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A.M. Best also has affirmed the ICR of "bbb-" and debt ratings of HMEC. The outlook for all ratings is stable.
The affirmation of Horace Mann's ratings reflects the group's adequate level of capitalization, stable operating results driven by recent underwriting and operating improvements that helped the group to weather a very volatile year in 2008 in terms of weather and investment markets. Supplementing these factors was the group's continued expertise in writing personal lines products in the educator market, which has enabled it to obtain numerous endorsements from local, state and national educational associations. These strengths are partially offset by Horace Mann's continued above-average underwriting leverage measures and the ever present susceptibility of its property book to severe weather, as seen in 2008.
Horace Mann Life's ratings recognize its key role within HMEC and the benefits derived from HMEC's strong business franchise in the K-12 educators market and historical growth in the 403(b) tax qualified annuity market. Additionally, the ratings acknowledge the company's solid stand-alone risk-adjusted capitalization for its current insurance and investment risks despite reduced levels of capital and surplus triggered by investment losses and dividends paid to the parent, overall profitable earnings performance and a distribution model that employs the use of both dedicated and independent agents that market its 403(b) tax-qualified annuity products.
Partially offsetting these positive factors are the challenges of spread management on Horace Mann Life's fixed annuity block, exposure to potential equity market volatility in the form of reduced fee income from its variable annuity business and elevated exposure to commercial mortgage-backed securities, where A.M. Best expects rising defaults industry-wide as the United States navigates through the current economic climate. The ratings also reflect the challenges Horace Mann Life encounters growing its proprietary ordinary life segment, while sustaining sales momentum in its 403(b) business in the face of the new Internal Revenue Service (IRS) 403(b) tax-qualified annuity regulations implemented on January 1.
HMEC continues to operate through a corporate structure that affords its financial flexibility as a publicly traded holding company with access to the capital markets, moderate financial leverage and historically solid fixed charge coverage.
The FSR of A- (Excellent) and ICRs of "a-" have been affirmed for Horace Mann Insurance Group and its following members:
- Horace Mann Insurance Company
- Horace Mann Property & Casualty Insurance Company
- Teachers Insurance Company
- Horace Mann Lloyds
The FSR of A- (Excellent) and ICR of "a-" have been affirmed for Horace Mann Life Insurance Company.
The ICR of "bbb-" has been affirmed for Horace Mann Educators Corp.
The following debt ratings have been affirmed:
Horace Mann Educators Corp.--
-- "bbb-" on $75 million 6.05 percent senior unsecured notes, due 2015
-- "bbb-" on $125 million 6.85 percent senior unsecured notes due 2016
The following indicative ratings have been affirmed on securities available under the $300 million shelf registration:
Horace Mann Educators Corp.--
-- "bbb-" on senior unsecured debt
-- "bb+" on subordinated debt
-- "bb" on preferred stock
For Best's Credit Ratings, an overview of the rating process and rating methodologies: ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at: ambest.com/ratings/methodology.
((Comments on this story may be sent to health@closeupmedia.com))
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