Horace Mann (HMN) Estimates Q2 Cat Loss Between $41M & $43M
Horace Mann Educators Corporation HMN estimates second-quarter catastrophe loss of $41-$43 million pre-tax. Catastrophe losses are expected to contribute 26 to 27 points to the second-quarter combined ratio.
Property Claims Services (PCS) identified 19 events as catastrophes in this year’s second quarter, including multiple severe convective storms across the Midwest and Texas in June.
The insurer estimates second-quarter core earnings between 1 cent to 3 cents, driven by sustained solid results at Worksite and Life & Retirement businesses. This is likely to be partially offset by elevated auto loss frequency from severe weather.
The Zacks Consensus Estimate for second-quarter earnings is currently pegged at 34 cents per share, rebounding from the year-ago loss of 1 cent. However, we expect the estimate to move south as analysts incorporate the cat loss in their numbers.
Concurrently, HMN estimates full-year 2023 cat loss to be in the range of $95 million to $100 million, anticipating severe weather in the second half of 2023.
HMN believes that well-performing Worksite and Life & Retirement businesses, along with continued progress toward P&C segment profitability targets, poise it well to deliver 2023 core EPS in the range of $1.20 to $1.45.
The insurer also expects average renewal premiums for property to increase 17% to 20% in 2023 due to rate increases and other profitability actions. The company intends to increase auto rates by 18% to 20% by 2023. In property, HMN expects to increase rates by 12% to 15% through 2023. It expects rate increases and non-rate actions to contribute to nationwide premium increases of 17% to 20%.
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.
Banking on its strength, HMN remains confident of achieving its long-term target of double-digit return on equity in 2024 with core EPS approaching $4. Long-term average annual EPS growth is expected to be 10%. Horace Mann targets a combined ratio between 95 and 96 over the longer term and auto combined ratio between 97% and 98% in 2024.
Horace Mann presently carries a Zacks Rank #4 (Sell). Shares of HMN have lost 22.5% year to date compared with the industry’s decrease of 2.9%. Nonetheless, strategic initiatives to fuel profitability, niche market focus and solid capital position should help it retain momentum.
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Stocks to Consider
Some better-ranked stocks from the insurance industry are HCI Group HCA, RLI Corporation RLI and Kinsale Capital Group KNSL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HCI Group’s 2023 and 2024 earnings indicates a year-over-year increase of 149.3% and 35.2%, respectively. HCI delivered a four-quarter average earnings surprise of 308.82%.
The consensus estimate for 2023 and 2024 earnings has moved up 22.7% and 14.1%, respectively, in the past seven days. Shares of HCI have gained 51.9% year to date.
RLI delivered a four-quarter average earnings surprise of 43.50%. Year to date, the insurer has gained 4.4%.
The Zacks Consensus Estimate for RLI’s 2023 earnings indicates a year-over-year increase of 4.1%.
Kinsale Capital delivered a four-quarter average earnings surprise of 14.77%. Year to date, the insurer has gained 41.1%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings indicates a year-over-year increase of 32.9% and 19.7%, respectively.
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