Horace Mann (HMN) Estimates Q2 Cat Loss, Trims 2022 Guidance
Horace Mann Educators Corporation HMN estimates second-quarter catastrophe loss of $44-$47 million pre-tax. The insurer noted that second-quarter catastrophe losses were well above the company’s 10-year historical average. Shares of HMN lost 0.1% in yesterday’s trading session.
HMN also stated that considerable equity market declines during the to-be-reported quarter resulted in unfavorable DAC unlocking. Thus, the insurer estimates second-quarter loss between 10 cents and 20 cents. Concurrently, HMN lowered its 2022 core earnings per share guidance to $2.10 to $2.30 from $3.45 to $3.65 per share guided earlier.
The Zacks Consensus Estimate for second-quarter earnings is currently pegged at 66 cents per share, which indicates a decline of 35.5% from the year-ago quarter’s reported figure. For 2022, the consensus estimate is currently pegged at $3.18 per share, which indicates a decline of 11.4% from the year-ago quarter’s reported figure. We expect estimates to move south once analysts start incorporating loss estimates into their numbers.
Horace Mann witnessed second-quarter voluntary product sales to be about $1 million higher than the year-ago level, given the addition of Madison National Life Insurance Company to its portfolio. Madison National will boost its presence in the education market as well as diversify the acquirer’s business profile. This apart, management stated, “auto sales continue at the strongest levels since the pandemic began.” These should reflect in the performance of the Supplemental & Group Benefits segment.
The multiline insurer also lowered expectations for full-year core earnings of the Property & Casualty segment and the Life & Retirement segment. At the Property & Casualty segment, HMN expects core earnings between $10 million and $14 million versus $44 million to $48 million guided earlier, to account for catastrophe losses, inflationary trends and expected cat loss of $20 million and $22 million, pretax, in the second half of the year. Horace Mann continues to implement rate and other underwriting changes to deal with inflationary trends as well as recognize the effect of those inflationary trends by adding about $6 million, pretax, to Property & Casualty reserve.
At Life & Retirement segment, core earnings are projected between $56 million and $59 million, versus $74 million and $77 million guided earlier, reflecting the effect of equity market declines and about $6 million of market-performance-related DAC unlocking in the first half of 2022.
Horace Mann estimates net investment income from the managed portfolio at the low end of its guidance of $310 million to $320 million in 2022. HMN remains focused on generating a double-digit return on equity in 2023. It deployed $14 million toward share buyback in the first half of 2022. The board of directors, in May, approved a $50 million increase in its share buyback program. HMN estimates generating about $50 million in excess capital annually in 2022 and beyond to support growth initiatives, buy back shares and hike dividends.
Horace Mann is the largest multi-line financial services company serving the U.S. educator market and is well poised to capitalize on the solid opportunity in the K-12 educator market. An 8% increase in K-12 teachers is anticipated between 2015 and 2027. A demographic shift is expected as baby boomers retire and millennials make up a higher percentage of the workforce. Thus, HMN is well poised to capitalize on the opportunity, given its strategic focus on designing products.
Horace Mann presently carries a Zacks Rank #4 (Sell).
Shares of HMN have lost 14.4% year over year compared with the industry’s decrease of 8.8%. Nonetheless, strategic initiatives to fuel profitability, niche market focus, and solid capital position should help it retain the momentum.
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Stocks to Consider
Some better-ranked stocks from the insurance industry are United Fire Group, Inc. UFCS, Zurich Insurance Group Ltd. ZURVY and Fidelity National Financial, Inc. FNF. While United Fire sports a Zacks Rank #1 (Strong Buy), Zurich Insurance and Fidelity National carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 270.8%. In the past year, UFCS' stock has gained 37.2%.
The Zacks Consensus Estimate for UFCS’ 2022 earnings has moved 23.5% north in the past 60 days.
The Zacks Consensus Estimate for Zurich Insurance’s 2022 and 2023 earnings has moved 3% and 5.1% north, respectively, in the past 60 days. In the past year, the ZURVY stock has rallied 6.8%.
The Zacks Consensus Estimate for Zurich Insurance’s 2022 and 2023 earnings implies 7.5% and 9.6 year-over-year growth, respectively.
Fidelity National’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.6%. In the past year, FNF stock has lost 14.8%.
The Zacks Consensus Estimate for Fidelity National’s 2022 and 2023 earnings has moved 0.3% and 0.5% north, respectively, in the past 60 days.
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