Aligns with focus on education
markets
- Adding new suite of employer-sponsored benefit products and new
independent benefit broker distribution to K-12 school
districts
- Expecting 2022 EPS accretion from this transaction to be in
mid-single digits with approximately 50 basis point contribution to
ROE
- Management to host conference call at 9:00 a.m. ET today to
discuss transaction
Horace Mann Educators Corporation (NYSE:HMN) today announced it
has signed a definitive agreement to acquire Madison National Life
Insurance Company, a subsidiary of Independence Holding Company
(NYSE:IHC). Madison National is a leading writer of employer-paid
and sponsored benefits provided to educators by K-12 school
districts. The transaction is expected to close early in the first
quarter of 2022, subject to regulatory approval and other customary
closing conditions.
Headquartered in Madison, Wis., Madison National offers short-
and long-term group disability, group life and other products, with
K-12 school districts representing 80% of 2020 premiums. Horace
Mann has also entered into a long-term distribution agreement with
National Insurance Services (NIS), a key distribution partner for
Madison National for almost 40 years. NIS is an AssuredPartners
company that provides employee benefit solutions exclusively for
K-12 schools and other public sector organizations. In 2020,
Madison National’s net premiums were approximately $108 million and
statutory earnings were approximately $14 million. Madison National
is rated A- u (Excellent) by A.M. Best & Co.
“The acquisition of Madison National is immediately accretive to
EPS and ROE. The transaction accelerates our progress on all fronts
of our multi-year strategic plan: strengthening our product
offerings, enhancing our distribution, and adding capabilities to
our infrastructure. This ultimately will help us achieve our
long-term objectives of a sustainable double-digit ROE and
significant education market share growth,” said President and CEO
of Horace Mann Marita Zuraitis. “We are excited to be adding the
distribution that enables us to serve every employee in a district
with employer-sponsored solutions designed to help districts
attract and retain good educators. This comes at a time when
districts are increasingly looking to provide more comprehensive
benefits to educators.
“We continue to build a track record of using capital to create
value for our shareholders. This transaction, coupled with our 2019
acquisition of NTA, strengthens our position in the education
market,” Zuraitis said. “With Madison National, Horace Mann will be
able to serve K-12 educators through a new distribution channel
that is entirely complementary to Horace Mann’s strengths in
individual products sold through local, trusted advisors. Whether
educators work with Horace Mann through our existing channels, or
benefit from employer-sponsored coverage from their district
employers, we will be providing the solutions to protect what
educators have today and help them prepare for a successful
tomorrow.”
“With 60 years of experience, Madison National today delivers
flexible, scalable solutions to school districts through a modern,
user-friendly platform,” said the senior executive at Madison
National, Bob Stubbe. “We look forward to joining forces with
Horace Mann to continue to serve the education market with
financial solutions that meet the needs of school districts and
educators.”
Terms of the Transaction
Under the terms of the transaction, Horace Mann will acquire
Madison National for $172.5 million. The transaction has been
approved by Horace Mann’s and IHC’s boards of directors and is
expected to close early in the first quarter of 2022, subject to
regulatory approval and other customary closing conditions. After
close, Madison National will operate as a wholly owned subsidiary
of Horace Mann Educators Corporation. IHC will have a potential
earnout of up to $12.5 million payable in cash, if specified
financial targets are achieved by the end of 2023.
In the 12 months after closing, the transaction is expected to
contribute approximately $7 million to $9 million or $0.15 to $0.20
per share to Horace Mann’s earnings, adding approximately 50 basis
points to return on equity excluding net unrealized gains and
losses on fixed maturity investments. These contributions include
the effect of amortization of intangibles and one-time items
related to the transaction, as well as modest assumptions regarding
repositioning of Madison National’s investment portfolio and
additional operating expenses.
The transaction will be funded with cash on hand and additional
borrowings on the company’s revolving credit facility, which is
being extended to 2026 and expanded by $100 million to $325 million
to provide ample liquidity. At closing, Horace Mann’s leverage
ratio is expected to be slightly below 25%, which aligns with
levels appropriate for the company’s current financial strength
ratings. The company will target year-end RBCs of 425% for life and
retirement subsidiaries and 400% for property and casualty
subsidiaries.
In addition, Horace Mann has signed a long-term distribution
agreement with NIS to take effect concurrent with the closing of
the Madison National transaction. NIS is an employee benefit
brokerage subsidiary of AssuredPartners, Inc., one of the largest
insurance brokers in the U.S. The agreement covers short- and
long-term group disability, group life and group supplemental
products.
Advisors
Raymond James & Associates is acting as financial advisor to
Horace Mann and Eversheds Sutherland (US) LLP is acting as legal
counsel to Horace Mann.
Investor Conference Call /Webcast
Horace Mann will host a conference call today to discuss the
transaction at 9:00 a.m. Eastern time (8:00 a.m. Central time). The
conference call will be accessible via the Events section of
investors.horacemann.com and by telephone. The dial in number for
the conference call is 844-735-3325. To listen via webcast,
register through the Events section of investors.horacemann.com. A
replay of the call will be available online at the same
location.
About Horace Mann Educators Corporation
Horace Mann Educators Corporation (NYSE: HMN) is the largest
financial services company focused on providing America’s educators
and school employees with insurance and retirement solutions.
Founded by Educators for Educators® in 1945, the company is
headquartered in Springfield, Illinois. For more information, visit
horacemann.com.
About The IHC Group
Formed in 1980, Independence Holding Company (NYSE: IHC) is a
holding company that is principally engaged in underwriting,
administering and/or distributing group and individual specialty
benefit products, including disability, supplemental health, pet,
and group life insurance through its subsidiaries (Independence
Holding Company and its subsidiaries collectively referred to as
“The IHC Group”). The IHC Group consists of three insurance
companies (Standard Security Life Insurance Company of New York,
Madison National Life Insurance Company, Inc. and Independence
American Insurance Company).
Safe Harbor Statement
Statements included in this news release that are not historical
in nature are forward-looking within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to certain
risks and uncertainties. Horace Mann is not under any obligation to
(and expressly disclaims any such obligation to) update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. Please refer to the
company’s Annual Report on Form 10-K for the year ended December
31, 2020, and Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2021, and the company’s past and future
filings and reports filed with the Securities and Exchange
Commission for information concerning important factors that could
cause actual results to differ materially from those in
forward-looking statements.
No Offer or Solicitation
This communication is for informational purposes only and is not
intended to and does not constitute an offer to sell or the
solicitation of an offer to subscribe for or buy or an invitation
to purchase or subscribe for any securities or the solicitation of
any vote or approval in any jurisdiction pursuant to the
acquisition, the merger or otherwise, nor shall there be any sale,
issuance or transfer of securities in any jurisdiction in
contravention of applicable law. No offer of securities shall be
made except in accordance with the Securities Act of 1933, as
amended, and other applicable law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210714005479/en/
Heather J. Wietzel, Vice President, Investor Relations
217-788-5144 | investorrelations@horacemann.com
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