UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2022~~March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 1-10890

HORACE MANN EDUCATORS CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			37-0911756
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1 Horace Mann Plaza, Springfield, Illinois 62715-0001

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 217-789-2500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange
on which registered

Common Stock, $0.001 par value

HMN

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes ☐ No ☑

As of ~~October 31, 2022,~~April 30, 2023, the registrant had ~~40,898,295~~40,843,579 common shares, $0.001 par value, outstanding.

HORACE MANN EDUCATORS CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2022~~MARCH 31, 2023

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION		Page

Item 1.	Consolidated Financial Statements

	Report of Independent Registered Public Accounting Firm	1

	Consolidated Balance Sheets as of ~~September~~ ~~30,~~March 31, 2023 and December 31, 2022 (Unaudited) ~~and~~ ~~December, 31 2021~~	2

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~March ~~30, 2022~~3 1 , 202 3 and ~~2021~~202 2 (Unaudited)	3

	Consolidated Statements of Changes in Shareholders’ Equity for the Three ~~and~~ ~~Nine~~ Months Ended ~~September~~March ~~30, 2022~~3 1 , 202 3 and ~~2021~~202 2 (Unaudited)	4

	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September~~March ~~30, 2022~~3 1 , 202 3 and ~~2021~~202 2 (Unaudited)	5

	Notes to Consolidated Financial Statements (Unaudited)
	Note 1 - Basis of Presentation and Significant Accounting ~~Policies~~Policie s	6
	Note 2 - ~~Acquisitions~~ Investments	9
	~~Note 3 - Investments~~	1011
	Note 43 - Fair Value of Financial Instruments	1516
	Note 54 - ~~Goodwill and Intangible Assets~~Short-Duration Insurance Contracts	21
	Note 6 5 - ~~Unpaid Claims and Claim Expenses~~Long-Duration Insurance Contracts	2322
	Note 6 - Reinsurance	34
	Note 7 ~~- Reinsurance~~	24
	~~Note 8 - Commitments~~	24
	~~Note 9~~ - Segment Information	2535
	Note 108 - Accumulated Other Comprehensive Income (Loss)	2636
	Note 119 - Supplemental Consolidated Cash and Cash Flow Information	2737
	Note 10 - Contingencies and Commitments	37
	Note 11 - Prior Period Consolidated Financial Statements	37

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2841

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4963

Item 4.	Controls and Procedures	5064

PART II - OTHER INFORMATION

Item 1A.	Risk Factors	5165

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5165

Item 5.	Other Information	5165

Item 6.	Exhibits	5165

SIGNATURES		5670

PART I: FINANCIAL INFORMATION

ITEM 1. I Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Horace Mann Educators Corporation:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance ~~sheets~~sheet of Horace Mann Educators Corporation and subsidiaries (the Company) as of ~~September 30, 2022,~~March 31, 2023, the related consolidated statements of operations, comprehensive income (loss), and changes in shareholders' equity for the ~~three and nine-month~~three-month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, and~~the related consolidated statements of cash flows for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance ~~sheets~~sheet of the Company as of December 31, ~~2021,~~2022, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February ~~25, 2022,~~28, 2023, we expressed an unqualified opinion on those consolidated financial statements. ~~In our opinion,~~As described in Note 1 to the Company's consolidated interim financial information, ~~set forth~~on January 1, 2023 the Company adopted Accounting Standard Update (ASU) No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (ASU No. 2018-12), using the modified retrospective adoption method for the Liability for Future Policy Benefits and Deferred Acquisition Costs and the fully retrospective adoption method for Market Risk Benefits resulting in revision of the ~~accompanying~~December 31, 2022 consolidated balance sheet. We have not audited and reported on the revised December 31, 2022 consolidated balance sheet asreflecting the adoption of ~~December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.~~ASU No. 2018-12.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ KPMG LLP
KPMG LLP

Chicago, Illinois
~~November 8, 2022~~May 10, 2023


Horace Mann Educators Corporation			1			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

($ in millions, except share data)


		September 30, 2022		December 31, 2021
		(Unaudited)					March 31, 2023		December 31, 2022
Assets	Assets					Assets
Investments	Investments					Investments
Fixed maturity securities, available for sale, at fair value (amortized cost, net 2022, $5,904.1; 2021, $5,797.7)		$	5,272.1	$	6,239.3
Fixed maturity securities, available for sale, at fair value (amortized cost, net 2023, $5,803.3; 2022, $5,756.9)						Fixed maturity securities, available for sale, at fair value (amortized cost, net 2023, $5,803.3; 2022, $5,756.9)	$	5,350.0	$	5,185.0
Equity securities at fair value	Equity securities at fair value	113.8		147.2		Equity securities at fair value	98.8		99.6
Limited partnership interests	Limited partnership interests	997.5		712.8		Limited partnership interests	1,045.4		983.7
Short-term and other investments	Short-term and other investments	254.6		350.2		Short-term and other investments	291.1		319.3
Total investments	Total investments	6,638.0		7,449.5		Total investments	6,785.3		6,587.6
Cash	Cash	36.2		133.7		Cash	27.4		42.8
Deferred policy acquisition costs	Deferred policy acquisition costs	440.1		248.0		Deferred policy acquisition costs	331.6		330.6
Reinsurance balances receivable	Reinsurance balances receivable	497.5		153.2		Reinsurance balances receivable	467.6		468.0
Deposit asset on reinsurance	Deposit asset on reinsurance	2,525.6		2,481.5		Deposit asset on reinsurance	2,518.0		2,516.6
Intangible assets	Intangible assets	192.2		145.4		Intangible assets	181.5		185.2
Goodwill	Goodwill	56.3		43.5		Goodwill	54.3		54.3
Other assets	Other assets	328.6		288.1		Other assets	333.5		328.7
Separate Account variable annuity assets	Separate Account variable annuity assets	2,599.6		3,441.0		Separate Account variable annuity assets	2,954.7		2,792.3
Total assets	Total assets	$	13,314.1	$	14,383.9	Total assets	$	13,653.9	$	13,306.1

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Policy liabilities	Policy liabilities					Policy liabilities
Investment contract and policy reserves		$	7,068.1	$	6,577.8
Future policy benefit reserves						Future policy benefit reserves	$	1,772.4	$	1,718.0
Policyholders' account balances						Policyholders' account balances	5,234.6		5,260.6
Unpaid claims and claim expenses	Unpaid claims and claim expenses	481.9		425.9		Unpaid claims and claim expenses	574.8		564.0
Unearned premiums	Unearned premiums	266.5		255.1		Unearned premiums	263.3		266.1
Total policy liabilities	Total policy liabilities	7,816.5		7,258.8		Total policy liabilities	7,845.1		7,808.7
Other policyholder funds	Other policyholder funds	1,000.7		945.9		Other policyholder funds	887.1		809.3
Other liabilities	Other liabilities	322.8		428.2		Other liabilities	329.8		299.5
Short-term debt	Short-term debt	249.0		249.0		Short-term debt	249.0		249.0
Long-term debt	Long-term debt	248.9		253.6		Long-term debt	249.0		249.0
Separate Account variable annuity liabilities	Separate Account variable annuity liabilities	2,599.6		3,441.0		Separate Account variable annuity liabilities	2,954.7		2,792.3
Total liabilities	Total liabilities	12,237.5		12,576.5		Total liabilities	12,514.7		12,207.8
Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued	Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued	—		—		Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued	—		—
Common stock, $0.001 par value, authorized 75,000,000 shares; issued, 2022, 66,612,323; 2021, 66,436,821		0.1		0.1
Common stock, $0.001 par value, authorized 75,000,000 shares; issued, 2023, 66,710,189; 2022, 66,618,465						Common stock, $0.001 par value, authorized 75,000,000 shares; issued, 2023, 66,710,189; 2022, 66,618,465	0.1		0.1
Additional paid-in capital	Additional paid-in capital	500.4		495.3		Additional paid-in capital	503.1		502.6
Retained earnings	Retained earnings	1,500.4		1,524.9		Retained earnings	1,505.2		1,512.4
Accumulated other comprehensive income (loss), net of tax:	Accumulated other comprehensive income (loss), net of tax:					Accumulated other comprehensive income (loss), net of tax:
Net unrealized investment gains (losses) on fixed maturity securities		(396.7)		290.7
Net unrealized investment losses on fixed maturity securities						Net unrealized investment losses on fixed maturity securities	(356.4)		(449.6)
Net reserve remeasurements attributable to discount rates						Net reserve remeasurements attributable to discount rates	17.8		59.0
Net funded status of benefit plans	Net funded status of benefit plans	(10.2)		(10.2)		Net funded status of benefit plans	(8.8)		(8.8)
Treasury stock, at cost, 2022, 25,714,153 shares; 2021, 25,043,337 shares		(517.4)		(493.4)
Treasury stock, at cost, 2023, 25,842,693 shares; 2022, 25,714,153 shares						Treasury stock, at cost, 2023, 25,842,693 shares; 2022, 25,714,153 shares	(521.8)		(517.4)
Total shareholders’ equity	Total shareholders’ equity	1,076.6		1,807.4		Total shareholders’ equity	1,139.2		1,098.3
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	13,314.1	$	14,383.9	Total liabilities and shareholders’ equity	$	13,653.9	$	13,306.1

The accompanying Notes are an integral part of these Consolidated Financial Statements.


Horace Mann Educators Corporation			2			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

($ in millions, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Statements of Operations	Statements of Operations									Statements of Operations
Revenues	Revenues									Revenues
Net premiums and contract charges earned	Net premiums and contract charges earned	$	257.8	$	225.4	$	769.5	$	678.8	Net premiums and contract charges earned		$	255.9	$	255.8
Net investment income	Net investment income	97.6		103.7		300.7		308.4		Net investment income		100.4		97.9
Net investment losses	Net investment losses	(12.8)		(6.5)		(43.8)		(10.6)		Net investment losses		(3.9)		(15.5)
Other income	Other income	0.4		7.0		9.7		22.1		Other income		1.5		8.5

Total revenues	Total revenues	343.0		329.6		1,036.1		998.7		Total revenues		353.9		346.7

Benefits, losses and expenses	Benefits, losses and expenses									Benefits, losses and expenses
Benefits, claims and settlement expenses	Benefits, claims and settlement expenses	173.6		164.8		558.2		446.2		Benefits, claims and settlement expenses		183.2		175.2
Interest credited	Interest credited	45.9		51.9		129.1		153.7		Interest credited		48.7		39.7
Operating expenses	Operating expenses	75.6		64.3		229.7		182.8		Operating expenses		79.8		76.7
DAC unlocking and amortization expense		23.3		22.9		76.7		70.5
DAC amortization expense										DAC amortization expense		23.7		22.0
Intangible asset amortization expense	Intangible asset amortization expense	4.2		3.3		12.6		9.8		Intangible asset amortization expense		3.7		4.2
Interest expense	Interest expense	5.3		3.4		13.5		10.4		Interest expense		6.7		3.9

Total benefits, losses and expenses	Total benefits, losses and expenses	327.9		310.6		1,019.8		873.4		Total benefits, losses and expenses		345.8		321.7

Income before income taxes	Income before income taxes	15.1		19.0		16.3		125.3		Income before income taxes		8.1		25.0
Income tax expense	Income tax expense	1.2		2.7		0.4		23.0		Income tax expense		1.5		4.7

Net income	Net income	$	13.9	$	16.3	$	15.9	$	102.3	Net income		$	6.6	$	20.3

Net income per share	Net income per share									Net income per share
Basic	Basic	$	0.33	$	0.39	$	0.38	$	2.44	Basic		$	0.16	$	0.48
Diluted	Diluted	$	0.33	$	0.39	$	0.38	$	2.43	Diluted		$	0.16	$	0.48

Weighted average number of shares and equivalent shares	Weighted average number of shares and equivalent shares									Weighted average number of shares and equivalent shares
Basic	Basic	41.4		42.0		41.7		42.0		Basic		41.3		41.9
Diluted	Diluted	41.6		42.2		41.9		42.2		Diluted		41.4		42.1

Statements of Comprehensive Income (Loss)	Statements of Comprehensive Income (Loss)									Statements of Comprehensive Income (Loss)
Net income	Net income	$	13.9	$	16.3	$	15.9	$	102.3	Net income		$	6.6	$	20.3
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Change in net unrealized investment losses on fixed maturity securities	Change in net unrealized investment losses on fixed maturity securities	(176.3)		(25.3)		(687.4)		(59.4)		Change in net unrealized investment losses on fixed maturity securities		93.2		(334.1)
Change in net reserve remeasurements attributable to discount rates										Change in net reserve remeasurements attributable to discount rates		(41.2)		181.5
Change in net funded status of benefit plans	Change in net funded status of benefit plans	—		—		—		—		Change in net funded status of benefit plans		—		—
Other comprehensive loss		(176.3)		(25.3)		(687.4)		(59.4)
Other comprehensive income (loss)										Other comprehensive income (loss)		52.0		(152.6)
Comprehensive income (loss)	Comprehensive income (loss)	$	(162.4)	$	(9.0)	$	(671.5)	$	42.9	Comprehensive income (loss)		$	58.6	$	(132.3)

The accompanying Notes are an integral part of these Consolidated Financial Statements.


Horace Mann Educators Corporation			3			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

($ in millions, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Common stock, $0.001 par value	Common stock, $0.001 par value									Common stock, $0.001 par value
Beginning balance	Beginning balance	$	0.1	$	0.1	$	0.1	$	0.1	Beginning balance		$	0.1	$	0.1
Options exercised	Options exercised	—		—		—		—		Options exercised		—		—
Conversion of common stock units	Conversion of common stock units	—		—		—		—		Conversion of common stock units		—		—
Conversion of restricted stock units	Conversion of restricted stock units	—		—		—		—		Conversion of restricted stock units		—		—
Ending balance	Ending balance	0.1		0.1		0.1		0.1		Ending balance		0.1		0.1

Additional paid-in capital	Additional paid-in capital									Additional paid-in capital
Beginning balance	Beginning balance	498.1		490.7		495.3		488.4		Beginning balance		502.6		495.3
Options exercised and conversion of common stock units and restricted stock units		0.2		0.2		(1.1)		(1.0)
Options exercised and conversion of common and restricted stock units										Options exercised and conversion of common and restricted stock units		(1.4)		(0.6)
Share-based compensation expense	Share-based compensation expense	2.1		2.0		6.2		5.5		Share-based compensation expense		1.9		1.9
Ending balance	Ending balance	500.4		492.9		500.4		492.9		Ending balance		503.1		496.6

Retained earnings	Retained earnings									Retained earnings
Beginning balance	Beginning balance	1,499.9		1,494.4		1,524.9		1,434.6		Beginning balance		1,512.4		1,547.0
Net income	Net income	13.9		16.3		15.9		102.3		Net income		6.6		20.3
Dividends, 2022, $0.32 per share; 2021, $0.31 per share		(13.4)		(13.2)		(40.4)		(39.4)

Dividends, 2023, $0.33 per share; 2022, $0.32 per share										Dividends, 2023, $0.33 per share; 2022, $0.32 per share		(13.8)		(13.5)
Effect of adopting ASU 2018-12(1)										Effect of adopting ASU 2018-12(1)		—		(0.8)
Ending balance	Ending balance	1,500.4		1,497.5		1,500.4		1,497.5		Ending balance		1,505.2		1,553.0

Accumulated other comprehensive income (loss), net of tax:	Accumulated other comprehensive income (loss), net of tax:									Accumulated other comprehensive income (loss), net of tax:
Beginning balance	Beginning balance	(230.6)		321.0		280.5		355.1		Beginning balance		(399.4)		(50.0)
Change in net unrealized investment losses on fixed maturity securities	Change in net unrealized investment losses on fixed maturity securities	(176.3)		(25.3)		(687.4)		(59.4)		Change in net unrealized investment losses on fixed maturity securities		93.2		(334.1)
Change in net reserve remeasurements attributable to discount rates										Change in net reserve remeasurements attributable to discount rates		(41.2)		181.5
Change in net funded status of benefit plans	Change in net funded status of benefit plans	—		—		—		—		Change in net funded status of benefit plans		—		—
Ending balance	Ending balance	(406.9)		295.7		(406.9)		295.7		Ending balance		(347.4)		(202.6)

Treasury stock, at cost	Treasury stock, at cost									Treasury stock, at cost
Beginning balance	Beginning balance	(507.4)		(489.6)		(493.4)		(488.1)		Beginning balance		(517.4)		(493.4)
Acquisition of shares		(10.0)		(0.2)		(24.0)		(1.7)
Treasury stock acquired - share repurchase authorization										Treasury stock acquired - share repurchase authorization		(4.4)		(2.2)
Ending balance	Ending balance	(517.4)		(489.8)		(517.4)		(489.8)		Ending balance		(521.8)		(495.6)
Shareholders' equity at end of period	Shareholders' equity at end of period	$	1,076.6	$	1,796.4	$	1,076.6	$	1,796.4	Shareholders' equity at end of period		$	1,139.2	$	1,351.5

(1)

See Note 1 to the Consolidated Financial Statements for information regarding the adoption of ASU 2018-12.

The accompanying Notes are an integral part of these Consolidated Financial Statements.


Horace Mann Educators Corporation			4			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

($ in millions)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash flows - operating activities	Cash flows - operating activities					Cash flows - operating activities
Net income	Net income	$	15.9	$	102.3	Net income	$	6.6	$	20.3
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Net investment losses	Net investment losses	43.8		10.6		Net investment losses	3.9		15.5
Depreciation and intangible asset amortization	Depreciation and intangible asset amortization	20.7		16.7		Depreciation and intangible asset amortization	6.6		3.8
Share-based compensation expense	Share-based compensation expense	6.7		6.0		Share-based compensation expense	2.0		2.1
Income from equity method investments, net of dividends or distributions		2.1		(31.1)
Loss from equity method investments, net of dividends or distributions						Loss from equity method investments, net of dividends or distributions	10.0		1.6

Changes in:	Changes in:					Changes in:
Insurance liabilities	Insurance liabilities	403.3		75.1		Insurance liabilities	55.8		367.7
Amounts due under reinsurance agreements	Amounts due under reinsurance agreements	(344.3)		(1.6)		Amounts due under reinsurance agreements	0.3		(333.0)
Income tax liabilities	Income tax liabilities	(6.0)		2.3		Income tax liabilities	(9.9)		54.5
Other operating assets and liabilities	Other operating assets and liabilities	(31.0)		(9.0)		Other operating assets and liabilities	5.4		(40.1)
Other, net	Other, net	4.6		6.8		Other, net	5.7		3.3
Net cash provided by operating activities	Net cash provided by operating activities	115.8		178.1		Net cash provided by operating activities	86.4		95.7
Cash flows - investing activities	Cash flows - investing activities					Cash flows - investing activities
Fixed maturity securities	Fixed maturity securities					Fixed maturity securities
Purchases	Purchases	(901.3)		(1,228.1)		Purchases	(185.5)		(397.4)
Sales	Sales	529.9		319.2		Sales	62.7		168.3
Maturities, paydowns, calls and redemptions	Maturities, paydowns, calls and redemptions	428.8		631.5		Maturities, paydowns, calls and redemptions	73.7		234.4
Equity securities	Equity securities					Equity securities
Purchases	Purchases	(4.5)		(45.0)		Purchases	(1.1)		(1.1)
Sales and repayments	Sales and repayments	7.0		1.0		Sales and repayments	—		6.8
Limited partnership interests	Limited partnership interests					Limited partnership interests
Purchases	Purchases	(332.3)		(202.1)		Purchases	(75.1)		(111.0)
Sales	Sales	45.5		69.4		Sales	3.4		20.5
Change in short-term and other investments, net	Change in short-term and other investments, net	95.4		103.1		Change in short-term and other investments, net	26.6		26.2
Acquisition of business, net of cash acquired	Acquisition of business, net of cash acquired	(164.4)		—		Acquisition of business, net of cash acquired	—		(164.4)
Net cash used in investing activities	Net cash used in investing activities	(295.9)		(351.0)		Net cash used in investing activities	(95.3)		(217.7)
Cash flows - financing activities	Cash flows - financing activities					Cash flows - financing activities
Dividends paid to shareholders	Dividends paid to shareholders	(39.5)		(38.6)		Dividends paid to shareholders	(13.5)		(13.2)
FHLB borrowings		—		1.0
Principal repayment on FHLB borrowings		(5.0)		(50.0)
Acquisition of treasury stock		(24.0)		(1.7)
Proceeds from exercise of stock options		—		0.3

Treasury stock acquired						Treasury stock acquired	(4.4)		(2.2)

Withholding tax payments on RSUs tendered	Withholding tax payments on RSUs tendered	(2.4)		(2.0)		Withholding tax payments on RSUs tendered	(1.7)		(0.9)
Annuity contracts: variable, fixed and FHLB funding agreements:	Annuity contracts: variable, fixed and FHLB funding agreements:					Annuity contracts: variable, fixed and FHLB funding agreements:
Deposits		516.7		833.2
Deposits including advances from FHLB funding agreements						Deposits including advances from FHLB funding agreements	278.7		182.8
Benefits, withdrawals and net transfers to Separate Account variable annuity assets	Benefits, withdrawals and net transfers to Separate Account variable annuity assets	(340.6)		(342.1)		Benefits, withdrawals and net transfers to Separate Account variable annuity assets	(152.2)		(117.9)
Principal repayment on FHLB funding agreements		(94.0)		(204.0)
Repayment of FHLB funding agreements						Repayment of FHLB funding agreements	(85.0)		—
Life policy accounts:	Life policy accounts:					Life policy accounts:
Deposits	Deposits	7.7		6.7		Deposits	3.4		2.2
Withdrawals and surrenders	Withdrawals and surrenders	(2.8)		(3.0)		Withdrawals and surrenders	(1.1)		(0.8)
Change in deposit asset on reinsurance	Change in deposit asset on reinsurance	(32.4)		(17.2)		Change in deposit asset on reinsurance	(24.0)		(14.2)
Net increase in reverse repurchase agreements		95.2		—

Change in book overdrafts	Change in book overdrafts	3.7		8.2		Change in book overdrafts	(6.7)		1.6
Net cash provided by financing activities		82.6		190.8
Net increase (decrease) in cash		(97.5)		17.9
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(6.5)		37.4
Net decrease in cash						Net decrease in cash	(15.4)		(84.6)
Cash at beginning of period	Cash at beginning of period	133.7		22.3		Cash at beginning of period	42.8		133.7
Cash at end of period	Cash at end of period	$	36.2	$	40.2	Cash at end of period	$	27.4	$	49.1

The accompanying Notes are an integral part of these Consolidated Financial Statements.


Horace Mann Educators Corporation			5			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

HORACE MANN EDUCATORS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - Basis of Presentation and Significant Accounting Policies

Business

Horace Mann Educators Corporation is a holding company for insurance subsidiaries that market and underwrite personal lines of property and casualty insurance products (primarily personal lines of auto and property insurance), life insurance products, retirement products (primarily tax-qualified fixed and variable annuities), ~~voluntary supplemental~~worksite direct insurance products (primarily cancer, heart, hospital, supplemental disability and accident coverages), and employer-sponsored group benefit products (primarily short-term and long-term group disability, and group term life coverages), primarily to K-12 teachers, administrators and other employees of public schools and their families (collectively, HMEC, the Company or Horace Mann).

~~As described in Note 2, the~~The Company ~~acquired Madison National Life Insurance Company, Inc. (Madison National) effective January 1, 2022. In conjunction with the acquisition, management changed how it~~conducts and manages ~~and conducts~~ its business ~~resulting~~ in ~~three operating~~four reporting segments: (1) Property & Casualty, (2) Life & Retirement, ~~and~~ (3) Supplemental & Group Benefits ~~(which includes the results of Madison National).~~and (4) Corporate & Other.

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in annual financial statements prepared in conformity with GAAP, but are not required for interim reporting purposes, have been omitted. These Consolidated Financial Statements and Notes thereto should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Part II - Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results to be expected for the full year.

The accompanying Consolidated Financial Statements and Notes thereto are unaudited and reflect all adjustments (generally consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods. The Company's significant accounting policies are summarized in Part II - Item 8, Note 1 of the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

The Company has reclassified the presentation of certain prior period information to conform to the current year's presentation.

Consolidation

All intercompany transactions and balances between HMEC and its subsidiaries and affiliates have been eliminated.

~~Accounting Policies~~

~~Reverse Repurchase Agreements~~

Beginning in the second quarter of 2022, the Company entered into reverse repurchase agreements to sell securities for cash. Such reverse repurchase agreements are primarily used as a financing tool for general corporate purposes and may be used as a tool to enhance yield on the investment portfolio.

A reverse repurchase agreement is a transaction in which one party (transferor) agrees to sell securities to another party (transferee) in return for cash (or securities), with a simultaneous agreement to repurchase the same securities (or substantially similar securities) at a specified price on a specified date. These transactions are generally short-term in nature, and therefore, the carrying amounts of these instruments approximate fair value.


~~Horace Mann Educators Corporation~~			6			~~Quarterly Report on Form 10-Q~~

~~NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)~~

In connection with reverse repurchase agreements, the Company transfers primarily U.S. government, government agency and corporate securities and receives cash. For reverse repurchase agreements, the Company receives cash in an amount equal to at least 95% of the fair value of the securities transferred (i.e., the collateral), and the agreements with third parties contain contractual provisions to allow for additional collateral to be obtained when necessary. The Company accounts for reverse repurchase agreements as secured borrowings. The securities transferred under reverse repurchase agreements are included in Fixed maturity securities with the obligation to repurchase those securities reported in Other liabilities on the Company's Consolidated Balance Sheets. The fair value of the collateral ~~was $95.8 million~~ as of September 30, 2022 and $0 as of December 31, 2021. The obligation for securities sold under reverse repurchase agreements was a net amount of $95.2 million as of September 30, 2022 and $0 as of December 31, 2021.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the reporting date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The most significant critical accounting estimates include valuation of hard-to-value fixed maturity securities, evaluation of credit loss impairments for fixed maturity securities, evaluation of goodwill and intangible assets for impairment, valuation of annuity and life deferred policy acquisition costs, valuation of liabilities for property and casualty unpaid claims and claim ~~expenses,~~expense reserves, valuation of ~~certain investment contracts~~liabilities for group benefits unpaid claims and claim expense reserves, valuation of future policy benefit reserves and policyholders' account balances and valuation of ~~assets acquired and liabilities assumed under purchase accounting and purchase price allocation.~~

~~Future Adoption of New Accounting Standards~~

~~Accounting for Long-Duration Insurance Contracts~~

~~In August 2018, the FASB issued targeted improvements to the accounting and disclosure guidance for~~ long-duration insurance contracts ~~(i.e., ASU 2018-12). The~~under the new accounting guidance in ASU 2018-12 (ASU) significantly changes how insurers account for long-duration insurance contracts. The guidance in the ASU also significantly expands the disclosure requirements for long-duration insurance contracts.

The Company will adopt the ASU effective January 1, 2023, using the modified retrospective transition method where permitted, and apply the guidance as of January 1, 2021 (and record transition adjustments as of January 1, 2021) in the Company’s 2023 consolidated financial statements. Prior periods presented (years 2021 and 2022) will be adjusted to apply the new method of accounting retrospectively under the ASU.

While the requirements of the ASU represent a significant change from existing GAAP, the adoption of the ASU will not impact cash flows on the Company’s policies, or the underlying economics of the Company’s business. The Company's insurance subsidiaries' risk-based capital amounts and ratios, and regulatory dividends will not be impacted as the National Association of Insurance Commissioners has rejected the adoption of ASU 2018-12.

The Company has created a governance framework and is managing a detailed implementation plan to support timely application of the guidance in the ASU. The Company has made progress and continues to refine key accounting policy decisions, technology solutions and internal controls. These activities include, but are not limited to, modifications of actuarial valuation, accounting and financial reporting processes and systems including internal controls.

The table below summarizes the areas of significant change and each significant area of change for the method of adoption and expected impact to the Company's results of operations and financial condition as a result from adopting the ASU at transition and subsequent to the effective date.


Horace Mann Educators Corporation			76			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)


~~Area of significant change~~	~~Impacts at transition (January 1, 2021)~~	~~Impacts subsequent to the effective date~~
~~Cash~~Adoption of New Accounting Standards Accounting for Long-Duration Insurance Contracts In August 2018, the FASB issued ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, as clarified and amended by (i) ASU 2019-09, Financial Services - Insurance (Topic 944): Effective Date, and (ii) ASU 2020-11, Financial Services - Insurance (Topic 944): Effective Date and Early Application (collectively referred to herein as ASU 2018-12). ASU 2018-12 changed existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts. ASU 2018-12 includes: (1) a requirement to review and, if there is a change, update cash flow assumptions used to measure the liability for future policy benefits (LFPB) at least annually, and to update the discount rate assumption quarterly, (2) a requirement to account for market risk benefits (MRBs) at fair value, (3) simplified amortization for deferred policy acquisition costs (DAC), and (4) enhanced financial statement presentation and disclosures. ASU 2018-12 became effective for ~~measuring the liability for future policy benefits~~
~~Under current accounting guidance, assumptions for traditional long-duration insurance contracts (e.g., mortality, lapses, etc.), are locked-in at issuance.~~ The new guidance requires insurers to review, and if necessary, update the cash flow assumptions used to measure liabilities for future policy benefits periodically. The change in the liability estimate as a result of updating cash flow assumptions will be recognized in net income.	The Company expects to adopt this guidance on a modified retrospective basis as of the earliest period presented in the year of adoption. Upon adoption, there will be an adjustment to retained earnings as a result of capping the net premium ratio at 100%. ~~The Company expects the impact of such adjustment will likely result in an after-tax decrease to retained earnings of less than $5 million.~~	~~The Company does not expect any material impacts to its results of operations subsequent to the effective date of the ASU.~~
~~Discount rate assumption for measuring the liability for future policy benefits~~
~~Under current accounting guidance, the-then current discount rate is locked-in at issuance.~~ The new guidance requires insurers to update the discount rate assumption used to measure liabilities for future policy benefits at each reporting period, and the discount rate utilized must be based on an upper-medium grade fixed income instrument yield. The change in the liability estimate as a result of updating the discount rate assumption will be recognized in other comprehensive income.	The Company expects to adopt this guidance on a modified retrospective basis as of the earliest period presented in the year of adoption. Upon adoption, there will be an adjustment to accumulated other comprehensive income (AOCI) as a result of remeasuring in force contract liabilities using a standard discount rate to measure the liabilities that will be equivalent to the yield from a high-quality bond and the adjustment will largely reflect the difference between discount rates locked-in at contract inception versus current discount rates at transition. ~~The Company currently estimates that the transition date impact from adoption is likely to result in an after-tax decrease to AOCI in a range between $475 million and $525 million.~~	~~The Company expects material impacts to AOCI subsequent to the effective date of the ASU due to subsequent increases and decreases in discount rates.~~
~~Market risk benefits~~
~~Under current accounting guidance, certain benefit features of annuity contracts (e.g., GMDB, etc.) are accounted for using a benefit ratio methodology.~~ The new guidance created a new category of benefit features called market risk benefits that will be measured at fair value with changes in fair value attributable to a change in the instrument-specific credit risk recognized in other comprehensive income.	The Company will adopt this guidance on a retrospective basis as of the earliest period presented in the year of adoption. Upon adoption, the Company expects an impact to AOCI for the cumulative effect of changes in the instrument-specific credit risk between contract issue date and transition date and retained earnings for the difference between fair value and carrying value at the transition date, excluding the changes in the instrument-specific credit risk. ~~The Company is currently evaluating the impact of these adjustments but anticipates they will likely reduce AOCI and retained earnings by less than $15 million after-tax.~~	Subsequent to the effective date of the ASU, the Company expects market risk benefits will add volatility to benefits expense which could be material. The Company is currently evaluating the impacts of these adjustments subsequent to the effective date of the ASU.
~~Deferred policy acquisition costs (DAC) including shadow DAC~~
Under current accounting guidance, for all annuity contracts, DAC is amortized over 20 years in proportion to estimated gross profits. For individual life contracts, DAC is amortized in proportion to anticipated premiums over the terms of the insurance policies (10, 15, 20, 30) years. For IUL, DAC is amortized in proportion to estimated gross profits over 30 years. ~~The new guidance requires DAC and other balances to be amortized on a constant level basis over the expected term of the related contracts.~~	The Company expects to adopt this guidance on a modified retrospective basis as of the earliest period presented in the year of adoption. Upon adoption, the Company expects an adjustment to AOCI for the removal of cumulative adjustments to DAC associated with unrealized investment gains and losses previously recorded in AOCI. ~~The impact of this adjustment will likely result in an after-tax increase to AOCI in a range between $70 million and $75 million upon adoption.~~	Subsequent to the effective date of the ASU, the Company expects a significant reduction in volatility of DAC unlocking due to the removal of investment performance and market impacts and an insignificant decrease in amortization expense due to the treatment of interest expense and method of amortizing DAC.


~~Horace Mann Educators Corporation~~			8			~~Quarterly Report on Form 10-Q~~

~~NOTE 2 - Acquisitions~~

~~Effective January 1, 2022,~~ the Company acquired all the equity interests in Madison National pursuant to a Stock Purchase Agreement (Agreement) dated as of July 14, 2021. The final adjusted purchase price of the transaction was $172.3 million. The seller of Madison National has a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023. As a result of the acquisition, Madison National became a wholly owned subsidiary of the Company. Madison National is a leading writer of employer-sponsored benefits provided to educators by K-12 school districts. Founded in 1961for interim and ~~headquartered in Madison, Wisconsin, Madison National offers short-term and long-term group disability, group term life, and worksite solutions products, including accident and critical illness.~~

Madison National's results are being reported in the operating segment titled "Supplemental & Group Benefits". The amount of revenues and pretax income for Madison National since the date of acquisition included in the Company's Consolidated Statement of Operations for the nine months ended September 30, 2022 are $106.7 million and $8.8 million (inclusive of the $3.5 million non-cash impact from amortization of intangible assets under purchase accounting), respectively.annual periods beginning after December 15, 2022.

The Company ~~anticipates completing~~adopted ASU 2018-12 for LFPB and DAC on a modified retrospective basis such that those balances were adjusted to conform to ASU 2018-12 on January 1, 2021. The Company adopted ASU 2018-12 for MRBs on a full retrospective basis, using hindsight where necessary. For variable annuities, actuarial assumptions (mortality, lapse, and premium payment patterns) used to measure MRBs were unobservable for years prior to 2006 and thus, hindsight was used to determine relevant assumptions for transition purposes. The factors used in applying hindsight included internal experience studies, the ~~process~~historical economic environment, actual performance of ~~estimating~~ the ~~fair value~~business, and relevant industry information.

The following table summarizes the balance of ~~Madison National assets acquired~~ and changes in LFPB on January 1, 2021 due to adoption of ASU 2018-12. The impact of shifts between deferred profit liabilities ~~assumed, including, but not limited to, intangible assets, policy reserves~~(DPL) and ~~certain tax-related balances by year end. Accordingly,~~LFPB for limited-payment products are presented as offsetting line items in the ~~Company’s preliminary estimates~~effect of net premiums exceeding gross premiums and the ~~allocation~~effect of the final adjusted purchase price to the assets acquired and liabilities assumed are subject to change as the Company completes the process. In accordance with Accounting Standards Codification (ASC) 805, Business Combinations, changes if any, to the preliminary estimates and allocationdecrease/increase of the final adjusted purchase price will be reported in the Company’s consolidated financial statements as an adjustment to the opening balance sheet. Based on the Company’s preliminary allocation of the final adjusted purchase price, the fair values of the assets acquired and liabilities assumed were as follows:DPL.


~~($ in millions)~~
~~Assets:~~
~~Investments~~	$	~~90.4~~
~~Cash and short-term investments~~	~~123.4~~
~~Reinsurance recoverable~~	~~356.0~~
~~Intangible assets(1)~~	~~59.4~~
~~Other assets~~	~~23.2~~
~~Liabilities:~~
~~Investment contract and policy reserves~~	~~274.5~~
~~Unpaid claims and claim expenses~~	~~48.2~~
~~Unearned premiums~~	~~1.5~~
~~Other policyholder funds~~	~~152.8~~
~~Other liabilities~~	~~15.9~~
~~Total identifiable net assets acquired~~	~~159.5~~
~~Goodwill(2)~~	~~12.8~~
~~Purchase price~~	$	~~172.3~~


($ in millions)
	Whole Life		Term Life		Experience Life		Limited Pay Whole Life		Supplemental Health(1)		SPIA (life contingent)
Balance, end of year December 31, 2020	$	218.7	$	93.2	$	758.3	$	51.3	$	392.5	$	115.9
Change in discount rate assumptions	111.5		27.3		433.0		18.2		23.0		20.6
Change in cash flow assumptions, effect of net premiums exceeding gross premiums	0.4		—		—		—		—		—


Adjusted balance, beginning of year January 1, 2021	330.6		120.5		1,191.3		69.5		415.5		136.5
Less: Reinsurance recoverables, end of year December 31, 2020	(0.1)		(5.4)		(1.3)		(0.1)		—		—
Less: Change in discount rate assumptions	(0.2)		(0.9)		(0.7)		(0.1)		—		—
Adjusted balance, beginning of year January 1, 2021, net of reinsurance	$	330.3	$	114.2	$	1,189.3	$	69.3	$	415.5	$	136.5

(1) ~~Intangible assets consist~~As of January 1, 2021, the ~~value of business acquired, value of customer relationships~~net LFPB for Supplemental Health was $163.5 million for cancer, $31.2 million for accident, $32.0 million for disability and ~~state licenses. The intangible assets that are amortizable have estimated lives of~~ ~~one~~ ~~to ten years. See Note 5~~$188.8 million for ~~further information.~~

~~(2)~~ ~~The amount of goodwill that is expected to be deductible for federal income tax purposes is $18.6 million.~~

other supplemental health policies.


Horace Mann Educators Corporation			7			First Quarter 2023 Form 10-Q

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)

The following table summarizes the balance of and changes in DAC on January 1, 2021 due to adoption of ASU 2018-12:


($ in millions)
	Whole Life		Term Life		Experience Life		Limited-Pay Whole Life		Indexed Universal Life		Supplemental Health		Total Annuities
Balance, end of year December 31, 2020	$	17.8	$	25.6	$	2.6	$	4.4	$	11.3	$	4.3	$	137.7
Adjustment for removal of related balances in AOCI	—		—		3.6		—		1.6		—		85.4
Adjusted balance, beginning of year January 1, 2021	$	17.8	$	25.6	$	6.2	$	4.4	$	12.9	$	4.3	$	223.1

The following table summarizes the balance of and changes in the net liability position of MRBs on January 1, 2021 due to adoption of ASU 2018-12:


($ in millions)

Balance, end of year December 31, 2020	$	0.1
Adjustment for the difference between carrying amount and fair value, except for the difference due to instrument-specific credit risk	6.8
Adjustment for cumulative effect of changes in the instrument-specific credit risk at issuance	1.7
Total adjustment for the difference between carrying amount and fair value	8.5
Balance, beginning of year January 1, 2021	8.6
Less: Reinsurance recoverable	—
Balance, beginning of year January 1, 2021, net of reinsurance	$	8.6

The following table presents the effect of the after-tax transition adjustments on consolidated shareholders' equity due to adoption of ASU 2018:


($ in millions)	January 1, 2021
	AOCI		Retained Earnings
Liability for future policy benefits	$	(496.3)	$	(0.2)
Deferred policy acquisition costs	71.1		—
Deferred sales inducements	—		—
Market risk benefits	(1.3)		(5.4)
Total	$	(426.5)	$	(5.6)

For LFPB, the net transition adjustment is related to the difference in the discount rate used pre-transition and the discount rate at January 1, 2021. At transition, the Company had several instances, at the cohort level, where net premiums exceeded gross premiums which were recorded as an adjustment to retained earnings. For DAC, the Company removed shadow adjustments previously recorded in accumulated other comprehensive income (loss) (i.e., AOCI) for the impact of net unrealized investment gains (losses) that were included in the pre-ASU 2018-12 expected gross profits amortization calculation as of the transition date.

For MRBs, the transition adjustment to AOCI relates to the cumulative effect of changes in the instrument-specific credit risk between contract issue date and transition date. The remaining difference between the fair value and carrying amount of MRBs at transition, excluding the amounts recorded in AOCI, was recorded as an adjustment to retained earnings as of the transition date.


Horace Mann Educators Corporation			8			First Quarter 2023 Form 10-Q

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)

While the requirements of ASU 2018-12 represent a significant change from legacy GAAP, the adoption of ASU 2018-12 did not impact cash flows on the Company’s policies, or the underlying economics of the Company’s business. The Company's insurance subsidiaries' risk-based capital amounts and ratios, and regulatory dividends are not impacted as the National Association of Insurance Commissioners (NAIC) rejected ASU 2018-12.

See Note 11 for summarization of the effects of adopting ASU 2018-12 on the Company's 2022 Consolidated Financial Statements.

Significant Accounting Policies

The following significant accounting policy has been added to reflect the Company's adoption of ASU 2018-12 as described above.

Liability for Future Policy Benefits

LFPB, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders and certain related expenses less the present value of estimated future net premiums to be collected from policyholders, is accrued as premium revenue. The liability is estimated using current assumptions that include discount rate, mortality, lapses, and expenses. These current assumptions are based on judgments that consider the Company's historical experience, industry data, and other factors.

For traditional, limited-payment and supplemental health contracts, such contracts are grouped into cohorts by contract type and issue year. The liability is adjusted for differences between actual and expected experience. With the exception of the expense assumption, the Company reviews its historical and future cash flow assumptions at least annually and updates the net premium ratio used to calculate the liability each time the assumptions are changed. The Company has elected to use expense assumptions that are locked-in at contract inception and are not subsequently reviewed or updated. At least annually, the Company updates its estimate of cash flows expected over the entire life of a group of contracts using actual historical experience and current future cash flow assumptions. These updated cash flows are used to calculate the revised net premiums and net premium ratio, which are used to derive an updated LFPB as of the beginning of the current reporting period, discounted at the original contract issuance discount rate. This amount is then compared to the carrying amount of the liability as of that same date, before updating cash flow assumptions, to determine the current period change in liability estimate. This current period change in liability estimate is the liability remeasurement gain or loss. The impact of updated cash flow assumptions as well as the periodic liability remeasurement gain or loss is recognized as Benefits, claims and settlement expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss). In subsequent periods, the revised net premiums are used to measure LFPB, subject to future revisions.

For traditional and limited-payment contracts, a standard discount rate is used to measure the liabilities that is equivalent to the yield from an A-rated bond. The discount rate assumption is updated quarterly and used to remeasure the liability at the reporting date, with the resulting change reflected in other comprehensive income. For liability cash flows that are projected beyond the duration of market-observable A- rated bond, the Company uses the last market-observable yield level, and uses linear interpolation to determine yield assumptions for durations that do not have market-observable yields.

Deferred Profit Liability

For limited-payment products, gross premiums received in excess of net premiums are deferred at initial recognition as a DPL. Gross premiums are measured using assumptions consistent with those used in the measurement of LFPB, including discount rate, mortality, lapses, and expenses.

DPL is amortized and recognized as premium revenue in proportion to insurance in force for life insurance contracts and expected future benefit payments for annuity contracts. Interest is accreted on the balance of DPL using the discount rate determined at contract issuance. The Company reviews and updates its estimates of cash flows for DPL at the same time as the estimates of cash flows for the liability for future policy benefits. When cash flows are updated, the updated estimates are used to recalculate DPL at contract issuance. The recalculated DPL as of the beginning of the current reporting period is compared to the carrying amount of DPL as of the beginning of the current reporting period, and any difference is recognized as either a charge or credit to Net premiums and contract charges earned presented in the Consolidated Statements of Operations and Comprehensive Income (Loss).


Horace Mann Educators Corporation			9			~~Quarterly Report~~First Quarter 2023 Form 10-Q

NOTE 1 - Basis of Presentation and Significant Accounting Policies (continued)

DPL is recognized as a component of the Investment contract and future policy benefit reserves presented in the Consolidated Balance Sheets.

Market Risk Benefits

MRBs are contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. MRBs include guaranteed minimum death benefits on variable annuity products. MRBs are measured at fair value using a non-option-based valuation model based on current net amounts at risk, market data, Company experience, and other factors. Changes in fair value of MRBs are recognized as a component of Benefits, claims and settlement expenses presented in the Consolidated Statements of Operations and Comprehensive Income (Loss) each period with the exception of the portion of the change in fair value due to a change in the instrument-specific credit risk, which is recognized in other comprehensive income.

MRBs are recognized as a component of Policyholders' account balances reserves presented in the Consolidated Balance Sheets.

Deferred Policy Acquisition Costs and Deferred Sales Inducements

DAC are costs that are incremental and directly related to the successful acquisition of new or renewal insurance contracts. Such costs include the incremental direct costs of contract acquisition, such as sales commissions; the portion of employees' total compensation and payroll-related fringe benefits related directly to time spent performing acquisition activities, such as underwriting, issuing, and processing policies for contracts that have actually been acquired; and other costs related directly to acquisition activities that would not have been incurred if the contract had not been acquired.

Contracts are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. DAC is amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization. For all life insurance products, the constant level basis used is face amount in force. For all deferred annuity products, the constant level basis used is the deposit amount in force. The constant level bases used for amortization are projected using mortality and lapse assumptions that are based on the Company's experience, industry data, and other factors and are consistent with those used for LFPB. If those projected assumptions change in future periods, they will be reflected in the cohort level amortization basis at that time. Unexpected terminations, due to mortality and lapse experience higher than expected, are recognized in the current period as a reduction of the capitalized balances.

Amortization of DAC is recognized as DAC amortization expense presented in the Consolidated Statements of Operations and Comprehensive Income (Loss). The DAC balance is reduced for actual experience in excess of expected experience. Changes in future estimates are recognized prospectively over the remaining expected contract term.

Deferred sales inducements (DSIs) are contract features that are intended to attract new customers or to persuade existing customers to keep their current policy. DSIs may be deferred if the Company can demonstrate that the deferred sales inducement amounts are both incremental to the amounts Company credits on similar contracts without sales inducements and the amounts are higher than the contract's expected ongoing crediting rates for periods after the inducement. Day-one bonuses and persistency bonuses generally meet the criteria to be deferred. DSIs are amortized using the same methodology and assumptions used to amortize DAC.


Horace Mann Educators Corporation			10			First Quarter 2023 Form 10-Q

NOTE 32 - Investments

Net Investment Income

The components of net investment income for the following periods were as follows:


($ in millions)	($ in millions)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in millions)	Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Fixed maturity securities	Fixed maturity securities	$	63.9	$	59.8	$	184.5	$	177.2	Fixed maturity securities		$	67.7	$	58.6
Equity securities	Equity securities	1.8		1.4		7.1		3.8		Equity securities		2.7		1.3
Limited partnership interests	Limited partnership interests	5.1		16.8		31.3		51.1		Limited partnership interests		4.4		13.0
Short-term and other investments	Short-term and other investments	2.8		2.8		8.2		8.5		Short-term and other investments		3.5		2.7
Investment expenses	Investment expenses	(2.7)		(2.7)		(7.8)		(7.3)		Investment expenses		(3.6)		(2.6)
Net investment income - investment portfolio	Net investment income - investment portfolio	70.9		78.1		223.3		233.3		Net investment income - investment portfolio		74.7		73.0
Investment income - deposit asset on reinsurance	Investment income - deposit asset on reinsurance	26.7		25.6		77.4		75.1		Investment income - deposit asset on reinsurance		25.7		24.9
Total net investment income	Total net investment income	$	97.6	$	103.7	$	300.7	$	308.4	Total net investment income		$	100.4	$	97.9

Net Investment Losses

Net investment ~~losses~~gains (losses) for the following periods were as follows:


($ in millions)	($ in millions)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in millions)	Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Fixed maturity securities	Fixed maturity securities	$	(10.7)	$	(4.0)	$	(15.9)	$	(7.9)	Fixed maturity securities		$	(2.4)	$	(2.3)
Equity securities	Equity securities	(4.4)		(1.0)		(32.5)		0.7		Equity securities		(1.0)		(15.5)
Short-term investments and other	Short-term investments and other	2.3		(1.5)		4.6		(3.4)		Short-term investments and other		(0.5)		2.3
Net investment losses	Net investment losses	$	(12.8)	$	(6.5)	$	(43.8)	$	(10.6)	Net investment losses		$	(3.9)	$	(15.5)

The Company, from time to time, sells fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer-specific events occurring subsequent to the reporting date that result in a change in the Company's intent to sell a fixed maturity security. The types of events that may result in a sale include significant changes in the economic facts and circumstances related to the invested asset, significant unforeseen changes in liquidity needs, or changes in the Company's investment strategy.

Net Investment Losses by Transaction Type

The ~~following table reconciles~~breakdown of net investment ~~losses~~gains (losses) by transaction ~~type:~~type for the following periods were as follows:

($ in millions) Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Credit loss impairments $ (0.6) $ (6.6) $ (2.8) $ (7.7)
Intent-to-sell impairments (6.2) — (7.6) (2.1)
Total impairments (6.8) (6.6) (10.4) (9.8)
Sales and other, net (3.9) 2.7 (3.9) 2.2
Change in fair value - equity securities (4.4) (1.1) (34.1) 0.4
Change in fair value and gains (losses) realized
on settlements - derivatives
2.3 (1.5) 4.6 (3.4)
Net investment losses $ (12.8) $ (6.5) $ (43.8) $ (10.6)


($ in millions)	Three Months Ended March 31,
		2023		2022
Credit loss impairments		$	—	$	(0.9)
Intent-to-sell impairments		—		(0.9)
Total impairments		—		(1.8)
Sales and other, net		(2.4)		1.1
Change in fair value - equity securities		(1.0)		(17.1)
Change in fair value and gains (losses) realized on settlements - derivatives		(0.5)		2.3
Net investment losses		$	(3.9)	$	(15.5)


Horace Mann Educators Corporation			1011			Quarterly Report on Form 10-Q

NOTE 32 - Investments (continued)

Allowance for Credit Loss Impairments on Fixed Maturity Securities

The following table presents changes in the allowance for credit loss impairments on fixed maturity securities classified as available for sale for the category of other asset-backed securities (no other categories of fixed maturity securities have an allowance for credit loss impairments):


($ in millions)	($ in millions)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in millions)	Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Beginning balance	Beginning balance	$	9.5	$	1.1	$	7.7	$	—	Beginning balance		$	1.2	$	7.7
Credit losses on fixed maturity securities for which credit losses were not previously reported	Credit losses on fixed maturity securities for which credit losses were not previously reported	—		6.6		—		7.7		Credit losses on fixed maturity securities for which credit losses were not previously reported		—		—
Net increase related to credit losses previously reported	Net increase related to credit losses previously reported	0.6		—		2.8		—		Net increase related to credit losses previously reported		—		0.9
Reduction of credit allowances related to sales	Reduction of credit allowances related to sales	—		—		—		—		Reduction of credit allowances related to sales		—		—
Write-offs	Write-offs	—		—		(0.4)		—		Write-offs		—		(0.3)
Ending balance	Ending balance	$	10.1	$	7.7	$	10.1	$	7.7	Ending balance		$	1.2	$	8.3

Fixed Maturity Securities

The Company's investment portfolio is comprised primarily of fixed maturity securities. Amortized cost, net, gross unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:


($ in millions)	($ in millions)	Amortized Cost, net		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		($ in millions)	Amortized Cost, net		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2022
March 31, 2023										March 31, 2023
Fixed maturity securities	Fixed maturity securities									Fixed maturity securities
U.S. Government and federally sponsored agency obligations:(1)	U.S. Government and federally sponsored agency obligations:(1)									U.S. Government and federally sponsored agency obligations:(1)
Mortgage-backed securities	Mortgage-backed securities	$	643.7	$	1.5	$	66.1	$	579.1	Mortgage-backed securities	$	637.6	$	2.0	$	55.6	$	584.0
Other, including U.S. Treasury securities	Other, including U.S. Treasury securities	408.3		0.4		66.0		342.7		Other, including U.S. Treasury securities	424.4		1.2		60.6		365.0
Municipal bonds	Municipal bonds	1,440.9		14.5		147.5		1,307.9		Municipal bonds	1,363.0		26.3		98.5		1,290.8
Foreign government bonds	Foreign government bonds	37.2		—		1.7		35.5		Foreign government bonds	34.1		—		1.5		32.6
Corporate bonds	Corporate bonds	2,228.8		10.0		311.0		1,927.8		Corporate bonds	2,155.4		17.2		229.1		1,943.5
Other asset-backed securities	Other asset-backed securities	1,145.2		2.9		69.0		1,079.1		Other asset-backed securities	1,188.8		2.9		57.6		1,134.1
Totals	Totals	$	5,904.1	$	29.3	$	661.3	$	5,272.1	Totals	$	5,803.3	$	49.6	$	502.9	$	5,350.0

December 31, 2021
December 31, 2022										December 31, 2022
Fixed maturity securities	Fixed maturity securities									Fixed maturity securities
U.S. Government and federally sponsored agency obligations:(1)	U.S. Government and federally sponsored agency obligations:(1)									U.S. Government and federally sponsored agency obligations:(1)
Mortgage-backed securities	Mortgage-backed securities	$	612.1	$	51.9	$	1.5	$	662.5	Mortgage-backed securities	$	638.2	$	1.3	$	69.1	$	570.4
Other, including U.S. Treasury securities	Other, including U.S. Treasury securities	342.5		27.7		4.3		365.9		Other, including U.S. Treasury securities	410.0		0.5		67.8		342.7
Municipal bonds	Municipal bonds	1,519.7		184.4		0.7		1,703.4		Municipal bonds	1,380.9		16.9		128.1		1,269.7
Foreign government bonds	Foreign government bonds	40.2		3.4		—		43.6		Foreign government bonds	35.1		—		1.6		33.5
Corporate bonds	Corporate bonds	2,217.7		176.2		5.2		2,388.7		Corporate bonds	2,161.2		12.7		272.2		1,901.7
Other asset-backed securities	Other asset-backed securities	1,065.5		16.6		6.9		1,075.2		Other asset-backed securities	1,131.5		3.6		68.1		1,067.0
Totals	Totals	$	5,797.7	$	460.2	$	18.6	$	6,239.3	Totals	$	5,756.9	$	35.0	$	606.9	$	5,185.0

(1) Fair value includes securities issued by Federal National Mortgage Association (FNMA) of ~~$337.5~~$341.3 million and ~~$376.7~~$330.8 million; Federal Home Loan Mortgage Corporation (FHLMC) of ~~$271.1~~$279.3 million and ~~$326.5~~$273.3 million; and Government National Mortgage Association (GNMA) of ~~$90.2~~$86.8 million and ~~$112.1~~$86.2 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.


Horace Mann Educators Corporation			1112			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 32 - Investments (continued)

The following table presents the fair value and gross unrealized losses for fixed maturity securities in an unrealized loss position ~~at September 30, 2022~~as of March 31, 2023 and December 31, ~~2021,~~2022, respectively. The Company views the decrease in fair value of all of the fixed maturity securities with unrealized losses ~~at September 30, 2022~~as of March 31, 2023 — which was driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition — as temporary. As of ~~September 30, 2022,~~March 31, 2023, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell the fixed maturity securities with unrealized losses before an anticipated recovery in value. There has been a significant increase in interest rates since ~~December 31, 2021,~~January 1, 2022 driven mostly by increases in U.S. Treasury rates, though credit spreads also widened. ~~The~~As of March 31, 2023, the 10-year U.S. Treasury yield increased ~~232~~196 basis points ~~for the nine months ended September 30,~~since January 2022, rising from 1.51% ~~at December~~as of January 1, 2022 to 3.47% as of March 31, ~~2021 to 3.83% at September 30, 2022.~~2023. Additionally, credit spreads widened during the same time period, with investment grade and high yield wider by 6946 and ~~233~~172 basis points, respectively. These upward movements in rates caused market yields in the Company's investment portfolios to rise sharply, with downward pressure on prices. ~~Investment~~As of March 31, 2023, investment grade and high yield total returns ~~for the nine months ended September 30, 2022~~ were down ~~18.3%~~12.8% and ~~14.6%~~8.0%, ~~respectively. The~~respectively, since January 1, 2022. As of March 31, 2023, the Bloomberg Barclays Index Yield-to-Worst for Investment Grade rose ~~3.4% for the nine months ended September 30,~~2.84% since January 1, 2022, ending at ~~5.7%~~5.2%, while the High Yield Index ~~increased by 5.5%~~rose 4.31% to ~~9.7%.~~8.5% since January 1, 2022. The Company's investment portfolios generated sizable unrealized losses as a result of sharp increases in interest rates. Therefore, it was determined that the unrealized losses on the fixed maturity securities presented in the table below were not indicative of any credit loss impairments as of ~~September 30, 2022.~~March 31, 2023.


($ in millions)	($ in millions)	12 Months or Less					More than 12 Months					Total					($ in millions)	12 Months or Less					More than 12 Months					Total
		Fair Value			Gross Unrealized Losses		Fair Value			Gross Unrealized Losses		Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses		Fair Value			Gross Unrealized Losses		Fair Value			Gross Unrealized Losses
September 30, 2022
March 31, 2023																	March 31, 2023
Fixed maturity securities	Fixed maturity securities																Fixed maturity securities
U.S. Government and federally sponsored agency obligations:	U.S. Government and federally sponsored agency obligations:																U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	Mortgage-backed securities	$	472.2		$	51.5	$	51.3		$	14.6	$	523.5		$	66.1	Mortgage-backed securities	$	305.4		$	22.1	$	202.0		$	33.5	$	507.4		$	55.6
Other	Other	266.6			36.6		58.0			29.4		324.6			66.0		Other	167.9			12.2		137.3			48.4		305.2			60.6
Municipal bonds	Municipal bonds	1,035.5			143.5		9.7			4.0		1,045.2			147.5		Municipal bonds	509.6			28.9		363.3			69.6		872.9			98.5
Foreign government bonds	Foreign government bonds	35.4			1.7		—			—		35.4			1.7		Foreign government bonds	31.2			1.4		0.4			0.1		31.6			1.5
Corporate bonds	Corporate bonds	1,496.6			280.0		80.3			31.0		1,576.9			311.0		Corporate bonds	684.9			51.4		781.6			177.7		1,466.5			229.1
Other asset-backed securities	Other asset-backed securities	776.2			52.4		213.9			16.6		990.1			69.0		Other asset-backed securities	339.3			14.1		663.0			43.5		1,002.3			57.6
Total	Total	$	4,082.5		$	565.7	$	413.2		$	95.6	$	4,495.7		$	661.3	Total	$	2,038.3		$	130.1	$	2,147.6		$	372.8	$	4,185.9		$	502.9

Number of positions with a gross unrealized loss	Number of positions with a gross unrealized loss	3,002					303					3,305					Number of positions with a gross unrealized loss	1,295					1,626					2,921
Fair value as a percentage of total fixed maturity securities at fair value	Fair value as a percentage of total fixed maturity securities at fair value	77.4		%			7.8		%			85.2		%			Fair value as a percentage of total fixed maturity securities at fair value	38.1		%			40.1		%			78.2		%

December 31, 2021
December 31, 2022																	December 31, 2022
Fixed maturity securities	Fixed maturity securities																Fixed maturity securities
U.S. Government and federally sponsored agency obligations:	U.S. Government and federally sponsored agency obligations:																U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	Mortgage-backed securities	$	67.4		$	1.3	$	3.9		$	0.2	$	71.3		$	1.5	Mortgage-backed securities	$	458.3		$	54.4	$	52.6		$	14.7	$	510.9		$	69.1
Other	Other	59.5			1.7		35.1			2.6		94.6			4.3		Other	242.7			34.1		65.8			33.7		308.5			67.8
Municipal bonds	Municipal bonds	56.8			0.7		0.6			—		57.4			0.7		Municipal bonds	911.6			113.7		42.2			14.4		953.8			128.1
Foreign government bonds	Foreign government bonds	—			—		—			—		—			—		Foreign government bonds	32.7			1.4		0.4			0.2		33.1			1.6
Corporate bonds	Corporate bonds	220.7			3.8		44.1			1.4		264.8			5.2		Corporate bonds	1,345.0			221.1		148.9			51.1		1,493.9			272.2
Other asset-backed securities	Other asset-backed securities	379.0			3.8		128.2			3.1		507.2			6.9		Other asset-backed securities	543.4			37.1		424.3			31.0		967.7			68.1
Total	Total	$	783.4		$	11.3	$	211.9		$	7.3	$	995.3		$	18.6	Total	$	3,533.7		$	461.8	$	734.2		$	145.1	$	4,267.9		$	606.9

Number of positions with a gross unrealized loss	Number of positions with a gross unrealized loss	516					122					638					Number of positions with a gross unrealized loss	2,515					587					3,102
Fair value as a percentage of total fixed maturity securities at fair value	Fair value as a percentage of total fixed maturity securities at fair value	12.6		%			3.4		%			16.0		%			Fair value as a percentage of total fixed maturity securities at fair value	68.2		%			14.2		%			82.4		%


Horace Mann Educators Corporation			1213			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 32 - Investments (continued)

With regards to fixed maturity securities that had gross unrealized losses more than 12 months, the number of positions by their respective credit ratings were as follows:


	Number of Positions
	March 31, 2023	December 31, 2022
Credit Rating
AAA	173	67
AA	591	217
A	283	94
BBB	327	93
BB	145	68
B	62	31
CCC or lower	4	2
Not rated	41	15
Totals:	1,626	587

Fixed maturity securities with an investment grade rating represented ~~94.9%~~96.3% of the gross unrealized losses as of ~~September 30, 2022.~~March 31, 2023. With respect to fixed maturity securities involving securitized financial assets, the underlying collateral cash flows were stress tested to determine there was no adverse change in the present value of cash flows below the net amortized cost basis.

Maturities of Fixed Maturity Securities

The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.


($ in millions)	($ in millions)	Percent of Total Fair Value				September 30, 2022				($ in millions)	Percent of Total Fair Value				March 31, 2023
		September 30, 2022		December 31, 2021		Fair Value		Amortized Cost, net			March 31, 2023		December 31, 2022		Fair Value		Amortized Cost, net
Estimated expected maturity:	Estimated expected maturity:									Estimated expected maturity:
Due in 1 year or less	Due in 1 year or less	3.9	%	4.0	%	$	204.0	$	204.6	Due in 1 year or less	4.7	%	4.4	%	$	249.5	$	256.3
Due after 1 year through 5 years	Due after 1 year through 5 years	26.0		27.0		1,369.3		1,439.0		Due after 1 year through 5 years	26.0		26.3		1,392.5		1,441.9
Due after 5 years through 10 years	Due after 5 years through 10 years	28.3		27.7		1,492.6		1,621.7		Due after 5 years through 10 years	28.1		27.9		1,501.0		1,581.4
Due after 10 years through 20 years	Due after 10 years through 20 years	25.5		23.9		1,348.3		1,551.8		Due after 10 years through 20 years	25.0		25.0		1,342.2		1,482.3
Due after 20 years	Due after 20 years	16.3		17.4		857.9		1,087.0		Due after 20 years	16.2		16.4		864.8		1,041.4
Total	Total	100.0	%	100.0	%	$	5,272.1	$	5,904.1	Total	100.0	%	100.0	%	$	5,350.0	$	5,803.3

Average option-adjusted duration, in years	Average option-adjusted duration, in years	6.5		6.7						Average option-adjusted duration, in years	6.3		6.4


Horace Mann Educators Corporation			14			First Quarter 2023 Form 10-Q

NOTE 2 - Investments (continued)

Sales of Fixed Maturity and Equity Securities

Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were as follows:

($ in millions) Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Fixed maturity securities
Proceeds received $ 164.6 $ 155.4 $ 529.9 $ 319.2
Gross gains realized 1.1 3.2 4.7 6.2
Gross losses realized (5.0) (0.7) (10.2) (4.3)
Equity securities
Proceeds received $ 0.2 $ 0.3 $ 6.0 $ 1.0
Gross gains realized — 0.1 1.7 0.3
Gross losses realized — — (0.1) —


~~Horace Mann Educators Corporation~~			13			~~Quarterly Report on Form 10-Q~~

~~NOTE 3 - Investments (continued)~~


($ in millions)	Three Months Ended March 31,
		2023		2022
Fixed maturity securities
Proceeds received		$	62.7	$	168.3
Gross gains realized		0.3		2.4
Gross losses realized		(2.7)		(2.9)

Equity securities
Proceeds received		$	—	$	5.8
Gross gains realized		—		1.7
Gross losses realized		—		(0.1)

Net Unrealized Investment Gains (Losses) on Fixed Maturity Securities

The following table reconciles net unrealized investment gains (losses) on fixed maturity securities, net of tax, included in ~~accumulated other comprehensive income (AOCI), before the impact of DAC:~~AOCI:


($ in millions)	($ in millions)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in millions)	Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Net unrealized investment gains (losses) on fixed maturity securities, net of tax	Net unrealized investment gains (losses) on fixed maturity securities, net of tax									Net unrealized investment gains (losses) on fixed maturity securities, net of tax
Beginning of period	Beginning of period	$	(283.2)	$	399.4	$	348.9	$	439.8	Beginning of period		$	(449.6)	$	347.1
Change in net unrealized investment gains (losses) on fixed maturity securities	Change in net unrealized investment gains (losses) on fixed maturity securities	(228.0)		(34.9)		(886.5)		(77.0)		Change in net unrealized investment gains (losses) on fixed maturity securities		91.3		(335.9)
Reclassification of net investment losses on fixed maturity securities to net income	Reclassification of net investment losses on fixed maturity securities to net income	11.9		3.9		38.3		5.6		Reclassification of net investment losses on fixed maturity securities to net income		1.9		1.8
End of period	End of period	$	(499.3)	$	368.4	$	(499.3)	$	368.4	End of period		$	(356.4)	$	13.0

Limited Partnership Interests

Investments in limited partnership interests are accounted for using the equity method of accounting (EMA) and include interests in commercial mortgage loan funds, private equity funds, infrastructure ~~debt~~equity funds, real estate equity funds, infrastructure ~~equity~~debt funds and other funds. Principal factors influencing carrying amount appreciation or ~~decline~~depreciation include operating performance, comparable public company earnings multiples, capitalization rates and the economic environment. The Company recognizes an impairment loss for EMA limited partnership interests when evidence demonstrates that the loss is other than temporary. Evidence of a loss in value that is other than temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment. The carrying amounts of EMA limited partnership interests were as follows:


($ in millions)	($ in millions)					($ in millions)
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Commercial mortgage loan funds	Commercial mortgage loan funds	$	601.5	$	346.8	Commercial mortgage loan funds	$	623.7	$	593.6
Private equity funds	Private equity funds	73.4		74.0		Private equity funds	77.7		76.3
Infrastructure equity funds	Infrastructure equity funds	70.2		58.3		Infrastructure equity funds	73.2		72.0
Real estate equity funds						Real estate equity funds	87.7		71.3
Infrastructure debt funds	Infrastructure debt funds	67.4		62.4		Infrastructure debt funds	62.6		60.0
Other funds(1)	Other funds(1)	185.0		171.3		Other funds(1)	120.5		110.5
Total	Total	$	997.5	$	712.8	Total	$	1,045.4	$	983.7

(1)Other funds consist primarily of limited partnership interests in corporate mezzanine, venture capital and ~~other fund strategies.~~private credit funds.


Horace Mann Educators Corporation			15			First Quarter 2023 Form 10-Q

NOTE 2 - Investments (continued)

Offsetting of Assets and Liabilities

The Company's derivatives are subject to enforceable master netting arrangements. Collateral support agreements associated with each master netting arrangement ~~provide~~provides that the Company will receive or pledge financial collateral in the event minimum thresholds have been reached. The Company’s reverse repurchase agreements are also subject to enforceable master netting arrangements but there was no offsetting in their presentation in the Company’s Consolidated Balance Sheets. Information regarding the Company's derivatives is contained in Part II - Item 8, Note 5 in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The following table presents instruments that were subject to a master netting arrangement for the Company.


($ in millions)			Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets
	Gross Amounts						Financial Instruments		Cash Collateral Received		Net Amount
March 31, 2023
Asset derivatives:
Free-standing derivatives	$	9.2	$	—	$	9.2	$	—	$	8.3	$	0.9

December 31, 2022
Asset derivatives:
Free-standing derivatives	$	6.8	$	—	$	6.8	$	—	$	5.9	$	0.9


~~Horace Mann Educators Corporation~~			14			~~Quarterly Report on Form 10-Q~~

Reverse Repurchase Agreements

In connection with reverse repurchase agreements, the Company transfers primarily U.S. government, government agency and corporate securities and receives cash. For reverse repurchase agreements, the Company receives cash in an amount equal to at least 95% of the fair value of the securities transferred, and the agreements with third parties contain contractual provisions to allow for additional collateral to be obtained when necessary. The Company accounts for reverse repurchase agreements as secured borrowings. The securities transferred under reverse repurchase agreements are included in Fixed maturity securities with the obligation to repurchase those securities reported in Other liabilities on the Company's Consolidated Balance Sheets. The fair value of the securities transferred wa~~NOTE 3 - Investments (continued)~~s $74.7 million

($ in millions) Gross
Amounts
Offset in the
Consolidated
Balance
Sheets Net Amounts
of Assets/
Liabilities
Presented
in the
Consolidated
Balance
Sheets Gross Amounts Not Offset
in the Consolidated
Balance Sheets
Gross
Amounts Financial
Instruments Cash
Collateral
Received Net
Amount
September 30, 2022
Asset derivatives:
Free-standing derivatives $ 2.0 $ — $ 2.0 $ — $ 1.8 $ 0.2
December 31, 2021
Asset derivatives:
Free-standing derivatives $ 10.7 $ — $ 10.7 $ 4.5 $ 6.4 $ (0.2)

~~Deposits~~

~~At September 30, 2022~~ as of March 31, 2023 and $73.3 million as of December 31, 2022. The obligation for securities sold under reverse repurchase agreements was a net amount of $70.2 million as of March 31, 2023 and December 31, ~~2021,~~2022.

Deposits

As of March 31, 2023 and December 31, 2022, fixed maturity securities with a fair value of ~~$30.0~~$29.0 million and ~~$26.2~~$28.6 million, respectively, were on deposit with governmental agencies as required by law in various states for which the insurance subsidiaries of HMEC conduct business. In addition, ~~at September 30, 2022~~as of March 31, 2023 and December 31, ~~2021,~~2022, fixed maturity securities with a fair value of ~~$920.7~~$948.1 million and ~~$870.1~~$860.4 million, respectively, were on deposit with the Federal Home Loan Bank of Chicago (FHLB) as collateral for amounts subject to funding agreements, advances and borrowings which were equal to ~~$842.5~~$869.5 million ~~at September 30, 2022~~as of March 31, 2023 and ~~$787.5~~$792.5 million atas of December 31, ~~2021.~~2022. The deposited securities are reported as Fixed maturity securities on the Company’s Consolidated Balance Sheets.

NOTE 43 - Fair Value of Financial Instruments

The Company is required to disclose estimated fair values for certain financial and nonfinancial assets and liabilities. Fair values of the Company’s insurance contracts other than annuity contracts (which are investment contracts) and EMA limited partnership interests are not required to be disclosed. However, the estimated fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk through ~~the~~appropriate matching of investment maturities with amounts due under insurance contracts.

Information regarding the three-level fair value hierarchy presented below and the valuation methodologies utilized by the Company to estimate fair values at each reporting date is included in Part II - Item 8, Note 4 of the ~~Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.~~


Horace Mann Educators Corporation			1516			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 43 - Fair Value of Financial Instruments (continued)

Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Financial Instruments Measured and Carried at Fair Value on a Recurring Basis

The following table presents the Company's fair value hierarchy for financial assets and financial liabilities measured and carried at fair value on a recurring basis. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ there were no transfers between Level 1 and Level 2. ~~At September 30, 2022,~~As of March 31, 2023, Level 3 invested assets comprised ~~7.4%~~8.0% of the Company’s total investment portfolio at fair value.


($ in millions)	($ in millions)	Carrying Amount		Fair Value			Fair Value Measurements at Reporting Date Using								($ in millions)	Carrying Amount			Fair Value		Fair Value Measurements at Reporting Date Using
						Level 1			Level 2			Level 3						Level 1			Level 2		Level 3
September 30, 2022
March 31, 2023															March 31, 2023
Financial Assets	Financial Assets														Financial Assets
Investments	Investments														Investments
Fixed maturity securities	Fixed maturity securities														Fixed maturity securities
U.S. Government and federally sponsored agency obligations:	U.S. Government and federally sponsored agency obligations:														U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	Mortgage-backed securities	$	579.1	$	579.1		$	—		$	576.5		$	2.6	Mortgage-backed securities	$	584.0		$	584.0	$	—	$	581.4	$	2.6
Other, including U.S. Treasury securities	Other, including U.S. Treasury securities	342.8		342.7			24.5			318.2			—		Other, including U.S. Treasury securities	364.8			364.8		38.5		326.3		—
Municipal bonds	Municipal bonds	1,307.9		1,307.9			—			1,254.6			53.3		Municipal bonds	1,290.9			1,290.9		—		1,235.5		55.4
Foreign government bonds	Foreign government bonds	35.4		35.5			—			35.5			—		Foreign government bonds	32.6			32.6		—		32.6		—
Corporate bonds	Corporate bonds	1,927.8		1,927.8			12.8			1,675.2			239.8		Corporate bonds	1,943.5			1,943.5		13.2		1,646.3		284.0
Other asset-backed securities	Other asset-backed securities	1,079.1		1,079.1			—			974.5			104.6		Other asset-backed securities	1,134.2			1,134.2		—		1,032.2		102.0
Total fixed maturity securities	Total fixed maturity securities	5,272.1		5,272.1			37.3			4,834.5			400.3		Total fixed maturity securities	5,350.0			5,350.0		51.7		4,854.3		444.0
Equity securities	Equity securities	113.8		113.8			22.4			89.4			2.0		Equity securities	98.8			98.8		24.3		72.5		2.0
Short-term investments	Short-term investments	51.4		51.4			49.0			2.4			—		Short-term investments	75.0			75.0		75.0		—		—
Other investments	Other investments	34.0		34.0			—			34.0			—		Other investments	41.8			41.8		—		41.8		—
Totals	Totals	$	5,471.3	$	5,471.3		$	108.7		$	4,960.3		$	402.3	Totals	$	5,565.6		$	5,565.6	$	151.0	$	4,968.6	$	446.0
Separate Account variable annuity assets(1)	Separate Account variable annuity assets(1)	$	2,599.6	$	2,599.6		$	2,599.6		$	—		$	—	Separate Account variable annuity assets(1)	$	2,954.7		$	2,954.7	$	2,954.7	$	—	$	—
Financial Liabilities	Financial Liabilities														Financial Liabilities
Investment contract and policy reserves, embedded derivatives		$	0.4	$	0.4		$	—		$	0.4		$	—
Investment contract and future policy benefit reserves, embedded derivatives															Investment contract and future policy benefit reserves, embedded derivatives	$	1.7		$	1.7	$	—	$	1.7	$	—
Other policyholder funds, embedded derivatives	Other policyholder funds, embedded derivatives	$	89.9	$	89.9		$	—		$	—		$	89.9	Other policyholder funds, embedded derivatives	$	89.9		$	89.9	$	—	$	—	$	89.9

December 31, 2021
December 31, 2022															December 31, 2022
Financial Assets	Financial Assets														Financial Assets
Investments	Investments														Investments
Fixed maturity securities	Fixed maturity securities														Fixed maturity securities
U.S. Government and federally sponsored agency obligations:	U.S. Government and federally sponsored agency obligations:														U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	Mortgage-backed securities	$	662.5	$	662.5		$	—		$	662.5		$	—	Mortgage-backed securities	$	570.4		$	570.4	$	—	$	567.8	$	2.6
Other, including U.S. Treasury securities	Other, including U.S. Treasury securities	365.9		365.9			17.7			348.2			—		Other, including U.S. Treasury securities	342.6			342.6		24.6		318.0		—
Municipal bonds	Municipal bonds	1,703.4		1,703.4			—			1,642.6			60.8		Municipal bonds	1,269.7			1,269.7		—		1,215.3		54.4
Foreign government bonds	Foreign government bonds	43.6		43.6			—			43.6			—		Foreign government bonds	33.6			33.6		—		33.6		—
Corporate bonds	Corporate bonds	2,388.7		2,388.7			14.9			2,163.5			210.3		Corporate bonds	1,901.7			1,901.7		12.2		1,628.2		261.3
Other asset-backed securities	Other asset-backed securities	1,075.2		1,075.2			—			976.3			98.9		Other asset-backed securities	1,067.0			1,067.0		—		962.0		105.0
Total fixed maturity securities	Total fixed maturity securities	6,239.3		6,239.3			32.6			5,836.7			370.0		Total fixed maturity securities	5,185.0			5,185.0		36.8		4,724.9		423.3
Equity securities	Equity securities	147.2		147.2			35.2			110.6			1.4		Equity securities	99.6			99.6		23.3		74.3		2.0
Short-term investments	Short-term investments	157.8		157.8			157.8			—			—		Short-term investments	109.4			109.4		109.4		—		—
Other investments	Other investments	43.6		43.6			—			43.6			—		Other investments	38.6			38.6		—		38.6		—
Totals	Totals	$	6,587.9	$	6,587.9		$	225.6		$	5,990.9		$	371.4	Totals	$	5,432.6		$	5,432.6	$	169.5	$	4,837.8	$	425.3
Separate Account (variable annuity) assets(1)	Separate Account (variable annuity) assets(1)	$	3,441.0	$	3,441.0		$	3,441.0		$	—		$	—	Separate Account (variable annuity) assets(1)	$	2,792.3		$	2,792.3	$	2,792.3	$	—	$	—
Financial Liabilities	Financial Liabilities														Financial Liabilities
Investment contract and policy reserves, embedded derivatives		$	2.1	$	2.1		$	—		$	2.1		$	—
Investment contract and future policy benefit reserves, embedded derivatives															Investment contract and future policy benefit reserves, embedded derivatives	$	1.2		$	1.2	$	—	$	1.2	$	—
Other policyholder funds, embedded derivatives	Other policyholder funds, embedded derivatives	$	106.6	$	106.6		$	—		$	—		$	106.6	Other policyholder funds, embedded derivatives	$	91.0		$	91.0	$	—	$	—	$	91.0

(1) Separate Account variable annuity assets represent contractholder funds invested in various actively traded mutual funds that have daily quoted net asset values that are readily determinable for identical assets that the Company can access. Separate Account variable annuity liabilities are equal to the estimated fair value of the Separate Account variable annuity assets.


Horace Mann Educators Corporation			1617			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 43 - Fair Value of Financial Instruments (continued)

Changes in Level 3 Fair Value Measurements

The reconciliation for all financial assets and financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows:


($ in millions)	($ in millions)	Financial Assets												Financial Liabilities(1)		($ in millions)	Financial Assets												Financial Liabilities(1)
		Municipal Bonds		Corporate Bonds		Mortgage-Backed and Other Asset- Backed Securities(2)		Total Fixed Maturity Securities		Equity Securities		Total					Municipal Bonds		Corporate Bonds		Mortgage-Backed and Other Asset- Backed Securities(2)		Total Fixed Maturity Securities		Equity Securities		Total
Beginning balance, July 1, 2022		$	51.0	$	270.5	$	97.1	$	418.6	$	1.4	$	420.0	$	93.2
Beginning balance, January 1, 2023																Beginning balance, January 1, 2023	$	54.4	$	261.3	$	107.6	$	423.3	$	2.0	$	425.3	$	91.0
Transfers into Level 3(3)	Transfers into Level 3(3)	—		20.5		12.2		32.7		0.8		33.5		—		Transfers into Level 3(3)	—		5.9		0.4		6.3		—		6.3		—
Transfers out of Level 3(3)	Transfers out of Level 3(3)	—		(34.8)		—		(34.8)		—		(34.8)		—		Transfers out of Level 3(3)	—		—		—		—		—		—		—
Total gains or losses	Total gains or losses															Total gains or losses
Net investment gains (losses) included in net income related to financial assets	Net investment gains (losses) included in net income related to financial assets	—		—		(0.8)		(0.8)		(0.1)		(0.9)		—		Net investment gains (losses) included in net income related to financial assets	—		—		—		—		—		—		—
Net investment (gains) losses included in net income related to financial liabilities	Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		(4.6)		Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		0.2
Net unrealized investment gains (losses) included in OCI	Net unrealized investment gains (losses) included in OCI	(5.3)		(7.4)		(3.9)		(16.6)		—		(16.6)		—		Net unrealized investment gains (losses) included in OCI	1.2		0.9		(0.4)		1.7		—		1.7		—
Purchases	Purchases	0.2		8.4		7.9		16.5		—		16.5		—		Purchases	—		19.0		0.2		19.2		—		19.2		—
Issuances	Issuances	—		—		—		—		—		—		2.7		Issuances	—		—		—		—		—		—		2.1
Sales	Sales	—		—		—		—		—		—		—		Sales	—		(2.6)		—		(2.6)		—		(2.6)		—
Settlements	Settlements	—		—		—		—		—		—		—		Settlements	—		—		—		—		—		—		—
Paydowns, maturities and distributions	Paydowns, maturities and distributions	7.4		(17.4)		(5.3)		(15.3)		(0.1)		(15.4)		(1.4)		Paydowns, maturities and distributions	(0.2)		(0.5)		(3.2)		(3.9)		—		(3.9)		(3.4)
Ending balance, September 30, 2022		$	53.3	$	239.8	$	107.2	$	400.3	$	2.0	$	402.3	$	89.9
Ending balance, March 31, 2023																Ending balance, March 31, 2023	$	55.4	$	284.0	$	104.6	$	444.0	$	2.0	$	446.0	$	89.9

Beginning balance, January 1, 2022	Beginning balance, January 1, 2022	$	60.8	$	210.3	$	98.9	$	370.0	$	1.4	$	371.4	$	106.6	Beginning balance, January 1, 2022	$	60.8	$	210.3	$	98.9	$	370.0	$	1.4	$	371.4	$	106.6
Transfers into Level 3(3)	Transfers into Level 3(3)	—		144.0		34.5		178.5		0.8		179.3		—		Transfers into Level 3(3)	—		67.5		4.7		72.2		—		72.2		—
Transfers out of Level 3(3)	Transfers out of Level 3(3)	(3.2)		(34.9)		(4.8)		(42.9)		—		(42.9)		—		Transfers out of Level 3(3)	(3.2)		—		(4.8)		(8.0)		—		(8.0)		—
Total gains or losses	Total gains or losses															Total gains or losses
Net investment gains (losses) included in net income related to financial assets	Net investment gains (losses) included in net income related to financial assets	—		—		(3.1)		(3.1)		(0.1)		(3.2)		—		Net investment gains (losses) included in net income related to financial assets	—		—		(0.9)		(0.9)		(0.1)		(1.0)		—
Net investment (gains) losses included in net income related to financial liabilities	Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		(14.4)		Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		(5.2)
Net unrealized investment gains (losses) included in OCI	Net unrealized investment gains (losses) included in OCI	(11.6)		(18.7)		(11.3)		(41.6)		—		(41.6)		—		Net unrealized investment gains (losses) included in OCI	(3.4)		(6.4)		(4.1)		(13.9)		—		(13.9)		—
Purchases	Purchases	0.2		13.3		7.9		21.4		—		21.4		—		Purchases	—		—		—		—		—		—		—
Issuances	Issuances	—		—		—		—		—		—		4.8		Issuances	—		—		—		—		—		—		0.9
Sales	Sales	—		—		(2.1)		(2.1)		—		(2.1)		—		Sales	—		—		—		—		—		—		—
Settlements	Settlements	—		—		—		—		—		—		—		Settlements	—		—		—		—		—		—		—
Paydowns, maturities and distributions	Paydowns, maturities and distributions	7.1		(74.2)		(12.8)		(79.9)		(0.1)		(80.0)		(7.1)		Paydowns, maturities and distributions	(0.1)		(45.4)		(4.0)		(49.5)		—		(49.5)		(3.2)
Ending balance, September 30, 2022		$	53.3	$	239.8	$	107.2	$	400.3	$	2.0	$	402.3	$	89.9
Ending balance, March 31, 2022																Ending balance, March 31, 2022	$	54.1	$	226.0	$	89.8	$	369.9	$	1.3	$	371.2	$	99.1

(1)Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.

(2)Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.

(3)Transfers into and out of Level 3 during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 were related to changes in the primary pricing source and changes in observability of external information used in determining fair value. The Company's policy is to recognize transfers into and out of the levels as having occurred at the end of the reporting period in which the transfers were determined.


~~Horace Mann Educators Corporation~~			17			~~Quarterly Report on Form 10-Q~~

~~NOTE 4 - Fair Value of Financial Instruments (continued)~~

($ in millions) Financial Assets
Financial
Liabilities(1)
Municipal
Bonds Corporate
Bonds

Mortgage-Backed
and Other
Asset-
Backed
Securities(2)
Total
Fixed
Maturity
Securities Equity
Securities Total
Beginning balance, July 1, 2021 $ 58.6 $ 150.5 $ 115.5 $ 324.6 $ 0.3 $ 324.9 $ 108.9
Transfers into Level 3(3)
— 55.7 4.0 59.7 — 59.7 —
Transfers out of Level 3(3)
— — — — — — —
Total gains or losses
Net investment gains (losses)
included in net income related
to financial assets
— — (6.6) (6.6) 0.1 (6.5) —
Net investment (gains) losses
included in net income related
to financial liabilities
— — — — — — 0.7
Net unrealized investment gains
(losses) included in OCI
(0.3) (0.1) 6.6 6.2 — 6.2 —
Purchases — — — — — — —
Issuances — — — — — — 1.4
Sales — — — — — — —
Settlements — — — — — — —
Paydowns, maturities and distributions (0.1) (1.1) (21.0) (22.2) — (22.2) (4.3)
Ending balance, September 30, 2021 $ 58.2 $ 205.0 $ 98.5 $ 361.7 $ 0.4 $ 362.1 $ 106.7
Beginning balance, January 1, 2021 $ 59.6 $ 155.8 $ 139.4 $ 354.8 $ 0.3 $ 355.1 $ 104.5
Transfers into Level 3(3)
— 108.3 10.2 118.5 — 118.5 —
Transfers out of Level 3(3)
— (56.7) (19.2) (75.9) — (75.9) —
Total gains or losses
Net investment gains (losses)
included in net income related
to financial assets
— — (7.7) (7.7) 0.1 (7.6) —
Net investment (gains) losses
included in net income related
to financial liabilities
— — — — — — 8.2
Net unrealized investment gains
(losses) included in OCI
(0.9) 1.0 8.7 8.8 — 8.8 —
Purchases — — — — — — —
Issuances — — — — — — 3.3
Sales — — — — — — —
Settlements — — — — — — —
Paydowns, maturities and distributions (0.5) (3.4) (32.9) (36.8) — (36.8) (9.3)
Ending balance, September 30, 2021 $ 58.2 $ 205.0 $ 98.5 $ 361.7 $ 0.4 $ 362.1 $ 106.7

~~(1)~~ ~~Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.~~

~~(2)~~ ~~Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.~~

~~(3)~~ Transfers into and out of Level 3 during the three and nine months ended September 30, 2021 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers into and out of the levels as having occurred at the end of the reporting period in which the transfers were determined.

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company had no net investment losses and $1.0 million of ~~$0.9 million and $3.2 million~~net investment losses for the three months ended March 31, 2022, that were included in net income and were primarily attributable to credit loss impairments for Level 3 financial assets. For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company had net investment losses of $0.2 million and $5.2 million of net investment gains ~~of $4.6 million and $14.4 million~~for the three months ended March 31, 2022, that were included in net income and were attributable to changes in the fair value of Level 3 financial liabilities.


Horace Mann Educators Corporation			18			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 43 - Fair Value of Financial Instruments (continued)

Quantitative Information about Level 3 Fair Value Measurements

The following table provides quantitative information about the significant unobservable inputs for recurring fair value measurements categorized within Level 3.

($ in millions)

Financial
Assets

Fair Value at

September 30, 2022

Valuation Technique(s)

Unobservable Inputs

Range

(Weighted Average)

and Single Point Best Estimate(1)

Financial
Assets

Fair Value as of

March 31, 2023

Valuation Technique(s)

Unobservable Inputs

Range

(Weighted Average)

and Single Point Best Estimate(1)

Municipal bonds

53.3

discounted cash flow

option adjusted spread

330 - 446 bps

Municipal bonds

55.4

discounted cash flow

option adjusted spread

308 bps

Corporate bonds

239.8

discounted cash flow

N spread(2)

363 bps

Corporate bonds

284.0

discounted cash flow

yield

6.1%

discounted cash flow

T spread(3)

16 - 403 bps

discounted cash flow

yield

3.8% - 11.2%

discounted cash flow

exit cap rate

6.2%

vendor priced

79.64

discounted cash flow

occupancy rate

31.0% - 100.0%

discounted cash flow

yield

11.0%

discounted cash flow

option adjusted spread

242 - 393 bps

market comparable

EV / Fwd EBITDA (x)

5.92x

discounted cash flow

weighted average cost of capital

5.0%

discounted cash flow

discount rate

6.2% - 10.7%

discounted cash flow

discount rate

11.3% - 12.0%

discounted cash flow

exit cap

6.2%

market comparable

EV / Fwd EBITDA (x)

5.1x

discounted cash flow

option adjusted spread

241 bps

Mortgage-backed and other asset-backed securities

107.2

discounted cash flow

discount margin

30.4%

Mortgage-backed and other asset-backed securities

104.6

vendor price

haircut

0.01% -0.3%

discounted cash flow

discount rate

16.0% - 21.0%

discounted cash flow

discount margin

39.5%

discounted cash flow

median comparable yield

17.2% - 33.1%

discounted cash flow

discount rate

16.0% - 21.0%

discounted cash flow

yield

7.0% - 7.4%

discounted cash flow

median comparable yield

20.7% - 43.2%

discounted cash flow

LIBOR

1.0%

discounted cash flow

yield

6.4% - 6.5%

discounted cash flow

PDI spread

6.8%

discounted cash flow

LIBOR

2.3%

discounted cash flow

SBL spread

4.5%

discounted cash flow

PDI spread

5.5%

discounted cash flow

weighting

17.0% - 83.0%

discounted cash flow

SBL spread

4.5%

discounted cash flow

CPR

20.0%

discounted cash flow

weighting

17.0% - 83.0%

discounted cash flow

default rate annual

4.0%

discounted cash flow

CPR

20.0%

discounted cash flow

recovery

65.0%

discounted cash flow

default rate annual

4.0%

discounted cash flow

N spread

463 bps

discounted cash flow

recovery

65.0%

discounted cash flow

T Spread

226 bps

discounted cash flow

I spread

175 bps

discounted cash flow

N spread

463 bps

discounted cash flow

T Spread

226 bps

market comparable

median price

81.34

Equity securities

2.0

black-scholes

volatility

low 32.0% - high 47.0%

Equity securities

2.0

black-scholes

volatility

low 28.0% - high 44.0%

black-scholes

time to exit

2.67 bps

market comparable

price/book ExAOCI

1.06x

($ in millions)

Financial
Liabilities

Fair Value at

September 30, 2022

Valuation Technique(s)

Unobservable Inputs

Range

(Weighted Average)

and Single Point Best Estimate(1)

Financial
Liabilities

Fair Value as of

March 31, 2023

Valuation Technique(s)

Unobservable Inputs

Range

(Weighted Average)

and Single Point Best Estimate(1)

Derivatives
embedded in
fixed indexed annuity products

89.9

discounted cash flow

lapse rate

5.3%

Derivatives
embedded in
fixed indexed annuity products

89.9

discounted cash flow

lapse rate

5.4%

mortality multiplier(4)

66.8%

mortality multiplier(4)

67.8%

option budget

0.9% - 3.3%

option budget

0.9% - 3.5%

non-performance adjustment(5)

5.0%

non-performance adjustment(5)

5.0%

(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.

(2) "N spread" is the interpolated weighted average life point on the swap curve.

(3) "T spread" is a specific point on the OTR curve.

(4) Mortality multiplier is applied to the Annuity 2000 table.

(5) Determined as a percentage of the risk-free rate.


Horace Mann Educators Corporation			19			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 43 - Fair Value of Financial Instruments (continued)

The valuation techniques and significant unobservable inputs used in the fair value measurement for financial assets and financial liabilities classified as Level 3 are subject to the control processes as described in Part II - Item 8, Note 4 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Generally, valuation techniques for fixed maturity securities include spread pricing, matrix pricing and discounted cash flow methodologies; include inputs such as quoted prices for identical or similar securities that are less liquid; and are based on lower levels of trading activity than securities classified as Level 2. The valuation techniques and significant unobservable inputs used in the fair value measurement for equity securities classified as Level 3 use similar valuation techniques and significant unobservable inputs as those used for fixed maturity securities.

The sensitivity of the estimated fair values to changes in the significant unobservable inputs for fixed maturity and equity securities included in Level 3 include: benchmark yield, liquidity premium, estimated cash flows, prepayment and default speeds, spreads, weighted average life and credit rating. Significant spread widening in isolation will adversely impact the overall valuation, while significant tightening will lead to substantial valuation increases. Significant increases (decreases) in illiquidity premiums in isolation will result in substantially lower (higher) valuations. Significant increases (decreases) in expected default rates in isolation will result in substantially lower (higher) valuations.

Financial Instruments Not Carried at Fair Value

The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. These financial assets and financial liabilities are further described in Part II - Item 8, Note 4 in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The following table presents the carrying amount, fair value and fair value hierarchy of these financial assets and financial liabilities.

($ in millions) Carrying
Amount Fair
Value Fair Value Measurements at
Reporting Date Using
Level 1 Level 2 Level 3
September 30, 2022
Financial Assets
Other investments $ 169.1 $ 172.5 $ — $ — $ 172.5
Deposit asset on reinsurance 2,525.6 2,164.9 — — 2,164.9
Financial Liabilities
Investment contract and policy reserves,
fixed annuity contracts
5,005.8 5,068.8 — — 5,068.8
Investment contract and policy reserves,
account values on life contracts
109.5 119.3 — — 119.3
Other policyholder funds 910.8 910.8 — 857.9 52.9
Short-term debt 249.0 249.0 — — 249.0
Long-term debt 248.9 249.5 — 249.5 —
December 31, 2021
Financial Assets
Other investments $ 148.8 $ 152.4 $ — $ — $ 152.4
Deposit asset on reinsurance 2,481.5 2,935.1 — — 2,935.1
Financial Liabilities
Investment contract and policy reserves,
fixed annuity contracts
4,941.3 5,004.9 — — 5,004.9
Investment contract and policy reserves,
account values on life contracts
105.4 115.4 — — 115.4
Other policyholder funds 839.3 839.3 — 782.8 56.5
Short-term debt 249.0 249.0 — — 249.0
Long-term debt 253.6 277.4 — 277.4 —


($ in millions)	Carrying Amount		Fair Value		Fair Value Measurements at Reporting Date Using
					Level 1		Level 2		Level 3
March 31, 2023
Financial Assets
Other investments	$	174.3	$	177.8	$	—	$	—	$	177.8
Deposit asset on reinsurance	2,517.9		2,270.6		—		—		2,270.6
Financial Liabilities
Investment contract and future policy benefit reserves, fixed annuity contracts	4,954.6		4,854.3		—		—		4,854.3
Investment contract and future policy benefit reserves, account values on life contracts	113.3		109.3		—		—		109.3
Other policyholder funds	938.4		938.4		—		888.1		50.3
Reverse repurchase agreements	70.2		74.7		—		74.7		—
Short-term debt	249.0		249.0		—		—		249.0
Long-term debt	249.0		239.7		—		239.7		—

December 31, 2022
Financial Assets
Other investments	$	167.4	$	170.9	$	—	$	—	$	170.9
Deposit asset on reinsurance	2,516.6		2,207.2		—		—		2,207.2
Financial Liabilities
Investment contract and future policy benefit reserves, fixed annuity contracts	4,988.5		4,901.3		—		—		4,901.3
Investment contract and future policy benefit reserves, account values on life contracts	111.9		107.7		—		—		107.7
Other policyholder funds	863.0		863.0		—		810.7		52.3
Reverse repurchase agreements	70.2		73.3		—		73.3		—
Short-term debt	249.0		249.0		—		—		249.0
Long-term debt	249.0		240.5		—		240.5		—


Horace Mann Educators Corporation			20			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 54 - ~~Goodwill and Intangible Assets~~Short-Duration Insurance Contracts

The Company conducts impairment testing for goodwill and intangible assets at least annually, or more often if events, changes or circumstances indicate that the carrying amount may not be recoverable. See Part II - Item 8, Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for more information regarding impairment testing.

~~The carrying amount of goodwill by reporting unit as of September 30, 2022 was as follows:~~

($ in millions) December 31, 2021 Impairment Acquisition September 30, 2022
Property & Casualty $ 9.5 $ — $ — $ 9.5
Life & Retirement 14.4 — — 14.4
Supplemental & Group Benefits 19.6 — 12.8 32.4
Total $ 43.5 $ — $ 12.8 $ 56.3

As of September 30, 2022, the outstanding amounts of definite-lived intangible assets subject to amortization are attributable to the acquisitions of Benefit Consultants Group, Inc. (BCG) and NTA Life Enterprises, LLC (NTA) during 2019, as well as the acquisition of Madison National during 2022. The acquisitions of BCG, NTA and Madison National resulted in initial recognition of definite-lived intangible assets subject to amortization in the amounts of $14.1 million, $160.4 million and $56.5 million, respectively. As of September 30, 2022 the outstanding amounts of definite-lived intangible assets subject to amortization were as follows:

($ in millions) Weighted Average
Useful Life (in Years)
At inception:
Value of business acquired 28 $ 100.1
Value of distribution acquired 17 54.0
Value of agency relationships 14 17.0
Value of customer relationships 10 59.9
Total 20 231.0
Accumulated amortization and impairments:
Value of business acquired (26.6)
Value of distribution acquired (13.8)
Value of agency relationships (7.7)
Value of customer relationships (4.5)
Total (52.6)
Net intangible assets subject to amortization: $ 178.4

With regards to the definite-lived intangible assets in the table above, the value of business acquired intangible asset represents the present value of the expected underwriting profit within policies that were in force on the date of acquisition. The value of distribution acquired intangible asset represents the present value of future business to be written by the existing agency force. The value of agency relationships intangible asset represents the present value of the commission overrides retained by NTA. The value of customer relationships intangible asset represents the present value of the expected profits from existing BCG customers in force at the date of acquisition as well as the present value of future business to be produced by Madison National's existing independent producing brokers. All of the aforementioned definite-lived intangible assets were valued using the income approach.


~~Horace Mann Educators Corporation~~			21			~~Quarterly Report on Form 10-Q~~

~~NOTE 5 - Goodwill and Intangible Assets (continued)~~

~~Estimated future amortization of the Company's definite-lived intangible assets were as follows:~~

($ in millions)
Year Ending December 31,
2022 (excluding the nine months ended September 30, 2022) $ 4.1
2023 15.5
2024 15.1
2025 14.8
2026 14.5
Thereafter 114.4
Total $ 178.4

The value of business acquired intangible asset is being amortized by product based on the present value of future premiums to be received. The value of distribution acquired intangible asset is being amortized on a straight-line basis. The value of agency relationships intangible asset is being amortized based on the present value of future premiums to be received. The value of customer relationships intangible assets are being amortized based on the present value of future profits to be received for BCG and based on the present value of future premiums for Madison National.

~~Indefinite-lived intangible assets not subject to amortization as of September 30, 2022 were as follows:~~


~~($ in millions)~~
~~Trade names~~	$	~~7.9~~
~~State licenses~~	~~5.9~~
~~Total~~	$	~~13.8~~

The trade names intangible asset represents the present value of future savings accruing to NTA and BCG by virtue of not having to pay royalties for the use of the trade names, valued using the relief from royalty method. The state licenses intangible asset represents the regulatory licenses held by NTA and Madison National that were valued using the cost approach.


~~Horace Mann Educators Corporation~~			22			~~Quarterly Report on Form 10-Q~~

~~NOTE 6 -~~Property & Casualty Unpaid Claims and Claim ~~Expenses~~

Expense Reserves

The following table is a summary reconciliation of the beginning and ending Property & Casualty unpaid claims and claim expense reserves for the periods indicated. The table presents reserves on both a gross and net (after reinsurance) basis. The total net Property & Casualty insurance claims and claim expense incurred amounts are reflected in the Consolidated Statements of ~~Operations.~~Operations and Comprehensive Income (Loss). The end of ~~the~~ period gross ~~reserve~~reserves (before reinsurance balances and reinsurance recoverable balances) are reflected on a gross basis in the Consolidated Balance Sheets.


($ in millions)	($ in millions)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in millions)	Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Property & Casualty	Property & Casualty									Property & Casualty
Beginning gross reserves~~(1)~~	Beginning gross reserves~~(1)~~	$	378.4	$	368.4	$	362.4	$	372.2	Beginning gross reserves~~(1)~~		$	388.7	$	362.4
Less: reinsurance recoverables	Less: reinsurance recoverables	109.8		108.9		110.3		112.9		Less: reinsurance recoverables		100.8		110.3
Net reserves, beginning of period~~(2)~~(1)	Net reserves, beginning of period~~(2)~~(1)	268.6		259.5		252.1		259.3		Net reserves, beginning of period~~(2)~~(1)		287.9		252.1
Incurred claims and claim expenses:	Incurred claims and claim expenses:									Incurred claims and claim expenses:
Claims occurring in the current period	Claims occurring in the current period	120.3		132.5		372.8		345.4		Claims occurring in the current period		128.8		108.3
Increase (decrease) in estimated reserves for claims occurring in prior periods~~(3)~~(2)	Increase (decrease) in estimated reserves for claims occurring in prior periods~~(3)~~(2)	2.0		(3.0)		8.0		(7.2)		Increase (decrease) in estimated reserves for claims occurring in prior periods~~(3)~~(2)		—		—
Total claims and claim expenses incurred~~(4)~~	Total claims and claim expenses incurred~~(4)~~	122.3		129.5		380.8		338.2		Total claims and claim expenses incurred~~(4)~~		128.8		108.3
Claims and claim expense payments for claims occurring during:	Claims and claim expense payments for claims occurring during:									Claims and claim expense payments for claims occurring during:
Current period	Current period	102.8		96.8		221.1		210.3		Current period		40.6		33.8
Prior periods	Prior periods	29.7		26.4		153.4		121.4		Prior periods		79.6		78.4
Total claims and claim expense payments	Total claims and claim expense payments	132.5		123.2		374.5		331.7		Total claims and claim expense payments		120.2		112.2
Net reserves, end of period~~(2)~~(1)	Net reserves, end of period~~(2)~~(1)	258.4		265.8		258.4		265.8		Net reserves, end of period~~(2)~~(1)		296.5		248.2
Plus: reinsurance recoverables	Plus: reinsurance recoverables	109.0		109.6		109.0		109.6		Plus: reinsurance recoverables		101.3		108.0
Ending gross reserves~~(1)~~	Ending gross reserves~~(1)~~	$	367.4	$	375.4	$	367.4	$	375.4	Ending gross reserves~~(1)~~		$	397.8	$	356.2

(1)Unpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for Life & Retirement and Supplemental & Group Benefits of $114.5 million and $64.7 million as of September 30, 2022 and 2021, respectively, in addition to Property & Casualty reserves.

~~(2)~~Reserves net of ~~anticipated~~expected reinsurance recoverables.

~~(3)~~(2)Shows the amounts by which the Company increased (decreased) its reserves in each of the periods indicated for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement ~~costs.~~costs - also known as prior years' reserve development.

~~(4)~~

There was no prior years' reserve development for Property & Casualty claims for the three months ended March 31, 2023 and 2022, respectively.

Group Benefits Unpaid Claims and Claim Expense Reserves

The following table is a summary reconciliation of the beginning and ending Group Benefits unpaid claims and ~~settlement expenses as reported~~claim expense reserves for the periods indicated. The table presents reserves on both a gross and net (after reinsurance). The total net Group Benefits insurance claims and claim expense incurred amounts are reflected in the Consolidated Statements of Operations and Comprehensive Income (Loss). The end of period gross reserves (before reinsurance balances and reinsurance recoverable balances) are reflected on a gross basis in the Consolidated Balance Sheets.


Horace Mann Educators Corporation			21			First Quarter 2023 Form 10-Q

NOTE 4 - Short-Duration Insurance Contracts (continued)


($ in millions)	Three Months Ended March 31,
		2023		2022
Group Benefits
Beginning gross reserves		$	121.6	$	125.4
Less: reinsurance recoverables		27.9		28.6
Net reserves, beginning of period(1)		93.7		96.8
Incurred claims and claim expenses:
Claims occurring in the current period		20.2		28.8
Increase (decrease) in estimated reserves for claims occurring in prior periods(2)		(4.9)		(1.9)
Total claims and claim expenses incurred		15.3		26.9
Claims and claim expense payments for claims occurring during:
Current period		4.2		4.4
Prior periods		12.4		15.9
Total claims and claim expense payments		16.7		20.3
Net reserves, end of period(1)		92.3		103.4
Plus: reinsurance recoverables		28.0		29.8
Ending gross reserves		$	120.3	$	133.2

(1) Reserves net of expected reinsurance recoverables.

(2) Shows the amounts by which the Company increased (decreased) its reserves in each of the periods indicated for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs - also ~~include amounts~~known as prior years' reserve development.

Favorable prior years' reserve development for ~~Life & Retirement and Supplemental &~~ Group Benefits ~~of $51.3~~was $4.9 million and ~~$177.4~~$1.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively,~~respectively. The favorable development for the three months ended March 31, 2023 was primarily the result of favorable loss trends in ~~addition to~~specialty health and group for loss years 2022 and prior. The favorable development for the three months ended March 31, 2022 was primarily the result of favorable loss trends in specialty health for loss years 2021 and prior.

Reconciliation of Property & Casualty ~~amounts.~~and Group Benefits ~~claims~~Unpaid Claims and ~~settlement expenses for~~Claim Expense Reserves to the Consolidated Balance Sheets


($ in millions)	As of March 31, 2023		As of December 31, 2022
Ending gross reserves
Property & Casualty	$	397.8	$	388.7
Group Benefits	120.3		121.6
Total short-duration insurance contracts	518.1		510.3
Other than short-duration(1)	56.7		53.7
Total unpaid claims and claims expenses	$	574.8	$	564.0

(1) This line includes Life & Retirement, Supplemental, and ~~Supplemental & Group~~other certain group benefit reserves.

Note 5 - Long-Duration Insurance Contracts

Liability for Future Policy Benefits

As of ~~$35.3 million~~ and ~~$108.0 million~~ for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2023 and 2022, the Company updated the net premium ratio when updating for actual historical experience for the quarter; future cash flow assumptions were reviewed but not changed.

The following tables summarize balances and changes in LFPB for traditional and limited-payment contracts.

~~Development~~


Horace Mann Educators Corporation			22			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

The balances of ~~total reserves for Property & Casualty claims occurring~~and changes in ~~prior years was $8.0 million net unfavorable~~LFPB as of and ~~$7.2 million net favorable~~ for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 were as follows:


($ in millions)
	Whole Life		Term Life		Experience Life(1)		Limited-Pay Whole Life		Supplemental Health(2)		SPIA (life contingent)
Present value of expected net premiums:
Balance at January 1, 2023	$	215.1	$	234.7	$	68.3	$	29.7	$	167.4	$	—
January 1, 2023 balance at original discount rate	245.9		265.4		65.5		32.4		205.1		—
Effect of:
Change in cash flow assumptions	—		—		—		—		—		—
Actual variances from expected experience	0.8		(1.5)		0.2		0.5		(1.4)		—
Adjusted balance at January 1, 2023	246.7		263.9		65.7		32.9		203.7		—
Issuances(3)	2.8		6.5		—		1.0		5.3		2.0
Interest accruals(4)	1.8		2.5		1.0		0.3		1.5		—
Net premiums collected(5)	(4.7)		(6.9)		(1.7)		(1.1)		(5.4)		(2.0)
March 31, 2023 balance at original discount rate	246.6		266.0		65.0		33.1		205.1		—
Effect of changes in discount rate assumptions	(24.4)		(22.2)		4.8		(1.9)		(32.6)		—
Balance at March 31, 2023	222.2		243.8		69.8		31.2		172.5		—

Present value of expected future policy benefits:
Balance at January 1, 2023	493.6		347.0		867.5		79.4		431.7		103.3
January 1, 2023 balance at original discount rate	581.9		401.0		805.2		98.6		537.1		113.4
Effect of:
Changes in cash flow assumptions	—		—		—		—		—		—
Actual variances from expected experience	0.8		(1.5)		0.4		0.6		(1.7)		(0.5)
Adjusted balance at January 1, 2023	582.7		399.5		805.6		99.2		535.4		112.9
Issuances	2.9		6.6		—		1.0		5.3		2.4
Interest accruals	4.7		4.0		11.9		0.9		3.6		1.1
Benefit payments(6)	(4.9)		(4.9)		(16.0)		(0.8)		(13.7)		(3.1)
March 31, 2023 balance at original discount rate	585.4		405.2		801.5		100.3		530.6		113.3
Effect of changes in discount rate assumptions	(70.3)		(40.2)		91.0		(15.9)		(92.9)		(7.4)
Balance at March 31, 2023	515.1		365.0		892.5		84.4		437.7		105.9
Net liability for future policy benefits	292.8		121.2		822.8		53.3		265.3		105.9
Less: Reinsurance recoverable	(65.0)		(16.6)		(0.8)		(0.1)		(3.7)		(3.5)
Net liability for future policy benefits, after reinsurance recoverable	227.8		104.6		822.0		53.2		261.6		102.4
Impact of flooring on net liability for future policy benefits	0.3		—		—		—		—		—
Net liability for future policy benefits at March 31, 2023	$	228.1	$	104.6	$	822.0	$	53.2	$	261.6	$	102.4

(1) Experience Life contains both whole life and ~~2021, respectively. The unfavorable development~~term elements.

(2) As of March 31, 2023, the net LFPB for ~~the nine months ended September 30, 2022~~Supplemental Health was ~~the result of unfavorable loss trends in auto offset by favorable loss trends in homeowners loss emergence~~$101.7 million for cancer, $22.2 million for accident, ~~years 2021~~$23.7 million for disability and ~~prior.~~$114.0 million for other supplemental health policies.

(3) Issuances are calculated at present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new policies issued during the current period.

(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in force business.

(6) Benefit payments represent the release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal and maturity payments based on revised expected assumptions.


Horace Mann Educators Corporation			23			~~Quarterly Report~~First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

The balances of and changes in LFPB as of and for the year ended December 31, 2022 were as follows:


($ in millions)
	Whole Life		Term Life		Experience Life(1)		Limited-Pay Whole Life		Supplemental Health(2)		SPIA (life contingent)
Present Value of Expected Net Premiums
Balance at January 1, 2022(7)	$	260.7	$	264.4	$	74.6	$	29.7	$	226.7	$	—
January 1, 2022 balance at original discount rate(7)	239.3		235.4		55.9		27.2		223.1		—
Effect of:
Change in cash flow assumptions	5.2		18.7		9.1		2.0		12.2		—
Actual variances from expected experience	7.2		(4.2)		3.0		1.6		(25.3)		—
Adjusted balance at January 1, 2022	251.7		249.9		68.0		30.8		210.0		—
Issuances(3)	12.5		28.0		—		6.3		12.0		5.3
Interest accruals(3)	6.7		9.0		3.3		1.1		5.9		—
Net premiums collected(5)	(25.0)		(21.5)		(5.8)		(5.8)		(22.8)		(5.3)
December 31, 2022 balance at original discount rate	245.9		265.4		65.5		32.4		205.1		—
Effect of changes in discount rate assumptions	(30.8)		(30.7)		2.8		(2.7)		(37.7)		—
Balance at December 31, 2022	215.1		234.7		68.3		29.7		167.4		—

Present Value of Expected Future Policy Benefits
Balance at January 1, 2022(7)	660.4		411.5		1,172.7		102.9		590.6		129.1
January 1, 2022 balance at original discount rate(7)	566.1		360.0		802.6		86.6		584.2		115.7
Effect of:
Changes in cash flow assumptions	5.2		21.5		11.0		2.0		13.8		—
Actual variances from expected experience	7.7		(4.7)		3.6		1.4		(30.0)		0.4
Adjusted balance at January 1, 2022	579.0		376.8		817.2		90.0		568.0		116.1
Issuances	12.4		28.3		—		6.4		12.0		5.3
Interest accruals	18.0		14.4		47.4		3.4		15.0		4.3
Benefit payments(6)	(27.5)		(18.5)		(59.4)		(1.2)		(57.9)		(12.3)
December 31, 2022 balance at original discount rate	581.9		401.0		805.2		98.6		537.1		113.4
Effect of changes in discount rate assumptions	(88.3)		(54.0)		62.3		(19.2)		(105.4)		(10.1)
Balance at December 31, 2022	493.6		347.0		867.5		79.4		431.7		103.3
Net liability for future policy benefits	278.4		112.2		799.3		49.6		264.4		103.3
Less: Reinsurance recoverable	(63.1)		(15.3)		(0.8)		—		(3.4)		(3.2)
Net liability for future policy benefits, after reinsurance recoverable	215.3		96.9		798.5		49.6		261.0		100.1
Impact of flooring on net liability for future policy benefits	1.1		0.2		—		—		—		—
Net liability for future policy benefits at December 31, 2022	$	216.4	$	97.1	$	798.5	$	49.6	$	261.0	$	100.1

(1) Experience Life contains both whole life and term elements.

(2) As of December 31, 2022, the net LFPB for Supplemental Health was $101.8 million for cancer, $21.8 million for accident, $23.1 million for disability and $114.3 million for other supplemental health policies.

(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in force business.

(7) Whole Life, Term Life, and Supplemental Health beginning balance at January 1, 2022 includes reserves acquired from Madison National Life Insurance Company, Inc. on January 1, 2022.


Horace Mann Educators Corporation			24			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

The balances of and changes in LFPB (including a summary of the balance and changes in the LFPB on January 1, 2021 due to adoption of ASU 2018-12) as of and for the year ended December 31, 2021 were as follows:


($ in millions)
	Whole Life		Term Life		Experience Life(1)		Limited-Pay Whole Life		Supplemental Health(2)		SPIA (life contingent)








Present Value of Expected Net Premiums
Balance at January 1, 2021	$	176.5	$	244.1	$	78.0	$	25.4	$	233.0	$	—
January 1, 2021 balance at original discount rate	143.5		200.8		55.2		22.0		218.2		—
Effect of:
Change in cash flow assumptions	2.4		(4.5)		(3.3)		—		(1.8)		—
Actual variances from expected experience	8.8		6.9		6.3		1.0		6.3		—
Adjusted balance at January 1, 2021	154.7		203.2		58.2		23.0		222.7		—
Issuances(3)	13.3		29.8		—		10.2		13.0		3.7
Interest accruals(4)	6.2		7.9		3.2		0.8		5.9		—
Net premiums collected(5)	(16.6)		(19.8)		(5.6)		(6.8)		(24.1)		(3.7)
December 31, 2021 balance at original discount rate	157.6		221.1		55.8		27.2		217.5		—
Effect of changes in discount rate assumptions	25.4		32.0		18.8		2.5		4.0		—
Balance at December 31, 2021	183.0		253.1		74.6		29.7		221.5		—

Present Value of Expected Future Policy benefits
Balance at January 1, 2021	507.1		364.7		1,269.3		95.0		626.9		136.5
January 1, 2021 balance at original discount rate	362.5		294.0		813.5		73.4		589.1		115.9
Effect of:
Changes in cash flow assumptions	2.8		(4.8)		(3.6)		—		(3.0)		—
Actual variances from expected experience	8.7		7.2		6.6		1.1		6.2		(0.4)
Adjusted balance at January 1, 2021	374.0		296.4		816.5		74.5		592.3		115.5
Issuances	13.3		29.8		—		10.2		13.0		3.7
Interest accruals	17.1		12.0		47.9		2.9		15.7		4.5
Benefit payments(5)	(18.1)		(18.7)		(61.9)		(1.0)		(48.4)		(12.1)
December 31, 2021 balance at original discount rate	386.3		319.5		802.5		86.6		572.6		111.6
Effect of changes in discount rate assumptions	114.4		51.1		370.2		16.3		8.0		13.1
Balance at December 31, 2021	500.7		370.6		1,172.7		102.9		580.6		124.7
Net liability for future policy benefits	317.7		117.6		1,098.1		73.2		359.1		124.7
Less: Reinsurance recoverable	(0.5)		(5.5)		(1.1)		(0.2)		—		—
Net liability for future policy benefits, after reinsurance recoverable	$	317.2	$	112.1	$	1,097.0	$	73.0	$	359.1	$	124.7

(1) Experience Life contains both whole life and term elements.

(2) As of December 31, 2021, the net LFPB for Supplemental Health was $140.8 million for cancer, $28.7 million for accident, $29.3 million for disability and $160.3 million for other supplemental health policies.

(4) Interest accruals represent the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(5) Net premiums collected represent the product of the current period net premium ratio and the gross premiums collected during the period of in force business.


Horace Mann Educators Corporation			25			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

The following table reconciles the net LFPB to LFPB in the Consolidated Balance Sheets. DPL for single premium and immediate annuity products is presented together with LFPB in the Consolidated Balance Sheets:


($ in millions)	March 31, 2023		December 31, 2022
Whole life	$	293.1	$	279.5
Term life	121.2		112.4
Experience life	822.8		799.3
Limited-pay whole life	53.3		49.6
Supplemental health	265.3		264.4
SPIA (life contingent)	105.9		103.3
Limited-pay whole life DPL	3.3		3.2
SPIA (life contingent) DPL	1.0		0.8
Reconciling items(1)	106.5		105.5
Total	$	1,772.4	$	1,718.0

(1) Reconciling items primarily relate to products not in scope of ASU 2018-12 and return of premium reserves.

The following table summarizes the amount of revenue and interest related to traditional and limited-payment contracts recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss):


($ in millions)	Gross premiums or assessments				Interest expense
	Three Months Ended March 31,				Three Months Ended March 31,
	2023		2022		2023		2022
Whole life	$	6.6	$	6.1	$	2.9	$	2.7
Term life	10.8		9.9		1.2		1.1
Experience life	8.2		8.5		11.0		11.1
Limited-pay whole life	1.6		1.8		0.6		0.6
Supplemental health	29.7		30.7		2.2		2.4
SPIA (life contingent)	2.2		2.5		1.1		1.1
Total	$	59.1	$	59.5	$	19.0	$	19.0

The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefits and expenses for traditional and limited-payment contracts:


($ in millions)	Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
	Undiscounted		Discounted		Undiscounted		Discounted
Whole life
Expected future gross premiums	$	471.6	$	322.5	$	448.0	$	308.9
Expected future benefits and expenses	1,128.1		585.4		1,080.6		568.1
Term life
Expected future gross premiums	744.6		465.3		720.9		447.0
Expected future benefits and expenses	687.8		405.2		597.0		355.8
Experience Life
Expected future gross premiums	559.0		310.2		598.4		329.4
Expected future benefits and expenses	1,740.3		801.5		1,774.5		799.5
Limited-pay whole life
Expected future gross premiums	61.9		47.3		51.3		39.7
Expected future benefits and expenses	230.7		100.3		196.9		88.8
Supplemental health
Expected future gross premiums	1,644.2		1,215.1		1,633.3		127.3
Expected future benefits and expenses	724.6		530.6		776.3		577.4
SPIA (life contingent)
Expected future gross premiums	—		—		—		—
Expected future benefits and expenses	158.2		113.3		161.6		116.2


Horace Mann Educators Corporation			26			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

For the three months ended March 31, 2023 and 2022, net premiums exceeded gross premiums for several cohorts in the Whole Life and Term Life product lines. This resulted in an immaterial change to current period benefit expense for both periods.

The following table summarizes the ranges of actual experience and expected experience for mortality and lapses of LFPB:


	March 31, 2023
	Whole Life		Term Life	Experience Life		Limited-Pay Whole Life		SPIA (life contingent)
Mortality
Actual experience	0.7	%	0.1% - 0.3%	1.9	%	—	%	N.M.
Expected experience	0.7	%	0.1% - 0.6%	1.6	%	0.2	%	N.M.
Lapses
Actual experience	3.6	%	5.6% - 8.3%	3.4	%	3.6	%	N.M.
Expected experience	4.6	%	2.8% - 5.6%	3.0	%	5.1	%	N.M.

	March 31, 2022
	Whole Life		Term Life	Experience Life		Limited-Pay Whole Life		SPIA (life contingent)
Mortality
Actual experience	0.8	%	0.1% - 0.1%	1.8	%	0.4	%	N.M.
Expected experience	0.7	%	0.1% - 0.3%	1.4	%	0.2	%	N.M.
Lapses
Actual experience	3.0	%	5.2% - 76.1%	3.1	%	2.9	%	N.M.
Expected experience	5.7	%	2.8% - 6.6%	3.1	%	7.2	%	N.M.

The following table provides the weighted-average durations of LFPB, in years:


	As of March 31,
	2023	2022
Whole life	18	18
Term life	17	16
Experience life	11	11
Limited-pay whole life	23	21
Supplemental health	10.2	9.8
SPIA (life contingent)	8	8


Horace Mann Educators Corporation			27			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

The following table provides ranges of the weighted-average interest rates for LFPB:


	As of March 31,
	2023		2022
Whole life
Interest accretion rate	1.7% - 4.9%		1.7% - 5.0%
Current discount rate	4.7% - 5.0%		3.2% - 3.7%
Term life
Interest accretion rate	4.1% - 4.3%		4.1% - 4.4%
Current discount rate	4.9% - 5.0%		3.6% - 3.6%
Experience life
Interest accretion rate	6.1	%	6.1	%
Current discount rate	5.0	%	3.7	%
Limited-pay whole life
Interest accretion rate	3.9	%	3.9	%
Current discount rate	5.0	%	3.7	%
Supplemental health
Interest accretion rate	1.7% - 2.7%		1.7% - 2.7%
Current discount rate	5.0% - 5.2%		3.5% - 4.0%
SPIA (life contingent)
Interest accretion rate	1.7% - 4.1%		1.7% - 4.0%
Current discount rate	4.9% - 5.0%		3.5% - 3.5%


Horace Mann Educators Corporation			28			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

Liability for Policyholders' Account Balances

The Company recognizes a liability for policyholders' account balances. The following tables summarize balances of and changes in policyholders' account balances:


($ in millions)	Three Months Ended March 31, 2023
	Indexed Universal Life			Experience Life			Fixed Account Annuities			Fixed Indexed Account Annuities			SPIA (non-life contingent)
Balance at January 1, 2023	$	47.6		$	64.3		$	4,591.1		$	510.3		$	34.4
Premiums received(1)	$	3.6		$	(0.2)		$	54.9		$	5.1		$	1.1
Surrenders and withdrawals(2)	(0.4)			(0.9)			(98.1)			(13.9)			(0.1)
Benefit payments(3)	—			(0.5)			(19.1)			(0.6)			(1.7)
Net transfers from (to) separate account	—			—			6.6			(0.9)			—
Interest credited(4)	—			0.8			40.1			—			0.3
Other	(0.9)			—			1.9			(1.6)			(0.2)
Balance at March 31, 2023	$	49.9		$	63.5		$	4,577.4		$	498.4		$	33.8
Weighted-average crediting rate	0.1		%	5.0		%	3.6		%	—		%	3.0		%
Net amount at risk(5)	$	—		$	—		$	39.5		$	—		$	—
Cash surrender value	$	32.9		$	62.8		$	4,540.9		$	486.7		$	33.7

($ in millions)	Three Months Ended March 31, 2022
	Indexed Universal Life			Experience Life			Fixed Account Annuities			Fixed Indexed Account Annuities			SPIA (non-life contingent)
Balance at January 1, 2022	$	39.1		$	66.2		$	4,532.7		$	522.6		$	37.7
Premiums received(1)	$	2.2		$	—		$	47.2		$	9.3		$	0.8
Surrenders and withdrawals(2)	(0.2)			(0.7)			(60.3)			(10.9)			(0.3)
Benefit payments(3)	—			(0.4)			(18.5)			(1.1)			(1.5)
Net transfers from (to) separate account	—			—			11.0			(0.1)			—
Interest credited(4)	0.5			0.8			38.9			1.8			0.3
Other	(0.6)			—			(2.8)			(3.4)			—
Balance at March 31, 2022	$	41.0		$	65.9		$	4,548.2		$	518.2		$	37.0
Weighted-average crediting rate	5.4		%	5.0		%	3.5		%	1.4		%	3.0		%
Net amount at risk(5)	$	—		$	—		$	66.4		$	—		$	—
Cash surrender value	$	26.0		$	65.2		$	4,489.4		$	504.2		$	36.6

(1) Premiums received represents premiums collected from policyholder during the period of in force business.

(2) Surrenders and withdrawals represent reductions to the policyholders' account balance due to policyholders surrendering the policy or withdrawing funds from the account balance.

(3) Benefit payments represent benefits due under contract that were paid to a policyholder during the periods.

(4) Interest credited represents interest earned and credited to policyholders' account balance during the periods.

(5) Net amount at risk represents guaranteed benefit amounts less current policyholders' account balance at the reporting date.


Horace Mann Educators Corporation			29			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

The following table reconciles policyholders' account balances to the policyholders' account balance liability in the Consolidated Balances Sheets:


($ in millions)	March 31, 2023		December 31, 2022
Indexed universal life	$	49.9	$	47.6
Experience Life	63.5		64.3
Fixed account annuities	4,577.4		4,591.1
Fixed indexed account annuities	498.4		510.3
SPIA (non-life contingent)	33.8		34.4
Reconciling items(1)	11.6		12.9
Total	$	5,234.6	$	5,260.6

(1) Reconciling items primarily relate to FIA reserves net of account balances, miscellaneous fixed annuity reserves, personal promise accounts and MRBs.

The following tables present the gross account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums:


($ in millions)	March 31, 2023
	At Guaranteed Minimum		1-50 Basis Points Above		51-150 Basis Points Above		Greater Than 150 Basis Points Above		Total(1)
Guaranteed minimum crediting rates:
Less than 2%	$	95.5	$	393.9	$	329.9	$	128.1	$	947.4
Equal to 2% but less than 3%	232.8		36.4		6.8		—		276.0
Equal to 3% but less than 4%	653.5		0.4		0.5		—		654.4
Equal to 4% but less than 5%	2,705.6		—		—		—		2,705.6
5% or higher	90.9		—		—		—		90.9
Total	$	3,778.3	$	430.7	$	337.2	$	128.1	$	4,674.3

($ in millions)	December 31, 2022
	At Guaranteed Minimum		1-50 Basis Points Above		51-150 Basis Points Above		Greater Than 150 Basis Points Above		Total(1)
Guaranteed minimum crediting rates:
Less than 2%	$	262.5	$	370.6	$	214.4	$	96.1	$	943.6
Equal to 2% but less than 3%	256.1		19.8		4.7		—		280.6
Equal to 3% but less than 4%	667.4		0.4		0.4		—		668.2
Equal to 4% but less than 5%	2,706.1		—		—		—		2,706.1
5% or higher	91.7		—		—		—		91.7
Total	$	3,983.8	$	390.8	$	219.5	$	96.1	$	4,690.2

(1) Excludes products not containing a fixed guaranteed minimum crediting rate.

Separate Account Liabilities

Separate account assets and liabilities consist of investment accounts established and maintained by the Company for certain variable contracts. Some of these variable contracts include minimum guarantees such as GMDBs that guarantee a minimum payment to the policyholder in the event of death.

The assets that support variable contracts are measured at fair value and are reported as separate account assets on the Consolidated Balance Sheets. An equivalent amount is reported as separate account liabilities. MRB assets and liabilities for minimum guarantees are valued and presented separately from separate account assets and separate account liabilities. MRBs are discussed further in the market risk benefits section of this


Horace Mann Educators Corporation			30			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

Note to the Consolidated Financial Statements. Policy charges assessed against the policyholders for mortality, administration and other services are included in the life premiums and contract charges line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table presents the balances of and changes in the Separate Account variable annuity liabilities presented in the Consolidated Balance Sheets(1):


($ in millions)	Retirement Services
	Variable Account Annuities
	March 31, 2023		December 31, 2022
Balance, beginning of year	$	2,792.3	$	3,441.0
Deposits	57.3		240.3
Withdrawals	(46.6)		(186.8)
Net transfers	(5.6)		(38.1)
Fees and charges	(9.1)		(36.8)
Market appreciation (depreciation)	168.2		(619.7)
Other	(1.8)		(7.6)
Balance, end of period	$	2,954.7	$	2,792.3

(1) The Separate Account variable annuity liabilities are backed by, and are equal to, the Separate Account variable annuity assets that represent contractholder funds invested in various actively traded mutual funds that have daily quoted net asset values that are readily determinable for identical assets that the Company can access.

Market Risk Benefits

The following table presents the balances of and changes in MRBs associated with deferred variable annuities as of and for the three months ended March 31, 2023 and 2022, respectively:


($ in millions)	March 31, 2023		March 31, 2022

Balance, beginning of year	$	0.2	$	4.8
Balance, beginning of year, before effects of changes in the instrument-specific credit risk	—		2.0
Changes in market risk benefits(1)	0.9		(0.4)
Balance, end of period(2)	$	0.9	$	1.6
Effect of changes in the instrument-specific credit risk	0.4		2.4
Balance, end of period	$	1.3	$	4.0
Net amount at risk(3)	$	38.3	$	20.2
Weighted-average attained age of contract holders	63		62

(1) Reflects interest accruals and effect of changes in interest rates, equity markets, equity index volatility and future assumptions.

(2) Balance, end of period, before the effect of changes in the instrument-specific credit risk.

(3) Net amount at risk represents the current guaranteed benefit less current account balance at the reporting date.

The following table presents MRBs by amounts in an asset position and amounts in a liability position. The net liabilities are included in Policyholders' account balances presented in the Consolidated Balance Sheets.


($ in millions)	As of March 31, 2023						As of December 31, 2022
	Asset		Liability		Net Liability		Asset		Liability		Net Liability
Deferred variable annuities	$	4.2	$	5.5	$	1.3	$	4.4	$	4.7	$	0.3


Horace Mann Educators Corporation			31			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

DAC and Deferred Sales Inducements

The following tables roll-forward DAC for the periods indicated:


($ in millions)	Three Months Ended March 31, 2023
	Whole Life		Term Life		Experience Life		Limited-Pay Whole Life		Indexed Universal Life		Supplemental Health		Total Annuities
Balance, beginning of period	$	20.9	$	30.0	$	5.8	$	6.7	$	15.4	$	6.2	$	221.1
Capitalizations	0.6		1.3		—		0.2		0.5		0.6		4.0
Amortization expense	(0.3)		(0.6)		—		(0.1)		(0.2)		(0.1)		(3.7)
Experience adjustment	—		—		—		—		—		—		(1.7)
Balance, end of period	$	21.2	$	30.7	$	5.8	$	6.8	$	15.7	$	6.7	$	219.7

($ in millions)	Year Ended December 31, 2022
	Whole Life		Term Life		Experience Life		Limited-Pay Whole Life		Indexed Universal Life		Supplemental Health		Total Annuities
Balance, beginning of year	$	19.1	$	27.5	$	6.0	$	5.6	$	13.7	$	4.9	$	223.3
Capitalizations	3.0		5.0		0.2		1.4		2.5		1.8		15.5
Amortization expense	(1.2)		(2.5)		(0.4)		(0.3)		(0.8)		(0.5)		(15.8)
Experience adjustment	—		—		—		—		—		—		(1.9)
Balance, end of year	$	20.9	$	30.0	$	5.8	$	6.7	$	15.4	$	6.2	$	221.1

($ in millions)	Year Ended December 31, 2021
	Whole Life		Term Life		Experience Life		Limited-Pay Whole Life		Indexed Universal Life		Supplemental Health		Total Annuities
Balance, end of year December 31, 2020	$	17.8	$	25.6	$	2.6	$	4.4	$	11.3	$	4.3	$	137.7
Adjustment for removal of related balances in AOCI	—		—		3.6		—		1.6		—		85.4
Adjusted balance, beginning of year January 1, 2021	$	17.8	$	25.6	$	6.2	$	4.4	$	12.9	$	4.3	$	223.1
Capitalizations	2.4		4.2		0.2		1.5		1.7		1.1		17.3
Amortization expense	(1.1)		(2.3)		(0.4)		(0.3)		(0.8)		(0.5)		(16.0)
Experience adjustment	—		—		—		—		(0.1)		—		(1.1)
Balance, end of year December 31, 2021	$	19.1	$	27.5	$	6.0	$	5.6	$	13.7	$	4.9	$	223.3


Horace Mann Educators Corporation			32			First Quarter 2023 Form 10-Q

NOTE 5 - Long-Duration Insurance Contracts (continued)

The following table presents a reconciliation of DAC to the Consolidated Balance Sheets:


($ in millions)	March 31, 2023		December 31, 2022
Whole life	$	21.2	$	20.9
Term life	30.7		30.0
Experience life	5.8		5.8
Limited pay whole life	6.8		6.7
Indexed universal life	15.7		15.4
Supplemental health	6.7		6.2
Total annuities	219.7		221.1
Reconciling item(1)	25.0		24.5
Total	$	331.6	$	330.6

(1) Reconciling item relates to DAC associated with the Property & Casualty reporting segment.

The assumptions used to amortize DAC were consistent with the assumptions used to estimate LFPB for traditional and limited-payment contracts. The underlying assumptions for DAC and LFPB were updated at the same time.

In the first quarter of 2023 and 2022, the Company conducted a review of all significant assumptions and did not make any changes to future assumptions because actual experience for mortality and lapses was materially consistent with underlying assumptions.

The following table rolls-forward the DSI balance as of and for the three months ended March 31, 2023 and 2022:


($ in millions)	March 31, 2023		December 31, 2022

Balance, beginning of year	$	15.9	$	17.3
Capitalizations	—		—
Amortization expense	(0.3)		(0.3)
Experience adjustment	(0.2)		(0.1)
Balance, end of period	$	15.4	$	16.9

DSI is included in Other assets in the Consolidated Balance Sheets.


Horace Mann Educators Corporation			33			First Quarter 2023 Form 10-Q

NOTE 76 - Reinsurance

The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and claim settlement expenses, including estimated amounts for unsettled claims, claims incurred but not yet reported and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on net premiums written and contract deposits; net premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:


($ in millions)	($ in millions)	Direct Amount		Ceded to Other Companies(1)		Assumed from Other Companies		Net Amount		($ in millions)	Direct Amount		Ceded to Other Companies(1)		Assumed from Other Companies		Net Amount
Three months ended September 30, 2022

Three months ended March 31, 2023										Three months ended March 31, 2023
Net premiums written and contract deposits(2)	Net premiums written and contract deposits(2)	$	390.3	$	15.4	$	13.4	$	388.3	Net premiums written and contract deposits(2)	$	367.8	$	16.6	$	10.4	$	361.6
Net premiums and contract charges earned	Net premiums and contract charges earned	262.0		17.6		13.4		257.8		Net premiums and contract charges earned	264.0		18.5		10.4		255.9
Benefits, claims and settlement expenses	Benefits, claims and settlement expenses	177.3		8.4		4.7		173.6		Benefits, claims and settlement expenses	192.9		12.7		3.0		183.2

Three months ended September 30, 2021
Three months ended March 31, 2022										Three months ended March 31, 2022
Net premiums written and contract deposits(2)	Net premiums written and contract deposits(2)	$	366.0	$	5.5	$	2.6	$	363.1	Net premiums written and contract deposits(2)	$	360.8	$	14.8	$	12.4	$	358.4
Net premiums and contract charges earned	Net premiums and contract charges earned	230.9		8.1		2.6		225.4		Net premiums and contract charges earned	260.4		17.2		12.6		255.8
Benefits, claims and settlement expenses	Benefits, claims and settlement expenses	164.5		1.5		1.8		164.8		Benefits, claims and settlement expenses	181.6		7.2		0.8		175.2

Nine months ended September 30, 2022
Net premiums written and contract deposits(2)		$	1,124.4	$	46.7	$	39.5	$	1,117.2
Net premiums and contract charges earned		783.4		53.5		39.6		769.5
Benefits, claims and settlement expenses		577.4		34.2		15.0		558.2

Nine months ended September 30, 2021
Net premiums written and contract deposits(2)		$	1,037.8	$	17.0	$	6.6	$	1,027.4
Net premiums and contract charges earned		696.6		24.6		6.8		678.8
Benefits, claims and settlement expenses		444.7		3.0		4.5		446.2

(1) Excludes the annuity reinsurance transaction accounted for using the deposit method.

(2) This measure is not based on accounting principles generally accepted in the United States of America (non-GAAP). An explanation of this non-GAAP measure is contained in the Glossary of Selected Terms included as Exhibit 99.1 in the Company's reports filed with the SEC.

~~NOTE 8 - Commitments~~

~~Investment Commitments~~

~~The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such unfunded commitments were~~ ~~$715.5 million~~ ~~and $858.1 million as of September 30, 2022 and December 31, 2021, respectively.~~


Horace Mann Educators Corporation			2434			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 97 - Segment Information

The Company conducts and manages its business in four reporting segments. The three operating segments, representing the major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement (primarily tax-qualified fixed and variable annuities as well as life insurance products), and (3) Supplemental & Group Benefits (primarily cancer, heart, hospital, supplemental disability, accident, short-term and long-term group disability, and group term life coverages). The Company does not allocate the impact of corporate-level transactions to these operating segments, consistent with the basis for management's evaluation of the results of those segments, but classifies those items in the fourth reporting segment, Corporate & Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items in Corporate & Other have also included corporate debt retirement costs, when applicable.

In 2021 and prior, the Company conducted and managed its business through four operating segments: (1) Property & Casualty, (2) Supplemental, (3) Retirement, and (4) Life. The change in operating segments in 2022 aligns with leadership assignments and how the Company makes operating decisions and assesses performance as well as maintaining discrete financial information to evaluate performance and allocate resources. Accordingly, the presentation of prior period segment information has been reclassified to conform to the current year's presentation.

Summarized financial information for these segments is as follows:


($ in millions)	($ in millions)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in millions)	Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Net premiums and contract charges earned	Net premiums and contract charges earned									Net premiums and contract charges earned
Property & Casualty	Property & Casualty	$	152.4	$	153.3	$	452.5	$	464.1	Property & Casualty		$	152.4	$	150.2
Life & Retirement	Life & Retirement	37.1		40.4		109.7		118.3		Life & Retirement		37.7		35.8
Supplemental & Group Benefits	Supplemental & Group Benefits	68.3		31.7		207.3		96.4		Supplemental & Group Benefits		65.8		69.8
Total	Total	$	257.8	$	225.4	$	769.5	$	678.8	Total		$	255.9	$	255.8

Net investment income	Net investment income									Net investment income
Property & Casualty	Property & Casualty	$	8.0	$	11.3	$	22.9	$	43.8	Property & Casualty		$	4.0	$	7.2
Life & Retirement	Life & Retirement	81.4		85.8		254.0		247.4		Life & Retirement		87.9		84.2
Supplemental & Group Benefits	Supplemental & Group Benefits	8.7		7.2		25.4		19.0		Supplemental & Group Benefits		9.1		7.1
Corporate & Other	Corporate & Other	—		—		—		—		Corporate & Other		—		—
Intersegment eliminations	Intersegment eliminations	(0.5)		(0.6)		(1.6)		(1.8)		Intersegment eliminations		(0.6)		(0.6)
Total	Total	$	97.6	$	103.7	$	300.7	$	308.4	Total		$	100.4	$	97.9

Net income (loss)	Net income (loss)									Net income (loss)
Property & Casualty	Property & Casualty	$	(2.5)	$	(4.7)	$	(19.4)	$	42.5	Property & Casualty		$	(11.6)	$	8.5
Life & Retirement	Life & Retirement	12.7		19.1		41.8		47.0		Life & Retirement		14.0		15.6
Supplemental & Group Benefits	Supplemental & Group Benefits	19.2		11.5		43.6		34.8		Supplemental & Group Benefits		14.0		13.2
Corporate & Other	Corporate & Other	(15.5)		(9.6)		(50.1)		(22.0)		Corporate & Other		(9.8)		(17.0)
Total	Total	$	13.9	$	16.3	$	15.9	$	102.3	Total		$	6.6	$	20.3


($ in millions)	($ in millions)	September 30, 2022		December 31, 2021		($ in millions)	March 31, 2023		December 31, 2022
Assets	Assets					Assets
Property & Casualty	Property & Casualty	$	1,052.1	$	1,243.4	Property & Casualty	$	1,077.0	$	1,083.8
Life & Retirement	Life & Retirement	10,719.4		12,064.7		Life & Retirement	11,085.1		10,754.5
Supplemental & Group Benefits	Supplemental & Group Benefits	1,431.7		858.8		Supplemental & Group Benefits	1,377.1		1,359.3
Corporate & Other	Corporate & Other	177.9		281.8		Corporate & Other	169.0		173.4
Intersegment eliminations	Intersegment eliminations	(67.0)		(64.8)		Intersegment eliminations	(54.3)		(64.9)
Total	Total	$	13,314.1	$	14,383.9	Total	$	13,653.9	$	13,306.1


Horace Mann Educators Corporation			2535			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 108 - Accumulated Other Comprehensive Income (Loss)

AOCI represents the accumulated change in shareholders’ equity from transactions and other events and circumstances from non-shareholder sources. For the Company, AOCI includes the after tax change in net unrealized investment gains (losses) on fixed maturity securities, the after tax change in net reserve remeasurements attributable to discount rates and the after tax change in net funded status of benefit plans for the periods as shown in the Consolidated Statements of Changes in Shareholders’ Equity. The following table reconciles these components.

($ in millions)
Net Unrealized Investment
Gains (Losses)
on Securities(1)
Net Funded Status of
Benefit Plans(1)
Total(1)
Beginning balance, July 1, 2022 $ (220.4) $ (10.2) $ (230.6)
Other comprehensive loss before reclassifications (188.2) — (188.2)
Amounts reclassified from AOCI(2)
11.9 — 11.9
Net current period other comprehensive loss (176.3) — (176.3)
Ending balance, September 30, 2022 $ (396.7) $ (10.2) $ (406.9)
Beginning balance, July 1, 2021 $ 332.2 $ (11.2) $ 321.0
Other comprehensive income before reclassifications (29.3) — (29.3)
Amounts reclassified from AOCI(3)
4.0 — 4.0
Net current period other comprehensive income (25.3) — (25.3)
Ending balance, September 30, 2021 $ 306.9 $ (11.2) $ 295.7
Beginning balance, January 1, 2022 $ 290.7 $ (10.2) $ 280.5
Other comprehensive loss before reclassifications (725.7) — (725.7)
Amounts reclassified from AOCI(2)
38.3 — 38.3
Net current period other comprehensive loss (687.4) — (687.4)
Ending balance, September 30, 2022 $ (396.7) $ (10.2) $ (406.9)
Beginning balance, January 1, 2021 $ 366.3 $ (11.2) $ 355.1
Other comprehensive loss before reclassifications (65.0) — (65.0)
Amounts reclassified from AOCI(3)
5.6 — 5.6
Net current period other comprehensive loss (59.4) — (59.4)
Ending balance, September 30, 2021 $ 306.9 $ (11.2) $ 295.7


($ in millions)	Net Unrealized Investment Gains (Losses) on Fixed Maturity Securities(1)		Net Reserve Remeasurements Attributable to Discount Rates(1)		Net Funded Status of Benefit Plans(1)		Total(1)












Beginning balance, January 1, 2023	$	(449.6)	$	59.0	$	(8.8)	$	(399.4)
Other comprehensive loss before reclassifications	91.3		(41.2)		—		50.1
Amounts reclassified from AOCI(2)	1.9		—		—		1.9
Net current period other comprehensive loss	93.2		(41.2)		—		52.0
Ending balance, March 31, 2023	$	(356.4)	$	17.8	$	(8.8)	$	(347.4)

Beginning balance, January 1, 2022	$	347.1	$	(386.9)	$	(10.2)	$	(50.0)
Other comprehensive loss before reclassifications	(335.9)		181.5		—		(154.4)
Amounts reclassified from AOCI(2)	1.8		—		—		1.8
Net current period other comprehensive loss	(334.1)		181.5		—		(152.6)
Ending balance, March 31, 2022	$	13.0	$	(205.4)	$	(10.2)	$	(202.6)

(1)All amounts are net of tax.

(2)The pretax amounts reclassified from AOCI, ~~$(15.0)~~$(2.4) million and ~~$(48.4)~~$(2.3) million, are included in Net investment gains losses and the related income tax benefits, ~~$(3.2)~~$(0.5) million and ~~$(10.2)~~$(0.5) million, are included in income tax expense in the Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively.~~

~~(3)~~The pretax amounts reclassified from AOCI, $(5.0) million and $(7.1) million, are included in Net investment losses and the related income tax benefits, $(1.0) million and $(1.5) million, are included in income tax expense in the Consolidated Statements of Operations for the three and nine months ended September 30, 2021, respectively.

Comparative information for elements that are not required to be reclassified in their entirety to net income in the same reporting period is disclosed in Note 3.2.


Horace Mann Educators Corporation			2636			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

NOTE 119 - Supplemental Consolidated Cash and Cash Flow Information


($ in millions)	($ in millions)					($ in millions)
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Cash	Cash	$	35.2	$	133.0	Cash	$	26.6	$	42.2
Restricted cash	Restricted cash	1.0		0.7		Restricted cash	0.8		0.6
Total cash and restricted cash reported in the Consolidated Balance Sheets	Total cash and restricted cash reported in the Consolidated Balance Sheets	$	36.2	$	133.7	Total cash and restricted cash reported in the Consolidated Balance Sheets	$	27.4	$	42.8


($ in millions)	($ in millions)	Nine Months Ended September 30,				($ in millions)	Three Months Ended March 31,
		2022		2021			2023		2022
Cash paid for:
Cash paid (recovered) for:						Cash paid (recovered) for:
Interest	Interest	$	9.1	$	7.3	Interest	$	1.2	$	0.6
Income taxes	Income taxes	6.4		20.2		Income taxes	0.1		(0.3)

Non-cash investing activities with respect to modifications or exchanges of fixed maturity securities as well as paid-in-kind activity for policy loans were insignificant for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, respectively.

NOTE 10 - Contingencies and ~~2021,~~Commitments

Lawsuits and Legal Proceedings

Companies in the insurance industry have been subject to substantial litigation resulting from claims, disputes and other matters. For instance, they have faced expensive claims, including class action lawsuits, alleging, among other things, improper sales practices and improper claims settlement procedures. Negotiated settlements of certain such actions have had a material adverse effect on many insurance companies.

At the time of issuance of this Quarterly Report on Form 10-Q, the Company does not have pending litigation from which there is a reasonable possibility of material loss.

Assessments for Insolvencies of Unaffiliated Insurance Companies

The Company is contingently liable for possible assessments under regulatory requirements pertaining to potential insolvencies of unaffiliated insurance companies. Liabilities, which are established based upon regulatory guidance, have generally been insignificant.

Investment Commitments

The Company has outstanding commitments to fund investments primarily in limited partnership interests. Such unfunded commitments were $599.4 million and $704.2 million as of March 31, 2023 and December 31, 2022, respectively.

Note 11 - Prior Period Consolidated Financial Statements

Effective January 1, 2023, the Company adopted ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (also known as LDTI). The Company adopted LDTI using the modified retrospective approach where permitted with changes applied as of January 1, 2021. As a result of adoption, the Company’s prior period consolidated financial statements have been restated.

The following tables summarize the effects of adopting LDTI on our unaudited Consolidated Financial Statements.


Horace Mann Educators Corporation			37			First Quarter 2023 Form 10-Q

Note 11 - Prior Period Consolidated Financial Statements (continued)

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED BALANCE SHEET (UNAUDITED)

($ in millions, except share data)


	December 31, 2022		Effect of the Adoption of ASU 2018-12		Reclassifications(1)		December 31, 2022
	As Reported						As Adjusted
Assets
Total investments	$	6,587.6	$	—	$	—	$	6,587.6
Cash	42.8		—		$	—	42.8
Deferred policy acquisition costs	433.1		(102.5)		$	—	330.6
Reinsurance balances receivable	506.2		(38.2)		—		468.0
Deposit asset on reinsurance	2,516.6		—		—		2,516.6
Intangible assets	185.2		—		—		185.2
Goodwill	54.3		—		—		54.3
Other assets	328.7		—		—		328.7
Separate Account variable annuity assets	2,792.3		—		—		2,792.3
Total assets	$	13,446.8	$	(140.7)	$	—	$	13,306.1

Liabilities and Shareholders' Equity
Policy liabilities
Investment contract and policy reserves	$	6,968.0	$	(151.9)	$	(6,816.1)	$	—
Future policy benefit reserves					1,718.0		1,718.0
Policyholders' account balances					5,260.6		5,260.6
Unpaid claims and claim expenses	585.1		(2.9)		(18.2)		564.0
Unearned premiums	264.2		1.9		—		266.1
Total policy liabilities	7,817.3		(152.9)		144.3		7,808.7
Other policyholder funds	954.0		(0.4)		(144.3)		809.3
Other liabilities	297.0		2.5		—		299.5
Short-term debt	249.0		—		—		249.0
Long-term debt	249.0		—		—		249.0
Separate Account variable annuity liabilities	2,792.3		—		—		2,792.3
Total liabilities	12,358.6		(150.8)		—		12,207.8
Preferred stock	—		—		—		—
Common stock	0.1		—		—		0.1
Additional paid-in capital	502.6		—		—		502.6
Retained earnings	1,468.6		43.8		—		1,512.4
Accumulated other comprehensive income (loss), net of tax:
Net unrealized investment losses on fixed maturity securities	(356.9)		(92.7)		—		(449.6)
Net reserve remeasurements attributable to discount rates	—		59.0		—		59.0
Net funded status of benefit plans	(8.8)		—		—		(8.8)
Treasury stock, at cost	(517.4)		—		—		(517.4)
Total shareholders’ equity	1,088.2		10.1		—		1,098.3
Total liabilities and shareholders’ equity	$	13,446.8	$	(140.7)	$	—	$	13,306.1

(1) The Company has reclassified the presentation of certain information to conform to the current year's presentation.


Horace Mann Educators Corporation			38			First Quarter 2023 Form 10-Q

Note 11 - Prior Period Consolidated Financial Statements (continued)

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

($ in millions, except per share data)


	Three Months Ended		Effect of the Adoption of ASU 2018-12		Three Months Ended
	March 31, 2022				March 31, 2022
	As Reported				As Adjusted
Statement of Operations
Revenues
Net premiums and contract charges earned	$	255.9	$	(0.1)	$	255.8
Net investment income	97.9		—		97.9
Net investment losses	(15.5)		—		(15.5)
Other income	8.5		—		8.5
Total revenues	346.8		(0.1)		346.7

Benefits, losses and expenses
Benefits, claims and settlement expenses	177.0		(1.8)		175.2
Interest credited	40.8		(1.1)		39.7
Operating expenses	76.8		(0.1)		76.7
DAC amortization expense	26.4		(4.4)		22.0
Intangible asset amortization expense	4.2		—		4.2
Interest expense	3.9		—		3.9
Total benefits, losses and expenses	329.1		(7.4)		321.7

Income before income taxes	17.7		7.3		25.0
Income tax expense	3.2		1.5		4.7

Net income	14.5		5.8		20.3

Net income per share
Basic	0.35		0.13		0.48
Diluted	0.35		0.13		0.48

Weighted average number of shares and equivalent shares
Basic	41.9		—		41.9
Diluted	42.1		—		42.1

Statement of Comprehensive Income (Loss)
Net income	14.5		5.8		20.3
Other comprehensive income (loss), net of tax:
Change in net unrealized investment losses on fixed maturity securities	(270.7)		(63.4)		(334.1)
Change in net reserve remeasurements attributable to discount rates	—		181.5		181.5
Change in net funded status of benefit plans	—		—		—
Other comprehensive loss	(270.7)		118.1		(152.6)
Comprehensive income (loss)	$	(256.2)	$	123.9	$	(132.3)


Horace Mann Educators Corporation			39			First Quarter 2023 Form 10-Q

Note 11 - Prior Period Consolidated Financial Statements (continued)

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

($ in millions, except per share data)


	Three Months Ended	Effect of the Adoption of ASU 2018-12			Three Months Ended
				March 31, 2022			March 31, 2022
				As Reported			As Adjusted
Common stock, $0.001 par value
Ending balance		$	0.1		$	—	$	0.1

Additional paid-in capital
Ending balance		496.6			—		496.6

Retained earnings
Beginning balance		1,524.9			22.1		1,547.0
Net income		14.5			5.8		20.3
Effect of ASU 2018-12(1)		—			(0.8)		(0.8)
Dividends,per share; 2022, $0.32 per share		(13.5)			—		(13.5)
Ending balance		1,525.9			27.1		1,553.0

Accumulated other comprehensive income (loss), net of tax:
Beginning balance		280.5			(330.5)		(50.0)
Change in net unrealized investment losses on fixed maturity securities		(270.7)			(63.4)		(334.1)
Change in net reserve remeasurements attributable to discount rates		—			181.5		181.5
Change in net funded status of benefit plans		—			—		—
Ending balance		9.8			(212.4)		(202.6)

Treasury stock, at cost
Ending balance		(495.6)			—		(495.6)
Shareholders' equity at end of period		$	1,536.8		$	(185.3)	$	1,351.5

(1) See Note 1 to the Consolidated Financial Statements for information regarding ASU 2018-12.


Horace Mann Educators Corporation			2740			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Note 11 - Prior Period Consolidated Financial Statements (continued)

HORACE MANN EDUCATORS CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

($ in millions)


	Three Months Ended		Effect of the Adoption of ASU 2018-12		Three Months Ended
	March 31, 2022				March 31, 2022
	As Reported				As Adjusted
Cash flows - operating activities
Net income	$	14.5	$	5.8	$	20.3
Adjustments to reconcile net income to net cash provided by operating activities:
Net investment losses	15.5		—		15.5
Depreciation and intangible asset amortization	3.8		—		3.8
Share-based compensation expense	2.1		—		2.1
Loss from EMA investments, net of dividends or distributions	1.6		—		1.6

Changes in:
Insurance liabilities	450.5		(82.8)		367.7
Amounts due under reinsurance agreements	(357.7)		24.7		(333.0)
Income tax liabilities	3.4		51.1		54.5
Other operating assets and liabilities	(35.5)		(4.6)		(40.1)
Other, net	(2.5)		5.8		3.3
Net cash provided by operating activities	95.7		—		95.7

Cash flows - investing activities
Net cash used in investing activities	(217.7)		—		(217.7)

Cash flows - financing activities
Net cash provided by financing activities	37.4		—		37.4
Net decrease in cash	(84.6)		—		(84.6)
Cash at beginning of period	133.7		—		133.7
Cash at end of period	$	49.1	$	—	$	49.1

ITEM 2. I Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

~~($ in millions, except per share data)~~

Measures within this MD&A that are not based on accounting principles generally accepted in the United States of America (non-GAAP) are marked with an asterisk (*) the first time they are presented within this Part I - Item 2. An explanation of these measures is contained in the Glossary of Selected Terms included as Exhibit 99.1 to this Quarterly Report on Form 10-Q and are reconciled to the most directly comparable measures prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) in the Appendix to the Company's ~~Third~~First Quarter ~~2022~~2023 Investor Supplement.

Increases or decreases in this MD&A that are not meaningful are marked "N.M.".


Horace Mann Educators Corporation			41			First Quarter 2023 Form 10-Q

Forward-looking Information

Statements made in ~~the following discussion~~this Quarterly Report on Form 10-Q 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 known and unknown risks, uncertainties and other factors. Horace Mann Educators Corporation (referred to in ~~Part I - Items 2 - 4 and Part II of~~ this ~~report~~Quarterly Report on Form 10-Q as "we", "our", "us", the "Company", "Horace Mann" or "HMEC") is an insurance holding company. We are not under any obligation to (and expressly disclaim any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. It is important to note that our actual results could differ materially from those projected in forward-looking statements due to a number of risks and uncertainties inherent in our business. ~~See~~Also, see Part I - ~~Item~~Items 1 and 1A in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for additional information regarding risks and uncertainties.

This MD&A covers the following:

Introduction

The purpose of this MD&A is to provide an understanding of our consolidated results of operations and financial condition. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in Part I - Item 1 of this ~~report.~~Quarterly Report on Form 10-Q.

HMEC is an insurance holding company focused on helping America’s educators and others who serve the community achieve lifelong financial success. Through our subsidiaries, we market and underwrite individual and group insurance and financial solutions tailored to the needs of the educational community including:


~~Horace Mann Educators Corporation~~			28			~~Quarterly Report on Form 10-Q~~

•personal lines of property and casualty insurance, primarily auto and property coverages

•retirement products, primarily tax-qualified fixed and variable annuities

•life insurance, primarily traditional term and whole life insurance products

•~~voluntary~~worksite direct insurance products, including cancer, heart, hospital, supplemental disability and accident

•employer-sponsored insurance products, primarily long-term disability and short-term disability

We market our products primarily to K-12 teachers, administrators and other employees of public schools and their ~~families.~~families, whether they engage with Horace Mann directly or through their district/employer.

Effective January 1, 2022, we acquired all the equity interests in Madison National Life Insurance Company, Inc., an insurance company organized under the laws of the State of Wisconsin (Madison National), for $172.3 million. The Seller has a potential earn-out of up to $12.5 million payable in cash, if specified financial targets are achieved by the end of 2023. As a result of the acquisition, Madison National became a wholly owned subsidiary of HMEC.

~~Beginning in 2022, we are conducting~~We conduct and ~~managing~~manage our business in four reporting segments. The three ~~operating segments:~~reporting segments representing our major lines of business, are: (1) Property & Casualty (primarily personal lines of auto and property insurance products), (2) Life & Retirement ~~(composed of individual~~(primarily tax-qualified fixed and variable annuities as well as life insurance ~~products and retirement~~


Horace Mann Educators Corporation			42			First Quarter 2023 Form 10-Q

products), and (3) Supplemental & Group Benefits ~~(composed of voluntary~~(primarily cancer, heart, hospital, supplemental disability, accident, short-term and ~~employer-sponsored insurance products)~~long-term group disability, and group term life coverages). ~~The Supplemental & Group Benefits segment includes the results of Madison National.~~ We do not allocate the impact of corporate-level transactions to ~~the operating~~these reporting segments, consistent with the basis for management's evaluation of the results of those segments, but classify those items in ~~a separate~~the fourth reporting segment, Corporate & Other. In addition to ongoing transactions such as corporate debt service, net investment gains (losses) and certain public company expenses, such items also have included corporate debt retirement costs, when applicable. See Part I - Item 1, Note 97 of the Consolidated Financial Statements in this ~~report~~Quarterly Report on Form 10-Q for more information.

Effective January 1, 2023, we adopted ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (also known as LDTI). We adopted LDTI using the modified retrospective approach where permitted with changes applied as of January 1, 2021. As a result of adoption, our prior period results of operations have been restated in this MD&A. See Part I - Item 1, Note 1 of the Consolidated Financial Statements in this Quarterly Report on Form 10-Q for more information regarding our adoption of LDTI.

Consolidated Financial Highlights

~~(All comparisons vs. same periods in 2021, unless noted otherwise)~~


($ in millions)	($ in millions)	Three Months Ended September 30,				2022-2021		Nine Months Ended September 30,						2022-2021		($ in millions)	Three Months Ended March 31,				2023-2022
		2022		2021		Change %		2022			2021			Change %				2023			2022			% Change
Total revenues	Total revenues	$	343.0	$	329.6	4.1	%	$	1,036.1		$	998.7		3.7	%	Total revenues		$	353.9		$	346.7		2.1	%
Net income	Net income	13.9		16.3		-14.7	%	15.9			102.3			-84.5	%	Net income		6.6			20.3			-67.5	%
Per diluted share:	Per diluted share:															Per diluted share:
Net income	Net income	0.33		0.39		-15.4	%	0.38			2.43			-84.4	%	Net income		0.16			0.48			-66.7	%
Net investment losses, after tax	Net investment losses, after tax	(0.24)		(0.11)		N.M.		(0.82)			(0.19)			N.M.		Net investment losses, after tax		(0.07)			(0.29)			N.M.
Book value per share	Book value per share							$	26.32		$	43.30		-39.2	%	Book value per share		$	27.87		$	32.66		-14.7	%
Net income return on equity - last twelve months	Net income return on equity - last twelve months							3.8		%	8.5		%			Net income return on equity - last twelve months		0.5		%	9.8		%
Net income return on equity - annualized	Net income return on equity - annualized							1.5		%	7.6		%			Net income return on equity - annualized		2.4		%	5.7		%

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, net income decreased ~~$2.4~~$13.7 million, ~~and $86.4 million, respectively,~~ primarily due to higher catastrophe losses and elevated underlying auto losses in the ~~impact of higher inflation~~Property & Casualty segment partially offset by favorable benefits experience in the Supplemental & Group Benefits segment and ~~other factors driving auto loss severity, equity market declines as well as higher~~lower net investment ~~losses mainly from changes in fair values of equity securities and investment impairments.~~losses.


Horace Mann Educators Corporation			2943			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Consolidated Results of Operations

~~(All comparisons vs. same periods in 2021, unless noted otherwise)~~


($ in millions)	($ in millions)	Three Months Ended September 30,				2022-2021		Nine Months Ended September 30,				2022-2021		($ in millions)	Three Months Ended March 31,			2023-2022
		2022		2021		Change %		2022		2021		Change %				2023		2022		% Change
Net premiums and contract charges earned	Net premiums and contract charges earned	$	257.8	$	225.4	14.4	%	$	769.5	$	678.8	13.4	%	Net premiums and contract charges earned		$	255.9	$	255.8	—	%
Net investment income	Net investment income	97.6		103.7		-5.9	%	300.7		308.4		-2.5	%	Net investment income		100.4		97.9		2.6	%
Net investment losses	Net investment losses	(12.8)		(6.5)		N.M.		(43.8)		(10.6)		N.M.		Net investment losses		(3.9)		(15.5)		N.M.
Other income	Other income	0.4		7.0		-94.3	%	9.7		22.1		-56.1	%	Other income		1.5		8.5		-82.4	%
Total revenues	Total revenues	343.0		329.6		4.1	%	1,036.1		998.7		3.7	%	Total revenues		353.9		346.7		2.1	%

Benefits, claims and settlement expenses	Benefits, claims and settlement expenses	173.6		164.8		5.3	%	558.2		446.2		25.1	%	Benefits, claims and settlement expenses		183.2		175.2		4.6	%
Interest credited	Interest credited	45.9		51.9		-11.6	%	129.1		153.7		-16.0	%	Interest credited		48.7		39.7		22.7	%
Operating expenses	Operating expenses	75.6		64.3		17.6	%	229.7		182.8		25.7	%	Operating expenses		79.8		76.7		4.0	%
DAC unlocking and amortization expense		23.3		22.9		1.7	%	76.7		70.5		8.8	%
DAC amortization expense														DAC amortization expense		23.7		22.0		7.7	%
Intangible asset amortization expense	Intangible asset amortization expense	4.2		3.3		27.3	%	12.6		9.8		28.6	%	Intangible asset amortization expense		3.7		4.2		-11.9	%
Interest expense	Interest expense	5.3		3.4		55.9	%	13.5		10.4		29.8	%	Interest expense		6.7		3.9		71.8	%
Total benefits, losses and expenses	Total benefits, losses and expenses	327.9		310.6		5.6	%	1,019.8		873.4		16.8	%	Total benefits, losses and expenses		345.8		321.7		7.5	%

Income before income taxes	Income before income taxes	15.1		19.0		-20.5	%	16.3		125.3		-87.0	%	Income before income taxes		8.1		25.0		-67.6	%
Income tax expense	Income tax expense	1.2		2.7		-55.6	%	0.4		23.0		-98.3	%	Income tax expense		1.5		4.7		-68.1	%
Net income	Net income	$	13.9	$	16.3	-14.7	%	$	15.9	$	102.3	-84.5	%	Net income		$	6.6	$	20.3	-67.5	%

Net Premiums and Contract Charges Earned

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, net premiums and contract charges earned ~~increased $32.4 million and $90.7 million, respectively, primarily due~~were comparable to the ~~inclusion of Madison National partially offset by lower net premiums earned by Property & Casualty and lower contract charges earned by Life & Retirement.~~prior year period.

Net Investment Income

~~Total~~For the three months ended March 31, 2023, total net investment income ~~decreased $6.1~~increased $2.5 million, ~~and $7.7 million for the three and nine months ended September 30, 2022, respectively. The decreases were~~ primarily ~~attributable~~due to higher returns ~~below our historical average in our portfolio of~~on floating rate fixed maturity securities including commercial mortgage loan funds partially offset by negative returns on limited partnership ~~interests. Investment yields have risen for recent investments due to the rising interest rate environment.~~interests in private equity funds. The annualized investment yield on the portfolio excluding limited partnership interests* was as follows:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2022	2021	2022	2021			2023	2022
Investment yield, excluding limited partnership interests, pretax - annualized*	Investment yield, excluding limited partnership interests, pretax - annualized*	4.3%	4.3%	4.3%	4.3%	Investment yield, excluding limited partnership interests, pretax - annualized*		4.7%	4.3%
Investment yield, excluding limited partnership interests, after tax - annualized*	Investment yield, excluding limited partnership interests, after tax - annualized*	3.4%	3.5%	3.4%	3.4%	Investment yield, excluding limited partnership interests, after tax - annualized*		3.7%	3.4%

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, we continued to identify and purchase investments with attractive risk-adjusted yields relative to market conditions without venturing into asset classes or individual securities that would be inconsistent with our overall investment guidelines for the core portfolio. We continue to fund at levels that allow us to maintain our targeted allocation to commercial mortgage loan funds and limited partnership interests ~~in line with our intent~~while maintaining balance to ~~increase our allocation to these portfolios to increase yields while balancing~~ principal protection and risk.

Net Investment Losses

For the three months ended March 31, 2023, net investment losses decreased $11.6 million, primarily due to a reduction in losses from changes in fair values of equity securities and impairments compared to the prior year period. The breakdown of net investment gains (losses) by transaction type were as follows:


Horace Mann Educators Corporation			3044			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

~~Net Investment Losses~~

For the three and nine months ended September 30, 2022, net investment losses increased $6.3 million and $33.2 million, respectively, mainly from changes in fair values of equity securities and impairments. The breakdown of net investment gains (losses) by transaction type were as follows:


($ in millions)	($ in millions)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in millions)	Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Credit loss and intent-to-sell impairments	Credit loss and intent-to-sell impairments	$	(6.8)	$	(6.6)	$	(10.4)	$	(9.8)	Credit loss and intent-to-sell impairments		$	—	$	(1.8)
Sales and other, net	Sales and other, net	(3.9)		2.7		(3.9)		2.2		Sales and other, net		(2.4)		1.1
Change in fair value - equity securities	Change in fair value - equity securities	(4.4)		(1.1)		(34.1)		0.4		Change in fair value - equity securities		(1.0)		(17.1)
Change in fair value and losses realized on settlements - derivatives	Change in fair value and losses realized on settlements - derivatives	2.3		(1.5)		4.6		(3.4)		Change in fair value and losses realized on settlements - derivatives		(0.5)		2.3
Net investment losses	Net investment losses	$	(12.8)	$	(6.5)	$	(43.8)	$	(10.6)	Net investment losses		$	(3.9)	$	(15.5)

From time to time, we may sell fixed maturity securities subsequent to the reporting date that were considered temporarily impaired at such reporting date. Such sales are due to issuer-specific events occurring subsequent to the reporting date that result in a change in our intent to sell a fixed maturity security.

Other Income

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, other income decreased ~~$6.6~~$7.0 million ~~and $12.4 million, respectively, primarily due to~~in the ~~inclusion of Madison National.~~employer-sponsored business.

Benefits, Claims and Settlement Expenses

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, benefits, claims and settlement expenses increased ~~$8.8~~$8.0 million, ~~and $112.0 million, respectively,~~ primarily due to ~~an increase in~~higher catastrophe losses and elevated underlying auto losses ~~and~~in the ~~inclusion of Madison National,~~Property & Casualty segment partially ~~reduced~~offset by ~~an offsetting change~~favorable benefits experience in ~~interest credited of $10.3 million and $31.0 million, respectively.~~the Supplemental & Group Benefits segment.

Interest Credited

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, interest credited ~~decreased $6.0~~increased $9.0 million, ~~and $24.6 million, respectively,~~ driven primarily by ~~an offsetting change in benefits, claims and settlement expenses~~higher interest rates on advances received from the Federal Home Loan Bank of ~~$10.3 million and $31.0 million, respectively.~~Chicago (FHLB). Under the deposit method of accounting, the interest credited on the reinsured annuity block continues to be reported. The average deferred annuity credited rate, excluding the reinsured annuity block, was 2.6% and 2.4% as of ~~September 30,~~March 31, 2023 and March 31, 2022, ~~and September 30, 2021,~~ respectively.

Operating Expenses

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, operating expenses increased ~~$11.3~~$3.1 million, ~~and $46.9 million, respectively,~~ primarily due to ~~the inclusion of Madison National.~~inflation.

Deferred Policy Acquisition Costs (DAC) ~~Unlocking and~~ Amortization Expense

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, DAC ~~unlocking and~~ amortization expense increased ~~$0.4~~$1.7 million, ~~and $6.2 million, respectively,~~ due to ~~equity market declines leading to unfavorable~~a write-off of DAC ~~unlocking~~ in the Life & Retirement segment ~~partially offset by reduced amortization expense~~related to a decrease in ~~the Property & Casualty segment.~~annuity premium persistency.

Intangible Asset Amortization Expense

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, intangible asset amortization expense ~~increased $0.9 million and $2.8 million, respectively, due to the acquisition of Madison National.~~decreased $0.5 million.

Interest Expense

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, interest expense increased ~~$1.9~~$2.8 million, ~~and $3.1 million, respectively,~~ due to an increase in floating interest rates on the ~~Bank~~Revolving Credit Facility.

Income Tax Expense

The effective income tax rate on our pretax income, including net investment losses, was 18.5% and 17.5% for the three months ended March 31, 2023 and 2022, respectively. Income from investments in tax-advantaged securities reduced the effective income tax rates by 5.3 and 6.3 percentage points for the three months ended March 31, 2023 and 2022, respectively.

In August 2022, the Inflation Reduction Act of 2022 (IRA) was passed by the U.S. Congress and signed into law by the Executive Branch. The IRA includes a new Federal alternative minimum tax (AMT), effective in 2023, that is based on the adjusted financial statement income (AFSI) set forth on the applicable financial statement (AFS) of an applicable corporation. A corporation is an applicable corporation if its rolling average pre-tax AFSI over three prior years (starting with 2020-2022) is greater than $1.0 billion. For a group of related entities, the $1.0 billion threshold is determined on a group basis, and the group's AFSI is generally treated as the AFSI for all


Horace Mann Educators Corporation			3145			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

~~Income Tax Expense~~separate taxpayers in the group. Except under limited circumstances, once a corporation is an applicable corporation, it is an applicable corporation in all future years.

An applicable corporation is not automatically subject to an AMT liability. The ~~effective~~corporation's tentative AMT liability is equal to 15.0% of its adjusted AFSI, and AMT is payable to the extent the tentative AMT liability exceeds regular corporate income tax. However, any AMT paid would be indefinitely available as a credit carryover that could reduce future regular tax ~~rate, including net investment losses, was 2.5%~~in excess of AMT.

HMEC and ~~18.4% for~~its controlled group of corporations have determined that it likely will not be an applicable corporation in 2023. In making such determination, the ~~nine months ended September 30, 2022~~group has made certain interpretations of, and ~~2021, respectively. Income~~assumptions regarding, the AMT provisions of the IRA. The U.S. Treasury Department is expected to issue guidance throughout 2023 that may differ from ~~investments in tax-advantaged securities reduced~~ the ~~effective income tax rates by 22.8~~group's interpretations and ~~3.3 percentage points for~~assumptions and that could alter the ~~nine months ended September 30, 2022 and 2021, respectively.~~group's determination.

We record liabilities for uncertain tax filing positions where it is more likely than not that the position will not be sustainable upon audit by taxing authorities. These liabilities are reevaluated routinely and are adjusted appropriately based on changes in facts or law. We have no unrecorded liabilities from uncertain tax filing positions.

~~At September 30, 2022,~~As of March 31, 2023, our federal income tax returns for years prior to ~~2017~~2019 are no longer subject to examination by the Internal Revenue Service. We do not anticipate any assessments for tax years that remain subject to examination to have a material effect on our financial position or results of operations.

Outlook for ~~2022~~2023

The following discussion provides outlook information for our results of operations and capital position. ~~Horace Mann’s outlook for 2022 reflects accretion from newly acquired Madison National as well as estimates of the initial contributions of strategic growth initiatives.~~

At the time of issuance of this Quarterly Report on Form 10-Q, we estimate that 2023 full year net income will be within a range of $2.00 to $2.30 per diluted share, generating a core return on equity* near 6%. This range is unchanged from our Outlook for 2023 we discussed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Property & Casualty Segment

In 2023, net income for Property & Casualty is now ~~estimate~~anticipated to be between breakeven and $5 million, reflecting the negative limited partnership portfolio returns in the first quarter. The primary factors in our ~~2022 core earnings will~~full-year outlook include:

•Catastrophe loss assumption of approximately 10 points on the combined ratio, in line with the 10-year average and consistent with historical frequencies and current severities applied to modeled exposures

•Property combined ratio near 100%, anticipating rate actions of 12% to 15% during 2023, reflecting inflation and current loss trends, accompanied by ‘inflation guard’ increases

•Auto combined ratio of 106% to 107%, anticipating auto rates to increase by 18% to 20% during 2023, supplemented by non-rate underwriting actions

Our longer-term Property & Casualty combined ratio target remains at 95% to 96%.

Life & Retirement Segment

In 2023, net income for Life & Retirement is anticipated to be in the range of ~~$1.70~~$67 million to ~~$2.00 per diluted share.~~$70 million, consistent with prior guidance. This guidance includes the adoption of LDTI effective January 1, 2023. The ~~decrease from~~spread on the fixed annuity business is expected to be in the range ~~discussed~~of 220 to 230 basis points. Mortality is anticipated to remain within actuarial expectations, increasing slightly from 2022.

Supplemental & Group Benefits Segment

In 2023, net income for Supplemental & Group Benefits is now anticipated to be in the range of $45 million to $49 million due to strong first quarter results. The primary factors in our ~~Outlook~~outlook include:


Horace Mann Educators Corporation			46			First Quarter 2023 Form 10-Q

•Claims utilization for ~~2022~~supplemental and disability products returning to near pre-pandemic levels. The longer-term target for the segment benefit ratio remains 43%.

•Higher expenses reflecting investments in the ~~Quarterly Report on Form 10-Q~~infrastructure for ~~the period ended June 30, 2022, reflects our nine-month results~~this business as well as ~~expectations for continued impacts~~a higher allocation of ~~inflation~~corporate expenses to reflect the segment’s utilization of shared staff, distribution, and ~~effects~~other resources.

Corporate & Other Segment

Corporate interest expense is expected to be in the range of ~~equity market declines.~~$26 million to $27 million in 2023 due to rising interest rates.

~~Total~~Investments

For 2023, we now expect total net investment income to be in a range of $429 million to $439 million, including approximately $104 million of accreted investment income on the deposit asset on reinsurance in Retirement. The expectation of full-year net investment income from the managed portfolio ~~for 2022 is now expected~~in a range of $325 million to ~~be between $295~~$335 million ~~and $305 million. Commercial~~reflects stronger returns from our commercial mortgage loan ~~fund balances are expected to be lower than originally anticipated due to slower capital call activity and limited~~portfolio as well as the benefits of the rising interest rate environment over the past 12 months. Limited partnership ~~fund~~ returns are ~~expected~~now estimated to be below ~~historical averages.~~

~~Results for each segment reflects~~their 10-year average of 8.5%, reflecting the ~~following:~~

first quarter lower-than-expected limited partnership portfolio returns in the Property & Casualty ~~Segment~~

Property & Casualty segment 2022 core earnings are now expected to be a loss of $13 million to $19 million, reflecting nine-month results, normal seasonality in auto loss patterns and the continued impacts of inflation on auto loss severity. Catastrophe losses are expected to be in line with the company’s 10-year average of approximately $5 million for this period.

We expect property rate changes and inflation adjustments will rise to the mid-teens in 2023. Rate increases will reflect changes in the level of weather activity. Based on the company’s current expectations for frequency and severity, we expect auto rate increases will also rise to the mid-teens in 2023, supported by non-rate underwriting actions.

~~Life & Retirement Segment~~

Life & Retirement segment 2022 core earnings are still expected to be $56 million to $59 million. The full-year net investment spread is expected to be below the 2021 level of 290 basis points due to the revised outlook for net investment income.

~~Supplemental & Group Benefits Segment~~

Supplemental & Group Benefits segment 2022 core earnings are now expected to be $55 million to $58 million, reflecting nine-month results. We continue to expect full-year 2022 benefit ratios will be in line with our longer-term targets of approximately 35% for voluntary products and approximately 50% for employer-sponsored products. Amortization of intangible assets is expected to be approximately $13 million, or 30 cents per share (after tax).segment.

As described in Application of Critical Accounting Estimates, certain of our significant accounting measurements require the use of estimates and assumptions. As additional information becomes available, adjustments may be required.


~~Horace Mann Educators Corporation~~			32			~~Quarterly Report on Form 10-Q~~

Those adjustments are charged or credited to net income for the period in which the adjustments are made and may impact actual results compared to our estimates above. Additionally, see ~~Forward-Looking~~forward-looking information in this Quarterly Report on Form 10-Q as well as Part I - Items 1 and 1A in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 concerning other important factors that could impact actual results. We believe that a projection of net income is not appropriate on a forward-looking basis because it is not possible to provide a valid forecast of net investment gains (losses), which can vary substantially from one period to another and may have a significant impact on net income.

Application of Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions based on information available at the time the consolidated financial statements are prepared. These estimates and assumptions affect the reported amounts of our consolidated assets, liabilities, shareholders' equity and net income. Certain accounting estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that subsequent events and available information may differ markedly from management's judgments at the time the consolidated financial statements were prepared. We have discussed with the Audit Committee the quality, not just the acceptability, of our accounting principles as applied in our financial reporting. The discussions generally included such matters as the consistency of our accounting policies and their application, and the clarity and completeness of our consolidated financial statements, which include related disclosures.

Information regarding our accounting policies pertaining to these topics is located in the Notes to the Consolidated Financial Statements contained in Part II - Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. In addition, discussion of accounting policies, including certain sensitivity information, was presented in Management's Discussion and Analysis of Financial Condition and Results of Operations --- Application of Critical Accounting Estimates in that Form 10-K within which we ~~have~~ identified the following accounting estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:

•Valuation of hard-to-value fixed maturity securities

•Evaluation of credit loss impairments for maturity securities

•Evaluation of goodwill and intangible assets for impairment

•Valuation of annuity and life deferred policy acquisition costs


Horace Mann Educators Corporation			47			First Quarter 2023 Form 10-Q

•Valuation of liabilities for property and casualty unpaid claims and claim ~~expenses~~expense reserves

•Valuation of liabilities for group benefits unpaid claims and claim expense reserves

•Valuation of certain investment ~~contract~~contracts and policy reserves

•Valuation of long-duration contracts under the new accounting guidance in ASU 2018-12

Except as noted below, compared to December 31, 2022, as of ~~September 30, 2022,~~March 31, 2023, there were no material changes to accounting policies for areas most subject to significant management judgments identified above.

~~Valuation of Assets Acquired and Liabilities Assumed under Purchase Accounting and Purchase Price Allocation~~

InEffective January 1, 2023, we adopted the new accounting guidance in ASU 2018-12 which changed our accounting policies for the valuation of annuity and life deferred policy acquisition costs (DAC) and the valuation of ~~Madison National Life Insurance Company, Inc. (Madison National), assets acquired and liabilities assumed are recognized based~~certain policy reserves (which is now referred to as the liability for future policy benefits or "LFPB"). DAC is now being amortized on ~~estimated fair values as~~a constant-level basis over the expected term of the date of acquisition. The excess of the purchase price when compared to the fair value of the net tangible and identifiable intangible assets acquired is recognized as goodwill. A significant amount of judgment is involved in estimating the individual fair values of tangible assets, intangible assets, and other assets and liabilities. We used all available information to make these fair value determinations and engaged third-party consultants for valuation assistance. The fair value of assets and liabilities as of the acquisition date were estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an appropriate discount rate; the cost approach, which required estimates of replacement costs and depreciation and obsolescence estimates; and the market approach. The estimates used in determining fair values were based onrelated contracts. Cash flow assumptions ~~believed to be reasonable but which are inherently uncertain. Accordingly, actual results may differ materially from the projected results~~ used to ~~determine fair value.~~

The value of business acquired intangible asset (VOBA) represents the present value of the expected underwriting profit within policies that were in force on the date of acquisition. The value of customer


~~Horace Mann Educators Corporation~~			33			~~Quarterly Report on Form 10-Q~~

~~relationships acquired intangible asset was valued based on the actuarial appraisal method net of VOBA. This represents expected future premiums arising from ongoing relationships~~measure LFPB must be reviewed at least annually, and includes assumed growth in premium in the first projection year as well as all premiums in projection years two through ten. The state licenses intangible asset represents the regulatory licenses held by Madison National that were valued using the cost approach. The valuation of Madison National's policy reserves represents the present value of expected future benefitsif there is a change, must be updated and ~~expenses associated with the policies, valued using the actuarial appraisal approach.~~

The valuation of the assets acquired and liabilities assumed of Madison National noted above required management to make multiple judgments and assumptions to project future cash flows. Assumptions included future policy and contract charges, premiums, morbidity and mortality, and persistency by product, as well as expenses, investment returns, growth rates and other factors. One of the most significant inputs in these calculations is the discount rate ~~used to arrive at the present value~~assumption must be updated quarterly. The new accounting policies are described in more detail in Part I - Item 1, Note 1 of the ~~net cash flows. Actual experience~~Consolidated Financial Statements in this Quarterly Report on ~~the purchased business may vary from these projections and the recovery of the net assets recorded is dependent upon the future profitability of the related business.~~Form 10-Q.

Results of Operations by Segment

Consolidated financial results primarily reflect the results of ~~three operating segments (Property~~the Property & Casualty, Life & Retirement, and Supplemental & Group ~~Benefits)~~Benefits reporting segments as noted in the Introduction and Outlook for ~~2022~~2023 sections of this MD&A, as well as the Corporate & Other reporting segment. These segments are defined based on financial information management uses to evaluate performance and to determine the allocation of resources.

The determination of segment ~~data~~information is described in more detail in Part I - Item 1, Note 97 of the Consolidated Financial Statements in this ~~report.~~Quarterly Report on Form 10-Q. The following sections provide analysis and discussion of the results of operations for each of the reporting segments as well as investment results.

Property & Casualty

~~(All comparisons vs. same periods in 2021, unless noted otherwise)~~

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, net loss reflected the following factors:

•~~Increase in the~~Higher catastrophe losses

•Elevated underlying auto ~~loss ratio due to impact of inflation and other loss cost factors, increased accident severity and increased utilization of medical treatments~~losses

•Decrease in net investment income due to ~~lower than historical~~negative returns on limited partnership interests ~~in the current year periods versus outsized returns on limited partnership interests in the prior year periods~~

•~~Unfavorable prior years' reserve development in the current year periods versus favorable prior years' reserve development in the prior year periods~~


Horace Mann Educators Corporation			3448			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

The following table provides certain financial information for Property & Casualty for the periods indicated.


($ in millions, unless otherwise indicated)	($ in millions, unless otherwise indicated)	Three Months Ended September 30,						2022-2021		Nine Months Ended September 30,						2022-2021		($ in millions, unless otherwise indicated)	Three Months Ended March 31,				2023-2022
		2022			2021			Change		2022			2021			Change				2023			2022			% Change
Financial Data:	Financial Data:																	Financial Data:
Net premiums written*:	Net premiums written*:																	Net premiums written*:
Auto	Auto	$	102.5		$	103.1		-0.6	%	$	296.0		$	300.1		-1.4	%	Auto		$	101.2		$	94.5		7.1	%
Property and other	Property and other	63.9			60.7			5.3	%	168.0			161.1			4.3	%	Property and other		47.9			45.1			6.2	%
Total net premiums written	Total net premiums written	166.4			163.8			1.6	%	464.0			461.2			0.6	%	Total net premiums written		149.1			139.6			6.8	%
Change in unearned net premiums	Change in unearned net premiums	(14.0)			(10.5)			33.3	%	(11.5)			2.9			N.M		Change in unearned net premiums		3.3			10.6			-68.9	%
Total net premiums earned	Total net premiums earned	152.4			153.3			-0.6	%	452.5			464.1			-2.5	%	Total net premiums earned		152.4			150.2			1.5	%
Incurred claims and claims expenses:	Incurred claims and claims expenses:																	Incurred claims and claims expenses:
Claims occurring in the current year	Claims occurring in the current year	120.3			132.5			-9.2	%	372.8			345.4			7.9	%	Claims occurring in the current year		128.8			108.3			18.9	%
Prior years' reserve development(1)	Prior years' reserve development(1)	2.0			(3.0)			N.M.		8.0			(7.2)			N.M.		Prior years' reserve development(1)		—			—			—	%
Total claims and claim expenses incurred	Total claims and claim expenses incurred	122.3			129.5			-5.6	%	380.8			338.2			12.6	%	Total claims and claim expenses incurred		128.8			108.3			18.9	%
Operating expenses, including DAC amortization	Operating expenses, including DAC amortization	41.6			42.1			-1.2	%	121.1			121.5			-0.3	%	Operating expenses, including DAC amortization		42.9			39.4			8.9	%
Underwriting gain (loss)	Underwriting gain (loss)	(11.5)			(18.3)			37.2	%	(49.4)			4.4			N.M.		Underwriting gain (loss)		(19.3)			2.5			N.M.
Net investment income	Net investment income	8.0			11.3			-29.2	%	22.9			43.8			-47.7	%	Net investment income		4.0			7.2			-44.4	%
Income (loss) before income taxes	Income (loss) before income taxes	(2.8)			(6.3)			55.6	%	(23.8)			52.1			-145.7	%	Income (loss) before income taxes		(14.6)			10.5			N.M
Net income (loss)	Net income (loss)	(2.5)			(4.7)			46.8	%	(19.4)			42.5			-145.6	%	Net income (loss)		(11.6)			8.5			N.M
Core earnings (loss)*	Core earnings (loss)*	(2.5)			(4.7)			46.8	%	(19.4)			42.5			-145.6	%	Core earnings (loss)*		(11.6)			8.5			N.M

Operating Statistics:	Operating Statistics:																	Operating Statistics:
Auto	Auto																	Auto
Loss and loss adjustment expense ratio	Loss and loss adjustment expense ratio	83.1		%	71.5		%	11.6	pts	84.1		%	66.0		%	18.1	pts	Loss and loss adjustment expense ratio		82.5		%	76.0		%	6.5	pts
Expense ratio	Expense ratio	27.7		%	27.7		%	—	pts	26.5		%	26.1		%	0.4	pts	Expense ratio		28.4		%	25.8		%	2.6	pts
Combined ratio:	Combined ratio:	110.8		%	99.2		%	11.6	pts	110.6		%	92.1		%	18.5	pts	Combined ratio:		110.9		%	101.8		%	9.1	pts
Prior years' reserve development(1)	Prior years' reserve development(1)	2.0		%	-2.0		%	4.0	pts	4.8		%	-1.6		%	6.4	pts	Prior years' reserve development(1)		—		%	—		%	—	pts
Catastrophe losses	Catastrophe losses	2.7		%	2.9		%	-0.2	pts	2.3		%	1.9		%	0.4	pts	Catastrophe losses		1.8		%	0.5		%	1.3	pts
Underlying combined ratio*	Underlying combined ratio*	106.1		%	98.3		%	7.8	pts	103.5		%	91.8		%	11.7	pts	Underlying combined ratio*		109.1		%	101.3		%	7.8	pts
Property	Property																	Property
Loss and loss adjustment expense ratio	Loss and loss adjustment expense ratio	75.1		%	108.9		%	-33.8	pts	84.2		%	86.0		%	-1.8	pts	Loss and loss adjustment expense ratio		88.1		%	65.0		%	23.1	pts
Expense ratio	Expense ratio	26.8		%	27.2		%	-0.4	pts	27.4		%	26.4		%	1.0	pts	Expense ratio		27.7		%	27.3		%	0.4	pts
Combined ratio:	Combined ratio:	101.9		%	136.1		%	-34.2	pts	111.6		%	112.4		%	-0.8	pts	Combined ratio:		115.8		%	92.3		%	23.5	pts
Prior years' reserve development(1)	Prior years' reserve development(1)	—		%	-1.9		%	1.9	pts	-3.7		%	-1.4		%	-2.3	pts	Prior years' reserve development(1)		—		%	—		%	—	pts
Catastrophe losses	Catastrophe losses	21.8		%	67.3		%	-45.5	pts	37.8		%	38.4		%	-0.6	pts	Catastrophe losses		37.9		%	12.7		%	25.2	pts
Underlying combined ratio*	Underlying combined ratio*	80.1		%	70.7		%	9.4	pts	77.5		%	75.4		%	2.1	pts	Underlying combined ratio*		77.9		%	79.6		%	-1.7	pts

Risks in force (in thousands)	Risks in force (in thousands)																	Risks in force (in thousands)
Auto(2)	Auto(2)									368			381			-3.4	%	Auto(2)		365			372			-1.9	%
Property	Property									172			178			-3.4	%	Property		170			175			-2.9	%
Total	Total									540			559			-3.4	%	Total		535			547			-2.2	%

(1) (Favorable) unfavorable.

(2) Includes assumed risks in force of 4.

On a reported basis, the ~~18.5~~9.1 point increase in the auto combined ratio for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was mainly attributable to a ~~11.3~~5.2 point increase in the auto underlying loss ratio* ~~and a 6.4 point increase~~. As expected, auto frequency outpaced levels experienced in the prior ~~years' reserve development. Although frequency continues to trend back up toward pre-~~


~~Horace Mann Educators Corporation~~			35			~~Quarterly Report on Form 10-Q~~

~~pandemic levels as miles driven continues to increase, higher severity is the primary driver of the increase in auto loss costs. This reflects the~~year period. The challenges being faced by the entire industry, including the unprecedented level of inflation that is driving higher replacement costs; the trend toward


Horace Mann Educators Corporation			49			First Quarter 2023 Form 10-Q

more severe accidents; and increased ~~utilization~~usage and costs of medical ~~treatments.~~services, also continue. We continue to implement rate and other underwriting changes that address these trends. Unfavorable prior years' auto reserve development of $14.0 million was reported for the nine months ended September 30, 2022 primarily due to pandemic-related systemic delays that are affecting the settlement of claims from recent accident years that remain open. These open claims are impacted by the higher severities currently being experienced.

The reported property combined ratio and loss ratio decreased 0.8 points and 1.8 points, respectively, for the nine months ended September 30, 2022. Favorable prior years' reserve development of $6.0 million benefited the reported property combined ratio by 2.3increased 23.5 points for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023, driven by higher catastrophe losses. The underlying loss ratio improved 2.1 points for the three months ended March 31, 2023 due to lower fire losses.

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, total Property & Casualty net premiums written* increased ~~$2.6~~$9.5 million ~~and $2.8 million, respectively,~~ as rate actions and inflation adjustments to coverage values for property more that offset declines in risks in force. The benefit of stronger retention is being offset by new business volumes that still remain below historical levels due to the lingering effect of the pandemic on sales*.

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, auto net premiums written* ~~decreased $0.6~~increased $6.7 million, ~~and $4.1 million, respectively,~~ primarily due to rate actions that began in the ~~continuing decline in auto risks in force partially offset by stabilization~~second half of ~~pandemic-related mileage changes. Though~~2022. For the three months ended March 31, 2023, average net premium written and average net premium earned ~~were flat for the nine months ended September 30, 2022, average net premium written~~increased 8.1% and 4.4%, respectively. We anticipate auto rates to increase by 18% to 20% in ~~the third quarter of 2022 increased sequentially~~2023 supplemented by ~~4.4% from 1.6% in the second quarter of 2022.~~non-rate underwriting actions. The number of educator risks has been over 80% relative to overall auto risks in force over the past two years.

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, property and other net premiums written* increased ~~$3.2~~$2.8 million ~~and $6.9 million, respectively,~~ due to increases in average net premium written and average net premium earned which increased ~~7.9%~~9.8% and ~~4.9%~~8.7% for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, respectively, as inflation adjustments to coverage values continue to take effect. With inflationary pressure continuing, ~~adjustments~~we anticipate property rates to ~~coverage values and rates are expected~~increase by 12% to ~~continue to play a role~~15% in ~~the coming quarters.~~2023. The number of educator risks has been atnear or above 80% relative to overall property risks in force over the past two years.

We continue to evaluate and implement actions to further mitigate our ~~exposure in catastrophe-prone areas of the country.~~exposure. Such actions could include, but are not limited to, non-renewal of property ~~policies,~~risks, restricted agent geographic placement, limitations on agent new business sales, further tightening of underwriting standards and increased utilization of third-party vendor products.


Horace Mann Educators Corporation			3650			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Life & Retirement

~~(All comparisons vs. same periods in 2021, unless noted otherwise)~~

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, net income reflected the following factors:

•~~A decline of 104 bps in the~~Higher net ~~interest spread on fixed annuities for the three months ended September 30, 2022~~investment income primarily due to ~~lower net investment income~~returns on floating rate fixed maturity securities including commercial mortgage loan funds

•~~Substantial volatility in financial markets leading~~Higher interest credited reflecting interest rates on FHLB funding agreements rising more rapidly than net investment income due to ~~unfavorable DAC unlocking and lower charges and fees earned on variable annuities and asset-based accounts~~timing of interest rate resets

•~~While higher for the current quarter,~~Lower mortality costs in Life results ~~benefited from lower mortality costs for the nine months ended September 30, 2022~~partially offset unfavorable market risk benefit adjustment in Retirement

•Higher DAC amortization due to a write-off related to a decline in annuity premium persistency


Horace Mann Educators Corporation			3751			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

The following table provides certain information for Life & Retirement for the periods indicated.


($ in millions)	($ in millions)	Three Months Ended September 30,				2022-2021		Nine Months Ended September 30,						2022-2021		($ in millions)	Three Months Ended March 31,				2023-2022
		2022		2021		Change		2022			2021			Change				2023			2022			% Change
Life & Retirement	Life & Retirement															Life & Retirement
Net premiums written and contract deposits*	Net premiums written and contract deposits*	$	138.0	$	150.8	-8.5	%	$	408.0		$	427.4		-4.5	%	Net premiums written and contract deposits*		$	136.1		$	136.4		-0.2	%

Net premiums and contract charges earned	Net premiums and contract charges earned	37.1		40.4		-8.2	%	109.7			118.3			-7.3	%	Net premiums and contract charges earned		37.7			35.8			5.3	%
Net investment income	Net investment income	81.4		85.8		-5.1	%	254.0			247.4			2.7	%	Net investment income		87.9			84.2			4.4	%
Other income	Other income	4.1		5.1		-19.6	%	13.4			14.9			-10.1	%	Other income		3.9			4.9			-20.4	%

Life mortality costs	Life mortality costs	11.1		10.3		7.8	%	31.5			33.4			-5.7	%	Life mortality costs		19.5			21.4			-8.9	%
Interest credited	Interest credited	45.5		51.8		-12.2	%	128.4			153.4			-16.3	%	Interest credited		47.9			39.6			21.0	%
Change in reserves	Change in reserves	21.6		14.5		49.0	%	65.8			44.0			49.5	%	Change in reserves		13.8			13.0			6.2	%
Operating expenses	Operating expenses	24.2		25.7		-5.8	%	74.8			74.0			1.1	%	Operating expenses		24.2			25.7			-5.8	%
DAC amortization expense, excluding unlocking		6.7		6.6		1.5	%	21.3			20.1			6.0	%
DAC unlocking		0.2		(0.8)		N.M.		6.4			(1.8)			N.M.
DAC amortization expense																DAC amortization expense		6.8			5.7			19.3	%
Intangible asset amortization expense	Intangible asset amortization expense	0.2		0.4		-50.0	%	0.8			1.0			-20.0	%	Intangible asset amortization expense		0.1			0.3			-66.7	%

Income before income taxes	Income before income taxes	13.1		22.8		-42.5	%	48.1			56.5			-14.9	%	Income before income taxes		17.2			19.2			-10.4	%
Income tax expense	Income tax expense	0.4		3.7		-89.2	%	6.3			9.5			-33.7	%	Income tax expense		3.2			3.6			-11.1	%
Net income	Net income	12.7		19.1		-33.5	%	41.8			47.0			-11.1	%	Net income		14.0			15.6			-10.3	%
Core earnings*	Core earnings*	12.7		19.1		-33.5	%	41.8			47.0			-11.1	%	Core earnings*		14.0			15.6			-10.3	%

Life policies in force (in thousands)	Life policies in force (in thousands)							162			163			-0.6	%	Life policies in force (in thousands)		162			163			-0.6	%
Life insurance in force	Life insurance in force							$	19,815		$	19,384		2.2	%	Life insurance in force		$	20,155		$	19,595		2.9	%
Life persistency - LTM	Life persistency - LTM							96.0		%	96.2		%	-0.2	pts	Life persistency - LTM		95.9		%	96.2		%	-0.3	pts

Annuity contracts in force (in thousands)	Annuity contracts in force (in thousands)							227			229			-0.9	%	Annuity contracts in force (in thousands)		226			229			-1.3	%
Retirement Advantage® contracts in force (in thousands)								16			14			14.3	%
Horace Mann Retirement Advantage® contracts in force (in thousands)																Horace Mann Retirement Advantage® contracts in force (in thousands)		17			16			6.3	%
Cash value persistency - LTM	Cash value persistency - LTM							94.0		%	94.7		%	-0.7	pts	Cash value persistency - LTM		93.1		%	94.3		%	-1.2	pts

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, life annualized sales* ~~were in line with prior year periods~~increased $0.4 million and life persistency remained strong at ~~96.0%~~95.9%.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net annuity contract deposits* for variable and fixed annuities decreased ~~$20.3~~$2.8 million from strong prior year levels. Educators continue to begin their relationship with Horace Mann through 403(b) retirement savings products, including attractive annuity products, which provide encouraging cross-sell opportunities. Cash value persistency ~~remained strong at 94.0%~~declined slightly to 93.1%.

As of ~~September 30, 2022,~~March 31, 2023, annuity assets under management were down ~~$515.3~~$190.2 million, or ~~9.8%~~3.7%, compared to a year ago primarily due to market depreciation. Assets under administration, which includes annuity assets under management, Horace Mann Retirement Advantage® and other advisory and recordkeeping assets were down ~~$1.4 billion,~~$628.9 million, or ~~15.4%~~7.0%, compared to a year ago largely due to the effect of equity market ~~performance on assets under management.~~performance. The year-to-date annualized net interest spread on fixed annuities, excluding reinsurance, decreased 980 basis points compared to a year ago, primarily reflecting ~~lower~~higher interest credited, which includes interest on FHLB funding agreements that rose more rapidly than net investment ~~income.~~income due to the timing of interest rate resets.

We actively manage our interest rate risk exposure, considering a variety of factors, including earned interest rates, credited interest rates and the relationship between the expected durations of assets and liabilities. We estimate that over the next 12 months approximately ~~$710.4~~$676.4 million of the Life & Retirement investment portfolio and related investable cash flows will be reinvested at current market rates.


Horace Mann Educators Corporation			3852			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Interest rates rose swiftly throughout 2022. However, the risk of a deep recession or shock to the economy, such as a global pandemic, could result in a return to historically low interest rates. The current environment of higher interest rates have afforded us the opportunity to invest insurance cash flows and reinvested cash flows at higher yields, which could be a benefit to net investment income, but the higher interest rates have caused an increase to both realized investment losses when securities are sold, and to net unrealized investment losses in the remaining portfolios.

As a general guideline, ~~for a 100 basis point decline in the average reinvestment rate and~~ based on our existing policies and investment portfolio, the impact from ~~investing~~a 100 basis point decline in ~~that lower interest~~the average reinvestment rate ~~environment could further~~would reduce Life & Retirement net investment income by approximately ~~$2.7~~$2.6 million in year one and ~~$8.1~~$7.8 million in year two, ~~further~~ reducing the annualized net interest spread on fixed annuities by approximately 9 basis points and 2726 basis points in the respective periods, compared to the current period annualized net interest spread on fixed annuities. We could also consider potential changes in rates credited to policyholders, tempered by any restrictions on the ability to adjust policyholder rates due to guaranteed minimum crediting rates.

The expectation for future annualized net interest spreads on fixed annuities is also an important component in the amortization of DAC. In terms of the sensitivity of this amortization to the annualized net interest spread on fixed annuities, based on DAC as of September 30, 2022 and assuming all other assumptions are met, a 10 basis point deviation in the current year targeted annualized net interest rate spread on the fixed annuities assumption would impact amortization between $0.3 million and $0.4 million. This result may change depending on the magnitude and direction of any actual deviations but represents a range of reasonably likely experience for the noted assumption.

We reinsure a ~~$2.4 billion~~ block of in force fixed annuities with $2.4 billion of assets under management and with a minimum crediting rate of 4.5% which helps mitigate the risk of not being able to generate appropriate spreads on the annuity business. Information regarding the interest crediting rates and balances equal to the guaranteed minimum crediting rates for deferred annuity account values excluding the reinsured block is shown below.


($ in millions)	($ in millions)	September 30, 2022										($ in millions)	March 31, 2023
		Total Deferred Annuities				Deferred Annuities at Minimum Guaranteed Rate							Total Deferred Annuities				Deferred Annuities at Minimum Guaranteed Rate
		Percent of Total		Accumulated Value (AV)		Percent of Total Deferred Annuities AV		Percent of Total		Accumulated Value			Percent of Total		Accumulated Value (AV)		Percent of Total Deferred Annuities AV		Percent of Total		Accumulated Value
Guaranteed minimum crediting rates:	Guaranteed minimum crediting rates:											Guaranteed minimum crediting rates:
Less than 2%	Less than 2%	56.3	%	$	1,436.9	65.7	%	47.1	%	$	943.6	Less than 2%	57.0	%	$	1,432.3	40.7	%	37.0	%	$	583.0
Equal to 2% but less than 3%	Equal to 2% but less than 3%	11.1		282.2		81.0		11.4		228.6		Equal to 2% but less than 3%	10.9		272.9		69.1		12.0		188.5
Equal to 3% but less than 4%	Equal to 3% but less than 4%	24.2		618.4		100.0		30.9		618.1		Equal to 3% but less than 4%	23.8		597.4		99.9		37.8		596.9
Equal to 4% but less than 5%	Equal to 4% but less than 5%	6.5		165.0		100.0		8.2		165.0		Equal to 4% but less than 5%	6.4		161.9		100.0		10.2		161.9
5% or higher	5% or higher	1.9		47.6		100.0		2.4		47.6		5% or higher	1.9		46.6		100.0		3.0		46.6
Total	Total	100.0	%	$	2,550.1	78.5	%	100.0	%	$	2,002.9	Total	100.0	%	$	2,511.1	62.8	%	100.0	%	$	1,576.9

We will continue to be disciplined in executing strategies to mitigate the negative impact on profitability of a sustained low interest rate environment. However, the success of these strategies may be affected by the factors discussed in Part I - Item 1A in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and other factors in this ~~report.~~Quarterly Report on Form 10-Q.


Horace Mann Educators Corporation			3953			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Supplemental & Group Benefits

~~(All comparisons vs. same periods in 2021, unless noted otherwise)~~

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, net income reflected the following factors:

•~~Inclusion of Madison National's results~~Improvement in benefit ratio due to frequency below prior year levels on employer-sponsored products

•Year-to date sales*Higher net investment income largely due to repositioning of ~~voluntary products were up $1.6 million, or 38.1%, and year-to-date sales* of~~the portfolio for the employer-sponsored ~~products added another $5.8 million~~business

•~~The benefit ratio on employer-sponsored products decreased sequentially due to a lower~~Increased level of ~~benefits expense~~operating expenses reflecting ~~seasonality~~

investment being made in the segment's infrastructure as well as higher allocation of corporate expenses

The following table provides certain information for Supplemental & Group Benefits for the periods indicated.


($ in millions)	($ in millions)	Three Months Ended September 30,						2022-2021		Nine Months Ended September 30,						2022-2021		($ in millions)	Three Months Ended March 31,				2023-2022
		2022			2021			Change		2022			2021			Change				2023			2022			% Change
Supplemental & Group Benefits	Supplemental & Group Benefits																	Supplemental & Group Benefits
Net premiums and contract charges earned	Net premiums and contract charges earned	$	68.3		$	31.7		115.5	%	$	207.3		$	96.4		115.0	%	Net premiums and contract charges earned		$	65.8		$	69.8		-5.7	%
Net investment income	Net investment income	8.7			7.2			20.8	%	25.4			19.0			33.7	%	Net investment income		9.1			7.1			28.2	%
Other income	Other income	(5.2)			0.6			N.M.		(8.4)			1.9			N.M.		Other income		(3.7)			1.6			N.M.
Benefits, settlement expenses and change in reserves	Benefits, settlement expenses and change in reserves	18.6			10.5			N.M.		80.1			30.7			N.M.		Benefits, settlement expenses and change in reserves		21.1			32.5			-35.1	%
Interest credited	Interest credited	0.4			0.1			N.M.		0.7			0.2			N.M.		Interest credited		0.8			0.1			N.M.
Operating expenses (includes DAC unlocking and amortization expense)		24.5			11.4			114.9	%	76.5			33.1			131.1	%
Operating expenses (includes DAC amortization expense)																		Operating expenses (includes DAC amortization expense)		27.9			25.3			10.3	%
Intangible asset amortization expense	Intangible asset amortization expense	4.0			2.9			37.9	%	11.8			8.8			34.1	%	Intangible asset amortization expense		3.6			3.9			-7.7	%
Income before income taxes	Income before income taxes	24.3			14.6			66.4	%	55.2			44.5			24.0	%	Income before income taxes		17.8			16.7			6.6	%
Net income	Net income	19.2			11.5			67.0	%	43.6			34.8			25.3	%	Net income		14.0			13.2			6.1	%
Core earnings*	Core earnings*	19.2			11.5			67.0	%	43.6			34.8			25.3	%	Core earnings*		14.0			13.2			6.1	%

Benefits ratio(1)		27.8		%	33.4		%	-5.6	pts	39.0		%	32.1		%	6.9	pts
Benefit ratio(1)																		Benefit ratio(1)		33.3		%	46.7		%	-13.4	pts
Operating expense ratio(2)	Operating expense ratio(2)	34.1		%	28.9		%	5.2	pts	34.1		%	28.2		%	5.9	pts	Operating expense ratio(2)		39.2		%	32.2		%	7.0	pts
Pretax profit margin(3)	Pretax profit margin(3)	33.8		%	37.0		%	-3.2	pts	24.6		%	37.9		%	-13.3	pts	Pretax profit margin(3)		24.9		%	21.4		%	3.5	pts

Voluntary products benefits ratio		31.4		%	33.9		%	-2.5	pts	31.7		%	31.8		%	-0.1	pts
Voluntary premium persistency (rolling 12 months)		91.3		%	92.2		%	-0.9	pts	91.3		%	92.2		%	-0.9	pts
Employer-sponsored products benefits ratio		25.0		%	—		%	N.M.		44.8		%	—		%	N.M.
Worksite direct products benefit ratio																		Worksite direct products benefit ratio		22.1		%	22.2		%	-0.1	pts
Worksite direct premium persistency (rolling 12 months)																		Worksite direct premium persistency (rolling 12 months)		90.6		%	92.1		%	-1.5	pts
Employer-sponsored products benefit ratio																		Employer-sponsored products benefit ratio		42.6		%	66.1		%	-23.5	pts

(1) Ratio of benefits to net premiums earned.

(2) Ratio of operating expenses to total revenues.

(3) Ratio of income before income taxes to total revenues.

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, total sales* were ~~$4.4 million and $11.6 million, respectively.~~$8.2 million. Sales of ~~voluntary~~worksite direct products* were ~~$2.2 million and $5.8~~$3.7 million for three ~~and nine~~ months ended March 31, 2023, representing an increase of 164.3%. Worksite direct premium persistency (rolling 12 months), while down slightly, remains strong at 90.6%. Sales of employer-sponsored products* were $4.5 million for the three months ended March 31, 2023, representing an increase of 95.7%.


Horace Mann Educators Corporation			4054			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

September 30, 2022, respectively, representing increases of 10.0% and 38.1% compared to the prior year periods. Though persistency was slightly lower, it still remains very strong at 91.3%. Sales of employer-sponsored products* added another $5.8 million for the nine months ended September 30, 2022.

The current periods include the results of Madison National which is driving increases in (1) benefits, settlement expenses and change in reserves, (2) operating expenses (includes DAC unlocking and amortization), and (3) intangible asset amortization expense. The non-cash impact of amortization of intangible assets under purchase accounting reduced net income by $4.0 million and $11.8 million pretax for the three and nine months ended September 30, 2022. Pretax profit margin reflects a combination of voluntary and employer-sponsored products.

Corporate & Other

~~(All comparisons vs. same periods in 2021, unless noted otherwise)~~

The following table provides certain financial information for Corporate & Other for the periods indicated.


($ in millions)	($ in millions)	Three Months Ended September 30,				2022-2021		Nine Months Ended September 30,				2022-2021		($ in millions)	Three Months Ended March 31,			2023-2022
		2022		2021		Change %		2022		2021		Change %				2023		2022		% Change
Interest expense	Interest expense	$	(5.3)	$	(3.4)	-55.9	%	$	(13.5)	$	(10.3)	-31.1	%	Interest expense		$	(6.7)	$	(3.9)	-71.8	%
Net investment losses, pretax	Net investment losses, pretax	(12.8)		(6.5)		N.M.		(43.8)		(10.6)		N.M.		Net investment losses, pretax		(3.9)		(15.5)		N.M.
Other operating expenses, net investment income and other income	Other operating expenses, net investment income and other income	(1.4)		(2.2)		36.4	%	(5.9)		(6.9)		14.5	%	Other operating expenses, net investment income and other income		(1.7)		(2.0)		15.0	%
Net investment losses, after tax	Net investment losses, after tax	(10.1)		(5.1)		N.M.		(34.5)		(8.3)		N.M.		Net investment losses, after tax		(3.1)		(12.2)		N.M.
Net loss	Net loss	(15.5)		(9.6)		-61.5	%	(50.1)		(22.0)		-127.7	%	Net loss		(9.8)		(17.0)		42.4	%
Core loss*	Core loss*	(5.4)		(4.5)		-20.0	%	(15.6)		(13.7)		-13.9	%	Core loss*		(6.7)		(4.8)		-39.6	%

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the net loss ~~increased~~decreased $7.2 million due to lower net investment losses ~~which are mainly from changes in fair values of equity securities and investment impairments as well as increases~~partially offset by an increase in interest expense on the ~~Bank~~Revolving Credit Facility.

Investment Results

~~(All comparisons vs. same periods in 2021, unless noted otherwise)~~

Our investment strategy is primarily focused on generating income to support product liabilities, and balances principal protection and risk. Total net investment income includes net investment income from our managed investment portfolio as well as accreted investment income from the deposit asset on reinsurance related to our reinsured block of approximately $2.4 billion of fixed annuity liabilities related to legacy individual policies written in 2002 or earlier.


($ in millions)	($ in millions)	Three Months Ended September 30,				2022-2021		Nine Months Ended September 30,				2022-2021		($ in millions)	Three Months Ended March 31,			2023-2022
		2022		2021		Change %		2022		2021		Change %				2023		2022		% Change
Net investment income - investment portfolio		$	70.9	$	78.1	-9.2	%	$	223.3	$	233.3	-4.3	%
Net investment income - managed investment portfolio														Net investment income - managed investment portfolio		$	74.7	$	73.0	2.3	%
Investment income - deposit asset on reinsurance	Investment income - deposit asset on reinsurance	26.7		25.6		4.3	%	77.4		75.1		3.1	%	Investment income - deposit asset on reinsurance		25.7		24.9		3.2	%
Total net investment income	Total net investment income	97.6		103.7		-5.9	%	300.7		308.4		-2.5	%	Total net investment income		100.4		97.9		2.6	%
Pretax net investment losses	Pretax net investment losses	(12.8)		(6.5)		N.M.		(43.8)		(10.6)		N.M.		Pretax net investment losses		(3.9)		(15.5)		N.M.
Pretax net unrealized investment gains (losses) on fixed maturity securities	Pretax net unrealized investment gains (losses) on fixed maturity securities							(632.0)		466.4		N.M.		Pretax net unrealized investment gains (losses) on fixed maturity securities		(453.3)		16.7		N.M

~~Net~~For the three months ended March 31, 2023, net investment income from our managed investment portfolio ~~decreased $7.2~~increased $1.7 million, ~~and $10.0 million for the three and nine months ended September 30, 2022 respectively. The decreases were~~ primarily ~~attributable~~due to ~~returns below our historical average in our portfolio of limited partnership interests.~~a higher contribution from floating rate fixed maturity securities including commercial mortgage loan funds.

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, pretax net investment losses ~~increased $6.3~~decreased $ 11.6 million, ~~and $33.2 million, respectively, which are mainly~~primarily due to a reduction in losses from changes in fair values of equity securities and impairments compared to the prior year period. Pretax net unrealized investment losses on fixed maturity securities as of March 31, 2023 were down $118.6 million, or 20.7%, compared to December 31, 2022, reflecting a 40 basis point decrease in the 10-year U.S. Treasury yield, which more than offset slightly wider credit spreads in investment grade.


Horace Mann Educators Corporation			4155			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

impairments. Pretax net unrealized investment losses on fixed maturity securities as of September 30, 2022 were $632.0 million compared to pretax net unrealized investment gains of $441.6 million as of December 31, 2021 reflecting a 232 basis point increase in the 10-year U.S. Treasury yield and wider credit spreads across most asset classes.

Fixed Maturity and Equity Securities Portfolios

The table below presents our fixed maturity and equity securities portfolios by major asset class, including the 10 largest sectors of our corporate bond holdings (based on fair value).


($ in millions)	($ in millions)	September 30, 2022							($ in millions)	March 31, 2023
		Number of Issuers	Fair Value		Amortized Cost, net		Pretax Net Unrealized Loss			Number of Issuers	Fair Value		Amortized Cost, net		Pretax Net Unrealized Loss
Fixed maturity securities	Fixed maturity securities								Fixed maturity securities
Corporate bonds	Corporate bonds								Corporate bonds
Banking & Finance	Banking & Finance	177	$	470.5	$	534.2	$	(63.7)	Banking & Finance	169	$	471.8	$	523.0	$	(51.2)
Miscellaneous		36	152.3		154.4		(2.1)
Misc.									Misc.	36	184.1		185.3		(1.2)
Insurance	Insurance	58	150.7		170.5		(19.8)		Insurance	57	157.3		170.2		(12.9)
Energy	Energy	81	134.4		157.7		(23.3)		Energy	86	144.3		158.4		(14.1)
HealthCare, Pharmacy	HealthCare, Pharmacy	80	119.7		147.9		(28.2)		HealthCare, Pharmacy	73	116.6		137.5		(20.9)
Utilities	Utilities	78	111.1		134.5		(23.4)		Utilities	78	114.9		132.5		(17.6)
Real Estate	Real Estate	46	105.1		118.2		(13.1)		Real Estate	42	97.9		107.6		(9.7)
Transportation	Transportation	50	89.3		102.9		(13.6)		Transportation	47	86.5		95.6		(9.1)
Food and Beverage		32	72.1		83.1		(11.0)
Consumer Products	Consumer Products	53	62.5		80.6		(18.1)		Consumer Products	54	69.5		83.6		(14.1)
Natural Gas									Natural Gas	15	52.9		59.1		(6.2)
All other corporates(1)	All other corporates(1)	305	460.1		544.7		(84.6)		All other corporates(1)	295	447.8		502.5		(54.7)
Total corporate bonds	Total corporate bonds	996	1,927.8		2,228.7		(300.9)		Total corporate bonds	952	1,943.6		2,155.3		(211.7)
Mortgage-backed securities	Mortgage-backed securities								Mortgage-backed securities
U.S. Government and federally sponsored agencies	U.S. Government and federally sponsored agencies	249	381.6		425.5		(43.9)		U.S. Government and federally sponsored agencies	239	375.0		412.5		(37.5)
Commercial(2)	Commercial(2)	159	290.9		322.3		(31.4)		Commercial(2)	164	302.9		327.9		(25.0)
Other	Other	31	13.0		14.1		(1.1)		Other	29	14.0		15.1		(1.1)
Municipal bonds(3)	Municipal bonds(3)	616	1,307.9		1,440.9		(133.0)		Municipal bonds(3)	605	1,290.9		1,363.0		(72.1)
Government bonds	Government bonds								Government bonds
U.S.	U.S.	44	345.4		412.0		(66.6)		U.S.	44	367.4		428.2		(60.8)
Foreign	Foreign	7	35.4		37.2		(1.8)		Foreign	5	32.6		34.2		(1.6)
Collateralized loan obligations(4)	Collateralized loan obligations(4)	218	679.7		707.3		(27.6)		Collateralized loan obligations(4)	252	741.2		764.5		(23.3)
Asset-backed securities	Asset-backed securities	125	290.4		316.1		(25.7)		Asset-backed securities	128	282.4		302.6		(20.2)
Total fixed maturity securities	Total fixed maturity securities	2,445	$	5,272.1	$	5,904.1	$	(632.0)	Total fixed maturity securities	2,418	$	5,350.0	$	5,803.3	$	(453.3)

Equity securities	Equity securities								Equity securities
Non-redeemable preferred stocks	Non-redeemable preferred stocks	29	$	97.1					Non-redeemable preferred stocks	26	$	80.4
Common stocks	Common stocks	5	1.1						Common stocks	6	1.0
Closed-end fund	Closed-end fund	1	15.6						Closed-end fund	1	17.4
Total equity securities	Total equity securities	35	$	113.8					Total equity securities	33	$	98.8

Total	Total	2,480	$	5,385.9					Total	2,451	$	5,448.8

(1)The All other corporates category contains 18 additional industry sectors. ~~Technology,~~Food and beverage, technology, telecommunications, ~~natural gas,~~ broadcasting and media and ~~industry manufacturing~~leisure entertainment represented ~~$236.4~~$230.6 million of fair value at ~~September 30, 2022,~~March 31, 2023, with the remaining 13 sectors each representing less than ~~$223.7~~$217.2 million.

(2)At ~~September 30, 2022,~~March 31, 2023, 100% were investment grade, with an overall credit rating of AA+, and the positions were well diversified by property type, geography and sponsor.

(3)Holdings are geographically diversified, ~~45.6%~~44.6% are tax-exempt and ~~77.4%~~77.6% are revenue bonds tied to essential services, such as mass transit, water and sewer. The overall credit quality of the municipal bond portfolio was AA- at ~~September 30, 2022.~~March 31, 2023.

(4)Based on fair value, 93.3% of the collateralized loan obligation securities were rated investment grade based on ratings assigned by a nationally recognized statistical ratings organization (NRSRO - S&P, Moody's, Fitch, Dominion, A.M. Best, Morningstar, Egan Jones and Kroll).


~~Horace Mann Educators Corporation~~			42			~~Quarterly Report on Form 10-Q~~

As of ~~September 30, 2022,~~March 31, 2023, our diversified fixed maturity securities portfolio consisted of ~~3,796~~3,722 investment positions, issued by ~~2,445~~2,418 entities, and totaled approximately ~~$5.3~~$5.4 billion in fair value. This portfolio was ~~90.9%~~92.4% investment grade, based on fair value, with an average quality rating of A+. Our investment guidelines target single corporate issuer concentrations to 0.5% of invested assets for AAA or AA rated securities, 0.35% of invested assets for A or BBB rated securities, and $5.0 million for non-investment grade securities.


Horace Mann Educators Corporation			56			First Quarter 2023 Form 10-Q

Rating of Fixed Maturity Securities and Equity Securities(1)

The following table presents the composition and fair value of our fixed maturity and equity securities portfolios by rating category. As of ~~September 30, 2022, 90.5%~~March 31, 2023, 91.9% of these combined portfolios were investment grade, based on fair value, with an overall average quality rating of A+. We have classified the entire fixed maturity securities portfolio as available for sale, which is carried at fair value.


($ in millions)	($ in millions)	Percent of Portfolio Fair Value				September 30, 2022				($ in millions)	Percent of Portfolio Fair Value				March 31, 2023
		December 31, 2021		September 30, 2022		Fair Value		Amortized Cost, net			December 31, 2022		March 31, 2023		Fair Value		Amortized Cost, net
Fixed maturity securities	Fixed maturity securities									Fixed maturity securities
AAA	AAA	10.1	%	10.8	%	$	567.8	$	610.1	AAA	10.8	%	11.3	%	$	605.2	$	634.4
AA(2)	AA(2)	37.1		38.6		2,034.2		2,299.9		AA(2)	39.3		39.1		2,093.6		2,303.7
A	A	19.2		17.9		944.9		1,040.2		A	17.8		18.2		975.3		1,038.1
BBB	BBB	23.6		23.6		1,247.3		1,436.6		BBB	24.1		23.6		1,266.6		1,393.2
BB	BB	3.1		2.5		131.7		148.2		BB	1.8		1.8		95.1		104.3
B	B	1.3		1.0		52.4		58.8		B	0.9		0.9		47.8		52.0
CCC or lower	CCC or lower	—		0.1		2.9		3.2		CCC or lower	—		—		1.1		1.7
Not rated(3)	Not rated(3)	5.6		5.5		290.9		307.1		Not rated(3)	5.3		5.1		265.3		275.9
Total fixed maturity securities	Total fixed maturity securities	100.0	%	100.0	%	$	5,272.1	$	5,904.1	Total fixed maturity securities	100.0	%	100.0	%	$	5,350.0	$	5,803.3
Equity securities	Equity securities									Equity securities
AAA	AAA	—	%	—	%	$	—			AAA	—	%	—	%
AA	AA	—		—		—				AA	—		—		—
A	A	0.5		0.5		0.6				A	—		—		—
BBB	BBB	67.3		70.0		79.7				BBB	68.7		65.4		64.6
BB	BB	12.7		13.1		14.9				BB	10.8		10.9		10.8
B	B	—		—		—				B	—		—		—
CCC or lower	CCC or lower	—		—		—				CCC or lower	—		2.1		2.1
Not rated	Not rated	19.5		16.4		18.6				Not rated	20.5		21.6		21.3
Total equity securities	Total equity securities	100.0	%	100.0	%	$	113.8			Total equity securities	100.0	%	100.0	%	$	98.8

Total	Total					$	5,385.9			Total					$	5,448.8

(1)Ratings are assigned by an NRSRO when available, If no rating is available from an NRSRO, then an internally developed rating is used. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings.

(2)At ~~September 30, 2022,~~March 31, 2023, the AA rated fair value amount included ~~$342.8~~$364.8 million of U.S. Government and federally sponsored agency securities and ~~$570.9~~$574.5 million of mortgage-backed and other asset-backed securities issued by U.S. Government and federally sponsored agencies.

(3)This category primarily represents private placement and municipal securities not rated by a NRSRO.

As of ~~September 30, 2022,~~March 31, 2023, the fixed maturity securities portfolio had ~~$661.3~~$502.9 million of pretax gross unrealized investment losses on ~~$4,495.7~~$4,185.9 million of fair value related to ~~3,305~~2,921 positions. Of the investment positions with gross unrealized losses, there were ~~659~~416 trading below 80.0% of the carrying value as of ~~September 30,~~March 31, 2023. See Part II - Item 8, Note 2 of the Consolidated Financial Statements in this Quarterly Report on Form 10-Q for more information

There was a significant increase in interest rates throughout 2022, driven mostly by increases in U.S. Treasury rates, though credit spreads also widened. As of March 31, 2023, the 10-year U.S. Treasury yield increased 196 basis points since January 1, 2022, rising from 1.51% as of January 1, 2022 to 3.47% as of March 31, 2023. Additionally, credit spreads widened during the same time period, with investment grade and high yield wider by 46 and 172 basis points, respectively. These upward movements in rates caused market yields in our investment portfolios to rise sharply, with downward pressure on prices. As of March 31, 2023, investment grade and high yield total returns were down 12.8% and 8.0%, respectively, since January 1, 2022. As of March 31, 2023, the Bloomberg Barclays Index Yield-to-Worst for Investment Grade rose 2.84% since January 1, 2022, ending at 5.2%, while the High Yield Index rose 4.31% to 8.5% since January 1, 2022. Our investment portfolios have generated sizable unrealized investment losses as a result of sharp increases in interest rates.

We view the pretax gross unrealized investment losses of all our fixed maturity securities as of ~~September 30, 2022~~March 31, 2023 as temporary. Future changes in circumstances related to these and other securities could require subsequent recognition of impairment.


Horace Mann Educators Corporation			4357			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Liquidity and Capital Resources

Our liquidity and access to capital were not materially impacted by inflation or changes in interest rates during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. For further discussion regarding the potential future impacts of inflation and changes in interest rates, see Part I – Item 1A - Risk Factors and Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Effects of Inflation and Changes in Interest Rates presented in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Investments

Information regarding our investment portfolio, which is comprised primarily of investment grade fixed maturity securities, is presented in Part I - Item 1, Note 32 of the Consolidated Financial Statements as well as Part I - Item 2 - Investment Results in this ~~report.~~Quarterly Report on Form 10-Q.

Cash Flow

Our short-term liquidity requirements, within a 12 month operating cycle, are for the timely payment of claims and benefits to policyholders, operating expenses, interest payments and federal income taxes. Cash flow generated from operations has been, and is expected to be, adequate to meet our operating cash needs in the next 12 months. Cash flow in excess of operational needs has been used to fund business growth, pay dividends to shareholders and repurchase shares of our common stock. Long-term liquidity requirements, beyond one year, are principally for the payment of future insurance and annuity policy claims and benefits, as well as retirement of debt. The following table summarizes our consolidated cash flows activity for the periods indicated.


($ in millions)	($ in millions)	Nine Months Ended September 30,				2022-2021		($ in millions)	Three Months Ended March 31,				2023-2022
		2022		2021		Change %			2023		2022		% Change
Net cash provided by operating activities	Net cash provided by operating activities	$	115.8	$	178.1	-35.0	%	Net cash provided by operating activities	$	86.4	$	95.7	-9.7	%
Net cash used in investing activities	Net cash used in investing activities	(295.9)		(351.0)		15.7	%	Net cash used in investing activities	(95.3)		(217.7)		56.2	%
Net cash provided by financing activities		82.6		190.8		-56.7	%
Net increase (decrease) in cash		(97.5)		17.9		N.M.
Net cash provided by (used in) financing activities								Net cash provided by (used in) financing activities	(6.5)		37.4		-117.4	%
Net decrease in cash								Net decrease in cash	(15.4)		(84.6)		81.8	%
Cash at beginning of period	Cash at beginning of period	133.7		22.3		N.M.		Cash at beginning of period	42.8		133.7		-68.0	%
Cash at end of period	Cash at end of period	$	36.2	$	40.2	-10.0	%	Cash at end of period	$	27.4	$	49.1	-44.2	%

Operating Activities

As a holding company, we conduct our principal operations in the personal lines segment of the property and casualty, life, retirement, supplemental and group insurance industries through our subsidiaries. Our insurance subsidiaries generate cash flow from premium and investment income, generally well in excess of their immediate needs for policy obligations, operating expenses and other cash requirements. Cash provided by operating activities primarily reflects net cash flows generated by ~~the~~our insurance subsidiaries.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash provided by operating activities decreased ~~$62.3~~$9.3 million, primarily due to higher claims paid on insurance policies.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2023 and 2022 was $(95.3) million and $(217.7) million, respectively. Prior year investing activities included the acquisition of Madison National.

Investing cash inflows consist primarily of proceeds from the sales and maturities of investments. Investing cash outflows consist primarily of payments for purchases of investments. Our ~~insurance subsidiaries maintain significant investments in~~investment strategy is to appropriately match the cash flows and durations of our assets with the cash flows and durations of our liabilities to meet the funding requirements of our business and, generally, the expected principal and interest payments produced by our fixed maturity securities ~~to meet future contractual obligations to policyholders. In conjunction with~~portfolio adequately fund the estimated runoff of our ~~management of liquidity and other asset/liability management objectives,~~insurance reserves. When market opportunities arise, we ~~from time to time, will~~may sell ~~fixed maturity~~selected securities ~~prior to maturity,~~ and reinvest the proceeds ~~into other~~to improve the yield and credit quality of our portfolio. We may at times also sell selected securities and reinvest the proceeds to improve the duration matching of our assets and liabilities and/or rebalance our portfolio. As a result, sales before maturity may vary from period to period. The sale and purchase of short-term investments ~~with different interest rates, maturities~~ is influenced by


Horace Mann Educators Corporation			58			First Quarter 2023 Form 10-Q

proceeds received from FHLB funding advances, issuance of debt, our reverse repurchase agreement program, and by the amount of cash which is at times held in short-term investments to facilitate the availability of cash to fund the purchase of appropriate long-term investments, repay maturing debt, and/or ~~credit characteristics. Accordingly, we have classified the entire fixed maturity securities portfolio as available for sale.~~

~~Investing activities includes our acquisition of Madison National for the nine months ended September 30, 2022.~~to respond to catastrophes.

Financing Activities

Financing activities include primarily payment of dividends, receipt and withdrawal of funds by annuity contractholders, changes in the deposit asset on reinsurance, repurchases of our common stock, fluctuations in book overdraft balances, and borrowings, repayments and repurchases related to debt facilities.


~~Horace Mann Educators Corporation~~			44			~~Quarterly Report on Form 10-Q~~

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash provided by financing activities decreased ~~$108.2~~$43.9 million compared to the prior year period, primarily due to a ~~$182.0 million net decrease in cash inflows from advances received under Federal Home Loan Bank of Chicago (FHLB) funding agreements and a $22.3~~$34.3 increase in cash outflows ~~related~~from benefits, withdrawals and net transfers to ~~acquisitions of treasury stock~~Separate Account variable annuity assets, a $9.8 million increase in cash outflows from the deposit asset on reinsurance and a $8.3 million increase in cash outflows from the change in book overdrafts; partially offset by a ~~$95.2~~$17.0 million net increase in cash inflows from ~~reverse repurchase~~FHLB funding agreements.

The following table shows activity from FHLB funding agreements for the periods indicated.


($ in millions)	($ in millions)	Nine Months Ended September 30,				2022-2021		2022-2021		($ in millions)	Three Months Ended March 31,				2023-2022		2023-2022
		2022		2021		Change $		Change %			2023		2022		$ Change		% Change
Balance at beginning of the period	Balance at beginning of the period	$	782.5	$	590.5	$	192.0	32.5	%	Balance at beginning of the period	$	792.5	$	782.5	$	10.0	1.3	%
Advances received from FHLB funding agreements	Advances received from FHLB funding agreements	154.0		446.0		(292.0)		-65.5	%	Advances received from FHLB funding agreements	162.0		60.0		102.0		N.M.
Principal repayments on FHLB funding agreements	Principal repayments on FHLB funding agreements	(94.0)		(204.0)		110.0		N.M.		Principal repayments on FHLB funding agreements	(85.0)		—		(85.0)		N.M.
Balance at end of the period	Balance at end of the period	$	842.5	$	832.5	$	10.0	1.2	%	Balance at end of the period	$	869.5	$	842.5	$	27.0	3.2	%


Horace Mann Educators Corporation			4559			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Liquidity Sources and Uses

Our potential sources and uses of funds principally include the following activities:

Property & Casualty

Life & Retirement

Supplemental & Group Benefits

Corporate & Other

Activities for potential sources of funds

Receipt of insurance premiums, contractholder charges and fees

☑

Recurring service fees, commissions and overrides

☑

Contractholder fund deposits

☑

Reinsurance and indemnification program recoveries

☑

Receipts of principal, interest and dividends on investments

☑

Proceeds from sales of investments

☑

Proceeds from FHLB borrowing and funding agreements

☑

Proceeds from reverse repurchase agreements

☑

Intercompany loans

☑

Capital contributions from parent

☑

Dividends or return of capital from subsidiaries

☑

Tax refunds/settlements

☑

Proceeds from periodic issuance of additional securities

☑

Proceeds from debt issuances

☑

Proceeds from ~~senior~~ revolving credit facility

☑

Receipt of intercompany settlements related to employee benefit plans

☑

Activities for potential uses of funds

Payment of claims and related expenses

☑

Payment of contract benefits, surrenders and withdrawals

☑

Reinsurance cessions and indemnification program payments

☑

Payment of operating costs and expenses

☑

Payments to purchase investments

☑

Repayment of FHLB borrowing and funding agreements

☑

Repayment of reverse repurchase agreements

☑

Payment or repayment of intercompany loans

☑

Capital contributions to subsidiaries

☑

Dividends or return of capital to shareholders/parent company

☑

Tax payments/settlements

☑

Common share repurchases

☑

Debt service expenses and repayments

☑

Repayment on ~~senior~~ revolving credit facility

☑

Payments related to employee benefit plans

☑

Payments for business acquisitions

☑

We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across HMEC and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across HMEC to enhance flexibility.


Horace Mann Educators Corporation			4660			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

As of ~~September 30, 2022,~~March 31, 2023, we held ~~$937.5~~$966.2 million of cash, U.S. government and agency fixed maturity securities and public equity securities (excluding non-redeemable preferred stocks and foreign equity securities) which, under normal market conditions, could be rapidly liquidated.

Certain remote events and circumstances could constrain our liquidity. Those events and circumstances include, for example, a catastrophe resulting in extraordinary losses, a downgrade of our Senior Notes rating to non-investment grade status or a downgrade in our insurance subsidiaries' financial strength ratings. The rating agencies also consider the interdependence of our individually rated entities; therefore, a rating change in one entity could potentially affect the ratings of other related entities.

Capital Resources

We have determined the amount of capital that is needed to adequately fund and support business growth, primarily based on risk-based capital formulas, including those developed by the National Association of Insurance Commissioners. Historically, our insurance subsidiaries have generated capital in excess of such needed levels. These excess amounts have been paid to us through dividends. We have then utilized these dividends and our access to the capital markets to fund growth initiatives, service and retire debt, pay dividends to our shareholders, repurchase shares of our common stock and for other corporate purposes. If necessary, we also have other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, including a revolving line of credit, as well as issuances of various securities.

The insurance subsidiaries are subject to various regulatory restrictions that limit the amount of annual dividends or other distributions, including loans or cash advances, available to us without prior approval of the insurance regulatory authorities. The aggregate amount of dividends that may be paid in ~~2022~~2023 from all of our insurance subsidiaries without prior regulatory approval is ~~$131.9~~$110.3 million, excluding the impact and timing of prior dividends, of which ~~$129.7~~$19.0 million was paid during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. We anticipate that our sources of capital will continue to generate sufficient capital to meet the needs for business growth, debt interest payments, shareholder dividends and our share repurchase programs. Additional information is contained in Part II - Item 8, Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Total capital was ~~$1,574.5~~$1,637.2 million as of ~~September 30, 2022,~~March 31, 2023, including ~~$497.9~~$498.0 million of short-term and long-term debt. Total debt represented ~~31.6%~~30.4% of total capital including net unrealized investment losses on fixed maturity securities ~~(25.3%~~(25.2% excluding net unrealized investment losses on fixed maturity securities*securities and net reserve remeasurements attributable to discount rates*) ~~at September 30, 2022,~~as of March 31, 2023, which was slightly above our long-term target of ~~25%~~25.0% for our debt to capital ratio excluding net unrealized investment gains (losses) and net reserve remeasurements attributable to discount rate).

Shareholders' equity was ~~$1,076.6~~$1,139.2 million as of ~~September 30, 2022,~~March 31, 2023, including net unrealized investment losses on fixed maturity securities of ~~$396.7~~$356.4 million after ~~taxes and the related impact of DAC associated with annuity contracts and life insurance products with account values.~~taxes. The market value of our common stock and the market value per share were ~~$1,443.3~~$1,368.2 million and ~~$35.29,~~$33.48, respectively, as of ~~September 30, 2022.~~March 31, 2023. Book value per share and adjusted book value per share* was ~~$26.32~~$27.87 and ~~$36.02,~~$36.16, respectively, as of ~~September 30, 2022.~~March 31, 2023.

Additional information regarding net unrealized investment gains (losses) on fixed maturity securities as of ~~September 30, 2022~~March 31, 2023 is included in Part I - Item 1, Note 32 of the Consolidated Financial Statements as well as in Part I - Item 2 - Investment Results in this ~~report.~~Quarterly Report on Form 10-Q.

Total dividends paid to shareholders was ~~$39.5~~$13.5 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. In March ~~May and August~~ of ~~2022,~~2023, the Board of Directors (Board) approved regular quarterly dividends of ~~$0.32~~$0.33 per share.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we repurchased ~~670,816~~128,540 shares of our common stock at an average price per share of ~~$35.82~~$34.01 under our ~~2015 and 2022~~ share repurchase ~~programs.~~program. See Part II - Item 8, Note 13 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for more information. ~~During the second quarter of 2022, our Board authorized $50.0 million of share repurchases under our 2022 share repurchase program. See Part II - Item 2 in this report for further information.~~ As of ~~September 30, 2022, $41.3~~March 31, 2023, $36.9 million remained authorized for future share repurchases under the ~~2022~~ share repurchase program.


Horace Mann Educators Corporation			4761			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

The following table summarizes our debt obligations.


($ in millions)	($ in millions)	Interest Rates	Final Maturity	September 30, 2022		December 31, 2021		($ in millions)	Interest Rates	Final Maturity	March 31, 2023		December 31, 2022
															($ in millions)	Interest Rates	Final Maturity	March 31, 2023	December 31, 2022
Short-term debt	Short-term debt							Short-term debt
Bank Credit Facility		Variable	2026	$	249.0	$	249.0
Revolving Credit Facility								Revolving Credit Facility	Variable	2026	$	249.0	$	249.0
Long-term debt(1)	Long-term debt(1)							Long-term debt(1)
4.50% Senior Notes, Aggregate principal amount of $250.0 less unaccrued discount of $0.3 and $0.3 and unamortized debt issuance costs of $0.9 and $1.1		4.50%	2025	248.8		248.6
FHLB borrowings		0.00%	2022	—		5.0
4.50% Senior Notes, Aggregate principal amount of $250.0 less unaccrued discount of $0.2 and $0.3 and unamortized debt issuance costs of $0.8 and $1.1								4.50% Senior Notes, Aggregate principal amount of $250.0 less unaccrued discount of $0.2 and $0.3 and unamortized debt issuance costs of $0.8 and $1.1	4.50%	2025	249.0		248.6
Total	Total			$	497.8	$	502.6	Total			$	498.0	$	497.6

(1) We designate debt obligations as "long-term" based on maturity date at issuance.

As of ~~September 30, 2022,~~March 31, 2023, we had outstanding $250.0 million aggregate principal amount of 4.50% Senior Notes (Senior Notes), which will mature on December 1, 2025, issued at a discount resulting in an effective yield of 4.53%. Interest on the Senior Notes is payable semi-annually at a rate of 4.50%. Detailed information regarding the redemption terms of the Senior Notes is contained in the Part II - Item 8, Note 910 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The Senior Notes are traded in the open market (HMN 4.50).

As of ~~September 30, 2022,~~March 31, 2023, we had no borrowings outstanding with FHLB. The Board has authorized a maximum amount equal to 15% of net aggregate admitted assets less separate account assets of the insurance subsidiaries for FHLB borrowing and funding agreements which is below our maximum FHLB borrowing capacity. ~~The $5.0 million FHLB borrowings that was outstanding as of December 31, 2021 is reported as Long-term debt in the Consolidated Balance Sheet.~~

Effective July 12, 2021, we, as borrower, amended our Credit Agreement ~~(Bank~~(Revolving Credit Facility). The amended ~~Bank~~Revolving Credit Facility increased the amount available on the senior revolving credit facility from $225.0 million to $325.0 million. PNC Bank, National Association and JPMorgan Chase Bank, N.A. serve as joint lead arrangers under the amended ~~Bank~~Revolving Credit Facility, with The Northern Trust Company, KeyBank National Association, U.S. Bank National Association, Illinois National Bank, and Comerica Bank as lenders participating in the syndicate. Terms and conditions of the amended ~~Bank~~Revolving Credit Facility are substantially consistent with the prior agreement, with an interest rate based on LIBOR plus 115 basis points. The amended ~~Bank~~Revolving Credit Facility expires on July 12, 2026.

On December 31, 2021, we utilized $114.0 million of the ~~senior revolving credit facility~~Revolving Credit Facility to fund a portion of the acquisition of Madison National Life Insurance Company, Inc. that occurred effective January 1, 2022, resulting in ~~an amount outstanding~~a remaining capacity of ~~$249.0 million under the senior revolving credit facility.~~$76.0 million. We expect that the unused portion of the ~~senior revolving credit facility~~Revolving Credit Facility will be available for ongoing working capital, capital expenditures and general corporate expenditures. The unused portion of the ~~Bank~~Revolving Credit Facility is subject to a variable commitment fee, which was 0.15% on an annual basis ~~at September 30, 2022.~~as of March 31, 2023.

To provide additional capital management flexibility, we filed a "universal shelf" registration statement on Form S-3 with the Securities and Exchange Commission (SEC) on March 10, 2021. The registration statement, which registered the offer and sale from time to time of an indeterminate amount of various securities, which may include debt securities, common stock, preferred stock, depositary shares, warrants, delayed delivery contracts and/or units that include any of these securities, was automatically effective on March 10, 2021. Unless withdrawn by us earlier, this registration statement will remain effective through March 10, 2024. No securities associated with the registration statement have been issued at the time of issuance of this Quarterly Report on Form 10-Q.

On March 13, 2018, we filed a "shelf" registration statement on Form S-4 with the SEC which became effective on May 2, 2018. Under this registration statement, we may from time to time offer and issue up to 5,000,000 shares of our common stock in connection with future acquisitions of other businesses, assets or securities. Unless withdrawn by us, this registration statement will remain effective indefinitely. No securities associated with the registration statement have been issued at the time of issuance of this Quarterly Report on Form 10-Q.


Horace Mann Educators Corporation			4862			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Financial Ratings

Our principal insurance subsidiaries are rated by A.M. Best Company, Inc. (A.M. Best), Fitch, Moody's, and S&P. These rating agencies have also assigned ratings to our Senior Notes. The ratings that are assigned by these agencies, which are subject to change, can impact, among other things, our access to sources of capital, cost of capital, and competitive position. These ratings are not a recommendation to buy or hold any of our securities.

All four agencies currently have assigned the same insurance financial strength ratings to our Property & Casualty and Life insurance subsidiaries. Only A.M. Best currently rates our Supplemental & Group Benefits subsidiaries. A.M. Best currently rates our NTA Life subsidiary at the same level as our Property & Casualty and Life & Retirement subsidiaries and our Madison National subsidiary is rated A- (Excellent). Assigned ratings and respective affirmation/review dates as of ~~October 31, 2022~~April 30, 2023 were as follows:

Insurance Financial

Affirmed/

Strength Ratings (Outlook)

Debt Ratings (Outlook)

Reviewed

A.M. Best

HMEC (parent company)

N.A.

bbb

(stable)

7/28/2022

HMEC's Life & Retirement subsidiaries

(stable)

N.A.

7/28/2022

HMEC's Property & Casualty subsidiaries

(stable)

N.A.

7/28/2022

HMEC's Supplemental & Group Benefits

subsidiaries

Madison National Life Insurance Company

A-

(stable)

N.A.

7/28/2022

National Teachers Associates Life

Insurance Company

(stable)

N.A.

7/28/2022

Fitch

(stable)

BBB

(stable)

~~8/30/~~10/18/2022

Moody's

HMEC (parent company)

Baa2

~~(stable)~~(negative)

8/3/~~2022~~1/2023

HMEC's Life Group

~~(stable)~~(negative)

~~7/27/2022~~3/1/2023

HMEC's P&C Group

~~(stable)~~(negative)

8/3/~~2022~~1/2023

S&P

(stable)

BBB

(stable)

2/~~14/2022~~7/2023

Reinsurance Programs

Information regarding the reinsurance programs for our Property & Casualty, ~~Supplemental,~~Life & Retirement and ~~Life~~Supplemental & Group Benefits segments is located in Part I - Item 1, Reporting Segments in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

ITEM 3. I Quantitative and Qualitative Disclosures about Market Risk

Market value risk, our primary market risk exposure, is the risk that our invested assets will decrease in value. This decrease in value may be due to (1) a change in the yields realized on our assets and prevailing market yields for similar assets, (2) an unfavorable change in the liquidity of an investment, (3) an unfavorable change in the financial prospects of the issuer of an investment, or (4) a downgrade in the credit rating of the issuer of an investment. Also see Consolidated Results of Operations in Part I - Item 2 of this ~~report~~Quarterly Report on Form 10-Q regarding net investment losses.


Horace Mann Educators Corporation			4963			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

Significant changes in interest rates expose us to the risk of experiencing losses or earning a reduced level of income based on the difference between the interest rates earned on our investments and the credited interest rates on our insurance and investment contract liabilities. Also see Consolidated Results of Operations in Part I - Item 2 of this ~~report~~Quarterly Report on Form 10-Q regarding interest credited to policyholders.

We seek to manage our market value risk by coordinating the projected cash inflows of assets with the projected cash outflows of liabilities. For all of our assets and liabilities, we seek to maintain reasonable durations, consistent with the maximization of income without sacrificing investment quality, while providing for liquidity and diversification. The investment risk associated with variable annuity deposits and the underlying mutual funds is assumed by those contractholders, and not by us. Certain fees that we earn from variable annuity deposits are based on the market value of the funds deposited.

More detailed descriptions of our exposure to market value risks and the management of those risks is contained in Part II - Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

ITEM 4. I Controls and Procedures

Management's Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as amended (Exchange Act), as of ~~September 30, 2022.~~March 31, 2023. Based on this evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) that is required to be included in our periodic SEC filings. No material weaknesses in our disclosure controls and procedures were identified in the evaluation and therefore, no corrective actions were taken. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

Changes in Internal Control Over Financial Reporting

Except as noted below, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the third quarter of 2022, we continued to execute internal controls associated with new processes supporting the implementation of Accounting Standards Update (ASU) 2018-12 for long-duration insurance contracts (LDTI). These controls provide assurance over the estimated impact to accumulated other comprehensive income and retained earnings that is expected upon adoption of LDTI on January 1, 2023, as disclosed in Note 1 to the Consolidated Financial Statements. We will continue to refine and maturate the internal controls associated with LDTI until adoption on January 1, 2023.

Effective January 1, 2022, we completed our acquisition of Madison National Life Insurance Company, Inc. (Madison National). We are in the process of integrating Madison National and our controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed. Therefore, we have elected to exclude Madison National from our assessment of internal control over financial reporting as of September 30, 2022.

~~Concurrent with the acquisition of Madison National, changes~~Changes were made to ~~the~~ relevant business processes and the related control activities over ~~purchase~~ accounting ~~in order to monitor~~ and ~~maintain appropriate controls over financial reporting.~~reporting for long-duration insurance contracts.


Horace Mann Educators Corporation			5064			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

PART II: OTHER INFORMATION

ITEM 1A. I Risk Factors

At the time of issuance of this Quarterly Report on Form 10-Q, we believe there are no material changes from the risk factors as previously disclosed in Part I - Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

ITEM 2. I Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On May 25, 2022, our Board of Directors authorized a share repurchase program allowing repurchases of up to $50 million (i.e., the 2022 Program) to begin following the completion of the $50 million repurchase plan which was authorized on September 30, 2015 (i.e., the 2015 Program). Both Programs authorize the repurchase of our common shares in open market or privately negotiated transactions, from time to time, depending on market ~~conditions.~~conditions (Program). The ~~Programs do~~Program does not have an expiration ~~dates~~date and may be limited or terminated at any time without notice. During the three months ended ~~September 30, 2022, the 2015 Program was completed and~~March 31, 2023, we ~~began repurchasing~~repurchased shares under the ~~2022~~ Program as follows:

Period

Total Number
of Shares
Purchased

Average Price
Paid per Share Total Number of Shares Purchased
under the Programs Approximate Dollar Value
of Shares that may yet be
Purchased under the Program
July 1 - 31 295,445 $ 33.87 295,445 $ 41.3 million
August 1 - 31 — — — $ 41.3 million
September 1 - 30 — — — $ 41.3 million
Total 295,445 $ 33.87 295,445 $ 41.3 million


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased under the Program	Approximate Dollar Value of Shares that may yet be Purchased under the Program
January 1 - 31	54,400	$	33.86	54,400	$	39.5	million
February 1 - 28	22,121	35.27		22,121	$	38.7	million
March 1 - 31	52,019	33.64		52,019	$	36.9	million
Total	128,540	$	34.01	128,540	$	36.9	million

ITEM 5. I Other Information

Not applicable.

ITEM 6. I Exhibits

The following items are filed as Exhibits. Management contracts and compensatory plans are indicated by an asterisk (*).


Exhibit
No.						Description

(3) Articles of incorporation and bylaws:

3.1						Restated Certificate of Incorporation of HMEC, filed with the Delaware Secretary of State on June 24, 2003, incorporated by reference to Exhibit 3.1 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the Securities and Exchange Commission (the "SEC") on August 14, 2003.


~~Horace Mann Educators Corporation~~			51			~~Quarterly Report on Form 10-Q~~


3.2						Bylaws of HMEC, incorporated by reference to Exhibit 3.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the SEC on August 14, 2003.


Horace Mann Educators Corporation			65			First Quarter 2023 Form 10-Q


(4) Instruments defining the rights of security holders, including indentures:

4.1						Indenture, dated as of November 23, 2015, by and between HMEC and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.1 to HMEC’s Current Report on Form 8-K dated November 18, 2015, filed with the SEC on November 23, 2015.

4.1(a)						Form of HMEC 4.500% Senior Notes due 2025, incorporated by reference to Exhibit 4.2 to HMEC’s Current Report on Form 8-K dated November 18, 2015, filed with the SEC on November 23, 2015.

4.2						Certificate of Designations for HMEC Series A Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4.3 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.

4.3						Description of Securities, incorporated by reference to Exhibit 4.3 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 2, 2020.

(10) Material contracts:

10.1						Credit Agreement dated as of June 21, 2019 among HMEC, certain financial institutions named therein and PNC Bank, N.A., as administrative agent, incorporated by reference to Exhibit 10.1 to HMEC’s Current Report on Form 8-K dated June 24, 2019, filed with the SEC on June 24, 2019.

10.1(a)						First Amendment to Credit Agreement dated as of June 21, 2019 among HMEC, certain financial institutions named therein and PNC Bank, N.A., as administrative agent, incorporated by reference to Exhibit 10.1(a) to HMEC's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 2, 2020.

10.1(b)						Second Amendment to Credit Agreement dated as of July 12, 2021, among HMEC, as borrower, PNC Bank, National Association, as administrative agent, and certain lenders party thereto, incorporated by reference to Exhibit 10.1(b) to HMEC's Current Report on Form 8-K dated July 14, 2021, filed with the SEC on July 14, 2021.

10.2*						Horace Mann Educators Corporation Amended and Restated 2002 Incentive Compensation Plan ("2002 Incentive Compensation Plan"), incorporated by reference to Exhibit 10.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed with the SEC on August 9, 2005.

10.2(a)*						Revised Specimen Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(b) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.2(b)*						Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(d) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.

10.2(c)*						Revised Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(f) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.


~~Horace Mann Educators Corporation~~			52			~~Quarterly Report on Form 10-Q~~


10.2(d)*						Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(e) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.


Horace Mann Educators Corporation			66			First Quarter 2023 Form 10-Q


10.2(e)*						Revised Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(h) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.3*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective March 3, 2021), incorporated by reference to Exhibit 1 (beginning on page 59) to HMEC’s Proxy Statement, filed with the SEC on April 8, 2021.

10.3(a)*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) (Section 16 Officer) Non-Qualified Stock Option Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(a) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.

10.3(b)*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) ~~(Non-Section 16)~~(Section 16 Officer) Non-Qualified Stock Option Agreement - Employee Grantee ~~incorporated by reference to Exhibit 10.3(b) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.~~(with Retirement Provision).

10.3(c)*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-Vested Restricted Stock Units Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(c) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.

10.3(d)*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-based Restricted Stock Units Agreement - Employee Grantee (with Retirement Provision).

10.3(e)*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Performance-Based Restricted Stock Units Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(d) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 9, 2022.

~~10.3(e)~~10.3(f)*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Performance-Based Restricted Stock Units Agreement - Employee Grantee (with Retirement Provision).

10.3(g)*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Performance-Based Restricted Stock Units Agreement - Employee Grantee (with Retirement Provision and ESG Modifier).

10.3(h)*						HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-Vested Restricted Stock Units Agreement - Employee Grantee (One-Time Grant Service), incorporated by reference to Exhibit 10.3(e) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.

~~10.3(f)~~10.3(i)*						Specimen Employee Performance-Based Restricted Stock Units Agreement - Key Strategic Grantee under the HMEC 2010 Comprehensive Executive Compensation Plan incorporated by reference to Exhibit 10.3(e) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 6, 2016.

~~10.3(g)~~10.3(j)*						Specimen Non-employee Director Restricted Stock Unit Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.17(a) to HMEC’s Current Report on Form 8-K dated May 27, 2010, filed with the SEC on June 2, 2010.


Horace Mann Educators Corporation			67			First Quarter 2023 Form 10-Q


10.4*						Horace Mann Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.1 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.

10.5*						Horace Mann Executive Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.


~~Horace Mann Educators Corporation~~			53			~~Quarterly Report on Form 10-Q~~

10.6*

Amended and Restated Horace Mann Nonqualified Supplemental Money Purchase Pension Plan, incorporated by reference to Exhibit 10.9 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.

10.7*

Summary of HMEC Non-employee Director Compensation, incorporated by reference to Exhibit 10.7 to HMEC's Quarterly Report on Form 10-Q for the quarter ended June, 30, 2022, filed with the SEC on August 8, 2022.

10.8*

Summary of HMEC Named Executive Officer Annualized ~~Salaries, incorporated by reference to Exhibit 10.8 to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 9, 2022.~~Salaries.

10.9*

Form of Severance Agreement between HMEC, Horace Mann Service Corporation ("HMSC") and certain officers of HMEC and/or HMSC, incorporated by reference to Exhibit 10.13 to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February 28, 2013.

10.10*

HMSC Executive Change in Control Plan, incorporated by reference to Exhibit 10.15 to HMEC’s Current Report on Form 8-K dated February 15, 2012, filed with the SEC on February 22, 2012.

10.10(a)*

HMSC Executive Change in Control Plan Schedule A Plan ~~Participants, incorporated by reference to Exhibit 10.10(a) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 9, 2022.~~Participants.

10.11*

HMSC Executive Severance Plan, incorporated by reference to Exhibit 10.16 to HMEC’s Current Report on Form 8-K dated March 7, 2012, filed with the SEC on March 13, 2012.

10.11(a)*

First Amendment to the HMSC Executive Severance Plan, incorporated by reference to Exhibit 10.16(a) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed with the SEC on August 9, 2012.

10.11(b)*

HMSC Executive Severance Plan Schedule A ~~Participants, incorporated by reference to Exhibit 10.11(b) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 9, 2022.~~Participants.

10.12

Stock Purchase Agreement Among Horace Mann Educators Corporation, and Robert Paglione, Paglione Family Irrevocable Trust F/B/O Adam Paglione, Paglione Family Irrevocable Trust F/B/O Lisa and Jorge Arroyo, Beau Adams and Benefit Consultants Group, Inc. dated as of October 30, 2018, incorporated by reference to Exhibit 10.12 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019.

10.13

Purchase Agreement By and Among Ellard Family Holdings, Inc., Brian M. Ellard, The JCE Exempt Trust and Horace Mann Educators Corporation dated as of December 10, 2018, incorporated by reference to Exhibit 10.13 to HMEC's Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019.

10.14

Stock Purchase Agreement for Madison National Life, incorporated by reference to Exhibit 10.14 to HMEC's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed with the SEC on November 5, 2021.

(15) KPMG LLP letter regarding unaudited interim financial information.

(31) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002:

~~31.1~~

~~Certification by Marita Zuraitis, Chief Executive Officer of HMEC.~~


Horace Mann Educators Corporation			5468			~~Quarterly Report on~~First Quarter 2023 Form 10-Q


31.1						Certification by Marita Zuraitis, Chief Executive Officer of HMEC.

31.2						Certification by Bret A. Conklin, Chief Financial Officer of HMEC.

(32) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:

32.1						Certification by Marita Zuraitis, Chief Executive Officer of HMEC.

32.2						Certification by Bret A. Conklin, Chief Financial Officer of HMEC.

(99) Additional exhibits:

99.1						Glossary of Selected Terms.

(101) Interactive Data File:

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						XBRL Taxonomy Extension Schema

101.CAL						XBRL Taxonomy Extension Calculation Linkbase

101.DEF						XBRL Taxonomy Extension Definition Linkbase

101.LAB						XBRL Taxonomy Extension Label Linkbase

101.PRE						XBRL Taxonomy Extension Presentation Linkbase


Horace Mann Educators Corporation			5569			~~Quarterly Report on~~First Quarter 2023 Form 10-Q

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		HORACE MANN EDUCATORS CORPORATION
		(Registrant)






Date	~~November 8, 2022~~May 10, 2023	/s/ Marita Zuraitis

		Marita Zuraitis
		President and Chief Executive Officer






Date	~~November 8, 2022~~May 10, 2023	/s/ Bret A. Conklin

		Bret A. Conklin
		Executive Vice President and
		Chief Financial Officer






Date	~~November 8, 2022~~May 10, 2023	/s/ Kimberly A. Johnson

		Kimberly A. Johnson
		Senior Vice President, Controller and
		Principal Accounting Officer


Horace Mann Educators Corporation			5670			~~Quarterly Report on~~First Quarter 2023 Form 10-Q


($ in millions)	December 31, 2021		Impairment		Acquisition		September 30, 2022
Property & Casualty	$	9.5	$	—	$	—	$	9.5
Life & Retirement	14.4		—		—		14.4
Supplemental & Group Benefits	19.6		—		12.8		32.4
Total	$	43.5	$	—	$	12.8	$	56.3


($ in millions)	Weighted Average
	Useful Life (in Years)
At inception:
Value of business acquired	28	$	100.1
Value of distribution acquired	17	54.0
Value of agency relationships	14	17.0
Value of customer relationships	10	59.9
Total	20	231.0
Accumulated amortization and impairments:
Value of business acquired		(26.6)
Value of distribution acquired		(13.8)
Value of agency relationships		(7.7)
Value of customer relationships		(4.5)
Total		(52.6)
Net intangible assets subject to amortization:		$	178.4


($ in millions)
Year Ending December 31,
2022 (excluding the nine months ended September 30, 2022)	$	4.1
2023	15.5
2024	15.1
2025	14.8
2026	14.5
Thereafter	114.4
Total	$	178.4


						Page
Introduction						2842
Consolidated Financial Highlights						2943
Consolidated Results of Operations						3044
Outlook for ~~2022~~2023						3246
Application of Critical Accounting Estimates						3347
Results of Operations by Segment						3448
Property & Casualty						3448
Life & Retirement						3751
Supplemental & Group Benefits						4054
Corporate & Other						4155
Investment Results						4155
Liquidity and Capital Resources						4458