Horace Mann Educators Corporation HMN has agreed to acquire National Teachers Associates Life Insurance Company for $405 billion. The acquisition will help the company consolidate its presence as a provider of financial solutions to the education market. Following the fulfillment of closing conditions, the acquisition is expected to be completed in the second quarter of 2019.
Dallas-based National Teachers Associates (NTA) has been providing supplemental insurance products to the education market for about five decades. It specializes in developing, marketing and underwriting supplemental insurance products, including cancer and heart. The company wrote $130 million premiums and delivered core earnings of $30 million for the twelve months ended Sep 30, 2018.
Post closure, National Teachers Associates will operate as a separate Horace Mann business segment under its current leadership team.
The addition of NTA will enhance the acquirer’s portfolio and expand its distribution network and scale. The transaction is estimated to be accretive to Horace Mann’s earnings by $15-20 million and to return on equity by 100 basis points. The company will also enjoy cross-sell opportunities, which will add to the long-term upside potential.
President and CEO of Horace Mann, Marita Zuraitis stated “this transaction brings together two organizations that share a deep commitment to the education market, increasing our reach and distribution by more than 30% with limited geographic overlap.”
The acquirer intends to deploy its cash balance and issue debt worth $250 million to fund the transaction.
Horace Mann has always pursued strategic opportunities that help it ramp up growth and enhance its product portfolio. Earlier, to cater to the requirement of educator employer market, Horace Mann agreed to buy Benefit Consultants Group, a retirement plan provider and record keeper.
Shares of Horace Mann have lost 13.1% year to date compared with the industry’s decline of 20.5%. The stock carries Zacks Rank #4 (Sell). The company’s investments to better serve the education market and achieve double-digit return on equity should help the stock rebound.
Other Insurers on the Same Track
Given the insurance industry’s all-time high available capital resource, there has been a conspicuous increase in consolidations in the space of late. Arthur J. Gallagher & Co. AJG recently acquired Pavey Group in an effort to expand outside the United States. Brown & Brown, Inc.’s BRO subsidiary, Brown & Brown of Kentucky, Inc., acquired Dealer Associates, Inc. to ramp up its dealer services team in Southwest United States. Arch Capital Group Ltd ACGL acquired McNeil & Co. to boost its underwriting business.
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