Good day, and welcome to the Horace Mann Educators First Quarter 2025 Investors Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Brendan Dawal, Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to Horace Mann's discussion of our first quarter 2025 results. Yesterday, we issued our earnings release, 10-Q, investor supplement and investor presentation. Copies are available on the Investors page of our website. Marita Zuraitis, President and Chief Executive Officer; and Ryan Greenier, Executive Vice President and Chief Financial Officer, will give the formal remarks on today's call. We also have Steve McAnena, Executive Vice President and Chief Operating Officer, with us for Q&A. 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, including 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, Brendan, and hello, everyone. Yesterday, we reported first quarter core EPS of $1.07, a sizable increase over prior year and a record first quarter. The results reflect solid business profitability and strong growth momentum, highlighting the ability of our multi-line business model to deliver consistent and reliable earnings. We are well on track to achieve our 2025 goals, including a shareholder return on equity above 10% for the year. Today, I'm going to discuss how our business continues to deliver strong profitability as we execute on our strategy to drive sustained profitable growth. In the first quarter, Property and Casualty segment performance was particularly strong with a reported combined ratio of 89.4%, a 10.5 point improvement over prior year. This reflects the profitability restoration work we completed in 2024, lower property frequency and favorable prior year development in both auto and property. As we noted last quarter, our exposure to California wildfires was limited. We estimate the impact of the wildfires to be $3.7 million, which includes $1 million in fair plan assessments. Excluding California wildfires, first quarter catastrophe losses were below both prior year and our historical averages. In property, we experienced lower-than-typical ex-cat claim frequency. Additionally, we are seeing the benefit of our roof settlement schedule and specific initiatives in claims to control costs of non-weather perils. In Life and Retirement, earnings were below prior year, primarily due to higher mortality, which was within our expected actuarial range. In Individual Supplemental and Group Benefits, earnings were slightly above prior year due to lower policyholder benefits utilization in individual supplemental as well as higher segment net investment income. Total net investment income of $116 million was a 10% increase over prior year, while income on our internally managed portfolio increased by 15%, driven by higher limited partnership returns…

Thanks, Marita. First quarter results are in line with our expectations and reflect solid business profitability and encouraging growth momentum. Before I review the quarterly results, I would like to cover our updated core earnings guidance. Beginning this quarter, we revised our core earnings definition to exclude certain non-core items, including intangible asset amortization and changes in market risk benefits to better reflect the true operating earnings of our business. In the past, we've reported this number as adjusted core earnings. We still expect the same business performance we laid out earlier this year and our updated core EPS range of $3.85 to $4.15 reflects that. Our supporting materials have been restated to reflect the year-over-year comparisons on this basis. Our 2025 guidance assumptions remain the same, roughly $90 million of catastrophe losses, in line with our five year historical average. Total net investment income in the range of $470 million to $480 million with managed portfolio income of $370 million to $380 million and interest expense and other corporate items of $35 million to $40 million. Turning to the results. Core earnings of $45 million or $1.07 per share was a 73% increase over the prior year. Core return on equity of 10.6% was a 4.9 point improvement over prior year, reflecting the profitability restoration work we completed in 2024. Total net written premiums and contract deposits were up 7% with total revenues up 8%. In the Property Casualty segment, core earnings were $27 million, more than double the prior year. Net written premiums of $185 million increased 8% over prior year, primarily on higher average written premiums. Of note, we recently received approvals for both auto and property rate increases in California. The auto rate increase of 14.5% went into effect in mid-April. We are starting to see…

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Wilma Burdis with Raymond James. Please go ahead.

Hey, good morning. Can you talk a little bit about the run rate earnings power of the Life and the Supplemental and Group Benefits segments? Was 1Q '25 a good level? Thanks.

Good morning, Wilma. It's Ryan. If I think about the Life Retirement business, we use the word ballast a lot to describe that business. Occasionally, you'll see a mortality blip, if you will, within actuarial expectations, and you saw that this quarter. So mortality was a little elevated. In addition to that, this quarter for Life and Retirement, the commercial mortgage loan funds that are predominantly in that segment, we had underperformance related to one specific fund. We can talk more about that if you'd like. But if you normalize and take a mid-single-digit, I think 6%, 7% annual return assumption for the $600 million of CMLs, that gives you kind of a run rate, if you will, for that contribution, and that's mostly in Life and Retirement, a little bit in Supplemental and Group. Turning to Supplemental and Group, Wilma, the benefit ratio overall was close to the blended benefit ratio that we would expect longer term. First quarter, we have seasonality, particularly in the Group business. But over a longer period of time, if you take like a run rate on that and you take multiple quarters and average it out, I think that gives you a good sense of where that business is. Does that answer your question?

Yes, it does. And then could you talk about the cat activity in 2Q '25 year-to-date? And also remind us how we should account for seasonality going into the second quarter? Thanks.

Thanks for the question, Wilma. This is Steve. So for context, I think you're aware, the major event for Q1 was California wildfires, and Ryan and Marita mentioned this in their opening remarks. Ultimate loss was $3.7 million, and that includes $1 million in fare plan assessment. We looked at April cats, and I'd say cats were in line with expectations, nothing outsized. And then I'd say, as we sort of look ahead for the full year, we're going to maintain our full year cat estimate. So we feel pretty good about what we've seen thus far, feel good about what we saw in California wildfires. And hopefully, that answered your question.

I'm going to just add on one thing, Wilma, it's Ryan. Just as a reminder for folks, second quarter has historically been our heaviest cat. About 50% of our cat load is typically -- has historically been coming through in the second quarter. And in my script, I gave you our annual guidance, $90 million for catastrophes.

Yes. And this would be the first year where we would see the full effect of the roof schedules and other things that we have begun to put in place and have been working on to mitigate that property volatility and keep that number in check.

Thank you.

Our next question comes from John Barnidge with Piper Sandler. Please go ahead.

Thank you for the opportunity. Curious about the individual supplemental distribution in the quarter. Were there any new school districts added that drove that growth in the quarter?

Hey, John, it's Steve. Thanks for the question. It's a big number, the 61%. So I guess first thing I'd say is we're having pretty good success with our benefit specialists, and their selling is up, and we feel pretty good. I think the comparison to Q1 '24 is kind of interesting. If you sort of look at the investor supplement and go quarter-by-quarter, I think what you'll note is Q1 of '24 was actually a relatively light sales quarter for us in the individual supplemental space. And so the comparison year-over-year looks massive. We tend to sort of look at -- we'll look at quarter-over-quarter, but then we'll look at things on a 12-month rolling basis. And when we look at things on a 12-month rolling basis, I think the math is around 12% new business growth. And our expectation is that's something around the number we're going to see for the remainder of the year. So there were no new districts or schools. This was sort of good continued momentum, strong activity from the benefit specialists, coupled with sort of an interesting Q1 of '24 that was a little light, making the year-over-year comparison a little challenging to look at.

Thanks for that Steve. And my follow-up question is sticking with Supplemental and Group Benefits. We've seen other companies begin to talk about increasing the reserves for Supplemental and Group Benefits products to assume some level of macro deterioration that would lead to increased utilization. Is that something you've begun to reserve for? Or how do you think through that? Thank you.

So I'll let Ryan handle the reserving part of the question. What I'll tell you is, and I'll keep my remarks to Group Benefits. Again, it's a similar story to what I just described on individual supplemental sales. Q1 of '24 was abnormally favorable for us. And so when you compare it to Q1 '25, it looks like there is a big increase, but we think '25 is within expectations. When we look at utilization for the quarter, we sort of looked at it by month. We saw January was slightly elevated. The book is small. The numbers are small. So all you need is a couple of extra claims to sort of distort some of the numbers. But January was elevated. February and March look pretty good. And so from our perspective, we feel good about the -- our expectations for Group Benefits and don't really see anything on the horizon that's going to sort of change our opinion on that. I'll let Ryan comment on how we reserve.

Sure, John, this is Ryan. Thanks for the question. On the reserving side of things, a lot of the quarterly changes in Supplemental and Group reserves are related to claim counts, frequency, et cetera. We do an annual reserve assumption review where we're looking at more of the longer-term trends. There's nothing in our current utilization trends that gives us any cause for concern. Historically, the public sector has performed well compared to other professions in recessionary environments. We'll watch it and respond accordingly. But there's not -- like I said, there's nothing that has us changing our assumption.

Yes. I think that's said well guys. When you run the tapes on previous calls, we've said over and over again that our assumption is that utilization will increase, and we had not seen that increase up to our expectations even in the numbers. So none of this is unexpected for us. None of this is not contemplated in our planning. And as Steve said, some of it, this business is small. Comparisons on any given quarter can be odd. But we are not surprised with what we're seeing and feel good about the earnings diversification that this business has brought to us and the way it has been performing. So we feel good about where we are in Individual Supplemental as well as Group Benefits.

Thanks.

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

I would just like to say before we close the call, I want to reiterate that this has been a record quarter for us and an excellent start to the year, and we're really looking forward to our Investor Day next week in New York. Brendan?

Yes. Again, as a reminder, it's next Tuesday. Details are available on our website. Thanks, and we hope you have a great day.

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