Horace Mann Educators (HMN)

Educator-focused insurance company Horace Mann Educators (NYSE:HMN) fell short of the market’s revenue expectations in Q2 CY2025, but sales rose 6.1% year on year to $411.7 million. Its non-GAAP profit of $1.06 per share was 78.2% above analysts’ consensus estimates.

Company Overview

Founded in 1945 and named after the 19th-century education reformer known as the "father of American public education," Horace Mann Educators (NYSE:HMN) is an insurance company that specializes in providing auto, property, life, and retirement products tailored for educators and other public service employees.

Life insurance companies collect premiums from policyholders in exchange for providing a future death benefit or retirement income stream. Interest rates matter for the sector (and make it cyclical), with higher rates allowing insurers to reinvest their fixed-income portfolios at more attractive yields and vice versa. Additionally, favorable demographic shifts, such as an aging population, are driving strong demand for retirement products while AI and data analytics offer significant opportunities to improve underwriting accuracy and operational efficiency. Conversely, the industry faces headwinds from persistent competition from agile insurtechs that threaten traditional distribution models.

Horace Mann Educators competes with large national insurance providers like Allstate, State Farm, Liberty Mutual, and Nationwide in the property and casualty market. In the retirement and financial products space, its competitors include TIAA, Voya Financial (NYSE:VOYA), and Lincoln National (NYSE:LNC).

In general, insurance companies earn revenue from three primary sources. The first is the core insurance business itself, often called underwriting and represented in the income statement as premiums earned. The second source is investment income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from various sources such as policy administration, annuities, or other value-added services.

Unfortunately, Horace Mann Educators’s 5% annualized revenue growth over the last five years was tepid. This fell short of our benchmark for the insurance sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Horace Mann Educators’s annualized revenue growth of 8.6% over the last two years is above its five-year trend, suggesting some bright spots. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Horace Mann Educators’s revenue grew by 6.1% year on year to $411.7 million, missing Wall Street’s estimates.

Net premiums earned made up 70.8% of the company’s total revenue during the last five years, meaning insurance operations are Horace Mann Educators’s largest source of revenue.

While insurers generate revenue from multiple sources, investors view net premiums earned as the cornerstone - its direct link to core operations stands in sharp contrast to the unpredictability of investment returns and fees.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Horace Mann Educators’s net premiums earned has grown at a 5.4% annualized rate over the last five years, worse than the broader insurance industry and in line with its total revenue.

When analyzing Horace Mann Educators’s net premiums earned over the last two years, we can see that growth accelerated to 7.4% annually. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. These additional streams do play a key role in the bottom line, but their impact can vary. While some firms have excelled in consistently investing their float, sudden shifts in the fixed income and equity markets can heavily sway short-term performance.

Horace Mann Educators produced $302.6 million of net premiums earned in Q2, up 7.7% year on year and in line with Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

Combined ratio = (costs of underwriting + what an insurer pays out in claims) / net premiums earned. If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations.

Over the last four years, Horace Mann Educators’s combined ratio has swelled by 8.5 percentage points, hitting 95.4% for the past 12 months. Luckily, it seems the company has recently taken steps to address its expense base as its combined ratio improved by 16.7 percentage points on a two-year basis.

In Q2, Horace Mann Educators’s combined ratio was 98.5%, beating analysts’ expectations by 4.1 percentage points. This result was 1.3 percentage points worse than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Horace Mann Educators’s EPS grew at an unimpressive 9.7% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Horace Mann Educators, its two-year annual EPS growth of 150% was higher than its five-year trend. This acceleration made it one of the faster-growing insurance companies in recent history.

In Q2, Horace Mann Educators reported adjusted EPS at $1.06, up from $0.20 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Horace Mann Educators’s full-year EPS of $4.51 to shrink by 7.1%.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float – premiums collected but not yet paid out – are invested, creating an asset base supported by a liability structure. Book value captures this dynamic by measuring:

• Assets (investment portfolio, cash, reinsurance recoverables) - liabilities (claim reserves, debt, future policy benefits)

BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

Horace Mann Educators’s BVPS declined at a 3.4% annual clip over the last five years. However, BVPS growth has accelerated recently, growing by 11.1% annually over the last two years from $26.96 to $33.31 per share.

Over the next 12 months, Consensus estimates call for Horace Mann Educators’s BVPS to grow by 23.5% to $38.49, elite growth rate.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Horace Mann Educators currently has $547.5 million of debt and $1.36 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.4×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for a financials business. Anything below 0.5× is a bonus.

Return on equity (ROE) serves as a comprehensive measure of an insurer's performance, showing how efficiently it converts shareholder capital into profits. Strong ROE performance typically translates to better returns for investors through a combination of earnings retention, share repurchases, and dividend distributions.

Over the last five years, Horace Mann Educators has averaged an ROE of 6.5%, uninspiring for a company operating in a sector where the average shakes out around 12.5%.

We were impressed by how significantly Horace Mann Educators blew past analysts’ EPS expectations this quarter. On the other hand, its revenue missed and its book value per share fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $42.34 immediately after reporting.

Updated: October 23, 2025 at 12:35 AM EDT

Before making an investment decision, investors should account for Horace Mann Educators’s business fundamentals and valuation in addition to what happened in the latest quarter.

Horace Mann Educators doesn’t pass our quality test. For starters, its revenue growth was uninspiring over the last five years. And while its estimated BVPS growth for the next 12 months is great, the downside is its BVPS has declined over the last five years. On top of that, its projected EPS for the next year is lacking.

Horace Mann Educators’s P/B ratio based on the next 12 months is 1.3x. At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $49 on the company (compared to the current share price of $44.79).