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On Wednesday, JMP Securities provided an update on the insurance industry, highlighting the potential winners and losers as interest rate environments evolve. Among the companies analyzed is Horace Mann Educators (NYSE:HMN), an insurer with a strong financial health score of 2.72 according to InvestingPro data. According to JMP’s industry analyst, the risk-free interest rates have seen a significant increase in recent years due to the Federal Reserve’s actions to combat post-COVID inflation. However, there’s now an anticipation of rate reductions in the upcoming months as inflation normalizes and recession concerns grow.
The analyst reviewed the interest rate trends, noting a spike due to tax reform legislation in early 2018, followed by a reversion to historical lows after a series of Federal Reserve cuts in 2019 and 2020. Rates had surged to a peak in October 2023 but have since moderated to around 425 basis points as of March 2025. This follows a period of volatility with several fluctuations in the past few years. During this period, HMN has maintained its impressive 34-year streak of consistent dividend payments, with a current yield of 3.37% - one of several key metrics available through InvestingPro’s comprehensive research reports.
The report detailed that the Federal Reserve has already implemented 100 basis points in rate cuts in the fourth quarter of 2024 and that there is a growing consensus for additional cuts in the second half of 2025. This is largely due to a slowing economy and labor market, particularly among lower-income consumers, which is expected to reduce inflation pressures from demand.
JMP’s analysis suggests that the middle and longer end of the yield curve, such as the 10-year yield which is down approximately 50 basis points from its January high, may be preempting the Fed’s actions on short-term rates. This anticipation is causing investors to reassess their expectations for future interest rates and consider the implications for the investment portfolios of insurance and reinsurance companies.
In other recent news, Horace Mann Educators Corporation has seen its stock target raised by Keefe, Bruyette & Woods. The research firm increased its price target from $44.00 to $45.00 while maintaining a Market Perform rating for the stock. This adjustment comes after Horace Mann’s fourth-quarter earnings report and subsequent conference call. Analysts at Keefe, Bruyette & Woods have also revised their earnings per share estimates for Horace Mann, projecting $3.80 for 2025 and $4.20 for 2026, up from previous estimates. The revision is based on anticipated higher income in the Property & Casualty and Supplemental & Group Benefits sectors, although this may be slightly offset by a decrease in Life & Retirement income. The analysts noted that the new price target reflects a multiple of 11.0 times their estimated 2026 earnings per share. They believe the current stock valuation fairly represents the company’s potential for margin improvement within the P&C segment. The maintained Market Perform rating indicates that the stock is not expected to outperform the average market return in the near future, although the increased price target suggests a modestly improved outlook.
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