Ryan Marshall: 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 three-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 half a million shares at a total cost of $21 million and an average price of $41.83. In 2026, we continued to buy back shares and through January 30th, we have repurchased approximately 140,000 shares at a total cost of 6 million and 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,
Operator: Please press star, then two. First question comes from Jack Matten with BMO Capital Markets. Please go ahead.
Jack Matten: Hey, good afternoon. Question is on the distribution initiatives and the shift to a more of a specialist model that you discussed in detail at the InvestJet 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.
Marita (last name): Yeah, 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, you know, 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 benefit space up record numbers as well. So more people selling the product, better support from a marketing and distribution perspective. And on all three 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 the strong production momentum that we have across the board.
Jack Matten: Well, thank you. And maybe one interest on kind of the moving pieces regarding the EPS outlook for 26, which I know implies double-digit growth in a normalize basis and it sounds like you you might expect that to then maybe accelerate heading into 2027 and and beyond if you see um cml returns kind of closer to your long-term trend and then you also i think mentioned some expense actions that you're taking to have more of an impact on 2027 because 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
Ryan Marshall: Hey, Jack, this is Ryan. Thank you for the question. You know, directionally, you're thinking about it the right way. When we laid out our financial targets at Investor Day, you know, 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. You know, 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, you know, come to fruition. And, you know, that revenue growth we would expect to pick up over that three-year period. And finally, we were, you know, I was pretty specific because we get a fair amount of questions around the timing of the expense initiatives earning in. 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. Those savings, I outlined for you how to think about that in 2027.
Jack Matten: Great. Thank you. If I could squeeze one more in just on the catastrophe loss assumption in your guide, which I think implies a lower ratio as a percent of premiums than your prior expectation. Is that mostly reflecting the improvements to the reinsurance program that you talked about? Or is there a meaningful kind of benefit from the terms and conditions changes that you've implemented in the property business as well?
Marita (last name): Yeah, 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 CATs, 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, you know, 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.
Ryan Marshall: Sure. Let me dive into both of those, you know, Jack. You know, on the cat, you know, our approach to setting a cat target, you know, it's kind of like predicting the weather, literally. You're probably going to be wrong. But 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, you know, or a, you know, under or out performance based on one year's individual results. So set another way, we are expecting, you know, 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, you know, 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, you know, the industry as a whole, you know, increased reserves. And over the last couple of years, you've seen us and the broader industry released. These large swings in reserves will normalize as we go back to a more normal loss trend, which is what we're seeing. You know, we're confident that the reserve, you know, 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, you know, auto insurers, we do see the impact of social inflation in our numbers. You know, we're insulated but not immune. Think about our policyholders, not super high limits, you know, compared to commercial auto or, you know, 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, you know, 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.
Jack Matten: That's all very helpful. Thank you.
Operator: The next question comes from Matt Carletti with Citizens. Please go ahead.
Matt Carletti: Hey, thanks. Good morning. Marita, 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 to 12 households into kind of where you are today, those you can currently access and those you don't have access to. And if I'm looking at kind of last quarter, right, there's a pretty big shift, almost a 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?
Marita (last name): Yeah, thanks for the question, Matt. You know, it's really been multi-dimensional and across the board. You know, we started last year, as you pointed out, and the slide pointed out at about a million or so predominantly educator households and ended the year close to 1.1 million households. You know, that's a hundred thousand household increase, if you will. And that's kind of how we think of the world. We're not a model line auto provider. We're a niche marketer to a homogeneous set of customers. You know, we understand the market dynamics of the auto line, and we posted our best P&C combined ratio in a very long time. You know, for us, a lot of folks ask the auto-specific question. We do expect our risks and force to turn positive in the second half of this year, you know, a little bit longer due to the competitive dynamics. Many of those auto customers we keep. We just place them through the horseman general agency if we're not willing to go to the auto price that maybe 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 six, with auto being 5.5%. you know, percent 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, you know, one in three educators on an unaided basis know who we are and are beginning to engage with us is pretty powerful. The three 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 other 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 homeschool 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, you know, 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.
Matt Carletti: Thank you. 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, a net interest spread of kind of 220 to 230 basis points. Is that still the case? Or I guess in another way, what is the long-term target for kind of net interest spread in retirement?
Ryan Marshall: Matt, yeah, 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 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 a 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, you know, when I look at the totality of the product mix, we're comfortable and are at target profitability overall for that mix of business. And when I say target profitability, that's implying, you know, that we have returns in line or above our ROE targets.
Matt Carletti: Great. Thank you for the answers. Appreciate it.
Ryan Marshall: Thanks, Matt.
Operator: The next question comes from John Barnage with Piper Sandler. Please go ahead.
John Barnage: Good morning. Thanks for the opportunity. 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? Thank you.
Marita (last name): Yeah, 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.
Ryan Marshall: No, I think Marita summed it up well, John. And as a reminder, any cost associated with it, because it was one time non-recurring, will be in non-core, so below the line.
Marita (last name): 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. You know, 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 plans, things that we have underway help us meet the commitment that we laid out at Investor Day. And, you know, obviously we knew about these plans when we laid that out, and some of this savings will, you know, drop right to the bottom line.
John Barnage: Thank you for that answer. My second question seems like shared purchase. 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? Thank you.
Ryan Marshall: John, that's a great question. Thank you for that. For 2025, 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. You know, and then if I sit back and think about uses of capital, you saw we've been quite, you know, active in the share buyback front. We've put, you know, $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 and our growth outlook. Thank you. Thanks, John.
Operator: The next question comes from Wilma Burtis with Raymond James. Please go ahead.
Wilma Burtis: Hey, good afternoon. Could you talk about the investment in sub and group segment and how Horace Mann sees sales and margins playing out, especially after the favorable benefits year in 2025 with respect to the 39% blended benefit ratio guidance? Does the benefit ratio continue to rise? Oh, sorry, after favorable. Sorry, Wilma, go ahead. Thanks. Oh, yeah, just was asking if the benefit ratio is continuing. Yep, you got it.
Marita (last name): No, 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. You know, 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, you know, 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. You know, go back to that PDI strategy. You know, 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, you know, Minnesota. It's, you know, 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 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 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. You know, very early thought, you know, 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 know, 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 had anything to add on the benefits ratio.
Ryan Marshall: 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, you know, individual supplemental runs lower than that and group runs higher than that. You know, both segments, if you look at the full year benefit ratio for 2025, you know, 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 targets, 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 in to 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.
Wilma Burtis: That was very helpful. Thanks for the answer. Second question, does softening of reinsurance pricing factor into the 26 margin outlook? And if so, give us some color there. Thanks.
Ryan Marshall: 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. You know, we did use the favorable reinsurance rate environment to add additional coverage, you know, at the top of our tower. There were some modeling updates from one of the PNC model tools, AAIR, 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.
Wilma Burtis: Thank you very much.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Rachel Luber for any closing remarks. Please go ahead.
Rachel Luber: 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 AFA in March, and we'd be happy to look at schedules to find time. So thanks again. Have a great day.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
