A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Horace Mann Educators Corporation’s (Horace Mann) (Springfield, Ill.) property/casualty insurance operating subsidiaries. Concurrently, A.M. Best has affirmed the debt ratings of “bbb-” on $100 million 6.625% senior notes due 2006 and the $353.5 million 3% convertible notes due 2032. All ratings have a stable outlook.
The affirmations reflect the revitalization of the property/casualty group’s capitalization driven by the corrective measures management has taken in recent years to operations. The 2004 operating results–although affected by roughly $69 million in net catastrophe losses due to Hurricanes Charley, Frances, Ivan and Jeanne–have been driven by positive underwriting results led by the private passenger auto liability and private passenger auto physical damage lines.
Performance of Horace Mann’s property book, although severely dampened by catastrophe losses, has improved markedly as rate increases and improvements in underwriting terms have begun to produce earning results.
The capital position of the property/casualty operations has been strengthened by its 2004 year-end results and is supportive of the A- (Excellent) rating level.
Horace Mann also benefits from its expertise in personal line products for the educator market, which has enabled it to obtain numerous endorsements from local, state and national educational associations. In addition, distribution through exclusive agents, many of whom are former educators, affords strong ties to local education communities.
The rating also reflects Horace Mann’s strict expense management and strengthened underwriting standards, as well as its adequate loss reserve position, which saw little development throughout 2004 after the corrections made in 2003. Horace Mann continues to operate through a corporate structure that affords financial flexibility as a publicly traded holding company with access to the capital markets, moderate financial leverage and historically solid fixed-charge coverage.
A. M. Best has also affirmed the financial strength rating of A- (Excellent) of the life/health insurance subsidiary, Horace Mann Life Insurance Company (Horace Mann Life) (Springfield). The rating outlook is stable.
The rating action on Horace Mann Life reflects its significant presence within Horace Mann, its strong risk-adjusted capitalization on a stand-alone basis, its overall positive statutory operating performance, increased agent productivity and the development of an independent field force, which complements its captive agency field force for the company’s 403(b) tax-qualified annuity products.
Partially offsetting these factors is A.M. Best’s concerns that Horace Mann Life may be challenged to sustain and further improve its statutory operating results due to the impact of the continuing low interest rate environment on its interest-sensitive businesses and spread compression from reinvestment opportunities, and the challenges to sustain its variable annuity business in the current economic climate and volatile stock market.
In addition, it may continue to face challenges to reverse sluggish life insurance sales. The company has begun several initiatives to address these challenges while focusing on new business growth through its core life insurance and annuity segments.
The financial strength ratings of A- (Excellent) have been affirmed with a stable outlook for Horace Mann Insurance Group and its following property/casualty subsidiaries:
— Horace Mann Insurance Company
— Horace Mann Property & Casualty Insurance Company
— Teachers Insurance Company
— Horace Mann Lloyds
The financial strength rating of A- (Excellent) has been affirmed with a stable outlook for the following life/health subsidiary of Horace Mann Educators Corporation, Horace Mann Life Insurance Company.
The issuer credit rating of “bbb-” has been affirmed with a stable outlook for Horace Mann Educators Corporation.
The following debt ratings have been affirmed with a stable outlook:
Horace Mann Educators Corporation–
— “bbb-” on $100 million 6.625% senior notes, due 2006
— “bbb-” on $353.5 million 3% convertible notes, due 2032
The following indicative ratings have been affirmed with a stable outlook on securities available under the $300 million shelf registration:
Horace Mann Educators Corporation–
— “bbb-” on senior unsecured debt
— “bb+” on subordinated debt
— “bb” on preferred stock
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