A.M. Best Affirms Credit Ratings of Horace Mann Educators Corporation and Its Subsidiaries
May 23, 2018 by A.M. Best
OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and 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 the 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 balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Additionally, the ratings of Horace Mann reflect the group’s continued expertise in writing personal lines products in the educators’ market, which has generated numerous endorsements from local, state and national educational associations. Horace Mann also benefits from its exclusive agency force, many of whom are former educators, which affords strong ties to local education communities. 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.
These strengths are offset partially by the susceptibility of Horace Mann’s property book of business to catastrophe and non-catastrophe weather losses. Weather-related losses and higher auto loss frequency and severity contributed to underwriting deficits and reduced levels of pre-tax operating earnings in 2016 and 2017.
The ratings of Horace Mann Life reflect its balance sheet strength, which A.M. Best categorizes as strong, as well as its strong operating performance, neutral business profile and appropriate ERM.
The ratings also 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 competitive advantages derived from its: diversified distribution, including its career and independent agency channels; positive statutory and GAAP net operating performance; long term growth in the 403(b) tax-qualified annuity market; effective asset/liability management; and a steady double digit return on equity driven by separate account fees, stable investment spreads, strong life insurance sales and favorable persistency.
Partially offsetting rating factors are Horace Mann Life’s exposure to interest-sensitive liabilities and, an increase in overall investment risk due to higher allocations to alternative assets reported on schedule BA as a percentage of statutory capital.
The FSRs of A (Excellent) and the Long-Term ICRs of “a” have been affirmed with a stable outlook for the following property/casualty members of 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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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Jonathan Harris, CFA, FRM
Senior Financial Analyst – P/C
+1 908 439 2200, ext. 5771
Senior Financial Analyst – L/H
+1 908 439 2200, ext. 5802
Manager, Public Relations
+1 908 439 2200, ext. 5159
Director, Public Relations
+1 908 439 2200, ext. 5644