A.M. Best Downgrades Horace Mann Ratings

A.M. Best Co. has assigned an initial debt rating of “bbb+” to Horace Mann Educators Corporation’s Springfield, Ill., existing $100 million senior notes due 2006. In addition, A.M. Best assigned a “bbb+” to the $150 million convertible note offering due in 2032.

In separate rating actions, A.M. Best downgraded the financial strength rating to A (Excellent) from A+ (Superior) of the property/casualty members of Horace Mann and affirmed the financial strength rating of A (Excellent) of Horace Mann Life Insurance Company, Springfield, Ill.

The rating action on the property/casualty members reflect the group’s capitalization which is below “Superior” standards and earnings deterioration in recent years. Operating results have been negatively influenced by prior year reserve strengthening in 2000 and 2001. The reserve strengthening has been largely attributable to ceded reserves related to automobile facility business in four states, primarily Massachusetts. Horace Mann ceased writing automobile business in Massachusetts as of Dec. 31, 2001.

Nevertheless, the rating reflects the group’s sustainable competitive advantages within the personal lines segment derived from prudent underwriting standards and experience in its niche educator market. High-quality service and strong name recognition in its target market facilitates the group’s ability to obtain endorsements from local, state and national educational associations. Additionally, the group benefits from its exclusive agent force, many of whom are former educators, which afford strong ties to local education communities.

Horace Mann continues to operate through a corporate structure that affords financial flexibility through its status as a publicly traded holding company with access to the capital markets, moderate financial leverage and historically solid fixed-charge coverage.

A.M. Best believes Horace Mann is well positioned for improved earnings to support future growth initiatives based on excellent capitalization and expertise in its target market. Accordingly, the outlook for the rating is stable.