Slide 1: Third Quarter 2023 Investor Presentation
Third Quarter 2023 Investor Presentation November 2, 2023 Information as of September 30, 2023, unless otherwise noted
Slide 2: Safe Harbor Statement and Non-GAAP Measures
Safe Harbor Statement and Non-GAAP Measures Certain statements included in this presentation, including those regarding our earnings outlook, expected catastrophe losses, our investment strategies, our plans to implement additional rate actions, our plans relating to share repurchases and dividends,
Slide 3: Our Foundation: Financially sound company with strong strategy for profitable growth
Our Foundation: Financially sound company with strong strategy for profitable growth Financial Niche Multiline Longevity strength market model • 1945: Founded by Educators for • $13.4B in assets(1) • Educators have preferred • Business mix balanced Educators to sell auto insurance • $1.4B in net pre
Slide 4: Driven by a noble mission
Driven by a noble mission Mission We listen to and understand educators and those who serve our community. They are taking care of our children’s future. We believe they deserve someone to look after theirs. Vision We aspire to be the company of choice to provide financial solutions for all educator
Slide 5: Driving shareholder value growth through business diversification and cross-sell
Driving shareholder value growth through business diversification and cross-sell K-12 educator market offers substantial growth potential with additional opportunities in adjacent markets of others who serve the community Market share has climbed to • Business diversification expands customer approx
Slide 6: Commitment to making a positive impact extends to all stakeholders
Commitment to making a positive impact extends to all stakeholders Our ESG commitment is ingrained in long-term strategy and day-to-day operations We are committed to doing • Aligned financial disclosures with Task Force on Climate-Related our part to protect the Disclosures in 2023 environment, inc
Slide 7: Strategic emphasis on solutions tailored for educators at every life stage
Strategic emphasis on solutions tailored for educators at every life stage Retirement Preparing to retire Established educator New Issues: • How to manage educator Issues: retirement income • Worried about Issues: ensuring smooth • Need to plan wealth Pre-educator • Protecting assets retirement tran
Slide 8: Delivering value proposition for educator customers
Delivering value proposition for educator customers Focus on ‘PDI’ provided roadmap for fix-and-build and transformational stages Serving K-12 Educator Market Focused on “PDI” Products Homogenous customer set with attractive • Products designed to meet educators’ needs risk profiles and protect thei
Slide 9: Addition of worksite solutions capped steps taken to implement 'PDI'
Addition of worksite solutions capped steps taken to implement ‘PDI’ Completed key steps while successfully navigating pandemic environment and impact of external events in 2022 LEVERAGE LEADERSHIP: 2022 AND BEYOND Stage set for return to long- TRANSFORMATION: 2019-2021 term ROE Initiated pre-pandem
Slide 10: Stage set for accelerated shareholder value creation as market share expands
Stage set for accelerated shareholder value creation as market share expands Largest financial services company focused on meeting the needs of educators and others who serve our communities $1,250 Net Premiums and Contract Charges Earned (in millions) $1,000 25% $750 15% $500 School access 60% limi
Slide 11: PDI implementation in leadership phase to drive strong shareholder value creation
PDI implementation in leadership phase to drive strong shareholder value creation Focus in 2023 and beyond is distribution initiatives to drive market share expansion Product: Complete Infrastructure: Ongoing • We have built a robust set of products, relevant to our Distribution: Focus educator mark
Slide 12: Transformation has driven strong shareholder value creation
Transformation has driven strong shareholder value creation 7.7% compound annual growth in adjusted book value plus accumulated dividends since 2010 $48.12 $48.63 $48.79 $44.09 $40.93 $35.73 $36.49 $32.91 $30.92 $28.44 • 15 consecutive years of dividend increases with current yield of 4.2%(1) • Targ
Slide 13: Earnings trajectory illustrates clear path to sustainable double-digit ROE
Earnings trajectory illustrates clear path to sustainable double-digit ROE through profitable growth Core EPS* 10% average Below long-term annual trendline as severe EPS $4.24 weather, inflation and financial market volatility growth + $3.40 offset benefits of sustained education market focus, sales
Slide 14: Diversified business key to return to core ROE near 10% in 2024
Diversified business key to return to core ROE near 10% in 2024 2023 core EPS in the range of $1.20 to $1.45 (or core earnings of $50 million to $60 million) on L&R and S&GB contributions • Committed to average annual core EPS growth of 10% in 2025 and beyond • Expect total 2023 net investment incom
Slide 15: 2023 segment outlook reflects value of business diversification
2023 segment outlook reflects value of business diversification • Unchanged: Life & Retirement segment • Updated: Property & Casualty segment core earnings of $63 million to $65 million core loss between $32 million and $37 to reflect the lower-than-anticipated first- million due to weather-related
Slide 16: Benefits of auto rate and other underwriting actions continue to accelerate
Benefits of auto rate and other underwriting actions continue to accelerate Reached inflection point in Q3 on path to targeted Auto combined ratio with earned premium growth moving ahead of loss costs growth and combined ratio improving sequentially Minimum cumulative countrywide impact of actual an
Slide 17: Property results to benefit from multi-faceted approach; on track to target
Property results to benefit from multi-faceted approach; on track to target Addressing more frequent and severe weather activity through additional filed rate, product changes and enhanced modeling • On track to longer-term combined ratio target of 92% to 93% by 2025 • Achieving 2023 rate plan of 12
Slide 18: Education market opportunity
Education market opportunity
Slide 19: Sizeable, growing opportunity in core K-12 education market
Sizeable, growing opportunity in core K-12 education market Additional opportunities to grow in legacy adjacent markets U.S. elementary and secondary education teachers, projected(1) • 7.5 million K-12 educators nationwide(1) - ~3.7M teachers in public and private schools; 3,874 3,907 ~3.1M public s
Slide 20: K-12 education a homogeneous market with similar customer characteristics and goals
K-12 education a homogeneous market with similar customer characteristics and goals Reachable through both retail and worksite channels Desire to Responsible, Conservative Dedicated to improve risk-adverse educator total & loyal students and loyal compensation • Strong desire for • Passion for educa
Slide 21: Increased relevance for educators
Increased relevance for educators Helping educators protect what they have today and prepare for a successful tomorrow Retail solutions Worksite solutions • Solutions directly selected by • Solutions offered to educators an educator, often working with via their district employer a trusted financial
Slide 22: Expanded product set aligns with educator needs throughout life stages
Expanded product set aligns with educator needs throughout life stages Retirement Preparing to retire Established educator New educator Pre-educator Renters insurance Auto insurance Employer-sponsored life, disability and supplemental health insurance 403(b) retirement plan Home insurance Voluntary
Slide 23: Expanded distribution allows educators to engage with Horace Mann the way they choose
Expanded distribution allows educators to engage with Horace Mann the way they choose “Horace Mann Companies” brings together three organizations with decades of commitment to educators and strong reputations in the market Purchase Purchase through from local, employer- trusted agent sponsored progr
Slide 24: Positioned with significant cross-sell opportunities between worksite product lines
Positioned with significant cross-sell opportunities between worksite product lines Over time, cross sell with districts reached by retail businesses presents additional upside Worksite direct (NTA) 2022 premiums(1) Employer-sponsored (MNL) 2022 premiums(1) Property & Casualty 2022 premiums(1) Life
Slide 25: Uniquely positioned to take advantage of education market opportunities
Uniquely positioned to take advantage of education market opportunities Retail customers: Natural cross-sell: Our individual retail customers plus worksite direct P&C and L&R supplemental customers and SLS users are a natural cross-sell universe (including third-party) for our retail products Revenu
Slide 26: Strong retention across retail business lines illustrates value proposition for educators
Strong retention across retail business lines illustrates value proposition for educators Retail customer retention Auto customer retention breakdown 100% 100% 96.1% 95.9% 95% 95% 95.0% 91.7% 90% 90% 87.2% 90.0% 85% 86.4% 85% 94.1% 90.2% 91.0% 83.5% 80% 80% 80.9% 75% 75% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q2
Slide 27: Business details and results
Business details and results
Slide 28: Diversified business delivered core EPS of $0.44
Diversified business delivered core EPS of $0.44 Continued household acquisition momentum with sales growth in all operating segments Total revenues • Q3 net income of $0.28 per share and core earnings of $0.44 per share - Strong Life & Retirement and Supplemental & Group Benefit segment core earnin
Slide 29: P&C segment: Providing coverage to protect what educators have today
P&C segment: Providing coverage to protect what educators have today Horace Mann 2022 revenues(1) Products • Auto, homeowners, renters and umbrella • Majority of P&C business is bundled auto Supplemental and home & Group Benefits • Partnerships through Horace Mann 21% General Agency Property & Casua
Slide 30: P&C segment: Third quarter results reflect elevated catastrophe and non-catastrophe weather activity
P&C segment: Third quarter results reflect elevated catastrophe and non-catastrophe weather activity Net Premiums Written* Q3 results $682 $683 $636 $608 $618 $662 • Segment core loss reflected higher weather activity millions - Catastrophe losses contributed 17.5 points, an increase over the 9.6 po
Slide 31: Life & Retirement: Helping educators and their families plan for a strong financial future
Life & Retirement: Helping educators and their families plan for a strong financial future Horace Mann 2022 revenues(1) Products • 403(b) tax-qualified fixed, fixed index and variable annuities Supplemental • Horace Mann Retirement Advantage® open & Group architecture platform for 403(b)(7) and Bene
Slide 32: Life & Retirement: Strong contributor to core earnings; improving net interest spread
Life & Retirement: Strong contributor to core earnings; improving net interest spread Net annuity contract deposits* Q3 results $439 $429 $449 $429 $453 • Segment core earnings of $20.9 million $419 - Annualized net interest spread rose to 251 basis points millions for the third quarter compared to
Slide 33: Supplemental & Group Benefits segment: Providing options to address unexpected events
Supplemental & Group Benefits segment: Providing options to address unexpected events Horace Mann 2022 revenues(1) Products • Individual limited benefit products that are guaranteed renewable and portable - Products include cancer, heart, hospital and accident as well as Supplemental short-term supp
Slide 34: Supplemental & Group Benefits: Delivers strong year-to-date performance
Supplemental & Group Benefits: Delivers strong year-to-date performance Net Premiums Written and Contract Deposits* $68.3 $67.9 $67.2 $65.2 $63.7 Q3 Results • Segment core earnings of $15.8 million millions $38.0 $38.4 $37.1 $35.0 $33.8 - Higher benefit ratio for employer-sponsored product lines in
Slide 35: High-quality, well-diversified investment portfolio
High-quality, well-diversified investment portfolio Constructed to support insurance liabilities through various market cycles Portfolio composition(1) $6.4 billion fair value • $5.0 billion fixed-maturity portfolio Short-term U.S. Treasury 2% & Agency 6% • 71% A-rated or higher Mortgage Loans • A+
Slide 36: $672M Commercial Mortgage Loan Fund Portfolio
$672M Commercial Mortgage Loan Fund Portfolio Diversified pool of high-quality loans 1% 1% 5% Office • Majority of exposure is to open-ended 23% funds comprised of senior loans 13% Multi-Family Retail • Fund structure and diversification of 3% managers provide access to broader Industrial markets –
Slide 37: $471M Limited Partnership Fund Portfolio
$471M Limited Partnership Fund Portfolio Well diversified by strategy(1), vintage year and potential volatility of returns 3% 5% 17% Corporate Mezz Hedge Funds • Inception-to-date performance strong 1% 17% Infrastructure Debt • Average annual return of 8.4% • 2022 performance near 10-year average In
Slide 38: Capital Ratios: Premium / Surplus Ratio
Financial leverage and other capital metrics align with levels appropriate for current financial strength ratings Capital Ratios • More than adequate capital to continue to grow business 600% 0.0 536% • Conservative targets for year-end 505% RBCs of 425% for non-P&C 500% 500% 475% 0.5 subsidiaries a
Slide 39: Appendix
Appendix
Slide 40: Highly rated by all rating agencies
Highly rated by all rating agencies Education market focus, earnings diversification and capital strength cited Agency Rating Outlook (affirmed/reviewed) • AM Best upgraded Madison National Life financial strength rating to A and affirmed AM Best A Stable ratings for all other companies in third- Co
Slide 41: 2023 single-event catastrophe reinsurance provides PML coverage of approximately 400+ years
2023 single-event catastrophe reinsurance provides PML coverage of approximately 400+ years Retention at $30 million, up from $25 million, first increase since 2011, with higher share of the lowest layer Casualty Property(1) $20M $175M ~400+ yrs 3rd LAYER 2nd LAYER CASUALTY $85M xs $90M CLASH & CONT
Slide 42: Horace Mann at a glance
Horace Mann at a glance Exchange ticker symbol NYSE:HMN Share Price $31.73(1) Weighted Average Diluted Shares (for 3Q23) 41.4 million Market Capitalization $1.3 billion(1) Annualized Dividend Per Share $1.32 Dividend Yield Per Share 4.2%(1) Adjusted Book Value Per Share (at September 30, 2023) $35.5