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Horace Mann (HMN) Ups 2021 Guidance on Strong Q2 Expectation

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Horace Mann Educators Corporation (HMN - Free Report) upped its 2021 EPS guidance, taking into account solid net investment income returns and lower-than-expected catastrophe losses in the second quarter. The company now estimates 2021 EPS between $3.50 and $3.70, an increase of 15% from $3.00 and $3.20 guided earlier. The Zacks Consensus Estimate is pegged at $3.30.  Shares of the company gained 0.9% in the last trading session.

The company now projects net investment income in 2021 between $385 million and $405 million, up from $370 million and $390 million guided earlier, primary reflecting strong second quarter net investment income. Its alternatives portfolio generated outsized returns in the second quarter, primarily benefiting the Property and Casualty segment per president and CEO, Marita Zuraitis, who pointed that increasing alternative investments portfolio aided the strong results apart from continually generating return on equity. The company expects 2021 core return on equity to be above 10% in 2021. Zuraitis also added that, “Still, several private equity funds saw realizations significantly above expectations during the quarter, leading to the strong return on the alternatives portfolio."

The company estimates catastrophe losses to be about $15 million to $18 million in the second quarter, much lower than its expectation, attributable to a not-so-active catastrophe environment.  Catastrophe loss estimates remain unchanged  between $20 million and $25 million for the second quarter of 2021, in line with the 10-year average for second-half catastrophe losses.

Management also expects Auto and Supplemental loss ratios to slowly return toward pre-pandemic levels with resumption of normal driving patterns by its policyholders and utilize more healthcare services.

This Zacks Rank #2 (Buy) company is the largest multiline financial services company serving the U.S. educator market. It noted solid opportunity in the K-12 educator market. An 8% increase in the number of 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. The company is well poised to capitalize on the opportunity, given its strategic focus on designing products. Zuraitis stated, "Midway through the year, we continue to see signs that our unwavering commitment to the education market, and multi-year emphasis on products, distribution and infrastructure, is setting the stage for success in the post-vaccine environment."

Shares of Horace Mann Educators have lost 10.2% year to date against the industry's increase of 13%. Nonetheless, transformational actions, profitability initiatives and niche market focus should help the shares bounce back.

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Assurant delivered an earnings surprise of 26.02% in the last reported quarter.

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