Horace Mann Educators Corporation’s ( HMN Quick Quote HMN - Free Report) strategic initiatives to fuel profitability, niche market focus, and solid capital position along with favorable growth estimates make it a good investment choice. Horace Mann targets about 10% ROE in 2022 and double-digit ROE over the long term. Solid Zacks Rank & Price Outperformance
Horace Mann currently sports a Zacks Rank #1 (Strong Buy). Year to date, the stock has gained 6.7% against the
industry’s and the Finance sector’s respective decrease of 4.1% and 7%. The Zacks S&P 500 composite has lost 11.7% in the same time frame. Image Source: Zacks Investment Research Optimistic Growth Projections
The Zacks Consensus Estimate for 2022 earnings is pegged at $3.63, indicating an increase of 1.1% on 1% higher revenues of $1.3 billion. The consensus estimate for 2023 earnings is pegged at $3.83, indicating an increase of 5.5% on 1.9% higher revenues of $1.4 billion.
Horace Mann estimates core earnings in the range of $3.45 to $3.65 per share in 2022. This includes accretion from Madison National of at least 15 cents. The increased guidance can be attributed to solid net investment income returns.
Net investment income in 2022 is projected between $310 million and $320 million. Solid Earnings Surprise History
The insurer has a solid track of delivering earnings surprise in the last nine quarters, with the average beat being 22.47%.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 has moved 8.4% and 11% north, respectively in the past 60 days, reflecting analyst optimism.
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. The addition of Supplemental products enhanced cross-selling.
HMN remains focused on improving product offerings, strengthening distribution, and modernizing infrastructure. The acquisition of Madison National Life Insurance Company will boost its presence in the education market as well as diversify the acquirer’s business profile. The insurer has been witnessing an increased frequency of fire and non-weather water losses with higher claims. Thus, HMN plans to file for property rate increases between 5% and 10% in more than 30 states, represented by 75% of the premium. Horace Mann targets a combined ratio between 95 and 96 over the longer term. HMN estimates generating about $50 million in excess capital annually in 2022 and beyond to support growth initiatives, buy back shares and hike dividend. The insurer has bought back $86.9 million worth of shares since 2011 and has $13 million remaining on the current repurchase authorization. Impressive Dividend History
Horace Mann has increased its
dividend for straight 14 years at a CAGR of 14%. Its current dividend yield of 3.1% is higher than the industry average of 2.2%. HMN targets a 50% dividend payout over the medium term. Discounted Valuation
HMN shares are trading at a discount than the industry average. Its price to book value of 0.95X is lower than the industry average of 1.45X. Before valuation expands, it is preferable to take a position in the stock.
Other Stocks to Consider
Some other top-ranked insurers include
United Fire Group ( UFCS Quick Quote UFCS - Free Report) , Cincinnati Financial Corpoartion ( CINF Quick Quote CINF - Free Report) and Kinsale Capital Group ( KNSL Quick Quote KNSL - Free Report) . While United Fire and Cincinnati Financial sport a Zacks Rank #1 (Strong Buy), Kinsale Capital carries 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 275.45%. Year to date, United Fire has gained 21.3%. The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 30 days. The bottom line of Cincinnati Financial surpassed earnings estimates in each of the last four quarters, the average being 38.48%. Year to date, the insurer has rallied 12.4%. The Zacks Consensus Estimate for Cincinnati Financial’s 2022 and 2023 earnings has moved 5.7% and 5.5% north, respectively, in the past 30 days. Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. Year to date, Kinsale Capital has lost 11.2%. The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 3.8% and 3.5% north, respectively, in the past seven days.