rate environment, and continues to be in the top quartile relative to industry benchmarks. Before I turn to Property, I want to remind you that fourth quarter auto results historically have had higher frequency due to weather.

In Property, net written premiums of $99 million increased 20% over the prior year, reflecting the continued benefit of rate actions on average written premium and solid growth momentum with sales up more than 8%. The combined ratio of 75.3% significantly improved over the prior year, primarily reflecting much lower catastrophe costs. Policyholder retention remained strong at nearly 89%.

In Life and Retirement, core earnings were $15 million, in line with the prior year, and net written premiums and contract deposits rose to $170 million. As a reminder, our non-P&C annual actuarial assumption reviews were moved to the third quarter this year, in line with industry practice. Annual reviews reflected favorable mortality, which resulted in a $3.5 million decrease in reserves for Life and a $5.4 million increase for Retirement pretax. These actuarial assumption review impacts are GAAP only and noncash, and as a result, have no impact on free cash flow.

In the Life business, mortality was favorable for the quarter. And on a year-to-date basis, mortality costs continue to remain within our expected actuarial range. Life persistency remained strong, near 96%. In the Retirement business, net annuity contract deposits increased by 9% and persistency rose to 92%.

Moving to Supplemental and Group Benefits. The segment contributed $18 million to core earnings, in line with the prior year, and net written premiums rose to $66 million. Annual actuarial assumption reviews resulted in a $2.4 million decrease in reserves for individual supplemental pretax, reflecting favorable morbidity. In individual supplemental, net written premiums of $31 million increased 3% over the prior year. The benefits ratio of 25.4% decreased 2.4 points over the prior year, reflecting the impact of the actuarial assumption review, in addition to favorable policyholder utilization trends. Policyholder persistency remained steady near 90%. In Group Benefits, net written premiums of $35 million increased 8% over the prior year. The benefits ratio of 35.7% was below prior year, primarily due to favorable policyholder utilization and disability products.

Turning to investments. Total net investment income on the managed portfolio increased nearly 11% over the prior year. We continue to see very strong results from our core fixed income portfolio, reflecting the benefit of higher average yields. This is the 15th consecutive quarter that new money yields in the core portfolio have exceeded book yield. Limited partnership returns outpaced the prior year, driven primarily by equity-related funds. And we continue to see stable returns from commercial mortgage loan funds. As I mentioned earlier, with each business segment performing in line with or above profitability targets, we are investing strategically to position Horace Mann for sustained profitable growth.

Sales are outpacing the prior year across all business lines, and we delivered outsized growth in the Supplemental and Group Benefits segment. Third quarter individual supplemental sales were $6 million, a 40% increase over prior year. And Group Benefits delivered record sales of $6 million, nearly double the prior year result. As we've mentioned before, the Group business is still relatively small, so results will fluctuate from quarter-to-quarter. We're encouraged by the growth momentum as we continue to scale this segment.

As Marita mentioned, as we invest in growth, we remain diligent about optimizing enterprise spend. In addition to our ongoing enterprise focus on leveraging GenAI, we've made the business decision to terminate our legacy dormant pension plan. We expect to finalize the transaction in the fourth quarter. This will be a noncore charge and will result in ongoing run rate savings of over $1 million annually pretax.

While our expense ratio remains competitive with peers, we do expect expense levels to be elevated in the near term as we build scale and execute on our longer-term financial goals. We will use periods of business outperformance to reinvest some of that success into initiatives that will drive future growth. Building scale is a key component of our plan to reduce the expense ratio by about 1.5 points over the next 3 years, and these investments are essential to achieving that goal.

Before I close, I'd also like to touch on the prudent capital management actions we took this quarter. In September, we issued $300 million of senior notes due in 2030 at a 4.7% coupon. Proceeds were used to refinance near-term maturities with the balance allocated for general corporate purposes. The transaction had very strong investor demand and was more than 5x oversubscribed. As a result, we achieved a record tight spread for Horace Mann.

We remain focused on driving shareholder value creation. Our dividend yield is strong. And we continue to opportunistically execute on our share buyback program. October year-to-date, we've repurchased 470,000 shares at a total cost of about $20 million at an average price of $41.70. We have around $57 million remaining on our current share repurchase authorization.

In conclusion, third quarter results reflect the strength and stability of our diversified business. On a year-to-date basis, we are clearly exceeding our 2025 objectives. And we are confident in our ability to achieve our long-term financial targets: a 10% average compound annual growth rate in core earnings per share and a sustainable 12% to 13% core return on equity by 2028. We are confident that we will continue to meet and exceed our strategic objectives, deliver sustained market-leading growth and accelerate shareholder value creation.

Thank you. Operator, we're ready for questions.

[Operator Instructions] The first question comes from Michael Zaremski with BMO Capital Markets.

It's Jack on for Mike. The first question just on your organic policy count growth trajectory, especially in the P&C operations. It's good to see retention stabilizing in auto and margins are at healthy levels, which I imagine implies less of a need to increase rates. So just, I guess, in light of that, wondering how you view the growth outlook on a policy count basis over the coming quarters in both auto and home.

Yes, it's a great question, but I think I might expand it a little bit. And when we think about growth, we don't really think about it as an on and off switch. We are always focused on educator household increase and that goal of sustained profitable growth. When we look at this quarter, I mean, I think it's a clear reflection that we have sales momentum across every business. I mean, new business for us is up across all our business and retention has been steady. If you look at individual supplemental up 41%; Group up 91%; Life is up 16%; Retirement is up 9%; Property is up 8%; auto is hanging in there, up 4%. And then, you look at the retention side of the equation, where Property is nearly 90% Life, Retirement, Supplemental in the mid-to-high 90s persistency. Auto is strong at 84%. Obviously, you see the effects of the increased competition across the industry there. But we are very well positioned for that sustained household growth that we're focused on and feel good that we're clearly going in the right direction when you see these kind of results across all the businesses.

Great. And then, just a follow-up on -- maybe a 2-parter, but just a follow-up on the EPS guidance. It implies, I think, sort of in the low-$1 range in the fourth quarter, a little bit of $1.36 this quarter. I guess just maybe if you could help us walk through the moving pieces. I guess, there's the kind of net assumption review this quarter. I think you called out auto margin seasonality being less favorable in the fourth quarter and then also accelerating some strategic investments. And on that last front, can you -- are you able to quantify or elaborate more on some of those investments that you're planning to accelerate over the coming quarters?

Sure. This is Ryan. I appreciate the question this morning. When I think about the updated guidance range that we gave you, the $4.50 to $4.70 on a full year basis, it implies $1 to $1.20 for the fourth quarter. We updated our cat assumption to reflect year-to-date outperformance. We narrowed the net investment income to the midpoint of the original range. And we did increase the corporate and other expenses by $5 million. That reflects known spend. We talked about the Foundation donation that we're excited to fund in the fourth quarter. In addition to that, when we think about guidance, we are reflecting our intent to continue to invest in growing our business.

I'll flag for you that fourth quarter last year was an unusually strong quarter. It was $1.68, and it had a number of onetime items that we don't expect to repeat. So last year, fourth quarter, we had favorable Property prior year development, which was worth about a quarter. In our non-P&C operations, we did our annual reserve assumption review, and we had some prior year favorable development in Group, and that was worth over $0.30. And we had very favorable weather. Both cat and non-cat was quite favorable. So, on a normalized basis, I think about fourth quarter last year as being about $1. And if you think about the midpoint of our guide, that's a 10% earnings growth rate, which is what we talked about achieving at Investor Day.

Yes. And Ryan touched on expenses a little bit, but if I could expand on that. I mean, we're clearly striking a balance here between investing for the future, while also maintaining expense discipline. And we think about it as both sides of the equation, both the numerator as well as the denominator; the numerator, obviously, through efficiency and the denominator by investing in growth to build scale because both are clearly important. I don't think any company can shrink their way to greatness, right? So both of those sides of that equation matter.

On the expense discipline side, our leadership realignment, efficiency in high turnover areas that result in headcount reductions over time. Ryan mentioned in the script, the legacy pension termination, our review of vendor spend, process improvements like straight-through processing. We're really focused on driving that efficiency. But at the same time, I think it's also important for us to invest in growth to drive scale, especially in times of outperformance like this. And at Investor Day, we talked about our goal to reduce the expense ratio by 1.5 points. But again, that's over the next 3 years, and we're confident that we can do that. And I think if you look at our track record over the last several years, as we've invested in the PDI, the products that are relevant in our educator space, expanding our distribution, which we're obviously doing, and modernizing our infrastructure, we have done that and continue to do that, while we maintain expense discipline. So I think it positions us very well for sustained profitable growth. And I think our track record speaks for itself.

The next question comes from John Barnidge with Piper Sandler.

My question is on Supplemental and Group Benefits. Lead management systems are increasingly required to get on the platform, and we're seeing a lot of investment over group benefit providers in the market. Can you talk about your capabilities, whether you're building your own lead management system or getting something out of the box? And really how important that is to winning business in Supplemental and Group Benefits for a core educator marketplace?

John, great question, and it's a little bit of both. I want you to think about our individual supplemental and Group Benefits -- Supplemental and Group Benefits business a little bit differently. Obviously, we have a head start in individual supplemental, and you're seeing those very strong sustained numbers come through on the individual supplemental side. In the group supplemental side, it's new for us. It's relatively small for us. We feel really good about the progress we're making, and you saw that in this quarter as well. That can be a little more lumpy for us because it is small, but we look at that year-to-date number and that track record of that sustained growth in that area. And we are making investments not only in lead generation, but in expanding our distribution and building the product necessary for that space, as well as modernizing the infrastructure to do that and do it well. And I feel really good about our progress there. But we're in this for the long haul, and that will take us longer to build all those pieces. But we're really happy with our start here. We're focusing on where we're good in our educator segment, and I think we're doing it really well with some really strong partners.

The thing I will add, John, we do have a lead management partner in place. So to answer your question directly, we do have the capabilities with an experienced partner.

And then, my other question, more and more insurers have launched partnerships with alternative asset managers, not just to monetize their distribution, but to better position spread-related products and enhance net investment income. I know you do externalize some asset management functions. But is there an opportunity for a larger partnership here with a dedicated alternative asset manager?

John, I appreciate your question. When I think about what we've built from an investment management capability over the past 5 years, we talked about over that period, improving net investment income by over 30%. We mentioned that at Investor Day. And yes, rates were -- created an opportunity over that time period, but we were very thoughtful about the third-party partners that we work with on an ongoing basis. We've made some changes to those partners recently. And we believe in that sort of best-of-breed model and finding core portfolio managers that do the bulk, if you will, of our liability-driven investment strategy, but at the same time, supplementing them with specialized managers in certain verticals. So while I understand the nature of your question, I like our approach of going out and getting best-in-breed and allowing us to really diversify our asset management partnership. So hopefully, that answers your question.

Yes. I was also talking about maybe product creation. There's some regulatory reform in retirement accounts. Interval funds or evergreen funds have increasingly become more in demand and valued by distribution. So do you have those capabilities? Are you looking to build those capabilities?

So when I think about tailoring product, John, to our customer set, the educator marketplace is a relatively conservative investor. They prefer fixed and fixed index products. Even within our variable annuity sleeve, there's a fair amount of fixed account selection. We also distribute through captive distribution. And so, when I think about marrying the product design to the distribution to the end customer, a lot of those more exotic, if you will, or newer product entrants aren't really what our customer base is asking for at this point in time. And you can see, our Retirement sales were up 9% in the third quarter. So we're seeing strong customer reception to the product set that we have.

Yes, Ryan is right. We're really not hearing from our registered reps out there working with our customers or even from the educators themselves that our affinity niche is looking for that, but yet we see what's going on with RILA products and other things in the industry. And if we felt there was a need, we could leverage a really good third party to offer that or we could build it ourselves, but there's no demand for that in our market segment right now.

The next question comes from Wilma Burdis with Raymond James.

Cat losses this year were $65 million versus, I think, you guys expected $90 million kind of coming into the year. And we also realize that 2 things have happened. It's been a low activity year, but also you have a lot of catastrophe mitigation efforts that you've been rolling out. So could you just help us think through that? How effective has the program been? And what are you just thinking into '26? I know you may not be able to give an exact answer.

Wilma, this is Ryan. Thank you for the question. As a reminder, our original guide in 2025 was about $90 million of catastrophe losses. And you're right, we and the industry have experienced a good catastrophe weather year. From a cat perspective, this year was more than one standard deviation below our historic averages. But when I think about cat losses and I think about the book, every year, you grow your total insured value. So, as we continue to grow the property book, the value that is exposed and that we get premium off of continues to grow. So you'd expect an increase in average modeled losses as a result of that. Candidly, offsetting this, though, is the non-rate actions that we took like the deductibles and roof schedule changes. We believe they are working as designed, and we're seeing the benefits. But in a light cat year, it's kind of hard to prove out the full magnitude of what you would expect. But we're seeing encouraging signs. When I look ahead to 2026, while we don't have official guidance out, I would not expect a significant decline in actual total cat dollar losses in 2026.

Understood. And I guess, this kind of ties into my first question, but could you talk a little bit more about normalized P&C earnings into '26 between that and -- between the cat loss mitigation efforts and the effects of rate increases that you're taking and seeing right now?

Sure, Wilma. We talk about our long-term targets and what we're striving to maintain in our P&C business, and we give you 2 targets. We talk about a mid-90s combined for auto, and we talk about wanting to run Property at or below 90% to account for the increased volatility just inherent in the Property business. We are at target profitability and better than that in Property. And when I think about the loss trends going forward in the rate plan, we are targeting a mid-single-digit rate plan in auto for next year. That's in line with loss trend expectations and a high-single-digit rate increases. So think about that as rate and inflation guard, so the increase in insured value, and that's for Property. And that's a little bit ahead of our loss trends. But that should keep us on track to maintain those profitability targets within P&C.

Yes. But I also think it's important, and I want to magnify what Ryan said about cats, it wouldn't be prudent for any of us to assume that this year will repeat. The only way you can do this right is to rely on the math, looking at 5 and 10-year averages, looking at probabilistic and deterministic models, all blended to give you a cat estimate in any given time frame and year. Obviously, the recency of this year is great for the industry and good for us, but it wouldn't make sense for us to assume that a year like this is going to repeat. It will obviously be factored into all the numbers. But I think the only thing anybody knows about cats is you're going to be wrong with your estimates. So you really have to rely on your math to determine that number. And obviously, building values are up. Insured values are up. We're larger as an organization. So I wouldn't expect that our forecasted cats would be going down next year, as Ryan clearly said.

And obviously, we'll discuss this with our guidance as we normally would in our normal course when we have our next call.

This concludes our question-and-answer session. I would like to turn the conference back over to Rachael Luber for any closing remarks.

Thank you for joining us today. If you have any additional questions or would like to schedule a meeting, please reach out to the Investor Relations team. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.