Critical Analysis: Horace Mann Educators (NYSE:HMN) versus Assured Guaranty (NYSE:AGO)

Horace Mann Educators (NYSE:HMN) and Assured Guaranty (NYSE:AGO) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their risk, institutional ownership, profitability, earnings, valuation, analyst recommendations and dividends.

Dividends

Horace Mann Educators pays an annual dividend of $1.40 per share and has a dividend yield of 3.0%. Assured Guaranty pays an annual dividend of $1.36 per share and has a dividend yield of 1.5%. Horace Mann Educators pays out 35.4% of its earnings in the form of a dividend. Assured Guaranty pays out 16.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Horace Mann Educators has increased its dividend for 17 consecutive years and Assured Guaranty has increased its dividend for 7 consecutive years. Horace Mann Educators is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Horace Mann Educators and Assured Guaranty, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Horace Mann Educators	0	3	2	1	2.67
Assured Guaranty	0	2	2	0	2.50

Horace Mann Educators presently has a consensus target price of $46.75, indicating a potential upside of 0.45%. Assured Guaranty has a consensus target price of $101.00, indicating a potential upside of 11.55%. Given Assured Guaranty’s higher probable upside, analysts plainly believe Assured Guaranty is more favorable than Horace Mann Educators.

Profitability

This table compares Horace Mann Educators and Assured Guaranty’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Horace Mann Educators	9.79%	15.69%	1.44%
Assured Guaranty	40.65%	7.09%	3.35%

Volatility and Risk

Horace Mann Educators has a beta of 0.08, suggesting that its share price is 92% less volatile than the S&P 500. Comparatively, Assured Guaranty has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500.

Earnings & Valuation

This table compares Horace Mann Educators and Assured Guaranty”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Horace Mann Educators	$1.60 billion	1.19	$102.80 million	$3.95	11.78
Assured Guaranty	$872.00 million	4.79	$376.00 million	$8.06	11.23

Assured Guaranty has lower revenue, but higher earnings than Horace Mann Educators. Assured Guaranty is trading at a lower price-to-earnings ratio than Horace Mann Educators, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

99.3% of Horace Mann Educators shares are held by institutional investors. Comparatively, 92.2% of Assured Guaranty shares are held by institutional investors. 3.8% of Horace Mann Educators shares are held by company insiders. Comparatively, 5.1% of Assured Guaranty shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Assured Guaranty beats Horace Mann Educators on 9 of the 17 factors compared between the two stocks.

About Horace Mann Educators

Horace Mann Educators Corporation, together with its subsidiaries, operates as an insurance holding company in the United States. The company operates through Property & Casualty, Life & Retirement, and Supplemental & Group Benefits segments. Its Property & Casualty segment offers insurance products, including private passenger auto insurance, residential home insurance, and personal umbrella insurance; and provides auto coverages including liability and collision, and property coverage for homeowners and renters. The Life & Retirement segment markets tax-qualified fixed, fixed indexed, and variable annuities; and internal revenue code for educator, which allows public school employees and employees of other tax-exempt organizations, such as not-for-profit private schools, to utilize pretax income to make periodic contributions to a qualified retirement plan. The Supplemental & Group Benefits segment offers employer-sponsored products including accident, critical illness, limited-benefit fixed indemnity insurance, term life, and short-term and long-term disability, as well as worksite direct products, such as supplemental heart, cancer, disability, and accident coverage. The company was founded in 1945 and is headquartered in Springfield, Illinois.

About Assured Guaranty

Assured Guaranty Ltd., together with its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. It operates through two segments: Insurance and Asset Management. The company offers financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. It insures and reinsures various debt obligations, including bonds issued by the United States state governmental authorities; and notes issued to finance infrastructure projects. In addition, the company insures and reinsures various the U.S. public finance obligations, such as general obligation, tax-backed, municipal utility, transportation, healthcare, higher education, infrastructure, housing revenue, investor-owned utility, renewable energy, and other public finance bonds. Further, the company involved in insuring and reinsuring of non-U.S. public finance obligations comprising regulated utilities, infrastructure finance, sovereign and sub-sovereign, renewable energy bonds, pooled infrastructure, and other public finance obligations; and the U.S. and non-U.S. Structured finance obligations, including residential mortgage-backed securities, life insurance transactions, consumer receivables securities, subscription finance facilities, pooled corporate obligations, and financial products. Additionally, it offers specialty business, such as real estate properties, insurance securitizations, and aircraft residual value insurance (RVI) transactions; and asset management services comprising investment advisory services. It markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. Assured Guaranty Ltd. was incorporated in 2003 and is headquartered in Hamilton, Bermuda.