On Jun 25, Zacks Investment Research downgraded Horace Mann Educators Corp. (HMN) by two notches to a Zacks Rank #3 (Hold) from a Zacks Rank #1 (Strong Buy).
Why the Downgrade?
Horace Mann has been witnessing sluggish earnings estimate revisions due to absence of new business in property segment and lack of any near-term growth catalyst. Additionally, this multiline insurer underperformed the year-to-date S&P 500 index, which generated a return of 6.30%, against negative return of 2.9% clocked by the company.
On Apr 24, Horace Mannreported first-quarter 2014 operating earnings per share (EPS) of 65 cents, which exceeded the Zacks Consensus Estimate by 38.3% and the year-ago quarter figure by 18.2%.
Sluggish premiums’ growth, significantly reduced gains from net realized investments and lower policies-in-force led to top-line growth of mere 2.6% from the prior-year quarter. Furthermore, higher catastrophe losses and policy acquisitions expenses partially offset growth in the property-casualty segment. Moreover, life insurance segment remained weak, overall dragging the book value per share.
Nevertheless, Horace Mann’s investment portfolio and annuities improved driven by strong performance in the fixed maturity and alternative investment portfolios as well as improved interest spreads.
Moreover, the Zacks Consensus Estimate for both 2014 and 2015 moved north by a penny per share to $2.37 and $2.61 in the last 7 days. The EPS in 2014 is also expected to decline about 22.4% from 2013. Meanwhile, no upward estimate revision was witnessed for both the years.
Moreover, the Most Accurate estimate for Horace Mann’s 2015 earnings currently stand at $2.59 a share, resulting in an Earnings ESP of -0.8%, and reflecting a slow growth momentum.
Other Worthy Insurers
While we prefer to be on sidelines with regard to Horace Mannfor the time being, some better-ranked insurers such as Old Republic International Corp. (ORI), AmTrust Financial Services Inc. (AFSI) and Radian Group Inc. (RDN) are worth considering. All these stocks sport a Zacks Rank #1 (Strong Buy).