A.M. Best Affirms Credit Ratings of Horace Mann Educators Corporation and Its Subsidiaries
May 16 2017 - 4:29PM
Business Wire
A.M. Best has affirmed the Financial Strength Ratings
(FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) of “a” of the property/casualty members of
Horace Mann Insurance Group (Horace Mann), as well as
Horace Mann Life Insurance Company (Horace Mann Life).
Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb” of
Horace Mann Educators Corporation (HMEC) [NYSE: HMN] and the
Long-Term Issue Credit Rating of “bbb” on its $250 million, 4.5%
senior unsecured notes, due 2025. The outlook of these Credit
Ratings (ratings) is stable. All companies are headquartered in
Springfield, IL.
The ratings reflect Horace Mann’s strong overall capitalization,
solid five-year 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. These strengths are offset
partially by the susceptibility of Horace Mann’s property book of
business to catastrophe and non-catastrophe weather losses, which
resulted in an underwriting deficit and a reduced level of pre-tax
operating earnings in 2016.
Horace Mann’s competitive advantages are derived from its strict
expense management, improved underwriting and operating standards,
exclusive agent business model and comprehensive enterprise risk
management program, as well as its strong name recognition in the
educators’ market. The group further benefits from its exclusive
agency force, many of whom are former educators, which affords
strong ties to local education communities. Through recent
supplemental education and support of its agency force, the group
is positioning its agents to utilize fully their positions in the
market. The ratings also reflect the financial flexibility of its
parent, HMEC, through its access to capital markets, moderate
financial leverage and solid fixed-charge coverage.
The group’s negative rating factors include deterioration in
pre-tax operating earnings in 2016, driven by underwriting losses
that were attributable to increased property catastrophe and
non-catastrophe storm losses, and increases in the frequency and
severity of losses in its auto line of business. In response, the
group has implemented rate increases, conducted re-inspections and
has reduced significantly its coastal exposures in a number of
states. Additionally, Horace Mann maintains modestly above-average
underwriting leverage relative to industry norms.
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 continued growth in the 403(b) tax-qualified
annuity market, the competitive advantages derived from its
exclusive and career full-time agent field force, overall positive
statutory and GAAP net operating performance, with good return on
equity ratios that continue to benefit from separate account fees,
strong life insurance sales and generally favorable persistency in
its ordinary life segment, favorable risk-adjusted capitalization
and effective asset/liability management and cash flow
analysis.
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, along with an increase in overall
investment risk due to higher allocations to BA assets as a
percentage of statutory capital. Going forward, Department of Labor
(DOL) Fiduciary Regulations may pose additional challenges to
Horace Mann Life’s annuity businesses outside the 403(b) market,
but currently the DOL is evaluating the fiduciary role at the
request of the executive branch. In addition, the Securities and
Exchange Commission (SEC) submitted a report to Congress
recommending that the SEC adopt a fiduciary standard of conduct for
broker-dealers.
The FSRs of A (Excellent) and the Long-Term ICRs of “a” have
been affirmed for the following property/casualty members of the
Horace Mann Insurance Group:
- Horace Mann Insurance
Company
- Horace Mann Property & Casualty
Insurance Company
- Teachers Insurance Company
- Horace Mann Lloyds
This press release relates to Credit Ratings 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. For additional
information regarding the use and limitations of Credit Rating
opinions, please view Understanding Best’s Credit
Ratings.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 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/20170516006721/en/
A.M. BestJonathan Harris, CFA, FRM, +1-908-439-2200,
ext. 5771Senior Financial
Analyst—P/Cjonathan.harris@ambest.comorRichard McMillan,
+1-908-439-2200, ext. 5615Senior Financial
Analyst—L/Hrichard.mcmillan@ambest.comorChristopher Sharkey,
+1-908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1-908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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