Horace Mann Beats on Earnings, Raises Guidance - Analyst Blog

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Horace Mann Educators Corp. ( HMN ) reported its third-quarter 2013 operating net income of 59 cents per share, surpassing the Zacks Consensus Estimate of 58 cents by 1.7%. However, the results lagged by 4.8% from the prior-year results.

Including net realized investment losses of 2 cents per share, net income of Horace Mann came in at 57 cents per share in the reported quarter decreasing 26.9% year over year.

Reduction in top line coupled with rise in expenses induced the decline in net income.

Operational Update

Horace Mann's total revenues grossed $251.9 million, declining 1.8% year over year on account of net realized investment losses and lower other income. However, higher net investment income (up 2.2% year over year) and earned insurance premiums and contract charges (up 3.5% year over year) limited the downside.

Total expenses increased 5.7% year over year to $221.5 million. The increase largely stemmed from higher operating expenses (up 8.7% year over year) and benefits, claims and settlement expenses (up 6.3% year over year).

A decline in top line along with increase in expenses led to an operating margin contraction of 10 basis points (bps) year over year in the third quarter.

Segment Update

Property and Casualty Segment

Net earned premiums in this segment of Horace Mann stood at $140.8 million in the reported quarter, increasing 2.8% year over year. The upside was driven by higher average premiums per policy in both auto and property.

Total combined ratio of 97.6% deteriorated 460 bps from the year-ago quarter results. The downfall was driven by 68.5% year-over-year increase in pretax catastrophe losses, partially offset by higher prior year reserve development (up 33.3% year over year).

The segment's net income declined 17.8% year over year to $11.1 million in the reported quarter.

Annuity Segment

Total annuity deposits received increased 12% year over year to $128.2 million, driven by higher single premium and rollover deposits received during the quarter.

The net interest spread of 198 bps decreased 13 bps year over year. However, the decline was more than offset by higher fixed annuity assets under management on year-to-date basis. Total annuity accumulated account value increased 11% year over year to $5.2 billion. Total cash value persistency remained in line with the prior-year quarter at 94.9%.

The segment reported its net income of $11.6 million, increasing 17.2% year over year. The upsurge was primarily driven by total year-over-year sales growth of 13% in the segment.

Life Segment

This segment's insurance premiums and contract deposits of $25.3 million increased 5% from the prior-year period.

This segment of Horace Mann reported new life sales growth of 87% year over. This growth is reflective of Horace Mann's strategic effort to substantially increase underwritten, mortality-based business.

Net income for the segment stood at $5.8 million, soaring 18.4% year over year.

Financial Update

Total assets of Horace Mann as of Sep 30, 2013 amounted to $8.5 billion, increasing 4.9% year over year.

Horace Mann's total debt of $237.9 million as of Sep 30, 2013 remained almost in line with the year-ago quarter end-level.

Share Repurchase

During the reported quarter, Horace Mann spent very little amount in buying back shares under its $50 million worth of share buyback program. As of Sep 30, 2013, Horace Mann had $28.4 million remaining under its authorization.

Guidance

The company raised its full year-2013 operating income guidance to the range of $1.95 to $2.05 per share, based on its better-than-expected earnings in annuity and life segments and favorable catastrophe losses during the quarter under review.

Zacks Rank

Horace Mann presently carries a Zacks Rank #1 (Strong Buy). Among others in the space, Assurant Inc. ( AIZ ) with a Zacks Rank #2 (Buy) reported its third-quarter 2013 net operating income of $1.71 per share, surpassing the Zacks Consensus Estimate of $1.45 per share.

Other multi-line insurers such as American International Group Inc. ( AIG ) and FBL Financial Group Inc. ( FFG ), each with a Zacks Rank #1, are scheduled to release their third-quarter 2013 financial results on Oct 31.



AMER INTL GRP (AIG): Free Stock Analysis Report

ASSURANT INC (AIZ): Free Stock Analysis Report

FBL FINL GRP-A (FFG): Free Stock Analysis Report

HORACE MANN EDS (HMN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AIG , AIZ , FFG , HMN

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