A.M. Best Upgrades Ratings of the Members of Horace Mann Insurance Group; Affirms Horace Mann Life Insurance Company
30 Mars 2016 - 3:51PM
Business Wire
A.M. Best has upgraded the financial strength rating
(FSR) to A (Excellent) from A- (Excellent) and the issuer credit
rating (ICR) to “a” from “a-” of Horace Mann Insurance
Company and its property/casualty insurance affiliates
(collectively referred to as Horace Mann P/C). The outlook for both
ratings has been revised to stable from positive.
Additionally, A.M. Best has affirmed the FSR of A (Excellent)
and the 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 issue rating of the
parent company, Horace Mann Educators Corporation (HMEC)
[NYSE:HMN]. The outlook for these ratings is stable. All companies
are headquartered in Springfield, IL. (See below for a detailed
listing of the companies and ratings.)
The upgrade of the ratings of Horace Mann P/C reflects the
group’s strong underwriting results, attributable to the
implementation of rate adjustments and numerous strategic
initiatives by its management team. As a result, operating
performance has been favorable and overall risk-adjusted
capitalization has strengthened. The ratings also acknowledge
Horace Mann P/C’s competitive advantage deriving from its strict
expense management, improved underwriting and operating standards,
evolving exclusive agent business model, comprehensive enterprise
risk management program and its strong name recognition in the K-12
educators’ market. The ratings also reflect the financial
flexibility of HMEC through its access to capital markets, moderate
financial leverage and solid fixed-charge coverage.
A.M. Best believes upward rating movement is unlikely for Horace
Mann P/C in the near term. Negative ratings actions could occur if
there were a sustained deterioration in the group’s operating and
underwriting performance, an occurrence of a sudden large
catastrophic loss event that materially hinders risk-adjusted
capitalization or if there was any material deviation from the
company’s submitted financial projections.
The ratings of Horace Mann Life reflect its strategic role
within HMEC and the benefits it derives from HMEC's strong business
franchise in the K-12 educators' market. The ratings also reflect
Horace Mann Life's favorable risk-adjusted capital position, aided
by reduced stockholder dividends to HMEC in recent periods. In
addition, operating performance is stable with good return on
equity ratios that continue to benefit from separate account fees,
strong life insurance sales and generally favorable mortality and
persistency in its ordinary life segment.
Partially offsetting rating factors are Horace Mann Life's
significant block of annuity business with high minimum interest
rate guarantees, its increasing exposure to interest sensitive
liabilities and continued spread compression due to the ongoing low
interest rate environment. While the increased focus on life
insurance sales has reversed the decline in life insurance
in-force, it has led to decreased fee income from third-party
vendors. A.M. Best notes that approximately 86% of its fixed
annuity account balances are at the guaranteed minimum interest
rate, which is contributing to ongoing spread compression over the
past year. A.M. Best believes that overall earnings will remain
favorable over the near to medium term, but could be pressured
somewhat if interest rates remain at current levels.
A.M. Best believes that positive rating action could occur if
there is a significant increase in Horace Mann Life's core 403(b)
market share while maintaining profitable results. However,
negative rating action could occur should there be a material
deterioration in operating performance due to spread compression,
or if an extraordinary stockholder dividend taken by HMEC leads to
a material decline in capital.
The FSR have been upgraded to A (Excellent) from A- (Excellent)
and the issuer credit rating (ICR) to “a” from “a-” for Horace
Mann Insurance Company and its following property/casualty
insurance affiliates:
- Horace Mann Property & Casualty
Insurance Company
- Teachers Insurance Company
- Horace Mann Lloyds
The following issue rating has been affirmed:
Horace Mann Educators Corporation—
-- “bbb” on $250 million 4.5% senior unsecured notes, due
2025
This press release relates to rating(s) that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. and/or its subsidiaries.
ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20160330005802/en/
A.M. BestJonathan Harris, +1 908 439 2200, ext.
5771Senior Financial Analyst –
P/Cjonathan.harris@ambest.comorChristopher Sharkey,
+1 908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorRichard
McMillan, +1 908 439 2200, ext. 5615Senior Financial Analyst
– L/Hrichard.mcmillan@ambest.comorJim Peavy, +1 908
439 2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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