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Horace Mann Educators & its Units Get Rated by A.M. Best


Horace Mann Educators Corporation HMN and its units recently received rating action from credit rating giant, A.M. Best. The rating agency affirmed the Long-Term Issuer Credit Ratings (Long-Term ICR) of “bbb” of the Multi line insurer and the Long-Term Issue Credit Rating of “bbb” on the company’s 4.5% senior unsecured notes worth $250 million. These notes are set to mature in 2025.

Also, the rating giant affirmed the Financial Strength Ratings (FSR) of A (Excellent) and the Long-Term ICR of “a” of the property/casualty units of Horace Mann Insurance Group (“Horace Mann”) as well as Horace Mann Life Insurance Company (“Horace Mann Life”). Notably, the outlook of the aforementioned ratings remained stable.

Solid overall capitalization, sustained operational performance and continued industry expertise in writing personal lines products are reflected by Horace Mann’s ratings affirmation.

However, Horace Mann’s property book of business is exposed to catastrophe and non-catastrophe weather losses, which has resulted in underwriting deficit and lower pre-tax operating earnings in 2016. This may partially offset the aforementioned positive rating affirmation.

Interestingly, Horace Mann Educators’ financial flexibility, owing to its access to capital markets, along with decent financial leverage and robust fixed-charge coverage, are represented from the company’s ratings affirmation.

This apart, Horace Mann Life’s ratings affirmation indicates its strategic position within the parent organization – Horace Mann Educators – as well as the benefits obtained from the same. Moreover, the ratings represent Horace Mann Life’s sustained growth in the 403(b) tax-qualified annuity market, overall strong operational performance, robust life insurance sales, and favorable persistency in the ordinary life segment. In addition, the ratings reflect positive risk-adjusted capitalization as well as efficient asset/liability management and cash flow analysis.

However, Horace Mann Life’s significant block of annuity business, high exposure to interest-sensitive liabilities and consistent spread contraction owing to a still low interest rate environment, as well as higher investment risk, can partially offset the ratings affirmed to this affiliate.

Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence as well as in maintaining credit worthiness of a stock. On the other hand, rating downgrades not only damage business but also increase the cost of future debt issuances. We believe that such ratings will help Horace Mann Educators to retain investor confidence and write more businesses going forward.

Zacks Rank and Share Price Movement

Horace Mann Educators currently carries a Zacks Rank #4 (Sell). Shares of Horace Mann Educators lost 3.95% since the release of first-quarter 2017 earnings results, underperforming the Multi line Insurance industry’s increase of 1.81%. However, we expect top-line growth, higher net investment income as well as solid operational performance across Retirement and Life businesses to help the stock to turn around in the near term.

Stocks to Consider

Some better-ranked stocks from the same space include Cigna Corporation CI, James River Group Holdings, Ltd. JRVR and Old Republic International Corporation ORI. Each of these stocks holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cigna Corp., which operates as a health services organization, offers insurance and related products and services in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 1.35%.

James River Group provides specialty insurance and reinsurance services in the United States. The company delivered positive surprises in all of the last four quarters with an average beat of 9.47%.

Old Republic International engages in the insurance underwriting and related services business, primarily in the United States and Canada. The company delivered positive surprises in two of the last four quarters with an average beat of 11.37%.

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