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Horace Mann's (HMN) Q2 Catastrophe Loss May Hit Bottom Line

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Horace Mann Educators Corp. (HMN - Free Report) has estimated to incur a pre-tax catastrophe loss between $31 million and $34 million for second-quarter 2017. The loss stemmed from 16 severe wind and hail catastrophe events which may hurt the company’s bottom line by 49–53 cents in the quarter to be reported.

The Zacks Consensus Estimate for the second quarter is currently pegged at 43 cents, which translates to year-over-year growth of 72%. However, we expect this estimate to move down as analysts incorporate the impact of the expected catastrophe loss in their estimates.

Being an insurer, Horace Mann is exposed to several catastrophe losses that in turn upset the underwriting results. The Zacks Rank #3 (Hold) multiline insurer estimates this catastrophe loss to deteriorate the combined ratio by 19-21 percentage points in the second quarter. Though the loss stemmed from 16 different catastrophe events, the major calamities were severe hailstorms of Colorado in May as well as Minnesota in mid-June.

Apart from catastrophe losses, the insurer suffered higher levels of non-catastrophe weather-related disasters in the quarter to be reported.

Property and casualty insurer The Allstate Corp. (ALL - Free Report) has estimated a catastrophe loss of $638 million during April and May.

In the first quarter too, Horace Mann was hurt by catastrophe losses. The company had experienced a record catastrophe loss of $17.2 million in the first quarter. Nonetheless, the company stated to be on course for mid-single-digit increases in property lines of business and enhance its claim practices to improve operational efficiencies.

The industry witnessed losses of about $7 billion in the first quarter, per a report by Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc (AON - Free Report) . Per the report, the first quarter was most impacted in the last 16 years.

The insurance industry has been building its capital reserve, courtesy benign catastrophe environment. We expect prudent underwriting standards to guard insurers from erosion of the same.

Horace Mann is likely to announce its second quarter results on Jul 27. However, our proven model does not conclusively show that the company will beat on earnings. This is because though Horace Mann carries a favorable Zacks Rank, its Earnings ESP of 0.00% makes a surprise prediction difficult.

Shares of Horace Mann have lost 13.79% year to date, underperforming the Multiline Insurance industry’s gain of 5.14%. The company has also not witnessed any earnings momentum over the last 60 days.


Other Stock to Consider

A better-ranked multiline insurer is Cigna Corp (CI - Free Report) , flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cigna provides health care and related benefits, the majority of which are offered through workplace. The company has delivered positive surprises in three of the last four quarters with an average beat of 1.35%.

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