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AM Best Affirms Credit Ratings of Horace Mann Educators Corporation and Its Subsidiaries


AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the property/casualty (P/C) members of Horace Mann Insurance Group (Horace Mann), as well as Horace Mann Life Insurance Company (Horace Mann Life). Concurrently, AM 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 AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The ratings of Horace Mann also reflect the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which benefits from conservative reserving practices and low reinsurance dependence. There is a history of favorable reserve development, which has slowed in recent years.

The group has produced modest operating earnings, as measured by its five-year pretax returns on revenue and equity, which are generally in line with the averages for the private passenger standard auto and homeowners industry composite. Horace Mann’s property book of business is somewhat susceptible 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 the past five-year period. Results for 2018 in particular, were driven primarily by elevated catastrophe costs related to the Camp Fire in California, the largest single catastrophe event for the company since Hurricane Katrina in 2005.

The ratings of Horace Mann Life reflect its balance sheet strength, which AM Best categorizes as strong, as well as its strong operating performance, neutral business profile and appropriate ERM. Horace Mann Life benefits from stable operating earnings despite some contraction within the retirement segment and growing life insurance sales and favorable persistency.

The ratings of Horace Mann Life 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 the company’s competitive advantages derived from its exclusive agency distribution channel and long-term growth in the 403(b) tax-qualified annuity market.

Partially offsetting rating factors are Horace Mann Life’s exposure to interest-sensitive liabilities, declining investment spreads in its retirement segment and an increase in overall investment risk due to higher allocations to alternative assets as a percentage of statutory capital.

The FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed with a stable outlook for the following P/C 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 AM 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 AM 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 AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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