|[September 26, 2013]
Fitch Affirms Horace Mann's Ratings; Outlook Stable
CHICAGO --(Business Wire)--
Fitch Ratings has affirmed the 'BBB' Issuer Default Rating (IDR) and
'BBB-' senior unsecured debt rating of Horace Mann Educators Corporation
(Horace Mann). Fitch has also affirmed the 'A-' Insurer Financial
Strength (IFS) ratings of Horace Mann's insurance subsidiaries. A
complete list of ratings follows at the end of this release. The Rating
Outlook is Stable.
KEY RATING DRIVERS
Horace Mann's ratings reflect solid capitalization in its operating
subsidiaries, a conservatively managed investment portfolio, and
reasonable financial leverage. The ratings also consider the company's
volatile earnings profile caused by catastrophe exposure along with its
modest size and scale relative to larger, national peers.
Horace Mann reported net earnings of $53 million through the first six
months of 2013, a 33% increase over the prior year period. The
improvement reflects lower catastrophe losses and improved underlying
underwriting results in the P/C segment. Horace Mann reported a combined
ratio of 100.3% through the first six months of 2013 compared with
103.9% for the prior year period.
The company's annuity and life insurance segments also posted solid
earnings during the first six months of 2013, following strong 2012
results. The annuity segment benefited from greater account values,
which more than offset modest spread compression on fixed annuity
assets. Life segment earnings declined as mortality costs returned to
more expected levels. Horace Mann continues to experience favorable
persistency in both its annuity and life businesses. Sales of company
manufactured life products were strong through the first six months of
Horace Mann's shareholders' equity declined by 3% during first-half 2013
to $1.1 million as of June 30, 2013, as earnings were offset by the
erosion of unrealized gains along with share repurchase activity and
shareholder dividends. Horace Mann's P/C and life insurance subsidiaries
are strongly capitalized with a 2012 risk-based capital (RBC) ratio of
541% and 471%, respectively. Additionally, the company scores "strong"
under Fitch's P/C Prism capital model as of year-end 2012.
Horace Mann's financial leverage rtio is within rating guidelines at
21.2% and fixed charge coverage is solid at 8.4x as of June 30, 2013.
Fitch views Horace Mann's ratings as somewhat limited by its modest size
and scale relative to larger, national peers. However, triggers that
could lead to an upgrade include extremely strong capital and
consistently solid earnings, as measured by a combined ratio in the mid
90's and/or fixed charge coverage at or above 10x.
Key rating triggers that could lead to a downgrade include a sustained
period of weak earnings with GAAP fixed charge coverage below 4x, a
deterioration in operating company capital quality and/or financial
leverage above 30%, adverse reserve development amounting to 5% of prior
year surplus, and/or a significant decline in market share or
distribution weakness in the 403(b) market.
Fitch has affirmed the following ratings with a Stable Outlook:
--IDR at 'BBB';
--$199.8 million senior notes at 'BBB-'.
Horace Mann Insurance Co.
Teachers Insurance Co.
Horace Mann Property & Casualty Insurance Co.
Horace Mann Lloyds
Horace Mann Life Insurance Co.
--IFS at 'A-'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria & Related Research:
--'Insurance Rating Methodology' (Aug. 19, 2013)
Applicable Criteria and Related Research:
Insurance Rating Methodology
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