Horace Mann to acquire Madison National Life from IHC in a $ 172.5 million transaction
Orientation towards the education market
Adding a new suite of employer-sponsored performance products and a new independent performance broker distribution for K-12 school districts
Earnings per share from this transaction are expected to be in the mid-single digits in 2022, contributing approximately 50 basis points to ROE
Management will host a conference call today at 9:00 a.m. ET to discuss the transaction
SPRINGFIELD, Ill. July 14, 2021– (BUSINESS WIRE) – Horace Mann Educators Corporation (NYSE: HMN) announced today that 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 made available to educators in 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.
Madison National, headquartered in Madison, Wisconsin, offers short- and long-term group disability, group life and other products, with K-12 school districts accounting for 80% of premiums in 2020. Horace Mann also has a long-term distribution agreement with National Insurance Services (NIS), a key distribution partner of Madison National for nearly 40 years. NIS is an AssuredPartners company providing employee benefit solutions exclusively to K-12 schools and other public sector organizations. In 2020, Madison National’s net premiums were approximately $ 108 million and statutory revenues were approximately $ 14 million. Madison National is rated A- u (Excellent) by AM Best & Co.
“The acquisition of Madison National has an immediate positive impact on EPS and ROE. The transaction accelerates our progress on all fronts of our multi-year strategic plan: strengthening our product offerings, improving our sales and expanding our infrastructure. This will ultimately help us achieve our long-term goals Achieve sustainable double-digit ROE and significant growth in the education market, “said Marita Zuraitis, President and CEO of Horace Mann. “We’re excited to add the distribution that will enable us to help every employee in a district with employer-sponsored solutions designed to help districts attract and retain good teachers. This comes at a time when districts are increasingly looking for broader benefits for educators.
“We can continue to build a track record of using capital to create value for our shareholders. This transaction, combined with the acquisition of NTA in 2019, strengthens our position in the education market,” said Zuraitis. “With Madison National, Horace Mann can serve K-12 educators through a new sales channel that fully complements Horace Mann’s strengths in individual products sold through local, trusted advisors. Regardless of whether educators contact Horace Mann through ours Working together with existing channels, or benefiting from employer-sponsored coverage of their district employers, we will provide the solutions to protect what educators have today and help them prepare for a prosperous future. “
“With 60 years of experience, Madison National today delivers flexible, scalable solutions for school districts through a modern, easy-to-use platform,” said Bob Stubbe, senior executive, Madison National. “We look forward to working with Horace Mann to continue serving 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 the Horace Mann and IHC boards of directors and is expected to close early in the first quarter of 2022, subject to regulatory approval and other customary closing conditions. Upon completion, 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 the financial targets set are met by the end of 2023.
In the 12 months following closing, the transaction is expected to add approximately $ 7 to $ 9 million, or $ 0.15 to $ 0.20 per share, to Horace Mann’s earnings, which is the return on equity excluding net unrealized gains and losses on investments with a fixed term increased by around 50 basis points. These contributions include the impact of the amortization of intangible assets and one-off items related to the transaction, as well as modest assumptions regarding the repositioning of Madison National’s investment portfolio and additional operating expenses.
The transaction will be funded with cash and additional loans from the company’s revolving credit facility, which will be extended through 2026 and expanded by $ 100 million to $ 325 million to provide sufficient liquidity. At closing, Horace Mann’s leverage ratio is expected to be just under 25%, which is in line with the company’s current financial strength ratings. The company will target RBCs of 425% for life and retirement subsidiaries and 400% for property and casualty subsidiaries by year-end.
In addition, Horace Mann has signed a long-term distribution agreement with NIS that will take effect at the same time as the Madison National transaction is closed. NIS is a subsidiary of AssuredPartners, Inc., one of the largest insurance brokers in the United States. The agreement includes short and long term group disability, group life and group supplement products.
Raymond James & Associates is acting as financial advisor to Horace Mann and Eversheds Sutherland (US) LLP is acting as legal advisor to Horace Mann.
Investor Conference Call / Webcast
Horace Mann will host a conference call today at 9:00 a.m. Eastern Time (8:00 a.m. Central Time) to discuss the transaction. The conference call will be accessible via the events area of investoren.horacemann.com and by telephone. The conference call dial-in number is 844-735-3325. To listen to the webcast, register via the events area of investor.horacemann.com. A recording 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 delivering insurance and retirement solutions to America’s educators and school staff. Founded by educators for educators® [In1945thecompanyisheadquarteredinSpringfieldIllinoisFormoreinformationvisitwwwhoracemanncom[1945hatdasUnternehmenseinenHauptsitzinSpringfieldIllinoisWeitereInformationenfindenSieunterwwwhoracemanncom
About the IHC group
Established in 1980, Independence Holding Company (NYSE: IHC) is a holding company primarily engaged in the underwriting, administration and / or distribution of group and individual specialty products, including disability, supplementary 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 made in this press 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 risks and uncertainties. Horace Mann undertakes no obligation (and expressly disclaims any such obligation) to update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason. Please see the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as well as the company’s past and future filings and reports filed at The Securities and Exchange Commission have requested information about important factors that could cause actual results to differ materially from those expressed in any forward-looking statements.
No offer or solicitation
This announcement is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to subscribe or to buy, or a solicitation of an offer to buy or subscribe for securities, or a solicitation of a vote or approval in any jurisdiction for the acquisition of the Merger or otherwise, nor any sale, issue or transfer of any securities in any jurisdiction in violation of any applicable law. Securities may only be offered in accordance with the Securities Act of 1933, as amended, and other applicable laws.
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Heather J. Wietzel, Vice President, Investor Relations
217-788-5144 | [email protected]