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Investing.com -- On March 26, 2025, Moody’s Ratings confirmed the Baa2 senior unsecured debt rating of Horace Mann Educators Corporation (NYSE: NYSE:HMN) and the A2 insurance financial strength (IFS) ratings of its property-casualty (P&C) and Horace Mann Life Insurance (NSE:LIFI) Company (HMLIC) subsidiaries. The outlook for Horace Mann and its subsidiaries was revised to stable from negative, due to considerable improvement in underwriting results of its P&C insurance operations and steady profitability in life insurance operations.
The affirmation of Horace Mann’s ratings takes into account the company’s diversified revenues and earnings from its P&C and life operations, its strong market position in providing insurance products to educators and school administrators nationwide, robust capitalization, and good subsidiary dividend capacity. The company’s customer base, primarily educators, is considered attractive due to their conservative risk profiles, which make them good insurance risks. Horace Mann also has the ability to cross-sell or bundle P&C products with life insurance and annuity products.
However, these strengths are somewhat offset by the company’s fluctuating, yet much improved, underwriting results in auto insurance, considerable gross exposure to natural disasters including frequent weather-related events, and exposure to interest rate risk and spread compression in fixed annuity liabilities. The company has historically relied heavily on captive agents to sell retail P&C and life and annuity products, but its expansion into worksite businesses has diversified its distribution strategy.
In 2024, Horace Mann reported a net income of $102.8 million, a significant increase from $45.0 million in 2023. This increase was due to stronger results in auto insurance and higher net investment income on fixed income securities, partially offset by higher crediting rates on its fixed annuities.
The P&C operations’ rating affirmation reflects the group’s strong niche position serving the educator community, good balance sheet strength, and significantly improved profitability in personal auto insurance. These strengths are tempered by Horace Mann’s significant gross exposure to catastrophe losses, including frequent weather-related events, and its limited size compared to larger competitors with greater financial and technical resources.
The P&C operations reported a combined ratio of 97.9% in 2024, a significant improvement from 113.3% in 2023. This improvement was due to better underwriting results in personal auto, lower catastrophe losses, and favorable prior year reserve development. Like its P&C peers, Horace Mann increased insurance rates and tightened underwriting standards to address profitability challenges. The company’s underlying combined ratio is expected to continue to improve in 2025 as additional rate increases are earned in both personal auto and property.
The rating affirmation of HMLIC is based on the firm’s niche positions within the K-12 markets for 403(b) retirement plans as well as its supplemental and group benefits businesses, which add earnings diversification. However, these strengths are offset by HMLIC’s significant and rising asset risk, with above-average exposures to highly structured, bespoke securities that are less liquid than public bonds. Other challenges include the firm’s shift to highly competitive fee-based 403(b)7 products from wider margined 403(b) fixed annuity products, and its relatively modest market presence and scale compared to larger peers.
The ratings for Horace Mann could be upgraded due to an upgrade of financial strength ratings of the company’s lead operating P&C and/or life insurance companies and financial leverage (excluding AOCI) below 15%. However, the ratings could be downgraded due to a downgrade of financial strength ratings of the company’s lead P&C and/or life insurance companies, a sizable acquisition outside of the company’s core strengths, or financial leverage (excluding AOCI) in the high-20s.
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