Exhibit 99.1
[Moody's Investors Service, Inc. logo]
MOODY'S DOWNGRADES HORACE MANN CORPORATION'S RATINGS (SENIOR DEBT TO Baa3);
HOLDING COMPANY AND P&C FINANCIAL STRENGTH RATING OUTLOOKS REMAIN NEGATIVE,
LIFE INSURANCE SUBSIDIARY OUTLOOK IS STABLE
New York, December 02, 2003 -- Moody's Investors Service has downgraded
Horace Mann Educators Corporation's (NYSE: HMN) senior debt ratings to Baa3
from Baa2 and the insurance financial strength of its principal property
and casualty (P&C) and life operating subsidiaries to A3 from A2. The
rating actions conclude a review that was initiated by the rating agency on
October 28, 2003 following continued adverse reserve development charges
and weaker than expected earnings. The outlook for HMN's senior debt and
P&C insurance financial strength ratings remains negative, reflecting
continued concerns with the company's ability to improve earnings over the
near-term. The outlook on the A3 insurance financial strength rating at
Horace Mann Life Insurance Company (HMLIC) is stable.
Moody's noted that the downgrade was primarily a result of the company's
ongoing struggles with adverse P&C loss reserve development that has
resulted in weak earnings and slower than expected organic capital growth.
While some of the adverse development can be attributed to the
restructuring of its claims operations, Moody's believes inadequate
pricing, a relatively late response with higher auto rates to address
increasing loss trends and inefficiencies in the claims settlement process
are among contributing factors to the recent pattern of adverse reserve
development. Moody's further explained that while the risk profile of HMN's
P&C business is modest overall, the insurer's lack of robust organic
surplus growth at this point in the operating cycle was a concern.
The negative outlook on the holding company and P&C operations reflects the
rating agency's concerns that HMN may be challenged to achieve and sustain
stronger operating results and maintain or improve current capitalization
levels. Moody's believes that HMN's fourth quarter and year-end 2003
results could be impacted by further adverse reserve development and weak
P&C results. With improved insurance profit margins currently being
reported throughout the personal lines P&C industry, price increases are
likely to moderate as competition intensifies. Moody's believes HMN will
challenged by larger, national competitors that possess greater financial
and technological resources, further pressuring the company's ability to
turn around profitability trends.
Commenting on the downgrade of HMLIC, Moody's highlighted the importance of
this operation as a source of dividends and earnings to HMN. Continuing
spread compression within the company's fixed annuity portfolio, as well as
the challenge of reinvigorating sales growth, earnings, and capital
formation were additional concerns, given the intensification of
competition in the company's core tax sheltered annuity market.
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However, Moody's noted that the recurring nature of HMLIC's 403(b) premiums
and the generally stable nature of its liabilities should help improve the
company's revenue, earnings and capital trends over time. For these
reasons, the rating outlook for HMLIC is stable.
The rating agency noted that HMN's current ratings reflect an expectation
that operating and net earnings will improve in 2004 and that the company
will moderate its operational and financial leverage profiles with organic
capital growth. The company's outlook could improve with the demonstration
of stronger, sustainable operating and net earnings and maintaining or
improving current capitalization measures. Conversely, the company's
ratings could face further negative pressure with further deterioration in
earnings or higher financial and operational leverage.
The following ratings were downgraded one notch and carry a negative
outlook:
Horace Mann Educators Corporation senior debt rating to Baa3 from Baa2;
Horace Mann Property and Casualty Insurance Company insurance financial
strength rating to A3 from A2;
Horace Mann Insurance Company insurance financial strength rating to A3
from A2;
Teachers Insurance Company insurance financial strength rating to A3 from
A2;
The following ratings were downgraded one notch and carry a stable outlook:
Horace Mann Life Insurance Company insurance financial strength rating to
A3 from A2.
HMN, headquartered in Springfield, Ill., primarily sells property &
casualty (auto and homeowners) and annuity and life products to the
nation's K-12 educators and their families.
New York New York
Marc Serafin Laura Bazer
Analyst VP - Senior Credit Officer
Financial Institutions Group Financial Institutions Group
Moody's Investors Service Moody's Investors Service
JOURNALISTS: 212-553-0376 JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653 SUBSCRIBERS: 212-553-1653
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