Analysis of Horace Mann Educators Corp.

With the kids back to school and my younger kids not wanting to stay in their beds at night it has been difficult to write.  Getting up earlier means getting to bed earlier (if I want to stay healthy.)  With the current situation I am down to about 1/2 hour of free time just to catch up with my wife and relax a little.  Hopefully everyone will get back into a rhythm and I will have more time to dedicate to one of my favorite activities, investing.  For my July ranking there was a large number of insurance companies in the top 25.  Horace Mann Educators Corp. was one I had not heard of and ranked pretty high on the DFG scale.  Let's take a closer look as to why.

The website has it has the Forbes 2014 America's MOST TRUSTWORTHY Companies 2 years in a row.  It was founded by teachers for teachers.  The name comes from the father of American public education system, Horace Mann.  It provides different type of insurance to educators and educational institutions (think school districts, etc.)  With more than 7 billion in assets they aren't doing too bad as a company.  Progressive Insurance says it has over 15 billion in annual premiums for comparison.  Unfortunately PGR cut their dividend in 2013 so they are off the list.

Value
There seems to be quite a few insurance companies with good valuations even in this market.  Yahoo has the Trailing P/E at 11.16 with the Forward P/E up a little at 11.55.  I usually look for value under 20 P/E but I am thinking to narrow it down to companies under 18.  The price to anything is hovering around 1 which is also what I like to see.  Lots of sales with the TTM at 1.18 and PEG at .93.   The Property & Casualty Insurance industry stats have the P/E at 18.9.  All good signs HMN is undervalued.

Growth
Wow had to double check this one but it has a 58% growth rate over the past 5 years.  Slows down a bit when looking into the future with the forecast at 12.7% over the next five years.  This is not bad for an insurance company of this size.  Earnings over the past twelve months is not bad at 2.53 with things a little better next year with an estimate of 2.58.  When you look at the stock price this is pretty decent but my ranking looks at a flat number right now so it almost knocked it out of the top 100 for growth.

Quality
How does management do is one way of looking at quality.  Managing the finances well usually leads to a good next category.  So when this is ranked higher I typically expect to see good things when looking at the numbers for yield.  Price-to-book was 1.01 for the most recent quarter and the Debt-to-Equity ratio was also low at .22.  All good numbers and not only point to quality but a good value as well.  This company you buy has less risk with a low amount of debt on its books.  With the way industry does business the P/B is usually low.  It is around 1.9 so HMN beats that out.

Yield
I do look for good companies with the highest yield possible.  HMN was at 3.20% today beating the industry average of 2.0%.  That .92 cents a share will continue to buy me candy bars well into the future.  Looking into the past they have been aggressive with dividend increases.  Over the last 5 years it has been double digit happiness of 16.2%.  The big concern is it is just a Challenger.  Having cut dividends in the great recession timeframe (2008) is a definite warning sign.  Have they changed their ways?



Overall
There is nothing I can find about this company that I don't like except for the dividend CUT in 2008.  Maybe I should stick to Contenders or Champions as they have a longer track record and have gone through a few cycles.  If I were to invest in them I would keep my eye open for any news or lack of cash flow that would signal a cut coming.   With the payout ratio at 32.90% that is unlikely.  Plenty of room for the dividend growth rate to stay in the double digits as long as the economy doesn't tank.  I wonder what the ratio was in 2008?  If anyone knows where to find that data let me know.

Insurance industry looking good to you or wait?

Full Disclosure: I do not own this stock.

Image from the Horacemann website.

Comments

  1. Henry @ Living At HomeAugust 29, 2014 at 12:23 PM

    Oh, this looks like an interesting insurance company. It selling at book value, not bad. I like my insurance companies to have at least a ROE of 10% before I do further research. Thanks for the analysis, I'll probably take a further look just for fun.

    Cheers.

    ReplyDelete
    Replies
    1. Dividend Family GuyAugust 30, 2014 at 9:34 PM

      HI Henry,
      Thanks for the tip. I will have to take a look at the ROE closer.
      Regards,
      DFG

      Delete
  2. Dividend LifeAugust 31, 2014 at 12:19 AM

    Hi DFG,

    Morningstar has the P/O ratio as far back as 2004. In 2008, it was 136% or so.
    You can find the historical values on the Ratio page for each stock.

    Best wishes,
    -DL

    ReplyDelete

Post a Comment

Popular posts from this blog

Will Dividends Teach My Kids to Work Hard?

After reading an article about education and learning from Mr. Money Mustache last week I starting thinking about my kids and their upbringing vs. how I was raised.  There was lots of discipline but also a tremendous amount of freedom.  That combined with loving parents taught me many lessons in life that I believe have led me to a great career and the joy of raising a large family.  The one thing that worries me the most is a fear that my children do not value gifts or money they receive as much as I did as a child. As a child I remember talking with my sister days before my birthday.  We share the same birthday one year apart.  We would spend the time talking excitedly about what we might get for our birthday.  Gifts were usually only on birthdays or major holidays.  Easter baskets filled with candy, or presents on Christmas or birthdays. Growing up with one TV that didn’t get the best reception left us with plenty of time to day drea...
Read more

What to write about when you have no money to invest?

Image
Without any money to invest from January all I could do is screen and learn about some new stocks that came up this month.  It is my hope still to save enough where I can actually invest on a regular basis again.  Part of me wants to start using loyal3 or computershare.com .  Buy for free and sell for free on Loyal3 or for a fee on Computershare.  That way I can continue to invest in some of the strong dividend payers these companies allow you to buy.  The other part wants simplicity and is willing to pay the fee to keep all my money in one place with one tax document.   The third part just reminded me my goal is to first rebuild an emergency fund.  That part is such a downer and is no fun.  The fourth part is my wife who wants me to put any free money into home improvements.  I avoid that conversation at all costs.   The house will hold up and last longer than me.  My time is what I want not a nicer house. I cou...
Read more

The Cost of A Vacation for Six

Image
All investing and no fun can lead to a happy me but a not so happy family .  I am the only one who actually doesn't mind managing the finances and money matters in my family.  The kids are slowly learning and my wife leaves it to me since I use my computer and online services.  Both systems work but my system allows me to get things done faster and produce reports I enjoy studying. Here is the breakdown of our 7 night trip to the beach and a 2 day visit with my brother: Lodging $1,966 This was the largest expense.  We stayed at hotels during the trip there and while visiting my brother.  Luckily we have a relative that works at a major hotel chain and is able to pass a discount on to us.  The remainder of it which was the big chunk was the condo on the beach that we stayed at.   I found it as one of the deals on Kayak.com .  Overall the site was easy to use and compare different places.  Unfortunately I should have listened to ...
Read more

Investment Disclaimer

This webpage is provided for general information only and nothing contained in the material constitutes a recommendation for the purchase or sale of any security. If you have any questions please feel free to contact me at dividendfamilyguy at gmail dot com.