A.M. Best Affirms Ratings of Horace Mann Educators Corporation and Its Subsidiaries
25 Avril 2012 - 6:24PM
Business Wire
A.M. Best Co. has affirmed the financial strength rating
(FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” of
the property/casualty group, Horace Mann Insurance Group
(Horace Mann P/C), and its members. Additionally, A.M. Best has
affirmed the FSR of A (Excellent) and ICR of “a” of the life/health
insurance company, Horace Mann Life Insurance Company
(Horace Mann Life). Concurrently, A.M. Best has affirmed the ICR of
“bbb” and debt ratings of the parent company, Horace Mann
Educators Corporation (HMEC) (NYSE: HMN). The outlook for all
ratings is stable. All companies are headquartered in Springfield,
IL. (See below for a detailed listing of the companies and
ratings.)
The affirmation of the ratings for Horace Mann P/C acknowledges
its strong overall capitalization, moderate operating earnings and
continued expertise in writing personal lines products in the
educators’ market, which has enabled the group to obtain numerous
endorsements from local, state and national educational
associations. Horace Mann P/C further benefits from its exclusive
agency force, many of whom are former educators, which affords
strong ties to local education communities.
These strengths are partially offset by the susceptibility of
Horace Mann P/C’s property book of business to catastrophe and
non-catastrophe weather losses, which resulted in increased
underwriting deficits in recent years. Additionally, Horace Mann
P/C maintains above average underwriting leverage relative to
industry norms, although underwriting leverage has trended downward
in recent years. Furthermore, Horace Mann P/C has made significant
stockholder dividend payments to HMEC over the previous five-year
period, which somewhat tempered surplus growth. However,
stockholder dividend payments have decreased in recent years, which
have helped to augment the surplus position.
As Horace Mann P/C’s rating outlook is stable, positive rating
actions could occur if there is a sustained favorable trend in
operating results. Negative rating actions could occur if there is
a deterioration in the group’s operating results similar to what
occurred in 2011 and/or a material decline in its risk-adjusted
capitalization, driven by operating losses or stockholder
dividends.
Horace Mann Life’s ratings reflect its important role within
HMEC and the benefits the company derives from HMEC’s strong
business franchise in the K-12 educators’ market. The ratings also
reflect Horace Mann Life’s strong risk-adjusted capital position,
despite increased stockholder dividends in recent periods. In
addition, the company has recorded favorable operating results due
to strong annuity sales and investment yields that have improved
following the reinvestment of much of its cash position, which
accumulated during the recent financial crisis for liquidity
purposes.
Partially offsetting these strengths is Horace Mann Life’s
significant block of annuity business with high interest rate
guarantees, its increasing exposure to interest sensitive
liabilities in recent periods primarily due to strong fixed annuity
sales and the lack of growth in the company’s ordinary life
insurance line of business.
Horace Mann Life is well positioned at its current rating level.
A material deterioration in the operating performance of its
property/casualty affiliate or excessive stockholder dividends
taken by HMEC that would result in a material decline in
risk-adjusted capitalization may result in a ratings downgrade.
The FSR of A- (Excellent) and ICRs of “a-” have been affirmed
for Horace Mann Insurance Group and its following
members:
- Horace Mann Insurance
Company
- Horace Mann Property & Casualty
Insurance Company
- Teachers Insurance Company
- Horace Mann Lloyds
The following debt ratings have been affirmed:
Horace Mann Educators Corporation—
-- “bbb” on $75 million 6.05% senior unsecured notes, due
2015
-- “bbb” on $125 million 6.85% senior unsecured notes, due
2016
The following indicative ratings have been affirmed on
securities available under the $300 million shelf registration:
Horace Mann Educators Corporation—
-- “bbb” on senior unsecured debt
-- “bbb-” on subordinated debt
-- “bb+” on preferred stock
The methodology used in determining these ratings is Best’s
Credit Rating Methodology, which provides a comprehensive
explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Key
criteria utilized include: “Rating Members of Insurance Groups”;
“Risk Management and the Rating Process for Insurance Companies”;
“Understanding BCAR for Property/Casualty Insurers”; “Catastrophe
Analysis in A.M. Best Ratings”; “Understanding BCAR for Life/Health
Insurers”; and “Insurance Holding Company and Debt Ratings.” Best’s
Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and
most authoritative insurance rating and information source. For
more information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
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