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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